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Krugman's Columns
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Jeremy H. Donovan
2010-08-24 06:00:01 UTC
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Paul Krugman is a NY Times Op-Ed columnist and winner of the 2008
Nobel Memorial Prize in Economic Science. His latest book is “The
Return of Depression Economics and the Crisis of 2008."

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Krugman's Columns I

Now That’s Rich
By PAUL KRUGMAN

We need to pinch pennies these days. Don’t you know we have a budget
deficit? For months that has been the word from Republicans and
conservative Democrats, who have rejected every suggestion that we do
more to avoid deep cuts in public services and help the ailing
economy.

But these same politicians are eager to cut checks averaging $3
million each to the richest 120,000 people in the country.

What — you haven’t heard about this proposal? Actually, you have: I’m
talking about demands that we make all of the Bush tax cuts, not just
those for the middle class, permanent.

Some background: Back in 2001, when the first set of Bush tax cuts was
rammed through Congress, the legislation was written with a peculiar
provision — namely, that the whole thing would expire, with tax rates
reverting to 2000 levels, on the last day of 2010.

Why the cutoff date? In part, it was used to disguise the fiscal
irresponsibility of the tax cuts: lopping off that last year reduced
the headline cost of the cuts, because such costs are normally
calculated over a 10-year period. It also allowed the Bush
administration to pass the tax cuts using reconciliation — yes, the
same procedure that Republicans denounced when it was used to enact
health reform — while sidestepping rules designed to prevent the use
of that procedure to increase long-run budget deficits.

Obviously, the idea was to go back at a later date and make those tax
cuts permanent. But things didn’t go according to plan. And now the
witching hour is upon us.

So what’s the choice now? The Obama administration wants to preserve
those parts of the original tax cuts that mainly benefit the middle
class — which is an expensive proposition in its own right — but to
let those provisions benefiting only people with very high incomes
expire on schedule. Republicans, with support from some conservative
Democrats, want to keep the whole thing.

And there’s a real chance that Republicans will get what they want.
That’s a demonstration, if anyone needed one, that our political
culture has become not just dysfunctional but deeply corrupt.

What’s at stake here? According to the nonpartisan Tax Policy Center,
making all of the Bush tax cuts permanent, as opposed to following the
Obama proposal, would cost the federal government $680 billion in
revenue over the next 10 years. For the sake of comparison, it took
months of hard negotiations to get Congressional approval for a mere
$26 billion in desperately needed aid to state and local governments.

And where would this $680 billion go? Nearly all of it would go to the
richest 1 percent of Americans, people with incomes of more than
$500,000 a year. But that’s the least of it: the policy center’s
estimates say that the majority of the tax cuts would go to the
richest one-tenth of 1 percent. Take a group of 1,000 randomly
selected Americans, and pick the one with the highest income; he’s
going to get the majority of that group’s tax break. And the average
tax break for those lucky few — the poorest members of the group have
annual incomes of more than $2 million, and the average member makes
more than $7 million a year — would be $3 million over the course of
the next decade.

How can this kind of giveaway be justified at a time when politicians
claim to care about budget deficits? Well, history is repeating
itself. The original campaign for the Bush tax cuts relied on
deception and dishonesty. In fact, my first suspicions that we were
being misled into invading Iraq were based on the resemblance between
the campaign for war and the campaign for tax cuts the previous year.
And sure enough, that same trademark deception and dishonesty is being
deployed on behalf of tax cuts for the wealthiest Americans.

So, for example, we’re told that it’s all about helping small
business; but only a tiny fraction of small-business owners would
receive any tax break at all. And how many small-business owners do
you know making several million a year?

Or we’re told that it’s about helping the economy recover. But it’s
hard to think of a less cost-effective way to help the economy than
giving money to people who already have plenty, and aren’t likely to
spend a windfall.

No, this has nothing to do with sound economic policy. Instead, as I
said, it’s about a dysfunctional and corrupt political culture, in
which Congress won’t take action to revive the economy, pleads poverty
when it comes to protecting the jobs of schoolteachers and
firefighters, but declares cost no object when it comes to sparing the
already wealthy even the slightest financial inconvenience.

So far, the Obama administration is standing firm against this
outrage. Let’s hope that it prevails in its fight. Otherwise, it will
be hard not to lose all faith in America’s future.


Gold Diggers of 2010:



***

Krugman's Columns II

America Goes Dark
By PAUL KRUGMAN

The lights are going out all over America — literally. Colorado
Springs has made headlines with its desperate attempt to save money by
turning off a third of its streetlights, but similar things are either
happening or being contemplated across the nation, from Philadelphia
to Fresno.

Meanwhile, a country that once amazed the world with its visionary
investments in transportation, from the Erie Canal to the Interstate
Highway System, is now in the process of unpaving itself: in a number
of states, local governments are breaking up roads they can no longer
afford to maintain, and returning them to gravel.

And a nation that once prized education — that was among the first to
provide basic schooling to all its children — is now cutting back.
Teachers are being laid off; programs are being canceled; in Hawaii,
the school year itself is being drastically shortened. And all signs
point to even more cuts ahead.

We’re told that we have no choice, that basic government functions —
essential services that have been provided for generations — are no
longer affordable. And it’s true that state and local governments, hit
hard by the recession, are cash-strapped. But they wouldn’t be quite
as cash-strapped if their politicians were willing to consider at
least some tax increases.

And the federal government, which can sell inflation-protected long-
term bonds at an interest rate of only 1.04 percent, isn’t cash-
strapped at all. It could and should be offering aid to local
governments, to protect the future of our infrastructure and our
children.

But Washington is providing only a trickle of help, and even that
grudgingly. We must place priority on reducing the deficit, say
Republicans and “centrist” Democrats. And then, virtually in the next
breath, they declare that we must preserve tax cuts for the very
affluent, at a budget cost of $700 billion over the next decade.

In effect, a large part of our political class is showing its
priorities: given the choice between asking the richest 2 percent or
so of Americans to go back to paying the tax rates they paid during
the Clinton-era boom, or allowing the nation’s foundations to crumble
— literally in the case of roads, figuratively in the case of
education — they’re choosing the latter.

It’s a disastrous choice in both the short run and the long run.

In the short run, those state and local cutbacks are a major drag on
the economy, perpetuating devastatingly high unemployment.

It’s crucial to keep state and local government in mind when you hear
people ranting about runaway government spending under President
Obama. Yes, the federal government is spending more, although not as
much as you might think. But state and local governments are cutting
back. And if you add them together, it turns out that the only big
spending increases have been in safety-net programs like unemployment
insurance, which have soared in cost thanks to the severity of the
slump.

That is, for all the talk of a failed stimulus, if you look at
government spending as a whole you see hardly any stimulus at all. And
with federal spending now trailing off, while big state and local
cutbacks continue, we’re going into reverse.

But isn’t keeping taxes for the affluent low also a form of stimulus?
Not so you’d notice. When we save a schoolteacher’s job, that
unambiguously aids employment; when we give millionaires more money
instead, there’s a good chance that most of that money will just sit
idle.

And what about the economy’s future? Everything we know about economic
growth says that a well-educated population and high-quality
infrastructure are crucial. Emerging nations are making huge efforts
to upgrade their roads, their ports and their schools. Yet in America
we’re going backward.

How did we get to this point? It’s the logical consequence of three
decades of antigovernment rhetoric, rhetoric that has convinced many
voters that a dollar collected in taxes is always a dollar wasted,
that the public sector can’t do anything right.

The antigovernment campaign has always been phrased in terms of
opposition to waste and fraud — to checks sent to welfare queens
driving Cadillacs, to vast armies of bureaucrats uselessly pushing
paper around. But those were myths, of course; there was never
remotely as much waste and fraud as the right claimed. And now that
the campaign has reached fruition, we’re seeing what was actually in
the firing line: services that everyone except the very rich need,
services that government must provide or nobody will, like lighted
streets, drivable roads and decent schooling for the public as a
whole.

So the end result of the long campaign against government is that
we’ve taken a disastrously wrong turn. America is now on the unlit,
unpaved road to nowhere.

***

Krugman's Columns III


Attacking Social Security
By PAUL KRUGMAN

Social Security turned 75 last week. It should have been a joyous
occasion, a time to celebrate a program that has brought dignity and
decency to the lives of older Americans.

But the program is under attack, with some Democrats as well as nearly
all Republicans joining the assault. Rumor has it that President
Obama’s deficit commission may call for deep benefit cuts, in
particular a sharp rise in the retirement age.

Social Security’s attackers claim that they’re concerned about the
program’s financial future. But their math doesn’t add up, and their
hostility isn’t really about dollars and cents. Instead, it’s about
ideology and posturing. And underneath it all is ignorance of or
indifference to the realities of life for many Americans.

About that math: Legally, Social Security has its own, dedicated
funding, via the payroll tax (“FICA” on your pay statement). But it’s
also part of the broader federal budget. This dual accounting means
that there are two ways Social Security could face financial problems.
First, that dedicated funding could prove inadequate, forcing the
program either to cut benefits or to turn to Congress for aid. Second,
Social Security costs could prove unsupportable for the federal budget
as a whole.

But neither of these potential problems is a clear and present danger.
Social Security has been running surpluses for the last quarter-
century, banking those surpluses in a special account, the so-called
trust fund. The program won’t have to turn to Congress for help or cut
benefits until or unless the trust fund is exhausted, which the
program’s actuaries don’t expect to happen until 2037 — and there’s a
significant chance, according to their estimates, that that day will
never come.

Meanwhile, an aging population will eventually (over the course of the
next 20 years) cause the cost of paying Social Security benefits to
rise from its current 4.8 percent of G.D.P. to about 6 percent of
G.D.P. To give you some perspective, that’s a significantly smaller
increase than the rise in defense spending since 2001, which
Washington certainly didn’t consider a crisis, or even a reason to
rethink some of the Bush tax cuts.

So where do claims of crisis come from? To a large extent they rely on
bad-faith accounting. In particular, they rely on an exercise in three-
card monte in which the surpluses Social Security has been running for
a quarter-century don’t count — because hey, the program doesn’t have
any independent existence; it’s just part of the general federal
budget — while future Social Security deficits are unacceptable —
because hey, the program has to stand on its own.

It would be easy to dismiss this bait-and-switch as obvious nonsense,
except for one thing: many influential people — including Alan
Simpson, co-chairman of the president’s deficit commission — are
peddling this nonsense.

And having invented a crisis, what do Social Security’s attackers want
to do? They don’t propose cutting benefits to current retirees;
invariably the plan is, instead, to cut benefits many years in the
future. So think about it this way: In order to avoid the possibility
of future benefit cuts, we must cut future benefits. O.K.

What’s really going on here? Conservatives hate Social Security for
ideological reasons: its success undermines their claim that
government is always the problem, never the solution. But they receive
crucial support from Washington insiders, for whom a declared
willingness to cut Social Security has long served as a badge of
fiscal seriousness, never mind the arithmetic.

And neither wing of the anti-Social-Security coalition seems to know
or care about the hardship its favorite proposals would cause.

The currently fashionable idea of raising the retirement age even more
than it will rise under existing law — it has already gone from 65 to
66, it’s scheduled to rise to 67, but now some are proposing that it
go to 70 — is usually justified with assertions that life expectancy
has risen, so people can easily work later into life. But that’s only
true for affluent, white-collar workers — the people who need Social
Security least.

I’m not just talking about the fact that it’s a lot easier to imagine
working until you’re 70 if you have a comfortable office job than if
you’re engaged in manual labor. America is becoming an increasingly
unequal society — and the growing disparities extend to matters of
life and death. Life expectancy at age 65 has risen a lot at the top
of the income distribution, but much less for lower-income workers.
And remember, the retirement age is already scheduled to rise under
current law.

So let’s beat back this unnecessary, unfair and — let’s not mince
words — cruel attack on working Americans. Big cuts in Social Security
should not be on the table.

***

Krugman's Columns IV (Long, Requires an Attention Span)

How Did Economists Get It So Wrong?
By PAUL KRUGMAN
September 6, 2009

How Did Economists Get It So Wrong?
By PAUL KRUGMAN

I. MISTAKING BEAUTY FOR TRUTH

It’s hard to believe now, but not long ago economists were
congratulating themselves over the success of their field. Those
successes — or so they believed — were both theoretical and practical,
leading to a golden era for the profession. On the theoretical side,
they thought that they had resolved their internal disputes. Thus, in
a 2008 paper titled “The State of Macro” (that is, macroeconomics, the
study of big-picture issues like recessions), Olivier Blanchard of
M.I.T., now the chief economist at the International Monetary Fund,
declared that “the state of macro is good.” The battles of yesteryear,
he said, were over, and there had been a “broad convergence of
vision.” And in the real world, economists believed they had things
under control: the “central problem of depression-prevention has been
solved,” declared Robert Lucas of the University of Chicago in his
2003 presidential address to the American Economic Association. In
2004, Ben Bernanke, a former Princeton professor who is now the
chairman of the Federal Reserve Board, celebrated the Great Moderation
in economic performance over the previous two decades, which he
attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive
failure was the least of the field’s problems. More important was the
profession’s blindness to the very possibility of catastrophic
failures in a market economy. During the golden years, financial
economists came to believe that markets were inherently stable —
indeed, that stocks and other assets were always priced just right.
There was nothing in the prevailing models suggesting the possibility
of the kind of collapse that happened last year. Meanwhile,
macroeconomists were divided in their views. But the main division was
between those who insisted that free-market economies never go astray
and those who believed that economies may stray now and then but that
any major deviations from the path of prosperity could and would be
corrected by the all-powerful Fed. Neither side was prepared to cope
with an economy that went off the rails despite the Fed’s best
efforts.

And in the wake of the crisis, the fault lines in the economics
profession have yawned wider than ever. Lucas says the Obama
administration’s stimulus plans are “schlock economics,” and his
Chicago colleague John Cochrane says they’re based on discredited
“fairy tales.” In response, Brad DeLong of the University of
California, Berkeley, writes of the “intellectual collapse” of the
Chicago School, and I myself have written that comments from Chicago
economists are the product of a Dark Age of macroeconomics in which
hard-won knowledge has been forgotten.

What happened to the economics profession? And where does it go from
here?

As I see it, the economics profession went astray because economists,
as a group, mistook beauty, clad in impressive-looking mathematics,
for truth. Until the Great Depression, most economists clung to a
vision of capitalism as a perfect or nearly perfect system. That
vision wasn’t sustainable in the face of mass unemployment, but as
memories of the Depression faded, economists fell back in love with
the old, idealized vision of an economy in which rational individuals
interact in perfect markets, this time gussied up with fancy
equations. The renewed romance with the idealized market was, to be
sure, partly a response to shifting political winds, partly a response
to financial incentives. But while sabbaticals at the Hoover
Institution and job opportunities on Wall Street are nothing to sneeze
at, the central cause of the profession’s failure was the desire for
an all-encompassing, intellectually elegant approach that also gave
economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy
led most economists to ignore all the things that can go wrong. They
turned a blind eye to the limitations of human rationality that often
lead to bubbles and busts; to the problems of institutions that run
amok; to the imperfections of markets — especially financial markets —
that can cause the economy’s operating system to undergo sudden,
unpredictable crashes; and to the dangers created when regulators
don’t believe in regulation.

It’s much harder to say where the economics profession goes from here.
But what’s almost certain is that economists will have to learn to
live with messiness. That is, they will have to acknowledge the
importance of irrational and often unpredictable behavior, face up to
the often idiosyncratic imperfections of markets and accept that an
elegant economic “theory of everything” is a long way off. In
practical terms, this will translate into more cautious policy advice
— and a reduced willingness to dismantle economic safeguards in the
faith that markets will solve all problems.

II. FROM SMITH TO KEYNES AND BACK

The birth of economics as a discipline is usually credited to Adam
Smith, who published “The Wealth of Nations” in 1776. Over the next
160 years an extensive body of economic theory was developed, whose
central message was: Trust the market. Yes, economists admitted that
there were cases in which markets might fail, of which the most
important was the case of “externalities” — costs that people impose
on others without paying the price, like traffic congestion or
pollution. But the basic presumption of “neoclassical” economics
(named after the late-19th-century theorists who elaborated on the
concepts of their “classical” predecessors) was that we should have
faith in the market system.

This faith was, however, shattered by the Great Depression. Actually,
even in the face of total collapse some economists insisted that
whatever happens in a market economy must be right: “Depressions are
not simply evils,” declared Joseph Schumpeter in 1934 — 1934! They
are, he added, “forms of something which has to be done.” But many,
and eventually most, economists turned to the insights of John Maynard
Keynes for both an explanation of what had happened and a solution to
future depressions.

Keynes did not, despite what you may have heard, want the government
to run the economy. He described his analysis in his 1936 masterwork,
“The General Theory of Employment, Interest and Money,” as “moderately
conservative in its implications.” He wanted to fix capitalism, not
replace it. But he did challenge the notion that free-market economies
can function without a minder, expressing particular contempt for
financial markets, which he viewed as being dominated by short-term
speculation with little regard for fundamentals. And he called for
active government intervention — printing more money and, if
necessary, spending heavily on public works — to fight unemployment
during slumps.

It’s important to understand that Keynes did much more than make bold
assertions. “The General Theory” is a work of profound, deep analysis
— analysis that persuaded the best young economists of the day. Yet
the story of economics over the past half century is, to a large
degree, the story of a retreat from Keynesianism and a return to
neoclassicism. The neoclassical revival was initially led by Milton
Friedman of the University of Chicago, who asserted as early as 1953
that neoclassical economics works well enough as a description of the
way the economy actually functions to be “both extremely fruitful and
deserving of much confidence.” But what about depressions?

Friedman’s counterattack against Keynes began with the doctrine known
as monetarism. Monetarists didn’t disagree in principle with the idea
that a market economy needs deliberate stabilization. “We are all
Keynesians now,” Friedman once said, although he later claimed he was
quoted out of context. Monetarists asserted, however, that a very
limited, circumscribed form of government intervention — namely,
instructing central banks to keep the nation’s money supply, the sum
of cash in circulation and bank deposits, growing on a steady path —
is all that’s required to prevent depressions. Famously, Friedman and
his collaborator, Anna Schwartz, argued that if the Federal Reserve
had done its job properly, the Great Depression would not have
happened. Later, Friedman made a compelling case against any
deliberate effort by government to push unemployment below its
“natural” level (currently thought to be about 4.8 percent in the
United States): excessively expansionary policies, he predicted, would
lead to a combination of inflation and high unemployment — a
prediction that was borne out by the stagflation of the 1970s, which
greatly advanced the credibility of the anti-Keynesian movement.

Eventually, however, the anti-Keynesian counterrevolution went far
beyond Friedman’s position, which came to seem relatively moderate
compared with what his successors were saying. Among financial
economists, Keynes’s disparaging vision of financial markets as a
“casino” was replaced by “efficient market” theory, which asserted
that financial markets always get asset prices right given the
available information. Meanwhile, many macroeconomists completely
rejected Keynes’s framework for understanding economic slumps. Some
returned to the view of Schumpeter and other apologists for the Great
Depression, viewing recessions as a good thing, part of the economy’s
adjustment to change. And even those not willing to go that far argued
that any attempt to fight an economic slump would do more harm than
good.

Not all macroeconomists were willing to go down this road: many became
self-described New Keynesians, who continued to believe in an active
role for the government. Yet even they mostly accepted the notion that
investors and consumers are rational and that markets generally get it
right.

Of course, there were exceptions to these trends: a few economists
challenged the assumption of rational behavior, questioned the belief
that financial markets can be trusted and pointed to the long history
of financial crises that had devastating economic consequences. But
they were swimming against the tide, unable to make much headway
against a pervasive and, in retrospect, foolish complacency.

III. PANGLOSSIAN FINANCE

In the 1930s, financial markets, for obvious reasons, didn’t get much
respect. Keynes compared them to “those newspaper competitions in
which the competitors have to pick out the six prettiest faces from a
hundred photographs, the prize being awarded to the competitor whose
choice most nearly corresponds to the average preferences of the
competitors as a whole; so that each competitor has to pick, not those
faces which he himself finds prettiest, but those that he thinks
likeliest to catch the fancy of the other competitors.”

And Keynes considered it a very bad idea to let such markets, in which
speculators spent their time chasing one another’s tails, dictate
important business decisions: “When the capital development of a
country becomes a by-product of the activities of a casino, the job is
likely to be ill-done.”

By 1970 or so, however, the study of financial markets seemed to have
been taken over by Voltaire’s Dr. Pangloss, who insisted that we live
in the best of all possible worlds. Discussion of investor
irrationality, of bubbles, of destructive speculation had virtually
disappeared from academic discourse. The field was dominated by the
“efficient-market hypothesis,” promulgated by Eugene Fama of the
University of Chicago, which claims that financial markets price
assets precisely at their intrinsic worth given all publicly available
information. (The price of a company’s stock, for example, always
accurately reflects the company’s value given the information
available on the company’s earnings, its business prospects and so
on.) And by the 1980s, finance economists, notably Michael Jensen of
the Harvard Business School, were arguing that because financial
markets always get prices right, the best thing corporate chieftains
can do, not just for themselves but for the sake of the economy, is to
maximize their stock prices. In other words, finance economists
believed that we should put the capital development of the nation in
the hands of what Keynes had called a “casino.”

It’s hard to argue that this transformation in the profession was
driven by events. True, the memory of 1929 was gradually receding, but
there continued to be bull markets, with widespread tales of
speculative excess, followed by bear markets. In 1973-4, for example,
stocks lost 48 percent of their value. And the 1987 stock crash, in
which the Dow plunged nearly 23 percent in a day for no clear reason,
should have raised at least a few doubts about market rationality.

These events, however, which Keynes would have considered evidence of
the unreliability of markets, did little to blunt the force of a
beautiful idea. The theoretical model that finance economists
developed by assuming that every investor rationally balances risk
against reward — the so-called Capital Asset Pricing Model, or CAPM
(pronounced cap-em) — is wonderfully elegant. And if you accept its
premises it’s also extremely useful. CAPM not only tells you how to
choose your portfolio — even more important from the financial
industry’s point of view, it tells you how to put a price on financial
derivatives, claims on claims. The elegance and apparent usefulness of
the new theory led to a string of Nobel prizes for its creators, and
many of the theory’s adepts also received more mundane rewards: Armed
with their new models and formidable math skills — the more arcane
uses of CAPM require physicist-level computations — mild-mannered
business-school professors could and did become Wall Street rocket
scientists, earning Wall Street paychecks.

To be fair, finance theorists didn’t accept the efficient-market
hypothesis merely because it was elegant, convenient and lucrative.
They also produced a great deal of statistical evidence, which at
first seemed strongly supportive. But this evidence was of an oddly
limited form. Finance economists rarely asked the seemingly obvious
(though not easily answered) question of whether asset prices made
sense given real-world fundamentals like earnings. Instead, they asked
only whether asset prices made sense given other asset prices. Larry
Summers, now the top economic adviser in the Obama administration,
once mocked finance professors with a parable about “ketchup
economists” who “have shown that two-quart bottles of ketchup
invariably sell for exactly twice as much as one-quart bottles of
ketchup,” and conclude from this that the ketchup market is perfectly
efficient.

But neither this mockery nor more polite critiques from economists
like Robert Shiller of Yale had much effect. Finance theorists
continued to believe that their models were essentially right, and so
did many people making real-world decisions. Not least among these was
Alan Greenspan, who was then the Fed chairman and a long-time
supporter of financial deregulation whose rejection of calls to rein
in subprime lending or address the ever-inflating housing bubble
rested in large part on the belief that modern financial economics had
everything under control. There was a telling moment in 2005, at a
conference held to honor Greenspan’s tenure at the Fed. One brave
attendee, Raghuram Rajan (of the University of Chicago, surprisingly),
presented a paper warning that the financial system was taking on
potentially dangerous levels of risk. He was mocked by almost all
present — including, by the way, Larry Summers, who dismissed his
warnings as “misguided.”

By October of last year, however, Greenspan was admitting that he was
in a state of “shocked disbelief,” because “the whole intellectual
edifice” had “collapsed.” Since this collapse of the intellectual
edifice was also a collapse of real-world markets, the result was a
severe recession — the worst, by many measures, since the Great
Depression. What should policy makers do? Unfortunately,
macroeconomics, which should have been providing clear guidance about
how to address the slumping economy, was in its own state of disarray.

IV. THE TROUBLE WITH MACRO

“We have involved ourselves in a colossal muddle, having blundered in
the control of a delicate machine, the working of which we do not
understand. The result is that our possibilities of wealth may run to
waste for a time — perhaps for a long time.” So wrote John Maynard
Keynes in an essay titled “The Great Slump of 1930,” in which he tried
to explain the catastrophe then overtaking the world. And the world’s
possibilities of wealth did indeed run to waste for a long time; it
took World War II to bring the Great Depression to a definitive end.

