Worthwhile posts of Note.

[RDR]

* Report this post * Reply with quote Is Thom's data regarding tariffs correct?

In Thom's recent piece Obama Drinks Friedman's Kool-Aid ( http://www.commondreams.org/view/2009/07/14-0 ), he states -

It was this policy, followed largely for most of the history of our country with average tariffs through most of the 19th and 20th centuries of around 40 percent, which built our American industry. All three times we radically dropped tariffs – for 3 years in 1857, for nine years in 1913 (just down to 25%), and in 1987 – what followed were economic disasters, particularly for small American manufacturers. Since Reagan blew out our tariffs in the 1980s (and Clinton kicked the door totally open with GATT, NAFTA, and the WTO), our average tariffs are now around 2-4 percent.

But according to the following chart, U.S. tariffs on imports haven't changed all that much since the late 70's, and arguably not since 1950.


http://home.netcom.com/~rdavis2/tariffs.html

I don't see any evidence that "Reagan blew out our tariffs in the 1980s". According to the above chart, they were already blown out before Reagan took office.

I love ya, Thom. I think you're the best political radio show host on the air, and I recommend your show all the time, but are you sure you're correct on this?

[RDR]

"Prestigious businesses urge their workers to work less.

In principle, rising productivity is full of blessings. It made possible successively reducing working hours since the Second World War.

I wish I knew who these "prestigious businesses" were, so that I could make sure my portfolio doesn't include them.

You, and I take it the author of the piece, seem to assume that productivity increases have been the sole result of labor, demandside, instead of or in addition to increases in capital and resources. While that may be the case, it is neither intuitively self-evident nor supported by any evidence I can find here.

These questions posed by DS and yourself does raise some important questions beyond just work week hours. It clearly is not an easy question to answer. I think it has a lot to do with how human capital is divided and allocated. It seems almost to beg an historical perspective to understand humans and their relationships to the "means of production".

Let me do a fast and dirty historical novel. Hunter/gatherers had life easy {I suppose} but long periods of waiting for the next event to occur and consumed large amounts of human capital or labor in waiting periods and across more resources and land. The agriculturalists had their division of labor allocated seasonally for the most part. Industrialist workers could split their work into time allotted periods and thus scarce resources of capital could be divided into "shifts". And then as we talked we are sunsetting the industrial age.

What age we enter is anyone's guess but if it is the age of information as many predicted then human capital that is manifested in individuals can not be so easily divided through space/time. Take for example the Medical Doctor. He like any doctorate spends vast amounts of time learning his trade and not only increasing his consumption {education services} but also forsaking opportunity costs that he could have been earning during the time of studies. Thus as people become more educated and increased levels of human capital would signify that more productivity and thus time is required from not only the return on investments. One way to think of this is that as capital was increased {HC in this case} then more other inputs were required to get the needed ROI and the only other allocation is more time devoted to his practice which even meant more time devoted to this specialty as he then outsources most of the other functions of running a business.

Also from the pace of technology/information change, information becomes more specialized but also deeper and broader which only makes a person in a specialty even harder to keep up with the changes. I first learned computer science in the 1980s, and well, today no one would use those languages. We as patients want doctors that are not "part-timers" we want people that are dedicated and devoted to their careers. We want them to also visit many other patients to see a variety of cases and how to solve those other problems. We also want them to spend time devoted to reading up on the latest procedures and technology.

Well enough for now...

A 25-Hour Week Would Be Enough

[RDR]

I agree with you here, noting again that corporatism is a product of certain socialist thought. We've had a genteel fascist system in America since at least the New Deal.

I am not sure which "socialist thought" you refer to as it seems that it formed from extensions of business arrangements at least in the USA and outside of Government controls at first.

Referring to European syndicalism or guild socialism of the Daniel DeLeon or G.D.H. Cole type which was adapted by other thinkers into national syndicalism or what became known in Italy as corporatism - state direction and coordination of labor and capital in matters of common interest. See Alfredo Rocco, Sergio Panunzio, Oswald Mosley for further detail.

In America, FDR's NIRA signaled a shift toward the same sort of arrangement.

[RDR]

Lots of interesting conversations. But let me pontificate a little also.

True. The 4% aren't "people"...just a statistic. How about changing the structures so that isn't required? A high unemployment rate at a monastery would be a real drain on productivity...just as its a drain on national productivity. Of course, we never have that problem.

Below 4 percent unemployment, inflation destroys the savings of people on fixed incomes. Why should those who lived a frugal life and saved be punished by having their savings wiped out?

Yes, inflation can destroy people's savings and can result from too much wage pressures resulting from above full employment. I also noted in my original post that inflation is not the only thing to be concerned about but that some "transitional" unemployment is expected as not labor is so easily transferred from sector to sector. Just as some capital can not be transferred between sectors also labor can have that same inability to adapt although human capital is more adaptable.

Also note that when you talk about the Phillips Curve, it really seems so passe in Economics now. At best it was only signifying a trade off in the short-term. It was shown that the Phillips curve is quite unstable with respect to when inflation expectations change.

That is, the negative relationship between inflation and unemployment is only a short-run phenomenon-it is only while wages are sticky relative to prices that this tradeoff between inflation and unemployment exists.
...
Milton Friedman warned that the Phillips curve could not be used for this purpose and, if it were, the result would be ever higher inflation rates. Key to Friedman' analysis is the fact that a different Phillips curve exists for each level of inflation expectations.

Thus I am more than likely to side with Dave on this issue no matter how stagflation defeated the Phillips curve or not. As inflation expectations are unmoored at a spot Phillips curve then the Phillips curve shifts to right and upward. And if this process is continued can lead to greater levels of inflation.

[RDR]

Dave M » Fri Jul 31, 2009 5:14 pm

If the following Keynes-On-Steroids power grab doesn't scare the shit out of you...

The Bernanke Doctrine

The seven steps that the Federal Reserve needs to take are:

1) Increase the money supply (M1 and M2).

"The U.S. government has a technology, called a printing press, that allows it to produce as many dollars as it wishes at essentially no cost." "Under a paper-money system, a determined government can always generate higher spending and, hence, positive inflation."

2) Ensure liquidity makes its way into the financial system through a variety of measures.

"The U.S. government is not going to print money and distribute it willy-nilly ..."although there are policies that approximate this behaviour."

3) Lower interest rates - all the way down to 0 per cent.
Bernanke observed that people have traditionally thought that, when the funds rate hits zero, the Federal Reserve will have run out of ammunition. However, by imposing yields paid by long-term Treasury bills,

"a central bank should always be able to generate inflation, even when the short-term nominal interest rate is zero ...[this] more direct method, which I personally prefer, would be for the Fed to announce ceilings for yields on all longer-maturity Treasury debt."

He noted that Fed had successfully engaged in "bond-price pegging" following the Second World War.

4) Control the yield on corporate bonds and other privately issued securities.
Although the Federal Reserve can't legally buy these securities (thereby determining the yields); it can, however, simulate the necessary authority by lending dollars to banks at a fixed term of 0 per cent, taking back from the banks corporate bonds as collateral.

5) Depreciate the U.S. dollar.
Referring to U.S Monetary Policy in the 1930's under Franklin Roosevelt, he states that:

"This devaluation and the rapid increase in money supply ... ended the U.S. deflation remarkably quickly."

6) Execute a de facto depreciation by buying foreign currencies on a massive scale.

"The Fed has the authority to buy foreign government debt ... [t]his class of assets offers huge scope for Fed operations because the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt."

7) Buy industries throughout the U.S. economy with "newly created money".
In essence, the Federal Reserve acquires equity stakes in banks and financial institutions. In this "private-asset option," the Treasury could issue trillions in debt and the Fed would acquire it - still using newly created money.

Link

...it should. Mike Shedlock takes on the idea of Bernanke as a "Military Commander Applying Overwhelming Force" (New York Times); and pithily blows apart any notion of the Fed's efficacy.

[RDR]

The fact that Smith's mistake was subtle and causal has only rendered it the more obfuscating and durable. Smith gave to division of labor unwarranted credit for advantages of economic life, a mistake still much with us. Division of labor, in itself, creates nothing. It is only a way of organizing work that has already been created....Division of labor is a device for achieving operating efficiency, nothing more. Of itself, it has no power to promote further economic development. (The Economy of Cities, p 82)

I have no idea why an economist that's major contribution is over 200 years old should be the last word in any field of study.

The writer tries to say that the only gain from division of labor is static gains. I may have to think about this more but it is more likely to be more able to change and adapt to further changes. There is a noted inverse relationship between agriculture plot size and output per acre. But again this is static gains and are not able to use economy of scales as well as new technologies as easily.

The most funny aspect of the paragraph is that division of labor is just considered a device for achieving efficiency. Well that clearly means using less resources, and I presume that is a good thing to use less resources and thus more is left for other consumption streams and not the least being, leisure, environmental services and health/welfare.

Yes some interesting observations. Especially the one about "Division of Labor" creates nothing. I guess she might say the same thing about roads. They produce nothing and one reason that Jacobs does not mind being in the way of expanding roadway access.

Not sure if you have had a chance to read the article: It's the Cities, Stupid. There is plenty of interesting material in that article. I will just start with this one:

But even better are the less read The Economy of Cities (1970) and Cities and the Wealth of Nations (1984), twin volumes which do nothing less than demolish and rebuild macroeconomics. Economics went wrong, she explains, with the work her titles allude to, Adam Smith's The Wealth of Nations. Nations aren't the proper unit of macroeconomic analysis; cities are.

Jacobs arrives at this conclusion by considering the stagflation of the 1970s-- simultaneous high unemployment and high inflation, something that was not supposed to be possible under either left-wing (Keynesian) or right-wing (monetarist) economics. They were supposed to trade off. She points out that this condition-- high prices and not enough work-- is normal for backward regions; Western economists mistook the fitful but constant economic boom from Smith's time on as a permanent condition.

Quote over the top on the "demolish and rebuild macroeconomics". But she does bring out one point I have been trying to convey for a very long time that the stagflation periods was much more of a problem to solve than any problem since and before excluding the Great Depression. Luckily Reagan used a Tinbergen instrument policy rule to combat both inflation and a severe recession at the same time. As far as right-wing, there were Keynesians as Nixon declared that all were. Even afterward, Supply-Siders look to be more Keynesian than Monetarists.

She may be right for certain concepts the City may be more important but then exchange rates play a major role in the macroeconomics of nation states. Although she does not seem to define what the "city" is, I am sure that Lewis Two Sector model could have been of use to her in her understanding. Unfortunately all the intellectuals here studiously ignored it.

[RDR]

That is certainly the case, Ron.
Maybe it was on the old board but I could not find any discussions of the Lewis model of the traditional sector and the "capitalist" sector. It is also used by the followers of Lewis to mean the agriculture sector and the industrial/manufacturing sector and then finally into a rural/urban broad categories. I did find one the papers on the Lewis Model which is a paper of 2004 addressing the 50 years of his theories. Notes on the Lewis Model and Agrarian Structure and the Abstract:

Abstract This paper considers the implications of the Lewis model for agrarian structure in the process of economic development. Beginning with at what Lewis himself has to say about traditional sector transformation in his model, the paper goes on to raise the question of agrarian structure in the context of the model and its assumptions. Particular attention is paid to the question of whether the transition to development implies the promotion of largescale agriculture, or land reform and other policies directed to assist the development of smallholder agriculture. In doing so the paper demonstrates the circumstances under which output under smallholder production will be higher than on large farms and, in a situation where labour is abundant, resources will be more efficiently allocated than under large scale agriculture. The conclusion is drawn that Lewis’s dual economy model has considerable relevance to agrarian policy, perhaps more in the duality of capital markets than labour markets.

OK. So what does Jane Jacobs thinks about this development processes?

But don't cities arise from and depend on agriculture? No: all economic progress originates in cities, Jacobs tells us; and cheekily adds that all agricultural progress originates in cities. Great advances, such as mechanical reapers and electricity, were invented and adopted in or near cities before being applied to agricultural regions farther out. Productivity improvements in agriculture always begin near the cities and spread out.

It is easy to come to a conclusion that Jacobs is urban biased in that passage. Aspects that all economic progress originates in cities and provides the supporting argument by claiming that inventions come from cities, indicates the biases. But this appears more of a tautology than actual understanding the aspects that draw entrepreneurs and inventors to a place that has a lot of social amenities and a greater division of labor. I think we can also assume that a balanced growth plan such as the Lewis model is not for her consideration. Especially since the article states as such:

Unbalanced regions
Cities generate five forces which reach out to transform their surroundings, or the world: their thirst for supplies; their wealth of jobs; their productivity improvements; transplants of city work; and capital.

Perhaps Jacobs's most productive insight is that these forces act in balance only in cities and city regions. Outside them, they act singly, and most often destructively.

[RDR]

The equation does not answer the question of how and only provides insights into inputs and then outputs. I presume that A is to represent increases in activity. If the A is to represent the increases then it must only record the net from additions and not the gross additions and subtractions of labor in the process. The factor nD could be more than or less than D in the gross and one reason for fear of certain sectors shrinking. We can think back to the sabots being thrown into the machines of progress.

Basically this analysis lacks what is the gross effects of the changes are and how they come about.

An understandable misunderstanding of interpretation, of course. Naturally, the board being a difficult place to provide an entire book for an explanation, we get these kinds of nit picky and distractive analyses when someone starts an explanation, rather than serious questions that may help to further a discussion by allowing someone to bring out more of a theory for explication. Let's try to go through it again:

First pass:

In describing the process of adding new work to old -- you'll find a more in depth explanation in chapter three of The Economy of Cities -- she (Jane Jacobs) describes how many businesses change and flourish as the result of adding new work to old work. She cites actual cases of how well known industries we have all heard of, like 3M of Minnesota, transformed from a company that dug, crushed and sorted sand in 1902 to a company that today produces a huge variety of adhesives and tapes, mainly beginning with an attempt to create sandpaper. She has a formula which she describes:

D + A ----> nD

D is an original division of labor.
A is added activity to the original division of labor.
nD is then a resultant expansion of divisions of labor to accomodate the new activity.

This basic formula explains a conceptual process for how existing, established bureaucratic structures deal with the introduction of new innovations by creating new divisions of labor which may often break off from the original (crushing and sorting sand in 3M's case) to become new work. What she exposes is a tension between those old habits and the new ideas that involve individual attention from those involved, who then innovate the new ideas because they see an opportunity of some kind, and thus something new emerges.

That's an explanation of how it takes place, not an abstract generalization that it takes place --

So, "A" in Jacobs' formula represents the "A"ddition of new work, which may come about in a variety of different ways and for a variety of reasons, i.e. new work may be the result of an invention of new products and concepts that may come about while trying to modify existing products, or to answer a need that has suddenly come up. Thus "A" represents the emergence of a type of work that does not now exist in the in-place "D" division of labor production process.

With the company 3M, one of the many examples she gives in the book for how this actually occurs in the real world, in 1902 it was a small and obscure company crushing and sorting sand for use in metal castings and other metal products in Minneapolis. That was their in-place division of labor production process, or their "D." Their first "A" (sandpaper, not a new concept but something they had the materials to make, so they "copied" the concept) was not made as an addition to the whole of that process. It came about from only one part, the sand sorting part of the whole in-place D. From the the new D process, (making sandpaper, which they marketed to entirely different customers) more "A's" came about as the company searched for better adhesive for the sand paper. New products and new productions processes came about from there, new work, (A) was added to old work (resulting in nD, and 3M expanded into new areas and became a producer of a whole family of additional products, some were truly innovations. We know some of them as Scotch tape, sound recording magnetic tapes and so on. Look into the history of 3M if interested.

This is merely a very stripped down effort to describe how the new work begins, be it in a city of small business entrepreneurs or in a major industry. For it to occur something needs to be possible, and that's a deviation from the in place bureaucracy, the division of labor, the "D".

Innovation is often an accident, or a time consuming process that takes a lot of extra energy, expense and time. In one example a guy working in a candy factory brought his boss an example of a new candy bar he had invented on his own time. The boss liked it and asked him how many he could make in a minute. "A minute?! It took me four months to make that one!" Of course the candy company reworked its D to accommodate the new product so it could be mass produced a little more efficiently.

The only thing actually missing from the formula is a representation for research and development, if one wants to account for that in the basic formula. The result of Research and Development is what she represents as resulting in "A" from Trial and Error, or TE, which she includes later in another chapter, "The Valuable Inefficiencies and Impracticalities of Cities."

In that chapter we begin to see how this tension between in place efficient bureaucracy of works ("D") can be at odds with a need to adapt to change ("A"). This same principle can be looked at in any systematic division of labor process, no matter what it is intended to do. The ineffeciancy factor and the costs could be plugged into the formula as such:

D + nTE + A ----> nD

Thus, an in-place division of labor produces nothing new, in and of itself, it is merely the existing method of production put in place in to create products in the most efficient manner possible through what can be also called the "bureaucracy of production," and it will continue mechanically producing in its efficient manner as long as called for.

