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| (slightly skeptical) Educational society promoting "Back to basics" movement against IT overcomplexity and bastardization of classic Unix | |||||||
| "Minsky's financial instability hypothesis depends critically on what amounts to a sociological
insight. People change their minds about taking risks. They don't make a one-time rational
judgment about debt use and stock market exposure and stick to it. Instead, they change their
minds over time. And history is quite clear about how they change their minds. The
longer the good times endure, the more people begin to see wisdom in risky strategies."
The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future, by Robert Barbera The flaw with Capitalism is that it creates its own positive feedback loop, snowballing to the point where the accumulation of wealth and power hurts people — eventually even those at the top of the food chain. ” Uncle Billy Cunctator |
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| Banks are a clear case of market failure and their employees at the senior level have basically become the biggest bank robbers of all time. As for basing pay on current revenues and not profits over extended periods of time, then that is a clear case of market failure ! | ||
| The banksters have been able to sell the “talent” myth to justify their outsized pay because they are the only ones able to deliver the type of GDP growth the U.S. economy needs in the short term, even if that kills the U.S. economy in the long term. You’ll be gone, I’ll be gone. | ||
| Unfortunately, many countries go broke pursuing war, if not financially, then morally (are
the two different? – this post suggests otherwise). I occurs to me that the U.S. is also in that flock; interventions justified by grand cause built on fallacy, the alpha and omega of failure. Is the financial apparatchik (or Nomenklatura, a term I like which, as many from the Soviet era, succinctly describes aspects of our situation today) fated also to the trash heap, despite the best efforts of the Man of the hour, Ben Bernanke? |
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Minsky moment is the synonym of financial crisis -- the moment when excessive leverage that was inevitably created by the financial system during the boom phase of the cycle, starts collapsing and financial system enter the state of deep crisis with many banks becoming insolvent to the level of leverage they accumulated. Government bailout of financial institutions under neoliberalism follows (because as Senator Durbin noted banks own the place -- the Congress) and then overhand of excessive debt depress the economy that enters the stage of prolonged stagnation.
The view developed in this volume identifies both real and financial causes for the Great Recession, including the real income stagnation suffered by households across most of the income distribution on one hand, and deregulation and institutional change in the financial sector on the other.
The interplay of these factors led to massive debt accumulation, particularly by U.S. households seeking to supplement stagnant incomes in their pursuit of increasing consumption aspirations. Household borrowing was spurred on by a financial sector rendered ever freer of inter- and postwar financial regulations. These regulations came to be seen as unnecessary fetters on an inherently self-regulating “free market,” an idealized notion in which financiers and policy makers placed increasing trust and confidence.
Ultimately, the self-reinforcing developments in the real and financial sectors proved deadly.
Minsky should be the most admired economist in the second half of the 21st. Century. His views are now partially accepted even by neoclassical economists with their stahostic equilibrium of supply and demand nonsense. This is mainly dues because they have no other choice. But Minsky was more then astute researcher of business cycle and the Great Depression. Perhaps his writings on eradicating poverty will earn the respect that it may deserve with time as well.
In any case he was one of the first researchers who understood (after Keynes) that financialization is inherent in capitalism and is the key to its instability:
“Capitalism is essentially a financial system, and the peculiar behavioral attributes of a capitalist economy center around the impact of finance upon system behavior.” Minsky (1967)
Fifty years ago, Minsky, following Marx, viewed instability as the central flaw of the financial system under capitalism, as its inherent flaw. But unlike Marx, who thought that the periodic crisis of overproduction is the source of instability (as well as impoverishment of workers), Minsky assumed that the key source of that instability in the cycles of business borrowing and fractional bank lending, when "good times" lead to excessive borrowing and overproduction (The Alternative To Neoliberalism )
Minsky on capitalism:
- He followed Marx stating that "capitalism is inherently flawed, being prone to booms, crises and depressions.
- This instability is due to characteristics the financial system must possess and will inevitably acquire, if it is to be consistent with full-blown capitalism.
- Such a financial system will be capable of both generating signals that induce an accelerating desire to invest and of financing that accelerating investment." (Minsky 1969b: 224)
- “The natural starting place for analyzing the relation between debt and income is to take an economy with a cyclical past that is now doing well.
- The inherited debt reflects the history of the economy, which includes a period in the not too distant past in which the economy did not do well.
- Acceptable liability structures are based upon some margin of safety so that expected cash flows, even in periods when the economy is not doing well, will cover contractual debt payments.
- As the period over which the economy does well lengthens, two things become evident in board rooms. Existing debts are easily validated and units that were heavily in debt prospered; it paid to lever." (65)
- It becomes apparent that the margins of safety built into debt structures were too great. ans should be reduced...
- As a result, over a period in which the economy does well, views about acceptable debt structure change. In the dealmaking that goes on between banks, investment bankers, and businessmen, the acceptable amount of debt to use in financing various types of activity and positions increases.
- This increase in the weight of debt financing raises the market pnce of capital assets and increases investment. As this continues the economy is transformed into a boom economy... ” (65)
- This transforms a period of tranquil growth into a period of speculative excess
- “Stable growth is inconsistent with the manner in which investment is determined in an economy in which debt-financed ownership of capital assets exists, and the extent to which such debt financing can be carried is market determined.
- It follows that the fundamental instability of a capitalist economy is upward.
- The tendency to transform doing well into a speculative investment boom is the basic instability in a capitalist economy." (65)
He called his model the "Financial Instability Hypothesis". According to Steve Keen, Minsky model boils down to three statements:
He considered the immanent rising of private debt to GDP ratio an immanent feature of capitalism that lead to financial crisis. While the ultimate feature of neoliberlaism is redistribution of wealth up (rising of inequality) it can continue only while private debt can compensate that sliding share of labor wages in GDP.
Several other source of financial instability were pointed out by others:
The idea of Minsky moment is related to the fact that the fractional reserve banking periodically causes credit collapse when the leveraged credit expansion goes into reverse. And mainstream economists do not want to talk about the fact that increasing confidence breeds increased leverage. So financial stability breeds instability and subsequent financial crisis. All actions to guarantee a market rise, ultimately guarantee it's destruction because greed will always take advantage of a "sure thing" and push it beyond reasonable boundaries. In other words, marker players are no rational and assume that it would be foolish not to maximize leverage in a market which is going up. So the fractional reserve banking mechanisms ultimately and ironically lead to over lending and guarantee the subsequent crisis and the market's destruction. Stability breed instability.
That means that fractional reserve banking based economic system with private players (aka capitalism) is inherently unstable. And first of all because fractional reserve banking is debt based. In order to have growth it must create debt. Eventually the pyramid of debt crushes and crisis hit. When the credit expansion fuels asset price bubbles, the dangers for the financial sector and the real economy are substantial because this way the credit boom bubble is inflated which eventually burst. The damage done to the economy by the bursting of credit boom bubbles is significant and long lasting.
Blissex said...«When credit growth fuels asset price bubbles, the dangers for the financial sector and the real economy are much more substantial.»
So M Minsky 50 years ago and M Pettis 15 years ago (in his "The volatility machine") had it right? Who could have imagined! :-)
«In the past decades, central banks typically have taken a hands-off approach to asset price bubbles and credit booms.»
If only! They have been feeding credit-based asset price bubbles by at the same time weakening regulations to push up allowed capital-leverage ratios, and boosting the quantity of credit as high as possible, but specifically most for leveraged speculation on assets, by allowing vast-overvaluations on those assets.
Central banks have worked hard in most Anglo-American countries to redistribute income and wealth from "inflationary" worker incomes to "non-inflationary" rentier incomes via hyper-subsidizing with endless cheap credit the excesses of financial speculation in driving up asset prices.
Not very hands-off at all.
Steve Keen understands this. http://www.debtdeflation.com/blogs/manifesto/
John Kay in his January 5 2010 FT column very aptly explained the systemic instability of financial sector hypothesis:
The credit crunch of 2007-08 was the third phase of a larger and longer financial crisis. The first phase was the emerging market defaults of the 1990s. The second was the new economy boom and bust at the turn of the century. The third was the collapse of markets for structured debt products, which had grown so rapidly in the five years up to 2007.
The manifestation of the problem in each phase was different – first emerging markets, then stock markets, then debt. But the mechanics were essentially the same. Financial institutions identified a genuine economic change – the assimilation of some poor countries into the global economy, the opportunities offered to business by new information technology, and the development of opportunities to manage risk and maturity mismatch more effectively through markets. Competition to sell products led to wild exaggeration of the pace and scope of these trends. The resulting herd enthusiasm led to mispricing – particularly in asset markets, which yielded large, and largely illusory, profits, of which a substantial fraction was paid to employees.
Eventually, at the end of each phase, reality impinged. The activities that once seemed so profitable – funding the financial systems of emerging economies, promoting start-up internet businesses, trading in structured debt products – turned out, in fact, to have been a source of losses. Lenders had to make write-offs, most of the new economy stocks proved valueless and many structured products became unmarketable. Governments, and particularly the US government, reacted on each occasion by pumping money into the financial system in the hope of staving off wider collapse, with some degree of success. At the end of each phase, regulators and financial institutions declared that lessons had been learnt. While measures were implemented which, if they had been introduced five years earlier, might have prevented the most recent crisis from taking the particular form it did, these responses addressed the particular problem that had just occurred, rather than the underlying generic problems of skewed incentives and dysfunctional institutional structures.
The public support of markets provided on each occasion the fuel needed to stoke the next crisis. Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern is one of cycles of increasing amplitude.
I do not know what the epicenter of the next crisis will be, except that it is unlikely to involve structured debt products. I do know that unless human nature changes or there is fundamental change in the structure of the financial services industry – equally improbable – there will be another manifestation once again based on naive extrapolation and collective magical thinking. The recent crisis taxed to the full – the word tax is used deliberately – the resources of world governments and their citizens. Even if there is will to respond to the next crisis, the capacity to do so may not be there.The citizens of that most placid of countries, Iceland, now backed by their president, have found a characteristically polite and restrained way of disputing an obligation to stump up large sums of cash to pay for the arrogance and greed of other people. They are right. We should listen to them before the same message is conveyed in much more violent form, in another place and at another time. But it seems unlikely that we will.
We made a mistake in the closing decades of the 20th century. We removed restrictions that had imposed functional separation on financial institutions. This led to businesses riddled with conflicts of interest and culture, controlled by warring groups of their own senior employees. The scale of resources such businesses commanded enabled them to wield influence to create a – for them – virtuous circle of growing economic and political power. That mistake will not be easily remedied, and that is why I view the new decade with great apprehension. In the name of free markets, we created a monster that threatens to destroy the very free markets we extol.
The economist Hyman Minsky was the first clearly formulate the financial instability hypothesis although I think Keynes understood the dynamic pretty well. He postulated that a world with a large financial sector and an excessive emphasis on the production of investment products creates instability both in terms of output and prices. In other words it automatically tends to generate credit and asset bubbles. The key driver is the fact that financial professionals generally risk other people’s money and due to this fact have asymmetrical incentives:
This asymmetry is not a new observation of this systemic problem. Andrew Jackson noted it in much more polemic way long ago:
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out.”
This asymmetrical incentives ensure that the financial system is structurally biased toward taking on more risk than what should be taken. In other words it naturally tend to slide to the casino model, the with omnipresent reckless gambling as the primary and the most profitable mode of operation while an opportunities last. The only way to counter this is to throw sand into the wheels of financial mechanism: enforce strict regulations, limit money supplies and periodically jail too enthusiastic bankers. The latter is as important or even more important as the other two because bankers tend to abuse "limited liability" status like no other sector.
Asset inflation over the past 10 years and the subsequent catastrophe incurred is a way classic behavior of dynamic system with strong positive feedback loop. Such behavior does not depends of personalities of bankers or policymakers, but is an immanent property of this class of dynamic systems. And the main driving force here was deregulation. So its important that new regulation has safety feature which make removal of it more complicated and requiring bigger majority like is the case with constitutional issues.
Another fact was the fact that due to perverted incentives, accounting in the banks was fraudulent from the very beginning and it was fraudulent on purpose. Essentially accounting in banks automatically become as bad as law enforcement permits. This is a classic case of control fraud and from prevention standpoint is make sense to establish huge penalties for auditors, which might hurt healthy institutions but help to ensure that the most fraudulent institution lose these bank charter before affecting the whole system. With the anti-regulatory zeal of Bush II administration the level of auditing became too superficial, almost non-existent. I remember perverted dances with Sarbanes–Oxley when it was clear from the very beginning that the real goal is not to strengthen accounting but to earn fees and to create as much profitable red tape as possible, in perfect Soviet bureaucracy style.
Deregulation also increases systemic risk by influencing the real goals of financial organizations. At some point of deregulation process the goal of higher remuneration for the top brass becomes self-sustainable trend and replaces all other goals of the financial organization. This is the essence of Martin Taylor’s, the former chief executive of Barclays, article FT.com - Innumerate bankers were ripe for a reckoning in the Financial Times (Dec 15, 2009), which is worth reading in its entirety:
City people have always been paid well relative to others, but megabonuses are quite new. From my own experience, in the mid-1990s no more than four or five employees of Barclays’ then investment bank were paid more than £1m, and no one got near £2m. Around the turn of the millennium across the market things began to take off, and accelerated rapidly – after a pause in 2001-03 – so that exceptionally high remuneration, not just individually, but in total, was paid out between 2004 and 2007.
Observers of financial services saw unbelievable prosperity and apparently immense value added. Yet two years later the whole industry was bankrupt. A simple reason underlies this: any industry that pays out in cash colossal accounting profits that are largely imaginary will go bust quickly. Not only has the industry – and by extension societies that depend on it – been spending money that is no longer there, it has been giving away money that it only imagined it had in the first place. Worse, it seems to want to do it all again.
What were the sources of this imaginary wealth?
- First, spreads on credit that took no account of default probabilities (bankers have been doing this for centuries, but not on this scale).
- Second, unrealised mark-to-market profits on the trading book, especially in illiquid instruments.
- Third, profits conjured up by taking the net present value of streams of income stretching into the future, on derivative issuance for example.
In the last two of these the bank was not receiving any income, merely “booking revenues”. How could they pay this non-existent wealth out in cash to their employees? Because they had no measure of cash flow to tell them they were idiots, and because everyone else was doing it. Paying out 50 per cent of revenues to staff had become the rule, even when the “revenues” did not actually consist of money.
In the next phase instability is amplified by the way governments and central banks respond to crises caused by credit bubble: the state has powerful means to end a recession, but the policies it uses give rise to the next phase of instability, the next bubble…. When money is virtually free – or, at least, at 0.5 per cent – traders feel stupid if they don’t leverage up to the hilt. Thus previous bubble and crash become a dress rehearsal for the next.
Resulting self-sustaining "boom-bust" cycle is very close how electronic systems with positive feedback loop behave and cannot be explained by neo-classical macroeconomic models. Like with electronic devices the financial institution in this mode are unable to provide the services that are needed.
As Minsky noted long ago (sited from Stephen Mihm Why capitalism fails Boston Globe):
Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.And he understood the roots of the current credit bubble much better that neoclassical economists like Bernanke:...our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”
Minsky’s vision might have been dark, but he was not a fatalist; he believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. But with a growing number of economists eager to declare the recession over, and the crisis itself apparently behind us, these policies may prove as discomforting as the theories that prompted them in the first place. Indeed, as economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what [Minsky] called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further.As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.
Minsky’s financial instability hypothesis suggests that when optimism is high and ample funds are available for investment, investors tend to migrate from the safe hedge end of the Minsky spectrum to the risky speculative and Ponzi end. Indeed, in the current crisis, investors tried to raise returns by increasing leverage and switching to financing via short-term—sometimes overnight— borrowing (Too late to learn?):
In the church of Friedman, inflation was the ol' devil tempting the good folk; the 1980s seemed to prove that, let loose, it would cause untold havoc on the populace. But, as Barbera notes:
The last five major global cyclical events were the early 1990s recession - largely occasioned by the US Savings & Loan crisis, the collapse of Japan Inc after the stock market crash of 1990, the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the millennium, and the unprecedented rise and then collapse for US residential real estate in 2007-2008. All five episodes delivered recessions, either global or regional. In no case was there a significant prior acceleration of wages and general prices. In each case, an investment boom and an associated asset market ran to improbable heights and then collapsed. From 1945 to 1985, there was no recession caused by the instability of investment prompted by financial speculation - and since 1985 there has been no recession that has not been caused by these factors.Thus, meet the devil in Minsky's paradise - "an investment boom and an associated asset market [that] ran to improbable heights and then collapsed".According the Barbera, "Minsky's financial instability hypothesis depends critically on what amounts to a sociological insight. People change their minds about taking risks. They don't make a one-time rational judgment about debt use and stock market exposure and stick to it. Instead, they change their minds over time. And history is quite clear about how they change their minds. The longer the good times endure, the more people begin to see wisdom in risky strategies."
Current economy state can be called following Paul McCulley a "stable disequilibrium" very similar to a state a sand pile. All this pile of stocks, debt instruments, derivatives, credit default swaps and God know corresponds to a pile of sand that is on the verse of losing stability. Each financial player works hard to maximize their own personal outcome but the "invisible hand" effect in adding sand to the pile that is increasing systemic instability. According to Minsky, the longer such situation continues the more likely and violent an "avalanche".
The late Hunt Taylor wrote, in 2006:
This is a gold age for bankers. As Peter Boone Simon Johnson wrote in New Republic (The Next Financial Crisis ):"Let us start with what we know. First, these markets look nothing like anything I've ever encountered before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness, the light-speed at which information moves, the degree to which the movement of one instrument triggers nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary to price them speak to the reality that we are now sailing in uncharted waters.
"... I've had 30-plus years of learning experiences in markets, all of which tell me that technology and telecommunications will not do away with human greed and ignorance. I think we will drive the car faster and faster until something bad happens. And I think it will come, like a comet, from that part of the night sky where we least expect it."
Banking was once a dangerous profession. In Britain, for instance, bankers faced “unlimited liability”--that is, if you ran a bank, and the bank couldn’t repay depositors or other creditors, those people had the right to confiscate all your personal assets and income until you repaid. It wasn’t until the second half of the nineteenth century that Britain established limited liability for bank owners. From that point on, British bankers no longer assumed much financial risk themselves.
In the United States, there was great experimentation with banking during the 1800s, but those involved in the enterprise typically made a substantial commitment of their own capital. For example, there was a well-established tradition of “double liability,” in which stockholders were responsible for twice the original value of their shares in a bank. This encouraged stockholders to carefully monitor bank executives and employees. And, in turn, it placed a lot of pressure on those who managed banks. If they fared poorly, they typically faced personal and professional ruin. The idea that a bank executive would retain wealth and social status in the event of a self-induced calamity would have struck everyone--including bank executives themselves--as ludicrous.
Enter, in the early part of the twentieth century, the Federal Reserve. The Fed was founded in 1913, but discussion about whether to create a central bank had swirled for years. “No one can carefully study the experience of the other great commercial nations,” argued Republican Senator Nelson Aldrich in an influential 1909 speech, “without being convinced that disastrous results of recurring financial crises have been successfully prevented by a proper organization of capital and by the adoption of wise methods of banking and of currency”--in other words, a central bank. In November 1910, Aldrich and a small group of top financiers met on an isolated island off the coast of Georgia. There, they hammered out a draft plan to create a strong central bank that would be owned by banks themselves.
What these bankers essentially wanted was a bailout mechanism for the aftermath of speculative crashes--something more durable than J.P. Morgan, who saved the day in the Panic of 1907 but couldn’t be counted on to live forever. While they sought informal government backing and substantial government financial support for their new venture, the bankers also wanted it to remain free of government interference, oversight, or control.
Another destabilizing fact is so called myth of invisible hand which is closely related to the myth about market self-regulation. The misunderstood argument of Adam Smith [1776], the founder of modern economics, that free markets led to efficient outcomes, “as if by an invisible hand” has played a central role in these debates: it suggested that we could, by and large, rely on markets without government intervention. About "invisible hand" deification, see The Invisible Hand, Trumped by Darwin - NYTimes.com. One of the most important counterargument against financial market self-regulation is existence of so called “Minsky moments”:
“Minsky” was shorthand for Hyman Minsky, an Amercan macroeconomist who died over a decade ago. He predicted almost exactly the kind of meltdown that recently hammered the global economy. He believed in capitalism, but also believed it had almost a genetic weakness. Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.
In other words, the one person who foresaw the crisis also believed that our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”
Minsky believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. As economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.
Misnky theory was not well recived due to powerful orthodoxy, born in the years after World War II, known as the neoclassical synthesis. The older belief in a self-regulating, self-stabilizing free market had selectively absorbed a few insights from John Maynard Keynes, the great economist of the 1930s who wrote extensively of the ways that capitalism might fail to maintain full employment. Most economists still believed that free-market capitalism was a fundamentally stable basis for an economy, though thanks to Keynes, some now acknowledged that government might under certain circumstances play a role in keeping the economy - and employment - on an even keel.
Economists like Paul Samuelson became the public face of the new establishment; he and others at a handful of top universities became deeply influential in Washington. In theory, Minsky could have been an academic star in this new establishment: Like Samuelson, he earned his doctorate in economics at Harvard University, where he studied with legendary Austrian economist Joseph Schumpeter, as well as future Nobel laureate Wassily Leontief.
But Minsky was cut from different cloth than many of the other big names. The descendent of immigrants from Minsk, in modern-day Belarus, Minsky was a red-diaper baby, the son of Menshevik socialists. While most economists spent the 1950s and 1960s toiling over mathematical models, Minsky pursued research on poverty, hardly the hottest subfield of economics. With long, wild, white hair, Minsky was closer to the counterculture than to mainstream economics. He was, recalls the economist L. Randall Wray, a former student, a “character.”
So while his colleagues from graduate school went on to win Nobel prizes and rise to the top of academia, Minsky languished. He drifted from Brown to Berkeley and eventually to Washington University. Indeed, many economists weren’t even aware of his work. One assessment of Minsky published in 1997 simply noted that his “work has not had a major influence in the macroeconomic discussions of the last thirty years.”
Yet he was busy. In addition to poverty, Minsky began to delve into the field of finance, which despite its seeming importance had no place in the theories formulated by Samuelson and others. He also began to ask a simple, if disturbing question: “Can ‘it’ happen again?” - where “it” was, like Harry Potter’s nemesis Voldemort, the thing that could not be named: the Great Depression.
In his writings, Minsky looked to his intellectual hero, Keynes, arguably the greatest economist of the 20th century. But where most economists drew a single, simplistic lesson from Keynes - that government could step in and micromanage the economy, smooth out the business cycle, and keep things on an even keel - Minsky had no interest in what he and a handful of other dissident economists came to call “bastard Keynesianism.”
Instead, Minsky drew his own, far darker, lessons from Keynes’s landmark writings, which dealt not only with the problem of unemployment, but with money and banking. Although Keynes had never stated this explicitly, Minsky argued that Keynes’s collective work amounted to a powerful argument that capitalism was by its very nature unstable and prone to collapse. Far from trending toward some magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a cliff.
This insight bore the stamp of his advisor Joseph Schumpeter, the noted Austrian economist now famous for documenting capitalism’s ceaseless process of “creative destruction.” But Minsky spent more time thinking about destruction than creation. In doing so, he formulated an intriguing theory: not only was capitalism prone to collapse, he argued, it was precisely its periods of economic stability that would set the stage for monumental crises.
Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans are almost always paid on time, businesses generally succeed, and everyone does well. That success, however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.”
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further. As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.
Once that kind of economy had developed, any panic could wreck the market. The failure of a single firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse first, as they lost access to the credit they needed to survive. Even the more stable players might find themselves unable to pay their debt without selling off assets; their forced sales would send asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that depended on the now-collapsing financial system.
From the 1960s onward, Minsky elaborated on this hypothesis. At the time he believed that this shift was already underway: postwar stability, financial innovation, and the receding memory of the Great Depression were gradually setting the stage for a crisis of epic proportions. Most of what he had to say fell on deaf ears. The 1960s were an era of solid growth, and although the economic stagnation of the 1970s was a blow to mainstream neo-Keynesian economics, it did not send policymakers scurrying to Minsky. Instead, a new free market fundamentalism took root: government was the problem, not the solution.
Moreover, the new dogma coincided with a remarkable era of stability. The period from the late 1980s onward has been dubbed the “Great Moderation,” a time of shallow recessions and great resilience among most major industrial economies. Things had never been more stable. The likelihood that “it” could happen again now seemed laughable.
Yet throughout this period, the financial system - not the economy, but finance as an industry - was growing by leaps and bounds. Minsky spent the last years of his life, in the early 1990s, warning of the dangers of securitization and other forms of financial innovation, but few economists listened. Nor did they pay attention to consumers’ and companies’ growing dependence on debt, and the growing use of leverage within the financial system.
By the end of the 20th century, the financial system that Minsky had warned about had materialized, complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy, his predictions started to look a lot like a road map.
“This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”
Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers that rereading Minsky’s 1986 “masterpiece” - “Stabilizing an Unstable Economy” - “helped clear my mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights - Paul Krugman and Brad DeLong - both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read Minsky.”
Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another depression [won’t] cure.”
But does Minsky’s work offer us any practical help? If capitalism is inherently self-destructive and unstable - never mind that it produces inequality and unemployment, as Keynes had observed - now what?
After spending his life warning of the perils of the complacency that comes with stability - and having it fall on deaf ears - Minsky was understandably pessimistic about the ability to short-circuit the tragic cycle of boom and bust. But he did believe that much could be done to ameliorate the damage.
To prevent the Minsky moment from becoming a national calamity, part of his solution (which was shared with other economists) was to have the Federal Reserve - what he liked to call the “Big Bank” - step into the breach and act as a lender of last resort to firms under siege. By throwing lines of liquidity to foundering firms, the Federal Reserve could break the cycle and stabilize the financial system. It failed to do so during the Great Depression, when it stood by and let a banking crisis spiral out of control. This time, under the leadership of Ben Bernanke - like Minsky, a scholar of the Depression - it took a very different approach, becoming a lender of last resort to everything from hedge funds to investment banks to money market funds.
Minsky’s other solution, however, was considerably more radical and less palatable politically. The preferred mainstream tactic for pulling the economy out of a crisis was - and is - based on the Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized labor - by building a new high-speed train line, for example.
Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government - or what he liked to call “Big Government” - should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars. In being available to everyone, it would be even more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone who was able to work. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers from falling too precipitously, and sending benefits up the socioeconomic ladder.
While economists may be acknowledging some of Minsky’s points on financial instability, it’s safe to say that even liberal policymakers are still a long way from thinking about such an expanded role for the American government. If nothing else, an expensive full-employment program would veer far too close to socialism for the comfort of politicians. For his part, Wray thinks that the critics are apt to misunderstand Minsky. “He saw these ideas as perfectly consistent with capitalism,” says Wray. “They would make capitalism better.”
But not perfect. Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that perfection, like stability and equilibrium, are mirages. Minsky did not share his profession’s quaint belief that everything could be reduced to a tidy model, or a pat theory. His was a kind of existential economics: capitalism, like life itself, is difficult, even tragic. “There is no simple answer to the problems of our capitalism,” wrote Minsky. “There is no solution that can be transformed into a catchy phrase and carried on banners.”
It’s a sentiment that may limit the extent to which Minsky becomes part of any new orthodoxy. But that’s probably how he would have preferred it, believes liberal economist James Galbraith. “I think he would resist being domesticated,” says Galbraith. “He spent his career in professional isolation.”
Stephen Mihm is a history professor at the University of Georgia and author of “A Nation of Counterfeiters” (Harvard, 2007). © Copyright 2009 Globe Newspaper Company.
Here is one such paper Leveraged Bubbles (Sep 01, 2015)
Posted by Mark Thoma on Tuesday, September 1, 2015 at 09:25 AM in Economics, Financial System | Permalink Comments (8) Double Capitulation said...The conclusion to "Leveraged bubbles," by Òscar Jordà, Moritz Schularick, and Alan Taylor:
... In this column, we turned to economic history for the first comprehensive assessment of the economic risks of asset price bubbles. We provide evidence about which types of bubbles matter and how their economic costs differ. Our historical analysis shows that not all bubbles are created equal. When credit growth fuels asset price bubbles, the dangers for the financial sector and the real economy are much more substantial. The damage done to the economy by the bursting of credit boom bubbles is significant and long lasting.In the past decades, central banks typically have taken a hands-off approach to asset price bubbles and credit booms. This way of thinking has been criticised by some institutions, such as the BIS, that took a less rosy view of the self-equilibrating tendencies of financial markets and warned of the potentially grave consequences of leveraged asset price bubbles. The findings presented here can inform ongoing efforts to devise better macro-financial theory and real-world applications at a time when policymakers are still searching for new approaches in the aftermath of the Great Recession.
"bursting of credit boom bubbles is significant and long lasting.
In the past decades, central banks typically have taken"
~~Òscar Jordà, Moritz Schularick, and Alan Taylor:~Did Kurt Vonnegut once quip
"Each fed governor likes to live on the edge, further out on a limb where she can see more then hope against hope that limb will not break until she leaves office." ?
Imprecisely, yet left us with a memorable hint of both his genius and fed governor's stupidity.
djb said...
Peter K. -> djb...of course if wages kept up with productivity, there would not have been as much of a bubble because people could have paid more, and borrowed less
but I doubt BIS was worried about that particular issue
mulp -> djb..."This way of thinking has been criticised by some institutions, such as the BIS, that took a less rosy view of the self-equilibrating tendencies of financial markets and warned of the potentially grave consequences of leveraged asset price bubbles."
Likewise I don't the believe the BIS is big on tighter regulation of the banks. As Krugman and others have pointed out, the BIS is always for raising rates but switches rationals. Sometimes it's about inflation, sometimes bubbles.
Arne said...We need a Fed that sets as policy buying long term debt that funds new infrastructure projects that are required by Federal regulation to pay prevailing aka higher wages.
If in 2010, the Fed had bought $3 trillion in bonds for such projects as building the NE HSR, for all the cities fixing their century old water and sewer systems, California's HSR, bonds for replacement bridges with tunnels as option, rerouting rail to eliminate grade crossings to speed for freight and truck traffic, then the Fed could have done what Republicans have done up until the Republicans decided to punish all the We the People for electing Obama.
Any debt issued that does not build new capital assets requiring American labor, ie, debt paying labor costs, is totally worthless to the economy.
Other than for some existing constant wealth redistribution purposes - during 2008-2011 savers were protected against having their wealth taken from them and given to the borrowers who had long ago spent it.
Is there some data on the extent to which asset price rises are credit fueled or not. My memory (which does not qualify as a data source) says that the housing bubble was much more so than the dot-com bubble.
Blissex said...mulp -> Blissex...«When credit growth fuels asset price bubbles, the dangers for the financial sector and the real economy are much more substantial.»
So M Minsky 50 years ago and M Pettis 15 years ago (in his "The volatility machine") had it right? Who could have imagined! :-)
«In the past decades, central banks typically have taken a hands-off approach to asset price bubbles and credit booms.»
If only! They have been feeding credit-based asset price bubbles by at the same time weakening regulations to push up allowed capital-leverage ratios, and boosting the quantity of credit as high as possible, but specifically most for leveraged speculation on assets, by allowing vast-overvaluations on those assets.
Central banks have worked hard in most Anglo-American countries to redistribute income and wealth from "inflationary" worker incomes to "non-inflationary" rentier incomes via hyper-subsidizing with endless cheap credit the excesses of financial speculation in driving up asset prices.
Not very hands-off at all.
Are you questioning creating wealth by price inflation of decaying asset which are churned in pump and dump?
Do you believe selling and reselling the same fixed quantity of assets creates jobs through the wealth effect of workers spending money they don't have to buy things on credit they can't pay back to keep up with the rich?
Wealth. Creating wealth. Wealth effect. Capital gains. Money in your pocket.
Signs of free lunch economic smoke and mirrors.
Wealth is created by paid labor or hard labor by the owner of the created wealth. But paying labor costs as a virtue is not something an economist is allowed to say in the post Reagan victory world.
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Feb 18, 2017 | economistsview.typepad.com
RC AKA Darryl, Ron... , February 16, 2017 at 07:35 AMJohn Kenneth Galbraith laid out the problem of companies with too much market/political power back in the 1950s and 60s. I never read Galbraith in an economics course, only on my own. Economists were not interested...not enough mathematics and marginal this equals marginal that.RC AKA Darryl, Ron -> JohnH... , February 16, 2017 at 08:27 AMNothing like overlooking the elephant is the room...something that economists are better at doing than trying to do their jobs.
Totally. John Kenneth Galbraith, like John Maynard Keynes, was a giant among midgets both figuratively and literally.
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Feb 15, 2017 | economistsview.typepad.com
RGC : February 15, 2017 at 10:04 AM
Contrary to What Robert Samuelson Says We Did Bail Out the Bankers and Did Not Prevent a Second Great DepressionDean Baker
13 February 2017Robert Samuelson is unhappy that people continue to believe something that is true - that we bailed out the bankers - and happy that people still believe something that is not true - that we prevented a second Great Depression. In his column Samuelson complains:
"The real Dodd-Frank scandal is that this misinterpretation of events, widely embraced by both parties, has been allowed to stand. In many bailouts, banks' shareholders suffered huge losses or were wiped out; similarly, top managers lost their jobs. The point was not to protect them but to prevent a collapse of the financial system."
Okay, let's imagine the counterfactual. We decide to take the free market seriously and let it work its magic on Citigroup, Bank of America, Goldman Sachs and the rest of the high rollers. These huge banks all go into bankruptcy with the commercial banking parts of the operations taken over by the FDIC. All insured deposits are fully protected, with the FDIC and Fed having the option to raise the limits to protect smaller savers.
The shareholders of these banks are out of luck. They have zero. Samuelson is right that share prices were depressed during the crisis, but that is different than going to zero. Furthermore, operating with the protection of Treasury Secretary Timothy Geithner's promise of "no more Lehmans," the share prices soon bounced back.
As far as the folks with uninsured loans that would have lost, well, many of these people were hedge-fund types and other financial institutions. They would have paid a price for not being very competent. The bailout ensured that they would not be left to suffer the consequences of their actions.
As far as the top executives of the banks, while some were shown the door, many of these people continue to earn paychecks in the millions or tens of millions as the financial sector remains hugely bloated. We had an opportunity to downsize the financial sector in one fell swoop, eliminating this enormous albatross which sucks money out of the economy and hands it to the very rich.
The narrow securities and commodities trading sector is now close to 2.5 percent of GDP ($470 billion a year). In the seventies, it was around 0.5 percent of GDP. Does anyone believe that capital is being allocated more effectively today than forty years ago or that our savings are safer?
The additional money spent operating this sector is a huge waste from an economic standpoint, which also plays a large role in the upward redistribution of the last four decades.
In terms of preventing a second Great Depression, this is a nice children's story that the elite like to tell. (And, they get very mad and call people names if they don't agree - we are supposed to take name-calling by the elites very seriously.) We know how to get out of a depression, we learned that lesson in the last one. It's called "spending money."
The claim that we would have suffered a decade of double-digit unemployment if we had not bailed out the banks is premised on a political claim, not an economic one, that we would never have spent the money needed to boost the economy out of a prolonged slump. This claim is not only that any initial stimulus would have been shot down, but even after two, three, or five years of double-digit unemployment the president and congress would not have agreed to a serious stimulus.
This is a pretty strong claim since even tax cuts would serve to provide stimulus, albeit less than spending. (Anyone ever meet a Republican that didn't like tax cuts?) Remember, the first stimulus occurred with George W. Bush in the White House and a 4.7 percent unemployment rate. Those making the claim that in the counterfactual the politicians in Washington never would have done anything to boost the economy has a really low opinion of these folks intelligence and/or honesty. That would be a good topic for a column, if someone really believed it.
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Feb 15, 2017 | economistsview.typepad.com
sanjait -> Jerry Brown... , February 15, 2017 at 10:38 AMEconomists are enormously diverse as a group. Any piece that explicitly or implicitly describes them as being homogeneous is being reductionist at best.DrDick -> sanjait... , February 15, 2017 at 10:51 AMBut Noah makes good points. Though it's probably worth emphasizing that if there exists a problem of communication between professionals and the public, there is probably mutual blame to be assigned. Economists should talk better to the general public, but as citizens we don't serve ourselves well when we expect the world to cater to our lack of knowledge and interest in complex but important issues.
I have to disagree. It is the professionals who need to do a better job of educating the public. It is ridiculous to assume that the general public has the time or resources to discover this for themselves.Peter K. -> sanjait... , February 15, 2017 at 11:19 AM"Economists are enormously diverse as a group.Peter K. -> sanjait... , February 15, 2017 at 11:20 AMMainstream economists who get paid well for their services are not that diverse. For one thing, most are white males.
That was Hillary's one good idea about the Fed. One.
"there is probably mutual blame to be assigned."Jerry Brown -> sanjait... , February 15, 2017 at 11:31 AMWhat a masochist.
Stockholm syndrome.
Yes economists are diverse as a group, but the opinions of the majority of that group might be described as having moved to the right since 1970. And often certain types of economists are described as fringe and there is a reluctance to discuss their ideas. That is somewhat understandable because any one economist has only so much time, but it seems to go deeper than that very often. Trade has been one of those areas, and I am happy to see many economists doing some re-evaluation of the free trade mantra, among other things. I would include Paul Krugman in that group.As far as being a knowledge lacking citizen- well we all are. Ain't no economist got it all completely figured out as far as I know. That's how I read Noah Smith's article, as a call to re-examine some previously sacred ideas with maybe a goal of keeping in mind their effects on different segments of society. And economists or anyone else who wants to impact public policy in a democracy certainly should expect to cater somewhat to those who are less knowledgeable about their theories.
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Feb 13, 2017 | economistsview.typepad.com
RGC : February 13, 2017 at 06:13 AM , 2017 at 06:13 AMJohn Kenneth Galbraith on Monetary Policy:anne -> RGC... , February 13, 2017 at 08:19 AM"If the near future is an extension of the near and more distant past, there are six imperatives that will shape or control monetary policy and the larger economic policy of which it is now a lesser part. these are:
(1) The perverse unusefullness of monetary policy and the frustrations and danger from relying on it. This is perhaps the clearest lesson of the recent past. The management of money is no longer a policy but an occupation. Though it rewards those so occupied, its record of achievement in this century has been patently disastrous.
It worsened both the boom and the depression after World War 1. It facilitated the great bull market of the 1920s. It failed as an instrument for expanding the economy during the Great depression. When it was relegated to a minor role during World War 11 and the good years thereafter, economic performance was, by common consent, much better. Its revival as a major instrument of economic management in the late '60s and early '70s served to combine massive inflation with serious recession.
And it operated with discriminatory and punishing effect against, not surprisingly, those industries that depend on borrowed money, of which housing is the leading case. To argue that it was a success may well be beyond even the considerable skills of its defenders. Only the enemies of capitalism will hope that, in the future, this small, perverse and unpredictable lever will be a major instrument in economic management.
The central bank remains important for useful tasks - the clearing of checks, the replacement of worn and dirty banknotes, as a loan source of last resort. These tasks it performs well. With other public agencies in the United States, it also supervises the subordinate commercial banks. This is a job which it can do well and needs to do better. In recent years the regulatory agencies, including the Federal reserve, have relaxed somewhat their vigilence. At the same time numerous of the banks have been involved in another of the age-old spasms of optimism and feckless expansion. The result could be a new round of failures. It is to such matters that the Federal Reserve needs to give its attention.
These tasks apart, the reputation of central bankers will be the greater, the less responsibility they assume. Perhaps they can lean against the wind - resist a little and increase rates when the demand for loans is persistently great, reverse themselves when the reverse situation holds.
But, in the main, control must be - as it was in the United States during the war years and the good years following - over the forces which cause firms and persons to seek loans and not over whether they are given or not given the loans.
-From "Money: Whence it came, Where it went" 1975 - pgs 305,6.
https://www.amazon.com/Money-Whence-Came-Where-Went/dp/0735100705RC AKA Darryl, Ron said in reply to RGC... , -11975
Money: Whence it came, Where it went
By John Kenneth GalbraithExcellent! THANKS!
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Feb 13, 2017 | economistsview.typepad.com
llisa2u2, February 13, 2017 at 10:34 AMJust finished reading a great little book, THE ECONOMIC PINCH, by C.A.Lindbergh, SR. Here's a link to it: https://archive.org/stream/nkooan_yahoo_Lind/Lind#page/n1/mode/2upSanjait, February 13, 2017 at 11:10 AMYes, the writing style is a bit dated, but it gives the bottom-line in really clear, well-written English.
It's a GREAT little book, should be required reading with proof by some book report written by each economist, before their being allowed any public discussion about the FEDERAL RESERVE.
It's probably more relevant today for all U.S. citizens than it was back in the early 1900's.
The Great Moderation era Fed has some good aspects but has fundamentally failed to understand how its obsession with keeping inflation from ever even thinking abut going up has suppressed wages and caused labor hysteresis.libezkova : February 13, 2017 at 03:07 PM , 2017 at 03:07 PMI think they assume that all those problems just equilibriate away across the cycle but the reality is not that.
So definitely it could and should be better.
But .. that doesn't make every proposal to change it a good one, or even a coherent one. Nor does it justify the attitude that we should just blow everything up and hope something better happens. Those bad arguments are what got us Trump, and at no point should reasonable people pander to such bad arguments, or confuse the fact that bad arguments are widely held with the notion that they aren't bad.
Fed independence was always a convenient fiction. This is an independence limited to implementing neoliberal policies.http://www.levyinstitute.org/pubs/wp_625.pdf
Which was done under "Maestro" Greenspan. This Ann Rand follower and staunch believer in unrestrained "free market" (which means the law of jungles) subverted the institution and pressured the Presidents who deviated from the "Party line" (and one time Bill Clinton tried). This is the extent he was a Maestro. Later, after 2008, Maestro turned into cornered rat, but this is quite another story.
Under Maestro Greenspan Fed as an institution became not so dissimilar to such post WWII financial institutions as IMF and World Bank (which became the key instruments for implementing "Washington consensus"). It became a very effective enforcer of the neoliberalization of the country.
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Feb 12, 2017 | economistsview.typepad.com
im1dc : February 12, 2017 at 07:44 PM
The Tax stuff is maybe, this is happening nowlibezkova -> im1dc..."America's Biggest Creditors Dump Treasuries in Warning to Trump"
by Brian Chappatta...February 12, 2017...5:00 PM EST
> Japanese investors cull U.S. government debt by most since '13
> Currency-hedged returns were worst on record last quarter
"In the age of Trump, America's biggest foreign creditors are suddenly having second thoughts about financing the U.S. government.
In Japan, the largest holder of Treasuries, investors culled their stakes in December by the most in almost four years, the Ministry of Finance's most recent figures show. What's striking is the selling has persisted at a time when going abroad has rarely been so attractive. And it's not just the Japanese. Across the world, foreigners are pulling back from U.S. debt like never before.
From Tokyo to Beijing and London, the consensus is clear: few overseas investors want to step into the $13.9 trillion U.S. Treasury market right now. Whether it's the prospect of bigger deficits and more inflation under President Donald Trump or higher interest rates from the Federal Reserve, the world's safest debt market seems less of a sure thing -- particularly after the upswing in yields since November. And then there is Trump's penchant for saber rattling, which has made staying home that much easier.
"It may be more difficult than usual for Japanese to invest in Treasuries and the dollar this year because of political uncertainty," said Kenta Inoue, chief strategist for overseas bond investments at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. "Treasury yields may rise rapidly again in the near future, which will continue to discourage them from buying aggressively."
Nobody is saying that foreigners will abandon Treasuries altogether. After all, they still hold $5.94 trillion, or roughly 43 percent of the U.S. government debt market. (Though that's down from 56 percent in 2008.) A significant drawdown can harm major holders like Japan and China as much as it does the U.S.
And, of course, homegrown demand has of late been able to absorb the pickup in overseas selling..."
im1dc,Here is the link https://www.bloomberg.com/amp/news/articles/2017-02-12/america-s-biggest-creditors-dump-treasuries-in-warning-to-trump )
Bloomberg, like WaPo and NYT, is "a wholly-owned subsidiary of the Deep State"
Thank God they stopped their Putin-did-it nonsense. Now they have found something new along the lines Trump-did-it. Both those attempts to control the narrative are false and dishonest.
I understand that Trump is now assigned to be as designated scapegoat for all blunders of three previous neoliberal administrations.
But can you please ask yourself two very simple questions:
- Who and how accumulated that much debt?
- Who did run the wars of neoliberal empire expansion to the tune of five trillion dollars?
Was it Trump?
I would greatly appreciated if you can answer them in the reply to this post. Or, even better, make some pause in posting neoliberal propaganda.
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Feb 12, 2017 | economistsview.typepad.com
Choco Bell -> Ed Brown... February 12, 2017 at 07:50 AM , 2017 at 07:50 AM
asymmetric information, and the recent illuminating example of Wells Fargo's excellence in pushing products that customers did not want nor need.BY: Some financial "innovation" is faddish. It does not create value.
GR: Approximately 9 percent of U.S. GDP is finance. Some economists argue that probably 3-5 percent is useful for allocating capital, storing value, smoothing consumptions, and creating competition, and the rest is preying on asymmetric information
"
~~Guy Roinik~Do you see how this asymmetric information plays out?
It is the retail vendor who keeps better information than the retail customer. It is the vendor's expectations of disinflation vs inflation rather than the customer's expectations that control the change in M2V. Got it?
When vendor expects deflation he dumps inventory, but when he expects inflation he holds on to inventory as he waits for higher profit margins to arrive. He holds onto merchandise by simply raising prices. But why do economists advertise the reverse mechanism? Why does the status quo have a need for distorting truth?
Inflation is offered to the proles as a substitute for tax relief to the impoverished. Do you see how it works?
" Tax relief for the wealthy will give you delicious inflation. Now jump for it! " ~~The Yea Sayers~
Jump, Fools, Jump
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Feb 12, 2017 | www.amazon.com
Selected as a Financial Times Best Book of 2013
Governments today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system. Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer.
That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment. As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality. Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we austerity for what it is, and what it costs us.
Metallurgist TOP 1000 REVIEWER on April 20, 2013 Format: Hardcover Vine Customer Review of Free Product ( What's this? )
An interesting Keynesian view of the current EU austerity programsDavid Lindsay on September 25, 2016 Format: Paperback Verified Purchase" I found this to be a very interesting and thought provoking book. The author makes his viewpoint very clear with the book's subtitle "The History of a Dangerous Idea". The essence of the author's argument is that austerity is unfair because it makes workers pay for the mistakes of banks, and even more importantly, dangerous because it does not lead to prosperity, but only to decreased economic growth and increased unemployment. This thesis is backed up by an analysis of the banking crisis of 2008, how it spread from the US to the EU, why the single currency Euro has made the problem worse for the EU and why using austerity to solve the problems will not work. It also discusses the history of the idea of austerity, both in terms of the economic theory that promotes it and the economic history that does not. Conservatives, who find Keynesian economics to be not only wrong, but also the road to economic ruin, will likely be turned off by the book's subtitle and many of the arguments that Professor Blyth utilizes. However, there is a lot of data in this book that they should look at, if only to criticize it. I found this book very enlightening and while I do not agree with all of Professor Blyth's ideas (particularly those of the last chapter), I learned a lot, so for me it was 5-stars.
What is in the book?
The book is divided into 7 chapters, which cover the following:Chapter 1 - A Primer on Austerity. This is a short chapter that summarizes the main thesis of the book (mentioned above), and sets the stage for the more detailed discussions in subsequent chapters.
Chapter 2 - America: To Big to Fail? This is an excellent chapter that summarizes the origins and unfolding of the 2008-banking crisis in the US. This is a very complicated story, which Professor Blyth tells in a clear manner. The story revolves around repurchase agreements (Repos), mortgage backed securities (MBS), collateralized debt obligations (CDO), credit default swaps (CDS), and how all these interacted in a climate of deregulation to produce the crisis. Professor Blyth does a good job of explaining these terms and how the interaction worked.
Chapter 3 - Europe: Too Big to Bail? This is another very illuminating chapter. It shows how Europe, which first believed it was not going to be affected by the US banking crisis, became a major casualty of it and their own internal banking problems. All these factors were compounded by the single currency Euro, which has removed devaluation as a solution to the crisis, instead fostering the idea that governmental austerity was the only way to correct a problem produced by the private banking sector.
Chapter 4 - Intellectual History of a Dangerous Idea 1692-1942. This chapter goes back to the writings of John Locke, David Hume and Adam Smith to see how the idea of austerity developed. It also covers the idea in the early 20th century and the development of anti-austerity Keynesian economic theory. It is a nice primer on classical economic ideas.
Chapter 5 - Intellectual History of a Dangerous Idea 1942-2012. This chapter carries the story of the idea of austerity into the present time. It shows how the idea of austerity, discredited by the Great Depression and the success of the Keynesian solution (although conservatives would argue these successes were illusory and set the stage for future economic problems), has been resurrected by economists writing in the latter part of the 20th century and early 21st.
Chapter 6. Austerity's Natural History 1914-2012. Blyth presents a lot of data that shows that, contrary to the theories presented in the previous chapter, austerity has not worked in practice. Much of the chapter is spent it refuting the writings of several economists that say that the recent historical data does support the idea. Blyth contends that in general it does not and if is does in a few cases it either does not when all the data is considered, or worked only marginally under a very limited set of conditions.
Chapter 7 - The End of Banking, New Tales and a Taxing Time Ahead. This is a very short eleven-page chapter, but perhaps the most controversial on in the book. Blyth, initially a supporter of bank bailouts as absolutely necessary to prevent a complete collapse of the banking system and with it the whole capitalist economic system and with it democratic society as a whole, now questions whether in might not have been better to let the banks fail. He cites the case of Iceland where the banks were allowed to fail and society has recovered. This was done by making the bank's creditors bear the cost of failure, instead of all of Iceland's citizens. He notes that most of this loss was borne by foreign creditors of a very small country, whose banking system was an immense part of the country's economy, but was small compared to the economies of the US or the EU. Unfortunately, he fails to say how a banking collapse in the US or EU could be handled when the systems are huge compared to Iceland's and where the creditors are largely internal. He does not explain how the failure of these huge banking systems, with their internal creditors, would not result in the scenario he originally envisioned. I found this analysis to be poor and not in keeping with the thoroughness of the rest of the book. Blyth also floats the idea of huge tax increases, either through a one-time tax on assets or a very large increase in higher bracket tax rates. Conservatives, and many not quite so conservative, will likely blanch at these ideas. There is no discussion of the political difficulties of doing this or very much development of the idea, which is contained in only the last four pages of the book.
Brilliant OverviewFang on September 27, 2016 Format: Paperback Verified Purchase" Mark Blyth is a professor at Brown University and he explains why austerity doesn't work. He points out that whenever austerity has been tried in the past it has usually proven to be disastrous. What its supporters often seem to forget is that one person's spending is another's income and demand in the economy would collapse if everyone stopped spending. The book is a sobering read because Blyth is not optimistic about the future. However, the book is well written and is often funny.
Blyth shows that the case for austerity does not add up. The US did not pursue austerity during the recession and its economy has been growing. US GDP is 10% higher than it was in 2007. The EU has pursued austerity with vigor, but GDP in the euro zone is still lower than it was in 2007. Blyth shows that countries that cut the most have had lower rates of growth. Blyth claims that all the countries that cut public spending in response to the financial crises had significantly more debt in 2012 than when they started. For example, Ireland's debt to GDP ratio more than quadrupled, from 24.8% in 2007 to 106.4% in 2012. The other problem is that austerity increased unemployment. Throughout southern Europe, unemployment has been at levels not seen since the Great Depression. It is still over 20% in Spain and Greece. As a result of cutting public expenditure Greece's GDP dropped by 30% in four years. There is no evidence that austerity improves growth.
Blyth spends a lot of time trashing the pro-austerity thinking that took place in Europe. Germany is driving economic policy for the euro zone and they have never believed in Keynesian economics. Keynes advised that austerity was a bad idea during a recession. German politicians seem to believe that all nations could have trade surpluses if only they tried hard enough, despite the fact that it is impossible for all countries to have a surplus. Only one European country can be Germany. The Germans have often advocated the sort of solutions that failed in the 1930s. They argue that budget deficits and government debt have to be kept under strict control. The Maastricht Treaty, which established the EU, required that national debt should not exceed 60% of GDP and the deficit should not exceed 3.0%. Entry to the euro also requires a budget deficit of 3.0%.
Blyth points out that when you have a deficit, you can either raise taxes or cut spending to fill the gap. The British government of David Cameron favored the latter in 2010. The British deficit had reached 10% in 2010. However, UK government debt went up, not down, despite the cuts, from 52.3% of GDP in 2009 to 90.7% in 2013. The same pattern was repeated throughout the euro zone. Cutting public expenditure shrank the underlying economy.
The German argument is that running large deficits increases the risk of high inflation. Blyth points out that the Germans have selective amnesia about their past. It was the Wall Street Crash in 1929 not hyper-inflation in 1924 that led to Hitler. Before the crash, 1.25 million people were unemployed in Germany. Hitler was an accidental Keynesian and by 1937 German unemployment had fallen from six million to one million. Unfortunately, much of his spending involved preparing for war. Blyth argues that Germany's continuing insistence on austerity is the biggest threat to the euro zone.
According to Blyth, the current version of the austerity argument was created by a group of Italian economists, originating from Bocconi University, in Milan. He explains why their arguments are deeply flawed. Blyth argues that, apart from Greece, public sector debt in the euro zone countries was not out of control before the financial crises. Blyth rubbishes the theory of "expansionary austerity," that cutting spending will lead to higher economic growth. The "austerians" believed that large spending cuts would be followed by expansion rather than contraction. The reason, they suggested, was that decisive fiscal austerity created confidence in the private sector. Keynesians agreed that insufficient private spending was the cause of the problem, but only governments could stimulate demand on the scale needed. Austerity failed to stimulate demand in Europe. Blyth also argues that everybody cannot cut their way to growth at the same time. The IMF once went along with austerity but it has recently concluded that austerity has had major adverse economic effects.
Blyth is worried that inequality could become a serious problem in the US. The 400 richest Americans own more assets than the poorest 150 million. He argues that both major parties have written off the bottom 30% of society. He claims that the American working class has not had a pay rise since 1979, and globalization has failed them. He believes this explains the anger behind the Trump phenomenon. Blyth points out that rich Americans and the country's biggest companies are reluctant to pay tax, so government borrowing has had to go up. Blyth claims that he pays more tax than GE.
Blyth is critical of Republicans who advocated austerity. Republicans in the US also favored balancing the budget and cutting taxes. Keynesians, like Paul Krugman, argued that this is what Herbert Hoover tried to do in the early 1930s and the result was a 25% unemployment rate. Obama inherited an 11.4% budget deficit in 2009. The Republicans wanted to cut government expenditure but Blyth argues the reason the US has recovered faster than Europe is because it cut less. He makes it clear that it is poorer people who usually rely on government services to make ends meet that are the hardest hit when public expenditure is cut. He believes that the rich and corporate America need to start paying more tax. He also argues that the US government should probably have let its banks go bankrupt – as the Icelandic government did – rather than bail them out.
Blyth reminds us that 2008 was a private sector crisis. The debts of the banks landed on the balance sheet of the public sector through bank bailouts and quantitative easing. In other words, taxpayers bailed out the bankers. He calls this the "greatest bait-and-switch in modern history." The EU is imposing austerity on southern Europe and dismantling the welfare state in Greece in order to protect German banks that made stupid decisions.
Blyth in recent interviews has argued that the EU may have a sinister agenda and it really wants to drag wages in Western Europe down to East European levels so that it can better compete with China. I assumed this must be an exaggeration but it might not be. The Guardian mapped labor costs across the euro zone from 1999 to 2013. What they found is that German workers have barely seen wages rise for that 14-year stretch, despite Germany having massive trade surpluses. We could be in for real trouble.
The Richness of Austerity" Mark Blyth tries to convey a simple message: austerity simply does not work. Defining austerity as "voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore competitiveness .best achieved by cutting the state's budget, debts and deficits" (p.2), Blyth argued that austerity's fallacies lies in the impossibility of having everybody to be thrift at the same time and the cyclical nature of debt (pp.7 and 12).
Blyth also suggests that austerity efforts unevenly hurt the lower strata of societies (p.8), and conflates debt and financialization problems in private sector (primarily referring to bank and financial institutions) into state (sovereign) issues (p.6 and p.23). In the first three chapters, Blyth strives to demonstrate that the financial and economic turmoil since 2008 is largely a crisis of financialization, lack of regulation, slow growth and imbalance between monetary policy and final creditor of printing press (in the case of Europe), not that of austerity (save the marginal case of Greece). Blyth argues that it is a mentality of treating these crises as endogenous and private actors as "rational" that underlay the bad policy choices in America and Europe (pp.91-93).
In chapters 4 through 6, Blyth provides an intellectual and practical history of austerity. It is suggested that a spirit of thrift and aversion towards state and state spending runs through the vein of economic liberalism, ranging from classical liberalism to neoclassical economics and to the Austrian school. In more contemporary era, it is public choice theory, neoliberalism and Milton Friedman's monetarism that carries this tradition forward to construct a pro-market and private-sector-favoring package that turns public spending into a corporate calculation of costs and benefits. Blyth goes on to illustrate the history of austerity in practice, arguing that it is usually the Keynesian expansionary policies that couple austerity that reinvigorated economy amid crises; austerity, carried out on its own, constitutes massive redistribution consequences.
Blyth obviously attempts to engage as wide an audience as possible in the public intellectual realm. As much as he is successful in his empirical chapters, Blyth appears to fight a deflationary economic policy with his own inflationary writing strategy. From chapters 4 to 5, he constantly conflates the moral teaching of thrift and financial prudence from Adam Smith to avoidance of debt, the Ordoliberalism's quest for order and proper state function to aversion of democratic politics, the methodological insights of public choice to a general fear of bureaucracy and government, and so on. These inflations, while sometimes credited, are bound to subject to scrutiny and questions.
Moreover, by glossing over the details of this rich intellectual history, Blyth dodges some key questions that his empirical chapters also fail to articulate: what is the distinction between private and public debt, and personal thrift and public austerity, when we talk about austerity, and how significant is it? How does this distinction play out in more classical economic philosophy?
And amid crisis, who should be considered the "ultimate creditor" or "final guarantor" of debt (and money)? There questions certainly exceeds the scope and intention of Blyth's book, but they should be instrumental in deepening our understanding of austerity.
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Feb 12, 2017 | economistsview.typepad.com
yuan -> DeDude... , February 10, 2017 at 09:49 AM"The real question is how much support he has a year from now when most of his voters realize that the majority of what he directly or implicitly promised them, turns out to be a lie."DeDude -> yuan... , February 10, 2017 at 12:52 PM
I'm sure that people in Kansas were telling themselves this 7 years ago.Yep - and they were right. The democrats lost the next midterm election. The midterm blowback is that of both an energized opposition and of a lot of disappointed followers.ilsm -> DeDude... , February 10, 2017 at 04:04 PMIf the libruls think Obama's multinational collateral damage from senseless bombing by drone and expensive aircraft is not worth protesting, then rallies and faux moral indignation against a travel ban are incongruous to reason.sanjait -> Estate Agent - Emily ... , February 10, 2017 at 10:31 AM"It's not quite that bad."ilsm -> sanjait... , February 10, 2017 at 04:08 PMWe can only hope.
But we have an administration that is unconstrained by conscience and logic and a GOP majority in both houses of Congress that shows scant willingness to stand against the administration on anything.
The only remaining check between now and 2018 is the fear Congresspersons might have of losing their seats, and the judiciary.
The former is very weak though, because rapid Trump supporters make up the majority of the GOP voting base, so GOP congressmen are going to stay in line to avoid primary challenges. Their party is almost completely captured by the wingnut wing.
Also, few at-risk GOP Senators are even up for re-election in 2018.
The latter is our only real hope, and even that is tenuous. Judges can be fickle and peculiar, but most GOP judges were selected for their partisan loyalty. Most will go along with almost anything the GOP wants, and as time passes, Trump is going to add more judges, and he will be damn sure to pick ones that go along with anything he wants.
We're hoping for judges' consciences, and loyalty to country over party, and common sense, to save us. But when the GOP picks judges they select against those traits.
ilsm : , February 10, 2017 at 04:09 AM"administration that is unconstrained by conscience and logic", we have had that continuously since 1980.You get worked up over a travel ban but not Obama's US bombing wedding parties. Or taking out 14 non combatants and losing n MV 22 to get a few smart phones.
Do you have stock in both refugee referral companies and Lockheed?
poor pk has grabbed the alt right's the concession over cognitive bias, false analogy and cherry picked faux facts.Benedict@large -> ilsm... , February 10, 2017 at 05:04 AMDoes anyone take this guy seriously anymore? This is Chicken Little, Sky-Is-Falling nonsense from a PhD Nobelist? Certainly the guy has lost his marbles, and someone needs to put him in a padded room. At least be kind, and retire him.RC AKA Darryl, Ron -> Benedict@large... , February 10, 2017 at 05:30 AMYou certainly cannot expect Krugman to criticize the constitutional political system of dollar democracy that gave us a choice between Trump and Hillary through first past the post elections and party caucuses any more than you can expect him to criticize lifetime congressional seats and a SCOTUS unanswerable to the people.pgl -> RC AKA Darryl, Ron... , February 10, 2017 at 05:59 AMI believe even Krugman will criticize gerrymandering, which is a safe target since it is implemented at the state rather than federal level.
DeLong is - at least when it comes to the Electoral College. This system is sort of telling the folks in California that they really do not matter.ilsm -> pgl... , February 10, 2017 at 06:10 AMElectoral college exists until "they" gut/get rid of states rule on amendments in the US constitution.RC AKA Darryl, Ron said in reply to pgl... , February 10, 2017 at 06:12 AMDemocracy is one thing within toen lesser in states........ the rest is republic the 'burgs' not wanting to be run from Morningside Hts.
The electoral college although problematic is not the best place to start. Campaign finance, gerrymandering, legislative term limits, and an alternative to first past the post voting are all state to state neutral, allowing a large and powerful electoral consensus to form without undue obstacles except for elite authority itself.yuan -> RC AKA Darryl, Ron... , February 10, 2017 at 08:39 AMThese are all assessable solidarity issues. The fear of reversal for Roe V. Wade makes petition and referendum to overturn SCOTUS decisions more difficult first time around, but not impossible since Citizens United. Liberals on the fence only need consider the polling numbers comparing those two SCOTUS decisions to see that petition and referendum to overturn SCOTUS would not threaten Roe V. Wade, but rather end the threat to Roe V. Wade. OTOH, the electoral college is a state by state issue and small states are not going to give it up. New York and California will need to subdivide into a bunch of small states to ever change that.
The constitutional ratification procedure can be hijacked by a solidarity electoral movement only so long as the solidarity is large and cohesive.
And, IMO, you are not seeing the forest for the trees. The republican party is laser focused on voter suppression. And they will not waste a crisis or supreme court judge slot.RC AKA Darryl, Ron -> yuan... , February 10, 2017 at 09:27 AM"A review of these documents shows that North Carolina GOP leaders launched a meticulous and coordinated effort to deter black voters, who overwhelmingly vote for Democrats."
When the Supreme court becomes un-deadlocked Jim Crow will destroy opposition to Trumpism.
You are certainly correct in their intent and if the South less Virginia, which was purple enough to go for Hillary in 2016, were the entire country then you would be correct in the impending reality.yuan -> RC AKA Darryl, Ron... , February 10, 2017 at 09:42 AMThe reality is uncertain though because many of the Trump voters were racists and misogynists, but then many of the Trump voters were just reacting to an opportunity to strike back at the corporatist hegemony in control of the political establishment. The corporatist controlled dollar democracy has dominated the conversation about the advantages of trade regardless of trade deficits for over thirty years now. A rebellion is long overdue. The US Constitution provides sufficient political tools to the electorate to stage a revolution using electoral means, but not by just choosing between establishment political parties without providing an electoral agenda of its own along with solidarity in imposing bipartisan anti-incumbency sanctions for failure to perform.
"The US Constitution provides sufficient political tools to the electorate to stage a revolution using electoral means"sanjait -> RC AKA Darryl, Ron... , February 10, 2017 at 10:39 AMAnd I see a mostly corrupt legal system that has already proven willing to overturn the will of the people.
Great. While Trump tries to tear down democracy, the supposed representatives of "the people" will keep talking about shit like how much they hate NAFTA.ilsm -> sanjait... , February 10, 2017 at 04:16 PMI won't type much here:libezkova said in reply to yuan... , February 10, 2017 at 07:57 PMhttps://www.youtube.com/watch?v=Sk3sURDS4IA
The opening rif is cool.
Monster, Steppenwolf
I need to play this once a week!
"And, IMO, you are not seeing the forest for the trees. The republican party is laser focused on voter suppression."ilsm -> RC AKA Darryl, Ron... , February 10, 2017 at 04:13 PMWith all due respect, I do not believe that.
Why republicans should be focused on voter suppression, if Democrats are working relentlessly to move blue collar workers and lower middle class voters to far right ?
'dollar democracy' is deeper than that.ken melvin : , February 10, 2017 at 05:22 AMit is 99% the system
but you got to do the right system
or the left one
trouble is like tamany
cannot see the system to fix
Paul Krugman didn't give us Trump, the progressives who can't stand dems, demonized Hillary, either didn't vote or voted for Trump gave us Trump. Idee fixe and big picture are not the same.Peter K. -> ken melvin... , February 10, 2017 at 05:38 AMWrong. Progressive neoliberals helped give us Trump. Nobody forced Hillary to give speeches to Goldman Sachs or to give Bush a blank check for war.yuan -> Peter K.... , February 10, 2017 at 08:56 AM"We're re-learning today what we should have learned in the 30s ... economic stagnation breeds reaction and intolerance"
Blaming the few who didn't vote Hillary. What about the many who stayed home? You're an example of learned helplessness. Like the wife who won't leave her abusive husband.
Peter K. -> yuan... , February 10, 2017 at 09:09 AM"Wrong. Progressive neoliberals helped give us Trump. Nobody forced Hillary to give speeches to Goldman Sachs or to give Bush a blank check for war."How many Goldman Sachs banksters does Trump have in his administration? I lost count.
The best predictor of a Trump vote was a tendency towards sexism and racism. And Trump voters were generally well-off middle class whites, not the underclass who either stayed home or predominantly voted for Clinton.
yuan -> Peter K.... , February 10, 2017 at 09:38 AM"The best predictor of a Trump vote was a tendency towards sexism and racism. And Trump voters were generally well-off middle class whites, not the underclass who either stayed home or predominantly voted for Clinton."Trump won the uneducated vote. Many of those people ain't middle class.
"How many Goldman Sachs banksters does Trump have in his administration? I lost count."
Yeah they own both parties. Democrats need to be for the people, not corporations. You are pretty naive for being leftwing. Probably you just get off on being argumentative.
"Trump won the uneducated vote. Many of those people ain't middle class." I see you are pimping Trump's faux-populist mythology again. Clinton won the majority of votes of those earning less the $50,000 and Trump won the majority of votes for those who earn more than $50,000.Peter K. -> yuan... , February 10, 2017 at 11:55 AM
high school or less [18 percent of total]yuan -> Peter K.... , February 10, 2017 at 05:49 PMClinton 46 %
Trump 51 %some college [32% of total]
Clinton 43%
Trump 51%college graduate [32%]
Clinton 49%
Trump 44%postgraduate [18%]
Clinton 58%
Trump 37%has it ever occurred to you that older white voters can be middle/upper class without having a college degree?libezkova said in reply to Peter K.... , February 10, 2017 at 08:05 PMit's ironic that many of these same people oppose unions, social insurance (e.g. pensions), and free education (GI bill) despite having benefited from these socialist programs.
