
Future Economists Will Probably Call This Decade the 'Longest Depression' - lutesfuentes
http://www.huffingtonpost.com/brad-delong/global-economic-depression_b_8924596.html
======
rm_-rf_slash
In the course of selling his New Deal to the impoverished American public,
president Franklin Delano Roosevelt pitched his reforms by stating: "It is
common sense to take a method and try it. If it fails, admit it frankly and
try another, but above all try something. The millions who are in want will
not stand by silently forever while the things to satisfy their needs are
within easy reach."

The most frustrating part of this "longest depression" is that in our
hyperconnected age, there more ideas than ever to at least try, from
guaranteed income to subsidized apprenticeships, yet our elected
representatives spend at least half of their time asking for money to run in
their next election, and nothing at all gets done. For at least the United
States, any substantial economic reform will require a corresponding
reconstruction of how our representatives campaign and are elected and held
responsible to the needs of their constituents, lest the economic engine be
left to muster no more than a tired sputter.

~~~
xlm1717
In my opinion, the most frustrating part is that despite our
hyperconnectedness, people still believe the propaganda that we're not in a
depression or that our leaders got us out of the recession. Future economists
will call the decade the "longest depression" not out of 20/20 hindsight, but
simply because there will no longer be a need to make things seem rosy.

~~~
mywittyname
The propaganda is the statement that we are in a depression. We are NOT in a
depression, nor a recession and have not been for several years. So, in fact,
historians will not at all call this period a depression.

More likely, they will look back and wonder why so many people thought things
were bad when, by all objective measurements, things were actually quite good.
Low inflation, low commodities prices, decent wage growth, cheap housing,
strong stock growth, a huge surplus of investment capital.

~~~
JBReefer
Does no one remember how negative everyone was at the height of the boom in
2007? We look back on that period as a time of incredible prosperity, but I
remember it was basically the same as today: everyone complaining about
everything.

------
mywittyname
First off, that prime age employment graph is a problem. The best way to lie
with a graph is to fuck with the scale, so unless your intentionally
misrepresenting data, your graphs should start at 0.

Secondly, his reasoning is, as he says,

"Back before 2008, I used to teach my students that during a disturbance in
the business cycle, we'd be 40 percent of the way back to normal in a year."

Yet, this has never been the case after a major crash. Not in 2008, nor '99,
'87, '78, etc. Compared to history, we are doing a bit better than previous
recoveries.

Sounds like he's just pissed off that the US is the doing well despite not
following his political beliefs regarding economic policy. It's like a
preacher on the street corner talking about how we are all on the path to
hell, despite all evidence to the contrary.

------
JimboOmega
We already have a "Long Depression":
[https://en.wikipedia.org/wiki/Long_Depression](https://en.wikipedia.org/wiki/Long_Depression)

There are some interesting parallels to the current time - that was the era of
the robber barons, for instance.

~~~
nerfhammer
Big difference was dependence on gold and/or silver for currency at the time.

------
paulpauper
Sounds like goalpost moving, where slightly mediocre growth becomes a
'depression'

The 2008 recession, while deep and sudden, was narrow, only lasting about 16
months until growth picked up, where it has remained. Hardly a decade.

Also, the authors seem to be cherry picking the bad data (weak wage growth,
China, shrinking labor force) and ignoring the good data such as exports,
consumer spending, robust S&P 500 profits & earnings, technological
innovation, stock market gains, etc.

 _Right now, we’re in a Goldilocks economy of modest growth, no stagnation,
tame inflation, and no meaningful economic headwinds. Some pundits like
Summers and Krugman bemoan how America’s economic growth is too anemic,
especially compared to the 40′s and 50′s, and that its best days are behind
it, but as I show here and in the graph below, US GDP growth has broken from
the pack, since 2008 exceeding pretty much all g-20 nations. Yeah, 2-3% GDP
growth ain’t great, but compared to pretty much everywhere else that has
either no growth (Japan, UK, France) or high-inflation growth (Turkey, India,
Brazil) – it’s pretty good._

source: [http://greyenlightenment.com/america-is-not-in-decline-
long-...](http://greyenlightenment.com/america-is-not-in-decline-long-post/)

 _And that is especially impressive for an economy as large as America. We’re
never going to get back to 40′s era growth, and that’s fine. Law of large
numbers and diminishing returns. It’s harder to grow an economy that is 5x
larger at the rate it was growing when it was 5x smaller.

Post-2008 GDP growth is pretty much back to the historical average, or at
least back to where it was in the late 90′s and 2000′s. Not hyper-speed
growth, but certainty not recessionary.

Recent real GDP (below) doesn’t differ too much from historical performance:_

[http://i.imgur.com/znVtqaH.jpg](http://i.imgur.com/znVtqaH.jpg)

Real US GDP growth is roughly back to where it was between 1997-2007, and no
one was complaining about stagnation back then.

