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ssor commons period of stabilization professor commons distinguishes three epochs three economic orders upon the third of which we are entering the first is the era of scarcity in such a period there is the minimum of individual liberty and the maximum of communistic feudalistic or governmental control this was with brief intervals in exceptional cases the normal economic state of the world up to say the fifteenth or sixteenth century next comes the era of abundance in a period of extreme abundance there is the maximum of individual liberty during the seventeenth and eighteenth centuries we fought our way out of the bondage of scarcity into the free air of abundance and in the nineteenth century this epoch culminated gloriously in the victories of laissez faire and historic liberalism it is not surprising or discreditable that the veterans of the party cast backward glances on that easier age but we are now entering on a third era which professor commons calls the period of stabilisation in this period he says there is a diminution of individual liberty it is not surprising or discreditable that the veterans of the party cast backward glances on that easier age one still sees this among conservatives today i stand by what i said four years ago scarcity abundance and stabilization if there are business cycles and cycles within cycles then there is a cycle of civilization the dark age is a great depression the era of scarcity is the long slow painful recovery the era of abundance is the boom the peak of the cycle and the era of stabilization is the professor s optimistic misnomer for crisis and decline if we re good if we choose wisely if we don t proceed blindly then there is a chance we can ride the downslope of that economic wave like a surfer the cycle of civilization is a cycle in the dispersion and concentration of wealth the inequality that troubles piketty and the pope is evidence of that cycle the growth and decay of cities and nation states is evidence of that cycle the saucer shaped pattern traced by interest rates during the course of ancient civilizations is evidence of that cycle stabilizing the decline of the great cycle is a simple matter of stabilizing the distribution of wealth and income at optimum at levels that best drive growth and maximize individual liberty under capitalism basically in order to give the conservatives what they want we have to give the liberals what they want ain t it sweet posted by the arthurian at 4 00 am 1 comments labels cycle of civilization sunday may 25 2014 as bogus as a three dollar bill that s not the expression you know i check my blogger stats often the main thing is always more pageviews can t help it but sometimes i look at what posts people have been reading sometimes i re read one of those that s how i came back to indirection from three years ago short post but some good comments and a link or two to why the u s gdp number may be as bogus as a three dollar bill at the globe and mail in 10 days washington will release its revised estimate of first quarter economic growth economists will issue a variety of learned opinions about what it all means what most of them will not be saying is that the gdp figure is essentially meaningless i have to go just briefly off topic where does this stupid fetish for the wrongness of gdp come from yes yes the economy is all screwed up no no gdp doesn t count the hours your mama spent hanging the wash out to dry maybe maybe such things should be counted in some alternate universe replacement for gdp but for now let s stop with the drivel and focus on the problems in our economy it wasn t the failure to count your mama s laundry that made the economy go bad okay so brian milner the author of the globe and mail article writes many of us instinctively distrust some okay a lot of what governments tell us but tell us gdp is growing at a faster clip than forecast and we erupt into loud cheers but what if the number turns out be fake that s the provocative question posed by renowned u s money manager rob arnott who makes a convincing argument that what passes for growth in the u s and a bunch of other deficit ridden economies is less than it seems fake not real what it may be for real or it may be phony based on increases in deficit spending mr arnott says of the latest european numbers but while he s unsure of euro zone growth in a new age of austerity the chairman of california based research affiliates is absolutely certain that next week s revised u s gdp number will be as bogus as a three dollar bill that s because it will not take into account how much of the american expansion stems from the government s deficit spending binge oh mr arnott says the increase in gdp is fake because the government upped its spending in response to the great recession eh his focus is wrong you re supposed to realize that increased federal spending is a policy response to recession an offsetting increase in spending intended to stimulate the economy whether that policy actually works is a separate topic there is a lot of related but irrelevant stuff in things people say that s what the word focus means to prune away the irrelevant gross domestic product is used to measure a country s economic growth and standard of living it measures neither mr arnott says flatly gdp measures spending gdp measures final spending not spending it excludes all of the preliminary spending that goes into a final product in order to avoid double counting because the preliminary spending is costs are already included in the price the consumer pays the final price not a big deal but if you re going to be critical like mr arnott and mr milner you may as well be accurate gdp counts final spending in order to measure the size of the economy but the size of the economy can be measured as income instead of output gdp is a measure of income when the federal government engages in deficit spending its purpose is not to fake the size of the economy its purpose is to increase income you might think people would be happy about that mr milner s article continues the problem arnott argues is that the gdp figure fed to the public does not distinguish between consumption that is covered by current income and that which is financed by deficit spending he likens it to a family with too many credit cards the more credit they use the higher the family gdp climbs but that expansion is unsustainable once they are forced to slice up their cards their gdp must plunge i want you to see two things in that paragraph first i want you to see that in arnott and milner s view it s the part of gdp which is financed by deficit spending that is the fake part the second thing i want you to see perhaps a little more difficult to see is arnott and milner s assumption that the use of credit is a personal decision and that the the excessive growth of debt in our time is the result of excessively bad personal decisions maybe that s a microfoundations based concept i don t know i do know it s a crock the excessive growth of debt in our time since the end of world war two i mean is the result of flawed thinking and of policies based on that thinking we think printing money causes inflation and using credit doesn t so we restrict the printing of money and encourage the use of credit so debt increases on top of that we fail to encourage the repayment of debt so of course our borrowing increases and of course our debt grows and of course it becomes a problem but