Many polls are open early across this country. And everyone from celebrities, to Super PACs to special interest groups to politicians are pleading with the American people to get out and vote. It's every American's civic duty, they say.
Even though most don't know what galaxy you are living in, Americans are told to vote on matters of domestic policy you likely know or care little about.
Even though a third don't know who the current Supreme Court Justice is, Americans are asked to decide the fate of judicial branch with your vote.
Even though half don't care to follow whether Obamacare was ruled constitutional or not, Americans are asked to decide the fate of it.
Even when one in ten think our sitting president is Muslim, they are asked to decide on the role of religion in our discourse.
Even though nearly half think that China is a greater economic power than the US, Americans are asked to decide the outcome of our foreign and economic policies.
Even though that scientists say that all the stupid Americans are dooming us with voting, many will listen, and will cast uninformed biased votes based on what your friends, celebrities tell you, or what your gut feelings say to you, or the fact that your skin color matches the candidate.... These are not reasons to vote. These are reasons to do your real civic duty and abstain from your vote.
The saving grace for our country is that due to the corrupt nature of our modern political process, most votes likely will not count anyway. Unless you live in Ohio or Florida or one of the few 'battleground' states, one should have no incentive to vote other than as a symbol. Most of you that vote anyway, whether you are stupid or not, will use your vote to symbolize your belonging to either the Democrats or Republicans. The rest will be disenfranchised - locked out from the process. We will continue to have 2 overly-powerful parties beholden to their Super PACs and special interest deciding the fate of the future with little to no hope for process changes to how congress or our electoral system could operate more effectively.
My friends may not agree with me now on this broader point, but in time I hope they do. The only solution is to demand real change from outside the system. So I urge every American not to get out and vote, but to boycott our political system - shock it into changing. Only when we eliminate the legitimacy of the system can we fix it. We must sacrifice any individual gains via party-support for true long-run gains for our country.
Tuesday, October 23, 2012
Thursday, October 4, 2012
Keen Connects to MMT
Continues to interest me:
or for a more encompassing version of lesser quality (sound):
Keen has a unique definition of Aggregate expenditure (closed economy):
=C + I + NetAssets + (G-T)
....he didn't explain that enough for me to fully understand what he's saying here. But here is my take (updated since I previously mentioned I too was confused) since many bloggers are just outright calling Keen's work nonsense. This is partly Keen's fault for not clearly defining things.
He goes on to say that:
Income + Change in Debt = Output + Net Asset Turnover
...which suggests to me he thinks that changes in assets (prices bubbles)are a result of changes in debt (a la Minsky, which makes sense).
From what I understand, what Keen means by Net asset turnover is speculative and ponzi financing. That is, financing of financial instruments that do NOT have a backing of a physical good or service and therefore are not expected to fully repay the principal and interest of the financing absent bubble formation.
In this way, Keen income and debt partially financing real goods and services, but also partially financing speculative and ponzi investments (the value of which is not based in real output).
In this view, neoclassical economics ignores this new class in the usual Y = C + I + G formation. The real question to me is then, why does he include G-T instead of just G in his above formula. That is still unclear to me.
UPDATE: had a brief back and forth with Prof. Keen about why he nets out taxes in his effective demand function. Not very insightful. He just said it's "cash flow."....hope he describes his re-formulation of the usual demand function in a more user-friendly way in the future.... Maybe he's too in-the-weeds.
or for a more encompassing version of lesser quality (sound):
Keen has a unique definition of Aggregate expenditure (closed economy):
=C + I + NetAssets + (G-T)
....he didn't explain that enough for me to fully understand what he's saying here. But here is my take (updated since I previously mentioned I too was confused) since many bloggers are just outright calling Keen's work nonsense. This is partly Keen's fault for not clearly defining things.
He goes on to say that:
Income + Change in Debt = Output + Net Asset Turnover
...which suggests to me he thinks that changes in assets (prices bubbles)are a result of changes in debt (a la Minsky, which makes sense).
From what I understand, what Keen means by Net asset turnover is speculative and ponzi financing. That is, financing of financial instruments that do NOT have a backing of a physical good or service and therefore are not expected to fully repay the principal and interest of the financing absent bubble formation.
In this way, Keen income and debt partially financing real goods and services, but also partially financing speculative and ponzi investments (the value of which is not based in real output).
