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It's the Economy, stupid - Languishing & Lingering after the Great Recession

Discussion in 'Tilted Philosophy, Politics, and Economics' started by rogue49, Aug 10, 2012.

  1. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Some of my assumptions are arbitrary, not all - be specific.

    Define the context. Pricing is a subject in many text books, but that doesn't mean there is not doctoral level discussions on the issue. If you want to discuss macro-economic policy without a rudimentary review and agreement of the concepts in question it is a waste of your time. So, when I suggest various factions supporting their individual agendas in this regard and conclude that at any given time policy is "working" for some and you write as if everyone has the same goals - there is a need to address the fundamental concepts.


    Right I am rigid. I must of forgot. Thanks for the reminder. Hey, I am an arrogant a$$ on occasion too. Wanna discuss more about my issues or do you want to talk economics? I can do either. I love economics and as T.O. would say and I as I would say:

    [​IMG]
    --- merged: Apr 10, 2013 at 5:38 PM ---
    I challenge the notion that consumer demand is weak. I think the issue is more specifically related to the growth in demand. I think there is an organic demand curve but I think our international economic malaise is due to a failure to shift the demand curve. we have touched on our different views many times, but I believe innovation leads to shifts in the demand curve. Innovation comes from efficient capital allocation or efficient investment. In my short-hand I say business creates demand. In the past your positions has been the consumer demand drives business investment or business activity. Either way if government is consuming the investment resources in a inefficient manner slower growth would occur relative to efficient capital investment. In total we are discussing marginal activity or areas where government policy can have a disproportional impact.
     
    Last edited by a moderator: Apr 17, 2013
  2. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    In the U.S., consumer demand for non-durable goods hasn't been the same since 2007. And since 2007, U.S. auto and home sales have—well, you know the story, don't you? If not, check the numbers for all these things. They're out there.

    If demand isn't weak in these areas, then what would you call it?

    You don't think household debt is an issue?

    We can innovate until we're blue in the face, but if consumer confidence is in the shitter, you're only going to see a change if this innovation comes in the form of increased incomes, reduced debt, and more opportunities for people to spend in their free time. Is the current environment allowing for that? Are there any innovations coming down the pipeline to allow for that?

    I wouldn't mind seeing innovations that simultaneously increase people's incomes and time off. I think that would be great.

    You'll need to speak in specifics. Even inefficient spending can be better than no spending. Is there a lack of efficient capital management because of a lack of capital? Aren't interest rates pretty good right now? Aren't a lot of companies sitting on a lot of cash? What gives? Why the fuck won't they innovate?
     
    Last edited: Apr 10, 2013
  3. roachboy

    roachboy Very Tilted

    i notice that you dodged the article i linked, ace dear.
    this does not surprise.
    that is why i find discussions with you to be a waste of time.
     
  4. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    A Different Perspective:

    Consumer demand can be measured in various ways, if the unit of measure is dollars we have to be careful on how we interpret actual consumer demand. For example it is clear that if the demand for heating oil goes down but the demand for natural gas for heating goes up, all other things being equal, we would not conclude the demand for heat changed. However, if there is the same heat output per comparable unit but natural gas is less expensive, measured in dollars on could conclude that the demand for heat is less because fewer dollars are being spent. I would argue this conclusion is incorrect and that the consumer demand was constant. And so it goes, if the consumer demand for cars is down but the demand for scooters is up - it is possible that the demand for A to B transportation did not change but that fewer dollars are being spent.

    I do not equate consumer demand with dollars being spent.



    It depends. For example there is a demand for haircuts. If the commercial demand for haircuts goes down because people are cutting their own hair, there has been no shift in demand. However, if people let their hair grow longer in order to save money or because of a new fashion trend - this would result in a shift in consumer demand.

    On an overall basis in the world economy I think we are seeing changes in demand, in manner illustrated rather than shifts in demand.
    --- merged: Apr 11, 2013 at 11:53 AM ---
    I think there is a more pressing issue that needs to be clarified. The opening in the article cited says something about Japan's "lost decade". I have no issue with openings intended to draw the reader in, however, I think the underlying premise held by the author is similar to my impression of your point of view on these issues. There is no doubt by some measures the Japan economy did not live up to expectations held by some people. As I try to clarify with you, not all would view the success or failing of the Japan economy in the period in question the same way. For some the 10 year period did exactly what they wanted it to do. When we measure success or failure we have to be specific. I question the use of broad generalities in this regard.

    As it specifically relates to one aspect in the article, many believe housing costs are too high and that housing deflation is a goal. I would think those who advocate for low income people would support policy that would lower the costs of housing. and of course this is at odds with those who would want to profit from increases in prices. What side are you on? If you own a home(s) currently and you hold social equality concerns I think you would be conflicted.
     
