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The Economy

blog.samaltman.com

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Re: The Economy

#81

Post by mathattack »

tdees40 wrote: post #24

I'm not clear on how any of this will lead to a recession. Why will high Debt-to-GDP or government spending send the economy into a recession? Q1 GDP numbers were clearly affected by dismal weather (although still bad), but labor markets are improving markedly, and there are reasons for optimism. I don't see this as a very convincing bear case. For the bull case, see this post, from a guy who's been right about every…

The issues of debt relate to a Minsky Moment. http://en.wikipedia.org/wiki/Minsky_moment

It happens when the assets can't pay their interest payments any more.

For now interest rates are low, so the government can pay it's billed. Unfortunately, we hold a lot of short denominated debt. We should lock in these rates while the going is good. If interest rates spike up, the government will have to cut programs, borrow a lot more money, or increase taxes. It's a very negative spiral.

The reality is that nobody has been in our exact situation, so there is more speculation. Are we becoming more like Japan? Or Europe? And how might aggressive immigration help us?

Re: The Economy

#82

Post by ef4 »

thenmar wrote: post #72
snowwrestler wrote: post #19

Earlier quoted context omitted.

Arguing about terminology is a great way to avoid arguing about tough fiscal realities.

I think it's worth mentioning. Propagandistic terms such as "entitlements" frustrate discussion and make it even more difficult to communicate. It belittles and trivializes the opinion that poor people are entitled to things like healthcare or food, making people who hold that opinion unwilling to discuss it.

It's the government's own term, used by nonpartisan entities like the CBO.

If anything, "welfare" is now used as a more politically loaded term. It's almost never used anymore without attaching a negative connotation -- whether by the right in the old way, or by the left when decrying "corporate welfare".

Re: The Economy

#83

Post by rplst8 »

autokad wrote: post #77
tdees40 wrote: post #24

I'm not clear on how any of this will lead to a recession. Why will high Debt-to-GDP or government spending send the economy into a recession? Q1 GDP numbers were clearly affected by dismal weather (although still bad), but labor markets are improving markedly, and there are reasons for optimism. I don't see this as a very convincing bear case. For the bull case, see this post, from a guy who's been right about every…

I don't think the writer ever said that a high Debt-to-GDP / government spending will send the economy into a recession. it means the government's ability to fight a recession if one comes will be extremely constrained; furthermore, having high debt prior to a recession makes the pains of having the high debt extremely painful as revenues will decline significantly.

This. Especially when some economists recommend recession spending as a way to fight it. We've already spent the money, maxed out the "credit cards" and currently interest rates are poised to go up.

If another recession does take hold, it will be a nasty fight.

Re: The Economy

#84

Post by firstOrder »

Some of the figures Altman gives are important. There are some more:

http://monthlyreview.org/2008/12/01/financial-implosion-and-...

If you read that article and consult the (mostly government) sources, you'll see:

* It's not just government debt that is high - household, business, and especially financial debt is high

* The financial sector has been growing much faster than the "real" economy

* Less and less of the GDP goes to consumers in wages and salaries

* Industrial capacity utilization goes down and down and down (so why invest in new capital?)

* Since the 1980s, profits have been an increasing share of GDP, while investment has been going down

Macroeconomic collapse on the scale (or greater then) it happened in the 1930s will, I believe, inevitably happen.

Re: The Economy

#85

Post by ef4 »

gautambay wrote: post #43
sama wrote: post #22

Earlier quoted context omitted.

oops, i accidentally published an earlier draft. i added a bit more of my thinking here--my sense is that it would probably lead to less waste than current systems. i'm also not sure it's the right approach, but i haven't heard any better ideas yet.

i prefer universal essential services (healthcare, education, etc.) over a guaranteed basic income. with basic income, you run the risk that the receivers spend it on shiny objects (especially in an economy like ours with rampant consumerism) instead of things that benefit them and their families long-term. of course, what constitutes "essential services" can be the subject of a lengthy debate.

Ah, the classic paternalistic argument. It's deeply appealing to many people's preconceptions. But a growing body of experimental results call it into question.

