A Third Dimension in American Economics…

Traditional economic principles have revolved around the Macro and Micro with interventionist influences driven by GDP (Gross Domestic Product, or total economic output), interest rates, inflation rates and federally controlled monetary policy designed to steer the broad economic outcomes.

Additionally, in large measure, the various data points which underline Macro principles are two dimensional.  As the X-Axis goes thus, the Y-Axis responds accordingly… and so it goes…. and so it has historically gone.

trump convention 2

Traditional monetary policy has centered upon a belief of cause and effect: (ex.1) If inflation grows, it can be reduced by rising interest rates.  Or, (ex.2) as GDP shrinks, it too can be affected by decreases in interest rates to stimulate investment/production etc.

However, against the backdrop of economic Globalism -vs- economic Americanism, CTH is noting the two dimensional economic approach is no longer a relevant model.  There is another economic dimension, a third dimension. An undiscovered depth or distance between the “X” and the “Y”.

I believe it is critical to understand this new dimension in order to understand Trump economic principles, and the subsequent “America-First” economy he’s building.

As the distance between the X and Y increases over time, the affect detaches – slowly and almost invisibly.  I believe understanding this hidden distance perspective will reconcile many of the current economic contractions. I also predict this third dimension will soon be discovered and will be extremely consequential in the coming decade.

To understand the basic theory, allow me to introduce a visual image to assist comprehension.   Think about the two economies, Wall Street (paper or false economy) and Main Street (real or traditional economy) as two parallel roads or tracks.  Think of Wall Street as one train engine and Main Street as another.

The Metaphor – Several decades ago, 1980-ish, our two economic engines started out in South Florida with the Wall Street economy on I-95 the East Coast, and the Main Street economy on I-75 the West Coast.  The distance between them less than 100 miles.

As each economy heads North, over time the distance between them grows.  As they cross the Florida State line Wall Street’s engine (I-95) is now 200 miles from Main Street’s engine (traveling I-75).

As we have discussed – the legislative outcomes, along with the monetary policy therein, follows the economic engine carrying the greatest political influence.  Our historic result is monetary policy followed the Wall Street engine.

a17b2-hip-replacement-recall-bribery[…]  there had to be a point where the value of the second economy (Wall Street) surpassed the value of the first economy (Main Street).

Investments, and the bets therein, needed to expand outside of the USA. hence, globalist investing.

However, a second more consequential aspect happened simultaneously.  The politicians became more valuable to the Wall Street team than the Main Street team;  and Wall Street had deeper pockets because their economy was now larger.

As a consequence Wall Street started funding political candidates and asking for legislation that benefited their interests.

When Main Street was purchasing the legislative influence the outcomes were beneficial to Main Street, and by direct attachment those outcomes also benefited the average American inside the real economy.

When Wall Street began purchasing the legislative influence, the outcomes therein became beneficial to Wall Street. Those benefits are detached from improving the livelihoods of main street Americans because the benefits are “global” needs. Global financial interests, investment interests, are now the primary filter through which the DC legislative outcomes are considered.

There is a natural disconnect. (more)

Here is an example of the resulting impact as felt by consumers:

economy-1

♦ TWO ECONOMIES – Time continues to pass as each economy heads North.

Economic Globalism expands.  Wall Street’s false (paper) economy becomes the far greater economy.  Federal fiscal policy follows and fuels the larger economy.  In turn the Wall Street benefactors pay back the politicians.

Economic Nationalism shrinks.  Main Street’s real (traditional) economy shrinks.  Domestic manufacturing drops. Jobs are off-shored.  Main Street companies try to offset the shrinking economy with increased productivity (the fuel).  Wages stagnate.

Now it’s 1990 – The Wall Street economic engine (traveling I-95) reaches Northern North Carolina.  However, it’s now 500 miles away from Main Street’s engine (traveling I-75).  The Appalachian range is the geographic wedge creating the natural divide (a metaphor for ‘trickle down’).

By the time the decade of 2000 arrives – Wall Street’s well fueled engine, and the accompanying DC legislative attention, influence and monetary policy, has reached Philadelphia.

However, Main Street’s engine is in Ohio (they’re now 700 miles apart) and almost out of fuel; there simply is no more productivity to squeeze.

From that moment in time, and from that geographic location, all forward travel is now only going to push the two economies further apart.  I-95 now heads North East, and I-75 heads due North through Michigan.  The distance between these engines is going to grow much more significantly now with each passing mile/month….

However, and this is a key reference point, if you are judging their advancing progress from a globalist vessel (filled with traditional academic economists) in the mid-Atlantic, both economies (both engines) would seem to be essentially in the same place based on their latitude.

From a two-dimensional linear perspective you cannot tell the distance between them.

It is within this distance between the two economies, which grew over time, where a new economic dimension has been created and is not getting attention.  It is critical to understand the detachment.

Within this three dimensional detachment you understand why Near-Zero interest rates no longer drive an expansion of the GDP.  The Main Street economic engine is just too far away to gain any substantive benefit.

Despite their domestic origin in NY/DC, traditional fiscal policies (over time) have focused exclusively on the Wall Street, Globalist economy.   The Wall Street Economic engine was simply seen as the only economy that would survive.  The Main Street engine was viewed by DC, and those who assemble the legislative priorities therein, as a dying engine, lacking fuel, and destined to be service driven only….

Within the new 3rd economic dimension, the distance between Wall Street and Main Street economic engines, you will find the data to reconcile years of odd economic detachment.

brexit-letter-1

Here’s where it gets really interesting.  Understanding the distance between the real Main Street economic engine and the false Wall Street economic engine will help all of us to understand the scope of an upcoming economic lag; which, rather remarkably I would add, is a very interesting dynamic.

