IS the US Economy a Ponzi Scheme?

http://useconomy.about.com/od/economicindicators/p/CPI.htm

"Two measures of inflation are often reported: Core CPI, which does not include food and energy cost, and non-core CPI, which includes everything. Core CPI is important because this is what the Federal Reserve looks at to decide whether or not to raise the Fed funds rate. The Fed uses the core CPI because food, oil and gas prices are so volatile and the Fed's tools are so slow-acting. Therefore, inflation could be high if gas prices have risen, but the Fed won't react until those increases trickle through to the prices of other goods and services."

 

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No I don´t reject the BLS statics or definitions. In fact I accept and use them with simple realistic mathematics model to illustrate why I think the decrease in the unemployment rate for 8.1% to 7.8% is due to discouraged workers stopping to look for work and not the retirement of the baby boomers as you assert. I invite you to make your own math model that shows the drop in unemployment rate is due to baby boomers retiring instead of discouraged unemployed ceasing to seek a job. I don´t think that is possible with even half way realistic number of baby boomers retiring compared to number of new workers entering the work force, but please do try. If you cannot, then it is your post the above quote comes from that is "ridiculous."

Quadraphonics lets do a simple educational numerical example:
Assume at end of last BLS accounting period:
The labor force LF = 100 and the unemployed, UP = 5; thus the employed EP = 95 as by BLS definitions UP = LF – EP is always true. So the percent of the labor force which is unemployed, the “unemployment rate” is exactly 5%. {The BLS´s equation in words is: the number of unemployed is total labor force less the employed}

Now assume that during the current accounting period, 2 persons became 16 years old so entered the BLS´s labor force LF, but only one of them could find a job as the society created only half as many jobs as were need to keep up the the growth of the labor force AND that 4 employed baby boomers got their gold watch and retired, but 1 of them had saved too little and immediately went to work bagging grocers but the other 3 did not seek any job. In the real case society did create half the number of new jobs needed (At least 228,000 new jobs needed but only 114,000 were created.)

Thus at end of the current accounting period, the second one considered, the labor force grew by the two youth who became 16 and decreased by the 3 baby boomers who did not seek any job.

I.e. LF = 100 + 2 – (4-1) = 99 and, the number of employed grew by the one lucky youth who did find a job but not by the one baby boomer, now bagging groceries as he was already counted in the 95 employed so is not again added to the employed.

Thus at end of the current, second, accounting period EP = 95 +1 - (4-1) = 93

Thus by the LBS equation and definitions: UP = LF – EP = 99 - 93 = 6 for 6/99 or slightly more than 6% unemployment rate, an increase by slightly more than 1%.

Now if we greatly exaggerate the 4 retiring baby boomer to 14 i.e. assume approximately 15% of the 95 that were the labor force at end of the original period considered are retired at the end of the second period considered and make no other change, we have, with the same colored equations, but 4 is now 14:

LF = 100 + 2 – (14-1) = 89 and EP = 95 +1 – (14-1) = 86. So the unemployed UP = 89 – 86 = 3 or 3/89 for ~4% a 1% decrease in unemployment rate with a very exaggerated 15% of the labor force retiring in one accounting period.

So yes, you are correct, a 1 % drop in the unemployment rate (from 5% to 4%) may be due to an unrealistic large 15% of the labor force retiring in one BLS accounting period and not seeking jobs, but even 4% of the labor force retiring in one BLS accounting period INCREASED the unemployment rate by 1%. I.e. from 5% to 6%. in this math model, which realistically assumed that twice as many baby boomers retired than there were youth entered the labor force by becoming 16 years old due to the baby boomer´s "demographic bulge."

Thus I, along with many others, remain with the view that the drop in unemployment from 8.1% to 7.8% is due to part of the unemployed labor force becoming so discouraged that they stop even trying to find a job. I.e. so that the BLS deletes them from both the labor force and the list of “unemployed” even though they may desperately want and need a job as their house is being foreclosed.

Perhaps reason they stopped looking for a job is that now all their time now is spent clearing a spot in the woods for the tents they are moving into. You do know that now there are rapidly growing “tent cities” of the unemployed and they would be larger if those sleeping in their cars moved into the tent cities. They are in almost every state and the largest, in Florida, now covers 13 acres! If you don´t know this, see photos and text in my next post, 142.

Perhaps for you and those you know times are good, but for most Joe Americans they are bad and growing worse (On the road to GWB´s inevitable depression, I think.) with their net worth decreased and the purchasing power of their salaries dropping by more than 1% annually (down 7.8% in last five years - since 2007)

 

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US economy is like a Ponzi scheme benefiting the rich, but from coast to coast, hidden from the sight of the better off, tent cities for the unemployed are expanding.
As the middle class who are losing their homes to bankers become renters, paying the rapidly increasing rents, some who were renters for years are pushed into tents.
These once middle class were assured by the bankers, even by Bernanke, that price of real estate always goes up so they would get a good return, buying a house they could not afford. Ponzi operators always promise good returns to the economically innocent they exploit to grow richer.

