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Yup, you also want to look at macroeconomic conditions around the world, tech trends, demographics, etc. For example, 10 years ago we had quantitative easing d

Yup, you also want to look at macroeconomic conditions around the world, tech trends, demographics, etc. For example, 10 years ago we had quantitative easing done by US/Europe, which led to subprime loans. Now, all of the major economies around the world is tapped out with QE, so deflation is the theme going forward Also, 10 years ago the dollar prime rate was 0%. Now it's close to 2%. That drives the emerging market capital outflow back to United States, since there is a great need to pay back dollar-denominated loans before rates go up even higher . This means as opposed to 10 years ago where there was capital diffusion from US into the emerging markets, now there's capital consolidation back into US, leading to great FDI for US. 10 years ago, US had the dual threat of energy crisis and offshore/globalization. today, US is the major oil/energy exporter, and robotics/automation/tariffs is bringing factories back to US.

User23 8y ago
Also the US federal government has been spending an extra $1 trillion in stimulus into the economy since 2009. We've had continuing budget resolutions since the ARRA was passed, and those always continue spending at the prior year's level. This is why the deficit went up $10 trillion. Or, if you're a half full kind of person, it's why private sector and foreign savings have gone up $10 trillion. Unfortunately it doesn't appear much of those new financial assets ended up in the hands of the so-called middle class.
- joefranklinsrs 8y ago
  If US is the beneficiary of the past few years of emerging markets deleveraging and economic stimulus, middle class is a big recipient of the benefits. For example, any middle class who invested in the stock market would have seen great returns, maybe close to 10X if they invested in amazon, netflix, or apple. also, US middle class income has been increasing, reaching highest level in the last year: https://www.washingtonpost.com/business/economy/us-middle-class-incomes-reached-highest-ever-level-in-2016-census-bureau-says/2017/09/12/7226905e-97de-11e7-b569-3360011663b4_story.html?noredirect=on https://www.washingtonpost.com/business/economy/us-middle-cl....
  - User23 8y ago
    For those of is comfortably in the top quintile, this is no doubt true. I'm certain many of us who post here have done quite well over the last decade. However the historical American middle class has, by and large, not benefited nearly as much. The vast majority of the gains have been captured by the top 0.1%. Please don't mistake me for some kind of commie, PG's essay on the necessity for income inequality to drive innovation is convincing. But that doesn't mean we should celebrate shameless cronyism, kickbacks, and rent-seeking either. Growing middle class income is nice, but income is a very poor metric to use to determine economic class. Net worth is what really matters.
  - otakucode 8y ago
    I am honestly curious... where does that income come from? We know it doesn't come from wages, because median wages of the lower 90% have risen less than 2% since 1980. Since the statistic is based on families, is it due to a larger number of 2-income families out of necessity?
daxorid 8y ago
> Now, all of the major economies around the world is tapped out with QE Tapped out? 1. Kuroda and Draghi are merely taking a breather. BOJ and ECB balance sheets were still growing as recently as April 2018. SNB shows no signs of ending their relentless buying of the QQQs. 2. No global central banks are prevented from restarting QE or QE-like programs at any time of their choosing. The very second deflation again becomes a threat, you can bet your ass that Powell, Kuroda, and Draghi will step on the gas. "Tapped out" implies limits to the volume of beer in the keg. Central banks have no limits. It is extremely trivial to begin printing money again if these governors/presidents will it so.
- jazzyk 8y ago
  The BOJ will eventually run out of domestic bonds to buy (at around 50% now) They also hold almost 80% of japanese ETFs. What happens when they buy all 100% of ETFs and bonds? Venezuela? https://www.japanmacroadvisors.com/page/category/economic-indicators/financial-markets/jgbs-held-by-boj/ https://www.japanmacroadvisors.com/page/category/economic-in... https://www.zerohedge.com/news/2017-09-11/wtf-chart-day-boj-now-owns-75-japanese-etfs https://www.zerohedge.com/news/2017-09-11/wtf-chart-day-boj-...
pmiller2 8y ago
> deflation is the theme going forward I sure haven't seen it. The price of gas, rent, food, etc. have gone nowhere but up for me. Is there any sector of the economy where deflation is actually happening right now?
neffy 8y ago
Er, no. 25 years ago we had Wall Street championing computer backed loan securitization, and repackaging of the those instruments into CDO's etc. That led over time to the subprime loans - as by creating the means of providing more debt instruments, Wall Street them had to find more borrowers. Which didn't end well - it never does. QE was done to stop the financial system imploding when those loans defaulted. To explain the deflation story especially over the last 4 or 5 years, you need to look at the drop in Oil Prices - which as you point out, is primarily due to fracking and the US going from the #1 oil importer in the world to a small exporter. I wouldn't call the export aspect major statistically, but the change in oil trade terms certainly is.
rsync 8y ago
"For example, 10 years ago we had quantitative easing done by US/Europe, which led to subprime loans." QE did not cause subprime loans - QE was the response to the effects of the subprime loan era. There was no QE before the liquidity crisis and subsequent economic recession, although it had been discussed academically.
- vivafrance 8y ago
  Of course it did. The Fed bought up all the debt it could. This had two effects: 1) It caused investors to search for yield anywhere they could (subprime is a good place to start!) 2) For many types of debt investors knew they could always pass it on up to the Fed!
claydavisss 8y ago
As long as the USD is the global reserve currency, the Fed can print its way to inflation at will. Even the most diehard bears during the last recession conceded deflation required the rejection of the USD as the world's reserve currency resulting in the nullification of the power of the Federal Reserve.
deleted 8y ago
[deleted]

