Sunday, September 30, 2012

Steven Pearlstein — I am a job creator: A manifesto for the entitled

Sums it up.

The Washington Post | Business
I am a job creator: A manifesto for the entitled
Steven Pearlstein | Washington Post columnist and Robinson Professor of Political and International Affairs at George Mason University
(h/t Unknown in the comments)

Bruce Krasting — On the Cliff

Various probable scenarios post-election, on the assumption that Obama retains the presidency, the GOP retains the House, and Dems a slim majority in the Senate — a reasonable assumption at this point.

Zero Hedge
On the Cliff
Bruce Krasting

Tim Duy — If QE Causes Commodity Price Inflation...

Inflation? What inflation exactly?

Tim Duy's Fed Watch
If QE Causes Commodity Price Inflation...
by Tim Duy

Take that, Zero Hedge.

Andrew Haldane — What have the economists ever done for us?

There is a long list of culprits when it comes to assigning blame for the financial crisis. This column argues economists are among the guilty, having succumbed to an intellectual virus of theory-induced blindness. It adds this calls for an intellectual reinvestment in models of heterogeneous, interacting agents, following in the footsteps of other social scientists. This will require a sense of academic adventure sadly absent in the pre-crisis period.
What have the economists ever done for us?
Andrew G Haldane | Executive Director, Financial Stability, Bank of England

Way important. Andy Haldane is going to be with us for awhile and he is just beginning to hit his stride. Here he takes economists to the woodshed.

Quite brilliant on one level, and rather damning, but nothing new for readers here. 

Moreover, Andy leaves out a few things that are highly relevant, like Godley's sectoral balance approach — developed while he was at Treasury. It's curious that this is still ignored, since Godley went on to become one of the "Six Wise Men" of British Treasury's Panel of Independent Forecasters.

Book Announcement — Wm Hogeland – Founding Finance

I’m happy to announce imminent publication of my book Founding Finance: How Debt, Speculation, Foreclosures, Protests and Crackdowns Made Us a Nation. It’s from University of Texas Press, in the “Discovering America” series edited by Mark Crispin Miller (pub. date: October 15, 2012).
Launch Party/Discussion/Signing for My Book “Founding Finance”: October 24 in Brooklyn USA
William Hogeland
The subjects of the book will not all be news to readers of this blog. Founding Finance ranges like a bull in a china shop through those critical years 1765-1795, turning up dire conflicts among 18th-century Americans over finance and economics. These are the conflicts that, while shockingly little-known, I think played directly into – no, they were — the decisive arc of the American founding, the stuff that really made us who we are.
Little-known founding episodes that may sound eerily resonant:
  • predatory lending in a real-estate bubble about to pop 
  • feverish speculation by upscale investors in dubious debt instruments 
  • foreclosure crises sending ordinary families into poverty and dependence
  • popular uprisings against government complicity in wealth concentration
  • militarized crackdowns on democratic approaches to finance
  • and, of course, much, much more
This is not, in other words, another book about founding conflicts between Americans and England. We won that war.
This is about the founding war between some Americans and other Americans, a war over money, debt, and government’s role in public and private finance. A war we refuse to believe formed us, a war we’ve never stopped fighting.

Robert Vienneau — Reproducing Civil Society

There exist at least two approaches to economics:
  • One focused on the allocation of given scarce resources among alternative ends.
  • One focused on the conditions for the reproduction of society.
The first is the approach of the so-called neoclassical theory [in which the focus is on price theory], and the second is the approach of classical political economy [where the focus is on political theory].
Thoughts on Economics
Reproducing Civil Society
Robert Vienneau

Stephen Roach— Macro Malpractice

The wrong medicine is being applied to America’s economy. Having misdiagnosed the ailment, policymakers have prescribed untested experimental medicine with potentially grave side effects.
Project Syndicate
Macro Malpractice
Stephen S. Roach | former Chairman of Morgan Stanley Asia and the firm's Chief Economist, and currently a senior fellow at Yale University’s Jackson Institute of Global Affairs and a senior lecturer at Yale’s School of Management

To model or not to model, that is the question — An impression of the UMKC Post Keynesian conference

The conference itself was a bit of a sleepy affair, with most of the other talks I attended being more literary criticism (e.g several quotes from Keynes, Minsky, and others, strung together and compared with recent events) than actual modeling.
My overall impression is that if this is all that heterodoxy has to offer as an alternative to mainstream economics, then the profession is in deeper trouble than I thought.
Quantitative Finance: Foundations and Applications
Having fun with economics and Lord Skidelsky
Matheus Grasselli | Associate Professor and Sharcnet Chair in Financial Mathematics working with the PhiMac group in the Department of Mathematics and Statistics at McMaster University, currently Deputy Director at the Fields Institute
(h/t Clonal in the comments)

Saturday, September 29, 2012

Steve Keen — Keen 2012 UMKC Reconciling MMT and MCT (video)

My presentation at the UMKC Post Keynesian conference in 2012 where I prove that, given endogenous money, effective demand is income plus the change in debt, and show that this is compatible with sectoral balances.
Steve Keen
Keen 2012 UMKC Reconciling MMT and MCT

Al Jazeera — Anti-austerity rallies hit Spain and Portugal

Protesters surround parliament in Madrid, while thousands take to the streets of Lisbon in new anti-austerity protests.
Al Jazeera
Anti-austerity rallies hit Spain and Portugal

David Sloan Wilson on the nature of regulation

Before we can think clearly about regulation, we need to think clearly about another important word: narrative. A narrative is a story that organizes our experience and compels certain actions. We need narratives, because the real world is too complex to comprehend without simplification. Narratives are invariably distortions of the real world because otherwise they could not perform their simplifying function. The simpler and more compelling a narrative the better--but only if it compels us to do the right thing. When a narrative compels us to do the wrong thing, then it traps us like a prison that we cannot easily escape because of the way that the narrative has structured our experience. The only way to break out of a narrative prison is to challenge and replace the narrative. The new narrative will also be a simplification, but one that is hopefully better anchored in reality and compels us to do the right thing.
Evolution — This View of Life
The Nature of Regulation I: Breaking Out of Our Narrative Prisons
David Sloan Wilson

The Nature of Regulation II: Regulate or Die

More to come on this.

Zero Hedge on New York's ultraluxury office vacancy rate change as a leading indicator

Traditionally, when it comes to reading behind the manipulated media's tea leaf rhetoric and timing major inflection points in the economy, the most accurate predictor are financial firms, whose sense of true economic upside (or downside) while never infallible, is still better than most. Yet unlike employment, which is usually a lagging, or at best concurrent indicator, one aspect that has always been a tried and true leading indicator, has been real estate demand, in this case rental contracts. Due to the long-term lock up nature of commercial real estate contracts, firms are far less eager to engage in rental transactions (and bidding wars) when they expect a worsening macroeconomic environment. Which is why news that office vacancy in Manhattan's Plaza district, the area between Sixth Avenue and the East River from 47th to 65th streets, anchored by the landmark Plaza Hotel at Fifth Avenue and Central Park South which is home to some of the nation’s most expensive and prestigious office towers, and where America's largest hedge funds and PE firms have their headquarters, has just risen to 12.3%, or a two year high, is probably the most troubling news for the economy and a real indicator of what to expect of the immediate future.
Zero Hedge
New York's Ultraluxury Office Vacancy Rate Jumps To Two Year High As Financial Firms Brace For Impact
Tyler Durden

Greg Palast on Paul Ryan's rise

Author Greg Palast follows the money trail leading up to Paul Ryan’s nomination.
In These Times
The Billionaire Bandits Behind Paul Ryan
Roger Bybee

Zero Hedge — The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default

And while it is impossible using historical data to extrapolate with precision what the current consolidated federal student loan default rate is, we do know that there is now $914 billion in federal student loans (which also was mysteriously revised over 50% higher by the Fed just a month ago). Using simple inference, all else equal (and all else has certainly deteriorated), there is now at least $122 billion in federal student loan defaults. And surging every day.
Zero Hedge
The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default
Submitted by Tyler Durden

These loans are federally guaranteed so wait for another bailout. 