FYIGMIf Trump got 37% of votes of people with postgraduate degree that's tell you something about Democratic Party. That only can means that Democratic Party smells so badly that most people can not stand it, not matter what is the alternative. As in "you should burn in hell".RC AKA Darryl, Ron said in reply to pgl... , February 10, 2017 at 06:16 AMIt's kind of reversal of voting for "lesser evil" on which Bill Clinton counted when he betrayed the working class and lower middle class. Worked OK for a while but then it stopped working as he essentially pushed people into embraces of far right.
My wife says Liz Warren will run in 2020 and win. I am hoping that it will be someone off radar now that gets elected as the youngest POTUS in history. We need a sea change with full millennial backing.Jay -> RC AKA Darryl, Ron... , February 10, 2017 at 06:32 AMYou're wife's prediction for next president will keep DeVos.RC AKA Darryl, Ron said in reply to Jay... , February 10, 2017 at 09:38 AM"A taxpayer-funded voucher that paid the entire cost of educating a child (not just a partial subsidy) would open a range of opportunities to all children. . . . Fully funded vouchers would relieve parents from the terrible choice of leaving their kids in lousy schools or bankrupting themselves to escape those schools.
the public-versus-private competition misses the central point. The problem is not vouchers; the problem is parental choice. Under current voucher schemes, children who do not use the vouchers are still assigned to public schools based on their zip codes. This means that in the overwhelming majority of cases, a bureaucrat picks the child's school, not a parent. The only way for parents to exercise any choice is to buy a different home-which is exactly how the bidding wars started.
Under a public school voucher program, parents, not bureaucrats, would have the power to pick schools for their children-and to choose which schools would get their children's vouchers."
Remember which side of the debate is pro-choice and which side of the debate is pro teacher's union.
I am not for either side. My wife's mother was a teacher as was her older sister. I am not sure what she thinks of the teacher's union.ilsm -> RC AKA Darryl, Ron... , February 10, 2017 at 04:26 PMThe pedagogical system is so oriented to a system of establishment indoctrination that the average private school is just as bad as the average public school and even the worst public schools are no worse than the worst private schools. Only the best private schools stand out along with a few of the charter schools as better than their public school counterparts and even then not by a great margin. The problem is the pedagogical approach itself. It is also a matter of who taught the teachers? We have developed a system that aspires to mold us all into obedient followers and it works very well. It is also self-replicating.
Putting up "competition" against public education which as evolved since the Northwest Ordinance is a crusade for the tea party.yuan -> Jay... , February 10, 2017 at 10:02 AMBut they would trip WW III, war to keep Russia from breaking up the Frankensteins of East Europe!
The system is: who makes money.
"Remember which side of the debate is pro-choice and which side of the debate is pro teacher's union."sanjait -> RC AKA Darryl, Ron... , February 10, 2017 at 10:47 AMWho needs labor and civil rights when we have capitalist billionaires who will give us "school choice vouchers", "right to work laws", and "deregulation"!
Complaining about the electoral college being screwed up is like complaining that human nature is screwed up.libezkova said in reply to RC AKA Darryl, Ron... , February 10, 2017 at 08:11 PMIt's true, but almost pointless, because it won't change in the foreseeable future.
I doubt that Trump is a political cycle outlier. He is a sign of the crisis of neoliberal political system, which pushes authoritarian figures as "Hail Mary Pass", when Hillarius politicans are proved to be un-electable.Peter K. -> The People's Pawn... , February 10, 2017 at 06:19 AMAnd despite his "bastard liberalism" he is the symbol of rejection of liberalism, especially outsourcing/offshoring and neoliberal globalization. Or more correctly his voters are.
Trump said the Iraq war was a disaster. He bragged about being against the war before it started. He used the Iraq war against Jeb Bush and Hillary as an example of the corrupt elite's incompetence.sanjait -> Peter K.... , February 10, 2017 at 10:55 AMThis infuriates thoughtless partisans like Krugman to no end.
The appellate court ruled against Trump's Muslim band even more strongly than the lower court judge.
"Trump said the Iraq war was a disaster. He bragged about being against the war before it started."wally : , February 10, 2017 at 06:20 AMThat is a very sneaky way of talking around the fact that Trump never said anywhere on record before the war that he was against it.
"America as we know it will soon be gone." Don't you think that much of it is already gone? We did not see ourselves as a nation of cowards years ago, but that's what we now appear to be.yuan -> wally... , February 10, 2017 at 09:13 AM"We did not see ourselves as a nation of cowards years ago, but that's what we now appear to be." USAnians have been cowards for generations. The transition from corporatist dyarchy to one-party authoritarianism is and was inevitable.ilsm -> wally... , February 10, 2017 at 04:36 PMpoor pk's [whatever it is] America is not my [or a lot of peoples'] America. America like freedom is a perspective thing!point : , February 10, 2017 at 06:41 AMIt seems we live in a system where two parties fight to a draw and then volatility in the system acts as a coin toss and we get new leadership. The people line up approximately half and half for the two.yuan -> point... , February 10, 2017 at 09:33 AMI'm having a hard time understanding why if half support the new leadership established by the operations of the system, that we should worry this a threat to the system itself.
For if that's what we think, it seems we have far bigger problems than simple disagreement to worry about. It seems those among us who think that way should be planning as revolutionaries to change this doomed system that except for luck has not yet careened over the edge into whatever.
Where do you see a draw? The republicans control the house, the senate, the executive branch, the majority of state legislatures, the majority of state governorships, and will soon control the supreme court.Julio -> point... , February 10, 2017 at 10:41 AMThe Republicans have embraced the idea that this is a battle, and that their 50% need to win and keep their heels on the neck of the other 50%. The Democrats seem more conflicted about this fight, partly because some of them have bought the neoliberal ideology of their opposition.yuan -> Julio ... , February 10, 2017 at 12:23 P"some of them have bought the neoliberal ideology of their opposition." i like the understatement.
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Feb 12, 2017 | economistsview.typepad.com
yuan -> Jim Harrison ... , February 10, 2017 at 12:34 PM"Does anybody around here have anything useful to suggest"Jim Harrison -> yuan... , February 10, 2017 at 01:46 PM
both demonstration and general strikes are powerful ways to express popular outrage. one is planned on for the 17th (too soon) and another more organized one is being planned for march."but you have no more of an idea of a global replacement for capitalism"
so the british welfare state, the war on poverty/great society policy era, and the scandinavian social model are unpossible pipe dreams because..."the british welfare state, the war on poverty/great society policy era, and the scandinavian social model are" not replacements for capitalism. They are forms of capitalism. And the sorts of policies that go with these versions of conventional social democracy are...pretty much the platform articles that Clinton ran on. Which is the serious reason the American right despised Hillary. They, at least, didn't have any trouble telling the candidates apart.yuan -> Jim Harrison ... , February 10, 2017 at 04:50 PMThere are two problems with storming the Winter Palace. First, you won't have a decisive majority of Americans behind you. Second, you have no idea what you'd do if somehow did seize the Winter Palace. You could conceivably solve the first problem by going balls out demagogue a la Hugo Chavez; but, like Chavez, you'd have to dispense with democracy to keep power because you have no solution to the second problem. For my money, a decent social democracy-universal healthy care, more progressive taxes, a higher minimum wage, more affordable college education, etc.- is plenty hard enough to secure.
"They are forms of capitalism."Before the long-decline began in the 70s, a large fraction of the UK's economic activity was chartered, regulated, and/or managed for the people. That's not capitalism, by definition. (Socialism was a market/trade-based system at its inception. The tendencies with alternative economic models came later.)
Some history:
https://en.wikipedia.org/wiki/Clause_IVAnd Corbyn has returned labor to its socialist roots: http://www.independent.co.uk/news/uk/politics/jeremy-corbyn-to-bring-back-clause-four-contender-pledges-to-bury-new-labour-with-commitment-to-10446982.html
"And the sorts of policies that go with these versions of conventional social democracy are...pretty much the platform articles that Clinton ran on."
I guess I missed Clinton advocating for the nationalization of health care, education, energy production, and transportation.And the "welfare state" has little to do with "social democracy" (whatever that recent nonsense phrase means), all of them were developed by socialist movements.
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Feb 12, 2017 | economistsview.typepad.com
RGC : Reply Sunday, February 12, 2017 at 08:08 AM , February 12, 2017 at 08:08 AMClassicals or Neoclassicals - who you got?RGC -> RGC... , February 12, 2017 at 08:55 AM...................
Classicals vs Neoclassicals: Tax and RentPosted on 8 January 2011
At the university I attended, a few of the academics were strongly influenced by Classical Political Economy, especially that of Smith and Ricardo. Prior to my student days, one of them had published a paper in the Cambridge Journal of Economics entitled "On the origins of the term 'neoclassical'" (no free link available), which is quite well known in heterodox circles. In it, he argued that the 'classical' in the term 'neoclassical' is a misnomer and that neoclassical and classical economics actually have little in common, despite attempts by neoclassicals to claim Smith, in particular, as their forefather.
The classical-influenced economists at my university happened to belong to the Sraffian School. This school attempts to synthesize Classical value and distribution with Keynesian output and employment determination, and is also known for its key role and victory in the Cambridge Capital Controversy. The school is named after Piero Sraffa, whose interpretation of Classical Political Economy, particularly Ricardo's work, has been highly influential.
Sraffians are not the only modern-day economists influenced by Smith and Ricardo. Another prominent example is Michael Hudson. In a recent interview (h/t to Tom Hickey), Hudson discusses one big difference between the Classical economists and the neoclassicals: their analysis of taxation as applied to economic rent.
Hudson touches on a number of noteworthy points during the interview. He draws attention to a historical correspondence that would probably surprise many, between high top tax rates and strong economic growth, and observes that the top rates were high in the period prior to WWII. Importantly, the focus of taxation in Classical Political Economy, which Hudson argues influenced US government policy in the late 1800s and much of the first half of the 1900s, was on confiscating economic rents. These rents include income that derives from ownership of assets that appreciate in value merely because of the growth in national income and/or improved public infrastructure, and not due to any participation in the production process (they arise especially in the real estate and financial sectors).
It is not mentioned in the interview, but profit, of course, is also income that derives from the mere ownership of assets – the means of production. However, the classical economists were engaged in a class war with rentiers, not capitalists. It was Marx who drew this reasoning out to its logical conclusion, and this probably goes a long way to explaining why neoclassical theory, rather than being a continuation of classical economics (as was often claimed once it was established), was an escape into a different conceptualization of a capitalist economy that sought to reframe the distribution of income as the result of marginal contributions (an attempt that failed and was the chief target and theoretical casualty of the Cambridge Capital Controversy). Even so, there does remain a significant distinction between profit, which relates to assets employed in the production process, and economic rents. For this reason, Marx also distinguished between these two categories of income and spent a great deal of space in volume 3 of Capital analyzing the various forms of surplus value, including different types of rent.
Hudson goes on to stress that the taxation imposed in the late 1800s and first half of the 1900s was highly progressive. Initially only the top 1 percent of income earners were required to submit tax returns. The purpose of this was to keep taxes on wages and profit low to promote price competitiveness against lower wage countries. This can be contrasted with neo-liberal policies of today which seem to be designed almost with the opposite intent: to tax wage and profit income (and also consumption) but provide loopholes or tax breaks for the recipients of economic rents.
Above all, Hudson distinguishes between what the classical economists meant by the term "free market" and what that term has come to mean in the neo-liberal period. Hudson emphasizes that, for the classical economists, "free market" meant a market unencumbered by rent-based claims on income that would draw economic activity away from income production and toward speculation. The aim of the classical economists was to incentivize production. This is a very different notion than the neo-liberal one of labor-market "deregulation" (meaning regulation in favor of employers over employees), which is really just code for union smashing and an attack on real wages, or the neo-liberal deregulation of financial markets, which is a euphemism for enabling financial parasitism.
Hudson makes another observation in passing. The observation is not central to his argument in the interview, but is relevant to current debates over deficits and public debt, and consistent with MMT. He notes that immediately prior to the commencement of the only extended period of high capitalist growth (WWII until the late 1960s), the US population was not in debt, and in fact had pent up savings from the war that it was waiting to spend.
By little or no debt, Hudson clarifies that he means little or no private debt. There was, of course, a large public debt – larger as a percentage of GDP than the current US government "debt". This public debt did not matter, in spite of the familiar opposition to deficits and public debt, the echoes of which can be heard today, simply because the budget deficit shrinks endogenously once private-sector activity and income growth resume. This is precisely what happened in the immediate postwar period.
Today, with the US government the monopoly issuer of its own flexible exchange-rate fiat currency, public "debt" is – or rather should be – even less of an issue. Unlike in the immediate postwar period, the government is not subject to the constraints of Bretton Woods or a similar commodity-backed money system. It is free to utilize its fiscal capacity to the extent necessary to restore full employment.
Government "debt" is nothing other than the accumulated net financial wealth of the non-government. Once the non-government is ready to spend, income growth will deliver stronger revenues, reducing the deficit. But the private sector needs to have its debt under control before it will resume spending at levels sufficient to sustain strong economic growth.
In addition to the absence of significant private debt at the end of WWII, there were other factors that contributed to the strong growth of the immediate postwar period, including Keynesian demand-management policies, a progressive tax system, and significant financial regulation. All these beneficial features of the economy were gradually undermined, and then exposed to outright attack from the 1970s onwards.
Hudson discusses how, over time, much of the progressivity in the tax system was removed, paving the way for the construction of the inequitable and anti-productive monster of today. Keynesian demand-management policies were also largely eschewed throughout the neo-liberal era on the basis of an opportunistic misinterpretation of the stagflation of the 1970s. All this took place alongside deregulation of the financial sector and an aggressive dismantling of worker employment protections.
The result of this neo-liberal policy mix was an increasing financialization and "rentification" of the economy, widening income inequality, and an adherence to fiscal austerity that directly corresponded, as a matter of accounting, to an unsustainable build up in the only US debt that matters – private debt – and culminated in the Global Financial Crisis and Great Recession.
If the aim is to restore sustainable growth under capitalism (which is not my preferred social system, but presumably the one commanding the allegience of policymakers), the insights obtained from the classical economists in conjunction with the lessons of the postwar period would seem to suggest some combination of the following policy responses: tighter regulations of speculative activities; a more steeply progressive tax system targeted at the confiscation of economic rents and the incentivization of production and consumption; stronger worker protections; and the abandonment of the faulty construct of a 'government budget constraint' and a return to deficit expenditure sufficient to underpin non-government net saving and full employment.
But the actual policy response has instead been to manipulate financial markets to engineer a massive transfer of wealth to the rentiers and exacerbate income and wealth inequality; to continue with the approach of taxing wage and profit income along with consumption rather than economic rents; and possibly even to revert foolishly to austerity while the private sector remains deeply indebted.
http://heteconomist.com/classical-vs-neoclassical-economics-tax-and-rent/
If you favor the neoclassicals, you also favor Paul Samuelson and the neo/new Keynesians- and today's mainstream economists.
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Feb 12, 2017 | economistsview.typepad.com
Floxo : February 11, 2017 at 01:11 PM , 2017 at 01:11 PMI originally tried to post this comment on Mainly Macro. It is in reply to some critical comments I received when I posted a comment suggesting economists themselves were largely responsible for the unpleasant political consequences typified by Trump and Brexit. I argued there has been a failure to properly communicate the serious distributional implications of trade and globalization. This has led people to become disillusioned with stagnant living standards and growing inequality. For some reason, my reply was disallowed, making it appear as though I had no answer to my critics. As my reply addresses issues of concern here I am hoping it will be published .anne -> Floxo... , February 11, 2017 at 01:23 PMThankyou for your replies to my comment.
Stéphane, I did not say trade gain arises from price convergence; neither do trade gains arise from differences in opportunity costs (I think that is what you meant). Trade gain can arise from several sources, these include relative differences in productive efficiency (Ricardian comparative advantage), differences in relative factor abundance (HO theory), from tradeable goods where production exhibits increasing returns to scale and from monopolistic competition (Krugman).
When trade gain is exhausted it is possible to derive further gains from factor mobility. For example, shifting capital from a capital abundant region to a capital poor region will typically result in further gains. An example of this process is off-shoring, where a firm shifts production to another country where wages are lower and rent (the return on capital invested) is higher.
So why are potential gains from globalization a problem? The challenge is the sheer size of the population industrializing from a very low capital base. Economically big regions with abundant labour and scarce capital mean low wages and high rents extending into the long term. For a developed economy, adopting a policy of free trade without capital controls with these regions will have two significant consequences:
1. There is a trade induced shift to more capital intensive production driven by the factor advantage of having a relative abundance of capital. This lowers the domestic labour share of GDP.
2. Capital abundance implies a capital drain as domestic saving is increasingly used to finance foreign investment in productive capacity, driven by the higher foreign return. This correspondingly lowers domestic investment which also slows growth. Labour now has less capital applied to it, reducing labour productivity and also wages.
What are called "magnification effects" virtually guarantee wage earners are big losers in these scenarios, whereas, capital owners are big winners; hence the rise in inequality.
The theoretical support for this view is very robust. I became interested in the debate when such effects showed up strongly in the numerical trade models I develop. Economists, generally, have not supported this basic theoretical perspective, preferring a grab bag of miscellaneous empirically based models. Rapid technological change, too little technological change, skills biased technological change, union demise, banks unwilling to lend, demographics, austerity, labour hoarding, financialization, shift in consumer preference to services and on and on. Personally, I prefer basic economic theory and regard all of these thought bubbles as garbage.
In answer to Anonymous, it is true; many economists assert automation is the principle cause of our economic woes. This is theoretically baseless. I cannot describe a model of how technological improvement is supposed to give rise to the above effects, because no such model exists. Improved technology means we get more goods and services from the same resources of capital and labour, boosting growth and wages and rents.
Where is the precise reference? Mainlymacro must however be separate as "mainly" and Macro" in posting the link.Floxo -> anne... , February 11, 2017 at 05:09 PMThankyou Anne, here is the reference you requested.anne -> Floxo... , February 12, 2017 at 04:59 AMhttps://mainlymacro.blogspot.com.au/2017/01/why-voting-for-article-50-may-ruin-mps.html
https://mainlymacro.blogspot.com.au/2017/01/why-voting-for-article-50-may-ruin-mps.htmlanne -> anne... , February 12, 2017 at 05:01 AMJanuary 29, 2017
Why voting for Article 50 * may ruin an MP's career
The last time I did something like this was to urge Labour party members to vote for Smith rather than Corbyn, knowing full well that Corbyn was almost certain to win. Being proved right on that occasion is no consolation, because I would rather have been wrong. This is even more futile, but now as then I feel a decision is about to be made that is both disastrous and irreversible. I also want to say something about the longer term interests of MPs that I have not seen said elsewhere.
There are so many principled reasons for MPs to vote against triggering Article 50. Let me summarise what I see as the main ones here, but this is far from comprehensive....
* https://en.wikipedia.org/wiki/Article_50_of_the_Treaty_on_European_Union
Article 50 of the Treaty on European Union is a part of European Union law that sets out the process by which member states may withdraw from the European Union.
-- Simon Wren-Lewis
Correcting:anne -> Floxo... , -1Mainlymacro can now be linked to directly. There is no need to separate "mainly" and "macro" in posting a link.
Interesting response to an interesting argument. I am grateful for this post.libezkova -> anne... , February 12, 2017 at 10:34 AMI do not share your enthusiasm.A couple of points
1. Neoliberal economists are stooges of financial oligarchy (much like Soviet economists were stooges of Communist Party) and if they do not promote Washington consensus on trade and globalization they would be ostracized and replaced by other no less talented puppets. They all are replaceable and they understand that perfectly well and behave accordingly. Being puppets they have no degrees of freedom to express the discontent with neoliberalism.
2. The author himself is still in completely under the spell of neoclassical economic framework. that's why his critique is so superficial. As in "There is a trade induced shift to more capital intensive production driven by the factor advantage of having a relative abundance of capital. This lowers the domestic labour share of GDP. " What a "neoliberal speak." Reminds me 1984 Newspeak. That was a political decision to shift capital to developing countries in order to destroy union power and decimate "trade unionism" as political force opposing to neoliberalism. As simple as that.
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Feb 12, 2017 | economistsview.typepad.com
anne : February 11, 2017 at 11:43 AM , 2017 at 11:43 AMhttp://www.yalelawjournal.org/article/amazons-antitrust-paradoxJanuary, 2017
Amazon's Antitrust Paradox
By Lina M. KhanAbstract
Amazon is the titan of twenty-first century commerce. In addition to being a retailer, it is now a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space. Although Amazon has clocked staggering growth, it generates meager profits, choosing to price below-cost and expand widely instead. Through this strategy, the company has positioned itself at the center of e-commerce and now serves as essential infrastructure for a host of other businesses that depend upon it. Elements of the firm's structure and conduct pose anticompetitive concerns-yet it has escaped antitrust scrutiny.
This Note argues that the current framework in antitrust-specifically its pegging competition to "consumer welfare," defined as short-term price effects-is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon's dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational-even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.
This Note maps out facets of Amazon's dominance. Doing so enables us to make sense of its business strategy, illuminates anticompetitive aspects of Amazon's structure and conduct, and underscores deficiencies in current doctrine. The Note closes by considering two potential regimes for addressing Amazon's power: restoring traditional antitrust and competition policy principles or applying common carrier obligations and duties.
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Feb 12, 2017 | economistsview.typepad.com
anne : February 11, 2017 at 06:45 AM , 2017 at 06:45 AMhttp://cepr.net/blogs/beat-the-press/justin-wolfers-is-mistaken-restrictions-on-firing-don-t-have-to-reduce-employmentcm -> anne... , February 11, 2017 at 11:55 AMFebruary 10, 2017
Justin Wolfers Is Mistaken, Restrictions on Firing Don't Have to Reduce Employment
Donald Trump has used his podium on several occasions to harangue companies about moving jobs overseas. This is probably not an effective way to conduct economic policy, but Justin Wolfers misled * New York Times readers in claiming:
"Research shows that efforts to boost employment by making it difficult or costly to fire workers have backfired. The prospect of a costly and lengthy legal battle for laid-off employees makes it less appealing to hire new workers. The result has been that higher firing costs have led to to weaker productivity, sclerotic labor markets and higher unemployment."
Actually, more recent research results, ** including more recent work *** from the Organisation for Economic Co-operation and Development (the source to which he links), show that there is no necessary link between restrictions on firing and unemployment. While excessive restrictions on firing can undoubtedly hurt employment and growth, there is no reason to assume that moderate amounts of severance pay, or other disincentives to dismiss workers, will discourage investment and hiring.
A requirement to give longer term workers severance pay when dismissed does change the incentives facing an employer. In this situation they have more incentive to retrain workers to ensure that they are as productive as possible. They may also opt to invest more in existing facilities rather than move overseas in order to avoid severance pay.
** http://cepr.net/documents/publications/cepa200404.pdf
*** http://www.oecd.org/els/emp/38569387.pdf
-- Dean Baker
The primary reason preventing hiring is lack of demand or sales prospects for additional product/services the company produces. A company that can pressure its existing workers to work more, without much risk of resistance or departure, will usually do that. Of course that works only up to a point due to negative impact on work quality etc. When there is convincing additional demand promising sufficient margin, they *will* hire. I have yet to see a company that will forgo profitable business to restrict its size (exception - small founder-owned/controlled businesses where the owner doesn't want the business to grow to the point where they can no longer themselves manage it, and have to accept outside "meddling" in business decisions, i.e. it's no longer their business; also known as "lifestyle business").cm -> anne... , February 11, 2017 at 12:01 PMIn the latter case the reason may also be that outside funding is needed to acquire new capacity (e.g. buy or build a new location), with the risk and imposition of external control that brings. But none of those are problems hiring workers.
One thing that employers will frequently do, if they can, is bring in contingent workers on time-limited contracts that are extended one period at the time, for any position where this is possible (low cost to bring somebody up to speed, no dependency on and risk of loos of institutional memory).anne -> cm... , February 11, 2017 at 12:12 PMState or national labor departments will often at some point react to "abuse" (e.g. perma-temps) by imposing limits on contract extensions. Then the next gambit is herding temp workers through staffing agencies, and telling them to change employer every so often to avoid the extension limit. And they will do it because they have no better options.
And that's where it always ends up - too few better options for workers.
Really nicely explained.cm -> anne... , February 11, 2017 at 12:32 PMThanks. Of course what would be convenient for employers is to be able to just let go of people who they have to hire as "perm" and retain for a while because of high costs of acquiring in-house experience and institutional knowledge effects. But every product/technology becomes obsolete eventually, the related experience diminishes in value, or at least the volume of demand for it, and after a number of years/decades, well, the workers are also exactly that many years older.
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Feb 11, 2017 | economistsview.typepad.com
libezkova -> Trump February 11, 2017 at 05:04 AM
What has happened to "hope and change" is very straightforward: it buried Democratic Party with its lies and militarism and there is no way back.That's why Trump. Obama said all the right things and did the opposite. He has gutted the country and obliterated the middle class while continuing fighting wars of neoliberal expansion and conquest.
Dismissing Trump and Trump's voters as "deplorables" gives Democrats like Krugman an excuse to avoid any self examination about how the neoliberal policies they advocated failed the majority of population of the country and have alienated electorate.
The last two democrat presidents destroyed as much of the New Deal as their Republican counterparts and couldn't wait to gut the remnants such as SS. That's undeniable.
As a result the key tenets of neoliberal ideology are now as dead as the key postulates of Bolshevism were in 1945. The rule of financial oligarchy disguised as "Liberal democracy", globalization and free trade, free markets as a substitute for government, deregulation, de-industrialization, letting market forces determine the characteristics of employment, etc.
Does anybody here believes this sh*t? I doubt it. Even those who advocate it, have doubts.
Still as a result of 36 years of brainwashing large swathes of US society accept without questioning the core tenets of neoliberalism much like Soviet population accepted the key postulates of Bolshevism. They believe that "the market" trumps all other forms of organization of activities of the society, that everything works better that way, that markets are virtuous. As a result, they believe in the false notion that the government is always and ever getting in the way of markets and therefore needs to be made as small and weak as possible.
If you read Michael Mann's, The Sources of Social Power you will notice that he places Ideological Power first in his four component model of social power: ideological, economic, military, and political.
Each of them create different but complementary sources of power within a given society:
- Ideological Power derives from the human need to find ultimate meaning in life, to share norms and values, and to participate in aesthetic and ritual practices with others.
- Economic Power derives from the human need to extract, transform, distribute, and consume the products of nature. Economic relations are powerful because they combine the intensive mobilization of labor with use of capital, trade, and production chains
- Military Power is based on refined, concentrated and lethal violence.
- Political Power is the centralized and territorial regulation of social life. The basic function of government is the provision of order using this type of power.
The main tenets of neoliberalism are still very powerfully embedded in people minds. But ideology is dead and that spells troubles the same way as death of Bolshevism spelled troubles for the USSR.
See also series of Mark Blyth interviews such as
- What Trump Voters Know That The Democrat Elite Don't! (Mark Blyth Interview)
- Mark Blyth--"Liberalisms' great trick has been to naturalize very difficult political contests."
- Liberalism Under Siege Mark Blyth, Margaret Weir with Ed Steinfeld
- Chris Hedges Brace Yourself! The American Empire Is Over - YouTube
- Chris Hedges On Alex Jones The Authoritarian Takeover - YouTube
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Feb 10, 2017 | economistsview.typepad.com
Gibbon1 : February 10, 2017 at 01:47 AM""seem unimpressed by the fact that globalization has lifted hundreds of millions of desperately poor people in China and India into the global middle class. ""libezkova -> Gibbon1... , February 10, 2017 at 02:08 AMErgo enabling the savaging of working class people in the US was worth it.
And I am not sure that it was neoliberal globalization as the only factor in rasining the standards of living in case of China. They have also industrialization process going on, give or take. Chinese maquiladoras were allowed under strict conditions of transferring technology. That's what distinguishes China from India or Mexico, where neoliberal administrations were much less protective of interest of their nations and allowed Western monopolies more freedom.pgl : , February 10, 2017 at 01:47 AMAfter all the Communist Party is still a ruling Party of China. With a neoliberal twist yes, but they still adhere to the ideas of Marx.
Kuttner really captures the contributions of Dani Rodrik. If I had to pick one sentence to capture this review - it would be this:libezkova -> pgl... , -1On the basis of careful empirical work, Rodrik concluded that "globalization makes it difficult to sustain the postwar social bargain" of labor peace in exchange for "steadily improving worker pay and benefits."
It's not globalization, it's "neoliberal globalization" and neoliberalism in general which killed the New Deal capitalism. As soon as the US elite realized the cookies are not enough for everybody they start withdrawing them from the table. Stagnation and the subsequent collapse of the USSR also played an important role, allowing neoliberal propagandists to claim the victory.
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Feb 09, 2017 | stumblingandmumbling.typepad.com
Nick Cohen makes a good point : it is not congenital liars that should worry us, but congenital believers – those who fall for the lies of charlatans. We know that many do so: almost half of voters believed the lie that leaving the EU would allow us to spend an extra £350m a week on the NHS.
This poses the question: why do people fall for lies? Here, we can learn from behavioural economics and research (pdf) into criminal fraud. I reckon there are several factors that liars exploit in politics.
One is wishful thinking. People want to believe there's a simple solution to NHS underfunding (leave the EU!) or to low wages (cut immigration!) just as they want to believe they can get rich quick or make money by taking no risk: Ponzi schemers like Bernie Madoff play upon that last one. The wish is often the father to the belief.
Relatedly, perhaps, there are lottery-type preferences. People like long-odds bets and pay too much for them: this is why they back longshots (pdf) too much and pay over the odds for speculative shares . To such people, the fact that an offer seems too good to be true is therefore, paradoxically, tempting. A study of fraud by the OFT found :
Some people viewed responding to a scam as taking a long-odds gamble: they recognised that there was something wrong with the offer, but the size of the possible prize or reward (relative to the initial outlay) induced them to give it a try on the off-chance that it might be genuine.
There's a particular type that is especially likely to take a long-odds bet: the desperate. Lonely people are vulnerable to the romance scam; gamblers who have lost take big bets to get even; losing teams try "hail Mary" tactics. In like fashion, people who feel like they have lost out in the era of globalization were tempted to vote for Trump and Brexit.
There's another mechanism here: people are likely to turn to con-men if the alternatives have failed. Werner Troesken shows (pdf) how snake-oil sellers exploited this. They invested a lot in advertising and in product differentiation and so when other products failed they could claim that theirs would work when the others hadn't. I suspect that fund managers use a similar trick: the failure of many to beat the market leads investors simply to trust others rather than tracker funds. The fact that previous policies had failed working people thus encouraged them to try something different – be it Brexit or Trump.
Yet another trick here is the affinity fraud. We tend to trust people like ourselves, or who at least who look like ourselves. Farage's endless posturing as a "man of the people" – fag and pint in hand, not caring about "political correctness" – laid the basis for people to trust him, just as Bernie Madoff joined all the right clubs to encourage wealthy (often Jewish) folk to trust him. By contrast, the claims from the Treasury and various think-tanks that Brexit would make us poorer came from metropolitan elites who were so different from poorer working class people that they weren't trusted. And in fact the very talk of "liberal elites" carried the subtext: "don't trust them: they're not like you".
All of these tendencies have been reinforced by another – the fact that, as David Leiser and Zeev Kril have shown , people are bad at making connections in economics. The idea that Brexit would hurt us rested upon tricky connections: between the terms of Brexit and trade rules; from trade rules to actual trade; and from trade to productivity. By contrast, the idea that leaving the EU would save us money was simple and easy to believe.
Now, I don't say all this merely to be a Remoaner; complaining about liars is like a fish complaining that the water is wet. Instead, I want to point out that it is not sufficient to blame the BBC for not calling out Brexiters' lies. Yes, the BBC disgraced itself during the plebiscite campaign. But we must also understand how voters fall for such mendacity. As Akerlof and Shiller write:
Voters are phishable in two major ways. First, they are not fully informed; they are information phools. Second, voters are also psychological phools; for example, because they respond to appeals such as lawnmower ads [a candidate seen mowing his own lawn is regarded as a man of the people] ( Phishing for Phools , p 75)
All this raises a challenge for liberals. Many used to believe the truth would win out over lies in the marketplace for ideas. This is no longer true, if it ever were. Instead, the questions now are: what can we do about this? And what should we do? The two questions might well have different answers. But we can make a start by understanding how lies are sometimes believed. Keith | February 07, 2017 at 04:47 PM
The marketplace of ideas assumes that the consumers are able and willing to inform themselves and be rational rather than emotional. Clearly this is not true of a lot of voters when confronted by a manipulative press and Tories like Jim with their right wing agenda slyly hidden for the time being.Matthew Moore | February 07, 2017 at 05:37 PMEqually as in other areas such as health care shopping around is impossible to do as the consumers lack expert knowledge. Allowing the profit motive to apply to many areas is sure to be a disaster for human welfare as the profit incentive stops the experts using their knowledge for good. Finance is a classic example of the uninformed being repeatedly duped into unsound investments decade after decade. Benjamin Graham describes how in his first job selling Bonds to grannies he came to realise that he was being asked to steal the life savings of pensioners via commissions designed to get a sale of junk paper. Which is why he moved elsewhere to a more ethical line of work. But I am sure leaving the biggest most integrated market in the world where lots of foreigners have helpfully learned our language will surely increase our prosperity....Nigel says so.
There will always be gullible people (/ people constrained by high opportunity cost of information search, as I prefer to think of them)Dipper | February 07, 2017 at 07:47 PMAnd there will always be liars looking to take advantage of them. Like 99% of politicians ever.
It's very Marxist to wonder how we might change this basic fact of humanity, when the real solution is clear. Don't set up powerful central institutions that rely on coercion: it attracts liars, rewards them, and makes new liars out of honest people.
Oh, we Leavers are being lectured again by our Remainer betters on our stupidity.Dipper | February 07, 2017 at 08:09 PMIf the statements of the amount we pay to the EU were lies, how come we owe them €50 billion?
how come no-one ever asks why we have to implement the four freedoms when Germany gets a free pass on the Free market in Services?
the government announced house building plans today, and no-one asks whether a cause of high house prices and a housing shortage is too much immigration?
It's not the lies, it's the questions never asked that stand out.
@ Keith - "Tories like Jim"Ralph Musgrave | February 07, 2017 at 09:45 PMI don't read Jim as a Tory. I read him as someone who was a Labour supporter but now just stares in amazement at a group of people who have become EU Federalist fanatics spouting delusional slogans who can never answer a straight question and refuse to acknowledge the obvious problems of democratic accountability.
How on earth did that happen? How did apparently intelligent people completely lose their critical faculties and join a quasi-religious cult that chants empty slogans and denounces anyone who questions them?
But I'm sure Jim can speak for himself.
Chris missed out the fact that people tend to give others the benefit of the doubt. I.e. if X tells a monster lie, peoples' immediate reaction is: "X is is a bastard". But then on second thoughts they feel ashamed at accusing someone else of being a bastard, and assume it's they themselves that must be wrong.Sotto Voce | February 07, 2017 at 10:45 PM
There is a bit of a danger here of another comment thread being derailed with Brexit mud-slinging. Chris's post isn't really about the pros and cons of Brexit, it just offers a vivid example of the phenomenon under discussion.e | February 07, 2017 at 10:57 PMThe point Chris makes in the last paragraph is more general and profound. If any and all data/information/evidence/argument is interpreted in partisan fashion and subject to massive confirmation bias so that debates increasingly polarise - or if different sides in debates proffer their own favoured but incompatible versions of the truth - then meaningful dialogue, deliberation and compromise become near impossible. All we get is intolerance, mistrust and greater partisanship. Clearly these are not entirely new issues, but it seems undeniable that there has been a qualitative shift in 'quality' of public debate.
We appear to be witnessing the US political system at great risk of imploding, as enlightenment values are abandoned and key tenets of liberal democratic practice are wilfully rejected. This is the route to chaos.
The questions Chris poses are, to my mind at least, the right ones. The very nature of the problem means that the old/favoured remedies are unlikely to be effective. But what can replace them? Is a violent conflagration the only way of shocking the system out of hyper-partisanship and the rejection of the foundational belief that we live in a shared reality (i.e. for people to 'come to their senses')? Or can we back out of this particular cul-de-sac peacefully? You've got to hope so. But, if so, how?
Our upper echelon, i.e. our long-standing middle of the road Labour MPs and commentators, have long been successful in fighting off calls for left leaning policy/talk of how things work (because who knows where this will end) under a guise of fighting off racism/ a closed shop mentality; the routes of least resistance 50s – 00s which should alert us to the ability of the English working class to embrace immigration and avoid base philosophies. But it seems not. Seems to me our shared interest beyond race creed colour and gender continues to be deliberately and systematically no-platformed. What I fail to understand, given the rise of UKIP, is why this is not glaringly obvious; because if you're one of the majority who live life as best you might with as much consideration and tolerance as you can muster where does credence go when an ordinary workers tendency to sound 'populist' is marked up to racism no matter known history...aragon | February 07, 2017 at 11:53 PM
Not again!aragon | February 08, 2017 at 12:29 AM
Phishing for Phools. The Political Brain...http://www.nytimes.com/2007/08/26/books/review/Brooks-t.html
"Serious thinkers set to work, and produced a long shelf of books answering this question. Their answers tended to rely on similar themes. First, Democrats lose because they are too intelligent. Their arguments are too complicated for American voters. Second, Democrats lose because they are too tolerant. They refuse to cater to racism and hatred. Finally, Democrats lose because they are not good at the dark art of politics. Republicans, though they are knuckle-dragging simpletons when it comes to policy, are devilishly clever when it comes to electioneering. They have brilliant political consultants like Lee Atwater and Karl Rove, who frame issues so fiendishly, they can fool the American people into voting against their own best interests."
And immigration is about economics. This is Sweden an immigration superpower.
http://www.express.co.uk/news/world/755997/Sweden-Malmo-military-intervention-no-go-zone-crime-surge
"Swedish police last year issued a report where it detailed incidents from more than 55 areas which it branded as "no-go zones" as it detailed brutal attacks on police, sexual assaults, children carrying weapons and general turmoil sweeping across the country."
"A ban was supported by 71 per cent of people in Poland, 65 per cent in Austria, 53 per cent in Germany and 51 per cent in Italy.
In the UK, 47 per cent supported a ban.
In no country did more than 32 per cent disagree with a ban."
Phishing for PhoolsGuano | February 08, 2017 at 12:42 AM"It thereby explains a paradox: why, at a time when we are better off than ever before in history, all too many of us are leading lives of quiet desperation."
http://nfs.sparknotes.com/macbeth/page_162.html
"Pour the sweet milk of concord into hell,
Uproar the universal peace, confound
All unity on earth."Human Nature has not changed.
The truth is complicated.Tony Holmes | February 08, 2017 at 09:13 AMThe truth is challenging.
Chris, a bit off the point, but if everyone followed your advice and put money in tracker funds and active funds disappeared, what would happen to the stock market ? Instinct tells me it would become extremely volatile, but instinct is a bad guide...gastro george | February 08, 2017 at 09:35 AM
FFS aragon, that "report" from Sweden is from the Express quoting directly a Swedish fascist.reason | February 08, 2017 at 11:29 AM
Isn't the key point here prospect theory (I've just finished reading Kahneman). People with no good options gamble.reason | February 08, 2017 at 11:30 AM
P.S. The no good options bit is a very good reason for opposing first past the post and the limited options consequence.aragon | February 08, 2017 at 11:47 AM
gasto georgeDipper | February 08, 2017 at 12:03 PMIt is not an extreme story, I don't speak Swedish or have any contact with Sweden. I only read the main stream media which includes the Daily Express.
As you would expect most of the media does not report on Sweden, unless it has a British angle.
e.g. Birmingham Boy killed by a hand grenade.
(I don't know how you can spin Hand Grenade)The report originates with the Swedish Police the situation in Malmo is serious and individual police officers like Peter Springare's Facebook post.
Here is a report from the thelocal.se
http://www.thelocal.se/20170127/malmo-police-chief-help-us"After a wave of violence in Sweden's third city, police boss Stefan Sintéus has appealed to residents in Malmö: "Help us. Help us to tackle the problems. Cooperate with us.""
@ gastro georgeGuano | February 08, 2017 at 02:06 PMThis isn't the first time facists have made inflammatory comments about muslims. Nick Griffin did this and was prosecuted for inciting racial hatred in 2006. The summary of what he said is some way down this article.
Eleven years later we have this http://www.bbc.co.uk/news/uk-england-south-yorkshire-38845332
And that, in a nutshell, is the problem with banning "fake news". You have to be really open, transparent and clear and be absolutely sure you are right, otherwise you end up making heroes of facists and stoking the notion that its all a plot to hide the truth from the people. And that is a really bad outcome.
MPs wrestling with their consciences, loud debates, arguments about the truth ... this is the sound of a properly functioning parliamentary democracy and long may that noise continue.
The first two words of the article: Nick Cohen.gastro george | February 08, 2017 at 02:24 PMNick Cohen does make some good points but he himself has a complicated relationship with the truth in some areas. When he isn't talking about congenital liars and congenital believers, he continues to get into a rage about people who opposed the invasion of Iraq. As far as I can see, the invasion of Iraq has been the disaster that some of us feared (because regime change involves putting in place a new regime change, which is very difficult and for which the USA and UK do not have the skills). And, as far as I can see, some of the assumptions made by Nick Cohen in 2002 and 2003 in supporting the invasion (such as the ability of the Iraqi National Congress to create a new regime) were very dubious and their weakness of these assumptions is why the invasion was a failure and has had created an array of other problems.
In his campaign to avoid a post-truth future, Nick Cohen claims that people like him "are on their own" and he explicitly rejects working with the kind of people who opposed the invasion of Iraq. That's a pity, really, because many people appear to have started their opposition to the invasion because the information provided and the logic used appeared to be dodgy. The period from August 2002 to March 2003 prefigured the Trump/Brexit era for post-truth information and arguments. Nick Cohen would be on stronger ground if he admitted that the invasion of Iraq has not necessarily worked to anyone's advantage.
I guess that what is going on in Nick Cohen's mind (and I can only guess) is that he has built up a negative image of the type of person who opposed the invasion of Iraq and he has difficulty getting past that image and come to terms with what those people were saying and what has actually happened in Iraq. Thus in between writing articles about the need for truth, Nick Cohen writes expressions of outrage about opponents of the invasion of Iraq as if they had been found to be wrong.
It seems to be a very extreme example of seeing the messenger and not the message, which is one of the issues with failing to recognise lies.
@aragonBarbara Konstant | February 08, 2017 at 05:36 PMOK, well I've worked most of my life with Swedes and Norwegians, and have regularly visited Malmo three or four times a year recently, although the last was a bit over a year ago.
So, yes, immigration is an issue, and the Sweden Democrats (fascists) have been rising in the polls. Malmo itself has some problems in the suburbs.
But there are no no-go areas. Armed violence has more traditionally been associated with biker-gang turf-related drug wars - otherwise with the far right (see Breivik in Norway) and then, as your last link discusses, lone serial killers.
Reading anything the Sweden Democrats have to say is the equivalent of believing Wilders in the Netherlands - they are loons.
Despairing as it seems, our humanity has not reached the necessary level of awareness needed to function peacefully in our world.
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Feb 07, 2017 | economistsview.typepad.com
Short-Run Effects of Lower Productivity Growth : A Twist on the Secular Stagnation Hypothesis: Despite interest rates being very close to zero, US GDP growth has been anemic in the last four years largely due to lower optimism about the future, more specifically to downward revisions in growth forecasts, rather than legacies of the past. Put simply, demand is temporarily weak because people are adjusting to a less bright future.
anne -> anne... , February 06, 2017 at 04:30 PMHaving read the paper again, the work still reads as parody. I find no coherence.libezkova -> anne... , February 06, 2017 at 06:44 PMAnne,
> Having read the paper again, the work still reads as parody. I find no coherence.I agree. Looks like
There are two major forces behind secular stagnation:
1. Neoliberalism which undermines the purchasing power of lower 80% of population due to redistribution of wealth up. Like in the "classic Marxism" theory of the absolute impoverishment of the working class under capitalism.
2. End of cheap oil, which undermines both productivity growth and, simultaneously, neoliberal globalization, which was the source of (fake) productivity growth in GDP statistics (which by itself is very suspect).
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Feb 06, 2017 | economistsview.typepad.com
pgl : February 04, 2017 at 03:41 PM , 2017 at 03:41 PMNot that Wikipedia gets everything right but here is a snippet of what it says about the Goldman Sachs CEO:libezkova -> pgl... , February 04, 2017 at 07:12 PM'Blankfein testified before Congress in April 2010 at a hearing of the Senate Permanent Subcommittee on Investigations. He said that Goldman Sachs had no moral or legal obligation to inform its clients it was betting against the products which they were buying from Goldman Sachs because it was not acting in a fiduciary role. The company was sued on April 16, 2010, by the SEC for the fraudulent selling of a synthetic CDO tied to subprime mortgages. With Blankfein at the helm, Goldman has also been criticized "by lawmakers and pundits for issues from its pay practices to its role in helping Greece mask the size of its debts". In April 2011, a Permanent Subcommittee on Investigations report accused Goldman Sachs of misleading clients about complex mortgage-related investments in 2007, and Senator Carl Levin alleged that Blankfein misled Congress, though no perjury charges have been brought against Blankfein. In August of the same year, Goldman confirmed that Blankfein had hired high-profile defense lawyer Reid Weingarten'
Weingarten helped in the defense of the Worldcom thieves. Why would anyone do business with a company led by such an ethically challenged CEO?
The problem here is probably deeper then personality of Blankfein.There is such thing as system instability of economy caused by outsized financial sector and here GS fits the bill. Promotion of psychopathic personalities with no brakes and outsize taste for risk is just an icing on the cake.
> Why would anyone do business with a company led by such an ethically challenged CEO?
Why you are assuming the other TBTF are somehow better then GS?
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Feb 03, 2017 | economistsview.typepad.com
ProMarket's Guy Rolnik interviews Bernie Yeung: "In a System with Dominance, There is Built-In Resistance to Change": ProMarket Interviews Bernie Yeung, Part 2 :Last week, we published the first part of an extensive three-part interview with Bernard (Bernie) Yeung, Dean of National University of Singapore's business school. This is the second part. The third and final part will be published next week. In the first part of our interview with Bernard Yeung, we talked about his seminal papers on power concentration, on which he collaborated mainly with Randall Morck. The discussion there focused on dominant players and their ability to shape their own markets, the capital market, and even the economy. In this installment, we talk about how free trade may have backfired, how wealth and power are connected, how big corporations can control and distort the market for ideas, and why governments may actually prefer markets that are controlled by dominant players rather than by many competitors. ...
... GR: Can you elaborate on what you call economic conditioning, mainly the part in which you say it may not be vicious?BY: Let's imagine I got rich and now own and control a bank. I'm saying to myself that I know what's right and what's wrong. I cannot allow new people to set up new banks and compete with me in an unruly manner. That will create chaos. They will cause people to lose their jobs. I help to set up barriers to entry in the financial sector. I myself lend money to my rich friends and they will create many jobs. I think I'm right-and I am righteous.I overlook the positive effects that competition will generate for the economy. I overlook the contributions of new ideas and innovations which leads to strong future growth and good future jobs. I focus on my lending to the established, which preserves current jobs and creates interest earnings for me. I am not [attuned] to the counterfactuals. I'm conditioned to believe that all I've done is good for my bank, for the financial sector, and for the country. That's economic conditioning. I'm not being sinful. I'm not being vicious. I only see what's good for me, and I believe that's good for the whole society.GR: This was the case for the Robber Barons in the U.S. more then a century ago.BY: Oh yes, and I believe it's very much how Donald Trump is thinking.GR: Do you think they genuinely believe that the country should be run by the incumbent oligarchs?BY: If it ain't broken don't fix it, right? 'Look at all the good things I have done. If I'm so rich and keep so many people employed, I cannot be so bad. I will never see people who cannot get into the market because of my behavior. I never see them. Indeed, I am always thinking that, in helping my established friends and using business judgment that brings me profits, I help society, create jobs and wealth, and my donations help society further. I see myself and my friends as pillars of our country.' ...... In a system with dominance, and I've already put that in paper, I think there is built-in resistance to change. Rich people don't like change and competition. And they themselves don't invest too much in innovations that displace their own business; that is, no creative self-destruction.I believe that a vibrant and robust capital market that gives people with good ideas a chance is very important. The problem is failed capital markets, lack of transparency and alternatives and dominant players in control who don't encourage entrepreneurship. ...... GR: Is there empirical data that shows that, when we take out economic concentration, we get better growth, better distribution of income, and a better quality of life?BY: Yes. Once, Randall, his student, and I looked at a current list of top firms, compared it to a similar list of 20 years earlier, and asked ourselves how many survived. We showed that high stability is correlated with lower growth, lower productivity, and poorer Gini. ...New Deal democrat , February 03, 2017 at 02:11 PM
This is really good stuff. And I think it gets to the central core of what is wrong with traditional macroeconomic models: bargaining power.kthomas -> New Deal democrat... , February 03, 2017 at 03:04 PMTraditional models assume a supply curve and a demand curve, but do not ask *why* particular players might have a particullar supply or demand curve. If there is market power, and sooner or later just via random chance the number of players in any given area will shrink down to a small numbe rthat have bargaining power, the ultimate rule is, "Thims that has, gits."
"thims that has, gits" is why libertarianism -- and neoclassical economic theory -- are ultimately nonsense.
It's interesting. More sociology than economics. There is some wisdom in this.sanjait -> kthomas... , February 03, 2017 at 04:29 PMIt's especially important for labor markets.kthomas -> sanjait... , February 03, 2017 at 04:47 PMAn individual worker typically has undiversified skills, constraints on liquidity, constraints on mobility, limited information on local market wages, few options of potential employers and a short time horizon to consider.
Labor markets behave in very unideal fashion and generally disadvantage the worker in negotiations with employers. Employers, these days, can set up offices anywhere, outsource, hire from large numbers of candidates, and they usually know what they can get away with paying. They can also survive without a position filled for an extended time, while employees can only go limited time without a job.
Thank you. What I find especially odd is that our normal cast of bloggers have yet to yield any thoughts. This one begs opinion.Half Mast Tailgate Streamlining : , February 03, 2017 at 04:20 PMthink of each corporation as encapsulated by a circle! Each circle encapsulates the corporate directors, the company's workers, customers, suppliers, creditors, part time consultants, institutional share holders, private shareholders and foreign share holders. Such overlapping circles constitute a Venn-diagram which provides a view of innumerable distinct classes of folks.kthomas -> Half Mast Tailgate Streamlining... , February 03, 2017 at 04:53 PM... ... ...
Was the author's post about Corp structures? This is more high-level, but you are free to continue beating your straw man.Justin Cidertrades -> sanjait... , February 03, 2017 at 08:06 PMhttps://en.wikipedia.org/wiki/Porter's_five_forces_analysis#/media/File:Elements_of_Industry_Structure.svgcm -> sanjait... , February 04, 2017 at 12:35 PMFor anyone interested in tinkering with this :
As I understand it, scalable vector graphics is a file that can be easily modified using programs like inkscape.
Technology is not driving consolidation. It only enables it, by enabling larger economies of scale. Without IT, managing operations in a large and complex company would require much higher personnel overhead just to handle all the data, information, coordination, conveying orders, etc. This overhead is not a linear function of size.cm -> sanjait... , February 04, 2017 at 12:39 PMFundamentally with IT this overhead doesn't go away, but the maximal size at which a company still remains manageable increases.
There is one "driving" aspect of technology - as having technology becomes mandatory, the technology overhead costs for smaller businesses tend to be larger, again because of economies of scale and differentials in variable cost being low compared to fixed cost, i.e. having an IT installation that has twice the capacity doesn't cost nearly twice as much (because it doesn't need twice the equipment and staff).
Actually you did mention the latter aspect. But in the case you cite it is not only about the equipment and operating cost of technology, but (by law or de facto) high fixed costs to manage all kinds of processes and bureaucracy. Again, the technology is only there to enable or execute the processes and the complexity.
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Feb 01, 2017 | economistsview.typepad.com
Dani Rodrik:Is Global Equality the Enemy of National Equality? : The question in the title is perhaps the most important question we confront, and will continue to confront in the years ahead. I discuss my take in this paper .Many economists tend to be global-egalitarians and believe borders have little significance in evaluations of justice and equity. From this perspective, policies must focus on enhancing income opportunities for the global poor. Political systems, however, are organized around nation states, and create a bias towards domestic-egalitarianism.How significant is the tension between these two perspectives? Consider the China "trade shock." Expanding trade with China has aggravated inequality in the United States, while ameliorating global inequality. This is the consequence of the fact that the bulk of global inequality is accounted for by income differences across countries rather than within countries.But the China shock is receding and other low-income countries are unlikely to replicate China's export-oriented industrialization experience. So perhaps the tension is going away?Not so fast. The tension is even greater somewhere else: Relaxing restrictions on cross-border labor mobility would have an even stronger positive effect on global inequality, at the cost of adverse effects at the lower end of labor markets in rich economies. On the other hand, international labor mobility has some advantages compared to further liberalizing international trade in goods.I discuss these issues and more here .
Mr. Bill : , January 22, 2017 at 12:39 PMWell said, Dani.TrumpisaJew : , January 22, 2017 at 12:43 PMAdam Smith never sited poverty, environmental intransigents, and malliable governments as a desireable " comparative advantage". Quite the opposite.
The export model was a credit bubble illusion. It just wasn't sustainable, it was a lie. Now China has massive capital flight.anne : , January 22, 2017 at 01:56 PMhttp://rodrik.typepad.com/Is%20Global%20Equality%20the%20Enemy%20of%20National%20Equality.pdfMr. Bill -> anne... , January 22, 2017 at 03:56 PMJanuary, 2017
Is Global Equality the Enemy of National Equality?
By Dani RodrikAbstract
The bulk of global inequality is accounted for by income differences across countries rather than within countries. Expanding trade with China has aggravated inequality in some advanced economies, while ameliorating global inequality. But the "China shock" is receding and other low-income countries are unlikely to replicate China's export-oriented industrialization experience. Relaxing restrictions on cross-border labor mobility might have an even stronger positive effect on global inequality. However it also raises a similar tension. While there would likely be adverse effects on low-skill workers in the advanced economies, international labor mobility has some advantages compared to further liberalizing international trade in goods. I argue that none of the contending perspectives -- national-egalitarian, cosmopolitan, utilitarian -- provides on its own an adequate frame for evaluating the consequences.
[ An excellent and necessary paper for which I am grateful. Now for another reading. ]
What is excellent about it ? Please explain.anne -> Mr. Bill... , January 22, 2017 at 04:09 PMhttp://rodrik.typepad.com/Is%20Global%20Equality%20the%20Enemy%20of%20National%20Equality.pdfanne -> Mr. Bill... , January 22, 2017 at 04:22 PMJanuary, 2017
Is Global Equality the Enemy of National Equality?
By Dani RodrikWhether one thinks the last quarter century has been good or bad for equity depends critically on whether one takes a national or global perspective. Within nations, inequality has typically risen in rich and poor nations alike. (Latin American countries, where we observe the highest levels of inequality in the world, were the only ones that significantly bucked the trend.) When commentators talk about inequality, this is usually what they have in mind. But there is another way of looking at inequality, which is to disregard national borders and focus on the distribution of income across all households in the world. Analyzed in this way global inequality actually fell sharply over the same period, thanks in large part to the very rapid growth of China and India, the world's two largest developing economies. In fact, this transformation has been so momentous that the contours of the global distribution of income have changed drastically. The two humps in the distribution – reflecting the all-too recent reality of a world divided into two clear segments, one small and rich, the other large and poor – have disappeared, with an emergent global "middle class" filling out the valley between the two humps (Figure 1).
The bulk of global income equality today is accounted for by income gaps between countries, rather than within them. This explains why economic growth in countries like China and India has a significant positive effect on global equality, even when inequality rises domestically in those countries, as it has done substantially in China's case.
To drive home the importance of between-country gaps, I sometimes ask my audience the following question: would you rather be rich in a poor country, or poor in a rich country? I tell them to assume they care only about their own income and purchasing power....
Among the excellent aspects, the question is raised as to what development means for relatively poor countries in which growth even when significant for a time shuts out much of a population; what has to be sacrificed by the fortunate for growth to be inclusive and as such sustainable; after all among the poorer countries growth has been decidedly subject to disruption for decades now; supposing trade is to be limited as a driver of growth, what then?Think -> anne... , January 22, 2017 at 05:21 PMAdd then to these questions in reading.
Thank you, Anne. You seem to adhere to a reality that says that the US is an illegitimate society.Think -> Think... , January 22, 2017 at 05:32 PMPersonally, I love the USA. Especially being able to shoot my mouth off.JohnH -> anne... , January 22, 2017 at 06:32 PMHell. i don't know if its right or wrong.
Eight billionaires have as much wealth as half the world's population.Ashok Hegde -> JohnH... , January 24, 2017 at 07:59 PM
http://events.tbo.com/news/world/these-8-billionaires-are-as-rich-as-half-the-worlds-population-oxfam-says/2309727I would have to conclude that the bulk of global inequality is accounted for by income differences between the 0.1% and the bottom 95%.
Ridiculous.DrDick : , January 22, 2017 at 04:31 PMIf people with no wealth continue to procreate at high rates, of course inequality will only grow. The real issue here is population growth. The poor are replicating at high rates, and the wealthy do not. This accounts for the growth of so much of this 'natural' inequality.
There is a major problem with Rodrik's piece. Between country inequality has been declining steadily since the 1990s, while within country inequality has been increasing since the 1980s. As I keep saying, the only real beneficiaries of globalization have been the wealthy of the world.Think -> DrDick... , January 22, 2017 at 04:40 PMhttp://www.un.org/en/development/desa/policy/wess/wess_bg_papers/bp_wess2013_svieira1.pdf
https://www.postkeynesian.net/downloads/working-papers/PKWP1303.pdf
https://unu.edu/media-relations/releases/global-income-inequality-unu-wider-press-release.html#info
Well, I agree with you, singing to the choir. My Dad raised seven on the union wage. How can I convince the folks of this simple fact ?anne -> Think... , January 22, 2017 at 06:06 PMMy Dad raised seven on the union wage. How can I convince the folks of this simple fact?Think -> anne... , January 23, 2017 at 01:23 AM[ By carefully explaining how this came to pass, the history of family told in context of the times is important. ]
Well, my dear, the truth is so simple that it eludes us. If American families have enough money, they will succeed.DrDick -> Think... , January 23, 2017 at 07:25 AMMy Dad was part of the cohort from WW2. They came back and were not about to succumb to those who did so little.I remember, during a strike, him going out with a bat to put an end to the company running scabs. They beat the hell out of them.
Some things are worth fighting for.
Bull. We are of the same generation and the 1950s was a period of almost unprecedented prosperity and upward mobility. Several factors drove this. First was the GI Bill, with free college and low cost home loans for vets. Second was the emergence or expansion of several industries which created a high demand for skilled labor and technical professionals (electronics, aerospace, petrochemicals, etc.). Third was massive government infrastructure investment, like the interstate highway system. Finally, strong unions fighting for the interests of the workers. Violence and bigotry help no one and the Tangerine Turd in the White House will do nothing good for working people.Kaleberg : , January 22, 2017 at 05:00 PMThe problem is that every nation that has ever developed in terms of productive capacity and increased living standards on this here earth of ours has done so by erecting some type of barrier. There really is no other way, at least not one that has been demonstrated to work. The barriers may take different forms and be more or less penetrable, but they remain. Before the turbine and diesel engines, transportation could be considered a barrier, but it is not much of a barrier today.realpc : , January 22, 2017 at 06:39 PMOne of the big problems we have nowadays is trying to solve problems that are basically too big to be solved, let alone solved simplistically. The nation state, for all its myriad faults, was a driving force for development and our current level of wealth. It was a powerful counter to the multi-nationalism of the feudal era which had an international upper class that was favored over the actually productive urban and trading classes. Encouraging multi-national corporations and coddling world-wide elites by trying to provide them the benefits of development without its political costs has been a formula for disaster.
Nationalism is natural. You either have nations or you have one big all-powerful world government.DrDick -> realpc... , January 23, 2017 at 07:27 AMCaring about your own nation first is common sense. Incredible that Trump even has to say it. But in this crazy political environment, it has to be said.
If you don't put yourself first, you will stop existing. If you don't put your nation first, it will stop existing.
All software developers understand modular design. Nature is designed modularly, and human society is part of nature.
We have nations because we are part of nature.
Sure you can love the whole world if you want. But if you care more about the rest of the world than your own nation, you are nuts. And yes, it is normal to be nuts these days.
"Nationalism is natural"river -> DrDick... , January 23, 2017 at 12:34 PMProving once again that you are an idiot who knows nothing. Nationalism is an artificial construct which only emerges in the late 18th-early 19th centuries, and does not spread widely until the late 19th-early 20th centuries.
I don't know the history between you two, and realpc may in fact be an idiot, but what he said above hardly proves that he is an idiot.DrDick -> river... , January 23, 2017 at 01:02 PM"nationalism is an artificial construct?" What does that even mean? I presume it means something like what is talked about here: http://ostrovletania.blogspot.com/2010/01/are-nations-artificial-or-natural.html
So here is some quick google information about native american tribes who fought over limited resources. I wonder if that was an artificial construct as well? Or if one tribe fought other tribes to help their own families out. I wonder if a starving neanderthal would share the meat off of a recent kill with a neanderthal not part of his tribe? Would that be an artificial construct? Surely Germany came into existence in the late 18th and early 19th centuries, but before that, the groups that became Germany were just as nationalistic as they were after they became Germany . . . they just defined their nation in more limited terms.
*sigh*river -> DrDick... , January 23, 2017 at 01:41 PM
People pay me good money to teach them about this stuff, but I do not think either of you could pass the entrance exam. Read Benedict Anderson, "Imagined Communities", or the works of E. J. Hobsbawm and T. O. Ranger on nationalism to start with. The truth is that mobile foragers(what all humans were until about 20,000 years ago) are not really very territorial. See the work of Brian Ferguson on the anthropology of warfare.Sorry, I am just a stupid engineer, and make sure that the building that you live and work in will stand up in an earthquake, yet, I am probably too stupid to ever know what you know. But that said, I didn't know that I am stupid, so I will probably ask a question that will make a genius like yourself roll their eyes in disgust that I was ever awarded a degree from an american university . . . but I don't have time to read four different authors on the subject of a simple blog post, so I am going to ask it anyways . . . you said that nationalism is an artificial construct that only came around about 200 years ago, and I came back with some ideas about, if that were the case, then why did different indian tribes battle over scarce resources (and also simply assumed that ancient humans behaved very similar to native american tribes). You rebutted that by insulting my intelligence, pointing me to four obscure academic authors (if I was as cool and as smart as Good Will Hunting, I am sure I would have read and remembered all the authors that you are pointing me to already, but alas, I am not), and then said that up until 20,000 years ago, there was surprisingly little conflict among people. So, what is it, was nationalism something that came about 20,000 years ago, or was it something that came about 200 years ago. And did indian tribes wage wars against each other? If they did, is that a form of nationalism, or is it different? If it is different, explain how.anne : , January 22, 2017 at 08:09 PMIF you are not smart enough to be able to answer these simple questions that support what you have asserted, then I would suggest that you don't go on message boards and insult the intelligence of others!
http://econospeak.blogspot.com/2017/01/auerbachs-tax-and-clone-wars.htmlanne -> anne... , January 22, 2017 at 08:10 PMJanuary 22, 2017
Auerbach's Tax and the Clone Wars
Menzie Chinn * introduces a new asset to economist blogging. Joel Trachtman ** provides an excellent discussion of whether the Destination-Based Cash Flow Tax violates WTO rules concluding that it does. He adds:
"If enacted, the plan would likely lead to lengthy litigation at the World Trade Organization. A (likely) ruling that the tax is an income tax, and is applied in a discriminatory manner, would mean that exempting exports would be considered an illegal subsidy and taxes on imports an illegal tariff. This could lead to trade sanctions against the U.S. and open the door to counter sanctions and the start of a trade war."
President Trump strikes me as someone who could care less about WTO rules. And starting a trade war fits his grand design of governance. As Yoda noted:
"Begun the clone war has"
President Trump is Lord Palpatine.
* http://econbrowser.com/archives/2017/01/econofact-bringing-facts-and-data-to-policy-debates
** http://econofact.org/house-gop-tax-plan-aims-to-boost-competitiveness-might-also-violate-trade-law
-- PGL
Nicely done.Tom aka Rusty : , January 23, 2017 at 07:09 AMRodrik seems to spend less time with math models and more time engaging with reality.Robert C Shelburne : , January 23, 2017 at 09:10 AMPerhaps a model for other economists?
Another good article by Rodrik but a weakness of his analysis is that welfare is assumed to be based upon real income and not relative income with ones "group". Most analyses of welfare find that relative income is quite important. Obviously if one assumes that one's reference group is the world, then the problem goes away; but empirically this is not the case. Assuming that welfare is strongly affected by relative income with a group which is smaller than the world, then global equality is no longer welfare maximizing. Those interested in these issues might be interested in Robert Shelburne, A Utilitarian Analysis of Trade Liberalization, available as a UN working paper.river : , January 23, 2017 at 11:05 AMMuch like how the biggest environmentalist is the one who already has her house built, the economists safely in their ivory tower and comfortable with their tenured positions in academia were more than happy to volunteer the American working class to give up some of their wealth so that people living in extreme property in the developing world could have slightly better positions. I am glad to see that this is what you guys argued for with all of your "free trade" agreements that you pushed for over the last several decades. Sadly, this is exactly what led us to Trump as president.reason -> river... , January 24, 2017 at 01:48 AMTheir models told them precisely that some people would suffer and others gain, but also that with appropriate redistribution everybody could gain. But appropriate redistribution was never forthcoming. Time for a national dividend.river -> reason ... , January 24, 2017 at 01:20 PMAppropriate redistribution will NEVER be forthcoming. It is so easily demonized, and people don't want redistributed income. They want jobs!This is why the Democrats lost. And frankly, this is the whole point of democracy.
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Feb 01, 2017 | economistsview.typepad.com
river : January 23, 2017 at 11:05 AMMuch like how the biggest environmentalist is the one who already has her house built, the economists safely in their ivory tower and comfortable with their tenured positions in academia were more than happy to volunteer the American working class to give up some of their wealth so that people living in extreme property in the developing world could have slightly better positions.reason -> river... , January 24, 2017 at 01:48 AMI am glad to see that this is what you guys argued for with all of your "free trade" agreements that you pushed for over the last several decades. Sadly, this is exactly what led us to Trump as president.
Their models told them precisely that some people would suffer and others gain, but also that with appropriate redistribution everybody could gain. But appropriate redistribution was never forthcoming. Time for a national dividend.river -> reason ... , January 24, 2017 at 01:20 PMAppropriate redistribution will NEVER be forthcoming. It is so easily demonized, and people don't want redistributed income. They want jobs!This is why the Democrats lost. And frankly, this is the whole point of democracy.
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Feb 01, 2017 | economistsview.typepad.com
Tom aka Rusty : January 30, 2017 at 12:02 PM , 2017 at 12:02 PMThere has not been "free trade" for a long long time if ever.Peter K. -> Tom aka Rusty... , January 30, 2017 at 12:29 PMThere is "negotiated trade" with rules set by governments.
Yuuuuge difference.
Exactly. And the rules have been set by U.S. multinational corporate negotiators. Just look at TPP.Paul Samuelson also praised Australia's Tariffs & US became ultra rich under Lincoln's protectionism : , -1There is also dollar policy which is again set by corporate interests.
In case anyone cared, Samuelson also argued cogently for Australia's high tariff regime in a famous 1981 article.In case economists want to bother learning history (why would they?) - you can also consider the funny example of Abraham Lincoln who "took away property rights" and raised tariffs sky high.
Did the US become a poor third world country because it took away plantation owners' property rights and jacked up tariffs? Hmm. Reason to pause and reflect economists?
