Sure, but my point is that there are people that reason like "such and such an elected official is bad, therefore everything they do is bad and will have drastic results", and that's not particularly informative even when I agree about the elected official being bad.
Krugman does a decent job of not letting his opinions about the political aspects color his analysis too much.
Things like
"Contrary to what many people believe, tariffs don’t necessarily lead to high unemployment. America had a high average tariff even before Smoot-Hawley — 15.8 percent in 1929 — but the unemployment rate in 1929 was under 3 percent."
He doesn't like the tariffs, he (and pretty much any serious economists) think they're bad, but he tries to be clear about why they're bad rather than just waving his hands at everything.
Politics and economics are two different lenses on the same subject matter, because “wealth” and “power over others” are two different ways of saying the same thing.
This is also why capitalism and democracy become progressively more clearly opposed the farther the status quo environment you are working in gets from feudalism or absolute monarchy, under which both seem to be changes in the same direction.
> This is also why capitalism and democracy become progressively more clearly opposed
You mean linked? Capitalism is what lets the people make economic decisions, democracy is what lets people make political decisions. I think you mean communisms where people can't make economic decisions is what's oppose democracy.
On election night when Trump was elected in 2016, Krugman wrote in the NYT that the markets would never recover, and that there would probably be "a global recession, with no end in sight".
He definitely lets his political angle completely color his economic analysis. Now that Trump is back in the White House we are of course doomed, same as the last time he was in the White House, same as the next time.
If you've got a political angle that is closer to Krugman's than say Trump's maybe this is fine? I mean as long as you're OK with an economic analyst who doesn't have the slightest idea how banks work. If that's the kind of writing you're looking for, Krugman is a very good choice.
> Krugman wrote in the NYT that the markets would never recover, and that there would probably be "a global recession, with no end in sight".
I think this needs some context. Remember that in 2016 we didn't know how Trumps rhetoric works and how seriously he will push his agendas. Now we know about TACO and how he was held back by the adults in the room. How would you feel about the future if you thought the POTUS will annex Greenland and Canada, and impose tariffs of 100-200% globally?
> If the political angle is not relevant to the analysis, then why do you enjoy it?
The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy.
This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor.
We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.
Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.
>Currently, the data suggest that reduced labor supply is likely the key driver
It's interesting as far as people I know looking for jobs, they're supply ... and having a hard time finding jobs. Reduced supply you'd hope you'd get a job.
Granted the article addresses this both in the types of jobs and:
>The stability of the unemployment rate masks effects of the low-hiring, low-firing labor market.
I do wonder, if this continues and a sense of economic slowdown or worse continues, would lowering a rate really fire up hiring? I know small businesses who can't eat /dance around tariffs like big companies, some are seriously terrified / facing hard decisions, others fine.
My read on this is most jobs growth in raw numbers occurs in the lower pay brackets. In those pay brackets supply has decreased and the people doing the hiring have not raised wages. This means these jobs aren't being filled and the work isn't getting done. This leads to lower jobs numbers and keeps unemployment rates stable.
Yeah, anecdotally no one I know exemplifies that finding. Everyone who had had to job search ran into a ton of competition and either beat them all out or is under-/unemployed currently. Only way I could see the finding of reduced labor supply is that no one can afford to work in the low wage jobs that are open.
>Reduced demand in tech due to constraints of capital
That's it, really. All the "hiring" money is being spent on building data centers, at least in the US tech field. Better hope AGI is really around the corner, or that's a lot of money chasing nothing that could have been put to productive use.
I can see one way in which it could be true that the labor supply is reduced, in specific sectors:
The ICE crackdowns are both directly removing large numbers of nonwhite people from the labor pool, and indirectly scaring much larger numbers of them away from it, lest they be the next ones sent to the camps.
Aside from that, though? No, I think talking about reduced labor supply is anti-labor propaganda at best.
Title is clickbait (we all know why) but its a great read. Its so many shocks to the economy at the same time, and with no goal other than to cause harm that I don't think anything the FED does will have any real impact in the real world.
The author goes for an OR between reasons but I really don't see it like that, its an AND, all jumbled together and pushing the economy down.
My read is not that it is to cause harm / break things down per sé, but instead to deglobalize. At various times, the left and the right have made globalization the bogeyman and something to fight, so this idea has been in the ether.
For many reasons (economic, geopolitics, peace), globalization is a great thing.
Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
I think that security/stability for a country as big as the US requires at least some localization. For example, IMO all medications, medical devices, infrastructure systems (such as telecom, power, etc.), hardware and materials should be at least 50% domestically produced and have at least dual sourcing.
I realize that not all countries are big or diverse enough to accomplish this, and that's a reason why loose confederations like the EU exist. The US started much closer to that itself.
A country like the US should be self sufficient in energy, food and medicine, but there has never been a concerted policy to do that.
