Just how messed up is our economy?

John Ransom says that our economy is so messed up that economists don’t even have tools to describe what is happening:

To give you an idea how bad the jobs report released on Friday is, consider this fact: The employment situation in the country is so bad that economists can’t accurately measure it with the existing tools they use to measure jobs. In other words, we have entered a period in our country not contemplated by economists. They simply don’t have the tools to measure what’s actually occurring in the jobs market.

Modern economists never imagined a scenario in which a country with as much wealth, power and innovation as United States could stretch out a jobs recession as long as the country has under Obama. . . .

We have a record amount of money in the system doing a record amount of nothing right now. And still the government policy wonks keep thinking that by injecting more money into a system already over-burdened by its money supply we will eventually get different results. . . .

The result is that investors today are still buying US Treasuries despite the fact that after calculating for the real inflation rate Treasury bonds are delivering net negative returns. In other words, investors choose to park money someplace where they are guaranteed to lose money. Because with Treasuries at least they know that their losses will be limited. If they invest in expanding businesses, they know they could lose their entire vig to the G-Men.

This phenomenon, where investors would rather have losses than any risk, has an effect on jobs.

As most of the commentariat is noting, the top-line unemployment number- the one that makes all the headlines- is going down not because of an improving jobs market, but rather because people are dropping out of the workforce at a record pace.

The 8.1 percent unemployment number is meaningless. It actually doesn’t exist. It’s like measuring an 8 foot board with a 12 inch ruler. Shortening the ruler doesn’t make the board smaller.

The rate at which Americans are participating in the jobs market is now 63.5 percent. More than one-third of Americans qualified to work have despaired of ever finding a job under Obama. That’s the highest number of Americans who have sat on the sidelines rather than look for work since 1981. For over a year the workforce participation rates have plunged, coinciding with expiring unemployment benefits.

And the problem is not that there is a lack of money in the system to sustain the economy. But there is a notable lack of demand. Demand comes from confidence that consumers and business feel about the health of the economy. Unlike politicians, those of us in the real world can’t spend what we don’t have. We have to manage our lives using the cash that we actually have at hand.

The problem here is not that businesses and banks don’t have money. Currently the money supply (MZM) stands at a record $11 trillion. Yet the velocity at which the money has moved through the system has plunged under Obama. Money is sitting in accounts, not contributing to GDP growth, but rather just chasing the price of hard assets up because people who make decisions fear that the worst in the economy is yet to come.

Obamacare, Dodd-Frank, Sarbanes-Oxley, TARP, public pensions, John Corzine, Solydnra and the UAW have done a fantastic job of muddying the waters for corporate America as well as small business owners and the self-employed.

These hostile acts taken by or on behalf of Big Government have our economy idling in place.

Economic conditions are so bad that the standard tools used by economists to explain current conditions can’t measure the depth of the peoples’- or the economy’s- depression. Jimmy Carter had the Misery Index. People, meet the President of the United States: Barack Hussien Obama.

The Obama Index is the new index for measuring our despair.

via The Obama Index: The Newest Index to Measure Our Despair – John Ransom – Townhall Finance Conservative Columnists and Financial Commentary.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • http://www.bikebubba.blogspot.com bike bubba

    Well, it looks like Ransom is coming to terms with what von Mises realized 80 years back; that econometrics was a fool’s errand because man acts willfully. Plus, measuring unemployment has always had difficulties–I remember the Democrats arguing back around 2004 that Bush’s low unemployment numbers were due to discouraged workers not looking anymore, too.

  • http://www.bikebubba.blogspot.com bike bubba

    Well, it looks like Ransom is coming to terms with what von Mises realized 80 years back; that econometrics was a fool’s errand because man acts willfully. Plus, measuring unemployment has always had difficulties–I remember the Democrats arguing back around 2004 that Bush’s low unemployment numbers were due to discouraged workers not looking anymore, too.

  • SKPeterson

    What is described here is a perfect example of regime uncertainty, coupled with the stagflationary policies put in place under Bush II and exponentially expanded by Obama, we now have massive public debt, net negative savings, resulting capital deterioration, human capital deterioration, and haphazard private sector investment. The new monetary and fiscal policies of the Administration have not absorbed, redressed or liquidated the malinvestments of the late Greenspan/Bernanke credit-fueled boom with its associated artificial and unsustainable investment and employment levels, but only further shelter an entrenched and cossetted financial elite, who can socialize their risk on the backs of taxpayers – taxpayers who seek safety in money-losing treasurys.