In this view, neoclassical economics ignores this new class in the usual Y = C + I + G formation. The real question to me is then, why does he include G-T instead of just G in his above formula. That is still unclear to me.
UPDATE: had a brief back and forth with Prof. Keen about why he nets out taxes in his effective demand function. Not very insightful. He just said it's "cash flow."....hope he describes his re-formulation of the usual demand function in a more user-friendly way in the future.... Maybe he's too in-the-weeds.
Saturday, September 15, 2012
Indiana Gov Race: Pence v. Gregg
Having recently attended the Fall 2012 session of the Indiana Economic Development Conference, I had the chance to hear Sue Ellspermann (Mike Pence's (R) running mate) and John Gregg (D) give their thoughts regarding how to improve Indiana's economy. Below I will outline what I heard, and give my opinion on who has the better direction:
Highlights from Sue Ellspermann for Mike Pence:
In regards to labor force and education, Ellspermann indicated that the Pence campaign wants to strengthen vocational and technical schools by working with high school and employers throughout the State. They want to eliminate the stigma of these schools and slowly get people to realize that 4-year colleges aren't for everyone and not necessary for many high-paying careers. While I don't think this focus would work for every State, I do think it's the right one for Indiana given the kind of labor pool and demand we have. This is in some sense an extension of the what the Daniel's administration has already started, so no marks for originality. Unlike the Gregg campaign, the Pence campaign wants to reduce education costs mostly by incentivizing students to graduate early or at least on-time by basically paying them to do so. I don't know how I feel about that. To me, there's usually a good reason students don't graduate on time. I'd rather see some of that money being spent on high schools to do a better job of helping students figure out their likes, dislikes, strengths etc.... Grade: B-
In regards to government operations, the campaign wants to have a "moratorium on regulations." Sue (I'm tired of typing her complicated last name) didn't give any specifics on this, and I consider this to be a throw away item that every politician says.... Grade: F
And of course the Pence campaign wants to support Veterans. Sue mentioned that the existing unemployment rate is about 15% for Veterans (twice the national average nearly). She gave no specifics other than wanting to put a Veteran on the IEDC Board. All in all, I don't see the point of that and consider this to be another throw-away political stance:... Grade: F
Of course, Sue wouldn't be a Republican if the main part of the platform weren't about cutting taxes. So, the Pence group wants to cut income taxes over 2 years by 10%. And again, like most Republicans, there was no mention of how this would be paid for (see regulations above). So, Grade: D
Sue talked about the need to increase exports, particularly with ag. She went on to talk entrepreneurship and partnering with universities, creating an Indiana jobs cabinet that can be movers and shakers that can spread the word about Indiana's strong business climate, and also talked about hosting a national site selector conference. Some of this seems like it might be beneficial, but she was a bit vague on specifics, so I'll go with a B-
Regarding energy, the Pence campaign supports an all-the-above strategy - which is the best any politician can do in coal country....no grade on this.
Overall, I was impressed with Sue Ellspermann's presentation (if not a majority of the content) and it is refreshing that she actually has an econ dev background (which I'm sure is why Pence sent her) but it's also disheartening that Pence didn't show up himself - just further exemplifies the fact that he is all social-issues, which is concerning to me. I think there were a couple good ideas, a lot of old ideas, and some throw-away vagueness. So, overall grade is a C-
Highlights from John Gregg:
John Gregg showed up on Friday to speak and I was struck my many similarities to the Pence campaign's ideas. First, some democrats don't realize, but John Gregg is just as (if not more so) conservative when it comes to social issues (which is part of the reason why he chose Vi Simpson as his running mate - to mask that). But also, on econ dev, there are more similarities than differences with Pence.