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Feb 01, 2017 | economistsview.typepad.com
Fred C. Dobbs : January 29, 2017 at 06:13 AM , 2017 at 06:13 AMThe end of manly laborjonny bakho -> Fred C. Dobbs... , January 29, 2017 at 09:02 AM
http://www.bostonglobe.com/ideas/2017/01/29/the-end-manly-labor/WjzhrUhDCFnWGN1NcR0clL/story.html?event=event25
via @BostonGlobe - Rob Walker - January 29, 2017It may be simplistic, or even wrongheaded, but the working-class man has become a political obsession. President Trump won this voting bloc with promises of resurrecting the "good jobs" of America's industrial heyday, ostensibly by toughening trade rules and jawboning individual companies. Democrats agree on the need to appeal to working-class men, but the party's strategy for doing so hasn't changed much since Nov. 8: Mostly we hear about addressing income inequality by raising the minimum wage, improving family leave, and making college more affordable.
But it's not clear that those issues resonate with the archetypal Rust Belt factory worker displaced by globalism, technology, or both. For starters, there's no grand-gesture proposal - no modern heir to the job-creating Works Progress Administration, let's say - to capture the imagination. The minimum wage doesn't mean much to this group, and family leave is more of a "new working class" issue, says Lance Compa, who teaches US labor law and international labor rights at Cornell University. After all, we're talking about a theoretical voter who once earned up to $30 an hour and could support a family without advanced skills or education beyond high school - and basically wants that life back.
And maybe there's another factor lurking in the background: This guy - you pictured a guy, right? - frames his concerns more bluntly. "Manly dignity is a big deal for most men," argued Joan C. Williams, founding director of the Center for WorkLife Law at the University of California, Hastings College of the Law, in a November essay for Harvard Business Review. "So is breadwinner status: Many still measure masculinity by the size of a paycheck. White working-class men's wages hit the skids in the 1970s and took another body blow during the Great Recession. . . . For many blue-collar men, all they're asking for is basic human dignity (male varietal)."
Let's acknowledge the obvious: The collision between 21st-century economic realities and the male ego makes an odd topic for think tank symposiums or congressional hearings. To consider "manly dignity" in the context of economic policy is no excuse to bring back a "when men were men" vision of Manhood 1.0 - much less to embrace the alt-right tweeters raining hatred upon women.
But just because an issue is awkward for scholars and politicians to address doesn't mean it isn't shaping our economy and our politics. "Look," Williams wrote, "I wish manliness worked differently."
Ultimately, men who are truly stuck in the past are going to find out that sloganeering and braggadocio won't revive it. Economist Betsey Stevenson has a point when she argues that "Manly Men Need to Do More Girly Jobs," as the title of her recent Bloomberg View column put it.
Still, as a straightforward matter of both policy and rhetoric, courting any group involves understanding, not belittling, its core concerns and addressing them in ways that make sense specifically to members of that group. Boosting an industrial policy that speaks to this class of men on its own terms "has just not been on the radar of the Democratic Party or progressives in general," Williams said in an interview.
After all, the wave of post-election attention notwithstanding, blue-collar men have been or felt under assault for decades. Writing in The Baffler, author Susan Faludi recently revisited some of her reporting for her 1999 book, "Stiffed: The Betrayal of the American Man." Her subjects, bitter about lost jobs, declining status, shifting gender values, and untrustworthy elite power structures, seem remarkably familiar.
It's not quite right to suggest that no one before Trump paid attention to these men. One popular and pragmatic-sounding solution is retraining: taking workers from sectors that economic change has destroyed and equipping them with the skills to participate in those it is creating. The problem is that men often don't seem to want those newer jobs. "These are working-class people," Ohio congressman Tim Ryan told NPR not long after the election, when he was challenging Nancy Pelosi for the Democratic House leadership role. "They don't want to get retrained, you know, to run a computer. They want to run a backhoe. They want to build things."
Moreover, newer job categories often involve work that has been dominated by women. Janette Dill, an assistant professor of sociology at the University of Akron, has researched lower-level jobs in the health care industry - a fast-growing category, according to government statistics - such as medical and nursing assistants. Very few men pursue such work. "There's some stigma around doing these kind of feminized job tasks," Dill says, such as helping a patient get out of bed or use the bathroom. While it's often physically demanding, it's "seen as women's work," she adds.
At the same time, Dill has seen some evidence of an uptick in younger male workers embracing health care positions with "more of a technical dimension." A gig as a surgical technician, respiratory therapist, or occupational therapist can pay $40,000. The proliferation of jobs like these may not sound as exciting as lightning-bolt gestures toward new car plants. But these new health care jobs generally require a two-year degree, not a four-year baccalaureate, and they "seem more masculine," as Dill carefully puts it.
Meanwhile, manufacturing itself isn't a lost cause, even if its golden age is unlikely to return, argues Timothy Bartik, a senior economist at the Upjohn Institute for Employment Research in Kalamazoo, Mich. Bartik advocates several ideas that could appeal to the working-man crowd: a more demand-driven approach to retraining; manufacturing extension services designed to help existing smaller manufacturers grow; and economic "empowerment zones" - a Bill Clinton-era policy that provided block grants to regions that devised plans to deploy them according to strategic local needs. These involve federal help but, importantly, play out at regional levels.
This could be more effective than doling out company-specific tax breaks or deploying the blunt instrument of tariffs on the one hand and a more macro-oriented, top-down approach on the other. Empowerment zones are an unlikely successor to the Works Progress Administration - the Depression-era federal agency that put unemployed men to work on public building projects - but could be positioned as a WPA-like expression of tangible government action.
Bartik notes the importance of "rhetorical emphasis" - selling these ideas as specifically beneficial to communities built on old-school working-class economics. Hillary Clinton did propose policies (including some that overlap with these ideas) to help US manufacturing, but for whatever reason, he says, "that didn't seem to get much attention."
What's missing is a more sweeping vision that gives alienated men - and others - a sense that the economy has a use for the kind of work they want to do.
Williams, of UC Hastings, says this is where progressives have been misguided and failed to think big and advocate a comprehensive industrial and educational policy. She points to the Markle Foundation's Rework America initiative, which calls for better matching of skills and training with real job demand. Germany's approach, involving apprenticeship programs and educational structures that also produce middle-skill workers that industry actually needs, offers an example. The point is to think beyond a one-size-fits-all advocacy of the four-year college degree - a "delusory" solution, as Williams puts it, that leaves some workers cold. "The kind of work that college grads do doesn't appeal to them," she says. "That's not their skill set."
Clearly this shift would take time, but Compa, the Cornell labor scholar, adds a couple of practical suggestions that could speak directly and immediately to displaced manufacturing workers. One is an effort to reinvigorate workers' compensation laws, which have withered in many states. Another is to improve COBRA policies, which allow laid-off workers to hang onto health benefits, by extending their duration and forcing companies to pay for them. "I don't want to stereotype," he says, "but men want to feel that they're providing for their family, and one way to provide for your family is to make sure they have health insurance." (Bartik further suggests considering ways of bridging later-career manufacturing layoff victims to retirement if retraining isn't a realistic possibility.)
Finally, Compa thinks we should embrace another facet of America's industrial peak: unions. Building bonds among working-class people as they take their own interests into their own hands, unions can still help provide the sense of dignity that some feel is lost. "The idea that we're going to stand together against this powerful force on the other side," he says, "I think that gives a sense of meaning and purpose."
That basic idea speaks to lost manliness, but also transcends it. Compa mentions that he was surprised to learn how little the sorts of low-level health care workers that Dill studies earn - maybe $12 an hour. "I understand they didn't go to college," he says. "But their work is so important, and requires the same skill and care and attention that a machinist job requires. They should get those kind of wages." Since the market's not making that happen, maybe organizing could.
Dill herself points out that these low wages are symptomatic of a direct link between the "stigma" of feminized labor that those manly men avoid and its direct economic consequences: "The kind of work that women do is often not as valued, by society." So more broadly, maybe this suggests that policy could speak to "the working man" in a way that's also heard by the broader and more diverse working class.
For all her frustration with the way she feels Democrats have ignored or misunderstood seekers of "dignity (male varietal)," Williams thinks so, too. "I don't think this is a zero-sum game," she says. Aggressively advocating for ways to create more and better middle-skill jobs will benefit workers of any race or gender.
But doing that will require progressive policy thinkers to dream bigger and push harder - to man up, you might say.
Not helpfullibezkova -> Fred C. Dobbs... , January 29, 2017 at 02:56 PM
Our media relentlessly markets "culture" to males
Sports culture, car culture, gun culture &c are supported by Big$
It is difficult to change the culture when Ad$$ are creating headwinds.
It is all a BigLie, but very appealing
Cultural change is slow, one funeral at a timeThis talk about "manliness" is disingenuous.libezkova -> libezkova... , January 29, 2017 at 02:59 PMLoss of work is a loss of social status in any industrial society.
And often involves real hardships, such as loss of home, breakup of family, etc.
Neoliberals seek to redistribute profits up and for this noble goal all means are good. Including decimation of lower 80% of their compatriots. Who cares. They are all cosmopolitans now.
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Feb 01, 2017 | economistsview.typepad.com
Peter K. : January 30, 2017 at 12:37 PM , 2017 at 12:37 PMBranko Milanovic had the best link in today's links. Of course PGL passed it over as unworthy of comment. kthomas called him a Russian.Peter K. -> Peter K.... , January 30, 2017 at 12:38 PMIs there a rise in hate crime against Russian businesses and people with Eastern European sounding names? Wouldn't be surprised.
http://glineq.blogspot.com/2017/01/is-liberalism-to-blame.html
Sunday, January 29, 2017
Is liberalism to blame? by Branko Milanovic
By "liberalism" I mean what is considered under this term in the US. By "to blame" I mean "for the rise of Trump and similar nationalist-populists".
What are the arguments for seeing liberal triumphalism which began with the collapse of Communism in the 1990s as having produced the backlash we are witnessing today? I think they can be divided into three parts: economics, personal integrity, and ideology.
In economics, liberalism espoused "neo-liberalism" which was the replacement economic ideology for social-democracy. It championed, especially under the Clinton-Blair duo, financial liberalization, much smaller welfare state, and so-called "meritocracy" which essentially meant the ability of the rich to place their kids into the best schools out of which 90% would graduate and thus "meritocratically" claim later in life huge wage premiums. Free trade agreement privileged, as Dean Baker has written, the interests of the rich in advanced economies through protection of patents and intellectual property rights and with scant or no attention to labor rights. In the international arena, through the World Bank and the IMF, Clintonite neo-liberalism was associated with Washington consensus policies. They are in many respects reasonable policies, but were applied dogmatically and mindlessly especially with respect to privatization and often with the principal objective of ensuring that the debts be collected regardless of the social effects on the population. Greece is the best known example of such policies because it sits in the middle of Europe and the results of "debt collections" are easiest to see. But the same principles were applied across the world.
Underpinning such policies was an ideology that saw economic success as the only dimension (in addition to the acceptance of certain liberal tropes which I will mention below) in which worth of an individual is expressed or measured. That ideology found broad acceptance across the world, fanned by globalization and by what that ideology has pleasing to the human psyche which craves acquisition of more. It was thus consistent with human nature and probably helped increase world output several-fold and reduce world poverty. But it might have been pushed too hard to the exclusion of other human characteristics and helped create especially among those who were economically less successful resentment and estrangement from the values promoted by liberals.
Corruption. A corollary of this hyper-economicism in ordinary life was the corruption of the elites who espoused the same yardstick of success as everybody else: enrichment by all means. Avner Offer documents this shift in his analysis of where social-democracy went astray with "New Labour" and "New Democrats". The corruption of the political class, not only in the West but in the entire world, had a deeply corrosive and demoralizing effect on the electorates everywhere. Being politician became increasingly seen as a way to acquire personal riches, a career like any other, divorced from any real desire either to do "public service" or to try to promote own values and provide leadership. "Electoralism", that is doing anything to be elected, was liberalism's political credo. In that it presaged the populists.
It is, I think, important to see the link between the economic ideology of "commercialism" which informed economic policies since the early 1980s in the West and China, and since the 1990s in the formerly Communist countries, and systemic and all-pervasive corruption of the elites. Since being successful meant amassing most money, politicians could not operate in a different dimension (for example in "ideals") nor could they get elected without being corrupt because campaigns could not be fought without money. It is an illusion that the political space may operate according to different rules from the rest of society.
Pensée unique. Liberalism introduced a dogmatic set of principles, "the only politically correct way of thinking" characterized by identity politics and "horizontal equality" (no differences, on average, in wages between men and women, different races or religions) which left actual inequality go unchecked. A tacit hierarchy was introduced, where the acceptance of these watered-down principles of equality combined with economic success, was the requirement to be "non-deplorable". Others, those who did not do well economically or did not adhere to all the tenets of the mainstream thinking, were not only failures but morally inferior.
The high priests of liberalism, ruling the media, loved to hold, at the same time, logically contradictory beliefs which somehow were both "good". Thus they created terminological or behavioral contortions that were either direct attacks on common sense or examples of hypocrisy as "supporting the troops" while being "against the war" or giving enormous donations to private schools (in order to get their names emblazoned in classrooms) while "supporting public education". They were not embarrassed by contradictions, nor accepted trade-offs: you could support soldiers killing civilians "because soldiers protect us" and be against the war and killing of civilians at the same time; you could send kids to private schools and be in favor of public education; you could fret about climate change, berate others who do not, and emit more CO2 than 99% of the mankind. It was ideologically an extremely comfortable position. It required very little mental effort to accept five or six essential tenets (you could just read a couple of writers who repeated ad nauseum the same ideas in the main liberal publications), and it allowed you to do wherever you liked while claiming that every such action was ethically unimpeachable. Everybody was a paragon of virtue and indulged all their preferences.
Others who failed to appreciate the advantages of such a position were ignored until their dissatisfaction exploded. No one among liberals seemed to think it odd (much less to do something about it) that the best educated country in the world with one of the highest world per capita GDPs, could have a third of the population who believed in creationism or in aliens running our lives. It really did not matter to the elite so long as these people existed in the Netherworld.
Those who trusted in Fukuyama, and to whom the 1990s seemed like a triumph that would keep them at the pinnacle of human evolution forever, see today's events as a catastrophe not only because they could indeed lead to a catastrophe but because their carefully nurtured ersatz ideology and place in society have collapsed.
I am writing this in Vienna, in Prater, overlooking a giant Ferris Wheel which inevitably makes one think of Harry Lime. One can see liberalism as having set the Ferris Wheel in motion, with each car moving at first slowly and then faster and faster. The ride brought immense joy at first, but eventually, it seems, somebody turned on the switch to super-fast, locked the control room, and most of us are now in these cars that no one controls and no one can stop, running at break-neck speed, and wondering how and when the crash will come.
"A corollary of this hyper-economicism in ordinary life was the corruption of the elites who espoused the same yardstick of success as everybody else: enrichment by all means. Avner Offer documents this shift in his analysis of where social-democracy went astray with "New Labour" and "New Democrats". The corruption of the political class, not only in the West but in the entire world, had a deeply corrosive and demoralizing effect on the electorates everywhere. Being politician became increasingly seen as a way to acquire personal riches, a career like any other, divorced from any real desire either to do "public service" or to try to promote own values and provide leadership. "Electoralism", that is doing anything to be elected, was liberalism's political credo. In that it presaged the populists."Think of Hillary's speeches to Goldman Sachs, etc, and Obama's failure to throw bankers in jail.
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Feb 01, 2017 | economistsview.typepad.com
pgl : , January 29, 2017 at 01:45 AM
Bill McBride on Trump's Muslim ban:Jerry Brown -> pgl... , January 29, 2017 at 02:10 AM'Mr. Trump's executive order is un-American, not Christian, and hopefully unconstitutional. This is a shameful act and no good person can remain silent.'
Thanks for saying this Bill. JFK International had a demonstration against this ban that featured the detention of a brave Iraqi who helped US troops. This ban is also incredibly stupid.
I add my thanks to yours. Very important post from Bill McBride.pgl -> Jerry Brown... , January 29, 2017 at 03:04 AMA temporary victory from the courts:New Deal democrat -> pgl... , January 29, 2017 at 05:24 AMAgreed in full.EMichael -> New Deal democrat... , January 29, 2017 at 05:29 AMI happen to think the heartlessness of this Order was a feature, not a bug, in order to garner maximum attention. I just read Mish's comment section, and Trump's base is cheering.
But on a longer term scale, heartlessness towards Muslim immigrants and DREAMers is going to turn persuadables against Trump. That and the next recession.
We'll differ on this one part, people that voted for Trump are not persuadables. They have always voted the same way in every single election they have voted in.ilsm -> EMichael... , January 29, 2017 at 05:45 AMAmazes me that even now people keep thinking that Trump voters are anything but loyal GOP voters. And I think the best argument against this (besides common sense) is the reaction of Rep leaders to this obviously illegal action.
They're silent.
They cannot afford to speak out against this racist policy, as their own voters are for this racist policy.
silent on ethnic racism and the rest of US so much more guilty ..... on drone assassination and militarist nation building gone awry, tilting with nuclear war to keep NATO less recondite, etc, etc.......New Deal democrat -> EMichael... , January 29, 2017 at 06:11 AMAre the libruls all riled up because the immigrant ban might reduce terror shootings in US to reduce screaming for techno-murder?
There were a fair amount of voters who "came home" to the GOP before the election, even though they found Trump himself distasteful. At least some of those nouveau-Reagan democrats also voted for him because of his economic agenda. They believed that his racism was all for show.New Deal democrat -> EMichael... , January 29, 2017 at 06:57 AMA further historical analogy ....anon -> New Deal democrat... , January 29, 2017 at 08:24 AMOnce upon a time, for academic reasons I read the same book that Trump was rumored to have by his bedside in NYC: the english translation of the full text of Adolf Hitler's speeches. Hitler's argument for getting ordinary Germans to go along with his extreme anti-Semitic agenda was masterful. It went in essence like this: "I know that there are a very few good Jews, and you may know a few of them. But the vast majority of Jews, who you don't know, are evil. But in order to get to the mass of bad apples, we might have to inflict some hardship on a few good people." By getting people to overlook their own experience with Jews they knew, he prevailed.
In contrast - for example - gay rights triumphed when enough people knew gays in their ordinary lives, and realized that they were no different from anybody else. So they were unable to see any valid reason to discriminate against them.
This ban is much more like the second situation than the first. It is inflicting a lot of pain on a lot of good people, in order to get to (allegedly) a few bad apples, and people can see that. It is not going to be popular.
" for academic reasons I read the same book that Trump was rumored to have by his bedside in NYC"New Deal democrat -> anon... , January 29, 2017 at 08:36 AMunsubstantiated nonsense. other wise known as fake news
Unsubstantiated = It may or may not be nonsense, since we don't know if it is true or not. Hence, as I said, "rumor."ilsm -> New Deal democrat... , January 29, 2017 at 01:24 PMHave a nice day.
Before the Nazi had the power to go after the Jews they had effect the party's police state, before which ordinary Germans [and whatever police there were after the depression shuttered everything] permitted the party to do organized violence on their opponents: the social democrats, socialists, bolshevists, et al.Peter K. -> EMichael... , January 29, 2017 at 08:05 AMIt was way too late when the pogrom started.
BenIsNotYoda -> Peter K.... , January 29, 2017 at 08:26 AM"We'll differ on this one part, people that voted for Trump are not persuadables. They have always voted the same way in every single election they have voted in."
Reminds me of the obstinate, closed-mindedness which Trump voters direct at immigrants and Muslims.
The ban on returning residents is utterly against the law.Peter K. -> BenIsNotYoda... , January 29, 2017 at 08:34 AMHowever, I agree on PeterK. The closed mindedness of neoliberals to their own follies has brought this state of affairs upon us. Wake up.
Neoliberals have not delivered a growing, healthy economy despite Krugman's claims that everything is great, crime is down, etc.Gibbon1 -> Peter K.... , January 29, 2017 at 11:48 AMObama's record for 8 years is an average of 1.7 percent growth. NGDP is even worse which is why I support an NGDP target for the Fed. It would show how poorly they have done.
This after decades of corporate trade deals and a shrinking middle class.
People are angry. They want scapegoats. Trump provided them with scapegoats and the uneducated white working class took the bait.
Peter K shows an understanding of politics.ilsm -> pgl... , January 29, 2017 at 05:33 AM
I agree!point -> pgl... , January 29, 2017 at 05:36 AMbut..... there are a lot more for all parties in starting with funding and training jihadis to do Assad like US did Qaddafi and Libya......
Bill pastes:
"Republicans in Congress who remain quiet or tacitly supportive of the ban should recognize that history will remember them as cowards."
http://www.calculatedriskblog.com/2017/01/these-are-not-normal-times.html#cGvlOOcKIMa08xzJ.99
Most of the 95% rest of the world see the US like the NYT says history see GOP congress.
I appreciate Bill's judgement that Trump's acts are odious, but "un-American, not Christian, and hopefully unconstitutional" seems to be going too far.New Deal democrat -> point... , January 29, 2017 at 06:04 AMIt only takes a quick tour of historical US acts on immigration to find plenty of precedent.
1870-1943, Chinese.
1882, lunatics.
1907, Japanese
1921, everybody.
1923, Indians.
1932, everybody, especially Mexicans.This according to the useful article:
https://en.wikipedia.org/wiki/History_of_laws_concerning_immigration_and_naturalization_in_the_United_States
Small historical anecdote.kthomas -> New Deal democrat... , January 29, 2017 at 06:23 AMMme. Chiang Kai Shek (recently deceased at age 106 on Long Island) has much to answer for before the bar of history, but she had one shining moment.
Supposedly at one point during WW2 both she and Winston Churchill were living at the White House (must have made for interesting dinner conversation). Anyway, during that time she gave a speech to Congress. In that speech she pointed out that Japanese militarist propaganda, that America's myth of liberty and equality before the law was hypocritical, had one inconvenient feature: given the Chinese and Japanese Exclusion Acts, it was true.
This speech was so shaming that Congress changed the law to allow Asian immigation - in a trickle at first, but thereafter a river.
Thank you for sharing.ilsm -> New Deal democrat... , January 29, 2017 at 06:48 AMMme Chiang was Christian, spent part of youth in Georgia.New Deal democrat -> ilsm... , January 29, 2017 at 07:15 AMJapanese militarist propaganda used 'Asian co-prosperity' propaganda to point out imperialism..... too!
Java was Dutch, etc.
Yes, and her teenage voyage to San Francisco ended with her being treated exactly like the people being detained at airports this weekend. It made a lifelong impression on her.ilsm -> New Deal democrat... , January 29, 2017 at 01:27 PMShe married Chiang to give him a link to the west....BenIsNotYoda -> point... , January 29, 2017 at 08:27 AMAside I am no fan of Chiang and Mme C.
whenever bans were by democrat presidents, people here will never criticize.Tom aka Rusty -> pgl... , January 29, 2017 at 05:51 AMGiven at least 16 years of intentional presidential failure to fully enforce immigration laws, this seems pretty small change.EMichael -> Tom aka Rusty... , January 29, 2017 at 05:57 AMBut enough to make lefty heads explode.
Have a nice day.
PS: Did the State Department intentionally avoid Christian Arabs for refugee status? Not certain.
Wow.kthomas -> EMichael... , January 29, 2017 at 06:23 AMFive feet over your head.
What head? Brain by accident.ilsm -> EMichael... , January 29, 2017 at 06:49 AMad hom when you ate wrog the best tool.Observer -> Tom aka Rusty... , January 29, 2017 at 06:49 AM
kt too!Yes, its pretty unremarkable. And you are correct the that Christian Arab refugees from Syria have been accepted at 5% of the rate their population would suggest:BenIsNotYoda -> Tom aka Rusty... , January 29, 2017 at 08:31 AM"But the numbers tell a different story: The United States has accepted 10,801 Syrian refugees, of whom 56 are Christian. Not 56 percent; 56 total, out of 10,801. That is to say, one-half of 1 percent.
The BBC says that 10 percent of all Syrians are Christian, which would mean 2.2 million Christians. It is quite obvious, and President Barack Obama and Secretary John Kerry have acknowledged it, that Middle Eastern Christians are an especially persecuted group."
Here's a quite detailed discussion of the background around the EO and its implementation ... including the 2015 law limiting visas from those countries, and the reference for the above quote. It also contrasts the headlines in much of the press. As they say, read the whole thing."There is a postponement of entry from 7 countries (Iraq, Syria, Iran, Libya, Somalia, Sudan and Yemen) previously identified by the Obama administration as posing extraordinary risks.
That they are 7 majority Muslim countries does not mean there is a Muslim ban, as most of the countries with the largest Muslim populations are not on the list (e.g., Egypt, Indonesia, Malaysia, India, Pakistan, Bangladesh, Turkey, Nigeria and more).
Thus, the overwhelming majority of the Muslim world is not affected.
Moreover, the "ban" is only for four months while procedures are reviewed, with the exception of Syria for which there is no time limit.
There is a logic to the 7 countries. Six are failed states known to have large ISIS activity, and one, Iran, is a sworn enemy of the U.S. and worldwide sponsor of terrorism.
And, the 7 countries on the list were not even so-designated by Trump. Rather, they were selected last year by the Obama administration as posing special risks for visa entry ..."
I believe they don't mention that IIRC we were bombing 5 of the 7 counties on the list last month.
The current system relies on referrals from the United Nations High Commissioner for Refugees. Syria's population in 2011 was 90 percent Muslim and 10 percent Christian, CNS said. Less than 3% admitted as refugees are Christian. But not the state dept's doing.Peter K. -> Tom aka Rusty... , January 29, 2017 at 09:48 AMwhy was Obama called "Deporter in chief?"DrDick -> pgl... , January 29, 2017 at 07:37 AMToo bad your empathy for those in the Rust Belt doesn't extend to honest, innocent immigrants trying to make a better life for their families.
Yep! But we need to get used to it, because this is just the beginning.pgl : , January 29, 2017 at 01:52 AMI've seen some farmers of late complaining about Trump's protectionism hurting their business. Yes they are smart enough to realize that the dollar appreciation will reduce their exports. Too bad these rural Americans were not smart enough on election day not to vote Trump in as President.kthomas -> pgl... , January 29, 2017 at 04:04 AMStupid is as stupid does. Stupid is the new Smart.ken melvin -> kthomas... , January 29, 2017 at 04:42 AMThe man knows only what he's seen on cable TV most of which he doesn't understand. Knows nothing about: economics, trade, foreign affairs, government, law, ... He epitomizes the know nothings of the world, and, the fact that he doesn't know doesn't bother him in the least. A narcissists-grandiose type with neither regard nor interest for the probable consequences.ken melvin -> ken melvin... , January 29, 2017 at 04:45 AMI think it's wrong to even hope Trump turns out well. I think the country needs act to save democracy, to save itself from traveling down the road of despots and tyrants, from the likes of Trump who can be manipulated by the likes of Bannon.ilsm -> ken melvin... , January 29, 2017 at 05:36 AMWe need a Dr. King, America's Gandhi!RC AKA Darryl, Ron -> ilsm... , January 29, 2017 at 07:57 AMWe have needed one ever since the last one we had was murdered.im1dc -> kthomas... , January 29, 2017 at 07:37 AM'Stupid is as stupid does. Stupid is the new Smart."BenIsNotYoda -> kthomas... , January 29, 2017 at 08:33 AMLOL, loved that.
It will make a great Bumper Sticker coupled with the GOP logo of its Red, White, and Blue elephant
stupid is one who ignores that Obama presidency growth averaged 1.7% and failed to lift millions while wall street prospered and corporate market power increased both in goods and labor markets.kthomas -> BenIsNotYoda... , January 29, 2017 at 09:25 AMHe's not President anymore. Now go f yourself, Vlad.BenIsNotYoda -> kthomas... , January 29, 2017 at 09:38 AM
awwww. did I hurt your fragile sensibility?ilsm -> pgl... , January 29, 2017 at 05:35 AMI will dig out that best seller about Jackson and review the chapter on Nullification in Charleston,. SC........
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Jan 30, 2017 | economistsview.typepad.com
cm -> Chris G ... Reply Sunday, January 29, 2017 at 12:21 AM , January 29, 2017 at 12:21 AMThe comparison comes 20 years late. In the 90's, MS Word was unsuitable for academic and scientific writing, period. Even for short documents like a conference or term paper. It was geared entirely to corporate users. In addition it was riddled with bugs and layout "quirks".Chris G -> cm... , January 29, 2017 at 06:35 AMIn reality, you also have to fiddle with Latex, and in the 90's embedding images was big PITA.
What I did not see in the comparison is price. I suppose one would need to compare legally-owned copies of one product vs. the other.
It is not just a matter of the author being able to afford Word and the equipment and other software to use it productively. E.g. how do you prepare your graphs and images? Also business partners accepting or returning the documents will have to buy into the "ecosystem".
Academia is a highly collaborative venture, and one has to consider overall cost and productivity.
Today there is PDF as a pretty established (readonly) document format, back in the day the standard in academia was Postscript.
>In the 90's, MS Word was unsuitable for academic and scientific writing, period... It is not just a matter of the author being able to afford Word and the equipment and other software to use it productively. E.g. how do you prepare your graphs and images?
I used Word when writing my thesis in '94-95 - each chapter a separate doc, figures inserted by creating artwork separately and then using a high-end copy machine to integrate text and figures. It was an ugly process.
> Also business partners accepting or returning the documents will have to buy into the "ecosystem".
That's what led my employer to switch from WordPerfect to MS Word and from Lotus 1-2-3 to Excel in the late '90s. Our customer, the US Govt, imposed a requirement that all reports and supplementary material, e.g., presentations and spreadsheets, be submitted in MS Office formats.
> What I did not see in the comparison is price. I suppose one would need to compare legally-owned copies of one product vs. the other.
Figure the business owns legal copies. Purchase price is one consideration, another is the cost to maintain the software and keep staff trained in how to use it.
The inertia - the tendency to stick with what you've got - can be huge when taking the latter factors into account. In an academic research group not only is there a mentality that you want to use the best available tool for the job but there's constant turnover, which supports rapid adaptation and evolution. Inertia is low. In contrast, turnover in (non-startup) business environments is comparatively slow.
Those businesses make cost-benefit assessments of adopting new software. The tendency is to stick with what you've got until it's absolutely positively unsustainable to do so.
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Jan 30, 2017 | economistsview.typepad.com
cm -> Observer... , January 29, 2017 at 01:07 AMEvery product is made for a market/audience. When TeX/LaTeX were created, the itch to be scratched was technical and scientific publications with content and formatting requirements that most commercial tools targeted at corporate users were simply unsuitable for, regardless of price level. Aside from affordability by organizations and individuals largely in the non-commercial sector.Fred C. Dobbs -> supersaurus... , January 28, 2017 at 11:05 PMSo academia standardized, and contributed to, the most promising "free" and "working" alternative.
If you don't have an appreciation for that, it's probably because you never had the need. Like with everything else. Most people are not interested in arcane medical implements and materials, or even mundane home furnishings, until they need them.
When the first paper volume of Donald Knuth's The Art of Computer Programming was published in 1968, it was typeset using hot metal typesetting set by a Monotype Corporation typecaster. This method, dating back to the 19th century, produced a "good classic style" appreciated by Knuth. When the second edition of the second volume was published, in 1976, the whole book had to be typeset again because the Monotype technology had been largely replaced by phototypesetting, and the original fonts were no longer available. When Knuth received the galley proofs of the new book on 30 March 1977, he found them awful. Around that time, Knuth saw for the first time the output of a high-quality digital typesetting system, and became interested in digital typography. The disappointing galley proofs gave him the final motivation to solve the problem at hand once and for all by designing his own typesetting system. On 13 May 1977, he wrote a memo to himself describing the basic features of TeX. ...The first version of TeX was written in the SAIL programming language to run on a PDP-10 under Stanford's WAITS operating system. For later versions of TeX, Knuth invented the concept of literate programming, a way of producing compilable source code and cross-linked documentation typeset in TeX from the same original file. The language used is called WEB and produces programs in DEC PDP-10 Pascal. ...(Wikipedia)
(And so, Tex begat LaTex.
Much as UNIX begat Linux, etc.)
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Jan 29, 2017 | economistsview.typepad.com
anne : January 28, 2017 at 05:12 AM , 2017 at 05:12 AMhttp://krugman.blogs.nytimes.com/2017/01/27/border-tax-two-step-wonkish/ilsm -> anne... , January 28, 2017 at 05:19 AMJanuary 27, 2017
Border Tax Two-Step (Wonkish) By Paul Krugman
Trump tantrums aside, you may be finding the whole border tax adjustment discussion confusing. If so, you're not alone; I've worked in this area my whole life, I co-wrote a widely cited paper * (with Martin Feldstein) on why a Value Added Tax isn't an export subsidy, and I have still had a hard time wrapping my mind around the Destination-Based Cash Flow Tax border adjustment that sort-of-kind-of constituted the basis for the Mexico incident.
But I have what I think may be a (relatively) easy way to think about it, which starts with the competitive effects of a VAT, then analyzes the DBCFT as a change from a VAT.
So, first things first: a VAT does not give a nation any kind of competitive advantage, period.
Think about two firms, one domestic and one foreign, selling into two markets, domestic and foreign. Ask how the VAT affects competition in each market.
In the domestic market, imports pay the border adjustment; but domestic firms pay the VAT, so the playing field is still level.
In the foreign market, domestic firms don't pay the VAT, but neither do foreign firms. Again, the playing field is still level.
So a VAT is just a sales tax, with no competitive impact.
But a DBCFT isn't quite the same as a VAT.
With a VAT, a firm pays tax on the value of its sales, minus the cost of intermediate inputs – the goods it buys from other companies. With a DBCFT, firms similarly get to deduct the cost of intermediate inputs. But they also get to deduct the cost of factors of production, mostly labor but also land.
So one way to think of a DBCFT is as a VAT combined with a subsidy for employment of domestic factors of production. The VAT part has no competitive effect, but the subsidy part would lead to expanded domestic production if wages and exchange rates didn't change.
But of course wages and/or the exchange rate would, in fact, change. If the US went to a DBCFT, we should expect the dollar to rise by enough to wipe out any competitive advantage. After the currency adjustment, the trade effect should once again be nil. But there might be a lot of short-to-medium term financial consequences from a stronger dollar.
I think this is right, and I hope it clarifies matters. Oh, and no, none of this helps pay for the wall.
ad hominem, then I appeal to my authority let my shark out and think like me....poor pkPeter K. -> ilsm... , January 28, 2017 at 05:36 AMdubious equivalence
appeal to cognitive biases.
I suggest a referee!
There are no referees in the world of alternative facts. Might makes right.ilsm -> Peter K.... , January 28, 2017 at 09:55 AMThe last time I subsidized the NYT a Clinton was president.Peter K. -> ilsm... , January 28, 2017 at 10:17 AMI stopped when Krugman and the NYT became so rude and unfair about Bernie Sanders and his supporters.ilsm -> Peter K.... , January 28, 2017 at 01:01 PMFinally an authentic left alternative appears on the scene and they lose their minds.
DNC = RNC!Peter K. -> anne... , January 28, 2017 at 05:35 AMThe odd man is Trump!
" If the US went to a DBCFT, we should expect the dollar to rise by enough to wipe out any competitive advantage. After the currency adjustment, the trade effect should once again be nil. "This is the big lie the progressive neoliberals like Krugman and PGL are pushing. Why? To combat Trump's economic nationalism.
Trump told his advisers the tax is too complicates so it probably won't see the light of day.
He'll do the 20 percent import tax on Mexico to pay for the wall. Then he'll do something with China.
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Jan 28, 2017 | economistsview.typepad.com
Fred C. Dobbs January 28, 2017 at 01:06 PMPutin, Trump, in 'Positive' Call, Say Want to Cooperate in Syria: Kremlin https://nyti.ms/2jIzuKa
NYT - REUTERS - January 28, 2017MOSCOW - Russian President Vladimir Putin and U.S. President Donald Trump said in a "positive" phone call on Saturday they favored their two countries cooperating in Syria to defeat Islamic State, the Kremlin said in a statement.
In an eagerly awaited phone call, the first since Trump's inauguration, the two men stressed the importance of restoring economic ties between the two countries and of stabilizing relations, the Kremlin said.
U.S.-Russia relations had hit a post-Cold War low under Barack Obama and Trump has made clear he wants a rapprochement with Moscow if he can get along with Putin.
"Both sides demonstrated a mood for active, joint work on stabilizing and developing Russian-American cooperation," the Kremlin said in a statement, saying Putin and Trump had agreed to work on finding a possible time and place for a meeting.
There was no mention in the statement that the possibility of Trump easing sanctions on Moscow imposed over the Ukraine conflict had been mentioned, a subject widely expected to be raised.
The Kremlin said Trump and Putin had agreed to establish "partner-like cooperation" when it came to global issues such as Ukraine, Iran's nuclear program, tensions on the Korean peninsula and the Israeli-Arab conflict.
Trump's stance on Russia has been under intense scrutiny from critics who say he was elected with help from Russian intelligence, an allegation he denies. His detractors have also accused him of being too eager to make an ally of Putin.
For Putin, an easing of Western sanctions would be a major coup ahead of next year's presidential election as it would help the economy recover.
libezkova -> Fred C. Dobbs... , January 28, 2017 at 03:58 PM
Compare the coverage withhttps://www.rt.com/news/375416-putin-trump-telephone-call/
== quote ==
In their first phone conversation that lasted nearly an hour, Russian President Vladimir Putin and the new US President Donald Trump have outlined their intent to cooperate on issues ranging from defeating Islamic State to mending bilateral economic ties.
"Both sides expressed their readiness to make active joint efforts to stabilize and develop Russia-US cooperation on a constructive, equitable and mutually beneficial basis," as well as "build up partner cooperation" on a wide range of international issues, according to a Kremlin statement following their discussion.
The White House said that the "positive" conversation was "a significant start to improving the relationship between the United States and Russia that is in need of repair."
"Both President Trump and President Putin are hopeful that after today's call the two sides can move quickly to tackle terrorism and other important issues of mutual concern," the White House statement added.
After speaking with Chancellor Merkel for 45 minutes @POTUS is now onto his 3rd of 5 head of government calls, speaking w Russian Pres Putin pic.twitter.com/RPAWIgcO2C
- Sean Spicer (@PressSec) January 28, 2017Q"The Presidents have spoken in favor of establishing a real coordination between the US and Russian actions in order to defeat ISIS and other terrorist organizations in Syria," the Kremlin statement said.
The two leaders also discussed the Israeli-Palestinian conflict as well as Iran's nuclear program. "Major aspects of the Ukrainian crisis have been also touched upon," the Kremlin announced.
The leaders of Russia and the US have noted a need to restore economic ties "to stimulate" further development of the relationship between the nations. Putin and Trump also agreed to initiate a process to "work out possible dates and venue of their personal meeting."
Telephone conversation with US President Donald Trump https://t.co/mjp9Tta1sE
- President of Russia (@KremlinRussia_E) 28 января 2017 г.Q
During the conversation the Presidents also expressed their desire to "maintain regular personal contacts," the Kremlin statement said.The Kremlin said the US President asked his Russian counterpart "to wish the Russian people happiness and prosperity" on his behalf, adding Americans "have warm feelings towards Russia and its citizens." Putin said the feeling was "mutual," stressing that historically, the Russians and the Americans were close allies on more than one occasion.
Putin said "for over two centuries Russia has supported the United States, was its ally during the two world wars, and now sees the United States as a major partner in fighting international terrorism."
U.S. President Donald Trump © Mark MakelaTrump hopes to get along with Russia, 'knock the hell out of ISIS together'
On Friday, speaking at a joint briefing with British Prime Minister Theresa May, Trump said he hoped he would have a "fantastic relationship" with Russia's president, but understands that might not happen. Trump has said previously that he would welcome Moscow's involvement in a joint effort to battle Islamic State (IS, formerly ISIS/ISIL).
"I don't know Putin, but if we can get along with Russia that's a great thing. It's good for Russia; it's good for us; we go out together and knock the hell out of ISIS, because that's a real sickness," he said in an interview with Fox News.
Moscow, for its part, has repeatedly suggested fostering closer cooperation between the Russian and US Air Forces in Syria, but blamed the previous Obama administration for failing to adequately respond to its entreaties. Relations between the two countries have been marred in recent years over various issues, including divisions on the Syrian crisis and allegations of Russian meddling into the US elections in November of 2016. US sanctions against Russia - imposed over the crisis in Ukraine - was one of the issues expected to be on the agenda of the Trump-Putin exchange. However, the issue was not mentioned in the Kremlin's statement summarizing the conversation.
Citing an unnamed source in the White House, a researcher at the Atlantic Council analytical center, Fabrice Pothier, wrote in a Twitter post on Thursday that the Trump administration "has an executive order ready" to lift the restrictions on Moscow, but Trump said on Friday that it is "very early to be talking about that."
U.S. House of Representatives in Washington © Gary Cameron Top Dem to propose bill to hamstring Trump in relaxing sanctions on Russia with GOP wingmen
However, earlier in January, Trump said that he would consider lifting restrictions if Moscow cooperates with Washington on certain issues, such as nuclear arms reduction.
"They have sanctions on Russia - let's see if we can make some good deals with Russia. For one thing, I think nuclear weapons should be way down and reduced very substantially, that's part of it," Trump was quoted as saying by the Times.
Trump also said in one of his Tweets that "having a good relationship with Russia is a good thing, not a bad thing," warning only "fools" would think otherwise. However, several US Senators proposed a bill last week that would make it impossible for the US President to lift restrictions without congressional approval.
Russia has been cautious about the prospects for a potential "reset" with the US under the new administration. Russian Foreign Minister Lavrov said the country has no "naive expectations" and is under no "illusions."
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Jan 28, 2017 | economistsview.typepad.com
DeDude -> Fred C. Dobbs... , January 28, 2017 at 07:08 AMYes the interesting difference between Trump and classic GOPsters is that they always have been careful with the language they use. They will say something that (to the average american) sounds like a promise of one thing but in reality doesn't actually promise that thing. When they fail to deliver, they can defend themselves as having not lied (or failed on their promises). Trump is a condo salesman, he will say whatever it takes to get the contract signed, the fact that he lied is no big deal because by the time the marks find out, he has gotten all their money.Peter K. -> DeDude... , January 28, 2017 at 09:59 AMWell if Trump is just a plain ole Republican then the Republicans have nothing to worry about.libezkova -> DeDude... , January 28, 2017 at 01:25 PMRepublicans have been about trickle down economics. No government involvement. In fact deregulation. Tax cuts for the rich period.
Trump is talking about the government involved. In currency policy. In infrastructure. In his rhetoric. We'll see what happens when the tire hits the road.
"Yes the interesting difference between Trump and classic GOPsters is that they always have been careful with the language they use."An interesting observation. Thank you !
So classic GOPsters try to hide "trickle down economics" under a layer of Doublespeak...
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Jan 26, 2017 | economistsview.typepad.com
Peter K. : January 26, 2017 at 07:28 AMPeter K. -> pgl... , January 26, 2017 at 08:37 AMSanjait -> Peter K....
Hillary proposed around $1.8 trillion / 10 years in total new spending programs as of early last year, then added more throughout the campaign season.
We've talked about this a number of times before and yet you insist on pretending that infrastructural spending is the only spending because your whole backward ideology is predicated on lying about what Hillary Clinton actually proposed. Seek mental help and stop being such a mendacious twat.
Reply Wednesday, January 25, 2017 at 07:35 PM
Seems like Sanjait is the mendacious twat who gets really angry when proven wrong. He can't argue the facts, like other centrists, so they try to shout you down.
Clinton's bad economics - which is neoliberal economics - is bad politics. If you google Hillary infrastructure spending you get:
https://www.hillaryclinton.com/issues/fixing-americas-infrastructure/
"That's why Hillary Clinton has announced a $275 billion, five-year plan to rebuild our infrastructure-and put Americans to work in the process"
Trump won the election partly on his promises to rebuild the infrastructure bigly. The Senate Democrats have upped the ante with a trillion dollar 10 year plan. That's twice as much as Hillary's plan.
They know its good politics. The Post article says Trump was thinking a trillion (via tax incentives and private-public partnerships) but his friend is quoted as saying more like $500 billion over ten years - Hillary sized.
Why wasn't Hillary's plan larger? Read Krugman's blog post from yesterday.
http://krugman.blogs.nytimes.com/2017/01/25/reagan-trump-and-manufacturing/
Too much fiscal expansion causes the Fed to raise rates and the dollar to appreciate. Did Hillary or her economics surrogates ever explain this? No. Alan Blinder did say that Hillary's fiscal plan wouldn't be large enough to cause the Fed to alter it's rate hike path.
Krugman says fiscal deficits near full employment causes interest rates to rise, like it's an economic law.
He's missing the middle factor, inflation. Fiscal deficits cause inflation which cause the Fed to raise raise rates.
Oh yeah he left out the Fed also.
I repeated the story about Clinton dropping his middle class spending bill in favor of deficit reduction but of course the neoliberals ignore it.
J.W. Mason:
http://jwmason.org/slackwire/what-does-crowding-out-even-mean/
"The master parable for this story is the 1990s, when the Clinton administration came in with big plans for stimulus, only to be slapped down by Alan Greenspan, who warned that any increase in public spending would be offset by a contractionary shift by the federal reserve. But once Clinton made the walk to Canossa and embraced deficit reduction, Greenspan's fed rewarded him with low rates, substituting private investment in equal measure for the foregone public spending. In the current contest, this means: Any increase in federal borrowing will be offset one for one by a fall in private investment - because the Fed will raise rates enough to make it happen."
Sanjait wasn't even aware that the Fed has switched over to the corridor system and will use IOER to help control inflation as it raises rates. He assumed Dani Rodrik was a woman.
And he presumes to go around and call people names about technical issues that can be debated rationally with reference to the facts?
Peter K. -> Peter K.... , January 26, 2017 at 08:39 AM... ... ...
https://www.dissentmagazine.org/article/the-legacy-of-the-clinton-bubble
"In 1992, Bill Clinton campaigned on the promise of a short-term stimulus package. But soon after being elected, he met privately with Alan Greenspan, chair of the Federal Reserve Board, and soon accepted what became known as "the financial markets strategy." It was a strategy of placating financial markets. The stimulus package was sacrificed, taxes were raised, spending was cut-all in a futile effort to keep long-term interest rates from rising, and all of which helped the Democrats lose their majority in the House. In fact, the defeat of the stimulus package set off a sharp decline in Clinton's public approval ratings from which his presidency would never recover.
It is easy to forget that Clinton had other alternatives. In 1993, Democrats in Congress were attempting to rein in the Federal Reserve by making it more accountable and transparent. Those efforts were led by the chair of the House Banking Committee, the late Henry B. Gonzalez, who warned that the Fed was creating a giant casino economy, a house of cards, a "monstrous bubble." But such calls for regulation and transparency fell on deaf ears in the Clinton White House and Treasury.
The pattern was set early. The Federal Reserve became increasingly independent of elected branches and more captive of private financial interests. This was seen as "sound economics" and necessary to keep inflation low. Yet the Federal Reserve's autonomy left it a captive of a financial constituency it could no longer control or regulate. Instead, the Fed would rely on one very blunt policy instrument, its authority to set short-term interest rates. As a result of such an active monetary policy, the nation's fiscal policy was constrained, public investment declined, critical infrastructure needs were ignored. Moreover, the Fed's stop-and-go interest-rate policy encouraged the growth of a bubble economy in housing, credit, and currency markets.
Perhaps the biggest of these bubbles was the inflated U.S. dollar, one of several troubling consequences of the Clinton administration's free-trade policies. Although Clinton spoke from the left on trade issues, he governed from the right and ignored the need for any minimum floor on labor, human rights, or environmental standards in trade agreements. After pushing the North American Free Trade Agreement (NAFTA) through Congress on the strength of Republican votes, Clinton paved the way for China's entry into the World Trade Organization (WTO) only a few years after China's bloody crackdown on pro-democracy demonstrators at Tiananmen Square in Beijing.
During Clinton's eight years in office, the U.S. current account deficit, the broadest measure of trade competitiveness, increased fivefold, from $84 billion to $415 billion. The trade deficit increased most dramatically at the end of the Clinton years. In 1999, the U.S. merchandise trade deficit surpassed $338 billion, a 53 percent increase from $220 billion in 1998.
In early March 2000, Greenspan warned that the current account deficit could only be financed by "ever-larger portfolio and direct foreign investments in the United States, an outcome that cannot continue without limit." The needed capital inflows did continue for nearly eight Bush years. But it was inevitable that the inflows would not be sustained and the dollar would drop. Perhaps the singular success of Bill Clinton was to hand the hot potato to another president before the asset price bubble went bust."
http://articles.latimes.com/1994-10-30/opinion/op-56424_1_deficit-reductionPeter K. -> Peter K.... , January 26, 2017 at 08:44 AM"The downward spiral began with Clinton's 1993 abandonment of his original threefold economic program--deficit reduction, economic stimulus and government investment in the nation's physical and human infrastructure. Facing opposition to the last two, Clinton abandoned them and focused on deficit reduction. This painted him into a corner that makes it near impossible to achieve any programmatic progress in this term--and so makes unlikely any hope of a second.
The 1993 story has been cast as the victory of the "deficit hawks," sober economists intent on reducing the gap between federal spending and tax revenues, over the purely political advocates of spending on the investment programs. But the common perception--that the "hawks" represented the responsible economic community, as against the irresponsible politicians--is not true.
Almost every one of the economists in the Clinton Administration had earlier espoused economic policies where stimulus took priority over deficit control. Rightly frightened by the mounting deficits of the Reagan-Bush years, however, by the 1990s they had abandoned their roots for Federal Reserve Chairman Alan Greenspan's "responsible" economics--where reduction of the deficit and fear of inflation were the operative factors."
http://www.pbs.org/wgbh/americanexperience/features/interview/clinton-reich/Peter K. -> Peter K.... , January 26, 2017 at 08:47 AM"Now, the irony is that Wall Street had never squawked when the first George Bush was spending like gangbusters or when Ronald Reagan was spending like mad. But the thought was that a Democratic administration has to sort of prove its chops, prove itself capable of being much more fiscally responsible than its Republican predecessors because it's a Democratic administration. Well, to us, to me, to those on my side of the debate, that sounded absurd. I mean, yes, let's satisfy the bond traders to some extent. Obviously, we have to get the deficit down somewhat. But let's not sacrifice the Clinton agenda.
....
Reich: The desire to do it all, to have the Clinton priorities and yet satisfy Wall Street led to this extraordinary effort to go line by line by line through the budget and to try to extract enough. And then the question was, "Well, how much is enough?" Do you bring the budget deficit down from five percent of the gross domestic product down to two and a half percent? Which is, basically, cutting the deficit by half. That's what many of us said we're perfectly fine to do.
Others, who were the deficit hawks, said, "No, no, no, no. You actually have to reduce the absolute amount of the deficit by half. That was your campaign promise, that's what we need to do. That's the only way we're going to satisfy Wall Street."
And in the background, Alan Greenspan, as head of the Fed, was whispering in ears -- Lloyd Bentsen's ear, and I think also the President's ear, "If you don't get this budget deficit down, I am not going to cut short-term interest rates. And if I don't cut short-term interest rates, by the time you face the next election in 1996, this economy is not going to be growing buoyantly, and you may not be re-elected." That's called extortion."
https://www.jacobinmag.com/2011/08/the-waning-of-the-bond-market-vigilantes/The Waning of the Bond Market Vigilantes
by Peter Frase
It wasn't so long ago that American politicians lived in fear of the bond market. During the Clinton administration, James Carville famously said that "I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody." That phenomenon gave rise to the concept of the "bond market vigilantes," which Krugman loves to employ.
But today, the bond market vigilantes are not much in evidence. Or rather, they are in evidence, but they suddenly seem unable to have much of an impact on US fiscal policy. Bill Gross, of the ludicrously enormous bond fund PIMCO, is running around screaming about the need for more borrowing and more stimulus. But he has no effect, because it turns out that while bond investors have powerful ways of constraining US government borrowing, they have only indirect and weak means of expanding it.
The United States has a large debt that is routinely rolled over, and it generally runs a budget deficit (Clinton interregnum aside). If bond investors start demanding higher interest rates on government debts, this immediately raises the cost of borrowing for the US government. This, in turn, has knock-on effects throughout the economy, as interest rates rise for everyone and economic activity is thereby constrained. For these reasons, the US government has powerful incentives to avoid doing things that cause the interest rate on treasuries to rise.
Today, however, we find ourselves in the opposite situation: what the bond market seems to want most of all is for the US to borrow more money and stimulate the economy. That's the best explanation for the incredibly low yield on Treasury bonds, which is negative in real terms over some time periods. And yet the US is not borrowing more; instead both parties are demanding insane policies that will cause a second recession, ostensibly based on fallacious notions about the magical effects of budget cutting and a nonsensical conception of the relationship between government and household finances.
The problem here is that the power of the bond market is asymmetrical. When the interest rate on Treasuries go up, this immediately makes all of the government's activities more expensive, and hence forces changes in fiscal planning. But when the interest rate falls to near zero, this only presents an opportunity for expanded borrowing, an opportunity that can easily be thrown away if the political system is too insane and dysfunctional to take advantage of it.
Hence the bond vigilantes sit on the sidelines, impotent and hopeless. Just like the rest of us.
...
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Jan 26, 2017 | economistsview.typepad.com
jonny bakho : , January 26, 2017 at 05:15 AMDean Baker has some interesting "Free Market" proposals that will make elitist libertarians sputter.jonny bakho -> jonny bakho... , January 26, 2017 at 05:18 AM
He suggests a vacant property tax, which I see is a good idea, especially in dense urban areas. It takes our city years to get abandoned houses condemned or landlord compliance through the legal system.
I would take it one step further and drastically raise taxes on parking lots. I would not allow religious organizations to exempt their parking lots from this tax. Other buildings, ok, but churches should not be allowed to destroy the tax base and neighborhoods by replacing buildings with parking lots.I would say that Dean Bakers proposals fit with DeLong's call for better economic policy:DrDick -> jonny bakho... , January 26, 2017 at 07:17 AMFrom his comments
"I would note that the "trade deals" did not create international trade. If you want to say that we should have no international trade, be my guest--but Donald Trump will not agree with you. The problem is that he is saying that getting rid of NAFTA and getting tough with China will bring all those good manufacturing jobs back. And that is completely false.
As I say, technology has carried us down from 30% to 12%--and we do not want to hinder that--lousy macro policies have gotten us down from 12% to 9%, and "trade deals" have maybe gotten us down from 9% to 8.6%. If you don't want to hear that, I can't make you..."
I would note that the "trade deals" did not create international trade. If you want to say that we should have no international trade, be my guest--but Donald Trump will not agree with you. The problem is that he is saying that getting rid of NAFTA and getting tough with China will bring all those good manufacturing jobs back. And that is completely false.
Meh. I generally really like Baker, but these are pretty weak tea. I do agree with him that the AMA monopoly needs to be broken.RC AKA Darryl, Ron -> DrDick... , January 26, 2017 at 07:40 AMDean Baker writing about market based reforms for publication by AEI is not the pro-labor Dean Baker that we have come to love and honor. It gets him exposure that he would otherwise not have though.-->
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Jan 26, 2017 | economistsview.typepad.com
RGC : Reply Thursday, January 26, 2017 at 04:45 AM Upward mobility declines sharply as the rich make off with the growthPosted on Thursday, January 26, 2017 by bill mitchell
Late last year (December 2016), an interesting academic research paper was released by the National Bureau of Economic Research – The Fading American Dream: Trends in Absolute Income Mobility Since 1940 – which provides stark evidence of the way in which this neo-liberal era is panning out and suppressing the opportunities for the least advantaged.
One of the constantly repeating claims made by conservatives is that if governments run deficits they are really undermining the future for their children and their children. The claim is that while the current generation is living it up (deficits are tantamount in this narrative to living a profligate existence), the next generations will have to pay for it via higher taxes and reduced services. It is a bizarre argument given that each generation chooses its own tax burden and we cannot transfer real resources through time. There is truth in the argument that if the current generation imposes terminal damage to our natural environment then we are diminishing the prospects for the future. But that is not the point that the neo-liberals make. Indeed, there is a strong positive relationship between conservative views of fiscal policy (deficits) and the propensity to engage in climate change denial.
Recently released research is now showing that around 50 per cent of American children born in 1980 have incomes higher than their parents compared to 90 per cent born in 1940. The so-called 'American Dream' is looking like a nightmare. Other research has shown that the bottom 50 per cent of the US income distribution have not enjoyed any of the growth since 1980 and that the top-end-of-town has increased its share of income from 12 per cent in 1980s to 20 per cent in 2014.
These shifts are the result of deliberate policy changes and inaction by governments, increasingly co-opted by the rich to serve their interests at the expense of the broader societal well-being. Revolutions have occurred for less.
It was considered the norm of human progress that each generation would leave the next generation better off. As parents we would ensure our children were (collectively) better off.
In his 2012 study of cultural history, The American Dream, Lawrence Samuel reprised the term introduced in 1931 by James Truslow Adams (in his The Epic of America). The two books should be read together to understand the evolution of the thinking about an American identity.
Samuel reflected on the fact that "that the term 'American Dream' was created in the darkest days of the Great Depression was all the more interesting given that many feared it no longer existed".
Times were so bad for many during that period.
Samuel published his book during the GFC, the worst downturn since the Great Depression. He considers there were six eras since the Great Depression marked by different characteristics and circumstance.
But binding the social progress that defines the 'American Dream' was, in the words of the NBER authors the "ideal that children have a higher standard of living than their parents".
We think of our own progress relative to that of our parents.
In recent history, the parents of the baby boomers had endured the Great Depression with it mass unemployment and rising poverty rates, then the Second World War and its aftermath.
Reflecting on that experience, this generation worked through government to ensure there was full employment, broad rights of citizenship with respect to income support, improved public services and reduced income inequality through income redistribution.
Wages growth was strong and proportional with productivity growth and mass education and public health improvements made obvious positive contributions to the growing well-being.
The 1950s and 1960s were not nirvana, but they were a damn site better than the two decades before that and the many before those.
Full employment combined with mass education, in particular, were considered an essential part of the quest for upward mobility
Previous research has shown that US children (a result that transfers across most nations) are pretty much doomed from the start as a result of who their parents are and the resources the parents have at their disposal.
I have written about this before. Please see – Parents are advance secret agents for the class society.
The title of that blog came from the work of Dutch economist Jan Pen, who wrote in his 1971 book – Income Distribution – that public policy had to target disadvantaged children in low-income neighbourhoods at an early age if governments wanted to change the patterns of social and income mobility.
The message from Pen was that the damage was done by the time the child reached their teenage years. While the later stages of Capitalism has found new ways to reinforce the elites which support the continuation of its exploitation and surplus labour appropriation (for example, deregulation, suppression of trade unions, real wage suppression, fiscal austerity), it remains that class differentials, which have always restricted upward mobility.
This also means that as fiscal austerity has further pushed people towards to the bottom of the income distribution that increasing numbers of children will inherit the disadvantage of their parents and this inheritance becomes a vicious circle of poverty and alienation.
In America, research has clearly shown that it is socioeconomic status rather than race which "largely explains gaps that appear to be due to race" (see cited blog for sources).
It is very obvious now that the bias towards fiscal austerity, which has been the hallmark of the neo-liberal era has increased inequality and suppressed dynamic forces in labour markets that promote upward mobility.
By failing to quickly end the most recent downturn (GFC) governments have allowed dynamic forces to multiply which reinforce disadvantage and suppress upward mobility.
While unemployment has been high (and remains high in most nations), the great American economist Arthur Okun considered it to be the 'Tip of the Iceberg'.The point is that the costs of recession and the resulting persistent unemployment extend well beyond the loss of jobs. Productivity is lower, participation rates are lower, the quality of work suffers and real wages typically fall.
The facts associated with the current downturn are consistent with this general model.
Within this context, Okun outlined his upgrading hypothesis (in the 1960s and 1970s) and the related high-pressure economy model, which provided a coherent rationale for Keynesian demand-stimulus policy positions.
Two references of relevance are Okun, A.M. (1973) 'Upward Mobility in a High-Pressure Economy', Brookings Papers on Economic Activity, 1: 207-252 and Okun, A.M. (1983) Economics for Policymaking, Cambridge, MIT Press.
Arthur Okun (1983: 171) believed that:
unemployment was merely the tip of the iceberg that forms in a cold economy. The difference between unemployment rates of 5 percent and 4 percent extends far beyond the creation of jobs for 1 percent of the labor force. The submerged part of the iceberg includes (a) additional jobs for people who do not actively seek work in a slack labor market but nonetheless take jobs when they become available; (b) a longer workweek reflecting less part-time and more overtime employment; and (c) extra productivity – more output per man-hour – from fuller and more efficient use of labor and capital.
The positive side of this thinking is that disadvantaged groups in the economy were considered to achieve upward mobility as a result of higher economic activity. The saying that was attached to this line of reasoning was "all boats (large or small) rise on the high tide".
Okun's (1973) results are summarised as follows:
The most cyclically sensitive industries have large employment gaps, and were dominated by prime-age males, offered high-paying jobs, offered other remuneration characteristics (fringes) which encouraged long-term attachments between employers and employees, and displayed above-average output per person hour.
In demographic terms, when the employment gap is closed in aggregate, prime-age males exit low-paying industries and take jobs in other higher paying sectors and their jobs are taken mainly by young people.
In the advantaged industries, adult males gain large numbers of jobs but less than would occur if the demographic composition of industry employment remained unchanged following the gap closure. As a consequence, other demographic groups enter these 'good' jobs.
The demographic composition of industry employment is cyclically sensitive. The shift effects are in total estimated (in 1970) to be of the same magnitude as the scale effects (the proportional increases in employment across demographic groups assuming constant shares).
This indicates that a large number of labour market changes (the shifts) are generally of the ladder climbing type within demographic groups from low-pay to higher-pay industries.
So prior to the neo-liberal onslaught and during the period that governments were cogniscant of their responsibilities to maintain full employment (and actively used fiscal and monetary policy to attack high unemployment relatively quickly), a recovery reversed the damage caused by the recession.
The evidence supported the proposition that when the economy is maintained at high levels of employment, workers in low paying sectors (or occupations) also receive income boosts because employers seeking to meet their strong labour demand offer employment and training opportunities to the most disadvantaged in the population. If the economy falters, these groups are the most severely hit in terms of lost income opportunities.
The full employment era (roughly 1945 to the late 1970s) to some extent, therefore, eroded the worst effects of the class differences that we discussed earlier.
Which is one reason why the conservatives had to take control of the state, which had been acting as a mediator in the class struggle – to encourage upward mobility.
The onslaught against full employment and the Welfare State (the hallmark of the social democratic era) began in the early 1970s as well-funded right-wing (so-called 'free market') think tanks started to publish a barrage of propaganda, infiltrated academic institutions, took over the mainstream media, and, even compromised judicial processes (for example, the appointment of Lewis Powell to the US Supreme Court).The upshot has been that once full employment was abandoned and governments adopted a chronic bias towards fiscal austerity (the belief that fiscal deficits are intrinsically bad), the upgrading benefits that used to accompany growth have been hijacked by the rich and the vast majority of the population now miss out.
In part, this is due to the increased casualisation of the labour market, the suppression of real wages growth, the attack on trade unions, and the shift away from high productivity job creation towards the FIRE sector, which is a largely unproductive sector.
The neo-liberal attack on the role of government in ensuring policy advances the well-being of all has changed the way the distributional system operates – with workers now finding it harder to gain access to real income growth despite contributing more per hour (productivity growth stronger).
Under these circumstances, the old class screening and channelling that the schooling system has provided for the Capitalist system is intensified and inequality accelerates.We are now starting to see the empirical results of this as cohort studies permit generational comparisons. Shedding light on what has been happening between generations is the task of the NBER paper cited in the Introduction.
The paper by a host of US academics (Raj Chetty, David Grusky, Maximilian Hell, Nathaniel Hendren. Robert Manduca and Jimmy Narang) asks two questions:
First, what fraction of children earn more than their parents today? Second, how have rates of absolute mobility changed over time?Absolute income mobility is defined as the:
the fraction of children earning or consuming more than their parents.
They seek to answer these questions using "historical data from the Census and CPS cross-sections with panel data for recent birth cohorts from de-identified tax records" that allows them to uniquely bind parent and children incomes.
I will leave it to your interest to explore the techniques they employed. They are very innovative.
Basically they:
- "measure income in pre-tax dollars at the household level when parents and children are approximately thirty years old, adjusting for inflation "
- "estimate the fraction of children who earn more than their parents in each birth cohort "
The headline findings are:
- "we find that rates of absolute upward income mobility in the United States have fallen sharply since 1940".
- "the fraction of children earning more than their parents fell from 92% in the 1940 birth cohort to 50% in the 1984 birth cohort."
- "Rates of absolute mobility fell the most for children with parents in the middle class."
- The finding of a decline in absolute majority is robust across different dimensions (pre-tax, post-transfer; age of child when measured; regions, gender, impacts of immigration, etc).
- "Absolute mobility fell in all 50 states between the 1940 and 1980 cohorts, although the rate of decline varied, with the largest declines concentrated in states in the industrial Midwest states such as Michigan and Illinois."
These are Trump's 'rust belts' that he appealed to during the Presidential election.
The following graph is one of many they produce (each offering a different dimension, for example, wage income, family income etc) and "plots the fraction of children earning more than their parents ('absolute mobility') by average by child birth cohort."
So you interpret it as saying that 90 per cent of children born in 1940 will on average have incomes higher than their parents, whereas, only 50 per cent of children born in 1980 will on average have incomes higher than their parents, and so on.
The authors ask: "Why have rates of upward income mobility fallen so sharply over the past half century?"
They offer the following possible reasons:
There have been two important macroeconomic trends that have affected the incomes of children born in the 1980s relative to those born in the 1940s: lower Gross Domestic Product (GDP) growth rates and greater inequality in the distribution of growth
They reject the first, saying that "the slowdown in aggregate economic growth in recent decades, although important, does not explain most of the observed decline in absolute mobility."
Their counterfactual analysis shows that:
increasing GDP growth without changing the current distribution of growth would have modest effects on rates of absolute mobility.
The problem is that:
a large fraction of GDP goes to a small number of high income earners today, higher GDP growth does not substantially increase the number of children who earn more than their parents.
The key takeaway of their research is this:
The key point is that reviving the "American Dream" of high rates of absolute mobility would require more broadly shared economic growth rather than just higher GDP growth rates.
This research is consistent with studies in other nations. For example, see the analysis in my blog – Policy changes needed to arrest decline in fortunes for low-pay British workers.
The point is that the neo-liberal era with widening income inequality, entrenched labour underutilisation, suppressed wages growth and continued attacks on income support systems is producing an unsustainable society.
Eventually, there will be a counterattack as the middle class prospects continue to be eroded. While it might not come from the current generation, the children who are no coming into adulthood have been dealt a very poor hand by their parents.
If the NBER research is correct, then 50 per cent of Americans born in 1980 (now in their mid-1930) are enjoying absolute mobility (relative to their parents), which brings into question the concept of the 'American Dream', a cultural device to maintain social stability and endeavour.
It should not be forgotten that the parents themselves are under attack from this dysfunctional system and the prospects of growing intergenerational wealth through inheritance is becoming a faded reality for many families.
Another perspective is offered in this paper also released in December 2016 by French economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman – : Distributional National Accounts: Methods and Estimates for the United States.
The paper examines the "growth rates for each quantile of the income distribution consistent with macroeconomic growth" in the US since 1913.
I will look at it more closely another day but its major findings are that:
- "a sharp divergence in the growth experienced by the bottom 50% versus the rest of the economy."
- "The average pre-tax income of the bottom 50% of adults has stagnated since 1980 at about $16,000 per adult (in constant 2014 dollars, using the national income deflator), while average national income per adult has grown by 60% to $64,500 in 2014."
