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It's a Sad Day for Potential Growth..

ResponsiblyIrresponsible
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7/31/2015 8:19:43 PM
Posted: 1 year ago
Well, technically, *yesterday* was a sad day for potential growth, but I didn't get around to actually typing a post.

Anyway, the BEA conducted its annual revision of the National Income and Product Accounts in conjunction with releasing its advanced estimate of Q2 GDP, and well... the downward revisions dating back to 2011 are astounding.

I guess I'll run the numbers for you all -- but only because I like you. Otherwise I would rightly assign this menial spreadsheet work to my intern.

(These are for *real* GDP, btw.. the inflation story -- i.e., the NGDP story -- is roughly the same.)

Q4 over Q4

2011: 1.68%

2012: 1.28%

2013: 2.45%

2014: 2.47%

All we have for 2015, of course, is the first two quarters -- or, I should say, a final (fourth, actually) estimate for Q1 and an advanced estimate for Q2:

Q1: 0.6% (up from -0.2%)

Q2: 2.3%

Bottom Line

The pace of growth from 2012 to 2014 averaged 2.3% prior to these revisions; now, it averages about 2 percent. Note that these revisions came amid significant employment growth, which began accelerating in 2013 -- due to the initiation of Q2 late in September 2012 to counteract the sequester (classic example of monetary offset) -- and 2014 -- due to the expiration of unemployment benefits. Even now, employment is still growing above "normal levels," so this clearly signals that the economy has reached a new normal with below-2 percent trend growth. Staff projections from the Board of Governors that were leaked last month estimated a potential growth rate of about 1.8 percent, which sounds about right, though may in fact be overly optimistic.

tl;dr: Jeb Bush isn't hitting 4 percent RGDP growth. Keep dreaming.
~ResponsiblyIrresponsible

DDO's Economics Messiah
Moseng
Posts: 1
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8/1/2015 3:48:06 AM
Posted: 1 year ago
I have recently started to read out this forum and i found very first post by you. Amazing informative post by you. Thanks
Chang29
Posts: 732
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8/2/2015 8:02:34 AM
Posted: 1 year ago
Low growth is the new normal. This is a politically desirable situation for elected politicians and those at the Fed. Growth without volatility is part of the Fed's mission statement. Elected politicians also like low growth since small short recessions can hurt incumbents.
A free market anti-capitalist

If it can be de-centralized, it will be de-centralized.
ironslippers
Posts: 513
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8/2/2015 9:47:56 AM
Posted: 1 year ago
At 7/31/2015 8:19:43 PM, ResponsiblyIrresponsible wrote:
Well, technically, *yesterday* was a sad day for potential growth, but I didn't get around to actually typing a post.

Anyway, the BEA conducted its annual revision of the National Income and Product Accounts in conjunction with releasing its advanced estimate of Q2 GDP, and well... the downward revisions dating back to 2011 are astounding.

I guess I'll run the numbers for you all -- but only because I like you. Otherwise I would rightly assign this menial spreadsheet work to my intern.

(These are for *real* GDP, btw.. the inflation story -- i.e., the NGDP story -- is roughly the same.)

Q4 over Q4

2011: 1.68%

2012: 1.28%

2013: 2.45%

2014: 2.47%

All we have for 2015, of course, is the first two quarters -- or, I should say, a final (fourth, actually) estimate for Q1 and an advanced estimate for Q2:

Q1: 0.6% (up from -0.2%)

Q2: 2.3%

Bottom Line

The pace of growth from 2012 to 2014 averaged 2.3% prior to these revisions; now, it averages about 2 percent. Note that these revisions came amid significant employment growth, which began accelerating in 2013 -- due to the initiation of Q2 late in September 2012 to counteract the sequester (classic example of monetary offset) -- and 2014 -- due to the expiration of unemployment benefits. Even now, employment is still growing above "normal levels," so this clearly signals that the economy has reached a new normal with below-2 percent trend growth. Staff projections from the Board of Governors that were leaked last month estimated a potential growth rate of about 1.8 percent, which sounds about right, though may in fact be overly optimistic.

tl;dr: Jeb Bush isn't hitting 4 percent RGDP growth. Keep dreaming.

