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

Weekly Indicators for December 28 – January 1 at Seeking Alpha

Weekly Indicators for December 28 – January 1 at Seeking Alpha

 – by New Deal democrat

My Weekly Indicators post is up at Seeking Alpha.

In a sparse data environment, it continues to stand out how surprisingly well – under the circumstances – the economy is doing, and how primed it is to really take off once the pandemic is brought under control.

As usual, clicking over and reading brings you up to the virtual moment, and puts a penny or two in my pocket.

The Fallacy of Unions

Because it had always been that way, none could think differently. From time immortal, labor was that what did much of the work of production. There is now a generation, maybe two, on this earth, most of whom will never know labor; will seldom see it performed. The energy for their world will not come from the sweat of the back’s of coal miners. So, if it wasn’t (production = material + labor) what was the real equation for production? The input was work, not labor. Today, machines, can and do, do the work. These machines doing the work are becoming more and more intelligent.

Without the help of governmental restrictions on immigration, the unions would never have been able to organize the coal miners; they had no leverage as long as there was a constant flow of poor and desperate immigrants. Point Pinole Regional Shoreline Park is nearby. The Park was once site for the manufacture of gunpowder and dynamite. Originally, the company had been located in what is now known as Glen Canyon Park in San Francisco (owners had one of the original licenses to manufacture dynamite). In 1869, an explosion destroyed every building on the site (including the fence around the plant), killed 2 and injured 9. So, they moved the plant to what is now the Sunset District of SF (area was sand dunes then). Blew up again. This time they moved across the Bay to Berkeley. When the plant in Berkeley blew up, it killed everyone on site. Wound up at, the then remote, unpopulated, Pt. Pinole on San Pablo Bay. The point? They never had any trouble hiring immigrants, mostly Croats, it seems, to work in the plants.

A Few Questions

A Few Questions

  1. What constitutes the wealth of a nation?
  2. What is the source of all wealth and revenue?
  3. Does the method by which one receives income — whether wage, rent, profit or interest — indicate the ultimate source of the value represented by it? 
  4. Do stores of money, machinery, manufactured goods or produce represent reserved surplus labour?

Final jobless claims of 2020 continue to show a lack of progress

Final jobless claims of 2020 continue to show a lack of progress

New jobless claims declined for the second week in a row this week, but are still significantly above their recent pandemic lows, while continuing claims, seasonally adjusted, once again made a new pandemic low. There is a sizable but by no means certain likelihood that December’s jobs number will be negative.

On a unadjusted basis, new jobless claims declined by 31,736 to 841,111. Seasonally adjusted claims also declined by 19,000 to 787,000. The 4 week moving average, however, rose again by 17,750 to 836,750. All of these are above their recent lows. 

Here is the close up since the end of July (for comparison, remember that these numbers were in the range of 5 to 7 million at their worst in early April): 


Professors Piketty, Saez, and Zucman!

Have a minute? A minute to talk about rentiers, retirement, growth, and sharing?


Seems some sixty-percent of Americans think that things are going pretty well. For them, things are going pretty well. But, for the lower forty, things aren’t going well at all. Surely, this sixty – forty ratio is not a healthy economy? What’s worse; it’s getting worse.

Fifty, maybe even as few as thirty, years ago, one could lease a commercial space for, what at the time, seemed a princely sum and start a business. Today, upon comparison, that princely sum seems a mere pittance. Today, more than half of what one could possibly gross in a small start up goes to the landlord, the rentier. Between the rent, insurance, utilities, …, and the bottom line; one winds up paying their employees less than they deserve. Hardly anything left. Plunge taken, the budding entrepreneurs, and their employees, winds up working for the rentiers, the insurance company, the utility company, …; wind up working for next to nothing, or even worse.

Is an Increased Federal Deficit good or bad ?

As the Senate decides whether to send an additional $1400 to US residents, there are two macroeconomic policy issues. One is whether aggregate demand stimulus would be useful. The other is whether we should be concerned about the budget deficit.