- "As a result, the bottom 50% income share has collapsed from about 20% in 1980 to 12% in 2014."
- "In the meantime, the average pre-tax income of top 1% adults rose from $420,000 to about $1.3 million, and their income share increased from about 12% in the early 1980s to 20% in 2014."
- "The two groups have essentially switched their income shares, with 8 points of national income transferred from the bottom 50% to the top 1%. The top 1% income share is now almost twice as large as the bottom 50% share, a group that is by definition 50 times more numerous. In 1980, top 1% adults earned on average 27 times more than bottom 50% adults before tax while today they earn 81 times more."
- "government redistribution has offset only a small fraction of the increase in pre-tax inequality."
- "the upsurge of top incomes has mostly been a capital-driven phenomenon since the late 1990s. There is a widespread view that rising income inequality mostly owes to booming wages at the top end, i.e., a rise of the "working rich." Our results confirm that this view is correct from the 1970s to the 1990s. But in contrast to earlier decades, the increase in income concentration over the last fifteen years owes to a boom in the income from equity and bonds at the top. The working rich are either turning into or being replaced by rentiers. Top earners became younger in the 1980s and 1990s but have been growing older since then."
So beware the middle-class. Your children are already losing out but neo-liberal is eating into the parental well-being as well as the financial capitalists prosper.
Conclusion
This situation is obviously unsustainable.
It is time for the Left to stand up and lead the way out of this mess.
Growth and redistribution is needed. Governments have to take on the top-end-of-town. They can start by introducing employment guarantees that provide decent pay (with social wage additions) to anyone, thus eliminating the income insecurity.
Then some serious regulation is required to rein in the financial sector (I would basically eliminate much of it).
The Left are scared to say anything because, in part, their leadership is compromised by relationships with the financial capitalists (for example, the revelations about Hillary Clinton in the leaked E-mails), and, also, because they have a massive inferiority complex when discussing macroeconomics.
They think if they argue that fiscal deficits are usually desirable and should be continuous they will look irresponsible. Well that is because they have allowed the public to be indoctrinated into these erroneous views.
The Left has to launch a massive educational onslaught to redress this knowledge gap as they set about reversing the ravages of neo-liberalism.
My blog is just a little pixel in the phalanx!
That is enough for today!
http://bilbo.economicoutlook.net/blog/?p=35255#more-35255
New Deal democrat -> RGC... , January 26, 2017 at 05:19 AMNice article, thanks for posting this.reason -> New Deal democrat... , January 26, 2017 at 06:48 AMA brief comment. First, Okun was one smart cookie.
Shorter and nerdier Okun:
1. Wage growth increases as the U6 underemployment rate falls under 10%.
2. As the economy heats up, U6 falls faster than U3, meaning an increasing share of marginal workers get jobs. These marginal workers are disproportionately minority groups.
3. Therefore, full employment tends to increase equality.
4. Unions were good vehicles to keep the labor share high enough that full or nearly full employment happened far more often.
New Deal democrat -> reason ... , January 26, 2017 at 06:55 AM"Unions were good vehicles to keep the labor share high enough that full or nearly full employment happened far more often."If this is true, isn't a bit of a paradox, since unions are a monopoly and in theory monopolies increase price by restricting supply? It could be true however, that the POLITICAL power of unions meant that full employment was regarded as a higher priority than inflation. (Note unions very much prioritize the interests of workers, even to some extent to the detriment of other poorer sections of the community. Could it have been that this caused a backlash in a western world that has been steadily getting older?)
General note, I'm perhaps an oddity on the left in that I'm not convinced that more union power is necessarily the way forward, no matter how effective it was in the past. I don't see the requirements of the future world as being the same as the requirements of the past.
I agree that more union power might not be the primary way forward, but in the absence of other effective proposals, it certainly should be one lever.DrDick -> reason ... , January 26, 2017 at 07:13 AMAnd yes, it is a paradox. On a micro scale, unions may act to the detriment of other potential workers, but on the macro scale, the effects on full employment may well outweigh that drawback.
Union power has been the key to worker power and increasing worker share for everyone, even nonunion workers, for a century. I see no reason why that should not be true now. Indeed, we need to expand union protections to a lot of workers who have not traditionally been covered (IT workers, low level professionals, etc.).RC AKA Darryl, Ron -> reason ... , January 26, 2017 at 07:14 AMUnions gave us higher wages for labor. Higher wages for labor gave us more spending. More spending gave us more jobs and lower unemployment. More jobs and lower unemployment AND unions gave us higher wages for labor. It is that old virtuous cycle thing until capital and management start pulling at a thread.Peter K. -> reason ... , January 26, 2017 at 07:43 AM"General note, I'm perhaps an oddity on the left in that I'm not convinced that more union power is necessarily the way forward, no matter how effective it was in the past. I don't see the requirements of the future world as being the same as the requirements of the past."Peter K. -> Peter K.... , January 26, 2017 at 07:44 AMI completely disagree and the acceptance of liberals of the destruction of the union movement is a primary reason why things have gone so badly.
Does Krugman ever talk about unions? No.
Does DeLong? No.
What did Obama do for unions?
Denis Drew is right. Maybe it's true that unions are never coming back but then if so we're in big trouble. It will take some sort of calamity to set things right.
Look at Senate Republicans blocking Supreme Court nominations.
If the democratic socialist ever got significant power you could expect a revolt by finance and big business and the one percent.
I've always imagined it would take a general strike to overcome such a capital strike.
My god, look at Canada. They still have unions. Same with Germany.
This fatalism regarding unions is one reason why things are so bad. Unions helped get out the vote among many other things.
One just needs to study labor history. Of course the neoliberals may be right that unions are of the past, but I suspect they're engaged in motivated reasoning.
You can unionize all jobs that can't be offshored.
I suspect the anti-union sentiment as expressed by reason - and many other well-meaning types - is the result of decades of pro-business anti-union propaganda.
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Jan 26, 2017 | economistsview.typepad.com
ken melvin : , January 25, 2017 at 01:27 PMFinancialization from Wiki:libezkova -> ken melvin... , January 25, 2017 at 09:35 PMGreta Krippner of the University of Michigan writes that financialization refers to a "pattern of accumulation in which profit making occurs increasingly through financial channels rather than through trade and commodity production." In the introduction to the 2005 book Financialization and the World Economy, editor Gerald A. Epstein wrote that some scholars have insisted on a much narrower use of the term: the ascendancy of shareholder value as a mode of corporate governance, or the growing dominance of capital market financial systems over bank-based financial systems. Pierre-Yves Gomez and Harry Korine, in their 2008 book Entrepreneurs and Democracy: A Political Theory of Corporate Governance, have identified a long-term trend in the evolution of corporate governance of large corporations and have shown that financialization is one step in this process.
Oleg Komlik asserts that financialization is a state project, stressing that:[2]
"Financialization is a key feature of neoliberalism. It refers to the capturing impact of financial markets, institutions, actors, instruments and logics on the real economy, households and daily life. Essentially it has significant implications for the broader patterns and functioning of a (inter)national economy, transforming its fabrics and modificating the mutual embeddedness of state-economy-society."
Michael Hudson described financialization as "a lapse back into the pre-industrial usury and rent economy of European feudalism" in a 2003 interview:[3]
"only debts grew exponentially, year after year, and they do so inexorably, even when–indeed, especially when–the economy slows down and its companies and people fall below break-even levels. As their debts grow, they siphon off the economic surplus for debt service (...) The problem is that the financial sector's receipts are not turned into fixed capital formation to increase output. They build up increasingly on the opposite side of the balance sheet, as new loans, that is, debts and new claims on society's output and income.
[Companies] are not able to invest in new physical capital equipment or buildings because they are obliged to use their operating revenue to pay their bankers and bondholders, as well as junk-bond holders. This is what I mean when I say that the economy is becoming financialized. Its aim is not to provide tangible capital formation or rising living standards, but to generate interest, financial fees for underwriting mergers and acquisitions, and capital gains that accrue mainly to insiders, headed by upper management and large financial institutions. The upshot is that the traditional business cycle has been overshadowed by a secular increase in debt. Instead of labor earning more, hourly earnings have declined in real terms. There has been a drop in net disposable income after paying taxes and withholding "forced saving" for social Security and medical insurance, pension-fund contributions and–most serious of all–debt service on credit cards, bank loans, mortgage loans, student loans, auto loans, home insurance premiums, life insurance, private medical insurance and other FIRE-sector charges. ... This diverts spending away from goods and services.
....
libezkova : , January 25, 2017 at 05:00 PM"Financialization is a key feature of neoliberalism. It refers to the capturing impact of financial markets, institutions, actors, instruments and logics on the real economy, households and daily life."That's why neoliberalism is often called "casino capitalism"
Meanwhile neoliberal "masters of the universe" are buying private jets and create plans to evacuate families to NZ in case pitchforks arrive to their residencieshttp://www.newyorker.com/magazine/2017/01/30/doomsday-prep-for-the-super-rich
== quote ==
By January, 2015, Johnson was sounding the alarm: the tensions produced by acute income inequality were becoming so pronounced that some of the world's wealthiest people were taking steps to protect themselves. At the World Economic Forum in Davos, Switzerland, Johnson told the audience, "I know hedge-fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway."
Johnson wishes that the wealthy would adopt a greater "spirit of stewardship," an openness to policy change that could include, for instance, a more aggressive tax on inheritance. "Twenty-five hedge-fund managers make more money than all of the kindergarten teachers in America combined," he said.
"Being one of those twenty-five doesn't feel good. I think they've developed a heightened sensitivity." The gap is widening further. In December, the National Bureau of Economic Research published a new analysis, by the economists Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, which found that half of American adults have been "completely shut off from economic growth since the 1970s."
Approximately a hundred and seventeen million people earn, on average, the same income that they did in 1980, while the typical income for the top one per cent has nearly tripled. That gap is comparable to the gap between average incomes in the U.S. and the Democratic Republic of Congo, the authors wrote.
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Jan 26, 2017 | economistsview.typepad.com
DrDick, January 25, 2017 at 11:07 AMThis is frankly rather disingenuous. Most of the major changes he mentions are clearly and explicitly the consequence of policy changes, mostly by Republicans, starting with Reagan: deregulation, lower taxes on the wealthy, a lack of antitrust enforcement, and the like.libezkova -> DrDick... January 25, 2017 at 09:29 PM
sanjait -> DrDick... , January 25, 2017 at 11:20 AMThe first POTUS who cut tax rates was JFK.
Read through the link and it's not nearly that simple, especially when you consider the fact that some trends, though plausibly or certainly reinforced through policy, aren't entirely or even primarily caused by policy.DrDick -> sanjait... , January 25, 2017 at 01:45 PMI did not say they were the *only* factors, but they are the primary causes. If you look at the timelines and data trends it is pretty clear. Reagan broke the power of the Unions and started deregulation (financialization is a consequence of this), which is the period when the big increases began. Automation plays a secondary role in this. what has happened is that the few industries which are most conducive to automation have remained here (like final assembly of automobiles), while the many, more labor intensive industries (automobile components manufacturing) have been offshored to low wage, not labor or environmental protections countries.libezkova -> DrDick... , January 25, 2017 at 05:39 PMBoth parties participated in the conversion of the USA into neoliberal society. So it was a bipartisan move.DrDick -> libezkova... , January 25, 2017 at 07:40 PMClinton did a lot of dirty work in this direction and was later royally remunerated for his betrayal of the former constituency of the Democratic Party and conversion it into "yet another neoliberal party"
Obama actually continued Bush and Clinton work. He talked about 'change we can believe in' while saving Wall street and real estate speculators from jail they fully deserved.
Clinton contributed, but the Republicans did all the real heavy lifting. I was in my late 20s and early 30s during Reagan.libezkova -> DrDick... , January 25, 2017 at 09:25 PMVery true. Republicans were in the vanguard and did most heavy lifting. That's undeniable.But Clinton's negative effects were also related to the weakening the only countervailing force remaining on the way of the neoliberalism -- trade unionism. So he played the role of "subversive agent" in the Democratic Party. His betrayal of trade union political interests and his demoralizing role should be underestimated.
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Jan 25, 2017 | economistsview.typepad.com
Reagan, Trump, and Manufacturing : It's hard to focus on ordinary economic analysis amidst this political apocalypse. But ... like it or not the progress of CASE NIGHTMARE ORANGE may depend on how the economy does. So, what is actually likely to happen to trade and manufacturing over the next few years?
As it happens, we have what looks like an unusually good model in the Reagan years... - it's not part of the Reagan legend, but the import quota on Japanese automobiles was one of the biggest protectionist moves of the postwar era.
I'm a bit uncertain about the actual fiscal stance of Trumponomics: deficits will surely blow up, but I won't believe in the infrastructure push until I see it, and given savage cuts in aid to the poor it's not entirely clear that there will be net stimulus . But suppose there is. Then what?
Well, what happened in the Reagan years was "twin deficits": the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what's tradable.) This led to an accelerated decline in the industrial orientation of the U.S. economy:
And people did notice. ...
Again, this happened despite substantial protectionism.
So Trumpism will probably follow a similar course; it will actually shrink manufacturing despite the big noise made about saving a few hundred jobs here and there.
On the other hand, by then the BLS may be thoroughly politicized, commanded to report good news whatever happens.
El Pato de Muerte -> EMichael... , January 25, 2017 at 03:28 PMSee here:anne -> El Pato de Muerte... , January 25, 2017 at 03:49 PM
https://object.cato.org/sites/cato.org/files/pubs/pdf/pa107.pdfForced Japan to accept restraints on auto exports. The agreement set total Japanese auto exports at 1.68 million
vehicles in 1981-82, 8 percent below 1980 exports. Two years later the level was permitted to rise to 1.85 million.(33)
Clifford Winston of the Brookings Institution found that the import limits have actually cost jobs in the U.S. auto
industry by making it possible for the sheltered American automakers to raise prices and limit production. In 1984,
Winston writes in Blind Intersection? Policy and the Automobile Industry, 32,000 jobs were lost, U.S. production fell
by 300,000 units, and profits for U.S. firms increased $8.9 billion. The quotas have also made the Japanese firms
potentially more formidable rivals because they have begun building assembly plants in the United States.(34) They
also shifted production to larger cars, introducing to American firms competition they did not have before the quotas
were created. In 1984, it was estimated that higher prices for domestic and imported cars cost consumers $2.2 billion a
year.(35) At the height of the dollar's exchange rate with the yen in 1984-85, the quotas were costing American
consumers the equivalent of $11 billion a yearhttps://object.cato.org/sites/cato.org/files/pubs/pdf/pa107.pdfEd Brown -> EMichael... , January 25, 2017 at 03:29 PMMay 30, 1988
The Reagan Record on Trade: Rhetoric vs. Reality
By Sheldon L. RichmanExecutive Summary
When President Reagan imposed a 100 percent tariff on selected Japanese electronics in 1987, he and the press gave the impression that this was an act of desperation. Pictured was a long-forbearing president whose patience was exhausted by the recalcitrant and conniving Japanese. After trying for years to elicit some fairness out of them, went the story, the usually good-natured president had finally had enough.
When newspapers and television networks announced the tariffs, the media reminded the public that such restraints were imposed by a staunch free trader. The less-than-subtle message was that if "Free Trader" Ronald Reagan thought the tariff necessary, then Japan surely deserved it. After more than seven years in office, Ronald Reagan is still widely regarded as a devoted free trader. A typical reference is that of Mark Shields, a Washington Post columnist, to Reagan's "blind devotion to the doctrine of free trade."
If President Reagan has a devotion to free trade, it surely must be blind, because he has been off the mark most of the time. Only short memories and a refusal to believe one's own eyes would account for the view that President Reagan is a free trader. Calling oneself a free trader is not the same thing as being a free trader. Nor does a free-trade position mean that the president, but not Congress, should have the power to impose trade sanctions. Instead, a president deserves the title of free trader only if his efforts demonstrate an attempt to remove trade barriers at home and prevent the imposition of new ones.
By this standard, the Reagan administration has failed to promote free trade. Ronald Reagan by his actions has become the most protectionist president since Herbert Hoover, the heavyweight champion of protectionists.
[ I appreciate this reference, which is in turn extensively referenced. ]
This is simple. It means instead of shipping low end Toyota Corolla's that were small, manual transmission, no A/C, etc., the Japanese started to make larger, more expensive cars, even luxury cars like Lexis, etc.pgl -> Ed Brown... , January 25, 2017 at 03:53 PMIf this helps, think of Volkswagen being limited to shipping 1,000 cars to the US. They would probably send us only the top-end Porsches (VW owns that brand) and none of the more middle class cars.
To Anne's point on whether this is an accurate portrayal of what happened: I have no recollection and no knowledge about this.
What really happened is simple. The Japanese car companies got that quota rents (Menzie Chinn documented this recently) from what was effectively a quota on the imports of Japanese cars. American consumers instead imported European cars. Any benefits to US car manufacturing was trivial and totally undo for the aggregate US economy by the massive dollar appreciation. All one has to do is to look at the exchange rate back then and one gets why net exports fell dramatically.Fred C. Dobbs -> anne... , January 25, 2017 at 04:29 PM(As in Acura, Lexus, Infinitiluxury brands.)Ed Brown : , January 25, 2017 at 01:52 PMJapanese manufacturers exported more expensive models in the 1980s due to voluntary export restraints, negotiated by the Japanese government and U.S. trade representatives, that restricted mainstream car sales. ...
https://en.wikipedia.org/wiki/Lexus
Acura holds the distinction of being the first Japanese automotive luxury brand. ... In its first few years of existence, Acura was among the best-selling luxury marques in the US. ...
In the late 1980s, the success of the company's first flagship vehicle, the Legend, inspired fellow Japanese automakers Toyota and Nissan to launch their own luxury brands, Lexus and Infiniti, respectively. ...
I am reluctant to disagree with Paul Krugman, as he has forgotten more economics than I'll ever know. But my first thought as I read this was: motivated reasoning. It is quite interesting, and affects all of us, and the brilliant folks seem to be more susceptible to it than the average folks.ilsm -> Ed Brown... , January 25, 2017 at 02:09 PMKrugman dislikes Trump (as do I). He seems motivated to find fault with Trump's policies. In fuzzy things like economics and their intersection with politics it is challenging, and perhaps actually impossible, for most of us to remain balanced. If someone as smart and knowledgeable as Paul Krugman subconsciously decides to dislike a policy, his brain is more than clever enough to invent reasonable economic arguments against the policy.
Of course, none of this implies that Krugman is actually wrong in this case.
One question for folks. Krugman says "the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what's tradable.)" I am wondering why a budget deficit has to push up interest rates?
In 2009 we ran a large budget deficit at low interest rates. In WW 2 we did as well (I think, not really sure about this). Is it well established that budget deficits push up interest rates?
Thanks in advance.
Cognitive bias. Using % of jobs that are manufacturing is relative to what was happening in other job areas: like Reagan building up the military and civil service to buy weapons a tiny part of the growth in that sector was manufacturing.ilsm -> Ed Brown... , January 25, 2017 at 02:28 PMWhat else was going on in late 70's early 80's... a lot of growth on service sector.
It is called cherry picking the chart to make a point with non thinkers.
My appropriate post for Krugman follows.
poor pk decided that correlation is causation.Dan Kervick -> Ed Brown... , January 25, 2017 at 02:49 PMThe answer at the time: US was offshoring bc 'they' made good things and that was their advantage, not Reagan and Volcker!
Labor participation rate exploded after that!
https://fred.stlouisfed.org/series/CIVPART
Interest rates steadily declined from the '83 recovery........... deficits may not have so much?
He might argue against 'protection'...... with logic.
Right, I think the answer is that budget deficits only push up interest rates if the Fed allows that to happen. The Fed could keep rates low if they wanted by signaling a willingness to buy up as much federal debt as is needed to hit some low target rate. So I think Krugman is, in effect, predicting that they will not do that, and that they will instead counteract the fiscal expansion with tighter monetary policy on the theory that this is needed to counteract potential "overheating".ilsm -> Dan Kervick... , January 25, 2017 at 03:14 PMIt's all a racket.
I bought a house in 1985, I bet interest rates would go down by taking a 1 year ARM. I did quite well each year it adjusted! I sold it in 1990 and rates were low enough to go fixed conventional on the "trade up".Ed Brown -> Dan Kervick... , January 25, 2017 at 03:20 PMIt is reputed the high rates helped cause the "Volcker" recession in the gray around 82.
Dan, thank you.anne -> Ed Brown... , January 25, 2017 at 02:49 PMThinking about it some more. If I understand this correctly, the thought is that deficit spending is stimulative, and the economy is already at full employment, so the Fed will raise interest rates to prevent the economy from "overheating." The increase in rates slows the economy down by two mechanisms:
(1) when the cost of capital is higher, fewer investments get made than when it is lower (say, a business needs to see a higher ROI when interest rates are high than when they are low). (As an aside, outside of the housing market, I don't think this effect is very strong. Real businesses don't change their approach to investment if rates change by, say, 100%; from 2% to 4%. At least, not the ones I have been exposed to, which are generally looking for ~ 15% IRR on investments.)
(2) People globally may be more inclined to hold dollars when the risk-free rate is higher, which increases demand for the currency, which means the currency gets stronger, and exports are less competitive and imports more competitive, counter-acting the stimulus.
The thing I don't like about this line of thought is that it is fatalist. It suggests that fiscal policy really does not matter, it will all be offset by monetary policy. There is no real impact to the economy whether we run huge budget deficits or surpluses. Me not liking it does not mean it is wrong, obviously, but I just don't buy it. When I run into things like this in economics I really start to wonder how much of macro is based on empirical observations and correlations versus 'models.'
I think I ought to take an intro econ course and actually learn something. Or read an introductory macro text book...
Krugman says "the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what's tradable.)" I am wondering why a budget deficit has to push up interest rates?anne -> anne... , January 25, 2017 at 03:04 PMIn 2009 we ran a large budget deficit at low interest rates.... Is it well established that budget deficits push up interest rates?
[ Here then is the relevant matter to be analyzed. ]
https://fred.stlouisfed.org/graph/?g=cunoEd Brown -> anne... , January 25, 2017 at 05:43 PMJanuary 15, 2017
Federal Surplus or Deficit [-] as Percent of Gross Domestic Product and Rates on 10-Year Treasury Bond, 1980-2015
Anne, thank you. From this plot I see that during Clinton's presidency we went from a budget deficit to a surplus. And interest rates dropped. During the George W. Bush presidency we went from a surplus to a deficit. And interest rates dropped.anne -> Ed Brown... , January 25, 2017 at 06:11 PMThere does not appear to be any obvious correlation between the budget deficit and interest rates.
I understand the textbook story is the Fed raises rates when the budget deficit increases. I am not sure if the empirical data supports that though. Perhaps the Fed cares more about inflation than budget deficits and perhaps budget deficits do not directly result in inflation? But if that is correct, what is the basis for Professor Krugman's assertion that Trump's budget will push up interest rates?
http://www.nytimes.com/2003/03/11/opinion/a-fiscal-train-wreck.htmlanne -> Ed Brown... , January 25, 2017 at 06:12 PMMarch 11, 2003
A Fiscal Train Wreck
By PAUL KRUGMANWith war looming, it's time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I'm terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.
From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If it goes well, administration officials have made it clear that they will use any bump in the polls to ram through more big tax cuts, which will also be a disaster for the budget. Either way, the tide of red ink will keep on rising.
Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.
And that's way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account - as the C.B.O. cannot - the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it's clear that the 10-year deficit will be at least $3 trillion.
So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don't matter. But we're looking at a fiscal crisis that will drive interest rates sky-high.
A leading economist recently summed up one reason why: "When the government reduces saving by running a budget deficit, the interest rate rises." Yes, that's from a textbook by the chief administration economist, Gregory Mankiw.
But what's really scary - what makes a fixed-rate mortgage seem like such a good idea - is the looming threat to the federal government's solvency.... ]
Why was Krugman wrong in 2003, and what about the 1980s and all through from there? I am thinking.Ed Brown -> anne... , January 25, 2017 at 06:20 PMYes, thank you for that column from 2003. Yes, Prof. K was correct about the future trend in deficits back then, but incorrect about the future trend in interest rates.anne -> anne... , January 25, 2017 at 03:05 PMIt is certainly conceivable that he is wrong now as well.
https://fred.stlouisfed.org/graph/?g=cuntpgl -> Ed Brown... , January 25, 2017 at 03:55 PMJanuary 15, 2017
Federal Surplus or Deficit [-] as Percent of Gross Domestic Product and Rates on 10-Year Treasury Bond, 1970-2015
Krugman captures very well what happened in the 1980's. He went to work for the CEA hoping to undo this disaster. Of course the political hacks in the Reagan White House did not listen to the CEA. Now he watches people in the Trump White House that are even more insane than these political hacks. You draw whatever conclusion you want but his concerns strike me as real from someone who has been there.Ed Brown -> pgl... , January 25, 2017 at 04:16 PMpgl - thank you. I am not drawing any hard and fast conclusions, just trying to learn. I appreciate your comment that is based on both education and experience.anne -> pgl... , January 25, 2017 at 06:14 PMI am still thinking about this Buffett proposal on trade with import certificates. http://fortune.com/2016/04/29/warren-buffett-foreign-trade/ Jared Bernstein mentioned it in passing in an opinion piece in the NY Times yesterday. I put a comment on his website asking him to share more of his thoughts on it, and he said that he will if/when he has time. I hope he does.
Krugman captures very well what happened in the 1980's....Peter K. -> Ed Brown... , January 25, 2017 at 05:19 PM[ I am not sure:
https://fred.stlouisfed.org/graph/?g=cupw
January 15, 2017
Real Trade Weighted Price of an American Dollar, * 1980-1988
(Indexed to 1980)
* Major and Broad Currencies
A lot of people here who agree with Krugman about everything do "motivated reasoning" as well.Ed Brown -> Peter K.... , January 25, 2017 at 05:45 PMWe all do it. It is completely unavoidable. I am trying to do it less but I suspect I am not very successful.Jerry Brown -> Ed Brown... , January 25, 2017 at 06:26 PMNo. Budget deficits for a country such as the US do not push up interest rates. They would in fact lower the interbank rate if not countered by Federal Reserve actions.Ed Brown -> Jerry Brown... , January 25, 2017 at 06:58 PMIf budget deficits added to aggregate demand to the point that the Fed thought its inflation target was in jeopardy, the Fed might raise its target rate of interest in the hopes of quelling demand.
The Fed has almost complete control over the interest rate paid by the Federal government when it decides to issue new debt. WWII is a great example of this. So is our most recent depression.
If what you say is correct, then what is Krugman's talking about? i am confusEd now.ilsm : , January 25, 2017 at 02:10 PMdespicable pk who is dealing with?pgl -> ilsm... , January 25, 2017 at 03:56 PMSo you want a massive increase in our trade deficit. Good to know.anne : , January 25, 2017 at 02:14 PMhttps://fred.stlouisfed.org/graph/?g=culdanne -> anne... , January 25, 2017 at 02:17 PMJanuary 15, 2017
Percent of Employment in Manufacturing for United States, 1970-2012
https://fred.stlouisfed.org/graph/?g=cul1January 15, 2017
Percent of Employment in Manufacturing for United States, 1970-2012
(Indexed to 1970)
https://fred.stlouisfed.org/graph/?g=cul5anne -> anne... , January 25, 2017 at 02:24 PMJanuary 15, 2017
Percent of Employment in Manufacturing for United States and Germany, 1970-2012
https://fred.stlouisfed.org/graph/?g=cul3January 15, 2017
Percent of Employment in Manufacturing for United States and Germany, 1970-2012
(Indexed to 1970)
https://books.google.com/ngrams/graph?content=deindustrialization&year_start=1970&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t1%3B%2Cdeindustrialization%3B%2Cc0anne : , January 25, 2017 at 02:29 PMJanuary 25, 2017
Deindustrialization
January 25, 2017
Rust belt
http://krugman.blogs.nytimes.com/2016/12/18/will-fiscal-policy-really-be-expansionary/anne -> anne... , January 25, 2017 at 02:30 PMDecember 18, 2016
Will Fiscal Policy Really Be Expansionary?
By Paul KrugmanIt's now generally accepted that Trumpism will finally involve the kind of fiscal stimulus progressive economists have been pleading for ever since the financial crisis. After all, Republicans are deeply worried about budget deficits when a Democrat is in the White House, but suddenly become fiscal doves when in control. And there really is no question that the deficit will go up.
But will this actually amount to fiscal stimulus? Right now it looks as if Republicans are going to ram through their whole agenda, including an end to Obamacare, privatizing Medicare and block-granting Medicaid, sharp cuts to food stamps, and so on. These are spending cuts, which will reduce the disposable income of lower- and middle-class Americans even as tax cuts raise the income of the wealthy. Given the sharp distributional changes, looking just at the budget deficit may be a poor guide to the macroeconomic impact.
Given the extent to which things are in flux, I can't put numbers on what's likely to happen. But I was able to find matching analyses by the good folks at Center on Budget and Policy Priorities of tax * and spending ** cuts in Paul Ryan's 2014 budget, which may be a useful model of things to come.
If you leave out the magic asterisks - closing of unspecified tax loopholes - that budget was a deficit-hiker: $5.7 trillion in tax cuts over 10 years, versus $5 trillion in spending cuts. The spending cuts involved cuts in discretionary spending plus huge cuts in programs that serve the poor and middle class; the tax cuts were, of course, very targeted on high incomes.
The pluses and minuses here would have quite different effects on demand. Cutting taxes on high incomes probably has a low multiplier: the wealthy are unlikely to be cash-constrained, and will save a large part of their windfall. Cutting discretionary spending has a large multiplier, because it directly cuts government purchases of goods and services; cutting programs for the poor probably has a pretty high multiplier too, because it reduces the income of many people who are living more or less hand to mouth.
Taking all this into account, that old Ryan plan would almost surely have been contractionary, not expansionary.
Will Trumponomics be any different? It would matter if there really were a large infrastructure push, but that's becoming ever less plausible. There will be big tax cuts at the top, but as I said, the push to dismantle the safety net definitely seems to be on. Put it all together, and it's extremely doubtful whether we're talking about net fiscal stimulus.
Now, you might think that someone will explain this to Trump, and that he'll demand a more Keynesian plan. But I have two words for you: Larry Kudlow.
December 18, 2016anne -> anne... , January 25, 2017 at 06:21 PMBill Black
Kansas City, MOIn looking at economic trends, the other issue to take into account is private lending. Individual debt (credit cards, etc.) is already back up to the levels before the financial crisis and Trump's appointees are determined to deregulate financial institutions, which may contribute to a return to the predatory lending that created the last set of booms and busts. *
* http://krugman.blogs.nytimes.com/2016/12/18/will-fiscal-policy-really-be-expansionary/
http://krugman.blogs.nytimes.com/2017/01/25/reagan-trump-and-manufacturing/anne -> anne... , January 25, 2017 at 06:24 PMJanuary 25, 2017
Reagan, Trump, and Manufacturing
By Paul KrugmanIt's hard to focus on ordinary economic analysis amidst this political apocalypse. But getting and spending will still consume most of peoples' energy and time; furthermore, like it or not the progress of CASE NIGHTMARE ORANGE may depend on how the economy does. So, what is actually likely to happen to trade and manufacturing over the next few years?
As it happens, we have what looks like an unusually good model in the Reagan years - minus the severe recession and conveniently timed recovery, which somewhat overshadowed the trade story. Leave aside the Volcker recession and recovery, and what you had was a large move toward budget deficits via tax cuts and military buildup, coupled with quite a lot of protectionism - it's not part of the Reagan legend, but the import quota on Japanese automobiles was one of the biggest protectionist moves of the postwar era.
I'm a bit uncertain about the actual fiscal stance of Trumponomics: deficits will surely blow up, but I won't believe in the infrastructure push until I see it, and given savage cuts in aid to the poor it's not entirely clear that there will be net stimulus. * But suppose there is. Then what?
Well, what happened in the Reagan years was "twin deficits": the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what's tradable.) This led to an accelerated decline in the industrial orientation of the U.S. economy:
[Graph]
And people did notice. Using Google Ngram, we can watch the spread of terms for industrial decline, e.g. here:
[Graph]
And here:
[Graph]
Again, this happened despite substantial protectionism.
So Trumpism will probably follow a similar course; it will actually shrink manufacturing despite the big noise made about saving a few hundred jobs here and there.
On the other hand, by then the Bureau of Labor Statistics may be thoroughly politicized, commanded to report good news whatever happens.
* http://krugman.blogs.nytimes.com/2016/12/18/will-fiscal-policy-really-be-expansionary/
Whether the analysis is challenged or or accepted, considerable further development is necessary. This is an important essay by Paul Krugman.Paul Mathis : , January 25, 2017 at 02:56 PMReal Manufacturing Output for the U.S. is far above its level at the end of the Reagan administration. https://fred.stlouisfed.org/series/OUTMS#0point : , January 25, 2017 at 03:09 PMRMO declines sharply during recessions and the worse the downturn, the harder manufacturing gets hit. Ergo, avoiding recessions is the absolute best policy for manufacturing. Trade and the dollar's value don't have nearly as strong correlations.
Likewise, Real Median Weekly Wages have been rising sharply since 2Q2014 and are now at an all time record high. https://fred.stlouisfed.org/series/OUTMS#0
RMWW rise strongly during sustained expansions of private industry employment. https://fred.stlouisfed.org/series/USPRIV
Trade deficits have little correlation but the correlation with private industry employment growth is strong: 16 million new jobs since 1Q2010.All of this should be obvious, as Keynes said: "The ideas (about economics) . . . are extremely simple and should be obvious."
Paul says:jonny bakho : , January 25, 2017 at 03:53 PM"Well, what happened in the Reagan years was "twin deficits": the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what's tradable.)"
which is to say,
"Watch out for the bond vigilantes."
Et tu, Paul?
Deficit spending would always stimulate an economy except the Fed controls the brakes.pgl -> jonny bakho... , January 25, 2017 at 03:59 PM
The Fed is especially worried about wage price inflation spirals
When inflation pops its head above target, the Fed slams on the brakes.At the ZLB, inflation is far below target so the Fed has its foot off the brakes.
Deficit spending is stimulatory because the Fed does not apply the brakes by raising interest rates.
This is textbook economicsThe first intelligent comment here. Yes Volcker kept real interest rate very high for a while which led to a dramatic appreciation of the dollar. But even as Volcker took off the monetary brakes to let the economy get back to full employment, real interest rates stayed elevated and the real appreciation was not entirely reversed. So we got a sustained trade deficit even in the face of trade protection. That is the simple point that some here wish to duck.point -> pgl... , January 25, 2017 at 06:29 PM"Yes Volcker kept real interest rate very high...".Ed Brown -> jonny bakho... , January 25, 2017 at 06:06 PMExcept that's not quite Paul's story: "...the budget deficit pushed up interest rates...".
Yes but historically it does not seem like it has worked that way. There does not appear to be an obvious correlation between budget deficits and either (a) interest rates themselves, or (b) the change in interest rates.Carol : , January 25, 2017 at 04:24 PMIt seems like the Fed is acting on inflation signals. It is not so clear that (changes in) budget deficits necessarily result in (changes in) inflation. Unless there is a direct link between budget deficits and inflation it is hard to credibly argue that increasing the budget deficit results in increased inflation results in Federal Reserve raising rates to choke off inflation.
The history of budget deficits and interest rates that Anne showed above don't provide much support for Prof. Krugman's point.
Potemkin BLSPeter K. : , January 25, 2017 at 05:18 PM
and jobsHow to run a country a la Putin
Krugman is predicting that the Fed will raise rates to counter Trump's fiscal expansion and will appreciate the dollar. That's what happened with Volcker jacking rates to fight inflation.Peter K. -> Peter K.... , January 25, 2017 at 05:24 PMHe doesn't spell this out exactly.
It's like how Greenspan and Rubin told Clinton he had to drop his middle class spending bill in order to focus on deficit reduction. Greenspan was threatening to raise rates and Clinton bent the knee to the "independent" Fed.
That's when Clinton threw a tantrum about being an "Eisenhower Republican."
The Senate Democrats like Schumer get what the populist backlash is about. That's why they're promising $1 trillion over 10 years in government spending rather than Hillary's $275 over 5 years.
They can do the math. They know what happened in the election. It wasn't just about Comey or the DNC hack. The election shouldn't have been that close.
"the budget deficit pushed up interest rates" We had large budget deficits during the Great Recession and they didn't push up interest rates. In fact Obama focused too much on deficit reduction.libezkova : , January 25, 2017 at 07:14 PMKrugman should remember that "Integrity, once sold, is difficult to repurchase - even at 10x the original sales price."-->
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sanjait : Wednesday, January 25, 2017 at 11:31 AMThis is tremendous.If the world were sane, this is the kind of thinking that would be taking place about inequality. Rather than jumping to simple conclusions based on heavy priors (which is where too much of the "debate" starts and stops), one starts with a broad, open minded and contemplative review that seeks to identify primary causal factors.
That said ... there is a lot that could be quibbled here.
One, it's not always the case that identifying primary causes leads one directly to solutions. Sometimes the solution has little to do with the cause. If, for example, changing climate causes an increase in forest fires, we should consider that as another factor in our evaluation of climate economics, but in terms of strategies for addressing forest fires, we have to find proximate solutions.
Although in practice, certainly we will often have a better understanding of what solutions might be possible and might be effective when we carefully analyze causes. The endeavor of identifying causes is absolutely worthwhile for that reason.
Another quibble, the defining of inequality by the single metric of share of income of the 1% is a bit reductive, though only a bit.
Last note ... I notice international trade is not mentioned here. That doesn't mean it isn't a primary driver, although as I've said many times, I don't think it is a primary driver, and it appears Kenworthy didn't think it even worth mentioning.
sanjait -> sanjait... , January 25, 2017 at 11:41 AM
Although my biggest quibble is that I think Kenworthy missed the big cause entirely: the effect technology has had in making workers fungible.sanjait -> sanjait... , January 25, 2017 at 11:42 AMIT has made communications almost free and made micromanagement of business systems ubiquitous. As a result, firms are no longer dependent on long-tenured workers, or even teams of workers in a particular place. Anything and anyone can be replaced and outsourced (in the broadest sense of the term, not just offshoring to foreign workers), and when costs are high companies do this aggressively.
This change has immeasurably changed the nature of work and the relative bargaining powers of individual workers and even teams of workers. That, I believe, is why education is rising, and doing so in the countries that are most adept and aggressive about business process solutions implementation across many sectors. If I'm right, we will see this trend accelerate very soon in countries that are laggards in this domain, as they finally start operating as resource planned enterprises.
Because this effect is not measured and difficult to measure ... I think it gets overlooked. But if I were a researcher in this field, I'd be looking at ERP adoption trends vs within firm inequality trends and looking for correlations. This would get confounded by firm size but I bet there are ways to tease out the effect.
"why education is rising" supposed to say "why INEQUALITY is rising" ...libezkova -> sanjait... , January 25, 2017 at 06:44 PMSanjait,"the effect technology has had in making workers fungible."
Yes, this is a very good point. Especially computer revolution and related revolution in telecommunications. Starting from "PC revolution" (August 12, 1981) the pace of technological innovation was really breathtaking. Especially in hardware.
Regular smartphone now is more powerful then a mainframe computer of 1971 which would occupy a large room with air conditioning (IBM 360/370 series). So say nothing about early 1960th ("Desk Set" movie with Katharine Hepburn, which was probably the first about displacement of workers by computers, was produced in 1957)
"This change has immeasurably changed the nature of work and the relative bargaining powers of individual workers and even teams of workers. That, I believe, is why education is rising..."
The nature of work in "classic" human fields (agriculture, steel industry, electrical generation, law, etc) was not changed dramatically but the "superstructure" above them did.
Sometimes I think that the success of neoliberalism would be impossible without computer revolution.
Bargaining power was squashed by neoliberalism by design. So this is not a "natural" development, but an "evil plot" of financial oligarchy, so to speak. In this sense dissolution of the USSR was a huge hit for the US trade unions.
Education is now used as the filter for many jobs. So people start to invest in it to get a pass, so to speak. With the neoliberal transformation of universities it now often takes pervert forms such as "diploma mills" or mass production of "Public relations" graduates.
Neoliberal transformation of universities into profit centers also played the role in increasing the volume -- they need "customers" much like McDonalds and use misleading advertisements, no entrance exams, and other tricks to lure people in.
So university education now is a pretty perverted institution too.
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Jan 25, 2017 | economistsview.typepad.com
ken melvin : January 25, 2017 at 11:10 AMsanjait -> ken melvin... , January 25, 2017 at 11:24 AMWhy the surge in inequality? Good question. When did this surge begin? What was going on that might have led to this surge?
Seems a lot of agreement on the 1970s as the beginning. What was going on in the 1970? Beginnings of offshoring to Mexico and Asia (the movement of well paying 'rustbelt' union jobs to the cheap labor southern states had begun earlier with questionable net in that southern labor gained and northern lost), industrial automation began to take off (especially in auto manufacturing – car plants that employed 5k in 1970 were producing more cars with 1.2k by the end of the 70s), but just as significant – about this time, the US began to lose market share to European and Asian manufacturing.
The education thing is a canard. In the 1950s, Detroit employed millions of workers who had less than a high school education; by the late 50s, they demanded a high school diploma; today, they can demand an Associate degree. All apart of the selection process. Higher academic credentials help the individual find a better paying job, but do not in fact create anymore jobs, let alone the well paying assembly line jobs of before.
To insist that offshoring and illegal immigration were not partially responsible for the increase in US inequality is gross denial. As with the earlier moves to the southern states, the lives of the illegal immigrants and the workers in Mexico and Asia were improved, but US workers paid a dear price in wage loss.
Another huge factor was the financialization that was occurring during this period (perhaps somewhat due the other changes and their effect on the nations politics).
In toto, it was a convergence of: loss of market, automation, offshoring, illegal immigrant laborers, this financialization that led to the surge in inequality.
"The education thing is a canard."DrDick -> sanjait... , -1Not at all.
The paper above references a book called "The Race between Education and Technology" that provides a useful framing of the issue. Essentially:
"The book argues that technological change, education, and inequality have been involved in a kind of race. During the first eight decades of the twentieth century, the increase of educated workers was higher than the demand for them. This had the effect of boosting income for most people and lowering inequality. However, the reverse has been true since about 1980. This educational slowdown was accompanied by rising inequality. The authors discuss the complex reasons for this, and what might be done to ameliorate it."
However, authors of the paper mentioned in the OP do dismiss education as a major cause of inequality if we are looking at the 1% vs the 99% (rather than a more broad measure).
Most college grads are working jobs that do not require a degree. Indeed many jobs routinely filled by high school graduates when I was young now want a college degree. Melvin completely nails it.libezkova -> DrDick... , January 25, 2017 at 05:45 PMhttp://www.attn.com/stories/1734/college-graduates-underemployed-working-requirements
http://www.gallup.com/poll/164321/majority-workers-say-job-require-degree.aspx
Mike S -> ken melvin... , January 25, 2017 at 12:27 PM"Most college grads are working jobs that do not require a degree."College degree now serves as a filter to cut off unnecessary applicants. That does not means that the college degree by itself is not worth it. There is a value in the college degree beyond job market prospects. In this sense huge inflation of the cost of higher education is a big injustice in itself.
I agree that I don't think there was any one single thing which started driving inequality.You pointed out 'Beginnings of offshoring to Mexico and Asia (the movement of well paying 'rustbelt' union jobs to the cheap labor southern states had begun earlier with questionable net in that southern labor gained and northern lost)'. True, but implicitly those southern states were 'right to work' states which is why the labor was cheaper.
Also, I believe in Thomas Pikkety's book 'Capital in the 21st Century' he pointed out that the top .01% have so much wealth, they can't spend all the income they earn from dividends, so that gets reinvested into more equities (stocks, bonds, et al) which then earn even more dividends.
And when you point out automation, implicit in that is that the owners of the company (either privately or stockholders) will increase their share of the 'pie', so to speak, which gets split between the entrepreneurs and the workers, also increasing the inequality.
My last point would be that, with things like Dynasty trusts, it becomes much easier for the top .01% to maintain their place at the top of the income 'food chain', versus people born into families of more modest means. Those people in the .01% can send their children to the truly best schools in the country, whereas the rest of us go to whatever schools our parents can afford, or however much college debt we're willing to absorb.
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Jan 22, 2017 | economistsview.typepad.com
William Meyer, Saturday, January 21, 2017 at 12:49 PM
What Wren-Lewis misses, I think, is that something I've noticed in my roughly a decade of reading economic blogs on the Internet. Economists have blinkers on. They want to view the economy as an isolated scientific subject, like the interior of a test tube, and treat politics and policy as a sort of exterior force, that can be isolated from the world of the chemist and pushed off-to-one side. It seems fairly clear to me that the two elements--politics and the economy--are obviously continuously co-mingled, and have all sorts of feedback loops running between them.
The discipline really consistently and deliberately blinds itself to politics and the dynamics of power, despite the deep entanglement of politics with everything economic. Wren-Lewis admits that macroeconomists "missed" the impacts of very high financial sector leverage, but finds that now that economists have noticed it, and suggested remedies, that the power of bank lobby prevents those remedies from being enacted. But shouldn't the political power of the finance lobby been a part of economic analysis of the world along with the dangers of the financial sector's use of extreme leverage? Does he think the two phenomena are unrelated?
Shouldn't economics pay more attention to the ongoing attempts of various groups to orient government policy in their favor, just like they pay attention to the trade deficit and GDP numbers?
I look at politics and the economy and see one thing, not two things, and I am astonished at the extent to which economists focus on the part they like to play with intellectually, while deliberately looking away from what is probably the more important part. Its like economists obsessively focus on the part that can be studied via numbers (money) and don't' want to think about the part that is harder to look quantify (political policy). And there is a political issue there, which Mr. Wren-Lewis, keeps ignoring in his defense of "mainstream economics."
The neoclassical economics tendency of not looking at power relationships makes power imbalances and their great influence on economics seem like "givens" or "natural endowments", which is clearly an intellectual sin of omission.
Many people, even within the halls of mainstream economics, note economists are "uncomfortable" with distributional issues.
Whether they like the implication or not, economists need to acknowledge that this discomfort has a profoundly conservative intellectual bias, in the sense that it make the status quo arrangement of society seem "natural" and "normal", when it is obviously humanly constructed and not in any sense "natural." So when left-wing people say that economists are defenders and supporters of the current order of things, they have a point: ignoring power relationships and their impact on the world supports the continued existence of those relationships.
Mr. Wren-Lewis seems like a nice guy, but he needs to take that simple home truth in. I'm not sure why he seems to struggle so with acknowledging it.
KPl, January 21, 2017 at 11:37 PM
cm -> cm... , January 22, 2017 at 08:40 AM"...but failing to ignore their successes,..."Oh you mean the success of being able to raise asset prices without the growth in wages, make education costly and unaffordable without student loans, not chargeable under bankruptcy, spruce up employment figures by not counting the people who have stopped look for jobs because they cannot find one, make people debt serfs, make savers miserable by keeping interest rates at zero and making them take risks that they may not want to take though it is picking pennies in front of a steamroller, keeping wages stagnant for decades and thus impoverishing people.
The list of successes is endless and you should be glad we are NOT talking about them. Because if we do, the clan called economists might well be torched.
Neoliberalism may have been in part so successful because it appeals to (and tries to explain many things in terms of) a narrative of competition (and assignment of reward and acknowedlgement) by merit.libezkova : , January 22, 2017 at 07:11 PMMost people, esp. when young (still largely sheltered) or (still) successful, probably have an exaggerated assessment of their own merit (absolute and relative) - often actively instilled and encouraged by an "enabling" environment.
A large part is probably the idea that "markets" are "objective" or at least "impartial" in bringing out and rewarding merit - also technology and "data driven" technocratic management, which are attributed "objectivity". All in the explicitly stated or implied service of impartially recognizing merit and its lack.
It promises a lake Wobegon of sorts where everybody (even though not all!) are above average, and it is finally recognized.
"Neoliberalism may have been in part so successful because it appeals to (and tries to explain many things in terms of) a narrative of competition (and assignment of reward and acknowedlgement) by merit."A very important observation. Thank you !
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Jan 21, 2017 | economistsview.typepad.com
Peter K. : January 20, 2017 at 04:28 AMHopefully Yellen won't raise interest rates as high as Volcker did in the early 1980s when he was fighting inflation.There are better less painful ways to fight inflation but the prog neolibs don't want to explore those options. Take it out on the working class with high unemployment.
BenIsNotYoda -> Peter K.... January 20, 2017 at 04:46 AM
I do not share your view of Yellen at all. She has changed her colors overnight. Her ugly partisan side is showing. There are less painful ways to stop Trump's policies that she does not agree with than sacrificing the working class.BenIsNotYoda -> BenIsNotYoda... , -1Yellen said last night - "I believe in systematic approach to monetary policy."Clear indication that she will revert to a Taylor rule type approach so she can justify raising rates fast to kill the Trump economy.
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Jan 21, 2017 | economistsview.typepad.com
Peter K. : , January 20, 2017 at 04:26 AM"As I explained in my May 14, 2015 column "How Increasing Retirement Saving Could Give America More Balanced Trade":Peter K. -> Peter K.... , January 20, 2017 at 04:26 AMI talked to Madrian and David Laibson, the incoming chair of Harvard's Economics Department (who has worked with her on studying the effects of automatic enrollment) on the sidelines of a Consumer Financial Protection Bureau research conference last week. Using back-of-the-envelope calculations based on the effects estimated in this research, they agreed that requiring all firms to automatically enroll all employees in a 401(k) with a default contribution rate of 8% could increase the national saving rate on the order of 2 or 3 percent of GDP."
Wasn't there a recent discussion about how 401(k)s are a sham?
Progressive neoliberals....
Hillary should have campaigned on this policy of diverting savings to Wall Street in order to help exports. This would have gotten more voters to the polls.... Call it a private Wall St. tax on savers.
from Miles Kimball the supply-siderPeter K. -> Peter K.... , January 20, 2017 at 04:41 AMhow would Brad Setser think about an 8 percent tax on Chinese consumers that the Communist sovereign wealth fund could invest abroad for their retirement? That would boost Wall Street some more.Peter K. -> Peter K.... , -1The other benefit of Kimball's plan - from a prog neolib viewpoint - is that it would weaken Social Security.
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Jan 21, 2017 | economistsview.typepad.com
anne : January 20, 2017 at 07:53 AM , 2017 at 07:53 AMhttp://cepr.net/blogs/beat-the-press/people-are-choosing-to-work-part-time-why-is-that-so-hard-for-economic-reporters-to-understandlibezkova -> anne... , January 20, 2017 at 10:34 AMJanuary 20, 2017
People are Choosing to Work Part-Time, Why Is that So Hard for Economic Reporters to Understand?
It is really amazing how major news outlets can't seem to find reporters who understand the most basic things about the economy. I guess this is evidence of the skills shortage.
Bloomberg takes the hit today in a piece * discussing areas where the economy is likely to make progress in a Trump administration and areas where it is not. In a middle "muddle through" category, we find "Full-Time Work Is Likely to Stay Elusive for Part-Timers." The story is:
"Trump has highlighted the number of part-time workers in the U.S. economy, saying 'far too many people' are working in positions for which they are overqualified and underpaid. While the proportion of full-time workers in the labor force remains below its pre-recession high, it's made up most of the ground lost during the downturn. But it hasn't budged much in the last two years, even as the job market has gotten tighter. Some economists point to the gig economy as the driving force (pun intended) behind part-timers. Others see a broader shift in the labor market that's left many workers stuck with shorter hours, lower wages and weaker benefits."
Okay, wrong, wrong, and wrong. In its monthly employment survey (the Current Population Survey - CPS), the Bureau of Labor Statistics asks people whether they are working more or less than 35 hours a week. If they are working less than 35 hours they are classified as part-time. The survey then asks the people who are working part-time why they are working part-time. It divides these workers into two categories, people who work part-time for economic reasons (i.e. they could not find full-time jobs) and people who work part-time for non-economic reasons. In other words the second group has chosen to work part-time.
If we look at the numbers for involuntary part-time workers, it dropped from 6.8 million in December of 2014 to 5.6 million in December of 2016. That is a drop of 1.2 million, or almost 18 percent. That would not seem to fit the description of not budging much. Of course Bloomberg may have been adding in the number of people who chose to work part, which grew by 1.4 million over this two year period, leaving little net change in total part-time employment.
Of course there is a world of difference between a situation where people need full-time jobs, but work part-time, because that is the only work they can find and a situation in which people work part-time because they don't want to spend 40 hours a week on the job. Most of us would probably consider it a good thing if people who wanted to spend time with their kids, or did not want to full time for some other reason, had the option to work part-time. This is what in fact has been happening and it has been going on for three years, not two.
Come on Bloomberg folks -- did you ever hear of the Affordable Care Act (a.k.a. "Obamacare")? As a result of Obamacare workers are no longer dependent on employers for health care insurance. This means that many people have opted to work part rather than full time. This has opened up full time jobs ** for people who need them, even though it has left total part-time employment little changed.
In total, the number of people involuntarily working part-time has fallen by 2.2 million since the ACA has been in effect, while the number choosing to work part-time has risen by 2.4 million. The sharpest increase in voluntary part-time employment has been among young mothers *** and older workers **** just below Medicare age.
It is really incredible that this shift from involuntary part-time to voluntary part-time is not more widely known. It is a very important outcome from the ACA.
* https://www.bloomberg.com/graphics/2017-how-well-know-if-trump-is-making-america-great-again/
** http://cepr.net/blogs/cepr-blog/obamacare-and-part-time-work-part-2-involuntary-part-time-employment
*** http://cepr.net/blogs/cepr-blog/the-affordable-care-act-still-family-friendly
**** http://cepr.net/blogs/cepr-blog/obamacare-is-good-for-older-workers-too
-- Dean Baker
My impression here is that in this particular issue Dean Baker is out of touch with reality.sanjait -> anne... , January 20, 2017 at 01:33 PMQuestion: how many people in this 1.2 million drop because they retired at 62 forced to take a half of their SS pension, or left workforce?
Also, can you consider Wal-Mart or Shop Right cashier working 36 hours for $7.5 an hour and without any benefits (as he/she can't afford them) fully employed.
Single mothers are probably the most important category to analyze here.
This is an example of how the libertarian and Republican conceptions of liberty and freedom are so off the mark.When people can afford to work part time instead of full time to do things like raise children, attain higher education or start companies, that is freedom. When the inaccessibility of health insurance forces them to work full time when they would otherwise prefer not, that is not enhanced freedom.
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Jan 21, 2017 | economistsview.typepad.com
pgl, Friday, January 20, 2017 at 01:37 AM
Ed Brown -> pgl... , January 20, 2017 at 07:31 AMTeam Trump needs to listen to Miles Kimball:
"border adjustability. In the eurozone, where there is a fixed exchange rate of 1 between the member countries, relying more heavily on a value-added tax-for which international rules allow taxing imports while exempting exports from the tax-and less on other taxes, is understood as a way to get the same effect as devaluing to an exchange rate that makes foreign goods more expensive to people in a country and domestic goods cheaper to foreigners. But in a floating exchange rate setup as the US has, most of the effects of border adjustment can be canceled out by an explicit appreciation in the dollar that cancels out the implicit devaluation from the tax shift. And indeed, such an appreciation of the dollar is exactly what one should expect."
The architect of this Destination Based Cash Flow Tax with "Border Adjustments" (is that like sprinkles on top) is Alan Auerbach and even he admits this. Miles moves onto something else I have been saying:
"A way to push down the value of the dollar and stimulate net exports for a much longer time is to increase saving rates in the US As greater saving pushed down US rates of return, some of that extra saving would wind up in foreign assets, putting extra US dollars in the hands of folks abroad, so they would have US dollars to buy US goods. This effect can be enhanced if the regulations for automatic enrollment are favorable to a substantial portion (say 30%) of the default investment option being in foreign assets. Note that an increase in US saving would tend to push down the natural interest rate, and so needs to be accompanied by the elimination of the zero lower bound in order to avoid making it hard for monetary policy to respond to recessions."
OK – it might not be so easy to lower the natural rate now but back in 1981, real interest rates soared as the Reagan tax cuts lowered national savings. This led to a massive dollar appreciation and a large drop in net exports.
I seriously question the assumption of FOREX adjustments perfectly offsetting policy changes such that the balance of trade remains unchanged. It seems like an article of faith that things work this way, based on logic, intelligence, and economic analysis based on various models of how the world works.Peter K. -> Ed Brown... , January 20, 2017 at 07:46 AMBut while this view seems to be held by intelligent people with far more economic education that I will ever have, I am wondering if there is any empirical evidence that supports this reasoning? I am sceptical.
Do economists have solid models that accurately predict the movement of FOREX rates in the first place? I mean, all else being equal, and given no policy changes at all, can economists accurately forecast the exchange rates between, say, Canada and the US over the next 10 years? And, if so, why do these economists have to work for a living? Shouldn't they be enormously wealthy people by now if they possess this level of predictive capabilities?
My personal thinking on the matter is to take a more humble approach. Given some solid reasons to believe the proposed border adjustment tax will increase the value of the dollar, but lacking a way to accurately predict FOREX, I would guess that exchange rates would adjust to cancel out only half the policy change. I'll assume trade flows adjust a bit and FOREX rates adjust a bit. And since it is just a guess, I'd be quite cautious in drawing any strong conclusions.
I welcome comments that would help educate me on this subject. Best wishes to all.
As I understand it Peter Dorman agrees with you here:JohnH -> Peter K.... , January 20, 2017 at 08:17 AMhttp://econospeak.blogspot.com/2016/12/paul-krugman-on-protectionism-and-trade.html
As does economics superstar Dean Baker.
PGL replied to Dorman twice, but Dorman ignored him.
I love PK's summary: ".... trade deficits are always a temporary phenomenon, to be followed eventually by surpluses, and vice versa."Ed Brown -> JohnH... , January 20, 2017 at 08:28 AMAfter 30 years of trade deficits, I wonder about PK's definition of temporary...
Oh well, in the long run, we're all dead...and the trade deficit will swing to a surplus...
:-)Old Opossum's Practical Cat -> Ed Brown... , January 20, 2017 at 08:39 AMAs The Clock Ticks DownEd Brown -> Peter K.... , January 20, 2017 at 08:26 AMStand by your data
"
~~Country & Western Song~Before the opportunity-window slams shut, harvest your data from the market! You need to record a baseline from the last moments of the O'Bummer World. Sure!
You will wish him back, but that is beside the point. We are scientists not wishers.
I wish you
well
!Hello. Thank you for this link. I found this comment by Peter Dornman to be interesting: "And also, yes, any theory that implies a known relationship between macro variables and forex rates is *very* counter-empirical."JohnH -> Ed Brown... , January 20, 2017 at 07:54 AMIf his comment is correct, it makes me wonder about the reliability of Miles Kimball's analysis.
There are certain types of problems we just can't reliably analyze, as they are too complicated, or the underlying physics is subject to extreme sensitivity to accuracy of the inputs (chaos theory, basically). For instance, our ability to make meaningful forecasts of the weather is limited to a few days. Maybe FOREX predictions are like that? If so, we should be cautious about making any strong statements about FOREX adjustments precisely offsetting policy changes.
I mean, doesn't it seem like hubris when you can't predict what a variable will do given no changes to current conditions, but you decide that you can predict *precisely* what it will do if we make changes to current conditions?
"Do economists have solid models that accurately predict the movement of FOREX rates in the first place?"JohnH -> JohnH... , January 20, 2017 at 07:58 AMMeese-Rogoff showed that exchange rates are disconnected from fundamentals. It's called the 'foreign exchange puzzle.'
Yet pgl keeps insisting on an 'if x then y' approach to most problems. His key variable is interest rates, which are at the root of most every change in pglian universe.
I'm actually surprised that he departs from his rate-centric universe to suggest that Trump might be responsible for something like the fall of the peso, though he stridently rejects the idea that Trump's bully pulpit might shame American companies into keeping more jobs at home.
Meese-Rogoff found that f-x rates are a random walk.
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Jan 21, 2017 | economistsview.typepad.com
Larry Summers:Disillusioned in Davos : Edmund Burke famously cautioned that "the only thing necessary for the triumph of evil is for good men to do nothing." I have been reminded of Burke's words as I have observed the behavior of US business leaders in Davos over the last few days. They know better but in their public rhetoric they have embraced and enabled our new President and his policies.JohnH -> Peter K.... , January 20, 2017 at 03:24 PMI understand and sympathize with the pressures they feel. ... Businesses who get on the wrong side of the new President have lost billions of dollars of value in sixty seconds because of a tweet. ...
Yet I am disturbed by (i) the spectacle of financiers who three months ago were telling anyone who would listen that they would never do business with a Trump company rushing to praise the new Administration (ii) the unwillingness of business leaders who rightly take pride in their corporate efforts to promote women and minorities to say anything about Presidentially sanctioned intolerance (iii) the failure of the leaders of global companies to say a critical word about US efforts to encourage the breakup of European unity and more generally to step away from underwriting an open global system (iv) the reluctance of business leaders who have a huge stake in the current global order to criticize provocative rhetoric with regard to China, Mexico or the Middle East (v) the willingness of too many to praise Trump nominees who advocate blatant protection merely because they have a business background.
I have my differences with the new Administration's economic policies and suspect the recent market rally and run of economic statistics is a sugar high. Reasonable people who I respect differ and time will tell. My objection is not to disagreements over economic policy. It is to enabling if not encouraging immoral and reckless policies in other spheres that ultimately bear on our prosperity. Burke was right. It is a lesson of human experience whether the issue is playground bullying, Enron or Europe in the 1930s that the worst outcomes occur when good people find reasons to accommodate themselves to what they know is wrong. That is what I think happened much too often in Davos this week.
Larry Summers lecturing us about bullies! Precious!anne : , January 20, 2017 at 12:24 PM"Larry Summers Is An Unrepentant Bully"
http://www.huffingtonpost.com/peter-s-goodman/larry-summers-bully-fed_b_3653387.htmlLike so much of the tit-for-tat between Democrats and Republicans, what's OK for to do is NOT OK for you to do!!!
https://books.google.com/books?id=SFNADAAAQBAJ&pg=PT951&lpg=PT951&dq=%22No+man,+who+is+not+inflamed+by+vainglory+into+enthusiasm%22&source=bl&ots=ufx9GiMtls&sig=jJgSGfaCuCQFzBa9KiNBKCoaYgQ&hl=en&sa=X&ved=0ahUKEwjE7YCOxtHRAhWjLMAKHVmSDFAQ6AEIHDAB#v=onepage&q=%22No%20man%2C%20who%20is%20not%20inflamed%20by%20vainglory%20into%20enthusiasm%22&f=falseanne -> anne... , -11770
Thoughts on the Cause of the Present Discontents
No man, who is not inflamed by vainglory into enthusiasm, can flatter himself that his single, unsupported, desultory, unsystematic endeavours are of power to defeat the subtle designs and united Cabals of ambitious citizens. When bad men combine, the good must associate; else they will fall, one by one, an unpitied sacrifice in a contemptible struggle.
-- Edmund Burke
Edmund Burke famously cautioned that "the only thing necessary for the triumph of evil is for good men to do nothing."anne -> Chris G ... , January 20, 2017 at 06:42 PM-- Lawrence Summers
[ Edmund Burke never cautioned this. ]
Notice the fear of association or community of Milton Friedman:Gibbon1 -> anne... , January 20, 2017 at 07:37 PMhttp://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
September 13, 1970
The Social Responsibility of Business is to Increase its Profits
By Milton Friedman - New York TimesWhen I hear businessmen speak eloquently about the "social responsibilities of business in a free-enterprise system," I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned "merely" with profit but also with promoting desirable "social" ends; that business has a "social conscience" and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are–or would be if they or anyone else took them seriously–preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades....
When I used to read Delong's blog before Delong went off on Sanders because Delong thought that Hillary Clinton would give Delongs son a job...anne -> anne... , January 20, 2017 at 12:52 PMThere was economics student that penned a response where he mentioned that the economics profession generally dislikes models with negative externalities. But truly loath models that incorporate positive externalities.
A positive externality is where some action on your part benefits you _and_ benefits some third party.
One can assume Milton Friedman and his followers find that concept revolting indeed.
While I was not in Davos, I read about the proceedings and meeting in the Western European and Chinese press and was impressed by the community emphasis placed on social justice. Possibly there was considerable individual resistance to the public theme, and Lawrence Summers would readily sense such resistance, but the public theme from the speech by Xi Jinping on was encouraging and portrayed in Western Europe and China as encouraging.kthomas -> anne... , January 20, 2017 at 02:19 PMThe headline of his post is somewhat misleading. He was not really talking about Davos.Chris G -> kthomas... , January 20, 2017 at 05:53 PMLet me rephrase: Name me some Fortune 500 companies who consider potential societal impacts of their actions and, as a result, sometimes make decisions which don't maximize their profits but are the "right" thing to do for the community/their workers/the environment/etc.? What Fortune 500 companies are motivated by things beyond maximizing profits for shareholders?anne -> Chris G ... , January 20, 2017 at 05:55 PMMy point is that corporate leaders who are charged to act to maximize profits will always be cowards when it comes to moral and ethical issues. If their job is to maximize profits. If they don't want to lose their job then that's what they'll do - act to maximize profits. Where would Summers get the idea that they would act any differently? Do the people he's referring to have a track record of choosing the moral high ground over profits? If they do then I could understand surprise and disappointment that they're folding. But they've never had to face that choice before let alone chosen moral high ground over money, have they?
My point is that corporate leaders who are charged to act to maximize profits will always be cowards when it comes to moral and ethical issues. If their job is to maximize profits. If they don't want to lose their job then that's what they'll do - act to maximize profits. Where would Summers get the idea that they would act any differently? Do the people he's referring to have a track record of choosing the moral high ground over profits? ...Winslow R. : , January 20, 2017 at 02:02 PM[ Properly argued, sadly. ]
I recall Summers/Romer with both houses and Obama blowing their chances to do something for the middle/working class.Summers/Delong said if the stimulus was too small we could always get another later, yet that chance to do something never came and he did nothing.....
I'd like Larry to ponder whether it was he who did nothing.
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Jan 21, 2017 | economistsview.typepad.com
ilsm -> im1dc... , January 20, 2017 at 04:41 PMAfter the new AG does what should have been done with HRC.ilsm -> pgl... , January 20, 2017 at 04:43 PMThen Trump can fire the CIA for the muck up in the middle east.
And pull the Mech brigade out of the Balts.
you are transferring the neocon enterprise on Trump.ilsm -> sanjait... , January 20, 2017 at 03:16 PMRunning up the flag in Estonia is a Kagan Clinton affair.
No Putin is not the Tsar incarnate nor is the US inheriting England and France 1856 protection of Turks in the Balkans.
Making a neocon moral point and tripping with WW III over Estonia is neocon war mongering insane.Who are Balts?
Why would US put a brigade of to defend Estonia? What is the strategic significance of Estonia?
There are as few people in Estonia as in New Hampshire and a large number are Russian speaking.
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Jan 21, 2017 | economistsview.typepad.com
Peter K. : January 20, 2017 at 11:50 AM Billionaires have to stick together.Buffett Supports Trump on Cabinet Picks 'Overwhelmingly'
by Amanda L Gordon and Noah Buhayar
January 19, 2017, 8:19 PM EST January 20, 2017, 10:12 AM EST
Warren Buffett said he "overwhelmingly" supports President-elect Donald Trump's choices for cabinet positions as the incoming commander-in-chief's selections face confirmation hearings in the U.S. Senate.
"I feel that way no matter who is president," the billionaire Berkshire Hathaway Inc. chairman and chief executive officer said Thursday in New York at the premiere of a documentary about his life. "The CEO -- which I am -- should have the ability to pick people that help you run a place."
"If they fail, then it's your fault and you got to get somebody new," Buffett said. "Maybe you change cabinet members or something."
