MetaFilter posts tagged with Economics and debt

Smaller Wallets, Larger Households?

The Whelk — Fri, 12 Apr 2013 09:54:43 -0800

A dozen ultraleft voluntarists arguing about shower schedules is a noise complaint; 120,000 downwardly mobile yuppies doing it out of necessity is a substratum. The material realities of declining wages, ballooning debt, and skyrocketing rents at the core of the neoliberal city have conspired to herd young people into unprecedentedly dense, poor, and precarious kinds of living arrangements. - Andrew Fogle on how the economic crisis is changing how people live together.

Incommensurable values

kliuless — Mon, 25 Mar 2013 20:42:30 -0800

Economists and the theory of politics - "why unions were often well worth any deadweight cost" abstract:

The standard approach to policymaking and advice in economics implicitly or explicitly ignores politics and political economy, and maintains that if possible, any market failure should be rapidly removed. This essay explains why this conclusion may be incorrect; because it ignores politics, this approach is oblivious to the impact of the removal of market failures on future political equilibria and economic efficiency, which can be deleterious. We outline a simple framework for the study of the impact of current economic policies on future political equilibria — and indirectly on future economic outcomes. We then illustrate the mechanisms through which such impacts might operate using a series of examples. The main message is that sound economic policy should be based on a careful analysis of political economy and should factor in its influence on future political equilibria.

viz. What kind of mass movement with truly powerful institutional support can take the place of unions? - "I agree with just about everything they say about the value of unions, but I also feel forced to acknowledge that it doesn't matter. As a truly powerful mass movement, unions are dead and they aren't coming back. This has left a gaping hole in American politics: Corporations and the rich continue to have enormous institutional power, while the working and middle classes have almost no one to speak for them. I figure that filling this hole is the most important problem the left has to address over the next decade or so. Unfortunately, I don't know how." cf. The Tyranny of Political Economy - "In reality, our contemporary frameworks for political economy are replete with unstated assumptions about the system of ideas underlying the operation of political systems. Make those assumptions explicit, and the decisive role of vested interests evaporates. Policy design, political leadership, and human agency come back to life... Expand the range of feasible strategies (which is what good policy design and leadership do), and you radically change behavior and outcomes." also btw...

Markets in almost nothing - "One of the first things I noticed when I started studying economics was that goods that can't be bought and sold are basically ignored."
Wealth and Motivations for Saving - "teach the public more about how wealth builds over time"
The Supply and Demand for Safe Assets - "Where do safe assets come from? Empirical evidence suggests that the private sector creates more near riskless assets when the supply of government debt is low and reduces privately-created near riskless assets when the supply of government debt is high."
The safe asset shortage - "Safe debts – or what is often called information insensitive assets, as they do not suffer from the types of financial frictions that are characteristic to other financial assets – play a major role in facilitating transactions for institutional investors. And, as we have learned in the recent years, they also play a major role in triggering financial crises when they lose their safety status and turn into information sensitive assets."
GDP, welfare and the rise of data-driven activities - "The worry today is not that investment in technology might not be as productive as we thought (the so-called computer paradox), but the fact that the economic value of the fast growing consumption and production of online data may not be adequately captured in official statistics."
Uncle Sam, venture capitalist - "AMERICA, like much of the world, is facing a crisis of innovation. Its roots rest in several significant challenges: an awareness that rapid technological progress and growth will be crucial in weathering demographic headwinds and the threat of climate change among them. But there is very little consensus in Washington on just what the government ought to be doing to help."
What Google Reader tells us about banking and nationalisation - "Which is why the government taking charge of a service like RSS for the benefit of the public good — or for that matter providing the country with universal internet or high quality media — should not necessarily be treated with suspicion or mistrust. In the civilized world there is a perfectly reasonable way to ensure arm's length detachment and to protect such institutions from the political meddling of government."
If You Can't Fix It, You Don't Own It - "Who owns our stuff? The answer used to be obvious. Now, with electronics integrated into just about everything we buy, the answer has changed. We live in a digital age, and even the physical goods we buy are complex. Copyright is impacting more people than ever before because the line between hardware and software, physical and digital has blurred. The issue goes beyond cellphone unlocking, because once we buy an object — any object — we should own it. We should be able to lift the hood, unlock it, modify it, repair it... without asking for permission from the manufacturer. But we really don't own our stuff anymore (at least not fully); the manufacturers do. Because modifying modern objects requires access to information: code, service manuals, error codes, and diagnostic tools."

like think about sovereign debt -- that is safe assets -- more as a national equity: [1,2,3,4,5]

The US national debt is in truth - like all national debts - a complete and surreal fiction: it is a national equity, the greater part of which is interest-bearing either as claims over public or private revenues. At least two-thirds of the quasi tax credits created by banks came into existence as mortgage loans, and are therefore backed by claims over the productive value of the US land and buildings which they fund. Much of the rest consists of claims over the value of US assets which fund the productive capacity of US corporations. The remainder - which provides the credit necessary to finance the circulation of goods and services in the US - is based upon the magnificent productive capacity of the US people. Only by liquidating US Incorporated could this National Equity ever be redeemed... There is no shortage of dollars because every dollar's worth of productive capacity - public or private; productive people or productive assets - in the US is the capacity to issue a dollar credit, which reflects the increase in the US national wealth which underpins the US national equity. President Barack Obama and his government should get busy creating national equity by instructing the Fed to create and issue the necessary finance for the creation of a new generation of US infrastructure; the transition to a low carbon future which the US can, and should, be leading; and in increasing the capacity of the US people to do so.

(or how the government budget constraint is different than a household's or corporation's -- namely that they can tax and can't be liquidated, unless extraordinarily mismanaged or conquered, I guess...)

Japan

kliuless — Thu, 27 Dec 2012 15:56:07 -0800

What's Going On In Japan? "Really Japan is quite a remarkable case, since neither fiscal nor monetary policy seems to be working to achieve the anticipated results. This year Japan will have a fiscal deficit of around 10% of GDP and gross government debt will hit 235% of GDP, yet the country is still struggling to find growth. Instead of reiterating old dogmas (whether they come from Keynes or from Hayek) more people should be asking themselves what is happening here. This is not a simple repetition of something which was first time tragedy and is now second time tragedy, it is something new, and could well be a harbinger for more that is to come, elsewhere. Oh, why oh why are economists not more curious?" Time to Japanic? "About half of the Japanese government's annual budget now goes to pensions and interest payments... With projected annual budget deficits between 7 and 10 percent of GDP, Japanese savers are essentially tendering their savings in return for newly issued government debt, which is not backed by hard assets. It is backed only by an aging, shrinking population of taxpayers... A crisis in Japan would most likely manifest as a collapse of confidence in the yen: At some point, Japanese citizens will decide that saving in any yen-denominated asset is not worth the risk. Then interest rates will rise; the capital position of banks, insurance companies, and pension funds will worsen (because they all hold long-maturing bonds, which fall in value when rates rise); and fears of insolvency will surface..."

