It's the Economy, stupid - Languishing & Lingering after the Great Recession

I don't agree that rentals have the same economic value as home purchases, especially new construction houses. New construction sends ripples through many sectors, from natural resources, processing and manufacturing to adding to (or subtracting from) individual net worth. Exchange of properties affects net worth and stimulates financial activity. Rentals are, essentially, a payment of a use fee. There are benefits to the parties involved, but the overall economic impact creates barely a ripple.

Hmmmm... Is it possible that increases in rentals are actually a negative indicator in the housing market? More renting, less owning could be a sign that fewer families are qualifying for mortgages. That would suggest that the economic recovery has yet to trickle down to the general population.

 

In my post #61 I clearly state - I challenge the notion that consumer demand is weak
In my post #64 I clearly state - I do not equate consumer demand with dollars spent.

In the context of housing, the demand for housing is not weak I stated that several times and gave explanations and examples. I think I was pretty clear and I recall asking you for clarification several times and eventually said I did not understand your point of view given what had been posted.

This illustrates you did not read what I wrote. I said the demand for housing has not changed unless there was a material increase in people using campgrounds, which I would not consider a form of housing. I also included other forms of non-housing.

The demand for housing is not down! The demand for houses is not down. What the hell are you talking about???? How many houses, how many housing units are there? How many last year, the year before, 10 years ago. How many are vacant? If today's base line unit count is 100 with a vacancy of 5, and a year ago the adjusted number is 99 with a vacancy of 4, what changed? What would you conclude, vacancy is up 1 therefore demand is weak? What if next year the unit number stays at 100 and vacancy goes to 3. What would you conclude, housing demand was weak because there was no increase in unit count even though occupancy is up? And this is not even factoring in pricing. Other than superficially saying the market was down and demand was soft, you are not saying anything and certainly not enough to draw the types of conclusions you and others are trying to say are true.

Start by clarifying your position in concept. I agree all of this is noise until you Roach and others address the core question.

What is it that you expect monetary policy to do?

Answer this question, then give examples to support what is or is not working. Even at the most basic level of looking at the issue the US economy is growing. And even with that point I try to get clarification of your point of view. Is your issue on the rate of growth and if that is true how do you say demand is weak?
--- merged: Apr 14, 2013 at 1:50 PM ---
Upon reflection I think I understand. In Buddhism there is a concept - to live is to suffer. Humans nor the world we live in are perfect. Due to unattainable expectations what results is suffering. Do we take responsibility for this suffering or attribute it to things beyond our control? What we control is our expectations. To control suffering we really must control expectation. Good luck to all on your paths to Nirvana.

 

Too much debt (excessive current consumer spending) there is economic suffering.
Too little debt (de-leveraging) there is economic suffering.
Slow growth there is economic suffering.
Fast growth there is economic suffering
Too much importing there is economic suffering.
Too little importing there is economic suffering.
high wages with low employment there is economic suffering.
low wages with high employment there is economic suffering.

No matter what the condition, the choice is suffering. I think it leads to a bitter and pessimistic existence. However, with clearly defined, reasonable and achievable expectations there is a bright and optimistic existence. My comments are not directed at you as an individual, you simply made the choice to engage me with much of the "conventional wisdom" or more accurately stated conventional misinformation.

 

If politicians were doctors -

Ace - Hey, Doc. tell me how am I doing.
Doc. - Well you have stopped growing, therefore you are not well at all.
Ace - I am 52. And I have been eating PBJ sandwiches for lunch rather than burgers and fries to drop a few pounds and save money.
Doc - What! save money why would you do that? Sucker. Yes I see your weight is less this year than last, looks like you are going to die.
Ace - ?!?
Doc - You have stopped growing, your weight is down, you are spending less, my goodness you may already be dead if not you are about to go through a lost decade I saw the exact same thing once - it is not good.
Ace - but, but my goal is too...
Doc - No it is not your goal, you don't know what your goal is I am the expert.
Ace - What is my goal?
Doc - I can't tell you I just know you are suffering and will continue to suffer. And by the way, this is further proof that monetary policy does not work and has never worked.

 

o hey..look at this. another bit of conservative dogma shot to hell. once again, the culprit appears to be shabby work. but to see what's up here, you have to look at more of that pesky data...

PERI: : Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff


a pretty good overview:

Researchers Finally Replicated Reinhart-Rogoff, and There Are Serious Problems. | Next New Deal

 

Aside from my contempt for treating Excel as though it were okay to use it for academic analyses, it bears mentioning that even in its original form, that paper was really shaky evidence for the ideas it attempted to support. Correlation is not causation. This is a perfect example of the disconnect between deserved and earned credibility endemic to the people associated with ivy league schools.

 

there's a quite funny chain of comments about peer review that follows the outline of the results of the paper that the second link takes you to. apparently the paper was a conference proceeding and wasn't reviewed even as it appeared in a normally peer-reviewed journal. personally, i think peer review a funny thing, but that mostly because it enforces a disciplinary conservatism. at the same time, there's an assumption that having moved through such a process would have required a sharing of the data. one would think that the sharing of it woulda short-circuited it's appropriation---but it seems that out there in conservativeland what matters most is that legit-seeming research feed back what conservative ideology predisposes one to want to see or hear. so it is in this case. the power of this ideological circle-jerk is such that, in almost every instance where the critique of reinhart-rogoff gets rehearsed, there's an expectation appended that the undermining of this basic policy constraint will change absolutely nothing.

r-r's defense from the wall st journal is a retreat to exactly that position, bodkin: correlation is not causation....they also try to argue that the data problems are trivial. it's pretty funny stuff.