Why was Keynes’s diagnosis of the Great Depression as a “colossal
muddle” so compelling at first? And why did economics, circa 1975,
divide into opposing camps over the value of Keynes’s views?

I like to explain the essence of Keynesian economics with a true story
that also serves as a parable, a small-scale version of the messes
that can afflict entire economies. Consider the travails of the
Capitol Hill Baby-Sitting Co-op.

This co-op, whose problems were recounted in a 1977 article in The
Journal of Money, Credit and Banking, was an association of about 150
young couples who agreed to help one another by baby-sitting for one
another’s children when parents wanted a night out. To ensure that
every couple did its fair share of baby-sitting, the co-op introduced
a form of scrip: coupons made out of heavy pieces of paper, each
entitling the bearer to one half-hour of sitting time. Initially,
members received 20 coupons on joining and were required to return the
same amount on departing the group.

Unfortunately, it turned out that the co-op’s members, on average,
wanted to hold a reserve of more than 20 coupons, perhaps, in case
they should want to go out several times in a row. As a result,
relatively few people wanted to spend their scrip and go out, while
many wanted to baby-sit so they could add to their hoard. But since
baby-sitting opportunities arise only when someone goes out for the
night, this meant that baby-sitting jobs were hard to find, which made
members of the co-op even more reluctant to go out, making baby-
sitting jobs even scarcer. . . .

In short, the co-op fell into a recession.

O.K., what do you think of this story? Don’t dismiss it as silly and
trivial: economists have used small-scale examples to shed light on
big questions ever since Adam Smith saw the roots of economic progress
in a pin factory, and they’re right to do so. The question is whether
this particular example, in which a recession is a problem of
inadequate demand — there isn’t enough demand for baby-sitting to
provide jobs for everyone who wants one — gets at the essence of what
happens in a recession.

Forty years ago most economists would have agreed with this
interpretation. But since then macroeconomics has divided into two
great factions: “saltwater” economists (mainly in coastal U.S.
universities), who have a more or less Keynesian vision of what
recessions are all about; and “freshwater” economists (mainly at
inland schools), who consider that vision nonsense.

Freshwater economists are, essentially, neoclassical purists. They
believe that all worthwhile economic analysis starts from the premise
that people are rational and markets work, a premise violated by the
story of the baby-sitting co-op. As they see it, a general lack of
sufficient demand isn’t possible, because prices always move to match
supply with demand. If people want more baby-sitting coupons, the
value of those coupons will rise, so that they’re worth, say, 40
minutes of baby-sitting rather than half an hour — or, equivalently,
the cost of an hours’ baby-sitting would fall from 2 coupons to 1.5.
And that would solve the problem: the purchasing power of the coupons
in circulation would have risen, so that people would feel no need to
hoard more, and there would be no recession.

But don’t recessions look like periods in which there just isn’t
enough demand to employ everyone willing to work? Appearances can be
deceiving, say the freshwater theorists. Sound economics, in their
view, says that overall failures of demand can’t happen — and that
means that they don’t. Keynesian economics has been “proved false,”
Cochrane, of the University of Chicago, says.

Yet recessions do happen. Why? In the 1970s the leading freshwater
macroeconomist, the Nobel laureate Robert Lucas, argued that
recessions were caused by temporary confusion: workers and companies
had trouble distinguishing overall changes in the level of prices
because of inflation or deflation from changes in their own particular
business situation. And Lucas warned that any attempt to fight the
business cycle would be counterproductive: activist policies, he
argued, would just add to the confusion.

By the 1980s, however, even this severely limited acceptance of the
idea that recessions are bad things had been rejected by many
freshwater economists. Instead, the new leaders of the movement,
especially Edward Prescott, who was then at the University of
Minnesota (you can see where the freshwater moniker comes from),
argued that price fluctuations and changes in demand actually had
nothing to do with the business cycle. Rather, the business cycle
reflects fluctuations in the rate of technological progress, which are
amplified by the rational response of workers, who voluntarily work
more when the environment is favorable and less when it’s unfavorable.
Unemployment is a deliberate decision by workers to take time off.

Put baldly like that, this theory sounds foolish — was the Great
Depression really the Great Vacation? And to be honest, I think it
really is silly. But the basic premise of Prescott’s “real business
cycle” theory was embedded in ingeniously constructed mathematical
models, which were mapped onto real data using sophisticated
statistical techniques, and the theory came to dominate the teaching
of macroeconomics in many university departments. In 2004, reflecting
the theory’s influence, Prescott shared a Nobel with Finn Kydland of
Carnegie Mellon University.

Meanwhile, saltwater economists balked. Where the freshwater
economists were purists, saltwater economists were pragmatists. While
economists like N. Gregory Mankiw at Harvard, Olivier Blanchard at
M.I.T. and David Romer at the University of California, Berkeley,
acknowledged that it was hard to reconcile a Keynesian demand-side
view of recessions with neoclassical theory, they found the evidence
that recessions are, in fact, demand-driven too compelling to reject.
So they were willing to deviate from the assumption of perfect markets
or perfect rationality, or both, adding enough imperfections to
accommodate a more or less Keynesian view of recessions. And in the
saltwater view, active policy to fight recessions remained desirable.

But the self-described New Keynesian economists weren’t immune to the
charms of rational individuals and perfect markets. They tried to keep
their deviations from neoclassical orthodoxy as limited as possible.
This meant that there was no room in the prevailing models for such
things as bubbles and banking-system collapse. The fact that such
things continued to happen in the real world — there was a terrible
financial and macroeconomic crisis in much of Asia in 1997-8 and a
depression-level slump in Argentina in 2002 — wasn’t reflected in the
mainstream of New Keynesian thinking.

Even so, you might have thought that the differing worldviews of
freshwater and saltwater economists would have put them constantly at
loggerheads over economic policy. Somewhat surprisingly, however,
between around 1985 and 2007 the disputes between freshwater and
saltwater economists were mainly about theory, not action. The reason,
I believe, is that New Keynesians, unlike the original Keynesians,
didn’t think fiscal policy — changes in government spending or taxes —
was needed to fight recessions. They believed that monetary policy,
administered by the technocrats at the Fed, could provide whatever
remedies the economy needed. At a 90th birthday celebration for Milton
Friedman, Ben Bernanke, formerly a more or less New Keynesian
professor at Princeton, and by then a member of the Fed’s governing
board, declared of the Great Depression: “You’re right. We did it.
We’re very sorry. But thanks to you, it won’t happen again.” The clear
message was that all you need to avoid depressions is a smarter Fed.

And as long as macroeconomic policy was left in the hands of the
maestro Greenspan, without Keynesian-type stimulus programs,
freshwater economists found little to complain about. (They didn’t
believe that monetary policy did any good, but they didn’t believe it
did any harm, either.)

It would take a crisis to reveal both how little common ground there
was and how Panglossian even New Keynesian economics had become.

V. NOBODY COULD HAVE PREDICTED . . .

In recent, rueful economics discussions, an all-purpose punch line has
become “nobody could have predicted. . . .” It’s what you say with
regard to disasters that could have been predicted, should have been
predicted and actually were predicted by a few economists who were
scoffed at for their pains.

Take, for example, the precipitous rise and fall of housing prices.
Some economists, notably Robert Shiller, did identify the bubble and
warn of painful consequences if it were to burst. Yet key policy
makers failed to see the obvious. In 2004, Alan Greenspan dismissed
talk of a housing bubble: “a national severe price distortion,” he
declared, was “most unlikely.” Home-price increases, Ben Bernanke said
in 2005, “largely reflect strong economic fundamentals.”

How did they miss the bubble? To be fair, interest rates were
unusually low, possibly explaining part of the price rise. It may be
that Greenspan and Bernanke also wanted to celebrate the Fed’s success
in pulling the economy out of the 2001 recession; conceding that much
of that success rested on the creation of a monstrous bubble would
have placed a damper on the festivities.

But there was something else going on: a general belief that bubbles
just don’t happen. What’s striking, when you reread Greenspan’s
assurances, is that they weren’t based on evidence — they were based
on the a priori assertion that there simply can’t be a bubble in
housing. And the finance theorists were even more adamant on this
point. In a 2007 interview, Eugene Fama, the father of the efficient-
market hypothesis, declared that “the word ‘bubble’ drives me nuts,”
and went on to explain why we can trust the housing market: “Housing
markets are less liquid, but people are very careful when they buy
houses. It’s typically the biggest investment they’re going to make,
so they look around very carefully and they compare prices. The
bidding process is very detailed.”

Indeed, home buyers generally do carefully compare prices — that is,
they compare the price of their potential purchase with the prices of
other houses. But this says nothing about whether the overall price of
houses is justified. It’s ketchup economics, again: because a two-
quart bottle of ketchup costs twice as much as a one-quart bottle,
finance theorists declare that the price of ketchup must be right.

In short, the belief in efficient financial markets blinded many if
not most economists to the emergence of the biggest financial bubble
in history. And efficient-market theory also played a significant role
in inflating that bubble in the first place.

Now that the undiagnosed bubble has burst, the true riskiness of
supposedly safe assets has been revealed and the financial system has
demonstrated its fragility. U.S. households have seen $13 trillion in
wealth evaporate. More than six million jobs have been lost, and the
unemployment rate appears headed for its highest level since 1940. So
what guidance does modern economics have to offer in our current
predicament? And should we trust it?

VI. THE STIMULUS SQUABBLE

Between 1985 and 2007 a false peace settled over the field of
macroeconomics. There hadn’t been any real convergence of views
between the saltwater and freshwater factions. But these were the
years of the Great Moderation — an extended period during which
inflation was subdued and recessions were relatively mild. Saltwater
economists believed that the Federal Reserve had everything under
control. Fresh­water economists didn’t think the Fed’s actions were
actually beneficial, but they were willing to let matters lie.

But the crisis ended the phony peace. Suddenly the narrow,
technocratic policies both sides were willing to accept were no longer
sufficient — and the need for a broader policy response brought the
old conflicts out into the open, fiercer than ever.

Why weren’t those narrow, technocratic policies sufficient? The
answer, in a word, is zero.

During a normal recession, the Fed responds by buying Treasury bills —
short-term government debt — from banks. This drives interest rates on
government debt down; investors seeking a higher rate of return move
into other assets, driving other interest rates down as well; and
normally these lower interest rates eventually lead to an economic
bounceback. The Fed dealt with the recession that began in 1990 by
driving short-term interest rates from 9 percent down to 3 percent. It
dealt with the recession that began in 2001 by driving rates from 6.5
percent to 1 percent. And it tried to deal with the current recession
by driving rates down from 5.25 percent to zero.

But zero, it turned out, isn’t low enough to end this recession. And
the Fed can’t push rates below zero, since at near-zero rates
investors simply hoard cash rather than lending it out. So by late
2008, with interest rates basically at what macroeconomists call the
“zero lower bound” even as the recession continued to deepen,
conventional monetary policy had lost all traction.

Now what? This is the second time America has been up against the zero
lower bound, the previous occasion being the Great Depression. And it
was precisely the observation that there’s a lower bound to interest
rates that led Keynes to advocate higher government spending: when
monetary policy is ineffective and the private sector can’t be
persuaded to spend more, the public sector must take its place in
supporting the economy. Fiscal stimulus is the Keynesian answer to the
kind of depression-type economic situation we’re currently in.

Such Keynesian thinking underlies the Obama administration’s economic
policies — and the freshwater economists are furious. For 25 or so
years they tolerated the Fed’s efforts to manage the economy, but a
full-blown Keynesian resurgence was something entirely different. Back
in 1980, Lucas, of the University of Chicago, wrote that Keynesian
economics was so ludicrous that “at research seminars, people don’t
take Keynesian theorizing seriously anymore; the audience starts to
whisper and giggle to one another.” Admitting that Keynes was largely
right, after all, would be too humiliating a comedown.

And so Chicago’s Cochrane, outraged at the idea that government
spending could mitigate the latest recession, declared: “It’s not part
of what anybody has taught graduate students since the 1960s. They
[Keynesian ideas] are fairy tales that have been proved false. It is
very comforting in times of stress to go back to the fairy tales we
heard as children, but it doesn’t make them less false.” (It’s a mark
of how deep the division between saltwater and freshwater runs that
Cochrane doesn’t believe that “anybody” teaches ideas that are, in
fact, taught in places like Princeton, M.I.T. and Harvard.)

Meanwhile, saltwater economists, who had comforted themselves with the
belief that the great divide in macroeconomics was narrowing, were
shocked to realize that freshwater economists hadn’t been listening at
all. Freshwater economists who inveighed against the stimulus didn’t
sound like scholars who had weighed Keynesian arguments and found them
wanting. Rather, they sounded like people who had no idea what
Keynesian economics was about, who were resurrecting pre-1930
fallacies in the belief that they were saying something new and
profound.

And it wasn’t just Keynes whose ideas seemed to have been forgotten.
As Brad DeLong of the University of California, Berkeley, has pointed
out in his laments about the Chicago school’s “intellectual collapse,”
the school’s current stance amounts to a wholesale rejection of Milton
Friedman’s ideas, as well. Friedman believed that Fed policy rather
than changes in government spending should be used to stabilize the
economy, but he never asserted that an increase in government spending
cannot, under any circumstances, increase employment. In fact,
rereading Friedman’s 1970 summary of his ideas, “A Theoretical
Framework for Monetary Analysis,” what’s striking is how Keynesian it
seems.

And Friedman certainly never bought into the idea that mass
unemployment represents a voluntary reduction in work effort or the
idea that recessions are actually good for the economy. Yet the
current generation of freshwater economists has been making both
arguments. Thus Chicago’s Casey Mulligan suggests that unemployment is
so high because many workers are choosing not to take jobs: “Employees
face financial incentives that encourage them not to work . . .
decreased employment is explained more by reductions in the supply of
labor (the willingness of people to work) and less by the demand for
labor (the number of workers that employers need to hire).” Mulligan
has suggested, in particular, that workers are choosing to remain
unemployed because that improves their odds of receiving mortgage
relief. And Cochrane declares that high unemployment is actually good:
“We should have a recession. People who spend their lives pounding
nails in Nevada need something else to do.”

Personally, I think this is crazy. Why should it take mass
unemployment across the whole nation to get carpenters to move out of
Nevada? Can anyone seriously claim that we’ve lost 6.7 million jobs
because fewer Americans want to work? But it was inevitable that
freshwater economists would find themselves trapped in this cul-de-
sac: if you start from the assumption that people are perfectly
rational and markets are perfectly efficient, you have to conclude
that unemployment is voluntary and recessions are desirable.

Yet if the crisis has pushed freshwater economists into absurdity, it
has also created a lot of soul-searching among saltwater economists.
Their framework, unlike that of the Chicago School, both allows for
the possibility of involuntary unemployment and considers it a bad
thing. But the New Keynesian models that have come to dominate
teaching and research assume that people are perfectly rational and
financial markets are perfectly efficient. To get anything like the
current slump into their models, New Keynesians are forced to
introduce some kind of fudge factor that for reasons unspecified
temporarily depresses private spending. (I’ve done exactly that in
some of my own work.) And if the analysis of where we are now rests on
this fudge factor, how much confidence can we have in the models’
predictions about where we are going?

The state of macro, in short, is not good. So where does the
profession go from here?

VII. FLAWS AND FRICTIONS

Economics, as a field, got in trouble because economists were seduced
by the vision of a perfect, frictionless market system. If the
profession is to redeem itself, it will have to reconcile itself to a
less alluring vision — that of a market economy that has many virtues
but that is also shot through with flaws and frictions. The good news
is that we don’t have to start from scratch. Even during the heyday of
perfect-market economics, there was a lot of work done on the ways in
which the real economy deviated from the theoretical ideal. What’s
probably going to happen now — in fact, it’s already happening — is
that flaws-and-frictions economics will move from the periphery of
economic analysis to its center.

There’s already a fairly well developed example of the kind of
economics I have in mind: the school of thought known as behavioral
finance. Practitioners of this approach emphasize two things. First,
many real-world investors bear little resemblance to the cool
calculators of efficient-market theory: they’re all too subject to
herd behavior, to bouts of irrational exuberance and unwarranted
panic. Second, even those who try to base their decisions on cool
calculation often find that they can’t, that problems of trust,
credibility and limited collateral force them to run with the herd.

On the first point: even during the heyday of the efficient-market
hypothesis, it seemed obvious that many real-world investors aren’t as
rational as the prevailing models assumed. Larry Summers once began a
paper on finance by declaring: “THERE ARE IDIOTS. Look around.” But
what kind of idiots (the preferred term in the academic literature,
actually, is “noise traders”) are we talking about? Behavioral
finance, drawing on the broader movement known as behavioral
economics, tries to answer that question by relating the apparent
irrationality of investors to known biases in human cognition, like
the tendency to care more about small losses than small gains or the
tendency to extrapolate too readily from small samples (e.g., assuming
that because home prices rose in the past few years, they’ll keep on
rising).

Until the crisis, efficient-market advocates like Eugene Fama
dismissed the evidence produced on behalf of behavioral finance as a
collection of “curiosity items” of no real importance. That’s a much
harder position to maintain now that the collapse of a vast bubble — a
bubble correctly diagnosed by behavioral economists like Robert
Shiller of Yale, who related it to past episodes of “irrational
exuberance” — has brought the world economy to its knees.

On the second point: suppose that there are, indeed, idiots. How much
do they matter? Not much, argued Milton Friedman in an influential
1953 paper: smart investors will make money by buying when the idiots
sell and selling when they buy and will stabilize markets in the
process. But the second strand of behavioral finance says that
Friedman was wrong, that financial markets are sometimes highly
unstable, and right now that view seems hard to reject.

Probably the most influential paper in this vein was a 1997
publication by Andrei Shleifer of Harvard and Robert Vishny of
Chicago, which amounted to a formalization of the old line that “the
market can stay irrational longer than you can stay solvent.” As they
pointed out, arbitrageurs — the people who are supposed to buy low and
sell high — need capital to do their jobs. And a severe plunge in
asset prices, even if it makes no sense in terms of fundamentals,
tends to deplete that capital. As a result, the smart money is forced
out of the market, and prices may go into a downward spiral.

The spread of the current financial crisis seemed almost like an
object lesson in the perils of financial instability. And the general
ideas underlying models of financial instability have proved highly
relevant to economic policy: a focus on the depleted capital of
financial institutions helped guide policy actions taken after the
fall of Lehman, and it looks (cross your fingers) as if these actions
successfully headed off an even bigger financial collapse.

Meanwhile, what about macroeconomics? Recent events have pretty
decisively refuted the idea that recessions are an optimal response to
fluctuations in the rate of technological progress; a more or less
Keynesian view is the only plausible game in town. Yet standard New
Keynesian models left no room for a crisis like the one we’re having,
because those models generally accepted the efficient-market view of
the financial sector.

There were some exceptions. One line of work, pioneered by none other
than Ben Bernanke working with Mark Gertler of New York University,
emphasized the way the lack of sufficient collateral can hinder the
ability of businesses to raise funds and pursue investment
opportunities. A related line of work, largely established by my
Princeton colleague Nobuhiro Kiyotaki and John Moore of the London
School of Economics, argued that prices of assets such as real estate
can suffer self-reinforcing plunges that in turn depress the economy
as a whole. But until now the impact of dysfunctional finance hasn’t
been at the core even of Keynesian economics. Clearly, that has to
change.

VIII. RE-EMBRACING KEYNES

So here’s what I think economists have to do. First, they have to face
up to the inconvenient reality that financial markets fall far short
of perfection, that they are subject to extraordinary delusions and
the madness of crowds. Second, they have to admit — and this will be
very hard for the people who giggled and whispered over Keynes — that
Keynesian economics remains the best framework we have for making
sense of recessions and depressions. Third, they’ll have to do their
best to incorporate the realities of finance into macroeconomics.

Many economists will find these changes deeply disturbing. It will be
a long time, if ever, before the new, more realistic approaches to
finance and macroeconomics offer the same kind of clarity,
completeness and sheer beauty that characterizes the full neoclassical
approach. To some economists that will be a reason to cling to
neoclassicism, despite its utter failure to make sense of the greatest
economic crisis in three generations. This seems, however, like a good
time to recall the words of H. L. Mencken: “There is always an easy
solution to every human problem — neat, plausible and wrong.”

When it comes to the all-too-human problem of recessions and
depressions, economists need to abandon the neat but wrong solution of
assuming that everyone is rational and markets work perfectly. The
vision that emerges as the profession rethinks its foundations may not
be all that clear; it certainly won’t be neat; but we can hope that it
will have the virtue of being at least partly right.
LowRider44M
2010-08-27 20:24:16 UTC
Permalink
(Repasted this to avoid Googles text chopping)

Paul Krugman is a NY Times Op-Ed columnist and winner of the 2008
Nobel Memorial Prize in Economic Science. His latest book is “The
Return of Depression Economics and the Crisis of 2008."

***

Krugman's Columns I

Now That’s Rich
By PAUL KRUGMAN

We need to pinch pennies these days. Don’t you know we have a budget
deficit? For months that has been the word from Republicans and
conservative Democrats, who have rejected every suggestion that we do
more to avoid deep cuts in public services and help the ailing
economy.

But these same politicians are eager to cut checks averaging $3
million each to the richest 120,000 people in the country.

(The Elite stick together to keep the game-soap opera running
smoothly)

What — you haven’t heard about this proposal? Actually, you have: I’m
talking about demands that we make all of the Bush tax cuts, not just
those for the middle class, permanent.

(This conclusion seems obvious. Expire the top tier retain the two
lower tiers)

Some background: Back in 2001, when the first set of Bush tax cuts was
rammed through Congress, the legislation was written with a peculiar
provision — namely, that the whole thing would expire, with tax rates
reverting to 2000 levels, on the last day of 2010.

Why the cutoff date? In part, it was used to disguise the fiscal
irresponsibility of the tax cuts: lopping off that last year reduced
the headline cost of the cuts, because such costs are normally
calculated over a 10-year period. It also allowed the Bush
administration to pass the tax cuts using reconciliation — yes, the
same procedure that Republicans denounced when it was used to enact
health reform — while sidestepping rules designed to prevent the use
of that procedure to increase long-run budget deficits.

( He is mixing apples and oranges here; even though both premises are
correct the linkage is dubious. People don't want health care as
presently packaged they did want the tax cuts. Also elections tipped
the balance out of health cares momentum when extremely liberal
Massachusetts elected a conservative Republican. Background is
important there for context. Both above premises are true but the
linkage is dubious.)


Obviously, the idea was to go back at a later date and make those tax
cuts permanent. But things didn’t go according to plan. And now the
witching hour is upon us.

So what’s the choice now? The Obama administration wants to preserve
those parts of the original tax cuts that mainly benefit the middle
class — which is an expensive proposition in its own right — but to
let those provisions benefiting only people with very high incomes
expire on schedule. Republicans, with support from some conservative
Democrats, want to keep the whole thing.

(The elite stick together and Obama could fight harder for his
position and take it to the streets and take it to the people. That
would be good politics basing a strong fight on a strong position.
What he would be telling people is; "I got a lot of rich friends, I'm
pretty rich now too because of this whole cult of personality game we
play in this country. But let me tell you something America... Hope
and change is real and as your President here is a two million dollar
check written to the Federal Treasury that is my share of the taxes
expiring. People may defeat this strategy of ending tier one and
saving tier two, but this President is a true believer that government
of the people, by the people and for the people shall not perish from
this Earth and in the spirit of Illinois native son Abraham Lincoln I
honestly refuse to allow myself to personally benefit from the
consequences of not expiring tier one of the tax cuts but instead not
expiring all three tiers as some fallacious compromise.")

And there’s a real chance that Republicans will get what they want.
That’s a demonstration, if anyone needed one, that our political
culture has become not just dysfunctional but deeply corrupt.

(Duh.... Surely a rhetorical flourish.)

What’s at stake here? According to the nonpartisan Tax Policy Center,
making all of the Bush tax cuts permanent, as opposed to following the
Obama proposal, would cost the federal government $680 billion in
revenue over the next 10 years. For the sake of comparison, it took
months of hard negotiations to get Congressional approval for a mere
$26 billion in desperately needed aid to state and local governments.

( Once again both are true but the linkage is dubious as a judgment of
motives.)

And where would this $680 billion go? Nearly all of it would go to the
richest 1 percent of Americans, people with incomes of more than
$500,000 a year. But that’s the least of it: the policy center’s
estimates say that the majority of the tax cuts would go to the
richest one-tenth of 1 percent. Take a group of 1,000 randomly
selected Americans, and pick the one with the highest income; he’s
going to get the majority of that group’s tax break. And the average
tax break for those lucky few — the poorest members of the group have
annual incomes of more than $2 million, and the average member makes
more than $7 million a year — would be $3 million over the course of
the next decade.

