I found this graph, courtesy of Doug Short, very interesting and a good prospect for a little exercise in interpreting graphs. How do you interpret this graph?
- Who cares? Net worth isn’t important; only income is important. You’re confusing stocks with flows!
- The right policies would return us to the trend of 2001-2007, we know what those policies are, and putting them in place is politically possible.
- The data are too chaotic to arrive at any reasonable analysis.
- What we have seen over the last five years is a reversion to trend. That is not good news because that trend is inadequate to put all of the people presently unemployed or underemployed back to work and we either don’t know what to do about it, the prospective solutions are politically unacceptable, or both.
- All of the above.
- Other (specify).
F. The data isn’t really granular enough to tell me anything other than what I already know, which is that the economic productivity of the nation tanked starting at the end of 2007. By itself this graph doesn’t even tell me that there was a bubble, although one might guess that. But that doesn’t tell me what the bubble was, or what the other potential bubbles (in the early 2000s and in the Nixon years) were.
Graphs like this are only helpful if one has a lot of context to apply to them, which in the case of economics also means bringing a lot of prejudices to the interpretation.
F. Let’s first look at the period from 1950 until the late 1960. There was less volatility and a slope. What happened in the late 60 s and into the 70s? Inflation. Read: destruction of net worth to finance the govt guns and butter campaign.
Now look at the long term slope through the 80 s and 90 s once Volker was on the scene. Same slopeas before, but after a re-establishment of the position on the y axis. Then two bubbles: the so called Clinton economic miracle was really the dot com bubble, and then we had the housing bubble. We are currently below the 80s 90s trend line.
So what next? Do we return to trend? I don’t think so. Despite govt stats, we have food, clothing, shelter and energy at about 8% inflation. In my opinion, the precursor to t he govt inflating away it’s largesse. And the banks. They probably think they are inflating away in the process the “rich’s” wealth base. But in the process they are beggaring the Average Joe.
This is filthy policy.
Drew, I don’t think the government is inflating away its largesse as long as it keeps spending at the current pace. I’ll re-post a commnet I put on the post that follows this one, as the numbers are pertinent:
Seriously, with that kind of continuing outlay increase inflation will only help so much. And i I will posit that the inflationary “savings” would likely be spent through other government programs. The inflation we’re seeing isn’t even going to help most people, as the pressure on wages (in part because of contimuing unemployment at sickening rates, despote the BS fromt he BLS) keeps paychecks from inflating. We’re just bleeding to death with no plan.
Sheesh, what a load of typos.
I read the graph a little differently, Drew. What I see is post-war growth that ends with two boomlets in the late 60s and early 70s, slower growth during the 70s and 80s, punctuated by some more boomlets, and even slower growth during the 90s and 00s, punctuated by two bubbles.
In other words I see the peaks as deviations from trend and the trend as an arc that bends slightly downward.
Note, too, that this graph is a log graph and reporting real dollars.
One could also say that having lots of babies is good for the economy. So why do Democrats hate the economy so much? Why do Republicans? (Dems for universal BC for everyone, Reps for aspirin tablets for all women.) Come on, people! Ladies, spread ’em! Men, drop trou, salute the flag and do your duty! Americas economic health DEMANDS it!
Ice pick –
I didn’t intend to convey a notion of a one to one correlation between profligate spending and inhaling. Just that they have almost no choice but to inflate as one aspect of the policy mix.
I suspect other aspects will include means testing for SS and other programs (read: retroactive taxes, or less diplomatically, fuck you, sucker), higher taxes on the rich, but since that only goes so far it will include higher taxes on the middle class (less diplomatically, fuck you, sucker) and of course, limited access to health care (less diplomatically, fuck you, sucker).
No doubt, the reporting on this will be “what’s a mother to do?”. With air brushed out pictures of Andrea Mitchels face strangely positioned in Obamas lap as he rides out on his chariot throwing roses to adoring crowds…..
Inflating. This iPad ain’t it’s all cranked up to be.
I know, Dave, you have long posited what would be called a polynomial growth curve that is declining asymptotically to, egad, zero, in the extreme. You may very well be correct.
But I have to note that It all seems to start as we rotated national resources from the private sector to the public, with a couple bubbles thrown in for sport. And so I ask must this polynomial be the only possible result? I say no.
But of course we have the “caring” class who declare government must intervene. And with only today’s candy visible, and taking away the candy a capital offense, the long term trend gets lost in the , ahem, “analysis. “
Did you see my link to Damn you, autocorrect?
No, but I second, third and fourth that sentiment.
I post at f sat speed sometimes as the plane doors are closing and I don’t need mr jobs, may he rest in peace, telling me what I meant….
More D and C. The last two bubbles were abby normal. I think there is a slowing trend since the 50s, but I am predisposed to believe that so it may be observational bias. Did they give us a log scale version?
Steve
Young Frankenstein (or should I say “Frahnkensteen”?) fan?
Drew, apparently the plan is to raise taxes on everyone when the time comes. By a lot.
Dave- Aye! One of those great movies where everyone in the cast works well.
Steve
Drew,
Turn off autocorrect before you send a rather salacious message to your wife’s mother.
As for the graph….
I see things a bit differently than most.
First off there are four events where the intercept for any underlying regression line would change:
1969
mid 1973
2000
2007
Periods where the growth is substantially above what we saw in the first part of the graph (1950 – 1969) are not sustainable. We had such periods in the early 1980s, the late 1990s, and then again after 2002.
It looks like there is a trend here where upward deviations are hard to sustain, and when it is attempted it often results in contractions and a return to trend.
Now if that is the case, the idea of hoping for faster growth to put people back to work might not be such a great idea…because of the resulting return to trend. Only once does it look like it was not that bad. In other words, we had a nice party from about 2002 to 2008, now we have to deal with the hangover and cleaning up. So all that talk about getting the labor market back in shape by 2018 or 2025….yeah probably right.
So Romney’s plan for balancing the budget which calls for 6.8% annual real growth seems unlikely.
Steve
I wasn’t born yesterday, so I saw recessions in ’87 and ’91.
What I see there are releases from the capital gains taxes.
That’s a good analysis, Steve V. I like it. Yes, you’re right, Steve (the other one). I think that anybody who’s relying on persistent growth above about 4% is kidding somebody. Maybe themselves. Notate bene: most pension plans assume nominal growth of 8% in their portfolios. How you accomplish that with near-zero inflation and 2% real growth is anybody’s guess.
I agree. And as I indicated, the graph also implies that if we can achieve that for a brief period it may very well be followed by a significant step down and a return to trend. In the end, it isn’t a good way to balancing things as it could very well make things much worse (as we are seeing now).
And I’d say the same thing for Obama if he has a plan that relies on super-normal growth rates. What we saw from say…2002 to 2007/8 was unsustainable growth. The fall back from that has been devastating.
Now if we could kick up growth 0.5 or 1 percentage point that would be a good solid accomplishment and it would help. Would it solve things in time for the election cycle? Probably not. And that right there is another problem we face. The focus of trying to fix things inside of an election cycle is probably a large contributing factor to improvements in medium to long term growth.
There are too many nutballs who think that super-normal growth rates are, in fact, normal growth rates.