Re: Slowdown

1

You got that right. We got some things 50% off and then 30% off that using the Kohl's charge card.

Recessions are great as long as you can keep your job. Knock on wood.


Posted by: Tripp | Link to this comment | 11-14-08 2:52 PM
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Whoo hoo! I'm going to Nordstrom Rack to stock up on jeans then!


Posted by: Po-Mo Polymath | Link to this comment | 11-14-08 2:55 PM
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Recessions are great as long as you can keep your job.

And everyone you need to worry about keeps theirs.


Posted by: LizardBreath | Link to this comment | 11-14-08 3:06 PM
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How does this affect inflation and/or the inflation statistics?


Posted by: Cryptec Nid | Link to this comment | 11-14-08 3:08 PM
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Lowers it. Prices going down is prices going down.


Posted by: LizardBreath | Link to this comment | 11-14-08 3:11 PM
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Prices were absurdly inflated in the first place.


Posted by: parsimon | Link to this comment | 11-14-08 3:25 PM
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They use a different name, but the UK has officially predicted a negative CPI for next year.

I suppose I should find the article, and the one about the general horrors of deflation. Deflation makes debt more expensive while lowering incomes. The economist's absolute worse nightmare.


Posted by: bob mcmanus | Link to this comment | 11-14-08 3:32 PM
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Part of the fear of deflation is that literally sticking cash in your mattress becomes a good investment.


Posted by: Walt Someguy | Link to this comment | 11-14-08 3:41 PM
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On an environmental mailing list I subscribe to, some people were trying to argue that the economic slowdown was going to be good for the Earth. I didn't buy the argument. But today on NPR the econ reporter explained that the problem with deflation is that "people only consume things they really need." That actually does sound good for sustainability.


Posted by: rob helpy-chalk | Link to this comment | 11-14-08 3:49 PM
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The Federal Reserve and other big institutions will go to the wall to prevent any serious deflation. They already are doing that.


Posted by: PGD | Link to this comment | 11-14-08 3:51 PM
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But today on NPR the econ reporter explained that the problem with deflation is that "people only consume things they really need." That actually does sound good for sustainability.

Yet it doesn't sound very sustainable.


Posted by: heebie-geebie | Link to this comment | 11-14-08 3:51 PM
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...not saying they'll succeed, but you saw the $250 billion deficit last MONTH. That's all going to reinflation, replacing the fake money generated in the bubble.


Posted by: PGD | Link to this comment | 11-14-08 3:53 PM
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Mmm. I have the same kind of picture of a depression where people move to a "use it up, wear it out, make it do, or do without" mindset, and that ends up being more sustainable. But I doubt that's realistic; I think the real environmental effects are likely to be far more dependent on how industry reacts to bad times ("Boss, if we disable the scrubbers on the smokestacks, we can save enough to keep the production line going!").


Posted by: LizardBreath | Link to this comment | 11-14-08 3:53 PM
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The economic slowdown is good for the Earth. In some ways, environmentalism and other aspects of progressivism are in conflict.


Posted by: Walt Someguy | Link to this comment | 11-14-08 3:57 PM
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Abandon All Hope Ye Who Enter Here ...article ref'ed in 7.2, Telegraph, via Yves Smith

Of course, Mish of Global Economic Report, and others have already said we are in massive deflation already. That has been Mish's main theme for a year. There may be a question of a difference between general price level deflation, and asset/credit/monetary deflation.

But what's gas running these days? Six months ago they were saying:"Don't worry when gold prices go thru the roof. Worry when nobody wants gold."


Posted by: bob mcmanus | Link to this comment | 11-14-08 4:02 PM
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I wish I could get a clear answer on whether to expect high deflation or high inflation in the medium term. Everyone seems to be sure we're getting one or the other, but there's a lot of disagreement about which.

(And, yes, I know, there's of course no clear answer. Still. Frustrating.)


Posted by: Brock Landers | Link to this comment | 11-14-08 4:03 PM
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13 was a fairly common response on the list. My argument was simply that you can't infer "Shrinking economies are always good for the environment" from "Unlimited exponential economic growth is bad for the environment" or even "Unlimited exponential economic growth is suicide for the Earth and all its creatures."

I imagine that in the years before they chopped down the last tree on Easter Island, the inhabitants were experiencing economic disruption. It didn't save them.


Posted by: rob helpy-chalk | Link to this comment | 11-14-08 4:05 PM
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16: I'm the last person to ask in terms of real knowledge, but why would we get inflation? We had an asset bubble pop, leaving people with much less money than they had before, and a stock market decline on top of it -- that sounds, on the primitive and uneducated level I approach these questions at, unambiguously like de- rather than in- flation.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:06 PM
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On one hand, it does feel like lower prices are nice as long as you're still employed, but on the other, it's a little hard to figure how this is supposed to play out when we were already squeezing the hell out of the poor and middle class in the good times.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 4:08 PM
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"Unlimited exponential economic growth is bad for the environment" or even "Unlimited exponential economic growth is suicide for the Earth and all its creatures."

Unlimited exponential resource use is suicide -- I have a vague hope that a technologically driven decoupling of economic growth from resource use is possible, along the lines of "an iPhone uses fewer resources to make than a 1950's era transistor radio, but represents much more economic wealth."


Posted by: LizardBreath | Link to this comment | 11-14-08 4:10 PM
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Is there a word for just-the-right-amount-flation?


Posted by: rob helpy-chalk | Link to this comment | 11-14-08 4:11 PM
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I suppose "euflation".


Posted by: John Emerson | Link to this comment | 11-14-08 4:11 PM
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18:Probably the only way is if the East Asian economies get bad enough that they move away from an export model, stop buying and start dumping treasuries, and the dollar falls off a cliff.

Variations on this happened in the 30s. Sarkozy is in town saying "Fuck the fucking fucked dollar as fucking reserve currency." I heard him say that, I did.

It could happen next summer.


Posted by: bob mcmanus | Link to this comment | 11-14-08 4:12 PM
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21: Well one of the Fed's mandated objectives is "price stability."


Posted by: Otto von Bisquick | Link to this comment | 11-14-08 4:13 PM
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Paul Krugman, I think, had an old essay (if it was Krugman, it was in his 1990's book of essays, The Accidental Theorist. But I'm not sure it was Krugman.) arguing that inflation short of hyper-inflation, maybe under 20% a year?, was actually pretty harmless.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:14 PM
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I like 22.

iPhone uses fewer resources to make than a 1950's era transistor radio

The thing is, I doubt this is true. Microchips involve some really exotic heavy metals like polonium, and raise issues for both production and disposal. I've heard econ types brag "Microchips are made of sand and human ingenuity" but it just isn't true.


Posted by: rob helpy-chalk | Link to this comment | 11-14-08 4:15 PM
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I think that euflation would be defined as something like 2-4% inflation. Same way that eu-unemployment has been defined as anywhere from 3% to 6%. This is one of the kinds of things that Republicans and Democrats tend to vary most on, I think -- forced to choose, Republicans are more anti-inflation and Democrats more anti-unemployment. Though too many Democrats are near-Republicans.


Posted by: John Emerson | Link to this comment | 11-14-08 4:18 PM
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Unhelpful ...Brad Setser on Thursday cautiously pessimistic about a China move.

"China has just increased its tax rebates on exports." ...Bsetser. "twofish" is a regular commenter with dual Chinese/US citizenship.

The shit can go spiral faster than you will believe.


Posted by: bob mcmanus | Link to this comment | 11-14-08 4:18 PM
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26: It might be false for an iPhone specifically, but stories like that are possible, and some of them are going to be true. Compare a modern compact car with a 60s era Detroit monster? The difference in sheer weight is huge, and the modern car is a better car in terms of comfort and durability and so on. The question is whether we're going to be able to create a lot of true stories along these lines.

This line of thinking is admittedly wishful, but it's worth exploring.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:21 PM
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Is there a word for just-the-right-amount-flation?

Flatus.


Posted by: ben w-lfs-n | Link to this comment | 11-14-08 4:21 PM
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25: yes, Krugman. Inflation risk is derived from overly-aggressive efforts to dump liquidity in the system.


Posted by: Brock Landers | Link to this comment | 11-14-08 4:21 PM
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Microchips involve some really exotic heavy metals like polonium

Quit othering microchips, rob.


Posted by: ben w-lfs-n | Link to this comment | 11-14-08 4:22 PM
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Sorry, last half of 31 was to 18.


Posted by: Brock Landers | Link to this comment | 11-14-08 4:22 PM
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Economic slowdown might help reduce pollution of the foul-air-and-water type, but I think it's a really bad thing for efforts to deal with the far larger problem of climate change. For that we really need spending to facilitate the transition to a carbon-free economy.


