Krugman Has His Backside Handed to Him

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

There are five reasons why people in the US are going to get poorer:

1. Global competition

You have pretty much just run afoul of Adam Smith's first principle of wealth creation by division of labor. I could not disagree more. Wealth in absolute terms should be going up.

2. Demographics

Given the longer life spans in an industrialized and commercialized society , I don't think the boomers are expired.

3. Decline of natural resource availability

Its actually more available, but there is more competition for it. This would be the first place I agree.

4. Increasing natural disasters

That is flimsy at best. Natural disasters have been happening all the time and I don't recall anything like the dust bowl or pandemics of the past. Sounds like end time propaganda.

5. Wealth (and power) inequality

That is the only one really worth talking about, especially in relation to the events since the late 90s culminating in the events in 2008. There are several causes:

* Resources are diverted. I recall the conservatives criticizing the luxury tax because it put middle class yacht builders out of work. They did not quite carry this to the absurd and wonder what resources would be available if we were all maids and butlers for a very few. With more resources building yachts, fewer must be avaible for anything else. Anthropologists recently determined power was distributed in the Indus valley civilization because there were no structures like an Egyptian pyramid that implies a very concentrated control of a civilizations resources.

* Resources are mis-allocated. When the surplus is not made available to the producers and it goes to the rentier, then the economic planing is made by rentiers...who have no experience in producing anything.

* Market manipulation. Once the market can be consolidated and controlled, done through these imbalances, competition is not dealt with by a better product, but by monopolistic practices. If the leading producer has 5% market share the only means to profit is competition. A well financed position of market dominance will more often than not lead to the elimination of competing products.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

Interesting.

The first time I've ever seen anyone, anywhere call a theory of economics a law.

I must say I disagree. The reserve currency syndrome you speak of was termed by Triffin to be a dilemma - not a law. It is a dilemma because there is a conflict on interest between short term domestic and long term international economic objectives.

Note that this isn't a action/reaction, although it could be termed zero sum.

Implicit within Triffin's commentary was that the owner of the reserve currency could not serve both international and domestic needs at all times, but it doesn't mean the international part wins. It just means the international part, if it wins, will at times cause the domestic parts to lose.

However, the choice as to whether the international part dominates over the domestic part - that is up to whoever controls the reserve currency. I don't think you argue that the US control the US dollar - therefore the ascendancy of international goals to the detriment of domestic US goals is a function of US political choice, not natural monetary law.



I'm still lost as to the reference. Fertile soil was what was being fought over, you're now saying other nations are fighting over being the reserve currency? Why would they if it is such a bad thing as your depiction of Triffin's dilemma --> law shows?



This relates to the above 'fight' over reserve currency, which is to say, who would want it if it is so bad?



I think the 'collective' as you term it had far more role in daily as well as international policies in the 19th century than today. Labor in the Marxist sense didn't exist until industrialization, but the world wasn't a blank slate before that period.

Just because what little national policy there was, was defined by Washington and New York, does not equate with any significant control over Americans.



The US government, however, is at least theoretically just as responsive to the people as the German government. Therefore if the US government destroyed unions, maybe the American people overall wanted that, or at least didn't care enough to oppose it.



Marx, while he had groundbreaking ideas in economics analysis, also had a lot of blind spots. One huge one is capital vs. money. There are many others, unsurprising given that Marx was writing about society 150+ years ago.

I'd suggest that you look into the economics section to see how economic thought has evolved from Marx/mid 1800s.

You believe Triffin's observation is a theory( one that hardly differs from MMT), which in casual conversation, the term "theory" is hardly descriptive since it can be as flimsy as parapsychology to established theories in physics. Yet you casually discuss a fictitious entity such as the interest of a sovereign state in "wanting" something as if a sovereign state is not just a legal construct of conflicting special interests. A country is no more a fact as something that can have desire than is Triffins dilemma. The question you should be asking is who wants what and where. Its easy to see a special controlling financial interest in the US can co-exist with a special controlling manufacturing interest in China, for example. Both certainly appear hostile to the majority interest. Its no different than an empire that keeps its vassals maintained by a well paid dictator. The minority benefits everywhere.

