
The World Economy Just Can’t Escape Its Low-Growth, Low-Inflation Rut - ciconia
https://www.nytimes.com/2019/01/27/upshot/world-economy-low-growth-low-interest-deflation.html
======
jlarocco
"That helps explain why American workers’ wages have been rising relatively
slowly despite a low unemployment rate."

Wouldn't surprise me if that's a big part of the problem.

Despite tax cuts, low interest rates, and other corporate handouts, nothing's
getting passed onto the people who do most of the spending. Inequality is
higher than ever and the people making the most money need it the least.

~~~
defertoreptar
> Inequality is higher than ever and the people making the most money need it
> the least.

In 2016, for the first time in a while, the middle class grew (in the USA,
anyway): [https://money.cnn.com/2018/04/12/news/economy/middle-
class/i...](https://money.cnn.com/2018/04/12/news/economy/middle-
class/index.html) .

Also, we're seeing real median incomes that we haven't seen for over 20 years:
[https://seekingalpha.com/article/4231615-november-2018-media...](https://seekingalpha.com/article/4231615-november-2018-median-
household-income)

~~~
TomMckenny
Those trends began 2011 not 2016. But it's nice the preliminary data shows
they may be continuing.

But inequality continues to grow at an alarming rate with almost all economic
growth going to asset value not wages. Likewise, the cost for necessary goods
such as housing, medicine etc far out pace wages.

~~~
defertoreptar
> Those trends began 2011 not 2016.

I'm not sure I'd call that totally accurate. Real wages have been increasing
since the Great Recession turned around. That's true. However, it is
continuing to increase past the point of previous highs. The middle class
inflex happened in 2016, although there doesn't seem to be data since then.

------
cagenut
I still personally believe that the real underlying truth of "peak oil" was
that as lower EROEI sources replaced higher ones, even though we would be able
to grow the total number of barrels per day, the net-energy provided to drive
the economy from those barrels would(is) plateau(ing). Everyone who points to
fracking (or even worse tar sands) as a disproof of peak oil never understood
the underlying argument about how the "economy" is effectively our word for
total/net energy consumption and a fracked barrel of oil provides vastly less
energy to the system.

~~~
flavius29663
If you think about it, a lot of the arabian/russian/corupt oligarchs money
from oil were spent in ludicrous ways, like luxury beyond belief. The economy
is getting less value from a fracked barrel, but those money are spent more
wisely, returning back into the industry. This is not just sticking a pipe in
the ground anymore, we are advancing our tech by using fracking. This is a new
economic engine, maybe it's not as big as the free oil, but it's something.

~~~
theptip
It's an interesting thought; I think you'd also have to look at the absolute
dollar amounts of "luxury spend vs. capital/research reinvestment" to get the
full picture. (Since the actual benefits accrued to society are proportional
to the absolute spend on R&D).

Also, is R&D in fracking transferable? Or is it just tech that will be
irrelevant in 20-30 years? (I don't have a good picture on this one; I could
see a reasonable argument that we will be using natural gas for a long time,
even when we're a mostly-renewable economy, since it's a convenient-to-
transport form of energy as LNG).

~~~
toomuchtodo
I can't imagine fracking is too transferable unless there's some other easily
flowing substance you want to get out of the ground besides water, oil, or
natural gas.

EDIT: It might be useful for enabling greater storage density of CO2 in rock
formations if we attempt to sequester CO2 out of the atmosphere at scale:
[https://phys.org/news/2018-11-co2-underground-curb-carbon-
em...](https://phys.org/news/2018-11-co2-underground-curb-carbon-
emissions.html)

~~~
ggm
Fracking is important in geothermal. An experimental form uses drilling to dry
hot rocks and injection of water (even waste water or grey water) to produce
steam.

Destructive uses of aquifers may mean we need skills in underground water
table remediation. I don't think fracking directly helps (I think it hinders)
but we're going to need to understand how to use it to fix things as well as
extract things.

------
Animats
As is typical of such articles, this is written from the point of view of a
central bank. Low inflation is only a problem to central banks. Central
bankers are bothered by low inflation because they can't cut interest rates
below zero. The US and Europe inject money into the economy by having the
central banks loan it out to commercial banks, who then loan it out at a
profit. That's not the only way to do things. Japan uses large government-
funded infrastructure projects to pump money into the economy.

The real problem is "secular stagnation". We just don't need that many people
to make all the stuff. The US now has a huge population that's irrelevant, and
acts as a dead weight dragging down wages. I've been saying this for over a
decade, and it's now conventional wisdom, although it took way too long.