Think about these engines doing a turn about and beginning a rapid reverse.  GDP can, and in my opinion, will, expand quickly.  However, any interest rate hikes (fiscal policy) intended to cool down that expansion -fearful of inflation- will take a long time to traverse the divide.

Additionally, inflation on durable goods will be insignificant – even as international trade agreements are renegotiated.  Why?  Simply because the originating nations of those products are going to go through the same type of economic detachment described above.

Those global manufacturing economies will first respond to any increases in export costs (tariffs etc.), by driving their own productivity higher as an initial offset, in the same manner American workers went through in the past two decades.  The manufacturing enterprise and the financial sector remain focused on the pricing.

♦ Inflation on imported durable goods sold in America, while necessary, will ultimately be minimal during this initial period; and expand more significantly as time progresses and off-shored manufacturing finds less and less ways to be productive.   Over time, durable good prices will increase – but it will come much later.

♦ Inflation on domestic consumable goods ‘may‘ indeed rise at a faster pace. However, it can be expected that U.S. wage rates will respond faster, naturally faster, than any fiscal policy because inflation on fast-turn consumable goods become re-coupled to the ability of wage rates to afford them.

The fiscal policy impact lag, caused by the distance between federal fiscal action and the domestic Main Street economy, will now work in our favor.  That is, in favor of the middle-class.

Within the aforementioned distance between “X” and “Y”, a result of three decades traveled by two divergent economic engines, is our new economic dimension….

Trump thumbs up

We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment,” said the platform released by the Republican National Committee. (link)

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164 Responses to A Third Dimension in American Economics…

  1. Craig W. Gordon says:

    First and foremost, the FED needs to be dealt with. They can ruin the best laid fiscal plans. Their fedspeak baffles. They make the rules as they go along.

    Liked by 17 people

    • coldwarrior says:

      the feds mandate is confused and often at odds with itself. it is to provide for price stability AND for full employment by using interest rates as the ‘spigot’ for cash flow.

      a qucick look at the ‘velocity of money’ or an IS/LM model will show that this is a difficult task, if not impossible.

      Liked by 3 people

      • dalethorn says:

        With the national debt at $20 trillion, how can anyone raise interest rates for investment? What do you suppose we pay for interest on the debt now?

        Liked by 1 person

      • Finalage says:

        They should only be allowed to affect price stability. The Feds eye should be on nominal GDP and nominal GDP only! When nominal GDP outstrips real GDP by too much, it’s time to raise rates. If it lags, cut rates. Simple.

        But I would rather the Fed be disbanded and the currency be pegged by gold or the real tangible assets of the Federal government. Gold has better convertibility than US government assets, so gold should do.

        Like

        • oncefired says:

          If I were Trump, the minute sworn in, quietly audit Ft. Knox, start mining ventures on public land that has been closed all these years. USGS knows where to go, ie, Chocolate Mountain, Alaska, etc. Let the FED keep monetizing debt, get all foreign debt back from unfriendly countries and let the FED monetize it. Put a new Glass-Stegall back in place. Then end the FED and stick all the Wall Street Banks that own the FED with the debt. Have the Treasury stop printing Federal Reserve Notes and print US Notes backed by gold. Empower small banks & credit unions. Sell off what is left of the carcasses of the Goldman’s, Citis, etc to pay back the little investor, Jail the CEO’s!

          Liked by 13 people

        • annieoakley says:

          The Federal Government has appropriated too much land. It is this asset they borrow against and it will ruin the US if not stopped. It belongs to the States and not the Feds. And yes a Central Bank has taken control of Money from Congress where it should reside.

          Liked by 2 people

      • val477 says:

        Their original mandate never included to provide full unemployment. They were only supposed to maintain price stability. It was fiscal policy that was supposed to handle unemployment. However, since congress can never control their spending, they turned to the Fed as a bailout to help them, thereby placing a new mandate on it to manage unemployment.

        Liked by 1 person

    • The fight against the Central Bank is basically the story of America.

      Jackson fought the bank. Lincoln tried to get off the Bank. JFK wanted to make silver a currency.

      Liked by 3 people

    • notamemberofanyorganizedpolicital says:

      Yeah. Get that Obama Chairman Mao outta the Fed to start with……

      Liked by 3 people

    • Bob says:

      The fed needs to be eliminated…..along with the IRS, in the case of the IRS, they can be eliminated by implementing the FAIR TAX then everyone wins.

      Liked by 3 people

      • dalethorn says:

        Before we have a Fair Tax, we MUST stop the feds from “granting” money to the states, and thus depleting the treasury while buying unconstitutional influence at the state level.

        Liked by 5 people

        • WSB says:

          This ‘grant’ scam should be stopped immediately just as you mention. The amount of funding these so called refugee settlement agencies are receiving just makes you want to strangle someone.

          Liked by 1 person

      • annieoakley says:

        I like the tax on a postcard idea very much. Doing my taxes online makes me really nervous.

        Like

    • First and foremost, the not at all Fed, nor is it a reserve… must go. Period. People can speculate all they want about it, and I know I have typed this here many times, but expecting the private central bank and its strongarm extortion revenue gang to suddenly do the right things and become “America First” is ludicrous. It was created to do just what it does, which is rape hard working Americans resources.

      Fiat currency is fiat, and voluntary compliance is right up there with political correctness in the oxymoron category.

      You decide.

