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EK1949

EK1949
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  • Printing Our Way To Negative Jobs Growth [View article]
    Why indeed? If we wanted people to work we'd try a wee bit harder to make it possible. We don't do that, so it appears we don't care all that much. Buy why to we bother to call people we prefer not to help nasty names? What's up with that?

    In spite of our worst efforts many people will continue to find work to support themselves and their families. They will work at 2 or 3 jobs, get some help from a government program, and make do somehow. But I see our effort to make jobs scarce with deficit cutting as bearing more responsibility for the number of people requiring assistance than the sudden eruption of a mass wave of character flaws.

    Mass laziness was blamed for unemployment back in the '30s by deep thinkers of the day, but they couldn't account for how quickly laziness disappeared when jobs became plentiful a few years later. Does my laziness cause the number of jobs to shrink? How does that work?

    Anyway, givers need takers otherwise what's it all for, so if you're hungry I hope you have food stamps. I'd like to think my taxes go for that, even though they don't really go for anything. :-)
    Jul 28, 2013. 01:02 PM | 3 Likes Like |Link to Comment
  • More on Obama's NYT interview: Obama played down claims TransCanada's (TRP) Keystone XL pipeline would generate large numbers of jobs. "The most realistic estimates are this might create maybe 2,000 jobs during the construction of the pipeline...and then after that we're talking about somewhere between 50 and 100 jobs." Obama also disputed that the line would cause gasoline prices to fall, saying it could do the opposite because it would lead to increased exports. Obama will decide whether to approve Keystone based on how much carbon would be added to the atmosphere because of it, but he isn't certain Canada is doing enough to resolve concerns about pollution. (Interview transcript[View news story]
    I hope taxes are lowered on me and raised on that guy over there. I believe in self interest to the max. Therefore the President is evil if he doesn't comply with my wishes, which are identical with the national interest, as luck would have it.

    Did I say that?? Or was I just thinking it? No, I don't realllly believe my interest is paramount in such a solipsistic way. I mean I'd LIKE to believe it, but some high school civics crap or something gets in the way, something about the greater good. I hated school by the way.
    Jul 28, 2013. 12:32 PM | 1 Like Like |Link to Comment
  • More on Obama's NYT interview: Obama played down claims TransCanada's (TRP) Keystone XL pipeline would generate large numbers of jobs. "The most realistic estimates are this might create maybe 2,000 jobs during the construction of the pipeline...and then after that we're talking about somewhere between 50 and 100 jobs." Obama also disputed that the line would cause gasoline prices to fall, saying it could do the opposite because it would lead to increased exports. Obama will decide whether to approve Keystone based on how much carbon would be added to the atmosphere because of it, but he isn't certain Canada is doing enough to resolve concerns about pollution. (Interview transcript[View news story]
    "Besides if this is such a small project then why not approve it? Its obviously just a blip on the radar screen."

    That's true, it doesn't matter much either way. I have no position on Keystone. I own pipeline MLPs, does that make a difference to me? I have no idea. It probably has no more effect on me than it does on the country as a whole, but it might. I hope the President makes the decision on objective criteria, that's all.

    "Are we to believe that transporting oil by rail is safer, cheaper, and less carbon intensive than a pipeline?"

    I don't think the argument is about all pipelines versus all rail transport. At least I don't think it is.
    Jul 28, 2013. 11:52 AM | Likes Like |Link to Comment
  • Printing Our Way To Negative Jobs Growth [View article]
    "Would the government paying people to spit at the moon create an inefficient economy?"

    I don't see how that could be the case. Do we need more workers or more consumers? Since we agree we need fewer workers, that is full employment requires fewer workers, the problem is to get to full output and whatever full employment is when we're there, and to solve the consumption problem beyond the cyclical peak. What policy should we adopt to handle a smaller workforce that can support more nonworkers?

    As I see it, and it's not just me, there will be a gap between full employment and the need for income, a gap that we saw open in the years before 2008, during the Bush years. The supercharged Clinton years obscured this phenomenon to the extent that we got away with surpluses for a time. That couldn't last (it never does), but when recovery began jobs didn't come back, and they never really did.

    Eventually we'll have to look beyond the cyclical problem to the structural problem. I don't mean the "kick poor people off welfare" structural problem, I mean the real structural problem, which is figuring out how to get income in the hands of people we have no intention of providing jobs for.

