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Gibbon
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Of course the policy worked as intended, investors reacted to the government buying share in exactly the way the government intended. Those 'confounding offsets' are what you are trying to accomplish with non-hamfisted policy actions. Look simple, say the government decides to buy feed corn from farmers dear and sell it to cheap to dairy farmers. What happens? The Chicago nitwits think 'the magic hand' will somehow see through the government chicanery. Reality: Corn and milk production rise. The cost of milk falls. Which one assumes _is the desired outcome_. That's different than say price controls where the government orders milk be sold at some price.
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Troubling trend in sub-prime auto loans is just a manifestation of the policy of trying to boost the economy by extending debt to the lower classes instead of earned income. You'd think we would have learned after 2008. But it appears we have learned nothing, forgotten nothing.
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So basically your argument is Lucas's shocks' are low frequency < 15/π, so the idea that they are responsible for high frequency shifts in the economy is suspect. If so I tend to agree. I think it's possible though that parts of the economy are sensitive to the derivative. So a change, especially a change in the sign, might have cascading effects. However chaotic systems can and do suddenly switch modes. A system can be orbiting an attractor and be stable. But add enough energy, it may then switch and start orbiting a different attractor. Fundamentally this what I think when 'you economist guys' talk about running up against the 'zero bound' The economy is stable at a higher rate of inflation/return on investment. And stable around the zero rate as well.
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No one will read this but. I can see a case for a higher than normal exchange rate, if you assume that investing the countries currency abroad gets a better return. IE, better return if you buy German and Japanese machine tools and ship them to factories in China than in Alabama or Ohio. However if Fed and the US government are going to use the public's money in such a way, then the public rightfully should demand a share of the profits. But I'm not sure this actually works in practice, because it's hard for me to see why you can't use industrial policy to develop both Alabama+Ohio etc, and China at the same time.
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> Owning CDS is like owning an insurance policy (which may be why insurance companies sold so many) What I understand was a lot of CDS's were not insurance against paper losses, but were pure wagers. Seems to me that you have three hierarchies of insurance. 1. Insurance against actual losses, bridge fall down go boom. 2. Insurance against paper losses, bridge tolls insufficient to make bond payments. 3. Third party bets on #2. What I remember reading is the majority of CDS were of this type. In a rational world we'd best solve the systemic risk created by #3 by tossing people in jail.
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If I remember correctly pretty much all aspects of British house wiring is odd and stupid. There is really no benefit over the US 120VAC wiring _at all_. They use 240VAC because, hey twice the voltage, you get double the power, except they use smaller gauge wires, but add 'redundancy' via a 'ring circuit' so the actual amount of copper needed is the same as in the US. And then because they're using 240VAC they don't feel safe without having ginormous, complicated, and expensive plugs. Some of which have fuses, which fail. Far as I can tell most British ex-pats when faced with an 'Edison Plug' for the first time feel it's completely dodgy and unsafe. And then after using them for a number of years return to the motherland and then find themselves, annoyed and unhappy with the large blocky plugs. Which being large, also have an alarming tendency to fall out of the socket.
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I think it's more complicated than that. Before D-day a German surrender would mean Soviet troops pouring into Eastern Europe, Germany and Western Europe. And Stalin, they imagined, would have everyone in the German Army with a rank, imprisoned or shot. Not to mention anyone with property is going to find it confiscated. (Seriously after WWII the Soviets stole a bunch of German and Polish factories, boxed them up, and took them back to Russia on rail) After D-day, the option of putting a bullet in Hitler and his best buds (Everyone involved in the Night of the Long Knives) and then Surrendering to the Americans becomes hopeful option. Because then American and British troops would pour into Western and Eastern Europe, which will block the Soviets. And FDR/Churchill wasn't going to be shooting any of the Generals that kept their nose clean. I think Stalin floated the idea of shooting a few tens of thousands of German leaders with FDR and Churchill, but they weren't interested.
