Dilip D'Souza — Hitler’s Strange Afterlife in India

Disturbing.

The Daily Beast
Hitler’s Strange Afterlife in India
Dilip d'Souza

Bill McBride summarizes Jan Hatzius on 2013 and beyond

Short summary. 

Hatzius uses a Godley-based model. He sees fiscal drag (taxes plus saving) declining.

Calculated Risk
Goldman Sachs: "Moving Over the Hump"
Bill McBride

Lars Syll — Rational expectations – assuming we know what in fact we never know

In a laboratory experiment run by James Andreoni and Tymofiy Mylovanov and presentedhere, the researchers induced common probability priors, and then told all participants of the actions taken by the others. Their findings is very interesting, and says something rather profound on the value of the rational expectations hypothesis in standard neoclassical economic models:

Lars P. Syll's Blog
Rational expectations – assuming we know what in fact we never know

Lars P. Syll | Professor, Malmo University

Summary: REH doesn't take into account the moron factor. :)

Bill Mitchell — Labour market measurement – 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.



Chapter 10 The Labour Market

Sections 10.1 and 10.2 were sketched in this blog – The labour market is not like the market for bananas, while Section 10.3 was started in this blog – Labour market measurement – Part 1.
We resume Section 10.3 today.

Bill Mitchell — billy blog
Labour market measurement – Part 2
Bill Mitchell

Schiff, Austrians, got everything wrong. MMT got everything right!

Joshua Wojnilower — Furthering the Post-Keynesian View of Wealth and Income Concentration

Though I support the government’s ability to offset private sector deleveraging with budget deficits, I find it troubling that more specifics on the distribution of funds and current tax laws are often omitted from the discussion.

Bubbles and Busts
Furthering the Post-Keynesian View of Wealth and Income Concentration
Joshua Wojnilower

Michael Hudson has been addressing this for some time and recommends taxing away economic rent — land rent, monopoly rent and financial rent — while leaving gains from productive contribution alone.

Dreamworks "Lincoln" and US Civil War Monetary Policy

Video of a Trailer from the recently released movie "Lincoln" which is now in US theaters.  I have not seen this Steven Spielberg movie yet (plan to sometime), and it looks pretty good, let's face it, Spielberg makes a pretty good flick...

I'm going to assume that this movie does not cover any details related to the US monetary policy during the period depicted.  Probably thought "too dry" for most by Spielberg, but of course not for readers of MNE here!

Some time back I was looking into what I could find from some Lincoln archives sites and have come across some interesting correspondence which we can read today and take a look into the past.

Not as vivid as a motion picture of course but here are two pieces of correspondence that reveal the thoughts of both Salmon Chase, who was a Treasury Secretary in the Lincoln Administration, and President Lincoln himself, on the topic of US monetary policy.

I'll post them in their entirety (neither are long).

Here is the first one by Chase in 1863:

Salmon P. Chase, Draft of Address to Congress  1, January 1863
The condition of the Finances will claim your most diligent consideration.

The vast expenditures incident to the military and naval operations required for the suppression of the rebellion have hitherto been met with a promptitude and certainty unusual in similar circumstances, and the public credit has been fully maintained.

The continuance of the war, however, and the increased disbursements made necessary by the augmented forces now in the field demand your best reflections on the best modes of providing the necessary revenue without injury to business & with the least possible burdens upon labor.

The suspension of specie payments by the Banks soon after the commencement of your last session made larger issues of United States notes unavoidable. In no other way could the payment of the troops and the satisfaction of other just demands be so economically or so well provided for..

The judicious legislation of Congress securing the receivability of these notes for loans & Internal duties & making them a legal tender for other debts has made them an universal currency; and and has satisfied, partially at least and for the time, the long felt want of a uniform circulating medium, saving thereby to the people immense sums in discounts and exchanges. 

A return to specie payments, however, at the earliest period compatible with due regard to all interests concerned, should always ever be kept in view.

Fluctuations in the value of currency are always injurious and to reduce these fluctuations to the lowest possible point will always be a leading purpose in wise legislation. Convertibility -- prompt & certain convertibility into coin is generally acknowledged to be the best & surest safeguard against them; and it is extremely doubtful whether a circulation of United States notes payable in coin and sufficiently large for the wants of the people can be permanently, usefully & safely maintained.

Is there then any other mode in which the necessary provision for the public wants can be made & the great advantages of a safe & uniform currency secured?

I know of none, which promises so certain results and is at the same time so unobjectionable as the organization of Banking Associations under a general act of Congress, well guarded in its provisions. To such Associations the Government might furnish circulating notes on the security of United States Bonds deposited in the Treasury. These notes prepared under the supervision of proper officers, being uniform in appearance and security & convertible always in to coin, would at once protect labor against the evils of a vicious currency and facilitate commerce by cheap and safe exchanges.

A moderate reservation from the interest on the bonds would compensate the United States for the preparation & distribution of the notes and a general supervision of the system, & would lighten the burden of that part of the Public Debt employed as securities. The Public Credit, moreover, would be greatly improved and the negotiation of new loans greatly facilitated by the steady market demand for Government Bonds which the adoption of the proposed system would create.

It is an additional recommendation of the measure, of considerable weight in my judgment, that it would reconcile as far as possible all existing interests by the opportunities offered to existing institutions to reorganize under the act, substituting only the secured uniform national circulation for the local & various circulation, secured & unsecured, now issued by them.

The Receipts into the Treasury, from all sources, including loans, & balance from last the preceding year, for the fiscal year ending on the 30th June 1862 was $583.885.247.06: of which sum $49,056,397.62 were derived from customs; 1.795.331.73 from the Direct Tax; from Public Lands 152.203.77; from Miscellaneous sources $931.787.64; & a from Loans in all forms $529.692.460,50. and The remainder, $2.257.065,80, was the balance in the from last year. The Disbursements during the same period were for Legislative Congressional, Executive, & Judicial expenses purposes, $5.939.009.29; for Foreign Intercourse $1.339.710,35; for Misallaneous Expences, including the Mints, Loans, Post office deficiencies, collection of revenue and other like charge $14,129,771.50; for expences under the Interior Department, $3.102.985.52; under the War Department, $394,368,407,36; under the Navy Department, $42.674.569,69; for Interest on public debt, $13.190,324,45; and for payment of public debt, including reimbursement of Temporary Loan & Redemptions $96.096,922,09; making an aggregate of $570.841,700,25; & leaving a balance in the Treasury on the 1st day of July 1862, of $13.043,546,81.

It should be observed that the sum of $96.096,922.09 expended for Reimbursement & Redemption of Public Debt being included also in the Loans made may be properly deducted both from Receipts & Expenditures, leaving the actual Receipts for the year $487,788,324,97; and the Expenditures $474,744,778,16. Other information on the subject of the Finances will be found in the Report of the Secretary of the Treasury; to whose Statements & views I invite your most candid and considerate attention 

There is this note at the end which identifies the context of Chase's letter:

 [Note 1 The following document was prepared by Chase for Lincoln to deliver to Congress in January 1863 when he signed a joint resolution that provided for the immediate payment of the military forces. Lincoln took the opportunity to urge Congress to consider Chase's plan for a national banking system that would supply a uniform currency. For the final text of Lincoln's message, see Collected Works, VI, 60-61.]

Then here is the referenced message from President Lincoln to Congress in follow up to Chase's above letter to Congress (again in entirety):

January 17, 1863 To the Senate and House of Representatives:

I have signed the Joint Resolution to provide for the immediate payment of the army and navy of the United States, passed by the House of Representatives on the 14th, and by the Senate on the 15th instant.

The Joint Resolution is a simple authority, amounting however, under existing circumstances, to a direction to the Secretary of the Treasury to make an additional issue of one hundred millions of dollars in United States notes if so much money is needed for the payment of the army and navy.

My approval is given in order that every possible facility may be afforded for the prompt discharge of all arrears of pay due to our soldiers and our sailors.

While giving this approval, however, I think it my duty to express my sincere regret that it has been found necessary to authorize  so large an additional issue of United States notes, when this circulation, and that of the suspended banks together have become already so redundant as to increase prices beyond real values, thereby augmenting the cost of living to the injury of labor, and the cost of supplies to the injury of the whole country.

It seems very plain that continued issues of United States notes, without any check to the issues of suspended banks, and without adequate provision for the raising of money by loans, and for founding the issues so as to keep them within due limits, must soon produce disastrous consequences.  And this matter appears to me so important that I feel bound to avail myself of this occasion to ask the special attention of Congress to it.

