Jak rozumět dnešní stagnaci

May 23, 2017 Robert J. Shiller

NEW HAVEN – Od doby „Velké recese“ v letech let 2007-2009 hlavní světové centrální banky drží krátkodobé úrokové sazby na téměř nulových úrovních. Ve Spojených státech zůstávají krátkodobé sazby i po nedávných zvýšeních ze strany Federálního rezervního systému pod 1 % a dlouhodobé úrokové sazby u významných státních dluhopisů jsou podobně nízké. Nadto hlavní centrální banky v rekordním rozsahu podporují trhy nákupy a držením obrovských množství dluhu.

Proč jsou všechny tyto ekonomické infuze nezbytné a proč tak dlouho?

Říct, že to zapříčinila Velká recese, by bylo příliš zjednodušující. Dlouhodobé reálné (inflačně očištěné) úrokové sazby nedosáhly skutečně nízkých úrovní během období let 2007-2009. Když se člověk podívá na křivku výnosu desetiletých dluhopisů USA během posledních 35 let, vidí celkem plynulý sestupný trend, bez čehokoli obzvláštního během Velké recese. Na konci recese, v roce 2009, dosahovala výnosová míra 3,5 %. Teď je jen něco přes 2 %.

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Robert J. Shiller

Writing for PS since 2003
130 Commentaries

Robert J. Shiller, a 2013 Nobel laureate in economics, is Professor of Economics at Yale University and the co-creator of the Case-Shiller Index of US house prices. He is the author of Irrational Exuberance, Phishing for Phools: The Economics of Manipulation and Deception (with George Akerlof), and Narrative Economics: How Stories Go Viral and Drive Major Economic Events.

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Jose araujo Jun 1, 2017

Michael, the thing is that QE was never aimed at stimulating demand via low interest rates. Thats just ignorance an non-sense.

QE was aimed at raising interest rates via inflation expectations
- Mauricio Duran-Loriga Jun 15, 2017
  
  Jose,
  
  Your post is utter non-sense. Basta
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Michael Parsons May 30, 2017

Quite simply monetary policy works downwards with higher interest-rates to depress demand-led inflation and GDP growth in money and real terms: it does not work upwards by lower interest rates to stimulate real growth as show by the failure of all the current QE etc.: only virtual growth results in terms of writing-up stock, property and land values and increased idle balances.
Since there is no long-run 'normal' equlibrium available by 'market forces' overall an economy can in principle graduate towards zero with government spending cutbacks, debt reduction and low interest rates, which broadly is what is happening. Greece shows an advanced working model of such monetary policy induced collapse.
The upshot is that relying on supply-upsurges fuelled by a flaccid private entrepreneurial system that aims at private profit and rent maximisation through increased poverty in real terms will only boost the growth of virtual money-terms profit, and will not lead to any substantial recovery.
So how forward? The State needs to take command and implement investment in real growth activity. Obviously this could be done by financing (and not out of bank-borrowings) production and social spending, roads, hospitals etc, , reduction of private consumer debt by transfering it to a low-interest fund in which the current lenders hold compulsory long-term paper; and money-grants to the poor (who will stimulate demand for real goods as opposed to shares etc because of their needs and their lowsavings rate). However where a 'Gladstonian' mentallity of debt repayment and tax cuts prevails this cannot be done short of a popular uprising, But propaganda against 'socialism' and the supposed idleness and worthlessness of the discarded part of the population then has an easy triumph in a society where 'greed is good' and men are supposed to be linked primarily by the cash-nexus and discard wider syumpathies,especially easy in multi-racial coutries. In so far as any GDP boosts then occur i spite of this liberal-individualism it will be through military spending; because there seems to be a greater public willingness to splash out on war than on humane objectives, even when war-debt is ultimately crippling (as was with UK 1945). The immediate advantage of military demand is that it can be endlessly self-renewing, either by obsolescence, military live-round 'exercises' or by mutual destruction and ruination of armies through conflict.
Here is the problem: the need to replace useless monetary policy by a new fiscal policy that is then devoted to social and national growth, and resists being turned into super-expensive bombs, and resists succumbing to the argument that state-initiative robs opportunities for private profit, whereas of course State spending creates money and can/should be directed towards increased activity and income in the service of the general good.
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Emilio Zuniga May 29, 2017

The argument that due to fear or uncertainty about sustained growth in the near future make people not to spend contradicts the fact That personal indebtness is now back at it's peak. The economic facts in the US economy are not easy to understand. On one side IT appears that the slow growth is due to unsufficient demand, but on the other side the unployment rate points to an economy close to full capacity. On top of that if wages increase, the trend of low productivity gains may accelerate inflation And cut the expected long term growth.
- Jose araujo Jun 1, 2017
  
  The fact you have low unemployment doesn't mean you are close to capacity, it means you have a bunch of low level value activities.
  