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1940 the US in a depression at maybe 80 industrial capacity, 20% under employment was producing 400,000 automobiles a year. I remember reading an essay by a Japanese American woman who was trapped in Japan at the start of the war. She said listening to the propaganda and Japanese talk she was like 'how can they not know they are going to lose?' Her comment was that Japan had a large well developed army and navy, but the civilian sector was woefully poor compared to California. In the US poor people own cars. Also, old WWII veteran that flew B29's over Japan told me that the US used it's experienced pilots to train new pilots, where the Japanese and Germans kept throwing them in till eventually they were all gone. And then there wasn't anyone with combat experience to train new pilots.
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What always gets me about these people is, it's like they never stop to consider what they are offering anyone else as part of their cunning America Strong(tm) plans. It's all carrot for me, stick for you. Which when implemented against well organized groups tends result in vast amounts ratf*cking and blow back by those who are supposed to be happy at the bottom of the new totem poll. Perhaps someone would except the horns of humiliation if sufficiently gilded. But even that isn't in the offering.
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I'll add that, there is world of difference between fixing prices and 1. Putting conditions on what money borrowed from the central bank is used for. Borrowing money from the central bank to speculate on assert, doesn't seem socially useful. 2. Governments are in a position to make longer term investments in infrastructure, technology, and human capital. I think historically markets don't efficiently provide for such things. Usually only way to make it pay is if the provider gets to charge monopoly type rents, which constrains demand. (Think transportation systems where the 'leafs' are usually 'unprofitable')
Toggle Commented Jun 13, 2014 on 'Synthesis Lost' at Economist's View
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Shorter Piketty: Despite technological progress, the Malthusian Limit still exists and unchecked capital accumulation will push the rabble right back into it.
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I'm not an economist, but I'm bothered a bit that James Hamilton seems (at least to me) fallacy of assuming that the flow of money and flow of goods and resources in the economy are congruent. They are not. The reason you depreciate a machine tool by 10-20% per year is because it becomes worthless junk or obsolete after 5 to 10 years of service. That is the way machine tools roll. Now commercial property excluding land depreciates over 39 years. At least according to the IRS. AKA 2.56% Residential homes it's 27.5 years (3.6%). Some things like land does not depreciate. The problem though is thew assumtion that for each dollar of 'capital' there is a dollars worth of machine tool, building, road, etc. Seems to me there a lot of capital is tied up in intangibles, the value of a company can be higher than all the office chairs and fake potted plants. Also anything that represents a limited commodity, the price can be bid up far in excess of the utility value. Pablo Picasso is dead for instance. And they aren't making anymore land in Manhattan. Some sort of principal, two building can't occupy the same plot of land. Capital. Hamilton needs to stop using that word. It doesn't mean what he thinks it does. I would suggest that the old measurement fallacy is at work. In process control you need to make measurements, which are often an incomplete picture of the process as it exists. Problem comes when an engineer tries to optimize the measurement not the process. (Defect rate is down, but the customers are hoping mad)
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Yeah the unspoken idea that 'credit' is a direct substitute for 'labor income' is something that mystifies me completely. In general I have this thought that taking credit makes sense under exactly two scenario's. True investments, meaning creation of productive assets. Or Short term cash flow situations. You take out a loan, to pay for a new roof, or transmission, or put food on the table. But the idea that credit is a permanent method for funding normal expected consumer expenses?
Toggle Commented Jun 7, 2014 on The Myth of Wage-Led Inflation at Economist's View
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I knew a few kids that grew up around Roseville, they said they were finding hunks of explosives in the area years after the mess was cleaned up. They were disappointed, no matter what they did to the stuff it'd just burn with a nasty smell. There is also the Port Chicago disaster which in the timeline is a month and a half away.
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I'll make a flip comment on the bottom end, of the scale, people making not much at low end jobs. A lot of pop economists tend to piss on the minimum wage as a 'distortion' people being paid more than there marginal value. A thought of mine is that people engage in both paid labor, which has some marginal economic value. (And as alluded above high compensation doesn't necessarily mean that marginal value is positive). People also do things like raise children, care for family members, friends, etc. And peoples labor and marginal value isn't static over time. I've known a few highly successful people that are some point in their career were reduced to waiting tables. A problem with low wage jobs is their tendency to trap competent people. One way to look at a minimum wage is one is subsidizing the employees unpaid labor (important labor that does not appear on the typical neoliberal economists balance sheet.
