ie
rep agent learning ...just more "reason" to change prices slowly
Tuesday, July 31, 2012
price stickiness in the end only shoots left too ....
stickiness is about price and wage adjustment inefficiency ...obviously
as in
"price stickiness causes relative prices to go awry,
which in turn causes resources to be misdirected"
MT
soooo
the way to avoid that is what ?
minimize necessary adjustments
that suggests steadiness which after a certain amount of ranging around
over optimal steady rates
usually settles on a real low rate because
that also reduces necessary absolute adjstments
and as average steady state price level change rises
and necessary absolute price adjustments rise with it
well the damn system might not scale well
might increase its dispersion of actual market prices from optimal market prices
so you settle down to
the creditors dream result a steadsy state rate
just enough above zero to avoid the mythic deflation suck***
-----------------------------------------------------------------------
****the deflation suck is postulated to dwell down there
where japans price system wobbled along
FOR TWENTY YEARS!
but that's off topic
------------------------------------------------------------------
what's on topic is simple
never drive the price change requirement thru serious ups and downs
it causes the system to miss some higher output thru better allocation
this follows
simply because adjustments miss optimal dead lines
the ones necessary for optimal output
and with a system of ever erratic and perhaps ever faster coming
and bigger adjustments .....
but avoiding these inefficiencies comrades
translates into perma-slack
we need to mobilize not rationalize
that is task one
keep the production system at full utilization
even if this means price change rates fly around like a bumble bee
thesis
in a market economy
based in part on relative price signals
we lose more from idling capacity then from misallocating it
from slack then from the inevitable miss pricing
that results from lots and rrapid jar-ings
of the system
by the emergence of ever new optimal targets
for relative and absolute prices
as in
"price stickiness causes relative prices to go awry,
which in turn causes resources to be misdirected"
MT
soooo
the way to avoid that is what ?
minimize necessary adjustments
that suggests steadiness which after a certain amount of ranging around
over optimal steady rates
usually settles on a real low rate because
that also reduces necessary absolute adjstments
and as average steady state price level change rises
and necessary absolute price adjustments rise with it
well the damn system might not scale well
might increase its dispersion of actual market prices from optimal market prices
so you settle down to
the creditors dream result a steadsy state rate
just enough above zero to avoid the mythic deflation suck***
-----------------------------------------------------------------------
****the deflation suck is postulated to dwell down there
where japans price system wobbled along
FOR TWENTY YEARS!
but that's off topic
------------------------------------------------------------------
what's on topic is simple
never drive the price change requirement thru serious ups and downs
it causes the system to miss some higher output thru better allocation
this follows
simply because adjustments miss optimal dead lines
the ones necessary for optimal output
and with a system of ever erratic and perhaps ever faster coming
and bigger adjustments .....
but avoiding these inefficiencies comrades
translates into perma-slack
we need to mobilize not rationalize
that is task one
keep the production system at full utilization
even if this means price change rates fly around like a bumble bee
thesis
in a market economy
based in part on relative price signals
we lose more from idling capacity then from misallocating it
from slack then from the inevitable miss pricing
that results from lots and rrapid jar-ings
of the system
by the emergence of ever new optimal targets
for relative and absolute prices
Monday, July 30, 2012
b4 any resolution cuz marty demands satisfaction from club med first
simple
ECB BUYS UP
as much of the outstanding stock of
CLUB MED SOVEREIGNS
as necessary to get rates back into the sustainable range
but cuz marty is quietly boiling over at the thought of such louche pratices by the ECB
find below
marty's ' tactic'-fully stated blast and counter proposal:
"is that what the ECB should be doing?"
"While any central bank must be able to conduct open-market operations to manage liquidity in financial markets, selective purchases of individual country bonds that bear high interest rates because of current and past fiscal profligacy is both unnecessary and dangerous."
we really could stop there and will so far as blasting goes
counter proposal:
" A better rule for the ECB would be to conduct open-market operations by buying and selling a “neutral basket” of sovereign bonds, with each country’s share in the basket determined by its share in the ECB’s capital."
we really could stop there and will so far as blasting goes
counter proposal:
" A better rule for the ECB would be to conduct open-market operations by buying and selling a “neutral basket” of sovereign bonds, with each country’s share in the basket determined by its share in the ECB’s capital."
holy moses
who in their right mind would want to
"reduce pressure on the governments of Italy, Spain, and other high-interest countries to make the politically difficult decisions that are needed to cut long-term fiscal deficits.... An ECB policy that artificially reduces their sovereign borrowing costs would make these steps even more politically difficult."
who in their right mind would want to
"reduce pressure on the governments of Italy, Spain, and other high-interest countries to make the politically difficult decisions that are needed to cut long-term fiscal deficits.... An ECB policy that artificially reduces their sovereign borrowing costs would make these steps even more politically difficult."
