Monday, September 3, 2012

"More stimulus is not the solution" - They're Right, From Their Myopic View of Things


commentary by Roger Erickson

Yet just how freaking myopic is that view?
(An open letter to Australian Bill Mitchell, about the following article.)


More stimulus is not the solution
THE AUSTRALIAN FINANCIAL REVIEW

Hello Bill,
Hope things are well down there in what was once the world's largest penal colony. I saw this article first thing this morning, and thought of you - as well as prison colonies - while wondering where on earth one finds "financial" experts able to come up with such views, and how they do it.

After reading the article, one has to ask what the "problem" is that such experts claim to know which solutions will not work for, and how they come by their particular view of that problem and that problem alone?  They implicitly answer that very question themselves, even though they don't even ask it.  It's so obvious that I'll also leave it implicit.

Ironically, it is Labor Day here, where Ben Bernanke opines that "US workers don’t have the skills to match job openings." If that's the case, then why wouldn't a populous consider some stimulus specifically targeted to rapidly retraining and re-applying available human capital?

Meanwhile, the Bundesbank & ECB are arguing over whether non-sovereign "bond buying is the equivalent of monetary financing." Well, of course it is. To hear two CB economists arguing, in effect, over who is & isn't allowed to finance the organized efforts of native populations is, to put it mildly, surreal. Surely the member populations of the euro-zone could consider some stimulus in order to utilize their under-utilized compatriots within their own financial union?

As a physiologist, this immediately makes me imagine a liver cell and brain cell arguing over whether they should let the lungs "stimulate" the heart cells. Mercy! Aesop was aware of this conundrum, over 2000 years ago, and the cell types in question had solved the operational issue well over a million years before that!

Yet the same experts opining above, also warn of another problem. "Waning exports have exposed vulnerabilities in China’s growth model, but the PBOC fears that cutting rates may reignite overborrowing and overinvestment." 

BMHOTK! Is it not within the paradigm of Aussie financiers to consider that China may simply choose to export less and itself consume more of what it produces? If that's the case, then the PBOC may have no real fears at all, and it is foreign populations who should be considering different patterns of stimulus, in order to protect their own living standards from the loss of cheap imports from China. If anything, the PBOC might be fearful that the authors of this article might wake from their stupor before China finishes successfully engineering a global realignment of realities on the ground!

Finally, there's this real kicker. "There is still lack of confidence that global policymakers can engineer a recovery." Really? After the stellar job these self-styled owner-managers have done the last 4, nay 8, nay 12, nay 20 years? Perhaps they could consider loosening the stimulus constrictures a wee bit, so that the rest of humanity could, say, stimulate themselves, through stimulating thinking leading to novel forms of coordination and the returns which that always brings?

The foregone conclusion of the whole article is that any action whatsoever "could" lower the present, unused buying power of that tiny fraction of people who have hoarded a significant cache of fiat currency - by means they would prefer not to discuss at this time. They're right, of course, in theory. In addition, the sky could fall at any moment.  In addition, the consequences of the sky falling could, in theory, matter to human populations. One question that financial experts and the rest of us ought to be pondering and monitoring is probability, not just possibility.  Of course there are endless other options to explore as well, but those are clearly beyond the intellect of the authors at THE AUSTRALIAN FINANCIAL REVIEW.

All this begs the question of how economics and finance training went so far off track in Australia, as it has in other countries. Back to my analogy, at this time - upon hearing liver & brain cells argue so idiotically over the future of all cells - all the other cells in a "body" should be triggering alarm bells, and desperately reviewing contingency plans to:

1) relieve current policy staff of their duties (for abject failure to perform those duties; surely those duties are spelled out somewhere?);
[in my mind, that would do much to remedy the "deeply embedded structural problems" in these countries!]

2) reorganize the training, education and tolerance limits for selecting future replacements, so such abject failure doesn't occur again soon;

3) initiate sizable & rapid stimulus in a search for replacement policy staff specifically NOT suffering from the same myopia or delusions, which are clearly not appropriate for the existing situation.

Perhaps then, we could all return to not only having a heart and a brain, but a breath of life as well! If that's what it takes, then our populations should take on the role of irregular but timely messages to the "financial" interests, something on the order of "inflate, deflate, .... inflate, deflate" ..., with a periodicity and depth matching whatever situations arise. Similar tapes for proverbial blondes are supposedly available, reminding similarly myopic people to "breathe in and breathe out" regularly.  Hence, it wouldn't be so outlandish to consider the same remedy for the financial community.

21 comments:

Matt Franko said...

"US workers don’t have the skills to match job openings."

Roger this is bullshit from Bernanke.