Posted by: essear | Link to this comment | 11-14-08 4:23 PM
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31: Oh, I got you. Geez, once you're thinking about that, who knows? You're guessing about the skill with which the response to the financial crisis will be carried out, and that seems pretty close to unknowable.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:25 PM
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35: well, right, I said there's no clear answer. But I wish all the smart people were at least lined up on one side of the question. Here's one recent article exanding on 33.


Posted by: Brock Landers | Link to this comment | 11-14-08 4:29 PM
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Expanding, that is.


Posted by: Brock Landers | Link to this comment | 11-14-08 4:30 PM
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Massive inflation is unlikely as an accidental short-term outcome. When the government lost control of inflation in the 70s, it was more of a case of it slowly ratcheting up. It's plausible that the government will deliberately incur inflation as a way of solving the mortgage crisis, but if that happens we'll probably see it coming.


Posted by: Walt Someguy | Link to this comment | 11-14-08 4:33 PM
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I'm commenting in half-thought fragments today, for some reason. Anyway, the link in 36 was supposed to help clarify that, contra 35, the question isn't really about potential future government response (which is fairly unknowable, sure), but more about the likely medium-term impact of government actions being taken today.


Posted by: Brock Landers | Link to this comment | 11-14-08 4:34 PM
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Uh, Brock, you're reading an article by Donald Luskin.


Posted by: Walt Someguy | Link to this comment | 11-14-08 4:34 PM
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(Not that I recommend that article or author, in particular--I only skimmed the article and don't know the guy. That was just the first google result. But it's the right general outline of the argument, at least.)


Posted by: Brock Landers | Link to this comment | 11-14-08 4:36 PM
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31:Nah. I, and others, have been worried about this scenario for like years.

1) China facing social unrest turns to consumption but closes borders to imports. Sells it's treasuries, starts a treasury panic.
2) Dollar falls off a cliff.
3) Imports become prohibitively expensive. Oranges. Baby and Pet food. Oil shhots toward 200.
4) If there is no general price inflation, it can only mean deflationary pressures are so bad the baby doesn't get fed because there is no money.
5) If the inflationary pressures mean the baby doesn't get fed because dollars won't buy baby food, the Fed will be under irresistable pressure for a "strong dollar" equals a massive rise in interest rates. But with a 15 trillion dollar nat debt...

Currency wars. Protectionism. GD2 times 2. Maybe this summer.


Posted by: bob mcmanus | Link to this comment | 11-14-08 4:36 PM
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Inflation risk is also derived from more statements about waiting for the housing market to rebound. If someone is going to be able to pay 400k for a house, they'll need to be making 100k a year. If most people now make $50k a year, just make the dollar worth half as much.


Posted by: water moccasin | Link to this comment | 11-14-08 4:37 PM
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41 before I saw 40, I swear. Who's Luskin?


Posted by: Brock Landers | Link to this comment | 11-14-08 4:37 PM
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Part of the fear of deflation is that literally sticking cash in your mattress becomes a good investment.

Plus, if your mattress is as shitty as mine, it'll improve your sleep.


Posted by: JRoth | Link to this comment | 11-14-08 4:38 PM
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44: The Stupidest Man Alive - google that + DeLong and you'll see.


Posted by: JRoth | Link to this comment | 11-14-08 4:38 PM
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Okay, well, he's not the only person making the argument.


Posted by: Brock Landers | Link to this comment | 11-14-08 4:39 PM
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Actually, you don't even need DeLong -- just "The Stupidest Man Alive" in quotes gets you there.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:41 PM
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"use it up, wear it out, make it do, or do without" mindset

Shit, I already use the shampoo - what's left to do?


Posted by: JRoth | Link to this comment | 11-14-08 4:42 PM
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OT: Why are all these Chinese people banging drums and waving flags?


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 4:44 PM
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48: Impressive, but I wanted to cover my bets.

Luskin is also famous for stalking Krugman, showing up at a book signing, and writing about how he had "looked evil in the face" or some such - stupid and insane.

But you know, blind squirrels, etc. I have no considered opinion on this particular argument.


Posted by: JRoth | Link to this comment | 11-14-08 4:44 PM
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50: Still excited about the Olympics?


Posted by: JRoth | Link to this comment | 11-14-08 4:45 PM
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My preferred solution, which is general and not limited to contractions?

Strong dollar via high interest rates. This also discourages finance and speculation.

Turn Maryland into a fiat printing press. The whole state. Lots of jobs churning out hundred dollar bills 24/7. Hyperinflation? Tax it away. It's called "velocity" I think.

Spend those semis of dollars on gov't jobs. Let's count bluebonnets in Texas.


Posted by: bob mcmanus | Link to this comment | 11-14-08 4:45 PM
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GnR's "Chinese Democracy" finally being released?


Posted by: jms | Link to this comment | 11-14-08 4:46 PM
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48: weird, this is what I get when I do that.


Posted by: Brock Landers | Link to this comment | 11-14-08 4:47 PM
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Again, I'm approaching this on a very primitive level. But as I understand the crisis, the basic problems is "zOMG, all our money went away, there's not enough money!! Where will we get more money from." And the response is the Gov't saying "I'll give you more money!" And the general concerns I've seen have been along the lines of "The gov't can't possibly come up with enough money to fix this in a responsible way," or "The money isn't going to go where it's really needed to fix the problem." The idea that, as Luskin seems to be suggesting, there's a chance that the gov't has already not only fixed everything but way overshot the mark and put much too much money in the system seems, in an offhand and uneducated way, unlikely.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:47 PM
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55: Actually, on checking, so do I as the top link. But if you look at all the links on the first page of google results, Luskin shows up more than anyone else.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:49 PM
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52, 54: Must be something diplomatical at the hotel across the street, judging from all the cop cars and security and shit.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 4:51 PM
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If the Fed had overshot the mark, we would already see inflation. The Fed has already put extra dollars into circulation.


Posted by: Walt Someguy | Link to this comment | 11-14-08 4:53 PM
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...arguing that inflation short of hyper-inflation, maybe under 20% a year?, was actually pretty harmless.

Uhm, it may be harmless to some but to those of us who are retired with a defined contribution arrangement, or other non-COLA pension, it could be disaster.

The traditional way to cushion against inflation is with equities. The equity portion of my retirement accounts is down a bit more than 40% in the last couple of months. If inflation eats the buying power of the debt portion (bonds, CDs, etc.) I'm, uh, I think the technical micro-economic term is "severely fucked".

Andecdatally, I do believe that the price of a dozen lousy bagels at Costco is up about 10% in the last 6 or 9 months.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 4:53 PM
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The traditional way to cushion against inflation is with equities. The equity portion of my retirement accounts is down a bit more than 40% in the last couple of months. If inflation eats the buying power of the debt portion (bonds, CDs, etc.) I'm, uh, I think the technical micro-economic term is "severely fucked".

Here's where I get even more ignorant. But is it possible (across the board, rather than in individual cases) for the price of equities to stay depressed while inflation goes up? It seems that there'd be a natural linkage there.


Posted by: LizardBreath | Link to this comment | 11-14-08 4:56 PM
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I read the Luskin, and I read the same stuff in the comment section at Calculated Risk.

I don't know if he is right. It could be twenty years of disinflation/deflation like Japan.

I do know monetary Keynesianism is fucking full of shit. Low Fed rates do not equal low taxes do not equal open markets ops do not equal fiscal stimulus do not equal useful liquidity. There are important differences in the way these things influence behavior.

High interest rates + high taxes + massive fiscal stimulus.


Posted by: bob mcmanus | Link to this comment | 11-14-08 4:57 PM
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56: I think you're oversimplifying. What we need isn't more "money"--which would be easy to produce--it's more liquidity. Or at least it was. Maybe we're past that at this point, and dealing not with a liquidity crunch but plain old recession. (Caused at least in part by falling asset prices.)


Posted by: Brock Landers | Link to this comment | 11-14-08 4:58 PM
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But is it possible (across the board, rather than in individual cases) for the price of equities to stay depressed while inflation goes up?

I'm pig-ignorant, too, but I think it's not. With inflation, equities should go up. But I've got only about half as many equities as I had six months ago, so even if they go up 100%, I'm only back where I was - except I'm behind because my interest income won't buy as many bagels.

So should I throw more money from debt into equity? The prospect terrifies. So, of course, I've cut spending tremendously, which is exactly what the economy doesn't need.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 5:01 PM
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Andecdatally, I do believe that the price of a dozen lousy bagels at Costco is up about 10% in the last 6 or 9 months.