If Japan doesn't change course, it will have a major crisis within the next decade. If. But what people need to understand is, the Japanese government does have the power to avert a crisis. It is not inevitable. There is one way that the crisis can definitely be averted: Raise taxes. Japan's fiscal woes can be boiled down to one sentence: Japan has European levels social spending and European levels of aging with American levels of taxation. But this could change; if Japan raised taxes to European levels, crisis would be instantly averted. According to analyses I've seen, this would require raising Japan's taxes from their current level of 32.5% of GDP to somewhere between 40% and 50% of GDP. That's comparable to France or Sweden. Painful, but not impossible. Now for the rumor (rumor always being a large component in Western analyses of Japan). My sources at the Bank of Japan and Ministry of Finance tell me that domestic Japanese investors are betting that, after all the grumbling and fighting and ending of political careers, Japan's government will suck it up and raise taxes. This, my shadowy sources say, is why pension funds are still willing to put the Japanese people's money into JGBs. But this story is not really outlandish. It's similar to what we're observing in America right now. U.S. borrowing is at all-time highs, but demand for Treasuries shows no sign of flagging, and most of that demand - more than in the past - is from domestic U.S. investors. Yes, we have shown a reluctance to raise taxes - witness the apocalyptic debt ceiling fight from last year. But if the public really thought the U.S. government was willing to default, domestic Treasury buyers would be heading for the exits. That they are not heading for the exits probably indicates that they believe that when push comes to shove, the U.S. government will suck it up and raise taxes. There are signs that the Republicans are quietly recognizing the necessity of this. At this point, it's just a fight between Democrats and Republicans to see who takes the fall for raising taxes - that's what the "fiscal cliff" is really all about. Japan seems to be in a similar situation. It is not really unusual or outlandish at all. Everyone in the country still seems to believe that the government will continue to function. The day that that belief falters - or is proven wrong by main force, when interest payments swamp the primary budget - is the day that Japan collapses (the same goes for the U.S.). But if Japan's government is less dysfunctional than the often skittish Western press believes, that day will never come. (Anyway... oh yeah, I did mention that there might be two ways out of Japan's fiscal trap, didn't I? The other way is to use monetary policy to create negative real interest rates for a very long period of time. If that can be done in a stable way (without accelerating inflation) and if stable growth persists, then Japan can use an "inflation tax" to erode the value of its government debt instead of an actual tax. Econ bloggers (and commenters), who tend to believe that central banks can hit any NGDP target they want, will probably advocate this "solution"...)

Is Japan set to lead after 20 years of torpor?

But while a revolution is under way in the attitude to economic targets, the new tools and instruments required to hit these targets have hardly begun to be discussed. The unemployment and GDP targets suggested by Bernanke and Carney are empty promises in the absence of policy tools that could convincingly boost jobs and growth in the present deflationary environment. Which is where Japan comes in. No other economy has (yet) suffered anything like Japan's 20 years of economic stagnation. It would not be surprising, therefore, if truly radical measures to deal with deflation were pioneered in Japan. Outside Japan, no central banker or politician has yet gone beyond pumping money into bond markets through quantitative easing. And nobody has suggested, at least officially, that central banks should directly lend to governments or finance one-off tax cuts.

This election may be different in Japan

The Japanese election on 16 December is attracting intense interest in the global financial markets. In part, this is because the LDP's election campaign, led by Mr Shinzo Abe, is based on forcing an entirely new monetary strategy on the Bank of Japan, with obvious consequences for the yen and the equity market. On top of that, the Japanese election is the first in a major democracy where the role and mandate of the central bank has taken centre stage in a national political campaign. Is this the shape of things to come in other democracies facing low growth, subdued inflation and rising government debt ratios? Politicians in many other developed economies will be watching the Japanese experiment with rapt attention... As the population ages, the savings ratio will fall further, and the government will be forced to look overseas for the financing of its rising debt burden. An important recent study by Takeo Hoshi and Takatoshi Ito concludes that this is likely to result in a government debt crisis well within a decade. Markets are forward looking, and will see this coming well in advance. Japan has defied the debt crisis doom-mongers for more than a decade now, but its long term deteriorating trends on demography, government debt and export performance cannot be held at bay indefinitely. Shinzo Abe has concluded that the only way out of this dilemma is to force the Bank of Japan to raise the inflation rate and (though he does not say this specifically) push the yen down. Unsterilised purchases of foreign assets may be the only way the central bank can do this. Of course, there are severe risks with the Abe programme. If inflation expectations rise, bond yields may follow suit, undermining the capital base of the financial sector which holds all the bonds. But the Japanese political wind is now blowing strongly in the direction of co-opting the central bank as an integral arm of the government. If Mr Abe does not do it, someone else almost certainly will.

A Conversation with Ray Dalio

I give the example of Japan because when you're looking at the United States, the Japan example, I think, is a very good example. We have -- Japan has total debt-to-GDP of about 500 percent, and it has government debt-to-GDP of about 270 percent. So it is way, way, way more leveraged, in a sense, than the United States is. And so then the question is, as we go through this, the magnitude of monetization. You have to go back to say, who are the buyers of the debt and what are the motivations? There is a "greater fool" theory. The "greater fool" theory can go on for a really long time. The timing of when that shift takes place is very much dependent on that. So as we look in terms of, let's say, the United Sates, certainly it's the case -- and in Japan -- certainly it's the case that we can't support these kinds of debt. Anybody with a sharp pencil will know that we're not going to be able to support that. That doesn't mean there won't be adequate buy, just like in Japan's case. You can have plenty of buy. You provide enough liquidity, and the question is, what are the choices?

Rational astrologies: "The process by which rational astrologies are chosen is the process by which the world is ruled. The United States is the world's financial power because it is conventional to pretend that the US dollar is a safe asset, and so long as it is conventional it is true and so the convention is very difficult to dislodge. Economics as a discipline has not performed very well from the perspective of commonsensical outside observers like the Queen of England. But the conventions of economic analysis are the rational astrology of technocratic government, and decisions that can't be couched and justified according to those conventions cannot be safely taken by policy makers. Policy is largely a side effect of the risk-averse behavior of political careerists, who rationally parade their adherence to this moment's conventions as enthusiastically as noblemen deferred to pronouncements of a court astrologer in an earlier time. We can only hope that our era's conventions engender better policy as a side-effect than attention to the movement of the stars. (As far as I am concerned, the jury is still out.) But it is not individuals' independent judgment of the wisdom of these conventions that guides collective behavior. Our behavior, and often our sincere beliefs, are largely formed in reaction to the terrifying accountability that comes with making consequential choices unconventionally. Our rational astrologies are at the core of who we are, as individuals and as societies." Central banks make an historic turn

When the economic history of the 21st century is written, September 2012 is likely to be recorded as a defining moment, almost as important as September 2008. This month's historic events – Ben Bernanke’s promise to buy bonds without limit until the U.S. returns to something approaching full employment, Angela Merkel's support for the European Central Bank bond purchase plans and the Bank of Japan's decision to accelerate greatly its easing program – may not seem earth-shattering in the same way as the near-collapse of every major bank in the U. S. and Europe. Yet the upheavals now happening in central banking represent a tectonic shift that could transform the economic landscape as dramatically as the financial earthquake four years ago. To see why, we must go back in history 40 years, to the early 1970s. Maintaining full employment was at that time regarded as the main objective of all economic policy, and this had been the case for roughly 40 years, since the Great Depression. But by the early 1970s, voters had enjoyed decades of more or less full employment and were starting to focus on inflation rather than depression as the main threat to their prosperity. Economists and politicians were responding to this shift. Milton Friedman led a monetarist "counterrevolution" against the Keynesian obsession with unemployment, designing new economic models to challenge the Keynesian view that market economies were naturally prone to long-term stagnation. By restoring the pre-Keynesian assumption that market economies were automatically self-stabilizing, the monetarist models produced two powerful policy prescriptions directly opposed to the Keynesian views. First, the monetarists insisted that price stability, rather than full employment, was the only legitimate target for monetary policy and government macroeconomic management more generally. Second, they argued that central bankers should not accept any direct responsibility for unemployment, since sustainable job creation depended solely on private enterprise – full employment would be achieved automatically if inflation were conquered and market forces were allowed to operate freely, with the minimum of government interference or union constraints. A few years later, Margaret Thatcher and Ronald Reagan turned Friedman's intellectual revolution into practical politics. On top of its economic impact, monetarism had huge ideological effects by absolving government macroeconomic management of any direct responsibility for jobs and instead attributing unemployment to regulations, unions, welfare policies and other market distortions.

