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-   -   Cylons and Voltron and Zombies! Oh My! (Adam Serwer & Katherine Mangu-Ward) (http://bloggingheads.tv/forum/showthread.php?t=7228)

sugarkang 12-28-2011 10:47 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Parallax (Post 235504)
But that sounds like I am insulting someone I disagree with. No?

People with principles don't like to be accused of lying without the slightest shred of evidence. Calling someone delusional is equally insulting, but, in the end, just a rude opinion.

sugarkang 12-28-2011 10:52 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Don Zeko (Post 235497)
Certainly those bad consequences Keynes describes occur in countries whose currencies are actually being debased, like Weimar Germany or the Confederacy in 1864. But we are not them, and Keynes well knew that any deflation at all can be just as ruinous as runaway inflation. And today, we don't have a debased currency.We have a core inflation rate of 2.15%, along with persistent high unemployment and a huge private debt overhang. If you look at these facts and start screaming about Weimar and debased currencies, that means you aren't willing to see what's in front of your eyes.

Looks like someone's been reading more economics, but still can't see the forest from the trees. Some questions you ought to ask yourself:

1. What does it mean for a currency to be debased?
2. Why is the dollar the exception?
3. Will we always be the exception?

badhatharry 12-28-2011 10:58 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Don Zeko (Post 235497)
Would you care to explain to me how, exactly, the government borrowing from itself instead of borrowing from others increases the future burden on the taxpayer?

I thought I did explain how the government borrowing increases taxpayer burden. Just as in any loan, the interest is an increased burden to the taxpayer. It doesn't matter where the money comes from but in this case it comes from the Fed. I was quibbling with your statement:

So when people add these loans that must be paid back by the borrowers to spending that must eventually be paid for by the taxpayer that wrongly implies that the government is spending far more money on stimulus than it actually is, since monetary stimulus by the Fed isn't government spending at all.

I think it would be more accurate to say that the interest payments on the loans that the government takes out should also be called spending but I'm no accountant. (thank goodness!)

Quote:

If you look at these facts and start screaming about Weimar and debased currencies, that means you aren't willing to see what's in front of your eyes
I'm not screaming Weimar and I know there are many theories about how and why the Fed should do this or that. And I'm just learning about all of this but I don't feel too bad that I don't understand all there is to know about the Fed because few do. But I do have it on good authority that all actions have consequences and very often these days actions are taken that look good politically but end up with very unsavory consequences.

You know, like payroll tax holidays so people have $20 to go out for pizza with their twins but that are going to add lots of fees to new home loans...stuff like that.

Florian 12-28-2011 11:19 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Parallax (Post 235504)
But that sounds like I am insulting someone I disagree with. No?

Less insulting than calling someone a liar, it seems to me, because delusion implies lack of self-awareness. Liars are conscious of what they are doing. Being deluded about something is a common fault of ideologues. Libertarians have a worldview, an ideology, that makes them impervious to reality* and thus eager to substitute fantasy for it.


*"Impervious to reality" may be a polite substitute for delusional.

Don Zeko 12-28-2011 12:15 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by badhatharry (Post 235508)
I thought I did explain how the government borrowing increases taxpayer burden. Just as in any loan, the interest is an increased burden to the taxpayer. It doesn't matter where the money comes from but in this case it comes from the Fed. I was quibbling with your statement:

So when people add these loans that must be paid back by the borrowers to spending that must eventually be paid for by the taxpayer that wrongly implies that the government is spending far more money on stimulus than it actually is, since monetary stimulus by the Fed isn't government spending at all.

I think it would be more accurate to say that the interest payments on the loans that the government takes out should also be called spending but I'm no accountant. (thank goodness!)

