Linking ≠ endorsement.
⇧ Ignored for Years, a Radical Economic Theory Is Gaining Converts – Bloomberg Business
This article is about THE issue of issues: monetary and banking reform.
What’s a shame is that it says, “… they don’t need to finance spending by collecting taxes, or even selling bonds” but doesn’t discuss that at all in the article.
The “they” there are nations that issue their own currency, such as the US.
The article goes on and on about deficits even though it had mentioned creating money without issuing bonds: without borrowing, without increasing the deficit.
Now I ask you, what is causing this gigantic mental blockage? Is it cognitive dissonance in reverse? Creating money without increasing the national debt is “too good to be true” (even though all top-flight economists know full well that it’s been done before even in the US via the real, original Greenbacks). Is that what they think? It’s probably what the Romers think if how they handled Gerald Friedman is any indication.
No one’s saying there are no limits. Real resources can be a constraint — how much labor is available to build that road? Taxes are an essential tool, to ensure demand for the currency and cool the economy if it overheats. But the MMTers argue there’s plenty of room to spend without triggering inflation.
That’s exactly right! Let’s do it.
Pointing to the failures in other nations is intellectually dishonest. We know what caused those failures and do not have to repeat them or invent new ways to fail.
What we need is total transparency about the economy and how it is financed. Then we need as much direct democracy as we can handle. It’s the people’s government, and we should know what’s going on and have the decision-making authority about where the money goes.
It would be a never-ending educational process. That’s a good thing. The people could handle it. It would be good for them.
What divides us is ignorance.
Anyway, I commend Michelle Jamrisko, the author, for attempting to delve into it. People have to start somewhere. I hope I’m helping to focus the issue: debt-free money, no deficits, no runaway inflation, just super growth by greater transparent and direct democracy.
⇧ USA uses TPP-like trade-court to kill massive Indian solar project / Boing Boing
Is this a good thing or not?
In a word, vague.
⇧ Xi Makes Party Faithful Toe Line as China Nears Key Juncture – Bloomberg Business
When it finally hits US mainstream media, such as Bloomberg, you know, “It begins.”
Since taking power three years ago, Xi’s government has reined in China’s Internet, televised confessions of prominent critics and detained five Hong Kong booksellers whose works criticized the party. The push has been accompanied by state media lauding Xi’s efforts to overhaul the economy and casting him as the avuncular hero of China’s masses, in what has been seen as a throwback to former leader Mao Zedong.
Qiao Mu, a media studies professor at Beijing Foreign Studies University barred from teaching in 2014 after advocating political reform, said the “political atmosphere now is probably at its most intense since 1989.” That’s the year that Chinese troops crushed pro-democracy protests in Tiananmen Square.
“The tightening up reflects a sense of siege — and this sense of siege is not a fantasy,” said Andrew Nathan, a political science professor at Columbia University who co-wrote “China’s New Rulers: The Secret Files.” “The regime indeed has many enemies and is creating more and more of them by virtue of its repressive methods.”
These are the things I’ve been talking about a great deal.
Where is the democracy promised by those who “opened China” from the West? It’s not better. It’s getting worse with every passing day.
What are US global corporations going to do about it, not give a damn because there’s still money to be made with China and then wonder why American youth questions capitalism?
⇧ Rain fills reservoirs, but California still suffers drought’s effects – SFGate
Many communities remain behind in water storage, groundwater levels are critically low after years of over-pumping, and California’s hills and valleys lack the usual moisture for plant and animal life.
“It really is a mixed bag now,” Anderson said. “Farther north has certainly improved, but for the southern half of the state, things continue to be dry, or at least not as wet as they like.”
El Nino will not last. The same force that’s flooded the southernmost Deep South is giving California this needed drink. Anthropogenic Global Warming is still alive and growing, getting more energy to slap humanity around for allowing those who are extremely self-centered to run things and call the shots solely for the sake of their false god: the almighty dollar.
Let’s change things and put money to work for everyone rather than killing the planet and ourselves in the process.
⇧ The 20 Richest Real Estate Barons In The World 2016 – Forbes
Despite the uncertainty roiling global financial markets, the real estate barons of the world are doing relatively well in 2016. Twenty-two people made the FORBES Billionaires List for the first time this year thanks to their real estate holdings, bringing the total number of the property-rich on the Forbes list to a whopping 184.
The majority of these uber-wealthy folks (we’re counting those who owe at least part of their fortunes to real estate) hail from the Asia-Pacific region, which boasts a collective 99 billionaires. Of that total, 42 are from China, 25 from Hong Kong, seven from India and six from Singapore.
The United States, with 44 billionaires, boasts the most property tycoons of any nation in the world.