[raja]

Re: Krugman Has His Backside Handed to Him

You have pretty much just run afoul of Adam Smith's first principle of wealth creation by division of labor. I could not disagree more. Wealth in absolute terms should be going up.

Take my pizza shop example.
This is not a case of division of labor. This is more people doing the same job.
Unless there is increased demand, those selling pizzas will get poorer.

Given the longer life spans in an industrialized and commercialized society , I don't think the boomers are expired.

I don't understand what you are saying.

It's simple math: There are fewer workers supporting more older folks.
Somebody's going to get poorer.

That is flimsy at best. Natural disasters have been happening all the time and I don't recall anything like the dust bowl or pandemics of the past. Sounds like end time propaganda.

Our technological society is far more vulnerable to natural disasters.
Plus, population spread puts more people in harms way.

Examples:
1) The record 1859 solar storms had little effect because the only use of electricity was the telegraph. Today such a storm would take down the grid, and scientists estimate it could take up to 10 years to rebuild it. An unimaginable disaster: all computers knocked out, so no financial system, no food delivery to Walmart, etc.

2) A big earthquake in Southern California in 1600 wouldn't have done any damage to human life.
But today . . .

Think about beachfront property and hurricanes . . . the cost of storms in terms of property damage has been rising because more people build more expensive houses along the shore.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

Take my pizza shop example.
This is not a case of division of labor. This is more people doing the same job.
Unless there is increased demand, those selling pizzas will get poorer.

And the people buying them will be richer. You are working only on one side of the equation in your thought experiment.

I don't understand what you are saying.

The boomers are still part of the work force. Most of them are not retired and many more especially 4 years ago when all this stated happening.

It's simple math: There are fewer workers supporting more older folks.
Somebody's going to get poorer.

Its the wealthy who will in this case because rents will fall, if it is allowed to do so. Worker scarcity will drive labor prices up, not down. That is what after the black plaque the rentiers instituted Statute of Labourers in 1351. So in that case the wealthy did fix prices.

Our technological society is far more vulnerable to natural disasters.
Plus, population spread puts more people in harms way.

But it didn't happen, so it didn't cause what is happening now. If natural disasters where the problem, I would say the problem is also easy to solve. You fix what was broken.

Examples:
1) The record 1859 solar storms had little effect because the only use of electricity was the telegraph. Today such a storm would take down the grid, and scientists estimate it could take up to 10 years to rebuild it. An unimaginable disaster: all computers knocked out, so no financial system, no food delivery to Walmart, etc.

2) A big earthquake in Southern California in 1600 wouldn't have done any damage to human life.
But today . . .

It hasn't happened. I thought we were discussing the state of the economy today.

Think about beachfront property and hurricanes . . . the cost of storms in terms of property damage has been rising because more people build more expensive houses along the shore.

Of course. They would ask us to leave as trespassers in the good times, but shift the cost of repairs to everyone else. That is how rentiers think and act.

The current problem is not from a natural disaster or an aging population; its from the financial cartel running this country which means doing the opposite of what they do would fix the country. Taxes should be shifted on to assets and shifted off labor. We should be raising interest rates with increased deficits. There should never have been a bailout, and defaults and bankruptcies should have been the order of the day.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

That isn't my opinion at all.

My opinion is the the entire VAT tax structure was designed to subsidize exports and penalize imports against those who do not deploy a like system. My opinion on currency exchange is that China uses a currency peg which is designed to increase exports and penalize imports. My opinion is that both have been overwhelming success stories... for America's trading partners.

And our lack of a response has been a dismal failure of American politics and economic thought.

These two factors don't account for the trade deficit in its entirety. What is does do is explain in large part how the trade deficit has been achieved AND maintained. Currency manipulation is a way to keep your labor costs down and your population less able to purchase abroad. VAT schemes were designed with the intent to allow our trading partners to subsidize exports and penalize imports. Taken together with a total lack of respect of intellectual property and a wall of informal and formal trade barriers they round out a mercantilist's wet dream.