( I agree but also know that seven trillion dollars has been
distributed to these people in the last two years and they are still
falling desperately into dire straits. Without complete system
collapse the agony shall continue until people realize that honest
rules and honest reportage and honest referees are required to keep
any system running at a level that can tolerate the 1-2% corruption
rate that is inevitable as a part of the usual reduction in profits
and taxes stolen by selfish individuals willing to steal food from
their neighbors table. My key point Jeremy is: They got their seven
trillion and I don't give a fuck what happens now. They got what they
wanted; absolute power and unlimited "green worthless paper" and now
they see the light. It was always about "Money as Trust."
A simple instrument used to transfer promises of immediate results and
scheduled delayed results.)

How can this kind of giveaway be justified at a time when politicians
claim to care about budget deficits? Well, history is repeating
itself. The original campaign for the Bush tax cuts relied on
deception and dishonesty. In fact, my first suspicions that we were
being misled into invading Iraq were based on the resemblance between
the campaign for war and the campaign for tax cuts the previous year.
And sure enough, that same trademark deception and dishonesty is being
deployed on behalf of tax cuts for the wealthiest Americans.

( This dudes so hung up on Bush it taints the power of his argument.
THE GAME IS OVER... Revolution is HERE... NOW!!! Fuck the Republicans
and Fuck the Democrats a pox and a plague for generations is upon
their house and both sides are 100% guilty. The game is finally over.
They shot the Referee. Money was the Referee and it is now
meaningless.)

So, for example, we’re told that it’s all about helping small
business; but only a tiny fraction of small-business owners would
receive any tax break at all. And how many small-business owners do
you know making several million a year?

Or we’re told that it’s about helping the economy recover. But it’s
hard to think of a less cost-effective way to help the economy than
giving money to people who already have plenty, and aren’t likely to
spend a windfall.


( This argument is superseded by analogy system regarding the baby
sitting network as a toy model for economics. The idea presented in
the conflict between economist that believe people are "always"
rational and markets free of undue influence "freshwater economists"
and their "saltwater economists" debate opponents who believe that
"*Anomalies*" occur and mechanisms must be available to temper and
mitigate in disaster scenario situations.
Both sides refuse to accept the *emotions* of markets and the synergy
between political power and economic power)

No, this has nothing to do with sound economic policy. Instead, as I
said, it’s about a dysfunctional and corrupt political culture, in
which Congress won’t take action to revive the economy, pleads poverty
when it comes to protecting the jobs of schoolteachers and
firefighters, but declares cost no object when it comes to sparing the
already wealthy even the slightest financial inconvenience.

( Tommorow millions of people shall gather in Washington to say
exactly that. OK the organizer is not exactly an Abe Lincoln or George
Washington this I concede easily, but people are F****** desperate to
be heard and respected instead of laughed at as the filthy unwashed
uneducated mindless masses.)


So far, the Obama administration is standing firm against this
outrage. Let’s hope that it prevails in its fight. Otherwise, it will
be hard not to lose all faith in America’s future.

( This is where he needed to DEFINE this outrage. I think you and I
could come to a compromise. Scratch tier one and keep tier two and
three for five more years? I'll detail my own entry into the so called
elite later on down the articles. That historical one is quite
extensive. Read it 3x so far. Still trying to summarize as the:

Freshwater Vs. Saltwater
AS
Free markets Vs. Fair markets
As
Friedman followers Vs. Keynesian followers
AS
Limited intervention Vs. Regular intervention

That's still a 3x scan before I read it again as I post to see if its
an accurate abstract summary.)


Gold Diggers of 2010:
http://youtu.be/UJOjTNuuEVw

***

Krugman's Columns II

America Goes Dark
By PAUL KRUGMAN

The lights are going out all over America — literally. Colorado
Springs has made headlines with its desperate attempt to save money by
turning off a third of its streetlights, but similar things are either
happening or being contemplated across the nation, from Philadelphia
to Fresno.

Meanwhile, a country that once amazed the world with its visionary
investments in transportation, from the Erie Canal to the Interstate
Highway System, is now in the process of unpaving itself: in a number
of states, local governments are breaking up roads they can no longer
afford to maintain, and returning them to gravel.

And a nation that once prized education — that was among the first to
provide basic schooling to all its children — is now cutting back.
Teachers are being laid off; programs are being canceled; in Hawaii,
the school year itself is being drastically shortened. And all signs
point to even more cuts ahead.

We’re told that we have no choice, that basic government functions —
essential services that have been provided for generations — are no
longer affordable. And it’s true that state and local governments, hit
hard by the recession, are cash-strapped. But they wouldn’t be quite
as cash-strapped if their politicians were willing to consider at
least some tax increases.

*Irony alert*
(Maybe yes maybe no. Depends on the locale. I live in a firmly
socialist communist state. In our local apparatchik community we have
stolen our fair hair of the government treasury and we are mortified
at the lack of Machiavellian duplicity displayed by our comrades in
the great nation that we lovingly call our left coast brethren in the
Peoples Republik of Kalifornia."

And the federal government, which can sell inflation-protected long-
term bonds at an interest rate of only 1.04 percent, isn’t cash-
strapped at all. It could and should be offering aid to local
governments, to protect the future of our infrastructure and our
children.

(He trusts the government forgetting its a collection of panicked
individuals.)

But Washington is providing only a trickle of help, and even that
grudgingly. We must place priority on reducing the deficit, say
Republicans and “centrist” Democrats. And then, virtually in the next
breath, they declare that we must preserve tax cuts for the very
affluent, at a budget cost of $700 billion over the next decade.

( Nod)

In effect, a large part of our political class is showing its
priorities:

( This point is where he coalesces his polemic into a conclusion. The
elite stick together and that is why they failed. The truth as a
function of assembling accurate facts into information, into strategic
overviews and grids of common sense adjustable tactical deployments of
people cooperating from top to bottom and bottom to top is what has
been abandoned. People were willing to destroy the system and they
succeeded. So everyone from all sides looks at a devastated playing
field and a dead referee and a bunch of players pointing fingers at
each other. First in the near future people shall say "What have we
done?" and then far far in the future individuals have said; "What
have I done?"

given the choice between asking the richest 2 percent or
so of Americans to go back to paying the tax rates they paid during
the Clinton-era boom, or allowing the nation’s foundations to crumble
— literally in the case of roads, figuratively in the case of
education — they’re choosing the latter.

(Yeah...)

It’s a disastrous choice in both the short run and the long run.

In the short run, those state and local cutbacks are a major drag on
the economy, perpetuating devastatingly high unemployment.

It’s crucial to keep state and local government in mind when you hear
people ranting about runaway government spending under President
Obama. Yes, the federal government is spending more, although not as
much as you might think. But state and local governments are cutting
back.

(Some cutbacks are difficult there are many pensioned government
workers pulling down huge multimillion dollar retirement packages.They
get out on disability or inflated rates of retirement based on the
last two years of employment during which their friends help them
boost their salaries from 60-85,000 into the 110-150,000 area
demanding a slow bleeding pay out of sometimes 3-5 million dollars per
government lottery winner. Its a form of the elitist disease that
struck the upper middle class white collar workers. Alas all that
stolen money now supports their out of work children and grand
children. Who did they really steal that money from; they stole it
from themselves in the future.)


And if you add them together, it turns out that the only big
spending increases have been in safety-net programs like unemployment
insurance, which have soared in cost thanks to the severity of the
slump.

That is, for all the talk of a failed stimulus, if you look at
government spending as a whole you see hardly any stimulus at all. And
with federal spending now trailing off, while big state and local
cutbacks continue, we’re going into reverse.

( I think the pain of resetting The Referees two broken arms and two
broken legs before applying the casts is giving people the sense of
queasiness as they listen to the howling pain as the game has come to
a complete full stop and the question of whether the Referee: -rules
based system and honest players, can ever again bring about the
commerce and trade of goods and services that promotes prosperity for
all levels from poor to working-poor to lower middle class to middle
class blue collar middle class small business to middle class white
collar to upper middle class and then the ruling class trained in the
ways of the elite schools and the old boy/girl system of controlling
information through the corporate media outlets.)

But isn’t keeping taxes for the affluent low also a form of stimulus?
Not so you’d notice. When we save a schoolteacher’s job, that
unambiguously aids employment; when we give millionaires more money
instead, there’s a good chance that most of that money will just sit
idle.

(Or pay off the damage in the millionaire's position in fictitious
assets that are nothing but paper gambling on a collection of paper
that is rating a collection of assets that the owners really don't own
but are slowly paying off. SIDE NOTE A whole lot of expensive
abandoned yachts around here. We had to pass an emergency law to seize
them so they would not threaten the flow of traffic in our working
fishing-shipping harbors.)

And what about the economy’s future? Everything we know about economic
growth says that a well-educated population and high-quality
infrastructure are crucial. Emerging nations are making huge efforts
to upgrade their roads, their ports and their schools. Yet in America
we’re going backward.

( Yes... BUT!!! "We need jobs for stupit weetards too cuz gottta eat
some micky dees, gudda eat ya know.")

How did we get to this point?

(Filthy depraved horrible indifference to the well being of the human
spirit exhausted by rhetoric and deception to the point where America
is as close to armed revolution as it has ever been and the more
jabbering people do the more frenzied the crowd becomes.)

It’s the logical consequence of three
decades of antigovernment rhetoric, rhetoric that has convinced many
voters that a dollar collected in taxes is always a dollar wasted,
that the public sector can’t do anything right.

( My experience with my own family who secured multi-million dollar
pensions and preceded to throw me overboard as useless baggage is a
personal bias here. The government occasionally does stuff right by
accident. You don't get fired in government for incompetence you get a
disability pension."

The antigovernment campaign has always been phrased in terms of
opposition to waste and fraud — to checks sent to welfare queens
driving Cadillacs, to vast armies of bureaucrats uselessly pushing
paper around. But those were myths,

(Yes and no. Depends on the particulars. Ask the Natives about
government efficiency.)

of course; there was never
remotely as much waste and fraud as the right claimed. And now that
the campaign has reached fruition, we’re seeing what was actually in
the firing line: services that everyone except the very rich need,
services that government must provide or nobody will, like lighted
streets, drivable roads and decent schooling for the public as a
whole.

( Welcome to land of "You are no longer needed." I've been here since
the recession of 1978-1982. )

So the end result of the long campaign against government is that
we’ve taken a disastrously wrong turn. America is now on the unlit,
unpaved road to nowhere.

( That wrong has been taken over and over again but I admire the
articles burgeoning awareness of deep systemic metastasized cancer.
This total threat to the system from top to bottom is absolutely
necessary which echoes what you say J. in the other thread about it
literally requiring a beating with a baseball bat to the soft tissue
to convince people that not only did we hit an iceberg but the ship
sank and that were either a bunch of ghost or we are in a brief air
pocket with one final chance to swim to the surface.)

***

Krugman's Columns III

Attacking Social Security
By PAUL KRUGMAN

Social Security turned 75 last week. It should have been a joyous
occasion, a time to celebrate a program that has brought dignity and
decency to the lives of older Americans.

*Don't make fun of this its self deprecating humor*
( I keep a picture of Richard Nixon from a trip to Russia on my food
shelf and I occasionally salute him for not allowing me to starve to
death. He did the who initiative for a safety net for the poorest of
the poor.)

But the program is under attack, with some Democrats as well as nearly
all Republicans joining the assault. Rumor has it that President
Obama’s deficit commission may call for deep benefit cuts, in
particular a sharp rise in the retirement age.

(Nod...)

Social Security’s attackers claim that they’re concerned about the
program’s financial future. But their math doesn’t add up, and their
hostility isn’t really about dollars and cents. Instead, it’s about
ideology and posturing. And underneath it all is ignorance of or
indifference to the realities of life for many Americans.

( He makes potent arguments.)

About that math: Legally, Social Security has its own, dedicated
funding, via the payroll tax (“FICA” on your pay statement). But it’s
also part of the broader federal budget. This dual accounting means
that there are two ways Social Security could face financial problems.
First, that dedicated funding could prove inadequate, forcing the
program either to cut benefits or to turn to Congress for aid. Second,
Social Security costs could prove unsupportable for the federal budget
as a whole.

But neither of these potential problems is a clear and present danger.
Social Security has been running surpluses for the last quarter-
century, banking those surpluses in a special account, the so-called
trust fund. The program won’t have to turn to Congress for help or cut
benefits until or unless the trust fund is exhausted, which the
program’s actuaries don’t expect to happen until 2037 — and there’s a
significant chance, according to their estimates, that that day will
never come.

( We'll see... Not plundering the Trust was a big issue in the
1992-1995 period.)

Meanwhile, an aging population will eventually (over the course of the
next 20 years) cause the cost of paying Social Security benefits to
rise from its current 4.8 percent of G.D.P. to about 6 percent of
G.D.P. To give you some perspective, that’s a significantly smaller
increase than the rise in defense spending since 2001, which
Washington certainly didn’t consider a crisis, or even a reason to
rethink some of the Bush tax cuts.

( He should stick to his main argument. Bush-Clinton-Bush-Reagan-
Carter-Ford-Nixon-Johnson they were all players of the economic game.
Kennedy tried to reform certain fundamental practices so I leave him
out. Even Nixon went to price controls and a partial end to the gold
standard.)

So where do claims of crisis come from? To a large extent they rely on
bad-faith accounting.

(Couldn't say it better than that!!)

In particular, they rely on an exercise in three-
card monte in which the surpluses Social Security has been running for
a quarter-century don’t count — because hey, the program doesn’t have
any independent existence; it’s just part of the general federal
budget — while future Social Security deficits are unacceptable —
because hey, the program has to stand on its own.

(The game without rules or referee)

It would be easy to dismiss this bait-and-switch as obvious nonsense,
except for one thing: many influential people — including Alan
Simpson, co-chairman of the president’s deficit commission — are
peddling this nonsense.

And having invented a crisis, what do Social Security’s attackers want
to do? They don’t propose cutting benefits to current retirees;
invariably the plan is, instead, to cut benefits many years in the
future. So think about it this way: In order to avoid the possibility
of future benefit cuts, we must cut future benefits. O.K.

(The children live in fear or simply ignore the whole issue for
clarity's sake)

What’s really going on here? Conservatives hate Social Security for
ideological reasons: its success undermines their claim that
government is always the problem, never the solution. But they receive
crucial support from Washington insiders, for whom a declared
willingness to cut Social Security has long served as a badge of
fiscal seriousness, never mind the arithmetic.

(Even Reagan was a partial fiscal conservative. He did deals and kept
the economy moving including giving amnesty to six million illegal
immigrants similar to the previous 1967 amnesty; always promising it
is the end. We have forty-seven million illegals who work as our
slaves. We didn't go from 225 million population 260-300 million.
Whoa... did a qwik check...

The United States will enter 2010 with a population of more than 308.4
million, according to a U.S. Census Bureau estimate. (Actually, their
estimate is 308,400,408--they're nothing if not precise.) That's a 2.6
million person increase--0.9 percent--from their estimate entering
2009. Further, they estimate one new birth every eight seconds and one
death every 12 seconds, so in the time it took you to read this far,
there have been three births and two deaths. Those figures are
unchanged from the start of 2009. The rate at which immigrants enter
the country has changed, marginally, down to one every 37 seconds in
2010 from one every 36 seconds in 2009. Make of that what you will.
Overall, the Census folks figure that those trends add up to one
person being added to the U.S. population every 14 seconds. (Net, I
suppose.)

Of course the operative word here is estimate. This year we get to
move past estimates and get real data to crunch, when the bureau
conducts the decennial census. And those figures not only affect the
distribution of congressional seats but also of $400 billion in
federal funds to state, local and tribal governments each year. So
when you get the form (only 10 questions this year) remember to fill
it out.)

------ Continuing original article -------

And neither wing of the anti-Social-Security coalition seems to know
or care about the hardship its favorite proposals would cause.

The currently fashionable idea of raising the retirement age even more
than it will rise under existing law — it has already gone from 65 to
66, it’s scheduled to rise to 67, but now some are proposing that it
go to 70 — is usually justified with assertions that life expectancy
has risen, so people can easily work later into life. But that’s only
true for affluent, white-collar workers — the people who need Social
Security least.

I’m not just talking about the fact that it’s a lot easier to imagine
working until you’re 70 if you have a comfortable office job than if
you’re engaged in manual labor.

(With college and a vocational profession as skilled labor closed to
me I would have appreciated a job where I could actually make enough
to eat and rent a bed and shower once a week. My social betters
sneered at desire to believe I was an American too. So... I dropped
out of the race including not marrying or creating children and
destining anyone else to a condition I would not inflict on anyone
purposely and hopefully not through an act of omission of
responsibility.)

America is becoming an increasingly
unequal society — and the growing disparities extend to matters of
life and death. Life expectancy at age 65 has risen a lot at the top
of the income distribution, but much less for lower-income workers.
And remember, the retirement age is already scheduled to rise under
current law.

( Revolution is inevitable.)


So let’s beat back this unnecessary, unfair and — let’s not mince
words — cruel attack on working Americans. Big cuts in Social Security
should not be on the table.


(I keep 2000 dollars hidden. If forced to choose between crime,
starvation, or death; I shall go to death grateful for each precious
moment stolen from a dying civilization.)


***

Krugman's Columns IV (Long, Requires an Attention Span)



(I'll go at this in next post.
I have to measure my thought tools accuracy as I go.)
LowRider44M
2010-08-28 01:56:25 UTC
Permalink
(Tacking this tool on the top to scan it and adjust it. The article is
obviously the final work product of a decent amount of knowledge
drafts and edits into a finalized synopsis of his historical opinion
of the forces in play. So I need the micro-tool to see where I am
following and where I am getting lost)

Tool

------

Some Nuts Vs All Sane
AS
Freshwater Vs. Saltwater
AS
Fair Markets Vs. Free Markets
As
Limited Regular Intervention Vs. Zero Rules
As
Keynesian Followers Vs. Friedman Followers



-----

Main Article


How Did Economists Get It So Wrong?
By PAUL KRUGMAN
September 6, 2009



I. MISTAKING BEAUTY FOR TRUTH

It’s hard to believe now, but not long ago economists were
congratulating themselves over the success of their field. Those
successes — or so they believed — were both theoretical and practical,
leading to a golden era for the profession.

(Navel gazing and self congratulations are modern America's cultural
gateway drugs to deepening narcissism)

On the theoretical side,
they thought that they had resolved their internal disputes. Thus, in
a 2008 paper titled “The State of Macro” (that is, macroeconomics, the
study of big-picture issues like recessions), Olivier Blanchard of
M.I.T., now the chief economist at the International Monetary Fund,
declared that “the state of macro is good.” The battles of yesteryear,
he said, were over, and there had been a “broad convergence of
vision.” And in the real world, economists believed they had things
under control: the “central problem of depression-prevention has been
solved,”

(This is where i deeply agree with the authors underlying premises
paraphrased as: "Stop thinking of people as robotic work units of
production, they may fool you one day and simply refuse to work as
slaves and continue to buy only the basic necessities they can't make
or grow themselves, hence; worldwide economic collapse as global
depression... for emphasis. Yes: DEPRESSION. They ignored the most
important factor of markets; psychology.)

declared Robert Lucas of the University of Chicago in his
2003 presidential address to the American Economic Association. In
2004, Ben Bernanke, a former Princeton professor who is now the
chairman of the Federal Reserve Board, celebrated the Great Moderation
in economic performance over the previous two decades, which he
attributed in part to improved economic policy making.

Hyperbole Alert!!!
( Huh... wrong wrong wrong BUSH IS EVIL... A nazi Satanic plant who
consumed human flesh to perpetuate the Third Reich's reign. Throw
Bernanke under the bus Messiah Obama for the truth that is Hope and
"keep the change.")

Last year, everything came apart.

Few economists saw our current crisis coming,

( I saw it coming. I can't elaborate on my preparation machinations
because I don't want to provoke the angry mob.)
http://groups.google.com/group/alt.dreams.castaneda/browse_thread/thread/4947b69fdab8d27f/afc8b23b7bba79d5?hl=en&q=#afc8b23b7bba79d5
http://www.google.com/finance?client=ob&q=INDEXDJX:DJI

but this predictive
failure was the least of the field’s problems. More important was the
profession’s blindness to the very possibility of catastrophic
failures in a market economy.

(Duh... Those who believe nothing terrible could happen are most
likely to drive the bus off a cliff.)

During the golden years, financial
economists came to believe that markets were inherently stable —
indeed, that stocks and other assets were always priced just right.

(He's exaggerating the opinions of others for ironic effect and i
concur with the underlying premise. I played the markets with
imaginary money from 1998-2004 to understand what was going on and
become immersed in it, then pull back and detox emotionally, then re-
immerse then pull pack etc etc for approximately seven full strategy
assessments and learning cycles. )

There was nothing in the prevailing models suggesting the possibility
of the kind of collapse that happened last year. Meanwhile,
macroeconomists were divided in their views. But the main division was
between.../

(Text edited for emphasis directly ahead)

Those who insisted that free-market economies never go astray
VERSES
Those who believed that economies may stray now and then but that
any major deviations from the path of prosperity could and would be
corrected by the all-powerful Fed.


Neither side was prepared to cope
with an economy that went off the rails despite the Fed’s best
efforts.

And in the wake of the crisis, the fault lines in the economics
profession have yawned wider than ever. Lucas says the Obama
administration’s stimulus plans are “schlock economics,” and his
Chicago colleague John Cochrane says they’re based on discredited
“fairy tales.” In response, Brad DeLong of the University of
California, Berkeley, writes of the “intellectual collapse” of the
Chicago School, and I myself have written that comments from Chicago
economists are the product of a Dark Age of macroeconomics in which
hard-won knowledge has been forgotten.

What happened to the economics profession? And where does it go from
here?

As I see it, the economics profession went astray because economists,
as a group, mistook beauty, clad in impressive-looking mathematics,
for truth. Until the Great Depression, most economists clung to a
vision of capitalism as a perfect or nearly perfect system. That
vision wasn’t sustainable in the face of mass unemployment, but as
memories of the Depression faded, economists fell back in love with
the old, idealized vision of an economy in which rational individuals
interact in perfect markets, this time gussied up with fancy
equations. The renewed romance with the idealized market was, to be
sure, partly a response to shifting political winds, partly a response
to financial incentives. But while sabbaticals at the Hoover
Institution and job opportunities on Wall Street are nothing to sneeze
at, the central cause of the profession’s failure was the desire for
an all-encompassing, intellectually elegant approach that also gave
economists a chance to show off their mathematical prowess.

( I wanted to broach this theme with you as a general idea. An idea I
label as:
[] THE POINT OF ABSTRACTION [] This idea I use as an outer circle
that marks the boundary of any idea or set of ideas operating range.
Beyond that range things quickly deteroirate similar to the ideas
expressed in the 1970's classic "The Peter Principal"
http://en.wikipedia.org/wiki/Peter_Principle
I substitute people with ideas in levels of: data, information,
knowledge, rule systems and wisdom. With wisdom as thumbnail sketch
reminders of previous journeys through information sorting processes.
Here is a recent site roughly parallel to my basic formulas - still
digesting it though.
http://techonomy.com/4-dimensions/
But.. to continue, that idea pops up in my head repeatedly. The
boundary function of: The Point of Abstraction as Imminent System
Collapse.)

---continues main article

Unfortunately, this romanticized and sanitized vision of the economy
led most economists to ignore all the things that can go wrong. They
turned a blind eye to the limitations of human rationality

(Good God Man... You've nailed it Old Sport. I've seen so much
madness. Survived so much... Its all so obvious)

that often
lead to bubbles and busts; to the problems of institutions that run
amok;

(Nod)

to the imperfections of markets — especially financial markets —
that can cause the economy’s operating system to undergo sudden,
unpredictable crashes; and to the dangers created when regulators
don’t believe in regulation.

(How many tax cheats does it take to screw in a lightbulb? One but he
has to be the secretary of The United States Treasury. AKA Geitner/
Princeton.)

It’s much harder to say where the economics profession goes from here.

(To the unemployment office first. The poorhouse second and then a
paupers grave.)

But what’s almost certain is that economists will have to learn to
live with messiness. That is, they will have to acknowledge the
importance of irrational and often unpredictable behavior,

(Duh... I'm agreeing with his rhetoric. I already used my dead
referee analogy to sketch "psychotic exuberance" as a replacement for
irrational exuberance.)

face up to
the often idiosyncratic imperfections of markets and accept that an
elegant economic “theory of everything” is a long way off.

(Impossible if it doesn't admit state wide anomaly as a function of
system distress that can turn catastrophic)

In
practical terms, this will translate into more cautious policy advice
— and a reduced willingness to dismantle economic safeguards in the
faith that markets will solve all problems.

