Tuesday, September 16, 2014

Inflation is an odd measurment

mainly because there are millions of things measured in price, none of them measured simultaneously, and few of them falling into neat categories. Hence, price theory is difficult.

Monetary inflation, sort of a meaningless statement. Are dollar/dollar going up or down? I think monetary inflation is log(one).

Consumer inflation, high or low? Depends on wages, employment and savings.

Nominal GDP is down, has been going down, and looks to go down in the future. But all that also applies to M1 Velocity, a measure of cash transaction rates.  So if consumers buy less often, do they buy more quantity per transaction? A drop in transaction rates causes a trend in inflation, probably up. We prefer the comfort of as needed purchases, I think. The price of convenience is too high. How well does the BLS calibrate this?


Monday, September 15, 2014

The jobs picture is all cyclical

Here the Yahoo reporter repeats all the old rules about structural vs cyclical unemployment.  Demographics is cyclical, cyclical on a 30 year period.  Still caused by DC where the tax and benefit system causes demographic changes over time.  Why the phase alignment of the baby boomers? Simple, the social security system incentivizes cycles. After an eight year recession cycle, retirement become counted in units of eight years, plus or minus. That, in turn, reinforces the eight year. What is different is  the thirty year cycle, counted in units of eight, has reached retirement age and the two cycles coincide.
Yahoo: The Federal Reserve has had its foot on the gas for so long that the conventional wisdom says a tap of the brakes can’t be far away. But just when and how hard the Fed should hit those brakes is still the subject of furious debate. The right answer — what’s really best for the economy — depends in large part on how much “slack” there is in the labor market, and economists readily admit that’s a hard measure to gauge. 
Since the Great Recession, the labor force participation rate — the percentage of the population gainfully employed or looking for work — has dropped significantly. Part of the reason is demographic, because the baby boom generation is hitting retirement age. As a result, labor force participation started declining before the recession and is projected to continue that decline for at least another decade. Demographic changes and other similar issues not specifically related to economic conditions are referred to as “structural” effects. 
Part of the change clearly has to do with the economic cycle — “cyclical” effects. It hasn’t just been older Americans dropping out of the workforce; the percentage of men between ages 25 and 54 has fallen to multi-decade lows. The aftermath of the Great Recession saw extraordinarily high levels of long-term unemployment. Many of those who were unemployed for more than 27 months (the rough definition of “long-term” joblessness) became “discouraged” and left the labor force, which meant that they were no longer counted among the unemployed for purposes of official recordkeeping.

Wacked out central planning

Not only do the DC Swamp Creatures make some 3 trillion in new debt roll over in Q3, but they saddle the states with a 1.5% GDP jump in health care costs, all due today, then make that worse by putting all of it on subsidized Obamacare, boosting the federal debt payable another 1.5% of GDP. All of this crap hitting the New York debt machine in the next few months. And the boneheads wonder why we have recessions.
Yahoo: WASHINGTON (AP) — Income inequality is taking a toll on state governments.
The widening gap between the wealthiest Americans and everyone else has been matched by a slowdown in state tax revenue, according to a report being released Monday by Standard & Poor's.
Even as income for the affluent has accelerated, it's barely kept pace with inflation for most other people. That trend can mean a double-whammy for states: The wealthy often manage to shield much of their income from taxes. And they tend to spend less of it than others do, thereby limiting sales tax revenue.

Saturday, September 13, 2014

Ben Leubsdorf at the WSJ says


Health-Care Revenue Rebound Could Boost U.S. Economic Growth
Total revenue at health-care and social-assistance firms rose 3% in the second quarter from the first three months of the year, the Commerce Department said Thursday in its Quarterly Services Survey. Hospital revenue rose 2.8% from the first quarter and revenue at physician offices jumped 4.1%.
But how does this surge affect other sectors? He does not say.  Here is how it affects government debt service:
 The blue line, straight up.  It is Obamacare bills and roll over of debt all piling up now. And that is driving up the ten year.  Now up to 2.6, but should be 2.8 with the two year at .56. Likely to rise to 3.0 plus much faster than economists think.

The high rates are driving up mortgage costs, and mortgage rates are the single important determinant of the housing market.



We are also seeing the dollar rise as a result of higher rates. That in turn drives up imports, further dropping domestic growth. And capital gains taxes from the market are running low after the one time payout.  The result of the Obamacare bunching will be several downward revisions og GDP growth.


How about California home sales?
SST September 11, 2014 - An estimated 37,228 new and resale houses and condos sold statewide in August. That was down 6.0 percent from 39,608 in July, and down 12.5 percent from 42,546 sales in August 2013, according to CoreLogic DataQuick data.

