The presidential campaign is both very boring and a waste of attention. Obama’s minions (to include the Boston Globe of course) would accuse Romney of being Jack the Ripper and the captain of the Exxon Valdez if they thought that such accusations would deflect public attention from the unemployment rate and retail sales figures. I don’t really fell bad for Romney. Does anybody doubt that Romney would be doing the same thing if the shoe was on the other foot? Meanwhile, the public aspects of the Romney campaign are in state of semi-hibernation as the campaign saves, money and candidate energy for when people are more focused on the election. On the one hand it seems like a reasonable strategy. No otherwise persuadable person is going to care in November what was on the Bain stationary while Romney was on leave running the Olympics. But the Bain story isn’t what matters. Bain is just a set up. Obama’s real campaign theme is going to be Mediscare. The Bain stuff is just to create the impression (however vague) of Romney as a greedy uncaring rich guy so they can terrify the public Romney is going to send the what is left of Greatest Generation and their Baby Boomer children to the veterinarian if they should get sick. The more people have a working understanding of Romney’s premium support Medicare plan, the tougher it will be for an Obama Mediscare campaign to work. The problem is that explaining premium support Medicare would take a major investment of time and effort. In the shot-term, it seems a lot easier to talk about how the latest Bureau of Labor Statistics report shows that Obama’s socialism of European Big Government has failed. Maybe Romney will be able to talk his way out of Obama’s Mediscare attacks even if the persuadable public knows little or nothing about Romney Medicare plan other than what Obama tells them. but I doubt Romney is putting himself in the best position to win on this issue if present economic conditions persist and Obama’s job approval stays in the 46-48% range.
On to the summer reading. I’ve been going through A Monetary History of the United States by Milton Friedman and Anna Schwartz. I think Chapter 7 and excerpts from Chapters 8 and 9 should be required reading for college students taking a survey course on US History in the 1900s. that isn’t because I necessarily totally buy into the Friedman ans Schwartz explanation for why the slowdown of 1929 turned into a Great Depression rather than a sharp recession. It isn’t because I think the book forms some kind of infallible guide to policy going forward. What the book does is it helps the reader think of large, and sudden moves in the economy in terms of monetary and banking policy and helps correct for narratives of economic events that tend to overwhelmingly focus on questions of taxation, spending and labor regulation. Reading Monetary History and then reading the campaign speeches of Hoover and FDR (and also FDR’s famous First Inaugural) gives a sense of how much of our public discussion of historical events is missing. A focus on monetary history helps undermine a lot of the coalitional narratives that we have inherited. It doesn’t exactly explode them. FDR’s banking holiday and deposit insurance were really important in stabilizing the banking system. It is just that the NRA, the AAA, and pump priming become a much smaller part of the story. The same hold true for the Reagan years. If you were trying to tell the story of the course of the economy in Reagan’s first term, do you start with the Kemp-Roth tax cut or Reagan’s relationship with Federal Reserve Chairman Paul Volker?
July 16th, 2012 | 7:10 pm
In response to your question, Would Romney do the same thing if he were in Obama’s shoes. I will answer for him “NO”. Romney strikes me as an honest man and an honorable one. Obama we know to be a liar.
Michael Parrino, MD
July 16th, 2012 | 7:29 pm
If you catch Santorum in a private moment, I suspect he would disagree with you and bring up Romney’s record of soliciting earmarks and then painting others as earmarking sellouts.
July 16th, 2012 | 7:40 pm
Ouch. I was a Santorum supporter and am only lukewarm about Romney. I classify myself as an ABO voter – Anyone But Obama. I do not recall the exchange of charges you refer to, but do not doubt you. It seems to be the American way to solicit earmarks, but only members of Congress can put them in the legislation, so both charges can be true. I know that Santorum was a team player in the Senate, hence his disastrous decision to endorse and support Arlen Specter.
July 16th, 2012 | 7:49 pm
Michael, both charges are true in the sense that Romney’s name appears on Bain stationary post-1999 is true, it the implications (that Santorum was somehow a sellout for using earmarks, or that Romney had a hand in whatever post-1999 decison that Obama wants to harp on) are what is deeply misleading when more of the context is added in. The whole “might be a felon” is worse.
Or put it this way, if Obama (while formally on leave) was still listed as a senior officer of an organization that was doing X sociialist activity, wouldn’t the Romney team use it?
July 16th, 2012 | 8:09 pm
True, true, and too true. Also (Heh) I’d help fund the anti-Obama ad. I really feel that Obama is a threat to the Constitution.
I have a brother who is an attorney and an agnostic. He was indifferent to Clinton but called Obama evil after Obama destroyed contract law in the GM settlement. That was the first moral judgement that I had heard my brother make since he returned from Vietnam in 1972. He is a contract lawyer and is best described as a phlegmatic Stoic. You have to be really bad to get his juices flowing.
July 16th, 2012 | 9:14 pm
Anything that Romney says for the next three and a half months that isn’t about one of these three topics is a waste of breath:
1. The federal budget deficit
2. The federal budget deficit
3. The federal budget deficit
July 17th, 2012 | 1:33 am
Wasn’t it Friedman’s ideology that Alan Greenspan championed throughout his many years shaping market policy, including those with Reagan? And was it not Greenspan who, while testifying before Congress a couple of years ago, threw that same ideology under the bus, sort of?
“I made a mistake…” and “I was partially wrong…” had to be hard words to get out of the mouth that had, until then, brought a reverent silence around the world with a mere utterance about the health of free markets. And he claimed his discipleship had always belonged to Friedman. Is that not true?
And is it not true that that very same ideology convinced Greenspan that not regulating derivatives was somehow a good idea? (Actually, I know this part is true. It’s one of those little things he says he got wrong.)
Thank goodness he “found a flaw in the model” he “perceived as the critical functioning structure that defines how the world works.” Whew! That’s a relief. But he isn’t sure he would have done anything differently. He’s a trouper to the end. Let no world recession or it’s causes stand between a man and his precious life’s work, however flawed; no matter how many millions, rather billions of lives suffered hardship because of it.
