What's going on with the US/Global economies?

[mheslep]

Unlimited growth is the philosophy of the cancer cell . In time it destroys its host.

True, because cancer growth takes exponentially more *physical* resources from the body. Economic growth requires some minimum of physical resources, but not necessarily ever more physical resources. That is, I need one washing machine, not 20. Beyond that minimum, there's plenty of economic activity that don't require any more physical resource, things like this web portal would be one example.

 

[EnumaElish]

That is true for each of us individually but may not hold collectively. Electronic communication and social media necessitate an ever-increasing amount of physical storage and an ever-increasing "need for speed." Haven't we been pushing the physical limits of what is possible on either front (storage and speed) for a while now?

And then there's the energy footprint:

The iPhone is just one reason why the information-communications-technologies (ICT) ecosystem, otherwise known as the digital economy, demands such a large and growing amount of energy. The global ICT system includes everything from smartphones to laptops to digital TVs to — especially — the vast and electron-thirsty computer-server farms that make up the backbone of what we call “the cloud.” In his report, Mills estimates that the ICT system now uses 1,500 terawatt-hours of power per year. That’s about 10% of the world’s total electricity generation or roughly the combined power production of Germany and Japan. It’s the same amount of electricity that was used to light the entire planet in 1985. We already use 50% more energy to move bytes than we do to move planes in global aviation. No wonder your smartphone’s battery juice constantly seems on the verge of running out.

http://science.time.com/2013/08/14/...al-cloud-is-using-more-energy-than-you-think/

 

[m k]

I read somewhere that France is using one nuclear plant for standby electricity.

 

[mheslep]

...

And then there's the energy footprint:
http://science.time.com/2013/08/14/...al-cloud-is-using-more-energy-than-you-think/

Writing to MSN News, Heiser said Mills’ work “seems blatantly wrong.” He said Mills overestimates the amount of power used by a modern smartphone, in this case a Galaxy S III, by more than four times.

 

[russ_watters]

That is true for each of us individually but may not hold collectively. Electronic communication and social media necessitate an ever-increasing amount of physical storage...

I'm really not following you here at all. That doesn't strike me as being necessarily true, but only true insofar as it is circular: we have ever-increasing storage and in order to keep having what we have we have to keep having it. That doesn't mean that we/they need ever-increasing storage for any particular external reason.

...and an ever-increasing "need for speed."

I think that part is false, considering the exponential speed increases slowed drastically a decade ago and most people didn't even notice unless they noticed they weren't upgrading their computers as often as they used to.

If you're trying to say that without exponential storage increases facebook will go out of business, I disagree and point to your second part's example - Intel - as being a good example of what happens when a product/market matures (when innovation slows and everyone already owns one): it levels-off.

In either case, I don't see what this has to do with the line of discussion we were on. I can't see how this has anything to do with capitalism, and barely even see any connection with economics in general. Could you be more specific about what your point is?

 

[EnumaElish]

I'm really not following you here at all. That doesn't strike me as being necessarily true, but only true insofar as it is circular: we have ever-increasing storage and in order to keep having what we have we have to keep having it. That doesn't mean that we/they need ever-increasing storage for any particular external reason.

I think that part is false, considering the exponential speed increases slowed drastically a decade ago and most people didn't even notice unless they noticed they weren't upgrading their computers as often as they used to.

In either case, I don't see what this has to do with the line of discussion we were on. I can't see how this has anything to do with capitalism, and barely even see any connection with economics in general. Could you be more specific about what your point is?

I need one washing machine, not 20. Beyond that minimum, there's plenty of economic activity that don't require any more physical resource, things like this web portal would be one example.

So mheslep's point must be, you can add value without increasing physical resource use. That statement doesn't have much to do with capitalism per se, but I guess you could say it makes a point about capitalism not requiring income growth.¹ That may well be true at the margin, for a narrow margin. Adding a single post on PF probably doesn't add much to resource use, and hence to "income growth." Even submitting a new thread wouldn't amount to much resource use by itself. But mheslep's statement is less defensible if your margin is sufficiently wide, and it includes the entire "web portal" -- and that's verbatim -- because PF in its entirety must have a measurable footprint. It takes up physical space and uses up real energy. But you'll never have a PF without the internet infrastructure, so arguably the margin should include the entire internet! And the internet takes up measurable space and uses up measurable energy. Without that energy use, the web portal would not exist and I could not have posted this one additional reply. So at the very least I do not agree with the letter of mheslep's example. If its point was capitalism does not require growth, then I don't think it makes that point.
-----------------------
¹That is my premise about what mheslep's point was and how it relates to capitalism. If the reader thinks I got the premise wrong, they should state so.