I don't get why you say its a sad day. 2 percent growth is what I beleave is idealistic. I beleave growth above 4 percent is not sustanable. Now if we could keep population growth and natural resource pilaging at 2 percent growth we could live in global peace.
Everyone stands on their own dung hill and speaks out about someone else's - Nathan Krusemark
Its easier to criticize and hate than it is to support and create - I Ron Slippers
ResponsiblyIrresponsible
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8/8/2015 9:16:29 PM
Posted: 1 year ago
At 8/2/2015 9:47:56 AM, ironslippers wrote:
I don't get why you say its a sad day. 2 percent growth is what I beleave is idealistic. I beleave growth above 4 percent is not sustanable. Now if we could keep population growth and natural resource pilaging at 2 percent growth we could live in global peace.

First, there's no reason to think that 2 percent is the new trend level of growth. We thought it was somewhere around 2 percent, but usually following a deep recession the economy tends to grow above trend for a period of time, and that's consistent with above-trend growth in nonfarm payrolls of 200k+. This report suggests the trend rate of growth is probably below even 2 percent.

Second, the historical average is roughly 3 percent, which corresponded to nominal growth of about 5 percent, so that the economy has reached a "new normal" over such a condensed period of time is very troubling.

Third, because the economy has been underutilized for so long, above 4 percent nominal growth would probably be desirable. It only becomes *unsustainable* if we're growing beyond potential over the longer run, but that would mean that actual output exceeds potential -- i.e., the output gap is positive -- not solely that the growth rate of output exceeds the growth rate of potential. The reason above-4-percent growth is unsustainable is *because* 2 percent is the new structural growth rate. Obviously if that rate were to rise as the fundamentals of the economy improve, 4 percent would be lackluster. I'm speaking of a cyclically-adjusted output, or the flexible-price output level.
~ResponsiblyIrresponsible

DDO's Economics Messiah
ResponsiblyIrresponsible
Posts: 12,398
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8/8/2015 9:23:54 PM
Posted: 1 year ago
At 8/2/2015 8:02:34 AM, Chang29 wrote:
Low growth is the new normal. This is a politically desirable situation for elected politicians and those at the Fed.

It's not remotely desirable for the Fed, especially because there's a lot of uncertainty around that long-run growth rate, and thus uncertainty about slack in the labor market, or even the connection between RGDP growth and unemployment. For instance, unemployment has been growing beyond trend, but RGDP has been a laggard. That obviously can't be explained by demand-side factors, so the result is supply side, namely a secular decline in trend productivity growth. That's entirely outside the control of the Fed, though nevertheless, insofar as that's cyclical in nature -- e.g., insofar as the drop-off in labor force participation is due to cyclical factors (about as much as a fourth or so, says the recent research) -- the Fed actually *could* influence the long-run rate of growth. The question is the risk calculus associated with that, which I address in my "overheating" thread.

I don't think it's desirable for elected politicians, on balance, because it applies a whole lot of pressure for structural reform. It might be helpful to the GOP who want to, for instance, slash capital gains taxes or neuter regulations, both of which would apply upward pressure on the long-run rate of growth. Of course, there's an additional factor at play, which is productive investment -- and unfortunately good policy doesn't often transcend party lines, so to support one, a politician must oppose the other.

That's why I hate politics, btw, and I couldn't be more thrilled that political dipsh1ts are, notwithstanding their many attempts, completely uninvolved in monetary-policy decisions.

Growth without volatility is part of the Fed's mission statement.

Indeed it is. Granted, it's "maximum sustainable employment," though unemployment around the natural rate is consistent with output at potential. Monetary policy has no effect on real variables in the long run, so it has virtually no impact on trend growth.

Elected politicians also like low growth since small short recessions can hurt incumbents.

A lower structural rate of growth would have no bearing whatsoever on whether there's a recession. People were screaming about Japan, for instance, being in a recession, though unemployment kept collapsing to about 3.5 percent. Trend NGDP growth, however, was negative and trend RGDP growth around 0. When trend growth falls, we lower the bar for whatever growth rate we would tend to associate with a broad-based slowdown in economic activity.
~ResponsiblyIrresponsible

DDO's Economics Messiah
ResponsiblyIrresponsible
Posts: 12,398
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8/8/2015 9:24:15 PM
Posted: 1 year ago
At 8/1/2015 3:48:06 AM, Moseng wrote:
I have recently started to read out this forum and i found very first post by you. Amazing informative post by you. Thanks

Awesome, glad to hear it!
~ResponsiblyIrresponsible

DDO's Economics Messiah
vrj
Posts: 11
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8/9/2015 3:07:28 PM
Posted: 1 year ago
At 7/31/2015 8:19:43 PM, ResponsiblyIrresponsible wrote:
Well, technically, *yesterday* was a sad day for potential growth, but I didn't get around to actually typing a post.