One of the biggest reasons is lobbying, for the US to be self sufficient in energy, for instance, it would have to invest heavily in renewable energy (like china is doing) but the oil lobby is never going to let that happen.
So with the government so captured by interests that don’t care about the long term stability of the country itself, it’s very difficult to effect these large changes.
> Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
> > Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
> Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
Globalization, or more loosely, more and more people or societies trading with each other over greater distances and competing at who does something best, has been a steady trend over the centuries and a force for good.
While an individual could get caught off guard one morning when their job is gone, when you zoom out the megatrends are slow but forceful and you can foresee a lot of the big picture. It is also easy to conflate "globalization" caused my job loss with "automation" caused my job loss.
The current deglobalization efforts, by contrast, have been haphazard, incompetent, rushed.
Unfortunately, deglobalization-by-edict is not going to bring jobs or industry back, it's just going to make things more expensive and inefficient to build. China has entire cities that are laid out like a giant assembly line, with raw materials inland, manufacturing and assembly midway, and final packaging and shipping at the coasts. Plus a skilled workforce trained to make it all work. We're not going to replicate this in Detroit or Houston.
I'm sure it's just automation that replaced a lot of the manufacturing jobs in the US with foreign workers earning less in a month than US workers earned in a day.
Please don't conflate what the left has done (actual economic plans and policies that resulted in economic growth) with what the right has done (pointlessly destroyed relations with multiple countries because they didn't get their way in 2020).
> Please don't conflate what the left has done (actual economic plans and policies that resulted in economic growth) with what the right has done (pointlessly destroyed relations with multiple countries because they didn't get their way in 2020).
What I further said is that even if deglobalization is a great idea (it isn't) then the execution we're seeing now by the right is very poor. We do not know how the left would have executed because the deglobalists in the Democratic Party do not have sufficient power.
Some quotes[1] just for fun:
Bernie Sanders: “increasingly globalized economy, established and maintained by the world’s economic elite, is failing people everywhere.”
JD Vance: “the effects of globalization have hollowed out America’s industrial core.”
Trump: “Globalization has made the financial elites who donate to politicians very wealthy, but it’s left millions and millions of our workers with nothing but poverty and heartache—and our towns and cities with empty factories and plants.”
And if you think these 3 represent fringes on the left and the right, you will be wrong. During the Biden admin, US Trade Representative Katherine Tai assert that governments’ urge “to liberalize as much as possible” has led to a “race to the bottom.”
The execution and evaluation (granted, that's part of the execution).
If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:
I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good.
If you're not bound by any results you don't like then you can't know if you're even winning.
Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.
> If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:
And even then, tarrifs right off the bat are the wrong approach. It takes time, a lot of time, to reorganize supply chains and spin up manufacturing. It also requires a ton of capital. It requires a slow roll, local incentives, subsidies, and long term planning.
It wouldn't be feasible to expect it to happen over the course of a single presidential term. If I'm a big company and I've got the cash reserves, I'm better off laying off a bunch of people and buckling down for the next 4 years rather than spending a bunch of capital to bring supply chain to the USA.
Personally, I would say you are both, to some extent, wrong.
I don't think it's true that there's no other goal than to cause harm, at least with the tariffs.
By the same token, though, while I think deglobalization is something that people around Trump would say they're shooting for, it's not really something Trump cares about in that sense.
No; I think Trump's primary goal with the tariffs is to flex his power and enjoy the feeling; he doesn't really care what the effect is on everyone else. With the ICE crackdowns, he definitely wants to hurt everyone nonwhite in America.
I, on the other hand, believe that it's not causing harm or deglobalization, but rather a way to generate cash for Trump himself. He or his lieutenants get cryptocurrency for either imposing tariffs on competitors, or not imposing threatened tariffs, or maybe shorting entire industries before the tariff is announced.
Yeah, it’s visible there is no particular plan for anything. Once they’re announced someone shows up to try to retcon it to something that resembles a reason but it is clear there are very large whales profiting from trading against these decisions.
That seems to be the main way people are profiting from this admin, insider trading. I doubt we’ll ever figure out who they were.
Increasing wealth inequality, drives prices inflation, wage stagnation and less disposable income, driving less consumption, driving less revenue for businesses, meaning cuts happen and hiring freezes, drives slowing growth in new job market.
> It's hard to square that with "less consumption", though...
Is it? I’m not sure of the truth, but it’s not hard to imagine that wealth inequality drives up the price of housing via the mechanism you describe, and increased housing prices drive down overall consumption as the non-wealthy struggle to afford basic necessities.
I think you've got your cause/effect chain a little muddled. I would also assert that the system dynamics are neither linear nor singular in the way you frame it.
> How does increasing wealth inequality drive price increases?
i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff.
past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?
i'm not the person you replied but if wages lag furhter, how rents going up? it should go down since there is noone to be able to pay higher rents. they have no choice but either convince homeowner or downgrade. and Group A(rich + upper-middle) won't rent since they have enough wealth to buy a house, they may upgrade and cause inflation in luxury houses/goods.
