Apologies for the absence of my own posts. I even had to turn down BBC Radio (one of their biggest shows). This is a dreadful week for me because we have to get a filing in on the CalPERS litigation. Even though I have a very able team getting a handle on what they have and haven’t provided, the data is in lousy shape. For instance, numerous variant renderings of the same fund name means that even simple exercises like trying to tally the number of fund names are not simple. As a result, I’m having to do a lot of coordination and supervision to make sure the process and results are sound. I will hopefully be closer to normal programming by Friday AM.
If you are in New York City, be sure to drop by our meetup this Friday, from 5:00 to 8:00 PM at Sláinte at 304 Bowery (map with nearby train stops here). Be there or be square!
Keep Your Kitten Away From Your Laptop With This Handy Cat Desk Time. Wouldn’t work with my productivity-draining cat. He thinks my job is to pet him all the time.
Women now doing lots of pointless bloke crap Daily Mash
Law School Trustee’s Company Chills Critical Speech With Subpoena For Students’ Personal Emails TechDirt
The Change Within: The Obstacles We Face Are Not Just External CommonDreams (Carol B)
Cost of Drugs Depends on Where You Live Patient Safety Blog
How Apple’s billion dollar sapphire bet will pay off Network World
Activist urges ‘fix’ for Silicon Valley Financial Times
Einhorn shorts the tech bubble MacroBusiness
Sherpas Move to Shut Everest in Labor Fight New York Times
Ethiopia: New railway project to link Addis Ababa with Djibouti Africa Research. Lambert: “Another Chinese train project.”
China Manufacturing Output and New Orders Contract Once Again Michael Shedlock
Tier 1 Chinese cities begin property discounting MacroBusiness
Crunch time looms for Thailand’s political crisis Financial Times
‘Cheese diplomacy’ fails: French experts snub North Korean officials Agence Frane-Presse (furzy mouse)
Deflation Is About to Wallop Europe Bloomberg
Greek Politics 4 Years After The Financial Crisis Real News Network
Ukraine: From Crisis to Catastrophe Counterpunch (Carol B)
Is Ukraine on a Long Road to Rupture? Council for Foreign Relations
Ukraine May Resume Push in East as Russian Deal Crumples Bloomberg
Kiev accuses separatists of torture Financial Times
US threatens more Russia sanctions BBC
Threat Of Tough Western Sanctions On Russia Unnerves U.S., EU Energy Firms OilPrice
Big Brother is Watching You Watch
They Are Watching You, The National Security State and the U.S.-Mexican Border TomDispatch
Making Sure NSA Reform Isn’t Caught in the Gears of the DC Machine EFF
Phoniness, calculation, and palatable hypocrisy Dan Fejes
Noam Chomsky helps explain the ‘Fox Effect’ in upcoming film ‘Brainwashing of my Dad’ Raw Story
G.M. Seeks to Fend Off Lawsuits Over Switch New York Times
Desperate Mission: Jeb Bush Asked Mexican Billionaire Carlos Slim To Save Lehman Brothers Forbes
New York Ramps Up Ocwen Probe Wall Street Journal
Peterson/CBO Beat for Austerity Goes On! Joe Firestone, New Economic Perspectives
A post-crash manifesto to rebuild economics Financial Times
The Future of the Captured State Simon Johnson, Project Syndicate
A more equal society will not hinder growth Martin Wolf, Financial Times
Sixteen for ’16 – Number 9: A Living Minimum Wage Truthout
Moving in with parents becomes more common for the middle-aged Los Angeles Times (furzy mouse)
If Larry Summers were worried about Thomas Piketty, he’d be awake Lambert
The American Middle Class Is No Longer the World’s Richest New York Times. Today’s must read.
Kiev accuses separatists of torture? Don’t we mean enhanced interrogation?
Our “ally” in Kiev practices enhanced interrogation. The separatist terrorists in east Ukraine practice torture.
I’ll be there.
