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If There Is Such a Thing as Economic ‘Good Times,’ These Are They (thesoundingline.com)
55 points by Four_Star 4 months ago | hide | past | web | favorite | 89 comments

I think the next downturn will prompt the investigation for new indicators to measure economic health. What does the number of food assistance enrollees measure if the government makes it much harder to receive assistance? What does the labor participation rate matter if you have millions of low-wage workers completely miserable (and from my experience, start abusing drugs because of that misery).

I'm just blowing steam here, but it feels like the economy and it's measures has been decoupled from a large segment of society.

GDP is a pretty terrible measure of the economy, even if you're trying to look at the big picture and ignore the day-to-day impact on individuals, because it only measures creation of value and not consumption/destruction of it.

If you destroy a city, GDP is not affected, but then if you rebuild it GDP gets a huge boost. In the end you're back where you started, but the numbers look great.

GDP is affected when you destroy it, because now all the people that rely on that city become much less productive (or die).

>If you destroy a city, GDP is not affected

Of course it is. Cities are engines for producing GDP. New construction, rolling infrastructure upgrades, the wages of all the people employed in it, the profits of corporations based in it, all add to GDP. Take away the city and all that GDP disappears off the books with it.

My example is a bit contrived, but it's a well-studied phenomenon that natural disasters tend to cause a net boost to GDP because of all the extra work needed to repair/rebuild/replace stuff.

We can write this kind of thing off as a statistical quirk, but if we actually attempt to increase GDP via policy changes, then there are definitely some perverse incentives that arise.

The immediate effect may be lots of economic activity, presumably paid for by borrowing, but consider the longer terms effects. Disruption of infrastructure reducing (or increasing the costs of) economic activity, disruption of businesses reducing profits and costing jobs which reduces wages. Death and injury of workers again reducing wage receipts by making more people non-contributing. These affects could last decades. Obviously I’ve not performed any studies on this, but it seems to me there would be significant impact on GDP. I’d be interested to see the results if a full case study.

I would find it hard to believe that the GDP of Puerto Rico, including reconstruction, has increased overall. It may depend on the scale though. A storm that knocks down a few trees and damages some buildings might generate a net gain if it’s not too disruptive but that gain must come from somewhere. Maybe increased future insurance costs, borrowing, increased taxation etc which would be difficult to quantify.

That still measures something meaningful doesn’t it? An alternative is that the city is destroyed and there are not enough resources to rebuild it.

They’ve always been decoupled, it’s just a lot more visible these days.

To be fair, nobody outside of the government and financial media is claiming we are having “good times”. And it’s in both of their best interests to pretend we are in an economic boom.

Consumer confidence is at an 18 year high. Obviously there are caveats but your characterization seems overly negative.


There are lots of places in the US where jobs are booming and people are doing great. Like West Texas where 22 year olds are making six figures in the oil fields.

Lots of places != Oil jobs in a handful of places

Let's not forget that both are in urban information bubbles.

Yeah, and we can all hope that those indicators are things like "% of population with secure housing, healthcare, community, and income" and other actual measures of wellbeing, followed closely by actual government policies to provide those things directly out of tax revenue.

this begs the question of government being the most efficient way to achieve these things. the story of capitalism versus communism is at least one indicator that this is not the Utopia you're seeking

I happen to believe that we should at least try, rather than just hope moneyed interests provide for us by accident while pursuing their own orthogonal interests.

We should be paying down the national debt during the upper-side of the business cycle so that we have stimulus funds for slumps. The tax-cuts are reverse Keynesian economics. They are "doing it wrong".

The tax-cuts are reverse Keynesian economics. They are "doing it wrong".

This is the big flaw i see against Keynes, that the political discipline and foresight it takes to pay forward is very hard. Instead it becomes another round of the too much debt cycle. Unfortunately I don't have any alternative. (many would put their pet economic hobby horse here)

Edit: I noticed a problem with my comment, I said pay forward but Keynes has a pay back what you borrowed earlier.