  Productivity increased and real wages stayed the same for decades, so why its now the problem?
  
  Higher wages means higher consumtion that means higher output that means higher productivity.... problem solved (the inverse also explains why productivity isn't moving)
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yw yap May 29, 2017

My 2-cent:-
1) Most leaders are short-termists e.g. Trump has only got 4 years so he will be tactical, not strategic
2) The advanced economies have to a considerable extent over-consumed so driving consumption for growth will only destroy the natural world quicker
3) Socially, "misplacement" is quite high that disruptions [a re-adjustment?] on socio-economy from other thingy such as terrorism will likely happen :(
- Jose araujo Jun 1, 2017
  
  Over production leads to stock pilling, not consumption.
  
  In most economic models there can't be over consumption, because of the non satiety axiom ... more > less.
  
  Its also logic defying since if you have consumed it before why can't you do it again?
  
  You could have production above capacity with the use of stocked resources, but that's highly unlikely.
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- yw yap May 31, 2017
  
  Good! "over-production" or over supply". tQ!
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- Jose araujo May 29, 2017
  
  Due to the fact that many of the production capacity being built to accomodate peak consumption, there will allways be under consumption when compared to the production capacity.
  
  Over consumption is a product of the prejudice of some.
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- Jose araujo May 29, 2017
  
  There is no such thing has over consumption, that is an impossibility.
  
  We cannot un-consume, so if we produced it before and consumed it, how can there be over consumption.
  
  If anything we are experiencing times of over saving, or under consumption.
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Janos Nagy May 28, 2017

Facts
The government pumped a trillion in average in the last 15 years in the economic and that's is more than 5 percent of the gdp to achieve 2 percent average gdp growth
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Janos Nagy May 28, 2017

All these numbers are just meaningless. Growth can only happen if profits are reinvested in the real economic instead of cycling in the financial economic. Of course profit was globalized but that was the real objectives of the globalists.
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Peter Ellis May 28, 2017

In essence we are at the end of capitalism as it has been lived with ever-increasing frenzy since WWII. Why? Because the gold standard can be seen to be slipping off fossil fuels but without any government honest enough to trigger a debate about what needs to be done and how it should be coordinated. Maybe Trump will be the catalyst that sees climate change acknowledged as mankind's biggest challenge and a new form of valuing labour and trading brought to the front of world politics.
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David Graubert May 28, 2017

While entirely speculative on my part, it may possibly be a partial result of the increasing move to online purchases, which may have less collateral effect than in-store shopping for a couple of reasons. When one "goes shopping" it would seem that other nearby items would be appealing that one had no initial thought of purchasing. The store itself, or the mall, as such, promotes sales of such items (hence, collateral in the sense of adjacent). Second, the effort in going (non-online) shopping is such that to end empty-handed is to negate the sunk "costs" of travel and such. There are also likely to be more, shall we say, social psychological aspects at play in brick and mortar shopping, too. One of these would be the desire to demonstrate one's capacity to buy and an interest in being served. And, at least so far much of the impetus for online shopping is that it is efficient, economical and utilitarian. That is not conducive to any kind of free spending. Finally - perhaps consistent with Prof. Shiller's hypothesis - there is a certain caution inherent in online interactions, given awareness of the online world as full of danger.
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Andrew Percy May 28, 2017

Perhaps it was the birth of social security systems in the 30s and their erosion in the last few decades (replaced in part with private pensions) that explains both fear of the future and safe haven seeking.
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Richard Graham May 28, 2017

The 1% pumped money out faster than governments could pump it into the economy. This is the reason that more equitable economies do better than the US or UK: the money circulates to lubricate business activity. Nobody believes that the economy is managed for the benefit of the broad electorate. Nobody believes that the electorate exists, or needs to be consulted; we are just consumers. So the broad electorate has withdrawn from participating in a corrupt and immoral economy.
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M0ntague Brown May 28, 2017

There is or should be a wide spread lack of trust in the institutions of government, politicians, pundits and the media in general. Messages of things really getting better when it was not so erode that trust.
For many more saving is indicated with longer life spans. So what happened, grand crisis, lots of asset values destroyed, Central Bank printed money kept interest rates low, expanded government spending. Cut earning on savings putting those age 50 plus in danger of losing out in their senior years. Buying more isn't in the cards for most.