(Example = Glass–Steagall Act as a firewall bewteen commercial banks
lending local money to local business and investment banks-share
brokerage and sales lending national money to corporations for routine
purchase repayment cycles of cash flow liquidity.)
http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act



II. FROM SMITH TO KEYNES AND BACK

The birth of economics as a discipline is usually credited to Adam
Smith, who published “The Wealth of Nations” in 1776. Over the next
160 years an extensive body of economic theory was developed, whose
central message was: Trust the market.

(This point is difficult to choose a comment for because people form
markets. If we trusted the market we would have allowed the collapse
of 2002 to proceed as scheduled but it was short circuited by the
people he speaks of above thinking they could by more water pumps and
not pull the economic ship into dry dock to patch the hull and repaint
before lowering it back into the water for another ten year sea
cruise. We mechanically avoided through intervention and a loosening
of credit standards the post 911 recession that should have occurred
and stayed until 2005 preventing this current asset inflation and
deflation event.)

Yes, economists admitted that
there were cases in which markets might fail, of which the most
important was the case of “externalities” — costs that people impose
on others without paying the price, like traffic congestion or
pollution. But the basic presumption of “neoclassical” economics
(named after the late-19th-century theorists who elaborated on the
concepts of their “classical” predecessors) was that we should have
faith in the market system.

(Including letting it fail and rebuilding after the rot and cancers
are identified and purged. Sound outfits who bit the dust gradually
and readjusted like Ford Motors and Scottrade and a host of others are
weathering this dark period better than those who "pumped and dumped"
by leveraging paper totals against paper totals and promising things
that could only be gotten by stealing from their own future.)

This faith was, however, shattered by the Great Depression. Actually,
even in the face of total collapse some economists insisted that
whatever happens in a market economy must be right: “Depressions are
not simply evils,” declared Joseph Schumpeter in 1934 — 1934! They
are, he added, “forms of something which has to be done.”

(I agree partly. The Glass–Steagall Act regulations of 1933 were aimed
at the gross market in price speculation of the 1920's)
( So far; with slight ahead reading my tool looks like this to
understand article as abstract summary)

Some Nuts Vs All Sane
AS
Saltwater Vs. Freshwater
AS
Fair Markets Vs. Free Markets
As
Limited Regular Intervention Vs. Zero Rules
As
Keynesian Followers Vs. Friedman Followers

------------ main article continues ------------------------

But many,
and eventually most, economists turned to the insights of John Maynard
Keynes for both an explanation of what had happened and a solution to
future depressions.

Keynes did not, despite what you may have heard, want the government
to run the economy. He described his analysis in his 1936 masterwork,
“The General Theory of Employment, Interest and Money,” as “moderately
conservative in its implications.” He wanted to fix capitalism, not
replace it. But he did challenge the notion that free-market economies
can function without a minder, expressing particular contempt for
financial markets, which he viewed as being dominated by short-term
speculation with little regard for fundamentals. And he called for
active government intervention — printing more money and, if
necessary, spending heavily on public works — to fight unemployment
during slumps.

( It didn't work during the depression to revive the emotional
component that is the American Dream of having a sense of pride that
you can take care of yourself whether you are the janitor or the CEO.
My family were once business people who solved problems and rented a
boat and came to America. Now my family excepting myself are all first
second and third generation government employees. Not joining the
government service and believing you could build something on your own
is frowned upon as foolishness of the highest sort. Get a job, secure
a pension, laugh at the stupid ones who haven't figured out the
government is the only road to wealth; that is the message they send
and receive amongst themselves. )

It’s important to understand that Keynes did much more than make bold
assertions. “The General Theory” is a work of profound, deep analysis
— analysis that persuaded the best young economists of the day. Yet
the story of economics over the past half century is, to a large
degree, the story of a retreat from Keynesianism and a return to
neoclassicism.

( Here J. is where I draw my own tool line to understand the argument
as [] Fair Markets TRUMP Free Markets []
using the previous boundary idea of "The Point of Abstraction."
Freedom without Responsibility implies cause without effect.
It just doesn't stand up, we could both come up with endless
analogies for free becoming synonymous with predatory if cause and
effect are seperated by
a ring of protection for the initiator of causes that forces the
effects upon their trading commerce partners such as a monopolies
control over price.)

The neoclassical revival was initially led by Milton
Friedman of the University of Chicago, who asserted as early as 1953
that neoclassical economics works well enough as a description of the
way the economy actually functions to be “both extremely fruitful and
deserving of much confidence.” But what about depressions?

(It seems exactly like a pendulum effect being described with degrees
marked on either side of the pendulums swing line.)

Friedman’s counterattack against Keynes began with the doctrine known
as monetarism. Monetarists didn’t disagree in principle with the idea
that a market economy needs deliberate stabilization. “We are all
Keynesians now,” Friedman once said, although he later claimed he was
quoted out of context. Monetarists asserted, however, that a very
limited, circumscribed form of government intervention — namely,
instructing central banks to keep the nation’s money supply, the sum
of cash in circulation and bank deposits, growing on a steady path —
is all that’s required to prevent depressions. Famously, Friedman and
his collaborator, Anna Schwartz, argued that if the Federal Reserve
had done its job properly, the Great Depression would not have
happened.

(I don't have the expertise to absorb that. I know panic occurred and
people hoarded gold and silver and mass hysteria lead to soup kitchens
and unstoppable foreclosures of real property farms, businesses and
homes.
This is a crude analogy but I learned it four years ago. I have a
dollar and I use it to buy a car from you. You take the dollar and buy
a refrigerator from Slider. Slider takes the dollar and gets Robert to
put a new roof on his house. Robert takes the dollar and buys a boat
from Thang. Thang takes the dollar and buys a acre of land from me to
grow crops. Then the circle begins again but slightly different. Its
always the same dollar. We might rip up the old dollar and agree to
use a freshly printed one as the dollar circles around but the only
thing that keeps it in motion is your willingness to build and sell
cars and Sliders willingness to build and sell refrigerators and
Roberts willingness to install new roofs and Thangs willingness to
build and sell boats and my willingness to sell an acre of land so
Thang can expand into the food production business so we don't all
starve together because I suck at farming even though I invested money
in land. Its about being willing to trust and use the dollar as an
abstract marker of a trust in motion. The dollar is worthless paper
compared to the land, the car,the refrigerator, the new roof, the
boat, and the willingness for people to expand similar to Thangs boat
building leading to buying land and farming investment. Once everybody
has all the stuff in the circle hopefully its time to replace it all
as routine maintenance of assets and the circle continues on. []
Specific to the here and now is there are a lot of expensive assets
out there and nobody to buy them.)

----------main article continues----------------------

Later, Friedman made a compelling case against any
deliberate effort by government to push unemployment below its
“natural” level (currently thought to be about 4.8 percent in the
United States): excessively expansionary policies, he predicted, would
lead to a combination of inflation and high unemployment — a
prediction that was borne out by the stagflation of the 1970s, which
greatly advanced the credibility of the anti-Keynesian movement.

Eventually, however, the anti-Keynesian counterrevolution went far
beyond Friedman’s position, which came to seem relatively moderate
compared with what his successors were saying. Among financial
economists, Keynes’s disparaging vision of financial markets as a
“casino” was replaced by “efficient market” theory, which asserted
that financial markets always get asset prices right given the
available information.

(Always = *Point of Abstraction* AS... Perfection Failure Bind / Data
Blindness. )

Meanwhile, many macroeconomists completely
rejected Keynes’s framework for understanding economic slumps. Some
returned to the view of Schumpeter and other apologists for the Great
Depression, viewing recessions as a good thing, part of the economy’s
adjustment to change. And even those not willing to go that far argued
that any attempt to fight an economic slump would do more harm than
good.

(I believe both are true. Some/a few small slumps prevent a big slump
as the circle of commerce corrects itself naturally.)

Not all macroeconomists were willing to go down this road: many became
self-described New Keynesians, who continued to believe in an active
role for the government. Yet even they mostly accepted the notion that
investors and consumers are rational and that markets generally get it
right.

(Ignoring the herd mentality of people trapped in a burning theater)


Of course, there were exceptions to these trends: a few economists
challenged the assumption of rational behavior, questioned the belief
that financial markets can be trusted and pointed to the long history
of financial crises that had devastating economic consequences. But
they were swimming against the tide, unable to make much headway
against a pervasive and, in retrospect, foolish complacency.

III. PANGLOSSIAN FINANCE

In the 1930s, financial markets, for obvious reasons, didn’t get much
respect. Keynes compared them to “those newspaper competitions in
which the competitors have to pick out the six prettiest faces from a
hundred photographs, the prize being awarded to the competitor whose
choice most nearly corresponds to the average preferences of the
competitors as a whole; so that each competitor has to pick, not those
faces which he himself finds prettiest, but those that he thinks
likeliest to catch the fancy of the other competitors.”

And Keynes considered it a very bad idea to let such markets, in which
speculators spent their time chasing one another’s tails, dictate
important business decisions: “When the capital development of a
country becomes a by-product of the activities of a casino, the job is
likely to be ill-done.”

( Seven Trillion dollars was just spent to relieve abstract paper
debts between paper traders.)

By 1970 or so, however, the study of financial markets seemed to have
been taken over by Voltaire’s Dr. Pangloss, who insisted that we live
in the best of all possible worlds.

( The name is right out of hollywood casting Pan Gloss The 3rd
declared today to be red tulip day.
Prices rose 200% before he got drunk and forgot it was red tulip
day and was seen on Broadway and 42nd purchasing a pink carnation for
his wife
Floss Gloss of heiress to the famous ultrawhite toothpaste
fortune.)

Discussion of investor
irrationality, of bubbles, of destructive speculation had virtually
disappeared from academic discourse. The field was dominated by the
“efficient-market hypothesis,” promulgated by Eugene Fama of the
University of Chicago, which claims that financial markets price
assets precisely at their intrinsic worth given all publicly available
information.

(In other words the market makers and specialists said;"Trust me, I am
your friend, I love you.")

------------Main Article continues -------------------

....(The price of a company’s stock, for example, always
accurately reflects the company’s value given the information
available on the company’s earnings, its business prospects and so
on.) And by the 1980s, finance economists, notably Michael Jensen of
the Harvard Business School, were arguing that because financial
markets always get prices right, the best thing corporate chieftains
can do, not just for themselves but for the sake of the economy, is to
maximize their stock prices.

(Translates now that they trust us it is time to reap the harvest of
fools and take the money and run)

In other words, finance economists
believed that we should put the capital development of the nation in
the hands of what Keynes had called a “casino.”

It’s hard to argue that this transformation in the profession was
driven by events. True, the memory of 1929 was gradually receding, but
there continued to be bull markets, with widespread tales of
speculative excess, followed by bear markets. In 1973-4, for example,
stocks lost 48 percent of their value. And the 1987 stock crash, in
which the Dow plunged nearly 23 percent in a day for no clear reason,
should have raised at least a few doubts about market rationality.

(Yes...)

These events, however, which Keynes would have considered evidence of
the unreliability of markets, did little to blunt the force of a
beautiful idea. The theoretical model that finance economists
developed by assuming that every investor rationally balances risk
against reward — the so-called Capital Asset Pricing Model, or CAPM
(pronounced cap-em)

— is wonderfully elegant. And if you accept its
premises it’s also extremely useful. CAPM not only tells you how to
choose your portfolio

— even more important from the financial
industry’s point of view, it tells you how to put a price on financial
derivatives, claims on claims.

(And then Humpdy Dumpdy had a great fall...)

The elegance and apparent usefulness of
the new theory led to a string of Nobel prizes for its creators, and
many of the theory’s adepts also received more mundane rewards: Armed
with their new models and formidable math skills — the more arcane
uses of CAPM require physicist-level computations — mild-mannered
business-school professors could and did become Wall Street rocket
scientists, earning Wall Street paychecks.

(The MIT boys were finally seduced into The Princeton Yale Harvard
club.)

To be fair, finance theorists didn’t accept the efficient-market
hypothesis merely because it was elegant, convenient and lucrative.
They also produced a great deal of statistical evidence, which at
first seemed strongly supportive. But this evidence was of an oddly
limited form. Finance economists rarely asked the seemingly obvious
(though not easily answered) question of whether asset prices made
sense given real-world fundamentals like earnings.

(Key Point = Self Referencing Trumped World Referencing)

Instead, they asked
only whether asset prices made sense given other asset prices. Larry
Summers, now the top economic adviser in the Obama administration,
once mocked finance professors with a parable about “ketchup
economists” who “have shown that two-quart bottles of ketchup
invariably sell for exactly twice as much as one-quart bottles of
ketchup,” and conclude from this that the ketchup market is perfectly
efficient.

But neither this mockery nor more polite critiques from economists
like Robert Shiller of Yale had much effect. Finance theorists
continued to believe that their models were essentially right, and so
did many people making real-world decisions. Not least among these was
Alan Greenspan, who was then the Fed chairman and a long-time
supporter of financial deregulation whose rejection of calls to rein
in subprime lending or address the ever-inflating housing bubble
rested in large part on the belief that modern financial economics had
everything under control.

(A much more complex set of reasons is he feared a Depression in 2002
similar to the one now.
Maybe stalling a Depression for eight years was right maybe not.
Maybe 2002 would have been just another recession.
Being important and respected and having your every word measured
like a financial christ figure on a jet plane circuit
of traveling with the elite could corrupt anyones judgement)

There was a telling moment in 2005, at a
conference held to honor Greenspan’s tenure at the Fed. One brave
attendee, Raghuram Rajan (of the University of Chicago, surprisingly),
presented a paper warning that the financial system was taking on
potentially dangerous levels of risk. He was mocked by almost all
present — including, by the way, Larry Summers, who dismissed his
warnings as “misguided.”

(Nod...)

By October of last year, however, Greenspan was admitting that he was
in a state of “shocked disbelief,” because “the whole intellectual
edifice” had “collapsed.” Since this collapse of the intellectual
edifice was also a collapse of real-world markets, the result was a
severe recession — the worst, by many measures, since the Great
Depression. What should policy makers do? Unfortunately,
macroeconomics, which should have been providing clear guidance about
how to address the slumping economy, was in its own state of disarray.

IV. THE TROUBLE WITH MACRO

“We have involved ourselves in a colossal muddle, having blundered in
the control of a delicate machine, the working of which we do not
understand. The result is that our possibilities of wealth may run to
waste for a time — perhaps for a long time.” So wrote John Maynard
Keynes in an essay titled “The Great Slump of 1930,” in which he tried
to explain the catastrophe then overtaking the world. And the world’s
possibilities of wealth did indeed run to waste for a long time; it
took World War II to bring the Great Depression to a definitive end.

Why was Keynes’s diagnosis of the Great Depression as a “colossal
muddle” so compelling at first? And why did economics, circa 1975,
divide into opposing camps over the value of Keynes’s views?

(Nixons move away from the gold standard. Thirty five dollars in
essence was backed by an ounce of gold at fort knox. You couldn't go
get the gold but you could imagine how the sytem of price fluctuations
were moving in relation to a "set standard" unmoved by local vagaries
of glut surplus and real or imagined shortages.)

I like to explain the essence of Keynesian economics with a true story
that also serves as a parable, a small-scale version of the messes
that can afflict entire economies. Consider the travails of the
Capitol Hill Baby-Sitting Co-op.

( This is a high quality toy model described below)

This co-op, whose problems were recounted in a 1977 article in The
Journal of Money, Credit and Banking, was an association of about 150
young couples who agreed to help one another by baby-sitting for one
another’s children when parents wanted a night out. To ensure that
every couple did its fair share of baby-sitting, the co-op introduced
a form of scrip: coupons made out of heavy pieces of paper, each
entitling the bearer to one half-hour of sitting time. Initially,
members received 20 coupons on joining and were required to return the
same amount on departing the group.

Unfortunately, it turned out that the co-op’s members, on average,
wanted to hold a reserve of more than 20 coupons, perhaps, in case
they should want to go out several times in a row. As a result,
relatively few people wanted to spend their scrip and go out, while
many wanted to baby-sit so they could add to their hoard. But since
baby-sitting opportunities arise only when someone goes out for the
night, this meant that baby-sitting jobs were hard to find, which made
members of the co-op even more reluctant to go out, making baby-
sitting jobs even scarcer. . . .

In short, the co-op fell into a recession.

O.K., what do you think of this story?

( Each co-op member should have been given 80 coupons instead of 20.
Periodically the co-op should have adjusted the coupon supply.)

Don’t dismiss it as silly and
trivial: economists have used small-scale examples to shed light on
big questions ever since Adam Smith saw the roots of economic progress
in a pin factory, and they’re right to do so. The question is whether
this particular example, in which a recession is a problem of
inadequate demand — there isn’t enough demand for baby-sitting to
provide jobs for everyone who wants one — gets at the essence of what
happens in a recession.

(I disagree at this moment... the problem was Scarcity of Demand
caused by Hoarding of resources. A technical point only.
Not sure though.)

Forty years ago most economists would have agreed with this
interpretation. But since then macroeconomics has divided into two
great factions: “saltwater” economists (mainly in coastal U.S.
universities), who have a more or less Keynesian vision of what
recessions are all about; and “freshwater” economists (mainly at
inland schools), who consider that vision nonsense.

Freshwater economists are, essentially, neoclassical purists. They
believe that all worthwhile economic analysis starts from the premise
that people are rational and markets work, a premise violated by the
story of the baby-sitting co-op. As they see it, a general lack of
sufficient demand isn’t possible, because prices always move to match
supply with demand. If people want more baby-sitting coupons, the
value of those coupons will rise, so that they’re worth, say, 40
minutes of baby-sitting rather than half an hour — or, equivalently,
the cost of an hours’ baby-sitting would fall from 2 coupons to 1.5.
And that would solve the problem: the purchasing power of the coupons
in circulation would have risen, so that people would feel no need to
hoard more, and there would be no recession.

------------------

Some Nuts Vs All Sane
AS
Saltwater Vs. Freshwater (flipped this just now)
AS
Fair Markets Vs. Free Markets
As
Limited Regular Intervention Vs. Zero Rules
As
Keynesian Followers Vs. Friedman Followers

-------------------

But don’t recessions look like periods in which there just isn’t
enough demand to employ everyone willing to work? Appearances can be
deceiving, say the freshwater theorists. Sound economics, in their
view, says that overall failures of demand can’t happen — and that
means that they don’t. Keynesian economics has been “proved false,”
Cochrane, of the University of Chicago, says.

Yet recessions do happen. Why? In the 1970s the leading freshwater
macroeconomist, the Nobel laureate Robert Lucas, argued that
recessions were caused by temporary confusion: workers and companies
had trouble distinguishing overall changes in the level of prices
because of inflation or deflation from changes in their own particular
business situation. And Lucas warned that any attempt to fight the
business cycle would be counterproductive: activist policies, he
argued, would just add to the confusion.

By the 1980s, however, even this severely limited acceptance of the
idea that recessions are bad things had been rejected by many
freshwater economists. Instead, the new leaders of the movement,
especially Edward Prescott, who was then at the University of
Minnesota (you can see where the freshwater moniker comes from),
argued that price fluctuations and changes in demand actually had
nothing to do with the business cycle. Rather, the business cycle
reflects fluctuations in the rate of technological progress, which are
amplified by the rational response of workers, who voluntarily work
more when the environment is favorable and less when it’s unfavorable.
Unemployment is a deliberate decision by workers to take time off.

( That's where the Egghead and Mad Hatter analogies kick in.)

Put baldly like that, this theory sounds foolish — was the Great
Depression really the Great Vacation? And to be honest, I think it
really is silly. But the basic premise of Prescott’s “real business
cycle” theory was embedded in ingeniously constructed mathematical
models, which were mapped onto real data using sophisticated
statistical techniques, and the theory came to dominate the teaching
of macroeconomics in many university departments. In 2004, reflecting
the theory’s influence, Prescott shared a Nobel with Finn Kydland of
Carnegie Mellon University.

(Nobel is one of the most respected purveyors of propaganda of any
elitist outfit anywhere.)


Meanwhile, saltwater economists balked. Where the freshwater
economists were purists, saltwater economists were pragmatists. While
economists like N. Gregory Mankiw at Harvard, Olivier Blanchard at
M.I.T. and David Romer at the University of California, Berkeley,
acknowledged that it was hard to reconcile a Keynesian demand-side
view of recessions with neoclassical theory, they found the evidence
that recessions are, in fact, demand-driven too compelling to reject.

(This is where he details the Free Market crowds descent into sheer
lunacy.
Sort of a "Lord of The Flies" phenomena for the ivy league crowd on
wall street.)

So they were willing to deviate from the assumption of perfect markets
or perfect rationality, or both, adding enough imperfections to
accommodate a more or less Keynesian view of recessions. And in the
saltwater view, active policy to fight recessions remained desirable.

But the self-described New Keynesian economists weren’t immune to the
charms of rational individuals and perfect markets. They tried to keep
their deviations from neoclassical orthodoxy as limited as possible.
This meant that there was no room in the prevailing models for such
things as bubbles and banking-system collapse.

( They refused to accept a bounded equation and crossed "The Point of
Abstraction.")

The fact that such
things continued to happen in the real world — there was a terrible
financial and macroeconomic crisis in much of Asia in 1997-8 and a
depression-level slump in Argentina in 2002 — wasn’t reflected in the
mainstream of New Keynesian thinking.

( By now I leave my tool alone as accurate because they are talking
about permutations driven by ideological crossing of the:

Fair Markets
Trump
Free Markets ... barrier which they have decided to
observe. All the ear marks of cult thinking, not referencing the
outside world)

Even so, you might have thought that the differing worldviews of
freshwater and saltwater economists would have put them constantly at
loggerheads over economic policy. Somewhat surprisingly, however,
between around 1985 and 2007 the disputes between freshwater and
saltwater economists were mainly about theory, not action. The reason,
I believe, is that New Keynesians, unlike the original Keynesians,
didn’t think fiscal policy — changes in government spending or taxes —
was needed to fight recessions.

( The elimination of key factors from their equations = taxing and
spending as money supply adjustments)

They believed that monetary policy,
administered by the technocrats at the Fed, could provide whatever
remedies the economy needed. At a 90th birthday celebration for Milton
Friedman,

(Key Point here J. Age 90 for Friedman is 2002 date spoken of is
07-31-2002)
(The point that I assert we were due for a natural contraction of
demand as excess capacity was eliminated.
Instead fear of terrorism and the likelihood of imminent war tempted
them to abort the natural process of a healthy
market with fair rules and complete transparency of disclosure, From
this day onward it was off to the races... BUBBLE.)

Ben Bernanke, formerly a more or less New Keynesian
professor at Princeton, and by then a member of the Fed’s governing
board, declared of the Great Depression: “You’re right. We did it.
We’re very sorry. But thanks to you, it won’t happen again.” The clear
message was that all you need to avoid depressions is a smarter Fed.

And as long as macroeconomic policy was left in the hands of the
maestro Greenspan, without Keynesian-type stimulus programs,
freshwater economists found little to complain about. (They didn’t
believe that monetary policy did any good, but they didn’t believe it
did any harm, either.)

It would take a crisis to reveal both how little common ground there
was and how Panglossian even New Keynesian economics had become.


(Well I guess its time to define Panlgossian. I guess naive was to
pedestrian a construct for the writer god bless his precious
information spewing editorial prowess as historical overview. If I was
his editor Panglossian would get the axe.
Panglossian
adj.
Blindly or naively optimistic.
[After Pangloss, an optimist in Candide, a satire by Voltaire.]
Candide
http://en.wikipedia.org/wiki/Candide)

----------------------- Main article continues
-----------------------------


V. NOBODY COULD HAVE PREDICTED . . .

In recent, rueful economics discussions, an all-purpose punch line has
become “nobody could have predicted. . . .” It’s what you say with
regard to disasters that could have been predicted, should have been
predicted and actually were predicted by a few economists who were
scoffed at for their pains.

(The elite played along to their own ruin It comes at a slower pace
for them. First the yacht 10 million, then the jet 5 million, then the
summer place and finally the family home or park avenue apartment. You
don't hear about that much but I see it where I live. The rich seemed
to have disappeared,especially at the country clubs. their empty.)

Take, for example, the precipitous rise and fall of housing prices.
Some economists, notably Robert Shiller, did identify the bubble and
warn of painful consequences if it were to burst. Yet key policy
makers failed to see the obvious. In 2004, Alan Greenspan dismissed
talk of a housing bubble: “a national severe price distortion,” he
declared, was “most unlikely.” Home-price increases, Ben Bernanke said
in 2005, “largely reflect strong economic fundamentals.”


