Monday, April 30, 2012

America's two-faced liberalism

 How do we explain this deep tension in liberal thought? How can liberty be treated so differently by Kennedy and some of his fellow supreme court justices in the context of economic exchange (healthcare) as opposed to the context of policing (strip-searches)? 
Though the contrast is so stark, there is a coherence and logic to it. It dates back to the 18th century, when the idea of natural order (which would evolve into the concept of free-market efficiency) was introduced into economics hand-in-hand with the idea of a police state. The first economists, François Quesnay and his disciples, referred to this as "legal despotism". Using this rubric, they formulated a political ideal of complete governmental inactivity in all but the penal sphere. Given the existence of natural laws governing economic exchange, the group envisaged no role for the legislature except to criminalize and punish severely those who fail to see and appreciate the fundamental laws of nature. The only object of positive manmade laws was to severely punish those who were disorderly, as a way to protect society from "thieves and the wicked".
The same paradoxical, but coherent link ran through early laissez-faire liberalism. It was reflected in the writings of Jeremy Bentham, who argued that the government should "Be Quiet" in economic matters – at the very same time that he was inventing the all-seeing panopticon prison. This paradox is found in the Chicago School of economics as well, which defined the function of criminal law in a capitalist society as punishing and preventing those who "bypass" the free market. And of course, it continues to the present – a period in which we may be declared free from a government mandate on healthcare, but subject to strip-searches and delousing if arrested. 
Since the 18th century, the idea of economic freedom has been joined at the hip with the need for a police state; government is perceived as incompetent with regard to economic regulation, but fully legitimate and competent at policing and punishing. Not surprisingly, the periods of strongest belief in the free market (the "Market Revolution" in the 1820s and the recent period of neoliberalism since the 1970s) have coincided with the starkest periods of penal expansion – with the birth of the penitentiary in the first half of the 19th century and the exponential rise in prison populations since 1973. 
The rise of neoliberal thought since the 1970s has left us with a frightening union, one in which there is both free-market ideology (which militates against universal healthcare) and mass incarceration (with the attendant excesses like generalized strip-searches). This is what many of us have come to call "neoliberal penality". 
Read it at The Guardian (UK)
by Bernard Harcourt |
(h/t Trixie in the comments)

Capitalism (economic liberalism) and democracy (political liberalism) fundamentally incompatible?

BTW, if anyone is wondering what Occupy is really about, this is it.

Mike Bloomberg gives another display of his ignorance of economics by vetoing the prevailing wage bill

By vetoing New York's prevailing wage bill, Mike Bloomberg shows once again that he has zero grasp of economics. How in the world does reducing or limiting the income of people create more jobs? Maybe under a slave system, but that's about it.

The fact is, low wages lead to less job creation, not more. Cutting or limiting the income of workers hits businesses where it hurts most--in demand for the very products they produce. When incomes fall or stay stagnant, so do sales. Marshall Auerbach eloquently explains this economic fact in a terrific post here.

I am baffled as to why this is so hard to understand. The total of all things produced in an economy is equal to the income paid (received). The two are identical. That means, when you talk about limiting or shrinking someone's income you're also talkng about limiting or shrinking the total output of goods and services (real wealth). Moreover, it's pretty hard if not impossible to create jobs when output is slowing or shrinking. Unless of course, you're freakin' Houdini.

Sadly, this is not Mike Bloomberg's first display of gross ignorance when it comes to the economy. He put on a terrific dumb show back in November when he gave a speech about the state of the U.S. and how we've gone off the track in terms of fiscal responsibility, blah, blah, blah; how the debt has zoomed to who knows how many thousand per every man, woman and child, blah, blah, blah and how we've run out of money (I'm puking now). Don't worry, he definitly used all those well-worn, yet massively stupid cliches in abundance, I can assure you.

Back then it was just a speech, nothing more. We could listen to it, get sick, and forget about it the next day. This time, however, it affects people's lives. Vetoing the prevailing wage bill ensures that the wages of city workers--who are already having a hard time making ends meet--will not be sufficient to allow them to live decent lives now or in the future. And why is he doing this? To "be competitive." Yes, it'll be a competitive race to the bottom ensuring that all workers earn less and less and less until there's no money to pay for anything that Mike's cherished businesses produce. Then Mayor Bloomberg, er...Houdini...will have to magically come up with a way to keep those businesses from going out of business.

The more I see of Mike Bloomberg the more I feel he has been a terrible Mayor and the more he convinces me that having a businessman in government is a horrible idea. Government should not be about profits, it should be about the public purpose.

Mike Bloomberg took over the city at a time when it was still flying high on all the positive momentum left over from the economic boom of the 1990s. It made him look good, but it had nothing to do with his leadership. Then came 9/11 followed by the financial crash and what did Bloomberg do? He doubled down on Wall Street, giving massive tax breaks to the likes of Goldman Sachs, Morgan Stanley and other, big, financial firms while closing schools, firehouses, senior centers, shelters and other important city departments and services. Now he vetos wage increases for workers saying it will "create jobs" even as his cuts have led to the layoffs of thousands of teachers, cops and firemen.

Great economics, Mike...great economics!

Out of the sewer

Read it at Mother Jones
Former CIA Official Seeking To Confirm Efficacy of Torture Does The Opposite
by Adam Serwer

This man belongs in a dock at The Hague. He and this whole episode are a disgrace to what America stands for, and this is a blot on the United States that can never be eradicated.

INET: Financial Instability Mini-Documentary

INET: Financial Instability Mini-Documentary (8 min.)
(h/t David Lawson at Steve Keen's DebtWatch)

A First Lesson in Econometrics

Read it at the Journal of Political Economy
A First Lesson in Econometrics
by John J. Siegfried
(h/t Naked Capitalism)

Short and funny.

Sunday, April 29, 2012

Marshall Auerback — Why Low Minimum Wages Kill Jobs and Crush Living Standards for Everyone

The point is: wages are a source of demand, as well as a cost input. Reduce wages and demand plummets, which more than overrides any cost savings derived from paying less to workers (especially given today's paltry minimum wage, which is hardly a living wage for any American).

Let's be clear; Americans have never embraced welfare. For better or worse, our nation has always preferred a more libertarian path: self-help, personal responsibility, individual initiative. As a result, our welfare programs have always been stingy, temporary and purposely demeaning. But maintaining the minimum wage at today’s ridiculously depressed level does not enhance anybody’s employment prospects. In fact, it makes it worse, because it sucks demand out of the economy and minimizes the chances of those now receiving unemployment benefits or other assistance to quickly get back into the workforce, to "pull themselves up by their own bootstraps," as conservatives like to say. They cannot do that when our work force continues to focus on policies which merely enhance the incomes of the top 1 percent.
Read it at AlterNet
Why Low Minimum Wages Kill Jobs and Crush Living Standards for Everyone
by Marshall Auerback
(h/t Kevin Fathi via email)

CR — Housing: The "Long Bottom"

It appears housing starts, new home sales and residential investment have already bottomed and will increase in 2012. All three had a "long bottom" of several years.
 I think house prices have "bottomed" too, but this is just the beginning of the bottoming process. I agree with Ms. Zelman that the "shadow inventory" will probably not push prices down further nationally (it probably will in some judicial foreclosure areas), but I think the "shadow inventory" will limit any price increases for some time.
Read it at Calculated Risk
Housing: The "Long Bottom"
by Bill McBride

I think that things are more "iffy." It all depends on how the foreclosure crisis  shakes out, how the sectoral balances look considering how economic policy decisions coming up are made, and whether there are any shocks globally. There are still many balls in the air resulting in uncertainties, and US residential RE is still fragile. The bottom may not yet be in, and it's not yet time to celebrate anything. The recovery generally seems on track in the US if all proceeds well, but that is hardly anything to bank on now. There are many areas of concern.

Two big areas of concern are structural. First, the housing crash has shaken belief in the maxim that housing always goes up and is the best investment. It may be that the American dream is now changing away from home ownership.

Secondly, the present structure of education is diverting funds away from housing into servicing student loans. This is delaying the schedule of rites of passage like marriage, family, and buying the starter house.

It is as yet unclear if this is a temporary phenomenon or a cultural shift. Looks like it may be the later, which would profoundly affect housing and the US economy as a whole.

Daniel Little — Actor-centered sociology

Read it at Understanding Society
Actor-centered sociology
by Daniel Little

David Little summarizes his position on microfoundations of sociological theory. Must-read for those interested in sociology and sociology as it relates to economics. It's short and to the point, tying up a lot of what has appeared on Little's blog.

