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Is Okun's Law The Latest Casualty Of Central Planning...And BLS Seasonal Adjustments

Tyler Durden's picture


Okun's rule-of-thumb relates the long-term empirical finding that a country's unemployment rate is closely related to a country's output (or GDP) - perfectly sensible and comprehensible. In fact to be a little more explicit, it is the change in unemployment that is more notable in its relationship to the potential GDP (the output gap). His original work noted that a 3% increase in output corresponds to a 1% decline in unemployment rates (and/or rise in labor force participation, rise in hours worked, and rise in labor productivity) but as Goldman Sachs notes this week, Okun's Law has broken. As they point out, even though US real GDP growth has averaged a meager 2.5% pace since the end of the recession, the unemployment rate has fallen almost two percentage points from its peak.

There are three implications, in our view: the unemployment rate is hopelessly miscalculated (and is much higher); potential growth is much lower than economists have been expecting (not such good news for real growth); and the multiplier effect of money has dropped structurally (in other words the implied money flow from more workers is not circulating the way it empirically has to juice growth).

It seems to us that none of these are good for growth as the reality of a higher unemployment rate (BLS adjustments aside) is negative, lower potential for growth impacts earnings expectations (as we are already seeing in company and analyst outlooks which has perplexed those market watchers pinning their hopes on the jobless rate), and the balance sheet recessionary impacts of the 'employed' minimizing debt rather than maximizing potential gain is a further drag. Either way, as Goldman notes the potential growth rate going forward (2012 and 2013) is likely to remain quite weak, in the neighborhood of 2% in line with the CBO's dismal views and this could be further exacerbated by the drop in labor force participation we have noted vociferously.

Source: Goldman Sachs


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Mon, 02/13/2012 - 11:54 | 2153593 RockyRacoon
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Jeebus.  They got a stock-picking dog on CNBC.   I'm gonna shoot myself in the front yard for all to see.

They should name the dog ALGO instead of whatever goofy name he has.

Mon, 02/13/2012 - 11:54 | 2153607 Dr. Engali
Dr. Engali's picture

Cramer is on?

Mon, 02/13/2012 - 12:01 | 2153639 JPM Hater001
JPM Hater001's picture

Does anyone else think the stock market looks drunk?

Ok, it's me.

Mon, 02/13/2012 - 12:19 | 2153736 scatterbrains
scatterbrains's picture

I would agree, just looking at the usual indicators of covert printing (IBM XOM GLD) to name a few... seem to be rolling over maybe ?


Mon, 02/13/2012 - 14:30 | 2154375 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Rolling over into a hangover or coma.

Mon, 02/13/2012 - 12:34 | 2153813 MsCreant
MsCreant's picture

That would be a low down dirty stock picking dog.

Mon, 02/13/2012 - 11:57 | 2153622 SheepDog-One
SheepDog-One's picture

'Stock picking dog'...makes as much sense as anything else these days!

Mon, 02/13/2012 - 12:05 | 2153649 Alcoholic Nativ...
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I wouldn't be surprised if they broke out the Ouija boards and started calling on the powers of the animal spirits. 


Mon, 02/13/2012 - 12:15 | 2153708 MsCreant
MsCreant's picture

If you are in the stock market, you too are a stock picking dog. 

Mon, 02/13/2012 - 12:03 | 2153643 Alex Kintner
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Stock pickin', doggie style. How fitting.

Mon, 02/13/2012 - 12:15 | 2153713 MsCreant
MsCreant's picture

Assume the position!!

Mon, 02/13/2012 - 12:50 | 2153892 falak pema
falak pema's picture

shoot on sight?

Mon, 02/13/2012 - 11:52 | 2153594 battle axe
battle axe's picture

"Unemployment rate is hopelessly miscalculated", BINGO!!!

Mon, 02/13/2012 - 11:56 | 2153614 Cognitive Dissonance
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As a good friend likes to say, the unemployment rate is hopelessly miscalculated "on accident". :>)

Mon, 02/13/2012 - 11:59 | 2153626 francis_sawyer
francis_sawyer's picture

Ball don't lie... (only BLS does)...

Mon, 02/13/2012 - 12:09 | 2153667 kridkrid
kridkrid's picture

It's a pity that the origin of "lies, damn lies and statistics" is unknown, but it has always been the case.  I can no longer hear a statistic of any sort without immediately considering the possible agenda behind the number... even with the most mundane topic.  

