The good economic news is actually bad. Here's why.

["Dave Farber" <farber () gmail com>]

Begin forwarded message:

> From: Dewayne Hendricks <dewayne () warpspeed com>
> Date: February 3, 2018 at 6:33:08 AM EST
> To: Multiple recipients of Dewayne-Net <dewayne-net () warpspeed com>
> Subject: [Dewayne-Net] The good economic news is actually bad. Here's why.
> Reply-To: dewayne-net () warpspeed com
>
> The good economic news is actually bad. Here’s why.
> By George F. Will
> Feb 2 2018
> <https://www.washingtonpost.com/opinions/the-good-economic-news-is-actually-bad-heres-why/2018/02/02/9af38e38-0782-11e8-8777-2a059f168dd2_story.html>
>
> In 1930, John Maynard Keynes was worried, but not about the unpleasantness that had begun the previous year and would 
> linger long enough to become known as the Great Depression. What troubled the British economist was that humanity “is 
> solving its economic problem.” 
>
> In his essay “Economic Possibilities for our Grandchildren,” Keynes, seeking to dispel pessimism, predicted that, 
> “assuming no important wars and no important increase in population,” the “permanent problem of the human race” — the 
> “struggle for subsistence” — “may be solved.” This, Keynes warned, could discombobulate the human race’s neurological 
> wiring, because mankind has evolved through many millennia for toil and stress. Basic “habits and instincts” are 
> unsuitable for a future of leisure and abundance. Because we have evolved as creatures designed by nature “to strive 
> and not to enjoy.” So, work would have to be apportioned, perhaps in three-hour shifts and 15-hour workweeks, to keep 
> people preoccupied. 
>
> Then history’s worst war came, as did a huge increase in population — and an enormous, planetwide enrichment. And 
> today people still toil and strive. In 1943, Paul Samuelson, who would become one of America’s leading economists and 
> win a Nobel Prize, anticipated peace with foreboding. Good things — demobilization of more than 10 million from the 
> armed services, the economy no longer busy producing instruments of destruction — would cause bad things. There would 
> be “the greatest period of unemployment and industrial dislocation which any economy has ever faced.” Any economy. 
> Ever. What actually happened is remembered as the Postwar Boom. 
>
> This stroll down memory lane suggests this rule: All news is economic news, because everything affects the economy, 
> or reveals attitudes or behaviors that soon will affect it. And all economic news is bad — especially good economic 
> news, because it gives rise to bad behavior. 
>
> Consider this recent Wall Street Journal front-page headline: “Americans Save Less As Good Times Roll.” The article 
> began: “Soaring stock prices and improving job prospects” — Good news? Good grief — “have set Americans off on a 
> spending splurge that is cutting into how much they sock away for retirement and rainy days.” Between 2008 and the 
> third quarter of 2017, the net worth of U.S. households surged from $56 trillion to $97 trillion (Good news? 
> Remember, that’s an oxymoron), but “previous busts — in the mid-2000s and the late 1990s — were preceded by periods 
> of rising asset values and especially low saving.” 
>
> In December, America’s household savings rate was the lowest (2.4 percent of disposable income) since the negative 
> savings rates in 2005 and 2006, before the housing bubble burst. Many Americans, forgetting the most intractable fact 
> — that nothing lasts — turned the equity in their homes into cash to fund immediate consumption. Today, 104 months 
> after the recovery from the Great Recession began in June 2009 (when the savings rate was 6.6 percent), 2.5 million 
> homes are still worth less than is owed on their mortgages. 
>
> As of 2013, 45 percent of working-age households had no retirement savings. Social Security (average annual payment, 
> $15,500), which provides 33 percent of seniors’ annual income, and 90 percent for the bottom third of retirees, but 
> only about 35 percent of a typical household’s pre-retirement income, last year became America’s first 
> trillion-dollar-a-year program. Absent reforms, its trust fund will be exhausted by 2035 and benefits will have to be 
> reduced 23 percent. A 2015 Federal Reserve study revealed that half of those surveyed said they could not gather $400 
> to cope with an emergency; one-third said they could not sell assets, tap retirement savings or turn to family and 
> friends to pay three months of expenses. By 2017, median household savings ($14,500) for those near retirement age 
> had declined 32 percent in a decade, and for the first time, older Americans had more credit card debt than younger 
> Americans. Between 2003 and 2015, the indebtedness of those between ages 50 and 80 increased 60 percent. Today, those 
> between 65 and 74 have five times more debt than that age cohort did two decades ago.
>
> [snip]
>
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> Twitter: https://twitter.com/wa8dzp



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