Relevant and even prescient commentary on news, politics and the economy.

Real Wages weak in Japan… trouble for Abenomics

I wrote last November that the success of Abenomics in Japan would depend on raising labor’s share of income faster than inflation. Basically real wages need to rise. I would now add that real wages need to rise faster than productivity. The key is to raise effective demand with healthier consumption demand.

So we see an article in the WSJ today that the Virtuous Cycle of Abenomics is Spinning more slowly. Why? What is happening?

“… a string of recent data — from soft consumer spending, tepid wage growth, and a newly muddled jobs picture — offer a sobering reminder of the challenges that remain before Prime Minister Shinzo Abe…”

The article points out that labor demand looks to be peaking. Unemployment has recently risen. There is a decline in permanent work with a rise in non-permanent work. The prospects for a significantly higher labor share are low.

The article did mention that profits in Japan are good.

“The signs aren’t all bad. Companies are expected to report robust profits over the next couple of weeks, suggesting more potential for hiring and higher wages. In anticipation of such results, the Nikkei Stock Average has rallied in recent days, trading at a six-month high.”

More potential for hiring and higher wages??? Firms are competing on the international market. It is not likely that those profits will find their way into the hands of labor in Japan in any significant way. That should have already happened. And there is little sign it is happening now.

In all, I measured the success of Abenomics upon raising labor share. So far, wages have not risen enough for Abenomics to eventually succeed in its goals.

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Bottom Line: Joni Ernst Is a Constitutional Law Scholar

You know we have talked about this at the state legislature before, nullification. But, bottom line is, as U.S. Senator why should we be passing laws that the states are considering nullifying? Bottom line: our legislators at the federal level should not be passing those laws. We’re right…we’ve gone 200-plus years of federal legislators going against the Tenth Amendment’s states’ rights. We are way overstepping bounds as federal legislators. So, bottom line, no we should not be passing laws as federal legislators—as senators or congressman—that the states would even consider nullifying. Bottom line.

Christine O’Donnell*, er, current Iowa Republican Senate candidate Joni Ernst, Sept. 13, 2013. H/T Paul Waldman, linking to a Daily Beast article by Ben Jacobs.

Personally, I think she’s right.  Vermont, Massachusetts and Rhode Island should have total veto power over the portion of the Farm Bill that gives subsidies to wheat, corn and soy bean farmers. And I know that James Madison would agree.

Bottom line: Ernst, unlike O’Donnell, is a witch.


*Corrected link to “Christine O’Donnell Finally Discovers Constitution’s ‘Religious Freedom’ Part,” Gawker, Oct. 19, 2010. 7/29 at 11:06 a.m.

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Profits are Maximizing at the Effective Demand Limit

When Keynes wrote about Effective Demand in Chapter 3 of General Theory… he tied the limit of effective demand to the maximization of profits. Currently I see the economy reaching the effective demand limit by the end of 2014. Is there a sign that profits are maximizing?

Here is Gina Martin Adams of Wells Fargo & Co. from an article at Bloomberg Businessweek.

“The decline in non-financial EBITDA margins is “sending something of an ominous signal” that may be followed by a peak in net-income margins, she wrote in today’s report. “Peak margins were a good indicator of impending recession in each of the last cycles,” she wrote. Sales growth will have to pick up considerably in order to ease concern about margins, she said.”

Time is running out on the bull market.


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Mark Cook & the Stock Market Divergence into the Twilight Zone

Mark Cook is an investor who uses his own proprietary indicator to assess the stock market. He saw the crashes of 1987, 2000 and 2007.  (article from WSJ Market Watch) He is seeing the stock market going into strange territory at the moment.

“It’s like being in the Twilight Zone, he says. “Imagine going outside when it’s raining and getting sunburned. That’s the environment we’re in right now.”

He sees a stock market downturn ready to happen and I agree. My assessment though is based on a different indicator, the effective demand limit.

As the economy expands in a business cycle, there will be periodic corrections of stock prices, but stock prices will continual their upward march afterwards. However, when the end of the business cycle is reached, there comes a pint where stock prices do not recover after a correction because of recession.

So when people talk about a correction, keep in mind that a correction may mean a recession.

The real question is… How internally unstable is the market? How explosive is the instability? Mark Cook says…

“Could the market go higher? Yes, it could, but the extension of time will create an even greater divergence that has to be snapped back together.”



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Reading the 2014 Social Security Report: Released July 28

The Countdown is ON!

(Update 2: It’s out, links work. See you in Comments)
(Update for Post Publication) If things go as scheduled the 2014 Report of the Trustees of Social Security wil be released to the web at 12:15 Easter or less than two hours from the time this post published. Assuming the same continuity in URLs between Reports as we saw the last few years the liks below should go immediately live. Until then of course they are dead and for that matter untested. If by chance they remain broken eager beavers can go right to the main page of the Reports and link from there: . Or not, since that page was down just a second ago, possibly for updating. One way or another you will have linkage soon after noon.

The 2014 Report of the Trustees of Social Security is scheduled to be released at 12:15PM Eastern, or 15 minutes after the scheduled publication time of this post. Assuming that the file name conventions of past Reports are maintained each of the following links should come alive coincident with the public release of the Report in DC, at least in past years the release to the web has been instantaneous. But I guess we will see, and I will be testing and editing links as necessary.