Mon, 02/13/2012 - 12:17 | 2153721 MsCreant
MsCreant's picture

100% of statistics are made up.

Mon, 02/13/2012 - 12:25 | 2153762 kridkrid
kridkrid's picture

One of my favorite lines... but you got to go with a random, more official sounding number.  I like throwing in "studies show" as a prelude to the BS.  Recent studies show that 72.7% or nearly 3 out of every 4 statistics quoted are made up on the spot.  It's fun to do at a dinner party... quickly exposes who is actually listening to what you are saying.... most people aren't, so I just keep on trucking.  I amuse only myself... which is really my only goal.

Mon, 02/13/2012 - 12:43 | 2153856 Cognitive Dissonance
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"I amuse only myself... which is really my only goal."

God bless single minded goal seeking. However....mother was never amused when she caught me amusing myself. But that's another story for a rainy day. :>)

Mon, 02/13/2012 - 14:00 | 2154156 carbonmutant
carbonmutant's picture

"I do not feel obliged to believe that the same God who has endowed us with senses and [sic] the equipment has intended us to forgo their use" -Galileo Galilei

Mon, 02/13/2012 - 12:00 | 2153628 midtowng
midtowng's picture

I vote for "all of the above"

Mon, 02/13/2012 - 12:53 | 2153900 LongSoupLine
LongSoupLine's picture

There are three implications, in our view...


I'll take "C"...all the above.

Mon, 02/13/2012 - 14:35 | 2154395 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Unemployed dropping out of the workforce and high prices explains a lot.

Mon, 02/13/2012 - 14:35 | 2154405 aerojet
aerojet's picture

Occam's razor.  They are cooking the numbers.

Mon, 02/13/2012 - 11:52 | 2153598 JailBank
JailBank's picture

Sounds bullish. Full speed ahead S&P 500!

Mon, 02/13/2012 - 11:57 | 2153601 CrashisOptimistic
CrashisOptimistic's picture

The most powerfully devastating effect of the disconnect in unemployment calculation derived from the labor participation rate focuses on the fiscal budget projections. With a 2% LPR drop now apparently in effect, all models of GDP based tax revenue estimates are blown apart.

With LPR 2% lower, tax revenue will be much lower than expected for a given GDP. Toss in the lower paying job nature of what job creation there is and the models are further blown apart. The deficit and debt is therefore woefully underestimated in the years to come.

This is what Bernanke sees and why he was so negative on the unemployment report. Regardless of our attitude towards his judgement here on ZH, he is a smart cookie.

Mon, 02/13/2012 - 12:07 | 2153657 GeezerGeek
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I read that the estimated budget deficit for this year will be around $1.3 trillion. If Obama had simply sent out a gift card for $5,000 to every adult rather than directing the money at normal government waste then he would have had approximately the same deficit while increasing the GDP immensely. After all, we're told that consumer spending is responsible for some 70% of GDP, and normal government waste no longer seems effective for generating GDP growth. If the gift cards were made to expire around Sept. 30 then he could easily win reelection without having to depend upon contributions from his normal sources, the guys who normally get the first shot at government largesse.

I feel like I've entered the twilight zone: it almost sounds reasonable to me.

Mon, 02/13/2012 - 13:25 | 2154019 GernB
GernB's picture

The way I heard it unemployment is stimulative. So if we can just get 100% of people on unemployment and boost it to 999 weeks GDP will go through the roof!

Mon, 02/13/2012 - 13:45 | 2154095 narnia
narnia's picture

There's no doubt $5k in the hands of people to engage in voluntary transactions would be better than the central wankers spending that $5k building a bomb, a prison or some other government delivery of unnecessary scope.  That doesn't mean that's the best answer, though.  

GDP doesn't measure wealth or quality of life.  Employment is a worthless statistic too if people are engaged in a trade that's counter-productive or irrelevant to market based voluntary transactions.

When the cost of everything you need and most of the stuff you want falls in price so dramatically that you can work 3 days a week for 20 years to save enough honest money to retire, you'll know we have a great economy.  When 50% of the population works for the TSA, you'll know the opposite is true.

Mon, 02/13/2012 - 14:40 | 2154428 aerojet
aerojet's picture

Agreed.  Plus, a big giveaway like that might stoke actual price inflation, and the Fed is trying to keep a lid on that as much as possible (and slowly failing at it).  If all that hot money ever does flow into the real economy, we're looking at $10/gal gas and "Game over, man!  Game over!" 