That Congress has power to regulate the currency of the country, can hardly admit of doubt; and that a judicious measure to prevent the deterioration of this currency, by a reasonable taxation of bank circulation or otherwise is needed, seems equally clear. Independently of this general consideration, it would be unjust to the people at large, to exempt banks, enjoying the special privilege of circulation, from their just proportion of the public burdens.

In order to raise money by way of loans most easily and cheaply, it is clearly necessary to give every possible support to the public credit. To that end, a uniform currency, in which taxes, subscriptions to loans, and all other ordinary public dues, as well as all private dues may be paid, is almost, if not quite indispensable. Such a currency can be furnished by banking associations, organized under a general act of Congress, as suggested in my message at the beginning of the present session. The securing of this circulation, by the pledge of United States bonds, as therein suggested, would still further facilitate loans, by increasing the present and causing a future demand for such bonds.

In view of the actual financial embarrassments of the government, and of the greater embarrassments sure to come, if the necessary means of relief be not afforded, I feel that I should not perform my duty by a simple announcement of my approval of the Joint Resolution which proposes relief only by increasing circulation, without expressing my earnest desire that measures, such in substances as those I have just referred to, may receive the early sanction of Congress.

By such measures, in my opinion, will payment be most certainly secured, not only to the army and navy, but to all honest creditors of the government, and satisfactory provision made for future demands on the treasury.

ABRAHAM LINCOLN January 17. 1863.

Looks like in 1863, both President Lincoln and his Treasury Secretary Chase at best reluctantly issued US Notes to pay for US Government war provision.

Chase felt obligation to return the US to a "specie" or what I interpret as a metallic standard as soon as possible and Chase also exhibits overt supportive language for banking institutions.  Chase doesn't mention taxes and includes language stressing the interest that would be paid on future US bonds.

Lincoln though, does not make statements as overtly accommodating of the banks, and also does not specifically mention a return to "specie"; but rather is imploring Congress to legislate for a national currency system furnished by an association of banking institutions organized and authorized under federal law.  Lincoln mentions taxes in association with such a new currency system, and does not mention interest on US bonds at all.

Although they both can be seen here as strongly advocating for federal legislation from Congress, I detect some disagreement between Lincoln and his Treasury Secretary on the details of any future lawfully authorized US monetary arrangements.

Could there be a future movie in this?

Ed Dolan — What Does it Mean for Fiscal Policy to be “Sustainable”? MMT and Other Perspectives

I'm a bit tardy putting this up. Here it is, if you haven't seen it yet.

Economonitor | Ed Dolan's Econ Blog
What Does it Mean for Fiscal Policy to be “Sustainable”? MMT and Other Perspectives
Ed Dolan

Washington's Blog — Ayn Rand Was NOT a Libertarian

Many people assume that Ayn Rand was a champion of libertarian thought.

But Rand herself pilloried libertarians, condemning libertarianism as being a greater threat to freedom and capitalism than both modern liberalism and conservativism.

Washington's Blog
Ayn Rand Was NOT a Libertarian
WashingtonsBlog

John Carney — Monetarists at the Gate: Krugman Vs Austrian School

Mentions MMT, but mostly about Austrian economics. John explains the difference between the usual meaning of "inflation" in economics and how  Austrian economics uses the term. They are conceptually different and this leads to confusion not only for critics of Austrian economics but also by some who profess to be following the principles of Austrian economics.

CNBC NetNet
Monetarists at the Gate: Krugman Vs Austrian School
John Carney

Lars Syll — General equilibrium economics – a dead end

As long as we cannot show, except under exceedingly special assumptions, that there are convincing reasons to suppose there are forces which lead economies to equilibria – the value of general equilibrium theory is nil. As long as we cannot really demonstrate that there are forces operating – under reasonable, relevant and at least mildly realistic conditions – at moving markets to equilibria, there cannot really be any sustainable reason for anyone to pay any interest or attention to this theory.

Lars P. Syll's Blog
General equilibrium economics – a dead end
Lars P. Syll | Professor, Malmo University

Why did this quest turn out so poorly and why is it so difficult to give up? It's based on the myth of the invisible hand as the economic correlate of laws of nature in the hard sciences. This myth has been enshrined as neoliberal dogma, and it constitutes the supposed connection between Classical and Neoclassical economics (with Paul Samuelson introducing it into Keynesian analysis). This leads to the assumption that markets operate based on laws of nature as if guided by an invisible hand, so that there are natural rates that are determined and can be expressed mathematically as invariants. 

The explanations are meticulously crafted but the predictions have neither been uniformly accurate nor comprehensive. Global financial crisis? The model did not predict it. What path will the recovery take and when will it be over. The model doesn't predict that either. So now economists are toying with multiple equilibria, and shifting natural rates.

As Joe Stiglitz famously said recently, there is no "invisible hand." And as Adam Smith's biographer Gavin Kennedy (Adam Smith's Lost Legacy) observes, Smith never used the phrase "invisible hand" in the way that later neoclassical economists' interpreted it in light of 19th century physics. See Gavin Kennedy, Adam Smith and the Invisible Hand: From Metaphor to Myth Econ Journal Watch, Volume 6, Number 2, May 2009, pp 239-263.

Ramanan — Origins Of The Sectoral Balances Identity

I thought I should share what I found recently about who was to state the sectoral balances identity first – since it comes across as enlightening to say the least. I found the identity in Nicholas Kaldor’s 1944 article Quantitative Aspects Of The Full Employment Problem In Britain.

The Case for Concerted Action
Origins Of The Sectoral Balances Identity
Ramanan

Hypocrisy is Official: Even Newt Gingrich Admits the "Fiscal Cliff" is a Scam

commentary by Roger Erickson

Yet even this fellow below falls back on assuming that the politicians still in Congress know less than Newt ... "obviously"?

Who's scamming whom?  Not another Atkins diet!

Can we, or can we not, scam all of the people all of the time?

If not, then how do we determine who's scamming whom, at what time?

If anyone can mass produce a Scamometer, I can sell a billion of 'em. Tomorrow.

It'd be the perfect scam, Sherlock!   A 47% solution!

[A non-scam cleverly disguised as a scam. Should sell like hotcakes, made with whole grain & real maple syrup. Problem would be supply.]

Thursday, November 29, 2012

Even Newt Gingrich knows the "fiscal cliff" is a scam

by David Atkins

Deficit hysteria is an integral part of the Republican Party's starve-the-beast economic sabotage. The idea is to spend like crazy on wars, tax cuts for the rich and boondoggles to favored corporate interests, blow the up the deficit, and then declare a crisis, demanding spending cuts that directly hurt people as human sacrifices to the Bond Lords, Confidence Fairies, and other Objectivist gods.

But when curbing deficits actually means increasing taxes on the wealthy, suddenly those who are more interested in preserving their bloated offshore bank accounts than in their ideology find that the scam doesn't look so good after all.

One such huckster is none other than Newt Gingrich, who stopped by Simi Valley and had this to say:

Politician and author Newt Gingrich, speaking in Simi Valley on Wednesday night, said there is no pending "fiscal cliff."

The "fiscal cliff is a fantasy. It is an excuse to panic," said the former speaker of the House and candidate for the 2012 Republican presidential nomination.

Gingrich told a sold-out audience at the Ronald Reagan Presidential Library and Museum that the fiscal cliff is a way to scare politicians into raising taxes.

"It is a device to get all of us running down the road so we accept whatever Obama wants, because otherwise we will have failed the fiscal cliff, and how can you be a patriot if you don't do what the fiscal cliff requires?" Gingrich said.

Gingrich, of course, frames the whole deal as a con of the President's creation to raise taxes. He's a gasbag. But the point remains that he knows it's a scam, and doesn't want to see his precious wealth impacted by an artificial deficit crisis.

The only people who don't know it's a scam are the Very Serious People in the beltway, their ideological friends, and those disconnected 20% who depend more on the stock market for their retirement and their wealth than on their actual wages plus medicare and social security.

It may well be that going over the cliff is temporarily bad for the Dow Jones Industrial Average and might impact a few 401Ks for a while. But the Dow Jones has been doing extremely well as the rest of the country suffers. Maybe it's time the Dow Jones investor class crowd felt a little bit of the pinch, too, rather than people on fixed incomes and those who depend on Medicaid.

Why doesn't the U.S. return to the gold standard so that the Fed can't "create money out of thin air"?

commentary by Roger Erickson

The St. Louis Fed answers.  [highlights by RE]

A.The phrase "create money out of thin air" refers to the Fed's ability to create money at virtually zero resource cost. It is frequently asserted that such an ability necessarily leads to "too much" price inflation. Under a gold standard, the temptation to overinflate is allegedly absent, that is, gold cannot be "created out of thin air." It would follow that a return to a gold standard would be the only way to guarantee price-level stability.

