Wednesday, October 31, 2012

Greg Palast — Harold Simmons: the GOP’s $50 million man

What is the Ice Man up to, giving each one of these guys enough money to beat the hell out of the other? I can’t claim to know everything in the Ice Man’s head. He’s playing multidimensional chess when I’m playing checkers. But, at the least, I know he’s teaching all the candidates to heel, roll over and beg.
In These Times
The Ice Man, Radioactive
Harold Simmons: the GOP’s $50 million man
Greg Palast

Beatrice Cherrier — What should every non-econ student know about economics?

Different take on teaching Econ 101 as the only course a student will take in economics based on what they will need to know and be expected to know.

INET | History of Economics Playground
What should every non-econ student know about economics?
Beatrice Cherrier | Assistant Professor, University of Caen

Nancy Duarte — Structure Your Presentation Like a Story

After studying hundreds of speeches, I've found that the most effective presenters use the same techniques as great storytellers: By reminding people of the status quo and then revealing the path to a better way, they set up a conflict that needs to be resolved.
Harvard Business Review | HBR Blog Network
Structure Your Presentation Like a Story
Nancy Duarte

Powerful narratives are also based on strong metaphors.

Noah Smith — The Secret to U.S. Growth in the 21st Century: More Asians


The Atlantic
The Secret to U.S. Growth in the 21st Century: More Asians
Noah Smith

Mike Kimel — The Economic System of the Apostles

Acts: "And all that believed were together, and had all things common; And sold their possessions and goods, and parted them to all [men], as every man had need."

Did Karl Marx read scripture?

Angry Bear
The Economic System of the Apostles
Mike Kimel

Lisa Pollack — Occupy is increasingly well-informed

Thin post, but Occupy made it into FT acknowledged as a serious player. Of course, Andy Haldane's recent endorsement had a lot to do with that. Occupy is not going away anytime soon and is now struggling for a seat at the table.

The Financial Times | Business
Occupy is increasingly well-informed
Lisa Pollack

Bill Mitchell— Fiscal austerity violates basic economic efficiency requirements

Economists like to tell students about efficiency. The concept – which really distils down to – zero waste (even though that term is loaded) – is drilled into undergraduates and graduates alike as a dogma that should not be violated. Most of the attacks on government intervention by the mainstream economists are couched in terms of efficiency – or the alleged lack of it. The seemingly objective framework that defines the orthodox approach to efficiency allows all the ideological indisposition towards government involvement in the economy to be discreetly hidden. But even then the mainstream do not consistently apply their own constructs. And when the empirical world violates the utopian vision (for example, when there is mass unemployment), the response is to either blame the government some more or redefine the violation away and continue on as if nothing was amiss. This sort of intellectual dishonesty has never been more apparent than in the current period as nations struggle with a deep and enduring crisis. This blog is about two examples of that – health care and youth unemployment.

Mainstream economics does not have a monopoly over concern about efficiency. Modern Monetary Theory (MMT) is also concerned about efficiency except the MMT approach provides a consistent conceptualisation of what zero waste actually means.
You will not be surprised to learn that the MMT appraoch is significantly different, in part because it is consistent, from the approach taken by the mainstream.
Bill Mitchell — billy blog
Fiscal austerity violates basic economic efficiency requirements
Bill Mitchell

Winterspeak — Misunderstanding the Financial Crises

I forget where I found this link, I think it was on an MMT blog and it was supportive towards the article. Having good MMT info on the Financial Times would be great, and I had not heard of Gary Gorton, so I was interested in reading what it said. Unfortunately, I don't agree with Gary.
Misunderstanding the Financial Crises

Harry Shearer Interviews Stephanie Kelton — Transcript: Stephanie Kelton Interview

Here's the transcript. Link to podcast, too, if you haven't heard it already.
Transcript: Stephanie Kelton Interview
Harry Shearer Interviews Stephanie Kelton

Paul Meli — Sectoral Balances within the Domestic Non-Government

There are many important laws that determine the behavior of various systems within the Universe but as far as economics is concerned, none is more important than the concept of a closed system.

From Wikipedia:

”In non-relativistic classical mechanics, a closed system is a physical system which doesn’t exchange any matter with its surroundings, and isn’t subject to any force whose source is external to the system. A closed system in the classical mechanics sense would be considered an isolated system in thermodynamics.”
What does this mean in the context of a monetary economy? What could properties of a physical system have in common with a system based largely on the relationships between stocks and the flows between them? It turns out that some math systems behave according to the same rules that constrain elemental physical particles, i.e. the concept of the conservation of matter holds mathematically for the “conservation” of currency units within the system.
If we define the closed system as the universe of state-backed US dollar assets and liabilities, including state-issued bonds held by the public, it means that the net dollar assets existing in the economic system cannot change over some period of time t without an add or subtract from a source external to the system.
New Economic Perspectives
Sectoral Balances within the Domestic Non-Government
Paul Meli

Hurricane Sandy Photos

Photo montage of some of the storm damage at Yahoo! here.

Tuesday, October 30, 2012

David Talbot — Given Tablets But No Teachers, Ethiopian Kids Teach Themselves

With 100 million first-grade-aged children worldwide having no access to schooling, the One Laptop Per Childorganization is trying something new in two remote Ethiopian villages—simply dropping off tablet computers with preloaded programs and seeing what happens.
The goal: to see if illiterate kids with no previous exposure to written words can learn how to read all by themselves, by experimenting with the tablet and its preloaded alphabet-training games, e-books, movies, cartoons, paintings, and other programs.
Early observations are encouraging, said Nicholas Negroponte, OLPC’s founder, at MIT Technology Review’s EmTech conference last week.
The devices involved are Motorola Zoom tablets—used together with a solar charging system, which OLPC workers had taught adults in the village to use. Once a week, an OLPC worker visits the villages and swaps out memory cards so that researchers can study how the machines were actually used.
After several months, the kids in both villages were still heavily engaged in using and recharging the machines, and had been observed reciting the “alphabet song,” and even spelling words. One boy, exposed to literacy games with animal pictures, opened up a paint program and wrote the word “Lion.”
The experiment is being done in two isolated rural villages with about 20 first-grade-aged children each, about 50 miles from Addis Ababa. One village is called Wonchi, on the rim of a volcanic crater at 11,000 feet; the other is called Wolonchete, in the Rift Valley. Children there had never previously seen printed materials, road signs, or even packaging that had words on them, Negroponte said.
Earlier this year, OLPC workers dropped off closed boxes containing the tablets, taped shut, with no instruction. “I thought the kids would play with the boxes. Within four minutes, one kid not only opened the box, found the on-off switch … powered it up. Within five days, they were using 47 apps per child, per day. Within two weeks, they were singing ABC songs in the village, and within five months, they had hacked Android,” Negroponte said. “Some idiot in our organization or in the Media Lab had disabled the camera, and they figured out the camera, and had hacked Android.”
Given Tablets But No Teachers, Ethiopian Kids Teach Themselves
David Talbot for MIT Technology Review

Whitney Tilson — Why I’m Voting for Obama Again

Stating the obvious. Is Romney a "real conservative," as he sold himself to the GOP base. Or is he a moderate, as he is selling himself to the independent undecideds? When etch-a-sketch becomes shapeshifting.
Why I’m Voting for Obama Again
Whitney Tilson

Dean Baker — Inequality: The silly tales economists like to tell

If economics was an honest profession, economists would focus their efforts on documenting the waste associated with protectionist barriers for professionals. They devoted endless research studies to estimating the cost to consumers of tariffs on products like shoes and tires. It speaks to the incredible corruption of the economics profession that there are not hundreds of studies showing the loss to consumers from the barriers to trade in physicians' services. If trade could bring down the wages of physicians in the United States just to European levels, it would save consumers close to $100 billion a year. 
But economists are not rewarded for studying the economy. That is why almost everyone in the profession missed the $8 trillion housing bubble, the collapse of which stands to cost the country more than $7 trillion in lost output according to the Congressional Budget Office (that comes to around $60,000 per household).
Few if any economists lost their 6-figure paychecks for this disastrous mistake. But most economists are not paid for knowing about the economy. They are paid for telling stories that justify giving more money to rich people. Hence we can look forward to many more people telling us that all the money going to the rich was just the natural workings of the economy. When it comes to all the government rules and regulations that shifted income upward, they just don't know what you're talking about.
Al Jazzera
Inequality: The silly tales economists like to tell
Dean Baker | Co-founder of the Centre for Economic and Policy Research

Andy Haldane — Occupy movement was right

The Occupy Movement has found an unlikely ally in a senior Bank of England official, Andrew Haldane, who has praised protesters for their role in triggering an overhaul of the financial services sector.
Haldane, who oversees the City for the central bank, said Occupy acted as a lever on policymakers despite criticism that its aims were too vague. He said the protest movement was right to focus on inequality as the chief reason for the 2008 crash, following studies that showed the accumulation of huge wealth funded by debt was directly responsible for the domino-like collapse of the banking sector in 2008....
Raw Story
Bank of England official: Occupy movement was right about global recession
Phillip Inman | The Guardian

First hand report of someone at New Putney:

Our Kingdom — power and liberty in Britain
Occupy and its ally in the Bank of England
Niki Seth-Smith

CNBC: Companies Are Sitting on More Cash Than Ever Before

Interesting post at CNBC that reveals [Ed: as usual without adequate explanation but I digress] S&P 500 companies are on track to soon accumulate record amounts of "cash", excerpt:
Amid a lackluster earning season that has featured many companies missing sales expectations, cash balances have swelled 14 percent and are on track toward $1.5 trillion for the Standard & Poor's 500, according to JPMorgan.
This is interesting in light of some recent discussions here at MNE about "savings" and "investment". These "cash" balances building up at these corporations represent simply the record of fulfilled savings desires by the managements of these companies and as are all types of "savings", are part of the ex post record of demand "leakage" or demand "destruction" in the economies that these companies operate in.

