Forget Peak Oil, Time To Worry About Peak Oil Labor [View article]
"but it is not written anywhere that getting there has to be easy, and a lot of vested interests and innumerate greens are hindering the transition massively."
This is my point. The transition should be easy and *would* be easy if the market were just left alone. But vested interests keep getting in the way, whether those be in oil or in green energy.
It really isn't any more complicated than simple supply and demand.
Forget Peak Oil, Time To Worry About Peak Oil Labor [View article]
This is an excellent point. This aspect of the energy debate is completely ignored.
The transition to alternate energy will of course eventually happen through natural market mechanisms as the price of oil continues to rise. But the thrust of education is in green and alternative energy. As oil workers run out and the price of oil increases, the transition to alternate energy will happen much more easily because there is an educated pool of employees ready and able to work in that sector.
As always, the take-away point is that the market will make the transition naturally and easily. And doom-and-gloom predictions about oil running out and an ensuing apocalypse are just simple fear-mongering by vested interests looking to capitalize off of manufactured fears.
The Economic Implications Of Quantifying Policy Uncertainty [View article]
“The future, of course, is always uncertain. Deciding if there's an unusually high level of ambiguity harassing decisions in the here and now is tricky.”
There is a huge difference between uncertainty due to the simple fact that we can’t see the future and uncertainty because of policy schizophrenia.
In my job I talk to small business owners every day and they almost to a man say they are terrified to hire anybody because they have *no idea* how much that employee will cost them. Healthcare, tax and financial regulations among others have become paralyzing.
In a normal environment, even with future uncertainty, business can still have a reasonable expectation of what the future will hold. This is why it is *imperative* for the government to only enact regulation when there is a clear and demonstrable need well in advance and the government is completely transparent and honest about why it’s being enacted and being committed to it.
When regulation becomes a knee-jerk reaction to the smallest market disturbances, or to score political points, or to validate irrational class-warfare mentality, we have completely lost sight of the proper role for government.
I suppose you could argue that, but QE and zero interest rate policy does not an MMTer make. Those are also textbook QTM operations.
It seems to me the discerning factor is whether or not expansionary OMOs cause inflation. Bernanke seems to think they won't, so in that sense he acts like an MMTer, but I would suspect his reasoning behind such a thought would be *completely* different from an MMTer.
As for the currency thing, yeah it sucks that China is doing that, but I personally am not of the opinion that it's doing the US any great harm. Quite the opposite in fact. Our trade is still mutually beneficial.
Something will eventually give on China's currency, especially if the US dollar keeps depreciating or if the US suddenly experienced very high inflation, or if China eventually withdrawals from the world market. But in the meantime, like I said, it's really not that big of a deal IMO
"what can we do to stop China theft of IP and currency control"
Regarding IP at least, we can end agricultural subsidies. The whole hangup during the current Doha Round has been about these two issues. Ironically, they *both* (IP theft and agricultural subsidies) cause great harm and severely distort the trade environment, yet neither side can come to an agreement.
Basically the US is demanding that IP be protected, but the BRICs (especially Brazil) and other developing nations are demanding that the US stop subsidizing its agriculture. I'm reminded of this cartoon:
"Still, I don't hear Krugman saying 'It's impractical and I think the economy still loses.'"
Yeah, you *definitely* don't hear him saying that anymore, but once upon a time he did, when he was still focused on actual economics.
Here are a few of his conclusions from the paper. I guess you can interpret them however you see fit. To me, he is clearly rejecting the idea, even if it's reluctantly.
"In the case of trade interventions, this concern is at two levels. First, to the extent that the policies work, they will have a beggar-thy-neighbor component that can lead to retaliation and mutually harmful trade war. Second, at the domestic level an effort to pursue efficiency through intervention could be captured by special interests and turned into an inefficient redistributionist program."
"The economic cautions are crucial to this argument. If the potential gains from interventionist trade policies were large, it would be hard to argue against making some effort to realize these gains. The thrust of the critique offered above, however, is that the gains from intervention are limited by uncertainty about appropriate policies, by entry that dissipates the gains, and by the general equilibrium effects that insure that promoting one sector diverts resources from others. The combination of these factors limits the potential benefits of sophisticated interventionism."
"To abandon the free trade principle in pursuit of the gains from sophisticated intervention could therefore open the door to adverse political consequences that would outweigh the potential gains."
JSTOR was blocking you? That's strange, I was able to pull the complete document straight off the internet and just copied the link.
