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Economists’ projections of interest rates and unemployment have proved too high

wsj.com

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Re: Economists’ projections of interest rates and unemployment have proved too high

#71

Post by gonational »

dv_dt wrote: post #50
gonational wrote: post #25

If you can find me economists that have predicted economic activities/results with any level of accuracy (e.g., greater than 50% even), then I will find you ~10 times as many prominent economists who have predicted the opposite. Economists probably predict things accurately at a rate lower than throwing a 20 sided die into the air and guessing which number will be facing up when it lands. Does that matter? Well, if t…

Businesses only become profitable in a almost completely artificial human made financial landscape. There is really no reason to believe much more than a successful businessman is someone who was smart, sure, but also lucky at some very particular niche. And as bad as economists are, they're the few which are studying how that landscape's construction affects how businesses and people grow within them. That isn't to…

You’re right; we shouldn’t throw out what they have created.

Economists have been working tirelessly for decades to generate models that can demonstrate how economies don’t work.

If we destroy the earth in nuclear war or some other calamity, these models could help to ensure that future civilizations fail before they ever reach the point that we did.

Re: Economists’ projections of interest rates and unemployment have proved too high

#72

Post by Mirioron »

qubex wrote: post #53
Mirioron wrote: post #36

Earlier quoted context omitted.

> There’s a very good reason why we came off the so-called Gold Standard (bimetallic standard, actually), and why coming off it heralded the greatest period of economic growth in Western history. How sure are we that this was a good idea in the long run? Politicians and their appointees aren't always the most responsible people. If it's possible for them to obfuscate some of their spending without upsetting people th…

> The US already has a big debt problem I’m going to stop you right there. You see a large public debt and you presume , because you view debt as all household agents do ( i.e. , as something that needs to be repaid and that limits future discretionary spending). It’s not necessarily that way for a nation-state that (as the article seems to recount) can literally print money to make good on the debts it is running up…

The percentage paid as interest of the budget seems to be increasing. Current forecasts put it at over 12% by 2023. That's double what it was in 2016. At that point it'll rival US military spending in size. When would you say it becomes a problem? Does it have to become the highest cost item on the budget? The government is borrowing money that future taxpayers have to bear the burden of. Does the return on that extra spending outpace the servicing cost?

>Who would be most alarmed by a true “debt problem”? The bond-holders, one presumes.

That's only the case if the problem was that the US wasn't going to pay back its debt. The problem is that future generations are responsible for paying back the debt, not the current generations. This means that the people potentially most affected by this aren't even born yet.

Re: Economists’ projections of interest rates and unemployment have proved too high

#73

Post by qubex »

Mirioron wrote: post #72
qubex wrote: post #53

Earlier quoted context omitted.

> The US already has a big debt problem I’m going to stop you right there. You see a large public debt and you presume , because you view debt as all household agents do ( i.e. , as something that needs to be repaid and that limits future discretionary spending). It’s not necessarily that way for a nation-state that (as the article seems to recount) can literally print money to make good on the debts it is running up…

The percentage paid as interest of the budget seems to be increasing. Current forecasts put it at over 12% by 2023. That's double what it was in 2016. At that point it'll rival US military spending in size. When would you say it becomes a problem? Does it have to become the highest cost item on the budget? The government is borrowing money that future taxpayers have to bear the burden of. Does the return on that extr…

Really it comes down to the present net value of future opportunity cost: of economic growth outgrows the compounded future cash flows to service the debt (particularly if debt principal and at least part of the interest due) can always be rolled over for the foreseeable future within the temporal horizon, it makes sense to accrue debt.

We’re arguably lumbering future generations with just as much when we do not invest in basic science and technology development because of debt concerns; when we do not service our infrastructure; and most definitely when we act myopically towards the environment.

Re: Economists’ projections of interest rates and unemployment have proved too high

#75

Post by nopriorarrests »

nathan_compton wrote: post #56
Excel_Wizard wrote: post #21

a savings glut is the thing that Krugman has suggested, and is the thing which makes sense to me. Which stinks because I hate Krugman.

Can you elaborate? Intuitively, no one I know has a "savings glut." If anything, people in my generation are saddled with debt.

Someone being in debt means that someone has an obligation on said debt, so "savings glut" means "debt glut",tautologically.

Re: Economists’ projections of interest rates and unemployment have proved too high

#76

Post by raxxorrax »

qubex wrote: post #33
raxxorrax wrote: post #27

Earlier quoted context omitted.

As a non-economist: Is there really any practical difference by now?

As an economist: yes.

