14 ms·

The Economy

224 points by dmnd 12y ago

deleted 12y ago
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nickthemagicman 12y ago
This is creepy. It's like you counter low GPD growth by 1>high government spending/invesmtent in the economy. 2>low interest rates. But both of these are already as high/low as it can get and still no response from GDP. Weird.
deleted 12y ago
[deleted]
mdlm 12y ago
Q1 2014 GDP growth was -2.9%. There's no minus sign in front of 2.9% in item #1 in the article (I'm using Chrome).
moblahbl4hblah 12y ago
The defense budget has gotten smaller as a total percentage of the economy since WWII, but the economy was smaller and the entire country was mobilized. We currently spend over a trillion dollars a year on defense and intelligence. "Entitlements" are not the problem.I love how they are entitlements even though you pay for them...in fact, let's start calling it the social safety net instead. The main problem is that the wealthy, corporations and individuals, don't pay enough. Cut defense by half and stop letting the wealthy walk all over us and all of a sudden you don't have a crisis.
- doyoulikeworms 12y ago
  I thought that they were called entitlements precisely because we pay for them.
  - moblahbl4hblah 12y ago
    They are called entitlements to make people think that some undeserving class is getting over...they think they are "entitled"...is the way that is put. It was done on purpose by conservatives. Its a dog whistle.
    - jerf 12y ago
      I don't think you get what a "dog whistle" is. Everyone calls them entitlements.
      - againblah 12y ago
        Everyone huh? Try Google-ing entitlements and racism.
        jerf 12y ago
        I don't see the relevance. All I'm getting is a lot of criticism of some comment Scalia once made which seems to have nothing to do with whether things should be called entitlements. Further, if that was somehow your point, bear in mind that "everyone" in this context is pretty clearly something like "the vast majority". I could find traces of evidence of people trying to redefine the term, sure, but no evidence they're being particularly successful. Even the NYT calls them entitlements with no apparent irony. Call them mainstream or call them leftist, either way, it's evidence on my side.
    - ericd 12y ago
      I don't think that comes from where you think it does. I think it comes from the fact that people are literally entitled to that money via the legal contract we've set up - it is spoken for.
      - VLM 12y ago
        Too many mixed metaphors. Aside from employees, .gov gives people money two ways: 1) Contracts. 200 F-22 for $100B or so. $1M for the service contract for that server for a year. Usually involves a psuedo competitive bidding process, a lack of one is unusual enough that you get the phrase "no bid contract" because its an oddity. 2) Entitlements. If you meet these requirements, you get this money, or income tax credit, or whatever. You're entitled as a member of a class where that class is poor dudes or historic property investors or hybrid car owner or whatever. Usually doesn't involve competitive bidding or auctions at all. You're just going to confuse people by mixing contracts and entitlements in the same line.
- josephschmoe 12y ago
  It looks like it's mostly medical costs. Social Security and other such things haven't increased much.
- DINKDINK 12y ago
  The problem with entitlements/social safety net programs (how ever you want to spin it) is that they're policies that are predicated on the old generation being funded by a larger younger generation. That's policy that isn't fault tolerant to population decreases nor medical black swans.
- cc438 12y ago
  I wouldn't say spending on entitlement programs are an issue, they're more of a symptom. IMO, the root cause of our economic stagnation is our government's inability to create policy that is efficient, thoughtful, and timely. The inherently conservative features found in the structure western-style democracies are increasingly becoming an anchor on societal progress. Our governments aren't "conservative" in the ideological sense but in the slow, methodical manner in which change is meant to flow through the system. I keep getting stuck on what I've learned of "lean" manufacturing principles and how hard it was for businesses to adapt to a more responsive and adaptive model of operations. Industrial behemoths could plod along, surviving off the enormous inertia they'd built over the decades. Some fell while others are still plodding along, yet unchallenged by efficient competitors that can't clear the entry barriers of the market, time will still come for them. Governments are behemoths of a much more impressive scale. Their size lets them wield tools that no business is large enough to hold (monetary policy, "monopoly of violence"). Unfortunately inertia will always be overcome by time and friction in the form of a century of inefficient policy. The fix isn't going to be found in dropping all forms of welfare or by jacking up tax rates to cover the continuing expenses of such programs, it will be found through guided reform. We need to base policy on facts and economic "facts" aren't universal, they're marginal and we need much more information and real world date to find those margins. In my opinion the US needs a few big picture changes in order to start making informed policy reforms: - States need to be given the room for experimentation that was intended our nations founders. The scientific approach to any problem requires a control group and when the federal government attempts to monopolize control at every level there's no room for comparison. - To that point, there are many problems that can only be approached at a national level. The areas of defense, common natural resources, border controls, and interstate disputes of all types were wisely enshrined in the constitution as the domain of the federal government. While I'd like to hand as much power to the states as possible and others would like to handle things like healthcare at a purely national level, I think the wise approach would involve studying the international picture before jumping to any conclusions. Looking internationally we'd find that universal and mixed systems can be equally successful. Universal national systems (NHS), regional systems (Canada's provincial system), privately weighted mixed systems (Malaysia), and publicly weighted mixed systems (Germany) are all able to produce better outcomes than our attempt at a mixed system. So we must study, experiment and design, maybe we'd find that a provincial system would work best, maybe a national single payer system would work but despite years of debate we've ended up arguing over ideology. Ultimately we must have a system of reasoned debate and a legislative process capable of enacting the well-validated policy. - Our electoral processes have resulted in a deeply divided, highly ideological country. There's no structural roadblock standing in the way of implementing well-researched policy as I've described, there are only political barriers. I can't think of a quick fix capable of changing millions of minds but I know that any slow shift like this degradation of political discourse can be reversed at the same slow pace. The solution is something that should have always been in the federal domain and that's our disjointed, uncoordinated redistricting processes. Centuries of gerrymandering have resulted in a map of districts engineered entirely for the purpose of furthering a party's political machine. The bent geography necessary for ensuring the "safety" of congressional seats is just a hair above the line of credibility if we are to consider our government "representative". The lack of fair demographic representation boxes us all in to neat little bubbles of ideology where few of us are allowed to express our political will in the face of an overwhelming majority opposition. We're the only country where districts are drawn by the interested parties and this needs to change. I believe it will push people out of their bubbles and hopefully bring about a stronger culture of political debate. I have a few other ideas that are much less feasible but my tl;dr is that we need to start fostering a less divisive culture that will be receptive to taking a scientific approach to policy. Otherwise the lumbering dinosaurs called western democracies are going to fall so behind the curve that failure will become the only option.
klunger 12y ago
He just suggested a basic income for everybody. I just wanted to point this out in case people missed it when skimming.
- johnward 12y ago
  " Personally, I think that current levels of entitlement spending are ok (thought maybe the spending should be distributed differently), and we should probably do more. But I think we need to plan for it. In addition to thinking about new sorts of jobs to replace lost jobs that aren’t coming back, we should probably think about things like a basic income."
- moblahbl4hblah 12y ago
  A basic income is a great idea...it would also be a good idea to completely remove the profit motive from health care. A social safety net that includes a living wage, guaranteed higher education, and retirement is completely possible if you don't spend so much on defense and intelligence.
  - sp332 12y ago
    You can't remove the profit motive from health care.
    - bluthru 12y ago
      What do you mean? It's quite common.
      - sp332 12y ago
        Some technology will be too expensive to provide, or some procedure will require skills that are too rare. They will command high prices. And you can't find enough doctors, hospital administrators, drug researchers etc for a whole country without finding some greedy/rational ones who will do better work for more pay.
    - zentiggr 12y ago
fokinsean 12y ago
Does anyone think we are heading towards an economic collapse?
- zenogais 12y ago
