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EconProf
ParticipantI just now read the article and interview and congratulate Rich, not only on his prescience but his leap into (correct) forecasting without formal training. It is a reminder that degrees often mean little, and one can be accomplished even if self-taught.
It was also good to walk down memory lane regarding the bubble and its aftermath. We need to remember who was right and who was wrong in past pronounciations and applaud and condemn accordingly. Too often journalists ignor the record of those they interview.June 10, 2014 at 11:05 AM in reply to: What is resonable amount a landlord can deduct from a deposit? #774900ParticipantIf it is 10 years old, replace the carpeting or put in hard surface floors. That plus all new paint should take care of the odor.
These comments are a good reminder of the kind of expense that comes with owning a rental. Beginners routinely underestimate big one-time expenses that are inevitable. A prospective rental property looks a lot less profitable if you are realistic about costs and vacancies.Participant[quote=SK in CV][quote=moneymaker]Companies have laid off, paid dividends to prop up stock price, and yet are still struggling with earnings. [/quote]
For the most part, well run companies don’t have a lot of excess employees. So layoffs aren’t to increase profits, they’re done in anticipation of lower demand. (some companies over-do it, in order to increase profits, and often end up paying the price as Walmart has over the last couple years.)
But more importantly, enterprise companies aren’t struggling so much with earnings. Growth hasn’t been booming, but S&P 500 reported earnings are up almost 6-fold from 2008, up almost 100% since 2009, and are up 23% since 2010. It hasn’t been smooth sailing every quarter, but reported earnings for the 4 months this year has shown an increase over Dec ’13 of over 2.5%. On an annual basis, it would be more than an 8% increase in profits.
There are areas that are still struggling, but overall, corporate profits don’t paint a picture of a struggling economy.[/quote]
You are correct, SK. Companies have boosted profits during this recession by eonomizing on labor wherever possible. That is one reason stocks have more than doubled since their low point during the recession, and why the stock market has done so well.
Companies know they can be stingy on wage hikes and hiring because of the weak recovery. They are acting rationally. If we had had 4%/year normal growth rates in the roughly five years since the bottom of this recession instead of 2%/year growth rates, workers (employed and unemployed) would now be faring much better. Economic growth is the worker’s best friend.Participant[quote=FlyerInHi]What about deficit spending and money printing. Will they not cause hyperinflation as some have predicted?[/quote]
So far, no, to the surprise of all of us.Participant[quote=XBoxBoy][quote=EconProf]For five years economists, and politicians, have said real growth would return, and thus inflation, and thus higher interest rates. We are now giving up on that scenario.[/quote]
What about the fed? Do you see signs that they are giving up on this too? From what I’m hearing the fed is still very much on track with their belief that growth will pick up, QE will be stopped and after a while interest rates will be raised. Are you saying you think the fed is also giving up on this scenario? If so, can you cite some evidence to confirm this?[/quote]
The Fed has been consistently wrong in their too-optimistic forecasts. They remain perplexed that true economic growth has not yet taken hold.
But they are not relenting much on their monetary stimulus (QE1, QE2, QE3), and have recently promised low interest rates for a long time.Participant[quote=joec]I’ve said before that I don’t think interest rates are going up anytime soon…still…
I’d say we won’t see noticeably rate increases for 10 more years+ or longer…
Noticeably as in anything over 5% on the 30 year fixed rate…
One thing you left out that is all over the press now is European country rates for a lot of economies are BELOW the US rate. France is at 1.75% I just saw and a lot of others are at ~2% or so. So France is in better shape than the US with 50% youth unemployment? Uhh, yeah, US can fall further even and there is huge fears in Europe of deflation. They are thinking of having a negative rate in EU soon.
In the end, I think we are headed to be like Japan and rates are going to be low for a long time.
Deflation will be very scary if it comes here. Especially since I got shit loads of debt.[/quote]
Bond interest rates are actually prices (the price for borrowing money), and are set by supply and demand. Low or falling interest rates imply low future expectations of inflation. A weak future economy means low interest rates. That is why european interest rates, even lower than ours, reflects their slower-than-US economic growth rate. And Japan, which hasn’t seen growth in over two decades, has near-zero interest rates. Both Japan and europe are now terrified of the possibility of deflation.
It all boils down to growth. For five years economists, and politicians, have said real growth would return, and thus inflation, and thus higher interest rates. We are now giving up on that scenario.ParticipantOther Bubble Bloggers?
I miss the Other Bubble list of blogs to go to below Active Forum Topics. They were often very informative. Rick, where did they go?ParticipantSK and CAR:
If you really, truely want to help the poor, let’s raise the minimum wage to $15. What would be the various results, short term and long term? This is a serious question.
Please be detailed and specific.Participant[quote=CA renter]Seriously, reading James Dorn’s drivel makes me wonder how he ever managed to get an audience outside of those whose interests he is serving.
