
What's holding back the world economy? - akg_67
http://www.theguardian.com/business/2016/feb/08/whats-holding-back-world-economy-joseph-e-stiglitz?CMP=oth_b-aplnews_d-1
======
whatwillbe2016
The world economy is being held back by debt and bad investments. Personal
Debt. Deceitful monetary practices by lenders or investors. (ie real estate
brokers encouraging debt) Corporate Debt. Government Debt. (city, county,
State, Country, etc) Economies based on sky-high commodity prices. (prices
relative to cost of living and relative to debt) Commodity producers financed
by lots of debt.

Basically, many people and entities have financed growth by massive debt. The
US is now comparatively better and has reduced QE and increased interest
rates. This has caused commodities to plunge. (minus the fear-buying precious
metals) A strong US dollar and faltering global markets have caused
commodities to sink. Oil producers continue to produce in hopes that they can
continue to finance their debt obligations.

In my opinion, the economic outlook will get worse-- especially in domestic
and international markets where shale oil and tar sand oil is produced. These
resources are much more expensive to extract and refine than traditional oil
wells. Once these economies fall further (corporate and personal forclosures),
the economic outlook will worsen.

The biggest problem is investing in expensive resources, financed by large
debts. This is why companies are socking money away at astounding rates- debt
is crippling the global economy.

~~~
darkr
Debt, in and of itself is not necesserily a bad thing, at least at the micro
level. If that debt is at a low interest rate, and used to finance something
that stimulates economic growth then that is a net positive.

One problem with debt is the long-term effects caused by the method in which
much modern debt is created: I.e the bank creates capital out of 'thin air'
and it costs them nothing other than some liability for the value of that
debt, and conversely when money is paid back to the bank, that money (minus a
small cut) is effectively destroyed. Usually you can only pay back that money
by receiving money from someone else who has gone into debt in order to raise
that capital.

At the macro level, this means that effectively all money is debt. It is very
hard (some would say impossible) to make any sizable reduction in levels of
debt without causing a recession.

The pessimist in me has some sympathy for the viewpoint that bailing out the
banks in 2008-2009 only served to delay an inevitable and long overdue
correction in the global economy.

~~~
andy_ppp
What happened when the amount of money was tied to gold? I do sometimes look
at fractional reserve banking and see a giant ponzu scheme. I'm not sure ever
increasing levels of debt are sustainable, but then I'm not an economist...

~~~
ArkyBeagle
Fractional reserve banking began under the gold standard or before.

"What happened" is the Great Depression in the interwar period. Some say
various nations "cheated" on the gold standard - rigged conversion rates to
hoard gold.

------
sprash
The article is beating around the bush: The answer is LACK OF DEMAND.

Since the ordinary person can't afford jack shit and already exceeded all
levels of debt he/she can take nobody buys anything besides bare necessities.
This is what you get if productivity rises sky high over decades and at the
same time wages stagnate.

~~~
yummyfajitas
_LACK OF DEMAND...wages stagnate._

You seem to be wildly misunderstanding Keynesian economics - the entire
purpose of stimulating demand is to create inflation and lower real wages.

Further, all your premises are definitively false in the US. Debt levels are
falling, and aggregate demand (i.e. NGDP) has been steadily rising.

[https://research.stlouisfed.org/fred2/series/GDP](https://research.stlouisfed.org/fred2/series/GDP)

[http://www.businessinsider.com/deutsche-bank-lavorgna-
americ...](http://www.businessinsider.com/deutsche-bank-lavorgna-americas-
debt-to-gdp-pre-crisis-2012-6)

[https://research.stlouisfed.org/fred2/series/HDTGPDUSQ163N](https://research.stlouisfed.org/fred2/series/HDTGPDUSQ163N)

[https://research.stlouisfed.org/fred2/series/TOTDTEUSQ163N](https://research.stlouisfed.org/fred2/series/TOTDTEUSQ163N)

Globally GDP also is rising:
[https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&...](https://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:GBR:RUS:FRA:CHN:IND:NGA:ZAF:DEU&ifdim=region&hl=en&dl=en&ind=false)

 _This is what you get if productivity rises sky high over decades and at the
same time wages stagnate._

Employee compensation has been rising, it's just shifted from taxable wages to
untaxed benefits.

[https://research.stlouisfed.org/fred2/series/ECIALLCIV](https://research.stlouisfed.org/fred2/series/ECIALLCIV)

Why don't you do even a tiny bit of research before posting? Literally every
word of your post is false.

~~~
j3116294
Wouldn't paying off debts and lack of demand go hand in hand?

~~~
yummyfajitas
Apparently not, as the graph of NGDP shows.