Of the greatest threats is the loss of trust. We got through the last 8 years or so on fiat money and rosy scenarios; now we get the opposite, the world will crash because the people distrusted government and hired an outsider to change things. So from rosy, to lets stop the train, get off and then what?

Is this an atmosphere where buying more makes sense? And for seniors, well, hang in and hope for the best while you last.
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Chandrashekar Tamirisa May 27, 2017

Report on the Economic Well-Being of U.S. Households (https://www.federalreserve.gov/publications/files/2016-report-economic-well-being-us-households-201705.pdf): "Many Americans have little savings, live on the knife edge of insolvency, fear a sudden large medical bill, and struggle with student-loan debt. Black and Hispanic Americans report slightly more economic worries than whites do."
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Henk Crop May 26, 2017

You see reluctance on spending of money because of job insecurity resulting from advances in technology.
I see some other trends that will much more determine the world economies in the future, but have already started
- shrinking and aging of the popultation (Europe, Russia, Japan, China )
- explosive population growth, almost beyond imagination, in developing countries (Africa, Middle East, Asia, Mexico)
- increasing political instability in the developing nations
- Steve Hurst May 27, 2017
  
  Henk
  
  'The basis of optimism is sheer terror'. Oscar Wilde
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Wayne Davidson May 26, 2017

@ Mauricio Duran Loriga
Speaking as a self funded retiree, not only were we thrown under the bus we were left with a profound aversion to risk after the 2008 great recession.
The Ponzi Scheme that is sold as monetary policy in America and Europe is beyond any risk metric.
- Andrew Percy May 28, 2017
  
  For millennia humans promised basic social safety to each other in their common community. 20th C attempt to replace that promise with private savings/pensions is unstable, fear inducing and bound to fail the many even if it works for the few.
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- Mauricio Duran-Loriga May 27, 2017
  
  Wayne
  
  It goes beyond that. By forcing retirees to eat their savings, they first induce capital destruction on a grand scale. As life expectancy rises, the estate for the heirs simply disappear. Making the surviving couples and the next generation fearful, weaker and more controllable.
  
  Fiat is Ponzi but nobody sees what a simple balance sheets has to tell us in plain capital letters.
  
  When the Fed creates 100 dollar reserves ("prints") it is at the same time creating a bigger amount of debt, as it will claim the 100 dollar bill + the interest due. Over the longer term, the Fed needs to print more (and create more debt at the same time) if it wants to recover old loans.
  
  Those who don't understand this basic scam write the numbers down. But take a relaxing pill beforehand.
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- Steve Hurst May 26, 2017
  
  Wayne
  You can only take money off people who have money. The guvnt wants your money, if not for itself then for the banks capital holding ratios.
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Mauricio Duran-Loriga May 26, 2017

On Zero interest rate (foolish) policy

ONE. Retirees that were able to decently muddle through with their little public pensions together with the 6% long term median interest earned on their hard-earned life savings have been thrown under the bus by zero interest rate policy.

Not only they endure daily panic over their financial future. Their consumption has been frozen. They try to save as much as possible and spend as little as possible, next to becoming survival hermits.

Retirees are becoming the most populated tranche. Bravo for the guys in charge who decided to shun the elder's consumption.

TWO. When all major central banks give literally free money at the same time, they stimulate aggregate supply. Never aggregate demand. Because the only people who can get cheap money are the wealthy, who don't need it for consumption.

The wealthy invest that free money in the supply side (worldwide basis), hence deflation as everybody produces cheaper. When economy recovers and the masses are given credit, it is not at zero interest rate. So the aggregate demand growth rate achieved is nowhere near what is needed to pay for cleaning in earnest the previous financial crisis.

For this situation to be resolved without going through a complete debt meltdown, society needs greater inflation. There is no better substitute for fueling inflation than war. Unlike pure Zimbabwean hyperinflation, war wraps politicians with some populist "dignity", in spite of the battles none of their children will be sent to fight, mind you.

That explains why the second depression of the 30's (1937) was resolved through war and not like the first one, by complete bankruptcy of the system.
- Jose araujo May 29, 2017
  
  Why Mauricio do you think that without stimulus Interest rates would be two digit?
  
  Two facts you are missing: First the fact that sovereign debt rates are below zero, there is a huge demand for liquidity that would push rates to zero or bellow without QE.
  