(Everyone who could lived large on easy credit using their homes like
ATM's to finance luxury items.
A lot of people entered the country lived the high life and simply
walked away after flipping ten or twenty properties.
The satanic over lord descendant of Adolph Hitler... a certain George
Bush made them do it with a magical anal suppository they designed
years ago at the skull and bones society at a late night celebration
of Hitlers 78th birthday after receiving instructions from reptilian
aliens from Zooter Scooter Nebula-5.)

How did they miss the bubble? To be fair, interest rates were
unusually low, possibly explaining part of the price rise. It may be
that Greenspan and Bernanke also wanted to celebrate the Fed’s success
in pulling the economy out of the 2001 recession; conceding that much
of that success rested on the creation of a monstrous bubble would
have placed a damper on the festivities.

(They did what they did consciously, I follow this crap because I know
they have the power to destroy this world just like they did. On the
other hand
I was watching from the sidelines knowing this could bite me hard.)

But there was something else going on: a general belief that bubbles
just don’t happen. What’s striking, when you reread Greenspan’s
assurances, is that they weren’t based on evidence — they were based
on the a priori assertion that there simply can’t be a bubble in
housing. And the finance theorists were even more adamant on this
point. In a 2007 interview, Eugene Fama, the father of the efficient-
market hypothesis, declared that “the word ‘bubble’ drives me nuts,”
and went on to explain why we can trust the housing market: “Housing
markets are less liquid, but people are very careful when they buy
houses. It’s typically the biggest investment they’re going to make,
so they look around very carefully and they compare prices. The
bidding process is very detailed.”

(They believed their own bullshit... They could see the personal
credit card debt figures that were based on the lenders ability to
attach real assets if the cards were defaulted on.)

Indeed, home buyers generally do carefully compare prices — that is,
they compare the price of their potential purchase with the prices of
other houses. But this says nothing about whether the overall price of
houses is justified. It’s ketchup economics, again: because a two-
quart bottle of ketchup costs twice as much as a one-quart bottle,
finance theorists declare that the price of ketchup must be right.

In short, the belief in efficient financial markets blinded many if
not most economists to the emergence of the biggest financial bubble
in history. And efficient-market theory also played a significant role
in inflating that bubble in the first place.

Now that the undiagnosed bubble has burst, the true riskiness of
supposedly safe assets has been revealed and the financial system has
demonstrated its fragility. U.S. households have seen $13 trillion in
wealth evaporate. More than six million jobs have been lost, and the
unemployment rate appears headed for its highest level since 1940. So
what guidance does modern economics have to offer in our current
predicament? And should we trust it?

(Excellent question. I believe they are moving out of America now that
the parties over.)


VI. THE STIMULUS SQUABBLE

Between 1985 and 2007 a false peace settled over the field of
macroeconomics. There hadn’t been any real convergence of views
between the saltwater and freshwater factions.

----------------------

Saltwater Vs. Freshwater
AS
Fair Markets Vs. Free Markets
As
Limited Regular Intervention Vs. Zero Rules
As
Some Anomalous People Vs All People Are Sane (switched from top
line and rephrased)
As
Keynesian Followers Vs. Friedman Followers [Bernanke / Greenspan]

--------------------------------------------

But these were the
years of the Great Moderation — an extended period during which
inflation was subdued and recessions were relatively mild. Saltwater
economists believed that the Federal Reserve had everything under
control. Fresh­water economists didn’t think the Fed’s actions were
actually beneficial, but they were willing to let matters lie.

But the crisis ended the phony peace. Suddenly the narrow,
technocratic policies both sides were willing to accept were no longer
sufficient — and the need for a broader policy response brought the
old conflicts out into the open, fiercer than ever.

Why weren’t those narrow, technocratic policies sufficient? The
answer, in a word, is zero.

(Detailed Money Market Manipulation/Direction follows here...)

During a normal recession, the Fed responds by buying Treasury bills —
short-term government debt — from banks. This drives interest rates on
government debt down; investors seeking a higher rate of return move
into other assets, driving other interest rates down as well; and
normally these lower interest rates eventually lead to an economic
bounceback. The Fed dealt with the recession that began in 1990 by
driving short-term interest rates from 9 percent down to 3 percent. It
dealt with the recession that began in 2001 by driving rates from 6.5
percent to 1 percent. And it tried to deal with the current recession
by driving rates down from 5.25 percent to zero.

------------------------------------------------------

(...) Rates of change as trigonometry curves

9 = 3 66% drive
6 =1 80% drive
5 = 0 Infinite drive Depression Begins.

(...) Rates of change as trigonometry curves

------------------ Main article continues -------

But zero, it turned out, isn’t low enough to end this recession. And
the Fed can’t push rates below zero, since at near-zero rates
investors simply hoard cash rather than lending it out. So by late
2008, with interest rates basically at what macroeconomists call the
“zero lower bound” even as the recession continued to deepen,
conventional monetary policy had lost all traction.

(No tools left the market must correct itself or stay broken)

Now what? This is the second time America has been up against the zero
lower bound, the previous occasion being the Great Depression. And it
was precisely the observation that there’s a lower bound to interest
rates that led Keynes to advocate higher government spending: when
monetary policy is ineffective and the private sector can’t be
persuaded to spend more, the public sector must take its place in
supporting the economy. Fiscal stimulus is the Keynesian answer to the
kind of depression-type economic situation we’re currently in.

( The seven trillion dollars given to the abstract paper holders is
the money that would have been stimulus.
In old folks expressions "They ate the seed corn." No crop can be
grown without the seeds.)

Such Keynesian thinking underlies the Obama administration’s economic
policies — and the freshwater economists are furious. For 25 or so
years they tolerated the Fed’s efforts to manage the economy, but a
full-blown Keynesian resurgence was something entirely different. Back
in 1980, Lucas, of the University of Chicago, wrote that Keynesian
economics was so ludicrous that “at research seminars, people don’t
take Keynesian theorizing seriously anymore; the audience starts to
whisper and giggle to one another.” Admitting that Keynes was largely
right, after all, would be too humiliating a comedown.

( Yes considering Obamas friends and Bushes friends and Clintons
friends got the money.
But there was no place to put it but pay off paper debts that now
reside on the books of the
federal registry. Americans owe seven trillion more and not a dime
was spent on them.
Maybe this is as it should be; "Let them eat tea bags Napoleon.")

And so Chicago’s Cochrane, outraged at the idea that government
spending could mitigate the latest recession, declared: “It’s not part
of what anybody has taught graduate students since the 1960s.

(So here comes the reason why the"Free Markets" & "No Rules" &
"Perfected Sane Humans" stole 7,000,000,000,000,000 $)


They
[Keynesian ideas] are fairy tales that have been proved false. It is
very comforting in times of stress to go back to the fairy tales we
heard as children, but it doesn’t make them less false.” (It’s a mark
of how deep the division between saltwater and freshwater runs that
Cochrane doesn’t believe that “anybody” teaches ideas that are, in
fact, taught in places like Princeton, M.I.T. and Harvard.)

Meanwhile, saltwater economists, who had comforted themselves with the
belief that the great divide in macroeconomics was narrowing, were
shocked to realize that freshwater economists hadn’t been listening at
all. Freshwater economists who inveighed against the stimulus didn’t
sound like scholars who had weighed Keynesian arguments and found them
wanting. Rather, they sounded like people who had no idea what
Keynesian economics was about, who were resurrecting pre-1930
fallacies in the belief that they were saying something new and
profound.

( He doesn't address the underlying calamity. The money that is needed
to test the Keynesian arguments solution
is now the private property of The Elite Mafia and its Chicago
Henchman. Game Over = Global Depression.)

And it wasn’t just Keynes whose ideas seemed to have been forgotten.
As Brad DeLong of the University of California, Berkeley, has pointed
out in his laments about the Chicago school’s “intellectual collapse,”
the school’s current stance amounts to a wholesale rejection of Milton
Friedman’s ideas, as well. Friedman believed that Fed policy rather
than changes in government spending should be used to stabilize the
economy, but he never asserted that an increase in government spending
cannot, under any circumstances, increase employment. In fact,
rereading Friedman’s 1970 summary of his ideas, “A Theoretical
Framework for Monetary Analysis,” what’s striking is how Keynesian it
seems.

( So concerned with personal glory they forgot the fundamental
principles of a well balanced tool box and sold smokes and mirrors and
novelty as acts of genius with the coup de grace being the making
good of the abstract speculation debts and the eviction of the common
classes from their property.)

And Friedman certainly never bought into the idea that mass
unemployment represents a voluntary reduction in work effort or the
idea that recessions are actually good for the economy.

( He was wrong. He attacked the early underlying principles with half
baked conclusions and word games only to find out that the old folks
warning not to eat the seed corn was the difference between famine and
survival. The seed corn in economic policy being a wide array of
specialized tools employed by skillful craftsmen to protect the circle
of smoothly flowing commerce)

Yet the
current generation of freshwater economists has been making both
arguments. Thus Chicago’s Casey Mulligan suggests that unemployment is
so high because many workers are choosing not to take jobs:

(Some jobs cost to much to take.
By the time you pay for food rent and transportation and soon
mandatory health care you are deeper and deeper in debt each week)

“Employees
face financial incentives that encourage them not to work . . .
decreased employment is explained more by reductions in the supply of
labor (the willingness of people to work) and less by the demand for
labor (the number of workers that employers need to hire).” Mulligan
has suggested, in particular, that workers are choosing to remain
unemployed because that improves their odds of receiving mortgage
relief. And Cochrane declares that high unemployment is actually good:
“We should have a recession. People who spend their lives pounding
nails in Nevada need something else to do.”

( Fuck their recent opinions. Their psychotic in their level of
rationalization knowing they are at the early premature end of their
careers.
A chimpanzee could get us into a depression with random picks on a
yes no lightboard what do we need a clique of ivy league satanics for.
Fuck em. Hopefully when they burn Washington to the ground the
Washington Monument and Jefferson Memorial shall survive. I have never
seen those yet.)

Personally, I think this is crazy. Why should it take mass
unemployment across the whole nation to get carpenters to move out of
Nevada? Can anyone seriously claim that we’ve lost 6.7 million jobs
because fewer Americans want to work? But it was inevitable that
freshwater economists would find themselves trapped in this cul-de-
sac: if you start from the assumption that people are perfectly
rational and markets are perfectly efficient, you have to conclude
that unemployment is voluntary and recessions are desirable.

( ZEIG HEIL ZEIG HEIL The Master Race has come.)

Yet if the crisis has pushed freshwater economists into absurdity, it
has also created a lot of soul-searching among saltwater economists.
Their framework, unlike that of the Chicago School, both allows for
the possibility of involuntary unemployment and considers it a bad
thing. But the New Keynesian models that have come to dominate
teaching and research assume that people are perfectly rational and
financial markets are perfectly efficient.

( Perfect is a word that always alerts me to the absolute as a
boundary "Point of Abstraction." achieved.
Model collapses as another utopian dream cult.)

To get anything like the
current slump into their models, New Keynesians are forced to
introduce some kind of fudge factor that for reasons unspecified
temporarily depresses private spending. (I’ve done exactly that in
some of my own work.) And if the analysis of where we are now rests on
this fudge factor, how much confidence can we have in the models’
predictions about where we are going?

( Only a declaration of Global Depression is now accurate.)


The state of macro, in short, is not good. So where does the
profession go from here?

(To the gallows obviously. This guy is clever at under estimating the
will of the people.)

VII. FLAWS AND FRICTIONS

Economics, as a field, got in trouble because economists were seduced
by the vision of a perfect, frictionless market system. If the
profession is to redeem itself, it will have to reconcile itself to a
less alluring vision — that of a market economy that has many virtues
but that is also shot through with flaws and frictions. The good news
is that we don’t have to start from scratch. Even during the heyday of
perfect-market economics, there was a lot of work done on the ways in
which the real economy deviated from the theoretical ideal. What’s
probably going to happen now — in fact, it’s already happening — is
that flaws-and-frictions economics will move from the periphery of
economic analysis to its center.

( I appreciate the guys intellect Jeremy but he sounds like he is
"Whistling as walks by the graveyard." just to keep his readers from
shooting themselves.)

There’s already a fairly well developed example of the kind of
economics I have in mind: the school of thought known as behavioral
finance. Practitioners of this approach emphasize two things. First,
many real-world investors bear little resemblance to the cool
calculators of efficient-market theory: they’re all too subject to
herd behavior, to bouts of irrational exuberance and unwarranted
panic. Second, even those who try to base their decisions on cool
calculation often find that they can’t, that problems of trust,
credibility and limited collateral force them to run with the herd.

(Powerful paragraph of encapsulation right there above)

On the first point: even during the heyday of the efficient-market
hypothesis, it seemed obvious that many real-world investors aren’t as
rational as the prevailing models assumed. Larry Summers once began a
paper on finance by declaring: “THERE ARE IDIOTS. Look around.” But
what kind of idiots (the preferred term in the academic literature,
actually, is “noise traders”) are we talking about? Behavioral
finance, drawing on the broader movement known as behavioral
economics, tries to answer that question by relating the apparent
irrationality of investors to known biases in human cognition, like
the tendency to care more about small losses than small gains or the
tendency to extrapolate too readily from small samples (e.g., assuming
that because home prices rose in the past few years, they’ll keep on
rising).

Until the crisis, efficient-market advocates like Eugene Fama
dismissed the evidence produced on behalf of behavioral finance as a
collection of “curiosity items” of no real importance. That’s a much
harder position to maintain now that the collapse of a vast bubble — a
bubble correctly diagnosed by behavioral economists like "Robert
Shiller of Yale, who related it to past episodes of “irrational
exuberance” — has brought the world economy to its knees.

(His summary is excellent there right above I'll do a search and read
up on "behavioral finance - theory" )

On the second point: suppose that there are, indeed, idiots.

(Irony is a very limited tool in the written form. Sometimes writers
imagine that the reader is hearing the inflection of their voice or
following the flow of their thesis and inject irony where "specificity
as precision" would serve better. If I were his editor that line would
be rewritten.)

How much
do they matter? Not much, argued Milton Friedman in an influential
1953 paper: smart investors will make money by buying when the idiots
sell and selling when they buy and will stabilize markets in the
process.

(What if the idiot investors hold more power proportionally than the
savvy investors. What if the idiots are the previous two Federal
Reserve Chairman and the last four Consecutive Presidents. Not a
subject question that government dependent financial wizards waiting
on their government pensions are willing to answer)

But the second strand of behavioral finance says that
Friedman was wrong, that financial markets are sometimes highly
unstable, and right now that view seems hard to reject.

(WHOA!!!!!! say it so Joe Dimaggio. In the same way you feel pursuit
of a grand theory of consciousness based on the word "g-o-d" is silly
beyond belief, I also feel the pursuit of a grand theory based on "m-o-
n-e-y" is silly. The word God and the word money are symbols for
investment of individual trust in something that is difficult to
understand. When I turn the key to my ignition I trust the car shall
start but certainly someday it shall not start. 1933-1997 was the
sixty-four years required to forget the need for clear concise rules
and fair and impartial referees. 1997 being the repeal of finance
laws.)

Probably the most influential paper in this vein was a 1997
publication by Andrei Shleifer of Harvard and Robert Vishny of
Chicago, which amounted to a formalization of the old line that

“the market can stay irrational longer than you can stay solvent.”

(This I know from personal experience as being considered an
expendable resource unneeded by modern economics)

As they pointed out, arbitrageurs — the people who are supposed to buy
low and
sell high — need capital to do their jobs. And a severe plunge in
asset prices, even if it makes no sense in terms of fundamentals,
tends to deplete that capital. As a result, the smart money is forced
out of the market, and prices may go into a downward spiral.

(Smart people too unable to reacquire the momentum to propel them back
into a self sustaining endeavor.)

The spread of the current financial crisis seemed almost like an
object lesson in the perils of financial instability. And the general
ideas underlying models of financial instability have proved highly
relevant to economic policy: a focus on the depleted capital of
financial institutions helped guide policy actions taken after the
fall of Lehman, and it looks (cross your fingers) as if these actions
successfully headed off an even bigger financial collapse.

(Seven Trillion, 44,000 dollars of debt per 306 million Americans. Too
late to cross your fingers grab your ankles put your head between your
legs and take one last gulp from the oxygen mask. The plane is in a
nose dive)

Meanwhile, what about macroeconomics? Recent events have pretty
decisively refuted the idea that recessions are an optimal response to
fluctuations in the rate of technological progress; a more or less
Keynesian view is the only plausible game in town. Yet standard New
Keynesian models left no room for a crisis like the one we’re having,
because those models generally accepted the efficient-market view of
the financial sector.

(He seems to be talking to himself as if he can't believe his friends
put their mothers and grand children on a plane and then took out an
insurance policy on the mother and put a bomb in her suitcase. He just
doesn't seem to believe his own conclusion: = Referee Is Dead = Game
Is Over = Global Depression.)

There were some exceptions. One line of work, pioneered by none other
than Ben Bernanke working with Mark Gertler of New York University,
emphasized the way the lack of sufficient collateral can hinder the
ability of businesses to raise funds and pursue investment
opportunities. A related line of work, largely established by my
Princeton colleague Nobuhiro Kiyotaki and John Moore of the London
School of Economics, argued that prices of assets such as real estate
can suffer self-reinforcing plunges that in turn depress the economy
as a whole. But until now the impact of dysfunctional finance hasn’t
been at the core even of Keynesian economics. Clearly, that has to
change.

(Obviously like duh... I study economics things stuffies and like they
are so whacka doodle now that I can't even relate but hay I'm not
ready to get in the soup line yet so I guess I'll have to study a bad
economy that those totally rad gum chewing babes from Harvard created.
BAD HARVARD... Bad dog.)


VIII. RE-EMBRACING KEYNES

(This guy wasted a lot of breath on detail before he had the courage
to say:
"I FIRMLY THINK... ACCORDING TO THE MOST COMPREHENSIVE RANGE OF
IDEA... THAT WE SHOULD... ABC-XYZ" )


So here’s what I think economists have to do. First, they have to face
up to the inconvenient reality

(Thats not an argument thats Al Gore waving his dick at massueses
telling him he needs help to save the planet from an "inconvenient
truth.")

that financial markets fall far short
of perfection, that they are subject to extraordinary delusions and
the madness of crowds.

(Including you and your friends who didn't believe our own predictions
and ride like the wind to spread them.)

Second, they have to admit — and this will be
very hard for the people who giggled and whispered over Keynes — that
Keynesian economics remains the best framework we have for making
sense of recessions and depressions.

(Government cutbacks and University loss of students shall take care
of that. Economists are part of the market they study. Their work is a
commodity too. Out in the fucking streets you go because the era of
the super genius narcissist cult of personality is over)

Third, they’ll have to do their
best to incorporate the realities of finance into macroeconomics.

Many economists will find these changes deeply disturbing. It will be
a long time, if ever, before the new, more realistic approaches to
finance and macroeconomics offer the same kind of clarity,
completeness and sheer beauty that characterizes the full neoclassical
approach.

(Forget about the romanticists pining away for academias glory days:
"GET A FUCKING ***REAL *** JOB YOU PUNK ASS BITCHES."

To some economists that will be a reason to cling to
neoclassicism, despite its utter failure to make sense of the greatest
economic crisis in three generations. This seems, however, like a good
time to recall the words of H. L. Mencken: “There is always an easy
solution to every human problem — neat, plausible and wrong.”

When it comes to the all-too-human problem of recessions and
depressions, economists need to abandon the neat but wrong solution of
assuming that everyone is rational and markets work perfectly. The
vision that emerges as the profession rethinks its foundations may not
be all that clear; it certainly won’t be neat; but we can hope that it
will have the virtue of being at least partly right.

(ONE PERCENT RIGHT WOULD BE A BIG IMPROVEMENT...)


---------------- Main Article ends
----------------------------------------------------


Thanks for the challenge of reading that Jeremy.
Quite a big historical overview. Useful as an innoculation against the
blatherings of the late comers to the phrase: GLOBAL DEPRESSION,

Tool ended up as pasted above last time unless you spot a well defined
flaw in the order.

--------------------------------------------------------------------


Complex Simple
Saltwater Vs. Freshwater
AS
Fair Markets Vs. Free Markets
As
Limited Regular Intervention Vs. Zero Rules
As
Some Anomalous People Vs All People Are Sane
As
Old School New School
Keynesian Followers Vs. Friedman Followers [Bernanke / Greenspan]

----------------------------------------------------

Math Data Culled

-----------------------------------------------------

(...) Rates of change as trigonometry curves

9 = 3 66% drive
6 =1 80% drive
5 = 0 Infinite drive Depression Begins.

(...) Rates of change as trigonometry curves
Jeremy H. Donovan
2010-08-29 16:50:49 UTC
Permalink
Art, I've read all of your comments in this thread, and found many of
them interesting. But I probably will not have time to reply in
detail. I'll see how things go.
LowRider44M
2010-08-29 17:30:29 UTC
Permalink
Post by Jeremy H. Donovan
Art, I've read all of your comments in this thread, and found many of
them interesting.  But I probably will not have time to reply in
detail.  I'll see how things go.
Don't sweat it man.
I knew you posted your best over view sources and used my commenting
to force my deeper absorption to try to retain the hidden information
the author detailed about how the competing ideologies were unable to
cope with the unforeseen. There was a bit of comic relief thrown in by
me also as the end of the article drew near. I definitely felt I got a
good understanding of the old school verses new school names, and the
recent players and middle school gyrations with all the subtle twists
and permutations. On business channels even the hosts eyes glaze over
on these discussions. The author struggled a little too, but I feel I
got the gist of the systems slow inexorable failure when it hit the:
"adapt or perish" boundary and couldn't adapt fast enough. I think a
double dip recession is upon us but I do believe (giving Obama & Team
due credit) that we avoided the psychotic style collapse of 1929-1933.

Usually I blow off the NYT as a silly pretentious news source but this
summary of history was very valuable insight to the thinking behind
the adjustments over the last thirty years.

Thx.
Jeremy H. Donovan
2010-08-29 17:43:05 UTC
Permalink
Post by LowRider44M
Usually I blow off the NYT as a silly pretentious news source but this
summary of history was very valuable insight to the thinking behind
the adjustments over the last thirty years.
Thx.
What sources of news do you think are better? I'm always on the
lookout for good ones. There are about a dozen different news sources
I use from time to time, yet I can't say I've found any that are
consistently better than the NY Times.

"The Times has won 104 Pulitzer Prizes, the most of any news
organization."

http://en.wikipedia.org/wiki/The_New_York_Times
LowRider44M
2010-08-29 23:01:17 UTC
Permalink
I'm pretty much a Google surfer.
I'll here about something I want background on and then Google News
search.
They had the big annual meeting in Jackson Hole, Wyoming for the
central bankers and according to news sources characterizing the event
it went similar to the lines of argument and counter-argument in the
historical synopsis of Krugman's article #4. They did describe the
debate as "heated" and "loud."



Brief synopsis: (I think these guys are centrists - pretty sure)
Financial Times.
http://www.ft.com/cms/s/0/d83698a8-b39d-11df-81aa-00144feabdc0.html


Overall search:
http://news.google.com/news/search?aq=f&pz=1&cf=all&ned=us&hl=en&q=jackson+hole+wyoming


I still have my old business links but probably half of them have
tanked. I gave up in Oct. 2007 when my family tossed me out, although
I am curious how my old portfolios on Yahoo are getting along. If I
was investing I would buy some "AutoZone" the car repair franchise,
because people shall be fixing their cars more. I would focus on
businesses that help people lower costs and maintain safety and
quality. I'm not sure if Facebook is public or not but there is still
probably two spurts of growth there too.

I'm a market timer and from now till election day the markets should
slowly rise with profit taking after the elections.
Jeremy H. Donovan
2010-09-03 14:37:31 UTC
Permalink
September 2, 2010
How to End the Great Recession
By ROBERT B. REICH

Berkeley, Calif.

THIS promises to be the worst Labor Day in the memory of most
Americans. Organized labor is down to about 7 percent of the private
work force. Members of non-organized labor — most of the rest of us —
are unemployed, underemployed or underwater. The Labor Department
reported on Friday that just 67,000 new private-sector jobs were
created in August, while at least 125,000 are needed to keep up with
the growth of the potential work force.

The national economy isn’t escaping the gravitational pull of the
Great Recession. None of the standard booster rockets are working:
near-zero short-term interest rates from the Fed, almost record-low
borrowing costs in the bond market, a giant stimulus package and tax
credits for small businesses that hire the long-term unemployed have
all failed to do enough.

That’s because the real problem has to do with the structure of the
economy, not the business cycle. No booster rocket can work unless
consumers are able, at some point, to keep the economy moving on their
own. But consumers no longer have the purchasing power to buy the
goods and services they produce as workers; for some time now, their
means haven’t kept up with what the growing economy could and should
have been able to provide them.