We need like say.... 10-15 million jobs perhaps more.

#1 this amount of jobs are NOT available.

I believe we have like 18 million people in colleges right now then what are they studying????

I guess Bernanke thinks 'the wrong things'???? Because they will soon graduate and will be available for employment..

We have a HUGE/MACRO problems with employment in the US due to productivity and 'outsourcing' and BS like this from the moron Bernanke leads Congress in the wrong direction...

We have to be looking at earlier retirements and JGs/BIGs...

rsp,

Roger Erickson said...

re: "bullshit from Bernanke"

Right. It's like telling a 3 month old, developing embryo that if it keeps growing, there won't be jobs for all the additional cells in it's body, by the time it is born, ready to start post-natal development & exploring options.

We have people to spare, let's find insanely great things to do with our time & talents. What's the option? Sit on hoarded fiat currency? Imprison public initiative & gloat over controlling it? Give me a freaking break. The most embarrassing thing in the world is the pitiful intellect & imagination expressed by those we select as policy staff.

paul meli said...

"Look deep into nature, and then you will understand everything better." -- Albert Einstein

Leverage said...

As long as there is people thinking we have run out of money imagination won't be able to create enough (quality, btw) jobs. Artificial scarcity creates this environment of lack of imagination about what to do.

Think of all the things you could fund if you didn't think you can run out of money. Suddenly thousands of highly educated and trained individuals could get expertise in real stuff instead of playing around doing nothing in finance, insurance and all that useless stuff (sectors that should be maybe about 1/10 of the size their are now to add any 'value', not that I buy that value stuff economists make up as an deus ex to explain stuff).

We could be even colonizing Mars already maybe, securing a future for our species (is very counter-adaptive to rely on a single planet for survival IMO, specially when our own specie is armed with armies of morons and destructive weapons). And the first idiot who talks about inflation or resources, please give me a break: for what use is all the inflation being created by consumption of the 1% of McMansions, or what real productivity & efficiency does financial chicanery adds?

In fact space programs should be priority right now, as resource use & extraction efficiency (there is unlimited energy in the space anyway) is one of the main topics for successful space living. But as long as our specie is dominated by psycho-morons (as Matt says), there ain't much we can do, except wait for collapse, chaos and disaster so more normal people can take over again. Very freudian, but maybe he was right after all, or 'every generations needs its own revolution' (to learn not let psycho-morons into power positions).

Greg said...

So how is it that all these prescient job creators ended up creating these businesses that no one in the United States was equipped to work for? Are we really supposed to believe that there are all these things which need doing but that its simply beyond the capabilities of Americans to do them?

So how did the conversation between the initial investors and the guy with the brilliant idea for an enterprise go? Something like this;

"Hey guys, listen Ive got this great idea for a business that I want you guys to invest in. Its really high tech!"

"Cool, we like high tech! How does it work?"

"Well I cant really explain it to you because you wouldnt understand.... its super high tech. No one has done this before"

"Okay, but what is the market like for it?"

"Well we've done our market analysis and there will be great demand for our product. Its super neat and high tech!"

"Great. What sort of numbers are we talking?"

" Profits will be enormous. People really like high tech stuff. We expect for sales to generate a profit inside two years"

"What will you need?"

"Well we have the site picked out and a contractor that can develop it and build the structure we need. Here is the blueprints for the high tech machines we will build to produce this high tech product. We have sales people ready and waiting to sell this stuff as soon as its produced, and we have a real cool name for the company. Only thing is we dont know of any one that can actually build this thing. There arent any people that have the skills to produce this.
But if you guys will put up 10 million say, we can have the funds ready to start hiring people....... once we actually find someone who can do this. We've got some job openings but no Americans are equipped to do this.... its a shame"

"Yes a shame. Im sure me and my friends can come up with the money...... we are all about creating American job openings"

"Thanks!!!"

Matt Franko said...

Greg, Ha!

This "job creator" bullshit is yes a complete farce.

And Bernanke puts this out here on our US Labor Day holiday weekend no less.

Tom Hickey said...

This is just a subterfuge for importing high-skilled foreign workers who will work of less than Americans.

It's already being done in Canada. See Inequality rules by Frances Wooley.

Unforgiven said...

Interesting post here vis-a-vis productivity and "endless growth":

http://www.guardian.co.uk/commentisfree/2012/sep/03/debt-federal-reserve-fixation-on-growth

paul meli said...

"The reason is that our present money system can only function in a growing economy. Money is created as interest-bearing debt: it only comes into being when someone promises to pay back even more of it. "

He may be right about the growth part but he's definitely out-of-paradigm on the money creation.