This is really just a very simple description of the entrepreneurial process. She got some of her inspiration for her ideas for it from people like me, small business entrepreneurs and artists, who discover these ways to innovate in their own small way. Maybe it's easier for people who actually do something with their hands and minds in an actual effort to create and produce things to grasp this simple abstract concept.

I still find not much of what you consider the structure of bureaucracy aside from some vague ideas you are presenting but nothing from the links provided has helped. It seems natural that I should explore this more since you accused me of "labeling" her as both Communist and then as Marxist. Neither being correct anyway. And thus natural that we should explore her underlying assumptions to her model. If that is not wanted then how am I to respond to your accusations? Part of this confusion seems to be that she talks in terms of Macroeconomics like city and rural divide and then innovation is grouped in the authoritarian hierarchical institutions located in "cities" in the Microeconomics sense. Thus the need to clarify her positions on this divide.

I understand the case of 3M, I just do not know if she thinks nD can be greater or less than D. Overall D would be less as less resources are used in the new process.

Innovation is often an accident, or a time consuming process that takes a lot of extra energy, expense and time. In one example a guy working in a candy factory brought his boss an example of a new candy bar he had invented on his own time. The boss liked it and asked him how many he could make in a minute. "A minute?! It took me four months to make that one!" Of course the candy company reworked its D to accommodate the new product so it could be mass produced a little more efficiently.

True enough, but this does show that innovation that takes to make the first one may have high overhead costs. Just as the first dose of a drug or the new operating system by Microsoft costs billions but then after that the marginal costs to produce are near zero. So just shows that intellectual property rights are important in society.

Before posting some notes in the next post about technology, I just wonder if Jacobs is under the concept of "it's in the manual" that the "blueprints" provide all that is necessary for development and there is no transitional or structural costs. Some of the same discussions I had with Lew.

[RDR]

First a paper from Jeffrey Sachs {} that brings out some important points, but still some questions left unanswered...
Jeffrey Sachs (2000) Tropical Underdevelopment, CID Working Paper No. 57 CID Working Paper No. 057, December 2000 Tropical Underdevelopment Jeffrey D. Sachs
I could include all my notes but maybe someone will read it first.
I am also including some select passages from Lall's work, since it might not be available on-line. I also have some notes on that too.
Lall, Sanjaya (1993) ‘Understanding Technology Development’ Development and Change, Sage: London, Newbury Park and New Delhi, vol. 24, pp 719–53.

Part of this difference in performance is traceable to different policy environments that allow firms to respond properly to market incentives in one country but hold back the response in another. Of the rest, however, much is explained by differences in the ability of productive enterprises to handle industrial technologies and cope with technical change: in other words, by their technolgical capabilities.

Technological capabilities (TCs) in industry are the skills - technical, managerial and institutional - that allow productive enterprises to utilize equipment and technical information efficiently. Such capabilities are firm-specific, a form of institutional knowledge that is made up of the combined skills of its members accumulated over time. The development of such capabilities may be defined as industrial technology development (ITD).

ITD in developing countries should not be seen as the development of the ability to undertake frontier innovation, though innovative capabilities are one form of TC. It comprises a much broader range of effort, reviewed below, that every enterprise must itself undertake in order to absorb and build upon the knowledge that has to be utilized in production. The successful transfer of a new technology to a developing country has thus to include a major element of capability building: simply providing equipment and operating instructions, patents, designs or blueprints does not ensure that the technology will be properly used. These 'embodied' elements of a technology have to be accompanied by a number of 'tacit' elements, which have to be taught and learned (Nelson,1987).

2. Characteristics of Technological Capabilities
To reiterate, TCs in manufacturing are the skills, technical knowledge and organizational coherence required to make industrial technologies function in an enterprise. They are not the technology that is 'embodied' in physical equipment or in manuals, blueprints and patents that are purchased by the enterprise, though these are the tools with which capabilities are put to work. ...passive 'learning by doing'...passive learning.

Regarding capability building as an investment helps highlight its most important features:
1. The investment has to be conscious and purposive.
2. Investments in TC, like other investments, are highly sensitive to the incentive environment, the cost of the investment, and the availability of the investable resources.
3. There is no predictable learning curve down which all firms travel. ...the learning process itself has to be learnt.
4. The growth of TC can take place at almost any point in the production process: shop-floor, engineering, design, procurement or formal R&D.
5. The complexity, cost and risks of TC investments rise with the sophistication of the technology and the level of technological development reached.
6. Manufacturing enterprises do not develop capabilities in isolation.
7. Finally, the development of TCs in enterprises, and so in industries and economies, follows an evolutionary but individual path.

[RDR]

How Poly is a Propagandist

Seemingly Poly didn't take my Reporting of his comment as being offsive to heart.

Seemingly Poly didn't take my Reporting of his comment as being offensive to heart. So we will allow the cleansing properties of sunlight to judge whether Poly is consumed by the disease of ideology.
Poly Post a interesting piece regarding Neuro-linguistic found Here take it or leave it, it matters little.

But Poly acting like a troll, consumed by his ideology decided to add his commentary to the”informational” piece he posted Here and I quote:

Tactics of the Far Right On This Board and Elsewhere

Since the piece he posted from is ideologically free. This is of his own accord. To head off what I am sure he suspected would be a retort to this obviously offensive comment about fellow posters of this board. He locked the Thread. A report was filed and action was taken and here we are.

“Ideology is a Disease” he write on every post he writes. For those of us who were here during the Bush years have seen equal to greater shows of disinformation spewing forth from the Left. It would have been better had Poly taken the neutral ground as moderator and poster if he had just left out the blatant ideological bias in his “informational” post. Instead he took that opportunity to attack and broadside the conservative side of this forum.

Poly, perhaps you should get some medicine for that disease you seem to have. I would hate to see it spread to a pandemic.

[RDR]

A collection of great debunking videos...

MYTH: They were predicting global cooling in the 1970s
I Love the 70s!!
http://www.youtube.com/watch?v=4nTw0KneNLg

Climate Denial Crock of the Week/Mars Attacks Remixed
http://www.desmogblog.com/climate-denia ... ks-remixed

1998 Revisited
http://www.youtube.com/watch?v=QwnrpwctIh4&e

Climate Crock of the Week... All Wet on Sea Level Rise
http://www.youtube.com/watch?v=PEXtrLKru-Y&e

MYTH: It's the Sun &/or Sunspots
Solar Schmolar: Debunking the "It's the Sun" fable
http://www.youtube.com/watch?v=_Sf_UIQYc20&e

MYTH: Other planets warming prove it's the sun
Mars Attacks!!
http://www.youtube.com/watch?v=YhHoCb6OBiI

MYTH: "The Hockey Stick" is broken
"The Medieval Warming Crock"
http://www.youtube.com/watch?v=vrKfz8NjEzU

MYTH: A cold day in ____ proves climate change isn't happening
"It's cold. So there's no Climate Change"
http://www.youtube.com/watch?v=l0JsdSDa_bM

MYTH: It's a natural 1500 year cycle
That 1500 Year Thing
http://www.youtube.com/watch?v=G0HGFSUx2a8&e

MYTH: 30,000 scientists signed a petition
The Great Petition Fraud
http://www.youtube.com/watch?v=5P8mlF8KT6I

MYTH: Sea levels are not rising, or not like they said
All Wet on Sea Level rise
http://www.youtube.com/watch?v=PEXtrLKru-Y

MYTH: Climate change ended in 1998
Party like it's 1998
http://www.youtube.com/watch?v=y15UGhhRd6M

MYTH: CO2 is not driving climate change
Sense from Deniers on CO2? Don't hold your breath....
http://www.youtube.com/watch?v=WPA-8A4zf2c

MYTH: Climate change is good for plants and crops
Don't it make my Green World Brown: CO2 and plant growth
http://www.youtube.com/watch?v=vFGU6qvkmTI

MYTH: The climate models are unreliable
This Year's Model: Climate models and modeling
http://www.youtube.com/watch?v=D6Un69RMNSw&e

MYTH: Arctic ice is recovering
Polar Ice Update: Arctic Perennial Ice and Methane
http://www.youtube.com/watch?v=MozcU7woNNQ&e

Ice Area vs Volume: Debunking the "Ice is back to 1979 levels" idiocy
http://www.youtube.com/watch?v=2nruCRcbnY0

MYTH: Weather stations are unreliable
Watts Up With Watts?
http://www.youtube.com/watch?v=P_0-gX7aUKk&e

The "Urban Heat Island" Crock
http://www.youtube.com/watch?v=B7OdCOsMgCw

MYTH: The "lag" shows CO2 does not cause climate change
The "Temp leads Carbon" Crock
http://www.youtube.com/watch?v=hWJeqgG3Tl8&e

The Big Swindle Movie
http://www.youtube.com/watch?v=boj9ccV9htk

Re: "The Cooling"

[RDR]

Every progressive on this board bemoans the alleged deregulation that has gone on over the past few years. What I never hear is why do we need regulation? Can't civil law and criminal law cover your concerns? Also, I would like to now where these regulations you do support should come from. The Congress? The Executive Branch and its Agencies?

I have never identified with "Progressive" ideas and even Hoover was not a good example.

But as the traditional liberal, let me try to answer this. First though let me state that "regulation" is often twisted and turned around so much so not sure if we will always be on the same page on this concept. Anyway, the short answer is contained on the other thread you have started also today:

I pose this question to anyone on this board. For me, as long as gov't exists, its role should be the protection of individual rights. In the case of the U.S., the Federal government is supposed to protect the Amercian people from outside threats, ensure that there is free trade among the states, coin money, have courts to adjudicate disputes among the states and for other matters that only involve the federal gov't and its territory, and a few other minor things. Everything else falls under the purview of the state governments. Of course, state governments also have constitutions that limit what they can do.

Or to quote Federalist 45,

“The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.”

I'm interested to hear how progressives and conservatives will answer my question.

From that passage, it supports some level of Federal Government and not strictly an Anarchist view. Thus my answer is simply that regulation as well as any other action of the Federal Government is to overcome non-trivial market failures that governments can provide more efficiently. As I said in the other threads, the first responsibility of governments is to get out of the way of consenting adults in dealing with other adults in mutually beneficial ways.

National defense and defense of individual rights {property rights} is a couple of examples of where markets tend to under-supply in the market and has strong tendencies of free-riders. There are other examples of market failures that may need to be enumerated but maybe more later.

One example comes to mind is the rise of state employment offices that supplied basic employment opportunities in the economy at very low or no costs. It stopped the "handbills" phenomenon that drove oversupply of workers in certain localities. "The Grapes of Wraith".

godknows

[RDR]

Also, I am not formally educated in economics, so forgive my ignorance if need be, but I have never seen anything about the alternatives to capitalism. It seems to me that their really is no alternative to capitalism, and regulated capitalism. other than subsistance living. Would somebody please provide a list of the "various" (which I doubt) forms of economies, and where they take place? It seems to me that people have money, buy and sell items, and accumulate money and goods everywhere in the world, so I would say that all peoples over the world except for the most primitive, are engaging in capitalism in one way or another.

Pleased.

In the 20th century:

Imperialism (failed)
Fascism (failed)
Import Substitution (failed)
Stalinism (failed)
Socialist Division of Labor (failed)
Maoism (failed)
Export Promotion (jury is out)
"Appropriate" Development (failed)
Islamic Development (jury is out)
Liberalism (mostly successful, but not without problems)

Well, I am not so certain to say that we can categorically claim that there is single word to describe the outcomes. It depends on what the goals were that is, no?
Imperialism {success for a limited time and limited peoples-overall good riddance}
Fascism {success for trains on time and economic growth for again a limited number of people in limited circumstances}
Import Substitution (ISI) {mixed results but not worth the efforts IMO but unmitigated failure when policies of autarky was tried, some of the successes most noted are through "Easy ISI", that is where consumer non-durables are promoted as well as agricultural value added products, and that is one aspect that has the most success}
Stalinism {it transitioned to an industrial state but the cost in human lives is not something I consider a success just like Imperialism and Fascism},count this the same Marxism, Maoism, Leninism, and any other combination.
Export Promotion {maybe not success by some standards but was most definitely better that ISI, it should be noted that the two are not mutually exclusive, Export Promotion often starts with devaluation and this will lead to higher costs for imports and that indirectly promotes import substitution}
"Appropriate" Development {not familiar with that terminology so no comment}
Islamic Development {unlikely as banking is significantly restricted}
Liberalism {Exactly!!!}

[RDR]

As a matter of fact, some economists agree with the selection process methods used and decided to in fact to award First-Year Grad Student {with} Nobel Prize in Economics!:

Pfuffnick's Nobel Economics Prize triumph hailed by many

LONDON — The surprise choice of first-year graduate student Quintus Pfuffnick for the Nobel Prize in Economics drew praise from much of the world Friday even as many pointed out the youthful economist has not yet published anything in scholarly journals.

The new PhD candidate was hailed for his willingness to tackle difficult problems, his commitment to improving the economic system, and his goal of bringing efficiency and equality into harmony.

Professor Paul Krugman of Princeton, who won the prize in 2008, said Pfuffnick's award shows great things are expected from him in the coming years.

"In a way, it's an award coming near the beginning of the first year in grad school of a relatively young economist that anticipates an even greater contribution towards making our economy a better place for all," he said. "It is an award that speaks to the promise of Mr Pfuffnick's message of hope."

He said the prize is a "wonderful recognition of Pfuffnick's essay in his grad school application."

[RDR]

The created the advantage over other nations on their own.

That's not what Ricardo's theory is about. You don't understand the theory of comparative advantage.

I guess I have stared at this post long enough to have come to a statement that may be relevant. I admit that I still may not have all nuances down to explain it fully but let me try.

First you are right that it is not strictly Ricardo's theory {as far as I can determine} but there is a concept of "dynamic comparative advantage". This is basically that a country can acquire certain traits that allow them to gain a comparative advantage in certain traits. One of the discussions along this line is the East Asian Tigers. As some have called it not necessarily was it "picking winners and losers" but it was more like "creating winners". How it is done is more important than what was done as many other nations tried also the same general techniques with abject failure.

But you are right that some do not understand comparative advantage even if pointing to a source that spells it out. As the example of comparative advantages was based on innate traits and not aspects that deal with dynamic comparative advantages. The one criticism I have of the link is that it shows the case of complete transition to the respective comparative advantages but in real life it is not so simple. For one aspect was that world production was only one unit of both wheat and wine and unless the units can be divided then trade may not go to complete specialization and the question as to how the gains are divided. I have seen other examples that shows the trade for each unit.

Just like most things Thom writes he just gets Ricardo's theories wrong also. He quoted the following in separate paragraphs in his book "Screwed" on pages 173-174.

Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.

He started this segment with the statement and ended with the second portion:

Cons argue the "productivity" is responsible for the loss of American jobs.
<snip>
In other words labor is part of the game of business, and one of the first goals of the game of business is "perpetuate" the existence of the laborers themselves. That's the natural price. If businesses want to keep their workers, according to Ricardo, they must make sure that the market price of labor is at least as much as the natural price of labor. And the natural price is the "subsistence" price-just enough to survive-which brings us back to Dicken's world.

Well the problem is that this is more along the lines of Malthus thinking and not something that conservatives adhere to. It is worth noting the two of them had close relationships and even the book makes mentions to Malthus in the same chapter. Thom is closer to the Malthus thinking than any conservative that I have read or corresponded with. Malthus felt that humankind would always stretch the limits of resources and famines would always be the burden of mankind. Sort of like many of the posters here. But to get more of Ricardo's book and what he means by this "natural" and "market" price of labour:

5.2 The power of the labourer to support himself, and the family which may be necessary to keep up the number of labourers, does not depend on the quantity of money which he may receive for wages, but on the quantity of food, necessaries, and conveniences become essential to him from habit, which that money will purchase. The natural price of labour, therefore, depends on the price of the food, necessaries, and conveniences required for the support of the labourer and his family. With a rise in the price of food and necessaries, the natural price of labour will rise; with the fall in their price, the natural price of labour will fall.
5.3 With the progress of society the natural price of labour has always a tendency to rise, because one of the principal commodities by which its natural price is regulated, has a tendency to become dearer, from the greater difficulty of producing it. As, however, the improvements in agriculture, the discovery of new markets, whence provisions may be imported, may for a time counteract the tendency to a rise in the price of necessaries, and may even occasion their natural price to fall, so will the same causes produce the correspondent effects on the natural price of labour.
5.4 The natural price of all commodities, excepting raw produce and labour, has a tendency to fall, in the progress of wealth and population; for though, on one hand, they are enhanced in real value, from the rise in the natural price of the raw material of which they are made, this is more than counterbalanced by the improvements in machinery, by the better division and distribution of labour, and by the increasing skill, both in science and art, of the producers.
5.5 The market price of labour is the price which is really paid for it, from the natural operation of the proportion of the supply to the demand; labour is dear when it is scarce, and cheap when it is plentiful. However much the market price of labour may deviate from its natural price, it has, like commodities, a tendency to conform to it.
5.6 It is when the market price of labour exceeds its natural price, that the condition of the labourer is flourishing and happy, that he has it in his power to command a greater proportion of the necessaries and enjoyments of life, and therefore to rear a healthy and numerous family. When, however, by the encouragement which high wages give to the increase of population, the number of labourers is increased, wages again fall to their natural price, and indeed from a re-action sometimes fall below it.
5.7 When the market price of labour is below its natural price, the condition of the labourers is most wretched: then poverty deprives them of those comforts which custom renders absolute necessaries. It is only after their privations have reduced their number, or the demand for labour has increased, that the market price of labour will rise to its natural price, and that the labourer will have the moderate comforts which the natural rate of wages will afford.
5.8 Notwithstanding the tendency of wages to conform to their natural rate, their market rate may, in an improving society, for an indefinite period, be constantly above it; for no sooner may the impulse, which an increased capital gives to a new demand for labour be obeyed, than another increase of capital may produce the same effect; and thus, if the increase of capital be gradual and constant, the demand for labour may give a continued stimulus to an increase of people.

