## Thursday, June 30, 2011

### every corporate story starts and ends with declining profits

implication:

isolating this fact  by explaining everything explains nothing

## Wednesday, June 29, 2011

### the attack on sin ister doctor pangloss continues

http://monthlyreview.org/2011/06/01/the-emperor-has-no-clothes%e2%80%94but-still-he-rules#.TgomuwaMbJo.email

quite tedious at this point ...no ??

poor jb clark what a prat pranging he takes

i mean really
how can any rad not   like the innocent   plain speak     in this :

"The welfare of the laboring classes depends on whether they get much or little; but their attitude toward other classes—and, therefore, the stability of the social state—depends chiefly on the question, whether the amount that they get, be it large or small, is what they produce. If they create a small amount of wealth and get the whole of it, they may not seek to revolutionize society; but if it were to appear that they produce an ample amount and get only a part of it, many of them would become revolutionists, and all would have the right to do so. The indictment that hangs over society is that of “exploiting labor.” “Workmen” it is said, “are regularly robbed of what they produce. This is done within the forms of law, and by the natural working of competition.” If this charge were proved, every right-minded man should become a socialist; and his zeal in transforming the industrial system would then measure and express his sense of justice. If we are to test the charge, however, we must enter the realm of production. We must resolve the product of social industry into its component elements, in order to see whether the natural effect of competition is or is not to give to each producer the amount of wealth that he specifically brings into existence."
---- the magnificent mr clark ---

sorcerer  lucas on the other hand ...

" bring me the family broad axe will you  jeeves "

and yet to blast unit  rationality loses the main chance here

units can learn and be as rational as they please
even close on the real systems features and workings
if given but time enough

but hey they aren't

the chaotic stagger despite staying within channels
is subject to innovations
new features new workings

sort of
the recent  special investment vehicle menace
writ large

best utterence on same:

"Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation ....all fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned, and humanity is at last compelled to face with sober senses its real conditions of life, and its relations with itself."

but still the irrationality at the macro level can be critiqued
within the criterion of the enlightenment

we can indeed make   system wide reformations that are progressive

vide vickrey or lerner for a brace of  authentic old time patent medicine men
souls that operated  cleanly  selling remedies
with potential efficacy
lost  out there   among the  zillion snake oil salesmen
err   shall we say sherman ....

healers  lost among   heelers

speaking of the swell intended

my soft faced pal cuzzin it stiglitz takes a very un necessary  wetted noodle thrashing

the shirk model
is a parable  idiot
it serves to "story "
rationed jobs as capitalistically rational

any admission test seves as well

and really to the point
the sack remains the executioner of choice
among rational exploiters
even when avoidable

meditate

discuss

### do rads misconstrue the social "purpose" in capitalistic society of the cyclical nature of the reserve army ?

the argument :

in as much as increasing  the RAU is  contrived conciously  by macronauts
to murder a "run away " boom

--as per say  larry s
apropos all post WWII pre green span  recessions

"they were fed  policy  induced  ... murder one "

---

the murder is  all about curbing the "unhealthy " advance of product prices
not wage rates

though looking at the change in unit labor costs is the key observation
its not about wage rate control per se

notice

wage rate gains  can only be curbed by blocking the cost pass thru
ie the ability to effectively raise product prices
induced mass  sacking  say by  cutting credit flow rates  into production firms
which yes   reduces effective  demand directly
--by cutting firm spending on expansion od production or the capacity to produce --
but also  pari passu  reduces  aggreagate wage sourced household income
and thus reducing in turn household spending on final products
and of course
this curbs price increases by firms as inventory backs up at certain stations
of  the interlaced production  system

even if formally accurate as far as it goes
this is not the whole story obviously

---nb comp stat models
obviously  bypass the dynamic chain here
the egg hen bit is irrelevent if you just "show" the start and the finish ---

but what i like is spot lighting the  product sellers / price setters
as both target and key  players here
not the  unorganized mass of employees that are just labor sellers

--recall more directly in a job rationed system its the employers bidding up wages to poach from each other etc
\that causes the wage spiral
and in organized settings
pass thru  capacity --

if
a wage increase can't be effectively  past thru
because general market conditions are too weak
because lets say effective demand is crippled by credit policy
at all  or at least enough  important points and levels
to maintain operating margins
then
the wage gains won't be granted
----------------

review :
this  presentation strikes me as exceedingly  unsatisfactory
but the use of it by rads  is clear

implicitly this story form
shifts  the onus onto the capitalistic process itself
not the wage earners

a hunk of the wagery makes  "the  ultimate  sacrifice "
by getting the sack
they join the  small craft  outfits in the general culling
by artificial discretionary  credit drought

they inadvertantly serve the cause of  DOM ( decent operating margin ) preservation

at  least at the big corporations
the one's that cause the problem in the first instance because
they have  market  pricing power
both on  the buy side  labor and  raw commodities as well as  the sell side

the misery gets allocated   to workers and petty proprietors and  easily canabalized  incer stinkers

its all just business nothing personal
purely  incidental
the misery and loss  a necessary instrumentality of  dynamic discretionary mangement of the price level

the goal in a mudered boom is pricing restraint
at the corporate level

gentlemen restraining themselves by impersonal albeit compulsory  means

a mark up market
would accomplish this mission without the mass sack

## Tuesday, June 28, 2011

### squeezing the petty firms

"Total lending to non-financial businesses shrank for nine straight quarters starting in the fourth quarter of 2008, before turning slightly positive in the first quarter of 2011; on net, lending has declined by a cumulative \$4.2 trillion since Fall 2008. Over the same period, larger businesses were able to raise \$3.6 trillion by issuing debt securities"
---our wall street Romulan at treasury

### profile of a self launching wage push inflation spiral

no match up sez pk
he's right of course
but stags require brakes
if credit constriction is necessary
so be it !!!!

this shows pk is not on the same page as corporate interests  (CI):

"there’s every risk that a premature tightening will ensure that Britain faces a lost decade or more"

but paulie girl
the CI's want lots of simultaneous north economy  ...lost decades

of course there may be no tightening if the system looks on the verge of a stall

mustn't trigger a second dip  with all that uncertainty and  possibly disorder
that would be sub optimal

### so aweful needs a full posting here

"The strong-dollar policy is a US government policy based on the assumption that a strong exchange rate of the dollar is both in the US national interest and in the interest of the rest of the world. The policy was first enunciated by the then-Secretary of the Treasury Robert E Rubin, shortly after he succeeded Lloyd Bentsen as US Secretary of the Treasury on 11 January 1995. It followed a sharp rise in Treasury bond yields at the end of 1994 and the weakness of the dollar early in 1995, especially vis-à-vis the deutschmark and the yen — at the time the two major currencies after the dollar. The dollar hit 80.63 yen on 18 April 1995, which was its post-war low until 16 and 17 March 2011.
Since August 1995, the strong-dollar policy has consisted exclusively of periodic statements by government officials — mainly the Secretary of the Treasury, occasionally the Chairman of the Fed — insisting that the US continues to pursue a strong-dollar policy (Klein 2011). While not all Treasury Secretaries have explicitly advocated a strong dollar (notably Treasury Secretaries Paul O’Neill and John Snow), current Treasury Secretary Timothy Geithner has repeatedly affirmed his support.
The strong-dollar rhetoric contrasts with a weak-dollar reality (Buiter and Rahbari 2011). From their peaks early in 2002, the broad nominal effective exchange rate fell by 25.1% and the broad real effective exchange rate by 26.7% (Figure 1). There has also been an almost complete absence of any policy measures to support the dollar. The rationale behind the strong-dollar policy is to prevent a rise in the yields on US Treasuries and many related assets and to deflect potential allegations of ‘competitive depreciation’, while there are net trade benefits from a weak dollar. The strong-dollar policy thus relies on misguided foreign-exchange market participants or on ‘benign neglect’ — benign neglect of the actions or statements of US policymakers, that is. Either way, we think the continuation of the strong-dollar policy and weak-dollar reality damages the reputational capital of the Treasury and the Fed and reduces their ability to influence markets by using statements of intent or announcements, but is nevertheless unlikely to disappear anytime soon.
Figure 1. Dollar nominal and real effective exchange rates, Jan 2002-Apr 2011 (Jan 2002 = 100)