I just clicked on that link and was able to bring up the entire PDF document. I wonder why it's blocking you...
It's called strategic trade because it supposes that the government can maximize national welfare if it acts in a strategic way, ala game theory, with regards to trade.
But it has some strict assumptions which even Krugman concedes aren't realistic (and it's basically his theory). Basically it assumes that the government has enough knowledge to be able to manage the economy just right and precisely pick winners.
It's too bad the link is not working, I think you would really enjoy the paper, assuming you have the interest and time, of course. Maybe this link will work (it's a short paper).
Ah yeah gotcha. I didn't pay close enough attention. Sorry.
Yeah it sounds like you're arguing strategic trade theory which does in fact focus on absolute advantage and suggests tariffs may be appropriate.
This argument has some merit in theory, but in practice it's impractical and I think the economy still loses.
Paul Krugman wrote a landmark essay on this topic back when he was still a real economist. Here he presents these ideas and explains why they should be rejected. This a must-read for anybody who wants to be literate in trade.
Check this stunning visualization of the various types and layers of U.S. debt, including a $114T skyscraper of unfunded liabilities. "If you still think the government are the best people to manage your money after [seeing] this, please come and see me about some magic beans I have to offer you." [View news story]
"The 'financial instruments' to which you refer didn't exist in 1992. Fannie and Freddie were not primarily responsible for 'subprime'"
I completely agree. Please show me where I said these existed in 1992, or where I said that Fannie and Freddie were responsbile.
These instruments were created *in response* to this legislation. The legislation gave birth to these instruments because it did two things 1) mandated Fannie and Freddie to buy these risky mortgages, and 2) forced banks to lend to borrowers they otherwise wouldn't have because they were too risky.
These two aspects of the legislation created the incentive to come up with innovative financial instruments in order to avoid huge losses.
Don't take my word for it. Go look it up yourself. There is, afterall, no excuse for willful ignorance.
"Lending is good for the economy." Not in all cases, as this current mess has so nicely illustrated. Or weren't you aware? When the market decides what or how much lending to do, things are fine. When the government decides it knows better than the market we get unintended consequences and often disastrous results.
"Now suppose the same facts except that British wool is only $4. In that case, the Brits can sell their wool in Portugal, putting Portuguese wool makers out of business but with only the $1 of savings available to circulate and create new opportunities for the displaced workers."
I see what you're saying, but Ricardian theory of comparative advantage assumes full employment and frictionless movement between factors. In other words, the Portuguese wool makers wouldn't go out of business. They would transfer into wine making because, since trade is occurring, specialization must have happened. Thus Portugal uses all of its labor to produce wine and Britain uses all of its labor to produce wool.
Since Portugal can now get 1.25 units of wool if they trade whereas they could only get 1 unit of wool if they produced domestically, they are clearly better off. So is Britain obviously because they now get 1 unit of wine for 5 labor hours instead of just .2 units of wine. Nobody loses.
Instead I think you're blurring the lines between comparative advantage and strategic trade theory.
Check this stunning visualization of the various types and layers of U.S. debt, including a $114T skyscraper of unfunded liabilities. "If you still think the government are the best people to manage your money after [seeing] this, please come and see me about some magic beans I have to offer you." [View news story]
kmi,
The 1992 legislation is what lowered the lending standards and created the incentives to innovate and create these new financial instruments. After all, banks knew they would lose money on these loans so they got creative and figured out to be profitable anyway.
They knew they were risky, and so did the government, so as part of the 1992 act, Fannie and Freddie were mandated to buy these risky loans - thus removing the downside for these banks and incentivizing them to create even *more* risky loans.
Do you see how a change in incentives created by this one piece of legislation had far reaching effects and changed the incentives in other areas as well?
And yes, the Fed is to blame for keeping money way too easy for too long and fueling the bubble. But that was an aggravating factor, not a cause.
The Future of Banking: Dodd-Frank at One Year [View article]
"The only real hope for imposing stability upon an increasingly complex and concentrated industry is the higher capital standards called for by Basel III."
I've thought this same thing. Banks don't want to fail or do stupid things that cost them money any more than we do. If they see the need to increase capital requirements, they do it themselves!
BIS is a good institution because it's by bankers for bankers who *really* know what's going on. We don't need passive, ignorant, third-party politicians that have no real stake in things trying to govern the most important industry in the world. Of *course* they'll screw it up.
