What happened to all of the doom and gloom economic threads?

[Frisco_Slug_Esq]

You can't have it both ways. Either you mess with the economy and to some extent pick winners and losers OR you deal with a top down economy where the bottom is just begging for scraps. You cannot have it both ways. Unless maybe you're playing GTA....

Ludwig Elder von Mises

Then you might understand the terms of the discussion.

Messing with the economy IS top-down.

 

[Frisco_Slug_Esq]

I prefer to let customers pick winners and losers.
As for the bottom begging for scraps, I suspect choices made are responsible for that situation 99 percent of the time.
Your concern for the people "begging for scraps" is illustrated by your dismissal of higher gas prices.

I have yet to see a managed economy where the bottom was not begging for scraps.

We see people risk death all the time to flee Cuba for the opportunity offered by the uncertainties of Capitalism.

 

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[Frisco_Slug_Esq]

They know that a little hope in "the uncertainties of Capitalism" is a fair gamble against the hopelessness of Communism.

For a fact jack!



That's why the flee California.

The hell with the kids man, RUN!!!

I see dominoes wanting to topple...
__________________
I'm Hungary for some €PIIGS!
A_J, the Incredulous

 

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[Frisco_Slug_Esq]

Too bad bailouts before Balkans...

 

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[Frisco_Slug_Esq]

Well, I read that they have stopped enforcing a lot of it in Oakland...

 

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[Frisco_Slug_Esq]

Welcome to Sanctuary, your guide Moonbeam will show you to your benefits...

 

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[Frisco_Slug_Esq]

Californians must love their tofu...

 

[Frisco_Slug_Esq]

Thoughtful stimulus advocates respond. Well, maybe people don’t notice future taxes. Does the man or woman on the street really understand that more spending today means more taxes tomorrow?

That’s an interesting position, but at this point, most of the battle is lost. Stimulus is no longer an “always and everywhere” law, it’s at best a “if people don’t notice that deficits today mean taxes tomorrow” idea. This qualification has deep implications.

First, it means that a “stimulus” policy can only work by fooling people. Is wise policy really predicated on fooling people? Also, people are unlikely to be fooled over and over again. If that’s how stimulus works, you can’t use it too often.

Second, it means that stimulus will work sometimes and not other times. Are American voters right now really unaware that larger deficits mean higher future taxes? Or is the zeitgeist of the moment exactly the opposite: Americans are positively aghast at the future taxes they think they’ll be paying? If you think people can be “irrational” they can be irrational in both directions. They can pay too much attention to future taxes corresponding to current deficits, and stimulus can have a negative effect! When I compare tea party rhetoric to the actual reforms needed to cure America’s deficits, I think there’s a good chance we’re in this range.

Third, if this is the reason that stimulus works, then the current policy attempt, consisting of stimulus now, but strong promises to address the deficit in the future, can have no effect whatsoever. If you think stimulus works by fooling people to ignore future tax hikes or spending cuts, then loudly announcing such tax hikes and spending cuts must undermine stimulus! Augustinian policy, “give me chastity, but not yet,” will not work. Casanova is needed.

...

There is a deeper problem with stimulus. Even if nobody notices future taxes, A was going to do something with the money. Suppose, for example, A was a small business owner, and he was going to buy a forklift3. The government borrows the money instead, and gives it to B who buys a car. Now the composition of spending has changed towards more “consumption.” But does the economy really care if B buys a car rather than A buying a forklift? Barro’s theorem gives conditions in which nothing changes, including the split between consumption and investment. But his real point is deeper: Borrowing does not alter the “intertemporal budget constraint,” society’s overall wealth.

These two stories capture the central logical errors of Keynesian economics, and central advance of “equilibrium” or “inetertemporal” thinking that destroyed it and revolutionized macroeconomics in the 1970s. Some other big names in this effort are Friedman (1957), Lucas (1975), with Sargent (1979), Kydland, Prescott (1982). They pointed out two big mistakes in Keynesian economics:

First, Keynesian economics treats each moment in time in isolation. People’s consumption depends on their current income, not their future prospects. Investment decisions depend on current sales and interest rates, not whether companies expect future sales to be any good. Modern macroeconomics extends across time. It recognizes that what people expect of the future is central to how they behave now. Now, maybe people don’t “perfectly” or “rationally” evaluate the future. But that’s a far cry from saying they don’t consider the future at all! And budget constraints – the fact that debt today must be paid off – are independent of your feelings.

Second, the “plans” of Keynesian economics4 ; how much we suppose people want to consume, invest, etc.; don’t automatically add up to their income, unlike the “demands” of regular economics that must do so. Keynesian economics ignores budget realities at each moment in time as well as the “intertemporal budget constraint” emphasized by Barro.

