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  • #41
  • Feb 12, 2020 4:19pm Feb 12, 2020 4:19pm
Job Openings were down sharply this month:

Attached Image


Historically it's got a pretty good track record as a leading indicator:

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Click to Enlarge Name: Screenshot2.png Size: 43 KB
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #42
  • Edited 12:34pm Feb 20, 2020 12:14pm | Edited 12:34pm
Leadinx Index data from today suggests that the US is still expanding very nicely and supports views that arecession is not due yet.

LEI Chart
Attached Image



In the last 8 months, LEI has fallen 6 times, this jump from January and some recession models from wfb suggest that the near term probability of recession has receded but is still present.

The surge in January brought the year-over-year rate up to 0.9%, and revisions to December, which had previously showed a negative year-overyear growth rate for the first time since 2009, now show a 0.09% gain. This should alleviate some concerns of recession, which has typically been preceded by a negative year-over-year growth rate in the index.

Still the persistent weakness in the Q4 LEI was enough to push one of wfb short-term recession models up to a 34% probability of recession in the next six months, the highest reading since the Great Recession . Though that is elevated relative to the last few years, it is well below our threshold of two quarters above 50% necessary for triggering a recession warning.


Keep in mind that muuch of this weakness was driven by a slowdown in the manufacturing sector. The manufacturing sector has a large weight in the LEI, with more than half of the index being derived from manufacturing, but also keep in mind that manufacturing is not crucial to the economy as it was a generation ago. Manufacturing was mostly volatile due to trade policies and uncertainty and slower global growth. However manufacturing is a very cyclical sector so it should be included in all recession models.


The 0.8% surge in the LEI last month brought this new model which includes the index recession probability down to roughly 0.9%. (chart 2)

Chart2
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Recession probability models based on forward looking financial indicators, such as the yield curve, still remain elevated. Combining these indicators with our other recession models, we reach a two-quarter ahead recession probability estimate of roughly 18%. (Chart 3)

Chart3
Attached Image


While this is an improvement from Q4, we only have one month of data for Q1. This probability projection assumes we maintain my current position for the next couple of months, which may be difficult if disruptions from the coronavirus emanating out of China spill over into the U.S. factory sector. More broadly, this projection reflects our view that the U.S. economy will continue to expand, but the pace of growth will likely remain around 2%.
Through the light of enlightenment, darkness unveils the path of truth.
  • #43
  • Feb 20, 2020 12:49pm Feb 20, 2020 12:49pm
Love the thread, love the MACRO... Many gets lost in the WOODS... I prefer to see the FOREST. Of course ideal would be to have the overview of FOREST and individual TREES Anyway, I find it interesting that so many people do not see it when all is based in the basics... base formulas...

GDP... What is that ?
Very "simple" and established formula
GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M).
Y = C + I + G + (X − M)
For more: https://en.wikipedia.org/wiki/Gross_domestic_product

This component is vital since others have somewhat limited effect, specially government spending that is increasing debt:
C (consumption) is normally the largest GDP component in the economy, consisting of private expenditures in the economy (household final consumption expenditure). These personal expenditures fall under one of the following categories: durable goods, nondurable goods, and services. Examples include food, rent, jewelry, gasoline, and medical expenses, but not the purchase of new housing.

And what is C (consumption) people... and what is that, people buying certain things.. And how does that change over time... Demographics is very important since
OLD people buy different things and than YOUNG... Also at certain age consumtion PEAKS and at certain age it FALLS.. But even though all this is very SIMPLE and BASIC.. people are still checking the CHART(s) as a separate beast and expect LINEAR if not EXPONENTIAL growth... where its basic components are in decline...
Aga AGING 1st world... How long can they stimulate the OLD horse? They can, artificialy... and this is where lies the "beauty" for some...
GDP does not DEDUCT for DEBT! If one wants to be loved, the only thing he/she has to do is INCREASE DEBT that would increase jobs, GDP, you name it... at the expense of the higher debt but the later no one understands anyway so guess which options they choose?

Alternatively they could reduce the debt and cause recession and certain (temp) problems and be impeached, discharged or whatever... So here you have it...

GDP is good indicator but also one the most abused one.. since DEBT is not "punished" in it but AWARDED.. At least in the short run and if one is operating in the short-term....