This crisis began decades ago when a new wave of technology — things
like satellite communications, container ships, computers and
eventually the Internet — made it cheaper for American employers to
use low-wage labor abroad or labor-replacing software here at home
than to continue paying the typical worker a middle-class wage. Even
though the American economy kept growing, hourly wages flattened. The
median male worker earns less today, adjusted for inflation, than he
did 30 years ago.

But for years American families kept spending as if their incomes were
keeping pace with overall economic growth. And their spending fueled
continued growth. How did families manage this trick? First, women
streamed into the paid work force. By the late 1990s, more than 60
percent of mothers with young children worked outside the home (in
1966, only 24 percent did).

Second, everyone put in more hours. What families didn’t receive in
wage increases they made up for in work increases. By the mid-2000s,
the typical male worker was putting in roughly 100 hours more each
year than two decades before, and the typical female worker about 200
hours more.

When American families couldn’t squeeze any more income out of these
two coping mechanisms, they embarked on a third: going ever deeper
into debt. This seemed painless — as long as home prices were soaring.
From 2002 to 2007, American households extracted $2.3 trillion from
their homes.

Eventually, of course, the debt bubble burst — and with it, the last
coping mechanism. Now we’re left to deal with the underlying problem
that we’ve avoided for decades. Even if nearly everyone was employed,
the vast middle class still wouldn’t have enough money to buy what the
economy is capable of producing.

Where have all the economic gains gone? Mostly to the top. The
economists Emmanuel Saez and Thomas Piketty examined tax returns from
1913 to 2008. They discovered an interesting pattern. In the late
1970s, the richest 1 percent of American families took in about 9
percent of the nation’s total income; by 2007, the top 1 percent took
in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated
was in 1928. I do not mean to suggest that such astonishing
consolidations of income at the top directly cause sharp economic
declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the
rest of us. So when they get a disproportionate share of total income,
the economy is robbed of the demand it needs to keep growing and
creating jobs.

What’s more, the rich don’t necessarily invest their earnings and
savings in the American economy; they send them anywhere around the
globe where they’ll summon the highest returns — sometimes that’s
here, but often it’s the Cayman Islands, China or elsewhere. The rich
also put their money into assets most likely to attract other big
investors (commodities, stocks, dot-coms or real estate), which can
become wildly inflated as a result.

Meanwhile, as the economy grows, the vast majority in the middle
naturally want to live better. Their consequent spending fuels
continued growth and creates enough jobs for almost everyone, at least
for a time. But because this situation can’t be sustained, at some
point — 1929 and 2008 offer ready examples — the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t
have in 1929; they knew they could avoid immediate financial calamity
by flooding the economy with money. But, paradoxically, averting
another Great Depression-like calamity removed political pressure for
more fundamental reform. We’re left instead with a long and seemingly
endless Great Jobs Recession.

THE Great Depression and its aftermath demonstrate that there is only
one way back to full recovery: through more widely shared prosperity.
In the 1930s, the American economy was completely restructured. New
Deal measures — Social Security, a 40-hour work week with time-and-a-
half overtime, unemployment insurance, the right to form unions and
bargain collectively, the minimum wage — leveled the playing field.

In the decades after World War II, legislation like the G.I. Bill, a
vast expansion of public higher education and civil rights and voting
rights laws further reduced economic inequality. Much of this was paid
for with a 70 percent to 90 percent marginal income tax on the highest
incomes. And as America’s middle class shared more of the economy’s
gains, it was able to buy more of the goods and services the economy
could provide. The result: rapid growth and more jobs.

By contrast, little has been done since 2008 to widen the circle of
prosperity. Health-care reform is an important step forward but it’s
not nearly enough.

What else could be done to raise wages and thereby spur the economy?
We might consider, for example, extending the earned income tax credit
all the way up through the middle class, and paying for it with a tax
on carbon. Or exempting the first $20,000 of income from payroll taxes
and paying for it with a payroll tax on incomes over $250,000.

In the longer term, Americans must be better prepared to succeed in
the global, high-tech economy. Early childhood education should be
more widely available, paid for by a small 0.5 percent fee on all
financial transactions. Public universities should be free; in return,
graduates would then be required to pay back 10 percent of their first
10 years of full-time income.

Another step: workers who lose their jobs and have to settle for
positions that pay less could qualify for “earnings insurance” that
would pay half the salary difference for two years; such a program
would probably prove less expensive than extended unemployment
benefits.

These measures would not enlarge the budget deficit because they would
be paid for. In fact, such moves would help reduce the long-term
deficits by getting more Americans back to work and the economy
growing again.

Policies that generate more widely shared prosperity lead to stronger
and more sustainable economic growth — and that’s good for everyone.
The rich are better off with a smaller percentage of a fast-growing
economy than a larger share of an economy that’s barely moving. That’s
the Labor Day lesson we learned decades ago; until we remember it
again, we’ll be stuck in the Great Recession.

(Robert B. Reich, a secretary of labor in the Clinton administration,
is a professor of public policy at the University of California,
Berkeley, and the author of the forthcoming “Aftershock: The Next
Economy and America’s Future.”)
Jeremy H. Donovan
2010-09-03 14:44:52 UTC
Permalink
September 2, 2010
The Real Story
By PAUL KRUGMAN

Next week, President Obama is scheduled to propose new measures to
boost the economy. I hope they’re bold and substantive, since the
Republicans will oppose him regardless — if he came out for
motherhood, the G.O.P. would declare motherhood un-American. So he
should put them on the spot for standing in the way of real action.

But let’s put politics aside and talk about what we’ve actually
learned about economic policy over the past 20 months.

When Mr. Obama first proposed $800 billion in fiscal stimulus, there
were two groups of critics. Both argued that unemployment would stay
high — but for very different reasons.

One group — the group that got almost all the attention — declared
that the stimulus was much too large, and would lead to disaster. If
you were, say, reading The Wall Street Journal’s opinion pages in
early 2009, you would have been repeatedly informed that the Obama
plan would lead to skyrocketing interest rates and soaring inflation.

The other group, which included yours truly, warned that the plan was
much too small given the economic forecasts then available. As I
pointed out in February 2009, the Congressional Budget Office was
predicting a $2.9 trillion hole in the economy over the next two
years; an $800 billion program, partly consisting of tax cuts that
would have happened anyway, just wasn’t up to the task of filling that
hole.

Critics in the second camp were particularly worried about what would
happen this year, since the stimulus would have its maximum effect on
growth in late 2009 then gradually fade out. Last year, many of us
were already warning that the economy might stall in the second half
of 2010.

So what actually happened? The administration’s optimistic forecast
was wrong, but which group of pessimists was right about the reasons
for that error?

Start with interest rates. Those who said the stimulus was too big
predicted sharply rising rates. When rates rose in early 2009, The
Wall Street Journal published an editorial titled “The Bond
Vigilantes: The disciplinarians of U.S. policy makers return.” The
editorial declared that it was all about fear of deficits, and
concluded, “When in doubt, bet on the markets.”

But those who said the stimulus was too small argued that temporary
deficits weren’t a problem as long as the economy remained depressed;
we were awash in savings with nowhere to go. Interest rates, we said,
would fluctuate with optimism or pessimism about future growth, not
with government borrowing.

When in doubt, bet on the markets. The 10-year bond rate was over 3.7
percent when The Journal published that editorial; it’s under 2.7
percent now.

What about inflation? Amid the inflation hysteria of early 2009, the
inadequate-stimulus critics pointed out that inflation always falls
during sustained periods of high unemployment, and that this time
should be no different. Sure enough, key measures of inflation have
fallen from more than 2 percent before the economic crisis to 1
percent or less now, and Japanese-style deflation is looking like a
real possibility.

Meanwhile, the timing of recent economic growth strongly supports the
notion that stimulus does, indeed, boost the economy: growth
accelerated last year, as the stimulus reached its predicted peak
impact, but has fallen off — just as some of us feared — as the
stimulus has faded.

Oh, and don’t tell me that Germany proves that austerity, not
stimulus, is the way to go. Germany actually did quite a lot of
stimulus — the austerity is all in the future. Also, it never had a
housing bubble that burst. And with all that, German G.D.P. is still
further below its precrisis peak than American G.D.P. True, Germany
has done better in terms of employment — but that’s because strong
unions and government policy have prevented American-style mass
layoffs.

The actual lessons of 2009-2010, then, are that scare stories about
stimulus are wrong, and that stimulus works when it is applied. But it
wasn’t applied on a sufficient scale. And we need another round.

I know that getting that round is unlikely: Republicans and
conservative Democrats won’t stand for it. And if, as expected, the
G.O.P. wins big in November, this will be widely regarded as a
vindication of the anti-stimulus position. Mr. Obama, we’ll be told,
moved too far to the left, and his Keynesian economic doctrine was
proved wrong.

But politics determines who has the power, not who has the truth. The
economic theory behind the Obama stimulus has passed the test of
recent events with flying colors; unfortunately, Mr. Obama, for
whatever reason — yes, I’m aware that there were political constraints
— initially offered a plan that was much too cautious given the scale
of the economy’s problems.

So, as I said, here’s hoping that Mr. Obama goes big next week. If he
does, he’ll have the facts on his side. '
LowRider44M
2010-09-03 20:04:44 UTC
Permalink
The first article was easy to absorb.
I don't object to carbon based restrictions as long as it doesn't
become another "derivative" factory for ivy league traders to act like
the kings of the jungle and rape every small time operator who can't
raise 200,000-10,000,000 to play the carbon credits game.

The second article was a little tougher and my overarching comment as
to synergy between politics and business is that both parties are
supposed to have conservative moderate and liberal factions to
properly engage in the polite honorable form of warfare our system
designed, including prescheduled revolutions every two, four and six
years. The Democrats own the unions and the Republicans own Wall
Street and the people get stuck with bill.

The first article had a wealth of common sense initiative.
Klugman seems to be detoxing from Bush derangement syndrome the same
way a lot of Republicans are going to have to detox from Obama
derangement syndrome. Obama's actions do not mirror the accusations of
his being raised secretly in Mao Tse-tung's summer palace.Bush did a
lot to grow government unnecessarily.

The argument of limited targeted timely input of the Keynsian
supporter versus the fuck the icebergs full speed ahead of the
Friedman supporters is an argument that didn't get resolved because
they never did a massive stimulus like 1977-1980 and they never let
things crash in terms of prices 2009.

A personal note; when my mom gave me the boot after we argued over a
large estate 2,000,000$ she refused to fight for her fair share of
(her husbands sister estate with no children or grandchildren and a
30yr old will. A good claim for her because she left my step dad 1/2
of all assets but he was dead.)
So in 2007 she put her house up for sale at 340,000$ and then got no
takers. Off the market and now back on it's selling for 239,000$ and
she would take 225,000$. At 185,000$ she goes underwater owing more
than its worth. If she had offered it at the second price the first
time she would be out and safe but that's the psychology of deflation.
Just like people couldn't accept the "Housing Bubble" people can't
accept "Massive Inevitable Deflation". In that sense the ultra
Friedmans are going to win for a period of time because I guarantee we
both shall be able to buy a high powered comfortable sedan for 10,000
dollars again by 2020. The economy shall reset to approximately
1977-1982 range where the house I described in my mother's situation
sold for 65,000 dollars in a pre-inflation Massachusetts market. My
parents had the down payment because we had just left a early recovery
inflating market in New Jersey where our house jumped from 30,000 to
55,000 between 1981-1983 and price rises hadn't arrived yet in
Massachusetts.

I think massive deflation is inevitable and a must.
I don't know your salary but you are at an age where you should be
able to afford a nice 1/4 acre six room bungalow and new car every
four years.
Otherwise the circle of commerce is broken and prices shall continue
to fall, When you buy a house for sure-comfort and privacy based on
your own economic conditions then you'll know the deflation is over.
The same adjustment for a lower middle class person translates to when
I can find a job for a skilled laborer with a after tax take home of
ten dollars an hour for an annual 19,200. That's almost exactly what I
draw down from tax payers as a unnecessary part of the labor force.
Cash benefit 9600$ Rent benefit 6500$ Food benefit 1900$ Medical
benefits lifetime total 250,000$
average per year approximately. 1,000$ Total yearly benefit 19,000$

To acquire that basic standard after all taxes equals an unskilled
labor job of 21-25$ dollars an hour
Somewhere along the way using illegal immigrants as slave labor and
exporting jobs overseas became the clever thing to do.
For me there's always the alternative of accepting a a government job
an alternative I rejected all along. I am an honest thief.
When I steal I don't lie to myself about stealing. On the other
hand...

I'm stealing money from the government that they stole from my
stepfather that he stole from me when he sabotaged my sports education
career wife children and grand children etc etc.

America has been very sick for a very long time, I'm 100% solid proof
of that.
People like me should be taken out and shot in the head like the
Nazi's did. That would be "honest" government

That's why some time we disagree on tactical specifics but the
strategic overview "The System Must Change" we agree on.
If there were conservative Democrats in my area I would join their
party and participate or if their were honest Republican conservative.
I like Mr. Bush but he was a big government Republican and Reagan
became one too. The last real Conservatives were Jack Kennedy and
Teddy Roosevelt.


Ultimately I am very conservative because I know from personal
experience what happens when a generation or two generations laughs at
their responsibility to the future and their role as protective
stewards of the American Dream which used to include Nature
Preservation.
Jeremy H. Donovan
2010-09-18 17:16:28 UTC
Permalink
September 16, 2010
The Tax-Cut Racket
By PAUL KRUGMAN

“Nice middle class you got here,” said Mitch McConnell, the Senate
minority leader. “It would be a shame if something happened to it.”

O.K., he didn’t actually say that. But he might as well have, because
that’s what the current confrontation over taxes amounts to. Mr.
McConnell, who was self-righteously denouncing the budget deficit just
the other day, now wants to blow that deficit up with big tax cuts for
the rich. But he doesn’t have the votes. So he’s trying to get what he
wants by pointing a gun at the heads of middle-class families,
threatening to force a jump in their taxes unless he gets paid off
with hugely expensive tax breaks for the wealthy.

Most discussion of the tax fight focuses either on the economics or on
the politics — both of which suggest that Democrats should hang tough,
for their own sakes as well as that of the country. But there’s an
even bigger issue here — namely, the question of what constitutes
acceptable behavior in American political life. Politics ain’t
beanbag, but there’s a difference between playing hardball and
engaging in outright extortion, which is what Mr. McConnell is now
doing. And if he succeeds, it will set a disastrous precedent.

How did we get to this point? The proximate answer lies in the tactics
the Bush administration used to push through tax cuts. The deeper
answer lies in the radicalization of the Republican Party, its
transformation into a movement willing to put the economy and the
nation at risk for the sake of partisan victory.

So, about those tax cuts: back in 2001, the Bush administration
bundled huge tax cuts for wealthy Americans with much smaller tax cuts
for the middle class, then pretended that it was mainly offering tax
breaks to ordinary families. Meanwhile, it circumvented Senate rules
intended to prevent irresponsible fiscal actions — rules that would
have forced it to find spending cuts to offset its $1.3 trillion tax
cut — by putting an expiration date of Dec. 31, 2010, on the whole
bill. And the witching hour is now upon us. If Congress doesn’t act,
the Bush tax cuts will turn into a pumpkin at the end of this year,
with tax rates reverting to Clinton-era levels.

In response, President Obama is proposing legislation that would keep
tax rates essentially unchanged for 98 percent of Americans but allow
rates on the richest 2 percent to rise. But Republicans are
threatening to block that legislation, effectively raising taxes on
the middle class, unless they get tax breaks for their wealthy
friends.

That’s an extraordinary step. Almost everyone agrees that raising
taxes on the middle class in the middle of an economic slump is a bad
idea, unless the effects are offset by other job-creation programs —
and Republicans are blocking those, too. So the G.O.P. is, in effect,
threatening to plunge the U.S. economy back into recession unless
Democrats pay up.

What kind of political party would engage in that kind of
brinksmanship? The answer is the same kind of party that shut down the
federal government in 1995 in an attempt to force President Bill
Clinton to accept steep cuts in Medicare, and is actively discussing
doing the same to Mr. Obama. So, as I said, the deeper explanation of
the tax-cut fight is that it’s ultimately about a radicalized
Republican Party, which accepts no limits on partisanship.

So should Democrats give in?

On the economics, the answer is a clear no. Right now, fears about
budget deficits are overblown — but that doesn’t mean that we should
completely ignore deficit concerns. And the G.O.P. plan would add
hugely to the deficit — about $700 billion over the next decade —
while doing little to help the economy. On any kind of cost-benefit
analysis, this is an idea not worth considering.

And, by the way, a compromise solution — temporary tax breaks for the
rich — is no better; it would cost less, but it would also do even
less for the economy.

On the politics, the answer is also a clear no. Polls show that a
majority of Americans are opposed to maintaining tax breaks for the
rich. Beyond that, this is no time for Democrats to play it safe: if
the midterm election were held today, they would lose badly. They need
to highlight their differences with the G.O.P. — and it’s hard to
think of a better place for them to take a stand than on the issue of
big giveaways to Wall Street and corporate C.E.O.’s.

But what’s even more important is the principle of the thing. Threats
to punish innocent bystanders unless your political rivals give you
what you want have no legitimate place in democratic politics. Giving
in to such threats would be an economic and political mistake, but
more important, it would be morally wrong — and it would encourage
more such threats in the future.

It’s time for Democrats to take a stand, and say no to G.O.P.
blackmail.

***

My opinion: I think Krugman has this nailed. It's true that:

* The majority of Americans oppose tax breaks for the rich.
* It's right to keep the tax rates essentially unchanged for the lower
and middle classes.
* We can't afford the hundreds of billions more in deficit.

It's cut and dried. Yet there's this partisan horse-trading
'blockade' thing happening. To me, a metaphor for the entire
Republican Party right now seems something like: 'a boxer getting
badly beaten in a fair fight desperately starts throwing dirt in the
opponent's eyes and hitting below the belt.' And it's going to
prevent the entire country from recovering if they succeed with their
dirty tactics.

We need more stimulus, job creation, and infrastructure repair.
Republicans are blocking it. We need fairer distribution of wealth
and a corresponding smaller deficit. Republicans are blocking it.
We need aggressive climate control and far-reaching alternative energy
policies. Republicans are blocking these. etc.

Here's what I think is going on. After the eight year Bush
administration and the crash at its end, deep down the Republicans
know they royally screwed up everything. Eight years of inadequate
regulation, catering to the wealthy, and a trillion dollar war started
under false pretenses got us into this. Now the Republicans CAN'T
STAND to let the Democrats get credit for fixing the situation. So
they're attacking and stalling, actively preventing needed solutions
from being implemented. They would rather let the world go down in
flames than let everyone see the Democrats fix their stinking mess.
Jeremy H. Donovan
2010-09-18 22:54:31 UTC
Permalink
http://www.rallytorestoresanity.com/

Bill Clinton on the Daily Show:
http://www.thedailyshow.com/full-episodes/thu-september-16-2010-bill-clinton
Jeremy H. Donovan
2010-09-19 15:50:53 UTC
Permalink
Quote from NY Times review on Charles Seife's new book named
'Proofiness':

"The Bush administration committed a more insidious form of proofiness
when it crowed, in 2004, that its tax cuts would save the average
family $1,586. This is technically correct, but deliberately
misleading — a trick that Seife calls “apple polishing.” ... The
average is the wrong measure to use when a set of numbers contains
extreme outliers — in this case, the whopping refunds received by a
very few, very wealthy families. In such situations, the average is
far from typical. That’s why, paradoxical as it might seem, most
families received less than $650."

http://www.nytimes.com/2010/09/19/books/review/Strogatz-t.html?_r=1&ref=global-home
LowRider44M
2010-09-19 20:25:37 UTC
Permalink
Checked out that Mr. Bill episode of Jon Stewart.
Here's a good one for Colbert on the mosque with a Dylan Biographer.



Opinion:

They'll fight it out until only the middle is standing.
Both shows point up the left and right fringe as conspiracy mongering
theatrical Clown Faces.
Both the far left and far right believe in the Bilderberg Conspiracy
where the worlds political economic and entertainment elites gather in
secret
to telepathically transmit the latest round of pre-scheduled orders to
ensure the New World Order continues as planned.

Clinton made good points about the delayed effect of economic
indicators.
It's a bit of fate and destiny that the economy shall begin turning
around a month after the elections.
LowRider44M
2010-09-19 20:26:12 UTC
Permalink
Whoops. Here's the link.

http://www.colbertnation.com/full-episodes/tue-september-14-2010-sean-wilentz
Jeremy H. Donovan
2010-09-21 00:28:19 UTC
Permalink
Yes, imagine my surprise. Twice now I've turned on my TV to find
these guys announcing major events on ... October 30, 2010.

Colbert's:
The March To Keep Fear Alive

Stewart's:
The Rally To Restore Sanity


The reason this had an impact on me is that it's also my birthday. :)
slider
2010-09-21 14:50:26 UTC
Permalink
jeremy laughingly wrote...
Post by Jeremy H. Donovan
The Rally To Restore Sanity
The reason this had an impact on me is that it's also my birthday. :)
### - ha ha how very apt, maybe you should go to it ;-)

(it's a sign i tell you! it's a sign! ;)
LowRider44M
2010-09-21 18:36:36 UTC
Permalink
You probably disdain Astrology at this point but I but in the past you
explored it.
I'm a 10-20-1959 Libra. Scorpio fits you J. My Uncle was a Scorpio
and a favorite girlfriend.

What about you Sir B. ? I'm guessing July-Cancer or Aquarius
the Cardinal and secondary water signs based on "flow of thoughts"
slider
2010-09-21 19:14:23 UTC
Permalink
LowRider writes...
Post by LowRider44M
You probably disdain Astrology at this point but I but in the past you
explored it.
I'm a 10-20-1959 Libra. Scorpio fits you J. My Uncle was a Scorpio
and a favorite girlfriend.
What about you Sir B. ? I'm guessing July-Cancer or Aquarius
the Cardinal and secondary water signs based on "flow of thoughts"
### - moi? i recently spilled those beans to our near-friend bassos (he's
cousin to us heh:)

leo m8 (yeah i know, tell me about it ha:) with a stellium in leo no less (means a
group of planets clustered together in the natal chart-nonsense, in this case 6
planets in leo including the sun, if that means anythin' to ya, randy would know +
could better explain it) something which (apparently) makes me a double-leo or
sumthin'? whatcha might call: double-bubble :)

personally i always got-on quite well with Libras :)

it's all nonsense btw, astrology i mean, that is unless you're a farmer mindful
of the seasons etc...

i.e. take people as you find them, i say... and then let your instinct/intuition
tell ya what's what at the time or just after, but never before (which is what
astrology purports to do) because reason and intuition are diametrically
opposed, and 'astrology' is the result of being all 'intellectual' about spiritual
things...

(and never the twain shall meet :)
LowRider44M
2010-09-22 05:02:37 UTC
Permalink
That fits. The sensitive/intuitive (not cowardly) lion.
I believe Madonnas a Leo and my niece is one too.
A bit flighty she is just like Madonna.
Dark side of Libra is bitterness ala "Pauls a cunt." phase of Lennon's
life.


Libras get along with everybody were like wristwatches. :-)
I got the double thing too but in Air as Libra-Gemini.
It means I can switch gear ration systems like a chameleon changes
skin color.
Its not a lack of integrity but the idea that only certain battles
are worth fighting to the end.

My favorite from my quote archive:

"Power concentrated wins battles. Power diversified wins wars."
Jeremy H. Donovan
2010-09-22 05:18:17 UTC
Permalink
You probably disdain Astrology at this point but I but in the past you explored it.
I drew up charts and did interpretations for people for years. Now
I'm completely skeptical. But I still pay attention when people tell
me their 'sign', for the simple reason that often that's who people
THINK they are. When they get told at an early age, ah you're
Manchego or you're Stradivarius, therefore you have traits: X, Y, Z -
to some extent these suggestions get internalized, and people act
according to the suggestions and identify with them, further
reinforcing them in reality. This is why even though astrology is
utterly bogus, one may often find people do conform to traits of their
sign. When I say this people usually sit there going ... hmmm, I
never thought about that... :)

So oddly enough, to some extent it doesn't matter what's a 'real'
effect and what isn't, because people *really do* conform to their own
bogus beliefs about themselves, which suddenly makes the bogus beliefs
appear to be true...
I'm a 10-20-1959 Libra. Scorpio fits you J.
Ah, both Sun and Moon in Air. A thinker. :)
My Uncle was a Scorpio and a favorite girlfriend.
You're Uncle was a favorite girlfriend?
Man, no wonder you were so embarrassed by that 'Uncle Fucker'
shtick. :)


Slider:
### - ha ha how very apt, maybe you should go to it ;-)
(it's a sign i tell you! it's a sign! ;)

Funny you would say that. Just today I wrote something about 'omens'.
It's obviously an omen that you should see what I wrote:

***

Today's random insight:

What it really says if you believe 'omens' are telling you how to
behave
in the world:

1) You're self-centered to the point of believing everything that
happens is about you

and/or ...