True, we have been creating most of the money through private credit, but that is mostly a recent phenomenon.

It certainly is not a rational way to drive an economy, and the fact that isn't obvious among the commentators tells us how far up the river without a paddle we are.

Roger Erickson said...

re: ttp://www.guardian.co.uk/commentisfree/2012/sep/03/debt-federal-reserve-fixation-on-growth

someone introduce these dinosaurs to Darwin?

Evolution happens, but do Luddites ever evolve? that's a de-existential question. We may stand on them briefly, but Luddites are soon evolutionary debris.

SchittReport said...

mitt romney fibbing again:

http://www.youtube.com/watch?v=LnyRHfvAKD0

Anonymous said...

Thank´s Schittreport.I wonder, could this uncarismatic Mitt Romney get away with all this??Is the state of mind so down in the drain in US today?? He have lied and flip flopped and his record at Bain capital is so shady so it´s stunning.I am afraid that bloody guy maybee could drown media with so much propaganda that he actually could succed

SchittReport said...

>anonymous:

as stated before in an earlier post, the mccain - palin ticket got 59.9m votes - this implies that mittens will get ~60m votes from zombie GOP voters this time around.

so, his task is to get ~20m or so undecided voters to go for him instead of obama. unfortunately for him, the GOP platform has all but excluded women and non-whites from this pool - so what else can he do but lie lie and lie (and use a lot of money to develop propaganda bombs)to try and dupe enough voters for his ticket. let's not forget, it worked for bush although kerry is obviously not obama.

yes it is an extremely sad situation and unfortunately for the US, it will be mired in this sort of political quagmire until by some miracle, the proportion of sane, rational people increase dramatically over zombies. unfortunately for the US, this trend now seems to be reverse.

as we have always maintained, you cannot have a democracy or meritocracy when 1/3rd of your population base are zombies.

now, there is always hope that a very charismatic leader will rise to (dictatorial) power in the US and he just happens to hate zombies with a vengeance and develops a terminal solution for them.

our preference would be the recycling of zombies into clean energy via arc plasma gasification.

yours?

SchittReport said...

mittens again:

http://www.youtube.com/watch?v=Z4JRfMCida4

Tom Hickey said...

our preference would be the recycling of zombies into clean energy via arc plasma gasification. yours?

The top echelon already has this figured out. Marginalize and exclude the lower echelons from the system unless they accept serfdom. Otherwise, it's social Darwinianism aka eliminationism of the less "fit" by the ravages of foraging.

The zombies? There will be the serfs that serve the masters by providing them service and rents, as in all good feudal systems.

SchittReport said...

tom, agreed.

this explains the increase in predatory business practices, particularly over the past decade.

given that social darwinism is a slow (and painful) process, why not just take the faster and more productive route?

Tom Hickey said...

given that social darwinism is a slow (and painful) process, why not just take the faster and more productive route?

This is largely an unconscious process on both sides, SR. Most of the people at the top are not evil people . They are just "realistic." They would never think of adopting an overt solution without a revolt that actually threatened them. They have rationalized the process of extreme self-interest as a combination of the "laws of economics" and social Darwinians. So it's just "doing God's work."

The zombies at the bottom are like frogs being boiled in a pot. They don't realize what's happening until after it is too late. As a result there is no large-scale organized resistance.

The media propaganda paints the resistance of people that are smart enough to catch on as the derogatory faction of the day, like "socialists," "communists," and "terrorists."

So it "just happens" as "the natural order."

paul meli said...

"The zombies at the bottom are like frogs being boiled in a pot"

In the real world, frogs leave the heated water before it kills them.

Does that mean we will wake up and do something before this crap kills us?

Tom Hickey said...

@ paul

When the water gets hot enough for concerted action.

SchittReport said...

tom,

if boiling 50m frogs (or converting them into clean energy) can set the US on a viable course for the future, the question we would like to pose is - why not?

as for the water getting hot enough for concerted action... isn't it past boiling point and has been for some years already?

...and yet, the romney-ryan ticket will get ~60m votes. what does that say about the state of society?

there is no way past this political and socio-economic quagmire unless these people are eliminated. the morality, legality etc. of this action aside, isn't that a highly logical conclusion?

would like to know your thoughts about this or what you think might be alternate paths.

SR

Tom Hickey said...

SR, it's up in the air. As Roger has pointed out its basically an issue of rate of change of adaptability and return on coordination to rate of change of complexity.

Right now things are not looking so good there, and the result will be a decrease in population and living standard, except for the few.

But that is not baked in. The path to increasing the adaptability rate is known, as Roger has also pointed out. Cordination is lacking.