But that is just my opinion. I'm interested in hearing yours.

Do you believe it is reasonable to dismiss both those major issues as irrelevant? I want to know how an export tax approaching 20% and active currency pegs don't affect price and therefore the balance of trade. Is this what you are putting forth? I know wage arbitration was a fact of life. No way we bring 2 Billion people into the labor force and not see a downward force on labor. But to dismiss these two factors as in no way making the problem worse and preventing a self correcting cycle is something I am not sure I have heard outside of right wind radio and some extreme anarchist websites.

Will

PS: I thought about this and have to admit that I have heard economists suggest that import tariffs placed on American goods and currency pegs do not affect our trade balance.... but it not been often. And it hasn't always been a right wing economist either.

The biggest cause is from our easy finance system. When credit is issue from the value of the asset and not from the credit worthiness of the borrower with a fixed money supply, every large asset soon turns into financial overhead. Labor can never accumulate because they keep bidding against each other to create windfall asset rents that are bought and sold with finance. Its our financially bloated land prices that make us most unable to compete. If every worker has to pay the bank 2k a month, and the factory has to pay the mortgage, how can we compete?

Here Hudson applies finance to Ricardo's trade theory that no longer is about the cost of wheat, but the cost feeding financial ponzi schemes.

http://michael-hudson.com/2011/10/tr...financialized/

The cost of labor is labor subsistence. The FIRE sector is now part of its subsistence.

[raja]

Re: Krugman Has His Backside Handed to Him

And the people buying them will be richer. You are working only on one side of the equation in your thought experiment.

You are missing something . . . .

Let's assume that in this town, everyone is eating as much pizza as they want, i.e., constant demand.
When there was one shop, it supplied the town's craving for pizza.
Now a second shop is opened by people who just moved into town.

If the town's pizza craving remains the same, then each shop will sell - on average -- only 1/2 the pizzas that were sold by the original shop. That's a 50% cut in profits. This would be a fatal blow to both shops if it continued. Lowering prices is out of the question, because that would reduce profits even further, hastening the demise.

One shop would eventually go out of business, and the shop owner and employees would join the ranks of the unemployed. In aggregate, the town got poorer.
I stand by my previous statements . . . . .

The boomers are still part of the work force. Most of them are not retired and many more especially 4 years ago when all this stated happening.

Many boomers continue to work because they have to. They cannot afford to retire.
That's getting poorer.

Anyway, those who continue to work will eventually retire, increasing the ratio of workers to retirees.

Its the wealthy who will in this case because rents will fall, if it is allowed to do so. Worker scarcity will drive labor prices up, not down. That is what after the black plaque the rentiers instituted Statute of Labourers in 1351. So in that case the wealthy did fix prices.

The wealthy have stockpiled resources with which they will buy real property at distressed prices, so they will get richer.

But it didn't happen, so it didn't cause what is happening now. If natural disasters where the problem, I would say the problem is also easy to solve. You fix what was broken.

In my post I said, "There are five reasons why people in the US are going to get poorer".
Future tense.

Our current problems will not be able to be "solved" today. If they are solvable, they will have to be solved in the future. I am pointing out reasons why the won't be solved in the future.

The current problem is not from a natural disaster or an aging population; its from the financial cartel running this country which means doing the opposite of what they do would fix the country.

I agree with this.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

You are missing something . . . .

Let's assume that in this town, everyone is eating as much pizza as they want, i.e., constant demand.
When there was one shop, it supplied the town's craving for pizza.
Now a second shop is opened by people who just moved into town.

If the town's pizza craving remains the same, then each shop will sell - on average -- only 1/2 the pizzas that were sold by the original shop. That's a 50% cut in profits. This would be a fatal blow to both shops if it continued. Lowering prices is out of the question, because that would reduce profits even further, hastening the demise.

