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George H. Blackford
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Well it is an interesting idea, but it is not exactly clear to me how the market for real-value consoles would work, and I’m afraid I’m too busy with other things right now to try to figure it out. I’m going to have to put it on a back burner for awhile, but will get back to you if I arrive at some kind of conclusion about it.
Toggle Commented Oct 11, 2017 on Links for 10-09-17 at Economist's View
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I am very much concerned about household debt, especially consumer and student debt, but that doesn’t mean public and corporate debt can or should be ignored. Ignoring corporate debt leads to fraudulent leveraged buyouts and agency problems of corporate looting that eventually leads to bankruptcies of the kind we experienced in the Saving and Loan crisis I discuss in http://rweconomics.com/htm/Ch_1.htm where the government ends up bailing out depositors and pension funds and the looters walk away with the cash. As for public debt, as long as it’s federal I would not worry about it at all if we had a highly progressive federal tax system and a balanced current account, but that debt redistributes income from the average taxpayers to debt holders who tend to be wealthy, and the last thing we need today is to redistribute income to the wealthy and abroad. I explain what I think about federal debt here: http://rweconomics.com/htm/MTFB.htm but I suspect there isn’t anything in this piece you don’t know or would disagree with.
Toggle Commented Oct 10, 2017 on Links for 10-09-17 at Economist's View
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I would also note that I do not find the issues surrounding the question of taxing corporations nearly as esoteric or arcane as some orthodox economists make them out to be: http://rweconomics.com/a_note_on_taxing_corporations.htm
Toggle Commented Oct 9, 2017 on Links for 10-09-17 at Economist's View
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Re: The Schlock Of The New - Paul Krugman Re: “The implicit story, pretty much taken for granted as true, was that the crisis proved the inadequacy of economic orthodoxy and the need for fundamental new concepts.… The rest of us…said…How stupid of me! standard macro worked pretty well.” If this is true, why is it that mainstream economists supported the policies—regressive tax cuts, deregulation of the domestic and international financial systems, and unregulated free trade—that led to the crisis in the first place? The direct effect of these policies was to increase the concentration of income: http://rweconomics.com/htm/Ch_1.htm , drive us deeper and deeper into debt while devastating manufacturing and our mass markets: http://rweconomics.com/htm/WDCh3e.htm , and led directly to the worst financial and economic crisis since the Great Depression: http://rweconomics.com/htm/WDCh10e.htm . Why did orthodoxy allow this to happen? Re: “What did the ideas they leaped at have in common? All of them had…conservative ideological implications.” I don’t think so! http://rweconomics.com/LTLGAD.htm What does orthodox economics offer to deal with the fundamental problems we face, namely, the trade deficits and concentration of income? I haven’t seen anything come out of orthodox economics except deficits and more of the same kind of thinking that led to these problems in the first place: http://rweconomics.com/Deficit.htm . This is particularly disturbing when a leading spokesmen for orthodoxy presents an argument, with a wink and a nod (“I know, I know”), “written for Olivier Blanchard and three or four other people” ( https://krugman.blogs.nytimes.com/2017/10/05/the-transfer-problem-and-tax-incidence-insanely-wonkish/?comments#permid=24340918 ) that is based on a “perfect-foresight dynamic model” which assume “rational expectations” and a “Cobb-Douglas production function” (presumably with constant returns and fixed income shares), and then declares that if “the US were to cut corporate tax rates….this would drive the after-tax rate of return back down….by increasing the U.S. capital stock”—an argument that ignores the fact that when “U.S. investment exceed[ed] U.S. savings [and we ran] current account deficits” leading up to the Crash of 2008 the mechanism by which our capital stock increased over time was by way of speculative bubbles that led to investment that made the current account deficits possible (not the other way around) as the concentration of income grew, and virtually all of the capital transfers that took place were either financial or of existing assets, and this is what happened in the meantime: http://rweconomics.com/htm/FUB.htm . Then he declares that after spending “three decades pointing out the fallacy of the doctrine of immaculate transfer [by arguing that] Exporters and importers don’t know or care about S-I; they respond to signals from prices and costs. A capital inflow creates a trade deficit by driving up the real exchange rate,” thus, ignoring the fact that those exchange rates can be manipulated by government controlled foreign central banks, especially those that have strict capital controls at home, for a very long time until the system melts down. This expert analysis of the way this smooth process is supposed to work doesn’t exactly correspond to the way it actually worked in the real world leading up to the Crash of 2008: http://rweconomics.com/htm/WDCh_2.htm It seems to me that this is exactly the kind of thinking that got us into the mess we are in today. Playing games with irrelevant mathematical puzzles that assume away the substance of the problems we actually face. I don’t know. Maybe I’m wrong about all of this, but if I am wrong I sure wish someone would explain it to me in a way that doesn’t assume away the problem by ignoring the financial sector and debt, and that doesn’t rely on a perfect-foresight dynamic model which assume rational expectations and a Cobb-Douglas production function with constant returns and fixed income shares.
