I haven't seen US economy this versatile and powerful in a long time, maybe since the 80s. This economy is diversified - manufacturing jobs used to be 32% in the 60s, now it is around 9% currently, but it is growing fast this year. We now have new jobs in every sectors growing, from finance (NY), college (Boston), healthcare (east coast), government (Washington DC), entertainment (Los Angeles), oil and gas (Texas), import/export (Cali/Florida), tourism (Florida), agriculture (flyover), and of course, tech (Silicon Valley, Seattle). And each industry is evenly distributed and growing. Thus the low unemployment rate and wage increases (higher in industries with higher demands)
US has gone through lots of challenges (globalization, gas/oil crisis, 9/11, cold war) in the last 50 years, and has come out on top every time.
4% growth is huge for the largest economy in the world, and the economy is nearly double the size of the closest competitor country. Bay Area alone is nearly a trillion dollar economy, and has double the growth rate of any other county in US.
Coupled with the flooding of capital back to US via the reduced expatriation tax rate, US is firing on all cylinders.
The economy is growing but it doesn't appear to actually be flowing back into most citizens pockets. The unemployment rate is very low but wages aren't rising.
Anecdotally, I am seeing more help wanted signs on retail and restaurants near me, but my friends who work those jobs are moving _farther_ away from work due to increasing rent without increasing pay. That doesn't seem sustainable
Could you link something that supports your opinion?
As for me: US consumer confidence surges in August to 18 year high. https://www.theguardian.com/business/2018/aug/29/us-economy-.... Consumers wouldn't be spending if they didn't have extra cash in their pocket, and they expect the economy to stagnate/decline
Wage data is well-tracked and is shown to be growing more slowly than inflation. It's possible the high growth in nominal wages are engendering some good feelings, but actual purchasing power is dropping.
My theory is that people are moving up to better jobs, after years of job training, education, and depressed demands, after 2008. Which would explain the low unemployment rate. Thus even though the wages for some industries are stagnating/declining, people are moving to better job positions, and thus have more money to spend.
No in fact it doesn't. American households are in tremendous shape compared to many of their peers. The household debt burden is at a 15 1/2 year low (household debt as a share of disposable income). [1]
Unlike the fake boom of 2004-2008, this one isn't built on a large expansion of household debt. Businesses have levered up some, however business profits are at an all-time high and debt accumulation began to decline in the most recent quarter (the tax changes + Fed rate policies should continue to push toward a decline; companies like Microsoft, Apple and others took on immense debt temporarily to use it to pay out profits to shareholders via debt rather than repatriate their cash at a high tax rate).
In fact, the single most interesting thing about this economic expansion, is that we haven't seen a big increase in household debt accumulation vs income, compared to the prior three major expansions (late 1980s, mid to late 1990s, and mid 2000s). That either implies consumers are skittish about unnecessarily taking on debt (trauma from the great recession, very plausible), or there's another very big leg left in this expansion (which would be fueled by debt).
"With personal disposable incomes at a $15.46 trillion annual rate in the quarter, the debt-to-income ratio dipped to 86%. That’s the lowest, by an admittedly small amount, since the fourth quarter of 2002. At the height of the credit bubble in 2008, debts topped at 116% of disposable income."
Household debt service payments as a share of disposable income is extremely low, near the lows of the last 40 years:
What you should be looking at is total compensation. Wages plus non-wage benefits. It’s been growing over the last few decades and out pacing inflation.
The down side is a lot of that is medical insurance where most people don’t see a benefit from the higher expenditure.
If paying more for medical care isn't getting you better medical care, making you being better off, then the problem is elsewhere. Not stagnant income.
Going off what the other poster said, when you don't see a benefit from the system you don't really care about the reason why. When a large portion of society doesn't see a benefit from the system, they're not really gonna care that the economy is "better than ever" and ar going to start engaging in activity that the current economic/social system finds destructive, because they will be trying to replace that system
While it's true that wage growth has been slower during since 2009 than in previous business cycles, it's false that real wages have actually gone down (it's up about 1-4% since the end of the last recession depending on how you measure[1]). Additionally, benefits have grown quite a bit over the long term, which makes looking at just wages misleading. If you look at total compensation, we've seen a 60% increase since the beginning of the 70s and about 30% since the 90s[2].