These loans can not be discharged in bankruptcy, so many students are going to be living with the consequences for a long time, likely including wage garnishment if they ever do get a job.

It's a debacle that will impoverish a significant portion of the generation.

Mark Thoma on Takeshi Amemiya's "Economy and Economics of Ancient Greece and Ancient China"

We had our first seminar of the year today. It was by Professor Takeshi Amemiya of Stanford. Takeshi is best known for his econometric research on a wide range of topics, including a series of highly influential theoretical papers in the 1970s and 1980s. His more recent research has been in a very different area -- the economics of ancient Greece. The title of his talk was: "Economy and Economics of Ancient Greece and Ancient China"
One of the things I took from the talk was how many of the ideas in Adam Smith's Wealth of Nations can be found in these ancient texts, concepts such as the division of labor, supply and demand, the role of prices, monopoly power, wealth accumulation, and so on.
But it was also interesting to see echoes of so many modern debates, e.g. about wealth inequality, taxes, etc., from so long ago. Here are a few quotes from the section "Economic Thoughts" in his slides (there is a timeline in the slides showing when each of the people quoted below lived)....
Economist's View
'Economy and Economics of Ancient Greece and Ancient China'
Mark Thoma

Brad DeLong — Paul Ryan: Socialism Must Be Destroyed, And By "Socialism" I Mean Things Like Social Security, Medicare, Food Stamps, And Unemployment Insurance

The Paul Ryan audiotape did not get the same attention as the Romney videotape. Yet I find it as damning....
Grasping Reality with Both Invisible Hands
Paul Ryan: Socialism Must Be Destroyed, And By "Socialism" I Mean Things Like Social Security, Medicare, Food Stamps, And Unemployment Insurance
J. Bradford DeLong | Professor of Economics at the University of California at Berkeley
(h/t Mark Thoma)

Howard Fineman — Armageddon in Congress Is Next

Howard Fineman looks at what's coming post-election, and none of the alternatives look good. BTW, President Obama is at 78.9% at Intrade this morning, so unless the Democrats take Congress with a super-majority in the Senate (or change the rules if only a majority), there is going to be gridlock and continuing divisiveness and obstruction. Worst case scenario: US recession resulting from fiscal austerity or deadlock leads to global contagion.

The Huffington Post | Politics
Armageddon in Congress Is Next: Countdown Day 39
Howard Fineman | Editorial Director, Huffington Post Media Group

Guardian — Greek police send crime victims to neo-Nazi ‘protectors’

Greece’s far-right Golden Dawn party is increasingly assuming the role of law enforcement officers on the streets of the bankrupt country, with mounting evidence that Athenians are being openly directed by police to seek help from the neo-Nazi group, analysts, activists and lawyers say.
In return, a growing number of Greek crime victims have come to see the party, whose symbol bears an uncanny resemblance to the swastika, as a “protector”.
The Raw Story
Greek police send crime victims to neo-Nazi ‘protectors’
Helena Smith | The Guardian (UK)

This is how it begins, if history is any guide. Soft fascism becoming hard fascism?

Guardian — Obama blocks Chinese firm’s purchase of four U.S. wind farms

Barack Obama has revoked a Chinese company’s acquisition of four wind farms, citing national security for the first time in two decades against a foreign investor.
The executive order from the White House on Friday, against the privately held Ralls Corporation, follows accusations from Mitt Romney that Obama has failed to stand up to Chinese businesses.
The Raw Story
Obama blocks Chinese firm’s purchase of four U.S. wind farms
Suzanne Goldenberg | The Guardian (UK)


Friday, September 28, 2012

Dr. Housing Bubble — Welcome back California home flippers!

It was only a matter of time for flippers to engulf the market once again. House flippers never really left but the magnitude hit a temporary lull during the housing crisis. Apparently all is well in SoCal once again and bubble 2.0 is back in full fashion. It is only a matter of time before the cable shows shift from the insane Canadian housing bubble and start filming our local neighbors taking a plunge into the new bubble market. Flipping at these levels can only exist in a partial mania like atmosphere. The constrained inventory and rising prices is pulling many people off the sidelines and I have heard this said a few times already, “I’m not missing the housing market this time!” Maybe it is the California sunshine that gets into our heads but we appear to have forgotten the housing bubble that just hit us a few minutes ago. Flippers are back in fashion and many hipster neighborhoods in SoCal and the Bay Area are bringing along a new party.
Dr. Housing Bubble
Welcome back California home flippers! Home flipping is back in fashion. 852 square foot home in hipster LA neighborhood bought for $211,000 in 2010 and flipped for more than double the price this year.

Here we go again. Chairman Bernanke will be pleased.

The House of Morgan now relegated to a Halloween costume shop!

Well, there's change on Wall Street alright, but not the kind you'd expect.

Pierpont Morgan was arguably the greatest financier of all time and in 1913 he built this structure at 23 Wall Street to serve as his bank's headquarters. In the years that followed this location would be the epicenter of global financial power.

So can we call it "hallowed" ground?

Wait...make that, Halloween gound!!

It's now a Halloween costume shop!

Pierpont must be rolling over in his grave!!

Bill Mitchell — Aggregate demand – Part 6 (redux)

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
[NOTE: The redux notation in the title refers to re-edits of earlier blogs with the same title. At present, the updated Chapter starts from Aggregate demand – Part 5 (redux) and continues today. Earlier Parts in the Aggregate Demand series are redundant and should be ignored].
Bill Mitchell — billy blog
Aggregate demand – Part 6 (redux)
Bill Mitchell

Thursday, September 27, 2012

Chris Dillow — Reactionary Postmodernism

There's one thing not happening today which should be. People are not ridiculing Nick Clegg, at least no more so than usual. But they should be, because one part at least of hisspeech yesterday was downright stupid:
Who suffers most when governments go bust? When they can no longer pay salaries, benefits and pensions? Not the bankers and the hedge fund managers, that’s for sure. No, it would be the poor....
Of course, this is plain wrong. In countries with their own central banks, governments cannot go bust because the central bank can simply print money to buy government debt: this is what QE is. Of course, this might or might not be a bad idea. But Clegg didn't argue this. He just made a prat of himself.
 However, my point is not to condemn Clegg; I'll not flog that dead horse. Instead, it's to note that the MSM seem to have ignored this. His speech was reported with the usual post-conference bromides rather than along the lines of "Deputy Prime Minister shows himself to be crass idiot."
This is the part of the post that will likely be most interesting to readers of MNE, but the rest of the post is where Dillow makes his point. Worth reading in full.

Stumbling and Mumbling
Reactionary Postmodernism
by Chris Dillow | Investors Chronicle (UK)

Economic policies pushed by neoliberal elites destroying our freedoms

SocSec taxes, medicare taxes, student loans ... how much of US economic initiative is left?

commentary by Roger Erickson

Student debt hits record 1 in 5 US households
"With college enrollment growing, student debt has stretched to a record number of US households -- nearly 1 in 5 -- with the biggest burdens falling on the young and poor."

Why not just be honest, and rename this pattern as indentured servitude, serfdom & hereditary slavery?

We can spend unlimited amounts of currency into existence for programs that the wealthy hire lobbyists to promote - from NASA to the DoD to agriculture and corporate and bank subsidies .... but we can't find any fiat currency to spend on mandatory education, mandatory public health measures, or mandatory minimum care for our own elderly? Rubbish!

It's not just that our electorate doesn't understand how a fiat currency works, they simply don't understand their situation. That's a recipe for disaster.

A foolish population & their future are soon parted.

We're already deep into a civil war.

"Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their [personal] gains."
Thomas Jefferson

That's what I was trying to get at in an earlier post, pointing out that we're duped into fighting a civil war against ourselves, by proxy.  Apparently this crowd doesn't know what a prion is anyway.  Anyone have the imagination to write out contingency tables for what's next, i.e., what lies beyond even social variants of the prion phenomenon?  It really doesn't matter how exactly we describe & document the escalating crimes in an evolving class war.  All that matters is what we do about them, and how quickly.  An ounce of prevention is still better than a pound of cure.