Buffett, 86, backed Hillary Clinton in the presidential election, stumping for her in Omaha, Nebraska, and headlining fundraisers. The billionaire frequently clashed with Trump and scolded him for not releasing income-tax returns, as major party presidential candidates have done for roughly four decades.
Trump's cabinet picks include Treasury Secretary nominee Steven Mnuchin, a former Goldman Sachs Group Inc. banker; former Exxon Mobil Corp. CEO Rex Tillerson as secretary of state; and retired Marine Corps General James Mattis as Defense secretary.
Since the election, Buffett has struck a more conciliatory tone toward Trump and called for unity. In an interview with CNN in November, he said that people could disagree with the president-elect, but ultimately he "deserves everybody's respect."
Trump's Popularity
That message hasn't resonated. Trump's popularity is the worst for an incoming president in at least four decades, with just 40 percent of Americans saying they have a favorable impression of him, according to a Washington Post-ABC poll published Tuesday. Buffett said on Thursday that the low approval ratings won't matter much.
"It's what you go out with that counts -- 20, 50 years later what people feel you've achieved," Buffett said.
The president-elect has continued his pugnacious style during the transition, picking fights on Twitter with news outlets, automakers, defense contractors, intelligence agencies, Hollywood actress Meryl Streep and civil rights hero-turned-U.S. Congressman John Lewis.
...
JohnH -> Peter K.... , January 20, 2017 at 12:05 PM
Class warfare at its finest...sanjait -> Peter K.... , January 20, 2017 at 12:54 PMI wondered how you'd synthesize a way to disagree with Krugman on this one, given how seemingly commonsense and obvious are Krugman's points.John M -> sanjait... , January 20, 2017 at 01:14 PMHere's the answer it seems: talk about something else.
The Bush team went further than that, actively sabotaging FBI field agents' investigations of possible upcoming attacks.John M -> pgl... , January 20, 2017 at 01:35 PMNeed it be stated that 9/11 did wonders for the Bush Administration?
Wonders for the Bush Administration:pgl -> sanjait... , January 20, 2017 at 01:20 PM* It solved the problem of Democrats beginning to get a spine and going after the Felonious Five (or at least the three with major conflict of interest).
* It bumped Bush's approval rating from 40% to 80%.
* It greatly lowered opposition to Bush's anti-civil-liberties policies, such as creating "1st Amendment Zones".
* It made passage of the Patriot Act possible.
* People were able to smear opposition to the Bush team policies as treasonous.
* It rendered torture, aggressive war, and barbaric imprisonment without due process of law respectable.
Bush Administration sabotaged investigation:
Remember Coleen Rowley who claimed that an FBI superior back in DC rewrote her request for a warrant, to make it less likely that it would be approved? There was also the FBI agent in Arizona who wanted to investigate certain pilot students, but was prohibited.
Remember the DeLenda Plan? Once we knew the USS Cole was Al Qaeda, it should have been executed. As in the spring of 2001. Alas, it was deferred to after 9/11. Most incompetent crew ever and the Twin Towers fell down taking 3000 people with because of their utter incompetence.ilsm -> sanjait... , January 20, 2017 at 03:09 PMObama presided over 8 more years of Bushco organized murder and good profits for the war mongers.
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Jan 21, 2017 | economistsview.typepad.com
ilsm -> Fred C. Dobbs... January 20, 2017 at 03:34 PMWhat sense does it make to tilt with thermonuclear war over a half million Balts' whim?Outside of the war mongering corporatists who take huge plunder off the US taxpayer.
How about an end to the one worlders?
Fred C. Dobbs said in reply to ilsm... January 20, 2017 at 04:04 PM
Can you come up with a theory of neoisolationism?libezkova -> Fred C. Dobbs... , January 20, 2017 at 09:44 PMLet me try. First of all, it is properly called non-interventionism and as such it is the opposing theory to neoconservatism, especially its Allbright-Kagan-Nuland troika flavor, which actually does not deviate much from so called liberal interventionists (Vishy left) such as Hillary-Samantha Power-Susan Rice troika.libezkova -> libezkova... , January 20, 2017 at 09:48 PMIt would be nice to put them on trial, because all of then fall under Nuremberg statute for war crimes. But this is a pipe dream in the current USA political climate with it unhinged militarism and jingoism.
Here is something that more or less resembles the definition
http://www.theamericanconservative.com/articles/noninterventionism-a-primer/
== quote ==
Americans have grown understandably weary of foreign entanglements over the last 12 years of open-ended warfare, and they are now more receptive to a noninterventionist message than they have been in decades. According to a recent Pew survey, 52 percent of Americans now prefer that the U.S. "mind its own business in international affairs," which represents the most support for a restrained and modest foreign policy in the last 50 years. That presents a challenge and an opportunity for noninterventionists to articulate a coherent and positive case for what a foreign policy of peace and prudence would mean in practice. As useful and necessary as critiquing dangerous ideas may be, noninterventionism will remain a marginal, dissenting position in policymaking unless its advocates explain in detail how their alternative foreign policy would be conducted.
A noninterventionist foreign policy would first of all require a moratorium on new foreign entanglements and commitments for the foreseeable future. A careful reevaluation of where the U.S. has vital interests at stake would follow. There are relatively few places where the U.S. has truly vital concerns that directly affect our security and prosperity, and the ambition and scale of our foreign policy should reflect that.
A noninterventionist U.S. would conduct itself like a normal country without pretensions to global "leadership" or the temptation of a proselytizing mission. This is a foreign policy more in line with what the American people will accept and less likely to provoke violent resentment from overseas, and it is therefore more sustainable and affordable over the long term.
When a conflict or dispute erupts somewhere, unless it directly threatens the security of America or our treaty allies, the assumption should be that it is not the business of the U.S. government to take a leading role in resolving it.
If a government requests aid in the event of a natural disaster or humanitarian crisis (e.g., famine, disease), as Haiti did following its devastating earthquake in 2010, the U.S. can and should lend assistance - but as a general rule the U.S. should not seek to interfere in other nations' domestic circumstances.
Note the female chickenhawks are the most bloodthirsty, overdoing even such chauvinists as McCain.point : , January 20, 2017 at 03:25 PMThat actually has its analogy in animal kingdom were female predators are more vicious killers then male, hunting the prey even if they do not feel the hunger (noted especially for lions)
Cross-posted from links earlier:ilsm -> point... , January 20, 2017 at 03:35 PM"So there you have it: ... completely unprepared to govern."
Paul means to imply the Obama boys and girls were better prepared? Judging by how well they did, maneuvering us into Larry's secular stagnation, for instance, some may be forgiven to think perhaps that kind of expertise we could do without.
Lost in all the discourse is that this government of ours was designed to be operated by amateurs.
Trump may end their expert preparedness for unending war.ilsm -> point... , January 20, 2017 at 03:39 PMNeolib/neocon conartists call their truthful detractors unready or ignorant of unpatriotic or Russian tools. Sore losers. Does not make war mongers right!
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Jan 20, 2017 | economistsview.typepad.com
Peter K. : January 20, 2017 at 04:35 AM
libezkova -> Peter K.... , -1Noah Smith: The Ways That Pop Economics Hurt America - Noah Smith
"So I wonder if economism was really as unrealistic and useless as Kwak seems to imply. Did countries that resisted economism -- Japan, for example, or France [Germany?] -- do better for their poor and middle classes than the U.S.? Wages have stagnated in those countries, and inequality has increased, even as those countries remain poorer than the U.S. Did the U.S.'s problems really all come from economism, or did forces such as globalization and technological change play a part? Cross-country comparisons suggest that the deregulation and tax cuts of the 1980s and 1990s, although ultimately excessive, probably increased economic output somewhat."
Ugh what an awful display of pop economism. Globalization and technology are "impersonal forces." No mention of the rise of inequality or the SecStags. No mention of monetary policy fail in Europe. The biggest lies of economism are the lies of omission.
Thank you !Looks like this concept of "Economism" introduced by James Kwak in his book Economism is very important conceptual tool for understanding the tremendous effectiveness of neoliberal propaganda.
I think it is proper to view Economism as a flavor of Lysenkoism. As such it is not very effective in acquiring the dominant position and suppressing of dissent, but it also can be very damaging.
https://www.bloomberg.com/view/articles/2017-01-19/the-ways-that-pop-economics-hurt-america
== quote ==
...When competitive free markets and rational well-informed actors are the baseline assumption, the burden of proof shifts unfairly onto anyone proposing a government policy. For far too many years, free-marketers have gotten away with winning debates by just sitting back and saying "Oh yeah? Show me the market failure!" That deck-stacking has long forced public intellectuals on the left have to work twice as hard as those safely ensconced in think tanks on the free-market right, and given the latter a louder voice in public life than their ideas warrant.
It's also true that simple theories, especially those we learn in our formative years, can maintain an almost unshakeable grip on our thinking.
For example, the basic Econ 101 theory of supply and demand is fine for some products, but it doesn't work very well for labor markets. It is incapable of simultaneously explaining both the small effect of minimum wage increases and the small impact of low-skilled immigration. Some more complicated, advanced theory is called for.
But no matter how much evidence piles up, people keep talking about "the labor supply curve" and "the labor demand curve" as if these are real objects, and to analyze policies -- for example, overtime rules -- using the same old framework.
An idea that we believe in despite all evidence to the contrary isn't a scientific theory -- it's an infectious meme.
Academic economists are unsure about how to respond to the abuse of simplistic econ theories for political ends. On one hand, it gives them enormous prestige. The popularity of simplistic econ ideas has made economists the toast of America's intellectual classes.
It has sustained enormous demand for the undergraduate econ major, which serves, in the words of writer Michael Lewis, as a "standardized test of general intelligence" for future businesspeople. But as Kwak points out, the simple theories promulgated by politicians and on the Wall Street Journal editorial page often bear little resemblance to the sophisticated theories used by real economists.
And when things go wrong -- when the financial system crashes, or millions of workers displaced by Chinese imports fail to find new careers -- it's academic economists who often get blamed, not the blasé and misleading popularizers.
... ... ...
Russia and China have given up communism not because they stopped having working classes, but because it became obvious that their communist systems were keeping them in poverty. And Americans are now starting to question economism because of declining median income, spiraling inequality and a huge financial and economic crisis.
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Jan 20, 2017 | economistsview.typepad.com
RC AKA Darryl, Ron :Thanks to New Deal democrat, who made me curious about yesterday's "comment section in re Summers' piece." Then thanks to Ron Waller for his comment which closed with: (Good read: "Robert Mundell, evil genius of the euro".)
https://www.theguardian.com/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro
Robert Mundell, evil genius of the euro
Greg Palast
For the architect of the euro, taking macroeconomics away from elected politicians and forcing deregulation were part of the plan
The idea that the euro has "failed" is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.
That progenitor is former University of Chicago economist Robert Mundell. The architect of "supply-side economics" is now a professor at Columbia University, but I knew him through his connection to my Chicago professor, Milton Friedman, back before Mundell's research on currencies and exchange rates had produced the blueprint for European monetary union and a common European currency.
Mundell, then, was more concerned with his bathroom arrangements. Professor Mundell, who has both a Nobel Prize and an ancient villa in Tuscany, told me, incensed:
"They won't even let me have a toilet. They've got rules that tell me I can't have a toilet in this room! Can you imagine?"
As it happens, I can't. But I don't have an Italian villa, so I can't imagine the frustrations of bylaws governing commode placement.
But Mundell, a can-do Canadian-American, intended to do something about it: come up with a weapon that would blow away government rules and labor regulations. (He really hated the union plumbers who charged a bundle to move his throne.)
"It's very hard to fire workers in Europe," he complained. His answer: the euro.
The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.
"It puts monetary policy out of the reach of politicians," he said. "[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business."
He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace – or the plumbing.
As another Nobelist, Paul Krugman, notes, the creation of the eurozone violated the basic economic rule known as "optimum currency area". This was a rule devised by Bob Mundell.
That doesn't bother Mundell. For him, the euro wasn't about turning Europe into a powerful, unified economic unit. It was about Reagan and Thatcher.
"Ronald Reagan would not have been elected president without Mundell's influence," once wrote Jude Wanniski in the Wall Street Journal. The supply-side economics pioneered by Mundell became the theoretical template for Reaganomics – or as George Bush the Elder called it, "voodoo economics": the magical belief in free-market nostrums that also inspired the policies of Mrs Thatcher.
Mundell explained to me that, in fact, the euro is of a piece with Reaganomics:
"Monetary discipline forces fiscal discipline on the politicians as well."
And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.
Thus, we see that (unelected) Prime Minister Mario Monti is demanding labor law "reform" in Italy to make it easier for employers like Mundell to fire those Tuscan plumbers. Mario Draghi, the (unelected) head of the European Central Bank, is calling for "structural reforms" – a euphemism for worker-crushing schemes. They cite the nebulous theory that this "internal devaluation" of each nation will make them all more competitive.
Monti and Draghi cannot credibly explain how, if every country in the Continent cheapens its workforce, any can gain a competitive advantage.
But they don't have to explain their policies; they just have to let the markets go to work on each nation's bonds. Hence, currency union is class war by other means.The crisis in Europe and the flames of Greece have produced the warming glow of what the supply-siders' philosopher-king Joseph Schumpeter called "creative destruction". Schumpeter acolyte and free-market apologist Thomas Friedman flew to Athens to visit the "impromptu shrine" of the burnt-out bank where three people died after it was fire-bombed by anarchist protesters, and used the occasion to deliver a homily on globalization and Greek "irresponsibility".
The flames, the mass unemployment, the fire-sale of national assets, would bring about what Friedman called a "regeneration" of Greece and, ultimately, the entire eurozone. So that Mundell and those others with villas can put their toilets wherever they damn well want to.
Far from failing, the euro, which was Mundell's baby, has succeeded probably beyond its progenitor's wildest dreams.
[Needless to say, I am not a fan of Robert Mundell's.]
Reply Friday, January 20, 2017 at 07:07 AM Peter K. -> RC AKA Darryl, Ron... , January 20, 2017 at 07:19 AMExcellent article!Peter K. -> RC AKA Darryl, Ron... , January 20, 2017 at 07:30 AM"It puts monetary policy out of the reach of politicians," he said. "[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business."
Reminded me of a point made by J.W. Mason:
http://jwmason.org/slackwire/what-does-crowding-out-even-mean/
"..It's quite reasonable to suppose that, thanks to dependence on imported inputs and/or demand for imported consumption goods, output can't rise without higher imports. And a country may well run out of foreign exchange before it runs out of domestic savings, finance or productive capacity. This is the idea behind multiple gap models in development economics, or balance of payments constrained growth. It also seems like the direction orthodoxy is heading in the eurozone, where competitiveness is bidding to replace inflation as the overriding concern of macro policy."
I wonder how this fits with the national savings rate discussion of Miles Kimball and Brad Setser.RC AKA Darryl, Ron said in reply to Peter K.... , January 20, 2017 at 08:58 AMLike would they advise Greece to boost their national savings rate or doesn't it matter since Germany controls monetary policy?
"I wonder how this fits with the national savings rate discussion of Miles Kimball and Brad Setser."pgl -> RC AKA Darryl, Ron... , January 20, 2017 at 09:47 AM[Don't know and it sounds like way too much work for me to try to figure out. Savings rate is not a problem for us and it is difficult to see how Greece could realistically increase theirs sufficient to change anything without some other intervention being made first to decrease unemployment and increase output.]
It is also too much work for PeterK. If he can't cherry pick it, he don't bother.But note our net national savings rate has been less than 2% for a long, long time.
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Jan 20, 2017 | economistsview.typepad.com
Tom aka Rusty -> Fred C. Dobbs... The elites are wetting their pants.I don't think much of Trump but it is kind of amusing to see the elites, who screwed over most of the population, now having nervous breakdowns.
Therapists in Manhattan and Hollywood will do a booming business. Reply Friday, January 20, 2017 at 07:05 AM Peter K. -> Tom aka Rusty... , January 20, 2017 at 07:14 AM
yeah the elites are getting a taste of the fear regular folks get over losing a job and financial disaster.EMichael -> Tom aka Rusty... , January 20, 2017 at 07:20 AMThe thing is, Trump is very unpopular.
So, which elites are you talking about?Peter K. -> EMichael... , January 20, 2017 at 07:36 AMJust give me an example or two.
Y'know, it is possible to be successful and still spend a lot of time doing the right things for people not as successful as you.
Summers and Krugman. See their most recent columns. I think more of the level-headed elites are thinking/hoping that Trump will be 4 years and out and it will all blow over.Peter K. -> Peter K.... , January 20, 2017 at 07:38 AM
The really clever ones recognize that their is a populist upsurge worldwide against elite policymaking as Thoma discussed in his column on Davos man.Tom aka Rusty -> EMichael... , -1Yes, there are a few of those. I;ve been impressed by some of the things I have heard from the Steyer brothers.But then there is Bill and Hill, Soros, the Trump cabinet, Rubin/Corzine/Rattner/Summers and a whole unheavenly host.
But not all that many impress me, particularly in Manhattan and California.
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Jan 20, 2017 | economistsview.typepad.com
anne : , January 20, 2017 at 05:42 AMhttp://cepr.net/blogs/beat-the-press/stop-the-presses-stop-the-presses-washington-post-decides-to-put-numbers-in-contextJanuary 19, 2017
Stop the Presses! Stop the Presses! Washington Post Decides to Put Numbers in Context
They said it couldn't be done. It would be like the Pope converting to Islam, but the Washington Post did the impossible. It headlined an article * on reports that Donald Trump wants to privatize the Corporation for Public Broadcasting and eliminate altogether the National Endowments for the Arts and Humanities:
"Trump reportedly wants to cut cultural programs that make up 0.02 percent of federal spending."
This is an incredible breakthrough. The Post has religiously followed a policy of reporting on the budget by using really big numbers that are virtually meaningless to the vast majority of their readers. One result is that people, including well-educated and liberal people, tend to grossly over-estimate the portion of the budget that goes to things like Temporary Assistance for Needy Families (@ 0.4 percent), foreign aid (@ 0.7 percent), and food stamps (@1.8 percent).
The fact that it uses really big numbers rather than express these items in some context feeds the claims of right-wingers that we are being overtaxed to support these programs. It also contributes to the absurd belief that large numbers of people are not working but rather surviving comfortably on relatively meager benefits.
It's too bad it took getting Donald Trump in the White House to get the paper to do some serious budget reporting.
-- Dean Baker
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Jan 20, 2017 | economistsview.typepad.com
Peter K. : , January 19, 2017 at 01:19 PMhttps://newrepublic.com/article/138915/jonathan-chait-failure-grown-up-liberalismPeter K. -> Peter K.... , January 19, 2017 at 01:19 PMDead Center
Jonathan Chait's new book shows the failure of "grown up" liberalism.
BY TIMOTHY SHENK
January 10, 2017
At the dawning of the Cold War, a worried Arthur Schlesinger Jr. looked out on a bleak horizon. The Soviet Union was a threat, but Schlesinger concluded that the roots of the crisis ran much deeper. "Our lives are empty of belief," he wrote in his 1949 book, The Vital Center. "They are lives of quiet desperation." Figures he looked to for guidance-Kierkegaard, Nietzsche, Camus-would become staples in the rhetoric of student protesters a generation later. So too would the concerns he dwelled upon: loss of community, feelings of powerlessness, a sense that politics had been drained of meaning. Even the poem he selected for his book's epigraph became a touchstone in the turbulent years to come: "Things fall apart; the center cannot hold; / Mere anarchy is loosed upon the world."
...
Any book published in the last month of a president's tenure is forced to reckon with the political scene that will form in his wake. While Chait was prescient on Trumpism in 2012, he underestimated its force in 2016, and was similarly blindsided by the success of Bernie Sanders's campaign. According to Chait, "The case for democratic, pluralistic, incremental, market-friendly governance rooted in empiricism-i.e., liberalism-has never been stronger than now." It is an odd claim to make in a season of populist upheavals. As the most bloodless technocrat should have long ago recognized, no policy achievement is complete without political legitimacy.
Deference to the status quo has always been a consequence of vital centrism. So is a propensity for self-important monologues on pragmatism. Schlesinger described his politics as "less gratifying perhaps than the emotional orgasm of passing resolutions against Franco, monopoly, or sin, but probably more likely to bring about actual results." But sentimental realists are never more utopian than when they try to banish idealism from politics. Democratic leadership does not consist of lecturing voters on what they should want. The intersection of politics and policy, briefing books and ideology, is where transformative candidates stake their claims.
Obama understood that in 2008, and it made him president. The passions inspired by his first run for the White House long ago slipped out of his control. A right-wing version of that democratic spirit gave Trump the presidency, but it could not have happened without Clinton's antiseptic liberalism-Obamaism minus Obama. Now Republicans are poised to eviscerate the achievements Chait celebrates. Reality has broken the realists.
" But sentimental realists are never more utopian than when they try to banish idealism from politics."libezkova -> Peter K.... , January 19, 2017 at 06:38 PM"loss of community, feelings of powerlessness, a sense that politics had been drained of meaning. "That's called alienation.
https://en.wikipedia.org/wiki/Social_alienation
== quote ==
...German sociologists Georg Simmel and Ferdinand Tönnies wrote critical works on individualization and urbanization. Simmel's The Philosophy of Money describes how relationships become more and more mediated by money. Tönnies' Gemeinschaft and Gesellschaft (Community and Society) is about the loss of primary relationships such as familial bonds in favour of goal-oriented, secondary relationships. This idea of alienation can be observed in some other contexts, although the term may not be as frequently used. In the context of an individual's relationships within society, alienation can mean the unresponsiveness of society as a whole to the individuality of each member of the society. When collective decisions are made, it is usually impossible for the unique needs of each person to be taken into account.The American sociologist C. Wright Mills conducted a major study of alienation in modern society with White Collar in 1951, describing how modern consumption-capitalism has shaped a society where you have to sell your personality in addition to your work. Melvin Seeman was part of a surge in alienation research during the mid-20th century when he published his paper, "On the Meaning of Alienation", in 1959 (Senekal, 2010b: 7-8). Seeman used the insights of Marx, Emile Durkheim and others to construct what is often considered a model to recognize the five prominent features of alienation: powerlessness, meaninglessness, normlessness, isolation and self-estrangement (Seeman, 1959).[19] Seeman later added a sixth element (cultural estrangement), although this element does not feature prominently in later discussions of his work.
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Jan 20, 2017 | economistsview.typepad.com
ilsm : , January 19, 2017 at 01:26 PMSummers is talking to the center right lefties:libezkova -> ilsm... , January 19, 2017 at 08:32 PM
- "U.S. global leadership" neocon, Clinton Kagan speak!
- "market-oriented democracy" neolib market idolatry!
this is a case study in the corruption of English language by neoliberalsm. Very similar to the same corruption by other ideologies such as Marxism. New "weasel" terms are constantly intoduiced to make it more difficult to understand the reality:For example:
- "rightsizing"=="layoffs",
- "flexible workforce"=="perma-terms"
- "shareholder value"=="looting of corporation by executives for bonuses"
Old words are re-defined differently as the word "free" in "free market". Free for what and for whom?
- https://en.wikipedia.org/wiki/Newspeak
- http://www.orwell.ru/library/essays/politics/english/e_polit
- https://en.wikipedia.org/wiki/Politics_and_the_English_Language
You just provided two more equivalences:
- "U.S. global leadership" = "neocon, Clinton Kagan speak!" -- VERY TRUE (attempt to hide jingoism and imperial tendencies under "morally neutral" language.
- "market-oriented democracy" = "neolib market idolatry!" -- Less true, but still relevant. Market oriented democracy looks more like propaganda slogan for color revolutions in xUSSR space so it is far from idolatry, is is about subversion of legitimate governments; it is more like "conspiracy theory" term -- invented with specific purpose by three letter agencies.
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Jan 19, 2017 | economistsview.typepad.com
libezkova : January 19, 2017 at 07:27 PM , 2017 at 07:27 PM
Summers is a card carrying neoliberal and a Rubin's boy,. And Rubin was former "Deregulator in chief". Actually Summers performed the role of hired gun for Wall Street ( http://www.softpanorama.org/Skeptics/Financial_skeptic/Casino_capitalism/Corruption_of_regulators/silencing_brooksley_born.shtml ).
So he organically can't state the main point: neoliberal ideology is bankrupt and neoliberalism as a social system is close, or may be entered the decline stage.
That's why neoliberal MSM lost large part of their influence. Much like Soviet MSM during Brezhnev's rule.
What is called "Secular Stagnation" should be properly named "Secular Stagnation of societies which accepted neoliberalism as a polito-economical model". Very similar to what happened with Marxism: broken promised, impoverishment of the majority of population, filthy enrichment, corruption and all forms of degradation at the top.
Neoliberal elite ("masters of the universe") is split. The majority is still supporting "change we can believe in" (the slogan courtesy of master of "bait and switch") which means "kick the can down the road". While the other part is flirting with far right movements.
In the USA the level of elite degradation became really visible despite attempt to mask it with jingoism as a smoke screen (look at the candidates of the last Presidential race - the choice was between horrible and terrible)
Trump is just a symptom of a much larger problem. Look what happened when Marxist ideology was discredited and everybody understood that Marxism can't deliver its social promises. And look at the level of degradation of Soviet Politburo before the collapse which resulted is the election of this naïve, "not so bright", deeply provincial, inexperienced politician (Gorbachov). who was also determined "to make the USSR great again". The level of demoralization of the society was pretty acute. Nobody believed the government, the MSM, the Party.
The system was unable to produce leaders of the caliber that can save it. That was one of the reasons why it was doomed (bankruptcy of ideology means among other things that there is nobody to defend it and nationalism works both ways). I think we see a very similar processes in the USA now.
With CIA performing the role of KGB in their efforts to prevent or at least slow down the inevitable changes is the system (although at the end of the day KGB brass was simply bought and stepped aside allowing the Triumph of neoliberalism in the xUSSR space).
Speaking about the level of demoralization I understand why somebody might hate Trump, but Hillary as alternative ? Give me a break. In this sense wining about Trump inauguration just signify the inability to connect the dots and understand that the last election was what in chess was called Zugzwang.
The fact is that neoliberalism as a social system no longer is viewed favorably by the majority of the US population (like Bolshevism before them in the USSR ). In this sense I think that with Trump election "the train just left the station".
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Jan 19, 2017 | mainlymacro.blogspot.com
If there is Fake News, is there such a thing as Fake Economics? I thought about this as a result of two studies that have received considerable publicity in the press and broadcast media over the last few weeks. Both, needless to say, involve Brexit. The first are two bits of analysis by 'Change Britain', saying Brexit would generate 400,000 new jobs and "boost the UK by £450 million a week". The second is a more substantial piece of work by economists at the Centre for Business Research (CBR) in Cambridge, which was both very critical of the Treasury's own analysis of the long term costs of Brexit and came up with much smaller estimates of its own for these costs.
Defining exactly what Fake News is can be difficult , although we can point to examples which undoubtedly are fake, in the sense of reporting things to be true when it is clear they are not. Fake News often constitutes made up facts that are designed for a political purpose. You could define Fake economics in a similar way: economic analysis or research that is obviously flawed but whose purpose is to support a particular policy. (Cue left wing heterodox economists to say the whole of mainstream economics is fake economics.) We can equally talk about evidence based policy and its fake version, policy based evidence.
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Jan 18, 2017 | economistsview.typepad.com
libezkova : , -1Mathiness and "number racket" are two feature of neoliberalism that are especially damaging.jonny bakho : , January 18, 2017 at 05:07 AMI like how neoclassical economics works: bought economists operate with fake models that use fake data.
It probably would be more interesting to discuss how US government measures unemployment those days. And all those "not in labor force" tricks.
Just seasonal adjustment make winter figures highly suspect.
Only U6 still has some connections to reality and if this measure shows "close to full employment", you can call any half empty glass "full".
http://unemploymentdata.com/current-u6-unemployment-rate/
== quote ==
Current U-6 Unemployment Rate is 9.1% (BLS) or 13.7% (Gallup)
Current U-6 Unemployment Rate:
Unemployment U6 vs U3 For December 2016 the official Current U-6 unemployment rate was 9.1% up from last month's 9.0% but still below the recent low of 9.3% in April and September and October's 9.2%.
On the other hand the independently produced Gallup equivalent called the "Underemployment Rate" was up to 13.7 in December from 13.0% in November nearing the 13.8% of April. The current differential between Gallup and BLS on supposedly the same data is 4.6%!
"The labor market remains near its sustainable, full employment level."pgl -> jonny bakho... , January 18, 2017 at 07:28 AMThis is a hope not a fact
There is plenty of slack if the underemployed move into jobs and we return the 20-50 yr olds to pre-recession participation rates.Yep. Which is why I focus on the employment to population ratio. We are far from full employment.John San Vant -> pgl... , January 18, 2017 at 09:54 AMnope,nope,nope. you don't get how employment to population ratio is calculated. it can't rise and should not rise unless the calculations are adjusted.John San Vant -> jonny bakho... , January 18, 2017 at 09:52 AMSorry, but it is a fact. Capital is at full employment.urban legend -> John San Vant... , January 18, 2017 at 11:09 AMUnderemployed is cost savings adjustment made 30+ years ago and the pre-recession trend is always the end of the expansion.
Let's see:
SUPPORTING the belief that we are "close" to full employment is the U-3 measure of unemployment, a measure with an arbitrary cut-off that excludes from the official labor force as many people as possible who are not employed but do want jobs -- by requiring (1) an "active" search effort only within the last four weeks, based on (2) a definition of "active" that probably does not fit rational behavior by the unemployed who now have access to comprehensive Internet jobs databases that did not exist 20 years ago. (It is not terribly hard to surmise the institutional interests that are served by keeping the size of the labor force for purposes of determining the official unemployment rate as small as possible.)NOT SUPPORTING the belief that we are close to full employment:
(1) the lowest employment-to-population ratio in almost half a century;
(2) negating the intellectually-lazy demographic excuse that invariably gets raised to point No. 1, the lowest employment-to-population ratio in 30 years in the prime working age group (25-54), a group that is 99.99% unaffected by the phenomenon of voluntary retirement;
(3) a U-6 (that counts many more of the unemployed in the labor force) that is still three percentage points higher than the low point reached in 2000 (three percentage points is a lot, representing about 7.5 million people who want jobs but are not counted in the labor force for calculating the U-3);
(4) an aggregate growth in full-time jobs of only 9% since the relative high point in 2000 even though the working age population has grown by 20%;
(5) average weeks unemployed among those who are counted as part of the labor force (26 weeks) that is still more than twice as high as it was in 2000 (under 13 weeks) and is still 10 weeks higher than it was before the Great Recession;
(6) involuntary part-time employment still 75% higher than it was in 2000, 33% higher than before the Great Recession;
(7) whereas in 2000, the U.S. was near the top in employment rate among the OECD countries, in 2017 it is close to the bottom; most OECD countries have recovered in their employment rates since the depths of the Great Recession, and many have moved to new levels (even supposedly sick France has a higher employment rate in the 25-54 prime working age group than te U.S.).With this array of negative date to overcome, it takes a lot of wise monkeys who neither speak, hear nor see any evil to expound a belief that we are close to full employment.
RW said... January 18, 2017 at 07:05 AM
Inflation for the 4th quarter of 2016 is zero -- no change Oct through Dec -- and real interest rates remain near the zero boundary. Republican history WRT governing particularly as it pertains to the economy is sufficiently poor that optimism appears entirely unwarranted. I hear a lot of investors are adjusting their portfolio allocations to favor equities over bonds. Two years ago that was a smart move; now, not so much.
mulp said...
"All else equal, tax cuts boost household and business income."
In 2001, I was rif'd from my 100K++ job and got a $20,000 tax cut.
That tax cut did not boost my household income.
That economists have been bamboozled into thinking this way is beyond my comprehension.
Economies are zero sum. For every action, there is a reaction. Tax cuts mean revenue cuts which means spending cuts and spending cuts mean lower household income.
Very few sectors of the economy are subject to demand price elasticity that results in higher revenue from price reduction due to the quantity increasing explosively from a small reduction in price.
For example, cutting the profit tax by 30% on $100 oil so gasoline falls from $4.05 to $4.00 and thus doubles the quantity of gasoline sold to boost profit taxes is an impossibility.
And cutting the tax on economic profits from restricting oil production to drive up prices and profits can only increase tax revenue if oil production is cut further by cutting jobs so gasoline prices can be increased from $4 to $5 to $6 per gallon.
Since Reagan, economists seem to have self lobotomized so they spout totally illogical nonsense like "All else equal, tax cuts boost household and business income."
Might as well say "if you believe, you can fly when tinker bell hits you with pixie dust."
Reply Wednesday, January 18, 2017 at 11:07 AM
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Jan 18, 2017 | economistsview.typepad.com
Fred C. Dobbs : January 15, 2017 at 08:37 AM , 2017 at 08:37 AMThe Biggest Changes Obamacare Made, and Those ThatFred C. Dobbs -> Fred C. Dobbs... , January 15, 2017 at 08:42 AM
May Disappear https://nyti.ms/2itydsr via @UpshotNYT
NYT - Margot Sanger-Katz - January 13, 2017It looks like the beginning of the end for Obamacare as we know it.
After years of vowing to repeal the Affordable Care Act, as it is formally known, Republican lawmakers in both chambers of Congress have now passed a bill that will make it easier to gut the law.
Because they are using a special budget process, Republicans won't be able to repeal all provisions of the health law. But it seems like a good time to look at the major changes Obamacare brought to health care, which of those changes may now disappear, and what might replace them.
An important note: We still don't know the details of a repeal bill, and passage is not guaranteed. But Republicans passed a similar package in 2015, vetoed by President Obama, that provides a rough template. Republicans have also said they hope to make further changes through additional legislation. We'll provide updates when new legislative language arrives, expected in several weeks.
1) Obamacare insured millions through new insurance markets.
The health law reduced the number of uninsured Americans by an estimated 20 million people from 2010 to 2016. One of the primary ways it did so was by creating online markets where people who didn't get insurance through work or the government could shop for a health plan from a private insurer. The law offered subsidies for Americans with lower incomes to help pay their premiums and deductibles.
What would happen? The Republican bill is expected to eliminate the subsidies. This would make insurance unaffordable for millions of Americans and sharply reduce the number who buy their own health coverage.
With many fewer people buying coverage, the insurance markets are likely to become increasingly unstable. Many insurers will stop offering policies, and the remaining customers are likely to be sicker than current Obamacare buyers, a reality that will drive up the cost of insurance for everyone who buys it, and force more people out of the markets. The Urban Institute estimates that the change would cause a total of 22.5 million people to lose their health insurance.
What might replace it? Separate legislation may include some new form of subsidy to help people afford insurance. Plans from House Speaker Paul Ryan and the budget committee chairman Tom Price, President-elect Donald J. Trump's pick to lead the Department of Health and Human Services, would both offer a flat tax credit to help buy insurance that varies by age. A proposal from the House Republican Study Committee would give all Americans a standard tax deduction to buy insurance.
2) Obamacare insured millions more by expanding Medicaid.
The health law provided federal funds for states to offer Medicaid coverage to anyone earning less than about $16,000 for a single person or $33,000 for a family of four. Not every state chose to expand, but most did.
What would happen? The Republican plan is expected to eliminate federal funding for the expansion. An estimated 12.9 million people would lose Medicaid coverage, according to the Urban Institute's projections.
What might replace it? Republican leaders have discussed reforming the remaining Medicaid program to give states more autonomy and to reduce future federal investment.
3) Obamacare established consumer protections for health insurance.
One of the law's signature features prevents insurance companies from denying coverage or charging a higher price to someone with a pre-existing health problem. The law included a host of other protections for all health plans: a ban on setting a lifetime limit on how much an insurer has to pay to cover someone; a requirement that insurers offer a minimum package of benefits; a guarantee that preventive health services be covered without a co-payment; a cap on insurance company profits; and limits on how much more insurers can charge older people than younger people. The law also required insurance plans to allow adult children to stay on their parents' policies until age 26.
What would happen? These rules can't be changed using the special budget process, so they would stay in place for now. But eliminating some of the other provisions, like the subsidies, and leaving the insurance rules could create turmoil in the insurance markets, since sick customers would have a much stronger incentive to stay covered when premiums rise. .
What might replace it? Mr. Trump has said that he'd like to keep the law's policies on pre-existing conditions and family coverage for young adults, but Senate Republicans recently voted against nonbinding resolutions to preserve those measures, suggesting they may be less committed. Some of the other provisions would probably be on the table if there were new legislation. Republicans in Congress would probably eliminate rules that require a minimum package of benefits for all insurance plans and allow states to determine what insurers would have to include. Mr. Trump has said he'd like to encourage the sale of insurance across state lines, a policy likely to make coverage more skimpy but less expensive for many customers. Republicans would also like to expand tax incentives for people to save money for health expenses.
Many of the Republican proposals would also establish so-called high-risk pools, which would provide subsidized insurance options for people with chronic health problems who wouldn't be able to buy insurance without rules forcing insurers to sell them coverage.
4) Obamacare required individuals to have health insurance and companies to offer it to their workers.
To ensure that enough healthy people entered insurance markets, the law included mandates to encourage broader coverage. Large employers that failed to offer affordable coverage, or individuals who failed to obtain insurance, could be charged a tax penalty.
What would happen? The bill is expected to eliminate the mandates. Some experts think that eliminating the individual mandate, in particular, could destabilize insurance markets by reducing incentives for healthy people to buy coverage. The mandate had less of an impact on the employers, which had already been offering coverage.
What might replace it? Some Republican plans would allow insurers to charge much higher rates to customers who allow their coverage to lapse than to those who renew their policies every year. Such a system might provide a different financial incentive for healthy people to stay insured.
5) Obamacare raised taxes related to high incomes, prescription drugs, medical devices and health insurance.
To help pay for the law's coverage expansion, it raised taxes on several players in the health industry and on high-income earners.
What would happen? The G.O.P. package may roll back those tax increases, though there is some disagreement among Republican lawmakers about the deficit impact of such changes.
What might replace it? Republicans have not discussed raising new taxes to replace those in the Affordable Care Act. But some of their plans would limit the tax benefits offered to people who get their health insurance through work. That change would increase tax revenues, but would increase the cost of health insurance for many people who get it through work.
6) Obamacare made major reforms to Medicare payments.
The law cut the annual pay raises Medicare gives hospitals and reduced the fees Medicare pays private insurance companies. It created new incentives for hospitals and doctors to improve quality. It also set up a special office to run experiments in how Medicare pays doctors and hospitals for health care services. Those experiments are now widespread and have begun changing the way medicine is practiced in some places.
What would happen? The new legislation is expected to leave these changes alone, even though many have come under criticism by Republicans in Congress over the years, including from Mr. Price, an orthopedic surgeon. Many of the experiments could be reshaped or eliminated through regulation or through a future budget process.
What might replace it? Republicans in Congress have long talked about even more ambitious changes to Medicare, intended to move more beneficiaries into private insurance coverage. Mr. Trump has said that he does not want to make major changes to Medicare, so it is unclear if such a proposal would move forward.
7) Obamacare made many smaller changes that will probably last.
Obamacare had a range of policies meant to improve health and health care, including requirements that drug companies report payments made to physicians, a provision written by the Iowa senator Chuck Grassley, a Republican; a requirement that chain restaurants publish calorie counts on their menus; and a rule that large employers must provide a space for women to express breast milk.
What would happen? When Republicans talk about repealing Obamacare, they tend to focus on the parts of the law that expanded insurance coverage and regulated health insurance products, not these ancillary parts. That means that portions of the Affordable Care Act that people don't associate with the word "Obamacare" are likely to endure.
Perhaps the most horrendous lossim1dc -> Fred C. Dobbs... , January 15, 2017 at 11:32 AM
(to Big Healthcare) will be if ~20M
people lose coverage, even if it is
high-deductible 'catastrophic' coverage,
hospitals will lose billions in insurance
reimbursements for 'free care', which had
*much* to do with why/how Massachusetts
got the ball rolling in the first place.
Every time I read an article about the Republicans 'Repeal of Obamacare' I remind myself that Trump has not said he would sign Repeal only.DeDude -> im1dc... , January 15, 2017 at 12:49 PMRather, he repeatedly has said and recently reiterated that he wants Repeal to coincide with Replace, hours, days, not weeks, months, or years.
That sets up an Executive Branch vs Legislative Branch conflict.
One of the party's pledges will have to give to the others, either Trump or the Speaker Ryan House Republican majority and or the Majority Leader McConnell's Republican majority Senate.
Today I'm guessing Trump gets his wish.
But that leads me to ask what are the Republicans going to substitute for PACA/Obamacare that is 'cheaper and provides more and better health care' that Donald Trump promised, repeatedly.
If it is exciting to watch a train wreck then it is exciting to watch this budding and self-inflicted catastrophe develop in Republican controlled D.C., although I would rather not.
"what are the Republicans going to substitute for PACA/Obamacare that is 'cheaper and provides more and better health care' that Donald Trump promised"DeDude -> Fred C. Dobbs... , January 15, 2017 at 01:02 PMYes my guess is that TrumpCare will not be bigger and better. More likely it will be small - like his hands
She missed the biggest and most important part. ACA reduced the size of the doughnut hole in Medicare part D. Indeed ObamaCare was going to make the doughnut hole go completely away by 2020. So if we go back to the old Bush part D there will suddenly be a $4000 gap of no coverage for prescription drugs for our seniors. What are the GOPsters going to do about that?Fred C. Dobbs -> DeDude... , January 15, 2017 at 01:19 PMGet rich(er), I'd guess.
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Jan 18, 2017 | economistsview.typepad.com
reason : , January 16, 2017 at 02:03 AMI know I will completely offside with my view on this, but I think the behavioural/rational expectations debate is rather besides the point. The much bigger issues are uncertainty and disequilibrium.pgl -> reason ... , January 16, 2017 at 02:06 AMhttp://noahpinionblog.blogspot.de/2017/01/cracks-in-anti-behavioral-dam.html
Not offside. Spot on.reason -> reason ... , January 16, 2017 at 02:09 AMThe fundamental problem is in trying to model an evolutionary system as though it was a quasi stationary system (with exactly proportional growth).New Deal democrat -> reason ... , January 16, 2017 at 05:31 AMAs I noted the other day, and Johnnny Bakho refers to below, the essence of this problem is that the thing being observed, observes back and adapts.reason -> New Deal democrat... , January 16, 2017 at 07:14 AMThe only kind of model that might work in the long run, is a model that works even after everybody becomes aware of it and adapts their behavior to it.
As to the issue of uncertainty, if we assume that most people operate with formal or informal budgets, anything that causes them to think that their budget is about to increase or decrease is going to change their consumption. And since people *hate* to sustain and realise losses, the change is going to be disproportionately intense if the uncertainty include an possible increase to the downside.
No that isn't enough. Sure people might change their behavior as their understanding changes. But other things are changing as well as the behavior. In particular, technology and available resources change.New Deal democrat -> reason ... , January 16, 2017 at 07:38 AMAs I said the system is evolutionary (which means an adaptive system - which includes behavior changes), and evolution is never easy to anticipate, which implies uncertainty. And the existence of uncertainty leads to persistent disequilibrium (as people adopt defensive contingent strategies to cope with uncertainty). The big errors in macro are all associated with the general equilibrium paradigm and the assumptions that come with it.
Point taken re technology and resources, although behavioral adaptation is a big part of why models fail.reason -> New Deal democrat... , January 16, 2017 at 08:40 AMI had a big long response worked out re the biggest endemic problem with "the assumptions that come with" macro's paradigm. Then my iPad decided to randomly pop up a keyboard screen and when I touched to get rid of it, deleted the entire comment!
The screaming at crapified Apple has passed now. I am zen again.
P.S. Rational expectations IS an attempt to build in behavioral adaptation. It is just that it turns out not very useful (it is empirically a complete flop).JohnH -> New Deal democrat... , January 16, 2017 at 07:36 AMI thought we were in a time of uncertainty right now due to Trump.New Deal democrat -> JohnH... , January 16, 2017 at 07:39 AMAnybody see any slowing of the economy? Markets are up.
Well-to-do GOPers foreseeing unfettered capitalist nirvana. It will pass.JohnH -> New Deal democrat... , January 16, 2017 at 08:11 AMSo there is 'uncertainty' and 'uncertainty.' Which kind of uncertainty leads to a slower economy? Why wouldn't unknown after-shocks from repealing Obamacare have current economic repercussions?reason -> JohnH... , January 16, 2017 at 08:45 AMRepublicans used to claim that the roll-out of Obamacare was causing economic uncertainty and hurting the economy.
Seems to me that the whole foundation of 'economic uncertainty' is rather shaky, particularly if the promised, disruptive actions of Trump don't cause economic repercussions.
Uncertainty (as for instance PK pointed out) can work in different ways in the short and long terms. In the short term it can result in hedging behavior which might actually promote some investment. In the longer term it will push up risk margins which will probably push growth rates down.ilsm -> reason ... , January 16, 2017 at 04:39 AMfootballjonny bakho -> reason ... , January 16, 2017 at 04:49 AMHumans evolved as social animals.point -> reason ... , January 16, 2017 at 06:07 AM
If rational expectations focuses on the individual and ignores that humans act as members of groups, not individuals, then it will not accurately predict human behavior or outcomes.Perhaps your comment is similar to supposing that perhaps "equilibrium" is a not always useful concept when the modeled surface may have multiple local maxima, minima and saddles.reason -> point... , January 16, 2017 at 07:18 AMNope. I think we are trying to model a system converging to an equilibrium that is changing faster than the system can possibly adapt. We should forget all about equilibrium in macro-economics. It only misdirects.libezkova -> reason ... , -1I once tried to explain this with an analogy to flying a plane - the plane is always sinking and rising and net path the outcome of the sum of different (constantly varying) forces. This is quite distinct for instance, from the way that a boat floats on the ocean (which is much closer to how we are trying to model things today). The stochastic shocks in economic models are like waves on the sea - where the net effect in the end is that the average position remains the same. I don't think the economy is like that.
The idea of equilibrium is a neoclassical fallacy. financial sector introduced in the system systemic instability, the positive feedback loop.Cassidy called it "Utopian economics".
As you wrote in 2015
reason :
The problem in thinking here is the equilibrium paradigm. Equilibrium NEVER exists. If there is a glut the price falls below the marginal cost/revenue point, if the seller is desperate enough it falls to zero!
Ignoring disequilibrium dynamics means this obvious (it should be obvious) point is simply ignored. The assumption of general equilibrium leads to the assumption of marginal productivity driving wages. You are not worth what you produce, you are worth precisely what somewhat else would accept to do your job.
See also
"The Virtues and Vices of Equilibrium, and the Future of Financial Economics"
J. Doyne Farmer and John Geanakoplos (2008)
http://cowles.econ.yale.edu/~gean/art/p1274.pdf
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Jan 18, 2017 | economistsview.typepad.com
Julio -> Peter K.... The main argument I've heard/read against UBI is that getting money without working is immoral and it should be "to everyone according to his work".Aside from the obvious contradictions here (we accept heirs getting money without working; and how do you measure anyone's work anyway?), I think this makes an assumption that everything we have is what we produce.
The fact is that most of what we have is inherited collectively. Even the most successful "job creator" types like Steve Jobs inherit a gigantic cart that they move a few inches forward.
This is not just concrete material wealth, but institutional wealth also, which we all contribute to continually. Every person that wakes up in the morning and accepts that problems with his neighbor should be resolved in court and not with a gun, is contributing to maintaining that inheritance.
From this perspective, a UBI that reflects your country's wealth is an inherited right.
This unstated assumption underlies many of our current debates. E.g. why does an American worker have the right to a Us-standard wage?
Reply Monday, January 16, 2017 at 11:15 AM RC AKA Darryl, Ron said in reply to Julio ... , January 16, 2017 at 12:01 PMWell said.anne -> Julio ... , January 16, 2017 at 12:26 PMNicely presented.
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Jan 18, 2017 | economistsview.typepad.com
im1dc : January 15, 2017 at 06:05 PM , 2017 at 06:05 PMEveryone will want to read this:"Trump's (and Putin's) Plan to Dissolve the EU and NATO."
http://talkingpointsmemo.com/edblog/trump-s-and-putin-s-plan-to-dissolve-the-eu-and-nato
"Trump's (and Putin's) Plan to Dissolve the EU and NATO."
By Josh Marshall...January 15, 2017...8:12 PM EDT
"Most people in this country, certainly most members of the political class and especially its expression in Washington, don't realize what Donald Trump is trying to do in Europe and Russia. Back in December I explained that Trump has a plan to break up the European Union. Trump and his key advisor Steve Bannon (former Breitbart chief) believe they can promise an advantageous trade agreement with the United Kingdom, thus strengthening the UK's position in its negotiations over exiting the EU. With such a deal in place with the UK, they believe they can slice apart the EU by offering the same model deal to individual EU states. Steve Bannon discussed all of this at length with Business Week's Josh Green and Josh and I discussed it in great detail in this episode of my podcast from mid-December.
Now we have a rush of new evidence that Trump is moving ahead with these plans.
One point that was clear in Green's discussions with Bannon and Nigel Farage is that Trump wants to empower Farage as its interlocutor with the United Kingdom. Given Farage's fringe status in the UK, on its face that seems crazy. But that is the plan. And it is a sign of how potent Farage's guidance and advice has become for Trump's view of Europe, the EU and Russia.
Two days ago, the United States out-going Ambassador to the EU gave a press conference in which he opened up about Farage's apparently guiding role in the Trump world and what he's hearing from EU Member states.
From the The Financial Times (sub.req.) ...
... Donald Trump's transition team have called EU leaders to ask "what country is to leave next" with a tone suggesting the union "is falling apart" this year, according to the outgoing US ambassador to the bloc.
... In a pugnacious parting press conference, Anthony Gardner warned of "fringe" voices such as Nigel Farage, the former UK Independence party leader, holding influence in Washington over Mr Trump's team.
... Speaking days before leaving office, Mr Gardner said it would be "lunacy" and "the height of folly" for the US to ditch half a century of foreign policy in order to support further EU fragmentation or become a "Brexit cheerleader" in Brussels.
... "I was struck in various calls that were going on between the incoming administration and the EU that the first question is: what country is about to leave next after the UK?" he said.
... "The perceived sense is that 2017 is the year in which the EU is going to fall apart. And I hope that Nigel Farage is not the only voice being listened to because that is a fringe voice."
Today in a new interview with the Germany's Bild and the Times of London Trump expanded on these goals dramatically. Trump leveled a series of attacks on German Chancellor Angela Merkel, suggesting he'd like to see her defeated for reelection and saying she'd hurt Germany by letting "all these illegals" into the country. Trump also called NATO "obsolete", predicted other countries would soon leave the EU, and characterized the EU itself as "basically a vehicle for Germany."
Trump and Bannon are extremely hostile to Merkel and eager to see her lose. But what is increasingly clear is that Trump will make the break up of the EU a central administration policy and appears to want the same for NATO.
My own view is that Trump and Bannon greatly overestimate America's relative economic power in the world. Their view appears to be that no European country will feel it is able to be locked out of trade with a US-UK trade pact. An America eager to break up the EU seems more likely to inject new life into the union. However that may be, Trump and Bannon clearly want to create a nativist world order based on the US, Russia and states that want to align with them. The EU and NATO are only obstacles to that goal."
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Jan 18, 2017 | economistsview.typepad.com
jonny bakho -> reason ... Do allies refuse to share intel with the US due to Trump-Russia
The Great Game has turned. Reply Monday, January 16, 2017 at 08:02 AM ilsm -> jonny bakho... , January 16, 2017 at 09:46 AMUS could do with a little better assessments and a lot less from many "allies".Chris G -> jonny bakho... , -1Do you mistrust US allies?
Like I do!
$20 says "Yes."And what happens if Trump and co decide to purge intelligence agencies of individuals they consider undesirable? I have no idea but I'm guessing they won't go flip burgers at McDonalds. (See also disbanding the Iraqi army ca. 2003.) Will they exhibit an entrepreneurial spirit? If so then what form will it take?
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Jan 18, 2017 | economistsview.typepad.com
It is MLK weekend....A Boy Named Sue : , January 15, 2017 at 12:22 AM
It is MLK weekend....ilsm -> A Boy Named Sue... , January 15, 2017 at 05:12 AM
https://www.youtube.com/watch?v=rynxqdNMry4Freedom is in the soul.RC AKA Darryl, Ron -> ilsm... , January 15, 2017 at 05:17 AMLet us 'ally' with all the world, let us protect civilians, let us impose 'just peace', let us squander the environment. No plan is too bloody, no price too steep to prevent another 9/11. The evening news still needs bodies of "those people". Non violence is un American.
I am not surprised the neoliberals do not post Dr King's Vietnam Speech:
Here it is:
http://www.lib.berkeley.edu/MRC/pacificaviet/riversidetranscript.html
War is a ... "destructive suction tube. And you may not know it, my friends, but it is estimated that we spend $500,000 to kill each enemy soldier, while we spend only fifty-three dollars for each person classified as poor, and much of that fifty-three dollars goes for salaries to people that are not poor."
Ike said the same thing in 1953 and 1961.
Poverty is violence.
I was informed by MLK's awareness of the truth on the ground in 1967. That is why I protested the war in Viet Nam when protests began early in 1968 in Richmond VA, but not the draft. In April 1969 I had to decide whether to go to Canada and maybe never see my family again and take my wife far from her family as well, go to prison, or go to Viet Nam. MLK had already been murdered and I had already lost hope in the truth and social justice. So, I went to Viet Nam. I figured Doctor King would understand.ilsm -> RC AKA Darryl, Ron... , January 15, 2017 at 05:34 AMI have a buddy who refused to take the step. Repeatedly until the SS board sent him to the 'judge'.RC AKA Darryl, Ron -> ilsm... , January 15, 2017 at 06:08 AMHe got 3 years in Public Health Service...... it was late '70 maybe they got kinder or maybe it was his area of NYS.
I took the ROTC route, became a cold warrior by accident.
Thank God! I never had to do any of my jobs!
Humans rarely see.
"...maybe it was his area of NYS..."RC AKA Darryl, Ron -> ilsm... , January 15, 2017 at 05:19 AM[I'd go with probably.]
BTW, that is an awesome great MLK speech. THANKS for dragging it out.
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anne : , January 15, 2017 at 09:43 AMhttps://www.nytimes.com/2017/01/15/world/europe/uk-set-to-choose-sharp-break-from-european-union.htmlFred C. Dobbs -> anne... , January 15, 2017 at 10:04 AMJanuary 15, 2017
U.K. Set to Choose Sharp Break From European Union
By STEVEN ERLANGERPrime Minister Theresa May is said to be opting for a "hard Brexit," taking Britain out of the European single market and the customs union.
[ This prospect makes no sense to me at all. How can the United Kingdom possibly gain economically from completely leaving the European Union? ]
'Hard Brexit greatest job-killing act in Welsh history'Fred C. Dobbs -> Fred C. Dobbs... , January 15, 2017 at 10:07 AM
http://www.bbc.com/news/uk-wales-politics-38628234
BBC News - January 15Taking the UK out of the EU single market would be "the greatest job-killing act in Welsh economic history", Plaid Cymru has said.
Several of Sunday's newspapers claim Prime Minister Theresa May will signal the move in a speech on Tuesday.
Plaid's treasury spokesman Jonathan Edwards told the BBC's Sunday Politics Wales programme the impact on Wales would be "devastating".
Downing Street has described the reports as "speculation".
The Carmarthen East and Dinefwr MP said pulling out of the single market and customs union would have a "huge impact on jobs and wages in Wales".
"The reality of what we're going to hear from [Theresa May] on Tuesday, it's going to be the greatest job-killing act in Welsh economic history, probably in British economic history," he added. ...
(Previously: EU referendum: Welsh voters back Brexit
http://www.bbc.com/news/uk-politics-eu-referendum-36612308
BBC News - June 24)Nine things you need to know about a 'Hard Brexit'
https://www.bloomberg.com/news/articles/2016-10-17/what-makes-a-hard-brexit-harder-than-a-soft-one-quicktake-q-a via @Bloomberg - October 171. What's a 'hard Brexit?'
It's a shorthand reference to one possible outcome of negotiations between the U.K. and the EU -- the U.K. giving up its membership in Europe's single market for goods and services in return for gaining full control over its own budget, its own law-making, and most importantly, its own immigration. If that happens, British leaders will be under pressure to quickly land a new trade pact or individual industry-by-industry deals with the EU. Otherwise, companies will be subjected to standard World Trade Organization rules, which would impose tariffs on them. Banks would lose the easy access they now enjoy to the bloc.
2. How would that differ from a softer Brexit?
A softer form would see the U.K. maintain some tariff-free access to the single market of some 450 million consumers. The U.K. would likely still have to contribute to the EU budget, allow some freedom of labor movement and follow some EU rules. That's what Norway does, as a member of the European Economic Area but not of the EU. ...
(And seven more things.)
Plaid Cymru: the Party of Wales, often referred to simply as Plaid) is a social-democratic political party in Wales advocating for Welsh independence from the United Kingdom within the European Union. ... (Wikipedia)anne -> Fred C. Dobbs... , January 15, 2017 at 11:39 AMI appreciate these additions.Fred C. Dobbs -> anne... , January 15, 2017 at 10:30 AM'How can the United Kingdom possibly gain economically from completely leaving theanne -> Fred C. Dobbs... , January 15, 2017 at 10:40 AM
European Union?'Voters decided that the UK was paying
more to be 'in the EU' than they were
receiving (in subsidies, etc.) for
*being* members. That and they were
expected by Way Too European, welcome
foreign workers, obey crazy regulations
imposed by foreigners, yada yada yada.(Wales, BTW, gets/got lots of aid from the EU.)
Or, is the key word 'completely'?
It was said months ago by the other major
EU members that they want Britain *out*, so
that alone should be a reason for PM May
to demand a very Soft Brexit.
After these months since the vote to leave the European Union, where the United Kingdom had special privileges to begin with, I still find no coherent rationale to the decision. There is no reason to think the cost of being an EU member was anywhere near the benefits to the UK, and evidence to the contrary that was repeatedly promised has never been produced.anne -> anne... , January 15, 2017 at 10:42 AMSimon Wren-Lewis has written often on Brexit and seems as puzzled as I am by the seeming toughness as well as the determination of Teresa May on the leaving.
https://mainly macro.blogspot.com/Fred C. Dobbs -> anne... , January 15, 2017 at 12:48 PMSimon Wren-Lewis, whose excellent blog can only be linked to by separating "mainly" and "macro."
It would seem UK voters were bamboozled aboutFred C. Dobbs -> Fred C. Dobbs... , January 15, 2017 at 01:07 PM
the finances. They do pay a lot *in* to be
EU members, as do other large/wealthy
members, but they also got a lot back.
They were told it was costing too much.'they were
expected (to be) Way Too European, welcome
foreign workers, obey crazy regulations
imposed by foreigners, etc.'Britain has always had mixed feelings
about being 'European' it seems, since
the end of their empire.
'End of Empire'...anne -> Fred C. Dobbs... , January 15, 2017 at 10:58 AMNo worries. There will
still be The Five Eyes,
the 'Special Relationship'.An exclusive club: The 5 countries that don't spy on each other http://to.pbs.org/2iv8mNk
via @PBS NewsHour - October 25, 2013It was born out of American and British intelligence collaboration in World War II, a long-private club nicknamed the "Five Eyes." The members are five English-speaking countries who share virtually all intelligence - and pledge not to practice their craft on one another. A former top U.S. counter-terrorism official called it "the inner circle of our very closest allies, who don't need to spy on each other."
This is the club that German chancellor Angela Merkel and French President Francois Hollande say they want to join - or at least, win a similar "no-spying" pact with the U.S. themselves.
It all began with a secret 7-page agreement struck in 1946 between the U.S. and the U.K., the "British-US Communication Agreement," later renamed UKUSA. At first their focus was the Soviet Union and its Eastern European satellites. But after Canada joined in 1948, and Australia and New Zealand in 1956, the "Five Eyes" was born, and it had global reach. They pledged to share intelligence - especially the results of electronic surveillance of communications - and not to conduct such surveillance on each other. Whiffs of the club's existence appeared occasionally in the press, but it wasn't officially acknowledged and declassified until 2010, when Britain's General Communications Headquarters, or GCHQ, released some of the founding documents. The benefits of membership are immense, say intelligence experts. While the U.S. has worldwide satellite surveillance abilities, the club benefits from each member's regional specialty, like Australia and New Zealand's in the Far East. "We practice intelligence burden sharing," said one former U.S. official. "We can say, 'that's hard for us cover, so can you?'" The ease and rapidity of information-sharing among the five "makes it quicker to connect the dots," said another intelligence veteran. "You can't underestimate the importance of the common language, legal system and culture," said another. "Above all, there is total trust." ...
Real per capita Gross Domestic Product for the United States had by 2014 recovered from the international recession to the level of 2007. Recovery for the United Kingdom came in 2015. The recession and recovery obviously were socially difficult and took an extended time.im1dc -> anne... , January 15, 2017 at 11:39 AMThen too, there had been a time of war from the US and UK extending from 2001.
An extended period of social turmoil that is difficult to grasp or shut out.
PM May is in way over her head and does not know what she is doing. Nor does she know what she says has meaning and effects. She's not long for office, imo of course.
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Jan 18, 2017 | economistsview.typepad.com
anne : , January 16, 2017 at 09:04 AMhttp://cepr.net/blogs/beat-the-press/brexit-the-story-on-tariffs-and-currency-fluctuationsanne -> anne... , -1January 16, 2017
Brexit: The Story on Tariffs and Currency Fluctuations
The New York Times decided to tout the risks * that higher tariffs could cause serious damage to industry in the UK following Brexit:
For Mr. Magal [the CEO of an engineering company that makes parts for the car industry], the threat of trade tariffs is forcing him to rethink the structure of his business. The company assembles thermostatic control units for car manufacturers, including Jaguar Land Rover in Britain and Daimler in Germany.
"Tariffs could add anything up to 10 percent to the price of some of his products, an increase he can neither afford to absorb nor pass on. 'We don't make 10 percent profit - that's for sure,' he said, adding, 'We won't be able to increase the price, because the customer will say, "We will buy from the competition."' "
The problem with this story, as conveyed by Mr. Magal, is that the British pound has already fallen by close to 10 percent against the euro since Brexit. This means that even if the European Union places a 10 percent tariff on goods from the UK (the highest allowable under the World Trade Organization), his company will be in roughly the same position as it was before Brexit. It is also worth noting that the pound rose by roughly 10 percent against the euro over the course of 2015. This should have seriously hurt Mr. Magal's business in the UK if it is as sensitive to relative prices as he claims.
[Graph]
It is likely that Brexit will be harmful to the UK economy if it does occur, but many of the claims made before the vote were wrong, most notably there was not an immediate recession. It seems many of the claims being made now are also false.
* https://www.nytimes.com/2017/01/15/world/europe/brexit-firms-business-relocate.html
-- Dean Baker
https://fred.stlouisfed.org/graph/?g=cov6January 15, 2017
Real Broad Effective Exchange Rate for United Kingdom, 2000-2016
(Indexed to 2000)
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Jan 18, 2017 | economistsview.typepad.com
Peter K. : January 15, 2017 at 08:38 AM http://www.eschatonblog.com/2017/01/changing-perspectives.htmlSUNDAY, JANUARY 15, 2017
Changing Perspectives
Short blog post means big generalizations, but...Post-impeachment, post-Bush selection, post-9/11 was a weird time in American politics (I suppose a specific weird time, it's always a weird time). One thing people forget about the impeachment era was that it was basically The Left (sometimes actually The Left like The Nation magazine writers and sometimes people who found themselves being branded The Left because of this) who defended Bill Clinton in the whole Monica Madness era (and before). Mainstream media (hi New York Times!), columnists, cable news personalities, all the respectable prominent "centrist" Democrats, were falling all over themselves to condemn that nasty Bill Clinton and his nasty penis, and Ken Starr was treated as the second coming of Jesus in respectable DC circles. It was a weird time in which the crazy left were actually the biggest defenders of the Democratic party, much bigger defenders of it than the Democratic party itself. It was a time when you wouldn't have been surprised if you woke up one morning and half the party hadn't decided to switch teams and become Republicans. "I was a Democrat before Bill Clinton did nasty things with that woman, but now I don't think rich people should pay taxes anymore..."
And then the selection, and then Iraq, and then Bush's re-election, and the whole Social Security privatization nonsense... It was always the "crazy left" that was trying to make the Democratic party just, you know, be Democrats, and everybody else basically being like "Why can't a Democrat be more like a Republican." Being against the war or against Social Security privatization (the Dems finally woke up on that one, but it took a lot of yelling) wasn't exactly calling for full communism, and plenty of people who thought they were just standard squishy Democrats suddenly found themselves being lumped together with radicals.
So I found myself on the crazy left. I'm genuinely more "lefty" than I was 15 years ago, but even now I'm not exactly calling for full communism. I generally think that usually the best use of my efforts are to pull the party leftward (not that I think I have the superpowers required to do this), not just because I'm more lefty, but because the forces pulling them to the right continue to be powerful and well-funded. Also, if the "crazy" position is a minimum wage of $25 an hour, then $15 an hour doesn't look so crazy anymore (for example). If the best we can ever do is a compromise, then it's best not to start the negotiations with the compromise position.
People get mad about criticizing Democrats these days in a way they never did before. People like Obama associates "the crazy left" with Bernie, blaming him (and therefore the crazy left) for Clinton's election problems. Maybe I'm wrong, but whatever horrors the Trump administration is going to unleash, the important thing is for the Democrats to draw distinctions, and not just hope for team R to step on enough rakes. "Not as evil as the other guys" just doesn't win elections, even when the other guys are really f!@#ing evil.
by Atrios at 09:48
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Jan 17, 2017 | economistsview.typepad.com
RC AKA Darryl, Ron : January 17, 2017 at 03:53 AMRE: Trump and Gorbachevreason -> RC AKA Darryl, Ron... , January 17, 2017 at 05:28 AMhttp://glineq.blogspot.com/2017/01/trump-and-gorbachev.html
"...Many people (myself included) have regretted that the Clinton administration has failed to seize the moment at the end of the Cold War to create a more just international order that would be based on the rules of law, would not be dichotomic or even Manichean one with its origin in the Cold War, and would include Russia rather than leave it out in the cold..."
[Was "Clinton administration has failed" a typo or a subtle semantic choice? Whereas "Clinton administration HAD failed" would have past perfect tense, "has failed" is present perfect tense, suggesting the subject "Clinton administration" is the continuum of compassionate conservatism beginning with Bill Clinton and ending with Barrack Obama. Semantics is why spelling is important. It is also why reading is important.]
I personally have no idea what Branko Milanovic is going on about there. As far as I can tell Russia chose to be "out in the cold", it wasn't excluded.RC AKA Darryl, Ron -> reason ... , January 17, 2017 at 06:21 AM[Not exactly. Sherman, set the wayback machine for 1998, near the end of the Bill Clinton administration's second term.]ilsm -> RC AKA Darryl, Ron... , January 17, 2017 at 02:00 PMhttp://fpif.org/aid_to_russia/
Aid to Russia
When the Soviet Union abruptly ceased to exist on December 25, 1991, it seemed that the West, particularly the U.S., finally had what it had always wanted–the opportunity to introduce quick, all-encompassing economic reform that would remake Russia in the West's own image.
By Janine Wedel, September 1, 1998.
Key Points
- Since 1992, the U.S. and other donors have provided Russia billions of dollars in aid for radical economic "reforms," largely defined as privatization of state-owned assets.
- The chief beneficiary of these reforms has been a small clique of political and economic powerbrokers.
- The Chubais clique typically instituted reforms through top-down presidential decree and a network of aid-funded "private" organizations which has circumvented Russia's legislature.
