Category: Uncategorized

Mailvox: improving RGD

PR has a suggestion or two:

I just got done with Return of the Great Depression. Great read. Thanks for the Nook version. I thought you did a pretty good job of dumbing things down enough that I could make sense of what you were saying, but you managed to do it in a way that it didn’t seem like you were talking down to me at all. I really appreciated that dictionary since I was reading it in a location where I didn’t have web access and therefore couldn’t use any outside references to help me out.

If you care for any criticism on it, here’s my effort:

1. You made me laugh about the apocalypse scenario. But I would’ve also appreciated a little more of an explanation as to why you think it’s not likely at all. Something a little more than telling me that no serious economists take that scenario seriously. So what! I want(ed) to know why YOU think it’s unlikely.

2. I would suggest maybe even a little bit more of a dictionary at the end. I’ll show a little bit of my ignorance here and confess that I wasn’t really sure what a “sub-prime” loan was and why it was a crisis. I did figure it out. But I started off thinking that “sub-prime” meant something like “below the ‘prime’ interest rate”. That sounds like some loan that would be given to only the best risks. I am certainly more knowledgeable now that I realize it’s quite the opposite. But a quick dictionary note would’ve helped me.

Anyway, I’m not even sure you care about feedback like this. But I thought it only right that since you gave me such a bargain, that I would give you my best critique. I’m looking forward to your next economics book.

In answer to (1), my reasoning is that despite the expectations of those anticipating the Eschaton, it never arrives. Societies seldom perish in blood and fire except at the hands of an implacable and merciless enemy; the fact that it is hard to think of many such societies besides some of the Slavic ones overrun by the Mongol hordes and the Carthaginian society wiped out by Rome is an indicator that when the global economy collapses, it will reduce living standards without ending civilization.

I’ve been reading Vanished Kingdoms, by Norman Davies, and one of the things that becomes eminently clear is that for the most part, societies are absorbed and replaced by larger societies that overwhelm them, either by invasion, immigration, or political amalgamation. So, America is much more likely to either devolve into a Brazilian-style second world country or break apart into a Europe of sovereign American states than to shatter into some sort of post-apocalyptic chaos out of Robert Adams or Walter Miller. Even a hypothetical Round 2 isn’t likely to be particularly apocalyptic, although it would certainly be interesting to see the South rise again once Aztlan separatism draws the primary focus of the American Unionists.

The big thing that is missing from the scenarios drawn up by those prophesying apocalypse is the Aztlan factor. Most people are thinking in Red/Blue, urban/rural, black/white terms, but possibly the most important question is whether the Hispanics simply return to Mexico once the flow of benefits end or if they stay to carve out their own state. I would tend to assume the latter, but no one actually knows.

I digress. In response to number two, if I do an updated RGD, I will certainly consider expanding the appendix to include the various non-economic terms that may be unfamiliar to some readers. It’s a good idea that simply had never occurred to me.

I should point out that although I’m not currently planning to write the economics book that melds Keensian Post-Keynesian economics with modified Austrian theory that some suggested yesterday, I do plan to begin working on an economics-related project after I finish the current novel in October.

In defense of mass murder

I find myself contemplating quitting. No, not the blog. And not writing in general. But it is really incredible to see how few people at WND are interested in substantive matters like a conceptual revolution in economics versus other, considerably less significant issues.

There are all of two comments on today’s WND column. That’s less than one-twentieth of how many comment on any given column. And it’s not the WND readership, it wouldn’t be any better if I wrote for Salon, the New York Times, or the Daily Show. I mean, it’s not that I don’t understand MPAI, I coined the acronym after all. But that’s true for varying degrees of “most” and sometimes the percentage is just a little higher than I can fathom. I mean, the world is on the brink of a total economic meltdown, and still no one gives a damn about why? I feel like Jonah staring at the walls of Nineveh, stomping up and down the beach, gesticulating wildly and saying: “Go ahead and do it, Lord, let them have it, you know they deserve it!”

Seriously, I’m not sure I can deal with trying to pretend I don’t think a world where the best-selling novel is Twilight fan fiction deserves to perish in fire and ice. I used to wonder to whom the old Norse pagan religion held any appeal, but now I understand completely. If I read one more idiot Republican bank apologist claiming that the root cause of the financial crisis was Democratic politicians forcing banks to provide home loans to minorities, I may climb the Rainbow Bridge, wrest the horn from Heimdall and blow it myself. Then I’ll sit there and cheer for the frost giants and fire demons.