Until then, we're once again manipulated into pitting ourselves against ourselves, this time for the twisted principle of merchant's rights, not even states rights. Same real stakes, however.

Kelly Evans — Why the State of the US Economy Defies Description

Certain events would put me into a position in which I could not go on with the old language games any further. In which I was torn away from the sureness of the game.
—Wittgenstein, “On Certainty”
Why the State of the US Economy Defies Description
Kelly Evans | CNBC Reporter

This is should generate some interesting comments.

Incidentally, I wrote my PhD dissertation on Wittgenstein's On Certainty.

Wednesday, September 26, 2012

Business Economics Has Become a Cruel Joke?

commentary by Roger Erickson

Economists' surprising election-year request: Raise taxes [and cut national spending], please!

Brad Lewis: "It's not intended to be, but what is clear is that the multiyear studies don't take into account the monetary regime. This may be the time to put out a manifesto."

Manifesto? Ahem. We DID put out several pretty significant manifestos. In 1933! As did Beardsley Ruml, in 1946, not to mention Abba Lerner, in 1942? etc, etc. There was at least one per decade, as it turns out.

Or, maybe it's time to simply write off orthodox economics ... in it's entirety?

Heck, go for both, simultaneously!

I'm no longer sure which is disintegrating faster, the GOP or the orthodox economics profession. :) There may even be a dark-horse contender ... the USA!

79 years and the bulk of PhD economists haven't yet NOTICED that we changed paradigms?

Would anyone notice even if we put out a hundred manifestos?

Reminds me of the beagle we once had: it would, nose to the ground, follow the scent trail of a meandering deer, even to the point of walking - oblivious - right past the deer still standing there munching grass!

I saw that with my own eyes; and now I'm seeing the exact same behavior in orthodox economists. Only difference is that their ears aren't as long & floppy. The one-track mind is still recognizably present - and dramatically magnified. Do they still bay at the scent of tenure, or academic prizes? :)

Can we at least start laughing at them? Is that the key?

Even if Geithner Won't, DoJ Bowing to State AG Demands.

Justice Dept to highlight investment fraud scams

"We see it as a growing problem. We see it as a serious problem," Connecticut U.S. Attorney David Fein said in an interview.

Ya think?

Sadly, it seems that the DoJ, despite it's history, back to the Peccorra Commission and beyond, finds itself in need of a manifesto as well (just like orthodox economics does).

Maybe Geithner would pen one, from scratch, as that seems to be where he's starting from.

Greece's International Lenders are Squabbling.

Gangsters fighting over the loot? Can someone remind me how a country can fail to supply itself with enough fiat currency, and decide to borrow someone else's fiat instead? And then panic at the prospect of running out of fiat? Somehow fiat currency was transmogrified to fiat looting? And people say that currency is hard to understand! It's Luddites who it is hard to understand. Viva la repression! Who says the ancient Greeks perfected tragecomedy. Their descendants are doing them one better - by staging worse.

The elite Greek families like to have a captive populous.

It's a question of how long the Greek peasants will covet their protective chains.

IMF, EU clash over Greece's bailout prospects

This is scarcely to be believed (no pun intended).
Whole populations really will do anything in their power to avoid thinking!

Are the loan sharks sensing that this pond is nearly all fished out?

Ironically, at least they're distributing income by buying & using teargas.

Enough tears adds to aggregate demand? What a sick outlook.

Robert Johnson — What About the Questions That Economics Can’t Answer?

Can economics be morally centered? And perhaps more importantly, should it be?
These are questions that society is grappling with in the face of the economics profession's failure to confront the global impact of exploding inequality within and between countries.
Yahoo Finance
What About the Questions That Economics Can’t Answer?
Robert Johnson | Executive Director of the Institute for New Economic Thinking (INET) and a Senior Fellow and Director of the Global Finance Project for the Franklin and Eleanor Roosevelt Institute in New York

David Moberg — ‘Going Nuclear’ on Class

The Democrats’ working-class disconnect.
In These Times
‘Going Nuclear’ on Class
David Moberg | Senior Editor

Rewriting history by editing Adam Smith

This is a warning for those who have bought the Promtheus edition of the Wealth of Nations by Adam Smith. It is abridged, and it seems to have been edited to the effect that Adam Smith appears as a market liberal. The following quotes are from the original book and are not found in the Prometheus edition.
The Wealth of Nations, diminished
Dirk Ehnts | Berlin School for Economics and Law

George Monbiot — Romnesia: The Ability of the Very Rich to Forget the Context in Which They Made Their Money

A potent myth is being used to justify economic capture by a parasitic class.
Romnesia: The Ability of the Very Rich to Forget the Context in Which They Made Their Money
George Monbiot (published in the Guardian 24th September 2012)
(h/t AlterNet)

Michael Hudson interview transcript — Financial Conquest or Clean State?

This is an edited and expanded transcript from a live phone interview by Dimitris Yannopoulos for Athens News, September 2012
Financial Conquest or Clean State?
Michael Hudson

Michael Lind — Robots are coming (for your job)

This is chiefly about employment in the future, but Michael Lind also presciently notes that this transition is likely to result in a restructuring of the class system in a way that is as thorough, far-reaching, and profound as the transition from agricultural feudalism to industrial capitalism. Are you ready for it? Those who have already been hit by "downsizing" are in the process of having had to deal with it.

Robots are coming (for your job)
Michael Lind
(h/t Kevin Fathi via email)

Warren Mosler — Comments on the Current U.S. Budget Debate (1996)

The assumptions underlying the current budget debate are erroneous. Historical analogies include “the earth is flat” and “the earth is the center of the solar system.” Chicken Little has returned, and the consequences are counter agenda for all parties.
The noble attempt by Congress to balance the budget will result in a weaker economy with a true depression a possibility. Every time there is a drop in the budget deficit, as a percent of GDP, the GDP growth rate drops a few quarters later. It is only after the deficit begins to expand again that the economy recovers. The historical correlation is 100%. Lowering interest rates, in an attempt to boost the economy, is seldom effective. Since the government is a net payer of interest, lower rates reduce spending, thereby increasing fiscal drag.
Governments are monopoly issuers of fiat currency. The incorrect , but prevalent, understanding is that issuers of fiat currency must tax, borrow, or otherwise raise revenue so they can spend it. Taxing and borrowing are considered “funding” operations. Consequently, the discussions revolve around how governments can raise “needed revenue” to fund spending. Revenue shortfalls are of great concern; witness the latest government shutdown.
Contrary to general perception, fiat money is driven by the fact that taxpayers need the government’s money to pay their taxes. By levying a tax, the government creates a need for its fiat currency. It creates this need, presumably, so it can obtain the real goods and services it desires via the spending of its currency.
From inception, the only source of money needed to pay taxes is the issuing government. The government cannot actually collect the tax it has levied, nor borrow any of its fiat currency, until it first spends, or otherwise provides, the funds.
A balanced budget, from inception, is therefore the theoretical minimum that a government can spend. The previous statement represents an accounting identity. If individuals and businesses desire to hold actual cash, that money must be “left over” after taxes are paid. All cash held by the public must be money provided by the government in excess of the need to pay taxes (deficit spending). This is also true for all dollars held by foreign central banks at the Fed. For these, and other structural reasons, the possibility of a balanced budget does not exist, and the current attempt to balance the budget will likely result in severe deflation. When the government does not spend enough to cover the total need for dollars created by taxes, the usual result is a recession and a concurrent shortfall in revenues. A deficit remains. Accounting identities have a way of being satisfied, one way or another.
Likewise, the government can borrow its currency only after it has provided it to the private sector. Government borrowing, therefore, functions to support interest rates, not as a funding operation. Nominal savings is not diminished, nor displaced - it is given a place to earn interest. If the government were to spend more than it subsequently collected in taxes, and did not offer securities for sale, the fed fund rate would immediately fall to 0% bid. Treasury spending is a reserve add. Selling securities, by the Fed or Treasury, is simply a reserve drain, a monetary operation. This underlies the empirical evidence that nations can run any debt ratios they want, in their own fiat currencies, and still “fund the debt.”
For all practical purposes, there is no such thing as a balanced budget. Singapore, for example, shows a budget surplus, but that does not include all government spending in excess of collected taxes. The central bank spends Singapore dollars to buy foreign currencies. This “off balance sheet” spending brings the consolidated spending to about 2% higher than collected taxes. The same happens in Czechoslovakia - fiscal policy is tight enough that the only way to get enough local currency to pay taxes is selling foreign currencies to the central bank. When the central bank makes the taxpayers “beg”, as evidenced by currency appreciation, the economy gets softer (Japan is another good example).
Consider inflation. Because the taxpayers need the government’s money, the government is able to define its currency by what it pays for goods and services. By changing what it pays, the government redefines its currency. Currently, the government fights inflation by maintaining an economy weak enough for the private sector to be under pressure to sell goods and services. This selling pressure keeps prices from rising.

