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Is GDP Over?
Is GDP Over?
Economists from rich countries increasingly agree: Sustainable development and reducing inequality matter more than economic growth.
(Photo: World Bank Photo Collection / Flickr)
Organizers of October’s fifth OECD World Forum on Statistics, Knowledge, and Policy could barely contain their sense of satisfaction when the three-day event opened in Guadalajara, Mexico.
Why all the good cheer? Officials at the OECD, the official economic research agency of the developed world, feel they haven’t just been organizing gabfests since the first of these triennial forums in 2004. They believe they’ve been helping change how the world — or at least the global public policy community — thinks about inequality.
And that belief, prominent independent observers believe, reflects a healthy dose of reality.
“We now have a broad consensus that more equal societies perform better,” as Nobel Prize-winning economist Joseph Stiglitz put it in his World Forum keynote address to the over 1,000 government statisticians, academics, and civil society analysts on hand in Guadalajara.
The OECD, Stiglitz observed, deserves much of the credit for this new consensus. The agency’s efforts have helped shift the global analytical mainstream off a mindless fixation on GDP — an economy’s total output of goods and services — and onto the importance of developing a sustainable “prosperity for all.”
In the United States today, pundits and politicians still regularly dismiss worries about our contemporary global prosperity for just a few as little more than do-gooder posturing. But at the World Forum in Guadalajara, no one treated inequality as anything less than a dangerous social pathology.
“Inequality is becoming unbearable,” former Inter-American Development Bank president Enrique Yglesias pronounced. Our economic chasms have reached “obscene proportions.”
Deeply unequal nations like Britain, lamented Catrina Williams of the UK Social Mobility and Child Poverty Commission, stand “on the brink of being permanently divided” as the offspring of the most affluent increasingly occupy most of the key levers of power in everything from the judiciary to the media.
…click on the above link to read the rest of the article…
Lost in Extrapolation
Lost in Extrapolation
Phillips Curve Fail
In the late 1970s the impossible happened. Inflation and unemployment simultaneously went vertical. The leading economists of the day were flummoxed.
Larry Summers favors us with his “eternal stagnation” shrug. The man is a sheer inexhaustible fount of truly atrocious ideas. As we have previously pointed out, when he’s around, the economy can only be deemed safe under certain circumstances.
Photo credit: Reuters
The Phillips curve said there’s an inverse relationship between inflation and unemployment. When unemployment goes down, inflation goes up. Conversely, when unemployment goes up, inflation goes down.
These are the data economist William Phillips originally studied – wage rates vs. unemployment in the UK in the years 1913 to 1948. Phillips’ study will forever stand as a monument as to why economic theory cannot possibly be derived from empirical data. In the wake of the 1970s experience, at least seven Nobel prizes in economics were awarded for work that debunked the Phillips curve-based assumptions of the Keynesians in some shape or form. Recently its long dead cousin NAIRU has risen from the grave again, like a zombie – click to enlarge.
How could it be that both were going up at once? Weren’t they mutually exclusive? Indeed, it took years of heavy handed government intervention to pull off such a feat.
When unemployment began creeping up in the 1970’s the U.S. Treasury, with backing from the Federal Reserve, did what Keynes had told them to do. They spent money to stimulate the economy and spur jobs creation.
According to the Phillips curve, with rising unemployment the planners could have their cake and eat it too. They could run large deficits without inflation.
Unfortunately, something unexpected happened. Instead of jobs they got inflation. Then, when they tried it again, they still didn’t get jobs. Astonishingly, they got more inflation.
…click on the above link to read the rest of the article…
Ahead of Senate Vote, Edward Snowden Speaks Out to Stop CISA Surveillance Bill
Ahead of Senate Vote, Edward Snowden Speaks Out to Stop CISA Surveillance Bill
As the U.S. Senate gears up for a vote on the controversial Cybersecurity Information Sharing Act (CISA) on Tuesday, privacy advocates are galvanizing an 11th-hour push against the bill they say does nothing more than expand government spying powers.
A slew of digital rights groups including Fight for the Future and the Electronic Frontier Foundation, along with whistleblower Edward Snowden and outspoken CISA opponent Sen. Ron Wyden (D-Ore.), joined forces Monday night for an Ask Me Anything (AMA) session on Reddit, which has also come out against the bill. The session was the latest action by civil society groups, activists, and tech companies calling on Congress to reject CISA for its anti-privacy provisions.
“CISA isn’t a cybersecurity bill,” Snowden wrote during the Q&A. “It’s not going to stop any attacks. It’s not going to make us any safer. It’s a surveillance bill.”