    Advanced economies have a feedback mechanism that recycles income to investment through spending by a broad consumer base, which acts to balance output and consumption at a higher level that could be achieved by letting consumption fall to "natural" levels. We call this mechanism the welfare state and think of it as an altruistic operation undertaken out of love for the poor. To some extent it is, though this rationale tends to obscure its more basic functional aspect. Advanced economies are too efficient for production to be distributed by an unmediated process.

    So we pay people to consume the products. Money isn't scarce, and resources are not scarce, but money to consume products is chronically scarce because the distribution system is governed by people with a poor understanding of the problem, that see money as a scarce commodity and oversupply as a problem that needs more supply. Demand is invisible to these people. How do we get them to adopt a view of both sides of the process rather than just one?

    So I end up in basic agreement with the author when he says:

    "Being able to produce much of what a population needs with only a small number of that population employed creates a confounding dilemma."
    Jul 27, 2013. 11:44 AM | 4 Likes Like |Link to Comment
  • Charlie Munger: Energy Independence Is Dumb [View article]
    "The money paid will be devalued in time meaning we are paying them with nothing but empty promises."

    My empty promises support me pretty well. If it bothers you I'll take yours off your hands, since they're empty and all. Is it a deal?

    If not your analysis is empty, just words meant for show.
    Jul 26, 2013. 10:36 PM | Likes Like |Link to Comment
  • Can The Fed Prevent The Next Recession? [View article]
    The behavior of government and private sector actors are intertwined to such a degree that it's hard to tell how a delayed recession differs from an induced one. I would not assume that severity is increased by action to delay the onset, as conditions may change beyond government action. There are no examples where recessions occur outside any influence from government since no such state exists or could exist. Anarchists posit that no control is better than any control, and our duty should be to guarantee the world never has to disprove this.

    "I'd be satisfied if they quit prolonging the current malaise"

    What prolongs the current malaise is policy pulling in two directions, to the extent that anything is caused by "they". I think action that consistently pointed the wrong way would be worse than the inconsistent current policy, bad as it is. There would be very little satisfaction generated by consistent austerity.
    Jul 26, 2013. 05:48 PM | 1 Like Like |Link to Comment
  • Business Investment Picks Up [View article]
    "This man is in his zone, he has been saying forever that the economy is slowly growing, all data shows that."

    And I agree. I just think the government cuts subtract from rather than add to the recovery. But the author has done a fine job of documenting the recovery such as it is, whatever interpretive differences there may be.
    Jul 25, 2013. 10:37 PM | Likes Like |Link to Comment
  • It's Time To Stop Listening To Ben Bernanke [View article]
    It's not like that. An improved economy makes tapering a nonevent.
    Jul 25, 2013. 10:20 PM | Likes Like |Link to Comment
  • Charlie Munger: Energy Independence Is Dumb [View article]
    "Munger is correct on all counts. We should rape and pillage every other country's energy stores, energy is a national treasure."

    Or we could buy the oil on the market. As world hegemon our job is to keep international trade going for our benefit and the worlds (they usually amount to the same thing).

    So long as oil is the principle fuel for transportation it will be in our interest to buy at the lowest price, which will usually mean buying from foreign producers, our energy boomlet notwithstanding.

    We get the oil, producers get the dollars, everybody gets what they want. As the price goes up the substitution effect gets stronger, which is why 1) we'll never run out of oil and 2) we'll gradually stop using it.
    Jul 25, 2013. 10:02 PM | 5 Likes Like |Link to Comment
  • Deep Dive: Surplus Capital Revisited [View article]
    "So then you conclude if its price sensitivity and not welfare, then we need to expand price sensitivity, and the growth in productivity will continue and eliminate the need for welfare."

    What's the growth in productivity for if no one consumes the product? Your system is out of balance, and redistribution restores it and allows the engine to run faster and more efficiently.
    Jul 25, 2013. 05:43 PM | Likes Like |Link to Comment
  • Deep Dive: Surplus Capital Revisited [View article]
    "So the way to figure out what improves our standard of living and what does not, is the utilization of human reason to divine why is it some societies are wealthier than others that both have welfare."

    When we apply our welfare notions to the system of capitalism it really is a kind of improvisation. I don't suggest that redistribution is how a country becomes rich, but it does play a role in how a rich country evolves, how it devises welfare to serve more than one purpose, as help for the needy and as a part of the engine of growth which recaptures waste and recycles it where it can do the most good by allowing mass consumption to balance increasing output.
    Jul 25, 2013. 05:38 PM | Likes Like |Link to Comment
  • Deep Dive: Surplus Capital Revisited [View article]
    I think if you take a descriptive point of view and look at how rich countries organize themselves you get more insights than if you adopt a purely theoretical framework. I want to know why, and how, rich societies behave as though welfare state spending is necessary to their functioning, even when they are under cyclical and political pressure to end such spending.

