One of the hopes for EP is we can zero in on the details and point out things like this Stimulus is not real Keynesian economics. We get into these broad based rallying cry philosophies that in terms of effectiveness...well, aren't.
i.e. "that's socialism", "that's the government controlling your health care", "that's conservatism", etc.
and one of the very good call outs, besides the incredible, raging, no oversight really, beyond belief debt going on...
is how keyword Stimulus is painted as Keynesian, but it's not actually.
It's kind of like "free trade". U.S. trade policies simply do not follow the theory and the means of production, i.e. people are not supposed to be mobile in the actual equations. Yet you'll hear "free trade" and "free trade is bad" and all of this rhetoric yet few have sat down and tried to read a trade agreement or understand the basic theory.
I hope we has open minded thinking lay people (and our economists and economic tourists) can discuss, point out, in reasonable discourse, on this site.
Was Galileo's error. He wasn't jailed for saying that the earth goes around the sun. He was jailed for calling the Pope an idiot.
I fear we as economists- whether strictly amateur like me or professional, like Paul Krugman- are in a similar boat. We're arguing math and reality against politics and faith- and calling our opponents idiots, while absolutely true, is getting us nowhere.
What we need, is to start coming up with some solutions that work within the system, instead of trying to change it. This is hard- because the system has been designed, whether on purpose or by accident, to utterly deny us the ability to come up with solutions.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
but I can tell you that population density w.r.t. optimal productivity and economic growth is not a new theory. It's a huge part of labor economics as well as general economics.
It's more that it's not "cool" these days to mention it, i.e. special interests, special agendas trump economic realities and theory.
If you want to add your blog to your signature on EP, that's fine by us as well as mention your book. But I wouldn't claim this is a "new economic theory" for population has been a factor for a long time in economics, especially labor, productivity, wages.
So well said, Mr. Oak, so well said. As you mentioned, Keynes was about using government spending to tweak an economy, to rev up its economic engine.
Of course, the "economic engine" of the USA has been, insanely, financialization, also known as financial "engineering."
One of the factors (it's important to emphasize "one of") leading up to the Great Depression (c. 1930) was over-production - that is, over production of real goods.
Today's over production is the "over production" of nonreal goods -- debt-based securities and other quasi-financial instruments -- formerly known as JUNK PAPER, JUNK BONDS, and so on.
Obviously to us thinking people, such over production enriches a select few, while scamming the rest of us.
When the Group of Thirty began promoting the adoption of credit derivatives back in the early '90s, either they were all financial geniuses or crooks - and given the obvious results -- and how they enriched themselves and their cronies to the detriment of the rest of us -- they were, and still are, crooks.
With the bailouts going to that select few, to further offshoring American jobs, further commodities speculation and lobbying against anything constructive to the American worker, they are continuing to disassemble the American economy -- as those stats clearly prove.
I'm thinking more they have run out of people to fire temporarily. ;)
Here is durable goods, which increased 1.9%, but it's all still pretty bad stats.
Add to that these "proclamations" that America has to get "used to it" 8% or more unemployment and only 2% GDP growth and maybe this time we're stuck at the bottom of the well.
I'm just not optimistic this recession would be "normal".
We also had a flurry of hearings and discussion on the possibility of speculators manipulating the market and the minute oil dropped, all of that activity disappeared.
Now it seems....they are back with more prices divorced from demand reality.
Why is it we only pay attention to certain things when there is a crisis?
"For those of you who don't understand what Bernanke just said above, he essentially means that the Fed can create such an unlimited supply of dollars that will devalue every other dollar in existence to the point that deflation will never be a problem. It'll make every owner of dollars poorer, but it will stop deflation."
Yeah, but that's only before the Revolution.
Bernacke's arrogance is absolutely stupifying. What is frequently forgotten by bacteria of his variety is the eternal verity that life is what happens to you while you're making plans. This man has been wrong about almost everything important he's had to confront over the last few years and here we find him pontificating? Better a show trial, a confession and quick sentencing.
As to Pope Benedict's evaluation of the Galileo verdict some centuries ago, the presuppositional overreach of both sides, while at the time perhaps "rational", must today be accepted as demonstrably untrue, which was the point of his remark when it was made. Had the Church then recognized moral reasoning as more properly the context for science and not its substitute and science the fact that its very underpinnings are derivative and not unsituated, much harm could have been avoided. Only among the emotionally underdeveloped and starkly uninformed are these truths largely ignored today.