The full Report is released in HTML and PDF. Those who want to read the Report in leisure can download it in PDF here: 2014 Social Security Report. On the other hand those who want to share impressions immediately would do better to work from the HTML version and its breakout of all the relevant Tables and Figures. 2014 Social Security Report linkable HTML version

Those readers who prefer their Reports unmediated feel free to dive in to either format. But for those who want some pointers as to valuable places to start and/or pointers on what those various Tables and Figures are trying to say can follow me below the fold.

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Conservative-Legal-Movement Law Is Really Just a Kaleidoscope

After taking a nearly-month-long hiatus from blogging here about legal issues, and blogging only very lightly about other things, I posted this controversial post last Friday and participated in a lengthy comments thread.  The final comment of mine, in reference to some of the preceding comments of others and of mine, reads:

A final point on this subject: Whatever the predominant ethnicity of the brutal “states’ rights” culture of much of the South, an important indication that its core is not ethnicity but instead the defense of the “right” of states to allow slavery, or to allow whatever brutality they want to allow, is that (as I said above) Appalachia itself, which has a very large Scots-Irish population, actually had (I believe) very few plantations.  West Virginia, after all, was not a Confederate state, and northern Kentucky had large contingents of soldiers who joined the Union army.

I don’t think this is an ethnicity legacy. I think it’s a plantation-culture political and cultural legacy—one that is at the very essence of the Conservative Legal Movement, whether its adherents are from the South or instead from, say, New Jerseyupstate New York and Northwestern Indiana, or northern California.  The attribution of the current, funhouse-bizarre states’-rights legal movement to the alleged “structure” of the Constitution is a pre-Civil War, and therefore pre-Reconstruction Amendments, construct.  It should be recognized for the machination of constitutional law that it is.

So much of Conservative Movement constitutional and statutory-interpretation law is really just a kaleidoscope—false statements of factsleight-of-hand redefinitions of standard-English words and of earlier-defined legal standards, comedy-routine-caliber the-knee-bone-is-connected-to-the-thigh-bone-which-is-connected-to-the-hip-bone (whether or not it actually is) Dictionary games, malleable-as-needed Court-created legal doctrines, and a deeply institutionalized look-the-other-way-at-everything-but-Conservative-Movement-claims ethos.

What a cesspool.

A carefully crafted one, in fact.

Enough said.  For the moment.

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The New Synthesis? Market Monetarists Meet New (and Post?) Keynesians on Helicopter Drops

A a year or so back I highlighted David Beckworth’s great post on Helicopter Drops. And the world’s best econoblogger, Steve Randy Waldman, did as well. (A “fantastic post,” he said.)

I’ve been pinging ever since to see a response to that post from Market Monetarist opinion-leader Scott Sumner. (AS SRW said, what we’d gotten from him was largely “quibbles.”)

I won’t rehash it all here but rather point you to Nick Rowe’s wonderfully successful effort to bring it all to conclusion, synthesizing Market Monetarist and New Keynesian thinking into support for a policy proposal that I think Post-Keynesians and MMTers would also jump on with gusto. (Also read the comments to Nick’s post, including one from Scott Sumner.)

I feel quite sure that Democrats/Liberals would embrace the policy wholeheartedly. Republicans/Conservatives, unfortunately, would consider it to be heresy and apostasy (often-sensible but utterly toothless Reformocons nothwithstanding).

Which pretty much clarifies where the problem lies…

Cross-posted at Asymptosis.

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Two thoughts for Sunday on increasing inequality of wealth

by New Deal democrat   originally published at  Bondadd blog.   (Dan here) NDD  takes a look at the new Russel Sage Foundation report on changes in net wealth for Americans:

Two thoughts for Sunday on increasing inequality of wealth

A new study by the Russell Sage Foundation on changes in wealth is yet another piece of confirmation that “the American dream” has only been working for a select few at least since the turn of the Millennium.  Two pieces of data in that study are of particular note.
First of all, the graph of median wealth per percentile since 1984 reveals that an important change happened shortly after 2000, but before the onset of the Great Recession:

Note that between 1984 and 2003, the increase in inequality did not involve the poor getting poorer (although studies of wages as opposed to wealth indicate wages for the lower percentiles were declining during that time).  Rather, the more affluent pulled away.
After 2003, however, but before the onset of the Great Recession, the bottom 25% of households, whose wealth had previously at least kept even over the previous 20 years,  experienced a real 30% decline in wealth.

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Border Crisis: Fictions v. Facts (Part 2 of “Children from Central America”)

 by Maggie Mahar

Despite extensive media coverage, there is probably much that you don’t know about the history of the border crisis—and what we can or should do in response. Too often the headlines are designed to stir passions, rather than inform.

At the end of next week, Congress will leave for its five-week August Recess. Between now and then legislators will be debating the issues, and no doubt many of your friends will be taking positions.

Here are the facts you need when weighing what you hear–whether on television or at a neighbor’s barbecue.

  • Are you aware that since President Obama took office, it has become harder for illegal immigrants to cross our Southwestern border? This is something Fox News doesn’t usually mention.
  • Did you know that even if we deport the tens of thousands of children who have come here since last October, many refugee experts agree they’ll try again—and that other children will follow them? In other words, they say, deportation will not serve as a deterrent. These kids are running for their lives.
  • Are you aware that in the past the U.S. has backed military coups and paramilitary death squads in Central America? As democratically-elected governments toppled, constitutional order collapsed, and the gangs took over the streets.  Does this mean that we are in part responsible for the exodus of kids fleeing violence at home? That is a difficult question, but definitely worth thinking about.

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