Look at this nonsense (from the linked article, above):
A higher minimum wage—without a corresponding increase in the demand for labor caused by an increase in labor productivity (due to more capital per worker, better technology, or more education)—will mean fewer jobs, slower job growth, and higher unemployment for lower-skilled workers. Higher-skilled workers and union workers will benefit, but only at the expense of lower-skilled workers, especially the young and minorities. There is no free lunch.
He doesn’t even seem to get the irony there. If you increase labor productivity, all else being equal, it will result in a *reduction* in the demand for labor. The ONLY things that will increase demand are changes in fashion/trends, or having a customer base that grows in population, or whose wealth/income increases, or some combination of these things.
Lowering taxes for the wealthy does NOT increase demand, nor does it benefit the economy. Increasing the wealth of the already wealthy does NOT stimulate the economy. History shows us this time and time, again. Increasing the wages of the greatest number of people (usually via taxes or other regulations), and reducing the wealth/income gap DOES stimulate the economy.[/quote]
Thank you SK and CAR. You are both revealing two common mistakes about the economy that cloud your thinking. One is that the economy’s output is a fixed amount to be divided up, like a pie. That’s true in the short run, but in the long run, which is what really counts, it is dynamic and grows. So increased productivity tends to benefit all groups, albeit disproportionately. Your comment about wages being flat or declining for three decades shows this mindset. Total compensation, including health and other fringe benefits are clearly up, and actual living standards, which include technological changes in goods and services we buy push up living standards further. Secondly, you are ignoring incentives, for both workers and employers. Supply-side advocates, like myself, stress incentives and expanding the overall economy, while your demand-side approach only divides what exists in the short run.
We have now had six years of demand side monetary and fiscal policies, begun by Bush and expanded by Obama. We all know the dismal results in terms of employment, the growth in poverty, and weak increase in living standards. The increased taxes and regulations are the exact opposite of what supply-siders advocate. Result–1/10 of one percent growth in the latest quarter. Perhaps it is time to try something different.ParticipantSure, CAR.
I have found a lot of facts and figures, pro and con, at Forbes.com. Search under “James Dorn” for several articles showing data.
Warning: Forbes is a pro business magazine. You will get the viewpoint of actual employers.Participant[quote=SK in CV][quote=EconProf]We economists are largely in agreement about raising the minimum wage: it will kill jobs.
[/quote]No, we economists are NOT largely in agreement that it will kill jobs. There is little evidence that it ever has before. At very best, economists have no f’ing clue whether it will kill jobs. At worst, they know exactly what will happen.
A plurality of economists think that the costs of raising the minimum wage are outweighed by the benefits.
At least 600 phd economists think that increases in the minimum wage “have had little or no negative impact on employment of minimum-wage workers:
In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front.
http://www.epi.org/minimum-wage-statement/%5B/quote%5D
Economists range from far right to far left, so the fact that the Economic Policy Institute could find 600 economists, out of tens of thousands, to support a minimum wage increase does not say a lot.
I noticed that those 600 included some distinguished notables as well as junior college instructors.
Please remember that I said economists are “largely in agreement” about the harmful effects of a minimum wage hike–meaning a majority. SK carefully says a “plurality” of economists favor a hike–meaning a minority. Glad we agree on that.
And let’s take a closer look at that neutral-sounding Economics Policy Institute. Turns out it is headed up by Richard Trumpka, head of the AFL-CIO. And ten of the Board of Directors are union heads. Nothing suspicious there.ParticipantPoliticians often pass laws that ignor the resulting effects on incentives. Cost-conscious businesses naturally react to a suddenly higher input cost (labor) by substituting another input that is unchanged in cost (capital). Self-checkout lines at stores are one of many examples.
The process of ordering and picking up food at both restaurants and fast-food places is labor-intensive and ripe for automation, and a jump to $13.09/hour in San Diego would incentivize owners to quickly replace workers with machines.
In europe, with much higher minimum wages, automation in food establishments is already farther along than here.ParticipantActually, a high minimum wage hurts the community, in that it does not allow upward mobility, ie, first job, that we all want those youths to have. Again, it is the seen vs the unseen. We will never know how many youths who are capable and eager to work and learn will not get their first job where they can prove themselves.
Employers have an array of applicants of varying qualifications and experience to pick from when they advertise an opening. Why should they take a chance on someone who has never had a job and maybe has other strikes against him/her for that $13.09/hour job within the San Diego city limits?ParticipantGood point JohnAlt. There seems to be an automatic assumption among advocates of minimum wage hikes that all low paid workers are exploited. The fact is that their productivity tends to be low, so their contribution to the firm does not justify an arbitrary wage hike dictated by the government. However, once they prove themselves through experience, promptness, learning, etc., a rational, profit-maximizing boss will pay accordingly (or risk losing them to a competitor). That’s our market system, greatly simplified.
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