If interest rates continue to increase, the stock market will continue to rally - in nominal, but not necessarily real, terms.
I have a sense that the mortgage resets/recasts may be less of an issue for the overall economy than most people think, although they will certainly continue to drive house prices lower.
I am more concerned about the rebound in gasoline prices. We have surging prices again, perhaps - again - driven by speculation, while EIA statistics show continuing lower gasoline demand.
Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the wealthiest nation on earth - its preeminent industrial power - into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, exceeds $9.2 trillion. What will happen when those assets are depleted? Today's recession is the answer.
Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.
Clearly, there is something amiss with "free trade." The concept of free trade is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?
At this point, I should introduce myself. I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.
This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.
One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one fifth of the world's population.
Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.
If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It's also available at Amazon.com.)
Please forgive me for the somewhat spammish nature of the previous paragraph, but I don't know how else to inject this new theory into the debate about trade without drawing attention to the book that explains the theory.
I agree with you, Rob. Intelligent decifit spending can grow the economy out of a recession, to be repaid during an expansion.
Intelligent spending on infrastructure is the best way to do that. For example, why did NYC become the premier city on the east coast? Because it was the only city on the ocean that had access to the Great Lakes and midwest without having to go over a mountain range. The building of the Erie Canal, linking the Mohawk River with Lake Erie, meant that goods could be transported at tremendously less cost than going over mountain passes. The tolls charged paid for the outlay in about 5 years, and the rest was, well, history.
It is important to separate temporary countercyclical deficit spending (the "stimulus package") from the financial bailout to financial firms. The former is proper Keynesian stimulus. The latter is simply an inflationary giveaway to the financial class (you may recall, I wrote an essay about Hyman Minksy and how the financial Bailout will harm average Americans even if it works). So I think G is right about the second point.
I promise to write out a detailed analysis of my points. I am frankly too tired today to make them but I honestly don't think you are realizing all of the VAT manipulations and methods I've read about in other nations and this is where I am coming from. So I will make the case in a later post to hopefully be Q.E.D.
Brooksley Born - what a great story. She exemplifies why citizens will ultimately prevail. There are quite a few folks out there who have integrity and intellectual honesty. And the vast majority will make the right choices every time with just a bit of the facts. Three cheers for Brooksley!
You add fuel to the fire with your facts and questions. Why indeed is GM sending those jobs off shore? If you have the link for that, I'd greatly appreciate it. It's worth a few words. I remember hearing it and thinking, "That can't be right.". But it's not GM doing these things, it's the federal government.
Seeking Alpha is a treasure! Black called that stress test before it took place.
One of the hopes for EP is we can zero in on the details and point out things like this Stimulus is not real Keynesian economics. We get into these broad based rallying cry philosophies that in terms of effectiveness...well, aren't.
i.e. "that's socialism", "that's the government controlling your health care", "that's conservatism", etc.
and one of the very good call outs, besides the incredible, raging, no oversight really, beyond belief debt going on...
is how keyword Stimulus is painted as Keynesian, but it's not actually.
It's kind of like "free trade". U.S. trade policies simply do not follow the theory and the means of production, i.e. people are not supposed to be mobile in the actual equations. Yet you'll hear "free trade" and "free trade is bad" and all of this rhetoric yet few have sat down and tried to read a trade agreement or understand the basic theory.
I hope we has open minded thinking lay people (and our economists and economic tourists) can discuss, point out, in reasonable discourse, on this site.
Was Galileo's error. He wasn't jailed for saying that the earth goes around the sun. He was jailed for calling the Pope an idiot.
I fear we as economists- whether strictly amateur like me or professional, like Paul Krugman- are in a similar boat. We're arguing math and reality against politics and faith- and calling our opponents idiots, while absolutely true, is getting us nowhere.
What we need, is to start coming up with some solutions that work within the system, instead of trying to change it. This is hard- because the system has been designed, whether on purpose or by accident, to utterly deny us the ability to come up with solutions.
