My God, you are an idiot.

[sebastian_dangerfield]

Originally Posted by LessinSF

You should follow Adder on Twitter.

And, as others have noted, Adder you need to get beyond your pedantic lawyer obsession with terminology. The rest of you too.

Whatever you call it, we are halfway down a jump out of an airplane. the Fed just said there is no parachute - your bleating about further deficit spending notwithstanding. It's time to bend our knees, hit and roll, and wait for the swelling to go down.

Ty said it referring to me sayin it - "You said it before. It's deleveraging. Once we work through it the economy will start to grow again, but there are still a lot of people with mortgages they can't pay, etc."

Yup. So what's your non-caricaturistic Keynesian point?

I disagree on one point. It's a tired idea, but I think a pared down WPA put to work on infrastructure maintenance is a good idea. Why not? Spend $1-200bil, ask the states to match, and put a few million construction people back to work for a time. We need to do it anyway.

[Adder]

Originally Posted by sebastian_dangerfield

Yes it is. Think globally. There is a huge need for workers we don't create. This is a global economy. Our unemployment problem is not cyclical. Perhaps we can disagree over whether it is classically structural. Fine. The point is, large sections of our workforce will never be competitive again, or even work again.

Whatever that is, it's not cyclical. And you're wrong if you think we'll return to something like 5% unemployment in the next decade. We will hemorrhage jobs, or at best stagnate in terms of employment, until the cost of foreign labor meets ours, and the skill sets of greater numbers of our workforce meet those of skilled workers abroad.

You can't argue against that point. You will. But you won't succeed. It's ironclad fact.

And please, don't say, "Inflation is going to cause their workers to become more expensive. The more the Fed prints, the more their labor costs rise. Another basis for further Keynesian policies!" Debasement of one's own currency is exactly what Ferguson has argued leads to trade and real wars. And that's only if it works. Right now, it appears that every time our numbers swoon, the world swoons with us. This means emerging markets have not yet decoupled, and are probably not self-sustaining enough to do so any time soon. So even if we kept on printing, it probably wouldn't have the desired result of making our workforce more competitive versus competition.

That's the conundrum. Print like mad and it works, trade wars, then real war. Print like mad and it doesn't work, an exercise in futility that punishes domestic savers. Many of whom are retirees.

You clearly worship Keynes. You might also consider Friedman: No free lunches. A position with which Keynes would agree.

First, Ferguson is a demonstrated idiot on monetary issues.

Second, at least try to understand the arguments of others before you shit on them.

[Greedy,Greedy,Greedy]

Originally Posted by LessinSF

You should follow Adder on Twitter.

And, as others have noted, Adder you need to get beyond your pedantic lawyer obsession with terminology. The rest of you too.

Whatever you call it, we are halfway down a jump out of an airplane. the Fed just said there is no parachute - your bleating about further deficit spending notwithstanding. It's time to bend our knees, hit and roll, and wait for the swelling to go down.

Ty said it referring to me sayin it - "You said it before. It's deleveraging. Once we work through it the economy will start to grow again, but there are still a lot of people with mortgages they can't pay, etc."

Yup. So what's your non-caricaturistic Keynesian point?

Maybe we can find some way to tie our financial future to the incredible growth in the Chinese and Indian economies? Perhaps we can try something creative - like trading Georgia for Mumbai and giving Mississippi, Alabama and Tennessee to the Chinese in exchange for a couple of Shanghai suburbs? All of those states are doing their best to develop third world economies anyways - maybe China or India can do something with them?

Seriously, at some point we have to deal with the drag on our economy from some of the economically marginal states. Ongoing federal subsidies from the states with real economies are fundamental causes of the deficit, and, at the same time, those other states regularly lower our own economic standards by undercutting us with lower wages and lower taxes (affordable in part thanks in part to our subsidies). I say we cut a grand deal, where we give the Rs the balanced budget amendment on the condition that it also require that next costs and benefits of taxation be reasonably apportioned among the states, so no state receives more than 110% of the what it pays in taxes or pays less than 90% of the benefits it receives.

[sebastian_dangerfield]

Originally Posted by Adder

First, Ferguson is a demonstrated idiot on monetary issues.

Second, at least try to understand the arguments of others before you shit on them.

The more I've read it, the more I reach the conclusion I am in agreement with Ty's article. I said Keynesianism is a bridge to new growth. Ty's point was, not only is it a bridge to new growth, but a guarantee that when growth does reappear, it is at an equilibrium consistent with previous growth. His point is a bit unique to mine, but could also be argued to have been subsumed in mine. You know many bridges with one side far lower than the other?

