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A Long Time Until the Economic New Normal

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Re: A Long Time Until the Economic New Normal

#251

Post by lkrubner »

WanderPanda wrote: post #209
nostromo wrote: post #168

Earlier quoted context omitted.

$6T has been created, but an unknown $X trillion has also been destroyed by a sharp and sudden decrease in economic activity, including a contraction of credit. So... who knows. Maybe it's enough, maybe it's too much, or maybe it's too little -- it's too early to say.

Decrease in economic activities = decrease in goods and services offered + increasing amount of Money > Inflation (inevitable?) Demand should stay the same for many products and services and decrease for some (cyclic) goods like machinery etc. Time to get into Gold, Bitcoin and (non-cyclic) Stocks?

Decrease in economic activities = decrease in goods and services offered

I really hope you meant this as a joke. Did you mean to use an equal sign? The subset symbol might be defensible:

decrease in goods and services offered ⊆ decrease in economic activities

The forced withdrawal of labor is one type of supply-side shock. If it lasts, it could cause some inflation. One could try to compare it to the OPEC oil shock of 1973. But significant inflation could only occur if people developed an expectation that the resource will remain scarce for the long-term. In 1973, there was the wide-spread belief that oil would remain scarce for a long-time. In the present time we can ask, is the forced withdrawal of labor a permanent change to the economy? Will this last 10 years, or 20 years? Should businesses rebuild their business models around the assumption that labor will remain scarce for a generation? You'd have to believe that's true, if you wanted to compare the current forced withdrawal of labor to something like the 1973 OPEC oil shock.

Re: A Long Time Until the Economic New Normal

#252

Post by lkrubner »

throwaway_USD wrote: post #84

It seems people don't realize how much $6T is and the effects of that kind of money being injected into the economy. Consider the 2008 housing bubble and financial crisis which was ultimately corrected with two stimulus packages totaling less than $2T...that money turned the economy around, put the economy into the longest bull market in history, resulting in a record stock market and corporate profits. Now its not t…

"it will be spread to an even smaller group of people"

I'll point out, the Democrats are fighting hard to ensure that the rescue money is spread to a very broad section of the public. With enough public pressure, Congress can be pushed to ensure that there is more rescue money made available, and also that the money should be distributed to the broadest possible spectrum of the public. We can look at the mistakes made during 2008 and promise ourselves that this time we will get things right. We all have the moral responsibility to fight and ensure that our government helps everyone through this crisis.

Meanwhile, the Fed has an obligation to make sure that there is no absolute breakdown of the credit markets. The Fed felt it necessary to inject some money into specific markets to ensure they continue to function (the repo market, in particular). But to whatever extent that money might help a narrow section of society, Congress can offset any unfair benefits granted to participants in those markets, by ensuring that money is also given to other sections of society.

Re: A Long Time Until the Economic New Normal

#253

Post by eternauta3k »

amelius wrote: post #250

> The first is that it overlooks the negative impacts on consumer sentiment and spending, which are likely to persist for many months, if not years. I sense a kind of broken-window fallacy here. If consumers want to spend less on things they don't essentially need, then why is that a problem? Isn't that a net-win for everybody (since what people don't want doesn't need to be produced) and the planet (for obvious reas…

It could be, once we reorganize the economy so the people who provided those pointless things get another job. The transition is painful.

Re: A Long Time Until the Economic New Normal

#254

Post by gniv »

3xblah wrote: post #247
throwaway_USD wrote: post #84

It seems people don't realize how much $6T is and the effects of that kind of money being injected into the economy. Consider the 2008 housing bubble and financial crisis which was ultimately corrected with two stimulus packages totaling less than $2T...that money turned the economy around, put the economy into the longest bull market in history, resulting in a record stock market and corporate profits. Now its not t…

Whatever the truth may be it is certainly interesting how 20 million people can lose their jobs simply as a result of their employer reducing or stopping its operations for a few weeks. Regardless of the previous unemployement figures it raises the question of how secure were these "jobs". Is job security worth measuring.

For certain jobs it's better to fire the workers so they can get unemployment benefits, rather than keep them without pay.

