Is economic growth slowing down permanently?

[sharkman]

69cat, that primer is the dark little secret that reveals how awful Obama's economic policies have been for Americans. It's why the American government has run 8 years of deficits and the only surprise for me is that he was this clueless. Or is he?

[eyeball]

Those mostly arise from the illiteracy.

No, I'd say a lot arises from the big hole in financial comprehension by people who are in fact very literate. That hole of course is the disconnect and divorce of the economy from the environment. If financiers are taking their cues from mainstream economists then they're clearly operating according to some mighty ignorant assumptions about reality.

[Bonam]

No, I'd say a lot arises from the big hole in financial comprehension by people who are in fact very literate. That hole of course is the disconnect and divorce of the economy from the environment. If financiers are taking their cues from mainstream economists then they're clearly operating according to some mighty ignorant assumptions about reality.

The debate regarding the long term viability of a growth-based economic system is tangential to the issue of financial illiteracy which msj brought up, which simply refers to people being unable to competently understand and take care of their own financial situation.

[eyeball]

The debate regarding the long term viability of a growth-based economic system is tangential to the issue of financial illiteracy which msj brought up, which simply refers to people being unable to competently understand and take care of their own financial situation.

I understand the basis for financial illiteracy all I'm saying is that the incredulity and disbelief exist as well and are based on more real and relevant factors, like the shrinking pool of natural capital that underwrites financial capital along with everything virtually else we depend on.

[Bonam]

I understand the basis for financial illiteracy all I'm saying is that the incredulity and disbelief exist as well and are based on more real and relevant factors, like the shrinking pool of natural capital that underwrites financial capital along with everything virtually else we depend on.

While understanding the availability of resources on a global scale and how to manage them is important, I don't think most ordinary people know or care about this topic. Nor is it as immediately harmful to themselves to not know anything about this topic, as being ignorant about basic personal finance. I don't think most people suffer from any "incredulity or disbelief" regarding the "pool of natural capital".

[eyeball]

While understanding the availability of resources on a global scale and how to manage them is important, I don't think most ordinary people know or care about this topic. Nor is it as immediately harmful to themselves to not know anything about this topic, as being ignorant about basic personal finance. I don't think most people suffer from any "incredulity or disbelief" regarding the "pool of natural capital".

I don't think most people do either. I think most are completely oblivious to it's existence.

The real trick would be to short the planet.

[msj]

COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to

have people stop looking for work.

ABBOTT: Now youre thinking like a Democrat.

COSTELLO: I dont even know what the hell I just said!

ABBOTT: Now youre thinking like Hillary.

This is hilarious viewed from a middle historical perspective.

I remember when Republicans were desperately denying what turned out to be the GFC and they pulled out every denial in the book: once again, go to the Canada/US sub forum and find the very long thread.

Sure one has to be careful with numbers: participation rates, U3 vs U6, hours worked, weekly earnings should all be considered.

What's worse is political partisans using numbers.

Worse than that is when one fools oneself with numbers. Or, rather, one chooses their narrative first and then are determined to support it with any numbers they get their hands on while ignoring contrary evidence.

Which is why I come back to this point again: http://ritholtz.com/2016/02/157526/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

Once again, consider both the negatives and positives before settling on your narrative.

Edited February 27, 2016 by msj

[Bonam]

I don't think most people do either. I think most are completely oblivious to it's existence.

The real trick would be to short the planet.

Sure. Buy stock in companies that make water levees, bottled water, and guns.

[msj]

Yeah. The problem with aggregate data is it tells you little about what is really happening. If I were in a room with Bill Gates, the average net worth of the people in that room is $40 billion.

It's really an issue of just finding the data.

Every once in a while I come across some good info but I don't always save it.

In my job I see an interesting slice of people's finances: hundreds of people's incomes, savings, taxes each year.

I get to see how people try to cheat the system to get a loan.

Mortgage brokers are terrible liars, for example. They will stretch anything anyway to get a deal done.

My favourite is the broker who wanted the client to file his tax return without filing the T5013 slip because the partnership investment had a large loss that was to flow through to his tax return. Great for tax savings (although the investment is questionable) but bad for getting the loan.

That's right, the broker thought we would file the return one way and then pretend that the slip came in late and then file an adjustment after the loan went through. Can't do that because if the client stops paying the loan we get sued.

Told the client to pee off and find someone else who is stupid enough to participate. At least that tax preparer may be able to claim plausible deniability if the client decided to play his cards right.

It's anecdotes like that, among far too many others, that make me pause.

[msj]

I don't think most people do either. I think most are completely oblivious to it's existence.

The real trick would be to short the planet.