One shop would eventually go out of business, and the shop owner and employees would join the ranks of the unemployed. In aggregate, the town got poorer.
I stand by my previous statements . . . . .

You just added new people to the town, so there was no drop in output at all. You seem unable to understand how you have tinkered with your thought experiment. You can't qualify this as a loss of a pizza establishment because 1 + 1 -1 = 1. You cannot add labor to the pool and call it a loss. I stand by my statement that its just not good economic theory at all. If the new pizza shop could not support itself, it means that the economic profits have been driven down to value for labor without economic rents caused by scarcity. It simple means their is a new labor pool.

Many boomers continue to work because they have to. They cannot afford to retire.
That's getting poorer.

That has nothing to do with output. They are getting poorer because all of the economic rents are going to the wealthy.

Anyway, those who continue to work will eventually retire, increasing the ratio of workers to retirees.

Which will create more scarcity for labor. That isn't what happened.

The wealthy have stockpiled resources with which they will buy real property at distressed prices, so they will get richer.

Which was my point. Thats the problem. Asset inflation is unearned income. Read all about it in progress and poverty. The property will be used to purchase labor with unearned income.

http://www.henrygeorge.org/pcontents.htm

In my post I said, "There are five reasons why people in the US are going to get poorer".
Future tense.

That makes it slightly more reasonable but there are many flaws in it. Retirees will lower asset prices while other effects like monopolization will raise them.

Our current problems will not be able to be "solved" today. If they are solvable, they will have to be solved in the future. I am pointing out reasons why the won't be solved in the future.

I agree with this.

Back to where we started. Its a political problem, not a technical one.

[raja]

Re: Krugman Has His Backside Handed to Him

You just added new people to the town, so there was no drop in output at all. You seem unable to understand how you have tinkered with your thought experiment. You can't qualify this as a loss of a pizza establishment because 1 + 1 -1 = 1. You cannot add labor to the pool and call it a loss. I stand by my statement that its just not good economic theory at all. If the new pizza shop could not support itself, it means that the economic profits have been driven down to value for labor without economic rents caused by scarcity. It simple means their is a new labor pool.

Forget the pizza. Even though I think it's an excellent example, it does not seem to be to your taste.

The point is that millions of intelligent, industrious Chinese and others have entered into global competition, and they are willing to work for $2 an hour making the same products that we produce for $35 an hour. The result? The Chinese are going to get richer, and we are going to get poorer.
Now, if we could switch our jobs to products for which there is demand, and the Chinese can't make these products, then we wouldn't get poorer. But that's not going to happen.

Retirees will lower asset prices while other effects like monopolization will raise them.

I'm not sure what you mean by this.

Back to where we started. Its a political problem, not a technical one.

We need to get clear on what we are talking about.
The thread started with an attack on Krugman's economic analysis.
I said that the problem with Krugman is that he thinks there is a solution. But no matter what we do, we are going to get poorer. If we solve the political problems we will still get poorer, for the reasons I mentioned.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

Forget the pizza. Even though I think it's an excellent example, it does not seem to be to your taste.

Its not a matter of taste. Your equation was 1 + (1 - 1) which is 1 + 0 = 1.
Its also good to keep in mind the moral philosophy you are using which is either maximizing production, maximizing distribution or some other factor like risk/reward, progress vs conservatism( as in is it OK to have some individual suffering for the sake of progress). I am going on the assumption of a production majority model. Slavery is certainly good for the master but even a minority slave population violates my moral philosophy for example.

The point is that millions of intelligent, industrious Chinese and others have entered into global competition, and they are willing to work for $2 an hour making the same products that we produce for $35 an hour. The result? The Chinese are going to get richer, and we are going to get poorer.

Too simplistic. What will pay for that $2 an hour Chinese labor is what you should be asking. It would not be sustainable in in a labor model because we would have nothing to buy it with. We would soon not be able to afford the Chinese labor. We are paying for that with debt/reserve currency aka "unearned income" with no need for a labor force. Most Chinese will not be rich at all, only another special interest. Unless labor can keep its surplus, the $2 an hour laborer has another master which can come from anywhere.

