26 May 2012

Some Items Not Blogged Last Week

I've been away this past week so I had little time to blog a few blog-worthy items that crossed my desk. Below is a quick round up of some of the most interesting ones.

Above is a music video featuring some local (to where I am now) talent. Normal service returns after the holiday and we see how well I perform in the Bolder Boulder with jet lag;-)
Coming next week on this blog ... an extended series of posts on economics, innovation, technology. Stay tuned!


  1. With regard to the Census, I disagree that it is "truly dumb" for this reason: The Constitution calls for an enumeration, no more, no less.

    As I understand it (and please correct me if I'm wrong), the Census Bureau has no legal authority to ask the other questions because it has never been granted by Congress. So, for them to contend we are compelled to answer those additional questions under "penalty of law" is false and misleading.

    Now, I have no problem with the additional questions (given adequate privacy protections), per se. I do have a big problem with agencies going outside of their legal authority and compounding the problem by threatening people when they have no authority to do so.

    If Congress wants the Census Bureau to continue asking those questions, it should authorize the Bureau to do so.

  2. -1-Mike Smith

    Thanks ... I don't object to your perspective, however, had the Rs felt as you do, then the quick fix would have been to simply introduce legislation authorizing the CB to ask these questions. That would have been a positive reaction.

    As you well know, good gov't data collection can underlie an awful lot of value-added work, here as well.


  3. So the article you linked is subscription only, and the summary doesn't actually reveal why the WSJ thinks that the government's long form census questionnaire promotes economic growth I can't really comment on it, but as someone who has won the lottery and gotten the long form the last two census runs, I can tell you they got no economic benefit from me, I answered the constitutionally covered questions at the front, crossed out everything else, and on the back where it promised me a fine for failure to answer, circled that and wrote 'send me a bill'. No such bill ever arrived.

    I simply don't want a government that is prying into every facet of my life. It's too dangerous whatever ephemeral benefits might accrue from it. They say that Mussolini made the trains run on time - I still wouldn't want to live there.

    As for the stimulus article, once again it's behind the pay wall, but here's my argument. We're no longer borrowing from our kids. We're borrowing from our grandchildren, and possibly great-grandchildren. If we got back on a fiscally sound footing today this debt wouldn't be paid off for at least fifty or sixty years.

    The federal government is like a drunkard who's going through bad times, and needs a loan from his friends to pay the rent. Except that the last time you loaned him money he spent it all on a weekend bender and still didn't get his rent paid. Would it be nice if you could loan him some money, and he could get a job, get sober, and then pay everyone back? Yeah, but evidence is it's not going to happen. So you're better off letting him hit rock bottom now rather than enabling his destructive behavior. And this is going to be painful for everyone involved. But it's better than the alternative.

  4. A couple of errors in Alan Blinder's WSJ not so brilliant (IMHO) Op-Ed:

    Explicit: "President Obama's health-care reform law, which Republicans want to repeal and the Supreme Court may vacate, takes a sensible approach to cost control. It includes—either on an experimental, small-scale, or pilot basis—virtually every cost-containment idea that has been suggested. The pragmatic attitude is: Let's try everything and go with what works."

    I believe this is factually false. I have not heard descriptions of the main goal of Obama-care use the term "cost containment". (I've not read the actual law.) Obama-care was championed as expanding coverage, not containing costs. Or was I a victim of misinformation as to its main goal?

    Implicitly: The analysis does not address current deficits, only future ones. And so does not address what happens when it is not further government borrowing that "crowds out" private capital being put to good use for economic growth, but the crowding out that occurs when having to borrow just to pay interest on past borrowing.

  5. Roger,

    While your characterization of the manufacturing jobs issue is correct, your prescription is not.

    The reason manufacturing jobs are untenable in the United States is not because they lack sufficient subsidies, it is because the cost of living due to financialization of the US economy is too high.

    This financialization has rendered any possible extra productivity on the part of American workers irrelevant.

    Thus while I do agree that throwing up trade barriers and/or investing massive subsidies is not a solution to the jobs problem, equally so a focus on service jobs is also not a solution to the jobs problem.

    The solution must be to definancialize the US economy, to reduce the massive interest debt carry burden.

  6. The federal government through its fiscal stimulus is harming the economy in two ways. First, when it occurs through the accumulation of debt, it acts as a hidden tax which devalues assets and income. Second, it accounts for approximately 10% of our national GDP, which is both unsustainable and irreplaceable. There is no historical evidence that the economy is capable of supporting the false demand created by the stimulus. Presumably, this is why they are promoting "global warming", "green technology", and other schemes to replace and supplement existing revenue streams and industrial production. It is a means to defer accountability to a future date. Eventually, there will be a correction or a reset (i.e. destruction of supply and demand).

