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on fails the nature of the breakdown can be summed up in three points a failure of creative power in the creative minority which henceforth becomes a merely dominant minority an answering withdrawal of allegiance and mimesis on the part of the majority a consequent loss of social unity in the society as a whole mimesis the deliberate imitation of the behavior of one group of people by another as a factor in social change when the u s was doing well our policies were imitated everywhere by growing 5 in real terms the u s experienced a sharper expansion than any other major nation even the most optimistic forecasts for 1965 turned out to be too low figuring that the u s had somehow discovered the secret of steady stable noninflationary growth the leaders of many countries on both sides of the iron curtain openly tried to emulate its success time magazine 31 december 1965 these days not so much these days it seems terrorist groups inspire the most mimesis meanwhile britain wants out of the eu scotland wants out of britain quebec wants out of canada and texas wants out of the usa withdrawal of allegiance and mimesis posted by the arthurian at 4 00 am 1 comments sunday july 10 2016 fdhbfr you thought it was gibberish didn t you the title but it snot f federal d debt h held b by f federal r reserve those six letters make up most of the series name for two data series at fred i checked the check boxes for both series and clicked add to graph result graph 1 fdhbfrb and fdhbfrbn at fred i m in a mood so you get the default shape of the graph as demented by fred there s that big up thing on the right there what with the crisis and all i don t care about the big up thing i m gonna cut it off like a finger in a gory movie graph 2 fdhbfrb and fdhbfrbn thru 2007 now there s not so much that s interesting to look at except what i want you to look at bumps one bump between 1985 and 1990 and one that seems to peak at 1995 goose bumps the fed was goosing the economy i m gonna go in and edit the graph and set the units to percent change from year ago for both series so we can see the growth of fed holdings of federal debt well shit i did that the graph changed and the cut off finger years magically re attached themselves to the graph the graph ends at 2016 again not 2007 like i want so i cut them off again graph 3 percent change from year ago for the data shown on graph 2 there maybe you can see a hump centered between 1985 and 1990 and the second hump between 1990 and 1995 yeah but there s humps all over the place i have to move the data to excel odd isn t it how bumps changed to humps when the graph changed from billions of dollars to percent change from year ago number one i want to take the two data series and average them together that way i end up with one data series for the period shown next i want to take and put a hodrick prescott on it to improve the visibility of the trend in the data done and it came out better than i expected graph 4 average of the two fred series blue and the h p trend red an h p high around 1966 another high in late 1985 one in 1993 and one in 2002 okay this being saturday the wife made me breakfast i came back to the computer an hour or so later ready to double check the dates of those four highs in the h p trend line nothing no excel file it s gone where the hell is it not on my desktop where i put everything not in my downloads folder i didn t download the data from fred not on the list of recent files in excel not on the list of recent files in the windows menu where the hell is it i know i created the file i used it to make graph 4 oh you know what it probably got saved where excel files go when you choose to open them rather than downloading them like that so where does the file go when you open with like that i have to do another one to see open it and check the path the temp folder it goes to the temp folder in the local folder in the appdata folder in my folder in users if i can remember all that so what s in the temp folder looking for an excel file not the first one the second one i think copy to desktop open yeah that s it the source for graph 4 is there got it okay i must have forgot to save the thing to the desktop immediately after i opened it and it went to the default place temp you thought it was a virus didn t you what i want to do now i want to look at real inflation adjusted gdp and rgdp per capita percent change of these graph 5 percent change from year ago for rgdp per capita blue and rgdp red i want to download the data average the two together as i did above and figure the hodrick prescott for it graph 6 average of the two rgdp series blue and the h p trend red okay now we re getting to the good stuff i have not seen it yet myself i want to take the hodrick prescott from graph 4 fed holdings of federal debt and put it on a graph with the hodrick prescott from graph 6 rgdp this will let us compare the growth rate trends so this next graph shows the h p for fed holdings of federal government debt in blue and it shows the h p for rgdp growth in red graph 7 h p trend from graph 4 blue and h p trend from graph 6 red i would want to argue that rgdp responds to changes in fed holdings looks like there are some timing issues to deal with variable lags but my day s energy is all used up and i don t want to get into it now maybe another day i will say only that the blue line shows policy and the red shows the result of policy afterthoughts the constant used in the h p calculations is 1600 all data are quarterly here s my excel file note the file contains kurt annen s vba code for the hodrick prescott posted by the arthurian at 4 00 am 3 comments saturday july 9 2016 get an education raghuram rajan what is the alternative to creating new mountains of consumer debt instead of looking for ways to resuscitate spending by those who can ill afford it and creating unsustainable bubbles in the process we need to think creatively about how americans can acquire the skills they need to enhance their incomes acquire the skills rajan says if your accumulation of debt is too big he says get an education you ll make more income and get out of debt fallacy of composition it works for the individual it doesn t work for the economy as a whole money comes from somewhere if we don t borrow it we have to get it from someone else if the stock of circulating money the money we can get from someone else as income is insufficient then the economy does not have the money we need unless we borrow it this is not a problem that can be solved by education it can only be solved by economic policy that considers the quantity of circulating money and the level of accumulated debt graph 1 total debt per dollar of m1 money 1916 2015 posted by the arthurian at 4 25 am 0 comments friday july 8 2016 in case you didn t read all the way to the end what i said to larry summers last time we need to get interest costs down to get economic growth so that we can raise interest rates and undermine that growth this is your plan for the economy what s to understand larry you crack me up all this focus on interest rates and no focus at all on the number of dollars on which interest must be paid you guys cut interest rates as low as they can go now you re trying silly stuff with negative rates an act of desperation to be sure but you pay no attention to the accumulation of debt it s the accumulation of debt that created the need for low rates cut debt in half larry and you cut