------
nextweek2
At the time everybody called BS on giving to the banks and trickle down
economics.

Hindsight even proved it.

Problem is, politicians don't have the courage. Bankers tell them if the
change the system, there'll be an economic crisis.

~~~
grp
Politicians just need to be electable, not courageous. Why we ask them more?

~~~
Qwertious
Hmm, that's an interesting question - if you're unable to be fired, do you
still have a moral obligation to do your job?

Well, I'd say yes.

~~~
grp
I share your opinion and bankers abuse it.

I'll look for the definition of moral obligation for politicians. Hoping that
there is one.

------
deciplex
It seems the main thing holding back the world economy is the mistaken
assumption that a sliver of the population hoarding all the capital
constitutes an economy in the first place. It does not.

------
dibbsonline
AFAIK there is still an ecomony, economising, and has been the whole time.

1\. Mainstream (maybe lobbied) view that growth is constant and without it
we're all going to die. 2\. Incurred debt trying to achieve #1

------
hackercomplex
Globally a very large percentage of construction materials, vehicle parts, and
plastics are currently produced from petrolium sources because of rules and
regulations which restrict our civilization from utilizing the sun optimally
via nature's most highly optimized solar fiber/oil generation system also
known as industrial hemp.

Although it's possible to obtain hemp fiber and oil now it's price is
artifically high because hemp farming is restricted on most of the surface
area of earth. This artifically high price pevents this plant from being used
in building construction and consumer plastics which keeps us locked into a
petrol economy.

In addition there is a vast amount of rough terrain in US and elsewhere which
is suitable for hemp production but not for agricultural crops. This land
currently sits unused which it could be absorbing co2 at a high rate while
contributing to the global economy. Also a reduction in the price of hemp
would cause it be used more as the world's primary source of cellulose which
would help neturalize the wholesale destruction of biodiversity in both the
rainforests and marine environments.

~~~
guard-of-terra
To even start to replace petroleum, hemp oil has to be very cheap. This means
using optimal land for growing it - plains, well-lit, well-rained. Where it
would compete with wheat and other food grown.

Trying to grow hemp (for hemp oil) on rough terrain won't work - far too
expensive given the implications of manual labor.

~~~
hackercomplex
1\. Hemp oil does not have to become cheaper than petrol in order to become
widely used globally because consumer behavior is likely to change to
accomodate it. What I mean is educated consumers are willing to pay more for
the "green alternative" of their disposable plastic product because they
recognize they will see that the extra value is created when the product does
not create a destructive externality.

2\. Wheat is not an ideal primary food crop in terms of nutrition for an
advanced civilization that has the technology to scale distributed food
production of much more nutritious plants. Instead we could scale out verical
farming, aquaponics technology, permaculture, etc. Still I don't believe
industrial hemp would effect large scale wheat production. I think that's a
misnomer based on calculations centered around the idea of what it would take
to replace petrol completely.

You can certainly grow hemp on flat terrain that is not optimal for food
crops, but how much can be realistically harvested on truly rough terrain is
debateable. It helps to remember that since you don't need insect repellent or
petro-fertilizers it's signficantly easier to grow. I estimate that it could
at least double the amount of land that can be used for productive farming in
the US, and another thing is that hemp actually helps add nitrogen back into
the soil.. in other words it's an excellent "cover crop". In addition it only
needs to be rotated once every 70 years.

------
bamie9l
The economist has a good article on this with a number of hypotheses:
[http://www.economist.com/blogs/buttonwood/2016/02/markets-
an...](http://www.economist.com/blogs/buttonwood/2016/02/markets-and-
economics)

------
jld89
The solution is a universal basic income for everyone. It will encourage
employment and spending.

There should also be a fix for the "1% of the population having more than 60%
of total wealth" problem.

------
jmckib
Relatively simple article from the New York Fed explaining why everything
Stiglitz says here is wrong:
[https://www.newyorkfed.org/medialibrary/media/research/staff...](https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr380.pdf)

Not sure if Stiglitz is aware of these points because he doesn't address any
of them. Or it's possible I'm misunderstanding something, Stiglitz' article is
very complex and is clearly intended for economists, I'm not sure why it's
appearing in the Guardian.

------
sebastianconcpt
States getting in the middle of individuals

~~~
bsbechtel
Here is a good post from Mark Cuban written just last week regarding onerous
reporting requirements for public companies and the changing mindset of
entrepreneurs, and how much it hurts wealth creation in this country:

[http://blogmaverick.com/2016/02/04/the-pre-cognitive-anti-
tr...](http://blogmaverick.com/2016/02/04/the-pre-cognitive-anti-trust-
violationhow-the-decimation-of-the-ipo-market-has-hurt-the-economy-and-
worse/?utm_campaign=Mattermark+Daily&utm_source=hs_email&utm_medium=email&utm_content=26043812&_hsenc=p2ANqtz-8gf4QV0APHZED4_4se-
cWXLoyhSC4amNhlGFi9SaladmuwpthkMHP2V-qMVi9InEHehYwFeyw3N3IBQILt5bds4zmg6A&_hsmi=26043812)

------
JohnDoe365
24 hours and mens necessity to get some sleep. And it's time for a new truly
disruptive technology past micro optimisations.

