Friday, August 31, 2012

HighBrowlander Humor Series - "There Can Be Only 1%!"

commentary by Roger Erickson

My brother sent me this video from the BraveNewFoundation.

Meet the industry that makes the Koch brothers look poor.

Now, after the last 4 years, I no longer trust anyone, and wouldn't even be surprised if the Koch Bro's secretly OWNED BNF! The video raises more questions than it answers, so does anyone have the skinny on BNF?  I hadn't heard of them before now.

Actually, as a sign of our paranoid times, my first thought was: "Don't dis da K'bros! They'll just make new vows to be #1. As in the Highlander video series, they think there can be only 1%."

Oh, no! Is our whole generation just an episode in a HighBrowlander series? In that series, the K'Bros are competitors from planet JBirch, sent here to compete to be chief assassin back in their parallel "ruiniverse" - the birthplace of Ludditism.

Note another suspicious feature the Highlander & HighBrowlander series share, each succeeding episode goes further downhill!  In a better world, there would have been only one, and we wouldn't have to keep remaking worse versions every generation.

* This post fully motivated & calculated by Austrian Dreckinomics, BFD, through it's wholly owned subsidiary, Austerian Wreckinomics.  If you have real insights to be ignored by these ideologues, please contact Paul Ryan's mentor, Ayn Rand.  Anything you say can & will be denied, and then held against you.

Bill Mitchell — Aggregate Demand Part 2

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 continues the Chapter on Aggregate Demand and Output and Income generation. 
Aggregate Demand
Bill Mitchell — billy blog
Aggregate Demand Part 2
Bill Mitchell

The Debt Doomsday crowd should now be called the Debt Taliban!

They are now using children to spread their misguided, ignorant, lies!

Catherine Rampell — Majority of New Jobs Pay Low Wages, Study Finds

While a majority of jobs lost during the downturn were in the middle range of wages, a majority of those added during the recovery have been low paying, according to a new report from the National Employment Law Project.

The disappearance of midwage, midskill jobs is part of a longer-term trend that some refer to as a hollowing out of the work force, though it has probably been accelerated by government layoffs. 
“The overarching message here is we don’t just have a jobs deficit; we have a ‘good jobs’ deficit,” said Annette Bernhardt, the report’s author and a policy co-director at the National Employment Law Project, a liberal research and advocacy group.
The New York Time | Business Day
Majority of New Jobs Pay Low Wages, Study Finds
Catherine Rampell

Welcome to Third World America.

Romney Analysis of Economy, just one word Jobs.

Dear Mr. President and Governor Mitt Romney;

Where as we who are not the lowest common denominator posit we are educated and here is the truth: 1) Political speeches are not speaking to US Stakeholders. 2) Politicians lie or tell half truths. 3) We are all trying to make a profit or get money 4) Your politicical speakers are for TV viewers 5) Lobby money buys political influence and legislation 6) Even your children don't like you.

Wow, I listened to Marco Rubio on the RNC and heard him say that Obama spend $1 Trillion more than the government received in revenue. What a lie. It is well over a $1 Trillion. Then he goes on to say all kinds of things that distract us from the State Of the Union. Clint Eastwood comes on to remind us that this is all a performance. Politics is a performance.

I listened to a few of these speakers and wondered if I would put some thing down on paper. No mater what I write the political performance at the RNC will prove to be more vague. There is no political info in politics. And the media don't help.

You listen to Mitt Romney and the party leaders and you end up dummer for the effort. It was the same old speech. There was nothing new. Romney is an analyst. Romney is a financial, business and economic analyst. He lives in the world of Balance Sheets and Financial Statements.

But Romney's analysis of the Economy is simply one word. Romney says that Jobs are number #1. We need Jobs. Do you have a plan for creating jobs? No.

What an idiot. He plays to the lowest common denominator. What message will America understand? Jobs. Well okay what is the solution? Jobs. Dumb ass.... I could kick him in the face.

Mitt Romney is an analyst of the economy and of business costs. What is his answer to the economic problems? Jobs. Any specifics? No.

Well Mr. Governor Romney what is your plan for the economy? Jobs. So after all your financial experience, business experience, layoff experience, off shoring experience, outsourcing experience, and merger experience.... you just say jobs. Yes. Do you have a plan for creating jobs? No.

What an asshole.

This man has made the US Voter dumber after 3 hours of TV waiting for him to show up.

Politicians feed their own addiction in public and on our time in the main stream media. Who else has the Ego to make us all watch his/her own life succeed or fail. These people are narcissistic. And when you start looking for it... there are many different examples of narcissism.

"Houston, We Have a Distribution Problem! And it's Not Just Currency."

commentary by Roger Erickson

In a comment at Warren Mosler's blog, reader "Save America" finds another useful book, from 1922.

The Story of American Public Life
from 1870 to  1920
SA: "The plutocrats of 1870 (moyers would really like this book)"

That's a good find, by SA. The clarity of thought in Pettigrew's 1922 comments suggest again that most things that need to be said have already been well said. Our problem is getting that key info to key people in key institutions, within critical time periods (say, most students, by 5th grade?).

"Houston, we have a distribution problem!"

The last sentence in the following excerpt from Pettigrew's book is a killer, in his section on "Bryanism":

'It is not easy to characterize a complex political situation in a brief and comprehensive manner. If such a thing can be done at all, I believe that it can be done most successfully through the personality of two men who typify the two extremes of American political life. One of these men that I shall select for the purpose is William Jennings Bryan. The other is Joe Cannon of Illinois. The first is a Democrat—the second a Republican.

I have known both of these men for many years. Neither is a statesman in any sense of the word. Both are lawyers and suffer from the disqualifications that go with the study and practice of the law. Bryan has integrity, of a sort ; Cannon has a keen mind. Both understand the political game, and both play it according to their lights. Bryan plays prohibition politics ; Cannon plays plutocratic politics. Neither has any real grasp of the meaning of the phrase “ the public welfare.” '

This brings us back to that perennial topic of "nothing new, but how do we scale-up what we're doing, this time using 10x more people?" There's no core concept in politics today that wasn't exquisitely solved by brilliant, tribal customs worked out thousand of years ago - if not longer. See this anecdotal post on tribal cooperation. "How can one of us be happy if all the other ones are sad?"  That's a Xhosa tribal saying.  It's a good reminder that even small children can be instilled with the habit of cooperation over competition.

The basic concept is called "return-on-coordination," and is obvious to anyone raised in a tribal or large-family setting. It gets lost when population growth outstrips ability to scale tribal customs.

However, note that return-on-coordination is also not obvious in harsher environments where population density grew more slowly; e.g., Russia.

The Xhosa language & culture is apparently adapted from the San tribes, and it adheres to a very old, small-tribe cultural paradigm.  Nelson Mandela was raised Xhosa.

US citizens have a choice to make. Do we really want to be more like Russians, especially Ayn Rand, or do we want to find faster/better/leaner ways to scale up something closer to what the Xhosa originally espoused?  We want our own way, but we want it to be even better, not just a copy of anyone else.

Our central need is methods for scaling coordination, across group size and different situations. 

How do we scale up coordination?  As an example, it's hard enough to train a basketball team.  How would you train a mega-basketball team of 5000 players on the floor, not 5?  That's the choreography question that military forces have pondered for thousands of years, and the same problem that was arduously solved by every species raising bodies comprised of trillions of well-coordinated, individual cells.  All known tribal cultures have worked out exquisite developmental methods.  Every known successful example required legendary amounts of practice to perfect.  Recent large cultures and nation-states are obviously still in the early stages of practice, working out the kinks. The Pentagon today, considered far ahead of any other military on earth, still struggles with core questions about troop & officer training, unit cohesion, and force agility.

In regional and national policy, we're doing even worse, because we're investing less and practicing less.  The only way for a nation to practice coordination is to keep itself busy doing insanely ambitious things.  What are WE reaching for?

Witness how our republic has degraded into opposing political parties. We're the easily duped victims of divide & conquer strategies played again and again by those enemies of the people called frauds. More - by far - than any other war, whether the War on Terror, War on Poverty, Cold War, War on Drugs, etc, etc, we need a War on Fraud. By not pursuing that war, against the diverse factors limiting our own coordination, we're committing the greatest unwitting act of terror of all - national self-fraud. Self fraud is so subtle that most aren't even aware of the distributed parasite. After all, it's on everyone's back, throughout our culture.