  Second: we have experienced no inflation, which means that there has not been a monetary expansion but the accomodation of the lower money velocity.
  
  So without QE we would experience monetary contraction, deflation and a generalized lack of liquidity.
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- Lawrence Kramer May 28, 2017
  
  What Jose araujo said. People who attack ZIRP are just blaming the messenger for an economy that can't rise even with a very low cost of capital.
  
  If you want some retirement income, tell your pols to borrow some money from you to fix the infrastructure.
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- Mauricio Duran-Loriga May 26, 2017
  
  Jose
  
  Take stimulus away, and market conditions will dictate two digit interest rates for several OECD countries that as of today are fictionally financed by money counterfeiters at circa 0% rates.
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- Steve Hurst May 26, 2017
  
  Mauricio
  
  Old people tend to spend less than young people. If you directly increase the percentage of old people in a population then you directly reduce spending overall, circa 0.5 to 1%
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- Jose araujo May 26, 2017
  
  Zero interest rates are not a policy but a consequence of the economic conditions.
  
  Zero interest rates are a direct consequence of the change in liquidity preferences and risk aversion, Central Banks are just accomodation the decrease in money velocity
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Mauricio Duran-Loriga May 26, 2017

A terrifying creature born out of technological advance? AMAZON. This company is making millions of people redundant worldwide. It is making massive real estate investments go sour. It is constantly lowering the working conditions of the entire supply chain worldwide.

I am not sure at all the benefits outpace the economic havoc it is creating everywhere. Under the phenomenon "the winner takes it all" it is becoming a de facto monopoly in plain sight.

So when you save 10 dollars in your Amazon purchase, somebody is losing its job, for the single benefit of Amazon. Because the 10 dollars saved will also be spent in Amazon. This is for idiots really.

Standard Oil was unchallengeable back then. And it was eventually chopped like cheap salami. Amazon will follow that destiny too. You first read it here.
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Jose araujo May 25, 2017

We no longer live in a resource constricted world, Capital is abundant, Work is abundant and land has always been abundant. Interest rates are at its lower point, wages are in a century low, and commodity prices are low also, why the non-sense of secular stagnation then?

We are living in times where the paradigm changed. Value does not lie on the production side, Marketing has taught us that value is a determined by consumption, value is not real, most of the value of the products we sell comes from the augmented product. That’s why nowadays primary and secondary sector accounts for less than 20% of the total value created, and less than 20% of the jobs.

We live in times where nothing is scarce, all is possible providing we believe in it. Growth is a self-fulfilling prophecy, so it’s only natural for rentiers and the ones that made a living on selling scarce resources to feel threatened and try to convince us that they old the keys to the future.

Economic science has to change, evolve. In a world without constrains, opportunity costs make no sense.
- Jose araujo May 29, 2017
  
  Steve, I know I am an optimist, but in this case I really don't believe we will continue making resources scarce like they are.
  
  We are close to a paradigm change, the system is not stable if there is no better distribution. Now we can redistribute income via taxes or via spending, but its unavoidable one or the both.
  
  For the wealthy to make more money, people have to consume...
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- Steve Hurst May 26, 2017
  
  Jose
  
  Money is a way of rationing access to stuff and that will always happen
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Jose araujo May 25, 2017

When we have 90% of the wealth concentrated on the hands of 1% of the population, I don't think technology angst is a good explanation.

Trying to stick to the facts, so IMHO we had a financial crisis who fundamentally changed agent behavior, especially on the 1%, namely risk perception and triggered a generalized preference for liquidity.

Old Keynesian explanation is perfectly coherent with Fisher equality, and an observable decline on money velocity that is responsible for deflation and the low interest rates that followed since Central Banks were / are trying to accommodate money velocity decrease to keep prices stable.

Now what we have to question ourselves is on why this risk aversion persisted so much time? Or if we want, what have we done to prevent crisis that triggered the great recession? We have not increased transparency in companies, we have done nothing on governance models, we have done almost nothing to assure investors that not only they have the information on time, that the information is reliable and that the agents are representing their best interests.

We have done virtually nothing to take the money that is idle and put it to good use, we have reverted to old Fayolism and Fordism in the workplace. Reverted to mercantilism and neo-colonialism policies in economics, export driven economic development anchored on low wages and supply side economics.
- Jose araujo May 29, 2017
  
  Peter, my understanding is the PSR is household saving, so it does not account for savings on the 1%.
  