Unfortunately, a gold standard is not a guarantee of price stability. It is simply a promise made "out of thin air" to keep the supply of money anchored to the supply of gold. To consider how tenuous such a promise can be, consider the following example. On April 5, 1933, President Franklin D. Roosevelt ordered all gold coins and certificates of denominations in excess of $100 turned in for other money by May 1 at a set price of $20.67 per ounce. Two months later, a joint resolution of Congress abrogated the gold clauses in many public and private obligations that required the debtor to repay the creditor in gold dollars of the same weight and fineness as those borrowed. In 1934, the government price of gold was increased to $35 per ounce, effectively increasing the dollar value of gold on the Federal Reserve's balance sheet by almost 70 percent. This action allowed the Federal Reserve to increase the money supply by a corresponding amount and, subsequently, led to significant price inflation.

This historical example demonstrates that the gold standard is no guarantee of price stability. Moreover, the fact that price inflation in the U.S. has remained low and stable over the past 30 years demonstrates that the gold standard is not necessary for price stability. Price stability evidently depends less on whether money is "created out of thin air" and more on the credibility of the monetary authority to manage the economy's money supply in a responsible manner.

??  Leave it to a Ph.D. economist to help some, but confuse things even further. Forget price stability, I'd prefer some logical stability, some coherent discourse, and stably accelerating Adaptive Rate.

It's Not the Static Capital, Stupid! It's the Net SUM of (static + dynamic) Capital.

commentary by Roger Erickson

There's a reason I feel like I've been talking to a brick wall all my life.

My entire culture IS a freaking brick wall.

As just one example, orthodox capitalists are toxically confused over a fundamentally simple feature of all social species.

Every culture is, by definition, a brick wall. It's always been this way. The latent capabilities are always stacked out the Wazoo. They can be unleashed only by group practice. People who understand this innately are typically the youngest child in a large family. From the onset they get to observe team activity at work, well before they get immersed in it, and lost in defined roles. It's rather like the coaches kid sitting on the bench for years, before even being eligible to play.

One lesson it's faster to learn by observing vs being on a team is that any team member or citizen seeking credentials or prizes is, by definition, a "toxic" team player. Alfred Nobel should never have endowed the Nobel Prizes, since they promote and reward totally academic endeavors and misely perspectives, at the expense of operational practice.  If we traded every Nobel Prize winner in history for a double dose of Walter Shewhart, W.E. Deming and John Boyd, we as a country would be far ahead for the trade.  Academic prizes weren't necessary through 3.5 billion years of evolution, and aren't necessary now, unless taking our eyes off the prize has become our suicidal goal.

In adaptive systems, component and system dynamics are always in both competition and cooperation.  Net benefit accrues to the extent that they optimize the combination of local and group initiative, not either alone. Dynamic return on coordination swamps both team-only and individual-only strategies, by far. To say it formally, it's simple, 2-stage optimization in real-time, that expands via successive layers of increasingly distributed autocatalysis. However, you don't even need to say it formally. It's obvious to little kids sitting on the bench, watching, seeing many possible combinations of individual and team outcomes, while waiting for their chance to join and/or change the game, or imagine inventing totally new ones.

Orthodox capitalists are toxically confused over this fundamentally simple feature of all social species. How is it that we invented both calculus and capitalism ~500 years ago, and the two have never met! (At least not where it mattered most.  The two fields use one another shamelessly, but have never formally met.) You couldn't make this up.

For those with the opportunity to watch and recognize a system before joining, endless opportunities to tweak - or replace - the entire process are easier to see. Few immersed in arbitrarily specific roles (e.g., seeking "prizes") in any version of any game are as likely to see the spectrum of options for changing the whole game.

It's not the static capital, stupid! It's the dynamic, net sum of distributed (static + dynamic) capital. We are ALWAYS in the process of completely changing the entire game, OVER the objections of all the Luddites working harder at specific things they learned how to do yesterday. It's the infinitely nested Degrees of Freedom, Stupid! NOT any subset of them whatsoever. By mathematics alone, there are ALWAYS more options awaiting than we can possibly imagine. Go do something to enlarge your imagination, rather than leaving it where it is today. Ditto for your culture. Do something to trigger bigger challenges worth going after, and achievable only through complete indirection. Otherwise, we're leaving our latent capabilities unemployed. For what reason? Eating more twinkies? Get real, or get extinct.

How many people today would rewrite the entire US Constitution? Or invent something radically different, and even better? Why not? We did it once before. Are you seeking prizes in the current game, or willing to design games involving an order of magnitude more imagination.

Which sound more satisfying, and more fun?

Forget Paris.  How ya gonna keep people down in a role, once they've seen "gaym" systems?

The orthodox among you will be too inhibited to see the value in that degenerate statement.  Try exploring it in a virtual game first, then imagine selecting from some of the more interesting options that crop up.  The ones you haven't thought of yet, and can't even imagine.   They're out there.

G-Protein Receptor Work Wins Nobel

News of a recent Nobel Prize awarded to two researchers who have been studying protein receptors which are part of our human bodies and facilitate a form of "communication" between our cells.  Our Roger's posts have piqued my interest in this area.

Here is a link to an interesting animation which attempts to help us visualize how a form of these G-Proteins functions. Ironically, this video is copyright McGraw-Hill which also operates the moron S&P rating agency, I guess too bad McGraw-Hill doesn't have as intelligent folks working at their S&P group as they have working at their biology education group here, but I digress.

From the article announcing the Nobel:

Since the discovery of cells in the 17th century, scientists have understood that these building blocks of life are constantly exposed to myriad chemical signals, which are then recognized, interpreted, and translated into a cellular response. But until around 20 years ago, how cells did this was a mystery.

Taking on the problem in the late 1960s, Lefkowitz set about trying to isolate receptors from cell membranes. He attached iodine isotopes to various hormones to track their paths through cells in the lab. His experiments revealed several cell surface receptors, including the β2-adrenergic receptor, which responds to adrenaline to regulate the body’s fight-or-flight response.

So it can be looked at as though these biochemical sub-units of our bodies "communicate" based on the input from our "real world" or cognitive language communication in the brain.

Here these researchers have isolated protein receptors that regulate our body's response to "fight or flight" situations that we encounter in our cognitive experience.

I've often observed Mike's videos where Mike confronts one or more of these morons and it seems that Mike is able to get them in a "fight or flight" situation. It looks to me that they exclusively take the "flight" option, and refuse to engage Mike.

If they didn't, they would certainly lose the "fight" which would lead to their education and a change in their point of view.

Their "path of flight" always seems to include language communication that contains a false metaphor. We've seen it recently with Mike's appearance on The Blaze where the host there was put in a "fight or flight" situation by Mike and fled the situation via literally a request for "help" and the metaphor then delivered by Miller "gobbledegook".  We can observe many other instances where Mike has fomented this same chain of behavioral events in the morons.

This is interesting.

Mike, simply through language, places these people in a "fight or flight" situation, and then apparently one of these G-protein receptors, acting as a virtual "regulator", somehow chemically "guides them" into the "flight" option, where the "path of flight" is also apparently facilitated by language.

So, if these Nobel winning researchers have indeed identified the protein receptors that "regulate our body's response to 'fight or flight' situations", then there has to be some sort of virtual "link" between our language and our biochemistry.

And then we could ask: What if anything is guiding the "regulator"?  Or are these "regulators" static?  Or do these regulator proteins possess a form of "hardwired judgement"?

This "link", whatever it is, seems to be malfunctioning within the morons and those who are remaining  morons.

Is This What Pending Revolution Feels Like? A Transition, to Communicating Only With Those Not in Power?

commentary by Roger Erickson

How are we supposed to understand this?

"... the CBI calls on the Chancellor to stick to his austerity plans at the same time as firing up the lacklustre economy."

Same thing here in the USA. Orthodox economics has adopted Catch-22.

To sanely plan any investment in self or country, you have to quit reading the news?

Don't even bother communicating with the people in power, because they don't make any sense whatsoever, and are officially insane?

There are always some old fuddy duddies to ignore, but I don't recall the entire government being simultaneously insane, at least not in my lifetime. No idea about internationally coordinated insanity, but it's obviously not just a historical oddity.