Are we victims of our own, Self-Stockholm Syndrome? Each of us feels trapped, surrounded by neighbors where everyone is out for themselves, forgoing public initiative in order to hoard fiat currency "for later use." Since fiat currency is backed by public initiative, hoarding fiat currency equates to putting off public initiative. Yet there's no return on forgoing initiative! That's a zero sum game! Nevertheless, when everyone is doing it, it's tempting to go along with the "small" approach to organization. We've been duped, and it's shameful.

Yet we have a group mind of 312million (~150 million "adults"?) that can only think big, or not at all. A group-mind is a terrible thing to waste. What methods would allow us to link more people, so we can achieve the insanely great return on coordination from our entire population?

Investing in those new methods is far more important than the comedy of trying to hoard fiat.

"Houston, we have a problem, but we can handle it."

Thursday, August 30, 2012

Economics: A Gaping Separation Between Theory and Operations

commentary by Roger Erickson

I've posted a longer essay on this topic, at Global Economic Intersection.

Since the two sites attract different readers & comments, the link is also posted here.

Chinese Premier Demands More Euro Action

commentary by Roger Erickson

What do you suppose that means? They want reassurances that whatever China invests in will be safe?

Here's the context. First, the person he's speaking to, summarizing how she'd answered the good Premier's questios.

Where there's a will.....

Angela Merkel's message to China is that the eurozone has an "absolute political will" to solve the crisis.

[Uh ... she might want to clear that with the people on the streets in Athens.]

She made the comments after her meeting with Wen Jiabao this morning.

Merkel has a two-fold mission.

1) to ressure Beijing that the euro crisis is in hand, thus encouraging them to keep buying European debt

2) to build trade links with China.

On that second point, several business deals were signed. As well as Airbus's 50-plane deal (see 8.38am), the conglomerate has also agreed to invest $1.6 billion in a new assembly plant in Tianjin, while Volkswagen is investing $219 million in an "environmentally friendly production facility" and vocational training initiative, also in Tianjin (Wen's home city)

Translation: China's elites & Europe's elites signed more deals agreeing to co-own both regions?  Is this rather like the infamous deal between an early Pope & germanic war chiefs to "invent" Royalty as permanent war chiefs?

Now on to the good Premier's own comments.

Wen Jiabao urges more action on euro crisis
Here's the full quotes from Chinese premier Wen Jiabao this morning, expressing his concern over the situation in the eurozone and calling for more action

"The European debt crisis has continued to worsen, giving rise to serious concerns in the international community. Frankly speaking, I am also worried.

The main worries are two-fold: first is whether Greece will leave the eurozone...The second is whether Italy and Spain will take comprehensive rescue measures. Resolving these two problems rests with whether Greece, Spain, Italy and other countries have the determination for reform."

Wen also said that solving the crisis required a two-fold strategy of "fiscal tightening", and rebalancing individual country's economies.

Translation: China's elite is siding with Germany's elite, to secure dominance of both China & Europe?  Is this foreign policy, or political racketeering?
Do you suppose Wen is wondering why Bonn can't control Europe the same way that Beijing controls China?  Is he comparing Greece to his view of Tibet & Taiwan?

Magpie on The Witch of Oz

Today Australia's richest person, Gina Rinehart, became the centre of national attention after selections of one of her regular columns from Australian Resources and Investment magazine were published by the Murdoch press. (See here)
These are some of the statements attributed to Rinehart:

  • "There is no monopoly on becoming a millionaire." (...)
  • "If you're jealous of those with more money, don't just sit there and complain. Do something to make more money yourself - spend less time drinking or smoking and socialising, and more time working." (...)
  • "Become one of those people who work hard, invest and build, and at the same time create employment and opportunities for others."
Rinehart, who has appeared every year in the BRW Rich 200 since 1992, when her father died, owns a personal fortune variously estimated between USD29 and 18 billion. In 2012, her wealth doubled its previous year's estimates, due to then rising international prices of coal and iron ore.
It's unknown how Rinehart's hard work contributed to those price increases, how many metric tonnes did she personally dig from her mines, or the relationship between commodity prices and "drinking, smoking or socialising", but her advise to would-be self-made people is clear cut: work hard, invest and build.

To help us become wealthier, Rinehart proposes to cut our minimum wages (currently at the astronomical level of AUD606.40 per week) and cut her taxes.
Magpie's Asymmetric Warfare
Fitzgerald and Rinehart

Hey, Paul Ryan...we can't run out of money!

Hey, Paul Ryan...we can't run out of money. Dollars are created when the government spends and that's the only way they can be created, so there's no risk of not being able to "pay" for entitlements.

That's point number one.

Point number two is that Medicare is eminently sustainable so long as we have the real assets (hospitals, doctors, nurses, technicians, medicine, etc) for people to consume. The only possible way that Medicare could not be sustained is if these assets were unavailable for some reason and that is not the case. And by the way, Alan Greenspan schooled you on this a while back.

Paul Ryan will never wake up to these facts. He's a blind, ideologue. He's a little boy who read a book a long time ago and now has the crazy beliefs of that book deeply embedded in his mind.

The sad part is that the people of this country beleive him. They believe him because they have been brainwashed into believing all that hogwash about running out of money and "not being able to afford" Medicare, Medicaid and Social Security. These have been some of the most succesful social programs this country has ever seen and millions of Americans have been kept out of poverty thanks to them. Yet despite this, Ryan and the GOP want to do away with them for reasons that are both ideological and irrational.

The powers that be love Ryan. He's their handome and "brilliant" messenger. But when we have millions of sick and homeless, then and only then will we will feel the REAL cost to society. It will be a burden that dwarfs any purported burden we face now.

In Paul Ryan the GOP have chosen a plan, but is it a plan whose ultimate consequences they truly understand?

Stephen Roach — China is Okay

Concern is growing that China’s economy could be headed for a hard landing. The Chinese stock market has fallen 20% over the past year, to levels last seen in 2009. Continued softness in recent data – from purchasing managers’ sentiment and industrial output to retail sales and exports – has heightened the anxiety. Long the global economy’s most powerful engine, China, many now fear, is running out of fuel.

These worries are overblown. Yes, China’s economy has slowed. But the slowdown has been contained, and will likely remain so for the foreseeable future. The case for a soft landing remains solid.
Project Syndicate
China is Okay
Stephen S. Roach — formerly Chairman of Morgan Stanley Asia and the firm's Chief Economist, and currently a senior fellow at Yale University’s Jackson Institute of Global Affairs

Gail Tverberg — The Long-Term Tie Between Energy Supply, Population, and the Economy

Our Finite World
The Long-Term Tie Between Energy Supply, Population, and the Economy
Gail Tverberg aka Gail the Actuary

Matt Taibbi — Greed and Debt: The True Story of Mitt Romney and Bain Capital

How the GOP presidential candidate and his private equity firm staged an epic wealth grab, destroyed jobs – and stuck others with the bill
Rolling Stone
Greed and Debt: The True Story of Mitt Romney and Bain Capital
Matt Taibbi

After taking on the vampire squid and the financial sector, Matt goes after Bain and private equity. Matt is getting this down. Not Hunter Thompson's gonzo journalism, but just as devastating and more tightly argued.

