Are We Doomed? "Smart" Accounting: "The Optimal Level Of Demand Leakage Is Aggregate Suicide"

   (Commentary posted by Roger Erickson)

Demand Leakage: (when we hoard initiative by sitting on it, rather than investing it)

A situation in which capital, or income, exits an economy, or system, rather than remains within it. .. In a two sector [economics] model, all individual income is sent back to employers when goods and services are purchased, and back to employees through wages and dividends. Leakage occurs when income is taken out through taxes, savings and imports.

So the following message, parroted nearly everywhere, is cringeworthy.

Save More Tomorrow: Using Behavioral Economics To Increase Employee Saving

Save More Tomorrow (hereafter, the SMarT program) involves people who commit in advance to allocating a portion of their future salary increases toward retirement savings. This has been shown to increase retirement plan savings significantly. (hat tip John Lounsbury)

And they have the temerity to call it SMART. I guess some people are just born stupid smart.

Why, by their logic, if we save EVERYTHING, just think how rich we'd be .... and how well off (dead) the next generation would be (since we wouldn't have invested a single penny in their development)!

Weepin' Buddha on a decline! They know not what they do. 

It's not a question of forgiving them, but rather of surviving them.

An electorate is a terrible thing to waste. No wonder some wag named "Smart" retirement savings as Zombie Economics. It's essentially investing in the walking dead.

No wonder every process is too important to be left to the presumed process owners. If we listened too much to professional risk-managers, we'd avoid living.

ps: for those who missed the point;

My rant is not against saving, but against collectively saving too much, as a fallacy of scale.

We already know that that approach alone won't save us. We as a people can't "save" ourselves out of lagging aggregate income, any more than individuals (as an aggregate of cells) can stay in a race by holding their breath and saving oxygen.

Sina (Xinhua) English — High public debt raises fiscal crisis risk: IMF official

More R-R out of the IMF today.

Carlo Cottarelli, Director of IMF's Fiscal Affairs Department, ... said the ratio of public debt to gross domestic product (GDP) has surpassed 90 percent in some advanced economies, and high debt would hamper economic growth.

Wake him up.

Sina (Xinhua) English
High public debt raises fiscal crisis risk: IMF official

Evidence of China's growing sophistication as a money manager in the U.S. markets

U.S. lets China bypass Wall Street for Treasury orders

Either the Fat Lady is singing in Mandarin, or idiocy is now distributed to unprecedented levels. It's amazing how much press this article has generated.

This may be the indirect benefit of having Chinese students study at our Harvard Economics Department - the Black Hole hidden at the center of the US economics profession, from which no logic whatsoever is allowed to escape. I'm beginning to think that Harvard Economics is just a front for the NSA, used to baffle, mislead & confuse enemies of our state.  [Now if they could just prevent domestic leakage of nonsense about a fiat national debt & deficit, we'd all be in better shape.  Does the NSA really consider professionally expanded fallacies of scale to be affordable collateral damage?]

Moving on, if China wants to waste brain cycles on better ways to optimize an inane investment ... fine. It may even be savvy policy by us to "help" them extend their confusion - but then again it may just be zombie bureaucrats "doing their job" of personally distributing small amounts of US financial assets to local bars & other establishments.

As an aside, the level of idiocy expressed by the security-panicked NeoCons in this article is downright embarrassing. One tires of repeatedly beating that undead, zombie horse (who let Brad Setser anywhere near the NEC or NSC?), so let's just move on to some other points.

Despite the considerable BS, there are actually some useful details in the article, that are not widely appreciated.

"Primary dealers are not allowed to charge customers money to bid on their behalf at Treasury auctions"  [Ought to sail right over the heads of some Deficit Terrorists.]

"China is preserving the value of specific information about its bidding habits. By bidding directly, China prevents Wall Street banks from trying to exploit its huge presence in a given auction by driving up the price." [fine; let 'em]

There's even one step forward for this journalist:

"The Chinese use Treasuries to house the dollars they receive from selling goods to the United States,"   [looking good ...]

Countered by two steps back!
"while the U.S. government is happy to see such strong demand for its debt because it keeps interest rates low."
[BMHOTK!  Whatever. You can feed a journalist data, but you can't make them think.  Is zombie horse meat added to hamburger in journalism school cafeterias?]

There was also this comical tidbit. "To safeguard against hackers, Treasury officials upgraded the system that allows China to access the bidding process."

Why not? An upgraded system has solved every other cybersecurity concern. The upgrade could have been the act of saying it was upgraded. Besides, the biggest danger of anyone breaking into that data stream may be that the poor hacker dies of boredom. It'd be like diverting a "proprietary" audio stream and finding nothing except Bee Gee's music.   Odd as it seems, the Bee Gee's were once taken as evidence of growing, even award winning sophistication in music management.

Steve Keen — From Zombie Banking to Zombie Democracy

Video at Steve Keens' DebtWatch (fast forward to 3:56)
From Zombie Banking to Zombie Democracy on Capital Account
By Steve Keen

Keen makes the point that New Classical economics is incompatible with liberal democracy and shows how the structure of the EZ under the Eurocrats reflects this.

Zombie economics — neoliberalism alive and well in Tunisia

On the verge of officially forming a coalition government to run the country and rewrite the nation’s pre-revolution constitution, Tunisia’s dominant, Islamist political party Ennahda has come under fire for its economic neo-liberalism, both from opponents and from coalition partners.

After an election noted for its transparency, the major Tunisian parties are busy putting the finishing touches on the first democratic government in the nation’s history. The Islamist party Hizb Ennahda will get the most important positions, including the coveted post of prime minister. 

A major reason for Ennahda’s popularity is its history of resistance against the old dictatorship. Its supporters see it as both the party of Islam and the party of revolution and change. However, when it comes to issues concerning economics and international finance, it generally advocates continuing the generally neo-liberal policies of the former dictatorship.

Read the rest at IPS
TUNISIA — Neo-Liberalism the Issue, Not Islam
By Jake Lippincott

A revolution that wasn't. The more things change, the more they remain the same.