User23 8y ago

Also the US federal government has been spending an extra $1 trillion in stimulus into the economy since 2009. We've had continuing budget resolutions since the ARRA was passed, and those always continue spending at the prior year's level. This is why the deficit went up $10 trillion. Or, if you're a half full kind of person, it's why private sector and foreign savings have gone up $10 trillion. Unfortunately it doesn't appear much of those new financial assets ended up in the hands of the so-called middle class.

joefranklinsrs 8y ago
If US is the beneficiary of the past few years of emerging markets deleveraging and economic stimulus, middle class is a big recipient of the benefits. For example, any middle class who invested in the stock market would have seen great returns, maybe close to 10X if they invested in amazon, netflix, or apple. also, US middle class income has been increasing, reaching highest level in the last year: https://www.washingtonpost.com/business/economy/us-middle-class-incomes-reached-highest-ever-level-in-2016-census-bureau-says/2017/09/12/7226905e-97de-11e7-b569-3360011663b4_story.html?noredirect=on https://www.washingtonpost.com/business/economy/us-middle-cl....
- User23 8y ago
  For those of is comfortably in the top quintile, this is no doubt true. I'm certain many of us who post here have done quite well over the last decade. However the historical American middle class has, by and large, not benefited nearly as much. The vast majority of the gains have been captured by the top 0.1%. Please don't mistake me for some kind of commie, PG's essay on the necessity for income inequality to drive innovation is convincing. But that doesn't mean we should celebrate shameless cronyism, kickbacks, and rent-seeking either. Growing middle class income is nice, but income is a very poor metric to use to determine economic class. Net worth is what really matters.
- otakucode 8y ago
  I am honestly curious... where does that income come from? We know it doesn't come from wages, because median wages of the lower 90% have risen less than 2% since 1980. Since the statistic is based on families, is it due to a larger number of 2-income families out of necessity?

daxorid 8y ago

> Now, all of the major economies around the world is tapped out with QE Tapped out? 1. Kuroda and Draghi are merely taking a breather. BOJ and ECB balance sheets were still growing as recently as April 2018. SNB shows no signs of ending their relentless buying of the QQQs. 2. No global central banks are prevented from restarting QE or QE-like programs at any time of their choosing. The very second deflation again becomes a threat, you can bet your ass that Powell, Kuroda, and Draghi will step on the gas. "Tapped out" implies limits to the volume of beer in the keg. Central banks have no limits. It is extremely trivial to begin printing money again if these governors/presidents will it so.

jazzyk 8y ago
The BOJ will eventually run out of domestic bonds to buy (at around 50% now) They also hold almost 80% of japanese ETFs. What happens when they buy all 100% of ETFs and bonds? Venezuela? https://www.japanmacroadvisors.com/page/category/economic-indicators/financial-markets/jgbs-held-by-boj/ https://www.japanmacroadvisors.com/page/category/economic-in... https://www.zerohedge.com/news/2017-09-11/wtf-chart-day-boj-now-owns-75-japanese-etfs https://www.zerohedge.com/news/2017-09-11/wtf-chart-day-boj-...

pmiller2 8y ago

> deflation is the theme going forward I sure haven't seen it. The price of gas, rent, food, etc. have gone nowhere but up for me. Is there any sector of the economy where deflation is actually happening right now?

neffy 8y ago

Er, no. 25 years ago we had Wall Street championing computer backed loan securitization, and repackaging of the those instruments into CDO's etc. That led over time to the subprime loans - as by creating the means of providing more debt instruments, Wall Street them had to find more borrowers. Which didn't end well - it never does. QE was done to stop the financial system imploding when those loans defaulted. To explain the deflation story especially over the last 4 or 5 years, you need to look at the drop in Oil Prices - which as you point out, is primarily due to fracking and the US going from the #1 oil importer in the world to a small exporter. I wouldn't call the export aspect major statistically, but the change in oil trade terms certainly is.

rsync 8y ago

"For example, 10 years ago we had quantitative easing done by US/Europe, which led to subprime loans." QE did not cause subprime loans - QE was the response to the effects of the subprime loan era. There was no QE before the liquidity crisis and subsequent economic recession, although it had been discussed academically.

vivafrance 8y ago
Of course it did. The Fed bought up all the debt it could. This had two effects: 1) It caused investors to search for yield anywhere they could (subprime is a good place to start!) 2) For many types of debt investors knew they could always pass it on up to the Fed!

claydavisss 8y ago

As long as the USD is the global reserve currency, the Fed can print its way to inflation at will. Even the most diehard bears during the last recession conceded deflation required the rejection of the USD as the world's reserve currency resulting in the nullification of the power of the Federal Reserve.

deleted 8y ago

[deleted]