    Last edited by a moderator: Apr 18, 2013
  5. roachboy

    roachboy Very Tilted

    read past the first page and get back to me, ace.
    jesus christ.
     
  6. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    There is a point on the table that has yet to be clarified. Reams of material won't change the key question. You and the author hold the premise that everyone agrees on the measures of success. This is a false premise. If you want to address this we can then move on. Or am I to assume that you don't even understand the point? And fail to see the weakness in your point of view.

    Perhaps I can put in a way that most men can understand - let's say a guy buys his wife some sleep ware. Her response is "this does not work, I get cold". But the guy responds with a spark in his eye - "oh, but it is working for me!" So in terms of economic stimulus we can do things to make party A happy or we can do things to keep party B happy - caeteris paribus, of course. Should I include a picture?
     
  7. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    It's measured by consumption, of course.

    Energy consumption for home heating is based on inelastic demand. No one is going to choose to freeze unless it's a last resort. They would sooner forego summer road trips. This is why oil prices are down. It's in large part due to weak growth in demand, since oil products have many uses tied into economic growth.

    I doubt the sales of scooters has made up for the changes in auto sales. Do you have any data?

    What are you doing here? Are you trying to disprove a fact? Overall, demand is soft. It's objectively true. Yes, demand for iPads and iPhones is growing explosively, but that doesn't change the fact that demand is soft in countless other areas.

    Try to look at the all facts instead of cherry-picking to make it look like everything is actually flowers and rainbows if only we'd pay attention.

    You still haven't acknowledged that demand, historically and widely speaking, is soft. This is objectively true. You're talking again about something with inelastic demand. People are not all going to go feral and forego haircuts to save money. Of course they're going to do it themselves. But when their household debt is high and they're extremely uncomfortable and pinched by it, they're not as likely to spend as much money on a new (or used, even) car, a new (or resold) home, and iPad, a computer, recreational travel, books, music, films, dining out, clothing, etc.

    If you have even the most rudimentary understanding of economics, you should know the overall effect this has on businesses and the wider economy.

    If less money is injected into the economy on the consumption side of things, what happens?

    It's not difficult.
     
  8. roachboy

    roachboy Very Tilted

    ace, dear, if you read the fucking article you'll see that the case being made is quite simple: monetarist policies don't work in the context of anything like a balance sheet recession. what they do, however, is drive recession to depression. the historical basis for this claim is outlined pretty clearly. the explanations for the ineffectual-to-distastrous outcomes of persisting in monetarist policies out of political and intellectual simple-mindedness are presented pretty clearly.

    obviously, you have nothing to say against the substance of these demonstrations, and prefer to bullshit around.

    i have other stuff to do.
     
  9. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    "[T]here is a need to address the fundamental concepts."​
    Aceventura

    Indeed.

    The article does just that. I hope Ace reads it.
     
  10. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    You use the concept of "don't work" - the author of the article cited thinks in those terms as well. It is incorrect. Is De-leveraging a bad thing or a good thing? Is deflation a good thing or a bad thing? Is slow/no economic growth a good thing or a bad thing? In language you use, it fucking depends! So what is his point??? He has no points, he just presents a series of random bits of data intended to support an il-defined point of view. Sounds like you - I see why you like what he wrote.
    --- merged: Apr 11, 2013 at 1:48 PM ---
    US consumers were highly leveraged. US banks were highly leveraged. Government agencies like Freddie and Fannie were highly leveraged. US government is highly leveraged. The goal of many responsible regulators is to de-lever the economy in a measured fashion. The tools available to the Fed primarily involves managing the money supply. The money supply is secondary to the goal of de-leveraging.

    I hope you read what I wrote. I hope you read/listen to the Fed Chair. I hope you do more than recite weak talking points. Right, consumer demand is down and that is why the economy is weak?!? What, is that really it? So all we have to do is spend more money and all will be roses? Is that really it?
     
    Last edited by a moderator: Apr 18, 2013
  11. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    If only those working class folks ate cheaper lunches (pbj sandwich), they could save more, invest more, and spend more on durable goods.

    Those greedy bastards just trying to make ends meet are fucking up the economy for all of us.
     
  12. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Oh, I read what you write. Trust me. But I don't know what you're reading because I don't know what weak talking points you're referring to. What I've been reciting is facts. Get is straight, man. If I said peanut butter and jelly sandwiches are a source of protein, you'd probably call that the weak talking point of a vegan. Well, it just so happens to be a fact. Facts are tricky that way. If you don't like them, or if they don't help your situation, they don't just go way or become disproven through denial or red herrings.

    Also, I didn't state weak consumer demand as the reason why the economy is weak.

    It's about reading comprehension and avoiding making conjectures. With all due respect, I suggest you be more careful. Maybe take more time before responding. Think things over a bit.

