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PostPosted: Sat Dec 27, 2014 2:15 am    Post subject: 1111 Reply with quote

PeakTrader:

It’s not surprising the U.S. is attracting more imports (including cheaper oil that require fewer resources to extract) and capital (with relatively higher interest rates, although they’re still low), along with rich foreigners (who want to live in the U.S.), because the U.S. economy is strengthening faster than the rest of the world.

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The U.S. shale oil boom is endogenous growth - private sector technology meeting or anticipating "Peak Oil."

It benefited U.S. producers and consumers, along with reducing oil imports, to raise U.S. GDP, ceteris paribus.

Of course, foreign oil producers and economies also influence oil prices.

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You’ll know when we reached potential GDP when accelerating inflation fails to raise real GDP.

We’re a long way from potential output, in part, because of globalization and the Information Revolution.

Also, I may add, in 1999, we started hiring bag ladies and guys sleeping in the park from temp agencies to process paperwork.

We’re nowhere near that point.

****

http://upload.wikimedia.org/wikipedia/en/7/7e/U.S._Phillips_Curve_2000_to_2013.png

****

It should be noted, the U.S. offshored older industries, imported those goods at lower prices and higher profits, and freed-up a lot of U.S. labor.

Also, U.S. Information-Age firms, which became more efficient after the quick and massive “creative-destruction” process, mostly from 2000-02, earn high profit margins and are sitting on huge piles of cash (the U.S. not only leads the world in the Information Revolution, it leads the rest of the world combined, in both revenue and profit).

So, there’s plenty of unused labor and capital, or productive capacity.

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http://finance.yahoo.com/news/19-lesser-known-biotech-stocks-135926987.html

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http://www.washingtonpost.com/opinions/robert-samuelson-where-have-all-the-entrepreneurs-gone/2014/08/06/e01e7246-1d7c-11e4-82f9-2cd6fa8da5c4_story.html

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https://www.uschamber.com/blog/vanishing-act-decline-american-entrepreneurship

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Randomworker:

Also from the link

Work Among SNAP Recipients in 2011
Most SNAP participants are either not expected to work or are working. In a typical month
of 2011, the most recent year for which data are available, almost 70 percent (68 percent) of SNAP
recipients were not expected to work because they were children, elderly, disabled, or were caring for
a disabled family member in their home or for a child under six where another household member
was working.9 (See Figure 6.)
And…

The overwhelming majority of SNAP
recipients who can work do so. Among SNAP
households with at least one working-age, nondisabled
adult, more than half work while
receiving SNAP — and more than 80 percent
work in the year prior to or the year after
receiving SNAP. The rates are even higher for
families with children — more than 60 percent
work while receiving SNAP, and almost 90
percent work in the prior or subsequent year.

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PeakTrader:

Randomworker, the information you cite is so general, it explains very little.

For example, there may be many people who work for a few weeks and then decide they don’t want to work.

If I wanted to write a statement that people would assume I knew what I was talking about, but hardly knew anything, that’s the type of statement I’d write.

****

Not Posted:

Randomworker, the information you cite is so general, it explains very little.

For example, there may be many people who work for a few weeks and then decide they don't want to work.

Or, there may be a guy who had five babies from five different women and a woman who had five babies from five different guys.

Or, a poor immigrant woman having multiple babies, while her husband works very hard at a low-wage job and she runs a nursery under the table.

The information you cite can mean the "waste, fraud, and abuse" is very high.

****

Demand can increase through higher wages or lower prices.

Lower oil prices is a transfer of income from oil producers to oil consumers.

And, lower oil prices, along with slowing the U.S. oil boom, will improve U.S. efficiency in oil production.

However, in general, although inflation has been low, there hasn’t been a transfer of income from profits to prices.

Since 2008, U.S. firms became more efficient, producing output with fewer inputs, to maintain or raise profits.

However, there hasn’t been enough competition to reduce prices, e.g. because of barriers to entry (with market power), regulations (hurting both smaller businesses and consumers), and taxes (including more progressive taxes).