I don’t know why today’s must-read is a must-read. The article is quite shallow and gives few reasons behind the middle-class decline, instead it merely reiterates numbers and trends that everyone here already knows about. It begins by placing the blame on fewer college degrees being earned compared to other countries (!!!???). Blame is placed on “inequality,” but nothing substantive. They totally ignored the #1 cause of middle-class decline: Offshoring of manufacturing and overall theft of American workers’ productivity gains.
I’m no expert, but II felt the article was really weak. They certainly played up the education angle– as if that is the at the root of stagnating incomes! Also, Britain and Canada’s income growth might look less impressive if you look at household debt. Canada’s trade deficit has been growing too– especially when you factor in that energy exports have become more important.
They shaped the narrative to fit their neoliberal framework.
“Educational attainment.” OK.
Americans between the ages of 55 and 65 have literacy, numeracy and technology skills that are above average relative to 55- to 65-year-olds in rest of the industrialized world…
So how can it be that American 55- to 65-year-olds, a large and growing American demographic, are more likely to die in a terrorist attack than to find a good job these days?
And how about fleshing this statement out just a little:
Finally, governments in Canada and Western Europe take more aggressive steps to raise the take-home pay of low- and middle-income households by redistributing income.
Point taken, but I still don’t think this looks good for Canada: http://www.ritholtz.com/blog/2013/10/household-debt-to-income-ratio-usa-vs-canada/
I see this as the reverse. They can’t get past the headline admission: the US is not longer leading. And who is ahead of them? Pinko Canada is mentioned first.
This is the NYT being forced to ‘fess up the US is no longer exceptional, thanks to extreme income inequality. This admission is more important than the strength of the article as an article.
Ha[!!!]… on Fuaxnewbs last night they had a petit mal over the NYT article.
Between cortex sphincter spasms they managed to Bernays the messaging too.
” – WE – were supposed to unleash the Der Ubermensch Entrepreneurs a la Siddhartha – Herman Hesse, but, the evil red ribbon collectivists with their rules [clean air, water, land, fiduciary duty, rule of law, et al] cock blocked the most powerful force in the Universe”. Lamentum~~~
Skippy…. its like watching a ideological wax museum slowly lose its air condition as the outside ambient temp keeps hitting record highs, all whilst the janitors start cannibalizing each other over who screwed with the mental thermostat to much.
PS. Have fun on Friday, but yeah, a short vid would be nice [lol] tho’ an audio clip will do.
“#1 cause of middle-class decline: Offshoring of manufacturing and overall theft of American workers’ productivity gains.”
Add to that, as Elisabeth Warren documents, the fact that the middle class is having to fork over more and more of a stagnating or falling income to increasing taxes, insurance, interest, health care, education.
This is why I am against all of the talk about increasing minimum wage, living wage, redistribution, etc. None of it will do any good unless we kill off all of the usury and extortion that saturates every aspect of society.
I ment to add this link;
“Distinguished law scholar Elizabeth Warren teaches contract law, bankruptcy, and commercial law at Harvard Law School. She is an outspoken critic of America’s credit economy, which she has linked to the continuing rise in bankruptcy among the middle-class. Series:”
And how do we do that? How do we create a moral society when most people don’t have any interest in either morality or society except rhetorically?
We can’t do more than promote justice in all our words and deeds. I must say I was heartened by all the genuine goodness I witnessed among those I worked with in the Rockaways in the aftermath of Hurricane Sandy!
Indeed, disasters bring out the best in most people–but after it’s over back to the work of the same ole same ole.
Build coalitions with the folks on the right! Think outside the box!
This is easy folks!
There are a lot of people on the right (not the silk tie set) but the rank & file who **HATE** buying imports more than anything. Google country singer Toby Keith and his song “Made in America.” The $500 billion a year trade deficit is destroying the country; reindustrialize and you’ve gone a long way to fixing the budget problems both national and in the pockets of individual Americans. There will finally be demand for working class labor and the chance of rebuilding the middle class.