The fact that world economies continue to underperform with output and employment gaps is signaling that sectors outside of the non-government corporate sector (addressed here in the article), which are the non-government household and external sectors, continue to be denied enough "cash" balances by the government sector (fiscal deficits are too small) to satisfy the savings desires of these other sectors.  As MMT (Warren) says: "Taxes are too high" for our given size of government.

This non-government corporate sector seems to remain in the first position as far as which sector is best enabled to satisfy savings desires with "cash" as the non-government household sector has to spend their income first on necessities such as gasoline, food, utilities, medical, etc (great portions of which go towards the revenues of these S&P companies); and can only satisfy their own savings desires with any balances or "cash" they have  left over after the purchase of these necessities.  Which I'm sure many households have no such balances in left over after spending on necessities under our current US fiscal policy.

So in this "muddle through" economy with too tight fiscal and the corresponding marginally positive growth, it can easily appear that the lower income demographic segment of the non-government household sector remains left with just the "scraps from the rich man's table".  In this case, the "rich man" can appear to be  mostly the non-government corporate sector who are in the best position to be able to save or retain a surplus of the "cash" that governments are making available.  But the real problem remains these negligent morons we have occupying positions of authority in economic policy making who continue to refuse to provide the "cash" to satisfy all non-government savings desires.

Daniel Little — The philosophy of economics

The philosophy of economics intersects with several different areas of philosophy, including the philosophy of science, ethics, and social philosophy. (Dan Hausman is the leading expert in the philosophy of economics. His The Inexact and Separate Science of Economics is a recent contribution.) The field is concerned with methodology, values, and substance.

The primary focus of the field is on issues of methodology and epistemology—the methods, concepts, and theories of economists. What kind of knowledge is provided by the discipline of economics? How is economic knowledge justified or confirmed? How does it relate to other social sciences and the bodies of knowledge contained in those disciplines?

Second, philosophy of economics is concerned with values—the values of human welfare, social justice, and the tradeoffs among priorities that economic choices require. Economic reasoning has implications for justice and human welfare; more importantly, economic reasoning often makes inexplicit but significant ethical assumptions that philosophers of economics have found it worthwhile to scrutinize.

Finally, the philosophy of economics is concerned with substance—what might be called the ontology and theoretical space of economics. Here philosophers have expressed interest in the institutions and structures through which economic activity and change take place, and have turned a critical eye to the assumptions economists often make about institutions and social processes. Are there alternative institutions through which modern economic activity can proceed? What are some of the institutional variants that exist within the general framework of a market economy? What are some of the roles that the state can play within economic development so as to promote efficiency, equity, productivity, and growth?....
Understanding Society
The philosophy of economics
Daniel Little | Chancellor, University of Michigan at Dearborn

MMT enters policy discussion in the UK

Reading Paul's call for increased spending on childcare might suggest that he's conflating two separate issues. He says:
"So how will the extra money be found? I’m a sensible post-Keynesian who enjoys the benefit of Modern Monetary Theory insight, and so I understand better than IPPR appear to that the best way to invest is through deficit spending. That would, well, just work."
Now, there is a case for deficit spending. And there is a case for increased spending on good childcare.
Stumbling and Mumbling
Cuts vs efficiency
Chris Dillow | Investors Chronicle (UK)

Lynn Parramore — 6 Top Economists Explain Which President Is More Likely to Speed the Next Financial Crisis

Five out of six say Romney is a worse bet on crisis-avoidance. But Obama has big challenges to address if re-elected.
6 Top Economists Explain Which President Is More Likely to Speed the Next Financial Crisis
Lynn Stuart Parramore

Monday, October 29, 2012

Ed Kilgore — How Mitt Romney Wants to Make America Like China

Near the end of a transcript of a Mitt Romney speech to donors revealed by MoJo’s David Corn (who brought the famous Boca Moment to our attention), Romney makes this plenary comment about the United States and China that goes a little deeper than claims of currency manipulation: 
"When I heard the head of Coca-Cola say that the business environment in America is less hospitable than the business environment in China, I knew we had a problem. I want to make sure that America has the most attractive business conditions in the world—that every entrepreneur once again says, “I want to be an American.” Whether it’s energy or regulation or tax policy or labor policy or legal policy or health care policy—I want America to be the best place for business."
This is interesting because Mitt is looking at a country with a wildly different history, political system, culture and economy and focuses strictly on what he clearly considers to be the cost advantages it offers to businesses . Yeah, China’s a semi-communist authoritarian gerontocracy with a horrendous human rights record, but man, look at those low wages and lack of regulation! I’m sure Mitt also admires China’s “labor policy,” which has no room for free unions, and its “legal policy,” which insulates companies from liability for their behavior.
How Mitt Romney Wants to Make America Like China
Ed Kilgore | The Washington Monthly

Of course, this is not just Mitt Romney talking. Mitt is expressing the desire of "job creators," who are the big donors to political campaigns, for a playing field tilted against workers so that adopt America can adopt Sam Walton's business model:  "I pay low wages. I can take advantage of that. We're going to be successful, but the basis is a very low-wage, low-benefit model of employment." — Attributed in Adam L. Penenberg, "Why Google Is Like Wal-Mart", Wired, 21 April 2005

How does Sam Walton's business model work when it doesn't pay a living wage? People get second or third jobs, and government welfare and Medicaid pick up the difference. See, for example, Taxpayers Should Stop Subsidizing Walmart by Tina Dupuy. Of course, this doesn't scratch the surface of corporate welfare at Walmart or other welfare in corporate America.

But we need to "broaden the tax base."

Oh, and then there's the bit about rolling back regulation (which led to the financial crisis). I have a professor friend who was telling me that he was travelling to Beijing to give courses on a periodic schedule. I said that it sounded great. He replied that it was the worst thing he had ever agreed to in his life, the pollution was so bad. What was that about abolishing the EPA to free up business?

William K. Black: CNBC’s Quick uses Clinton to aim at Krugman, but shoots herself in the foot

At NEP, UMKC Professor William Black follows up Mike's post last week dissecting a recent Forbes article by CNBC host Becky Quick and other out of control high jinks at this cable channel that more and more seems to be spinning out of control in it's ersatz mission to provide accurate and edifying information to it's viewers seeking information about public banking and investments, economic policy and the related political issues facing our nation.

Prof. Black chronicles and details faulty logic, a lack of knowledge of macroeconomics, inability to discern contradiction, unbalanced reporting and even misapplication of Christian social doctrine.  Quite a wide ranging rebuke.  Those at CNBC would do well to seriously reflect on the issues that Prof. Black identifies here.

Tip for CNBC: Give Mike a call and see if he can come in there to get you all up to speed on what is REALLY happening on austerity, the fiscal balance, and in general, how the US economy operates under our monetary system that utilizes a free floating, non-convertible state currency.  And then at least you will be able to offer your viewers some truth and accuracy in reporting as NO ONE you have either on staff or as a regular guest knows how our monetary system operates and how this effects our nation's economy.  YOUR RATINGS WILL IMPROVE.

Koch Brothers and the Road to "Citizens United"

Greg Palast: When billionaires break the law, they get the law changed
Real News Network
Koch Brothers and the Road to "Citizens United"
Paul Jay Interviews Greg Palast — Transcript
(h/t Yves Smith at Naked Capitalism)

Alan Kirman — What’s the use of economics?