  Seeing as how "natural economic growth" is not infinitely sustainable (I'm operating under the assumptions that there are finite quantities of natural resources and human ingenuity is not infinite and infallible). It's probabilistically inevitable.
  - fokinsean 12y ago
    Yeah I agree, I guess what I meant to ask is if we are going to experience one in the near future (within 10 years)
  - sliverstorm 12y ago
    Natural resources are finite, but so long as we can improve our efficiency faster than some rate N, we will never run out of a given resource. Thank you Zeno's Paradox. (Recycling also plays a part, though I don't know if it should be considered increasing the supply, or increasing our efficiency) The only one that is a real problem is energy. Thanks to the laws of physics, we may not be able to forever increase our energy efficiency, and energy cannot be recycled.
    - deleted 12y ago
      [deleted]
  - richcollins 12y ago
    It seems unlikely to me that we're anywhere close to diminishing returns from technology. More likely we're seeing what happens when a system is full of perverse incentives that reward unproductive / destructive behavior.
  - deleted 12y ago
    [deleted]
- 12y ago
moblahbl4hblah 12y ago
"Entitlement" is a dog whistle that is used in place of "welfare". http://rationalwiki.org/wiki/Entitlement_program http://rationalwiki.org/wiki/Entitlement_program
- moblahbl4hblah 12y ago
  I realize that it's biased but it also explains the point very well. It's a dog whistle.
- snowwrestler 12y ago
  Arguing about terminology is a great way to avoid arguing about tough fiscal realities.
  - thenmar 12y ago
    I think it's worth mentioning. Propagandistic terms such as "entitlements" frustrate discussion and make it even more difficult to communicate. It belittles and trivializes the opinion that poor people are entitled to things like healthcare or food, making people who hold that opinion unwilling to discuss it.
    - ef4 12y ago
      It's the government's own term, used by nonpartisan entities like the CBO. If anything, "welfare" is now used as a more politically loaded term. It's almost never used anymore without attaching a negative connotation -- whether by the right in the old way, or by the left when decrying "corporate welfare".
    - nkohari 12y ago
      Politicians can't refer to social programs as "welfare" because it carries a negative connotation, and people on Medicare, Medicaid, and Social Security will be uncomfortable with being grouped with those on SNAP. They also can't refer to them as "social programs" because it's three short letters away from "socialism." The use of the word "entitlements" is a lot like how socially left-leaning people are now more commonly referred to as "progressives" rather than "liberals."
neuromancer2701 12y ago
So what is the reasonable response to the future we have at hand. Most answers are the sky's the limit(stock will just keep going up) or zombie apocalypse. I would prefer more of a negative income tax.
api 12y ago
I have gradually become convinced by mountains of evidence from many quarters that the Keynesians are right-- we are in a demand constrained economy. One of the problems I think is that economists and politicos tend to always be fighting the last war. In the late 1970s to early 1980s -- the last time the economy seemed this systemically bleak -- the problem was insufficient capital available for investment combined with high inflation. This resulted in "stagflation," something classical Keynesians thought impossible, and thus resulted in a widespread discrediting of classical Keynesian and economic liberal thought. Thing is... in the late 70s the supply siders may well have been right and the Keynesians wrong. We were in a supply limited economy, and stimulus and other liberal policies just made everything inflate. But now I think the situation has reversed. Today looks a lot more like the 1930s, albeit not quite as viscerally nasty. There's a huge amount of capital available but few good investments. Wages are stagnant, savings are down, pay and wealth inequality are utterly massive, etc. So today I think the Keynesians may well be right again. Hopefully it'll come in the form of something less destructive than a war. I'd personally suggest a massive program to electrify all transport, huge investments in both renewable energy and next-generation nuclear power, a medical "war on aging," and a campaign to establish a permanent human settlement on Mars. All that taken together would probably end up costing about what WWII did, and so might be enough. The war on aging would have the added follow-on benefit of helping with our demographic problems. (As would a more liberal immigration policy.) Meta question: perhaps there's a new insight here... do modern industrial economies actually tend to oscillate between demand constrained and supply constrained failure modes? Perhaps the Keynesians overcorrected for the great depression, resulting in the 1970s, and now the supply siders have overcorrected for the 1970s resulting in today. In that case maybe we oscillate between periods when Keynesian demand-side policies work and periods when Friedman-esque supply-side policies work. Edit: the reason I don't think we're hurting as bad at the street level today as we were at the depths of the Great Depression is simply because we've grown so far beyond subsistence level. Today the amount of economic pain required to cause visceral physical pain among large numbers of people in the developed world -- starvation, etc. -- would be quite a bit larger than what it took in the 30s. To lead to that kind of thing we'd need the 2008 financial crash times ten at least, combined with a major political collapse and some kind of technological train wreck. A mega-sized solar flare or a sudden "oh crap" worst case peak oil cliff coming to pass might do it. But compared to a non-slump timeline -- compared to what should be happening given the technological growth we've experienced -- we are in a depression. We should be colonizing Mars, conquering aging, pretty much doing all the things I suggested as stimulus. Instead we are building apps like Yo while people go bankrupt in underwater houses with underwater student loans. (Not blaming the authors of Yo either... during the depression a lot of people took up whittling sticks and other little time-passing pursuits for lack of good work to do.)
001sky 12y ago
US GDP growth in real dollars is low (and trending down). It was 2.9% for Q1 2014 after the second official revision [1]. If it’s down again for Q2, we’ll be in a recession. Just a nit, but to be clear... 1Q 2014 GDP #s (revised) growth rate was negative 2.9% (-2.9%). The second sentence in the quote also implies as much, so I think the quoted text has an oversight/typo. http://www.cnbc.com/id/101787838 http://www.cnbc.com/id/101787838
tdees40 12y ago
I'm not clear on how any of this will lead to a recession. Why will high Debt-to-GDP or government spending send the economy into a recession? Q1 GDP numbers were clearly affected by dismal weather (although still bad), but labor markets are improving markedly, and there are reasons for optimism. I don't see this as a very convincing bear case. For the bull case, see this post, from a guy who's been right about everything since the mid-2000s. http://www.calculatedriskblog.com/2014/06/the-future-is-still-bright.html http://www.calculatedriskblog.com/2014/06/the-future-is-stil...
- TheCowboy 12y ago
  I think the responses you're getting are ignoring the key question: How will high debt-to-GDP or government spending send the economy into a recession? Many have been forecasting complete collapse and hyperinflation for these reasons, and it hasn't materialized. It seems there is something flawed with the models people are trying to use to make their economic forecasts, or their reasoning doesn't apply to this situation. One reason government spending would be bad is that it is crowding out private investment by driving up rates. But he indirectly recognizes this isn't the case due to rates being low enough that they should be encouraging investment. He doesn't say how government debt should be reduced, and where government spending should be cut. He also glosses over the point that we're at a zero bound. The post is basically a bunch of graphs while expressing concern about government spending and debt. He doesn't really connect these to the GDP and go into detail about the reasons for that quarter. I could go on.
  - adventured 12y ago
    The sole reason the US avoided disaster - temporarily - from occurring due to the massive increase in public debt, is the Fed began buying the radical majority of the government's debt after China let up on its buying. When you have to rely on your central bank to fund your government's debt burdens with magic fiat, you're in a perpetual downward spiral scenario already. These are the good years, the deficit is set to explode dramatically higher again soon, and there will be nobody to buy except the Fed. Who else can eat $500b to $1t per year in junk paper? China can't afford it any longer (having just taken on a mountain of debt the past five years). Japan hasn't been able to afford it for a very long time, they can't even afford their own debt. Now it's merely a question of time. The Fed is pulling its programs because it can't sustain them any longer without running inflation through the roof. They know the US economy is weak, they see the data that led to the -3% GDP print. It's not like we're producing 500,000 full-time jobs and 200,000 manufacturing jobs per month.
gregoryw 12y ago