Think outside the box. The left-right division on gay rights, abortion etc. is mostly geared toward protecting the top 1% “globalization” agenda. We need to make a temporary alliance with patriots on the right to save the economy before we are stuck at the level of Malawi forever, after which there definitely won’t be any progress on gay rights or women’s pay or whatever else you may be concerned with.
Seek out Rick Santorum, Ross Perot, Donald Trump and the anti-import right wing populists as temporary alliance partners. Run a Warren-Santorum “American patriots” ticket in 2016, and make the election about globalization and talk about nothing else. Nothing. However much you may dislike Santorum, Pat Buchanan or people like him, they are necessary allies; otherwise the 1% globalization agenda will be complete and the US will really have absolutely nothing.
Unless we reindustrialize we’ll be Malawi and we’ll have to worry mostly about mass starvation.
You say think outside of the box and then you suggest an alliance with money grubbing whores like Donald Trump, Rick Santorum, and Pat Buchanan, the worst of the inside of the box players? Pleassssse!
I’ve suggested that approach many times and the politically correct crowd start howling. Politics is about listening, negotiating, making deals and playing realpolitik. There was an attempt by Ron Paul people to take part in Occupy but that alliance never came to much. Had more activists agreed to put cultural issues aside an anti-Wall Street alliance could have been formed. Few people know that the current Tea Party was formed in reaction to the Wall Street bailout, at least in part.
Portions of the tea party right used to be the union left.
The original call to #OccupyWallStreet, put forward on July 13, 2011, explicitly sought something that “all Americans, right and left, yearn for and can stand behind.” In part the idea was to find a way to “[force o]ur government…to choose publicly between the will of the people and the lucre of the corporations.” What was hoped for was “the beginning of a whole new social dynamic in America, a step beyond the Tea Party movement, where, instead of being caught helpless by the current power structure, we the people start getting what we want.”
About three weeks later, David Graeber and his friends strangled that baby in the cradle:
“Adbusters’ idea had been that we focus on ‘one key demand.’ This was a brilliant idea from a marketing perspective, but from an organizing perspective, it made no sense at all. We put that one aside almost immediately… We quickly decided that what we really wanted to do was something like had already been accomplished in Athens, Barcelona, or Madrid: occupy a public space to create a New York General Assembly, a body that could act as a model of genuine, direct democracy to contrapose to the corrupt charade presented to us as ‘democracy’ by the US government. The Wall Street action would be a stepping-stone.”
You might be surprised how much interest the average person has in those things. It has taken well over 50 years of neoliberalism, Ayn Rand-influenced propaganda, divisive politics, and incitement to class warfare to beat it out of Americans, and even that has only partially succeeded.
Almost every non-American I know who has travelled in America and dealt with Americans has been surprised at how nice they are (those that only know America from its foreign policy were usually expecting the opposite). My theory is that most Americans have a repressed desire to be part of a healthy, well-functioning society where you care about others and are cared for in turn. They have been taught that this is a shameful, socialist, and un-American viewpoint, so they would deny it if you asked, and they don’t base their vote on it. But you can see it coming out in a lot of subtle ways, like the way they treat guests.
I can’t agree more.
“This is why I am against all of the talk about increasing minimum wage, living wage, redistribution, etc. None of it will do any good unless we kill off all of the usury and extortion that saturates every aspect of society.”
Bingo!!!!! The problem isn’t wages – the problem is expenses. If houses weren’t being held off the market (to benefit the banks), house prices and rents wouldn’t be so stunningly high, and present wages would go much further. If people weren’t sold/fed garbage food that makes them sick, courtesy of subsidized agribusiness, present wages would go much further. And on and on.
You can raise the minimum wage as much as you want, but if the corruption and government and corporate grabbing and extortion continue, it won’t help at all. There is a Depression era saying that “It’s not what you make (earn), it’s what you save.” People could live on small incomes easily and happily in a system that wasn’t so sick.
It’s the NY Times. It’s telling you how the 1% view the plight of the middle class which is why offshoring makes no appearance.
