Dave Altig, research director of the Atlanta Federal Reserve, takes note of a speech given last Tuesday by the Atlanta Fed’s president, Dennis Lockhart, describing the finding of the Atlanta Fed that it expected growth in the 3rd quarter of 2011 to be pretty robust and growth in 2012 to be around the “steady-state growth rate of the economy’s potential”. Unfortunately, that isn’t good enough. From Dr. Lockhart’s speech:
[M]ost private sector forecasters envision growth in 2012 approaching 2.5 percent. In the opinion of many economists, that 2.5 percent approximates the steady-state growth rate of the economy’s potential. This rate would certainly be an improvement over 2011 as a whole. The problem is without growth measurably better than 2.5 percent, little progress will be made in absorbing slack in the economy—above all, labor market slack.
I think there are a number of takeaways from Dr. Lockhart’s speech including
- The Atlanta Fed believes we are still in the expansion phase of the present business cycle
- There will not be a second recession hard on the heels of the last
- In the absence of structural changes the economy is unlikely to grow fast enough to bring those who lost their jobs during the recession back to work
In my view among the changes that would be most helpful would be significantly increased productivity in the healthcare and education sectors of the economy, which now appear to hold the “commanding heights” of the economy.
In the absence of structural changes the economy is unlikely to grow fast enough to bring those who lost their jobs during the recession back to work
Balderdash. If only those unemployed people would SMILE then they’d all have jobs now. It’s entirely their own fault.
“The Atlanta Fed believes we are still in the expansion phase of the present business cycle”
This is exactly the problem: the Fed has no understanding that we are not in a typical business cycle, despite the complete failure of their models to explain why the economy hasn’t responded to monetary policies.
Congratulations, Helicopter Ben. You’ve helped turn us into Japan.
I believe Drew and I warned about this…hmmm around 3 years ago or so when Bush and Obama and Bernanke were so eager to prop up the financial system (zombie banks), followed with propping up GM, and then the stimulus. That we were pursuing precisely the same policies Japan did, which then went on to have a decade plus of sub-standard growth in GDP.
Hope and change you can believe in.
I believe Drew and I warned about this…hmmm around 3 years ago or so …
Lots of people did. Lots of people said otherwise, just like now. But the people that matter (the governing class) have biases that keep them making these mistakes over and over again. They believe NO MATTER WHAT that they and they alone can control their lives. That they and they alone can control other people’s lives. That they and they alone have the knowledge, wisdom, skill, good haircuts to put Humpty Dumpty back together again. Add to that a bias that it’s always better to do something than nothing.
If they didn’t have these biases they wouldn’t be in the positions they’re in now. How many of these people haven’t been working towards their present positions for most of their adult lives? It’s pathological behavior, and its what the system demands. If you don’t have these biases you will never rise very far, and thus won’t be in a position to influence policy.
That we were pursuing precisely the same policies Japan did, which then went on to have a decade plus of sub-standard growth in GDP.
Japan has other problems, too, primarily demographic in nature. And did Japan (does Japan) have the cultural mind-set that would allow them to NOT do what they did, trying to prop up the whole? It’s pretty clear we don’t, and we don’t have anything like the culutural homogeneity that they’ve got.
“I believe Drew and I warned about this…etc”
That would be correct. And I recall being roundly criticized, as was SV. I even posted a University of Chicago economic roundtable video including my favorite red-headed economist (perhaps balding now; he was wearing a cap) who predicted the folly of the policy.
Speaking of being roundly criticized…….
I have also been kicked in the, uh, knees, about the role of government social engineering wrt housing. You know, government promotion of “subprime loans” (code for crap loans people can’t repay). Never happened. Couldn’t happen. Well, here we go again…………the government (read: Obama) is determined to advocate “subprime” (snicker) loans to “good folks” and let Fannie and Freddie (read: the taxpayers) pick up the inevitable disaster. Its right in front of you.
But I know there is no way this could be true. College prefessors do “studies” and their mindless, no-practical-experience sycophants tell me so. In fact, I didn’t actually see this happening in credit meetings………I was hallucinating. I don’t want to name names or anything…….John Personna……or whatever name he goes by now…..
@Steve Verdon
We were doomed the moment the Fed announced it would pursue Quantitative Easing. That the Reserve Board of the central bank thought boosting bank reserves would spur lending when banks are not reserve constrained was proof in the pudding they had no clue. The good news was that it didn’t make things worse, but that’s the only positive aspect I can think of.
Gee, Drew, why don’t you stop waffling and tell us what you really think?
My favorite part in your spot-on vituperation was, their mindless, no-practical-experience sycophants tell me so.
Oftentimes, there is no hesitation, no second thoughts, in some people’s minds that they are right, you are wrong, end of story. How can anyone say, though, with absolute certainty, that their way is the only way to look at the complexities of a country, like the United States, economic conundrums? And, if you can’t truly isolate and identify the weaknesses of certain policies afflicting an economy, and instead just stick with the platitudes of social progressive ideology, how can a suitable plan be duly constructed to rectify such problems?
“their mindless, no-practical-experience sycophants tell me so.”
Hmm. nearly every physician I know thinks they have nothing to do with the increasing costs of health care. Nearly everyone who worked in the financial area thinks they had nothing to do with causing the financial crisis. Neither group acknowledges money as incentive, unless it is being taxed away from them.
Steve
“Gee, Drew, why don’t you stop waffling and tell us what you really think?”
Its a hyperbolic posting style.
