Economics

Discussion in 'Money & Finances' started by Harry Havens, Jun 29, 2017.

  1. Harry Havens

    Harry Havens Very Well-Known Member
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    Not sure why it gave you fits. Been there done that. While both economics and engineering have equations and formulas for calculating stresses, only engineering must fully appreciate the variables of the human independence of thought, as well as a broad application of materials... which results in the so called misconception of "over engineering".

    The various fields of economics consider humans as predictable, as is stated in such views as humans as selfish and/or rational, (Austrian, Neoclassists, Marxists, Classical). Except for the Austrian view, the others consider the world as predictable.

    To me, economics is strangely intriguing, as it diverges radically from my background. Economists prefer to think of themselves as a "science", which baffles me... considering the track record of predicting recessions that never happened, while missing the recessions that did.
     
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  2. Harry Havens

    Harry Havens Very Well-Known Member
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    The BLS released the Consumer Inflation Report for April.

    You can read the link for details.

    Here's a chart for the past 12 months...
    upload_2019-5-10_12-39-11.png
    Dont' read too much into the sharp increase from late last year. Since the late 80s, the inflation tends to trend upward during the 1st Quarter of a year and trailing off during the 4th Quarter. Historically, pre- WW2, showed the reverse of that. The intervening years indicated the swing to the current situation. This may account for some of the weakness in GDP growth during the 1st quarter of the past several years, although this year is an outlier.

    The CPI-W has increased 1.9% y/y.
     
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  3. Thomas Stearn

    Thomas Stearn Very Well-Known Member
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    I've stumbled over these two statements. Is "predicting a crisis" really a realistic aim for economists? I don't expect them to be capable of doing that. If they could forecast a recessions with all its implications on share prices, income, interest rates, etc. those economist could become rich. It has never happened. Even the big shots in the field are apparently unable to do that nor are groups of pundits working together. After all, economic development is influenced by too many factors - human factors which can hardly be predicted. If economists are (partly) right, as in the case of one economist who predicted the financial crisis in 2008, it's one lucky shot and not repeatable.
    Such being the case, it seems to me that a large number of economists have been taking a more modest approach to predicting human behavior.
    And why should economics not be a (social) science? Doesn't it meet the characteristics of what science is all about? It does not belong to "natural science", though, but why should it?
     
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  4. Don Alaska

    Don Alaska Very Well-Known Member
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    My college roommate, who became a math professor, always said the social science courses spend the first half of the semester telling you why they are a science and the second half of the semester proving to you that they aren't a science. I also find it interesting that the Federal Reserve was patterned after the Deutschbank and was supposed to stop the extremes in the economy, and just a decade or so after implementation, we dell into the worst down cycle of our history.
     
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  5. Harry Havens

    Harry Havens Very Well-Known Member
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    I agree that they could not possibly predict a "crisis". They tend to be retroactive in that sense. Certainly they have started leaning towards the concept of human unpredictability, as with regards to spending habits, etc. Their focus has become more political, imo, with the result being chaos across the various economic ideologies. There needs to be more peer review, prior to taking to social and mass media with their ideas. Unfortunately the divisions across the various fields of economic theory, are beginning to resemble a troll farm. Fortunately for them, few people take heed or notice.
     
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  6. Harry Havens

    Harry Havens Very Well-Known Member
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    I've vented over this previously, so a complete rehash is not necessary. There seems to be a growing worry over the anticipated wage inflation not taking place, with unemployment numbers so low. Those that clung to the notion that a rapidly dropping civilian labor force participation of the past 10 years was due to a massive retirement exodus of boomers, seem to be the ones worried, as the worrying drop that had republicans reeling was actually expected by democrats. Generally, this fell along political lines.
    upload_2019-5-13_18-56-11.png

    Put simply the participation rate is holding steady. Jobs are being created, but the number of people in the Civilian Labor Force is growing at the same rate. Until there is an upward bias to the participation rate, upward pressure on wages cannot truly be expected. Simple math tells us the numerator (employed) must rise at a faster rate than the denominator (total work force). Of course, if the denominator were to drop, as boomers hit 65 and retire, then that would create upward wage pressures.

