Tag Archives: Productivity

David Stockman on Why Money Printing Doesn’t Generate Economic Growth

How can the simple act of printing out scrip or making an electronic bookkeeping entry generate anything real, like increased productivity or real economic growth? From David Stockman at internationalman.com:

Fed stimulus

To understand the Fed’s culpability for the inflationary disaster afflicting the American economy, it is necessary to start with the Big Lie that underlies all of its destructive machinations: the claim that market capitalism gravitates toward cyclical instability, recession and chronic shortfall from its potential Full Employment path.

From this presumption, there flows an alleged requirement for continuous central bank “stimulus.” Deft action by the central banking arm of the state is purportedly needed to compensate for the inherent prosperity-retarding imperfections of the free market.

If Fed policy has actually been reducing cyclical instability and pushing the $21 trillion US economy ever closer to its Full Employment potential, then productivity growth should be rising over time commensurate with the Fed’s more aggressive deployment of its “stimulus” policies.

In this context, it should be noted that productivity growth is a purer measure of monetary policy impact than total real GDP growth. That’s because the latter is in part driven by long-run demographics and the annual growth of the labor supply.

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Capitalism Is The Worst, Except For All The Rest, by Lance Roberts

This is the third of a series on capitalism, the first two parts are linked below. From Lance Roberts at realinvestmentadvice.com:

n Part 1, we discussed how “Capitalism” was distorted by Wall Street. In Part 2, we reviewed some of the “myths” of capitalism, which are used to garner “votes” by politicians but are not really true. Most importantly, we discussed the fallacy that “more Government” is the answer in creating equality as it impairs economic opportunity.

I want to conclude this series with a discussion on the fallacy of socialism and equality, and provide a some thoughts on how you can capitalize on capitalism.

Socialism Requires Money

The “entire premise” of the socialist agendas assumes money is unlimited. Since there is only a finite amount of money created through taxation of citizens each year the remainder must come from the issuance of debt.

Therefore, to promote an agenda which requires unlimited capital commitments to fulfill, the basic premise has to be “debt doesn’t matter.” 

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Productivity and Debt, by Raúl Ilargi Meijer

Raúl Ilargi Meijer reaches the same conclusion as SLL for the US’s declining productivity and wealth: debt. From Meijer at theautomaticearth.com:

Earlier this week I was struck by the similarities and differences between two graphs I saw float by. And the thought occurred that they are as scary as they are interesting. The graphs show eerily similar trends. And complement each other. The first graph, which Tyler Durden posted, shows productivity, defined as more or less the same as GDP per capita. It goes all the way back to 1790 and contends that 2017 productivity is about back to the level it was at in 1790. In the article, Tyler suggests a link with the amount of time people spend on Instagram et al, but perhaps there is something more going on.

That is, America and Western Europe exported almost their entire manufacturing capacity to China etc. And how can you be productive if you don’t manufacture anything? Yeah, I know, ‘knowledge economy’ and ‘service economy’ and all that, but does anyone still really believe those terms? Sure, that may have worked for a while as others were still actually making stuff (and nobody really understood the idea anyway), but it’s a sliding scale. As productivity plunged, so did GDP per capita. We can all wrap our heads around that.

America’s Productivity Plunge Explained

For the first time since the financial crisis, US multifactor productivity growth turned negative last year, mystifying economists who have struggled to find something to blame for the fact that worker productivity is declining despite a technology boom that should make them more efficient – at least in theory. To be sure, economists have struggled to find explanations for the exasperating trend, with some arguing that the US hasn’t figured out how to properly measure productivity growth correctly now that service-sector jobs proliferate while manufacturing shrinks. But what if there’s a more straightforward explanation? What if the decline in US productivity measured since the 1970s isn’t happening in spite of technology, but because of it?

To wit, Facebook has just released user-engagement data for its popular Instagram photo-sharing app. Unsurprisingly, the data show that the average user below the age of 25 now spends more than 32 minutes a day on the app, while the average user aged 25 and older. The last time Facebook released this data, in October 2014, its users averaged 21 minutes a day on the app. According to Bloomberg, “time spent is an important metric for advertisers, which like to hear that users are browsing an app beyond quick checks for updates, making them more likely to run into some marketing.” Maybe they should matter more to economists, too.

To continue reading: Productivity and Debt

Free Gulliver, by Robert Gore

The future is held hostage by little minds and small ideas.

A gaggle of intellectual Lilliputians gaze upon their handiwork—productive people on their backs, bound by government strings of taxes, debt, phony money, out of control spending, entitlements for the unproductive, regulation, war, etc.—and proclaim Gulliver permanently disabled, he’ll never walk again. Invariably their palliatives never involve cutting strings, only more government.

It’s claimed that true innovation is dead, except for innovation directed by bureaucrats and funded by governments. Or there’s going to be so much innovation—automation and artificial intelligence—that there’ll be no work left for humans to do. Then government will have to confiscate the increased wealth flowing from those innovations and dole it out to the unemployed legions. Or soon it will take more energy to produce fossils fuels than the energy derived, so government must push us towards its chosen alternative energies. You get the idea: humanity faces a grim future and only governments can make it less grim.





There are economists and historians of a certain political bent who claim that government is responsible for every innovation since the wheel. Government, however, is a coercive, zero-sum endeavor. Every dime it spends comes from either a taxpayer or creditor, and is a dime the taxpayer can’t spend or the creditor can’t lend elsewhere. Government dimes have funded nuclear weapons and flights to the moon, but we don’t know where those dimes might otherwise have been spent. Left in taxpayer or creditor pockets, they could have funded more prosaic innovations of greater real-world utility than H-bombs or moonshots.