Almost certainly an artifact of the commodities spike that happened in 2007 and continued into this summer - there was a bagel shop in Ithaca that last May had a sign up saying, basically, we're changing our prices week-to-week, because we kept a lid on it as long as possible, and now we need to spread the pain around.

It'll be interesting to see if food prices come back down - I recall in the mid-to-late 90s that there was a big increase in dairy prices (drought, I think, or maybe the massive flooding in '93). A couple years later, producer prices had gone back down to normal levels, but distributors were holding the line, sucking up profits. Something free market evangelists say can't happen, but did. As I recall, butter went from $1.50/lb. to $2+ in a matter of weeks, and never came back down.


Posted by: JRoth | Link to this comment | 11-14-08 5:01 PM
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Luskin setting the bar high:

Here's the reason why world markets dropped so dramatically this week. You can forget about all the other explanations you've heard. They're all just talk. This is the real deal. The reason is that Sunday night Al Gore won an Oscar for his film "An Inconvenient Truth," the documentary purporting the threat of global warming. Yes, there was a one-day lag. The award was given on Sunday night, and the global stock market crash didn't start until Tuesday. Picky, picky, picky. Give me a little rope, here.


Posted by: JP Stormcrow | Link to this comment | 11-14-08 5:02 PM
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So should I throw more money from debt into equity?

Buy a tin cup and pencils while you still can.


Posted by: JRoth | Link to this comment | 11-14-08 5:03 PM
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64: Only if you have the gift of prophecy that allows you to know future inflation rates. Anyway, the value of equities wouldn't go up, in real terms. They would just maintain their value, while debt will lose its value.

63: We're definitely past the point of the liquidity crisis, and into a recession. Consumer demand is dropping incredibly quickly.


Posted by: Walt Someguy | Link to this comment | 11-14-08 5:04 PM
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Here's the next result I get when I search on the topic. And no, I don't know who these authors are either, so possibly they're loons too. But I'm sure I've read lots of respsectable people writing more or less this same thing. I just don't recall where.


Posted by: Brock Landers | Link to this comment | 11-14-08 5:04 PM
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Uhm, it may be harmless to some but to those of us who are retired with a defined contribution arrangement, or other non-COLA pension, it could be disaster.

John Maynard Keynes called it the "socialization of investment." It is also called Social Security and Medicare. Anybody counting on Wall Street is a fool. You aren't on their boards. Wall Street can just fucking die.

If the government is responsible for you, it is less likely that you will get that retirement ranch in Montana. But you won't starve.

It is also called "socialism" or "socialized risk" or "sharing."


Posted by: bob mcmanus | Link to this comment | 11-14-08 5:05 PM
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We're definitely past the point of the liquidity crisis, and into a recession. Consumer demand is dropping incredibly quickly.

Right, that's what I said.


Posted by: Brock Landers | Link to this comment | 11-14-08 5:07 PM
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Google searches for financial advice are dis-recommended.


Posted by: Walt Someguy | Link to this comment | 11-14-08 5:07 PM
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Using the word "maybe" automatically eliminates all pwnership privileges for a comment.


Posted by: Walt Someguy | Link to this comment | 11-14-08 5:08 PM
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Financial advice is pretty much dis-recommended, for that matter. Except dsquared's.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 5:08 PM
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Almost certainly an artifact of the commodities spike that happened in 2007 and continued into this summer

Yep. I was just looking at the price of #6 THHN wire (suitable for electric stoves) at Home Depot, and despite the fact that copper had dropped from $4 back to $2 (or so), their price for the wire is still sky high.

My recollection from the days of Whip Inflation Now is that no, prices don't drop back, not as far, and certainly not as quickly.

When silver hit $20 I wondered if I should sell my (small) collection. Now that it's dropped back below $10 I don't have to worry about that any more.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 5:10 PM
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More.

I'm not looking for financial advice, and generally heavily discount anything containing it. I'm looking for economic analysis.


Posted by: Brock Landers | Link to this comment | 11-14-08 5:10 PM
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despite the fact that copper had dropped from $4 back to $2

What's that worth in meth?


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 5:11 PM
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Brock, there is no problem with the debt, deficit, or Fed balance sheet or probably inflation as long as interest rates stay low. Long rates can even go way up as long as short rates stay low.

The problem, and I think the Republican plan, is when they Volckerize us. And who gets rich off high interest rates & deflation? The upper upper class.

The middle class, even with double digit everything and gas lines, was doing fine until 1982.


Posted by: bob mcmanus | Link to this comment | 11-14-08 5:11 PM
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More.

How many links do I have to post before I can get confirmation that at least one of these persons isn't batshit insane?


Posted by: Brock Landers | Link to this comment | 11-14-08 5:13 PM
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I'm looking for economic analysis.

There is no final, objective, non-ideological economic analysis. There can't be.

Bye.


Posted by: bob mcmanus | Link to this comment | 11-14-08 5:13 PM
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What's that worth in meth?

I don't know how to compare over-the-counter items with under-the-counter items.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 5:13 PM
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Buy a tin cup and pencils energy efficient data processing devices while you still can.

Also anecdatally, I think I'm already noticing an increase in the availability and a decrease in the cost of slightly used consumer goods at the flea market. People downsizing, raising money.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 5:17 PM
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Brad DeLong calls Luskin the stupidest man in the world and cites chapter and verse. I think that you're safe taking him off your reading list.


Posted by: John Emerson | Link to this comment | 11-14-08 5:18 PM
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Brock, your last two links have exactly the same text.


Posted by: Walt Someguy | Link to this comment | 11-14-08 5:20 PM
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Plus, the conclusion is that deflation is winning.


Posted by: Walt Someguy | Link to this comment | 11-14-08 5:21 PM
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Whoa, you actually read these sort of things, Walt? I just skim headlines.


Posted by: Brock Landers | Link to this comment | 11-14-08 5:21 PM
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Don't ever change, Brock.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 5:22 PM
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Brock, your last two links have exactly the same text.

The ultimate in comity.

Hey, AB pronounces it (with apologies to the IPA) COMB-ity. I've always said KAHM-ity. What say you-all?


Posted by: JRoth | Link to this comment | 11-14-08 5:23 PM
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50, 52, 54: Aha. I think I know where the Chinese delegation is staying.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 5:27 PM
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||

http://missoulian.com/123-2008/amish-oct/

|>


Posted by: CharleyCarp | Link to this comment | 11-14-08 5:28 PM
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83:DeLong is just about off my reading list.

On the broadest measure of money, including the MBS's and dreivatives and CDO's and CDS's, what will be their value in five years? It's all bullshit money, but bs money buys yachts. So Mish says those financial instruments are disappearing as we watch. Money is disappearing. Deflation. House prices going down. Money is disappearing. Deflation. Maybe tens or hundreds of trillions of dollars of deflation.

But those instruments are not dollars. The Fed really can't pump up or draw down the price of a CDO. But it can & does affect treasury bill prices. It can print money. It can expand or contract the dollar supply.

Maybe you can have M1 expansion and M3 contraction simultaneously, when you have private actors creating or destroying trillions of dollars in "money."


Posted by: bob mcmanus | Link to this comment | 11-14-08 5:30 PM
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KAHM.


Posted by: redfoxtailshrub | Link to this comment | 11-14-08 5:30 PM
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I do concede that an awful lot of the people trying to convince me I should really be worried about inflation seem to be trying to sell me gold.

But I want to buy a house, dammit.


Posted by: Brock Landers | Link to this comment | 11-14-08 5:32 PM
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89 -- Thanks for the link. I'm afoot, and was thinking about walking across Lafayette Square towards my bus stop. Still thinking about it.


Posted by: CharleyCarp | Link to this comment | 11-14-08 5:32 PM
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80 is 100% correct.

Bob, the issue with your total crisis/collapse scenario in 42 is that the rest of the world is just as dependent on us as we are on them. They don't want that kind of hard landing any more than we do.


Posted by: PGD | Link to this comment | 11-14-08 5:33 PM
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93 -- You can buy mine. And the best way to fight back against the forces of deflation and depression is for you to pay me what the county thinks it's worth for tax purposes. Don't give in!


Posted by: CharleyCarp | Link to this comment | 11-14-08 5:35 PM
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Both pronunciations are in the dictionary, but KAHM is first.


Posted by: Brock Landers | Link to this comment | 11-14-08 5:35 PM
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90: Changelessness we can believe in, or something. Anyway, I like it.

94: There may be a motorcade coming your way.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 5:36 PM
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91 is exactly the point, Bob's on a roll. We have massive amounts of "money" disappearing in one segment of the economy, with concomittant deflation (in asset prices), and the government is frantically trying to shove enough money into the other end to make up the difference. The debate is about the best way to get money out there so it actually functions as money in the economy. The rap on the Treasury bailout is that giving the money to financial institutions with no control is like filling up a leaky bucket, the institutions are shot. But part of the Treasury thing was always about saving the institutional framework of the financial system.


