A look beyond the Twitter IPO finds rot beneath the gloss of recovery | Hacker News Reader

A look beyond the Twitter IPO finds rot beneath the gloss of recovery

theguardian.com

38 pointsantr18 comments

This article condenses arguments being put forth by econ/finance blogs but fails to connect the dots. One angle: Banks have been receiving money at 0% interest rate for 5 years now due to ZIRP (http://en.wikipedia.org/wiki/Zero_interest-rate_policy) but can't lend it to fund quality investments across the entire economy. Instead of growth across all sectors, we have exploding valuations in Internet Tech indicative of investors "chasing returns" -- a bubble!

Meanwhile the middle class continues to shrink without growth of jobs in other sectors. Food stamp demand and low labor participation rates further validate this assumption that the economic recovery hasn't come for most Americans even as high-level averages such as GDP and stock markets tell us otherwise.

> that the economic recovery hasn't come for most Americans even as high-level averages such as GDP and stock markets tell us otherwise

So you're saying trickle-down doesn't work

It certainly doesn't work when it's entirely fake.

The Fed is trying to skip the cause, and acquire the result. It's one of the dumbest economic concepts ever devised.

Trickle-down is a goofy name for capital investment. Meaning, rich people have capital, they allocate it where they can earn a return. Nothing can ever actually alter this premise, it will exist even in the most Communist of nations; so calling anything trickle-down is absurd, it's all trickle-down, even when it's the Communist Party in the USSR that is the rich and doing the trickling down. In a healthy economy, job creation goes hand-in-hand with that capital investment, it's no more complex than that.

Normally a booming stock market is the result of widespread economic growth - that is, in the absence of the Fed generating huge imbalances in the economy that spur an artificial stock market boom.

This (the Fed trying to acquire the result without the cause) is the same exact reason we're seeing non-existent job creation. The Reagan recovery saw massive, full-time job months, such as 1.1 million produced in Sept 1983. Bill Clinton also saw very impressive full-time job gains. So far this non-recovery is lucky if it produces 200k jobs, and if 10% of them are full time jobs, with only 50% in hospitality and retail (low paying consumption driven jobs instead of production).

Not directly (but I agree). I'm saying that averages ignore distribution. If you combine one part of 100% growth and nine parts 0% growth then overall you have 10% growth. Does that mean all the parts are growing, or even most of them are growing? Nope.

I think it's even more skewed than that. Growth that occurs among wealthier people has a disproportionate impact on the average, too.

For example, if the top 10% of people have half the stuff, then just 20% growth among the top 10% and 0% growth among the rest will give you an average of 10%.

On the other hand, if the bottom 90% experience 5% growth and the top 10% experience none, it looks like an average of merely 2.5%.

In January 1958 Walter Reuther gave testimony at a Senate subcommittee hearing, and he shared this anecdote;

In 1951, the Ford Motor Co. opened up a new engine plant in Cleveland, Ohio, adjacent to the municipal airport. It was the first fully automated engine plant. … I went through that plant many years back…

So they said to me, “Aren’t you worried about how you are going to collect union dues from all of these machines?”

I said, “the thought never occurred to me. The thought that occurred to me was how are you going to sell cars to these machines?” You know you can make automobiles, but consumers are still made in the good old fashioned way.”

Without good wages to provide the populace at large with cash to buy things growth will stagnate and wither. One of the big reasons that growth was so good during the 50's and 60's is that income was spread more evenly between capital and labour. If the trends that favour capital continue in the way that they have since the 80's then for 99%+ of us our children will have a much bleaker existence that we have had. Bringing back much higher income taxes for the very wealthy is one obvious way to rebalance this inequality.

Growth was so good in the 50s and 60s because demand was so high from a range of countries that had just destroyed almost everything in them and needed to rebuild.

The rest here is just the usual luddite stuff reframed for a post-industrial revolution era.

The reason growth was so great had nothing to do with high taxes; it had to do with the rest of the world being destroyed and technological changes.

I believe he said growth was so great because riches was spread more evenly. Not high taxes, even though that was also the case.

The premise that this article is attacking seems weird. Did anyone (except maybe other link-baiting journalists) believe that the Twitter IPO was a valid positive indicator that the US economy was improving at a macro level?

Spot on. Trying to think of any meaningful article or program I've seen lately that described the American economy as somehow well on its feet with much of its trouble behind it. Perhaps this article plays well with international audiences who see the Twitter headlines and draw assumptions. Even that seems unlikely. Certainly though in the US there's not a lot of back patting going on but rather a keen awareness of the serious problems. It's just in the proposed solutions that all the trouble begins.

Only lazy financial journalists who have trouble defining what "the economy" is in the first place.

Because this is the only thing the US produces any more, so it's major part of the GDP... Pretty simple.

This is pure politics, and is built on a straw-man argument. I know of no credible source, or even of a popular source, that suggests that Twitter is a bellwether of economic recovery. I flagged it, and so should you.

For those curious, here is the labor force participation rate graph that she's taking data points from: http://data.bls.gov/generated_files/graphics/latest_numbers_...

In particular, the LFPR was on a continuous roll from 1965 to 1989, and continued to rise through the "dark years of oil shortages and stagflation", as she called them.

I have never heard anyone herald the Twitter IPO as a sign of economic recovery. The IPO is in the news constantly because it's a minute-by-minute spectacle of wealth lost and wealth gained – not because people think it's a sign of easing economic times.

> Meanwhile, in the real America – the one where you can't call Uber to take you to a launch party – people are dropping out of the workforce, the recovery is weakening and early cuts in food stamps are already slamming the poor. That real America is the one that's not getting much attention.

I don't think the economic slump that affects such a large segment of the population is not getting much attention. The shoddy economy has basically dominated economic news for the past five years; I see articles about its poor state every time the jobs numbers come out. The public doesn't believe the economy is recovering either: http://www.gallup.com/poll/151127/Economic-Conditions-Weekly...

This article draws the wrong conclusions.

Falling gasonline prices have had me worried for a couple weeks now, for me its a sign that we are on the cusp of a double-dip recession. Growing income inequality belies a wider underlying weakness in the economy. The Depression grew from a decade long recession in the agricultural market, it was sparked however by a stock market bubble imploding that caused widespread bank failures. The failures of the banks are what turned it from a blip (see the post-dot-bomb era) into a worldwide crisis. I believe honestly that the next 5 years its going to be about as bad as the last 5, but hopefully should improve going forward.

Too much faith in the Guardian around these parts at the moment.

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