Marshall Auerback — Spain is the New Greece

This is a big deal socially and politically, therefore economically. The EZ is visibly beginning to disintegrate, visibly from the outside and tangibly on the inside.

Read it at New Economic Perspectives
Spain is the New Greece
by Marshall Auerback

Andrew Sheng reflects on INET Berlin 2012

Almost everyone agrees that the old paradigm of neoclassical economics is broken, but there is no agreement on what can replace it. A recent conference in Berlin explored the possibilities.
Read it at Project Syndicate
A Berlin Consensus?
by Andrew Sheng, chief adviser to China's Banking Regulatory Commission, is President of the Fung Global Institute in Hong Kong. Previously, he served as Chairman of Hong Kong’s Securities and Futures Commission, and was Deputy Chief Executive of the Hong Kong Monetary Authority. In the late 1990’s, he chaired the Financial Stability Forum’s Task Force on Implementation of Standards. His latest book is From Asian to Global Financial Crisis.

No boss? Hey, there's an idea!

Earlier this week, Valve Software—the company behind the Half-Life, Counter-Strike and Portal video game series—released its employee handbook to the public because, according to Valve co-founder Gabe Newell, somebody asked. “I’d mentioned the handbook on a podcast and one of the listeners contacted us and said ‘Hey, can I get a copy?’ So [designer] Greg Coomer sent him a copy and all of a sudden it got posted online,” he said. The handbook attracted a lot of attention because, in addition to offering company massage rooms and free food, Valve has a unique corporate structure rarely seen at such a large company. Valve has 300 employees but no managers or bosses at all. Newell talked to Bloomberg Businessweek about his company’s environment and how it works.
Read it at Bloomberg Businessweek
Why There Are No Bosses At Valve
By Claire Suddath
(h/t Naked Capitalism)

Obama as Neoliberal Ideologue

Yves Smith calls out President Obama.

Read it at Naked Capitalism (short with video)
Matt Stoller: Obama as Neoliberal Ideologue
by Yves Smith

Day of Global Love

This Tuesday is May Day, traditionally a day of labor activism combined with celebrations of springtime. This year, the Occupy Movement is calling for a general strike on May Day, to demonstrate the economic power of the 99 Percent.An alternative plan comes from the Love Foundation, which is proposing that May 1 be observed as Global Love Day. The group explains that Global Love Day is dedicated to “universal recognition of our innate oneness through love. When we come from this limitless love we naturally and easily embrace ourselves and our fellow humanity. Opening our heart, we allow unconditional love to be our guide and compassion to be our gift to life.”
Will Global Love Day bring about the growth of a worldwide surge of love that overcomes hate and violence? This isn’t an abstract question. So far, the empirical data suggest that Global Love Day isn’t likely to create change on anything close to a global level. There have been eight annual Global Love Day observances so far, and still, global love has not arrived. There’s loads of hatred and war, and a lot of grumpy resentments.What if we could have global love, though? What if it was possible to obtain unconditional love between all human beings?
Read it at Irregular Times
Can we have a Day of Global Love?
By Rowan

Surprisingly to me, Rowan responds not only that he regards it as impossible but he also rejects it if it were possible.

I agree it seems impossible given the present evolutionary age of humanity, which has not progressed past adolescence yet, and many are still at the childhood stage of selfishness.

But not desirable? All sages from time immemorial have said that universal love is the goal. When asked about the "great command" of the Law (Torah), Jesus responded, "Thou shalt love the Lord thy God with all thy heart, and with all thy soul, and with all thine understanding — this is a first and great command; and the second [is] like to it, Thou shalt love thy neighbor as thyself; on these -- the two commands -- all the law and the prophets do hang." Matthew 22:36-40.

""Thou shalt love the Lord thy God with all thy heart, and with all thy soul, and with all thine understanding — this is a first and great command" is a reference to Deuteronomy 6:5, which is immediately preceded by shema yisrael yhvh eloheynu yhvh echad, which is literally Hear, O Israel, YHVH [is] our God, YHVH [is] one. YHVH is usually rendered Adonai, meaning Lord, since out of respect, the Name is not uttered aloud. It is the Name revealed to Moses in the desert. The nearest meaning of YHVH in English is "existence." According to Zohar, this means the existence is one but not in number, that is, "only one is." This is the idea that Paul asserts in quoting Epimenides in Acts 17:28 "‘For in him we live and move and have our being.’

This is also found in Rig Veda 1.164.46: ekam sad vipra bahudha vadanti, meaning "The Existent is one, the sages express it variously," as well as in the Holy Qur'an Allah ho ahad, meaning God is one, interpreted by Sufis (al 'Arabi) as "existence is one," or "only one is." Unity of being is also fundamental to Buddhism, and it is the basis of the Mahayana teaching on Pali metta/Sanskrit maitri, meaning lovingkindness or compassion.

If only one is, then the command to love that one and all in that one follows naturally as the way to unite with the one and with all in that one though unconditional love. The cost of true discipleship is one's own separate self to discover one's true nature as unlimited. This is the perennial teaching.

It appears as a hard teaching because everyone loves their separate self, which manifests as individuality (ego), and identifies themselves with their personality, mind, and body. The path of transformation is one of transcending these limitations and discovering who and what one really is.

See Meher Baba's discourse on The New Humanity for a contemporary elaboration on this timeless theme.

All You Need Is Love

Cold fusion, or something equally as important?

Godes' hypothesis is interesting for those with even a smattering of physics in their background. First of all, he holds that the heat which is coming from infusing hydrogen into nickel or palladium is not coming from "cold fusion" in the classic sense of the term. It is not a deuterium fusing with deuterium reaction as takes place in the sun or H-bombs and which requires extremely high energies.
What seems to be happening in this new kind of fusion is that when hydrogen is "loaded" into nickel or palladium and subjected to the proper kind of an electromagnetic pulse, the hydrogen nucleus which is a positively charged proton acquires and electron which turns it into a low energy free neutron. Now a low energy free neutron is something very nice to have for it quickly combines with other protons to form deuterium, tritium and finally quadrium. The quadrium only lasts for an instant before undergoing a process called beta decay turning it into helium.This is where Einstein and E = MC2 comes in. The beta decay of quadrium results in a loss of mass which is turned into heat. If all this pans out as claimed, it could be one of the most important secrets of nature that has ever been discovered, for our energy problems are over.
This new hypothesis, it is not yet a theory, says that It would be possible to use water as the source of all energy that mankind could ever want with no bad or radioactive leftovers -- only helium and heat. Note that Godes says that if the reaction is done properly, the nickel or palladium which are only used as a matrix to hold the hydrogen in one place, are not consumed in the reaction. For those who are skeptical, and I don't blame you for this a lot to comprehend, I recommend Brillouin's web site ( where you will find some reasonably comprehensible explanations and videos as to just how all this supposedly works. For those conversant with Bose-Einstein condensates, the Molecular Hamiltonian, Heisenberg confinement energy, and the dense mathematics of nuclear physics there are papers there for you too.
Read it at Energy Bulletin

It's beyond my ability to critique, but it looks like it is actually happening.
Brillouin Energy says they have a contract with SRI International to design and build a prototype of what they call a "Hot Tube" boiler. If the concept works well Brillouin would license the technology to the world's boiler makers who presumably would work overtime replacing every fossil fuel fired boiler on the face of the earth. And that is just the start.
Brillouin Energy may be poised to become the hottest stock ever (pun intended).

More INET Videos: Sessions on Complexity and Fiscal Policy


Read it at Economist's View
More INET Videos: Sessions on Complexity and Fiscal Policy
by Mark Thoma

CR — Measuring Recovery

Graphs show GDP, industrial production, personal income less transfers, and employment levels. Only GDP has completely recovered and surpassed its previous level. (What was that about targeting NGDP?)