July 17th, 2012 | 5:03 am
I agree with all of that. Also congrats on having the smartest summer reading.
“I think Chapter 7 and excerpts from Chapters 8 and 9 should be required reading for college students taking a survey course on US History in the 1900s.”
I agree. I would also make it required reading in any course called/labeled “X-Macroeconomics.”
“What the book does is it helps the reader think of large, and sudden moves in the economy in terms of monetary and banking policy and helps correct for narratives of economic events that tend to overwhelmingly focus on questions of taxation, spending and labor regulation.”
I would disagree here a bit. Broad brush I can concede labor regulation, which is basically contract law.
In the end this contract law is going to be fundamental…that is one thing that happens when the Money Supply contracts is that all the contracts negotiated in with certain material expectations about future supply/demand need to be reworked.
That is a “Depression” can be conceived as an event which causes a chain of contractual breaches. Non-performance leading to non-performance. i.e., I have 2000 in accounts receivable and 800 cash with 1500 in bills. If I don’t get at least 700 of the accounts receivable then I won’t be able to pay my 1500 in bills(accounts receivable for others). If everyone else is similarily situated on accounts receivables then what you are really looking at is a chain of breaches, that all really have to do with liquidity, or monetary supply at the micro/firm level, and the monetary supply that Freedman discusses is just this aggregated.
On a personal or subjective level, depression or recession is personal bankrupcy or business failure, what happens when I can’t collect on my accounts receivables, or when my bills outstrip my income, and I am forced into changing my lifestyle or going homeless. A depression or recession is simply this happening to a lot of people all at once.
Alright, now spending by the government is a rather certain and guaranteed account receiveable. In addition to being recession proof AR, In a macro sense it also puts dollars into the economy.
Taxes by the government take money out of the economy…For those of us with a Justice Roberts view of taxation we completly agree with Friedman about raising interest rates.
Albeit here is where it gets tricky(If you persit in being an idiot)… a higher interest rate on gov. bonds actually puts more dollars into the system… that is a higher interest rate on treasury bonds is actually gov. spending.
This is because the government acts Verticaly in changing the money supply. If some dollar denominated debt or credit is not government spending or taxation(In the Roberts sense, or broader) it is simply Horizontal, that is an income adjustment.
From a slightly philosophical/broad enough view of taxation and spending, taxation and spending end up being Vertical adjustments to money supply.
That is the “zero-bound” is in some sense the point of no-taxation. And really almost every policy in economics is based around a sort of “tax”, or a monetary incentive/cost/nudge.
So it is very important to realize that a higher U.S. treasury bond rate is gov spending… i.e. a vertical increase in the money supply… while the Fed Funds rate is more or less a tax… that is when it was 6.5% this was the amount banks were taxed/charged to lend money above and beyond excess reserves. Now the Fed Funds rate is near 1% so there is less the Fed can do to reduce “taxes” (thus the zero-bound question).
So basically in a sort of non-partisan Macro-economics: Taxing by the fed gov. takes money out of your pocket, and out of the economy as a whole. Spending by the fed gov. puts money into your pocket, and into the economy as a whole. And a broad view of just what is spending and just what is taxation taking into account the Federal Government’s monetary sovereignty, also covers monetary policy.
July 17th, 2012 | 7:23 am
Some summer reading is clearly more profitable than other summer reading.
John, say it again; where does the federal government get the money it is going to put in my pocket? When it takes our money, how much of it gets back to the pocket it came out of? There is a whole lot of diversion of funds in the transaction. Isn’t the lesson (as if any had been needed) of the Stimulus Bill of 2009?
The Bain Capital story is a wonderful and horrible example of how little the American public understands economics. It seems like it could a simple positive story for Romney; he ran a company that took businesses that were sinking and tried not just to keep them afloat, but to make them sail well. There is profit in that. There is more profit in that than in salvage, which is what happens when the company sinks despite best efforts.
Couldn’t the Romney campaign paint the Bain story in terms of recycling? Most Americans think of recycling as a noble effort. Or what about the image of a car that breaks down. Is it better to leave it rusting in the driveway? Shall we sell it for scrap? What if we sell it cheap to a mechanic who can make it run. If he sells it and makes money doing so, do we condemn him for his profit?
July 17th, 2012 | 7:34 am
Daniel, Friedman’s opinions on optimal policy evolved. I think the value comes more from thinking through the problems.
Kate, l’m now reading a Stephen king novel so…
July 17th, 2012 | 7:54 am
Kate: Honestly, I think that at this point, if Mitt tried to explain Bain along those lines (lines that are perfectly valid and accurate, of course), he’d be spun as being more of a “house flipper” type, something that folks don’t have much esteem for right now, for better or worse.
July 17th, 2012 | 8:47 am
I am related to a set of female house flippers. They buy the worst house possible in a good neighborhood and make it a good house. They work hard.
Do it in an ad campaign and make it visual.
The American people are sold on Marxism. Even young conservatives I know will say that communism is the inevitable end of mankind and can only be slowed, never stopped. Isn’t that awful? What a defeat for humanity. There must be a competing and compelling narrative in favor of liberty and self-government or that is a self-fulfilling prophecy.
July 17th, 2012 | 8:48 am
Of course Romney’s ‘better’ than Barry,and he would certainly improve the American economy and not destroy it for ideological reasons. But, Mitt has a record and he is a flip-flopper, and who can say what he’ll reallly do? Maybe he won’t work to repeal Obamacommiecare, or maybe he’ll do a ‘no child left behind?’ So he’s probaby only marginallly better than Barry on most issues.
As an independent-republican it’s not likely that I’ll vote for him. unless I think Barry will succeed in his second term. And, even then, as horrific as revolution is, perhaps the nation would be much better off by restoring the founding principles by force of arms. We’re way past due washing that tree of which Jefferson spoke.
I’ve been inquiring among my overweight and slightly stupid Pentecostal and Evangelical friends regarding their willlilngness to stand with the Catholics on the question of religious freedom. The vote is unanimous in favor of supporting the Papists.