As best I can tell, no type of commercial activity was ever codified in any City Hall document. The use of the house evolved as a gentlemen’s agreement of sorts with neighbors — use without fiat.
How about a bed and breakfast? That would be a bit more sedate. I suppose it would cramp their meetings though and might not bring in enough dollars.
⇧ Authorities Raid Home of Controversial Real Estate Agent | WNEP com
A search warrant on Beato’s home comes after months of investigating allegations that Beato took tens of thousands of dollars from people in Hazleton who thought they were buying a home.
It turns out they weren’t. Beato allegedly gave them fake deeds.
The district attorney’s office has led the investigation and as they have interviewed more and more victims, they are realizing this may be one of the biggest cases the office has investigated.
This article is pure laissez-faire spin. It does exactly what it criticizes: ignores. It ignores various instances of social democracy and the welfare state, the political economy Bernie Sanders is advocating (not Stalinism) and which social democracy has done very, very well for the people and without any of the Stalinism brought up by Lawrence J. McQuillan in what amounts to no more than fear-mongering at best and deliberate false propaganda being possible.
Watch the following video interview to see a prime, current example of a very socialistic society that is none of the things Lawrence suggests are inevitable with socialism. Also consider the social democracies of Northern Europe. Have they been what Lawrence describes? No.
Oh, here’s the Wiki article on the man who inspired the Kurdish leader, Abdullah Ocalan, who strikes deep fear into the heart of the increasingly fascistic leader of Turkey, Erdogan.
Note that Murray Bookchin split with the Stalinists. Does Bookchin sound scary? He doesn’t to me and neither does Bernie Sanders or Abdullah Ocalan or the people of Kurdish Syria speaking in the video.
And don’t tell me I don’t know anything about these issues. I studied the Stalinist purges in quite a bit of detail in addition and that was just for starters.
By the way, the New Deal created the US welfare state and was quite close to social democracy. It didn’t result in any of the things McQuillan is fear-mongering about. What, on the other hand, did rolling back the New Deal regulations do? It caused the Great Recession is all. If we had left the regulations in place and had continued regulating in the same spirit, the Great Recession/depression wouldn’t have happened. The New Deal and public spending completely crushed the Great Depression and prevented many bad recessions from happening, unlike how things were before the New Deal.
Lastly, how many tens of millions of people has imperialistic capitalism killed? McQuillan only wants us thinking about how many the anti-democratic “communists” killed while also wanting us to ignore all the democratic socialists out there who haven’t killed anyone and never wanted to and don’t want to in the future.
⇧ Obama expected to severely limit oil drilling in Arctic and Atlantic | Environment | The Guardian
… after protests from dozens of coastal tourist towns, which feared a repeat of BP’s oil disaster in the Gulf of Mexico, and opposition to drilling from the Democratic presidential contenders Hillary Clinton and Bernie Sanders, Georgia and the Carolinas were expected to remain closed to future drilling, sources familiar with the plans said.
We definitely do not need more drilling. We need solar, etc. (and not nuclear).
⇧ NYC homeless prefer streets to violent shelters – NY Daily News
While we bailout banksters (living in the decadent lap of luxury) to the tune of tens of trillions of dollars, we leave others drowning in utterly nightmarish conditions.
“It’s very hostile,” she told the Daily News. “Some of these women have mental traumas. They need help, the help of professionals.”
The government should create the debt-free money needed to construct and operate very high-quality places to help all of these people live decent lives. At least we should try and not stop trying. Improvements would be well worth it. There’s absolutely no reasonable justification for not trying.
⇧ One person injured, rescued from balcony in downtown Denver fire – The Denver Post
One person was injured in a downtown Denver apartment fire Tuesday morning, officials said.
⇧ As home builder sentiment treads water, calls for more construction intensify – MarketWatch
Even though the builder group sees “a steady firming of the single-family sector in 2016,” according to a release, builder members continue to report trouble obtaining lots and workers.
There aren’t enough skills-training programs, and needed land should be subsidized. Build affordable housing. If you’re opposed to socialism, we could still give private builders a decent profit for doing it.
⇧ U.S. producer prices fall; unchanged from a year ago | Reuters
The data indicate no aggregated inflationary pressure.
“Housing prices are shaped by market forces,” said Liu Cigui, governor of southern China’sHainan province, adding that if housing prices are rising too quickly because of strong demand, the local authorities should increase supply.
Government statistics show that while housing sales rebounded last year, most of the gains were recorded in large cities, leaving smaller cities saddled with hefty inventories.
Real-estate investment in hundreds of smaller cities has declined as builders become more cautious in oversupplied markets. This has been a drag on the broader economy, lowering demand for everything from cement and steel to furniture.
In some overbuilt cities in inland provinces, developers estimate that they would need seven to eight years to work through their current housing stock.