    To summarize... the wisdom that the falling civilian labor force participation rate was due to boomers retiring, should now be replaced with the boomers not retiring fast enough, is slowing the rise in wages.

    In any case, I am a boomer and it is all my fault. Get over it!

    Rant now officially over.
     
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  7. Harry Havens

    Harry Havens Very Well-Known Member
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    I guess the U.K. will soon have a new P.M. Not sure what that actually means, but it has given the talking heads on SkyNews some fresh fodder. You have to give May credit... she managed to unite her country, but probably not in a good way for her. Of course, having a remainer lead the way on Brexit was probably not a good idea.

    All this coming on the heels of a vote for M.E.P.s (Members of the European Parliament). It amazes me how something called the Brexit Party appears set to win in something they totally abhor.

    Oh well, the storm clouds are brewing on this side of the pond, so it is kinda nice to see someone else messed up. Misery truly does love company. :confused:
     
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  8. Don Alaska

    Don Alaska Very Well-Known Member
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    This is a bit of an aside, but I have been told by those in the know that many of the jobs in the states (including Alaska) in which recreational marijuana is legal are going unfilled because it is almost impossible to find applicants who can pass the drug tests required for health care, transportation and heavy construction, even at 18 when it is illegal for that age group.
     
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  9. Harry Havens

    Harry Havens Very Well-Known Member
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    I guess a lot of companies use drug tests as a way to "weed" out applicants. On the other hand, I have heard that some companies have stopped random drug tests of employees. Probably because turnover was [drum roll] " too high".
     
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  10. Harry Havens

    Harry Havens Very Well-Known Member
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    Curiousity about Brexit has left my head spinning. Apparently nothing has really been settled by the PM's resignation and the EU parliament vote.

    If nothing is done, then a no deal brexit kicks in after Halloween. Apparently the parliament vote against a no deal brexit wasn't really a law and any foot dragging by the new PM could in fact result in a hard brexit, unless this and that were to happen. This and that being new parliament elections, etc. etc. Such an occurrence, based on the EUP elections would certainly be devastating to the conservative party... as well as labour. With the extreme likelihood of a new PM being from the conservative party, what nutjob actually thinks a new election would be in the offing. But, as stated in a previous post... they did put a remainer in charge of brexit negotiations and stood brexiteers for the European Parliament, so anything is possible.

    On the mainland side of the channel, several EU members have said negotiations are over and May's deal is the only deal. So it would seem the cards are stacked for a hard brexit on halloween.

    I'm not buying that premise. Here is a nice article on a hard brexit, which doesn't answer all the questions... but should clear some air.

    A lot has been made about how problems will arise with imports from the EU and the impact it would have on the U.K. as well as how it would impact exports to the EU and elsewhere. AND there should be no doubt the problems are real.

    It is the who/whom (within the EU) that would be impacted that should also be considered. Trade data from 2017, provides some clues. (Note the link is a bit messy at times).

    In 2017, the UK had an overall trade deficit of $223B, of which $159B was with its EU partners. Of that $159B, $52.3B was with Germany. The U.K. exported $38.6B to Germany and imported $90.3B. The aforementioned $52.3B trade surplus with the U.K. represents about 17.4% of Germany's global leading trade surplus.

    While many EU leaders may have stated negotiations are over... it ain't over until Germany says it's over, imo.

    3 Years after a referendum to leave the E.U., the U.K is poised to... _______________.

    At least that's my conclusion.
     
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  11. Harry Havens

    Harry Havens Very Well-Known Member
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    I'm not finished with Brexit, etc. and have a few questions.
    First off...
    In 2015, there were 30,697,525 total votes cast for parliament.
    In 2016, there were 33,577,342 total votes cast for the EU referendum.
    In 2017, there were 32,204,124 total votes cast for parliament.
    In 2019, there were 17,199,701 total votes cast for the EU parliament.

