9 ms·

Nate Silver: Double Dip or Not, Economy Is Falling Farther Behind

57 points by codex 15y ago

tomjen3 15y ago
Interesting way to look at the economy, but I am not sure I buy it since the growth since the last war was really fueled by the fact that only America had unharmed factories.
- watmough 15y ago
  So-called 'trend growth' has been fueled by fossil fuels, with massive increases in the ability to exploit oil fields quickly, occurring since the 40's. Basically, civilization is a heat engine, where prosperity, power, industry is directly tied to how much energy we can burn. Increasing prosperity demands increasing energy. In the case of the US, oil production peaked in 70's, and the US has struggled to increase oil supplies since then. The show-downs with OPEC in the 70's that led to bad recessions are an example of the struggles. As of 2005, World oil production has been basically flat. There's plenty of oil left, the problem is that despite trillions of dollars of CAPEX, it just can't be pumped fast enough to support 6 billion humans at increasing living standards. Hence, World prosperity is probably staying level, but redistributing itself Eastward towards Asia. edit: Per NBC, there are 45 million Americans claiming foodstamps in order to feed themselves. That's a very scary contrast with how the US normally thinks of itself.
  - redthrowaway 15y ago
    >Per NBC, there are 45 million Americans claiming foodstamps in order to feed themselves. That number is set to increase with severe cuts to entitlements and the unlikelihood of another extension of unemployment benefits. Americans have really drunk the Kool-Aid on the notion of American exceptionalism. The idea that America is somehow special, possessed of some manifest destiny and unable to lose has been so deeply engrained in the American psyche, and for so long, that even now the notion of failure seems too fanciful to enter the common narrative. America is not special. It's been favoured by politics and luck, but there's nothing keeping it on top besides continued prosperity. Look at Japan for an example of what could easily happen: a high-tech economy with a massive banking and manufacturing sector, that collapsed then...never really restarted. There are, in fact, many parallels between the Japanese and American recessions. While Japan is still a massive innovator, the benefits have not trickled down to the average Japanese citizen. China long ago took over as the biggest economy in Asia, and could easily supplant the US globally if current trends continue. To face these challenges, the US has...Congress. The leadership vacuum in Washington is downright depressing. Amidst bitter political bickering, the disaffected masses turn to the demagoguery of the Tea Party, further perpetuating the political morass. Can anyone see a viable, achievable solution? Cutting the deficit is critically important, yet any proposed method of doing so seems likely to hurt the economy at a time when it simply can't take it. Everything seems poised to get much worse before it gets better.
    - watchandwait 15y ago
      America is exceptional, just read the founding documents, there's been nothing like the American experiment in liberty before or since. That freedom resulted in unprecedented prosperity and innovation. The Tea Party movement seeks to restore that, and their plan of budget austerity is the only path forward. The other way-- profligate spending and stimulus-- is the path that Japan took and it failed.
      - redthrowaway 15y ago
        That you believe that just further speaks to my point.
nhebb 15y ago
While Washington was busy debating whether or not to sabotage the recovery by failing to raise the federal debt ceiling Up to now, Washington has thrown every Keynesian trick in the book at this recession, and it doesn't seem to have had a substantial impact. I think the original stimulus would have had a better impact if it had included a lot more infrastructure investments than "give a man a fish" type expenditures. I'm not a student of economics, and I won't try to pretend to be one on this forum, but haven't we run out of Keynesian options if we want to continue with the current economic policies? Nate Silver's leading line above makes me think of Germany [1]. They were the only government to take a position of austerity, were widely criticized for it, but they're the only major Western economy that rebounded from the economic crisis. The U.S. government, on the other hand, lacks the unity and political will to lead a turnaround. [1] http://www.nytimes.com/2010/08/14/world/europe/14germany.html http://www.nytimes.com/2010/08/14/world/europe/14germany.htm...
- sesqu 15y ago
  It was recently argued that the initial assessment of the severity of the downturn was wildly off (by 4% of GDP), and that led to poor strategy formulation by Washington.
  - watchandwait 15y ago
    There's no strategy in Washington. Indeed, policy chaos caused by sweeping changes (both proposed and enacted) in health care, energy, financial, tax, and union rules have wrecked private business planning. America is being run like a banana republic, borrowing over 40% of its spending budget, randomly intervening in industries like auto, banking, and housing to reward political allies, and operating on a week-to-week horizon.
- ekidd 15y ago
  Up to now, Washington has thrown every Keynesian trick in the book at this recession, and it doesn't seem to have had a substantial impact. I don't think this accurately represents the arguments of the Keynesian economists. Krugman, to pick an example, calculated that high unemployment rates would cause us to miss out on at least $3 trillion of wealth creation, and he called for about $1.5 trillion in infrastructure investment. The government would capture perhaps 25% of the restored growth in taxes, so the federal government would come out at least $750 billion behind. But in theory, America as a whole would be wealthier. (All numbers from memory.) The actual "stimulus" consisted of about $700 billion, of which maybe $350 billion was actually spent on things that Krugman thought would help the economy. He predicted that this was far too small to have any real impact, and that we would therefore spend years in a weak economy. (We later spent additional money on unemployment insurance; I don't know how this affects the models.) So while you could very easily disagree with Krugman's theory, his models accurately predicted the results of the stimulus: A minor, temporary boost that would be insufficient to actually fix anything. So at least one high-profile Keynesian called it correctly, although you might argue that he just got lucky. Personally, I don't know enough economics to have an informed opinion on my own. But we have at least 15 million Americans who should be creating wealth, and who are currently sitting around doing nothing. I'd love to see that get fixed, especially because the last 20 years of Japanese history suggests that if we alternate between rounds of weak stimulus and austerity measures, we might be stuck in this economy for decades.
troymc 15y ago
Fun exercise: If something grows at 3.5% per year, how long does it take to double in size? Answer: About 20 years. The exact answer is ((log 2)/(log 1.035)).
- kqr2 15y ago
  A handy rule of thumb for doubling is 70/(rate of growth).
  - troymc 15y ago
    Yes... Unfortunately, some people think that's the correct way to calculate doubling time for all rates of growth. Some pop investing books even elevate that rule to some kind of magical status. One way to see why it's a good approximation is to do a Maclaurin series: (log 2)/(log(1+r/100)) = c/(log(1+x)) where c=(log 2) and x=(r/100) = c/(x - [x^2]/2 + [x^3]/3 - ...) ~ c/x = 0.693/x = 0.693/(r/100) = 69.3/r ~ 70/r
jleyank 15y ago
Another concern might be that the jobs are (slowly?) (rapidly?) being created, they're just not being created in N. America. Growth might be suppressed until this trend reverses or new activity appears to soak up the unemployed.
- bho 15y ago
  Well, sure. As the economy moves to be more global, jobs previously held by the US are now moving to China. Just a few weeks ago Goldman Sachs announced layoffs in the US, but added jobs in Singapore and Brazil. This is only going to continue.