Rent can continue to go up as long as there is room (literally physical space) in whatever housing is still on the market. Ten years ago you might have been able to afford your own apartment. Now you need three roommates. Soon you'll need seven, and then fifteen, and that can just keep going up as long as that number of bodies can be crammed into the same lodgings.
> How does increasing wealth inequality drive price increases?
When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.
Obviously I'm not an economist, nor do I play one on TV.
One would indeed expect removing currency from the economy to be deflationary, but in GPs example we didn't just remove currency, we removed demand too. If less people have money to buy a car, less cars are produced. When you are making 1k instead of 1m cars, you no longer benefit as much from scale and must raise your prices, which only the rich can afford.
Now why might this happen instead of prices dropping to the point the now-poorer people can afford them? Maybe the cost of inputs can't go much lower, or maybe other less-stratified markets are picking up the slack, so demand shifts there. Or maybe the rich have enough money they don't care about the higher prices. Or some combination of all of the above.
Economies are complicated beasts, it's rarely as simple as X leads to Y. Instead you have the whole alphabet pulling in different directions and the forces that win out may be quite unintuitive.
> Doesn't the lack of liquidity in an economy cause deflationary behavior?
Which seems to accept the given premise.
But ok, let's look at yours:
> the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
Is it? I thought it was well understood at this point that the best place to stimulate the economy was from the bottom, because every dollar put in goes directly back into circulation, creating demand, while the wealthy and middle class will save some portion of it. Certainly I don't think the money in my savings account is doing much to create the kind of demand that would stimulate job growth, and while one might argue that the stocks in my 401k are doing something the idea that it's driving more growth than buying a car is... Dubious.
> > the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
> Is it?
Yes, it is an inaccurate belief. The super-rich don't take most of the money (did the person mean money or did they mean wealth?) they receive, remove it from the economic system, and stash it unproductively in a tax haven.
I mean, apart from the open question of whether the majority of money gets moved into tax havens, if the money is out of the economic system entirely, won't it just inflate away? I presume rich people want to put their money in instruments that return interest, which means that it has to be used /somehow/. I mean, potentially just speculative assets like gold or art, but those are high risk.
Ok, what do they do with it, and how does effect the economy compared to the way lower wealth people behave when they receive money?
FWIW I do agree that if we give Jeff Bezos or Elon Musk more money, it's not headed straight for an account in the Caymans, but I also don't think the exact destination of said money is core to the point.
> what do they do with it, and how does effect the economy compared to the way lower wealth people behave when they receive money?
Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets.
In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts (and is therefore illiquid).
Great! So how does that compare in economic impact to spending it?
I can help with that: it doesn't. If I buy stock, it doesn't create demand for... Anything. Unless it was stock bought from the company itself it doesn't give the company any more funds to work with. It doesn't help the company produce more, nor does it create demand that would encourage them to do so.
If you will please allow me an oversimplified example:
A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service.
However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example.
So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.)
Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way.
This example is obviously oversimplified for the sake of showing the point
> How does increasing wealth inequality drive price increases?
Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.
If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group?
> If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group?
That's a fantastic question that I don't think I've heard before, but I have a practical answer to.
Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets.
In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts.
So as a tax authority you have to balance getting cash (to run the government) against reducing the productive capacity of the economy (by asking businesses to reduce their capital).
The missing dynamic is that businesses are encouraged to increase growth in profit YoY.
Each year, a business needs to grow faster than it did the previous year.
If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it.
The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending).
If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders.
AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole.
For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation.
Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.
> The missing dynamic is that businesses are encouraged to increase growth in profit YoY.
> Each year, a business needs to grow faster than it did the previous year.
It is very reasonable for an investor or a worker wanting the business they have hitched their financial wellbeing to to do very well, which means growing profit. It gives the business more strength and stability.
The difference between “I earned a tidy profit for me and my investors, as well as for my non-investor workers” and “I earned the maximum profit possible for me and my investors, moreso by denying workers as much of those profits as possible” compounds detriment at the difference in profit and wage growth rates, which steadily decreases the maximum profit possible to all firms due to household purchasing powerlessness. Eventually they’ll reach a lower maximum profit than could have be reached if they’d shared more profits as worker wages rather than as investor payouts. Oops.
I hate to tell you, the single cause of inflation is not "wealth inequality", it's extra dollars spent by the Federal Government that literally don't exist.
The US Government writes checks that always cash, and unlike you and me, they don't have to have anything in the bank account behind it. This is the _sole and only_ cause of inflation. _Its the literal definition_ and is well documented.
It definitely feels like many companies have simply given up trying to do anything new. I mean look at the blowback against renewables that happened this election cycle, possibly killing the IRA. Why take risks when you’re making a ton of money just keeping the lights on?