How so if money is created by commercial banks today with a fictional multiplier for bonds (did I get that right?)? I believe money to be an intermediary, but it works because we all believe that it does have an inherent value. At least as long as it is relatively stable for the time frame between earning and spending.

If I cannot use it for any form of saving, we had a primitive market of natural produce for any form of security. It don't think that financial assets are a widespread reality for most market participants.

If there is at least the factor to theoretically restrict the creation of money, what mechanism would replace it? Trust in banks or the currency itself?

Wouldn't that be practically the same? Or asked otherwise: What are the greatest problems with the current banking system?

Re: Economists’ projections of interest rates and unemployment have proved too high

#77

Post by qubex »

logicchains wrote: post #47
qubex wrote: post #10

Earlier quoted context omitted.

Satoshi got it extremely wrong, to the point that if he had any economic background at all I’d suspect the first wave of crypto currencies to be a sick joke: artificial scarcity (and more generally, inflexible money supply) of the kind engendered by bitcoin and its ilk are the exact embodiment of what money must not be if one is to not artificially crimp the economy’s growth. There’s a very good reason why we came of…

>Satoshi got it extremely wrong, to the point that if he had any economic background at all I’d suspect the first wave of crypto currencies to be a sick joke ... >coming off [the Gold Standard] heralded the greatest period of economic growth in Western history. You got this extremely wrong, to the point that if you had any economic background at all I'd suspect your comment to be a sick joke. The US saw average growt…

As the youth of today are wont to remark: “whatevs”.

Re: Economists’ projections of interest rates and unemployment have proved too high

#78

Post by twic »

nathan_compton wrote: post #66
Excel_Wizard wrote: post #63

Earlier quoted context omitted.

There is more money saved up than there are good productive investments available for it, in comparison to the past. This correlates with a few things: - Inflation of the value of investment assets (high P/E ratios) - Low interest rates on bonds - Secular stagnation

That I can believe, but it seems a bit double-speaky to call it a savings glut, right? My untutored intuition tells me that its a glut of savings in a small number of people's hands. People who don't have a glut of savings, or even significant debt, which is a lot of people, can probably think of a lot of good uses for that money. Assuming this sketch is accurate, the problem is too much money in the hands of too few…

The thing that's glutted is the savings themselves - the number of dollar bills that have been scanned in and put in spreadsheets. That the spreadsheets are in the name of a small fraction of the population doesn't change the fact that there is a glut of the dollars.

Re: Economists’ projections of interest rates and unemployment have proved too high

#79

Post by jmartrican »

claudeganon wrote: post #15
joshuaellinger wrote: post #2

Except for the MMT people. They mostly got it right but they don't count as 'real' economists to the WSJ.

Do you know does MMT says about printing money for the express purpose of infrastructure development? I’d be interested to see what their take would be on doing so for doing things like high speed internet expansion, decentralized green grids, etc. In housing, the fed doing this has obviously led to real estate asset bubbles, but what would happen in the case of public assets?

Is this what China is doing? I often wonder about whether there are real downsides to just printing money as long as the rest of the world buys into your currency. Seems like printing money fails only when there is lost in confidence. But as long as the confidence is there, maybe it can just continue working.

Re: Economists’ projections of interest rates and unemployment have proved too high

#80

Post by helen___keller »

aketchum wrote: post #3
joshuaellinger wrote: post #2

Except for the MMT people. They mostly got it right but they don't count as 'real' economists to the WSJ.

I love MMT in theory but it is terrifying to consider actually making policy decisions with MMT as the justification. The downside risk of MMT being wrong and the resulting runaway hyper inflation would destroy the dominant economic standing that the US has spent the entire post war era cultivating.

That risk exists independent of MMT. We could deficit spend an airdrop of a million bucks to every American with a bill today under modern economics, and still destroy the economy with hyperinflation. We could borrow trillions in a foreign currency and face hyperinflation risk today.

As I understand it, MMTs actionable insights range from issuing less/no debt for the same government spending, offering jobs to the unemployed and underemployed through a federal jobs program, and tinkering with government spending /taxation as a tool for controlling inflation (as opposed to interest rates as a tool for controlling inflation).

Note that regardless of your economic beliefs, these are all still subject to the same political system we live in today. Most of the worst case scenarios people imagine with MMT look like "we gave someone the power to print money and they printed too much money". But in the real world that's a problem with autocracy, incentives, and feedback loops. If we keep autocracy out and still monitor/alter incentives and feedback loops as needed, it's hard to imagine MMT having a massive downside risk any moreso than existing economic orthodoxy.

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