Fabius Maximus — Two vital lessons from the election so far, about lies and force

Summary:  This campaign season has, as they should, taught us much about the condition of the Republic’s most vital political processes.  We should have learned that the Republic is dying.  Watch your TV and smell the rot.  Our leaders lie — big lies — and are willing to casually use overwhelming force to suppress protests. What will we learn in the remaining two months? We can re-take control, if we can muster the will to do so.
Fabius Maximus
Two vital lessons from the election so far, about lies and force

Bruce Bartlett — Why Hayek Isn’t Paul Ryan’s Guru

I suspect that in his heart, Representative Ryan is more attracted to the dogmatism of Rand than the complex, nuanced philosophy of Hayek, who told the Cornell political scientist Theodore Lowi that Rand angrily called him “a compromiser” on the only occasion they met.
The New York Times | Economix
Why Hayek Isn’t Paul Ryan’s Guru
Bruce Bartlett

Izabella Kaminska — The unintended consequences of QE: not what you think

By now, everyone is familiar with the mantra that QE is [arghh!] money-printing and that a major unintended consequence could be a chronic and uncontrollable inflation. (One could call this the goldbug, Austrian, Republican case). 
Less well known, perhaps, is the theory that QE could be just as unexpectedly deflationary — because long-term micro yields come to threaten a number of financial sectors outright, as well as general expectations of risk-free returns which lead to capital destructive feedback loops....
Case in hand, the latest Federal Reserve Bank of Dallas working paper from William (Bill) White entitled “Ultra Easy Monetary Policy and the Law of Unintended Consequences“.
The Financial Times | FT Alphaville
The unintended consequences of QE: not what you think
Posted by Izabella Kaminska

Wednesday, August 29, 2012

Howard Fineman— Mitt Romney GOP Convention Rule Change Gives More Power To His Campaign

GOP Establishment reasserts control through rule change.
"All we want is to make sure that the popular vote in a primary is what controls the outcome in delegates," Ginsberg told me.
But the result will make state and local conventions irrelevant. And soon enough, the big convention will be irrelevant, too.
It'll all be big money.
The Huffington Post
Mitt Romney GOP Convention Rule Change Gives More Power To His Campaign
Howard Fineman

Mike Lofgren — Revolt of the Rich: Our financial elites are the new secessionists

Former Republican congressional staffer Mike Lofgren strikes again, in, of all places, The American Conservative. Right on, Mike. Strong stuff.
If a morally acceptable American conservatism is ever to extricate itself from a pseudo-scientific inverted Marxist economic theory, it must grasp that order, tradition, and stability are not coterminous with an uncritical worship of the Almighty Dollar, nor with obeisance to the demands of the wealthy. Conservatives need to think about the world they want: do they really desire a social Darwinist dystopia?
The objective of the predatory super-rich and their political handmaidens is to discredit and destroy the traditional nation state and auction its resources to themselves. Those super-rich, in turn, aim to create a “tollbooth” economy, whereby more and more of our highways, bridges, libraries, parks, and beaches are possessed by private oligarchs who will extract a toll from the rest of us. Was this the vision of the Founders? Was this why they believed governments were instituted among men—that the very sinews of the state should be possessed by the wealthy in the same manner that kingdoms of the Old World were the personal property of the monarch?
The American Conservative
Revolt of the Rich — Our financial elites are the new secessionists
Mike Lofgren
(h/t The Huffington Post)

This guy can write. He has a future. Just what the GOP desperately needs.

Heiner Flassbeck — The Heart of the Euro Problem: A Response to INET's Rob Johnson

A currency union at its core is about harmonization of inflation rates as all countries give up national monetary policies and explicitly agree on a common inflation target (close to under two percent in the EMU). From here the argument is absolutely straightforward.
First, we have very strong evidence that inflation rates are highly correlated with unit labour costs (ULC, for the overall economy, of course, not for industry). Second, we know in general that the development of ULC is much more the result of exogenous factors than the development of price changes, which leads to the conclusion that ULC growth determines inflation to a very large extent. Third, we know specifically (or should know) that the biggest country in Europe, Germany, even before the official start of EMU, had decided to dramatically change the course of its wage policy.
In a tripartite agreement in 1999 government and negotiating partners on the labour market agreednot to allow growth of nominal wages along the lines of productivity growth and the inflation target of two percent (hitherto the traditional German approach) for the future but to remain clearly below that line. This has being applied and has been enforced by the “flexibilization of the labour market” in the first years of the Red-Green government. This implied that German ULC growth and its inflation rate would systematically remain below the commonly agreed inflation target in EMU.
As no other country had a similar arrangement it implied also that over time huge discrepancies in inflation rates and huge real appreciations of other countries (against those like Southern Europe that would slightly overshoot the inflation target but even against those like France that would strictly stick to the target) and huge unsustainable imbalances would be the result. One big country permanently gaining international market shares and increasing its surpluses and the others permanently losing and going deeper into deficit is a scenario for collapse if corrective forces do not come into play sooner or later.
The Heart of the Euro Problem: A Response to INET's Rob Johnson
Heiner Flassbeck, August 8, 2012

Senator Bob Corker Whining to British Bankers About the US Fed.

commentary by Roger Erickson

Bernanke should show some humility

Overall, Corker's article causes my hair to stand on end. More than anything else, it makes me feel that there's a banking lobby once again running circles around US policy - a lobby that has Congressmen eating out of their hands. People this confused should NOT be on the Senate Banking Committee.

First off, why on earth would a US Congressman publish a rant in the FT, a bankers rag in a foreign country? That strikes me the same way LIBOR does, catering to a London banking cartel vs your own constituency. We don't need our Congresspeople discussing our policy in foreign newspapers.

Plus, the article is riddled with inconsistencies. (Fed watching is a distraction ... so complain about the Fed! Really?) Maybe we could send Corker some Nike shoes, with a note saying "Just Do It" ?

After reading the article, I'm not sure exactly why Corker is bringing up the issues he mentions, in a letter to a foreign banking newspaper. Classic politics? Bring up a few valid points, but twist their relevance?

For whatever reason, Corker has a problem with the Fed's dual mandate.

'A big part of the problem is that the US Congress has given the Fed an overly broad "dual mandate" of price stability and full employment. In 1978 Congress congratulated itself for “ending unemployment” via its passage of the Humphrey-Hawkins Act, which added full employment to the Federal Reserve’s existing mandate. This approach has not only proved unsound. It undermines the free market system, allows Congress to use the central bank as a scapegoat while avoiding tough policy decisions, and creates Fed addicts in our financial markets.'

He might have had a bit of a point there, if some Congresspeople really thought they'd delegated responsibility by abrogating it! Yet that's only a fraction of the whole story. He's doing the Humphrey-Hawkins Act a sweeping & severe disservice, and pandering to the 1% who would prefer right of first refusal on private ownership of any publicly-funded R&D. I smell a rat!

'[The Fed's Dual Mandate] undermines the free market system, allows Congress to use the central bank as a scapegoat while avoiding tough policy decisions, and creates Fed addicts in our financial markets.'

Perhaps, but that's no excuse for not acting like a Senator! If he were serious, wouldn't he be having this conversation with colleagues behind closed doors? This sort of public rant in a foreign banker's newspaper would irritate me if I were trying to serve on the Banking Committee. So what's the real purpose? Was the rant requested by certain lobbyists? For what reason? Who are Corker's financial advisors and main campaign finance contributors?

"We are one of the only developed countries in the world that has such a mandate. The European Central Bank, the Bank of England and the Bundesbank, to name but a few examples, all have single mandates."

First, wanting to be like the ECB or other CBs is not necessarily a positive!  Second, it's questionable how true his thesis is. And either way, what's the point for a Congressman responsible for shaping domestic banking policy? I have a bad feeling that Corker simply doesn't know what he's talking about, and is being used & abused by his campaign donors.

Comments at the FT article are all over the place, but one raises a killer point:

"This is the gentleman who when he had a chance to question Jamie dimon. Just brushed aside any serious questions and showered praise on the gentleman- these are the same guys who don't want any regulation" [sic]

In publishing his letter to the FT, what is Bob Corker showing?

Tuesday, August 28, 2012

Randy Wray — Minsky and MMT in the News

We’re off gold. We’re not going back. Get over it.
Economonitor | Great Leap Forward
Minsky and MMT in the News
L. Randall Wray | Professor of Economics, UMKC

John Aziz provides an Austrian "Critique of the Methodology Of Mises & Rothbard"

Praxeology is leading Austrian economics down a dead end.
Austrianism would do well to return to its root — Menger, not Mises.
Zero Hedge
Guest Post: A Critique of the Methodology Of Mises & Rothbard
John Aziz | Azizonomics

Looks like it is not just Keynesians. Some Austrians, too, are dismissive.

Eric Shinseki has Intrinsic Grasp of Monetary Operations

commentary by Roger Erickson

The retired General & current VA Secretary is my kind of guy.

Shinseki Defends Claims Backlog: 'Let it Grow'

The VA secretary said he doesn't regret opening the opportunity to issue disability claims to nearly a million veterans of wars going back more than 60 years. He only wishes the decision had been made sooner to give the VA a head start.

"It was the right thing to do … And we will do it again whenever the opportunity to better serve veterans presents itself," he said. "Let's not back away from such decisions, either because we're afraid of, or don't want the backlog to grow – let it grow. We'll work on it. We'll get it down. But let's keep our priorities straight here. It's about taking care of veterans."
In the cases of Vietnam and Gulf war illnesses, the VA is dealing with claims now because "we didn't take care of business when we should have," he said.