Deport + limit immigration = degrowth = of course job growth would slow, maybe even turn negative. Perhaps there's this alternative scenario world where pressed Americans start working jobs illegals work, aka the jobs allegedly Americans won't. But Americans are too soft / have too much dignity / employers haven't increased wage (whatever interpretation you wish) for that to happen.
Not mentioned in the summary at the bottom: crippling inflation. This is the result of policies (Both Red and Blue) put into motion 4-5 years ago. Businesses run on razor thin margins, and when your purchasing power is suddenly reduced 25%, well this result is predictable.
I think it's a moot point. We've been trying to increase the number of jobs and the amount that jobs pay for most of modern history. And since when has that ever worked? well it worked until about the 70s and then we roughly flat line for about 30 years and since 98, its been nothing but down hill from there (if you dought this, calculate the standard of living: nominal gdp per capita or median wages / case-shiller housing index). by all means try but it's not going to work.
There's two sides to personal finance: what you earn and what you spend. earning more, on a wholistic countrywide scale, simply isn't possible anymore (if the last 50 years has taught us anything).
The answer lies in allowing the economy to make life more cost effective (removing regulations that force housing costs to be high, making more land available for living, thus driving down it's costs, etc.). The answer lies in controlling costs and spending, both in the personal life and for government.
"The employment statistics are broadly consistent with the reduction in immigrant labor supply. Job growth has slowed more this year in industries that have a higher fraction of unauthorized immigrants like construction and restaurants, according to analysis by Jed Kolko at the Petersen Institute."
...I feel like the article answers its own question pretty well. I guess the headline is there for SEO/"engagement".
World already changed in 2024 (covid era ends, AI era begins, huge trade dis-balance of US actual for many decades, and new administration want to resolve it), but employers not release changed reality immediately (even when plans of conservatives was known in November).
Looks like now they slam on the brakes, and first cut new projects and now trying to build new approach.
And looks like, tip point was when president Trump demonstrated tables with new import tariffs.
What I mean, even when Apple, TSMC and other tech giants already said about huge investments, but they first stopped many already running projects and will spend at least few months before start new jobs (to be exact, on big projects, from budget decision to start hire, usually spend ~1-2 months).
What worsened things, some infrastructure giants are not in good shape (Intel, IBM, Ford), so, probably their tops will spend additional time to negotiate with investors new terms.
I have been enjoying Paul Krugman's writing, now that he's free from the shackles of the New York "both sides!" Times
https://paulkrugman.substack.com/p/its-beginning-to-smell-a-...
He's obviously got a political angle, but doesn't let that completely color his economic analysis.
Economics is political.
Sure, but my point is that there are people that reason like "such and such an elected official is bad, therefore everything they do is bad and will have drastic results", and that's not particularly informative even when I agree about the elected official being bad.
Krugman does a decent job of not letting his opinions about the political aspects color his analysis too much.
Things like
"Contrary to what many people believe, tariffs don’t necessarily lead to high unemployment. America had a high average tariff even before Smoot-Hawley — 15.8 percent in 1929 — but the unemployment rate in 1929 was under 3 percent."
He doesn't like the tariffs, he (and pretty much any serious economists) think they're bad, but he tries to be clear about why they're bad rather than just waving his hands at everything.
Politics and economics are two different lenses on the same subject matter, because “wealth” and “power over others” are two different ways of saying the same thing.
This is also why capitalism and democracy become progressively more clearly opposed the farther the status quo environment you are working in gets from feudalism or absolute monarchy, under which both seem to be changes in the same direction.
> This is also why capitalism and democracy become progressively more clearly opposed
You mean linked? Capitalism is what lets the people make economic decisions, democracy is what lets people make political decisions. I think you mean communisms where people can't make economic decisions is what's oppose democracy.
Krugman's not partisan.
Politics, people, policy, platforms, party, positions, and partisanship are adjacent, but remain distinct.
On election night when Trump was elected in 2016, Krugman wrote in the NYT that the markets would never recover, and that there would probably be "a global recession, with no end in sight".
He definitely lets his political angle completely color his economic analysis. Now that Trump is back in the White House we are of course doomed, same as the last time he was in the White House, same as the next time.
If you've got a political angle that is closer to Krugman's than say Trump's maybe this is fine? I mean as long as you're OK with an economic analyst who doesn't have the slightest idea how banks work. If that's the kind of writing you're looking for, Krugman is a very good choice.
> Krugman wrote in the NYT that the markets would never recover, and that there would probably be "a global recession, with no end in sight".
I think this needs some context. Remember that in 2016 we didn't know how Trumps rhetoric works and how seriously he will push his agendas. Now we know about TACO and how he was held back by the adults in the room. How would you feel about the future if you thought the POTUS will annex Greenland and Canada, and impose tariffs of 100-200% globally?
If the political angle is not relevant to the analysis, then why do you enjoy it?
