Thursday, August 25, 2011

GDP, Debt, Wages, and Aliens

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Ease up. Sounds like a blown transaxle. You're just grinding metal. - Hicks, Aliens (1986)

Click to enlarge.

Hey, Ripley, don't worry. Me and my squad of ultimate badasses will protect you. - Hudson, Aliens (1986)

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Apone, collect magazines from everybody. We can't have any firing in there. - Gorman, Aliens (1986)

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How long after we're declared overdue can we expect a rescue? - Ripley, Aliens (1986)

Source Data:
St. Louis Fed: Household Debt
St. Louis Fed: Federal Government Debt
St. Louis Fed: State and Local Government Debt
St. Louis Fed: Wage and Salary Disbursements
St. Louis Fed: CPI


Stagflationary Mark said...

Jeremy Siegel holds out hope for 3% to 4% real GDP growth over the long-term.

This is what the charts say.

We can get 4% real long-term GDP growth if real household debt increases by around 7% to 8%. That's laughable.

We can get 4% real long-term GDP growth if real government debt rises by about 17% per year. That's even more laughable.

We can get 4% real long-term GDP growth if wages and salary disbursements rise 4% per year. That's also laughable.

That's 4 laughables out of 4.


Stagflationary Mark said...

You'll just have to trust me that there are 4 laughables there. You might have to read between the lines a bit though. ;)

Stagflationary Mark said...

That's inflation adjusted wage and salary disbursements by the way.

This is what it would take to get get 4% real wage and salary disbursement growth long-term.

If employment grows by about 1% per year long-term and inflation rises about 3% per year long-term then typical wages would need to rise about 6% per year long-term.

Good luck on that one.

Jazzbumpa said...

The second chart actually looks like the alien.

Yeah, you have to squint, but - still . . .


Stagflationary Mark said...


The second chart actually looks like the alien.

Hahaha!!! Nice. :)

Here's an alien economic theory to go with it.

These healthy rates were not a surprise, since economic theory predicted that real yields should approximate real gross domestic product growth, which averaged between 3 per cent and 4 per cent at that time. - Jeremy Siegel, February 2, 2011

He felt the real yield of 2.10% on 30 year TIPS at that time showed that there was a great bond bubble.

The 30-year TIPS bond currently has a real yield of 1.13%. Oops!

So here's my theory for what it is worth.

IF we can grow employment by 1% per year over the long-term AND IF inflation adjusted wages do not fall even with increasing global competition, a stubbornly high unemployment rate, and the advancement of robotic workers, then locking in 1.13% would seem to be a fine choice to me.

Of course, if we can't grow employment by 1% per year and/or inflation adjusted wages do fall then the supposed great bond bubble could in fact be the great bond opportunity. That's assuming I use his economic theory as seen above and combine it with the GDP vs. Wage chart I've included in this post.

Bullish on American wages? Take Siegel's advice.

Bearish on American wages? Don't!

This is not investment advice though nor have I written books about embracing stocks for the long run. I'm just a mostly anonymous blogger on the Internet.

Jazzbumpa said...

U.S. population growth is 0.97%.

Growing unemployment by 1% per year is barely enough to provide jobs for an expanding population.

I am not optimistic.


Stagflationary Mark said...


Cheer up!

It's nothing but biscuits and gravy from here on out!

Of course, that is a downgrade from the steak and lobster days. I'm not a miracle worker.

nanute said...
I hope this is the Aliens link from SNL with Dana Carvey and Sigourney Weaver. "We're gonna die man."

Stagflationary Mark said...


I watched the link and the ad played fine. The clip did not (stayed black). My system must be too old for content but not too old for advertisements. Splendid, lol.

I had to go here to see it, which is odd because it seems to link to the same video.