------
RobertoG
"I was wrong. He was right."

That's an statement that you don't see frequently. Huge respect to professor
DeLong.

~~~
ci5er
I can take more evidence than has been accumulated over the last 5 years to
turn him around, but once he changes his mind, he's usually pretty up-front
about it and giving credit where it is due. You are right - it's a nice
feature of his character.

------
jrochkind1
> Back before 2008, I used to teach my students that during a disturbance in
> the business cycle, we'd be 40 percent of the way back to normal in a year.
> The long-run trend of economic growth, I would say, was barely affected by
> short-run business cycle disturbances. There would always be short-run
> bubbles and panics and inflations and recessions. They would press
> production and employment away from its long-run trend -- perhaps by as much
> as 5 percent. But they would be transitory.

Wait, how do you know this isn't the long-term trend now?

~~~
AnimalMuppet
This has bugged me for a while, too. People look at the trend from 2000-2008,
and think that it was the long-term trend. But we were blowing a bubble then;
why does anyone think that that growth rate was sustainable?

------
ddingus
It's the decade(s) where it took a really long time for us to figure out we
just can't have our cake and eat it too.

If we want to continue with our economic preferences toward growth and
capitalism, fine, but we also need to make sure the people at the bottom have
enough to contribute meaningfully too, or we blunt the potential in all of
that.

It really is like a field. Farmer grows some years of high yield, high drain
on the soil crops. Good times, until they aren't.

Greed may see sucking it dry as a good thing, but the expectation of high
profit at low investment just won't last. What happens when the bounty in a
rich, fertile soil is gone?

Tepid returns, that's what. Increases in risks and costs too.

Edit: One could seek new, fresh ground, and repeat this. At some point, there
is a lot of sour, drained ground with the winners all fighting over the ever
shrinking fertile ground remaining, a clear case of diminishing returns at the
macro level, despite many success stories suggesting otherwise.

On the other hand, either taking a little less, say by staggering crops or
resting ground, or reinvesting some of what is gained to keep the ground
healthy and fertile, act together and the bounty possible goes from an awesome
peak to something less, still good, but sustainable longer term. Wealth can
still be accumulated, but perhaps less liquid and larger amounts happen over
longer periods of time.

In a very general sense, this all feels a lot like placing blame and shifting
risks and costs around to avoid the more simple, direct and growing issue of
how many of us just aren't able to participate in the economy in a growth
meaningful way.

In this sense, disruption is like crack. Big gains are often had, and we like,
want and need those, but it's all just buying more time, not actually getting
at root causes. Because of that, many larger gains are offset by problem
growth and tepid demand growth, neither of which do any of us longer term
good.

And while each success appears to hint at an answer, we in a macro sense, just
can't seem to string enough of them together to make sustainable gains.

GDP limps along, while we all chase bright spots... and for many, standard of
living declines, despite some growth which should seemingly preserve at least
parity.

------
peter303
Decade recession, maybe, depression no. Depression is when few who want to
work have jobs and many dont have money for necessities. 80 years since the
last one. People may not be getting ahead like they used to, but few are
actually suffering.

------
roymurdock
This is a terrible article. It strikes me as too technical to do anything but
anger the casual reader (see the article's comment section for examples) and
too vague to say anything meaningful to the informed reader.

The only new information presented here is the professor's (extremely late)
admission that his strict adherence to a misguided school of theoretical
economics that no longer applied in the face of structural changes and non-
economic factors ("politics and ideology" as he repeats throughout the
article) was wrong. Great - how much did they pay you to put your brand name
behind this article in order to lend _The World Post_ , the Huffington Post's
new highbrow project, credence?

As for what the author says we should do:

 _What we need now is 1) debt relief to unwind the overhang and 2) much
tighter financial regulation to prevent the growth of new fragilities. And if
those prove inconsistent with full recovery, then we need massive government
spending on infrastructure and other investments financed by money printing
until full employment is reattained.

The second task will be one of political organization. For until politicians,
finance ministry technocrats and central bankers feel under pressure to
respond to and in fact internalize the diagnoses of Stiglitz, Eichengreen,
Wolf and others, our problems will remain, as Stiglitz puts it, "not rooted in
economics, but in politics and ideology."

And it is only after those ideological and political blockages have been
removed that the tasks of economic policy -- and then of shifting policy to
deal with the new problems that arise as consequences of fixing our current
economic policies -- can be seriously begun._

1) _debt relief to undwind the overhand_

First of all, which debt is he referring to? Which overhang?

Bank mortgage debt caused by people taking out stupid loans on stupid housing
projects, then walking away from that debt? That was already absolved and
nationalized by in 2008.

Federal government debt? So we're going to ask everyone (including our own
pension funds) who owns a treasury bond to forget that they have some claim
that the US gov promised to repay? Or should we continue with QE and currency
wars to try and devalue the dollar so that old debts become relatively less
expensive, and long-term interest rates continue to fall?

