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  • Is Inequality Causing Soft Economic Growth? [View article]
    stvrob, so much to say in response. You are largely correct. The problem is not so much with dollars held in savings abroad, rather what is done with them. If holders do not want to hold them any longer, they can always spend them on assets or consumption denominated in US dollars, globally or domestically. More later.
    Aug 17 12:04 AM | Likes Like |Link to Comment
  • Wages And Productivity [View article]
    Hi Jason, thank you for a learned and detailed response. I need time to mull over your analysis, but have been thinking about the interesting topic and your input to it.

    "And the answer is, the more the value added goes to capital, the higher the pay in that industry, and this is statistically significant..." And naturally intuitive. I am entirely comfortable with the concept.

    "To be specific and technical, if we exclude cases (like the Federal government) where pay takes more than value added..." There is a lot to be said about that, you have no idea. LOL Well, yea, surely you do. It's a whole new topic in an of itself. I feel an anecdotal rant coming on, so...let's exclude that for the moment.

    "Actually it is directing external processes and capital outside its own industry, raising value added..." Interesting observation.

    You know, you mentioned above, a back hoe worker does not earn by standing next to a back hoe. He earns by operating it. Nice example of the night watchman, too. I am generally in agreement with you and with theory.

    Another anecdotal thing struck me watching a game show. They have a series of trivia questions that build up to $1 million US dollars if the contestant can get them correct, including the use of a life line. He does not even have to have the complete skill, he can call on someone who does. This contestant, and the program itself, is bringing in who knows how much money in the form of advertising and a large viewer audience. He is, arguably, close to the capital.

    Is the idea one can spout a few answers to trivia actually worth $1 million per hour simply serving those who earn a lot producing such a program? Is the suspense we feel at home worth that much money to someone? Apparently, but something seems amiss. Here's an industry with so much money to throw around in a single hour on a nerdy skill while so many folks will never see that much money in a life time.

    A friend of mine, along similar lines, used to complain fervently about the actually increase in GDP of a high paid NBA (baseball, football or whatever) star drawing a crowd and earning who knows how much money in revenue for someone. For what, dunking a ball?

    Anyway, just wanted to throw that out while I consider your comment more fully.
    Aug 16 11:59 PM | Likes Like |Link to Comment
  • Is Inequality Causing Soft Economic Growth? [View article]
    "Nobody cares how rich the rich are so long as they are doing well themselves. Income inequality has only become an issue as the US economy has been degrading since 1980."

    Nice, David.
    Aug 16 11:31 PM | 3 Likes Like |Link to Comment
  • Is Inequality Causing Soft Economic Growth? [View article]
    "It's as simple as that."

    It is, but it's also circular. Those same people can't make more stuff, long term, if no one consumes it today.
    Aug 16 11:29 PM | 2 Likes Like |Link to Comment
  • Why The Federal Reserve Will Never Be Able To Get Out Of QE [View article]
    II, I made no overt attempt to twist what you said. Maybe discussion began to clarify what you meant by, "The US Federal Reserve Bank can idly sit on ALL ITS PURCHASED DEBT until that debt has matured." What did you mean by maturing, letting the monetary base fall right after the taper when they stop buying?

    "First, can everyone agree that the US Fed will stop buying debt to increase the US Fed's total holdings, in October 2014 at the current rate of decrease?"

    I suppose so. Yes, the fed will reach a level of accommodation and remain there for a while, as I understand their intent to reinvest maturing securities. Now, I have to go back and read the minutes to be sure they didn't mention anything about doing so prior to raising rates. Not sure, now, how long the Fed intends to keep this level of accommodation in conjunction with interest rates via IoER, reverse repo, and maybe debt maturing on it's books.

    Anyway, II, I was not twisting (not intentionally, anyway) what you said so much as engaging in debate to clarify it. I apologize if it came across as unclear. I feel ya.
    Aug 16 10:34 AM | Likes Like |Link to Comment
  • Is Inequality Causing Soft Economic Growth? [View article]
    Very interesting topic. Need to think it through a bit.

