Who's to blame for the slow recovery?

[David_N]

Yup...with apparently no idea whatsoever of a real world figure for this idea of yours.

How you expect people who actually understand macroeconomics to take this theory of yours seriously when you are saying - in essence - ' here is my great idea, but I have absolutely no idea how much money is required to make it work'.; is beyond me.

But...knock yourself out.


Good day.

Yup...with apparently no idea whatsoever of a real world figure for this idea of yours.

Again, providing an exact number is meaningless.

 

[JohnfrmClevelan]

First off the government spends money and business invest. There is a big difference. During the WPA walls were built down the middle of streets. Some still stand today as testament to wasted manpower and money. Germany built the Autobahn instead. Our government spent money to spend money where business wants something from the money it spends such as a state of the art highway.

Just spending money is stupid and wasteful which government excels at. No matter how much the waste it is OK. Raise taxes the Clinton plan.

When the Port of Houston was built it was called corporate welfare by the democrats who did not want to invest in America. The Republicans call it providing infrastructure to promote business and industry. The Port of Houston is one of the busiest ports in this country. #2 in the country because of infrastructure or corporate welfare as the democrat see it.

The democrats wanted to spend the money paying people not to work rather than provide millions of jobs. I want to our government spending to help industry put people to work in middle class jobs. The democrats want to bring cheap labor from south of the border to drive down wages.

I can see already that you are going to put everything in terms of Democrats and Republicans. I have no time for that kind of silliness, and there is nothing to be learned from it.

 

[DA60]

Again, providing an exact number is meaningless.

Do you have any remote idea at all? A range of figures? Anything?

Again, if you do not, I honestly do not understand how you expect your idea to be taken seriously by anyone who actually understands this subject.

 

[David_N]

First off the government spends money and business invest. There is a big difference. During the WPA walls were built down the middle of streets. Some still stand today as testament to wasted manpower and money. Germany built the Autobahn instead. Our government spent money to spend money where business wants something from the money it spends such as a state of the art highway.

Just spending money is stupid and wasteful which government excels at. No matter how much the waste it is OK. Raise taxes the Clinton plan.

When the Port of Houston was built it was called corporate welfare by the democrats who did not want to invest in America. The Republicans call it providing infrastructure to promote business and industry. The Port of Houston is one of the busiest ports in this country. #2 in the country because of infrastructure or corporate welfare as the democrat see it.

The democrats wanted to spend the money paying people not to work rather than provide millions of jobs. I want to our government spending to help industry put people to work in middle class jobs. The democrats want to bring cheap labor from south of the border to drive down wages.

First off the government spends money and business invest.

Do you understand what happens when the government spends money? That money (dollars) goes into bank accounts of individuals/businesses in the private sector. Government spending past tax receipts boosts demand for goods and services which helps businesses if the dollars end up in the hands of the poor/middle class who spend more then they save.

During the WPA walls were built down the middle of streets. Some still stand today as testament to wasted manpower and money.

Why do you see this as a waste? Were people not employed? Were people not earning dollars they would not otherwise have that contributed to increased spending? Was money truly wasted?

 

[David_N]

Do you have any remote idea at all? A range of figures? Anything?

Again, if you do not, I honestly do not understand how you expect your idea to be taken seriously by anyone who actually understands this subject.

I have my own personal opinion. The government budget deficit needs to be greater then the trade deficit.
So already we're looking at a budget deficit at 3% of GDP. If the government were to export more then it imported, the deficit should be reduced, assuming that full employment and inflation targets are being met.
I think this explains it better then I can:
Budget Deficits and Net Private Saving | heteconomist

 

[Hawkeye10]

The answer is easy: The entire global economic system is in a death spiral.

It will have to be replaced.

With something.

rof

 

[DA60]

I have my own personal opinion. The government budget deficit needs to be greater then the trade deficit.
So already we're looking at a budget deficit at 3% of GDP. If the government were to export more then it imported, the deficit should be reduced, assuming that full employment and inflation targets are being met.
I think this explains it better then I can:
Budget Deficits and Net Private Saving | heteconomist

Okay...thank you.

But you do realize that in 2012, the national debt was over double the trade deficit, yet the GDP growth rate for that year was practically identical to 2015 - even though that FY the federal deficit was not even as much as the trade deficit? And there are many other years like this as well.

Which kinda dispels your theory.

• U.S. trade balance 2000-2015 | Statistic

https://fred.stlouisfed.org/series/FYFSD

US GDP Growth Rate by Year

 

[JohnfrmClevelan]

Okay...thank you.

