	Generational Dynamics
	Forecasting America's Destiny ... and the World's

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Generational Dynamics Web Log for 15-Aug-04
More economists are raising concerns about job issue in Europe and America

Web Log - August, 2004

More economists are raising concerns about job issue in Europe and America

Economists have been consistently dead wrong for two years on jobs, as they predicted that hiring was just about to surge. This has been going on at least since early 2003. Each month they would say, "Employment is a lagging indicator - now that the recession is over, we'll see lots of hiring soon." Early in 2004 they were saying, "We just don't understand it. Employment has to take off soon."

And yet it hasn't happened. But now we're seeing more economists express the view that "something is going on that we don't understand."

According to today's San Francisco Chronicle, the fact that California lost 17,300 jobs in July, when we're supposed to be in a recovery, has "left regional economists disappointed and puzzled."

And, "There is a growing camp of economists who believe today's brutally tough labor market is not a temporary American oddity," according to an article in the current international edition of Newsweek magazine..

There's no scarcity of possible villains. The price of oil, getting close to $50 per barrel, is receiving a great deal of the blame.

Alan Greenspan is receiving some criticism for increasing interest rates this week. I agree with this criticism, since we're in a long-term deflationary period.

The reason that we're in a deflationary period, as we've said, is that the country as a whole -- federal, state and local governments, businesses, labor unions, public schools, colleges, financial institutions, military, and so forth -- has become increasingly bureaucratic and resistant to change, and is producing products and services that are increasingly obsolete. We've been pointing out this obvious concept out for two years, but economists seem completely oblivious to it. They expect the economy to act the way it did in the 1991 or 1962 recessions, but they don't understand that the structure of today's economy is completely different from anything we've seen since 1945. You have to go back to the late 1920s to find an economy which is so bureaucratic and inflexible, and it was only cured by the mass bankruptcies of the 1930s depression.

From the point of view of Generational Dynamics, Europe is in roughly the same situation as America. Our major financial cycles are mostly synchronized, and it's to be expected that both would become increasingly bureaucratic at the same time.

In fact, it's a little noticed fact that America and Europe have gone through parallel generational financial cycles for centuries. The major historical financial credit bubbles have been as follows:

These are the major international bubbles of the last few centuries. The reason that they're approximately evenly spaced at roughly 70-80 years (the approximate maximum length of a human lifespan) is that a new major credit bubble only occurs when the people in the generation who remember the wild, undisciplined nature of the previous credit bubble all disappear (retire or die), all at the same time.

In each of the historical bubbles, the crash was a complete surprise to all the intelligent people of the day. There was no lack of experts in 1929, but if do as I did and you go back and look at what happened then, you discover that the experts of the the time (with the except of a few unpopular Cassandras) had no idea what was going on, even as late as a month or two after the crash had begun. (15-Aug-04) Permanent Link
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Generational Dynamics Web Log for 15-Aug-04 More economists are raising concerns about job issue in Europe and America

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Generational Dynamics Web Log for 15-Aug-04
More economists are raising concerns about job issue in Europe and America