The only thing that I do not get is if some people really do not understand the BASICS (wikipedia s...) or they PRETEND they don't, because it is very simple.. I have gone through a deduction with many economists and they either confirm, have moment of clarity or they admit that they have no clue... The ones that are the most dangerus are the ones that think they "got it", specially the ones that think SPENDING will get us out of (natural) cycle... Basically the whole "1st world" is trying to stimulate the economy for the past 10+ years with debt and it doesn't work as they think it would... And what happens when they stop stimulating... Withdrawal time
Can you afford to take that chance?
  • #44
  • Edited Feb 21, 2020 8:06am Feb 20, 2020 1:35pm | Edited Feb 21, 2020 8:06am
I'll explain the 4 sector model to those who haven't encountered these formulas yet. Lots of this stuff is not on Wikipedia or the "general internet" but is taught in most economics courses.




C = Alpha + Beta * (Y-T) where Alpha is autonomous consumption and Beta is tendency of a consumer to spend, and T is TOTAL TAX.

S = savings = -Alpha + (1-Beta)*Y, in an ideal system S=I (savings = investment) , 1-beta represents the tendency of a consumer to save

Total tax income= Flat tax + value added tax

The full formula for a 4 sector model would be

Y= Alpha + Beta * (Y - Tf - Tat) + G + I + X - M

Another thing to keep in mind is that the budget formula is D = T - G

You can increase the GDP by increasing Government Spending (G), but then you have to be careful not to get D into negative, as then you'd have to get more debt out (as auricforecas said).

Another way to increase government spending without going into negative budget would be to increase T (taxes), but by doing this you are also increasing this negative number here Beta * (Y - Tf - Tat) and thus lowering your GDP.

The goal of fiscal policy is to find the optimal level of taxes and Government spending.

The reason why EU interest rates are at 0% is because ECB wants to motivate INVESTMENT to keep the GDP growing, they want I to grow because G is too low. That's why Mario Draghi said "If you want higher rates, increase government spending".


Fiscal policy needs to find how much they can increase T while also increasing G while keeping in mind that the effect of increasing G has to be greater then the effect of increasing T.

Monetary and fiscal policy need to find the optimum level of interest rates and I (investments) to keep the GDP growing.

I have ignored import and exports for this explanation, but you can see how they impact GDP from the formula


The point of BALANCE is when Y is equal to those in the formula, the goal is for the point of balance to be as HIGH as possible on the vertical axis scale.


This is the FOUNDATION economic model that every economist should know, but as we all know many people unfortunately get degrees in economics without really having a lot of underlying knowledge to back it up.
Through the light of enlightenment, darkness unveils the path of truth.
  • #45
  • Feb 20, 2020 6:02pm Feb 20, 2020 6:02pm
Quoting Vorenzd
Leadinx Index data from today suggests that the US is still expanding very nicely and supports views that arecession is not due yet. LEI Chart {image} In the last 8 months, LEI has fallen 6 times, this jump from January and some recession models from wfb suggest that the near term probability of recession has receded but is still present. The surge in January brought the year-over-year rate up to 0.9%, and revisions to December, which had previously showed a negative year-overyear growth rate for the first time since 2009, now show a 0.09% gain....
Welcome back Vorenzd!

Thank you for your post on the LEI. I'm curious, what are your thoughts on US labor?

Weakness in the labor market has been my main concern, although indicators like the yield curve are alarming too. Here's how I'm looking at labor right now and how it factors into the business cycle...

First off, labor force expansion is a major driver of GDP. If you have x people producing y goods, then GDP is x*y. You'll always be better off with (x+1)*y so an expanding labor force is highly important. The unemployment rate is 3.6% so its questionable how much more the labor force can expand at this point. This source of growth is either tapped out or pretty close to it.

Secondly, leading economic indicators point to weakness in the labor market. Job Openings have fallen sharply and Unemployment Claims are trending sideways (rather than down).

