'Hysteresis': An ugly word for an increasingly ugly economic situation

[kentuck]

<snip>
You may not know the term "hysteresis." It's the "lagging of an effect behind its cause," and it's an ugly word that sounds like a foot fungus. It's also an ugly thing to have happen to your economy. And it may be what's happening to ours.

<snip>
When people worry about what comes next for the economy, he said in a speech to the Bank of England, they worry about a double-dip recession or a temporary period of deflation. Those, he explained, are not close to how bad things can get. "The risks that I believe we face now are the far more serious ones of sustained low growth turning into a self-fulfilling prophecy," Posen said, "and/or inducing a political reaction that could undermine our long-run stability and prosperity."

<snip>
Right now, he's an example of what economists call "cyclical unemployment." He's unemployed because of the business cycle. But if his stretch of joblessness lasts for too long, that might change. His skills might deteriorate, and so too might his confidence. He might join an altogether more troubled group: the "structurally unemployed" - the out-of-work who can't get jobs because they're not suited for the jobs that employers are offering. The long-term unemployed, Posen warns, can become "de facto unemployable over time."

<snip>
Remember that we're only three years into this economic crisis. Goldman Sachs Group chief economist Jan Haltzius is projecting that we'll see growth in the range of 1.5 to 2 percent next year and that unemployment will rise above 10 percent. If this sort of pain persists over several years, the anger and frustration will only grow, and the political consequences could well be tragic for our economic policy and thus for our economy. And make no mistake, this sort of pain will persist for many years. Even if we started adding 200,000 jobs a month, it would take us about 12 years to return to full employment.

......more

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/08/AR2010100806671.html?hpid%3Dtopnews&sub=AR

[leveymg]

1. The 20th Century solution to this cycle was World War. Mass destruction of surplus labour --

the structurally unemployed can be politically troublesome and a threat to elites. Wars also stimulate demand for strategic goods and authoritarian government. For those who run things, WIN-WIN, no matter who wins the war.

[Warpy]

2. Only that really wasn't the case

The New Deal programs were working. Unfortunately, FDR was saddled with a chickenshit Congress that insisted on reducing the deficits (sound familiar?) and demanded a balanced budget in 1936. That resulted in the programs being ended prematurely and that resulted in the Great Recession of 1937.

That recession, caused entirely by deficit hawks and other conservatives, is what took WWII to end.

Remember, conservatives are the enemy. They will fuck us up every way they can, and then lie about who was responsible. Learn that fact and you'll begin to understand history a little better.

[leveymg]

5. The Great Depression was a global phenomenon that in large part led to World War Two

I'm very familiar with the partial withdrawal of the New Deal in 1937. But, decisions in Congress that year did not have much to do with the events elsewhere that would lead to the mass carnage to follow.

The Spanish Civil War started in 1936, and that was a sort of dress rehearsal. Throughout the 1920s and 1930s, Wall Street and some American companies were pumping money into the armaments industries of Germany, Italy and Japan. Some very famous names ran those efforts - the Dulles Brothers, Prescott Bush, Morgan Bank, the DuPonts. Same names pop up in the "Banker's Plot" of 1934. Read the Nye Report and Scott Horton's articles in Harper's.

[Warpy]

10. Yes, the war would have happened, however

your point that it's what it took to end the Great Depression was in error, since without a cowardly Congress, the New Deal would most likely have done so.

That's the point I was addressing, not the inevitability of WWII.

[WhiteTara]

3. hopefully we will look to the 21st century

for the answers rather than the past. If we laid down our weapons, we could rebuild the world and it certainly needs it. The infrastructure all over the world is crumbling.

[Cirque du So-What]

4. Particularly worrisome

is the prospect of an economic downturn in China, where scores of millions of young, single, jobless men (owing to China's one-child social policies that encouraged abortion/abandonment of female babies) have moved into urban areas - restless & primed for something - ANYthing to do, represent a threat to the regime. In such a case, an expeditionary war may represent the Chinese regime's best hope for quelling domestic unrest - keeping the masses of young men occupied by war.

[leveymg]

7. Sort of how the PRC and US military encouraged cigarette smoking after the Surgeon General's Report

around 2000 people a day are currently dying of smoking in China. ...
http://news.bbc.co.uk/2/hi/health/216998.stm

The costs of smoking among US military health care system beneficiaries have been estimated to be more than $900 million per year in 1995 - Wiki: Military and Smoking

Same phenomenon, just in slow-motion.

[blindpig]

6. Capitalism may turn to the 20th century solution ...

to over-production, war.

We've seen this movie, WWI and it's continuance, WWII. This is an endemic contradiction of Capitalism, those who do not learn from history....