-------------------------------------
Executive compensation is inversely proportional to morality and ethics.
but I can tell you that population density w.r.t. optimal productivity and economic growth is not a new theory. It's a huge part of labor economics as well as general economics.
It's more that it's not "cool" these days to mention it, i.e. special interests, special agendas trump economic realities and theory.
If you want to add your blog to your signature on EP, that's fine by us as well as mention your book. But I wouldn't claim this is a "new economic theory" for population has been a factor for a long time in economics, especially labor, productivity, wages.
Interesting how Michael Hudson, quite some time ago, exactly predicted what Bernanke would both say and do.
So well said, Mr. Oak, so well said. As you mentioned, Keynes was about using government spending to tweak an economy, to rev up its economic engine.
Of course, the "economic engine" of the USA has been, insanely, financialization, also known as financial "engineering."
One of the factors (it's important to emphasize "one of") leading up to the Great Depression (c. 1930) was over-production - that is, over production of real goods.
Today's over production is the "over production" of nonreal goods -- debt-based securities and other quasi-financial instruments -- formerly known as JUNK PAPER, JUNK BONDS, and so on.
Obviously to us thinking people, such over production enriches a select few, while scamming the rest of us.
When the Group of Thirty began promoting the adoption of credit derivatives back in the early '90s, either they were all financial geniuses or crooks - and given the obvious results -- and how they enriched themselves and their cronies to the detriment of the rest of us -- they were, and still are, crooks.
With the bailouts going to that select few, to further offshoring American jobs, further commodities speculation and lobbying against anything constructive to the American worker, they are continuing to disassemble the American economy -- as those stats clearly prove.
I notice you are leaving comments a lot. So can I suggest going to the left hand corner, creating an account and joining us?
The CAPTCHA is bypassed and you can then track your comments and see who has replied to you. Makes it much easier to have a conversation and discuss.
That's worst than what a bankruptcy judge would do, no?
What about this?
Instead of a large equity stake in GM, the UAW was reduced to only 17.5%...
didn't the UAW make huge concessions earlier for a large equity stake and isn't this also a shafting of the auto workers?
I'm thinking more they have run out of people to fire temporarily. ;)
Here is durable goods, which increased 1.9%, but it's all still pretty bad stats.
Add to that these "proclamations" that America has to get "used to it" 8% or more unemployment and only 2% GDP growth and maybe this time we're stuck at the bottom of the well.
I'm just not optimistic this recession would be "normal".
We also had a flurry of hearings and discussion on the possibility of speculators manipulating the market and the minute oil dropped, all of that activity disappeared.
Now it seems....they are back with more prices divorced from demand reality.
Why is it we only pay attention to certain things when there is a crisis?
"For those of you who don't understand what Bernanke just said above, he essentially means that the Fed can create such an unlimited supply of dollars that will devalue every other dollar in existence to the point that deflation will never be a problem. It'll make every owner of dollars poorer, but it will stop deflation."
Yeah, but that's only before the Revolution.
Bernacke's arrogance is absolutely stupifying. What is frequently forgotten by bacteria of his variety is the eternal verity that life is what happens to you while you're making plans. This man has been wrong about almost everything important he's had to confront over the last few years and here we find him pontificating? Better a show trial, a confession and quick sentencing.
As to Pope Benedict's evaluation of the Galileo verdict some centuries ago, the presuppositional overreach of both sides, while at the time perhaps "rational", must today be accepted as demonstrably untrue, which was the point of his remark when it was made. Had the Church then recognized moral reasoning as more properly the context for science and not its substitute and science the fact that its very underpinnings are derivative and not unsituated, much harm could have been avoided. Only among the emotionally underdeveloped and starkly uninformed are these truths largely ignored today.
If interest rates continue to increase, the stock market will continue to rally - in nominal, but not necessarily real, terms.
I have a sense that the mortgage resets/recasts may be less of an issue for the overall economy than most people think, although they will certainly continue to drive house prices lower.
I am more concerned about the rebound in gasoline prices. We have surging prices again, perhaps - again - driven by speculation, while EIA statistics show continuing lower gasoline demand.