When you put the two together, it's not hard to deduce that the US will probably struggle to get continued GDP gains simply from an expanding labor force. So where does the growth come from? In theory it could come from productivity, but realistically it won't.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #46
  • Feb 20, 2020 6:10pm Feb 20, 2020 6:10pm
Quoting auricforecas
Love the thread, love the MACRO... Many gets lost in the WOODS... I prefer to see the FOREST. Of course ideal would be to have the overview of FOREST and individual TREES Anyway, I find it interesting that so many people do not see it when all is based in the basics... base formulas... GDP... What is that ? Very "simple" and established formula GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M). Y = C + I + G + (X − M) For more: https://en.wikipedia.org/wiki/Gross_domestic_product...
Quoting Vorenzd
I'll explain the 4 sector model to those who haven't encountered these formulas yet. Lots of this stuff is not on Wikipedia or the "general internet". C = Alpha + Beta * (Y-T) where Alpha is autonomous consumption and Beta is tendency of a consumer to spend, and T is TOTAL TAX. S = savings = -Alpha + (1-Beta)*Y, in an ideal system S=I (savings = investment) , 1-beta represents the tendency of a consumer to save Total tax income= Flat tax + value added tax The full formula for a 4 sector model would be Y= Alpha + Beta * (Y - Tf - Tat) + G + I + X...
This really is a great way of looking at GDP. The basic GDP equation is taught in ECO 1001 in college here, but few people really use it and that's a shame I think. As explained earlier, I have a little different way of looking at GDP but I still give the actual GDP equation fair consideration.

My biggest question lately is how much government spending is about to impact the economy. There's an excellent chance many nations are about to embark on a spree of fiscal stimulus and I'm not entirely sure what to make of it. In countries like the US where there's minimal labor slack you'd expect it to be inflationary, but the concept of inflation seems to have died sometime in the 1990s so who knows. At minimum there should be higher interest rates from government stimulus, but again, that's fighting a 30 year trend so it's a tough bet to make.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #47
  • Feb 21, 2020 2:04am Feb 21, 2020 2:04am
Quoting EF5
{quote} {quote} My biggest question lately is how much government spending is about to impact the economy. . At minimum there should be higher interest rates from government stimulus, but again, that's fighting a 30 year trend so it's a tough bet to make.
Quite so. Fiscal (government) spending *should* be focused and very specific. If stimulus required, direct it towards those with what is called a high marginal propensity to consume.

If you wanna give/splash a thousand bucks out to people, give it to those on genuine welfare (in Australia there is a LOT of welfare/handouts directed to the middle - and even upper - class which is appalling. Big politics) and who have no hope of lodging a tax return.

Of course, prudent expenditure ought to be directed to infrastructure in the long term. Read up on the Hoover dam as an excellent example on many levels, despite many shortcomings in its administration.

This, I think, ought to be reasonably intuitive to blind freddy. Its not.
  • #48
  • Feb 21, 2020 4:34am Feb 21, 2020 4:34am
Quoting EF5
{quote} Welcome back Vorenzd! Thank you for your post on the LEI. I'm curious, what are your thoughts on US labor? Weakness in the labor market has been my main concern.
Good to be back


The December labor market report shows that the labor market generally remains on a firm foundation. Employment gains have averaged 184K per month over the past three months. Although not quite as strong as a year ago, this pace of gains is solid. The unemployment rate remains at a 50-year low.

I expect the pace of hiring to slow, though census hiring in the coming months will create some volatility in the monthly data. Nonfarm payroll growth averaged 175K in 2019, and I expect it to slow to an average of 135K in 2020. By estimates it currently takes 130K new jobs a month to keep the unemployment rate steady.


Slower growth in the labor supply during this expansion has reduced the “breakeven” number for job growth, i.e. the amount of new jobs needed each month to reduce the unemployment rate on trend, relative to previous cycles. As a result, the weaker pace of job growth in 2019 generated little cause for concern that fundamentals in the labor market were deteriorating meaningfully. After all, at 176K, the average number of jobs added per month over the course of the year was still comfortably above the roughly-100K jobs thought necessary to reduce the unemployment rate on a trend basis. Yet has the number of new jobs needed to further reduce the unemployment rate changed as the labor market’s recovery has matured and we head further into the expansion?


By estimates, the trend number of jobs needed to reduce the unemployment rate has risen over the past few years, thanks primarily to stronger labor force participation trends. If the labor force participation rate remains on its current upward trajectory, I estimate about 130K jobs per month would be needed to exert further downward pressure on the unemployment rate. In a more pessimistic scenario, where labor force participation succumbs to the downward force of an aging population, trend job growth would be weaker at 85K per month—still about 15K higher than a similarly conservative scenario a few years ago.

While labor market developments have taken a back seat to other issues at the Fed this past year, the higher estimates for the trend-pace of payrolls could be considered in sync with the FOMC’s generally easier policy stance of late, as the risk of the labor market overheating appears to have lessened. But the higher threshold also indicates that job growth may be nearing its underlying trend more quickly, and further tightening in the labor market will be harder to come by in 2020.