Read it at CalculatedRisk
Recovery Measures
by Bill McBride

Limbaugh Transcript: Observations on Fiscal Morons in Action

Transcript from Limbaugh last week on the emerging federal legislation to maintain lower interest rates on student loan debt at this link. (Please ignore all the ads for "investing" in Precious Metals that may appear on his site... if you go there.)
He's (Pres. Obama) gonna veto this so that student loan rates will go up so that he can blame Republicans for it. He is counting on the fact that the media will not significantly report the Republicans tried to stop it. Pelosi is attacking the Republican bill. This is what they're saying. Because this is paygo. "Okay, how we gonna pay for this? The student loan interest rate." The government runs it now. The higher interest rate goes the more the government gets. So if you're not gonna have the student loan rate doubled, then the government says, "Uh-oh, we're losing money here." So Boehner and the boys, to make up the loss, take $5.8 billion from Obamacare, and Pelosi is attacking Boehner's bill because it uses that $5.8 billion from Obamacare's preventative health program. She's calling it an attack on the health of American women. Apparently only American women benefit from preventative health care. Now, never mind that Democrats voted earlier this year to take money from the preventative health fund to help pay to keep doctors' Medicare reimbursements from dropping. And never mind that Obama's own budget proposed cutting $4 billion from the same fund to pay for some of the other stuff they wanted. The GOP has always been against the interest rate on student loans going up. They just want to pay for it. Again, folks, just so everybody's clear, the student loan interest rate is scheduled to double because of legislation the Democrats wrote in 2007. And since the government runs the student loan program, all the interest payments go to the government now, not private sector banks. So, if the student loan interest rate's scheduled to double, then the government's telling itself it's gonna have that much more money coming in as people pay off their loans and pay the new interest rate. So the Republicans come along and say, "We're gonna make sure the interest rate doesn't go up." Well, that means the government's gonna lose all that money.
You can see here how the absolute ignorance of our morons in government, who have signed on to some sort of "pay-go" idiocy due to their mistaken beliefs in what the fiscal authorities of the Federal government represent,  handcuffs them from being able to pass any legislation that would create needed net financial assets in the non-govt sector at this point.

Here they feel that they must trade off preventative health care services for less revenues from student loan interest, when in fact the government doesn't need to charge ANY interest on student loan debt in the first place and non-govt sector direct healthcare providers continue to be revenue constrained.

Limbaugh is good at pointing out this idiocy, but he too has NO CLUE what it is REALLY all about:  Both sides are mired in absolute economic and fiscal ignorance which has them surrendering the only true authority that they have all worked so hard to obtain positions within.

Saturday, April 28, 2012

Max Keiser interviews David Graeber

Keiser Report: Oh My Gun! (E281)
(h/t James in the comments)

Europe’s far right marches on

From France to Norway, the far right is at its greatest strength since World War II
Read it at
Europe’s far right marches on
BY Steve Weissman And Frank Browning
(h/t Kevin Fathi via email)

Paul Ryan, Ayn Rand, and Thomas Aquinas = Exploding Heads

Following up on Paul Ryan's recent repudiation of Ayn Rand and embrace of Thomas Aquinas, Mike Kimel point us to a couple of arguments Aquinas mounts in the Summa Theologica — one against interest, which is also prohibited in Islam, and the other to the effect that the purpose of wealth is to provide aid to the poor. Aquinas also asserts that it is no sin to appropriate the private property of others for survival, if society doesn't provide the means of subsistence.

Interestingly, both Ayn Rand and Thomas Aquinas professed to be followers  of Aristotle in asserting the reason is the defining characteristic of human nature. The assumption that humans are "rational animals" also underlies REH. However, Ayn Rand and those subscribing to REH hold that rationality   equates with individual pursuit of maximum utility economically. Aquinas could not disagree more. He holds that rationality and faith are compatible rather than mutually exclusive, as Rand thought.

The views of Aquinas that Kimel mentions stand in stark contrast to the foundational assumptions of modern capitalism, especially neoliberal economics. However, in the mind of Aquinas he was just providing a solid rational basis for the teaching of the gospels, which is a matter of faith, showing the compatibility of faith and reason.

Jesus was much more direct,however, and cut to the chase:

"...but seek ye first the reign of God and His righteousness, and all these shall be added to you." Matthew 6:33 (Young's Literal Translation)

"...Verily I say to you, inasmuch as ye did it to one of these my brethren — the least — to me ye did it." Matthew 25:40 (Young's Literal Translation)

"Treasure not up to yourselves treasures on the earth, where moth and rust disfigure, and where thieves break through and steal, but treasure up to yourselves treasures in heaven, where neither moth nor rust doth disfigure, and where thieves do not break through nor steal, for where your treasure is, there will be also your heart." Matthew 6:19-21 (Young's Literal Translation)

"... 'If thou dost will to be perfect, go away, sell what thou hast, and give to the poor, and thou shalt have treasure in heaven, and come, follow me.'" Matthew 19:21 (Young's Literal Translation)

These are called "hard sayings." Many either ignore them or else reinterpret them to suit themselves. But the meaning is abundantly clear, and the message is incompatible with what Paul Ryan represents.

The entire Sermon on the Mount, including the Beatitudes (Matthew, chapters 5-7) are considered by most Christians to be the formula for discipleship, and scholars, who often argue over the authenticity of sayings attributed to Jesus, are in general agreement that the Sermon on the Mount represents authentic sayings of Jesus, probably very close to the words he uttered on the occasion. So there should be no dispute over this.

Read it at Angry Bear
Ayn Rand v. Thomas Aquinas in Paul Ryan's Mind
by Mike Kimel

To Be Able To Do a Drain You First Have to Do an Add

This older baby knows that to be able to help with the other baby's bath, she must first fill the cup with water before she is able to pour any water out of the cup and on to her little brother's head.

I surmise that no one ever "taught" her how to do this.  She perhaps saw her mother do this act of first filling the cup and then pouring it out and picked  up this concept in about 5 seconds at age 2 1/2.

For this concept (ie Add : Drain) you cannot "dumb it down".  You cannot make this concept "easier to understand".  This little baby in the photo above is empirical evidence that normal humans are able to understand this concept in a foundational way.

In "Soft Currency Economics", Warren Mosler writes:
The imperative behind federal borrowing is to drain excess reserves from the banking system, to support the overnight interest rate. It is not to fund untaxed spending. Untaxed government spending (deficit spending) as a matter of course creates an equal amount of excess reserves in the banking system. Government borrowing is a reserve drain, which functions to support the fed funds rate mandated by the Federal Reserve Board of Governors.
I believe that I have read that Warren has sometimes quipped: "To be able to do a reserve drain you first have to have done a reserve add", this should be simple enough.  This is a concept that 3 year old babies can and often do exhibit knowledge of, yet, many morons in economic policymaking positions, some with advanced degrees, cannot understand this concept.

To these economic imbeciles, when the US Treasury issues securities, the US government is "borrowing from grandchildren" or "borrowing from China" or my favorite: "borrowing from the future"; and there is the potential that the US "can become the next Greece"; completely blind to the fact that to be able to settle all transactions for US Treasury securities, the US government first has to provide the USD balances required for this said settlement and is in no way restrained from doing so.

This is the mental equivalent of the little baby in the above picture, trying to pour from an empty cup onto her little brother's head, not realizing that the cup had to be filled first.  But she is not stupid.  Perhaps this little baby can teach these morons who have current charge of economic policy some basic concepts of logical procedure in between her nappy-time.  Maybe she would agree to put a seminar together for them; or chair a conference in Europe.  We could get her a teenie-tiny podium.

A concept that is easily understood by babies at bath-time cannot be made simpler to understand.  Indeed, it may be a bit of a fools errand to think that we can do so.

Friday, April 27, 2012

Zero Hedge — Why Is It Necessary For The Federal Government To Turn The United States Into A Prison Camp?

Well said.

Read it at Zero Hedge
Why Is It Necessary For The Federal Government To Turn The United States Into A Prison Camp?
Submitted by ilene
Reposted courtesy of Michael Snyder of Economic Collapse

CR — Lack of demand

It really isn't hard to understand.
Read it at Calculated Risk
Lack of demand
by Bill McBride

Lawrence Mishel — Understanding the wedge between productivity and median compensation growth

During the 1973 to 2011 period, labor productivity rose 80.4 percent but real median hourly wage increased 4.0 percent, and the real median hourly compensation (including all wages and benefits) increased just 10.7 percent. These trends are shown in the table below. If the real median hourly compensation had grown at the same rate as labor productivity over the period, it would have been $32.61 in 2011 (2011 dollars), considerably more than the actual $20.01 (2011 dollars). Consequently, the conventional notion that increased productivity is the mechanism by which living standards increases are produced must be revised to this: Productivity growth establishes the potential for living standards improvements and economic policy must work to reconnect pay and productivity....

