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Regulation - Lost Decades? - Low Interest Rates (Krugman)

 
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PostPosted: Fri Aug 29, 2014 11:24 pm    Post subject: Regulation - Lost Decades? - Low Interest Rates (Krugman) Reply with quote

PeakTrader:

The study may be based on too much qualitative data.

Not all types of regulations are the same.

And, they don’t have the same effect, on growth, in each state.

Some states can absorb regulations better than others.

Study: http://www.pacificresearch.org/fileadmin/templates/pri/images/Studies/PDFs/2013-2015/50StatesEnergy_FirstFinalWeb.pdf

****

Here in California, my vehicle failed emissions this year, although it’s a 2006.

After paying for the emissions test (about $100), which the state receives part of the money, I went to the DMV (and waited for hours) to pay my registration for this year (over $200), but didn’t receive a 2014 sticker for the license plate, since I failed emissions (I had to renew my license too, which cost $72, and couldn’t go to triple A to save lots of time waiting, since they don’t renew drivers licenses).

So, now I have to pay to fix the “problems” (who knows how much they’ll cost) to pass emissions and pay for the emissions test again. If I get pulled over by the police, in the meantime, I may be in trouble and have to pay.

What a racket.

****

Baffling, Dr. Morbius, and Spencer, so, you all believe it’s worth the money, time, effort, and aggravation of millions of Californians to make their vehicles 99.5% cleaner than 99% cleaner.

Not all Californians can afford the highest emissions standards in the country. There are opportunity costs.

If California wants to limit the number of vehicles, on the road, or create lots of illegal drivers, it’s probably doing a great job.

And, by the way, I got my first estimate to “fix” my vehicle today – $585 (it didn’t meet two of the around 15 standards).

****

We know this has been a weak “recovery,” the expansion is getting old, at 63 months, and a recession is likely within five years.

It’s uncertain how strong the recovery will be after the next recession, and how much growth we’ll get in the 2020s, before the last of the Baby-Boomers (born between 1946-64) reach 65 in 2029.

****

The federal government has been selling bonds and the Federal Reserve has been buying bonds.

The U.S. has become more efficient in production and “capital creation,” particularly since the quick and massive “creative-destruction” process mostly from 2000-02.

The S&P 500 had 20 consecutive quarters of double-digit earnings growth in the mid-2000s.

However, it seems, it has become more difficult for small businesses to become big businesses, and there are fewer business start-ups.

Related article:

Profits Without Production
Paul Krugman
June 20, 2013

“Economies do change over time, and sometimes in fundamental ways.

“…the growing importance of monopoly rents: profits that don’t represent returns on investment, but instead reflect the value of market dominance.

…consider the differences between the iconic companies of two different eras: General Motors in the 1950s and 1960s, and Apple today.

G.M. in its heyday had a lot of market power. Nonetheless, the company’s value came largely from its productive capacity: it owned hundreds of factories and employed around 1 percent of the total nonfarm work force.

Apple, by contrast…employs less than 0.05 percent of our workers. To some extent, that’s because it has outsourced almost all its production overseas. But the truth is that the Chinese aren’t making that much money from Apple sales either. To a large extent, the price you pay for an iWhatever is disconnected from the cost of producing the gadget. Apple simply charges what the traffic will bear, and given the strength of its market position, the traffic will bear a lot.

…the economy is affected…when profits increasingly reflect market power rather than production.

Since around 2000, the big story has been one of a sharp shift in the distribution of income away from wages in general, and toward profits. But here’s the puzzle: Since profits are high while borrowing costs are low, why aren’t we seeing a boom in business investment?

Well, there’s no puzzle here if rising profits reflect rents, not returns on investment. A monopolist can, after all, be highly profitable yet see no good reason to expand its productive capacity.

And Apple again provides a case in point: It is hugely profitable, yet it’s sitting on a giant pile of cash, which it evidently sees no need to reinvest in its business.

Or to put it differently, rising monopoly rents can and arguably have had the effect of simultaneously depressing both wages and the perceived return on investment.

If household income and hence household spending is held down because labor gets an ever-smaller share of national income, while corporations, despite soaring profits, have little incentive to invest, you have a recipe for persistently depressed demand. I don’t think this is the only reason our recovery has been so weak — but it’s probably a contributory factor.”

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