~~~
deafcalculus
Capitalism seems to be capable of producing far more than it can consume.

~~~
Animats
Production technology today is capable of producing far more than can be
consumed. This is a change from most of history, and it's why classical
economics doesn't have the answers.

Capitalism is now market limited. There has to be buying power. People who are
only marginal players in the economic system don't generate much discretionary
buying power. As the CEO of WalMart has said, "Our customers are out of
money".

------
stubbort
Low grow is good. You can't sustain growth forever.

~~~
crazygringo
Can't you?

Growth just means the human race getting smarter at being productive, so we
can grow more food with less effort, get around in transportation with less
cars and drivers, buy the things we need at lower prices and with less
friction.

You could argue that once literally everything is roboticized and automated
with strong AI then there's no more growth... except humans will be looking
for even better real-life experiences, better art, better teaching, better
personal connections... and robots and technology will still evolve to be
better designed, use less energy, use less resources...

I'm not sure I can imagine a world in which people didn't want anything else
to be improved that could possibly be improved, which is what a world with no
growth would have to be.

~~~
fallingfrog
We’re upright walking apes. If productivity in every other sector goes to
infinity, you’re still left with raising your kids, eating meals, socializing
with friends, and a few other things that humans just do for the same reason
that fish swim and birds fly. At some point you’ve got to ask the question,
what does productivity actually mean, when you’re talking about those kinds of
activities. What is there to optimize?

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ummonk
Past Chinese growth has set expectations too high. It is ridiculous to point
to a 6.6% growth rate and say it is low.

~~~
seppin
Also ridiculous to think those numbers were accurate.

~~~
polxiform
In a lecture to senior business executives on Dec. 16, Renmin University
economics professor Xiang Songzuo, said that a “very important institute” in
China estimated that China’s GDP growth for 2018 should be about 1.67 percent
or even _negative_ , and not the statistics bureau’s official figure of 6.5
percent.

[https://sinoinsider.com/2018/12/politics-watch-xis-reform-
an...](https://sinoinsider.com/2018/12/politics-watch-xis-reform-anniversary-
speech-signals-political-crisis-in-china/)

------
WhompingWindows
You need an increase in worker population or an increase in productivity per
worker to increase the output of your economy. If populations are stagnating
and innovation is low, that would cause less growth overall. Consider that
many countries have a lopsided age distribution, such as Japan, China, and
some European countries. Immigration into those countries may in fact be
useful if it balances their population pyramids.

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peisistratos
[https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit...](https://en.wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to_fall)

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lewis500
It’s inaccurate to say that we “can’t” escape it. The federal reserve has been
raising interest rates to slow inflation and growth in employment, and for
years they have paid interest on bank reserves at the fed and constantly
talked up plans to unwind their portfolio (selling off assets). If they had
done less of all that we would have higher inflation.

Same is true of some other central banks. I always am frustrated when I hear
about japan not being able to raise inflation rates much. If their activities
have no impact on inflation at all, why not buy up all the securities and
foreign exchange in the world by printing yen? The Japanese could live
entirely off the dividends because of this magical property of their central
bank.

~~~
deafcalculus
If the central banks sold off all the bonds they bought with QE, that'd cause
deflation, not inflation. In fact, the japanese central bank is printing money
and buying up ETFs. It's too soon to say if this is a success, but thus far,
hardly any inflation!

------
dijit
So, I have a question and it may seem like a childish or stupid one because I
think I've missed something somewhere.

Our society, and I think capitalism in general, seems to be pinned on the
foundation of perpetual growth.

The question for me is: how can we have infinite growth on a planet with
limited resources?

~~~
shoo
> how can we have infinite growth on a planet with limited resources?

I find it sad but unsurprising that a reasonable question like this attracts a
bunch of downvotes here.

I heartily recommend Higgs' book "Collision Course" \-- it doesn't provide
solutions about how to get ourselves out of the mess that we're in, but it
does provide a lot of historical evidence explaining how much public thought
and speech around economic growth has been warped by propaganda:

Kerryn Higgs -- Collision Course: Endless Growth on a Finite Planet

[https://mitpress.mit.edu/books/collision-
course](https://mitpress.mit.edu/books/collision-course)

A few quotes from reviews:

> If modern society ever had a core taboo it is against speaking favorably of
> limits, especially with respect to growth.

> Higgs explains brilliantly how our ideas about economics and the environment
> have been carefully warped and manipulated over decades, just so a small
> minority could get rich.

~~~
dijit
Thanks for the recommendation, from the quotes that seems like the exact thing
to fill my knowledge gap.

:)

------
saveThePlanet
In my opinion a deflation is what the world and especially the nature needs.
People have to stop wasting our limited resources.

~~~
devmunchies
I think this is a valid point of view. Has anyone ever stopped and asked if an
ever-increasing GDP is sustainable?

~~~
wolfram74
This physicist has done a number of blogs on physical restraints on economic
growth.