      Liked by 6 people

    • sunnydaysall says:

      We need to audit the fed and get rid of them. They are what is holding this country back. and JFK had the right idea! Pay them off and get rid of them… But then again, some say it cost him his life…

      Liked by 4 people

      • Pay them off and get rid of them???

        Haven’t they stolen enough by now?

        Just end the fed and be done with it.

        Liked by 1 person

        • sunnydaysall says:

          Do you think they would go lightly? I agree we should kick them in their a$$ and show them the door with their hat in their hand, but it may not end well if we do not pony up for our debt! And just how much we owe them could be far less once they are audited! Hell, they just might owe us!

          Like

    • dmi60ex says:

      What is evident from the chart ( so called) luxuries have reduced while basics have inceased sustantially. Therefore those on the edge of middle income never get ahead .If you have an income that goes above rhe break even point your add on luxuries have tended to be lower increasing the gap between the life styles of the lower and middle income from the upoer income.

      Liked by 1 person

  2. Your Tour Guide says:

    One thing hit me when I looked at the increase in College Tuition/ books. It’s a 4 way win for the elites:
    1. Overcompensate fellow travelers for maintaining the approved narrative.
    2. Overcompensate Wall Street on the bond market for endless bricks and mortar costs.
    We have a community college nearby ( currently Georgia Perimeter, Clarkston Campus, formerly
    Georgia Perimeter College). I attended there about 4 years ago, and there was a 50 MILLION
    deficit. My instructor did out of pocket for white board supplies, scan sheets, and the like.

    Fast forward 3 years. Georgia State has combined with the outlying campuses of Georgia Perimeter. I go to help enroll my oldest child at the campus. There's brand new furniture everywhere, new lamposts in the central areas, expensive stone structures for the kids to sit on and
    

    study. Everywhere I turned in central areas furniture and surroundings had been replaced/updated.
    The most damning thing( other then being in the hole out of tax payers pocket 50 million before) was that none of these areas had looked remotely shabby or outdated when I was attending.

    Enslave everyone to the banks / government with student loans that are a crap shoot to be able
    to be repaid with the current job market.
    Over rewardd the textbook publishers for pushing the narrative. One hundred forty eight dollars
    for a paperback math book. (And that was at the low end for required texts).

    Liked by 7 people

    • Fake Nametag says:

      My wife’s textbooks are often near in cost to her tuition. Why are they rewriting these textbooks? My father’s Calculus book from 1951 has the exact same topics in the same order as the $250 Calculus book I am going through right now, which was written in 2015.

      Textbooks, the biggest scam ever. If there was anything that should be universally provided by our government, it should be textbooks. Of course, for things like history, I wouldn’t want them inserting their bias. But for subjects like math and engineering, the government should have the books written, and provide them free.

      Like

      • annieoakley says:

        Why? You are ‘the government’ you provide textbooks for free.

        Like

        • Fake Nametag says:

          I’m not in favor of handouts. I’m simply saying that if the government is going to give out ANY handouts, accurately written and timeless textbooks should be at the top of the list. There is no reason for most math textbooks to be rewritten every 2-3 years and sold for $300.

          Like

          • notamemberofanyorganizedpolicital says:

            You have it figured out.

            Even online e-text books routinely cost $150.
            The text book publishers introduce new editions about every 9 to 12 months now.

            Guess who owns those publishers? The same people who own the MSM.

            Liked by 1 person

            • annieoakley says:

              This is a problem and the biggest reason Common Core was introduced. A big way to boost publishing houses although the actual printing is done in China. (As far as I know)

              Like

      • rashamon says:

        Nothing is EVER free. Schooling in general has escalated in price since the mid-1960s as more loans were made available to suck students into perpetual debt. Not everyone needs to go to college, especially to study a “studies” major. The job market doesn’t support the cost of the loans taken out to attend. Nor does the uptick in the number of “administrators” to handle all the social justice warriors’ complaints. There are now as many administrators at colleges as there are professors and instructors. I have two words for the SJW: Grow up!

        Back to free stuff: You want or need it, you pay for it.

        Like

  3. citizen817 says:

    Excerpts
    Janet Yellen and the Feds raised the interest rates again. After crying the rate hike wolf for nearly a year, she finally raised rates by another quarter point while promising more hikes to come in 2017. Rates weren’t raised sooner because they probably wanted to protect the stock market under Obama. The Fed protects their own because they want globalism and collectivism. That means most Americans get poorer while the central bankers and their elite friends get stupendously richer.

     Quantitative easing never ended, it simply went underground. The Fed does as it pleases. There is no accountability—not really. 

    It’s time to end the Fed and return the power of money creation and its management back to Congress as stated in our Constitution.

     https://grrrgraphics.wordpress.com/2016/12/17/mothers-debt-bomb-cake-new-cartoon/

    Liked by 18 people

  4. Jack says:

    You don’t have to make it so complicated. Usury is the problem, and it has been since the Bank of England was created. The Oligarchs will have their hooks into the Crown wherever Christ has been overthrown and mammon put in His place. Plain and simple.

    Liked by 6 people

    • dalethorn says:

      People confuse the Capitalist system and usury. The aim of usury is to place people in permanent debt, and thus gain control of the nation’s economy. And everything else that’s evil flows into the nation after that – crime, drugs, terror, all related to the kind of immigration that the banksters promote.

      Liked by 1 person

    • nyetneetot says:

      I guess in abstract I can to agree usury being a core issue in Western society but we’re about 325 years into accepting it’s usage. As for the rest of your statement, the worship of money has been an issue long before the time of Christ, and the oligarchs has succeeded in replacing crowns with bodies of men starting about…. 325 years ago… coincidence?