This doesn't make sense. When the government runs a deficit, the Treasury makes up the difference by selling bonds. When it does this, interest has to be paid on that debt*, which is an additional cost to the taxpayer. That interest must be paid no matter who the Treasury is borrowing from. Interest payments on government debt are absolutely considered spending, but the Fed's activities only effect that cost insofar as they effect the interest rates the Treasury has to pay on that debt. And in this case, quantitative easing aims to reduce real interest rates even further than normal open market operations. This means that it actually reduces the cost to the taxpayer by reducing interest rates, and if it stimulates the economy successsfully then it will reduce the burden on the taxpayer even more, as more economic activity leads to greater tax receipts, fewer transfer payments for welfare, unemployment insurance, Medicaid, and so forth, and therefore smaller deficits.

Quote:

Originally Posted by badhatharry (Post 235508)
I'm not screaming Weimar and I know there are many theories about how and why the Fed should do this or that. And I'm just learning about all of this but I don't feel too bad that I don't understand all there is to know about the Fed because few do. But I do have it on good authority that all actions have consequences and very often these days actions are taken that look good politically but end up with very unsavory consequences.

You know, like payroll tax holidays so people have $20 to go out for pizza with their twins but that are going to add lots of fees to new home loans...stuff like that.

If you aren't screaming Weimar then what are you saying? You bring up inflation and debased currencies in order to cast doubt on the wisdom of monetary expansion, but then when I point out our low inflation rate and high unemployment you ignore it and start pleading ignorance. As far as I can tell, the only thing you really know about this subject is that policies favored by Democrats are bad, even if you don't have the slightest idea why.

Don Zeko 12-28-2011 12:17 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by sugarkang (Post 235507)
Looks like someone's been reading more economics, but still can't see the forest from the trees. Some questions you ought to ask yourself:

1. What does it mean for a currency to be debased?
2. Why is the dollar the exception?
3. Will we always be the exception?

If you want to have a conversation about this, why don't you tell me what you actually think and what's wrong with my argument instead of snottily asserting your intellectual superiority? Until you do that, I don't see much point in answering your random questions.

badhatharry 12-28-2011 12:58 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Don Zeko (Post 235512)
This doesn't make sense. When the government runs a deficit, the Treasury makes up the difference by selling bonds. When it does this, interest has to be paid on that debt*, which is an additional cost to the taxpayer.

right

Quote:

And in this case, quantitative easing aims to reduce real interest rates even further than normal open market operations.
Yeah, I've been reading about this...zero bound and all that.

Quote:

This means that it actually reduces the cost to the taxpayer by reducing interest rates, and if it stimulates the economy successsfully then it will reduce the burden on the taxpayer even more, as more economic activity leads to greater tax receipts, fewer transfer payments for welfare, unemployment insurance, Medicaid, and so forth, and therefore smaller deficits.
Gosh it sounds so magically wonderful. Makes you wonder why anyone would balk at it although many do.

Quote:

If you aren't screaming Weimar then what are you saying?
I'm saying that adding more money to the system devalues the dollar.

Quote:

You bring up inflation and debased currencies in order to cast doubt on the wisdom of monetary expansion, but then when I point out our low inflation rate and high unemployment you ignore it and start pleading ignorance.
Well, Gee Whiz! low inflation rate and high unemployment haven't improved much so should I mention the obvious...that QE ain't delivering as promised? Still trying to figure out why low inflation is a bad thing.

You can't ever write anything to me which doesn't include some snide remark about my ignorance. I have a tip for you. Just ignore my posts if they are so beneath your consideration. You seem to have the impression that people think you are some kind of genius about these matters. Not I. I think you read stuff just like I read stuff. You may have read more than I but I will be catching up one of these days. And it's harder for me because I am trying to understand instead of just parroting some Krugman aphorism.

Quote:

As far as I can tell, the only thing you really know about this subject is that policies favored by Democrats are bad, even if you don't have the slightest idea why
I said I am in the learning mode but I know enough to assert that there are differing opinions about how the Fed should behave. Hmmm, I seem to remember saying this before, when you decided to castigate me about how silly and stupid my comments are. And it certainly isn't at all controversial to say that people in Washington do things for crass political advantage, even the holier than thou Democrats. So it follows that manipulation of the currency would have very political motivations. These guys aren't monks.

