EVERY time? Are you sure?
Or are you perhaps neglecting to count the times when they don’t?
For how long? Again, that’s a pointless way to do things.
I can just wait for your natural death and “BAM”, my prediction is correct. That’s a worthless prediction, so why defend it, even in part?
So what?
Arguments aren’t either “good” or “nutjob”.
His arguments, no matter how sane, have not borne fruit. It happens. It happens a lot in science, actually. And scientists then generally have to figure out why, modify their underlying models, and try to do better next time. When they are wrong, it doesn’t make them nutjobs. But when they persist in defending debunked claims, it is fair to wonder about their objectivity and if there’s some other non-scientific reason (political? economic? other?) they wish to hang on to discredited work.
But, for some reason, some economists and many people who listen to them don’t change their tune when things don’t pan out, they claim the world around them is tone deaf instead.
How long can we have a recovery w/o consumption by the bottom 80%? Maybe it is possible and we are converting to a plutonomy and things will chug along. I thought the top 20% already made up something like 50%+ of consumer spending. Can that trend continue, the top 20% making up 70%+ of consumer spending?
Simon Johnson claims that the US will chug along going from crash to crash, or we will hit a crash so big we are forced to change course. No idea if/when that will happen.
However he wrote that article 5 1/2 years ago, and he said we were ‘running out of time’ to avert a more serious depression and that didn’t happen.
We’re not “converting” to a plutocracy.
Whatever plutocratic elements that exist in our society – and they do exist – have always existed. This is not something new or different or unique. If we’re shifting at all, it’s small steps. There is no major rewriting of the entire social contract. You can’t look at the history of this country, or any other, and see anything else than governance by small groups. And if anything, the long-term trend is in the opposite direction. Today we don’t restrict voting to property-owning white men.
The top quintile makes up slightly less than 40% of consumption expenditures.
You not only get the number wrong, but you then ponder an extrapolation from the false figures.
I might suggest that we should first have a firm idea of what the reality is today before we make estimates of where things are going tomorrow, because prediction is much, much, much harder than just comparing numbers in an easily googleable table. Keep in mind that even if we identify a real trend today, that trend won’t necessarily last. The longer the time line, the higher the chance that other things will happen. History does not move in a straight line. You can essentially never extrapolate rigid lines and expect reality to back you up forever. Reality eventually curves.
He compared the durability of institutions of the US to those of a “Banana Republic”.
I don’t really think it’s any surprise his prediction has been wrong.
Okay, this index shows a steep decline from November '14 to January '15. How does the rise and fall of the BDI correspond historically with stock market fluctuations? Is the current slide a predictor for the economy or just a reflection of current data?
As explained to me the Baltic Dry index measures how much raw materials are being transported around the world (shipping) vs. capacity. The low numbers indicate a massive overcapacity. So if very little raw materials are being shipped, how does that compare to a rising SP500 and a rising DJIA when the actual raw materials required for base manufacturing just are not there? Is it possible Wall Street is just churning stocks to create higher indices without an underlying basis for real growth?
The Administration recently touted all this great economic news. But stagnant jobs growth when it came to real jobs employed by real people. So where is the money actually going? Depending upon which report you read more than 90/95/99 percent of all growth (greater interactive tool on this link) went to the top one percent of earners.
So for me, a literally dead BDI (no raw materials moving so little real manufacturing), phenomenal SP500/DJIA growth (with no underlying basis for growth), no real growth for 99 percent of all incomer earners, and great economic news just don’t work. The rich are churing the markets for themselves at the expense of everyone else. It’s only a matter of time before what is top-heavy falls over. So will falling oil prices be what does it? I don’t know but what if the economies of Russia and Venezuela implode? Who will they take with them? Remember the current US federal budget rolled backed financial safeguards so if various notes become due earlier than designed, how many US-based banks will be on the hook (in turn to be bailed out by the 99 percent who have no money?).
Part of the discrepancy is that the U.S. is currently doing better than other countries. We went farther down in the hole dug in 2008 but have rebounded, while Europe has been hurt by its austerity measures, oil countries by the drop in oil prices, and China’s growth has been slowing and its economy becoming more consumer-driven, as this Forbes article suggests. Markets are therefore sluggish worldwide, naturally leading toward overcapacity. With the U.S. economy less dependent on raw material imports, a dead BDI says little about it.
It’s true that the U.S. economy is heavily unequal, but so are all the others. I can’t vouch for the accuracy of this blog report but it appears to cite a sound report.
I don’t doubt that the world economy is in the throws of a major systemic change that will make middle class security far more difficult. That is not the same as saying that the U.S. economy is going into depression in 2015 or that the world economy is going to collapse. It may, for any number of reasons. But the actual state of the U.S. economy as a whole is the best it’s been since 2007, and may be better than it was then, and all the indicators that have been going up since 2008 are still going up.