Corporate savings are high across a broad basket of companies like the S&P500 because the earnings of multinationals are parked in Luxembourg, avoiding US taxes. We've all read about the Double Dutch and other IP licensing schemes that avoid taxes for Google, Apple and others. I personally feel these funds are waiting for a US corporate income tax holiday, perhaps under the guise of creating new jobs and investment domestically. The stock price of companies like Apple has their cash balance as "money good", meaning the market doesn't believe they'll pay tax on the $150 billion parked overseas. Sam's zero interest rate point is the most salient to the startup world. It forces accredited investors to chase asset classes like technology startups for yield. You also see it in the midwest in oil, gas and other natural resource drilling/mining. These are long term 10 year investments for these investors to park their cash.
- saym 12y ago
  So, the 0% interest is a catalyst for startup investment? Do institutional investors or big banks directly fund incubators and the like? I read somewhere recently that global bank income was up 29 billion from last year, does any of that profit come from startup success?
  - gregoryw 12y ago
    Institutionals and investment banks are higher up the chain. Accredited investors serve as front-line angels that fund would-be entrepreneurs, and then the aforementioned parties provide them with liquidity (distribution and marketing of the company's other shares to more sophisticated investors).
kaonashi 12y ago
The first sentence prophesies 'collapse', but then reading on you see a recipe for a continuing mild recession. Where does the collapse come in? (if it's nebulously caused spike in treasury rates, I'm not going to be convinced)
michaelochurch 12y ago
It's a dismal situation. Low interest rates mean cheap money in theory, but the "people" best equipped to take advantage of it are corporations. It's not like average people are able to start businesses just because the interest rate is low. However, low interest rates mean the penalty (to companies) for hoarding and for general risk aversion is also low. This means that lousy executives don't get a lot of investor pushback (companies don't have to do much to beat the risk-free rate) and can stick around indefinitely. The only thing that changes is that their exorbitant salaries go up (as do housing prices, college tuitions, and healthcare costs). Meanwhile, for the 99%, this debt/poverty cancer just keeps growing inside the country, making it weaker every day: it's not just government debt-- although that is a real problem-- but student debt and credit cards as the replacement for Fordist wage increases. The macro picture is bad, but the micro picture is even more dismal. Corporate management is becoming more self-serving and corrupt, internal policies of corporations are becoming more mean-spirited (many companies now require employees to use vacation when sick, and open-plan <50 SF allotments of office space are becoming the norm). When you see the reality of work life for most Americans, you realize that the corrosion is organic, inevitable, and really quite deserved. Our country has become a patchwork system of slapped-together corporate garbage, whether you're talking about its healthcare coverage or the way most of us have to work. What used to be a country is now a phalanx of uninspiring, mean-spirited organizations not worth caring about. I think that startups and venture capital will continue to do well. Ouch. Sorry to disagree, but... what's pushing people into startups is not that this VC-funded game is so great (it ain't) but that corporate employment has become such a raw deal. Now that big companies have ceased doing the right thing when it comes to investing in their employees, avoiding layoffs unless absolutely necessary, etc., we've reached a point that shoestring long-shots called "startups" look like a good idea in comparison. The startups haven't improved. (In fact, they've become worse.) The alternatives, however, have gone to shit. VC-funded startups are notoriously cheap, and stinginess leads to mediocrity. For example, they don't pay relocation, don't pay for education, and usually involve 80+ percent "employee contributions" on health insurance. Some even make people take fucking vacation days to attend conferences. If you look at it honestly, "we're a startup" is usually just used to justify being a terrible company. Now, the proper strategy is either to bet big on someone, or not hire that person, and (in general) to be very selective. (If you're not willing to pay full relocation, you shouldn't be hiring that person at all.) The problem is that these VC-funded startups are so weak in terms of technical talent that "hire a few strong people and bet big on them" isn't a viable strategy, because they can't get the first part down. So they have to hire large (as in, a large number of people... like 30 before they even launch) and so they offer crappy salaries, dogshit equity, and nonexistent perks in the hope that one of the clueless 22-year-olds who takes their offer will be an undiscovered talent. Occasionally, it works out that way. Most of the time it doesn't. Hence, the high failure rate of VC-funded startups. VC has been, and will continue to be, an underperforming asset class and there's a clear reason why. The main players aren't optimizing for the performance of their portfolios but their careers (and, to be fair, I can't blame them; I'd do the same in their shoes). Their career goals push them to over-collaborate (read: collude) and that creates that disgusting culture of co-funding. But as soon as you have important decisions made by committee, mediocrity is a result because you're now biased in favor of mediocre/never-offends-anyone people instead of high-variance people who actually do the fucking work. Personally, I think that innovation and new technology is what will save us. Eventually, yes. But I think we're going to see things get a lot worse before they start getting better. I don't think that the US or the world economy is in terminal decline, but I think we have another 10-15 years of ugliness before things start to improve.
lexcorvus 12y ago
In this context, I hope at some point sama has a chance (if he hasn't already) to read the post "Sam Altman is not a blithering idiot" by Mencius Moldbug: http://unqualified-reservations.blogspot.com/2013/03/sam-altman-is-not-blithering-idiot.html http://unqualified-reservations.blogspot.com/2013/03/sam-alt... The basic problem with our society is a disconnect between consensus reality and actual reality. We actually have no shortage of natural leaders. But they cannot actually lead us anywhere. They are operating in consensus reality rather than actual reality. Their joysticks are not plugged in. When the consensus is nonsense, sober good sense is nonsense. Nonsense is no use to anyone. It's a long post, but if you're interested in examining the problems we face from a fresh and unusual perspective it's worth reading the whole thing.
- ef4 12y ago
  It's also critically wrong in understanding technology: "one run of a time machine, with a printout of Wikipedia, would be pretty much all the real 1950 needed. Send the technology back to 1945, and you'll have iPads by '55 at the latest. Those guys got things done." That kind of thinking betrays a common misunderstanding. The limiting factor on what we can build at any given time is very rarely ideas. In 1950, people already knew enough physics to build an iPad. The idea of integrated circuits had already been proposed. The first one was demonstrated in 1958 -- only three years later than Moldbug's alternate history. And yet no iPads in 1960. Because there's a vast global capital structure that needed to evolve first. Technology is not an external factor. It makes no sense to argue whether society is better after factoring out technology, because technology cannot be factored out. It's all part of the same web of interrelationships. Edit to add: I had to add this, because it's so wrong it's perverse: "At the base of the pyramid are air, water and food. How does 2013 do at supplying oxygen, hydration and nutrition? How did 1950 do? Just fine. Gentlemen, a draw." Only if you limit yourself to the wealthiest 10% of human beings. Out here in reality, global food security for everybody else is dramatically better than it was in 1950. Much of the developing world is starting to worry more about obesity than starvation. Moldbug is simply ignoring the biggest economic story of the last 40 years, presumably because it didn't happen in The West.
  - deleted 12y ago
pyfish 12y ago
I agree technology will save us from the mad max scenario that we repeatedly have read about over the last 5 years. However, it will be interesting to see how the "Technocracy" plays out.
josephlord 12y ago
The private debt levels are just as critical as the public debt levels and much higher (although down from their 2008 peak still I think). What is particularly is the total rate of change for public and private debt which heavily dictates the growth levels. When the economy suddenly switches from growing debt at accelerating rates to reducing debts is when the major crash happens.
plaxis 12y ago
But it's not a bad economy VC/PE. It's basically loads of 0% money and no tax via carried interest. If you disagree, come see the number of entire floor apartment renovations happening on 5th ave. <3 NYC
danielweber 12y ago
This comment section turned out about the way one would predict: politics.
- thathonkey 12y ago
  This comment section turned out about the way one would predict when so few of the participants have ever studied economics.
  - danielweber 12y ago
    Unfortunately there seem to be two distinct groups that each think the other has never studied economics. It's possible to have good discussions about this, but it requires a lot more moderation than HN wants to do (rightly, in my estimation). And probably a different format: the threaded discussion format leads to all sorts of weird tarpits.
  - ZenPro 12y ago
    This ^^ +10
- georgemcbay 12y ago
  How could it not? Macroeconomics and politics are inseparable.
firstOrder 12y ago