California is doing great in this regard[0]. In my opinion we're lucky to have Jerry Brown at the helm. If you have nice, boring elections, then you can get nice, boring people in leadership positions.

[0]: https://www.wsj.com/articles/jerry-browns-legacy-a-6-1-billi...

I'm not so sure we have the same definition of doing great.


Cached version for those under GDPR (the LA Times has seen it fit to block all GDPR countries from their website):


Most of that is because of demand for real-estate here, and because the weather brings homeless from states with crappy weather. It's not bad governing. It's not Brown's fault TX is humid.

>If you have nice, boring elections, then you can get nice, boring people in leadership positions

The key argument for approval voting - right here.

The first debt borrowed starts a countdown timer of X years--not to exceed the median age of mothers at the birth of their first child--until the jubilee date, when all outstanding debts are cancelled and forgotten.

If your state is debt-free, that's great; you have X years to borrow and spend your way out of trouble. If your state owes even $1, better pay it off quick to reset your Keynesian pump-priming capacity! And if your state can't pay off its debt, the younger generations aren't forced into austerity to pay for the excesses of the elders.

What is the incentive to pay it off at all, if it will be forgiven in X years?

So that lenders will keep loaning you money when you need it, and on better terms.

Lending terms will tighten up as the jubilee deadline approaches. If it's only 5 years away, lenders will not even bother calculating payoff periods further than 5 years into the future, minus the amount of time required to file and collect on any lawsuits for nonpayment.

If a state actually hits a jubilee with debt still on its books, it will quickly find that borrowing becomes a much weaker tool in its fiscal toolbox. It might also help to make all persons holding elected office with budgeting or spending authority at any time during the state's indebtedness to become ineligible to hold such offices for Y years after a jubilee.

when national debt goes down , private debt goes up. Private debt is the issue. The federal government has no issue paying debts because those debts are dollar denominated. The private sector on the other hand can't. Government debt is not the same as household debt, unless of course the household can print their own money. Image you are the Joe family and all your debt is denominated in Joe dollars, do you anticipate you will have a problem paying that debt?

Reducing government debt will result in bad times for the private sector. Ever wonder why Clinton's surplus resulted in large private sector debt and then a crash? This is why.

I see this argument all the time and I don't understand how people don't see the flaw. The government can't just print dollars to service their debt without devaluing the dollar. If they devalue the dollar they'll make a lot of people upset and get their butts voted out of office. There is obviously some lee-way, but there is a tight upper limit on printing their way out of debt.

Re: "when national debt goes down, private debt goes up." - Why would that be the case?

The national debt can wait, the private sector is more indebted than at any point in recorded history, and getting worse. In the US especially you can see the seeds of debt servitude being sown.

>The national debt can wait

Until it can't. It's an interesting gambit because while carrying high levels of debt is easier to do during periods of low interest, the second-order effect of taking on that debt is the pain it'll bring you to service it when interest rates rise.

Unless you have certainty on future economic conditions (which nobody does), it's prudent to cap your debt level such that can be paid down within a relatively short time frame. That way when tough times inevitably arrive, you have an escape plan. But even then, enacting that escape plan (paying off the debt) causes a shockingly sudden lack of available funds to go anything else (i.e. austerity).

This doesn't mean debt, well-applied, isn't a hugely valuable tool. Provided it's used for investment in suitable force multipliers (infrastructure) that help ensure your future ability to service the debt, and profit beyond. But infrastructure isn't well funded and there doesn't seem to be suitable proposals to make it happen, so if debt's not being increased towards that end....

> Until it can't.

It already couldn't, thus monetary easing (aka, inflation, aka increasing the money supply). Governments always default on their debts through inflation. In the US it was called "QE"

Without QE, the treasury auctions would have yielded higher rates of borrowing for the feds. Instead, QE pushed the yields down and money rushed into risk assets (stock market). We're in uncharted economic territory. How do we unwind? Right now, they're slowly letting the balance sheet shrink, but not significantly.

Inflation was sub-par during the QE era.

Well, there's inflation and then there's the governments version of 'inflation.' Have you see the prices of homes and the stock market?