I’m considering a literary experiment of sorts. I’m wondering how much more interest would be expressed in the dumbest, most lowbrow column I can get past the editors devoted to the simple and straightforward concept of Obama being bad. Bad for the nation. Bad for the world! Bad. So bad. I’m thinking of calling it: Obama is Bad. Subtitled: Obama is really and truly very bad for America.

And if the column hits Drudge and results in an offer from Fox News to host my own cable news show, I’m going to give up op/ed, study genetics, build a lab, and start creating customized killer viruses.

The wages of theological sin

It’s really remarkable how cause and effect seems to repeatedly elude liberal Christians:

IN 1998, John Shelby Spong, then the reliably controversial Episcopal bishop of Newark, published a book entitled “Why Christianity Must Change or Die.” Spong was a uniquely radical figure — during his career, he dismissed almost every element of traditional Christian faith as so much superstition — but most recent leaders of the Episcopal Church have shared his premise. Thus their church has spent the last several decades changing and then changing some more, from a sedate pillar of the WASP establishment into one of the most self-consciously progressive Christian bodies in the United States…..

Yet instead of attracting a younger, more open-minded demographic with these changes, the Episcopal Church’s dying has proceeded apace. Last week, while the church’s House of Bishops was approving a rite to bless same-sex unions, Episcopalian church attendance figures for 2000-10 circulated in the religion blogosphere. They showed something between a decline and a collapse: In the last decade, average Sunday attendance dropped 23 percent, and not a single Episcopal diocese in the country saw churchgoing increase.

For some reason, despite the observable fact that chasing after the world and attempting to “appeal to today’s young people” has been negatively affecting church attendance since I was in junior high, no one ever seems to question an assumption that so repeatedly and reliably fails. It’s no different than politics and the fallacy of moderate appeal. People without direction seek leadership, and when the Church refuses to stand for its Christian principles as defined in the New Testament and provide intellectual leadership against the zeitgeist, it not only sacrifices its reason to exist, but counterintuitively, also loses its primary appeal.

Of course Douthat, being somewhat of a moderate conservative, fails to recognize that the gifts of progressive Christianity he cites, “Social Gospel and the civil rights movement”, were both intellectually poisonous and societally destructive in the long run. Liberal Christianity shouldn’t be saved and it won’t be saved. Having cut itself off from its Christian roots, it should be abjured by the rest of the Church and left to its inevitable demise.

There were surely wolves in sheeps clothing who helped engineer the demise of the liberal denominations and congregations, but it should not be forgotten that they were abetted by many foolish and short-sighted individuals who were genuine Christians. One of the great shortcomings of nearly every church I have ever attended is the complete lack of vigilance for the wolves. Paul warns of them, and yet most churches never stop to think that among their most avid volunteers are likely those who seek to destroy the institution.

Book Review: Debunking Economics

Staking the Undead Economist

After nearly three decades of reading across a broad spectrum of economic thought, the two books on the subject I would most recommend are Joseph Schumpeter’s History of Economic Analysis and Murray Rothbard’s An Austrian Perspective on the History of Economic Thought. But now there is a third. After finishing Debunking Economics: The Naked Emperor Dethroned? I have to assert that Keen’s book is not only an absolute masterpiece, but may, in fact, represent the most important intellectual development in economics since The General Theory of Employment, Interest and Money was published in 1936. And if some of Keen’s more controversial assertions hold up over time, it will be the most important contribution to the literature since The Wealth of Nations.

Avert your eyes

In which I publicly engage in the practice of the Ricardian Vice:

Unit Labor Costs

Britain 100 cloth 110 wine
Portugal 90 cloth 80 wine

In the absence of transportation costs, it is efficient for Britain to produce cloth, and Portugal to produce wine, as, assuming that these trade at equal price (1 unit of cloth for 1 unit of wine) Britain can then obtain wine at a cost of 100 labor units by producing cloth and trading, rather than 110 units by producing the wine itself, and Portugal can obtain cloth at a cost of 80 units by trade rather than 90 by production.

Now let’s do this Ricardo-style and assume the perfect mobility of labor, maintaining, as Ricardo does, the perfect immobility of capital. We will likewise assume that Britain and Portugal have equally-sized labor forces. We will also follow Ricardo in leaving time and transport costs out of the equation. So, what are the consequences?

