The new forums will be named Coin Return (based on the most recent vote)! You can check on the status and timeline of the transition to the new forums here.
The revival of [The Economy] (thread) and the potential for its coming collapse
silence1186
Character shields down!As a wingmanRegistered User regular
Character shields down!As a wingmanRegistered User regular
So tangential to many discussions I've been following in D&D (taxes, the budget, the Russia investigation) have been posts about the state of the economy, and the potential for an economic downturn in the very near future. Rather than have off-topic discussions in those threads, I feel like there's enough meat for a discussion about the current US economy, the signs of a potential recession, how such a recession could affect the world economy, and what the political ramifications such a downturn might cause.
So in some good news, unemployment is down to ~4.1%, which is pretty close to levels pre-2007 recession. This doesn't take into account a reduction in workforce participation (source), or that a lot of people that lost their jobs in the last recession weren't able to get jobs at similar salaries, meaning while people are employed, their purchasing power is down, which is bad for the consumer economy. (Median income has only just recovered to pre-recession levels)
The USA has basically experienced a lost decade of economic growth. But now that we've recovered, the economy can finally start to thrive, yes? Not so fast. The official end of the Great Recession of 2007 was June 2009, but as that link shows, we are in the third longest stretch of time without a recession since the Great Depression of 1929. So then we must be due for a downturn? As with most things, the answer is "it's complicated."
Do you or do you not think the US is headed for a recession? If so, why? If not, is there anything that could disrupt how well things are going?
As for me, I suspect we are headed for one. The stock market is red hot, but there's no clear basis in the economy for it to be so good, so I'm worried there's a bubble that's about to pop. And since we've only just managed to get back to where we were pre-2007, I suspect the next recession will be particularly painful for a lot of people (not that they aren't always so).
Link to @ronya 's last excellent Economy thread.
Official cross contamination of off-topic posting links:
Talk about the budget here
Talk about the tax reform here
Talk about the Russia investigation here
Talk about anything Trump-related in one of the myriad of threads about him
So in some good news, unemployment is down to ~4.1%, which is pretty close to levels pre-2007 recession. This doesn't take into account a reduction in workforce participation (source), or that a lot of people that lost their jobs in the last recession weren't able to get jobs at similar salaries, meaning while people are employed, their purchasing power is down, which is bad for the consumer economy. (Median income has only just recovered to pre-recession levels)
The USA has basically experienced a lost decade of economic growth. But now that we've recovered, the economy can finally start to thrive, yes? Not so fast. The official end of the Great Recession of 2007 was June 2009, but as that link shows, we are in the third longest stretch of time without a recession since the Great Depression of 1929. So then we must be due for a downturn? As with most things, the answer is "it's complicated."
Do you or do you not think the US is headed for a recession? If so, why? If not, is there anything that could disrupt how well things are going?
As for me, I suspect we are headed for one. The stock market is red hot, but there's no clear basis in the economy for it to be so good, so I'm worried there's a bubble that's about to pop. And since we've only just managed to get back to where we were pre-2007, I suspect the next recession will be particularly painful for a lot of people (not that they aren't always so).
Link to @ronya 's last excellent Economy thread.
Official cross contamination of off-topic posting links:
Talk about the budget here
Talk about the tax reform here
Talk about the Russia investigation here
Talk about anything Trump-related in one of the myriad of threads about him
+4
This discussion has been closed.
Posts
The "monopoly hypothesis" (and some casual political economy). Some discussion. The focus on rent and industrial concentration has gathered some fans as the 2008 GFC has receded, so arguably Klein won that battle back in 2013 - it really turned out to be growth after all - albeit for the wrong reasons. Some discussion.
Which, there are some reasons to question how accurate their calculations are. But, regardless, even if they are undercutting what GDP could be we are basically there or will be in another year or two if trends continue.
once we're lost in the weeds of housing policy, then left vs right becomes a lot fuzzier. fuzzier than Eat the Rich anyway...
Actual GDP being higher than potential GDP is ... ok what? Just within the margin of error of the model?
predicts inflation
I'm not sure if failed to show up is right, more that it's been hyper-concentrated into a few sectors so far.
Velocity of M2.
M2 is is the broader money supply, velocity is how frequently money is used. Lower velocity is indicative of higher concentration of wealth, as the average dollar changes hands less frequently.
M2 velocity is the lowest that has ever been recorded.