 

[EnumaElish]

Capitalism or any other system not requiring income growth may be a truism in some sense. Suppose a wearable device is invented and it increases the wearer's productivity hundredfold across any and all endeavors. More of everything can be produced at a lower cost. Prices would fall across all markets. In a utilitarian sense we'd all be much richer than we are now. But income growth may well be negative, if income is measured at current prices. This is my extreme example for making the point. Productivity increases rarely are so drastic or so general, at least in the short run, but they do occur. The expected result is lower costs, and lower prices.

 

[Astronuc]

Hanjin, the world’s seventh-largest container shipper, filed for bankruptcy protection Wednesday and stopped accepting new cargo. With its assets being frozen, ships from China to Canada were refused permission to offload or take aboard containers because there were no guarantees that tugboat pilots or stevedores would be paid. It’s also been a factor in shipping rates rising and could hurt some trucking firms with contracts to pick up goods from Hanjin ships.

https://www.yahoo.com/news/hanjin-bankruptcy-causes-global-shipping-chaos-retail-fears-002837676--finance.html

http://www.bbc.com/news/business-37227560

 

[Dotini]

IMO, our system may not have been deliberately predicated on the notion of perpetual growth. But in practice it has become required. This is because of the level of debt that has been piled up by individuals, companies and government at all levels. Growth is now mandatory if interest payment on the debt is to be maintained without sacrificing the standard of living of all concerned. Without growth, at some point the currency must be devalued with concomitant price rises to avoid general collapse of economic activity. This debasement of the currency in itself would instantly impoverish those on fixed incomes. Please correct me if I'm in error here.

 

[nikkkom]

IMO, our system may not have been deliberately predicated on the notion of perpetual growth. But in practice it has become required. This is because of the level of debt that has been piled up by individuals, companies and government at all levels.

Individuals: There always were, and always will be people who borrow too much. I don't know what can be done here.

Companies: if you have a good business idea, it does make sense to borrow and grow faster than if you'd work only from your money. OTOH, underperforming companies go bankrupt all the time, it's SOP.

Government: US govt debt has more than a few peculiar aspects to it, making it more like a device for dollar emission than "real" debt.

Without growth, at some point the currency must be devalued with concomitant price rises to avoid general collapse of economic activity. This debasement of the currency in itself would instantly impoverish those on fixed incomes. Please correct me if I'm in error here.

US currency is being devalued (inflation). A small and predictable inflation is actually better than completely stable currency: it encourages people to invest money rather than hoard them.

 

[mheslep]

As an issue of simple math, debt, even large amounts of debt do not require growth forever. Once an income becomes sufficient for needs and the interest on debthe then no further income growth is required, even if the debt is continually rolled over and never retired. If however income is habitually insufficient (the case with the US government), then debt grows and therefore continual income growth is required.

US federal spending deficit 2016 per CBO: 534 billion, up 100 billion from last year, and forecast to grow in coming years. Interestingly most major media outlets continually reported the declines in the US deficit after it reached more than 1000 billion during the recession of 2009 - 10. Reports of the 2016 increase in popular media are rare I find.

 

[russ_watters]

US federal spending deficit 2016 per CBO: 534 billion, up 100 billion from last year, and forecast to grow in coming years. Interestingly most major media outlets continually reported the declines in the US deficit after it reached more than 1000 billion during the recession of 2009 - 10. Reports of the 2016 increase in popular media are rare I find.

Yes, that's something I would generally pay attention to and I was not aware of it. It's disturbing. And I don't mean just the media silence on the issue compared to the Amazing Halving Of the Deficit By Obama (after it doubled under his watch), but the fact that it is actually happening. We're in an expansion period. A mediocre one, but expansion nonetheless, so the deficit should be falling, not rising. The current deficit and the expected ones the next few years are on the high side historically on a gdp ratio basis, which is a problem given the already high debt. In the aftermath of the Great Recession, we ran-up a higher than typical debt and we should be trying to reduce it.

