Economy is on the cusp of a major boom and economists believe it could last
cnbc.com
cnbc.com
They've solved all of economics! Just suppress growth intentionally for a while so then when you stop suppressing you'll get a couple great quarters!
Its the economics equivalent of a perpetual motion machine
I suspect the types of businesses opening will be ones that are inherently better adapted to lockdowns and lack of indoor dining in case things surge again.
Not clear how you are connecting this to the broken window theory, which as a side note, while often used fallaciously is not a fallacy in itself.
Also if the economy can grow by providing more and better games, bread, and Netflix, why didn't it happen during the various lockdowns in various countries?
If there was no growth and bleak predictions of future growth, it would have been just as easy to rationalize.
> This sounds pretty technical but I think I can follow. If you put people out of jobs and out of their homes for 1+ year, they ain't going to come back to an utopian pre-pandemic world. What did you think, that all the lost human capital & institutional knowledge lost in destroyed jobs and bankrupt companies was going to be rebuild in a day?
If there was no growth and positive predictions of future growth, it would have been just as easy to rationalize.
> This sounds pretty technical but I think I can follow. It takes a little while for people and companies to adjust to the post-pandemic world - takes a while to ramp up production, takes a while to stop saving just in case and start spending again. If you let people out of their houses to buy stuff, might take a couple months to transition back to normal but it will happen eventually.
If there was high growth in the short and bleak predictions of future growth, it would have been just as easy to rationalize.
> This sounds pretty technical but I think I can follow. If you let people out of their houses to buy stuff, after they couldn't for a year, then the economy is going to show growth in the quarter you let them out. But after that quarter, not much will happen. Long term growth depends on HN engineers developing revolutionary new software and the pandemic hasn't changed that. Opening up will allow us to catch up but won't have sustained effect.
And so forth.
They're taking a single week of spending, compared to a time when people were under serious threat of losing their income, and full of fear, and from that one number, they suggest that we've entered a boom cycle.
I'm not an economist, but I don't think the person who wrote this should be able to call themselves one either.
If they're going to go by this number, how about also including the numbers for 2019? Is the economy back to where it was? higher than it was then?
A major boom takes more than just stimulus from the government, otherwise, they'd just constantly be printing money.
I'd like to see reasoning behind the "boom" that is coming, beyond just that people are back spending money. That "should" only get us back to "normal".
I've met a few econ peeps in finance. All of them full of it and they knew it. Great peoples though. Spending a third of the time inebriated in some shape or form while making the best, most awful looking presentation about the micro-economics for a pitch to a huge fund. And it worked.
I disagree. Massive, massive investment in beneficial projects is what causes booms. The last great booms we saw in the States were both the result of massive public investment during and after World War II. This gave us large scale American industrial manufacturing boom of the 40s/50s/60s, and the research funded in 60s/70s/80s, would go on to produce Silicon Valley in the 90s and 2000s.
Its helpful to think about where money comes from. And what can be done with it. Private firms ripping off consumers doesn't generate anything at scale. Massive public investment, historically speaking, does.
The exact same booms were seen all over the world. It's probably due to innovation and sharply falling energy prices (oil, hydro and nuclear.)
A boom the 90s is probably attributed to IT-productivity, but mostly sharply falling labour prices due to Chinese manufacturing.
Overall, booms are probably due to falling prices in input factors. Subsidies alone just leads to increasing prices.
Next boom probably happens when AI can replace menial jobs.
However, is there such large scale projects the current stimulus is going to? It is my impression that the money is going to individuals to try to pump money into the economy. That's money without direction, which I don't believe would have the same effect you are suggesting.
I think it's far more likely that the USD is dropping along with most other currencies as a response to worldwide inflation than a strong economy.
Inflation right now is not up as measured by the consumer price index. The CPI is made of a basket of common goods. Those goods so far have stayed steady in price, but they are made of component commodities that have gone up vastly over the last year. Iron ore, lumber, corn, and soybean are all up ~2x in the past year. That's a very very bad sign.
I think it's a great time to borrow a bunch of money and put it into inflation-proof assets. Real estate in particular (via diversified funds) seems like the best hedge. A basket of crypto, stocks, and commodities seems smart too. I would avoid bonds because lenders get screwed by inflation.
I generally think modern monetary theory is completely bogus.
Any moron can start an alarming blog.
Be careful.
After the banking crisis in 2008, interest rates around the world have been low, and in some Western countries the lowest on records stretching back hundreds of years. It doesn't seem to have occurred to many "Jeez, that doesn't sound right."
Most troubling is the great divide between the wealthy profiting from stock market growth while the working poor are lucky to have an unsafe workplace to labor in. This is a formula for strife.
Airlines, hotels, restaurants, airplane makers, brick and mortar stores, has had and will have a torrent of bankruptcies as will industries connected to them.
I know several European airlines are bankrupt and being kept on life support by governments pouring money in.
The number of travelers will not recover in the foreseeable future to the pre pandemic numbers.
Let them fail.
The guy behind "Norwegian" (NAS) the airline, quit NAS a while back and now he has started a new airline, buying up cheap deals on airplanes and airport permits.
Probably a great idea as long as he has enough money to sit on those assets for a while.
I dont see how Boeing can survive. If the military contracts are large enough perhaps
If that's what economists believe, then we're all doomed.
Stock Market 1929, Yale economist Irving Fisher declared that "stock prices have reached what looks like a permanently high plateau." The markets experienced a major crash not long after.
In the late 70's we had the "death of equities", and "only old people were buying them". It turns out that the old people weren't as dumb as others thought, as stock markets subsequently went on to have one of the greatest bull markets in history.
Late 90's, IIRC Greenspan stated that we were in a Goldilocks economy. Starting 2000, stock markets dived.
2007, UK Chancellor of the Exchequer in the UK said the economy was in great shape. Shortly before the banking crisis.
Again and again, economists have proven that they are no better at predicting the economy than you or I.
Greenspan once boasted that his job was difficult that being a quantuum physicist was probably easier.
The sheer conceit of the man! All those PhDs, all those smarts and hard work, so much hubris, yet all of it is complete nonsense.
As far as I'm concerned, the only use of economists is as a contrary indicator.
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design" -- Friedrich Hayek
I don't trust anybody's ability to predict the future. The economy typically runs on a roughly 10 year cycle, but wars, pandemics, and natural events can throw it off. The stimulus will probably work for a while, but can't last forever. How long it lasts and what happens afterward is hard to say.
As you point out, it’s better to observe history and the boom/bust cycles to extrapolate that this will not last. I’d wager the next bust will be even bigger than anything in our lifetime, but would be a happy to be wrong.
* it is impossible to predict the (economic) future if it is your job
* any layman can predict the future through simple extrapolation of GDP variation around the long term trend
So why are economists so much worse than the layman?
Part of it might be due to "insider" (not in the illegal sense) knowledge (aka "expert" knowledge) vs "outside" knowledge.
In other words, economists apply a great deal of thought, knowledge and expertise in making their calculations. The problem is that the future is inherently unpredictable, and in the end, all their effort is spent on elaborating what is, in the final analysis, just a story.
For outsiders, they basically admit that they don't know very much, and just resort to naive base rate analysis.
Yet it often turns out that naive forecasting is actually better than elaborate forecasting, because you're not kidding yourself that you know something when you don't.
“What gets us into trouble is not what we don't know. It's what we know for sure that just ain't so.” -- Mark Twain
Great.
I sit on 2 apartments in downtown and am thinking about selling one of them.