A step in the right direction, but not anywhere near large enough. No recognition of the significance of monetary economics, for instance.
What’s the use of economics?
Alan Kirman | Professor Emeritus at the Universite Paul Cezanne in Aix-en Provence, Director of Studies at the Ecole des Hautes Etudes en Sciences Sociales, (EHESS) and member of the Institut Universitaire de France

Buddhist monk declared world’s happiest man

As he grins serenely and his burgundy robes billow in the fresh Himalayan wind, it is not difficult to see why scientists declared Matthieu Ricard the happiest man they had ever tested.
The monk, molecular geneticist and confidant of the Dalai Lama, is passionately setting out why meditation can alter the brain and improve people’s happiness in the same way that lifting weights puts on muscle.
“It’s a wonderful area of research because it shows that meditation is not just blissing out under a mango tree but it completely changes your brain and therefore changes what you are,” the Frenchman told AFP.
Ricard, a globe-trotting polymath who left everything behind to become a Tibetan Buddhist in a Himalayan hermitage, says anyone can be happy if they only train their brain.
Neuroscientist Richard Davidson wired up Ricard’s skull with 256 sensors at the University of Wisconsin four years ago as part of research on hundreds of advanced practitioners of meditation.
The scans showed that when meditating on compassion,
Ricard’s brain produces a level of gamma waves — those linked to consciousness, attention, learning and memory — “never reported before in the neuroscience literature”, Davidson said.
The scans also showed excessive activity in his brain’s left prefrontal cortex compared to its right counterpart, giving him an abnormally large capacity for happiness and a reduced propensity towards negativity, researchers believe. 
Research into the phenomenon, known as “neuroplasticity”, is in its infancy and Ricard has been at the forefront of ground-breaking experiments along with other leading scientists across the world....
Much more of interest in the full article.

The Raw Story
Buddhist monk declared world’s happiest man
Agence France-Presse

Kind of undercuts the assumption of "pursuit of happiness" in terms of maximum utility based on measurement of units of consumption, and the scarcity thinking on which neoclassical economics is based.

Lars Syll — S = I ?

Lars calls upon Simon-Wren-Lewis to provide a simple explanation of S=I.

Lars P. Syll's Blog
S = I ?
Lars P. Syll | Professor, Malmo University

Is This Why Most CEOs Won't Make Good Policy Leaders?

Lack of situational awareness?

Romney on disaster relief: ‘We can’t afford to do those things’

They don't recognize altered context? Isn't that rather like walking outside ... and noticing that you're no longer inside? What's more basic than noticing context?

In this case, a Presidential candidate doesn't know the difference between the ISSUER & the USERS of sovereign, fiat currency. That's more than a bit surprising. Unfortunately, the other candidate doesn't either, and neither party's platform illustrates adequate understanding of that basic, operational point.  Ergo, it's up to the electorate.

How, pray tell, does a group run out of fiat?  Just as a point of logic.  Can we resurrect dictionaries, and agree upon terms?

There's a better way to mix domain expertise into policy development. We need to find it. FAST!

Otherwise, watching policy development will continue to be like watching old Wile E. Coyote & Roadrunner cartoons.

Sunday, October 28, 2012

Puntland Part Time Regulatory Farce

SWJ on More Piracy Near Somalia

Why does this sound so similar to ... well, to EVERYTHING we read in the press?

Here's just one, example, paraphrasing of the quote highlighted at SWJ:

"WASHINGTON — It seemed like a simple idea: In the chaos that is [Washington, DC], create a sophisticated, highly trained [economic] force that could finally defeat the pirates terrorizing the [finance] lanes off the [Wall Street] coast.

But the creation of the Puntland [Parttime Regulatory Farce] was anything but simple. It involved dozens of [retired political] mercenaries and the shadowy [lobbyist] firms that employed them, millions of dollars in secret payments by the United [Grab Campaignirates], a former clandestine officer with the Central Intelligence Agency, and the [Princelings], the billionaire former [employees] of [the too big to fail banks] who [were] residing at the time in all the [key policy agencies]."

How do YOU spell SNAFU mess?   A majority of the idiots blindly groping this elephantine situation actually like what they feel, and can't comprehend that it's gonna fall over and squash 'em?  They're so busy enjoying how their own, undersized gropings feel that they don't even want to absorb perspectives outside their addiction?   Whaddya do when you wake up in a den of hopium addicts?  Kick open the doors & windows to let sunlight & fresh air in ... or hold your breath & run for the exit?   Decisions, decisions.

New Economic Thinking and Models

Brad DeLong calls attention to Howard Davies: "Economics in Denial", to which Stephanie Kelton alerted me. Davies writes:
In an exasperated outburst, just before he left the presidency of the European Central Bank, Jean-Claude Trichet complained that, “as a policymaker during the crisis, I found the available [economic and financial] models of limited help. In fact, I would go further: in the face of the crisis, we felt abandoned by conventional tools.”

Trichet went on to appeal for inspiration from other disciplines – physics, engineering, psychology, and biology – to help explain the phenomena he had experienced. It was a remarkable cry for help, and a serious indictment of the economics profession, not to mention all those extravagantly rewarded finance professors in business schools from Harvard to Hyderabad.
So far, relatively little help has been forthcoming from the engineers and physicists in whom Trichet placed his faith, though there has been some response. Robert May, an eminent climate change expert, has argued that techniques from his discipline may help explain financial-market developments.
Epidemiologists have suggested that the study of how infectious diseases are propagated may illuminate the unusual patterns of financial contagion that we have seen in the last five years.
These are fertile fields for future study, but what of the core disciplines of economics and finance themselves? Can nothing be done to make them more useful in explaining the world as it is, rather than as it is assumed to be in their stylized models?
Professor Davies then proceeds to mention the Institute for New Economic Thinking (INET) and its recent conference where some new ideas were put forward, as well as recent developments at the Bank of England.
But it is not clear that a majority of the profession yet accepts even these modest proposals. The so-called “Chicago School” has mounted a robust defense of its rational expectations-based approach, rejecting the notion that a rethink is required. The Nobel laureate economist Robert Lucas has argued that the crisis was not predicted because economic theory predicts that such events cannot be predicted. So all is well.
The EMH fared no better than REH, But Eugene Fama is also unphased.
On the contrary, the University of Chicago’s Eugene Fama has described the notion that finance theory was at fault as “a fantasy,” and argues that “financial markets and financial institutions were casualties rather than causes of the recession.” And the efficient-market hypothesis that he championed cannot be blamed, because “most investing is done by active managers who don’t believe that markets are efficient.”
Davies concludes by noting that a reworking of the profession's economic models is in order.

Paul Krugman then jumped into object to the charge Davies makes that economics lacks suitable models.
Brad DeLong points us to Howard Davies, who accuses economists of being in denial, and of having had nothing useful to say in the crisis. The first part is definitely true for much of the profession; the second charge is just false. The truth is that basic macroeconomics, the stuff that is still taught in textbooks, has been very, very useful in this crisis. The problem is that half the profession and most policy makers turned their back on this kind of economics.
But Professor Krugman doesn't tell us what those models are. His own favorite model is the Hicksian ISLM, which Hicks later distanced himself from the way it was being used — as Lars Syll reminds us.

So Professor Krugman tells us that new thinking is unnecessary.
What that says, however, is that while we obviously need new thinking — we always do! — the biggest problem these days has been the rejection of knowledge we used to have.
In an article in Thought and Action Fall 2009, James K. Galbraith notes that Professor Krugman does not mention one person that got it right. Professor Galbraith rephrased the question in his article, which was entitled Who Are These Economists Anyway? Dirk Bezemer wrote a similar article in 2009, entitled "No One Saw This Coming": Understanding Financial Crisis Through Accounting Models (June 2009). Professor Bezemer summarizes it in a VOX post.

However, neoclassical economists and neoclassical synthesis Keynesians not only don't cite any of these economists, but also avoid considering them even when they are brought up. I was a bit nonplussed by this, since I had brought this up on several occasions in blog comments, only to be ignored or to get some perfunctory excuse.

Then I ran into a Twitter exchange yesterday that alerted me to what seems to be going on. Noah Smith rejected any "commonsense approach," which I realized is code for "no model." It's also a criticism Paul Krugman often makes. I could not understand that since Wynne Godley predicted the crisis using his stock-flow consistent macro model based on sectoral balances.