Slightly off topic, but I also found it interesting that net transfers (e.g. from the government) also make up a much larger percentage of total household income than they used to (growing from 5% in 1950 to about 17% now[3].)
Indeed the cost of benefits has risen precipitously while the value has dropped. White-collar professionals are insulated from this by a combination of much greater employer contribution ratios and a healthier risk pool.
I had read an article claiming that the major source of government transfers were due to a much larger percentage of people being on Social Security disability. The causes are a mix of improvement in the enrollment process and a loss of jobs in regions that experience lower migration. I could be misremembering aspects of this so I won't be shocked if someone disputes this.
Anecdotally, I feel as though the trend amongst my friends and family has been that the cost of benefits has increased, while the benefits themselves have contracted. I'm lucky to work at a fairly young company where we get nice health insurance options, but even so, our sick leave policy leaves something to be desired.
>> The economy is growing but it doesn't appear to actually be flowing back into most citizens pockets. The unemployment rate is very low but wages aren't rising.
> Could you link something that supports your opinion?
> Consumers wouldn't be spending if they didn't have extra cash in their pocket, and they expect the economy to stagnate/decline
Cash... or credit. Americans currently hold around $3.6 trillion in credit cards and auto/student loans - those types of credit can hinder long-term growth.
And the CCI is not a predictive metric. Consumers don't consider the economy in their purchasing decisions unless the media has given them reason to be concerned... if they're even paying attention to news at all.
I'm also curious how CCI is influenced by lowering expectations - if populations have been struggling to find jobs for the past 4 years, how do people answer?
That's why the traffic is so damn awful now ... people are having to travel further out of the cities to find affordable housing, but the high paying jobs are in the cities.
I’ve been trying to learn a little about economics. Do you have any favorite economists, etc that you follow? I’m trying to learn more about the interaction of QE, rising fed rates, growing deficits, etc.
Basically, I’d like to move beyond the headlines and the spin.
I'm particularly curious about why you prefer Reinhart over Krugman, specifically because of the disagreement over the famously erroneous Reinhart-Rogoff results (Krugman comment here: https://krugman.blogs.nytimes.com/2013/04/16/reinhart-rogoff.... As far as I know, Reinhart-Rogoff never republished or responded further than what Krugman discussed in the linked post). Specific examples supporting/disproving the case of either would be helpful.
I tend to ignore Krugman when he's talking politics (eg. his prediction of a Trump recession). However, when he goes through the process of laying out the assumptions of an economic model (happens in many of his blog posts labeled 'wonkish'), his discussion of economic consequences of various policies seems to map very well with reality.
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson (the authors of "Economics: Private and Public Choice")
I also have to second the "I don't like Krugman" opinion. Not that predicting the future is ever reliable of course, but his seriously incorrect predictions seem to be clearly motivated by politics. That won't help you understand economics.
If you are trying to learn about a subject, then I fully recommend you disregard current popular subject matter experts and focus on learning the basics as that is where you will learn the most especially considering the subject matter experts probably won't make sense if you do not understand the basics.
How each person learns is subjective but I find textbooks are by far the best learning materials so if you are like me, then I would recommend you buy some introductory economic textbooks and read them. I know a lot about economics because I read a few intro economics textbooks and I kept reading new textbooks based on what interested me from previous ones and now I have read over 20.
>Basically, I’d like to move beyond the headlines and the spin.
Create a Twitter account and get on FinTwit (finance Twitter). Find the people doing real research (you have a couple in your list, Dalio, Grantham, I follow some of the guys from Ritholtz Wealth Management who are active on the platform) and follow their retweets or follows. More information than you can handle.