Also, has M2 increased past a point that anyone can do anything with it?
I know so little about this stuff, but it's just enough to ask embarrassing questions!
This article Ronya linked above argues "It’s not so hard to believe that people like to have money, even much more money than they ever plan to spend on their own consumption or care to pass onto their children. You can explain a preference for wealth in terms of status competition, or in terms of the power over others that wealth confers. I’ve argued that we desire wealth for its insurance value, which is inexhaustible in a world subject to systemic shocks. These motives are not mutually exclusive, and all of them are plausible. Why pick your poison when you can swallow the whole medicine cabinet?"
Arguably just the having of money, beyond what you could ever need or want, is becoming the goal, which could explain the decreasing velocity and virtual shrinking of the (active) money supply.
This always struck me as absurd thinking on the part of rich people (I kind of agree with the author). If a rich person pays his employees more, or hires more employees, the employees are just going to turn around and spend that money on some rich person's goods or services, which will filter back up and consolidate in the hands of the rich person, but a bunch of other people will have enjoyed goods and services along the way.
All first world countries have them, yes. I don't know if "inevitable" is the word I would use. More like "known side-effect of our economic system but mostly believed to be worth it."
Anyways, the other thing we should be sweating bullets about, that no on is really talking about. AI hitting a point where it's adequate to start automating jobs that were out of the question for automation. It's a scary prospect because the resulting loss of jobs will probably fuck the economy, but also because of how people think it's really fucking easy for it to be a rude, unexpected awakening for money. Right now the power of AI's is doubling, so we have a chance for this stuff to be nonthreatening one year and then putting tons of people out of work because the AI does a much better job than meat-bags. People also still describe to the notion that new innovations will create more jobs than they wipe out, which hasn't been true for awhile. These people also forget many of the new jobs or available old jobs require lots of time to attain the knowledge to do, if not massive amounts of money as well. Right now in the US, the work culture makes it rather hard for people to build up new skills without having to sacrifice personal time. Also many businesses are loath to do any sort of professional development for their workers on their own dime, but wonder why younger workers won't stick with them long term.
In short, based on what I'm seen for AI predictions, we'll likely see the impacts in the middle of the 2020s. So figure we'll get a down turn in 2025 at the latest because of job losses from AI (I'll admit it's not conservative estimate, but it isn't the earliest that AI could fuck the economy). I think we'll probably see a downturn before then because the idiots got into power and the heirs of the oligarchs have no fucking idea what they are doing and are more interesting in looting their nations for high score purposes.
That is the question. The far-right-wing (on economics, so the Randroid crowd) ascribes economic shocks to the accumulation of "malinvestment" and that the shock itself is self-correcting because it forces people to become more conservative in their investments for a time, and then argue that the malinvestment is due to perverse incentives created by government regulation (which is the part that walks off into nutbar territory). Ergo they suggest that if everything was properly priced by a pure free market then malinvestment would never happen in quantities large enough to cause a protracted recession.
My two cents is that the cycle is natural but that particularly large recessions are the result of bad policy (either bad policy outright, or a lack of laws to prevent certain ills like buying on margin) that exacerbate the natural tendencies of the market, so that the far right might be correct about the cause but wrong about the solution.
Australia has an economic expansion that's lasted over a generation, including the years 2007-2009. They haven't had 2 Quarters of back to back GDP contraction since 1991.
Anyone trying to predict anything about the broader economy and computing 8 years out is almost certainly going to be wrong. It's going to be a problem, but probably not that quickly. Human labor costing more and more due to our fucked health insurance system will probably have as much to do with this as anything.
For example, after regulation came down upping fiduciary accountability for advising on retirement plans, most big banks addressed the problem with that third option (chat bots), because you need a small number of business analysts to keep your answer repository up to snuff vs expensive training for your sales force, which takes them away from their normal jobs and ups your required FTE to handle the same workload.
This is all white collar work, higher-paying jobs not being created...
Mill, the job apocalypse has already started, currently in the form of future job growth slowing.
(*cough* Most of my job involves implementing these systems and business practices *cough*)
Though I do wonder if you have a plan for when your job also becomes automated/obsolete.
(inasmuch as one can plan for "and then Skynet starts herding us all into camps")
Oh, and hope we've instituted a basic income, universal health care, and happiness-maximizing-vs-wealth-maximizing society by then...