Note: 1 — Nominal trade-weighted exchange value of dollar vs. major currencies; 2 — real trade-weighted exchange value of dollar vs. major currencies; 3 — nominal broad trade-weighted exchange value of the dollar; 4 — real broad trade-weighted exchange value of the dollar. Sources: Federal Reserve Board and CIRA.

# The politics and economics of the strong-dollar policy and the weak-dollar reality

The desire of senior US policymakers to prevent a sharp decline in the dollar or collapse in its external value is motivated by the recognition that a sudden weakening of the dollar (or the market’s belief in a sudden weakening of the dollar) would likely be associated with a sharp rise in long-term US Treasury yields and of the many important public and private interest rates that co-move with them.
A lower dollar reduces the local currency return on dollar investments for foreign investors and should call forth an increase in the yield required for foreign investors to hold on, let alone add, to their holdings of Treasury securities. Foreign ownership of US government securities has risen strongly over the past decade and has been above 50% of the total since 2004 (Figure 2).1 Additional concerns about the external value of the dollar may be generated by the dollar’s reserve currency status and, in principle, about foreign-currency exposure of the US banking system – in practice, the liabilities of the US banking system are mostly in dollars.
Figure 2. Foreign-owned marketable US Treasury holdings

Sources: Bureau of the Public Debt, Table 1, Summary of Public Debt Summary of Treasury Securities Outstanding, Total marketable held by the public less Bills, and CIRA.
By contrast, a low actual dollar exchange rate may be seen as a net benefit for the US, because, in the presence of nominal rigidities, a depreciation of the nominal dollar exchange rate implies a real depreciation and therefore an increase in the international competitiveness of the US tradables sectors. The US is quite an open economy today, with the ratio of trade (the sum of imports and exports) to GDP at around 30%, comparable to Japan (Figure 3). Net exports have also played a significant part in the slowly solidifying recent cyclical recovery in the US, though it is, of course, true that many factors affect the evolution of net exports besides the level of the (nominal or real) exchange rate.
Figure 3. US and Japan — Trade openness (% of GDP), 1970-2010

Note: Exports plus imports of goods and services, % of GDP. Sources: Census Bureau, Bank of Japan/Ministry of Finance and CIRA
An improvement in the international competitiveness of the US tradables sectors is equivalent to a deterioration in the competitiveness of the trading partners of the US. It is therefore no surprise that a weak dollar can lead to irritations in the corridors of international diplomacy. Two additional factors come into play currently. The first is that the US has long upheld the view that the very slow appreciation of the renminbi vis-à-vis the dollar results in an undervalued renminbi that puts the US at a competitive disadvantage. Any moral high ground the US can occupy in this dispute is eroded if the US is seen to engage in a form of market-mediated downward adjustment of the dollar exchange rate. The second is that the US position in the ‘currency wars’ debate – a debate about the potentially negative effects of highly permissive monetary and liquidity policies in advanced economies on emerging markets – would undoubtedly be weakened if it became widely accepted that the expansionary monetary policies pursued by the US since 2008 would inevitably entail a weakening of the dollar.

# Exchange rate determination and the (ir)relevance of intent

A bilateral nominal exchange rate is the relative price of two moneys, strictly speaking, of two currencies or base monies. All drivers of money demand and money supply, at home and abroad, are therefore relevant to the determination of the nominal exchange rate.
A large number of factors can influence the dollar exchange rate when this exchange rate is market-determined and floats more or less cleanly. Yet when all is said and done, we cannot think of any model of the monetary transmission mechanism in an open economy with a floating (market-determined) exchange rate for which the proposition fails to hold that expansionary monetary policy will, ceteris paribus, weaken the exchange rate. This holds true when the official policy rate of the monetary authority is above the effective lower bound on nominal interest rates and when policy rates are at the lower bound and the central bank engages in large scale asset purchases, in the latter case due to the presence of irreducible financial market inefficiencies.
With the exception of a tiny operation with the Bank of Japan, the ECB, the Bank of Canada and the Bank of England in March 2011 to prevent excessive yen appreciation following the Japan earthquake, US authorities have not intervened a single time since 2000, in sharp contrast to the first quarter century since the collapse of the Bretton Woods regime in 1973 when intervention was quite frequent. Monetary policy has been unqualifiedly expansionary since the onset of the financial crisis (expansionary not only in relation to earlier US monetary policy, but also relative to the monetary policies pursued by the other leading central banks).
The exchange-rate consequences of this policy, significant and predictable as they are, nevertheless scarcely receive mention in statements and speeches of Fed officials. One reason is an institutional anomaly which is not unique to the US, namely that, although monetary policy constitutes the single most important type of policy affecting exchange rates, ultimate authority over the management of the exchange rate rests with the Treasury, not the Fed. Another reason for the omission of discussion of the exchange rate in Fed documents may be a legacy from the now bygone days when closed-economy thinking was less inappropriate.
Yet another reason for the lack of discussion may be the view that because the dollar is freely floating and its value is thus set by market participants or by ‘the market’, unlike the currencies of countries with managed exchange rates, its value is not manipulated in any view. This argument holds little merit as expansionary monetary policy can be expected to depreciate the currency even if depreciation is not desired, sought or intended by the policymaker.

# Conclusion and outlook

The US strong-dollar rhetoric has contrasted sharply with a weak dollar reality — which is not surprising given the almost complete absence of any policy measures to support the strong-dollar policy and, especially since the financial crisis, a consistently expansionary monetary policy with predictable (depreciative) exchange-rate consequences. By one measure, the strong-dollar policy has been a success. Treasury yields remain close to all-time lows despite persistent depreciation of the dollar, a very large (federal and general) government budget deficit, and high and rising (federal and general) government debt. The downside, however, of talking a strong-dollar talk while walking a weak-dollar walk has been damage to the reputational capital of the US monetary and fiscal authorities and thus a reduction in their ability to use statements of intent or announcements of future policy actions to influence markets.
In any case, we see little immediate prospect for either the strong-dollar rhetoric or the weak-dollar reality to disappear anytime soon. High and rising levels of general government debt mean the Treasury will keep a close eye on Treasury yields. The need for rebalancing in the US economy suggests continuing loose monetary policy, while the eventual fiscal tightening, if and when it happens, will put further downward pressure on the dollar. The alternative scenario – a fiscal crisis in the US – will also likely be associated with a dollar weakening, of a more dramatic kind. But even a dramatic fall in the dollar and/or a marked rise in Treasury yields would not mark the end to the primacy of the dollar as an international currency just yet – for that, a viable alternative was needed, and for the time being none is in sight."