Re: A Long Time Until the Economic New Normal

#255

Post by sytelus »

throwaway_USD wrote: post #84

It seems people don't realize how much $6T is and the effects of that kind of money being injected into the economy. Consider the 2008 housing bubble and financial crisis which was ultimately corrected with two stimulus packages totaling less than $2T...that money turned the economy around, put the economy into the longest bull market in history, resulting in a record stock market and corporate profits. Now its not t…

World GDP is $80T. An important fact: USD is world reserve currency. So no, I don't think that injecting, $6T is going to be super big deal. Just like in 2008, this additional money gets dispersed in to world economy or in other words the burden of US action gets transferred to other countries. This is precisely the reason why $2T injection has almost no effect on inflation within US but if any other country had dared to inject same proportion, it would have faced about 10% inflation making most of the imports pretty expensive for them.

Re: A Long Time Until the Economic New Normal

#256

Post by thundergolfer »

amelius wrote: post #250

> The first is that it overlooks the negative impacts on consumer sentiment and spending, which are likely to persist for many months, if not years. I sense a kind of broken-window fallacy here. If consumers want to spend less on things they don't essentially need, then why is that a problem? Isn't that a net-win for everybody (since what people don't want doesn't need to be produced) and the planet (for obvious reas…

That’s getting at fundamental problem in our economics, where it’s considered a good thing that some wealthy people will buy over a 100 pairs of sneakers and 3 or more IPhones in only a few years. Buying lots of things, barely using them, and then sending it all to landfill is fantastic for GDP.

Re: A Long Time Until the Economic New Normal

#257

Post by CydeWeys »

harimau777 wrote: post #189
alistairSH wrote: post #175

Earlier quoted context omitted.

This was done through cooking the unemployment books ... That's patently false. BLS reports 6 different "unemployment rates" (1). The media has historically reported U-3. You can argue that U-6 is more meaningful in light of recent economic trends. But, no books have been cooked. 1 - https://www.bls.gov/news.release/empsit.t15.htm

For sake of argument: If U-3 is the one that everyone pays attention to does it really matter that much if the others exist?

Economists definitely pay attention to more than U-3, and they're the ones coming up with the stimuluses and other proposals. Not everyone needs to be aware of TCP to be able to, e.g., use the Internet on their smart phone.

Economists use a wide variety of different metrics to measure employment and set economic policies accordingly. Wage matters a lot too, not just unemployed/partially employed/fully employed.

Re: A Long Time Until the Economic New Normal

#258

Post by CydeWeys »

School-Cotton wrote: post #118
epistasis wrote: post #20

Earlier quoted context omitted.

It's not completely without precedent, in that the 1918 flu pandemic was only a century ago. We don't have a ton of good data, but some researchers are looking at its effects in the US: https://www.bloomberg.com/news/articles/2020-03-27/pandemic-... But I do agree 100% with taken current economic estimates with a huge brain of salt, as our economic machine is far different from the past.

Were virtually all businesses shut down for weeks or months during the 1918 flu pandemic? All I can find is reports of localized shutdowns in certain cities. If not, I don't think you can say it's comparable.

Yes, there were very large, long shutdowns during the 1918 flu pandemic. And they had more of an effect than what we're doing now, because people couldn't work remotely.

Re: A Long Time Until the Economic New Normal

#259

Post by coldtea »

alistairSH wrote: post #175
throwaway_USD wrote: post #84

It seems people don't realize how much $6T is and the effects of that kind of money being injected into the economy. Consider the 2008 housing bubble and financial crisis which was ultimately corrected with two stimulus packages totaling less than $2T...that money turned the economy around, put the economy into the longest bull market in history, resulting in a record stock market and corporate profits. Now its not t…

This was done through cooking the unemployment books ... That's patently false. BLS reports 6 different "unemployment rates" (1). The media has historically reported U-3. You can argue that U-6 is more meaningful in light of recent economic trends. But, no books have been cooked. 1 - https://www.bls.gov/news.release/empsit.t15.htm

>But, no books have been cooked.

Just spiced enough to make them taste better.

Re: A Long Time Until the Economic New Normal

#260

Post by CydeWeys »

danbolt wrote: post #193
ipnon wrote: post #94

Earlier quoted context omitted.

The US spends $7 for seniors for every $1 they spend on minors.[0] [0] https://www.brookings.edu/wp-content/uploads/2016/07/1_how_m...

I’m not an expert, but I’d imagine that’s related to seniors voting much more reliably than the youth.

Well, minors can't even vote ...
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