Obviously the wine and cloth laborers will move to Britain, since they will receive an 11 percent raise and a 38 percent raise respectively. However, once they get there, the doubling of the labor supply in Britain this causes will cause the price of labor to be cut in two. Britain can now produce the same amount of cloth for the cost of what was previously 50 units of labor and the same amount of wine for 55, thereby obtaining both wine and cloth for a much lower unit labor cost than what it used to cost to produce the wine alone. Portugal doesn’t get anything out of it, but that doesn’t matter because they’ve got no ability to retain their laborers without resorting to badges and guns.

Therefore, open immigration is not only desirable, but is vastly preferable to comparative advantage by a factor of 105/200 and autarky by a factor of 105/210. QED. What else can we conclude?

1. Ricardo implicitly postulated the immobility of labor.
2. The mobility of labor not only fails to disprove comparative advantage, but actually strengthens the case for even freer trade… at least if you’re in the higher labor cost country and you only look at the labor costs.
3. The mobility of labor will eliminate international trade since everyone will be living in Britain.
4. The mobility of labor operates to the detriment of labor.
5. Ricardo’s logic is remarkably stupid.

History is freedom

Brandon Smith notes the collectivist hatred for heritage and history:

A distaste or hatred of heritage is very common at the onset of any collectivist restructuring. These restructurings usually target principles of individual liberty and self governance while masquerading as a fight against oppression or corruption. The old principles are either presented as too outdated and insufficient to deal with the new problems of a culture, or, they are presented as the actual SOURCE of the problems of that culture. In either case, the elites wielding the collectivist machine inevitably call for a purge of all bygone ideals.

In Communist China, Mao instituted the Cultural Revolution, which encouraged the mindlessly mesmerized collectivists in the Chinese populace to destroy everything which represented the past. Artwork, buildings, historical artifacts, books; even teachers and proponents of any brand of pre-communist heritage were targeted.

In Fascist Germany, the Nazis destroyed countless books and manuscripts, rewrote German history, censored and removed thousands of artworks, instituting state designated artforms that depicted the collectivist vision of the new society.

In Russia, the Communists focused intently not only on liquidating manuscripts extolling the methods of different eras, but also the people who wrote them. Under Lenin and Stalin, the goal was to annihilate the memory of the world before, even if it meant annihilating the masses along with it.

A complete reformation of educational infrastructure came next. The children of the collectivist age had to be indoctrinated as if there had never been another way of doing things.

These purges, as numerous examples have shown, are only temporary. The great conundrum for the elites has not only been the obstacle of memory, but the obstacle of the soul; that inherent quality in human beings that compels us to pursue freedom, balance, and truth, regardless of the constraints of our environment. The documents and remnants of heritage that oligarchs seek to destroy are ultimately only expressions of our inborn consciences. Deep down in each person, no matter what they have been conditioned to believe, there is a well-spring of vital ideas that conflict with the mechanizations of collectivism. Individualism finds a way to surface, and so, the central rulers must start over once again, looking for an insurmountable method of control.

I’d never associated my love of history with my intellectual affinity for human liberty. I’d merely regarded history as a useful tool for potentially avoiding past mistakes. But it is true, the totalitarian thirst for eliminating and creatively rewriting history does tend to lend some credence to the idea that the knowledge of history is important, perhaps even integral to understanding and upholding human freedom. The goal of the totalitarian is always stasis, which involves not only destroying the future and turning it into a facsimile of the present, but the past as well.

Mailvox: the best defense

In which the self-appointed champion of free trade doctrine, Unger, demonstrates that he literally does not know what he is defending:

Free trade does not require the free movement of labor, dumbass. If I buy a hamburger, I don’t have to move in with the cook, or vice versa. Maybe it works differently on Planet Stupid, where the Superintelligent natives can’t so much as buy a stick of gum without inviting comparisons to U-haul-driving lesbians; here on Earth, it thankfully ain’t so.

Free trade most certainly does require the free movement of labor. This is self-evident because it does so by its very definition. An immigration limitation is, quite obviously, a restraint on trade every bit as restrictive as a tariff or a control on capital. Unger here demonstrates that he knows absolutely nothing about the doctrine he is so dogmatically and so ineptly defending. I don’t mind being called childish names by such an interlocutor, indeed, I would be more concerned if anyone so intellectually hapless claimed to follow my reasoning, let alone agree with it.