But I can't use simple analogies with you. You're in the clouds. Which is why, as much as you cite academic studies here, nobody takes your points seriously. It's egghead gibberish. You're utterly unable to talk in practical terms or see anything through the eyes of a businessperson, or for that matter, any regular person on the street. Like a typical dickhead lawyer, you want to find some semantic angle on which to say, "You're wrong! I'm right!", ignoring the rest of the conversation.

I didn't shit on Ty's argument. I agreed with most of it. I shit on yours. I still shit on it, and I'll probably shit on most of those you offer going forward because, well, they're usually shit. Dense pseudo-intellectual pontifications. Hell, even the National Review article you cited sucked. "We shouldn't aim for inflation. But we do need some policies the main effect of which will be, yes, inflation." Stated otherwise, ease (which, of course = inflate, but nevermind that). Brilliant fucking point.

(Cue Adder furiously rereading that article to distinguish it from my paraphrasing.)

[sebastian_dangerfield]

Who's been right about the trajectory of the economy so far? You, buying the retail adviser horseshit (tomorrow will almost always be a lot like yesterday), or me?

We're not headed for The Road, but I'm a hell of a lot more accurate so far than you.

You earn the ad hominems. God, how you earn them.

[Adder]

Originally Posted by sebastian_dangerfield

Which is why, as much as you cite academic studies here,

That's one of the things that is so strange. You people keep saying things like this, while I don't recall ever citing an academic study.

I have, however, linked to any number of blogs that have actually dealt with how to analyze the situation we are in, which is not at all unlike where Japan has been for some time now, and you still make knee-jerk, homespun arguments against Keynes.

But another of the things that is so strange, is that I haven't been arguing for Keynes, or at least not beyond the extent that you accept it (i.e., spending can help fill the gap).

Instead, where you depart is with the Friedman-like, quasi monetarist part of the argument. That is, you rail against "printing money" and "debasing the currency" as if these things are inherent evil. In doing so, you miss the what a broad range of economists will tell you: in the kind of slump we are in now, featuring lots of deleveraging and with policy interest rates at zero, neither monetary nor fiscal stimulus is going to lead to inflation unless and until it also leads to growth.

You have made clear that you do not agree, but I've seen nothing from you about why you don't agree, nor have I seen you engage with the arguments.

Maybe that's because I haven't been clear enough about them, and, for the most part, because I've linked to people who understand these things more than I do (after all I've had exactly one college level macro course, I think), but I'll try to put in a nutshell as best I understand it, through a bit of history.

So, you have Keynes saying, shock to demand leads people to panic and reduce their consumption and increase their saving, thus via paradox of thrift, you get the great depression. Hayek responds, no way, people saving more means more money available for credit which means lower interest rates which means investments that weren't profitable at the higher rates now become profitable, thus the economy rights itself. Keynes wins for the time being, but Friedman (and others) come along and largely kill off Keynes because in most circumstances, Hayek is right about the importance of interest rates and the supply of loanable funds, and control of policy interest rates and the money supply can be more effective and responsive than fiscal policy.

Cue the Krugman's of the world, who say, consistent with Friedman, fine, well, but what happens when your paradox of thrift kicks in and people save so much that rates go to zero and can't go any lower? In other words, what happens when supply of loanable funds sufficiently exceeds demand such that the market clearing rate is/should be negative? Or, as DeLong would put it, there is excess demand for safe assets (e.g. cash, government bonds) where what people really want is lots of perfectly safe stores of value. Those whose bias is left (Krugman, Thoma, DeLong) will say borrow cheap and spend, thus increasing the supply of safe assets as the market wants without fears of uncontrollable inflation (because there is lots of demand for those safe assets). Those on whose bias is on the right (Sumner, Beckworth, Mankiw, at times hints of agreement from Cowen) say lots of quantitative easing. The concept is the same. Because people want dollars and/or government bonds (essentially the same thing as a store of value at zero rates), hyper inflation will not be imminent.

You say, "fuck all that noise" what's going on is that the long-term trends of the last fifty years, when American manufacturing has declined and American labor is less competitive are now suddenly acute and can't be fixed.

But again, the argument about what "structural" means is telling. Most people use it as a justification for doing nothing, which is why I resist using it so much, and I think why Ty does as well. But you don't use it that way, and you don't use it the way the economist do. Fine. When you say "structural" you mean "we've got problems that are going to last awhile." Again, fine. I don't think those problems are as big an obstacle as you do, because as usual, I think your sense of proportion is out of whack, and I think your desire to understand macroeconomics through story arcs is misplaced. But your predictions will probably turn out to be right if the people who like to talk about how it's all structural get their way and we do nothing.