And the big failure is that the US is not #1 in terms of median income any more. Canada is. But that still may not make it the best place to live for everyone. The best place with the most shared prosperity has probably never been #1. I looked at post transfer gini coefficients of OECD states on wikipedia. Of course Scandinavian states were the lowest, but I also noticed it was more off the radar states such as Slovenia and the Czech and Slovak Republics that had gini coefficients that decreased in the last decade. I wonder why that is?
Chasing the 1% American dream is costly – buy on credit, pay with work, work more hours, to buy more on credit, wash, rinse, repeat. I don’t know how you turn the ship.
This inequality you speak of is also due to the fact that capital enjoys a tax advantage in this country relative to labor. It is no mystery that people want to use capital rather than labor to make profits. It is no mystery that wages keep getting compressed, since there is a 3-5% disadvantage at the margin for labor. We can reverse this trend if we would just treat capital gains as ordinary income, just like wages. Remove the tax advantage and growth will return to the real economy, the place where labor is on equal footing with capital, then the economy will rectify itself over time.
RE: If Larry Summers were worried about Thomas Piketty, he’d be awake Lambert
How many more embarrassing pics like this have to be posted of Summers before he learns to eat some protein with his empty, insulin-spiking carbs?
The words “doddering old fool” come to mind.
Re: The Change Within
Naomi Klein presents the basic argument that is the central issue of our time, i.e., why we can’t deal with the greatest collective threat human beings have ever faced. And let me qualify here–I’m not merely talking about climate change. Just because 97% of scientists who publish in professional journals agree that this climate crisis in largely man-made doesn’t mean it’s true. It’s possible they’re wrong but, if you just look at the odds and have a reasonable grasp of how biological systems work (the Earth is a bio-system) and the physical nature of greenhouse gases you certainly have to figure the chance these scientists are right is well over 50% and certainly isn’t 0% as many “deniers” I’ve read online seem to believe. Yet, the media and our political and community leaders all over the world don’t seem to think this is much of a problem. Climate change is likely, in my view, to cause catastrophe because I know, as Klein does, that problems in many ecosystems are showing up already–but since most people are completely uninterested in natural systems either observing them or reading about them these pass us by largely unnoticed. But these problems of the opposition between living systems and cultural systems are still a secondary problem–the main problem is that, structurally, the human community is unable to act.
The most central human trait we have is that we are hard-wired for connection. Individualism/narcissism that is the chief feature of modern consumer-culture is a perversion that is ugly and sinister. We are like addicts who keep injecting drugs in our system despite the destruction of infections, or hepatitis or AIDS, or the destruction of our relationships and families. This is who we are at this point in history.
Sadly, though we could change, there is no sign that we will change. Abuse of the Earth is central to our current fossil-fueled based system and people seem to be prepared to live and die by that system. We have to face the fact that this is what our fellow humans have decided and there appears to be nothing we can do about it. Most people have heard about climate-change, large numbers reject it out of hand, most ignore the issue. I’ve often made the comment here that there is little we can do other than witness and make our feelings known. We could, theoretically, bind ourselves together and take common action but few, even those who comment here have any interest in that because coming together requires trust, faith, courage and we are enculturated towards the opposite of those virtues even those of us who are dissidents–and isn’t that tragic? The path is clear, in my view, but we can’t take steps to do much more than complain and shake our fists at Capitalism that is steaming happily and triumphantly towards catastrophe.
We should bless the sun and sky, thank the seas and work with the ground beneath us.
For everyone who complains about overpopulation, remember there is a vibrant industrial concern which will, payment in advance, let you depopulate your own sour self, along with your nearest and dearest .
All I ask is that you leave me out of you’re narcissistic dealth cult.
You are too quick to blame the victim. Oil and gas companies have made a huge effort to influence policy and people’s perceptions.
“We” means the whole sytem including each of us who live in the U.S. As you know, I believe citizens are, in part, to blame not just the oligarchs. If the citizens had not been weak, divided and uninterested in looking at the facts they bear some responsibility just like I do for my part.
So should we blame the slaves in the 1800s for not rebelling against the slave owners?
