Thomas Klitgaard and James Narron — Crisis Chronicles: Gold, Deflation, and the Panic of 1893

In the late 1800s, a surge in silver production made a shift toward a monetary standard based on gold and silver rather than gold alone increasingly attractive to debtors seeking relief through higher prices. The U.S. government made a tentative step in this direction with the Sherman Silver Purchase Act, an 1890 law requiring the Treasury to significantly increase its purchases of silver. Concern about the United States abandoning the gold standard, however, drove up the demand for gold, which drained the Treasury’s holdings and created strains on the financial system’s liquidity. News in April 1893 that the government was running low on gold was followed by the Panic in May and a severe depression involving widespread commercial and bank failures.…

FRBNY — Liberty Street Economics
Crisis Chronicles: Gold, Deflation, and the Panic of 1893

Thomas Klitgaard, vice president in the Federal Reserve Bank of New York’s Research and Statistics Group, and James Narron, First Vice President and Chief Operating Officer of the Federal Reserve Bank of Philadelphia

Thomas Klitgaard and James Narron — Crisis Chronicles: The Long Depression and the Panic of 1873

It always seemed to come down to railroads in the 1800s. Railroads fueled much of the economic growth in the United States at that time, but they required that a great deal of upfront capital be devoted to risky projects. The panics of 1837 and 1857 can both be pinned on railroad investments that went awry, creating enough doubt about the banking system to cause pervasive bank runs. The fatal spark for the Panic of 1873 was also tied to railroad investments—a major bank financing a railroad venture announced that it would suspend withdrawals. As other banks started failing, consumers and businesses pulled back and America entered what is recorded as the country’s longest depression.…

FRBNY — Liberty Street Blog
Crisis Chronicles: The Long Depression and the Panic of 1873
Thomas Klitgaard and James Narron

Brad DeLong — Future Economists Will Probably Call This Decade the 'Longest Depression'

Economist Joe Stiglitz warned back in 2010 that the world risked sliding into a "Great Malaise." This week, he followed up on that grim prediction, saying, "We didn't do what was needed, and we have ended up precisely where I feared we would."
The problems we face now, Stiglitz points out, include "a deficiency of aggregate demand, brought on by a combination of growing inequality and a mindless wave of fiscal austerity."

He says the only cure is an increase in aggregate demand, far-reaching redistribution of income and deep reform of our financial system. The obstacles to this cure, he writes, "are not rooted in economics, but in politics and ideology."

Indeed. Joe Stiglitz is right.…

World Post
Future Economists Will Probably Call This Decade the 'Longest Depression'
Brad DeLong

Completely ignores Post Keynesians and MMT economists who were right in advance of the crisis and warning about it and who prescribed addressing the demand issue when the crisis hit. Imputes Hyman Minsky's financial instability theory based on the three stage financial cycle to Martin Wolf.

The disturbing thing is that Brad knows better.

Thomas Klitgaard and James Narron — Crisis Chronicles: The Man on the Twenty-Dollar Bill and the Panic of 1837

President Andrew Jackson was a "hard money" man. He saw specie—that is, gold and silver—as real money, and considered paper money a suspicious store of value fabricated by corrupt bankers. So Jackson issued a decree that purchases of government land could only be made with gold or silver. And just as much as Jackson loved hard money, he despised the elites running the banking system, so he embarked on a crusade to abolish the Second Bank of the United States (the Bank). Both of these efforts by Jackson boosted the demand for specie and revealed the soft spots in an economy based on hard money. In this edition of Crisis Chronicles, we show how the heightened demand for specie ultimately led to the Panic of 1837, resulting in a credit crunch that pushed the economy into a depression that lasted until 1843.

FRBNY — Liberty Street Economics
Crisis Chronicles: The Man on the Twenty-Dollar Bill and the Panic of 1837

Thomas Klitgaard, vice president in the Federal Reserve Bank of New York’s Research and Statistics Group, and and James Narron, senior vice president in the Federal Reserve Bank of San Francisco’s Cash Product Office

Ivan Kitov — The US economy is in the middle of 35-years-long period with depressed economic conditions

Kondratiev wave.

The US economy is in the middle of the 35 years long period with depressed economic conditions. Any recovery can be just transient. Do not trust good news – the US economy is still stagnating as low GDP growth rate and very low inflation prove.