From: Chapter 5 Of Wages

godknows

PS: Thom, you did not even bother to make footnotes for chapter 13. Great job!

[RDR]

Reference please.

Most of what I wrote was in regards to local papers as well as community council meetings. Much as your links show. I appreciate that you are honestly looking at this issue so let me add one source that I did Yahoo!

Oil Spills: Impact on the Ocean
Oil wastes that enter the ocean come from many sources, some being accidental spills or leaks, and some being the results of chronic and careless habits in the use of oil and oil products. Most waste oil in the ocean consists of oily stormwater drainage from cities and farms, untreated waste disposal from factories and industrial facilities, and unregulated recreational boating.

It is estimated that approximately 706 million gallons of waste oil enter the ocean every year, with over half coming from land drainage and waste disposal; for example, from the improper disposal of used motor oil. Offshore drilling and production operations and spills or leaks from ships or tankers typically contribute less than 8 percent of the total. The remainder comes from routine maintenance of ships (nearly 20 percent), hydrocarbon particles from onshore air pollution (about 13 percent), and natural seepage from the seafloor (over 8 percent).
Prevalence during Drilling versus Transportation
Offshore oil spills or leaks may occur during various stages of well drilling or workover and repair operations. These stages can occur while oil is being produced from offshore wells, handled, and temporarily stored; or when oil is being transported offshore, either by flowline, underwater pipeline, or tanker. Of the approximately 706 million gallons of waste oil in the ocean each year, offshore drilling operations contribute about 2.1 percent, and transportation accidents (both ships and tankers) account for another 5.2 percent. The amount of oil spilled or leaked during offshore production operations is relatively insignificant.

Oil waste from offshore drilling operations may come from disposal of oil-based drilling fluid wastes, deck runoff water, flowline and pipeline leaks, or well failures or blowouts. Disposal of offshore production waste can also pollute the ocean, as can deck runoff water, leaking storage tanks, flowline and pipeline leaks, and the wells themselves. Oil spilled from ships and tankers includes the transportation fuel used by the vessels themselves or their cargos, such as crude oil, fuel oil, or heating oil.

It is worth noting that Exxon Valdez oil spill was 10.8 Million Gallons. Read the rest but that should be at least close to what my statements were conveying.

godknows
Obama wins Nobel Peace Prize

[RDR]

I apologize for misspelling your name. As you can tell, I really care less about your personal life then you seem to be about mine.
So, whose email did you share with Board Administrators? Did you think that violating personal confidences in order to ingratiate yourself with the Administrators was an honest thing to do? Or is violating personal confidences no big deal to you?
If I am a "liar," what are you, who divulges privileged communications in order to make yourself the favorite of the Administrators?

So are you admitting that your objective is to destroy the board and the credibility of Thom and his listeners?? By some of the postings by you and your comrades it does seem that is true.

As usual that has been the tactic of the Republicans for years...stop all speech but their own. They talk about being for Democracy, but they'll do everything they can to only have their side be heard.

Thank you to whomever let this out. The comrades are acting like a bunch of children. If someone is paying them, they sure are wasting their money.

[RDR]

This Board knows where I stand on this question; where do you stand?

Well I am not sure. After reading your post {although did not bother with reading all the linked articles} several times, I can not help but to ask for clarification. When you talked about the right to development are you talking in terms of positive rights or negative rights. I understand that these concepts may be so rudimentary as to be silly but I could not get past these concepts in reading your post.

The right to development is an inalienable human right by virtue of which every human person and all peoples are entitled to participate in, contribute to, and enjoy economic, social, cultural and political development, in which all human rights and fundamental freedoms can be fully realized.

It reminds me of the US phrase "pursuit of happiness". I can find no reason that people in general do not have a right to development in whatever fashion they want. If they want to live in a cave, like people in Cuba and North Korea do under their "Socialist Revolution" then fine by me {given that people can leave those countries on their own free will}. Autarky works so well for them, that I think they should even continue it longer.

As far as the US is concerned then we should grant them the right to become a development partner with the USA. We should unilaterally lower any and all trade and capital restrictions with the Bottom Billion countries and let them decide what levels of protectionism they want. High income countries may need some brakes on hot money flows but only under severe hot money flows.

So, where do you stand, with the poor countries or the rich? If economic development is a fundamental human right, then efforts by interest groups in the rich countries to prevent the "outsourcing of jobs" and to erect protectionist barriers to trade might be construed as violation of fundamental human rights.

This only seems to be the case if it is a positive right and that we must lower our trade restrictions. I have no problem with the negative rights granted but as far as the positive, I would still want some level of politics to deal with "rogue nations" or use trade as a tool for diplomacy.

godknows

[RDR]

Perhaps I’m reaching, but I think I see a hint of something more insidious and incendiary behind the vitriolic tea bagger outrage than what we typically think of as racism. Perhaps it’s because I grew up on the fringes of the deep south culture where people could still point out lynching trees, could still remember the time those trees swung their last victims. Perhaps it’s because some argue that the first major land battle of the Civil War1 took place less than a mile down a dirt road from our hardscrabble family farm. But in truth, perhaps it’s because the strongest taboo in the pre and post-Civil War South was any association between a black man and a white woman.

Barack Obama, born of a union between a black man and a white woman, was elected president of the United States in 2008, after a contest determined in large part by the enthusiastic support of American white women. Even now, months later, women find a deep connection with his sincerity, his strength, and the vitality of his presence. Bluntly put, he is an appealing man on many levels and, just maybe it is this deep emotional connection between the President and his white female supporters that infuriates certain elements within the white population. If this is the case, does the basis for their fury hide deep in their psyche, or are they willing carriers this toxic miscegenation meme? Does the realization that countless white women articulate and demonstrate their admiration and devotion to a black man trigger smoldering anger that lingers until kindled by a right wing propagandist2 into a backlash that threatens the very stability and safety of our public discourse?

Perhaps I’m reaching, but I don’t think so. Do you?
Nancy Frank, PH.D.

1 http://en.wikipedia.org/wiki/Battle_of_Carthage_(1861)
2 From http://en.wikipedia.org/wiki/Propaganda : “Propaganda is generally an appeal to emotion, not intellect.”

http://www.thomhartmann.com/board/viewt ... f=5&t=2093

[RDR]

Define profoundly sick.

I can't. Some people think it is. I was hoping they would educate me.

We have problems, some of them profound. Sick? I can think of many worse, e.g., Somalia, Zimbabwe come to mind.

Let me pontificate. Not because I believe that we are any more sick than any other "society" {sic} but a casual observer of it and those "its".

First, I would like to separate the merely studiously ignorant that live in some fantasy world full of unicorns and monasteries containing only the Übermensch with what I like to call pseudo intellectual nihilistic drop outs.

The second category tries to describe humans as nothing more than a "virus". Of course they use pseudo statistics to show population growth and correlate it in spurious ways {technically speaking of course} with population growth. Even in their writings it comes across as nothing more than contempt for their fellow mankind other than those that worship them. You really have to believe other humans are of less value than plants and animals if you consider 6 billion humans dieing as something good. Some most definitely have the trait of narcissism {specifically Compensatory Narcissistic Personality Disorder}.

I am sure there are a variety of strains of this if I gave it more thought. Since Derrick Jensen was brought up, he seems to fit the bill nicely. As I noted elsewhere he values humans very lowly and thus rejects "civilization" and any manifestation of that beyond cave men status. So much for any agreement with Jane Jacobs that identifies cities as the source of growth of mankind. For those nihilists {DJ} I can only ask that they leave this planet and leave their chemicals behind.

Besides the blatant rejection of all human values as DJ shows, there is also a variety that rejects all fundamental human constructs that would help build society. They reject socialism/communism/Marxism/Leninism/Maoism/etc but strangely trumpet those thinkers around like they have something close to the truth. They easily reject the simplistic model of Corporatism but strangely most support the Dems with their corporatist agenda. They quickly put corporatism under the banner of Fascism and then try to label it under the "extreme right" with endless pseudo intellectualism. Useful idiots come to mind. They also reject liberal democracies and try to identify it as something else including the polysyllabical word Polyarchic.

Thus they reject all forms of government in a civilized society without explaining anything as a substitute beyond destroying civilization either explicitly or implicitly. Basically I sum it as nihilism gone mad.

So going back to Gen's questions, it is a sick society since humans are in it or that the structures are sick as in the authoritarian hierarchical structures. I hope that helped explain my understanding, considering that I am not writing an doctorate thesis on it {yet}.

godknows

[RDR]

Perhaps I’m reaching, but I think I see a hint of something more insidious and incendiary behind the vitriolic tea bagger outrage than what we typically think of as racism. Perhaps it’s because I grew up on the fringes of the deep south culture where people could still point out lynching trees, could still remember the time those trees swung their last victims. Perhaps it’s because some argue that the first major land battle of the Civil War1 took place less than a mile down a dirt road from our hardscrabble family farm. But in truth, perhaps it’s because the strongest taboo in the pre and post-Civil War South was any association between a black man and a white woman.

Barack Obama, born of a union between a black man and a white woman, was elected president of the United States in 2008, after a contest determined in large part by the enthusiastic support of American white women. Even now, months later, women find a deep connection with his sincerity, his strength, and the vitality of his presence. Bluntly put, he is an appealing man on many levels and, just maybe it is this deep emotional connection between the President and his white female supporters that infuriates certain elements within the white population. If this is the case, does the basis for their fury hide deep in their psyche, or are they willing carriers this toxic miscegenation meme? Does the realization that countless white women articulate and demonstrate their admiration and devotion to a black man trigger smoldering anger that lingers until kindled by a right wing propagandist2 into a backlash that threatens the very stability and safety of our public discourse?

Perhaps I’m reaching, but I don’t think so. Do you?
Nancy Frank, PH.D.

1 http://en.wikipedia.org/wiki/Battle_of_Carthage_(1861)
2 From http://en.wikipedia.org/wiki/Propaganda : “Propaganda is generally an appeal to emotion, not intellect.”

I like most participants on this thread find very little substance to help you in your quest since it is mainly an appeal to emotion and not much on pertinent facts. So your last sentence sums up our interpretations of your post.

If it was not obvious, I pointed out the blatant way the Democrats showed their sexism. As a woman how did that make you feel?

As far as your stories of lynchings, luckily I am not a white man and my family was more than likely the end of the rope than one of the mob.

I do have one question. What characteristics does "this toxic miscegenation meme" have that qualifies it as a meme.

godknows

Well since Dr. Frank has not graced us again with her thoughts on clarification, I can see the ideas of sexism has not been another taboo subject here. The more I read her post the more I get the sense of a dime store novel instead of serious search for knowledge in a scientific manner. For example:

Does Nancy realize that white racism did not prevent Obama from being elected president? What the hell is she worried about? Nobody denies the existence of racism in America, but historically speaking, racism wasn't our big problem. Our big problem as a nation was white supremacy. That part has been mostly dismantled.

It certainly seemed to be a problem in any woman being elected.
I think if we look through history it was women that was the last to achieve equality {at least in the USA experience}.

One theory I have read and heard about was the Northern whites considered if blacks got the right to vote and emancipated {on paper at least} that it could only lead to women also get the right to vote. Well in that case it took around 50 years for their right to vote.

High Negativity Ratings
I have been thinking about this and pose a possible explanation. The TV news stations (MSNBC, CNN, NBC etc) all make very derogatory, sexist comments about her every day. Here are some of the names she is called or described......looking like everyone's first wife, tough bitchy image, (MSNBC); reminds men of their nagging first wives, only reason she is a candidate for anything is because her husband messed around; men hear, "take out the garbage"; reminds men of their nagging wives, (Fox) Does Hillary shave?; Someone has to take her behind the barn; Scolding mother; White women are a problem, but we all know that....(all male panel at Fox laugh knowingly). The negative comments are not just on newscasts, they are in writing and objects for sale like the Hillary Clinton nutcracker where the nuts are cracked between her legs. (I saw a whole display at the Washington Reagan airport this past weekend.) And how about the bumper stickers and political signs that read....Life's a bitch, don't elect one! or What is Hillary? C.U.N.T. (citizens united not timid) or this one...showing an elephant with "the good" under it, a donkey with "the bad" under it and Hillary with "the ugly" under it....or the hand made sign held up that says, "Iron my shirt!" Rush Limbaugh has described her strength in an unusual way by saying, "Mrs Clinton's testicle lockbox is big enough for the entire democratic hierchy." And that is supposed to be a compliment!!!

Now if you did not know a person or had never met her, and you got your information from tv and the print media, wouldn't you think that if all these people say such terrible things about someone, some of it must be true and you probably would think less of them or have somewhat of a negative reaction to them. These comments are made mostly by men (not all) and they are against a woman, a powerful woman who will not go away, who will not step aside, who will not accommodate them or be controlled by them. This is sexism, pure gut level, unconscious cultural sexism. And it is important to note that sexism is not limited to men against women, women are very sexists against each other, almost instinctively and sometimes unconsciously but that is a whole other blog. Rev. Jerimiah Wright in one of his sermons said, Hillary ain't never been called a nigger....and he is right. But that is about all she hasn't been called.

I'm amazed at how much hostility the left shows toward interests groups, which allow individuals to influence government in-between the occasional election.

[RDR]

Traits of an internet troll

Women
Insecure
Probably a child bully
Wants to intimidate others, but only feels “secure” under the guise of a MB
Scared
Coward
Hysterical

While I am sure there are various types of trolls on message boards, the ones I am the most fascinated by are those who develop long term relationships with their “host”.

Why do they choose a certain individual or site? I suspect in the case of Thom Hartmann, they have listened to his program, and decided that they agree with him 100%, so they become increasingly obsessed with the idea of attempting to disparage opposing views. As these individuals are not in any influential position to support Thom on directly, they find other methods, such as posting on his message board. Trying to indoctrinate the community in this environment. Why they think it has an impact on the host himself I don’t believe is the primary issue. I think the real issue is to attack the people who listen and oppose Thom Hartmann. After all if you can’t understand what Thom is talking about, you go after his opponents- right?

I dare say for those of us who have been a part of this board community for years (and I know I am a relative newbie compared to others here), its disheartening to witness the evolution of this MB. However I have learned much about human nature in general observing the characteristics and actions of these “Thomlanders”. Those who have very little power in the “real” world want to create an environment in which they believe they can indoctrinate others. I suspect before the Internet, these same women would have been more likely to be possessive or stalkers (unfortunately, I have had some experience with these type of women and the similarity in personality type is uncanny), so in that respect I think the relatively benign action of Internet bullying probably has saved many an individual from more direct assault.

I am curious what others here think. These are just my observations, but I find the human psyche a constant source of disappointment.

[RDR]

It's interesting that you trash the "liberal trolls" on this issue. The solutions the paper seems to suggest is the breaking up of the big firms, and limiting the power of business to influence government so that a more free MARKET economy returns.

By appealing to the best of the populist tradition, we can introduce limits to the power of the financial industry — or any business, for that matter — and restore those fundamental principles that give an ethical dimension to capitalism: freedom, meritocracy, a direct link between reward and effort, and a sense of responsibility that ensures that those who reap the gains also bear the losses. This would mean abandoning the notion that any firm is too big to fail, and putting rules in place that keep large financial firms from manipulating government connections to the detriment of markets. It would mean adopting a pro-market, rather than pro-business, approach to the economy.

I'd agree that the Obama administration is failing in those tasks (the people he hired guaranteed he would), but it's the "liberals" that are blistering him for it, including Thom who apparently you don't have much respect for as it relates to economics. I don't see any evidence that the so called free market conservatives have a clue that supporting a business or small group of businesses might be detrimental to free markets. But I've seen several people on "liberal" outlets who grasp it. The entire premise of Ravi Batra is free markets are dying because of the rise of pro-business forces that have won (bought) policies that ultimately benefit only a tiny slice of firms and more importantly a tiny slice of owners of those firms.