    So, no, it isn't simply spending that will make things better. It's a part of the puzzle though. We could talk about that, but it won't make sense until you understand the impact of consumer debt on consumer spending, and consumer spending on the economy.

    Maybe according to you, consumer spending is just fine. Maybe it can be reduced further. Maybe so. Maybe America shouldn't be so much of a consumer society. It should consider the benefits of a steady-state/no-growth economy. If Americans are leaders, maybe they could lead the way to a new paradigm.
     
    Last edited: Apr 11, 2013
  13. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    Here is a better article on the issues in question.

    http://www.newyorkfed.org/research/epr/10v16n1/1008gean.pdf

    PBJ sandwiches have nothing to do with the leverage problems created by regulators. The money supply is inadequate for controlling the leverage cycle - the root cause is in failed government regulation and so is the solution.
    --- merged: Apr 11, 2013 at 2:36 PM ---
    I asked you to be specific when referring to "global demand", then if I recall correctly you stated that you meant overall consumer demand. Excuse me for asking for clarification! If I misread what you meant - please correct me, I have no issue with trying to clearly understanding the point of view of others.

    I honestly don't get why so many here have so much difficulty with responding to questions. I would love to get an understanding of that.

    {added} The expressed goals of the Fed is worth a read also, in particular the question involving conflicting goals.
    The Federal Reserve Bank of San Francisco: Economic Research, Educational Resources, Community Development, Consumerand Banking Information
     
    Last edited by a moderator: Apr 18, 2013
  14. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    Blame the government?

    That sounds like a severe and acute case of excusitis. You should have that checked out.

    Have a look at the consumer demand indices. Have a look at auto sales. Have a look at home sales. The economic crisis didn't come about because people simply decided they didn't want all that cool shit anymore and instead wanted to become non-consumer hippies.

    The question is: Why isn't consumer spending returning to previous levels? Or why is it taking so long?

    I respond to your questions. It doesn't seem to get us anywhere though. But still I try. I appreciate your attempts as well.

    I would say it's also important to note the difference between disinflation and deflation.
     
    Last edited: Apr 11, 2013
  15. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    If we were in a free market economy - no. The use of leverage is a regulatory issue in our economy. Case in point the regulatory environment controlling Canadian banks relative to the regulatory environment controlling US Banks. US Banks highly leveraged resulting in a financial crisis. Canadian banks did not suffer the same fate.

    Don't try to tell me I am against regulation, I am not. I am against bad regulation.

    Right, I will get that checked out...

    what should I take from looking at these numbers? For example new auto sales measured in units is down from the peak, new auto unit sales go in cycles. conversely used auto sales are up, used car maintenance expenditures are up, alternative transportation option sales are up, new car prices are higher - so what is your point? My point is that demand for transportation is not down. why can't you acknowledge this point and move on? You present your perspective and I present mine - they differ. I understand your perspective and I acknowledge it - I add a point of caution and look for clarity. Even here you say "auto sales" your point of view is narrow or I don;t know what you mean when you say "auto sales" - obviously there are new auto sales, used auto sales, motorcycle sales, public transportation bus/rail sales, truck sales, commercial sales, consumer sales, imports, exports, etc., etc. I look for the net to draw conclusion. What do you do?
     
  16. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    If only the U.S. banking industry were regulated the same way. U.S. bank policy encourages more borrowers (i.e., increased risk), while Canadian banking policy ensures sound lenders (i.e., mitigating risk). You're right, though, there is a difference between good and bad regulation. There is also a difference between too much and not enough regulation. I think the U.S. suffers from not enough regulation in some areas and too much bad regulation in others.

    Is this what you blame for the consumer debt burden? Should this debt be written off somehow? Incomes are fine? etc.

    Used auto sales peaked at 44.1 million in 2005. They will be lucky to break 41 million this year. So used car sales may be up from last year, but they're still 3 million (or about 8%) from their peak. This is why I point out the difference between decreased demand (like during a crash) vs. weak demand growth as we typically see in a trough. The only hope in such cases is "pent-up" demand, which can kick in during a recovery when jobs and income stabilize and grow. This is yet to happen on a large scale.

    I can't acknowledge something and move on from it until you make the point clear enough. I also can't acknowledge something that's false. Airline travel is still down from its peak, and people don't switch to scooters in that case—they're not a feasible substitute. And regarding oil consumption, which is tied heavily to transportation: it's still down from its 2007 peak. The transportation sector consumption is still down. Household gasoline consumption is still down. Now unless people are switching to walking and bicycles to make up for the reduction in travel in planes, trains, and automobiles, there must be a net decrease in travel demand. The latter is the case. Americans are saving money by reducing their travel expenses. This is likely done both on the household and business level. And, no, electric cars and biofuel aren't the reason why these numbers are what they are. You'll need to show me data suggesting that travel demand has actually been constant since 2005 to 2007 (it hasn't).