Maintaining rapid overall productivity growth—through innovation, restoring manufacturing, improved education and skills—is obviously an important policy goal. But if we want to improve the living standards of the vast majority—and we definitely can do so given the expected productivity growth—then we must also place the challenge of reconnecting growth in overall productivity and median compensation at the center of economic policy.
Read it at The Economic Policy Institute Blog | Working Economics
Understanding the wedge between productivity and median compensation growth
by Lawrence Mishel

Levy Economics Institute of Bard College Strategic Analysis April 2012

Our three scenarios show that no matter how these policy issues are resolved in the next congressional session, the nation is still likely to be producing at far below its potential output levels when that session begins next January. Moreover, it is very unlikely that unemployment and underemployment will have reached even moderately elevated levels—say, an official unemployment rate of 6 percent. In fact, scenarios 1 and 2 above indicate that the CBO's meager projections of a mild surge in job growth starting two years from now are unrealistic, unless private sector borrowing takes off again. But a macro policy based on a new run-up in private sector debt levels would heighten the risk of a financial crisis, especially in light of the financial threats already facing households, state and local governments, and corporations. Once again, keeping in mind political realities, we urge at least a modest application of fiscal stimulus. Scenario 3 illustrates that a small, tax-financed increase in government investment could lower the unemployment rate significantly—by approximately one-half of 1 percent. Figure 9 depicts the paths of unemployment achieved under each of the three scenarios. Based on our results, we surmise that it would take a much more substantial increase in fiscal stimulus to reduce unemployment to a level that most policymakers would regard as acceptable.
Levy Economics Institute of Bard College Strategic Analysis | April 2012
Back to Business as Usual? or A Fiscal Boost?
by Dimitri P. Papadimitriou, Greg Hannsgen, and Gennaro Zezza
(h/t Michael Stevens at Multiplier Effect)

Rajiv Sethi — On Equilibrium, Disequilibrium, and Rational Expectations

Interesting post on a current debate on REH and DSGE on the blogs, if you are interested in this. Looks to me like after the dust settles, the concepts of rational expectations and equilibrium are going to get a lot looser than they were going in, at least for some people. Simple models based on narrow assumptions are no longer considered tenable. Professor Sethi explains why and what the new direction needs to be.

Read it at Rajiv Sethi | thoughts on economics, finance, crime and identity...
by Rajiv Sethi | Professor, Barnard College, Columbia University & External Professor, Santa Fe Institute

Zero Hedge — US Companies Are Furiously Creating Jobs... Abroad

Whatever one thinks of the practical implications of the Kalecki equation (and as we pointed out a month ago, GMO's James Montier sure doesn't think much particularly when one accounts for the ever critical issue of asset depreciation), it intuitively has one important implication: every incremental dollar of debt created at the public level during a time of stagnant growth (such as Q1 2012 as already shown earlier) should offset one dollar of deleveraging in the private sector. In turn, this should facilitate the growth of private America so it can eventually take back the reins of debt creation back from the public sector (and ostensibly help it delever, although that would mean running a surplus - something America has done only once in the post-war period). This growth would manifest itself directly by the hiring of Americans by US corporations, small, medium and large, who in turn, courtesy of their newly found job safety, would proceed to spend, and slowly but surely restart the frozen velocity of money which would then spur inflation, growth, public sector deleveraging, and all those other things we learn about in Econ 101. All of the above works... in theory. In practice, not so much. Because as the WSJ demonstrates, in the period 2009-2011,America's largest multinational companies: those who benefit the most from the public sector increasing its debt/GDP to the most since WWII, or just over 100% and rapidly rising, and thus those who should return the favor by hiring American workers, have instead hired three times as many foreigners as they have hired US workers. Those among us cynically inclined could say, correctly, that the US is incurring record levels of leverage to fund foreign leverage, foreign employment, and, most importantly, foreign leverage.
Read it at Zero Hedge
US Companies Are Furiously Creating Jobs... Abroad
Submitted by Tyler Durden

Zero Hedge — Richard Koo On The Three Problems With Bullish Speculation On Europe

Richard Koo's latest thinking.

Read it at Zero Hedge
Richard Koo On The Three Problems With Bullish Speculation On Europe
Submitted by Tyler Durden

Tim Duy — Bernanke's Shift

Bottom Line:  Bernanke is being disingenuous in his defense.  Despite his claims that his earlier views only applied to deflation, his writings still appear at odds with his willingness to embrace a new price and aggregate demand paths.  Moreover, the Fed's own forecasts clearly do not support his contention that the target is symmetric, but indeed a hard ceiling.  The Fed must also know that the by reducing the path of inflation they have knowing altered the distribution of outcomes in a way that is likely to slow the pace of recovery. Finally, with inflation near 2 percent, I suspect the bar toward another round of QE is higher than many believe.
Read it at Tim Duy's Fed Watch
Bernanke's Shift
by Tim Duy

Garth Brazelton — Mosler - Keen Connection

Garth Brazelton takes a Mosler quote and assumes that MMT is agnostic to public v. private debt in offsetting demand leakage. What Warren said is that as fiscal policy, it is a political choice, which is correct. However, MMT economists are very clear that private debt growth is unsustainable since borrowers are revenue constrained, whereas tsys issuance by the currency issuer is not operationally constrained. At the margin, public financing of demand is clearly superior in safety to private borrowing, even though the bulk of total debt is private.

For example, Steve Keen indicated recently that in his view the ratio of public to private debt should be on the order of 35%-65% instead of the present 15%-85%. Scott Fullwiler responded in a comment that MMT economists are in agreement with this.

Read it at Reviving Economics
Mosler - Keen Connection
by Garth Brazelton

White House Promotes a Bioeconomy

 The Obama administration is expected to announce a broad plan on Thursday to foster development of the nation’s “bioeconomy,” including the use of renewable resources and biological manufacturing methods.
The National Bioeconomy Blueprint, as the plan is called, discusses a variety of measures and strategies to spur research and development of medical treatments, crops, biofuels and biological manufacturing processes that would replace harsher industrial methods.
Read it at The New York Times | Energy & Environment
White House Promotes a Bioeconomy
By Andrew Pollack

Economics needs to abandon mechanistic models, which came in with the Industrial Revolution, Newtonian physics, and technological innovtion, and get back to biological models, which were characteristic of the Agricultural Age. Think the film, Being There.

There's a down side though, too:
Some groups are also calling for regulation of a field that could be a cornerstone of the bioeconomy, synthetic biology, which involves synthesizing DNA to create novel organisms to perform specific tasks. The blueprint does note that creation and use of novel organisms “carry potential safety and security risks if misapplied.”

Jim Thomas of the ETC Group, an environmental organization, said the whole idea of a bioeconomy was misguided. Using crops and other plants for energy or manufacturing could lead to destruction of forests, particularly in the tropics, and increases in food prices“A biomass economy is the recipe for more land grabs, increased hunger, particularly in the developing world, and putting more control of land and food production in the hand of large agribusiness,” he said.

Thomas I. Palley — From Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics

Broadly speaking, there exist three different perspectives on the crisis. Perspective 1 is the hard-core neoliberal position, which can be labelled the “government failure hypothesis”. In the U.S. it is identified with the Republican Party and the Chicago school of economics. Perspective 2 is the soft-core neoliberal position, which can be labelled the “market failure hypothesis”. It is identified with the Obama administration, half of the Democratic Party, and the MIT economics departments. In Europe it is identified with Third Way politics. Perspective 3 is the progressive position which can be labelled the“destruction of shared prosperity hypothesis”. It is identified with the other half of the Democratic Party and the labour movement, but it has no standing within major economics departments owing to their suppression of alternatives to orthodox theory.
Read it at Global Labour University
From Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics
by Thomas I. Palley
(h/t Matias Vernengo at Naked Keynesianism)

The Cooperative Movement — The hidden power of coops

A group of scholars at the University of Wisconsin recently counted nearly 30,000 cooperatives in the United States operating at 73,000 locations. The vast majority are consumer cooperatives, with 343 million memberships (many people belong to multiple co-ops, hence the number of memberships exceeds the U.S. population). Another 7 million memberships can be found in producer and purchasing cooperatives. Credit unions, which are essentially banking cooperatives, have 92 million members. Electrical utility co-ops reach 42 million Americans. Agricultural cooperatives have three million members.
Read it at Energy Bulletin
The hidden power of coops
by Michael Shuman

Ann Pettifor interviewed by Renegade Economist

Renegade Economist with Ann Pettifor

Ann Pettifor: speech notes for presentation to the Just Banking Conference, Edinburgh, 20th April, 2012

This is a must read.

