The big corporations could spend money too. Or it could be taxed out of them.
I don't like Scott Sumner, but he is right about one thing, even if he phrases it wrong. Sumner says fiscal stimulus is useless unless the central bank will allow inflation.
And the ECB and Fed are publicly committed to 2%, and are actually getting less than that. And as far as I can tell, 2% is an upper limit, not a range.
There is another way to keep the CB's happy, but that involves spending and then taxing the inflation away.
Look, disinflation is not a mistake, it is a fucking strategy.
1: Right. But we're not allowed to accuse them of not spending intentionally, because that would be really mean.
The Fed doesn't have a numerical inflation target - it has the famous dual-mandate (hence the OWS protest sign).
It's the ECB that has not one but two numerical inflation targets (one for CPI inflation, one for the broad money supply), and that is targeting 2% or rather, "not above 2%" as it's not a symmetrical target like the one the Bank of England uses (i.e. undershoot is meant to be as serious as overshoot).
It is, of course, a monster.
I was reading something recently about the Populist party in the 1890s and how there was a mass movement wanting more inflation. It seems like now hardly anyone thinks that inflation can ever be a good thing. I'm not sure if that's some kind of leftover fear from the 70s, or if it's indoctrination by the media.
Oh, it's politically unpopular to spend money right now? Well, that's terribly inconvenient. It would help.
This isn't really true, at least not from where I'm standing; there are all sorts of protests about cutbacks etc and a government which said "in order to help the economy we are going to not cut our health and education spending" would be, IMO, doing the morally right thing, the politically wise thing, and the economically prudent thing all at the same time, an opportunity that arises very rarely.
6: Which leads to the question that genuinely puzzles me. Why isn't it being done? I don't actually agree with bob that "it's a fucking strategy," but absent some better explanation, that's hard to rule out.
I think it's basically the Naomi Klein disaster capitalism thesis. Once the status quo becomes untenable, then radical revisions to the status quo become possible, even if they go against the stated desires of the populace.
For example, right now the European elite is in a position to dictate policy to Italy and Greece, so they're dictating the policies they always wanted to. The American right always wanted to destroy the welfare state, but now they're openly calling for it. The Tories are in a position where they can fuck up the NHS, so they're going for it.
The Fed doesn't have a numerical inflation target - it has the famous dual-mandate (hence the OWS protest sign).
But but but it's the LAW! Ben is breaking the LAW!
Bernanke in testimony and all public pronouncements has been absolutely resolute about 2%, and has handwaved at employment.
Evans of Chicage has called for "3% until UI reaches 7%" and has been laughed at. Any QE will be sent to bankers to bring inflation back up to 2.
This isn't really true, at least not from where I'm standing; there are all sorts of protests about cutbacks etc and a government which said "in order to help the economy we are going to not cut our health and education spending" would be, IMO, doing the morally right thing, the politically wise thing, and the economically prudent thing all at the same time, an opportunity that arises very rarely.
Huh? It's good for health and education to be preserved, of course, they're probably among the most vital things to well-being and long-term growth respectively, but are you saying that cuts are wise assuming those two are left untouched?
I like how when you poll Americans about what merits cuts in government spending, it's always their outsize estimate of how much we give in foreign aid.
it's always their outsize estimate of how much we give in foreign aid.
To be fair to Americans, if you include military spending as foreign aid, they aren't totally off track. How much foreign aid do Americans give to South Korea? Not much, unless you count all the money spent on troops stationed there to protect their border from the North. And why wouldn't you count that?
Any QE will be sent to bankers to bring inflation back up to 2.
Back *up*?
Yeah, inflation in the UK is much higher. No fucking sign of wage inflation, though. Bastards.
13:If necessary. The Bernanke Romer lesson learned from the 30s was to prevent deflation at any cost.
I am pretty sure we are under 2 right now.
re: 15
US is a little under 4, I think. UK is a little over 5.
Huh? It's good for health and education to be preserved, of course, they're probably among the most vital things to well-being and long-term growth respectively, but are you saying that cuts are wise assuming those two are left untouched?
Au contraire. I probably should have put in a "for example" there: "there are all sorts of protests about cutbacks etc and a government which said "in order to help the economy we are going to, FOR EXAMPLE, not cut our health and education spending" would be, IMO, doing the morally right thing, the politically wise thing, and the economically prudent thing all at the same time, an opportunity that arises very rarely."
16: In the US: core was 2% annualized, overall 3.9%. The Fed targeting is core.