Toggle Commented Oct 9, 2017 on Links for 10-09-17 at Economist's View
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That act converted Social Security from a pay-as-you go to a partial-prepayment system, and, in the process, seriously cut benefits by increasing the retirement age which dramatically affects working people, and it increased taxes on working people to help finance the Reagan tax cuts for the Wealthy. See: http://rweconomics.com/WD/Ch17.htm
Toggle Commented Oct 9, 2017 on Links for 10-06-17 at Economist's View
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I probably shouldn't do this, but I would kind of like to know what you think of my analysis of this problem: http://rweconomics.com/a_note_on_taxing_corporations.htm
Toggle Commented Oct 7, 2017 on Links for 10-06-17 at Economist's View
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Now it is undoubtedly true that “there were always users of these models that opposed the array of policies we call neo liberal,” since these models are the currency of modern economics, and, in fact, I don’t have any problem with the use of these models to oppose neo liberal policies or to establish the validity of those policies. They are, in fact, essential to economic analysis, but not when they are based on nonsensical assumptions. These models are descriptive, and predictive, but they do not establish causality. Causality must come from somewhere else, and fed into them through their assumptions. As a result, when they are based on nonsensical assumptions they are meaningless, and lead to nonsensical policies, ( http://rweconomics.com/BPA.htm ) policies such as: 1) Abandonment of the capital controls of the Bretton Woods Agreement. 2) Depository Institutions Deregulation and Monetary Control Act of 1980. 3) Refusal to regulate repurchase agreements and money-market funds. 4) Marginalization of unions. 5) The Reagan Tax Cuts. 6) Social Security Reform Act of 1983. 7) Garn–St. Germain Depository Institutions Ac of 1982. 8) Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. 9) Financial Services Modernization Act of 1999. 10) Commodity Futures Modernization Act of 2000. 11) The OCC, Fed, FDIC, and OTS promulgated in 2001 of the rules that allowed depository institutions to set up Special Purpose Vehicles to secure financing in the Asset-backed Commercial Paper (ABCP) and Repurchase Agreement markets, and to allow depository institutions to hold less capital reserves against AAA rated investment assets than against ordinary loans. 12) The SEC promulgated in 2004 of the rule that allowed the major investment banks to set their own capital requirements as determined by their in-house risk assessment models. I see the cumulative effect of these policies to be disastrous. They led us blindly into the Crash of 2008, and all of these policies were justified and defended by a near consensus of mainstream economists through the use of neoclassical and new-neoclassical models that were based on nonsensical assumptions. Now maybe I’m wrong about this. Maybe there was a groundswell of mainstream economists who came forward with sensible models to oppose these policies, but I lived through that era, and I didn’t see it, other than from the post Keynesians who were, and still seem to be, marginalized within the discipline. Who were these mainstream economists? Where is the literature of these protesters? I haven’t been able to find it.
Toggle Commented Oct 7, 2017 on Links for 10-06-17 at Economist's View
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I don’t know how to deal with the jargon issue with regard to neoclassical and new-neoclassical except to suggest Weintraub’s, Neoclassical Economics, http://www.econlib.org/library/Enc1/NeoclassicalEconomics.html . Also David Warsh, a journalist, posted a number of very interesting articles on the history of economic though on his website, http://www.economicprincipals.com/archive-index , during the Summer of 2015. There’s also Abdallah Zouache’s, TOWARDS A 'NEW NEOCLASSICAL SYNTHESIS'? AN ANALYSIS OF THE METHODOLOGICAL CONVERGENCE BETWEEN NEW KEYNESIAN ECONOMICS AND REAL BUSINESS CYCLE THEORY in the History of Economic Ideas, Vol. 12, No. 1 (2004), pp. 95-117, but this piece is probably not the best for what you are looking for.
