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JohnRoberts

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Back on the topic of economics, I read today that there are 100 people in the US with >$1M in student loan debt.

The example they gave of an orthodontist married with two kids, was not even paying the interest due, so that unpaid interest was being capitalized into the principal so the debt was growing larger (+$130 a day).

This is crazy. Lending people that much money is not helping them, and not even helping the lender who isn't getting paid back.

JR
 

Script

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Student loan system is almost inexistent in Japan.  There is small-amont, government-based support  though (not enough to pay for tuitions, just a little help for rent etc).

Findings have shown that students who benefitted from support are indeed able to get better (paid) jobs later in life. 

However, these people tend not to be better off automatically. On the contrary: simply because they spend money and time to pay back their debts during the prime time of their work/employment lifetime.

Clearly, although better employed, there is no significant rise in or incentive to marry or/and have kids for example (which is vital for the future of any society).

This makes me think that student loans are rather useless in the first place.

Student grants based on performance and/or a combination of subject-related  criteria seems a much better system to tap into talent.
 

JohnRoberts

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Script said:
Student loan system is almost inexistent in Japan.  There is small-amont, government-based support  though (not enough to pay for tuitions, just a little help for rent etc).

Findings have shown that students who benefitted from support are indeed able to get better (paid) jobs later in life. 
I have written about this before, a classic mistake made by politicians is to see correlation (college graduates generally earn more) and ASSume they can just expand the population going to college and everybody will earn more money and there won't be any unintended consequences.
However, these people tend not to be better off automatically. On the contrary: simply because they spend money and time to pay back their debts during the prime time of their work/employment lifetime.
There are better ways to improve the education level of the public than just making borrowing easy. Just like too easy lending made the housing bubble, we have seen a similar cost increase in college tuition as they soak up all the extra money, and worse lower the standards of that education to accommodate the expanded population of new students.
Clearly, although better employed, there is no significant rise in or incentive to marry or/and have kids for example (which is vital for the future of any society).

This makes me think that student loans are rather useless in the first place.

Student grants based on performance and/or a combination of subject-related  criteria seems a much better system to tap into talent.
Technology has made it so much cheaper to deliver course materials including lectures via electronic media, such that the government could just about subsidize free education for anybody with web access.  This too would cause economic distortion as the old business model of college institutions crumbles under the weight of their obsolescence.

Many businesses have expanded their own training/education programs to deal with the tight labor market that isn't supported by modern educational institutions.

JR

PS: STEAM is the new STEM.... Science, Technology, Engineering, Art, and Math  8)
 

JohnRoberts

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Job openings have just exceeded the number on unemployment. This means it "should" be easier to find jobs and will increase upward pressure on wages.

The lack of qualified workers could actually limit economic growth (still arguments about our ability to grow GDP faster than 3% but now they are grasping for different excuses for why we can't).

The rate of productivity increase is slower than it was before but still slightly increasing.

JR
 

JohnRoberts

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This thread appears to be a monologue but many may not get much real economic news, so here goes another tidbit.

SCOTUS just overturned the 1992  precedent that states couldn't collect sales taxes from out of state merchants for out of state sales. Small internet businesses (like me) are now liable for out of state sales taxes.

I will need to see how this plays out, I ASSume small fish like me may be excluded, but major web merchants counting on the sales tax arbitrage (like Wayfair) just had their business model crushed.

[edit] I just read that Wayfair already collects sales tax on 80% of their sales, so not that crushing [/edit]

Amazon will probably gain profit from this because they already have the software. I hope paypal and the like offer small business solutions.

I have no problem with collecting taxes owed, but dealing with 50 individual states, with different taxation rates,  every month would be an operational headache.

JR
 

dmp

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JohnRoberts said:
This thread appears to be a monologue but many may not get much real economic news, so here goes another tidbit.

SCOTUS just overturned the 1992  precedent that states couldn't collect sales taxes from out of state merchants for out of state sales. Small internet businesses (like me) are now liable for out of state sales taxes.
It was an interesting split decision

KENNEDY,  J.,  delivered  the  opinion  of  the  Court,  in  which  THOMAS, GINSBURG, ALITO, and GORSUCH, JJ., joined.
THOMAS, J., and GORSUCH,J., filed concurring opinions. 

ROBERTS, C. J., filed a dissenting opinion, in which BREYER, SOTOMAYOR, and KAGAN, JJ., joined.

It seems this overturned a long held precedent.

I wonder how it will affect state coffers and if this will reduce the incentive of companies to locate in low tax states.
 

dmp

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JohnRoberts said:
Job openings have just exceeded the number on unemployment. This means it "should" be easier to find jobs and will increase upward pressure on wages.

The lack of qualified workers could actually limit economic growth (still arguments about our ability to grow GDP faster than 3% but now they are grasping for different excuses for why we can't).