      Like

  5. India Maria says:

    Makes sense. Recall over the last eight years, even a MENTION of slight rate increase by some Fed official caused a week long swoon in the market. Serious chatter by Yellen caused a month-long malaise in the market. This week a 1/4 point ACTUAL INCREASE with a PROMISE of another 1/2 point increase at the next Fed meeting caused a slight pullback, followed by further INCREASES in the stock market. Wall Street utilizing ZERO interest money to pump the Stock Market may see some reduce profiting. But MAIN Street will only benefit from lower taxes, repatriation, reduced regulation and lower energy costs.

    I am a simple, flyover rube. But SAVERS, Lenders, and Bondholders (including Corporate Bondholders) all benefit from more normalized interest rates. Plus, a good paying job, for a change, will motivate a new home purchase, despite a slightly higher mortgage rate.

    Liked by 7 people

    • dalethorn says:

      But then the interest goes up on the national debt, and that robs $trillions out of the economy.

      Like

      • Finalage says:

        Interest expense is already factored in the deficit as is. The additional interest expense due to higher interest rates will be covered as does all additional spending by borrowing until growth catches up.

        It will be good for Trump to trim the fat from government as well and really addres waste, fraud and abuse and procurement reform. That way you can offset increase interest expense with spending cuts.

        Like

        • repsort says:

          meh.. I agree that all of that has to happen, but it’s small-fry stuff compared to what’s really destroying our budget. 37 cents of every buck spent is on Medicaid/Medicare.. It’s rising exponentially and will destroy us within a few years if it’s not FIXED NOW. https://market-ticker.org/akcs-www?post=231561

          Like

          • Sam says:

            Medicare is being stolen from to finance Obamacare. Keep that in mind. Unwind Obamacare first, but have a free market and a high risk pool to replace it.

            Medicare was part of a promise to seniors that they would have some medical care after they retired. Social Security was the same, an income after retirement. The Congresses never bothered to put the taxes collected for them under lock and key so that they or their successors couldn’t spend it on pork. And they refused to raise FICA taxes to fully fund those programs.

            The essential problem is the men and women running legislatures and medical care are greedy and foolish.

            Liked by 1 person

            • Social Security and Medicare/Medicaid were always and ARE still welfare under a more palatable term. My mother opposed it as a very young woman and ever after that, as did many other people who were crushed under the Socialist boot of the FDR administration.

              {{{waving}}} Hi, FDR in Hell! How ya doin’?

              Like

              • annieoakley says:

                Oppose all you want but you pay into it. Give me back the money I paid to it that has been stolen by Congress twice. Any trust fund is replaced with worthless Government Bonds. Paid into all of them and the money went to Congress/Federal Government programs for illegals and refugees.

                Like

              • WSB says:

                Medicaid is but not Medicare and Social Security.

                Like

          • jrapdx says:

            You have to account for where the health care dollars are going. How much is going to middlemen (like insurance companies) and government bureaucracy vs. direct patient care. I think you’d find there’s a lot spent on overhead vs. treating/preventing illness.

            It’s important to factor in the costs of not providing adequate care. When total costs to the economy are considered, the least expensive option is treating health conditions thoroughly.

            Remember there is cost for actions we decide to take, and a potentially greater cost for actions we decide not to take. It’s the classic story: there’s no free lunch to be had.

            Like

            • jrapdx – your excellent comment is a very concise explanation of why all medical care MUST BE the responsibility of the patient and his/her family!

              Any other system builds in waste, fraud and abuse. Including private insurance, but I understand that people are very afraid of getting desperately ill and not being able to pay for necessary care, so I favor voluntary purchase of health insurance policies..

              Like

            • WSB says:

              I believe we should only have catastrophic insurance. I do not need food insurance to make regular trips to the grocery store. Why would I need insurance to regularly visit the doctor or dentist?

              Cut out the middleman and make regular healthcare goods and services competitive.

              Liked by 2 people

            • notamemberofanyorganizedpolicital says:

              Touche. I bet 50 to 75 percent of the cost is because of the middle man and administrative overhead.

              Like

          • India Maria says:

            What budget?….One Trillion dollars from 2008 “Stimulus” is being carried over with Budget Reconciliation since 2008. There IS no budget. So “all that..” must happen, i.e. jobs and National Wealth creation IN ORDER to fix Medicaid/Medicare, Social Security, and National Infrastructure, among other items that need to be “fixed,” such as, The National Debt.

            What percentage of Medicaid would you estimate, for example, do we spend on the 30 MILLION PLUS ILLEGAL ALIENS, ANCHOR-families, and REFUGEES for life, and over multi-generations?

            Liked by 3 people

          • Finalage says:

            Medicare can be fixed for the future generations by pegging the growth to inflation and giving long-term HSAs to the young. It must become a partial define contribution benefit.

            Like

      • India Maria says:

        The National Debt has DOUBLED from 10TRILLION to 20 TRILLION with ZERO Interest. Maybe something else, BESIDES interest is responsible for this increase. In National Debt, I mean.

        Like

      • Who gets those interest payments on govt debt/bonds? Why, individuals, esp. retirees, who invest in “safe” govt bonds and bills; state and private pension funds; insurance companies; foreign governments (!); businesses (looking for places to park excess cash); banks and other financial institutions.

        Just sayin’ This is not an easy problem to solve.

