Wednesday, April 20, 2005

Marriage History
Note: this post originally posted on July 20, 2004. I'm reposting it because I thought this would be helpful to Adam O'Neill (it's about time, I've taken without giving back long enough).

Mawage. Mawage is wot bwings us togeder tooday. Mawage, that bwessed awangment, that dweam wifin a dweam...”

Many conservatives and Christians fear that the traditional family values are under siege. They feel that they must combat any beachhead on the assault against the institution of marriage. Thus, many slippery-slope arguments are used to multiply the arguments against the two main offenders, same-sex marriages and legalized abortions. But what is the traditional family?

marital percent history

From the Percent of Population chart, we see that less people are married in recent decades than in the 1960-1970 because more Americans have divorced or have never married. But looking back to even more "traditional" times, we see that, compared to recent decades, even larger percent of Americans were never married in the first four decades of this century.

marital rate history

While marriage rate per 1,000 population has decreased since 1980, the divorce rate per 1,000 population has decreased the same proportion, so that the ratio has remained constant since 1977. Each year, Americans marry twice as often as they divorce.

It is very likely that a large factor of the rise in the divorce rate from 1965 to 1975 was the advent of no-fault divorce laws. However, I hypothesize that the increase in divorce rate is merely the delayed consequence of the prior increase in marriage rate.

I suspect that the marriage rate data paints a worse picture for the institution of marriage because more of the denominator of 1,000 population is constituted from the againg baby-boomers, whose marriage/re-marriage pattern is less important for the health of the institution of marriage. Furthermore, the already-married status of the immigrants are not counted, further diminishing the rate per 1,000. The immigration bias probably does not exist for divorces because emigrants seem to be a lot fewer in numbers. It would be nice to be able to isolate marriage and divorce rates among only the younger generation, or only the first-time marriages and divorces, but such data are unavailable to me.

Americans seem to be marrying less, but maybe not. Americans are definitely getting divorced less, but still at a higher rate than "traditionally." However, about the same percent of Americans are married at the end of the 20th Century as at the beginning. In that century, about 10% of Americans have been "liberated" from the never married category, but the ranks of the divorced Americans have swelled by almost 10%.

In the future, I will examine other measurements of "traditional family values." But as expressed through marriages and marital rates, I do not see an unprecedented crisis of the institution of marriage. If I am blind, help me see through your comments.

Is the conservative goal to have 70% of American males in holy matrimony again?

Monday, April 04, 2005

Bubble Trouble
Morgan Stanley's Andy Xie sees a three-pillared bubble.
Three Pillars of the Global Bubble

American optimism, Japanese pessimism, and the Chinese labor surplus are the three pillars of the global bubble economy, ... American optimism turns liquidity into rising asset markets and, through the wealth effect, consumption. Japanese pessimism has channeled the liquidity from BoJ’s easy monetary policy into demand for the US Treasuries, capping the US bond yield despite the strong US economy. The Chinese labor surplus allows global companies to decrease production costs and keeps inflation down despite strong demand.

The above factors form the conditions for but do not automatically lead to a global bubble economy. An accommodative Fed allows the bubble to happen. The Fed sees CPI inflation as the only warning signal for slowing economic growth. In today’s global economy, CPI inflation is the second-to-last price to move up after wages. When CPI inflation is significant, the bubble is already gigantic. The Fed’s easy attitude towards asset inflation has ... led the global economy to where it is today.

In addition to the Fed’s accommodative attitude, the behavior of the Asian central banks is also a factor in maintaining the global bubble. The large US trade deficits that result from asset-based consumption flood the world with dollar supply. The oversupply depresses the dollar’s value, which should cause inflation in the US that forces the Fed to tighten. Instead, the Asian central banks have been mopping up the unwanted dollars in the world to buy Treasuries. From the perspective of Asian central banks, they see a higher US interest rate, not a weak dollar, as the key to a stable equilibrium. So they are propping up the dollar and hope that the Fed will step up its pace of raising interest rates. Instead, the Fed sees that the Asian central banks are holding its bag and that, therefore, it can afford to take things slow and keep the ‘measured pace’ policy in raising interest rates.
Stephen Roach sees the bubble popping.
America’s income-short, consumer-led recovery is the aberration -- not the norm .... It is all about ever-declining personal saving rates, ever-widening current account deficits, mounting debt burdens, and increasingly wealth-dependent consumers. It ... is one of the most precarious macro models that has ever existed for a major economic power ... that not only puts pressure on future prospects in the US but also underscores the tensions bearing down on the rest of the world. In my view, income-short growth models are not sustainable -- the only question pertains to the circumstances of their demise.
Coping with the global labor arbitrage could well test an unbalanced world’s commitment to globalization. The temptation of politicians in the developed world is to react to pressures on voters by indulging in scapegoating -- in effect, pinning the blame on the China and Indias of the world. Consequently, to the extent that developed nations fail to address the excesses of deficit-financed lifestyles, the risks of trade tensions and protectionism may only mount. Courtesy of the unrelenting pressures on labor income that arise from this cross-border labor arbitrage, high-wage workers have found it exceedingly difficult to sustain life-styles. Asset-dependent US consumers ... have consciously elected to draw down saving and go deeply into debt in order to defend the most cherished of American values -- excess consumption. Liquidity-prone central banks have been the great enabler of this process. The Federal Reserve has led the charge with its post-bubble zero real interest rate policy. And by freely funding the US current-account deficit, foreign central banks -- especially those in Asia -- have done more than their fair share in subsidizing US interest rates. That not only keeps the asset party going but also provides the cut-rate refinancing rates that have allowed American consumers to keep on extracting purchasing power from increasingly over-valued assets such as homes.

The endgame is not in doubt, in my view. The American consumer will ultimately cave. It is the only means by which the US will ever “fix” its twin saving and current account problems. It is the timing and circumstances of that fix that we endlessly debate. But the clock is ticking -- especially now as interest rates and energy prices rise. Yet another in a long string of crummy US labor market reports only serves to underscore the obvious: Excess consumption is on a collision course with subpar labor income growth. Courtesy of an unrelenting global labor arbitrage, the “big squeeze” is getting tighter and tighter on the world’s only real consumer.