Googling, I found several articles that mention the increase and then launch into a broad discussion of the topic of deficits/debt and several that discuss the small increase from previous projections, but discussion of the specifics of this rise haven't been all that easy to find. On about the 5th try, I did find this:

December’s budget deal explains the $32 billion increase in 2016 in discretionary spending (the kind Congress approves each year). Defense spending will “edge up slightly,” CBO says, while domestic discretionary climbs by 4%. That leaves the big money to the usual suspects—entitlements. Outlays for Medicare (net of premiums), Medicaid, the children’s health insurance program and ObamaCare subsidies will increase no less than 11%, or $104 billion, this year.

http://www.wsj.com/articles/the-deficit-rises-again-1453768153

...which isn't specific enough for me.

And I still wonder why - again - in a growing economy we aren't seeing reductions in outlays for social programs. As an example, this shows that outlays as a percentage of GDP fell throughout the '90s expansion period:

 

[nikkkom]

Yes, that's something I would generally pay attention to and I was not aware of it. It's disturbing. And I don't mean just the media silence on the issue compared to the Amazing Halving Of the Deficit By Obama (after it doubled under his watch), but the fact that it is actually happening. We're in an expansion period. A mediocre one, but expansion nonetheless, so the deficit should be falling, not rising.

World economy is growing (mostly outside of the West, by virtue of several formerly extremely poor countries becoming less and less poor).
World economy uses US dollars extensively for international and even local trade.
This means world economy needs more dollars in circulation.

How do you think these new dollars are coming into existence?

 

[russ_watters]

World economy is growing (mostly outside of the West, by virtue of several formerly extremely poor countries becoming less and less poor).
World economy uses US dollars extensively for international and even local trade.
This means world economy needs more dollars in circulation.

How do you think these new dollars are coming into existence?

They are being printed...but I don't see what that has to do with my post.

 

[mheslep]

And I still wonder why - again - in a growing economy we aren't seeing reductions in outlays for social programs.

Employment and growth usually bounces back after a recession strongly enough to put the country back on trend to where it would have been, as if there had never been a recession. That didn't happen after the recession of 2009, and the US is about ten million jobs short of where it "should" be to stay on trend. That is, if the US had continued from 135M employed in Jan 2006, increasing at 1.8M per year with no recession, then employment as of Jan 2016 would be 153M instead of the reality, 143M. The shortfall is not theoretical, as the population did continue to increase over the past ten years. The recovery of the commonly touted official "U3" unemployment rate over the last several years means that people have dropped out of the US labor force in large numbers, apparently permanently.

BLS:
http://data.bls.gov/generated_files/graphics/CES0000000001_149123_1473385253489.gif

 

[nikkkom]

They are being printed...but I don't see what that has to do with my post.

They are being printed _how_?

What is the exact process how a new $1m of dollars (as a number in a bank account, not a pile of paper rectangles) springs into existence?

The answer is: it is usually born as US govt debt to FRS. FRS gives US govt a new, never before existing $1m. US govt gives FRS a Treasury IOU.

Since world economy is growing, US govt _has to_ go into more and more debt, in order to create more and more dollars for world economy.

 

[russ_watters]

The answer is: it is usually born as US govt debt to FRS. FRS gives US govt a new, never before existing $1m. US govt gives FRS a Treasury IOU.

The debt you are referring to has changed very little from last year (+$1.6 billion), so is a very small part of the government debt increase from last year. The vast majority is apparently in Social Security/Medicare outlays, though I'm still not entirely clear on the cause of that.

 

[mheslep]

...
Since world economy is growing, US govt _has to_ go into more and more debt, in order to create more and more dollars for world economy.

No, the US govt has to increase the money supply to support/promote growth. The Fed's purchase of US government debt, instead of the usual sales to other parties (e.g. individuals, other governments) puts more money into the system, but does not per se increase the debt. The Fed does have unprecedented amounts of US debt on its books, though as Russ indicates the Fed mostly stopped the practice some time ago.

https://fred.stlouisfed.org/series/TREAST

The problem for the Fed now is, in some future inflationary period when it desires to tighten the money supply, how does it unload some $3 trillion in debt without crashing the financial world.
http://www.cfr.org/monetary-policy/exiting-monetary-stimulus-better-plan-fed/p30174

 

[mheslep]

...The vast majority is apparently in Social Security/Medicare outlays, though I'm still not entirely clear on the cause of that.