Supporters of CISA—including Sens. Dianne Feinstein (D-Calif.) and Richard Burr (R-N.C.)—say the bill would make it easier for tech companies to share data in cases of security breaches and other digital attacks. But critics say there aren’t enough safeguards in place to protect user privacy and the bill only works to serve intelligence agencies in domestic surveillance operations.
“What it allows is for the companies you interact with every day—visibly, like Facebook, or invisibly, like AT&T—to indiscriminately share private records about your interactions and activities with the government,” Snowden wrote on Monday. “CISA allows private companies to immediately share a perfect record of your private activities the instant you click a link, log in, make a purchase, and so on—and the government with reward for doing it by granting them a special form of legal immunity for their cooperation.”
…click on the above link to read the rest of the article…
Germany to investigate Google, Facebook data transfers to US
Germany to investigate Google, Facebook data transfers to US
Data protection authorities in Germany have announced that they will review the legality of internet giants’ data transfers from the EU to the US, after the European Court of Justice ruled that Europeans’ data isn’t safe from intelligence services on US-based servers.
The Hamburg Commissioner for Data Protection and Freedom of Information, Johannes Caspar announced that his office will investigate the Germany-based subsidiaries of companies like Google and Facebook for potentially illegal data transfers.
The Federal Reserve: Illusion of Understanding, Illusion of Control
The Federal Reserve: Illusion of Understanding, Illusion of Control
The net result is nonsensical policies that fail to achieve their stated objectives.
We live in an era of illusion: the illusion of understanding, and the illusion of control.
Few institutions reflect these illusions better than the Federal Reserve, though the Pentagon, Congress, the Imperial Presidency, the sick-care cartel and the higher education cartel are certainly giving it a run for its money.
The foundation of the illusion of understanding is data–Big Data. That the Fed has no idea of how the real economy actually functions is painfully apparent. But the state’s vast flood of data, neatly organized into slop-troughs that suggest precision, creates a very compelling illusion of understanding: media shills go to absurd lengths to treat bogus or marginal data as the equivalent of the tablets brought down by Moses.
Sorry, Corporate Media: the unemployment rate and the official rate of inflation are not real. They are illusions rigged to lull the masses and enrapture the simulacrum experts living high on the hog in academia, NGOs (non-governmental organizations) and think-tanks.
Here is the reality, as expressed by IMF Chairwoman Christine Lagarde: what passes for precise data is a guesstimate at best, and a carefully executed distortion at worst.
The net result is nonsensical policies that fail to achieve their stated objectives. Even more tragicomic, the spokespeople tasked with presenting this failure to the Great Unwashed are forced to speak gobbledigook that borders on the psychotic if taken at face value.
For example, Janus Yellen must claim she is planning to raise interest rates while also proclaiming that she’s keeping rates at zero for the indefinite future. If a non-Elite person rambled on in this fashion, they would be tossed in jail as a 51-50 (involuntary psychiatric hold).
…click on the above link to read the rest of the article…
Drones, IBM, and the Big Data of Death
Drones, IBM, and the Big Data of Death
LAST WEEK The Intercept published a package of stories on the U.S. drone program, drawing on a cache of secret government documents leaked by an intelligence community whistleblower. The available evidence suggests that one of the documents, a study titled “ISR Support to Small Footprint CT Operations — Somalia/Yemen,” was produced for the Defense Department in 2013 by consultants from IBM. If you look at just one classified PowerPoint presentation this year, I recommend you make it this one.
Like a good poem, the ISR study has multiple meanings, and rewards careful attention and repeated reading. On its surface, it’s simply an analysis by the Defense Department’s Intelligence, Surveillance, and Reconnaissance (ISR) Task Force of the “performance and requirements” of the U.S. military’s counterterrorism kill/capture operations, including drone strikes, in Somalia and Yemen. However, it’s also what a former senior special operations officer characterized as a “bitch brief” — that is, a study designed to be a weapon in a bureaucratic turf war with the CIA to win the Pentagon more money and a bigger mandate. The study was also presumably an opportunity for IBM to demonstrate that it can produce snappy “analysis” tailored to the desires of its Defense Department clients, as well as for current Defense employees to network with a potential future employer.
But the presentation’s most compelling meaning is much deeper: It’s a rare, peculiar cultural artifact that opens a window into the deep guts of the military-industrial complex, where the technologies of assassination and corporate sales converge, all described in language as dead as the target of an ISR platform kinetic engagement.