You can invest in water or find ways to short water if you like: http://vintagevalueinvesting.com/how-to-invest-in-water-like-michael-burry-from-the-big-short/?utm_source=Vintage+Value+-+New+Posts&utm_campaign=74f7f96c3c-Vintage_Value_New_Posts_1&utm_medium=email&utm_term=0_3156a47ac1-74f7f96c3c-116879585

Or you can buy shares in Fairfax Financial as they have made a big bet shorting the US stock market (I think). Something like a $650 million bet that at best would pay out $109 billion. At worst the company will lose the $650 million and in all likelihood the company will make a billion or two prior to cashing out.

Or try shorting the Vanguard Total Market index ETF.

Prior to doing this, however, remember that people have been talking like you for centuries so it's more likely that you will be broke before you need that vas in your mattress or gold, canned tuna, and ammo.

[Bonam]

Might as well invest as if all will be well with the world. If you're right, your investment will grow. If you're wrong, investments won't matter anyway, all that will matter is how good you are at escaping the hordes of zombies coming after you.

[69cat]

Sharkman, i am very sure Obama understands the numbers, so does the majority of the population and so we have a net pessimistic outlook on the US economy. And so it is up to the propoganda machines to keep using the "unemployment" rate in attempts to boost some confidence. And so government now turns to GDP numbers to support their positive economic outlook, but that number is bs too. The US and the Liberals turn to GDP data to support their positions. Thing is that the government can easily boost GDP as we are seeing right now, Liberal claim is Canada GDP is 1.4% and want 2% growth so we need stimulus spending to raise GDP. Lets see now, 0.6% growth on $2000B is $12B, so JT proposed to run a deficit around $18B. Who here does not think we wont see an increase in Canadas GDP and reach target if all things remain equal this year?

Similarily the US is borrowing a ton of money each year, but hey, GDP is looking ok as a result so can borrow more again because GDP is growing year after year.

The question of financial illiteracy comes up.

As a side note, i am a right winger and i am a farmer and also worked full time and was part owner of a company, so fiscal responsibility is a big thing for me - just the way i am wired. But it is interesting how rural parts of Canada are talked of in unfavourable terms because they tend to vote right wing. But when a large percent of rural people are independent business owners and less likely to suffer from financial illiteracy is it any wonder they vote the way they do?

Spending tax payer money simply to raise GDP does not make sense to me. And people can call it an "investment" all they want but i prefer seeing it for what it is. If Canada wants to make an "investment" in infrastructure i suggest we build another rail line to the west coast complete with right away for a highway and a pipeline. That would be an investment worth borrowing for that my kids will benefit from. Majority of infrastructure work being discussed these days is not an investment, it is maintenance and expenditures, an investment pencils out with a ROI.

[eyeball]

Prior to doing this, however, remember that people have been talking like you for centuries so it's more likely that you will be broke before you need that vas in your mattress or gold, canned tuna, and ammo.

People have been talking about sustainability and ecological limits to growth for centuries? Maybe in the last few decades - but Malthus and Darwin are about the only two I can think of who preceded that.

Might as well invest as if all will be well with the world. If you're right, your investment will grow. If you're wrong, investments won't matter anyway, all that will matter is how good you are at escaping the hordes of zombies coming after you.

I can see the sense of that from an individual's point of view but not collectively.

[sharkman]

I don't think most people do either. I think most are completely oblivious to it's existence.

The real trick would be to short the planet.

So you're obviously a complete doomsdayer. So are you socking away foodstuff and such? Can you filter water to make it safe for drinking? How about seeds to grow vegetables? How far are you taking this?

[msj]

As a side note, i am a right winger and i am a farmer and also worked full time and was part owner of a company, so fiscal responsibility is a big thing for me - just the way i am wired.

That explains your negative views: you're a farmer.

I would share your view somewhat more if most of my income was related to world prices of commodities which have been going down for quite sometime now.

Of course, you could have shorted wheat or corn and would have made a killing in the past couple of years had you jumped on this trend.

It's not easy being long something when it is trending down as I know from personal experience since I am often too early to a party.

OTOH, it sure was nice that prices held their own during the GFC back in 2008/2009. That would reflect well on Harper even though the government had nothing to do with prices set on a world market (just as now the government can't do anything about prices and nor should they try).

Fortunately farming is a small part of our economy so, as in anything, this will pass in time.

[msj]

People have been talking about sustainability and ecological limits to growth for centuries? Maybe in the last few decades - but Malthus and Darwin are about the only two I can think of who preceded that.

Even if one accepts that the concepts of Malthus are somehow only "invented" in 1798/99 by Malthus, that still goes back centuries and there is no doubt that his theories have a big following amongst the doomer gloomer crowd of humanity.

[eyeball]

Where does his thinking go back centuries? You're not lumping in run of the mill doomsday scenarios stemming from religion or some supernatural cause with concerns over sustainability are you?

[msj]

Where does his thinking go back centuries? You're not lumping in run of the mill doomsday scenarios stemming from religion or some supernatural cause with concerns over sustainability are you?

You don't think Malthus' popularity since 1798/99 goes back centuries? Huh?