When the Soviet Union abruptly ceased to exist on December 25, 1991, it seemed that the West, particularly the U.S., finally had what it had always wanted–the opportunity to introduce quick, all-encompassing economic reform that would remake Russia in the West's own image. To this end, the U.S., over the past seven years, has embarked upon a fairly consistent course of economic relations with Russia. Three interrelated policies characterize this course: 1) the urging of radical economic "reforms," defined largely as the privatization of state-owned assets, to restructure the economy; 2) the backing of a particular political-economic group, or "clan," to do so; and 3) the provision of billions of dollars in U.S. and other Western aid, subsidized loans, and rescheduled debt.
The United States has consistently supported President Boris Yeltsin and a Russian cadre of self-styled economic "reformers" to conduct Western aid-funded economic reforms and negotiate economic relations with the West. U.S. support for Anatoly Chubais, Yegor Gaidar, and the so-called "Chubais Clan" (a group of savvy operators dominated by a clique from St. Petersburg) has bolstered the Clan's standing as Russia's chief brokers with the West and the international financial institutions. This support continues to the present. And, the Chubais Clan–not the Russian economy as a whole–has been the chief beneficiary of economic restructuring funding from the U.S. Agency for International Development (USAID).
Throughout the 1990s, Chubais has been a useful figure for Russian president Boris Yeltsin: beginning in November 1991 as head of Russia's new privatization agency, the State Property Committee (GKI), then additionally as first deputy prime minister in January 1994, and later as the lightning rod for complaints about economic policies after the communists won the Russian parliament (Duma) election in December 1995. Chubais made a comeback in 1996 as head of Yeltsin's successful reelection campaign and was named chief of staff for the president. In March 1997, Western support and political maneuvering catapulted him to first deputy prime minister and minister of finance. Although fired by Yeltsin in March 1998, Chubais was reappointed in June 1998 to be Yeltsin's special envoy in charge of Russia's relations with international lending institutions.
Working closely with Harvard University's Institute for International Development (HIID), the Chubais Clan controlled, directly and indirectly, millions of dollars in U.S. aid through a variety of institutions and organizations set up to perform privatization, economic-restructuring, and related activities. Between 1992 and 1997, HIID received $40.4 million from USAID in noncompetitive grants for work in Russia and was slated to receive another $17.4 million until USAID suspended HIID's funding in May 1997, citing evidence that HIID principals were engaged in "activities for personal gain." In addition to receiving millions in direct funding, HIID and the Clan helped steer and coordinate USAID's $300 million economic reform portfolio, which encompassed privatization, legal reform, development of capital markets, and the creation of a Russian securities and exchange commission.
The preferred method of economic reform was top-down presidential decree orchestrated by Chubais. Shortly after Yeltsin became the elected president of the Russian Federation in June 1991, the Federation's Supreme Soviet passed a law mandating privatization. After several schemes were floated, the Supreme Soviet passed a program in 1992 intended to prevent corruption, but the one Chubais eventually implemented contained none of the safeguards and was designed to encourage the accumulation of property in a few hands. This program opened the door to widespread corruption and was so controversial that Chubais ultimately had to rely largely on presidential decrees, not parliamentary approval, for implementation.
Instead of encouraging market reform, this rule by decree frustrated many market reforms as well as democratic decisionmaking. Some reforms, such as lifting price controls, could be achieved by decree. But many other reforms advocated by USAID, the World Bank, and the International Monetary Fund (IMF), including privatization and economic restructuring, depended on changes in law, public administration, or mindsets, and required working with the full spectrum of legislative and market participants-not just one group. The "reformers" set up still other means of bypassing democratic processes, including a network of aid-funded "private" organizations controlled by the Chubais Clan and HIID. These organizations enabled reformers to bypass legitimate bodies of government, such as ministries and branch ministries, and to circumvent the Duma.
Problems with Current U.S. Policy
Key Problems
- U.S. officials and a team of Harvard advisers have embraced the "reformers'" dictatorial political methods, arguing they alone are capable of instituting swift privatization and other economic restructurings.
- While professing to support simply economic reform, U.S. policies have consolidated political and economic power in the hands of one clique.
- The $11.2 billion IMF bailout in July 1998 will intensify these abuses and has failed to stem Russia's financial crisis.
The privatization drive that was supposed to reap the fruits of the free market instead helped to create a system of tycoon capitalism run for the benefit of a corrupt political oligarchy that has appropriated hundreds of millions of dollars of Western aid and plundered Russia's wealth.
Despite evidence of corruption and lack of popular support, many Western investors and U.S. officials embraced the "reformers" dictatorial modus operandi and viewed Chubais as the only man capable of keeping the nation heading along the troublesome road to economic reform. As Walter Coles, a senior adviser in USAID's Office of Privatization and Economic Restructuring program, said, "If we needed a decree, Chubais didn't have to go through the bureaucracy," adding, "There was no way that reformers could go to the Duma for large amounts of money to move along reform."
While this approach sounds good in principle, it is less convincing in practice because it is an inherently political decision disguised as a technical matter. As Chubais Clan member Maxim Boycko himself acknowledged in a 1995 co-authored book on privatization, "Aid can change the political equilibrium by explicitly helping free-market reformers to defeat their opponents . Aid helps reform not because it directly helps the economy–it is simply too small for that–but because it helps the reformers in their political battles."
In a 1997 interview, U.S. aid coordinator to the former Soviet Union, Ambassador Richard L. Morningstar, stood by this approach: "If we hadn't been there to provide funding to Chubais, could we have won the battle to carry out privatization? Probably not. When you're talking about a few hundred million dollars, you're not going to change the country, but you can provide targeted assistance to help Chubais."
U.S. assistance to Chubais continued even after he was dismissed by Yeltsin as First Deputy Prime Minister in January 1996. Chubais was placed on the HIID payroll, a show of loyalty that USAID Assistant Administrator Thomas A. Dine said he supported.
Much of this feels familiar to Russians raised in the Communist practice of political control over economic decisions–the quintessence of the discredited Communist system. While professing simply to support reform, U.S. policies afforded one group a comparative advantage and allowed much aid to be used as the tool of this group. Ironically, far from helping to separate the political and economic spheres, U.S. economic aid has instead reinforced the interdependency of these spheres. Indeed, the activities of HIID in Russia provide some cautionary lessons on abuse of trust by supposedly disinterested foreign advisers, on U.S. arrogance, and on the entire policy of support for a single Russian group of so-called reformers.
The July 1998 IMF bailout of Russia represents an intensification of the very policies that have produced such abuses. The $11.2 billion aid package for 1998, (with another $7.8 billion funds over three years pledged if Russia "stays on track"), is supposed to put an end to Russia's financial crisis. Yet only a very few certain political-economic players–not the population at large, including workers who have gone without wages for months–stand to reap any benefits.
Among those who spoke out against the bailout was Veniamin Sokolov, head of the Chamber of Accounts of the Russian Federation, Russia's equivalent of the U.S. General Accounting Office. Sokolov, who has investigated the destination of some previous monies from international lending institutions and aid organizations, argued, "All loans made to Russia go to speculative financial markets and have no effect whatsoever on the national economy." And it is the Russian people who are responsible for repaying those loans.
The very call for an IMF bailout is a commentary on the failure of previous economic aid to Russia: If aid had been effective, why were billions in IMF loans needed to prevent the country from falling into crisis? The IMF loan and accompanying hype were intended to revive confidence in Russia's plummeting markets and give the government time to get its financial markets under control. However, just weeks after the IMF deal was approved, investor confidence hit a new low and the Russian government was forced to devalue the ruble.
For its part, USAID, which provided Russia with $95.7 million in economic aid in 1997 and another $129.1 million estimated for 1998, is requesting from Congress $225.4 million in economic aid for Russia in 1999.
Toward a New Foreign Policy
Key Recommendations
- In order to support its stated objectives of fostering sound economic development and democratic institutions, the U.S. needs to reverse its current policies and practices in Russia.
- The United States must accept that the future shape of Russia must and will be determined by the Russian people and adhere to its basic principles such as participatory democracy and the rule of law.
- Washington should recognize that a healthy banking and financial system depends on a revival of production and distribution within Russia and should use its considerable influence with the World Bank and IMF to promote policies that address these fundamental problems.
Given the continuing socioeconomic deterioration of Russia, what should the United States do? If the U.S. government wants to adhere to its own declared objectives and help promote in Russia sound economic development and equitable growth as well as viable and transparent democratic institutions, it has no option than to reverse its current policies and practices.
The U.S. role in creating a system of tycoon capitalism and the current economic meltdown, coupled with military policies such as NATO expansion, have fueled anti-American sentiment in Russia. The first thing we should do, as Joseph Stiglitz, a leading World Bank economist, correctly suggests, is to adopt "a greater degree of humility . (and) acknowledgement of the fact that we do not have all of the answers." Washington must also accept that the future shape of Russia society will and must be determined by the Russian people. U.S. policy should at least try to adhere to some of the principles that it preaches, such as participatory democracy and the rule of law or even "no taxation without representation." In line this with, the U.S. must stop its policy of support-at-all-costs for Yeltsin and the Chubais Clan, not only in USAID targets but also in U.S. influence in IMF and World Bank lending.
Second, the U.S. government should recognize that a healthy banking and financial system cannot arise without a revival of production and distribution in the "real" economy. Measures which emphasize increases in tax collections and reductions in government expenditures under the current extremely depressed conditions simply guarantee accelerated decline of the real economy and social-political chaos. The United States should use its great influence on the IMF andWorld Bank to reduce their pressure on Russia to pursue such suicidal policies. Not only did the IMF bailout fail to restore confidence, but the business of international aid has been fundamentally ill-conceived. As Veniamin Sokolov warned: "Giving more loans to the Yeltsin government is comparable to giving a drug addict a fresh supply of narcotics. Any new loans will only go to the realm of financial speculation and to prop up support for Boris Yeltsin. Russia does not need any further such lending." In sum, further aid will go to the same corrupt niches and is likely to make the situation worse, not better.
Third, the U.S. should embark on a broad-based policy to encourage governance and the rule of law. It is essential that the United States discontinue support of non-inclusive organizations and the bypassing of democratic process through decree. Some U.S. aid funds have gone for "democracy building," including strengthening and revamping the judiciary. However, these efforts have been a low priority and have been compromised and undermined by the practice of U.S. economic advisers encouraging the Chubais Clan to enact swift economic reforms without approval of the Duma, Russia's popularly elected legislature.
The U.S. needs to adopt a pro-democracy stance that encourages institution-building and as broad a range of democratic positions as possible. We must cease to select specific groups or individuals as the recipients of uncritical support, which both corrupts our "favorites" and delegitimizes them in the eyes of their fellow citizens.
Fourth, President Clinton himself, other U.S. officials, and economic advisers need to establish contact and ties with a wide cross-section of the Russian leadership–politicians, economists, and social and political activists–and not only with Yeltsin and his allies. How Russian elites perceive the efficacy of U.S. aid programs and policies should be a source of concern, especially because many Russians have questioned American intentions. Although a reversal of policy will require a long and resolute process of diplomacy, Clinton administration officials can take steps by, for example, making efforts to meet with members of the Duma and a diversity of Russian elites.
[What the US largely did at that point was disengage aid to Russia and set them adrift.]
This is a jr high social studies homework assignment from a pro neocon teacher.ilsm -> ilsm... , January 17, 2017 at 02:02 PMBill Clinton was all out after Russia, Talbot and his neocon advisors!
The look the other way when the united Germany sent a brigade size armored set to Croatia to do Serbs.
In Jul 1997 Poland, Hungary and Czech republic were entered in to NATO.
Several undeclared wars against Serbia under Clinton. The Russians looked on helpless to aid the historic Tsarist protectorate.
The Crimean War in 1857 was fought over the same issues.
End of cold war was back to the historic west Europe versus Russia.
Milanovic is out of his element.
Then there was Harvard's economic advisors' pillaging Russian evolution.RC AKA Darryl, Ron -> ilsm... , January 17, 2017 at 02:37 PMDocumented by David Warsh.
It is not clear what Milanovic was trying to get at, but what Janine Wedel wrote about was how I came to understand the story. Your writing makes Milanovic seem cogent. I am talking about your organization of ideas and your semantics, as well as his. Neither of you get much across for the effort. Wedel can actually write. Whether she is right or not, I cannot say, but it is how I have heard the story told from the beginning.ilsm -> RC AKA Darryl, Ron... , January 17, 2017 at 03:29 PMI typed too much!libezkova -> ilsm... , January 17, 2017 at 05:55 PMno more six word lines
Here is a web page about Harvard mafia did Russia in 90thlibezkova -> libezkova... , January 17, 2017 at 06:43 PMhttp://www.softpanorama.org/Skeptics/Pseudoscience/harvard_mafia.shtml
Looks like there was a desire to completely destroy Russian economics and turn Russia into vassal state by the USA ruling elite. So the policy was not to help, but help to destroy.Chris G -> RC AKA Darryl, Ron... , January 17, 2017 at 02:15 PMHuge profits were made by devouring Russia and all xUSSR region and plunging the population into abject poverty. But eventually it backfired.
Yeah, hard to argue that the U.S. did the Russian people a solid after the Soviet Union collapsed.RC AKA Darryl, Ron said in reply to Chris G ... , January 17, 2017 at 02:38 PM
Yep. The US is good about intervening, screwing it up, and then leaving the scene of the crime.JohnH -> RC AKA Darryl, Ron... , January 17, 2017 at 07:31 AMRegarding Russia, Clinton was more interested in domination that development...a consistent theme in US history since its beginning.pgl -> JohnH... , January 17, 2017 at 08:04 AMInstead of promoting democracy, the US rigged the 1996 election in favor of the drunkard Yeltsin.
http://www.newsmax.com/Newsmax-Tv/bill-clinton-advise-boris-yeltsin-dick-morris/2016/09/08/id/747327/To hear the all the whining of Democrats and of the security state, the chickens may have come home to roost.
Wow - Anne is not going to like this suggestion that Yeltsin was a drunkard. Of course you missed the real problem - his regime of crony capitalism was incredibly corrupt. Stiglitz covered the damage that was done in a chapter entitled "Who Lost Russia". Something else you never bothered to read.pgl -> pgl... , January 17, 2017 at 08:05 AMChapter 5 of Globalization and its Discontents (2002)JohnH -> pgl... , January 17, 2017 at 09:54 AMhttps://www.princeton.edu/wwac/academic-review/files/561/8.3c_StiglitzCh5.doc
Yeltsin's "regime of crony capitalism was incredibly corrupt"...Clinton's regime on a grander scale...which was why Clinton wanted to rig the Russian election for Yeltsin?ilsm -> RC AKA Darryl, Ron... , January 17, 2017 at 02:16 PMHaving been is Strategic Air Command, as well as a long time in the technical side of NORAD's mission I find Milanovic's concluding statement utterly misguided.ilsm -> RC AKA Darryl, Ron... , -1"But note that the Cold War had one good feature: it was "Cold".
"Civilization"* could have ended in less than the time to watch an NFL football game.
My experiences in the cold war were really great!! The nuclear forces I supported were on 'immediate' launch alert, several rumors abide about close calls from 'sensor errors and communication black out". Any of SAC's bomb wings could have its alert Buffs in the air in single digit minutes!
It is safer to move NATO right up to Moscow! Neocon hyperbole from Milanovic selling the US military industrial complex' marketing plans. Look how secure and prosperous the 'west' has been under the umbrella of $28T in US war spending.
It don't cause any concerns that NATO has organized former Warsaw pact against Russia.
It will be deceptively "Cold" until it goes thermonuclear over that brigade level trip wire.
Obama on cornering Russia is an extension of Wm Clinton.
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Jan 17, 2017 | economistsview.typepad.com
anne : , January 17, 2017 at 05:56 AMhttp://cepr.net/blogs/beat-the-press/the-housing-bubble-was-not-hard-to-see-except-for-economistsRC AKA Darryl, Ron -> anne... , January 17, 2017 at 06:43 AMJanuary 17, 2017
The Housing Bubble Was Not Hard to See (Except for Economists)
Max Ehrenfreund features * a rather silly debate among economists about explanations for the housing bubble (wrongly described as the "financial crisis) in a Washington Post piece. The debate is over whether subprime mortgages were central to the bubble. Of course subprime played an important role, but the focus of the piece is on new research showing that most of the bad debt was on prime mortgages taken out by people with good credit records.
I sort of thought everyone knew this, but whatever. The more important point is that economists continue to treat the housing bubble as something that snuck up on us in the dark and only someone with an incredibly keen sense of the housing market would have seen it. (I focus on the bubble and not the financial crisis, because the latter was very much secondary and really a distraction. By 2011 our financial system had been pretty much fully mended, yet the weak economy persisted. This was due to the fact that we had no source of demand in the economy to replace the demand generated by the housing bubble.)
Anyhow, there was nothing mysterious about the housing bubble. We had an unprecedented run-up in real house prices with no remotely plausible explanation in the fundamentals of the housing market. This could be clearly seen by the fact that rents were just following in step with the overall rate of inflation, as they have generally for as long as we have data. (This is nationwide, rents have outpaced inflation in many local markets, as have house prices.) The bubble should also have been apparent as we had record vacancy rates as early as 2002. The vacancy rate eventually rose much higher by the peak of the market in 2006.
It should also have been clear that the collapse of the bubble would be bad news for the economy. Residential construction reached a peak of 6.5 percent of GDP, about 2.5 percentage points more than normal. (When the bubble burst it fell to less than 2.0 percent of GDP due to massive overbuilding.) Also, the housing wealth effect led to an enormous consumption boom as people spent based on $8 trillion in ephemeral housing wealth.
In short, there was really no excuse for economists missing the bubble or not recognizing the fact that its collapse would lead to a severe recession. The signs were very visible to any competent observer.
-- Dean Baker
Precisely. THANKS!Chris Lowery -> anne... , January 17, 2017 at 07:29 AMMortgage payments as a percentage of personal disposable income --Stan Dupcomic -> anne... , January 17, 2017 at 08:00 AMhttps://fred.stlouisfed.org/graph/fredgraph.png?g=cp0S
Median home price versus median family income --
unprecedented run-up in real house prices with no remotely plausible explanation in the fundamentals of the housing market. This could be clearly seen by the fact that rentsilsm -> anne... , January 17, 2017 at 03:24 PM
"
~~dB~During that run-up would have been the perfect time to shift into full reserve banking thus cutting off the deluge of cash looking for a home, looking for homes to buy, flip, and inflate.
Now it's too
late
!
Res Re getting bubbly up here in parts of the Boston MRSA.
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Jan 17, 2017 | economistsview.typepad.com
All those notions like "full employment" (when employment metrics are completely screwed) are very questionable indeed. And role of federal reserve in enforcing neoliberal policies is often underestimated. Greenspan was a neoliberal stooge. A servant of Wall Street.Peter K. : , January 17, 2017 at 08:02 AM
JW Mason remembers a famous episode that the progressive neoliberals would have us forget:http://jwmason.org/slackwire/what-does-crowding-out-even-mean/
What Does Crowding Out Even Mean?
by J.W. Mason
Posted on January 16, 2017Paul Krugman is taking some guff for this column where he argues that the US economy is now at potential, or full employment, so any shift in the federal budget toward deficit will just crowd out private demand.
...
...In the more sophisticated textbooks, this becomes a central bank reaction function - the central bank's actions change from being policy choices, to a fundamental law of the economic universe. The master parable for this story is the 1990s, when the Clinton administration came in with big plans for stimulus, only to be slapped down by Alan Greenspan, who warned that any increase in public spending would be offset by a contractionary shift by the federal reserve. But once Clinton made the walk to Canossa and embraced deficit reduction, Greenspan's fed rewarded him with low rates, substituting private investment in equal measure for the foregone public spending. In the current contest, this means: Any increase in federal borrowing will be offset one for one by a fall in private investment - because the Fed will raise rates enough to make it happen."
...
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Jan 17, 2017 | economistsview.typepad.com
Dan Kervick : January 16, 2017 at 07:08 PMWhether Trump is seen by most of the public in the end as a "legitimate" president will be determined primarily by perceptions of his job performance.
Chris G -> Dan Kervick... , January 16, 2017 at 07:28 PM
He's got a lot of options for catastrophic failure - potential conflict with China coming to the forefront over the past week or so.* If he decides to have a go with them that will have an adverse effect on people's ability to buy cheap shit at WalMart.libezkova -> Dan Kervick... , -1It could well adversely affect their ability to feed themselves. If that happens then I predict it will adversely affect his popularity.
Trump is a narcissist. Popularity is of foremost importance to him. That noted, I'm skeptical that he's self-aware enough to recognize what actions he might take that people - as in essentially all of us, not just the ones who didn't vote for him - would hate him for. If given enough rope will he hang himself? Perhaps more significantly, how many of us will hang first?
*Next week it'll be something new. Iran's probably due for a turn in the headlines before the winter is out. Perhaps a dust up with Putin in the spring?
Dan,Jas11 -> libezkova... , January 16, 2017 at 08:40 PM"Whether Trump is seen by most of the public in the end as a "legitimate" president will be determined primarily by perceptions of his job performance."
I am not so sure. People fought to block Hillary not to elect Trump. Hillary was the chosen candidate of the deep-state and international finance capital. They actually don't care if politician belong to 'D' or 'R' branch of the establishment party. They are only concerned how well they will serve the US led global neoliberal empire.
That means that Trump deserves the "Benefit of the Doubt" in evaluation of his performance -- most people understand that he will be fighting on two fronts, with the deep state being one.
The market reaction to Trumps surprise win pretty clearly indicates that Hillary was not the finance industries choice.libezkova -> Jas11... , January 16, 2017 at 09:08 PMIf your that far off on this one, I'd bet your just as far off on the 'deep state', whatever that means.
I agree that it is strange that we have "Trump rally" and that this rally somewhat contradicts my hypothesis (although not much if we analyze S&P 500 by sector, for example oil industry definitely should rally, no question about it).Ben Groves -> libezkova... , January 16, 2017 at 09:35 PMYou forgot a very important nuance that S&P500 as a whole did much better that financial industry ETFs.
People made a lot of money based on this recently.
In any case, thank you for pointing this out.
Trumps ties to de Rothschild is where you don't get it. Oh, what did Donald do in 2008 that got him in bad trouble..............GS left the Morgans in 2009 and finally that truth is coming out of the closet. My guess when Democrats come back into the WH, GS gets hurt bad bad bad.sanjait -> libezkova... , January 16, 2017 at 11:14 PM"You forgot a very important nuance that S&P500 as a whole did much better that financial industry ETFs."libezkova -> sanjait... , January 17, 2017 at 03:20 AMThis is the exact opposite of what actually happened.
Seriously, go look it up. The finance sector has been *by far* the biggest beneficiary of Trump's election, in terms of stock price movement.
Seriously, go look it up. XLF, for example, vs S&P 500.
Yes, from election day I am deeply wrong. For 2017, I am right.Dan Kervick -> libezkova... , January 17, 2017 at 04:59 AMTrump will likely do something bold militarily, very early in his administration, most likely directed against ISIS and related jihadi groups. He will partner with Russia in doing this.Chris G -> Dan Kervick... , -1If it goes reasonably well, Putin will be our new best buddy in the war on terror. The media herd, responding with the usual America at War televised info-frenzy, will ramble en masse away from it's current obsession with Russian spying and hacking, and will instead be covering the war theater with embedded journalists in flak jackets and helmets. They will be interviewing, among others, Russian pilots and generals, newly discovered to be likable and sturdy vodka-slugging war heroes, and our allies against terrorists, not diabolical villains. They will regale the public with background stories about heroic Russian deeds of the past, including how they stopped Hitler in the snows of western Russia. Nobody will care any more about the details of the 2016 election, and the sad dead-enders who can't let it go.
On the other hand, if it goes poorly, this will give the public even more opportunity to indulge conspiracy theories about false flags, Russian and American "deep state" subversion, crony-capitalist bribery, election meddling and the illegitimacy of the 2016 outcome, Russian state television propaganda, left-wing fifth columnists and traitors, etc.
So that's what I mean when I say that Trump's perceived legitimacy will depend on how things go.
That sounds about right.
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Jan 17, 2017 | economistsview.typepad.com
Dan Kervick : , January 16, 2017 at 07:08 PMWhether Trump is seen by most of the public in the end as a "legitimate" president will be determined primarily by perceptions of his job performance.Chris G -> Dan Kervick... , January 16, 2017 at 07:28 PMHe's got a lot of options for catastrophic failure - potential conflict with China coming to the forefront over the past week or so.* If he decides to have a go with them that will have an adverse effect on people's ability to buy cheap shit at WalMart. It could well adversely affect their ability to feed themselves. If that happens then I predict it will adversely affect his popularity.libezkova -> Chris G ... , January 16, 2017 at 08:30 PMTrump is a narcissist. Popularity is of foremost importance to him. That noted, I'm skeptical that he's self-aware enough to recognize what actions he might take that people - as in essentially all of us, not just the ones who didn't vote for him - would hate him for. If given enough rope will he hang himself? Perhaps more significantly, how many of us will hang first?
*Next week it'll be something new. Iran's probably due for a turn in the headlines before the winter is out. Perhaps a dust up with Putin in the spring?
If we assume that Trump is a narcissist, your analysis is all wrong. In this case he might go not after China, but after security parasites who tried to play J. Edgar Hoover on him. And try to destroy this scum.libezkova -> Dan Kervick... , -1Dan,"Whether Trump is seen by most of the public in the end as a "legitimate" president will be determined primarily by perceptions of his job performance."
I am not so sure. People fought to block Hillary not to elect Trump. Hillary was the chosen candidate of the deep-state and international finance capital. They actually don't care if politician belong to 'D' or 'R' branch of the establishment party. They are only concerned how well they will serve the US led global neoliberal empire.
That means that Trump deserves the "Benefit of the Doubt" in evaluation of his performance -- most people understand that he will be fighting on two fronts, with the deep state being one.
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Jan 17, 2017 | economistsview.typepad.com
JohnH -> Fred C. Dobbs... From the man who studied Obama before he started rising:"the early Obama phenomenon (dating back to his campaign for an open U.S. Senate seat in Illinois in 2003-04) was intimately tied in with the United States' corporate and financial ruling class. Obama was rising to power with remarkable backing from Wall Street and K Street election investors who were not in the business of promoting politicians who sought to challenge the nation's dominant domestic and imperial hierarchies and doctrines."
http://www.truthdig.com/report/item/we_were_warned_about_barack_obama_--_by_obama_20170114Now 'liberal' commentators are celebrating Obama because he did his job...behaving like a Bush41 Republican and normalizing the damage that Bush43 did. Reply Tuesday, January 17, 2017 at 07:39 AM Peter K. -> Fred C. Dobbs... , January 17, 2017 at 07:53 AM
"John F. Kennedy, though popular in retrospect, had his agenda stalled in Congress when he was killed. "Peter K. -> Peter K.... , January 17, 2017 at 08:41 AMThat will tend to stall your agenda.
Kennedy's wanted to cut taxes on the rich and corporations and increase inequality.Peter K. -> Peter K.... , January 17, 2017 at 08:42 AM"President John F. Kennedy brought up the issue of tax reduction in his 1963 State of the Union address. His initial plan called for a $13.5 billion tax cut through a reduction of the top income tax rate from 91% to 65%, reduction of the bottom rate from 20% to 14%, and a reduction in the corporate tax rate from 52% to 47%. The first attempt at passing the tax cuts was rejected by Congress in 1963. Conservatives revolted at giving Kennedy a key legislative victory before the election of 1964."
LBJ helped pass his agenda. Neoliberal!
"The Office of Tax Analysis of the United States Department of the Treasury summarized the tax changes as follows:[2]
reduced top marginal rate (on income over $100,000, roughly $770,000 in 2015 dollars, for individuals; and over $180,000; roughly $1,380,000 in 2015 dollars, for heads of households) from 91% to 70%
reduced corporate tax rate from 52% to 48%
phased-in acceleration of corporate estimated tax payments (through 1970)
created minimum standard deduction of $300 + $100/exemption (total $1,000 max)
starve the beast!
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Jan 17, 2017 | www.zerohedge.com
DAVOS MAN : "A soulless man, technocratic, nationless and cultureless, severed from reality. The modern economics that undergirded Davos capitalism is equally soulless, a managerial capitalism that reduces economics to mathematics and separates it from human action and human creativity."
– From the post: "For the Sake of Capitalism, Pepper Spray Davos"
One thing I've been very careful about not doing over the years is self-identifying under any particular political ideology. I articulated my reasoning in the post, Thank You and Welcome New Readers – A Liberty Blitzkrieg Mission Statement :
I am not a Democrat or a Republican. I do not consider myself a libertarian, progressive, socialist, anarchist, conservative, neoconservative or neoliberal. I'm just a 38 year old guy trying to figure it all out. Naturally, this doesn't imply that there aren't things which I hold dear. I have a strong belief system based on key principles. It's just that I don't think it makes sense for me to self-label and become part of a tribe. The moment you self-label, is the moment you stop thinking for yourself. It's also the moment you stop listening. When you think you have all the answers, anyone who doesn't think exactly as you do on all topics is either stupid or "paid opposition." I don't subscribe to this way of thinking.
Despite my refusal to self-identify, I am comfortable stating that I'm a firm supporter of populist movements and appreciate the instrumental role they've played historically in free societies. The reason I like this term is because it carries very little baggage. It doesn't mean you adhere to a specific set of policies or solutions, but that you believe above all else that the concerns of average citizens matter and must be reflected in government policy.
Populism reaches its political potential once such concerns become so acute they translate into popular movements, which in turn influence the levers of power. Populism is not a bug, but is a key feature in any democratic society. It functions as a sort of pressure relief valve for free societies. Indeed, it allows for an adjustment and recalibration of the existing order at the exact point in the cycle when it is needed most. In our current corrupt, unethical and depraved oligarchy, populism is exactly what is needed to restore some balance to society. Irrespective of what you think of Donald Trump or Bernie Sanders, both political movements were undoubtably populist in nature. This doesn't mean that Trump govern as populist once he is sworn into power, but there's little doubt that the energy which propelled him to the Presidency was part of a populist wave.
Trump understands this, and despite having surrounded himself with an endless stream of slimy ex-Goldman Sachs bankers and other assorted billionaires, his campaign took the following position with regard to Davos according to Bloomberg :
Donald Trump won't send an official representative to the annual gathering of the world's economic elite in Davos, taking place next week in the days leading up to his inauguration, although one of the president-elect's advisers is slated to attend.
Former Goldman Sachs President Gary Cohn, a regular attendee in the past, told the group he would skip 2017 after being named in December to head the National Economic Council, said people familiar with the conference. Other top Trump appointees will also pass up the forum.
A senior member of Trump's transition team said the president-elect thought it would betray his populist-fueled movement to have a presence at the high-powered annual gathering in the Swiss Alps. The gathering of millionaires, billionaires, political leaders and celebrities represents the power structure that fueled the populist anger that helped Trump win the election, said the person, who asked for anonymity to discuss the matter.
While all of this sounds great, it's not entirely true. For example:
Hedge fund manager Anthony Scaramucci is planning to travel to Davos, though. The founder of SkyBridge Capital and an early backer of Trump's campaign, Scaramucci was named on Thursday as an assistant to the president.
Not that Scaramucci's presence should surprise anyone, he's the consummate banker apologist, anti-populist. Recall what he said last month :
"I think the cabal against the bankers is over."
This guy shouldn't be allowed within ten feet of any populist President, but Trump unfortunately seems to have a thing for ex-Goldman Sachs bankers.
While we're on then subject, let's discuss Davos for a moment. You know, the idyllic Swiss town where the world's most dastardly politicians, oligarchs and their fawning media servants will gather in a technocratic orgy of panels and cocktail parties to discuss how best to manage the world's affairs in the year ahead. Yes, that Davos.
To get a sense of the maniacal mindset of these people, I want to turn your attention to a couple of Reuters articles published earlier today. First, from Davos Elites Struggle for Answers as Trump Era Dawns :
DAVOS, Switzerland – The global economy is in better shape than it's been in years. Stock markets are booming, oil prices are on the rise again and the risks of a rapid economic slowdown in China, a major source of concern a year ago, have eased.
First report from Davos is in. Everything's fine.
And yet, as political leaders, CEOs and top bankers make their annual trek up the Swiss Alps to the World Economic Forum in Davos, the mood is anything but celebratory.
Last year, the consensus here was that Trump had no chance of being elected. His victory, less than half a year after Britain voted to leave the European Union, was a slap at the principles that elites in Davos have long held dear, from globalization and free trade to multilateralism.
Moises Naim of the Carnegie Endowment for International Peace was even more blunt: "There is a consensus that something huge is going on, global and in many respects unprecedented. But we don't know what the causes are, nor how to deal with it."
Thank you for your invaluable insight, Moises.
The titles of the discussion panels at the WEF, which runs from Jan. 17-20, evoke the unsettling new landscape. Among them are "Squeezed and Angry: How to Fix the Middle Class Crisis" , "Politics of Fear or Rebellion of the Forgotten?", "Tolerance at the Tipping Point?" and "The Post-EU Era".
Ah, a panel on how to fix the middle class. Sounds interesting until you find out who some of the speakers are.
You really can't make this stuff up. Now back to Reuters .
Perhaps the central question in Davos, a four-day affair of panel discussions, lunches and cocktail parties that delve into subjects as diverse as terrorism, artificial intelligence and wellness, is whether leaders can agree on the root causes of public anger and begin to articulate a response.
This has to be a joke. The public has been yelling and screaming about all sorts of issues they care about from both sides of the political spectrum for a while now. Whether people identify as on the "right" or the "left" there's general consensus (at least in U.S. populist movements) of the following: oligarchs must be reined in, rule of law must be restored, unnecessary military adventures overseas must be stopped, and lobbyist written phony "free trade" deals must be scrapped and reversed. There's no secret about how strongly the various domestic populist movements feel on those topics, but the Davos set likes to pretends that these issues don't exist. They'd rather focus on Russia or identify politics, that way they can control the narrative and then propose their own anti-populist, technocratic solutions.
A WEF report on global risks released before Davos highlighted "diminishing public trust in institutions" and noted that rebuilding faith in the political process and leaders would be a "difficult task".
It's not difficult at all, what we need are new leaders with new ideas, but the people at Davos don't want to admit that either. After all, these are the types who unanimously and enthusiastically supported the ultimate discredited insider for U.S. President, Hillary Clinton.
Moving along, let's take a look at a separate Reuters article previewing Davos, starting with the title.
Davos elite faces evaporating trust in "post-trith" era
Did you see what they did there? The evaporating trust in globalist elites has nothing to do with "post-truth," but as usual, the media insists on making excuses for the rich and powerful. The above title implies that elites lost the public truth as a result of a post-truth world, not because they are a bunch of disconnected, lying, corrupt thieves. Like Hillary and the Democrats, they are never to blame for anything that happens.
With that out of the way, let's take a look at some of the text:
Trust in governments, companies and the media plunged last year as ballots from the United States to Britain to the Philippines rocked political establishments and scandals hit business.
The majority of people now believe the economic and political system is failing them, according to the annual Edelman Trust Barometer, released on Monday ahead of the Jan. 17-20 World Economic Forum (WEF).
"There's a sense that the system is broken," Richard Edelman, head of the communications marketing firm that commissioned the research, told Reuters.
"The most shocking statistic of this whole study is that half the people who are high-income, college-educated and well-informed also believe the system doesn't work."
Even wealthy, well educated people understand things aren't working, which begs the question. Who does think the system is working? Well, the people attending Davos, of course. These are the folks who cheer on a world in which eight people own as much as the bottom 50%.
As can be seen fro the above excerpts, one thing that's abundantly clear to almost everyone is that the system is broken. This is exactly where populism comes in to perform its crucial function. This is not an endorsement of Trump, but rather an endorsement of mass popular movements generally, and a recognition that such movements are the only way true change is ever achieved. As Frederick Douglass noted in 1857:
This struggle may be a moral one, or it may be a physical one, and it may be both moral and physical, but it must be a struggle. Power concedes nothing without a demand. It never did and it never will. Find out just what any people will quietly submit to and you have found out the exact measure of injustice and wrong which will be imposed upon them, and these will continue till they are resisted with either words or blows, or with both. The limits of tyrants are prescribed by the endurance of those whom they oppress. In the light of these ideas, Negroes will be hunted at the North and held and flogged at the South so long as they submit to those devilish outrages and make no resistance, either moral or physical. Men may not get all they pay for in this world, but they must certainly pay for all they get. If we ever get free from the oppressions and wrongs heaped upon us, we must pay for their removal. We must do this by labor, by suffering, by sacrifice, and if needs be, by our lives and the lives of others .
The above is an eternal truth when it comes to human struggle. The idea that the most wealthy and powerful individuals on earth are going to get together in a Swiss chalet and figure out how to help the world's most vulnerable and suffering is on its face preposterous. Again, this is why popular movements are so important. They represent the only method we know of that historically yields tangible results. This is also why the elitists and their media minions hate populism and demonize it every chance they get. Which is really telling, particularly when you look at the various definitions of the word. First, here's what comes up when you type the word into Google:
pop·u·lism
/ˈpäpyəˌlizəm/
noun
support for the concerns of ordinary people.
"it is clear that your populism identifies with the folks on the bottom of the ladder"
•the quality of appealing to or being aimed at ordinary people.
"art museums did not gain bigger audiences through a new populism"
Or how about the following from Merriam-Webster:
Definition of populist1 :
a member of a political party claiming to represent the common people; especially, often capitalized
:
a member of a U.S. political party formed in 1891 primarily to represent agrarian interests and to advocate the free coinage of silver and government control of monopolies
2:
a believer in the rights, wisdom, or virtues of the common people-
populism
play \-ˌli-zəm\ noun-
populistic
play \ˌpä-pyə-ˈlis-tik\ adjectiveAside from the 19th century historical reference, what's not to like about any of the above? The mere fact that billionaire-owned media is so hostile to populism tells you everything you need to know. Behind the idea of populism is the notion of self-government, and Davos-type elitists hate this. They believe in a technocracy in which they make all the important decisions. Populism is dangerous because populism is empowering. It implies that the people ultimately have the power.
I think a useful exercise for readers during this Davos circus laden week is to note whenever the word "populism" is used within mainstream media articles. From my experience, it's almost always portrayed in an overwhelmingly negative manner. Here's just one example from the first of the two Reuters articles mentioned above.
The global financial crisis of 2008/9 and the migrant crisis of 2015/16 exposed the impotence of politicians, deepening public disillusion and pushing people towards populists who offered simple explanations and solutions.
The key phrase in the above is, " populists who offered simple explanations and solutions." This betrays an incredible sense of arrogance and contempt for regular citizens. Note that it didn't offer a critique of a specific populist leader and his or her polices, but rather presented a sweeping dismissal of all popular movements as "simplistic." In other words, despite the fact that the people mingling at Davos are the exact same people who set the world on fire, they somehow remain the only ones capable enough to fix the world. How utterly ridiculous.
The good news is that most people now plainly see the absurdity of such a worldview, and understand that the people at Davos represent a roadblock to progress, as opposed to any sort of solution. While I don't endorse any particular populist movement at moment, I fully recognize the need for increased populism as a facet of American political life, particularly at this moment in time.
Populism can be dangerous, and it's certainly messy, but it's a crucial pressure release valve for any functioning free society. If you don't allow populist movements to do their thing in the short-term, you'll get far worse outcomes in the long-term.
In the timeless words of JFK:
Those who make peaceful revolution impossible will make violent revolution inevitable.
Nobody wants that.
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Jan 16, 2017 | economistsview.typepad.com
anne : , January 15, 2017 at 12:16 PMhttp://voxeu.org/article/how-status-competition-killed-german-wwii-fighter-pilotsanne -> anne... , January 15, 2017 at 01:48 PMJanuary 14, 2017
Better dead than bad: Status competition among German fighter pilots during World War II
By Philipp Ager, Leonardo Bursztyn, and Joachim VothDuring World War II, the German military publicly celebrated the performance of its flying aces to incentivise their peers. This column uses newly collected data to show that, when a former colleague got recognition, flying aces performed much better without taking more risks, while average pilots did only slightly better but got themselves killed much more often. Overall the incentives may have been detrimental, which serves as a caution to those offering incentives to today's financial risk-takers.
Conceptually alone, this essay on the effects of competition is intriguing and possibly quite important and surely worth following up.
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Jan 16, 2017 | economistsview.typepad.com
ilsm -> DrDick... , January 16, 2017 at 05:44 PMWhat do you call dumping a Ukraine president? And Qaddafi, blowing up the middle east, and funding al Qaeda? Fraud/treason, both Clinton neocon connections same as Reagan, shruBush and Obama.ilsm -> New Deal democrat... , January 16, 2017 at 05:48 PMThe recondite democrat bar for traitor is very high. As arcane as the demo-neolib definition of progressive!
The center has moved to the Reagan republican side except for its abhorrence of any judeo-christian sexual code.llisa2u2 : , January 16, 2017 at 12:05 PMNeutrality is shameful when the time is siding with the immoral.
The old saying what's good for the goose is good for the gander. Well considering all that the Republican party and leadership has dissed out for 8 years or so. Hey, they need to be dissed right back. Trump has set the "TONE" that all is fair as he set the rules, established the rule-book way below the belt, loves playing in the swamp and slinging mud. He deserves any and all that gets slung back from in and out of the swamp, in all global directions! Unfortunately everyone else will be the only citizens to suffer. He's just way above the maddening crowd, and protected by all his cronies!ilsm -> llisa2u2... , January 16, 2017 at 04:14 PMyup, only difference between the neocons of Kagan and Bush and progressive neolibs is gay rights.Jay : , January 16, 2017 at 12:54 PMUS is a master of manipulating foreign elections.ilsm -> Jay... , January 16, 2017 at 03:38 PMhttp://www.latimes.com/nation/la-na-us-intervention-foreign-elections-20161213-story.html
"In Yugoslavia, the U.S. and NATO had long sought to cut off Serbian nationalist and Yugoslav leader Slobodan Milosevic from the international system through economic sanctions and military action. In 2000, the U.S. spent millions of dollars in aid for political parties, campaign costs and independent media. Funding and broadcast equipment provided to the media arms of the opposition were a decisive factor in electing opposition candidate Vojislav Kostunica as Yugoslav president, according to Levin. "If it wouldn't have been for overt intervention Milosevic would have been very likely to have won another term," he said."
Google Camp Bonesteel. A large NATO base funded mostly by you to keep Serbia under wraps. Enforcing the Clinton neocon "just peace". With threat of US' brand of expensive high tech mass murder.JohnH : , January 16, 2017 at 01:28 PMMLK's memory is defiled by the fake liberals grabbing it for revolting political gain.
Democrats voting against legalizing drug imports from Canada (Hall of Shame:) Bennett, Cory Booker, Cantwell, Carper, Casey, Coons, Donnelly, Heinrich, Heitkamp, Menendez, Murray, Tester, and Warner.ilsm -> JohnH... , January 16, 2017 at 03:35 PMPresumably many, like Cantwell, are avid supporters of 'free' trade--trade that is rigged in favor of certain special interests. Legalizing drug imports from Canada would have hurt the special interests that fund their campaigns.
Only a prelude to Democrats caving to Trump...
progressive neoliberals are libertarians and market idolators' lackies that want gays to get their wedding cakes from Christian bakeries.ilsm -> ken melvin... , January 16, 2017 at 03:34 PM30000 destroyed e-mails, denying the public access to records. How many felony counts is 30000? Read the Federal Records Act.B.T. -> ken melvin... , January 16, 2017 at 04:40 PMWhat drove the assassination of Bernie Sanders campaign?DeDude : , January 16, 2017 at 02:14 PMPeople who ask if Trump is illegitimate need to ask if Hillary was as well.
After all, we aren't talking about literal rigging right? Just leaks with bad timing?
Considering that Trump and the GOP majority got millions less votes than their democratic counterparts, one can question the legitimacy (but not the legality) of the laws they pass - since they would not represent the will of the people.ilsm -> DeDude... , January 16, 2017 at 03:32 PMpoor dudlibezkova -> DeDude... , January 16, 2017 at 06:09 PMYes that's true. But all those votes belong to just two places: NYC and California.ilsm : , January 16, 2017 at 03:27 PMYou have a problem here my democratic friend.
por pk!Chris Herbert : , January 16, 2017 at 04:17 PMI start this sermon with poor pk, and those who of unsound logic who think he is not jumped the shark poor pk.
John Lewis.......
From Dr King's Vietnam Sermon Apr 1967:
"Now, I've chosen to preach about the war in Vietnam because I agree with Dante, that the hottest places in hell are reserved for those who in a period of moral crisis maintain their neutrality. There comes a time when silence becomes betrayal."
The liberals' silence is betrayal! All the democrat sponsored fake liberal agendas around this holiday remain damnably silent about the evil that is Clinton/Obama war to end "unjust peace".
Here is my comment for poor pk, Lewis and the whining do-over tools:
Last week US drones killed 3 supposed terrorists in Yemen, they were supposed to be al Qaeda in Arabian Peninsula (AQAP). No charges, no jury, no judge.
AQAP is related to the guys Obama is funding to take down Assad and put Syria in ruinous hate filled group of jihadis like run amok in Libya.
So silent on deadly evil; but so boisterous about affronts to gay people wanting nice cakes!
Lewis and his crooked neoliberal ilk have been milking Dr. King for 50 years!
Hey, if it's politics every pathology from torture to assassination to bombing civilians is approved. If you did it as a person, you would be immediately incarcerated. This nation state worship, or religious worship in many parts of the world, is infused with pathology. It's in our DNA apparently. We are over killers par excellence. Only rats are as good. I'm betting on the rats.ilsm -> Chris Herbert... , January 16, 2017 at 06:01 PMwhy we have Dr King and Gandhi.Jesse : , January 16, 2017 at 05:35 PMI like the rat metaphor for neolibs and GOP.
ilsm : , -1"Politicians were mostly people who'd had too little morals and ethics to stay lawyers."
George R. R. Martin
poor democrats!Cannot reconcile your corporatist, neoliberal, war monger losing to a TV star who suggests we should not tilt with a nuclear power with insane doctrine defining when peace should be breeched; you say the winner is 'illegitimate' or make up relations with a nationalist leader who does not toe the 'one worlder' line.
US should be Denmark!
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Jan 16, 2017 | economistsview.typepad.com
reason : January 16, 2017 at 02:25 AMJust as an aside - not really economics, but I am really worrying about what the war between the future white house team and the CIA that seems to be brewing. I don't see good solutions to this. It is sort of unprecedented in a major western country. Can you think of a similar case (where the intelligence services - and perhaps the military as well regarded there own government head as an enemy agent)?reason -> reason ... , January 16, 2017 at 03:02 AMPerhaps MI5 and Wilson?Fang__z -> reason ... , January 16, 2017 at 04:03 AMCanaris and Hitler. :pilsm -> reason ... , January 16, 2017 at 04:41 AMHenry VI Pt2ilsm -> reason ... , January 16, 2017 at 04:49 AMdems playing Yorks
put the CIA in
the Tower
CIA been the neocon
payroll too long
who told you Soviets
were never going
tp collapse
Define unprecedented. What are your standards for a "major western nation"? Any moral standard? Do they include blowing up countries, using militarized spooks with unlimited secret funding?jonny bakho -> reason ... , January 16, 2017 at 05:03 AMIf you side with the devil what are you?
In tilting with the CIA, Trump is a saint.
Don't worry. Be happy. Nothing can be done now.The voters wanted someone to "shake things up"Chris G -> jonny bakho... , January 16, 2017 at 05:06 AM
Trump will be applying creative destruction to government
Obama failed to drive the NeoCons out of government. Trump may do so, but the replacement might be fundamentally more corrupt.As with Obamacare, the idea is to destroy it and replace it with something better.
Most revolutions find it easy to destroy and very much harder to build
Most sane leaders recognize this difficulty and modify the existing rather than destroy and never getting around to replacement or find the replacement to be worse than the existing.Looters on the other hand love destruction. The resulting chaos affords them more opportunity to get windfalls. Trump will give the voters the radical change they think they want. But Trump will use the destruction as an opportunity for personal gain. The public will be left with a gutted government that will need to be rebuilt before it will function again
One quibble: The destruction he applies will not be creative. It will be thorough but entirely unimaginative.reason -> jonny bakho... , January 16, 2017 at 07:24 AM
I don't believe in "creative destruction", I believe in "destructive creation" which is something quite different. But that is not the point. This is not about the government as such, it is about the security apparatus in itself. It could get very nasty if that ends up either totally alienated or politicized.Chris G -> reason ... , January 16, 2017 at 05:03 AMIf I were President, provoking an organization whose specialty is covert operations and which has track record of bringing about the demise of insufficiently agreeable leaders would not be high on my to-do list.ilsm -> Chris G ... , January 16, 2017 at 05:20 AMHas the imperator surrounded himself with the wrong praetorians?Peter K. -> reason ... , January 16, 2017 at 05:37 AMWhy do you think a war is brewing? What do you think is going to happen?ilsm -> Peter K.... , January 16, 2017 at 05:44 AMThey'll give him bad intel like they did with Bush?
The meme that Trump will "get US into war" is a Clinton loser-whiner meme! Delusional and misleading; the neocon Clinton would have done Putin first CIA fictional, regime change excuse the yellow press could spread.Peter K. -> ilsm... , January 16, 2017 at 05:54 AMTrump is an isolationist who repeatedly said the Iraq war was a disaster, which it was.reason -> Peter K.... , January 16, 2017 at 07:29 AMIf the CIA is going after Trump they're doing a bad job. The worst they could come up with is some unverified accounts that Trump likes pee-pee parties.
Because they are already reportedly telling some of their contacts not to trust the government with information in case it ends up with hostile governments. Maybe using the word "war" is misleading. Maybe "cold war" is more accurate, but in general I mean a state of mutual distrust.
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Jan 08, 2017 | economistsview.typepad.com
Peter K. : January 07, 2017 at 01:25 PM , 2017 at 01:25 PMDeLong:im1dc : , January 07, 2017 at 04:32 PM"The Wheel Has Turned Again
The Longer Depression: But now the wheel of history has turned once again. We have a Second Gilded Age. We have had what looks to have been either the second-largest or the largest adverse financial business-cycle shock in history. We have had an economic downturn followed by a very slow recovery that has produced and will produce a cumulative output gap vis-a-vis potential that will rival and may well exceed the Great Depression itself as a multiple of the economy's productive potential.
But it is not just what people call "the Great Recession" and should call "the Longer Depression". It is the long, steady decline in safe interest rates at all maturities since 1990: the decline in short-term safe real interest rates from 4% to -1.5%, and the decline in long-term safe real interest rates from 5% to 1%."
Krugman insists things are basically the same. We're almost back to normal. Progressive Neoliberalism. Really, these people need to be sidelined.
Bernie Sanders was completely right.
"We're just barely over the border into normality, which is why I think the Fed should hold and we could still use some fiscal stimulus for insurance, and very low rates still make the case for lots of infrastructure spending. But it's not the same as it was.'"
No it's not the same as it was, as DeLong points out.
I don't recall these points being discussedilsm : , January 07, 2017 at 05:22 PM1. Jason Furman Obama's chief economist, says, 'Aging workforce and declining productivity are driving slower growth' & "Furman noted that productivity is declining all around the world"
2. "Former Obama chief economist Alan Krueger told the panel that the administration might have accepted a lower growth rate in order to foster a "no-drama" economy so that the financial sector could heal from the financial crisis."
3. "Hubbard and John Taylor, a Stanford University professor, argued that new policies could make a difference. Sluggish growth "is due to policy," Taylor said. "What you need is a whole set of policies" to address the problem"
I am drawn to Krueger and Furman's views b/c they are based on the past 8 years experience but shocked by Hubbard and Taylor's since their views are solely based on Trump Economic Team Hype without reference to specific concrete Policy or even a known proposal by Trump's team
"Suggesting Trump's economic plans can spark growth closer to 3% is 'wishful thinking,' Obama adviser says"
'Aging workforce and declining productivity are driving slower growth, Furman says'
By Greg Robb, Senior economics reporter...Jan 7, 2017...4:42 p.m. ET
"CHICAGO (MarketWatch) - Republican economists were upbeat Saturday that President-elect Donald Trump's economic policies could get the economy growing closer to a sustainable 3% annual rate, but the suggestion was greeted with skepticism by a senior member President Obama's economic team.
At the moment, the Congressional Budget Office estimates the economy's sustainable growth rate is 1.8%, down from a historical rate above 3%.
During a bipartisan panel discussion at the American Economic Association meeting, Glenn Hubbard, dean of the Columbia University Business School, said Trump's plans could get GDP growth "up to 2.75% or so."
While the details of Trump's policies remain unknown, the combination of broad-based tax reform, regulatory reform, infrastructure and military spending could boost the economy, Hubbard said.
However, Jason Furman, Obama's chief economist, shot back that Republicans were ignoring the "massive" depressing impact on growth from an aging workforce.
"This is going to matter a lot. If you forecast something like 2%-2.2% [growth], it is going to take your budget in one direction, if you forecast 2.75% or higher, it is going to take your budget in a different direction, he said.
Furman said of growth rates of 2.75% or higher would be further away from the forecast of mainstream economists "than any budget in the last 24 years."
"Part of how you get higher is wishful thinking," Furman said. Details of any tax cut will matter, he said.
However, Hubbard and John Taylor, a Stanford University professor, argued that new policies could make a difference.
Sluggish growth "is due to policy," Taylor said. "What you need is a whole set of policies" to address the problem, he added.
"Where we are now in this economy...is that some structural reforms have the potential for not only a long-term benefit which as economists we emphasize but also short-run," Taylor said.
Taylor said poor U.S. economic policies "had a huge influence" on productivity growth, which has been weakening since 2005.
"There is an opportunity for reversal," he said.
But Furman noted that productivity is declining all around the world, which suggests that Obamacare and other U.S. regulations might not be the cause of the decline.
Former Obama chief economist Alan Krueger told the panel that the administration might have accepted a lower growth rate in order to foster a "no-drama" economy so that the financial sector could heal from the financial crisis.
"Part of that was by design, part of that was...an attempt to make the financial system safer to ensure that banks raised more capital as a buffer against shocks. It probably has come at the cost of some growth," Krueger said.
"Going forward...I think we may go from a no-drama economy to something very different," he added."
They work for the guy who chooses to blame the Russians and ignore the crooked party he led. Who borrowed $1422B and his mouthpieces said the deficit was <$600B......They say the same things to John Lennon about Peace!
Who knows what happens in the future?
Someone should have heard the guy who said 'it makes no sense to run Qaddafi's weapons from Benghazi to the jihadis', and 'don't send the ambassador over there late in the day'.
I am reminded of what the losers, the naysayers said about Bernie's ideas.
Too much opinion, and not enough let's try it rather than saying "it cannot be done".
Answer to the point about aging workforce: EPR for under 54 year olds has plenty of slack. As to productivity that is a "on the one hand" proposition.
I would have a tarot reading before I listened to the Obama guys.
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Jan 08, 2017 | economistsview.typepad.com
point -> pgl... , January 07, 2017 at 05:37 AMIt seems the lightning speed spread of contingent labor in the 2010s should be evidence of this. Contingent labor as in being "on call" for positions such as retail clerk. A person who must be available for uncertain hours loses the opportunity to find a second job. The employer demanding contingent labor is essentially demanding uncompensated work hours.cm -> point... , January 07, 2017 at 08:39 AMIn any event, the practice seems to have become near universal by a couple years ago, suggesting a level of employer market power far in excess of what one would think by looking at numbers like the official unemployment rate. It may also suggest that labor market monopsony may exist at quite small employer size.
What you describe is in general not due to monopsony. There is still a substantial number of independent retail and other companies that are not (explicitly) coordinating their actions and job function designs.RC AKA Darryl, Ron -> cm... , January 07, 2017 at 09:46 AMIt is just regular supply and demand dynamics, in combination with social feedback (actors observing what "peers" are getting away with and trying the same, and after a while it works its ways into a new normal).
In corporate lingo it is known as "best practices" - don't innovate process, just copy what has worked elsewhere.
Unfortunately, in the contemporary corporate Zeitgeist "best" usually means "worst", at least from the POV of employees.Zeppelin Hindenburg Delivery -> cm... , January 07, 2017 at 09:58 AMLibezkova -> cm... , January 07, 2017 at 10:53 AM
retail and other companies that are not (explicitly) coordinating
"Although they have an app for coordinating plus incentive to coordinate, they fully understand that by the time they begin coordinating the game is over. The game for brick and mortar retail is now hanging by a tread.
16% of retail is now intertube orders being shipped out by USPS, Fedex, Amazon airship drone & UPS. For the next 2 years the 16% will double each year then slowly expand toward the 99% asymptote. Sure!
When you ski at Aspen you will see old-time-y shops for retail, shops that only the wealthy will use for more than window-shop. Plenty time for best practices but
no time to
innovate
!
cm,
"companies that are not (explicitly) coordinating their actions and job function designs."That happens by default.
Wall-Mart dominates retail (5K stores I think out of over 11,593 stores and clubs in 28 countries) and it is a very cruel company. Other companies copy Wall-Mart practices.
They have no "social conscience" at all and try to drive their labor as hard as possible paying as little as possible. In other words, they can be viewed as a corporate psychopath.
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Jan 08, 2017 | economistsview.typepad.com
RGC : January 07, 2017 at 11:45 AM , 2017 at 11:45 AMBy Asad ZamanRGC -> RGC... , -1
January 7, 2017P8 Keynesian Complexity
................
"But no one appears to have understood the fundamental insights of Keynesian complexity: the system as whole does not act as a simple aggregate of the actions of the individual agents within the system. Pre-Keynesian macroeconomics was based centrally on the misunderstanding that the macroeconomy can be understood by scaling up the microeconomic behaviors of individual agents. While Keynes forcefully rejected this thesis, and created a complex system view of the macroeconomy, simple-minded followers failed to understand complexity, and went back to the pre-Keynesian views."
........................
https://weapedagogy.wordpress.com/2017/01/07/p8-keynesian-complexity/Paul Samuelson on Keynes (same link):Libezkova -> RGC... , January 07, 2017 at 01:39 PMIronically, failure to understand Keynes led to dismissal and contempt "Paul Samuelson felt he could say that "it is remarkable that so active a brain would have failed to make any contribution to economic theory . .." (cited in John Foster 2006).
Because Samuelson could not understand the complexity of Keynesian theory, he wrote that: "[The General Theory] is a badly written book, poorly organized; any layman who, beguiled by the author's previous reputation, bought the book was cheated of his 5 shillings. It is not well suited for classroom use. It is arrogant, bad-tempered, polemical, and not overly generous in its acknowledgements. It abounds with mares' nests and confusions: involuntary unemployment, wage units, the equality of savings and investment, the timing of the multiplier, interactions of marginal efficiency upon the rate of interest, forced savings, own rates of interest, and many others. In it the Keynesian system stands out indistinctly, as if the author were hardly aware of its existence or cognizant of its properties; and certainly he is at his worst when expounding its relations to its predecessors."
Samuelson's arrogance in believing that he understood the Keynesian system better than Keynes created the biggest barrier to understanding Keynes for 20th Century economists. Because of his stature, he became the authorized interpreter of Keynes, and very few went back to original writings to try to understand them. Those who did also failed to come to grips with complexity, and as a result, it is impossible to count the variety of interpretations of Keynes - see for example, Backhouse and Bateman. The Keynesian elephant has a huge number of parts, it seems.
Thank you for this link and quote.RGC -> RGC... , January 07, 2017 at 02:24 PMThat was my problems with Samuelson too, but I never was able to express is with such a clarity,
This blogger is discussing The General Theory chapter by chapter. This post is chapter 2 of 24.anne -> anne... , January 07, 2017 at 10:26 AMhttp://krugman.blogs.nytimes.com/2013/08/20/coalmines-and-aliens-again/anne -> anne... , -1August 20, 2013
Coalmines and Aliens, Again
By Paul KrugmanBrad DeLong * catches John Cochrane ** being remarkably dense:
"Paul Krugman recommended, with refreshing clarity, that the US government fake an alien invasion so we could spend trillions of dollars building useless defenses. (I'm not exactly sure why he does not call for real defense spending. After all, if building aircraft carriers saved the economy in 1941, and defenses against imaginary aliens would save the economy in 2013, it's not clear why real aircraft carriers have the opposite effect. But I'm still working on the nuances of new-Keynesianism, so I'll let him explain the difference. I'm not a big fan of huge defense spending anyway.)"
As I've explained before, *** the alien thing was a modern riff on Keynes's coalmine thought experiment. **** It's worth quoting that one in full:
"It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly 'wasteful' forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict 'business' principles. For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions.
"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."
In a way, I'm amazed by economists who find this sort of thing absurd on its face. Leave macroeconomics on one side: what about the theory of the second best? This theory - which is just basic micro - says that when some markets are distorted, for whatever reason, social costs and benefits across the economy don't correspond to private costs, so that unprofitable, even seemingly wasteful activities can sometimes be beneficial. And an economy in which millions of willing workers can't find work is surely one with massive distortions of some kind.
Oh, and let's always remember that Keyensians like me don't believe that thing like the paradox of thrift and the paradox of flexibility are the way the economy normally works. They're very much exceptional, applying only when interest rates are up against the zero lower bound. Unfortunately, that happens to be the world we're currently living in.
** http://johnhcochrane.blogspot.com/2013/01/more-new-keynesian-paradoxes.html
*** http://krugman.blogs.nytimes.com/2011/08/24/coalmines-and-aliens/
**** https://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/chapter10.html
A series of superb short essays by Paul Krugman.
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Jan 07, 2017 | economistsview.typepad.com
Peter K. : January 07, 2017 at 08:08 AM , 2017 at 08:08 AMDeLong has a lengthy thought-provoking blogpost about Larry Summer, secular stagnation and John A. Hobson.Peter K. -> Peter K.... , January 07, 2017 at 08:10 AMHe disagrees with Yellen and Krugman about fiscal stimulus.
http://www.bradford-delong.com/2017/01/three-four-many-secular-stagnations.html#more
Three, Four... Many Secular Stagnations!
by Brad DeLong
January 07, 2017 at 05:25 AM...
C. Seeking Not a Cure But Palliatives: For Summers, secular stagnation does not have one simple cause but is the concatenation of a number of different structural shocks un- or only loosely-connected with each other in their origin that have reinforced each other in their effects pushing the short-term safe nominal Wicksellian "neutral" rate down below zero. But even though there is no one root cause, there are two effective palliatives to neutralize or moderate the effects.
Thus Summers calls for two major policy initiatives:
1. Larger and much more aggressive progressive tax and transfer (and predistribution?) policies to end the Second Gilded Age.
2. A major shift to an investment-centered expansionary fiscal policy as the major component of what somebody or other once called "a somewhat comprehensive socialisation of investment [as] the only means of securing an approximation to full employment not exclud[ing] all manner of compromises and of devices by which public authority will cooperate with private initiative "
I think he has a very, very strong case here.
..."
Be more like Denmark.
Although technocratic, these are more socialist than progressive neoliberal solutions. Progressive neoliberalism with its emphasis on private sector "solutions" helped to bring about our so-called secular stagnation.
Why didn't Summers back Bernie Sanders over Clinton?Peter K. -> Peter K.... , -1
Krugman in today's links:"Now deficits are fine at precisely the moment when the economy seems to be fairly close to full employment, the Federal Reserve is starting to hike rates, and the case for fiscal expansion, while not completely absent, is fairly subtle, resting mainly on the precautionary motive. "
The "center-left." Progressive neoliberalism.
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Jan 07, 2017 | economistsview.typepad.com
point -> pgl... , January 07, 2017 at 05:37 AMIt seems the lightning speed spread of contingent labor in the 2010s should be evidence of this. Contingent labor as in being "on call" for positions such as retail clerk. A person who must be available for uncertain hours loses the opportunity to find a second job. The employer demanding contingent labor is essentially demanding uncompensated work hours.cm -> point... , January 07, 2017 at 08:39 AMIn any event, the practice seems to have become near universal by a couple years ago, suggesting a level of employer market power far in excess of what one would think by looking at numbers like the official unemployment rate. It may also suggest that labor market monopsony may exist at quite small employer size.
What you describe is in general not due to monopsony. There is still a substantial number of independent retail and other companies that are not (explicitly) coordinating their actions and job function designs.RC AKA Darryl, Ron -> cm... , January 07, 2017 at 09:46 AMIt is just regular supply and demand dynamics, in combination with social feedback (actors observing what "peers" are getting away with and trying the same, and after a while it works its ways into a new normal).
In corporate lingo it is known as "best practices" - don't innovate process, just copy what has worked elsewhere.
Unfortunately, in the contemporary corporate Zeitgeist "best" usually means "worst", at least from the POV of employees.Zeppelin Hindenburg Delivery -> cm... , January 07, 2017 at 09:58 AMLibezkova -> cm... , January 07, 2017 at 10:53 AM
retail and other companies that are not (explicitly) coordinating
"Although they have an app for coordinating plus incentive to coordinate, they fully understand that by the time they begin coordinating the game is over. The game for brick and mortar retail is now hanging by a tread.
16% of retail is now intertube orders being shipped out by USPS, Fedex, Amazon airship drone & UPS. For the next 2 years the 16% will double each year then slowly expand toward the 99% asymptote. Sure!
When you ski at Aspen you will see old-time-y shops for retail, shops that only the wealthy will use for more than window-shop. Plenty time for best practices but
no time to
innovate
!
cm,
"companies that are not (explicitly) coordinating their actions and job function designs."That happens by default.
Wall-Mart dominates retail (5K stores I think out of over 11,593 stores and clubs in 28 countries) and it is a very cruel company. Other companies copy Wall-Mart practices.
They have no "social conscience" at all and try to drive their labor as hard as possible paying as little as possible. In other words, they can be viewed as a corporate psychopath.
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Jan 07, 2017 | economistsview.typepad.com
RGC : January 07, 2017 at 11:45 AM , 2017 at 11:45 AMBy Asad ZamanRGC -> RGC... , -1
January 7, 2017P8 Keynesian Complexity
................
"But no one appears to have understood the fundamental insights of Keynesian complexity: the system as whole does not act as a simple aggregate of the actions of the individual agents within the system. Pre-Keynesian macroeconomics was based centrally on the misunderstanding that the macroeconomy can be understood by scaling up the microeconomic behaviors of individual agents. While Keynes forcefully rejected this thesis, and created a complex system view of the macroeconomy, simple-minded followers failed to understand complexity, and went back to the pre-Keynesian views."
........................
https://weapedagogy.wordpress.com/2017/01/07/p8-keynesian-complexity/Paul Samuelson on Keynes (same link):Ironically, failure to understand Keynes led to dismissal and contempt "Paul Samuelson felt he could say that "it is remarkable that so active a brain would have failed to make any contribution to economic theory . .." (cited in John Foster 2006).
Because Samuelson could not understand the complexity of Keynesian theory, he wrote that: "[The General Theory] is a badly written book, poorly organized; any layman who, beguiled by the author's previous reputation, bought the book was cheated of his 5 shillings. It is not well suited for classroom use. It is arrogant, bad-tempered, polemical, and not overly generous in its acknowledgements. It abounds with mares' nests and confusions: involuntary unemployment, wage units, the equality of savings and investment, the timing of the multiplier, interactions of marginal efficiency upon the rate of interest, forced savings, own rates of interest, and many others. In it the Keynesian system stands out indistinctly, as if the author were hardly aware of its existence or cognizant of its properties; and certainly he is at his worst when expounding its relations to its predecessors."
Samuelson's arrogance in believing that he understood the Keynesian system better than Keynes created the biggest barrier to understanding Keynes for 20th Century economists. Because of his stature, he became the authorized interpreter of Keynes, and very few went back to original writings to try to understand them. Those who did also failed to come to grips with complexity, and as a result, it is impossible to count the variety of interpretations of Keynes - see for example, Backhouse and Bateman. The Keynesian elephant has a huge number of parts, it seems.
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Jan 07, 2017 | economistsview.typepad.com
Libezkova -> ilsm... January 07, 2017 at 12:43 PM , 2017 at 12:43 PMilsm,"The MSM is building a case to do Putin like the one to do Assad."