        Also, **private banks” have always issued currency in the form of IOUs backed by their OWN gold. That’s why the Gold Rush that began in 1848-9 caused massive inflation in the rest of the US.

        I’m not as up on my financial history as I’d like to be, but I believe that the debate about a National Bank vs State Banks has gone on since before we became the United States. The Federal Reserve Bank System is made up of 12 regional banks, some of which provide excellent economic research papers (St. Louis, Dallas), others of which, um, not so much. Janet Yellen came from the San Francisco Fed Bank. Need I say more?

        For initial reading on the FRB, start here (but don’t believe a word in the first paragraph about why the System was formed. Simple note the proximity to WW I):: https://en.wikipedia.org/wiki/Federal_Reserve_System

        Like

        • annieoakley says:

          Government Bonds have been paying about .01% for 8 years now.

          Like

        • nyetneetot says:

          “Just sayin’ This is not an easy problem to solve.”

          Actually, yes it is. What you and everyone else mean is, ‘what can be changed that will have little to no negative impact?’ and of course the answer is nothing.

          Like

      • svenwg says:

        The FED interest rate has nothing to do with the National Debt. The National Debt is controlled by the issuing of government bonds that have the interest rate built in by the buyers of the bonds. It all relies on the country’s credit rating and as far as I am aware, the USA is still rated triple A, with bond repayments at something like 2% if not less.

        Like

  6. Yeoman says:

    Sundance has done a great job of illustrating the failures with the prevailing economy theory.

    Even “conservative” economic professors don’t recognize this dichotomy between main street and wall street.

    I prefer to view them as the real economy (main street) versus the virtual economy (wall street). Individuals can do really well playing in the virtual evonomy, but it does little to nothing for the real economy. The real economy on the other hand affects everyone.

    Expect the liberals to harp on the improvemeets in wall street, as main street im proves, as proof Trump is the same old wall streel supporter as all the other “rich supporating politicians”. As Sundance has pointed out, they are dramatically different; however, this is an economic theory the pundits may not ever embrace and liberals will always refute.

    Liked by 7 people

    • That’s ok Yeoman, “they” can continue down that path of refuting the truth and reality, as they did during the campaign and election of DJT BUT, watch our Pres. Trump gather we the people together and start teaching economics of today while taking the pulse of the American people.
      More Winning.

      Liked by 8 people

  7. TimeIsNow says:

    Fantastic info once again.Thanks Sundance!!

    Liked by 3 people

  8. Arkindole says:

    If Paul Krugman wasn’t still crying so hard with Hillary, and looking to the sky for UFO saviors, he could step in here and tell us where we are wrong.

    Like

  9. 4bleu says:

    Interesting!

    That graph shows the absolute crazy that’s still heading skyward. The education sector’s ability to suck money out of anything that walks by is incredible. Who doesn’t contribute to the ‘education’ tax? Every supermarket and sports store has discounts, gifts and points for schools, food companies, credit cards, there are scholarships, grants and loans that go to schools. School bonds, lotteries and gambling are all sold on a % going to ‘education.’ Booster clubs, fund raisers, books, fan items for sale. Hundreds of millions of dollars above and beyond the money collected from taxes – property, consumer, state and federal.

    Yet the ‘educators’ are ‘underpaid for 4 days work week, 9 months of annual work. That’s odd, there’s a colossal amount of money collected on a hundred levels to pay/subsidize schools. But every year there’s wailing that student scores are falling because salaries are too low to attract ‘good teachers’ (implying inadvertently that the incumbents aren’t), so asked-for tax increases are almost always approved to ‘fix’ that, ‘for the children.’
    Where’s the money? ‘Educators’ have been underpaid since schools were invented, but the US steam-shovels money into education.

    So, does that middle economic grey zone include factors like fraud? The ‘education effect’ on that graph throws the entire economy out of whack.

    Liked by 4 people

    • tvollrath66 says:

      Teaching illegals..

      Liked by 1 person

      • 4bleu says:

        The big joke on everyone is that illegals’ home countries have better academics than the US and by law those countries require ‘teachers’ with academic credentials of degrees in say, math, plus have passed competitive hiring exams competing against many to be eligible to be on the hiring list.

        99.5% of US educators could not pass a routine teacher’s qualifying exam required by other countries. That .5% are the few naive engineers and other people with real qualifications in math, science, rhetoric, etc. who wanted to ‘give something back’ and who are usually chased out rather quickly by jealous and nervous ‘educators’ who cannot have an actual competent and knowledgeable person inadvertently expose their ‘gaslighting’ of the public. (The story of Jaime Escalante, dramatized in the movie ‘Stand and Deliver’ is a classic example. Despite his huge success in teaching calculus, he was shunned out of the public school system. Not an exaggeration. Have witnessed it.

        US schools LOOK outstanding – state of the art. Millions go into the physical plant of just one school. The academics and educators are never fundamentally touched. But that’s where the problem is and persists. Americans are two generations away from experiencing true teaching and the educators put out a lot of effort to make sure they’ll never experience it. So, the public keeps falling for gimmicks at ever-increasing prices.

        This is having a serious negative effect on US innovation, quality and expectations, today and for the future.

        Liked by 2 people

    • notamemberofanyorganizedpolicital says:

      A recent study revealed that for the last 30 years all increased funding of education went into administration and it’s staff.

      Like

  10. skipper1961 says:

    Sundance,
    Is your first name Steve?

    Like

    • rsanchez1990 says:

      He does give the impression that he is a well-educated economist, who might even be ahead of the curve with his spidey senses and “I also predict this third dimension will soon be discovered and will be extremely consequential in the coming decade.”

