What does actually cause mass unemployment in the US?

What does actually cause mass unemployment in the US?

Globalization? Automation? Low demand?

Other urls found in this thread:

brookings.edu/blog/ben-bernanke/2016/04/11/what-tools-does-the-fed-have-left-part-3-helicopter-money/),
bloomberg.com/view/articles/2016-08-05/helicopter-money-is-coming-to-the-u-s).
cato-unbound.org/2009/09/14/scott-sumner/real-problem-was-nominal
themoneyillusion.com/?p=31617
cepr.net/documents/publications/dereg-timeline-2009-07.pdf
econlog.econlib.org/archives/2016/05/the_invisible_h.html
gesd.free.fr/kalecki43.pdf
moslereconomics.com/mandatory-readings/full-employment-and-price-stability/
twitter.com/AnonBabble

welfare

Bullshit. That's like saying hospitals cause illness.

antibiotic resistance superbugs evolved in hospitals

Wow... I've been asleep all my life.

I don't work now because of this. Why work when the government will pay me to not work?

Actually it mostly evolved on farms.

The main cause is a lack of spending. Private spending never wuite recovered from the GFC, and the government's reluctant to take on debt.

If the government stopped pretending the debt ever needed to be or would be paid off, and Congress abolished the debt ceiling, it would be pretty easy to get rid of mass unemployment.

>current year
>being this retarded

So you're proposing hardcore Keynesianism?

Say, why doesn't government debt need to be paid back? A lot of debt is held by private corporations and banks, regular people, foreigners, even China.

Well yeah that's the major counter-argument to it since it opens up another can of worms. I'd just be in favor of an NGDP targeting regime with emphasis on QE.

Don't give them the real reason, that's not how we play here

>This policy makes sense, since consumer price deflation also means wage deflation and debt deflation.
It does indeed make sense. Though whether or not the policy is sustainable indefinitely is a troubling matter. It's arguable that the crash of 08 was precipitated by the very policy.

May we be digging ourselves into a grave?

Wait wait actually I've been reading into this. This might have something to do with it (bloomberg.com/view/articles/2016-08-05/helicopter-money-is-coming-to-the-u-s).

"Developed-country central banks purchase government securities on open markets, not from governments directly. You might ask: "What’s the difference between the Treasury issuing debt in the market and the Fed buying it, versus the Fed buying securities directly from the Treasury?" The difference is that the open market determines the prices of Treasuries, not the government or the central bank. The market intervenes between the two, which keeps the government from shoving huge quantities of debt directly onto the central bank without a market-intervening test. This enforces central bank discipline and maintains credibility.

In contrast, direct sales to central banks have been the normal course of government finance in places like Zimbabwe and Argentina. It often leads to hyperinflation and financial disaster. (I keep a 100-trillion Zimbabwe dollar bank note, issued in 2008, which was worth only a few U.S. cents as inflation rates there accelerated to the hundreds-of-million-percent level. Now it sells for several U.S. dollars as a collector’s item, after the long-entrenched and corrupt Zimbabwean government switched to U.S. dollars and stopped issuing its own currency.)"

I don't think low interest rates are guaranteed to cause financial crashes. It took the efforts of. a whole industry of dickheads and the lack of efforts of regulators to do that.

Creating an environment where the only way to not lose 50% of your wealth in a decade is to invest it in assets of questionable value is a fairly good start to guaranteeing a financial crash.

Inflation wasn't even that high.

cato-unbound.org/2009/09/14/scott-sumner/real-problem-was-nominal

This explains it pretty well- monetary policy was too tight, not too easy

Low interest rates are typically a sign that money has been tight, as Milton Friedman once said

Maybe it's worth trying. Economists like Summers and Krugman advocate it, but then, they've been wrong on many things.

IMO the creation of a sovereign wealth fund of some sort would probably work better than a helicopter drop and it should really only be used as a last resort

This provides a pretty good perspective on the matter: themoneyillusion.com/?p=31617

Most support for helicopter drops is based on the flawed view that central banks are "out of ammo" given that interest rates are near zero and we had quantitative easing.

>Inflation wasn't even that high.
Depends on what prices you look at

A profitability crises broke out in the 1970s and you had stagflation. This provided the opportunity for a full reorientation of policies towards deregulating the financial sector and the Fed spiked interest rates making long term fixed-capital investments, which actually employ people, look less profitable in comparison to financial speculation. Remember the financial industry was highly regulated until the end of the 1970s. Here's a report by the Center for Economic and Policy Research "A Short History of Financial Deregulation in the United States" showing a overview of these issues:
cepr.net/documents/publications/dereg-timeline-2009-07.pdf
Two important events were:
>1978, Marquette vs. First of Omaha – Supreme Court allows banks to export the usury laws of their home state nationwide and sets off a competitive wave of deregulation, resulting in the complete elimination of usury rate ceilings in South Dakota and Delaware, among others
>1980, Depository Institutions Deregulation and Monetary Control Act – Legislation increases deposit insurance from $40,000 to $100,000, authorizes new authority to thrift institutions, and calls for the complete phase-out of interest rate ceilings on deposit accounts.

