All those tax cuts for the really rich have led to massive inflation in the things that really rich people buy: shares of government chartered collectives, high end art work, luxury and income real estate and so on. There's a reason the markets are up, inflation. It's just not a general inflation because most Americans have had flat or falling income for the last four decades despite rising productivity. It's inflation at the very high end.
P.S. This was rather obvious after the 1986 crash. The stock market recovered quickly. It was obvious that the Reagan tax cuts and union busting had done their work. Americans were going to get poorer. There was nothing to invest in, so people with money to invest were going to buy stocks and that buying would drive up their prices. It has been an inflationary spiral since then.
The Federal Reserve has been suppressing economic growth for 40 years now. We had a brief economic stimulus and so much of the money went to people in the bottom 50% that it unleashed an incredible level of demand. Our economy is still reeling from this. It could have been avoided if wages had tracked productivity or at least inflation, but when something is tamped down for decades, there will be dramatic changes when it is released. Look at consumer goods purchases in East Germany after unification.
It's not as if we can't afford this. Wages have massively lagged productivity. Meanwhile, the gains for that productivity were concentrated at the high end resulting in massive rich person stuff inflation. There's a reason stock prices and real estate prices keep rising. There has been a stagnant consumer market, so there is nothing to invest in. Wealthy people buy stocks instead.
Sorry, Arnold, but you are ignoring what happened in 2020 and 2021. The grotesque response to Covid disrupted the world economy and the U.S. economy in particular. Before attempting to explain what is going on in 2022, you should provide a detailed explanation of that disruption. I'm not surprised that Summers, Krugman, and others that look only at standard aggregates cannot explain the past three years (they have not been able to provide good explanations of anything that happened in the past 75 years --remember what happened after the end of WWII). I'm surprised that you who have been critical of standard macroeconomics now relies on it to explain how the economy is recovering from the largest disruption since WWII.
Indeed, to the extent that people's current responses depend both on their frustration about the grotesque government interventions at home and abroad in 2020-2022 and their expectations about how politicians are willing to do to grab and abuse power, we should not be surprised that many people are adjusting and adapting their behavior in ways we can hardly understand right now. I live in Chile, a lab in which and I can observe people's struggle to deal with that extreme uncertainty, and I bet you --on the basis of what I know about California-- that it's much worse in the U.S.
I still have to ask where are the almost 6 million workers that should be in the "employed" category as of September 2022 that aren't there in the BLS survey? In other words, without COVID, under the long-term trend at the time, there should have been 6 million more workers today than there are. Is it all just Boomers retired when COVID hit? It is when I look at those numbers, that I believe the GDP report, and not the establishment jobs survey. As for the GDI, maybe the the numbers have gapped out because cash infusions by the governments have run high for 2.5 years now, only just starting to peter out.
* Stimulus measures increased the money supply. This increased inflation and increased measured GDP.
* The retirements of the Boomers reduced the labor supply. This increases labor prices and decreases GDP. Since labor is used in almost everything, increased labor costs increase most measures of inflation even if the two are analytically distinct.
* Supply interruptions in eastern Europe (war) and China (Covid lockdowns) reduced the supply of energy (Russia) and many manufactures (China). This increases prices for most everything (not technically inflation, but very similar in effect) and reduces GDP.
You've basically covered it. I'll throw in a couple of possibles.
This stimulus was particularly effective as it actually benefited people in the bottom 80% of earners. The usual "stimulus" is usually a tax cut that just gets turned into higher stock and real estate prices.
There are also a couple of COVID effects. COVID and long COVID knock people out of the workforce, some briefly, some long term. COVID also knocked a lot of women out of the workforce when child care became unavailable and schools closed.
Fuel cost rising should be separate from supply interruptions. Raising energy prices / reducing energy supply looks a lot like "inflation" since there's some more or less significant energy cost in all products, and even in services.
Supply interruptions, like in baby formula, are far more particular, even when there are many specific products suffering supply chain delivery/ production problems. Tho computer chip supply disruptions affect even more products.
But, conclusion is only "true" if there is some other candidate for World's Reserve Currency. So far - nada. Not Euro, not Renminbi/ Yuan, certainly not ruble, nor rupee (India).
America's terrible problems ... remain generally less bad than other countries.
All those tax cuts for the really rich have led to massive inflation in the things that really rich people buy: shares of government chartered collectives, high end art work, luxury and income real estate and so on. There's a reason the markets are up, inflation. It's just not a general inflation because most Americans have had flat or falling income for the last four decades despite rising productivity. It's inflation at the very high end.