Student loan debt that cannot be discharged through bankruptcy? This one is
actually semi-reasonable, but would create a huge moral hazard for anyone
looking to invest in education. We should probably stop creating that debt in
the first place.

The debt that the captains of finance and industry owe to the average American
for leading their companies and the country in an irresponsible and
destructive fashion? Only one trader saw jail time post financial crisis -
Kareem Serageldin, a senior trader at Credit Suisse who is serving 30 months.
The rest have apparently absolved their debt through billions in fines paid
out by the shareholders of the companies they managed. [1]

2) _much tighter financial regulation_

We established the Financial Stability Board, which adopted Basel III capital
requirements, countercyclical capital buffers, surcharges for TBTF banks,
stricter liquidity coverage ratios, minor decentralization of TBTF banks,
enhancements to the terrible securitization model, etc. [2] What additional
regulation is the author calling for, specifically?

Not to mention that financial regulation is causing the banks to be unable to
lend out QE money! AKA restricting aggregate supply! So even if we were able
to boost aggregate demand, it would be met with banks shrugging and saying -
we need to keep more capital due to new regulation so we can't invest in your
business or provide you with a loan, sorry.

3) _massive government spending on infrastructure and other investments
financed by money printing until full employment is reattained_

Why would you return to Keynesian ideals when you've just admitted they were
wrong?! We've already "printed" all the money we need through QE. We then gave
it to the banks, who have subsequently parked it with the Federal Reserve,
earning interest on it due to the LACK OF AGGREGATE DEMAND that the author
describes in the first paragraph! It would make more sense for the Fed to
enact a _negative_ interest rate in order to spur the banks into loaning that
money out!

As for spending on infrastructure - what budgets should we cut to get the
funds? Social security and healthcare (~50% of budget [3])? Older voters would
destroy any candidate who would even suggest such a thing, as they very well
should. They contributed what the gov said was their fair share, they expect
to be paid back in their old age.

Defense department (17%)? Good luck getting that past war lobbies and a public
that's terrified of any mention of terrorism whether real or imagined. Other
mandatory (12%)? It's mandatory. Interest (6%)? Can't change without renegging
on bond contracts which would be terrifically destructive.

[1] [http://www.theatlantic.com/magazine/archive/2015/09/how-
wall...](http://www.theatlantic.com/magazine/archive/2015/09/how-wall-streets-
bankers-stayed-out-of-jail/399368/)

[2]
[https://www.imf.org/external/pubs/ft/wp/2014/wp1446.pdf](https://www.imf.org/external/pubs/ft/wp/2014/wp1446.pdf)

[3]
[https://en.wikipedia.org/wiki/United_States_federal_budget#/...](https://en.wikipedia.org/wiki/United_States_federal_budget#/media/File:U.S._Federal_Spending_-
_FY_2011.png)

~~~
someguydave
> Older voters would destroy any candidate who would even suggest such a
> thing, as they very well should. They contributed what the gov said was
> their fair share, they expect to be paid back in their old age.

So people have a moral ('fair' is a moral judgement word) right to unbounded
medical services because some politician told them in the past that they could
have things without paying for them? Would it be 'fair' for the youth of today
to pay 50% of their earnings (plus all existing taxes) to the government to
provide those services?

~~~
roymurdock
I'm 23. Do I think paying 50% of our budget on medicare and social security is
sustainable? No. Personally, I believe it to be completely unsustainable given
the lower birthrates, higher medical costs, higher levels of chronic disease
and obesity, much higher life expectancies.

Can I empathize with someone who paid into these programs with years of hard
work and is expecting the "fair" payout they were promised? Yes.

Am I making a value judgement of what is truly "fair"? No. That's completely
subjective and can be argued in favor of either side.

------
jjtheblunt
elephant in the room alert : huffingtonpost.com is a click farmer with
questionable content.

~~~
iolothebard
So point out where the article is wrong.

Argument fallacy alert:
[https://en.wikipedia.org/wiki/List_of_fallacies](https://en.wikipedia.org/wiki/List_of_fallacies)

------
kaonashi
A Solow-humper sees the error of his ways. It's the feel good hit of the new
year.

~~~
Mikeb85
Just curious, what do you think any of this has to do with Solow? Brad Delong
was mistaken about certain shocks within the framework of the 'Keynesian'
model - the Solow model is about how investment, capital and productivity
(enabled by technology) sets long-run output.

~~~
kaonashi
> Back before 2008, I used to teach my students that during a disturbance in
> the business cycle, we'd be 40 percent of the way back to normal in a year.
> The long-run trend of economic growth, I would say, was barely affected by
> short-run business cycle disturbances.

it was a stupid flip comment based on that, probably best it was downvoted

