Links 5/21/09

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  1. Richard Kline

    Nial Ferguson was once, and in the privacy of his own home perhaps remains still, an historian of considerable ability. Not that I bought all of his conclusions, but he knows how to do that work. —But he bought into Conservative Imperialism at the top of the market, and now he’s having the Devil’s own time getting out from under The Crash with his reputation intact. He should just fling a few shirts and some undershorts in an intellectual valise, and catch the next bus going anywhere like Posner, but no, he’s game for a fight. . . . The fool.

  2. Dan Duncan

    To Richard Kline and Yves:

    Did you even read Purcell’s report…the source upon which Delong based his post?

    Let’s take a moment to actually go to the source of Delong’s derivative cut and paste comments as Purcell—NOT Delong—describes the conference:

    “The Scot (Ferguson) landed the first blow. In the exaggerated cadence of a TV presenter, he chastised Krugman’s entire profession. ‘Psychological terms are very helpful when economics fails as a discipline, as it clearly has,’ he said, noting that a period of shock followed the initial collapse because economists were in denial about the financial system’s structural weaknesses.”

    {Yves, how many times would you estimate that you stated the same thing about the economics profession?}

    “Flooding the market with newly minted treasury bonds would force interest rates upwards, Ferguson claimed, in direct contradiction of monetary policy’s aim, thereby causing long term stagflation. ‘We’re going to get the 1970s for fear of the 1930s. That is exactly where the majority of people on this panel are steering this country,’ he concluded.”

    {Yves, how many times have you written that the US is making a SERIOUS mistake by treating the current situation like it’s the 1930s…? 20 times? 50 times?}

    “Then…Ferguson jumped in with both feet. Calling the government’s growth forecasts ‘crazily optimistic’ he predicted federal debt would soon reach 140% of GDP and that private savings could not possibly absorb it all. ‘I hate to teach arithmetic to a Nobel laureate but it doesn’t quite add up,’ he said. ‘At what point do people stop believing in the United States dollar as a reserve currency?'”

    Ferguson continues with:

    “There’s a fundamental problem here, which would be addressed if there were any commitment on the part of this administration to root and branch long run fiscal reform, an attempt to put the United States on a sound fiscal footing, but I see no sign of it at all. The idea that we make $100 million worth of savings, or whatever ridiculous number the President came up with the other day, testifies to the fundamental unseriousness that is the problem in Washington today.”

    {It’s as if Ferguson channeled Maureen Dowd and started plagiarizing Yves Smith}

    Finally Ferguson veers off the Naked Cap course with:

    “On the core subject of deficit spending, Ferguson could not find a single ally. ‘I feel depressed after what I’ve heard tonight,’ he said. ‘We are now contemplating a massive expansion of the state to substitute for the private sector. We’re gonna re-regulate the markets. We’re gonna print money, almost limitlessly. And then when we’re done with that, we’re going to raise taxes.’

    {Even though I’d imagine that you disagree with the last paragraph, it hardly merits a “WOW!”}

    “Ferguson repeated that only human enterprise, not government intervention, can create sustainable growth, and in one last defiant gesture, reveling in his role as pantomime villain, reached for the ultimate conservative put-down: ‘If you wanna try the Soviet model, fine…'”

    {Obviously, a silly response from Ferguson, engaging in Black and White fallacious thinking. But it’s ONLY this last sentence that Brad “Cut-N-Paste” chooses to focus on….}

    I suppose actually reading these sources might interfere with the rhetorical, but empty, flourishes of:

    “WOW! Ferguson is a Conservative Imperialist…The Fool.”

  3. selise

    the mp3 of the pen event (ferguson, krugman, soros, et al.) is available for download here:

    i listened to it a couple of weeks ago and thought that ferguson had either some great personal animosity towards krugman or way too much to drink. not so much because he was antagonistic, but because he didn’t help his own cause. i’ve heard ferguson speak at other events in last few months and in none of them was he so affected. for example, here’s a link to the npr debate “Who’s To Blame For The Financial Crisis?” which also includes ferguson and roubini:

  4. Independent Accountant

    Thanks for the James Kwak link. He’s got this knocked. If Uncle Sam wanted to increase vehicle fuel economy, about 30 years ago I came up with an excise tax that could do the job. Part of the problem with CAFE is that it uses average not, marginal concepts, levying the tax on fleets, not vehicles. What would I do?
    Assume a car has a 150,000 mile life. We have a “target” 30 mpg for all vehicles, even trucks, SUVs, no exemptions. Therefore on average a vehicle uses 5,000 gallons of gas over its life. A vehicle getting 25 mpg uses 6,000 gallons, it is assesed a $1,000 excise tax (6,000 – 5,000) x $1 at sale. A vehicle getting 40 mpg uses 3,750 gallons, it gets a $1,250 credit (3,750 – 5,000) x $1. This type of tax “tilts” the demand curve for various vehicles and will be hard to evade. If after say three years, Uncle Sam concludes average fuel economy is still too low, he can change the “multiplier” to say $2. A “gas hog” getting 8 mpg, would be assessed a $13,750 (18,750 – 5,000) x $1 tax.
    I look at CAFE and think it was designed by the same people who came up with the windfall profits tax.

  5. lineup32

    “The National Golf Foundation has identified more than 500 clubs at serious risk of closing, and a recent survey of club managers showed that twice as many members resigned during the past 12 months than during a typical year.”

    The entire golf industry has been in decline since the dot. come bust and this period of economic contraction should be the final chapter unless Uncle Ben creates another funding channel.
    Golf equip makers have been busy creating better clubs hoping to bring greater joy and more folks to the course which on closer viewing is another reason to challenge the belief that new technology creates jobs, well at least a few older men can make a longer tee shot.

  6. Peripheral Visionary

    On the DeLong/Ferguson piece, DeLong’s ostensible complaint was the comparison of Keynesianism with the Soviet system, which was a fair complaint (although the Keynes citation was, shall we say, a bit unfortunate in some of the wording.)

    But Ferguson’s real sin seems to have been questioning the entire Keynesian stimulus spending approach. You’ll forgive me for seeing DeLong’s and Krugman’s shocked reactions as being feigned, as they must be perfectly aware that this is far from the first criticism of Keynesianism since the start of this crisis. Not a day goes by that Mike Shedlock (among others) doesn’t take another shot at the Keynesians, and as much of a populist rabble-rouser as he is, Mish has consistently been correct.

    But to echo Dan’s points, Ferguson correctly pointed out that this downturn has exposed fundamental problems with the economic profession, as clearly delineated on this blog as elsewhere. There is a “circle the wagons” mentality whereby any criticism of the profession and of its accepted tenets (specifically Keynesianism) has been mightily resisted. Krugman’s and DeLong’s sneering responses to Ferguson’s (not always eloquent) criticisms fit squarely into a pattern of defensive behavior that resists even the suggestion that something might be wrong with the accepted orthodoxy.

  7. Anonymous Jones


    Who isn’t defensive, especially about their life’s work? Seriously.

    At the same time, there are ways to defend oneself that are more appropriate than others. Screaming at wild pitch, accusing everyone who disagrees with him of stupidity and idiocy, as Mish is wont to do, or accusing centrists of being Marxists, as Ferguson did, is rather unhelpful, wouldn’t you agree? It’s not just that it’s one small part of Ferguson’s speech, it’s the unexpected admission that seems to be a window into his soul. I’m not sure about that, but it sure seems that way.

    And I’m sorry, but the idea that Mish is a serious critic of Keynesian ideas is a farce. You think he has even read GT cover to cover? If he did, it certainly seems (to someone who did) that he didn’t understand it. Mish’s prose is littered with unsubstantiated attacks, uninformed explications of “libertarian” thought and almost religious fervor about taxes and the overpaid middle class. He tosses normative judgments into supposedly objective phrases like “tax themselves to death for the benefit of unions and other undeserving parties.” Yes, he literally used the word
    “undeserving.” I’m glad he feels qualified and informed enough to make this blanket judgment for all of us. His belief that taxation is always bad and reduced spending is always good and that unionized workers are always overpaid seems a little light on subtlety, don’t you think? His idea that there should be little regulation, except for the fact that the government should prevent people from associating in the form of a union and the fact that the government should prevent banks from engaging in fractional reserve banking seems to be a tad inconsistent, doesn’t it? It’s the age-old “get rid of all the government except for the part that I think will benefit me” argument that dooms one’s credibility on the subject (e.g., everyone who is more meritorious of course wants a meritocracy…the rest, I’m not so sure…and I don’t know how we’ll convince them to want it). These are hardly sustainable positions, and certainly not ones that should elicit such fierce anger and totally unsubstantiated epithets about everyone else’s intelligence.

    What’s crazy about this little comment of mine is that I *agree* with Mish on many of his attacks, especially how defined benefit government pensions are ticking time bombs given out in good times to those with political power. These plans are too dangerous (as a result of the accounting fallacies used to “estimate” their future burden) to be left in the hands of politicians (of course, we differ in that I would be in favor of raising taxes to fund higher government salaries, as long as the true burden were more transparent).