Some of the figures Altman gives are important. There are some more: http://monthlyreview.org/2008/12/01/financial-implosion-and-stagnation http://monthlyreview.org/2008/12/01/financial-implosion-and-... If you read that article and consult the (mostly government) sources, you'll see: * It's not just government debt that is high - household, business, and especially financial debt is high * The financial sector has been growing much faster than the "real" economy * Less and less of the GDP goes to consumers in wages and salaries * Industrial capacity utilization goes down and down and down (so why invest in new capital?) * Since the 1980s, profits have been an increasing share of GDP, while investment has been going down Macroeconomic collapse on the scale (or greater then) it happened in the 1930s will, I believe, inevitably happen.
pkaler 12y ago
Almost any argument that relies on GDP numbers to back up its claim is specious at best. For example, you could have a tornado destroy a town and the disaster recovery spending would increase GDP. You could build a teleportation device that puts all delivery drivers out of work. GDP would decrease but there would be an overall increase in wealth and quality of life. Thinking about economics through the lens of GDP is just the wrong way to think about the economy. Here's a great Planet Money podcast on the invention of "The Economy" and on GDP: http://www.npr.org/blogs/money/2014/02/28/283477546/the-invention-of-the-economy http://www.npr.org/blogs/money/2014/02/28/283477546/the-inve...
- penguindev 12y ago
  Yep. Heart attacks, perpetual 'diabetes treatment', borrowing a million (or a trillion) dollars you can't pay back and spending it, promising unrealistic pension benefits, and depleting natural resources (wood, water, energy, overfishing, selling your seed corn), fighting losing wars (is there ever a winner?), paying other people to raise your kids, all grow "gee-dee-pee'.
- DINKDINK 12y ago
  Additionally none of this is population normalized. https://www.google.com/publicdata/explore?ds=a7jenngfc4um7_&ctype=l&met_y=per_capita_real_gdp_by_state&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=per_capita_real_gdp_by_state&scale_y=lin&ind_y=false&rdim=country&idim=country:US&ifdim=country&tstart=867654000000&tend=1341039600000&hl=en_US&dl=en&ind=false https://www.google.com/publicdata/explore?ds=a7jenngfc4um7_&... Additionally, the first GDP chart conflicts with what it's reporting: Title "United States GDP Growth Rate", Subtitle "Percent change in Gross Domestic Product". Additionally, percent change relative to what?
- quadrangle 12y ago
  Perfectly stated. We need to get to where we truly reject the whole GDP concept. It is corrupt, manipulable, and destructive.
Shivetya 12y ago
You would think with all the social spending we do that things would be better by now for people in this category but its not really. There needs to be a concerted effort to reduce the number of assistance programs to a single digit number so that funds are not lost to paying the workers to administer the programs. There are thousands of assistance programs just at the Federal level, sure that is not an ideal way of getting help to those in need.
nostromo 12y ago
We need to find the next big growth engine. Like "the internet" big, or its baby brother "mobile" big. (Imagine what the US economy would be like without those growth engines. Even with them, their effect on the US GDP growth chart in the article is unnoticeable.) I have a hard time thinking of things that could be so dramatic in terms of growth. AI, radical life extension, space elevators, renewables... I'm not sure. The sad thing is we only have one Google. Very few other well-monied companies are taking big moon-shot risks. We need a dozen Googles and a hundred Elon Musks to find the next growth engine. But instead we have billionaires buying NFL teams, the government taking money from STEM to fund entitlements, and corporations too risk-averse to make any big bets.
- fchollet 12y ago
  Although Google has done a much better PR around its research efforts, IBM and Microsoft are both investing much more in R&D. Microsoft is the tech company with the most research investment.
  - throwawaymsft 12y ago
    I'd caution using R&D investment as a metric. Historically, it seems the huge game changers (Google, Apple, Facebook, etc.) came from motivated individuals and not corporate research labs. Microsoft's early and enormous investments did not help them catch/contribute to the search/social/tablet/mobile wave which generated much of the value in the tech economy the past decade.
    - jeffdavis 12y ago
      What about, say, the solid-state transistor?
      - CamperBob2 12y ago
        The massive catalog of Bell Labs innovations came from a heavily-regulated monopoly, not a half-forgotten research arm of a software or advertising company whose mission can best be summarized as "Hire smart people so the competition doesn't get them." Why the Bell Labs approach worked so well while most such heavily-subsidized and centralized research efforts fail is something I don't entirely understand. It could be because their charter was centered on the improvement of telecommunications in general. In the twentieth century, that covered endless acres of fertile intellectual ground. To extend the cliche', there was a lot of low-hanging fruit on the physics trees, and once it was picked, that was it for Bell Labs.
uptown 12y ago
Another interesting chart: https://twitter.com/hblodget/status/483577150805901312 https://twitter.com/hblodget/status/483577150805901312
natural219 12y ago
There's a specific mental trap -- I'll call this "scientism" -- that a lot of comments here are rapidly falling into. It's in treating macroeconomics as a "solved" problem, or putting too much faith in specific studies or sentences. That's not at all the proper way to look at macroeconomics. Our economy is unimaginably complex -- it's full of hundreds and millions of moving parts, with each single part (the human brain) driven by an even more complex system with hundreds of billions of parts (neurons). All of these parts are re-orienting themselves with new data in real time. What Sam is trying to say here, is that we don't know if these trends are "good" or "bad", or if they'll lead to bad outcomes or not, or in what time frame this will occur. All we know now -- and this I agree with -- is that something in our economy has changed permanently. And this should be a good cause to worry, or at least, should be taken as a call to arms to economists everywhere to try and figure out why our models aren't working as well as they used to. "Too large a proportion of recent "mathematical" economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols." - John Maynard Keynes
seoguru 12y ago
I wish everyone (or at least Sam Altman) would read "The Seven Deadly Innocent Frauds": http://goo.gl/6a22pX http://goo.gl/6a22pX less than 2 hour read. read it with an open mind and your worldview may change. watch Stephanie Kelton and Warren Mosler talk about gov debt and deficits: (2 hours!) https://www.youtube.com/watch?v=ba8XdDqZ-Jg https://www.youtube.com/watch?v=ba8XdDqZ-Jg Randall Wray on Job Guarantee vs Basic Income: http://www.economonitor.com/lrwray/2014/01/27/lets-compare-the-job-guarantee-to-the-alternatives-not-against-some-distant-utopian-vision/ http://www.economonitor.com/lrwray/2014/01/27/lets-compare-t... Mosler's current prescription: 1) A full FICA suspension, which raises take home pay by 7.6%, and, for businesses that are competitive, lowers prices as well, restoring sales/output/employment in short order 2) A $10/hr federally funded transition job for anyone willing and able to work to promote the transition from unemployment to private sector employment ...
privatedan 12y ago
A simplified example of what happens when trade deficits occur over a long enough period of time: Squanderville versus Thriftville (Warren Buffet) - http://www.freerepublic.com/focus/news/1053684/posts http://www.freerepublic.com/focus/news/1053684/posts
lukasm 12y ago
It's intriguing that US economy is slowing down since WWII. What are the reasons? 1. No significant improvements like agriculture. 2. Increasing regulations 3. Big middle class that have no strong motivation to advance further or have "enough money" for good living (modulo individuals) 4. Growth in domain which GDP doesn't capture e.g. Open Source 5. No obvious investments opportunities e.g. Highway
- humanrebar 12y ago
  6. Retirement of the baby boom generation. 7. Low birth rates.
- scoofy 12y ago
  I'd say it's probably just the world slowly but surely becoming less dependent on the U.S. economy after the entire world economy was destroyed in a War. And, yes, birthrates and longer retirement are probably relevant.
magoghm 12y ago
"On the positive side, but as you’d expect with near-zero rates, US equities are at record levels." I'm no so sure this should be on the positive side. Those equities are artificially inflated by central bank (indirect) manipulation. Those prices might not reflect the real value of the underlying assets and could collapse, which would once again put the whole financial system at risk.
rogerbinns 12y ago
I believe tax breaks don't show up as government spending. If for example Boeing is given a billion dollar tax break, then the government has a billion dollars loss and Boeing has a billion dollars more. But that won't show up as a billion dollars going to the government, and then spent on Boeing, even though that is exactly what is happening. I suspect that if tax breaks were accounted for, then government spending would be higher. It looks like US corporate welfare is around $200bn/year, although there are many larger estimates out there (eg count the banking bailouts). I haven't seen numbers for personal tax breaks, but adding them will make the number larger.
deleted 12y ago
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gadders 12y ago
I'm confused - Sam who held a fundraiser for Obama is now saying the economy is screwed?
- gadders 12y ago
  To expand further - is there not a certain tension in a) saying the US economy is screwed, and b) holding a fundraiser for the man that has presided over it for the last 6+ years?