Nice planning, not.
⇧ Is America Facing Another Real Estate Bubble? | Seeking Alpha
The median household income in the United States was $57,936 in 2007 and $53,657 in 2014, according to DepartmentofNumbers.com. The average home in the U.S. cost $247,900 in 2007 and $278,800 in January 2016, according to the U.S. Census Bureau. The average new home in the U.S. cost $365,700 in January 2016.
Hanson is absolutely right. The average American household has less money, yet the average house costs more, which means something has to give. …
… Hanson actually thinks that there is also a rent bubble, and he notes that rents in Phoenix are now so high that over 50% of the households in that city cannot afford a two-bedroom apartment.
We are not in a bubble. The demand is really for housing. It is not about buying from a highly leveraged position for property-value appreciation. It is a supply issue. There isn’t enough rightly sized housing, period.
⇧ Seattle housing market is ‘driven by true demand and true limited supply’ – Local News | MyNorthwest com
You’d think I had read this before writing my commentary on Mark Hanson’s views above, but, no.
Gudell [Zillow’s Chief Economist, Svenja Gudell] tells KIRO Radio there are distinct signs that signify a housing bubble. One is speculation, or people buying homes just for the investment.
“I don’t think we’re seeing a ton of speculation in the Seattle market. People actually want to live in these homes that they’re searching for,” she said.
Of course, my commentary is more refined in that I differentiated solely based upon appreciation. People were over buying and living in houses they hoped would endlessly appreciate to fund their growing consumer spending and debt. Then came the crash.
According to Zillow’s number, overall metro Atlanta prices hit bottom in April 2012 and have risen 35.1 percent since then. Atlanta ranks 17th among the nation’s metro areas, according to Zillow.
Is it a bubble? No, not yet.
⇧ How Home Energy Modeling Will Transform the Real Estate and Solar Sectors | Greentech Media
Over the last decade, Tendril has applied its TrueHome Simulation Model to behavioral energy-efficiency programs, utility customer engagement initiatives, and, most recently, customer acquisition for things like community solar.
The company is now using that model to create a library of energy-related content for markets where data access is limited, or hasn’t been effectively harnessed to improve the customer experience.
Just to be clear, these people don’t actually have the fine details about each home.
⇧ Understanding Title Insurance: How to Read a Preliminary Title Commitment – REtipster com
Seth doesn’t date his posts because he wants them to appear timeless and doesn’t want people immediately leaving just because a post is a bit old (but may still contain valid/current info rather than being outdated due to changed laws, etc.). This one is from March 7, 2016. It’s current as of my posting, which shows the posting date and includes it in the title.
I don’t link to his articles without checking the posting date because of the inherent issues just mentioned above.
… there is a small subset of real estate investors who are literally able to buy properties for a few hundred dollars (say, $100 — $500), and then flip them for a few thousand dollars ($1,000 — $5,000)… and when you’re talking about dollar amounts this small (coupled with the fact that a title insurance policy almost never costs less than $300 — $500), it’s not always easy to justify paying more for title insurance than for the property itself.
⇧ Stanley Fischer and Lael Brainard Are Battling for Yellen’s Soul – Bloomberg Business
Tim rates Bloomberg:
The twist is that Brainard and her allies are shifting focus away from “resource utilization” toward “inflation expectations.”
The belief that the Fed policy can diverge significantly from the rest of the world has been called into question.
I hold that, that second point is the most important because Fed policy cannot diverge significantly from the rest of the world, at least not without huge changes in banking and our monetary system, which isn’t likely soon enough for the Fed to tighten much and get away with it even in the midterm.
⇧ South Loop Boom Continues with Two Projects Heading to Plan Commission – Curbed Chicago
While Chicago’s West Loop was this month’s big winner with three large projects headed to next week’s Plan Commission meeting at City Hall, the booming South Loop neighborhood is showing no sign of slowing its current constriction craze with two new highrise proposals of its own up for official review.
⇧ Austin Peay bans hoverboards on campus
Smart move, but slow to have been taken:
Self-balancing scooters, also known as hoverboards, are now prohibited on Austin Peay State University’s campus.
Have you banned them on your properties yet? If not, why not?
The Mississippi State Department of Health (MSDH) reminds all residents affected by recent flooding that there are precautions to take when returning home and cleaning up after a storm ….
⇧ On Trade, Angry Voters Have a Point – The New York Times
I usually agree with Eduardo Porter, but not this time.
In a recent study, three economists — David Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon Hanson at the University of California, San Diego — raised a profound challenge to all of us brought up to believe that economies quickly recover from trade shocks. In theory, a developed industrial country like the United States adjusts to import competition by moving workers into more advanced industries that can successfully compete in global markets.