------
rewqfdsa
Malthus. Malthus, or more specifically, declining returns on investment in
science and technology, is holding back the economy. It's not debt levels or
bad interest rate policy or currency manipulation; these effects are all
second-order. The primary cause of the slowdown is that there's just not much
more to _do_.

This lack of opportunity is reflected in the very low interest rates available
today combined with low growth. This technological stagnation is reflected in
the massive funding of SV-area tech companies, which are shitty opportunities
for a return on investment in a world full of even shittier opportunities.

Investors are desperate for a return anywhere. That it's so hard to find a
good ROI is against indicative of technological development petering out.
After 300 years, we've reached the end of super-Malthusian growth, and we're
going to return, hopefully peacefully, to the normal steady-state conditions
of human existence, albeit at a higher baseline technology level.

There are no major advances left. Physics can predict everything except the
most extreme conditions at the largest and smallest scales, and there are no
more bugs in the universe to exploit. Computing will see incremental
improvements, but all the really hard problems have already been solved or
proved impossible. Quantum computing will make some problems a square-root
function easier, but won't change anything. Biotechnology may help us live
longer, but research that might change the human condition --- germ-line
genomic editing --- has _already_ been banned.

Sure, you might argue, we're still going through the technology revolution.
But that's petering out. Cell phone sales growth slipped into the single
digits last year. Tablets are dead. Desktop sales have been declining forever.
The commercialization of technology we've already developed --- e.g., self-
driving cars, automated personal assistants, and high-efficiency power
generation --- will decrease costs by some constant factor, but also put a lot
of people out of work.

It's remarkably, really, that the laws of the universe are such that humanity
was able to elevate itself from ape to thinking ape, and then from thinking
ape to calculating machine. It's remarkable that we can compute. Why should we
expect the universe to be further more compliant?

~~~
tomp
> There are no major advances left.

I think the problem is elsewhere. There's noone doing the advancing. People
like myself (smart, educated, ambitious, technically-oriented) are _way_
better of doing the unproductive things (finance or ad-tech) than the
productive (research). And by " _way_ better" I mean it doesn't even compare!
Academia is fucked-up as well (chasing it's proverbial tail by encouraging
young researchers to publish, not to, you know, actually research).

Simply said, everyone is looking to invest capital in equity, but nobody
actually wants to pay _people_ to do the work. Give me a living wage (i.e. not
40k when the tiny apartment I live in costs 600k) and freedom to decide the
direction I'll go in, and I'll gladly research "useful stuff". Otherwise, I'd
rather chase my own interest by doing the "useless" (but highly-paid) stuff.

~~~
rewqfdsa
> Academia is fucked-up as well (chasing it's proverbial tail by encouraging
> young researchers to publish, not to, you know, actually research).

I have to wonder how much of this phenomenon is due to genuine advances just
being harder to come by. When others have already filled in the color between
the lines in your field except for tiny bits in the corners here and there,
what's left to do but fudge experimental results, salami-slice what genuinely
novel results you do see, and take advantage of publication bias?

Maybe researchers wouldn't need to resort to these shenanigans if we weren't
running out of things to discover.

~~~
TheOtherHobbes
Here's a partial list of things that could have had more funding over the past
twenty five years, and which are ripe for game-changer advances without
needing completely new science:

Renewable energy Social housing Aerospace AI Quantum computing Transport
infrastructure Novel Internet distribution/5G SETI Biotech Fusion power Next-
generation operating systems

There's been an uptick in momentum in some of these over the last few years,
but they're easily at least a decade behind where they could have been if
money had been dropped on them from a helicopter instead of being wasted on
(say) invading Afghanistan, and keeping banks fed and watered with QE.

The real problem is Wall St. So many PhDs moved there when they could have
been doing useful, original research. And Wall St cannibalised academia in
other ways, pressuring universities to offer stupendous ROI at the expense of
genuine education and research, and warping what used to be a productive
culture into yet another hyper-competitive sweat shop.

Financialisation has a social reverse Midas effect - it looks like it's
producing gold in the short term, but over longer scales everything it touches
turns to shrivelled crap.