Toggle Commented Oct 7, 2017 on Links for 10-06-17 at Economist's View
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"Yes we are not here conducting mass media agitation. But rather analysis that can lead to more effective policy paths." You may have confidence in this kind of neoclassical (new-neoclassical if you prefer) analysis in leading to more effective policy, but I do not. The way I see it, it was this kind of analysis that led directly to the policies that gave us the Crash of 2008: http://www.rweconomics.com/htm/Ch_1.htm , http://www.rwEconomics.com/htm/WDCh3e.htm , and http://www.rweconomics.com/htm/WDCh10e.htm . Who are the neoclassical economists that opposed these policies as they were implemented leading up to the Crash of 2008?
Toggle Commented Oct 6, 2017 on Links for 10-06-17 at Economist's View
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"I’m fine with all that. But I think it’s also important to ask exactly how inflows of capital that equalize rates of return are supposed to happen. Once you ask that question, you see that long run analysis may not be good enough for policy purposes." I'm fine with all that too. I just don't see exactly how his analysis of capital inflows explain how rates of return have been equalize since 1980 as manufactures have been driven out of business, the monopoly power of mass retailers and bankers has increased (hence, their rates of return), and the concentration of income has increased as we have been driven deeper and deeper into debt in the wake of these capital inflows. I don’t see this as the smooth flowing equilibrating process that Krugman assumes. As I try to explain in http://www.rweconomics.com/LTLGAD.htm , I see it as generating financial imbalances that, in the absence of sound regulatory processes and institutions to deal with the excesses, lead to the kind of breakdown we saw in 2008.
Toggle Commented Oct 6, 2017 on Links for 10-06-17 at Economist's View
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I guess I should add, the way the world has worked since 1980 with regard to capital flows is discussed here: http://rweconomics.com/htm/WDCh_2.htm
Toggle Commented Oct 6, 2017 on Links for 10-06-17 at Economist's View
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Krugman uses standard neoclassical analysis to show how relying on corporate tax cuts to increase our capital stock by increasing current account deficits to repatriate profits held abroad will take too long to be very effective. The assumption underlying his analysis is that the offsetting capital account surpluses will increase the domestic capital stock. The logical conclusion to be drawn from this argument by those who wish to cut corporate taxes is that all we have to do to make the process work is to speed up the repatriation, say, by declaring a tax moratorium on repatriated profits within a set time period. My point is that this is not the way the world has worked since 1980 with regard to capital flows, and even if it were to work this way in the future, it would not solve our problems. Krugman’s analysis ignores the fundamental causes of our problems, namely, the tax and regulatory policies we have followed over the past fifty years that has led to the dramatic increase in the concentration of income we have seen since the 1980s. ( http://www.rweconomics.com/htm/Ch_1.htm ) If these causes are not dealt with, there is no reason to believe repatriating profits, no matter how quickly, will be any more effective in increasing the domestic capital stock today than it was in the 1980s. To my mind, anyone who ignores this history and those causes in analyzing the problems we face today is (with all due respect, for want of a better metaphor) just blowing hot air: http://www.rweconomics.com/LTLGAD.htm
Toggle Commented Oct 6, 2017 on Links for 10-06-17 at Economist's View
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On Krugman’s: The Transfer Problem and Tax Incidence “One does not simply unbolt machines in other countries from the floor and roll them into America the next week.” I find this shocking since this is exactly what happened in Flint, MI, except the machines were rolled out to Mexico, Canada and overseas: http://rweconomics.com/htm/FUB.htm “What we’re talking about is a process in which U.S. investment exceeds U.S. savings – that is, we run current account deficits – which increases our capital stock over time.” I find this just bizarre. The U.S. has run current account deficits since the 1981. Our International Investment Position went from a $360 billion creditor position to a $2.47 trillion debtor position, and less than 20% of the foreign investment in the U.S. is direct foreign investment and most of that was in existing real estate and the takeover of existing U.S. companies. More than 80% of foreign investment in U.S. is in financial assets such as government or agency bonds. How did this increase our capital stock over time as our factories were shipped to Mexico, Canada, and overseas? If this is the way it works, how have the Asian Tigers managed to build up their capital stocks with trade surpluses? Why is there any reason to believe that the increases in deficits from corporate tax cuts won’t just lead to corporations buying back their stock and increasing