      Liked by 3 people

    • Sam says:

      I sure hope Steve Moore gets a spot in Trump’s administration. He is on Trump’s economic team.

      Liked by 2 people

      • skipper1961 says:

        Sam,
        While I concur with you that Steve Moore not only projects the competency (and courage) to have earned a “spot” in the Trump administration, I was referring to a different Steve than Mr. Moore.
        BTW MERRY CHRISTMAS!!!!!!!!!!!

        Like

  11. MrE says:

    A couple months ago, I attended an event hosted by one of the senior economists at the STL Fed. We spent a lot of time in the Q&A discussing interest rates, and among other things, he said that the reason rates have been so low for so long is that it allows the government to continue to renew maturing debt as well as take on new debt (which is what I’ve thought for several years, so it was nice to be vindicated).

    Services-based economies by definition are so heavily leveraged in terms of manufacturing and REAL infrastructure that they necessarily become exponentially more sensitive to interest rate shifts. Increasing interest rates simultaneously kills asset values and makes debt more costly – a double whammy to entities that derive their value solely from interest gains marked in a financial statement. And because the US economy has been services-based for so long, its position is that much more precarious.

    The larger concern for Manufacturing/Infrastructure is depreciation, which operates independent of interest. Main Street will boom; Wall Street is an overfilled balloon that’s going to be deflated. And we need to be careful that it is deflated, not popped. Beware of Yellen. She could very easily screw the whole nation over.

    Liked by 7 people

    • Stringy theory says:

      An astute observation and comment. Thank you.

      Liked by 2 people

    • Your tour guide says:

      Mr E: Good post.
      Regarding your mention of depreciation and how it factors in. Did the “tax reform” act of 1986 aggravate the problem by basically removing it from the table? Looking to be educated further here. Thanks.

      Liked by 1 person

    • 4bleu says:

      Undeveloped countries are almost all service and no (little) local production. They have to import everything and thus are locked to exchange rates and currencies and taxes. With the big importers standing to lose money, they actively undermine any local initiatives to produce competitive alternatives for the local markets. It takes a lot to build production infrastructure – the US ran the USSR into the ground because of US decentralized off-the-shelf local production capabilities, and the US politicians gave it away?
      The US is indeed in a very ‘precarious’ position as you said, worse because Americans have no sense of how much of the current US economy has the negative attributes of a Third World economy.

      Liked by 1 person

  12. NJF says:

    OMG help me. I’m stuck at a dinner party surrounded by Hillary supporters!!!!!!!

    (Pours another Tito’s and vodka)

    Liked by 7 people

  13. rsanchez1990 says:

    Let’s see how Democrats try to rationalize their opposition to reinstating the Glass-Steagall act. Glass-Steagall was neutralized under Bill Clinton, and then voters chose Bush over Gore. Any Congressmen who oppose re-instatement, especially after the staggering irresponsibility of Wall St. over the past decade, will be swept out of office.

    Liked by 2 people

  14. haoleboy says:

    Very good illustration.

    The crux of the matter :
    “The Main Street engine was viewed by DC, and those who assemble the legislative priorities therein, as a dying engine, lacking fuel, and destined to be service driven only….”

    The “Main Street Engine” was depending on those who were supposed to be representing them , the (D)’s . But the (D)’s had become invested in the “Wall Street Engine” and thus were fueling the WS Engine only and allowing the MS train to run out of fuel . But the MS engine was carrying
    the food that feeds us all.

    In my opinion , when the Unions were at the “Workers of the WORLD Unite !” stage , the nation was somewhat on the right track. However as the Union Organizers became wealthy and started investing in the WS Engine they then forgot about the workers of the rest of the world. The temporary result wasn’t bad , but it was doomed. We brought about a wonderful living standard in America , yes , but in the process priced our goods out of the world market because of the starving workers elsewhere. This problem wasn’t addressed and his is where the MS Engine started to run out of fuel . Unfortunately , the MS leaders were so busy trying to grow their investment in the WS Engine they ignored the MS Engine.

    Trump and many of our leaders caught on to this but ONLY Trump has the foresight and was willing to base his run for the leadership on fixing this fuel problem. Which by the way is a fuel problem for both trains. The MS leaders , now invested in the WS Engine , were content to gain on their own investments only , leaving the MS Engine dry.

    I can only hope that the folks on the MS Engine , who have been left by their leaders to starve , and tricked into still voting for those “used to be leaders” by freebies , continue to wake up.

    At the moment Trump and his fledgling but rapidly growing movement is both train’s only hope.
    It is like dragging a child kicking and screaming out of the way of a charging bull.

    Keep the faith.

    Liked by 3 people

  15. Finalage says:

    Trump’s plan will definitely result in higher wages because he is shooting the economy up with full barrels! The Dems usually restrict their fiscal prescriptions to just infrastructure spending and higher social spending to “stimulate” the economy. While the GOP usually resort to tax cuts and increased military spending, though the military consumption spending of Bush consumed by war vs. Reagan’s military investment spending is worth noting.

    Trump is not restricted. He’s going to increase infrastructure spending, military spending and cut taxes massively to created jobs. And the cherry on top is that he’s going to do what neither party has managed to do in the past. He’s going to renegotiate trade deals to bring back jobs and unleash American conventional energy sources to achieve energy independence. The boost to GDP from all of this economic activity will be tremendous and will allow for interest rates to rise without impacting GDP negatively.