I’ma thinkin’ of attending the “Hollow Rock” camp meeting down on Yellow Creek. It’s among the nation’s oldest camp meetings. I need a little churchin’ up.
Martha downloaded Daniel Silva’s new book on kindle last night, our forty-first anniversarry. She’s a regular techie!
July 17th, 2012 | 10:18 am
Kate: That doesn’t matter one bit. Folks are still scarred from the housing bubble, and the Dems can easier demonize Mitt using the house flipper/speculator image than he can use it to explain himself. The time for explaining is long past. If Mitt’s talking about his background, he’s going backwards. He needs to talk about nothing but how horrible Obama is, and the deficit is #1 on that front for most Americans who are persuadable.
July 17th, 2012 | 11:24 am
I value the Constitution, but remarks like Mr. Cheeks quotation of Jefferson’s willingness to refresh the Revolution with the blood of patriots disturb me. The last time we tried that in the South it cost us 25% of the white male population and in terms of today’s national population the equivalent of over 7,000,000 dead in the nation at large. Let’s settle it with the ballot. Anyone on the Right or Left who wants to settle it by arms is naive or an imbecile.
July 17th, 2012 | 11:36 am
Were it only that Greenspan’s views, and those of Larry Summers, Tim Geithner, Robert Rubin, on regulatory policy had changed prior to their late 90s’ testimony before Congress, where they wrongly advised against allowing Brooksley Borne to do her job in regulating that new invention of greed called derivatives.
Kate, Romney cannot proudly make the claims about the noble effects on businesses, saving them to continue operating and providing employment, supporting local economies…because it just isn’t true. And were he to make too much of his work at Bain, he would invite all the more scutiny of what effects were actually realized.
Had it been that he only took failing companies and turned them into profitable companies, no one could or should argue over Bain. But Bain, like all corporate raiders (that’s all Bain is) let all of the hardships involved in their schemes with companies, whether failing or viable, fall upon employees. Employees lost jobs, took pay cuts, lost benefits. Bain capitalized on all of this, and only this. Perhaps you haven’t been “restructured.” It is painful for employees and a windfall for “investors” like Romney, i.e. offshore bank accounts all over the world and a need to withhold tax returns. The only thing Romney was investing in was the schemes.
I believe in capitalism. But laizze faire style capitalism doesn’t work. It corrupts and sends parties down different roads, eventually pitting investor and employer against those they need to produce or serve.
One lesson of the EU problems of today should be that the stimulus of 2009 was a wise investment. Only a federal government could do what was done here in the short time it was. It saved the world economy. A confederation, like that of the EU, is proving to be far inferior to what we have. That’s a great advantage for us. And it would be further to our advantage to see the EU grow closer to our model of federalism. Thank goodness we dropped the Articles of Confederation. Thank goodness Calhoun’s argument of nullification lost in his day. Thank goodness the South didn’t remain a confederation (and I’m glad to be a southerner).
July 17th, 2012 | 12:59 pm
“John, say it again; where does the federal government get the money it is going to put in my pocket?”
That is what is exceptional about the federal government, and what I am trying to say somewhat poorly I suppose about the Monetary system.
“where does the federal government get the money it is going to put in my pocket?” It doesn’t have to get it anywhere, the federal government is in the vertical position. It is the only one who can create money. All money in circulation today was “spent” into existance by the federal government. So one answer might be the congressional debt ceilling. That is why I say that the Money Supply really is an issue of taxation and spending. Taxation takes money out of the system, i.e. shrinks the money supply, and spending puts money into the system, i.e increases the money supply.
In fact anything that isn’t “taxation” or “spending” does not create or destroy money. For the federal gov. Taxes are just a mechanism to destroy money, or shrink the money supply.
Everyone who isn’t the federal government basically operates horizontally with money.
That is what I mean when I say this: “If some dollar denominated debt or credit is not government spending or taxation(In the Roberts sense, or broader) it is simply Horizontal, that is an income adjustment.”
Spending between two people may increase money velocity… but this transaction does not involve spending by the federal gov. It is “horizontal”…that is the money supply is not affected, i.e. there is an income adjustment.
Your question is assuming an income adjustment for the federal government… but if there was an income adjustment for the federal government then the money supply would not increase.
What Friedman is getting at in my opinion (a long time since I actually read it) Is basically that the depression was caused by a lack of money, and exasperated essentially by policies which were more or less “taxes” upon the money supply, i.e. raising interest rates.
i.e. one thing that happened even in 1929 was that the flight to safety actually pushed U.S. treasury bonds down to a very low yield. This is reduced “spending”… but the Fed did not step in with lending (much at all) and to the extent that it did so it did so at rates higher than the Treasury Interest rates. All of this is contractionary.
In the Reagan era, the government spent considerable amounts of money into existance via bond yields… servicing the debt.
July 17th, 2012 | 2:11 pm
Mr. Eason, not all companies will succeed. How can we insist that all companies be successful, can we? Not any more than we can insist that all children be good-looking and of above average intelligence? The bad managers of the companies bought by Bain were responsible for the distress of all the other employees of that company. Or perhaps economic conditions were responsible for the failure of those businesses, or shifts in the marketplace, or an inability to meet rigorous government regulations. Each company has a different story and sometimes that story is of success and sometimes it is of failure. Bain Capital and companies like it invest — INVEST — in companies that are failing. They do what they can to turn the company around and often that requires pain to the employees. However, it is as if an overweight person complains about his doctor putting him on a diet to save his life, or complains about the diet itself. The loss is necessary to save the whole. I don’t see why you think there is more profit in the failure of a business than there is in turning it around. It’s like saying the doctor that demands the diet is trying to kill you. Your demise is more far more likely to be caused by your obesity.