I shit on yours. I still shit on it, and I'll probably shit on most of those you offer going forward because, well, they're usually shit. Dense pseudo-intellectual pontifications.

Brilliant. You don't get it so it must suck. Congrats, you have proven yourself a true American, in all the ways that you typically condemn.

Hell, even the National Review article you cited sucked. "We shouldn't aim for inflation. But we do need some policies the main effect of which will be, yes, inflation." Stated otherwise, ease (which, of course = inflate, but nevermind that). Brilliant fucking point.

(Cue Adder furiously rereading that article to distinguish it from my paraphrasing.)

Nope, your paraphrase is about right. It was his positioning for why people who read the National Review shouldn't be freaking out about inflation.

[Adder]

Originally Posted by LessinSF

As the Fed admitted today, there is nothing more they can do.

That's a truly strange way to read the Fed statement.

When it says things like this:

The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

and

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

It's saying it can do other stuff.

[Gattigap]

Jeb Bush channels Spanky, comes up with The Grand Strategy.

Shit. Growth! I mean, when you put it like that, it is *so* *simple*.

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

Yes it is. Think globally. There is a huge need for workers we don't create. This is a global economy. Our unemployment problem is not cyclical. Perhaps we can disagree over whether it is classically structural. Fine. The point is, large sections of our workforce will never be competitive again, or even work again.

Whatever that is, it's not cyclical. And you're wrong if you think we'll return to something like 5% unemployment in the next decade. We will hemorrhage jobs, or at best stagnate in terms of employment, until the cost of foreign labor meets ours, and the skill sets of greater numbers of our workforce meet those of skilled workers abroad.

You can't argue against that point. You will. But you won't succeed. It's ironclad fact.

And please, don't say, "Inflation is going to cause their workers to become more expensive. The more the Fed prints, the more their labor costs rise. Another basis for further Keynesian policies!" Debasement of one's own currency is exactly what Ferguson has argued leads to trade and real wars. And that's only if it works. Right now, it appears that every time our numbers swoon, the world swoons with us. This means emerging markets have not yet decoupled, and are probably not self-sustaining enough to do so any time soon. So even if we kept on printing, it probably wouldn't have the desired result of making our workforce more competitive versus competition.

That's the conundrum. Print like mad and it works, trade wars, then real war. Print like mad and it doesn't work, an exercise in futility that punishes domestic savers. Many of whom are retirees.

You clearly worship Keynes. You might also consider Friedman: No free lunches. A position with which Keynes would agree.

I'm not saying that no part of unemployment in the US is structural. Obviously there's been quite a bit of it in recent years. But the reason why unemployment jumped in the last couple of years is not because there has suddenly been more structural employment. It's because we've had a financial crisis.

[Hank Chinaski]

Originally Posted by Gattigap

Spanky

This isn't to you Gattigap.

So I'm Spanky's friend on another web community, the real guy. I've seen photos. He is actually with very pretty women a lot, and some seem too young (for him, not legally). He may have been the most honest about his real life of anyone here.

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

That's your point run to its logical conclusion.

Your Keynesian/Krugman-esque hypothesis that we can print our way of this rests on the assumption the private sector will inevitably fill in the lack of demand. That Keynesian spending will hold us at equilibrium until the private sector comes back.

In a traditional recession, you're right.

But this is, to borrow from Rogoff, a Great Contraction. We've printed and spent (they necessarily go together), and printed and spent, and we have sustained a better equilibrium than we would have otherwise. But the private sector, and the consumer, hasn't stepped in to pick up the slack.

So what do we do? Two choices. Print more and risk debasing the currency to the point it no longer remains the world reserve (China's been making a solid case for a non-dollar reserve for a long time), destroying the immense advantage we've had since Bretton Woods? Or stop printing and let the economy take some of its medicine, as Less described it.

We can't preserve equilibrium indefinitely, Ty. So tell me, where's the sunset on your Keynesianism? At what point do you say, "Enough. We have to sacrifice some future equilibrium on the employment and human side to preserve the greater equilibrium we enjoy from remaining a AAA rated state with the world's reserve currency"?

That's the problem every Keynesian has right now: They all know it can't persist indefinitely. But few, if any, of them want to admit it.

I really don't get your "printed and spent" point. We've continued to spend at more or less the same rate as before.