"Marginal Revolution is the blog of Tyler Cowen and Alex Tabarrok, both of whom teach at George Mason University. MR began in August of 2003 and there have been new posts daily since that time. In numerous reviews and ratings over the years Marginal Revolution has consistently been ranked as the best or one of the best economic blogs on the web, but it is more (and less) than that, also representing the quirks of its authors."
As far as I can tell so far, it seems to be a relatively unbiased, non-ideological commentary on economic news. One interesting article (not from the site itself, but from an "assorted links" post) is this one on NAFTA negotiations:
Maybe I'm wrong, but as far as I can tell, that sort of perspective is highly unusual in mainstream public economic news. I've certainly never seen many articles on trade policy that go much beyond discussing aggregate GDP.
> I haven't seen US economy this versatile and powerful in a long time, maybe since the 80s.
The big 90s expansion was much better than now.
> 4% growth is huge for the largest economy in the world
Not really; one quarter at a 4.2% annualized rate is nothing to write home about; there was a better single quarter in 2011 and two consecutively in 2014, and neither were particularly gangbusters aside from those blips.
> Bay Area alone is nearly a trillion dollar economy, and has double the growth rate of any other county in US.
“Bay Area” isn't a county, and the Bay Area growth rate over the last year is about double the overall national growth rate, not double the best non-Bay county (it's about the same growth rate as Washington State—not the top county in the state, but the state overall.)
While the US economy is doing great, it feels like the US workers are doing worse than ever. Spiraling healthcare costs, unaffordable housing, student debt and a lack of real wage growth are all pinching the middle class out of existence. Unemployment is low, but many of the job gains are in low skill temp positions and the gig economy.
As is usual for the past 20 years, capital is doing great while labor suffers.
Seriously though, you’re asking a fantastic question. And, surprisingly, my tongue in cheek response above is sort of correct. The world was actually in a similar position to the one you ask about right after WWII ended. The world was still on fire and most countries had no real currency to spend. So, we loaned them the money to buy our goods (not much of a services economy back then).
Of course, that’s what we know today as the Marshall plan. In it, we gave billions of dollars of aid to other countries to help them rebuild their infrastructure and economies.
But if that ever happened in peacetime (I.e. not right after a war), then that would be very unusual. Maybe after a worldwide depression, but that is usually followed by war anyway.
Great question, and hopefully we never really find out. It probably would be a very rough ride for lots of people on this planet.
> my tongue in cheek response above is sort of correct.
The world is in a very different state now. Most of the manufacturing bases are outside the US. If the US somehow withheld the dollar, most of the world would just switch to alternative currencies and continue to trade with one another.
That of course would most likely never happen in our lifetimes, since the dollar is a key pillar in the American economy and global power projection.
Most of the world (and especially China and Mexico) cannot withdraw from the largest market for their goods without their economies totally collapsing. That’s why Trump is going to win his trade wars. Money talks, bullshit walks.
The answer last time was global recession. Mainly because there was no alternative to USA and Soviet Union (which was crumbling). Third world countries were used as pawns.
This time though, most other countries have solid institutions of their own. More likely, they will unite and start trading with each other in other currencies, gradually reducing dependence on dollar and trading with the US.
The bitter truth about the world is that the US was a hero in 80s and 90s. Today, it's a toxic material that everyone deals with simply because of petrodollar.
There is a lot you can criticize Trump about but what he has done with the economy deserves a lot of credit. Just 3 or 4 years ago, economists were saying that we would never see 4% growth ever again and that 1 to 2% growth was the new normal.
> Just 3 or 4 years ago, economists were saying that we would never see 4% growth ever again and that 1 to 2% growth was the new normal.
No, they generally weren't, and any who were saying that we'd never see a quarter of 4% annualized growth rate four years ago (i.e., between the Q2 and Q3 releases of 2014) was especially silly.
And all it took is Republicans abandoning their perennial platform of cutting spending and free markets. I wonder what else they were complete wrong about?
I doubt that the current administrations policies have had much effect on the economy yet, not enough time has passed. And even if the economy was doing well due to their decisions, you can't use that data to determine that policies they chose not to implement were flawed.
