Brad DeLong's Semi-Daily Journal (2004)

The Vietnam War was the Right War at the Right Time for the Right Reasons and it was worth it!

President John F. Kennedy decided to stop the locust swarm-like advance of Communism in Southeast Asia for morally right and geopolitically correct reasons. He continued in the tradition of President Harry Truman and the old patriotic Democratic Party. President Lyndon B. Johnson loyally continued and expanded that effort to contain Communism.

Contain Communism? Modern Americans are prone to laugh at such a goal because they are totally ignorant of the bloody history of Communism because the Left liberal controlled Media-Academic Complex has done its best to erase it from our collective memory.

Here is the truth about Communism;

http://pep.typepad.com/public_enquiry_project/2004/08/the_vietnam_war.html

The Vietnam War was the Right War at the Right Time for the Right Reasons and it was worth it!

President John F. Kennedy decided to stop the locust swarm-like advance of Communism in Southeast Asia for morally right and geopolitically correct reasons. He continued in the tradition of President Harry Truman and the old patriotic Democratic Party. President Lyndon B. Johnson loyally continued and expanded that effort to contain Communism.

Contain Communism? Modern Americans are prone to laugh at such a goal because they are totally ignorant of the bloody history of Communism because the Left liberal controlled Media-Academic Complex has done its best to erase it from our collective memory.

Here is the truth about Communism;

http://pep.typepad.com/public_enquiry_project/2004/08/the_vietnam_war.html

Adrian,

We all realize your zeal to get your hatred out there for all to see, but could you at least pretend to write something that is marginally pertinent to the topic? You are increasingly sounding like the pathestic character from The Big Lebowski played by John Goodman that always talked about Vietnam regardless of the actual topic of the conversation.

the chinaman is not the issue!

I'm not sure it's possible, after a start like that, to get us back on topic, but I'll try.

Spending? Spending will look after itself, I think, as long as you provide income. Wages and salaries are up 2.3% on the year, after inflation adjustment, while real disposable income is up 3.5% in June, 3.8% in May, vs over 4% in each of the prior 6 months. The recent slowing in real disposable income growth is, not surprisingly, coincident with a slowing in PCE growth.

The cooling in real disposable income growth also seems coincident with the end of refis and tax refunds (as well as with the sharp rise in gasoline prices). So, for most households, we are back to wages to fuel spending. That 2.3% real rise in wages and salaries seems, to me, a pretty worrying feature of today"s report.

Are gasoline and other energy purchases considered part of consumer spending?

If so, I find the argument that higher energy prices reduced consumer spending unconvincing.

Gasoline demand is inelastic, so higher prices would increase total spending there. Presumably there is some decline in pleasure travel, and maybe even ordinary shopping trips, but is this really enough to account for the reduced total spending?

Can someone shed a little more light on this explanation of the drop?

Are gasoline and other energy purchases considered part of consumer spending?

If so, I find the argument that higher energy prices reduced consumer spending unconvincing.

Gasoline demand is inelastic, so higher prices would increase total spending there. Presumably there is some decline in pleasure travel, and maybe even ordinary shopping trips, but is this really enough to account for the reduced total spending?

Can someone shed a little more light on this explanation of the drop?

In an effort to sprinkle as much data around as I can (thereby clearing away the smell of napalm), real disposable income rose at a 2.9% annualized pace in Q2, down from 3.2% in Q1 and down from a 3.6% average over the past 6 quarters. That 2.9% is way off the recent pace of PCE and GDP growth, but is just about identical to the 3.0% annualized pace of growth in GDP in the quarters. Coincidence? I don't think so.

Are gasoline and other energy purchases considered part of consumer spending?

If so, I find the argument that higher energy prices reduced consumer spending unconvincing.

Gasoline demand is inelastic, so higher prices would increase total spending there. Presumably there is some decline in pleasure travel, and maybe even ordinary shopping trips, but is this really enough to account for the reduced total spending?

Can someone shed a little more light on this explanation of the drop?

Are gasoline and other energy purchases considered part of consumer spending?

If so, I find the argument that higher energy prices reduced consumer spending unconvincing.

Gasoline demand is inelastic, so higher prices would increase total spending there. Presumably there is some decline in pleasure travel, and maybe even ordinary shopping trips, but is this really enough to account for the reduced total spending?

Can someone shed a little more light on this explanation of the drop?

Bernard,

Yes, yes, yes, gasoline is part of PCE. Note that the big decline in spending was on durable goods. That's the plunge in auto sales, along with some other stuff. It is very hard to argue, on a one-month basis, that energy costs were the culprit, when energy costs have been rising for a long time.

Real spending can be depressed by a rise in energy prices, because real spending still takes place with nominal dollars, many of which are headed overseas to oil producers and also into what are now rather high refining margins. Spending very likely is being sapped by high energy prices, but the nominal 0.7% drop in spending was so large (2nd largest since October, 2001), that looking for an explanation in a persistent factory like energy prices is probably naive.