Amen.  Can we have this guy run for President?

Mike Beggs — Debt: The First 500 Pages

Mike Beggs reads David Graeber's Debt and finds it wanting.

Debt: The First 500 Pages
Mike Beggs | Lecturer in Political Economy at the University of Sydney
(h/t widmerpool in the comments)

Matias Vernengo — Krugman on the meaning of neoclassical economics

So what is neoclassical economics? According to Krugman it is basically maximization and equilibrium....This is clearly incorrect.
Naked Keynesianism
Krugman on the meaning of neoclassical economics
Matias Vernengo | Associate Professor, University of Utah

Sergio Cesaratto — A reply to Wray - Part I & II

The debate continues for those following it.

Naked Keynesianism
A reply to Wray - Part I

A reply to Wray - Part II

Sergio Cesaratto
(h/t Anonymous in the comments)

Lara Lee and Daniel Sobol — What Data Can't Tell You About Customers

Across industries, companies are using the vast amounts of user-generated data to guide innovation of new products and services. But data mining does not equate to developing "customer intelligence." Human behavior is nuanced and complex, and no matter how robust it is, data can provide only part of the story. Desire and motivation are influenced by psychological, social, and cultural factors that require context and conversation in order to decode.
Data can reveal new patterns that point a firm in the right direction, but it can't indicate what to do once there. It reveals what people do, but not why they do it. And understanding the why is critical to innovation.
Harvard Business Review | Blog Network
What Data Can't Tell You About Customers
Lara Lee and Daniel Sobol
h/t Apj in the comments)

Monday, August 27, 2012

Mark Dempsey — Enlightened Economics: There Is an Alternative

LA Progressive
Enlightened Economics: There Is an Alternative
By Mark Dempsey
(h/t Clonal in the comments)
Mark Dempsey is a writer who lives near Folsom. The Modern Monetary Theorists who made this article possible include Yves Smith (, Steve Keen (, Bill Mitchell (, William K. Black and Marshall Auerback (, Warren Mosler ( and Kucinich economics advisor Michael Hudson ( Recommended viewing for a little historical perspective, Youtube video The Secret of Oz.

David Rosenberg — Paul McCulley on capex trend

Paul McCulley, the former legendary economist and fund manager at PIMCO, who was once being touted to join the Fed as a policymaker, told me last year at the Altegris-Mauldin conference, the YoY trend in the three-month moving average of core capex orders had for a long time been his preferred indicator of how the broader economy was going to fare a few quarters into the future. Well, if you are bullish on U.S. growth prospects over the near-term, I suggest you look at the chart below:
Zero Hedge
Submitted by Tyler Durden

How's PIMCO been doing since McCulley left?

Mary Hobart, 1891, Presages Parts of Modern Monetary Operations

"Our government exacts taxation, but devoid of justice, fails to provide the means in sufficient quantity to meet these exactions. A government “by the people, of the people, and for the people,” demanding from the people that which it is impossible for them to obtain ! 

Can human tyranny sink to lower depths of infamy ? And has it come to this in our free Republic, that the people, armed with the ballot, have not the power to provide themselves with a currency sufficiently large to pay their taxes ? Have we no right as a people to establish a currency which will be sufficient in quantity to adjust our social debts and credits ? "

Sounds like a very smart lady. What happened, the banking lobby?

ps:  She was very much against a gold-standard.

Frances Woolley — Elinor Ostrom, you were turtley right

Elinor Ostrom described how to design institutions to manage common pool resources. They have to be able to establish boundaries (the fence), monitor the use of the resource (all of the dog walkers, watching other dog walkers), have sanctions for people who over exploit the resource (the shame of being known in the local community as a turtle-nest disturber), and so on.
The turtles show that Elinor Ostrom was right - communities can manage common property resources. The real challenge is to scale up institutions for managing common pool resources - to go beyond little neighbourhoods managing snapping turtles, and find ways to solve large-scale challenges: managing parks, watersheds, the global environment.
Worthwhile Canadian Initiative
Elinor Ostrom, you were turtley right
Frances Woolley | Professor of economics at Carleton University

Studying Steve Keen — Economics at UWS (University of Western Sydney)

This could never have happened at an “Ivy League” University: the gatekeepers of the subject would have fought vigorously to undermine the program, which they would have seen as unprofessional–a topic covered at length in a (yes, I’m serious) Playboy article recently. That’s why places like UWS and the University of Missouri Kansas City (UMKC) are where non-Neoclassical work flourished over the last 20 years–the mainstream ignored us.
Steve Keen's Debtwatch
Studying Economics at UWS
Steve Keen

Steve Keen reflects.

Lord Keynes — Rescuing Menger from the Austrians

I have written before of Carl Menger’s Lectures to Crown Prince Rudolf of Austria (trans. Monika Streissler and David F. Good; Aldershot, 1994).

That book shows that the founder of Austrian economics was worlds apart from the modern cult of anarcho-capitalism.
Social Democracy for the 21st Century
Rescuing Menger from the Austrians
Lord Keynes

Herman Daly’s proposal for 100% reserve banking

Post of "Nationalize Money, Not Banks," by Herman Daly

P2P Foundation
Herman Daly’s proposal for 100% reserve banking
Posted by Michael Bauwens

Evan Soltas — The Great Depression in Graphs

The St. Louis Federal Reserve Bank's FRED database has uploaded a "macrohistory" collection from the National Bureau of Economic Research. For anyone interested in data like me, this is a treasure trove of time series on prices, employment, and other macroeconomic data from the 1800s through the Depression you've likely never seen before.
Evan Soltas | economics & thought
The Great Depression in Graphs
Evan Soltas

1833 Review of US Currency History: William Gouge

commentary by Roger Erickson

Hat tip to "Save America," commenting at Warren Mosler's site.

Including an Account of Provincial and Continental Paper Money.
To which is prefixed AN INQUIRY INTO THE 


[advisor to US President Jackson]

ps: also found as a downloadable pdf, at 

Dirk Ehnts — Profit sharing as alternative for interest rate

I have been at a book presentation of David Graeber (5,000 years of Debt) in May at Dussmann Berlin and he reminded me of something I have long forgotten: profit-sharing is an alternative for an interest rate. The incentives the two mechanisms create are quite distinct. With an interest rate, the creditor is supposed to get his money (back) whatever occurs. With a profit-sharing agreement, this looks quite differently. Only when the debtor books positive profits does the debtor get his or her share.
Profit sharing as alternative for interest rate
Dirk Ehnts

Michael Pettis — How do we measure debt?

In the last issue of my newsletter much of the first half was dedicated to a discussion of recent events in Spain and Italy and why they reinforce the argument that several countries will be forced to leave the euro and restructure their debt. The most worrying, but expected, fact was the amount of capital fleeing the afflicted countries. I cited an article in Spiegel that claims that in the past year an amount equal to nearly 30% of Spain’s GDP had left the country. Flight capital is both a major result of declining credibility and a major cause of further declining credibility, and because it is so intensively reinforcing it is a major warning signal.
This matters for China for at least two reasons.  First, a worsening Europe will make it harder than ever for China to rebalance growth away from investment, and second, China itself is experiencing capital flight.
China Financial Markets
How do we measure debt?
Michael Pettis

Ralph Musgrave — Jan Kregel of the Levy Economics Institute tries to criticise narrow banking

Ralph mounts a defense of narrow/full reserve banking.

Jan Kregel of the Levy Economics Institute tries to criticise narrow banking
Ralph Musgrave

John Carney — The Gold Standard and the Myth of Price Stability

I’m not convinced that a return to sound money is possible. Our government is too big, our banking system too entrenched, to ever permit a reversion to gold.
But if you are going to attempt an intellectual assault on the gold standard, you can’t just point to price instability in the 1920s. The Austrians have been here before you—and they understand the period much better. And, more importantly, the value of a gold standard does not hinge on price stability in the first place. 
CNBC NetNetThe Gold Standard and the Myth of Price StabilityJohn Carney | Senior Editor
John makes two good points here. First, politics trumps economics. One has to realize that the advocates of sound money advocate not only a return to the gold standard but also 100% gold reserves to money creation. Even it were the greatest idea ever, it's not gonna happen due to vested interests. Not only does it knock down policy space for governments, limiting their power to affect their national economies, it also adversely affects profits of the financial sector by reducing the amount of rent that can be generated.