Yes, he did. It's amazing how inheriting a thriving economy, and then lowering taxes, while increasing government spending, can result in a strong economy. Unfortunately the national debt is going up and up, too.
US economy is strong enough that it rebounds after a crash like in 2008. The recovery under Obama was the worst in a long time [1]
Stock markets ( which are a rough proxy for investor confidence ) went up on the eve of election results [2], so it is an awfully specific time for the "inherited economy" to improve
Real GDP growth quarter-over-quarter was higher in 2014 than in 2017 or 2018 [1].
In reality, the chief executive has a small possible impact on the economy in the positive direction, and an unbounded opportunity for plunging its economy. Claiming Obama is responsible for the recovery is disingenuous (beyond some good Federal Reserve and Treasury appointments).
Look at pretty much all economical stats. Since 2009 they all have been going up steadily. You will have trouble even seeing a change when Trump came in. Let's talk about Trump in 4 or 8 years and let's see what the effect of his policies will be then.
Apparently facts are "partisan flamebait". I would be happy to write an NLP bot that parses your moderation and exposes political bias on this website. Consider an experiment where I post biases from either side, recording your respective responses and A/B test this websites moderation.
A reasonable hypothesis. I also wonder if its a (business) culture issue: companies these days just seem really reluctant to give raises, with people (or rather, those with the ability to do so) just changing jobs to get a "raise"
One thing I've noticed hiring in both the USA, Australia, and Europe is the huge amount of 'hidden' taxes in Europe.
For example, if I hire a worker even on minimum wage, I'm paying up to half of their gross labour cost (depending on the country) as taxes to the Government! This is called things like a social security tax, healthcare tax, disability tax, etc etc.
By contrast in the USA you have one pretty simple and low payroll tax, plus health insurance. Australia has it even better, with no health insurance, though you do have mandatory superannuation/retirement fund contributions on behalf of the employee (all still much lower in Europe).
This creates huge incentives in Europe to just pay cash in hand, or say pay the annual bonus or overtime as cash. There are also a lot of companies afraid of growing larger and hiring more staff, because it will make their cash payments harder to conceal.
I hope from this boom in the US that the Federal Government can remove payroll taxes there. Combined with a move to a single-payer healthcare system, hiring and paying US employees could be the simplest on the planet.
The challenge of the next 10 years will be housing. We are not building nearly enough. A fraction of what we need even to slow price growth. We still have these quaint subdivisions built in the 60s and 70s full of nimbyism and voting down all development. We need a big move here.
No amount will ever be enough if we all try to cram into the most fancy spot.
Americans don't have many kids now. There are lots of empty towns all across the country. We thus have plenty of housing. We could stop building today and be fine for decades.
>Americans don't have many kids now. There are lots of empty towns all across the country. We thus have plenty of housing. We could stop building today and be fine for decades.
But the empty towns also don't have jobs. It's not fine even now.
Their jobs were based in industries which no longer exist or which have been automated into requiring far fewer workers.
Similarly, you have the problem that a lot of people lived there by necessity rather than by choice.
There are absolutely people who enjoy a rural lifestyle. But there's plenty of rural places not particularly enjoyable to anyone over other rural places with better scenery, less difficulty to getting to a store, etc.
They have/had a town because at one time, there was a farm, or a factory, or whatever there that needed people and it the next closest town was too far of a commute for the time period.
4. Efficiency improvements in manufacturing and resource extraction.
The amount of rural blight caused by the favority political demon of late (outsourcing of manufacturing) is relatively minor compared to the above items. Especially 1 and 2! (Seriously, if you come across a run-down main street away from any interstate, odds are better than even it used to be a railroad station.)
IF we follow your advice in a way that's meaningful to most rural communities, we'd have to roll back the green revolution, bring back passenger rail, and magically refill coal veins/oil wells.