  • SKPeterson

    What is described here is a perfect example of regime uncertainty, coupled with the stagflationary policies put in place under Bush II and exponentially expanded by Obama, we now have massive public debt, net negative savings, resulting capital deterioration, human capital deterioration, and haphazard private sector investment. The new monetary and fiscal policies of the Administration have not absorbed, redressed or liquidated the malinvestments of the late Greenspan/Bernanke credit-fueled boom with its associated artificial and unsustainable investment and employment levels, but only further shelter an entrenched and cossetted financial elite, who can socialize their risk on the backs of taxpayers – taxpayers who seek safety in money-losing treasurys.

  • Jon

    But all Obama needs is just another 4 years to fix it all–ALL. We have to keep the dream alive, have to keep moving forward! Don’t lose faith in The One now.

  • Jon

    But all Obama needs is just another 4 years to fix it all–ALL. We have to keep the dream alive, have to keep moving forward! Don’t lose faith in The One now.

  • DonS

    http://www.forexlive.com/blog/2012/09/11/moodys-text-to-downgrade-us-if-no-deal-to-cut-debtgdp-ratio/

    Don’t worry, though. Obama says it’s going to take a while, but if we just borrow even more money and “invest” it in teachers, police, and firefighters, everything will be great. Oh, and if we can just get those rich deadbeats like Romney to pay their “fair share”.

    Like Jon says, don’t lose faith! We just haven’t borrowed enough yet, obviously.

  • DonS

    http://www.forexlive.com/blog/2012/09/11/moodys-text-to-downgrade-us-if-no-deal-to-cut-debtgdp-ratio/

    Don’t worry, though. Obama says it’s going to take a while, but if we just borrow even more money and “invest” it in teachers, police, and firefighters, everything will be great. Oh, and if we can just get those rich deadbeats like Romney to pay their “fair share”.

    Like Jon says, don’t lose faith! We just haven’t borrowed enough yet, obviously.

  • http://www.toddstadler.com/ tODD

    I hardly believe our country is doing the right things, economically, but I’m having a hard time seeing Ransom’s piece as anything but an anti-Obama tirade.

    The employment situation in the country is so bad that economists can’t accurately measure it with the existing tools they use to measure jobs.

    What does that even mean? What, exactly, can’t be measured? And if it can’t be measured, how does Ransom assert that things are “so bad”? He never really develops this thought. It’s such an odd claim. Especially since Ransom then goes on to give us facts and figures, in spite of the lack of “tools to measure what’s actually occurring in the jobs market”.

  • http://www.toddstadler.com/ tODD

    I hardly believe our country is doing the right things, economically, but I’m having a hard time seeing Ransom’s piece as anything but an anti-Obama tirade.

    The employment situation in the country is so bad that economists can’t accurately measure it with the existing tools they use to measure jobs.

    What does that even mean? What, exactly, can’t be measured? And if it can’t be measured, how does Ransom assert that things are “so bad”? He never really develops this thought. It’s such an odd claim. Especially since Ransom then goes on to give us facts and figures, in spite of the lack of “tools to measure what’s actually occurring in the jobs market”.

  • http://www.toddstadler.com/ tODD

    The 8.1 percent unemployment number is meaningless. It actually doesn’t exist.

    No, it is meaningful, and it does exist. Ransom acts like he only just now discovered the existence of the workforce participation metric. Which would be odd, as he’s the “Finance Editor for Townhall Finance”.

    But, seriously, does he not get that there are two ratios here: there’s workforce participation, and then there’s unemployment.

    That’s the highest number of Americans who have sat on the sidelines rather than look for work since 1981.

    Right, back when Reagan was in office. Which, correct me if I’m wrong, was generally held to be a Good Thing.

    But I was curious, so I went to the Bureau of Labor Statistics to look up the “Civilian labor force participation rate”. Sure enough, it’s seen a significant slide since 2008. So, you know, it may have started under Some Other President (whom we No Longer Talk About). Indeed, that Other President saw a not-insignificant drop in the participation rate for most of his administration.

    But if you take the numbers all the way back to 1948 (the earliest data), it’s curious. Workforce participation has never been over 68%, ever. Ransom says that

    More than one-third of Americans qualified to work have despaired of ever finding a job under Obama.

