Out economy is now in the hands of an entitled narcissist with clear cognitive decline, surrounded only by enablers. Policy is determined by personal aggrandizement, greed, and vendettas. It's fucking crazy and to pretend otherwise is fucking crazy.
Judging policy solely by the their promoter would normally be wrong (book by its cover, eh?), but these days there's been some consistency in the quality (and lack of same) by various groups so challenging them out of the gate isn't unreasonable.
Sure, but my point is that there are people that reason like "such and such an elected official is bad, therefore everything they do is bad and will have drastic results", and that's not particularly informative even when I agree about the elected official being bad.
Krugman does a decent job of not letting his opinions about the political aspects color his analysis too much.
Things like
"Contrary to what many people believe, tariffs don’t necessarily lead to high unemployment. America had a high average tariff even before Smoot-Hawley — 15.8 percent in 1929 — but the unemployment rate in 1929 was under 3 percent."
He doesn't like the tariffs, he (and pretty much any serious economists) think they're bad, but he tries to be clear about why they're bad rather than just waving his hands at everything.
Politics and economics are two different lenses on the same subject matter, because “wealth” and “power over others” are two different ways of saying the same thing.
This is also why capitalism and democracy become progressively more clearly opposed the farther the status quo environment you are working in gets from feudalism or absolute monarchy, under which both seem to be changes in the same direction.
On election night when Trump was elected in 2016, Krugman wrote in the NYT that the markets would never recover, and that there would probably be "a global recession, with no end in sight".
He definitely lets his political angle completely color his economic analysis. Now that Trump is back in the White House we are of course doomed, same as the last time he was in the White House, same as the next time.
If you've got a political angle that is closer to Krugman's than say Trump's maybe this is fine? I mean as long as you're OK with an economic analyst who doesn't have the slightest idea how banks work. If that's the kind of writing you're looking for, Krugman is a very good choice.
> Krugman wrote in the NYT that the markets would never recover, and that there would probably be "a global recession, with no end in sight".
I think this needs some context. Remember that in 2016 we didn't know how Trumps rhetoric works and how seriously he will push his agendas. Now we know about TACO and how he was held back by the adults in the room. How would you feel about the future if you thought the POTUS will annex Greenland and Canada, and impose tariffs of 100-200% globally?
> If the political angle is not relevant to the analysis, then why do you enjoy it?
The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy.
This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor.
We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.
Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.
>Currently, the data suggest that reduced labor supply is likely the key driver
It's interesting as far as people I know looking for jobs, they're supply ... and having a hard time finding jobs. Reduced supply you'd hope you'd get a job.
Granted the article addresses this both in the types of jobs and:
>The stability of the unemployment rate masks effects of the low-hiring, low-firing labor market.
I do wonder, if this continues and a sense of economic slowdown or worse continues, would lowering a rate really fire up hiring? I know small businesses who can't eat /dance around tariffs like big companies, some are seriously terrified / facing hard decisions, others fine.
My read on this is most jobs growth in raw numbers occurs in the lower pay brackets. In those pay brackets supply has decreased and the people doing the hiring have not raised wages. This means these jobs aren't being filled and the work isn't getting done. This leads to lower jobs numbers and keeps unemployment rates stable.
Yeah, anecdotally no one I know exemplifies that finding. Everyone who had had to job search ran into a ton of competition and either beat them all out or is under-/unemployed currently. Only way I could see the finding of reduced labor supply is that no one can afford to work in the low wage jobs that are open.
I can see one way in which it could be true that the labor supply is reduced, in specific sectors:
The ICE crackdowns are both directly removing large numbers of nonwhite people from the labor pool, and indirectly scaring much larger numbers of them away from it, lest they be the next ones sent to the camps.
Aside from that, though? No, I think talking about reduced labor supply is anti-labor propaganda at best.
>Reduced demand in tech due to constraints of capital
That's it, really. All the "hiring" money is being spent on building data centers, at least in the US tech field. Better hope AGI is really around the corner, or that's a lot of money chasing nothing that could have been put to productive use.
Title is clickbait (we all know why) but its a great read. Its so many shocks to the economy at the same time, and with no goal other than to cause harm that I don't think anything the FED does will have any real impact in the real world.
The author goes for an OR between reasons but I really don't see it like that, its an AND, all jumbled together and pushing the economy down.
My read is not that it is to cause harm / break things down per sé, but instead to deglobalize. At various times, the left and the right have made globalization the bogeyman and something to fight, so this idea has been in the ether.