It's all an accounting game still right now.  Well, not in Athens.  The real austerity hasn't even hit and people are rioting.  The future looks like of ugly to me.  Think Japan--high suicide rate, no real prosperity.  Probably a lot more crime and violence than in Japan, though. 

Mon, 02/13/2012 - 14:43 | 2154444 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

If 9 women could make a baby in one month.

Mon, 02/13/2012 - 12:22 | 2153748 djudy003
djudy003's picture

I agree that Bernanke is a smart cookie, but you also have to factor in the fact that he spent a huge amount of time studying the great depression. I can only imagine the question that anyone who is studying a crisis would be thinking about. "How can I prevent this? or how can I make it less painful next time." I think that has been evident through his pursuit of unorthodox methods to deal with the issue at hand. This presents a huge risk which is that we have the fate of the entire country/world at the hands of a man who thinks he can save the world. Just like everything in life, higher risk more reward. Meaning if he succeeds he would have saved us 10 or so year of pain and 5 years or so of a massive global war that we can no longer afford. I think it is important for everyone including the young generation to understand how much of their future lies in the judgement of this man. I hold my fingers crossed, but there has to be a sanity check at one point in time by someone. I am in no position to evaluate whether he is right or wrong but I hope he knows what he is doing. And god knows, I would want the government to put more security around this man than Barack Obama because if any international terrorist (if they exist) hope to screw things up he would be the man to target.

Mon, 02/13/2012 - 12:57 | 2153914 Ahwooga
Ahwooga's picture

"Just like everything in life, higher risk more reward. Meaning if he succeeds..."

And what about moral hazard?

Mon, 02/13/2012 - 14:06 | 2154252 djudy003
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I agree with you. Moral hazard is the issue here, that is why I questioned who would stand to make sure that he does not take too much risk. Because he may continue to follow his dream of saving the world from another great depression, that he might lose track of what kind of risks he is taking. Effectively, it seems like the entire global economy is Bernanke's research lab and there are no supervisors. At what point do the risks of his policies out weight the draw backs of another great depression. Situations in which he will not be the bearer of the ultimate costs.

Mon, 02/13/2012 - 14:42 | 2154438 aerojet
aerojet's picture

He may be holding it off only at the cost of making the eventual blow up far worse.  The breaking point will come, regardless of Fed policy.

Mon, 02/13/2012 - 15:35 | 2154681 donsluck
donsluck's picture

In this sad case, the man IS the problem. If someone were to target him, it would force interest rates up, which would help to re-capitalize our economy. However, one man coming or going is never the answer. The system cannot be changed any more than you could get a brain transplant. One must play the cards one has been dealt.

Mon, 02/13/2012 - 12:29 | 2153793 DeadFred
DeadFred's picture

Not to worry, those effects won't really start to show until after the election. Party on.

Mon, 02/13/2012 - 11:56 | 2153608 Cheesy Bastard
Cheesy Bastard's picture

unemployment rate is hopelessly (miscalculated) manipulated

Mon, 02/13/2012 - 12:09 | 2153670 JPM Hater001
JPM Hater001's picture

Well, that much is obvious. The bigger question is what do you do when the lagging indicator stops following the leading indicator.

One of two theory below is true.

One of the two numbers is more right.

One of them has been right longer.

Mon, 02/13/2012 - 12:18 | 2153733 Cheesy Bastard
Cheesy Bastard's picture

The bigger question is what do you do when the lagging indicator stops following the leading indicator.

Buy more silver, gold and bullets.

Mon, 02/13/2012 - 11:55 | 2153610 alexwest
alexwest's picture

sorry to upset my NOT SO SMART FRIENDS in GS but
using uneployment rate is kind of stupid..

TRY TO USE LABOR PARTICIPATION RATE... it will align perfectly..


Mon, 02/13/2012 - 11:56 | 2153613 SheepDog-One
SheepDog-One's picture

WTF! We arent arent at DOW 13,000 YET? WTF is taking these assclowns so long COME ON we want all-time record highs here, bitchez!

Mon, 02/13/2012 - 12:01 | 2153636 Dr. Engali
Dr. Engali's picture

Patience sheep dog. They can'tmake it too obvious. They must make it seem like a real market. Don't worry we will be at 14,500 by election day and Apple will be pushing $1000.