Secondly, if you are going to argue against a position or meet objections to you position, you should deal the strongest arguments that have been advanced. That's a reasonable demand.

Rodger Mitchell — The coming election: Presidents come and go, but the Supreme Court is “forever”

Rodger points out that the coming election is really about the Supreme Court and judiciary. The right has realized this for a long time. It has long been the objective of conservatives to gain effective control of the judiciary.
After Citizens United the left is now waking up to the danger to liberalism posed by the current composition of the Supreme Court and that one more relatively young conservative justice would tip the balance hard right for some time to come, with potentially devastating social consequences decisions reflecting business interests and conservative morality.
This is a dynamic that greatly favors President Obama, since many on the left who would otherwise either pass or vote for a third party candidate to "send a message" will hold their noses and vote for the president again just because of the judiciary.

In the US, voting for a particular party is also voting for the composition of the judicial branch of government, and this aspect of voting is not subject to periodical review through future elections. Once federal judges are appointed it is for life, unless removed for cause, which is rare.

Bill Mitchell — Return to a gold standard – don’t even think about it

Conservatives hark back to the gold standard as some sort of golden age when all was well with the world. They still think that prosperity is within the grasp of a society if it anchors its currency to the price of gold. It seems the US Republican party is toying with the idea again – presumably as a pitch to rope in the real conservatives (Ron Paul supporters). They couldn’t be serious though. It would be a disaster if the world attempted to go back to a system that failed when it operated and it would lead to the further immiserisation of the poor if implemented. The salient point is that it didn’t work when it was in operation. It didn’t produce lower price variability and lower inflation rates nor did it prevent bank crises and financial panics. It was abandoned because it was politically unsustainable such was the entrenched unemployment that accompanied it.
Bill Mitchell — billy blog
Return to a gold standard – don’t even think about it
Bill Mitchell

Even if the Entity Fails, Executives Walk Away Rich. From Banks? Or From the Entire USA? How about WE Walk Away Instead, With OUR Nation Still Wealthy?

commentary by Roger Erickson

"Even if the entity fails, you walk away rich." That's the last line of Bill Black's famous recipe for Control Fraud, learned while prosecuting the guys who bought & owned the Keating-5. Bill was the featured guest during the third hour of the Coast to Coast AM banking fraud special on Saturday, August 25, 2012

Here's the whole recipe again, because we need to repeat this as many times as it takes for the US electorate to recognize how they're being robbed.

Black's recipe for robbing a bank is simple:

1) If you're a bank, grow like crazy by making really crappy loans

2) Make lots of really crappy loans at a premium interest rate.

3) Employing extreme leverage (a whole lot of debt compared to equity)

4) Set aside next to nothing for loss reserves for the inevitable deluge of losses that are going to be coming.

“If you do those 4 things you are mathematically guaranteed, in the near term, to report record profits. And with modern executive compensation, that means that the controlling officers will be made wealthy... Even if the entity fails, you walk away rich.”

Even paranormal researchers are now hearing Bill's message! So, that's progress. :)

ps: That definition certainly ought to define Geithner and most members of Congress. Maybe we're closer than we imagine?

Or are we further?

We once had the Keating-5 just in the US Senate. Now we have the Geither-535? Or is that number even bigger, and now distributed across gov agencies from the Fed to the DoJ? Not to mention the Presidency of Harvard U and U-Chicago, the preferred sites for either opposing or collaborating fraud camps.

Do today's Control Frauds care if even the entire USA fails? Will they still walk away personally wealthy? To where? And with what form of wealth guarantees?

How about WE walk away from them instead, with OUR nation still wealthy?

Bill Black, wherever you are, we need a simple slogan and plan to mobilize citizens in opposition to Control Frauds and Innocent Frauds alike.  Here's a suggested version.

George Washington's simple recipe for saving a nation from its banks:

1) If you're a citizen, grow your country like crazy by improving the quality and tempo of distributed decision-making!

2) Improve economic tempo by the simple act of de-centralizing decision-making, so we can explore more of our options, and select innovations, faster.

3) Eschew extreme leverage - and invest in generating many small failures, not too few large ones. Decentralize decision-making by distributing resources well enough to explore distributed options. Scalable success will emerge by default, as everything that doesn't work is quickly & cheaply exposed.

4) Don't bet the farm. Instead, invest in resilient systems capable of meeting all the unpredictable challenges, conceivable or inconceivable, that are inevitably coming. Continuously prioritize decentralized decisions by distributing feedback well enough to align all actions with net benefit.

“If WE do those 4 things WE are mathematically guaranteed, in the LONG term, to ACHIEVE record SUCCESS. And with modern AUTOMATIC STABILIZERS, that means that the NATIONS CITIZENS will ACHIEVE SUCCESS... Even if a few frauds fail, our nation will continue generating success.”

Sunday, August 26, 2012

Richard Reeves — Stockman Redux

As he became president in 1981, Ronald Reagan called in a 34-year-old congressman from Michigan named David Stockman, considered by many to be the most articulate and intellectually imposing Republican of the moment.

Stockman had impressed the new president by humbling the old man in practice debates before Reagan took on President Carter back in September.

“Dave,” said Reagan, “I’ve been thinking about how to get even with you for that thrashing you gave me in the debate rehearsals. So I’m sending you to the OMB (Office of Management and Budget).” Commented David Brinkley of NBC News: “He’s so fast with big figures that he scares old Washington hands.”

Stockman had only days to come up with a balanced budget that fulfilled Reagan’s campaign promises to cut taxes and build up the military. He was fast, but not necessarily accurate or truthful. Not by a long shot. What he did was use a pre-Reagan-projected budget with a $75 billion deficit the first year. But he already knew the real figure would be more than $600 billion after totaling Reagan’s new programs. On the revenue side, he used asterisks instead numbers. Lots of asterisks.
Stockman retired after four years, wrote a book, a confessional of sorts, went to Wall Street and made a lot of money. He turned down interview requests and kind of faded away.

Until last week, when he wrote an opinion piece for The New York Times. The headline was: “Paul Ryan’s Fairy-Tale Budget Plan.”
Stockman Redux
Richard Reeves

As they say, "it takes one to know one.

Michel Bauwens — The future of (participatory) religion

Article/Interview: : Rethinking the Future of World Religion: A Conversation with Jorge N. Ferrer. Integral Review. July 2012, Vol. 8, No. 1, pp. 22+
P2P Foundation
Posted by Michel Bauwens

Why is this significant for economics, policy, and society? Because spirituality is about consciousness and religion is about values and norms. Economic systems is based on the level of collective consciousness of societies, and institutional rules reflect prevailing values and norms in practice. 
For Dante, individual morality cannot be dissociated from social responsibility because the individual is a citizen, and to be a good individual, he must be a good citizen. Thus, to retrace the moral journey of the pilgrim through Hell, Purgatory, and Paradise, is to follow the journey of the citizen from a corrupt society, through the transition from selfishness to social responsibility, to his goal in the ideal society. The moral level of Dante's allegory is also the political level because it is impossible to be a moral human being without being a good citizen, and it is difficult to be either a good citizen or a moral person in a bad society. In Hell, Dante leads his pilgrim-persona step by step through a knowledge of what constitutes a corrupt society and a corrupt person and shows how even a basically good individual can be affected by the evil around him. By analyzing the structure of Hell, investigating each region in the order in which the pilgrim goes through it, since each sin has political implications, we can see how Dante reveals the hidden corruption that undermines society and how he unmasks the respected public figures. By the end, Dante's audience should understand what constitutes evil in a society as well as in an individual and be able to see the part we play in the evil around us.

Dr. Housing Bubble on shrinking income, increasing debt, and housing prospects

The sustainability of the housing market is going to come from the potential pool of younger home buyers. The housing market since World War II has followed a very common and steady path up until the 2000s. Each year it was expected that home values would increase but this also came hand and hand with rising household incomes. There is little mention of how big of a hit household income has taken over the last decade. The pattern is broken so to expect that we are now going to be back on a similar path that was very familiar to the baby boomer generation is simply not the case. When we look at the actual income declines taken by the younger groups we realize that something is very different now. Combine this stagnant household income with large levels of student debt and you have headwinds that are likely to keep a lid on the entry level of the market.
Dr. Housing Bubble
The indebted young and shrinking middle class – 6 charts examining fluctuating income changes and the impact on the future housing market

Miles Kimball — The Egocentric Illusion

Miles Kimball reflects on David Foster.