Private debt levels have been exploding; what you have is just an asset-price illusion i.e. people feel that their net worth is rising even when their debt servicing obligations are also rising and the access price to housing and other property keeps on increasing. Inflating real-estate and stocks doesn't only just benefit 1% of the population, it "befits" (or appears to at least) everyone with property or a retirement plan of some sort.

this. its a tactic the "gov'ment " puts in order to make population depend on a free "gov'ment" check. when you get paid to do nothing it destroys ambition. ill stop here before i get too NWO-ish

I'll take "because welfare doesn't pay shit" for 500, Alex.

The most totalitarian states are far from welfare states. You actually gotta work in places like China if you're going to survive.
Welfare is lobbied for by (smart) businesses because it allows them to pay low wages and get high profits in return. Eliminate welfare or any safety net and profits will begin to fall when you have more people demanding higher wages and not afraid of unemployment and completely pauperised a section of your population who will become a bigger threat.

It's guaranteed to assume that a helicopter drop causes inflation. So the question is whether the increase of economic activity would boost the earnings of people enough to more than make up for this inflation.

And I guess there's no way to prove that, so helicopter money is truly a desperation measure when the inflation target absolutely cannot be reached.

Oh...? Oh! Yes of course, I meant to say it's the cryptoJews. Like Scarlet Johansson.

Exactly- it should only be pursued if all other measures (quantitative easing, interest rate cuts, etc. etc.) fail to stop deflation.

Wasn't the house price inflation the result of real estate speculation, not the cause of it?

Why would you lose wealth if you sit on your ass whilst your house price rises?

One of the dumbest posts I've ever seen on biz.

You think if great and high paying jobs were available to everyone, anyone would still stick to welfare?

The issue is that welfare and other benefits can guarantee a person a comfy enough lifestyle that there isn't enough incentive for them to look for work.

Every individual bondholder ALWAYS needs to be paid back in full and on time.
Except in the rare cases where it's held by a country that there's sanctions against, in which case payment can be delayed until the issue is resolved.

However, the debt as a whole does not have to be paid off. Old bonds can simply be replaced with new ones.

You mean the kind of welfare that makes the government pay private sector workers' wages and benefits, like Walmart? So this allows Walmart to have a higher profit margin?

There's also welfare for the absolutely unemployed and for the elderly. How does that benefit corporations?

Not saying I endorse this view, but how would you counter the viewpoint that increased budget deficits have an effect on the market? (pic related)

Okay, let's make it more digestible for people like me.

Stagflation breaks out, as result of trying to apply Keynesianism amidst an oil price shock. So you had a wage-price spiral.

This was used as a pretext (???) to start a deregulation program in favor of the financial industry and asset holders. This, (coupled with top rate tax cuts) made inequality in the US skyrocket.

What is still confusing me about this interpretation: even if these deregulations befitted everyone owning assets, half of the population doesn't own any assets at all. And 90% of the population depends on wages as sole source of income. So how could the whole western world adopt policies which undermined wage growth?

The population that owns assets still affects the segment of the population that owns no assets

>nosocomial infections

Not necessarily in a positive way... It lowers the ability of the general population to buy houses, stocks and other financial assets to move upwards.

Hyperinflation is nearly always the result of countries holding the currency's official value above market value until they lose the ability to do so. Countries on the gold standard have to be very careful to avoid that situation, but any country with a freely floating currency is almost totally immune from the problem, as the currency's value is self correcting. If there's more money, the currency will devalue a bit, so the country will import less and export more.

It is possible for a country with a floating currency to have hyperinflation if it borrows from its own central bank to make foreign currency repayments, but no country has ever experienced hyperinflation as a result of borrowing from its own central bank to fund domestic spending. Indeed the last time a country with a floating currency experienced hyperinflation as a result of physically printing money purely for domestic spending was in the American war of independence!

Argentina, Venezuela and Zimbabwe were stupid enough to tie their currencies to the US dollar, and Zimbabwe committed economic suicide in several other ways too.

Futures contracts allow employers in the commodity industries to keep blue collar workers employed. There would've been more layoffs in the oil sector without the hedges provided by oil futures, you fucking communist.