Digital automation seems like the one of those buses where throwing millions of people under it is the only way to draw attention to it's inevitable approach.
https://www.bloomberg.com/news/videos/2017-11-21/macy-s-plan-to-survive-the-retail-apocalypse-video
The looming "retail apocalypse" has been popping up for a while now, ever since JC Penney took an ill-fated stab at reinventing itself and had to shutter a bunch of stores:
http://ir.jcpenney.com/mobile.view?c=70528&v=203&d=1&id=2249169
Alright department stores are dying, so what? Maybe it's their time, they're dinosaurs and retail is evolving. Here's what the future looks like:
https://consumerist.com/2017/04/04/dollar-express-chain-sells-out-to-competitor-dollar-general-after-1-5-years/
https://www.bloomberg.com/news/features/2017-10-11/dollar-general-hits-a-gold-mine-in-rural-america
I can source the rest of this if requested: the trend seems to be private equity buying struggling retail companies, selling off real estate and other assets, then flipping the gutted company. Meanwhile, retail growth seems to be almost exclusively at the absolute lowest end: dollar stores, Wal-Mart, etc.
I don't think I need to cite anything when I say that Amazon is the big reason for the retail sector's trouble. You can read about it everywhere.
The U.S. economy is rapidly becoming dependent on service jobs (as opposed to industrial). At the upper-middle end, automation is making white collar jobs obsolete. At the lower-middle end, the squeeze of automation is putting distressed legacy retailers into a position where the only way to remain profitable is to sell off assets piecemeal - this creates no jobs.
I read a lot of Bloomberg for market news so forgive me one more link.
https://www.bloomberg.com/features/2017-future-of-automation/
I read this article with two kinds of fascination: the hypothetical consumer ordering shoes lives right down the street from me! and also I was trying to puzzle something out: in a world this automated, who has the disposable income to impulse shop for shoes? A large number of traditional service jobs - sales, transport driver, warehouse worker - simply don't exist in this future. What does an economy without any of those jobs look like? Who is left with a paying job?
The forces at work in all of this will create an economic crisis that makes the last one look quaint. It might not be the next one, but it's coming. Unlike the last one, there will be no recovery; there can only be total reinvention. When automation has squeezed enough labor into obsolescence, if we haven't already laid the groundwork for a new kind of society we're in a lot of collective trouble.
My belief is that this is due to our government putting us into surplus with the introduction of a sales tax in 2000. This gave us the breathing room for the downturn in 07-09, but also to a large extent we've been riding on the back of China's growth, which didn't appear to suffer at that point.
We could probably use more tax and more social services however, without being in deficit.
Also yes Vanguard, statistically speaking most years there is a stock market correction (defined as a 10% or more peak to valley fall). We've had a few of them already since 2008 despite the market being unusually calm for most of the time period.
E: stupid mobile
When you look at all of the costs that come with a significant expansion to bring significantly more goods to market, you are looking at a much higher cost for producing the product overall. Having two factories from a perspective of looking at your costs isn't like having a factory times two, its having a factory 2*x, x being some amount more than the cost of the original factory. In the process of getting that second factory you enter into all kinds of long term commitments that now need to be serviced.
So why is all of the previously described a problem? If your the only one in the industry you can look at the current price of goods in a market and say, "that price justifies us opening up an additional factory. We would make enough money based on these prices to pay the additional costs and make more profit. This all makes sense." However, you aren't making the decision to open up the second factory in a vacuum. Your competitors were also looking at their costs, and the rising price and making their own decisions, some of them to expand, some of them not to. Also, other people interested in getting into the industry may make a decision to start their own factory based on the current price of the goods or services being produced. Inevitably, in some industries many competitors will look at the same data and decide to expand, particularly if the original price of the good or service increased significantly or stayed high over a long period of time, and what will inevitably happen in that industry is the price will go down because they will increase the supply of their good or service to the point that the market becomes saturated, and people are only interested in consuming more of it if the price is lower than the current equilibrium.
If the price of the good or service gets low enough, then the industry suffers as company's are no longer able to make a profit off of their second factory, and it is now losing money. If the market is saturated to an extreme point, which is likely if it takes many years to bring additional factories into service, then the price might be driven to the point that they are no longer profitable on either of their factories. What happens is over a long period of time these companies do anything and everything they can to stay in business until some companies are forced to exit the market.
