Productivity in manufacturing fails to show any growth in the USA since 2001

 In the USA, productivity in manufacturing in 2021 is the same as in 2001. In business, productivity growth is fast. The reason behind such a deviation is not clear. Could it be insufficient funding of industry? Something like "defund the industry"?

How many escalation steps Russia needs to ruin US stock market

 The current escalation of military confrontation between US and Russia has many non-military dimensions. One of the most dangerous for the US is the stock market collapse. The bubble of the global stock market is vulnerable to any unrest potentially influencing US safety which is usually impeccable. The hypersonic missiles make the aircraft carriers inefficient in protecting global trade.  The investment profit projection may fall below the panic level and ... voila.  No horizon will be safe for investment since no forecast can be done for the chaotic military escalation. 

США: во второй половине 2022 года грядет серьезная дефляция

Связь между инфляцией цен и изменением рабочей силы в США практически линейна. Скорость изменения рабочей силы опережает уровень инфляции на 1,5 года, а коэффициент регрессии составляет примерно 3,0 после 1980 года, то есть инфляция в 3 раза превышает скорость изменения рабочей силы. На Рисунке 1 показана скорость изменения (1/год) CPI и рабочей силы (умноженной на 3,0 и сдвинутой на 1,5 года вперед). Бегущее среднее значение за 8 лет сглаживает годовые колебания и демонстрирует силу статистической связи. До 1980 года определение CPI и рабочей силы было другим и претерпевало множество изменений, но связь осталась прежней с другим коэффициентом. Мы провели тщательный статистический анализ этой ссылки в книге и серии статей.

Рисунок 1. Долгосрочная связь между изменением рабочей силы и инфляцией цен в США

Пандемия COVID-19 оказывает драматическое влияние на рабочую силу в 2020 и 2021 годах. Отсутствие заработной платы из-за невероятного сокращения рабочей силы (см. Рисунок 1) было компенсировано государственными социальными трансфертами в размере нескольких триллионов долларов. Этот перевод создал свободные деньги, которые не были связаны с производством  с товаров и услуг. Это прямая девальвация доллара, которая, очевидно, заканчивается более высокой инфляцией, наблюдаемой в 2021 году. Это не экономическая инфляция цен, описываемая кривыми на Рисунке 1 как баланс между производством, выраженным в уровне рабочей силы, и личным доходом. Разрыв между инфляцией и изменением рабочей силы определенно вернется к долгосрочным тенденциям, если печатание необеспеченных товарами и услугами денег не будет вечным. Таким образом, сокращение рабочей силы в первой половине 2020 года вызовет сильную волну дефляции во второй половине 2022 года. Все знают, как сложно бороться с дефляцией. Деньги, напечатанные в 2020 и 2021 годах, усугубят дефляцию. Окончательный уровень цен в волне дефляции определяется изменением рабочей силы в соответствии с долгосрочной привязкой, но падение начнется с гораздо более высокого уровня цен из-за того, что деньги вливаются в экономику США только по политическим причинам.

USA: severe deflation is coming in the second half of 2022

The link between price inflation and the change in the labor force is practically linear in the USA. The rate of labor force change leads the rate of inflation by 1.5 years and the regression coefficient is approximately 3.0 after 1980, i.e. inflation is 3 times larger than the rate of labor force change.  Figure 1 shows the change rate (1/year) in the CPI and labor force (multiplied by a factor of 3.0 and shifted 1.5 years ahead). The 8-year-average irons out the yearly fluctuation and demonstrate the strength of the statistical link. Before 1980, the definition of CPI and labor force was different and had many revisions, but the link is the same with a different coefficient.  We have done a thorough statistical analysis of this link in a book and a series of papers. 

Figure1 . The long-term link between the change in the labor force and price inflation in the USA

The COVID-19 pandemic has a dramatic influence on the labor force in 2020 and 2021. The lack of wages due to an incredible decrease in the labor force (see Figure1 ) was compensated by the government social transfers of several trillions of dollars. This transfer created free money not matched by goods and services. This is direct dollar devaluation, which obviously ends in higher inflation observed in 2021. This is not economic price inflation described by the curves in Figure 1 as a balance between production as expressed in labor force level and personal income. The gap between inflation and labor force change will definitely return to the long-term trends unless the money printing is eternal.  Therefore, the drop in the labor force in the first half of 2020 will generate a severe deflation wave in the second half of 2022. Everybody knows how it is difficult to fight deflation. The money printed in 2020 and 2021 will deepen the deflation. The final price level in the deflation wave is driven by the labor force change according to the long-term link, but the fall will start at a much higher price level because of the money poured into the US economy for political reasons only.  