Corruption is human. At least laissez-faire capitalism is honest about itself. Government interventions in the marketplace are just as likely to be corrupt or corrupting — Solyndra, anyone? Government puts a smiley face on its interventions, but those interventions are not always beneficial. Look at what is happening with GM and look into how much the subsidies cost the American taxpayer. If we ignore that investment, GM looks to be doing pretty well. If we put the loss of taxpayer money on the ledger, and that of the private investors who were dispossessed, then GM is wholly a failure and the only excuse for the intervention is to give aid and comfort to the unions involved. Bain Capital, to be profitable to its investors, had a limit to how much it could invest in any given business venture it took on. Thanks to the US taxpayer, government funding is unlimited because profit and loss becomes irrelevant.
Again, my point, Americans know little about economics and especially not the economics of the business world.
Brian, neither man running has any choice but to explain his past. The other guy is going to bring it up as that is good politics.
July 17th, 2012 | 2:15 pm
“But laizze faire style capitalism doesn’t work.”
Well, then it’s a really good thing that our system has absolutely nothing to do with “laizze faire capitalism”, or else we’d be in serious trouble.
(Note: Sarcasm often doesn’t come across well online, so let me clarify that I do in fact mean that our system has nothing to do with laissez-faire. I mean, if you think we have “an economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression”, then you REALLY need to get out more.)
“One lesson of the EU problems of today should be that the stimulus of 2009 was a wise investment. Only a federal government could do what was done here in the short time it was. It saved the world economy”
You’ve got to be kidding, right? I’m missing some satirical intent, right? Please tell me you’re joking.
Note: I know you’re not joking. I just wish I lived in an alternate universe where people didn’t believe stuff like “the stimulus of 2009 was a wise investment.” Or “Communism hasn’t ever failed, it’s just never been tried” (no, I’m not saying you’re one of the nutters who says this). Or other equally nonsensical things.
July 17th, 2012 | 3:13 pm
“…then you really need to get out more.”
Actually, I am out in the real world, working at my own capitalist enterprise. (Currently on rain delay.)
Some of the writing here has gotten a bit over the top and insulting. Are your notions more important than mine? I came to this blog several months ago hoping to learn from a professor whom I admire, though I don’t share his notions much of the time. I do recognise his brilliance and hope to soon again be in his class.
It would be desirable, at least to me, to argue ideas without accusations of being nutty or stupid. I’m neither and don’t assume such of anyone else here. Is a blog worth engaging for the comfort of only like-minded people? Don’t you folks tire of splitting hairs? And how can you assume so strongly that every notion you have is correct? One might conclude, by the strong comments, that some here (and throughout the blogging world) that some of us have never even missed an answer on a test. Lighten up.
I’ll respond to some of the more valid arguments later, after earning a little money from lazy rich people.
July 17th, 2012 | 5:20 pm
Perhaps you are of more value in your capitalist enterprise than you were in the other job?
Here, I just found a useful article on this subject in the WSJ.
July 17th, 2012 | 6:54 pm
Dr. Parrino because your income will be drastically reduced and your religiious liberties rendered non-existent by the regime should Barry gain re-election perhaps you’ll be able to find a position as an apparatchik. You seem very well qualified.
l’d much prefer to be considered an ‘imbecile’ in quoting Jefferson then a man unwilling to risk his life and fortune in the constant struggle for liberty and freedom.
July 17th, 2012 | 7:35 pm
Daniel: Sorry dude, but throwing around nonsense like “laizze faire style capitalism doesn’t work” with regards to the current political and economic situation doesn’t require detailed, thought-out counterarguments. If you think regurgitating bumper-sticker level talking-points qualify as meaningful argument, you can expect to be mocked.
July 17th, 2012 | 9:00 pm
Brian, my mention of laizze faire economics was not to claim it to be in practice here. It was a reference to Milton Friedman, a subject of the Pete’s post and a proponent of laizze faire. And he proved himself wrong time and again.
His notions on monetarism, according to Dr. Thomas Palley, wherein central banks target money supply growth, became en vogue in the 70s’. Central banks briefly adopted the policy in the late 70s’ and early 80s’, “leading to devastating interest rate volatility, prompting central banks to revert to their traditional practice of targeting interest rates.” It took Paul Volcker, not Alan Greenspan or even Ronald Reagan, to cure us of that failed policy. And just in case some don’t know it or don’t care to remember, Volcker was a Carter appointee.
In fact, according to Volcker’s and his son’s book, Volcker went to Carter after he had worked toward a remedy for the devestating effects that interest rates were having on the economy and told Carter that he could solve the crisis quickly, with Carter likely losing the 80 election, or gradually, with Carter perhaps winning a second term. He wanted the President to decide. Carter decided, without hesitation, that it must be done quickly. Few presidents, if any, since, would have put the country ahead of ambition. And please don’t quote me back on that, as it is certainly only my opinion. You won’t change it.
Name one reputable economist who would say that the stimulus was bad for the economy. Of course, I’m referring to the Stimulus Act of 2008 (not 2009) and the TARP of 2009. The contrast between our condition and that of the EU is due to the stimulus and the TARP. Even Republican lawmakers had to reluctantly admit it while in the midst of the crisis.
Better yet, notice the difference in policy between the crash of ’29 and the collapse in ’08. Had he not been shown the effects of Hoover’s hands-off approach to the crash, Bush might well have done much the same. But he had the advantage hind-sight, and a whole lot of qualified economists, to the last one of them, strongly advising that he and Congress act quickly by pumping money into the economy.
And I would be remiss were I not to remind us all that Bush indeed attempted several smaller versions of government stimulus in the early years of his administration. It did put money back into the pockets of taxpayers, but it also created a record debt and had no stimulative effect.
Kate, GM is a great success story. The 2008 stimulus money received by GM had no strings attached. However, the their 2009 bailout money did. Unions did make required concessions. Management was forced to make changes. Millions of jobs were saved, from auto workers to employees at dealerships to tire makers and parts suppliers… The auto industry accounts for by far more jobs than any other industry in the U.S. And best of all, at least for conservatives, the taxpayer is being reimbursed every dime of the investment. GM is ahead in paying the money back. How is any of that bad?
Kate, thanks for the positive outlook. However, I retired from my old job; wasn’t let go. My value at my current enterprise is small, no matter how it’s looked at in comparison to my value to my old employer. Simple corrective practices become exponentially more valuable when projected en masse. And I was fortunate to have played a role in some of that. So do many others who never receive compensation comparable to the worth of their contributions. I can live with that.
