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posted by the arthurian at 7 38 pm 0 comments couldn t interrupt a video this way given the choice i much prefer reading to watching video oh not for entertainment no but when it is something i have to think about like the economy i want to read it otherwise i just get bludgeoned by ideas that there is no time to evaluate i think that s how things go wrong but even in print people try to present ideas faster than they can be evaluated that s my first impression of this forked tongue piece from cato liberty don t blame obama for bush s 2009 deficit posted by daniel j mitchell some critics are lambasting president obama for record deficits this is not a productive line of attack largely because it puts the focus on the wrong variable america s fiscal problem is excessive government spending and deficits are merely a symptom of that underlying disease time to interrupt third sentence in daniel j mitchell is using a conclusion as if it were an observation the problem is excessive government spending sounds like a conclusion to me and how would you know that america s fiscal problem is excessive government spending if not for the deficits but perhaps this is mr mitchell s point so then let us suppose that deficits are evidence of excessive government spending oh well there you go this is how we arrive at mitchell s conclusion by supposing it in addition to being theoretically misguided critics sometimes blame obama for things that are not his fault listening to a talk radio program yesterday the host asserted that obama tripled the budget deficit in his first year this assertion is understandable since the deficit jumped from about 450 billion in 2008 to 1 4 trillion in 2009 as this chart illustrates with the bush years in green it appears as if obama s policies have led to an explosion of debt but there is one rather important detail that makes a big difference the chart is based on the assumption that the current administration should be blamed for the 2009 fiscal year while this makes sense to a casual observer it is largely untrue the 2009 fiscal year began october 1 2008 nearly four months before obama took office the budget for the entire fiscal year was largely set in place while bush was in the white house as for myself i much prefer to leave out the politics altogether and deal directly with the economics of the economic problem posted by the arthurian at 4 00 am 1 comments sunday june 26 2011 ball of twine made in china for a u s company with a canadian parent this is not free trade posted by the arthurian at 10 28 am 1 comments why is krugman saying this that said widespread credit constraints presumably reduce the number of players who can take advantage of lower rates we can t boost the economy with more debt liquidity preference has changed posted by the arthurian at 10 21 am 1 comments twenty cent trends second look at some numbers from twenty cent paradigms fairness is in the eye of the beholder but the us economy actually grew faster when top marginal tax rates were higher here is the annual average growth in real gdp and the average annual top marginal tax rates for the us by decade 1951 60 3 42 91 2 1961 70 4 11 78 4 1971 80 3 14 70 0 1981 90 3 21 44 5 1991 2000 3 22 37 9 2001 2006 2 51 36 2 so i put those numbers into a graph and let excel add trend lines for them everything trends downhill at least since the 60s but then so do my spirits come to think of it maybe the economy s long decline is all my fault maybe if i cheer up the economy will get better oh wait i thought i was making a joke but that s not a joke it s the actual view of all those economists who say the problem is expectations posted by the arthurian at 4 00 am 17 comments saturday june 25 2011 must read one brief comment at macro and other market musings posted by the arthurian at 4 37 pm 2 comments pce and cpi long term from beckworth via retirement blues this graph showing similarity for five years or so from fred a longer view showing what looks to me like lots of similarity posted by the arthurian at 12 25 pm 4 comments don t screw it up the penguin classics abridgement of adam smith s the wealth of nations includes an introduction by andrew skinner in skinner s introduction there is a quote from smith about systems systems in many respects resemble machines a machine is a little system created to perform as well as to connect together in reality those different movements and efforts which the artist has occasion for a system is an imaginary machine invented to connect together in the fancy those different movements and effects which are already in reality performed so adam smith says the economy is a system it is comparable to a complex machine in our day you could compare it to a computer years back a friend of mine would try to fix his computer when it went haywire by going in and changing a bunch of settings all at once far as i could see he was only making things worse one has to be methodical one has to remember the lessons the system teaches you don t just go messing with it carelessly because you re liable to screw it up posted by the arthurian at 4 00 am 5 comments friday june 24 2011 not my style follow up the other day i made the most of a michael hudson post pointing out that he and i agree on a lot of debt related stuff and that at least some of my agreement is based on my own independent analysis of long term trends in our economy but then i stopped short and said forget about reading hudson s post here s why after eight strong paragraphs hudson does the kelton thing changing horses to make the point he wanted to make all along hoping the reader will have been drawn in by what came before depending on the reader s sympathy for the objective that stands behind the second horse irrelevancies if there was a silver lining to all this it has been to demonstrate that if the treasury and federal reserve can create 13 trillion of public obligations money electronically on computer keyboards there really is no social security problem at all no medicare shortfall no inability of the american government to rebuild the nation s infrastructure the bailout of wall street showed how central banks can create money as modern money theory mmt explains the argument is only effective because people want to accept the second horse part but the second horse turns the first eight paragraphs of meat into fluff it s just filler there to draw you in complete with the diet of donuts out of the blue completely irrelevant imagery of the buildup of plaque deposits in human veins and arteries the whole of the first eight is as irrelevant to michael hudson s silver lining purpose as is the one line about plaque people dispute whether economics is science i don t care we have to treat it like science regardless we have to make our best arguments and we have to have relevant conclusions otherwise the whole thing is a joke posted by the arthurian at 8 00 am 0 comments not my style if you look at my recent series three posts beginning with the world in red and blue you ll see several graphs but few conclusions hope that doesn t bother you i d rather understate things than overstate them the economy is what it is i can t change that by bs ing you in a recent post stephanie kelton discusses obama s implausible dream i will skip the donut part and get to the meat as far as washington is concerned there are only two ways to bring down the deficit cut spending or increase