For many reasons (economic, geopolitics, peace), globalization is a great thing.
Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
I think that security/stability for a country as big as the US requires at least some localization. For example, IMO all medications, medical devices, infrastructure systems (such as telecom, power, etc.), hardware and materials should be at least 50% domestically produced and have at least dual sourcing.
I realize that not all countries are big or diverse enough to accomplish this, and that's a reason why loose confederations like the EU exist. The US started much closer to that itself.
> Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
Personally, I would say you are both, to some extent, wrong.
I don't think it's true that there's no other goal than to cause harm, at least with the tariffs.
By the same token, though, while I think deglobalization is something that people around Trump would say they're shooting for, it's not really something Trump cares about in that sense.
No; I think Trump's primary goal with the tariffs is to flex his power and enjoy the feeling; he doesn't really care what the effect is on everyone else. With the ICE crackdowns, he definitely wants to hurt everyone nonwhite in America.
I, on the other hand, believe that it's not causing harm or deglobalization, but rather a way to generate cash for Trump himself. He or his lieutenants get cryptocurrency for either imposing tariffs on competitors, or not imposing threatened tariffs, or maybe shorting entire industries before the tariff is announced.
The execution and evaluation (granted, that's part of the execution).
If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:
I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good.
If you're not bound by any results you don't like then you can't know if you're even winning.
Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.
Increasing wealth inequality, drives prices inflation, wage stagnation and less disposable income, driving less consumption, driving less revenue for businesses, meaning cuts happen and hiring freezes, drives slowing growth in new job market.
I think you've got your cause/effect chain a little muddled. I would also assert that the system dynamics are neither linear nor singular in the way you frame it.
> How does increasing wealth inequality drive price increases?
i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff.
past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?
> How does increasing wealth inequality drive price increases?
When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.
If you will please allow me an oversimplified example:
A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service.
However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example.
So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.)
Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way.
This example is obviously oversimplified for the sake of showing the point
> How does increasing wealth inequality drive price increases?
Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.
If the majority of wealth is centralized to a small group of people, why would you bother trying to extract smaller amounts of money from the other group?
The missing dynamic is that businesses are encouraged to increase growth in profit YoY.
Each year, a business needs to grow faster than it did the previous year.
If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it.
The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending).
If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders.
AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole.
For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation.
Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.
I hate to tell you, the single cause of inflation is not "wealth inequality", it's extra dollars spent by the Federal Government that literally don't exist.
The US Government writes checks that always cash, and unlike you and me, they don't have to have anything in the bank account behind it. This is the _sole and only_ cause of inflation. _Its the literal definition_ and is well documented.
It definitely feels like many companies have simply given up trying to do anything new. I mean look at the blowback against renewables that happened this election cycle, possibly killing the IRA. Why take risks when you’re making a ton of money just keeping the lights on?
Deport + limit immigration = degrowth = of course job growth would slow, maybe even turn negative. Perhaps there's this alternative scenario world where pressed Americans start working jobs illegals work, aka the jobs allegedly Americans won't. But Americans are too soft / have too much dignity / employers haven't increased wage (whatever interpretation you wish) for that to happen.
Because the tariffs are raising the cost of goods for both businesses and consumers so business costs go up while sales go down. Meaning businesses can’t afford to hire.
People who actually understand economics have been predicting this for months.
Not mentioned in the summary at the bottom: crippling inflation. This is the result of policies (Both Red and Blue) put into motion 4-5 years ago. Businesses run on razor thin margins, and when your purchasing power is suddenly reduced 25%, well this result is predictable.
Readit News
https://paulkrugman.substack.com/p/its-beginning-to-smell-a-...
He's obviously got a political angle, but doesn't let that completely color his economic analysis.
But he’s terrible if you want criticisms of left-side ideas, or if you want to hear about right-side policies that are working well.
To me, that’s of very limited utility.
Judging policy solely by the their promoter would normally be wrong (book by its cover, eh?), but these days there's been some consistency in the quality (and lack of same) by various groups so challenging them out of the gate isn't unreasonable.
MMT is left-side, and he's highly critical of it. Not a fan of rent control, a favourite of many left-leaning folks.
What right-side policies—especially perhaps ones that are being pursed by Trump / Project 2025—are working well?
Krugman does a decent job of not letting his opinions about the political aspects color his analysis too much.