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First photo is 70 people unemployed in a NJ tent city. Second tent city photo has this caption:
" Tammy Day, who has recently become homeless, sits outside of her tent at a homeless tent city on March 5, 2009 in Sacramento, California. Sacramento's tent city is seeing an increase in population as the economy worsens with more people becoming unemployed and having their homes slip into foreclosure. "

Even the BBC is covering rich America´s shame.

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Figure caption was: "America´s middle under-class once again searches for work." which in BBC original is also this link: http://www.bbc.co.uk/news/world-us-canada-14296682 An article called: "In Steinbeck's footsteps: America's middle-class underclass" and tells how it is all happening again. I.e. article start is: ".. This year the last rains came in May to western Oklahoma. They lasted long enough to produce the last alfalfa crop but the winter wheat was already lost. Brett Porter, who farms 3,000 hectares, unrolls the last of his hay in front of a thirsty line of prime Angus cattle. With just 18 bales left, and at $200 (£123) a bale on the open market, when he runs out he will have to sell the cows.

"I already sold half my mamma cows and I sent my calves to market early," he says. He has been working on the herd's DNA for 12 years. If no rain comes, he will sell the rest for hamburger meat before high summer. With the south-west in the grip of its worst drought for 60 years, old-timers here are beginning to talk about the Dust Bowl years, years Steinbeck chronicled in his Pulitzer Prize-winning book of migration, poverty and social injustice. ..."

To relate this to the America economy´s Ponzi scheme, I note that in all Ponzi schemes enrich a few, like Maddoff and his friends, and others not caught, but huge masses get to be poorer. The gap between rich and poor, as measured by the Gini index is now growing more rapidly than ever before. The top 400 got 16% of all the income in 2011 and the 99% got so little some are protesting in the streets, but when government can no longer afford the higher cost of food increasing the cost of the food and disability programs, they will begin by burning buildings, etc.

Americans super rich must not know what happen in France 225 years ago. One in three Americans is now getting some form of financial aid from federal government and deficits are growing by at least a trillion dollars per year while their fortunes are very rapidly growing. Where do you think this all ends? I think like all Ponzi schemes do in hardship for many, but this one brings Marshall Law to the US to control the hunger riots.

 

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Your accusation above was that the government intentionally excludes food and energy from "inflation statistics" in order to mislead the public about the state of the economy.

And not just that one of the various inflation statistics used by the government excludes food and energy.

By all means, feel free to retract any implication that the government is in the business of issuing misleading inflation statistics, and affirm your belief in the basic accuracy of the statistics that are released.

As to citations, I have provided such repeatedly in the past on the many occasions that I have corrected you on this exact issue. The time for you to demand evidence, re-appraise your statements, and update your "memory" was then. At this late juncture, I am not going to be doing any further homework in response to your continuing, apparently willful bullshit on this point. And anyway, Carcano seems to have supplied such already.

Moreover, "working from memory" is not a defensible general approach. If you want the authority that goes along with moderating a business and economics subforum at a putatively "scientific" website, then you need to exhibit scientific rigor in your approach. This means constantly checking your memory against reliable, external sources of facts - particularly when in doubt - and doing your own homework. Cop-out excuses about how you can't seem to use Google, or remember conversations from the previous day, do not satisfy: in fact, they amount to indictments of your fitness to moderate, or even participate.

 

You don't even seem to know what they consist of, in the first place. And when you are informed of such, you have made quite a stink about how they are defined, in this thread. In fact, the rest of your post there consists of a direct attack on the validity of the BLS definitions in question.

Why do you keep trying to bullshit me with these claims that you accept data that you are right in the middle of energetically attacking?

That assertion comes from the Congressional Budget Office. They've had professional accountants and statisticians go over the relevant data - including demographic data on Baby Boomer tax filings and Social Security claims - to reach their conclusion that the main driver of the decline in labor force participation rate sinze the year 2000 is the retirement of the Baby Boomers.

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http://www.cbo.gov/sites/default/fi...20xx/doc12052/03-22-laborforceprojections.pdf

There is no need for me to do that, since the CBO has already hired a bunch of professionals who produced a very thorough, complete accounting of such, which I have been referencing.

There is likewise no reason for me to pay any heed to your ham-fisted, amateurish efforts at the same. You can feel free to read the CBO's report and tell us where you think the professionals erred, if you like.

Either way, you need to understand that this is not some contest between competing amateur analyses, evaluated on a peer basis. There is the reputable, scientific data from the CBO on the one hand, and your own data-free crank hand-waving and "gut feeling" on the other. Furthermore, I do not appreciate your ongoing, energetic troll efforts to misrepresent the issue as the former.

Again, I have already pointed you at the professionally-produced analysis that supports my conclusions. It is bizarre that you seem not to have noticed this, and to imagine that we are engaged in some contest between our own amateur analyses. We are not. There is a real, professional analysis, done with actual data and science, which supports my statements. My assertions were drawn directly from its conclusions.