I was going to do it earlier, but I feel like at this point the gamble is just to high; especially, with all the other fuckery going on.
captain inertia, yeah, I know the job apocalypse is already underway. Just seems like everyone is predicting that the noticeable losses won't start until the middle of next decade. That's the most troubling thing, people are going to wait until it's really noticeable to do anything to try and avoid having AI cause some massive problems, but by that point it will be too late. It's also not something we can simply put back in the bottle either because people with money will want the cheapest way to make more money. Even if that cheapest way will fuck them long term. Then their is the whole thing with automation taking some jobs that are super shitty and making it so we don't have to them (I doubt I'm the only with mixed feeling on driverless cars. On one hand fuck traffic, namely interstate traffic and all the people that shouldn't be driving period. On the other hand, that is a shit ton of jobs that go pull and many of those people don't have the option to get another job because they probably won't have the skills to get any of the remaining jobs).
Pretty much every shopping center I go to has at least one, many of them multiple vacancies that had previously been occupied as long as I remember. New businesses are really slow to move in, and when they do they are either restaurants, or they cater to some really niche market. For the restaurants, we are pretty saturated. We have a lot of restaurants of varying quality.
Every week I'm looking at what I would consider prime real estate located within biking distance of some of the better neighborhoods in the area with lots of vacancies. So, I really don't get it. I feel like the prices to rent/lease these places should be going down. Its not like they stopped building stuff. If anything the construction companies in my area have been pretty busy finding anywhere that can be built but hasn't yet.
This and the above
There is downward pressure on rents that landlords have to charge for retail stores to remain profitable. In some areas there is increasing demand for relatively cheap office space that isn't in a dense downtown area. At some point these curves cross, and it doesn't make sense to actually build for dedicated retail; a mix of those stores that can still absorb a periodic rent increase and offices that see retail-level rents as a bargain is the ideal scenario for the rentier class.
Which is why private equity loves commercial real estate. The value of a company like Macy's isn't in the stores it runs, the product it sells, or the people it employs. It's in the rents it can seek as a result of decades of expansion. Investors salivate over real estate portfolios measured in the billions, because they can bring in many times their purchase price in a few short years. Unlike exchange traded stocks the pressure on private equity for quarterly results is less diminished. Thus the retailer is pushed four times a year closer to insolvency, while the land it sits on can be patiently monetized.
Not only that, but a crash in residential real estate affects commercial property less severely and for less time. It's by no means immune to shocks, and as I outlined above its eventually going to collapse, but at that point it will cease to matter who owns what.
Ups and downs are inevitable, but not boom and bust. Booms and busts are the result of unfettered capitalism and happened all the time pre-1929. Once the biggest bust hit and regulations were put in, the curves were much more moderate, downturns rather than crashes. Removing those regulations allowed the deeper bust of 2008, and the more the fetters are removed, the worse the crashes will get.
on the other hand, VIX is quiet
it's so quiet that analysts are penning articles worrying that VIX is too low, i.e., people are worrying that people are not worried enough, to quote matt levine
Let's look at this article closer:
Is the definition used by industry of persistent inability to hire skilled workers "vacancies that last for three months or more"? Based on my experiences, it isn't, because we frequently go through hiring freezes. A big part of why hiring is so difficult in the corporate world is self inflicted, because corporations want their employees to do more with less.
The majority of computer help desk work is effectively unskilled labor. And manufacturing facilities rarely need more than a handful of employees with programming skills, where a help desk may require the majority to do so.
Etc Etc.
Mind you, I don't disagree with the premise of the article, that much of the perceived skill gap is driven by employers. But call centers aren't where tech skills are typically required.
Fair point, but "small population, large land area with tons of natural resources to export" is pretty much the god-mode of economic expansion.
I am strongly of the opinion that we are headed for a recession if not an outright depression. The stock market continues to hit record highs, but almost all of these gains are by the top 0.01%. GDP continues to hit record highs, but almost all of these gains are by the top 0.01%.
Meanwhile, unemployment is at record lows, and wage growth is severely lagging behind any measure of economic prosperity. In my opinion, the average American never left the recession. Buying power is down, hours worked are flat, salaries are stagnant and often not keeping up with our already low inflation.
I think when the bubble bursts in the stock market, the average American will more adversely affected than the super rich that have been benefiting, as they will institute even more laws and practices that only benefit them. For example, raising our taxes and cutting welfare while giving themselves tax breaks and handouts.
*corrected to unemployment. Thanks Xaquin!