Things like
"Contrary to what many people believe, tariffs don’t necessarily lead to high unemployment. America had a high average tariff even before Smoot-Hawley — 15.8 percent in 1929 — but the unemployment rate in 1929 was under 3 percent."
He doesn't like the tariffs, he (and pretty much any serious economists) think they're bad, but he tries to be clear about why they're bad rather than just waving his hands at everything.
This is also why capitalism and democracy become progressively more clearly opposed the farther the status quo environment you are working in gets from feudalism or absolute monarchy, under which both seem to be changes in the same direction.
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He definitely lets his political angle completely color his economic analysis. Now that Trump is back in the White House we are of course doomed, same as the last time he was in the White House, same as the next time.
If you've got a political angle that is closer to Krugman's than say Trump's maybe this is fine? I mean as long as you're OK with an economic analyst who doesn't have the slightest idea how banks work. If that's the kind of writing you're looking for, Krugman is a very good choice.
I think this needs some context. Remember that in 2016 we didn't know how Trumps rhetoric works and how seriously he will push his agendas. Now we know about TACO and how he was held back by the adults in the room. How would you feel about the future if you thought the POTUS will annex Greenland and Canada, and impose tariffs of 100-200% globally?
Politics, people, policy, platforms, party, positions, and partisanship are adjacent, but remain distinct.
The politics angle is unavoidable because Krugman is commenting on the impact that the economic policies of the current US administration is having on the US economy.
This is the same US administration that fires staticians for reporting numbers that render bare the impact of their own economic policies, which they are actively trying to censor.
We live in a day and age where in the US reporting facts leads to political persecution. Of course mentioning stagflation, as Krugman does, is deemed political.
Personally, I would feel like a discussion about economics that completely avoids politics would be missing something, and I would enjoy it a lot less.
It's interesting as far as people I know looking for jobs, they're supply ... and having a hard time finding jobs. Reduced supply you'd hope you'd get a job.
Granted the article addresses this both in the types of jobs and:
>The stability of the unemployment rate masks effects of the low-hiring, low-firing labor market.
I do wonder, if this continues and a sense of economic slowdown or worse continues, would lowering a rate really fire up hiring? I know small businesses who can't eat /dance around tariffs like big companies, some are seriously terrified / facing hard decisions, others fine.
The ICE crackdowns are both directly removing large numbers of nonwhite people from the labor pool, and indirectly scaring much larger numbers of them away from it, lest they be the next ones sent to the camps.
Aside from that, though? No, I think talking about reduced labor supply is anti-labor propaganda at best.
But funny enough, we can't just ship 100k software developers from the bay to the central valley and it just work.
That's it, really. All the "hiring" money is being spent on building data centers, at least in the US tech field. Better hope AGI is really around the corner, or that's a lot of money chasing nothing that could have been put to productive use.
But you could pitch a startup idea to replace those workers with agricultural robotics and collect some of that sweet AI venture capital!
The author goes for an OR between reasons but I really don't see it like that, its an AND, all jumbled together and pushing the economy down.
My read is not that it is to cause harm / break things down per sé, but instead to deglobalize. At various times, the left and the right have made globalization the bogeyman and something to fight, so this idea has been in the ether.
For many reasons (economic, geopolitics, peace), globalization is a great thing.
Even if deglobalization were a great idea, then the execution is haphazard, incompetent, rushed.
I realize that not all countries are big or diverse enough to accomplish this, and that's a reason why loose confederations like the EU exist. The US started much closer to that itself.
Doesn't this apply to globalization as well? Saying "learn to code" to people who lose their jobs due to globalization is not great execution either and sets the stage for backlash.
I don't think it's true that there's no other goal than to cause harm, at least with the tariffs.
By the same token, though, while I think deglobalization is something that people around Trump would say they're shooting for, it's not really something Trump cares about in that sense.
No; I think Trump's primary goal with the tariffs is to flex his power and enjoy the feeling; he doesn't really care what the effect is on everyone else. With the ICE crackdowns, he definitely wants to hurt everyone nonwhite in America.
If for some reason someone smart (with an education and who did something other than default to praise Trump's ego in press conferences) were to decide we should go to the mattresses wildly with tariffs to fight globalization:
I would hope they would care to actually evaluate if it is working / the impact, and not fire government workers when they report one thing that didn't sound good.
If you're not bound by any results you don't like then you can't know if you're even winning.
Granted ... that might not matter as I suspect market manipulation and bribes is the only real measurement with this administration.