I have always had this problem with blaming the powerless for just not standing up and accepting their responsibility for this whole mess.
That’s absurd–think about it. The average American is far from powerless.
Exceptionalism is some strong monkey goo i.e. –
“Noam Chomsky helps explain the ‘Fox Effect’ in upcoming film ‘Brainwashing of my Dad’ Raw Story” – link will unpack that a bit better.
skippy… or are some still confused as to why many people think gold is a store of value still – the “sweat of gawds” will liberate me!
President Hope and Change is in Tokyo to push plutocracy.
We’ll see whose lap he throws up on.
I like that antidote.
“Sure is hot out here, isn’t it, old chap. Say, would you mind fetching my rife for me?”
Same here! :)
Lesson Learned Report: Reading just one more page of Game of Thrones, when you are suppose to be hunting Lions, can get you into trouble….
Says the lion, “could you please pass the Grey Poupon…before I eat you.”
Re: Pointless bloke crap
Guys are now taking up quilting as well. Cutting fabric into small geometric shapes and stitching them back together again.
Quilting takes otherwise unusable clothes with holes or stains and turns them into something that will get another 20-40 years use. Why do you hate thriftiness? If we continue our descent into third world type conditions for most of the country, I suspect eventually you’ll start to see the “point” in learning to produce useful goods out of your home.
Of course. The piece was intended to make light of guys’ similar instinct to build and repair in the mechanical realm.
Model train enthusiasts are the last, best hope of humanity. :P
What’s the carbon footprint for this decadence?
I trust you at least put it to useful work like transporting cocktails to guests
You see decadence. Those on the long-descent path see the practice of miniature-scale mechanical fabrication and application of early industrial automation techniques, at household scale.
this is to address the bloomberg piece of deflation in Europe
Deflation and Depression: Is There an Empirical Link? from federal reserve
by docd about 1 hour ago
Deflation and Depression:
Is There an Empirical Link?
Federal Reserve Bank of Minneapolis
Deflation and Depression:
Is There an Empirical Link?
University of California, Los Angeles
and Federal Reserve Bank of Minneapolis
Federal Reserve Bank of Minneapolis
and University of Minnesota
Are deflation and depression empirically linked? No, concludes a broad historical study of inflation and real
output growth rates. Deflation and depression do seem to have been linked during the 1930s. But in the rest
of the data for 17 countries and more than 100 years, there is virtually no evidence of such a link.
So who/where do we write to to notify NYU that we oppose this oligarchy protection exercise?
Great catch for Tomdispatch, that offhand mention of ‘internal dissent’ as a demand driver for the homeland security procurement market. Yet people continue to pretend this is a democracy. They can’t help ruminating about the rigged vote that designates a figurehead as president.
Freedom of expression is just a subsidiary target of the homeland security Cheka. Their mission is to carry out the regime’s highest priority and core vital interest: control of climate-related transhumance, international and domestic. One of these days there’ll be a Snowden to disclose the SAP and SCI of it.
For all the synthetic skepticism on the internet, the deep state knows what global warming means. They are preparing to lock down desperate populations at home and abroad. They’re going to cull us. Depending on when it starts they may cull 95% of the herd. Much of the surviving 5% will be guard labor. A US-Russia thermonuclear war gets you only one-fifth of the way there. Managed genocide.
The deep state is deciding deciding now whether you’re one of the lucky 5%. And you think they give a shit what you think? You’re a English cow in the foot-and-mouth outbreak.
I found the comments to the weak tea NYT article more interesting than the article itself. Here’s a typical one from reader hen3ry:
“We have experienced a declining standard of living, seen our values derided, watched as Congress fights over small sums of money that could help us while funding wars, helping large corporations avoid taxes, and then shrug their shoulders or proclaim us mooches. I think I can write for many here when I say that I’ve worked hard all my work life. I’ve paid my bills even when unemployed. I’ve lived below my means and I have nothing to show for paying my taxes, getting an education, and working hard. In other words, we’ve been had by our elected officials in their zeal to advance the causes of their large donors. We can and probably should elect new people to Congress and send a message that the actions taken by our elected officials to keep their cushy positions are unacceptable to us.”