The world has been going to hell in a handbasket my entire life, and virtually no one on the planet 30 or 40 or 50 years ago predicted the incredible worldwide prosperity we are experiencing. A billion people have entered the middle class in the past couple of decades! Pundits always predicted disaster. For some reason that sells better. One day it might come true, but their track record hovers very near zero. I don’t know the future, but I can read the past very well.
Wow what a genius. Why are you wasting time with us barely literate simpletons with your arrogance if you are certain that the ex chief economist of the IMF is full of shit about economics compared to you.
Also the term plutonomy was coined to describe nations like the US or Australia that are wealthy and moving towards more inequality
You can have a discussion about economics w/o being a douchebag.
I am reminded of the standard disclaimer, “Past performance does not guarantee future results.”
However, the massive shift of wealth out of the middle class to the rich/super rich, combined with a blind ignorance by the masses is for me a huge red flag.
You would benefit from reading more slowly and more carefully and more graciously.
I didn’t say the ex-chief economist of the IMF was “full of shit”. I didn’t say anything even remotely resembling that. What I said was:
That was the entirety of my comment on him.
Your strange response is not commensurate to my two simple sentences.
If you’re interested in economic discussions, the way an adult would discuss these issues, then you should be prepared for people making mistakes and making poor predictions. Even people you like. Especially people you like. I do it. The ex-chief of the IMF does it. Your favorite economist [insert name here] does it. You do it – you yourself have graced this thread with error. Everyone does it. Economists are people. People are stupid.
Having a fancy title or a prestigious position is not proof against error or plain bad thinking. Need more examples beyond what you’re already cited? Here’s something that tickled my fancy recently from Ed Prescott. Prescott believes that business cycles are the result of random shocks about which the government can do essentially nothing. Nearly anything the government would try to do, he believes, would make things worse. I don’t agree with him on this. In fact, I think it’s pretty fucking stupid. He has a shiny piece of metal from Sweden and I don’t, but I still happen to think it’s pretty fucking stupid. His fancy prize is not protection against error. Quite possibly the opposite, in fact, since he might actually receive more deference today than his ideas deserve.
But the recent recession has not been kind to his precious baby of an idea. He is on the defensive. Finally.
He has a relatively recent paper out, and here’s a summary:
When the data disagrees with his theory, the data must be wrong! I love that. So ridiculous. So human.
For the record, I’m fine with asserting straight-up that Prescott’s full of shit, on this particular issue. (I’m still willing to cite him on other issues.) I don’t think Simon Johnson was full of shit when he wrote that article. I have a lot more sympathy for Simon Johnson’s bad prediction because his was a much harder mistake to avoid. His basic perception wasn’t wrong: there is parallel corruption. That parallel is so easy to see that it’s a trap. Seeing the corruption doesn’t give us any tools for measuring its actual size in a Banana Republic vs the US, or for measuring the ability of broader institutions in disparate countries to be resilient against any possible damage from that corruption. There are no numbers for those sorts of things.
So he was wrong. You have a choice when you’re caught in error. You can get huffy and stick words in people’s mouths, or even act like Prescott and make an even more complicated story that would keep you from ever having to change your mind. Or… you can respond graciously and update your beliefs.
Here’s a claim from the OP’s first cite:
This is a very poorly thought out thing to say, and it makes me question the author’s credibility.
The British Empire was a worldwide colonial empire. Set all the colonies free and Britain becomes just an island again. The US, by contrast, is half of freaking North America, a positively awesome slice of real estate. This massive national territory isn’t just going to wither away under any but the most extraordinary circumstances. Our military isn’t going to just vanish, and our economy will be formidable in size, even during a depression.
Sure, the US may lose relative influence over world affairs and generally be less dominant. There will probably be recessions and even depressions. But comparing the outcome for the US to the breakup of the British Empire is just ridiculous.
Moderator Warning
Attack the post, not the poster. If you want to attack the poster, as you’ve done here, do it in the Pit.
This is an official warning for personal insults outside of the Pit.
Moderator Action
This topic has resulted in a great deal of debate (not surprising, given the subject matter). As such, the thread has progressed in a way that is better suited to GD than GQ.
Moving thread from General Questions to Great Debates.
Why was his abuse ok but mine isn’t? The rules here are very stupid, I’ve seen it many times. You can insult posters and once they fight back they get in trouble. It is idiotic.
Where is the post where he insulted you? I don’t see any personal insults against you in this thread. The only personal comment he made against you was that he thought that you were wrong, and that’s not an insult.