You're deluded to the point of believing some 'supernatural
force' is concerned enough with our human lives to be busily
providing magical 'instructions' to anyone 'special' enough
to 'read them'.

2) You're susceptible to wishful thinking and/or arrogance,
imagining your interpretations of the 'instructions' are correct.
LowRider44M
2010-09-22 17:48:22 UTC
Permalink
I'm a huge believer in mental programming.
That within reason a person can start from the center and reorganize
every aspect of how they see themselves and the world and their
positional relation to it.
There seems to be a little bit to astrology but I don't read my
horoscope for each day for the reasons you suggest. I am extremely
suggestible and know that about myself and avoid all hypnotic input. A
long time ago when there was less to do the astro-nomy/logy folks
tried to quantify personality.
I think they had some small success in correlating times of year to
personality but I think the correlations were misassigned it's
probably underlying quantum fluctuations and topology weather systems
unseeable to human observation, not stars or seasons or positions of
celestial bodies. If there is a circular/spherical empirical
relationship it is to something much smaller and much larger; then
choose as a candidate my current pet theory that I'm walking about on
a leash. The outer boundary event horizons quantum information
connections and transfers to the active black hole event horizons
within the expanding quantum topology equation we label The Universe.
Jeremy H. Donovan
2010-09-22 19:50:56 UTC
Permalink
Post by LowRider44M
I'm a huge believer in mental programming.
That within reason a person can start from the center and reorganize
every aspect of how they see themselves and the world and their
positional relation to it.
I would have to agree, 'within reason'. As an example, my own actions
and attitudes are practically diametrically opposed to what they were
25 years ago. And yet, in a lot of ways I'm not really that
different...
Post by LowRider44M
There seems to be a little bit to astrology but I don't read my
horoscope for each day for the reasons you suggest. I am extremely
suggestible and know that about myself and avoid all hypnotic input. A
long time ago when there was less to do the astro-nomy/logy folks
tried to quantify personality.
Yes, but there's no way those 'folks' could have been genuinely
careful or unbiased in making observations or in drawing conclusions.
The methodology did not exist.
Post by LowRider44M
I think they had some small success in correlating times of year to
personality but I think the correlations were misassigned it's
probably underlying quantum fluctuations and topology weather systems
unseeable to human observation, not stars or seasons or positions of
celestial bodies.
Too non-specific to comment. The actual constellations are not even
in the same places they were in back when the Babylonian/Hellenistic/
Roman astrological system was established, due to the precession of
the equinoxes, and of course the constellations do not occupy the same
amount of space in the sky either (30 degrees). So the system is
really almost completely 'abstract' in nature.
Post by LowRider44M
If there is a circular/spherical empirical relationship it is to something much smaller
and much larger; then choose as a candidate my current pet theory that I'm
walking about on a leash. The outer boundary event horizons quantum information
connections and transfers to the active black hole event horizons
within the expanding quantum topology equation we label The Universe.
There are billions of black holes. So I don't get what you're
saying. I often don't, though. :) Are you referring to the black
hole at our galactic center or to some hypothetical 'giant' black hole
at the origin point of the universe (if there is such a thing)?
LowRider44M
2010-09-23 07:03:44 UTC
Permalink
There are billions of black holes.  So I don't get what you're
saying.  I often don't, though.  :)  Are you referring to the black
hole at our galactic center or to some hypothetical 'giant' black hole
at the origin point of the universe (if there is such a thing)?
I'm starting to think about all of them (Black Holes) as a population
of gravity/information sink holes pulling inward to the smallest
infinity of pure geometric information that is attempting a
counterbalancing of the outward expansion of the difficult to describe
missing 96%. Some sort of equation that justifies the inward pull
ratio of 23% Dark Matter vs. the outward push ratio of 73% Dark Energy
leaving 1% Matter as mostly "talking dust" interacting on all the
virtual levels and the smooth waves through lattices of the 3% common
radiations; infrared x-ray gamma ray etc.

I guess the black holes as smooth chaos re distributors back to pure
virtual particles and the expansion as a symmetrical outward pulse.
Jeremy H. Donovan
2010-09-23 16:22:56 UTC
Permalink
Jon Stewart's 'Rally to Restore Sanity' could draw tens of thousands

'The Daily Show' event is planned as a comical response to Glenn
Beck's recent rally — but politically minded fans are taking it, and
Stephen Colbert's 'March to Keep Fear Alive,' seriously.

By Matea Gold, Tribune Washington Bureau

5:31 PM PDT, September 22, 2010

Reporting from Washington
Advertisement

The moment Shawna Riley heard Jon Stewart lay out his plans to hold a
"Rally to Restore Sanity" on Oct. 30 on the National Mall, she raced
to get online and book her hotel and airline tickets.

The 41-year-old owner of an advertising firm, who lives in Marble
Falls, Texas, described the event as "one of those we-got-to-be-there
moments."

"I think people are going to be pouring in from around the country,"
she said. "We're tired of the fear-mongering in the mainstream media."

Stewart's event — for people "who think shouting is annoying,
counterproductive and terrible for your throat," according to the
rally website — is the comedian's latest gambit to send up today's
overwrought political discourse. This time, he is keying off the
"Restoring Honor" rally hosted by conservative commentator Glenn Beck
last month. Stewart's faux nemesis, fellow Comedy Central host Stephen
Colbert, will hold a counter-protest, a "March to Keep Fear Alive," at
the same time.

But their fans are not taking it as a joke. As of Wednesday afternoon,
more than 132,000 people planned to attend, according to the event's
Facebook page, while satellite rallies were being organized in
Chicago, Seattle, Austin and other cities.

"I know people like me are frustrated at seeing what's going on with
the 'tea party' and the amount of press they're getting," said Jim
Baum, 55, a private building inspector and farmer who is organizing a
"Rally to Restore Sanity" in Seattle. "It's getting shown as if it's
more of a trend nationally than it actually is. A lot of us would like
to counter those people."

But Stewart, of course, is a comedian, not a political leader, and it
remains unclear exactly what his fans are going to get when they
assemble on the National Mall. While the event is still in the
planning stages, people familiar with the discussions said it would be
about entertainment, not a political call to action.

Still, in hosting the rally, Stewart appears to be moving closer to
participating in the very establishment he lampoons. And the response
to the event speaks to his influence on the country's political
culture.

"I think this puts him in the powerhouse in a new way," said Lorrie
Sparrow, 45, a business analyst, who plans to drive all night from
Xenia, Ohio, to attend the event with two friends and her 8-year-old
son. "We tread lightly, but he does truly wield a big stick in his fan
base."

Sparrow said her son chose to see Stewart over going trick-or-
treating. "I told him something like this might be like Woodstock —
you might be able to say, 'I was at the Rally to Restore Sanity,' "
she said.

The weekend before the election is a key period for local get-out-the-
vote operations, and having thousands of people in Washington could
sap those efforts.

But a Democratic Party official insisted that the rally would be a
boost, adding: "Getting people engaged can only help."

Some details need to be worked out. The National Park Service still
needs more information about security, transportation and crowd
estimates before deciding whether to approve the gathering, said
spokesman Bill Line.
LowRider44M
2010-09-26 19:37:38 UTC
Permalink
http://www.democracynow.org/seo/2010/9/21/glenn_greenwald_on_iran_tea_party


Curious for your opinion.
Is "Salon" called right or left.
What about "Democracy Now"
------

AMY GOODMAN: World leaders have gathered in New York this week for a
series of high-level meetings at the United Nations. Among them, the
Iranian president Mahmoud Ahmadinejad, who’s already attracted a range
of critics protesting his presence outside the UN building.

On Monday, President Obama told a town hall meeting a military attack
on Iran would not be the ideal solution to the "serious problem" of
Iran’s nuclear program, he said, but that he’s not taking that option
off the table.

For more on how the Obama administration is handling Iran, as well as
other matters—for example, here at home, particularly looking at the
tea party—we’re joined by Glenn Greenwald. He’s a constitutional law
attorney and political/legal blogger for Salon.com.

Welcome to Democracy Now! Let’s start with Iran, and then we’ll move
here to domestic politics. What about what President Obama said about
Ahmadinejad and the nuclear program?

GLENN GREENWALD: There’s a great irony, because every time President
Ahmadinejad comes to the United States, the same media commentary
decrees him as some kind of crazy, threatening figure. The same set of
two or three comments that he made that are of dubious translation are
continuously repeated, much the way that Saddam Hussein, the fear
mongering around him, was based on two or three assertions repeated
over and over. And yet, what you have is evidence about what real
aggression is, which is the President of the United States is always
insinuating that we reserve the right, at any moment, at any time, at
our will, to go on to military attack on Iran, even if they don’t
attack us. Yesterday, Senator Lindsey Graham was at a luncheon at the
American Enterprise Institute and said that we need to start
finalizing plans for an attack on Iran that would not just be about
striking at their nuclear facilities, but removing the regime, as
well, though he said we shouldn’t do that with ground troops, but only
with air and sea strikes, which would entail massive devastation of
that country, huge numbers of civilian deaths. The very idea is
monstrous. And you see these proposals talked about on an almost daily
basis in leading American, and obviously Israeli, journals, as well.
So when it comes to who threatens whom and crazy and deranged ideas,
it is true that parties to this dispute are engaging in those kinds of
actions, and sometimes Iran does, but far more often it’s not Iran
who’s doing it.

AMY GOODMAN: Let’s look here at home at this election year, the
midterm elections, and the significance of the tea party.

GLENN GREENWALD: I think the significance, principally, of the tea
party for the Democrat Party is that they don’t really have much to
talk about in terms of why voters and supporters ought to go out and
keep the Democrats in power. And so, what you see from the Democratic
Party is this fixation on the tea party as a means of ratcheting up
fear levels among Democrats and others, in order to encourage them to
go to the polls. I mean, every pollster has said that the huge threat
to the Democratic—the Democrats maintaining their power is this
enthusiasm gap, the fact that Democratic supporters don’t perceive any
reason to go to the polls. And so, in the absence of any reason to
give them, all that you hear is a lot of focus on individual
candidates like Christine O’Donnell, Sharron Angle, these tea party
candidates, to try and highlight their extremism, make people afraid
of who they are, all as a means of encouraging people who don’t see
any reason to go vote for the Democrats to do so. And I think that’s
extremely telling, that two years into this administration, that
that’s all the Democrats have is a fear campaign.

AMY GOODMAN: Talk about Sharron Angle and Harry Reid’s chances. He was
just here in New York last night at a Democratic fundraiser.

GLENN GREENWALD: Right. Well, I mean, there was an incident yesterday
that really illustrates why anyone has a very difficult time
supporting Harry Reid. He was at a fundraiser on the Upper West Side
for very wealthy Democratic Party donors, which is where these
candidates spend most of their time. And the New York—New York’s
junior senator, Kirsten Gillibrand, was present, and he was talking
about her and introducing her, and he said, "And Kirsten Gillibrand is
here, or, as we refer to her in the Senate, the hottest member of the
United States Senate"—you know, an absolutely revolting remark, sexist
in every single possible way and offensive. And so, when you hear
things like that—and Harry Reid has been, you know, saying things like
this. He came out and said that the Park51 community center ought to
move. He said, "We don’t want any people in Guantánamo anywhere near
the United States." And so, when you hear this series of remarks from
the most powerful Democrat in the Senate, you can show people all you
want the craziness of Sharron Angle, but it’s very difficult to get
people to be motivated to go out and care whether or not Harry Reid,
someone like Harry Reid, remains in the Senate.

AMY GOODMAN: At the same time, he’s battling to overturn "Don’t Ask,
Don’t Tell." At the Netroots Nation conference, he hugged Dan Choi and
said he, you know, promised to give him his ring back when they
overturned "Don’t Ask, Don’t Tell," though it’s not clear he will beat
McCain on this.

GLENN GREENWALD: Well, it’s incredibly cynical. I mean, you see this
flurry of activity over the last four weeks from President Obama and
from Democratic leaders suddenly trying to don once again their
progressive masks to convince people that they ought to go to the
polls. And they know that "Don’t Ask, Don’t Tell" won’t be repealed.
They know the DREAM Act is not actually going to be enacted. All of
these measures that they’re talking about to stimulate the economy and
create jobs are things that they know won’t happen, and that’s why
they’re able to advocate them. You even saw, with the cynical
appointment of Elizabeth Warren, who probably will do some good being
able to create this agency to police Wall Street abuses, nonetheless
they stayed away from the fight to actually appoint her as the
director of this agency, so that once the election is over, they can
find somebody more pleasing to Wall Street. So you—

AMY GOODMAN: Explain that, what they actually did.

GLENN GREENWALD: Well, there’s this—one of the best parts about the
financial regulation bill, maybe the only truly meaningful part, is
the creation of this agency, which is the idea of Professor Elizabeth
Warren at Harvard to essentially police the ability of Wall Street to
put fine print into mortgage and credit applications that lure the
consumer into extremely one-sided and imbalanced transactions that
they don’t know about, because they lack the sophistication, they
don’t have lawyers to do it. And the idea of the progressive base was
that she is the person who ought to be heading this agency, because
she is genuinely committed to the idea of limiting Wall Street abuses.
She’s a crusader for economic justice and for protection of consumers,
exactly the kind of person that this administration needs but doesn’t
have in important financial positions.

And the problem was, progressives were demanding it, but their real
constituency, which is Wall Street and business, are horrified by the
idea of Elizabeth Warren, and they needed to find some solution,
because if they didn’t nominate her, progressives would be in revolt
before the election. And so, what they did was they created this
hybrid solution, where they pretended that they were going to appoint
her, even though she has no real authority—she’s just an adviser to
the President—to set up the agency, but not to run it, and meanwhile
they’re telling Wall Street, "Oh, don’t worry, she’s not really going
to have any authority. She’s not going to be the person who’s running
it." And it’s these kind of symbolic gestures in the last several
weeks that I think are almost more offensive, as they try and pretend
that they are something that for the last two years they haven’t been.

AMY GOODMAN: And Christine O’Donnell, her significance?

GLENN GREENWALD: Well, I mean, if you were a Martian who came down from
—to Planet Earth in the last week and just turned on television news
and watched, you would think that Christine O’Donnell was by far the
most powerful person in the world, because, especially on stations
devoted to maintaining Democratic power, like MSNBC and other cable
shows, it’s twenty-four hours nonstop about Christine O’Donnell,
because that way, if you’re on one of these stations, you don’t have
to talk about the things that Tariq Ali was here just talking about,
about what we’re doing in Afghanistan and Pakistan, the continuation
of Bush-Cheney terrorism policies. You get to talk about Christine
O’Donnell and comments she made fifteen years ago on some late night
television show as a way of mocking her and deriding her and
distracting people’s attention from what a failure this administration
has been. That’s why she serves such an important role. It’s a way of
manipulating and distracting the voting base.

AMY GOODMAN: I wanted to go to another subject you’ve taken on, and
that is Jon Stewart making his announcement that he’s going to be
holding a protest in Washington to—what was it?—counter what he
identified as extremists on both sides. Let’s go to a clip.

JON STEWART: I see you’re intrigued, but there’s something still
bothering you. "As a reasonable, busy person, I’d love to come, Jon.
But I really don’t have time to handcraft a message or some signage."
Not to worry. That’s where we come in. We’re going to have signs for
you down there, if you don’t have time. Of course, you can bring your
own, but here’s a quick one: "I disagree with you, but I’m pretty sure
you’re not Hitler."

You may be asking yourself right now, sitting at home, "But am I
the right type of person to go to this rally?" The fact that you would
even stop to ask yourself that question, as opposed to just, let’s
say, jumping up, grabbing the nearest stack of burnable holy books,
strapping on a diaper, and just pointing your car towards DC, that
means, I think, you just might be right for it.


AMY GOODMAN: That was Jon Stewart on The Daily Show. You wrote a piece
about this called "The Perils of False Equivalencies and Self-
Proclaimed Centrism." Glenn Greenwald?

GLENN GREENWALD: Right. Well, I was somewhat ambivalent about this
rally, because, on the one hand, I think everybody agrees that we need
more rationality and substantive examination in our political
discourse, and so, to the extent that he’s calling for that, that’s a
perfectly fine and uncontroversial idea. And, as well, he reaches a
demographic group, young people, who tend to be politically
disengaged, and he draws them into the political process, which I
think is a very commendable thing to do.

The problem that I had with how it was structured and what it is that
he’s saying—and he’s far more than a comedian; I mean, he’s a very
influential voice among progressives and in the media narratives—is
that, for one thing, I don’t think the problem with our politics is
tone. I think the problem is content. There are all kinds of people
who advocate extremely heinous ideas, but do so in a very soft-spoken
and civil manner. Bill Kristol comes to mind, John Yoo, as well. These
are people who can go on and be extremely polite in conversation and
have done that on his show. So I think the problem, in terms of
extremism, is not about tone, but about content, and to talk about
tone, I think, distracts from the issue.

I also think that we don’t really have a problem with excess activism
in the United States, as he seems to suggest—we need to stand up for
the virtuous people who don’t go to rallies. I think going to rallies
and being politically engaged and even passionate is actually a virtue
and something that ought to be encouraged.

But the real problem I had with it is that, in order to appear as
though he was being more evenhanded, he didn’t depict the extremism as
being a problem on the right, which is the reality. These extremist
ideas are really quite pervasive on the right. And so, what he did was
he tried to create an equivalency by saying, well, it’s—the problem is
on the left, as well. And he picked out 9/11 Truthers and a CodePink
rally and suggested that people who call Bush a war criminal are every
bit as inflammatory and extremist and to be condemned as, say, people
who say the President was not born in the United States. And that’s an
extraordinary false equivalency, because these extremist ideas are
pervasive on the right. People who go to CodePink rallies are a tiny
minority, for better or for worse, among Democrats. But more so, the
fact that Bush is a war criminal happens to be true, and there’s ample
evidence for it, including, as I cited, the report by the four-star
general, Antonio Taguba, who is in charge of investigating detainee
abuse, who concluded that George Bush and top administration officials
committed war crimes. And so, I think what he was trying to do was to
show how fair-minded he was by condemning both the left and the right.
This is a common disease in our media, even though left and right are
not equal.

AMY GOODMAN: And the competing rally of Stephen Colbert?

GLENN GREENWALD: Well, that, I think, is actually something that I
found incredibly encouraging, because the rally there is “to keep fear
alive.” And, of course, the American right is dependent, more than
anything else, on fear. And as we talked about earlier, Democrats use
fear, as well, to motive their base. And so, the role that fear plays
in our political culture and the way in which politicians exploit
that, I think, is one of the most central issues. And to the extent
this rally is designed to mock that, I think that’s a good thing.

AMY GOODMAN: Talk about your post, "Obama in Wonderland," at
Salon.com, where you talk about assassinations.

GLENN GREENWALD: Well, there’s this scene in Alice in Wonderland in
which the Red Queen is sitting with the King, and Alice is in front of
them, and they are condemning one convict after the next. And the King
keeps saying, “Call in the accused. Let’s have the verdict and then
the sentence.” And then, at one point, the Red Queen says, “No! I
don’t want it that way. I want first the sentence and then the
verdict.” And Alice objects, and the Queen threatens to execute her.

Well, if you look at what the President is doing with presidential
assassinations, it’s almost exactly the same thing. Eight months ago,
we learned that there’s a list that President Obama maintains with at
least four Americans on it, one of whom is Anwar al-Awlaki, the
American-born cleric in Yemen, of individuals who President Obama,
with no criminal charges, no trial, no due process, has ordered
assassinated, to be killed anywhere they’re found, far away from a
battlefield, no matter what they’re doing at the time, on the grounds—
the accusation, unproven accusation—that they’re involved in
terrorism. Well, that’s the sentence. The President has imposed the
death penalty on these individuals. But two weeks ago, it was reported
in the New York Times that the administration is now considering
bringing an indictment against Awlaki in response to a lawsuit brought
on his behalf and other—for other considerations, in order to bring
him into a court and charge him with a crime, finally, in order to
prove that he’s guilty—not in lieu of trying to kill him. They’re
still trying to kill him, but just in case we don’t find him to kill
him, at least we want to indict him. And the equivalence, how
identical that was, was so striking. This was essentially Obama
saying, “I, the President, hereby impose the death penalty on this
American citizen with no trial,” and then eight months later he says,
“Well, now it’s time to get around to charging him with a crime.” It’s
sentence first, verdict after, just like the Red Queen in Alice in
Wonderland decreed.

AMY GOODMAN: Glenn Greenwald, the racial and ethnic exploitation of
economic insecurity?

GLENN GREENWALD: Well, I think, you know, one of the real dangers in
terms of political extremism is when there are people who are
suffering economically. And we have pervasive economic suffering in
the United States. And one of the problems has been is that the
Democratic Party has offered people who are truly angry and scared
about their futures very few solutions, because they’ve been perceived
accurately as standing for public—for corporate interests and
lobbyists. And so, the void that has been left has been filled by
these extremists on the right who use, traditionally and right now,
economic, racial and other forms of culturally divisive tactics in
order to exploit this economic anxiety. You see that with
Islamophobia. You see that with fear mongering over immigration. And I
think that’s when it becomes quite dangerous, when you combine that
kind of demagoguery with economic exploitation, like the right is
doing.

AMY GOODMAN: Finally, you’re here in New York to participate in an
event sponsored by Brooklyn Law School on the Mavi Marmara, on the
Gaza aid flotilla. It’s an issue that you have taken on in a big way.

GLENN GREENWALD: Yeah, it’s Wednesday at 6:00 p.m. It’s at Brooklyn
Law School. It’s open to the public. There’s a dinner served with it.
And I think, you know, one of the real challenges that we have is to
go back and look at how the American media depicted that incident,
because the level of propaganda that shaped American discourse around
that event, I think, was unlike any other. And it’s very—

AMY GOODMAN: This was the Memorial Day weekend in the United States,
but it was when the Israeli commandos opened up fire on the Mavi
Marvara and killed nine—eight Turks, one American citizen—onboard.

GLENN GREENWALD: Precisely. And if you go back and do a dissection,
you know, kind of a post-mortem, about how the American media behaved
and how the American people were misled about that incident, while it
took place and in the weeks after, I think it’s incredibly
instructive. And that’s what this event is intended to do.

AMY GOODMAN: Well, I want to thank you for being with us, Glenn
Greenwald.

---------

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Jeremy H. Donovan
2010-09-29 02:28:19 UTC
Permalink
I think Greenwald is kind of an 'independent'. He makes some good
points, but they're sort of 'show boat points'. Obama is actually
more of a 'moderate' on a lot of issues, and he caters to compromise
with the right whenever he can. Amy Goodman is pretty much from the
left. Yes, of course there is some political maneuvering going on in
the Obama administration, there would absolutely have to be since some
of their main agenda items have been stymied.

As for where Salon is politically in general, I don't really know
(probably center left), but since you mention it, about a week ago
that guy Robert Marshall who did the Castaneda interview for Salon
magazine interviewed me for a new book he's writing on Castaneda. We
exchanged several e-mails and then had about a 2 hour phone
conversation (because he's in New York and I'm in LA). I had not been
interviewed by anyone on the topic of Castaneda since that big Rolling
Stone article that got killed.
LowRider44M
2010-09-30 22:24:02 UTC
Permalink
I think Greenwald is kind of an 'independent'.  He makes some good
points, but they're sort of 'show boat points'.  Obama is actually
more of a 'moderate' on a lot of issues, and he caters to compromise
with the right whenever he can.  Amy Goodman is pretty much from the
left.  Yes, of course there is some political maneuvering going on in
the Obama administration, there would absolutely have to be since some
of their main agenda items have been stymied.
As for where Salon is politically in general, I don't really know
(probably center left), but since you mention it, about a week ago
that guy Robert Marshall who did the Castaneda interview for Salon
magazine interviewed me for a new book he's writing on Castaneda.  We
exchanged several e-mails and then had about a 2 hour phone
conversation (because he's in New York and I'm in LA).  I had not been
interviewed by anyone on the topic of Castaneda since that big Rolling
Stone article that got killed.
How long ago was the Rolling Stone article event.
That's pretty darn curious behavior to engage and disengage on a
subject that has a long linear story arc.
They obviously have to nix articles that get lost in pursuit of a
clarified vision of the subject matter; which is usually a second tier
rock n roll outfit.