Maybe making this a conservative versus liberal issue is a mistake, but your invitation to read the paper invites it. I read the paper and conclude the liberals have it much more right than the so called free market conservatives in both parties who have us speeding towards a pro-business economy and killing free markets. The real frustration is there is essentially NO talk, no debate, no open discussion at all along these lines among the mainstream, either in national politics or the non-fringe media. There just is no opposition to the big business model.

FWIW, I don't see how inequality has much to do with anything. It's a matter of fairness, a reward for actual achievement, instead of anger about the actual levels of pay. Never seen anyone complain about tech billionaires or Buffett or Gates or many others, since they don't appear to have looted the country to get their bonuses like the finance boys did the last few years.

Just throwing down the gauntlet. Considering the conservatives here are criticized in the same manner then returning the favor is always fun.

First it is different between the liberal stance that all business influence is bad and the stand by conservatives that undue influence by one sector of the economy is bad, just as if labor unions had too much power in congress also. For me liberals have not convinced me that corporations and business interests should not have a voice in the government also. The paper states the following:

The real effect of Gramm-Leach-Bliley was political, not directly economic. Under the old regime, commercial banks, investment banks, and insurance companies had different agendas, and so their lobbying efforts tended to offset one another. But after the restrictions were lifted, the interests of all the major players in the financial industry became aligned, giving the industry disproportionate power in shaping the political agenda. The concentration of the banking industry only added to this power.

That to me is an eye opener since it was not necessarily the individual parts of the GLB but that the confluence of powers that made it an important issue. I have studied much on financial systems and they are the most prone to having contagion effects on the economy. Even as you point out that the system can not support complete collapse of the banking system.

If you read through the paper there is a lot of concern by conservatives that align with "big business" {as he describes it} based on the fact that if property rights are violated just because of "bigness" then next in line is determining how big a lot size makes a person a member of the Kulak class and destined for a bad situation.

Well we are having a discussion here, right? And the information is available, right? No people like Ravi are just not economist by my standard. And no the left does not have it better when they first were all for the TARP and the "Stimulus" and the "Soak the Rich" mentality as well as lot of anti-corporation rhetoric. The paper notes:

While such extreme episodes have, fortunately, been quite rare, they are symptomatic of a broad discontent. In one recent survey, 65% of Americans said the government should cap executive compensation by large corporations, while 60% wanted the government to intervene to improve the way corporations are run. And those views hardly reflect confidence in the government: Only 5% of Americans in the same poll said they trust the government a lot, while 30% said they do not trust it at all. It is just that, at the moment, Americans trust large corporations even less: Fewer than one out of every 30 Americans say they trust them a lot, while one of every three Americans claims not to trust large corporations at all.

There obviously a disconnect from people that live their economic lives by dealing with corporations on a daily basis and the concept of "corporations" that want to steal and kill their customers. Conservatives for the most part point this out and say if there is a problem then deal with them but not destroy the structures that support our society and economy. And as least for here, I think all the conservatives do not believe in too big to fail. I would be one of the few to advise that the "unwinding" of insolvent banks is more important than any other bankruptcy as you pointed out in your posts. I am not even sure if I understand what people mean by "bail outs" since the unwinding can happen in a variety of ways.

Yes I agree it is about "fairness" but many people here and other liberal places have even stated that Bill Gates and Warren Buffet should not be allowed to give their money away as they choose, since it is "our money". And this matter of fairness is ingrained in conservative thoughts for even conservatives that make less than median income levels.

godknows
PS: Some interesting thoughts, maybe some more later including the post about a tax for the TBTF corporations.

[RDR]

Thanks for proving my point.

I don't see any evidence that the so called free market conservatives have a clue that supporting a business or small group of businesses might be detrimental to free markets.

Here's another snippet that I agree with:

It is also no coincidence that in the early part of the 20th century, fueled by an inquisitive press and a populist (but not anti-market) political movement, the United States experienced a rise in regulation aimed at reducing the power of big business. Unlike in Europe — where the most vibrant opposition to the excesses of business came from socialist anti-market movements — in the United States this opposition was squarely pro-market. When Louis Brandeis attacked the money trust, he was not fundamentally trying to interfere with markets — only trying to make them work better. As a result, Americans have long understood that the interests of the market and the interests of business may not always be aligned.

That is correct in my view. There is a fundamental difference, IMO, between what is good for Goldman Sachs, as an example, and what is good for markets. They compete on a field tilted incredibly in their favor. We just made them and the other TBTF banks Government Sponsored Enterprises. But if you suggest breaking them up, the so called free market conservatives squeal like stuck pigs as if it helps the country to have a TBTF enterprise who gets to pay out private profits at an average pay per employee of $700,000 or so, but with a taxpayer guarantee. That's offensive to free markets in my view.

And you don't have to have government do the breaking up. Many commentators propose Ma Bell or Standard Oil (?) type approach, but another would be for regulators or Congress to impose punitive capital requirements on the larger banks, or impose a higher FDIC premium based on size with a big jump at some level that is considered Too Big To Fail. Those measures would accomplish the same goals by making the big boys less competitive because of their size, providing strong incentives to break into smaller pieces.

Europe has it right, IMO. They've moved towards a straight up conclusion, TBTF is too big to exist.

True enough on the Goldman and the good of the economy and the USA. But it is also not necessarily given that what is bad for Goldman is good for the country, no?

Aside from the incestuous relationship already noted in the paper I linked to, why do you think the field is tilted incredibly in their favor? And how is what someone gets paid offensive to the free market? Are you just as upset when actors and athletes get huge sums of money to do silly little things?

Anyway, I would agree that a tax might be a really good idea but I am afraid that you are looking beyond just internalizing the externalities and want to bankrupt them into submission through taxes as Obama seems to want to do with coal. You do also say "impose punitive capital requirements" and a "big jump at some". I see that if there is negative externalities then yes a type of Pigou tax is warranted. It would be based on either the cost of insurance like in the FDIC case of insuring larger more systemically at risk firms or it could be a tax based on the risks that the government is taking on by explicitly or implicitly supporting policies of TBTF.

If the larger firms enjoy decreasing marginal costs over long production functions then in fact the efficiency of largeness may in fact be minor compared to the Pigou tax or the extra insurance premiums. Then what would you say>?

Not sure about what you mean by Europe but I did find this list interesting with Spain included and a few Chinese banks: 10 World’s Largest Banks in 2008

So it seems like a good idea, I just wonder if you think it is great or are you more willing to support the "breakup" route. I would avoid that myself as it usually has unintended consequences and some examples made consumers worse off-which would be based on the above ideas including natural monopolies.

godknows

[RDR]

I am not sure whether to laugh or to laugh most out loud most uncontrollably.

No free market advocate has successfully explained how a free market plans into the future to solve a sustainability crisis.

I certainly am not a "free market advocate" and as such could not help you but this does raise several questions for myself and some are:
1. What would it take to be "successful"?
2. How many did you ask for explanations?
3. Is this in CSV file format or something else that you are willing to share with the group?
4. What would constitute a "sustainability crisis" or in other words what is the criteria to signify one?
5. Did you constrain it to only be market transactions or was their any collective aspects that are allowed? Is soft paternalism allowed under any scenario?

godknows

You are not a free market advocate? And you can't help me? Help me what?

If you can manage to be coherent, why not explain to Jeff, me, and any others who care, just what you think a sustainable human society would entail. Use the necessary elements of ecological science as it pertains to environmentalism, and please explain how the whole biosphere of the planet works in order to explain what you mean by sustainability. Global warming is just one aspect of the whole living biosphere, but it could certainly be one of the earth's systemic factors to have a major effect on the collapse of other related ecosystems, especially those being threatened by human activities.

If you can't talk in those terms, I'm not interested, maybe someone else would be. As far as I'm concerned, we won't be talking about the same topic. Right now your questions have no meaning to me what-so-ever. What I'm saying in this post is at least partly why.


If you can't make at least that much of a gesture, I already know the conversation is at a dead end. And I'm not going to waste my time babbling out forty years of my ongoing education on the topic for your entertainment.

Explain what you think sustainability means. If you think you can explain sustainability:

Please explain what a sustainable society would look like.

Please explain at least some of the rudiments of how the humans in a society determine what exactly is sustainability, and how they could achieve sustainability together.

Did you lose your pet doc? I expected him to be the first jump on my post with something inane and distracting.

Your first three questions seem more rhetorical since the answers are there to figure out for anyone beyond the 3rd grade.

Why don't you answer your questions about "what a sustainable society" is since presumably you are the expert on that.

Neither was this a conversation or a signal to enter into a conversation. You obviously seem confused because I only asked myself out loud what questions would be interesting to know.

Maybe you can explain what a null hypothesis is and what it means when the statistical test fails? And explain that, with respect to the analysis that the statisticians performed in the linked article above.
Then we could explore issues of analyzing trend data. Like is the data trend stationary or a random walk with trend? Which statistical tests would we need to perform to check for cointegration?
Then finally we could start on the problems of forecasting and which approach that would be the best for this type of data sets.

godknows

[RDR]

Do you think the economy would have been better, worse, or the same without the stimulus?

If you think the economy would have been worse, (i.e. the stimulus did work to goose economic activity by funneling billions into the economy during a worldwide collapse of consumer demand) you're making a compelling argument that the Obama administration "saved or created" many jobs. And it's not whether there were nominal jobs lost or gained last month. It is whether there were MORE or LESS jobs gained or lost last month than would have occurred without the stimulus.

I can't believe there is a credible economist alive who believes the hundreds of billions had NO positive effect on GDP in the SHORT TERM. So, we're left with arguing whether the positive number of jobs saved or created was +650k or +1,000k or maybe +300k or +2,000k and I don't think any of us have the data to be able to estimate those figures. If someone credible on the "right" comes up with their own estimate, it might be a fun debate.

As an aside, this is the same kind of flawed argument that the right uses to sell the "Laugher" Curve. They say, well, Reagan/Bush cut tax rates, revenues went up, ergo the Laffer Curve does work! But revenues going up proves nothing - the question is whether the post rate cut revenues were higher or lower than they'd been without the cut. If tax revenues would have been +1,000x without the cut in tax rates but were only +500x, that is proof the Laffer curve did NOT work in that rate environment. Conservatives would however use it as proof it did work, since nominally revenues did rise.

Jasper again you bring up some important points, but if you do support such contentions that the fiscal policy could in fact have been an element of this GDP growth rates then why state: "this is the same kind of flawed argument...". If it is flawed then why imply some support for the stimulus plan?

The problem I see is that this stimulus was not hundreds of billions. It was at best around 100 billion for the time frame considered at the same time the addition to the debt was in the hundreds of billions. Thus there could be a theoretical hypothesis that in fact this stimulus made things worse and not better including for the short term basis. The foundation of such a statement is derived from the Ricardian Equivalence theory. Normally, I do not hold that RE is valid in most cases but in this case if tax payers in fact see the increased debt levels they could in fact over-adjust spending accordingly and actually reduce absorption over the short to medium term periods.

There are a multitude of factors that could increase the GDP during the last quarter aside from the Fiscal Stimulus. The most obvious is the large monetary stimulus that has driven rates to near zero and has had time to take full effect on the economy {12 to 18 months lag}.

The only estimate the right needs is the number of unemployment numbers as they rise. But it was only a couple of years ago that Bush was judged by a different standard. Their standard they held Bush to was anything less than around 140k per month or approximately 1.8 million per year. A couple of sites that represent this attitude:

Second, the apologists give numbers without context. President Bush boasts about 1.5 million new jobs over the past 11 months. Yet this was barely enough to keep up with population growth, and it's worse than any 11-month stretch during the Clinton years.
Spin the Payrolls

Employment
One of the most important measures of economic well-being is the number of people with jobs. The number of jobs in the economy increased 2.38 percent per year under Clinton, but it has decreased 0.17 percent per year under Bush.9 While it's clear that the economic downturn in 2001 was not Bush's fault, the sluggishness of the recovery is unprecedented in the period since the federal government began issuing detailed employment reports in the 1940s. There have been 1.7 million jobs created since September 2003, which may sound like a lot, but that number falls short of the 1.8 million jobs that must be created per year just to match population growth, and it falls far below the 3.7 million jobs that the administration predicted would be created when the president signed his 2003 tax cut into law.10 This slow job growth is largely attributable to both the failure of the administration's fiscal policies (which targeted tax cuts to stimulate savings rather than spending) and the failure of its trade policies (which have done a poor job of opening foreign markets to spur export growth, and have not created the conditions for an orderly decline in the value of the dollar, which would have helped ease the trade imbalance).11
Bush vs. Clinton: An Economic Performance Index

godknows

How Do You Measure "Saved" Jobs?

[RDR]

The numbers I've seen show that credit default swaps "only" totaled about $70 Trillion at the peak. As best I could find out some time ago, the U.S. held maybe $20 trillion at the peak, down somewhat now. There are hundreds of trillions in interest rate bets.

One article I had bookmarked.

* The notional value of derivatives held by U.S. commercial banks increased $1.5 trillion in the first quarter, or 0.7%, to $203.5 trillion.
...
* Derivative contracts remain concentrated in interest rate products, which comprise 85% of total derivative notional values. The notional value of credit derivative contracts decreased by 8% during the quarter to $13.4 trillion.

I still don't see how the counterparty risk of contracts that measure 15-20 times the annual value of the U.S. economy can be evaluated on an unregulated product like these derivatives. $203,500 billion outstanding! Goodness that's a big number. What happens to those interest rate swaps in the event of a real spike in inflation and rates? Who wins, who pays off the winners? Do they really all cancel out in the end?

First off even as your link talks about, "notional" is not what is settled but just the underlying value of the potential transaction at a certain time. One way of looking at these "bets" or insurance policies is to think of what is the "notional" amount you have written on your insurance policy. Considering that it covers you for liability including medical expenses. Now if you calculate all the potential losses of an insurance company, you could see the numbers would be great indeed.

You also have to understand that the market for derivatives is both over the counter {OTC} and packaged products that fall under standardized contracts and most of the counter party risk is reduced through organizations like the ISDA {http://www.isda.org/}. To provide how even a climatic event was settled in the derivatives markets take a look at:
Tracking Firm Says Bets Placed on Lehman Have Been Quietly Settled

Hundreds of traders who placed bets on Lehman Brothers’ creditworthiness before it went bankrupt have settled their positions “without incident,” according to a company that tracks derivatives contracts.

The company, Depository Trust & Clearing Corporation, processes large numbers of investment transactions. It said that only $5.2 billion had to change hands for all the traders to close out their positions, a much smaller amount than had been predicted a week ago.

The settlement process had been seen as a major test of the market for credit-default swaps, and whether it could handle the unprecedented stress of a big Wall Street firm going bankrupt. The overall system appears to have borne the shock successfully, although individual firms might have taken painful losses they have not yet disclosed.

At the same time, the contrast between this week’s orderly settlement process and last month’s financial turmoil, which also involved credit-default swaps, raised anew policy questions over the market for credit derivatives and its failure to limit systemic risk. Because the swaps are private contracts between two parties, there is still almost no information in the public domain over who holds which positions, or who might be left teetering the next time there is a major default.

The lack of information is thought to have fueled the general panic in mid-September, when Lehman Brothers went bankrupt and the American International Group came to the brink of collapse before being rescued by the Federal Reserve.

As if to underscore the opacity of the market, American International said this week that it had to pay only $6.2 million to settle all of its credit-default swaps on Lehman’s debt. The amount was much smaller than had been expected, given A.I.G.’s big presence in the market for credit-default swaps, and given that A.I.G. required an emergency line of credit worth $85 billion from the Fed.

A spokesman for A.I.G., Nicholas J. Ashooh, said that the company had needed the big loan from the Fed because of its high level of exposure in other areas, but not on its derivatives trades on Lehman’s debt. He said that A.I.G. had written many derivatives contracts on Lehman’s debt, but because they took opposing trading positions they almost completely canceled each other out during the settlement process.

“Lehman was not the source of our problem,” Mr. Ashooh said. “Our issue really preceded that. We were already having problems when Lehman went under.”

He said most of A.I.G.’s problems with the credit derivatives involved swaps that covered the financial strength of complex debt securities linked to the housing market.

Credit-default swaps are similar to insurance, providing coverage to investors who hold a company’s bonds or other fixed-income instruments. In the event of a default, the one who sold the protection has to pay the one who bought it.

In Lehman Brothers’ case, Depository Trust & Clearing calculated the amount of payments each trader would pay or receive, based on the price of Lehman Brothers’ bonds, which was set in a special auction on Oct. 10.

Interesting...
Buffett makes $40 bln bet on derivatives

Derivatives. On behalf of a number of shareholders who had asked about Berkshire's derivatives positions, Carol Loomis noted that Buffett has previously referred to derivatives as financial weapons of mass destruction.