> If the political angle is not relevant to the analysis, then why do you enjoy it?
The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy.
This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor.
We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.
As thankyoufriend said, "economics is political".
Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.
Some people enjoy things that others do not
New York “both sides” Times? There are only a few papers less suited for that monicker.
The fact that he left the NYT because it wasn't letting him be partisan enough cracked me up so hard.
>Currently, the data suggest that reduced labor supply is likely the key driver
It's interesting as far as people I know looking for jobs, they're supply ... and having a hard time finding jobs. Reduced supply you'd hope you'd get a job.
Granted the article addresses this both in the types of jobs and:
>The stability of the unemployment rate masks effects of the low-hiring, low-firing labor market.
I do wonder, if this continues and a sense of economic slowdown or worse continues, would lowering a rate really fire up hiring? I know small businesses who can't eat /dance around tariffs like big companies, some are seriously terrified / facing hard decisions, others fine.
My read on this is most jobs growth in raw numbers occurs in the lower pay brackets. In those pay brackets supply has decreased and the people doing the hiring have not raised wages. This means these jobs aren't being filled and the work isn't getting done. This leads to lower jobs numbers and keeps unemployment rates stable.
Yeah, anecdotally no one I know exemplifies that finding. Everyone who had had to job search ran into a ton of competition and either beat them all out or is under-/unemployed currently. Only way I could see the finding of reduced labor supply is that no one can afford to work in the low wage jobs that are open.
Reduced demand in tech due to constraints of capital, and increased demand in agricultural and low wage jobs where immigrant labor was significant.
But funny enough, we can't just ship 100k software developers from the bay to the central valley and it just work.
That’s basically the plot of Stardew Valley. Programmers yearn for the fields.
I don't think Stardew Valley prepares you for the sweltering heat of performing manual labor in the Central Valley.
Save us Yoba!
>Reduced demand in tech due to constraints of capital
That's it, really. All the "hiring" money is being spent on building data centers, at least in the US tech field. Better hope AGI is really around the corner, or that's a lot of money chasing nothing that could have been put to productive use.
> just ship 100k software developers from the bay to the central valley and it just work
But you could pitch a startup idea to replace those workers with agricultural robotics and collect some of that sweet AI venture capital!
I can see one way in which it could be true that the labor supply is reduced, in specific sectors:
The ICE crackdowns are both directly removing large numbers of nonwhite people from the labor pool, and indirectly scaring much larger numbers of them away from it, lest they be the next ones sent to the camps.
Aside from that, though? No, I think talking about reduced labor supply is anti-labor propaganda at best.
Title is clickbait (we all know why) but its a great read. Its so many shocks to the economy at the same time, and with no goal other than to cause harm that I don't think anything the FED does will have any real impact in the real world.
The author goes for an OR between reasons but I really don't see it like that, its an AND, all jumbled together and pushing the economy down.
> with no goal other than to cause harm
My read is not that it is to cause harm / break things down per sé, but instead to deglobalize. At various times, the left and the right have made globalization the bogeyman and something to fight, so this idea has been in the ether.
For many reasons (economic, geopolitics, peace), globalization is a great thing.
Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
I think that security/stability for a country as big as the US requires at least some localization. For example, IMO all medications, medical devices, infrastructure systems (such as telecom, power, etc.), hardware and materials should be at least 50% domestically produced and have at least dual sourcing.
I realize that not all countries are big or diverse enough to accomplish this, and that's a reason why loose confederations like the EU exist. The US started much closer to that itself.
A country like the US should be self sufficient in energy, food and medicine, but there has never been a concerted policy to do that.
One of the biggest reasons is lobbying, for the US to be self sufficient in energy, for instance, it would have to invest heavily in renewable energy (like china is doing) but the oil lobby is never going to let that happen.
So with the government so captured by interests that don’t care about the long term stability of the country itself, it’s very difficult to effect these large changes.
> Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
> > Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
> Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
Globalization, or more loosely, more and more people or societies trading with each other over greater distances and competing at who does something best, has been a steady trend over the centuries and a force for good.
While an individual could get caught off guard one morning when their job is gone, when you zoom out the megatrends are slow but forceful and you can foresee a lot of the big picture. It is also easy to conflate "globalization" caused my job loss with "automation" caused my job loss.
The current deglobalization efforts, by contrast, have been haphazard, incompetent, rushed.
Unfortunately, deglobalization-by-edict is not going to bring jobs or industry back, it's just going to make things more expensive and inefficient to build. China has entire cities that are laid out like a giant assembly line, with raw materials inland, manufacturing and assembly midway, and final packaging and shipping at the coasts. Plus a skilled workforce trained to make it all work. We're not going to replicate this in Detroit or Houston.
I'm sure it's just automation that replaced a lot of the manufacturing jobs in the US with foreign workers earning less in a month than US workers earned in a day.
