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John Lounsbury

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  • Connecting The Dots - Oil And Accelerating Growth [View article]
    David - - -

    It's a great poker game.

    Major shale producers are claiming a steep learning curve and production costs coming down to $40 and even lower. The Saudis are claiming their production cost is $20. Both are likely bluffing. And the Saudis can only forego their large margin for a limited period of time - their sovereign wealth funds are not sufficient to carry their population support commitments for more than possibly a year.

    Either someone will fold or we will see all the cards - don't know which.
    Dec 28, 2014. 04:29 AM | 2 Likes Like |Link to Comment
  • Nasty Storm Brewing In Trade [View instapost]
    Wouldn't we have to come up with a rationale for exports being affected more than imports to say work slowdowns impacted the numbers?
    Dec 20, 2014. 06:26 PM | 1 Like Like |Link to Comment
  • Hav Existing Home Sales Volumes Finally Recovered? [View article]
    Peter - - -

    Great discussion of the sad state of financial corruption in the world. The U.S. may have led but the entire world had no problem following down the rabbit hole. We posted at Global Economic Intersection a couple of weeks ago the piece that you linked from FDL using the original manuscript provided to us by Prof. Galbraith. This is a great document describing what was understood over three years ago about the extent of financial fraud. Of course Bill Black is doing a great job of making sure we don't have an opportunity to forget.
    Dec 2, 2014. 02:00 AM | Likes Like |Link to Comment
  • Lack Of Rental Units Can Trigger Inflation [View article]
    Jan - - -

    In general inflation is the friend of the borrower and the enemy of the lender. So if you mean by poor those too low on the financial totem pole to use credit in any form then I can see the possibility that inflation is a burden on the poor. Otherwise the middle 60% of the populace is boosted by inflation and the top 20% (or maybe only the top 10%) are hurt by it.
    Nov 23, 2014. 01:32 PM | Likes Like |Link to Comment
  • November Jobs Report Had Highest Jobs Gain Since 1939 [View instapost]
    fishfryer - - -

    How many of that 4.5 million are already here?
    Nov 13, 2014. 07:27 PM | Likes Like |Link to Comment
  • Is Consumer Income Improving Or Declining? [View article]
    One added note: CPI-MED is 5.825% of the overall CPI formula. Since medical expenditures are about 17% of GDP a crude implication is that at least 11% to 11.175% of costs are still born by employers. But it may be more if the 5.825% includes an estimation that some fraction of households pay all medical expenses. That may be a bad assumption - I don't know. Anyway, some large portion of medical costs seem still to be employer paid so there is a lot of room left for more transfer of costs to employees which could depress the "effective household income" for many years to come.
    Nov 9, 2014. 06:48 PM | Likes Like |Link to Comment
  • Is Consumer Income Improving Or Declining? [View article]
    Alltee - - -

    Great question. But the answer is not straightforward. As median household income has stagnated over the past few of decades, employer paid medical insurance has become more and more expensive and that should be included in the estimation of total compensation. It is not.

    But, especially over the past 20 years employees have increasingly shared in the premium costs of health insurance. And those dollars are included in the median family income (only the employer contribution is excluded).

    But the calculation of how income should be adjusted gets complicated because the numbers are inflation adjusted for comparison over time. And medical cost inflation has been underestimated in the opinion of many in the CPI index (which includes only estimated consumer paid costs) and the PCE deflator (which includes all medical expenditures). That is one complication which I will put aside for the rest of this discussion.

    As healthcare costs have been shifted more to the employee the additional compensation that would be imputed for employer paid premiums has been reduced so a first order estimate is that during the past 10-20 years there would be a negative effect on imputed income progressing over time. At the same time, any costs transferred to the employee could be reducing income available for all things not medical to the extent that CPI or PCE understate the component of medical in household expenses, which some (many?) believe is the case. See for example

    I have not done the tedious analysis to determine the actual profile over time, but my SWAG is that "effective" median household income was increasingly understated as medical costs and employer provided health insurance both increased during the 1960s, 1970s and 1980s. Then in the 1990s employers started shifting some of the costs to the employees and those portions health care costs started coming out of the median household incomes, leaving less for other expenses. This has continued in the 2000s further stretching (diminishing) the "value" of the recorded household incomes.