How large a deficit is prudent? Let the market decide! This option has not even been considered. For example, the government could offer a job to anyone who wanted one, at some minimum rate of pay deemed appropriate, and let the deficit float. This would end unemployment and unemployment compensation, eliminate the need for minimum wage laws, and promote price stability. Employment (rather than unemployment) would define the currency and become the stabilizer. The price of labor would be stable. Private sector wages would be related to the benchmark of government employment. If the government labor force were larger than needed by the government, taxes could be lowered. This would result in fewer government workers and reduced government spending as the private sector hired these workers.

The Fed sets short term rates. Congress has ultimate control over the Fed. Short term rates go up because the Fed, and ultimately Congress, wants them to - not because of market forces. These rates are not determined by market forces. Treasury securities are not necessary unless the government wishes to support higher long term rates. Short term rates could be maintained simply by paying interest on excess reserves held at the Fed.
The Federal debt is all the money spent but not taxed. It was borrowed after it was spent, so the holders of the money might earn interest. The government pays interest, voluntarily, depending on how much it wants savers to be able to earn. Have you ever heard an owner of government securities say, “I wish the government would stop selling securities so I can get my money back!”?
The current budget debate is based on erroneous assumptions. Washington does not understand fiat money. Until it does, efforts to reduce the deficit will continue, and the economy will continue to underperform.
EPIC | A Coalition of Economic Policy Institutions
Comments on the Current U.S. Budget Debate
Warren B. Mosler
 January 1996
(h/t Charles Hayden of MMT DALLAS DEFICIT OWL COMMITTEE, via Facebook)

Right sixteen years ago, and right now.

"Suicide is NOT the Solution!" - Budget Cutting Is?

commentary by Roger Erickson

Army Post Bucks Trend, Sees Suicide Rate Progress

This article really forces comparison of individual and national-suicide.

First, do all citizens know what national-suicide is, and how to recognize it's warning signs, early on?  The therapies are analogous.  Distributed life-support for individuals, and distributed income-support for our economy.  This ain't rocket science.

Yet there is so much confusion - with people at every level of all institutions not knowing WHY they're doing what they're doing. Our distributed, national-situational-awareness is abysmal, which is, of course, exactly why we're floundering.

"Fort Campbell, which in 2009 led the Army in suicides, has spent the last several years taking what the Army sees as drastic steps toward suicide prevention education. In 2008, it became the first post in the Army to hire a suicide prevention manager."

[rge: Wow!  If the methods described are considered drastic, we really are in trouble.  In addition to their stated goal - reducing individual suicide rates - at least the DoD is accidentally reducing our chances of national suicide as well.  They're spending more, more widely, and allowing another bit of aggregate demand, by providing salaries for more psychiatrists. Whatever!  It may be incidental, but it's an economy-saving start.  They're spending more currency income into our economy, so we can at least use that circulating currency to denominate pent-up real demand.]

"In still another program, the post has assigned a pharmacist to monitor the post’s soldiers who have been prescribed four or more medications, including one psychotropic, to make sure they both still need the medications and are taking them properly."

[rge: Oh lord!  Yes, it's still more income for a token few more people, but is the solution to stressful situations really to simply stay in them, and take drugs?  How about drastically accelerating reexamination of both the situation and our response options, i.e., how individuals, groups and our entire nation can manage or re-shape the situation?  We COULD consider changing policy, a wee bit faster?]

'Coupled with the Army-wide “standdown” suicide prevention training days scheduled for this week, yet another program piloted at Fort Campbell in 2009, the steps toward prevention seem to be doing something that has eluded other Army programs -- working.'

Poll: Is Military Suicide Preventable?

[rge: Ok, I'd like to take an informal poll. Is national-suicide preventable? Please simply comment here with a vote NS: yes, or NS: no.]

"Military suicides are historically linked to the 90 days before a deployment and the 90 days afterward, Varney said. "

[rge: Hmmm.  You have to wonder if that claim would hold up historically, for national-suicide before/after disastrous policy choices.  Seems obvious.]

"Army ... health care officials and .. chaplain ... teaching soldiers to not only recognize the signs of suicide in themselves and seek help, but even more importantly, to watch for signs in their friends and reach out on their behalf."

[rge: For Pete's sake! How long will it take us to scale up that same skill regarding national-suicide?]

'“A keen observer can tell when someone is under [suicidal] stress,” Varney said. “We have to teach people to know the signs and tell someone when they see someone else exhibiting those signs. … People don’t want to get into each other’s business. But that’s not the solution.”'

[rge: So far, so good. Now, how about when an entire economy is under stress? Can we get people to LISTEN to our existing keen observers?]

'"The programs across post look to focus on prevention as well, with “the entire community working together,” said Laura Boyd, a spokesman for Campbell’s Blanchfield Army Community Hospital. They aim to teach every medical provider to spot the signs of suicide, and every leader and worker to intervene, regardless of whether they are in the mental health field.
Still, there is one group on the outside of most of the Army and Fort Campbell’s suicide prevention training efforts: military families.'

[rge: So, let me ask all of us US citizens. Why can't we scale up those simple practices noted here, so we can have have more people spot the signs of suicidal national policy - soon enough?]

'“We spend every day asking ourselves the question of how we can get the word out about all of these programs,” Varney said.'

[rge: How about improving distributed situational-awareness, and thereby start down the path to altering the root causality?  Isn't that called an adequately informed electorate?]
'“Essentially, we know what leads people to suicide -- it’s stress,” Varney said. “What we don’t know is who has the ability to relieve that stress.”'

[rge: ?? Sure we do! It's us. That's what social species DO!!! ]

"The Timeless Theme of Official Corruption" - Gogol's Plays

commentary by Roger Erickson

It's official? Nothing's changed? At least not much?  Only the details?

Does one of Gogol's plays remind you of the Keating-5?

Has anyone seen this one?

The Government Inspector (Nikolai Gogol’s satire on corrupt people worrying they're being investigated)

A modern retake must certainly feature the GORBS (Greenspan, Geithner, Orszak, Rubin, Bernanke, Summers).

Especially if given a looney-tunes veneer.

Tuesday, September 25, 2012

Daniel LiIttle — Actor-centered sociology and agent-based models

Actor-centered sociology (ACS) begins in the intuition that social processes begin in the interactions of socially constructed individuals, and it takes seriously the idea that actors have complex and socially inflected mental schemes of action and representation. So actor-centered sociologists are keen not to over-simplify the persons who constitute the social domain of interest. And this means that they are generally not content with sparse abstract schemata of actors like those proposed by most versions of rational choice theory.