The first point he made was about energy - Gregg wants to eliminate the sales tax (not the use tax) on gasoline. He tried to persuade the audience that the amount of money saved per family is significant, but that is laughable for all but the poorest of families. Also, while I don't support tax increases on gas like many economists do, I certainly don't support eliminating taxes on them. This seemed more to me to be a political populist ploy more than anything else, though perhaps he has his heart in the right place, we are never going to close the gap on the clean/coal cost differential if we cut the cost of gas. Like Pence he claims to have an all-the-above strategy and mentioned something about making more wind turbines here....Grade: D-
Like the Pence camp, he wants to have an 'efficiency audit' which just means he wants to spend a lot of time looking at the regs to see if we can save money. Given that the Daniel's administration spent 8 years doing that, I don't see the value. Also, he gave the same talk about Veterans although he didn't mention anything about putting one on the IEDC board. I'll give this the same grade I gave Sue: F
Regarding specific econ dev stuff, Gregg wants to cut the corporate income tax (with a credit) particularly on HQ relocation to Indiana. I see two difficulties: one is that we just don't see that many HQs relocating anywhere except for Indianapolis metro or Fort Wayne (so it's hardly a big benefit Statewide), and two is we already have tax credits to do this! He went on to talk about how he wants to target specific industries like life science and advanced mfg. but again, these are targets the State already has. He mentioned a tax credit also for companies that relocate jobs from overseas (I think Obama had a similar idea?) Again, while the IEDC doesn't have a credit specific to that, we already have credits we can give companies to relocate back home. It's REDUNDANT. My biggest disappointment is he made no mention of his recently announced idea to create a midwest econ dev cooperative (which I love) - so I can't factor that into his grade. Grade: F
Regarding international trade, again like Pence, he wants to increase exports. Gregg says he'll accomplish this by creating a new office at IEDC devoted to international strategic exports. He was very vague on this, but I imagine this might involve expanding our already-existing international office. He also wants to fight unfair trade practices abroad. While I applaud that sentiment, that seems like a federal issue. The US can't get China to change, how in the world is Indiana? Finally, he wants to create a 'heritage to home' program essentially turning foreign students into ambassadors for the state. I suppose the idea being he wants all this foreign talent to earn degrees here, then leave, and spread the word about Indiana in India, China....I would rather the focus be on keeping them HERE. Grade: D-
Unlike Sue's speech (actually the two were very different deliveries, Sue's was polished and professional and Gregg's was very off the cuff and folksy to the point of being obnoxious), Gregg kept preaching to the crowd (of mostly local econ dev officials) that he wants the State to better engage the localities on how to do econ dev. He gave no specifics and I mostly thought he was just trying to push his populist preaching, but I DO wish the State were more collaborative with local officials. So, I'll grade that a C.
He ended on education. His plan to cut costs is to look at our schools and ask the question, 'is that building needed?' 'Is that program redundant with this program?' Again...fluff. He wants to give a tax credit or other incentive to keep kids in Indiana after graduation (which to me seems counter to his plan for a foreign ambassador program). Perhaps his biggest difference with Pence is that he seemed largely resigned to the fact that kids take more than 4 years to graduate these days - it's the new normal. As such, he has no plans to incentivize on-time graduation. Grade: C-
Overall, while funny, his speech was a lot like his campaign: lacking a clear direction or focus and overly folksy. He actually made a point of not asking for anyone's vote, which I found odd to say the least. Another oddity was that (and yes, I was keeping track), he not only said "IEDC operates good (folksy grammar)" but he also credited Mitch Daniels with 4 things: Indiana Buy-IN program, BMV makeover, strategic overseas focus, and community college focus. Gregg kept his best econ dev idea off the table for this group and largely either has a copy of the Pence campaign or imop has some really uninformed ideas. So, his grade is a D.
So, it's Pence/Sue by a nose - but certainly nothing to write home about.
