patrick.net

To all the doom and gloomers in here: while you worry about the economy I'll be surfing on my cheap used surfboard, hiking in the beautiful mountains here in California, and enjoying my recently purchased REO townhouse that I got for 77% less than what it was sold for in 2006. Gotta run, I have a date with a gorgeous brunette I met in Walgreens 2 days ago. : P

postbubblesucess says

To all the doom and gloomers in here: while you worry about the economy I'll be surfing on my cheap used surfboard, hiking in the beautiful mountains here in California, and enjoying my recently purchased REO townhouse that I got for 77% less than what it was sold for in 2006. Gotta run, I have a date with a gorgeous brunette I met in Walgreens 2 days ago. : P

You are already underwater by at least 6%(RE commission). Feel free to add all other losses and expenses.

postbubblesucess says

To all the doom and gloomers in here: while you worry about the economy I'll be surfing on my cheap used surfboard, hiking in the beautiful mountains here in California, and enjoying my recently purchased REO townhouse that I got for 77% less than what it was sold for in 2006. Gotta run, I have a date with a gorgeous brunette I met in Walgreens 2 days ago. : P

Really! At least you will be making love on a beautiful sandy beach at sunset, while a few of the posters on this site will be raping women. That's how much they hate life.

Love your positive outlook!

How does wage inflation happen? Being an infant the last time it happened in an epic way, I have no personal knowledge. I suspect it would go like this(feel free to correct me): dollar drops vs international currency. This makes American goods and real estate cheap. Landlords take advantage of this to raise rents. Public employee unions lobby for salary increases to cover inflation. Governments raise taxes to cover increased wage payments. High end workers ask for raises. Since their companies are making more money on the international market, they can afford it. Unions negotiate for more and get it for the same reasons. Non union employees, feeling left out, beg and maneuver into higher wages for themselves. The average wage goes up. Housing rises in lock step, assuming interest rates stay constant.
The USA takes in more taxes and acquires a "budget surplus" which it uses to pay some debts.
The public forgets about the crisis.
The next bubble begins to build.
Rinse, repeat.

Quigley says

This makes American goods and real estate cheap.

Problem is a weakening dollar also makes energy imports more expensive.

Plus we'll have to export more food to get the same dollar income, meaning less food here at home, meaning higher food prices. Energy & food is non-core inflation but if they go up then the rest of the economy also takes a hit.

The 1970s did have something of a wage-price spiral going on, as the various oil supply shocks resulted in price increases and then wage increases in response.

But the 2010s are NOT the 1970s.

The economy was adding 2-4 million jobs a year:

http://research.stlouisfed.org/fred2/graph/?g=cZP

there's a big hole in that graph but that was due to the Fed fucking with the economy:

http://research.stlouisfed.org/fred2/graph/?g=cZQ

(red line, right axis is Fed rate)

by jacking up interest rates to 12%.

In percentage terms, job growth was 3-5%:

http://research.stlouisfed.org/fred2/graph/?g=cZR

1972-1979

while job growth 2000-now has been -5% to 2%:

http://research.stlouisfed.org/fred2/graph/?g=cZU

and that 2% growth was coming from the mother of all mortgage credit bubbles pumping a $1T into the consumer economy.

The Great Recovery 2009-now has shown ~1.5% job growth.

But we're still 4M jobs down from the 2008 peak:

http://research.stlouisfed.org/fred2/graph/?g=cZ1

and a lot of the jobs we have now are crappier than 2008.

This nation is so, so fucked.

Another reason the 2010s are not the 1970s is that the baby boom was aged 11 to 29 in 1975 and in 2015 they will be aged 51 to 69.

Can you spot the difference?

Now, in some ways the baby boom edging off into retirement will be VERY stimulative to the economy. TONS of jobs being opened up by their retirement, and also TONS of jobs being created by their new demand -- in health and other services they will command.

This will throw a lot of velocity into the economy and might make things better than I expect. We'll probably just keep raising the debt ceiling trillions at a time and borrowing to pay for all of this, with the Fed doing their part with their $40-$50B/mo monetary expansion, and that's how inflation will keep going.

War says

Worse yet, adjusted per capita wages are at 30 year lows.

http://research.stlouisfed.org/fred2/graph/?g=cZV

is real (2012) per-capita wages.

Now, this is deceptive due to the increasing L-curve of wages being shifted to the upper decile and percentile I guess.

There are literally thousands of ways that the 2010s aren't the 1970s. So much so that it's extraordinarily difficult to draw conclusions based on what happened in the 70s.

As it turns out, there really aren't any patterns in economics. Each period is different, for different reasons. New technologies, wars, cultural shifts, politics, demographics, disease, and so many other factors contribute to the result.

Anyone claiming certainty about what will happen over the next 10 years is probably trying to sell you a book. Even if they're right about the direction, they're most likely way off about the magnitude. The number of people who have accurately predicted a major economic trend more than once is incredibly small...possibly zero. Many blowhards claim that they have, and yet they've never profited from such accurate powers of prediction for some reason.

Bellingham Bill says

Now, in some ways the baby boom edging off into retirement will be VERY stimulative to the economy. TONS of jobs being opened up by their retirement,

The average baby boomer without a company plan has 32k in retirement savings, with a company plan 88k. That is a whole 6k a year for average lifespan. With that kind of nest egg when do you suppose they will be retiring and opening up all these jobs?

Kevin says

here really aren't any patterns in economics. Each period is different, for different reasons. New technologies, wars, cultural shifts, politics, demographics, disease, and so many other factors contribute to the result.

No kidding. I just read in this morning's WSJ, 2nd consecutive year of Japanese trade deficit. Mainly because of an offshore earthquake causing a tsunami, and political discord with China.

Put that on your quant extrapolations.

bob2356 says

Bellingham Bill says

Now, in some ways the baby boom edging off into retirement will be VERY stimulative to the economy. TONS of jobs being opened up by their retirement,

The average baby boomer without a company plan has 32k in retirement savings, with a company plan 88k. That is a whole 6k a year for average lifespan. With that kind of nest egg when do you suppose they will be retiring and opening up all these jobs?

When they turn 65 and can get social security and medicare.

It won't have any real impact on the jobs market though.

Gold:
It's in a standard consolidation that's happened at least 3 times since 2001. It's just now entering the timing band to break out again.

K-cycle:
Yes I thought they were the length of a human life. I don't where people got the 70s from.

Points 1-7:
Everyone will think all those things are going to happen, causing the dollar to tank and gold to explode for a couple years. In the end only the minor ones will happen this time... Several year consolidation, solidify another level lower living standards level for all. Then come some more off the list, and then worse than the list. Rinse, Repeat for a decade or two.