    The only problem with the ACS is when it requests and stores data used to enforce institutional discrimination of individuals by their race, gender, etc. The only "minority" of consequence is the individual. Any other definition serves to denigrate individual dignity and devalue human life.

    Manufacturing jobs do represent a unique subset of our economy. They convert recovered natural resources for productive use. Resource recovery and its processing through manufacturing comprise the foundation of wealth creation. Perhaps we can outsource one or both layers, but it leaves us vulnerable to manipulation and eventually to extortion by global competing interests.

    America needs to resume resource recovery and domestic production. It needs to modify trade agreements when there exist regulatory disparities, including labor and environmental standards. We need to end unmeasured immigration (i.e. illegal) and reevaluate legal immigration, both of which are capable of displacing Americans, at school, work, etc., and inevitably contribute to overpopulation (due to population convergence).


    I disagree in part. The problem is not "financialization" per se, but its exploitation to excess. There is nothing wrong with "lubricating" economic exchange, and exploiting leverage with expectation of a future return; but, it should generally be short-term, the risk must be explicit and remain with the parties involved, and it must have a capital base. Too many people and cooperatives are living far in excess of their means.

    The problem occurs not only in the financial sector, but throughout our society, including: industrial, health care, and political. It is subject to abuse and shifts responsibility throughout the society. The employment of excessive leverage distorts everything, beginning with our economy. Ultimately, it contributes to corruption of individuals and society.

    The solution is for people to reject their dreams of instant gratification, especially through redistributive and retributive change.

  7. Re: Blinder;

    There are myriads of studies new and old, from just about every direction, with respect to government spending. There are few if any that credibly correlate economic growth with government spending, and in fact numerous studies strongly correlated government spending with a reduction in growth.

    Government can borrow at low interest because it has created so much future uncertainty that investors are risk averse. Bond rates are low because no matter how risky investing in government is, since all other risks layer on top of that, it is still the lowest available risk.

    There are myriads of economic theories to guide our choices - but only some of them work in the real world.

    The core problem is that government is pretty horrible at investment. There are good structural reasons for that. Regardless, if government was actually good at investment, business, and economic decision making, we would have no need for markets, or business.

  8. @n.n (#6)

    I strongly recommend you read some of UMKC Michael Hudson's work (as opposed to reporter Michael Hudson) to understand the impact financialization has had on the US economy.

    The leverage you speak of is exactly what financialization is all about: the increase of debt in order to jack up asset prices.

    Jacked up asset prices lead directly to increased housing costs as well as product costs. Increased debt leads to more and more money siphoned off from the production/consumption economy to FIRE - finance, insurance, real estate and education. Even health care in the United States and its associated 'insurance' system can be said to be a form of financialization: rather than a national utility focused on health as a public good, we have corporations seeking to squeeze profit out as middle men between health care providers and consumers.

    A belief that somehow everything would be fixed if only people were 'better' ignores that reality that much of the above is far better controlled in other nations. Thus either you must prove Americans are fundamentally more short sighted/ignorant/immature or acknowledge that there are systemic aspects to the financialization problem.

  9. Real interest rates are not near zero. Real interest rates are presently unknown. The Fed is artificially manipulating interest rates by bidding in the market with monopoly money. If it wanted to, the Fed could keep interest rates at zero forever -- by simply doing what it does now, printing all the money necessary to buy up the debt issued by the Treasury. Eventually, inflation would destroy the US economy, but interest rates would stay at zero.

    It is brain dead stupid for someone to suggest that the government should act as if the artificial market created by the govt actually represents a real market. Actual market prices DO contain useful information upon which economic actors can make intelligent choices. But manipulated markets, with prices dictated by the government, do not.

    The king may decree that his army of 1000 fighting men is actually composed of 100,000 men. Hey, he's the king. But he'd be really, really stupid if he believed his own BS and invaded his neighbor.

    Blinder is saying that the government should sell trillions and trillions in debt because the government has found a sucker willing to take it at a great price. Who's his sucker? The government.



  10. Regarding this 'stimulus now, cuts later' business: Can anyone cite me a quote from such people demanding cuts during 'later' periods? Was Krugman, for instance, demanding cuts in entitlements late in the Clinton administration, when there was no deficit at all?

    If someone asks me to loan him money now, and tells me he'll pay me back later, and 'later' never seems to come, eventually I figure it out.

  11. Unknown:

    What is the context of the "better" reference?