interest costs in half what s to understand posted by the arthurian at 4 00 am 0 comments thursday july 7 2016 dear larry notes on larry summers s interest rates are at inconceivable levels and we must confront what that means larry you are thinking inside the box the u s 10 and 30 year interest rates on wednesday reached all time lows of 1 32 percent and 2 10 percent such rates would have seemed inconceivable a decade ago e xtraordinarily low rates reflect both sub target expected inflation even over long horizons and very low real interest rates remarkably the market does not now expect a full fed tightening until early 2019 this is despite all the fed speeches expressing optimism about the economy and a desire to normalize interest rates there is a growing sense that the world is demand short that the real interest rates necessary to equate investment and saving at full employment are very low and often may be unattainable first of all larry you are explaining demand short in terms of interest rates don t do that it gets you to interest rates too soon actually you skipped the explanation altogether and went straight to your conclusion that the interest rates we need are unattainably low let s say you re right then the question is why why are rates so low and how did rates get that way in other words larry we still need an explanation and then maybe it is not the need for low rates that is the problem maybe it is the thing that created the need for low rates that is the problem see how that works the situation is different now not like before the crisis the situation is different but your thinking is no different you are still relying on concepts and short cuts that you used back in 1991 when you were wrong about the 4 5 mortgage rate being an antique in truth larry there is no remedy except to throw over the axiom of parallels and to work out a non euclidean geometry if you get my drift second are you relying on loanable funds theory sounds like it savings and investment are not made equal by interest rates they are made equal by accounting convention and then larry and then you look at the world around you you describe what you see and you call it the result of the conclusion that you jumped to look what you wrote larry there is a growing sense that the world is demand short that the real interest rates necessary to equate investment and saving at full employment are very low and often may be unattainable given the bounds on nominal interest rate reductions the result is very low long term real rates sluggish growth expectations concerns about the ability even over the fairly long term to get inflation to average 2 percent and a sense that the fed and the world s major central banks will not be able to normalize financial conditions in the foreseeable future so having fitted the post crisis world to your pre crisis economics and having identified the problem by proclamation you now move on and consider solutions having the right worldview is essential if there is to be a chance of making the right decisions good point larry i agree with that here are the necessary adjustments first with differences between countries neutral real interest rates are likely close to zero going forward there is no good reason to think given sluggish investment expectations that the neutral rate will rise to be significantly positive in the foreseeable future substantial continued reductions in fed estimates of the real neutral rate lie ahead larry you are doing it again starting with low interest rates fact is interest rates in the u s have been drifting down hill since 1981 maybe we should think about that maybe we should think about why that don t start with interest rates being low at the moment that s what you thought about your parents mortgage rate think instead about why rates went down for 34 years maybe there is more to it than just interest rates get my drift larry having the right worldview is essential without it you end up saying things like substantial continued reductions in fed estimates of the real neutral rate lie ahead they ve been lowering rates for 34 years larry and now they ve reached the zero bound the only interest rate left for them to lower is their estimate of the real neutral rate you re not telling me anything useful larry anyway you got to your conclusion by jumping second as counterintuitive as it is to central bankers who came of age when the inflation of the 1970s defined the central banking challenge our problem today is insufficient inflation no larry our problem is not insufficient inflation third in a world where interest rates over horizons of more than a generation are far lower than even pessimistic projections of growth traditional thinking about debt sustainability needs to be discarded in the u s the u k the euro area and japan the real cost of even 30 year debt will be negative or negligible if inflation targets are achieved indeed the conditions brad delong and i set out in 2012 for expansionary fiscal policy to pay for itself are much more easily satisfied today than they were at that time thinking inside the box larry the keynesian box keynes said deficit spending so larry summers says deficit spending get out of the box larry think for yourself we ve had 80 years of deficit spending in the public and private sectors maybe it is time for something else get out of the box want a hint i ll give you a hint what happens when you have 80 years of deficit spending in the public and private sectors you accumulate a lot of debt that s what happens larry hint maybe the problem is too much debt anyhow why are you still talking about public debt everybody knows keynes said increase the public debt you say that is the solution again now other people say public debt was the problem then and is the problem now nobody says fuckall about private debt get out of the box larry this isn t 1936 the facts are different when events change i change my mind what do you do fourth the traditional suite of structural policies to promote flexibility are not especially likely to be successful in the current environment though some structural policy approaches such as removal of restrictions on investment are still desirable indeed in the presence of chronic excess supply structural reform has the risk of spurring disinflation rather than contributing to a necessary increase in inflation there is in fact a case for strengthening entitlement benefits so as to promote current demand is larry the traditional suite of policies is not likely to be successful if you re going to say it larry at least get the grammar right larry larry larry first you say some structural policy approaches such as removal of restrictions on investment are still desirable then you say in the presence of chronic excess supply structural reform has the risk of spurring disinflation i know when the facts change you have to change your mind but you changed your mind mid paragraph the facts didn t have time to change and then oh my you say there is in fact a case for strengthening entitlement benefits so as to promote current demand you re a case larry you get things we need mixed up with policies we should put in place instead of doing something about income inequality you would increase entitlements to promote current demand have you forgotten what an economy is do you not know how an economy works and that brings us to your concluding paragraph there is much more to be said about policy...
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