Unlike a financially sound private pension system which pays out what participants put in over time (plus interest), the US entitlements are ponzi schemes that pay out much more than was ever paid in. With i) an aging population, and ii) anemic economic growth choking govt revenue, the problem accelerates.

 

[russ_watters]

Unlike a financially sound private pension system which pays out what participants put in over time (plus interest), the US entitlements are ponzi schemes that pay out much more than was ever paid in. With i) an aging population, and ii) anemic economic growth choking govt revenue, the problem accelerates.

I do get all that, but a sudden [edit: not sudden, see below], substantial acceleration isn't something that makes any sense to me. In order to suddenly and substantially accelerate, something had to rapidly change this year. What I'm not seeing is the specifics on what change, how much and why --- and perhaps more importantly, is it going to keep getting worse faster next year and the year after. I guess what I'm looking for is the details on this:

Outlays for Medicare (net of premiums), Medicaid, the children’s health insurance program and ObamaCare subsidies will increase no less than 11%, or $104 billion, this year. [from my earlier link]

How much did each of those things account for the $104 billion, why, and is it going to keep getting worse that fast next year too?

[edit]
From the link, the year-over-year delta in outlays has been:
2011: +$146B
2012: -$66B
2013: -$82B
2014: +$49B
2015: +$184B
2016: +$231B

From your graph, employment has been increasing linearly since 2010 and as expected for a recovery, outlays dropped two years in a row. But stating in 2014 that trend reversed and outlays began to rise again. This is despite the fact that the country is adding jobs faster than it is adding people (so the total number of people without jobs, whether they are looking or not, is decreasing), and it should only need to add jobs about 70% as fast as it is adding people in order to keep pace.

So this reality, that we are paying more for entitlements - a lot more - than the trajectory we were on, is still very confusing to me. Federal outlays today are some $600 Billion higher than I would have expected, given the trajectory of the recovery in 2010-2012.

 

[jim hardy]

So this reality, that we are paying more for entitlements - a lot more - than the trajectory we were on, is still very confusing to me.

I don't understand much about high finance.

My old mentor who'd grown up during the depression told me that shortly after SS was intitiated they changed it from savings based to a "pay as you go" ponzi so gov't could spend the surplus (which he described as "a Bonanza" ).
I researched that some years later when internet showed up and found it in the prewar Federal Register . It was tedious to find and i won't try that again.
But now it's mentioned discreetly on the SS site:
https://www.ssa.gov/policy/docs/ssb/v66n1/v66n1p1.html

In fact, the Advisory Council on Social Security of 1938, whose work led to the 1939 amendments, was created in 1937 at the suggestion of Senator Arthur Vandenberg (R-MI). Vandenberg had a number of concerns regarding the large reserve funds that were being built up as a result of the original Social Security Act, one of which was that the government would not truly "save" the reserves but rather use them to finance spending on other federal initiatives.

Surely "Ant or Grasshopper" is just part of the story of how we got here.

 

[mheslep]

...This is despite the fact that the country is adding jobs faster than it is adding people (so the total number of people without jobs, whether they are looking or not, is decreasing), ...

From the data I see job creation is barely keeping pace with population, and that only for the post recession years. Looking back past the recession, job creation over the past 8 years has been far short of population growth. This is just one the facts that makes me irate when the Obama administration frequently touts X million jobs created over several years, when the recovery job creation needed to be much higher, and could have been to my mind.

More later on Medicare spending spikes, time permitting, which I gather is your current main interest.

 

[Dotini]

China has built ghost 100 cities with housing for 100 million people. All waste and ruin, but the colossal debt is yet unpaid, and rising faster than the economy. A hard landing is envisioned. In some ways China is the world's #1 economy, and when the crash comes, it may ripple down the chain.
.

 

[Dotini]

http://www.bloomberg.com/news/artic...to-world-order-confronts-elite-at-imf-meeting

Policy-making elites converge on Washington this week for meetings that epitomize a faith in globalization that’s at odds with the growing backlash against the inequities it creates.

From Britain’s vote to leave the European Union to Donald Trump’s championing of “America First,” pressures are mounting to roll back the economic integration that has been a hallmark of gatherings of the IMF and World Bank for more than 70 years.

Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that International Monetary Fund Managing Director Christine Lagarde says is already “weak and fragile.”