Mon, 02/13/2012 - 12:04 | 2153648 SheepDog-One
SheepDog-One's picture

Why NOT make it too obvious? Really, who would do anything? Why not just open the markets up +5% daily? No ones objected to ANYTHING so far, much less actually do anything at all about why not just make the DOW 25,000 by July?

Mon, 02/13/2012 - 12:07 | 2153655 alexwest
alexwest's picture

where to sign in for, bro ?


Mon, 02/13/2012 - 11:56 | 2153616 Dr. Engali
Dr. Engali's picture


There are three implications, in our view: the unemployment rate is hopelessly miscalculated (and is much higher); potential growth is much lower than economists have been expecting (not such good news for real growth); and the multiplier effect of money has dropped structurally (in other words the implied money flow from more workers is not circulating the way it empirically has to juice growth)

 4) All of the above.





Mon, 02/13/2012 - 12:01 | 2153640 SheepDog-One
SheepDog-One's picture

Yea right, like GOLDMAN SACHS is 'confused' by whats going on? Oh poor innocent little us...Mission Control for Operation 'Implode USA' ... 'GEE we just dont understand these numbers we're highly confused here'...gimma a break, Squid.

Mon, 02/13/2012 - 11:58 | 2153624 kaiserhoff
kaiserhoff's picture

Dudes, look at all those broken windows in Greece...., BULLISH, or something to do with bull...

Mon, 02/13/2012 - 12:03 | 2153644 battle axe
battle axe's picture

Buy Greek window makers. Huge upside....

Mon, 02/13/2012 - 12:08 | 2153661 Cheesy Bastard
Cheesy Bastard's picture

Definitely.  I heard somewhere that Greeks like to take it in the glass.

Mon, 02/13/2012 - 12:13 | 2153696 Manthong
Manthong's picture

Long tear gas.

They take it in the gas as well.

Mon, 02/13/2012 - 12:22 | 2153741 Cheesy Bastard
Cheesy Bastard's picture

Lol. Long marijuana and donkeys too?

Mon, 02/13/2012 - 11:59 | 2153627 falak pema
falak pema's picture

Okun was supposed to be terrific in downward trends; not so much upward. A decrease in growth rate was a pinch hitter on unemployment rate. But that assumes that Okun was a tax paying person who was fed honest fare on numerator and denominator to use his slide rule calc. Now if the critters who feed the beast are downright beastly about spitting out the truth what's a fella got to do with his slide rule? 

A wet finger up in the air is just as good at getting a shreak from an excited geek, let alone an impoverished Greek.

Mon, 02/13/2012 - 13:16 | 2153983 Bob
Bob's picture

Not to mention GDP calculated on growth in "financial products and services" that have little relevance to employment, particularly in a society where ever greater income goes to folks disinclined to spend it in the real economy, as either consumers or "job creators." 

Mon, 02/13/2012 - 12:01 | 2153632 Alex Kintner
Alex Kintner's picture

Okun's Law meet Occam's razor. New assumption: 1) Gubmint is lying about unemployment. (well, I guess that's not a new one.)

Mon, 02/13/2012 - 12:01 | 2153633 Burr's 2nd Shot
Burr's 2nd Shot's picture

Not broken, just more decoupling.

Mon, 02/13/2012 - 12:01 | 2153634 alexwest
alexwest's picture

# even though US real GDP growth has averaged a meager 2.5%


no need read another BS propaganda from GSucks


Mon, 02/13/2012 - 12:13 | 2153687 SheepDog-One
SheepDog-One's picture

I love how Giant Squid is trying to act all innocent and confused here, 'Gee, might something be manipulated here? Gosh we dont understand what we're looking at, we're all confused now...'

LMAO give me a break GS is at the heart of ALL the corruption and lies all along! 

'Real GDP', lol how about REAL unemployment being around 20% throw THAT in the formula!

OMG how these people continue to be able to walk around is beyond me!

Mon, 02/13/2012 - 12:26 | 2153769 MsCreant
MsCreant's picture

Yeah, as if they are NOT the ones calling the shots. I feel the same way about stuff out of JP Morgan too. Give me a F-ing break.

Mon, 02/13/2012 - 12:01 | 2153635 Snakeeyes
Snakeeyes's picture

Seasonal adjustments are a joke. Plagued with measurement errors. Should ban them, but economists go crazy if you use NSA numbers. 

And Okun's Law did not anticpate the growth of the welfare state where the economy struggles to cope with a falling labor force.