"...factory..." Sheesh.

It seemed that gasoline prices dropped fairly quickly from their early summertime highs, much more quickly than the lags that we seem have after other highs. On the flip side the run up in gasoline prices is usually swift and seems to almost immediately follow increases in oil. That said, however, I have seen no local price increases following the recent oil price increases. Aside from AAA's recent gasoline prices, I can't afford to pay for the historical data on gasoline prices, has anyone looked at this in an analytical fashion? Are my observations real or is my imagination running away with me?

Some fool asked, "Are gasoline and other energy purchases considered part of consumer spending?"

Only a rep, elevating form over substance, would ask this stupid, vapid, silly question. Energy prices are a tax, a tax that we principally pay to foreign governments. If you think not, understand that the only reason one cannot sue OPEC for a treble refund under the antitrust laws is that OPEC is a conspiracy by several foreign states, making such immune from suit.

Moe "Speak the Truth" Levine

Sorry for the multiple posts, but I was getting some sort of message about inability to locate the URL or something. I guess it's Brad's left-wing software again.

kharris,

Thanks for the comments. I had overlooked the fact that these are real rather than nominal figures, but still have to agree that attributing it to energy prices seems to be a stretch.

Surely rising interest rates affected durable goods purchases, and could consumers finally have maxed out all their credit cards?

Some fool asked, "Are gasoline and other energy purchases considered part of consumer spending?"

Only a rep, elevating form over substance, would ask this stupid, vapid, silly question. Energy prices are a tax, a tax that we principally pay to foreign governments. If you think not, understand that the only reason one cannot sue OPEC for a treble refund under the antitrust laws is that OPEC is a conspiracy by several foreign states, making such immune from suit.

Moe "Speak the Truth" Levine

Spending on napalm is up 3.8, spending on hand-held explosives including grenades is up 8.5., firearms spending is slightly down at .04 but expected to pick up when the ban on assault rifles ends.
Spending on "dirty bomb" programs is slightly lower than forecasted, at 13.8 percent, but this is not cause for worry. It is thought a corresponding upswing in bio-chemical weaponry will compensate.
What this means in an election year remains to be seen.

Spending on napalm is up 3.8, spending on hand-held explosives including grenades is up 8.5., firearms spending is slightly down at .04 but expected to pick up when the ban on assault rifles ends.
Spending on "dirty bomb" programs is slightly lower than forecasted, at 13.8 percent, but this is not cause for worry. It is thought a corresponding upswing in bio-chemical weaponry will compensate.
What this means in an election year remains to be seen.

Spending on napalm is up 3.8, spending on hand-held explosives including grenades is up 8.5., firearms spending is slightly down at .04 but expected to pick up when the ban on assault rifles ends.
Spending on "dirty bomb" programs is slightly lower than forecasted, at 13.8 percent, but this is not cause for worry. It is thought a corresponding upswing in bio-chemical weaponry will compensate.
What this means in an election year remains to be seen.

While the business pages are lamenting the fall in spending or writing it off as a blip on the screen, shouldn't we be glad that consumption is more in line with income? Nominally, wages and salaries actually fell in June: -0.02%. In real terms wages and salaries were down 0.27% in a single month. Annualized that's a 3.25% fall!

Greenspan is full of crap -- as usual.

If this economy is experiencing but a slight "soft patch," then the La Brea Tar Pits were but a tad tacky.

Dear KHarris

You are a wonder.
Do persist.

My sense is energy prices are not causing the decline in consumer spending, rather limited wage and benefit increases. Living on asset wealth becomes trickier as interest rates increase and home refinancing slows, so we are more wage and benefit dependent. There seem to be the rub.

Anne

Adrian the jinx strikes again.

"...the Left liberal controlled Media-Academic Complex..."

Does anyone know what planet AS is from?

"...because the Left liberal controlled Media-Academic Complex has done its best..."

How does one become this unraveled?

"...because the Left liberal controlled Media-Academic Complex has done its best..."

How does one become this unraveled?

Excuse the multiple posts.

I kept getting a Web Site Not Responding message.

Sorry for the multiple posts, but I kept getting a Web Site Not Rssponding message.

Anne,

I blush.

Bernard,

Just to keep the record straight (since I'm the one who inadvertently set it crooked), the income and spending data come in both flavors, real and nominal. Since there have been some notable recent gains in energy and food prices, along with lesser gains in the core, I tend to automatically set things in real terms, without always specifying what's what. The figures in the press are mostly nominal.

Moe,

You're a jackass. How's that for truth?

"Manufacturing activity increases again"(Hmmm?)

http://www.msnbc.msn.com/id/5342467/

But the economy is booming:

http://www.nytimes.com/2004/08/04/opinion/04shultz.html