They examined the experience of American workers after China erupted onto world markets some two decades ago. The presumed adjustment, they concluded, never happened. Or at least hasn’t happened yet. Wages remain low and unemployment high in the most affected local job markets. Nationally, there is no sign of offsetting job gains elsewhere in the economy. What’s more, they found that sagging wages in local labor markets exposed to Chinese competition reduced earnings by $213 per adult per year.
The United States might have leaned against China’s export-led strategy, they argue, perhaps by insisting more forcefully that Beijing let its currency rise as its trade surplus swelled. It might have tried to foster the cutting-edge industries of the future, as government had done so many times before, encouraging the shift from textiles to jumbo jets and from toys to semiconductors.
What Washington did, instead, was hitch the nation’s future to housing and finance. But Wall Street, instead of spreading prosperity, delivered the worst recession the world had seen since the 1930s. Even at best, they write, the transformation of banking and finance has “produced nothing (or exceedingly little) of value.”
…. Tearing up existing trade agreements and retreating behi nd high tariff barriers — as Mr. Trump, and perhaps Mr. Sanders, would have it — would be immensely unproductive.
“… immensely unproductive”? That depends on the conditions for new agreements. The existing agreements were negotiated in bad faith, under false pretenses, that damaged not only American workers but also the global environment while solidifying the iron grip of various dictatorships around the world.
⇧ Top 8 Issues Found In Home Inspections (Infographic) – Cincinnati and Northern Kentucky Real Estate
Don’t fail to scroll down in the article, as there’s more than just the graphics at the top.
Electrical Issues are the number one issue to be on the lookout for as they are one of the most common problems found by home inspectors. You should be checking to make sure all your electrical outlets work properly, that there are no defective electrical outlets, and that all GFCI outlets work properly. Burnt out light bulbs should be replaced and any electrical switches that no longer work should be looked at to determine the problem and repaired.
⇧ Two hundred budget surprises: A new IMF dataset | VOX, CEPR’s Policy Portal
Political pressure, public opinion, or moral obligations can lead governments to recapitalise struggling banks, but also to cover the debts of local authorities or state-owned enterprises when these are unable to pay. … in most cases, taxpayers only know about them when it’s too late; that is, when these liabilities are no longer ‘potential’ but ‘actual’.
… we find that support to the financial sector, including bailouts, accounts for the largest share of contingent liability costs …. …
… our analysis shows that liabilities tend to materialise after periods of high growth and coincide with low-growth periods and banking crises. …
Countries should build strong institutions to avoid the emergence of these contingent liabilities in the first place. This means better governance at the local government level, in state owned-enterprises, and public-private partnerships. It also means stronger supervision and better resolution regimes for financial sector institutions to avoid the taxpayer having to pay for financial sector bailouts, the most costly source of liabilities.
Lastly, governments need to put in place more transparent and better arrangements for disclosing and monitoring their hidden liabilities. In particular, fiscal frameworks should be strengthened to enhance discipline and limit the excessive growth of contingent liabilities. This is particularly important because the evidence shows that these hidden deficits tend to emerge in times of financial distress when public finances are the weakest.
All of that assumes, at best, a mixed economy where the government is financed via borrowing rather than creating debt-free money itself.
⇧ The boom, not the slump, is the time for austerity – Guardian Letters — Prime Economics
As Keynes argued: the boom, not the slump, is the time for austerity. It is that simple.
⇧ Globalization and Growth – The New York Times
Look at Mexico, which did a radical trade liberalization in 1985-88, then joined NAFTA. It has seen a transformation of its economy in many ways; it has gone from an economy that didn’t export much besides oil and tourism to a major manufacturing export power. And the effect on development has been … undewhelming.
Paul, how much of the profits are generally spread throughout the population as opposed to concentrated in billionaire hands? That’s the rub.
⇧ Return of the Undeserving Poor – The New York Times
… poor whites are moral failures, and they should move to where there are opportunities (where?) [and with what money?]. It’s really extraordinary.
Oh, and lots of swipes at food stamps, welfare programs, disability insurance (which conservatives insist is riddled with fraud, despite lots of evidence to the contrary.)
It’s surely worth noting that other advanced countries, with much more generous welfare states, aren’t showing anything like the kind of social collapse we’re seeing in the U.S. heartland.
⇧ Irish Luck or Just Good Timing, These Home Buyers are Rolling in the Green | Zillow Porchlight
… a buyer who purchased a home in the Las Vegas metro in January 2012 has seen their home value increase an average of 75 percent.
One needs to be able to buy to reap. Where did the money come from? Was it savings?
⇧ How to Safely Navigate Landlord-Tenant Laws as a Real Estate Investor
You may have read … that the lease reigns supreme, but the landlord-tenant laws of your state trump the lease.