fact narrative:
" The peripheral eurozone countries became over-indebted in the last decade because the bond market failed to provide a signal that debts were too high."
fortunately
" That has now ended...bond investors no longer treat all eurozone sovereign debt as equal."
restating the obvious :
" an ECB program to limit interest-rate differentials would eliminate this important signal."
but how about this crooked angle
" ...the ECB risks finding itself in the politically dangerous position of deciding whether a country’s fiscal actions are tough enough to be rewarded with lower interest rates. "
"The ECB would thus cross the threshold from monetary policy to fiscal policy"
that is why one reads marty ...to get at the sophistry
the ECB isn't NOW dictating fiscal policy marty ?
------------------------
then comes the upside down cake taker :
" The peripheral eurozone countries became over-indebted in the last decade because the bond market failed to provide a signal that debts were too high."
fortunately
" That has now ended...bond investors no longer treat all eurozone sovereign debt as equal."
restating the obvious :
" an ECB program to limit interest-rate differentials would eliminate this important signal."
but how about this crooked angle
" ...the ECB risks finding itself in the politically dangerous position of deciding whether a country’s fiscal actions are tough enough to be rewarded with lower interest rates. "
"The ECB would thus cross the threshold from monetary policy to fiscal policy"
that is why one reads marty ...to get at the sophistry
the ECB isn't NOW dictating fiscal policy marty ?
------------------------
then comes the upside down cake taker :
" Germany might not continue to accept the default risks implied by large ECB purchases of high-risk sovereign bonds."
risk to who and conveyed to them how martnik ?
" Germany already faces large financial risks, owing to the ECB’s balance sheet and the Target2 balances at the Bundesbank that are generated by international flows of deposits to German commercial banks. "
is this the risk net fund flows might head back toward club med ?
i see that might not get a big "do it " from the german bankers now on the receiving end that would then be on the losing end
but mary what about the german woikers ? are they more at risk
with a ECB going toward a med bail ?
risk to who and conveyed to them how martnik ?
" Germany already faces large financial risks, owing to the ECB’s balance sheet and the Target2 balances at the Bundesbank that are generated by international flows of deposits to German commercial banks. "
is this the risk net fund flows might head back toward club med ?
i see that might not get a big "do it " from the german bankers now on the receiving end that would then be on the losing end
but mary what about the german woikers ? are they more at risk
with a ECB going toward a med bail ?
" As the risks accumulate, it is not inconceivable that Germany might conclude
that, despite the potential impact on its exchange rate, it would be better off
returning to the Deutsche Mark"
yup better a soaring revaluation then all these added risks
.
that, despite the potential impact on its exchange rate, it would be better off
returning to the Deutsche Mark"
yup better a soaring revaluation then all these added risks
.
.
side bar zinger
side bar zinger
", ECB officials’ recent statements , by reversing the decline of the euro’s value, may have blocked the market response that is needed to shrink current-account imbalances and boost GDP in the eurozone."
get it ?
germany could take a reval
the entire zone couldn't
ya ya ya
the damn corral fucks with every member nations options
that was the fucking point from day 1 !
there is no way but the MNC way
the MNCs are the only Gods
and ECB is their.....errrr .... enforcer
zone bull session
Crash of the Bumblebee, by Paul Krugman, Commentary, NY Times: Last week Mario Draghi, the president of the European Central Bank, declared that his institution “is ready to do whatever it takes to preserve the euro” — and markets celebrated. ... But will the euro really be saved? That remains very much in doubt.
First of all, Europe’s single currency is a deeply flawed construction. And Mr. Draghi, to his credit, actually acknowledged that. “The euro is like a bumblebee,” he declared. “This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years.” But now it has stopped flying. What can be done? The answer, he suggested, is “to graduate to a real bee.”
Never mind the dubious biology, we get the point. In the long run, the euro will be workable only if the European Union becomes much more like a unified country. ...
But ... a United States of Europe won’t happen soon, if ever, while the crisis of the euro is now. So what ... could turn this dangerous situation around? The answer is fairly clear: policy makers would have to (a) do something to bring southern Europe’s borrowing costs down and (b) give Europe’s debtors the same kind of opportunity to export their way out of trouble that Germany received during the good years — that is, create ... a temporary rise in German inflation... The trouble is that Europe’s policy makers seem reluctant to do (a) and completely unwilling to do (b).
In his remarks, Mr. Draghi ... basically floated the idea of having the central bank buy lots of southern European bonds to bring those borrowing costs down. But ... German officials appeared to throw cold water on that idea. In principle, Mr. Draghi could just overrule German objections, but would he really be willing to do that?