Aside: Many of the people who are exercised about federal spending are exercised because a Democrat is the President (and a black one to boot), so they have rediscovered a concern about federal spending that is entirely situational -- it disappears when a Republican is in the Oval Office. (What Obama has done is, by and large, not all that different from what Mitt Romney would have done as President, and if he had done it Republicans would be lining up to cheer, but for a few Jesus freaks who would be freaking about his being Mormon.) And we've seen substantial cuts in spending at the state and local level, so the overall picture is hardly one of an expanding government. Yet the public discourse has been captured by the sort of Tea Party freaks who show up at meetings to complain that the UN is going to expropriate their land.

What is different is that we keep cutting taxes to try to stimulate the economy (if you're a Democrat) and because it's what your donors want (if you're a Republican or a Democrat). And there's been a recession. So government revenues have declined dramatically, and we have deficits. But that has much more to do with the fiscal picture than the macroeconomy.

Your concern about debasing the currency is insane. As Krugman points out, people have been worrying about inflation for two or three years, always predicting that the sky is about to fall, and we still have historically low interest rates. You have inflation when the economy is running hot. We have the opposite. People can't find things they want to invest in -- lending is risky, and there's a flight to the few safe investments, which means Treasuries. You saw this again this week when the stock market dropped like a bomb on fears of a double-dip recession and everybody moved to Treasuries, notwithstanding S&P's downgrade. The market is saying that it wants to put money in US government bonds because they're safe.

What is this medicine you and Less talk about it? There's nothing beneficial about people getting hurt. We already have this colossal loss from the millions of people who are sitting around, not working, instead of doing something. I think you said that we should put some of them to working doing construction, and I agree. This country's infrastructure is decidedly sub-standard compared to a lot of places, and now is a great time to fix that -- we have people out of work, and we have people willing to lend us the money to build stuff for nothing.

Instead, we're going to have the GOP try to block the renewal of the gasoline tax, which pays for highway maintenance.

I really, really don't understand the concerns about phantom inflation when we have all these people out of work. One problem is thirty-five years old and entirely notional. The other is all around us.

[Tyrone Slothrop]

Click through for more.

[Adder]

Originally Posted by Tyrone Slothrop

This country's infrastructure is decidedly sub-standard compared to a lot of place

And we spend way less on it, and have been spending at lower rates over time.

[Tyrone Slothrop]

Originally Posted by Adder

And we spend way less on it, and have been spending at lower rates over time.

This is why your flight is delayed


The chart above comes from a new report by Building America’s Future, “Falling Apart and Falling Behind,” which offers some graphs to punch up an old theme — namely, that a good chunk of U.S. transportation infrastructure is underfunded, outmoded and crumbling.

Take air travel: The United States, the report notes, now has the worst air-traffic congestion on the planet, with one-quarter of flights arriving more than 15 minutes late. One reason is that U.S. air-traffic control still relies on 1950s-era ground radar technology, even as the rest of the world has been shifting to satellite tracking (the FAA has begun the transition to a satellite-based system, though it’s moving slowly and future funding is a big question). According to recent World Economic Forum rankings, even Malaysia and Panama now boast better air infrastructure.

Nationwide, about 37 percent of all delays can be chalked up to outdated technology. In some cities, it’s worse: Two-thirds of all airport delays in the New York City area are due to air-traffic control, and, in an irritating game of dominoes, those delays then trigger delays at other airports across the country. In 2007, the Joint Economic Committee pegged the cost of all this waiting at $41 billion per year. Building America’s Future is essentially arguing that having Congress spend more money on infrastructure could, in many cases, pay for itself.

Here’s one reason, though, all may not go as planned: Although the worst delays are concentrated in the busiest metro areas, Congress tends to sprinkle money for improvements on as many localities as possible. In 2009, for instance, the FAA spent $2.6 billion on airport improvements, but only one-quarter of that money went to the country’s largest airline hubs (which, in sum, serve about three-quarters of traffic). It’s good to be a small state with disproportionate representation.

Brad Plumer

[Adder]

Originally Posted by sebastian_dangerfield

But this is, to borrow from Rogoff, a Great Contraction.

You could, of course, keep borrowing from Rogoff and conclude that a bit of inflation would do a world of good.

From my point of view, you borrowed the less useful bit (I don't really care whether you call it Great Contraction or Liquidity Trap or Balance Sheet Recession or whatever).

I don't usually agree at that much with libertarian economist Arnold Kling, but I'm with him on the evaluation of the monetary policy options.