Clint Ballinger — Austerity in a Time of Plenty: : The “domestic default” bogeyman = More bad statistics from Reinhart & Rogoff

R & R are at it again.

Clint Ballinger
Austerity in a Time of Plenty: : The “domestic default” bogeyman = More bad statistics from Reinhart & Rogoff

The ladder of social science reasoning, 4 statements in increasing order of generality, or Why didn’t they say they were sorry when it turned out they’d messed up? — Andrew Gelman

Reinhart and Rogoff. Why didn't they take responsibility, a student asked Andrew Gelman. Statistics professor Gelman answers:  It wasn't actually about the data in the minds of R & R, so being wrong about it apparently made no significant difference to them. Empirical result? Meh.

Rationalists, or just ideologues with a cognitive bias?

Statistical Modeling, Causal Inference, and Social Science
The ladder of social science reasoning, 4 statements in increasing order of generality, or Why didn’t they say they were sorry when it turned out they’d messed up?
Andrew Gelman | Professor of Statistics and Political Science and Director of the Applied Statistics Center, Columbia University

See also

Paper by Mohsen Javdani and Ha-Joon Chang
Marginal Revolution
Ideological bias and argument from authority among economists
Tyler Cowen | Holbert C. Harris Chair of Economics at George Mason University and serves as chairman and general director of the Mercatus Center

Ramanan — Hangovers And Economic Ideology

Ramanan brings us up to speed on the latest controversy over policy, economic reasoning, and political ideology.

The Case for Concerted Action
Hangovers And Economic Ideology
V. Ramanan

Cross-post: Warren Mosler — Rogoff and Reinhart NYT response

The Center of the Universe
Rogoff and Reinhart NYT response
by Warren Mosler

The intellectual dishonesty continues.


As before, it’s the lie of omission.

R and R are familiar with my book ‘The 7 Deadly Innocent Frauds of Economic Policy’ and, when pressed, agree with the dynamics.

They know there is a more than material difference between floating and fixed exchange rate regimes that they continue to exclude from their analysis.

They know that one agents ‘deficit’ is another’s ‘surplus’ to the penny, a critical understanding they continue to exclude.

They know that ‘demand leakages’ mean some other agent must spend more than its income to sustain output and employment.

They know federal spending is via the Fed crediting a member bank reserve account, a process that is not operationally constrained by revenues. That is, there is no dollar solvency issue for the US government.

They know that ‘debt management’, operationally, is a matter of the Fed simply debiting and crediting securities accounts and reserve accounts, both at the Fed.

They know that if there is no problem of excess demand, there is no ‘deficit problem’ regardless of the magnitudes, short term or long term.

They know unemployment is the evidence deficit spending is too low and a tax cut and/or spending increase is in order, and that a fiscal adjustment will restore output and employment, regardless of the magnitude of deficits or debt.

Carmen’s husband Vince was the head of monetary affairs at the Fed for many years, serving both Alan Greenspan and Ben Bernanke. He knows implicitly how the accounts clear and how the accounting works, to the penny. He knows the currency itself is a case of monopoly. He knows the Fed, not ‘the market’ necessarily sets rates. He knows that, operationally, US Treasury securities function as interest rate support, and not to fund expenditures. He knows it all!

Carmen, Vince, please come home! I hereby offer my personal amnesty- come clean NOW and all is forgiven! As you well know, coming clean NOW will profoundly change the world. As you well know, coming clean NOW will profoundly alter the course of our civilization!

Carmen, Vince, either you believe in an informed electorate or you don’t!?

(feel free to distribute)

New York Times

Debt, Growth and the Austerity Debate

By: Carmen Reinhart and Kenneth Rogoff

Bozo Watch — Bowles-Simpson go on the attack in spite of Reinhart-Rogoff debacle

On April 19, just after I had written about how the key academic research used to bolster austerity policies was exposed by a 28-year-old grad student at U Mass, Amherst, I got a surprise in my email box.

In the email, Erskine Bowles and Alan Simpson giddily announced their new deficit-reduction plan, which includes, among other things, a recommendation to increase the eligibility age for Medicare. Their plan would reduce debt as a share of GDP below 70 percent by 2023 and, as the Washington Postreports, “seeks far less in new taxes than the original, and it seeks far more in savings from federal health programs for the elderly.”

What’s incredible is that over the last week, the study by Harvard economists Carmen Reinhart and Ken Rogoff that famously warned of the dangers of government debt has been proven to be riddled with errors and questionable methodology. To recap: R&R’s paper purported to show that countries with public debt in excess of 90 percent of gross domestic product suffered negative economic growth. Austerity hawks everywhere used it to justify cuts that have cost people jobs and vital services. The original spreadsheet used by R&R was obtained by a U Mass grad student, who found that in addition to the mistakes already noted by several economists, there was a coding error in their Excel spreadsheet that significantly changed the results of their study.

As New York Magazine’s Jon Chait has pointed out, that same discredited research has been used by Bowles and Simpson to formulate their deficit-reducing austerity plans.

Let’s take a look at some ugly chronology.....

AlterNet
Unbelievable! Bowles and Simpson Release New Deficit-Reduction Plan Based on Discredited Austerity Research by Rogoff and Reinhart
Lynn Stuart Parramore

Watch me take apart Reinhart and Rogoff, deceitful, lying, manipulative, self-serving scum

Rates vs. debt...gotta love this chart!

I love this chart so much I had to post it again. Here's the Federal debt (in red, millions $) and here is the rate on the 10yr Treasury (blue).

Hey Schiff, Rogers, Kotkikoff, Rogoff, Reinhart, Greenspan, Walker, Peterson, Simpson, Bowles, and the rest of you...what's your excuse now???

Brad DeLong: Richard Koo Is Right

Bretton Woods Blogging: Old Economic Thinking Is New, or Is It that New Economic Thinking Is Old?

Prof. Brad DeLong tell us that the basic principles of monetary economics are nothing new.

"Take, say, yesterday morning's panel with Carmen Reinhart and Richard Koo--both were making arguments the logical structure and framework of which seemed to me to be straight out of Walter Bagehot's Lombard Street. And Lombard Street was published in 1873.

"Richard argued that--just as in Japan in the 1990s--the collapse of asset values had created a world desperately short of financial assets, in this particular case savings vehicles of moderate and long duration. The impairment of balance sheets thus left households and businesses anxious to cut back on their spending in order to rebuild their balance sheets. Since the interest rate could not fall any further to clear the market for savings vehicles, recession followed. The recession would, he said, last until and unless the supply of financial assets to serve as savings vehicles rose to levels consistent with financial-market demand. And government could materially accelerate this process if it stood up while the private sector was standing down: if it spent, invested, and borrowed in order to boost the market supply of savings vehicles."

Brad concludes:

"My view is that Richard Koo is right, and economic core governments should be frantically engaging in expansionary fiscal policy right now until the wake-up call from financial markets comes, and then they should stop.

"The main takeaway point, however, is that this is all the macroeconomics of 1873."