Ultimately, derivatives are bets and as such then aside from counter party risks they represent only transfers and do not effect the real economy at least as economic analysis and appraisal would signify.

godknows
village idiots

[RDR]

I'll answer some other points when I have more time. For now here's an interesting article about CDS and clearing houses, etc.

As Gillian Tett points out in the Financial Times today, clearing derivatives centrally has come to be viewed in policy circles as a magical solution. As a result, it has not gotten the scrutiny it deserves.

The reason for the enthusiasm is that, in theory, a clearinghouse would make sure all agreements were adequately backstopped, so that if customer defaulted, it would not produce cascading counterparty defaults. The clearinghouse would have enough margin and capital to absorb the loss. And observers take great comfort from the fact that no significant exchange (which also has central clearing) has failed in a very long time.

But that view is based on precedents that have limited relevance for credit default swaps, which is the product that is the biggest source of risk.
...
CDS are not true derivatives, but are the economic equivalent of credit insurance. When a “reference entity” has a “credit event” meaning a bankruptcy or default, CDS prices jump to default. That means they shoot up massively because a payout on the CDS is certain, the only item in question is the precise amount.

Much more at the link for those interested.

Thanks Jasper, it brings up some of the points I was explaining in more detail. While I disagree with the writer's conclusions, he does make some valid points that I wish to address.

But that view is based on precedents that have limited relevance for credit default swaps, which is the product that is the biggest source of risk. First, the CDS market is dominated by a comparatively small number of very large counterparties. So the failure of any one would be a vastly more serious blow than any modern exchange has suffered.

The risks are already systemic in the system and thus CDS help mitigate some of that risk. Secondly, it seems that CDS do not signify a significant portion of trades and thus margins and transaction fees from other derivatives can cover the black swan events.

Of this total notional amount, 67% are interest rate contracts, 8% are credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity contracts, 1% are equity contracts, and 12% are other.
Derivative

We also saw that Lehman brothers was not such a major event in CDSs. To second point of article:

Second, the cheery view of the safety of exchanges is based on the airbrushing out of a near failure. In the 1987 stockmarket crash, a large counterparty of the Chicago Merc had failed to make a large payment by settlement date, leaving the exchange $400 million short. Its president, Leo Melamed, called its bank, Continental Illinois, to plead for the bank to guarantee the balance, which was well in excess of its credit lines. The officer in charge said no,. It was only because the chairman walked in and authorized the backstop only three minutes before the exchange was due to open that the Merc kept going.

I have heard too many "conspiracies" about the 1987 financial problems to take the 400 million was going to bring down a complete economic system. Someone along the way would have stepped in to do just as was done. "Near failure" is like horseshoes and hand-grenades.

Third, a clearinghouse for credit default swaps is certain to be undercapitalized. That means it is an AIG, a concentrated point of failure. The reason is that the contracts will be undermargined. CDS are not true derivatives, but are the economic equivalent of credit insurance. When a “reference entity” has a “credit event” meaning a bankruptcy or default, CDS prices jump to default. That means they shoot up massively because a payout on the CDS is certain, the only item in question is the precise amount.

A large enough initial margin to allow for jump to default risk will make CDS uneconomic (that’s an outcome I welcome, but that is contrary to the motives for the clearinghouse). So dealers and counterparties will fight for a lower margin, meaning the exchange will be undercapitalized relative to the risks it faces.

That conclusion is not supported by the facts. Just because there is influences of one direction does not in the least mean that there are just as many influences for the exact opposite. This falls under the assumptions that market participants will flock to the least regulated clearing houses and in fact that is never the case.

True the events are either of the "0/1" definition of a crisis but that does not negate their usefulness in reducing risks to parties. Some with fight for lower margins but others that are not certain of the counter party risks will actually consider higher levels of capitalization.

Clearinghouses are the wrong remedy for CDS, but that horse has left the barn and is already in the next county. And I must confess, they sound deceptively appealing (I was a proponent early on) until you dig further into how they would work for CDS. They need to be regulated intrusively, with the intent of shrinking the market considerably over time, and like insurance, with tough capital requirements and frequent examinations of the capital adequacy and claims-paying ability of the sponsor. But the real need is to cut off the air supply to CDS to reduce the size of the market so the product itself no longer represents a systemic threat.

As the title suggested this may not be the magic bullet {as most events are not solved by magic bullets}. But without clearing houses then systemic risks are still present and the desires to reduce them will not go away just because clearing houses are over regulated. These proposals would in fact lead to more OTC transactions which I assume the writer would also not like.

Similar types of regulations led to the rise of the Euro-Dollar through Regulation Q, Interest Equalization Tax (IET) and Voluntary Foreign Credit Restraint Guidelines. Over-regulation, over capitalization requirements and more persuasion does not reduce the need for reducing systemic risks it only moves these risks to other markets or increases the risks to market participants.

godknows
A Great Talk on the Great Depression by Jacob Hornberger

[RDR]

I don't think you can separate the credit default swaps from the CDOs. As I understand the marketing, the fact these CDOs consisted of toxic waste wasn't a concern because they had an insurance contract aka CDS (which I called a "money back guarantee") that guaranteed at least a portion of the payback in case of unexpected levels of default in the underlying mortgages. All the accounts I've read of the underwriting and packaging of the loans into securities indicate NO ONE in the entire process cared about the ability of the borrowers to pay back the loans. At the underwriting level, the originators were clear after 90 days, or 180 days, of timely payments by the borrower. The groups that packaged the loans of course sold them, or most of them, and the buyer got an insurance contract along with an investment grade rating based on the payback assumption in the highest tranches.

The point is these insurance contracts, and as I understand it the interest rate swaps too, provided the financial "protection" that allowed the bubble to really explode. Without someone guaranteeing the principle of those loans, there couldn't have been nearly the ready market for baskets of loans from known deadbeats. I've read from admittedly UNreliable sources that the CDS gave the ratings agency cover too - hey, if that AAA rating is wrong, there is a guarantee as the fallback! Makes sense but I'm not confident of that.

The buyers of these insurance contracts I'm sure did some due diligence, but in AIG's case, how much do you really think the investors needed to do. AIG was the biggest insurer on the planet, with huge stated reserves, but we know now it wasn't nearly enough since 400 employees cratered the entire firm, writing naked insurance contracts they had no ability to pay off. At least 185 billion worth. So you can't say, well they do their due diligence and ignore that in the case of contract written by AIG they simply did NOT do enough to ensure AIG could make good on those insurance policies aka CDS.

So the specific market failure is people wrote naked insurance contracts with not nearly enough capital to pay off in the event of a black swan, and so we have, to the tune of TRILLIONS. We have no idea where all that money went, and until we do, you can't really make any assumptions about any of this. All we KNOW is the system underpriced some risk by trillions since that is the amount the Fed has expended in loans/guarantees/direct purchases, etc. to keep it all functioning. They were wrong by thousands of billions. That's a big error.

And the regulation would be to end the casino nature of what was going on and in the case of derivatives, make sure the person writing a contract can fulfill the contract, like we do with insurance companies. And if a person gambles with derivatives, like Buffett has on occasion, make his exposure public and/or highly regulated so there is much less risk that if Buffett loses his bet on the S&P 500 in 10 years, the person who made that bet with Buffett gets his money, like we do with casinos.

Jasper, I appreciate the thought that went into your post but some of my points are not soaking in.
For example I am not sure you can really tie the MBS with the CDS. First the way the tranches were built and as they say the mortgage pools were sliced and diced, then not sure how the CDS could evaluate the risks also in such non-standard instruments. Secondly the markets because of the slice and dice would make the markets "thin". Thirdly, if they were rated as AAA already then the need for insurance seems reduced greatly on the part of the buyers/investors. Fourthly if there were CDS on the MBS then there would have been safeguards in place already. Lastly, as mentioned before CDS and insurance can be summed up as transfer payments and as a result zero sum for economic analysis.

Some of the points I have been making can be found in this article including some important points about the zero effects that the CDS has on the markets and that they can actually reduce the demand for MBS by creating a market for shorting them. It is fairly pedestrian but should be an interesting read at: Credit Default Swaps And Mortgage Backed Securities

The problem was not "naked insurance contracts" by themselves but just like many brokers and market makers they willingly enter into some contracts when they can "hedge" the opposite side and maybe not totally neutral they can be real close to being like a good bookie and not be exposed to any risk. Thus they can facilitate more trades and increase the flow and efficiency of markets as well continue to garner transaction fees.

It was not underpricing of some risks by trillions it was more along the lines of "animal spirits". It suddenly became apparent that some of the pricing of MBS and other assets were way off and the markets like usual overreacted. The markets had no idea of how to reprice these assets and the mark to market only made matters worse by trying to price in collapsed markets. They could have been repriced based on cash flow analysis for one thing. The lending markets all dried up because of counter party risks and assets being opaque to price. My boss says something along the lines of bankers were not as concerned about return on investment but investment return...

It seems that maybe a little of research on your part might help us to explore these issues further.

godknows

[RDR]

"At any time there is a fixed total amount of cash, determined primarily by the Federal Reserve if cash is defined as the base, or by the Fed and the banks if cash is defined more broadly. You can hold more only if someone else is holding less, yet there is nothing in your personal situation to make you aware of that.

For the life of me, I can not understand how anyone can confuse cash as it clearly states twice as to mean anything besides real tangible cash and not in any way referring to wealth or some notional aspect of wealth.
Let us look at a little more of his texts to see what his example was to illustrate:

Rapid increases in the quantity of money produce in­flation. Sharp decreases produce depression. That is an equally well documented proposition. It is not directly documented in this book, though some episodes of it are referred to: the 1873-79 depression in the United States, the depressed years of the early 1890s, the great contrac­tion of 1929-33 that brought Franklin Delano Roosevelt to the White House and set the stage for the silver purchase program of the 1930s.

Why are these and similarly well documented proposi­tions about money so often neglected in shaping policy? One reason is the contrast between the way things appear to the individual and the way they are to the community. If you go to the market to buy some strawberries, you will be able to buy as many as you wish at the posted price, subject only to the dealer's stock. To you, the price is fixed, the quantity variable. But suppose everyone suddenly got a yen for strawberries. For the community at large, the total amount of strawberries available at a given time is a fixed amount. A sudden increase in the quantity demanded at the initial price could be met only by a rise in price sufficient to reduce the quantity demanded to the amount available. For the community at large, the quantity is fixed, the price variable-just the opposite of what is true for the individual.

Such a contrast is true of most things. In the area of money that we have been dealing with, you as an individ­ual can hold any amount of cash you wish, subject only to the level of your wealth. But at any time there is a fixed total amount of cash, determined primarily by the Federal Reserve if cash is defined as the base, or by the Fed and the banks if cash is defined more broadly. You can hold more only if someone else is holding less, yet there is nothing in your personal situation to make you aware of that.

To you as an individual, an increase in income is a good thing, whether its ultimate source is your own en­hanced productivity or the government's printing of money. Yet to the community at large the two sources are very different: the first is a boon, while the second may be a curse.

It is natural for individuals to generalize from their personal experience, to believe that what is true for them is true for the community. I believe that that confusion is at the bottom of most widely held economic fallacies ­whether about money, as in the example just discussed, or about other economic or social phenomena.

It is human, also, to personalize both the good and the bad, to attribute anything bad that happens to the evil intent of someone else. However, good intentions are at least as likely to be frustrated by misunderstanding as by an unseen devil. The antidote is to be found in explana­tion, not recrimination.

The importance of a correct understanding of eco­nomic relations in general and of monetary matters in particular is vividly brought out by a statement made two centuries ago by Pierre S. du Pont, a deputy from Nemours to the French National Assembly. Speaking on a proposal to issue additional assignats-the fiat money of the French Revolution-he said: "Gentlemen, it is a disagreeable cus­tom to which one is too easily led by the harshness of the discussions, to assume evil intentions. It is necessary to be gracious as to intentions; one should believe them good, and apparently they are; but we do not have to be gracious at all to inconsistent logic or to absurd reasoning. Bad logicians have committed more involuntary crimes than bad men have done intentionally [September 25, 1790]."”

He was not using the fact of tangible cash as a fixed quantity {fixed and real printing presses} as some kind of economic monetary proof about money but solely to illustrate a concept called the isolation paradox. That is when the actions of one person seems perfectly reasonable that there are plenty of strawberries at the farmers markets but that if everyone wanted to buy the strawberries then there would be a shortage at any "one time". The market would react in various ways as the farmer now sees his product being more valuable and would pursue extracting more consumer surplus at the same time thinking of how to increase production.

Your "opinion" is duly noted by
godknows

Involuntary crimes Posted on 17th October 2008 by Chetan Parikh

[RDR]

I'm a big believer in nuclear energy. I fish right upstream from a nuclear plant and also live near a coal fired plant, spewing acid rain and mercury, producing smog that cuts off my view of the nearby mountains and burning coal mined from what used to be mountains but now are helpfully flattened and the streams destroyed, which is so much better for building local schools (I heard that defense one time from a coal lobbyist on TV - flat areas are better for development than those hilly places!).

I'll take the nuclear plant! I know waste is a big issue, but the question I have to ask - it's a problem compared to what? Fighting more wars in the ME, mountain top removal mining, the environmental disaster that is coal, the smog etc.

I knew eventually we would find something to agree on. You have succinctly pointed out the contrasts and I am sure you are aware of even more.

On Sunday, I was happening to listen to one of the local progressive radio stations not even sure which one or even who was talking but he talked about a book coming out and that he was a strong supporter of nuclear also. Some of the points he was making as a counter argument to others that suggest nuclear is not a local source, was about mini-nuclear power plants. He described them as buried 100 feet into the ground and after 30-40 years then just abandon them or refuel them. Just a couple of interesting links:
Backyard reactors? Firms shrink the nukes. New designs could power some remote areas by 2012.
Power your home with a mini nuclear reactor. No, really.

The writer also says that technically the problem of disposal has already been decided as the military is burying them in salt domes that he says would be on geological scales and plenty long enough for the radiative materials. He opposed Yucca mountain but felt other sites would be good or in the mean time just do what is being done now-store them in barrels out back of the plant. That is until we decide to do with them and some could be reprocessed.

He also noted that in total about 60 people have died from nuclear accidents and most were the heroic Russians trying to contain the "meltdown". Many times this die from coal including even the Chinese have around 5000 deaths per year just from coal mining deaths.

The only thing about the mountain top removal, I would like to see some of that used here on the central California coast. Ugly brown mountains have little value to me.

godknows

[RDR]

What is the Real Level of UK National Debt?

However, it is argued that UK’s national debt is actually a lot higher. This is because national debt should include pension contributions and private finance initiatives PFI which the government are obliged to pay.

The Centre for Policy Studies (at end of 2008) argues that the real national debt is actually £1,340 billion, which is 103.5 per cent of GDP. This figure includes all the public sector pension liabilities such as pensions, and Private Finance Initiative contracts e.t.c (Northern Rock liabilities).

* However, these pension liabilities are not things the government are actually spending now. Therefore, there is no need to borrow for them yet. It is more of a guide to future public sector debt. I don’t accept the fact that future pension liabilities should be counted as public sector debt. In 2006, the Statistics Office did change calculations to include some PFI into public sector debt figures [pdf - Treasury.gov.uk]
* However, it is a sign that it will be difficult to improve finances in the future.

Another problem is that with the financial crisis, the government have added an extra £500bn of potential liabilities. Note: the Government has offered to back mortgage securities. They are unlikely to spend this money. But, in theory the government could be liable for extra debts of upto £500bn. If we include this bailout package as a contingent liability National debt would be well over 100% of GDP.

[RDR]

I wonder if they considered the costs as relative or absolute values.

EROEI

EROEI

EROEI Ethanol

EROEI Coal

EROEI Oil Shale

EROEI and the Renewables hump

EROEI -- stories tagged with

Excellent Googling!!!
Not really a response to my post even though it was not addressed to you.
Here have some reading...
http://www.econ.umu.se/ues/ues745.pdf
http://www.pide.org.pk/pdf/PDR/2004/Iraj%20Saleh.pdf
http://www.unido.org/fileadmin/media/do ... 5_2008.pdf
Industrial Project Identification, Preparation and Appraisal (ADVANCED) » Background
http://www-wds.worldbank.org/external/d ... 34079B.txt
Social Cost Benefit Analysis : Overview about two approaches of SCBA
Shadow Pricing and Externalities in ICT Investments

godknows
PS: Was tempted to use the name Jay Davis but that was already given to Mel and Flounder was already taken in Animal House so...

[RDR]

http://www.nytimes.com/2009/11/11/business/11views.html

American workers are overpaid, relative to equally productive employees elsewhere doing the same work. If the global economy is to get into balance, that gap must close.

Above is the topic Thom is discussing this morning and I must say, isn't it a good talking point to remind our republican fellow Americans that their idea of global trade just might NOT be good for Americans?

I don't want to live on $5 a day. I thought Americans got past that in the 1800's.

I say, end trade treaties and end global trade. End the Republican way of doing business. Strip corporations of person-hood and any corporation that wants to remain a free trader global company, can be considered a foreign business doing business in America, and their products can be slapped with tariffs.