  You can see that because Gross saving have increased massively since 2008, from circa 14% to 19% of GDP, while Public savings have gone down and household savings (PSR) has decreased.
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- Peter Schaeffer May 27, 2017
  
  JA, the Personal Savings Rate (PSR) is an aggregate that includes rich households, poor households, and those in-between. Inequality (less or more) doesn't change the meaning of the aggregate PSR. A trivial (but wrong) prediction would be that higher inequality, would translate into a higher (PSR) and vice-versa. In other words, people with very high incomes would be able to save more readily, driving up the PSR.
  
  In real life, this doesn't appear to be the case, the U.S. PSR has declined as inequality has increased. Conversely, China combines high inequality with a very high PSR. Broadly stated there doesn’t appear to be any particular relationship between the PSR and inequality (in the U.S. historically and worldwide).
  
  Converse, inequality and Open Borders are strongly related. More immigration means more inequality. Clearly, that’s’ your idea of catnip. The linkage between immigration, inequality, and political polarization is quite strong. See “Polarized America” for the data.
  
  Given your intense (religious?) personal advocacy of Open Borders, you should be embracing inequality, not condemning it.
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- Mauricio Duran-Loriga May 26, 2017
  
  I support what ???
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- Jose araujo May 26, 2017
  
  Mauricio, you have a strange way of thinking, something, well not strange just more or less 300 years old.
  
  Also don't understand your anger twards Russian and Chines authoritarian regimes, from your words you support authority and olicharquies, so you shouldn't have a problem with Stalin and Mao, quite the contrary, unless you are an hyporcite and olny support your authoritarian regimes....
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- Mauricio Duran-Loriga May 26, 2017
  
  Wealth inequality is a politically correct mantra nowadays, but it's far from what it is being constantly parroted by the media like a Chinese water torture. Kinda Goebbels propaganda of repeating 1000 times a lie to make it look like an unchallengeable truth.
  
  When US civil war ended, middle XIX century, ONE single family owned 50% of total word's wealth, One family, not the 1% ! Which by the way, never gave up...
  
  On the debatable excuse of redistributing wealth, the Chinese Emperor and the Russian Emperor (to name just a few) were replaced by control freak revolutionaires that instantly put in place longest ever authoritarian regimes in mankind's history, forcing overall poverty for everyone excepted the politically controlling elite.
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- Jose araujo May 25, 2017
  
  In conclusion, the problem isn't secular stagnation, actually if you dig deep you can see that the concept behing secular stagnation is quite stupid, the problem is that people are not grasping the economics of prosperity.
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B Wilds May 25, 2017

Time has a way of revealing certain realities but does so at its own choosing. The economy is far from a well-oiled and designed machine and in the end, we may find that it is not really completely under the control of those who have been placed in the driver's seat.

In a world where central banks have become so deeply involved in manipulating and distorting markets we find true price discovery no longer exist. The question remains how best to prepare for a economic meltdown. Expect both luck and caution to play a big role on our individual fortunes as we move through the financially violent period before us. More on this subject below.

http://brucewilds.blogspot.com/2017/05/catalyst-of-our-economic-demise-yet-to.html
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Philip Ralli May 25, 2017

As a retiring baby-boomer, I'm scaring myself by modeling the household budget on the basis of a negative-real interest rate and rising life expectancy: not pretty. Part of it is that "inflation" is being gamed by quasi-monopolists. Take telephony as an example: we have been moved from per-call billing to a monthly all-inclusive deal: this is cheaper for large users and more expensive for small users: effect on inflation: who knows? Similarly for our small business, the business entry in the phone directory used to be bundled with the line rental, but now is a separate charge that did not exist before. In our town, there has long been a for-pay car park, but also free on-street parking. Now there are no-parking signs on-street; this is inflation, but not recorded as such! Many prices that used to be constants (say air tickets) are now variable, changing every hour as computers dictate. The formula seems to be that the per-item price often goes down, while the minimum spend goes up. And health care costs, which most affect the elderly, are climbing far higher than "core CPI".
So retirees can see that nominal yields are low; we feel we may be being fooled or even coerced by new forms of inflation in the present. And even if the present worry on inflation is wrong, central bank policies may be stoking inflation up in the future. The natural reaction is to reduce discretionary consumption; but falling income means that saving does not go up much as a resuit...
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Peter Schaeffer May 24, 2017

R. Shiller is a serious economist (at least in my opinion). However, the facts don't support his case. Check out FRED series PSAVERT (Personal Saving Rate). Its around 5% these days. That's up a bit from the lows of the 2004/2008 period, but still far below the average from 1960 to 2004.