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Why?
It's hard to square that with "less consumption", though...
Plus the fact that in last 5 years assets have gone up so much means there's just a lot of wealth being invested.
How much does a bottle of water cost?
- Supermarket? - Festival? - In a drought, when you're standing in line behind a thirsty billionaire?
People with a large relative net worths, drive asset prices up, like bids in an auction - even if they aren't the final bidder.
> Increasing wealth inequality, drives prices inflation
How does increasing wealth inequality drive price increases?
i'm not the person you asked, and i'm just spit-balling, but here's a way: wealth inequality means there's a group that has substantially more wealth than normal, let's call that group A, and the complimentary group of people who don't have substantially more wealth than normal, let's call them B. A's wealth ultimately comes from B-- you know, you got workers who make you more money than you pay them, you extract rent from them, they buy your stuff.
past a certain point of inequality, A controls so much wealth that they could exert power over the market to squeeze B even more-- wages lag further behind productivity, rents go up, goods cost more. this is inflation, yeah?
When poor people receive money, they tend to put it to circulate in the economy, by spending it. When super-rich people receive money, it goes mostly to tax havens, removing it from circulation. Business lose scale, as there is less consumers, raising unitary prices.
A restaurant is limited by the amount of food a person can eat in a meal. So this hypothetical restaurant can sell a $20 meal to 100 people (with $20 expendable income to spend,) and thus will generate $2,000 revenue for that meal service.
However, if fewer and fewer people have $20 expendable income, then obviously it becomes harder and harder for that restaurant to generate that same $2,000. Especially as the cost of bills, ingredients, and employee wages increase, for example.
So they are left with a dilemma of: 1) Raise prices knowing that there will be fewer customers with enough expendable income to buy the expensive food, or 2) Lower prices and hope that more customers will offset the lower prices (this usually does not happen.)
Also it's important to point out that 1 person with a lot of money won't come in and order 100 people's worth of meals. The human stomach doesn't scale in that way.
This example is obviously oversimplified for the sake of showing the point
Increasing wealth inequality means fewer owners of more assets and market share, which means there's less competition and more monopoly pricing that cause higher inflation.
This begs the question of how many rich people there actually are, though.
Each year, a business needs to grow faster than it did the previous year.
If business owners get wealthy more rapidly than workers, then eventually the business will not be able to maintain increasing rates of growth, as its profit velocity exceeds the wage velocity of households. Think of a car fuel pump: you can accelerate all you want, at least your until the engine explodes, but if your fuel pump can’t pump more than 50mph of fuel, uour acceleration will crater into the negative and then flatline at 50mph when you hit that threshold — unless your efficiency gearbox has another upshift in it.
The only solutions that maintains profit growth velocity in that scenario is for the business to decrease wage velocity relative to profits velocity, and to decrease labor dollars per product. Namely, wage stagnation (which leads to wealth inequity), enshittification (which reduces customer brand investment), and layoffs (which decreases customer spending).
If, instead, businesses ensured that wage velocity matched profit velocity, then households wouldn’t have increasing wealth inequity and would be able to continue funding the growth velocity through spending. Businesses are prohibited from this by their fiduciary duty to shareholders.
AI is a last ditch attempt to discard 95% of the human creative labor force in all industries rather than face the rapid deceleration of profit growth going negative market-wide as household spending power (after inflation) continues to decrease. If AI succeeds, the eventual crash of growth velocity is delayed a few years until AI saturates the market. If AI fails, the market crashes, as investors can no longer expect positive growth acceleration from the market as a whole.
For any economic system where business profit growth acceleration exceeds wage growth acceleration, the eventual collapse of business is assured unless a miracle of productivity delays it. That’s why AI workers can get paid a quarter billion dollars: pocket change, compared to the wage inequality reckoning. That’s also why economists can’t explain inflation: they’re not yet willing to confront profit growth vs wage growth acceleration inequity as a primary cause of inflation.
Job growth has decelerated rapidly because otherwise profit growth decelerates rapidly. If this seems like killing the golden goose, that feeling typically correlates with a lack of faith in AI providing the necessary efficiency factor to permit sustaining profit growth after the one-time, profit-accelerating, inflation-spiking layoffs.
The US Government writes checks that always cash, and unlike you and me, they don't have to have anything in the bank account behind it. This is the _sole and only_ cause of inflation. _Its the literal definition_ and is well documented.
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