Is this a bit what if felt like living under the Bolsheviks, or in 1929? General Butler was right, yet the short-term rackets continue to expand beyond just military adventurism, and always at the colossal expense of foregoing long-term growth. We could have been a great nation! Why squander public initiative by doing nothing, by practicing austerity?  It seems almost Neanderthal in scope, and brings one back to the implications of the Austerian Toolkit.

This is worse than "The beatings will continue until morale improves."

Now we have, "Keep a firm hold on our collar, to make sure the beatings get us moving."

Brings new meaning to the term "White Collar Crime."

Eliot Spitzer — Boehner Wants To Hold Obama Hostage on the Debt Ceiling Again. Here’s How to Stop Him

It is time to take the debt ceiling off the table as a negotiating ploy, time to call their bluff, recognize that time is on our side, and turn up the heat on a Republican house leadership that has a weak hand. 

Play hardball Mr. President. It feels good, and you’ll win.

Slate
Boehner Wants To Hold Obama Hostage on the Debt Ceiling Again. Here’s How to Stop Him.
Eliot Spitzer

When I saw the title, I was hoping he was going to push the platinum coin.

James K. Galbraith — Actually, The Retirement Age Is Too High

The most dangerous conventional wisdom in the world today is the idea that with an older population, people must work longer and retire with less.

This idea is being used to rationalize cuts in old-age benefits in numerous advanced countries -- most recently in France, and soon in the United States. The cuts are disguised as increases in the minimum retirement age or as increases in the age at which full pensions will be paid.

Such cuts have a perversely powerful logic: "We" are living longer. There are fewer workers to support each elderly person. Therefore "we" should work longer.

Foreign Policy | Special Report on Unconventional Wisdom
Actually, The Retirement Age Is Too High
James K. Galbraith | Lloyd M. Bentsen, Jr. Chair in Government/ Business Relations, Lyndon B. Johnson School of Public Affairs, and Professor, Department of Government, The University of Texas at Austin
(h/t Joe Weisenthal via Twitter)

Nate Silver — In Silicon Valley, Technology Talent Gap Threatens G.O.P. Campaigns

Nate investigates why the president had such an overwhelming tech advantage.

Even without the Bay Area’s vote, Democrats would still be favored to win California by solid margins. So why does any of this matter? 

The reason is that Democrats’ strength in the region is hard to separate out from the growth of its core industry — information technology – and the advantage that having access to the most talented individuals working in the field could provide to Democratic campaigns.

Companies like Google and Apple do not have their own precincts on Election Day. However, it is possible to make some inferences about just how overwhelmingly Democratic employees at these companies are based on fund-raising data. (The Federal Election Commission requires that donors to presidential campaigns disclose their employer when they make a campaign contribution.)

Among employees who work for Google, Mr. Obama raised about $720,000 in itemized contributions this year, against only $25,000 for Mr. Romney. That means that Mr. Obama took almost 97 percent of the money between the two major candidates.

Apple employees gave 91 percent of their dollars to Mr. Obama. At eBay, Mr. Obama took 89 percent of the money from employees.

Over all, among the 10 American-based information technology companies on the Fortune’s list of “most admired companies,” Mr. Obama raised 83 percent of the funds between the two major party candidates.

Mr. Obama’s popularity among the staff at these companies holds even for those which are not headquartered in California. About 81 percent of contributions at Microsoft, which is headquartered in Redmond, Wash., went to Mr. Obama. So did 77 percent of those at I.B.M., which is based in Armonk, N.Y.

It does not require an algorithm to deduce that the sort of employees who might be willing to donate substantial money to a political campaign might also be those who would consider working for it.

The New York Times | FiveThirtyEight

In Silicon Valley, Technology Talent Gap Threatens G.O.P. Campaigns

Nate Silver

Steve Keen — Cambridge Monetary Macroeconomics

Keen 2012 Cambridge Monetary Macroeconomics

Steve Keen

My talk to the Heterodox Economics Students at Cambridge University on November 28th 2012 on the necessity of a strictly monetary approach to macroeconomics.

Bearish yen talk from the same guys that got everything else wrong

There's a lot of bearish yen talk going around and I can understand the traders' mind of wanting to short a currency that has been so strong for so long (think Jim Rogers or Kyle Bass or Peter Schiff shorting Treasuries for years and years and years) and I also understand that this time it could be different as Japan has shown an inclination recently to sell yen for euros in an effort to support exports to the Eurozone. However, what makes me suspicious about this short yen trade is that it's coming from all the same people and they are making all the same, stupid and failied arguments that they made for Treasuries (and JGBs) and QE and hyperinflation, etc.

Here's an example of what I am talking about. Axel Merk, who runs a currency fund, who's been predicting a dollar collapse for years (like Schiff) because of Fed "money printing" is bearish on the yen now (presumably because none of his other trades worked out) and he wrote this:

The size of the current account deficit represents the amount foreigners need to buy in assets (local financial assets or real assets) to keep a currency from falling. With a current account deficit, Japan's debt to GDP ratio of over 200% may suddenly matter, as Japan may need to offer higher rates to attract foreigners to buy local assets (e.g., Japanese government bonds). The trouble is that Japan’s debt might be unsustainable at higher interest rates. To the extent that Japan has a current account surplus, it doesn't matter whether foreigners buy the yen, but those surpluses have fallen to deficits recently and that trend looks set to continue.

Once again Merk is showing his lack of understanding of macro. Lets have a look. Take thus sentence, for example:

"The size of the current account deficit represents the amount foreigners need to buy in assets (local financial assets or real assets) to keep a currency from falling."

Those assets that Merk says foreigners need to buy, well, they've already bought. A nation's current account balance is equal but opposite to its capital account. So if a country has a current account deficit it has a capital account surplus of the same magnitude. In practical terms it means that it paid for those imports in yen, and those yen sit at the Bank of Japan, parked in Japanese gov't instruments. They're the very financial assets Merk worries that foreigners will have to buy, but they've already been bought. It's all just accounting.

Merk has this notion that Japan needs to go looking around for investors to "finance" this trade deficit, but that's already done in the capital (or, cash) side of the transaction.

Furthermore, the current account balance has no impact on interest rates whatsoever (as Merk suggests) as we clearly have seen with th U.S. which runs HUGE current account deficits and interest rates are at historic lows. And even if the BOJ were to raise its interest rates it doesn't make Japan's debt "unsustainable." They can pay any rate because they print yen, just like the US can pay any rate because it prints dollars. The debt never becomes unsustainable.

And on and on it goes. Another example of clueless idiots who just keep repeating the same, old, tired, misinformed crap even as they are proven wrong over and over and over and over and over.

For what it's worth, I am long yen.

Wal-Mart, Disney and other major U.S. companies tied to Bangladesh factory fire that killed 100+

Profit. Profit above all. That's America's new MO. Cut safety nets, kill unions, reduce incomes, engage in harmful speculation and financial engineering. Then, when the ordinary incomes of workers can't afford the products these companies sell, they must find cheaper and cheaper ways to produce the stuff, often employing slave labor toiling away in horrible conditions.

We saw this here in America back at the turn of the 20th century. Remember the Triangle Shirtwaist Fire? Eerily similar. In that disaster 146 people, many of them children, perished in the flames or jumped to their deaths trying to escape the inferno. The company had locked the doors to the stairwells and exits. Same seems to be true in the Bangladesh fire.

The Triangle tragedy ushered in a new era of improved safety standards and unionization. I'm not hopeful we are going to see this happen in Bangladesh.

You can't sustain a business/economic model based upon reducing wages and income to support profit. Eventually something's got to give. It's just too bad that along the way to change you need so much tragedy and hardship to wake people up to how screwed up this is.

Up Against the Wall, Orthodox Ma's

commentary by Roger Erickson

Where does a lowly citizen go to get transaction liquidity? A local dealer or bartender?

"Bartender, gimme a case of liquidity."

Forget School Drug Sweeps. How About Congress Common Sense Sweeps?

Instead of complaining about rising stupidity, we can simply replace it, and crowd it out with adaptive suggestions, which are always more attractive, by definition. It's purely a matter of phrasing, and taking the time to know your audience (i.e., each other). We're all motivated, but the more of us there are, the harder it is to keep up with shifting communication channels and currently distributed themes.

So how about some Congressional Common Sense Sweeps? Ditto for school boards, blog discussion boards, and conversations in general? Surely it's possible to come up with - and use - an OpenSource index for how adaptive a discussion process is? Can we achieve a common taxonomy for describing adaptive discourse? That's one way to embrace accelerate use of escalating diversity.