Japan, Corporate Profits, Kalecki and Living Standards - "Saying that the government's deficit is the non-government's surplus is only a slice of the overall story and really tells us very little about the overall health of the economy. It's more important to understand how domestic investment plays the primary role in how increases in living standards are generated." also btw... -Effects of QE3 -A time of hoarding and inflation fears, 1930s edition -When Banks Were Able to Print Their Own Money, Literally [1,2,3] -Is a revolution in economic thinking under way? [1,2,3] -Judge Posner's Remarkable New Ideas About Taxation, Regulation, and the Constitution [1,2,3] -Robots and Liberalism [1,2,3] -Japan's women hold key to growth

"how we learned to stop worrying and embrace the abstraction"

the man of twists and turns — Sun, 16 Dec 2012 06:43:00 -0800

A Brief History Of Money Philip Pilkington: Debt And Decay And The Myth Of Liberal Individualism

Money, for example, is a mythic or fetish object and most people know that it is ultimately just bits of old paper and metal. But in our day-to-day intercourse we treat money as a sacred object with mythic properties – we defend it, hoard it, accumulate it. And yet, at some level we know that it is ultimately just bits of old paper and metal. In this very real sense we repress the reality of money – we render it unconscious – in order to allow it assume its mythic and social function. If we did not do this, and instead simply treated it as scraps of paper and lumps of useless metal, the entire social economy would collapse.

Escape From Minus World

By fixing some daily element of human relations into a tradable thing banks made it plausible to imagine one day being freed from those relationships. The central storehouse became both a crude symbol of security — grain insured by gods and masonry — and its general currency an icon of hope for people who might someday free themselves from the dead weight of their neighbors.

The Impact Of Money On An African Subsistence Economy (PDF)

Fiscal-Cliff-Diving

the man of twists and turns — Sat, 01 Dec 2012 07:19:08 -0800

There's been a lot of talk in the US media about the "Fiscal Cliff" and the "Grand Bargain" What are they?

The "fiscal cliff" is a confluence of three legal changes taking effect Jan. 1: the expiration of a payroll-tax cut, the expiration of the Bush-era tax cuts, and the advent of mandatory spending cuts known as "sequestration."

Fiscal Cliff 101: 5 Basic Questions Answered. What's Happening: Fiscal Cliff Explained Not all are convinced of the necessity of Congress' self-created problem: 6 Reasons why this Fiscal Cliff Is A Scam. Large numbers get thrown around, making it hard to see what exactly is at stake. How did we get here? Fiscal Cliff Reality Check: Are US Taxes Low Or High? "It’s simply a fact that the fiscal cliff was created in response to GOP threats to force the U.S. government to default on its obligations." Or did we already go over the cliff years ago? Who is involved? President Obama; Speaker of the House John Boehner and House Republicans; Minority Leader Nancy Peolsi and House Democrats include the Gang of Six and the Progressive Caucus. Even the CEO of Goldman Sachs has weighed in. The "Fix the Debt" group of is concerned about the growth of deficit spending, while 'the Left is divided' on the Grand Bargain - or the Great Betrayal. What are the sides? The White House's Fiscal Cliff Proposal, delivered by Treasury Secretary Tim Geithner which Speaker Boehner calls "not a serious proposal." Obama's opening bid and the Republican response is all part of the negotiations. The White House plan "is a start, not an end." Obama's proposal appears to be a break from the negotiating in the middle path that he has taken before, though Robert Reich ( who recommended aiming high) thinks not much has changed. And Republicans have yet to make any proposals of their own, preferring to follow the President's lead. The Economist has a brief summary. Paul Krugman characterizes most of those calling for deficit reduction "hawks and hypocrites". And its always good to remember that elections have consequences.

The Long Treacherous Climb Up The Fiscal Cliff. The so-called fiscal cliff is one of those rare issues where everyone has an incentive to predict the worst. Barack Obama thinks it will force Republicans to accept higher taxes on the rich, Republicans think they can back him into a corner and force him to cave to their demands as they did two years ago, and businesses and consumers are wary that the still-fragile economy may take a nosedive. Figuring out how this will play out is Washington’s favorite parlor game right now, so let’s play.

What will happen now? Obama pushes for stimulus in fiscal cliff deal. 10 easy way to avoid the fiscal cliff. Three Votes Could Make Or Break Fiscal Cliff Deal. Lobbys, like the AARP, the IFA, and various unions, are gearing up. One paper predicts 'lower GDP and higher unemployment' if no deal is struck. The Weekly Standard says Obama's Plan Will Raise Taxes On Small Businesses, Lower Them For Corporations. The White House is apparently worried there won't be a deal by 2013, since prominent politicians like Senator Alan Simpson and Senator Erskine Bowles say falling off fiscal cliff is 'likely.' But perhaps the President should reassure Americans they will survive the fall. But what does the public really want? To "cut military waste, not charitable deductions"? How Obamacare Came To The Fiscal Cliff and The Grand Cynicism Of The Grand Bargain. A failure to reach a bargain may spur 'bond vigilantes' to move, but that may not be a bad thing. Will the Romney-Ryan plan live on? Perhaps a Obamney plan? Of course, the military-industrial complex will be largely spared. What does this mean for you? The Congressional Budget Office outlines options and consequences. Could the 'Fiscal Cliff' Push The US Into A Recession?. But if entitlement programs are your top priority, the fiscal cliff is your friend. 12 Ways the "Grand Bargain" could screw the poor. The mortgage-interest deduction could be on the table. City Journal writes: Localities should worry less about Washington’s spending cuts than about how their own state governments handle them. Costco is paying a special dividend, part of 10 tax moves to make now. And maybe we'll get some tax simplification too. Disney's Bob Iger's position has spawned a hashtag: 15 Best Star Wars Fiscal Cliff Tweets

Buying useful things, like roads and universities and health care and solar energy and spaceships, should be better stimulus than fighting wars.