[xchrom]

8. And this why we need a serious Jobs/New Deal legislation.

You can't just allow a whole bunch of people to
Become unemployable.

It will on an energy all it's own create serious trouble in society,
In the economy, etc.

It won't just stay still.

[area51]

16. +1

Long-term unemployment is going to turn really ugly, eventually there may be a revolution though I think that will occur after my lifetime.

[lunatica]

9. The thin veneer of civilization is wearing out

Because there's a point of no return in every direction. It's much easier to lift a country like the United States out of this slump than it is to lift a third world country. That is, until we reach that point of not being able to lift out of the deepening slump.

On top of that the wealthy are perfectly happy to live with the slump. The deeper it is the better off they are and they run the world.

[bvar22]

20. The point of No Return?

When FireFighters watch someone's home burn to the ground because he didn't pay his fee.

We have returned to the Gilded Age,
and the Top 1% lived quite well then.

[divvy]

11. The Economic outlook is far better than the political speech implies

Right now, businesses are flush with cash. The cost to borrow has dropped to multi-generational lows. A 30-year mortgage is at 4%. Bond yields are extra-ordinarily low.

What this means is that we are on the cusp of a fantastic recovery. If you are old enough, think of the opportunity you would have had 30 years ago to buy a house at 4% compared to the 10% you likely would have paid. The same opportunity is now present for businesses who can borrow cheap to refinance old debt and create new opportunities.

The same opportunity is here for municipalities. The alarmist-conservative news machine predicts municipal defaults while most of these are re-financing public debt at near-zero rates. Illinois has about the worst credit rating of all, and they are having no problem selling BAB in the 5% range.

It is not as bad as the republicans / teabaggers want you to think it is. They want to seize control now so they can take credit for the huge expansion just around the corner.

[Tesha]

12. Another way to think of this is that a system can have multiple stable states.

Our entire economy was in one
mostly-stable state since about WWII.
We had manufacturing jobs, financial
jobs, service jobs, education and training,
housing, etc.. And, more or less, we could
have rolled along un that stable state forever,
probably even transitioning to other forms
of energy as oil became too expensive.

But the Republicans, substantially starting in
1980, broke all that. They removed most of
the manufacturing jobs, destroyed public education,
and radically remade the economic system not to
function for the long term but to rapidly transfer vast
masses of the nations wealth into the hands of the
already-wealthy.

And so our economy tipped into another state, a state
that far more resembles a third world nation. And this
is also a stable state, so absent a huge, huge effort,
we'll be remaining in this state for the foreseeable future.

Tesha

[IDemo]

13. Hysteresis isn't an inherently ugly word

It's what keeps any system which relies on feedback mechanisms, whether economic or physical, from "oscillation", or reversing direction continuously. Hysteresis is why your heating and air-conditioning don't turn on and off rapidly with the slightest change in temperature.

Under the conditions the author speaks of, it will definitely leave a chill in the room for most, while the One Percenters enjoy perfect comfort upstairs.

[Kurt_and_Hunter]

14. I think the Post is misunderstanding the word

Hysteresis has two main definitions. One is an effect lagging a cause.

The one that is widely discussed today in economics as pertinent to unemployment is the other definition, a substance's ability to "remember" a state.

The hysteresis everyone is worried about is that prolonged high unemployment changes the basic nature of the economy in ways that reduce the "natural" unemployment rate.

That is, the longer you have high unemployment the lower the amount of job creation the economy can experience without sparking inflation. (The "nature" employment rate.)

[L0oniX]

15. FACT: Sustainability is impossible with finite resources. PEAK OIL!

All this squabbling over jobs and the economy and the politics of it all is futile.

Do you all realize what all comes from oil? It's not just for gas. Plastic, rubber, pesticides, agriculture, etc.

Keep looking somewhere else and stay in denial. Keep holding up that idea that science can conquer all problems or that the right political party and leader can solve the problems and wars that are a result of the world reaching peak oil.

[Odin2005]

17. Yes, we are all DOOOOOOMED! Let just go into a cave and kill ourselves!

:sarcasm:

The lack of imagination from the PO Doomers is very sad. Moving to a post-oil society does not mean reverting to a pre-industrial existence. Necessity is the mother of invention.

[L0oniX]

18. Go on smoking ya crack and ...enjoy your ride on the Titanic.

You need a good imagination to believe there is a way out from using oil and keeping the same standard of living we have. You also need to be on crack or LSD to think or believe that oil is not a finite resource.

[Odin2005]

22. I'm not the one treating oil as some magical substance.

[Hannah Bell]

19. "we're only three years into this economic crisis" - *only*?

[kentuck]

21. Yep, "Only"...

"Even if we started adding 200,000 jobs a month, it would take us about 12 years to return to full employment."