Sulla the Dictator 12-28-2011 03:40 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Don Zeko (Post 235512)
When the government runs a deficit, the Treasury makes up the difference by selling bonds. When it does this, interest has to be paid on that debt*, which is an additional cost to the taxpayer. That interest must be paid no matter who the Treasury is borrowing from. Interest payments on government debt are absolutely considered spending, but the Fed's activities only effect that cost insofar as they effect the interest rates the Treasury has to pay on that debt. And in this case, quantitative easing aims to reduce real interest rates even further than normal open market operations. This means that it actually reduces the cost to the taxpayer by reducing interest rates

Indeed; the federal reserve bank subsidises federal spending by hiding the cost of borrowing. This is made possible because of the complicity of foreign buyers of American debt, who allow the fiction by purchasing Treasury bonds. This can continue without excessive inflation as long as the dollar is perceived as a shelter for people fleeing the euro. In other words, this is a one off (and temporary) situation that doesn't argue for the wisdom of the policy. If the ECB ever pulls of a hail mary, if the Chinese continue to spiral downward, or if the EU simply collapses, this all comes to an end. And you will have hyper-inflation.

Also you didn't touch on the cost of FED policy when it comes to savings. This policy more or less punishes taxpayers for saving, urging risk taking in the market or real estate with the only backstop being federal entitlement. Clsoing the circle.

Quote:

and if it stimulates the economy successsfully then it will reduce the burden on the taxpayer even more, as more economic activity leads to greater tax receipts, fewer transfer payments for welfare, unemployment insurance, Medicaid, and so forth, and therefore smaller deficits.
When will we see the rewards of this unprecedented monetary expansion (300%?)?

I do have a question for you. Since we both know that this massive money expansion has been tried before in the history of economies, what leads you to believe this is the unique circumstance when the people do not pay for the consequences?


Quote:

If you aren't screaming Weimar then what are you saying? You bring up inflation and debased currencies in order to cast doubt on the wisdom of monetary expansion, but then when I point out our low inflation rate and high unemployment you ignore it and start pleading ignorance.
Weimar's problems were coupled with repayment of loans. The equivalent trigger for us would be the first time the US doesn't get the money its looking for during a bond offering with the interest rates you're defending.

badhatharry 12-28-2011 09:19 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Parallax (Post 235503)
What is wrong with a win-win?

I was being sarcastic. There's always a down side.

Quote:

I should also mention that monetary stimulus will devalue the dollar against other major currencies. And this is a good thing! A weaker dollar means cheaper US goods, which means more exports and more jobs. Why else do you think all the emerging economies complain when the Fed goes for another round of stimulus? Because they know their exports to US will take a hit. Why do you think China keeps its currency artificially low compared to the dollar? To keep the price of Chinese exports to US down.
Yes, I've read this. I need to research this a lot more before I come to a conclusion about whether this is ultimately a good thing but I think I understand your argument.

Bottom line, I just don't think anyone is smart enough to be able to successfully orchestrate the economy. Since 2008 it really hasn't worked. I know, I know, the economy would have been worse. Prove it.

Parallax 12-28-2011 10:49 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by sugarkang (Post 235506)
People with principles don't like to be accused of lying without the slightest shred of evidence. Calling someone delusional is equally insulting, but, in the end, just a rude opinion.

I have presented plenty of evidence above it is not an accusation it is just a matter of checking the record.

Parallax 12-28-2011 10:52 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Florian (Post 235509)
Less insulting than calling someone a liar, it seems to me, because delusion implies lack of self-awareness. Liars are conscious of what they are doing. Being deluded about something is a common fault of ideologues. Libertarians have a worldview, an ideology, that makes them impervious to reality* and thus eager to substitute fantasy for it.

*"Impervious to reality" may be a polite substitute for delusional.