This reads to me like the first, hesitant, move of a thoroughly propagandized middle American to maybe, if things don’t get better soon, stop drinking the neoliberal kool-aid and begin to become conscious of the real world beyond the television set. We can only hope!!
‘We can and probably should elect new people to Congress.’
Exactly what the oligarchy are counting on, in our managed democracy. May I please have another glass of that delicious Depublicrat Kool-Aid?
Jim — Have a gander at this book. Fiction, or prediction for future action?
Or go to Amazon and search Jess + Public Enemies
Thanks for the book reco. Now let’s sneak it into the Core Curriculum!
Strongly worded statements. One hopes hen3ry means a new variety of person entirely, rather than another branch of flexian.
Wasn’t there a honey badger party or something someone tried to pull together here a while back?
it was the skunk party (raising a stink about politics). Anyone see the PBS show about honey badgers?
Well I guess one works to change the society they have and not the society they wish they had like Rumsfield says. But could you get more milquetoast?
Very middle class indeed – still superior to all those without “an education” (who no doubt deserve to be too poor to meet their basic needs and/or unemployed). Superior to those who find themselves utterly unable to pay their bills (or heaven forbid anyone who would join a debt resistance movement like OWS’s Strike Debt) Superior to those who they imagine don’t work hard (even though one’s job market fate has minimal to do with that) or value something in life other the blind work ethic of largely alienating work. Superior to those who don’t live below their means (but what if their means don’t allow it? but what if they use their money to help other people instead?). And shocked, shocked to be stung by the scorpion when one was so obedient as to even adopt it’s value system.
But one works to change the society one has and there’s plenty for a centrist to be upset about (the money, the gobs of money in politics, the never ending corruption it breeds)
That’s me in the corner, that’s me in the spotlight, losing my religion …
‘The data is in lousy shape. For instance, numerous variant renderings of the same fund name means that even simple exercises like trying to tally the number of fund names are not simple.’
I feel for you. Just finished several days of beating into shape a Compustat database of S&P 100 members since 1989. Trouble is, in the case of mergers and acquisitions, Compustat ‘thoughtfully’ replaced the old names and ticker symbols with those of the successor company. In the most egregious example, a long-gone tech company named Datapoint is listed by Compustat as ‘Cattlesale,’ an OTC pink sheet stock that operates out of mailbox in San Antonio. DOH!
Carry on, it’s worth it. If you find Calpers’ data confusing and unmanageable, then I can assure you … SO DO THEY!
America’s Middle Class No Longer the World’s Richest.
Yesterday, Bloomberg had responded with America’s Middle Class Still The Worlds’ Richest.
What we are asked to focus on is how American’s middle class does vs., say, Canada’s middle class.
What we are being diverted away from is how America’s middle class fares versus America’s 0.01%.
“Let them fight, with envy and jealousy, among themselves.”
The cognitive dissonance in the article is jarring.
They suggest that most American families are paying a steep price for high and rising income inequality.
What does that even mean? A steep price? So if the price was lower, it might be a bargain? Are they saying that rising inequality is basically a good thing, but with some undesirable consequences that need to be mitigated? Whose viewpoint is the author representing here?
Although economic growth in the United States continues to be as strong as in many other countries, or stronger, a small percentage of American households is fully benefiting from it.
Fully benefiting? The cited studies and numerous other metrics suggest that things have gone backwards for the 99.9% in America over the study period (35 years). That looks a lot to me like ‘benefit’ outside the 0.1% is nonexistent. It also raises the question: if economic growth doesn’t translate into better lives for ordinary Americans, what good is it?
A better article would look at all the above, conclude that the popular success metrics were flawed, and then start delving into why they are flawed and how they were chosen in the first place. Here’s a question to begin with: how is it that in a nominal democracy, a group representing almost the entirety of the voting population can become so thoroughly disenfranchised and feel so powerless to do anything about it?