The Whelk — Sun, 30 Sep 2012 08:34:17 -0800

"Liberals have not always been very good at communicating why liberalism works. There’s many reasons for this, but part of it is that it can be hard to defend the obvious from an absurd and deceptive attack. For half a century you had to be a crank to oppose what Roosevelt accomplished; liberals got out of the habit of arguing for their beliefs. I hope this page will help. Liberals don’t need to apologize for their vision of how American society should work. Liberalism saved American capitalism and democracy, defeated Naziism, created a prosperous middle class, and benefited every sector of society, from the back streets to Wall Street. " Mefi's own Zompist (previously) on Why Liberalism Works.

sovereignty and taxation

kliuless — Fri, 08 Jun 2012 14:46:51 -0800

David Graeber: Of Flying Cars and the Declining Rate of Profit (via)

Mandel had argued that humanity stood at the verge of a "third technological revolution," as profound as the Agricultural or Industrial Revolution, in which computers, robots, new energy sources, and new information technologies would replace industrial labor – the "end of work" as it soon came to be called – reducing us all to designers and computer technicians coming up with crazy visions that cybernetic factories would produce. End of work arguments were popular in the late seventies and early eighties as social thinkers pondered what would happen to the traditional working-class-led popular struggle once the working class no longer existed. (The answer: it would turn into identity politics.)

Daron Acemoglu: The world our grandchildren will inherit - "The last century has been the age of political rights. Never in our history have so many people taken part in choosing their leaders and having a say in how their societies are governed. To be sure, this unparalleled expansion of civil and political rights remains incomplete. Yet it is profoundly significant, not only due to its transformative impact on the lives of billions, but also because so many other phenomena in recent history are connected to it. The rights revolution is intertwined with diverse trends such as the development of technology; sustained yet uneven economic growth; a general decline in war within recent decades; and a population explosion placing new pressures on our resources and environment." Anatole Kaletsky: A New Capitalism

Seabright engages in some fascinating speculations on anthropology and biology. He posits a form of "group selection" – natural selection operating within entire societies rather than individuals... His conclusion – which is quite pessimistic – is that over millions of years humans have evolved to operate quite successfully in limited and well-defined groups. But we're now moving into a world where the social group that is relevant to the future success, maybe even survival, of humanity is no longer a tribe, a city or a nation. It is the world as a whole. Once humanity is operating on a global level, people have to cooperate on a far broader scale, and the mechanisms for cooperation which have evolved over thousands of years may break down. He gives the financial crisis and the inability of nation states to control it as one example of this breakdown. Others are climate change, nuclear proliferation, energy depletion and environmental destruction. These are all global challenges for which cooperative social mechanisms have not had time to evolve... If you go back to the roots of the monetarist revolution in the 1970s, you find that all its conclusions depend on the assumption that profit-motivated individuals operating in free and competitive markets will make the best possible decisions about the allocation of resources. Frydman and Goldberg explain that this claim of optimal decisions by the markets is simply untrue, unless we also assume that perfect knowledge of reality is possible, at least in theory – and not just about the present, but about the forces shaping the future. If such perfect knowledge does not exist, even in theory, then the claims about self-stabilising markets at root of most economic policy since the early 1980s are false. And if perfect knowledge did exist, then ironically Communist central planning would work as well as a market system. All you would need is a computer large enough to take into account all this knowledge, and it would be able to plan the economy. The reason you need markets is precisely because it's impossible to know what the future will hold. Therefore, markets are a system of experimentation – and they will only work properly if non-market decisions, made by regulators and ultimately by politicians, set some bounds within which market prices can be allowed to freely fluctuate.* This is a very important and profound insight which will ultimately undermine not just the structure of academic economics, but also the way in which people think about the relationship between markets and government.

Capitalism's risk manager: The philanthropic complex - "We envision a society that values more of what matters – not just more... a new emphasis on non-material values like financial security, fairness, community, health, time,** nature, and fun." The Progressive Consumption Tax - "By pulling a simple tax lever, we could reduce the costs of growing income disparities, while at the same time freeing up several trillion dollars of additional resources each year – more than enough to pay down the federal debt and rebuild our crumbling infrastructure – all without requiring painful sacrifices from anyone." Beyond scarcity: The parable of water - "Yet if water abundance is great enough people will look around and see there is no scarcity. They will see they are better off than they have ever been. Eventually, they will understand all the scarcity is artificial. They will also realise they have no need for receptacles, because receptacles have no value. You can live directly off the source. As those with receptacles adjust to the realisation that they have no advantage over those with no receptacles, there is a crisis in the old system. Ultimately, however, more people are provided with access to a constant supply of water than ever before, and on equal terms. The crisis is only for those who used to have an advantage in the system." The end of artificial scarcity - "Without something like a war — or an extra-terrestrial pursuit*** — the system can only be rebalanced by a boom in credit supply and/or artificial scarcity enforced by manufacturers themselves." Debunking goldbugs - "Unlike the gold system, which asks you to put your faith in an inanimate shiny object, a paper 'fiat' system asks you to put faith in relationships, in your neighbours, your community. It asks you to believe that society will honour its debts because it doesn't make sense for it not to – largely because it is just as dependent on you honouring your debts to it, as you are on it honouring its debts to you. It's a system based on quid pro quo relationships. A symbiosis based on trust." Gold's Anti-Social Behaviour Order - "So while gold may be a workable underlier for a redemption option, this doesn't change the fact that at the heart of the system it is faith and faith alone which holds everything together. Whether that faith is reflected in a sovereign's ability to manage the economy on behalf of the group, in the sovereign's guarantee to honour a gold option, or faith in the gold god himself... faith is the constant. Not gold. What's more, while gold encourages anti-social behaviour and hoarding in individuals, a fiat-based system encourages the very opposite: sharing, distribution, collaboration and cooperation." Space opera, beyond finance edition

That includes the notion that in the future there will likely be more currencies not less. "Perhaps even billions of currencies," he says, sketching out a world where every individual and every human network boasts its own unit of exchange. He believes that city-states will become more relevant than nations. And that communities and networks will take control over their own units of account. Virtual currencies such as BitCoin or Facebook credits or others not yet invented, meanwhile, could well start to rival established state-issued money both in private exchange and international trade. And community-led Peer2Peer networks will run alongside more established currency systems. If you thought exchange rates might pose a problem here, Park says technology will provide us with something akin to a "universal translator" for establishing relative values. Real-time and cost efficient. The concept of pricing, meanwhile, will likely to be turned on its head entirely. That's because in the future Park believes prices will become a function of who you are just as much as broader supply and demand fundamentals. One reason why reputation tracking will once again become critical to business, investment and even daily exchange of goods. Just like when a gentleman's word used to be his bond.

previously :P --- *gzip the universe: "I feel we look at matter and information and we see the dichotomy because it's semiotcratic to do so. Just as we look at particles and see fermions (things that can't be in the same place at the same time) and bosons (things that can be so). Perhaps it's just an artefact of our measuring equipment. It's all string vibrations, further down. And rooms and corridors. Buildings and streets (tell that to those in Catalhoyuk!). And objects and textures, of course, animate/inanimate, background/attended. Mesh/tree, mesh-becoming/tree-becoming, branching/canalising, push/pull. But we've talked about that, or we will. We've created an arboreal world, we've also been created. We can't assign causality, only proximity. Does it makes sense to talk about any thing if everything is every thing?" or look at the world in terms of affordances, viz. Hans Rosling: Religions and babies **Paul Ford: 10 Timeframes - 'we're asking people to spend their heartbeats on things we make'

The time you spend is not your own. You are, as a class of human beings, responsible for more pure raw time, broken into more units, than almost anyone else. You spent two years learning, focusing, exploring, but that was your time; now you are about to spend whole decades, whole centuries, of cumulative moments, of other people’s time. People using your systems, playing with your toys, fiddling with your abstractions. And I want you to ask yourself when you make things, when you prototype interactions, am I thinking about my own clock, or the user’s? Am I going to help someone make order in his or her life, or am I going to send that person to a commune in Vermont? There is an immense opportunity—maybe it’s even a business opportunity—to look at our temporal world and think about calendars and clocks and human behavior, to think about each interaction as a specific unit, to take careful note of how we parcel out moments. Whether a mouse moving across a screen or the progress of a Facebook post through a thousand different servers, the way we value time seems to have altered, as if the earth tilted on its axis, as if the seasons are different and new. So that is my question for all of you: What is the new calendar? What are the new seasons? The new weeks and months and decades? As a class of individuals, we make the schedule. What can we do to help others understand it? If we are going to ask people, in the form of our products, in the form of the things we make, to spend their heartbeats—if we are going to ask them to spend their heartbeats on us, on our ideas, how can we be sure, far more sure than we are now, that they spend those heartbeats wisely?