Finally, having read the article, I got to the end and realized why Andy Kessler wasn’t making sense. He’s a hedge fund manager. He has no idea, apparently, that the productivity of the U.S. worker is at an all-time high.
Staples didn’t come into the market and drive prices down. They raised prices. Staples has high prices in comparison to mom-and pop stores, big box stores and similar competitors, like Office Max or Office Depot. So no, Staples is not helping to create “millions of new [jobs].”
And no, advances in technology and efficiency do not “always, always create new jobs.” Sometimes, like in the current climate, businesses sit on capitol, estimated at over $100 billion worldwide today. Employers are getting more bang for their buck than ever before and don’t see a need to put much investment back into the employee or production. That’s much more likely the reason for an unemployment rate above 8% than any other. Employers simply see no reason to hire. Why go through the angst when profits are growing without hiring?
And to prove a former hedge fund manager is out of touch, he lists stock brokers as among those we hear about getting laid off. No we don’t. No one cares about stock brokers. They’re bottom feeders like used car salesmen repo men. People cheer when those jobs disappear.
July 18th, 2012 | 11:11 am
Mr. Cheeks: I’m retired so my income is already much reduced. I’m also a retired Colonel in the US Army Reserve, 3 years active, 25 years in the reserves. I spent 3 years in Germany. Do you have any time served in the military? It is easy to impute cowardice to others. I was willing to put my life at risk for my country. Were you? Two of my three brothers also served their country on active duty, one in Vietnam.
July 18th, 2012 | 4:52 pm
There is not much point in having a discussion if you are declaring obduracy, she says with a smile. Additionally, your idea of a reputable economist is much different than mine, clearly so if you dismiss Milton Friedman.
GM is not success story except if you believe their press releases, and, as I said, choose to believe that government investment requires no return or even repayment. It seems to me that’s little comfort to taxpayers who have no choice about the investment. If GM was such a good investment vehicle, why was it going under in the first place? You may like corporate welfare. I find it appalling. People who work have been forced to give money away through taxation to a company that brings them no profit. Why is that wonderful?
“Staples didn’t come into the market and drive prices down. They raised prices. Staples has high prices in comparison to mom-and pop stores, big box stores and similar competitors, like Office Max or Office Depot. So no, Staples is not helping to create “millions of new [jobs].”
Staples offers something, since it is profitable and actually does produce jobs, not just of its own employees, but of its suppliers. I really don’t think you understand how any of this works. What do you read on this topic?
“And no, advances in technology and efficiency do not “always, always create new jobs.” I agree. In fact, robotics and machine production are the wise choice for businesses, since the mechanicals do not need health insurance or pensions or workman’s compensation or any of the benefit guarantees won by unions in businesses (like GM). Folks worry about companies sending manufacturing jobs overseas, but robots and machine production have rendered far more American jobs obsolete and contributed to unemployment. If our government keeps mandating benefits for employees, then employees become too great a burden and ought to be replaced for more efficiency. Efficient production keeps prices down. What jobs are opening in the private sector are skilled positions. Unskilled labor is useful in the service economy; that’s about it.
I don’t think we are going to agree about any of this. Your premises are anti-capitalist and I don’t care what you do for a living. I’m still marveling over a young man who proclaims himself a conservative and insists that communism is the way of the future. He doesn’t know he’s a Marxist
Stockbrokers are actually top-feeders since those on the bottom have nothing to invest and feed them nothing.
July 18th, 2012 | 5:16 pm
Brian [Update:I meant Daniel],sorry being late to get back to you but I was out of town until now.
“my mention of laizze faire economics was not to claim it to be in practice here. It was a reference to Milton Friedman, a subject of the Pete’s post and a proponent of laizze faire. And he proved himself wrong time and again.” To keep in mind what we were talking about, Friedman proposed that the US central bank extend liquidity to banks in the early 1930s and suggested that the central bank slow the growth of the money supply in the late 1970s. Whatever bone you have to pick with Friedman’s ultimate policy preferences, these policy proposals aren’t “laissez faire” anyplace out of North Korea.
“In fact, according to Volcker’s and his son’s book, Volcker went to Carter after he had worked toward a remedy for the devastating effects that interest rates were having on the economy and told Carter that he could solve the crisis quickly, with Carter likely losing the 80 election, or gradually, with Carter perhaps winning a second term. He wanted the President to decide. Carter decided, without hesitation, that it must be done quickly. Few presidents, if any, since, would have put the country ahead of ambition. And please don’t quote me back on that, as it is certainly only my opinion. You won’t change it.”
You might want to look at the movements of the Fed Funds rate and the prime interest rate from May to November of 1980.
http://www.federalreserve.gov/monetarypolicy/files/fomcropa19791006.pdf
http://www.fedprimerate.com/wall_street_journal_prime_rate_history.htm
The evidence is that the Fed cut interest rates sharply just as the general election was heating up. The theory that Volker let up on the inflation busting in the hopes that Carter would squeak through fits the fact much more closely than that fairy tale of “What greater love hath any President than to give up a second term for his fellow man.”
“Of course, I’m referring to the Stimulus Act of 2008 (not 2009) and the TARP of 2009. The contrast between our condition and that of the EU is due to the stimulus and the TARP…”
That’s what I’m talking about. In late 2008, the Federal Reserve loaned out 9 trillion dollars during the financial crisis. This dwarfs TARP and anything else Bush did. Yet we have this mythologizing about how Bush learned from hands off Hoover. That doesn’t mean that monetary policy is the only thing that matters. It does indicate that powerful narratives dealing with political identity and the foundation myths of political coalitions are interfering with our perspective. Not for nothing that Bernanke was an admirer of Friedman and Schwartz (though Schwartz ended up disagreeing with how TARP was structured. )
July 18th, 2012 | 8:04 pm
Dr. Parrino, I’m honorably discharged from the USAF, but I’ve never served in combat. My only experience with ‘enemy’ gunfire occurred in Chicago a few days following the Dallas ‘Tower’ shootings; a ‘copycat’ I was told.