Anyway, the BEA conducted its annual revision of the National Income and Product Accounts in conjunction with releasing its advanced estimate of Q2 GDP, and well... the downward revisions dating back to 2011 are astounding.

I guess I'll run the numbers for you all -- but only because I like you. Otherwise I would rightly assign this menial spreadsheet work to my intern.

(These are for *real* GDP, btw.. the inflation story -- i.e., the NGDP story -- is roughly the same.)

Q4 over Q4

2011: 1.68%

2012: 1.28%

2013: 2.45%

2014: 2.47%

All we have for 2015, of course, is the first two quarters -- or, I should say, a final (fourth, actually) estimate for Q1 and an advanced estimate for Q2:

Q1: 0.6% (up from -0.2%)

Q2: 2.3%

Bottom Line

The pace of growth from 2012 to 2014 averaged 2.3% prior to these revisions; now, it averages about 2 percent. Note that these revisions came amid significant employment growth, which began accelerating in 2013 -- due to the initiation of Q2 late in September 2012 to counteract the sequester (classic example of monetary offset) -- and 2014 -- due to the expiration of unemployment benefits. Even now, employment is still growing above "normal levels," so this clearly signals that the economy has reached a new normal with below-2 percent trend growth. Staff projections from the Board of Governors that were leaked last month estimated a potential growth rate of about 1.8 percent, which sounds about right, though may in fact be overly optimistic.

tl;dr: Jeb Bush isn't hitting 4 percent RGDP growth. Keep dreaming.

keep it vit and sleep
ResponsiblyIrresponsible
Posts: 12,398
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8/9/2015 4:14:04 PM
Posted: 1 year ago
At 8/9/2015 3:07:28 PM, vrj wrote:
At 7/31/2015 8:19:43 PM, ResponsiblyIrresponsible wrote:
Well, technically, *yesterday* was a sad day for potential growth, but I didn't get around to actually typing a post.

Anyway, the BEA conducted its annual revision of the National Income and Product Accounts in conjunction with releasing its advanced estimate of Q2 GDP, and well... the downward revisions dating back to 2011 are astounding.

I guess I'll run the numbers for you all -- but only because I like you. Otherwise I would rightly assign this menial spreadsheet work to my intern.

(These are for *real* GDP, btw.. the inflation story -- i.e., the NGDP story -- is roughly the same.)

Q4 over Q4

2011: 1.68%

2012: 1.28%

2013: 2.45%

2014: 2.47%

All we have for 2015, of course, is the first two quarters -- or, I should say, a final (fourth, actually) estimate for Q1 and an advanced estimate for Q2:

Q1: 0.6% (up from -0.2%)

Q2: 2.3%

Bottom Line

The pace of growth from 2012 to 2014 averaged 2.3% prior to these revisions; now, it averages about 2 percent. Note that these revisions came amid significant employment growth, which began accelerating in 2013 -- due to the initiation of Q2 late in September 2012 to counteract the sequester (classic example of monetary offset) -- and 2014 -- due to the expiration of unemployment benefits. Even now, employment is still growing above "normal levels," so this clearly signals that the economy has reached a new normal with below-2 percent trend growth. Staff projections from the Board of Governors that were leaked last month estimated a potential growth rate of about 1.8 percent, which sounds about right, though may in fact be overly optimistic.

tl;dr: Jeb Bush isn't hitting 4 percent RGDP growth. Keep dreaming.



keep it vit and sleep

What does this mean?
~ResponsiblyIrresponsible

DDO's Economics Messiah
Diqiucun_Cunmin
Posts: 2,710
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8/9/2015 4:16:13 PM
Posted: 1 year ago
At 8/9/2015 4:14:04 PM, ResponsiblyIrresponsible wrote:
At 8/9/2015 3:07:28 PM, vrj wrote:
At 7/31/2015 8:19:43 PM, ResponsiblyIrresponsible wrote:
Well, technically, *yesterday* was a sad day for potential growth, but I didn't get around to actually typing a post.