[https://dothemath.ucsd.edu/2012/04/economist-meets-
physicist...](https://dothemath.ucsd.edu/2012/04/economist-meets-physicist/)

For example, if economic growth persists black body ration independent of
power source raises the surface temperature of the earth to boiling in a few
hundred years.

~~~
shoo
this link is _fantastic_ , thank you for sharing it, i haven't heard this
argument before .

First: For a given constant T > 0 there exists C > 0 such that Temp(earth) <=
T implies Energy(earth) <= C

    
    
      > Right, if you plot the U.S. energy consumption in all forms from 1650 until
      > now, you see a phenomenally faithful exponential at about 3% per year over
      > that whole span. The situation for the whole world is similar. So how long
      > do you think we might be able to continue this trend?
    
      > Alright, the Earth has only one mechanism for releasing heat to space, and
      > that’s via (infrared) radiation. We understand the phenomenon perfectly
      > well, and can predict the surface temperature of the planet as a function of
      > how much energy the human race produces. The upshot is that at a 2.3% growth
      > rate (conveniently chosen to represent a 10× increase every century), we
      > would reach boiling temperature in about 400 years. [Pained expression from
      > economist.] And this statement is independent of technology. Even if we
      > don’t have a name for the energy source yet, as long as it obeys
      > thermodynamics, we cook ourselves with perpetual energy increase.
    
      > At that 2.3% growth rate [of global energy consumption], we would be using
      > energy at a rate corresponding to the total solar input striking Earth in a
      > little over 400 years. We would consume something comparable to the entire
      > sun in 1400 years from now. By 2500 years, we would use energy at the rate
      > of the entire Milky Way galaxy—100 billion stars! I think you can see the
      > absurdity of continued energy growth. 2500 years is not that long, from a
      > historical perspective. We know what we were doing 2500 years ago. I think
      > I know what we’re not going to be doing 2500 years hence.
    
      > If we tried to generate energy at a rate commensurate with that of the Sun
      > in 1400 years, and did this on Earth, physics demands that the surface of
      > the Earth must be hotter than the (much larger) surface of the Sun.
    

Second: Energy(earth) / GDP(earth) >= K > 0

    
    
      > Then in order to have real GDP growth on top of flat energy, the fractional
      > cost of energy goes down relative to the GDP as a whole.
      > How far do you imagine this can go? Will energy get to 1% of GDP? 0.1%? Is
      > there a limit?
      > if energy became arbitrarily cheap, someone could buy all of it, and
      > suddenly the activities that comprise the economy would grind to a halt
    
    

That is, assuming we want Temp(earth) <= T for some constant temperature T,
then there exist positive constants C > 0, K > 0 such that Energy(earth) <= C
and Energy(earth) / GDP(earth) >= K > 0 . Therefore GDP(earth) <= C / K .

~~~
wav-part
We do not consume energy. We consume goods and services which require energy
to produce. This model completely ignores past and future advancments in
energy efficieny.

------
peterwwillis
I can see the appeal of being a Doomsday prepper now. Having your livelihood
held hostage to fiscal policies of random nations feels a bit like an ant
being played with by a bored child. You might as well gain some agency by
stocking cans of beans and vitamin supplements in a concrete bunker.

------
hevi_jos
What the world can't escape is politicians and people in power always
overspending.

The overspending always must come to an end when for every additional monetary
unit in debt you get very low improvement in the economy but you in debt the
future. You are living from your children income.

What usually comes after that is destruction of capital, either by war(you
loose all what you have) or inflation, deflation or both
simultaneusly(terrible deflation in some things,terrible inflation in others).

You can make the general population pay for it(raising inflation higher than
incomes), or you can make the owners of capital pay for it(haircut of 30% or
so of their worth).

Of course the owners of capital, like the owners of the NewYorkTimes do not
want to pay for it. So they will try to influence the population to do what is
best for them basically with propaganda.

In the past it was basically States and Church the only capable institutions
for using propaganda. Right now there are also private institutions who
control what people feel and think through PR, ownership of media, think tanks
and Universities.

~~~
vkou
> The overspending always must come to an end when for every additional
> monetary unit in debt you get very low improvement in the economy but you in
> debt the future. You are living from your children income.

Borrowing from your children's future is perfectly fine if your borrowing lets
you bring things like clean running water, electricity, working transportation
systems, etc.

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crb002
Homeostasis will become far more common as the economy further deversifies and
education becomes more commodity.

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fallingfrog
Stagnant real wages + increasing real expenses + a captured political system =
revolution.

Get ready, it’s coming.

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petermcneeley
Im guessing most of this is a measuring error due to incorrectly accounting
for technologies impact on industry. In an extreme example: If we all spent
99.9% of our lives in VR then every single industry would basically implode.