Regarding “Ethiopia: New railway project to link Addis Ababa with Djibouti”
I’m not sure why the story uses a pix of a sleek passenger train. The real intent behind the Chinese building this rail system probably has more to do with the massive African land grab the Chinese are undertaking for agricultural purposes – to cultivate food for consumption in China, not for the indigenous people of Africa. Therefore, the Chinese need a way to haul crop harvests to the ports of Djibouti and from there, to China. The railway’s purpose is likely for freight, not passenger, use.
From about 5 days ago – One fifth Chinese farm land polluted.
Same in Laos (-> Thailand).
Moving back in with parents article
I suppose they’re being sympathetic, but the language is so creepy:
“Driven by economic necessity — Rohr has been chronically unemployed and her husband lost his job last year — she moved her family back home with her 77-year-old mother.”
Unemployment is not a congenital defect or a disease.
And since when has taking care of grandma in her declining years been a bad thing? Until very recent times, historically, extended family households were the norm, not an outlier. The fact of the reintegration of family households isn’t the important thing here. The reasons for the theft of wealth from “working” families by the rentier class are.
Reader Liam pointed yesterday towards some links to videos burried in the comments on the FT. For anyone who did not have access to those, here they are:
“German TV program with English subtitles – Hotel Ukrayna – the headquarters of the protesters –being the base of the shootings”
https://www.youtube.com/watch?v=bqnhJVx5EJw “a live video showing unarmed protesters being shot at from the back”
Martin Wolf – More equality will not hinder growth.
But, equality or a more equal society is the goal.
Growth, a Pavlovian word, is not the goal, by itself or not by itself.
And in fact, a more equal, just and happy world is possible with less growth.
I am sorry to have to demote economics and economists who are experts on ‘growth’ like this. But it’s time we promote English/Humanities majors.
Wolf’s column sheds some light on a problem which has been puzzling me; why we should
ever believe that there might be a tradeoff (inverse relationship) between equality and growth. I understand that for many people such a tradeoff sounds plausible, but I don’t understand why.
Wolf explains that “Inequality might in fact promote growth because it reflects high incentives for innovation and entrepreneurship. It might mean higher savings and so higher investment, since richer people may well save a higher fraction of their income.” On redistribution, he says: “…it is easy to see why redistributive policies might hurt growth. The economic costs of taxes rise disproportionately, as they reach very high levels.”
These are suggestions redolent of introductory economics courses. They are the sort of thing young students are taught very early on, and which they have to regurgitate convincingly if they are going to get good marks. But they aren’t the sort of ideas non-economists might have, nor, importantly, are they ideas common to all advanced students or leading economists. In talking about Prof. Sargent’s 2007 speech in which Sargent espouses the tradeoff between equality and growth as a “principle”, Prof Krugman brings out ideas like “the zero lower bound”, “debt deflation” and the “multiplier”. So at the top level, that tradeoff isn’t a “principle”, and there are good arguments against it. But no introductory economics course would cover that ground.
If the plausibility of the equality/growth “tradeoff” relies on half-remembered introductory economics we are in a bad way. Very many people nowadays have “done” introductory economics courses, but very few have progressed to the point of “zero lower bound”, “debt deflation” and “multipliers”. It looks as though introductory economics is a pretty dubious exercise, consisting of material which many of the leading practitioners don’t in fact believe themselves.
Prof. Krugman’s critique of Sargent’s speech is spread over two blog posts:
Randy Wray (LRW) was asked what he would do if he was the head of the Fed..
TS: If you could be Fed Chairman what would your monetary policy look like right now?
LRW: I would dismiss 99.9% of all people who work at the Fed. I would have a robot that was programmed to keep the overnight rate at 50% of 1%, at 50 basis points, half of a percent interest. I [would] charge on loans of reserves by the Fed and pay 25 basis points on reserves held at the Fed.
I would move all the supervising and regulating out of the Fed, because the Fed for the past three decades has shown no interest whatsoever in regulating and supervising financial institutions so we need to take regulating from the Fed and put it in the FDC and OCC at the Treasury.