Given the checkered record of government, especially over the last century or so, it may seem that those who still believe in it are engaging in something akin to religion. That maligns religion, which generally involves a belief, or faith, in one or more deities whose existence and powers cannot be objectively proved or disproved. Belief in government is faith in an ersatz deity—incompetent, often malevolent—who ignores prayers, squelches hope, and destroys lives.

Naifs believe in government beneficence; more sinister acolytes’ worship not government and its alleged good works, but power. Beneath the slogans, bromides, and expressions of righteous intent, they live for subjugation and obedience. They are like a drum master to whom it’s more important that the slaves row to his beat than where the galley might be going. Compliance is an end—the end—in itself; everything else is secondary. Relationships are those of superiors to inferiors, rulers to ruled, Lilliputians to Gullivers.

President Trump, who was not the candidate of superiors, rulers, and Lilliputians, elicits abject horror and furious demonstrations over what he has done or said, or might do or say. The powerful realize their power may be a thing of the past. The demonstrators are horrified that the “victimization” concerns to which every right-thinking American and major institution, especially government, has reflexively genuflected will be ignored. Trump could be the turning of that page, Americans concluding that there are more important issues than race, ethnicity, gender, and sexual orientation. Do the “victims” even want an America where people don’t care about irrelevant factors and accept or reject them based on their virtues and flaws? If that day comes, it will be not acknowledged and would leave many of the victims unhappy. They’d have to find something else to bitch about.

To his detractors’ consternation, the president has pledged to eliminate 75 percent of the federal government’s regulations. At least 95 percent are useless or counterproductive, but if Trump can get rid of 75 percent, celebration will be in order. Compared to other strings regulation is almost invisible, but it’s an important Lilliputian spool. When they come up against a true Gulliver—a productive giant, an innovative genius—the difference in stature is obvious. Regulation keeps the giants on the ground where they belong, and leaves the Lilliputians in control. Selective enforcement lets officials reward..and punish— imposing costs, wasting producers’ precious time and energy, crippling their ability to compete.

Pundits and “experts” have declared the end of growth, without any demonstration of what would happen if the strings were cut. The stagnation they decry—but accept as inevitable—has been government-sponsored, but they assign an even larger role for government in “managing” future decay. The best the Davos crowd has to address manifest disgust with the ruling class is more redistribution from the productive to the unproductive (see “The 2017 “Davos Consensus”—More Welfare and Warfare,”). Not a peep at their conclave that redistribution—and the taxes and debt that fund it—are the problem for decrepit, bankrupt welfare-warfare states. Government is always the solution, never the problem.

Growth comes from innovation and increased productivity: using existing resources more efficiently. Is that the province of politicians and bureaucrats, who regard larger appropriations every year as their divine right, or profit-driven, cost-minimizing innovators and entrepreneurs? Say, for example’s sake, that someday soon it does require more energy to produce fossil fuels than the energy derived from them. The global economy would have to transition away from petroleum, a daunting undertaking. Do you trust that transition to markets, producers, and the price mechanism, which would signal a rise in the relative cost of petroleum, spurring more energy-efficient petroleum production, development of alternative energy sources, and conservation and substitution by consumers? Or do you trust taxes and increased debt, regulations, government-funded research, and bureaucrats and politicians who have never produced anything selecting winning and losing technologies and companies?

To the Davos crowd the answer is obvious, which is why much of the world is rebelling against their top-down, command-and-control regime. Their media has taken to “explaining” the revolt, but they rarely mention the strings. Among the “average” and “ordinary” people the media now purports to understand, there are many Gullivers whose productive and innovative energies could and should be unleashed. Strings are the source of Lilliputians’ status and power and they’ll never willingly sever them. Unfortunately, the world faces a plethora of pressing problems, and if the Gullivers aren’t freed soon, the bleak future the Lilliputians promise will assuredly come to pass.


TGP_photo 2 FB




Why A Crisis Is Coming—–Two Charts Which Explain It All, by Eugen Von Bohm-Bawerk

The government’s tax receipts are trending down, but employment has been holding up. Why? From Eugen Von Bohm-Bawerk at davidstockmanscontracorner.com:

The great “science” of economics once discovered an empirical relationship between GDP and unemployment that has been dubbed Okun’s Law. It simply states that the unemployment rate rises as GDP contracts, or vice versa, as production shrinks less people will be employed. It is not exactly rocket science.

However, this made us think about another relationship we have observed lately. US government real tax receipts have been trending downwards while employment has kept up remarkably well. If we draw a chart of US withholding taxes (smoothed from all the short-term noise) and overlay that with employment growth, we find a worrisome divergence that has historically not been there.

If we plot the same chart, but using annual change in real GDP instead of the annual employment growth, everything seem to fall into place though.

What can explain this dichotomy? The most obvious explanation is the increased employment of low paid workers with lower productivity relative to what we have seen in previous recoveries. Substituting $50 – 100k full time breadwinner jobs with barmaids and waiters is certain to drive down wages (and hence taxes) and GDP as the marginal productivity of each additional new hire is lower than the previous. Both productivity statistics and the monthly labour market report substantiates our view.

Years of capital consumption have led to peak debt whereby each additional unit of debt reduces economic growth instead of artificially stimulating it. There is only one way out of this, and that is a wholesale admission that current policies of extend and pretend is no longer working; unfortunately only real crisis seem to focus minds enough to implement necessary changes. Until then, the painful slog will continue. Our dire prediction for the future is simply one where the confluence of a struggling middle class and politics jointly forces through some sort of structural change. These usually makes things much worse before the system reset toward a more sustainable path. Upcoming elections in Italy, the US, the Netherlands, France, Germany and Spain in a post-Brexit environment provide ample opportunity for radical change.