### what is the va share of total national va of our fire sector

how does it compare to other sectors shares and the fire sector of other advance market economies
now what is the profit share

these numbers apple to apple lined up makes for a coherent sensible grounded discussion

### first step in mark up market exposition

show what  firm level  sector level  and national level value added  is and how its calculated

### we need a social price level "contract "

using mark up markets we need assured price paths
then yes we could get to any real rate we wanted to get ti
and make rational minds eager to invest in new capacity
regardless of current demand

### more on pk and negative "reals"

so there must exist some real rate of interest payment that can induce investment spending now
among qualified borrrowers

in this system ???

assume we can't alter the inflation expectations let alone the current inflation rate
the firms we want top induce to spend
security markets only tell you what specs expect next day really

now what  ???

go near zero on all rates
yup
]now given the zero bound
the  state of the rate structure flattened down to where holding money
is just as good as holding a note
what happens next or better what just happen
as the rate structure approached this point
when all bonds of no matter the length and repayment structure got  so damn close to the vansihing "return " point ???

what if we're still hung up above the reat rate necessary to move firms to spend more ??
in fact spend enough to begin a recovery that won't stall out

look to the creditors to motivate them to lowerr standards
okay we could have uncle insure against default but still why
would that work unless it was wreckless  a hazard liquidating madness
uncle inducing  an oklahoma loan rush

sound firms for sure would up their  locked in credit line  if they could
imagine a ten year no reduction essentially costless to carry for any part
converted to a loan
after refinancing which doesn't build anything real
what next
sure any firm might want that locked in if it could
but  borrow to pay for some one to  make something real ??

why ??

the production sysatem, is in heavy slack mode

taking the loan money to build  a factory
or build a machine even  or write some soft where or do r and d
why ?? now ??
what does that mean if rational  firms are cadging cash already ??

they might buy up each other and existing real assets like timber land and oil fields
but add new capacity actually induce new productionb
why ??
of course it happens
but out of unquenchable spirits that fearlessly face down current adversity
these folks will act regardless of rate even with borrowed money
...so long as bankers will lend
the uncle default insurance propells the  no fear of fucking hazard conditioning
that built the minsky moment in the first place

this conditioning is precisely what sober capitalists want to expunge
by harsh consequences

err for the other guy

### finacialization versus just securitization

the hallowed lefty phrase the financialization of the economy
is a fools  canker

of course the capitalist system in its high corporate stage  is steadily intensifying financialization

the latest  phase :

securitization of more and more debt
that  means the further objective socialization of debt
even as debt penetrates more deeply into every transaction
this is the full  buy on credit  not cash system
the evaporation of cash  in the interstices of the transaction system
even  the move from debit card to credit card ie zero deposit systems
this is the logical limit and inversion point of commodity production

to loathe it  is
REACTIONARY

yes now its an asocial  herd of wild horses
hey
once all horses were wild ...no ???

### nudgo phobia the palm sized origin of big picture fear and loathing about any State

i have it of course

but the spontaneous fear of the nudge even sublated into action inducing fury
obscures the social role of coercion in any hierarchical system

okay so we say
no more hierarchies we are vondervogels

free birds alas is that the end of it  all
mr cain and mr abel

well maybe we have corercion min  ....

ahh the thin edge of the wedge
thank you that's all in needed
i'll take it the rest of the way from there ...

live with the consequences ??
attendez vous
greenwald stiglitz

do the gadanken dixit  cost bene accounting

### we should be constantly raising wage rates

and through out the wage structure

that  pressure coupled with   a  socially manged system of     maximally  efficient  fully incentivizing
firm level profits of enterprise
would produce all the transformational pressure any  progressive innovative production system must have

here is where the hours bought tax comes in

hey every social arrangement requires at least one  salubrious ogre ...prolly several

### employer paid head tax and other labor tax schemes

this nudges mangers toward time use efficiency even with lids on compensation

of course making the possessor of some bodacious hu cap
pay a tax on it is another way aropund and prolly better

god asks much of those with great ability

-----------------
amazingly even though "economizing on labor time is system job one
we  pwogs resist a pigou tax on hours bought
unlike the carbon tax

its of cpourse because under capitalist job rationing
the aretificial scarcity of jobs makes pwogs push ever button that might produce more jobs now
or later

of course as the great kaslecki pointed out  back  in 1941
while in comfortable  exile from his beloved then stooged up  duchy of warsaw

our science now shows us macronauts
just how we can have as many jobs as we want

errrr
so long as we  can at some point or other
fucking crush the  living day lights out of our present
hegemony of the border crossing private profiteers

### so what if uncle pops bubbles

okay uncle has some rule of thumb
that he uses to pop bubbles
now what happens ???

bubbles don't form
but what if there's been a real change in some relationship
want to violate it
push against it

well like an orderly appreciation uncle allows the price to rise or fall as the case may be

thesis bubble up prices  will not persist once "demonstrated"

real changes in relationships will persist will try to push past the artificial barrier

could be gamed ??
of course
forex markets may be our best paradigm here as in much else

the point is to floor and ceiling  spec markets
what harm can that do if the floor and ceiling show enough flex when persistently challenged

wagering on a car race is socially harmless nonsense

folks like skew they like the lottery the chance taking

but commodity specs and currency specs and house lot specs and equity specs and bond specs
they can do serious long lasting social harm

neighbors on either side of your house
playing a game of toss ' the live grenade '  at each other
are perhaps going  to bring  harm  down on you too
at some point eh ???

### rajiv on spec marts

"a  disaggregated view of speculative behavior and an explicit recognition of belief heterogeneity."

At any point in time there are a variety of price views within the population of speculators, and trading based on this distribution of beliefs causes prices to move. Prices rise if those expecting appreciation are more confident or better capitalized than those expecting depreciation. The rise then reinforces the price views of buyers and further increases their capitalization advantage relative to sellers. This propels further appreciation.

The main check on the process is the increasing perception among some investors that "the risk of a setback outweighs the prospect of further gains." When such fears become sufficiently widespread, further price appreciation is arrested. But the crash does not follow until selling is synchronized, an event whose precise timing is essentially impossible to predict.  "

note carefully

"Prices rise if those expecting appreciation are more confident or better capitalized than those expecting depreciation"

in particular
"better capitalized "

that is the key
the credit lines feeding the spec bubble blowers

and gander on this too :
" the crash does not follow until selling is synchronized"

"The resilience of the bubble stems from the inability of arbitrageurs to temporarily coordinate their selling strategies. This synchronization problem together with the individual incentive to time the market results in the persistence of bubbles over a substantial period ....news events, by enabling synchronization, can have a disproportionate impact relative to their intrinsic informational content.."

i can think of covert synch ups can't u ??

do dah word  market corner come to you as this in extremum
how big a conspiracy need form to drive a spec mart

radical uncertainty  is  the foundation of capitalist systems

hence
there will be  both  "minds with  flashes of  baseless conviction "
and  180  conversions that come in waves to ass hole innocent specs

but those with credit to command can drive the market  in both directions

credit is concious concentration
the illusion of a pack of independent specs rushing to buy or sell

", the presence of non-fundamental volatility in speculative asset prices is important to consider in the execution of monetary policy. "

tie in to the news of the day:

"Headline inflation has recently exceeded core inflation largely due to pressures from commodity prices"