Agent-based modeling (ABM) is a collection of aggregative techniques aimed at working out the aggregate consequences of the hypothetical choices of a number of individuals interacting in a series of social environments. ABM models generally represent the actors' motivations and decision rules very abstractly -- sometimes as economic actors, sometimes as local optimizers, sometimes as heuristically driven decision makers. An ABM model may postulate several groups of actors whose decision rules are different -- predators and prey, landlords and tenants, bandits and generals. The goal is to embody a set of behavioral assumptions at the actor level and then to aggregate the results of the actions and interactions of these actors at a macro level. (Stephen Railsback's Agent-Based and Individual-Based Modeling: A Practical Introduction provides an accessible introduction.)
My question here is a focused one: do these apparently similar approaches to explaining social outcomes actually have as much in common as they appear to at first glance? And the answer I'll suggest is -- not yet, and not enough.
Understanding Society
Actor-centered sociology and agent-based models
Daniel Little | Chancellor for the University of Michigan-Dearborn and Professor of Philosophy

Cuts to the quick about what's wrong with rational choice modeling. Hint: it's too simplistic to be representational.

Marshall Auerback — Spain collapsing

Economics has political consequences. Greece and now Spain heading for the drain. Who's next in line?

New Economic Perspectives
Mario vs. Mariano Could Mean the End of Spain
Marshall Auerback

Monday, September 24, 2012

Pettis: How to be a China bull

…So if anyone wants to continue to be very bullish about Chinese growth prospects over the next decade, it seems to me that he must address and answer these three questions:

1. How much debt is there whose real cost exceeds the economic value created by the debt, which sector of the economy will pay for the excess, and what is the mechanism that will ensure the necessary wealth transfer?

2. What projects can we identify that will allow hundreds of billions of dollars, or even trillions of dollars, of investment whose wealth creation in the short and medium term will exceed the real cost of the debt, and what is the mechanism for ensuring that these investments will get made?

3. What mechanism can be implemented to increase the growth rate of household consumption?
Pettis: How to be a China bull
Posted by Houses and Holes in China Economy
(h/t Yves Smith at Naked Capitalism)

Plato on the Fiscal Limits of Government Penalties and Fines c. 360BC

Excerpt from Plato's "Laws" below where he is writing in dialog format about the point at which economic policy should trump jurisprudence in the levying of "penalties" or what we may call "fines" or "fees" or even "taxes" today:
Touching the exaction of penalties, when a man appears to have done anything which deserves a fine, he shall pay the fine, if he have anything in excess of the lot which is assigned to him; but more than that he shall not pay.  And to secure exactness, let the guardians of the law refer to the registers, and inform the judges of the precise truth, in order that none of the lots may go uncultivated for want of money. But if any one seems to deserve a greater penalty, let him undergo a long and public imprisonment and be dishonoured, unless some of his friends are willing to be surety for him, and liberate him by assisting him to pay the fine.
So we can see here, documentary evidence that the ancient Greeks were fully aware of how their fiscal policy of their 'nomisma' system, or what we call today a system of state currency, could effect economic output.

In this paragraph, Plato is warning that if penalties or fines were called for due to some sort of transgression by an individual, the amount should be limited to only amounts that the transgressor possessed beyond "the lot assigned to him" but no more than that; and futher, the various government officials should take extreme care to make sure that adequate balances should remain in the non-government sector so as to not negatively effect output.

Plato's concern with a fine that would exceed this amount is due to his concern about a corresponding fall in local output "for a want of money" or in half Greek, I would assume "for a want of nomisma".

Fining the transgressor a punitive amount that would render deficient the amount of state currency or "nomisma" in the non-govenment sector required to maintain previous achieved levels of economic output was to be strictly avoided.

Too bad our disgraced morons running fiscal policy today in the west don't know what our Greek ancestors already knew well over 2,000 years ago.

Michael Hudson — Surviving Progress transcript

Theme: In the name of “progress,” the world is regressing to neoserfdom.
Surviving Progress transcript
Michael Hudson

Warren Mosler's draft presentation to some euro central bankers in October

Sneak peak.

Warren Mosler

Bill Mitchell — Fear of inflation scales new heights

Contains some good quotes from the ECB about the endogenous nature of money such that central bank reserves function to provide liquidity for clearing transactions after netting, and changes in the amount of base money neither influence credit extension by banks nor affect the money supply, although changes in the amount of base money will affect the interest rate unless the central bank intervenes with monetary policy to set the rate it desires through open market operations or payment of interest on reserves. Just as MMT has been saying all along.

Bill Mitchell — billy blog
Fear of inflation scales new heights
Bill Mitchell

Scott Mayerowitz — Federal Deficit Should Be Reduced With Spending Cuts, Tax Hikes, Economists Say

The best way to reduce the federal deficit is through a combination of higher taxes and spending cuts, according to a group of economists.
The 236 members of the National Association for Business Economics recently surveyed say the country needs more fiscal stimulus through 2013, but by 2014 it should be time to throttle back. The reason for the delay: the sluggish nature of the country's economic recovery.
The Huffington Post
Federal Deficit Should Be Reduced With Spending Cuts, Tax Hikes, Economists Say
Scott Mayerowitz

With "experts" like this, the country will do as well as medieval patients with blood-letting.

Izabella Kaminska — A time of hoarding and inflation fears, 1930s edition

History repeats or just rhymes?

The Financial Times | FTAlphaville
A time of hoarding and inflation fears, 1930s edition
Posted by Izabella Kaminska
(h/t Andy Blatchford)

13) From, Inflation and deflation — February 22, 1932 (Izzy — a.k.a. employment targeting Version 1):
"In times of depression, when equipment is largely idle and much labor is unemployed, expansion of credit which may effectively stimulate prices, and thus bring about increased employment of equipment and labor with a corresponding enlargement of output is to be regarded as normal and healthy. Such expansion should be called “inflation”. Expansion becomes “overexpansion” or “inflation” when it tends to carry prices beyond the level at which the maximum output is insured through reasonably full employment of available equipment and labor. Similarly, contraction becomes excessive when it forces a lowering of prices below the level of maximum output and leads to shut-downs and unemployment. In short, that level of prices is to be regarded as 'normal' which brings about maximum output through full employment of equipment and labor, and it is from this level that credit movements, in so far as they may be considered responsible should be judged."

Sunday, September 23, 2012

Zero Hedge — Gold Counterfeiting Goes Viral: 10 Tungsten-Filled Gold Bars Are Discovered In Manhattan

A few days ago, our report on the discovery of a single 10 oz Tungsten-filled gold bar in Manhattan's jewelry district promptly went viral, as it meant that a tungsten-based, gold-counterfeiting operation, previously isolated solely to the UK and Europe, had crossed the Atlantic. The good news was that the counterfeiting case was isolated to just one 10 oz bar. This morning, the NYPost reports that as had been expected, in the aftermath of the realization that the sanctity of the gold inventory on 47th Street just off Fifth Avenue has been polluted, and dealers promptly check the purity of their gold, at least ten more fake 10-ounce "gold bars" filled with Tungsten has been discovered.
Zero Hedge
Gold Counterfeiting Goes Viral: 10 Tungsten-Filled Gold Bars Are Discovered In Manhattan
Submitted by Tyler Durden

James K. Galbraith on QE, banking, and central banking

What we need instead, today, is a candid review of what central banks cannot do. Yes, they can usually forestall panic. Yes, for better or worse they can keep zombie banks alive. No, they cannot bring on economic recovery or solve any of our deeper economic problems, from unemployment and foreclosures in America to unemployment and economic collapse in Greece and elsewhere. The sooner we stop thinking of central bankers as wizards and magicians, the better.
The Guardian (UK)
Quantitative easing isn't magic
James K. Galbraith | Lloyd M Bentsen Jr chair of government/business relations at the Lyndon B Johnson school of public affairs, the University of Texas at Austin, senior scholar with the Levy Economics Institute, and chair of the board of Economists for Peace and Security
(h/t Matias Vernengo at Naked Keynesianism)