Matias Vernengo then brought in Godley and Professor Smith apparently took a look. (I had mentioned Godley to him on several occasions previously in the comments at Noahpinion.) Here's the Twitter feed:
Noah Smith ‏@Noahpinion: If macroeconomics had real forecasting power, people using "common sense" would be laughed off the stage.
Naked Keynes [Vernengo]: @Noahpinion Bezemer shows in this paper that some models (e.g. Godley's) did pretty well …
Noah Smith ‏@Noahpinion: @NakedKeynes Hmm...didn't predict timing, size, or features of crash...but not bad.
Naked Keynes ‏@NakedKeynes: @Noahpinion agreed, but stock-flow models emphasize the interaction of spending flows & debt accumulation essential for macro analysis
Noah Smith ‏@Noahpinion: @NakedKeynes Maybe. Or maybe it'll turn out not to be very useful to include that as a variable... ;-)
So the upshot is that anything advanced with "no (neoclassical) model" doesn't count as "scientific"in the sense of predictive, as a hypothesis must be. Therefore, no one actually saw the crisis coming since they didn't have a credible model — and even a broken clock is correct twice a day.

Too bad for Professor Godley, and so much for new economic thinking.

Arturo Garcia — Ex-ACORN CEO: Voter suppression a response to ‘browning’ of America

The former CEO of the activist group ACORN called the Republican party’s ongoing voter-suppression efforts a response to what she called the “browning” of America Sunday.

“This is about demographics,” Bertha Lewis said on Up With Chris Hayes. “Their base just swallows this whole. Who is that base? That is a base that is shrinking in this country. This country is browning. People of color are going to be the new majority in this country. Then, you have folks out there who see this as an absolute threat.”
The Raw Story
Ex-ACORN CEO: Voter suppression a response to ‘browning’ of America
Arturo Garcia

Sometimes it is necessary to state the obvious.

The ironic thing is that people lower down the socio-economic scale tend to have more children. Moreover, the more intelligent people are, the fewer children have have. Natural evolutionary forces along with the march of time become the great leveler.

Lars Syll — Keynes on why saving doesn’t finance investment

Quote from the General Theory you may want to Evernote.

Lars P. Syll's Blob
Saving doesn’t finance investment
Lars P. Syll, Malmo University

John Aziz — The Burden Of Government Debt

It is relatively easy to calculate what the monetary burden of government debt is. Credit inheritance and debt inheritance are not distributed uniformly. The credit inheritance is assumed strictly by bondholders, and the debt inheritance is assumed strictly by taxpayers. Each individual has a different burden, equalling their tax outlays, minus their income from government spending (the net tax position).
For an entire nation, everyone’s individual position is summed together. In a closed economy where the only lenders are domestic, the intergenerational monetary burden is zero. But that is by no means the entire story.
First, debts to foreign lenders are a real monetary burden, because the interest payments constitute a real transfer of money out of the nation. 
Second, while there may be little or no debt burden for the nation as a whole, interest constitutes a transfer of wealth between citizens of the nation, specifically as a transfer payment from future taxpayers to creditors. This adds up, at current levels, to nearly half a trillion of transfer payments per year from taxpayers to creditors. So while the intergenerational burden may technically add up to zero for the nation, it will not for individuals. The real burden is huge transfers from those who pay the tax to those who receive the spending, and those who receive the interest. So who loses out?
The Burden Of Government Debt
John Aziz
(h/t Zero Hedge)

Lord Keynes — Mises on Rational Economic Planning under Syndicalism and “Economic Calculation” in Keynesian Economies

When Mises and Hayek were making their argument against central planning and command economies, their focus was Soviet communism, that is, Marxist-Leninist Stalinism. Thankfully, that historical period is now over and has been declared a failure.

Some followers of Mises and Hayek now seek to apply that critique to contemporary systems in which government is an institutional player economically. Does that original criticism hold? Lord Keynes argues, no.

Social Democracy for the 21st Century
Mises on Rational Economic Planning under Syndicalism and “Economic Calculation” in Keynesian Economies
Lord Keynes

Michel Bauwens —The Historical Origins of Inequality

Below, Peter Turchin discusses the book by Robert Bellah. Religion in Human Evolution which in turn refers to Boehm’s Hierarchy of the Forest, a classic on hunter-gathering egalitarianism.
This is a must-read review from Peter Turchin’s article, Religion and Empire in the Axial Age. (an Invited Article for Religion, Brain & Behavior.)
P2P Foundation Researching, documenting and promoting peer to peer practices
The Historical Origins of Inequality
Michel Bauwens

Paul Krugman excoriates Robert Samuelson for "mystical thinking"

 What’s really going on here, as far as I can tell, is a modern version of the 18th century physiocratic notion that only agriculture is real, that everything else is fluff on top. And we really shouldn’t be seeing a rebirth of that sort of nonsense in the 21st century. If you believe that we should have fewer schoolteachers and firefighters — or that education should be privatized — make that case. Don’t try to hide your prejudices under a mystical doctrine in which important, productive jobs somehow don’t count if they come from a place with a .gov email address.
The New York Times | The Conscience of a Liberal
The New Physiocrats
Paul Krugman | Professor of Economics, Princeton University

A deft thrust to the heart. While we may disagree with Professor Krugman over some aspects of monetary economics, he is a master of the take-down.

Dean Baker — Why Big Bucks Donors Don't Want President Obama to Champion Social Security

But there is another set of economic considerations affecting the politics of social security. These considerations involve the economics of the political campaigns and the candidates running for office. The story here is a simple one: while social security may enjoy overwhelming support across the political spectrum, it does not poll nearly as well among the wealthy people – who finance political campaigns and own major news outlets. The predominant philosophy among this group is that a dollar in a workers' pocket is a dollar that could be in a rich person's pocket – and these people see social security putting lots of dollars in the pockets of people who are not rich.
Cutting back benefits could mean delays in repaying the government bonds held by the Trust Fund. The money to repay these bonds would come primarily from a relatively progressive income tax revenue. The wealthy certainly don't want to see changes like raising the cap on wages that are subject to the social security tax, which is currently just over $110,000.
For this reason, a candidate who comes out for protecting social security can expect to see a hit to their campaign contributions. They also can anticipate being beaten up in both the opinion and news sections of major media outlets.
Why Big Bucks Donors Don't Want President Obama to Champion Social Security
Dean Baker | Co-director of the Center for Economic and Policy Research

Saturday, October 27, 2012

Warren Mosler's "Soft Currency Economics II" and Randy Wray's MMT Primer are now available

Warren Mosler's Soft Currency Economics II is now available for purchase as a Kindle ebook for $2.99. It is free to Amazon Prime members.

While you are there, pick up a copy of The Seven Deadly Innocent Frauds of Economic Policy. It's only a buck in the Kindle edition.

And if you haven't already ordered it, get a copy of Randy Wray's just published Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems while you are at Amazon. This is a reworking of the MMT primer series Randy put up incrementally at New Economic Perspectives over the last year. The paperback is only $28.85 with free shipping in the US.

That's quite a deal for under $35.00.

GDP - The Warning Signs From Exports

The importance of this shift in the U.S. from away from being the epicenter of global production and manufacturing to a service and finance based economy should not be overlooked. This transition is responsible for the issues that are impeding economic growth in the U.S. today from structural unemployment, declining wage growth and lower economic prosperity.
Zero Hedge
GDP - The Warning Signs From Exports
Lance Roberts | Street Talk Live

The sectoral balances make it clear that unless the government steps in to offset the fall in domestic production and production for export, the economic situation in the US will deteriorate. But neoliberal ideology dictates against that.

Food production — Simple is beautiful

Hydroponics at work.
Most of his rooftop is given over to an aquaponic system, which produces food by linking fish tanks of tilapia with gravel-filled planters.
The integrated system feeds the water from the fish tanks into the plant beds, where Abu Ahmed’s crops — lettuce, peppers, broccoli, celery and herbs — are fertilised by waste produced by the tilapia.
As the water trickles through the gravel, the plants absorb nutrients from the fish waste, cleaning the water, which then replenishes the tanks.
“The idea really was to help the poorest people in Gaza be able to grow some of their own food, and healthy food, grown without pesticides,” explains Mohammed El Shatali, the project’s deputy manager.
The Raw Story
Fish and vegetables grow without soil on Gaza rooftops
Agence France-Presse

See also:

Drip Irrigation
The 2012 World Food Prize will be awarded to Dr. Daniel Hillel for his role in conceiving and implementing a radically new mode of bringing water to crops i­­n arid and dry land regions - known as “micro-irrigation.”
Dr. Hillel’s pioneering scientific work in Israel revolutionized food production, first in the Middle East, and then in other regions around the world over the past five decades. His work laid the foundation for maximizing efficient water usage in agriculture, increasing crop yields, and minimizing environmental degradation.
The World Food Prize
2012 Laureate

Sonya Ross and Jennifer Agiesta — Racial Views: Poll Shows Majority Harbor Prejudice Against Blacks