Read it at Debtonation: The Global Financial Crisis |
Ann Pettifor On Debt, Credit & The International Financial System
Ann Pettifor: speech notes for presentation to the Just Banking Conference, Edinburgh, 20th April, 2012
by Ann Pettifor

CMI — BEA Report Shows GDP Growth Slowing During 1Q-2012 to 2.20%

In their "advanced" estimate of the first quarter 2012 GDP, the Bureau of Economic Analysis (BEA) found that the annualized rate of U.S. domestic economic growth was 2.20%, down more than three-quarters of a percent from the fourth quarter of 2011. The vast bulk of the downturn was in commercial activities, with both fixed investments and inventories lowering the headline number substantially. Consumer spending on both goods and services improved slightly, and the ongoing contraction in governmental spending moderated somewhat. The BEA's bottom-line "real final sales" improved about a half-percent to an annualized growth rate of 1.61% -- hardly robust and certainly not the kind of numbers we would expect to see nearly three years into a recovery. [emphasis added]
Read it a Consumer Metrics Institute
BEA Report Shows GDP Growth Slowing During 1Q-2012 to 2.20%

The post contains a sectoral breakdown.

Analysis: Secretive far-right party taps into Greeks' anger, fear

In the port of Piraeus, dozens of young men with shaven heads and black t-shirts packed a small room one evening to hear Golden Dawn's dream of a Greece purged of foreigners, its borders sealed with landmines.
"We want all illegal immigrants out, we want to take their stench out of this place," said Frangiscos Porihis, an election candidate for the ultra-nationalist and highly secretive party.
"They shouldn't be here and they will leave one way or the other - the good or the bad way," he told the Piraeus meeting.
Read it at Reuters
Analysis: Secretive far-right party taps into Greeks' anger, fear 
By Renee Maltezou
(h/t Kevin Fathi via email)

Shades of the thirties.
Members say discipline and years of unwavering dedication are required to win acceptance. One said it can take up to three years to become a member - starting first as a supporter, then as trial-members before joining the "family".
"For the Communists we are Nazis, for the Socialists we are fascists and for the conservatives we are extreme right," said Nas, a Golden Dawn member who declined to give his last name. "Let them call me what they want. I do what I do with honor." 

Prison Industries: "Don't Let Society Improve or We Lose Business"

Stating the obvious. Too bad it needs to said.

Read it at Truthout
Prison Industries: "Don't Let Society Improve or We Lose Business"
By Dina Rasor | News Analysis, Truthout
(h/t Kevin Fathi via email)

Jim Cramer: "We can't take a Spain-like outcome off the table for the United States"

In general, I like Jim Cramer. I find him to be educated, enlightened and very entertaining. However, the comment he made this morning on CNBC, where he said that he could not take a "Spain-like-outcome" off the table when it comes to the United States, highlights just how deeply misinformed even the most highly regarded mainstream media pundits are when it comes to basic concepts about our economy. It is really, truly, eye-opening and frightening at the same time.

That Cramer would even consider lumping the United States in the same boat as Spain, when the former is a currency issuer while the latter is not, is sheer lunacy. It's absurd. No, it's worse, it's horribly, inexcusably, ignorant.

I do not for one second pretend that any of these people would even try to comprehend MMT. Believe me, I know--I've been doing TV for 18 years, with the last 10 spent at Fox and I've tried. Oh, how I've tried to get them to see the light. But we're not talking about making some quantum leap from the current, mainstream neoliberal view to a full-blown acceptance of MMT. All we're asking is that they acknowledge a very simple distinction that should have become absolutely, crystal clear after the comical U.S. downgrade by S&P last summer. Remember that? Yes, rates went DOWN...big time! The United States is not credit sensitive as an issuer of its own currency. When will these jerks get this through their thick heads?

Look, Cramer is no Rick Santelli. If anyone could understand this, it's him. He's a Harvard educated law school grad who worked at Goldman Sachs. For him to make a straight-faced comparison between the U.S. and Spain, especially in light of what we saw after the S&P downgrade last summer, is mind-boggling to me. I am having a hard time questioning his intelligence given his pedigree education, but he's giving me every reason to do so.

When I hear things like this it makes me think that it should be easy to make tons of money as an investor betting against these fools. Their views are based on nothing more than superstition and irrationality. Hell, it would seem that under those circumstances making a fortune should be as easy as taking candy from a baby. But then I am reminded of what the great, John Maynard Keynes once said: "The market can stay irrational a lot longer than most people can remain solvent."

Truer words were never spoken.

Ralph Musgrave — Three MMTers and Milton Friedman say government borrowing is pointless

So if three MMTers (Warren Mosler, Dan Kervick and me) all say the same, namely that government borrowing is pointless – not to mention Milton Friedman - I challenge anyone to contradict us!!!!
Read it at Ralphonomics

Three MMTers and Milton Friedman say government borrowing is pointless
by Ralph Musgrave

Add me to the list.

Insanity: CISPA Just Got Way Worse

Up until this afternoon, the final vote on CISPA was supposed to be tomorrow. Then, abruptly, it was moved up today—and the House voted in favor of its passage with a vote of 248-168. But that's not even the worst part.
Read the rest (and weep) at Tech Dirt
(h/t Kevin Fathi via email)

Higher Salaries: Costco's Secret Weapon

The research compares two well-known and very similar retailers in the United States:  Costco and Sam's Club.
The first, Sam's Club, pays employees an average of just over $11 per hour, and between 20-50 percent of its employees quit each year for various reasons. (I found conflicting data.)
Costco, however, pays employees an average of $17 per hour and replaces between 6-20 percent of its employees each year.  After four years with the company, a Costco cashier can make $40,000 salary plus another 10 percent of that in annual bonuses.Said another way, Sams Club pays less for salary -- but up to 350 percent more for recruiting, hiring, and training expenses than Costco.
Even more impressive are the differences in sales at the two companies.  At Costco, where higher-paid employees stick around longer (and thus are probably better trained, happier, and more knowledgeable about the store), sales average$814 per square foot.
At Sams Club?  You guessed it -- just $586 per square foot.
Read it at All Business
Higher Salaries: Costco's Secret Weapon
by David Worrell
(h/t beowulf in the comments)

Thursday, April 26, 2012

The Self-Made Myth

A new book makes a strong case that nobody ever makes it on their own in America.
The self-made myth is one of the most cherished foundation stones of the conservative theology. Nurtured by Horatio Alger and generations of beloved boys' stories, It sits at the deep black heart of their entire worldview, where it provides the essential justification for a great many other common right-wing beliefs. It feeds the accusation that government is evil because it only exists to redistribute wealth from society's producers (self-made, of course) and its parasites (who refuse to work). It justifies conservative rage against progressives, who are seen as wanting to use government to forcibly take away what belongs to the righteous wealthy. It's piously invoked by hedge fund managers and oil billionaires, who think that being required to reinvest any of their wealth back into the public society that made it possible is "punishing success." It's the foundational belief on which all of Ayn Rand's novels stand....
 Brian Miller and Mike Lapham have written the book that lays out the basic arguments we can use to begin to set things right. The Self-Made Myth: The Truth About How Government Helps Individuals and Businesses Succeed is a clear, concise, easy-to-read-and-use summary that brings forward a far more accurate argument about government's central role in creating the conditions for economic prosperity and personal opportunity.
Miller, the executive director of United For a Fair Economy, and Lapham, a co-founder of UFE's Responsible Wealth project, argue that the self-made myth absolves our economic leaders from doing anything about inequality, frames fair wages as extortion from deserving producers, and turns the social safety net into a moral hazard that can only promote laziness and sloth. They argue that progressives need to overwrite this fiction with the far more supportable idea of the "built-together reality," which points up the truth that nobody in America ever makes it alone. Every single private fortune can be traced back to basic public investments that have, as Warren Buffet argues in the book, created the most fertile soil on the planet for entrepreneurs to succeed. 
Read it at AlterNet
The Self-Made Myth: Debunking Conservatives' Favorite -- And Most Dangerous -- Fiction
by Sara Robinson | editor of AlterNet's Vision page

Costco Offers Mortgages

Costco wants to be your one-stop shop for everything you need in life, from groceries and cell phones to diamond rings and mortgages.
That's right: Costco wants to help you buy a home.In partnership with First Choice Bank and 10 other lenders, Costco is now offering mortgages, CNN Money reports.
After issuing more than 10,000 mortgages over the past year while testing the program, Costco now plans to market the mortgages more aggressively to its 66 million members, according to CNN Money....
Lauren Kutschka, Costco's manager of financial services, told CNN Moneythat Costco is also looking into offering auto and student loans. 
Read it at The Huffington Post
Costco Offers Mortgages To Homebuyers
by Bonnie Kavoussi

Sarah Palin: New child labor rules will cause ‘America to fail’

Read it at Raw Story

Sarah Palin: New child labor rules will cause ‘America to fail’
by Eric Dolan | editor for Raw Story

Without child labor the US cannot compete in the global economy? Really?

This woman is crazy.

