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Thursday, September 01, 2011

Try It Now, Jeff

I went in there and took out all the blogrolling entries.

On a side note: some new stuff below in the prior post.

I note with some interest that mainstream independent economists are now beginning to sing my tune - that this is structurally a depression rather than a recession. See this link, for example. It's got a lot of graphs and so forth, but the upshot is that we are a long way from recovery.

The implication is that monetary policy can't do much. Monetary policy works in recessions, but only fiscal policy works in depressions, and the effect in depressions is quite limited. Also there are natural limits, and here we should revert to Reinhart and Rogoff - the cost of shoring up a system is capitalized and shows up as a net long term drag on the economy.

Works now. Thanks.
We had a structural depression in the 1930's. We changed ABSOLUTELY NOTHING about the structure since then - we got the benefit of half the world blown to bits and then taking themselves out of competition with the (failed) Communism experiment. And even then we had to have a massive public propaganda campaign to convince women to be housewives instead of taking paying jobs AND we had to increase the compulsory education age to keep teenagers from competing for jobs. Adult women eventually wised up and demanded actual fulfilling work. With the added supply of adult woman labor we had to entice 18-year-olds to forego 4 or more years of working for more useless schooling to cut the labor supply a bit. We can't paper over the end of the Communism experiment - we have no other choice but to address the structural problems now.

My feeling is we are right back in the same depression rather than a brand new one. We've been kicking the can for 80 years. The can has survived but our foot is about to break.
Charles - we changed a great deal of the structure as a result of the GD.

FDIC insurance, Glass-Steagall separation of financial businesses, social insurance programs.... We set up investment-related circuit breakers and Keynesian-oriented circuit breakers.

But the huge economic growth engine was of course the rise of production. If you look at the current account balance, it seems clear that by the 1990s we were living off inherited capital, and the rise of indebtedness, both among the population and the government, was a result of living beyond our real earnings.

To restore prosperity, both our living standards must drop and our production must become a significantly higher proportion of GDP. I am strongly in favor of increasing production so that living standards don't have to drop.

If you just look at student loans, it's clear that we are just moving debt-loading around. We haven't begun to address root causes yet.
It would help a lot if China would float their currency, or would recyle their dollars into something other than Treasuries and commodities.

Of course, we'd hardly notice China if we could cut way back on imported oil, unless the alternative is made-in-China solar panels. It's terribly important that we not just swap one imported energy source for another.
I dunno, MoM. The structural problem is over-leveraging. Glass-Stegall was destined to be repealed as long as federal and local governments wanted to be just as leveraged as Lehman Bros and AIG.
Yep, working nicely again.

I love reading your stuff -- usually a fresh view or data compared to the same regurgitated stories/blogs.

I would comment more on the economy but this amazingly slow recovery and the gubbmint can kicking has dulled my opinions.
Speaking of structural depressions...

Our Self-Serve Economy

WV = chizers

That's actually a real word.


The Chizer is able to jump suprisingly high for a small dog.
And here I thought chizers was almost the same thing as chiselers.
Mark - Google-Hal is probably trying to cheer you up.
Neil - I already have a mental parody of Obama's jobs speech running as a continuous loop. The "green" economy is the no-jobs economy, at this point.

As for China, it isn't doing well. Look at the breakdown in price increases YoY for the different categories.
Food, fuels, gold, and healthcare, all up. Oh, and of course cotton--which I still don't quite understand.

Prices are running hotter in the rural-classified areas, especially gold. Which makes sense, I guess--you don't have to be so worried about inflation if you have a steady income. If your savings might have to get you through a couple of lean years, precious metals start to look more important. That rural-urban divide is the frightening thing. Tai-ping, much?
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