Please don't conflate what the left has done (actual economic plans and policies that resulted in economic growth) with what the right has done (pointlessly destroyed relations with multiple countries because they didn't get their way in 2020).
> Please don't conflate what the left has done (actual economic plans and policies that resulted in economic growth) with what the right has done (pointlessly destroyed relations with multiple countries because they didn't get their way in 2020).
Have I?
The idea of deglobalization has been a rallying cry of both the left and the right. If you don't believe me, review someone like Bernie Sanders' beliefs (e.g. https://slate.com/business/2016/06/bernie-sanders-take-on-gl...)
What I further said is that even if deglobalization is a great idea (it isn't) then the execution we're seeing now by the right is very poor. We do not know how the left would have executed because the deglobalists in the Democratic Party do not have sufficient power.
Some quotes[1] just for fun:
Bernie Sanders: “increasingly globalized economy, established and maintained by the world’s economic elite, is failing people everywhere.”
JD Vance: “the effects of globalization have hollowed out America’s industrial core.”
Trump: “Globalization has made the financial elites who donate to politicians very wealthy, but it’s left millions and millions of our workers with nothing but poverty and heartache—and our towns and cities with empty factories and plants.”
And if you think these 3 represent fringes on the left and the right, you will be wrong. During the Biden admin, US Trade Representative Katherine Tai assert that governments’ urge “to liberalize as much as possible” has led to a “race to the bottom.”
[1] https://www.cato.org/free-society/summer-2024/globalization-...
I love how your evidence on the left is basically what people have said, which you think is somehow just as bad as what the right has actually done.
You had to pick a senator who isn’t even part of any party but an Independent to contrast against a two term president and one of his vice presidents.
This is like trying to use a scale to balance weights but the fulcrum is all the way on one side
Yeah, the Sanders administration was a disaster. Glad he didn't win reelection in 2024.
The execution and evaluation (granted, that's part of the execution).
If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:
I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good.
If you're not bound by any results you don't like then you can't know if you're even winning.
Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.
> If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:
And even then, tarrifs right off the bat are the wrong approach. It takes time, a lot of time, to reorganize supply chains and spin up manufacturing. It also requires a ton of capital. It requires a slow roll, local incentives, subsidies, and long term planning.
It wouldn't be feasible to expect it to happen over the course of a single presidential term. If I'm a big company and I've got the cash reserves, I'm better off laying off a bunch of people and buckling down for the next 4 years rather than spending a bunch of capital to bring supply chain to the USA.
Personally, I would say you are both, to some extent, wrong.
I don't think it's true that there's no other goal than to cause harm, at least with the tariffs.
By the same token, though, while I think deglobalization is something that people around Trump would say they're shooting for, it's not really something Trump cares about in that sense.
No; I think Trump's primary goal with the tariffs is to flex his power and enjoy the feeling; he doesn't really care what the effect is on everyone else. With the ICE crackdowns, he definitely wants to hurt everyone nonwhite in America.
I, on the other hand, believe that it's not causing harm or deglobalization, but rather a way to generate cash for Trump himself. He or his lieutenants get cryptocurrency for either imposing tariffs on competitors, or not imposing threatened tariffs, or maybe shorting entire industries before the tariff is announced.
Yeah, it’s visible there is no particular plan for anything. Once they’re announced someone shows up to try to retcon it to something that resembles a reason but it is clear there are very large whales profiting from trading against these decisions.
That seems to be the main way people are profiting from this admin, insider trading. I doubt we’ll ever figure out who they were.
Increasing wealth inequality, drives prices inflation, wage stagnation and less disposable income, driving less consumption, driving less revenue for businesses, meaning cuts happen and hiring freezes, drives slowing growth in new job market.
> Increasing wealth inequality, drives prices inflation
Why?
The idea is that if you have 1 billion in assets, let's say you make 5% per year, that's 4 million a month income. That money goes to into assets.
Plus the fact that in last 5 years assets have gone up so much means there's just a lot of wealth being invested.
I think the claim is that the rich can overpay for whatever they want, driving up the price for everyone else. And that's true.
It's hard to square that with "less consumption", though...
> It's hard to square that with "less consumption", though...
Is it? I’m not sure of the truth, but it’s not hard to imagine that wealth inequality drives up the price of housing via the mechanism you describe, and increased housing prices drive down overall consumption as the non-wealthy struggle to afford basic necessities.
when the fed lowers the rates, who benefits?
I think you've got your cause/effect chain a little muddled. I would also assert that the system dynamics are neither linear nor singular in the way you frame it.
> Increasing wealth inequality, drives prices inflation
How does increasing wealth inequality drive price increases?
> How does increasing wealth inequality drive price increases?
i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff.
past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?
i'm not the person you replied but if wages lag furhter, how rents going up? it should go down since there is noone to be able to pay higher rents. they have no choice but either convince homeowner or downgrade. and Group A(rich + upper-middle) won't rent since they have enough wealth to buy a house, they may upgrade and cause inflation in luxury houses/goods.
