Re: Irrational morbidity
 

Krugman's still a little pissy that Hillary lost the primaries. He was among her most rabid supporters.

Re: Irrational morbidity
 

Why isn't it just his good-faith belief as an economist that the worst is yet to come?

Re: Irrational morbidity
 

I thought he just wanted to be Nouriel Roubini. Who was on CNBC this morning avoiding questions like a real politician, and sticking to his doom and gloom narrative.

Re: Irrational morbidity
 

Perhaps it is. But he doesn't offer any explanation for why he thinks that, which would be nice. And it is a little strange to describe optimism about the eoconomy as "ominous." It is the exact opposite of ominious.

Re: Irrational morbidity
 

Unless there isn't a good reason to think things are really getting better, in which case the propensity of commentators to think otherwise will be an obstacle to doing what needs to be done. After all, he thinks the stimulus and the bank rescue are inadequate to the task.

Here's what he said:

It is in the nature of the press to overreact to minor developments and to try to look on the bright side.

Re: Irrational morbidity
 

Yeah, Krugman can't stand all the party pics of Roubini. Nouriel keeps sending him links.

Re: Irrational morbidity
 

Perhaps you didn't read the sentence in my post beginning with "Second." People believing things are getting better is a good reason to think things are really getting better.

Right. Thus the question of ideology.

Huh? Have you read/watched/listened to the press at all over the last six months? They have been nothing if not focused squarely on the dark side. Which is why folks like Krugman, Simon Johnson and Roubini are everywhere.

Don't get me wrong, he may well be right. But to look at optimism as a bad thing and insist in the face of it that there is nothing to be positive about without giving a reason is irresponsible, I think.

Re: Irrational morbidity
 

I'm actually inclined to side with Krugman here. Cost cutting will create paper profits, or smaller losses, only for a time. And Geithner's only got so many rabbits in his hat with which to excite Wall Street.

Inevitably, unless something restarts consumer spending, the contraction in overall demand for everything will continue. And businesses are already cutting into bone. I think we're due for a few large collapses in the next six months, and I think the unemployment figures are more dire than similar numbers have been in the past months since this malaise started because they contain a shitload of high paying white collar jobs. When 500,000 carpenters and contractors lost their jobs, you were talking about a big swath of people making between $50-75k per year pulling back on spending almost all of their income. When 250,000 white collar workers, including lawyers, bankers and stockbrokers start losing jobs, it's 250,000 people spending all of between $150k and $400k per year being taken out of the pool of reliable consumers.*

You might say higher wage earners save more, so they're comparable to carpenters or school bus drivers in terms of lost consumer spending. Ican point to hundreds of thousands if not millions of McMansions, private school tuitions, yearly vacations to exotic locales, high end wardrobes and expensive foreign cars suggesting you're wrong. Just in the East Coast suburbs alone.

*I realize many professionals earn in excess of $400k per year, but I'm assuming they don't spend all of that.

Chicagoland
 

Nevermind. Wrong board.

Re: Irrational morbidity
 

That is part of my point. Optimism is what will restart consumer spending. And business investment.

God I hope these people aren't spending all of their salary. Sadly, they probably are.

ETA: add an crucial missing "n't"

Re: Irrational morbidity
 

Unless, like Krugman apparently does, you think they're overreacting to news that shouldn't lead you to think things are getting better.

Again with the ideology. How do you know it's not his best view of the facts and the economics?

I honestly don't know what press he is reacting to. I was thinking specifically of the way that newspapers are all too happy to regurgitate the happy predictions from the National Ass'n of Realtors, doubtless in part because real-estate ads are worth a lot. There is a long tradition of major papers being civic boosters.

He's saying there's an absence of good news. What do you want him to point to? The good news that isn't there?

Re: Irrational morbidity
 

Optimistic or otherwise, consumers can only spend money they don't have for so long, and we're past that point. This is no longer a Tinker Bell Economy, where just believing in growth will make it so.

Re: Irrational morbidity
 

Exotic locales, high-end wardrobes and expensive (ie, foreign-built) foreign cars don't add much to the US economy. Yes, yes, free-trade helps everyone, but ...

Re: Irrational morbidity
 

I don't. That's why it's a question. If I knew, it wouldn't be a question.

No he isn't. He is saying that people are overreacting to better than expected news (which he quizzically attributes to a normal distribution of news).

Re: Irrational morbidity
 

That's where you are wrong. Believing in growth is the only thing that creates growth. It's what makes investors invest, consumers consume and lenders lend.

Re: Irrational morbidity
 

It's not a narrative any more than your certainty of a recovery in the short term is a narrative. I don't know which will come, but I do know this - a lot of the smiles I'm seeing right now accrue from an uptick in the market, and the rebound there was a dead cat bounce. Everybody's got a raging hard-on for Geithner's plan simply because he offered a coherent framework. Nobody's pressing on the next question: Will it actually work? I think it will, but that will occur in fits and starts, and it is going to take a long time. And Wall Street can mint short term profits all fucking day and make people like your folks and mine feel safe and chipper about their retirement, but guess what? None of that is addressing the lack of work for all the unemployed in this country.

I see tons of people throwing money into land speculation right now - buying stuff in short sales and auctions, and I keep wondering, "Who's going to buy it from them? How the fuck are they going to carry that shit when they find out there's no market because the first time home buyer doesn't exist anymore... That he's been priced out of any market because he has no savings because he had no work." I know it's a meta-meta criticism, but until we start creating things and selling them the way companies are supposed to, instead of living off profits wrung from transactions, most of the middle class we need to spend money to keep this economy going isn;t going to have any money.