    Off the cuff, though, I would think the amount of inequality that resulted from extraordinary monetary policy (pretty much working alone) has not driven growth, employment, nor inflation...nor a robust recovery. It likely has spurred global growth to some extent, but very little domestically. I mean, obviously, right? At $4 trillion on the Fed's balance sheet and this is the best we can do?

    Trickle up or trickle down aside, the consumer needs to buy stuff. Retail comes to mind. So, where do they get the money? Credit? Labor market slack? Food stamps? Home equity? Cash in their retirement early? Clipping news paper ads? Government hand outs? Student loans? Starting up a small business when demand is weak? From the new engine of growth: EM? China? Insurance fraud? Fund a war?

    What ever is a wealthy nation to do about weak growth besides bicker in the nation's capital and spin decisive politics we mistakenly pass as NEWS? Obviously, we cannot make everyone equal in the eyes of our collective wallet.

    Here's another look at the same problem from a different angle.
    Aug 16 10:19 AM | 1 Like Like |Link to Comment
  • The Collapse Of Our Monetary System [View article]
    Yea, I was being facetious, or partly so, about bit coin. Its an interesting phenomenon, but sold as the greatest thing since sliced bread. I'm cautious, just watching.

    I don't think we really disagree on the rest, tangential or otherwise. Cheers, Neil.

    "So what if your dollar is deposited in a bank, which then deposits that dollar in the Fed?"

    Depends on how it got there. If directly deposited, it already exists at the Fed as a liability and your bank's asset. In turn, your money is a bank liability and your asset in whatever form it may have. You can hold it in your wallet, if you want. It really does not matter.

    "It's not your dollar anymore, because you exchanged it for a bank account."

    Yep, you are a creditor to the bank. They owe it back to you if you were to walk in and ask for it. They'd simply debit your digits.
    Aug 16 09:38 AM | Likes Like |Link to Comment
  • Euro Area Back On The Brink Of Recession [View article]
    "U.S. QE has kept euro too high for too long."

    The euro was at $1.60 pre crisis. Although I would concede QE might have kept the euro elevated to $1.35 recently. But, that would be due to capital inflows (which the periphery cannot borrow and spend under fiscal compact and competitiveness), but someone is investing in the euro to keep it above $1.20. Actually, it may be due to ECB "whatever it takes" jawboning euro safety and relatively attractive yields.

    Even Greece, who appears doomed, has experienced a dramatic improvement in sovereign bond yields. Again, too bad they cannot tap the capital markets and grow rather than being spoon fed euros by their EMU partners. They are waiting for industry to come in and employ their lower waged work force, which is fine. It just takes a long time, especially during a recession.
    Aug 16 07:58 AM | Likes Like |Link to Comment
  • U.S. Household Debt And Composition [View article]
    "As we have noted, the expansion of American consumption has financed by income associated with increased employment more than an increase in revolving credit."

    So, our sluggish recovery is more a result of aggregate income (inherent growth) than credit driven growth or investment. Credit card and home equity debt have eased possibly providing some credit space with which to ramp up. If credit can kick in along with income spending, maybe aggregate debt can resume it's upward slope. There's not much throttle peddle travel to reach escape velocity, though. Maybe if the growth can resume something near it's pre 2008 slope, a few years from now, we can get back to trend. Almost like nothing ever happened, a bump in the road causing us to throttle back for a second (really 5 years.)

    "The fact that the de-leveraging process looks to be complete means that the next cycle has begun with higher overall debt."

    What's interesting is the 5 year ramp up to 2008-2009 is steeper than the 5 year deleveraging to 2013, as you noted.

    "The most striking observation is how little household debt has fallen from its peak."

    Agreed. Maybe this is due to population growth. Maybe individual household debt might be a little lower, there's just more of them today.

    There's a lot more going on other that this single graphic, surely, but it's interesting in what it shows.
    Aug 16 07:32 AM | 2 Likes Like |Link to Comment
  • Does Monetary Policy Explain The British Jobs Recovery? [View article]
    "...even the Nazis had a better monetary policy."