But you do realize that in 2012, the national debt was over double the trade deficit, yet the GDP growth rate for that year was practically identical to 2015 - even though that FY the federal deficit was not even as much as the trade deficit? And there are many other years like this as well.

Which kinda dispels your theory.

• U.S. trade balance 2000-2015 | Statistic

https://fred.stlouisfed.org/series/FYFSD

US GDP Growth Rate by Year

David is on the right track, but asking for a solid number is like asking him to predict the future. Instead, simply count up demand leakages and injections:

Aggregate demand =

National Income

Minus net savings (or plus net dis-saving)

Minus the trade deficit (or plus the trade surplus)

Plus credit growth (or minus a credit contraction)

Plus deficit spending (or minus a federal budget surplus)

= next year's income. Hopefully, a few % larger than your starting income.

 

[Kushinator]

Aggregate demand =

National Income

Minus net savings (or plus net dis-saving)

Minus the trade deficit (or plus the trade surplus)

Plus credit growth (or minus a credit contraction)

Plus deficit spending (or minus a federal budget surplus)

= next year's income. Hopefully, a few % larger than your starting income.

With all due respect, economic growth is far more complicated than what can be extrapolated by a mere hind-sighted accounting identity. National income, in your example, is also function of all the pluses and minuses.

 

[JohnfrmClevelan]

With all due respect, economic growth is far more complicated than what can be extrapolated by a mere hind-sighted accounting identity. National income, in your example, is also function of all the pluses and minuses.

Right, but you have to have some sort of cut-off period. How else would you explain it?

 

[KLATTU]

Why do you see this as a waste? Were people not employed? Were people not earning dollars they would not otherwise have that contributed to increased spending? Was money truly wasted?

{Did he just ask why building walls down the middle of the street was a waste? }

 

[Kushinator]

Right, but you have to have some sort of cut-off period. How else would you explain it?

It is such a complicated subject, that involves quite a bit of calculus and matrix math. IMO, far beyond the scope of this forum. Both of the dominant trends in growth economics, the Solow growth model and Romer growth model, utilize the steady state assumption, which is not supported by the new data. Much of the economic research on growth is currently looking for a way to account for this growing trend.

GDP calculation has, IMO, become a highly flawed methodology as of late. It fails to account for so many other aspects of the economy that add to both standard of living and productivity enhancements.

For example: what is the value of parents that partake in their child's upbringing relative to ultra-wealthy parents who hire help? One will account in GDP, the other will not, even though we can argue that parents will have more of an impact than the help, all else equal.

 

[JohnfrmClevelan]

It is such a complicated subject, that involves quite a bit of calculus and matrix math. IMO, far beyond the scope of this forum. Both of the dominant trends in growth economics, the Solow growth model and Romer growth model, utilize the steady state assumption, which is not supported by the new data. Much of the economic research on growth is currently looking for a way to account for this growing trend.

GDP calculation has, IMO, become a highly flawed methodology as of late. It fails to account for so many other aspects of the economy that add to both standard of living and productivity enhancements.

It's beyond the scope of this forum, and beyond my scope as well. But I think the simple way is good enough to explain the additions and subtractions to demand, and to get the point across that money doesn't just spring up out of nowhere because you want to buy something. I'd be more than happy just getting that point across.

 

[JohnfrmClevelan]

{Did he just ask why building walls down the middle of the street was a waste? }

What, exactly, was wasted? Labor that was not otherwise employed? Cement that was not otherwise produced? Money that the government can never run out of?

 

[Kushinator]

It's beyond the scope of this forum, and beyond my scope as well. But I think the simple way is good enough to explain the additions and subtractions to demand, and to get the point across that money doesn't just spring up out of nowhere because you want to buy something. I'd be more than happy just getting that point across.

Here is my contention: the level of consumption is also dependent on investment, government, trade, and credit. The same goes for basically all of these identities. When you say that a trade deficit or budget surplus subtracts from growth, it ignores how growth is occurring overall. They are so interconnected, attempts at isolation does the whole topic a dis-service.

Take investment for example: by the end of the year, the amount which is invested will be heavily reliant upon all of these factors, including cheaper/better/whatever foreign alternatives. If it wasn't for inexpensive technology being imported, how much new IT investment would have occurred? Is it fair to claim that in the absence of these imports, growth would have been greater?

 

[Kushinator]

What, exactly, was wasted? Labor that was not otherwise employed? Cement that was not otherwise produced? Money that the government can never run out of?

The long term value added in terms of productivity. If we are to just dig and fill holes, it will create income. But when we build a new highway that reduces traffic and automobile collisions, this adds to long term economic growth. At the same time, there isn't going to be a ROI in terms of growth for providing a bridge in isolated areas. Sometimes, we just have to do our best to encourage enough endeavors that overtake the loss in terms of opportunity cost.