And bond purchases are the easy part. The euro can’t be saved unless Germany is also willing to accept substantially higher inflation... — and so far I have seen no sign that German officials are even willing to discuss this issue...
So could the euro be saved? Yes, probably. Should it be saved? Yes, even though its creation now looks like a huge mistake. For failure of the euro wouldn’t just cause economic disruption; it would be a giant blow to the wider European project, which has brought peace and democracy to a continent with a tragic history.
But will it actually be saved? Despite Mr. Draghi’s show of determination, that is, as I said, very much in doubt.
Sunday, July 29, 2012
noah pine cone has noah notion of urgent remedies for structurally generated deficits
no don't stare at this picture of mr 'really really geeky' pine cone guy ...read this :
"A. If you have a high amount of debt but no deficit, you can pay it off without high inflation or rapid growth. It just takes a really long time. But it's perfectly possible.
B. A high deficit does not require either inflation or growth to go up in the future. Why? Because you can cut the deficit."
it leaps out at u doesn't it
"you can cut the deficit "
syre you can look at the baltic states ...
or greece even
the deficit cut prolly won't reduce the economy's tax bases
enough to nullify let alone increase the deficit
so cut away .....
but what about all that slack you create ?
you simply wait out the structural source of the slack
the built in deficiency in effective demand for domestic output
if its say like greece too much importing at full employment
youy get along on less then full employment or you cut wages and increase the real burden of existing debt
but you are trying to pay it off aren't you
the key here must be time frame
"It just takes a really long time" applies just about everywhere
yup you just gotta tough it out as you wait it out
the sea always calms down some time or other ...am i right citizen ?
---------------------------------------------
had enough ?
well i haven't
"So, here's a perfectly possible scenario:
We temporarily run a high deficit. Then we balance the budget after that. "
this is so under motivated he might as well say
we temporarily drive back and forth across the median stripe for a while
scaring the shit out of our passengers
on coming traffic and maybe even ourselves ..
.then we stop doing that ...
"We have a bunch of debt."
and Growth remains slow
but inflation remains low."
" Over time, we very slowly pay off the debt,
without defaulting, growing faster, or causing higher inflation."
or we fall of the prudence wagon
into another massive deficit spasm and ....
-------------------------------
look we can have a built in chronic deficiency of effective demand
gotta solve that ...eh ?
who's to say how long that might take while running full employment budget deficits
we can over save for almost ever maybe christ sake
or go so stale we invest too much over seas
or buy too many foreign made trinkets and goo gaws and gadgets and stuff
or ...
pk "imagine an E- zone with just germany and spain"
the current situation looks like this:
notice spain has serious slack while germany is at the point where more demand would lead to ...WAGE INFLATION !!!!!
----------------------------------------------------------
"The current European strategy:
internal devaluation
Spain cuts money wages to restore competitiveness "
but cutting money wages is " resisted " strenuously
plus deflation in spain only increases the real weight of her debt load
---------------------------------------------------------------------
so pk best macro
"Aggressively expansionary monetary policy"
" this shifts the AD curves of both countries to the right. "
" raising output and employment in Spain,
and creating wage inflation in Germany "
-------------------------------------------------
note this assumption :
"the ECB can determine nominal GDP for the euro area."
bogus eh
" Under liquidity-trap conditions, this is a very problematic assumption,
and I don’t mean to drop my skepticism for other purposes."
good
" For right now, however, it’s useful"
oh really ?
"as a proxy for the whole range of possible expansionary policies
the ECB might follow."
rather characteristically pk prefers to make things "happen" by assuming
the near impossible !
the ECB could no more kick off such a demand surge
that wages and prices spiral in germany while spain recovers zippidity zip
obviously this is a proxy for its opposite
not monetary policy but fiscal policy
as in
germany cuts savagely taxes on job class households
and guns up transfer payments
pk wants to avoid the real choice because he wants to avoid
the entailed fiscal deficit boom that suggests the idiotic retort
" but pk there's not enough debt space "
that hassle however is the only road forward out there
in the real market economies of europe
notice spain has serious slack while germany is at the point where more demand would lead to ...WAGE INFLATION !!!!!
----------------------------------------------------------
"The current European strategy:
internal devaluation
Spain cuts money wages to restore competitiveness "
but cutting money wages is " resisted " strenuously
plus deflation in spain only increases the real weight of her debt load
---------------------------------------------------------------------
so pk best macro
"Aggressively expansionary monetary policy"
" this shifts the AD curves of both countries to the right. "
" raising output and employment in Spain,
and creating wage inflation in Germany "
-------------------------------------------------
note this assumption :
"the ECB can determine nominal GDP for the euro area."
bogus eh
" Under liquidity-trap conditions, this is a very problematic assumption,
and I don’t mean to drop my skepticism for other purposes."
good
" For right now, however, it’s useful"
oh really ?