Oh, yes, keep reminding voters this is what the republicans have been fighting for all along. Remind them of the child slavery penchant from the Mariannas Islands DBA America too.

Yellowbird, why not make this discussion about why foreigners are not underpaid?
Don't you think they would like to live on more than $5 a day?

The article is pretty sloppy with its economic concepts as in first it states:

The answer depends in large part on two measures: the difference in productivity in making goods that can be traded across borders, and the quantity of such goods. Both measures point to a narrowing wage gap.

Yes, that describes correctly that general wage levels of a country will depend significantly on the productivity of the "tradeables sectors". Thus when people say they want to save "American workers jobs" in manufacturing they actually want others to suffer lower wages also.

Many factors are raising productivity in poor countries. Fast development, cheap capital and more efficient shipping all help. Cheap communication via the Internet reduces costs and makes it easy to trade many more goods and especially services.

The global wage gap has been narrowing, but recent labor market statistics in the United States suggest the adjustment has not gone far enough.

Good for them as that also makes products less expensive here. As far as the wage gap, the convergence happens when their wages are rising faster than our wages in the tradeables sectors.

The big trade deficit is another sign of excessive pay for Americans. One explanation for the attractive prices of imported goods is that American workers are paid too much relative to their foreign peers.

The trade deficit is to everyone and not just tradeables sectors so it does not follow that all "Americans" {sic} are earning excessive pay. And more importantly the deficits are a result of currencies {China} being undervalued by at least 15%. Is the article then stating that China's currency manipulation is to determine wage rates in the USA. That would be quite a stretch in reasoning.

godknows

[RDR]

Footprint wrote:
If the tax man spanks me harder thus depleting my cash, how should I hire more employees?
No money left over means no worky for employees.

Sawdust tells us he rolls his taxes into the charges to the customer. Customers pay the taxes.

True.
But at what point does your ever increasing price eliminate buyers or send customers shopping?
China loves it when that happens.

Technically and as economists would say, no. Customers do not pay all the taxes especially over the short run and to medium run depending on rigidity of the economy. I could go through the elasticities of supply and demand and show how the taxes are shared but instead just think of marginal cost and marginal revenue curves. As long as marginal revenue {in perfectly competitive markets this is fixed at the clearing price of the market} is above the marginal costs {i.e. the costs just to produce the last unit excluding any fixed costs} a business will still operate even if total average fixed costs make the whole operation as negative cash flows.

But Footprint you do point out that in most cases taxes are discriminatory and as a result distort the markets. In this case you are talking about punishing US firms, which makes domestic firms less competitive at least on an individual or sector wide basis.

godknows

[RDR]

Well, sawdust and WAR, the first rule of economics might be incentives matter. It is not just small business entrepreneurs but also the "working poor" that perverse disincentives arise in our political economy.

The Dead Zone: The Implicit Marginal Tax Rate


When the marginal tax rates go above 100% then it does not pay to work and it is actually discouraged.

godknows
Your "opinion" is duly noted....again.
48% of ALL US homeowners in negative equity by 2011

[RDR]

Jasper, how do you think the Fed can control bubbles and what should they have done ahead of time? Try to be as specific as you can. Also, do you have a quote about the Fed claiming to being unable to open their eyes?

godknows

The easy part is the quote. I had recently read this piece by Mishkin. Here's a snippet, but there's much more detailed reasons why they A) are incapable of recognizing a bubble, and B) powerless to act.

A special role for asset prices in the conduct of monetary policy requires three key assumptions. First, one must assume that a central bank can identify a bubble in progress. I find this assumption highly dubious because it is hard to believe that the central bank has such an informational advantage over private markets. Indeed, the view that government officials know better than the markets has been proved wrong over and over again. If the central bank has no informational advantage, and if it knows that a bubble has developed, the market will know this too, and the bubble will burst. Thus, any bubble that could be identified with certainty by the central bank would be unlikely ever to develop much further.

As to the questions, can they contain bubbles? Sure, they create them, so they can contain them. Without going deep into Austrian economics la la land, it's not controversial to recognize that the tech and the debt/housing bubble followed extremely low interest rates by the Fed in response to what it considered financial threats to the system, so they flooded the economy with loads of cheap money and predictably we had inflation, but in financial asset prices. During 2003-2004 rates were held at 1% for over a year, less than 2% for about another year. During part of that time, "official" inflation measures (another story) meant rates were negative on a real basis. And so the money as it always does found an outlet.

And what they should have done about them is do what they're told to do and that is contain inflation, across the entire economy, and not just in the basket of goods that has been arbitrarily picked to represent the consumer price index while avoiding houses, and stocks, and commodities, unless they bleed through to those arbitrary items in the CPI.

I think I have Friedman right "Inflation is everywhere a monetary phenomenon" but the Fed creates huge amounts of money, says, gosh, consumer goods aren't going up like they used to before globalization/technology put huge dampers on prices, so therefore all that stuff that looks like bubble froth in stocks/housing/debt/commodities (valuations not seen EVER except in other bubbles) isn't really inflation or a bubble, it's WEALTH!!!!

I just think if we give them the tools to create money and set interest rates and therefore create imbalances aka bubbles they ought to be capable and willing to recognize imbalances aka bubbles and and deal with them. If not, then I have to agree with Ron Paul and his cohorts and conclude they're hopelessly incompetent and/or crooks and we should remove them from their jobs permanently. It's pretty stunning to read someone telling you that they are incapable of doing their job.

BTW, this idea that "hoocoodanode" is nonsense. The people who correctly called the tech bubble and that I subsequently followed since they were right as opposed to CNBC herd followers, were eloquently and accurately calling the bubble as it was forming. I can't believe the Fed can't find some people with the same ability to recognize, for example, that housing prices double the 200 year historical affordability trends aren't actually, you know, real! Or during the tech bubble to note that money losing companies, in a highly competive and rapidly changing industry with at the time no or low barriers to entry do not in fact command premiums, but rather discounts. If not, they can maybe hire some bloggers on the side and have them send tips on occasion.

[RDR]

Jasper, thanks for the thoughtful response.
I think that Mishkin makes some important points.
One is that the Fed does not create bubbles and from at least one report bubbles are not correlated with loose monetary policy. In fact, higher interest rates may in fact encourage more money being channeled into the last "sure bet". We could use the NPV of evaluating various projects and as the cut off rate increases then the remaining projects would more than likely get the monies creating the bubbles.

Housing is a component of the CPI and as such it bleeds through. Mishkin makes note that to the degree bubbles {asset prices out of long term trends} do influence the levels of inflation then they should be dealt with to that degree. I believe that he is against the suggestion of adaptation of the Taylor Rules something that Mark Thoma has talked about {Pegging a Stock Price Index}.

The Fed only has one basic control and that is a break even speeding up the economy is very hard for it to do as noticed by low interest rates but high unemployment. So again Mishkin, I would consider right in that asking for another target or targets will dilute the ability to already have two targets as compared to the EU where it has one target only (although not inflation nutters). Although just a minor note by most economists, I find the Tinbergen instrument policy rule as useful to understand the limits that one policy instrument can only have one target. If there are multiple targets then other tools are needed and Mishkin again addresses that the regulatory agencies need to take a more active part in controlling bubbles.

Again, what exactly do you expect them to do? If they try to prick the bubble, they may actually create more problems and would distract from the other targets. As I showed in the other thread CDSs could actually create a virtual MBS and as such would create short positions. Thus people that are sure that there is a bubble then would be able to take short positions on the market and control excesses of bubbles. One of the market failures that happen even in high income countries is not complete markets and this may be case here too.

So it is not really "open their eyes" but due to whether they have more advanced knowledge than what complete markets have. So one aspect that Mishkin may have missed is that the markets are not complete and thus the market may not be able to self correct in the short term.

godknows

[RDR]

Ren, the best form of unemployment compensation is a job. We won't be back to normal until unemployment heads back to below 5%, all of your emotive language not withstanding. Our government should be helping business create jobs, not trying to make it comfortable to be poor.

Well, no question that my mother would have been much better off with a job. It seems there was a small market for her services, though. Not everyone had her special gift of seeing houses wrapped in evil, and her solution of washing it off with a garden hose and putting baking soda on the doorsteps didn't seem to have much of a market, but she was obsessed that that was the only responsible job for her to do.

The President, not being a small business person himself, like the CEO of a very large corporation, has to rely on information he receives from other sources in order to be of any "help." How do you suggest he go about evaluating the problem?

Here's one of the things he looks at that I know about: The Small Business Economy: A report to the President.

It's from one of those horrible, inefficient, socialistic government bureaucracies, the U.S. Small Business Administration: Office of Advocacy, the voice for small business in the Federal Government.

Here are a couple of paragraphs from pps 7-8 of the above linked report to the president.

For their part, small business owners have struggled, along with their larger counterparts, to weather the economic downturn. Some surveys have shown that owners are less willing than in previous years to expand their small businesses, to hire additional workers, to invest in new plant and equipment, or to borrow money. A top concern, which had been the high cost of health insurance for the past few years, is now poor sales.5 The Federal Reserve Board’s quarterly report, the Senior Loan Officer Opinion Survey on Bank Lending Practices, recently showed tougher lending standards and reduced demand for small firm commercial and industrial loans.6 Another survey showed that, while entrepreneurs are cautious, many believe managing their business through the recession has made them better business owners.7 Many small business owners are awaiting signs that the economy is improving, while they look for ways to streamline their firms’ operations, paying closer attention to their balance sheets.8

Looking forward, small businesses will be a large part of moving the economy ahead as entrepreneurs continue to spur new innovation and create employment. That said, industries will recover from the downturn in different ways,9 and some industries, such as construction and business services, have clearly been hit harder than in past business cycles. Construction in particular is overwhelmingly dominated by small businesses—more than 86 percent of firms in this sector are considered small. The construction industry lost 682,000 jobs in 2008; only one other major industrial sector lost more jobs over the period—manufacturing, with a loss of 875,000 jobs. These employment trends will be discussed in more detail.

I highlighted a section that uses the word "willing" found in your "blaming" video, which is probably where his speech writer found it. Funny how these things trickle out into the media again, go through hoops and spins, like a hula hoop. You'll notice that this byzantine effort to do something about health care costs to small business, as best as these inefficient government bureaucrats can understand these things, once addressed a top concern, but that concern has apparently (if we can believe any of these reports) been eclipsed by a concern about poor sales, all of which goes into the term "willing."

Perhaps, as your suggestion to the President, you could provide a study and a report yourself, and add it to this one for the his consideration. Just a thought. You could say what you think you can do if you want. Or just ignore it and just keep telling us what he's doing wrong.

All my instructors would not have accepted that as valid quotes to use in an assignment since much of the material is derived from other sources. Even then it does not reference what time periods considered and the link is broken also. Exploring the NFIB SBET Reports {NFIB SBET Report: Small Business Owners Remain Depressed Over Economic Conditions | NFIB} does not reveal that about "health insurance" for the last two months at all and only "Cost/availability of insurance". For August the single most important problem was poor sales at 32 while cost/availability of insurance was merely 9 which was a drop from last year of 13. Red tape was actually higher with 11 and just ahead of competition from large business. {http://forum.rdrutherford.com/posting.php?mode=reply&f=9&t=3200}.

For September the numbers are quite similar with poor sales number one at 32 again {rise from 18} and insurance at 8 {drop from 10} with competition from large business at 11. It is worth noting that taxes were 3 times higher at 24 which was an increase from 17 for last year. {http://www.nfib.com/Portals/0/PDF/sbet/sbet200909.pdf}

I too am certain he found "willing" there also. There were only 503,000,000 pages of "willing" by Yahoo, give or take a hundred million pages.

godknows
let the yelping begin.

[RDR]

Ren, the best form of unemployment compensation is a job. We won't be back to normal until unemployment heads back to below 5%, all of your emotive language not withstanding. Our government should be helping business create jobs, not trying to make it comfortable to be poor.

Well, no question that my mother would have been much better off with a job. It seems there was a small market for her services, though. Not everyone had her special gift of seeing houses wrapped in evil, and her solution of washing it off with a garden hose and putting baking soda on the doorsteps didn't seem to have much of a market, but she was obsessed that that was the only responsible job for her to do.

The President, not being a small business person himself, like the CEO of a very large corporation, has to rely on information he receives from other sources in order to be of any "help." How do you suggest he go about evaluating the problem?

Here's one of the things he looks at that I know about: The Small Business Economy: A report to the President.

It's from one of those horrible, inefficient, socialistic government bureaucracies, the U.S. Small Business Administration: Office of Advocacy, the voice for small business in the Federal Government.

Here are a couple of paragraphs from pps 7-8 of the above linked report to the president.

For their part, small business owners have struggled, along with their larger counterparts, to weather the economic downturn. Some surveys have shown that owners are less willing than in previous years to expand their small businesses, to hire additional workers, to invest in new plant and equipment, or to borrow money. A top concern, which had been the high cost of health insurance for the past few years, is now poor sales.5 The Federal Reserve Board’s quarterly report, the Senior Loan Officer Opinion Survey on Bank Lending Practices, recently showed tougher lending standards and reduced demand for small firm commercial and industrial loans.6 Another survey showed that, while entrepreneurs are cautious, many believe managing their business through the recession has made them better business owners.7 Many small business owners are awaiting signs that the economy is improving, while they look for ways to streamline their firms’ operations, paying closer attention to their balance sheets.8

Looking forward, small businesses will be a large part of moving the economy ahead as entrepreneurs continue to spur new innovation and create employment. That said, industries will recover from the downturn in different ways,9 and some industries, such as construction and business services, have clearly been hit harder than in past business cycles. Construction in particular is overwhelmingly dominated by small businesses—more than 86 percent of firms in this sector are considered small. The construction industry lost 682,000 jobs in 2008; only one other major industrial sector lost more jobs over the period—manufacturing, with a loss of 875,000 jobs. These employment trends will be discussed in more detail.

I highlighted a section that uses the word "willing" found in your "blaming" video, which is probably where his speech writer found it. Funny how these things trickle out into the media again, go through hoops and spins, like a hula hoop. You'll notice that this byzantine effort to do something about health care costs to small business, as best as these inefficient government bureaucrats can understand these things, once addressed a top concern, but that concern has apparently (if we can believe any of these reports) been eclipsed by a concern about poor sales, all of which goes into the term "willing."

Perhaps, as your suggestion to the President, you could provide a study and a report yourself, and add it to this one for the his consideration. Just a thought. You could say what you think you can do if you want. Or just ignore it and just keep telling us what he's doing wrong.

All my instructors would not have accepted that as valid quotes to use in an assignment since much of the material is derived from other sources. Even then it does not reference what time periods and the link is broken also. Exploring the NFIB SBET Report {NFIB SBET Report: Small Business Owners Remain Depressed Over Economic Conditions | NFIB} does not reveal that about "health insurance" for the last two months at all and only "Cost/availability of insurance".

[RDR]

I just wanted to say welcome applewuud. And I am not ignoring your earlier post Jasper.

Jasper, how do you think the Fed can control bubbles and what should they have done ahead of time? Try to be as specific as you can. Also, do you have a quote about the Fed claiming to being unable to open their eyes?

godknows

I'll offer an idea: Look at historical proportions. If the median house price rises above the ability of a median income to pay for it, there's a housing bubble. If stock prices rise above the profitability (both in retained earnings and dividends paid out) of the corporations being priced, there's a stock bubble. Historical rates of return and affordability revert to a mean.

The Fed has the blunt instrument of interest rates to pop bubbles. They also can swing markets with public statements and opinion (e.g., when Greenspan spoke of "irrational exuberance" in the market). If they say they have a target for commercial real estate values, or that a market is outrunning itself based on their historical data, the market will sit up and take notice.

But they can't affect bubbles as targeted as an enlightened and nimble tax policy could. The Fed could recommend tax changes to Congress that keep a lid on bubbles as they're forming, so that when they pop they don't blow up the whole room. Congress listens to them.

Yes a fine idea as such. Yes, reversion to the mean is a good overall concept, but the question even is whether the reversion process is a bust or just letting out of air slowly. For example on the stock markets they are forward looking and as such it would be hard to correctly predict if the markets are overly rosy in their future looking states. Housing could more easily relate to the underlying pricing for rents but still difficult if it is just a change in the market or an actual bubble.

But let me just state that out of his three assumptions, I do find the idea that the "government" can not be a better gage of long term equilibrium for assets prices as the weakest points of his talk. Maybe he considers this outside the realm of knowledge that government officials have but even the Fed influencing interest rates is second guessing the cost of money {interest rates} as to the market itself. I also do not hold to the efficient market pricing theories and as such I understand that imperfect and incomplete markets can deviate quite a bit from equilibrium situations.

But as I noted above, I am not even convinced that the Fed can in fact control the ascent or decent of a bubble and interest rates are unlikely to "pop bubbles". In fact he does mention and I stated I agree that it may in fact create a bigger bubble by raising interest rates since the irrational exuberance would still exist and more monies may actually pore into that market segment.