taxes both reduce private sector incomes this means that the president is looking for a way to reduce private sector incomes without hampering sales or job creation obama s dream is to find a way to reduce private sector incomes without hampering sales or job creation can it be done kelton asks after careful analysis her answer is no the careful analysis is done in words accompanied by little formulas that leave me wondering mostly why are some of the zeroes smaller and bold so much for the algebra here is kelton s summary of her analysis the bottom line is this as long as unemployment remains high the deficit will remain high so instead of continuing to put the deficit first it s time get to work on a plan to increase employment but that s not what her analysis showed the analysis does not consider whether it is possible to reduce the deficit while unemployment remains high the analysis considers whether it is possible to reduce private sector incomes without hampering sales or job creation look i do not disagree with kelton s analysis and i agree with her goal which evidently is to reduce unemployment but after doing the careful analysis she changes horses just in time for her conclusion to me either the conclusion is irrelevant or the analysis is they re not both part of the same argument i think i ve seen kelton do this before actually posted by the arthurian at 4 00 am 3 comments thursday june 23 2011 focusing on krugman in woodford on monetary and fiscal policy paul krugman reviews the thoughts of mike woodford on policy options when you re up against the zero lower bound then pk describes what he himself was thinking in say january 2009 with the severe financial crisis still relatively recent and many people still expecting a v shaped recovery it didn t seem possible to persuade the fed to commit to a permanent rise in the monetary base or a rise in the medium run inflation target nor did it seem possible to convince markets that there had been a long run change in policy the chances for persuading congress to agree to a large temporary fiscal stimulus seemed much better but as it turned out that didn t happen either i do think it s funny that pk spends so much time worrying about the chances for persuading congress and the possibility of persuading the fed what they should do perhaps krugman would be more persuasive if rather than worrying what others think he would focus on writing persuasive arguments about what must be done just to be clear the options paul krugman sees are 1 increase the monetary base and or increase inflation and 2 increase government spending with a large temporary fiscal stimulus now if i tell ya i m gonna disagree with krugman you re prob ly gonna think i m austerian i m not but i have to evaluate krugman s options in relation to the problem as krugman defines it as krugman defines it in default is in our stars 25 september 2010 krugman wrote i think it s fair to say that a majority of economists believe that excessive private debt played a key role in getting us into this economic mess and is playing a key role in preventing us from getting out eh slightly out of focus there he doesn t say what he thinks he says what he thinks a majority of economists think is he trying to strengthen his position by embedding himself in the majority can t say does he include himself among them doesn t say well then here s another krugman of 18 november introduces his new 32 page pdf debt deleveraging and the liquidity trap and offers an informal summary of the paper as well in the summary krugman writes sharply rising debt it s widely argued set the stage for the crisis and the overhang of debt continues to act as a drag on recovery heh same thing again doesn t say what he thinks says what is widely argued let me try one more time in the recent mr keynes and the moderns krugman writes i constantly encounter the argument that our crisis was brought on by too much debt which is largely my view as well largely well i guess that s as good a commitment as we re gonna get from paul krugman so i guess i ll go ahead and say what i think krugman thinks as he seems unwilling or unable to do so i ll take a chance and say krugman includes himself among those arguing widely that debt is the problem krugman includes himself in that majority of economists who see excessive debt as the problem krugman includes himself among those who think the crisis was brought on by too much debt too much debt so assuming that krugman sees excessive debt as the problem let us evaluate his solutions his first option is to have the federal reserve increase the quantity of base money does this solve the problem it could it could reduce the debt per dollar ratio which is exactly what needs to be done but the method is indirect at best directly it affects only prices not debt moreover in practice a large fall in debt relative to base money has induced only a small decline in debt relative to m1 money which is the crucial ratio his second option calls for a massive increase in government spending and presumably though this also is out of focus a massive increase in the federal debt but the problem according to krugman sez i is that there is too much debt already indeed yes krugman s words are excessive private debt the federal debt is not private but option two increases debt it does not reduce debt and if the problem is excessive debt the solution is to reduce debt neither of krugman s options reduces debt specifically neither of krugman s options reduce private sector debt furthermore if either of krugman s options does work the outcome will be renewed economic growth doubtless accompanied by more private sector debt growth yet excessive private sector debt was the problem to begin with but as long as excessive private sector debt remains an unresolved problem there is no chance that krugman s options can succeed perhaps if paul krugman could focus on the problem if he could actually bring himself to say that he thinks excessive private debt played a key role in getting us into this economic mess and a key role in preventing us from getting out perhaps then he would have a better handle on a solution a better handle on a solution i would print money and use it to pay off debt destroy that money by destroying debt posted by the arthurian at 8 00 am 2 comments evolution in november of last year i came upon a comment at truthout that led back to this post by chip shirley 11 17 10 conservatives have no answer to this question they can t explain in their economic policy how america did most of the great things we have ever done and paid for them between 1940 1980 and the whole time our federal income tax on the most wealthy citizens was double to triple what it is today while our deficit and debt were nill compared to today conservatives have no answer to that question in comments on mine of 21 november i evaluated chip s theme in those postwar years when the economy was doing really well taxes on the wealthy were very high by our standards this shows that such taxes do not ruin a healthy economy on the other hand i don t think it shows that high taxes on the wealthy will restore health to our economy as an afterthought i would add in order to think that high taxes on the wealthy will restore health to our economy you have to think that the federal debt and deficit are the cause of our economic troubles i do not agree that the federal debt and deficit are the cause of our economic troubles and everything i ...