Quoting EF5
{quote} First off, labor force expansion is a major driver of GDP. If you have x people producing y goods, then GDP is x*y. You'll always be better off with (x+1)*y so an expanding labor force is highly important. The unemployment rate is 3.6% so its questionable how much more the labor force can expand at this point. This source of growth is either tapped out or pretty close to it. Secondly, leading economic indicators point to weakness in the labor market. Job Openings have fallen sharply and Unemployment Claims are trending sideways (rather...
I do agree with this, however we need to keep in mind that we are at what is considered full employment, meaning that in this economic scenario our goal is to keep the unemployment rate steady as it is at it's "lowest point".

Yeah, ofcourse, but the labour force can not keep expanding forever, what I'm suggesting is that Labour wise we are nearly paretto optimal, the unemployment rate can not really go lower then this, that is why unemployment claims will likely continue to trend sideways while job openings fall and then stabilize at a positive number.

In order for US GDP to keep growing in this scenario, we have a few possible drivers.
The one that is more theory then reality is , as you mentioned, productivity. In my opinion productivity will increase only marginally and wont have a strong enough impact to keep the GDP going, however I don't believe that that will be our key factor, in my opinion our key factor will be wage growth.

If the economy keeps expanding while at full employment it will very likely have a higher demand for labour force then the labour force available and willing to work for a certain ammount of money, this will in turn cause the wages to grow. As wages grow consumers will spend more money thus increasing the gdp.

I think that the well of labour force expansion growth has dried out for now, so we need to dig into the wage growth and productiviy ones. While this will likey cause the GDP growth to slow, it will still remain positive.


Another scenario is that jobs have topped (just like in 2007 when we had around 5% unemployment) and that we are heading for a catastrophic economic contraction that will last for the next couple of years. The most likely way out of this depression will be a very high increase in government spending (probably large infrastructure projects) as rates can't really go lower in much of the world anymore.

While i do believe that certain assets are overpriced at this moment and that TOO MUCH money is being pumped into the market, i also believe that the current expansion is not over yet.
Through the light of enlightenment, darkness unveils the path of truth.
  • #49
  • Edited 8:49am Feb 21, 2020 7:51am | Edited 8:49am
Quoting Vorenzd
This is the FOUNDATION economic model that every economist should know, but as we all know many people unfortunately get degrees in economics without really having a lot of underlying knowledge to back it up.
Actually, it is just algebra - an accounting identity which is true by definition in equilibrium in a textbook. Sort of like double-entry bookkeeping. This isn't even Eco 101 - it is taught at secondary school where things like supply and demand are also taught.

I agree that there may be some people who receive degrees in Economics who may have spent more time partying than studying.

I usually can tell who did what - the former sometimes go on to call themselves commentators and self styled gurus.

Those who studied know the values of modesty and humility about the nuances they understand (including the economics of general and partial disequilibrium which is actually more interesting and a reason why self styled "economists" struggle with finding the next cliche), and may often be found quietly undertaking analysis that their bosses may not understand, but hopefully appreciate. When I can, I teach.
  • #50
  • Edited 1:54pm Feb 22, 2020 10:50am | Edited 1:54pm
Quoting EF5
{quote} {quote} This really is a great way of looking at GDP. The basic GDP equation is taught in ECO 1001 in college here, but few people really use it and that's a shame I think. As explained earlier, I have a little different way of looking at GDP but I still give the actual GDP equation fair consideration. My biggest question lately is how much government spending is about to impact the economy. There's an excellent chance many nations are about to embark on a spree of fiscal stimulus and I'm not entirely sure what to make of it. In countries...
Yeah, it is basic but rarely people understand it or they pretend not to... Still not sure which... But the reason goes like this..

