Author: VD

Integrity vs intelligence

Calculated Risk is one of the best, and most statistically useful, economics blogs on the Internet. However, I do have to disagree with one of CR’s recent posts in which he comments on the character of the current Federal Reserve Chairman. Contra CR, I don’t think it is the least bit unreasonable to have serious questions about Ben Bernanke’s integrity:

“It is one thing to have different views from those of the Fed Chair on particular decisions that have been made– I certainly have plenty of areas of disagreement of my own. But it is another matter to question Bernanke’s intellect or personal integrity. As someone who’s known him for 25 years, I would place him above 99.9% of those recently in power in Washington on the integrity dimension, not to mention IQ. His actions over the past two years have been guided by one and only one motive, that being to minimize the harm caused to ordinary people by the financial turmoil. Whether you agree or disagree with all the steps he’s taken, let’s start with an understanding that that’s been his overriding goal.”

I agree with Professor Hamilton.

I assert, to the contrary, that if one is sufficiently familiar with Mr. Bernanke’s books and speeches, one is forced to choose between his intelligence and his integrity. I have no doubts at all about the former and I am reasonably confident about his lack of the latter. By way of example, I quote his 2007 speech to the Bundesbank:

“I will begin by reviewing the origins and development of the global saving glut over the period 1996-2004, as discussed in my earlier speech, and will then turn to more-recent developments…. The question at issue, therefore, is whether the decline in the realized saving rate in the United States reflected a decline in desired saving or was instead a response to other, possibly external, economic developments. Or, in textbook terms, did the fall in the realized saving rate in the United States reflect a shift in the demand for savings at any given interest rate (a shift in the saving schedule) or a decline in savings induced by a change in the interest rate (a movement along the saving schedule)? In fact, there is no obvious reason why the desired saving rate in the United States should have fallen precipitously over the 1996-2004 period.5 Indeed, the federal budget deficit, an oft-cited source of the decline in U.S. saving, was actually in surplus during the 1998-2001 period even as the current account deficit was widening.”

First, as Stephen Roach of Morgan Stanley pointed out three months before Bernanke gave his speech, there is no “global savings glut”. The global savings rate as a percent of world GDP fell from 23 percent to 22.8 percent from 1990 to 2006; the reason Bernanke – in 2007 – chose 2004 as a figure is because the global savings rate had briefly risen to 24.9 percent before falling back below the 24-year average of 23 percent.

Second, Bernanke had to know the answer to the question he posed was “a decline in savings induced by a change in the interest rate” since the interest paid on 6-month CDs from 5.7 percent in 1996 fell to 1.0 percent in 2004. This is not only an obvious reason that suffices to explain the decline in U.S. personal savings, but is one that Bernanke, in his role as a Federal Reserve governor, absolutely had to know. The fact that he cites far more obscure interest rates in his 2007 speech, such as the real yields on inflation-indexed government bonds in the UK and Canada, strongly supports this contention.

Why would Bernanke speak in such a deceitful manner? For the same reason he is stonewalling the US Congress and refusing to allow any audits of the Federal Reserve’s activity. He is desperately attempting to keep people from realizing that the Federal Reserve not only created the Great Depression, but that it has most likely played a central role in bringing about its return. The attempts to deceive may be silly and implausible, but it’s all the Bernanke has left if his best efforts prove unsuccessful in averting the contraction in 2010 he has to know is in the works.

It’s worth noting that the “global savings glut” theory is pure Keynesianism, as is the famous helicopter money response to economic contraction. There’s nothing truly monetarist about these practitioners of active and discretionary monetary policy.

UPDATE – Can you spot the savings glut? From Brigitte Desroches and Michael Francis,.

Denying the Climacaust

The true believers in the hoax that is AGW/CC are getting desperate as fewer and fewer people buy into their scheme to bring in global governance by the back door. You can practically hear Paul Krugman foaming at the mouth in his column today:

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet. To fully appreciate the irresponsibility and immorality of climate-change denial, you need to know about the grim turn taken by the latest climate research. The fact is that the planet is changing faster than even pessimists expected: ice caps are shrinking, arid zones spreading, at a terrifying rate. And according to a number of recent studies, catastrophe — a rise in temperature so large as to be almost unthinkable — can no longer be considered a mere possibility.

It’s funny how the planet is changing even faster than the pessimists expected when global temperatures are dropping, in direct contradiction to those very models that Krugman is so concerned about. Of course, he’s still using an outdated economics model from the 1930s, so it should hardly surprise us that he’s not up on the latest climate science either.

WND column

Americans Walk Away

Mortgage lenders are rightly terrified that more and more of the 22 percent of American homeowners whose homes are now worth less than their mortgages are going to exercise their borrower’s right to default on them. At this point, most home defaults are still involuntary, but according to the paper cited above, more than one-quarter of them already consist of what the mortgage industry calls “ruthless defaults.” And yet, why shouldn’t homeowners be ruthless in their disregard for the financial interests of the home lenders when the lenders themselves have been utterly ruthless – and utterly stupid – in squeezing every last drop of potential demand out of the American public?

Global Exclusive: NASA finally makes better fakes

Apparently they believe the state of CGI has reached a sufficient level of quality to have another go at the public:

ECSTATIC space officials at Nasa could be about to unveil one of their most stunning discoveries for 40 years — new and amazingly clear footage of the first moon landing.
The release of the new images next month could be one of the most talked about events of the summer.

Of course, these revised “lunar tapes” will end up being exposed as fraudulent when hardcore gamers recognize the lighting model from the Unreal Engine 3.

Laughing at myself


This is the graphic representation of that Limits of Demand concept that I was considering as a more broadly explanatory substitute for the middle step in Austrian malinvestment theory, which presently relies upon the shift from consumer goods to capital goods. After I drew it, I realized that it looked extremely familiar.