their dividends? Krugman’s analysis of the problem of corporate tax cuts may be an interesting intellectual exercise, but in light of this history it would seem that it is in no way relevant to the way in which the world actually works. Our problems cannot be solved by increasing current account deficits in order to increase investment no matter how quickly this can be done. Our problem IS the current account deficits which were predicted by Hobson more than 100 years ago: "It is here enough to repeat that Free Trade can nowise guarantee the maintenance of industry, or of an industrial population upon any particular country, and there is no consideration, theoretic or practical, to prevent British capital from transferring itself to China, provided it can find there a cheaper or more efficient supply of labour, or even to prevent Chinese capital with Chinese labour from ousting British produce in neutral markets of the world. What applies to Great Britain applies equally to the other industrial nations which have driven their economic suckers into China. It is at least conceivable that China might so turn the tables upon the Western industrial nations, and, either by adopting their capital and organisers or, as is more probable, by substituting her own, might ** flood their markets with her cheaper manufactures, and refusing their imports in exchange might take her payment in liens upon their capital, reversing the earlier process of investment until she gradually obtained financial control over her quondam patrons and civilisers. ** This is no idle speculation. If China in very truth possesses those industrial and business capacities with which she is commonly accredited, and the Western Powers are able to have their will in developing her upon Western lines, it seems extremely likely that this reaction will result." John Atkinson Hobson, Imperialism, A Study, 1902. In the national income accounts, income Y is given by the sum of consumption C, investment I, and exports X minus imports M: Y = C + I + G + (X-M) Thus, the saving equal investment equilibrium condition is given by: (Y- C - G) + (M-X) = I The fact that foreign sector saving (M-X) has increased since 1980 by way of the trade deficit (X-M) does not mean that the trade deficit (X-M) increased I. What actually happened was that the policy changes that occurred since the 1960s created an economy fueled by speculative bubbles as the concentration of income increased, domestic saving (Y-C- G) decreased, and foreign sector saving (M-X) increased. ( http://www.rweconomics.com/htm/Ch_1.htm ) The increase in foreign sector saving (M-X) did not increase investment I. Speculative bubbles increased I which made it possible for (M-X) to increase as (Y-C- G) decreased. In the process, the U.S. economy went deeper and deeper into debt ( http://www.rwEconomics.com/htm/WDCh3e.htm ) until the financial system began to melt down in 2007 and crashed in 2008. ( http://www.rweconomics.com/htm/WDCh10e.htm ) It's not a good idea to ignore this kind of history. When history is ignored it becomes prologue: http://www.rweconomics.com/LTLGAD.htm
Toggle Commented Oct 6, 2017 on Links for 10-06-17 at Economist's View
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You're are right. I was confusing price and yield.
Toggle Commented Sep 24, 2017 on Links for 09-22-17 at Economist's View
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Re: The Fed Buys into Secular Stagnation - Joe Gagnon "Shrinking the balance sheet will tighten financial conditions because it will increase the amount of long-term bonds in the market and thus push up their yields." What am I missing here?
Toggle Commented Sep 23, 2017 on Links for 09-22-17 at Economist's View
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It seems fairly clear to me that our problems began in the 70s when we abandoned international capital controls, broke the unions, cut taxes on corporations and upper income groups, and deregulated the financial system. This led to the stagnation of wages and an increase in the concentration of income at the top of the income distribution. ( http://www.rweconomics.com/htm/Ch_1.htm ) The export-led growth model that came into being in the 90s made matters worse and proved to be unsustainable. ( http://rwEconomics.com/htm/WDCh_2.htm ) When combined with tax cuts and financial deregulation it led to a situation in which the full utilization of our economic resources can only be maintained through an unsustainable increase in debt relative to income. ( http://rwEconomics.com/htm/WDCh3e.htm ) There’s more going on than just globalization here, and it’s going to take more than just tinkering around the edges of our social safety net and creating federal deficits to solve the problems we face today if we are to survive this mess with our political, social, and economic institution in tact. It’s going to take a dramatic restructuring of our economic system to undue the changes that have taken place over the past fifty years. ( http://rwEconomics.com/LTLGAD.htm ) Unfortunately, it seems unlikely that this is going to happen in a world in which half the discipline believes we can solve our problems by creating deficits, and the other half believes that all we have to do is ignore them and they will go away on their own.