    But for over sixty years, one third of Americans or more have, to use Ransom’s phrasing, “despaired of ever finding a job”. So … um?

    What should the number be? Because the participation rate has only been over 65% since 1986 or so. Back in the 50s and 60s, it was below 60%. Presumably, those were the Good Ol’ Days, and yet, well, Ransom would have thrown an even bigger conniption fit then, it would seem.

  • http://www.toddstadler.com/ tODD

    The 8.1 percent unemployment number is meaningless. It actually doesn’t exist.

    No, it is meaningful, and it does exist. Ransom acts like he only just now discovered the existence of the workforce participation metric. Which would be odd, as he’s the “Finance Editor for Townhall Finance”.

    But, seriously, does he not get that there are two ratios here: there’s workforce participation, and then there’s unemployment.

    That’s the highest number of Americans who have sat on the sidelines rather than look for work since 1981.

    Right, back when Reagan was in office. Which, correct me if I’m wrong, was generally held to be a Good Thing.

    But I was curious, so I went to the Bureau of Labor Statistics to look up the “Civilian labor force participation rate”. Sure enough, it’s seen a significant slide since 2008. So, you know, it may have started under Some Other President (whom we No Longer Talk About). Indeed, that Other President saw a not-insignificant drop in the participation rate for most of his administration.

    But if you take the numbers all the way back to 1948 (the earliest data), it’s curious. Workforce participation has never been over 68%, ever. Ransom says that

    More than one-third of Americans qualified to work have despaired of ever finding a job under Obama.

    But for over sixty years, one third of Americans or more have, to use Ransom’s phrasing, “despaired of ever finding a job”. So … um?

    What should the number be? Because the participation rate has only been over 65% since 1986 or so. Back in the 50s and 60s, it was below 60%. Presumably, those were the Good Ol’ Days, and yet, well, Ransom would have thrown an even bigger conniption fit then, it would seem.

  • http://Www.gslcnm.com Pastor Spomer

    Let Obama remain in office that we may test Jon’s hypothesis @3.

  • http://Www.gslcnm.com Pastor Spomer

    Let Obama remain in office that we may test Jon’s hypothesis @3.

  • WebMonk

    tODD, I had decided to sit this one out because I had gone into full-blown rant mode on the genetic article from before. But, you brought up the same point as I was going to rant on, and thus as you are the triggering mechanism, the following is your fault.

    That has got to be one of the stupider and more ridiculous opening lines I have read in quite a while. Did the ability for economists to measure unemployement, wages, debt, productivity, and the thousands of other metrics suddenly disappear?? In what way is the current economic status no longer measurable by those things?

    In other words, we have entered a period in our country not contemplated by economists. They simply don’t have the tools to measure what’s actually occurring in the jobs market.

    Economists have never contemplated our current position? Really? That’s pretty weird considering the THOUSANDS of economic studies over the last 5 years. And if they don’t have the tools to measure what’s actually occurring in the jobs markets, how did they ever manage to come up with recent numbers on unemployment?

    The numbers as reported by the media – yes, very broad picture and only as accurate as something that broad can be. But, if you look into the numbers, they are very thoroughly broken down – how many are looking for jobs, how many have given up, how many have started again, how many are in part time, how many are underemployed, how many aren’t wanting to be employed, etc, etc, etc.

    But, according to this tool of a columnist, all that doesn’t exist!

    Anyone who is generating stupidity of this magnitude can’t be trusted. The rest of that load of tripe is essentially the same quality. The economy is in poor shape, but claiming that it is so insanely bad that economists can’t even measure it, is idiocy generated to make a splash no matter how inaccurate.

  • WebMonk

    tODD, I had decided to sit this one out because I had gone into full-blown rant mode on the genetic article from before. But, you brought up the same point as I was going to rant on, and thus as you are the triggering mechanism, the following is your fault.

    That has got to be one of the stupider and more ridiculous opening lines I have read in quite a while. Did the ability for economists to measure unemployement, wages, debt, productivity, and the thousands of other metrics suddenly disappear?? In what way is the current economic status no longer measurable by those things?

    In other words, we have entered a period in our country not contemplated by economists. They simply don’t have the tools to measure what’s actually occurring in the jobs market.