Tom Hickey, in a recent comment, reminded us of an eternal truth, which I'll state even more generally. ALL information exchanges in organized networks boil down to attempts to parse, and then enlarge, "policy space." Warren Mosler calls this simply "exploring options." Charles Darwin said it's what adaptive species do, and William Thomson said it's what reverse-entropy networks do.

Shoot! We could do that.

We always do ... eventually ... in our spare time ... when we're not pursuing orthodoxy. All morons, no matter how credentialed or orthodox, eventually stop beating their heads against the walls of change, at a speed we refer to as Adaptive Rate. It really does feel better. We should try it more often, and even consider measuring it in real-time. Just as individuals use biofeedback, groups use culturofeedback, including terms like liquidity, Output Gap and group intelligence.

Policy Space Sweeps?

If we don't do such sweeps, then too often, when we trip over an adaptive option, we may just dust ourselves off and go about our orthodoxy as though nothing new had happened.

Here's a suggested theme song for a "Save Our Policy Space" campaign, to help people willing to cross dangerous lines.

"Up Against the Wall, Orthodox Ma's"

Where's the Pete Peterson Foundation HQ? I'll volunteer to walk in and order a case of liquidity. What's the worst they can do? Revoke my voting license for 6 months?

"Hey Gomer, gimme a case of that there leeeeQuidiTee! Pronto."
"We got a bunch of hairyAudacious citizens waitin' ta grease some option exploration. Wait'll ya hear the record. You won't recognize it at all, but I guarantee you're gonna like it."

Ever had your whole community beat up by a bunch of dumb-ass banksters?  We've all been there.  It's their mama's fault.  It's the way they was raised, but times are a'changin, as usual.  In 50 years, they'll be obsolete, and singing our tune along with us.

Would rates be higher if the Fed hadn't done QE?

I heard some funny discussion recently between two, typically out of paradigm folks on what would happen to interest rates if the Fed didn't conduct QE. One said that rates would be lower because there wouldn't have been "stimulus." The other said rates would have been higher because the Fed was the principal buyer of the government's paper and without that buying rates would have shot up.

First, it's important to understand that QE is just another monetary policy tool and these tools are all designed, or I should say, capable, of doing only one thing and that is change an interest rate somewhere along the term structure. In so doing the Fed changes the composition and duration of the financial assets held by the public. It's not stimulus, it doesn't enable gov't spending and it's not money printing. These are asset swaps, that's it, pure and simple.

We also know that a currency issuing government, like the U.S. Federal Government, spends by electronically crediting bank accounts and there is no constraint on its ability to do this other than the occassional political constraint, like when we have to go through these ridiculous debt ceiling shenanigans every now and then. Furthermore we know that when the government spends it adds to the level of bank reserves in the system and this accumulation of reserves causes the Fed to engage in monetary operations on a fairly regular basis (like, daily) to maintain reserves at a level that is consistent with whatever target interest rate they have decided upon. If the Fed were to allow reserves to build and build and build as a normal consequence of ongoing gov't spending, then the overnight lending rate (Fed Funds) would quickly fall to zero and all other rates out along the term structure would follow suit.

So the fact of the matter is the Fed has to work quite hard to KEEP RATES FROM FALLING TO ZERO ON THEIR OWN if the banking system were just left alone without its intervention. Those who say the Fed is keeping rates "artificially low" have got it backward. On the contrary, high rates or rising rates for a currency issuing nation are artificial.

The notion that rates would have been higher if the Fed had not done QE is false. Nor can one say thay rates would be lower absent QE because there "wouldn't have been any stimulus." That's patently absurd. QE simply was the Fed's way of reducing the rate on some specific instrument (mortgages, longer dated Treasuries, etc.) in the hopes that such a move would have some desired effect on the economy, despite the fact that the causal relationship there is spurious.

Chris Dillow — On Social Change

And perhaps we are seeing a slow-motion revolution. Credit unions and peer-to-peer lenders, owners of coffee shops competing against Starbucks, the steady rise in the numbers becoming self-employed, the growth of bloggers, tweeters and file-sharers are all taking small - not necessarily deliberate - steps away from hierarchical capitalism, just as early factory owners made small contributions to the industrial revolution.

What Erik Olin Wright calls (pdf) interstitial transformations can ultimately add up to more radical economic change than windbags on marches.

Stumbling and Mumbling
On Social Change
Chris Dillow | Investors Chronicle (UK)

I did a master's thesis in social and political philosophy entitled Revolution or Evolution: Toward a Theory of Social Change (Georgetown University, 1972). My conclusion was similar to Dillow's (evolution leading to revolution), but with a bit of a different focus.

I concluded that real and lasting social change occurs as a consequence of a change in the level of collective consciousness based partially on the integration of subjectivity with objective condition, especially growth of complexity, and partially on changes in subjectivity itself in the direction of greater universality. The latter is the chief reason that history has a liberal bias. Greater universality entails a greater range of freedom by expanding awareness of potential.

Riverdaughter — Ok, here’s my theory about why the Masters of the Universe want to kill the social insurance programs

BUT, if you raise the retirement age and keep a lot of older people working, they will be forced to put their money back into the market. Well, they won’t be able to retire until they’re much older than their parents were at retirement. If they have any hope of ever taking time out to go travel or garden, they’re going to have to risk their money in the market, hope that it will pay off so they can get out of the job market before they’re dead and forget about social security.

My theory is that raising the retirement age forces more savings to stay in the market longer and that with a pool of people who can’t retire yet still working, the amount of money going into 401Ks and IRAs is going to go up. Stripville!

The Confluence
Ok, here’s my theory about why the Masters of the Universe want to kill the social insurance programs
Kim

(h/t Naked Capitalism)

New Right strategy – Take power by controlling the narrative

The only political party linked to organized ‘voter fraud’ in 2012 was the one loudly denouncing it....

As [Richard] Viguerie has explained, over the decades, and as part of its long term strategy to take power, the New Right has built a net- work of alternative media outlets, think tanks, political operatives and elected officials, the likes of which progressives cannot begin to match. And it’s why they control the national conversation.

In These Times
The New Right’s Rabid Watchdog
Joel Bleifuss | former director of the Peace Studies Program at the University of Missouri-Columbia, is the editor & publisher of In These Times

These are also some of the neoliberal forces aligned against increasing policy space and therefore MMT. And they control the narrative at present. It's not all on the right either. Pete Peterson is a New Democrat, and he has been just as active for decades, too. Now it is paying off.

Meanwhile, the left is asleep at the switch as the New Deal crumbles under the assault, lead especially by the assault on organized labor. The economic dynamic is between ownership, with management the minions of ownership, and labor. Distribution of productivity gains over the past several decades reveals graphically who is winning. This chart illustrating the productivity-compensation gap says it all.

Irony comes full-circle. Paul Krugman touted as "MMT grand-poobah"

commentary by Roger Erickson

Japan Is Turning Into The United States

[see comment from "gh1616"]

Anyone seen any pigs flying recently? A snowball still frozen in hell? Is the 2nd coming of the New Deal imminent?  Has the Ghost of Marriner Eccles been visiting Scrooge?

Is it a sign?

Peter Schiff...the PT Barnum of Economics

Peter Schiff...what more need I say?

Wrong on interest rates
Wrong on unflation
Wrong on US growth
Wrong on the dollar
Wrong on gold
Wrong on China
Wrong on US stocks
Wrong even on housing

And there's poor little Lauren Lyster of RT, trying so hard to save this fool and make him look smart. Keep trying, Lauren...keep trying.

Alyssa Figueroa — Gun Enthusiast Kills 17-Year-Old for Playing Loud Music; Lawyer Says He Acted "Very Responsibly"

We'll have to see how the facts come out on investigation, but on this report, it is way over the top. This seems to be even more flagrant agression on the part of the shooter than the Trayvon Martin case. The "Stand Your Ground" laws are nutty. Florida is another state to cross off the list to visit. I guess they don't realize they they are a tourist state yet.

AlterNet
Gun Enthusiast Kills 17-Year-Old for Playing Loud Music; Lawyer Says He Acted "Very Responsibly"
Alyssa Figueroa

Rep. Alan Grayson — Walmart "the largest recipient of public aid in the country"

Representative-elect Alan Grayson (D-FL) said Monday that he will put mega-retailer Walmart squarely in his sights during the next Congress for the company’s liberal use of public assistance programs to supplement their workers’ wages.

Speaking to Current TV host Cenk Uygur on Monday’s episode of “The Young Turks,” Grayson called Walmart “the largest recipient of public aid in the country,” saying their low wages force workers to take food stamps, housing assistance and Medicaid just to get by....