Now, if we could switch our jobs to products for which there is demand, and the Chinese can't make these products, then we wouldn't get poorer. But that's not going to happen.

When ever you look at the cost of production, you look at the cost of overhead. What is most of our overhead? Its debt service from land/ponzi. So combined with the faux product of the reserve currency and debt overhead, this is why we cannot compete.

I'm not sure what you mean by this.

Retirees will tend to be sellers of assets rather than buyers and check the price. It will actually make US based assets cheaper and more competitive. I would expect an American worker who pays less for a house to bid less for an hour of work. Its also Why the Fed's asset bloating scheme has thus far halted any improvement in the general economy. I am not sure which planet they are on pricing housing out of the market of wages but...

We need to get clear on what we are talking about.
The thread started with an attack on Krugman's economic analysis.
I said that the problem with Krugman is that he thinks there is a solution. But no matter what we do, we are going to get poorer. If we solve the political problems we will still get poorer, for the reasons I mentioned.

There is a technical solution, as I keep saying. Its a simple formula.


If you want to lower employment, raise asset prices.

If you want to increase employment, lower asset prices.

What is going on is quite simple. Shifting wealth to the upper classes results in a lower propensity to consume, so we have idle capacity. The wealthy are not investing in more capacity so they are "investing" in wealth preservation which does not recirculate as demand for labor. Land, precious metals, and mineral rights and money flowing into them does not create demand for labor. It actually lowers demand for labor since the speculative values price them out of production. Worthless land never has negative equity. That is why pioneer states can rapidly increase wealth and wealthy nations can stagnate for quite some time.


As simply put by Henry George:


"
Therefore, the problem must be speculation in things that are not the product of labor. Yet it must be things needed for production. And finally, it must be things of fixed quantity.

The cause of recurring recessions must be speculation in land.
"

In other words what short circuits the product demand loop? In my book thats shifting wealth upward towards lower consumption and rent seeking.


If you want a simple pizza like model, which island would you rather swim towards, the one that you can use for nothing or the one that costs $1,000 a month rent?

Which one has more potential to remain idle? Land that has speculative value or one that has "no value"?

Every one will swim to the free island(China) and the costly island will remain idle(The West) until someone can grow enough coconuts to pay the rent. That won't happen with cheap coconuts from the free island. So either some rentier buys the free island and charges rent, or the other island drops in price. Its just that simple.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

I have to point out that perhaps the example of Germany is more in line with proving the case that currency regimes DO matter. What you have in Europe is essentially a currency peg that prevents devaluation to balance trade flows. Germany, being a more efficient and technologically based economy is running ongoing and chronic trade surpluses with its currency partners. Politics and Euro policy being what it is there was no way to balance trade.

No one can with 100% certainty say exchange rates affect trade to X dimensions. And when you try to pin them down on it the defenders of the current regime try to talk Forex instead of individual trades of the given trade partners. What you can say with 100% certainty is that it does matter and it does matter a lot.

To say otherwise is to say that price doesn't matter.

There are certainly other matters at work. No one can deny that. But to say price doesn't matter is to jump a shark that puts one rudderless in terms of economics. At least that is how it seems to me but I've been wrong before this.

Will

Just take it to the extreme. What would happen to a 50 person hunter gatherer clan if they abandoned barter and went on a "hard currency"? It would be impossible to trade even among themselves if they had no money. It would even make it difficult to do so if they had a trade deficit since they would have a depression. This would tend to make their assets cheap, and if they loss their means of production like land and resources it will more or less suck the hunter gather tribe dry.

Yeah I don't think I buy into Ricardian barter models so much. Finance is frictionless my foot.

[raja]

Re: Krugman Has His Backside Handed to Him

Too simplistic. What will pay for that $2 an hour Chinese labor is what you should be asking. It would not be sustainable in in a labor model because we would have nothing to buy it with. We would soon not be able to afford the Chinese labor. We are paying for that with debt/reserve currency aka "unearned income" with no need for a labor force. Most Chinese will not be rich at all, only another special interest. Unless labor can keep its surplus, the $2 an hour laborer has another master which can come from anywhere.

