Love this! Had to chime in that the tulip thing is 100% real. Michael Pollan writes about it in his provocative page-turner, “Second Nature,” about plants that have recruited humans to do their bidding. 😁
Oops, should’ve followed your link. 😳 Still, it makes a great story. And I stand behind my recommendation of Pollan’s book. He also gets into apples and weed (yes, that weed), among others.
Have you seen Elizabeth Warren’s analysis of how crashes happen? And her argument that strict regulation prevents them? (I’m vastly simplifying here, but it makes sense when she explains it.)
Okay last one, promise! I’m so curious about this, where you say Galbraith was “describing the economic forecasting model that made his main characters billionaires, and then outcasts.” I’m holding onto that “outcasts” for dear life. If he predicted everything else, please please please please let him be right about that! 🙏 Great read. Thank you.
I would say read the book. In this case, the billionaires are good people, giving away money to progressive causes. Galbraith's cynicism says this can't happen. People with money can be rewarded for only caring about money, but they cannot use that money in a way that changes the political calculus to the left. Of course, what we're watching now - after the $1.2 billion donation to Leonard Leo - is that an ungodly sum is being spent on right wing causes.
Just to play Devil’s Advocate.... J. K. Rowling gave away so much of her fortune she is no longer a billionaire; Bill Gates is doing the same thing with his foundation and created the Giving Pledge to convince others to do the same; Warren Buffet is a signature of the Giving Pledge; Soros also funds a silly amount of progressive causes; ok this is a very controversial one but while he was still a billionaire SBF gave away a lot of money to progressive candidates (though it turned out, just as a distraction to his other activities 😂).
Galbraith was talking about a one-to-one ratio - assuming that PACs who supported conservative pols would be canceled out if only we could have PACS that supported progressive pols. But it doesn’t work that way. PACS often give to both candidates in a race. And PACs (in the ‘80s for sure) were more financial than ideological - or racist. (Although, with the Welfare Queen, I would argue that our politics were just as overtly racist in the '80s.) Now, there's more money (see Barri Seid's $1.2 billion to Leonard Leo), no transparency after Citizens United, and more places where it wouldn't matter how much an opposition candidate received, they still couldn't get elected. Stacy Abrams greatly outspent Brian Kemp in 2022, and still lost. So yeah, campaign finance has gotten more complicated since Galbraith wrote it, and also he simplified a lot.
That’s the argument billionaires use to get out of paying their fair share of taxes - that they make donations. In reality, most don’t even feel it; it’s like lunch money to them. In a progressive society (which I continue to hold out the hope we can be), giving random rich people the power over what gets funded and what doesn’t isn’t the best way to go (imho). One only has to look at state budgets that have been decimated by trickle-down economics for decades now. Relying on rich people to fund societal values via donations doesn’t work.
The great challenge of economics is translating the data into reality. Even in the current situation, the disparity between the narrative and what some of the ramifications presented by various bits of the reported data.
Case in point: we are told that the economy has grown by an annual rate of 2.4% over the most recent quarter, even as private investment and real personal incomes have been trending down. That's a rather hard circle to square.
Communicating these dichotomies to people is a constant challenge.
Private investment and personal incomes have been trending down? What metrics are you looking at. What im seeing is the public investment has spurred record private investment, and the gains workers made after “the Great Resignation” have outpaced what inflation there was.
So, I finally got to look at your links, and... they don't support your assertions. Unfortunately, Notes doesn't support images. But all three graphs you linked show a decades-long upward trend, disturbed only by the 2008 financial crisis and the pandemic. In the Real Personal Income graph, there were spikes in 2020 and 2021, when stimulus checks went out. It returns to what was normal at the end of the monthly child tax credit payments. And now it's going up again. Despite the Fed's attempts to hijack employment.
The personal income graph shows that at the end of the 2020 recession real personal income was just over $19,095 Billion. In June of 2023 it was at $17,956 Billion. Even in Common Core math $19 Trillion is more than $17.9 Trillion, which means that...wait for it...real personal income DECLINED between April 2020 and June 2023.