Contra his illogical and incorrect insistence that free trade does not require open immigration, I cite Ludwig von Mises in Liberalism: “Under a system of completely free trade, capital and labor would be employed wherever conditions are most favorable for production…. Capital and labor tend to move from areas where conditions are less favorable for production to those in which they are more favorable. But the migration of capital and labor presupposes not only complete freedom of trade, but also the complete absence of obstacles to their movement from one country to another.”

Once more, we see that the defenders of free trade aren’t merely anti-American, they are either ignorant of their own doctrine or astonishingly intellectually dishonest. And it is beyond irony to see a free trader present an appeal to how things work on Earth in the real world.

The total safety of vaccines

Of course, nothing like this unfortunate little incident of gene-swapping viruses could ever possibly occur with human vaccines. Because scientists have performed all sorts of scientific experimentsstatistical reviews and so they can assure you that no vaccine has ever been scientifically proven to harm anyone ever.

Three vaccines used to prevent respiratory disease in chickens have swapped genes, producing two lethal new strains that have killed tens of thousands of fowl across two states in Australia, scientists reported on Friday. The creation of the deadly new variant was only possible because the vaccines contained live viruses, even though they were weakened forms, said Joanne Devlin, lead author of the paper published in the journal Science….

The viruses emerged in 2008, a year after Australia started using a European vaccine along with two very similar Australian vaccines to fight acute respiratory disease in poultry. The illness causes coughing, sneezing and breathing difficulties in birds, normally killing 5 percent of them. The two new strains, however, were far more harmful, and since they were created have killed up to 17 percent of chicken flocks across Victoria and New South Wales, the two main chicken rearing states in Australia.

Of course, if these Australian scientists utilized the system presently used by the U.S. vaccine reporting system, their reports would show that twelve chickens had died for reasons that were inexplicable, but definitely had absolutely nothing to do with the vaccines they received the previous day.

Upending economics

Steve Keen’s Debunking Economics is less a critique than slashing out the legs upon which economics has rested for centuries. One of the pillars he topples has a direct connection to the deflation dichotomy, as he attempts to explain to Mish why the Federal Reserve’s big increase in bank reserves has not led to more lending:

That “increase reserves to increase lending” argument is so hard to shake, but reserves can’t be lent from simply from a double-entry bookkeeping point of view.

The way that accountants keep track of the “assets equals liabilities plus equity” rule is to record an increase in assets as a positive and an increase in liabilities as a negative (your liabilities rise, so a negative gets bigger). Reserves are an asset, as are loans, and shown as a positive. Deposits–which are created by a loan–are a liability and shown as a negative

So to lend to a customer, a bank has to show a negative on that customer’s accounts. This can be matched by a positive on the loans entry–because the loan has increased in size. No problem.

But if banks were to lend from reserves, they would need to record a minus there–reserves have fallen. And on the liabilities side, they want to … also show a negative. Whoops! No can do.

The end result of this logic is that reserves are there for settlement of accounts between banks, and for the government’s interface with the private banking sector, but not for lending from.

Banks themselves may (if they are allowed–I simply don’t know the rules here) swap those assets for other forms of assets that are income-yielding, but they are not able to lend from them.

As Keen points out in his book, it’s not merely an accounting perspective that suggests the conventional economic understanding of the relationship between deposits and loans in a fractional reserve system cannot be correct, but the empirical observation of banker’s activities as well. Loans not only don’t depend upon deposits, they usually precede them.

This also helps explain why the artificially low interest rates maintained by the Bank of Japan and the Federal Reserve, have not, as the monetarists expected, produced increased borrowing.

That could create a problem

Sure, the macroeconomic statistics are fiction, but it would be rather hard to make decisions based on them look convincing when they don’t even exist:

Istat, the Italian statistics agency, says its resources are strained to breaking point amid the country’s tough austerity drive to repair its public finances. From January 2013, the agency – the equivalent of the UK’s own Office for National Statistics – warned it will stop putting out any official data, if the government goes ahead with planned budget cuts.

“Spending cuts are putting Istat at risk. From January onwards we will not issue any statistics,” Enrico Giovannini, head of the agency, told newspaper La Repubblica.

Zen question of the day: If an economy doesn’t have any statistics reported, does economic activity still occur?