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Wednesday, April 13, 2011

There Will Be A Brief Horrified Blogging Pause

Succeeded, I suspect, by another four years of wandering in the desert. Boy, that good mood did not last for very long! Whatever would I do without my dear friends and commenters?

I had stared solemnly at Yellen's recent public ravings and concluded that the speech was so self-contradictory that it was intended to be so; that the only market message was that the Fed is determined to keep the stock market rally going, and will do whatever it needs to do to keep it going, and that intellectual coherence was sacrificed to insist that the Fed also intended to control inflation as a means of controlling one portion of inflation only - the sexpectation part.

But CF says no; he says that Yellen meant it, which raises specters and zombies to walk the earth and eat the living. If Yellen doesn't understand how future prices are set, then it's logical to assume that the rest of the Fed doesn't either. The funniest part of Yellen's speech is the discussion of US wages and the belief that US wages will constrain inflation. It is, of course, external wages that are controlling inflation, and since external wages are not controlled....

In any case, we have poetry courtesy David and CF:


[Major MARINDIN, in his Report to the Board of Trade on
the railway collision at Eastleigh, attributes it to the
engine-driver and stoker having "failed to keep a proper
look-out." His opinion is, that both men were "asleep, or
nearly so," owing to having been on duty for sixteen hours
and a-half. "He expresses himself in very strong terms on
the great danger to the public of working engine-drivers and
firemen for too great a number of hours."--_Daily Chronicle_.]

_Who_ is in charge of the clattering train?
The axles creak, and the couplings strain.
Ten minutes behind at the Junction. Yes!
And we're twenty now to the bad--no less!
We must make it up on our flight to town.
Clatter and crash! That's the last train down,
Flashing by with a steamy trail.
Pile on the fuel! We must not fail.
At every mile we a minute must gain!
_Who_ is in charge of the clattering train?

Why, flesh and blood, as a matter of course!
You may talk of iron, and prate of force;
But, after all, and do what you can,
The best--and cheapest--machine is Man!
Wealth knows it well, and the hucksters feel
'Tis safer to trust them to sinew than steel.
With a bit of brain, and a conscience, behind,
Muscle works better than steam or wind.
Better, and longer, and harder all round;
And cheap, so cheap! Men superabound
Men stalwart, vigilant, patient, bold;
The stokehole's heat and the crow's-nest's cold,
The choking dusk of the noisome mine,
The northern blast o'er the beating brine,
With dogged valour they coolly brave;
So on rattling rail, or on wind-scourged wave,
At engine lever, at furnace front,
Or steersman's wheel, _they_ must bear the brunt
Of lonely vigil or lengthened strain.
_Man_ is in charge of the thundering train!

Man, in the shape of a modest chap
In fustian trousers and greasy cap;
A trifle stolid, and something gruff,
Yet, though unpolished, of sturdy stuff.
With grave grey eyes, and a knitted brow,
The glare of sun and the gleam of snow
Those eyes have stared on this many a year.
The crow's-feet gather in mazes queer
About their corners most apt to choke
With grime of fuel and fume of smoke.
Little to tickle the artist taste--
An oil-can, a fist-full of "cotton waste,"
The lever's click and the furnace gleam,
And the mingled odour of oil and steam;
These are the matters that fill the brain
Of the Man in charge of the clattering train.

Only a Man, but away at his back,
In a dozen ears, on the steely track,
A hundred passengers place their trust
In this fellow of fustian, grease, and dust.
They cheerily chat, or they calmly sleep,
Sure that the driver _his_ watch will keep
On the night-dark track, that he will not fail.
So the thud, thud, thud of wheel upon rail
The hiss of steam-spurts athwart the dark.
Lull them to confident drowsiness. Hark!

What is that sound? 'Tis the stertorous breath
Of a slumbering man,--and it smacks of death!
Full sixteen hours of continuous toil
Midst the fume of sulphur, the reek of oil,
Have told their tale on the man's tired brain,
And Death is in charge of the clattering train!

Sleep--Death's brother, as poets deem,
Stealeth soft to his side; a dream
Of home and rest on his spirit creeps,
That wearied man, as the engine leaps,
Throbbing, swaying along the line;
Those poppy-fingers his head incline
Lower, lower, in slumber's trance;
The shadows fleet, and the gas-gleams dance
Faster, faster in mazy flight,
As the engine flashes across the night.
Mortal muscle and human nerve
Cheap to purchase, and stout to serve.
Strained _too_ fiercely will faint and swerve.
Over-weighted, and underpaid,
This human tool of exploiting Trade,
Though tougher than leather, tenser than steel.
Fails at last, for his senses reel,
His nerves collapse, and, with sleep-sealed eyes,
Prone and helpless a log he lies!
A hundred hearts beat placidly on,
Unwitting they that their warder's gone;
A hundred lips are babbling blithe,
Some seconds hence they in pain may writhe.
For the pace is hot, and the points are near,
And Sleep hath deadened the driver's ear;
And signals flash through the night in vain.
Death is in charge of the clattering train!
The above poem is in an issue of Punch from 1890. All too apposite. The Panic of 1890. The Panic of 1893.

