Comments on: National Bureau of Economic Research: Recession Began December of 2007

By: Stirling Newberry

Stirling Newberry — Mon, 01 Dec 2008 22:55:56 +0000

The old economy has bottlenecks to expanding production and wages, the only way out of this trap is to widen the playing field, as it were, and dramatically expand the range of goods and services which people can buy and produce. Only then can you get the virtuous circle of greater capital specialization producing greater labor specialization, which leads to higher productivity and returns for both.

A simple example is a computer. The more skilled a computer user is, the more return from the capital there is, and in turn, the more the workers will be compensated, because they cannot as easily be replaced.

By: Ian Welsh

Ian Welsh — Mon, 01 Dec 2008 22:44:54 +0000

Yes. “It’s not a bug, it’s a feature”.

It’s the flip side of why I constantly say that the wage stagnation of the past 30 years was deliberate.

By: eCAHNomics

eCAHNomics — Mon, 01 Dec 2008 22:21:30 +0000

Good addition.

By: eCAHNomics

eCAHNomics — Mon, 01 Dec 2008 22:21:14 +0000

Policies that, at the same time suppress wage growth and foster profit growth, always result in asset bubbles. There’s nowhere else for the excessively easy monetary policy to go since the stimulus is not oriented enough toward workers to get real growth strong enough to ignite widespread inflation in goods and services. (There are structural inflation issues in medical, higher ed, and legal, but those should be addressed by industry policies not macro policies.)

By: selise

selise — Mon, 01 Dec 2008 22:20:32 +0000

trade policy too.

By: Ian Welsh

Ian Welsh — Mon, 01 Dec 2008 22:15:37 +0000

A lot depends on what you count as inflation. Since asset bubbles weren’t counted as inflation they were used as ways of providing very inefficient stimulus to the economy and making various folks rich at the same time. It’s also because asset bubbles tend to sidestep the oil bottleneck.

By: selise

selise — Mon, 01 Dec 2008 22:12:33 +0000

gotcha. although i don’t see how that suggests a positive influence on market conditions. unless propping up the house of cards is the goal. oh, wait….

By: eCAHNomics

eCAHNomics — Mon, 01 Dec 2008 22:10:43 +0000

That’s exactly what I’m talking about, but Hugh said it better in 118. Suppressing wage growth, whether it was NAIRU, or anti-union or whatever other dastardly trick they used, was POLICY. And if it worked in the intended direction in suppressing real wage growth then it might work in the opposite direction in increasing it. But it will never happen as long as real wage growth is considered identical to inflation.

By: Ian Welsh

Ian Welsh — Mon, 01 Dec 2008 22:08:36 +0000

As for NBER, they miscalled the Bush recession, which is why a lot of folks don’t trust them much.

By: Ian Welsh

Ian Welsh — Mon, 01 Dec 2008 22:07:53 +0000

That doesn’t follow.