The rate of productivity increase is slower than it was before but still slightly increasing.

JR

I've been meaning to post on this as it's a very interesting mystery. Why have wage increases been restrained with such a tight job market?
 

dmp

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It seems there are two main theories why wages aren't going up much - either the labor market isn't as tight as the figures indicate or employers are refusing to raise wages in the US (by either investing in automation or hiring more overseas)

One argument is that there is additional slack in the labor market, not accounted for in the 'official' 3.8% unemployment figure.
Overall participation ratio is historically low (~60ish%)
But the effect of the age wave is important to consider as the baby boomers get older. I've read many baby boomers are putting off retirement until older, however.

 

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JohnRoberts

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dmp said:
It was an interesting split decision

KENNEDY,  J.,  delivered  the  opinion  of  the  Court,  in  which  THOMAS, GINSBURG, ALITO, and GORSUCH, JJ., joined.
THOMAS, J., and GORSUCH,J., filed concurring opinions. 

ROBERTS, C. J., filed a dissenting opinion, in which BREYER, SOTOMAYOR, and KAGAN, JJ., joined.

It seems this overturned a long held precedent.

I wonder how it will affect state coffers and if this will reduce the incentive of companies to locate in low tax states.
The headline is that states can now collect millions of dollars from internet sales occurring outside the states. The reality is that this will not be trivial in practice.  First the large web retailers are already collecting and paying state sales tax, so the headline numbers may be exaggerated. Collecting from the smaller retailers will be more work for less revenue.

Not only is this reversal by SCOTUS way too late to slow the march of web retailing (Amazon won't even notice), they are kind of punting the problem back to the states. While I agree with this in general, the hundreds of different sales tax jurisdictions (with different rates and schedules for how much and what to tax) this tower of babel needs to be harmonized to be remotely manageable.

I repeat, I hope somebody like paypal comes up with a small business solution. I don't mind charging sales tax (I do already for MS sales), but the bookkeeping overhead for servicing hundreds of tax jurisdictions would crush a small business like me. I don't even want to think about the postage to mail that many sales tax returns every month. 

I guess it's a good thing that I'm getting old.

JR
 

dmp

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On the macro economic picture, some recent news on the USA finances.
The deficit is increasing again as the chart here shows. The deficit hit a high in 2010 after the great recession, and decreased over the Obama admin. Now with the Republican tax cut and spending increases, the deficit is projected to go further into the red.

Recently the white house made news when Larry Kudlow spoke about the Fed policy. Like many parts of the USA Gov, administering monetary policy is supposed to be separated from politics

From WSJ:
"President Donald Trump’s top economic adviser said he hoped the Federal Reserve would raise interest rates “very slowly,” breaking with a 25-year White House precedent of generally refraining from commenting on monetary policy."

Now the question is, how much pressure will the white house exert on the Fed to keep the rising debt level manageable? Higher interest rates make debt more expensive. And when the interest causes the debt to increase it is a dangerous kind of positive feedback.
Low interest rates in an 'overheated' economy are generally believed to allow high inflation, which is why the Fed is raising rates. But inflation happens only when wages rise, and we aren't seeing serious wage increases yet, only modest increases.
 

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Script

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... inflation happens only when wages rise, and we aren't seeing serious wage increases yet, only modest increases.

Not exclusively, but substantially.

'Wages not rising substantially' is exactly the reason why the third pillar of Abenomics in Japan hasn't started to fly yet...
 

JohnRoberts

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dmp said:
On the macro economic picture, some recent news on the USA finances.
The deficit is increasing again as the chart here shows. The deficit hit a high in 2010 after the great recession, and decreased over the Obama admin. Now with the Republican tax cut and spending increases, the deficit is projected to go further into the red.
Yes the last budget was too big, and attempts at rescission have failed. President Trumps $60B rescission package in April has already shrunk to $15B by June, and is still missing in action.  So yes the Republicans are big spenders too.
Recently the white house made news when Larry Kudlow spoke about the Fed policy. Like many parts of the USA Gov, administering monetary policy is supposed to be separated from politics
cough,,,  Glad to see Larry survived his mild heart attack. He should be a voice of moderation and wisdom among President Trumps economic advisers. One voice among several does not move the needle that far but I am glad he is in that room.
From WSJ:
"President Donald Trump’s top economic adviser said he hoped the Federal Reserve would raise interest rates “very slowly,” breaking with a 25-year White House precedent of generally refraining from commenting on monetary policy."
The Trump WH is way too invested in watching (and taking credit) for the stock market. The market goes both up and down so this could end embarrassingly badly, but probably not before Nov. I have been selling stocks lately but mostly because I'm old and up. 
Now the question is, how much pressure will the white house exert on the Fed to keep the rising debt level manageable? Higher interest rates make debt more expensive. And when the interest causes the debt to increase it is a dangerous kind of positive feedback.
The fed has been trying to manage this grand experiment for a decade now.  In that time the world economies have become even more intertwined. While not strictly correlated the liquidity pumped in by central bankers is fungible and has increased economic activity across the world.