Highlights from Sue Ellspermann for Mike Pence:
In regards to labor force and education, Ellspermann indicated that the Pence campaign wants to strengthen vocational and technical schools by working with high school and employers throughout the State. They want to eliminate the stigma of these schools and slowly get people to realize that 4-year colleges aren't for everyone and not necessary for many high-paying careers. While I don't think this focus would work for every State, I do think it's the right one for Indiana given the kind of labor pool and demand we have. This is in some sense an extension of the what the Daniel's administration has already started, so no marks for originality. Unlike the Gregg campaign, the Pence campaign wants to reduce education costs mostly by incentivizing students to graduate early or at least on-time by basically paying them to do so. I don't know how I feel about that. To me, there's usually a good reason students don't graduate on time. I'd rather see some of that money being spent on high schools to do a better job of helping students figure out their likes, dislikes, strengths etc.... Grade: B-
In regards to government operations, the campaign wants to have a "moratorium on regulations." Sue (I'm tired of typing her complicated last name) didn't give any specifics on this, and I consider this to be a throw away item that every politician says.... Grade: F
And of course the Pence campaign wants to support Veterans. Sue mentioned that the existing unemployment rate is about 15% for Veterans (twice the national average nearly). She gave no specifics other than wanting to put a Veteran on the IEDC Board. All in all, I don't see the point of that and consider this to be another throw-away political stance:... Grade: F
Of course, Sue wouldn't be a Republican if the main part of the platform weren't about cutting taxes. So, the Pence group wants to cut income taxes over 2 years by 10%. And again, like most Republicans, there was no mention of how this would be paid for (see regulations above). So, Grade: D
Sue talked about the need to increase exports, particularly with ag. She went on to talk entrepreneurship and partnering with universities, creating an Indiana jobs cabinet that can be movers and shakers that can spread the word about Indiana's strong business climate, and also talked about hosting a national site selector conference. Some of this seems like it might be beneficial, but she was a bit vague on specifics, so I'll go with a B-
Regarding energy, the Pence campaign supports an all-the-above strategy - which is the best any politician can do in coal country....no grade on this.
Overall, I was impressed with Sue Ellspermann's presentation (if not a majority of the content) and it is refreshing that she actually has an econ dev background (which I'm sure is why Pence sent her) but it's also disheartening that Pence didn't show up himself - just further exemplifies the fact that he is all social-issues, which is concerning to me. I think there were a couple good ideas, a lot of old ideas, and some throw-away vagueness. So, overall grade is a C-
Highlights from John Gregg:
John Gregg showed up on Friday to speak and I was struck my many similarities to the Pence campaign's ideas. First, some democrats don't realize, but John Gregg is just as (if not more so) conservative when it comes to social issues (which is part of the reason why he chose Vi Simpson as his running mate - to mask that). But also, on econ dev, there are more similarities than differences with Pence.
The first point he made was about energy - Gregg wants to eliminate the sales tax (not the use tax) on gasoline. He tried to persuade the audience that the amount of money saved per family is significant, but that is laughable for all but the poorest of families. Also, while I don't support tax increases on gas like many economists do, I certainly don't support eliminating taxes on them. This seemed more to me to be a political populist ploy more than anything else, though perhaps he has his heart in the right place, we are never going to close the gap on the clean/coal cost differential if we cut the cost of gas. Like Pence he claims to have an all-the-above strategy and mentioned something about making more wind turbines here....Grade: D-
Like the Pence camp, he wants to have an 'efficiency audit' which just means he wants to spend a lot of time looking at the regs to see if we can save money. Given that the Daniel's administration spent 8 years doing that, I don't see the value. Also, he gave the same talk about Veterans although he didn't mention anything about putting one on the IEDC board. I'll give this the same grade I gave Sue: F
Regarding specific econ dev stuff, Gregg wants to cut the corporate income tax (with a credit) particularly on HQ relocation to Indiana. I see two difficulties: one is that we just don't see that many HQs relocating anywhere except for Indianapolis metro or Fort Wayne (so it's hardly a big benefit Statewide), and two is we already have tax credits to do this! He went on to talk about how he wants to target specific industries like life science and advanced mfg. but again, these are targets the State already has. He mentioned a tax credit also for companies that relocate jobs from overseas (I think Obama had a similar idea?) Again, while the IEDC doesn't have a credit specific to that, we already have credits we can give companies to relocate back home. It's REDUNDANT. My biggest disappointment is he made no mention of his recently announced idea to create a midwest econ dev cooperative (which I love) - so I can't factor that into his grade. Grade: F
Regarding international trade, again like Pence, he wants to increase exports. Gregg says he'll accomplish this by creating a new office at IEDC devoted to international strategic exports. He was very vague on this, but I imagine this might involve expanding our already-existing international office. He also wants to fight unfair trade practices abroad. While I applaud that sentiment, that seems like a federal issue. The US can't get China to change, how in the world is Indiana? Finally, he wants to create a 'heritage to home' program essentially turning foreign students into ambassadors for the state. I suppose the idea being he wants all this foreign talent to earn degrees here, then leave, and spread the word about Indiana in India, China....I would rather the focus be on keeping them HERE. Grade: D-
Unlike Sue's speech (actually the two were very different deliveries, Sue's was polished and professional and Gregg's was very off the cuff and folksy to the point of being obnoxious), Gregg kept preaching to the crowd (of mostly local econ dev officials) that he wants the State to better engage the localities on how to do econ dev. He gave no specifics and I mostly thought he was just trying to push his populist preaching, but I DO wish the State were more collaborative with local officials. So, I'll grade that a C.