    I haven't even told you my perspective yet. The only thing you "know" about my perspective is my stating facts. This isn't my perspective. I'll tell you my perspective as soon as you acknowledge facts and admit when you're wrong.

    Don't take it personal. This isn't me; this is the world as it is.

    Read this carefully: No you don't.

    You can't understand something that hasn't been made. You can't acknowledge something that doesn't exist (at least not if you wish to be taken seriously).

    I look for the net to draw a conclusion. All of the things you just listed are down from their 2007 peak.

    I looked for the net to draw a conclusion.

    What the fuck did you do?



     
    Last edited: Apr 11, 2013
  17. Aceventura

    Aceventura Slightly Tilted

    Location:
    North Carolina
    You use a quantitative approach rather than a qualitative approach? In other words is volume equal or more important than the effectiveness of regulation? And again I look to the objective of regulation in some instances regulation is implemented for reasons other than commonly stated objectives, for example a regulation with the state objective of consumer safety may have no impact on consumer safety but may have the benefit of profiting segments of the economy. This is a type of regulation I would call "bad", would you agree?

    I personally think de-leveraging the US economy is a good thing. In the short-run there are some costs, but in the long-run the economy will be better off. I think the notion of the non-government segment of the economy going through a de-leveraging period while the government increases leverage (as the author of Roach's article wants) is counter productive and accomplishes nothing in the long-run. But you folks can go on and assume I did not read the article. As it starts and as I stated initially housing prices in the US were over-extended and required deflation. It will be good for the health of the housing market and good for the up coming generation of buyers. The author begins with the assumption that housing deflation is bad and that everyone is in agreement. This is false.

    I don't believe you folks get it and because you folks don't get it, attack the messenger. And then we have little snide comments from DC - as if I am ashamed of where I came from and what I did to get ahead. I can say I tried to stay on the high road. I doubt anything else I write in this thread will be serious - just so you know.
     
  18. Baraka_Guru

    Baraka_Guru Möderätor Staff Member

    Location:
    Toronto
    No, the other way around. The Canadian system is a qualitative approach, favouring a minimum of standards for lenders and borrowers before a loan can be approved (especially mortgages). This even includes limits and restrictions on the amount of funding based on each borrower's situation.

    Well, what's the net benefit? It really depends. Sometimes unintended outcomes can be good despite the original intentions. I suppose the bad outcomes are bad.

    Most major economies are currently going through a deleveraging process, both in the private and public sectors. It's a common phenomenon after a crash. The problem, however, is that heavy deleveraging in the private sector coupled with too much deleveraging in the public sector can have devastating consequences in the trough phase of the economic cycle. Just have a look at the Eurozone, especially places like Ireland, Spain, and Greece.

    And then you add to that the deleveraging on the household level.

    You know what's at risk if everyone attempts to deleverage at once and it goes too far? A deflationary spiral.

    But at least it seems you can acknowledge that debt is an issue when it comes to a weak economy. Now you just need to realize that deleveraging usually means weakened demand.

    Would you say that all bursting bubbles are a good thing? Was the dot-com crash a good thing? How would you compare this to an alternative, say, disinflation? Are you always this keen on boom and bust? Is this the best way? Is it the only way?

    If busts are inevitable and ultimately "good," then you need to face reality: After particularly sharp drops in the global economy, the recovery is going to take a while. All things considered, things might not be all that bad right now despite what unsubstantiated gripes you have with the government.

    Thanks for the warning, I guess. Sometimes it's difficult to tell.

    For the record, I get what you're saying, and I'm not attacking any messenger.
     
    Last edited: Apr 11, 2013
  19. rogue49

    rogue49 Tech Kung Fu Artist Staff Member

    Location:
    Baltimore/DC
    Debate - Tennis matches for the brain. ;)

    Accept, I've got a crick in my neck watching the ball.

    Things are slowly spinning up in a positive feedback cycle...just not fast enough for the scaredy-cats and skeptics.

    Housing starting with some momentum...spurring quiet a few new workers.
    Adjusted unemployment less than expected.
    Record settings for the Markets
    etc...and so on.

    Frankly, I'm tired of the nay-sayers.
    Then again, I was tired of the hype when there were warning signals everywhere.

    Can't we for once follow the right call when it actually is happening.
     
  20. redux

    redux Very Tilted

    Location:
    Foggy Bottom
    Ace, there was no personal attack.

    It was a tangent to the discussion (as you so often take discussions), referencing your suggestion that working folks can simply save money (or have more disposal income) by switching to peanut butter sandwiches for lunch.