Edge Methods
In 2010, IBM employees delivered a talk at IBM’s Analytics Solution Center in Washington, D.C., titled “An Introduction to Edge Methods: Business Analytics and Optimization for Intelligence.” The audience was “the Defense and Intelligence communities,” and IBM’s goal was to explain to them how the company could help them with “managing large volumes of data” to derive “invaluable” insights. Among its already-existing governmental customers, IBM explained, was the ISR Task Force.
…click on the above link to read the rest of the article…
Veiled TPP Deal Holds Hidden Privacy Risks
Veiled TPP Deal Holds Hidden Privacy Risks
It would restrict governments from creating safeguards for your sensitive data.
The Trans-Pacific Partnership (TPP), a massive trade agreement that covers nearly 40 per cent of world GDP, wrapped up years of negotiation earlier this month. The TPP immediately emerged as an election issue, with the Conservatives trumpeting the deal as a source of future economic growth, the Liberals adopting a wait-and-see approach (the specific details of the agreement are still not public), and the NDP voicing strong opposition.
The focal point of most TPP discussion in Canada has centred on two sectors: the dairy industry, who would experience a modest increase in competition and receive a staggering multi-billion dollar compensation package, and the automotive parts sector, which would face Asian-based competition as a result of new, lower local content requirements (the industry is also pressing for a compensation package).
Lost in the discussion over imported butter and Japanese-made auto parts are the broader implications of the TPP. New rules on corporate lawsuits could result in more claims by foreign corporations against the Canadian government over national policies or court decisions (pharmaceutical giant Eli Lilly is already suing the government for $500 million over Canadian patent rulings) and an extension in the term of copyright beyond the international standard would lock down the public domain for decades and potentially cost Canadians hundreds of millions of dollars per year.
One of the most troubling, but largely ignored effects of the TPP involves privacy. Privacy is not an issue most associate with a trade agreement, however, the TPP features several anti-privacy measures that would restrict the ability of governments to establish safeguards over sensitive information such as financial and health data as well as information hosted by social media services.
…click on the above link to read the rest of the article…
Biometric data collection evolves and expands in Canada
Ottawa wants to collect data from visitors of 150 countries, up from the current 30
The federal government’s plan to increase its collection of biometric data from visitors to Canada has been met with concern, but the practice is already a large part of our day-to-day lives.
Biometrics measure a person’s unique physiological characteristics — including face, iris, retinal veins, fingerprints, voice and hand geometry — to verify identity.
Citizenship and Immigration Canada told CBC News that digital photos and fingerprints are “the only biometrics data applicants will have to provide” under the government’s plan for expanded collection of data. Visitors will have to pay $85 to cover the cost of data collection.
Here are some ways that biometrics already touch our lives.
How it works now
The government currently collects the biometric data of foreign nationals from 29 countries and one territory. For an $85 fee, a visitor’s fingers are scanned on a glass screen and their digital photo is taken. Exemptions include those under 14 or over 80 years of age, as well as diplomats.
New regulations expected by 2018-19 would expand screening to include visitors from about 150 more countries, including those visitors who need visas, work or study permits. Americans are exempt.
Move to biometrics launched in 2008
The government first announced it was moving to biometrics in 2008 because they are more reliable than the use of subjective photo identification.
The 2008 budget said, “Border security remains a priority for Canadians. Criminals are increasingly more sophisticated and well-funded, including those who engage in document fraud to illegally move people or goods across borders.”
…click on the above link to read the rest of the article…
Why the Fed Will Crash the Economy If It Hikes Rates: In Three Charts
Why the Fed Will Crash the Economy If It Hikes Rates: In Three Charts
If you’ve been scratching your head since the middle of last year as consumer confidence surveys depicted an optimistic, eager to spend consumer while other hard economic data was showing a sputtering economy, we’re here to put your mind to rest. You’re not crazy. The U.S. economy is dramatically diverging from where most consumers think it is and we have three charts to prove it.
Most Americans have never heard of the Labor Force Participation Rate. Consumers judge the availability of jobs, or lack of them, by the Unemployment Rate that is fed to them in newspaper headlines and TV sound bites monthly. The Unemployment Rate has been coming down nicely and fueling positive vibes among consumers.
Unfortunately, the Labor Force Participation Rate, which measures the number of people who are either employed or actively looking for a job has been hitting historic low numbers, suggesting far more slack in the labor market than captured by the official Unemployment Rate.