## Monday, June 27, 2011

### the stag asnd the stall

there is a rate of growth creep that stalls out

thesis
fittingly
like a shark a capitalist market system
needs to move forward at a certain min nominal rate
or it will stall itself out and start to contract
there is no neutral no steady state in capitalist systems
grow at least a little or  one hiccup will set of a convulsion
that preludes  a contraction

### orwell on rabelais

"an exceptionally perverse, morbid writer, a case for  psychoanalysis ."

how exceptionally perfect

georgie  pointing at  some  one  else
and  accusing them of an  extra helping of the morbid and perverse

### bis warning for north economy nations

"The existence of .... imbalances also implies that an extrapolation of
pre-crisis growth is neither the correct matrix by which to assess the state of
the recovery nor a useful guide for policy"

the report goes on to misdirect the reader
but this point is clear

THE STAG PARTY IS  IN THE SADDLE

"Aggregate supply and demand seem
to be roughly balanced on a global scale. But having declined during the crisis,
current account balances are increasing again. That means domestic demand
is too high in some countries and too low in others"

translation
domestic demand is still too  low in china and too high in the states

spells stag here boom there
at least in nominal terms
china may use more inflation and less real growth
the us no deflation and ultra low growth

### father of elliot wave market price science

"No truth meets more general acceptance than that the universe is ruled by law. Without law, it is self-evident there would be chaos, and where chaos is, nothing is.... Very extensive research in connection with... human activities indicates that practically all developments which result from our social-economic processes follow a law that causes them to repeat themselves in similar and constantly recurring serials of waves or impulses of definite number and pattern... The stock market illustrates the wave impulse common to social-economic activity... It has its law, just as is true of other things throughout the universe."

elliot "...tied the patterns of collective human behavior to the Fibonacci  ratio "

$F_n = F_{n-1} + F_{n-2},\!\,$

not to be confused with the liberace ratio

or the thomas lemma

### larry talks of murdering expansions

"Inflation dynamics defined the traditional postwar US business cycle. Recoveries continued and sometimes even accelerated until they were murdered by the Federal Reserve with inflation control as the motive"
--larry s
so the pigster sez all the post WWII expansions were killed off by the fed deliberately
ie murdered  with afore  thought
by cutting the rate of increase in the credit flow
why ?
to control wages
oh ya  core product price increases
one and the same really

the only one of these  murders boldly and openly admited to at the time
was the volcker dammerung

conclusion
all the others like the present stag were double talked
"soft landings  that flop are not  murders even if they kill "
but do fed bosses or their prompters really believe in soft landings
or do they know its a kill shot they're delivering

on another point :

"Our current situation is very different. With more prudent monetary policies, expansions are no longer cut short by rising inflation and the Fed hitting the brakes. All three expansions since Paul Volcker as Fed chairman brought inflation back under control in the 1980s have run long. They end after a period of overconfidence drives the prices of capital assets too high and the apparent increases in wealth give rise to excessive borrowing, lending and spending.
After bubbles burst there is no pent-up desire to invest. Instead there is a glut of capital caused by over-investment during the period of confidence – vacant houses, malls without tenants and factories without customers. At the same time consumers discover they have less wealth than they expected, less collateral to borrow against and are under more pressure than they expected from their creditors"

larrry sez expansions post WWII were fed killed until
the last three iie the  greenspan era
since then we've reverted to the older pre 29 type
bubble pop economy with its spontaneous implosions

S and L  pop
dot pop and lot pop

so now the fed doesn't murder expansions
it merely perpetuates stagnations or booms
as international requirements  demand

### pk and the real rate jiggernaut

implicit pk assumption :

"There is always  a sufficiently low real interest rate that would produce recovery, but it’s a rate that’s hard to achieve under zero bound conditions"

higher inflation expectations seem to be pk's answer once even long rates bump the bottom bound

comes heresey
credit isn't regulated by rates anyway:

koo sez  under these conditions
rates don't matter :

"Koo’s argument is that interest rates and monetary policy don’t matter because everyone is debt-constrained. "

we have rations like admissions systems for  credit worthiness
these admissions systems change their criteria over the cycle
the system is  independent of tuition charges

but what if as we raise standards we lower tuition charges ?

more candidates

what if admission numbers are fixed and only quality rises ??

pk:

"That can’t be right; if there are debtors, there must also be creditors,
and the creditors must be influenced at the margin by interest rates, expected inflation, and all that."

at the margin pk assumes there is no lending quota no fixed  dispensable  amount of loanable funds
but pk with counter cyclica policy
lenders face reduced rates of return in the recovery phase just when borrowers worthy of the higher standards are pulling back for lack of  demand for their product
the nominal rate can go to zero at least in say the initial periods
but not negative
so what's the spur to loan or borrow  beyond inflation now

as in by pk

"That said, widespread credit constraints presumably reduce the number of players who can take advantage of lower rates. "

So the IS curve, while still downward-sloping, is probably steeper than normal"

i think rates are like the price that accompanies  a ration
all thru the cycle and under all conditions
ie unconnnected to total credit flow

to be continued

### debt grid talk by randy

are today's bankers always tight credit guys ???

"Financial sector lobbying plays an outsized role in tilting policy away from risk-and-loss-sharing arrangements and towards an alchemy of blood from turnips."

great line eh ??
correct thesis ??
randy ruminates in large  loving looping ways but comes to a clear comclusion:
:
" We transformed them from nervous debtors into pure rentiers, who see a lot more upside in squeezing borrowers than in eliminating a crippling debt overhang. "

the key is of course outside  money ie the fed's ability to keep the chosen banks
fully hydrated in a time of  general credit drought

credit rationing and retrenchment "

whole story ??

randy :

" ... Banks, after all, are not only creditors. They are also the economy’s biggest debtors. "

so

" bank loyalties ought to be mixed."

" On the one hand, banks prefer deflationary, zero-forgiveness tight-money policies, to maximize the real value of their assets and of the lending spread from which they draw profits and bonuses. "

debt grid value max

"On the other hand, troubled banks are very happy to support loose money and expansionary policy, even at risk of inflation."

a troubled system is the key

systemic trouble  ie " phase changes "
prompt changes in fed actions

" For bank managers and shareholders, it is bad to have the value of past loans eroded by inflation."
which shareholders ??

" it is much worse to lose their franchises entirely, to have their wealth, prestige, and freedom put at risk in the aftermath of an explicit bank failure. "
if the shareholders arte diversified one banks trouble hardly causes grief
systemic trouble that might block credit flows
is really a full economy danger

"When banks are in trouble, they are perfectly happy to support all manner of expansionary policy, as long as short-term interest rates are kept low. Even a broad-based inflation helps troubled banks twice over, by increasing borrowers incomes and by steepening the yield curve. "

"Increased incomes ensure that loans will be repaid in nominal terms, preventing insolvency due to credit losses. A steep yield curve permits banks to recapitalize themselves via maturity transformation, using deposits to purchase Treasury notes while the central bank promises to hold short rates low for a few years."

"But banks’ interests are aligned with those of debtors only to the degree that banks, like debtors, are at risk of real insolvency."

randy suggests banks that are imortalized by fed credit lines are different
one banks default dominos thru the busting of the curcuits of the payments grid
into other banks problems too
but if banks are effectively on limitless  fed credit lines ....

-------------------------------------------------
thesis:

" When we committed to a policy of “no more Lehmans”, when we made clear via TARP and TGLP and the Fed’s alphabet soup that big banks would have funding on demand and on easy terms, when we modified accounting standards to eliminate the risk that bad loans on the books would translate to failures, when we funded their recapitalization on the sly, we changed banks."