"as a proxy for the whole range of possible expansionary policies
the ECB might follow."
rather characteristically pk prefers to make things "happen" by assuming
the near impossible !
the ECB could no more kick off such a demand surge
that wages and prices spiral in germany while spain recovers zippidity zip
obviously this is a proxy for its opposite
not monetary policy but fiscal policy
as in
germany cuts savagely taxes on job class households
and guns up transfer payments
pk wants to avoid the real choice because he wants to avoid
the entailed fiscal deficit boom that suggests the idiotic retort
" but pk there's not enough debt space "
that hassle however is the only road forward out there
in the real market economies of europe
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2) However, the effects of such bond purchases on core countries is not clear. On the one hand, exports to the periphery will increase; but, on the other hand, nominal interest rates in the core are likely to increase as well because of higher expected Eurozone-wide inflation. Therefore, for the core countries, the effect of the ECB's intervention will be small, or maybe even contractionary. As a result, purchases of GIIPS bonds will improve the economic situation in the periphery countries, but at the cost of preserving the existing structural imbalances. If the ECB could control core interest rates by buying German and French bonds, the ECB's intervention would be more effective, but such scenarios probably lead us to the land of economic fantasy.
3) Of course, fiscal policy would be a much more effective way to increase inflation in the core countries, but that option is probably not politically acceptable since many core countries are already close to full employment (e.g. Germany, Austria, the Netherlands).
4) Since it may be difficult to produce large inflation differentials between the core and the periphery, and since nominal wages in the periphery are still low compared to the core, the Eurozone is right to put so much emphasis on productivity gains in the periphery.
5) Yes, the Eurozone is probably pushing austerity measures a bit too far, and yes, it probably should do more to limit nominal interest rates in the periphery (by the way, that’s the EFSF/ESM job, not the ECB’s), but its overall strategy makes sense and has a reasonable chance of success.
Hire another 7 million people.
There's a little more than 400 billionaires out of a working population of roughly 147,000,000 million people.
It's entirely a problem of perception.
{For failure of the euro wouldn’t just cause economic disruption; it would be a giant blow to the wider European project, which has brought peace and democracy to a continent with a tragic history.}
Well put, PK. You have put your finger on what most Europeans feel is the "raison d'être" of the EU - so riven over the centuries has it been by war.
A common economic dependence brings the peace that has escaped Europeans for more than a century and a half since the demise of the Pax Romana.
Which answers your next question. {But will it actually be saved?}
Yes, of course, because it must be saved.
And do not dismiss Draghi. He is Italian and quite used to the fecklessness of politicians. If push comes to shove, he will do his duty, rather than go down in history as the head of the ECB who failed at saving the Euro.
History has more importance in Europe than the US - where history was five minutes ago and ancient history yesterday.
Draghi's too proud to allow the collapse of the EuroZone to happen. We'd do well to worry more about an ineffectual Fed under Bernanke.
Flight Of The Bumble Bee Is Based More
On Brute Force Than Aerodynamic Efficiency http://www.sciencedaily.com/releases/2009/05/090507194511.htm
"We decided to go back to the insect itself and use smoke, a wind tunnel and high-speed cameras to observe in detail how real bumblebee wings work in free flight," said Dr Richard Bomphrey of the Department of Zoology (Oxford), co-author of a report of the research published this month (May '09) in Experiments in Fluids. ‘We found that bumblebee flight is surprisingly inefficient – aerodynamically-speaking it’s as if the insect is ‘split in half’ as not only do its left and right wings flap independently but the airflow around them never joins up to help it slip through the air more easily.’
Such an extreme aerodynamic separation between left and right sets the bumblebee [Bombus terrestris] apart from most other flying animals.
"Our observations show that, instead of the aerodynamic finesse found in most other insects, bumblebees have a adopted a brute force approach powered by a huge thorax and fuelled by energy-rich nectar," said Dr Bomphrey. "This approach may be due to its particularly wide body shape, or it could have evolved to make bumblebees more manoeuvrable in the air at the cost of a less efficient flying style." ...
These statements can only be construed as an attempt to pacify skittish investment Markets and investors into supporting the Euro.
BTW, its been 5 days since Draghi made his pronouncement. What has he done since then?
(and don't tell me "it's the weekend". When a Continent is on fire, you work overtime)
the parallel between the post civil war US and the zone nowis over looked
there was no transfer union to speak of back then aqnd we tied ..retied the dollar to gold
check out dixie during that period
it wasn't just the struggle between the race nations down there that turned our ante bellum
export dynamo into a poverty sump
if the parallel isn't clear to ya
you ain't thinking about it much
content pull out ?
the protracted date range
1866 to ......1936 !