“In state after state after state, Walmart employees represent the largest group of Medicaid recipients, the largest group of food stamp recipients....

The Raw Story

Grayson: Walmart is ‘the largest recipient of public aid in the country’

Stephen C. Webster

The living wage movement is picking up steam. Prof. Galbraith must be pleased that he played a part in getting it up and running.

John Carney — The Hunger Artist, or, How to Think About Government Spending and Taxes

John Carney attacks "Starve the Beast" as based on bad economics.

CNBC NetNet
The Hunger Artist, or, How to Think About Government Spending and Taxes
John Carney | Senior Editor

Steve Roth — Modeling the Wealth, Income, and “Saving” Effects of Redistribution: More is Better?

I’m rather taken with this spending + surplus = income dynamic approach to modeling. (But I would be, wouldn’t I?) I’d be delighted to see how others might analyze and display results using various parameters, and how they might adjust, improve, or dismantle the model. In particular: are there obvious, gaping flaws here?

Whaddya think? 

I take issue with is the statement about "redistribution." 

"Some percentage of the rich person’s wealth is transferred to the poorer people every year (by the ebil gubmint man)."

There is no inherent connection between taxing and spending for a currency sovereign, nor should their be. Expenditure is not funded by taxation. There is nothing preventing transfers without offsetting taxes.

Increasing spending power at the bottom increases aggregate demand and flow. Decreasing the stock of wealth at the top decreases the political and economic power of the wealthy without affecting flow in the economy.

Following the principles of functional finance, I would use taxation, first, to control incipient inflation and secondly, to discourage negative behavior such as rent-seeking.

Asymptosis
Modeling the Wealth, Income, and “Saving” Effects of Redistribution: More is Better?
Steve Roth

The Aftermath of Preparing People and Groups Improperly

commentary by Roger Erickson

Design is Dead!

Much of the military discussion that proceeds in this particular essay reminds me of the unnecessary battle between operations and theory in economic policy formation. Just think of theory as "process design," and operations as "adjustable personal/group habits."

Given those analogies, would it be simpler to say the following?

Dealing with distributed, initially uncertain options requires adequately distributed initiative, communications, flexibility and imagination? That's how groups discover and select successful patterns of behavior.
[To be specific, by "flexibility," I mean degrees of freedom, to act in any way demanded by context.]

The sack of molecules we call an amoeba can do this. Obviously, human networks can do amazing things ... if we let them practice beforehand.

Why on earth waste time arguing over what might or might not occur, in situations where we have zero predictive power, i.e. uncertainty? Why not just find out, ASAP, by practicing use of our impressive selective power?

Warren Buffett: Jamie Dimon Is Best Person For Treasury Secretary

'Nuff said.

The Huffington Post
Warren Buffett: Jamie Dimon Is Best Person For Treasury Secretary
Mark Gongloff

Bruce Bartlett — Revenge of the Reality-Based Community

My life on the Republican right—and how I saw it all go wrong.

The American Conservative
Revenge of the Reality-Based Community
Bruce Bartlett

This is a "confessional" setting forth how Bruce Bartlett  came to the unsettling (for him) conclusion that Keynes was right after all. Its the demand, stupid.

Ripe for MMT?

Lars Schall interviews Chris Cook

The internationally acknowledged energy consultant Chris Cook addresses in this exclusive interview the new IEA report; the pre-dominant factors in the oil market; his version of a commodity-based currency; why an attack on Iran is rather unlikely; and the consequence of a rising oil price for gold.

GoldSwitzerland
THE MATTERHORN INTERVIEW – November 2012: Chris Cook
“The Petrodollar is Either Dead or Dying”
Lars Schall interviews Chris Cook

Barry Ritholtz — 80 Years of Financial (De) Regulation in the U.S.

Big graphic illustrates history. Useful resource. Blow it up to read more easily.

The Big Picture
80 Years of Financial (De) Regulation in the U.S.
Barry Ritholtz

Marshall Auerback — The Bank of Canada Governor is Wrong on Too Big To Fail and Wrong on Canada’s Banking System

As Canadian familiar with the Canadian economy and financial system, Marshall doesn't think much of the Mark Carney appointment.

New Economic Perspectives
The Bank of Canada Governor is Wrong on Too Big To Fail and Wrong on Canada’s Banking System
Marshall Auerback | Corporate Spokesperson, Pinetree Capital Ltd.

GOP leader to Obama: Break talks' impasse caused by 'radical... left'

Uh-oh... so much for the immediate post election spirit of bipartisanship.

Story at The Hill.  (I've taken the liberty to highlight the metaphors in advance ;) )

Senate Minority Leader Mitch McConnell (R-Ky.) on Monday said "fiscal cliff" talks are at an “impasse” and only President Obama can break the logjam.

McConnell laid the blame for the slow-going discussion on liberal Democrats who are dragging their feet on reforms to Medicare, Medicaid and Social Security.

“So we’ll continue to wait on the president, and hope that he has what it takes to bring people together to forge a compromise. If he does, we’ll get there. If he doesn’t, we won’t. It’s that simple,” McConnell said.

Through last Friday, Current Debt Limit:  $16,394B ...  Public Debt Subject to Limit: $16,268B ...  Fiscal Policy Space Available: $126B

Treasury auctions over the last 2 days have totaled over $100B so depending on concurrent amounts of UST redemptions, a lot of the remaining ceiling could already be accounted for...

Bill Mitchell — Macroeconomic constraints render individual action powerless

When recessions become prolonged and long-term unemployment rises, the conservative denial machinery always scapegoats the most disadvantaged by recommending cuts to welfare to make people more desperate. This is dressed up in terms that attempt to make this sort of policy sound reasonable – like we should all be adventurous and entrepreneurial. The facts are that mass unemployment represents a macroeconomic failure that can be addressed by expansionary fiscal and/or monetary policy. It has nothing to do with the provision of the miserly amounts that are given to the unemployed via income support arrangements. Cutting those benefits will not cure involuntary unemployment. In all likelihood, cutting benefits will make the aggregate demand shortfall that caused the unemployment to worsen. The result is that the cuts will only make the lives of the unemployed more desperate than they already are. It is time that the conservatives learned about macroeconomic constraints....

Macroeconomics teaches us that individual choice can be rendered powerless as a result of the presence of macroeconomic constraints – most usually spending constraints on the product market that ration the number of overall jobs and working hours that will be on offer at any point in time to an economy.

Once an economy is operating under such a demand constraint, the supply-side of the economy loses traction – that is, no longer influences the market outcome, which renders much of the orthodox labour market analysis irrelevant, if not false.

Bill Mitchell — billy blog
Macroeconomic constraints render individual action powerless
Bill Mitchell

Ten dogs, nine bones.

Statute of Monopolies: so Royalty Invented Royalties!

commentary by Roger Erickson

Why am I not surprised?

The whole concept of Royalty is simply taking tribal temporary leadership posts and inventing excuses for making them permanent and, later on, hereditary. Just another bad idea that took on it's own momentum. It's truly amazing how long it takes for group intelligence to ponder the obvious. What part of this wasn't obvious from the beginning? It's all a result of effective marketing - 1700 years of propaganda - all started by some conniving Pope selling desperate ideas to Attila the Hun and later tribal war chiefs.   Today, similar people still claim they're doing God's work, and banking on it.

Curtailing Intellectual Monopoly

Now if we can just break curbs on extending facile understanding of currency operations. Another set of Control Frauds would see their functional monopoly broken.

Derek Thompson — Demographics Explain Practically Everything

The charts say it all. "It's the demographics, stupid."

The Atlantic
Demographics Explain Practically Everything
Derek Thompson | Senior Editor at The Atlantic, where he oversees business coverage

Same Seder Interviews Stephanie Kelton

Why the Elite are Living In an Economic Fantasy

Same Seder Interviews Stephanie Kelton
(h/t Dan Lynch at MMT Deficit Owl Committee)

Professor Stephanie Kelton explained the origins of the Bretton Woods system, why US policy makers still make policy as if we were in a gold standard world, why we will not become like Greece, what really creates hyper inflation, why the US can easily reach full employment without inflation, the problem is demand, why the inflation of the 70s was not driven by government seeking full employment, why the "solutions" to the fiscal cliff will produce a fiscal crisis, what is the best policy to follow now and how the economic debate is changing.

This clip from the Majority Report

Ann Pettifor — Mark Carney's 'shock' appointment means more of the same

Osborne's choice for governor of the Bank of England will do nothing to prevent the next collapse of the financial system...