Right now these international economies who got a free boost from western central bank easing are now the canary in the coal mine catching cold from this steady withdrawal of liquidity.  All central banks are not in strict synchronization so some EU easing countered early US tightening, but I expect more tightening from here.
Low interest rates in an 'overheated' economy are generally believed to allow high inflation, which is why the Fed is raising rates.
The  FED has an inflation target that it is only now hitting, inflation has been below target for some time. The obvious concern is about having no dry powder to use for stimulus the next time it is needed.  You can't reduce rates below zero (while some central bankers even do that). So we need to get rates higher, but gradually as the economy grows.
But inflation happens only when wages rise, and we aren't seeing serious wage increases yet, only modest increases.
Inflation is classically considered a money supply issue, more money chasing the same economic output results in higher prices.

Wage increases do not have a direct connection to money supply, but are more a reflection of jobs growth and available supply of workers to fill those positions.  Wage growth can increase inflation as those costs get  priced into finished goods cost.

The trillion dollar question still unanswered is can this administration deliver on promised GDP growth. The domestic economy seems to be moving in the right direction but softening in several world regions could affect that negatively.

I am just happy that the grand liquidity experiment has not blown up (yet), but ten years is a long time, and we are still far from normal whatever that will look like. In my judgement interest rates that have been too low for too long have allowed a whole generation of investors and business leaders to think this is some new normal, it isn't.  8)


JR 
 

Script

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The Trump WH is way too invested in watching (and taking credit) for the stock market. The market goes both up and down so this could end embarrassingly badly, but probably not before Nov.
Yes, way too invested in watching and, even more so, taking credit, but...

What is supposed to happen in Nov (November?) ?
 

JohnRoberts

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Script said:
Yes, way too invested in watching and, even more so, taking credit, but...

What is supposed to happen in Nov (November?) ?
November is the mid term elections for congress so he/they can (probably?) continue to brag about the economy (stock market) past then.

Stock market prices are not always rational, especially in the short term, so I wouldn't peg my success to that.

I'm not expecting the next recession until maybe 2019-20, but the future is always difficult to predict (I'd be rich if I could predict the future. I can't even call elections).  ::)

JR
 

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"I'd be rich if I could predict the future. I can't even call elections"

Well it doesn't help when you can't trust any published win probabilities.

I had a rude awakening when my blind trust of NYT got the "Hillary is 95% probable to win" message they kept blasting for weeks about as wrong as possible.  :mad:
How many people didn't run to the polls or submit absentee ballots because they thought, 'why bother? It's a clean sweep!'
 

JohnRoberts

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boji said:
Well it doesn't help when you can't trust any published win probabilities.
They wish they could predict it too
I had a rude awakening when my blind trust of NYT got the "Hillary is 95% probable to win" message they kept blasting for weeks about as wrong as possible.  :mad:
How many people didn't run to the polls or submit absentee ballots because they thought, 'why bother? It's a clean sweep!'
I voted, even though I expected to lose, but i always vote... and can resist the "force".  ;D

The betting lines are generally more accurate (money talks) but in this case even they got it wrong.  I would have bet money that Hillary would win, but that's why we hold elections and count (all) the votes.

JR

PS: Has anybody here ever answered a phone poll..? I hang up on them early and often.
 

benb

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boji said:
Well it doesn't help when you can't trust any published win probabilities.

I had a rude awakening when my blind trust of NYT got the "Hillary is 95% probable to win" message they kept blasting for weeks about as wrong as possible.  :mad:
I heard other "pundits" weren't giving such high probabilities. Regardless, if they're not predicting anything less than a 100 percent probability, they didn't "predict wrong" in a statistical sense. Sometime five coin flips DO come up as five heads.

How many people didn't run to the polls or submit absentee ballots because they thought, 'why bother? It's a clean sweep!'
That's harder to say.
 

JohnRoberts

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benb said:
I heard other "pundits" weren't giving such high probabilities. Regardless, if they're not predicting anything less than a 100 percent probability, they didn't "predict wrong" in a statistical sense. Sometime five coin flips DO come up as five heads.
That's harder to say.
A modern problem is voting across several time zones with access to instant media analysis that could easily discourage west coast voters, if they think their vote doesn't matter.

Energizing and/or discouraging voters to show up is a major part of the "work" involved in political organizing. Convincing undecided voters doesn't matter if they don't show up to cast their vote. This is why older voters get more respect (we are reliable voters).

JR
 

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