224 points by dmnd 12y ago

deleted 12y ago

[deleted]

This is creepy. It's like you counter low GPD growth by 1>high government spending/invesmtent in the economy. 2>low interest rates. But both of these are already as high/low as it can get and still no response from GDP. Weird.

deleted 12y ago

[deleted]

mdlm 12y ago

Q1 2014 GDP growth was -2.9%. There's no minus sign in front of 2.9% in item #1 in the article (I'm using Chrome).

moblahbl4hblah 12y ago

The defense budget has gotten smaller as a total percentage of the economy since WWII, but the economy was smaller and the entire country was mobilized. We currently spend over a trillion dollars a year on defense and intelligence. "Entitlements" are not the problem.I love how they are entitlements even though you pay for them...in fact, let's start calling it the social safety net instead. The main problem is that the wealthy, corporations and individuals, don't pay enough. Cut defense by half and stop letting the wealthy walk all over us and all of a sudden you don't have a crisis.

doyoulikeworms 12y ago
I thought that they were called entitlements precisely because we pay for them.
- moblahbl4hblah 12y ago
  They are called entitlements to make people think that some undeserving class is getting over...they think they are "entitled"...is the way that is put. It was done on purpose by conservatives. Its a dog whistle.
  - jerf 12y ago
    I don't think you get what a "dog whistle" is. Everyone calls them entitlements.
    - againblah 12y ago
      Everyone huh? Try Google-ing entitlements and racism.
      - jerf 12y ago
        I don't see the relevance. All I'm getting is a lot of criticism of some comment Scalia once made which seems to have nothing to do with whether things should be called entitlements. Further, if that was somehow your point, bear in mind that "everyone" in this context is pretty clearly something like "the vast majority". I could find traces of evidence of people trying to redefine the term, sure, but no evidence they're being particularly successful. Even the NYT calls them entitlements with no apparent irony. Call them mainstream or call them leftist, either way, it's evidence on my side.
  - ericd 12y ago
    I don't think that comes from where you think it does. I think it comes from the fact that people are literally entitled to that money via the legal contract we've set up - it is spoken for.
    - VLM 12y ago
      Too many mixed metaphors. Aside from employees, .gov gives people money two ways: 1) Contracts. 200 F-22 for $100B or so. $1M for the service contract for that server for a year. Usually involves a psuedo competitive bidding process, a lack of one is unusual enough that you get the phrase "no bid contract" because its an oddity. 2) Entitlements. If you meet these requirements, you get this money, or income tax credit, or whatever. You're entitled as a member of a class where that class is poor dudes or historic property investors or hybrid car owner or whatever. Usually doesn't involve competitive bidding or auctions at all. You're just going to confuse people by mixing contracts and entitlements in the same line.
josephschmoe 12y ago
It looks like it's mostly medical costs. Social Security and other such things haven't increased much.
DINKDINK 12y ago
The problem with entitlements/social safety net programs (how ever you want to spin it) is that they're policies that are predicated on the old generation being funded by a larger younger generation. That's policy that isn't fault tolerant to population decreases nor medical black swans.
cc438 12y ago
I wouldn't say spending on entitlement programs are an issue, they're more of a symptom. IMO, the root cause of our economic stagnation is our government's inability to create policy that is efficient, thoughtful, and timely. The inherently conservative features found in the structure western-style democracies are increasingly becoming an anchor on societal progress. Our governments aren't "conservative" in the ideological sense but in the slow, methodical manner in which change is meant to flow through the system. I keep getting stuck on what I've learned of "lean" manufacturing principles and how hard it was for businesses to adapt to a more responsive and adaptive model of operations. Industrial behemoths could plod along, surviving off the enormous inertia they'd built over the decades. Some fell while others are still plodding along, yet unchallenged by efficient competitors that can't clear the entry barriers of the market, time will still come for them. Governments are behemoths of a much more impressive scale. Their size lets them wield tools that no business is large enough to hold (monetary policy, "monopoly of violence"). Unfortunately inertia will always be overcome by time and friction in the form of a century of inefficient policy. The fix isn't going to be found in dropping all forms of welfare or by jacking up tax rates to cover the continuing expenses of such programs, it will be found through guided reform. We need to base policy on facts and economic "facts" aren't universal, they're marginal and we need much more information and real world date to find those margins. In my opinion the US needs a few big picture changes in order to start making informed policy reforms: - States need to be given the room for experimentation that was intended our nations founders. The scientific approach to any problem requires a control group and when the federal government attempts to monopolize control at every level there's no room for comparison. - To that point, there are many problems that can only be approached at a national level. The areas of defense, common natural resources, border controls, and interstate disputes of all types were wisely enshrined in the constitution as the domain of the federal government. While I'd like to hand as much power to the states as possible and others would like to handle things like healthcare at a purely national level, I think the wise approach would involve studying the international picture before jumping to any conclusions. Looking internationally we'd find that universal and mixed systems can be equally successful. Universal national systems (NHS), regional systems (Canada's provincial system), privately weighted mixed systems (Malaysia), and publicly weighted mixed systems (Germany) are all able to produce better outcomes than our attempt at a mixed system. So we must study, experiment and design, maybe we'd find that a provincial system would work best, maybe a national single payer system would work but despite years of debate we've ended up arguing over ideology. Ultimately we must have a system of reasoned debate and a legislative process capable of enacting the well-validated policy. - Our electoral processes have resulted in a deeply divided, highly ideological country. There's no structural roadblock standing in the way of implementing well-researched policy as I've described, there are only political barriers. I can't think of a quick fix capable of changing millions of minds but I know that any slow shift like this degradation of political discourse can be reversed at the same slow pace. The solution is something that should have always been in the federal domain and that's our disjointed, uncoordinated redistricting processes. Centuries of gerrymandering have resulted in a map of districts engineered entirely for the purpose of furthering a party's political machine. The bent geography necessary for ensuring the "safety" of congressional seats is just a hair above the line of credibility if we are to consider our government "representative". The lack of fair demographic representation boxes us all in to neat little bubbles of ideology where few of us are allowed to express our political will in the face of an overwhelming majority opposition. We're the only country where districts are drawn by the interested parties and this needs to change. I believe it will push people out of their bubbles and hopefully bring about a stronger culture of political debate. I have a few other ideas that are much less feasible but my tl;dr is that we need to start fostering a less divisive culture that will be receptive to taking a scientific approach to policy. Otherwise the lumbering dinosaurs called western democracies are going to fall so behind the curve that failure will become the only option.

klunger 12y ago

He just suggested a basic income for everybody. I just wanted to point this out in case people missed it when skimming.

johnward 12y ago
" Personally, I think that current levels of entitlement spending are ok (thought maybe the spending should be distributed differently), and we should probably do more. But I think we need to plan for it. In addition to thinking about new sorts of jobs to replace lost jobs that aren’t coming back, we should probably think about things like a basic income."
moblahbl4hblah 12y ago
A basic income is a great idea...it would also be a good idea to completely remove the profit motive from health care. A social safety net that includes a living wage, guaranteed higher education, and retirement is completely possible if you don't spend so much on defense and intelligence.
- sp332 12y ago
  You can't remove the profit motive from health care.
  - bluthru 12y ago
    What do you mean? It's quite common.
    - sp332 12y ago
      Some technology will be too expensive to provide, or some procedure will require skills that are too rare. They will command high prices. And you can't find enough doctors, hospital administrators, drug researchers etc for a whole country without finding some greedy/rational ones who will do better work for more pay.
  - zentiggr 12y ago

fokinsean 12y ago

Does anyone think we are heading towards an economic collapse?

