Great Depression?

[Roxanne Appleby]

Is there one that takes the hollywood writers' strike into account?

Seriously, all those people at home with nothing to watch but news programs predicting the doom of all...

Bush better step in and resolve this strike for the good of the status quo... white, rich men aren't going to like what my plans are if I can't get new episodes of House, Heroes, or Moonlight... I'm talking a whirlwind tour around the nation to organize La Raca into a single political block and affect REAL change for mi gente.

Or I guess I could always write more porn... which would be just as offensive to the Moral Right (maybe more so).

Oh this reminds me of a useful analysis by economist Brian Wesbury of how the media's effort to provide "balance" in financial reporting has the effect of "warped perspective of the economy."

August 9, 2007

. . . I am a regular guest on business TV shows. Both venues stress debate and journalistic skepticism. In my view this tendency causes a great deal of confusion.

If one guest or expert is a "bull," then the other must be a "bear," to keep things fair. Or, if there is a single guest on air, the host often takes the other side of the issue in order to keep things balanced. Get some sparks between guests, a little argument here or there, and it's even better for the ratings.

But this idea of presenting both sides of an issue, while entertaining, informative and seemingly balanced, may paradoxically create a warped perspective of the economy.

For example, the most recent Wall Street Journal economic forecasting survey, from July, shows that 49 out of 60 forecasters expect real GDP to grow at an average annual rate of 2%, or faster, in 2007.

(More examples of expert bullishness cited - RA.)

. . . Despite this, an NBC News/Wall Street Journal poll taken in late July found that 68% of Americans thought that the economy either was in recession already, or would experience a recession sometime during the next 12 months. This same survey question has been polled at least five times since September 2002. Each time a robust majority of between 65% and 85% of respondents thought a recession either was under way or would occur within the year. Americans have been bearish on the economy for quite some time.

. . . In short, over the past five years, forecasting economists from academia, consulting shops, financial services and industry have a perfect 5-0 record against a random sample of American citizens.

In fact, some suggest that the experts don't know what they are talking about. (details omitted - RA)

. . . But this is hard to believe. The unemployment rate is still just 4.6%, almost a full percentage point below its 20-year average of 5.5%. Since the jobless rate first fell below 5% in December 2005, average hourly earnings have expanded at a 4.1% annualized rate--as good as any year during the late 1990s. And recent research shows that incomes for the bottom fifth of wage earners have risen faster in the past few decades than incomes at the top, hard work is being rewarded more by performance pay, and income volatility is no worse today than it was in the 1980s and 1990s.

Stranger still is a July poll by the American Research Group (ARG) in which 68% of respondents rated their own personal financial situation as "good, very good or excellent." This is a huge improvement from March 2003, when another ARG poll found only 46% of Americans were either "hopeful or happy" about their personal financial situation, while 46% were "worried or angry."

This begs the question: If the actual economic data, the views of professional economists and the self-proclaimed personal financial situation of a majority of Americans have improved this much, why are people so worried about the economy? Why do people assume they are the exception rather than the rule?

One answer is that people gather knowledge about the rest of the economy, the part they cannot see, from watching news. As a result, it could be that the format behind most business journalism skews perceptions and creates pessimism. To be very clear, I am not arguing that business news is purposefully biased. But what seems clear is that in the name of producing an entertaining product, and in an attempt to provide contrasting views, the true consensus of experts is rarely reported.


http://www.opinionjournal.com/extra/?id=110010446

 

[xssve]

An excellent example of how the profit motive can distort certain social processes.

 

[JAMESBJOHNSON]

XSSVE

Socialists always miss the boat when it comes to incentives. The foremost socialist delusion is people wanna pull the wagon because they like pulling their betters around in wagons. So you force people to pull until they like doing it. But they never like doing it.

 

[Handprints]

Most of your wage growth relative to infaltion occured between the mid Sixties and the late Seventies, during the inflationary spiral, and have declined relative to inflation ever since - very difficult to draw any conclusions from averages, a two tiered economy has emerged in the last twenty years, partially due to the erosion of jobs you could make a decent living at with only a high school education.

As you say, this line of reasoning doesn't hold up if we look at the average, where the median US earner (full- and part-time) saw his/her wages climb more slowly than inflation in only five years since 1970. (74-75, 2001-03, and never by more than 1.15%) I'm pretty sure we can find a few groups of workers who were better off in 1970 than they are in 2007 but I'm equally certain they're not representative of the experience of the many.

