
The Economy Got Off to a Historically Bad Start in 2014 - ryan_j_naughton
http://fivethirtyeight.com/datalab/the-economy-got-off-to-a-historically-bad-start-in-2014/
======
nostromo
I'm starting to wonder if the Federal Reserve is no longer an effective tool
for job creation.

After years of propping up the economy and expanding the supply of money, we
have very little to show for it on "main street." We have booming real-estate
prices in some cities, a growing stock market, and lots of cheap money flowing
into the hands of the wealthy -- but most regular folks have been completely
shut out of this recovery.

Imagine if in 2009, instead of using the traditional means to expand monetary
supply, we just started sending checks to all citizens. It seems we're still
waiting for the trickle down effect to kick in from the Fed's stimulus. Why
are we waiting for banks to lend and businesses to hire? If the goal is to
prime the economic pump with an influx of new money, put that money in the
hands of people who will actually go out and buy something.

~~~
jacobolus
Just sending checks to all citizens is politically difficult, because it
starts conversations about “class warfare” and “socialism”, and implies that
the federal government should have a policy of explicit wealth redistribution,
rather than the current hodge-podge of means tested welfare programs and
monetary policy tools.

But to answer your question: yes, we’d increase liquidity, reduce unemployment
and dramatically improve the lives of basically everyone in the society if we
taxed capital gains as income, restored inheritance taxes to historical
levels, raised the top marginal income tax rates, and closed various corporate
tax loopholes, and then just took the resulting pool of cash and distributed
it equally among citizens.

In the long term, the great-great grandchildren of today’s billionaires would
probably end up richer, too, since the whole society would be richer.

~~~
nostromo
Let's put aside the Federal Government (and taxes and spending) for a moment
and focus on the Federal Reserve.

The Federal Reserve printed a large amount of money in response to the crisis.
(That was a silent tax on anyone holding cash.) To inject this money into the
economy, they bought a bunch of securities. My question is simply: why use
asset buying as a vehicle for injecting money into the economy and not cash to
citizens? Cash to citizens seems more fair than picking winners and losers and
propping up assets that would otherwise be worth much less. It seems the
Federal Reserve's strategy of the past 5 years has done very little to reboot
the economy, and has worsened wealth inequality dramatically.

~~~
dragonwriter
> The Federal Reserve printed a large amount of money in response to the
> crisis. (That was a silent tax on anyone holding cash.) To inject this money
> into the economy, they bought a bunch of securities. My question is simply:
> why use asset buying as a vehicle for injecting money into the economy and
> not cash to citizens?

Because that's all that the Federal Reserve can do. If you want someone to do
something else, you'll need to talk to the government, not the Fed (even if
that is just talking to the government about changing the rules on what the
Fed can do.)

Of course, the more you give flexibility to the Fed to do more of the things
that otherwise would be within the domain of the government, the more you
undercut the whole point of an independent central bank (while simultaneously
undercutting democratic accountability.)

> It seems the Federal Reserve's strategy of the past 5 years has done very
> little to reboot the economy, and has worsened wealth inequality
> dramatically.

The Federal Reserve, by design, does not have a general set of tools for
dealing with the economy, but a very limited set of tools for managing the
money supply.

~~~
001sky
_Because that 's all that the Federal Reserve can do._

Yes. Pretty much.

Problem is "unemployment" is such a fake number the entire mandate of the fed
has been based on flawed stats. The fed is happy to lower the "unemployment"
rate by forcing people onto "disability" (permanent welfare) and un-paid leave
of the workforce.

That's not reducing unemployment in any meaningful sense. Its just statistical
arbitrage/3-card-monty.

------
Paul_Dessert
The chart in the articles below paints the picture. I've never really been
overly involved in economics up until last year. When I started reading and
exploring I was shocked at what I found. I kept struggling, because I knew
something wasn't right, I just couldn't put my finger on it. I still can't.

All indicators that I can find show the economy slipping into another
recession (or simply continuing the previously interrupted "Great Recession")

[http://www.zerohedge.com/news/2014-06-25/unforgettable-
winte...](http://www.zerohedge.com/news/2014-06-25/unforgettable-winter-bank-
americas-explanation-17th-worst-gdp-print-us-history)

[http://www.zerohedge.com/news/2014-06-25/gdp-disaster-
final-...](http://www.zerohedge.com/news/2014-06-25/gdp-disaster-final-q1-gdp-
crashes-29-worst-2009-far-below-worst-expectations)

~~~
mikeyouse
I sincerely hope Zerohedge isn't your source for economics information, they
are desperately alarmist and wrong nearly constantly. The source of your
unease might just be your source of news. The world isn't falling apart, there
is no 'great lie', poor homebuyers in Topeka aren't to blame for the GFC, and
you shouldn't be stockpiling bullets and gold.

The world entered a debt-driven recession and we're still climbing out of the
aftermath. Everyone tried to deleverage at once, which left nobody to drive
the economy toward previous growth levels. Monetary policy is ineffective
since the Western World is bouncing off the Zero Lower Bound, and fiscal
policy is ineffective since politicians don't have the will to take on new
debt to stimulate their respective economies. The historically low interest
rates combined with new capital requirements are preventing financial
institutions from lending money. Inflation will eventually return but not
before many Western countries see several quarters of strong (4%+) growth.

Hopefully the following will help brighten your outlook;

* There are more Americans working today than at any point in US history: [http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=E...](http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=Ef0)

* There are 9 million more Americans working today than at the bottom of the recession -- even with nearly 800k fewer government employees: [http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=E...](http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=Ef1)

* Americans are now spending the lowest percentage of their disposable income on debt payments in the 40-year history of the data series: [http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=D...](http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=DS6)

* US government debt interest payments as a percentage of federal outlays are as low as they've ever been: [http://www.pewresearch.org/files/2013/10/debt_interest2.png](http://www.pewresearch.org/files/2013/10/debt_interest2.png)

~~~
todd8
Those numbers do brighten my outlook, but while our economy has added 9
million more workers our population has grown by almost 12 million.

Isn't it appropriate to be looking at the employment-population ratios instead
of the number of workers? This chart (of the employment-population ratio)
doesn't paint such a rosy picture:

[http://data.bls.gov/timeseries/LNS12300000](http://data.bls.gov/timeseries/LNS12300000)

~~~
mikeyouse
Of course population matters, but as more people are attending college
([https://www.nacs.org/research/industrystatistics/higheredfac...](https://www.nacs.org/research/industrystatistics/higheredfactsfigures.aspx))
and as the baby boomers retire
([http://www.ssa.gov/oact/progdata/icpGraph.html](http://www.ssa.gov/oact/progdata/icpGraph.html)),
the employment ratio would naturally decrease.

I like U4 as a good measure of unemployment since it also includes discouraged
workers who gave up looking for jobs:

[http://research.stlouisfed.org/fred2/graph/?g=Ehe](http://research.stlouisfed.org/fred2/graph/?g=Ehe)

Obviously not a completely healthy economy, but a rate that's dropped 40% from
the peak of the recession, and is back to levels comparable to 2003/2004 is a
good start.

------
karlkatzke
Two of my consulting clients have seen this show up in their Q2 sales to date;
one is missing their Q2 revenue goal by a whopping 50%. Admittedly, they are a
small business, but they have a great B2B recurring revenue model. The goal
miss is driven completely by customers who had missed their own goals in Q1,
and tightened their belts as a reaction.