When you actually conduct the experiment -- a randomized controlled trial where you give some poor people cash and others in-kind services, the cash group outperforms.

Re: The Economy

#86

Post by nerfhammer »

api wrote: post #20

I have gradually become convinced by mountains of evidence from many quarters that the Keynesians are right-- we are in a demand constrained economy. One of the problems I think is that economists and politicos tend to always be fighting the last war. In the late 1970s to early 1980s -- the last time the economy seemed this systemically bleak -- the problem was insufficient capital available for investment combined w…

> Thing is... in the late 70s the supply siders may well have been right and the Keynesians wrong

Keynesians were definitely wrong since at the time sustained stagflation was considered basically impossible. Which is why what is today colloquially called "Keynesian" is different from Keynesian as it was then because important parts of it were disproved.

Re: The Economy

#87

Post by at-fates-hands »

klunger wrote: post #7

He just suggested a basic income for everybody. I just wanted to point this out in case people missed it when skimming.

I'm wondering at point do we stop relying on the government to provide us with everything we need.

What happens when we have too many unfunded liabilities and the government runs out of money and all the millions of people who suddenly depend on government from everything from medical care, income, employment, and other forms of support?

All you have to do is take a good, hard look at countries like Greece and Argentina for examples to see what happens when countries go bankrupt.

Re: The Economy

#88

Post by VLM »

gautambay wrote: post #43
sama wrote: post #22

Earlier quoted context omitted.

oops, i accidentally published an earlier draft. i added a bit more of my thinking here--my sense is that it would probably lead to less waste than current systems. i'm also not sure it's the right approach, but i haven't heard any better ideas yet.

i prefer universal essential services (healthcare, education, etc.) over a guaranteed basic income. with basic income, you run the risk that the receivers spend it on shiny objects (especially in an economy like ours with rampant consumerism) instead of things that benefit them and their families long-term. of course, what constitutes "essential services" can be the subject of a lengthy debate.

"you run the risk that the receivers spend it on shiny objects"

The problem is, what is a shiny object?

For me it might be going to grad school without a care in the world how I'll feed my kids.

For another it might be a car. Well, that's OK, car sales are imploding on a decade or so scale.

For another, housing. Anytime housing goes up thats trumpeted as an inherent good. It isn't, of course. But no one will say that in public.

Usually "wasted money" is just whatever someone doesn't personally like, its not actually bad. The problem with central planning, including of what everyone will have to invest in, is lack of flexibility.

Re: The Economy

#89

Post by dnautics »

dageshi wrote: post #57
api wrote: post #20

I have gradually become convinced by mountains of evidence from many quarters that the Keynesians are right-- we are in a demand constrained economy. One of the problems I think is that economists and politicos tend to always be fighting the last war. In the late 1970s to early 1980s -- the last time the economy seemed this systemically bleak -- the problem was insufficient capital available for investment combined w…

My view on Keynesianism is that it's basically been bastardised to the point where it's unworkable. I say that because my understanding is that Keynes originally proposed a system where the government ran a surplus during the "good times" and then ramped up borrowing and spending during the "bad times". This actually makes a great deal of sense because during a recession investors are usually falling over themselves…

But no modern government seems capable of running a surplus for any length of time.

Can you name any government, ever, that was capable of running a surplus indefinitely (say, until it was brought down by plague or war)?

Re: The Economy

#90

Post by VLM »

oniTony wrote: post #15
klunger wrote: post #7

He just suggested a basic income for everybody. I just wanted to point this out in case people missed it when skimming.

The actual quote was > In addition to thinking about new sorts of jobs to replace lost jobs that aren’t coming back, we should probably think about things like a basic income. So not necessary "basic income", and certainly for everyone. The reality is that many of the emerging economies are better (as in "cheaper") able to fulfill low-skill/high-labor positions, and not everyone will be able to transition into higher…

Another thing to think about is eventually the higher skill jobs are leaving. There's nothing inherently American about, say, programming, and there's a heck of lot more of "them" than "us".

The only real hope for natives is high skill service jobs perhaps ER doctor.

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