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

"And since banks are, shall we say, not entirely disenfranchised among policymakers, we increased the difficulty of making policy that includes accommodations between creditors and debtors, accommodations that permit the economy to move forward rather than stare back over its shoulder, nervously and greedily, at a gigantic pile of old debt."

Our problem is not that our banks are still weak, our financial system too fragile.
Our problem is that we have made our banks strong and cocky, so they needn’t care
about abstractions like lives disrupted, production foregone, human capacities undeveloped. "

We’d have better policy if banks themselves were at risk of foreclosure when Joe Sixpack still can’t find a job. We should work to put them in that position.

this suggests the fiscal route to recovery
and uncle's willing ness to bypass a troubled credit system  full of disintegrating domino banks
to make good ass hole innocent "counter parties"
by soft loans not
make good payments
only after final work out would counter parties get the loan or part of the loan forgiven

### a map is coming to market earth !!!

perhaps if i proclaim this

it will happen

if   we can build for the  gubmint
a  reliable market mechanism to control the movements of the price level
or any sub set of the system's price level
we will  have  restored in one stroke
the efficacy and independence
of national economic policy
we can become true and fearless KK  macronauts again

### once again pk laments the prominence of the pain lobby

why oh why do they love pain ??

they don't

they love slack
market slack
in particular credit and job market slack

contrived "high slack "
justified by chitter about transformational pressure
at least these days after 80 years of
"on and off " keynes kalecki (KK) guided macro policy
today with the obvious superiority of the KK methods
proven umpteen times over the years
is a cover story
a plain and ultimately simple
cover story
for many of those heads out there
advocating monetary tightness and fiscal prudence
they know better but can't make the real arguments in public that have convinced themselves to lay off
the tax and transfer effective demand injector
their reasons are outlined in this (oddly shakey )cloumn by barry Eichengreen
http://www.voxeu.org/index.php?q=node/6694
facing the present global imbalances
"At their February 2011 meeting in Paris, G20 finance ministers agreed to a set of three types of indicators on which the sustainability of national economic policies would be assessed:
1 public debts and deficits,

2 private savings and debts,

3 current-account balances"
note the first two national market slack makers or preservers
are ways to hold down general demand
and this is to hold down its very proper sub set
import demand
this is aimed at the northern economy nations now on snail speed
message:
"keep this snail speed up
no use of the credit system to inject spendable new funds into these national systems either by way of gubmint or directly to households and firms
reason:
the structural imbalances between north and south hemi
have yet to be effectively and sustainably liquidated "
and three is of course the raison d'etre
the bop imbalances
barry in fuzz mode
"The G20, rightly, has continued to make global imbalances and their correction...a focus of its deliberations"
a focus ???
more like prime directive !!!!
and that means continued stag in the advanced north
and boom in the faster developing parts of the south
we fail to see clearly the multi national corporate perspective here
because our dominant media is overwhelming fed by the MNC corporate flackers
out here waiting to analyize this and that for them
and its not just purblind gyro gear loose abstracticators
caught up in their BOPW models
they are more often well rewarded MNC stooges
and shameless patent frauds
coming forth from the academy and the think tanks
specifically to provide the misdirection the cover story the alibi etc etc
most econo-pundits that have reached pk's level
have over the years carefully weighed their words
cut a critical path between critique and me tooing
moving to one side or other of the broad middle ground (when its there when narrows are not imposed as in the early kold war )
stay "statistically " within the vague bounds
avoid consistent blasting away
interlard attack modes with obvious pulled punching
( i think of pk on commodity spec )
pick only so many crucial fights
stay "on average " where it feels possible to stay
read the cues and make the asjustments
could pk by now not even conciously notice this steering mechanism in his head
probably
disguises rationalizations get pretty convincing
especially for a terrier that barks a lot like pk
and yet has continued to "rise"
hey who oughta blame them
at least among us that have never been tempted
they want to jet set and spot light
be at the big table
and ever hovering near is the marginalization
if pk even up there on top with his nyt column
and tv spots
be a bill vickrey or abba lerner
and he's admited la dolche vita is damn hard to wave off
after a couple sips of the bubbly
-----
and yet i hope
he has certainly reached the outer limits a few times
punching thru to prpheteering country to become
the Isaiah of times square and nassua hall ??
might yet happen
i think of chalmers johnson often
though he hardly reached so high
does the bubbly get to be ho hum up there ??
or does the pull into ever greater "private kicks "
divert ???

pk
is no gulliver from the american academy
now among the folks up on laputa
he lacks gulliver's innocence
he's full of his own ingenuity
he's more like twain's yankee
at the court of arthur
only he has gone forward in time not backward
this court is way advanced beyond his world
the high and mighty of todays society
live in the first draft of our future

### justice ?? why ?? they're all just people

so why care who gets what who wins who loses who lives who dies when where and how

the level where we owe everything to ourselves is that level eh ??

justice requires some refinements some detailing

greece even with a colander market couldn't simply co ordinate a product price deflation
because lots of its debt is not "owed to the greek nation itself
or denominated in a greek controled currency

the price level must move up on non tradeable and import products  and down on export products

sounds like a gosplan  II assignment to me
an intricacy of taxes and subsidies
ala greenwald stgilitz
at least they could be linear eh ???
unlike the tuning up of social welfare  possible to a  generally empowered hierarchy

the implications of our responsibilitry is daunting
no wonder patent fools bought
the libertarian delusions
they get to abdicate  in the name of doc pangloss
all collective responsibility for individual outcomes

but their conjecture
ie
the optimality of  open unfettered market systems
is a pipe dream
in itself that's no harm no foul

but it  clouds a nasty reality
ie free range limited liablity and now  socially insured  asocial transgressive  private gain driven corporations

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

perhaps a complex set of interlocking mark up markets could do this eh?
colander markets
for imports and exports
all given different caps

why not ??

removes the visible hand that can swipe smite and spike
in defiance of socially prefered moves
that the mark up market scotches
by rendering all firms  cloutless
and abstractly equal in the pricing game

### expectations versus the debt grid

the very real debt grid seems a better modeling object then the spooky stuff about expectations

backing up first:

the premise of most models seems to be
we need a model that works best if you only get to bite the aple very infrequently

ie interventions are few and far between

wrong

they are constant thru the credit and autostab aspects of the tax and transfer system

discretionary moves relying on real time feed back can use a very simple rugged model to motivate
the prooduction system's
steerage brakes and  gas pedal

now the point of the head line

the real factor in micro decisioning is placement on the debt grid among other things
and that is quite observable potentially

the payment system and the sueper imposed debt grid could be monitored like a subway system or electric power grid or telecommunications grid eh ?

the fed oughta have that level of info in this data quick data deep age we are entering

### two different worlds

unit labor costs and  household  price index

## Sunday, June 26, 2011

### restated thesis disease

i'd like to see a deep discussion of this implicit thesis in mainstream new keynesianism

example:

http://krugman.blogs.nytimes.com/2011/06/26/monetary-policy-in-a-balance-sheet-recession-wonkish/?gwh=55909E873C5974633114D70C1E4986A0

statement of thesis:

"There is always a  sufficiently low real interest rate that would produce recovery"

which amounts to the assertion
any market system can be stablized no matter what it pulls on itself
so long as
at the core of the market system's credit sector
is a central bank with a limitless money mine

of course can is not will
and gentle ben may well not use all the power he has
and he hasn't

believe this and US fiscal policy the handmaiden of the congress and thus politics
can be by passed on our way to a full recovery even when we hit the zero bound
by the  actions of an independent guardian fed  only

do we really believe this
or is it simply the reification of our simple Hicksian type IS  modeling  assumptions
models that merely assert the non floor under  real r
and  that there is always a reachable real r
that would allow the market system to restore itself
without a gubmint fiscal sector
now thgis is not a comparative dynamics  assertion
ie it is not making claims about faster to recovery versus a  fiscal deficit driven recovery
nor is it an efficency or  social welfare improving assertion

but still
is it just a pigou gambit
or have we still too mkuch reliance on fed policy to stablize the economy
too much reliance on elite behind the curtain "solutions"
to stablization problems

### smoking gun pk

"... Richard Koo is wrong to insist that monetary policy can’t do anything in a balance sheet recession."