Confessions of a Supply-Side Liberal
The Egocentric Illusion
Miles Kimball

Perennial wisdom, the universal mystical spirituality, or "core spirituality," at the heart of all religions and wisdom traditions is about liberation from "the egocentric illusion" also known as spiritual ignorance.

Jesus in the The Gospel of Thomas, logion 3: "...if you will not know yourselves, you dwell in poverty and it is you who are that poverty."
Thomas O. Lambdin translation

(for jrbarch)

Dick Meister — The Billionaires Bill of Rights

California's Proposition 32, on the ballot this November, would severely limit unions' election spending while leaving corporations free to spend as much as they like.
The Billionaires Bill of Rights
Dick Meister |

Loading the dice.

Dennis Marker — Teaching People to Hate Their Own Govt. Is at the Core of the Project to Destroy the Middle Class

The following is an excerpt from Dennis Marker's new book15 Steps to Corporate Feudalism , published this year. In the text below, Marker shares one of the steps he sees as central to the destruction of the middle class since Ronald Reagan took over.
Your goal for this step is to figure out how to teach the middle class to hate their own government using a strategy that takes into consideration the political climate of the United States of thirty years ago.
Teaching the middle class to hate their government was an essential part of the plan to implement Corporate Feudalism. A middle class cannot exist without a strong government. This is because only a government has the power to stand up to the giant corporations of today’s world, or the powerful individuals and private armies of earlier times. It is the government that enforces the laws to protect the middle class from those who would like to become their economic rulers. That is why prior to the Industrial Revolution and the creation of the middle class all economies were run according to some version of the feudal system. If you want to put an end to the middle class and replace it with a feudal republic, you would need to change people’s perception of their government.
Teaching People to Hate Their Own Govt. Is at the Core of the Project to Destroy the Middle Class
Dennis Marker

Nicholas Levis — Money and Magic

On David Graeber, Charles Eisenstein, and Daniel Pinchbeck.

Occupy Wall Street — Alternative Banking
Money and Magic
Nicholas Levis

Jonathan Krajack (JK) — Jonathan Krajack

Our own JK pens an op-ed for the hometown newspaper.

Great work, JK. Congrats on getting it published.

The Sentinel
Understanding the unemployment problem
By Jonathan Krajack, Special to The Sentinel

Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts

commentary by Roger Erickson

Thank the Gods - any & all - for The Atlantic. They've said the obvious, which is more than any other media outlet has come out and said.

Why the Gold Standard Is the World's Worst Economic Idea, in 2 Charts

Good as this article is, the range of comments makes one fear for our country. Still, it's a step forward to see this clear statement in print.

Jeb Bush: Republican Party Needs 'To Reach Out To A Much Broader Audience'

Doh. Look at the demographics. The GOP is way on the wrong side of the future. History has a liberal bias.

I suspect that Jeb is also talking his own book. If Obama wins in '12, Jeb will definitely run in '16. He doesn't want to be on the losing side out of the gate due to demographics.

Keep from All Thoughtful Men: How U.S. Economists Won World War II

commentary by Roger Erickson

Keep from All Thoughtful Men: How U.S. Economists Won World War II
    (Hat tip to Hoonose at Warren Mosler's blog)

"Jim Lacey has overturned nearly 60 years of sloppy work by historians."

This thread of actively suppressing information comes up repeatedly. From the colonial currencies of Ben Franklin's time, to Abe Lincoln's greenback advisors, to Marriner Eccle's time, to the current time of Warren Mosler, Bill Mitchell, Randy Wray, Wynne Godley, William Vickrey, and countless other, largely ignored authors pointing out obviously emerging operational realities (I've compiled a partial list, but there's still no telling how large it really is - an OpenSource repository of neglected works is sorely needed).

Is our 1-step forward, 2-step regression due to overt conspiracies, innocent frauds, or simply institutional momentum of outdated professional staff refusing to die off fast enough?

Whatever the cause, the time constant for re-acquainting existing theory with emerging operations formerly outside the "pure" theory area is obviously hampering us. And it may kill us.

Our first step should be to OpenSource this book, and many more like it, and invest to send a pdf copy to every citizen in the USA. The delay in distributing needed information is critically harmful. In any social species, the net value of key information is defined by how far and wide it spreads, not by how much static value a parasitic group member tries to extract in return for their participation. Best way to succeed is to keep your team alive and protecting you. We lose track of that.

It's not just that HP doesn't know what HP collectively knows. The "winners" occupying dominant institutional staff positions are actively resisting adequate sampling of already emerging operations that would cause faster turnover of theoretical frameworks. We're seeing a perfect storm of income fears, neglect of basic needs, fueling desperation to hold on to turf. That kind of distributed, institutional panic is exactly NOT what team members in a democratic republic want to see.

In short, the difference between policy-oriented theory and operations is diverging in many if not all arenas. That can only happen if a populace allows itself to be inadequately connected, inadequately practiced at managing change, and simply off the pace of contingency management. Scary stuff.

What are we going to do about it? We have more than adequate precedents for rising to such occasions, from Ben Franklin's famous table talk on to Marriner Eccles forgotten testimony to the US Senate. Our operational problem seems to be that most of the population is missing adequate exposure to these key lessons that would enable rapid development of adequate situational awareness. "We can do it," yet most of us don't seem to know that.

Sending inadequately trained staff into a democratic battlefield is a recipe for disaster.

We don't need cynics saying that any attempt to foster coordination is "paternalism."

We don't need arrogant "theoretical experts" in one field refusing to talk with operational experts in other fields - which they may not even know exist!

We do need trust and will to scramble through the current mess.
Then we need systematic planning to ensure another generation doesn't see themselves in the same situation yet again, this time with 600 million, not just 300 million people.

Seems to me that our problems are largely problems of scale. How do we maintain and actually increase group-intelligence when group size is rapidly scaling? That's a mobilization task, and we have plenty of people already familiar with such tasks.  Every system model known says that required inter-connectivity always scales far faster than population size. Lessons from all known examples of development - "ontogeny" - indicate that rapid re-mixing of connectivity patterns is the winning approach, allowing us to formally search for transiently successful "team patterns" while also knowing full well that we must soon disassemble them and re-assemble them in novel ways to meet accelerating change. We've been there & done that, but are acting like we don't have to do it again.  Get real!

Future shock already rolled past us. It looks like an intractable problem, yet every intractable task has a solution, and that solution will involve another level of indirection. Our #1 problem is that too many "experts" are actively resisting - not accelerating - indirection. Grandparent hubris & parent stubbornness is putting the kids at dire risk, just when all co-existing generations should be working together more fluidly, not less.

What was the literature major's take? "If we want everything to remain the same, everything must change." Why are we letting ourselves be afraid to stabilize our succession path by accelerating change?

AFP — Report: Germany calls for new EU treaty

German Chancellor Angela Merkel has called for a new European Union Treaty but is facing lukewarm interest from her EU partners, the weekly Der Spiegel reported....

According to the weekly, one of Berlin’s proposals concerns the role of the European Court of Justice, which “could for example acquire the right to monitor the budgets of member states and punish those that run up a deficit.”