Other favorite policy quick-fixes as of late (in particular, on-shoring manufacturing) might help a handful of communities but are a teeny, tiny fragment of the story for blighted rural america in general. The ~80% of small towns that never had a factory to begin with can't reasonably blame outsourcing for their woes.
> It should be even easier now, given that a little remote office can be easily connected to the rest of the world.
1. Have you lived in rural America? Especially outside of "technically rural" locations such as university/college towns, good internet connections are sometimes available but usually not. And if not, convincing an ISP to dig is anything but "easy".
2. Most execs have no interest in building a big office in a remote location, both for personal reasons and for legitimate business reasons (proximity to a major airport is important in a lot of businesses).
3. Chicken-and-egg: People very reasonably won't move to most small towns due to lack of quality services (schools, hospitals, and entertainment). But those services can't be established without a critical mass of people moving into town.
You reasons mostly date to the era from 1910 to 1960. The era from 1960 to 2010 matters too, and that is more about outsourcing.
The USA already subsidizes airport service for these locations. Increasing that might be worthwhile. The same goes for good internet connections and many other services. It's like the rural electrification done a century ago.
The schools are sometimes better than the urban ones. Often there are pros and cons that could be considered to even out. We can expand Teach for America if need be, but I think things are mostly fine already.
The only area that I am aware of that has that problem is the bay area. Yeah, you guys are fucked but every other city that I am aware of is aggressively building to supply demand for housing.
> Part of the problem is that a lot of wage growth is concentrated in areas that are experiencing a housing crunch.
This is actually a really good point. There's actually a great paper that covers how much higher housing prices have hurt growth due to workers being discouraged from moving to high productivity areas[1]. The tl;dr is that if only NYC, SF, and San Jose adopted the land uses restrictions of a median US city, GDP would be about 9% higher (about $8,775 per worker assuming the labor share of GDP and number of workers doesn't change).
Take a look at this paper[1] for actual data on different cities respond to demand (table VI). Bay Area cities are all in the top 10 of least elastic, but there are a number of other cities with a similar level (the authors specifically call out NYC, Boston, and LA as examples of low elasticities translating into higher prices).
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[ 3.3 ms ] story [ 143 ms ] threadUS has gone through lots of challenges (globalization, gas/oil crisis, 9/11, cold war) in the last 50 years, and has come out on top every time.
4% growth is huge for the largest economy in the world, and the economy is nearly double the size of the closest competitor country. Bay Area alone is nearly a trillion dollar economy, and has double the growth rate of any other county in US.
Coupled with the flooding of capital back to US via the reduced expatriation tax rate, US is firing on all cylinders.
Anecdotally, I am seeing more help wanted signs on retail and restaurants near me, but my friends who work those jobs are moving _farther_ away from work due to increasing rent without increasing pay. That doesn't seem sustainable
As for me: US consumer confidence surges in August to 18 year high. https://www.theguardian.com/business/2018/aug/29/us-economy-.... Consumers wouldn't be spending if they didn't have extra cash in their pocket, and they expect the economy to stagnate/decline
https://www.washingtonpost.com/amphtml/business/2018/07/12/i...
https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx
https://www.cnbc.com/2018/05/21/consumer-debt-is-set-to-reac...
https://www.washingtonpost.com/business/economy/beware-the-m...
Unlike the fake boom of 2004-2008, this one isn't built on a large expansion of household debt. Businesses have levered up some, however business profits are at an all-time high and debt accumulation began to decline in the most recent quarter (the tax changes + Fed rate policies should continue to push toward a decline; companies like Microsoft, Apple and others took on immense debt temporarily to use it to pay out profits to shareholders via debt rather than repatriate their cash at a high tax rate).
In fact, the single most interesting thing about this economic expansion, is that we haven't seen a big increase in household debt accumulation vs income, compared to the prior three major expansions (late 1980s, mid to late 1990s, and mid 2000s). That either implies consumers are skittish about unnecessarily taking on debt (trauma from the great recession, very plausible), or there's another very big leg left in this expansion (which would be fueled by debt).