"Koo’s argument is that interest rates and monetary policy don’t matter because everyone is debt-constrained."

" That can’t be right; if there are debtors, there must also be creditors, and the creditors must be influenced at the margin by interest rates, expected inflation, and all that."

"That said, widespread credit constraints presumably reduce the number of players who can take advantage of lower rates. "

So the IS curve, while still downward-sloping, is probably steeper than normal, So .....There is still a sufficiently low real interest rate that would produce recovery, but it’s a rate that’s hard to achieve"

faith based conviction ??

no reification based deduction

he has a model that assumes there is always"a sufficiently low real interest rate that would produce recovery"

really ???

this is essence means a market economy  only needs a central bank  with a limitless money mine
at the core of its credit system   to stablize it no matter what naughty excesses it gets itself into

conclusion

pk is style a macro tool cyclops

because his model sez so

## Saturday, June 25, 2011

### never necessary always a problem so no numbers just squiggles

Source: Bureau of Economic

## Friday, June 24, 2011

### from neo classical synthesis (NCS) to neoliberal dogmatic minimalism (LDM)

whats in a label ???

well the target of radical critique in poli econ con
has been neo liberalism for what ??
20 years now
the washington consensus rubinomics etc etc
at its core unlike the prior king hell mind set
samuelson named neoclassical synthesis
at the core of neoliberalism is a reaction to a reaction

the  friedman to lucas  battery of critiques of  the
utterly hegemonic
( though  at times only tacit but always present behind the curtain )
post war activist positivist  NCS  macro management  "school"

witrh the total smash up of the stalinoid frankenstein production platform in the late 80's
the new school arose  to unite the younger generations of american macronauts and developmennt "theorists"

it was LDM
new keynesianism and patch work minimalism
leveraging  as the dummy hand version of state action
with in often tiny top layers of  corporate and foundation "equity" players  calling the strategic
as well as the  tactical  shots

if 89 might be used to mark the moment of triumph that arched over the blooming of neo liberalism
to go along with 79 and 49  perhaps as prior  pivots and 09 as the post pivot

post pivot ??
we're in a new era ??
yup
a  rise of  anti dogmatic  clamour
a cacophonic eclectic chorus

## Thursday, June 23, 2011

### okun contradicts gentle ben ....maybe sez wolfers

"   1.       You need economic growth in excess of around 3% to lower the unemployment rate.

2.       If GDP grows a percentage point faster—which counts as a very optimistic forecast at the moment—then unemployment will fall by half a percentage point, from say, 9% to 8.5%.

Now keep your eye on the red dots, which show the Fed’s unemployment projections. These unemployment forecasts are all more optimistic than Okun’s law suggests. That is, the Fed is projecting better news on the unemployment front than is justified by their economic growth forecast."
---- wolfers

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

err don't get too  excited  doom and gloomers

draw a horizontal  line at the zero point on the vertical axis across the graph
now  draw a vertical line up from the 3% point on the horizontal axis

see any dots where they ought not to be ???
ie south west of these two lines intersection

i do

real point

look at the  "predicted  " rate of gdp growth  that closes the gap
to 5%
looks to be  off the bottom south east end of the data spread  eh ?

talking 9 % baby ...9 % to get there in one year

gentle ben 's latest projections
this year not even 3%
next year maybe 3.5 %  .. but less then  4 %
and 2013  ???
after barry gets re elected and there's no pressure

4 % or so ....maybe ..if the Almighty smiles on us

we could do it it of course  ourselves without divine help
just run  a big enough  increase in the federal fiscal deficit (net of any state or local contraction)

say we're at 3 % now
then 6 % that might take 5 to 6% increase
in deficit as percent of gdp

or another 800- 900  billion net gubmint deficit increment
and sustain  it  thereindefinitely only tapering off
as  we close the trade gap and see a lift in the corporate  and or housing spending rate
sufficient to sustain the necessary  aggregate spending at that level   and keep the whole national system
growing at at least  three percent

### graph of the day stag wise

US manufacturing real wages by education level, 1979-2002
US manufacturing employment by education level, 1979-2002

Domestic and foreign employment US-based multinationals

Import penetration

### 國家發展和改革委員會

National Development and Reform Commission (NDRC)

we need one here in uncle reich
and we both need
NATIONAL  MARKUP  MART (NMM)

## Wednesday, June 22, 2011

### Is China driving the wrong kind of structural change in the U.S.?

By Maggie McMillan, guest blogger
When economists talk about structural transformation, they typically have in mind developing countries and the dual economy models à la W. Arthur Lewis that emphasize productivity differentials between broad sectors of the economy, such as agriculture and manufacturing. They don't usually think about countries like the United States where this type of transformation has already taken place. But the figure below indicates that it is something we should be thinking about. The horizontal axis shows that between 1998 and 2007, the share of the labor force in manufacturing fell by around 3%. The share of the labor force in services (cspsgs) increased by a little more than two percent. The problem with this is that labor productivity in services is lower than economywide productivity (vertical axis) so this sectoral shift in employment lowers economywide productivity. Note that these changes took place before the Great Recession (the picture looks much worse for the period 1998 to 2009).

Note: Abbreviations are as follows: (agr) Agriculture; (min) Mining; (mfg) Manufacturing; (pu) Public Utilities; (con) Construction; (wrt) Retail and Wholesale Trade; (tsc) Transport and Communication; (fire) Finance and Business Services; (cspsgs) Community, Social, Personal and Government Services.
The cost of this transformation has not been well understood. For example, one often hears that the loss of jobs in manufacturing is no big deal because productivity in manufacturing is increasing and this will drive growth. But this argument ignores the economywide effects of labor reallocation. Another argument that is often heard is that we don't need to worry about losing jobs in manufacturing because jobs in professional and business services are growing. But average labor productivity in professional and business services (not shown separately) is lower than average labor productivity in manufacturing. Using the March version of the Current Population Survey which follows workers over time, Ebenstein et al ( http://pluto.huji.ac.il/~ebenstein/) show that the majority of workers who leave manufacturing end up in the service sector where their wages are between 3 and 11 percent lower.
The key question is: what is driving this pattern? I don't have an airtight identification strategy but I have a hunch that it has something to do with China. Here's why. Between 1998 and 2007, offshore employment to China by U.S. based manufacturing firms increased from around 100,000 to around 600,000 or roughly 500 percent. In 2008, China held more U.S. affiliate jobs than any other country in the world. This is a first - affiliate activity has typically been concentrated in high income countries. Over this same period, manufacturing employment in the U.S. contracted sharply. But the smoking gun lies in the figure below. It shows a strong negative correlation by sector between manufacturing employment in China and manufacturing employment in the United States. It seems highly unlikely that this pattern is driven by labor-saving technological change in the U.S. I guess it could be driven by underlying changes in demand, but I doubt it.