> i'm not the person you replied but if wages lag furhter, how rents going up?
The greater the number of people who cannot afford buying a home, the greater the number of people whose only option is to rent.
The more people enter the rental market, the higher rental prices get.
It would be very interesting to have statistics on how many people share apartments/rent rooms. I'd bet those numbers would be spiking.
Rent can continue to go up as long as there is room (literally physical space) in whatever housing is still on the market. Ten years ago you might have been able to afford your own apartment. Now you need three roommates. Soon you'll need seven, and then fifteen, and that can just keep going up as long as that number of bodies can be crammed into the same lodgings.
> How does increasing wealth inequality drive price increases?
When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.
Doesn't the lack of liquidity in an economy cause deflationary behavior?
Obviously I'm not an economist, nor do I play one on TV.
One would indeed expect removing currency from the economy to be deflationary, but in GPs example we didn't just remove currency, we removed demand too. If less people have money to buy a car, less cars are produced. When you are making 1k instead of 1m cars, you no longer benefit as much from scale and must raise your prices, which only the rich can afford.
Now why might this happen instead of prices dropping to the point the now-poorer people can afford them? Maybe the cost of inputs can't go much lower, or maybe other less-stratified markets are picking up the slack, so demand shifts there. Or maybe the rich have enough money they don't care about the higher prices. Or some combination of all of the above.
Economies are complicated beasts, it's rarely as simple as X leads to Y. Instead you have the whole alphabet pulling in different directions and the forces that win out may be quite unintuitive.
> One would indeed expect removing currency from the economy to be deflationary, but in GPs example
the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
The question I answered was:
> Doesn't the lack of liquidity in an economy cause deflationary behavior?
Which seems to accept the given premise.
But ok, let's look at yours:
> the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
Is it? I thought it was well understood at this point that the best place to stimulate the economy was from the bottom, because every dollar put in goes directly back into circulation, creating demand, while the wealthy and middle class will save some portion of it. Certainly I don't think the money in my savings account is doing much to create the kind of demand that would stimulate job growth, and while one might argue that the stocks in my 401k are doing something the idea that it's driving more growth than buying a car is... Dubious.
But if you have data please share.
> > the issue is that the GP's premise ("When super-rich people receive money, it goes mostly to tax havens, removing it from circulation.") is invalid.
> Is it?
Yes, it is an inaccurate belief. The super-rich don't take most of the money (did the person mean money or did they mean wealth?) they receive, remove it from the economic system, and stash it unproductively in a tax haven.
I mean, apart from the open question of whether the majority of money gets moved into tax havens, if the money is out of the economic system entirely, won't it just inflate away? I presume rich people want to put their money in instruments that return interest, which means that it has to be used /somehow/. I mean, potentially just speculative assets like gold or art, but those are high risk.
see my reply to sibling about where most of the wealth of the top 1% is applied (tl;dr productive assets or ownership)
Ok, what do they do with it, and how does effect the economy compared to the way lower wealth people behave when they receive money?
FWIW I do agree that if we give Jeff Bezos or Elon Musk more money, it's not headed straight for an account in the Caymans, but I also don't think the exact destination of said money is core to the point.
> what do they do with it, and how does effect the economy compared to the way lower wealth people behave when they receive money?
Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets.
In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts (and is therefore illiquid).
Great! So how does that compare in economic impact to spending it?
I can help with that: it doesn't. If I buy stock, it doesn't create demand for... Anything. Unless it was stock bought from the company itself it doesn't give the company any more funds to work with. It doesn't help the company produce more, nor does it create demand that would encourage them to do so.
Short term, maybe, as you still have excess production capacity. Long term excess capacity get dismantled, business go bankrupt, scale is lost.
>When poor people receive money, they tend to put it to circulate in the economy, by spending it.
That causes inflation, as we seen by the covid stimmy checks.
This is only true if the demand can't be met midterm or longterm
If you will please allow me an oversimplified example:
A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service.
However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example.
So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.)
Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way.
This example is obviously oversimplified for the sake of showing the point
> How does increasing wealth inequality drive price increases?
Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.
If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group?
> If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group?
That's a fantastic question that I don't think I've heard before, but I have a practical answer to.
Most of the wealth of the top 1% (to pick an arbitrary "small group of people") is not sitting as cash in the bank; it is concentrated in financial and business assets: equities & mutual funds, private businesses, real estate, bonds and other fixed-income investments, alternative assets.
In the US, over half of all publicly traded stocks and mutual fund shared are held by the top 1%, meaning their wealth is overwhelmingly tied to ownership of productive assets rather than wages or savings accounts.
So as a tax authority you have to balance getting cash (to run the government) against reducing the productive capacity of the economy (by asking businesses to reduce their capital).
Presumably because there's a perception that if there are lots of rich people, they can afford to be gouged.