In other words, the actual data doesn't support the under-consumption thesis. Of course, the U.S. does run vast trade deficits these days (which was not the case for most of the post-WWII period). Investment has also fallen of late (see FRED series A006RE1Q156NBEA).

The actual numbers show that the pervasive malise of the U.S. economy (which is quite real) is rooted in U.S. trade deficits and low investment, not under-consumption. Note that Shiller's article fails to mention (even once) trade or investment.
- Peter Schaeffer May 27, 2017
  
  MM, Trump has emphasized trade issues to some extent (rightfully so). Low corporate investment in the U.S. has never been a major Trump (or Hillary/Bernie) theme. The U.S. trade deficit peaked in 2006/7 at around 6% of GDP (a U.S. record as a percent of GDP and a global record in absolute terms. Large trade deficits are strongly tied to subsequent crashes. The U.S. after 2006/7 was just another example (“tis time it is not different”).
  
  The fact that the “underconsumption” thesis has no factual basis, but is widely touted is a reflection of the prejudices of the economic establishment. The data is very easy to find. The numbers all show that the U.S. continues to run a large (but below the peak) trade deficit, corporate investment is relatively low, and the PSR (Personal Savings Rate) is modest (to say the least). The fact that “underconsumption” gets all the hype (with no obvious factual basis) and trade / corporate investment are ignored shows that power of Political Correctness in academic/intellectual/political circles. Mere mention of trade as a “problem” will cause anyone to be immediately excommunicated from polite circles.
  
  To use an analogy, suggesting that mass low-skill immigration might hurt low-skill natives is simply not allowed among decent folks. Suggesting that low-skill immigration might hurt taxpayers is simply not allowed among decent folks. The facts don’t matter. Victorian women had ankles. They couldn’t be seen or mentioned either.
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- Peter Schaeffer May 27, 2017
  
  JA, the Personal Savings Rate (PSR) is an aggregate that includes rich households, poor households, and those in-between. Inequality (less or more) doesn't change the meaning of the aggregate PSR. A trivial (but wrong) prediction would be that higher inequality, would translate into a higher (PSR) and vice-versa. In other words, people with very high incomes would be able to save more readily, driving up the PSR.
  
  In real life, this doesn't appear to be the case, the U.S. PSR has declined as inequality has increased. Conversely, China combines high inequality with a very high PSR. Broadly stated there doesn’t appear to be any particular relationship between the PSR and inequality (in the U.S. historically and worldwide).
  
  Converse, inequality and Open Borders are strongly related. More immigration means more inequality. Clearly, that’s’ your idea of catnip. The linkage between immigration, inequality, and political polarization is quite strong. See “Polarized America” for the data.
  
  Given your intense (religious?) personal advocacy of Open Borders, you should be embracing inequality, not condemning it.
  A new reply to this comment has been posted.
- Jose araujo May 25, 2017
  
  In a world where 90% of the wealth and the funds are held by 1% of the population, personal savings rate is of no importance at all
  
  We are living in times where although consumption is not low, the gap between current and potential consumption is widening.
  
  Most of us want more, much more than what we have and above all we want more for our children.
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- M M May 24, 2017
  
  Peter, is it because Trump gave these two items his priority?
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Michael Public May 24, 2017

The fear of future technologies really only went mainstream this last year or so. I think the bigger fear is a distrust of the elite ruling class and their economic savants. 2008 showed that they were both deeply corrupt and quite out their depth. Of course, the pendulum swung too far the other direction and the people voted in Donald Trust - one with near zero aptitude to lead but who at least professed to be trustworthy. As the saying goes "Out of the frying pan and into the fire".
- Jose araujo May 25, 2017
  
  There is no fear of technology except for the one that fear their own shadow, just look at the younger generations, do you think they feel unease with technology?
  
  It has always been like that, fear of technology has always came from the old and small minded that cannot realize that the world has already changed.
  
  The skills we need for the future are already here and being further developed by the youth… say goodbye to the blue collars…
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Steve Hurst May 24, 2017

The big problem with capitalism is it is actually another ism, consumerism. There are bound to be problems in a consumer society if the consumers stop consuming.
Forces against consuming are -
Ageing demographic, old people spend less
Lack of disposable income due to real wages being forced down by globalisation expanding the available labour
Fear of debt due to aversion therapy from the banks
Deflation of product prices due to globalisation
A manipulated housing market pushing ticket prices to unsustainable levels in Western democracies thereby taking money out of the system for a key consumer group
ZIRP to save the banks killing inflation therefore stopping the debt being rapidly reduced by inflation erosion
- Jose araujo May 29, 2017
  
  Steve, I honestly don't think we live worst than we lived 20 years ago.
  
