Why We Are Still In Recession

Who cares about double-dip. We never left. Why? because you can't get out of a recession without consumers/labor income growth. While productivity has grown over the last few years, labor's share of national income continues to plummet. This implies that others (capitalists / profit-makers) are 'out of their recession' but consumers and laborers are not.

The BLS has a nice publication here.

Ordinarily a low cyclical labor share isn't necessarily a problem because firms can use profits to invest in new business ventures and eventually lower the unemployment rate and provide more compensation in a recovery. The problem here of course is that firms are too busy paying off past debts from poor decisions made a decade ago, or too skittish to do anything substantial with their profits at the moment. So that, in combination with the low labor share of income is like a double-whammy for consumers and laborers who see the haves continue to have and the have-nots continuing to have nothing.

My Take On the Fed Announcement That Sent Stocks Down

The Dow was up about 200 points before the Fed announcement, and then promptly moved negative. The Fed announced it would hold interest rates (at least to the degree it thinks they can control them) at historic lows through mid-2013. The Fed was hoping this concreteness might reduce some jitters about uncertainty, but here is my take on what Wall Street heard:

"The economy is even crappier than we thought, and crappier than many private economists think. So, we are going to continue to do the same impotent thing we've been doing for the past 3 years in hopes that somehow it will magically improve the next 2."

UPDATE:
I post this in then the Dow bounces back up 200 points.... Maybe it's not just the Fed doesn't know what to do.... ;)

Love this post

If you haven't, please head over and check out Daniel MacDonald's blog.

I particularly am loving this post.

Sad Sad World

It's a sad sad world, in economics circles at least, when one of the so-called leaders in economic education encourages (or at least implies) it's ok to keep your nose buried in your differential equations (and HIS textbooks I'm sure) as opposed to occasionally peeking up at the real world.

I'd just like to say, the whole concept of economic bubbles (one of the major causes of our most recent crisis) was not learned from a textbook Dr. Mankiw.

BTW, the most 'influential' research is the same as saying, most 'popular' which is code for "mainstream of mainstream economics." And as we all know, mainstream economics often ignores reality. How about all the fringe research in behavioral and pluralist economics. Oh that's right, it's been ignored for decades....

Who's Worse: Spending Obsessed Keynesians or Austerity Obsessed Tea Partiers?

I just can't decide which is worse, Kindergarten Keynesians like Paul Krugman - blind to the present disconnect between spending and jobs and to the irrationality of thinking our sin can be our sole savior, or one-minded Tea Partiers - blind to anything other than their own ideology at the expense of economic stability.

On Economic Definitions: Recession

Media's definition: 2 consecutive quarters of negative GDP growth
Economists' definition: Whenever the NBER says so....
And then there's reality:

Debt Debates: Who's to Blame

You could blame Republicans for not compromising

You could blame Tea Partiers for their ideological wall

But you'd be blaming the wrong persons

No, ultimate blame lies with one group: mainstream economics

Why? Where do the tea partiers and the conservative Republicans get this deep underlying notion that economic efficiency (ignoring inconvenient truths like externalities and fairness) is the goal our society should aspire to at all costs? Where do they get the mistaken notion that keeping taxes marginally lower is more important than reducing uncertainty for jobs and business growth? Where do they get the notion that growth can and should be pursued with a complete blind eye to issues of equity and fairness? Where do they get the notion that national income can be looked at in aggregate to be a barometer of economic well-being - as long as profits are rising, things must be going well....?

Where else, but those that taught them - mainstream economics professors across this country that continue to turn a blind eye to the real, full picture - including matters that other economists have been shunned for decades for trying to discuss.

So, if anyone is to be blamed or should feel ashamed it should be mainstream textbook authors that conceal real truth with half truths; and it should be teachers that can't pick their face up out of a glossy text to recognize that ability is as important as willingness - forever getting lost in the assumptions; and it should be researchers who hide behind differential equations and so called 'simulation' models; and it should be students that take it all in without blinking.

Welcome to our future.

Heed the warning, economists.