You are correct that there was a spike in late 2020 and early 2021. After a peak in March of 2021 at $21,448 Billion, real personal income declined again.
Put another way: real personal income declined 8% from April 2020 to June 2022, and rose 2% from June 2022 to June 2023. If you extrapolate that forward real personal incomes do not recover to their April 2020 levels until the summer of 2026--which assumes that there is no further decline in real personal income (an unlikely scenario at best, and foolishly naive at worst). Call me demanding but it would be nice to see personal incomes recover on at least the same pace as they fell. That would be something to crow about--only that's not happening.
Moreover, inflation's effects are cumulative. Unless and until we have consumer price deflation prices don't come down when inflation eases.
Consequently, if we look at personal income growth indexed to the end of the 2020 recession, and index the CPI to the same point, we see that consumer prices have risen more than 18% since April of 2020, while personal incomes have risen only 8%.
If we index both to May of 2021--after the effects of the stimulus checks has dissipated--we see that consumer prices have risen since then by more than 13%, while personal income has risen only 10%.
That's using nominal personal income--that's the optimistic scenario. Looking at real personal income over that same period you have a decrease of 0.7%
Moreover, the Real Personal Income graph at FRED uses 2012 dollars, which gives a slightly overoptimistic view of inflation's impact.
However, when you compare nominal growth in personal incomes (as well as nominal growth in disposable personal incomes) to the growth in the Consumer Price Index, you see that inflation exceeded personal income growth from April of 2021 through to March of 2023 almost without interruption, and exceeded disposable personal income growth from April 2021 without interruption between April of 2021 and January of 2023. When inflation exceeds income growth that means people are losing ground to inflation.
Keep in mind that the return to income growth exceeding inflation is largely the result of energy price deflation. Core inflation as of June 2023 is still 1.8 percentage points higher than headline inflation, and food price inflation is 0.8 percentage points higher than core inflation.
If one compares income growth to food price inflation food price inflation still exceeds personal income growth as of June 2023, and exceeded disposable income growth until April of 2023. In other words, people are still spending an increasing amount of their income on food.
Depending on where global wheat prices head long term with Russia having abrogated the Ukrainian grain deal it is quite possible that we may even see a resurgence of food price inflation. As it stands wheat prices have risen through most of July but have recently begun moving down again. If they move higher then it is quite likely food price inflation will also increase, which will hit consumers square in their personal income growth, knocking out what little they've been able to keep of late.
“None of these firms toiled to produce goods or render services; all were brought into being to bring a great and special wisdom to speculative success.”
Reminded me of the excerpt From Utopia for Realists by Rutger Bregman
“In fact, it has become increasingly profitable not to innovate. Imagine just how much progress we’ve missed out on because thousands of bright minds have frittered away their time dreaming up hypercomplex financial products that are ultimately only destructive. Or spent the best years of their lives duplicating existing pharmaceuticals in a way that’s infinitesimally different enough to warrant a new patent application by a brainy lawyer so a brilliant PR department can launch a brand-new marketing campaign for the not-so-brand-new drug.
Imagine that all this talent were to be invested not in shifting wealth around, but in creating it. Who knows, we might already have had jetpacks, built submarine cities, or cured cancer.”
This sounds like a book I have to read. I studied Economics for my first degree, and I read a lot of Galbraith whose books were not, unsurprisingly, on the recommended reading lists. I once, in a seminar, raised a point that Galbraith had made. The professor's response was "Weeeell, these people like Galbraith who purport to be economists...." Good to learn that Galbraith was right about a lot of things all along.
Love this! Had to chime in that the tulip thing is 100% real. Michael Pollan writes about it in his provocative page-turner, “Second Nature,” about plants that have recruited humans to do their bidding. 😁
Oops, should’ve followed your link. 😳 Still, it makes a great story. And I stand behind my recommendation of Pollan’s book. He also gets into apples and weed (yes, that weed), among others.
Have you seen Elizabeth Warren’s analysis of how crashes happen? And her argument that strict regulation prevents them? (I’m vastly simplifying here, but it makes sense when she explains it.)