57 points by codex 15y ago

Interesting way to look at the economy, but I am not sure I buy it since the growth since the last war was really fueled by the fact that only America had unharmed factories.

watmough 15y ago
So-called 'trend growth' has been fueled by fossil fuels, with massive increases in the ability to exploit oil fields quickly, occurring since the 40's. Basically, civilization is a heat engine, where prosperity, power, industry is directly tied to how much energy we can burn. Increasing prosperity demands increasing energy. In the case of the US, oil production peaked in 70's, and the US has struggled to increase oil supplies since then. The show-downs with OPEC in the 70's that led to bad recessions are an example of the struggles. As of 2005, World oil production has been basically flat. There's plenty of oil left, the problem is that despite trillions of dollars of CAPEX, it just can't be pumped fast enough to support 6 billion humans at increasing living standards. Hence, World prosperity is probably staying level, but redistributing itself Eastward towards Asia. edit: Per NBC, there are 45 million Americans claiming foodstamps in order to feed themselves. That's a very scary contrast with how the US normally thinks of itself.
- redthrowaway 15y ago
  >Per NBC, there are 45 million Americans claiming foodstamps in order to feed themselves. That number is set to increase with severe cuts to entitlements and the unlikelihood of another extension of unemployment benefits. Americans have really drunk the Kool-Aid on the notion of American exceptionalism. The idea that America is somehow special, possessed of some manifest destiny and unable to lose has been so deeply engrained in the American psyche, and for so long, that even now the notion of failure seems too fanciful to enter the common narrative. America is not special. It's been favoured by politics and luck, but there's nothing keeping it on top besides continued prosperity. Look at Japan for an example of what could easily happen: a high-tech economy with a massive banking and manufacturing sector, that collapsed then...never really restarted. There are, in fact, many parallels between the Japanese and American recessions. While Japan is still a massive innovator, the benefits have not trickled down to the average Japanese citizen. China long ago took over as the biggest economy in Asia, and could easily supplant the US globally if current trends continue. To face these challenges, the US has...Congress. The leadership vacuum in Washington is downright depressing. Amidst bitter political bickering, the disaffected masses turn to the demagoguery of the Tea Party, further perpetuating the political morass. Can anyone see a viable, achievable solution? Cutting the deficit is critically important, yet any proposed method of doing so seems likely to hurt the economy at a time when it simply can't take it. Everything seems poised to get much worse before it gets better.
  - watchandwait 15y ago
    America is exceptional, just read the founding documents, there's been nothing like the American experiment in liberty before or since. That freedom resulted in unprecedented prosperity and innovation. The Tea Party movement seeks to restore that, and their plan of budget austerity is the only path forward. The other way-- profligate spending and stimulus-- is the path that Japan took and it failed.
    - redthrowaway 15y ago
      That you believe that just further speaks to my point.