If you think his post is incorrect, attack the post, not the poster. Instead of sarcastically calling him a genius, say what you think is wrong about his post, as he is doing to yours. You are more than free to defend your ideas. What you can’t do is insult other posters. Take the insults to the Pit. That’s what it’s for.
I’m going to join the bandwagon and say that an economic prediction with no timeframe, just like almost any prediction with no time frame, is completely meaningless twaddle. Seriously, how is this not obvious? How would anyone ever be able to tell if his prediction was wrong? A prediction that fails the test of falsifiability is completely useless. This is true in any part of reality. And like most of the people predicting inflation, Jim Rickards has been wrong. He was just smart enough to not give his prediction a way of being proven wrong.
But even more to the point, the reason he predicted inflation, QE, was also wrong. The best models we have in dealing with the economy have some interesting things to say about the current recession, where savings interest rates brush up against the zero lower bound. Specifically, that actions like QE are non-inflationary. When we print money, the actual value doesn’t decrease. It’s weird, counterintuitive, and beautifully explains demand-side slumps.
My question is did any of the people who were “correct” in their predictions make money on them? (Besides selling “I told you so” books.) If they were so sure about their predictions they could have made economic bets that would work in their favor. If they didn’t make those bets then they weren’t sufficiently secure in their predictions for them to have any predictive power.
When someone says “I believe the economy will go into a depression and I’ve put all my investments into derivatives” then I will (possibly) pay attention.
On a side note, how have I been here so long and didn’t know a SDMB member had the name “by-tor”?!?
Then you should be asking yourself, is this something entirely new in history or has it happened before, and if so what was the result?
In fact, it has happened before in the U.S. The era of the Trusts, around the turn of the 20th century, saw huge increases in the wealth of the upper tier and stagnant wages for the masses, much as we see today. The trusts were broken, labor made gains in wages. All it took were massive governmental intervention, labor disputes bordering on insurrection, the Great Depression, and World War II. After WWII we entered a brief period when workers were highly compensated and secure and executives took good but not spectacular salaries.
Most of us grew up in that period and people tend to assume that the world they grew up in is the norm. That’s wrong. The world of the 50s and subsequent decades was an anomaly. (The stock market happened to be stagnant throughout the 50s and 60s, another anomaly. When that changed so did wealth, and greed became good.) It was produced by a series of unlikely, unexpected disruptions that cannot be foreseen to happen in a similar fashion in the future.
Ironically, the future that is most likely to occur is another series of unlikely, unexpected disruptions. I don’t know what those are, and neither does anyone else. But I am on solid ground when I say that if you don’t understand how we got to today’s world anything you say about its continuance is suspect.
Books predicting doom always sell well. “I told you so” books never appear, because none of the dooms come through on schedule and the dooms that do are always different and unexpected. Why do people buy them? I think that most people never have felt that the times are good, even back in the days where we retrospectively assign rosy sunshine. Absolute income doesn’t matter; if you are living beyond your means you feel panic whether you earn $20,000 or $50,000 or $200,000. Since studies show that only a tiny percentage of families have sufficient money put away for retirement, almost every family falls into this category. It must feel good to be told that it’s all going to go bust for reasons beyond your financial illiteracy and you might as well be the grasshopper instead of the ant.
The flip side is all those money-making brochures, pamphlets, and newsletters. Secure minds would understand that anyone who had a workable scheme would just make money with it and not tell others. Panicky, insecure people reach out to any easy-money hoax, including lotteries.
A few people have created firms to exploit their theories, probably the most famous being Long-Term Capital Management, a fabulous misnomer since their entire strategy was to exploit short-term mispricings in the market. A totally unexpected change in the market wiped them out. But these funds were out of the ordinary investor’s reach. Gold funds aren’t. Ask all the people who bought gold at $2,000 expecting the country to flatline.
One old weird trick that I use I got from a local Mom…
Banners at the bottom of my phone apps are unreliable.
Lately I’ve been seeing a number of banners (ads on the Weather.com app, maybe?) implying that Warren Buffet is expecting a depression and stock crash.
So I am suspect that Mr Buffet is expecting a depression.
As a pessimist, I personally am always expecting one. And eventually, I’ll be right.
One person who did make money off of the 1987 and late 2000 troubles was Nassim Taleb. Somewhat ironically, his main thesis is that the economy is to a large extent characterized by large, unexpected, hard to predict events. He did not so much “predict” these events, as predict that people in the industry were underestimating risk. And he certainly hasn’t been uniformly successful: he’s had lengthy dry spells as well. And recently, he’s made money not as a trader but as an author and academic, somewhat reinforcing the point in this thread. Anyways, I think that he is in many aspects correct: the events that most affect the economy tend to be large, unexpected, and inherently unpredictable.