girdles_gone_wild posted:
How am I supposed to interpret this?

the left side is what they talk about when they mention debt-to-GDP, the right side actually matters. the left side is undoubtedly preventing the right side from getting worse.

if you sell something (including your own labor-power) and have debt, you have to use the money to pay down that debt, meaning it won't go into buying anything else. that money not spent on something else is in turn a sale that someone else can't make, ad infinitum.

GDP is the prices and quantities of all final sales summed together, so that tells us that income for each of those countries is a lot lower than what is needed to pay off all of the private debt

dm posted:
yeah it's not english, sorry. i'm not very good at translating it. the "obvious" is also sort of problematic with the virtual media blackout on a lot of relevant things since 2008. like the fact that the fed bailed the banks out for multiple trillions that most certainly did not get "paid back" rather than the $700 billion is just now hitting the media.

you could see it in publicly available data before, but you have to know how to interpret it and then when you do there's all sorts of propaganda to make it sound less believable.

You Know What You Must Do My Leige

Crow posted:
lmao

http://www.lewrockwell.com/blog/lewrw/archives/99238.html

In 2004 at a session of the Southern Economic Association meetings in New Orleans, Paul Krugman was the speaker and in the Q&A (with Dr. Joe Salerno sitting next to me), I asked Krugman if he supported the 70 percent tax rates that existed before the tax cuts of 1981. "No!" he exclaimed, and added (these exact words), "Those rates were insane!"

In the next paragraphs, the guy who once called 70 percent an "insane" rate now attacks anyone who might say, well, what Krugman told me in 2004.

http://krugman.blogs.nytimes.com/2011/11/22/taxing-job-creators/

economics without procedures!

yeah, that's why i pick him out over other economists. he's a paradigmatic opportunistic liberal and an economist!

discipline posted:
krugman is an unprincipled scab I think I said that like 3 or 4 pages ago

i imagine that you remember the stuff he used to write about in the 90's with "globalization" and third world countries. his old columns are at Slate if you feel like taking a look: http://www.slate.com/authors.paul_krugman.html

girdles_gone_wild posted:
Every time dm goes into the economic disaster thread in D&D and owns the shit out of everyone by trashing Krugman, etc., the entire thread grinds to a halt for about 5 days or so until someone takes the leap to 'change' the subject. Then, everyone just completely forgets about dm's post and goes back to Krugman fellatio until dm reappears releasing the Kraken, and the cycle is repeated.

they also get seriously upset about it. it's like they need to defend his honor or something. there was an argument spanning several pages earlier in the thread where the tension reached its peak and i had to break their will to resist.

now it's just like what you're talking about though because they've realized that arguments from authority don't work.

girdles_gone_wild posted:
Hey dm

I understand that all... except you didn't explain what the "guarantees" are.

from a former ECB board member turned Goldman Sachs adviser: http://www.ft.com/intl/cms/s/0/41640740-1a7a-11e1-ae4e-00144feabdc0.html

So, why is there pressure on the ECB to act as lender of last resort? Because this term is used, or one should say badly misused, for totally different actions: namely a commitment by the central bank in principle to make unlimited purchases of government bonds.

The argument for this request is often explained like this. Whereas, for example, the public debt to gross domestic product ratio for Spain is much lower than that for the US or the UK, the interest rate for Spanish sovereign bonds is much higher than for these countries. The reason is seen in the fact that the Federal Reserve and the Bank of England, “if needed”, can buy unlimited amounts of their sovereign bonds. In contrast, Spain does not have this option as it is a member of the euro area and has no access to the money printing machine. So, the argument goes, if the ECB would only commit itself to play the same role for Spanish – and for all the other governments of the euro area – sovereign bond interest rates would fall substantially. If there is such a panacea to solve the eurozone problems, why not use it?

To answer this question we have to look at two different dimensions of the problem. Firstly, the broader aspect: Should a central bank act as the ultimate buyer of public debt? (One should not disguise it under the term of lender of last resort). Solvency of a sovereign debtor is traditionally defined as the state being able to service its debt by collecting taxes. Bringing this issue into the domain of the central bank means transferring an obligation of public finance into a monetary phenomenon. Nota bene: not of monetary policy!

All the arguments in favour of such a “solution” of the public debt problem imply that the central bank will be taken hostage by politics (history provides us with a number of bad examples). How would investors react to such a new regime? Would they expect higher inflation in the future? If so, what would be the effect on long term interest rates? If those rates rose substantially this would lead to new problems for the sustainability of public finance. It is futile to speculate on a possible spiral of dangerous developments, but ignoring this risk is irresponsible. Stressing the role of the central bank as the ultimate buyer of public debt should be seen as an indication of the pathological state of public finances not as a sign of strength.

Secondly, the situation in the euro area is fundamentally different from the US or the UK . No one would argue that the Fed should guarantee the debt of individual states. No need because there are strict limits for debt financing by US states . This is also a fundamental principle of European Monetary Union (EMU) as it was designed by the Maastricht treaty and presented to the people in countries getting the euro as the currency.