zenogais 12y ago
Seeing as how "natural economic growth" is not infinitely sustainable (I'm operating under the assumptions that there are finite quantities of natural resources and human ingenuity is not infinite and infallible). It's probabilistically inevitable.
- fokinsean 12y ago
  Yeah I agree, I guess what I meant to ask is if we are going to experience one in the near future (within 10 years)
- sliverstorm 12y ago
  Natural resources are finite, but so long as we can improve our efficiency faster than some rate N, we will never run out of a given resource. Thank you Zeno's Paradox. (Recycling also plays a part, though I don't know if it should be considered increasing the supply, or increasing our efficiency) The only one that is a real problem is energy. Thanks to the laws of physics, we may not be able to forever increase our energy efficiency, and energy cannot be recycled.
  - deleted 12y ago
    [deleted]
- richcollins 12y ago
  It seems unlikely to me that we're anywhere close to diminishing returns from technology. More likely we're seeing what happens when a system is full of perverse incentives that reward unproductive / destructive behavior.
- deleted 12y ago
  [deleted]
12y ago

moblahbl4hblah 12y ago

"Entitlement" is a dog whistle that is used in place of "welfare". http://rationalwiki.org/wiki/Entitlement_program http://rationalwiki.org/wiki/Entitlement_program

moblahbl4hblah 12y ago
I realize that it's biased but it also explains the point very well. It's a dog whistle.
snowwrestler 12y ago
Arguing about terminology is a great way to avoid arguing about tough fiscal realities.
- thenmar 12y ago
  I think it's worth mentioning. Propagandistic terms such as "entitlements" frustrate discussion and make it even more difficult to communicate. It belittles and trivializes the opinion that poor people are entitled to things like healthcare or food, making people who hold that opinion unwilling to discuss it.
  - ef4 12y ago
    It's the government's own term, used by nonpartisan entities like the CBO. If anything, "welfare" is now used as a more politically loaded term. It's almost never used anymore without attaching a negative connotation -- whether by the right in the old way, or by the left when decrying "corporate welfare".
  - nkohari 12y ago
    Politicians can't refer to social programs as "welfare" because it carries a negative connotation, and people on Medicare, Medicaid, and Social Security will be uncomfortable with being grouped with those on SNAP. They also can't refer to them as "social programs" because it's three short letters away from "socialism." The use of the word "entitlements" is a lot like how socially left-leaning people are now more commonly referred to as "progressives" rather than "liberals."

neuromancer2701 12y ago

So what is the reasonable response to the future we have at hand. Most answers are the sky's the limit(stock will just keep going up) or zombie apocalypse. I would prefer more of a negative income tax.

api 12y ago

I have gradually become convinced by mountains of evidence from many quarters that the Keynesians are right-- we are in a demand constrained economy. One of the problems I think is that economists and politicos tend to always be fighting the last war. In the late 1970s to early 1980s -- the last time the economy seemed this systemically bleak -- the problem was insufficient capital available for investment combined with high inflation. This resulted in "stagflation," something classical Keynesians thought impossible, and thus resulted in a widespread discrediting of classical Keynesian and economic liberal thought. Thing is... in the late 70s the supply siders may well have been right and the Keynesians wrong. We were in a supply limited economy, and stimulus and other liberal policies just made everything inflate. But now I think the situation has reversed. Today looks a lot more like the 1930s, albeit not quite as viscerally nasty. There's a huge amount of capital available but few good investments. Wages are stagnant, savings are down, pay and wealth inequality are utterly massive, etc. So today I think the Keynesians may well be right again. Hopefully it'll come in the form of something less destructive than a war. I'd personally suggest a massive program to electrify all transport, huge investments in both renewable energy and next-generation nuclear power, a medical "war on aging," and a campaign to establish a permanent human settlement on Mars. All that taken together would probably end up costing about what WWII did, and so might be enough. The war on aging would have the added follow-on benefit of helping with our demographic problems. (As would a more liberal immigration policy.) Meta question: perhaps there's a new insight here... do modern industrial economies actually tend to oscillate between demand constrained and supply constrained failure modes? Perhaps the Keynesians overcorrected for the great depression, resulting in the 1970s, and now the supply siders have overcorrected for the 1970s resulting in today. In that case maybe we oscillate between periods when Keynesian demand-side policies work and periods when Friedman-esque supply-side policies work. Edit: the reason I don't think we're hurting as bad at the street level today as we were at the depths of the Great Depression is simply because we've grown so far beyond subsistence level. Today the amount of economic pain required to cause visceral physical pain among large numbers of people in the developed world -- starvation, etc. -- would be quite a bit larger than what it took in the 30s. To lead to that kind of thing we'd need the 2008 financial crash times ten at least, combined with a major political collapse and some kind of technological train wreck. A mega-sized solar flare or a sudden "oh crap" worst case peak oil cliff coming to pass might do it. But compared to a non-slump timeline -- compared to what should be happening given the technological growth we've experienced -- we are in a depression. We should be colonizing Mars, conquering aging, pretty much doing all the things I suggested as stimulus. Instead we are building apps like Yo while people go bankrupt in underwater houses with underwater student loans. (Not blaming the authors of Yo either... during the depression a lot of people took up whittling sticks and other little time-passing pursuits for lack of good work to do.)

001sky 12y ago

US GDP growth in real dollars is low (and trending down). It was 2.9% for Q1 2014 after the second official revision [1]. If it’s down again for Q2, we’ll be in a recession. Just a nit, but to be clear... 1Q 2014 GDP #s (revised) growth rate was negative 2.9% (-2.9%). The second sentence in the quote also implies as much, so I think the quoted text has an oversight/typo. http://www.cnbc.com/id/101787838 http://www.cnbc.com/id/101787838

tdees40 12y ago

I'm not clear on how any of this will lead to a recession. Why will high Debt-to-GDP or government spending send the economy into a recession? Q1 GDP numbers were clearly affected by dismal weather (although still bad), but labor markets are improving markedly, and there are reasons for optimism. I don't see this as a very convincing bear case. For the bull case, see this post, from a guy who's been right about everything since the mid-2000s. http://www.calculatedriskblog.com/2014/06/the-future-is-still-bright.html http://www.calculatedriskblog.com/2014/06/the-future-is-stil...

TheCowboy 12y ago
I think the responses you're getting are ignoring the key question: How will high debt-to-GDP or government spending send the economy into a recession? Many have been forecasting complete collapse and hyperinflation for these reasons, and it hasn't materialized. It seems there is something flawed with the models people are trying to use to make their economic forecasts, or their reasoning doesn't apply to this situation. One reason government spending would be bad is that it is crowding out private investment by driving up rates. But he indirectly recognizes this isn't the case due to rates being low enough that they should be encouraging investment. He doesn't say how government debt should be reduced, and where government spending should be cut. He also glosses over the point that we're at a zero bound. The post is basically a bunch of graphs while expressing concern about government spending and debt. He doesn't really connect these to the GDP and go into detail about the reasons for that quarter. I could go on.
- adventured 12y ago
  The sole reason the US avoided disaster - temporarily - from occurring due to the massive increase in public debt, is the Fed began buying the radical majority of the government's debt after China let up on its buying. When you have to rely on your central bank to fund your government's debt burdens with magic fiat, you're in a perpetual downward spiral scenario already. These are the good years, the deficit is set to explode dramatically higher again soon, and there will be nobody to buy except the Fed. Who else can eat $500b to $1t per year in junk paper? China can't afford it any longer (having just taken on a mountain of debt the past five years). Japan hasn't been able to afford it for a very long time, they can't even afford their own debt. Now it's merely a question of time. The Fed is pulling its programs because it can't sustain them any longer without running inflation through the roof. They know the US economy is weak, they see the data that led to the -3% GDP print. It's not like we're producing 500,000 full-time jobs and 200,000 manufacturing jobs per month.

gregoryw 12y ago

Corporate savings are high across a broad basket of companies like the S&P500 because the earnings of multinationals are parked in Luxembourg, avoiding US taxes. We've all read about the Double Dutch and other IP licensing schemes that avoid taxes for Google, Apple and others. I personally feel these funds are waiting for a US corporate income tax holiday, perhaps under the guise of creating new jobs and investment domestically. The stock price of companies like Apple has their cash balance as "money good", meaning the market doesn't believe they'll pay tax on the $150 billion parked overseas. Sam's zero interest rate point is the most salient to the startup world. It forces accredited investors to chase asset classes like technology startups for yield. You also see it in the midwest in oil, gas and other natural resource drilling/mining. These are long term 10 year investments for these investors to park their cash.