I am not sure about that. I think this anti-Russian hysteria is mainly for internal consumption and designed to put a smoke screen of the problem of the US neoliberal society and increase the cohesion of population, which essentially rejected neoliberal elite during the recent elections.
The bout of McCarthyism that we observe now might also be an attempt to de-legitimize Trump presidency and to tie his hands. This Machiavellian trick with expulsion of diplomats that Nobel Peace Price winner played with Russians recently suggests the latter. Deep state that controls the US foreign policy feels the threat and reacts accordingly.
Too many people in Washington are "national security parasites" and are dependent of continuation of wars for the expansion of the US led global neoliberal empire.
Trump promised to drain the swamp, but he probably underestimated the level of resistance he will encounter.
Just look at hissy fits that WaPo and NYT is still engaged it. They really behave like Putin agent ascending into position of POTUS :-). The same is true of some commenters here.
They feel threatened by the rejection of their ideology and are ready to do purges in best Trotskyites tradition. As I mentioned before they are really "Latter Date Trotskyites" in most of their ideological postulates.
- Use of violence for the spread of the ideology. A totalitarian vision for a world-encompassing monolithic global state (US led neoliberal empire) governed by an ideologically charged "vanguard".
- Creation and maintenance of the illusion of "immanent threat" from powerful enemies for brainwashing the population (National Security State instead of "Dictatorship of proletariat").
- Purges of dissent via neo-McCarthyism tactics.- The mantle of inevitability (famous TINA statement of Margaret Thatcher)
- The study of neoclassical economics as the key method of indoctrination of people with economists as a class of well paid priests of neoliberal ideology.
- War on, and brutal suppression of organized labor. While in Soviet Russia organized labor was emasculated and trade unions became part of government apparatus, under neoliberalism they are simply decimated. It "atomize" individual workers presenting them as goods on the "labor market" controlled by large corporations ( via the myth of human capital ). Economic fetishism. Neoliberals see the market as a semi-sacred element of human civilization. They want to create global labor market that favors transnational corporations. The idea of "employability" is characteristically neoliberal. It means that neoliberals see it as a moral duty of human beings, to arrange their lives to maximize their value on the labor market. Paying for plastic surgery to improve employability (almost entirely by women) is a typical neoliberal phenomenon -- one that would surprise Adam Smith.
- The pseudoscientific (or quasi-religious) myth of "free-market" (why not "fair"?). with neoclassical economy instead of "Marxist political economy" which provides a pseudo-scientific justification for the greed and poverty endemic to the system. Set of powerful myths, which like in Marxism create a "secular religion". Such as on "Free Trade", "Invisible Hand Hypothesis", "Rational expectations" scam, "Shareholder value" scam, etc. Fake promises of prosperity, which are not unlike the rhetoric of the Communist Party of the USSR about "proletariat" as the ruling class to which all benefits belongs.
- Scapegoating and victimization of poor as new Untermensch. This is a part of Randism and is closely related to glorification of the "creative class".
- Rejection of the normal interpretation of the rule of the law and the idea of "neoliberal justice" (tough justice for Untermensch only).
- Cult of GDP. Like Marxism, neoliberalism on the one hand this reduces individuals to statistics contained within aggregate economic performance. It professes that GDP growth is the ultimate goal of any society. This is very similar to the USSR cult of gross national product.
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Jan 07, 2017 | economistsview.typepad.com
ilsm : January 07, 2017 at 06:40 AM , 2017 at 06:40 AMBarry Ritholtz does a service linking us to a propaganda piece in politico:http://www.politico.com/magazine/story/2017/01/putins-real-long-game-214589
The service is an example of propaganda using "deductive reasoning"; a journalist interviewing lots of propagandists and using their spin to support an hypothesis that is Clinton Mrs Kagan/Nuland neocon bat crazy!
The fake image is what the neocons want us to believe about the dire threat from Putin!
At least once a year Barry posts the cheat sheet, then he sets out hundreds of examples in his reads.
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Jan 07, 2017 | economistsview.typepad.com
Fred C. Dobbs : As observed, Dems don't like deficits when GOPsters do them, and the GOP doesn't like them unless they do them.PK: 'And meanwhile I and other Keynesians are getting mail accusing us of being the hypocrites: "You were for deficits when Obama was in, now they're bad!"
But as I just said, the situation has changed.' ...
As even I have noted, deficits are *useful* when employment is down and infrastructure needs building. We haven't done enough of that lately, for sure.
Like with that wall, maybe.
Reply Friday, January 06, 2017 at 12:54 PM Fred C. Dobbs said in reply to Fred C. Dobbs... , January 06, 2017 at 01:24 PMPaul Krugman @paulkrugman · 4 hours agoilsm -> Fred C. Dobbs... , January 06, 2017 at 01:41 PMLabor markets are much closer to normal than they were in 2010-2012. So giving different policy advice is rational, not hypocritical
A neolib victory, with participation rate for 24 to 54 still in the dumps.anne -> Fred C. Dobbs... , January 06, 2017 at 01:55 PMhttps://fred.stlouisfed.org/graph/?g=cirlJesse : , January 06, 2017 at 12:59 PMJanuary 4, 2017
Average Hourly Earnings of All Private Workers and Quits Rate, 2007-2016
(Percent change)
ilsm -> Jesse... , January 06, 2017 at 01:40 PM
It may not be overwhelming in its effect, but he did DO something, and had an effect, made an example.Gee, what a terrible thing to do.
What the Wall Street Dems have done is feel the average worker's pain, hand out some questionably progressive programs like the Heritage Foundation's ACA, and explain why it was all necessary in the name of free trade and globalization.
And the rubes like it. What a bunch of dopes.
Uh huh.
Trump is neither neolib nor neocon enough for the non-deplorables.sanjait -> Jesse... , January 06, 2017 at 03:47 PMHey, Rube:Libezkova -> sanjait... , January 06, 2017 at 04:51 PMRemember when the "Wall Street Dems" saved the ENTIRE US-branded auto manufacturing industry?
Trump hands out crumbs and the rubes think he's a leader.
>" Remember when the "Wall Street Dems" saved the ENTIRE US-branded auto manufacturing industry?"Tom aka Rusty : , January 06, 2017 at 01:27 PMDid not they save their friends investment portfolios (and some saved their own). Collapse of auto sector means plunge of S&P500, because of interconnection with other sectors. the lowest point of S&P 500 during this period was around 670. I think they have no other options.
a show intended to impress the rubes,ilsm -> Tom aka Rusty... , January 06, 2017 at 01:39 PMAt least now we know what Krugman thinks of working people, as in people who do honest work.
Krugman is an arrogant elitist who is good at math but has no real grasp of the real world (much like Trump has no grasp of reality).
it ain't deplorables who Trump attracted it is us whom the crooks and neolibs [like poor pk of the] DNC drive away in disgust.sanjait -> Tom aka Rusty... , -1Krugman didn't call working people rubes, you lying sack.
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Jan 07, 2017 | economistsview.typepad.com
Jesse :
It may not be overwhelming in its effect, but he did DO something, and had an effect, made an example. Gee, what a terrible thing to do.What the Wall Street Dems have done is feel the average worker's pain, hand out some questionably progressive programs like the Heritage Foundation's ACA, and explain why it was all necessary in the name of free trade and globalization.
And the rubes like it. What a bunch of dopes.
Uh huh.
Reply Friday, January 06, 2017 at 12:59 PM ilsm -> Jesse... , January 06, 2017 at 01:40 PMTrump is neither neolib nor neocon enough for the non-deplorables.pgl -> ilsm... , January 06, 2017 at 05:09 PMThat's right - Trump is Putin's poodle aka Comrade Donald.Libezkova -> pgl... , -1Why you don't just buy m16, some ammunition and go to Syria to prove your point and take revenge for Hillary fiasco.Chickenhawks like you should better be careful what they wish for. With the election of Hillary we would be on the brink of not "cold", but "hot" war, starting in Syria. But chickenhawks like you prefer other people to die to their imperial complex of inferiority.
In other words, all you funny "Putin Poodle", "Putin is a kleptocrat", etc noises is just a testament of the inferiority complex of a typical neoliberal chickenhawk. Much like was the case with Hillary.
War conflict is not a chess game.
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Jan 07, 2017 | economistsview.typepad.com
Libezkova -> kurt... , -1"Krugman a neolib?"
that's true statement. He is. With penchant for mathiness and globalization. Although like any talented person sometimes he transcends this limitation and writes really good articles.
"Clinton a Reagan copy?"
Not quite, they belong to different flavors of neoliberalism. As a politician Clinton was a "soft neoliberal", or "Third way" neoliberal. Not quite the same as Reagan who was closer to "hard neoliberalism", or Thatcherism -- "in your face" neoliberalism. They do not hide their principles and attitudes.
Wikipedia: "Thatcherism represented a systematic, decisive rejection and reversal of the post-war consensus, whereby the major political parties largely agreed on the central themes of Keynesianism, the welfare state, nationalised industry, and close regulation of the economy"
Clinton (like later Tony Blair) basically accepted the central postulates of neoliberalism such as globalization, deregulation, privatization, maintaining a flexible labor market by high unemployment, marginalizing the trade unions, but made his intentions hidden under the smoke screen ("I feel you pain"). Essentially he created the second major flavor of neoliberalism "soft neoliberalism", or neoliberal "wolf in sheep's clothing".
That's the difference. Peter K. -> kurt... , -1
Krugman is center-left and doesn't like the left.Haven't you been paying attention?
http://krugman.blogs.nytimes.com/2016/05/09/the-facts-have-a-well-known-center-left-bias/
The Facts Have A Well-Known Center-Left Bias
by Krugman
MAY 9, 2016 8:01 AMYesterday I tweeted a response to Donald Trump's claim that America is the highest-taxed nation in the world. Actually, he's been busted on that claim repeatedly, which makes it even more shameful that TV interviewers just let it slide. But I'm also interested in the responses I've been getting, which I think tell you something about the broader situation – maybe call it the politics of epistemology.
As you might guess, I'm getting a lot of denial, with quite a few people "explaining" that the international comparisons don't include state and local government. Um, guys, maybe you shouldn't make confident pronouncements about stuff you've never looked at.
And I do wonder about right-wingers weighing in here. After all, isn't it a (false) right-wing trope that the economic troubles of European nations are caused by their excessive welfare states? Doesn't that suggest that they have bigger government and higher taxes than we do? Oh, never mind.
But I'm also hearing from Berniebros, insisting that anything I say must be wrong, because I criticized their hero. And this suggests to me that we may need a clarification of the doctrine that facts have a well-known liberal bias. More specifically, they seem to have a center-left bias: conservatives are big on empirical denial, but so is some of the U.S. left.
This has become especially obvious in the waning days of the Democratic primary: you can watch data journalists like the two Nates (Cohn and Silver) growing increasingly exasperated with Sanders supporters who keep insisting that Hillary is stealing the nomination with superdelegates, when it's actually the Sanders campaign talking about getting supers to overturn the pledged delegate count and the popular vote.
Of course, campaigns can't be held responsible for everything their supporters say, although it's a bit worse when some of those supporters are actual campaign surrogates. Still, we can ask whether Sanders himself is inclined to dismiss inconvenient facts. Well, as you know, I think the answer is yes, on issues ranging from economic projections to the sources of Clinton primary victories.
I was therefore primed to notice when Sanders declared that Democrats need their own version of Fox News. What does he mean, exactly? Should the proposed network engage in similar factual distortions and outright falsehoods, except this time in the service of progressive goals?
By the way, it wouldn't work. Fox caters to an audience of angry old white men; the angry young white guys who would want a left-wing version of this message are fewer in number, have less purchasing power, and anyway don't get their news from TV. But that's a side point.
The main point, instead, is that what we're seeing is that the sort of people who really care about getting facts right – who see facing up to inconvenient truths as an important value – are largely on the center-left. Care with evidence appears to matter if you are, say, the 11th most liberal senator; this is in contrast not just with the right, but also with some of the left.
The good news is that this general election will be a contest between the center-left and the ignorant right, so political values and intellectual values will be in perfect accord.
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Jan 06, 2017 | economistsview.typepad.com
yuan -> anne... , January 05, 2017 at 04:07 PMLibezkova -> yuan... , -1"but over time these prices have always increased"except for japan:
is the usa immune to this kind of stagnation? if so, why?
> "is the usa immune to this kind of stagnation? if so, why?"mulp -> rayward... , January 05, 2017 at 01:25 PM
Impoverishment of population under neoliberalism pushes the economy into recession. Not enough demand so unless exports compensate for this you are cooked. To make the situation much worse Japan is net oil importer.Oil prices above, say, $60 per barrel (inflation adjusted, the last column below) facilitate the slide into recession.
(average per year)
2004 $37.66 $47.98
2005 $50.04 $61.65
2006 $58.30 $69.64
2007 $64.20 $74.44
2008 $91.48 $102.00 <= !!!
2009 $53.48 $59.93
2010 $71.21 $78.65
2011 $87.04 $93.21 <= !!!
2012 $86.46 $90.72 <= !!!
2013 $91.17 $94.25 <= !!!
2014 $85.60 $87.05 <= !!!
2015 $41.85 $42.53
2016 $34.39 $34.13 (partial)
The USA like Japan is importer too (actually the largest one) but it has large domestic production: forth largest (data below are for 2015):
== quote ==
Country | Production (bbl/day) | Share of World's output (Percentage)1 Russia 10,107,000 14.05%
2 Saudi Arabia 9,735,200 13.09%
3 United States 9,373,000 12.23%
4 China 4,189,000 5.15%
5 Canada 3,603,000 4.54%
6 Iraq 3,368,000 4.45%
7 Iran 3,113,000 4.14%
== end of quote ==Simultaneously the USA is the owner of world reserve currency (in which oil is predominantly traded). That also helps.
Those two factors as well as the fact that the Fed put the economy on life support in 2011 again might be one reason why the USA still (formally) is not in perma-recession (secular stagnation), but it might be in the pipeline with oil prices reverting or exceeding the previous maximum. Which might be a matter of the next three-five years. Trump still might be lucky but "after Trump" might be not.
If we measure income of the lower 80% of the US population I am not that sure the USA is doing that well and the economics is out of the wood. Real GDP per capita has increased since 2009 while the real median income per household has not, indicating a trend toward greater income inequality (and/or smaller households). Extreme poverty ( households living on less than $2 per day before government benefits), doubled from 636,000 to 1.46 million households (including 2.8 million children) between 1996 and 2011, with most of increase occurring between late 2008 and early 2011
Most jobs created since 2008 are McJobs in service sector, but a lot of jobs eliminated were permanent reasonably paying jobs. So domestic demand is dropping and with the credit lines already overextended there is no light at the end of the tunnel.
Of course, neoliberal "cult of GDP" (aka "pro-growth") crowd will deny this, but now GDP includes everything including such activities as gambling (and in GB prostitution). In other words, it is probably slightly fudged, much like inflation numbers.
This is my hypothesis, anyway... My impression is that markets got ahead of themselves in the current rally.
Real capitalism, the policies that place a priority on building more capital, solve most income inequality, because you can't build capital without paying a lot of workers, and when lots of workers are being paid, they can demand more pay, and at the same time, more capital means more production, and to sell all the increased production, prices must equal the wages paid for both operations and for building all the capital.pgl -> rayward... , January 05, 2017 at 01:53 PMEconomies are zero sum, at least in the long run. Since conservatives have adopted free lunch economics, the idea that economies are not zero sum, the idea that prices can far exceed wages paid, profits come out of ever increasing debt, which is basically paying for current production using labor from the future.
Since Reagan and the conservative embrace of free lunch economics, private and public debt has exploded, committing trillions in future wages to paying for past consumption.
A sign of the past consumption is in the decaying value of infrastructure. Flint water is a case of bipartisan free lunch economics. Can't charge higher rates for water starting in 1950 and keep hiking water rates because paying workers cost too much, and the unemployed, or underemployed workers being paid too little because low prices require not paying workers, can not afford higher water rates to pay workers which would lift all wages in Flint. By not paying workers for the past 75 years, the water system capital has been consumed, thus creating billions in debt for the continued supply of clean water.
Multiply Flint water by the hundred thousand communities who made similar bipartisan free lunch economic policy decisions on water, sewer, energy, transportation, education, housing, communications, and the US has trillions in debt to be the leader in national economic power globally that the US was in the 60s.
Even in health, the US has run up trillions in debt by failing to pay more for better health capital over the past half century. Better health in human capital is costly because humans would need to work more every hour of the day for free. Like walking or biking instead of driving. People hate public transit because it can be provided only by having central nodes to use it, requiring human power to get to and from those nodes.
But having placed a priority on using cars to move more than the distance to where the car is parked, paying to use cars has not been high enough, so the roads are trillions in debt in carrying capacity.
But hey, we can't charge higher prices to use cars because the low wage food workers stuck in that job because they lost their road construction job, can not afford to pay more for using a car to pay more road construction workers.
"markets will correct excessive inequality".David -> rayward... , January 05, 2017 at 03:36 PMEven hard core conservatives know this is not true in general. Per financial markets, Milton Friedman would tell you how backwards this claim really is. Of course he grew up during the Great Depression so he saw even as a kid how destructive financial crises can be. Maybe you should read some of what he wrote about that period.
People like Warren Buffet make their bread and butter on market crashes - they have lots of reserve cash and can buy up equities at bargain basement prices. Personally I missed the boat by a year because I'm small potatoes but I got in by 2010 and did very well indeed.I think one of the biggest distortions is in big Pharma, where the government pays for a lot of the research and gets nigh on none of the return, and excessive patent and patent manipulation allow pharma to rip off consumers.
This is essentially medical care, which really should be a public good. It's not, it's a distorted market.
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Jan 06, 2017 | economistsview.typepad.com
Fred C. Dobbs : January 05, 2017 at 06:53 AM , 2017 at 06:53 AMA Threat to US Democracy:kthomas -> Fred C. Dobbs... , -1
Political Dysfunction
http://nyti.ms/2hOJ9AB
NYT - Eduardo Porter - Jan 3Is American democracy broken?
There are precedents around the world for the kind of political jolt the United States experienced in November. They usually include a political firebrand who promises to sweep away a system rigged to serve the powerful rather than the interests of ordinary people. They usually end badly, when the popular champion decides to read electoral victory as an invitation to bend the institutions of democracy to the force of his will.
Most Americans, I'm sure, never expected to worry about that sort of thing in the United States. And yet concern is decidedly in the air (*). Did a combination of globalization, demographic change, cultural revolutions and whatever else just upend America's consensus in support of liberal market democracy? Did American democracy just succumb to the strongman's promise?
(* Is Donald Trump a Threat to
Democracy? http://nyti.ms/2hNr32N )I'm skeptical that the United States is about to careen down the path taken by, say, Venezuela, governed by the whim of President Nicolás Maduro - the handpicked successor of the populist champion Hugo Chávez, who was elected in the late 1990s on a promise to sweep away an entrenched ruling class and proceeded to battle any democratic institution that stood in his way.
Still, the embrace by millions of American voters of a billionaire authoritarian who argues that the "system" has been rigged to serve a cosmopolitan ruling class against the interests of ordinary people does suggest that American democracy has a unique credibility problem.
The United States resisted the temptations of Nazism, fascism and communism that beguiled Europe in the first half of the 20th century. Extreme parties like France's National Front or the United Kingdom Independence Party never established an American toehold. Populist candidates running as outsiders - Pat Buchanan, Ross Perot, Ralph Nader - could only tip the balance between the two parties of the establishment.
And yet, when the 21st century brought about a populist insurrection, the United States government was quick to cave.
"What makes the United States so distinctive?" wrote Ronald Inglehart, a political scientist at the University of Michigan, in a somewhat prescient article a few months before the election. "One reason may be that in recent years U.S. democracy has become appallingly dysfunctional."
Working Americans have suffered disproportionately from the economic shocks of our time. Income inequality in the United States far exceeds anything seen in other advanced nations. Families from the middle on down have suffered stagnant or declining incomes for years. And the nation's threadbare social safety net remains the weakest in the industrialized world, providing only the most meager insurance to working families undercut by globalization and technological change.
But for all the reasons Americans may have to rebel against the status quo, what made the political system so vulnerable to a populist insurrection in November was that - for all its institutional strengths - the political system itself has come to be seen by too many voters as illegitimate.
"There is persistent lack of confidence in U.S. political institutions which allows populists to make hay," said Pippa Norris, a political scientist at the Kennedy School of Government at Harvard and the University of Sydney in Australia. "And the institutions need a major overhaul because some, like elections, are badly broken."
This is not just about the Electoral College system, which awarded the presidency to the candidate who lost the popular vote. It is not just about money's growing influence in politics, though that plays a part, too.
The problems are embedded in the design of America's political institutions - with all their checks and balances ostensibly designed to slow down policy-making and prevent political extremists from swiftly taking over the gears of government. These institutions have produced a polarized government, paralyzed by partisan gridlock, unable to govern effectively. They have built a system easy to demonize as rigged.
The Electoral Integrity Project, run by Professor Norris and colleagues from Harvard and the University of Sydney in Australia, surveys thousands of election experts to assess the quality of hundreds of elections around the world. They are asked to rate how well district boundaries are drawn, whether voter registration procedures are adequate, and the effectiveness of campaign finance regulation, among other things.
Based on the average evaluations of the elections in 2012 and 2014, the United States' electoral integrity was ranked 52nd among the 153 countries in the survey - behind all the rich Western democracies and also countries like Costa Rica and Uruguay, the Baltic states, and Cape Verde and Benin in Africa.
A paper by Professor Norris on these results, titled "Why American Elections Are Flawed," describes the major problems with American electoral institutions, perhaps the most critical of which is partisan control over electoral institutions, which has subjected the integrity of elections to the distortions of a partisan lens.
( https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2844793 )
The fact that each state has its own set of electoral regulations - covering things like the type of technology used and opening hours of the polls - means that Americans' voting rights can change substantially from state to state. And the party polarization that has gripped statehouses across the country has stymied attempts to build sensible, effective electoral regulations and bred mistrust.
The patchwork of electoral systems - run by politically appointed local officials managing part-time workers - is hardly a recipe for competence. "Among mature democracies, the nuts and bolts of American contests seem notoriously vulnerable to incompetence and simple human errors," Ms. Norris notes. ...
Gerry Mander.Libezkova said in reply to Fred C. Dobbs... , January 05, 2017 at 10:17 AMOh, and let's not forget the Corporations have Constitutional rights.
Democracy like love is a fuzzy term. Democracy for whom?Peter K. : , January 05, 2017 at 07:12 AMFor top .1%? For top 1%? For top 10%? For 100% of voters?
A more interesting question is whether two party system based on "the first past the post" rule can be considered a democracy at all.
If the party elites are free to chose two candidates for which then voters are forced to vote this is oligarchy (the rule of the elite) or at best poliarchy (two competing factions of the same elite install their candidate using popular vote for legitimizing one of the two pre-chosen candidates), not a democracy.
Nobody can dismiss the fact that the iron law of oligarchy is the governing law of any two party system. In this sense Parliamentary democracy with proportional representation is a much better model.
One can see that the iron law of oligarchy was clearly in action in the Democratic Party the last Presidential elections.
In case of Republican Party this time the law was broken (or it looks to us like that) but this exception just confirms the rule.
All of the political, partisan progressive neoliberals are pretty pessimistic about Trump: DeLong, Krugman, Vox, etc.Peter K. -> Peter K.... , January 05, 2017 at 07:17 AM(the same people that assured us Clinton was a great candidate who would win easily...)
And it's funny how the stock market is booming (despite the looming trade wars) and all of the establishment type neoliberals are pretty optimistic! (DeLong here questions Olivier Blanchard)
DeLong: January 04, 2017 at 06:44 AM
Should-Read: Disagreeing with Olivier, my chances of success are surely less than 50-50. Nevertheless...
As I read the evidence, the short-run fiscal multipliers (1) from government purchases are rather high, (2) from transfer payments to the liquidity-constrained are moderate, and (3) from high-income tax cuts are next to zero. At the moment it looks like effectively all of the Trump fiscal initiative to be will take the form of (3). Some of it will be direct tax cuts. The rest will be tax credits to businesses that are not currently cash-constrained but rather, at the margin, in the share buyback business.
But they will produce a stronger dollar.
Thus I expect next to no effective fiscal stimulus. I expect a larger capital inflow (trade deficit). And I am told we now expect the trade war to start soon.
Thus I do not see why Olivier Blanchard is so optimistic.
Where is he coming from? What does he see that I do not?...
The "stronger dollar" seems to be the go-to criticism.Peter K. -> Peter K.... , January 05, 2017 at 07:24 AMI agree that tax cuts and deregulation alone won't do much (see the Bush years) except blow more asset bubbles.
I just don't get the theory of a larger capital inflow and strong dollar. Aren't those good things?
All of the comfortable progressive neoliberals' vacations in foreign countries will be cheaper. Their multinational corporate sponsors now can purchase more for the dollar in foreign lands, whether it be labor, assets, whatever.
Yes the export sector will be hurt, but they've never really cared about the export sector or unionized manufacturing jobs. The Fed will create more jobs as necessary. Plus it's mostly automation which can't be stopped. What, are you a Luddite?
Olivier Blanchard:kthomas -> Peter K.... , January 05, 2017 at 07:30 AM"To the extent that both growth and interest rates are higher, the dollar is likely to appreciate, leading, ironically, to larger US trade deficits, which Donald Trump the candidate indicated he wanted to fight. This leads me to trade issues and trade measures."
Isn't that what Clinton wanted? Higher growth and interest rates? That would also lead to a stronger dollar.
But absent tax cuts for the rich and deficits, interest rates wouldn't be so high.
Seems like progressive neoliberals and mainstream macro economists are slaves to the bond vigilantes. See Bill Clinton dropping his middle class spending bill campaign promise.
"Increase the demand for domestic goods, and increase output (although, even then, as pointed out by Robert Mundell more than fifty years ago, the exchange rate may appreciate enough to lead to lower output in the end). But the "by themselves" assumption is just not right: Tariffs imposed by the United States would most likely lead to a tariff war and thus decrease exports. And the decrease in imports and exports would not be a wash. On the demand side, higher import prices would lead the Fed to increase interest rates further. "
So tariffs are bad because they cause retaliation. That's politics, not economics. And again the Fed is brought in to tell us that something good is actually bad.
High growth causes the Fed to kill the economy. Same would happen under Democrats.
Neoliberal BS.
Da, comrade!Peter K. -> kthomas... , January 05, 2017 at 07:34 AMWhere is our Miss Manners, Chris Lowrey?anne -> kthomas... , January 05, 2017 at 07:42 AMDa, comrade!
Da, comrade!
Da, comrade![ Ceaseless crazed destructiveness. ]
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Jan 04, 2017 | economistsview.typepad.com
im1dc -> JF... , January 03, 2017 at 11:35 AMIt is obvious to me at least that PE Trump will force immediate detente with Russia, weaken NATO, and substitute China as the bogey man to prepare to battle, economically, politically, and militarily.sanjait -> im1dc... , January 03, 2017 at 12:11 PMWatch for it.
Of course, that also entails tossing US Allies in Europe under the bus b/c Putin wants more influence and control over nations on his borders than the USA and NATO have allowed following the break up of the USSR both economically and militarily.
Not so sure how the experienced foreign policy Hawks, mostly retired Generals, will go along with letting Putin's Russia out of NATO's cage.
Should be interesting if Trump gets them to go along with is plans to free Putin and make him and Russia friends with the US again.
Pork for defense contractors and WWC workers with little or no legitimate defense value ... sounds like the kind of thing Trump will support enthusiastically.ilsm -> sanjait... , January 03, 2017 at 06:27 PMDid you lose any sleep the past week?ilsm -> ilsm... , -1There was not one US navy carrier on 'patrol' anywhere for the past week.
Littoral Combat Ships are useless too small too little keel, and no good in open water.
The CVN 78 is a dinosaur...........
Look how those CV/CVN's did off Vietnam for 7 years!
The faux 'threats' must have decided to be nice to the empire:"For the next week, not only will there be no U.S. Navy aircraft
carrier in the Middle East, but there will be no American aircraft
carriers deployed at sea anywhere else in the world, despite a hosthttp://www.foxnews.com/us/2016/12/30/no-us-carrier-at-sea-leaves-gap-in-middle-east.html
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Jan 02, 2017 | economistsview.typepad.com
anne : January 01, 2017 at 01:54 AMhttp://krugman.blogs.nytimes.com/2013/08/08/milton-friedman-unperson/anne -> anne... , January 01, 2017 at 01:56 AMAugust 8, 2013
Milton Friedman, Unperson
By Paul KrugmanDavid Glasner * has been making a series of posts on the legacy of Milton Friedman, some of them in response to Scott Sumner; they're interesting if you want to delve into the intellectual history. I'm not personally big on such things - in general, what people thought Keynes or Friedman meant ends up being more important than what they turn out, on close reading, to (maybe, possibly) actually have meant. For what it's worth, I think Glasner makes a good case that Friedman was indeed more or less a Keynesian, or maybe Hicksian - certainly that was the message everyone took from his "Monetary Framework," which was disappointingly conventional. And Friedman's attempts to claim that Keynes added little that wasn't already in a Chicago oral tradition don't hold up well either.
But never mind. What I think is really interesting is the way Friedman has virtually vanished from policy discourse. Keynes is very much back, even if that fact drives some economists crazy; Hayek is back in some sense, even if one has the suspicion that many self-proclaimed Austrians bring little to the table but the notion that fiat money is the root of all evil - a deeply anti-Friedmanian position. But Friedman is pretty much absent.
This is hardly what you would have expected not that long ago, when Friedman's reputation bestrode the economic world like a colossus, when Greg Mankiw ** declared Friedman, not Keynes, the greatest economist of the 20th century, when Ben Bernanke concluded a speech praising Friedman *** with the famous line,
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.
"Best wishes for your next ninety years."
So what happened to Milton Friedman?
Part of the answer is that at this point both of Friedman's key contributions to macroeconomics look hard to defend.
First, on monetary policy: Even if you give him a pass on the 3 percent growth in M2 thing, which was abandoned by almost everyone long ago, Friedman was still very much associated with the notion that the Fed can control the money supply, and controlling the money supply is all you need to stabilize the economy. In the wake of the 2008 crisis, this looks wrong from soup to nuts: the Fed can't even control broad money, because it can add to bank reserves and they just sit there; and money in turn bears little relationship to GDP. And in retrospect the same was true in the 1930s, so that Friedman's claim that the Fed could easily have prevented the Great Depression now looks highly dubious.
Second, on inflation and unemployment: Friedman's success, with Phelps, in predicting stagflation was what really pushed his influence over the top; his notion of a natural rate of unemployment, of a vertical Phillips curve in the long run, became part of every textbook exposition. But it's now very clear that at low rates of inflation the Phillips curve isn't vertical at all, that there's an underlying downward nominal rigidity to wages and perhaps many prices too that makes the natural rate hypothesis a very bad guide under depression conditions.
So Friedman's economic analysis has taken a serious hit. But that's not the whole story behind his disappearance; after all, all those economists who have been predicting runaway inflation still have a constituency after being wrong year after year.
Friedman's larger problem, I'd argue, is that he was, when all is said and done, a man trying to straddle two competing world views - and our political environment no longer has room for that kind of straddle.
Think of it this way: Friedman was an avid free-market advocate, who insisted that the market, left to itself, could solve almost any problem. Yet he was also a macroeconomic realist, who recognized that the market definitely did not solve the problem of recessions and depressions. So he tried to wall off macroeconomics from everything else, and make it as inoffensive to laissez-faire sensibilities as possible. Yes, he in effect admitted, we do need stabilization policy - but we can minimize the government's role by relying only on monetary policy, none of that nasty fiscal stuff, and then not even allowing the monetary authority any discretion.
At a fundamental level, however, this was an inconsistent position: if markets can go so wrong that they cause Great Depressions, how can you be a free-market true believer on everything except macro? And as American conservatism moved ever further right, it had no room for any kind of interventionism, not even the sterilized, clean-room interventionism of Friedman's monetarism.
So Friedman has vanished from the policy scene - so much so that I suspect that a few decades from now, historians of economic thought will regard him as little more than an extended footnote.
* http://uneasy money.com/2013/08/05/second-thoughts-on-friedman/
** http://gregmankiw.blogspot.com/2006/11/milton-friedman.html
*** http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/
"Uneasymoney" can only be linked to directly by separating "uneasy" and "money."anne :http://krugman.blogs.nytimes.com/2013/08/09/more-on-the-disappearance-of-milton-friedman/Jay : , January 01, 2017 at 08:31 AMAugust 9, 2013
More On the Disappearance Of Milton Friedman
By Paul Krugman
It seems that many people misunderstood my post * on Milton Friedman. It was not intended as Friedman-bashing, as a claim that MF was a bad economist; in fact, I'm on record ** declaring Friedman a "great economists' economist". His work aimed primarily at a professional audience - the permanent income theory of consumption, the case for flexible exchange rates, the natural rate (even if it does break down at low inflation), the optimum quantity of money - was often, maybe even usually, brilliant, and will live on.
What isn't living on, however, is Friedman's role as a guiding light for conservative economic policy.
Think about Paul Ryan, who is, like it or not, the leading economic intellectual of the modern GOP. Ryan sometimes drops Friedman's name - but when he does, it's to cite "Capitalism and Freedom," not "A Monetary History of the United States." When it comes to monetary policy, Ryan has said that his views are based on fictional characters in "Atlas Shrugged." No, really.
Or think about the economics rap video of "Keynes versus Hayek" everyone had fun with. Never mind that back in the 30s nobody except Hayek would have considered his views a serious rival to those of Keynes; the real shock should be, what happened to Friedman?
Partly this disappearance reflects real problems with Friedman's analysis. His views on the omnipotence of monetary policy,let alone the adequacy of a simple quantity-of-money rule, haven't withstood the test of time. As far as stabilization policy is concerned, he was indeed, as Brad DeLong archly puts it, a minor post-Hicksian. ***
But the bigger issue, I'd argue, is that modern conservatives can't accept the things Friedman was right about. Take, in particular, his essay on flexible exchange rates, in which he argued that a country that finds its wages and prices out of line should devalue its currency rather than rely on unemployment to push wages down, "until the deflation has run its sorry course." Contrast this with Ryan's declaration that "There is nothing more insidious that a country can do to its citizens than debase its currency."
The point is that Friedman was, when all is said and done, a pragmatist; he leaned right ideologically, but was willing to make room for awkward realities. And these days reality has a well-known liberal bias. Hence, Friedman has become an unperson.
* http://krugman.blogs.nytimes.com/2013/08/08/milton-friedman-unperson/
** http://www.nybooks.com/articles/archives/2007/feb/15/who-was-milton-friedman/?pagination=false
"What's odd about Friedman's absolutism on the virtues of markets and the vices of government is that in his work as an economist's economist he was actually a model of restraint."pgl -> Jay... , January 01, 2017 at 12:21 PMWhat's ironic is if you read Krugman pre-2000 his work as an economist was actually a model of restraint. Then BDS (Bush Derangement Syndrome) kicked in and he turned into a political "science" crank.
2000 was when George W. Bush lied his way into office. Krugman called out Bush's lies and was tagged as the Shrill One. Over time - a lot of progressives began to wear being shrill as a badge of honor.Jay -> pgl... , January 01, 2017 at 02:52 PMKind of like Obama, Clinton and the likes lied to intervene in Libya? They hate us for our freedom? No they hate us because we fight proxy wars in their territory and kill innocent civilians. As long as Assad is around Obama can drone bomb innocent people in Yemen and Proggers hail him as a saint.Chris Herbert : , January 01, 2017 at 08:31 AMDoes anyone have any comments about the constitutional monopoly over the money supply awarded to the Treasury? I don't understand what an economist means when he uses the word 'monetarist' to describe a set of ideas, but I do understand what it would mean if the Treasury (or a national Central Bank) stopped issuing debt for net government spending. Why we do issue this debt is beyond my comprehension. It's incredibly expensive, and there are no guidelines that make any sense to me when it comes to what is paid for by deficit spending. That we have piled up $17 trillion or whatever amount of debt when most of it was unnecessary is astonishing.Paul Mathis -> Chris Herbert... , January 01, 2017 at 09:01 AM"the constitutional monopoly over the money supply awarded to the Treasury"RGC -> Chris Herbert... , January 01, 2017 at 09:04 AMYou have heard of bitcoin, right?
Why doesn't the Federal Reserve just buy Treasury securities directly from the U.S. Treasury?RGC -> RGC... , January 01, 2017 at 09:24 AMThe Federal Reserve Act specifies that the Federal Reserve may buy and sell Treasury securities only in the "open market."
https://www.federalreserve.gov/faqs/money_12851.htm
.................
Direct Purchases of U.S. Treasury Securities by Federal Reserve BanksKenneth D. Garbade Federal Reserve Bank of New York
Abstract
Until 1935, Federal Reserve Banks from time to time purchased short-term securities directly from the United States Treasury to facilitate Treasury cash management operations. The authority to undertake such purchases provided a robust safety net that ensured Treasury could meet its obligations even in the event of an unforeseen depletion of its cash balances. Congress prohibited direct purchases in 1935, but subsequently provided a limited wartime exemption in 1942. The exemption was renewed from time to time following the conclusion of the war but ultimately was allowed to expire in 1981. This paper addresses three questions: 1) Why did Congress prohibit direct purchases in 1935 after they had been utilized without incident for eighteen years, 2) why did Congress provide a limited exemption in 1942 instead of simply removing the prohibition, and 3) why did Congress allow the exemption to expire in 1981?
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr684.pdf
Paul KrugmanDeDude -> RGC... , January 01, 2017 at 12:17 PM
Be Ready To Mint That Coin
January 7, 2013 9:05 am
.....................
For those new to this, here's the story. First of all, we have the weird and destructive institution of the debt ceiling; this lets Congress approve tax and spending bills that imply a large budget deficit - tax and spending bills the president is legally required to implement - and then lets Congress refuse to grant the president authority to borrow, preventing him from carrying out his legal duties and provoking a possibly catastrophic default.And Republicans are openly threatening to use that potential for catastrophe to blackmail the president into implementing policies they can't pass through normal constitutional processes.
Enter the platinum coin. There's a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector's items - but that's not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling - while doing no economic harm at all.
So why not?
http://krugman.blogs.nytimes.com/2013/01/07/be-ready-to-mint-that-coin/?_r=1
If the Fed were to buy treasuries directly, then Wall Street would be losing a big fat paycheck for the horrendous work of two keystrokes. That is why Wall Streets little sock puppets in Congress has not done anything.anne -> RGC... , January 01, 2017 at 05:05 PMBy the way, I have been wondering about "demonetization" in India and what that might mean but I have read no convincing analysis so far:DeDude : , January 01, 2017 at 09:38 AMhttps://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation
Rule number one for a populist (popular) communicator of complicated issues is that you lose any and all doubt or granularity. The peeps will immediately lose interest in you and think you know nothing, if you fail to say things with great certainty and great simplicity.RC AKA Darryl, Ron -> DeDude... , January 01, 2017 at 10:28 AMThis is the exact opposite of how you communicate in an academic environment. If a scientist give a talk and fail to acknowledge the weaknesses in the narrative they present; the scientists listening will dismiss him/her as ignorant or a BS artist (and confront them with those weaknesses).
Academics at least theoretically seek to discourage group think while politicians seek to cultivate group think. Nonetheless, peer review processes instill group think in academics regardless of intentions. Elite groups only think that they are better when in fact they are hardly any different in essential and existential ways, just in customs, habits, and aesthetics. Individual results may vary though in the general population and among elites.RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , January 01, 2017 at 10:34 AMIn a democratically electoral republic if the mainstream or status quo is the result of majority opinion then how can the opposition be characterized as populist?DeDude -> RC AKA Darryl, Ron... , January 01, 2017 at 12:06 PM"Elite groups only think that they are better when in fact they are hardly any different"RC AKA Darryl, Ron -> DeDude... , January 01, 2017 at 01:08 PMA case of false equivalency. There is a huge difference between a process that is constructed to reach a correct conclusion (but fails when inappropriately applied) and a process that has less of a chance of reaching the correct conclusion than a random number pick. Yes there are many examples where the scientific process has failed to reach the correct conclusion (and we know that because eventually it cleansed itself of those conclusions). However there are many more times when the scientific process got things right. That is in contrast to the FoxBot blowhards who seems almost incapable of getting anything right.
Intellectual conclusions only matter when they influence real world policy decisions. Real world policy decisions are not governed by science regardless of political control and economics is not deterministic science and often is not even probabilistic science. Of course that is why real world policy decisions are not governed by science. The political influence of wealth, custom and habit, heuristic guidelines obtained from the random walk of history, and popular memes all have more influence over public policy decisions than science.RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , January 01, 2017 at 02:50 PMQuasi-science makes for fun social clubs though.
When we pursue technocrats, elitists, and oligarchs to advance the cause of socialism we do not get social democracy, but we may get liberal policy aimed at quelling discontent when necessary to prevent a popular uprising. That was the catch-22 omitted from Schumpeter's "Capitalism, Socialism and Democracy". Corporatism does not naturally lead to socialism in republican governments as Joseph Schumpeter said that it would. If we want social democracy then we must start by pursuing the electorate to advance the cause of democracy first.DeDude -> RC AKA Darryl, Ron... , -1"Real world policy decisions are not governed by science regardless of political control"pgl -> DeDude... , January 01, 2017 at 12:24 PMAnother false equivalency...
The real world is not yes/no, black/white. Just because science sometimes get corrupted doesn't mean it always is corrupted. Just because one of our main parties have become addicted to refusing facts and evidence against their narratives doesn't mean that everybody all the time refuse to listen to facts and evidence. I know that the corruption narrative is what keeps you alive and thinking you got it all figured out, but it also is what leads you astray on a regular basis.
Milton Friedman once tried to explain to doctors why their precious cartel known as the AMA was a bad idea. One would have thought the doctors would have shot him on the spot. But no - Friedman pitched this as a way to keep away "socialism" aka things like Medicare. The doctors loved it. Of course I thought this was one of his lower moments. BTW - never tell a doctor we should have Medicare for all unless you want to endure a tirade of why they don't make all that much.DeDude -> pgl... , January 01, 2017 at 06:51 PMYes, you got to give Friedman that he was a good salesman. Scientist and economists: mediocre - just to easily addicted to his own narratives. But he was a brilliant salesman.jonny bakho : , January 01, 2017 at 11:15 AMMF proposal to manage economies with monetary policy only and to sideline fiscal and regulatory policy found favors with free market conservatives.pgl -> jonny bakho... , January 01, 2017 at 12:26 PMFree market rules mean that the greedy are free to market their get rich quick scams to the harm of the rest of us and their own personal enrichment.
Monetary policies such as Volcker's job killing interest rates in 1980 are praised. Fiscal and regulatory policies such as the CAFE standards and subsidies to move away from oil created the Great Moderation, yet are dismissed or worse vilified.
Monetary policy is not saving us from climate change. Fiscal incentives for clean energy and regulation of carbon emissions are the tools that can be applied effectively.
The reformation we need is Post-Monetary with a strong emphasis on the fiscal and regulatory...
The free markets do hate fiscal policy or almost anything else that is sensible policy. But if they ever really understood what Friedman was saying about monetary policy - they would turn on him as being some of sort of communist.RC AKA Darryl, Ron -> pgl... , January 01, 2017 at 01:12 PMThen the free markets (sic) do not really understand some of sort of communist either.RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , January 01, 2017 at 01:16 PM[If pgl would learn to type then I could copy from his comments without getting sic.]Larry : , January 01, 2017 at 04:27 PMCORRECTION: "...they would turn on him as being some of [sic] sort of communist."
"But there's a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications."Chris Herbert : , January 01, 2017 at 06:12 PMMarvelous irony how well this applies to its author.
Still, nothing regarding the monopoly over the money supply. Not addressed. Ignored. That the Treasury can inject debt free money into the money supply, is ignored! That we could have a job guaranteed program is ignored. That we never needed to produce debt for deficit financing is ignored. What the hell!anne -> Chris Herbert... , -1Monopolization of the money supply: I have been wondering about "demonetization" in India and what that might mean but I have read no convincing analysis so far:https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetisation
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Gibbon1 -> anne... , December 31, 2016 at 10:21 PMTwo of my criticisms about Krugman/Friedman, etc is that is 'free markets' are supposed to substitute for policy in the government sphere. Except very telling except when we're talking about funding the security state.AngloSaxon -> Gibbon1...The other is that the real power of markets is that in a real free market (not a Potemkin one) decisions are made often at the point where needs, information, incentives, and economic power come together. But the large scale decisions the governments have to make, markets fail. Policy though doesn't.
But Neoliberals hate policy.
Well, duh. "Policy" and "Capitalism" don't go together and never have. When you enact policy, you destroy the ability to make profit and you get the 1970's.likbez -> Gibbon1... January 01, 2017 at 10:15 PMFree market is a neoliberal myth, the cornerstone of neoliberalism as a secular religion. Somewhat similar to "Immaculate Conception" in Catholicism.In reality market almost by definition is controlled by government, who enforces the rules and punish for the transgressions.
Also note interesting Orwellian "corruption of the language" trick neoliberals use: neoliberals talk about "free market, not "fair market".
After 2008 few are buying this fairy tale about how markets can operate and can solve society problems independently of political power, and state's instruments of violence (the police and the military). This myths is essentially dead.
But like Adventists did not disappear when the second coming of Christ did not occurred in predicted timeframe, neoliberals did not did not disappeared after 2008 either. And neither did neoliberalism, it just entered into zombie, more bloodthirsty stage. the fact that even the term "neoliberalism" is prohibited in the US MSM also helped. It is kind of stealth ideology, unlike say, Marxists, neoliberals do not like to identify themselves as such. The behave more like members of some secret society, free market masons.
Friedmanism is a flavor of economic Lysenkoism. Note that Lysenko like Friedman was not a complete charlatan. Some of his ideas were pretty sound and withstood the test of time. But that does not make his less evil.
And for those who try to embellish this person, I would remind his role in 1973 Chilean coup d'état ( https://en.wikipedia.org/wiki/1973_Chilean_coup_d%27%C3%A9tat ) and bringing Pinochet to power. His "Chicago boys" played a vital role in the events. This man did has blood on his hands.
http://www.bidstrup.com/economics.htm
=== quote ===
Of course, bringing a reign of terror to Chile was not why the CIA had sponsored him. The reason he was there was to reverse the gains of the Allende social democracy and return control of the country's economic and political assets to the oligarchy. Pinochet was convinced, through supporters among the academics in the elite Chilean universities, to try a new series of economic policies, called "neoliberal" by their founders, the economists of the University of Chicago, led by an economist by the name of Milton Friedman, who three years later would go on to win a Nobel Prize in Economics for what he was about to unleash upon Chile.Friedman and his colleagues were referred to by the Chileans as "the Chicago Boys." The term originally meant the economists from the University of Chicago, but as time went on, as their policies began to disliquidate the middle class and poor, it took on a perjorative meaning. That was because as the reforms were implemented, and began to take hold, the results were not what Friedman and company had been predicting. But what were the reforms?
The reforms were what has come to be called "neoliberalism." To understand what "neoliberal" economics is, one must first understand what "liberal" economics are, and so we'll digress briefly from our look at Chile for a quick...
=== end of quote ===
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Dec 31, 2016 | economistsview.typepad.com
JohnH : Ironic isn't it? "Why didn't ... exhibit the same restraint in his role as a public intellectual?The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy."
Krugman should have stuck to economics...
Reply Saturday, December 31, 2016 at 04:38 PM likbez -> JohnH... , -1Yes, this is pretty nasty verdict for Krugman too.But, in reality, Milton Friedman was an intellectual prostitute of financial oligarchy most of his long life, starting from his days in Mont Pelerin Society ( https://en.wikipedia.org/wiki/Mont_Pelerin_Society) , where he was one of the founders.
So, if the period when he was a good econometrician exists it is limited to pre-war and war years. As he was born in 1912, he was just 33 in 1945. His "A Theory of the Consumption Function" was published in 1957. And "A Monetary History of the United States, 1867–1960" in 1963, when he was already completely crooked.
Mont Pelerin Society was founded in 1947 with the explicit political goal of being hatching place for neoliberal ideology as alternative to communist ideology. He served as a President of this Society from 1970 to 1972.
Capitalism and Freedom that many consider to be neoliberal manifesto similar to Marx and Engels "Manifesto of the Communist Party" was published in 1962.
So what Krugnam is saying is a myth. And he is not an impartial observer. He is a neoliberal himself. I still remember Krugman despicable attacks on John Kenneth Galbraith and his unhealthy fascination with the usage of differential equations in economic modeling, the epitome of mathiness.
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Paul Mathis -> anne... , December 31, 2016 at 06:48 PMI have two problems with Prof. K:yuan -> Paul Mathis... , December 31, 2016 at 06:56 PM1. His refusal to acknowledge the central role of consumption in our economy. As Keynes said, ""Consumption - to repeat the obvious - is the sole end and object of all economic activity." The General Theory, p. 104.
And Adam Smith agreed: "Consumption is the sole end and purpose of all production." The Wealth of Nations, Book IV Chapter VIII, v. ii, p. 660, para. 49.
2. Krugman's refusal to endorse fiscal stimulus unless the economy is at ZLB. That is not only anti-Keynesian, it plays directly into the hands of the debt fear mongers. (Krugman is also worried about the debt.)
"Krugman's refusal to endorse fiscal stimulus unless the economy is at ZLB."anne -> Paul Mathis... , December 31, 2016 at 06:57 PMThat is a strawman, and a bad one.
PS: My criticism of Krugman is far more fundamental. I do not believe the profit motive is superior to the mutual benefit motive when it comes to organizing economies.
Important criticisms.anne -> Paul Mathis... , December 31, 2016 at 07:00 PMhttps://www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book04/ch08.htmanne -> Paul Mathis... , December 31, 2016 at 07:07 PM1776
An Inquiry into the Nature and Causes of The Wealth of Nations
By Adam SmithOn Systems of Political Economy
Conclusion of the Mercantile System
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.
https://www.marxists.org/reference/subject/economics/keynes/general-theory/ch08.htmanne -> Paul Mathis... , -11935
The General Theory of Employment, Interest and Money
By John Maynard KeynesThe Propensity to Consume: The Objective Factors
Consumption - to repeat the obvious - is the sole end and object of all economic activity. Opportunities for employment are necessarily limited by the extent of aggregate demand. Aggregate demand can be derived only from present consumption or from present provision for future consumption. The consumption for which we can profitably provide in advance cannot be pushed indefinitely into the future. We cannot, as a community, provide for future consumption by financial expedients but only by current physical output. In so far as our social and business organisation separates financial provision for the future from physical provision for the future so that efforts to secure the former do not necessarily carry the latter with them, financial prudence will be liable to diminish aggregate demand and thus impair well-being, as there are many examples to testify. The greater, moreover, the consumption for which we have provided in advance, the more difficult it is to find something further to provide for in advance, and the greater our dependence on present consumption as a source of demand. Yet the larger our incomes, the greater, unfortunately, is the margin between our incomes and our consumption. So, failing some novel expedient, there is, as we shall see, no answer to the riddle, except that there must be sufficient unemployment to keep us so poor that our consumption falls short of our income by no more than the equivalent of the physical provision for future consumption which it pays to produce to-day.
Krugman's refusal to endorse fiscal stimulus unless the economy is at zero lower bound. That is not only anti-Keynesian, it plays directly into the hands of the debt fear mongers. (Krugman is also worried about the debt.)[ Only correct to a degree, economic weakness is recognized. ]
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Dec 31, 2016 | economistsview.typepad.com
Mathew Kahn:2007 Krugman on Milton Friedman : As you read this direct Paul Krugman quote, do y ou hear this song in the background."What's odd about Friedman's absolutism on the virtues of markets and the vices of government is that in his work as an economist's economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing the role of individual rationality-but unlike some of his colleagues, he knew where to stop. Why didn't he exhibit the same restraint in his role as a public intellectual?
The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm of his early career hardened into a rigid defense of what had become the new orthodoxy.
In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man indeed-a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant communicator of economic ideas to the general public that ever lived. But there's a good case for arguing that Friedmanism, in the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world needs now, I'd argue, is a counter-counterreformation."
Paul Mathis : , December 31, 2016 at 02:26 PM
Counter-reformation? Not exactly.Dan Berg -> Paul Mathis... , December 31, 2016 at 02:38 PMIn an interview with Public Broadcasting System on Oct. 1, 2000, Dr. Milton Friedman said, "Let me emphasize [that] I think Keynes was a great economist. I think his particular theory in The General Theory of Employment, Interest, and Money is a fascinating theory. It's a right kind of a theory. It's one which says a lot by using only a little. So it's a theory that has great potentiality."
Brilliant economist? Not exactly.
For monetarists who believe as Dr. Friedman did that "inflation is always and everywhere a monetary phenomenon," the nearly $4 trillion added to the money supply by the Fed since 2008 should have produced raging hyper-inflation. For Friedman, the answer was not debatable: "A steady rate of monetary growth at a moderate level can provide a framework under which a country can have little inflation and much growth." The Counter-Revolution in Monetary Theory (1970).
$4 T was not "added to the money supply"anne -> Dan Berg ... , December 31, 2016 at 03:35 PMhttps://fred.stlouisfed.org/graph/?g=2VX3
For Krugman, this is called being hoisted by one's own petard.
https://fred.stlouisfed.org/graph/?g=2VX3 :anne -> Paul Mathis... , December 31, 2016 at 02:44 PMthis graph, which should have been labelled but was not, depicts the monetary base from October 2012 to December 2015 for reasons that are a mystery to me.
https://fred.stlouisfed.org/graph/?g=cfmnanne -> anne... , December 31, 2016 at 02:47 PMJanuary 15, 2016
Adjusted Monetary Base, 2000-2016
https://fred.stlouisfed.org/graph/?g=cfmqJanuary 15, 2016
Adjusted Monetary Base, 2008-2016
About $3 trillion was added to the monetary base between 2008 and the beginning of 2015.Dan Berg -> anne... , December 31, 2016 at 05:05 PMso why are you depicting the monetary base if they are such a mystery; and without labels?anne -> anne... , December 31, 2016 at 05:18 PMPerfectly described and drawn graphs depicting more than a $3 trillion increase in the monetary base between 2008 and 2015. Nice and simple as that:anne -> Paul Mathis... , December 31, 2016 at 03:44 PMhttps://fred.stlouisfed.org/graph/?g=cfmn
January 15, 2016
Adjusted Monetary Base, 2000-2016
https://fred.stlouisfed.org/graph/?g=cfmqJanuary 15, 2016
Adjusted Monetary Base, 2008-2016
Tra la, tra la.
http://krugman.blogs.nytimes.com/2013/08/08/milton-friedman-unperson/anne -> Paul Mathis... , December 31, 2016 at 05:26 PMAugust 8, 2013
Milton Friedman, Unperson
By Paul KrugmanSo Friedman has vanished from the policy scene - so much so that I suspect that a few decades from now, historians of economic thought will regard him as little more than an extended footnote.
Do write further on this matter when possible.anne : , December 31, 2016 at 02:39 PMhttp://www.nybooks.com/articles/19857anne -> anne... , December 31, 2016 at 03:00 PMFebruary 15, 2007
Who Was Milton Friedman?
By Paul Krugman - New York Review of Books1.
The history of economic thought in the twentieth century is a bit like the history of Christianity in the sixteenth century. Until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936, economics-at least in the English-speaking world-was completely dominated by free-market orthodoxy. Heresies would occasionally pop up, but they were always suppressed. Classical economics, wrote Keynes in 1936, "conquered England as completely as the Holy Inquisition conquered Spain." And classical economics said that the answer to almost all problems was to let the forces of supply and demand do their job.
But classical economics offered neither explanations nor solutions for the Great Depression. By the middle of the 1930s, the challenges to orthodoxy could no longer be contained. Keynes played the role of Martin Luther, providing the intellectual rigor needed to make heresy respectable. Although Keynes was by no means a leftist-he came to save capitalism, not to bury it-his theory said that free markets could not be counted on to provide full employment, creating a new rationale for large-scale government intervention in the economy.
Keynesianism was a great reformation of economic thought. It was followed, inevitably, by a counter-reformation. A number of economists played important roles in the great revival of classical economics between 1950 and 2000, but none was as influential as Milton Friedman. If Keynes was Luther, Friedman was Ignatius of Loyola, founder of the Jesuits. And like the Jesuits, Friedman's followers have acted as a sort of disciplined army of the faithful, spearheading a broad, but incomplete, rollback of Keynesian heresy. By the century's end, classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit.
I don't want to push the religious analogy too far. Economic theory at least aspires to be science, not theology; it is concerned with earth, not heaven. Keynesian theory initially prevailed because it did a far better job than classical orthodoxy of making sense of the world around us, and Friedman's critique of Keynes became so influential largely because he correctly identified Keynesianism's weak points. And just to be clear: although this essay argues that Friedman was wrong on some issues, and sometimes seemed less than honest with his readers, I regard him as a great economist and a great man....
http://krugman.blogs.nytimes.com/2009/03/02/friedman-and-schwartz-were-wrong/anne -> anne... , December 31, 2016 at 03:17 PMMarch 2, 2009
Friedman and Schwartz Were Wrong
By Paul KrugmanIt's one of Ben Bernanke's most memorable quotes: at a conference honoring Milton Friedman on his 90th birthday, he said: *
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
He was referring to the Friedman-Schwartz argument that the Fed could have prevented the Great Depression if only it has been more aggressive in countering the fall in the money supply. This argument later mutated into the claim that the Fed caused the Depression, but its original version still packed a strong punch. Basically, it implied that no fundamental reforms of the economy were necessary; all it takes to avoid depressions is for central banks to do their job.
But can we say that recent events appear to disprove that claim? (So did Japan's experience in the 1990s, but that lesson failed to sink in.) What we have now is a Fed that is determined not to "do it again." It has been very aggressive about monetary expansion. Here's one measure of that aggressiveness, banks' excess reserves:
[Bank excess reserves, 1990-2009]
And yet the world economy is still falling off a cliff.
Preventing depressions, it turns out, is a lot harder than we were taught.
* http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm
https://fred.stlouisfed.org/graph/?g=cfmxJanuary 30, 2016
Excess Reserves of Depository Institutions, 1990-2009
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Dec 31, 2016 | economistsview.typepad.com
To belabor what should be obvious: either the wealthy care about having more money or they don't. If lower marginal tax rates are an incentive to produce more, the prospect of personal gain is an incentive to engage in corrupt practices. You can't go all Ayn Rand/Gordon Gekko on the importance of greed as a motivator while claiming that wealth insulates ... from temptation. ...
And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. It was never about the incentives; it was just another excuse to make the rich richer.
Anomalous Cowherd : , December 29, 2016 at 11:35 AMIn one sentence, you still can't beat John Kenneth Galbraith's assessment: "The modern conservative is engaged in one of man's oldest exercises in moral philosophy: that is, the search for a superior moral justification for selfishness."DrDick -> Anomalous Cowherd... , December 29, 2016 at 12:31 PMNothing is more admirable than the fortitude with which millionaires tolerate the disadvantages of their wealth. -- Nero Wolfe
You need to know nothing else to understand the entirety of the conservative edifice.JohnH :"choosing a cabinet of billionaires, because rich men are incorruptible"...kind of like showering ZIRP on the Wall Street banking cartel and letting them how to ration credit to the rest of economy...mostly their wealthy clientele, who use it for stock buy-backs and asset speculation.Gibbon1 : , December 29, 2016 at 12:29 PMOf course, 'liberal' economists see nothing wrong with trickle down, supply side economics, as long as it's the Wall Street banking cartel who's in charge of it...
Why do we need Krugman to tell us this?DrDick -> Gibbon1... , -1*We* do not, but our pandering press does and I think that is Krugman's intended target.JohnH -> pgl...Stiglitz: "I've always said that current monetary policy is not going to work because quantitative easing is based on a variant of trickle-down economics. The lower interest rates have led to a stock-market bubble – to increases in stock-market prices and huge increases in wealth. But relatively little of that's been translated into increased and broad consumer spending."yuan -> JohnH...
http://www.theglobeandmail.com/opinion/munk-debates/joseph-stiglitz-current-monetary-policy-is-not-going-to-work/article24346548/But pgl and many other '[neo[liberal' economists just can't get enough of the trickle down monetary policy...all the while they vehemently condemn trickle down tax policy.
and few liberal economists have been more skeptical of QE's economic impact than Krugman.ilsm :http://www.marketwatch.com/story/krugman-meh-is-grade-fed-gets-on-qe-2015-11-09
PS: bernie, please save me from your bros.
You all think Trump can do worse than the sitting cabal adding $660B from Sep 2015 to the federal debt quietly keeping the economy going for the incumbent party?yuan -> ilsm...The losers think the winners are as crooked as they!
when we can borrow over the long-term at 3% and have truly massive infrastructure and clean energy needs we should be borrowing like military Keynesian republicans...
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Dec 29, 2016 | economistsview.typepad.com
Peter K. : All of the Democratic primary voters somehow believed Hillary Clinton would make a better candidate against Trump than Sanders would.And now we're stuck with Trump for at least 4 years.
Good job.
As Saul Bellow once said, "a great deal of intelligence can be invested in ignorance when the need for illusion is strong". Reply Wednesday, December 28, 2016 at 07:09 PM Peter K. -> Peter K.... , December 28, 2016 at 07:11 PM
Seriously why should we ever believe these neoliberal centrist Democrats again?likbez -> Peter K.... , December 28, 2016 at 10:09 PMWhy when they were so very, very wrong!
Krugman ASSURED us Clinton was a great candidate who would easily win.
Krugman was clearly a neoliberal propagandist on payroll. He should not be even discussed in this context because his columns were so clearly partisan.Cal -> likbez... , -1As for "Centrist Democrats" (aka Clinton wing of the party) their power is that you have nowhere to go: they rule the Democratic Party and the two party system guarantees that any third party will be either squashed or assimilated.
In no way they need that you believe them: being nowhere to go is enough.
Remember what happened with Sanders supporters during the convention? They were silenced. And then eliminated. That's how this system works.
Krugman is a polarizing agent here in RiverCity...to our collective loss IMHO...as you know I don't have the Nobel.Egmont Kakarot-Handtke : , -1
But you might be giving him some hope with that "was"? Clearly he does not need $.He is writing for our....yes, American, maybe even Global citizenship, which he thinks is in peril. It is. Otherwise I'd be out fishing.
And you? What's in it for you? Are you familiar with the history of political party systems that transition in and out of 2 parties? Is this little forum an example of the 2 party system: pro/con Krugman?
Americans believe crazy things, yet they are outdone by economists
Comment on Catherine Rampell on 'Americans - especially but not exclusively Trump voters - believe crazy, wrong things'#1Americans are NOT special. Since more than 5000 years people believe things JUST BECAUSE they are absurd - in accordance with Tertullian's famous dictum "credo quia absurdum".#2
As a matter of principle, almost everybody has the right to his own opinion no matter how stupid, crazy, wrong, or absurd; the only exception are scientists. The ancient Greeks started science with the distinction between doxa (= opinion) and episteme (= knowledge). Scientific knowledge is well-defined by material and formal consistency. Knowledge is established by proof, belief or opinion counts for nothing.
Opinion is the currency in the political sphere, knowledge is the currency is the scientific sphere. It is extremely important to keep both spheres separate. Since the founding fathers, though, economists have not emancipated themselves from politics. They claim to do science but they have never risen above the level of opinion, belief, wish-wash, storytelling, soap box propaganda, and sitcom gossip.
The orthodox majority still believes in these Walrasian hard core absurdities: "HC1 economic agents have preferences over outcomes; HC2 agents individually optimize subject to constraints; HC3 agent choice is manifest in interrelated markets; HC4 agents have full relevant knowledge; HC5 observable outcomes are coordinated, and must be discussed with reference to equilibrium states." (Weintraub)
To be clear: HC2, HC4, HC5 are NONENTITIES like angels, Spiderman, or the Easter Bunny.
The heterodox minority still believes in these ill-defined Keynesian relationships: "Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment."
Until this day, Walrasians, Keynesians, Marxians, Austrians hold to their provable false beliefs and claim to do science. This is absurdity on stilts but it is swallowed hook, line and sinker by every new generation of economics students. Compared to the representative economist the average political sucker is a genius.
Egmont Kakarot-Handtke
#1 The Washington Post
https://www.washingtonpost.com/news/rampage/wp/2016/12/28/americans-especially-but-not-exclusively-trump-voters-believe-crazy-wrong-things/?utm_term=.3b8eabe9eb3d
#2 Wikipedia
https://en.wikipedia.org/wiki/Credo_quia_absurdum
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Dec 23, 2016 | economistsview.typepad.com
Noah Smith:The Case for Protecting Infant Industries : I must say, it's been almost breathtaking to see how fast the acceptable terms of debate have shifted on the subject of trade. Thanks partly to President-elect Donald Trump's populism and partly to academic research showing that the costs of free trade could be higher than anyone predicted, economics commentators are now happy to lambast the entire idea of trade. I don't want to do that -- I think a nuanced middle ground is best. But I do think it's worth reevaluating one idea that the era of economic dogmatism had seemingly consigned to the junk pile -- the notion of infant-industry protectionism. ...DrDick -> pgl...DrDick -> sanjait... , December 22, 2016 at 04:52 PMThe fact remains, however, that every single developed country got there by using protectionist policies to nurture the develop local industries. Protectionism in developed countries does have strongly negative consequences, but it is beneficial for developing economies.
You are exactly right about Japan and I lived through that period. Please name one advanced economy which did not rely on protectionist laws to support domestic industries. All of the European industrial countries did it. The US did it. Japan and Korea did it. China is currently doing it and India has done it.JohnH -> pgl... , -1Japan and other developed countries took advantage of the strong dollar/reserve currency, which provided their industries de facto protection from US exports along with a price umbrella that allowed them export by undercutting prices on US domestic products. The strong dollar was viewed as a strategic benefit to the US, since it allowed former rivals to develop their economies while making them dependent on the US consumer market, the largest in the world. The strong dollar also allowed the US to establish bases and fight foreign wars on the cheap, while allowing Wall Street to buy foreign economies' crown jewels on the cheap.JohnH -> anne... , December 22, 2016 at 05:06 PMNobody cared about US labor or about hollowing out the US economy. Krugman frequently noted that the benefits to investors and 'strategic' considerations for free trade were more important that job losses.
Even pgl's guy, Milton Friedman, recognized that "overseas demand for dollars allows the United States to maintain persistent trade deficits without causing the value of the currency to depreciate or the flow of trade to re-adjust."John San Vant -> JohnH... , -1
https://en.wikipedia.org/wiki/International_use_of_the_U.S._dollarThis extra demand for dollars as a commodity is what drives the price of the dollar higher, leading to the strategic benefits and economic hollowing out that I noted above.
That is because you get a persistent trade surplus in services, which offsets the "Goods" trade deficit. The currency depreciated in the 2000's because said surplus in services began to decline creating a real trade deficit.DrDick -> Mike Sparrow... , December 22, 2016 at 04:57 PManne -> DrDick... , -1"What about the post-industrialization era?"There really is no "post-industrialization era", no matter what fantasies the FIRE sector wants to sell. To the extent there is, the existing global trade agreements (including the WTO, World Bank, IMF, and related organization) accomplish that as well by privileging the position of first world capital.
There really is no "post-industrialization era", no matter what fantasies the Finance, Insurance, and Real Estate sectors want to sell....Greg : , -1[ Interesting assertion. Do develop this further. ]
The Long-Term Jobs Killer Is Not China. It's Automation.anne -> Greg... , December 22, 2016 at 01:08 PM
( http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html?ref=economy&_r=0 )1. I'm moderately surprised that this piece hasn't shown up in Links.
2. The Lump of Labor Fallacy is exposed as a fallacy - Sandwichman has been right all along.
3. Infant industry protection won't help in this environment
http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.htmlGreg -> Greg... , December 22, 2016 at 01:08 PMDecember 21, 2016
The Long-Term Jobs Killer Is Not China. It's Automation.