Bob Dylan to receive Presidential Medal of Freedom

Yes, it's a big deal, especially at this time. And it's not going to hurt with the youth vote either. But this is no time to be cynical. Dylan deserves it. Kudos to the president.

Read it at Raw Story

Bob Dylan, Toni Morrison among 13 tapped for Presidential Medal of Freedom
by Agence France-Presse

Under Catholic pressure Paul Ryan backs away from Rand, Objectivism

Representative Paul Ryan (R-WI), when faced with a letter of condemnation by 90 Catholic faculty members at Georgetown University, has abruptly decided to back away from his famous endorsement of the works of controversial author Ayn Rand and her philosophy of “Objectivism.”  The congressman, who is scheduled to speak at the Catholic university today, is now emphasizing Christian philosophers and the writings of Pope Benedict XVI as the true exemplars of his world view over Russian émigré and atheist Rand.
A National Review profile from early Thursday said, “‘I reject her philosophy,’ Ryan says firmly. ‘It’s an atheist philosophy. It reduces human interactions down to mere contracts and it is antithetical to my worldview. If somebody is going to try to paste a person’s view on epistemology to me, then give me Thomas Aquinas,’ who believed that man needs divine help in the pursuit of knowledge. ‘Don’t give me Ayn Rand,’ he says.”Ryan, said the Review, is actually “a practicing Roman Catholic” and that “his faith and moral values shape his politics as much as his belief in freedom and capitalism does.”

Ryan went so far as to decry his affinity for the book Atlas Shrugged and its author as an “urban legend,” and cites it as proof that he’s “arrived in politics” that a false story is out there circulating about him.  He says the association of his name to Rand and her brand of capitalism-as-religion is “inaccurate” and “part of an effort on the left to paint him as a cold-hearted Objectivist.”
Pardon me while I laugh. (ROFL)

Read it at Raw Story
Under Catholic pressure Paul Ryan backs away from Rand, Objectivism
by David Ferguson | editor at Raw Story

The crack in the dike?

In Transition 2.0 — printing your own money, growing food, localising economies, and setting up community power stations

To mark the release of In Transition 2.0 — an inspirational film about communities printing their own money, growing food, localising their economies and setting up community power stations — I spoke to Rob Hopkins, co-founder of the Transition Network and Transition Totnes, about energy ownership, cooperative finance strategies, and how storytelling can change our expectations of ourselves and our communities.
Read it at Energy Bulletin
In Transition 2.0 — printing your own money, growing food, localising economies, and setting up community power stations
by Jonny Gordon-Farleigh

John Carney— The $1 Trillion Coin Solution to the Debt Ceiling

Yale’s constitutional law professor Jack Balkin has some innovative ideas about how to get around the debt ceiling. 
Read it at CNBC NetNet
The $1 Trillion Coin Solution to the Debt Ceiling
by John Carney | Senior Editor

Great that Jack Balkin is on board, but it was beowulf who proposed the idea initially and Joe Firestone who pushed it, and Balkin does give credit to "some commentators."

But, let's face it, Balkin's backing makes it likely that the president's team will pick it up and at least consider it.

Note that Prof. Balkin also asserts, "The "jumbo coin" and "exploding option" strategies work because modern central banks don't have to print bills or float debt to create new money; they just add money [reserves] to their customers' checking accounts [at the Fed with a few keystrokes]."

Dani Rodrick — Ideas over Interests

The most widely held theory of politics is also the simplest: the powerful get what they want. Financial regulation is driven by the interests of banks, health policy by the interests of insurance companies, and tax policy by the interests of the rich. Those who can influence government the most – through their control of resources, information, access, or sheer threat of violence – eventually get their way....
Yet this explanation is far from complete, and often misleading. Interests are not fixed or predetermined. They are themselves shaped by ideas – beliefs about who we are, what we are trying to achieve, and how the world works. Our perceptions of self-interest are always filtered through the lens of ideas.
Read the rest at Project Syndicate
Ideas over Interests
by Dani Rodrick | Professor, Harvard University Kennedy School of Government

There may be trouble with this like due to something amiss at Project Syndicate. I got in initially but am having difficulty now. UPDATE: Link working again now.

Matias Vernengo debunks the expectations and confidence fairies

There are confidence fairies and there is the inflation expectations fairy. It's a 4% fairy apparently. I'll explain. So Krugman correctly points out always that the more fundamentalist neoclassical economists (the Talibans that love price flexibility and instantaneous adjustment to full employment, not the moderates that also believe in a natural rate, but think it takes a while to get to it like Krugman himself) believe that the economy would recover if only a proper environment for investment was created. Hence, if confidence returned we would have a recovery.
They obviously invert causality between confidence and recovery. As noted by Marriner Eccles long ago: "confidence itself is not a cause. It is the effect of things already in motion. (...) What passed as a 'lack of confidence' crisis was really nothing more than an investor's recognition of the fact that new plant facilities were not needed at the time." Investment is the result of a growing economy, in which firms tend to adjust their capacity to demand. No demand for your goods no need to invest to create capacity to produce more. Plain and simple.
Read it at Naked Keynesianism
The inflation expectations fairy
by Matias Vernengo | Associate Professor of Economics,Univeristy of Utah

"If Paul Ryan Knew What Poverty Was, He Wouldn't Be Giving This Speech"

Rep. Paul Ryan (R-Wis.), chairman of the House budget committee, knew some Catholics were spoiling for a fight with him Thursday when he was scheduled to speak at Georgetown University, a Catholic institution. Nearly 90 faculty members and administrators sent him a letter expressing concerns with his recent comments that his proposed budget, which includes massive spending cuts to programs for the poor but not a single tax increase, was inspired by his Catholic faith.
"I am afraid that Chairman Ryan's budget reflects the values of his favorite philosopher Ayn Rand rather than the gospel of Jesus Christ," said Father Thomas Reese, a fellow at the Woodstock Theological Center at Georgetown, in a press release Tuesday. "Survival of the fittest may be okay for Social Darwinists but not for followers of the gospel of compassion and love."
Read it at Mother Jones
"If Paul Ryan Knew What Poverty Was, He Wouldn't Be Giving This Speech"
by  | Stephanie Mencimer | legal affairs and domestic policy correspondent, Mother Jones' Washington bureau

This is just the beginning of push-back by Christians against Randism, which is incompatible with Christianity.

Jared Bernstein — The Limits of the Fed 

They [Fed BoG] control interest rates.  In fact, they only directly control short term rates.  Indirectly, through the “twist” and QE, they can target longer term rates.  But that’s almost all she wrote when it comes to what’s under their direct control.
Don’t get me wrong—that ain’t nothin,’ especially in normal times.  But the price of capital isn’t so much the issue right now.  Borrowing’s cheap, it has been for a while, and corporate cash reserves are flush.  The missing ingredient is demand.  Without that, the Fed is pushing on a string.
Read it at On The Economy
The Limits of the Fed
by Jared Bernstein

Jared Bernstein gets it.

The May 2012 Insurrection

May 1968 was the first wildcat general strike in history … it spawn hundreds of occupations, campus uprisings and workplace disruptions globally … but then it fizzled. Maybe this May 2012 we won’t?
Read it at Adbusters

The May 2012 Insurrection
Tactical Briefing #30
posted by Culture Jammers HQ

Winterspeak — Economic Theory and Durable Goods

...people buy [durables] when money is cheap. If Monetarists want a mechanism by which interest rates impact the economy, this would be it. Low interest rates encourage consumer spending via horizontal credit expansion because they use the money to buy housing. That increase in AD then brings the economy into full employment.
However, when the fall in AD is caused by over-consumption of housing due to cheap money, offering more cheap money to buy those assets at their fully leveraged priced is truly pushing on a string. Even more than ZIRP.
Read it at
Economic Theory and Durable Goods
by Winterspeak

Monetary policy operates through the housing channel. Except when it doesn't, and then it just doesn't do much.

(Winterspeak asserts although housing is booked as investment,  it really acts more as a durable good for consumers.)

Jeff Cox — What Falling Milk Prices Say About an Economic Slowdown

Falling milk prices—particularly over the past decade—have been a warning signal for a slowdown, while rising prices have accompanied upturns in the economy, according to research from Nicholas Colas, chief market strategist at ConvergEx in New York.
 "That's good news for this high-profile consumer good and its effect on inflationary expectations," Colas said. "At the same time, milk prices have been cyclical since the Great Depression. The pullback in 2012 could therefore be a useful early warning sign about a slowing U.S., and global, recovery."

Read it at CNBC NetNet

What Falling Milk Prices Say About an Economic Slowdown
by Jeff Cox | Senior Writer

Other interesting stuff about price level in the post, too.