 The US is more polarized racially now than in 2008.
Racial attitudes have not improved in the four years since the United States elected its first black president, an Associated Press poll finds, as a slight majority of Americans now express prejudice toward blacks whether they recognize those feelings or not.
Those views could cost President Barack Obama votes as he tries for re-election, the survey found, though the effects are mitigated by some people's more favorable views of blacks.
Racial prejudice has increased slightly since 2008 whether those feelings were measured using questions that explicitly asked respondents about racist attitudes, or through an experimental test that measured implicit views toward race without asking questions about that topic directly.
In all, 51 percent of Americans now express explicit anti-black attitudes, compared with 48 percent in a similar 2008 survey. When measured by an implicit racial attitudes test, the number of Americans with anti-black sentiments jumped to 56 percent, up from 49 percent during the last presidential election. In both tests, the share of Americans expressing pro-black attitudes fell.
"As much as we'd hope the impact of race would decline over time ... it appears the impact of anti-black sentiment on voting is about the same as it was four years ago," said Jon Krosnick, a Stanford University professor who worked with AP to develop the survey.
Most Americans expressed anti-Hispanic sentiments, too. In an AP survey done in 2011, 52 percent of non-Hispanic whites expressed anti-Hispanic attitudes. That figure rose to 57 percent in the implicit test. The survey on Hispanics had no past data for comparison.
The AP surveys were conducted with researchers from Stanford University, the University of Michigan and NORC at the University of Chicago.
The Huffington Post
Racial Views: Poll Shows Majority Harbor Prejudice Against Blacks
Sonya Ross and Jennifer Agiesta

American politics

The Raw Story
Bill Maher's Mitt Romney Warning: 'When You Elect Mitt You're Electing Every Right-Wing Nut He's Pandered To In The Last 10 Years'

The Huffington Post
Lawrence Wilkerson, Former Colin Powell Aide, Blasts Sununu, GOP, As 'Full Of Racists'
Peter Finocchiaro

The Huffington Post
Obama: Deficit Reduction Panel Right On Revenues, Wrong On Defense Cuts
"I've said to folks, I'll wash (House Speaker) John Boehner's car, I'll walk (Republican Senate leader) Mitch McConnell's dog, I'll do whatever is required to get this done," Obama said in an interview with radio host Michael Smerconish that was released on Friday."The key that the American people want from us right now is for us to tackle some big challenges that we face in a common-sense, balanced, sensible way," the president said.
The headlines above reveal the fundamental GOP strategy of currying to its base, which is liberally sprinkled with extremists and effectively purged of moderates like Powell and Wilkerson. To the degree that the GOP prevails, those voices will have access to the corridors of power and also dues to collect.

On the other hand, President Obama is assiduously running from the "center," splitting the difference between left and right as he sees it. Actually, the majority of people want to see the deficit cut and the debt reined in but not by lowering taxes on the rich and cutting social benefits. But that is not the way the president sees it, apparently.

Is the country actually center to far right, or is it that the major donors are, and neither party is willing to buck them?

What this means practically is that the left is left with out in the cold without a voice, and no dues to collect since the centrists know that with such an extremist GOP, their base will come along no matter what, the consequences of lossing being so dire.

The upshot is that the country will be governed either from the hard or center right over the next four years. This has social, political and economic implications, of course, but the primary issue is the lack of a viable left in US politics.

This means that the best the country can likely hope for is a grand bargain in the case of an Obama with a worst case scenario of a GOP win resulting in the solidification of a far right judiciary for several generations.

Could e-voting machines in Election 2012 be hacked? Yes

Could e-voting machines in Election 2012 be hacked? Yes. (via The Christian Science Monitor)
Rapid advances in the development of cyberweapons and malicious software mean that electronic-voting machines used in the 2012 election could be hacked, potentially tipping the presidential election or a number of other races. Since the machines are not connected to the Internet, any hack would not…

Lars Syll — Econometrics with Gretl [It's free]

Thanks to Allin Cottrell and Riccardo Lucchetti we today have access to a perfect tool for doing and teaching econometrics – Gretl. And, best of all, it is totally free!
Lars P. Syll's Blog
Econometrics with Gretl
Lars P. Syll | Professor, Malmo University

Randy Wray — Cross Border Lending and Imbalances in Euroland

Randy examines the meaning of "imbalance."

Economonitor | Great Leap Forward
Cross Border Lending and Imbalances in Euroland
L. Randall Wray | Professor of Economics, UMKC

Friday, October 26, 2012

Dr Éoin Clarke — It's official. The first privatised NHS [UK] hospital is failing.

On the 1 August, Circle Health celebrated the 6 month anniversary of its take over of the first NHS Hospital with a sequenced blitz of good news stories. The BBC swallowed them up, unquestioningly, and reurgitated Circle press releases like they were Papal decrees. The Daily Telegraph did likewise. For a flavour of what they reported, you can see (here, here, and here). They pieces can be best summed up as follows "We are performing so amazing at Hinchingbrooke that we deserve to be given more NHS hospital".
Today, less than 3 months on, that argument is dead. Circle Health have failed to deliver at Hinchingbrooke Hospital in ways that have even surprised me....
The Green Benches
It's official. The first privatised NHS hospital is failing.
Dr Éoin Clarke

Noam Chomsky does Adam Smith

"Who Owns the World?"
Actually, a good answer to this was given years ago by Adam Smith, someone we’re supposed to worship but not read. He was—a little subversive when you read him sometimes. He was referring to the most powerful country in the world in his day and, of course, the country that interested him, namely, England. And he pointed out that in England the principal architects of policy are those who own the country: the merchants and manufacturers in his day. And he said they make sure to design policy so that their own interests are most peculiarly attended to. Their interests are served by policy, however grievous the impact on others, including the people of England.
But he was an old-fashioned conservative with moral principles, so he added the victims of England, the victims of the—what he called the "savage injustice of the Europeans," particularly in India. Well, he had no illusions about the owners, so, to quote him again, "All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind." It was true then; it’s true now.
Chomsky: America Acts Like It Owns the World, While Endangering the Planet from Nuclear War and Climate Change
Noam Chomsky | Professor (Emeritus) in the Department of Linguistics & Philosophy at MIT

Lord Keynes — Fisher on Debt Deflation by Lord Keynes

Short summary of Irving Fisher on debt-deflation.

Social Democracy for the 21st Century
Fisher on Debt Deflation
Lord Keynes

David M. Rothschild — Understanding How Polls Affect Voters

Confirming past studies, we find strong evidence of an overall bandwagon effect; people become more supportive of policies that have more general support. We further find that both social acceptance and social learning drive the bandwagon effect. However, the effect of social learning is significantly and substantially stronger than that of social acceptance. Thus, the main reason that people conform to majority opinion in the political domain is that they believe there is information about the quality of the candidates or policies to be learned from mass support. We find no evidence for the third mechanism -- that people conform because they want to reduce cognitive dissonance related to not supporting a candidate that will likely win or policy that will likely be implemented.
The idea of the bandwagon effect seems disheartening for democracy if conformity pressures silence minority opinions. However, this research has given us a reason for optimism; people seem to be conforming not only because they see normative value in being part of the majority but also because they believe that there is information in collective opinion. Citizens want to be informed and the collective wisdom of their fellow citizens is just one source of information on which they have learned to rely.
Understanding How Polls Affect Voters
David M. Rothschild | PhD in Applied Economics at the University of Pennsylvania’s Wharton School, Economist with MicroSoft Research-NYC, and a fellow at the Applied Statistics Center at Columbia.

Christopher Ketcham — Monopoly Is Theft

The antimonopolist history of the world’s most popular board game
Harper's Magazine | The Stream
Monopoly Is Theft
Christopher Ketcham

Our Man in Vermont Keeps up the Good Work

Bernie Sanders Exposes 18 CEOs who took Trillions in Bailouts, Evaded Taxes and Outsourced Jobs

These are among those same who now say we have to balance our fiat. (Whatever the heck THAT means!)

Overall, we're developing good tactics, but we're still far short of effective, scalable strategy, policy and campaign design. Declaring defeat may be honest, but still leaves work to do.

Whatever YOU are thinking, please up the audacity at least 10x, and act yesterday, not tomorrow.

Giuliani: If contraception is covered, ‘it’s only fair’ to provide Viagra

Democrats are way down with white men. Rudy has just given them a winner. Will they pick it up and run with it?

Hey, "bread and circuses" worked for the Romans. I'll bet "contraception and Viagra" will work even better.

And as the comedians are already pointing out, being for rape and against sex doesn't sound like a political winner.

Lilleputian Brains Redefine Poverty

Poverty? What Poverty

Let's see, "poor" people may also have subprime mortgage, auto, furniture & student loans they can't repay either? Not to mention credit card limits they'll never repay?