Do you really think that ideas known today and "invented" in 1798/99 were not thought of before?

Famine, for example, goes back forever in various different lands so I doubt very much anything was invented other than the ideas getting written down.

[eyeball]

So you're obviously a complete doomsdayer. So are you socking away foodstuff and such? Can you filter water to make it safe for drinking? How about seeds to grow vegetables? How far are you taking this?

Doomsdayer? You mean like someone who thinks a million Muslims will destroy us?

I'm confident I'm in a good position due to where I live. There's plenty here to keep our local population happy but not enough to be shipping it everywhere like there was no tomorrow. I could start living a lot like you say if I had to in pretty short order. In the meantime I invest as Bonam suggests because it's the sensible thing to do and because optimism is better than the alternative - I'm not about to ignore reality either and the reality is that shortages are starting to bite.

Of all the things cited that could cause economic growth to permanently slow down, sustainability is the least of everyone's concerns. I get the sense that most people think we're just experiencing a little bumpy patch that will soon pass and we'll be back on track after the next election or business cycle. I just don't see it myself.

[eyeball]

You don't think Malthus' popularity since 1798/99 goes back centuries? Huh?

Do you really think that ideas known today and "invented" in 1798/99 were not thought of before?

Famine, for example, goes back forever in various different lands so I doubt very much anything was invented other than the ideas getting written down.

The realization of what Malthus talked about was certainly experienced lots of times in smaller localized areas but the possibility of it occurring on a global scale is entirely recent. The fact that ecological sustainability is now being strained is evidenced by the rate of extinctions occurring around the planet.

What does exist through the centuries is the capacity for humans to often optimistically ignore the blind alleys and bottlenecks they wander into until its too late to do anything about it. Usually people only become aware of how nature will take it's proper course after the fact.

Edited February 27, 2016 by eyeball

[msj]

Extinctions are not a recent invention either although maybe more people are more aware of them.

[eyeball]

You're saying mass extinctions are a normal bump in the road that humans have experience with?

You seem to know a thing or two about the value of diversity. What do you think it is that humans have benefited most from in an ecological sense?

[69cat]

In away we have shorted the grain markets msj as bins are emptied once again except for a bunch of canary seed that has been on farm for 5 years now, that stuff has not moved in price for about that same period. More typical to sit on grain and wait for price bump over 6 to 24 months but not this time around.

But i would not say farmers are pessimistic. Land values in recent years and amount of new equipment bought would say otherwise. I would say farmers are typically more optomistic than the average Joe as there is always "next year" to make things better on the farm. However much a farmer is isolated from world economic cycles the reality is that when commodities go down then ALL go down including grain. The optomistic farmers are the guys buying land right now under the assumption that the market owes them a profit and that people always need food so somehow grains will remain high. If that were true i should by land right now and maintain the optomistic view that things will always be better and land is an investment regardless of price. But i simply cant have that degree of optomism.

This all comes back to original post. If economic growth is not slowing down then certainly one needs to be optomistic. I think that a long term trend in the US of borrowing money to keep generating GDP does not say good things. Canada with balanced budgets would speak positively but we are not going to see positive cash flow for many years so being optomistic does not fit the reality.

The consumer driving the economy may be valid but when it is the government giving the consumer the money then it is not valid. Economic prosperity comes from the consumer generating his own wealth to spend in the economy. Therefore if the consumer is not generating new wealth on his own and has bought all the things needed to live a comfortable lifestyle (reference to ever increasing standard of living that will eventually and likely has levelled off) then i expect economic growth to slow down as a matter of fact. And government needs to accept this at some point.

[eyeball]

Economic prosperity comes from the consumer generating his own wealth to spend in the economy.

There's a lot more to prosperity than the generation of money and wealth.

As far as generating one's own wealth goes, haven't we been operating on the economic principle that it's other people's accumulated wealth trickling down through society that's nourishing it?

Edited February 27, 2016 by eyeball

[sharkman]

Doomsdayer? You mean like someone who thinks a million Muslims will destroy us?

I'm confident I'm in a good position due to where I live. There's plenty here to keep our local population happy but not enough to be shipping it everywhere like there was no tomorrow. I could start living a lot like you say if I had to in pretty short order. In the meantime I invest as Bonam suggests because it's the sensible thing to do and because optimism is better than the alternative - I'm not about to ignore reality either and the reality is that shortages are starting to bite.

Of all the things cited that could cause economic growth to permanently slow down, sustainability is the least of everyone's concerns. I get the sense that most people think we're just experiencing a little bumpy patch that will soon pass and we'll be back on track after the next election or business cycle. I just don't see it myself.

No, a doomsdayer that thinks that some sort of break down in government/capitalism will lead to food and other shortages. I'm wondering if that's what you think?

Are you storing food for when some sort of system collapse happens?

Do you have survival strategies?