⇧ Central banks beat Bitcoin at own game with rival supercurrency
Finally, people are starting to really think.
RSCoin may be irresistible for central banks. Dr Danezis said it is allows them to turn the money tap on and off with calibrated precision, and lets them track the sort of counterparty liabilities that nearly blew up the financial system during the Lehman crisis. “There would be instant visibility. They could react very quickly in an emergency, ” he said.
“Monetary-and-Banking-Reform Platform for The United States”: Here
⇧ February breaks global temperature records by ‘shocking’ amount | Environment | The Guardian
This is why I kept warning the naysayers, the AGW deniers, that they haven’t seen anything yet and to wait until the next El Nino hits, which it now has.
What Global Warming? This Global Warming!:
“This result is a true shocker, and yet another reminder of the incessant long-term rise in global temperature resulting from human-produced greenhouse gases,” said Masters and Henson.
… It is in line with our expectations that due to the continuing effect of greenhouse gas emissions, combined with the effects of El Niño on top, 2016 is likely to beat 2015 as the warmest year on record.”
Fossil fuel-burning and the strong El Niño pushed CO2 levels up by 3.05 parts per million (ppm) to 402.6 ppm compared to 2014. “CO2 levels are increasing faster than they have in hundreds of thousands of years,” said Pieter Tans, lead scientist at Noaa’s Global Greenhouse Gas Reference Network. “It’s explosive compared to natural processes.”
⇧ Mineworkers’ protests shake Chinese leaders
This is what I’ve been suggesting would happen. It has been happening more and more.
This confirms the worst fears of the one-party regime that workers’ anger can soon be directed against the political regime and not just against local bosses for creating these problems.
… China’s news media have of course refused to report on the protests. They fear that the Shuangyashan workers’ action could inspire other groups to take to the streets. Despite the censors’ efforts to hide the news about Shuangyashan, this has been among the top trending topics on social media in China.
At the same time, as graphically shown in amateur videos, the provincial authorities mobilised a huge contingent of armed police to forcibly disperse the protests. The government of Shuangyashan warned in a statement on its website that it would “strike firmly” against unrest such as “blocking state railway lines, disrupting production activities, organising joint actions and picking quarrels”. This clearly shows the CCP regime’s fears that strikes and “joint actions” by workers could spread.
The Chinese dictatorship, which serves the interests of the billionaires who have enriched themselves during the past three decades of capitalist restoration, wants us to believe that large scale closures and killing off the ‘zombies’ is the only way out. Xi Jinping’s attitude was spelt out at the NPC meeting on Monday 7 March, when he said Longmay must “face the market”. This was reported on the company’s website.
The socialist approach is that workers’ should not pay for this crisis. …
Socialists argue that the transition to alternative energy must be planned and managed democratically, not by bureaucratic diktat, but through democratic control and management of major companies, banks and natural resources by employees themselves and working class communities. …
The strike in Shuangyashan is an important sign of what is happening in China. I t comes at a time when the number of workers’ protests is soaring, with 90 percent of labour conflicts linked to wage arrears or non-payment of social entitlements such as housing and pension funds.
The northeast, including Heilongjiang, has been the scene of huge workers’ struggles in the not-so-distant past. In 2002, tens of thousands of workers in coal, oil and metal industries protested against redundancies, even launching for a short period an independent trade union. That movement was brutally crushed by the CCP, with workers’ leaders imprisoned. At that time the CCP regime under former premier Zhu Rongji presided over mass downsizing and privatisation of state-owned enterprises. Around 40 million state sector workers lost their jobs between 1997-2002, in a reform that was praised by the global capitalists and held up as a model for China’s current rulers to follow.
Today, Xi Jinping and his government are preparing a new wave of downsizing and layoffs aimed at the ‘zombie’ companies. They say this will be “gradual” and insist it won’t be on the same scale as the job destruction under premier Zhu. …
This region is already a social powder keg. … There are voices warning that the working class, not least in the hard-hit northeast, will rise up to fight these draconian cutbacks. Because the gap between rich and poor is much wider than in the late 1990s, and the global economy no longer offers new markets and sources of growth, the mood of resistance can be even more determined than it was at that time. The idea of an independent trade union movement in China, which was briefly realised in the mass protests of 2002, will be resurrected as an unstoppable force in the period we are now entering.
It’s time for the one-party dictatorship of China to end! It’s time for all other nations that are striving for democratic rule to stand up against the violent oppression and backwardness being led by the dictator, Xi. It’s time for the world’s major corporations, including those in China, to likewise stand up.
China needs reform. That reform is democracy. All the so-called economic and financial reforms without instituting complete democracy in China are merely distractions from the central issue.