Posted by: PGD | Link to this comment | 11-14-08 5:36 PM
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99 - Which is why actions like American Express and the Hartford filing for bank holding company status and applying for bailout money should be making people sick, especially because American Express isn't even losing money yet. It's like shooting two extra holes in the bucket.


Posted by: snarkout | Link to this comment | 11-14-08 5:48 PM
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75: Funny about that silver thing: I bought some coins (Silver Eagles) for Christmas gifts a couple of months ago. The coin shop had just a piddling supply (less than 20) because people are coming in and buying boxes of 500 at a time. "As an investment", the shop guy said. I tell ya, there's some funny stuff going on.


Posted by: Klug | Link to this comment | 11-14-08 5:49 PM
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... there's some funny stuff going on.

If Obama gets elected the only way to buy a semi-automatic weapon or ammo will be with bullion.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 5:55 PM
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COMBity, but I believe KAHMity is correct.

Look: food, shelter, warmth. Whether or not my source of income is supportable (not), I think in terms of what I spend money on. I figure I'll put some effort into preserving foods, including, say, drying some of the mint for tea in the winter (saves on buying tea!) As long as electricity and water remain, okay. Not that I freak out or anything; I've always thought this way. A New England mentality, maybe.


Posted by: parsimon | Link to this comment | 11-14-08 5:56 PM
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90: I can't believe they're using aluminum bats.

But it's wonderful.


Posted by: JRoth | Link to this comment | 11-14-08 6:02 PM
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Can we retire "semi-automatic weapon" from the language? It's kind of a reverse dog whistle to Redstatia.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 6:08 PM
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105: thank you.


Posted by: water moccasin | Link to this comment | 11-14-08 6:20 PM
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Well, if DeLong is no good, I guess Luskin must be right.


Posted by: John Emerson | Link to this comment | 11-14-08 6:21 PM
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107:They can both be wrong. I bet both mostly believe in exogenous money.


Posted by: bob mcmanus | Link to this comment | 11-14-08 6:26 PM
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via hilzoy, here is William Buiter on Iceland & the UK. Long & scary.

If the deficits get monetised, there will not be the upward pressure on real interest rates that would result from debt financing. But the markets may fear the long-term inflationary consequences of the monetary financing, especially if it were to be done by the government after invoking the Treasury's Reserve Powers. So long nominal rates would be likely to rise if monetisation of the government's deficits were chosen. Monetisation of deficits would also weaken sterling further.

Luskin & Brock are right, a lot of people are talking about inflation threats. This shit is very complicated, speculative, and ideological.

Krugman after the 1st bailout bill failed called us a "banana republic" and just kinda sulked. He mentions lightly in passing that well someday after a huge fiscal stimulus things will have to be rebalanced.

What this means to me is that at some point Krugman will support a Volckerization, a spike in Fed rates and a contraction in money supply. Krugman will follow that with a suggestion for safety-net improvements and high marginal taxes.
And if he doesn't get them? Banana republic...sulk. Not his fault.

And the working class just gets fucked.

Sorry. I don't trust them anymore. I don't even trust their motives anymore. NAFTA needed worker retraining before it passed, not after. Monetary stimulus requires massive simultaneous tax increases or STFU. I can't eat the promises and failures of the monetary Keynesians.


Posted by: bob mcmanus | Link to this comment | 11-14-08 6:48 PM
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And that is the point of the conflict between Post-Keynesians and Neo_Keynesians.

The P-Ks say jobs and safety net first and always.

The Neo-Keynesians say monetary policy and trust us.


Posted by: bob mcmanus | Link to this comment | 11-14-08 6:55 PM
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JRoth, I've been reading And The Wolf Finally Came. It's very engrossing; thanks for the recommendation last week.


Posted by: Minivet | Link to this comment | 11-14-08 6:58 PM
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KAHM-ity sounds like an East-Coast put-on. Like all true valley girls, I pronounce the vowels with the least effort, for "COMB-ity."


Posted by: Jackmormon | Link to this comment | 11-14-08 6:59 PM
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I find long vowels to take more effort than short vowels. So KAHM-ity it is for me.


Posted by: Blume | Link to this comment | 11-14-08 7:02 PM
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Well, JRoth suggested KAHM-ity, and I assumed it was an exaggeration. The idea would be COM-ity, sounding very much like comedy. Not much of a stretch from comity to comedy.


Posted by: parsimon | Link to this comment | 11-14-08 7:06 PM
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And I just returned from Boston's downtown shopping area. Bought a nice skirt for $14! Forty percent off of the price that had already been marked down twice.

I was at the store because I was returning the full-priced suit jacket I recently re-bought for thirty percent off. Sale-o-rama!


Posted by: Blume | Link to this comment | 11-14-08 7:08 PM
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I don't pronounce much of a difference between KAHM and COM. I assumed the h was there to differentiate it from a syllable that sounded like KAMM.


Posted by: Blume | Link to this comment | 11-14-08 7:11 PM
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I pronounce it more like COH-mity, rhyming with Joe.


Posted by: Jackmormon | Link to this comment | 11-14-08 7:13 PM
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I don't pronounce much of a difference between KAHM and COM.

There was an extended pronunciation thread just recently -- but I do pronounce those differently. Do you have a Bahston accent, by chance (nothing wrong with that)?

I don't know what a syllable that sounds like KAMM would be. Use it in a word?


Posted by: parsimon | Link to this comment | 11-14-08 7:14 PM
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I don't know what a syllable that sounds like KAMM would be.

Like a webcam.


Posted by: Blume | Link to this comment | 11-14-08 7:16 PM
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I find long vowels to take more effort than short vowels.

To get in touch with your inner Valley, loosen up your lower mandible, let your tongue loll in your throat, focus your breath into the back of your throat. Now speak slowly, without moving your tongue or closing your mouth. The best practice is to say "I don't know" until you can simply imply the phrase by tonal inflection rather than consonants or anything resembling standard English vowels.


Posted by: Jackmormon | Link to this comment | 11-14-08 7:17 PM
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Not much of a stretch from comity to comedy.
A very great stretch, as comity is antithetical to comedy.


Posted by: TJ | Link to this comment | 11-14-08 7:20 PM
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Do you have a Bahston accent, by chance (nothing wrong with that)?

No trace of a Boston accent. (Didn't live here until I was 24.) My speech is all kinds of mixed up though, from having grown up in the rural midwest but deciding in high school that I wanted to speak 'properly', and then going to college with a bunch of rich kids and then moving abroad and teaching British English. I wasn't asked to affect an accent (as some other Amis I knew were), but I did have to teach British constructions, and all the students and teachers had British accented English.


Posted by: Blume | Link to this comment | 11-14-08 7:24 PM
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119: Got it.

TJ, what are you saying?


Posted by: parsimon | Link to this comment | 11-14-08 7:25 PM
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The best practice is to say "I don't know" until you can simply imply the phrase by tonal inflection rather than consonants or anything resembling standard English vowels.

I am trying to break my son of that. Three words, dammit.

||
Hu's back.
|>


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 7:27 PM
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The best practice is to say "I don't know" until you can simply imply the phrase by tonal inflection rather than consonants or anything resembling standard English vowels.

When Germans ask me to teach them some English they wouldn't otherwise know, I always teach them this, and also the repetition of the word 'like' to mean 'like seriously'. "Do you like like him, or do you just like him?"


Posted by: Blume | Link to this comment | 11-14-08 7:27 PM
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I'm deliberately misunderstanding you, parsimon, rejecting comity for the sake of comedy. Admittedly an inferior brand, but still.


Posted by: TJ | Link to this comment | 11-14-08 7:27 PM
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124: Jiantao?


Posted by: TJ | Link to this comment | 11-14-08 7:29 PM
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That's what I'm assuming.


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 7:34 PM
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120: To get in touch with your inner Valley, loosen up your lower mandible, let your tongue loll in your throat, focus your breath into the back of your throat. Now speak slowly, without moving your tongue or closing your mouth.

Frightening. I just tried this, and it works. It also made me feel like my eyes were about to roll back in my head, or I was about to gag. Scary stuff. Stand up straight, dammit.


Posted by: parsimon | Link to this comment | 11-14-08 7:34 PM
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I don't actually speak like that. But I can, which never failed to crack up my students when I had 'em.

Moving my vowels up to my nose was the most difficult part for me in learning French.