The Fed can’t do any of the things that most pundits believe that it can do. It cannot fine-tune the economy, it cannot hit money targets, and it cannot hit inflation targets. Some people are proposing that it target nominal GDP, which is ridiculous, it can’t hit a target GDP. There is one thing the Fed can do. It can hit the overnight rate, that’s it, and monkeying around with that rate has been shown, without any question at all, as being not useful at all for influencing the economy in the direction that we want.
TS: I know a lot of Austrian economists are for no central banking. Do you oppose that or what do you think would happen if you got rid of the Fed or a central bank?
LRW: So I said we are going to program this robot, what we need then is the Fed has to be a lender of last resort. So you need a team of people who can provide reserves, which is done through keystrokes. You need people with an index finger so they can keystroke reserves into bank balance sheets. You need a lender of last resort to stop bank runs. This is not nuclear physics. This is simple. We know how to do it, we have known how to do it since the 19th century. The central bank lends without limit at a penalty rate against good assets and you stop a bank run by doing that. We still need to do that, and the other thing the Fed has to do is clear accounts.
The Fed operates the most important clearing mechanism so banks have to clear with each other and with the government. We still need to do that. The combination of these policies insures bank liabilities always clear at par, that is a one-dollar deposit at Bank of America equals a one-dollar deposit at Chase Manhattan. The Fed ensures that by providing reserves, the clearing mechanism and by being a lender of last resort when necessary. What the Austrians either don’t understand or think is not important is that without a central bank to do this, bank liabilities do not clear at par. We tried doing without a central bank in the US. We were the last major country to develop a central bank. We tried operating a banking system without a central bank and it was a disaster. You never knew how much a bank check would be worth. You didn’t have par clearing but you had bank runs. We had the worse banking crises because we didn’t have a central bank. I obviously am very critical of the Fed, but you have to have a central bank. We just don’t need a central bank to do what people think it is supposed to do – fight inflation for example; we don’t need a central bank to do that because they cannot.
I absolutely have to have one of these suits for my next visit to the bank.
a little TPP coverage: http://www.huffingtonpost.com/lori-wallach/obamas-asia-trip-tpp-make-_b_5201529.html
and, (unrelated), https://www.jacobinmagazine.com/2014/04/the-trial-of-cecily-mcmillan/
If this is part of Apple’s apparent effort toward vertical integration, perhaps there is an ulterior motive of owning a cheap pathway to silicon-on-sapphire wafer production (yields faster transistors at lower power), and the display cover talk is just a head fake.
The NYTimes and the US Government are giving me rather unpleasant flashbacks to 2002, when the Times in the persons of Judith Miller and Michael Gordon were the main outlet for trumped up “evidence” of Iraqi WMDs, fed to them directly by Cheney’s office and uncritically published by the Times as a way to build-up support for the Iraq War. Judith Miller may be gone but Gordon is still in the business of publishing US Government propaganda and calling it “news” or even worse, “investigative journalism”. Those photos published by the Times which allegedly proved that Russian Special Forces are operational in Eastern Ukraine? Turns out it is all bunk:
“In publishing the false allegations, the Times worked closely with the US government, which received the photos from the unelected pro-US regime in Kiev and “endorsed” them before passing them on. At a press briefing, however, US State Department spokeswoman Jen Psaki, whom the New York Times quoted in its article, indicated that the administration was well aware that the photos did not constitute proof of what was being claimed.”
“Washington, as it passed the pictures on to the Times, knew very well that they did not constitute evidence of anything, but were simply a new propaganda point supporting its as-yet unsubstantiated accusations of Russian involvement in Ukraine. The Obama administration relied on theTimes to publish the pictures, fanning the flames of the media campaign to denounce Russia, without doing any due diligence to check that its materials were accurate or that proved anything at all.” http://www.globalresearch.ca/new-york-times-propaganda-photos-on-ukraine-exposed/5378942
The Times make the old Pravda look like paragon of journalistic objectivity by comparison.