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Gibbon
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What I find when I've made that sort of argument with conservative is they tend to find the actual mechanism repulsive and thus they reject it on moral grounds. And the fall back on the human tendency when confronted by things the way they don't like to simply pretend the way they want them to be is the way it is. I find the people in certain soft occupations, opinion is reality. These guys are trying ti push an opinion thinking it will be the reality, but macro doesn't work like that.
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No talk about total money supply, not just the feds first order contribution to it. In particular private credit in the form of credit chains which are anchored via various forms of paper. In a crisis the value of private credit can collapse, and the amounts are staggering. Which means just to compensate the Fed has to extend vast amounts of credit.
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>If you get absolution from a pedophile did it work? If the same guy consecrates....????? My understanding of the faith comes from St Carlin. (Okay George Carlin isn't yet a Saint) Anyway what is important is belief and intent tend to be more important to Catholics than Protestants. Doing the right thing for base reasons is bad, mkay. Doing bad things when well meaning is excusable.
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Lets time shift 1960 to 2014 and then look back at it. So first off, in 1999 the Red Army fought their way into Berlin. And the Red Army and US Army have been staring each other down for the last fifteen years in Europe. In the rest of the world the US and Soviet union are trying to gain leverage over each other. In the world of 1960 the US elites are willing to cut the US working man a better deal cause they are terrified of losing the economic and propaganda war against the Commies. My take is that the propaganda war was won by the West in about 1980, the de facto end of the cold war*. After that the elites the war against the working class was on. By 2000 the elites were winning and the working class politically divided and in disarray. * De facto and of the cold war. Meaning it was obvious to anyone paying attention that the Communist economies were lagging behind the west and that Soviet tanks weren't going to go rolling into West Germany at all ever. If you disagree with this point, you were one of the people mesmerized by the propaganda of the time. And one might disagree but sorry that is the truth.
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Reminded me, someone once mentioned to me some scuttlebutt floating around the crappy industrial part of town where they had their business. A large corporation had put out feelers to develop a collection of parcels into a office park for themselves. Deal feel though because the crooks working for the city council member representing the district demanded that the negotiators for the company pay a bribe, as in shopping bag full of cash bribe. Really thuggish and stupid. Since if the deal had gone through the increase in local property values would have been far in excess of the number of $20 bills one can stuff into a shopping bag. The guys at the Chicago School with their rational agent models can kiss my furry monkey butt.
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I'm always surprised when I see corruption that involves 'cash' changing hands. It means the people involved seriously lack vision. That disturbs me more than the corruption.
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"no one with big piles of capital cares about productivity, only returns, and not only is productivity expensive, there are better, or at least much faster, ways to get returns" Yeah, returns are better by mining the assets and wages from the middle class, and working the dollar carry trade between the fed and the treasury*. * Long time ago a farm boy who grew up to be an engineer commented to me while holding up one of my companies products. See this here? We make $500 on this board. Back where I come from, they make the same amount per acre planting corn. But it takes them an entire year of planting, weeding, and harvesting to do so. We get these boards back in a month, test them, and ship them out, to earn our $500. Thinking, Wall Street guys, maybe working the deferential between what the fed loans at, and what the treasury pays, so you only earn a few points on your trades, but it only takes a couple of hours.
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I have one comment, the 0.1% don't do macro. They do wealth accumulation. Use social engineering to grab a hold of a revenue stream. Then use that to leverage control of other revenue streams. These guys don't have a big picture. All they really know is balance sheet economics. Money comes in, money goes out. You can borrow money, but that is usually bad news unless you're using it to lever up your position. Or if you can leave a sucker holding the bag. From your other article, Cochrane: every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. This is a pure corporate balance sheet understanding of economics. No wonder salt water macro sounds strange and alien to them. In macro money is merely chips used for accounting. Cochrane thinks money is a fundamental. I think another difference is Cochrane and all those guys think the goal of the economic system is to amass large stashes of money. (I'm rich I'm rich! I'm a happy miser). Full employment? What the f*ck is that and why should anyone care. In this case increases in GDP means, our stashes of money are getting bigger. Not the over all resources and living standards of society are increasing. No wonder they thing you are an unwashed Hippie. Ya Hippie.
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David Kotok: Deflation Fears: "The burden of turning global economies around now falls on governments and their fiscal policies – policies that encourage growth, policies that diminish taxation, policies that expand trade, policies that address rising geopolitical risks that interfere with the expansion of trading." Kotok doesn't get it, none of the mess is about taxation. Making superstitious offerings to the gods won't bring back the confidence fairy. The problem is Kotok has an assumption that government taxation, spending, and regulations inhibit economic growth. What we have instead is a problem best summarized by Yogi Berra problem "If people don't want to come out to the ballpark, how are you going to stop them" If businesses see low demand growth, and low interest rate spreads, they respond simply by hoarding cash or cash like securities. if the papers be believed large corporations are sitting in huge stockpiles of cash. That money just sits idle in non economically preforming paper 'assets' instead of being invested in real things or disbursed as dividends.
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So, yes, if demand growth is low, then robots be eating your jobs.
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I can see a couple of parameters that influence that. Thinking more, you have demand growth and productivity growth. Probably due to concentration of power at the top, we have a 'management oligopoly' that has enough of a monopoly power to keep a lid on wages. (I'm going to defend this by pointing out the Silicon Valley no poaching agreement between Apple etc). Low wage growth ==> low demand growth. (I'll point out, you can't have sustained demand growth via consumer borrowing*) But productivity continues to increase. * I think if consumers borrow money in order to raise a large pack of children, then it's sustainable in a way. More children, more demand, due to higher population growth, later increased household formation. However in a low population growth scenario like today's middle class, borrowing just pulls demand forward a few years, followed by collapse.
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Small point because people get this wrong. Before the great advance in steel making in the 1700-1800's iron was made in two ways The oldest technique was in a bloomery. This furnace was a low temperature affair, converting iron oxides into iron by exposing it to hot carbon monoxide. The iron never melted and thus never absorbed much carbon. The result of a run was a blob of iron and slag. Hammering was used to reduce the amount of slag and consolidate the iron. The second later way was a blast furnace that was big enough and hot enough to melt the resulting iron. Molten iron in contact with carbon allowed it to absorb carbon, forming a saturated solution of iron and a few percent carbon. When the iron cools the carbon comes out of solution forming flakes of graphite. Which makes raw cast iron brittle. (Later additives and processes were found that converted the flakes of graphite into small spheres, resulting a ductile product) I'm unsure, I think the Romans only had access to Wrought Iron from bloomeries. The only way to make steel from this was via carburization. Basically heating plates or wires of iron with carbon for a few _days_. And then forging the result to make it as homogeneous as possible. You can make iron from cast iron (from a blast furnace) but no one, from what I've read, was doing that before maybe 1500. Though you never know, sometimes you find really precocious artisans. Anyway the old sift through the ashes for the nails thing is something that was pretty common. Making iron required huge amounts of fuel and manual labor and so was more valuable than the wood. Enough from what i read a long time ago that in Colonial America they passed laws against burning old builds to get at the nails as dangerous nuisance. And I'll agree, it's not really trying to keep advanced nail technology out of the hands of the wogs that was an issue but that iron back in the day was extremely valuable.
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Shorter: Conservative economists understand that the world is made of five substances. Earth, Wind, Fire, Water, ... Money Gold is the most pure form of money known to man. I once made a joke that leaded gasoline is a nearly pure mixture of money and freedom
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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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