He ended on education. His plan to cut costs is to look at our schools and ask the question, 'is that building needed?' 'Is that program redundant with this program?' Again...fluff. He wants to give a tax credit or other incentive to keep kids in Indiana after graduation (which to me seems counter to his plan for a foreign ambassador program). Perhaps his biggest difference with Pence is that he seemed largely resigned to the fact that kids take more than 4 years to graduate these days - it's the new normal. As such, he has no plans to incentivize on-time graduation. Grade: C-
Overall, while funny, his speech was a lot like his campaign: lacking a clear direction or focus and overly folksy. He actually made a point of not asking for anyone's vote, which I found odd to say the least. Another oddity was that (and yes, I was keeping track), he not only said "IEDC operates good (folksy grammar)" but he also credited Mitch Daniels with 4 things: Indiana Buy-IN program, BMV makeover, strategic overseas focus, and community college focus. Gregg kept his best econ dev idea off the table for this group and largely either has a copy of the Pence campaign or imop has some really uninformed ideas. So, his grade is a D.
So, it's Pence/Sue by a nose - but certainly nothing to write home about.
Saturday, August 25, 2012
Dangerous Precedent: Patenting Cool
Apple vs. Samsung proves that we don't have anywhere close to a free market economy. We have an economy that has a lot of the negative elements of one: greed and corruption, and an economy that has taken away the ability to have the positive elements: namely, competition.
When you can patent a look, a feel, a size dimension... it erodes competition. You are eliminating the rights of companies to learn and imitate, which in reality is a much more powerful force than to innovate. Innovations are a once in a generation find most of the time. And the catalyst for them are usually not monetary gain - but passion. Jobs and Wozniak innovated because they were passionate. Imitation allows companies to learn from each other, and to pass that learning on the customers in the form of lower prices. Imitation is not just a sufficient condition for competition, it is a necessary one. When the system takes even the most basic form of imitation away from companies, it takes away the positive power of markets.
If you own Apple stock, you should be happy, but if you own stock in the American dream, you should be very afraid.
When you can patent a look, a feel, a size dimension... it erodes competition. You are eliminating the rights of companies to learn and imitate, which in reality is a much more powerful force than to innovate. Innovations are a once in a generation find most of the time. And the catalyst for them are usually not monetary gain - but passion. Jobs and Wozniak innovated because they were passionate. Imitation allows companies to learn from each other, and to pass that learning on the customers in the form of lower prices. Imitation is not just a sufficient condition for competition, it is a necessary one. When the system takes even the most basic form of imitation away from companies, it takes away the positive power of markets.
If you own Apple stock, you should be happy, but if you own stock in the American dream, you should be very afraid.
Thursday, August 2, 2012
Reason over Vitriol
http://www.dailyrepublic.com/opinion/localopinioncolumnists/cant-get-worked-up-over-chick-fil-a/
http://www.chow.com/food-news/121994/chick-fil-a-is-conservative-so-are-a-lot-of-other-restaurants/
http://money.msn.com/politics/post.aspx?post=5546973f-da8f-41e5-b87d-d35257efa6ea
If we truly believe that business institutions are not 'people', then we shouldn't be attacking them for their leader's beliefs. And if you do believe businesses should be treated like coherent organisms, why stab the heart if it's the head that hurts.
If they break the law or there is evidence of systematic actual job discrimination or customer discrimination / abuse, then that's a different story. But what we have here is a misdirected attack on an independently operated chain.
And as for the whole Chick-fil-a supports killings gays argument, which seems to be the strongest argument for all the hateful words on this issue, it again is misdirected and has so many degrees of separation that it's nonsensical.
Chick-fil-a leaders decide to provide some profit to a separate non-profit arm WinShape. WinShape then takes some of its money and donates to the Family Research Council. FRC then takes some of its money and lobbies the US congress not to denounce Uganda's 'kill the gay' bill - no money is actually directly supporting Uganda's bill - it's being used to not support US denouncement of the bill. If you even believe that's what the FRC's goal was in the first place....