The Future of Banking: Dodd-Frank at One Year [View article]
"In other posts I have argued that the banks that were too big to fail before are now bigger and more prominent than before the recent crash."
This is exactly right. Many of the regulations in Dodd-Frank are simply too much for small community banks. These banks either close down or are bought out by the big banks.
In either case, we have fewer community banks that actually practice community banking (i.e. knowing their market and their customer) and more, large robo-banks that are now even *bigger* and more important to the economy than they were before.
Forget Peak Oil, Time To Worry About Peak Oil Labor [View article]
This is my point. The transition should be easy and *would* be easy if the market were just left alone. But vested interests keep getting in the way, whether those be in oil or in green energy.
It really isn't any more complicated than simple supply and demand.
Forget Peak Oil, Time To Worry About Peak Oil Labor [View article]
The transition to alternate energy will of course eventually happen through natural market mechanisms as the price of oil continues to rise. But the thrust of education is in green and alternative energy. As oil workers run out and the price of oil increases, the transition to alternate energy will happen much more easily because there is an educated pool of employees ready and able to work in that sector.
As always, the take-away point is that the market will make the transition naturally and easily. And doom-and-gloom predictions about oil running out and an ensuing apocalypse are just simple fear-mongering by vested interests looking to capitalize off of manufactured fears.
The Economic Implications Of Quantifying Policy Uncertainty [View article]
There is a huge difference between uncertainty due to the simple fact that we can’t see the future and uncertainty because of policy schizophrenia.
In my job I talk to small business owners every day and they almost to a man say they are terrified to hire anybody because they have *no idea* how much that employee will cost them. Healthcare, tax and financial regulations among others have become paralyzing.
In a normal environment, even with future uncertainty, business can still have a reasonable expectation of what the future will hold. This is why it is *imperative* for the government to only enact regulation when there is a clear and demonstrable need well in advance and the government is completely transparent and honest about why it’s being enacted and being committed to it.
When regulation becomes a knee-jerk reaction to the smallest market disturbances, or to score political points, or to validate irrational class-warfare mentality, we have completely lost sight of the proper role for government.
Economy 2013: Seeing Downward Arrows [View article]
I suppose you could argue that, but QE and zero interest rate policy does not an MMTer make. Those are also textbook QTM operations.
It seems to me the discerning factor is whether or not expansionary OMOs cause inflation. Bernanke seems to think they won't, so in that sense he acts like an MMTer, but I would suspect his reasoning behind such a thought would be *completely* different from an MMTer.
Economy 2013: Seeing Downward Arrows [View article]
The Current Account Dilemma [View article]
Something will eventually give on China's currency, especially if the US dollar keeps depreciating or if the US suddenly experienced very high inflation, or if China eventually withdrawals from the world market. But in the meantime, like I said, it's really not that big of a deal IMO
The Current Account Dilemma [View article]
Regarding IP at least, we can end agricultural subsidies. The whole hangup during the current Doha Round has been about these two issues. Ironically, they *both* (IP theft and agricultural subsidies) cause great harm and severely distort the trade environment, yet neither side can come to an agreement.
Basically the US is demanding that IP be protected, but the BRICs (especially Brazil) and other developing nations are demanding that the US stop subsidizing its agriculture. I'm reminded of this cartoon:
libertymaven.com/wp-co...
Both sides are killing themselves and each other yet none wants to give in. It's insane.
The Current Account Dilemma [View article]
Yeah, you *definitely* don't hear him saying that anymore, but once upon a time he did, when he was still focused on actual economics.
Here are a few of his conclusions from the paper. I guess you can interpret them however you see fit. To me, he is clearly rejecting the idea, even if it's reluctantly.
"In the case of trade interventions, this concern is at two levels. First, to the extent that the policies work, they will have a beggar-thy-neighbor component that can lead to retaliation and mutually harmful trade war. Second, at the domestic level an effort to pursue efficiency through intervention could be captured by special interests and turned into an inefficient redistributionist program."
"The economic cautions are crucial to this argument. If the potential gains from interventionist trade policies were large, it would be hard to argue against making some effort to realize these gains. The thrust of the critique offered above, however, is that the gains from intervention are limited by uncertainty about appropriate policies, by entry that dissipates the gains, and by the general equilibrium effects that insure that promoting one sector diverts resources from others. The combination of these factors limits the potential benefits of sophisticated interventionism."
"To abandon the free trade principle in pursuit of the gains from sophisticated intervention could therefore open the door to adverse political consequences that would outweigh the potential gains."