 

[Hawkeye10]

It is such a complicated subject, that involves quite a bit of calculus and matrix math. IMO, far beyond the scope of this forum. Both of the dominant trends in growth economics, the Solow growth model and Romer growth model, utilize the steady state assumption, which is not supported by the new data. Much of the economic research on growth is currently looking for a way to account for this growing trend.

GDP calculation has, IMO, become a highly flawed methodology as of late. It fails to account for so many other aspects of the economy that add to both standard of living and productivity enhancements.

For example: what is the value of parents that partake in their child's upbringing relative to ultra-wealthy parents who hire help? One will account in GDP, the other will not, even though we can argue that parents will have more of an impact than the help, all else equal.

speaking to that:

The third is academic macro. This traditionally involves professors making toy models of the economy -- since the early ’80s, these have almost exclusively been DSGE models (if you must ask, DSGE stands for dynamic stochastic general equilibrium). Though academics soberly insist that the models describe the deep structure of the economy, based on the behavior of individual consumers and businesses, most people outside the discipline who take one look at these models immediately think they’re kind of a joke. They contain so many unrealistic assumptions that they probably have little chance of capturing reality. Their forecasting performance is abysmal. Some of their core elements are clearly broken. Any rigorous statistical tests tend to reject these models instantly, because they always include a hefty dose of fantasy.
.
.
.
And because academic macro is so useless for forecasting -- including predicting the results of policy changes -- the financial industry can’t use it for practical purposes. I’ve talked to dozens of people in finance about why they don’t use DSGE models, and some have indeed tried to use them -- but they always dropped the models after poor performance.

Most unfortunately, the Fed has had to go it alone when studying how the macroeconomy really works. Regional Fed banks and the Federal Reserve Board function as macroeconomic think tanks, hiring top-level researchers to do the grubby data work and broad thinking that academia has decided is beneath it. But that leaves many of the field’s brightest minds locked in the ivory tower, playing with their toys.

Economics Struggles to Cope With Reality - Bloomberg View

Egg Heads in ivory towers playing with their favorite toys, often ones that they created and are trying to promote, who never get out to see what the real world is all about, is who sits at the pinnacle of the field of economics.

The discipline is a full blown train wreck.

 

[Kushinator]

Egg Heads in ivory towers playing with their favorite toys, often ones that they created and are trying to promote, who never get out to see what the real world is all about, is who sits at the pinnacle of the field of economics.

The discipline is a full blown train wreck.

It is unfair to cry foul because a macroeconomic model is unable to forecast events that are simply impossible to account for. Yes, forecasting is not always fruitful. However, the ability to examine past data and extrapolate reality is well within the reach of macroeconomists.

 

[Hawkeye10]

It is unfair to cry foul because a macroeconomic model is unable to forecast events that are simply impossible to account for. Yes, forecasting is not always fruitful. However, the ability to examine past data and extrapolate reality is well within the reach of macroeconomists.

You lost me on that argument after it took a year for the economists to figure out that we were in the Great Recession, that there was a big problem that needed dealing with.

 

[Moderate Right]

Deficit spending aimed at getting the poor/middle class spending more dollars and reducing their debt burdens. Another answer is, to the point where full employment is met with noticeable unwanted inflation.

In other words, you're saying that 20 trillion was not enough.

 

[David_N]

In other words, you're saying that 20 trillion was not enough.

If that's how you want to see it.

 

[Kushinator]

You lost me on that argument after it took a year for the economists to figure out that we were in the Great Recession, that there was a big problem that needed dealing with.

**** happens. Economists didn't know, nor did they build assumptions into their models at the time, that ratings agencies or financial institutions would act against their own best interests for short term gain and long term loss that was magnitudes greater than their ST profits.

Remember, the reason that market based economics is superior is the very assumption that participants will always act within their best interests.

 

[Moderate Right]

I asked 'exactly how much'?

Do you not have any idea at ALL how much?

If you don't, then your idea is hard to take seriously (imo) as anyone can just peddle a dream with zero specifics to it and claim it would be wonderful.

This question has been asked a thousand times and not answered a thousand times but I can give you their answer. We should keep on deficit spending until we finally catch up to that pot of gold at the end of the rainbow.

 

[Kushinator]

In other words, you're saying that 20 trillion was not enough.

yep........

 

[Moderate Right]

Providing an exact number is meaningless.

Why would it be meaningless? Why can't you just admit that you don't know the exact number?