Economics as Classical Mechanics — Analyzing economic data with a physicist
The US economy is in the middle of 35-years-long period with depressed economic conditions
Ivan Kitov | Doctor of Physics and Mathematics, Lead Researcher at the Institute for the Geospheres' Dynamics, Russian Academy of Sciences

Speaking Of Demos: Control Fraud Regulation and Agile, Representative Government

(commentary posted by Roger Erickson)

The Mother of All Demos: The 1968 presentation that sparked a tech revolution
(hat tip also to Lynn Wheeler)

D'yer think we could use a revolution in Control Fraud Regulation?

If, say, in your country, you as an Middle Class worker were supplied with ... a cultural-self-regulatory feedback/response system that was alive for you all day and was instantly responsive to every culturally significant action that all citizens had, how much value could your culture derive from that?

Could that trigger a cultural revolution rivaling the Renaissance? Sure seems like it. And we're sitting on it, and reserving it for our police state?

Talk about the ass calling the skull and bones Central Planners! CP by other means is what you get when private factions gain effective control of a supposed democracy.

Why keep PRIZM as a prison for the citizens that own it? Open source and adaptive re-purpose it, and call it culture? Or just freedom of speech?

Democracy is too important to be left to the NSA?

Or to the Control Frauds who currently taken private OWNERSHIP of all 3 branches of our ex-Democracy? The one we now call 'de Mockracy?

Gosh, isn't all that what's called an agile, representative government? We keep inventing new technologies, but keep forgetting to run our whole culture through 'em?

Why is it that the first thing we do with new technology is to shoot our cultural foot? No wonder the Middle Class is always hopping mad.

Haven't we already had a few, abject demonstrations - called "depressions" - illustrating the value of a cultural-regulatory feedback/response system?

How long will it take for THAT to catch on, and REMAIN in use?

Matthew O'Brien — Germany's Export Obsession Is Dooming Europe to a Depression

Europe is in a depression, because Germany is afraid of a recovery [not on its terms].

It's afraid that more inflation and more spending would wreck its export-led growth model. And afraid that southern Europe would stop trying to adopt that model if they had an easier way out. So Germany has left them no way out....

The euro's problem, as the U.S. Treasury points out, is Germany wants the rest of Europe to become sellers too, but isn't willing to buy more itself.

Germany, of course, calls this criticism "incomprehensible." Its Economics Ministry thinks that its massive trade surplus just shows the "strong competitiveness of the German economy and the international demand for quality products from Germany." But that's a non sequitur. Germany doesn't have such a big trade surplus because it sells so many quality products. It has such a big trade surplus because it sells so many quality products and it buys so little. Nobody is asking Germany to stop making quality products. They're asking Germany to start paying their workers more and to start buying more from abroad. In other words, to tolerate a bit more inflation and government spending.

But the opposite has happened. Germany has fought any and all monetary easing out of fear of nonexistent inflation. And it really is nonexistent. In October, overall euro zone inflation fell to a four-year low of 0.7 percent, while German inflation was just a tad higher at 1.2 percent. Despite this, Germany's central bank still opposes easier money, because it sees the specter of inflation in ... apartment prices in its major cities. It'd be funny if it weren't dooming southern Europe to a depression. See, with German prices (and wages) rising so slowly, Europe's crisis countries can't regain competitiveness by having their own just rise slower. They have to cut wages instead—which, as Iriving Fisherpointed out back in 1933, can throw an economy into a death spiral by making debts harder to pay back.

Austerity, though, has already thrown southern Europe into a death spiral.

The Atlantic | Business
Germany's Export Obsession Is Dooming Europe to a Depression
Matthew O'Brien

John Carney — Why Debt Ceiling Is Far Scarier Than the 'Fiscal Cliff'

John redeems CNBC again. Rick Santelli doesn't seem to mind seeing the economy sink into an abyss of the extremists own making "for a good cause."

CNBC NetNet
Why Debt Ceiling Is Far Scarier Than the 'Fiscal Cliff'
John Carney | Senior Editor

Oliver Staley — Depression Deepens Greek Middle Class Despair With Crime

“I don’t think there is a single Greek citizen who believes that things will be better,” Tzogopoulos said. “There is no money for people to spend.”

Bloomberg
Depression Deepens Greek Middle Class Despair With Crime
Oliver Staley
(h/t Naked Capitalism)

Bill Mitchell — Eurozone policy makers destroying prosperity

In the last week, several major data releases have been published by Eurostat, culminating in yesterday’s release of the September unemployment which shows that the jobless rate has risen to its highest in the currency union’s history. There are now 18.49 million people in the Eurozone without work and that is the tip of the iceberg when it comes to assess the wasted production and lives that the fiscal austerity is creating. Just in the last month, a further 146,000 became unemployed. More than 25 per cent of available workers are unemployed in Greece and Spain. We have moved from describing this tragedy as a recession. This is now a full blown Depression of the scale of the 1930s travesty and, once again, its depth is a direct result of policy failure. All the indicators are coming together and providing an unambiguous verdict – that the Eurozone policy makers destroying prosperity and have relinquished any sense of capacity to govern, where that term means the capacity to advance public purpose and improve welfare.