    Economists have never contemplated our current position? Really? That’s pretty weird considering the THOUSANDS of economic studies over the last 5 years. And if they don’t have the tools to measure what’s actually occurring in the jobs markets, how did they ever manage to come up with recent numbers on unemployment?

    The numbers as reported by the media – yes, very broad picture and only as accurate as something that broad can be. But, if you look into the numbers, they are very thoroughly broken down – how many are looking for jobs, how many have given up, how many have started again, how many are in part time, how many are underemployed, how many aren’t wanting to be employed, etc, etc, etc.

    But, according to this tool of a columnist, all that doesn’t exist!

    Anyone who is generating stupidity of this magnitude can’t be trusted. The rest of that load of tripe is essentially the same quality. The economy is in poor shape, but claiming that it is so insanely bad that economists can’t even measure it, is idiocy generated to make a splash no matter how inaccurate.

  • helen

    In the 50′s and 60′s many more women were at home,
    [They "didn't do anything." :( ]
    so they weren’t counted in the potential job holders.
    It was possible to maintain a family on one income.

    But Bernanke shouldn’t be held responsible for all of the debacle… Greenspan was at least equally guilty. And as anyone who thinks, knows, the housing boom/bust goes back to the giving away of mortgages to people with a renter mentality and no skin in the game, i.e., to Congress under Clinton.

  • helen

    In the 50′s and 60′s many more women were at home,
    [They "didn't do anything." :( ]
    so they weren’t counted in the potential job holders.
    It was possible to maintain a family on one income.

    But Bernanke shouldn’t be held responsible for all of the debacle… Greenspan was at least equally guilty. And as anyone who thinks, knows, the housing boom/bust goes back to the giving away of mortgages to people with a renter mentality and no skin in the game, i.e., to Congress under Clinton.

  • SKPeterson

    Todd & WM – I took it as tacit admission that the stats are still official lies.

  • SKPeterson

    Todd & WM – I took it as tacit admission that the stats are still official lies.

  • http://www.toddstadler.com/ tODD

    SK (@10), hmm?

  • http://www.toddstadler.com/ tODD

    SK (@10), hmm?

  • http://steadfastlutherans.org/ SAL

    Ransom’s point is poorly made. The problem isn’t that our economic statistics no longer accurately measure what they purport to.

    The problem is that the American economy has entered a phase where most previous measures of American economic health fail to capture the relevant state of the economy.

    We’re in a time period that doesn’t have a close parallel in our own history.

    We’re kind of like Japan from the late 90′s. Pretty much everything liberals want was tried in Japan. Japan tried massive public works projects to create shovel-ready jobs. Japan did the new technique of Quantitative Easing to raise inflation expectations. Japan kept its interest rates near zero for many years to stimulate growth.

    Well with Japan this led to a decade of stagnation. Now Japan basically afforded its massive deficits with loans held by the Japanese public. America’s primary difference from Japan is that we owe large parts of our debt to foreigners and to largely fictitious financial entities (Social Security Trust Fund, Federal Reserve).

  • http://steadfastlutherans.org/ SAL

    Ransom’s point is poorly made. The problem isn’t that our economic statistics no longer accurately measure what they purport to.

    The problem is that the American economy has entered a phase where most previous measures of American economic health fail to capture the relevant state of the economy.

    We’re in a time period that doesn’t have a close parallel in our own history.

    We’re kind of like Japan from the late 90′s. Pretty much everything liberals want was tried in Japan. Japan tried massive public works projects to create shovel-ready jobs. Japan did the new technique of Quantitative Easing to raise inflation expectations. Japan kept its interest rates near zero for many years to stimulate growth.

    Well with Japan this led to a decade of stagnation. Now Japan basically afforded its massive deficits with loans held by the Japanese public. America’s primary difference from Japan is that we owe large parts of our debt to foreigners and to largely fictitious financial entities (Social Security Trust Fund, Federal Reserve).

  • SKPeterson

    Just the wry observation that economists may be having trouble squaring the concentric circles of government derived and supplied statistics. That many of these economists are in the government itself is doubly delicious.

  • SKPeterson

    Just the wry observation that economists may be having trouble squaring the concentric circles of government derived and supplied statistics. That many of these economists are in the government itself is doubly delicious.

  • http://www.toddstadler.com/ tODD

    Sorry SK, I still don’t understand. What (government) stats are “lies”?

  • http://www.toddstadler.com/ tODD

    Sorry SK, I still don’t understand. What (government) stats are “lies”?