This is not a flaw in the institutional arrangement of EMU , but the prohibition of monetary financing is an indispensable element for a stable currency . Pressing the ECB into the role of ultimate buyer of public debt of individual member states would create the biggest conceivable moral hazard .

On top of these alarming economic and monetary consequences, providing monetary financing would break the law – a constitution ratified by all governments and parliaments. Should one be surprised that a number of well-known economists ignore legal principles? Who is disappointed by the fact that numerous politicians and European bureaucrats press hard on the ECB to violate the law? Now even some central bankers follow this line. Imagine: unelected technocrats as they are often called lifting themselves above the law.

This happens when big ideas are floated, eg to strengthen the rules of the Stability and Growth Pact and even to advance EMU in the direction of a fiscal union. How credible is an announcement of “strict future rules” if at present violation of law is so widely not only accepted, but requested by academics, politicians and even central bankers? Will the future new rules survive the next crisis? And what about investors and markets? Is it risky to predict that a crisis will occur again when the credibility of the central bank and solvency of public finance will be anew at stake? And that speculation will be blamed for conspiring against an otherwise stable arrangement?

If the ECB goes in the direction of becoming the ultimate buyer of the public debt of member states detailed consequences are hard to predict. However, one thing seems to be certain. It would be a daunting challenge to restore credibility.

http://krugman.blogs.nytimes.com/2011/03/25/deficits-and-the-printing-press-somewhat-wonkish/

The key thing to remember is that current conditions — lots of excess capacity in the economy, and a liquidity trap in which short-term government debt carries a roughly zero interest rate — won’t always prevail. As long as those conditions DO prevail, it doesn’t matter how much the Fed increases the monetary base, and it therefore doesn’t matter how much of the deficit is monetized. But this too shall pass, and when it does, things will be very different.

....And now suppose that for whatever reason, we’re suddenly faced with a strike of bond buyers — nobody is willing to buy U.S. debt except at exorbitant rates.

So then what? The Fed could directly finance the government by buying debt, or it could launder the process by having banks buy debt and then sell that debt via open-market operations; either way, the government would in effect be financing itself through creation of base money. So?

Well, the first month’s financing would increase the monetary base by around 12 percent. And in my hypothesized normal environment, you’d expect the overall price level to rise (with some lag, but that’s not crucial) roughly in proportion to the increase in monetary base. And rising prices would, to a first approximation, raise the deficit in proportion.

So we’re talking about a monetary base that rises 12 percent a month, or about 400 percent a year.

Does this mean 400 percent inflation? No, it means more — because people would find ways to avoid holding green pieces of paper, raising prices still further.

so yeah that's the deal with not speaking in english. you see the imagery with the "green pieces of paper" though? gotta keep "money" and "debt" separate so we don't get any political interference between them, with the debt "worth" huge sums of money and the money all covered in debt!

i also like how he used the word "launder" like it's something "unclean" with the government having such a close relationship to bankers and everything. open market operations are a totally "normal" thing that take place all the time. it's what scared the fuckers so badly during the debt ceiling thing

Edited by dm (Dec. 2, 2011 01:11:20)

Goldman, in its 2012 outlook this week, was boldly bullish on oil, calling Brent at $127.50 a year from now as Chinese demand keeps climbing. This week Brent hovered near $110.

“All this creates a very real risk for a significant oil price spike in 2012 that could threaten world oil demand and economic growth,” the bank warned. (These ominous potential repercussions did not stop Goldman recommending clients profit from any increase by going long July 2012 crude.)

This brings us back to the US, which still has the world’s biggest oil appetite. How much would a jump in oil prices hurt the US consumer, and thus the economy and Wall Street generally? I called James Hamilton, an economist at the University of California at San Diego. His research highlights how oil increases affect growth.

He noted that since the summer, petrol prices have declined along with global crude prices, putting cash back in consumer pockets. With gasoline still averaging $3.30 a gallon, “there has been some burden on the economy overall. Readings on consumer sentiment remain pretty low,” Prof Hamilton told me.

But Americans are driving less and generally doing it in smaller cars.

“That is one reason why we’re not quite as vulnerable to something like a flare-up in Iran,” he said.

In 2008, when crude shot to nearly $150, the shock helped exacerbate the US recession already under way. Thanks to changes this sparked in consumers, worst-case scenarios in 2012 may not be as dire.

they are treating already produced materials that go further into production as "investments" and as the stock bubble deflates, money managers shift towards this stuff. it's sort of like collecting a tax on this stuff because the price increases have nothing to do with the rate of output ("supply") as the cartoons that economists use would suggest.

what they do is shift the attention to the bad things about oil and imply that this is the wisdom of markets as arbiters of truth and justice as if there weren't other ways to cut down on oil consumption if that was actually the point here. this has been surprisingly effective. it's like David Harvey says about how "we're all neoliberals now"

notice the signifiers: http://www.nytimes.com/2008/06/27/opinion/27krugman.html

Congress has always had a soft spot for “experts” who tell members what they want to hear, whether it’s supply-side economists declaring that tax cuts increase revenue or climate-change skeptics insisting that global warming is a myth.