US price inflation is actually dollar devaluation

 do not confuse benign price inflation and dollar devaluation. Inflation is an economic process to match the volume of goods and services to personal income and thus labor force. Trump and Biden devalued the US dollar by injecting (through government social transfers) trillions in personal income (104% of GDP in 2022 and ~100% in 2021 with a long-term average of 85%) Considering the fall in GDP, the injection was around 30%. This value is observed in some PPI variables which will surface in a few months. In that sense, the price growth is not long-term "structural", but “helicopter” or short-term transient. But the price will not fall to the 2019 level after the transition immediately. First, the real personal income will sink below the 2019 level, however. Then a dramatic deflation period will come. The wave of deflation related to the fall in real personal income was suppressed in 2020 and 2021 by the government transfers. The economy is a real process, however.

Distinguishing the aftershock sequences of the DPRK5 and DPRK6 underground nuclear tests

Link to full paper in arxiv.org

Abstract

The rate of aftershocks in the sequence initiated by the DPRK underground tests has been increasing since January 2021. In total, 22 reliable aftershocks were detected between January 13 and October 1, 2021. Their characteristics are similar to the aftershocks in one of two clusters: 1) the fifth DPRK (DPRK5) test (mb(IDC)=5.09) conducted on September 9, 2016, which induced the first DPRK aftershock in the sequence detected at 1:50:48 UTC on September 11, 2016; 2) the sixth DPRK (DPRK6) explosion (mb(IDC)=6.07), which generates its aftershock sequence with characteristics significantly different from the aftershocks in the DPRK5 sequence. The length, intensity, and alternating character of these sequences suggest specific mechanisms of energy release likely associated with the interaction of the damaged zones of the DPRK5 and DPRK6 and the collapse of their cavities with progressive propagation of the collapsing chimneys to the free surface. According to the depth estimates based on the moment tensor modelling, the DPRK5 and DPRK6 were conducted at practically the same depths. The difference in magnitudes suggests that their damaged zones differ by a factor of 2 or more. The first aftershock of the DPRK6 (mb(IDC=4.12) 8.5 minutes after the test is evidence of the cavity collapse and creation of a chimney, which did not reach the surface. The activity in 2021 indicates that the chimney collapse is not finished yet. One can expect more aftershocks in the near future, likely ending with the chimney reaching the free surface.

Seismic events found by waveform cross correlation after the announced underground nuclear tests conducted by the DPRK on 12.02.2013 and 06.01.2016. Aftershocks or hidden nuclear tests?

Link to full paper in arxiv.org

Abstract

The multi-master method based on waveform cross-correlation has found several aftershocks of the third (DPRK3) and the fourth (DPRK4) announced underground nuclear tests conducted by the DPRK on 12.02.2013, and 06.01.2016, respectively. The second DPRK test had no reliable aftershock hypotheses at the level of the method sensitivity and resolution. The closest to the test site array station USRK was not operational before 20.12.2008 and the first DPRK test cannot be analyzed by the multi-master method based on waveform templates from two IMS stations - USRK and KSRS. The largest aftershocks of the DPRK3 and DPRK4 are close in magnitude to the first aftershock of the DPRK5 on 11.09.2016, and many aftershocks of the DPRK6. Three big aftershocks of the DPRK3 occurred on 25.05.2014, i.e. 467 days after the mainshock. The DPRK3 aftershock found at 6:43:03 UTC had a relative magnitude of 2.91. There were found two aftershocks of the DPRK4: on 19.02.2016 (0:28:07 UTC) and on 02.07.2016 (19:52:27 UTC). The largest aftershocks of the DPRK3 and DPRK4 could be interpreted as related to the cavity collapse process likely followed by a chimney collapse, not reaching the free surface, however, as no noble gases and/or radionuclide particles were detected. Seismic signals from all events found before the DPRK5 (09.09.2016), had a high level of cross-correlation with the waveform templates of the DRPK5 and DPRK6. These signals prove the shape similarity, and thus, the close spatial proximity of the seismic events after DPRK3/DPRK4 to the DPRK5/DPRK6 aftershocks. There were no other events found by the multi-master method since 01.01.2009, even when the highest resolution regime was used. The resolution and sensitivity of the multi-master method were tuned and tested using the data after 09.09.2016.