It was you who declared that anyone who considered Jefferson’ sage advice to be an imbecile. As a result of that remark, I believe your political opinions to be puerile, derailed, and ill-considered
July 18th, 2012 | 9:31 pm
Mr. Childs:
I thank you for your service to our country.
I have a copy of Jefferson Writings from The Library of America on my shelf. Jefferson was a great man who made great contributions to our country. He was also very enthusiastic about the French Revolution, so much so that it drove a wedge between him and other great men (Adams and Washington) of our revolution. About a decade later as president he was almost ready to go to war with France at one point. He was kind of naive at first about them, wasn’t he? He also thought initially that the tens of thousands slain by the French revolution were necessary sacrifices. That is a sophomoric (wise fool) or if you prefer foolish thought. He was a lawyer who passed the Revolutionary War as a member of the Continental Congress and as governor of Virginia. I don’t think he was ever a soldier. I don’t think he was a coward. He risked his life by being a revolutionary patriot. I think though, that if he had ever been to a battlefield he would have thought twice before he uttered that line about watering the tree of Liberty with the blood of patriots. On two occasions I helped care for our wounded. Once after a claymore went off in a nightclub (terrorism) and once after some troops accidently detonated a mortar shell. It didn’t look anything like what I have seen in movies. It was a lot bloodier and more unpleasant. It changed their lives forever.
I don’t have anything further to say except to urge all to vote in the coming election.
July 18th, 2012 | 11:53 pm
So much for hoping people might take a more diplomatic approach to debating with fellow citizens who obviously give a damn.
Kate, I’m glad you’re smiling. It’s too bad you seem to believe you’re every opinion is the only one without flaw, so long as a scarce few others on a silly blog come somewhat close to argreement each time you venture one. I thought those on the right and extreme left were the only ones hardened of heart in a wrong-minded kinda way. Please continue to show pity and mercy upon the rest of us. A compassionate conservative I hope you are, though the term seems ever increasingly to be an oxymoron.
You appear to be stating that GM is not repaying the TARP loan. They are, and early. That, by definition, even for conservatives, makes it an investment, absolutely not corporate welfare. (I despise corporate welfare, by the way.) The money which is not being repaid is the bailout money orchestrated by that liberal 43rd (the Shrub).
You happen to be completely ignoring the truth about the GM story. You claim the money is gone. You wonder about how the American people could possibly be happy about their taxpayer money being used that way. Perhaps you should open your windows and let in some light, and stop watching the Faux entertainment channel so much, unless of course, you write for Faux. (Did you hear about all the trouble Rupe and son are getting into for their lying ways? Does Faux report anything on the subject?)
The auto industry affects a greater number of American jobs (aka taxpayers) directly and indirectly than any other industry in this country, bar none. How in the world do you figure these, and the rest of us who share this economy, shouldn’t be happy that GM didn’t shutter it’s doors? Is it just the fact that it wasn’t allowed to happen, so maybe there’s a possibility it really wouldn’t have happened, that allows you to ignore the overwhelming likelihood that it would have happened?
O.K. Name any economist who says that the stimulus or TARP was bad. Let’s dumb it down and find the lowest comon denominator. Pull some nut from Faux if you like. Then defend his notions.
My point about Staples was a response to the article that you suggested. The author fantasized the creation of millions of jobs specifically on the premise that Staples has low prices, so businesses have more money left in their pockets to hire millions of employees. Maybe where your’e from, but not around here. They’re the high price leader. Bad premise in, wrong conclusion out. Logic.
Pete, even Greenspan has publicly stated that it was Volcker’s leadership, not his own, that was of most importance in the 80s. And Volcker told the man who told the story I related. Argue you point with them. I think they’ll prevail, as they were the players.
And yes, Friedman did do as you say. He did it reluctantly, though, knowing his views (on laissez faire style economics) would never carry the day, any day. He was a believer in it. Greenspan liked those same views, and openly advocated going more in that direction. And yes, ultimately he did testify before Congress that his beliefs in a more relaxed regulatory involvement in the markets, as he had learned from his hero Friedman, were indeed wrong, or in some areas of the market, only “partially wrong.”
Kate, bringing this up doesn’t at all make me a Marxist. I’m not. And you have never seen my writing proclaim me to be a conservative; I don’t know from where you imagined that. Nor am I that young. I am retired from one job and have 3 grandchildren. And who said anything about communism being the way of the future?
And the last thing you clearly don’t understand, Kate, is what a bottom feeder is. Maybe folks don’t use the term where you live. A bottom feeder, in the truest definition is an aquatic animal, like a catfish, which eats crap off the bottom of a body of water. In society, a bottom feeder is a person who leeches off others, unable to provide for his own income through honest employment, i.e. a stockbroker or a hedge fund manager, even a banker or a lawyer. You can tell bottom feeders by the skin they have in the game, or lack thereof. When the deal goes sour all the bottom feeders profit just as well, sometimes better, than had the deal panned out. Romney, for example, is a bottom feeder, by the urban definition. Thats’ not capitalism. That’s robber baron economics, and is a corruption of capitalism.
I’d be all for lassez faire economics if the investors, including the affected employees (they make the greatest investment after all), were allowed to mete out appropriate punishment on the unscrupulous. And if you people really want to believe that “corporations are people, too”, then let’s have the death penalty apply to them just as you people enjoy applying it to real people. Can that be done, or that just silly? If it’s silly, then why isn’t it sill to call corporations people? There’s that darn logic getting in the way again. Sorry.
July 19th, 2012 | 12:07 am
http://guardian.co.uk/commentisfree/cif
The legendary Friedman was wrong!, again.