But “the proposal has not stirred enthusiasm among the member states,” the weekly added....
The Raw Story
Report: Germany calls for new EU treaty
Agence France-Presse

Aristotle on *nomisma* in Nicomachean Ethics

"Now proportionate return is secured by cross-conjunction. Let A be a builder, B a shoemaker, C a house, D a shoe. The builder, then, must get from the shoemaker the latter's work, and must himself give him in return his own. If, then, first there is proportionate equality of goods, and then reciprocal action takes place, the result we mention will be effected. If not, the bargain is not equal, and does not hold; for there is nothing to prevent the work of the one being better than that of the other; they must therefore be equated. (And this is true of the other arts also; for they would have been destroyed if what the patient suffered had not been just what the agent did, and of the same amount and kind.) For it is not two doctors that associate for exchange, but a doctor and a farmer, or in general people who are different and unequal; but these must be equated. This is why all things that are exchanged must be somehow comparable. It is for this end that money has been introduced, and it becomes in a sense an intermediate; for it measures all things, and therefore the excess and the defect-how many shoes are equal to a house or to a given amount of food. The number of shoes exchanged for a house (or for a given amount of food) must therefore correspond to the ratio of builder to shoemaker. For if this be not so, there will be no exchange and no intercourse. And this proportion will not be effected unless the goods are somehow equal. All goods must therefore be measured by some one thing, as we said before. Now this unit is in truth demand, which holds all things together (for if men did not need one another's goods at all, or did not need them equally, there would be either no exchange or not the same exchange); but money has become by convention a sort of representative of demand; and this is why it has the name 'money' (nomisma)-because it exists not by nature but by law (nomos) and it is in our power to change it and make it useless [1133 a 29-30].There will, then, be reciprocity when the terms have been equated so that as farmer is to shoemaker, the amount of the shoemaker's work is to that of the farmer's work for which it exchanges. But we must not bring them into a figure of proportion when they have already exchanged (otherwise one extreme will have both excesses), but when they still have their own goods. Thus they are equals and associates just because this equality can be effected in their case. Let A be a farmer, C food, B a shoemaker, D his product equated to C. If it had not been possible for reciprocity to be thus effected, there would have been no association of the parties. That demand holds things together as a single unit is shown by the fact that when men do not need one another, i.e. when neither needs the other or one does not need the other, they do not exchange, as we do when some one wants what one has oneself, e.g. when people permit the exportation of corn in exchange for wine. This equation therefore must be established. And for the future exchange-that if we do not need a thing now we shall have it if ever we do need it-money is as it were our surety; for it must be possible for us to get what we want by bringing the money. Now the same thing happens to money itself as to goods-it is not always worth the same; yet it tends to be steadier. This is why all goods must have a price set on them; for then there will always be exchange, and if so, association of man with man. Money, then, acting as a measure, makes goods commensurate and equates them;for neither would there have been association if there were not exchange, nor exchange if there were not equality, nor equality if there were not commensurability. Now in truth it is impossible that things differing so much should become commensurate, but with reference to demand they may become so sufficiently. There must, then, be a unit, and that fixed by agreement (for which reason it is called money); for it is this that makes all things commensurate, since all things are measured by money. Let A be a house, B ten minae, C a bed. A is half of B, if the house is worth five minae or equal to them; the bed, C, is a tenth of B; it is plain, then, how many beds are equal to a house, viz. five. That exchange took place thus before there was money is plain; for it makes no difference whether it is five beds that exchange for a house, or the money value of five beds.

"We have now defined the unjust and the just. These having been marked off from each other, it is plain that just action is intermediate between acting unjustly and being unjustly treated; for the one is to have too much and the other to have too little. Justice is a kind of mean, but not in the same way as the other virtues, but because it relates to an intermediate amount, while injustice relates to the extremes. And justice is that in virtue of which the just man is said to be a doer, by choice, of that which is just, and one who will distribute either between himself and another or between two others not so as to give more of what is desirable to himself and less to his neighbour (and conversely with what is harmful), but so as to give what is equal in accordance with proportion; and similarly in distributing between two other persons. Injustice on the other hand is similarly related to the unjust, which is excess and defect, contrary to proportion, of the useful or hurtful. For which reason injustice is excess and defect, viz. because it is productive of excess and defect-in one's own case excess of what is in its own nature useful and defect of what is hurtful, while in the case of others it is as a whole like what it is in one's own case, but proportion may be violated in either direction. In the unjust act to have too little is to be unjustly treated; to have too much is to act unjustly.

"Let this be taken as our account of the nature of justice and injustice, and similarly of the just and the unjust in general."

Aristotle, Nichomachean Ethics, V, 5 — W. D. Ross, tr.)

Here is the Bekker page in Greek for 1133, a 29 (click on the right arrow underneath to go to 1133, a 30).

Nomisma is the modern Greek term for "currency." It is usually translated as "money" in the ancient texts.

Saturday, August 25, 2012

Washingtons Blog — Top Economists: Iceland Did It Right … And Everyone Else Is Doing It Wrong

Iceland Shows the Way
Washingtons Blog
Top Economists: Iceland Did It Right … And Everyone Else Is Doing It Wrong
Washingtons Blog

Israeli News Channel — Netanyahu ‘Determined to Attack Iran’ Before U.S. Elections

Hardly a confirmation, but it could be a signal so that it is not a surprise. It would be a shock though and would send shock waves across the globe.


Netanyahu ‘Determined to Attack Iran’ Before U.S. Elections, Israeli News Says
Alexander Reed Kelly

Lord Keynes — Davis on US Recessions in the 19th Century

Dates of recessions. Lots of recessions.

Social Democracy For The 21St Century
Davis on US Recessions in the 19th Century
Lord Keynes

Lord Keynes — Debate on the Origin of Money

Lord Keynes updates the debate on money origins.

Social Democracy For The 21St Century
Debate on the Origin of Money
Lord Keynes

Constitutional law professor Jonathan Turley on Obama's statism

TURLEY: Oh, President Obama has created an imperial presidency that would have made Richard Nixon blush. It is unbelievable.
Shannyn Moore: Just A Girl From Homer
John Cusack & Jonathan Turley on Obama’s Constitution
(h/t Lambert Strether at Naked Capitalism

Joel Bleifuss — GOP Land Grab

Another way resources will be redistributed--if the Republicans have their way--is the privatization of public assets.
Think of all the riches tied up in our public education system. At the Koch-funded Heartland Institute, President Joseph Bast said: "We see vouchers as a major step toward the complete privatization of schooling. In fact, after careful study, we have come to the conclusion that they are the only way to dismantle the current socialist regime...."
Romney also wants to privatize Social Security–at least, that was his position when he last ran for president. At a town hall meeting in October 2007, Romney said that rather than paying into Social Security, people should be required to invest their money in the stock market. When someone in the audience told Romney it sounded like “privatization,” the perennial presidential hopeful replied: “You call it privatization. I call it a private account....”
Though he has backed away from that scheme, Romney now advocates selling Amtrak, claiming such a sale will save the country $1.6 billion a year. Amtrak, or more specifically its highly profitable Northeast corridor, was the target last year of an unsuccessful privatization attempt by Rep. John Mica (R-Fla.), chair of the House Transportation and Infrastructure Committee. 
In These Times
GOP Land Grab
Joel Bleifuss, a former director of the Peace Studies Program at the University of Missouri-Columbia, is the editor & publisher of In These Times

Evan Soltas — NGDP Is a 'Simple Rule'

It is tempting to wonder whether NGDP targeting came up during the FOMC discussion, given Eric Rosengren and Charles Evans, two alternate members present at the meeting who are respectively the Federal Reserve Bank presidents of Boston and Chicago, have both endorsed it. Given explicit debate over the practice in the FOMC's November 2011 minutes, whether it entered the discussion is uncertain.

It should be obvious, though, that an NGDP level target would meet the Fed criteria voiced in the minutes. Above all, an NGDP target is a "simple rule" which fulfills the dual mandate, serves as the most clear of benchmarks, dodges the zero lower bound problem, and has been shown to outperform other rules under model uncertainty. "Hybrid" NGDP targeting, which assigns weight to both the level and rate of growth of NGDP, would most closely fit the Fed's interest in "inertial" policy rules.
Evan Soltas | economics & thought
NGDP Is a 'Simple Rule'
Evan Soltas

Joshua Wojnilower — Macroeconomics Could Benefit From Complexity

How complexity affects macroeconomics and results in calculation problems in ergodic (deterministic) models due to emergence in that a whole (system) is greater than the sum of its parts (elements) since unforeseeable properties may arise from the relations among the elements. This is true even in the physical sciences and even more so in the life and social sciences. It's one reason for radical uncertainty and a strong argument against a neoclassical approach.

Bubbles and Busts
Macroeconomics Could Benefit From Complexity
Joshua Wojnilower

Martin Ford — The Lights in the Tunnel: Automation, Accelerating Technology, and the Economy of the Future

Free Book in PDF.