So, we have more efficient producers with less competition, high profits, and too much pricing power.

****

The rise in corporate profits:

http://research.stlouisfed.org/fred2/graph/?g=cSh

***

BC, I agree, the U.S. oil boom had a positive effect on GDP, through production, international trade, and prices (including natural gas).

However, most of the real effects were regional, similar to throwing pebbles in the water causing waves that become increasingly smaller away from the center.

There’s still tremendous idle and underemployed labor and capital for much faster real growth to close the output gap.

We need to raise and then sustain income = consumption + saving to shrink debt as a percent of income = GDP = output.

****

BC, you need to see the definition of the financial sector:

“…firms that provide financial services to commercial and retail customers. This sector includes banks, investment funds, insurance companies and real estate.

Financial services perform best in low interest rate environments. A large portion of this sector generates revenue from mortgages and loans, which gain value as interest rates drop. Furthermore, when the business cycle is in an upswing, the financial sector benefits from additional investments.

Improved economic conditions usually lead to more capital projects and increased personal investing. New projects require financing, which usually leads to a larger number of loans.”

http://www.investopedia.com/terms/f/financial_sector.asp

Corporate profits are also high for non-financial firms, because of efficiencies in production.

You may want to read this 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.”

****

BC, you continue to ignore the real economy and turn any positives into negatives.

For example, U.S. market power improves U.S. terms-of-trade. So, the U.S. is able to consume more than produce in the global economy and in the long-run. Americans are able to consume more with less effort, because of structural trade deficits and efficiencies in production.

You want Americans to spend and borrow in a depression to generate jobs and raise living standards. So, more Americans can afford to spend and borrow to generate more jobs.

And, when the country reaches full employment, you want to slow growth to a sustainable rate.

The U.S. has enormous productive capacity to expand and raise income = consumption + saving.

There’s no “hyper-financialization.” Instead, there’s massive idle capital earning enough for capital preservation, along with massive idle labor.

So, there’s great potential for the economy to expand, and I’ve explained before how to unleash that growth.

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PeakTrader:

Too many people believe they’re more important than they really are, particularly politicians.

***

We know for sure trying to make the world cooler will make everyone poorer.

How about a massive industrial revolution in Africa?

****

I tend to agree with this professor:

UK professor emeritus of biogeography Philip Stott of the University of London:

“…regards climate as the most complex coupled non-linear, possibly chaotic, system known… does not believe we can manage climate change predictably through fiddling at the margins with just a couple of factors.

…humans have survived climate change for thousands of years, not by playing God with one or two politically selected factors, but by adapting to the new conditions.

,,,the fundamental point has always been this: climate change is governed by hundreds of variables and the very idea that we can manage climate change predictably by understanding and manipulating at the margins one politically-selected factor (CO2), is as misguided as it gets.

Philip Stott is no longer a member of the Scientific Alliance because he deems it important to be academically independent of all organisations, industry, and green groups. In the UK, he is a lifelong Labour supporter and he is mildly left wing politically.”

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People shouldn't blame Obama entirely for this deep, and now long, depression.

Like people shouldn't praise only Bush for the boom in living standards.

Congress deserves much credit (pun intended) for the housing bubble, which lifted the Bush economy.

And, Bush shouldn't receive too much credit for the up to $800 billion a year trade deficits, which subtracted from GDP. but added to living standards.

http://www.advisorperspectives.com/dshort/charts/indicators/GDP-per-capita-overview.html?Real-GDP-per-capita-since-1960-log.gif

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Howard, how can you have a “nice controlled experiment” comparing two different economies and ignoring so much economics?

It doesn’t seem easy to turn rust into steel, and attract the best from the rest of the country, and the world, to move to Wisconsin or Kansas.

Of course, here in California, there’s lots of money to shake out of people’s pockets, and the state, along with many city governments, are very aggressive.

That may help explain why much of the “middle class” is struggling in this “rich” state, or fleeing, unless they paid-off a home mortgage, refinanced (at lower rates and/or took out some equity); or work in a government, union, or private job in a growing or emerging industry.

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