This begs the question of how many rich people there actually are, though.
> Presumably because there's a perception that if there are lots of rich people, they can afford to be gouged.
1) Is this a wrong way to think ?
2) Isn't this what progressive taxation is supposed to do (or *should* do if folks like Musk, et al, actually earned 'income') ?
The missing dynamic is that businesses are encouraged to increase growth in profit YoY.
Each year, a business needs to grow faster than it did the previous year.
If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it.
The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending).
If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders.
AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole.
For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation.
Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.
> The missing dynamic is that businesses are encouraged to increase growth in profit YoY. > Each year, a business needs to grow faster than it did the previous year.
It is very reasonable for an investor or a worker wanting the business they have hitched their financial wellbeing to to do very well, which means growing profit. It gives the business more strength and stability.
The difference between “I earned a tidy profit for me and my investors, as well as for my non-investor workers” and “I earned the maximum profit possible for me and my investors, moreso by denying workers as much of those profits as possible” compounds detriment at the difference in profit and wage growth rates, which steadily decreases the maximum profit possible to all firms due to household purchasing powerlessness. Eventually they’ll reach a lower maximum profit than could have be reached if they’d shared more profits as worker wages rather than as investor payouts. Oops.
I don't think anyone is disagreeing that this is what investors want. I think the point is that it ultimately becomes detrimental.
I hate to tell you, the single cause of inflation is not "wealth inequality", it's extra dollars spent by the Federal Government that literally don't exist.
The US Government writes checks that always cash, and unlike you and me, they don't have to have anything in the bank account behind it. This is the _sole and only_ cause of inflation. _Its the literal definition_ and is well documented.
Interest rates, supply chain issues, and monetary policy also play a role
It definitely feels like many companies have simply given up trying to do anything new. I mean look at the blowback against renewables that happened this election cycle, possibly killing the IRA. Why take risks when you’re making a ton of money just keeping the lights on?
Deport + limit immigration = degrowth = of course job growth would slow, maybe even turn negative. Perhaps there's this alternative scenario world where pressed Americans start working jobs illegals work, aka the jobs allegedly Americans won't. But Americans are too soft / have too much dignity / employers haven't increased wage (whatever interpretation you wish) for that to happen.
Not mentioned in the summary at the bottom: crippling inflation. This is the result of policies (Both Red and Blue) put into motion 4-5 years ago. Businesses run on razor thin margins, and when your purchasing power is suddenly reduced 25%, well this result is predictable.
I think it's a moot point. We've been trying to increase the number of jobs and the amount that jobs pay for most of modern history. And since when has that ever worked? well it worked until about the 70s and then we roughly flat line for about 30 years and since 98, its been nothing but down hill from there (if you dought this, calculate the standard of living: nominal gdp per capita or median wages / case-shiller housing index). by all means try but it's not going to work.
There's two sides to personal finance: what you earn and what you spend. earning more, on a wholistic countrywide scale, simply isn't possible anymore (if the last 50 years has taught us anything).
The answer lies in allowing the economy to make life more cost effective (removing regulations that force housing costs to be high, making more land available for living, thus driving down it's costs, etc.). The answer lies in controlling costs and spending, both in the personal life and for government.
Interest rates are higher than the recent norm. Thats it.
Interest rates have been high for a while now. Why would we see dramatic change now when we didn’t before?
Shitty leaders shoot the messenger.
This is about 2/3 the way through the article:
"The employment statistics are broadly consistent with the reduction in immigrant labor supply. Job growth has slowed more this year in industries that have a higher fraction of unauthorized immigrants like construction and restaurants, according to analysis by Jed Kolko at the Petersen Institute."
...I feel like the article answers its own question pretty well. I guess the headline is there for SEO/"engagement".
More interesting question: more spare time for everyone or just for a small part of the population?
More spare time for a vanishingly small part of the population that has wealth, and to hell with the rest of us
What’s interesting is many on HN will do a lot to avoid the obvious answer: AI and automation.
As If
Any Intelligent
American Indvidual
'Ad Ideas
Red administration is in bed with tech and gives them H1B’s to prevent domestic labor cooperation
World already changed in 2024 (covid era ends, AI era begins, huge trade dis-balance of US actual for many decades, and new administration want to resolve it), but employers not release changed reality immediately (even when plans of conservatives was known in November).
Looks like now they slam on the brakes, and first cut new projects and now trying to build new approach.
And looks like, tip point was when president Trump demonstrated tables with new import tariffs.
What I mean, even when Apple, TSMC and other tech giants already said about huge investments, but they first stopped many already running projects and will spend at least few months before start new jobs (to be exact, on big projects, from budget decision to start hire, usually spend ~1-2 months).
What worsened things, some infrastructure giants are not in good shape (Intel, IBM, Ford), so, probably their tops will spend additional time to negotiate with investors new terms.