Forex hedges allow companies to maintain international presences and protect thousands of jobs that are tied to international commerce across a wide variety of sectors.

>being this clueless

econlog.econlib.org/archives/2016/05/the_invisible_h.html

Hyperinflation, regardless of your quads, is a meme

Thanks a lot for the explanation. That's how Japan kept the value of their currency: the market still acknowledged its value, because it was covered by a trade surplus, right?

Related question: do you advocate deficit spending to boost the economy then?

I'm not saying that financial products are useless or to be shunned, user.

But how does inflating their worth, as well as the worth of real estate, help the general population?

During the Great Depression, the Federal Reserve never undertook anything similar to quantitative easing and tried to force liquidation of excess assets.

The result?

Banks could not liquidate and satisfy depositors' need for cash. The Fed's response caused the collapse of the money supply by 1/3.

In 2008, if the Fed let WaMu get seized by the FDIC and let Lehman and the others go under, what would be the result user?

Deposits and, by extension, depositors would've been wiped out. Investors in money market mutual funds would've been wiped out. These are savers who would've lost all their savings in the resulting evaporation of liquidity and market freeze.

The Fed, in 1933, by allowing monetary contraction through forced liquidation, caused the Great Depression. In today's world, if that were allowed to take place, it would make 2008, Greece, and the Great Depression look like a cake walk.

The only people who would benefit by this inaction would be the tiny fraction of people who would be able to purchase assets for pennies on the dollar and make huge returns. Is that beneficial for the rest of the population? Is it?

I'm not arguing for letting existing assets deflate or liquidate them on purpose, so everyone can buy houses for $29.99

What my initial question to was is how monetarism and financial deregulation are a more legitimate system than the priory existing Keynesianism, with its aim to maximize employment and wages.

Welfare is when the government takes money from one group and gives it to people who will spend it on buying goods... the alternative is government doesn't take the money and those people don't spend it on those goods i.e. it moves spending power around the economy. The money otherwise would have been probably more likely to have been saved (i.e. lending money with the expectation of a return i.e. creating debt for business) since the wealthy save instead of spend... if you have a welfare system you're probably going to have more spending going on and that's what a lot of business models are based around by purchasing goods you can internally finance out of profit if people are not you're going to be more dependent on using forms of external financing.

Most people think if the wealthy have more money and the stock market is exploding and housing prices are going up that means more jobs and improving living conditions for them.

Even "leftists" like Piketty cannot see what is really going on. He equates capital and wealth i.e. there's no difference between machines in factories, housing and shares in companies. From this his research shows that in recent years: return on wealth > rate of economic growth
He claims because of this you see rising inequality. But if he actually distinguished between different types of "capital" and striped out financial assets Piketty would see that the capital-output ratio has actually stayed roughly constant. The value of financial assets is what has rapidly increased which is causing the increasing concentration of wealth at the top of the scale. The lack of real investment in fixed-capital has resulted in low growth, shrinking wages and growing inequality. What is needed is more investment not a "wealth tax".

If you want full employment, then give infrastructure workers spoons rather than advanced machinery and modern-day equipment. You'll have full employment in no time.

Haven't you ever heard of creative destruction?

I'm not saying it's a more legitimate system just what historically happened. Keynesianism became politically infeasible because of the crises that broke out in the 70s and financial interests saw it as a chance to get the upper hand over industrial interests. Long term fixed-capital investments have a low rate of return and are risky; rentier interests are interested in short term capital-gains and don't care if they have to destroy the economies long term growth potential as long as they can get a bigger slice of the pie.

Keynesianism was the last era when we came close to full employment. Any other system failed to deliver this goal or abandoned it altogether.

What exactly was anti-Keynesian about the 2008/2009 stimulus package?

I'm trying to say that full employment is not a legitimate goal.

Economic theory should be judged by its results, not by its intentions. And the stagflation of the 1970s and the Obama Recovery should be clear arguments against Keynesian "shovel ready jobs" doctrine.

>if you have a welfare system you're probably going to have more spending going on
That's also what I thought.
Why doesn't big business back Democrats then? Why did neoliberal reforms in Europe cut welfare during crisis times then, instead of increasing it?

For example, the German Agenda 2010 reduced unemployment benefits to the existential minimum and lowered wages for the working class.

And big business supported that. And it's argued to have positive effects on unemployment. So I guess the story with "business wants welfare" isn't as easy?

>What is needed is more investment not a "wealth tax".

A wonderful conclusion, since everyone would benefit from it.

So, to be clear, what is a "financial asset", what is not a financial asset, and how did its value been "inflated" by monetarism in a way that Keynesianism didn't?

