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PostPosted: Mon May 25, 2015 8:07 pm    Post subject: 1111 Reply with quote

PeakTrader:

The U.S. has had much faster per capita real growth, since the Fed was established and since we went off the gold standard.

You can praise the Fed later for the faster (compounded) growth that resulted in a much higher standard of living today than otherwise.

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Ricardo, I responded to your statement before:

Average annual per capita real GDP growth

1871-1914: 1.56% (height of the Industrial Revolution)
1982-2007: 2.30% (height of the Information Revolution)
1814-1913: 1.39%
1914-2013: 2.15%

Economic boom/bust cycles (not to be confused with asset booms and busts) are inefficient both in the boom and bust phases, because of periods of strain and slack. Sustainable growth is optimal growth (rather than feasts and famines or floods and droughts). Monetary and fiscal policies smoothed-out business cycles.

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The Long Depression

The National Bureau of Economic Research dates the contraction following the panic as lasting from October 1873 to March 1879.

At 65 months, it is the longest-lasting contraction identified by the NBER, eclipsing the Great Depression’s 43 months of contraction.

In the US, from 1873–1879, 18,000 businesses went bankrupt, including hundreds of banks, and ten states went bankrupt, while unemployment peaked at 14% in 1876, long after the panic ended.

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The Depression of 1893

The Depression of 1893 was one of the worst in American history with the unemployment rate exceeding ten percent for half a decade.

During this period population grew at about 2% per year, so real GNP per person didn’t surpass its 1892 level until 1899.

The depression, which was signaled by a financial panic in 1893, has been blamed on the deflation dating back to the Civil War, the gold standard and monetary policy, underconsumption, a general economic unsoundness, and government extravagance.

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List of recessions in the United States – Wikipedia

Recessions in the Industrial Revolution – 1871-1914

Period – Percent Decline of Business Activity

1873-79 – 33.6%
1882-85 – 32.8%
1887-88 – 14.6%
1890-91 – 22.1%
1893-94 – 37.3%
1895-97 – 25.2%
1899-00 – 15.5%
1902-04 – 16.2%
1907-08 – 29.2%
1910-12 – 14.7%
1913-14 – 25.9%

Recessions in the Information Revolution – 1982-2007

Period – Percent of Contraction

1990-91 – 1.4%
2001 – 0.3%

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It should be noted, immigrants during the Industrial Revolution had roughly the same skills as the domestic population. So, if the U.S. population doubled from immigration, GDP also doubled.

In the Information Revolution, immigrants were less skilled, in general, than the domestic population. So, if immigration doubled, GDP would less than double.

During the Industrial Revolution, the average workweek for factory workers was 10 to 12 hours a day, six days a week. On the farm, it was from sunrise to sunset. It was common for children to work in factories and farms.

Small economies tend to grow faster than large economies. Of course, most women didn’t work at paid jobs and families had more children.

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Looking at debt, while ignoring equity, consumption, and human capital doesn’t tell you much.

Most people live month-to-month. Without a job, or with a low-paying or part-time job, debt can be a problem.

The solution is to raise monthly income by increasing production. So, people can borrow and save, to build equity, consume, and employ their human capital.

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All output isn’t “pledged” to the top 1% or 10%. People consume more than produce or produce more than consume.

How can equity be overvalued, since its value is determined by the market. If people are willing to pay x-dollars for an asset, why do you believe they’re overpaying?

Yes, there’s income and wealth inequality. If you work little, for example, your income may be low. If you save and invest little, your wealth may be low.

Income and wealth can be created, particularly in a high income and very wealthy country, like the U.S., to benefit everyone.

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BC, your statement is full of contradictions. You assume there’s too much debt and then assume there’s too much equity.

You assume there’s too much equity to “wages, profits, and GDP” being “hoarded” when low interest rates facilitate consumption and investment, for households and firms, and then conclude low or zero growth.

You assume stagnation, because of lower borrowing costs, more equity, and more debt, while ignoring the effects on employment and income.

I’ve stated before how to raise employment and income more quickly. Nonetheless, you can praise the Fed later for its exceptional performance.

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BC, you continue to contradict yourself. For example, you’re critical of an equity “bubble,” while complaining of a balance sheet recession.

Economic policies can improve household and firm balance sheets, which shouldn’t be ignored.

It’s not a zero sum game. It’s expanding the economy, to raise income and wealth.

And, I’ve explained before how the economy can expand more quickly.

