Sunday, November 16, 2014

Bubble Blowing Careers for Dummies (Musical Tribute)

The following chart shows the 12-month moving average of warehouse and storage employment.

Click to enlarge.

Note that the trend floor in red is growing parabolically. It is unfortunate that we feel the need to grow warehouse and storage employment faster than that, because even that red parabola is guaranteed to fail at some point. It's not an opinion. It's a mathematical fact.

November 14, 2014
Fed's Bullard says U.S. inflation fails to justify near-zero rates

When asked what his concerns were, Bullard cited asset price bubbles...

There wouldn't be any need to worry about asset price bubbles if they didn't exist.

...adding that the Fed's ability to deflate such bubbles was untested.

Test #1: Dotcom Bubble
Test #2: Housing Bubble

The test results were apparently inconclusive. Needs more testing! Perhaps the Fed just needs to raise interest rates again and see what happens again?

Perhaps that's not what he really means though. Perhaps he's worried that the markets will deflate such bubbles without the Fed's help. In other words, the Fed would not be able to deflate asset bubbles if the economy actually did it for them first. And why might that be? Parabolas don't need the Fed to pop them. Given time, they will pop all on their own. What cannot go on forever, will not go on forever. Warehouse and storage employment is definitely one of those things. At the very least, since we do not grow our population parabolically, we would eventually run out of people to fill the positions.

Bullard said that while the U.S. economy is on strong footing, the specter of Japan, with its sustained low interest rates, deflation, and sluggish growth, always looms.

Let's say I go in to see the doctor about a cough. He listens to my lungs and tells me they are strong. However, he'd like to run some more tests. I ask him why. He then spends the next few minutes talking about the "specter" of cancer, sluggish lung functions, lung deflation, and that the risk of abnormal growths, always looms. How strong would I think my lungs really were?

Thanks Dr. James Bullard for easing my concerns! ;)

Back at you! Musical tribute time!

Source Data:
BLS: CES Employment Data

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