Michael Pettis — China rebalancing

The greater the local production component, the higher the subsidy created by an undervalued currency. The more labor intensive the manufacturer, the greater the subsidy created by low wages. And finally the more capital intensive the producer, the more it benefits from artificially low interest rates.
The mechanisms also distribute the costs in different ways. An undervalued currency hurts households in proportion to the value of imports in their total consumption basket. Low wages hurt workers. Low interest rates hurt households in proportion to the amount of their savings as a share of income. 
Because they boost economic growth at the expense of households, these three mechanisms cause the economy to grow much faster than household income. This is the root of China’s unbalanced economy – household income has grown so much more slowly than the economy that household consumption over the past three decades has collapsed as a share of GDP. Rebalancing in China means by definition, however, that the household consumption share of GDP must rise, and the only effective way to do this is by raising the household income share of GDP. Revaluing the currency is one way of doing so. It increases the real income of households by reducing the cost of imports, and it raises local production costs for manufacturers.
But it is not the only way. Raising Chinese wages increases household income too, while increasing labor costs for manufacturers. Finally, allowing interest rates to rise benefits households by increasing the return on savings, and it raises costs for capital-intensive manufacturers....
This is ultimately what rebalancing means. One way or another as China rebalances it will lose competitiveness abroad because it must raise the cost of production in favor of household income. In exchange, however, China’s domestic market will become a bigger source of demand as Chinese households benefit from rebalancing. Over the long term Chinese growth will be much healthier and the risk of a Chinese debt crisis much reduced, but over the short term, unless there is an unlikely surge in global demand, China cannot both rebalance and improve its trade performance.
China Financial Markets
Can China increase export competitiveness?
Michael Pettis

Saturday, September 22, 2012

Shackle & Imprison Aggregate Demand. "That'll fix it!"

commentary by Roger Erickson

What part of systems optimization don't these @#$%&! idiots understand? We've become a whole nation that has kids & then locks 'em in the basement. That'll fix it?  BMHOTK!

These list entries reek of specific lobbies.

Debts That Are Always Nondischargeable

Some types of debts are deemed nondischargeable if they fall within one of a list of prescribed categories. Debts falling in one of these categories do not require a court hearing to determine dischargeability status.

Unless the debtor can demonstrate extraordinary circumstances to override public policy, the following debts are deemed automatically nondischargeable:

unscheduled debts (any debts the debtor fails to list on the bankruptcy petition or include on the mailing list), unless the creditor had actual notice or knowledge of the bankruptcy filing. Also, many jurisdictions allow discharge of otherwise dischargeable debts not listed in the petition due to an innocent mistake when there are no assets to distribute.

certain taxes (for details, see Tax Debts in Bankruptcy)

debts for spousal or child support or alimony

debts to government agencies for fines and penalties

student loans (with a few rare exceptions)

debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated

debts owed to certain tax-advantaged retirement plans

debts for certain condominium or cooperative housing fees (such as homeowners association fees)

attorney fees in child custody and support cases, and

court fines and penalties, including criminal restitution.

So why not just reinstitute debtors prisons?

"They are on the way!" Russ Huntley

"The taxes and fees owed to government on that list are especially
absurd from our perspective."
Jerrit Erickson

"The elephant on this list is student loans. We gotta do something about this or we are impoverishing our children." Steve Hansen

Viewed another way, the argument is that "we" collectively can't
afford to self-educate our own population, but the same "we" collectively
as individuals can all afford to take out student loans. What part of "does not compute" don't these @#$%&! idiots understand?

Randy Wray and Michael Hudson — The Historical Evolution of Money and Debt 

First Session of Modern Money and Public Purpose 
L. Randall Wray and Michael Hudson

Unlearning Economics — Endogenous Versus Exogenous Money, One More Time

I’ve always sided with endogenous money because it is supported by the evidence. If anyone can offer me contrary evidence about the above or other relevant hypotheses, I’ll be happy to listen. But economist-y special pleading about how, even though exogenous money is wrong, the economy behaves as if it is right, or about how I’m not allowed to refute ‘centuries of theory,’ is simply not enough when the evidence is this strong.
Unlearning Economics
Endogenous Versus Exogenous Money, One More Time

Nominate Your BS for the Best Tragecomedy of the Week

commentary by Roger Erickson

This is the best tragecomedy I've received so far this week.  To keep from crying, I've learned to laugh out loud at this kind of BS.

"Nominate Your Company for an Exporter of the Year Award"

Now, for any novice readers, understanding this tragecomedy depends on achieving a modern perspective and paradigm. Why would YOU want to send our real resources to foreigners, for them to use in their country? Better to build insanely great products or services that further build our capabilities of and opportunities within the USA. What the heck do you need THEIR fiat currency for, when we already have our own fiat currency?  As long as we can build & do new things here that simultaneously improve the confluence of faster+leaner+better, then we can always let less-accomplished nations export things that are no longer rate limiting for us.

However, we should do that only IF they can't self-organize by any other means than agreeing to at least practice by exporting real real goods to us instead of using them to improve the general welfare of their own people.  In reality, we allow that only to give them an organized purpose they're failing to do by other means, just as we let them mow our lawns & clean our houses & go to our schools. After all, people with less useful currencies are still clamoring to acquire our fiat currency.

The best things you can do for people in foreign countries are:
1) make USA economic practices a beacon for them to emulate;
2) volunteer to help educate & train them, and help them practice;
3) donate critical resources to them if you feel that's more productive than making your country something even more worth emulating.

Best thing you can do for YOUR country?  Don't slow down our relentless progress in "making a more perfect union."

Nirvana = having a fiat currency and knowing how to use it - and demonstrating that to other countries.

Meanwhile, here's the clueless BS of the week, below.


Exporter of the Year Award Nominations Now Being Accepted: Deadline is Sept. 30th   [Imagine that!  BS comes with deadlines!  Didn't know it could get stale.]

ThinkGlobal Inc. is seeking nominations for the 2013 USA Exporter of the Year awards.   [Note, their use of the word "think" here proves their misuse of the term.  "ThinkIndentured would be more appropriate."]

ThinkGlobal Inc. is the publisher of Commercial News USA, the official export promotion magazine of the U.S. Commerce Department. Commercial News USA is a catalog-style magazine distributed to a quarter million international buyers in 178 countries worldwide in print, and 25,000 buyers per month online.

Awards will be given to U.S. companies in all of the categories included in the magazine.

Winners in each industry will be chosen by the ThinkGlobal publishing team based on the total number of documented export deals completed, total percentage increase in sales, exports as a percentage of total sales, the company's commitment to exporting, the company's commitment to customer service, and the company's innovation and originality in marketing products or services.

To be eligible for the award, the nominee must be a company that is exporting from the United States. Companies may nominate themselves for the award.

There is no cost for applying for this award. Winners will be recognized in a special section in Commercial News USA. Plus, winners will have an unique opportunity to promote their products and services to international buyers in an online, streaming media, presentation.

Register Now for the Exporter of the Year Awards

The Committee to Re-Elect Supposedly Innocent Fraud

commentary by Roger Erickson

Ignorant fraud, no matter how you look at it.

PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I’m Paul Jay in Baltimore.

And now’s time for the Bill Black Financial and Fraud Report for this week. Bill now joins us. Bill is a professor, associate professor of economics and law at the University of Missouri–Kansas City, a white-collar criminologist, a former financial regulator, and author of the book The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.


JAY: So what have you got for us this week?

BLACK: Well, Lanny Breuer, who is head of the U.S. criminal division at the Justice Department, gave a speech to the New York bar—in other words, the primarily defense lawyers up there—in which he gave them a roadmap of how they should pitch him when they’re representing a large corporation and they don’t want him to indict. But he gave his audience a stern warning: he said that when they made this pitch about how they had to protect innocent workers from losing their jobs, if this—you know, the place was indicted, he said you won’t always be successful.

JAY: I’m sure they were heartbroken. So what induces him to do this?  ... (read & hear more at the link)

Friday, September 21, 2012

Bill Mitchell — Aggregate demand – Part 5 (redux)

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.
Please read this blog as a continuation of last week’s – Aggregate demand – Part 4 (redux) – which sought to consolidate the edits to date on this Chapter’s material.
Bill Mitchell — billy blog
Aggregate demand – Part 5 (redux)
Bill Mitchell

Cutting spending is not fiscal responsibility. It's fiscal irresponsibility!