***cf. John Hodgman: Design, explained & Reggie Watts disorients you in the most entertaining way

Crooked Timber on David Graeber

nangar — Sat, 07 Apr 2012 13:07:36 -0800

Crooked Timber's online seminar on David Graeber's Debt: The First 5000 Years (previously, previously, previously and previously). Late post by John Holbo not included in the first link. Graeber's response. Henry Farrell's response to Graeber's response.

The Failure of Judges and the Rise of Regulators

kliuless — Thu, 23 Feb 2012 06:54:39 -0800

The Control Revolution And Its Discontents - "the long process of algorithmisation over the last 150 years has also, wherever possible, replaced implicit rules/contracts and principal-agent relationships with explicit processes and rules."

Choose Your Own Greek Fiscal Adventure

escabeche — Thu, 16 Feb 2012 11:07:49 -0800

Choose Your Own Greek Fiscal Adventure.

The Greeks have no word for "Sovereign Default" OR timeo danaos et linguas quae futurum tempus habent dicentem.

gauche — Sat, 11 Feb 2012 13:44:01 -0800

I ﬁnd that speakers of languages with little to no grammatical distinction between the present and future (weak-FTR ["Future Time Reference"] language speakers) engage in much more future-oriented behavior. Weak-FTR speakers are 30% more likely to have saved in any given year, and have accumulated an additional 170 thousand Euros by retirement. I also examine non-monetary measures such as health behaviors and long-run health. I ﬁnd that by retirement, weak-FTR speakers are in better health by numerous measures: they are 24% less likely to have smoked heavily, are 29% more likely to be physically active, and are 13% less likely to be medically obese. MetaFilter has discussed the Sapir-Whorf Hypothesis previously here and here. The inimitable Geoff Pullum of Language Log is on the case. Additional coverage at Big Think.

Sacred Economics and Beyond

velvet winter — Tue, 07 Feb 2012 00:16:51 -0800

"It’s a very ancient idea that the universe runs by the principles of the gift...in fact the purpose for our existence, the reason why we’re here, is to give." Writer Charles Eisenstein speaks on his book Sacred Economics: Money, Gift, and Society in the Age of Transition.

Is a Law Degree a Good Investment Today?

reenum — Wed, 23 Nov 2011 12:38:23 -0800

Professor Herwig Schlunk of Vanderbilt University explores whether a law degree is a good investment today. (SSRN link) Paul Caron of TaxProfBlog summarizes Schlunk's findings here.

FiveThirtyEight rips apart Standard and Poor's ratings

East Manitoba Regional Junior Kabaddi Champion '94 — Wed, 10 Aug 2011 11:14:09 -0800

Nate Silver: Why Standard & Poor’s Ratings Are Substandard and Porous

I'll take the Double Dip to go

AndrewKemendo — Sat, 16 Jul 2011 06:24:19 -0800

There may be $2 trillion sitting on the balance sheets of American corporations globally, but firms show no signs of wanting to spend it in order to hire workers at home, however much Washington might hope they will.

Time magazine outlines five common destructive myths about how to stimulate U.S. Growth.

Germans should remember...

Sat, 25 Jun 2011 07:12:47 -0800

Albrecht Ritschl (web site / papers) of the London School of Economics says Germans should remember their status as postwar debtors when offering advice to Greece.

Bubbles and Public Facts

kliuless — Mon, 23 May 2011 14:23:01 -0800

The Destruction of Economic Facts - "Renowned Peruvian economist Hernando de Soto argues that the financial crisis wasn't just about finance—it was about a staggering lack of knowledge" (via)

During the second half of the 19th century... To prevent the breakdown of industrial and commercial progress, hundreds of creative reformers concluded that the world needed a shared set of facts. Knowledge had to be gathered, organized, standardized, recorded, continually updated, and easily accessible... The result was the invention of the first massive "public memory systems" to record and classify—in rule-bound, certified, and publicly accessible registries, titles, balance sheets, and statements of account—all the relevant knowledge available... for investors to infer value, take risks, and track results... Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The results are hardly surprising. In the U.S., trust has broken down...

BONUS

The Gaussian copula function tattoo
The financial crisis was a major event which was caused by Wall Street's shortsighted greed — a greed which is epitomized in the way that the copula function became ubiquitous even though risk managers and even Li himself knew full well that it was extremely limited in how it should be used. If we want to 'be vigilant and not forget' the destructive potential of Wall Street, then the Gaussian copula function is actually a really good thing to get as a tattoo. There's an irony here too. Elms got this tattoo, in part, because of its very incomprehensibility — the way it epitomizes the way that Wall Street is 'predicated in obfuscation'. But Wall Street embraced Li's formula for the opposite reason — that it was very tractable and easy to understand, at least if you were a quant with a degree in finance. Elms's tattoo is the version of the formula which I used in the Wired article — but it's not, actually, the version of the formula which was used day-to-day on Wall Street... Most representations of the copula look nothing like that, and are much harder to understand. All of which shows that Elms is absolutely right, at heart, about the copula function and what it represents. To Wall Street, it's simple and easy — disastrously so. To the rest of us, however, it makes a Semiotext(e) book look like a Sesame Street lyric. And that, I think, is why Levin and Elms are going to be disappointed, and Blankfein is going to remain out of jail. Back in 1933, when Ferdinand Pecora uncovered huge scandals on Wall Street, they were easy for all Americans to understand, and easy to protect against. This time around, Wall Street's activities are incomprehensible not only to the lay person but even to senior bankers: a big part of the reason why the crisis was so big and so bad is precisely that people like Stan O'Neal and Bob Rubin failed at their job of understanding the risks their banks were taking. They were knavishly foolish, but still more fools than knaves — which means that it's extremely hard to make a strong case in front of a jury that what they did was criminal.
The new argument against financial innovation - "It is from the not yet but soon to be famous Alp Simsek, at Harvard, and smart people tell me it is important and already influential..." cf. Speculation and Risk Sharing with New Financial Assets
While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief disagreements about these assets naturally lead to speculation... Financial innovation always decreases the uninsurable variance because new assets increase the possibilities for risk sharing. My main result shows that financial innovation also always increases the speculative variance. This is true even if traders completely agree about the payoffs of new assets. The intuition behind this result is the hedge-more/bet-more effect: Traders use new assets to hedge their bets on existing assets, which in turn enables them to place larger bets and take on greater risks. This effect suggests that financial innovation is more likely to be destabilizing in more complete financial markets and when it concerns derivative assets... A question emerges as to how new assets should be introduced to minimize their short run impact on the speculative variance. I show that staggering (or delaying) the introduction of new assets is not effective because it reduces traders learning simultaneously with their speculation. A viable alternative is to set temporary position limits (or taxes) on new assets.
Financial Repression - "There are only a few ways to bring down sovereign debt burdens. Growth is one, but growth may be impaired by high debt burdens. Austerity is another, but to cut debts this way requires a long period of painful policy, of the sort that's rarely tolerable to electorates. Default is another way. And rapid inflation is another way still... a fifth option—financial repression—was key to quickly and relatively painlessly addressing large sovereign debts... The tight financial controls associated with post-Depression financial regulation and the introduction of the Bretton Woods system enabled a period of financial repression that persisted from the end of the war to around 1980. This period was characterised by low real interest rates (during this time they were quite often negative) persistently, modestly high inflation rates, and rapid reduction in debt levels thanks largely to this 'financial repression tax'. It was an incredibly effective mix of policies." cf. The Liquidation of Government Debt [1,2,3]