On February 4, Jim Clifton, Chairman and CEO of Gallup, told a stunned interviewer at CNBC that he was concerned he might “suddenly disappear” and not make it home that evening if he disputed the reliability of what the U.S. government is reporting as unemployed workers. Clifton’s concerns are essentially based on the fact that consumer confidence and Fed jawboning on when it’s going to hike interest rates to slow down this “strong” U.S. economy before it overheats is about all the U.S. has left in its monetary arsenal.
Clifton had penned an opinion piece on the company’s web site which punctured the rosy spin on the improving jobs market. Clifton wrote:
…click on the above link to read the rest of the article…
Suddenly “You Can’t Ignore The Data” Has Turned Into “Trust Me”
Suddenly “You Can’t Ignore The Data” Has Turned Into “Trust Me”
The week that passed has been nothing short of a roller coaster ride for many nervous investors. And for some: a realization that the once hyped, hawked, and levered Billion dollar babies can indeed “come off the rails.” Turning the once joyride into something more in common with a free fall into the abyss.
And just like at the carnival the progression is the same: The barker takes your money, you get to ride and scream in fits of mania and terror, and if by chance it careens out of control? It’ll be insisted that such things can, and do happen which are clearly stated in micro-print on the back of your ticket. And – there is no refund. Only issue is the cost for such a ride isn’t comparable to some expensive latte – it’s your future retirement savings, and whether or not you’ll ever have enough left to buy another latte after this ride is through.
However, you’re told not too worry: For if you loved the ride when the prices were higher, then surely you should be ecstatic to “ride again” since the new ticket prices are clearly “on sale!”
Is it any wonder why “carnival barker” seems so easily interchangeable with the next in rotation Wall Street fund manager, analyst, economist ___________(fill in the blank) on the financial media shows than not?
If you dared question the meme “everything is awesome” you were branded as some “data denier.” If you weren’t branded with that moniker you were surely scolded to have: “No understanding of Fed. monetary policy.” Or, you’re insulted for using common sense backed up with actual business acumen for questioning their premise to which they proclaimed people like myself as: “Idiots.” (yes, that’s an actual quote) Well, I have only one “idiotic” question: How’s all that data working out?
…click on the above link to read the rest of the article…
US Economic Output – “Ugly, but Fleeting”?
US Economic Output – “Ugly, but Fleeting”?
On the Uselessness of Aggregate Economic Statistics
We actually hate talking about GDP. It mainly measures consumption and leaves out the bulk of the economy’s production structure – which has led to the completely erroneous, but often repeated notion that “the consumer represents 70% of economic activity”. In reality, consumption represents somewhere between 35% and 40% of all economic activity. The manufacturing sector is actually not the “smallest sector of the economy”. It is stillthe by far largest sector in terms of total output.
Moreover, “GDP growth” is really not informative with respect to whether or not the activity measured is profitable and therefore indicating that wealth is created. Given that government consumption is a major component of GDP, there is obviously a lot of wasteful spending that is counted as “growth”.
Furthermore, in a bubble era, when credit expansion ex nihilo is running wild, a lot of investment in fixed assets will eventually be discovered to have been malinvestment. Such spending is also added to “growth” while it occurs, but in reality, it is just a waste of scarce capital. Simply put, there isn’t much worth measuring, because the truly important things cannot really be measured anyway. Even so, it makes a lot more sense to occasionally look at the gross output tables per industry rather than GDP.
Now let us think for a moment about Wednesday’s quarterly GDP report. What does it even mean that the economy has allegedly grown by “0.2%”? This strikes us as a completely absurd number. Given that it actually represents quarterly growth annualized, it means that “real growth” last quarter was 0.05%. Really? Someone has measured the economic output of the entire country and found out it grew by 5 basis points? This sounds like a tiny fraction of the margin for error rather than a meaningful number.
…click on the above link to read the rest of the article…
U.S. Oil Glut Story Grossly Exaggerated
U.S. Oil Glut Story Grossly Exaggerated
It’s called the “age of propaganda” where truth matters little and comes out later in so called revisions. Take the recent spate of economic data points from the Kansas City Fed which said that economic activity not only stalled but wasnegative at -4 vs expectations of +1. The recent durable goods statistics also show contraction as well.
Yet we see the services PMI at a 6 month high. How can these divergences be possible? Well for one, some statistics are hard while others are estimated/massaged and others are seasonally adjusted or estimated (only to be revised later). In oil, the same thing appears to be occurring as we speak. The near record pace of oil storage additions in some weeks nearing 8-10 million barrels per day comes at a time when all indicators are that oil production is slowing.