Mon, 02/13/2012 - 12:18 | 2153727 Alex Kintner
Alex Kintner's picture

Agree with your comment but also...
The crumbs thrown to the poor pale in comparison to the huge sums pissed away on pointless wars and a morbidly bloated Military complex.

Mon, 02/13/2012 - 12:07 | 2153656 Shizzmoney
Shizzmoney's picture

A) People are getting more jobs than in 2009.  But the labor force has also shrunk in that time.

B) Inflation has also increased; yet wages have not.

Immovable object vs irresistable force.

Something's gotta give.

Mon, 02/13/2012 - 12:08 | 2153662 lunaticfringe
lunaticfringe's picture

Today, I have been having a discussion on our irresponsible government. Their inability to govern, and their lack of political will and courage. They'd rather lie with numbers than grapple with the real problem.

So here, let me address the real problem. Starve the beast.

I have the solution. Quit paying federal taxes. I'm a retired cop, I'm not nuts, and I am as serious as a heart attack.

Mon, 02/13/2012 - 13:45 | 2154093 Nobody For President
Nobody For President's picture

That should be morre than adequate to get you placed on the FBI PT list...

Mon, 02/13/2012 - 12:11 | 2153683 Cursive
Cursive's picture

Should have had the disclaimer, "Ceteris paribus."

Mon, 02/13/2012 - 12:13 | 2153688 MsCreant
MsCreant's picture

E = MC2

From this we know that the speed of light is such that mass becomes infinite as you approach the speed of light. Part of that is a perception issue.

We also know that it takes more and more fuel (exponentially so) to propel an object to greater speeds. That assumes the mass of the object stays constant. But what if the object is growing in size? 

You gotta burn the world to get there...

In other words, the need for infinte growth propels us to burn everything.

In other words, this whole model, never mind central banker bullshit, is doomed.

In other words, thanks to this paradigm, we are screwed

It always was unsustainable.

Mon, 02/13/2012 - 12:18 | 2153730 SheepDog-One
SheepDog-One's picture

What! Tell the people their comfy 'consumer' lifestyle based upon living well beyond their means on 'credit' is unsustainable? No no no...Gotta promise people more and MORE so that the phony baloney politician terrorists and several elite families who own the world can keep on living free and unthreatened on the Animal Farm! 

Cant EVER let the sheeple see its all just fake! 

Mon, 02/13/2012 - 12:16 | 2153714 Dermasolarapate...
Dermasolarapaterraphatrima's picture

GDP is now mostly consumer spending and government spending. I don't see much solid maufacturing?


Anybody else?

Mon, 02/13/2012 - 12:17 | 2153722 kralizec
kralizec's picture


Mon, 02/13/2012 - 12:21 | 2153746 Die Weiße Rose
Die Weiße Rose's picture

The Unemployment Rate is probably closer related to Consumer spending

than to a country's output (or GDP) -

Okun's rule-of-thumb relates the long-term empirical finding that a country's unemployment rate is closely related to a country's output (or GDP) - perfectly sensible and comprehensible ?

No, I don't agree there. Most Industry sectors and manufacturing sectors are now highly automated and computerized. Just look at the Car-manufacturing Industry,basically Robots have replaced humans.Other Industries have almost entirely disappeared, just look at the Printing Industry with Digital replacing Film (Kodak) yet Publishing and Newspaper stll exist,just less People are needed.Since we live in a Computerized age,Machines have taken over the place of people, so we need less Jobs to have the same GDP output.The same is true in every Industry I can think of, even construction of buildings, that is now also prefabricated by Robots and then put in place like a Lego set.

Therefore Okun's rule-of-thumb that a country's unemployment rate is closely related to a country's output (or GDP) - does not compute with me...

And yes- this answer was written by a homo sapien that was replaced by an Android (robot),

designed to resemble a human....

and yes, Apple just hit US $500

slave to the machine...


Mon, 02/13/2012 - 13:42 | 2154079 GernB
GernB's picture

I disagree. Automationn and technology do not make the size of a companies workforce no longer relate to it's productive output.

Mon, 02/13/2012 - 12:23 | 2153752 SheepDog-One
SheepDog-One's picture

But...but...ObaMao is now giving himself award ceremonies because everything is certified 'never been better than now...I fixed it all, WHAT 'problems? We outlawed the truth a while back as 'subversive...likely terrorist activity even'...WTF all is WELL lets have some more bread and circuses today!