But we live in a democracy and about half the US population is much more interested in preserving military rather than civilian spending.
Reforming health care so that it's not fee-for-service intermediated by for-profit hospitals and insurance companies is pretty important. It's so depressing that this failed and that there was no intelligent public debate to make a plausible hope that the next iteration will end less badly.
about half the US population is much more interested in preserving military rather than civilian spending
I'm not convinced this is true.
20: Right. When I had to go to that dreadful Pete Peterson-funded "town hall meeting" last year, I was surprised and impressed that people at my table and in the room and across the country were much more blunt about being willing to cut military spending than I anticipated. I forget what the percentages were, but I think there was strong agreement on 15% cuts and some sustained support for bigger ones.
Here's the link to my June 2010 comment.
I'm probably just paranoid, but I'm not crazy about the idea of putting a bunch of young men with military training and counterinsurgency experience on the unemployment rolls right now.
But we live in a democracyplutocracy and about half the US population a significant block of monied interests is much more interested in preserving military rather than civilian spending.
Fixed.
I'm not crazy about the idea of putting a bunch of young men with military training and counterinsurgency experience on the unemployment rolls right now.
bob's not commenting on this thread because he read that sentence and got so excited he had to go for a walk.
21: Right -- goes toward why Ron Paul remains so popular, despite his simultaneous calls to abolish 5 (five!) federal agencies.
I'm not crazy about the idea of putting a bunch of young men with military training and counterinsurgency experience on the unemployment rolls right now.
Well, if not soldiers, then how about pasty, middle-aged defense contractors?
23:What, are the Oakland and Denver PD's facing budget cuts?
I am not worried about violence, I am disturbed by the absence of violence.
A friend of mine (a rightish-leaning Economist) is saying that we have short-term problems and long-term problems. He's pro stimulus in the short-term but terrified of entitlements in the long run. He was quick to agree with me that it isn't really an entitlement problem, i.e. that social security is fine, but that he's freaked out about healthcare. I said that you can't separate it out from the broader healthcare inflation issue.
He studies the housing market and sees lots of people who bought way more than they could afford. He also had just seen his parents who are practically immobile and (don't want to expand healthcare but readily use tons of Medicare) did little to maintain their health over time, e.g., watch their weight and exercise.
He's suddenly thinking that people need to save to pay medical bills and save for retirement and not stretch themselves on houses they can't afford etc.
He did agree with me that zoning laws which keep people from walking are bad as is all the high fructose corn syrup which of course he opposes because of the subsidy and the tariff.
This was an emotional reaction, and he's disgusted by the political prcoess and longs for a temporary dictatorship by economists, since the Republicans are so crazy.
Directed in Nick Rowe's comments to this Michael Hudson article on Friedrich List, Erasmus Peshine Smith, and Henry Carey and much etc, I am amazed at what a great resource Hudson's archives are to lefty amateur economists. The post is about theories of trade.
This real-world fact of diplomatic coercion, above all in reinforcing agricultural backwardness, shows the need to extend "technological economics" into the diplomatic sphere so as to recognize the IMF and World Bank financial pressures now being witnessed most notoriously in Russia. These loan programs promote capital-intensive export sectors whose proceeds are taken by the large multinationals, side by side with capital-starved low-wage domestic subsistence sectors.
Hudson was mostly talking about North-South, but try applying this to the European imbalances. Germany and France do not want to export capital (factories) to Italy and Greece, nor do they want Italy and Greece to develop their human capital to a level close to Germany France.
What they might want is conditions leading to bright young Greek and Italian professionals migrating to the core and driving wages down. This would also help with their demographic problems.
If it looks like a duck, and quacks like a duck, it is probably neo-colonialism.
He also had just seen his parents who are practically immobile and (don't want to expand healthcare but readily use tons of Medicare) did little to maintain their health over time, e.g., watch their weight and exercise.
It appears that increase in obesity incidence only contributes about 12% to health inflation.
In his book, The Engineers and the Price System (1921) Veblen envisioned that capitalism would be overthrown by engineers, not by workers as Marx predicted. Veblen believed that technological developments would eventually lead toward a socialistic organization of the economy in a Technocracy movement....Henry C K Liu
Engineers and Price System pdf
Try Ch 1, "Sabotage"
"conscientious withdrawal of efficiency"
No, for real: spend money, governments. You're the only ones who can, and you're not in debt all that much.