saym 12y ago
So, the 0% interest is a catalyst for startup investment? Do institutional investors or big banks directly fund incubators and the like? I read somewhere recently that global bank income was up 29 billion from last year, does any of that profit come from startup success?
- gregoryw 12y ago
  Institutionals and investment banks are higher up the chain. Accredited investors serve as front-line angels that fund would-be entrepreneurs, and then the aforementioned parties provide them with liquidity (distribution and marketing of the company's other shares to more sophisticated investors).

kaonashi 12y ago

The first sentence prophesies 'collapse', but then reading on you see a recipe for a continuing mild recession. Where does the collapse come in? (if it's nebulously caused spike in treasury rates, I'm not going to be convinced)

michaelochurch 12y ago

It's a dismal situation. Low interest rates mean cheap money in theory, but the "people" best equipped to take advantage of it are corporations. It's not like average people are able to start businesses just because the interest rate is low. However, low interest rates mean the penalty (to companies) for hoarding and for general risk aversion is also low. This means that lousy executives don't get a lot of investor pushback (companies don't have to do much to beat the risk-free rate) and can stick around indefinitely. The only thing that changes is that their exorbitant salaries go up (as do housing prices, college tuitions, and healthcare costs). Meanwhile, for the 99%, this debt/poverty cancer just keeps growing inside the country, making it weaker every day: it's not just government debt-- although that is a real problem-- but student debt and credit cards as the replacement for Fordist wage increases. The macro picture is bad, but the micro picture is even more dismal. Corporate management is becoming more self-serving and corrupt, internal policies of corporations are becoming more mean-spirited (many companies now require employees to use vacation when sick, and open-plan <50 SF allotments of office space are becoming the norm). When you see the reality of work life for most Americans, you realize that the corrosion is organic, inevitable, and really quite deserved. Our country has become a patchwork system of slapped-together corporate garbage, whether you're talking about its healthcare coverage or the way most of us have to work. What used to be a country is now a phalanx of uninspiring, mean-spirited organizations not worth caring about. I think that startups and venture capital will continue to do well. Ouch. Sorry to disagree, but... what's pushing people into startups is not that this VC-funded game is so great (it ain't) but that corporate employment has become such a raw deal. Now that big companies have ceased doing the right thing when it comes to investing in their employees, avoiding layoffs unless absolutely necessary, etc., we've reached a point that shoestring long-shots called "startups" look like a good idea in comparison. The startups haven't improved. (In fact, they've become worse.) The alternatives, however, have gone to shit. VC-funded startups are notoriously cheap, and stinginess leads to mediocrity. For example, they don't pay relocation, don't pay for education, and usually involve 80+ percent "employee contributions" on health insurance. Some even make people take fucking vacation days to attend conferences. If you look at it honestly, "we're a startup" is usually just used to justify being a terrible company. Now, the proper strategy is either to bet big on someone, or not hire that person, and (in general) to be very selective. (If you're not willing to pay full relocation, you shouldn't be hiring that person at all.) The problem is that these VC-funded startups are so weak in terms of technical talent that "hire a few strong people and bet big on them" isn't a viable strategy, because they can't get the first part down. So they have to hire large (as in, a large number of people... like 30 before they even launch) and so they offer crappy salaries, dogshit equity, and nonexistent perks in the hope that one of the clueless 22-year-olds who takes their offer will be an undiscovered talent. Occasionally, it works out that way. Most of the time it doesn't. Hence, the high failure rate of VC-funded startups. VC has been, and will continue to be, an underperforming asset class and there's a clear reason why. The main players aren't optimizing for the performance of their portfolios but their careers (and, to be fair, I can't blame them; I'd do the same in their shoes). Their career goals push them to over-collaborate (read: collude) and that creates that disgusting culture of co-funding. But as soon as you have important decisions made by committee, mediocrity is a result because you're now biased in favor of mediocre/never-offends-anyone people instead of high-variance people who actually do the fucking work. Personally, I think that innovation and new technology is what will save us. Eventually, yes. But I think we're going to see things get a lot worse before they start getting better. I don't think that the US or the world economy is in terminal decline, but I think we have another 10-15 years of ugliness before things start to improve.

lexcorvus 12y ago

In this context, I hope at some point sama has a chance (if he hasn't already) to read the post "Sam Altman is not a blithering idiot" by Mencius Moldbug: http://unqualified-reservations.blogspot.com/2013/03/sam-altman-is-not-blithering-idiot.html http://unqualified-reservations.blogspot.com/2013/03/sam-alt... The basic problem with our society is a disconnect between consensus reality and actual reality. We actually have no shortage of natural leaders. But they cannot actually lead us anywhere. They are operating in consensus reality rather than actual reality. Their joysticks are not plugged in. When the consensus is nonsense, sober good sense is nonsense. Nonsense is no use to anyone. It's a long post, but if you're interested in examining the problems we face from a fresh and unusual perspective it's worth reading the whole thing.

ef4 12y ago
It's also critically wrong in understanding technology: "one run of a time machine, with a printout of Wikipedia, would be pretty much all the real 1950 needed. Send the technology back to 1945, and you'll have iPads by '55 at the latest. Those guys got things done." That kind of thinking betrays a common misunderstanding. The limiting factor on what we can build at any given time is very rarely ideas. In 1950, people already knew enough physics to build an iPad. The idea of integrated circuits had already been proposed. The first one was demonstrated in 1958 -- only three years later than Moldbug's alternate history. And yet no iPads in 1960. Because there's a vast global capital structure that needed to evolve first. Technology is not an external factor. It makes no sense to argue whether society is better after factoring out technology, because technology cannot be factored out. It's all part of the same web of interrelationships. Edit to add: I had to add this, because it's so wrong it's perverse: "At the base of the pyramid are air, water and food. How does 2013 do at supplying oxygen, hydration and nutrition? How did 1950 do? Just fine. Gentlemen, a draw." Only if you limit yourself to the wealthiest 10% of human beings. Out here in reality, global food security for everybody else is dramatically better than it was in 1950. Much of the developing world is starting to worry more about obesity than starvation. Moldbug is simply ignoring the biggest economic story of the last 40 years, presumably because it didn't happen in The West.
- deleted 12y ago

pyfish 12y ago

I agree technology will save us from the mad max scenario that we repeatedly have read about over the last 5 years. However, it will be interesting to see how the "Technocracy" plays out.

josephlord 12y ago

The private debt levels are just as critical as the public debt levels and much higher (although down from their 2008 peak still I think). What is particularly is the total rate of change for public and private debt which heavily dictates the growth levels. When the economy suddenly switches from growing debt at accelerating rates to reducing debts is when the major crash happens.

plaxis 12y ago

But it's not a bad economy VC/PE. It's basically loads of 0% money and no tax via carried interest. If you disagree, come see the number of entire floor apartment renovations happening on 5th ave. <3 NYC

danielweber 12y ago

This comment section turned out about the way one would predict: politics.

thathonkey 12y ago
This comment section turned out about the way one would predict when so few of the participants have ever studied economics.
- danielweber 12y ago
  Unfortunately there seem to be two distinct groups that each think the other has never studied economics. It's possible to have good discussions about this, but it requires a lot more moderation than HN wants to do (rightly, in my estimation). And probably a different format: the threaded discussion format leads to all sorts of weird tarpits.
- ZenPro 12y ago
  This ^^ +10
georgemcbay 12y ago
How could it not? Macroeconomics and politics are inseparable.

firstOrder 12y ago

Some of the figures Altman gives are important. There are some more: http://monthlyreview.org/2008/12/01/financial-implosion-and-stagnation http://monthlyreview.org/2008/12/01/financial-implosion-and-... If you read that article and consult the (mostly government) sources, you'll see: * It's not just government debt that is high - household, business, and especially financial debt is high * The financial sector has been growing much faster than the "real" economy * Less and less of the GDP goes to consumers in wages and salaries * Industrial capacity utilization goes down and down and down (so why invest in new capital?) * Since the 1980s, profits have been an increasing share of GDP, while investment has been going down Macroeconomic collapse on the scale (or greater then) it happened in the 1930s will, I believe, inevitably happen.