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I have no hard feelings, and really do wish you well.
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I think that the only difference between us on this issue is that I believe the lobbyist have such a powerful control over both parties that I don't think the Democrats can do what has to be done to avoid the kind of disastrous policies we have seen over the past forty years if they don't settle these differences before they gain power. What happened in 06 and 08 was that the voters were looking for change and when the Democrats gained power nothing changed in their eyes. The fact is, it seems to me, the neoliberals have such a powerful grip on the Democratic Party that the Party can't do what has to be done to fix the mess we are in that led to Trump if it doesn't settle these differences now, and that can't happen if Democrats are unwilling to debate them and face them head on. I just don't see any hope for the future if this doesn't happen. I explain why I believe this in the two links above to which I would add: http://www.rweconomics.com/IVR.htm and http://www.rweconomics.com/LTLGAD.htm
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I don't see how that 50 years of history explains why Obama got over 600,000 more votes in Michigan in 08 than Hillary in 16, or where those 200,000 missing voters went when Hillary lost Michigan by only 11,000 votes. In any event, we really have gotten to the nub of the difference between us when it comes to your willingness to write them off and why I think this is a mistake. You are going to have to read http://www.rweconomics.com/blame.htm and http://www.rweconomics.com/IVR.htm before we can discuss this further.
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I know the feeling, but I think it is a big mistake. It seems to me that this exactly the attitude that led to Trump, and if it continues it's going to lead to worse than Trump, assuming, of course, we are able to survive Trump which is not at all certain. All I can say is read the introduction to: http://www.rweconomics.com/blame.htm This is where I am coming from and the way I think about the problems we face today. I also think you should read: http://www.rweconomics.com/IVR.htm Neither of these pieces are very technical, but they do explain why I think it is a very big mistake to just write these people off rather than try to deal with their problems, and note that I am very sincere about this. I am not calling you names or saying you don't have a right to feel the way you do. I'm just saying that I think it is a very bad mistake for Democrats to approach the problems we face today in this way.
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I guess I should also add that the Democrats aren't going to win them back by pretending that they don't exist.
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We are not talking about the white working class here. We are talking about the people who voted for Obama in 08 and then either stayed home, voted for a third party, or voted for Trump in 2016. Those are the people the Democrats have to win back if they want to win elections, and they aren't going to win them back by calling them names or trying to convince them that they are idiots because they don't know how well off they are.
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I don't have to think about why I did that. I know why I did that, and you would too if you were to click on: http://www.rweconomics.com/Deficit.htm
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Thank you for you condolences. I appreciate that, but your state of denial is just mindboggling. Strange as it may seem, I also know some Democrats who voted in the Republican primary in Michigan to vote against Trump, and I know one right-wing Republican who came out to vote against Trump and vote for Cruse because "Trump is an idiot" then voted for Trump in the general anyway because "Hillary is going to take away my guns." You are just grasping at straws trying to hold on to the idea that the problem is with the voters rather than the fact that conservative and neoliberal rule in this country has been disastrous for a large portion of our society, especially in the rust-belt states, and has pissed them off to the point that they are fed up with both political parties. Calling them names, rather than trying to understand and address their problems is not going to win elections. Now here is a link that I really would appreciate your clicking on and thinking about: http://www.rweconomics.com/htm/FUB.htm It's just some pictures to look at with hardly anything else.
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This is jut silly. You want to argue over our different interpretation of what was the "topic" of this article and refuse to address or even think about substance on my criticism of PK's article, namely, that he doesn't address "how Democrats should counter the legitimate complaints that voters have about the healthcare system so that Democrats can win elections and improve the system. It's not enough to just ridicule the Republicans." How are Democrats ever going to learn how to win elections if they insist on ignoring this kind of thing and argue about what was the real topic of an article?
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