Our enormous trade deficit is rightly of growing concern to Americans. Since leading the global drive toward trade liberalization by signing the Global Agreement on Tariffs and Trade in 1947, America has been transformed from the wealthiest nation on earth - its preeminent industrial power - into a skid row bum, literally begging the rest of the world for cash to keep us afloat. It's a disgusting spectacle. Our cumulative trade deficit since 1976, financed by a sell-off of American assets, exceeds $9.2 trillion. What will happen when those assets are depleted? Today's recession is the answer.
Why? The American work force is the most productive on earth. Our product quality, though it may have fallen short at one time, is now on a par with the Japanese. Our workers have labored tirelessly to improve our competitiveness. Yet our deficit continues to grow. Our median wages and net worth have declined for decades. Our debt has soared.
Clearly, there is something amiss with "free trade." The concept of free trade is rooted in Ricardo's principle of comparative advantage. In 1817 Ricardo hypothesized that every nation benefits when it trades what it makes best for products made best by other nations. On the surface, it seems to make sense. But is it possible that this theory is flawed in some way? Is there something that Ricardo didn't consider?
At this point, I should introduce myself. I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." My theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.
This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.
One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one fifth of the world's population.
Ricardo's principle of comparative advantage is overly simplistic and flawed because it does not take into consideration this population density effect and what happens when two nations grossly disparate in population density attempt to trade freely in manufactured goods. While free trade in natural resources and free trade in manufactured goods between nations of roughly equal population density is indeed beneficial, just as Ricardo predicts, it’s a sure-fire loser when attempting to trade freely in manufactured goods with a nation with an excessive population density.
If you‘re interested in learning more about this important new economic theory, then I invite you to visit either of my web sites at OpenWindowPublishingCo.com or PeteMurphy.wordpress.com where you can read the preface, join in the blog discussion and, of course, buy the book if you like. (It's also available at Amazon.com.)
Please forgive me for the somewhat spammish nature of the previous paragraph, but I don't know how else to inject this new theory into the debate about trade without drawing attention to the book that explains the theory.
Pete Murphy
Author, "Five Short Blasts"
Link.
Looks like there could be another problem if interest rates go up.
Fed and Treasury cannot afford to have mortgage rates to increase. It threatens their plans. But mortgage demand (I believe) is off.
Another potential issue is if interest rates go up what does that mean for adjustable rate mortgages still out there - it could be a good amount.
I agree with you, Rob. Intelligent decifit spending can grow the economy out of a recession, to be repaid during an expansion.
Intelligent spending on infrastructure is the best way to do that. For example, why did NYC become the premier city on the east coast? Because it was the only city on the ocean that had access to the Great Lakes and midwest without having to go over a mountain range. The building of the Erie Canal, linking the Mohawk River with Lake Erie, meant that goods could be transported at tremendously less cost than going over mountain passes. The tolls charged paid for the outlay in about 5 years, and the rest was, well, history.
It is important to separate temporary countercyclical deficit spending (the "stimulus package") from the financial bailout to financial firms. The former is proper Keynesian stimulus. The latter is simply an inflationary giveaway to the financial class (you may recall, I wrote an essay about Hyman Minksy and how the financial Bailout will harm average Americans even if it works). So I think G is right about the second point.
I promise to write out a detailed analysis of my points. I am frankly too tired today to make them but I honestly don't think you are realizing all of the VAT manipulations and methods I've read about in other nations and this is where I am coming from. So I will make the case in a later post to hopefully be Q.E.D.
RebelCapitalist, that's such an on target axiom.
I can just imagine how Einstein would react to the current cast of characters driving the country into the ground.
Brooksley Born - what a great story. She exemplifies why citizens will ultimately prevail. There are quite a few folks out there who have integrity and intellectual honesty. And the vast majority will make the right choices every time with just a bit of the facts. Three cheers for Brooksley!
You add fuel to the fire with your facts and questions. Why indeed is GM sending those jobs off shore? If you have the link for that, I'd greatly appreciate it. It's worth a few words. I remember hearing it and thinking, "That can't be right.". But it's not GM doing these things, it's the federal government.
Seeking Alpha is a treasure! Black called that stress test before it took place.
Here's my original populist statement.
The Money Party (1). The Essence of Our Political Troubles
Sept 30, 2007
Has a pretty scathing article on the financial crisis "government response". The Greatest Swindle Ever Told.
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