“My favorite part in your spot-on vituperation was, their mindless, no-practical-experience sycophants tell me so.” Just as the trial lawyers can find an “expert” to testify to anything, you can find someone to do a study “proving” that government driven EZ credit had any material effect. Rather, it was all the “greedy bankers” fault. And, of course, no chance that those who applied for credit were anything but pure as the driven snow, or perhaps, as the line in the first Godfather movie – ‘either your signature or your brains will be on this contract.’
“Neither group acknowledges money as incentive, unless it is being taxed away from them.
I don’t know about that steve. Most people I know would acknowledge money. Its why those of my particular philosophy desire to avoid government power that facilitates monopoly, regulatory favors, rent seeking and all that jargon.
“..did not have…”
You don’t think we have demographic problems? An aging population combined with income transfer programs for that aging population that are unsustainable come to mind.
Icepick, I don’t disagree here, but I’d like to point out that I think this makes them both mentally disturbed and unfit to be leading a church choir let alone a nation.
This, fits with what I’ve been saying for awhile now. These people see themselves as special, that normal rules don’t apply to them. That they can do things the rest of us can’t because they are wise, and skilled, and can do things nobody else can.
Totally agree here. This is one of the reasons I see little hope for changing things. Even somebody with the best of intentions early on will, by the time get to a position of power, have absolutely the worst of intentions. Or to put it differently, even if you could find the “Right Person” to get us out of this mess, as soon as you put him into power be becomes the “Wrong Person”.
Not remotely as severe as Japan’s, actually. Japan’s population is actually declining and a quarter of the population is already over 65. There are presently no projections for either of those two things to happen here for the foreseeable future.
Japan also appears to have a rather serious problem of corruption in its public pension system but that’s pretty hard to document. The number of dead people on the rolls seems to be pretty high, at least in part due to poor recordkeeping in the early part of the last century and also due to a loss of records a little before the middle of the last century.
Drew, my retort was in humor, as I personally find your hyperbolic posting style to be an effective foil for political counterparts who are dyed in their hyperbolic remarks….Michael Reynolds comes to mind. Most people, of a conservative bent, aren’t as well-equipped to carry it off as adroitly as you do. It’s somewhat of a gift, that is probably marinated in self confidence and over all experience.
Actually, physicians have less and less to do with rising health costs, as their fees are increasingly more vulnerable to retooling downwards because of contractual obligations to insurance companies and/or to the government itself, placing strict limits on medicare/medicaid payments, which often barely covers a doctor’s costs (this is especially true for anesthesiologists). That’s why there is a physician drift over to private practices, which don’t deal with the government or insurance companies, in exchange for personally being more available to their exclusive patient base.
To what extent does immigration (particularly) illegal immigration help us out here.
And, I’m not as concerned about population size in and of itself so much, as I am about the fiscal impact of the programs we’ve set up–i.e. Medicare and Social Security. Are our problems that much better? Medicare and Social Security are very much demographic problems.
Totally agree here. This is one of the reasons I see little hope for changing things.
Welcome to DoomFest 2011. Don’t forget to buy a t-shirt, hat and drink koozies in the lobby. (Watch that you don’t get Bannished for it.)
As for the demographic comments, Dave already handled that matter.
You won’t find a system of government that doesn’t attract the kind of people mentioned before. You have to have a bossy personality to effectively boss people around – the rest of us just aren’t wired that way. Such people are pathological to begin with. (A-hem.) They won’t be the only kind attracted to it, but they will be the most determined. They’re basically dominatrixes in business suits. The worst of it is, they’re probably the only people that can do it well.
As for the RIGHT PERSON turning into the WRONG PERSON. Doesn’t work quite like that. First of all, they won’t necessarily have the wrong intentions, neither in their minds or in fact. But a great deal of government work (indeed, a good deal of all of it today) is the need to compromise, to get along with co-workers, to meet the needs of many different stake-holders, to use some jargon. In that mess of conflicting goals, things will get messed up. They will often get messed up by way of half-measures and idiotic compromises. It’s the nature of the beast.
And don’t forget the most important point, which is that most of the people involved in most of the worst stuff actually believe they’re doing it for the good of all the rest of us. I’d give you 99-1 odds that Tim Geithner, in his heart of hearts, believes that every crummy thing he has done has been with the best of intentions for the little people. (He wouldn’t use that phrase, but you know what I mean.) Every bank bail-out, every regulation or law trampled, every principle ignored, it was all done for the good of the people. The fact that some people benefitted more than others, well, the cream will rise to the top. Or the pond scum. Don’t forget Charlie Munger’s comments on the bailouts, for perspective.
Are our problems that much better?
It’s more a matter that they could be so much worse.
As for the demographics, yes, immigration has “helped”. But importing millions of Third World peasants isn’t likely to help all that much in the long run. I’m pretty sure though that the native population demographics are still better than Japan’s, though I’d have to look that up. I think the native born types here are just under the replacement threshold, while the Japanese are far below it.
See here for a quick take on Japanese demographics. Japan has universal healthcare; it also has a system of social insurance that takes up about 20% of the national budget. IIRC the Japanese are much more broadly covered by company pensions than we are here.
Despite a significantly greater use of technology than we employ here healthcare costs aren’t growing as fast in Japan as they are here or in Europe, probably for a variety of cultural reasons. The Japanese are less inclined to adopt the latest pharmaceuticals for one thing and for another they are less predisposed towards over-utilization.
The Japanese are less inclined to adopt the latest pharmaceuticals for one thing and for another they are less predisposed towards over-utilization.
Let Madison Avenue get a hold of ’em and we’ll fix that right up! Plus, hot pharmacy reps with that whole naughty business woman thing going on sent to all the doctors and hospitals. It’s a massive untapped market.
MASSIVE, I tell you!