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Monthly Archives: November 2013

Point of No Return

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Low interest rates are a good thing, right? They are if you are a borrower, but not if you are a saver. People salting money away for retirement right now are getting almost no return on their savings, thanks in large part to a zero interest rate policy (ZIRP). Banks can borrow money from the Fed with no interest, so why would they pay interest on ordinary deposits, CDs, or any other money making instrument?

There is a lot of talk about the Fed’s policy of quantitative easing, which currently is performed by buying $85B in mortgage backed bonds every month. They may or may not start “tapering” to zero sometime in the near future. Beyond that, at some point interest rates have to come off of the peg of zero that they have been at since 2008, but that’s even further into the future. And the implications are vast.

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The Immigration Solution

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Barataria has noted before that there are three great forces weighing on the economy today: business cycles, globalization, and demographics (the retirement of the Baby Boom, already starting). Business cycles don’t last forever, and this particularly destructive one should end about the same time the heart of the Baby Boom starts to retire in 2018. The latter is a genuinely double-edged sword, providing opportunities for young people to fill the jobs that open as the burden of retirees on public assistance grows. There is still the potential for a great period of economic expansion in the 2020s if we can manage the downside effectively.

As with everything in economics, a growing economy makes everything easier. But how can we grow the economy through this period if there is a shortage of workers? The missing part of this Managed Depression is, as always, the important policy changes that will set us up for the next economy once this phase of the business cycle is over. One part of this pending in Congress, held up by partisanship, is immigration reform.

In other words, the challenges of globalism present one solution to the challenges of demographics.

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Day of the Doctor

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Are you ready for the Day of the Doctor? If you’re not a fan of the TV show, which has 1.6M viewers here in the US, you may have not heard the hype. For fans, however, it’s the biggest event in the last 50 years. That’s how long it’s been on, first airing on 23 November 1963 (oddly, the day after President Kennedy was assassinated). 11 people have played the title role and, except for a hiatus between 1989 and 2005, it’s become something of a tradition in the UK.

To celebrate, the special show “The Day of the Doctor” will be shown simultaneously throughout the entire planet, (23 November at 2:50 PM Eastern time, 19:50 GMT) making it the biggest simulcast of anything other than the Olympics. It’s the first truly global television show with fans absolutely all around the world. And that, alone, is worth celebrating.

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Jobs Debate Heats Up

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The October Jobs Report from the Bureau of Labor Statistics (BLS) came out last Friday, and it was incredibly positive. 204k jobs were added by the official measure, enough to send the stock market up and make everyone happy. Well, not everyone. There were some strange features in this report that only accelerated the criticism of this report that started the month before and sharpened the political debate over jobs in the new economy.

Much of this is long overdue, but some of the criticism was weak and pointless all the same. Labor force participation has fallen from 63.2% of all workers to a 35 year low of 62.8% – a figure that may or may not be important. And anyone paying attention to the ADP Employment report has to question where the great news came from seeing as the latter had a gain of only 130k jobs. What on earth is going on?

The short answer is that everyone is starting to question everything. It’s a good thing – if we can sort it all out. Let’s give it a try.

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Minneapolis’ New Generation

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Much has been said about the upheaval in the Republican Party. But there may be just as much change happening in the Democratic Party, at least if the Minneapolis City Council election this year is representative of any trends. The generational turnover in the Council has dropped the average age from 52 to 41, by my reckoning, and increased the non-white membership from 1 to 3 of 13 – all of whom are foreign-born.

Is this the future of the Democratic Party? The short answer is yes, but it starts small. Leadership is developed at the local level, and there’s no better place to develop it than the City Council. Minneapolis has a Weak Mayor system, so it’s the council that actually runs things. And not only is the new council much younger, it was generally elected on a platform of social justice and neighborhood development – not downtown.

I may have to stop making fun of our younger sister city.

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