    Sure, he’s been right about deflation. A monkey flipping an inflation/deflation coin would have been right 50% of the time on that subject, too.

  8. lineup32

    The horror, economist’s having food fights and calling each other names! It’s terrible I can’t sleep and it gives me a headache, please stop. Can’t we all just get along!!

  9. Views By a

    Three cheers for Dan Duncan’s reply. DeLong apparently is too stupid not to realize that Ferguson isn’t a Republican.

    Another quote (which I don’t see above) from Ferguson is about the “fundamental unseriousness” of Washington. Surely a government in the process of spending twice what it takes in, is not serious.

    And in the Purcell report, we read: ‘Krugman devotes most of his columns in the New York Times to arguing that the administration is not spending enough. “The only thing that might drive up interest rates is that people might grow dubious about the solvency of governments,” he responded. “Ireland is being forced to raise taxes and cut spending because of fears about its solvency. The UK is fairly close to the edge because people are worried about the cost of financial bail-out. The United States is not there yet.” ‘

    So this is Krugman’s policy suggestion? To deficit-spend more and more so that it pushes the U.S. to that mythical place which is right before “the edge” but not quite over, as if this place can be designated exactly, or as if, actually there, a small perturbation in external events won’t push the U.S. over anyway. Surely it’s Krugman, rather than Ferguson, who has lost it – lost in his own contradictions (let’s spend more and more! but we have to be careful about the deficit!) without the least shame.


  10. DownSouth

    Ferguson is one of these guys who uses a history filter so that history is made to conform to his ideology.

    I began following him after his televsion debut on PBS last year:

    I knew then, when he expressed approval of Milton Friedman’s prescriptions for Chile back in the mid-70s, that I had profound ideological (and factual) disagreements with him. For a differnt history on the Chile affair than Ferguson’s, here’s an article by Greg Grandin:

    Then there was this interview, where Ferguson says:

    As long as the rest of the world continues to take that view, that it doesn’t mind piling up great mountains of American government debt, then the U.S. somehow walks away from this pileup relatively unscathed… If, however, foreigners suddenly take the view that enough is enough, and the profligacy of Uncle Sam will no longer be tolerated, then we will see something very ugly, which is a dollar rout, higer interest rates… And then we will discover the real meaning of financial crisis. Let’s hope it doesn’t happen.~

    Well yes, I suppose that's true. But it never seems to cross Ferguson's mind that the endless accumulation of debt is a plan with no future, or at least with no good future, and it's not a question of if foreingers will tire of financing U.S. profligacy, but when.

    But the quote also hints at Ferguson’s anti-goverment ideology. For notice that he only mentions the piling up of “government debt.” I suppose that any mention of private debt, in the neoliberal, neocon netherworld in which Ferguson resides, is taboo.

    We see this anti-government bias manifest itself more clearly in an interview Fergunson gave before he delivered a presentation to public-policy think tank, Canada 2020, in February:

    In the Ascent of Money, I argue that you can’t really have a bubble if you don’t have a monetary authority that has been excessively generous. From John Law in 1719 to Alan Greenspan in the late 90s, there’s always a banker, there’s always a central banker making credit too readily available. The second thing is, though, that regulation may not prevent that.”~

    Again, what is missisng from Ferguson’s ideologically blinkered rewrite of history is any acknowledgment of the private, “shadow banking system,” which came to dwarf the size of the traditional banking system. It had infinitely much more to do with “making credit too available” than did the traditional banking system, operating as it did completely outside the purview of the regulatory framework (In the last week there have been a couple of posts here on NC talking about this phenomenon.) And yet, Ferguson manages to lay all the blame at the feet of the government, the “monetary authority.” Then he concludes that “regulation may not prevent that.” Again, this is completely consistent with his anti-government ideology–the government caused this problem, but the government could not have prevented it. And if we buy into Ferguson’s historical revsionism, then the solution of course is clear: get rid of government. It is also a demonstation of the level of mind-numbing cognitive dissonance Ferguson is capable of in service to his libertarian, lassez-faire ideology. For it is only through regulation of the shadow banking system that the government could have prevented the bubble.

    But this is the quote from the interview that really demonstrates how out-to-lunch Ferguson is:

    The truth about the crisis is that it is in large measure psychological. We’re not dealing here with mathematics.~

    I think Yves calls this “Tinker Bell” economics–just click your heels and “make a wish” and all your problems will go away.

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