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ny common ground between these two they cannot have the same ideas the same standards the same tastes the same character the same customs the same laws the same morality or the same religion 1850 was part of the period that keynes called the greatest age of the inducement to investment it was around to the peak of the cycle of civilization as i see it from that lofty point bastiat could see great differences between societies we also can see such differences but we are beyond the peak and near to what no one dares call a dark age so we don t have to imagine those differences we see them every day as we are in transition from the high of the cycle to the low if you stand at the north pole and i stand at the south we both stand on our feet but if i could see you i would see that you look upside down as you would me each of us thinks ourself rightly positioned on top of the world and the other guy all wrong the problem is economic decline when we cannot get right by righting the economy we lean into it we become disoriented and we find ourselves we find the other guy not only wrong but inexplicable the only solution that i can see is to improve the economy to the point that everyone wants to be part of it only when the economy is good can we see eye to eye at may 17 2023 no comments email this blogthis share to x share to facebook share to pinterest tuesday may 16 2023 small picture solutions don t solve big problems we ve been mopping up water on the kitchen floor for fifty years now does anyone think we should have been looking for a leaky pipe after fifty years of failure am i the only one who says balancing the budget by cutting federal spending is the wrong plan people say it is spending in excess of revenue that creates deficits even economists say it it is true of course the arithmetic is correct but it is a small picture view the trouble with the small picture view is surprise it doesn t show the big picture if you balance your budget it can affect your favorite restaurant because you don t go out for dinner anymore it can affect the deli where you no longer stop for coffee on your way to work that s three small pictures yours the restaurant s and the deli s your small picture view ignores two of them or dozens of them or hundreds but those dozens or hundreds then have to consider adjusting the small picture of their budgets and that can affect you or your neighbor or dozens or hundreds more people and so on that s a glimpse of the big picture if you spend a dollar it has a ripple effect if you don t spend a dollar it has a ripple effect everything that happens in the economy affects the economy the big picture is not as simple as spending in excess of revenue raising taxes and cutting spending impact everyone s small picture if there is an imbalance in the big picture a monetary imbalance perhaps then small picture solutions at best only move the problem to someone else s budget like when you squeeze a balloon at one and it gets bigger at the other or like the whack a mole fifty years and counting it is time to re think the plan we need a plan that will work at may 16 2023 no comments email this blogthis share to x share to facebook share to pinterest labels debt ceiling 2023 fallacy of composition whack a mole monday may 15 2023 gw message to the house of representatives pay without delay george washington 1793 message to the house of representatives no pecuniary consideration is more urgent than the regular redemption and discharge of the public debt on none can delay be more injurious or an economy of the time more valuable from treasury direct history of the debt look under the 18th century at may 15 2023 no comments email this blogthis share to x share to facebook share to pinterest labels debt ceiling 2023 sunday may 14 2023 thomas palley interview in jacobin at jacobin the forgotten case against milton friedman an interview with thomas palley i love it when economics is exciting right from the opening paragraph i love the palley interview heh right from the title i love the interview every case against milton friedman rises immediately to the top of my reading list and i think palley s informal title of the interview is even better than the title jacobin used thomas palley calls it inflation the phillips curve and the forgotten case against milton friedman when i came to this part i had to repeat it here well if you go back to the early 1960s there was a widespread belief that there was a systematic trade off between inflation and unemployment that policy could use people believed in the structural phillips curve friedman questioned the long run existence of that trade off using very conventional economic theory and then as i interpret it the economics profession willingly went along with the story that friedman was right and there s a reason for that friedman had based his case on conventional theory and the zinger and the economics profession is not in the business of challenging conventional theory in fact the exact opposite is true it s in the business of defending conventional theory palley also says in my own work i talk of the backward bending phillips curve which generates an optimal rate of inflation that i call the minimum unemployment rate of inflation or muri the rate of inflation that will deliver the minimum unemployment rate i think that is what policy should aim for and i would say it s somewhere between 3 percent and 6 percent well you know i m gonna have something to say about that at may 14 2023 1 comment email this blogthis share to x share to facebook share to pinterest wednesday may 10 2023 financial soundness indicator nonfinancial corporations total debt as a percent of equity level an interesting item https fred stlouisfed org series bogz1fl010000286q since 1980 it looks like this financial soundness riding high up near 100 since the financial crisis put fearofgod into the nonfinancial corporate sector yeah maybe but this is how it looks since start of data i always want to know what happened before that at may 10 2023 no comments email this blogthis share to x share to facebook share to pinterest tuesday may 9 2023 hypocrisy and irrelevance a thought on the debt ceiling nonsense this impasse is not about debt when america s debt to gdp ratio went up by 40 to bail out wall street the republicans did not even squeak yanis varoufakis 2013 a similar thought left by a friend years ago on my old blog a large portion of public sector debt was recently absorbed from the private sector by the public sector nanute 2011 to me these are statements about the hypocrisy of the players in the game of risk that we call the debt ceiling crisis the practice of claiming to have moral standards or beliefs to which one s own behavior does not conform the dictionary says pretense sounds right to me hypocrisy by the way you can see it happen everything goes along normally right up to the end of 2007 then suddenly in 2008 everything changes direction the increase of financial debt suddenly drops off and the increase in the federal debt surges as the government steps in to limit the severity of the collapse graph 1 annual change in federal debt red and the financial sector blue note that debt is measured as end of period values everything looks fine right up to the end of 2007 then suddenly in 2008 finance cuts its losses and the government has to step in to limit the disaster the vertical gray bar represents the recession