I think that the case for fiscal stimulus is medium strong and the case for higher Federal Debt is very strong. Thus I agree with Donald Trump and Bernie Sanders and disagree with Larry Summers.

The case for stimulus is only medium strong. Unemployment is fairly high, but part of this is an efficient response to the risk of Covid Transmission. There are two ways to argue that demand is undesirably slack. One is below peak employment in sectors which are not especially directly affected by Covid 19 such as construction. The other is that core inflation is below target and falling. Both are enough to convince me that general stimulus is OK.

But mostly the amazing fact is that the 30 year TIPS real interest rate is negative. This means that investors are willing to pay the US Federal Government to store their wealth safely. Given this, I think there is a very strong case for selling more long term bills and giving the money to residents. The interest rates assert that the US Federal Government intertemporal budget constraint is slack. This can’t be Pareto efficient.

I anticipate the concern that interest rates might rise. That is why I graphed the 30 year rate, which is locked in now. If interest rates rise, investors will lose money, but it won’t create a new problem for the Treasury. Also these are real rates (paid in multiples of the consumer price index) so deflation wouldn’t be a problem for the Treasury (although it would be a catastrophe for the economy).

Given the market interest rate, the ration of the debt to GDP should fall roughly in half over the life of the bonds. If the rates lasted, rolling over the debt would be a source of income indefinitely. The argument is absurdly simple. It is also valid.

The only concern is that public debt might crowd out private investment. This could cause higher returns on capital and lower wages with undesirable distributive effects. This problem can be managed by shifting taxation from labor to capital.

I am convinced that raising the subsidy to $2000 is an improvement.

The Four big coincident indicators as of the end of 2020

The Four big coincident indicators as of the end of 2020

All of the important economic data for 2020 has already been released. In this final week only November house prices and one last week of jobless claims remain.

So this is a good time to take a look at the current state of the economy as it has unfolded in this pandemic year.

The 4 most important components in the NBER’s toolkit for calling recessions and expansions are real sales, real income, production, and employment. With the exception of manufacturers’ and wholesalers’ sales, all of the above components, including retail sales, have already been released through November. Let’s take a look:

Figure one

The onset of the pandemic in March is really obvious, and the outsized distortions, first to the downside, and then to the upside, continued through July. In the last 3 months, the gains have slowed dramatically, and in November two of the four components went negative.

Reichtum ist verfügbare Zeit und nichts weiter

Reichtum ist verfügbare Zeit und nichts weiter

How it started (Charles Wentworth Dilke, 1821):

THE PROGRESS OF THIS INCREASING CAPITAL WOULD, in established societies, BE MARKED BY THE DECREASING INTEREST OF MONEY, or, which is the same thing, the decreasing quantity of the labour of others that would be given for its use; but so long as capital could command interest at all, it would seem to follow, that the society cannot have arrived at that maximum of wealth, or of productive power, when its produce must be allowed to perish.

When, however, it shall have arrived at this maximum, it would be ridiculous to suppose, that society would still continue to exert its utmost productive power. The next consequence therefore would be, that where men heretofore laboured twelve hours they would now labour six, and this is national wealth, this is national prosperity. After all their idle sophistry, there is, thank God! no means of adding to the wealth of a nation but by adding to the facilities of living: so that wealth is liberty––liberty to seek recreation––liberty to enjoy life––liberty to improve the mind: it is disposable time, and nothing more. Whenever a society shall have arrived at this point, whether the individuals that compose it, shall, for these six hours, bask in the sun, or sleep in the shade, or idle, or play, or invest their labour in things with which it perishes, which last is a necessary consequence if they will labour at all, ought to be in the election of every man individually.

Weekly Indicators for December 21 – 25 at Seeking Alpha

 by New Deal democrat

Weekly Indicators for December 21 – 25 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

While there have been some signs of softening in a few of the high profile metrics, overall the economy continues to remain surprisingly resilient.

As usual, clicking over and reading should bring you up to the moment, and put a little coin jingle in my pocket.