Saturday, September 30, 2023

Motor Vehicle Manufacturing in Michigan: Employment

Graph #1

Dunno how much of US auto manufacturing is done in Michigan, nor the reason for the 2000-2010 decline, but I think the graph shows an interesting picture. Employment shown on the graph fell from 90,000 to 30,000 in ten years.

Wednesday, September 27, 2023

Seven good years...

Note the sequence: First the low spot, then the good years of the latter 1990s. Then too much of a good thing, followed by hard times:

Graph #1: Ratio of Credit to Money

Saturday, September 23, 2023

Same graph as yesterday, but showing natural log of the values

Natural Log of the federal spending data shown yesterday:

Graph #1: Natural Log of federal current spending

The slope of the line indicates the rate of growth.

From say 1952 to 1965 the line goes up.

From 1965 to around 1983 it goes up a lot faster: this was during the "Great Inflation".

After 1983 it goes up about as fast as it did from 1952 to 1965. In other words, since the 1980s federal spending has been increasing about as fast as it did during the "golden age" that followed World War Two.

Friday, September 22, 2023

Federal Government: Current Expenditures 1947-2023

See those sharp points there on the right?

Graph #1: Current expenditures of the federal government

Republicans don't like sitting on them.

But even those of us on the left should be able to sympathize.

Sunday, September 17, 2023

Labor Cost and Profit since 2018

Comparing the labor cost of Nonfinancial Corporate Business (NCB) to NCB profits since 2018. The vertical gray bar during 2020 shows the recession we had during the covid-19 shutdown:

Graph #1xxx

The values are "indexed" so that labor costs and profits both start at the 100 level in 2018. When they start out the same, it is easy to see how they vary as time goes by.

Before the covid recession, profit (red) varies more than labor cost (blue), but they do run more or less together. After the covid recession profit goes high, and since that time profit has been running about 25% higher than before.

Tuesday, September 12, 2023

Political irony on a massive scale

I don't know, but Milton Friedman did speak of "long and variable" lags in the effects of policy on inflation. Specifically, he observed lags as long as two years and more.

It would be political irony on a massive scale if the covid shutdown of 2020 caused the inflation of 2021-2023, and Biden took the hit for it in 2024.


From the CDC's Covid Timeline:

  • December 12, 2019: A cluster of patients in China’s Hubei Province, in the city of Wuhan, begin to experience the symptoms of an atypical pneumonia-like illness that does not respond well to standard treatments.
  • March 13, 2020: The Trump Administration declares a nationwide emergency...
  • March 15, 2020: States begin to implement shutdowns in order to prevent the spread of COVID-19.


Milton Friedman (1961):

The central empirical finding in dispute is my conclusion that monetary actions affect economic conditions only after a lag that is both long and variable.

Axios (July 2023): 

In Central Banking 101, there is frequent talk of "long and variable lags" — the idea that after making an interest rate move, there is a delay of uncertain length before it really affects the economy. (Jan 2023):

Raphael Bostic, President and Chief Executive Officer Federal Reserve Bank of Atlanta said,

A large body of research tells us it can take 18 months to two years or more for tighter monetary policy to materially affect inflation.

The Hill (March 2023):

Citing the findings from his joint work with Anna Schwartz, Friedman goes on to state: “For individual cycles, the recorded lead has varied between 6 and 29 months at peaks and between 4 and 22 months at troughs.”

Sunday, September 3, 2023

It depends what you mean by "influenced by"

I came upon this just now in Google Search:

They are right, of course. The one they call "Real GDP" changes because of changes in the output we produce, but not because of changes in prices. The one they call "Nominal GDP" changes because of changes in output and because of changes in prices. 

If we say Nominal GDP is all of the output purchased in a year, measured at that year's prices, then Nominal GDP is a measure of actual spending. If we say Real GDP is all of the output purchased in a year, measured at 2012 prices, then Real GDP is a measure of what that spending would have been if prices never went up. Actual things are called "nominal", and fantasies are called "real". This, it seems, is the way economists think. That being the case, it must be easy for them to say Real GDP is "not influenced by changes in prices."

As for myself, I understand that raising interest rates slows the economy and reduces inflation. I understand this is the preferred economic policy of many nations. I do not think it is the best way to reduce inflation, nor even a very good way, but that is not my topic here. So I say, without complaining, that raising interest rates slows the economy and reduces inflation.

Now, Nominal GDP measures changing output at changing prices. And Real GDP measures changing output at unchanging prices. But to get prices to be really "unchanging" we would have to reduce inflation. 

And reducing inflation slows the economy.

And "slowing the economy" means reducing the amount of output we produce. So, if the question is Do changing prices influence Real GDP? then the answer is Yes, absolutely, they do.

To expand on that thought: If by "price changes" we mean either "prices going up because of inflation" or "policies that reduce inflation", again I have to say yes, such changes in the price level do influence Real GDP growth. Yes, absolutely.

That's my short answer.