It is untrue that governments are the only actors that could increase their spending. Lots of people in the upper part of the income distribution (such as me) could easily spend more and save less if they wanted to.
I could spend more, but every time I get confident about the economy, I pass out from the booze.
OT: Police Begin Clearing Zuccotti Park of Protesters
Fuck. Hopefully this will help transition OWS into a second and stronger phase.
Judging from what happened in Oakland, I figure it will. This seems like a really dumb move on Bloomberg's part.
On the OP, you know what I don't understand? Why wouldn't the business community consider it a priority to get the economy rolling?
I've butted heads against this fact in so many, many forms before. I usually conclude that wealthy people prefer a big gap between rich and poor over a rising tide.
39: again, this may be a US-only thing. The CBI (Confederation of British Industry) is very worried about employment levels and has called for a government stimulus package aimed at the construction and infrastructure sectors.
http://www.construction-manager.co.uk/news/cbi-calls-housing-stimulus-plan/
39.2 -- I usually end up concluding that it's tribal. Folks would rather leave money on the table than conclude that the goddam hippies were right. Again.
The business community's number one goal, with regard to people who aren't in the business community, is to have high unemployment, right? Which necessitates having a bad economy.
39
On the OP, you know what I don't understand? Why wouldn't the business community consider it a priority to get the economy rolling?
I've butted heads against this fact in so many, many forms before. I usually conclude that wealthy people prefer a big gap between rich and poor over a rising tide.
The business community and wealthy people aren't exactly the same you know. Although Warren Buffet did say back in 2009 that Obama was making a big mistake by pushing health care reform instead of fixing the economy.
In general there is no consensus about what the economy needs. And as usual many people have convinced themselves that what is best for them is best for everybody.
42
The business community's number one goal, with regard to people who aren't in the business community, is to have high unemployment, right? Which necessitates having a bad economy.
This is silly. The number one priority is generally high demand for their products. You really believe for example that the home building industry wants high unemployment and a bad economy?
44.2(a) is literally true, in the same way that 'in February 2003, there was no consensus as to whether the US Army would be greeted as liberators by the vast bulk of the Iraqi populace' was literally true.
What I see in 40 is someone from the construction industry expressing a desire for subsidies for the construction industry. And I recognize the offhand mention of the "create jobs" talking point from US business people explaining why we should do everything from using the city of Miami's tax revenue to build a baseball stadium, to having a profits repatriation tax holiday, to eliminating job-killing government departments that employ useless job-killing regulators.
45 makes a good point. Apparently it is possible to overemphasize how much the average employer wants to have the power to keep the payroll low, because I just did it.
46
44.2(a) is literally true, in the same way that 'in February 2003, there was no consensus as to whether the US Army would be greeted as liberators by the vast bulk of the Iraqi populace' was literally true.
What's your point? You may think people who don't agree with you about what should done are all morons but it is hardly surprising that they should pursue their deluded agenda rather than your program. And it appears one of the people who doesn't agree with you is the President.
I wasn't disagreeing with you, Shearer. I don't think people who disagree with me are all morons; I do think, though, that there's a 'blinded by self-interest' gap. A reality based community, if you will, that's more likely to consider the possibility that it might be wrong.
The President was objectively wrong about the size of the stimulus required to achieve a certain level of employment. Part of the explanation for this is that his people didn't want to take seriously the arguments of people who said so at the time.
A RBC, and a wish based community.
Shearer, at this point you just don't want to admit that people you don't like are right. I know it's hard for you, but your rationalizations for ignoring the actual existing historical evidence look increasingly pathetic. The historical record says certain things, and the people who have paid attention to those things have gotten it right, while the people who've ignored it have gotten it wrong.
50
... A reality based community, if you will, that's more likely to consider the possibility that it might be wrong.
I haven't noticed any great willingness on the left to consider the possibility that it might be wrong. Or even that the problems are complicated and it is unclear how to fix things.
53 -- Do you know anyone "on the left"?
52
Shearer, at this point you just don't want to admit that people you don't like are right. ...
No doubt true but hardly unique to me. In the euro thread people were reluctant to admit the euro has been a disaster because it was opposed by the wrong sort.
... I know it's hard for you, but your rationalizations for ignoring the actual existing historical evidence look increasingly pathetic. The historical record says certain things, and the people who have paid attention to those things have gotten it right, while the people who've ignored it have gotten it wrong.
I don't know what this is referring to exactly but historical evidence is rarely unambiguous. People can construct their own narratives in accordance with their general world view about what happened.