Say ... doesn't that sound a lot like the sharecropper business model?  Or lifelong serfs tied to the coal company's store?

Who knew that NeoCon capitalism means Central Planning! (By business "owners" run amok.)

Seems that the only time WE fail is when we collectively allow presumed process owners to think they actually own social processes. Didn't Churchill say that was a General rule about war? :)

In unrestrained capitalism, there's nothing like capturing the customer.
(And then underutilizing human capital.)

And, so much for owning land as a guarantee!

No matter what a host achieves, the parasite's goal is to own the process for owning it.

Anyone who can't escalate social immune defenses to whatever level needed, can't compete in the host/parasite evolutionary spiral (especially when your own family will always be the source for some of it's own parasites)!

Much of the time, even our own left & right hemispheres are their own worst enemies, so practiced coordination is our only salvation path.

Every process is too important to be left to the presumed process owners! Can we go back to teaching that to all Lilleputians in Kindergarten? And reinforcing it throughout their lives?  Without the return on coordination, we'll doom our entire population to being poorer than they need to be.  Indeed, what part of relativity do the 1% not understand.  Being the richest 1% in a constrained population demonstrates only a poverty of imagination.  Those poor rich people!

Stephanie Kelton — Pete Peterson Has Won

As Stephanie intimates, this is the politics of fear, pure and simple. It's the same hyper-emotional politics that is depriving Americans of their constitutional liberties in the name of fighting drugs, and terror, and undermining their future in the name of preventing US bankruptcy.

It's carefully crafted, well-financed, and ruthless. And Stephanie is right, they are winning, with leaders of both parties in the tank and the leadership of the left clueless and resistant to learning there might be a better way. Lookin' bad not only on the economic front but also on the social and political front as well. This is not going to end well for America.

New Economic Perspectives
Pete Peterson Has Won
Stephanie Kelton | Associate Professor of Economics at the University of Missouri-Kansas City and Director of Graduate Student Research at the Center for Full Employment and Price Stability

A rising supply of money does not mean inflation is coming

Becky Quick chimes in: CNBC anchor lets loose a totally brainless rant against Krugman

Just when you thought there weren't any more ill-informed people left to spew out their nonsense, CNBC anchor Becky Quick chimes in and writes this mind-numbingly dumb piece in Fortune Mag attacking Paul Krugman.

The New York Times columnist and Nobel Prize-winning economist recently wrote a column attacking a bipartisan proposal to reduce the nation's debt problems, arguing, "We're not facing any kind of a fiscal crisis." He maintains that President Barack Obama, if reelected, should reject calls to resurrect the debt-reduction blueprint.

The only problem with Krugman's critique? It is hard to find anyone who actually agrees with him. He's certainly not getting assent from Alan Simpson and Erskine Bowles, who headed the panel that crafted the ideas Krugman is now attacking. Nor will the economist find much support from the 44 CEOs of Fortune 500 companies who are now advocating the plan. And most notably, perhaps, he's not charming former President Bill Clinton, for whom Bowles served as chief of staff. Clinton's office provided me with the following statement when I called for comment. It's a damning retort to Krugman -- and a bold statement about a plan the Obama administration has failed to embrace, even though the President commissioned it:

"While everyone can find things to disagree with in the recommendations of the Simpson-Bowles commission, I believe it got some big things right: The debt will become a much bigger problem when normal economic growth returns and causes interest rates to rise; passing a credible 10-year plan now will keep the government's borrowing costs much lower than they will be without one; it's important not to impose austerity now before a growth trend is clearly established, because as the austerity policies in the eurozone and the U.S. show, that will slow the economy, cut jobs, and increase deficits; and any credible deficit-reduction plan requires three things -- spending reductions, revenue increases, and economic growth."

Quick hauls out the old, "if no one says what you're saying, you must be wrong," attack.

They said that to Christopher Columbus and Copernicus and the Wright Brothers, Becky.

And the staple, "If we don't get out debt in order interest rates will rise and how will we be able to pay it," garbage.

These people are paid millions of dollars to sit there and say this shit, folks.

Derek Thompson — The Dirty Secret of Debt-Hating CEOs: They Need Big Deficits to Live

The big red gash you see at the far right? That's the contribution of government borrowing to corporate profit margins since the recession hit.

The Atlantic
The Dirty Secret of Debt-Hating CEOs: They Need Big Deficits to Live
Derek Thompson | Senior Editor, Business
(h/t Stephen Ewald via Twitter)

Bill George — Mindfulness Helps You Become a Better Leader

Ever since the financial crisis of 2008, I have sensed from many leaders that they want to do a better job of leading in accordance with their personal values. The crisis exposed the fallacies of measuring success in monetary terms and left many leaders with a deep feeling of unease that they were being pulled away from what I call their True North.
As markets rose and bonus pools grew, it was all too easy to celebrate the rising tide of wealth without examining the process that created it. Too many leaders placed self-interest ahead of their organizations' interests, and ended up disappointing the customers, employees, and shareholders who had trusted them. I often advise emerging leaders, "You know you're in trouble when you start to judge your self-worth by your net worth." Nevertheless, many leaders get caught up in this game without realizing it.
The Harvard Business Review | HBR Blog Network
Mindfulness Helps You Become a Better Leader
Bill George | Professor of Management Practice at Harvard Business School and former chair and CEO of Medtronic

Bill George reminds of two factors involved in developing authenticity and becoming a "real person" — a moral compass and a quiet mind. And he points out how maintaining a quiet mind is necessary in following one's moral compass.

Simon Wren-Lewis — A political economy argument for economic policy delegation

Good idea or throwing democracy under the bus? Looks like the later to me.

mainly macro
A political economy argument for economic policy delegation
Simon Wren-Lewis

Bill Mitchell — Sectoral balances – Part 3

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text by the end of this year. Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

This is the third part in Chapter 6 on Flow-of-Funds and Sectoral Balances. The first two installments were:
▪ Sectoral balances – Part 1
▪ Sectoral balances – Part 2
This blog builds directly onto Part 2.
A graphical framework for understanding the sectoral balances
Bill Mitchell — billy blog
Sectoral balances – Part 3
Bill Mitchell

The Fall of Babylon and the Babylonian Unit of Account

I was skimming a paper linked to in Tom's Bookstaber thread below and came across a reference to this document that analyses some archaeological records from ancient Babylon.

The purpose of the paper was to analyse price patterns exhibited by certain commodities [Ed: sigh...] but perhaps more interesting to MNE readers may be what it reveals about the unit of account or "money" or monetary system that Babylon was using during the period under investigation (652 BC forward).
Archaeological excavations started in 1899 by Robert Koldewey have uncovered astronomical diaries, written in cuneiform on clay tablets, from the period 652 B.C. to 69 A.D. Since the tablets contain celestial observations, all information inscribed on them is dated, including records of the weather, the level of the Euphrates River, socio-political events and market quotations of six commodities: barley, dates, mustard (cascuta), cress (cardamom), sesame and wool. The commodity prices are expressed in weight quantities that could be purchased per shekel of silver, recorded three times a month.
The Babylonians were using weight measures of the "Noble Metal" silver, as their unit of account and apparently as their "money" or coins or their physical unit of exchange. The unit being the "shekel"  a weight measure that is popularly thought to have been based on the weight of a certain number of grains of barley mandated by some governmental authority.

This monetary arrangement itself looks like it was a key factor in the downfall of Babylon, as the Prophet Isaiah wrote:
17 Behold Me rousing against them the Medes, who are not accounting silver, And gold - they are not delighting in it.   (Isaiah 13:17)
Here, we can see from Isaiah's account that Babylon's use of weight measures of silver became a relative disadvantage to them versus apparently a different approach used by the Medes; and ultimately took them down.

The monetary systems we humans design and use to facilitate and account for exchange between ourselves are perhaps the most important aspects of our economic policies we are authorized to implement.

Looking back now at the 20th century, we can see that there for sure was a lot of economic development and of course the historic high levels of destruction. But one thing we should not overlook here in the west is that we somehow became able to throw off the yoke of these so-called "precious" metals, weight measures of which were for centuries used as our medium of exchange between ourselves.

FDR and Richard Nixon, two US Presidents delivering a knockdown left-right combination to the head across several decades against these metals. Metals that somehow continuously seek to establish themselves as a chaos inducing medium of exchange between we humans.... have we reached the ten count yet I wonder.

Thursday, October 25, 2012

Caijing — China Replaces U.S. to Be World’s Largest Investment Recipient in First Half of 2012

China replaces the U.S. to be the world’s largest recipient of foreign investment in the first half of 2012 despite a decline in Foreign Direct Investment (FDI) inflows, according to the Global Investment Trends Monitor released at Thursday’s UN Conference on Trade and Development....