    It looks like a bootstrapping process to me, that states get rich, begin to devise a system of transfer payments to equalize consumption with higher production and then add features as they go along, with altruistic rationales for the distributions. We want to help the poor, it's often said, and I think we do, but what really drives the system forward is we don't really have a choice if we want production to be used for something and not stagnate. Someone must benefit from the production by consuming it, and what appears to work best is if that someone is everyone.
    Jul 25, 2013. 05:19 PM | Likes Like |Link to Comment
  • Business Investment Picks Up [View article]
    The fall of government spending you see in the last chart was both inevitable as emergency spending began to fall and the economy started to grow from a very low base. But it did not mean the government was getting out of the way, because in a severe downturn increased spending is positive for the private sector, which is suffering because overall spending is down.

    Government spending cuts on top of private sector savings mean a weak slow recovery with few jobs. In this circumstance the government can't be in the way. It's the last spender standing, so when it cuts it drives the economy down further. And that's what the last chart is showing, an emergency spending spike that helped to end the coming depression and then a dropoff that assured we wouldn't completely recover for many years.
    Jul 25, 2013. 05:05 PM | Likes Like |Link to Comment
  • Shots fired. Some digging around turns up recent comments from Larry Summers in which he was dismissive of QE's effectiveness and suggested he might tighten policy ahead of when a Bernanke or Yellen-led Fed might. "If we have slow growth, we are not going to keep thinking that 5.5% UE is normal ... that is going to operate in favor of suggesting that we should normalize interest rates (sooner) ... I think the market is underestimating the pace at which the Fed will alter its current course and the consequences of that for interest rates." It's reportedly down to Summers and Janet Yellen to replace Bernanke atop the Fed. [View news story]
    Deficits do matter. In a depressed economy you need them to be larger. That's what the failure of austerity means. When everyone is saving the government must spend or the economy can't recover. The question is how much. In 2012 Christina Romer wrote about the effects of the 2009 stimulus:

    "THOUGH the Recovery Act appears to have had many benefits, it could have been more effective.

    Most obviously, it was too small. When we were designing it, most forecasters estimated that the United States would lose around six million jobs during the recession without fiscal stimulus. Compared with this baseline, creating three million jobs would have filled roughly half of the employment hole.

    As it turned out, even with the stimulus, we lost almost nine million jobs. Indeed, because of horrific job losses in late 2008 and early 2009, we’d nearly passed the six-million mark before the Recovery Act was even signed. Adding in the estimated effect of the act, the correct no-stimulus baseline was a total employment fall of nearly 12 million. With a loss that big, creating three million jobs was helpful, but not nearly enough."

    The lesson should be that estimates of the effectiveness of stimulus should be scaled to the size of the problem it's designed to address. The stimulus created jobs when we were losing even more jobs.

    If Summers had presented the Romer stimulus plan to the President I have no doubt it would have been scaled down, possibly even cut in half by the time it was passed. It still would have been larger than the plan we got. By now unemployment would be under 7% and we'd be closer to the point the economy will eventually reach where the Fed could pull back, and perhaps we'd be there by now. The basic error was thinking we had fill a 6 million jobs hole when we really needed to fill a 12 million jobs hole.
    Jul 25, 2013. 04:47 PM | 3 Likes Like |Link to Comment
  • Deep Dive: Surplus Capital Revisited [View article]
    The general consensus of the majority here at SA is that there is too much money and not enough stuff (so there must be hidden inflation), while the article says there is too much stuff, perhaps leading to the realization that contrary to common assumptions we don't have enough money circulating to buy the stuff available.

    Too much supply and not enough demand would seem like a problem that doesn't require a whole lot of heavy lifting to solve. Somehow we have to get dollars in the hands of people who will spend them to buy the products of what would be excess capital if we didn't use our dollars to create a balance that serves both production and consumption needs.

    We can see, once we get this far (I hope), how welfare states are not dead weights on affluent societies, they are in fact necessary components of the solution to the problem of how an affluent society can continue to find use for the excess capital it generates. Transfer payments, far from being a drag on an economy, actually help to propel it forward. They add to rather than detract from efficiency. This explains something otherwise inexplicable, why wealthy states are not made poor by their large public sectors and relatively generous welfare. It actually is an advantage for them, a feature of their success.
    Jul 25, 2013. 01:32 AM | Likes Like |Link to Comment
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