That is a lot farther and a lot different than "Chick-fil-a supports killing gays."
http://www.chow.com/food-news/121994/chick-fil-a-is-conservative-so-are-a-lot-of-other-restaurants/
http://money.msn.com/politics/post.aspx?post=5546973f-da8f-41e5-b87d-d35257efa6ea
If we truly believe that business institutions are not 'people', then we shouldn't be attacking them for their leader's beliefs. And if you do believe businesses should be treated like coherent organisms, why stab the heart if it's the head that hurts.
If they break the law or there is evidence of systematic actual job discrimination or customer discrimination / abuse, then that's a different story. But what we have here is a misdirected attack on an independently operated chain.
And as for the whole Chick-fil-a supports killings gays argument, which seems to be the strongest argument for all the hateful words on this issue, it again is misdirected and has so many degrees of separation that it's nonsensical.
Chick-fil-a leaders decide to provide some profit to a separate non-profit arm WinShape. WinShape then takes some of its money and donates to the Family Research Council. FRC then takes some of its money and lobbies the US congress not to denounce Uganda's 'kill the gay' bill - no money is actually directly supporting Uganda's bill - it's being used to not support US denouncement of the bill. If you even believe that's what the FRC's goal was in the first place....
That is a lot farther and a lot different than "Chick-fil-a supports killing gays."
Friday, July 20, 2012
Privatizing Profits and Socializing Losses
This phrase has become all-to-familiar post-financial crisis with bankers receiving government bailouts and allowed to continue their abhorrent bonus structures and other practices unchecked.
But, if you think about it, this problem is pervasive in our modern economy, even absent government intervention.
Textbook economics assumes perfect competition. Students are often told, "well, nothing is ever truly perfectly competitive, but capitalism tends towards that." It's often stated as a truism, even though evidence suggests that our real-life capitalism whether due to some combination of economics of scale, cronyism, information and power asymmetries, etc actually tends toward oligopoly. Oligopolies have some significant degree of price manipulating power and can actually take losses for years and still not be forced to exit a market. In oligopolistic economies, price is usually not the factor that businesses in an industry compete on. Rather, they usually compete over product differentiation and advertising in general. (A nice example here)
The point is, if an industry or even just an individual firm in that industry is hit by a significant loss (negative profit, say due to a financial crisis, or whatever), oligopolistic firms need not cut their prices in the face of low demand - they can simply cheapen their product, or tack on hidden fees, etc (all the while marketing the fact that their products are new and improved and inexpensive). The result is that the losses that should at least partially be born by the industry, are actually largely passed on to the masses (the consumers) who are duped (via asymmetric information). IE, losses are socialized. In the opposite case, due to their market power inherent in their structure, during 'good times', oligopolies can reap huge private profits.
A more obvious way in which losses are socialized is that poor decisions (and by poor, I mean fraudulent in most cases) by the institutional management in a firm creates costs, but those costs are often passed on not via punishments to the bad decision maker but to the employees in the form of pink slips. Employment in financial and insurance services has fallen 7% from its peak in 2006 - about 400,000 employees.
But, if you think about it, this problem is pervasive in our modern economy, even absent government intervention.
Textbook economics assumes perfect competition. Students are often told, "well, nothing is ever truly perfectly competitive, but capitalism tends towards that." It's often stated as a truism, even though evidence suggests that our real-life capitalism whether due to some combination of economics of scale, cronyism, information and power asymmetries, etc actually tends toward oligopoly. Oligopolies have some significant degree of price manipulating power and can actually take losses for years and still not be forced to exit a market. In oligopolistic economies, price is usually not the factor that businesses in an industry compete on. Rather, they usually compete over product differentiation and advertising in general. (A nice example here)
The point is, if an industry or even just an individual firm in that industry is hit by a significant loss (negative profit, say due to a financial crisis, or whatever), oligopolistic firms need not cut their prices in the face of low demand - they can simply cheapen their product, or tack on hidden fees, etc (all the while marketing the fact that their products are new and improved and inexpensive). The result is that the losses that should at least partially be born by the industry, are actually largely passed on to the masses (the consumers) who are duped (via asymmetric information). IE, losses are socialized. In the opposite case, due to their market power inherent in their structure, during 'good times', oligopolies can reap huge private profits.