The Opening of a Conservative Mind

kliuless — Mon, 26 Jul 2010 11:22:40 -0800

Bruce Bartlett, senior policy analyst in the Reagan White House, speaks out against Republicans - The monumental hypocrisy of the Republican Party is something amazing to behold. And their dimwitted accomplices in the tea-party movement are not much better. They know that Republicans, far more than Democrats, are responsible for our fiscal mess, but they won't say so. And they adamantly refuse to put on the table any meaningful programme that would actually reduce spending. Judging by polls, most of them seem to think that all we have to do is cut foreign aid, which represents well less than 1% of the budget. Martin Wolf, éminence grise of the Financial Times, also fulminates:

Republicans have no interest in doing anything sensible ... To understand modern Republican thinking on fiscal policy, we need to go back to perhaps the most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: "supply-side economics". Supply-side economics liberated conservatives from any need to insist on fiscal rectitude and balanced budgets.

BONUS -The election in one graph -Can American Conservatism Ever Be Reformed? -Towards Economic Humility -How To Balance The Budget -High-debt History -Some Thoughts on the Bush Tax "Cuts" Expiration More BB on (lack of) stimulus - Thus it appears that there is virtually nothing that can be done to stimulate the economy. For various reasons—political, institutional and substantive—there is no prospect of either fiscal or monetary stimulus. [1,2,3] A Toxic Toolkit - Why is the Fed unwilling to do more to help the economy? Trickle Down Meanness - There is more at stake here than our economy. We must, as a nation, decide whether we want to continue on the path we have been on since roughly 1980. Do we want to continue to reward disproportionately a small fraction of the population that (based on recent performance) seems better at misallocating financial, physical, and human capital through speculative endeavors? Do we want to continue the trickle down of meanness? Shall we live in a society in which trust and fellow feeling are lost, replaced by mindless (not rational, not productive) winner-take-all competition that favors one group disproportionately? If the answers to these questions are all "yes," then the social fabric may already be torn beyond repair and I fear we are about to learn firsthand how empires crumble. A titanic struggle to decide whether the jobless should get money for longer - There are two main reasons why Republicans oppose extending benefits: because the country cannot afford it, and because benefits, they believe, have given the unemployed an incentive to stay out of work. Neither reason is well founded. Is Another Economics Possible? - Textbook economics also largely ignores worker-owned businesses and consumer cooperatives, although these are geographically widespread in the United States. Recent research suggests that many workers would like to play a larger role in the management of their companies and that "shared capitalism" works remarkably well ... One could say, therefore, that another economics is now under way. Still, it seems fragmentary and incomplete and not yet adequate to the task of institutional design. We still don’t know how best to organize cooperative efforts or how to mobilize the capital necessary to support them on a large scale.

Be it resolved that financial 'innovation' does not boost economic growth

kliuless — Tue, 02 Mar 2010 06:24:34 -0800

Basicland vs. Sorrowland
A parable about how one nation came to financial ruin by Charles Munger. For extra colour there's... ...a debate on the merits of financial innovation; Jeremy Grantham writes "Beware the Financial Industrial Complex"

Clients can't easily distinguish talent from luck or risk taking. It's an unfair contest, nothing like the fair fight assumed by standard Economics. As we add new products, options, futures, CDOs, hedge funds, and private equity, aggregate fees per dollar rise. As the layers of fees and layers of agents increase, so too products become more complicated and opaque, causing clients to need us more. As total fees in the past grew by 0.5%, we agents basically reached into the clients' balance sheets, snatched the 0.5%, and turned it into income and GDP. Magic! But in doing so, we lowered the savings and investment rate by 0.5%. So, we got a short-term GDP kick at the expense of lower long-term growth. This is true with the whole financial system. Let us say that by 1965 – the middle of one of the best decades in U.S. history – we had perfectly adequate financial services. Of course, adequate tools are vital. That is not the issue here. We're debating the razzmatazz of the last 10 to 15 years. Finance was 3% of GDP in 1965; now it is 7.5%. This is an extra 4.5% load that the real economy carries. The financial system is overfeeding on and slowing down the real economy. It is like running with a large, heavy, and growing bloodsucker on your back. It slows you down. For 100 years the GDP Battleship grew at 3.5%. (Even the Great Depression did not change that trend.) But after 1965 the GDP growth rate ex-finance fell to 3.2% a year. After 1982 it fell to 3.1%, and after 2000 to 2.5%, with all of these measurements to the end of 2007 before the current crisis. From society's point of view, this additional 4.5% burden works like looting or an earthquake. Both increase short-term GDP through replacement effect, but chew up capital. All of the extra financial workers might as well be retirees or children, in that they are supported by the rest of the workforce, but they are much, much more expensive.

BONUS(es) Bonuses boost activity, not quality Bonuses and pay-for-performance are a risky business:

First, it can be hard to see whether employees make the right decisions; superiors do not hold the same information, and the results of decisions play out years later. Second, performance pay will attract exactly those who are willing to take on more risk. People interested in high but steady income will choose other careers. Third, to get their pay, employees may manipulate the system, against the interests of those who set up the incentives: like teachers who are threatened with losing their jobs and teach to the test. Finally, and most perniciously, performance pay can crowd out intrinsic rewards, as when children, having received gold stars for drawing pictures, later draw less than before in their own time. Why draw without getting paid? In organisations that work well, employees identify with their work and their organisations. People want to do a good job because they think they should and because it is the right thing to do... Why then, we ask, do traders and bankers need outsize bonuses and performance pay to get them to do their jobs?