The CWI opposes the billionaire-dominated CCP dictatorship, which has made China the ‘Sweatshop of the World’ with one of the most extreme wealth gaps on the planet. We stand for the creation of fighting independent trade unions to organise workers in the fight against capitalist exploitation: for an 8-hour working day, huge increases in wages, universal pension cover, and secure jobs instead of irregular, outsourced, and agency labour.
We link this to the fight for immediate and full democratic rights, while rejecting the squeamish ‘gradual’ approach of China’s liberals who fear revolutionary change while also swallowing the myth that democracy and capitalist economics are inseparable.
⇧ Working-Class Whites Have Moral Responsibilities — In Defense of Kevin Williamson
I guess this is the post Paul Krugman meant and concerning which I added my editorial comment, “With what money?”
The thinking of people who right such articles is probably that those who worked under the great New Deal programs, the WPA and the CCC, were on the dole.
Immediately after the onset of the Great Recession, the US should have embarked upon a new New Deal, a New Deal 2.0, a New Deal on steroids, a New Deal just as if the US were on a real old-fashioned wartime footing only without the war. The recession would have ended quickly.
So, these guys think people should just rent U-Hauls and pull out on those public roads, those socialist roads, some built during the New Deal no doubt, and just travel until they find good jobs, as if there are sure to be good jobs waiting for them; and, what do they do in the meantime, knock on doors asking housewives who aren’t home anymore if there are any chores that need doing in exchange for some food? Why in the world would we want to put people through that when the government, the big, bad government, could simply fire up the public sector with debt-free money?
Oh, I forgot. “It’s too good to be true” that the government could do that, even though the government has fired up the public-job creation before and also fired up the debt-free money printing presses before and, wait for it, without causing hyper-inflation.
Instead of whining about all the unemployed people, how about we stop all the whining about the public sector employing those people in highly productive work and training them to do it: like fixing all the broken infrastructure all over the place?
When I was a boy, I remember all the WPA stamps in the sidewalks in front of my house and on the libraries and bridges, etc., all over the country. I remember asking my dad what that stamp stood for and marveling at how great the USA is (was) that we did that. Of course that was back when Republican President Eisenhower was building all the superhighways across the country that my family traveled on seeing that great nation, from sea to shining sea with brotherhood for all; but, I digress.
Hat tip to Mark Thoma for the link. Great aggregator Mark is. Almost as good as I am. Ha! Just kidding. He specializes, as do I but in slightly different fields.
⇧ Economic Research | What’s Up with Wage Growth?
“… this time is different.”
We find that cyclical components, such as the entry of low-wage workers to full-time jobs, have combined with secular components, specifically the exit of higher-wage retirees, to hold down recent measures of overall wage growth.
Standard economic theory tells us that wage growth and unemployment are intimately linked. Wage growth slows when the unemployment rate rises and increases when the unemployment rate falls. The experience since the Great Recession has been very different. …
Overall, our results suggest that changes in the composition of employment have had a significant impact on wage dynamics over the past seven years. During the recession, compositional changes served to prop up wage growth despite the large increase in labor market slack. As the labor market has recovered, this pattern has reversed. Compositional changes are now a drag on aggregate wage growth. Decomposing this drag, we show it has both cyclical components, such as the entry of low-wage workers, and secular components, such as the exit of higher-wage retirees. Many of the patterns exhibited throughout the recent business cycle are part of the normal dynamics of recession and recovery. However, the size of the Great Recession and the addition of the aging of the baby boom mean this time is different.
⇧ Gerald Friedman Responds to the Romers on the Sanders Plan: Different Models, Different Politics | naked capitalism
Why not have a period where high employment raises output by drawing more into the labor force, and by upgrading skills, promoting investment, and raising productivity through learning-by-doing? If recession induces a decline in productivity, could a boom raise productivity growth through induced investment in equipment and facilities, and when employers seek to increase the efficiency of their operations to reap profits from expanding sales opportunities? This is a model consistent with some of the giants in the economics profession, including not only Keynes, Kaldor, and Verdoorn, and Schumpeter.
While economists from different perspectives will differ on these fundamental issues, we have experience in the United States that demonstrates the lasting effect of government stimulus spending. Emerging from the depths of the Great Depression, New Deal stimulus spending (including monetary easing) nearly doubled the GDP growth rate from pre-1929 levels to 7% per year, 1933-40, and nearly 10% a year from 1933-44; between the 1929 peak and 1944, output grew to a level 25% higher than it would have been at the pre-1929 growth rate. Active Keynesian policy maintained faster growth rates for the next quarter century as well. From 1947-73, the unemployment rate averaged 4.7% and annual GDP growth averaged 4.0%; output in 1973 was 13% higher than it would have been at earlier growth rates. Only when we abandoned Keynesian policies after 1973 did growth rates fall. From 1973-2014, annual growth has averaged only 2.6%, almost a full percentage point below the pre-1929 rate, while unemployment has risen to 6.5%. Because of the slowing of growth rates after jettisoning Keynesian policies, output in 2007 was almost 30% less than it would have been at the growth rates of the 1947-73 period.