Well if you put it that way then no delusional does not make the cut. She can't be ignorant f the composition and the structure of the stimulus. And even then I wrote a long comment in her last diavlog detailing why she was wrong. This time she came back with an even bigger claim that was false!

Parallax 12-28-2011 11:14 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by badhatharry (Post 235529)
I was being sarcastic. There's always a down side.

My point is exactly that this does not have to be a zero sum game.

Quote:

Yes, I've read this. I need to research this a lot more before I come to a conclusion about whether this is ultimately a good thing but I think I understand your argument.

Bottom line, I just don't think anyone is smart enough to be able to successfully orchestrate the economy. Since 2008 it really hasn't worked. I know, I know, the economy would have been worse. Prove it.
It is not a matter of being smart, we know the theory, we know it works but what we lack is determination. The Fed can lower unemployment with a speed that would stun any observer if it really wanted to (for example this would happen if the Fed sais it will buy $250 billion in MBS every month until unemployment drops below 7%). But the problem is then that would make people in Fed look like incompetents because they sat on their hands for 4 years before doing this (remember the recession started in Dec. 2007).

I don't know what I am supposed to prove, or even the concept of proof is a meaningful one in economics (can you prove something in history?). You have models but every model is an approximation, it has various assumptions that you can dispute and so on. Inside that mathematical model you can "prove" things but whether your model is actually a good one that reflects what is going on in the real world is not something you can rigorously demonstrate.

But to see the advantages of more easing look at Europe. Unlike the Fed, ECB actually raised the rates in summer and several EU countries are now in recession. If you doubt the value of a fiscal stimulus look at UK and how fragile their recovery has been compared to that of US (they had one quarter with a sharp contraction and another one with no growth since summer of 2009).

The most effective way of dealing with the current situation was already suggested by Milton Friedman. The treasury and the Fed should prepare a money bomb: treasury issues debt directly to Fed and using this money cuts everyone in US a $5000 check. It is disturbing to see that a solution suggested by Friedman is not acceptable to people who think they are his intellectual successors ...

badhatharry 12-29-2011 12:19 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Parallax (Post 235533)
I don't know what I am supposed to prove, or even the concept of proof is a meaningful one in economics (can you prove something in history?). You have models but every model is an approximation, it has various assumptions that you can dispute and so on. Inside that mathematical model you can "prove" things but whether your model is actually a good one that reflects what is going on in the real world is not something you can rigorously demonstrate.

But you said unequivocally that the theory works and that the only problem is that the Fed has not been bold enough. You say that unemployment would go away of there was enough money injected into the system...but how about the jobs which have gone overseas? how about the fact that our educational system is not producing the kind of graduates that are needed for the kinds of jobs that are available? I know that there are plenty more systemic problems which contribute to unemployment that can't be fixed by a money bomb.

Quote:

The most effective way of dealing with the current situation was already suggested by Milton Friedman. The treasury and the Fed should prepare a money bomb: treasury issues debt directly to Fed and using this money cuts everyone in US a $5000 check. It is disturbing to see that a solution suggested by Friedman is not acceptable to people who think they are his intellectual successors ..
There seems to be some disagreement about what Friedman would advise. Here's a contrary view:

Friedman’s main message for central banks was to maintain a monetary rule that kept the growth of the money supply constant. In his Newsweek column, “Inflation and Jobs” (Nov. 12, 1979), for example, Friedman emphasized that “unemployment is . . . a side effect of the cure for inflation,” so that if a central bank “cured” unemployment by inflating, it “will have unemployment later.” In other words, don’t try it.


And here is Scott Sumner's view of what Friedman would advise:

Friedman thinks near-zero interest rates are a sign that money has been too tight. And he suggest that QE is the proper response.


It seems to be pretty popular to play "What would Milton Friedman do?"

As Keynes said:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

I like this one too:
"Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."

badhatharry 12-29-2011 02:10 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Parallax (Post 235533)
My point is exactly that this does not have to be a zero sum game.