# Shares of income by type and sector, 1959-2009

## Monday, June 20, 2011

### pk on quant ease paper dragons

Note both that Japan reversed much of the initial expansion in the monetary base, confirming the expectations of those who might have regarded that expansion as temporary – and Japan did this even though deflation continued! Note also that nominal GDP never moved at all despite the huge amount of money “printed”.

## Saturday, June 18, 2011

### drag

.

" new payroll cuts" !!!
hey this is a goldie sex projection
prolly a cut to employer side PTs

translation
blue line special :
the UE rate and the job market stay in mud up to the door handles
and  the increase in imports ie  absorption rate
remains marvelously tepid

election year boost ???

well we'll see i think it really depends on  how much "fear of stalling "
aggregates  up there at the tip of manhattan

### not so fast sailor

but look at this:

Houseman and Mandel :
“Suppose a US automaker imports one million parts from a Japan-based supplier at \$10 per part, for a total import bill of \$10 million. Consider two scenarios:
Scenario 1: The US automaker improves its production process in its domestic factories, so it only needs half as many components. The import bill goes down to \$5 million.
Scenario 2: The US automaker switches to a China-based supplier that only charges \$5 per part. The import bill goes down to \$5 million.
... these two scenarios are indistinguishable in the US economic statistics.
In both scenarios,
the import bill goes down to \$5 million.
The value-added of the US auto company goes up (sales minus the cost of materials),
as does its profitability (sales minus cost of labor and materials)
and measured productivity (value-added per worker).

Note
even though value-added per domestic factory worker goes up in the second scenario
the impact on domestic real wages and employment is ambiguous.

if value-added per worker is rising because of an improved ability to identify new sourcing opportunities, that same capability could be easily used to replace domestic workers…
... a measured productivity gain from increased efficiency in the supply chain
doesn’t necessarily improve the real wages or employment of US workers in auto factories.”

# this graphic only  fools benighted helots

a snap shot nitemare set of  "projections"  crafted by a useful idiot
might as well come  straight from the agit prop department
of the great  north economy stag  spontaneous corporate conspiracy :

four scenarios for greece and the consequent climb of the national debt to gdp ratio

"SCARRRY"
as count floyd might say

hey take the bad ass one
the one  that gets national debt to  plus 350% of gdp  by mid 2020's
well  the sober verdict of scientific macro
using the prime control tools
ie
the  i/g ratio
this fearful ice berg
nothing but a pile of ice cubes
meltable in five years say 26-31
into an evaporating puddle
the great  shrinking value  act in 5 annual stages

alas the deficit/debt clown crap runs rampant

so fucking what oughta be the screamed  face purple response to one of these flap doodles

yup just 5 years of  price level sprinting by the lead partners in the euro trap
could render the most tewibble tewibble debt berg  feeble  as snow ball in hell

lesson number one for north economy wagelingers

there is no run away uncontainable  national gubmint deficit series

deduction

people of greece !!!!
keep striking
keep mobilizing i
keep ....  rioting   and burning
keep on keeping on
till the  bureaucrat  fuckers
and their tower troll masters .... cave

all this grinding  of the class gears
is music of the anti spheres

it manifests in  its cacaphonic glory

the  bloody  bizzaro farce
that is the Temple of  Folly
at the core of  Korporate Earth

## Friday, June 17, 2011

### sovereign debt recycled every month ???

why pay a risk premium ???

set a target short rate and recycle at that rate

## Sunday, June 12, 2011

### gaining control of price level movements is like controling fire

i can't get enough of that analogy

colander  negligent  prometheus

### the difference between sovereign own currency own cb issued debt build up and carbon build up

debt obligations  like uncles  can be reduced as much as possible as fast as sensible

the mind tends to associate build ups with certain action constraining system  real cost exacting remedies

not so eh ??

to escape  the consequences of our carbon emissions will take considerable time and sacrifice
not so for the treasury debt
liberation might  simply  sit out ahead of us just one revolution away

### nice job by slacker ace

Let b be the government debt and d the primary deficit (i.e. the deficit exclusive of interest payments), both as shares of GDP. Let i be the after-tax interest rate on government borrowing and g the growth rate of GDP (both real or both nominal, it doesn't matter). Then we can rewrite the paragraph above as:

We can rearrange this to see how the debt changes from one period to the next:

Now, what happens if a given primary deficit is maintained for a long time? Does the debt-GDP ratio converge to some stable level? We can answer this question by setting the left-hand side of the above equation to zero. That gives us:

What does this mean? There are three cases to consider. If the rate of GDP growth is equal to the interest on government debt net of taxes, then the only stable primary balance is zero; any level of primary deficit leads to the debt-GDP rate rising without limit as long as its maintained. (And similarly, any level of primary surpluses leads to the government eventually paying off its debt accumulating a positive net asset position that grows without limit.) If g > i, then for any level of primary deficit, there is a corresponding stable level of debt; in this sense, there is no such thing as an "unsustainable" deficit. On the other hand, if g < i, then -- assuming debt is positive -- a constant debt requires a primary surplus.

There is a further difference between the cases. When g > i, the equilibrium is stable; if for whatever reason the debt rises or falls above the level implied by the long-run average primary deficit, it will move back toward that level over time. But when g < i, if the debt is one dollar too high, it will rise without limit; if it is one dollar too low, it will fall without limit, to be eventually replaced by an endlessly growing positive net asset position.

So, which of these three cases is most realistic? Good question! So good, in fact, I'm going to devote a whole nother post to it. The short answer: sometimes one, sometimes another. But in the US, GDP growth has exceeded pre-tax interest on 5-year Treasuries (the average maturity of US debt is around 5 years) in about 50 of the past 60 years.

The discussion up to now has been in terms of the primary balance. But nearly all public discussions of fiscal issues focus on the total deficit, which includes interest along with other categories of spending. We can rewrite the equations above in those terms, adding a superscript T to indicate we're talking about the total deficit. In these equations, g is the nominal growth rate of GDP.

Again, we define equilibrium as a situation in which the debt-GDP ratio is constant. Then we have:
In other words, any total deficit converges to a finite debt-GDP ratio. (And for every debt-GDP ratio, there is a total deficit that holds it stable.) So defining a sustainable total deficit requires picking a target debt-GDP ratio. Let's say we expect nominal GDP growth to average 5% in the future. (That's a bit low by historical standards, but it's what the CBO assumes in its long-run budget forecasts.) Then 2010's deficit of 8.8% of GDP implies a long-run debt-GDP ratio of about 175% -- a number toward the top of the range observed historically in developed countries. 175% too high? Get the long-run average deficit down to 4%, and the debt-GDP ratio converges to 80%. Deficit of 3% of GDP, debt of 60% of GDP. (Yes, the Maastricht criteria apparently assume 5% growth in nominal GDP.) It is not at all clear what the criteria are for determining the best long-run debt-GDP ratio, but that's what you've got to do before you can say whether the total deficit is too high -- or too low.