A more obvious way in which losses are socialized is that poor decisions (and by poor, I mean fraudulent in most cases) by the institutional management in a firm creates costs, but those costs are often passed on not via punishments to the bad decision maker but to the employees in the form of pink slips. Employment in financial and insurance services has fallen 7% from its peak in 2006 - about 400,000 employees.
Tuesday, July 17, 2012
Bernanke: Misguided, Egomaniac or Weakling?
He's definitely got to be one of the three.
Bernanke the misguided:
Maybe he truly believes the words that come out of his mouth in these hearing - that the Fed is 'ready to act' as if it has anything it can do at all. What we've learned is that interest rates matter very little in these kinds of deep financial recessions, and even if they did, the Fed has already pushed even certain mid/long-term rates to record lows. Is it possible that Bernanke wants to believe that he can help and truly is just misguided. Perhaps, but I think the probability that he could be duped this easily is low.
Bernanke with the big ego:
Maybe he's fully aware that the Fed's actions are likely to do little to stimulate the economy but he wants to come off to Congress and the American people as someone with a lot of power. He wants to continue living in a fantasy where everyone hangs on the Fed chair's every word as if at this point it really means anything. I don't know the man personally, but again, I have a hard time seeing Bernanke being Mankiw-like in this way.
Bernanke the weakling:
At this stage in the history of economic policy, Bernanke has had opportunities to really take it congress, to really express what I must imagine is his and certainly the average Joe's frustration with the deadlock, vitriol, and general dysfunction that defines our legislative branch. He could talk about how the fiscal dangers are not of 'running out of money' but of failure of the public sector to invest in our future or to help the private sector rebound - leaving employment and with it tax revenues fairly stagnant. But instead he talks in low tones about 'fiscal cliffs' - he suggests no innovative legislative actions beyond maintaining the status quo (not letting tax cuts expire, and not reducing government-driven demand beyond current levels). In other words, Bernanke the weakling knows the only potential solution, if there is one, lies with the legislative and executive branches, but he is too scared to push the point. This sounds like an academic economist - someone who is good at numbers but not good at message. Could this be the real Bernanke legacy?
Bernanke's response:
I don't know if it's his 'job', but it seems like the right thing to do for the country.
Bernanke the misguided:
Maybe he truly believes the words that come out of his mouth in these hearing - that the Fed is 'ready to act' as if it has anything it can do at all. What we've learned is that interest rates matter very little in these kinds of deep financial recessions, and even if they did, the Fed has already pushed even certain mid/long-term rates to record lows. Is it possible that Bernanke wants to believe that he can help and truly is just misguided. Perhaps, but I think the probability that he could be duped this easily is low.
Bernanke with the big ego:
Maybe he's fully aware that the Fed's actions are likely to do little to stimulate the economy but he wants to come off to Congress and the American people as someone with a lot of power. He wants to continue living in a fantasy where everyone hangs on the Fed chair's every word as if at this point it really means anything. I don't know the man personally, but again, I have a hard time seeing Bernanke being Mankiw-like in this way.
Bernanke the weakling:
At this stage in the history of economic policy, Bernanke has had opportunities to really take it congress, to really express what I must imagine is his and certainly the average Joe's frustration with the deadlock, vitriol, and general dysfunction that defines our legislative branch. He could talk about how the fiscal dangers are not of 'running out of money' but of failure of the public sector to invest in our future or to help the private sector rebound - leaving employment and with it tax revenues fairly stagnant. But instead he talks in low tones about 'fiscal cliffs' - he suggests no innovative legislative actions beyond maintaining the status quo (not letting tax cuts expire, and not reducing government-driven demand beyond current levels). In other words, Bernanke the weakling knows the only potential solution, if there is one, lies with the legislative and executive branches, but he is too scared to push the point. This sounds like an academic economist - someone who is good at numbers but not good at message. Could this be the real Bernanke legacy?
Bernanke's response:
I've been assigned to focus on maximum employment and price stability, not to hold threats over Congress’ head. Congress is in charge here, not the Federal Reserve.
I don't know if it's his 'job', but it seems like the right thing to do for the country.
Subscribe to:
Posts (Atom)