Wednesday, August 22, 2012

Not Living Up to Our Reduced Potential

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Let's zoom in.

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It is my opinion that we will *never* make it back to the real potential GDP line in blue, much less the exponential trends established from 1949 through 1999.

I am disillusioned enough to know that no man's opinion on any subject is worth a damn unless backed up with enough genuine information to make him really know what he's talking about. - H.P. Lovecraft

Since H.P. Lovecraft is my favorite author, I better supply more genuine information in his honor.

Click to enlarge.

It is my opinion that something bad will happen between now and 2028. Topping my list of bad things might be one or more of these. I know! That's just crazy talk!

Source Data:
St. Louis Fed: Custom Chart


Mr Slippery said...

From the wikipedia link to recession,

Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.

After 4 years of ZIRP and gross debt knocking on 16 trillion, I am looking forward to the government response to the next recession.

Next moves:
1. Monthly stimulus check to every household
2. Suspend all federal taxes for 2 years
3. Set interest rates negative up to 3 years on the curve and cap it at 1% out to 20 years.

Now that would be a stimulus.

Troy said...

^ probably going to happen, too.

This whole Greenspan Commission idea that we'd set FICA rates to overtax the baby boom a total of $1.5T+ 1989-2009 and then raise income taxes when they retired to pay the resulting multi-trillion dollar treasury position off was either colossally naive or colossally corrupt, par for the course with Greenspan of course.

The current holding is $2.6T. Paying that off over the next 20-odd years is going to take $130B/yr in higher income taxes.

To put that in perspective, $130B is basically TWICE the Bush tax cuts on the top brackets that are the difference in the present deadlock in TC.

(estate tax change is a $30B hit, while the top marginal bracket change is $50B/yr)

We're not going to be able to raise marginal rates 600 basis points on the upper brackets to effect the back end of the Greenspan deal, so (short of finding a deep-pockets foreign buyer) the alternative to blowing them off completely is printing the money as we need it by having Uncle Ben hold them for us.

Why the hell did I ever come back to this place 12 years ago. My original idea to GTFO in 1992 was entirely correct.

One thing I learned recently wrt the doommobile was that natural gas is essentially free in BC . . .

And I also discovered that they're working on CNG-fueled microturbine hybrid electric vehicles.

That is a very interesting powerplant for the doom-mobile. Only one moving part, and 20,000-hr major service intervals (run 3 hrs/day that's 18 years). At current US CNG prices it produces electricity at 22c/kwhr, and teamed with a PV installation would provide all my household energy needs without breaking a sweat.

Stagflationary Mark said...

Mr Slippery,

After 4 years of ZIRP and gross debt knocking on 16 trillion, I am looking forward to the government response to the next recession.

I know not with what weapons World War III will be fought, but World War IV will be fought with sticks and stones. - Albert Einstein

I know not with what economic weapons the next recession will be fought, but the one following will be fought with words.

"Sticks and Stones" is an English language children's rhyme. It persuades the child victim of name-calling to ignore the taunt, to refrain from physical retaliation, and to remain calm and good-natured.

Please remain calm. There is no reason to panic. Our economy is a resilient economy with innovative financial creativity and resiliency.

Stagflationary Mark said...


^ probably going to happen, too.

Why does everyone just assume that savers won't be able to make money in the aftermath of the next recession?

Oh yeah, now I remember.

Stagflationary Mark said...

In other news, Bondmageddon 2 has been cancelled due to bad weather and the lack of interest (pun intended) in Bondmageddon. Big shocker.*

It's too bad. I heard it was going to star Pauly Shore. I'm confident that he would have won an Oscar for his performance.*

It would have been a huge blockbuster. No doubt about it.*

* Denotes extra sarcasm