Economic models matter because they guide policy. For a time after World War II, we had effective economic policy which reduced unemployment and raised growth rates. W e turned our backs on this success at the suggestion of economists who adopted older, Classical models premised on assumptions of full employment and exogenously determined growth.
Did Paul Krugman not read this? To my knowledge, he never addressed Gerald Friedman’s response to all the attacks on him, cheer led by Paul.
The reason for that, I believe, was crass politics. The dirty work was done. Gerald Friedman was trashed in the mainstream. Why give Gerald any room in the mainstream to express his counter views? After all, that would only help Bernie Sanders against Paul’s candidate, Hillary Clinton. So much for intellectual honesty, at least it appears that way to me (so far).
It would be pretty late for the Gerald Friedman attackers to respond to Gerald, but better late than never (or have I missed their responses?).
⇧ Antonio Fatas on the Global Economy: ECB: I cannot do whatever it takes
… the zero lower bound trap is a real one. In the absence of aggressive fiscal policy or a sudden and large improvement in the world economy, the ECB is going to have a hard time reaching its inflation target or helping the Euro zone economy return to normal growth rates.
⇧ The Fear Factor in Global Markets by Kenneth Rogoff – Project Syndicate
Some say that governments did not do enough to stoke demand. Although that is true, it is not the whole story. The biggest problem burdening the world today is most countries’ abject failure to implement structural reforms. With productivity growth at least temporarily stuck in low gear, and global population in long-term decline, the supply side, not lack of demand, is the real constraint in advanced economies.
I disagree. It is both.
⇧ Spending on public higher education overlooks net benefits as investment in state’s future | EurekAlert! Science News
McMahon concluded that public education in Illinois contributes to investment returns of 9.5 percent for K-12; 15.3 percent for community college; and 13.4 percent for university, respectively, for every dollar that’s spent — returns that are well above the 7.2 percent the money would have earned if invested in an index fund that tracked returns of the S&P 500, McMahon noted.
“A major opportunity being missed is estimating the effects of higher education on state tax revenues and on budgeted state tax costs for health care, welfare, child support and the criminal justice system,” McMahon said. “Beyond these state budget savings, I also found about a 30 percent total return that includes these wider health and other benefits to statewide development.”
Not fully funding free, public education through college is myopic.
⇧ Wage inequality continued its 35-year rise in 2015 | Economic Policy Institute
The system is rigged by, and for, the richest of the rich. There’s no doubt about it.
Over the last three-and-a-half decades, rising inequality has been a defining feature of the American economy. The way rising inequality has directly affected most Americans is through sluggish hourly wage growth in recent decades, despite an expanding and increasingly productive economy. For example, had all workers’ wages risen in line with productivity, as they did in the three decades following World War II, an American earning around $50,000 today would instead be making close to $75,000. A hugely disproportionate share of economic gains from rising productivity is going to the top 1 percent and to corporate profits, instead of to ordinary workers—who are more productive and educated than ever. This rising inequality is largely the result of big corporations and the wealthy rewriting the rules of the economy to stack the deck in their favor. This has prevented the benefits of productivity growth from “trickling down” to reach most households.
Unfortunately, although inflation-adjusted wages grew across the board in 2015 (due to a sharp dip in inflation), the trend of rising wage inequality continued unabated last year. This paper begins by detailing the most up-to-date hourly wage trends through 2015 and then examines the continued growth in inequality that began in the late 1970s. This rising inequality is confirmed by the latest wage data, analyzed across the wage distribution and education categories, including striking differences by race and gender.
… 2015 saw overall real wage gains driven by a dip in inflation. It also saw a pronounced increase in wage inequality. Larger gains in real wages were clearly concentrated at the top of wage distributions, with the exception of 10th percentile gains associated with state-level minimum-wage increases. Growth was faster for male workers and white workers, particularly at the top of the wage distributi on, which continued to exacerbate racial, ethnic, and gender wage gaps. Wages for those with additional schooling remain higher than those with less, though the college premium has remained fairly stable over the last few years.