And then there are your silly efforts to hand-wave your way to a contrary outcome, which do not impress anybody (except with your determination not to let things like facts and science get in your way, and to recast the issue as some contest of peers between yourself and myself).

I have zero interest in your silly fantasy exercises. You've been shown the actual data and scientific conclusions. That is the only thing that anyone is answerable to. Your Colbert-esque "gut feeling" fantasies are a waste of everyone's time.

What "many others?" A bunch of talking weasels?

The CBO agrees that a small portion of the decline in labor force participation rate is due to discouraged workers exiting the workforce. It does an explicit analysis to figure out how much that factor affects the total, as well as other factors like demographic trends, immigiration, etc. It finds that the main driver is retiring baby boomers. You have presented nothing more than the most blatant of hand-waving in your attempt to refute this - not a single reference to any actual employment or demographic data, no accounting of the various factors that affect labor force participation rates, no attempt to statistically quantify the way each one contributes to the observed trends. You obviously haven't even read the CBO reports that you are attempting to dispute.

In short, you are just bullshitting. As usual.

I doubt very much that anybody who is facing imminent foreclosure and is genuinely desperate for work has truly given up looking for work. Do you have any data that one could use to estimate how many such people there are? Anything at all?

 

No. I have never said or suggested that was the reason why core inflation does not include food or energy price changes. I have long known,(30 years or more) that they are both volatile and seasonal but Fed and other agencies need a more steadily changing index of inflation.

You have no grounds for your assertion, which is just more of you sticking words in my mouth. Reply instead to the challenge I gave you in post 142 which uses the BLS definitions and simple math only. I.e.

" I invite you to make your own math model that shows the drop in unemployment rate is due to baby boomers retiring instead of discouraged unemployed ceasing to seek a job. I don´t think that is possible with even half way realistic number of baby boomers retiring compared to number of new workers entering the work force, but please do try. If you cannot, then it is your post the quote comes from that is "ridiculous." .."

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Yes I do think, in contrast to the BLS definition, that someone who has been trying for more than a year to find a job without any success and still wants to and could work if society had a job for him should be counted as unemployed. Many share this POV. The simple fact is that the US is creating at most half the number of jobs as there are new workers entering the work force. Ergo some college grads can look for a decade without success. Ask any college graduate, even one with a business or science degree, who has been seeking a job for a year if he is or is not "unemployed" even though he has decided to stop wasting bus fare, etc. going to interviews, etc.

If he is smart he will stop beating his head against the "no jobs here wall" and go back to nursing school or some US field that does have jobs or learn Mandarin and move to China where there is a labor shortage.

Most of the high pay jobs the baby boomers are retiring from are being replaced by automation (or corporate mergers with one of two managers no longer needed. - You really see this in the financial area as "too big to fail" banks get even bigger.) and certainly that increase of automation is true of many other jobs. Great for corporate profits, but not for the US which needs workers with salaries who can buy products and homes, get married etc. instead of move back home with their parents. Corporate production is increasingly exported to well off Asians. American jobs are now mainly personal service jobs (cut hair, wait on table, drive taxi, etc.) that cannot be exported or automated. - Why Joe American´s purchasing power is dropping more than 1% eaach year now. (Big Mac jobs don´t pay as well as the factory jobs that went to Asian - and also very serious is fact the tax collected from them as US revenue is less, helping making the debt increase by a trillion or more per year. Corporations now supply more than half of all the US revenue!)

AFAIK, there is no valid reason to expect any of this to change. If you know why and how it will, please tell; but until you or someone can, I will continued to believe the US (and EU) are on the road to GWB´s inevitable depression.

 

Your post there contains nothing to justify the application of the term "Ponzi Scheme." You seem to be using it as some kind of catch-all scare phrase, without any regard for its major features and so meaning and connotations.

As has been noted repeatedly throughout this thread.

How can you pretend to be engaged in serious analysis of business and economics, when you spend your time not on examining actual data nor on carrying out actual analyses, but instead on advocating scary metaphors for the US economy - and that without any clear definition of what the terms of your metaphor are supposed to be?

 

Found this old tread while looking for one to note that even just the anticipation surge printing press money boosts stock prices seems true for the EU too. US's QEs added more than 3 trillion to the money supply and have more than double the price of stocks, but not increased the mean salaries paid. I wonder what super Mario's 1.3 trillion dollars will do. Anyone with an opinion?

Here from Bloomberg are today's results for Europe (at essentially the close of markets)

Value, Change, and % Change :
Bloomberg European 500 Index 247.96, up +3.66, or +1.50%
EURO STOXX 50 Price EUR 3,322.65, up +52.92, or +1.62%
and the "emerging markets" too, but less than 20% as much up
Bloomberg EMEA -World Index 136.61, up +0.32, or +0.23%