Related: Oil Price Speed Limit Presaging An Age Of Austerity?
Even using the EIA’s own data, production is up some 500,000 per day since October or 3.5M per week. So how can more than two times that be added to storage while gasoline demand accelerates to 5% year over year from low single digits? Refinery maintenance is part of it, yes, as well as seasonality as people drive less in absolute terms, so as production continues this would explain storage adds, but to this magnitude?
…click on the above link to read the rest of the article…
Is The Fed Still Fabricating Loan Creation Data? Bank Of America Would Like To Know
Is The Fed Still Fabricating Loan Creation Data? Bank Of America Would Like To Know
Just under a year ago, when looking at aggregate loan creation by America’s banks, we stumbled upon something strange: there was a massive discrepancy between what the Fed, in its weekly call reports, said was weekly US loan issuance – which the then bulls gloatingly announced was rising and thus a confirmation of US growth – and what the actual banks reported.
This is what we reported:
One of the more bullish “fundamental” theses discussed in recent weeks, perhaps as an offset to the documented record collapse in mortgage origination – because without debt creation by commercial banks one can kiss this, or any recovery, goodbye – has been the so-called surge in loans and leases as reported weekly by the Fed in its H.8 statement. Some, such as the chief strategist of retail brokerage Charles Schwab, Liz Ann Sonders, went so far as to note that this is, to her, the “most important chart in the world.”[S]ince the Fed’s data is sourced by the banks themselves, what the Fed is representing and what the banks report quarterly should be in rough alignment. Unfortunately it isn’t.
As the chart [above] shows, in the first quarter, of the Big 4 banks, only Wells Fargo reported an increase – a tiny $4 billion to be exact – in its loans and leases portfolio. All the other banks… saw a decline in their loans and leases holdings.
Our question then: “is the Fed fabricating loan level data?”
…click on the above link to read the rest of the article…
Economy Finally Reaches “Escape Velocity,” Heads South
Economy Finally Reaches “Escape Velocity,” Heads South
It’s hard to measure the growth rate of a vast, complex economy with just one number, accurately, and on a timely basis.
The Chinese found an ingenious solution. They decree the growth rate and announce it in advance, and that’s about what the number says when it comes out. It’s faster than any other major country can produce its GDP numbers. It avoids nasty surprises and doesn’t need messy revisions. Whether or not establishing statistical data by decree is an accurate reflection of reality is a hotly disputed topic.
But then, the accuracy of any statistical data is a hotly disputed topic.
In the US, it’s a slog to get to the final answer. Quarterly changes in GDP, as measured by the Bureau of Economic Analysis, come in a series of estimates. The first estimate gets all the press, but subsequent revisions in the second and third estimates can be significant. Further revisions follow over the years. By the time the BEA has a fairly good handle on what actually happened back in the day, no one cares anymore.
So the Atlanta Fed started a new approach in 2011. The forecasting model is supposed to reflect a more immediate picture of the economy. Taking into account economic data when it is released, the model adjusts its GDP forecast accordingly and closer to real time. It has plenty of quirks. It’s jumpy as it reacts to incoming monthly data that is itself highly volatile and subject to revision. But it’s a good indication of where the economy has been going over the past few months.
…click on the above link to read the rest of the article…
Troy Will Burn – the Big Deal about Big Data
Troy Will Burn – the Big Deal about Big Data
I know, I know … I’m a broken record and a Cassandra, with 2 successive notes on Big Data. But I don’t care. This is a much larger structural risk for markets and investors than HFT and the whole Flash Boys brouhaha, it’s just totally under the radar and hasn’t surfaced yet. And unfortunately, just as I think Jeb Bush speaks for most Americans – Democrat and Republican alike – when he says that he doesn’t get what all the fuss is about when it comes to metadata collection and Big Data technologies, so do I think that most investors – institutional and individual alike – are blithely unaware of how their market identities can be stolen and their market behaviors influenced, all in plain sight.
Jeb Bush should know better. I think he probably does. Investors may not know better yet, but they will soon, one way or another. As you read this note, a small group of hedge fund managers are doing to you exactly what the NSA is doing to “terrorists”.
Today a handful of governments use Big Data to identify individual behavioral patterns so that certain individuals can be killed. Today a handful of hedge funds use Big Data to identify investor behavioral patterns so that certain investors can be crushed. Today Big Data is primarily an instrument of social information gathering, with a powerful but punctuated impact on those individuals on the receiving end of a drone strike or a targeted trade.
…click on the above link to read the rest of the article…