Real wage growth in 2015 was driven by falling commodity prices and not by accelerating nominal wage growth. This is important, as the Federal Reserve regularly analyzes wage trends in search of inflationary pressures. If the Federal Reserve makes decisions based on the data, it is clear that the United States is not in a period of inflation-spurring wage growth. And, for the vast majority of workers to experience stronger and more durable wage growth, the Federal Reserve needs to let the economy continue to recover. In lieu of stronger bargaining power elsewhere, full employment is one of the remaining levers that will allow most workers to see wage increases, as employers will have to pay more to attract and retain the workers they need. That lever is most important for workers at the bottom of the wage distribution (Gould, Davis, and Kimball 2015). To see strong broad-based wage growth outside of the tightest of labor markets, policymakers could strengthen labor standards, such as by raising the minimum wage, expanding eligibility for overtime pay, and protecting and strengthening workers’ right to bargain collectively for higher wages and benefits.
⇧ EconoMonitor : Ed Dolan’s Econ Blog – The Great Bipartisan War on Free Trade
Ed Dolan’s food for thought about “protectionism”:
… if we narrow our focus to the auto industry, we see that after a big dip during the recession, US auto output has recovered to its pre-NAFTA level. Yet, because productivity has risen, the number of automotive jobs remains 40 percent below the 1994 level.
Presumably, productivity would have grown even faster if competition from imports had not put downward pressure on autoworkers’ wages, easing the pressure for ever-greater automation.
In short, there is a story here about trade and jobs, but it is more nuanced than the one Sanders and Trump tell. Politicians may promise that erecting barriers to trade will bring back both the factory wages and the jobs of the past, but that is fantasy. Protectionism might raise the share of manufacturing in US GDP, but in many cases, the beneficiaries would be robots, not flesh and blood workers. And in the process, the three-quarters of the labor force that would remain in the service sector, many of them working for low pay, would find their standard of living further eroded by higher import prices.
… one study found that a tariff imposed on Chinese tires in 2009 saved 1,200 American jobs, but did so at a cost to $1.1 billion in higher prices to American consumers. That comes to more than $800,000 per tire worker’s job. And it does not even try to account for the fact that consumers, after paying more for tires, had less to spend on other goods, meaning that American jobs in other sectors were threatened.
It would be far more reasonable to employ direct forms of aid. Retraining, adjustment assistance to workers or employers, income support, or wage subsidies are some of the possible remedies. None would come close to costing $800,000 per job.
Ed, however, doesn’t mention exploitation and anti-democratic tendencies in so many of America’s “trading partners,” such as China. He doesn’t mention the huge global costs that come back to haunt America in the form of global pollution because high US standards were not exported with the American jobs that were shipped across the border and out of the country. He also doesn’t mention how capitalist constantly move employment to the lowest paying places they can get away with in terms of logistics and a few other aspects. The issue of dictatorships doesn’t seem to matter much, or is it that the US still actually favors dictatorships so long as they are our puppets or duped, as the Chinese have been?
⇧ Indianapolis man convicted of murder in home explosion | The Modesto Bee
An Indianapolis man was convicted of murder, arson and insurance fraud … for his role in a 2012 house explosion that killed two neighbors and devastated a subdivision in the southern part of the city.
⇧ Daughter gets 12 years for burning down mom’s house – Connecticut Post
A Brookfield woman was sentenced … to 12 years in prison for setting her mother’s Stratford home on fire so they could collect the insurance money.
⇧ Construction Material Prices Continue Free Fall in February
“Weak global growth and the prospects of a strengthening U.S. dollar have helped suppress commodity and therefore material prices,” said ABC Chief Economist Anirban Basu. “The February PPI data do not reflect the more recent increases in various commodity prices, ranging in oil to iron ore, and it is quite likely that in construction materials prices will rebound some in March. However, a significant run up in prices is unlikely in the coming months as little has changed to support stronger commodity prices.
⇧ Scientists Predict Termite Risk in South Florida to Grow
… University of Florida entomologists are predicting that subterranean termite activity will expand, placing half the structures in South Florida at risk of infestation by 2040.
⇧ Louisiana and Mississippi Hit With Unusually Widespread Flooding
Downpours…affecting Louisiana, Mississippi, Arkansas, Tennessee and Alabama — submerged roads and cars, washed out bridges and forced residents to flee homes.
…three people have died in Louisiana….
MEMA reported major damage to 95 homes, minor damage to 277 others, with reports still coming in from 41 of the state’s 82 counties.
⇧ Pollution, Drought, El Niño Leading to Collapse of Florida’s Coastal Environments
Central Florida’s Indian River Lagoon, North Florida’s Apalachicola Bay and a trio of coastal estuaries in South Florida are in the throes of ecosystem collapses that threaten sea grass, fisheries, recreation and local economies.
…chronic pollution and crippled drainage has been compounded by drought in recent years and El Niño….
A 55-year-old man has been charged in connection to fire at a Winchester apartment building … that killed three and injured at least five.