Wall Street isn't the economy, and this recent "recovery" is all Wall Street. We're once again avoiding the bigger questions, focusing on the short term. Can't blame us, really... Why? Because there's no answer for the bigger question. You know it, I know it - everybody knows it. Until the cost of foreign labor meets the cost of domestic labor, we're not a profitable place for anyone to make anything.*

*Don't cite me Toyota or BMW in the South. When the tax subsidies run out and the unions pollute those factories, they're gone. And that'll happen. It always does.

Re: Irrational morbidity
 

Nice catch. But you get my broader point.

Re: Irrational morbidity
 

plus cost from factory to market.

Re: Irrational morbidity
 

True. Oil could turn out to be labor's best friend in that regard.

Re: Irrational morbidity
 

Just trying to help refine your rant.

Re: Irrational morbidity
 

It's a hard thing trying to catch the shotgun pellets in flight and herd them down to a bullet. But thanks for the assist.

Re: Irrational morbidity
 

I have no certainty.

As for Roubini, the question was "why are you an expert on predicting where the stock market will go." If he wasn't telling a narrative, he would have said, "I'm not, but my view is that the underlying economy is going to continue to be bad and that is not good for stocks." He didn't say that. He gave a politician's answer that avoided admitting that anything is outside his expertise.

I agree with most of this.

Re: Irrational morbidity
 

Buy a copy of "Fooled By Randomness" and read the sections on "Narrative Fallacy." Yeah, I know it's pop-intellect stuff, but it's spot on in regard to that issue and I think it will offer the explanation you're seeking.

Re: Irrational morbidity
 

As I don't have a copy of the book with me, and Google Books does not yet rule the world, care to offer a preview?

Re: Irrational morbidity
 

Google is still your friend. From the Glossary available on the author's website (which is really disorganized:

"Narrative fallacy: our need to fit a story or pattern to a series of connected
or disconnected facts. The statistical application is data mining."

ps: I suspect the examples fit with the expectations created by the definition.

Re: Irrational morbidity
 

I saw that but was hoping that Sebby would explain how he thought the concept applies to the discussion we are having. And if he had in mind the obvious points, wondering if he would recognize that it applies as much to Roubini's successful predictions as it does to any optimism generated by less pessimistic than expected news.

Re: Irrational morbidity
 

Until somebody can examine and analyze data in vacuum it will be the Achilles Heel in the scientific method.

Re: Irrational morbidity
 

I already admitted its universal, inescapable application in response to somebody's previous post. I directed you to the book because I couldn't hope to articulate it as well here, and it requires a detailed description.

Re: Irrational morbidity
 

Huh? Isn't it a built in part of the scientific method? Look at data, find pattern, continually test until the pattern is disproved, look for another pattern?

Re: Irrational morbidity
 

Can one wear a spacesuit while analyzing data?

Re: Irrational morbidity
 

His statement, that "on average, after all, half the news should be better than expected," is incredibly stupid.

Does that mean that expectations are at always at the median of what actually occurs? If so, the optimists he's criticizing are exactly half-right (as is his more pessimistic view. Somehow.)

Re: Irrational morbidity
 

Thanks for letting us play "where was the 'not' supposed to go?"

Re: Irrational morbidity
 

Just reading that makes me kind of miss Spanky. ("We don't have to pay the national debt back!")

Re: Irrational morbidity
 

Otherwise known as "Opening Statement."

Re: Irrational morbidity
 

It is necessary but hardly sufficient, as you seem to be suggesting.

Re: Irrational morbidity
 

He doesn't think the news is better than expected in the way you are suggesting. He thinks there is nothing to suggest that things will be fundamentally better.

Re: Irrational morbidity
 

Fail.

Read the book and stop asking me retarded questions.

Re: Irrational morbidity
 

No, he's trying to suggest that the "news" is not a monolithic thing, but a collection of data points, some better than expected and some worse, and that he sees people overstating the importantance of the former and downplaying the latter. At least that how I understand him. He would acknowledge that we could be pleasantly surprised by unexpected news that things are fundamentally improving. But he says he doesn't see any such news.

Re: Irrational morbidity
 

You don't want to read what the guy has to say about trial practice. Less sneers at organized religion with a 1000x less venom.

Re: Irrational morbidity
 

Krugman and I have no disagreement about whether the news is better than anticipated. We also have no disagreement about whether the better than anticipated news itself is evidence of a pattern of improvement (it probably isn't).

Where I take issue with him is when he is the suggesting that it is a bad thing for people to see better than expected news as reason for hope. He thinks it's bad because it may delay adoption of the policies he advocates (or he is a media whore). That is valuing his perscription over the cure. He doesn't seem to leave open the possibility that he is wrong about what is needed.

Where you seem to be getting hung up (and perhaps Krugman is as well), is the belief that there are fundamental things outside of the basic structures (e.g., legal systems, rules of law, market structures, etc.) that change and can be good or bad. The only real factor that drives growth vs. contraction is herd behavior.

There are things that can be done guide the herd, and there are myriad ways of trying to understand where it is going, but none of those things matter more than the weight of the aggregate decisions of billion of individual economic decision makers.