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Unfortunately this is economic bullshit. They are taking a description of an economy that requires a constantly increasing workforce and increasing productivity

Unfortunately this is economic bullshit. They are taking a description of an economy that requires a constantly increasing workforce and increasing productivity and then apply the most obvious, ill-thought out short-term fix, and actually expect it to work despite violating the basic assumptions. Population growth stopped 15 years ago. Normally those people that weren't born would be entering the workforce in about 5 years. So with quite a bit of variability, the new people coming into the workforce will drop of a cliff. Extending the age of retirement has already (if "temporarily") stopped the outflows out of the workforce that are going to stop. This means that the total workforce will drop anyway. Even if people don't retire. Second they assume productivity will keep rising. But productivity (amount of $ per hour of work) has been dropping for 30 years, initially still compensated by rapid workforce increase, but not anymore since 1995 or so. The government has spent a ridiculous amount of money (~100% of GDP) to increase the money supply to make it seem like this hasn't happened, but of course the change has in fact happened. The question is how long can we keep spending like this. 100% GDP is a worldwide stat and roughly means that for every dollar anyone, anywhere spends, the government lent and spends 0.08 dollar yearly to, firstly, pretend the economy is not shrinking, secondly, keep the local social welfare going (for the US that partially includes the military, which is in some ways a social welfare program). Every year. Since about 2000. And of course, this has been on an exponentially rising trajectory, with 2 huge growing peaks. One right after 2000. One right after 2008.

nandemo 10y ago
> But productivity (amount of $ per hour of work) has been dropping for 30 years, What, what? Except for some years during the 2008~ financial crisis, productivity has been rising steadily all over the developed world. https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH In fact it would be very odd if it wasn't rising; it would mean all of the aggregate investment in machinery and office automation during the last 30 years was useless. Of course, productivity's rate of growth itself isn't always rising, but that's a different story.
- candiodari 10y ago
  If you take a 1980s inflation measure, or the big mac index, and extend it out, it turns negative in 1984 (87 for big mac) and stays negative. If you take government figures for inflation, yes it stays positive. But unless you agree that since 1990 people "deserve" less housing (and therefore don't see the less square footage for their rental/mortgage dollar as any kind of loss), less fuel, a lot less education. Then in 2000 it gets lowered again. We've gotten to the point that they call the current measure "PCE deflator". So unless you agree people now deserve less of essentially any and all capital goods, ... This is the issue with government measures. Their claim is that they're just adjusting to what they're seeing, and the "underlying value" is the same. Yet when I offer an economist to provide him with a 10 year supply of tobacco if he pays for my PhD ... no takers (and that's generous, in 1980 it was just 6.8 years of tobacco for a PhD, and I think that included housing for 5 years). That's an investment yielding over 5% ! No takers. But ... I thought the underlying value was the same ? So I'm offering you something of what you claim is greater value for something of less value, and yet you don't take the deal ? Obviously something is wrong here. They have an excuse, obviously. The reasoning goes like this: more inflation, without higher wages - people spend less measured in goods (in a few years even in dollars) - therefore the inflation measure must be broken (doesn't represent a realistic basket of goods anymore type argument) - inflation measure gets replaced with something with less of whatever got expensive, and less in general - goto 1. Result: inflation measure gets deflated by ~5% every 5 years. Substract that and productivity growth has been negative for decades. This matches people's experiences much better than the figures, so I'm not really willing to accept the PCE deflator. So these official figures neglect to state that "real" is calculated using about a different inflation measurement every 2 columns. Not totally non-overlapping, perhaps, but different. And despite the repeated claims that they're just changing it to reflect what people buy it always changes in the same way ... Needless to say, for specific inflation measures, productivity is disastrous. For instance, take square footage real estate per hour worked. Gold in kg per hour worked. Those sorts of measures. They look really, really, really bad. And for what should be the real inflation measure, the total amount of money, which is total credit + M1 supply, and calculate what portion of "the world economy" you get for an hour of work and see it evolve over time ... blimey.

nandemo 10y ago

> But productivity (amount of $ per hour of work) has been dropping for 30 years, What, what? Except for some years during the 2008~ financial crisis, productivity has been rising steadily all over the developed world. https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH https://stats.oecd.org/Index.aspx?DataSetCode=PDYGTH In fact it would be very odd if it wasn't rising; it would mean all of the aggregate investment in machinery and office automation during the last 30 years was useless. Of course, productivity's rate of growth itself isn't always rising, but that's a different story.

candiodari 10y ago
If you take a 1980s inflation measure, or the big mac index, and extend it out, it turns negative in 1984 (87 for big mac) and stays negative. If you take government figures for inflation, yes it stays positive. But unless you agree that since 1990 people "deserve" less housing (and therefore don't see the less square footage for their rental/mortgage dollar as any kind of loss), less fuel, a lot less education. Then in 2000 it gets lowered again. We've gotten to the point that they call the current measure "PCE deflator". So unless you agree people now deserve less of essentially any and all capital goods, ... This is the issue with government measures. Their claim is that they're just adjusting to what they're seeing, and the "underlying value" is the same. Yet when I offer an economist to provide him with a 10 year supply of tobacco if he pays for my PhD ... no takers (and that's generous, in 1980 it was just 6.8 years of tobacco for a PhD, and I think that included housing for 5 years). That's an investment yielding over 5% ! No takers. But ... I thought the underlying value was the same ? So I'm offering you something of what you claim is greater value for something of less value, and yet you don't take the deal ? Obviously something is wrong here. They have an excuse, obviously. The reasoning goes like this: more inflation, without higher wages - people spend less measured in goods (in a few years even in dollars) - therefore the inflation measure must be broken (doesn't represent a realistic basket of goods anymore type argument) - inflation measure gets replaced with something with less of whatever got expensive, and less in general - goto 1. Result: inflation measure gets deflated by ~5% every 5 years. Substract that and productivity growth has been negative for decades. This matches people's experiences much better than the figures, so I'm not really willing to accept the PCE deflator. So these official figures neglect to state that "real" is calculated using about a different inflation measurement every 2 columns. Not totally non-overlapping, perhaps, but different. And despite the repeated claims that they're just changing it to reflect what people buy it always changes in the same way ... Needless to say, for specific inflation measures, productivity is disastrous. For instance, take square footage real estate per hour worked. Gold in kg per hour worked. Those sorts of measures. They look really, really, really bad. And for what should be the real inflation measure, the total amount of money, which is total credit + M1 supply, and calculate what portion of "the world economy" you get for an hour of work and see it evolve over time ... blimey.