So I've been doing some reading...The Conservative Case for QE2 and I came across this little bit:

If these creditor households, firms, and banks all simultaneously started spending their excess money balances, this would increase total current-dollar spending and in turn spur a real economic recovery...Knowing that prices will be higher in the future will motivate creditor households, firms, and banks to start spending their money today while prices are lower.

BUT, this article was written a year ago and these creditor types haven't gotten the message probably because inflation is still low...in fact, inflation (according to everything I've read) hasn't happened at all despite QE. But I see it at the grocery store.

I have the feeling you're going to say QE wasn't big enough. But let me ask you this...doesn't the inflation which you so avidly desire hurt anyone? It would seem that it would especially hurt those who are no longer in the earning sector.

I'm still in the "step away from the economy" camp. I think all this fooling around is foolish but I'm still looking into it.

Don Zeko 12-29-2011 02:11 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by badhatharry (Post 235539)
But you said unequivocally that the theory works and that the only problem is that the Fed has not been bold enough. You say that unemployment would go away of there was enough money injected into the system...but how about the jobs which have gone overseas? how about the fact that our educational system is not producing the kind of graduates that are needed for the kinds of jobs that are available? I know that there are plenty more systemic problems which contribute to unemployment that can't be fixed by a money bomb.

Did all of these systemic problems not exist in 2007, when unemployment was under 5%? There are things we should do to improve our long-term economic efficiency that are emphatically not as simple or easy as looser monetary policy, but they don't address the problem at hand: dealing with the massive crisis of unemployment that began in the wake of the 2007 financial crisis.

Quote:

Originally Posted by badhatharry (Post 235539)
There seems to be some disagreement about what Friedman would advise. Here's a contrary view:

Friedman’s main message for central banks was to maintain a monetary rule that kept the growth of the money supply constant. In his Newsweek column, “Inflation and Jobs” (Nov. 12, 1979), for example, Friedman emphasized that “unemployment is . . . a side effect of the cure for inflation,” so that if a central bank “cured” unemployment by inflating, it “will have unemployment later.” In other words, don’t try it.

The money supply isn't equal to the simple number of dollar bills that are in circulation. It's equal to the amount of money times the velocity of money. After all, if I keep $10 trillion in cash under my mattress and never spend it, that money won't have any effect whatsoever on how many dollars are chasing how many goods in the rest of the economy. And the financial crisis caused a dramatic decrease in the velocity of money as banks stopped lending and consumers started borrowing. That means that loose monetary policy to restore the money supply to where it was before the crash is perfectly consistent with the (single, out of context...Hey, I think I see a pattern!) quote you dug up.

Florian 12-29-2011 02:59 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Sulla the Dictator (Post 235518)
Indeed; the federal reserve bank subsidises federal spending by hiding the cost of borrowing. This is made possible because of the complicity of foreign buyers of American debt, who allow the fiction by purchasing Treasury bonds. This can continue without excessive inflation as long as the dollar is perceived as a shelter for people fleeing the euro. In other words, this is a one off (and temporary) situation that doesn't argue for the wisdom of the policy. If the ECB ever pulls of a hail mary, if the Chinese continue to spiral downward, or if the EU simply collapses, this all comes to an end. And you will have hyper-inflation.

For once we are in agreement sulla. Because the dollar is the world reserve currency, the US can do what no other country in the world can do: borrow from abroad at low interest rates despite a huge current account deficit and a sovereign debt in relation to GDP that is as bad or worse than that of any European country. As long as the Chinese, the Japanese, the Gulf Arabs and Europeans continue to recycle their excess dollars by purchasing treasuries, the FED can print money to its heart's content.

sugarkang 12-29-2011 08:57 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Parallax (Post 235531)
I have presented plenty of evidence above it is not an accusation it is just a matter of checking the record.