July 19th, 2012 | 6:19 am
@ Daniel, I agree on GM…it was a sort of high-speed technocratic custom contract procedure…just what GM would have looked like under bankrupcy is debateable. It probably would have made the entire state of Michigan fail, in terms of workers comp and unemployment bennefits, Michigan(which is not monetarily sovereign) could not have handled the shock. Potentially the deficit package would have been better if it was larger and directed to the states(it would have been more shovel ready) Under a different stimulus package maybe GM undergoing the normal bankrupcy procedures would have been better. Kate living in Northern Ohio might not understand the fall out if Michigan fails. But certainly I think the way money spreads out, at the very least northern ohio businesses would have been stuck with even more inventory, and this is only good for the region if you own an Odd Lots, or maybe if you are an internet entrepreneur grinding out E-bay sales(but even if this means you could pick up the inventory for cheap, it is a bit of a random walk, because everyone else can do the same, and E-bay might get flooded with a supply of the same junk that can’t move because its blue collar customer base is broke).
@Pete, I agree with your conclusion:
“It does indicate that powerful narratives dealing with political identity and the foundation myths of political coalitions are interfering with our perspective.”
On the other hand I think this is misleading: “In late 2008, the Federal Reserve loaned out 9 trillion dollars during the financial crisis.”
It is misleading for a reason that would not escape a bottom feeding victim (a slot machine player). You put $100 in and you pull the lever(hit the button)… you “win” $20 on a $5 bet. You can play thru the $100, and potentially end up getting several hundred button pushes. At the end of the day you bet $5 a hundred times. So maybe you bet a total of $500… Still misleading math. On a transaction in which $100 leads to $400 in winnings the casino can claim 80% payout, even if you just lost $100.
In a similar matter the 9 trillion is basically more like 2.3 trillion. I mean almost a trillion was loaned to Bear Stearns. But this was paid back.
My conceptual understanding of this isn’t perfect, but this $9 trillion for simplification sake actually reduced the money supply, when all is said an done… but by less than 5 billion. These were low interest loans to prevent a chain of contract defaults. Some of these loans were carried for less than a day.
I would say that the very low interest rate charged by the Fed was actually a “tax”…so analytically this decreases the money supply long term (albeit obviously the narrative is Keynesian in so far as in the long run we are all dead… so this did increase the money supply short term(damn you complications!) If the Fed had actually not been paid back…then this would have increased the money supply. But the Fed was paid back with interest… so this decreased the money supply.
The real story is that this is still just a horizontal transaction, that doesn’t impact the money supply.
The “boldest ignorant” thing I can say is that only “taxes” and “spending” by the federal government are vertical additions to the money supply. I do have some good reasons (american legal exceptionalism…if you bring up Canada!) for thinking this, and as it turns out if I know what M3 is I know what the Outstanding public deficit is and vice versa.
So again I challenge you Pete to maintain that questions of taxation, spending do not directly impact the money supply. In point of fact I will have you know that the TT&L program exists to complicate my position. If it did not exist my position would be more materially obvious.
While I am not a respectable economist, it is interesting to see articles like this one in Forbes essentially agreeing with me on what was originally a sort of blog post rant/devils advocate position on NLT.
http://www.forbes.com/sites/johntharvey/2012/07/18/why-you-should-love-government-deficits/
What is also interesting, is that the critique of the Bush tax cuts sort of belong to Friedman. Appart from sophistication, what is the difference between the permanent income hypothesis, and this statement by Daniel: “It did put money back into the pockets of taxpayers, but it also created a record debt and had no stimulative effect.”
I tend to believe it did have a stimulative effect, if only because it increased the money supply. Friedman who believes in a ballanced budget would say that the stimulative effect is muted… On the other hand if the tax cuts(spending) didn’t end up in the pockets of those who would use it to soak up inventory, then it really did not stimulate the economy, on a subjective level for middle class entrepreneurs like Daniel.
On the other hand arguably team Bush did sort of target its spending(tax cuts and incentives) to direct consumers into education and housing.
July 19th, 2012 | 6:36 am
We judge people when we assume they are motivated by our worst inclinations. I disagree with your views on economics. You make a personal attack by assuming I am making a personal attack. I thought we were disagreeing. Maybe I am at fault for not doing all necessary research to prove my points and assuming whoever I mentioned, say Laffer or Sowell or any other economists who I’ve read in the WSJ or Forbes or National Review or even the Economist, or elsewhere and certainly economists I know who are conservative, would not meet your standards. (I can’t follow your U.K. Guardian link about Friedman.) Current articles on GM are all about the disaster in their European operations and I neglected to save the links to all I’ve read on the topic over the last couple of years.
Faux?
A business is never too big to fail. The best deal for employees of a big company is when it is broken up and sold. The pieces of the corporation that are profitable and useful can continue operations. The parts that are failing or flailing can be sort of sold for parts. Instead of thinking of a corporation like one body, like and animal body, think of it like a hosta or some other plant that is united at root. You can break it up and remove the dead and diseased parts, treat the healthier sections and the plant still has life because it wants to live. We cannot break you up in the same way.
Some economists I have read say that the real problem with GM was about the pensions. The federal government had guaranteed the pensions of all of the union employees and no one was going to want to accept that liability with the purchase of the parts of the corporation. Where would that liability go? What’s cheaper, a bailout or pension liability for the union employees of GM? Hence, the problem is in the federal regulations regarding pensions.
You missed my point about Staples which is that is so successful and competitors have to keep their prices lower than Staples to compete. Hence, prices might be lower elsewhere in your town (not mine) but that is as a response to Staples, not despite it. Like Walmart, Staples is setting a new standard for pricing. In my town, we go to the remaining Mom & Pop business supply store because we like them (our kids were in Little League together) and they offer service. For those things, we suffer their slightly higher prices.
Greenspan can afford to be generous.
When did I say you are a Marxist? I mentioned a young man I met recently who might have been paraphrasing Karl Marx and didn’t know it. He said communism is the way of the future. I never said you did. My point was that people often don’t know the source of their political principles. Some 10 years ago, I knew John Locke and Adam Smith existed, but hadn’t read them and didn’t know how sympathetic I was to what they wrote. Read Marx. You might like him.
I know what a bottom feeder is and that’s not what Romney is. It is not what a stock broker is, either. Again, read Marx. You’ll find him sympathetic.