Okay last one, promise! I’m so curious about this, where you say Galbraith was “describing the economic forecasting model that made his main characters billionaires, and then outcasts.” I’m holding onto that “outcasts” for dear life. If he predicted everything else, please please please please let him be right about that! 🙏 Great read. Thank you.
I would say read the book. In this case, the billionaires are good people, giving away money to progressive causes. Galbraith's cynicism says this can't happen. People with money can be rewarded for only caring about money, but they cannot use that money in a way that changes the political calculus to the left. Of course, what we're watching now - after the $1.2 billion donation to Leonard Leo - is that an ungodly sum is being spent on right wing causes.
Just to play Devil’s Advocate.... J. K. Rowling gave away so much of her fortune she is no longer a billionaire; Bill Gates is doing the same thing with his foundation and created the Giving Pledge to convince others to do the same; Warren Buffet is a signature of the Giving Pledge; Soros also funds a silly amount of progressive causes; ok this is a very controversial one but while he was still a billionaire SBF gave away a lot of money to progressive candidates (though it turned out, just as a distraction to his other activities 😂).
Galbraith was talking about a one-to-one ratio - assuming that PACs who supported conservative pols would be canceled out if only we could have PACS that supported progressive pols. But it doesn’t work that way. PACS often give to both candidates in a race. And PACs (in the ‘80s for sure) were more financial than ideological - or racist. (Although, with the Welfare Queen, I would argue that our politics were just as overtly racist in the '80s.) Now, there's more money (see Barri Seid's $1.2 billion to Leonard Leo), no transparency after Citizens United, and more places where it wouldn't matter how much an opposition candidate received, they still couldn't get elected. Stacy Abrams greatly outspent Brian Kemp in 2022, and still lost. So yeah, campaign finance has gotten more complicated since Galbraith wrote it, and also he simplified a lot.
That’s the argument billionaires use to get out of paying their fair share of taxes - that they make donations. In reality, most don’t even feel it; it’s like lunch money to them. In a progressive society (which I continue to hold out the hope we can be), giving random rich people the power over what gets funded and what doesn’t isn’t the best way to go (imho). One only has to look at state budgets that have been decimated by trickle-down economics for decades now. Relying on rich people to fund societal values via donations doesn’t work.
I agree donations won’t fix societal problems alone but one can have both a fair tax system and charity. The two aren’t mutually exclusive
The great challenge of economics is translating the data into reality. Even in the current situation, the disparity between the narrative and what some of the ramifications presented by various bits of the reported data.
Case in point: we are told that the economy has grown by an annual rate of 2.4% over the most recent quarter, even as private investment and real personal incomes have been trending down. That's a rather hard circle to square.
Communicating these dichotomies to people is a constant challenge.
Private investment and personal incomes have been trending down? What metrics are you looking at. What im seeing is the public investment has spurred record private investment, and the gains workers made after “the Great Resignation” have outpaced what inflation there was.
Gross Private Domestic Investment has been trending down in real terms since Q1 of 2022.
Personal incomes have been trending down in real terms since March of 2021.
Please link data
Real Personal Income
https://fred.stlouisfed.org/graph/?g=17nvc
Real Gross Private Domestic Investment
https://fred.stlouisfed.org/graph/?g=17nvt
Real Private Fixed Investment
https://fred.stlouisfed.org/graph/?g=17nwm
When the lines go down that's not a good thing.
So, I finally got to look at your links, and... they don't support your assertions. Unfortunately, Notes doesn't support images. But all three graphs you linked show a decades-long upward trend, disturbed only by the 2008 financial crisis and the pandemic. In the Real Personal Income graph, there were spikes in 2020 and 2021, when stimulus checks went out. It returns to what was normal at the end of the monthly child tax credit payments. And now it's going up again. Despite the Fed's attempts to hijack employment.
The personal income graph shows that at the end of the 2020 recession real personal income was just over $19,095 Billion. In June of 2023 it was at $17,956 Billion. Even in Common Core math $19 Trillion is more than $17.9 Trillion, which means that...wait for it...real personal income DECLINED between April 2020 and June 2023.
