Except that the economy is in its 22nd year of pretty much uninterrupted growth, a period during which inflation has been quiescent. That and we have the highest savings rate in the history of man and the highest % of people employed. Oh, and the dollar's purchasing power and real wages have steadily increased. Ask your father or grandfather if his life was more comfortable when you were a kid than yours is now.

A heathen!! A pagan!! Orrin, what are you doing? First a Canadian and then a #$*& atheist. What would the Founders say?

Bravo, Robert. This is going to be great fun.

Peter:

I did retain editorial control in this instance, can't have godless pap cluttering up the frontpage as it does the comments. Jeff is theoretically writing up an affirmative action piece, though in a stately fashion.

Peter, thanks for the backhanded compliment ;-) I think that he will draw the line at Canadian atheists.

oj-

Why has the purchasing power of the dollar has been in a steady and rather dramatic decline since the Fed was assigned the job of smoothing out the business cycle through monetary policy? Is it possible that the size of the federal government and the regulatory burden it has placed on the economy through unpredictable and mainly restrictive and costly fiscal policy has grown to an unsustainable level and left in itys wake a series of poorly thought out programs which are ever in need of reform? (great for the political class,BTW) The keynesian belief that an economy the size of America's can be managed and tweaked to the point of abolishing the harsh effects of greed, fear, scarcity and plain old stupidity may just be the height of 19th century progressive hubris.

The 22 years of economic growth we have expeienced in this country has much to do with the geopolitical changes and the globalization which has resulted through the collapse of applied Marxism/socialism. The left is still addicted to such statism and the growth of the bureaucratic administrative state continues. The US economy may look so strong only through comparison with the alternatives.

Tom:

Let's not be silly. Name anything that you have to work longer to purchase than your Dad did at a similar age.

oj-

My dad raised a family of six while my mother was able to remain at home. His first home cost about 20,000.00 (about, what, 150,000 today?) and his tax burden, both local, state and federal was about 1/3 what it would be today. Thank God my family was in pretty good health. What do you think health insurance for a family of eight would cost a self-employed businessman today?

How many cars? phones? TV's? How often could he afford beef? etc., etc., etc.

He probably didn't have insurance, just paid out of pocket Still quite doable.

OJ, several points:

If you are including home equity and stock holdings in the savings number, these components are both inflated at the current time and interest rate sensitive. And the refi boom has spent down a large portion of those savings.

You are looking backward, not forward. We have gotten to where we are as the result of several unsustainable trends - budget deficits & tax cuts, easy credit and low interest rates fueled by accomodative monetary policy, and a blind eye towards risk on the part of lenders, encouraged by the Fed. Tom's father could not have gotten a zero down mortgage at 125% loan to value ratio.

What you are leaving out is that this largely unbroken prosperity has ridden on the back of an exponentially rising debt expansion. It has taken more and more debt to keep the expansion going.

Robert:

You're simply wrong:

http://www.brothersjudd.com/blog/archives/010341.html

Oak floors.

There have been some fundamental changes in the way things are done that have to be taken account of.

When Arno Penzias was appointed head of Bell Labs in the early '70s, he took a tour of US manufacturing plants to learn what the situation was. In a book (whose title I have forgotten), he wrote that what struck him most forcibly was the fact that the application of computers to manufacturing (he did not also say, but could have, to design) had resulted in improvements in precision and quality that "I would not have believed possible or desirable." (Quoted from memory.)

The "or desirable" is the nugget.

The cost of production of most things, combined with commoditization of many things, makes the last 30 years qualitatively different, in an economic sense, from the 60 years before that.

Go back far enough, though, to the 1870s when iron and steel production costs dropped through the floor, and you have a sort of a model for what kinds of effects to look for.

The period 1870-1914 was the longest secular deflation in history, just about.

Whether that sort of deflation is likely to continue is a puzzle. The nanotechnologists think so. I'm not sure.

OJ, I did not argue that personal net worth is not at an all-time high, I argued that it is inflated. We are at the peak of the real estate bubble now - enjoy the view.

Let's assume it's inflated $42 trillion. We still have no debt.

Back in the day when I was a stockbroker (five years with the old PaineWebber in the late 80s) I worked with a guy who had display of egregiously wrong financial books in his office: "The Coming Great Depression", "The Great Reckoning", "The Coming Currency Collapse", etc. An entire library of stupid financial literature.

Whenever any client would start talking about how the American economy was heading for a fall he'd point to this collection of books (some dating back to the early 70s) and talk about how the "perma-bears" have been so wrong for so long, and that if you had listened to them and invested your money according to their precepts (usually a mason jar buried in the backyard) you'd have missed out on the most productive and lucrative period in American history

It was a very persuasive presentation.

You're young, H.D.

I can remember front page stories -- not entirely disapproving, either -- in the Wall St. Journal around 1969 about young Wall Street hot shots who were advising widows that they could dip into capital, because the market was only going to go up.

Whatever happens, it'll be a surprise to me.

Ah, the beginnings of wisdom, Grasshopper.

Economic cycles still exist, but the "panics" have been smoothed out, by deposit insurance and transfer payments.
I, for one, am willing to accept their drag during good times, for their flywheel effect during bad times.

Harry:

I'm with the nanotechnologists 100%.
Nanotech may ultimately prove to be of only limited use over the next century, but barring the total collape of civilization, I can't see how it won't result in massive improvements in the quality of consumer goods.

Michael-

The "panics" of 1929,the inflationary shock of the 70's, 1987, and NASDAQ 5100 in 2000 were fairly solid. Keynesian policy hasn't softened anything. In the future, we may be seeing shorter and more extreme boom and bust cycles than ever before.

Deposit insurance is wonderful until it needs to be widely paid. Transfer payments which are financed through deficit spending in combination with a tax system which encourages consumption rather than savings along with smaller families with both parents working is self-defeating and short sighted.

I honestly believe that fiscal and monetary policy which attempts to manage the business cycle within our currently over-regulated and over-taxed economy soon finds itself being implemented by the Fed or the executive branch to correct problems caused by their fellow bureaucrats or policy-makers who have their own agendas.

Arguably, bad government policy is responsible for business cycles lasting longer and cutting deeper than they would if left to work themselves out.

History doesn't bear that out, Tom.

19th century panics were plenty deep.

Kindleberger, in "Manias, Pancis and Crashes," makes a persuasive case that government intervention in liquidity crises (as in '29 -- '27 and '28 in the cow states) as 'lender of last resort' tends to squelch panics and keep them shallow.

A lot of solvent businesses went under at the start of the Depression because they could not realize on their receivables fast enough.

I have a hard time admiring a theoretical economic policy that sacrifices the healthy along with the sick.

Wages and prices were falling while FDR (Hoover before, of course) and his brain trust thought wages and prices should be supported and taxes raised. Jobs were "liquidated" while the gov't got bigger and bigger. I wonder why folks and businesses couldn't pay their bills?

Tom, you mischaracterize both Hoover and FDR, whose responses, despite what Orrin thinks, were exactly opposite.

The Brain Trusters did not want to raise prices as such but to curb overproduction so that producers would have some income.

Orrin objected to my example of corn, because it was used as boiler fuel, it wasn't a dead loss.

OK. Milk. The farmers poured unsalable milk into ditches. The market-clearing price was 0.

The market had stopped functioning.

If a a solvent business cannot get liquidity because none is available at any price -- which is what happened -- then market-clearing has failed there, too.

Markets are a means to an end, and most of the time they are a good one. People like Hayek get confused about what the purpose of work is. It is not to get a really neat market.

Harry:

No value is a market price.

True enough, but it is not an economic price.

Quite economical.