At any rate, social mobility requires that to happen to certain groups and I'm all for social mobility.

I don't have a problem with people who only have a high-school education falling behind the mass for earnings in an environment that offers as many affordable further educational options as the US. Put another way, why would I possibly want the health or speed of progress of my economy to be dependent on people who are bringing so little to the table?

My biggest concern about the growth in the business and professional service sector is about resiliancy... you're fooling yourself if you don't think there will be a backlash should things go South... not your problem, I'm aware, you can take the next flight out, I'm stuck here.

As a likely victim of such a backlash, I recognise that one of the reasons I'm paid so (relatively) well is that my employer will fire me without a second thought if things turn south. That's the case in every industry but it's perhaps a bit more explicit - and trigger-happy - in financial services.

What effect is there on an economy when a large group of well-educated, analytically-trained, numerate people with a deep understanding of finance are forced to find a new way to make a living? I'm willing to bet on better results, on the whole, than one would expect from a similarly-sized group whose members have, on average, a high-school education and X years' worth of being told to stop making stupid suggestions and get back on the line...

Those are some of the reasons an employer will pop for my plane fare but not a factory worker's, as it happens.

The point I guess, in all of this, is that the concept of balanced local economies, i.e., sustainability, seems to have been largely ignored in the shift to globalizaion, it all sounds very dynamic and interesting to investors I'm sure, Indonesia makes textiles China makes everything else, etc., i.e., the way entire regions, even hemispheres specialize in a certain thing, creating continental sized economies of scale, but this interdependency is also a weakness to local economies - Argentina would be the example of the failure of neo-liberal managed capitalism, which doesn't seem very far removed from neo-con military colonialism, every bit as devastating, it just didn't cost us as much in lives and taxes.

Europeans seem to me to have achieved this balance to a large extent, but then you have more history, so maybe it makes more immediate sense - I'm curious if Europe has policies to this effect, or is it a function of general consensus?

I'm not sure I understood that as well as I should have done but here are a couple of (hopefully) relevant comments:

Specialist markets suck: "Love your nickel mining - terrific chaps - but I can take that bet more cheaply on the commodities market" Markets attempting to go up the one-commodity value chain - "That's an interesting little smelter you've got there" - are better. Markets attempting to use commodity profits to grow other parts of their economy - "That railhead by the steel mill leads to the new shipyard complex" - are much better. Economies that have succeeded in doing that and now offer an economy opening up in hundreds of new ways - "You won't find a lawyer in Lagos until the post-NIT party hangovers have cleared" - are best of all.

Argentina's a good example of almost every bad idea ever to hit South America. Less facetiously, it's still a good example of what happens when they're no real political cohesion between opposition parties - each strives mightily, when elected, to undo everything the other did. Argentina is still waiting for an Eisenhower. At least it's not short of generals...

Every country, eretz Europe included, with a functioning government, attempts to support the creation of the broadest mix of industries (servcie and goods) possible. They succeed in maintaining a (relatively) healthy mix because they've had time to develop capabilities - in the Amartya Sen sense - that any neo- (from Marxist to conservative) believes in his little evidence-intolerant heart somehow spring up automatically, whether from the "people's heroic sacrifices to industry" or "the invisible hand."

Hope that's of use,
H

 

[Handprints]

Damn, HP, where have you been all my life?

Up in your condiments shelf, next to the ketchup...

 

[JAMESBJOHNSON]

HANDPRINTS

Comparisons such as XSSVE makes are absurd. Today's goods and services are significantly different than they were in 1970. Prices are significantly reduced for many things now.

Take phone calls. Long distance costs about 5 cents a minute. It was a lot more in 1970.

My first computer, with 48K RAM and tape operation, cost me $1500. I can buy a lot better, anywhere, for half that money.

I can buy a color tv for around $100. Not so in 1970.

Saturday I bought 15 disposable razors for $1. Not possible in 1970.

The internet has saved people gozillions of dollars for online purchases and research and many other things. It really didnt exist in 1970.

 

[Pure]

simple question, jbj

Is the US a freer country now, than it was in 1970? (i am referring to its citizens' enjoyment of a spectrum of basic liberties/freedoms.)

 

[JAMESBJOHNSON]

PURE

I love your control issues. You unwrap when you get a response you dont expect or want.

 

[JAMESBJOHNSON]

http://biz.yahoo.com/ap/071124/apfn_doomsday_scenario.html?.v=1