Posted by: Jackmormon | Link to this comment | 11-14-08 7:47 PM
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When my brother was about five he learned the word "kayseeyabye" and it took him years to figure out that it meant "OK, see ya, bye."


Posted by: John Emerson | Link to this comment | 11-14-08 7:48 PM
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See, French is lewd. Anything with an "r" or a "ΓΌ*" in it just sounds like "fuck me".


Posted by: John Emerson | Link to this comment | 11-14-08 7:53 PM
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18

16: I'm the last person to ask in terms of real knowledge, but why would we get inflation? We had an asset bubble pop, leaving people with much less money than they had before, and a stock market decline on top of it -- that sounds, on the primitive and uneducated level I approach these questions at, unambiguously like de- rather than in- flation.

But the government is also running huge and increasing deficits which all other things equal is inflationary. And there are positive feedbacks involved. When prices are falling people delay spending causing further declines, when prices are rising people accelerate spending causing further increases. This means there is a substantial chance that efforts to stop deflation will overshoot causing inflation. Especially if people are impatient. Like trying to melt frozen pipes with a blow torch, things can go wrong.


Posted by: James B. Shearer | Link to this comment | 11-14-08 7:54 PM
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I don't buy 114 for a minute. If "comity" was supposed to be pronounced like it started with "COM", why wouldn't it be spelled that way?


Posted by: Sifu Tweety | Link to this comment | 11-14-08 7:56 PM
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I've always pronounced it cohmity, but I think that's just to avoid confusion with comedy, which in most American dialects would be pronounced identically.


Posted by: F | Link to this comment | 11-14-08 8:06 PM
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I was reading some comment threads on various news stories related to the economic crisis, and what struck me is that the average person views the crisis in almost purely moral terms. For example, people are obsessed with the idea that we all brought this on ourselves with debt, and that we deserve a recession as our just deserts. So stimulating demand or deliberately running inflation are outrageous, because it means we're avoiding the punishment that's due us.

In general, whenever people are on unfamiliar ground they tend to fall back on moral reasoning. One advantage the rich have is that since they think about financial questions all the time, they tend to view it in technical terms rather than moral ones. If you're used to viewing it technically, then when the time comes you can calculate your own self-interest without being distracted by the morality of it all. The average person has trouble doing that, which means that they can be manipulated by using that moral reasoning.


Posted by: Walt Someguy | Link to this comment | 11-14-08 8:08 PM
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Isn't there an unavoidable moral judgment when shifting from "what have we here?" to "what should we do about it?"


Posted by: F | Link to this comment | 11-14-08 8:13 PM
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134: You think you're clever, but opinion is thus far divided over whether it should be KAHM- (or COM-)ity as opposed to COMB-ity.

Pronounce "probity," I dare you. Compare to "probably."

We can argue over the pronunciation of "qua" if need be, but I lost that one years ago, to my deep embarassment, so I'd rather not go there.


Posted by: parsimon | Link to this comment | 11-14-08 8:15 PM
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138: "qua" is easy. You loosen your mandible, let your tongue loll in your throat, and pronounce it like "what" without the t.


Posted by: Sifu Tweety | Link to this comment | 11-14-08 8:18 PM
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... when the time comes you can calculate your own self-interest without being distracted by the morality of it all.

That's why I'm plumping for serious deflation. That way all those irresponsible people who took on too much debt will be punished, and thrifty me with my cash in govenment insured CDs wil be rich rich rich. I'll be able to buy up all their toys at garage sale prices.

Really, doesn't this go back to one of those whacko Christian sects that pushed out the natives in the 16 or 1700s, somehing about how earthly rewards and riches proved that you we're doing what God wanted? Mrality and money - like social class and God's natural order - have always been conflated.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 8:18 PM
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darn, first it was periods infiltrating, now it's mysterious apostrophes. I blame you-know-who.


Posted by: Michael H Schneider | Link to this comment | 11-14-08 8:20 PM
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139 should have been "whaaaaa?!?!?"

Does 140 just reek of somebody asking to get bitten in the ass by circumstance, or qua?


Posted by: Sifu Tweety | Link to this comment | 11-14-08 8:20 PM
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Mrality and money - like social class and God's natural order - have always been conflated.

That's so true.


Posted by: Po-Mo Polymath | Link to this comment | 11-14-08 8:23 PM
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Pronounce "probity," I dare you. Compare to "probably."

Also: vowel is long if it ends the syllable. Second-grade phonetics.


Posted by: Blume | Link to this comment | 11-14-08 8:23 PM
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There's some effing justice in the world. Apparently Tom Friedman and his wife just lost more than 99% of their net worth.

The crash is still terrible and the worst is yet to come, but this single quantum of disaster is just too beautiful for words. I can't really believe it. Too good to be true.

He's still worth $35 million, but that still must hurt.


Posted by: John Emerson | Link to this comment | 11-14-08 8:24 PM
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@144

I don't get this. Why is it co -mity, but prob -ity?


Posted by: F | Link to this comment | 11-14-08 8:27 PM
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136: S/B "When the time comes you can figure out how to come out OK yourself without worrying about the people you're brutalizing and destroying".

Or whether the time comes or not (e.g. Dick Cheney.)


Posted by: John Emerson | Link to this comment | 11-14-08 8:27 PM
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Oops, I got it exactly backwards: Why is it com -ity, but pro- bity?


Posted by: F | Link to this comment | 11-14-08 8:28 PM
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I'd guess it depends on how the word got formed, but I don't really know.


Posted by: Blume | Link to this comment | 11-14-08 8:29 PM
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The Latin roots are, on the one hand, comis, and on the other, probus!

That's irrelevant to anything!


Posted by: Sifu Tweety | Link to this comment | 11-14-08 8:32 PM
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148: Cripe. Thanks. I just saw 144 and was like: qua?


Posted by: parsimon | Link to this comment | 11-14-08 8:33 PM
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I just finished the New Yorker profile on Friedman and although on one level he sounds impressive, the guy just sounds like a first-class wanker. Only curious enough about the world to figure out how to distill it down to its most cartoonish principles, which he then repeats over and over until they sell. Obsessed with work for work's sake without really seeming to have a purpose behind it.

Fun line from the piece: he writes that he and his wife bought the land "to prevent it from being redeveloped into a subdivision of a dozen or more houses", which could sound like someone buying a lot of champagne to protect society from cork-related injuries.


Posted by: F | Link to this comment | 11-14-08 8:34 PM
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This question can be discussed at enormous length. There may or may not be a right answer. It's quite possible that both pronunciations of each word are acceptable, or that there's a US / GB difference.

These are two words that are read much more often than they're spoken, which is a big part of the problem.

Can't we just gloat about Friedman?


Posted by: John Emerson | Link to this comment | 11-14-08 8:34 PM
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although on one level he sounds impressive, the guy just sounds like a first-class wanker.

So he's impressive on the level of wanking, then?


Posted by: Sifu Tweety | Link to this comment | 11-14-08 8:35 PM
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"Driving in from LaGuardia I asked the middle-aged Jewish cabby for his thoughts on the financial disaster. It turned out that he and his wife had lost their entire fortune, and that right at the worst moment, he had also lost his job writing for a local newspaper called 'The Times'. He then made a characteristic native gesture and said something colorful in Yiddish."


Posted by: John Emerson | Link to this comment | 11-14-08 8:38 PM
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It would not be surprising. He comes across as a total dork, and not the kind of total dork where you think "He's smart,and is doing something important with passion, so I respect that", but the kind of total dork where you think "Wow, he's not that bright and really irritating." Or another thought I had: "He's kind of a idiot-savant of writing. He doesn't seem to really understand any of the things he writes about, but has a profound gift for writing about them in a way that is easy to understand.


Posted by: F | Link to this comment | 11-14-08 8:41 PM
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He doesn't seem to really understand any of the things he writes about, but has a profound gift for writing about them in a way that is easy to understand.

Yes, Dan Brown does have that gift.


Posted by: Sifu Tweety | Link to this comment | 11-14-08 8:41 PM
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145: More good news for Hawaii! (General Growth owns the local mega-mall and another big retail/redevelopment project nearby, and while those are still very nice assets, having no capital and a distracted headshed can't be good.)


Posted by: Not Prince Hamlet | Link to this comment | 11-14-08 8:44 PM
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That same gift makes him sound like a walking TV commercial. I can't imagine someone who would grate on my nerves more.


Posted by: F | Link to this comment | 11-14-08 8:44 PM
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Friedman was on The Daily Show the other day, and I was actually surprised at how articulate and on-point he was. Just in terms of affect. That gets you a long way, of course. He was promoting his new book, let's see: Hot, Flat, and Crowded: Why We Need a Green Revolution--and How It Can Renew America. This is not a new idea, that we need to construct a new economic bubble, this time in the form of investment in green technology.