Unfortunately, when "Greenspan spoke of "irrational exuberance" in the market" nothing happened and that was years before the bubble bust. I have read several papers that talk about credibility of the central banks. They can only influence the markets if the market believes they can carry out those specific goals. So while it is nice for them to declare interest rate targets are 2 to 2.5% for the next two years, if it comes to not be true then they would have been better off not risking their reputations to the market. Fool me once shame on you and fool me twice...

I hope that you have had a chance to read the article by Miskin linked above. We also need to have representatives that have some knowledge of economics and not necessarily "community organizers". Because while the Fed may suggest some changes including Paulson had a paper out that talked about changing some of the regulatory structures, it matters whether the politicians will understand and be willing to implement changes. Maxine Waters is a joke on her committees for example. So it seems that you, Mishkin and myself all support more prudent regulations as well as tax structures to prevent bubbles that can adversely affect the economy.

godknows

[RDR]

What do you think of the idea that the last two bubbles were inflation, but in asset prices as opposed to consumer goods in the CPI? I'm 25 years out from my undergrad degree, but it seems to me these people who were amazed that in the face of 1% Fed rates that "inflation" (core of course, ignoring energy!) was under control but "gosh, look at the stock market and housing!" were just pretending that the only place "inflation" can occur is in cars and iPods and clothing, instead of all that plus houses and stocks and oil.

And to say, well, we can't target but this one measure, core CPI, since to target more than one is just too much for the most powerful central planner in history is IMO a cop out. Let's take the 1% rates in 2003. What was the purpose of those rates if not to set the cost of money at near (or below) zero, encourage lending, and get the economy moving. Now they say that if their stated policy of encouraging lending and increasing money through low rates goes to far and they create a debt bubble, they're incapable of doing anything until it reaches CPI. Sorry but it makes no sense and seems to be a CYA policy that not at all coincidentally has the least chance of offending their money center bank clients who make out like bandits with below zero cost of money.

BTW, there was a specific reason I should have mentioned that I made the "arbitrary" comment about CPI. As I understand it, and I'm no expert, the housing component of the index is based on rent, not cost of housing, and during the bubble those two diverged with rent flat or declining in some areas even as home prices were skyrocketing. So the 2/3s of us who own our houses were ignored and monetary policy was directed at the 1/3 mostly lower income categories that rents. And since the 1/3 renting were seeing good deals as everyone with a pulse was buying their own house, the housing component (40%) of CPI was tame as we all watched prices go up 10, 20, 30% per year in some areas. If the index had properly included the actual cost of shelter instead of just "rent" we'd have seen HUGE increases in CPI that would have forced the Fed to act. Instead they defined away the inflation - purposeful or not, the Fed can recognize the temporary divergence and recalculate inflation using a more comprehensive measure of housing and target that CPI.

And we could get into another discussion about hedonics and substitution and how those have affected the CPI and why targeting a number with those distortions also biases them towards looser policy.

In the end it seems like the Fed has a built in bias towards loose monetary policy and ever rising asset prices, and lo and behold that bias created two bubbles in 10 years, as they reacted to two extraordinary events - the Y2K scare and the 9/11 attacks and the bursting of the tech bubble. Along with the moral hazard of TBTF and the Greenspan Put how else does an advanced economy created two massive asset bubbles in less than a decade?

Not much about bubbles since they are not included in the definition of inflation. Notional wealth adjustments are not in fact inflation only consumption is. They "target" {sic} core inflation as that has less noise in the data and thus less influenced by sudden shifts in those prices. It turns out that while headline inflation was gyrating around core remained stable and thus was not cause of fear as so many kept stating that hyper-inflation was just around the corner.

The CPI components are specified here for example: http://www.bls.gov/cpi/cpid0909.pdf on page 6 of 118 in the table. And "How BLS Uses Rent Data in the Consumer Price Index" at: http://www.bls.gov/cpi/cpifact6.pdf
Which includes an explanation of the "The Owners' Equivalent Rent Index". So as I read this, as rents in an area go up then it is assumed the opportunity costs are reflected in the housing costs even though for the individual the rise in prices may be minimal or nearly nothing. That is if you own your house and proposition 13 in California then even your property taxes are not increasing as fast as rent increases. If anything this could actually overestimate the "inflation" factor in housing. Just because the price of the asset increases does not even indicate that the costs to live their increases. Even if we say it becomes more expensive to own a house {down payment}, this has not proven an obstacle for people purchasing houses in the past few years. And Mishkin said that as prices of assets reflect inflationary forces then he would consider that important.

Since the US Fed is governed by two goals then it is more likely that it would be more biased toward inflation since they are willing to sacrifice that in the hopes of reducing unemployment. The EU seems to be fine with higher levels of UE over the long term but low inflation rates. I prefer our bias, but if you let politicians have at the controls then you would see the inflationary bias in spades {Zimbabwe comes to mind}.

I am familiar with the Hedonic Price Approach since one of my class assignments was explaining this method for environmental attributes of investment projects. Compared to other methods it is better since revealed preferences are better than survey results {IMHO}.

Survey says...
godknows
http://www.thomhartmann.com/board/viewt ... 64&p=32870

[RDR]

Jasper wrote:
Here is the question. If you have an economy and increase some measure of money by 30%, I think we'd agree that the money will find a home somewhere and you'll have inflation. There isn't any increase in wealth, since you just took $1,000 and made it $1,300. If you bid up tech stocks or housing by $300, it's not wealth, it's inflation reflected in financial assets, what we called "wealth." If you bid up cars or sports jackets, it's inflation. Why is one benign and one destructive - both are distortions caused simply by the fact the money supply increased. If you disagree, tell me where that theory goes awry and isn't totally consistent with Friedmans quote about inflation being always and forever a monetary phenomenon.

Nope. Depending on the circumstances you could have higher levels of idle cash on hand as Keynes stated that the speculative demand for money may change in anticipation of future increases in interest rates. So to make a blanket statement, I would not agree with those assertions. As far as Friedman, do you really want to base it all on his quotes? I would state that the structuralists do have some important points to make about inflation and not necessarily always a monetary phenomenon. I would state the hyperinflation is but as low levels there is no direct correlation as we have seen money supply increase dramatically for any measure but low inflation rates the velocity of money may have more dramatic effects.

Again inflation is:

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

That is not asset prices but the "cost of living" even if you want to use the same terminology. You keep wanting to talk about only his first assumption that needed to be overcome. Maybe you can address the other issues as I have spelled out above.

Let me direct you to a report by the IMF/BIS and you can find the complete reports at the IMF by chapters: BIS Papers No. 21 Real Estate Indicators and Financial Stability {or the complete PDF at http://www.bis.org/publ/bppdf/bispap21.pdf?noframes=1}. Let me provide some more insights to this discussion from chapter 1.

V. Conclusions
The recent equity price bust has been a forceful reminder of how dramatic asset price reversals and their implications can be. This paper examined the main empirical regularities of housing price booms and busts in 14 industrial countries during 1970-2001. The evidence suggests that while housing price busts are infrequent events, they nevertheless occur frequently enough to be of great concern to policymakers and investors alike. Like other asset prices, housing prices do sometimes decline, especially when they are adjusted for general consumer price increases, notwithstanding frequent claims to the contrary. However, booms and busts are not as closely connected, as it is widely believed. Depending on the metric used to identify booms, only between two fifths and two thirds of all housing price booms in the sample ended in a bust. The paper also established that large housing price increases over several years need not be good indicators of forthcoming busts. Relatively rapid increases over a short period of two years or less appear to be better but still imperfect indicators.

godknows

[RDR]

Too much free time on your hands? I have sat through a couple thesis presentations that after hours of dribble and neck breaking nods, the presenter states that the findings are inconclusive. It's enough to make your head explode.

When nit wit economic theorists utilize nonsense , they can't come up with anything conclusive that is actually so. "There can never be a housing bubble" - Greenspan. "GREENSPAN'S BUBBLES: THE AGE OF IGNORANCE AT THE FEDERAL RESERVE"~ William Fleckenstein.

"Greenspan, however, saw rising subprime loans as the "benefit" of increased lender productivity through the use of new technology." http://www.amazon.com/GREENSPANS-BUBBLES-IGNORANCE-FEDERAL-RESERVE/dp/0071591583
An interesting read.

"The Maestro" of economics was a Chicago School of Economics fool. His protege's have been hired by Obama to head the nation's top economic posts. The same nit wits McCain would have hired and who Bush would have endorsed. Heaven help us.

Retired Monk
"Ideology is a disease"

Commercial Real Estate - The New Subprime

[RDR]

I haven't heard this very explosive issue on Thom's show, nor seen it addressed in the forum, so I'm going to introduce it.

The straight dope is that somebody, a hacker or an insider from the Intergovernmental Panel on Climate Change exposed 1079 internal emails and some 3000+ documents, including financial records, on the internet a few days ago.
From a scientific perspective, the Climate Research Unit (CRU) do not present themselves in a favorable light. Emails gloat over the death of a skeptic, demonstrate a resistance to transparency (even to the point of deleting data rather than releasing it) and, in general, present the authors more as defenders of a faith rather than dispassionate scientists.
It's an ugly, ugly time.
Especially with so much on the line: Mandatory participation in carbon markets is about to be discussed at the December 5th climate forum, and Britain is considering personal carbon allowances (http://www.telegraph.co.uk/earth/enviro ... wance.html), which are certainly a very, very regressive and intrusive form of taxation.

A quick quote from that article:

It would involve people being issued with a unique number which they would hand over when purchasing products that contribute to their carbon footprint, such as fuel, airline tickets and electricity.

Which, no doubt, will be tracked by contracted private interests that will have no interest in your political leanings. (unless they do)

All of the proposed solutions are "public-private partnerships" where the private interest has a captive market and a guaranteed profit.
Think Enron. Think Goldman Sachs. Wonder whether or not you'd ask Bernie Madoff to save the world.

Here's how it's fed to us, behind the corporate wall, in the US and elsewhere in the empire:

A hack that exposed thousands of private e-mails and documents about global warming from a University of East Anglia climate change research center Friday could be used for more malicious attacks down the road, as hackers use cybercrime to further political agendas, security experts say.

Note:
* The emails and documents are presented as private, even though they are the work product of public employees.
* The subject matter is presented as about global warming, though it's arguably about presenting the appearance of global warming.
* And, the hack is cast as malicious, and termed "cybercrime".

The message that we're supposed to get is this: bad hackers threaten the dogma of global warming and, like terrorists, they can't be reasoned with and won't stop.

But mostly, we're just not supposed to know or care.
A google search of the string "CRU hack" gives 198,000 results and some quick clicking around will show that the first twenty or so pages are relevant.

CNN's search page, by contrast gives: 0 results.
A search for "global warming hack" actually returns one relevant result - off site (sorry, TV viewers), to WIRED magazine. More on that result later.
By contrast, a CNN search for "balloon boy" returns the following:
* View: * All Results (178) * Stories (144) * Videos (34) * More Results: Web

After all, what's more relevant to your life?
The honesty of the people telling you that the world's ending, or a proven fraud?

As a far left of center individual who is not at all sold on "global warming", allow me to present you a different angle: that of what was leaked and in the context it was leaked in.

The data appeared on anonymously on a Russian FTP server accompanied by the following message:

We feel that climate science is, in the current situation, too important to be kept under wraps.

We hereby release a random selection of correspondence, code, and documents

And so it is. You can search the documents yourself ont this makeshift search engine:
http://www.di2.nu/foia/foia.pl
I recommend searching the string "FOI" as that's the apparently the British abbreviation for their Freedom of Information Act, but also returns results for the US FOIA. Some of these emails are truly astounding. The only thing more astounding is the press reaction.
A minor example -
WIRED magazine apparently felt the need to address the issue (unlike most US media), and offered this whitewash:
http://www.wired.com/threatlevel/2009/11/climate-hack

Here's a little sample of the type of coverage this story is getting:

Another e-mail from Jones dated last year with the subject line “IPCC and FOI” is a request to Michael Mann, asking him to delete certain e-mails. Bloggers allege that Jones was trying to destroy data that had been requested under the Freedom of Information Act.

Jones wasn’t available for comment. Mann told Threat Level that he never deleted any e-mails and doesn’t know the context under which Jones made the request.

Thanks to the hacker or whistleblower, we can read the email for ourselves:

Mike,
Can you delete any emails you may have had with Keith re AR4?
Keith will do likewise. He’s not in at the moment - minor family crisis.
Can you also email Gene and get him to do the same? I don’t
have his new email address.
We will be getting Caspar to do likewise.
I see that CA claim they discovered the 1945 problem in the Nature paper!!
Cheers
Phil
Prof. Phil Jones

AR4, is of course, the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. (for background on controversy over the AR4 and Mann's role, see here: http://bishophill.squarespace.com/blog/ ... paper.html)
So, WIRED lets Mann slide saying he can't remember the context? The context is simple - the context is the Director of the Climatic Research Unit of the IPCC telling him to delete all his emails relating to their most recent authoritative report. It might be a criminal act on Jones part, since England has a FOI law and Jones is a public employee. It seems like a context that would be very difficult to forget.
But WIRED apparently doesn't care, because they don't even try to identify or contact the other 3 people named in the email.
Still, WIRED mentioned the story, so they're well ahead of most of the US press.

George Monbiot has called for Jones resignation and gives us his snide, dismissive take on the email he'd need to see to disbelieve global warming here: http://www.guardian.co.uk/commentisfree ... scientists

Oddly, the leaked emails do discuss how to rig the peer-review process and withhold data and code from scrutiny.
Global warming orthodoxy is exploding in slow motion. Don't miss it just because of corporate blackout.

http://www.thomhartmann.com/board/viewt ... f=4&t=2514

[RDR]

Here's some other information I've come across in the process of following this story:
http://www.samizdata.net/blog/archives/ ... ck_wh.html

http://www.climateaudit.org/ - Steve McIntyre is mentioned 325 times in the emails.

http://bishophill.squarespace.com/ - has deep background on the issues.

For some discussion of the issue of the hacked emails, see The CRU hack and The CRU hack: Context. I think that that's what you're referring to.

Yes, that's the stuff. BTW, RealClimate.org is mentioned in the emails 125 times, including here:

From: "Michael E. Mann" <mann@xxxx>
To: Tim Osborn <t.osborn@xxxx>, Keith Briffa <k.briffa@xxxx>
Subject: update
Date: Thu, 09 Feb 2006 16:51:53 -0500
Reply-to: mann@xxxx
Cc: Gavin Schmidt <gschmidt@xxxx>
<x-flowed>
guys, I see that Science has already gone online w/ the new issue, so we
put up the RC post. By now, you've probably read that nasty McIntyre
thing. Apparently, he violated the embargo on his website (I don't go
there personally, but so I'm informed).
Anyway, I wanted you guys to know that you're free to use RC in any way
you think would be helpful. Gavin and I are going to be careful about
what comments we screen through, and we'll be very careful to answer any
questions that come up to any extent we can. On the other hand, you
might want to visit the thread and post replies yourself. We can hold
comments up in the queue and contact you about whether or not you think
they should be screened through or not, and if so, any comments you'd
like us to include.
You're also welcome to do a followup guest post, etc. think of RC as a
resource that is at your disposal to combat any disinformation put
forward by the McIntyres of the world. Just let us know. We'll use our
best discretion to make sure the skeptics dont'get to use the RC
comments as a megaphone...
mike

What I find really amazing from these emails is just how small this AGW community of scientists appears to be and how much of their time appears to be involved in political concerns, i.e. keeping people 'on message', and circling the wagons, etc.

Again, that search engine is here: http://www.di2.nu/foia/foia.pl

Sawdust, that does seem an odd assumption.
Anyone else remember in the 70's when the big scare was that an ice age was coming?

[RDR]

What makes you think that a War on Poverty will be any more successful than a War on Drugs, a War on Immigrants, a War on Terrorism, a War on Foreigners, etc?

Does the criteria for being in poverty change or is it constant? Is a person in poverty in 1930 as bad off as someone in poverty in 2009?

Since we in the USA have a shifting definition then it of course will never be "won". That seems obvious enough even for small minded Libs. One definition of poverty {not sure who said it} was that it allowed all segments of the society to participate in the social benefits of society. For example if most people own microwaves then the poor should own those devices also. Some thoughts that complement this line of thinking is at: The Real Solution to Poverty By Arnold Kling. I would suspect that you are familiar with Arnold Kling and if not you should check out some of his writings on his blog also.

But if we are to be honest then it should be an absolute {vs. relative} poverty that we should be concerned about with respect to nutritional requirements. This passage should provide some framework for explaining it.

