Watching Mohamed El-Erian here on a CNBC video and he's talking about "artificial growth" turning to "real growth."
I guess he is referring to the period from 2008 to now because that's how long the Fed has been implementing its zero rate policy along with the asset purchases.
So my question is, what the hell is "artificial growth?"
Are the 100 million new vehicles that were produced and sold, "artifical?"
Are the 5 million new single family homes that were built "artifical?"
Was the $13 trillion in health care administered to people "artifical?"
Was the $13 trillion of food consumed, "artifically" consumed?
And gasoline?
And fuel?
And clothing?
And education?
And...and...and?
You get the picture.
Does El-Erian really think this only happened because the Fed lowered interest rates a few points? And if it hadn't, no one would have eaten? No one would have bought clothes? Houses? Fuel? Sought health care? Gotten an education? Etc, etc?
What an idiot. As is CNBC.
Do you see how this propagates a) a lie, and; b) a false belief? Then the public goes around saying stupid things like, "it's all artificial."
Moron this El-Erian. CNBC total dopes.
Has per capita consumption grown? No.
ReplyDeleteHas real median income grown? No, it has declined.
Most of our so-called growth has either gone to the rich or is explained by population growth, mostly due to immigration. For Joe Average, we're not growing, and we may even be shrinking.
wholeheartedly agree w/ Dan
ReplyDeleteGood point Mike. I've always gotten the sense, from his TV appearances, that El-Erian is a total fraud. He speaks in flowery generalities that seem to impress people, but he never goes any deeper than that. Yet people treat him like some economic genius. This seems to be a chronic problem with today's news media. And none of the journalists ever push him to explain his answers with any specifics.
ReplyDeleteDan/Jay
ReplyDeleteHow all that real output has been distributed is a completely different argument. I don't disagree with you guys, however, the cars, houses, medical care, education, food, clothing, fuel, etc...was indeed produced.
Mike it is False Prosperity's first cousin. ...
ReplyDeleteGrowth is real and bubbles are real, but the unemployment rate is artificial.
ReplyDeleteI hear the same sort of thing from internet "experts" who claim money government spends isn't real money. Good to know a guy who ran the biggest bond fund in the world fits right in with America's Blog Troll Legions.
ReplyDeleteStrangely enough what El-Erian and so many people like him mean is not all that different from what people like Bill Mitchell and Steve Keen say. There is such a thing as artificial growth: credit induced booms are artificial and they're dangerous.
ReplyDeleteThe kind of growth we saw during the nineties and noughties was not sustainable or equitable or stable. And the same is probably true post-2008. I'd say El-Erian is right but for the wrong reasons. Bill Mitchell and Steve Keen are right and for the right reasons.
In what sense can any growth be artificial? All money is fiat and its all credit based, so why would any of it be real or artificial? Its all the same, things dont become real when the Govt does it and dont become artificial because its the private economy. These types of distinctions are just silly. Yes, private sector, debt led expansions arent sustainable but they are certainly not fake.
ReplyDeleteAuburn, quite right: unsustainable, not fake or artificial.
ReplyDeleteThe wording matters, but I suspect that is what they really mean. Except for the Austrians, for whom all growth is artificial unless it is linked to gold and (almost) no government.
Keen and Mitchell say unsustainable, inequitable and dangerous; El-Erian and likeminded economists say artificial; Austrians say Bolshevik fascism. The point is that no matter how you cut it, these policies aren't what's required, unless you're a banker or generally in the 1%.
@Auburn if "growth" is supposed to be a measure of quality of life, then certainly some of GDP is "artificial." I.e., if the financial sector or the military sector increases GDP, that does not improve our quality of life. If immigration increases GDP, that does not improve our quality of life. If health care spending increases GDP, that does not necessarily improve our quality of life.
ReplyDeleteA better, though still imperfect, economic measure of "real" growth might be median household income, which has declined.
Perhaps we are debating semantics, but at a personal level we're not growing, we're shrinking.
I suspect that the "real" v. "artificial" distinction is based on the neoclassical theory grounded in production, I.e., "capital.
ReplyDeleteSo supply-led growth from producer investment is "real," while demand-led growth from government fiscal stimulus or loose monetary policy is "artificial."