 

  1. GDP (as an indicator of "growth) is very "simple" GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M).
  2. C - consumption is the LEADING "drive" or should be! it counts around 70% of the TOTAL GDP https://www.thebalance.com/component...-chart-3306015
  3. Different DEMOGRAPHIC group spends differently... Link of Bureau of Labor Statistics is down atm so here is the alternate link
  4. Demographic is CHANGING! Boomers retiring etc...
  5. CONCLUSION: DRIVING/BOOMing chunk of demographics started to retire some years ago which (some argue, that this) caused "some" cooling in the SPENDING -> cooling in GDP that caused panic... Yeah there were also (speculative) bubbles sure, but the decline would happen either way due to spending slowing "a bit"... This caused panic since it was ASSUMED that GROWTH (of GDP) should be eternal/forever or even exponential... So they started to STIMULATE the economy... and after 10 years we still haven't seen the EPIC results... but we saw the DEBT as % of GDP increasing (you can check for EU countries also, similar; remember Greece reached 160% when we saw it in the news), while GDP was increasing also so the actual DEBT % would/will be even stronger when GDP "normalises" when the stimulation stops...

So could not be simpler that decline is inevitable and should be praised, adjusted and then we go on... But with stimulating (with debt) we are not only kicking can down the road, but the WITHDRAWAL could be much more severe next time... Oh yeah, immigration and other effects can correct this aging demographics, sure, but let's keep things simple just for the sake of an argument... Spending drives the GDP, driving spending BRACKET started to cool down 10 years ago... Which is perfectly normal and natural.. If we would adapt then, we would not need any stimulus, debt or panic, just a cycles of life/economy.... We could promote BABY MAKING instead and we could be HALF WAY there already

But with all said, ECONOMICS is maybe no different than other profession, you have believers in one or the other thing regardless the math/reason behind it.. So there you have it... Some believe in GOV spending (with debt) aka Keynesian economics that is OK but has limited effect, it is more a BUFFER, DAMPING or (UN)LOAD BALANCING instead of FIX for eternal growth, on the other hand you have believers in totally free market etc but this assumptions of what free means are much different among those...
But the good thing is that the truth will derive itself out on its own, will just have to take a bit longer I might be wrong but no one has proven me (with math, economics) any different outcome at current trajectories... Not to mention other issues, but just base GDP that is (ab)used when talking about "GROWTH"
It has an error, no deduction/minus for DEBT increase...

Can you afford to take that chance?
  • #51
  • Feb 24, 2020 4:34pm Feb 24, 2020 4:34pm
Quoting LloydOz
{quote} Quite so. Fiscal (government) spending *should* be focused and very specific. If stimulus required, direct it towards those with what is called a high marginal propensity to consume. If you wanna give/splash a thousand bucks out to people, give it to those on genuine welfare (in Australia there is a LOT of welfare/handouts directed to the middle - and even upper - class which is appalling. Big politics) and who have no hope of lodging a tax return. Of course, prudent expenditure ought to be directed to infrastructure in the long term. Read...
I completely agree with you. Targeting high MPC segments would result in a higher government spending multiplier, but infrastructure is more likely and much more politically acceptable.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #52
  • Feb 24, 2020 4:48pm Feb 24, 2020 4:48pm
Quoting Vorenzd
{quote} Good to be back The December labor market report shows that the labor market generally remains on a firm foundation. Employment gains have averaged 184K per month over the past three months. Although not quite as strong as a year ago, this pace of gains is solid. The unemployment rate remains at a 50-year low. I expect the pace of hiring to slow, though census hiring in the coming months will create some volatility in the monthly data. Nonfarm payroll growth averaged 175K in 2019, and I expect it to slow to an average of 135K in...
Thanks Vorenzd, I didn't realize 130K was the magic number that keeps unemployment steady. That's some great info to have.

Quoting Vorenzd
In my opinion productivity will increase only marginally and wont have a strong enough impact to keep the GDP going, however I don't believe that that will be our key factor, in my opinion our key factor will be wage growth. If the economy keeps expanding while at full employment it will very likely have a higher demand for labour force then the labour force available and willing to work for a certain ammount of money, this will in turn cause the wages to grow. As wages grow consumers will spend more money thus increasing the gdp. I think that the...
That's interesting you see wage growth as a source of GDP growth. I suppose it's true that higher wage growth would imply higher inflation and higher nominal GDP, but I'm not so sure it would boost real GDP. Higher wage growth by itself would imply lower corporate margins, higher inflation, and higher interest rates so the increase in consumption might come at the expense of investment.