A government can be said to be fiscally responsible when it taxes and spends at a level that sustains full output and employment. Doesn't matter what the arbitrary level of taxation, spending or deficits are; what matters is the outcome. Simply cutting spending for the sake of cutting spending is not fiscally responsible behavior of government, especially a currency issuer.

Maureen Tkacik — The radical right-wing roots of Occupy Wall Street

Nice historical article about Karl Hess, if you are into the history thing.

The radical right-wing roots of Occupy Wall Street
By Maureen Tkacik

Conflicted white working class voters

Some desires of white working class voters are compatible with GOP campaign promises and some not. Which will prevail is the question.

The Huffington Post
Working-Class Whites Want Higher Taxes On The Rich, Study Finds
Bonnie Kavoussi

Joe Weisenthal — What Ray Dalio Said About The Rise Of Hitler Is His Most Worrisome Observation Yet

But his [Dalio's] most worrisome observation was on something that few people really want to discuss, which is the connection between economic weakness and social unrest, and what happens historically when depressions drag.
Business Insider
What Ray Dalio Said About The Rise Of Hitler Is His Most Worrisome Observation Yet
Joe Weisenthal

Thursday, September 20, 2012

Adele M. Stan — Paul Ryan Called for Ending Social Security in Speech to Ayn Rand Fans

Ryan called Romney "inarticulate" for characterizing 47 percent of Americans as moochers. How would Ryan say it better? They're "collectivists."
Paul Ryan Called for Ending Social Security in Speech to Ayn Rand Fans
Adele M. Stan

Revealing. This really is a stealth campaign designed to fool the majority of voters about the hidden agenda of Romney and Ryan on behalf of the extreme rightwing. This is John Birch Society stuff. And Paul Ryan is the Koch candidate being groomed for the top office.

Brad DeLong on Mises and gold

Brad DeLong takes on Mises and the Austrian cohort over gold. (Longish but interesting if you are following this debate)

Grasping Reality With Both Hands
Paul Krugman Asks A Question: On The "Austrian" Hatred Of Fractional Reserve Banking, Paper Money, Etc. Weblogging
J. Bradley DeLong
(h/t Mark Thoma)

Wednesday, September 19, 2012

How Many Times Can You Repeat "Treasury did nothing"?

Barofsky Interview: Another Financial Crisis All But Inevitable

Can we launch a citizen's arrest of Geithner the crook? Or at least a class-action lawsuit?

Needed: A Hierarchy of Cultural Needs

Can Anyone Get Consumer Reports to Notice White Collar Crime?

Consumer Reports Urges Creating Federal Regulations for Arsenic Levels in Rice

Someone warn them that you can boil both frogs & the 99% in unregulated rice-cookers?

Look, I'm all for protecting consumers from arsenic in rice. Yet out of the millions of real concerns besetting US consumers, why on earth is there no statistically relevant HIERARCHY of needs? Maslow must be turning over in his grave. Why on Earth hasn't Consumer Reports noticed the primacy of white collar crime since at least 1990?

We need our own statement on A Hierarchy of Cultural Needs.

ps: That statement absolutely MUST NOT come from economists. It has to be a consensus from all the 1900 or so professions already recognized by the NAICS.  It's not just war and generals.  EVERY process is too important to be left to the presumed process owners.

USA Middle Class is NOT a Bottomless Pit to Loot

commentary by Roger Erickson

"Nearly 6 million Americans - most of them in the middle class - will face a tax penalty for not carrying medical coverage once President Barack Obama's health care overhaul law is fully enacted."

I knew there was a catch, but it's just sinking in. Just another tax, if we don't submit to the FIRE segment.

That sellout might be touted as an incentive to practice preventive health maintenance, but that excuse is a joke. If that were the real goal, provide incentives to drink less sodas, eat less crappy food, be less obese, and stop excessive practice of things we didn't excessively practice prior to at least 1970. The F500 lobby wouldn't like that any more than the FIRE industries. It's very profitable to systematically make American's unhealthy, then twice as profitable
to make heroically expensive efforts to repair the self-inflicted damage.

If an ounce of prevention is worth a pound of cure, they key fraud corollary is that a pound of cure is far more profitable to a few parasites, than is that ounce of prevention. It's all in the perspective, and situational awareness.

Meanwhile, the 1%, Upper Looting Class simply don't recognize that the USA is not a bottomless pit to loot. First we finally depleted the Grand Banks of cod, now we've depleted the US middle class of financial assets.

We could review the passenger pigeon & American Bison too. However the next targets are US middle class real assets, or what's left of them.

We finally got a moratorium to ONLY deplete whatever cod actually show up off the Grand Banks.

Can we at least suggest a moratorium to ONLY loot whatever middle class asset sticks it's head above the crowd - to get lopped off? That's not the end goal, but it has to at least be a start, for Pete's sake!

Illustrating All That's Wrong With Economics Education in the USA

commentary by Roger Erickson

And it is VERY wrong;

Sep 19, 2012 5:14:23 PM   I was a Political Science major before going to Nam. After my tour I finished my Masters in Economics. With all the bragadashery of how we defeated the evil empire and berating of China in other contexts we certainly are leaving ourselves open to retribution in the long run via our national debt and it being subsidized by foreign powers like China. Economists warn what could happen if [they] decide to dump the Treasury holdings or refuse to fund more. Our superpower status along with the hype is vulnerable to long term ambitions of these foreign powers who might be patiently plotting our demise as a superpower. The Chinese would say that "The tiger only pounces when it is ready not when the prey wants them to".

That was a comment at: Gates Slams Congress for 'Managerial Cowardice'

How can a person get a Masters in Economics, without knowing the difference between a FIAT-CURRENCY-ISSUER, and a fiat-currency-user? Where'd he get his degree, at the Institute for Gold-Standard Economics? Whatever they taught him has been out of date in the USA, and plain wrong, since 1933, despite the pretend of the Breton Woods inter-gov agreements from 1944-1973.

If anything, the Harvard-economics cronies or Wall St. "economists" are waiting until our electorate is dumbed down enough, before they decide to pounce on their own nose to spite their face.

Ryan Grim — Mitt Romney's Secret Fundraiser Remarks Put The Lie To Supply-Side Economics

Lying just beneath Mitt Romney's dismissal of nearly half the electorate at a high-dollar fundraiser in May is an admission not as immediately damaging, but perhaps more important in the long run. 
Romney told his donors back then that his campaign's political calculation assumes people who do not pay federal income taxes will not be interested in a candidate who proposes tax cuts. But that ignores the decades-long argument that the GOP has employed on behalf of tax cuts -- that wealth in the private sector will "trickle down"and spur economic growth, and therefore benefit everybody. If trickle-down economics is true, Romney should have no problem selling it to all the people who will supposedly benefit.
Unless he doesn't buy it either.
The Huffington Post
Mitt Romney's Secret Fundraiser Remarks Put The Lie To Supply-Side Economics
Ryan Grim

Ryan, many people on the right really do believe that the Democrats have managed to "privilege" the lazy with "welfare" in order to guantee their votes. They think that trickle down hasn't worked only because with liberal welfare the lazy won't work even when there are jobs with possible riches waiting if they "work hard enough." When the elderly and students are mentioned, they respond that that's not who they mean. Then, the red state statistics are rolled out, and they say that's not who they mean either.

Who do they mean then? This is at bottom a racially bigoted position that plays to the "white vote," which is the GOP constituency. It's about "putting people in their place."

States Try Fiscal Drag on Pot

Several western states are debating "how much tax money recreational marijuana laws could produce."

Weepin' Buddha on a recline! There may be solid reasons for states to legalize marijuana, but generating tax-revenue is NOT one of them. State taxes do not "produce" currency, they only redirect currency from private use to publicly targeted use. No net change in net financial assets, no net change in local incomes or population capabilities.