"Inflation" should more correctly refer to the inflation of the money supply and not the corresponding rising of prices from dollar dilution.

The Federal Reserve didn't seem very comfortable using QE, but felt it was needed due to the depth of the crash. We were lucky we didn't have a repeat of the 25% unemployment of the 1930's. There's no law of nature that says all slumps are repairable. When things get bad enough, the masses rise up and demand socialism, because "average" socialism is usually better than crashed capitalism. Eating bland food and standing in line is better than death.

Short of a meteor/nuclear strike, I can't imagine mass starvation in the US, we simply produce too much food. Without QE, there would have been economic slowdown, banks would have been shuttered, but IMO life would have otherwise carried on as normal.

Not to mention failure to raise interest rates to bleed the artificially cheap money out of the economy after quantitative easing. But you can't find a political party these days that supports doing a Keynesian strategy. Everyone wants to have their cake and eat it too, as it were.

The US Fed is raising interest rates. Gradually, but arguably fairly aggressively considering inflation is so low.

Oh, they did do the whole spending part of the Keynesian "strategy", it's just that if they now raise rates too high there will be bankruptcies across the board, causing another crisis.

Keynesianism just doesn't work exactly because no politician ever finds themselves in a position where they can apply the savings side of it.

This is pretty dismissive. The Obama admin was very cognizant of keeping ACA deficit neutral, for example. Far cry from the current spend and don't tax policies.

You are confusing fiscal policy with monetary policy.

Ah. The comment you replied to was about tax cuts. I misunderstood your point.

Maybe democracy isn't the ideal we should be looking towards

My comments are all US-based:

Alternatively we (govt) should be taking advantage of historically low interest rates to spend money on infrastructure maintenance that we KNOW needs to be fixed. This provides stimulus (or wealth transfer, depending on your perspective) through creating jobs and fixes a looming problem before it stops looming. We'll have to pay the price one way or another, and right now the price is at a discount.

I read a report claiming that the tax-cuts are in effect demonstrating short-term stimulus spending. Based on my anecdotal observations from trying to read/hear viewpoints from across the political spectrum, lower-income conservatives ARE seeing a difference in their paychecks, and they like it. So the not-fiscally-conservative conservatives are proving the point the fiscally-conservative conservatives don't believe in, at the risk of proving the fiscally-conservative conservatives right about the longer-term costs because of the methods chosen.

I do feel bad for those that are truly fiscally-conservative: They've not really had anyone to vote for in a long time.

Unfortunately, infrastructure maintenance doesn't get people (re)elected. Infrastructure expansion does. And infrastructure expansion increases the future burden of infrastructure maintenance.

+1 on the lack of true fiscally conservative. The choice is between tax-and-spend and cut-tax-and-spend. Of those choices, the tax-and-spend is the fiscal conservative.

Is it if the tax cut spurs the economy faster than the debt growth, which appears to be happening right now?

That's unlikely. And that theory failed bigly in Kansas.

>right now the price is at a discount

The price is generally at a discount in bad times, when there's a lot of people and companies looking for work. And it's not like the central banks around the world are going to increase interest rates in a downturn.

How do other countries avoid this?

I understand that modern governments generally do have this same problem, but how do they do slightly better than the US?

The problem is that our growth ( the good times ) is fueled by debt. If the debt stops, then growth stops. Then politicians get blamed and we can't have that. So back to debt we go.

And it's not a partisan issues. Both democrats and republicans love debt, just like they love defense spending. It's politically expedient.

Obama increased the debt tremendously. And now Trump is doing the same. Our debt went from around $10 trillion to $21 trillion in 10 years.


Think interest rates are going to increase much anytime soon? Yeah me neither.

What happens if there is too much debt (as assets) on the Fed's balance sheet? Can they just write them off?

They can just sit there in perpetuality, there’s no swat team going to bust in the door because one leg of government lent to the other.

The biggest downside is that if there is a big slump, the gov't doesn't have spending money for a stimulus. We could then get stuck in a protracted rut or deflationary spiral. In the longer term, GDP growth can make the debt moot (if more is not added), but if we have a big slump sooner, we are screwed.

Calling the Federal Reserve an arm of the government is misleading at best.

Does that erode trust in currency and cause hyper inflation? I suspect no.

> So while times are looking good, and there will inevitably be a certain momentum to that fact, there is no better time to contemplate what has always come next: not good times.

I’d argue that the good times are not good to begin with. Americans don’t save. Everyone is heavily indebted and creditors keep lending without restriction. How can economy be healthy if people don’t buy capital goods and are indebted in order to buy consumer goods? It’s quite the opposite.

Leveraging one's credit to accelerate their standard of living growth doesn't make an economic culture bad implicitly. People who leverage themselves too far and fail to pay it back do.

Some people are trusted with credit more than they should be (empirically speaking), while other more reasonable people are misled by systemic incentives (e.g. home appraisals).

The system isn't perfect, but in historical context, nothing has ever been better. I find it unlikely that public figures whose day job is to complain without offering solutions are capable of improving anything.

We stand on the shoulders of giants; ancestors that were more thoughtful then us. We shouldn't reject the foundation they laid so willingly.

The USA economy is flush with cash savings, and anything where it's plausible to invest to (i.e buying capital goods) either has been invested or is being invested. It's just that it's not the general population who are doing this; the savings are held by corporations (as a proxy for the few ultra-rich individuals) and accumulating because there's not much to invest in.

Re: "not much to invest in." - In the factory era, investing in new or better factories or stores was the usual use of excess cash. But most new industries are labor intensive, not asset-intensive. You can invest in start-ups, but many argue there are already too many questionable startups floating around, not unlike 1999.

That is presently true but it doesn't have to be. A Silicon Valley business could start paying millions of people to perform tasks for it - like babysitting a semi-self driving car.

Not good times for wage growth.

Interesting that "wages" does not appear once in the article. I guess "wages" are not a relevant metric is assessing economic "Good Times".

As the article states, "Not for everyone and not equitably"; however, the intended meaning of "good times" in this isn't "wow, everyone's happy" but "this is as good as it's going to get". The current wage level and (limited) growth, even if not satisfactory, is still better compared to what was in the previous economic downturn, and better compared to what's going to come.

For average wage earners, no matter how hard it is, this really is the good times, as good as they're ever going to be. It won't be better. It will be worse. Be prepared, winter is coming.

I guess the people who rely on wages aren't really important.

I'm not sure what the current statistics are, but often when wages are reported as stagnating, total compensation is still going up.

Mainly this is due to the increasing costs of health insurance and other employer provided benefits.

They are if you’re a corporation.

Hasn't been since the middle 1970s.

The headline there is basically the entire content of this article. Just a statement of the positive indicators and a question "how long can this last?" No critical analysis or discussion of the contradicting indicators. Not really worth a post. What are we supposed to be discussing?

Everyone knows this, but they also know that the market will remain irrational longer than they will remain solvent.

Main question for me is how well do previous indicators of this kind of activity predict the CURRENT state of things. Which fundamental cascade effects have we missed? Most of the time the things that cause the crisis are not the contagion problems you predict (obviously). If I could see it, I'd be hedging :)

If I had to guess, I'd say more like the Savings and Loan crisis than 2008, but I'm an optimist.

Well, that's the problem, isn't it. These are supposed to be the "good times" but normal people can't afford to live on the wages all those new jobs afford them (and god help you if you get sick or need healthcare for whatever reason). They're going to be screwed even worse when it stops being the "good times".

If this is what our economy has to offer in the "good times" then............. maybe something is fundamentally wrong with it.

> normal people can't afford to live on the wages all those new jobs afford them

I don’t believe reality agrees with your assumption here.

It’s true that an average wage worker can’t afford to live in any city of their choice, and there are some markets that are out of reach for most.

It’s also true that an average wage earner today enjoys a higher standard of living than at any point in history - bigger house, more cars, tvs, and luxury items.

> It’s also true that an average wage earner today enjoys a higher standard of living than at any point in history - bigger house, more cars, tvs, and luxury items.