Posted by: parsimon | Link to this comment | 11-14-08 8:48 PM
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I always confuse him with Robert Samuelson because of the mustaches and the pomposity.

And YHWH forgive me, the Jewishness. So shoot me. (Some of my best friends are Jews.)


Posted by: John Emerson | Link to this comment | 11-14-08 8:49 PM
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I can't believe I've never seen it before: parsimon is a Friedman sock puppet!


Posted by: Sifu Tweety | Link to this comment | 11-14-08 8:49 PM
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So shoot me. (Some of my best friends are Jews.)

You think people should shoot you because you're friends with jews?

Nazi!


Posted by: Sifu Tweety | Link to this comment | 11-14-08 8:51 PM
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Robert Samuelson isn't even good at being glib.


Posted by: Walt Someguy | Link to this comment | 11-14-08 8:52 PM
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162: Just saying that I was surprised. He was nimble; Jon Stewart couldn't get a foothold, though he tried.


Posted by: parsimon | Link to this comment | 11-14-08 8:58 PM
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165: mmm hmm. And you expect me to believe that somebody who isn't Tom Friedman would type the entire name of that ridiculous book? Likely story!


Posted by: Sifu Tweety | Link to this comment | 11-14-08 9:01 PM
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166: I didn't type it. I cut and pasted it, having checked it first, because the subtitle was informative.


Posted by: parsimon | Link to this comment | 11-14-08 9:05 PM
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Poor Samuelson. It must be horrible to have your nickname to be "The Lesser Mustache of Understanding".

Not related to Paul Samuelson, not that that would be a very good thing.


Posted by: John Emerson | Link to this comment | 11-14-08 9:06 PM
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I mean, the book seems a bunch of recycled apparent wisdom (I haven't read it, and don't intend to); that's what pundits produce.


Posted by: parsimon | Link to this comment | 11-14-08 9:09 PM
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169: Since producing new apparent wisdom generates prodigious amounts of greenhouse gases, you should be in favor of recycling it.


Posted by: Walt Someguy | Link to this comment | 11-14-08 9:24 PM
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170: What?


Posted by: parsimon | Link to this comment | 11-14-08 9:28 PM
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171: Apparent wisdom.


Posted by: Walt Someguy | Link to this comment | 11-14-08 9:29 PM
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Qua?!?!?


Posted by: Sifu Tweety | Link to this comment | 11-14-08 9:32 PM
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172: Right, well, I have no idea what you're talking about, why generating prodigious amounts of greenhouse gases is something one would be in favor of, but hey. I'm off.


Posted by: parsimon | Link to this comment | 11-14-08 9:42 PM
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I suggest actually reading comment 170, and all will become clear.


Posted by: Walt Someguy | Link to this comment | 11-14-08 9:46 PM
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We'll have to refer it to Standpipe's other blog.


Posted by: parsimon | Link to this comment | 11-14-08 9:50 PM
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everyone should watch this for the betterment of mankind


Posted by: Cecily | Link to this comment | 11-14-08 10:33 PM
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(||, |>, etc)


Posted by: Cecily | Link to this comment | 11-14-08 10:34 PM
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Is cuteness like that permitted on this earth?


Posted by: A White Bear | Link to this comment | 11-14-08 11:11 PM
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I think you have to apply for a special permit. But yes. "Oh what it called when you protect yourself?"

also the constant mispronunciation of hippopotomos is probaby the 4th or 5th best thing ever.


Posted by: Cecily | Link to this comment | 11-14-08 11:51 PM
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The Luskin link in 36 is, if you look at it closely, incoherent. Luskin and the Moustache of Understanding both have a gift for gibberish aimed at people who aren't reading closely. (Samuelson, alas, lacks even that gift.) Look at Luskin:

So when the U.S. Treasury says it will invest $700 billion to support the banking system, it has to be able to issue $700 billion in Treasury bonds. Someone has to buy those bonds. Someone has to think they're a good investment, at a time when most people don't think anything is a good investment. The Treasury's effort to restore confidence in banks depends on people having confidence in the Treasury.

Can someone explain what Luskin is worried about here? Is he telling us that nobody is going to buy these treasuries? If so, that's utter nonsense. If not, then what?

You could pick this piece apart paragraph by paragraph, but why bother when the Internet is full of people saying actual intelligent things.

Here's Krugman today, and here's a link to a 10-year-old Krugman piece that looks pretty dense (I haven't read it yet), but it looks like it's directly on point to the topic here. Plus, it's done by someone who's not a nitwit ideologue, and it's done by a guy who writes stuff that actually, you know, means something.


Posted by: politicalfootball | Link to this comment | 11-15-08 8:23 AM
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Posted by: | Link to this comment | 11-15-08 8:36 AM
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Or another thought I had: "He's kind of a idiot-savant of writing. He doesn't seem to really understand any of the things he writes about, but has a profound gift for writing about them in a way that is easy to understand.

are you kidding? His writing is incomprehensible. Actually, I guess saying that he doesn't understand anything but writes about it in a way that is easy to understand does capture his unique brand of gibberish.


Posted by: PGD | Link to this comment | 11-15-08 8:55 AM
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181: Krugman has been thinking about this problem for ten years, ever since he started writing about the Japanese recession. There's a guy who's truly good at making complex things simple.


Posted by: PGD | Link to this comment | 11-15-08 9:05 AM
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Semi on topic piece by Eliot Spitzer in the WaPo. Worth a read and a sober reflection on the nature of hardball politics at the top. (The start of his last paragraph, Although mistakes I made in my private life now prevent me from participating in these issues as I have in the past,).


Posted by: | Link to this comment | 11-15-08 9:22 AM
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"Easy to understand" = "plausible and persuasive".


Posted by: John Emerson | Link to this comment | 11-15-08 9:25 AM
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185: Was me.

The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. -- Galbraith


Posted by: JP Stormcrow | Link to this comment | 11-15-08 9:29 AM
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I loved watching Steve Moore get repeatedly booed on Colbert the other night. It's so obvious that these guys live in such a bubble they have no idea why people might find their ideas offensive.


Posted by: A White Bear | Link to this comment | 11-15-08 9:36 AM
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Posted by: | Link to this comment | 11-15-08 9:39 AM
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There's some effing justice in the world. Apparently Tom Friedman and his wife just lost more than 99% of their net worth.

The next six months will be crucial for the Friedmans.


Posted by: asl | Link to this comment | 11-15-08 9:39 AM
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I've been confused about something, and I just realized that either economists use a term in two different senses, or they use it more narrowly than I thought. I think of deliberately increasing inflation as monetary policy. So when Zimbabwe pays for everything by running the printing presses, that's monetary policy, albeit not the best sort. When an economist says "the liquidity trap makes monetary policy ineffective" they mean more narrowly that the government can't conduct monetary policy by buying government bonds. They have to use extra cash to buy real assets.


Posted by: Walt Someguy | Link to this comment | 11-15-08 9:43 AM
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I really miss Spitzer. The whole thing pisses me off. He had a chickenshit, non-prosecutable sexual problem which was illegally publicized by a partisan in the justice system, and his career ended. By that time everyone was his enemy for one reason or another, often for purely personal reasons, and almost no one stuck up for him. Not that it would have done any good -- it was just the right thing to do.


Posted by: John Emerson | Link to this comment | 11-15-08 9:47 AM
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Can someone explain what Luskin is worried about here? Is he telling us that nobody is going to buy these treasuries? If so, that's utter nonsense.

Isn't this the same thing that bob is worried about, that the Chinese will get out of the bond market?

Are Donald Luskin and Bob McManus on the same page?


Posted by: rob helpy-chalk | Link to this comment | 11-15-08 9:48 AM
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In not too long I think that the ToS will be at peace. It's a pity that it's illegal to help him get there.


Posted by: John Emerson | Link to this comment | 11-15-08 9:49 AM
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Rob: The problem with Luskin's argument is that in a recession, people are desperate to park their money somewhere. The least risky place to park it is short-term US Treasuries, which is every investor in the world is sticking their money there, and why interest rates on Treasuries are absurdly low (like 0.5%), which is why Krugman is worried about the liquidity trap (which is when the interest rate hits 0.0%).


Posted by: Walt Someguy | Link to this comment | 11-15-08 9:56 AM
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||

"How did Iceland Go Bankrupt?" At my URL.

Lots of schadenfreude. It's mostly links from as recently as a year ago about Iceland's free-market miracle.