    The point being that comparing household income from 20-30 years ago to those of today has an apples to oranges aspect. In the earlier time the effective income including imputed value of employer paid health insurance would be larger than the numbers in more recent years when the imputed value would be decreased as employees assumed increasing shares of the costs out of income received.

    Thus, it seems that "effective household income" from years ago would be increased more than it would be today. This would make the income change over time even less positive (or more negative) starting when the employees began sharing premium and increased deductible costs. In other words, if you see that "median household income is the same in 2014 as it was 25 years ago" (1989) - which I believe I have read - these effects are likely to change the statement to "today the "effective" median household income is less than it was in 1989".

    Thus I suspect a more exact analysis including medical insurance parameters would produce a worse trajectory for median household incomes starting 20-30 years ago up to the present day than is "on the record" today.
    Nov 9, 2014. 06:28 PM | 3 Likes Like |Link to Comment
  • No Risk Of Inflation If Velocity Of Money Is Falling? [View article]
    Ordinary - - -

    You need to modify your otherwise excellent discussion. You wrote:

    "We have not had conservatives control the executive, house, & senate all at one time since prior to the FDR era, and going back to Wilson and the launch of the FED, the 16th amendment/income taxes, and the start of WWI."

    The Republicans controlled all three (executive, house, & senate) for 12 years, from 1921-1933, so you should delete "and going back to Wilson".
    Oct 30, 2014. 06:25 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Can Earnings Season Reverse The Stock Market Decline? [View article]
    dancing diva - - -

    Very good observation on the Scott Grannis chart which plots liabilities against asset value. Debt is mostly repaid with income (or selling assets which puts downward pressure on value so that would produce "unpleasant" distortions to the Grannis plot).

    A more meaningful graph is obtained by plotting liabilities against income and that shows we are still at historic over-leveraged conditions. To be technically correct we should plot debt service against income (cash flow vs. cash flow) but I don't know if the data is that easy to compile.

    Bottom line, I am not ready to sign up for the deleveraging is "Mission Accomplished" kool-aide.
    Oct 13, 2014. 06:46 PM | 3 Likes Like |Link to Comment
  • Why Not Ignore Economic Forecasts? [View article]
    Drummer Dude - - -

    I apologize in advance for an overly long response.

    Your analogy is incomplete. The determination of real information in electromagnetic waves from an overriding noisy background is a technology that has developed into the 21st century. The determination of economic patterns from a somewhat analogous type of noise has not left the 18th century for the most part.

    Yes, there are some examples of success but they are few and far between.

    The best examples of definitions in economics where this lack of ability to extract meaningful economic data from the noise come from Marx, Schumpeter, Keynes, von Mises and Hayack (and a few others) who have been largely ignored by most economists - who simply put on blinders and make assumptions that ignore the noise. They end up with rigorous proofs (based on assumptions) which all too often turn out to be nonsense.

    My criticism might be represented by a couple of analogies:

    1. Many economic models assume to describe the economy in a manner which would allow someone to describe the progress of a motor car across the country from a small set of photos taken of it as it traveled down a highway.

    2. Many economic models depend on the assumption that the future is defined by present expectations. This unfortunately removes the uncertainty of the future from economic modeling and eliminates the most valuable contributions of the classical economists I mentioned previously. Much economic modeling attempts to predict the future by assuming it is predetermined by present expectations. How circular can a process get?

    I will repeat an instructive parody which relates to the EMH (Efficient Market Hypothesis) which is a manifestation of the assumption that uncertainty about the future does not apply.

    An economics professor and a student are walking across campus. A $100 bill appears on the sidewalk immediately in the professor's path. As they walk by (the professor stepping over the $100) the student says: "Why didn't you pick up the money?"
    "Because" said the professor, "it was obviously an illusion and not real. If it were real someone would have picked it up already."
    Sep 20, 2014. 02:02 PM | 6 Likes Like |Link to Comment
  • Is Inequality Causing Soft Economic Growth? [View article]
    @ billcharlesdixon
    Should I limit the use of the word "rant" when I describe my own writing? I use the descriptor often when I express an opinion in more than a couple of dozen words (in which case I usually manage to identify it as an opinion). If I have written 100 words or more of opinion I often edit the presentation to identify it as a "rant". This is because I try to deal with facts as much as possible and avoid wasting a lot of effort on opinion - but when I do I warn the reader(s). So I think I will continue to use the word. (Including describing the writing of others.) I remember the use, but not the exact occasion, not too long ago of describing an essay written by another as a "magnificent rant". I thought that much more apropos than saying something like a "well written opinion".

