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Strong underlying data, though series very volatile
Orders ex-aircraft and defense up 4.1%
Here is what the last 6mths look like: +4.1%; -5.3%; +3.6%; +4.7%; -2.8%; +6.7%
Y/Y gwth is 22.2%
Trends look like reversal of prior month: auto sector weaker, computers and machinery stronger
“So basically, we can do this cleanly or we can do this ugly. And ugly is the way we’re going.”
Sounds like Warren…..
Defaults Account for Most of Pared Down Debt
“There are two ways, though, that the debts can decline: People can pay off existing loans, or they can renege on the loans, forcing the lender to charge them off. As it happens, the latter accounted for almost all the decline.”
“when everyone tries to pay down debt at the same time, the result is a depressed economy and falling inflation, which cause the ratio of debt to income to rise if anything.”
Here we have another mainstream economist who cant stop comparing a Stock to a Flow when he invokes the “debt (stock) to income (flow) ratio”. Then, there is no context or consideration of policy options that could address the Flow that is the denominator in this ratio. Its all about the Stock in the numerator.
“That is, we’re living in a world in which the twin paradoxes of thrift and deleveraging hold, and hence in which individual virtue ends up being collective vice.”
To Krugman, apparently an increase in the debt to income ratio is a ‘vice’, that cannot be avoided by policies that specifically increase the Flow that is the denominator.
Lately, I haven’t given increasing income a lot of thought, except for my own 🙂
We currently see a fierce debate about raising low income relative to high income, through taxation, resulting in ‘unnecessary’ division and gridlock.
Perhaps decreasing debt relative to income would be an easy political sell?
Politically, how do you increase overall income except through tax cuts? How do you decrease debt except through paydown , default, or forgiveness?
I’d suggest the ‘easiest’ non-tax policy, would involve politically popular structural changes in the economy opening access to government regulated monopolies (allow citizens to borrow from fed using tsy secs as collateral) and opening access to government spending (breaking up small contracts into digestible chunks) would also be easy. Amazon’s mechanical turk could work on a grand scale. Dave B could have been paid to provide the transcript for that song!
Currently Krugman is only railing against the idea we have structural unemployment. He hasn’t taken the next step to address the structural issues in the economy that lead to income inequality, lack of aggregate demand and high debt/income ratios.
Most economists focus on monetary policy. Of economists/politicians that focus on fiscal policy, most focus on tax policy which mostly affects the income of those who pay taxes or the extremely rich rather than spending policy which affects the income of those that have monopolized government spending.
Structural Problems, Not Structural Unemployment
Maxine Udall responds to my writing about structural unemployment and the absence thereof by arguing that the US economy probably does have some major structural problems. She’s right, of course —
“The fact that the financial sector’s share of GDP has grown so dramatically over the last 30 years suggests that other sectors have lost out in terms of the growth and productivity they might otherwise have delivered to the benefit of us all. A massive drain such as this must have affected both physical and human capital in those sectors as well as affecting the larger economy we would otherwise expect to see. Unfortunately, we have no way of knowing what is the conterfactual economy we would have observed without the bubble(s). (Note that if George Soros is correct and the last 30 years have been superbubble, then I think the effect I’m trying to describe is even more entrenched and difficult to detect.)”
He also mentions “fallacy of composition” in referring to private debt.
Sounds like he’s been reading MMT literature.