"With personal disposable incomes at a $15.46 trillion annual rate in the quarter, the debt-to-income ratio dipped to 86%. That’s the lowest, by an admittedly small amount, since the fourth quarter of 2002. At the height of the credit bubble in 2008, debts topped at 116% of disposable income."
Household debt service payments as a share of disposable income is extremely low, near the lows of the last 40 years:
https://fred.stlouisfed.org/series/TDSP
[1] https://www.marketwatch.com/story/households-in-best-positio...
The down side is a lot of that is medical insurance where most people don’t see a benefit from the higher expenditure.
Slightly off topic, but I also found it interesting that net transfers (e.g. from the government) also make up a much larger percentage of total household income than they used to (growing from 5% in 1950 to about 17% now[3].)
[1] https://fred.stlouisfed.org/graph/?g=l1e2
[2] https://fred.stlouisfed.org/graph/?g=74dI
[3] https://fred.stlouisfed.org/graph/?g=7rNW
I had read an article claiming that the major source of government transfers were due to a much larger percentage of people being on Social Security disability. The causes are a mix of improvement in the enrollment process and a loss of jobs in regions that experience lower migration. I could be misremembering aspects of this so I won't be shocked if someone disputes this.
> Could you link something that supports your opinion?
This does: Are Superstar Firms and Amazon Effects Reshaping the Economy? (https://www.nytimes.com/2018/08/25/upshot/big-corporations-i...)
> The biggest companies may be influencing things like inflation and wage growth, possibly at the expense of central bankers’ power to do so.
Cash... or credit. Americans currently hold around $3.6 trillion in credit cards and auto/student loans - those types of credit can hinder long-term growth.
And the CCI is not a predictive metric. Consumers don't consider the economy in their purchasing decisions unless the media has given them reason to be concerned... if they're even paying attention to news at all.
I'm also curious how CCI is influenced by lowering expectations - if populations have been struggling to find jobs for the past 4 years, how do people answer?
Debt, leverage, credit cards, loans, home equity lines, etc.
Perhaps 2007 is a great teacher about overleveraged consumers "spending money in their pockets".
It wasn't real, sustainable, and ended terribly.
The entire credit industry would beg to differ.
...yet.
Wages are a driver of inflation, which will rear its head as we reach late cycle. Then we blow up and start over. This is the way of the world.
Basically, I’d like to move beyond the headlines and the spin.
[Update]
Here are some people I try to follow:
Jan Hatzius - Goldman Economist
Robert Schiller
Stephen Roach - Yale Economist https://www.project-syndicate.org/columnist/stephen-s--roach
Jeremy Grantham - GMO
Ray Dalio - Bridgewater
Larry Summers
I like Nikolai Kondratiev, Pettis, Alfred Marshall, Carmen Reinhart, and Bill Gates (read his recent stuff on software economics)
I don't like Krugman and Greenspan.
I tend to ignore Krugman when he's talking politics (eg. his prediction of a Trump recession). However, when he goes through the process of laying out the assumptions of an economic model (happens in many of his blog posts labeled 'wonkish'), his discussion of economic consequences of various policies seems to map very well with reality.
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson (the authors of "Economics: Private and Public Choice")
I also have to second the "I don't like Krugman" opinion. Not that predicting the future is ever reliable of course, but his seriously incorrect predictions seem to be clearly motivated by politics. That won't help you understand economics.
How each person learns is subjective but I find textbooks are by far the best learning materials so if you are like me, then I would recommend you buy some introductory economic textbooks and read them. I know a lot about economics because I read a few intro economics textbooks and I kept reading new textbooks based on what interested me from previous ones and now I have read over 20.
Create a Twitter account and get on FinTwit (finance Twitter). Find the people doing real research (you have a couple in your list, Dalio, Grantham, I follow some of the guys from Ritholtz Wealth Management who are active on the platform) and follow their retweets or follows. More information than you can handle.
https://marginalrevolution.com/about
"Marginal Revolution is the blog of Tyler Cowen and Alex Tabarrok, both of whom teach at George Mason University. MR began in August of 2003 and there have been new posts daily since that time. In numerous reviews and ratings over the years Marginal Revolution has consistently been ranked as the best or one of the best economic blogs on the web, but it is more (and less) than that, also representing the quirks of its authors."