By Claire Cain Miller
The first job that Sherry Johnson, 56, lost to automation was at the local newspaper in Marietta, Ga., where she fed paper into the printing machines and laid out pages. Later, she watched machines learn to do her jobs on a factory floor making breathing machines, and in inventory and filing.
"It actually kind of ticked me off because it's like, How are we supposed to make a living?" she said. She took a computer class at Goodwill, but it was too little too late. "The 20- and 30-year-olds are more up to date on that stuff than we are because we didn't have that when we were growing up," said Ms. Johnson, who is now on disability and lives in a housing project in Jefferson City, Tenn.
Donald J. Trump told workers like Ms. Johnson that he would bring back their jobs by clamping down on trade, offshoring and immigration. But economists say the bigger threat to their jobs has been something else: automation.
"Over the long haul, clearly automation's been much more important - it's not even close," said Lawrence Katz, an economics professor at Harvard who studies labor and technological change. No candidate talked much about automation on the campaign trail. Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies are in the United States and benefit the country in many ways.
Mr. Trump told a group of tech company leaders last Wednesday: "We want you to keep going with the incredible innovation. Anything we can do to help this go along, we're going to be there for you."
Andrew F. Puzder, Mr. Trump's pick for labor secretary and chief executive of CKE Restaurants, extolled the virtues of robot employees over the human kind in an interview with Business Insider in March. "They're always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex or race discrimination case," he said.
Globalization is clearly responsible for some of the job losses, particularly trade with China during the 2000s, which led to the rapid loss of 2 million to 2.4 million net jobs, according to research by economists including Daron Acemoglu and David Autor of M.I.T.
People who work in parts of the country most affected by imports generally have greater unemployment and reduced income for the rest of their lives, Mr. Autor found in a paper published in January. Still, over time, automation has had a far bigger effect than globalization, and would have eventually eliminated those jobs anyway, he said in an interview. "Some of it is globalization, but a lot of it is we require many fewer workers to do the same amount of work," he said. "Workers are basically supervisors of machines."
When Greg Hayes, the chief executive of United Technologies, agreed to invest $16 million in one of its Carrier factories as part of a Trump deal to keep some jobs in Indiana instead of moving them to Mexico, he said the money would go toward automation.
"What that ultimately means is there will be fewer jobs," he said on CNBC....
Clarification of 3: that is, infant industry protection as traditionally done, i.e. "picking winners", won't help. What would help is structural changes that make things relatively easier for small enterprises and relatively harder for large ones.anne -> Greg... , December 22, 2016 at 01:09 PMMaking direct lobbying of state and federal politicians by industry groups and companies a crime punishable by 110% taxation of net income on all the participants would be a start.
http://cepr.net/blogs/beat-the-press/what-s-different-about-stagnating-wages-for-workers-without-college-degreesPeter K. : , -1December 21, 2016
What's Different About Stagnating Wages for Workers Without College Degrees
There seems to be a great effort to convince people that the displacement due to the trade deficit over the last fifteen years didn't really happen. The New York Times contributed to this effort with a piece * telling readers that over the long-run job loss has been primarily due to automation not trade.
While the impact of automation over a long enough period of time certainly swamps the impact of trade, over the last 20 years there is little doubt that the impact of the exploding trade deficit has had more of an impact on employment. To make this one as simple as possible, we currently have a trade deficit of roughly $460 billion (@ 2.6 percent of GDP). Suppose we had balanced trade instead, making up this gap with increased manufacturing output.
Does the NYT want to tell us that we could increase our output of manufactured goods by $460 billion, or just under 30 percent, without employing more workers in manufacturing? That would be pretty impressive. We currently employ more than 12 million workers in manufacturing, if moving to balanced trade increase employment by just 15 percent we would be talking about 1.8 million jobs. That is not trivial.
But this is not the only part of the story that is strange. We are getting hyped up fears over automation even at a time when productivity growth (i.e. automation) has slowed to a crawl, averaging just 1.0 percent annually over the last decade. The NYT tells readers:
"Over time, automation has generally had a happy ending: As it has displaced jobs, it has created new ones. But some experts are beginning to worry that this time could be different. Even as the economy has improved, jobs and wages for a large segment of workers - particularly men without college degrees doing manual labor - have not recovered."
Hmmm, this time could be different? How so? The average hourly wage of men with just a high school degree was 13 percent less in 2000 than in 1973. ** For workers with some college it was down by more than 2.0 percent. In fact, stagnating wages for men without college degrees is not something new and different, it has been going on for more than forty years. Hasn't this news gotten to the NYT yet?
* http://www.nytimes.com/2016/12/21/upshot/the-long-term-jobs-killer-is-not-china-its-automation.html
** http://www.stateofworkingamerica.org/chart/swa-wages-table-4-15-hourly-wages-men-education/
-- Dean Baker
http://jaredbernsteinblog.com/inequality-technology-globalization-and-the-false-assumptions-that-sustain-current-inequities/Peter K. : , -1Inequality, technology, globalization, and the false assumptions that sustain current inequities
by Jared Bernstein
December 22nd, 2016 at 3:24 pm
Here's a great interview* with inequality scholar Branko Milanovic wherein he brings a much-needed historical and international perspective to the debate (h/t: C. Marr). Many of Branko's points are familiar to my readers: yes, increased trade has upsides, for both advanced and emerging economies. But it's not hard to find significant swaths hurt by globalization, particularly workers in rich economies who've been placed into competition with those in poorer countries. The fact that little has been done to help them is one reason for president-elect Trump.
As Milanovic puts it:
"The problems with globalization arise from the fact that gains from it are not (and can never be) evenly distributed. There would be always those who gain less than some others, or those who lose even in absolute terms. But to whom can they "appeal" for redress? Only to their national governments because this is how the world is politically organized. Thus national governments have to engage in "mop up" operations to fix the negative effects of globalization. And this they have not done well, led as they were by the belief that the trickle-down economics will take care of it. We know it did not."
But I'd like to focus on a related point from Branko's interview, one that gets less attention: the question of whether it was really exposure to global trade or to labor-saving technology that is most responsible for displacing workers. What's the real problem here: is it the trade deficit or the robots?
Branko cogently argues that "both technological change and economic polices responded to globalization. The nature of recent technological progress would have been different if you could not employ labor 10,000 miles away from your home base." Their interaction makes their relative contributions hard to pull apart.
I'd argue that the rise of trade with China, from the 1990s to the 2007 crash, played a significant role in moving US manufacturing employment from its steady average of around 17 million factory jobs from around 1970 to 2000, to an average today that's about 5 million less (see figure below; of course, manufacturing employment was falling as a share of total jobs over this entire period).
....
* https://newrepublic.com/article/139432/understand-2016s-politics-look-winners-losers-globalization
market monetarist Scott Sumner makes a good point about the post-war years.If Economists hadn't ignored US and World Economic History they would have had a clue : , December 22, 2016 at 07:53 PMhttp://www.themoneyillusion.com/?p=32214
Do current account deficits cost jobs
Over at Econlog I have a post that suggests the answer is no, CA deficits do not cost jobs.
But suppose I'm wrong, and suppose they do cost jobs. In that case, trade has been a major net contributor to American jobs during the 21st century, as our deficit was about 4% of GDP during the 2000 tech boom, and as large as 6% of GDP during the 2006 housing boom. Today it is only 2.6% of GDP. So if you really believe that rising trade deficits cost jobs, you'd be forced to believe that the shrinking deficits since 2000 have created jobs.
So why have manufacturing jobs plummeted since 2000? One answer is that the current account deficit is the wrong figure, since it also includes our surplus in trade in services. If you just look at goods, the deficit is closer to 4.2% of GDP.
But even that doesn't really explain very much, because it's slightly lower than the 4.35% of GDP trade deficit in goods back in 2000. So again, the big loss of manufacturing jobs is something of a mystery. Yes, we import more goods than we used to, but exports of goods have risen at about the same rate since 2000. So why does it seem like trade has devastated our manufacturing sector?
Perhaps because trade interacts with automation. Not only do we lose jobs in manufacturing to automation, but trade leads us to re-orient our production toward goods that use relatively less labor (tech, aircraft, chemicals, farm produces, etc.), while we import goods like clothing, furniture and autos.
So trade and automation are both parts of a bigger trend, Schumpeterian creative destruction, which is transforming big areas of our economy. It's especially painful as during the earlier period of automation (say 1950-2000) the physical output of goods was still rising fast. So the blow of automation was partly cushioned by a rise in output. (Although not in the coal and steel industries!) Since 2000, however, we've seen slower growth in physical output for a number of reasons, including slower workforce growth, a shift to a service economy, and a home building recession (which normally absorbs manufactured goods like home appliances, carpet, etc.) We are producing more goods than ever, but with dramatically fewer workers.
Update: Steve Cicala sent me a very interesting piece on coal that he had published in Forbes. Ironically, environmental regulations actually helped West Virginia miners, by forcing utilities to install scrubbers that cleaned up emissions from the dirtier West Virginia coal. (Wyoming coal has less sulfur.) He also discusses the issue of competition from natural gas.
The historical record is totally unambiguous. Protectionism always leads to wealth and industrial development. Free trade leads you to the third world. This was true four hundred years ago with mercantilist England and the navigation acts; it was true with Lincoln's tariffs in the 1860's, it was true of East Asia post 1945.Peter K. : , -1Economists better abandon silly free trade if they want to have any credibility and not be seen as quacks.
http://www.cnn.com/2016/12/21/politics/donald-trump-tariffs/likbez : , December 23, 2016 at 08:25 AMTrump team floats a 10% tariff on imports
By John King and Jeremy Diamond, CNN
Updated 3:57 PM ET, Thu December 22, 2016
Washington (CNN)President-elect Donald Trump's transition team is discussing a proposal to impose tariffs as high as 10% on imports, according to multiple sources.
A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed at spurring US manufacturing, which could be implemented via executive action or as part of a sweeping tax reform package they would push through Congress.
Incoming White House Chief of Staff Reince Priebus floated a 5% tariff on imports in meetings with key Washington players last week, according to two sources who represent business interests in Washington. But the senior transition official who spoke to CNN Thursday on the condition of anonymity said the higher figure is now in play.
Such a move would deliver on Trump's "America First" campaign theme, but risks drawing the US into a trade war with other countries and driving up the cost of consumer goods in the US. And it's causing alarm among business interests and the pro-trade Republican establishment.
The senior transition official said the transition team is beginning to find "common ground" with House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady, pointing in particular to the border adjustment tax measure included in House Republicans' "Better Way" tax reform proposal, which would disincentivize imports through tax policy.
Aides to Ryan and Brady declined to say they had "common ground" with Trump, but acknowledged they are in deep discussions with transition staffers on the issue.
Curbing free trade was a central element of Trump's campaign. He promised to rip up the North American Free Trade Agreement with Mexico and Canada. He also vowed to take a tougher line against other international trading partners, almost always speaking harshly of China but often including traditional US allies such as Japan in his complaint that American workers get the short end of the stick under current trade practices.
Gulf with GOP establishment
It is an area where there is a huge gulf between Trump's stated positions and traditional GOP orthodoxy. Business groups and GOP establishment figures -- including Ryan and Senate Majority Leader Mitch McConnell -- have been hoping the transition from the campaign to governing would bring a different approach.
Ryan did signal in a CNBC interview earlier this month that Trump's goals of spurring US manufacturing could be accomplished through "comprehensive tax reform."
"I'll tell him what I've been saying all along, which is we can get at what he's trying to get at better through comprehensive tax reform," Ryan said.
The pro-business GOP establishment says the new Trump administration could make clear it would withdraw from NAFTA unless Canada and Mexico entered new talks to modernize the agreement to reflect today's economy. That would allow Trump to say he kept a promise to make the agreement fairer to American workers without starting a trade war and exacerbating tensions with America's neighbors and vital economic partners.
But there remain establishment jitters that Trump, who views his tough trade message as critical to his election victory, will look for ways to make an early statement that he is serious about reshaping the trade playing field.
And when Priebus told key Washington players that the transition is mulling a 5% tariff on imports, the reaction was one of fierce opposition, according to two sources who represent business interests in Washington and spoke on condition of anonymity because the conversations with the Trump team were confidential.
Priebus, the sources said, was warned such a move could start trade wars, anger allies, and also hurt the new administration's effort to boost the rate of economic growth right out of the gate.
Role of Wilbur Ross
One of the sources said he viewed the idea as a trial balloon when first raised, and considered it dead on arrival given the strong reaction in the business community -- and the known opposition to such protectionist ideas among the GOP congressional leadership.
But this source voiced new alarm Tuesday after being told by allies within the Trump transition that defending new tariffs was part of the confirmation "murder board" practice of Wilbur Ross, the President-elect's choice for commerce secretary.
At least one business community organization is worried enough about the prospect of the tariff it already has prepared talking points, obtained by CNN Wednesday night.
"This $100 billion tax on American consumers and industry would impose heavy costs on the US economy, particularly for the manufacturing sector and American workers, with highly negative political repercussions," according to the talking points. "Rather than using a trade policy sledgehammer that would inflict serious collateral damage, the Trump administration should use the scalpel of US trade remedy law to achieve its goals."
The talking points also claim the tariffs would lead to American job loss and result in a tax to consumers, both of which would harm the US economy.
Trump aides have signaled that Ross is likely to be a more influential player in trade negotiations than recent Commerce secretaries. Given that, the aides know his confirmation hearings are likely to include tough questioning -- from both Democrats and Republicans -- about Trump's trade-related campaign promises.
"The way it was cast to me was that (Trump) and Ross are all over it," said one source. "It is serious."
The second source was less certain about whether the tariff idea was serious or just part of a vigorous debate about policy options. But this source said the unpredictability of Trump and his team had the business interests nervous.
The business lobbying community is confident the GOP leadership would push back on any legislative effort to impose tariffs, which organizations like the Chamber of Commerce, the Business Roundtable, the National Association of Manufactures and others, including groups representing farmers, believe would lead to retaliation against US industries heavily dependent on exports.
But the sources aligned with those interests told CNN the conversation within the Trump transition includes using executive authority allowed under existing trade laws. Different trade laws enacted over the course of the past century allow the president to impose tariffs if he issues a determination the United States is being subjected to unfair trade practices or faces an economic or national security threat because of trade practices.
There are industries that are closely connected with the sovereignty of the country. That's what neoliberals tend to ignore as they, being closet Trotskyites ("Financial oligarchy of all countries unite!" instead of "Proletarian of all countries unite!" ;-) do not value sovereignty and are hell bent on the Permanent Neoliberal Revolution to bring other countries into neoliberal fold (in the form of color revolutions, or for smaller countries, direct invasions like in Iraq and Libya ).For example, if you depends of chips produced outside the country for your military or space exploration, then sabotage is possible (or just pure fraud -- selling regular ships instead of special tolerant to cosmic radiation or harsh conditions variant; actually can be done with the support of internal neoliberal fifth column).
The same is probably true for cars and auto engines. If you do not produce domestically a variety at least some domestic brans of cars and trucks, your military trucks and engines will be foreign and that will cost you tremendous amount of money and you might depend for spare parts on you future adversary. Also such goods are overprices to the heaven. KAS is a clear example of this as they burn their money in the war with Yemen as there is no tomorrow making the US MIC really happy.
So large countries with say over 100 million people probably need to think twice before jumping into neoliberal globalization bandwagon and relying in imports for strategically important industries.
Neoliberal commenters here demonstrate complete detachment from the fact that like war is an extension of politics, while politics is an extension of economics. For example, denying imports can and is often used for political pressure.
That was one of factors that doomed the USSR. Not that the system has any chance -- it was doomed after 1945 as did not provide for higher productivity then advanced capitalist economies.
But this just demonstrates the power of the US sanctions mechanism. Economic sanctions works and works really well. The target country is essentially put against the ropes and if you unprepared you can be knocked down.
For example now there are sanctions against Russia that deny them advanced oil exploration equipment. And oil is an important source of Russia export revenue. So the effect of those narrow prohibitions multiples by factor of ten by denying Russia export revenue.
That's how an alliance between Russia and China was forged by Obama administration. because China does produce some of this equipment now. And Russia paid dearly for that signing huge multi-year deals with China on favorable for China terms.
Now Trump want to play this game selectively designating China as "evil empire" and providing a carrot for Russia. Will it works, or Russia can be wiser then donkeys, I do not know.
And look what countries are on the USA economic sanctions list: many entries are countries that are somewhat less excited about the creation of the global neoliberal empire led by the USA. KAS and Gulf monarchies are not on the list. So much about "spreading democracy".
The US propagandists usually call counties on which they impose sanction authoritarian dictatorships to make such actions more politically correct, but the fact remains: The USA as a global hegemon enjoys using economic pressure to crush dissidents and put vassals in line.
The problem with tariffs on China is an interesting reversion of the trend: manufacturing is already in China and to reverse this process now is an expensive proposition. So alienating Chinese theoretically means that some of USA imports might became endangered, despite huge geopolitical weight of the USA. They denied export of rare metals to Japan in the past. They can do this for Apple and without batteries Apple can just fold.
Also it is very easy to prohibit Apple sales in China of national security grounds (any US manufacturer by definition needs to cooperate with NSA and other agencies). I think some countries already prohibit the use of the USA companies produced cell phones for government officials.
So if Trump administration does something really damaging, for Chinese there are multiple ways to skin the cat. Neoliberalism as a social system is past it pinnacle and that creates some problems for the USA as the central player in the neoliberal world. The triumphal march of neoliberalism over the globe ended almost a decade ago.
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Oct 05, 2014 | Casino Capitalism and Crapshoot Politics
Regulatory Capture 101The financial scandal du jour involves leaked audio recordings that purport to show that regulators at the Federal Reserve Bank of New York were soft on Goldman Sachs . Say it ain't so.Impressionable journalists finally meet George Stigler.
... ... ...
The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra's revelations were broadcast, the firm added new restrictions on employees trading for their own accounts.
The New York Fed won against Ms. Segarra in district court, though the case is on appeal. The regulator also notes that Ms. Segarra "demanded $7 million to settle her complaint." And last week New York Fed President William Dudley said, "We are going to keep striving to improve, but I don't think anyone should question our motives or what we are trying to accomplish."
On the recordings, regulators can be heard doing what regulators do-revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been "legal but shady" in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman's explanations without a fight.
The sleuths at the ProPublica website, working with a crack team of investigators from public radio, also seem to think they have another smoking gun in one of Ms. Segarra's conversations that was not recorded but was confirmed by another regulator. Ms. Seest means. For example, a company offering securities is exempt from some registration requirements if it is only selling to accredited investors, such as people with more than $1 million in net worth, excluding the value of primary residences.
The journalists have also found evidence in Ms. Segarra's recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government?
***Enter George Stigler, who published his famous essay "The Theory of Economic Regulation" in the spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago economist reported empirical data from various markets and concluded that "as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit."
Stigler knew he was fighting an uphill battle trying to persuade his fellow academics. "The idealistic view of public regulation is deeply imbedded in professional economic thought," he wrote. But thanks to Stigler, who would go on to win a Nobel prize, many economists have studied the operation and effects of regulation and found similar results.
A classic example was the New York Fed's decision to let Citigroup stash $1.2 trillion of assets-including more than $600 billion of mortgage-related securities-in off-balance-sheet vehicles before the financial crisis. That's when Tim Geithner ran the New York Fed and Jack Lew was at Citigroup.
Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can't be gamed by the biggest firms and their captive bureaucrats. This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple requirement for more bank capital-an equity-to-asset ratio of perhaps 15%. It means bringing back bankruptcy for giant firms instead of resolution at the discretion of political appointees. And it means considering economist Charles Calomiris's plan to automatically convert a portion of a bank's debt into equity if the bank's market value falls below a healthy level.
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Jun 02, 2015 | econospeak.blogspot.com
Yes, we miss the late Hy Minsky, especially those of us who knew him, although I cannot claim to be one who knew him very well. But I knew him well enough to have experienced his wry wit and unique perspective. Quite aside from that, it would have been great to have had him around these last few years to comment on what has gone on, with so many invoking his name, even as they have in the end largely ended up studiously ignoring him and relegating him back into an intellectual dustbin of history, or tried to.
So, Paul Krugman has a post entitled "The Case of the Missing Minsky," which in turn comments on comments by Mark Thoma on comments by Gavyn Davis on discussions at a recent IMF conference on macroeconomic policy in light of the events of recent years, with Mark link http://economistsview.typepad.com/economistsview/2015/06/the-case-of-the-missing-minsky.htmling to Krugman's post.
He notes that there seem to be three periods of note:
- a Minsky period of increasing vulnerability of the financial system to crash before the crash,
- a Bagehot period during the crash,
- a Keynes period after the crash.
Krugman argues that, despite a lot of floundering by the IMF economists, we supposedly understand the second two, with his preferred neo-ISLM approach properly explaining the final Keynes period of insufficiently strong recovery due to insufficiently strong aggregate demand stimulus, especially relying on fiscal policy (and while I do not fully buy his neo-ISLM approach, I think he is mostly right about the policy bottom line on this, as would the missing Minsky, I think).
He also says that looking at 1960s Diamond-Dybvig models of bank panics sufficiently explain the Bagehot period, and they probably do, given the application to the shadow banking system. However, he grants that existing official models do not sufficiently explain the Minsky period, the runup, how things got so fragile that they could collapse so badly.
Now I do not strongly disagree with most of this, but I shall make a few further points. The first is that in effect Minsky provided a model and discussion of all three stages, although his model of the Keynes stage is not really all that distinctive and is really just Keynes.
But he probably did a better job of discussing the Bagehot stage than did Bagehot, and more detailed, if less formal, than Diamond and Dybvig. I suspect that Bagehot got dragged in by the IMF people because he is so respectable and influential regarding central bank policymaking, given his important 1873 Lombard Street, and I am certainly not going to dismiss the importance of that work.
But the essentials of what go on in a panic and crash were well understood and discussed prior to 1873, with Minsky, and Kindlegerger drawing on Minsky in his 1978 Manias, Panics, and Crashes, quoting in particular a completely modern discussion from 1848 by John Stuart Mill (I am tempted to produce the quotation here, but it is rather long; I do so on p. 59 of my 1991 From Catastrophe to Chaos: A General Theory of Economic Discontinuities), which clearly delineates the mechanics and patterns of the crash, using the colorful language of "panic" and "revulsion" along the way. Others preceding Bagehot include the inimitable MacKay in 1852 in his Madness of Crowds book and Marx in Vol. III of Capital, although admittedly that was not published until well after Bagehot's book.
One can even find such discussions in Cantillon early in the 1700s discussing what went on in the Mississippi and South Sea bubbles, from which he made a lot of money, and then, good old Adam Smith in 1776 in WoN (pp. 703-704), who in regard to the South Sea bubble and the managers of the South Sea company declared, "They had an immense capital dividend among an immense number of proprietors. It was naturally to be expected, therefore, that folly, negligence, and profusion should prevail in the whole management of their affairs. The knavery and extravagance of their stock-jobbing operations are sufficiently known [as are] the negligence, profusion and malversation of the servants of the company."
It must be admitted that this quote from Smith does not have the sort of detailed analysis of the crash itself that one finds in Mill or Bagehot, much less Minsky or Diamond and Dybvig. But there is another reason of interest now to note these inflammatory remarks by Smith. David Warsh in his Economic Principals has posted in the last few days on "Just before the lights went up," also linked to by the inimitable Mark Thoma. Warsh discusses recent work on Smith's role in the bailout of the Ayr Bank of Scotland, whose crash in 1772 created macroeconomic instability and layoffs, with Smith apparently playing a role in getting the British parliament to bail out the bank, with its main owners, Lord Buccleuch and the Duke of Queensbury, paying Smith off with a job as Commissioner of Customs afterwards. I had always thought that it was ironic that free trader Smith ended his career in this position, but had not previously known how he got it. As it is, Warsh points out that the debate over bubbles and what the role of government should be in dealing with them was a difference between Smith and his fellow Scottish rival, Sir James Steuart, whose earlier book provided an alternative overview of political economy, now largely forgotten by most (An Inquiry into the Principles of Political Oeconomy, 1767).
I conclude this by noting that part of the problem for Krugman and also the IMF crowd with Minsky is that it is indeed hard to fit his view into a nice formal model, with various folks (including Mark Thoma) wishing it were to be done and noting that it probably involves invoking the dread behavioral economics that does not provide nice neat models. I also suspect that some of these folks, including Krugman, do not like some of the purveyors of formal models based on Minsky, notably Steve Keen, who has been very noisy in his criticism of these folks, leading even such observers as Noah Smith, who might be open to such things, to denounce Keen for his general naughtiness and to dismiss his work while slapping his hands. But, aside from what Keen has done, I note that there are other ways to model the missing Minsky more formally, including using agent-based models, if one really wants to, these do not involve putting financial frictions into DSGE models, which indeed do not successfully model the missing Minsky.
Barkley Rosser
Update: Correction from comments is that the Ayr Bank was not bailed out. It failed. However, the two dukes who were its main owners were effectively bailed out, see comments or the original Warsh piece for details. It remains the case that Adam Smith helped out with that and was rewarded with the post of Commissioner of Customs in Scotland.
Thornton Hall said... June 2, 2015 at 6:21 PM
What, exactly, is the value added of formal (or even informal) "models" in all this? That is to say, if a historian were to describe the events and responses outlined above, what would he leave out that an economist would put in?Keep in mind, there are an infinite number of models that fit the data. Science requires more that a fit. It requires that the model correspond with reality in a way that it can fill in observable data before it is observed.
Meanwhile, Simon Wren-Lewis dismisses the policy-maker who listens to the historian as using mere "intelligent guess work", strongly suggesting that economists clearly do better. But if trying to figure out whether the current moments is Minsky, Keynes or even Keen, isn't "guesswork" then I don't know what is. Put "intelligent guess work" policy next to model guided policy in your history above. Where's the value added from modeling? It has to be useful AND the policy maker must have a scientific reason for knowing it will be useful IN REAL TIME.
Krugman frequently defends "textbook" modeling with a "nobody else has come up with anything better" response. But that's a classic "when did you stop beating your wife".
What if the economy can't be modeled? Claiming to do the impossible is deluded, even if you can correctly say: "no one has ever improved upon my method of doing the impossible."
"But we have learned so much!" People say that, but what, exactly, are they talking about?
Thornton Hall said... June 2, 2015 at 6:42 PM
Here's a theory (not a model): the true and revolutionary insights of Veblen, Keynes, and Minsky have all failed to significantly alter the trajectory of economic thought because the discipline expects "the truth" to do the impossible.Newton faced this when his theory of universal Gravity was criticized for failing to explain the distance of the planets from the sun. The Aristotelian tradition said that a proper theory of the heavens would do this.
And so Keynes has his Aristotelian interpreter Hicks and Minsky has his Keen. Requiring the revolution to succeed in doing the impossible means that the truth gets misinterpreted or ignored. Either way, no revolution despite every generation producing a revolutionary that sees the truth.
What is the value of this theory? If true, it explains how economics can be filled with smart people seeking the truth and yet make zero progress in more than a century.
chrismealy June 2, 2015 at 8:27 PM
I get the impression that mainstream economists are generally resistant to any kind of boom-and-bust models (at least while getting a BA in econ I was never taught any). Is this the case? It's too bad, because models like Lotka–Volterra are not that hard. Just from messing around with agent-based models it seems like anything with a lag or learning generates cycles. Is it because economists are fixated on optimization and equilibrium? Are they worried about models that are too sensitive to initial conditions?[email protected] said... June 2, 2015 at 11:24 PM
Thornton,Maybe they should not be, but the discussion among IMF economists, Davis, Thoma, and Krugman has involved models, and in particular, conventional models. So, Krugman declares that there are conventional models as noted above to cover two of the stages, the latter two, but not the first one identified with Minsky. I think there are better models for all this, but they are not the conventional ones.
chrismealy,
The DSGE and other conventional models are able to model booms and busts, although they generally do not use the Lotka-Volterra models that such people as the late Richard Goodwin (and even Paul Samuelson) have used for modeling business cycle dynamics. The big difference is that the conventional models involve exogenous shocks to set off their busts, with cyclical reverberations that decay then following the exogenous shock, with some of the lag mechanisms operating for that.
It is not really surprising that this sort of thing does not model Minsky or the Minsky moment, which involve endogenous dynamics, the very success of the boom as during the Great Moderation itself undermining the stability and even resilience of the system as essentially endogenous psychological (and hence behavioral) factors operate to loosen requirements for lending and to use Minksy language, lending and borrowing increasingly involves highly leveraged Ponzi schemes (and I note that some more conventional economists have emphasized leverage cycles, notably John Geanakoplis, although avoiding Minsky per se in doing so).
New Deal democrat said... June 3, 2015 at 10:52 AM
This is a good post and discussion so far. So here's my $.02:1. Maybe the behaviorists like Thaler have already explored this, but it seems to me that economists still need to learn learning theory from psychologists. Most importantly, "bservational learning," { http://psychology.about.com/od/oindex/fl/What-Is-Observational-Learning.htm ), or more simply "monkey see, monkey do." We constantly learn by observing behavior in others: our parents, our older siblings, the cool kids at school, our favorite pop icons, our professors, our business mentors, and so on. As to which,
2. Some people are better at learning than others (duh!). Some learn right away, some more slowly, some never at all. And further,
3. Some people are more persceptive than others, recognizing the importance of something earlier or later. If you recognized how important the trend change was when Volcker broke the back of inflation in the early 1980s, and simply bought 30 year treasuries and held them to maturity, you made a killing. If you discovered that in the early 1990s, you made less. And so on.
All we need, to pick up on chrismealy's comment, are time periods and learning. Incorporate variations in skill and persceptiveness into the population, and you can get a nice boom and bust model. As more and more people, with various levels of skill, learn an economic behavior (flipping houses, using leverage), they will "push the edge of the envelope" more and more -- does 2x leverage work? Yes, then how about 4x? Yes, then how about 20x? -- until the system is overwhelmed.
4. But if you don't want to incorporate imitative learning models from psychology, how about just using appraisals of short term vs. long term risk and reward. Suppose it is the 1980s, and I think treasury yields are on a securlar downtrend. But this book called "Bankruptcy 1995" just came out, based on a blue ribbon panel Reagan created to look at budget deficits. That best selling book forecasts a "hockey stick" of exploding interest rates by the mid-1990s due to ever increasing US debt. So let's say I am 50% sure of my belief that treasury yields will continue to decline for another 20 years, and I can make 10% a year if I am right. But if I am wrong .....
Meanwhile, I calculate that there is an 80% chance I can make 10% a year for the next few years by investing in this new publicly traded company named "Microsoft."
Even leaving aside behavioral finance theories about loss aversion, it's pretty clear that most investors will plump for Microsoft over treasuries, given their relative confidence in short term outcomes.
Historically, once interest rates went close to zero at the outset of the Great Depression, they stayed there for 20 years, and then gradually rose for another 30. How confident are investors that the same scenario will play out this time?
Either or both of the learning theory or the short term-long term risk reward scenario are good explanations for why backwards induction ad absurdum isn't an accurate description of behavior.
----
BTW, a nice example of a failed "backwards induction" is the "taper tantrum" of 2013. Since investors knew that the Fed was going to be raising interest rates sooner or later, they piled on and raised interest rates immediately -- and made a nice intermediate term top at 3%.
reason said... June 3, 2015 at 11:19 AM
Barkley,I think New Deal Democrat has it here. This surely, can be covered with a simple model of asynchronous adaptive expectations with stochastic (Taleb type - big tail) risks. I wouldn't think you would even need a sophisticated agent based model. There must be plenty of ratchet type models out there to chose from.
Sandwichman said... June 3, 2015 at 11:47 AM
Thornton,"...the true and revolutionary insights of Veblen, Keynes, and Minsky have all failed to significantly alter the trajectory of economic thought because the discipline..." sacrifices to the God, Equilibrium.
New Deal Democrat,
WRT "monkey see, monkey do" see Andred Orlean's The Empire of Value which articulates his mimetic theory of value.
[email protected] said... June 3, 2015 at 2:14 PM
To New Deal Dem and reason,Sorry, I am not on board with this at all. Sure, I am all for incorporating learning and lags. No problem. This is good old adaptive expectations, which I have no problem with.
The problem is back to what I said earlier, that Minsky's apparatus operates endogenously without any need for exogenous shocks, although it can certainly operate within those, as his quoting of Mill shows, although I did not provide that quote, but Mill starts his story of how bubbles happen with some exogenous initial supply/demand shock in a market.
Why is what you guys talk about an exogenous shock model? Look at the example: Volcker does something and then different people figure it out at different rates. But Volcker is the exogenous shocker. If he does nothing, nothing happens.
In Minsky world, there does not need to be an exogenous shock. The system may be in a total anf full equilibrium,, but that equilibrium will disequilibrate itself as psychological attitudes and expectations endogenously change due to it. This is what the standard modelers have sush a problem with and do not like. They have no problem wiht adaptive expectations models. This is all old hat stuff for them, with only the fact that one does not know for sure what all those lags are being the problem, and what opened the door to the victory of ratex because it said there are no lags and thus no problem. Agents now what will be on average.
csissoko said... June 3, 2015 at 3:14 PM
Warsh's history of the Ayr Bank has errors. The Bank of England offered it a "bailout" in 1772 but required the personal guarantees of the two Dukes which were not forthcoming. The Ayr Bank struggled on without lender of last resort support until August 1773, when it closed for good. (This is all in Clapham's history of the Bank of England.)What Warsh is calling a "bailout" was not a bailout of the bank, but of its proprietors who had unlimited liability and were facing the possibility of putting their estates on the market (which would have affected land prices in Scotland).
As I understand Warsh's description, Parliament granted the two Dukes a charter for a limited liability company that would sell annuities. It is entirely possible that contemporary sources would describe such an action as "indemnifying" the promoters of the company. But what is meant by this use of the term is only that Parliament authorized the formation of corporation. The actual indemnity is provided in the event the corporation fails by the members of the public who are creditors of the corporation.
In short, it is an error to claim that there was a "bailout" of the Ayr Bank.
[email protected] said... June 3, 2015 at 3:30 PM
Point taken, csissoko. I accept your corrected version. Parliament bailed out the dukes, not the Ayr Bank, which indeed failed.Thornton Hall said... June 3, 2015 at 4:42 PM
I still don't understand what information is added by "models". Krugman has a job he has created for himself where everything he does is with an eye toward policy.So I'm a policy maker. Explain why I need a model. in the 1930s austerity caused recessions and WWII ended the Depression. A little history of Japan's lost decade and some thinking about the implications of fiat currency, and, voilia, Krugman's policy suggestions, with no models and therefore no need to listen to economists like Mankiw or the Germans currently destroying Europe (third times a charm).
Thornton Hall said... June 3, 2015 at 4:51 PM
By the by, I have thought this thru. The head of Duke's Philosophy Department agrees: Krugman's method for using models is empty hand-waving. However he comes to his conclusions, it is not logically possible that ISLM, or any other model, has anything to do with it.
http://thorntonhalldesign.com/philosophy/2014/7/1/credentialed-person-repeats-my-critique-of-krugmanAXEC / E.K-H said... June 3, 2015 at 5:04 PM
Sitcom economicsComment on 'On Missing Minsky'
Since Adam Smith economists have told rather enthralling stories about speculations, manias, follies, frauds, and breakdowns. The audience likes this kind of stuff. However, when it comes to how all this fits into economic theory things become a bit awkward. Of course, we have some modls -- Minsky, Diamond-Dybvig, Keynes come to mind -- but we could also think of other modls -- more agent-based or equilibrium with friction perhaps. On closer inspection, though, economists have no clue at all.
Keynes messed up the basics of macro with this faulty syllogism: "Income = value of output = consumption + investment. Saving = income - consumption. Therefore saving = investment." (1973, p. 63)
From I=S all variants of IS-LM models are derived including Krugman's neo-ISLM which allegedly explains the post-crash Keynes period. Let there be no ambiguity, all these models have always been conceptually and formally defective (2011).
Minsky built upon Keynes but not on I=S.
"The simple equation 'profit equals investment' is the fundamental relation for a macroeconomics that aims to determine the behavior through time of a capitalist economy with a sophisticated, complex financial structure." (Minsky, 2008, p. 161)
Here profit comes in but neither Minsky, nor Keynes, nor Krugmann, nor Keen, nor the rest of the profession can tell the fundamental difference between income and profit (2014).
The fact of the matter is that the representative economist fails to capture the essence of the market economy. This does not matter much as long as he has models and stories about crashing Ponzi schemes and bank panics. Yes, eventually we will miss them all -- these inimitable proto-scientific storytellers.
To have any number of incoherent models is not such a good thing as most economists tend to think. What is needed is the true theory.
"In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion." (Stigum, 1991, p. 30)
The true theory of financial crises presupposes the correct profit theory which is missing since Adam Smith. After this disqualifying performance nobody should expect that some Walrasian or Keynesian bearer of hope will come up with the correct modl any time soon.
Egmont Kakarot-Handtke
References
- Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper Series, 1966438: 1–20. URL http://ssrn.com/abstract=1966438.
- Kakarot-Handtke, E. (2014). The Three Fatal Mistakes of Yesterday Economics: Profit, I=S, Employment. SSRN Working Paper Series, 2489792: 1–13. URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2489792.
- Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
- Minsky, H. P. (2008). Stabilizing an Unstable Economy. New York, NY, Chicago, IL, San Francisco, CA: McGraw Hill, 2nd edition.
- Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics and Econometrics. Cambridge, MA: MIT Press.
New Deal democrat said... June 3, 2015 at 5:28 PM
Prof. Rosser:In addition to my hypo re Volcker and interest rates, I also mention flipping houses and leverage.
Person A flips a house, makes $100k. Person B learns of it, figures s/he can do just as well, and flips a house. Eventually enough people are doing it that news stories are written about it. By now 1000s of people are figuring, "if they can do it, I can do it.":
So long as the trend continues, the person using financial leverage to flip houses makes even more profit. Person B uses more leverage, and so on. And since 2x leverage worked, why not 4x leverage. And if that works, why not 10x leverage?
Both the number of people engaging in the behavior, and the financial leveraging of the behavior, are endogenous, unless you are going to hang your hat on existing trend (note, not necessarily a shock - of rising house prices0.
All you need is more and more people of various skill sets at various entry points of time engaging in the behavior, and testing increasing leverage the more the behavior works.
Secondly, as to stability breeding instability, stability itself is the existing trend. Increasingly over time, more and more leverage will be used to profit off the existing trend. All it takes is learning + risk-takers successfully testing the existing limits. The more stable the system, the more risk-takers can apply leverage without rupturing it -- for a while.
New Deal democrat said... June 3, 2015 at 5:59 PM,
Let me try to express my position as a series of axioms:
1. Assume that no system, no matter how stable, can withstand infinite leverage.
2. Assume that there is a certain non-zero percentage of risk-taking individuals.
3. Assume that risk-takers will use some amount of leverage to attempt to profit within a stable system.
4. Assume that risk-takers will use increasing leverage once any given lesser percentage of leverage succeeds in rendering a profit, in order to increase profits.
5. Assume that others will learn, over various time periods, at varying levels of skill, to imitate the successful behavior of risk-takers.Under those circumstances, it is certain that any system, no matter how stable, will ultimately succumb to leverage. And the more stable, the more leverage will have been applied to reach that breaking point. I.e., stability breeds instability.
Bruce Wilder said... June 3, 2015 at 6:50 PM
Even using history as an analogy is implicitly introducing a model. You're saying, here's my model of this history and I crank my little model to show the behavior of the model simulates the historical record, then I adapt the model to present circumstances, and crank again arguing, again by analogy.Thornton Hall said... June 3, 2015 at 7:35 PMWhat I would object to is the reliance on "analytic models" as opposed to operational models of the actual institutions. Economists love their analytic models, particularly axiomatic deductive "nomological machines", DSGE being the current orthodox approach. Not that there is anything wrong about analysis. My objection would be to basing policy advice on a study of analytic models to the exclusion of all else -- Krugman's approach -- rather than an empirical study of institutions in operation (which would still involve models, because that's how people think, but they might be, for example, simulation models calibrated to observed operational mechanisms).
There are reasons why economists prefer analytic models, but few of those reasons are sound. In the end, it is a matter of bad judgment fostered by a defective education and corruption or weakmindedness. Among other things, reliance on analytic models give economics an esoteric quality that privileges its elite practitioners. Ordinary people can barely understand what Krugman is talking about in the referenced piece, and that's by design. He does his bit to protect the reputations of folks like Bernanke and Blanchard, obscuring their viewpoints and the consequences of their policies.
I am not sure what can be done about it. Economists like Krugman are as arrogant as they are ignorant -- there's not enough intellectual integrity to even acknowledge fundamental errors, and that lack of integrity keeps the "orthodoxy" going in the face of manifest failures. For the conservatives on some payroll, the problem is even worse.
I am not confident that shooing economists from the policy room and encouraging politicians to discuss these matters among themselves improves the situation. In doubt, people fall back on a moral fundamentalism of the kind that gets us to "austerity" and "sacrifice" and blames the victims -- pretty much what we have now.
Re-doing Minsky as an analytic model is an impossible task almost by definition. Minsky's approach was fundamentally about abstracting from careful observation of what financial firms did, operationally. It made him a hero with many financial sector denizens, who recognized themselves in his narratives, even when he cast them in the role of bad guys. (No one is ever going to recognize himself as a representative agent in a DSGE model.)
Perhaps the hardest thing to digest from Minsky is the insight that business cycles can not be entirely mastered. The economy is fundamentally a set of disequilibrium phenomena, the instability built-in (endogenous, as they say). The New Keynesian idea is that the economy is fundamentally an equilibrium phenomenon, that occasionally needs a helping hand to recover from exogenous disturbance. These are antagonistic world views, which cannot be reconciled with each other, and the New Keynesian view can be reconciled only minimally with the observable facts of the world, by a lot of ad hoc fuzzy thinking ("frictions").
It's very ugly.
Bruce, I disagree with your view of politicians. The current GOP crop are essentially following the moral philosophy that, in the end, is the only content generated by economics. But it was not always thus.I once watched Senator Kit Bond of Missouri (very-R) try to round up a quorum in the Small Business Committee. It was quite clear that the man enjoyed people. He liked the company of just about everybody. Without the strong interference from economists, that's who ends up in politics. People like that are pragmatic. They try things. They aren't there for the purpose (contra Ted Cruz) of breaking things.
You're right, my problem really is with analytic "models" which aren't really models but rather metaphors or analogies. But I don't think that's the only way reasoning from history can work.
There are lots of areas of policy, some of which continue to resist conversion to economic religion. In education policy we try interventions and see what happens. It's inductive and mostly correlation, but thru trial and error we do progress toward better policy (although schools of education are only slowly moving away from their notoriously anti-scientific past).
Politicians don't have to think about the budget like a household and tighten belts. They know that business borrow money all the time. It's actually the language of the academy that leads to "tightening belts" instead of investing in the future. Economics is the science of claiming that if you need something, and you can afford that something, you still must consider "multipliers" or "the philosophers stone" or some other nonsense before you can decide to buy what you need.
Thornton Hall said... June 3, 2015 at 7:36 PM
Mark Buchanan's book "Forecast" describes just this process.Thornton Hall said... June 3, 2015 at 7:44 PM
What I mean to say about history: don't confuse theories with models. I have a theory about what caused what in the Great Depression. But I don't model the economy.reason said... June 4, 2015 at 9:36 AM
Barkley,I think I should clarify, I think endogenous and exogenous are a little bit besides the point here. I think the exact trigger that starts a "state change" in the system has a stochastic component. But the increasing vulnerability of the system is endogenous, in a very Minsky sense. What I am saying is that increasing vulnerability could be modelled without using agent based modelling (a bit like modelling landslides or earthquakes if you like). I'm not saying that the model is just being driven by exogenous shocks.
Bruce,
I think there is a bit of tendency to mischaracterise what Paul Krugman is saying. He is the last person you should be accusing of mistaking the map for the territory. He is saying that EVEN relatively simple models can make sensible suggestions about policy in some circumstances.
Yes, though I tend to agree with you that general equilibrium is the original sin in macro-economic modelling and that the system is in fact a disequilibrium system. But that doesn't imply to me at all that you can't use analytical approaches.
Thornton Hall said... June 4, 2015 at 1:57 PM
Krugman has no map. My link above demonstrates this quite conclusively.
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Nov 05, 2016 | www.nakedcapitalism.com
Michael Hudson spends a half hour with Meet the Renegades explaining his views on money, finance, economic training, rentier capitalism, and how debt overhangs operate. Hudson fans will recognize his regular themes. This is a good segment for introducing people you know to Hudson and to heterodox economic ideas.EndOfTheWorld November 5, 2016 at 5:52 am
Distrubed Voter November 5, 2016 at 6:21 amI've always found it interesting that both Hudson and Bill Black are on the faculty of UMKC, which is a state university in a pretty conservative state. It's possible that some of the funding for UMKC comes from the municipality of Kansas City, MO, but that town has never been known as a hotbed of radical intellectuality either.
craazyboy November 5, 2016 at 8:43 amJoseph Campbell didn't teach at an Ivy League either. Conformity starts with the faculty in your own department … and the Ivy League is as status quo and status conscious as it gets.
sgt_doom November 5, 2016 at 1:31 pmThe Ivy League are not much different than privately held corporations when you consider who their alma materi are, how much money the alma materi have, and where Ivy League endowments come from.
a different chris November 5, 2016 at 8:40 amIn fact, I would posit that the Ivy League, especially Yale, Princeton, Harvard and MIT, are the principal crime factories in America today.
Please recall that the dood who financed Liberty Lobby and other white supremacist nonsense was Koch family patriarch, Fred Koch, who was a trustee at MIT. (Ever hear Noam Chomsky complain about that????? Of course not!)
EndOfTheWorld November 5, 2016 at 11:11 amAh but is it really an inherently conservative state fiscally, or just socially? That is, are the people like Brownback appealing to one sort of conservatism and using that to do a "trust me" on the other sort?
I would say it's not unreasonable for anybody to delegate something they are not so sure of to somebody they trust for other reasons.
Randy November 5, 2016 at 8:53 amBrownback is in Kansas; UMKC is in Missouri. There is a Kansas City in Kansas, and another Kansas City in Missouri. Missouri is not as red as KS, but it's still a red state.
Moneta November 5, 2016 at 8:59 amUMKC is part of the state system and most likely receives no funding from the city. It was home to New Letters, a respected literary magazine edited by poet John Ciardi. I hail from Kanasa City and always thought of UMKC as a decent commuter school, mostly catering to the educational needs of adult city dwellers. But the evolution of both the Econ and jazz studies departments lead me to suspect things have changed. Whether that's by design or through organic happenstance I don't know.
Steve H. November 5, 2016 at 10:47 amIf you are not on the money makers' distribution list, it would make sense to find other ways to get some of that loot if you can't the traditional way…
You can be conservative in your social values but want change, i.e. liberalism, in the way the monetary system distributes the money.
EndOfTheWorld November 5, 2016 at 7:32 amThank Warren Mosler, wouldn't be there without his direct support.
Benedict@Large November 5, 2016 at 9:32 amWell, little UMKC can claim to be pretty much "cutting edge" in economics with these two stalwarts on their faculty.
Amateur Socialist November 5, 2016 at 9:14 amThe UMKC is also the home of the Kansas City School of Economics, more commonly known as the MMT School. Neither Hudson nor Black are MMTers per se, but both have grown by their affiliation with the school.
susan the other November 5, 2016 at 11:04 amThanks for sharing this excellent interview. Watching it I realized the people I actually admire more than Hudson are his students. They must care more about learning the truth than securing wealth and job prospects on wall street.
EndOfTheWorld November 5, 2016 at 11:08 amfun to learn how Hudson fired Greenspan way back when
King Arthur November 5, 2016 at 11:49 amlol "Free trade" is Orwellian word usage.
BecauseTradition November 5, 2016 at 12:29 pmCouldn't a Marxian analysis of capitalism as a whole also shed some light on this issue? I think Hudson is pretty much right but I think, like Sanders, he's offering a reformist option as opposed to a full on critique of the entire system.
Not that a revolution is the option you necessarily want to go with, I just think that Marx's criticism of capitalism has useful information that could help with shaping the perspective here.
Steve in Dallas November 5, 2016 at 12:46 pmThe solution is write down the debt. Michael Hudson
Why not Steve Keen's "A Modern Jubilee" since non-debtors have been cheated by the system too?
Ivy November 5, 2016 at 1:35 pmI asked Yves Smith at the Dallas meetup last week (paraphrasing) "Do you meet with Michael Hudson and Bill Black… is the independent media community, or any community, organizing around Michael Hudson and Bill Black… to not only support and promote Hudson's and Black's perspectives but to help develop their concepts and 'fine tune' their messaging?" I said to Yves "Hudson and Black are clearly the leaders we desperately need to rally behind and push into Washington… they clearly know what needs to be done… a PR machine needs to be developed… to get their messages out to our families, friends, and acquaintances… unfortunately, the current messaging is not good enough… I can't get my family, friends, and others to engage and echo the messaging to their family, friends, etc."
Michael Hudson has been good at repeating his central message… 'by increasing land, monopoly, and finance rent costs… the 1% are a highly organized mafia methodically looting our economy… effectively raping, pillaging and consequently destroying every component of our social structures'.
Very unfortunately, Bill Blacks central message seems to have been lost for years now… he doesn't repeat his central message… 'the crimes must be stopped… there is no alternative… looting criminals MUST be publicly exposed, investigated, indicted, prosecuted, convicted, punished and their loot returned to society… by letting cheaters prosper, organized white-collar crime, perpetrated by the top-most leaders of our public and private institutions, has become an epidemic… the very fabric of civil society is being destroyed… we have no choice… the criminals must be stopped… and the only way to do that is to publicly expose, investigate, indict, prosecute, punish, and take back what is ours'.
In 2008, when I tuned out of the mainstream media and tuned into the independent media, I thought the messages from Michael Hudson ("they are organized criminals… this is what they're doing…") and Bill Black ("the criminals must be stopped… here's how we stopped the Savings & Loan criminals…) would resonate and become common knowledge. I quickly discovered that it didn't even resonate with close family and friends. Why???
I will send out this video… Michael Hudson at his best, speaking-wise. I don't expect to get any reaction… why?… very frustrated…
Amen. Once you start noticing, it becomes hard to stop. In looking hard for a silver lining to the current election storm clouds, public awareness of the MSM seems to have nudged a few toward slightly more objectivity, although I may just be wishing for that after media fatigue ;)
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Oct 28, 2016 | www.nakedcapitalism.com
Jim Haygood October 27, 2016 at 3:29 pm
Arizona Slim October 27, 2016 at 5:00 pmStately mating of dinosaurs:
CenturyLink Inc. is in advanced talks to merge with Level 3 Communications Inc., a deal that would give the telecommunications companies greater heft in a brutally competitive industry.
Terms of the deal couldn't be learned. As of Thursday afternoon before the Journal's report of the talks, Level 3, based in Broomfield, Colo., had a market value of $16.8 billion. CenturyLink, based in Monroe, La., was worth $15.2 billion.
CenturyLink is a former rural telephone exchange operator which bought former Baby Bell, Qwest (U S West) in 2011.
CenturyLink is a miserable, crappy telco - so spectacularly bad it makes the cable company look like a paragon of customer friendliness by comparison. CTL's share price has declined by about a third since its acquisition of Qwest, reflecting CTL's braindead managerial incompetence.
If this merger goes through, we'll have a Big Three of dinosaur telcos: AT&T, Verizon, and CenturyLink.
EnonZ October 27, 2016 at 5:52 pmCenturyLink is the landline carrier/ISP wannabe for my part of AZ. Around here, they make Cox Communications look like an excellent cable/ISP company.
My experience has been just the opposite. I have had excellent, reliable DSL service from CenturyLink and good technical support. Perhaps it's because I live somewhere there is still some competition – a duopoly with Comcast. I do have to call them every 6 or 12 months and talk to a retention service rep to keep the charges down.
CenturyLink does seem slow in getting fiber to the end of the block everywhere in my city. I know lots of people who have been stuck for years down at 5Mbps, which is not enough these days. The routers they provide for customers (which most people call modems even though they're not) are crap. I tried getting a router from CenturyLink that supports 802.11n so I could use 5GHz (2.4GHz is very crowded in my neighborhood) – that's when I found out that 5GHz support is OPTIONAL under the 802.11n standard. Of course CenturyLink went with the cheaper model. Returning the router was no problem and the refund appeared promptly and correctly on my bill.
The return of monopolization is traced by Barry C. Lynn in his 2010 book, Cornered: The New Monopoly Capitalism and the Economics of Destruction . It goes back to the decision of the Reagan administration to reinterpret antitrust regulation to emphasize efficiency over competition. No previous 20th century administration would have allowed the A&P chain to become a behemoth like Walmart.
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Oct 25, 2016 | economistsview.typepad.com
RC AKA Darryl, Ron : October 25, 2016 at 04:56 AM RE: Mergers Raise Prices, Not Efficiency
https://www.bloomberg.com/view/articles/2016-10-24/mergers-raise-prices-not-efficiency
[IMO, Noah muddles the message, but it is a important topic that gets muddled by everyone else too. Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century.
Efficiency itself is an amorphous term. Mergers can be an efficient use of capital since they deliver lower competition and higher profits. JP Morgan did not want to be in a industry that he could not dominate. Efficiency is different for a fish than a capital owner. Mergers are good for regulatory capture and ineffishient for fish. Mergers are inefficient for workers that want higher wages or the unemployed that want jobs. Market power and regulatory capture can be efficient vehicles for taking advantage of trade agreements to offshore production and increase returns to capital all while lowering both prices and quality as well as reducing domestic wages. Efficiency is in the eyeballs of the beholder especially if they make good soup.] Reply Tuesday, reason -> RC AKA Darryl, Ron... , October 25, 2016 at 06:58 AM
But Keynes was saying something quite different - he wasn't actually talking about policy but about economics (the task of economists). He was saying that understanding short term fluctuations was as important as predicting the long term. Still relevant in this age of irrelevant general equilibrium models.RC AKA Darryl, Ron -> reason ... , October 25, 2016 at 09:56 AMSorry, I thought that the whole purpose of the study of macroeconomics was to guide policy decisions. I stand corrected.RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:02 AMI always looked at Keynes as a fellow traveler, one who wrote obtusely at times for the express purpose of couching his meaning in sweetened platitudes that at a second glance were drenched in cynicism and sarcasm, at least when it came to his opinions of economists and politicians and the capital owning class that they both served.RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , October 25, 2016 at 10:39 AMOK, "obtusely" was a poor choice of words, at least with regards to Keynes. Keynes realized WWI was a big mistake, the Treaty at Versailles was an abomination with regards to German restitution, and he was accused of anti-Semitism just for being honest about Jewish elites in the Weimar Republic. It was not that Keynes was insensitive, unpatriotic, or anti-Semitic, but that Keynes was just correct on all counts.JohnH -> RC AKA Darryl, Ron... , -1This is a good example of economists working in lock step with investors: "Economists with a financial bent had no problem apparently with the bank mergers that started in the seventies and everyone loved the auto maker mergers of the first half of the 2oth century."point -> RC AKA Darryl, Ron... , October 25, 2016 at 10:26 AMI think it has been questioned for decades whether increased efficiency in banking actually materialized in the wake of industry consolidation. Local market oligopolies may well have generated higher profits and the appearance of more efficiency. And concentration certainly facilitated collusion as we have seen in many markets, including LIBOR.
What concentration indisputably caused was a dramatic increase in the political power of the Wall Street banking cartel, which owns not only the Federal Reserve but also a lot of powerful politicians...a subject on which 'liberal' economists are generally agnostic, since politics is outside their silo.
The article ignored the effect of mergers on supplier relationships, often one of near monopsony (oligopsony?). DOJ seems to be focused on unit pricing to consumers(though perhaps not with cable) to the point that most managements understand that they have free rein to squeeze suppliers. And so they merge to do so.RC AKA Darryl, Ron -> point... , October 25, 2016 at 10:41 AMIt may be that more contribution to increasing margins is from purchase prices than selling prices.
Doubly so with global supply chaining.
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Oct 20, 2016 | www.moonofalabama.org
psychohistorian | Oct 19, 2016 8:29:29 PM | 99
I just read this posting at ZH and believe that this information when fully grokked will take the market down.This is the smoking gun behind the corruption of the Fed during the 2008 crisis. I want to see how they tell the world that this was all legal.
END PRIVATE FINANCE! The folks that own private finance also own the US and many other governments.....with or without vote rigging as one of their tools.
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Oct 19, 2016 | economistsview.typepad.com
Anon : , 2016 at 12:17 PM
so when people criticize the big deflation in computer/electronics hardware using baseless measures like "if the computer has a processor twice as fast then it has fallen by half in price" they are wackos. but now the real growth that is artificially generated by this way (quality improvements) to keep inflation down is being criticized by Fox. Of course it is completely made up growth. the absurdity of the economists deal with price inflation. now years later, everyone realizes we have all taken a big fall in living standards no matter how many gigahertz my stupid computer is.Ben Groves -> Anon... , October 19, 2016 at 01:10 PMOh please, when RFK was talking about the massive poverty in eastern kentucky in 1968, where was the huge increase in living standards?pgl -> Ben Groves... , October 19, 2016 at 02:19 PMGovernment data is flawed right now, to a extent in needs a total reworking. There is no artificial growth. Just lost growth by outdated models.
Do you have some weird need to spew nonsense completely unrelated to the post every time you comment? Geesh.DrDick : , October 19, 2016 at 12:20 PMColor me shocked by this revelation./sanne : , October 19, 2016 at 12:28 PMhttps://fred.stlouisfed.org/graph/?g=7yCjanne -> anne... , October 19, 2016 at 02:03 PMJanuary 15, 2016
Manufacturing Production Index, 1992-2016
(Indexed to 1992)
https://fred.stlouisfed.org/graph/?g=7OvRJanuary 15, 2016
Manufacturing Production and Manufacturing Durable Computer and Electronic Indexes, 1992-2016
(Indexed to 1992)
Using separate axes for clarity:anne -> anne... , October 19, 2016 at 02:40 PMhttps://fred.stlouisfed.org/graph/?g=7OBH
January 15, 2016
Manufacturing Production and Manufacturing Durable Computer and Electronic Indexes, 1992-2016
(Indexed to 1992)
What is the share of manufacturing production of durable computer and electronic manufacturing? I do not know how to graph this.anne -> anne... , October 19, 2016 at 03:32 PMGetting closer:anne -> anne... , October 19, 2016 at 03:37 PMhttps://fred.stlouisfed.org/graph/?g=7OFU
January 15, 2016
Relative Importance Weight (Contribution to the total industrial production index): Durable manufacturing: Computer and electronic product, 1992-2016
(Indexed to 1992)
https://fred.stlouisfed.org/graph/?g=7OG5Ben Groves : , October 19, 2016 at 01:08 PMJanuary 15, 2016
Relative Importance Weight (Contribution to the total industrial production index): Durable manufacturing: Computer and electronic product, 1992-2016
8.8% in 1992
to 11.4% in 1999
to 5.2% in 2014
to 6.1% in 2016.
Manufacturing hasn't boomed since the 60's. The FRED graphs are garbage and useless in general. They are improperly calculated and they have out right admitted they may have "problems".pgl -> Ben Groves... , October 19, 2016 at 02:21 PMManufacturing is dying out and becoming automated over the decades. There is no such thing as artificial growth either. Demand based on consumption is just as valid as industrial production shipped to other countries.
"The FRED graphs are garbage and useless in general."Ben Groves -> pgl... , October 19, 2016 at 02:48 PMNo - your comments are garbage and useless. Actually READ the post. He did not get his graphs or data from FRED. Seriously - you need professional help.
poppycock. the garbage on their industrial production chart in the 90's and 00's was stupid bad. The US hasn't had a industrial boom since the 60's when our consumption was surging while we still made most of our products. No wonder inflation surged by the late 60's. The war against communism was having a painful bad side effects to rentiers and bankers, which spread to capital by the late 60's.pgl -> Ben Groves... , October 19, 2016 at 04:07 PM"the garbage on their industrial production chart in the 90's and 00's was stupid bad."likbez : , October 19, 2016 at 02:02 PMCan we focus on the single word "their". You think he used FRED. No jackass, he made his own charts from the source data - BLS. But noooooooo - you are too stupid to get even this simple point. So the rest of your ramblings is nothing more than your usual intellectual garbage.
Quality adjustments = number racketjonny bakho : , October 19, 2016 at 03:28 PMAuto mfg dropped by half post 2008.sanjait : , October 19, 2016 at 03:53 PM
It is now back but has nowhere to grow.
Urbanization makes cars less necessary and less desirable
There is not enough room to park them all now.
People who earn MinWage cannot afford themInteresting point but many will overinterpret this. Leave in the expansion of computer and electronics manufacturing value add, and we have manufacturing output slightly expanding. Take it out entirely and we have manufacturing output basically steady.anne -> sanjait... , October 19, 2016 at 04:23 PMThe difference isn't telling an important macro story.
The important macro story is the major decline in manufacturing employment, and that has two big and one smaller causes.
The two big factors are the increased productivity of manufacturing globally and the declining share of manufactured products as a % of GDP globally. The smaller factor is the US's declining share of global manufacturing output, which itself is only fractionally attributable to trade policy.
This one graph tells most of the story:
http://1.bp.blogspot.com/-JEZXR9XK7vc/Tbr46ReInRI/AAAAAAAAPQ0/HlLXeVin_g0/s1600/worldmfg.jpg
I don't know anyone who says US manufacturing is "booming." It certainly isn't. It's treading water. It's growing slowly as the economy grows, but we can predict with high confidence that it will continue to contract as a share of total output over time, because that has been the secular trend for decades and there's no reason to expect that to change.
The only big question is how we adapt to the world as it actually is.
Nicely done.anne -> sanjait... , October 19, 2016 at 04:26 PMAlso, I did not realize I was being presented with an argument about Chinese growth and sustainability. I foolishly stopped reading and I am entirely sorry. I have set down data and begun to answer the argument below on Links:
October 19, 2016
What is significant though is how China insists on holding to growth targets that are very likely not sustainable. Stability is a worthy aim but when growth is achieved through pushing bad private sector loans, that is ultimately the enemy of stability.the forgotten spirit of American protectionism : , -1[ For these 39 past years China has been holding to and achieving growth targets that were repeatedly considered unsustainable so I prefer to figure out why Chinese growth targets have been and from my perspective are now sustainable. ]
YES! Of course US manufacturing isn't booming - how could it? We have horrible economic policies that are focused almost entirely on destroying our industrial base. High overvalued currency, combined with 0% tariffs and we have no VAT, so foreign imports from countries with a VAT receive export subsidies but are not taxed on the US side. That we have even one factory left is amazing and testament to the quality of American workers. Under Clinton, we'll lose what's left. Trump is our only hope. If we don't get Trump's protectionism we will quickly become a country as poor as Armenia or Moldova - stripped of industry and wealth, dependent on remittances from our migrant workers in Asia and Europe.
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Oct 19, 2016 | economistsview.typepad.com
Justin Fox:No, U.S. Manufacturing Isn't Really Booming :...[Is]American manufacturing .. in decline? An answer frequently offered by wonky economics journalists is that, no, U.S. manufacturing output has actually kept growing. ...
There's a catch, though. As economist Susan N. Houseman of the W.E. Upjohn Institute for Employment Research ... points out , about half of the growth in U.S. manufacturing output since 1997 has been in just one sector: computer and electronics manufacturing.
If it weren't for computers and electronics (which includes semiconductors), manufacturing output would still be well below its 2008 peak and only 21 percent higher than in 1997...
The ... way those computers-and-electronics numbers are arrived at is worthy of a closer look. ... Without adjusting for deflation, value added in computer and electronics manufacturing is up 45 percent since 1997. With the adjustments, it's up 699 percent! What's happening here is that the Bureau of Economic Analysis has been trying to account for vast improvements in ... quality... Writes Houseman:
Such quality adjustment ... can make the numbers difficult to interpret..., figures that exclude this industry ... arguably provide a clearer picture of trends in manufacturing output.As it stands now, those trends don't look impressive. U.S. manufacturing output has held up a lot better than manufacturing employment. But it definitely isn't booming.
Anon : October 19, 2016 at 12:17 PM
anne -> anne... , October 19, 2016 at 03:37 PMso when people criticize the big deflation in computer/electronics hardware using baseless measures like "if the computer has a processor twice as fast then it has fallen by half in price" they are wackos. but now the real growth that is artificially generated by this way (quality improvements) to keep inflation down is being criticized by Fox.
Of course it is completely made up growth. the absurdity of the economists deal with price inflation. now years later, everyone realizes we have all taken a big fall in living standards no matter how many gigahertz my stupid computer is.
https://fred.stlouisfed.org/graph/?g=7OG5likbez : , October 19, 2016 at 02:02 PMJanuary 15, 2016
Relative Importance Weight (Contribution to the total industrial production index): Durable manufacturing: Computer and electronic product, 1992-2016
8.8% in 1992
to 11.4% in 1999
to 5.2% in 2014
to 6.1% in 2016.
Quality adjustments = number racketjonny bakho : , October 19, 2016 at 03:28 PMAuto mfg dropped by half post 2008. It is now back but has nowhere to grow. Urbanization makes cars less necessary and less desirablesanjait : , October 19, 2016 at 03:53 PM
There is not enough room to park them all now. People who earn MinWage cannot afford themInteresting point but many will overinterpret this. Leave in the expansion of computer and electronics manufacturing value add, and we have manufacturing output slightly expanding. Take it out entirely and we have manufacturing output basically steady.anne -> sanjait... , October 19, 2016 at 04:23 PMThe difference isn't telling an important macro story.
The important macro story is the major decline in manufacturing employment, and that has two big and one smaller causes.
The two big factors are the increased productivity of manufacturing globally and the declining share of manufactured products as a % of GDP globally. The smaller factor is the US's declining share of global manufacturing output, which itself is only fractionally attributable to trade policy.
This one graph tells most of the story:
http://1.bp.blogspot.com/-JEZXR9XK7vc/Tbr46ReInRI/AAAAAAAAPQ0/HlLXeVin_g0/s1600/worldmfg.jpg
I don't know anyone who says US manufacturing is "booming." It certainly isn't. It's treading water. It's growing slowly as the economy grows, but we can predict with high confidence that it will continue to contract as a share of total output over time, because that has been the secular trend for decades and there's no reason to expect that to change.
The only big question is how we adapt to the world as it actually is.
Nicely done.anne -> sanjait... , October 19, 2016 at 04:26 PMAlso, I did not realize I was being presented with an argument about Chinese growth and sustainability. I foolishly stopped reading and I am entirely sorry. I have set down data and begun to answer the argument below on Links:
October 19, 2016
What is significant though is how China insists on holding to growth targets that are very likely not sustainable. Stability is a worthy aim but when growth is achieved through pushing bad private sector loans, that is ultimately the enemy of stability.the forgotten spirit of American protectionism : , -1[ For these 39 past years China has been holding to and achieving growth targets that were repeatedly considered unsustainable so I prefer to figure out why Chinese growth targets have been and from my perspective are now sustainable. ]
YES! Of course US manufacturing isn't booming - how could it? We have horrible economic policies that are focused almost entirely on destroying our industrial base. High overvalued currency, combined with 0% tariffs and we have no VAT, so foreign imports from countries with a VAT receive export subsidies but are not taxed on the US side. That we have even one factory left is amazing and testament to the quality of American workers. Under Clinton, we'll lose what's left. Trump is our only hope. If we don't get Trump's protectionism we will quickly become a country as poor as Armenia or Moldova - stripped of industry and wealth, dependent on remittances from our migrant workers in Asia and Europe.
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no cost-of-living
adjustment to benefits had led some seniors to "distrust" government data, like the CPI-W?
Again, this hypothesis would be a lot better to test with a time series of data, comparing years
with benefit increases and without. But feeling shortchanged by the data may be understandable