    The "above" is not far better nor better controlled in other nations. Americans are not short-sighted/ignorant/immature. They have been subject to policies which sponsor fundamental corruption of individuals and society. They have experienced a progressive denigration of individual dignity and devaluation of human life since the civil and human rights movements. Their nation, states, cities, and communities are being invaded by illegal aliens in excess of 1 million annually, and are forced to tolerate an unreasonable immigration policy, both of which serve to displace American citizens and increase costs, directly and indirectly. The result of which is overpopulation and its attendant problems.

    Financialization is not the problem per se, but its exploitation to excess is. Now there is a question of distinguishing between cause and effect. We do not know whether it was "well-intentioned" policies or simple greed which initiated this massive and progressive distortion of our economy and society. We do know it was the former, but it's not clear if the latter was a symptom or a cause. Clearly, it was both; but, characterizing the causal dynamic matters.

    So, the cause and dynamic surrounding it is not clear. What is clear is that individuals, cooperatives, and authoritarian interest (i.e. civil servants) were complicit as they dreamed of instant gratification through redistributive and retributive change. In the real world, with finitely accessible resources, this does not occur without consequence. It's important for us to distinguish between cause and effect, and to stop treating symptoms, which has been very profitable indeed.

  12. RE: Blinder WSJ - Excerpt: "So, as long as the government can borrow on reasonable terms, the crucial short-run question is: Does the economy need more or less demand?"
    Many countries of the world including the US share the problem of structural debt overload which is inhibiting economic growth. Too much debt is the disease. How can borrowing more money (as much as we can?) and spending it help cure the disease?

    As I recall Keynesian economics had to do with increasing government expenditures in the very early stages of a typical business cycle downturn and had nothing to do with correcting a destructive structural debt problem. Blinder and Krugman have a government-spend hammer and everything looks like a nail. This is music to the ears of big-spending politicians.

    Where were the academicians when the debt problem was developing? - Subprime loans, student debt, massive government budget deficits, unfunded social security and government pensions didn't just happen.

    Was it wise for Greece to intentionally borrow and spend as much as the could until they couldn't borrow any more? This makes as much sense as eliminating all CO2 emissions as many would recommend because CO2 causes warming.

    Roger, as you have noted the Global warming issue is much more complex than just banning CO2 and the optimal policies require careful analysis. Likewise there is no painless solution to the debt problem. I'll be interested to see how your thinking progresses on the economic issues. I hope you look beyond Blinder for solutions and apply critical thinking as you have in the case of global warming.

  13. @stan #9
    You said: "Real interest rates are not near zero. Real interest rates are presently unknown."

    The present official interest rate is near zero, while real interest rates are negative. The precise amount is subject to debate, but the difference between interest payments and inflation is, so to speak, very real.

    Thus while the first part of your statement above is factually correct, it is not clear what your actual point is.

    As for your commentary on the Federal Reserve being able to keep interest rates at zero forever: this is patently false. It is false because there are many actors involved in the US dollar beyond American citizens. The Federal Reserve might be able to keep interest rates at zero for the American people and American economy, but it cannot do so while simultaneously preserving the US dollar as worldwide reserve currency and as petrodollar standard. The loss of reserve currency status and/or petrodollar standard would have very real consequences both politically and economically, just as a permanent ZIRP state would have different but equally significant consequences.

    @n.n. #11
    You said: "Financialization is not the problem per se, but its exploitation to excess is. "

    Again we clearly are coming from different viewpoints. While I don't disagree with the above statement, my view is that the so called 'excessive exploitation' is not an accident. It is a result of a clear program by a group of people in which Rubin and his lackeys are prominent.

    Thus while perhaps you are not saying that the excessive exploitation was unavoidable or accidental, nonetheless the reason for the financialization is relevant, as is the fact that the financialization is a major component in the economic problem America faces.

    And returning to my original point: How exactly can further subsidies to promote manufacturing jobs be of benefit when the fundamental competitiveness of said manufacturing jobs is so poor?

  14. 13. Unknown -- read more carefully.

    "But in recent years foreigners and the U.S. private sector have grown less willing to fund the U.S. government. As the nearby chart shows, foreign purchases of U.S. Treasury debt plunged to 1.9% of GDP in 2011 from nearly 6% of GDP in 2009. Similarly, the U.S. private sector—namely banks, mutual funds, corporations and individuals—have reduced their purchases of U.S. government debt to a scant 0.9% of GDP in 2011 from a peak of more than 6% in 2009.

    The Fed is in effect subsidizing U.S. government spending and borrowing via expansion of its balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit. Similarly, the Fed is providing preferential credit to the U.S. government and covering a rapidly widening gap between Treasury's need to borrow and a more limited willingness among market participants to supply Treasury with credit."

  15. Only an economist could look at a market where no one is willing to lend and see an argument for borrowing even more from those unwilling lenders.