Do I know How Iceland went bankrupt? Not really, but my guess probably isn't too far off. But actually, I don't answer my question. It's mostly just cchadenfreude.

|>


Posted by: John Emerson | Link to this comment | 11-15-08 10:32 AM
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Okay, this is weird. IIRC, bob recommended a book by Snowden and Vane on macroeconomics. I looked for it in my local library catalog, and they didn't have it. Yesterday, I was browsing through the shelves at the library, and I saw an interesting book on macro that I took home. I just realized it was Snowden and Vane. I searched the archives, and now I can't find bob's original comment. Is bob manipulating reality? Are occult forces manipulating reality, and bob is just their catspaw? Or are the occult forces just inserting false memories into my brain? It's really November 2008, and Obama is President-elect, right? They didn't change that, did they?


Posted by: Walt Someguy | Link to this comment | 11-15-08 11:07 AM
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Where are the Snowdens and Vanes of yesteryear?


Posted by: heebie-geebie | Link to this comment | 11-15-08 11:12 AM
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197

Is this an old book? Some libraries have never added their old books to their electronic card catalog.


Posted by: James B. Shearer | Link to this comment | 11-15-08 11:21 AM
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No, it's pretty new, but not brand new (2005). Either they just happened to buy it shortly after bob mentioned it, or more sinister explanations are required.


Posted by: Walt Someguy | Link to this comment | 11-15-08 11:24 AM
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200:More sinister explanations are always required. Trust me.


Posted by: bob mcmanus | Link to this comment | 11-15-08 11:27 AM
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191:Krugman has another blogpost, today or yesterday, that specifically deals wit the difference between Zimbabwe and the US re inflation/liquidity trap.

IIRC, "monetary policy" for economists is short rates and open market/window operations. Maybe long rates if they are magicians. Liquidity trap happens when the banks don't want to borrow from the Fed, because nobody wants to borrow from the banks. You can print money all day but according to sane monetary policy, you use the banks as a conduit, gaining a lot of multiplication via leveraged reserves..

Bernanke's helicopter wasn't so much about printing money as about dropping it on the shmoes.


Posted by: bob mcmanus | Link to this comment | 11-15-08 11:40 AM
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Krugman

Ok, K's post is related, but not quite on. He's mostly about generating inflationary expectations.
Business are very hesitant to borrow to make widgets when they expect prices/profits to decline, and not cover their costs.


Posted by: bob mcmanus | Link to this comment | 11-15-08 11:46 AM
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198: ,i>Where are the Snowdens and Vanes of yesteryear?

Avignon?


Posted by: | Link to this comment | 11-15-08 11:47 AM
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shit pwned at 181

bye


Posted by: bob mcmanus | Link to this comment | 11-15-08 11:48 AM
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181: But Is he telling us that nobody is going to buy these treasuries? If so, that's utter nonsense.

Uhh, 90 day Ts are returning theoretically 1%, and practically about 0.3%? That wouldn't cover the cable bill? Why are people buying that shit?


Posted by: bob mcmanus | Link to this comment | 11-15-08 11:53 AM
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It's really November 2008, and Obama is President-elect, right?

No, it just seems that way. It's really November 2009 and Obama has used his Satanic time-travel-fu to institute an Islamo-Stalino-Nazi dictatorship and nationalise Fox. Sorry to disappoint you.


Posted by: OneFatEnglishman | Link to this comment | 11-15-08 11:59 AM
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206: "nobody goes there anymore, it's too crowded."


Posted by: water moccasin | Link to this comment | 11-15-08 12:53 PM
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"Can we, those of us in the rest of the world, go on financing the deficits of a leading world power without having any say? The answer is clearly no." ...Nicolas Sarkozy

Ya know, I have no brief for Luskin and don't think I have ever read him.. But I also find those who want to use him as an excuse to blow off all worries about inflation (sooner or later) or other consequences of the deficits at best incomprehensible.

China & the Big Central Banks are carrying us, buying treasuries at a loss to prop up our economy. Yes, if we fall, they will hurt bad. But even if they continue to eat our pain, at some point they will demand a better deal. If the world economy continues to crash, it could be as soon as next year.

I really suggest people study the Int'l Currency and trade history of the early Great Depression and stop assuming that what can't be sustained will be sustained. France fucked itself, well, because it was France. Germany & Italy?

Or that rational analysis will always result in universal consensus. This is the fucking liberalism, that reason & the facts will reveal the one reality, the scientific truth.

Things can get crazy weird. Guaranteed.


Posted by: bob mcmanus | Link to this comment | 11-15-08 12:58 PM
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But I am trying to take a break from macro.

Reading Jared Diamond's Collapse instead.

Those rational actors on Easter Island, ya know?


Posted by: bob mcmanus | Link to this comment | 11-15-08 1:01 PM
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All I was saying was that Luskin is a einger hack and a known idiot and shouldn't be part of anyone's dataset. No one can be wrong all the time, but he comes as close to anyone.

Was I wrong?


Posted by: John Emerson | Link to this comment | 11-15-08 1:03 PM
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"winger hack"


Posted by: John Emerson | Link to this comment | 11-15-08 1:05 PM
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But they're not carrying us anymore. Everyone wants Treasuries now. Declaring that its time to end American hegemony is a pastime of the French government; it never seems to lead to anything.

US consumer demand is central to the world economy -- it's a dysfunctional system, but it's what we have. If the US goes into a serious recession, I don't see how the government of China can survive.


Posted by: Walt Someguy | Link to this comment | 11-15-08 1:08 PM
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Declaring that its time to end American hegemony is a pastime of the French government

How nice for them that they have a little hobby.


Posted by: rob helpy-chalk | Link to this comment | 11-15-08 1:20 PM
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Isn't it? I wish I had a hobby.


Posted by: Walt Someguy | Link to this comment | 11-15-08 1:23 PM
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211:How would I know, I don't read Luskin.

John, I have repeatedly told you I try to give Republicans no attention. They are off my radar, and I would prefer they were off my planet.


Posted by: bob mcmanus | Link to this comment | 11-15-08 1:27 PM
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Bob, when several people pointed out that Luskin is an idiot, you felt the need to object.

Luskin & Brock are right, a lot of people are talking about inflation threats. This shit is very complicated, speculative, and ideological.

Likewise, when I cited DeLong about Luskin, you felt the need to take the opportunity to slam DeLong.


Posted by: John Emerson | Link to this comment | 11-15-08 1:44 PM
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217:I didn't feel I was defending Luskin or Brock, but defending their argument, or at least keeping the topic open...

,,,aw hell. Why am I engaging in this swinging dick contest?

Emerson Agonistes.


Posted by: bob mcmanus | Link to this comment | 11-15-08 1:56 PM
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Yeah, Bob, it's always someone else.


Posted by: John Emerson | Link to this comment | 11-15-08 2:19 PM
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17: before they chopped down the last tree on Easter Island

210: Those rational actors on Easter Island

Although I'm sure that in reality it was not clear what the last tree was, somehow it would be appropriate if they *did* know and cut it down in a triumphant drunken frenzy. Something along the lines of the party in The Shipping News where they trash the boat of the Englishman (forget his name) who is about to leave.

All hail mankind! The self-defeating conqueror of the Earth. But it was fun while it lasted.


Posted by: | Link to this comment | 11-15-08 3:21 PM
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I guarantee that some economist right now is working on a rational model to explain Easter Island. It probably wouldn't even be that hard -- some externality argument would do it.


Posted by: Walt Someguy | Link to this comment | 11-15-08 3:23 PM
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An externality argument could explain why rational self interest models are still great, even though they don't explain this case.

The real money goes to the guy who explains why the fate of Easter Island was actually the *ideal outcome*.

I've been thinking about developing arguments like that for global warming. Just as there are some cases where it is rational for an individual to prefer death, so too there are cases where it is rational for the human species to prefer extinction. Clearly extinction is preferable to any outcome where unlimited exponential growth is impossible. Therefore our current climate policy is ideally rational. QED.

I'm certain I could get this argument published in Reason magazine.


Posted by: rob helpy-chalk | Link to this comment | 11-15-08 3:35 PM
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helpy-chalk is the Sokal of economics. Do it.


Posted by: OneFatEnglishman | Link to this comment | 11-15-08 3:39 PM
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220 was me.

The real money goes to the guy who explains why the fate of Easter Island was actually the *ideal outcome*.

"It is not enough to succeed. Others must fail."
-- Gore Vidal

I think you get there if you assume a utility function where the other guy's (clan, whatever) success hurts you more than your own success helps you. Maximum utility when everyone gets fucked.


Posted by: JP Stormcrow | Link to this comment | 11-15-08 4:11 PM
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Walt: So when Zimbabwe pays for everything by running the printing presses, that's monetary policy, albeit not the best sort.

