Thanks for sharing your travel inspired throughts. Of course, I agree completely with the point you're making, but it seems your allegory needs to be augmented for our current "progressive" era by adding this line to the end:The speaker of the house laughs and says, "But imagine how many jobs we could create if instead of paying people to dig with their hands, we pay them not work at all!" I can only wonder what Uncle Milton do about this!
The version I heard was that some Eurasian socialist state had created a make-work project for returning veterans after WWII. They were using shovels to dig ditches along roads. Milton Friedman asked why they were not using small bulldozers. He was answered they wanted to create jobs. So Friedman asked, "Well, why not have the men dig with spoons?" Still, I doubt make-work projects cause nearly the mis-allocation of capital that does, say, the home mortgage interest tax deduction. This deduction becomes larger the higher one's income, and the more-expensvie the house (or houses) purchased. It is an unlimited deduction.Yet, if someone suggests whacking the home mortgage interest tax deduction, I bet the reply would be, 'But the homebuilding industry creates jobs." What would MF says about that? So many states, such as Egypt or Iraq, or Afghanistan, crush their own economies and population through corrupt and elite-serving governments. Thank goodness we have a free press in the United States..
Extremely important paper published by the St. Louis Fed here: http://research.stlouisfed.org/wp/2010/2010-018.pdf
Mark: that's indeed a worth addition to the story.
Scott;I'm not sure if you have ever offered an opinon on this before.....What is your thoughts/opinions on Bob Chapman who writes the International Forecaster. His thoughts are quite distressing, but his reasoning seems clear....but it's very frightening.
What you say about Egypt applies 100% to Argentina.
[I realize this post is out of context with this thread, but since NIPA profits are one of the key metrics watched in this group, I thought this was meaningful and didn't have a better place to post it.]It is frustrating and at the same time interesting that so many very smart analysts have completely polar views of the same data. It's one thing for people to differ on which facts are important, how to weight the facts, and especially the projected outcome divined from all the facts they believe in and intuiting so much that is unknown. But what to make of it when the very smart people have polar understanding of the facts themselves.Are NIPA profits "less volatile or frequently revised", "leading or lagging", “indicating overvalued or undervalued stocks”? I very much appreciate both these analysts take, but I dunno. Add to that hyper-sensitive program trading, media driven volatility - maybe factual analysis matters less than behavioral analysis anyway. Good luck with that, right.Scott Grannis:http://scottgrannis.blogspot.com/2010/07/corporate-profits-are-strong-but.html"Lots of pessimism in those figures, as I think you can see from the second chart, which compares profits according to the NIPA calculations (which in turn are based on IRS data), and standard earnings calculations based on what companies report using GAAP and write-offs. I note that the NIPA measure of profits is much less volatile than the S&P measure, and to my eye the NIPA series tends to lead the S&P series. NIPA profits are just a shade below their all-time high (as of last March), while S&P profits are still almost 25% below their all-time high. If the NIPA series is indeed a leading indicator of reported profits, then there is plenty of good news on the profits front to come."John Hussman:http://www.hussman.net/wmc/wmc100719.htm "In short, the NIPA profit estimate is a frequently revised, noise-ridden, extrapolation-based quarterly data point, reported with a substantial lag, that excludes a host of shareholder-relevant expenses, and covers a broadly different universe of companies than does the S&P 500. So I've been asking myself, why would anyone want to use NIPA profits to value the market, instead of using actual earnings reports, or even forward operating earnings which are already a sufficiently overblown measure of corporate performance? The only answer I can come up with is that NIPA profits are an even more overblown and misleading measure, allowing the continued assertion that stocks are undervalued."
[I realize this post is out of context with this thread. Since NIPA profits are one of the key metrics watched in this group, I thought the alt view discussed was meaningful, and had no where else to post it.]It is frustrating and at the same time interesting that so many very smart analysts have completely polar views of the same data. Are NIPA profits "less volatile or frequently revised", "leading or lagging", “indicating overvalued or undervalued stocks”? I very much appreciate both these analysts take, but I dunno. Add to that hyper-sensitive program trading, media driven volatility - maybe factual analysis matters less than behavioral analysis anyway. Good luck with that, right.Scott Grannis:http://tinyurl.com/284h78k"Lots of pessimism in those figures, as I think you can see from the second chart, which compares profits according to the NIPA calculations (which in turn are based on IRS data), and standard earnings calculations based on what companies report using GAAP and write-offs. I note that the NIPA measure of profits is much less volatile than the S&P measure, and to my eye the NIPA series tends to lead the S&P series. NIPA profits are just a shade below their all-time high (as of last March), while S&P profits are still almost 25% below their all-time high. If the NIPA series is indeed a leading indicator of reported profits, then there is plenty of good news on the profits front to come."John Hussman:http://www.hussman.net/wmc/wmc100719.htm "In short, the NIPA profit estimate is a frequently revised, noise-ridden, extrapolation-based quarterly data point, reported with a substantial lag, that excludes a host of shareholder-relevant expenses, and covers a broadly different universe of companies than does the S&P 500. So I've been asking myself, why would anyone want to use NIPA profits to value the market, instead of using actual earnings reports, or even forward operating earnings which are already a sufficiently overblown measure of corporate performance? The only answer I can come up with is that NIPA profits are an even more overblown and misleading measure, allowing the continued assertion that stocks are undervalued."
[I recognize this post is out of context with this thread. Since NIPA profits are a key metric watched in this group, this alt-view seemed meaningful. Didn’t know where else to post it.]It is frustrating and at the same time interesting that so many very smart analysts have completely polar views – not just with speculated outcomes, but of the characteristics of the supporting data itself.Are NIPA profits "less volatile or frequently revised", "leading or lagging", “indicating overvalued or undervalued stocks”? I very much appreciate both these analysts take, but I dunno. Add to that hyper-sensitive program trading, media driven volatility - maybe factual analysis matters less than behavioral analysis anyway. Good luck with that, right.Scott Grannis:http://tinyurl.com/284h78k"Lots of pessimism in those figures, as I think you can see from the second chart, which compares profits according to the NIPA calculations (which in turn are based on IRS data), and standard earnings calculations based on what companies report using GAAP and write-offs. I note that the NIPA measure of profits is much less volatile than the S&P measure, and to my eye the NIPA series tends to lead the S&P series. NIPA profits are just a shade below their all-time high (as of last March), while S&P profits are still almost 25% below their all-time high. If the NIPA series is indeed a leading indicator of reported profits, then there is plenty of good news on the profits front to come."John Hussman:http://www.hussman.net/wmc/wmc100719.htm "In short, the NIPA profit estimate is a frequently revised, noise-ridden, extrapolation-based quarterly data point, reported with a substantial lag, that excludes a host of shareholder-relevant expenses, and covers a broadly different universe of companies than does the S&P 500. So I've been asking myself, why would anyone want to use NIPA profits to value the market, instead of using actual earnings reports, or even forward operating earnings which are already a sufficiently overblown measure of corporate performance? The only answer I can come up with is that NIPA profits are an even more overblown and misleading measure, allowing the continued assertion that stocks are undervalued."
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