 

What is your or the conclusion from the analysis?

Who holds the position that high public debt always stifles economic debt as measured by GDP? Do you realize that the measure of GDP includes government spending, i.e. if government increases spending, all other things being equal, GDP goes up? But there are other measures of economic health that could be affected in other ways.

Here is the issue with high public debt or government spending. In some circumstance it can be a net "good" and in others a net "bad". In some cases government spending will be more efficient than private sector spending, in other cases it won't be. In some cases government will spend in areas for the common long-term good that the private sector will not do. Short of the uniformed, most conservatives I know hold this view. I would imagine most informed liberal would agree as well.

Perhaps it would be better to look at the relative adjusted cost of the debt and the impact of the cost on GDP.


--- merged: Apr 17, 2013 at 11:45 AM ---

I am curious I you would administer economic policy, here is a scenario:

Currently there are many potential homeowners who are willing to purchase a home and begin accumulating equity and minimize the inflationary risk of future housing costs but can not due to current lending standards.

Banks are not currently lending to those who have credit score issue, down payment issues, income consistency issues (commission income for example), employment stability issues, etc. - or people who would be considered higher risk compared to prime lending candidates.

Of course there is the issue of our recent financial crisis and banking system integrity and of course there is an issue with economic growth partly affected by housing construction and related economic activity.

Would you regulate to encourage or force banks to increase lending activity for home ownership, negatively affecting the banking system integrity?
Would you do the opposite to encourage home ownership and perhaps stimulate economic activity in the short-run?
Would you allow banks to mitigate their risk exposure if you wanted them to lend to these individuals - perhaps through secondary market derivatives?
Would you manipulate the money supply to manipulate interest rates and if so in what directions and to what level?

Then after you make your decisions, what conclusions would your draw from your regulatory activities? What conclusions if defaults went up? Some banks failed? Some in the secondary markets lost money? The economy failed to grow but the balance sheets of banks were strong? Etc., Etc., Etc.

I don't expect any type of a reasonable response, but I think the point is clear. If monetary policy is being used in this context to manage regulatory goals, one would have to measure the success or failure of the policy based on the goals and only the foolish would do otherwise.

 

residential mortgage rates are at about 3%..it's a historic low.
one thing that's happening is lots and lots of refinancing.
i don't accept your premises that, for example, state action to force banks to act in ways that serve public and/or political ends leads to problems of banking system integrity. what it does is shift the balance of power away from private interests that have been acting since 2008 in largely dysfunctional ways from a system viewpoint. that is not a bad thing. for specific examples of the range of options open to the state, and an outline for the rationales that shape such actions, you might actually read the koo piece linked above. similarly, for a model of state actions in a period of economic crisis, particularly in a policy context in which the central rationale for austerity has also been undermined empirically (maybe actually read the material on reinhart-rogoff)...

what i'm saying is that your entire way of thinking sits of falsified assumptions.
the case for that is best made via actual data.

 

My premise is that there can be and often are conflicting economic goals and objectives for policy makers. Is this the premise you disagree with?

Regulators can score the integrity of the balance sheets of banks, even if you don't agree with how I presented the scenario do you agree that the factors that make you the "score" can be manipulated to increase or decrease the score? And that there would be real consequences for changes in the "score"?

Using higher education admission standards, administrators can manipulate their standards to accomplish different objectives and we could create a scenerio that address the various consequences - in theory the premise is a very simple one. So, I can see having issue with the way I presented the scenerio, but not with the premise.

here is the exact point where your thought goes off track and you need to clarify the point being made. You say "dysfunctional" - dysfunctional for who? How do you define or measure dysfunctional? What is dysfunctional for you may be very functional for me. so, unless you can be more specific, this has no meaning.

 

ace, darling, let's be clear for once. i am entirely aware of the relational nature of concepts, particularly in the social policy context. my basic point has been that i don't accept the terms that you continuously try to impose as if they were the condition of possibility for discussion. i've already referred you to the koo piece 3 or 4 times. i don't regard it as Reveal Wisdom, but it is nonetheless interesting and a useful place to depart from if you want to actually have a discussion.

it's been this way for a long time, ace. you imposing terms on discussion, me telling you they're arbitrary. that's why there's never any motion.
i've outlined in the past why i consider the way you frame arguments to be reflective of a failed economic ideology.
at this point, the choice is simple: move off those terms and maybe have a discussion. stay with them and talk to yourself.

there's data in the thread.
read it.
try to get your head around it.

 

The thing about peer review is that sometimes the reviewers don't know enough to provide any sort of meaningful review. Or sometimes the reviewers are ideologically predisposed to ignore flawed assumptions or methods. I suspect both of these things may be true here. These things happen. But, if you've made a name for yourself touting result of research that was flawed, it doesn't seem to me to be all that respectable to admit that your research is meaningless and that you never said it wasn't.

But econ is more religion than science, so whatever. Facts are merely small parables in the grand narrative of reasoning your way backwards from your assumptions.

 

Damn, Bodkin, you sure talk purty!

 

America still has some problems, and it seems like the stock market went too low, and now it is too high. Why can't it just hold at some steady level and represent reality?

The Austerity stuff doesn't seem to be doing the job in Europe though. Nobody really has a good plan on how to cut government spending while finding private sector jobs for all of the effected people. As well as increasing the monetary supply and getting rich people to spend money.

Plus, there hasn't been a big shift in the mindset of people yet to get by with less or change their lifestyles to not need to work. It might not help the 'unlimited growth' numbers that governments want to see, but it might actually improve people's lives and the environment.

Anyways, there will be more than enough data for economists to study for the next 10 years to come up with better plans.