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Herb Smith

Herb Smith
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  • Inflation And Recession [View article]
    Recession is not defined by 2 quarters of negative nominal GDP. The NBER defines recession using mutliple criteria as they explain on their website:

    Recession is defined as peak to trough. Unemployment typically continues to rise and remains elevated during recovery which is defined as trough to peak. You can find this information in any text book on business cycles and most macroeconomics texts.

    Seeking Alpha ought to require additional disclosure something like: the author of this article entitled "Inflation and Recession" does not use the standard definitions of these concepts. He has his own definitions and preferred ways to measure inflation and recession that are not comparable to how these terms are used in other articles."
    Jul 7 10:44 PM | 1 Like Like |Link to Comment
  • A Surprise Recession? [View article]
    The problem is that, in nominal terms, wages and salaries have grown much slower than National Income not only over the past 6 years but also over much of the past 30 years.
    Jul 7 07:42 PM | Likes Like |Link to Comment
  • Weakening Consumers Will Be A Drag On The Retail Sector Going Forward [View article]
    KC and FL,

    do I understand correctly that you think that if US workers would only regain the past work ethic, then business would pay them more?

    I see business paying their CEOs more when they claim they motivated employees to work harder but not paying the employees a dime more in wages and salaries unless they are forced to by the competition. And I don't think shareholders would like kindly on paying workers above- average wages & salaries. Shareholders expect management to keep labor costs down!
    Jun 27 09:50 PM | Likes Like |Link to Comment
  • 3 Things I Think I Think [View article]
    S2L says Democratic party leaders "have become indistinguishable from communists in their aims, ideals, and rhetoric." It's such an absurd exaggeration. It's as bad as calling conservatives fascists for some of the views they hold. It sounds to me like the HATE with a passion that djoseph says is largely foreign to conservatives.
    Jun 26 11:03 PM | Likes Like |Link to Comment
  • CPI And PCE Deflator: Should We Be Worried? [View article]
    credit .. . credit . . long term . . credit . .

    so you've nothing to say about short run Fed policy to grow the real economy and reduce unemployment?
    Jun 26 06:08 PM | Likes Like |Link to Comment
  • 3 Things I Think I Think [View article]

    You clearly know Detroit better than I. I don't claim that the auto industry created Detroit's mess, rather that industry-wide changes made Detroit a less important employment center for that industry (along with a number of other smaller cities heavily dependent on that industry.) Does it have any advantage that would make it an attractive place for any other business to consider locating there rather than someplace else? Or, is it just another old central city that has lost it's economic reason for being there, regardless whose running the local government?

    Even if Detroit were a well run and efficient city government, it's losing tax base while poverty, crime, and unemployment increased the cost of and workload for most public services. It's a slow fiscal death spiral common to many old cities: cuts in public services with growing workload combined with increase tax rates (to replace revenue lost by decline tax base) ---> the place becoming even less attractive so business and people go elsewhere ---> more loss of tax base and more increased public service workloads ---> and on and on for decades.

    Nassau is largely well-off suburbs and it's located next to NYC so it does attract business. And, yes, it's problems result entirely from a corrupt and fiscally irresponsible local political machine. It has no underlying loss of tax base to blame for its long-term structural deficits.

    Consider the police function. Suburbs typically pay a higher wage rate while their workload of serious crimes is much lower. Similarly for elem & secondary education - - kids in poverty make the job much harder and the suburbs pay much higher wages.
    Jun 26 04:45 PM | Likes Like |Link to Comment
  • The Most Hated Bull Market Ever [View article]
    Itsgt1, You're right. Someday, there will be a correction and a crash, though I don't expect a crash anytime soon and I'm investing in equities for that reason.

    As for the economic data, I take it for what it is based on the enormous amount of information supply to us by the statistical agencies. I'm a centrist, but I know many conservatives who trust and rely on these data.

    So, how long have you been expecting a crash and how do you invest for it? Since Obama took office? When Yellen took over from Bernanke? 100% in gold?
    Jun 26 04:08 PM | Likes Like |Link to Comment
  • Weakening Consumers Will Be A Drag On The Retail Sector Going Forward [View article]
    Sorry, but I think your perceptions are based on anecdotes about some losers. I grew up in the 50's and finished grad school in economics in the 1960's. When I compare my experiences at the same age to those of my adult children and compare them also to the young people they know of and the ones they tell me about, I see that they worked much harder than I did for everything they've gotten (which is often less than I got), they had much more competition for fewer opportunities, they had far more potential distractions that could have prevented them from being as successful as they are. Their college courses were much more demanding than when I took the same courses 40 years ago (especially the more technical ones.) And, even though they have made themselves excellent performers for their employers, they have to work longer hours and their companies provide far less job security than I had. They haven't started families yet, and the question of job security and the thought they might need to move on short notice is a factor in that choice. It also matters that their advancement within is slowed by baby-boomers hanging on and the slow expansion of employment in the industries. On top of that, housing in the areas where employment is located is far more expensive than 40 years ago.