The Current Account Dilemma [View article]
I just clicked on that link and was able to bring up the entire PDF document. I wonder why it's blocking you...
It's called strategic trade because it supposes that the government can maximize national welfare if it acts in a strategic way, ala game theory, with regards to trade.
But it has some strict assumptions which even Krugman concedes aren't realistic (and it's basically his theory). Basically it assumes that the government has enough knowledge to be able to manage the economy just right and precisely pick winners.
It's too bad the link is not working, I think you would really enjoy the paper, assuming you have the interest and time, of course. Maybe this link will work (it's a short paper).
bss.sfsu.edu/jmoss/res...
The Current Account Dilemma [View article]
Yeah it sounds like you're arguing strategic trade theory which does in fact focus on absolute advantage and suggests tariffs may be appropriate.
This argument has some merit in theory, but in practice it's impractical and I think the economy still loses.
Paul Krugman wrote a landmark essay on this topic back when he was still a real economist. Here he presents these ideas and explains why they should be rejected. This a must-read for anybody who wants to be literate in trade.
dipeco.economia.unimib...
Check this stunning visualization of the various types and layers of U.S. debt, including a $114T skyscraper of unfunded liabilities. "If you still think the government are the best people to manage your money after [seeing] this, please come and see me about some magic beans I have to offer you." [View news story]
I completely agree. Please show me where I said these existed in 1992, or where I said that Fannie and Freddie were responsbile.
These instruments were created *in response* to this legislation. The legislation gave birth to these instruments because it did two things 1) mandated Fannie and Freddie to buy these risky mortgages, and 2) forced banks to lend to borrowers they otherwise wouldn't have because they were too risky.
These two aspects of the legislation created the incentive to come up with innovative financial instruments in order to avoid huge losses.
Don't take my word for it. Go look it up yourself. There is, afterall, no excuse for willful ignorance.
"Lending is good for the economy." Not in all cases, as this current mess has so nicely illustrated. Or weren't you aware? When the market decides what or how much lending to do, things are fine. When the government decides it knows better than the market we get unintended consequences and often disastrous results.
The Current Account Dilemma [View article]
I see what you're saying, but Ricardian theory of comparative advantage assumes full employment and frictionless movement between factors. In other words, the Portuguese wool makers wouldn't go out of business. They would transfer into wine making because, since trade is occurring, specialization must have happened. Thus Portugal uses all of its labor to produce wine and Britain uses all of its labor to produce wool.
Since Portugal can now get 1.25 units of wool if they trade whereas they could only get 1 unit of wool if they produced domestically, they are clearly better off. So is Britain obviously because they now get 1 unit of wine for 5 labor hours instead of just .2 units of wine. Nobody loses.
Instead I think you're blurring the lines between comparative advantage and strategic trade theory.
Check this stunning visualization of the various types and layers of U.S. debt, including a $114T skyscraper of unfunded liabilities. "If you still think the government are the best people to manage your money after [seeing] this, please come and see me about some magic beans I have to offer you." [View news story]
The 1992 legislation is what lowered the lending standards and created the incentives to innovate and create these new financial instruments. After all, banks knew they would lose money on these loans so they got creative and figured out to be profitable anyway.
They knew they were risky, and so did the government, so as part of the 1992 act, Fannie and Freddie were mandated to buy these risky loans - thus removing the downside for these banks and incentivizing them to create even *more* risky loans.
Do you see how a change in incentives created by this one piece of legislation had far reaching effects and changed the incentives in other areas as well?
And yes, the Fed is to blame for keeping money way too easy for too long and fueling the bubble. But that was an aggravating factor, not a cause.
The Future of Banking: Dodd-Frank at One Year [View article]
I've thought this same thing. Banks don't want to fail or do stupid things that cost them money any more than we do. If they see the need to increase capital requirements, they do it themselves!
BIS is a good institution because it's by bankers for bankers who *really* know what's going on. We don't need passive, ignorant, third-party politicians that have no real stake in things trying to govern the most important industry in the world. Of *course* they'll screw it up.
The Future of Banking: Dodd-Frank at One Year [View article]
This is exactly right. Many of the regulations in Dodd-Frank are simply too much for small community banks. These banks either close down or are bought out by the big banks.
In either case, we have fewer community banks that actually practice community banking (i.e. knowing their market and their customer) and more, large robo-banks that are now even *bigger* and more important to the economy than they were before.
Dodd-Frank just pumped steroids into TBTF.