Have you considered that equality is neither possible nor desirable?

It's easy to say "more investment" is needed, anyone can realize that. What's more complicated is how the investment gets there. And some state-sponsored investment authority, as you seem to be suggesting here, isn't going to help it, in fact, it's probably going to make things worse.

Look at China as an example. China is essentially one big bubble waiting to burst, thanks to the government's "investment." Central planning doesn't work- whether it gets determined by some hippies in a Volkswagen or suits in Washington.

>I'm trying to say that full employment is not a legitimate goal

That should be up for everyone to decide.
Market economies clearly delivered the very best results during the Keynesian era.

Then came the oil price stagflation that indeed undermined Keynesianism, so it's questionable today.

Why didn't the 1 trillion we shipped off to the White House for "shovel ready jobs" do anything? In fact, why did the transfer of this 1 trillion dollars coincide with the slowest economic recovery since the end of the Second World War?

You said it: recovery :}

We're currently discussing the reasons why. Monetarism has been named as potential cause.

Why would growth in the stock market and expansion of the money supply in any way hinder economic growth, especially when we aren't in a deflationary or a hyper inflationary situation?

And as for your "recovery," well- you're the one bitching about inequality- care to explain pic related?

It goes only up to 2011. Five year have passed since then, and only the last three or so were dubbed "recovery"

Sorry, looks like those shovel ready jobs really are working :^)

gesd.free.fr/kalecki43.pdf

moslereconomics.com/mandatory-readings/full-employment-and-price-stability/

Here.

Yay! :}

So the US truly never recovered after 2008.

>false analogy
>what else should I expect from Veeky Forums

In spite of the 1 trillion spent on a Keynesian binge for "Shovel ready jobs."

What do you mean by shovel ready jobs?
Most of the Obama recovery can be attributed to the low interest rates, not the Keynesian stimulus, which has been tiny relative to the amount of bailout money.

My question about these "easy solution to everything" suggestions like "let's offer anyone unemployed a public job" is: why hasn't it been done long ago?

That's monetarism at work, you dense fuck

Because over 1/3 of American adults do not own a home. As a micro issue this can be fixed with hard work, budgeting, and moving to cheaper areas. As a macro issue that cure won't work, as the economy takes a hit if everyone tries that, and those "cheap" areas aren't cheap anymore when 80 million additional people are looking for homes.

Wonderful. That's what I've been pointing out.

Then why has this recovery been so slow, as you've been pointing out?

>What does actually cause mass unemployment in the US?

Labor Unions & artificially high pay for unskilled labor.

Labor Unions:
> "pay us our artificially high wages, benefits, and pensions or else we will STRIKE and hold your company hostage!!!"

Jeff Bezos:

> "llloooololololololololololololollolololololololo"

:middle finger:

>Labor Unions & artificially high pay for unskilled labor.

And these same losers are trying their hardest to eliminate the few jobs that still exist for unskilled labor.

Want $15 minimum wage? Here's your replacement.

Probably because of taxes, regulations, and other federal interventions in the economy that hinder the marketplace?

also these

Which ones that weren't there already in 1945-1980, were added under Obama?

Did you read the first link? I posted it as an answer to that.

The short answer: Unemployment = Low demand for labour.

Since labour market does not clear, labour has low bargaining power. Which means higher bargaining power for capital. Which means higher portion of income as profits.

There is also the benefit of making the economy less dynamic. Running a small business in a low demand environment is hard, which means that the rich face less competition.

We have a more global interconnected world, some countries with more pro-business policies than ours, where companies can go to when fucks like you start peddling socialism to the masses

No-no, I fully understand the benefits of full employment for employees, that's not what I'm asking about. (Albeit the thesis that unemployment is a purely monetary phenomenon is far-fetched. Imagine a cripple that cannot hunt or gather more than he consumes in food and living space. He would be "unemployed", or, much rather, disposed off in a tribal society.)

What I'm asking is: if there's an easy solution to the daily worries of 90% of the population about low wages and unemployed, why isn't this easy solution applied yet?

>Then why has this recovery been so slow, as you've been pointing out?

Costs are way too high. Period.

Immediately after the $15 minimum wage hike in Seattle, Washington DC, & California, McDonalds started rolling out automated payment kiosks in those markets.

Its like these brain dead liberals can't make the connection that they are literally killing their own unskilled labor jobs right in front of their eyes.

Which countries do you mean, in particular? What can the US, which always ranks very high in terms of competitiveness, learn from them?

A lot of jobs have been automated before and everyone benefitted from it.