Bill Mitchell – billy blog
Eurozone policy makers destroying prosperity
Bill Mitchell

Dirk Ehnts — Real personal income and depression

Dirk Ehnts looks at a 1999 Papadimitriou and Wray paper. (Short)

econoblog 101
Real personal income and depression
Dirk Ehnts | Berlin School for Economics and Law

GOP & WashPost Dredge Up Warren Harding - It's So Simple

commentary by Roger Erickson

As in simple minded thinking. Yet this kind of simpleton's discussion gets disseminated far and wide by newspaper editorial staff. It's very unhelpful to our nation - which desperately needs to elevate, not depress the level of public discussion of currency operations and fiscal policy.

Letter to the Editor

Taking Exception

Mr. Obama could do worse than follow Warren Harding’s lead

In this letter, the writer suggests that:

If Mr. Obama is looking to propel economic recovery, he could do far worse than to embrace the legacy of Harding.

Harding was elected during the “panic” (depression) of 1920, when unemployment grew from 4 percent to 11.7 percent, the gross domestic product fell by 24 percent, and the production of goods and services dropped by 21 percent. These conditions were worse than those in the first year of what became known as the “Great Depression” a decade later.

Under Harding’s leadership, federal spending was cut in half by 1922 and, unlike Herbert Hoover and Barack Obama, he did not seek nor implement a stimulus policy. With these policies in place, the post-World War I depression ended by the summer of 1921. The unemployment rate fell to 6.7 percent in 1922 and then to an astonishing 2.4 percent in 1923, the last year of Harding’s administration.

Richard E. Sincere Jr., Charlottesville
The writer is a member of the Charlottesville City Republican Committee.

ps: There's only one comment to his article, at the Post, but at least it raises some of the many context-dependent flags comparing different contexts.

If this passes as editorial approach to public policy, are we doomed?

Bill Mitchell — The ECB plan will fail because it fails to address the problem

The diagnosis is wrong so the ECB plan to "save the euro" is the wrong treatment for the wrong disease. It's not the euro that needs saving, it is Europe. The EBC plan of bond-buying with "conditionality" is counter-indicated. Providing medicine while also letting blood is contradictory when economies are depressed and so are societies with raging unemployment.

Bill Mitchell — billy blog
The ECB plan will fail because it fails to address the problem
Bill Mitchell

Hugh Hendry – ‘Bad things are going to happen’

At the Milken Institute conference in May, he told the audience that France was just a year away from nationalising its banks and that politicians had still not faced up to the scale of the global debt bubble that was now imploding.

“We have reached a profound point in economic history where the truth is unpalatable to the political class – and that truth is that the scale and magnitude of the problem is larger than their ability to respond – and it terrifies them.”

Read it at The Financial Times
Hendry – ‘Bad things are going to happen’
by Rober Cookson

In line with Randy Wray.

Krugman does Minsky on PBS

Thursday on PBS Newshour, Nobel prize-winning economist Paul Krugman explained the relevance of Hyman Minsky’s theory on the current economic crisis.

“One of his arguments was exactly that you have, you have a depression, you have a bad scene and everybody gets cautious and that caution gives you several decades of stability and as the stability goes on people forget the dangers and they make the same mistakes and get you right back into another one,” he said. “So there was a natural cycle.”

Krugman added that in addition to this natural cycle, conservatives had pushed a “religiously pro-market” ideology that claimed all regulation was harmful and the government was always the problem.

Read it at Raw Story
Krugman explains the gradual march to economic crisis
by Eric W. Dolan


The PBS video is included at the end of the article

J. Bradford DeLong and Barry Eichengreen — New preface to Charles Kindleberger, The World in Depression 1929-1939

The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.

Both the existence of these parallels and their tragic nature would not have escaped Charles Kindleberger, whose World in Depression, 1929-1939 was published exactly 40 years ago, in 1973.1 Where Kindleberger’s canvas was the world, his focus was Europe. While much of the earlier literature, often authored by Americans, focused on the Great Depression in the US, Kindleberger emphasised that the Depression had a prominent international and, in particular, European dimension. It was in Europe where many of the Depression’s worst effects, political as well as economic, played out. And it was in Europe where the absence of a public policy authority at the level of the continent and the inability of any individual national government or central bank to exercise adequate leadership had the most calamitous economic and financial effects.2

These were ideas that Kindleberger impressed upon generations of students as well on his reading public.