The Lights in the Tunnel: Automation, Accelerating Technology, and the Economy of the Future
Martin Ford
(h/t Andy Blatchford via email)

Dan Mitchell and William Black Debate Economic Policy in Steamboat "Freedom Conference"

commentary by Roger Erickson

Dan Mitchell and William Black debate economic policy in Steamboat

Unfortunately, the article plays down MMT and throws in "Keynes" - the arch-fiend to Libertarians - as often as possible. Were there any other journalists present, that were more open minded?  If readers come across more coverage, or especially video, please post the links in comments here.

On the positive side, note that Dan Mitchell comes right out and says: cutting the deficit isn’t his main concern. “I worry about the size of government,”

So far so good on the fiat budget issue.  However, about that "social brain" - aka, governance.  Seems to me the need is for smart governance, regardless of size?

Hmmm. Do you supposed he worries about the size of our population, or only the absolute size of government?   Maybe someone should introduce him to basic concepts of system self-control?  Anyone wanting smaller government regardless of population size should also want a smaller brain relative to their body size.  Maybe they've already achieved it.

Overall, I'm amazed they let Bill Black into their "Freedom Conference."

ps: Is anyone else confused by the very concept of International Liberty? Our ancestors all came here to make a nation that was - in one way or another - more free than other nations. Now some of us want to be free of any nation whatsoever? Time for some fact checking. Can any member of a social species be free from their species? Sure, commit suicide?

There is a LOT of sloppy discussion of processes that have to be exquisitely tuned.  That takes accurate semantics and serious thought.  Not just polemics.  We need more adults in our policy apparatus.

Friday, August 24, 2012

Kimball Corson — Ayn Rand's Central Idea Is Wrong

Labor then is in surplus supply, as Marx predicted. It is displaced by capital and lower waged labor on distant shores. Its marginal productivity in aggregate and across the labor pool has fallen, even though for some few working with much capital, it has risen. There are too few jobs. Unemployment is high. Indeed, many have dropped out of the labor market altogether. We need to consider the labor pool as a whole and the impacts on it. On balance, it has suffered net losses in this process.
The Randian notion of no redistribution of income in this situation is therefore absurd. It is crazy. There is no significant real class of either hyper productive gainers or lazy, indolent and base losers, though exemplars of each can be found to muddy the waters in ad hoc fashion. More, the situation is some wallow in unearned income and the fruits of it and much of the labor pool is cut out of the productive process entirely because of a surplus of labor caused my more labor becoming available and by capital being substituted for labor.
Wandering the Oceans
Ayn Rand's Central Idea Is Wrong
Kimball Corson
posted from Pago Pago, American Samoa

Adam Davidson — Prime Time for Paul Ryan’s Guru (the One Who’s Not Ayn Rand)

It's Friedrich Hayek. Paul Ryan is an Austrian, sort of.

New York Times Magazine
Prime Time for Paul Ryan’s Guru (the One Who’s Not Ayn Rand)
Adam Davidson

Billionaire Ty Warner gives woman $20,000 for her cause after asking her for directions

Human interest story out today at Yahoo!.

A California woman suffering from kidney failure was begging for "money" in the middle of the street  to pay for a life saving medical treatment when a billionaire seller of "beanie babies" rolled down the window as he pulled up next to her to ask for directions.

Apparently the billionaire heard about her plight then he drove off and then thought about it and turned around:
He'd returned after an hour or so. Rolling down his window, he reached out his hand and introduced himself. I immediately recognized his name. He was kind and sincere as he looked directly into my eyes... I listened as he repeated over and over that he was going to help me. That my fundraising was done. That I didn't need to worry any longer. He said he would send a check after he returned to his offices during the week.
I'm very happy that this woman has happened upon the US dollar balances needed to account for her critical procedure.  But, I'm sorry to say that beyond this fact, this kind of story makes me sick to my stomach.

What if this wealthy person didn't need directions?  She dies?  How can we take any satisfaction from this story?  We cannot provide balances to our citizens for critical health care without the financial success of moron "beanie babies"?  We have all of these critical medical technologies, research, development of surgical procedures, facilities, training and education of personnel, pharmacology, rehabilitation, etc... BUT NONE OF THIS CAN BE UTILIZED WITHOUT THE US DOLLAR BALANCES TO ACCOUNT FOR THIS UTILIZATION FIRST BEING ALLOCATED TO BEANIE BABIES????

What kind of morons are running this country?!

Accordingly, I'm sure this billionaire will be invited on "Oprah" or whatever moron daytime show and everyone will fawn all over him that "what a great person he is", blah, blah, blah, and don't get me wrong I have great respect for what he did and his generosity; but this guy shouldn't be blushing red from humility, he should be purple with rage (if he has a brain).

Matthias Matthijs — How Europe's New Gold Standard Undermines Democracy

In order to understand the euro zone's current predicament, it is useful to see Europe's Economic and Monetary Union as an intra-EU gold standard system: a fixed exchange-rate system with strict internal budget rules for external adjustment and therefore a deflationary bias. I will explain this in more detail below. But first, how do we know a gold standard is an unworkable idea for modern democracies?
Harvard Business Review | Blog Network
How Europe's New Gold Standard Undermines Democracy
Matthias Matthijs | Assistant Professor of International Political Economy at Johns Hopkins University’s School of Advanced International Studies (SAIS)

Warren Mosler on the monetary economics of a gold standard

Must-read. 'Nuff said. Roger Erickson has already posted on it here, but I want to emphasize it is a must-read if you want to understand the MMT position on monetary systems — non-convertible, floating rate versus convertible fixed rate. This is key to grasping MMT and the MMT position.

Bonus: Contains a link to a paper Warren wrote in the '90's.

Exchange Rate Policy and Full Employment
December 1998, loosely structured lecture in Newcastle, Australia.

The Center of the Universe
Gold standard thoughts
Warren Mosler

Cutting Through the Fairy Dust Regarding Gold-Std and Other Fixed-Rate Exchange Regimes

commentary by Roger Erickson

Warren Mosler explains, once again, why the GOP fixation with a gold-std currency is nonsense. This is about as level-headed a discussion as you'll ever see expressed in print. If you ever wondered what all the fuss was about fixed vs fiat currencies, read Warren's essay.

"The ideological issue is whether the primary function of the currency is to be an investment/savings vehicle, or a tool for provisioning government and optimizing real economic performance."

Bingo! I'll add more emphasis differentiating "private savings" from adequately provisioning the incredibly dynamic capabilities of a constantly and rapidly scaling nation. When it comes down to personal hoarding vs social growth, there are simple reasons why cooperative, social species have won vs solitary hermits, no matter how heroic the hermits are. Return on coordination swamps all other returns. It's far more adaptive to hoard coordination capabilities than to hoard commodity assets.

Having a dynamically scaling currency system is a requirement for denominating all the complex transaction-chains that a dynamically growing society executes. In going from fixed (aka NOT agile) to floating (aka, agile) exchange regimes, we're simply voting with our feet, to voluntarily swap SOME, limiting personal options for SOME, enabling group options.

Once people viscerally perceive the options of personally perishing vs banding together to flourish, the decision to go with agile decisions and rapid, floating changes in local valuations gets very easy. It's a no brainer.

The fact that we currently have millions of people who don't grasp those personal vs group options is a sign of our social dissolution, not of our potential.

To survive, we need every person in every profession to at least be aware of evolving reality (say, biology 101?), and also practiced at Outcomes Based Training.  That way we wouldn't have Luddites resurfacing every 3 generations, and trying to take us 2 steps backwards instead of another step forward.

This all gets very simple from a systems point of view. To do more things, new tools are always needed, the sooner the better. To rapidly invent & distribute new tools as needed, we need toolmakers, the sooner the better. To both develop toolmakers & ensure safe vs unsafe use of proliferating tools ... we need processes to develop (educate & train) both toolmakers and tool-users. Those layers of organization never stop growing. It's what we are.

That's how complex societies and all systems compete and evolve. The only other option is group suicide, which always looks attractive to those individuals who don't yet see the next train coming down the tracks, nor the need to rapidly distribute & efficiently use totally new tools to escape it.

Yes, there is ALWAYS a lot of noise, with people crying "wolf" and offering a huge range of new tools, mostly not needed. Yet the only choice is to SELECT carefully from the palette of options, to SELECT to train the right toolmakers, and to SELECT to learn to use the right tools well ... all soon enough. We can't abstain from natural selection, except by group suicide.

We're always in a hurry to be a more agile culture, and fixed-value-exchange regimes are the antithesis of agile. Case closed.