Okay, I'll reserve judgment as this doesn't concern me. However, I don't know Harry to be a liar. I do know that I've been called a liar multiple times by various people on here, with not a single person coming up with the slightest justification. And just by the deluge of agreement, this noise beats out truth most of the time.

I don't mind being called a liar. I don't mind people accusing other people of lying. However, I do mind people making false accusations.

sugarkang 12-29-2011 09:25 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Don Zeko (Post 235514)
If you want to have a conversation about this, why don't you tell me what you actually think and what's wrong with my argument instead of snottily asserting your intellectual superiority? Until you do that, I don't see much point in answering your random questions.

My questions weren't random. I'm sorry you thought my questions "snotty," but it seems that my crime was to overestimate your intelligence despite the fact that you habitually underestimate mine.

1. Paper money is fiat. Originally, paper served as receipts for gold. We had this conversation months ago. If the amount of gold stays the same, but the number of dollars goes up, then each dollar is worth less.

2. Since we went off the gold standard and the Saudis accepted dollars as if they were still backed by gold, and Asia accepted dollars as the trade currency, fiat became "as good as gold." The reason we aren't Weimar is because people accept our dollars. If the people believe the emperor wears clothes, it's true. Recent footage of North Korea is proof. People are just as delusional here; the difference is in the manifestations.

3. China sees that we're debasing our currency. And if that's not the reason for the recent move, then it knows that we're quite likely to do so. Our massive debt necessitates it. Do you think the agreement with Japan was just a coincidence? Dollar's fine! Nothing to see!

Of course, your news sources will tell you that China is a currency manipulator. Give me a fucking break. Economics is symmetrical. There are debits and credits, and rising values on one side means falling values on the other. The news only gives you half the information so you have to fill in the blanks. China holds $1 trillion of our debt. A strong dollar makes them richer. So, if they are weakening their yuan to boost exports, it also makes their US debt holdings worth less. This is all bullshit politics and you will suck on whatever teat Charles Foster Kane wishes upon you.

Try reading Jon Huntsman's China related Wikileaks.

miceelf 12-29-2011 10:17 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by sugarkang (Post 235548)
1. Paper money is fiat. Originally, paper served as receipts for gold. We had this conversation months ago. If the amount of gold stays the same, but the number of dollars goes up, then each dollar is worth less.

Isn't gold also fiat? Why would the worth of dollars have to be measured in how much gold it can buy rather than (say) how much bread or oil, or gunpowder?

Ocean 12-29-2011 10:36 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by miceelf (Post 235550)
Isn't gold also fiat? Why would the worth of dollars have to be measured in how much gold it can buy rather than (say) how much bread or oil, or gunpowder?

Of course, you can change the standard, but I guess the idea about gold is that it's a precious metal, in limited amounts, it can't be made or destroyed (although you can hide it or find hidden unexploited sources).

But it's an interesting question. I think there have been many other alternatives considered over the years, but I'm not sure what it would take to change to a different standard.

Here's an article.

badhatharry 12-29-2011 10:42 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Don Zeko (Post 235542)
Did all of these systemic problems not exist in 2007, when unemployment was under 5%? There are things we should do to improve our long-term economic efficiency that are emphatically not as simple or easy as looser monetary policy, but they don't address the problem at hand: dealing with the massive crisis of unemployment that began in the wake of the 2007 financial crisis.

I agree that these problems existed in 2007. But I do not agree that it is clear that looser monetary policy is the answer for this either. Although I am not advocating any of these, there have been other solutions offered which make at least as much sense...eliminating the minimum wage, getting rid of a lot of regulations, getting rid of obamacare, which is an onerous cost to employers.

As far as the financial crisis...it makes perfect sense to me that there has been a catastrophic result. From my perspective everyone has lost trust in our big systems...government and financial. This is bound to take time to sort out.