You are correct that there was a spike in late 2020 and early 2021. After a peak in March of 2021 at $21,448 Billion, real personal income declined again.
Put another way: real personal income declined 8% from April 2020 to June 2022, and rose 2% from June 2022 to June 2023. If you extrapolate that forward real personal incomes do not recover to their April 2020 levels until the summer of 2026--which assumes that there is no further decline in real personal income (an unlikely scenario at best, and foolishly naive at worst). Call me demanding but it would be nice to see personal incomes recover on at least the same pace as they fell. That would be something to crow about--only that's not happening.
Moreover, inflation's effects are cumulative. Unless and until we have consumer price deflation prices don't come down when inflation eases.
Consequently, if we look at personal income growth indexed to the end of the 2020 recession, and index the CPI to the same point, we see that consumer prices have risen more than 18% since April of 2020, while personal incomes have risen only 8%.
https://fred.stlouisfed.org/graph/?g=17q9I
If we index both to May of 2021--after the effects of the stimulus checks has dissipated--we see that consumer prices have risen since then by more than 13%, while personal income has risen only 10%.
https://fred.stlouisfed.org/graph/?g=17q9Q
That's using nominal personal income--that's the optimistic scenario. Looking at real personal income over that same period you have a decrease of 0.7%
https://fred.stlouisfed.org/graph/?g=17q9Y
Moreover, the Real Personal Income graph at FRED uses 2012 dollars, which gives a slightly overoptimistic view of inflation's impact.
However, when you compare nominal growth in personal incomes (as well as nominal growth in disposable personal incomes) to the growth in the Consumer Price Index, you see that inflation exceeded personal income growth from April of 2021 through to March of 2023 almost without interruption, and exceeded disposable personal income growth from April 2021 without interruption between April of 2021 and January of 2023. When inflation exceeds income growth that means people are losing ground to inflation.
https://fred.stlouisfed.org/graph/?g=17q8R
Keep in mind that the return to income growth exceeding inflation is largely the result of energy price deflation. Core inflation as of June 2023 is still 1.8 percentage points higher than headline inflation, and food price inflation is 0.8 percentage points higher than core inflation.
If one compares income growth to food price inflation food price inflation still exceeds personal income growth as of June 2023, and exceeded disposable income growth until April of 2023. In other words, people are still spending an increasing amount of their income on food.
https://fred.stlouisfed.org/graph/?g=17q9v
Depending on where global wheat prices head long term with Russia having abrogated the Ukrainian grain deal it is quite possible that we may even see a resurgence of food price inflation. As it stands wheat prices have risen through most of July but have recently begun moving down again. If they move higher then it is quite likely food price inflation will also increase, which will hit consumers square in their personal income growth, knocking out what little they've been able to keep of late.
These are not good trends.
The quote:
“None of these firms toiled to produce goods or render services; all were brought into being to bring a great and special wisdom to speculative success.”
Reminded me of the excerpt From Utopia for Realists by Rutger Bregman
“In fact, it has become increasingly profitable not to innovate. Imagine just how much progress we’ve missed out on because thousands of bright minds have frittered away their time dreaming up hypercomplex financial products that are ultimately only destructive. Or spent the best years of their lives duplicating existing pharmaceuticals in a way that’s infinitesimally different enough to warrant a new patent application by a brainy lawyer so a brilliant PR department can launch a brand-new marketing campaign for the not-so-brand-new drug.
Imagine that all this talent were to be invested not in shifting wealth around, but in creating it. Who knows, we might already have had jetpacks, built submarine cities, or cured cancer.”
This sounds like a book I have to read. I studied Economics for my first degree, and I read a lot of Galbraith whose books were not, unsurprisingly, on the recommended reading lists. I once, in a seminar, raised a point that Galbraith had made. The professor's response was "Weeeell, these people like Galbraith who purport to be economists...." Good to learn that Galbraith was right about a lot of things all along.
Loved this, and it’s making me want to read Galbraith’s novel again - I restacked a quote, but messed up the novel title - apologies :-)