financial sector debt blue drops from near a 15 growth rate to zero and below maybe we should call that a shrinkage rate now we can t know for a fact what would have happened if the government didn t step in but it is clear to me that it would have been a disaster like the great depression that my dad lived through and his parents my dad was ten years old when that depression hit we can t know for a fact because this time that fact didn t happen but our economy was bad for years after the recession shown on the graph we still had not recovered we still were not back to normal even by the time of covid remember people talking about the new normal that s not the same as normal we never fully recovered it had to be done what the government did it had to be done could it have been done better of course but that s not the question and now after the financial crisis and the disruption that followed and after the covid pandemic where similarly the response was necessary if imperfect now there are tantrums in congress now the government is held up as irresponsible for doing the responsible thing now the federal debt is held up as evidence of irresponsibility hypocrisy is exactly the right word i tripped over nanute s observation went looking for more and found yanis s statement they are right you know yes the federal debt was high even before covid and yes high even before the financial crisis but nobody is subtracting the government s responses to those problems from the federal debt no one is making allowances for those emergencies no one is just trying to be decent let me say yes our federal debt is a problem yes it is but for me the problem is not that that the debt causes well whatever it is the tantrum people say it causes i don t accept those stories for me the federal debt is a problem because we cannot stop the increase not even briefly we are not in control of it i am tempted to say that the economy has a mind of its own and it is making the federal debt increase and nobody believes that the economy has a mind of its own so nobody can figure out what must be done to stop the increase it s almost like we refuse to listen to the economy we refuse to try to understand it we know the economy is bad and that is all we know and you know i think maybe this obtuseness on our part is what spread to the political world so that now we refuse to listen to each other we refuse to try and understand each other we know those guys are assholes and that is all we know and that seems to be the only thing the two sides agree on my view of the debt ceiling discussion is this our economic problems are not caused by the federal debt debt other than federal is the cause excessive private sector debt is the cause of our economic troubles if we reduce private sector debt so that the economy can grow the federal debt will come down easily our economic problems are not caused by the federal debt and deficits balancing the federal budget will not solve the problems therefore the whole debt ceiling argument is irrelevant irrelevant nanute s view and yanis s is that the move to limit federal spending by such a drastic measure is blatant hypocrisy these two arguments are the strongest of all the arguments against the republican tantrum nonsense hypocrisy and irrelevance that about sums it up hypocrisy and irrelevance at may 09 2023 no comments email this blogthis share to x share to facebook share to pinterest labels debt ceiling 2023 monday may 8 2023 private debt per dollar of public debt revising and re posting mine of march 29 2012 i ll just go with the newest version of the private to public debt graph graph 1 dollars of private debt per dollar of public debt when the line goes up times are good 1920 1929 the roaring twenties 1947 1973 the golden age 1994 2000 the macroeconomic miracle when the line is too high times are tough 1929 start of the great depression 1974 1993 small ups and downs here suggesting only brief good periods 2008 start of the great recession when the line peaks there are problems 1929 1974 2007 when the line falls dramatically there can be a depression when the line goes up times are good but when the line is high times are tough this is the stuff that cycles are made of my idea is to use policy to keep the line flat somewhat like 1974 1993 on the graph but to keep it flat at a much lower level a level where the economy constantly wants to grow vigorously we may not get golden age growth that way but long term growth will be better that way than any other way and it will be sustainable growth it will be the quasi boom i expect you know who said this the right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi slump but in abolishing slumps and thus keeping us permanently in a quasi boom that s the end of the old post by the way this topic comes up lately because the debt ceiling is in the news the purpose of the debt ceiling political bluster aside is to reduce the growth of the federal debt but if you spend a moment with the graph you can see that when private debt is high and federal debt is low the one relative to the other times are hard i m not making this up it s in the data and it s on the graph we also know from experience since the 1970s that increasing the federal debt and federal spending and all that does not make the economy better 1 so we cannot solve the problem stephanie kelton s way by setting public spending always to the level required to achieve full employment and accepting whatever deficit may result we ve seen insane increase in the federal debt for half a century and for half a century economic growth has been slowing we cannot solve the problem kelton s way the idea that we need more federal debt is only half a thought we need more federal debt relative to debt other than federal this could happen easily without increasing the federal debt if we sufficiently reduce debt other than federal our own debt i d like to see new policies that encourage us to pay down our debt more quickly and help us afford to do it as an alternative perhaps a massive debt forgiveness but i have trouble picturing that as a practical matter i think we should expect continued increase in federal debt while we transition to a lower private debt economy after the transition we will be able to whittle down feddebt without creating problems it s a good plan but we need policy to make lower private debt happen because existing policy works the other way existing policy does everything possible to increase the availability and use of credit because policymakers think credit helps the economy grow they think using credit helps the private sector grow but that too is only half a thought using credit helps the private sector grow if we are not already overburdened with debt but we in the private sector are already overburdened with debt we have been overburdened with debt for two generations now that s why the economy got slow in the mid 1970s and it s why increasing the federal debt has not improved the economy since the mid 1970s it is the policy of always encouraging more use of credit that created the problem what policy has to do now is encourage us to pay down debt faster than normal we have to offset all the policies that caused the excessive use of credit and because policymakers let things get so bad the new policies must do more than encourage us to pay down our debt those new policies must help us pay down our debt think of i...
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