Look, the bottom line is mobilizing the capabilities of a local population. Why not institute a state tax that requires people to acquire "time-bank" hours? Better yet, allow people to pay some of their existing state taxes with those time-bank hours.   That way people could get together and propose useful projects where group A[i-j] could do something for members of group B[k-m], who would in turn provide a service that members of group A desired. That approach would actually "produce" a return on coordination, by encouraging people with otherwise idle or spare time to find locally useful things to do. Various forms of drug use by bored citizens might even decrease.

Instead, "pro-pot campaigners say it could prove a windfall for cash-strapped states with new taxes on pot and reduced criminal justice costs."

What part of sector flows don't these people understand? Unless out of state buyers flock in (redistributing currency from other states), all this will do is recycle existing currency assets in-state, and also remove additional aggregate demand, by increasing net taxes.

Their argument might be that significant pot-profits are smuggled out of state, and eventually to Wall St, but the variability, per state, of those assumptions are not even being accurately examined yet in this debate.

Spiraling down through a haze of smoke-tax, man! Like, whatever.

If any good comes from these efforts, it'll be entirely indirect, through reduced crime and other current intangibles.

On the plus side, if they stop spending so many resources prosecuting pot-smokers, maybe they can afford to ramp up prosecution of white-collar crime? If they instead simply spend less on in-state civic regulation, that decline in aggregate demand "spent into the economy" will tend to offset their imagined savings.

Can you play musical chairs while high on pot?

Could be comical.

Can We Transition From Hoarding Static Assets, To Hoarding of Coordination Capabilities?

commentary by Roger Erickson

How do people like this get tenure at the Princeton Economics department?

Beyond Our Means: Why America Spends While the World Saves

For Pete's sake!  With orthodoxy like this, who needs Luddites?

How do we further accelerate the transition from inefficient hoarding of static assets, to hoarding of coordination capabilities? Is another world war the only way to demonstrate the return on coordination ... once again? Are we still that dumb?  Given the transition to a fiat currency, what fool would persist in trying to hoard fiat?  ??  Does the concept of "use it or lose it" exist in economics?  Especially when applied to dynamic vs static value?

What part of dynamic, scalable "teamwork" in a social species, and among citizens of an organized nation-state does the Fed not understand? Which part of that does the typical orthodox economist also not understand?

How about we at least stage Rhyme of the Ancient Marriner Eccles as a play, in every highschool in America? I'd pay just to NOT have to see Music Man ever again, or Death of a Traveling Economist.

Repeated Loudly and Often Enough, a Self Deception Becomes Accepted Truth?

commentary by Roger Erickson

According to some commodity investment advisors, this is ...

How QE3 – Like QE1 and QE2 – Will Trigger Inflation.

Seems like no 2 people use the same, semantic definition for "inflation," but that word triggers the same fear in most, regardless of which definition is used. Let's call it inflated convergence.

I would bet $50 that there's a correlation between financial trades and the frequency of media mention of anything sounding remotely like "inflation."

Some psychology dept somewhere has likely done a test run with some local media outlets - sprinkling a variety of "be-, ce-, de-, fe-, ge- ... on to ze-flations" into ongoing business section articles. Maybe even "zen-flayshun," for those meditating on how to boycott self flagellation!

Failure of US Long Range Strategic Planning, National Economic Security, Public Law

If we are living in the solution rather than the problem, then why not look at a National Referendum to force ethical planning and transparency into corporate and government planning documents.  

Why not seek a referendum requiring all US organizations include a paragraph in their objectives, mission statements, and long range organizational plans that would address larger national failures that resulted in the sub-prime housing bubble, savings and loan crisis, 2008 financial crisis, Dot Com Crash, high unemployment, low taxes for high income earners, federal income tax rules that can't be understood by any one individual, court systems that are too expensive for common man on Main Street, and political and regulatory capture by those with the money to 'get in the game'.

Politics based on power is no longer acceptable.  And business or multinational business based on money or power is no longer acceptable or sustainable.  That means leaving money overseas off-shore till legislation is drafted for the US Congress - is no longer acceptable for those that pay payroll taxes automatically every payday.  Balancing power between people, the government, and corporations is a much better policy.

The main advantage of a National scheme or referendum for government and organizational ethics clauses is to make up for failure of the US Constitution and Federal Legislation.  We should adopt some national pride codified by public law that supports public discussion and transparency to keep our US Organizations on the right track.  The theory being that if we think right, can point to common goals and national concerns, then we will act 'right'.  We will address as a team or community the weakness in policy or actions.  Employees will raise discussions on their own to bring their organization in line with ethical objectives.  And it is very appropriate as ethics training for our young students and businessmen and businesswomen.  

I believe there is value looking at a kind of "reorganization" of government based on transparency, ethics, and opportunity for everyone.  I believe this kind of reorganization can be accomplished though goal setting and long range planning.  Of course the idea is to position our nation for the future and correct the failures of the past.

First I wanted to point out some problems with Strategic Planning, organizational missions and objectives. Maybe we can agree that a strategic plan by Henry Kissinger or Zbigniew Brezinski for the world based on an ethnocentric perspective is flawed and likely unethical. Perhaps we can even agree that strategic planning is a corrupting influence on the world based on the killing of non-christians and suppression of foreign governments by our own governments. 

I think a government or corporate executive can be easily understood as a human working on his mission to secure revenue, funding, profit, or value for his organization. Each of us may play roles during the work day as a corporate player, an ideologue, as a financial investor, as a person that provides service to his community, as a parent, as a friend, or as a moral citizen. Each human has many different motivations and interests.

So how do you fight the Long Range Strategic Plan for Goldman Sachs?

How do you stop a Long Range Strategic Plan by some faction of Big Businessmen, Big Multinationals, Big Petroleum Interests, World Bankers, or some evil doer?  Well you don't.  You regulate to discourage crime and fraud.  But if you can create a national imperative or national initiative to include ethical rules in all Strategic Planning it may accomplish very much in my opinion.  

In the Government they call this a "Reorganization". Clearly new rules of transparency (regulations) and new "Grand Goals", "National Goals", or "Sustainable Social Goals" would have to be adopted.

There is a precedence for this kind of legislation under public statutory law known as the social contract between a citizen and a state. The social contract defines the relationship between a state and an entity that owes allegiance to it according to wikipedia. Further, public law interacts with civil and human rights.

What is the weakness of my idea?  Well there is no way to know what government is doing. No one wants people sticking their nose into their business even government business. We have a federal "Freedom of Information Act of 1966" that has helped US Transparency and various states have passed their own version. So there is a conflict of interest between the corporate or government employee/manager/executive and letting citizens know the details of business operations. The point is large organizations by their nature do not want their operations publicly known, will resist transparency, and citizens will face years of work to get the full picture of government activities in order to demand that remedies or reparations be made through public planning documents. 

In summary this is my proposal: 

1) Insert National rules for mission statements and objective statements

2) Insert National rules for ethical behavior in goal statements

3) Mandate that US Legal Organizations Strategic Planning clearly state and addresses the community, environmental, financial interests of the government in unemployment, job preservation, and social safety nets that may be affected by job losses created by mergers and leveraged take-overs by hostile or unfriendly firms that may saddle the organization with huge debt

4) Make all US Corporations, Fountadtions, governments, and legal organizations incorporate mission, objectives, and goals that are ethical and transparent to the public and employees.

5) US Strategic Planning as practiced in the US is focused as it is on it's own goals is acting like a maverick, acting like a loner, acting to the exclusion of national identity and responsibility. US Organizations ARE Acting like an off-shore privateer, a pirate, or a disinterested party. 

6) There is nothing wrong with forcing corporations to serve the country if not the community by being transparent. I think we would expect the same of NGOs, Foundations, PACs, 501 (c)(4) organizations, 527 organizations (soft money), and any legal entity formed or incorporated in the USA.  US Legal entities must be better citizens or state economy participants.

Links for discussion of weakness in current US Strategic Planning: