Stop Me Before I Vote Again

Fred, four questions:

1. How does a slowdown in corporate deleveraging lead to 6% real GDP growth?

2. How much of that 6% is financial sector explansion?

3. If 3.2 growth makes no employment dent, and 6% is only going to get unemployment down to 8.2%, how does one imagine capitalism makes it past another decade or two?

4. Where is oil in all this? What would 6% GDP growth do to the price, and wouldn't it be likely to boomerang?

In other words, stagnating employment*, declining wages and soaring profits**.

Predictive success here perhaps has less to do with insight into mysterious market forces provided by Okun's Law and more to do with the fact the architects of the economy have gotten it to do what they planned it to do.

*A "meaningful" decrease in unemployment according to the author--by a whopping 3/4 of a percent. The margin of error is left unqualified but may well exceed the predicted change value judging by their own graph. Apart from the notoriously dubious way economists and other experts are fond of generating unemployment data.

**If one prefers the euphemisms of financespeak: "The best macroeconomic predictor of changes in profit margins is the gap between price inflation and labor unit cost inflation." With 15% profit growth predicted this year...well, you do the math.

MD,

1. When a corporation is deleveraging that means that it is paying down debt, rather than buying goods and services like new machinery, inventory, etc. Since they aren't buying anything real with the money, this leads to a decline in real GDP. When they stop paying down debt, and start replacing inventory, it causes a jump in real GDP like we saw in late 2009.

2. Not sure. I'd have to look into it.

3. Remember that's just the United States. In the developing economies they have plenty of employment, "too much" even, so it's not necessarily a problem for global capitalism.

4. Well, we're already seeing the upward pressure on oil prices, and commodities more generally, but it's to be expected with high GDP growth and is not necessarily a problem. There's only really a problem if we get another big oil bubble like last time, and I'm not seeing that yet. That's when we would really get the boomerang effect persistent cost-push inflation in the developing economies and demand destruction.

commodity markets make a nice focus
given the harbinger of
emerging nation upheavels ala egypt

janwitch here seems eager to pre empt spec drivers behind these commodity price spirals
in that he has the seconding of peak resource types on his left
including the inner krugman
that as a man fan of the planet
i think scotches the spec talk
precisely because it reduces the peak freak
needed to bring on the long green rectification

in general jan seems in the center of thoughts
perhaps a picture of inner working as our ward heeler
suggests
but i doubt any of them are ever as confident as they appear

its a bull ride of the mind
going on up there in the glass penthouse

btw
as usual a delightful "framing" by fb

i like md's question
i'll rephrase

If present and expected US gdp growth makes "no (or little) employment dent...... how does one imagine capitalism makes it past another decade or two"?

well it might possibly be a question of "domesticating" a larger --over the cycle--
reserve army
ie morefolks on transfer payments
but here's the chestnut
and its an old one

how do you justify this mass dole
to the still jobbled majority ??

one way is to cut hours per head and spread the opportunity wider
that is inheently anti exploitation max of course
at any rate

the causes of instablity in a job based society
are related to the dynamics
of the reserve army
ie its flux
not its average size

if the flux can be tamed
ie we can as a system come to tolerate
higher average levels of idle ness...

we've learned we prolly can
if the jobless ghetto is substantially staffed with "inferior"
ethnic groups

social construction of reality

"long green rectification"

Is that the "long-awaited" green rectification?

A recent NYT article on the moving of manufacturing facilities of a much-touted and generously government-funded solar panel business from Boston environs to China was taken to prove that green industries do not guarantee higher employment.

what tends to spoil the calm
is attempts by corporations
to switch horses
suddenly open opportunity to out groups
and as a result compress their labor costs
one can off shore of course
but hey its all one angry planet
they can run but they can't hide ...forever
in fact in due time like magellan they come back around the other side

That Krugman post really is something. I was going to write a post about it but I didn't want to ruin my weekend by going full ornery.

I mean, what a fucking weasel Krugman can be! Not a peep out of him for TWO AND A HALF YEARS, and then, once commodities have recovered, he shows up with this load of nonsense all subtly aimed at rescuing his last mistake. His proof? a study on ETFs. There's more to what was going on the commodities market than ETFs, but Krugman tries to slip this study in as proof of a much larger and more difficult argument through sleight of hand.

sen
too much is made of this

jobs are for homer
he'd be better off if he had less income
less job time
less resource command

pure greeners
only want solar cells everywhere
they don't care where they are made

greeners have no country they call their own
only a planet

"in general jan seems in the center of thoughts
perhaps a picture of inner working as our ward heeler
suggests
but i doubt any of them are ever as confident as they appear

its a bull ride of the mind
going on up there in the glass penthouse "

Translation please?

"As always, though, it’s crucial to keep your eye on the bale — that is, whatever your logic, it must translate into actions that affect the physical supply and demand for raw materials"
this is wrong

pk won't let himself entertain
the possum-bility his eco 101 pricing model for competitive global trade commodity markets
is flat out wrong

i haven't got a model
but a metaphor

bubbles induce quasi rents
in perishable commodities
as in house lots
and hi ho silver
what makes this possible ?
well here's the metaphor

emergent "as if" monopoly
the credit fueled market
in commodity paper can induce a spiral independently of primary demand

but pk blindly saying
after a review of the weird facts
that fly in the face of his dogma

" well soulmate
are you gonna believe the facts
or my model "

as he hunts for hidden
burgeoning physical stocks

maybe this is like the indian rope trick

btw
every fact stream i've seen looks weird enough
to require a brand new revolutionary price formation model

what i like about lerners realytics
as opposed to pk's analytics

you don't have to now the why or how
only the what
and come up with a system like MAP to
take it over and allign it with the public interest
aka jobster best outcome

MD,

There are three benchmark oils globally, Brent, West Texas Intermediate and Dubai...all others are priced as a differential to one [or two] of these which are determined much less by physical supply/demand/cost of production than by the futures markets [NYMEX, ICE {which acquired the IPE in 2001 and has some 'interesting' founders}, and OTC.
As Citi's Alan Heap put it in regard to metals, this allows price to be driven well "beyond fundamentals."

This short paper by Robert Mabro [The Journal of Energy Literature, Volume XI, No1, June 2005] is more complete:

The International Oil Price Regime
Origins, Rationale and Assessment
http://users.ox.ac.uk/~sant0084/mideast/The%20International%20Oil%20Price%20Regime.pdf

Or another, 'FUTURES PRICES DETERMINE PHYSICAL OIL PRICES'
http://peakoildebunked.blogspot.com/2008/07/366-futures-prices-determine-physical.html

or, 'OPEC Pricing Power
The Need for a New Perspective'
http://www.oxfordenergy.org/pdfs/WPM31.pdf

or many others.

Krugman et al seem to have no knowledge of changes in the oil price regime, which was never quite what theory dictates but has served ideological purpose.

the quants can advertise but have no effective model{s}

MD,

There are three benchmark oils globally, Brent, West Texas Intermediate and Dubai...all others are priced as a differential to one [or two] of these which are determined much less by physical supply/demand/cost of production than by the futures markets [NYMEX, ICE {which acquired the IPE in 2001 and has some 'interesting' founders}, and OTC.
As Citi's Alan Heap put it in regard to metals, this allows price to be driven well "beyond fundamentals."

This short paper by Robert Mabro [The Journal of Energy Literature, Volume XI, No1, June 2005] is more complete:

The International Oil Price Regime
Origins, Rationale and Assessment
http://users.ox.ac.uk/~sant0084/mideast/The%20International%20Oil%20Price%20Regime.pdf

Or another, 'FUTURES PRICES DETERMINE PHYSICAL OIL PRICES'
http://peakoildebunked.blogspot.com/2008/07/366-futures-prices-determine-physical.html

or, 'OPEC Pricing Power
The Need for a New Perspective'
http://www.oxfordenergy.org/pdfs/WPM31.pdf

or many others.

Krugman et al seem to have no knowledge of changes in the oil price regime, which was never quite what theory dictates but has served ideological purpose.

the quants can advertise but have no effective model{s}