CAUSES So What Exactly Caused the Financial Crisis? [1,2,3] Lessons from the crisis How financial innovation causes bubbles A special report on financial risk: Financial risk got ahead of the world's ability to manage it, cf. Mark-to-Make Believe – Still toxic after all these years, viz. When Goldman Sachs hates marking to market Are Derivatives the Real Problem? "it's the underlying 'business purpose' of transactions. Hedging has a legitimate business purpose. Making markets, speculation, and financing projects have solid business foundations as well. But entering into transactions that serve to hide or obfuscate economic reality work against this principle... let's be clear. The issue isn't derivatives; it's all financial transactions whose objective is to deceive or to weaken financial transparency." FIXES Breaking the Banks: "they promote a noncompetitive industrial organization. They do that by, among other things, creating informational asymmetries. The innovative products they promote -- both derivatives and consumer products -- give them an informational edge over their customers." Maybe it's time to bank simple? The Big Bank Fix:

...many countries with integrated banking systems did not have to bail out any of their financial institutions. Canada's banks were not too big to fail – just too boring to fail. There is nothing in Canada to rival the power of Wall Street or the City of London. This enabled the government to swim against the tide of financial innovation and de-regulation. It is countries like the US and Britain, with politically dominant financial sectors competing to take over financial leadership of the world, that suffered the heaviest losses. This is the point that the well-intentioned regulators miss. At root, the battle between the two approaches is a question of power, not of technical financial economics...

cf. Douglass North POLITICS Business interests and democracy, cf. Persistence of bad governments Were the US & UK central banks complicit in robbing the middle classes? Elizabeth Warren Does The Daily Show Again, cf. Parametric estimations of the world distribution of income The Market's "Howard Beale" Moment How Should We Reform Taxes? [1,2,3] A government that works well is a government that taxes easily [1,2,3,4] CULTURE Institutional failure Double Down Institutional Investing: "Are we the double-down society as far as investing goes? It's sad to see this phenomenon reappearing. Don't we ever learn?" Interview with Raghuram Rajan: "Private sector—yes, it can take care of itself, but its incentives may not be in the public interest; may not even be in the corporate interest if corporate governance is problematic. So the trader could fail the corporation, could also fail society." Power: "The scientists argue that power is corrupting because it leads to moral hypocrisy. Although we almost always know what the right thing to do is - cheating at dice is a sin - power makes it easier to justify the wrongdoing, as we rationalize away our moral mistake." Does feeling like a victim make you selfish? The corporate conscience Ten things that influence conformity: "People use conformity to ingratiate themselves with others... Have you noticed that nonconformers are less likely to care what other people think of them?" Beliefs Conform To Cultural Identities: "an experiment that demonstrates that people don't put as much weight on facts as they do their own belief about how the world is supposed to work" The arts are far more than just another industry: "After gravity, culture is the thing that holds humanity in place." ACADEMIC A financial system ill-equipped to serve the purpose to which it is addressed: "Real market institutions seem designed to hide information and shift consequences rather than reveal outcomes and allocate costs and rewards." [1,2] Market Failure: "I want to propose a new definition of market failure. For me, market failure exists to the extent that innovation is blocked by incumbents. If innovators can succeed by out-competing incumbents, then the market is working. If incumbents have a self-reinforcing system that keeps out innovators, then we have market failure." [1,2] Winding up economists: a research methodology

Q: What is a market? A: it's an institution Q: who owns it? A: often nobody, sometimes a private company Q: so is it a private asset or not? A: not really. Even if it is owned, it has considerable positive externalities. It's what we call a 'public good'. Q: what is a 'public good'? A: It's one of the four varieties of 'market failure'. Q: So you're telling me that a well-functioning market is a 'market failure'.

The disciplines of economics [1,2] High modernism and expert knowledge -- Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed OVERVIEW What Is the "New Normal" for Global Growth? Your undivided attention for the full 90 seconds

To begin with, let's get reacquainted with the fundamental economic problem of our age – lack of global aggregate demand – and how we got to where we are today: (1) Twenty years of accelerated globalization incrementally undermined the real incomes of most developed countries' workers/citizens, forcing governments to promote leverage and asset price appreciation in order to fill in what is known as an "aggregate demand" gap – making sure that consumers keep buying things. When the private sector assumed too much debt and asset prices bubbled (think subprimes and houses, or dotcoms/NASDAQ 5000), American-style capitalism with its leverage, deregulation, and religious belief in lower and lower taxes reached a dead end. There was a willingness to keep on consuming, there just wasn't the wallet. Vigilantes – bond market or otherwise – took away the credit card like parents do with a mall-crazed teenager. (2) The cancellation of credit cards led to the Great Recession and private sector deleveraging, the beginning of government policy reregulation, and gradual deglobalization – a reversal of over 20 years of trade policies and free market orthodoxy. In order to get us out of the sinkhole and avoid another Great Depression, the visible fist of government stepped in to replace the invisible hand of Adam Smith. Short-term interest rates headed to 0% and monetary policies of central banks incorporated new measures labeled "quantitative easing," which essentially involved the writing of trillions of dollars of checks to replace the trillions of dollars of credit that disappeared after Lehman Brothers. In addition, government fiscal policies, in combination with declining revenues, led to double-digit deficits as a percentage of GDP in many countries, a condition unheard of since the Great Depression. (3) For awhile it seemed that all was well, that the government’s checkbook could replace the private market’s wallet and credit cards. Risk markets returned to normal P/Es as did interest rate spreads, and GDP growth resumed; it was only a matter of time before job growth would assure the world that we could believe in the tooth fairy again. Capitalism based on asset price appreciation was back. It would only be a matter of time before home prices followed stock prices higher and those refis and second mortgages would stuff our wallets once again. (4) Ah, but Dubai, Iceland, Ireland and recently Greece pointed to a potential flaw in the model. Shaking hands with the government was a brilliant strategy in 2009 when it was assumed that governments had an infinite capacity to leverage themselves. But what if they didn't? What if, as Carmen Reinhart and Kenneth Rogoff have pointed out in their book, "This Time is Different," our modern era was similar to history over the past several centuries when financial crises led to sovereign defaults or at least uncomfortable economic growth environments where real GDP was subpar based on onerous debt levels – sovereign and private market alike. What if – to put it simply – you couldn't get out of a debt crisis by creating more debt? You are now up-to-date and I've used up all of my 90 seconds...

The Ring of Fire: "These red zone countries are ones with the potential for public debt to exceed 90% of GDP within a few years' time, which would slow GDP by 1% or more. The yellow and green areas are considered to be the most conservative and potentially most solvent, with the potential for higher growth." Forward Don Quixote, the windmills are in sight:

Quixotic journeys often make for great literature, but by definition are rarely productive. I am, after all, referring to windmills here – not their 21st century creation, but their 17th century chasing. Futility, not productivity, was the ultimate fate of Cervantes' man from La Mancha. So it is with hesitation, although quixotic obsession, that I plunge headlong into a discussion of American politics, healthcare legislation, resultant budget deficits and – finally – their potential effect on financial markets. There will be windmills aplenty in the next few pages and not much good can come of these opinions or my tilting in their direction. Still, I mount my steed, lance in hand, and ride forward. Question: What has become of the American nation? Conceived with the vision of liberty and justice for all, we have descended in the clutches of corporate and other special interests to a second world state defined by K Street instead of Independence Square. Our government doesn't work anymore, or perhaps more accurately, when it does, it works for special interests and not the American people. Washington consistently stoops to legislate 10,000-page perversions of healthcare, regulatory reform, defense, and budgetary mandates overflowing with earmarks that serve a monied minority as opposed to an all-too-silent majority. You don't have to be Don Quixote to believe that legislators – and Presidents – often do not work for the benefit of their constituents: A recent NBC News/Wall Street Journal poll reported that over 65% of Americans trust their government to do the right thing "only some of the time" and a stunning 19% said "never." What most politicians apparently are working for is to perpetuate their power – first via district gerrymandering, and then second by around-the-clock campaigning financed by special interest groups. If, by chance, they're ever voted out of office, they have a home just down the street – at K Street – with six-figure incomes as a starting wage. What amazes me most of all is that politicians can be bought so cheaply. Public records show that combined labor, insurance, big pharma and related corporate interests spent just under $500 million last year on healthcare lobbying (not much of which went to politicians) for what is likely to be a $50-100 billion annual return. The fact is that American citizens have never been as divorced from their representatives – and if that description fits the Democratic Congress now in control – then it applies to Republicans as well – past and present. So you watch Fox, or is it MSNBC? O'Reilly or Olbermann? It doesn't matter. You're just being conned into rooting for a team that basically runs the same plays called by lookalike coaches on different sidelines. A "ballot box" pox on all their houses – Senators, Representatives and Presidents alike. There has been no change, there will be no change, until we the American people decide to publicly finance all national and local elections and ban the writing of even a $1 check for our favorite candidates. Undemocratic? Hardly. Get on the internet, use Facebook, YouTube, or Twitter to campaign for your choice. That's the new democracy. When special interests, even singular citizens write a check, it represents a perversion of democracy not the exercise of the First Amendment. Any chance that any of this will happen? Not one ghost of a chance.