Your last I don’t get at all. Corporations are made of people. Buildings and/or machines don’t need legal protections. People do. People in corporations need legal protections because you and people who think like you want to kill them. That’s ugly, but I don’t see how it is logic.
July 19th, 2012 | 8:57 am
Dr. Parrino, you keep moving the target.
My politics is more closely aligned to Jefferson’s cousin, John Randolph, then Jefferson, and no, I don’t agree with every position he embraced. He was, however, correct about destroying tyrants and tyranny if one expected to maintain or restore the principles of republicanism.
No one is saying war/revolution isn’t horrific. I believe I mentioned that. However, are we to meekily and mildly allow the rise of consolidated regime intent on destroying liberty because dismembered bodies and terrible wounds should be avoided at all costs? Hell, it’s happening to our soldiers in Afghanistan NOW, and I don’t see you shying away from their suffering as a result of foreign adventurism. Yet, you won’t stand with Jefferson?
July 19th, 2012 | 10:10 am
No, Mr Cheeks, I am not moving the target. I am responding to ad hominem attacks from you. It would appear that I am wasting my breath and time. I am not going to continue to post responses to you. Eleven years ago I volunteered to re-enter my country’s service. They wisely refused. I am overweight and hypertensive. Willingness is no substitute for fitness. And no, Thomas Jefferson is not my favorite Founding Father. I prefer Adams, Washington, and Madison. Madison, who was the author of much of the Constitution, is my favorite. Madison, who was another non-soldier by my recollection, got a personal taste of how badly wars can go when he had to flee Washington, D.C. before the British burned it. I repeat myself when I say that anyone who urges a new civil war does not know how it will end or who the winners will be. I will vote this fall to keep the Constitution and the government we have and I will vote for anyone but Obama. I think Obama is a not very bright demagogue and the greatest threat to the Republic ever elected.
July 19th, 2012 | 10:45 am
John, I agree with you that the Stimulus and TARP could have and should have been better aimed. Both were messy, but necessary, but shouldn’t have been necessarily messy, except maybe in the argument that our legislative system doesn’t work as fast as some other forms of governance. Compared with those others in every other difference, I’m glad we have our’s. Besides, our’s did work pretty well.
Kate, I didn’t read your point about Staples. It wasn’t in what I read, only an article which didn’t make your point, evidently. I responded to Andy Kessler’s point about Staples. (I looked back at your posts and didn’t find any mention of even the word Staples until later. Correct me if I’m wrong.)
Thanks for clearing up the matter of the young, Marxist communist who hadn’t been mentioned before.
The mention of corporate personhood was a reference to the Supreme Court’s decision in Citizens United. It has nothing to do with corporations actually being made up of individual people, as those individuals cannot possibly individually direct the corporation’s political spending, except those individuals at the top. But that’s a different topic.
Robert, Jefferson’s notions on healthy revolution have absolutely nothing to do with why my son went to Afghanistan. Jefferson believed that the people of a nation should hold their government to account, and not be afraid to act up when government needed correction. He was wrong about what is a healthy way to accomplish this. Holding our government to account is not why we’re in Afghanistan, now is it?
July 19th, 2012 | 7:58 pm
Daniel, I’m not sure what your point is? I don’t have the strength to repeat my position on America’s response to 911. Suffice it to say it has nothing to do with sending soldiers to drive down IUD infested dirt roads in strange countries or ‘taking democracy’ to said countries.
Dr. I also don’t have the strength to go into my critique of that little wanker, Madison. You forget, sir, that the gentlemen of the convention were instructed by their state legislatures to alter and tweak the Articles of Confederation, not lay the ground work for the elite consolidators and monied interests. And, Mr. Madison, that draft dodger, was the leader of that clique of opportunists.
Like the Jews of Samuel’s day, they had to have a king, even when God told them what will happen.
July 19th, 2012 | 8:30 pm
Daniel, “even Greenspan has publicly stated that it was Volcker’s leadership, not his own, that was of most importance in the 80s.” Pointless in this context and not in dispute. Now whether Volcker’s policy was optimal (Friedman seemed to think – as I remember – that Volcker raised rates higher than was optimal) and whether he played timing games with interest rates in 1980 is a different question. Which brings us to…
“And Volcker told the man who told the story I related. Argue you point with them. I think they’ll prevail, as they were the players.” Who cares who anyone thinks “prevails?” Theodore Sorenson went to his grave lying about what happened in the Excom meetings during the Cuban Missile Crisis – and that was despite audio tape evidence that contradicted his story! What I can see is that, in a year with double digit inflation (1980) the Fed funds rate and the prime interest date were both lower in August 1980 than the previous August when Volcker was first appointed as Fed Chairman. You can track the U that those two interest rates make from the late Spring onward and they both stay well below their early-Spring 1980 peaks until after the November election when both reached new peaks. I did include one wrong link http://research.stlouisfed.org/fred2/data/FEDFUNDS.txt
“And yes, Friedman did do as you say. He did it reluctantly, though, knowing his views (on laissez faire style economics) would never carry the day, any day.” Substitute Friedman and “laissez faire style economics” and with the name of the incumbent president and some other label (and the president before that and…) and you could say the same thing. Pretty much every political actor ends up making suggestions for the institutions that exist rather than from the position of their optimal policy preferences in a different institutional context. It is a non sequitur when discussing Friedman’s policy suggestions for the Great Depression and the Sorta Great Inflation. They either pointed to better policy in the contexts of the then-existing institutions or they didn’t. If you have a bone to pick with Friedman about the regulation of derivatives, or abortion, or drugs, or whatever, I don’t really see it as my business.
July 21st, 2012 | 12:46 pm
When Obama contrived to sell Chrysler to Fiat, how was that not a form.of “outsourcing” the profits from that company?
As Newark Mayor Booker pointed out, the major public employee pension funds of the US gave been making money from Bain Capital for years. They were not bothered.by any of Bains business practices, and the proceeds are distributed to public employees all over tne country. That is easy to understand. Romney should point that out every chance he gets.
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