As far as I can tell so far, it seems to be a relatively unbiased, non-ideological commentary on economic news. One interesting article (not from the site itself, but from an "assorted links" post) is this one on NAFTA negotiations:
https://moneymaven.io/baldingsworld/china/chinese-economics-...
Maybe I'm wrong, but as far as I can tell, that sort of perspective is highly unusual in mainstream public economic news. I've certainly never seen many articles on trade policy that go much beyond discussing aggregate GDP.
The SSC survey:
https://www.reddit.com/r/slatestarcodex/comments/9aak39/favo...
The big 90s expansion was much better than now.
> 4% growth is huge for the largest economy in the world
Not really; one quarter at a 4.2% annualized rate is nothing to write home about; there was a better single quarter in 2011 and two consecutively in 2014, and neither were particularly gangbusters aside from those blips.
> Bay Area alone is nearly a trillion dollar economy, and has double the growth rate of any other county in US.
“Bay Area” isn't a county, and the Bay Area growth rate over the last year is about double the overall national growth rate, not double the best non-Bay county (it's about the same growth rate as Washington State—not the top county in the state, but the state overall.)
As is usual for the past 20 years, capital is doing great while labor suffers.
What happens when all the money is repatriated and no more dollars left for other countries to import from US?
Seriously though, you’re asking a fantastic question. And, surprisingly, my tongue in cheek response above is sort of correct. The world was actually in a similar position to the one you ask about right after WWII ended. The world was still on fire and most countries had no real currency to spend. So, we loaned them the money to buy our goods (not much of a services economy back then).
Of course, that’s what we know today as the Marshall plan. In it, we gave billions of dollars of aid to other countries to help them rebuild their infrastructure and economies.
But if that ever happened in peacetime (I.e. not right after a war), then that would be very unusual. Maybe after a worldwide depression, but that is usually followed by war anyway.
Great question, and hopefully we never really find out. It probably would be a very rough ride for lots of people on this planet.
[0] - http://www.history.com/topics/world-war-ii/marshall-plan
The world is in a very different state now. Most of the manufacturing bases are outside the US. If the US somehow withheld the dollar, most of the world would just switch to alternative currencies and continue to trade with one another.
That of course would most likely never happen in our lifetimes, since the dollar is a key pillar in the American economy and global power projection.
People wanted out of usd for lots of reasons but the other choices were worse.
The answer last time was global recession. Mainly because there was no alternative to USA and Soviet Union (which was crumbling). Third world countries were used as pawns.
This time though, most other countries have solid institutions of their own. More likely, they will unite and start trading with each other in other currencies, gradually reducing dependence on dollar and trading with the US.
The bitter truth about the world is that the US was a hero in 80s and 90s. Today, it's a toxic material that everyone deals with simply because of petrodollar.
No, they generally weren't, and any who were saying that we'd never see a quarter of 4% annualized growth rate four years ago (i.e., between the Q2 and Q3 releases of 2014) was especially silly.
US GDP growth by quarter for 2014:
Q1: -1% Q2: +5.1% Q3: +4.9% Q4: +1.9%
Stock markets ( which are a rough proxy for investor confidence ) went up on the eve of election results [2], so it is an awfully specific time for the "inherited economy" to improve
[1] https://www.forbes.com/sites/louiswoodhill/2012/08/01/obama-...
[2] https://www.businessinsider.in/Heres-why-stocks-have-been-on...
In reality, the chief executive has a small possible impact on the economy in the positive direction, and an unbounded opportunity for plunging its economy. Claiming Obama is responsible for the recovery is disingenuous (beyond some good Federal Reserve and Treasury appointments).
1. https://www.statista.com/statistics/188185/percent-chance-fr...
https://news.ycombinator.com/newsguidelines.html
https://www.businessinsider.com/wages-growth-is-weak-due-to-...