P.S. This was rather obvious after the 1986 crash. The stock market recovered quickly. It was obvious that the Reagan tax cuts and union busting had done their work. Americans were going to get poorer. There was nothing to invest in, so people with money to invest were going to buy stocks and that buying would drive up their prices. It has been an inflationary spiral since then.
"no matter how you look at it, job vacancies are really high right now. I don’t think this phenomenon is yet well-understood. "
Employers aren't paying enough and gov't is taxing labor too much. Not sure how that's hard to understand, unless you're being paid not to.
The Federal Reserve has been suppressing economic growth for 40 years now. We had a brief economic stimulus and so much of the money went to people in the bottom 50% that it unleashed an incredible level of demand. Our economy is still reeling from this. It could have been avoided if wages had tracked productivity or at least inflation, but when something is tamped down for decades, there will be dramatic changes when it is released. Look at consumer goods purchases in East Germany after unification.
It's not as if we can't afford this. Wages have massively lagged productivity. Meanwhile, the gains for that productivity were concentrated at the high end resulting in massive rich person stuff inflation. There's a reason stock prices and real estate prices keep rising. There has been a stagnant consumer market, so there is nothing to invest in. Wealthy people buy stocks instead.
We can afford helping the people, or militarism and welfare for the 0.01%.
Our "elite" have made their intentions clear. The are choosing poorly.
I would caution against using US GDP as a normalizing denominator for the S&P 500.
Sorry, Arnold, but you are ignoring what happened in 2020 and 2021. The grotesque response to Covid disrupted the world economy and the U.S. economy in particular. Before attempting to explain what is going on in 2022, you should provide a detailed explanation of that disruption. I'm not surprised that Summers, Krugman, and others that look only at standard aggregates cannot explain the past three years (they have not been able to provide good explanations of anything that happened in the past 75 years --remember what happened after the end of WWII). I'm surprised that you who have been critical of standard macroeconomics now relies on it to explain how the economy is recovering from the largest disruption since WWII.
Indeed, to the extent that people's current responses depend both on their frustration about the grotesque government interventions at home and abroad in 2020-2022 and their expectations about how politicians are willing to do to grab and abuse power, we should not be surprised that many people are adjusting and adapting their behavior in ways we can hardly understand right now. I live in Chile, a lab in which and I can observe people's struggle to deal with that extreme uncertainty, and I bet you --on the basis of what I know about California-- that it's much worse in the U.S.
I still have to ask where are the almost 6 million workers that should be in the "employed" category as of September 2022 that aren't there in the BLS survey? In other words, without COVID, under the long-term trend at the time, there should have been 6 million more workers today than there are. Is it all just Boomers retired when COVID hit? It is when I look at those numbers, that I believe the GDP report, and not the establishment jobs survey. As for the GDI, maybe the the numbers have gapped out because cash infusions by the governments have run high for 2.5 years now, only just starting to peter out.
"It is difficult to sort out economic indicators these days"
That's because they're partly, or wholly, bullshit. See John William's Shadowstats for starters.
I see three things happening in the economy:
* Stimulus measures increased the money supply. This increased inflation and increased measured GDP.
* The retirements of the Boomers reduced the labor supply. This increases labor prices and decreases GDP. Since labor is used in almost everything, increased labor costs increase most measures of inflation even if the two are analytically distinct.
* Supply interruptions in eastern Europe (war) and China (Covid lockdowns) reduced the supply of energy (Russia) and many manufactures (China). This increases prices for most everything (not technically inflation, but very similar in effect) and reduces GDP.
Is there something I'm missing?
You've basically covered it. I'll throw in a couple of possibles.
This stimulus was particularly effective as it actually benefited people in the bottom 80% of earners. The usual "stimulus" is usually a tax cut that just gets turned into higher stock and real estate prices.
There are also a couple of COVID effects. COVID and long COVID knock people out of the workforce, some briefly, some long term. COVID also knocked a lot of women out of the workforce when child care became unavailable and schools closed.
Fuel cost rising should be separate from supply interruptions. Raising energy prices / reducing energy supply looks a lot like "inflation" since there's some more or less significant energy cost in all products, and even in services.
Supply interruptions, like in baby formula, are far more particular, even when there are many specific products suffering supply chain delivery/ production problems. Tho computer chip supply disruptions affect even more products.
Fine analysis of problems based on data!
But, conclusion is only "true" if there is some other candidate for World's Reserve Currency. So far - nada. Not Euro, not Renminbi/ Yuan, certainly not ruble, nor rupee (India).
America's terrible problems ... remain generally less bad than other countries.