Within 10 seconds of Thursday’s income and spending release for July, CNBC’s economics reporter, Steve Leisman, spotted the good news. He noted that private wages and salaries were up by 0.4% from last month — and that this welcome news showed that we’re gaining on personal income growth “not by transfer payments alone.”
Actually, today’s numbers prove nothing of the kind, and might well be nominated for the “running in place via prior period revision” award. I’ve been closely tracking a slightly broader category called “private incomes” which consists of private wages and salaries plus proprietors’ income, rental incomes, and interest and dividend payments. Improvement in these components would be the essence of
“organic income growth” because the remaining significant elements of personal income are transfer payments and public-sector wages and salaries — both of which are now becoming hostage to the nation’s increasingly precarious fiscal condition at all levels of government.
In June, the Commerce Department reported “private incomes” at $8.433 trillion. This figure was $463 billion or 5.2% lower than it had been way back in the third quarter of 2008 before the Wall Street heart attack. So as of June, we were still deep in the hole in terms of the organic income which must ultimately support consumption spending and drive GDP growth. Indeed, it was only an offsetting growth of $460 billion or 13% growth in transfer payments and government wages and salaries during the same period that kept income and spending about flat in nominal terms.
In today’s report for July, however, “private incomes” for June were revised down by $24 billion to $8.409 trillion. This permitted July to be reported “up” by 0.3%. “Up” to what? To exactly, $8.433 billion — the same number reported for June about 30 days ago! So we’re still $463 billion below the third-quarter 2008 level on private incomes. Since December 2009 when the recovery allegedly began in earnest, this yawning gap has been closed by a minuscule $13 billion per month. At that rate, it will take us another 35 months to get back to the pre-Lehman level of nominal private income; that is, we would experience no growth in private incomes from mid-2008 until mid-2013. We’ve seen that scenario only once before, but it was in that unmentionable era just before World War II. Thus, as has been the case repeatedly in recent months, prior period revisions are generating the illusion of gains when we are, in fact, running in place.
This originally appeared on Minyanville.
They will do “whatever it takes” to fix our problems, as if lying, cheating, armed robbery, etc. could possibly fix anything!
On ZeroHedge, there eis a constant refrain demanding more regulation: Glass-Steagal, Volcker rule, High Frequency Trading, etc. I keep pointing out in comments that the regulators are the very same people who (a) caused the crisis, (b) are trying to perpetuate, and (c) lie through their teeth at every opportunity! God save us from people who see 2+2 and come up with 3.1415926!
Bearster,
Regulators are not regulations.
So what are your comments on the regs?
Buck
My comments on the regulations:
1) regulations are laws that are written (legislated), enforced (executed), and judged by regulators. I wrote this out this way to illustrate that they are, by nature, unconstitutional in the US.
2) regulations, being written by men, are subject to the problem that Hayek first described, namely that the authors do not have perfect information–but can sometimes be arrogant enough to believe that they do
3) regulations always benefit some and hurt others. being written by men, this is an inherently corrupt and corrupting process. it always ends up a case of “[some] businesses working with government [against other businesses, and consumers]“. Consumers have neither the specialized knowledge nor the time to engage a multiyear process of endless hearings.
4) except sometimes, populism takes hold in a particular industry. For example, in finance and stock trading. The popular idea was to condemn market makers. Oh, I am not talking about today (where the target is high frequency trading), but 17th century London.
5) regulations are rigid and fixate in law a particular set of circumstances, assumptions, technology, level of capitalization, liquidity, etc. For example, in a primitive farming town that is 1% above subsistence level, there might be a produce market once per month. Imagine if regulation rigidly fixed this as a monthly occurrence.
6) regulations represent non-objective law. the hallmarks of objective law are: (1) one can know, in advance, whether one’s action is legal or illegal, (2) the line between legal and illegal is not based on one’s end goal, (3) all parties are subject to the same law, (4) it is never justified to initiate the use of physical force to either prevent a transaction between willing parties or compel a transaction between unwilling parties, (5) and the law does not change, neither retroactively nor rapidly.
7) in a free market, entities that destroy wealth go out of existence; in regulation, regulators who utterly fail to perform their stated mission are often rewarded with larger budgets, more employees, and expanded missions.
It was point #7 to which I referred in my previous post.
Bearster,
Your observe that your comments are applicable to law in general, and not just regulations (financial or otherwise).
Is it your opinion then that a complete deregulation/dismantling of law (financial AND otherwise) is preferred?
Note: I personally agree with most all of your points, an exception perhaps being number 6. Yes, current law contrast to your so-called ‘objective’ law. The implication is that this is of import. I probably would say its irrelevant.
Buck
Opening sentence should read ‘I observe…’.
Hi Buck,
Oh, I forgot one more item.
8. Regulation presumes your guilt and makes you prove your innocence. We have exactly the opposite standard for when someone guns down 20 people in cold blood in a public place with hundreds of witnesses, vs. a productive enterprise which provides valuable goods to willing customers. The former must be treated as innocent until proven guilty, even if a major news channel has the entire event on video. The latter must prove its innocence every day, or else face fines, be shutdown, and have its property confiscated and its officers sent to prison. What would happen if a company built a building on its own property without bothering to ask permission? What would happen if a company (or
No, I would not say eliminating all law. I would eliminate whatever law (and all regulation) that has one or more of the following characteristics:
1) Isn’t written by the legislative branch, enforced by the executive, and judged by the judiciary
2) Are written on the grounds that the writers have perfect or superior knowledge than the market
3) Take from one group–by force–to give to another group–unearned
4) Based on the idea that “we” don’t need
5) Fixate permanently a particular technology, market structure, cost structure, labor category, business model, etc.
6a) Make it impossible to determine, in advance, whether one’s proposed action is illegal
6b) Perhaps because legality/illegality is determined by one’s size, market position, end goals, creed, race, religion, etc.
7) Enshrine wealth-destroying activities.
8. Force anyone to keep records on himself, provide records on himself, incriminate himself, etc.
On the other hand, the laws against murder, robbery, assault, arson, rape, and fraud are good laws and necessary laws (and do not fit into any of the points I’ve made above regarding illegitimate laws).
Bearster,
Re:
1 & 5-8) Agreed or in rough agreement.
2) I don’t understand what you mean by this. I’ve never seen legislation that began, “Whereas the authors of this bill have pefect and/or superior knowledge…”
3) Does this mean all taxes?
4) Even if this ‘is’ the underlying assumption, it is not explicitly expressed in the laws (usually, so far as I am aware), so I’d say this point is irrelevant.
Buck
argh. Those “smiley faces” were supposed to be the number eight followed by a parenthesis.
Done.