Mon, 02/13/2012 - 12:30 | 2153796 MsCreant
MsCreant's picture

The bread is green and multiplying like mold. Election circuses fill the airwaves, preventing any real news from escaping. I think you got that right.

Mon, 02/13/2012 - 12:26 | 2153771 gwar5
gwar5's picture

Fraudulent deception and manipulation of the numbers is the central plan by the central planners. If people knew the truth they would already be rioting. From Shadowfacts: real US unemployment is 16%+, real inflation is 6.3%+ (11% by 1980 measures). How can real GDP be a positive number if the reported USD number is not even keeping up with inflation?

Just wait until all the post-settlement foreclosures get dumped on the market. MBO printing and more fake numbers.

Mon, 02/13/2012 - 13:47 | 2154104 onebir
onebir's picture

I think this makes more sense than Tyler's explanations, which are valid observations but don't really explain the breakdown of this relationship, because the changes in the way unemployment's measured predate the breakdown by too much. So I think the real GDP measure is more likely broken.

Stats offices measure nominal GDP then deflate it. If GDP deflator growth is too low - measured real GDP growth will be too high. That could be what's happening here.

My guess is that the GDP deflator is failing to capture the commodity price re/inflation induced by the post-crisis loosening of monetary policy - either because of some pre-existing underweighting of the relevant commodities or some (recent) changes. 

I'd be very interested to hear what John Williams has to say about the GDP deflator... 

Mon, 02/13/2012 - 12:26 | 2153772 rsnoble
rsnoble's picture

Summarized: There is no recovery.

BTW speaking of stock picking dogs they wouldn't want to televise my bloodhound who's keen sense of smell would tell him it's all a pile of rancid shit.

He loves to track, I thought about having him track down all the crooks in the US.  That would be the never ending trail.

His instincts are deep seated ill say that much.

Mon, 02/13/2012 - 13:08 | 2153867 ptoemmes
ptoemmes's picture

I was thinking that when metrics that used to do a reasonable job of explaining things - even if those things are perverted - fail to do so and cannot even be "hacked" back to a believable correlation when Greer and catabolic collapse flashed though my mind...Maybe it aint the measurements that are screwy.


Let’s start with some basics, for the sake of those of my readers who haven’t waded their way through the fine print of the paper. The central idea of catabolic collapse is that human societies pretty consistently tend to produce more stuff than they can afford to maintain. What we are pleased to call “primitive societies” – that is, societies that are well enough adapted to their environments that they get by comfortably without huge masses of cumbersome and expensive infrastructure – usually do so in a fairly small way, and very often evolve traditional ways of getting rid of excess goods at regular intervals so that the cost of maintaining it doesn’t become a burden. As societies expand and start to depend on complex infrastructure to support the daily activities of their inhabitants, though, it becomes harder and less popular to do this, and so the maintenance needs of the infrastructure and the rest of the society’s stuff gradually build up until they reach a level that can’t be covered by the resources on hand.

It’s what happens next that’s crucial to the theory. 





Mon, 02/13/2012 - 12:55 | 2153910 Sean7k
Sean7k's picture

All mathematics require honest assumptions if you are to generate a valid result. Thus, Samuelson and the Neokeynsians will always disappoint. Not because they lack intellectual rigor, but because the assumptions are provided by liars and thieves.

Econometrics are useless in a society void of valid assumptions. When the numbers are lies the results are confusing. 

Keynes peed in the pool of economics. Rather than see economics through the lense of human action, he choose to create a metric with mathematics. The brain is neither a machine nor a computer. It is neither predictable nor reliable. For all the ability to predict behavior over large populations, the individual eludes the grasp of science.

The only laws that are valid are those that reflect this: there is no such thing as a free lunch, power corrupts and absolute power corrupts absolutely, the growth of free riders are equal to the growth in central government, etc.

Strip away the trappings of the intellectual and the common sense sees the economic picture in vivid reality. Labor participation rates, tax revenues, M3, debt creation ( wish we got to see the real numbers), future liabilities, etc.

It is the ability to filter out the noise that creates clarity. 

PS Bernanke a smart cookie? Absolutely. Unfortunately, he isn't in it for us. He will only continue the march to total debt slavery, thinking himself and his family protected from the abuse to be perpetrated in the future. As if the Elites care what happens to him. Every tool in the shed thinks it's the most important, until it laid to the side and replaced by a sharper one.