Quote:

The money supply isn't equal to the simple number of dollar bills that are in circulation. It's equal to the amount of money times the velocity of money. After all, if I keep $10 trillion in cash under my mattress and never spend it, that money won't have any effect whatsoever on how many dollars are chasing how many goods in the rest of the economy. And the financial crisis caused a dramatic decrease in the velocity of money as banks stopped lending and consumers started borrowing. That means that loose monetary policy to restore the money supply to where it was before the crash is perfectly consistent with the quote you dug up
So a question...do they know the the amount of money that was there before the crash? Have they injected that amount back more or less?

I know that some think it's a bad thing that creditors are holding onto their money, but couldn't there be a good, animal spirity reason for this hoarding (as some call it). Shouldn't we let this thing sort out naturally and perhaps all the fiddling is just postponing the day that the sorting out will commence?

Quote:

single, out of context...Hey, I think I see a pattern!
Just can't help yourself, can you? There was an entire article attached to that one, out of context quote. But it wasn't written by Paul Krugman so you probably would be interested.

badhatharry 12-29-2011 10:48 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by sugarkang (Post 235548)
This is all bullshit politics and you will suck on whatever teat Charles Foster Kane wishes upon you.

rosebud

http://www.blogonauts.com/eats-the-w...oster-Kane.jpg

Parallax 12-30-2011 01:02 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by badhatharry (Post 235539)
But you said unequivocally that the theory works and that the only problem is that the Fed has not been bold enough. You say that unemployment would go away of there was enough money injected into the system...but how about the jobs which have gone overseas? how about the fact that our educational system is not producing the kind of graduates that are needed for the kinds of jobs that are available? I know that there are plenty more systemic problems which contribute to unemployment that can't be fixed by a money bomb.

Right now the unemployment is 9% how much of that do you think is structural problems you mentioned? And may I remind you that this level of unemployment is a relatively new thing and not something chronic.

In our current low inflation environment the Fed can create jobs by printing money: it will discourage savings and encourage investment. If it is done sufficiently enough everyone who wants to will get to work. That is also why free trade agreements will have no impact on unemployment, which is a variable the Fed decides on.

Quote:

There seems to be some disagreement about what Friedman would advise. Here's a contrary view:

Friedman’s main message for central banks was to maintain a monetary rule that kept the growth of the money supply constant. In his Newsweek column, “Inflation and Jobs” (Nov. 12, 1979), for example, Friedman emphasized that “unemployment is . . . a side effect of the cure for inflation,” so that if a central bank “cured” unemployment by inflating, it “will have unemployment later.” In other words, don’t try it.


And here is Scott Sumner's view of what Friedman would advise:

Friedman thinks near-zero interest rates are a sign that money has been too tight. And he suggest that QE is the proper response.


It seems to be pretty popular to play "What would Milton Friedman do?"

As Keynes said:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

I like this one too:
"Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities."
People may disagree about details but I think the verdict is that Friedman would advocate more easing not less (same as Hayek by the way). The money bomb was a solution he gave for the 1930s depression era. Moreover the fixed monetary rule is very close to Sumner's NGDP targeting which would require massive easing on Fed's part since in the past 3.5 NGDP has grown about 4% in total where as with a 5% annual target it should have grown about 18%.

More easing will mean less pain among those unemployed. People who have large savings will be slightly inconvenienced in the sense that they have to look for better investments than parking their cash. I say that is a small prize to pay to get out of this slump.

Parallax 12-30-2011 01:03 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by sugarkang (Post 235546)
Okay, I'll reserve judgment as this doesn't concern me. However, I don't know Harry to be a liar. I do know that I've been called a liar multiple times by various people on here, with not a single person coming up with the slightest justification. And just by the deluge of agreement, this noise beats out truth most of the time.

I don't mind being called a liar. I don't mind people accusing other people of lying. However, I do mind people making false accusations.

Who is Harry?

badhatharry 12-30-2011 09:44 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Parallax (Post 235561)
Right now the unemployment is 9% how much of that do you think is structural problems you mentioned? And may I remind you that this level of unemployment is a relatively new thing and not something chronic...