  • SKPeterson

    Just about all of them. :)

    checkout shadowstats.com

  • SKPeterson

    Just about all of them. :)

    checkout shadowstats.com

  • http://www.toddstadler.com/ tODD

    SK (@15), I’m lazy. Can you give me a hint?

  • http://www.toddstadler.com/ tODD

    SK (@15), I’m lazy. Can you give me a hint?

  • WebMonk

    SK, shadowstats is well known and overhyped IMO. The gov stats are what they are – decent, only moderately complex, and relatively stable benchmarks by which to measure things. Shadowstats goes WAAAAY down into the weeds. (in many areas, not all)

    Once you get down that far though, you start getting lots of caveats – the data can get really precise and expose things that the government derived stats don’t show, but they are also a lot more specific to certain aspects (usually) and more prone to adjustment and fixing over time. They are also a bit sloppy (IMO) in some of their collection methodologies.

    Having a (mostly) consistent baseline of rigorously collected stats is an extremely valuable tool, and that’s what the govt stats are. They sacrifice some things for that, but they are not lies.

    Take the unemployment numbers – shadowstats has their own methodology for gathering that number and looks at different things. Surprise, surprise, they have a very different number than the government’s. A person can say that the methods used by shadowstats are more accurate representations of reality and I would agree to a certain extent, but that doesn’t mean the government’s numbers are lies or false. The government is very upfront about what and how it is measuring to generate those numbers.

    The govt numbers that get reported aren’t and aren’t intended to be the numbers people use to make detailed and precise business decisions. (at least not if they aren’t ignorant or dumb) For stuff like that, there are thousands of numbers gathered by companies, for- and non-profit. Shadowstats.com is a non-profit (last I checked) site that does moderate accuracy stat collection. They still aren’t the quality of stats a corporation uses in its own financial planning.

    If one says govt stats are lies because of the superior nature of shadowstats.com’s stats, then one would also say that shadowstats.com’s stats are lies because of the superior nature of stats collected by companies who do professional economic research.

    I’m a fan of shadowstats, but saying that govt stats are lies because of shadowstats is misunderstanding the nature of the two very different styles of economic measurements the two represent.

  • WebMonk

    SK, shadowstats is well known and overhyped IMO. The gov stats are what they are – decent, only moderately complex, and relatively stable benchmarks by which to measure things. Shadowstats goes WAAAAY down into the weeds. (in many areas, not all)

    Once you get down that far though, you start getting lots of caveats – the data can get really precise and expose things that the government derived stats don’t show, but they are also a lot more specific to certain aspects (usually) and more prone to adjustment and fixing over time. They are also a bit sloppy (IMO) in some of their collection methodologies.

    Having a (mostly) consistent baseline of rigorously collected stats is an extremely valuable tool, and that’s what the govt stats are. They sacrifice some things for that, but they are not lies.

    Take the unemployment numbers – shadowstats has their own methodology for gathering that number and looks at different things. Surprise, surprise, they have a very different number than the government’s. A person can say that the methods used by shadowstats are more accurate representations of reality and I would agree to a certain extent, but that doesn’t mean the government’s numbers are lies or false. The government is very upfront about what and how it is measuring to generate those numbers.

    The govt numbers that get reported aren’t and aren’t intended to be the numbers people use to make detailed and precise business decisions. (at least not if they aren’t ignorant or dumb) For stuff like that, there are thousands of numbers gathered by companies, for- and non-profit. Shadowstats.com is a non-profit (last I checked) site that does moderate accuracy stat collection. They still aren’t the quality of stats a corporation uses in its own financial planning.

    If one says govt stats are lies because of the superior nature of shadowstats.com’s stats, then one would also say that shadowstats.com’s stats are lies because of the superior nature of stats collected by companies who do professional economic research.

    I’m a fan of shadowstats, but saying that govt stats are lies because of shadowstats is misunderstanding the nature of the two very different styles of economic measurements the two represent.

  • WebMonk

    Don’t get me wrong, shadowstats has a lot of very good critiques of the government stats, especially the consumer price index (inflation index), but by and large they fall short of declaring govt stats to be lies.

  • WebMonk

    Don’t get me wrong, shadowstats has a lot of very good critiques of the government stats, especially the consumer price index (inflation index), but by and large they fall short of declaring govt stats to be lies.


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