Mon, 02/13/2012 - 13:23 | 2154012 Die Weiße Rose
Die Weiße Rose's picture

Personally, I actually believe that the world is sliding into a Depression

all the signs are there

China, the Factory of the world will have to slow down,there will be noone left to buy.

Besides China is more than just Hong-Kong and Shanghai. What do we really know about China ?

Why do so many Chinese still work for slave-wages of US $2 a day if their economy is so good ?

The great Depression:

By mid-1930, interest rates had dropped to low levels, but expected deflation and the continuing reluctance of people to borrow meant that consumer spending and investment were depressed.[13] By May 1930, automobile sales had declined to below the levels of 1928. Prices in general began to decline, although wages held steady in 1930; but then a deflationary spiral started in 1931. Conditions were worse in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs.

The decline in the US economy was the factor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. Frantic attempts to shore up the economies of individual nations through protectionist policies, such as the 1930 U.S. Smoot–Hawley Tariff Act and retaliatory tariffs in other countries, exacerbated the collapse in global trade. By late 1930, a steady decline in the world economy had set in, which did not reach bottom until 1933.

well, to me that sounds a lot like what's happening right now !

unless you have a slave-job with Foxcon, in Shenzhen and Chengdu, China-

assembling Apple I-Phones for $1 a day, suicidal and beyond depression

Fuel poverty in Britain
Energy Bills up 16% in 2011 over last 6 years Energy Bills in UK up 90%
In the UK alone 3000 people could die this winter alone, because they can not afford Energy bills,

from Deutsche Welle Radio:,,15727627_type_audio_...

Recovery - where ?


Mon, 02/13/2012 - 13:48 | 2154098 Sean7k
Sean7k's picture

Wikipedia is a poor resource for historical periods. In that time, deflation was still an acceptable tool to eliminate malinvestment. Banks actually cared about the quality of their capital and gold influenced the money supply. Government intervention was novel and thought to be a miracle cure for everything.

Today we face a new frontier. Capital is defined by quantity, not quality. Government intervention is the rule, not the exception. Central banks function as sovereign overlords. To compare the two is meaningless. Operation twist was a new concept after WWII. Hidden FED assets, the ESF and taxpayer bailouts were unknown. In the 1930's, a billion was alot of anything.

The larger the numbers, the better to slice off the occasional, unmissed piece of meat. 

Terms like depression and recession have no meaning. In a world where deflation is denied, there can only be inflation and bigger numbers. Risk no longer exists, there is only access to power. You either have it or you don't. 

Everyone else gets tossed loaves of bread and fancy circuses for the adoration of the current emperor. When you can satisfy the economic needs of whole generations with two dollar audio-video apple orgasms, does it matter what we call it? 

It is a terrible catastrophe but we will be saved- they have promised us- they just never tell us how...


Mon, 02/13/2012 - 13:29 | 2154034 tony bonn
tony bonn's picture

"the unemployment rate is hopelessly miscalculated (and is much higher); ..."

okun did his work when the economic parameters were substantially different....and there have been innumerable methodological changes to gdp, inflation, and unemployment calculations in the meantime of which john williams tries to hold constant....

it is remarkable that okun's law holds as well as it does assuming that it works in reverse (shrinking gdp) as it does in forward (growing gdp)

of course i think that the whole concept of gdp - a purely synthetic number - a complete crock, but that is entirely another matter....

Mon, 02/13/2012 - 13:31 | 2154044 carbonmutant
carbonmutant's picture

BLS trumps Okun's Law.... News at 11

Mon, 02/13/2012 - 13:54 | 2154144 El Yunque
El Yunque's picture

OK, love the doggie references, but to me, if a bigger and bigger portion of your GDP is debt and the financial services industry, unemployment is going to be decoupled for obvious reasons, no matter how you spin it.

It just doens't take that many rednecks to program trading algo's and keep the bloody things lit.

At least that's what my dog tolt me.

Mon, 02/13/2012 - 14:22 | 2154329 Problem Is
Problem Is's picture

"unemployment rate is hopelessly miscalculated (and is much higher); potential growth is much lower than economists have been expecting...and the multiplier effect of money has dropped structurally"

Let Me Translate That:

  1. The B(L)S is lying...
  2. The BEA is lying...
  3. They're both lying...
Mon, 02/13/2012 - 17:53 | 2155315 mantrid
mantrid's picture

perhaps the "employed" work for food? that would explain why "money flow from more workers is not circulating". it makes sense these days: helps you keep up with inflation.

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