when the costs of accumulated debt become a burden that hinders economic growth we don t see the burden of debt we only see that growth is slow so we fix our policies to make them do more to encourage the use of credit because using credit is good for growth well yeah using credit is good for growth but it also adds to the accumulation of debt and that s not good for growth i don t know if you can see all of that in the paragraph about the family with too many credit cards but think about it and keep an open mind posted by the arthurian at 4 00 am 0 comments saturday may 24 2014 related fragments at the library of economics and liberty david henderson writes why do i make such a strong distinction between the 1960s and the 1970s because in the 1960s the dominant view about economists in macro was keynesianism the dominant ideology was statism and the leading economist was the late paul samuelson by the late 1960s that had started to shift and by the mid 1970s the shift was well under way by the late 1970s the dominant macro view was either monetarism or rational expectations and the leading economist was milton friedman from marcelle chauvet and zeynep senyuz before october 1979 the federal reserve fed used to target bank reserves in the financial system a measure of the tightness of monetary policy was the changes in the federal funds rate in october 1979 the federal reserve bank adopted new operating procedures shifting their emphasis from targeting the federal funds rate to the quantity of non borrowed bank reserves in order to achieve the desired rates of growth in the monetary aggregates from understanding open market operations by m a akhtar the formulation of monetary policy has undergone significant shifts over the years in the early 1980s for example the federal reserve placed special emphasis on objectives for the monetary aggregates as policy guides for indicating the state of the economy and for stabilizing the price level since that time however ongoing and far reaching changes in the financial system have reduced the usefulness of the monetary aggregates as policy guides from macroeconomics by n gregory mankiw in 1993 fed chairman alan greenspan announced that the fed would pay less attention to short run fluctuations in monetary aggregates posted by the arthurian at 4 00 am 0 comments friday may 23 2014 at asymptosis modern monetarist thoughts on wealth and spending the full title of the post is modern monetarist thoughts on wealth and spending volume or velocity i started our writing a brief comment at asymptosis in response to the post but it stopped being brief so my choice was to prune it and leave it there or bring it here and let it grow the latter don t be surprised if my words here sound as though i m talking specifically to steve roth from roth s opening money should be technically defined as a term of art as the exchange value embodied in financial assets we see things differently to me money is the medium of exchange not the exchange value it sounds like you re talking about erosion of the dollar s value but i think you are talking about the liquidity of financial assets jw mason might agree with you that this is what money is today i don t disagree it is what money has become but i see this as the source of our economic troubles things that are not money have come to be widely used and accepted as money you make things too complicated dollar bills aren t money they re embodiments of money jesus roth the embodiment of money is money money and currency aren t the same thing and economists conceptual confution of money with currency like things is central to the difficulties economics faces in understanding how economies work how economies work but since the crisis or before economies don t work currency like things are the things we spend things that are current things that flow take a dollar out of the flow and tuck it away as assets and it is no longer in the current it no longer flows graph 1 household financial assets per dollar of currency like things by the third paragraph you re building a story on a definition that you hope is safe add up the value of all financial assets and that s the money stock nonsense in the paragraph just before your graph you seem to confuse two definitions of the word real here s the offending sentence we see this clearly when we look at recessions and the year over year change in real inflation adjusted household assets a measure of households total claims on real assets the one meaning of real is inflation adjusted as you point out the other meaning is not monetary real assets are things like the drill press you sometimes write about financial assets do not become in that sense real when you drain the inflation out of them i took a look at the total household assets from your first graph in comparison to total household financial assets graph 2 total blue and financial red household assets looks like financial assets are the larger part of the total real assets homes factories drill presses the smaller part then too there s some confusion just after your first graph you write when people have less money they spend less and gdp declines or grows more slowly that is hardly a counterintuitive conclusion but before that you said if they want to spend more there will be more currency like stuff around the fed will ensure it you say it s obvious hardly counterintuitive that when we have less money we spend less but you also say that if we want to spend more the money will grow to accommodate us your statements are contradictory further if all financial assets are money as you say then to calculate the velocity of money one would divide gdp by total financial assets not by total assets as you show in your second graph not that i buy the premise at the end you pull the inequality rabbit out of the hat some readers will like your post because you give them the ending they want no matter it s non sequitur and your last words at the very least the goal should be to reverse the rampant radical upward distribution of the last thirty years okay so look at policy changes since the late 1970s and reverse them but don t blather me with nonsense and error posted by the arthurian at 4 00 am 0 comments thursday may 22 2014 gillibrand is one of 29 co sponsors of the measure that could save graduates thousands of dollars on their repayments from timesunion com with student loan debt surging u s sen kirsten gillibrand on tuesday pushed for legislation that would allow graduates to refinance their loans at lower rates people are spending all their money to pay back debt instead of investing in the economy she told reporters during a conference call it s a huge drag on the economy in one example refinancing could save 70 to 100 a month it s not nothing but it only eases things it doesn t turn the trend around we need to accumulate less debt you know what s gonna happen you save 70 a month on student loans now and you re feeling pretty good and pretty soon you go out and put that new tv on the credit card policy has to change the fed has to keep an eye on the ratio of private debt to circulating money and congress has to create policies that encourage repayment rather than accumulation of debt once this is done we can eliminate a lot of the policies established since the 1980s that were designed to moderate inflation by keeping wages down and rising wages will mean we have money enough that it doesn t kill us to pay down ...
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