Ah, but in that case it is monetary policy serving fiscal policy. Spending too much (because you can't or won't get it in taxes and you can't borrow) requires the printing of money, which then causes the inflation.

When Weimar did it, they were engaging in financial maneuver of trying to get out from under their wartime reparations debts which were denominated in marks.

When an economist says "the liquidity trap makes monetary policy ineffective" they mean more narrowly that the government can't conduct monetary policy by buying government bonds.

Or by reducing interest rates, or by reducing reserve requirements. I give the bank a thousand bucks. They stick it in a vault and don't lend it. How much inflation have I caused? Zero. The liquidity trap is when lending to banks is no more effective than burying the stuff in the ground and not telling anyone else where it is so they can dig it up.

They have to use extra cash to buy real assets.

A government has to use a diffusion mechanism that doesn't involve giving/lending/loaning/throwing money at banks, which is about the only method central banks use.

Chalky:The real money goes to the guy who explains why the fate of Easter Island was actually the *ideal outcome*.

Since any isolated population on Easter Island was unsustainable, self-destruction reduced the population to zero, which is the ideal outcome for all other entities, including potential Easter Islanders. [*]

McManusMan: I didn't feel I was defending Luskin or Brock, but defending their argument, or at least keeping the topic open...

We HAD a bout of inflation: that's part of why commodity prices went up. Unfortunately, there was this financial catastrophe thingy, that was induced by the low interest rate doohickey and kablammo, sudden contraction of the money stock whatchamacallit. A wet fart noise goes here.

ANyways, I have no idea what Luskin is on about because that would involve reading him and I like my eyes, however that other link way back there was basically accurate. The FReserve has been trying to inflate away for some time (no, really! pay no attention to the bogus floating head apparation in front of you!) because we already had deflationary issues. Now we have way more deflationary problems, and should be praying to [the entity of your choice] that we get some actual inflation. Hubba hubba the inflation. Sadly, the Devil has yet to purchase iceskates.

The Chinese could pull dump their t-bills but that doesn't matter anymore since t-bills are now basically at zero, so the price can't go down. If import prices rose, that would be great since that would mean that fewer pricier imports would be actually being purchased. It wouldn't matter at all if China refused to accept imports, since the only thing they have been importing from us is now worthless paper. The problem with China was that they has us over a barrel and could cause us major economic problems, but since the economy has basically collapsed, they don't matter anymore. Fuck 'em.

We are now in so much trouble that the ordinary constraints don't apply. Nobody in the US is importing anyways (relatively speaking!) because they're all hanging on to their money. And people are shifting their money into the US to bail themselves out, so we need to make hay while the sun shines.

We could (and will) have a problem IF we can induce lots of tasty inflation. If we do that, the dollar may collapse in value relative to other currencies and things like platinum and oil will get really expensive. Ouch. To be troubled by that though would require that people have fucking jobs, and that they not be rioting in the streets.

max
['First things first.']

[*] Yeah. Tautology. Sue me.


Posted by: max | Link to this comment | 11-15-08 4:24 PM
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224 is a pretty accurate description of how people instinctually operate, as described by Jared Diamond in a recent profile of Papua New Guineans. Only by reprogramming WOPR can this be overcome.

"A strange game. The only winning move is not to play."


Posted by: F | Link to this comment | 11-15-08 5:08 PM
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Easter Island was a net gain to humanity just by providing an example for modern environmentalists to use over and over and over again. The utility to readers of "Collapse" alone outweighed the loss to a few thousand savages.


Posted by: PGD | Link to this comment | 11-16-08 9:06 AM
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I haven't read Diamond's book people are talking about here, but all through GG&S I was asking myself whether Diamond was overstating his case or getting the facts wrong.


Posted by: John Emerson | Link to this comment | 11-16-08 9:11 AM
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228: I've been involved in several online discussions of the merits and bona fides of Diamond's work (shockingly, they've been inconclusive). My impression is that GG&S probably "stretches" things a bit more in support of its hypothesis, but there is also legitimate debate over the way Easter Island played out. I like them, especially Collapse*, if for nothing else Diamond's willingness to tackle the grand sweep.

I really recommend reading the Greenland chapter in conjunction with Jane Smiley's The Greenlanders which covers the same time period in a work of fiction. I think it her best book by far.

And then he saw what he was, an old man, ready to die, pressed against the Greenland earth, as small as an ash berry on the face of the mountain, and he did the only thing that men can do when they know themselves, which was to weep and weep and weep.

Posted by: JP Stormcrow | Link to this comment | 11-16-08 9:51 AM
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he did the only thing that men can do when they know themselves, which was to weep and weep masturbate and weep.


Posted by: PGD | Link to this comment | 11-16-08 10:52 AM
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The question 'Would you like a pony with that?' gets poignant.


Posted by: CharleyCarp | Link to this comment | 11-16-08 3:18 PM
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God, that's awful. On the bright side, Malia's pony should be almost free.


Posted by: John Emerson | Link to this comment | 11-16-08 3:40 PM
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That's totally awful.

Good news for suffering maguro fans, though.


Posted by: Sifu Tweety | Link to this comment | 11-16-08 3:45 PM
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I don't want the abcess sushi, thank you.


Posted by: John Emerson | Link to this comment | 11-16-08 3:54 PM
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World fisheries depleted! Sushi lovers mourn!

I pray there is no God.


Posted by: JP Stormcrow | Link to this comment | 11-16-08 4:10 PM
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With all that money people are saving on clothes, they will finally be able to afford that divorce they've been wanting!


Posted by: will | Link to this comment | 11-16-08 5:33 PM
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Has anyone ever developed pyramid divorce marketing, sort of like Mary Kay or Scientology?


Posted by: John Emerson | Link to this comment | 11-16-08 5:52 PM
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Holy shit, you aren't kidding- $15 for a horse? How much can hay to maintain a horse cost that you'd be forced to essentially give it away?


Posted by: SP | Link to this comment | 11-16-08 6:42 PM
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Cheaper than I'd imagined.


Posted by: Sifu Tweety | Link to this comment | 11-16-08 6:57 PM
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Speaking of deals and tying this to the baby thread, we just bought a car seat normally $250 for $45 at Target. Britax granite for anyone else who needs one. I wonder if they're expired or something.


Posted by: SP | Link to this comment | 11-16-08 7:58 PM
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SP,

Holy shit, you aren't kidding- $15 for a horse? How much can hay to maintain a horse cost that you'd be forced to essentially give it away?

Around these parts boarding for a horse is about $200-$300/month. Maybe it is lower now, I dunno, but that price does NOT include the routine vet and ferrier costs.

Putting four kids through college meant I had to give up my Mustang and my wife gave up our horse. Honestly. Since we seem to be ahead of the rest of the country (bought the scooter four years ago) I'm not surprised other people are now facing the same thing.


Posted by: Tripp | Link to this comment | 11-17-08 9:20 AM
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I think there's also a huge difference, expense-wise, between maintaining a horse properly and kind of keeping it alive. You can do the latter pretty cheaply (I know people with pointless, poorly cared for, untrained, unrideable horses as sort of giant pets) if you've got the space for it.


Posted by: LizardBreath | Link to this comment | 11-17-08 9:28 AM
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I think there's also a huge difference, expense-wise, between maintaining a horse properly and ind of keeping it alive cruelty to animals.

From the stories of a colleague who keeps a couple of horses, I gather this is very true indeed. Also time-wise. The animals have to be exercised, fed, mucked out on a regular basis. Don't undertake it if your ideas have been formed by changing the kitty litter and opening the odd can.

OTOH, said colleague tells me that the large misshapen carrots she buys by the cwt. as horse treats are a lot tastier, and cheaper, as people food than the bland but pretty things in the supermarket.


Posted by: OneFatEnglishman | Link to this comment | 11-17-08 10:06 AM
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With all that money people are saving on clothes, they will finally be able to afford that divorce they've been wanting!

My family law colleague in the office tells me that divorces and separations have been a lot trickier for the last while, now that couples can't just sell the house, split the money in whatever proportions they grudgingly agree to and start again on the property ladder. Meanwhile life was very quiet for me for the last few months as no-one needed any conveyancing done. However! everyone is now suing each other over sales that failed to close/ businesses that are doing badly so I am busy again. We just hope that our clients can find the money to pay us.


Posted by: emir | Link to this comment | 11-18-08 1:30 PM
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the large misshapen carrots she buys by the cwt. as horse treats are a lot tastier, and cheaper

We will soon be able to buy these as people food again (I always thought it was an urban legend that the EU banned their sale but apparently it was true).


Posted by: emir | Link to this comment | 11-18-08 1:31 PM
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