6.3.3 Nutritional Requirements

In fact, food is taken to be of central significance. The most common measure of absolute poverty takes as its single criterion ‘minimum nutritional requirements’, and this is sometimes referred to as ‘the biological approach’. Poverty, then, is a matter of nutritional deprivation, which has at its centre hunger and malnutrition, with all of the consequences that flow from these.
To measure directly whether and to what extent individuals were so deprived is extremely time-consuming and would require immense effort to establish on a national basis. We may approximate that by specifying the level of income at which it is possible to reach the necessary level of nutrition; identifying as poor all those whose income falls beneath that minimum; and expressing this as a proportion of the total population. This is back to the ‘head-count measure’.
The possible shortcomings are discussed in the Sen...,three difficulties are identified–those of:
• precise definition
• translating nutritional requirements into food requirements and specific commodities
• differing proportions of income spent on food.

I would also expand it to include a "basic needs approach" to determining absolute level of poverty. Sorry, instead of correcting my statement about who said fruits of society let me include the passage:

‘Poverty is about deprivation, and deprivation, for a human being, must be a relative condition’ {Sen}.
He quotes Peter Townsend’s observation that one should try ‘to define the style of living which is generally shared or approved in each society and find whether there is…a point in the scale of distribution of resources below which families find it increasingly difficult … to share in the customs, activities and diets comprising that style of living’ (p. 16). In different societies/economies, the notion of what constitutes ‘tolerable’ levels of living may differ.

Even these approaches I criticize since it is not income as the most important factor to consider but in fact consumption which I suppose is a much harder figure to derive at for the average household {in poverty}. I close with another view on poverty that contrasts sharply with the Kling article but in fact allows a few important points to be considered also. Human Rights - The Next Step by Eyal Press

godknows

How About a War on Poverty Instead? By JAYNE LYN STAHL

[RDR]

http://www.youtube.com/watch?v=cSWSwhn-AWc&feature=player_embedded

Investors Buy Gold As Central Banks on Course to Crash World Economy

The perception now is that the massive stimulus put into international markets, especially US markets, will be withdrawn as interest rates are allowed to float upward. This stimulus was responsible for the stock market climbing from Dow 6600 to 10,500, a 60% leap built on monetization. If the punch bowl is removed the market will return to test 6600. In addition, the deflationary undertow kept at bay by the stimulus, will overcome monetary policy and the nation and the world will slip into monetary, deflationary depression.

The Fed is now forced to allow gold to trade higher and the dollar to fall lower. What else would one expect under current monetary circumstances? This policy will allow both gold and the dollar to play out to their full extent. The Fed’s job has been very difficult considering a fiscal budget deficit of $1.5 trillion not counting off budget items that take it over $2 trillion – a condition we are told that will persist for the next ten years. The solution has been the creation of ever more money and credit. There has been no cooperation. Nothing has worked together. All the problems have gone spinning off into a number of directions. There is no control on fiscal or monetary policy. What the players refuse to understand is that until the system is purged the situation is only going to get worse. There is no recovery. It is only an interlude in an ongoing depression.

...The further our government, via Goldman Sacks, JPMorgan Chase, HSBC and Citigroup, short gold and silver and the shares, the greater price appreciation will be in the future as they ultimately will have to cover their shorts. We are at the confluence of big things happening. The fiscal debt overhand is so onerous that a ¾% rise in interest rates would mean the Fed would have to monetize another $150 billion and a 5% increase in interest rates would increase debt service interest by $600 billion additional dollars.

http://www.marketoracle.co.uk/Article15355.html

DALLAS FED PRESIDENT ACKNOWLEDGES EASY MONEY CAUSING DOLLAR DECLINE

A number of Federal Reserve officials made comments Tuesday about U.S. employment likely continuing for a long time and the need for the Fed to maintain super low interest rates. In an eye popping comment, the Dallas Fed president acknowledged that the easy money was damaging the dollar, but he was unconcerned as long as the decline was orderly. So as long as the U.S dollar collapses slowly instead of suddenly, everything is fine. This is the wisdom from the people in charge folks.

The economic geniuses at the Fed are not worried about inflation, as is also the case across the pond in the other quantitative easing powerhouse, the Bank of England. There is no case in history where significant excess money creation didn't lead to inflation, but why be bothered by historical fact. How excessive the money creation is this time is indicated by a gauge kept by Morgan Stanley which measures the amount of cash circulating in the global economy as a percent of total economic activity. It is at a record high by far. Of course, you don't need complex money measures to determine if there is inflation. Gold has been the inflation thermometer throughout the ages and it indicates quite clearly that inflation is heating up.

http://nyinvestingmeetup.blogspot.com/2 ... chive.html (November 11, 2009)

[RDR]

Bilderberg plan to ensure that "US Dollar Will Collapse At End Of 2010
http://eclipptv.com/viewVideo.php?video_id=8516
He talks more about it in his interview from earlier today:
http://www.youtube.com/user/thebobchapm ... 2_l8JY4Kzw

[RDR]

Who really cares that a US Ford sold a Swedish Volvo, which it has only owned for 10 years, to the Chinese?

"Volvo's market share is shrinking in the North American market. However, Volvo increased its market share in new markets such as Russia, China and India. Specifically, Volvo expected sales in Russia to double and exceed 20,000 units by the end of 2007, making Russia one of the ten biggest markets for the company. Volvo already boasts the leading position in Russia's luxury car segment."

So, Volvo's Suck, Ford sells.
BFD

Truly this is one BFD. Although this is good news for Ford now as it gets rid of the albatross and gets them to focus on their core competency it also points out that Ford sucked. What I mean is that Ford was unable or unwilling to create synergies between their brands. It did not fit well in the overall brand image as well as cross development seemed to never take off.

For the "big picture" it showed that the Swedes did not fear "globalization" as many xenophobes here parade around like Thom Hartmann. As far as balance of payments and the effects on the USA, this seems to be a good thing. Chinese will more than likely purchase this with their excess reserves of US dollars and that will be repatriated by Ford back to the USA. Since xenophobes are preventing them from purchasing US assets directly located in the USA this is a good compromise. The people that should worry is {aside from Western Industrialized Countries} is the Swedes, as in:

Fresh promise for Volvo as Ford agrees $2bn deal with China's Zhejiang Geely • Ford agrees commercial terms with Zhejiang Geely group • Volvo's former directors say Geely lacks 'technical competence'
Geely, established in 1986, has production capacity of about 300,000 vehicles at six factories in China and is thought to be keen to get its hands on Volvo's technology as part of an ambition to increase in scale and expand internationally. A rival Chinese manufacturer, Beijing Automotive, recently spent $200m to buy the rights from General Motors to three vehicle platforms from troubled Saab, in a similar initiative to accelerate technological development.

A Chinese buyout will mean a cultural shift for Volvo, which employs about 20,000 staff, three quarters of which are in Sweden. The brand, established in Gothenburg in 1927, is named after the Latin verb volvere, meaning to roll, and has a reputation for chunky, ultra-safe cars and trucks.

The deal has not been universally welcomed. Eight former Volvo directors recently wrote to Ford's chairman, Bill Ford, arguing that Geely is an unsuitable owner for Volvo because of its relatively small size and lack of "technical competence".

Unions have expressed unease, claiming that Geely has little transparency, an ownership structure based in tax havens and a history of intellectual property theft. And, uneasy about reports that Geely may receive money from Chinese state banks to fund the buyout, several Christian Democratic politicians in Sweden have portrayed the deal as a sale of Volvo to the Communist party and the Chinese government.

Volvo's management responded earlier this month by writing to all of its employees imploring them to avoid xenophobia and to be mindful that the company has a multicultural ethos.

Just like the USA unions, they want the benefits but do not want to take the risks involved in running their own company. Just taking their present staff of 20,000 this means that the deal if the unions had decided to self owned it would be around $100,000 per staff in a highly paid and high income country. Seems not like much if it means your jobs.

I am sure it has a lot to do with technology transfers as noted but crying to Ford will not do much to help their cause. Only cash now is what Ford wants.

godknows
http://www.thomhartmann.com/board/viewt ... 40&p=37562

[RDR]

Hello everyone,

I'm a long-time Tom listener, and a new member to the podcast/boards. I'm looking for a little help with an economic argument I stumbled into over the holidays with a friend. Basically, his line was:

"If you raise wages at the bottom (unskilled laborers, retail people, food and other service, etc.), then the cost of the low end products (i.e. cheap manufactured goods, cheap services, and cheap food) will also go up hand in hand."

He stood on this to self-evidently show that raising wages at the bottom would be moot, as the inflationary effect would render such an action useless.

I stammered, offering that rather than passing the price on to the consumers, the corporations could take on a slimmer profit margin, but we both knew this was unlikely. I also tried arguing that if wages at the bottom were raised it would increase the quality of life for low wage earners, as not ALL prices would go up automatically hand-in-hand with the pay increase (only the low end products and services), but he pointed out that a living increase at the bottom would amount to a tax on the middle class, as their pay staid the same in this scenario while the low end products and services they purchase ended up costing more.

I intuit that he is wrong. I know Thom always says: "I'll pay 20% more for goods and services if I'm making 40% more in my paycheck." Can anyone explain to me specifically how this works? If, to take Thom's example, we increased wages at the bottom by 40%, what economic mechanism would ensure that the increase in costs would not also go up 40%, rendering the increase moot?

Thanks,

Jeff

Welcome Jeff. If you don't mind, let me try to explain some aspects of your discussions with your friend. To be honest, your friend is probably closer to reality than your position and most definitely closer than Thom Hartmann.

I assume that the discussion is based on raising the minimum wages and thus the chosen method to supposedly raise the wages on the least skilled workers. Thus my answers will address it in that framework.

So basically he is right that lower the wages on lowest wage earners raises the costs to the consumers and especially on the low income consumers. But there is also another aspect of the wage rates that raising the minimum wages also distorts the wage differentials and thus there will be a "feed-through" effect as each job category will also expect the wage differentials to be established again. For example if the bus-person gets a raise then the fry cooks would expect a higher wage and the head chef also a raise as well the hostess and waitresses etc, etc. Thus eventually the costs of most items for consumers will raise and no one will be better off. The worst situation is if the minimum wages are tied to inflation. Eventually inflation expectations will be unmoored and the economy will be faced with spiraling inflation.

Thus the people the policy was suppose to help actually hurt them as well as everyone else.

You are correct partially that "corporations" could in fact accept lower profits {for the short term}. But as profits in certain sectors of the economy is lower then capital is diverted to more profitable sectors of the economy. In the end it again may make unemployment for unskilled labor higher. Secondly as the factors of production is changed in raising labor costs then everything else being equal then businesses will shift the factors of production until marginal productivity of capital or other factors to be the same as the marginal productivity of labor. Thus a shift from labor to capital and again making unemployment for unskilled labor worse.

Ultimately, the people that the policies are suppose to help will just make it more difficult for unskilled labor. I would say the answer is to increase the pool as well as the individual allotments of human capital.

godknows
And Thom just lives in a make believe world, let the Rodeo Clowns pop-up...
http://www.thomhartmann.com/board/viewt ... 273#p38273

[RDR]

Lew Merrick wrote:

mattnapa wrote:
Did not have time to follow this whole discussion, but I am always fascinated that increasing wages is viewed as an "unnatural" to the marketplace. But at the same time profit taking is seen as a necessary function. My opinion is that the whole question of raising some particular wages of some group and trying to analyze its effect on the larger economy is simply an impossibility given the scale and dynamism of the the larger economy. What is clear to me however is the mindset that claims the marketplace is a given and that any attempts to improve worker wages will only hurt other workers and low income individuals is, as the cons so eloquently stated on the first page of this thread, BULLSHIT!

The thing that makes this so true, yet is denied in most forums today is the elimination of ethics from business. In the mid-1960's 50% of the wholesale cost of a physical product was the cost of the direct labor that produced it. The manufacturing company was "allowed" to add 10% to the cost of materials, labor, and hour-reduction amortization of facilities and equipment to set the price the wholesaler paid for the goods. The wholesaler was "allowed" to add an additional 10% when setting their price.

In 1970 or 71 Richard Nixon, by executive authorization (usually called "executive order") ceased enforcement of laws against usury. We saw "mark-up allowances" to rise to 100% at wholesale and retail levels within months. In the wake of the Sputnik "crisis," we established the American Board of Engineering and Technology (ABET) as a quasi-governmental group to analyze and direct the development of technology (specifically related to space, but with a rather broad technology overview). This was 1957. ABET was supposed to study the development and use of technology and made a report each decade as to the state of technology and the direction future technologies should be "encouraged." Their first report (made under the leadership of Buckminster Fuller) was issued in 1966. Later reports were issued in 1976, 1986, and 1996 (ABET was "privatized" in 2002 and their 2006 report was never publicly released).

These are rather massive reports. I was a student in 1975 and did some data analysis for the 1976 report. I was working on a governmental manufacturing technology program (Factory of the Future) and both generated data (manufacturing automation) and did some analysis for the 1986 report. I helped write the manufacturing automation section of the 1996 report. Few people know that these reports exist.

The thing that a study of these reports show are: (1) The absolute necessity of government funding of R&D. The typical technology has a gestation period of two-three decades between initial development and financially practical application. No private investor is going to wait that long (half a lifetime) to garner a "return" on their investment. (2) The "shift" has been that "management" has risen very consistently from being 5% of an operation's cost (1966) to more than 50% of an operation's cost today. This should tell us something.

The problem is that we have allowed Harvard and Yale to set our "standards" in business. Back in the mid-1970's I had a bumper sticker on my car that read, "Nuke Harvard NOW!" This would be a "good thing."

[RDR]

Ok, that's enough for me. You should realize that I was actually humoring you by helping your thread along because I felt bad for you: Not because I bought any of your incoherent and painfully transparent "ego" nosnense. I've already given you more time and ratings than your topic ever deserved. You honestly imagine you're "manipulating" anyone who's engaged you here?
http://www.thomhartmann.com/board/viewt ... 18&p=42102

Not really much on information as the other posts here, but it does provide a good example of framing that is precise but full of innuendos. Stuff that Sue will let pass but still is just as effective as calling someone a troll.

But the second post of the thread is even more interesting:

I'm sorry but I don't get it. This captioned video of a speech seems to have been created as some sort of cheesy, inane, right-wing propaganda. This isn't the Glen Beck forum--it's the Thom Hartmann forum: I don't imagine you'll likely get the reaction you intended on this kind of thing. Surely there's enough legitimate material that's actually thoughtful and consequential to criticize Obama about though?

One last one quoted:

kopanko wrote:

dr. bobby wrote:
you dont get that our president is a total narcissist? that he is invested in himself and not in America. that he has done nothing but prop up all the people that he declares are the problem. he says the banks are evil and then gives them a bunch of cash. everything is about him, he is supposed to be running a country not a popularity contest. it is his speech, wasnt made up by the right. there is plenty to criticize about him, but he needs to have his ego knocked down a few pegs. this is no longer about him, its about us and its about this country as a whole. and if you cant see that, then you must be blinded by your ideology. you probably a progressive, and then there are the conservatives, the liberals, the righties, the lefties, the tea partiers, the code pink people, etc, etc. where are all the Americans?

Bobby, you are all over the place with this one. As friendly advice, if you want to catch flies you need to use honey. The fact that he is narcissistic is irrelevant. Name one politician who is not. You picking on Obama this way only discredits the points you are trying to make. If you take the time to look you'd see that many here are probably more tired of Obama than even you--but for actual, meaningful reasons.

To try to respond to the last part at least ALL THES PEOPLE ARE AMERICANS: "Liberals/progressives" is largely, effectively a semantic distinction. Code pink people are in sympathy with these and are a small activist groups that is a subset of them. "Conservatives" as the term is self-applied are the same thing as "righties". "Tea Partiers" is a term self-applied by a group comprised almost exclusively of, white, low-educated working class dupes (note the ironic name) organized by corporate Republican think tanks to turn these people against their political self-interest by playing on and encouraging racist and xenophobic themes and ignorance ("obama in white face", "obama the primitive witch doctor", the oxymoronic conflation of progressivism with fascism, communist dictatorship, etc.), and using the economic situation they left the country in to herd these gullible people into populist panic.

These are "the Americans". The question isn't "where are they?" The question is, rather, what are YOU doing to combat ignorance and delusion and and to combat the spread of divisive and deceptive propaganda meant to do nothing but exacerbate these divisions which you decry? What are you doing to combat the corporate propaganda, to get down to the common political sensibilities that unite BOTH progressives AND the teabaggers? Think about it: Is your goal actually do to that?

Obviously you can not see narcissism when you are are narcissist.

[RDR]

You know what poly, I was thinking the same thing.

Dr. Buckley was the only other person I can recall (on this board) who thought we should actually legislate a way to dumb down the population even further. Considering he is a so-called professor, it always struck me as odd, but then I never said I understand the mind of a right wing ideologue.

Dr. Buckley participated in annual conferences of CEO's of transnational corporations...and co-authored books supporting their agenda. He knew where his bread was buttered.

The information was readily available on the internet.

My own feeling was that he was a paid troll. He resurrects himself from time to time with a new user name.

Retired Monk
"Ideology is a disease"