doodle wrote:
I cannot think of a reasonable scenario (short of some massive war leading to the downfall of the US government and hyperinflationary collapse) that could lead to bond yields climbing too much higher than 4 percent.
I view the demographic trend, continued low demand for credit, and high unemployment as one that is much more conducive to low inflation and interest rates.
So according to your theory:
The last time we saw a steady rise in rates (1950-1980) it was because U.S. manufacturing was ramping up and people were living the "American dream".
These situations will not be repeated anytime soon.
Therefore rates will stay low for the foreseeable future.
Just trying to understand all of this, in the context of what has previously lead to steady rate rises in US history.
I'm probably the wrong person to help anyone understand this, but the conditions in the 70's that led to inflation seem somewhat different from those that exist today. In the 70s labor and unions still had a strong place at the bargaining table.....I on the other hand haven't seen a salary increase in 6 years. When labor pushes too hard, companies either move overseas or eliminate workers through automation. Also, during that time you had massive expansion of credit on the part of the consumer. Baby boomers spent nearly three decades leveraging up. We are seeing the other side of that now.
I just don't see any conditions in the economy that could lead to inflation right now. How can one have inflation when the average American is strapped for cash? How do prices get bid up in such a situation?
Last edited by doodle on Fri Aug 16, 2013 2:14 pm, edited 1 time in total.
All of humanity's problems stem from man's inability to sit quietly in a room alone. - Blaise Pascal
Mdraf wrote:
I don't know. Automation has certainly increased employment at the NSA !
You may be right about the trend but it's productivity that counts. So if automation can increase productivity then people can enjoy the same standard of living with less work. Think of the labor that our ancestors had to put in just for one meal. So maybe the future laborer will work one or two hours a day while the robots will do the rest
Yes, but this only holds true if people can afford the labor-saving machines or their products. The downward pressure on prices caused by this increase in production means that anyone with any job at all will probably be able to afford all the cool stuff (poor people with iPhones and all that), but what about the people whose labor is so useless compared to the machines that they really can't find any job? Right now they survive on government transfer payments.
Come to think of it, that's definitely the long-term trend we're settling into: more and more people's labor being rendered useless and subsisting on government transfer payments funded by the smaller pool of productive people.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
Mdraf wrote:
I don't know. Automation has certainly increased employment at the NSA !
You may be right about the trend but it's productivity that counts. So if automation can increase productivity then people can enjoy the same standard of living with less work. Think of the labor that our ancestors had to put in just for one meal. So maybe the future laborer will work one or two hours a day while the robots will do the rest
Yes, but this only holds true if people can afford the labor-saving machines or their products. The downward pressure on prices caused by this increase in production means that anyone with any job at all will probably be able to afford all the cool stuff (poor people with iPhones and all that), but what about the people whose labor is so useless compared to the machines that they really can't find any job? Right now they survive on government transfer payments.
Come to think of it, that's definitely the long-term trend we're settling into: more and more people's labor being rendered useless and subsisting on government transfer payments funded by the smaller pool of productive people.
Exactly my perspective. Socialism (or the more euphemistic "citizens dividend") seems like the easiest and most expedient way to address this. We are looking at the beginnings of a massive economic paradigm shift.
All of humanity's problems stem from man's inability to sit quietly in a room alone. - Blaise Pascal
It's a danger, though. Too many people taking advantage of the socialism and society gets fat and lazy and flames out as the ranks of the productive dwindle and external threats become more pronounced as fewer people join the armed forces (why bother putting yourself in danger if the government will give you everything you need?).
Come to think of it, that's another direction we already seem to be going in: the creation of a make-work domestic military force (police, FBI, ATF, DHS, ICE, NSA, etc). I guess those are all people whose violent tendencies have been channeled into a profession rather than being left to foment revolution.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
Mdraf wrote:
I don't know. Automation has certainly increased employment at the NSA !
You may be right about the trend but it's productivity that counts. So if automation can increase productivity then people can enjoy the same standard of living with less work. Think of the labor that our ancestors had to put in just for one meal. So maybe the future laborer will work one or two hours a day while the robots will do the rest
Yes, but this only holds true if people can afford the labor-saving machines or their products. The downward pressure on prices caused by this increase in production means that anyone with any job at all will probably be able to afford all the cool stuff (poor people with iPhones and all that), but what about the people whose labor is so useless compared to the machines that they really can't find any job? Right now they survive on government transfer payments.
Come to think of it, that's definitely the long-term trend we're settling into: more and more people's labor being rendered useless and subsisting on government transfer payments funded by the smaller pool of productive people.
Exactly my perspective. Socialism (or the more euphemistic "citizens dividend") seems like the easiest and most expedient way to address this. We are looking at the beginnings of a massive economic paradigm shift.
I agree. This is the way the more productive European economies have gone in last 60 years.