  Yes, real salaries have declined and inequality rose to higher levels, but the base line has increased due to technology.
  
  Now, one of this days we are going to wake up from this nightmare and people are going to discover that the root problem of growth lies in the fact that in order for the economy to grow, consumers and workers must have a higher share.
  
  I don't think its possible to remain this stupid for generations. Once the ones who have staked theire reputation (the Rogoffs, El-Erians, etc) have been removed, we will see progress.
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- Steve Hurst May 26, 2017
  
  Jose
  
  The change in consumerism is related to the change in perception of value and the fact low levels of disposable income is influencing lifestyle choices for many. The change in value is related to low costs of production in Asia and the disposable income is related to real wage decline and over priced housing costs through a manipulated market
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- Jose araujo May 25, 2017
  
  Steve, he are now at a new level of consumism, and I can tell you that most of the consumption is not going to come from tradable products but from services and social goods.
  
  Trdable goods are going to reduce its value, we are going to place very low value on them, like now we do to agricultural goods, value comes from human interaction, that's what makes us happy and what we value the most.
  
  Services, Health, Education, Safety, Social Security
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- Steve Hurst May 25, 2017
  
  Michael
  
  I think it depends on the product but generally reducing the retained value of a product is seen as counter productive. There also is a difference in creeping price drop and a marked drop. If perpetual 'sales' are used in retailing then the customer doesnt believe the original price was valid. It is one of the self harm devices Main Street retailers fell into. Oddly the deflation aspects of imported goods via globalisation is very seldom raised by economists. Trust is very much part of a brand and you tinker with trust at your peril.
  
  Thats why I posted earlier-
  - There is a thing called trust and it has gone on sabbatical -
  
  It operates at all levels. I suspect there is a lot of aversion therapy going on with consumers at present. You might have noticed the movement to vampire stories in the entertainment sector in the last decade. This historically crops up in times of duress, its not accidental.
  
  The last thing anybody should do in a consumer society is change the behaviour of consumers, because for sure the change is not going to boost consumption. If debt levels keep rising and consumption is flat-lining what does it suggest to you
  
  Ageing demographics on their own are expected to bring a 0.5% to 1% drop and the pundits keep getting excited about the prospect of 2% growth. If growth comes in at 1% you have standstill. Basically the model is damaged and from the last century and it has been sold as a gold standard with 'Great Expectations' to quote the Dickens book title
  
  You have, apart from the digital economy, corporations relying on M&A and cost stripping- platform engineering - coupled with a critical decline in SMEs who find it tough to complete with the globalisation mechanism. Many corporations are an illusion and SMEs are sick. Its very very unhealthy and there is something called the living extinct which feeds thru to the protest vote at the ballot box
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- Michael Public May 24, 2017
  
  Does deflation of consumer goods prices not increase consumer activity? I guess it depends whether people spend until they have what they want or whether they spend until their money is finished. I personally know both types of people.
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Gunnar Eriksson May 23, 2017

The basic reason for pessimism is the hollowing out of the basic missions of both public and private organizations. Research and development is seen as an unneeded cost. Financialization has made the money flow and the diverting of as much as possible into a few pockets as the only mission and such diverted funds are not even seen as cost. Multinational corporations with octopus strategies hold on to their prey (us) and muddle the water to eliminate competition.
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Jerry F. Hough May 23, 2017

People are not so dumb. Middle income voted for Trump for a good reason The DOW is up 25 times since 1982, and wages have been stagnant.

Obviously a change in the supply-demand relationship in labor is a cause. The immigration law of 1924 limited the supply of labor, and Lenin was right that investment in raw materials that produced demand abroad was in the interest both of capital and trade unions.

The immigration law of 1965 changed this as did the computer revolution that permitted the production of components abroad that destroyed trade unions. They must be changed or the tax system must be changed to redistribuite the fruits of the growth of profits.