Global foreign direct investment inflows reached US$668 billion in the first half of 2012, a decline of 8 per cent compared with the same period of 2011, according to the report.
The decline in global FDI inflows was due to increased uncertainty in the global economy, marked by fears of an exacerbation of the sovereign debt crisis in Europe and a slowdown of growth in major emerging market economies, the report explained.
The US$61 billion fall was mainly caused by a decline of US$37 billion in inflows to the United States and a US$23 billion fall in inflows to BRIC countries – Brazil, Russian Federation, India and China.
China Replaces U.S. to Be World’s Largest Investment Recipient in First Half of 2012

Bruce Wilson — Almost 1.4 Million Pledge For Jesus as Write-In Candidate in 2012, as Disgruntled Evangelicals Vent Their Anti-Mormon, Anti-Obama Ire founder Bill Keller makes a big call to "say 'no' to Satan this November."
Almost 1.4 Million Pledge For Jesus as Write-In Candidate in 2012, as Disgruntled Evangelicals Vent Their Anti-Mormon, Anti-Obama Ire
Bruce Wilson |

Mike Lofgren — How Democracies Die

Mike Lofgren compares the present-day dysfunctional US with the French Third Republic.

How Democracies Die
Mike Lofgren

The Schiff-Rogers-Faber Hail Mary about to sink another famous hedgie

Another in a long line of famous hedge fundies is about to bite the dust and I couldn't be any more pleased to learn that it's this pompous blowhard, Hugh Hendry. It seems that ol' Hugh has run out of ideas so he's opted for the Schiff-Rogers-Faber-Bass Hail Mary, which is, short-Treasuries and S&P and buy gold trade.

In his most recent missive, Hendry says he "has no idea where the stock market is going to be, but he's long gold and short S&P." Just like that. That's how simple these guys make it. Some REAL investing acumen let me tell you. Ohhhh yeahhhh! Did I hear someone say, blindfolded monkey throwing darts at a dartboard? You might as well.

Hendry has become another in a long line of True Believers and this trade is their cross that they bear. For Hendry I'm sure it'll be the biggest Hail Mary of his career and we may not see him again after this, but from his remarks he seems dead set on sacrificing himself at the altar of failed Austrian economics.

Schiff and Jim Rogers and most likely Kyle Bass and Marc Fah-ber have already imploded on this position. If they haven't, personally, then their clients have for sure because they've been preaching this comically ignorant trade for years, displaying a level of cluelessness that dwarfs anything in the known economic universe. (And that's quite an achievement when you consider what's out there.)

It's no wonder why guys like Schiff, Rogers and Faber write books or sell investment advice because they clearly can't make money on their own in the markets. Remember, George Soros said that Jim Rogers was not a good investor. I submit that the luckiest thing that ever happened to Rogers was his association with Soros, but now I blame Soros for having created this jerk and putting me through the unpleasant experience of having to see his fat, bloated, face on TV or listen to his drivel whenever he makes an appearance. I get physically ill, I swear.

At least Hugh Hendry doesn't wear bowties.

Rick Bookstaber — A Crack in the Foundation of Economics -- More Readings

Last year I did a post on a mathematical error that has dictated the direction of important work in economics, and more especially finance. The discovery of this error, by U.K. mathematician Ole Peters, has slowly gained some recognition, though for some reason the journal where the original paper was published has not been willing to publish this correction.

At its root the error is obscure -- as would inevitably be the case for it to have persisted for so long and for its incorrect conclusion to be relied on by such luminaries as Paul Samuelson and Kenneth Arrow.
Rick Bookstaber
A Crack in the Foundation of Economics -- More Readings

circuit — Bill Vickrey and Alan Blinder on the burden of the national debt

Alan Blinder on the blindingly obvious. "...the bonds that will be issued to cover deficits will almost always mature in less than 10 years, a time frame within which most of today's taxpayers will still be around to pay the bills. So intergenerational aspects of present-value budget constraints are mostly irrelevant."

But the post is mostly about Vickrey.

Anatole Kaletsk — Is a revolution in economic thinking under way?

The radical idea of depriving banks of their money-creating function, like the idea of helicopter money, was first proposed by conservative Chicago economists – Henry Simons and Irving Fisher – in 1936. A distinguished conservative pedigree will not make the loss of seignorage rights acceptable to bank lobbyists any more than it makes helicopter money acceptable to conventional central bankers. But if global economic stagnation continues, public patience with conventional responses will run out – and ideas that now seem revolutionary may become conventional wisdom.
Is a revolution in economic thinking under way?
Anatole Kaletsky

As deleveraging drags out and neoliberal nonsense fails to distract, the natives are getting restless.

Dirk Ehnts — Golddämmerung

Wolfgang Münchau has it right in his article in the SPIEGEL. A legend is created on one end of the political spectrum about Germans getting ripped off in the financial markets by evil foreigners. That legend is spun on the same day that ECB president Mario Draghi visits the German Bundestag (federal parliament) to explain his proposals.  Hans-Werner Sinn and his TARGET-2 nonsense hits exactly the same chord. Grexit is the plan, and it will be sold as betrayal. The preparations in Germany for returning to nationalism are gaining speed, driven by the unwillingness of both politicians and the financial sector to tell the truth about the German Exportweltmeister system. Net exports led to a portfolio with more and more non-performing loans from the periphery, and this – together with the birth defects of the euro – is what led us into the crisis.
A Grexit and then an exit of more euro zone members would lead to high unemployment in Germany. The export sector would find itself priced out of markets as the new currencies will all devalue against the euro (or the deutschmark). Once again, international finance would be the scapegoat for German mass unemployment after a financial crisis.

Golddämmerung in Germany
Dirk Ehnts | Berlin School for Economics and Law

Michael Stephens — Announcing the Levy Institute Master of Science in Economic Theory and Policy

Starting in fall 2013, the Levy Economics Institute will begin offering theMaster of Science in Economic Theory and Policy, a two-year degree program designed to meet the preprofessional needs of undergraduates in economics and finance. Headed by Senior Scholar and Program Director Jan Kregel, this innovative program draws on the expertise of Institute scholars and select Bard College faculty, and emphasizes empirical and policy analysis through specialization in one of four key research areas: macroeconomic theory, policy, and modeling; monetary policy and financial structure; distribution of income, wealth, and well-being, including gender equality and time poverty; and employment and labor markets.
Multiplier Effect
Announcing the Levy Institute Master of Science in Economic Theory and Policy
Michael Stephens

Felix Salmon — CEOs’ self-serving deficit manifesto

In other words, the letter basically just says “please cut our taxes, raise taxes on everybody else, and cut the benefits they get from Medicare, Medicaid, and Social Security, which are programs we individually don’t rely upon”. It’s gross self-interest masquerading as public statesmanship.
It’s also the latest example of the absolutely enormous influence of Pete Peterson on the public debate. Peterson’s extremely well-funded and highly-focused concentration on fiscal issues has turned worrying about the national debt into a bipartisan pastime, to the point at which debate moderators can simply assume that the national debt in general, and entitlements in particular, are an enormous and urgent problem, and then ask the candidates how they’re going to fix this huge problem which we can all agree exists. The public just nods along.
But the fact is that nothing is remotely so obvious. The really huge and important and urgent issue facing the US right now is the problem of unemployment, and specifically of long-term unemployment.
Reuters | Opinion
CEOs’ self-serving deficit manifesto
Felix Salmon

Although Salmon's diagnosis is good, his etiology and treatment solution is bonkers.
A plan to stabilize the debt would be a welcome thing; we could get a lot of the way there by capping deductions, a la Romney, and then putting in a few Pigovian taxes on things we don’t want, like carbon emissions or high-frequency trading. And if you want to strengthen Social Security, Medicare, and Medicaid, then one way of doing that is to go the European route and pay for them with a VAT. But nobody is suggesting that as an option.

Peter Cooper — Couple of Links to MMT Blogs

Add Bulgaria and Greece to the MMT blog list. Welcome aboard.