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Thing to remember, we have flipped into in a 'paper' economic regime where wealth is generated by rents and asset appreciation. For the time being this is a politically stable low growth era. Could last easily another twenty thirty years before some crisis flips it back into one of the other modes.
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CVE Lost USS Liscome Bay (CVE-56) 644 USS Gambier Bay (CVE-73) 60? <-- Taffy 3 USS St. Lo (CVE-63) 143 <-- Taffy 3 USS Ommaney Bay (CVE-79) 95 USS Bismarck Sea (CVE-95) 318 ----------------------------- Total 1260 So for the ships lost survival rate was 26% assume crew of 960. Of the total 50 built, 1260 men were lost out of 50,000 plus men serving, or <2.5% Not sure i'm going to blame Kaiser for the loss of Gambier and St Lo considering how out matched they were. Sure if they never were built, then yes they wouldn't have been sunk. I think Henry Kaiser was a shrewd practical man.
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How do you know, that interest payments leave the US? Consider interest often is rolled back over into moar bonds. Most investors aren't like granny buying cat food with the monthly dividend check. One of my takes is that foreign investors are likely to hold bonds as a way of hedging and as a way of obtaining collateral denominated in liquid currency. If you're an Indian multinational, using treasuries as collateral has a value beyond whatever miserly interest rate Uncle Sam is giving out. One of my takes on this is rule that comes from computer science; beware of leaky abstractions. The abstraction isn't what's going on 'under the hood' In particular the flow of 'money' does not fully abstract economic activity. The question 'does government borrowing reduce growth' isn't actually a meaningful question when said borrowing is in the countries own currency.
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Based on this I have to admit I was wrong about something I've been saying. That within a decide in order to get the 5-10% growth in wealth the top feels they are entitled too, the wealth of the bottom 99.99% had to shrink in absolute terms, not just relative terms. I was wrong, it's already happening for the last ten years. I have to say when the decline in lower class income hits the terminal tipping point where incomes fall rapidly 5-10% yoy, it's going to be real ugly, real fast. Might only be ten years away from that not twenty.
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I'll be really simple. During a financial panic. There is net destruction of 'money' because corporate and consumer bonds become risky. Credit chains collapse or shorten. Output shrink because corporations and consumers cut back on expenditures. In this environment there is a 'rush to safety' which usually means converting portfolio's from high yield riskier investments to low yield safe investments, which drives down the price of the former and up the price of the latter. In this case the government has a singular advantage, it's debt is rock solid. So there is an opportunity for some arbitrage here. The government can borrow at very low rates because it's debt is 'safe' There are 'risky' things that have liquidity issues. So it makes sense for the government to provide low yield safe 'paper' and spend the money on the things the economy would be spending on money, if it had the cash. A broader point is there are always risky, or long tail investments even in good times that suffer under investment. Makes sense to educate school children, all of them, I don't to Oracle paying educate school children in hopes of reaping a new crop of engineers 20 years later. Also Fatima's been staring at his equals sign for too long.
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I remember taking a summer course where the professor let slip how much an hour she was getting and you could almost hear the thirty engineering students brains comparing what they paid X thirty and her rate by X hours... One of the students said, "we should hire you directly' We were paying roughly per hour of instruction what she was getting per hour. All thirty of us.
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I suspect that the army air force was hampered greatly by errant prewar thinking. 70 years ago for the US the war has been 'on' for less than 30 months. At the start, the air force had access to heavily armored bombers when they needed long range fighters armed with surface to air rockets. Those were not available till summer of 44. That said it seems that they realized fairly quickly they needed different gear and strategy, but were stuck with trying to make due with what they had available. All that said the largest impediment to war effort was the British, Americans, and Soviets didn't fully trust each other.
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Me summer of 1999 I buried a stolen tanker truck full of diesel and a semi trailer full of smokes out in the desert. Plus a 55 gallon drum of Maxwell House Coffee(tm). Come the end times I'm going to own you all.
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Those comments are totally off topic from the get go and not a result of thread drift. Really ought to have not been posted. On the other hand perhaps typepad shit itself.
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Though at this point American submarines are sinking Japanese shipping at a ferocious rate. The Japanese lose half their tonnage in 1944. Unlike the North Atlantic the US Merchant Marine has mostly easy sailing in the Pacific.
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