    It seems everyone is claiming some symbolic victory based on those last results... and predicting the future..
    upload_2019-5-28_12-1-27.png

    But when comparing the votes from the EU referendum to the EU parliament vote, it really changes...
    upload_2019-5-28_12-1-50.png

    There seems to be a lot of unknowns that need to be understood prior to jumping for joy, imo.

    What am I missing?
     
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  12. Harry Havens

    Harry Havens Very Well-Known Member
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    It happens from time to time and this is one of those times.

    I have been recently reading where economists are predicting the odds for a recession as getting higher. The issues being put forth are trade wars, slowing economic growth, inverted yield curve, etc.

    There are indications that the 2qtr has slowed, but given the weakest current prediction (2%), it is not really that bad, imo. SOURCE
    upload_2019-6-6_19-2-39.png SOURCE

    As to the yield curve, let's not forget that it did invert circa end of 2015, beginning of 2016. The yield curve as a predictor of recessions may be rather passe. It might possibly predict a slowing economy, but the jury is still out. We must remember that the BEA might very well have an intial release for a qtr, and then 2 additional reports the following months... everything is up for revision at the end of every July.
    upload_2019-6-6_19-3-18.png
    As to a trade war... it certainly would/should create inflation and would be ultimately passed on to the consumer. Oddly, that would put the FED in a position to theoretically raise interest rates, unless the inflation was such it caused a further slowing in the economy. The latter would necessitate a rate cut. I guess what I am saying is... the jury is still out. As an aside, tariffs should be placed on all goods, from every country... if the aim is to reshore jobs. Picking and choosing would only allow movements to other low wage countries. While there seems to be a preception that companies are rushing back to the U.S., the data indicates that reshoring is not keeping up pace with the rise of foreign made goods. SOURCE

    Another problem with recession thinking is the mood of the public.
    upload_2019-6-6_19-12-57.png SOURCE
    Currently not a harbinger of bad things to come. IF consumer confidence begins to wane, it most likely is from some "trigger". Unfortunately, there are a number of potential triggers in the next 17 months... an election, a debt ceiling battle that will most likely be shaped by an election, etc. etc.

    In my opinion, when economists say the odds or a recession are rising, they are basically saying that it likely will, due to politicians and political parties firmly entrenched in winning an election, using "principled" stands as cover for a lust of recession.
     
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  13. Don Alaska

    Don Alaska Very Well-Known Member
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    There are Federal regulations for transportation, some aspects of construction, and, I believe, for many Federal contractors. You wouldn't want pilots, bus drivers, train conductors and engineers, and high-rise crane operators to be high while on the job. There are problems with the time frame when test for cannabinoids, as it is fat-soluble and stays in the system for long periods of time.
     
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  14. Harry Havens

    Harry Havens Very Well-Known Member
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    Another month... another CPI release from the BLS.

    A different chart showing the trends of the past few years. This year is not out of the norm, imo and actually less of an upslope from preceding year's trend.
    upload_2019-6-12_10-35-13.png
    With all the talk of trade wars, etc., I thought it would be relevant to compare previous years. But then, the actual impact on inflation might get lost in the muddle. IF all China goods are subject to 25% tariff, the impact would likely be about $900 per household. Even I can calculate that impact, and it would be inflationary, but to what extent? The answer would be about 1.8%. As the tariff implementation has been staggered across a few months, the impact would be spread across those months. I would expect most of the impact to be in the fall, considering the latest round.

    No one can be sure of the actual impact, as imports from China's neighbors have started to surge. One theory has Chinese goods moving into those countries and the being labels as from that country. Not likely a large volume, imo, but does show the inherent flaws of a trade policy targeting any single country.

    As to the way too early to predict C.O.L.A., something around 1.7%.
     
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