The where-did-all-the-horses-go example is applicable here. It's 2016; cramming flesh and blood human beings into a factory isn't as efficient as muh robots. If using your welfare to shitpost on a Khmer sand-painting forum entertains the next great genius programmer enough to motivate him in his work, that's a lot more efficient for everyone than paying you to dig a ditch.

It depends wtf you mean by "Keynesian". Keynes didn't think a spontaneous restoration of balance between savings and investments is guaranteed by the market so S>I can arise and insufficient investment spending can persist for a long time.... with weak demand even low interest rates would not induce manufacturers to borrow and invest so the government in such a situations should step in and borrow the idle savings and spend them to close the savings–investment gap. That's not what happened in 08... but Keynes also thougth there were other options:
>"The full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In US it almost certainly will not do the trick. Less work is the ultimate solution (a 35 hour week in US would do the trick now). How you mix up the three ingredients of a cure is a matter of taste and experience, i.e. of morals and knowledge." -- Keynes
"Big business" is more financial today than industrial, most big players see they have more to gain from saving the past paper value of their failed investments at all costs even if that means destroying the whole economy.
By financial assets I just mean stocks, bonds, real-estate, intellectual property rights, etc, etc... this paper is the real wealth of nations e.g. the land titles in new york city is worth more than all the physical fixed-capital in america today and apple owns hardly any physical assets just some people and buildings; their real wealth comes from monopoly rent extraction on intellectual property not real profit generation. Since the distribution of spending power is just a result of this captialization and the prime goal in a monetary economy is just the accumulation of this paper the actual supply and demand of real goods will never actually equilibrate

You can't use that use that excuse anymore, now that the Internet is being pushed all across America. If you really wanted to learn you would have learned by now.

Real investments actually tend to hurt the bottom line of most private capitalists so they do not like it because it decreases their income from their paper savings. If they want their assets to maintain their yield-value they must find ways to curtail further investments and real productivity increases.

>"The most important confusion concerning the meaning and significance of the marginal efficiency of capital has ensued on the failure to see that it depends on the prospective yield of capital, and not merely on its current yield. This can be best illustrated by pointing out the effect on the marginal efficiency of capital of an expectation of changes in the prospective cost of production, whether these changes are expected to come from changes in labour cost, i.e. in the wage-unit, or from inventions and new technique. The output from equipment produced to-day will have to compete, in the course of its life, with the output from equipment produced subsequently, perhaps at a lower labour cost, perhaps by an improved technique, which is content with a lower price for its output and will be increased in quantity until the price of its output has fallen to the lower figure with which it is content. Moreover, the entrepreneur's profit (in terms of money) from equipment, old or new, will be reduced, if all output comes to be produced more cheaply. In so far as such developments are foreseen as probable, or even as possible, the marginal efficiency of capital produced to-day is appropriately diminished." - KEYNES

>A lot of jobs have been automated before and everyone benefitted from it.

You know this. I know this.

Labor Unions know this. Which is why they are spreading fear about "muh dissapearing jobs" and fighting tooth & nail against automation.

Killing "unskilled labor jobs" is called progress, that should be a goal not something that is viewed as a bad thing. Keeping wages low only slowers the pace of development. A low wage economy is going to look like what China does today.
If costs are to high the question is what costs do you want to lower? Rents, profits or wages. Is lowering wages really the best way to lower the overhead expenses of conducting business? Remember lowering wages will also decrease aggregate demand and probably decrease R&D investments trying to find ways to automate processes if labour is made more cost-efficient of an investment. Advanced economies have traditionally had high wages and it worked good, why is a low wage model like China better?

>such a situations should step in and borrow the idle savings and spend them to close the savings–investment gap
So you suggest we need more, not less government spending now, as proposed by, for example, Krugman?

What exactly should this stimulus be spent on?
Also, how should this debt eventually be repaid?

Neither Greece pre-2008, nor France today are glorious examples of high expenditure countries.

>most big players see they have more to gain from saving the past paper value of their failed investments at all costs even if that means destroying the whole economy

You didn't answer my initial question, which I asked out of doubt about the statement that,"corporations lobby for welfare".

As the economy of Germany went into double-digit unemployment, less, not more welfare has been proposed by the industry. And it seemed to have mildly moderate effects.

>. the land titles in new york city is worth more than all the physical fixed-capital in america today and apple owns hardly any physical assets just some people and buildings; their real wealth comes from monopoly rent extraction on intellectual property not real profit generation

Okay, now this is indeed horrible and I could confirm it after some research.

The two questions about this development I have left are:
1. What is the difference between the era Keynesianism (pre-1980s) and today which made "real" investment less profitable than speculation and
2. What should be done to strengthen real investment again?