Do you have a link for Salon article on CC?
LowRider44M
2010-09-30 22:26:40 UTC
Permalink
Thx for the tip.

http://www.salon.com/books/feature/2007/04/12/castaneda
slider
2010-10-01 01:17:18 UTC
Permalink
LowRider posted...
Post by LowRider44M
http://www.salon.com/books/feature/2007/04/12/castaneda
### - excellent article, reads more like an advert for cc than a critique haha...

and still selling 10,000+ books a year?? (was in 2006 anyway)

interesting character! ;-)
Jeremy H. Donovan
2010-10-01 02:54:11 UTC
Permalink
Post by LowRider44M
I think Greenwald is kind of an 'independent'.  He makes some good
points, but they're sort of 'show boat points'.  Obama is actually
more of a 'moderate' on a lot of issues, and he caters to compromise
with the right whenever he can.  Amy Goodman is pretty much from the
left.  Yes, of course there is some political maneuvering going on in
the Obama administration, there would absolutely have to be since some
of their main agenda items have been stymied.
As for where Salon is politically in general, I don't really know
(probably center left), but since you mention it, about a week ago
that guy Robert Marshall who did the Castaneda interview for Salon
magazine interviewed me for a new book he's writing on Castaneda.  We
exchanged several e-mails and then had about a 2 hour phone
conversation (because he's in New York and I'm in LA).  I had not been
interviewed by anyone on the topic of Castaneda since that big Rolling
Stone article that got killed.
How long ago was the Rolling Stone article event.
I think it was in 1998, when everything was still very fresh. This
guy - I think his name was Mike something from Rolling Stone -
interviewed several of us in detail and wrote a big, long detailed
article. I even saw a draft of it at one point somehow. Can't quite
recall. Ha, I found it! The guy's name was Mike Sager. And it looks
like he put the Castaneda article - or a rewrite/expansion thereof -
into this book of his:
http://www.amazon.com/Scary-Monsters-Super-Freaks-Stories/dp/1560255633
http://search.barnesandnoble.com/Scary-Monsters-and-Super-Freaks/Mike-Sager/e/9781560255635

Quote from the Publisher's Weekly review of Sager's book:
"...two articles are especially compelling. One is an intimate
portrait of Janet Cooke (with whom Sager was once involved), the
journalist whose Pulitzer Prize-winning, and fake, story about an
eight-year-old heroin addict got her fired from the Washington Post;
the other is a lengthy, detailed look at the life and death of author
Carlos Castaneda."

Hmmm. I wonder if Mike used any of my comments in his article on CC?
Damn, I just ordered it...

Look here, you can actually read 4 pages where Sager is talking about
Melissa, who was one of the 'Electric Warriors' (pages 440-443).
She's nice. I've partied with her a couple of times over at Greg and
Gabi's. Melissa was Amy Wallace's 'personal assistant' for a while
too.
http://books.google.com/books?id=3QBuyvqIq9sC&pg=PA441&lpg=PA441&dq=%22Carlos+Castaneda%22+%22Mike+Sager%22&source=bl&ots=P44CWpAM2s&sig=BmSnQlGTOKi12kZHgKpB8z0I6-o&hl=en&ei=vkulTIPsJc_vngeI9tSQAQ&sa=X&oi=book_result&ct=result&resnum=3&ved=0CCAQ6AEwAg#v=onepage&q&f=false
Post by LowRider44M
That's pretty darn curious behavior to engage and disengage on a
subject that has a long linear story arc.
They obviously have to nix articles that get lost in pursuit of a
clarified vision of the subject matter; which is usually a second tier
rock n roll outfit.
I think the original article may have been too long, detailed, and
controversial. Rolling Stone might have been afraid of getting sued
over it. I'm really not sure though.
Post by LowRider44M
Do you have a link for Salon article on CC?
Looks like you found it. This guy Robert Marshall seems pretty cool.
I didn't mind talking with him, and he says he's going to run all my
material by me before he prints it.

And have you seen the book of 'Felix Wolf'?


This is actually Paul Gutsmuth. He was another Sunday Class member.
I've read his book. He is claiming to have been one of Castaneda's
'apprentices'.
Jeremy H. Donovan
2010-10-01 04:23:31 UTC
Permalink
I see that there's a factual error on page 443 of Sager's book.
...Howard Lee, with whom Carlos had studied for many years, and to whom Ixtlan had been dedicated.
Wrong. It was the Fire From Within that was dedicated to Howard Lee.
You know, people just shouldn't write anything on Castaneda without
consulting me first. LOL.
Jeremy H. Donovan
2010-10-11 15:47:23 UTC
Permalink
Once again Krugman says what I've been thinking for a long time. My
opinion for a long time has been: well, the stimulus wasn't large
enough or broad enough, so do another one already, and this time let's
do some major infrastructure job creation stuff. It has seemed like a
no-brainer to me for at least a year, and it isn't even my job. So I
guess I'd have to say that I also agree with the view that the extreme
partisan nature of our 'two party' system has recently become even
more dysfunctional than it was before.

***

October 10, 2010
Hey, Small Spender
By PAUL KRUGMAN

Here’s the narrative you hear everywhere: President Obama has presided
over a huge expansion of government, but unemployment has remained
high. And this proves that government spending can’t create jobs.

Here’s what you need to know: The whole story is a myth. There never
was a big expansion of government spending. In fact, that has been the
key problem with economic policy in the Obama years: we never had the
kind of fiscal expansion that might have created the millions of jobs
we need.

Ask yourself: What major new federal programs have started up since
Mr. Obama took office? Health care reform, for the most part, hasn’t
kicked in yet, so that can’t be it. So are there giant infrastructure
projects under way? No. Are there huge new benefits for low-income
workers or the poor? No. Where’s all that spending we keep hearing
about? It never happened.

To be fair, spending on safety-net programs, mainly unemployment
insurance and Medicaid, has risen — because, in case you haven’t
noticed, there has been a surge in the number of Americans without
jobs and badly in need of help. And there were also substantial
outlays to rescue troubled financial institutions, although it appears
that the government will get most of its money back. But when people
denounce big government, they usually have in mind the creation of big
bureaucracies and major new programs. And that just hasn’t taken
place.

Consider, in particular, one fact that might surprise you: The total
number of government workers in America has been falling, not rising,
under Mr. Obama. A small increase in federal employment was swamped by
sharp declines at the state and local level — most notably, by layoffs
of schoolteachers. Total government payrolls have fallen by more than
350,000 since January 2009.

Now, direct employment isn’t a perfect measure of the government’s
size, since the government also employs workers indirectly when it
buys goods and services from the private sector. And government
purchases of goods and services have gone up. But adjusted for
inflation, they rose only 3 percent over the last two years — a pace
slower than that of the previous two years, and slower than the
economy’s normal rate of growth.

So as I said, the big government expansion everyone talks about never
happened. This fact, however, raises two questions. First, we know
that Congress enacted a stimulus bill in early 2009; why didn’t that
translate into a big rise in government spending? Second, if the
expansion never happened, why does everyone think it did?

Part of the answer to the first question is that the stimulus wasn’t
actually all that big compared with the size of the economy.
Furthermore, it wasn’t mainly focused on increasing government
spending. Of the roughly $600 billion cost of the Recovery Act in 2009
and 2010, more than 40 percent came from tax cuts, while another large
chunk consisted of aid to state and local governments. Only the
remainder involved direct federal spending.

And federal aid to state and local governments wasn’t enough to make
up for plunging tax receipts in the face of the economic slump. So
states and cities, which can’t run large deficits, were forced into
drastic spending cuts, more than offsetting the modest increase at the
federal level.

The answer to the second question — why there’s a widespread
perception that government spending has surged, when it hasn’t — is
that there has been a disinformation campaign from the right, based on
the usual combination of fact-free assertions and cooked numbers. And
this campaign has been effective in part because the Obama
administration hasn’t offered an effective reply.

Actually, the administration has had a messaging problem on economic
policy ever since its first months in office, when it went for a
stimulus plan that many of us warned from the beginning was inadequate
given the size of the economy’s troubles. You can argue that Mr. Obama
got all he could — that a larger plan wouldn’t have made it through
Congress (which is questionable), and that an inadequate stimulus was
much better than none at all (which it was). But that’s not an
argument the administration ever made. Instead, it has insisted
throughout that its original plan was just right, a position that has
become increasingly awkward as the recovery stalls.

And a side consequence of this awkward positioning is that officials
can’t easily offer the obvious rebuttal to claims that big spending
failed to fix the economy — namely, that thanks to the inadequate
scale of the Recovery Act, big spending never happened in the first
place.

But if they won’t say it, I will: if job-creating government spending
has failed to bring down unemployment in the Obama era, it’s not
because it doesn’t work; it’s because it wasn’t tried.
Jeremy H. Donovan
2010-11-01 15:18:06 UTC
Permalink
I think Krugman is exactly right about what he says here.

***

October 31, 2010
Mugged by the Moralizers
By PAUL KRUGMAN

“How many of you people want to pay for your neighbor’s mortgage that
has an extra bathroom and can’t pay their bills?” That’s the question
CNBC’s Rick Santelli famously asked in 2009, in a rant widely credited
with giving birth to the Tea Party movement.

It’s a sentiment that resonates not just in America but in much of the
world. The tone differs from place to place — listening to a German
official denounce deficits, my wife whispered, “We’ll all be handed
whips as we leave, so we can flagellate ourselves.” But the message is
the same: debt is evil, debtors must pay for their sins, and from now
on we all must live within our means.

And that kind of moralizing is the reason we’re mired in a seemingly
endless slump.

The years leading up to the 2008 crisis were indeed marked by
unsustainable borrowing, going far beyond the subprime loans many
people still believe, wrongly, were at the heart of the problem. Real
estate speculation ran wild in Florida and Nevada, but also in Spain,
Ireland and Latvia. And all of it was paid for with borrowed money.

This borrowing made the world as a whole neither richer nor poorer:
one person’s debt is another person’s asset. But it made the world
vulnerable. When lenders suddenly decided that they had lent too much,
that debt levels were excessive, debtors were forced to slash
spending. This pushed the world into the deepest recession since the
1930s. And recovery, such as it is, has been weak and uncertain —
which is exactly what we should have expected, given the overhang of
debt.

The key thing to bear in mind is that for the world as a whole,
spending equals income. If one group of people — those with excessive
debts — is forced to cut spending to pay down its debts, one of two
things must happen: either someone else must spend more, or world
income will fall.

Yet those parts of the private sector not burdened by high levels of
debt see little reason to increase spending. Corporations are flush
with cash — but why expand when so much of the capacity they already
have is sitting idle? Consumers who didn’t overborrow can get loans at
low rates — but that incentive to spend is more than outweighed by
worries about a weak job market. Nobody in the private sector is
willing to fill the hole created by the debt overhang.

So what should we be doing? First, governments should be spending
while the private sector won’t, so that debtors can pay down their
debts without perpetuating a global slump. Second, governments should
be promoting widespread debt relief: reducing obligations to levels
the debtors can handle is the fastest way to eliminate that debt
overhang.

But the moralizers will have none of it. They denounce deficit
spending, declaring that you can’t solve debt problems with more debt.
They denounce debt relief, calling it a reward for the undeserving.

And if you point out that their arguments don’t add up, they fly into
a rage. Try to explain that when debtors spend less, the economy will
be depressed unless somebody else spends more, and they call you a
socialist. Try to explain why mortgage relief is better for America
than foreclosing on homes that must be sold at a huge loss, and they
start ranting like Mr. Santelli. No question about it: the moralizers
are filled with a passionate intensity.

And those who should know better lack all conviction.

John Boehner, the House minority leader, was widely mocked last year
when he declared that “It’s time for government to tighten their
belts” — in the face of depressed private spending, the government
should spend more, not less. But since then President Obama has
repeatedly used the same metaphor, promising to match private belt-
tightening with public belt-tightening. Does he lack the courage to
challenge popular misconceptions, or is this just intellectual
laziness? Either way, if the president won’t defend the logic of his
own policies, who will?

Meanwhile, the administration’s mortgage modification program — the
program that inspired the Santelli rant — has, in the end,
accomplished almost nothing. At least part of the reason is that
officials were so worried that they might be accused of helping the
undeserving that they ended up helping almost nobody.

So the moralizers are winning. More and more voters, both here and in
Europe, are convinced that what we need is not more stimulus but more
punishment. Governments must tighten their belts; debtors must pay
what they owe.

The irony is that in their determination to punish the undeserving,
voters are punishing themselves: by rejecting fiscal stimulus and debt
relief, they’re perpetuating high unemployment. They are, in effect,
cutting off their own jobs to spite their neighbors.

But they don’t know that. And because they don’t, the slump will go
on.
LowRider44M
2010-11-08 13:07:40 UTC
Permalink
He has a solid talent for summarizing news trends and underlying cause
and effect synergies.


Listening to business channels over the years I know the idea of
"reducing excess capacity" is a huge
factor in the intersecting rivers of economic forces. It just takes a
long time to rebalance the supply vs demand
forces. There are massive assets turning to rust or dust because
people still can't accept ten cents on the dollar.

Eventually they shall bite the bullet and unload unused capacity as
time drags on. Great Article!

slider
2010-09-29 11:52:41 UTC
Permalink
jeremy wrote...

I would have to agree, 'within reason'. As an example, my own actions
and attitudes are practically diametrically opposed to what they were
25 years ago. And yet, in a lot of ways I'm not really that
different...

### - heh my immediate inclination was to slowly roast you over this,
rotisserie-fashion hehehe ;-)

however... i also find that your above statement contains the potential for a
profound realisation, the implications of which being nothing less than staggering
if 'fully' realised and acted upon...

e.g. to make the above statement means to realise that even though you now find
yourself on the opposite end of the pole (i.e. "diametrically opposed") yet do you
also realise that this massive shift in position has ultimately resulted in you
basically being no better off now than you were all those years ago, the
ideologies and beliefs involved have changed from one extreme to the other
ultimately making no real difference to you personally in that your system of
belief remained intact and seemingly genuine to you personally 'regardless' of
which end of the pole you were at, your perceived truth at the time being and
remaining relative to your position wherever along that pole; only adding evidence
to the fact that such perceived truths are meaningless to anyone except the person
perceiving them and are thus only relative...

that a pole is a pole no matter what end of that pole that you're on, one's
perception of truth shifting to accommodate one's whatever position along that
pole (or line) even to the point of going from one extreme to the other and it
making no real difference except perceptually to the person involved!

the point (and realisation) being that obviously our perception fills in the
blanks accordingly no matter where along that pole one might be, the fact that
people then defend their ultimately arbitrary-position to the death little
realising that their perception and resulting opinions automatically shift
accordingly to accommodate any position whatsoever along its entire length,
accounting for the various beliefs and rationales (similar and opposing) that
typically abounds in our world as the whole of humanity is veritably strung-out
along that whole line of potential perception from one end to the other and at all
possible places and stations in between (many stuck in one place for life!)

of course to have travelled from one end to the other as you have done (i.e. from
faith and belief to science and reason: things "diametrically opposed" etc)
potentially being the one experience that can provide someone thus otherwise
hooked to their perceptual world with the above realisation, thus allowing them
the possibility of seeing that perceptual line in its entirety, thus potentially
enabling a person to take a small step back from the engrossment of their
otherwise arbitrary relative truths and practices whereby it then becomes apparent
that actually there's no rules to say that that's the way we absolutely have to
remain and deal with our perception(s) and relative truths of the world...

that from this pov one can thus deliberately 'hold-back' from plunging in and
wrestling along with everyone else to establish some one idea over another or
whatever, whereon one finds oneself at the gates of another realm of perceptual
being, one wherein knowledge and understanding are never the result of thinking or
of figuring things out to make things fit the whatever-mould it's possible to
adopt, but instead comes to us directly or not at all, is self evident and self
explanatory or not worth bothering with...

anyway, quite a long time ago you became very angry at me for suggesting that you
changing from being a true believer to a rationalist hadn't resulted in any real
change in you personally, that you had effectively just shifted allegiances from
one camp to the other rather than 'actually' changing anything about yourself,
only now i think you can perhaps at least appreciate where i was actually coming
from at the time rather than what you were accusing me of (that i was still
advocating for belief systems etc) and perhaps even now agree with me that all
systems (of thought and thinking) are similar in method and approach, even when in
seemingly direct opposition to one another?

or of course we can just go back to the endless affirmations of your 'currently'
adopted system of belief... rationalism, logic and science, and how that's all so
much better than anything else because that's what you're presently into...

personally, i can only implore you to deliberately stay out here for a bit longer
and have a little look around :)
Jeremy H. Donovan
2010-09-30 07:23:14 UTC
Permalink
Slider ... why? That's all. Just ... why?

Your petty judgments have no relevance to my reality at all. You seem
to have literally zero ability to see the real me, or to understand
what I say in the way it's meant.

Just please don't talk to me. To watch you repeat the same shallow
mistakes over and over is disgusting. One of is indeed a fool, but
not the one you think. Even people you thought were your 'friends'
like Chris left here because they got sick of your retarded bullshit.
slider
2010-09-30 09:19:45 UTC
Permalink
jeremy complains...
Post by Jeremy H. Donovan
Slider ... why? That's all. Just ... why?
### - i'll tell you 'exactly' why + i've told you before so it's absolutely
nothing new! (you 'already' know why!)
Post by Jeremy H. Donovan
Your petty judgments have no relevance to my reality at all. You seem
to have literally zero ability to see the real me, or to understand
what I say in the way it's meant.
Just please don't talk to me. To watch you repeat the same shallow
mistakes over and over is disgusting. One of is indeed a fool, but
not the one you think. Even people you thought were your 'friends'
like Chris left here because they got sick of your retarded bullshit.
### - ohhh don't go on so jeremy, i might have ribbed you in that first post, but
only to make a point re an obvious lie and seeming contradiction, plus i knew
exactly what you were saying because you've said it all before anyway, many times
in fact, so now you're only bible-thumping instead of conversing, 'again'
deliberately overlooking the actual issue involved by dragging everything down to
some personal level (the content of that post actually being an attempt to get
away from such difficult things, only you never seem to 'get it' and always but
always go-on all wounded and outraged etc etc, only you don't want to examine
'that' part and always go for the potentially insulting part instead, it's routine
of you to do this)

fact is you 'did' make that up about 'omens' etc and your fictitiously 'previously
written' comment on them, iow my mentioning an omen, even in a totally joking
sense, immediately had you rise to again attack even such an concept as 'omens' -
a kind of reflex bible-thumping on your part only of course its reason and
rationality that you're thumping every time now... and yes i pulled you up on it,
basically because it was totally unnecessary for you to do that, to turn a fairly
jovial and light-hearted conversation back away from humour and self deprecation
by 'pretending' a coincidence about the very subject you wish to ban entirely from
all conversation (what a coincidence! only of course it wasn't, you lied)

and so now you feign being all hurt and outraged by an unjustified attack which
was actually completely justified based on you making things up and then preaching
to us about how made up things ain't right?? nah, that's crap and you know it +
you certainly wouldn't tolerate it yourself under any circumstances yet you expect
others to do so with you - which IS hypocritical is it not?

(basically if there was any decency left in you you'd have immediately admitted
the truth and perhaps we could have then all just laughed at it and our (shared)
human foibles, only you refuse to be adult about it)

plus my second post to you however was of an entirely different nature and
made/raised several quite genuinely serious points, and which 'should' have served
to offset my first missive to you by bringing the conversation back on track to
that of third-party perception, only you of course totally ignore that opportunity
in favour of again parading yourself around like some injured and outraged peacock
instead of just dealing with the more serious issue contained therein, one that
incidentally was based upon your 'own' realisation and nothing at all that i was
personally inventing (i was 'adorning' it not attacking it)

i mean, why didn't you just address 'that' instead of your dying swan act?

as for ribbing you... well i don't need to be a scientologist to know how to push
'your' buttons jeremy heh + if ya really don't like it then why present me with so
very many opportunities to do so? (big question eh)

as for talking, well truth is you don't talk at all, i.e. at every opportunity you
merely just repeat-preach the same old shit time after time until it's become a
kind of dogma with you to do so (and as we both know, dogma ain't where it's at
jeremy and never will be)

iow, you stop doing it and you'll find that so will i (basically because there
wont be anything for me to latch onto along those lines as i never attack people
for nothing you know + ribbing isn't attacking btw, ribbing is friendly and thus
is actually more like affection:)

problem with you jeremy is that you're still being 'disingenuous' and
'unreasonable' even though you advocate for reason and truth, and that's something
i will never ever condone in 'anyone', so it's not just all about 'you' and i
think you should know that by now or you're just not as smart as you reckon
yourself to be...

-----------------------

"To become the spectator of one's own life is to escape the suffering of life."
--Oscar Wilde
Jeremy H. Donovan
2010-10-01 02:17:21 UTC
Permalink
Post by slider
fact is you 'did' make that up about 'omens' etc and your fictitiously 'previously
written' comment on them
No I didn't make it up, you boob. I'd posted that exact comment about
'omens' to the Sustained Reaction board, like the day before.
Post by slider
iow my mentioning an omen, even in a totally joking
sense, immediately had you rise to again attack even such an concept as 'omens' -
I was joking back with you about it being an 'omen'. And then I just
reposted my SR comment, which was actually more serious, but see I'm
capable of switching gears like that. You don't seem to be able to.
Never again. Just don't talk to me. Slider, I've read hundreds of
your posts over the years and I *absolutely guarantee* that you have
*nothing* to say that I'm ever going to want to hear. Just leave me
alone.
slider
2010-10-01 02:46:36 UTC
Permalink
jeremy replied...
Post by slider
fact is you 'did' make that up about 'omens' etc and your fictitiously 'previously
written' comment on them
No I didn't make it up, you boob. I'd posted that exact comment about
'omens' to the Sustained Reaction board, like the day before.
Post by slider
iow my mentioning an omen, even in a totally joking
sense, immediately had you rise to again attack even such an concept as 'omens' -
I was joking back with you about it being an 'omen'. And then I just
reposted my SR comment, which was actually more serious, but see I'm
capable of switching gears like that. You don't seem to be able to.
Never again. Just don't talk to me. Slider, I've read hundreds of
your posts over the years and I *absolutely guarantee* that you have
*nothing* to say that I'm ever going to want to hear. Just leave me
alone.

### - well it's not all just for you you know :)

plus good if i made a mistake (i don't mind making honest ones) your joke re omens
'was' appreciated, it was just the follow up to it that seemed so contrived and
unnecessary was all (i mean, who needs bible-thumping in the middle of a joke?)

so i mentioned it and then i did actually change tracks quite overtly in my other
post to you instead of merely continuing on from the first, an open subject
(ultimately raised by yourself from a comment you'd made) that had nothing to do
with nothing about ribbing or anything, yet you dragged us right back to here
anyway without even a second thought...

smile, i remember something dan murray once stated about "i post here assuming
that the people here have already dealt with their ego and so wont be offended"
(or words to that effect)

obviously you've yet to effectively deal with yours or you wouldn't get into so
much difficulty...

(i.e. lighten up dude, it's only the end of the world :)
slider
2010-09-29 05:26:22 UTC
Permalink
jeremy again makes us all laugh :)
Post by slider
### - ha ha how very apt, maybe you should go to it ;-)
(it's a sign i tell you! it's a sign! ;)
Funny you would say that. Just today I wrote something about 'omens'.
### - nonsense, admit that you're making that up just so you can 'repeat-opine'
you're by-now standard denial of our life-condition and circumstance in-favour of
some over-rationalised reaction to some of the less rational things that often
happen to people walking around on this earth... the fact that you still feel this
'need' to lie being the 'proof' that you still live in a world of bs of your own
design, making and perpetuation :)
Post by slider
***
What it really says if you believe 'omens' are telling you how to
behave
1) You're self-centered to the point of believing everything that
happens is about you
and/or ...
You're deluded to the point of believing some 'supernatural
force' is concerned enough with our human lives to be busily
providing magical 'instructions' to anyone 'special' enough
to 'read them'.
2) You're susceptible to wishful thinking and/or arrogance,
imagining your interpretations of the 'instructions' are correct.
### - i made a 'joke' (i thought a fairly amusing one heh:) but instead of joining
in the laughing (an invitation to laugh at ourselves for instance) you went for
this above rationalised bs that even 'you' felt the need to disguise and lie about
as to its origin (i.e. because it's ultimately all a lie anyway), something that
only proves your spirit is still dead even after all these years, how dull...

i mean, didn't it even 'occur' to you that surrounding, what you consider to be
the truth with an obvious lie, would in fact weaken/destroy your affirmation
instead of strengthening it? particularly seeing as your whole argument recently
has been totally adverse to 'any' kind of truth/reality ever being correctly
presented via bs (or made up) stories?? (slider scratches his head)

that you are in fact now here doing 'yourself' exactly what you object to in
others and thinking it's all ok and wont be noticed?? it's hypocritical!

i.e. you advocate for truth and reality over illusion while hiding behind bs and
lies, and you really expect that to fly in this place??

"i think someone here is a fool", boomed bengito ;-)
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