Couple of Links to MMT Blogs
Peter Cooper

Wednesday, October 24, 2012

My RT appearance today

Simon Johnson — Too Big To Handle

In the discussion of whether America’s largest financial institutions have become too big, a sea change in opinion is underway. Two years ago, during the debate about the Dodd-Frank financial-reform legislation, few people thought that global megabanks represented a pressing problem. Some prominent senators even suggested that very large European banks represented something of a role model for the United States.
In any case, the government, according to the largest banks’ CEOs, could not possibly impose a cap on their assets’ size, because to do so would undermine the productivity and competitiveness of the US economy. Such arguments are still heard – but, increasingly, only from those employed by global megabanks, including their lawyers, consultants, and docile economists.
Everyone else has shifted to the view that these financial behemoths have become too large and too complex to manage – with massive adverse consequences for the wider economy. And every time the CEO of such a bank is forced to resign, the evidence mounts that these organizations have become impossible to manage in a responsible way that generates sustainable value for shareholders and keeps taxpayers out of harm’s way.
Wilbur Ross, a legendary investor with great experience in the financial services sector, nicely articulated the informed private-sector view on this issue. He recently told CNBC, “I think it was a fundamental error for banks to get as sophisticated as they have, and I think that the bigger problem than just size is the question of complexity. I think maybe banks have gotten too complex to manage as opposed to just too big to manage.”
Project Syndicate
Too Big To Handle
Simon Johnson | former chief economist of the IMF, professor at MIT Sloan, and a senior fellow at the Peterson Institute for International Economics

David Rothschild and Chris Wilson — As goes February, so goes the nation

Back in February, when the Signal predicted that President Barack Obama will win re-election with 303 electoral votes, we wrote that "while campaigns and candidates matter, they don't matter all that much. Despite the varying quality and positions of the campaigns and candidates over the last 10 presidential elections, variables beyond their immediate control describe the outcome very well."
We won't know if our model of predicting elections is any good for another two weeks. We do know that it has held remarkably steady. The reams and reams of information about the election that have been revealed in the past eight months—for example, who the Republican candidate is—have barely shifted the political reality of the race. In fact, the only difference between February and now is that we think Virginia is now leaning in Mitt Romney's favor.
Yahoo News |The Signal
As goes February, so goes the nation
David Rothschild and Chris Wilson | Predictwise

Nate Silver — The Virtues and Vices of Election Prediction Markets

Nate on polls, prediction markets, and methodology.

The New York Times | Five Thirty Eight
The Virtues and Vices of Election Prediction Markets
Nate Silver

See also:

I will be on "Capital Account" on RT Network today at 4:30pm ET

I will be on "Capital Account" on RT Network today at 4:30pm ET. Tune in!

Here it is.

Nicloe Foss — Japan Is Not A Good Example Of How Deflation Typically Plays Out

Japan is not a good example of how deflation typically plays out. As Ilargi points out, they were an exporting powerhouse exporting into the biggest consumption boom the world has ever seen. They also had a very large pile of money to burn through building their four lane highways from nowhere to nowhere, since they were the world's largest creditor when their bubble burst in 1989. This is clearly not our situation.
No one will be exporting their way out of a global economic depression. In contrast, exporters are going to feel the pain big time as their markets dry up. We can expect trade wars and protectionism to abound. Take note Germany, Scandinavia, Australia, New Zealand etc etc.
We have had the inflation, only instead of a currency hyperinflation, we experienced a 30 year credit hyper-expansion. Either one amounts to an expansion of money plus credit compared to available goods and services, and is therefore inflation. Credit is equivalent to money on the way up, but not on the way down. Credit loses 'moneyness' and credit instruments are massively devalued in a great deleveraging. This is deflation by definition and it is already underway. Debt monetization is nothing in comparison with the scale of the excess claims to underlying real wealth that stand to be eliminated.
The Automatic earth
Japan Is Not A Good Example Of How Deflation Typically Plays Out
Nicloe Foss (Stoneleigh)
(h/t Naked Capitalism)

Barbara Shelly — Commentary: Health insurance and the savage doctrine of personal responsibility

It seems like poor form to spit on the graves of dead people, but such are the passions inspired by our health care debate.
Last week I wrote that, contrary to what Mitt Romney has said in his campaign, Americans do die for lack of health insurance. Every day, in fact.
Oh, the fury. Emails and telephone calls ranged from the generic “you are an idiot” to a reader’s account about a woman who died of leukemia after passing up COBRA insurance because she didn’t want to pay $400 a month.
“You may report that she died because of lack of insurance,” my correspondent wrote. “I believe she might have died anyway, but if it’s anyone’s fault it was her own for failing to exercise personal responsibility.”
The deceased was her sister.
A strain running deep in the American psyche will always want to shrug off the burden of a social compact in favor of the personal responsibility argument. I’m all for personal responsibility myself, but, honestly, we’re talking about people’s lives here.
Commentary: Health insurance and the savage doctrine of personal responsibility
Barbara Shelly | The Kansas City Star

Tim Johnson — Ethics and Finance: The Role of Mathematics

I am wary of the sectarian divisions in economics, but I feel my thesis leans heavily towards certain aspects of Post-Keynsian thought, specifically relating to the non-neutrality of money and having to deal with ontological uncertainty. More broadly, I think the paper is a clear argument against the fact/value dichotomy in economics and is aligned with McCloskey's project promoting virtue ethics within economics.

I hope the thesis sits within Pielke's "honest broker" classification. The thesis is an apologia for the use of mathematics in finance, which includes an argument legitimising speculation, suggestin advocacy. However it also provides a framework, in the context of virtue ethics, for when speculation is legitimate. I believe it contributes to being an "honest broker" in that it opens the debate and recognises that science is implicitly based on values, and if we are to get finance right we need to examine the normative basis on which we work.
Magic, Maths, and Money — The Relationship between Finance and Science
Ethics and Finance: The Role of Mathematics
Tim Johnson | Academic Fellow in the Department of Actuarial Mathematics and Statistics, Heriot Watt University

Obama crashing on Intrade now

Obama's nosedive on Intrade is accelerating. There's only about a 10 point difference separating him and Romney with less than two weeks to go. And his lead in the electoral vote count has pretty much evaporated.

I know a lot of you will say, "yeah, but he's still in the lead," however, it could be the trend that counts and his trend is definitely down, while Romney's is surging upward.

Jeffrey Frankel — Four Magic Tricks for Fiscal Conservatives

You know this already, but its funny.
By the time the crowd realizes that it has been conned, the magician has already pulled off the greatest trick of all: yet another audience that came to see the deficit shrink leaves the theater with the deficit bigger than before.
Project Syndicate
Four Magic Tricks for Fiscal Conservatives
Jeffrey Frankel | Professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers

Dirk Ehnts — The anti-European Sinn

Discussion of a United States of Europe wrt the USA.

The anti-European Sinn
Dirk Ehnts | Berlin School for Economics and Law

I disagree with the Europeanizers. A democratically decided political union must precede a hierarchically imposed economic union, or there will be political disunity and possible disaster down the line, judging from the history of the US. The potential for disunity is much greater in Europe given the ethnic, historical, cultural, and language differences — conditions that the US did not have to contend with at its inception and it still fought a Civil War to preserve the union. That war never really ended, since the militarily-imposed resolution was never really accepted by all parties.

The guy from UFAA got back to me...

After several email exchanges where I attempted to explain my ideas and show an MMT perspective could contribute, the guy from United Front Against Austerity (his name is Kyle) sends me this:

Mike, you have no idea what you're talking about here. Once again, I've offered several ways for you to get involved, and those offers stand. You and your acolytes are pissing and moaning that we're not turning this into the United Front for MMT. Thus far, nobody will provide a clear answer about what the fuck MMT is or why anyone should care. We have a number of collaborators from various economic disciplines, most of whom will not be at this event. I'm sure you could have an interesting discussion with Dr. Tarpley, who will be there. If you want to do something useful for your own movement and your country, stop worrying about a meaningless 5 minute speaking opportunity and please come to the assembly with something concrete to offer. -Kyle

No idea what the fuck I am talking about, huh?

Well, here are some of their brilliant proposals.

1. I and I'm sure Dr. Tarpley would underscore the distinction between fiscal and credit stimulus. The government, via a nationalized or controlled Federal Reserve system, should issue zero interest credit only and specifically for physical production of the types you mention. This is not spending but lending that will be repaid through future tax revenue. 2. Tarpley's plan doesn't really get into income tax, and we'll have to fight a lot of leftists in our coalition who want to focus on some kind of wealth tax or more progressive income tax. I'd argue that Romney's tax plan, for example, is a kick in the nuts to the middle class, who need deductions, and a gift to the super-rich, who will pay less income tax and continue to claim carried interest, capital gains and other preferred types of income. A Wall Street sales tax doesn't touch "wealth" but only penalizes and prevents speculation. If I have to pay 7-10% tax to buy a car, why should Jamie Dimon pay 0% to buy credit default swaps? If "the 1%" wants to invest in production, I assume our program will suggest tax incentives for doing so.

You decide. One thing is for sure, we have to start organizing our own gatherings. It's a waste of time trying to educate these "progressives." They are their own worst enemies.