Should you be in an inquiring, if unhappy turn of mind, it turns out that the accident reports have been duly archived but the Eastleigh report is missing.

So Yellen seriously thinks that the Fed's QE has no effect on energy and commodity prices? That's what he says right up front in the intro to his speech. How representative is this of the FOMC as a whole? I know some other Fed governors (Dallas, ferinstance) have been saying something quite different.
Not that the rest of the Fed deserves the benefit of the doubt, but I put Yellen in the same bucket as the 9th circuit court of appeals. You know, they are interesting thought experiments and mind altering institutions, but all of their pronouncements are almost immediately the subject of ridicule and derision. Something in the water out there in the land of fruits and nuts.

It's like Obama saying he's got a fail safe trigger for the deficit, but SS and Medicare are off limits from any spending cuts imposed a result. The fiscal fantasies continue.
Of course she has an inflationary bias, she was appointed by a Democrat. " The struggle " is the priority for all progressives, with Clinton differing from Barry only in small ways. Remember it was another piece of Clinton macro wisdom - creating an unlimited market for junk mortgage debt - that ignited the housing conflagration.

"...this day marks the end of that grief."

( several lines later )

"Because the US could face a future like Ireland's or Greece's if we don't stop playing with the funny money" MOM

Please could you clarify your thinking here, MOM?

Why are you over your grief when the future, if unaltered, leads to Greece, for the US? Are a few ok quarters enough to offset your concern for the future? If so, why do you suggest a contractionary policy that would cause more economic pain?
The destruction of purchasing power will continue until morale improves.
Anon - because up until this point - approximately 55 months later - all we could possibly do is try to mitigate the collapse. There was no possible way not to experience a devastating downturn.

Now we have a shot at building again. We can avoid being Greece. It's the difference between being diagnosed with chemo and being told
A) You're going to have to go through chemo and radiation, but we've caught it early, it's quite treatable and most people do survive, and
B) Do you have a will? There is some palliative treatment that can help your discomfort and there is some excellent information in this folder about hospices.

There's quite a difference!

Any country can destroy its finances at any time by mismanaging them. It appears that Yellen is shooting for the Acropolois and burning bank buildings.

Maybe sanity will prevail, maybe not.
Edit - I meant "being diagnosed with cancer".
I'm so glad we are choosing currency debasement
to pay our debts and goose our exports. Of course
I bike to work.

M_O_M; You flatter me; Thank you.

Neil; Yellen is a woman. At least she looked like one.
Neil - Yellen is not a man, and you can be proud of that.

As to whether she's a woman - I don't know. It's rare to find a woman that disengaged from reality.

My sister-in-law, who certainly has never studied economics and who is very busy, noticed that the Entenmann's baked goods are now always on sale and drew her own conclusions.

If Yellen wanted to be more officially economic about it, she could read the latest NFIB survey, note the declining earnings, collapsing expectations for real sales and the economy, the beginnings of an employment slide, and plans to raise prices, and draw some conclusions about diffusion. But no, instead she talks about a model which is apparently insulated from evidence.
Spork - heck, who needs a middle class anyhow?

The damned yeomanry is surly and disgruntled anyway! They need to be disciplined until they learn to talk nicely to their betters.
There I go, skimming Fed papers again. Apparently, I didn't feel the word "Janet" was a key concept at the time.

Still, I'm wondering to what extent Ms. Yellen is voicing the Fed consensus. Clearly she can say these things and not get laughed out of any meetings...
"the only market message was that the Fed is determined to keep the stock market rally going"

As the astute John Hussman has pointed out, excess stock returns in a given time period simply represent "borrowing" from *future* stock returns. It's amazing how many people do not grasp this point.
David - yes, indeed.

But then, so is juicing the economy overly in any way, whether it is boosting credit or sending everyone checks to spend. That's really what got us into this mess in the first place.

You can never push out of the active range. You can only push to the top of that range. If you push past, you are just building up an explosive head. The Fed's problem is that it will not recognize current limitations.

I don't think the Fed has the ability to accrue such a huge payback again. However if Congress and the Fed keep working on it together, they could create a situation that would make the Late Great Recession look like a Sunday amble at the park.
I was thinking about this article ( link ) and wondering how those in power can have so little understanding of what the average American is dealing with. I think I found the answer. It has to do with the gap between haves and have nots. In the past, the gap was narrower and those in power were more likely to have lived on a budgets, shopped for sales, etc. Now, they don't even seem to understand that most folks can't go out and buy a new car when gas prices go up. Maybe we need a tax increase targeted ONLY for government officials.
Teri - you are right. There is a whole group of people that grew up sort of middle-upper class and only associate with the same kind of people. They just don't know.

There was a pretty strong class division along the coasts, especially the East Coast in the US, but first the GD and then WWII knocked it out. Especially the common experience of serving in the military. For about 30 years, the mindset of the average professor/journalist/politician was greatly leavened by those experiences.

But now we are more than 55 years out from WWII, and the average journalist/professor/politician has no sympathy and no understanding of the average citizen. Unfortunately, on the left side a culture of contempt for the average citizen has emerged, and it makes the symptoms of the disease much worse.
The Eastleigh report is not missing, just not on line. One man died by accident, it wasn't a big enough incident to make the newspapers.
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