nhebb 15y ago

While Washington was busy debating whether or not to sabotage the recovery by failing to raise the federal debt ceiling Up to now, Washington has thrown every Keynesian trick in the book at this recession, and it doesn't seem to have had a substantial impact. I think the original stimulus would have had a better impact if it had included a lot more infrastructure investments than "give a man a fish" type expenditures. I'm not a student of economics, and I won't try to pretend to be one on this forum, but haven't we run out of Keynesian options if we want to continue with the current economic policies? Nate Silver's leading line above makes me think of Germany [1]. They were the only government to take a position of austerity, were widely criticized for it, but they're the only major Western economy that rebounded from the economic crisis. The U.S. government, on the other hand, lacks the unity and political will to lead a turnaround. [1] http://www.nytimes.com/2010/08/14/world/europe/14germany.html http://www.nytimes.com/2010/08/14/world/europe/14germany.htm...

sesqu 15y ago
It was recently argued that the initial assessment of the severity of the downturn was wildly off (by 4% of GDP), and that led to poor strategy formulation by Washington.
- watchandwait 15y ago
  There's no strategy in Washington. Indeed, policy chaos caused by sweeping changes (both proposed and enacted) in health care, energy, financial, tax, and union rules have wrecked private business planning. America is being run like a banana republic, borrowing over 40% of its spending budget, randomly intervening in industries like auto, banking, and housing to reward political allies, and operating on a week-to-week horizon.
ekidd 15y ago
Up to now, Washington has thrown every Keynesian trick in the book at this recession, and it doesn't seem to have had a substantial impact. I don't think this accurately represents the arguments of the Keynesian economists. Krugman, to pick an example, calculated that high unemployment rates would cause us to miss out on at least $3 trillion of wealth creation, and he called for about $1.5 trillion in infrastructure investment. The government would capture perhaps 25% of the restored growth in taxes, so the federal government would come out at least $750 billion behind. But in theory, America as a whole would be wealthier. (All numbers from memory.) The actual "stimulus" consisted of about $700 billion, of which maybe $350 billion was actually spent on things that Krugman thought would help the economy. He predicted that this was far too small to have any real impact, and that we would therefore spend years in a weak economy. (We later spent additional money on unemployment insurance; I don't know how this affects the models.) So while you could very easily disagree with Krugman's theory, his models accurately predicted the results of the stimulus: A minor, temporary boost that would be insufficient to actually fix anything. So at least one high-profile Keynesian called it correctly, although you might argue that he just got lucky. Personally, I don't know enough economics to have an informed opinion on my own. But we have at least 15 million Americans who should be creating wealth, and who are currently sitting around doing nothing. I'd love to see that get fixed, especially because the last 20 years of Japanese history suggests that if we alternate between rounds of weak stimulus and austerity measures, we might be stuck in this economy for decades.

troymc 15y ago

Fun exercise: If something grows at 3.5% per year, how long does it take to double in size? Answer: About 20 years. The exact answer is ((log 2)/(log 1.035)).

kqr2 15y ago
A handy rule of thumb for doubling is 70/(rate of growth).
- troymc 15y ago
  Yes... Unfortunately, some people think that's the correct way to calculate doubling time for all rates of growth. Some pop investing books even elevate that rule to some kind of magical status. One way to see why it's a good approximation is to do a Maclaurin series: (log 2)/(log(1+r/100)) = c/(log(1+x)) where c=(log 2) and x=(r/100) = c/(x - [x^2]/2 + [x^3]/3 - ...) ~ c/x = 0.693/x = 0.693/(r/100) = 69.3/r ~ 70/r

jleyank 15y ago

Another concern might be that the jobs are (slowly?) (rapidly?) being created, they're just not being created in N. America. Growth might be suppressed until this trend reverses or new activity appears to soak up the unemployed.

bho 15y ago
Well, sure. As the economy moves to be more global, jobs previously held by the US are now moving to China. Just a few weeks ago Goldman Sachs announced layoffs in the US, but added jobs in Singapore and Brazil. This is only going to continue.