Quoting Vorenzd
Another scenario is that jobs have topped (just like in 2007 when we had around 5% unemployment) and that we are heading for a catastrophic economic contraction that will last for the next couple of years. The most likely way out of this depression will be a very high increase in government spending (probably large infrastructure projects) as rates can't really go lower in much of the world anymore. While i do believe that certain assets are overpriced at this moment and that TOO MUCH money is being pumped into the market, i also believe that the...
That's inline with what I'm thinking. I'm not saying the jobs market has topped out because it is plausible the US sees a 2% unemployment rate, but I get the sense the current expansion won't last that long.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #53
  • Feb 24, 2020 4:59pm Feb 24, 2020 4:59pm
Quoting auricforecas
{quote} Yeah, it is basic but rarely people understand it or they pretend not to... Still not sure which... But the reason goes like this.. GDP (as an indicator of "growth) is very "simple" GDP (Y) is the sum of consumption (C), investment (I), government spending (G) and net exports (X – M). C - consumption is the LEADING "drive" or should be! it counts around 70% of the TOTAL GDP https://www.thebalance.com/component...-chart-3306015 Different DEMOGRAPHIC group spends differently... Link...
The effect of demographics on the economy has long been an interest of mine. The idea has merit, but I'm skeptical of being able to make economic predictions based on demographics. I'm aware of one guy who's made a career out of his demographics based economics forecasting, but he's got an exceptionally poor track record unfortunately.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #54
  • Edited 6:44pm Feb 24, 2020 6:27pm | Edited 6:44pm
Quoting EF5
That's interesting you see wage growth as a source of GDP growth. I suppose it's true that higher wage growth would imply higher inflation and higher nominal GDP, but I'm not so sure it would boost real GDP. Higher wage growth by itself would imply lower corporate margins, higher inflation, and higher interest rates so the increase in consumption might come at the expense of investment.
Higher wages don't have to come at the expense of investments and they can affect real GDP significantly.

If I understood correctly in your scenario wage growth is equal to inflation, but more ofthen then not wage growth outpaces inflation by quite a bit and that causes a very different sequence of events.

My theory: Higher wages cause an increase in REAL GDP as long as they outpace inflation.

This is what is happening currently and why the GDP growth is not followed by a wage growth:

 

  1. Population growth causing higher GDP, but not higher GDP per capita.
  2. Rising in the share of profit retained by firms.
  3. Flexible labour markets putting downward pressure on wages.
  4. Fall in unemployment but enabled by low wage jobs/part-time job.
  5. Low productivity growth. With low productivity, firms are keeping wages correspondingly low.
  6. Cost-push inflation reducing real wages.
  7. Rise in non-wage benefits (private pensions/healthcare)



The reason why i believe wage growth in the US will be significantly stronger then inflation is the rest of the world. The rest of the world is currently far from the US when it comes to economic capabilities, that's why the dollar can not inflate as much as it realistically should. This is how wage growth can push the real GDP higher.
Savings will also increase in this scenario as people will have more cash to put aside, this will in turn result in more capital being available for investments.

This has actually been happening in Croatia for the last 20ish years, wage growth is significanly outpacing inflation and as a result is a source of real GDP growth. The same can happen in the US, but for other reasons.

Through the light of enlightenment, darkness unveils the path of truth.
  • #55
  • Feb 24, 2020 11:55pm Feb 24, 2020 11:55pm
Quoting Vorenzd
{quote} Higher wages don't have to come at the expense of investments.
Incorrect.
  • #56
  • Edited 6:38am Feb 25, 2020 3:10am | Edited 6:38am
Quoting LloydOz
{quote} Incorrect.
No. As i have explained as long as they outpace inflation they do not have to.

There are MANY examples of this which i can gladly provide if you ask nicely.


If you want to communicate with me provide a proper reply, write your reasoning.
You can disagree with me completely, but reply to me in a polite way with arguments or do not reply at all.



Writing "incorrect" just makes you look bad. If you wish to communicate in such a way, i invite you to add me to your ignored list, as i will do this in to you case your communication remains inapropriate to my standards.

This is not a university course test where you write "correct" or "incorrect" to anyones replies, and if anything, i should be writing that to yours as I'm likely far more qualified than you.


Im not talking to you in this thread, i actually find your replies annoying and condoscending with far too many mistakes, but i dont care, im here to have some "Macro talk" with members whose opinion i respect and with any other members who wish to communicate in a polite and argumentative manner.

Based on this reply,and your previous replies it is clear that you believe you are the best and the smartest, but you are far from that.

-You are in no way superior to people here,i actually find you inferior.
-Your arrogance and ignorance has nothing to back it up.