    Indeed, take me back to the Summer of 1968 - - or better yet the last 8 years of the 1990's. I'd like to see the young adults I know about catch a break and at least one stroke of good luck for their gneration.
    Jun 26 03:21 PM | 1 Like Like |Link to Comment
  • Long Dated Treasury Bonds Are Undervalued [View article]
    cpa, No, I'm not a hold over from the 1930's; I'm a holdover from 1993-1999. Even if Friedman were right about the monetary cause of the Great Depression, expansionary monetary policy alone would not have gotten the US out of it. (Though going off the gold standard certainly helped.) As for living in the past, I never thought we'd see a liquidity trap such as Keynes wrote about, but it came back with the Great Recession. BTW, If you're interested in old defunct economic theory, the Austrians seem to be back with their 19th century ideas that pre-date macroeconomics, econometrics, national income accounts and much economic data.

    There are numerous reasons for the large US trade imbalance and the off shoring of US capital that have nothing to do with the American worker, and instead are due to such things as bad tax policy, manipulation of currency markets, and bad trade deals.

    If you think consumers will only spend added income on Asian-made products, then how about increasing aggregate demand by federal govt spending on R&D, infrastructure, education, health care, etc because these are spent in the US (at least in the first round.)
    Jun 24 11:28 PM | Likes Like |Link to Comment
  • Macroeconomic Opportunities And Anomalies [View article]
    by what measure of inflation?
    Jun 17 08:28 PM | Likes Like |Link to Comment
  • McCulley: Inflation vanquished [View news story]
    McCulley doesn't say what price index he uses and there are other measures of inflation: wages rates, the producer price index, GDP price deflators to name a few. Do you think they all lie? And your subjective impression from your local grocery store is better?
    Jun 13 02:47 PM | Likes Like |Link to Comment
  • The World Debt Bubble Is About To Burst [View article]
    Well, EK, your model of the economy is just two variables. Specifically, change in surplus/deficit determines expansion/contraction.

    In most economic slumps that model gives you the right answer about fiscal policy. Especially now when too many tout a mindless austerity that is the wrong medicine now. But, in the real world the growth of the economy is affected by multiple variables. One key strength of modern macroeconomics is that it has many variables operating in complex models. Even the simplest of Keynesian macro models have economic growth determined by both monetary policies and tax and spending policies.
    Jun 13 12:40 AM | Likes Like |Link to Comment
  • Detailed Case To Short The S&P 500: This Time Isn't Different [View article]
    <"A basic reason productivity cannot be measured directly is that there are hundreds of billions of kinds of goods and products and services of which no one can keep track. "> Having billions of goods and services, and new ones too, makes producing any aggregate economic statistics challenging (e.g., price deflators/indexes.) Though the productivity data are flawed, they are produced with consistent and careful methodologies, so they are much better than crude indicators that can be driven by other factors.

    <" . . . economics is owned by Keynesians at present. Keynesians believe that consumer spending leads to the formation and accumulation of wealth, rather than the reverse. As such, they can't conceive of the pivotal role played by saving and investment."> Neoclassical and Austrian economics were focused exclusively on the supply side (capital and investment) and ignored the Demand side. Keynes brought balance to economic thinking by providing the basis for models addressing a shortage of aggregate demand in downturns, and by showing that fiscal policy was sometimes needed to stabilize economies because monetary policy alone could sometimes fail to do the job of stabilization. And economic thinking is now dominated by this balanced view of the macroeconomy.

    If it appears now that Keynesians "own economics now", that's because the 2008 downturn was much more of a demand side problem than supply side. What is the point of additional investment in plant and equipment when so much of it is currently idle or producing well-below capacity? Answer: Since 2008, business have been investing in plant and equipment largely because it allows reduction in labor costs (which macroeconomists know reduces aggregate wages and subtracts from consumer purchasing power.)

    It's the ideologues on the right and left who can only think in terms of either supply or demand rather than considering how much of each is appropriate to the conditions. The rightwing ideologues still think supply side tax cuts for the rich are needed for a booming economy and so they refused to consider any higher tax rates for top incomes during the fiscal cliff negotiations. The right wing seems to never revisit its claims about supply side tax cuts. Such cuts are NOT always effective in producing more economic growth. The Bush tax cuts did NOT pay for themselves with added revenues and did NOT produce a booming economy.
    Jun 6 11:44 AM | Likes Like |Link to Comment
  • The World Debt Bubble Is About To Burst [View article]
    Itsgt1 says "our founding fathers didn't envision a huge bloated federal government which we have today."

    I've read historians who say that Alexander Hamilton and other founders wanted the USA to be the largest economy in the world, have military power second to none, and a large federal government including such things as infrastructure spending and central banking. Jefferson, Madison, and others had utter disdain for that view.
    Jun 3 02:47 PM | Likes Like |Link to Comment
  • The World Debt Bubble Is About To Burst [View article]
    States use operating expenditures in calculating their deficits. If a state spends $600M on a bridge, it's in their capital account and does not enter the deficit as spending in that year. When a business buys an offshore drilling platform for $600M, the full amount does not enter into computing profit and loss for the year. When the federal government buys any capital goods (ships, planes, etc.), that fully enters the deficit for that year. If state and local governments used federal accounting procedures and methods, they too would all show mostly deficits (and some very big deficits too.)

    I have no idea how the founders calculated government deficits 200+ years ago. Does anyone here know? Itsgt1?

    This, of course, does not explain why the federal government should or should not run deficits, nor when if would be appropriate policy to run deficits, what levels of debt are moral, and what debt is sustainable. I say it only to point out that comparison of the federal government with state and local government finances and fiscal policy can be an apples and oranges comparison.
    Jun 3 02:37 PM | 1 Like Like |Link to Comment