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HydroCabron
2015 May 17, 2:01pm
Given the brutal nature of retail and manufacturing, and Gen Y flooding into the workforce now, I'm not entirely sure how wage inflation is going to get going here.
I figure the population will divide more starkly into haves and have-nots, with the top chunk of the middle class - fortunate professionals in medicine, law and technical enterprises - heading upwards, while the rest of the middle class, plus the lower class, sinks further away from any chance of asset ownership.
I also think any salaried career will get more competitive and provide less mobility.
We are headed basically towards how Venezuela is socially constituted, but very slowly. There will be less and less need for labor, ferocious competition for the fewer and fewer jobs remaining, and a desperate drive to hold rent-yielding and capital assets.
I don't think that children today should aim for any salaried career, even in medicine or law, unless they believe it will be highly fulfilling. You're better off trying to start a company or business, or just using a salaried position short-term to earn money to purchase rentable assets. Do not imagine for a moment that you will be able to sell your labor and put away enough for retirement at 65: maybe, maybe not, but it's not a sure thing, and will get less so.
As for the people who would normally work in retail or office work? They're fucked. The only upside is that lower demand should cut the cost of the smaller rental units along with the wages of these workers.
HydroCabron
2015 May 17, 2:02pm
but getting my usual kebab lunch yesterday and seeing the price had been raised 10%
Bill, you might want to delete his posts: he's not participating in good faith; he's just trying to derail.
Bellingham Bill
2015 May 17, 6:56pm
The Japanese experience over the past 3 years is interesting.
What's odd is that their conservatives (i.e. the LDP) mau-mau'd the centrists (aka the DPJ) to pass the consumption tax increase to 10% (from 5%)
then the conservatives (aka Abe) replaced the 'conservative' Shirakawa at the BOJ early to get "Bubblejet" Kuroda in.
So the government increases taxes on poor people and then starts printing yen so much that the BOJ is the main buyer of gov't debt issues.
"The BOJ accumulates government bonds at an annual pace of about ¥80 trillion ($667 billion) under an unprecedented “qualitative and quantitative†easing program that Kuroda expanded in October. The policy gives the central bank room to soak up every new bond issued. The BOJ held ¥233 trillion of JGBs and treasury bills as of Sept. 30, or 23 percent of total issuance."
"It is a far cry from where Kuroda, 70, an Oxford University-educated reflation advocate for more than a decade before he took the BOJ’s helm, planned to be two years after unleashing a bigger-than-forecast asset-purchase program. His campaign ran into road bumps with a 2014 recession triggered by a sales-tax increase and a slump in oil that’s restrained consumer prices."
It's insane to me that falling consumer prices are a bad thing and rising land prices are a good thing, but here we are.
But thus far Japan has been doing bank-shots with all the stimulus spending.
If and when the US returns to 2007-2008-2009 conditions, we'll have more pages of the BOJ playbook to use. . .
http://research.stlouisfed.org/fred2/graph/?g=1bFs
Orange is their debt / GDP, blue is ours.
Red is the BOJ debt / GDP, green is ours.
We've got 40% of GDP borrowing cushion before we even get to Japan's 2007 levels, and Yellen's going to have 60% of GDP on tap in the Fed's monetization gun by 2017 by the looks of it (compared to where Kuroda's going to have taken the BOJ's balance sheet by 2017).
shows that SSA payouts have risen to $700B/yr from $600B at the start of 2007, and will increase a lot since the boomers are still age 51 to 69 this year -- we're only about 1/3 into the induction of the boomers into SS.
The Bernanke Fed demonstrated to me in the 2008-2009 period that the quasi-hard money system as we knew it was fiction, that it can be modified as circumstances warrant and the politics demands.
We've lived through the Greenspan Put of 2001-2006 and the Bernanke Put of 2008-2011, I don't think Yellen is going to be asleep at the wheel when the Fed is needed again.
The Fed's power to intervene is largely bounded by what the politicians in DC are willing to allow it to do (with the threat of restricting its charter if the Fed crosses its Congressional overseers).
But one thing I've learned since 2007 is that I don't really know what's going on, actually.
Bellingham Bill
2015 May 17, 9:31pm
I don't know, I suspect at this point the investor class is just happy having their money on auto-pilot, looping back the yield into buying more of the same.
GOP's got their back for the foreseeable future with their control of Capitol Hill, and I've said I fully expect a complete re-working of our socio-economics should the GOP take the WH.
http://research.stlouisfed.org/fred2/graph/?g=1bFN
shows FTE is still at recessionary levels, right at the 1983 nadir actually.
What if the rest of the decade is an expansion instead of a contraction? Housing Bubble 3.0, another round of Bush Tax Cuts . . . expanding 'entitlement' spending (SSA, Medicare, Medicaid, PPACA subsidies) will provide a significant stimulus even in absence of Bush's GWOT and Obama's ARRA.
DC can have all kinds of hare-brained ideas to address the looming housing crisis, like turning the MID into a tax credit. Why the hell not?
Everything depends on who's got the WH two years from now, that's all.
This is probably obvious to people who've actually read a micro econ book, but getting my usual kebab lunch yesterday and seeing the price had been raised 10% the thought hit me how market capitalism has a built-in inflationary impetus of sellers seeking their customers' pain point on the demand side, where "value" if not "affordability" disappears for the consumer when the price goes too high for them.
Chipotle is one case in point for me. I started eating there in 2005, when a burrito & chips was around $6 IIRC. Now it's $9!
Equally obvious is that deflation requires competition among sellers to find their own pain point on the supply curve, where the profit is not worth the effort.
Paying an extra $1 for lunch is one thing, but where the rubber meets the road in our economy is housing and healthcare, where renters and buyers of housing goods and consumers of health services and goods juggle annual costs measured in the thousands.
Housing and health care are where economies boom, and bust, though it's difficult seeing how the predatory health care sector is going to bust anytime soon, given the tens of millions of boomers just beginning to age out now.
compares major sectors of the CA economy; mfg (blue) is of course down 700,000 jobs, ~30%, since 1990.
Education (red) has doubled to 400,000 jobs.
Health (green) has also doubled since 1990, from 1M to 2M jobs.
Retail employment has been flat since 2000 and is only up 200,000 jobs since 1990 (population on the whole has expanded 1/3 -- 10M -- since 1990).
Given the brutal nature of retail and manufacturing, and Gen Y flooding into the workforce now, I'm not entirely sure how wage inflation is going to get going here.
http://research.stlouisfed.org/fred2/graph/?g=1bEB
shows jobs are up ~3M since 1990, but population is up 9M.
Hopefully a lot of that gap is retirees, which will be a nice tailwind for the CA economy, millions of boomers here finally collecting from SSA vs. paying into it 197x-201x.
#housing