I really disagree with that. I'm a 35 year old single man with no kids and a well payed software developer, better paid than 90% of the population. At this point in life my father had a stay at home wife, 2 kids and was working for near minimum wage as a cleaner.

He had a huge 4 bedroom house, double garage, large backyard with a swimming pool, 2 cars etc and was close to paying off the house at my age. Meanwhile I'm looking forward to pay off a tiny studio apartment in a few years.

Yes we've got bigger TV's and smart phones now, but they don't contribute to a high standard of living.

And you chose to live in the most expensive area in the USA, while your father did not correct? If you are earning in the top 10% and can barely eke out a living, you either need to re-align your priorities, accept your lot, or move.

If I moved back not much would change, I'd maybe have a whole bedroom but the jobs pay less. Take fixed expenses like groceries and electricity I to account and it ends up about even.

In comparison to history when people actually just died when they got the flu, things are much better than you indicate. Health Care is scarce. There must be a mechanism for rationing. Some must be left behind. There is no other option.

Health care isn't scarce in most of the first world. Many first world societies offer health care to all of their citizens, and those visiting their country. Much as we view education as a fundamental human right in the United States and no longer treat it as scarce, most other societies view healthcare as a fundamental human right. As a society and political system the United States has actively made the choice to pursue a profit-based, insurance-centered care model that is purposefully scarce.

Which is to say, I completely disagree that there is no other option.

There are a limited number of health care practitioners, health care facilities, etc. The demand for health care is unlimited as people get older.

And yet in nations like Japan, where there are proportionately a greater number of elderly than in the US, their healthcare delivers at a much lower cost (by half!) as well as a higher life expectancy. This despite a decades long economic stagnation, as opposed to the curious economic "good times" in the US which seems to decrease our life expectancy and increase our health care costs.

Many first world societies have unreasonably long waiting periods to receive specialist attention and care. For example, Canada's average wait from referral to specialist appointment was 10.2 weeks in 2017, up from 3.7 in 1993. The average wait period for treatment was 10.9, up from 5.6 in 1993. 4.1 weeks for a CT Scan, 10.8 for an MRI. Some types of treatment require almost a year of waiting. Hope you aren't in a hurry to get your health issues resolved.

It IS scarce in the short term. Not everyone can get treatment right away, someone will have to wait. And the wait times seem to gradually trend upward, which would indicate (at first glance at least) that it cannot keep up. There's no magical solution to getting everyone timely care.

"Hope you aren't in a hurry to get your health issues resolved."

You make it sound so scary, but you make no mention of health outcomes. I don't care if an appointment happens in 10 minutes or 10 weeks, so long as the outcomes are positive. Wait times alone are not a meaningful metric to me.

Well, the parent is illustrating a basic point of freshman economics. We ration scarcity with cost (money) or time. In this case Canada chose to be "fair" and ration scarcity of medical care with lines.

Your comment belies a belief that peoples time or comfort are worth nothing. Should my children wait a year or more to have a specialist examine a chronic skin condition that thus far cannot be treated and causes severe itching? In Canada the answer is yes. Ever dealt with a toddler that can't sleep and you can't help?

Acute care here is the same. People die waiting at emergency. 24 hour waits for patients not bleeding out on the floor happen (but usually we can keep it down to 12).

"Your comment belies a belief that peoples time or comfort are worth nothing"

You mention nothing about comfort, just wait times, which is essentially my point. Are people being left in extreme discomfort? If so, that is a problem. Health outcomes help paint that picture, and in most first world systems outcomes are good.

Should my children wait a year or more to have a specialist examine a chronic skin condition that thus far cannot be treated and causes severe itching?

That sucks for there to be long waits, but the alternative being evaluated (the USA's system) has lots of people not ever getting treatment.

Comparisons to the older times would be more apt if people weren't today dying for example from diabetes not from lack of medical knowledge, but of price of the insulin. It is also relevant that insulin is not fundamentally expensive to produce, and that in other first world nations, this kind of death by healthcare driven financial cuts simply do not occur.

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