And frankly, you kind of let me down, AGDers. Extra credit in Voxiversity III for the AGDer who can identify the very similar chart. And additional extra credit for anyone who can explain why Rothbard limited his application of the concept as he did when it offers a better explanation for malinvestment than the shifting investment dynamic between consumer and capital goods, which the Limits of Demand also explains.

Submission never works

I have little respect for the poor shrinking violets getting beaten by their women:

New South Wales Bureau of Crime Statistics figures show that over the past eight years, the number of women charged with domestic abuse has rocketed by 159 per cent. In 2007, 2,336 women fronted court on domestic violence charges, compared to around 800 in 1999.

What is the point of living your life in fear of a bully of either sex? If a woman is going to divorce you because you hit her back, good! Why would you ever want to continue to share your life with that person anyhow? In fact, if you know that you’re married to someone who would divorce you over something they started, you’re probably going to end up divorced because eventually your submission is going to become an unbearable provocation to her. There are exceptions, but in general, that’s how they tend to work.

Your mileage may vary, but I think I would rather emasculate myself and eat my deep-fried testicles rather than meekly accept a serious physical assault from a woman, especially a woman who claimed to love me. (I’m not talking about a Scarlett O’Hara slap here, I mean a genuine assault with harmful intent.) Start nothing, finish everything. Those who attack others with a genuine intent to harm merit whatever beating they end up receiving, no matter their size or sex.

The ironic thing is that these self-emasculated men claim their passivity stems from their chivalry, but that can’t possibly be true because chivalry requires honor. And a lady, for that matter. Speaking of honor, it’s not hard to imagine that female-initiated domestic violence cease to be an issue soon enough now that the concept of honor-killing has reached the USA and Europe.

The pretense of democracy

The Congress isn’t even trying to maintain it anymore:

Through a series of parliamentary inquiries, the Republicans learned that the 300-plus page managers’ amendment, added to the bill last night in the House Rules Committee, has not even been been integrated with the official copy of the 1,090-page bill at the House Clerk’s desk, let alone in any other location. The two documents are side-by-side at the desk as the clerk reads through the instructions in the 300 page document for altering the 1,090 page document….

Global Warming is apparently so urgent that we can’t even wait until members of Congress know what they’re voting on.

This sort of thing is why I find the false and sentimental concern for Iranian democracy to be so ludicrous. Worry about your own so-called democracy, people, while you can still harbor the illusion that you possess it. They’re passing fill-in-the-blank legislation.

Liberal Fascism – Chapter Two


The weak and the sick have been weeded out, as always happens once people take the introductory quiz and realize that they actually have to read the book in order to do well on these quizzes. And yet, more than 850 staunch readers remain. Congratulations, if you are one of them. As before, please keep the extraneous and tangential elements to a minimum; I have some thoughts of my own on this chapter that I will expound upon in the comments once others have had a chance to say their piece.

The reading for next week will be Chapter 3 – “Woodrow Wilson and the Birth of Liberal Fascism”. The quiz for that chapter will be posted on Monday, July 6th. If you happen to be be on vacation, please note that you can always take it later by scrolling down through the blog posts or by clicking on the Voxiversity III link on the left sidebar.

Econ project

I have something I intend to do once I finish the book – which is rapidly approaching the end – and I’m interested in knowing if anyone else might be interested in helping with it. I’ve made use of the figures from Angus Maddison’s The World Economy: historical statistics, but they end in 2003. It seems to me it would be useful to update them through 2008. I’ll handle the 21 nations in the Western Offshoots and Western Europe categories, but I’d like to know if anyone else wants to do any the other regions once I’ve worked out the conversion process required. If you’re up for it, please let me know how many countries for which you’d be willing to calculate Populatio, GDP, and GDP per capita.

Also, Don Reynolds, please email me. There’s a chapter which concerns Friedman that I’d like to run by you.

Phillip Ball bitchslaps Mr. Harris

My lab amigo unfortunately fails to present much of an argument. If he was an economist, we would be forced to conclude that he was an extreme practitioner of the Ricardian Vice:

One somewhat frustrating aspect of this exchange for me has been that you seem to insist that any disagreement with your point of view is not genuine disagreement as such but is missing the point. My sense is that you cannot conceive how any sane, rational person can hold a point of view different from your own, so that if they insist on doing so, they are obviously being either obtuse or stupid. Your first long paragraph is all rhetoric along those lines. I’d add here that, while I won’t accuse you of intellectual laziness, I do feel that your absolutism is, like most absolutisms, the easy way out. There is then always a right answer, and your convictions supply it ready-made. I understand everything you say about religion being generally filled with irrational beliefs, and it would be very easy for me too to say that ‘people should not believe anything for bad or invalid or flaky reasons, and therefore we must strive to ensure that they never do.’ I suspect that philosophers might find that an epistemologically dodgy position to take, but I can see that it makes life easy. I don’t find it either attractive or useful, however….

But to the meat of your argument. I stated in my original article that at least your position can claim some philosophical rigour. I think this is the one aspect of the piece I might now have to withdraw.

I’ll write up a full review of this debate between atheists later, but the root problem is that because Harris’s basic argument is tautological in nature and empirically absurd – if you believe in religion then you must be incapable of scientific rationality – he finds it hard to understand how anyone can disagree with him. Compounding this is the fact that he pays no attention to what his opponent is actually saying and so fails to respond to the point at hand. And notice how, as usual, Harris is complaining that he’s being misunderstood. The thing is, if intelligent people continually fail to understand what you are saying, then the onus is on you to learn to communicate more clearly.