    Thus concludes another rant. :-)
    Aug 21, 2014. 05:20 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: The Market Risk From Current Crises [View article]
    I don't know how bbro calculates loan growth it but I would use the data for 'Loans and Leases, All Commercial Banks' at the St. Louis Fed data base ( I just did a quick check of that data and the two results he quoted are very close to what I estimated from the Fred data.
    Aug 10, 2014. 05:39 PM | 2 Likes Like |Link to Comment
  • Obamacare And Part Time Jobs Growth [View article]
    drdata - - -

    Yes, the example you give will count as three workers in the nonfarm payrolls data (establishment survey). But they only count as one employed person in the household survey and that is the data which determines the unemployment rates (U-3 through U-6). This may be one of the reasons that employment losses have been completely recovered by nonfarms payroll data but not when using the household survey employed numbers.

    Doug Short has posted data showing that since 2006 the percentage of the employed with two or more jobs with one being full-time has declined from about 1.15% of the total employed to about 0.75% today (35% decline). Link:

    He also shows that since 2007 the percentage of those with two or more jobs who are part-time for all jobs has increased from about 1.18% of total employed to 1.32% today (12% increase).

    The total with two or more jobs (including those with two full-time jobs, a very small number) has declined from about 2.75% of the total employed in 2007 (and from about 2.85% in 2008 and 2009) to 2.5% today, which is a decline of 9% (12% from 2008 and 2009).

    The net from this data is that it supports a net change in full-time to part-time employment for about 0.4% of the total number of people employed. That percentage seems small but it amounts to more than half a million people.

    On a macroeconomic scale, 500,000 out of more than 146 million people employed is "noise". For the half million individuals so affected it can be life changing.

    When we discuss what can be determined on a macroeconomic scale the individuals falling into a fraction of one percent get lost.

    Just a note, in case the low percentage numbers discussed above are confusing compared to the much higher percentages the author discussed in the article. The author was discussing the numbers for all part-time employment which covers those with only one job as well as the smaller number with two or more jobs that I was discussing.
    Jul 13, 2014. 12:29 AM | 3 Likes Like |Link to Comment
  • Proof That Cutting Taxes Does Not Stimulate? [View article]
    MLP Trader - - -

    You said: "Under a distortive tax regime, you inefficiently re-invest it to avoid taxes."

    Aren't all taxes distorting? The question is what distortions do the least harm or encourage the best macroeconomic patterns?

    Are you proposing that corporate tax rates be reduced by recognizing (in some form) all investment anywhere as tax preferred?

    Interesting thought, but would that aid and abet capital outflows from a country? And if the tax preference was allowed only for domestic investment doesn't that create the possibility of malinvestment, which you have mentioned?

    Tax incentives are complicated things. When it comes to taxation you can be damned if you do and damned if you don't (tax).

    You have opened a very interesting discussion. I fear it can never be concluded to a reasonable conclusion in a forum such as this. And maybe not to the satisfaction of everyone in any venue. Every tax law/levy creates winners and losers and the losers are seldom happy about it.
    Jul 6, 2014. 02:08 PM | 1 Like Like |Link to Comment
  • Why Ending The USA Export Import Bank Is Bad For The Economy [View article]
    The Exim bank may be making a profit for the government but it would not be well served by private banking because the profit is modest. There are much more profitable (as well as risky) ventures for the private sector. There are many service areas of banking that are better served by a public bank (like the Exim bank) such as infrastructure development, for example. The government is a big, fat brood sow for private banking; the functions of public funding should be operating by-and-large through public banking entities. Private banking would then provide its services to private enterprise and individual citizens. Obviously the Federal Reserve becomes a very different animal functioning as an interface between two banking functions - a clearing house and reserve operation for each and their intersections. Too Big To Fail might well be a much easier condition to cure under the new system.
    Jun 28, 2014. 11:57 AM | 1 Like Like |Link to Comment