    In fact, interest rates rising in a high real GDP growth economy is a good thing! High interest rates in a bubble economy (nominal GDP) is the kiss of death. As real GDP grows, wages and income will rise. As incomes rise, savings will increase. Guess what is good for savings? Higher interest rates. Savings begins to add to income growth as people begin to earn more on their savings. Higher savings also result in higher lending and business investment/risk taking. Greater risk taking results in more business and capital formation. More capital formation results in higher productivity. Higher productivity in turn results in higher income and a lid on inflation.

    With such an economy, Trump’s ability to use access to America’s market as leverage in trade negotiations increases. This will result in more concessions by foreign countries, resulting in more jobs, more wage growth, more savings, and more productivity. Higher interest rates will increase the purchasing power of consumers which in addition to lower tax rates, decreased regulations, lower health care costs (repeal of Obamacare) and lower energy costs will mitigate or more than offset any increase in inflation from tariffs or quotas imposed by renegotiated trade agreements.

    Higher interests rates actually will act as a check on nominal GDP growth that has resulted in Wall Street inflamed asset bubbles. Finally, home prices will become more affordable as wage/income growth outstrips housing inflation. The stock market will no longer rise because of cheap money but because of increased savings from Main Street, as Sundance would say. The US balance sheet will finally be recapitalized and national debt will decline as a percentage of GDP, as the budget deficit begins to decline precipitously after the Trump program takes hold.

    Remember folks, our guy Trump has a bachelors degree in economics! He understands Main Street and Wall Street alike. His program will be seen as unprecedented (or unpresidented? Lol) because of the sheer audaciousness of it. But it will completely turn this country around and put us on the path of peace and prosperity for many years to come! MAGA!!

    Liked by 2 people

    • Kroesus says:

      Since Trump has an MBA from UPenn (Whartons) I am certain he has some graduate level economics training as well to go with his BA

      Liked by 2 people

      • Sam says:

        Finance is what Wharton is really good at teaching. Economics is part of Finance since you need a base in Econ to understand Finance. So yeah, I put more stock in Wharton’s B-school than an Econ BA.

        Liked by 1 person

      • haoleboy says:

        The real benefit is that on top his BA (and possible higher) he also has the non-academic reality of a “hard knocks” education of running businesses utilizing materials purchasing from both in and out of country , wage production for in-country goods producing workers (living spaces) and the use of Wall Street money and speculators. Businesses that cannot be Outsourced. He’s been thinking about how to save such for a good many years.

        Liked by 2 people

      • Fake Nametag says:

        I don’t think he has an MBA, just a bachelors. I don’t think it matters though. I just finished an MBA and, aside from a few finance classes (my focus area), everything else aside from the Capstone was a rehash of the bachelors prerequisites I took.

        Trump certainly has beyond a master’s degree level of education in finance and if you considered the construction of Trump Tower as his Capstone, he is supremely more educated than any MBA graduate.

        Liked by 1 person

      • Finalage says:

        I don’t think Trump has a MBA

        Like

    • Magnificent summary of how economies work! Or, at least, a free market economy. I hope our guy Trump’s Econ 101 class had his best professor!

      Sundance, your discovery of a third rail or dimension is ground-breaking and important. It might explain anomalies that are currently not seen or not understood.

      May I respectfully suggest that you use different terms than X-axis and Y-axis? Those are normally applied to mathematical models of the Laws of Supply and Demand, among other things. Normally, the X-axis goes up and down and the Y-axis goes side to side, right angles, not parallel lines. Your model actually uses two-dimensional parallel lines that diverge. Hence, your use of the term “axis” is confusing.

      A third axis would be a third dimension and represent… what?

      “X” can apply to price, and “Y” can apply to quantity, for example. So as prices for goods go up they become less affordable, so quantity sold goes down. The line then slopes downward and to the right. The slope of the line indicates demand.

      Like

  16. Southpaw says:

    What i noticed on the graph is that government intervention dramatically increased in the highest rising sectors. Who says you have to repay debt with money. Energy abundance can make a great barter in exchange for debt reduction.

    Liked by 1 person

  17. Jim Rustle says:

    We have put faith in the fed for a long time and we’re being taken advantage of, it’s time to end this disfunction. We also need to umbrella our DOD over the NSA, CIA, FBI and DHS. We need the Pentagon riding roughshod over these agencies during this global transition.

    Liked by 2 people

  18. The Boss says:

    The third dimension of economics is well-explained here. I wonder what it will take for the corporate media whores to actually report on it. Or will we need another means? I’m leaning toward another means.

    Liked by 1 person

    • Fake Nametag says:

      I’m fine with us understanding it and everyone else being confused. Trump will then seem to the ignorant to be a miracle worker, getting the needed votes to keep his agenda moving forward, while we get to be the smartest people in the room and hopefully profit on good investments that others are missing out on.

      Liked by 1 person

  19. clash108 says:

    I knew tuition was out of control, but I really can’t believe textbooks are so high. I know part of the reason is that many professors require textbooks they have written themselves. It causes scarcity of the books that keep the prices high, even used ones. Completely ridiculous. Instead of putting more money in their pockets, they should be accessible to students electronically or use a book with similar content that’s cheaper. It’s just one example of what’s wrong with college education overall.

    The college system is just a high priced paper mill churning out degrees that many aren’t worth the paper they’re printed on.

    Liked by 3 people

  20. Maquis says:

    Reinstate Glass-Steagall Act, definitely.

    REPEAL DODD-FRANK TOO!

    Wiki has it that President Trump has his sights on just that. Glad for that, or I’d be stuck in ALL-CAPS mode.