For example, if I hire a worker even on minimum wage, I'm paying up to half of their gross labour cost (depending on the country) as taxes to the Government! This is called things like a social security tax, healthcare tax, disability tax, etc etc.
By contrast in the USA you have one pretty simple and low payroll tax, plus health insurance. Australia has it even better, with no health insurance, though you do have mandatory superannuation/retirement fund contributions on behalf of the employee (all still much lower in Europe).
This creates huge incentives in Europe to just pay cash in hand, or say pay the annual bonus or overtime as cash. There are also a lot of companies afraid of growing larger and hiring more staff, because it will make their cash payments harder to conceal.
I hope from this boom in the US that the Federal Government can remove payroll taxes there. Combined with a move to a single-payer healthcare system, hiring and paying US employees could be the simplest on the planet.
Americans don't have many kids now. There are lots of empty towns all across the country. We thus have plenty of housing. We could stop building today and be fine for decades.
But the empty towns also don't have jobs. It's not fine even now.
It should be even easier now, given that a little remote office can be easily connected to the rest of the world.
Similarly, you have the problem that a lot of people lived there by necessity rather than by choice.
There are absolutely people who enjoy a rural lifestyle. But there's plenty of rural places not particularly enjoyable to anyone over other rural places with better scenery, less difficulty to getting to a store, etc.
They have/had a town because at one time, there was a farm, or a factory, or whatever there that needed people and it the next closest town was too far of a commute for the time period.
1. the construction of interstates and airports that routed around old railroad/highway towns.
2. The green revolution. Agriculture became much more efficient, productive, centralized, and automated. See https://en.wikipedia.org/wiki/Agriculture_in_the_United_Stat...
3. Resource extraction running its course.
4. Efficiency improvements in manufacturing and resource extraction.
The amount of rural blight caused by the favority political demon of late (outsourcing of manufacturing) is relatively minor compared to the above items. Especially 1 and 2! (Seriously, if you come across a run-down main street away from any interstate, odds are better than even it used to be a railroad station.)
IF we follow your advice in a way that's meaningful to most rural communities, we'd have to roll back the green revolution, bring back passenger rail, and magically refill coal veins/oil wells.
Other favorite policy quick-fixes as of late (in particular, on-shoring manufacturing) might help a handful of communities but are a teeny, tiny fragment of the story for blighted rural america in general. The ~80% of small towns that never had a factory to begin with can't reasonably blame outsourcing for their woes.
> It should be even easier now, given that a little remote office can be easily connected to the rest of the world.
1. Have you lived in rural America? Especially outside of "technically rural" locations such as university/college towns, good internet connections are sometimes available but usually not. And if not, convincing an ISP to dig is anything but "easy".
2. Most execs have no interest in building a big office in a remote location, both for personal reasons and for legitimate business reasons (proximity to a major airport is important in a lot of businesses).
3. Chicken-and-egg: People very reasonably won't move to most small towns due to lack of quality services (schools, hospitals, and entertainment). But those services can't be established without a critical mass of people moving into town.
The USA already subsidizes airport service for these locations. Increasing that might be worthwhile. The same goes for good internet connections and many other services. It's like the rural electrification done a century ago.
The schools are sometimes better than the urban ones. Often there are pros and cons that could be considered to even out. We can expand Teach for America if need be, but I think things are mostly fine already.
Part of the problem is that a lot of wage growth is concentrated in areas that are experiencing a housing crunch.
This is actually a really good point. There's actually a great paper that covers how much higher housing prices have hurt growth due to workers being discouraged from moving to high productivity areas[1]. The tl;dr is that if only NYC, SF, and San Jose adopted the land uses restrictions of a median US city, GDP would be about 9% higher (about $8,775 per worker assuming the labor share of GDP and number of workers doesn't change).
[1] http://www.nber.org/papers/w21154.pdf
[1] http://www.brown.edu/Departments/Economics/Faculty/Matthew_T...