    And a better fiscal policy, too. Someone had to pay for the war.
    Aug 16 01:11 AM | Likes Like |Link to Comment
  • The Collapse Of Our Monetary System [View article]
    Okay, I'm easy. :)

    I'm not really a fan of bit coin. I mean it's deflationary and makes the dollar look bad. I think you can buy a Lamborghini for about 3 bit coins. I'm going to wait until you can get it for one bit coin. LOL

    Hey, get caught up on the Schiff/bond market debate in Shareholder's article.
    Aug 16 01:05 AM | Likes Like |Link to Comment
  • Wages And Productivity [View article]
    "No, that fact in itself is not even the beginnings of the slightest evidence that a worker today is actually worth more than one 20 years ago, in real terms, in what they actually personally add to the value of output, at the margin."

    Jason, your comment is well articulated and understood, you pay the capital responsible for productivity, in your example we pay Caterpillar because we can "shovel" more dirt. Absolutely. It does appear capitalistic economics works that way. The problem is the US is not entirely capitalistic. Whether it should be or not is not so much an economic argument as a political one. Backhoes do not eat nor seek shelter, workers do. What we have is a pretty sound theory, by all appearances, butting heads with reality of life in a wealthy nation like the US.

    The theoretical curve closely approximates the actual one, but there are differences whether we like them or not. Whether they work efficiently or not. Caterpillar get's paid, so does the guy who runs the back hoe. He's not paid as much as Caterpillar, and maybe more than he is "marginally" worth. He's got to make a living, too, because capitalism is supposed to benefit everybody. If that means labor unions and bargaining power or socialism and waste, so be it. Otherwise we're talking third world structure with a large underclass of poor and a wealthy capitalist class in theory and, if unchecked, in reality, too.

    In the real world, I know people with the "fake it 'till you make it" skill set of a Wal Mart cashier and innovative productivity of a twinky pulling down high 5 figures simply because of their proximity to productive capital. I also know more highly skilled folks who, for whatever reason other than efficient economic theory, pulling in much less.

    The former is over paid, in my view, with his economic worth garnered through the position he literally just stepped into. This is a form of waste generated by circumstance rather than efficient economic theory. I would have hired the latter guy because he's more productive. I fired a highly skilled person because he was not productive. He did not earn a single dime from me simply because of his position his the skill set nor proximity to the capital making me money. He could have contributed and stayed on, but he chose not to be sufficiently productive to earn it.

    I guess what I am arguing is proximity to capital should not be the ultimate determination of worth. We're not expecting to be rich, but to be able to work themselves into a better "class" over the wide range of skills all Americans bring to the table, not just the few. But, especially the few, sure. That is how it works.
    Aug 16 12:25 AM | 1 Like Like |Link to Comment
  • The Bond Markets Vs. Peter Schiff [View article]
    No doubt, SU. I am thinking if US rates rise, Mario might have to do something more dramatic. EMU capital inflows /may/ taper, as well.
    Aug 15 11:45 PM | Likes Like |Link to Comment
  • The Collapse Of Our Monetary System [View article]
    "That's hardly a definition of money."

    But when our money resides in bank accounts, it's really an accounting entity. It has all, most, or some of the qualities that define it, but it's "accounted" for as accounting entries from your checkbook ledger all the way through the central bank.
    Aug 15 10:30 PM | Likes Like |Link to Comment
  • The Bond Markets Vs. Peter Schiff [View article]
    "I also think if you take CB out of the equation in the bond markets, the results will be vastly different. The bond vigilantes are dead, shot down by the Central Banks."

    Interesting observation, look a Greece who can borrow at near risk free rates and their economy is still slumping. I believe this has a lot to do with ECB jawboning "whatever it takes" essentially making EMU debt safe. Couple this ECB safety and EMU periphery yield with the reach for risk inspired by holding a lot of (inflating) US dollars courtesy of the Fed, and the result is a resilient euro. Well played, Mario.

    As for the US, it's easy to keep vigilante's at bay when you can buy your own debt. LOL

    Great conversation.
    Aug 15 10:26 PM | Likes Like |Link to Comment