John Carney — New Jobs Growth Trend? Nonprofit Pursuit of Happiness

This is an important trend. Kudos to John for calling attention to it.

I have spent much of my professional life in the non-profit sector and although it is less remunerative, it is much more fulfilling on a number of counts. First, it is a lot less high pressure and stressful, in that the people in it are aware of the importance of lifestyle to health and happiness, which are the real wealth. Secondly, and related to this, the non-profit sector attracts a different sort of person than the for profit sector. Thirdly, social contribution is much more visible and tangible. Of course, it is not necessary to be employed in the non-profit sector to participate. There are plenty of opportunities to volunteer on a part-time or even occasional basis. Many even see this as a social responsibility.

Read it at CNBC NetNet
New Jobs Growth Trend? Nonprofit Pursuit of Happiness
by John Carney | Senior Editor

Occupy gearing up for a May 1 general strike

The Occupy movement is gearing up for general strike on May 1. I was handed this by one of the movement's members outside my office today on Wall Street. Here is an excerpt:

"The questions are simple. Why does a small group of humanity reap the efforts of billions? Why can this elite group poison the planet to further enrich themselves? Why do we accept a soulless social order built around the concept of people staying in line? Why do we allow armed police to beat and cage us if we step off that line?"

Take some time to read the rest. I think it's worth it. There are some well written thoughts.

Still Going........

---Mike Norman Economics---USD Net SAVINGS Clock

Paul Krugman — [David] Cameron’s Remarkable Achievement

Now Britain is officially in double-dip recession, and has achieved the remarkable feat of doing worse this time around than it did in the 1930s.
 Britain is also unique in having chosen the Big Wrong freely, facing neither pressure from bond markets nor conditions imposed by Berlin and Frankfurt.
Read it at The New York Times | The Conscience of a Liberal
Cameron’s Remarkable Achievement
by Paul Krugman

David Glasner — Wicksteed on the Value of Paper Money

Finally, I’ll just mention that in the Wealth of Nations Adam Smith off-handedly mentioned acceptability in payment of taxes as a condition for inconvertible money not to be worthless.  So the lineage of the idea, despite its somewhat disreputable and unorthodox associations, is really quite impeccable.
Read it at Uneasy Money
Wicksteed on the Value of Paper Money
David Glasner | FTC economist

Expands on Nick Rowe's mention of Wicksteed's Chartalism. Extensive quotes on Wicksteed's Chartalism, as well as his anticipation of the Coase theorem.

Paul Krugman — The Big Wrong

It’s Official: Keynes Was Right, says Henry Blodget. Recent election results in Europe seem to have raised consciousness in a way literally years of economic data couldn’t: the austerity doctrine that has ruled European policy is a big fat [policy] failure.
Read it at The New York Times | The Conscience of a Liberal
The Big Wrong
by Paul Krugman

Frank Pasquale — Why Do We Lack the Infrastructure that We Need?

(There is an online symposium on Brett Frischmann's book Infrastructure at Concurring Opinions. My contribution appears below.)
Brett Frischmann's book is a summa of infrastructural theory. Its tone and content approach the catechetical, patiently instructing the reader in each dimension and application of his work. It applies classic economic theory of transport networks and environmental resources to information age dilemmas. It thus takes its place among the liberal "big idea" books of today's leading Internet scholars (including Benkler's Wealth of Networks, van Schewick's Internet Architecture and Innovation, Wu's Master Switch, Zittrain's Future of the Internet,and Lessig's Code.) So careful is its drafting, and so myriad its qualifications and nuances, that is likely consistent with 95% of the policies (and perhaps theories) endorsed in those compelling books. And yet the US almost certainly won't make the necessary investments in roads, basic research, and other general-purpose inputs that Frischmann promotes. Why is that?
Lawrence Lessig's career suggests an answer. He presciently "re-marked" on Frischmann's project in a Minnesota Law Review article. But after a decade at the cutting edge of Internet law, Lessig switched direction entirely. He committed himself to cleaning up the Augean stables of influence on Capitol Hill. He knew that even best academic research would have no practical impact in a corrupted political sphere. 
Were Lessig to succeed, I have little doubt that the political system would be more open to ideas like Frischmann's. Consider, for instance, the moral imperative and economic good sense of public investment in an era of insufficient aggregate demand and near-record-low interest rates:
Read the rest at Balkiniztion
Why Do We Lack the Infrastructure that We Need?
Frank Pasquale

Important for understanding the developing trend, where the super-rich create their own socio-economic world and infrastructure, leading to a planet of slums, such as existed at the time Marx was writing.

Occupy The Progressive Movement: Why Occupy Should Embrace "Co-Optation"

An Occupy organizer asks: When established groups show up wanting to help, then who's really co-opting whom?
Almost immediately after a small band of activists first occupied Zuccotti Park in September of last year, many in the movement started expressing concern about potential co-option by more established and moderate forces. 
These concerns have become more central in 2012, an election year. Wariness is certainly warranted. But angst about an over-generalized sense of co-option may be an even bigger problem. We cannot build a large-scale social movement capable of achieving big changes without the involvement of long-standing broad-based institutions. OWS should actively and strategically forge relationships with many of these institutions, while preserving the role of OWS as an "outsider" force.
Read it at AlterNet
Occupy The Progressive Movement: Why Occupy Should Embrace "Co-Optation"
by Jonathan Matthew Smucker | Beyond the Choir

This is a important debate that this now going on in Occupy and opposed by many, especially the "black bloc." Many remember how the countercultural revolution of the Sixties and Seventies was eventually co-opted and, while successful as a cultural force, virtually evaporated as a political force for change. Yet, without engaging the mainstream and using some of its resources, it is difficult to achieve political objectives.

Pepe Escobar — How a Rising Block of Countries Will Challenge America

There's a rising new bloc on the planet: BRICS (Brazil, Russia, India, China, South Africa). What does that mean for America?
Read it at AlterNet
How a Rising Block of Countries Will Challenge America
by Pepe Escobar | roving correspondent for Hong Kong/Thailand-based Asia Times and analyst for Toronto/Washington-based The Real News

Pepe Escobar is an excellent reporter. Glad to see him getting wider coverage. This post is a must-read in terms of geo-politics and geo-strategy, as well as globalization going forward and the global economy of the future. There is a serious rift and potential clash developing between Global North (West) and Global South (East).

Some observations:
Still, for the moment the key problem they face is this: they don't have an ideological or institutional alternative to neo-liberalism and the lordship of global finance.
As Vijay Prashad has noted, the Global North has done everything toprevent any serious discussion of how to reform the global financial casino. No wonder the head of the G-77 group of developing nations (now G-132, in fact), Thai ambassador Pisnau Chanvitan, has warned of “behavior that seems to indicate a desire for the dawn of a new neocolonialism.” 
The usual self-description of the system there as “socialism with Chinese characteristics” is, of course, as mythical as a gorgon. In reality, think hardcore neoliberalism with Chinese characteristics led by men who have every intention of saving global capitalism.
At the moment, China is smack in the middle of a tectonic, structural shift from an export/investment model to a services/consumer-led model. In terms of its explosive economic growth, the last decades have been almost unimaginable to most Chinese (and the rest of the world), but according to the Financial Times, they have also left the country’s richest 1% controlling 40%-60% of total household wealth.
For all that military strength, however, it’s worth keeping in mind that this is distinctly a New World (and not in North America either).  Against the guns and the gunboats, the missiles and the drones, there is economic power.  Currency wars are now raging. BRICS members China and Russia have cordilleras of cash. South America is uniting fast. The Putinator has offered South Korea an oil pipeline. Iran is planning to sell all its oil and gas in a basket of currencies, none dollars. China is paying to expand its blue-water Navy and its anti-ship missile weaponry. One day, Tokyo may finally realize that, as long as it is occupied by Wall Street and the Pentagon, it will live in eternal recession. Even Australia may eventually refuse to be forced into a counterproductive trade war with China.
So this twenty-first century world of ours is shaping up right now largely as a confrontation between the U.S./NATO and the BRICS, warts and all on every side. The danger: that somewhere down the line it turns into a Full Spectrum Confrontation. Because make no mistake, unlike Saddam Hussein or Muammar Gaddafi, the BRICS will actually be able to shoot back.

Europe to relax 3-percent deficit limits. This could be very bullish, but bearish for euro.

Saw this on Warren Mosler's blog today.

So the word out of Europe today is that policy makers in Brussels are looking to back down on the 3% deficit limits.