For these and other reasons, Keynesian ISLM models have not been taught in any serious graduate school since at least 1980, except as interesting fallacies or history of thought. I include my own graduate education at very liberal Berkeley starting in 1979. Even sympathetic textbooks, like David Romer’s Advanced Macroeconomics, cannot bring themselves to integrate Keynesian thinking into modern macro. The “new Keynesian” economics, epitomized by Mike Woodford’s Interest and Prices has nothing to do with standard Keynesian thinking5 . Not a single policy simulation from a Keynesian model has appeared in any respectable academic journal since 1980. Not one. The whole business was simply discredited as being logically incoherent 30 years ago.

Now stimulus advocates may say “all academia lost its mind in about 1975.” Paul Krugman’s New York Times article pretty much took that view. Maybe so. I think most of academic macroeconomics lost its mind about 1935 and only started to regain it in the 1960s, so it certainly can happen. But the claim “all academic economics from the last 35 years is wrong” is a far different form of scientific advice to policy-makers than is “sensible well-understood and widely-accepted economics supports my view.”

I will admit to a bit of disappointment that so many economists revert to archaic Keynesian fallacies when under pressure. I have seen far too many well-trained Chicago Ph.D.s, whose entire professional career consists of exquisite intertemporal equilibrium modeling, fall apart when asked to explain policy, say to a Fed governor. Suddenly output becomes the sum of consumption “demand”, investent “demand” and government “demand,” ignoring that there is a supply in each case, and demand for one thing must come a the expense of another. I have seen the same economists forget that high interest rates are as likely to be a symptom of good times (high marginal product of capital) as a cause of bad times. In this sense, modern economics has indeed failed – we have failed to train our graduate students to really understand, apply and use the tools of modern macroeconomics, and to explain that analysis to slightly older economists trained in the ISLM tradition. But that doesn’t mean that good policy results by reverting to theories that were proved logically incoherent in the 1970s.

http://faculty.chicagobooth.edu/john.cochrane/research/papers/stimulus_rip.html

 

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[Frisco_Slug_Esq]

To reiterate, I was opposed to the Bush-Pelosi stimulus too...





Consistency is important.

 

[Frisco_Slug_Esq]

Remember when he took the Japanese Premier out to lunch for a bamboo shoot sandwich?

All I remember about Japanese and food is Bush puking...

 

[ivantheterrible]

I prefer to let customers pick winners and losers.
As for the bottom begging for scraps, I suspect choices made are responsible for that situation 99 percent of the time.
Your concern for the people "begging for scraps" is illustrated by your dismissal of higher gas prices.

definantly. the last time it went over $3 a gallon here, there were a lot less people on the road everyday. less people buying shit, less people visiting, etc.,etc.,etc.. but that happens in a society based on vehicles.

inflation is a mudderfucker

 

[trysail]

When you "Drill, baby, drill" one of the things you get is increased supplies of natural gas which reduces the cost of heating, of petrochemicals, and electricity.

http://alfred.stlouisfed.org/graph/alfredgraph.png?&chart_type=line&graph_id=&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=false&fo=ve&id=GASPRICE&transformation=lin&scale=Left&range=Max&cosd=1993-11-01&coed=2010-08-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=1&vintage_date=2010-09-01&revision_date=2010-10-31&mma=0&nd=&ost=&oet=&fml=a&fq=Monthly&fam=avg​

 

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[Frisco_Slug_Esq]

During the 2008 campaign, we were told that foreigners would once again respect America if voters elected Obama. That wasn’t apparent in South Korea.

In Washington, too, there have been complaints coming from a surprising source. Shortly after Bernanke announced the Fed’s QE2 policy, Federal Reserve Board member Kevin Warsh wrote an article for the Wall Street Journal saying that there won’t be much easing and that the Fed can’t compensate for bad fiscal policy. “The Federal Reserve is not a workshop for broken fiscal, trade or regulatory policies,” he wrote.

Warsh has been regarded, by me and others more expert, as a solid Bernanke ally on the Fed, one given to justifying the chairman’s policies to the outside world, and he voted with Bernanke on QE2. But in the Journal, he wrote, “I consider the (Fed’s) action as necessarily limited, circumscribed and subject to regular review.” Translation: Ben, you haven’t got my vote for long.

Similarly, many were surprised to see World Bank president Robert Zoellick write in the Financial Times on November 9 calling attention to the risk of inflation. “Markets are using gold as an alternative monetary asset today,” he wrote.

He urged economic policymakers to consider “employing gold as a reference point of market expectations about inflation, deflation and future currency values.” Gold prices, as viewers of cable-news ads know, have been rising to near-record levels, so inflation is what Zoellick is worried about.

Michael Barone
NRO

 

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[Frisco_Slug_Esq]

As a commodity, the dollar is getting to the point where investors are going to look for viable replacements...






... ol' Spooky Dude will, again, be leading the charge.

 

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[Frisco_Slug_Esq]

We ought to run the old spook (Soros) out of the fucking country as a subversive.

Careful what you say, big Sis is watching...

 

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