Read the rest at Vox.eu
New preface to Charles Kindleberger, The World in Depression 1929-1939
by J. Bradford DeLong, Professor of Economics, University of California at Berkeley and Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley; formerly Senior Policy Advisor at the International Monetary Fund, and CEPR Research Fellow

Two kinds of deleveraging, and MMT rebalancing

Dalio's article, "An In-Depth Look at Deleveragings" is apparently authored by him. It concludes that the best way to "deleverage" is a "proper" combination of debt reduction (defaults and restructurings) and debt monetization (monetary inflation). This is what he considers to be a "beautiful" deleveraging whereas deleveraging by debt reduction and austerity are "ugly." The ugly ones cause recessions/depressions and deflation which is bad. Beautiful deleveragings minimize debt reduction and revive economies with monetary stimulation....

Dalio defines a beautiful deleveraging as one "in which enough 'printing' occurred to balance the deflationary forces of debt reduction and austerity in a manner in which there is positive growth, a falling debt/income ratio and nominal GDP growth above nominal interest rates....

What he calls "ugly", an austerity and debt reduction, is actually "beautiful". While it is painful, it is painful for a much shorter period of time and enables the "economy", i.e., people, to go bankrupt, repair their finances, start saving again, create new capital, and then create new economic growth and jobs. By preventing or delaying this process the policy makers only doom us to economic stagnation, inflation, and permanent high unemployment. And I fear that is exactly where we are headed.

Read it at Zero Hedge
Ugly = Beautiful; Beautiful = Ugly: Ray Dalio On Deleveraging
by Econophile

What Austrians don't seem to get is that the art of deleveraging, should it become necessary due to Ponzi finance as Fisher and Minsky describe, is to reduce debt overhang with minimal capital destruction. Austrians want to "liquidate malinvestment due to credit excess and don't seem to get that in a debt-deflation this involves massive capital destruction in an indiscriminate fashion. So recovery begins from a quashed capital base. That's ugly to me.

Monetarist solutions involve high unemployment and significant idle resources for some time. Hardly "beautiful."

The MMT solution for rebalancing is to provide the necessary net financial assets to non-government in order to offset increased saving desire and make space for deleveraging, while maintaining output and employment. Now that's elegant.

The Decline of the West — 2012 revised edition

Street lights have been turned off in a Sicilian town after local authorities failed to pay a million-euro bill for power supplies, Italian news websites reported on Tuesday.

Local residents of Monreale near Palermo — a popular tourist destination because of its famous Norman cathedral — have been forced to use flashlights in the evenings and some are warning of the risk of a spike in crime.

A local transport company also on Tuesday requested the seizure of property worth 600,000 euros ($786,000) belonging to the Monreale commune to honour another debt.

Read it at Raw Story
Street lights turned off as Italian town fails to pay bills
by Agence France-Presse

Oswald Spengler finding new relevance?

James Hamilton — "Why not abolish the Fed and return to the gold standard?"

James Hamilton recites the facts and figures and provides charts showing that the gold standard doesn't ensure either financial stability or price stability, as gold bugs advertise it does. Gold is deflationary and favors creditors. In economic downturns it results in debt deflation and depression.

See it at Econobrowser
Why not abolish the Fed and return to the gold standard?
by James Hamilton

I recommend reading Pennies from heaven: How Mormon economics shape the G.O.P by Chris Lehmann (Harper's Magazine, Oct 2001) in conjunction with this. Explains a lot of what otherwise may seem somewhat mysterious. Combine Mormon economics with Murray Rothbard's Libertarian Austrian economics and traditional fiscal conservatism, and one sees how contemporary GOP economics is constructed. It's just about the opposite of MMT.

Jeff Cox — Riots in US Streets? Why Soros' Prediction Is Unlikely

Read it at CNBC NetNet
Riots in US Streets? Why Soros' Prediction Is Unlikely

by By Jeff Cox | Senor Writer

I would agree with this analysis, but I suspect that this is not what Soros is concerned with. I would guess that he, like Randy Wray, foresees another crisis developing that will be far worse than the present one since it will be hitting on top of this crisis before this one is resolved. If that happens, who knows what will happen. Moreover, the global economy now has countries joined at the hip. Another crisis would likely be global.