    Has anyone heard of President Trump planning to reform the USPTO? The Patent Office crushes the little guy, in favor of Corporatists. It’s like a smorgasbord of great ideas for the moneyed interests to feed on while the conceptualists watch their dreams go ip in smoke. No third party should be able to browse patent applications for new product ideas, that they build just different enough to skirt any patent that might actually be eventually granted.

    Liked by 3 people

    • bill riser says:

      Fix 1 Yes he wants to repeal Dodd-Frank
      Fix 2 it won’t take into total effect until end of his first term–to Turn the Feds Board Members into Trumpers. There are to be supposed to be 7 member’s on the board, there are only 4 now. Three by Obama one Bush. They are leftest and Globalist. Two more Obama’s appointees have not been approved by the Senate. So 4 of 7 will be appointed by Trump and approved by Senate.

      Like

  21. Trump's Aussie Mates says:

    In the analogy, why is the northward progress of each train identical (as viewed from an observer in the Atlantic)? If there is complete detachment then the northward progress would match by coincidence and only at discrete points in time. Another way of thinking about it is to consider the extent to which one engine affects the output of the other.

    Also, what does the relative distance between the two engines represent? If it is a (qualitative) assessment of the level of detachment then one might expect the latitude of each engine to vary more significantly as they become more detached.

    Liked by 1 person

  22. waynestrick says:

    Fall Street only had innovation to grift Main Street. The real inventions come from John Public.

    Like

  23. Shamrock says:

    It is silly to say Wall Street provides no value to the economy. End financial intermediation and see how fast Main Street grows.

    Anger towards Wall Street for capturing its regulators and the political process is justified. But fix the system to make laws and regulations fair for all, don’t over compensate and destroy financial markets through anger and believe it is the right thing to do.

    Some of the talk becomes a bit too emotional and losses it’s relevance.

    Like

  24. WSB says:

    So, my question from another thread stands. How will OMB understand scoring policy that may be so disconnected from their wheelhouse? Understandably, the OMB scores only as well as what is put in…so how do Trump’s nominees, assuming they will be approved, work with that spider web?

    There could be a lot of black hats in that rabbit hole. Might there be a lot of contention between the two camps, or so well detailed that the OMB wuld not be able to hide in their own weeds?

    Like

  25. Millwright says:

    SD, Just how many of you are there ? Not a bad ( IMO) economic analogy, BTW ! But my past experience in metals mining suggests mine owners play the market and often have large reserves on hand; recall the Hunt Silver debacle . OTOH, there are a several scarce metals the USG would do well to stockpile, ( not to mention develop its known reserves and explore for more ) but current political practice seems intent upon thwarting that goal .

    Liked by 1 person

  26. Deplorable Jeff says:

    The Vacuum created by the distance between the two economies is SEALED OFF by the alphabet agencies of the COMMUNIST (uni-party ) government . GATEKEEPERS protecting the CRONY FASCIST stranglehold of the Chamber of Commerce …you know …the same people funding the #NeverTrump movement !!

    The GIANT SUCKING sound of NEW JOBS in the third dimension will come when that SEAL IS BROKEN . When the EPA is put back in the box . When the IRS is no longer an attack dog . When the BLM is dismantled and unconstitutionally acquired land is sold off . When the DOMESTIC ENERGY HARVEST is GREEN LIT !!

    The re-institution of Glass /Steagall to separate banks from investment houses will restore the community and STATE banking system >

    The repeal of Dodd/ Frank will open up the Capital markets again too !!

    Liked by 1 person

  27. Deplorable Jeff says:

    On January 21st 2017 an epic spate of retirements will begin . Congress will see it as will the FEDGOV leviathan . Record retirements and epic rants as the people depart . Their jobs will simply be phased out in the FEDGOV and in Congress the Trump coattails will be long and come from the private sector as well .

    MANY will be encouraged to serve !! WINNING HAS ITS REWARDS …..it will be fun to hear all the epic RANTS as congress clears out before Trump can truly restore WHITE HATS to power in the FEDGOV .

    Liked by 1 person

  28. The mountain range that divides Wall Street from Main Street is the U.S. trade deficits. Wall Street wants foreign savings inflows, even though they drive up the dollar’s exchange rate and make Main Street less competitive in U.S. and world markets.

    The decision to favor Wall Street over Main Street was first made in 1984 by Treasury Secretary Don Regan. He pushed through a tax loophole which exempted foreigners from paying taxes on interest earned in the United States, even though everyone at the May 1, 1984, House Ways and Means Committee hearing knew that the higher exchange rate would hurt Main Street.

    You can read about that this tax loophole in Chapter 2 of our 2008 Book “Trading Away Our Future”:

    http://www.idealtaxes.com/TradingAwayOurFuture.pdf

    Liked by 1 person

  29. nyetneetot says:

    I’d like to confuse the topic further by pointing out stock markets have been around since the 1100’s and divisions described in the post are what economically defined the Northern from the Southern states. Prior to the creation of the Federal Reserve were the Coinage Acts of 1873, 1891 and a gold standard formally adopted in 1900. That is what has allowed the fiat currency that we use today to become inflated out of control.

    Like

  30. Jimmy Jack says:

    This is an outstanding post Sundance and will be helpful to those who are not well educated in economics. And people have got to understand economics if they hope to understand politics clearly. Thanks.

    Like

  31. Spencer's Mom says:

    Thanks, Sundance. Great explanation for those of us who do not have much of a background in economics – and – more importantly – helps us understand just how/why various policies were put in place over the past 20+ years. This helps demystify the whole process! 😊

    Like

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