Right now, the welcome mat is out for analysts who claim that out-of-control speculators are responsible for $4-a-gallon gas.

Back in May, Michael Masters, a hedge fund manager, made a big splash when he told a Senate committee that speculation is the main cause of rising prices for oil and other raw materials. He presented charts showing the growth of the oil futures market, in which investors buy and sell promises to deliver oil at a later date, and claimed that “the increase in demand from index speculators” — his term for institutional investors who buy commodity futures — “is almost equal to the increase in demand from China.”

Many economists scoffed: Mr. Masters was making the bizarre claim that betting on a higher price of oil — for that is what it means to buy a futures contract — is equivalent to actually burning the stuff.

e2: this is what i was waiting for

from one of Clinton's deputy treasury secretaries named Roger Altman

http://www.ft.com/intl/cms/s/0/890161ac-1b69-11e1-85f8-00144feabdc0.html

The succession of political dramas in Europe, most recently the end of Socialist dominance in Spain, again shows the financial markets acting like a global supra-government. They oust entrenched regimes where normal political processes could not do so. They force austerity, banking bail-outs and other major policy changes. Their influence dwarfs multilateral institutions such as the International Monetary Fund. Indeed, leaving aside unusable nuclear weapons, they have become the most powerful force on earth.

The power of financial markets, however, is a double-edged sword. When that power is flexed, the immediate impact on society can be painful – wider unemployment, for example, frequently results and governments fall. Yet history suggests the longer-term effects can be often transformative and positive. For all the recent hand-wringing over the role of the markets, this could yet be the case in Europe, too.

After all, the Latin American debt crisis of the 1980s ultimately toppled Authoritarian regimes in Brazil and Argentina. The subsequent and de facto Mexican and Russian defaults transformed the budget and financing policies of those nations. The 1997-98 Asian crisis led to broad IMF-mandated reforms in Thailand, Indonesia and South Korea.

In hindsight, those crises look like tremors compared to the 2008 credit market collapse in the US and the current sovereign debt and banking crisis in Europe – events that have brought about stunning changes.

In late 2008, financial market pressures forced the US Congress to create the Troubled Asset Relief Program, which was charged with investing up to $700bn of taxpayer funds into weakened financial institutions. Tarp, which was seen as a Wall Street bail-out, was deeply unpopular. The programme’s creation and the sweeping financial re-regulation legislation that followed would have been unthinkable under any other circumstances.

In Europe, the elected leaders of five European Union members have been swept aside in just 18 months. Silvio Berlusconi’s near perpetual grip on power in Italy was broken almost overnight. Further, forced austerity is now spreading across Europe, despite public opposition.

How did the markets amass so much power? The answers lie in globalisation, blah, blah, blah...

Whether this power is healthy or not is beside the point. It is permanent. Even a resumption of traditional patterns in global capital flows would not change it.

Today’s remarkable economic growth in Brazil was facilitated by reforms emanating from the 1980s’ debt crisis. Both growth and governance in South Korea were accelerated by the late 1990s’ Asian crisis. Perhaps it is a Panglossian view, but, in the long term, Europe could be strengthened by the current crisis. After all, a smaller role for the state in Europe could facilitate a more competitive private sector to face the economic challenge posed by China and other emerging markets.

But, above all, there is no stopping the new policing role of the financial markets. There may be more frequent market crises. We should not rush to conclude that they will end in tears.

Edited by dm (Dec. 3, 2011 07:03:23)

Since then, however, mainstream economics has become obsessed with the ‘irresponsibility’ of opportunistic politicians who cater to an economically uneducated electorate by interfering with otherwise efficient markets, in pursuit of objectives—such as full employment and social justice—that truly free markets would in the long run deliver anyway, but must fail to deliver when distorted by politics. Economic crises, according to standard theories of ‘public choice’, essentially stem from market-distorting political interventions for social objectives. In this view, the right kind of intervention sets markets free from political interference; the wrong, market-distorting kind derives from an excess of democracy; more precisely, from democracy being carried over by irresponsible politicians into the economy, where it has no business. Not many today would go as far as Hayek, who in his later years advocated abolishing democracy as we know it in defence of economic freedom and civil liberty. Still, the cantus firmus of current neo-institutionalist economic theory is thoroughly Hayekian. To work properly, capitalism requires a rule-bound economic policy, with protection of markets and property rights constitutionally enshrined against discretionary political interference; independent regulatory authorities; central banks, firmly protected from electoral pressures; and international institutions, such as the European Commission or the European Court of Justice, that do not have to worry about popular re-election. Such theories studiously avoid the crucial question of how to get there from here, however; very likely because they have no answer, or at least none that can be made public.

it sounds like a reiteration, but if you look closely there are a few extensions there. a good example of the "public choice" thing is this. there's a sense in which it's true, but you can also see the sort of underlying cynicism and how it relates to some notions that are more or less "common sense" when we think about them. if you look at the wikipedia article on it and you'll notice some things that emerge elsewhere, like how "special interests" are defined as what ordinary people want.

xipe posted:

omipotent meerkats? sign me up!