pkaler 12y ago

Almost any argument that relies on GDP numbers to back up its claim is specious at best. For example, you could have a tornado destroy a town and the disaster recovery spending would increase GDP. You could build a teleportation device that puts all delivery drivers out of work. GDP would decrease but there would be an overall increase in wealth and quality of life. Thinking about economics through the lens of GDP is just the wrong way to think about the economy. Here's a great Planet Money podcast on the invention of "The Economy" and on GDP: http://www.npr.org/blogs/money/2014/02/28/283477546/the-invention-of-the-economy http://www.npr.org/blogs/money/2014/02/28/283477546/the-inve...

penguindev 12y ago
Yep. Heart attacks, perpetual 'diabetes treatment', borrowing a million (or a trillion) dollars you can't pay back and spending it, promising unrealistic pension benefits, and depleting natural resources (wood, water, energy, overfishing, selling your seed corn), fighting losing wars (is there ever a winner?), paying other people to raise your kids, all grow "gee-dee-pee'.
DINKDINK 12y ago
Additionally none of this is population normalized. https://www.google.com/publicdata/explore?ds=a7jenngfc4um7_&ctype=l&met_y=per_capita_real_gdp_by_state&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=per_capita_real_gdp_by_state&scale_y=lin&ind_y=false&rdim=country&idim=country:US&ifdim=country&tstart=867654000000&tend=1341039600000&hl=en_US&dl=en&ind=false https://www.google.com/publicdata/explore?ds=a7jenngfc4um7_&... Additionally, the first GDP chart conflicts with what it's reporting: Title "United States GDP Growth Rate", Subtitle "Percent change in Gross Domestic Product". Additionally, percent change relative to what?
quadrangle 12y ago
Perfectly stated. We need to get to where we truly reject the whole GDP concept. It is corrupt, manipulable, and destructive.

Shivetya 12y ago

You would think with all the social spending we do that things would be better by now for people in this category but its not really. There needs to be a concerted effort to reduce the number of assistance programs to a single digit number so that funds are not lost to paying the workers to administer the programs. There are thousands of assistance programs just at the Federal level, sure that is not an ideal way of getting help to those in need.

nostromo 12y ago

We need to find the next big growth engine. Like "the internet" big, or its baby brother "mobile" big. (Imagine what the US economy would be like without those growth engines. Even with them, their effect on the US GDP growth chart in the article is unnoticeable.) I have a hard time thinking of things that could be so dramatic in terms of growth. AI, radical life extension, space elevators, renewables... I'm not sure. The sad thing is we only have one Google. Very few other well-monied companies are taking big moon-shot risks. We need a dozen Googles and a hundred Elon Musks to find the next growth engine. But instead we have billionaires buying NFL teams, the government taking money from STEM to fund entitlements, and corporations too risk-averse to make any big bets.

fchollet 12y ago
Although Google has done a much better PR around its research efforts, IBM and Microsoft are both investing much more in R&D. Microsoft is the tech company with the most research investment.
- throwawaymsft 12y ago
  I'd caution using R&D investment as a metric. Historically, it seems the huge game changers (Google, Apple, Facebook, etc.) came from motivated individuals and not corporate research labs. Microsoft's early and enormous investments did not help them catch/contribute to the search/social/tablet/mobile wave which generated much of the value in the tech economy the past decade.
  - jeffdavis 12y ago
    What about, say, the solid-state transistor?
    - CamperBob2 12y ago
      The massive catalog of Bell Labs innovations came from a heavily-regulated monopoly, not a half-forgotten research arm of a software or advertising company whose mission can best be summarized as "Hire smart people so the competition doesn't get them." Why the Bell Labs approach worked so well while most such heavily-subsidized and centralized research efforts fail is something I don't entirely understand. It could be because their charter was centered on the improvement of telecommunications in general. In the twentieth century, that covered endless acres of fertile intellectual ground. To extend the cliche', there was a lot of low-hanging fruit on the physics trees, and once it was picked, that was it for Bell Labs.

uptown 12y ago

Another interesting chart: https://twitter.com/hblodget/status/483577150805901312 https://twitter.com/hblodget/status/483577150805901312

natural219 12y ago

There's a specific mental trap -- I'll call this "scientism" -- that a lot of comments here are rapidly falling into. It's in treating macroeconomics as a "solved" problem, or putting too much faith in specific studies or sentences. That's not at all the proper way to look at macroeconomics. Our economy is unimaginably complex -- it's full of hundreds and millions of moving parts, with each single part (the human brain) driven by an even more complex system with hundreds of billions of parts (neurons). All of these parts are re-orienting themselves with new data in real time. What Sam is trying to say here, is that we don't know if these trends are "good" or "bad", or if they'll lead to bad outcomes or not, or in what time frame this will occur. All we know now -- and this I agree with -- is that something in our economy has changed permanently. And this should be a good cause to worry, or at least, should be taken as a call to arms to economists everywhere to try and figure out why our models aren't working as well as they used to. "Too large a proportion of recent "mathematical" economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols." - John Maynard Keynes

seoguru 12y ago

I wish everyone (or at least Sam Altman) would read "The Seven Deadly Innocent Frauds": http://goo.gl/6a22pX http://goo.gl/6a22pX less than 2 hour read. read it with an open mind and your worldview may change. watch Stephanie Kelton and Warren Mosler talk about gov debt and deficits: (2 hours!) https://www.youtube.com/watch?v=ba8XdDqZ-Jg https://www.youtube.com/watch?v=ba8XdDqZ-Jg Randall Wray on Job Guarantee vs Basic Income: http://www.economonitor.com/lrwray/2014/01/27/lets-compare-the-job-guarantee-to-the-alternatives-not-against-some-distant-utopian-vision/ http://www.economonitor.com/lrwray/2014/01/27/lets-compare-t... Mosler's current prescription: 1) A full FICA suspension, which raises take home pay by 7.6%, and, for businesses that are competitive, lowers prices as well, restoring sales/output/employment in short order 2) A $10/hr federally funded transition job for anyone willing and able to work to promote the transition from unemployment to private sector employment ...

privatedan 12y ago

A simplified example of what happens when trade deficits occur over a long enough period of time: Squanderville versus Thriftville (Warren Buffet) - http://www.freerepublic.com/focus/news/1053684/posts http://www.freerepublic.com/focus/news/1053684/posts

lukasm 12y ago

It's intriguing that US economy is slowing down since WWII. What are the reasons? 1. No significant improvements like agriculture. 2. Increasing regulations 3. Big middle class that have no strong motivation to advance further or have "enough money" for good living (modulo individuals) 4. Growth in domain which GDP doesn't capture e.g. Open Source 5. No obvious investments opportunities e.g. Highway

humanrebar 12y ago
6. Retirement of the baby boom generation. 7. Low birth rates.
scoofy 12y ago
I'd say it's probably just the world slowly but surely becoming less dependent on the U.S. economy after the entire world economy was destroyed in a War. And, yes, birthrates and longer retirement are probably relevant.

magoghm 12y ago

"On the positive side, but as you’d expect with near-zero rates, US equities are at record levels." I'm no so sure this should be on the positive side. Those equities are artificially inflated by central bank (indirect) manipulation. Those prices might not reflect the real value of the underlying assets and could collapse, which would once again put the whole financial system at risk.

rogerbinns 12y ago

I believe tax breaks don't show up as government spending. If for example Boeing is given a billion dollar tax break, then the government has a billion dollars loss and Boeing has a billion dollars more. But that won't show up as a billion dollars going to the government, and then spent on Boeing, even though that is exactly what is happening. I suspect that if tax breaks were accounted for, then government spending would be higher. It looks like US corporate welfare is around $200bn/year, although there are many larger estimates out there (eg count the banking bailouts). I haven't seen numbers for personal tax breaks, but adding them will make the number larger.

deleted 12y ago

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gadders 12y ago

I'm confused - Sam who held a fundraiser for Obama is now saying the economy is screwed?

gadders 12y ago
To expand further - is there not a certain tension in a) saying the US economy is screwed, and b) holding a fundraiser for the man that has presided over it for the last 6+ years?