If you want to see who's buying Chinese products made by $2/hour labor, you need to look no further than Walmart.
The Chinese have gotten richer, and the US has gotten poorer.
What more evidence do you need?

When ever you look at the cost of production, you look at the cost of overhead. What is most of our overhead? Its debt service from land/ponzi. So combined with the faux product of the reserve currency and debt overhead, this is why we cannot compete.

Also, relative wages levels.

Retirees will tend to be sellers of assets rather than buyers and check the price. It will actually make US based assets cheaper and more competitive. I would expect an American worker who pays less for a house to bid less for an hour of work. Its also Why the Fed's asset bloating scheme has thus far halted any improvement in the general economy. I am not sure which planet they are on pricing housing out of the market of wages but...

This doesn't alter the fact that there are less workers supporting more retirees.

There is a technical solution, as I keep saying. Its a simple formula.
What is going on is quite simple. Shifting wealth to the upper classes results in a lower propensity to consume, so we have idle capacity. The wealthy are not investing in more capacity so they are "investing" in wealth preservation which does not recirculate as demand for labor. Land, precious metals, and mineral rights and money flowing into them does not create demand for labor. It actually lowers demand for labor since the speculative values price them out of production. Worthless land never has negative equity. That is why pioneer states can rapidly increase wealth and wealthy nations can stagnate for quite some time.

I don't think we're ever going to agree on this . . . so why don't we just agree to disagree?
Go ahead and take the last word, if you like . . . .

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

If you want to see who's buying Chinese products made by $2/hour labor, you need to look no further than Walmart.
The Chinese have gotten richer, and the US has gotten poorer.
What more evidence do you need?

Many Americans have gotten rich with China. I keep trying to point out that its a minority of special interests who benefit from this, bankers and out sourcing over here, and slave labor vendors over there.

Also, relative wages levels.

Not really. Wage levels are set by the expense of labor's subsistence. The subsistence of the average American is much higher because every product they make and buy is over high rent land which is siphoned off to the FIRE sector. So why look as wages when you can look at what sets the market price in wages?

This doesn't alter the fact that there are less workers supporting more retirees.

It alters economic rent. Since most workers don't collect rents its going to hit the small rentiers the hardest. That fact does not change either.

I don't think we're ever going to agree on this . . . so why don't we just agree to disagree?
Go ahead and take the last word, if you like . . . .

Ok

[raja]

Re: Krugman Has His Backside Handed to Him

Ok

I meant what I said about you having the last word, but something appeared in my InBox this morning that pertains to our discussion of demographics. I'll copy it below . . . without comment. These are excerpts. The whole article is good . . . .

http://danielamerman.com/articles/2012/OverC.html

In a major speech in October of 2006, Federal Reserve Chairman Ben Bernanke identified what he believed would be the single most important influence on the economy in the decades to come. He asserted that as the Baby Boom aged, the declining number of workers as a percentage of the population would likely decrease the growth rates for per capita GDP, decrease the growth rate in living standards, and decrease the growth rate in consumption.

Now, one might say that Bernanke missed the mark entirely, as he failed to anticipate the building financial crisis of 2007 that would lead to the near collapse of 2008, with disastrous consequences that still dominate the global economy today - and that would be correct. Bernanke did completely fail to foresee the changes that would shatter the economy under his watch.

Bernanke's blunder does not, however, make the major demographic problem that he spoke of go away, or lessen it. Indeed the problem is that the two are happening side by side, and both are powerful long term trends that may last for decades. The Boomers are aging, while the national debt is sky-high and climbing - and both will be true for many years to come.

The precise impact of an aging Baby Boom is harder to assess than debt overhangs, as this is not something that one can study over the centuries. It is a phenomenon of the early 21st century, being the result of the intersection of fundamental advances in medicine, the post-World War II economic and social environment, and the arrival of highly effective and convenient birth control in the 1960s.