Carney is a central banker steeped in the culture and practices of Goldman Sachs's investment banking arm. Before becoming Canada's central bank governor, he spent 13 years with Goldman Sachs in its London, Tokyo, New York and Toronto offices. He held a range of senior positions. The most significant was as managing director of investment banking.

In a speech made recently Carney made the right noises. He complained of "a system that privatises gains and socialises losses" and endorsed the approach that sets capital and leverage ratios for banks. He's even commended the Occupy movement for being "constructive".

But there is nothing in his speeches that indicates that he will help give Britain's real economy the protection it needs from its over-mighty – and still very dangerous – banking sector. Nothing, in other words, that indicates the real economy – the productive sector – will be given priority over the City's preference for reckless global speculation.

The Guardian (UK)

Mark Carney's 'shock' appointment means more of the same
Ann Pettifor | Director of Prime: Policy Research in Macroeconomics and a fellow of the New Economics Foundation

The Only Variant of Capitalism That Works is Pass-Through Capitalism

commentary by Roger Erickson

The Imperfect World of George Soros

Soros' views on complex systems are passe, of course, to any 1st student in any system science whatsoever (math, physics, chem, ecology, biology, etc), but the article drives home some great points about the separation of theory and operations in the daily life of humans.

'One of Soros's intellectual hallmarks is an ability to quickly size up who wins in such a scenario. This is a useful habit of mind if you run a hedge fund. It also happens to be a very Eastern European way of thinking: Vladimir Lenin famously insisted that the key question of any political agenda was "who whom?" -- as in, who is doing what to whom?'

That question always occurs as part of a series. At one end is the question of group responsibility. What are WE doing to OURSELVES? Enough?

Track the pace of organization by tracking local "frictions?"  That way of thinking is not isolated to Eastern Europe, it's universal in dumb systems.  Going further, catalyzing ways to circumvent distributed frictions is the gateway to scalable Adaptive Rate in smarter cultures - i.e., those capable of more advanced system tuning.  It's also a reminder to view any system of complex operations as following a survival path, by tipping along, via a dynamic, subtly morphing disequilibrium between a great many conflicting forces. Dumb forces, at that, each with their own, blind local momentum that simply continues ... until it doesn't. People tend to forget that, and anthropomorphise collections of simple observations into quite silly projections. Reality is that Human Culture = Alice in Blunderland.

All parasites search for such friction points, to separate the foolish civil combatants from their shared resources. In political terms, prophets and statesmen do so in order to design appropriate tuning catalysts to bypass the frictions. Fusing the crude nomenclature, group Adaptive Rate reduces to the dynamic ratio of parasites/statesmen, which in turn reduces to the expanding perceptive range of the parasites. In bio-political jargon, what's the definition of a statesman? A parasite who finally realizes that there are orders of magnitude more profits accessible post coordination.  Systemic growth always starts with sensing potential, then continues by linking, staging & sequencing steps to access more of that potential.  Obviously, some statesmen are better than others, and some electorates don't always select their best statesmen.   Would Soros make a good President or Prime Minister?  Does talent for perceiving frictions guarantee talent for catalyzing circumventions?  Talent for alleviating distributed frictions?  Talent for system tuning?

This brings us back to a simple axiom stated in various ways in all system sciences.

There is no point of seeming stability in the natural world that is not a dynamic equilibrium between [blindly] conflicting forces.

More accurately: There is no survival path in the natural world that is not followed via dynamically shaped dis-equilibrium between [blindly] conflicting forces.

It's only a question of which group tunes itself to fall down the rabbit hole faster. By definition we never have the bandwidth to reason with situations, only opportunities to shape and survive them. That holds whether training monkeys, or slowly training a human culture. Group intelligence is the OUTCOME of shaping both our group and our situation by practice. It is not the original intent, or even the practice, but the outcome of a ruthless selection process.

Simple logic says that every Automatic Stabilizer used to shore up the base should be matched with another Automatic Destabilizer, exposing citizens to our potential to pursue even greater challenges. Anything less, after all, is boring, and just failure to explore our expanding options.

There is no accelerated Adaptive Rate in the natural world that does not follow the rate of repurposing resource-sink parasites into passthrough catalysts.

Sequestering capital is useless.  Putting it to work for the general welfare is useful.  The only variant of capitalism that works is pass-through capitalism, which is simply tribalism on a larger scale.

If we don't want the kids sitting around the unemployment office, complaining that they're bored, then it all boils down to which of the challenges they propose we carefully select to support. Our selection quality - including rate - is are potentially how we provision our future Adaptive Rate. If we don't select quickly and wisely, someone else will shape situations, and probably not as well as we could have.

Robert Johnson — What About the Questions That Economics Can’t Answer?

Can economics be morally centered? And perhaps more importantly, should it be?

These are questions that society is grappling with in the face of the economics profession's failure to confront the global impact of exploding inequality within and between countries. 

Limitations of the Dismal Science

Economists are very good at studying mechanisms for efficiently allocating things. But they are less effective at addressing more fundamental questions related to these things' social value. Indeed, economists typically leave values unexamined in their mathematical formulas. Social utility is simply not explored.

But what happens when economists' implicit value assumptions break down?

Yahoo Finance
What About the Questions That Economics Can’t Answer?
Robert Johnson | Executive Director of the Institute for New Economic Thinking

(h/t Stephan Ewald via Twitter)

It's necessary to view human knowledge as an integrated whole rather than atomized into separate and distinct disciplines.

On one hand, economics is a subset of political economy, which is a subset of social and political philosophy, which is a subset of ethics. Ethics interfaces with metaphysics and epistemology in formulating the fundamental POV of a system of thought.

The other hand, economics as a science is subset of cognitive-science-psychology and social science and is informed by other social sciences such as anthropology and sociology. Psychology and sociology are subsets of life science, including biology and evolutionary theory. Economics, being focused on real resources and production, also depends on hard sciences and their application, e.g., physics, engineering.

Moreover, all thought must find expression to be communicated and therefore, logic and its branches, mathematics and analytic philosophy-philosophy of language are also essential.

This list is not offered as exhaustive. Indeed, the entire body of human reflection impacts economics to some degree and ignoring important contributions from any field is myopic.

Considering economics in isolation from the entire system and the subsystems in which it is nested results in persistent ignorance and often malignant error.

Michael Hudson — Fiscal Cliff: An Artificial Crisis

Fiscal Cliff: An Artificial Crisis

Michael Hudson

Transcript

MichaelHudson.com

Fiscal Cliff Trojan

Michael Hudson | Visiting Professor, UMKC

Ralph Musgrave — Steve Keen’s objections to full reserve banking

Steve Keen does not deny that full reservewould work, but thinks the change would not be worthwhile. He gives three reasons, all of which are a bit shaky....
Ralphonomics
Steve Keen’s objections to full reserve banking
Ralph Musgrave

Ramanan — Canada’s Mark Carney To Head The Bank Of England

Wynne Godley would have been happy – had he been alive and known that Carney is perhaps the only central banker to have recognized his foresight.

The Case for Concerted Action
Canada’s Mark Carney To Head The Bank Of England
Ramanan

NBER's Edward N. Wolff — The Asset Price Meltdown and the Wealth of the Middle Class

I find that median wealth plummeted over the years 2007 to 2010, and by 2010 was at its lowest level since 1969. The inequality of net worth, after almost two decades of little movement, was up sharply from 2007 to 2010. Relative indebtedness continued to expand from 2007 to 2010, particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. In fact, the average debt of the middle class actually fell in real terms by 25 percent. The sharp fall in median wealth and the rise in inequality in the late 2000s are traceable to the high leverage of middle class families in 2007 and the high share of homes in their portfolio. The racial and ethnic disparity in wealth holdings, after remaining more or less stable from 1983 to 2007, widened considerably between 2007 and 2010. Hispanics, in particular, got hammered by the Great Recession in terms of net worth and net equity in their homes. Households under age 45 also got pummeled by the Great Recession, as their relative and absolute wealth declined sharply from 2007 to 2010.

The paper is behind a pay wall unless you have a key, but this abstract is probably enough to get the point across if you don't have need of the numbers.

National Bureau of Economic Research
The Asset Price Meltdown and the Wealth of the Middle Class
Edward N. Wolff

Reuters Summit-Occupy Wall St leader keeps heat on politicians

Inspiring post on Cathy O'Neil, organizer of the Occupy Wall Street alternative bank group, math PhD, former Barnard professor, former Wall Street financial engineer, and mom. And a general in the volunteer army.