This could be HUGE!! It would end austerity and allow “automatic stabilizers” to work.
The only problem is (as Warren points out), these countries are still revenue constrained because of their status as currency users, however, if the ECB keeps buying their bonds (and I believe it will), then the ECB BECOMES THE FUNDING AGENT FOR THESE COUNTRIES.

This is potentially a HUGE bullish development for Europe. It stops the economic collapse dead.
Wouldn't it be completely ironic, though, that as Europe ends its miserably failed experiment in austerity, the U.S. will embark on its own, ill-conceived and idiotic, “go it alone” austerity plan? How mind-numbingly dumb!!

P.S. Expanded deficit limits in Europe could finally be the catalyst that sends the euro down.

Sponsored Truths & Manufactured Consent

Is it that simple?  Is the world a stage for elite family & other concerns?  Does the concept of the divine right of royalty linger on as extended colonialism?

Many anthropologists will tell you there is class/clan competition WITHIN any culture.  If family groups and small tribes assemble into larger tribes, the existing groupings typically compete for process "space" in the growing aggregate (the corporate history of corporate GM is actually a classic example, as is royal court subterfuge).  The sub-groups compete essentially by jockeying to underfund & over-tax competing sub-groups.

Now we have another "sponsored" truth.

The Rise of China
"The Chinese economy is still growing far faster than the United States. These American companies are hoping to seize that opportunity to boost their bottom lines."

"Their" bottom lines?  What about the net, compound growth of the USA?   Does this imply that elite families & corporations here as well as worldwide would rather see the bulk of their own citizenry underfunded & over-taxed, in order to maintain their ill-gotten financial leverage?  For merchants, does nirvana still look like personally pilfering low-hanging fruit from distant sources while simultaneously constraining options for their own neighbors?    It was elucidated over a Billion years ago that that strategy - of cheating the aggregate - does not scale! Tom Jefferson & JM Keynes & amoebas all agree that the "merchant" knows no country except the ground he stands upon - and cannot scale up more perfect unions.

Is it possible that the way we calculate 'cost' in the lab or personal finance is not the way it's calculated in nature?   COUNT ON IT!!  This is so tiresome.  There are always even more options emerging, and failure to explore them at pace ... is death in any race between aggregates.

Does personal human wealth breed treason like no other social cause?   Shall we simply have done with it, and nominate Benedict Arnold for president?  And Quisling for VP?  Or, shall we ramp up the manufacturing of dissent?

To successfully adapt, or not to adapt.  Aye, that is still the question.  The answer, as always, seems to involve trusting but verifying that return-on-coordination is always insanely greater than solitary, uncoordinated hoarding.

National Review Spins for Rep. Paul Ryan

NRO (CAUTION: Extremely disturbing image of Rand at the top of this NRO page) out at 4:00 am this morning with some early spin on behalf of Rep. Paul Ryan, in advance of his speech to be given at Georgetown U. this morning, wrt his views on the atheist Ayn Rand and how her deranged and disgraceful philosophy has influenced him.  From the NRO:
Paul Krugman, the New York Times columnist, recently called Ryan “an Ayn Rand devotee” who wants to “slash benefits for the poor.” New York magazine once alleged that Ryan “requires staffers to read Atlas Shrugged,” Rand’s gospel of capitalism. President Obama has blasted the Ryan budget as Republican “social Darwinism.”
These Rand-related slams, Ryan says, are inaccurate and part of an effort on the left to paint him as a cold-hearted Objectivist. Ryan’s actual philosophy, as reported by my colleague, Brian Bolduc, couldn’t be further from the caricature. As a practicing Roman Catholic, Ryan says, his faith and moral values shape his politics as much as his belief in freedom and capitalism does.
Here is a video that although it includes only some quotations from others, at the end it includes actual video of Ryan speaking about his view of Rand's philosophy:

We report, you decide. ;)

From Ryan's namesake:  "Beware that no one shall be despoiling you through philosophy and empty seduction, in accord with human tradition, in accord with the elements of the world, and not in accord with Christ"  Col 2:8

Hey Paul, please just read the Scriptures brother.

Wednesday, April 25, 2012

Nick Rowe — Wicksteed, stocks and flows

Hmmm. That's starting to sound like a transactions demand for money function. But if we have a demand to hold money for transactions purposes, we can still get an equilibrium in which money is held and valued even if T(t) is always zero.

(Wicksteed said (HT David Glasner) that fiat money has value because the government requires it for payment of taxes. I'm saying that's not sufficient. And it's not even necessary, in the sense that if my local recycler accepted fiat money, even at a negligible price, that would be enough to replace T(t)>0 in ruling out the equilibrium in which fiat money has a price of zero.)
Read it at Worthwhile Canadian Initiative
Wicksteed, stocks and flows
by Nick Rowe

Seems like Nick is saying that the money supply is set exogenously by government whereas the operational reality is that in a system in which the central bank is the lender of last resort the money base is determined by demand for reserves for settlement and reserve requirements based on credit creation. Moreover, the size of the money supply (M2) is set endogenously by credit extension that creates credit money.

There is no doubt that money is an idea rather than a thing, that is, a human social construct that underlies a primary social, economic and financial institution. The state theory of money does not deny this and admits that credit money predates state money historically. Anthropologists have also observed that credit money grew out of social relationships involving reciprocity and trust.

The Chartalist claim is that state money, that is, currency, gets value from the necessity of the private sector to settle its government-imposed obligations with government when government only accepts is own liabilities as credits. This allows government to shift private assets to public use through currency expenditures.

Joe Romm — Obama: Climate Change Will Be A Campaign Issue

In a Rolling Stone interview published today, President Obama broke out of his self-imposed silence on climate change. He made some remarkable statements, including his belief that the millions of dollars pouring into the anti-science disinformation campaign will drive climate change into the presidential campaign.
Read it at Climate Progress
Obama Stunner: Climate Change Will Be A Campaign Issue, We Need to Do Much More To Combat It
By Joe Romm

Pavlina Tcherneva disputes Paul Krugman on Ben Bernanke

This is the conundrum: either he believes (as indicated by his research of the late 90s and early 2000s) that deficits are sustainable and cause a crowding in effect where the policy rate is under the direct control of the Fed, or he believes that they are not (as in his Congressional testimonies). Bernanke simply cannot argue it both ways. And we know well that in practice the operational reality is the former. In sovereign currency nations as in the US, deficits are infinitely sustainable, do not crowd out, and do not put upward pressure on interest rates.
So yes, I too have been unable to resolve Bernanke’s paradox. How is it possible for someone to hold two completely incongruent intellectual positions? Either he has been intellectually dishonest when appearing before Congress fueling the deficit phobia of policy makers, or he has become intellectually lazy and has not taken the time to rethink the crowding out dogma he has learned in grad school in the face of his later academic work and practical experience, which point all evidence to the contrary.
Read it at New Economic Perspectives
No, Mr. Krugman, Bernanke’s Conundrum is Completely Different
By Pavlina R. Tcherneva

Excellent analysis.

I would call it "the Bernanke mystery" instead of the Benanke paradox. Something is going on in his mind that is a mystery to analysis. Has he forgotten what he once knew, is he in denial, or he is just afraid to lead? It's a mystery.

Geithner: "We have been very aggressive in protecting the interests of American companies"

Just watched Geithner on an interview on CNBC talking about China and how the Administration has been "very aggressive" (his exact words) in protecting the interests of American companies.

Absent, however, was any mention of protecting the interests of American consumers.

So, companies have benefitted--a lot--in terms of much higher profits, but consumers have been the big losers as prices have increased and jobs have been cut.

Don't ever let someone tell you we've done away with welfare in America, because we haven't...we've just taken it away from the truly needy and given it big corporations and the rich in the form of policies that not only protect their interests, but give them direct government handouts.

Athens-based “Express” Dedicates Page in Its Sunday Edition to Levy Institute Research

The Levy Institute has announced its collaboration with the daily financial newspaperExpress, based in Athens, Greece. Beginning with its April 22 issue, Express will publish each week, on a specially designated page in its Sunday edition, articles, research summaries, and interviews by Levy Institute scholars and associates. The collaboration is a natural extension of the Institute’s recent undertaking in translating selected publications into Greek as part of its mission to disseminate its research findings to the global community, and as a gesture of solidarity with a nation under severe duress due to an unprecedented economic crisis. The editorial work for this collaborative project will be carried out by C. J. Polychroniou, a research associate and policy fellow at the Levy Institute.
Read it at Multiplier Effect
Athens-based “Express” Dedicates Page in Its Sunday Edition to Levy Institute Research
by Michael Stephens