More easing will mean less pain among those unemployed. People who have large savings will be slightly inconvenienced in the sense that they have to look for better investments than parking their cash. I say that is a small prize to pay to get out of this slump.

I'm sure you are aware that my understanding of economic theory is pretty basic if it exists at all. Although, since I'd imagine the vast majority of folks in this country know ziltch about how the economy is supposed to work and the theories about it, I guess I'm at least a bit ahead of most. But when you ask me how much of unemployment is systemic, I say How the hell should I know?. But I'm sure there's some kind of graph made up by some economist which shows exactly how much unemployment is systemic. And then there's another one from some other economist which disagrees with the first graph.

HOWEVER! I think that the current economic challenges we are facing have been a long time coming and they are made up, not just of the amount of cash in circulation. a) We have a pretty shitty educational system that isn't doing a very good job of preparing our youth and no one knows what to do about it. b) We have entire classes and generations of youth growing up in broken families with no father and no one knows what to do about it. c) We have life long pensions being paid out to public employees who aren't contributing to the system while their municipalities and states and the Federal government are going broke and the answer is to tax the rich. d) Ever since Enron, we have lost faith in the honesty of those with great power and wealth. We may have been deluded about their honesty before, but now the corruption in high places is on display for everyone to see and no one goes to jail. John Corzine just doesn't know where the money went. He was too busy.

These are just the tip of the iceberg and include more and I'm not aware of an economist who has graphed these phenomenon. I don't believe that printing money will be the kind of solution that is needed but I suppose it may get us by for a while. Although I realize I am naive and this sort of thing never happens... I believe in natural consequences and that they are the only way to right the ship. The banks and auto makers should have never been bailed out, nor should people who bought homes they couldn't afford.(This hasn't happened yet but is being talked about as well as forgiving ill advised student loans.) If we keep propping up failed enterprises we are building on sand. But I guess that's the way of the world these days. Do what's easy...do what's expedient...why suffer the consequences when you can paper them over?

Of course all this presumes that QE actually works as advertised.

sugarkang 01-02-2012 08:45 PM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by miceelf (Post 235550)
Isn't gold also fiat? Why would the worth of dollars have to be measured in how much gold it can buy rather than (say) how much bread or oil, or gunpowder?

Because for whatever reason, gold has been recognized as valuable by people all around the world. Paper is just paper. Money doesn't have to be measured in terms of gold and, in fact, I don't want it to be. As much as Ron Paul shouts about gold, I don't believe he wants that, either.

Paper money can be "backed" by something substantial. Hell, we could probably have it backed by Fannie/Freddie mortgages. Right now, nothing controls the money except our trust in the Federal Reserve. I'm not an "End the Fed" crank, either. But to call for an audit of the Fed is totally legitimate. All of this is missed because Kane doesn't want you to hear it. And it's been clearly shown that Kane always gets his way.

Don Zeko 01-03-2012 11:33 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by sugarkang (Post 235928)
All of this is missed because Kane doesn't want you to hear it. And it's been clearly shown that Kane always gets his way.

Yes, it's all a conspiracy. Those rich bankers are afraid of your bold truth-telling. And above all else, there's absolutely no chance that this view is ignored because it's mind-numbingly stupid and rejected by basically the entire economic profession. Just for kicks, here's my favorite gold standard graph, showing different country's GDP growth in the wake of the Great Depression, with the point where they left the gold standard clearly marked:

http://2.bp.blogspot.com/_INy8vWv7G0...+revisited.png

sugarkang 01-04-2012 12:55 AM

Re: Katherine's pants are on fire
 
Quote:

Originally Posted by Don Zeko (Post 235990)
Yes, it's all a conspiracy.

Nice try. Kane is a substitute for the entirety of media; that's why I used a fictitious character and not the Bilderbergers. And why try to turn me into a gold bug? I've really overestimated your intelligence.


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