Reuters Global Investment Outlook Summit
Reuters Summit-Occupy Wall St leader keeps heat on politicians
Matthew Goldstein

Paul Krugman doubles down on the MMT POV on deficits

This is the NYT op-ed page, not his blog. The big time. And he calls out Pete Peterson by name. The fight is on.

The New York Times
Fighting Fiscal Phantoms
Paul Krugman | Professor of Economics, Princeton University

UK to Plug Hole in Fiat, by Digging Faster

commentary by Roger Erickson

Did PT Barnum ever go to the UK?

Osborne warned his slow economic growth .. means another 6 years of Austerity
The era of austerity could last until 2018 and VAT may have to rise to as high as 25 per cent to help plug the hole in the public finances, the Chancellor was warned last night.

They talk about their fiat currency as though it's something they get from someone else, and have to finance. Earth to Osborne: "Get a grip!"

And imagine. They say Americans are ignorant! Churchill must be choking on his cigar. How does an electorate plug a hole in fiat? ?? Index a public initiative tax, so it automatically remains excessive?  Standing in a bucket - in London no less, in a pouring rain - trying to pull themselves up by their bootstraps?

Will "Osborne" someday become an adjective, somewhere between Innocent Fraud and Quisling? Will a link someday be found between Moon Madness and Banker Battiness? Is it the dust, ink or fiber found in Sterling Pound notes? Surely this era's unique mass psychosis will someday be featured in legend.

"Death Panel" Advocate Rattner's Math

Democrat fixer Steven Rattner is out with another NYT op-ed that is getting some attention today.

Remember this is the same guy who previously authored a disgraceful NYT op-ed that advocated for "Death Panels" in health care policy which in contrast made the Randian and former VP candidate Paul Ryan seem almost empathetic.

And now it seems he is weighing in on fiscal policy.  Rattner:

Here’s the math: We need at least $4 trillion of long-term deficit reduction, with a substantial portion — on the order of $1.2 trillion — coming from new revenues.

This is a textbook example of how math can be misapplied and misused by morons.  The key with mathematics is knowing how to correctly apply it;  which Rattner here exhibits no capability thereof.

Here is the REAL math:  The fiscal deficit is simply the ex-post accounting record of the non-government sector's previous period $NFA savings desires.

As an ex-post accounting record, the "deficit" cannot be looked at as a "tool" that policymakers can "use" via positive actions in an effort to influence future economic outcomes. The deficit can only be looked at ex-post of the previous REAL economic outcomes, and a rising deficit is an ex-post indicator of poor REAL economic outcomes in the previous accounting period.  It is a rear view mirror.

To the extent that Rattner is revealing the Democrat position going into the current political negotiations we can see here that the Dems are thinking approximately $1T of tax increases and $3T of spending cuts.

Looks like in the $1T of tax increases the Dems are going to target higher income level taxpayers so that part of their fiscal plans most likely won't effect the macro economy that much.  Taxpayers at the targeted income levels would probably just save much of those marginal $NFA anyway.

But the $3T in implied spending cuts is substantial and real.  This represents $300B per year over the 10 year period that the current political negotiations over fiscal policy are focused on; or about 2% of current GDP.

These $3T in proposed cuts are mathematically equivalent to a tax increase for the lower to middle class of $3T.  Because the recipients of most government spending are the citizens working in the areas of the economy that benefit most from discretionary government spending.

It takes true mathematical insight to understand that in the US today, a spending cut is equivalent to a tax increase.  A mathematical insight that is surely lacking among those currently working to influence economic policy in the US today.

New GOP Tactic: "We'll Abandon Payroll Taxes if You Abandon Social Security Benefits"

commentary by Roger Erickson

Our Enemy, the Payroll Tax

Aka, "we'll agree to throw out the initiative-freezing ice-bathwater .... but only if the baby goes with it!" Doh!

Is this progress, or an insidiously brilliant & evil plan?  Crazy like a genius idiot fox?  Shouldn't be news.  It's the socio path we've chosen.

Outcomes depend on how smart the American Public is. PT Barnum is watching.

The undeniably good news is that everything finally seems to be openly listed and on the table for the GOP. The bad news is that our targeted corpse is among those exhibits, for ulterior motives still not clear even to the determined perps! Only argument is which foot to shoot first, and they're willing to trade anything on "our" behalf, even all of us. Only Wall St. could screw a market that badly.

Kneecap and trade (body politic parts) anyone? The new GOP view of capitalism is to "free up underutilized assets" by amputating a leg. After all, two legs represent redundant assets.  Even Tom Jefferson would have to give them their due. Merchants have finally found a way to outsource even the land they stand upon. Yet why stop there? If they think they no long need a country, what makes 'em think they need planet Earth either? The solar system is, after all, Centrally Planned.

PT Barnum would say to forget about Arizona. "I have a bridge in Sun City to sell you. Deals so hot that owners can only take obsession after 30 million days ... or longer.  [ps: Don't be not left behind, if you know what's good for your country.  No one will be denied public credit!  Plus, I can earn frequent liar miles if you act within the next 30 minutes.]"

You'd Think People Would Catch On .... That This Is Not Business As Usual

commentary by Roger Erickson

6m trapped in poverty: Poor earning Brits fail to cover cost of living
More than six [UK] million workers are not earning enough to drag their families above the breadline. And for the first time since records began, working families in poverty outnumber the 5.1 million jobless households in poverty.

Unlike in the USA, Cameron's UK administration forget to re-define official poverty levels downwards fast enough to keep 'em conveniently below median labor-class incomes.  If you want to stay ahead in a continuous race to the bottom, you need the finish line to fall faster than the contestants.

When will the 1% and their newly poverty stricken acolytes catch on? When they start suggesting euthanasia, and start running out of lower classes to keep their incomes and wealth levels above? Will that be before or after we all re-recognize that we'll either hang together, or hang en masse? What good are supposed honeypots if there are no ant "servants" to utilize and re-consume the group output that honeypots hoard? What good are even capitalist Central Planners who think that they can personally dole out Group Intelligence faster than the quality of distributed decision-making - even among those on the dole - can rise?

Forget Al Qada. The worst terrorist threat is always Uu Qanta, and it's staring out from your own mirror. The only way to kill that terrorist threat is to kill the notion that we can control, rather than simply unleash and enjoy, the quality of coordinated, distributed decision-making. Instead of seeing increasing gross liquidity as a deficit, call it by it's more appropriate name - "asset."

Note to Central Planners. There is no way to hoard and dole out Group Intelligence, Group Agility and Group Adaptive Rate. It's equivalent to hoarding group suicide. Good luck with that.

When will our mega tribe realize that they themselves are the prime asset, that currency is simply liquidity, and that anything hindering society-wide liquidity limits return on coordination - and hence our future options? Hopefully not after it's too late to avoid setting us back another generation. Hopefully at least slightly before then?

There is a better way.

We can't accelerate return on coordination without getting rid of all royalty and most royalties, forever. Every bit of personal initiative withheld and forgone (i.e., hoarded) forgoes some compounding return on coordination. The only way to optimize growth of any organization is to both grow the system AND keep the components adquately maintained. That's a 2-stage optimization task, neither neo-capitalism nor neo-socialism alone, but a dynamic function of both continuously summed. This is NOT difficult. Any 12 year old exposed to algebra can learn the core concept of return on scalable teamwork, aka return on coordination.

Humor

Self-taught African Teen Wows M.I.T.

Self-taught African Teen Wows M.I.T. 

15-Year-Old Kelvin Doe is an engineering whiz living in Sierra Leone who scours the trash bins for spare parts, which he uses to build batteries, generators and transmitters. Completely self-taught, Kelvin has created his own radio station where he broadcasts news and plays music under the moniker, DJ Focus.

Kelvin became the youngest person in history to be invited to the "Visiting Practitioner's Program" at MIT. THNKR had exclusive access to Kelvin and his life-changing journey - experiencing the US for the first time, exploring incredible opportunities, contending with homesickness, and mapping out his future.

Put on Nov. 16 and already approaching 3 million hits.

Simon Wren-Lewis — Defining countercyclical fiscal policy: a proposal

Finally moving away from reliance on monetary policy? Right direction, anyway.

MMT already has a proposal on the table.

mainly macro
Defining countercyclical fiscal policy: a proposal
Simon Wren-Lewis | Professor of Economics, Oxford University

circuit — Old Keynesian themes in Modern Monetary Theory

circuit weighs in on MMT and Paul Krugman's post today, and he finds that the ideas that this is based on were articulated by the "Old Keynesians" decades ago.

Some good quotes to save for future use, too.

Fictional Reserve Barking
Old Keynesian themes in Modern Monetary Theory
circuit