August sales have varied from a low of 29,764 in 1992 to a high of 73,285 in 2005. Last month's sales were 21.6 percent below the average of 47,456 sales for all the months of August since 1988, when Irvine-based CoreLogic DataQuick's statistics begin. California sales haven’t been above average for any month in more than eight years.
And part time work?
 Part time work shoots up just when healthcare spending goes up. Bad indicator, it means fewer taxes and fewer Obamacare taxes especially. Employment growth over all is stable, no batch of new jobs are coming down the line.


How much new debt?
Optimistically, Obamacare adds 1% of GDP to the deficit. Realistically, make that 2%.  DC is stable when the debt service, including the social security payments, are at the ten year rate. The deficit is now 3.56% of GDP, but if that jumps to 5% then the ten year goes to 3.5%.

But consumer spending is up. Yes, byt 2.5%, was the number I think.  But over half of that will go to imports and be a negative on growth.

How bad a recession? Maybe be a simple slog, a few quarters of struggle as the interest payments work their way through. But it could also be a continuing build up of Obamacare bills, we do not know. Watch California, the previous recession started there, the current slow down will likely start there.

Voters threaten end of the world because of Obama

Voter approval down to 42% with disapproval up to 51%. Evidently voters would prefer Pelosi to threaten civilization rather than support Obama and his Senators.

My favorite secessionist threatens the end of the world

But why would she care about the Senate in some swamp back east, she has already declared Federal law null and void while Jerry Brown has completed out independence from the USA and merger with Mexico. President Nieto needs to keep his political underlings in line.
Daikly Caller: On the one hand, California U.S. Rep. Nancy Pelosi claims that Democrats are not “fear-mongers;” on the other hand, she believes civilization is doomed if Republicans take control of the Senate from Democrats in November. The former speaker of the House made those dramatic, incongruous statements on “Real Time with Bill Maher,” which aired live from Washington, D.C. Friday. Maher asked Pelosi about recent polling which shows that the GOP is likely to take over the upper chamber and asked, given gridlock in Washingon, why it matters that Democrats keep control. “It would be very important for the Democrats to retain control of the Senate,” Pelosi told Maher. “Civilization as we know it today would be in jeopardy if the Republicans win the Senate.”

Friday, September 12, 2014

The recession is not quite here yet

But we are getting close.
(CNSNews.com) - Inflation-adjusted federal tax revenues hit a record $2,663,426,000,000 for the first 11 months of the fiscal year this August, but the federal government still ran a $589,185,000,000 deficit during that time, according to the latest Monthly Treasury Statement.
Each month, the Treasury publishes the government’s “total receipts,” including all revenue from individual income taxes, corporate income taxes, social insurance and retirement taxes (including Social Security and Medicare taxes), unemployment insurance taxes, excise taxes, estate and gift taxes, customs duties, and “miscellaneous receipts.”
The largest share of the tax revenue so far this year has come from individual income taxes, which totaled $1,233,274,000,000 in the first 11 months of fiscal 2014.

Did Mexico grant amnesty to all Californians?

I missed the exact wording of President Nieto when he visited. As I understand it, we Californians are now the other Mexico.  So how do I apply for an absentee ballot from Mexico?  Did anyone get the exact procedure or is this still being worked out?

How's the vacuum theory coming, you ask?

I am looking at tanh'(n)/tanh(n) as the determining factor in quant values for quants of integer n. We all know these form a two binary system with a trinomial; (perfect prime).  These forms will be the standard finite elements for spherical differentials, sphere packing.

How close am I? I am so far away that I expect a smart mathematician to have the answer well before I can say wxMaxima, my favorite math tool.

Wednesday, September 10, 2014

John Cochrane nails it

There are economists who know statistics and stability. Chris Sims, Roger Farmer and John Cochrane are a few examples, there are many more. So the Keynesian idea that some magical expectation operatorss us in the head and we undergo personality change is horse manure, frankly.

Grumpy Economist:
The Friedman Optimal Quantity and Financial Stability Milton Friedman long ago wrote a very nice article, showing that the optimum state of monetary affairs is a zero short-term rate, with slow deflation giving rise to a small positive short-term real interest rate. Friedman explained the optimal quantity in terms of "shoe-leather" costs of inflation. Interest rates are above zero, people go to the bank more often and hold less cash, to avoid lost interest. This is a socially unproductive activity. Bob Lucas once added up the area under the money demand curve to get a sense of this social cost, and came up with about 1% of GDP. Not bad, but not earth-shattering.
Simple really. Keynesians contend that having a Fed that always acts as the short term monopoly lender causes NGDP growth, the total money circulating increases relative to reak growth. Yet a steady state analysis tells us that the Fed, in doing so, actually causes deflation because the Fed is earning unencumbered money with each interest payment it receives.

How did Keynes miss such an obvious problem of connecting two dots on a flat paper? I dunno, I suspect he intended to be fraudulent from the start.