54
53 -- Do you know anyone "on the left"?
In the random person on the internet sense sure.
In the euro thread people were reluctant to admit the euro has been a disaster because it was opposed by the wrong sort.
"The wrong sort" for lefties meaning, in this case, Paul Krugman?
People can construct their own narratives in accordance with their general world view about what happened.
Rem acu tetigisti, Shearer. Rem acu tetigisti.
What I see in 40 is someone from the construction industry expressing a desire for subsidies for the construction industry.
The CBI isn't a construction industry group (or rather not specifically), and the director general isn't from the construction industry.
32 is actually quite funny, especially read without context.
If it looks like a duck, and quacks like a duck, it is probably neo-colonialism.
Sir Bobmacmanus: So, if it looks like a duck, then it's...?
Villagers:...made out of wood?
Sir Bobmacmanus: And therefore...?
Villagers: A neocolonialist! Burn it! Burn everything! Nuke Japan!
especially read without context.
I find myself wondering how one would read that in context.
Anyway, I like Royko's construction best: If it looks like a duck and quacks like a duck, it's probably a Cub.
In the euro thread people were reluctant to admit the euro has been a disaster because it was opposed by the wrong sort.
James, the Euro has been a disaster, as many liberals acknowledge. But so what if liberals couldn't acknowledge it. Would that make it less true?
You really have to stop viewing everything through an ideological lens. Charlie said that there was an consensus of elite opinion about the Iraq War that is analogous to the the current consensus of elite opinion about the economy. You replied in 49 that Charlie was wrong, in part because the President is part of the current consensus. What the fuck?
The only way that makes sense is if you think Charlie is talking about liberals and conservatives, or Democrats and Republicans. What he's talking about are people who are wrong and people who aren't. (Even through your ideological lens, that ought to be obvious, because so many Democrats and liberals supported the Iraq War.)
We can know things, James, and even when we can't know things, there are ways to be pretty sure about things. And even when we can't be pretty sure about things - even then - we still aren't reduced to just guessing. There are methods of acquiring knowledge beyond determining tribal loyalties.
55: How are we supposed to read 55 James? I'm reading it as a brief for blind tribalism - which you acknowledge is part of your epistemology - and against assessing history, economics and other disciplines that fail to yield definitive, perfect answers every single time.
But surely that's not what you are trying to say. What's your point? You can't possibly be saying that governments shouldn't have policies, right? If you can acknowledge that governments should do some stuff and shouldn't do other stuff, on what basis should those decisions be made?
62 63
Heebie asked in 39:
On the OP, you know what I don't understand? Why wouldn't the business community consider it a priority to get the economy rolling?
I replied in 44:
In general there is no consensus about what the economy needs ...
with the implication that this makes it difficult for the business community to press for action on the economy. CharleyCarp made a claim in 46 that I took to mean that he thought what should be done was obvious. Which I thought was off point as it is clearly not obvious to everybody importantly including key figures like the President.
Walt Someguy then observed in 52 that
Shearer, at this point you just don't want to admit that people you don't like are right. ...
as if this was some special failing of mine instead of a general human trait.
My point was and is that the answer to heebie's question is that while the business community would generally like a healthier economy there is no consensus position within the community about how to achieve this and hence no unified support for particular policies.
What should be done is a separate issue.
This is silly. The number one priority is generally high demand for their products. You really believe for example that the home building industry wants high unemployment and a bad economy?
James is unwittingly stumbling across Marx's point about one of the central internal contradictions of capitalism -- that the economic interests of the individual capitalists (lowering worker wages to increase profits) are at cross purposes with the needs of the system as a whole (maintaining mass consumption power). Just a few more posts and he'll figure it out.
I was reading something recently about the Populist party in the 1890s and how there was a mass movement wanting more inflation.
I believe the old Populist Party took shape soon after the initial imposition of the gold standard led to savagely deflationary results. I predict a new Populist Party if Ron Paul is elected, but not until then.
Herman Cain: "I'm not supposed to know anything about foreign policy."
Yes! Yes, you are supposed to know something about foreign policy! Even if you aren't running to be the architect of foreign policy for the most powerful nation on earth, you are still supposed to have at least a passing familiarity with your country's foreign policy. How is this guy's 15 minutes still not up yet?
How is this guy's 15 minutes still not up yet?
Canonically, those in the pizza business are allowed 30 minutes to deliver. But your larger point certainly stands.