Quoting LloydOz
{quote} the former sometimes go on to call themselves commentators and self styled gurus. Those who studied know the values of modesty and humility When I can, I teach.
-You are the self styled guru you talked about, you know nothing of humility and modesty,very hypocritical.

-You say, when i can, i teach. Well... you cant reap what you sow until you learn what you teach.
-You have to start learning as well if you want to escape mediocriticy. You are not here to teach. You are here to participate in Macro Talk. An individual like you can never teach nor learn.
Through the light of enlightenment, darkness unveils the path of truth.
  • #57
  • Feb 25, 2020 9:27am Feb 25, 2020 9:27am
Quoting EF5
{quote} The effect of demographics on the economy has long been an interest of mine. The idea has merit, but I'm skeptical of being able to make economic predictions based on demographics. I'm aware of one guy who's made a career out of his demographics based economics forecasting, but he's got an exceptionally poor track record unfortunately.
For sure it is not a complete picture or only parameter but helps. Also there are behaviour changes. You can also approach from another way. Breakdown GDP to variables and try to estimate future changes. Similar with inflation when one could breakfown personal or group inflation down to products/services price changes and estimate the possible trends.
Can you afford to take that chance?
  • #58
  • Feb 26, 2020 5:00pm Feb 26, 2020 5:00pm
Quoting Vorenzd
{quote} Higher wages don't have to come at the expense of investments and they can affect real GDP significantly. If I understood correctly in your scenario wage growth is equal to inflation, but more ofthen then not wage growth outpaces inflation by quite a bit and that causes a very different sequence of events. My theory: Higher wages cause an increase in REAL GDP as long as they outpace inflation. This is what is happening currently and why the GDP growth is not followed by a wage growth: Population growth causing higher GDP, but not higher...
Sorry for the delay, I've needed sometime to think about what you wrote. My understanding is that in a closed economy higher real wages would have to be accompanied by a rise in productivity for it to help GDP. The thing that's puzzled me is the point you make about it being an open economy, and I have to concur that real wages should be able to rise without a rise inflation. However, I don't know if this actually helps GDP since higher wages without productivity might imply there's a larger trade deficit.

The theory you proposed actually has been happening. If you look at the past few years of data, wages perked up after the unemployment rate dropped below the natural rate of unemployment and to date there hasn't been inflation.

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I also think the 'animal spirits' aspect of higher wages may be able to boost GDP. Its a complicated topic and it gets considerably more complicated when you start factoring in second order effects like animal spirits improving.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #59
  • Mar 3, 2020 3:08pm Mar 3, 2020 3:08pm
The Fed had an emergency rate cut today for the first time since October 8th, 2008. I'm becoming more convinced the economic expansion is done. As we already discussed, labor has been weak and now we've got an exogenous force that will hurt growth further. The loss of economic momentum should put us into a full recession soon. I'm about 60% confident of that view now, but I'm still open to the possibility central bank cuts and fiscal stimulus might allow us to avoid recession.

Bonds yields have been puzzling me lately. Yields have come down a lot due to the flight to safety trade, but coronavirus is really inflationary since its slowing production in China and hindering international trade overall. If this does cause inflation then bond yields will need to come back up so a short bond trade makes sense fundamentally.
Self-sufficiency is the greatest of all wealth. - Epicurus
  • #60
  • Mar 4, 2020 3:56pm Mar 4, 2020 3:56pm
Quoting EF5
The Fed had an emergency rate cut today for the first time since October 8th, 2008. I'm becoming more convinced the economic expansion is done. As we already discussed, labor has been weak and now we've got an exogenous force that will hurt growth further. The loss of economic momentum should put us into a full recession soon. I'm about 60% confident of that view now, but I'm still open to the possibility central bank cuts and fiscal stimulus might allow us to avoid recession. Bonds yields have been puzzling me lately. Yields have come down a lot...
It feels like markets do not know how to react to it... About the expansion... You could ask yourself what expansion would be really had for the last 10years if the DEBT would stay nominal... BTW assuming you are correct, imagine you are a politician with a term of 4 years and KNOW what is happening. What do you do? Take some more debt and kick can down the road, handling the problem to the next guy... Or SOLVE the situation aka preventing potential disaster down the road, for future generations and become the fall guy and hated by the most that do not consider DEBT level as any serious parameter... But if you take DEBT, GDP increases, this is proven formula.. and you get smiles... Tough one right
Can you afford to take that chance?
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