That said, economists have given the assessment a try, and during the same month that Bernanke gave his speech, the Economist magazine published an article titled “The Slow Road Ahead". A number of economists were consulted about the economic impact of this upcoming fundamental demographic change, and the consensus was that there might be a new "speed limit" for economic growth of around 2.5% per year among the aging nations of the West. In other words, an ever-increasing ratio of retirees to younger workers was likely to lead to about a 1% decline from the 3.5% long-term average in the developed world, with this slow down persisting for decades.

So, the debt overhang is likely to lead to a decades-long reduction in economic growth of about 1.2% per year - if this overhang works out to be average. Separately, if economists' estimates are correct, an aging nation with a steadily decreasing percentage of people in their prime working years is likely to experience reduced economic growth over the long-term, with a shortfall of about 1% per year. Combine the two factors, and economic growth falls by 2.2% per year, from 3.5% to 1.3% per year, which is a 63% reduction in the growth rate.

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.
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A different perspective is that the ending economy after 23 years is only 61% of the size it would be with normal growth, meaning the average person sees a reduction of almost 40% in their income and standard of living, compared to normal economies (135/221 = 61%). To go back to our 1985 to 2008 example, if growth had been reduced by 2.2% per annum, then the median household income today would be about $30,000 per year instead of the current $50,000 per annum.

In other words, about 40% of the current US economy simply wouldn't exist.

.
.
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And if, on average, there is no gain in real wealth per person over the coming decades - then stock market valuation (in inflation-adjusted terms), retirement account values and the solvency of pension plans all implode together. Because they are all based upon a (deeply mistaken) belief that substantially positive economic growth is not only the most likely path but the only path ahead.

[gwynedd1]

Re: Krugman Has His Backside Handed to Him

I meant what I said about you having the last word, but something appeared in my InBox this morning that pertains to our discussion of demographics. I'll copy it below . . . without comment. These are excerpts. The whole article is good . . . .

OK but my first comment is its from Bernanke who certainly is not going to blame bank bailouts, and zero interest rate policy.

Fewer workers will cause a loss of real wealth. I am not arguing that. How could anyone argue that fewer workers will make more goods and services?( oh right that would be both political parties where one is in love with welfare while the other is in love with unearned income, neither of which makes a product). I am arguing it had nothing to do with the current crisis. It will also not fall on labor who will be high in demand. It will fall most heavily on those who have assets, particulaly those who cannot out last short and intermediate term cycles. In other words, the oligarcs will be just fine picking up the cheap assets of the lower asset income classes. We are seeing that now as more and more people rent. The petty land owner will be fewer where the large land owners will rent out more land. Its happening now.

[c1ue]

Re: Krugman Has His Backside Handed to Him

You believe Triffin's observation is a theory( one that hardly differs from MMT), which in casual conversation, the term "theory" is hardly descriptive since it can be as flimsy as parapsychology to established theories in physics. Yet you casually discuss a fictitious entity such as the interest of a sovereign state in "wanting" something as if a sovereign state is not just a legal construct of conflicting special interests. A country is no more a fact as something that can have desire than is Triffins dilemma. The question you should be asking is who wants what and where. Its easy to see a special controlling financial interest in the US can co-exist with a special controlling manufacturing interest in China, for example. Both certainly appear hostile to the majority interest. Its no different than an empire that keeps its vassals maintained by a well paid dictator. The minority benefits everywhere.

The difference between a theory/dilemma and a law is that Triffin's dilemma posits there is a conflict of interest - but does not state one way or the other the way the balance shifts.

Triffin's law, as stated by you, is that the balance will always fall to the benefit of international interests.

Do you understand the difference?

The point of using Germany as an example is that international interests do not always win.

As for your commentary on minority interests, it is hardly compelling because the interests of a minority in power will always be incentivized to help itself irregardless of the presence of a reserve currency. China can peg the RMB just as easily to any other nation's currency.