One last point: An implication of that last equation above is that if the total deficit averages zero over a long period, the debt-GDP ratio will also converge to zero. In other words, "Balance the budget over the business cycle" is another way of saying, "Pay off the whole federal debt." Yet I doubt many of the people who argue for the former, would support the latter. Which only shows how important it is to get the accounting relationships clear.

# Housing Starts

and it only got worse ....

### look at all of ...us economic northerners caught in jobbler status

notice the rest of the pack say in the early to mid 90's versus now

the euros ??
italy germany france england  all better off now

japan ??

well no not better off now  worse off in fact  but not worse then  in the early 2000's

no contest look at the early 90's !!!!

is this   jobs market depression  as bad as then ...for our top economic north  partners ??

### in a time of expected long term negative real rates

a newly issued  zero coupon TIPS
would sell at a premium above face value

too bad we're no there yet

then look at this

"The Treasury could save that money by buying back TIPS, entering into inflation swaps, and issuing Treasury bonds with the same maturity instead.
Treasury Inflation-Protected Securities (TIPS) are obligations issued by the U.S. Treasury, similar in most respects to Treasury bonds except that the principal amount of a TIPS issue is inflation-indexed -- that is, it is adjusted over time to reflect changes in the consumer price index. The Treasury began issuing TIPS in 1997.
With a type of arbitrage strategy, investors can convert the inflation-linked cash flows from a TIPS issue into fixed cash flows using inflation swaps. The resulting cash flows can then be structured to match the cash flows from a Treasury bond with the same maturity date as the TIPS issue, which results in straight-forward arbitrage profit opportunities that are greater than the costs of the transaction.
In Why Does the Treasury Issue TIPS? The TIPS-Treasury Bond Puzzle (NBER Working Paper No. 16358), authors Matthias Fleckenstein, Francis Longstaff, and Hanno Lustig show that the price of a Treasury bond and an inflation-swapped TIPS issue that exactly replicates the cash flows of the Treasury bond can differ by more than \$20 (per \$100 notional), with Treasury bonds almost always overvalued relative to TIPS. The total differential, they estimate, has exceeded \$56 billion, or nearly 8 percent of the total amount of TIPS outstanding.
This mismatch in TIPSâ€“Treasury pricing is strongly related to supply factors, such as Treasury debt issuance and the availability of collateral in the financial markets, and is correlated with other types of fixed-income arbitrages. However, this study raises the issue of why the Treasury issues TIPS, since in so doing it both gives up a valuable fiscal hedging option and leaves large amounts of money on the table. The authors contend that the Treasury could save that money by buying back TIPS, entering into inflation swaps, and issuing Treasury bonds with the same maturity instead.
The analysis here is based on a review of daily prices for 29 matched-maturity pairs of TIPS issues and Treasury bonds for the 64-month period from July 2004 to November 2009. "
-- Frank Byrt (NBER)

what are TIPS price moves telling us now about inflation expectations ???

well  TIPS price moves are contaminated by other rate change risks

## Friday, June 10, 2011

### for us macronauts decent micro foundations DO NOT maybe can not ..EXIST

so stick with what works

shlock of the walk lernerite vickreyized  keynes-kalecki ism
we got the cybernetical gimmick called
interim results feed  back

i think of this every time i think about driving a car
i can  no more explain in any detail
then a  mountain goriilla can differentiate  an algebraic expression
and a car motor  isn't even aperiodic
like a  robust market system
one might want to macro drive

but shit i can drive my little  korean fuckerof a car  anywhere i want

so too can we take the us economy
errr ...with a few more wheels brakes and accelerators

### health services as new market paradigm

quote of a quote by pk of some  randomly correct miteful  by some geefster at the britful  abominist :

"key thing to pay attention to is who this marketing campaign was targeted at: key decisionmakers at providers and insurance companies. Those are the people who decide whether medical procedures get ordered. It’s not patients. Patients aren’t going to experience a loss of freedom or satisfaction because an expert reviewer at the Independant Payment Advisory Board makes the call as to whether a procedure is medically beneficial, rather than the corresponding bureaucrat at their insurance provider or at the for-profit clinic they’re attending"

gets paul to this :

http://www.aeaweb.org/aer/top20/53.5.941-973.pdf
that's arrow's now classic analytics of an ... exceptional market : health services

pre dating akerloff's   not so exceptional   used car market model
and apres that ??...  the  eclectic deluge

which gets me to this:

the culminating  greenwald stigiltz theorem ( GST )

revisited here by dixit:
http://www.princeton.edu/~dixitak/home/StiglitzFest_Dixit.pdf

"Among the hundreds of papers Joe has written on information economics, the one
with Greenwald (1986) surely ranks near the top. It establishes a conceptual parallel
between asymmetric information and technological externalities, and shows that a
competitive equilibrium of an economy with asymmetric information is generically not
even constrained Pareto efficient ...
but  !!!!!!!
A government facing the same information constraints as the private individuals in the economy
can nevertheless find Pareto-improving policy interventions."
-dixit-

what was it about trading beaver pelts for deer meat that seemed so univerisal
neoclassics  made all markets  structurally identical  ...errrr  except for the exceptions ???

or fresh fish at dock side ???

or gold on an exchange .... ...oops !!!! calling doctor mallinvaud !!!!

dancing frolicing asymmetries
market self immolation
unnatural  sellection pressures
survival of the credit worthy or at  least  credit connected

product markets plus or minus free range  ad blitzing

all this
hardly  proving universal  or even near universal reign of markets as optimal

and after  the coming of the GST  in the mid 80's
yes all that long ago now

why  not more shouts of

"no mercatian "dike "
no  mercodicy
for you... mr plutonic"

from the windows of the ivory tower ???

maybe we wild childs
of the post neoclassic  post eclectic  dispensation
need to remove the walrasian  homoginization process
once and for all  ....eh

past master of  leon's  dairy ken arrow himself
drank straight from raw markets

the GST
"shows that a competitive equilibrium of an economy with asymmetric information
is  GENERICALLY NOT EVEN PARETO OPTIMAL " !!!!!!

## Thursday, June 9, 2011

### rusty ...if that were true

pigs could fly

u guys are like a troop of chimps
watching a ball game

### what if ....

push rates into the negative range ie a tax on holding  prior debt obligations

what would the  bond price curve look like ??

i got the up stroke  on the positive side ending in a singularity at zero
but once in the negative range .....??

is it really no price ...only entrapment ???

### what happens to corporates ?? chapter 23 of the tales of the rate fetish macronauts

when theres a flight to treasuries the initial effect is to raise corporate rates and lower treasury rates
if the fed steps in and reduces the treasury rates  even lower
does it have enough above zero rate room to lower the corporate default risk premium enough to counter
both

and

the knock on effect to the inflation premium
from the fed's monetary base increasing  safe rate reducing  reaction

just fooling around here of course

but the entire array of security rates  on n private and m public issues plus f  forex rates and  e equity p/e ratios
makes for quite a bundle to aggregate into one hicksian rate eh ??

in fact there's prolly no rate of real return  feasible in our system
even if we went to negative nominal rates that could induce corporaions the build new capacity or hire additional staff

lets call this formal I(r) the hicks effect
ie that so llong as we can push the real rate r low enough
we can induce all  the I we need

that's like the venerable old escape hatch
called the pigou effect
if product prices fall  low enough
the purchasing power of money  ie the real balances  will rise high enough to  induce
as much more consumption as we need
a particularly absurd  sub set of the wealth effect