The Twilight of the Guilds? "The biggest bubble in the United States is the upper-middle class professional bubble; for the last generation the incomes of Americans with professional degrees continued to rise, sharply in many cases, even as incomes for blue collar workers steadily fell... This can't and won't go on." Towards A Vocation Nation The cost of doing nothing [1,2,3] The Real Roots of the Crisis

Macroeconomists argue that the roots of the crisis are in imbalances: asymmetries in the flow of trade between nations. But those imbalances themselves are just effects. A current account deficit is a symbol: just numbers that point to a deeper reality. The real roots of the crisis aren't about liquidity requirements, reserve ratios, or monetary transmission mechanisms. No amount of regulation or rule-making can fix it. And mere "growth" in GDP, as we're discovering, isn't a cure for it. What really caused the crisis was the fact that we didn't care. Bankers didn't care about the loans they issued. Boards didn't care about bankers. Shareholders didn't care about boards. Markets didn't care about shareholders. Communities didn't care about markets. Society didn't care about communities. No one cared much about society. The fundamental question, then, is this: why not? My answer's simple — and probably even simplistic. But it will serve well enough to make a point. We didn't care because we were chasing stuff. The real crisis is a crisis of nihilism: the belief that apart from stuff, nothing else matters economically. In the name of stuff, we sacrificed what mattered: people, community, comity, trust, education, skill, quality, happiness — and tomorrow itself. It is those institutions — not mere stuff — that underpin authentic value. Stuff is just window dressing. In Wall Street's parlance, we got blown up by a bad trade. Trading stuff for institutions was a bad idea. The real crisis is inside us. It's how we make sense of the world, what motivates us, and in what we value. It is, in short, culture. And it is culturally that we have lost our way.

cf. The Rules Have All Changed: "Julian Sanchez, criticizing guru Umair Haque and his manifesto[s]" [1,2,3,4,5]

funemployment

kliuless — Thu, 11 Feb 2010 13:49:10 -0800

How a New Jobless Era Will Transform America
The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults. It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come. (via rw)

Homeowners! You Have Nothing to Lose But Your Mortgages!

jonp72 — Mon, 30 Nov 2009 18:05:20 -0800

The Moral Dimensions of Ditching a Mortgage: University of Arizona law professor Brent T. White has written a provocative new paper (pdf) that urges homeowners with "underwater" mortgages" to walk away by strategically defaulting on their mortgage debts. White argues that most "underwater" homeowners don't default on their mortgages, because "social control agents," ranging from the housing industry to President Obama, enforce an "asymmetry of norms" that makes it immoral if an individual homeowner walks away from a debt, but allows banks to walk away from debt with impunity. Meanwhile, other economic research appears to confirm White's argument that main barriers to homeowners engaging in "strategic default" are moral and social, not economic and legal.

Renewing the economics of theatre

divabat — Sun, 29 Mar 2009 17:11:28 -0800

The recession has hit the theatre world (and the arts scene in general) very hard - but some argue that theatre practitioners aren't doing themselves any favours when seeking funding. The main question insufficiently addressed is "who is the funding for?" - hint: it's not about you. Approaching theatre as a product isn't working, not when MFA acting programs don't often allow its graduates to earn enough to earn back their debt. So now the question is: how can the economics of theatre be changed?

The bubble to end all bubbles?

up in the old hotel — Mon, 05 Jan 2009 16:29:40 -0800

The cover of a major financial publication warns: If you're holding U.S. Treasuries, GET OUT NOW! As has been noted previously, investors have headed for the financial equivalent of a bomb shelter -- U.S. Treasury bills and notes -- triggering an epic rise in prices and pushing yields (which move inversely to prices) to zero. Now, with a weakening dollar and gold prices holding steady, some see Treasuries as a bubble that's about to pop. Who will apply the pinprick?

Will it be Japan, which holds half a trillion of our debt? The president of a Japanese credit rating agency says the land of the rising sun should write off its holdings of U.S. Treasuries or start building U.S. roads and bridges in what he sees as Marshall Plan II.

Japan's holdings of U.S. debt is second only to China's, which has announced plans to build its way out of economic collapse. Analysts worry that it may dump its massive stockpile of U.S. debt to pay for it.

Another ominous sign: the price of an index funds that shorts (bets against) long-term Treasuries is on the way up.

If the bears are right and this bubble pops, it could be really bad:

Because foreign holdings represent a significant proportion of the stock of Treasuries outstanding, a collapse in Treasuries prices might soon be reflected in a collapse of the US dollar, with the accompanying threat of hyper-inflation in the USA and depression elsewhere. At that point, many investors might wish they still enjoyed the comparative calm of the ‘credit crunch’.

Via the FT's excellent Alphaville blog.

Economics in One Lesson

hoverboards don't work on water — Thu, 25 Jan 2007 15:49:36 -0800

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Economics in One Lesson, by Henry Hazlitt, is available online for all to peruse, and makes sobering reading for anyone who's ever fretted over the United States' $8.7tn national debt. Or if you prefer action to theory, you can always help your fellow citizens out by making a check payable to the Bureau of the Public Debt.

U2 Can B A Rock Star Prez

nakedcodemonkey — Tue, 01 Mar 2005 21:05:44 -0800

U2 Can B A Rock Star Prez. The president of the World Bank is traditionally an American. But in a recent editorial the L.A. Times nominated third-world debt relief activitist and Nobel Peace Prize nominee and--oh yeah--U2 frontman for the soon-to-be-vacant position. With economic tutoring from "probably the most important economist in the world", the singer/activist (and self-confessed egomaniac) has spent the last 5 years lobbying the World Bank and IMF to help African nations break the decades' old cycle of debt by combining debt relief with improved trade and AIDS assistance. After a stint as celebrity spokesmodel for Jubilee2000, then founding a similar DATA Agenda funded by Bill Gates, he's developed cred as "a serious player on Third World debt". "It's about the right to begin again," Bono says. "The right to be free of your past..." President Bono: a chance to reform the World Bank from the inside, or celebrity poser? Readers' response... [BugMeNot for the reg-only sites]