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It seems, the U.S. dollar to a broad basket of currencies and the U.S. dollar to the euro is highly correlated.

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Perhaps, Lazear was optimistic in May 2008, given the timely Bush stimulus plan passed earlier in the year and didn’t completely work its way through the economy. Real GDP growth was positive in 2008, until Lehman failed in September.

Here we are six years into the expansion, since June 2009, and monetary policy is still in emergency mode. We seem constrained to deal with another recession, particularly after increasing federal debt by one-third, since 2008.

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A housing and stock market bubble began in 1995.

The stock market bubble ended in 2000. We had a mild recession in 2001, because of the Bush tax cuts, while the housing boom continued.

There was a quick and massive creative-destruction process mostly from 2000-02, in the mild recession, which made firms more efficient.

While another stock market bubble formed, after the mild recession, more tax cuts were needed than a housing bubble.

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The point of the tax cuts was to raise income equals consumption and savings, not raise tax revenue.

Income equals GDP equals output.

If taxes, or tax rates, were zero, there would be no tax revenue.

It should be noted, when output gap closes, taxes can be raised to slow the expansion, to a sustainable rate.

And, if taxes become too progressive, particularly huge negative taxes for low income workers and high “middle income” taxes, it’ll cause disincentives to work and invest.

If taxes are too progressive, someone may choose a part-time job with tax credits than a full-time job without tax credits.

A full-time worker may work less hours, because of a higher marginal tax rate.

High taxes may slow the expansion of a small business.


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Baffling, I’m for promoting work and investment, including through government spending.

However, a $5,000 per worker tax cut is regressive and broad-based.

The housing bubble was unfair. For example, some homebuyers (not only low income buyers) won big and others lost big.

And, risk in the housing bubble increased dramatically over its last few years.

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The private sector made rational choices based on the poor policies of government.

The housing bubble was the result of a giant social program politicians believed they didn’t have to pay for.

Government failed and effectively shifted blame to others, because that’s part of what it does.

The country doesn’t need more failure.

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Baffling, without the encouragement and support of the federal government, throughout the bubble, there wouldn’t have been a bubble.

It would’ve been irrational not to take advantage of the moral hazard and “too-big-to-fail” that government created.

Don’t fight the government, and the Fed.

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There hasn’t been much job creation beyond population growth, after the severe recession, and older workers have been working longer, in this deep depression.

Nominal and real GDP growth remain low. The economy is underproducing by a huge amount each year. There has been a lot of lost output in this L-shaped recovery.

****

We lost 8.7 million jobs in the recession.

We created 11.5 million jobs, since the start of the recession.

So, we had an average increase of 33,000 jobs per month, since the economy peaked in December 2007.

However, if we needed 125,000 jobs per month, since December 2007, to keep up with the population growth, then we need over 7.5 million more jobs.

Even if one-third of the output gap has been destroyed, we’d still need over 5 million jobs beyond population growth.

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If Indiana loses industries with a strong record on gay rights, it may gain industries with a strong record on religious freedom.

Regarding Russia, there are also economic losses outside of Russia. China may be the big winner.

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Do they want to deny services to certain individuals or deny services to certain behaviors?

Historically, many societies controlled some behaviors, perhaps, for good reasons.

Society should accept everyone, but that doesn’t mean it should accept every behavior.

Some people cannot accept “marriage” is something other than between one man and one woman.

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From several articles over the past day:

A crowdfunding page in support of Memories Pizza, the Indiana pizzeria that drew criticism this week for saying it wouldn’t cater gay weddings, has raised nearly $500,000 in 24 hours. A GoFundMe page was set up this week after the restaurant’s Yelp page was flooded with negative reviews.

…one of the pizzeria’s co-owners told a local news affiliate that “[i]f a gay couple came in and wanted us to provide pizzas for their wedding, we would have to say no.” Memories Pizza said they would continue to serve gay customers that came into their store.

The GoFundMe page was set up by Lawrence Jones…the company had received threatening phone calls and messages on social media….quickly met its initial goal of $25,000, and, at the time of this writing, has amassed more than $493,000…in order to “combat the leftist hatred” that other commenters have left there.

Co-owner Crystal O’Connor: “I don’t know if we will re-open,” she said when asked about the backlash the business has received. She also said her family is considering leaving town. “We’re in hiding, basically.”

“We’re very hurt and confused,” she added. “We stood up for what we believe. We said we would serve anyone who walked in the door — even gays — but we would not condone a wedding, we would not cater for it because that’s against our religious beliefs.”

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