One should be careful about inflation. Ite was related to wage growth and if wages grow again, it will return. The author of irrational exubberance should not write as if bond buyers are purely rational actors. Bondr buyers can be as irrationally exubberant as the buyers of stocks.
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Marc Laventurier May 23, 2017

'Economics' is itself a set of narratives, wherein, like decaying strands of DNA (which is said to have a half-life of 521 years), each conventional concept entails others to propel the organic plot. Logical lacunae are patched over with more of the same, even precluding common sense observations such as that most people are biologically secure (for the first time in history) but that a financialized capitalist conception of 'growth' has at this point been imposed on their circumstances, complicating what could otherwise
be simple, decent and appropriately efficient ways of life. As an old technologist, let me predict that a mounting wave of innovation will re-engineer social structures and their economic expressions, and that Robert et al. should brush up on their 'theory of the firm', the locus of impending mutation and subsequent evolution. That is, if they want to understand what they're looking at instead of just swapping old tautologies around the campfire.
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stephan Edwards May 23, 2017

Having watched 2 jobs shipped to the 3rd world and having trained my H1B at a third I am not inclined to spend money I don't need to. After all one never when one is going to be told that one has to train ones replacement to get severance pay or we are shipping the entire factory to the 3rd world here is 2 weeks pay get lost. There is no reason to feel optimistic about the future so you save what you can when you can.
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Ben Giliberti May 23, 2017

All the talk about Social Security running out of money has scared a lot of people, and understandably so. For many people, it's the only source of retirement income they will have. When SS is no longer considered a "safe" asset, the rational response is to borrow and spend less, and save more. Of course, when they try to save more, they see that they are getting virtually nothing in the way of interest. Why would anybody who is not already wealthy feel secure in such an economic environment?
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M M May 23, 2017

The People are not imagining disaster scenarios....they are living it....Is the author on this planet or living on another galaxy? It is inequality, inequality and nothing but inequality.
- Michael Public May 24, 2017
  
  Yale is like another planet in relation to those places where the bottom quintile live, eat and breed.
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- Andrew (Andy) Crow May 23, 2017
  
  Yes, MM he's living on a different planet -
  
  There are two forms of social security welfare benefits: those called 'welfare benefits' which condemn the recipients, who are casualties of economic disruption, to live in a declining state of poverty; and the other sort of welfare benefit which is a secure overpaid position doing some sort of make-work that produces nothing tangible.
  
  We do not have a good balance to support a consumer-society economic model because those who would spend have nothing to spend and those that have money have nothing they need to spend it on - their spending is discretionary and inadequate to support the economy. They also feel insecure because they know they are economically vulnerable so tend to squirrel their money.
  
  All the QE and other bailout funds 'printed' by central banks has been fed into the wrong end of the economy. As a result we have soaring stock markets and other asset prices.
  
  It must be rather pleasant to have a position in a cosy academic institution or government office being paid to pontificate as to why utterly absurd economic policies are not producing the (ostensibly) desired effect.
  
  I could do that.
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Odyssios Redux May 23, 2017

I think the brutal fact is that with effectively stagnant or relatively declining incomes, increasing living costs against this, and the fact that most jobs crated since 2008 have been insufficient to support a former , even modest, lifestyle, stagnation is the direct result of systematic impoverishment of the great majority. Worries about later replacement (of most of us!) by AIs or whatever, is there, but is not a dominant factor in immediate consumption. Those who have access to it use credit to compensate for wage deflation, but obviously credit card and other lenders aren't sugar daddies, and want their five kilos of flesh. PDQ.

For reasons well known and understood, the stock market is no reliable indicator of financial stability, far less progress, of the majority.

The nominal 'unemployment rate' is (deliberately?) completely misleading. To be partially employed is nominally not to be 'unemployed', but this need not guarantee any level of stability in one's life, at all.

Even at the time of the Great Bailout, it struck me that the best way of spending that money would have been to give everyone (yes, right down to infants!) several thousand dollars. As a one-off, kick-start, it would have been a far more effective use of the Federal printing press. Quantitative easing for the quantitatively dis-eased.Of course, in Puritan America, this could never become policy.
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Henry Rech May 23, 2017

Future inequality might be on the minds of consumers, however, I would say that the secularly increasing mal-distribution of income is what has held back the world economy.
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Steve Hurst May 23, 2017

There is a thing called trust and it has gone on sabbatical
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Chandrashekar Tamirisa May 23, 2017

This is a rational expectations explanation for low growth, in particular consumption. I would, however, argue that the explanation is far simpler: people are hesitant to spend not because of uncertainty of future income but because they do not have that much money to spend. They are once bitten twice shy about borrowing to spend.
- Vedant Desai May 25, 2017
  
  As far as the the rosy news paper report are concerned , most of the people have stopped giving any trust to any kind of news paper report, economic report or otherwise, long ago.
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- Andrew (Andy) Crow May 23, 2017
  
  Spot on I'd say.
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