Have I been too hard on the Conference Board?
Has my criticism of their modification of the LEIs been unjustified?
I think not, but my "take-no-prisoners, suffer-no-fools" approach is too harsh for more genteel souls.
For those of you who think so, a refresher is in order. How would you interpret this comment in a Bloomberg article from last week:
"Kenneth Goldstein, economist for the Conference Board in
New York, says concern about the impact of high oil prices "is misplaced,”
partly because incomes are keeping pace. "Unless oil prices go still higher,
we’re talking about the equivalent of a nuisance tax,” Goldstein says." (emphasis added)
Let’s dissect this junkonomics: We know Real Wages have actually decreased over the past 5 years, and that the savings rate is zero, and that poverty levels have risen. And any economist worth a plug nickel knows how much the CPI understates actual inflation.
Why the disconnect? Is Mr. Goldstein that ill informed? Are we to believe a Conference-Board economist managed to miss the recent Census Bureau Report, the front page of the NYT, and page 2 in the WSJ?
Or, is this merely another example of economic cheerleading serving as a substitute for actual analytical work? I am starting to think that Economists are the new corrupt Analysts on Wall Street.
Oh, and "nuisance tax?" Puh-leeze.
>
Source:
Soaring Fuel Prices Finally Prompt U.S. Consumers to Cut Back
Art Pine
Bloomberg, August 29, 2005 00:45 EDT
http://www.bloomberg.com/apps/news?pid=10000103&sid=a23lH2gSUkH4&refer=us#
Don’t forget that “savings rate” does not include 401k and IRA accounts (which, ’til a week ago, I thought it did). Considering that outside of my house, 100% of my investments are put into various IRAs or 401k… I would be considered 0%.
At the end of the year, my checking account usually has about the same amount as it did the year before. However, I would hardly consider myself as saving nothing.
And you’re right…. if gas prices effected me… it would likely mean less money in the IRAs. So short and long term it’s far more than a nuisance tax. People tend to adjust their actual savings rate before considering other budget cuts.
Gas prices are a nuisance to high-income folk, but to low and middle wage earners they’re a significant expense. I’d bet that the massive increases in gas and oil heating costs we’ve seen over the past couple of years are taking a thousand or three bucks a year out of everyone’s pockets.
The economists tell us that every tax increase kills economic growth, but suddenly taking the equivalent of 1-5% of income and giving it to oil companies isn’t anything more than a nuisance?
(sorry about the guesstimates on fuel costs and income percentages, but you get the drift)
Are you sure about IRA”s & 401s.
I though the funds you place in the IRA or 401 is included in savings but the capital gains in the account is not included.
Savings does not include any capital gains.
If the Feds stood on their podium and spoke the truth, people would rush to the banks and with-draw their monies. Ooops!…..they have none! Well then, there would definitely be a panic…..and we can’t have that. So they lie through their teeth.
“What goes around comes around” the problem is when the comes around part comes into play we will have a severe economic downturn.
In the national acounts savings are a residual.
It is calculated by subtacting consumption from income
So, they do not directly measure savings so individual places to put savings — like an IRA or a savings account are never counted directly.
It is like GDP does not directly measure output.
It measures consumption and adjusts that for changes in inventory and foreign trade to indirectly estimate production.
That is why the statement you hear all the time that consumption accounts for two-thirds of GDP is technically not correct. Consumption may be equivalent to two-thirds of something, put it is zero percent of production.
In my opinion, currently with this economic anemia, the definition of savings is how much money you have under your mattress.
IRA’s and 401’s are not savings!!!! They are risky investments……in my opinion that is.
But economists are useful. Ask them for their predictions and you can anticipate the opposite.
It’s not that they are not savings, it’s just that apparently they do not track them as savings in-so-far as is being reported here. Also, company stock options also do not count (which i would probably agree shouldn’t).
I’ve read a few articles (including 2 today) that say the numbers DO include 401k and IRA contributions, but count any asset sales as loss in investment… and repurchase as savings… so in theory, moving some money to cash would hurt the savings rate…
BUT… I read the following and get a different picture…
http://www.bea.doc.gov/bea/newsrel/pinewsrelease.htm
It does appear to properly account for (somewhat) dividend reinvestment.
Posted by: Tonythetiger | Sep 12, 2005 1:03:04 PM: “In my opinion, currently with this economic anemia, the definition of savings is how much money you have under your mattress. IRA’s and 401’s are not savings!!!! They are risky investments……in my opinion that is.”
Just semantics. Of course 401K savings plans are a form of (forced/disciplined) savings. And, what one does with it is another story. And, who cares if “they” count it as such. “They” don’t count food in energy in reporting core inflation! Maybe “they” should be replaced with “us”………………….
Well my good friend Larry, who cares??…I do!.
Forced/Discipline? ….that makes no sense, there are literally millions of folks that have 401’s that are invested in the markets. When the markets finally cycle into it’s downtrend mode (for several years), then we will see an economic disaster on our hands.
Most Americans are in denial and have become desensitized……so when will we start “caring”??….when it’s too late?
How bout that wild and wacky confidence, er conference board—consumers the most confident in four years! Um, yeah right.
http://www.breitbart.com/news/2006/04/25/D8H72OQO0.html
“Consumers shrugged off higher gasoline prices in April and sent a widely watched barometer of consumer confidence to its highest level in almost four years, a private research group said Tuesday.
“But the New York-based Conference Board warned that if fuel prices continue to rise, it would cast a pall on consumer spending, which accounts for two-thirds of all U.S. economic activity. ”