Anyway, the BEA conducted its annual revision of the National Income and Product Accounts in conjunction with releasing its advanced estimate of Q2 GDP, and well... the downward revisions dating back to 2011 are astounding.

I guess I'll run the numbers for you all -- but only because I like you. Otherwise I would rightly assign this menial spreadsheet work to my intern.

(These are for *real* GDP, btw.. the inflation story -- i.e., the NGDP story -- is roughly the same.)

Q4 over Q4

2011: 1.68%

2012: 1.28%

2013: 2.45%

2014: 2.47%

All we have for 2015, of course, is the first two quarters -- or, I should say, a final (fourth, actually) estimate for Q1 and an advanced estimate for Q2:

Q1: 0.6% (up from -0.2%)

Q2: 2.3%

Bottom Line

The pace of growth from 2012 to 2014 averaged 2.3% prior to these revisions; now, it averages about 2 percent. Note that these revisions came amid significant employment growth, which began accelerating in 2013 -- due to the initiation of Q2 late in September 2012 to counteract the sequester (classic example of monetary offset) -- and 2014 -- due to the expiration of unemployment benefits. Even now, employment is still growing above "normal levels," so this clearly signals that the economy has reached a new normal with below-2 percent trend growth. Staff projections from the Board of Governors that were leaked last month estimated a potential growth rate of about 1.8 percent, which sounds about right, though may in fact be overly optimistic.

tl;dr: Jeb Bush isn't hitting 4 percent RGDP growth. Keep dreaming.



keep it vit and sleep

What does this mean?

The post is strangely reminiscent of vi_spex...
The thing is, I hate relativism. I hate relativism more than I hate everything else, excepting, maybe, fibreglass powerboats... What it overlooks, to put it briefly and crudely, is the fixed structure of human nature. - Jerry Fodor

Don't be a stat cynic:
http://www.debate.org...

Response to conservative views on deforestation:
http://www.debate.org...

Topics I'd like to debate (not debating ATM): http://tinyurl.com...
ResponsiblyIrresponsible
Posts: 12,398
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8/9/2015 4:31:12 PM
Posted: 1 year ago
At 8/9/2015 4:16:13 PM, Diqiucun_Cunmin wrote:
At 8/9/2015 4:14:04 PM, ResponsiblyIrresponsible wrote:
At 8/9/2015 3:07:28 PM, vrj wrote:
At 7/31/2015 8:19:43 PM, ResponsiblyIrresponsible wrote:
Well, technically, *yesterday* was a sad day for potential growth, but I didn't get around to actually typing a post.

Anyway, the BEA conducted its annual revision of the National Income and Product Accounts in conjunction with releasing its advanced estimate of Q2 GDP, and well... the downward revisions dating back to 2011 are astounding.

I guess I'll run the numbers for you all -- but only because I like you. Otherwise I would rightly assign this menial spreadsheet work to my intern.

(These are for *real* GDP, btw.. the inflation story -- i.e., the NGDP story -- is roughly the same.)

Q4 over Q4

2011: 1.68%

2012: 1.28%

2013: 2.45%

2014: 2.47%

All we have for 2015, of course, is the first two quarters -- or, I should say, a final (fourth, actually) estimate for Q1 and an advanced estimate for Q2:

Q1: 0.6% (up from -0.2%)

Q2: 2.3%

Bottom Line

The pace of growth from 2012 to 2014 averaged 2.3% prior to these revisions; now, it averages about 2 percent. Note that these revisions came amid significant employment growth, which began accelerating in 2013 -- due to the initiation of Q2 late in September 2012 to counteract the sequester (classic example of monetary offset) -- and 2014 -- due to the expiration of unemployment benefits. Even now, employment is still growing above "normal levels," so this clearly signals that the economy has reached a new normal with below-2 percent trend growth. Staff projections from the Board of Governors that were leaked last month estimated a potential growth rate of about 1.8 percent, which sounds about right, though may in fact be overly optimistic.

tl;dr: Jeb Bush isn't hitting 4 percent RGDP growth. Keep dreaming.



keep it vit and sleep

What does this mean?

The post is strangely reminiscent of vi_spex...

Lol, oh gosh..
~ResponsiblyIrresponsible

DDO's Economics Messiah