WE'RE STUCK. MORE OF THE SAME THE SOLUTION?

This should be another relatively fast post but I thought it'd be a worthy topic of conversation.

Trough Economist' View (many thanks to Mark Thoma for his remarkable blog, it's quite a versatile resource, with countless links to other interesting sites. I am a bit envious, I have to say) , I came across this interesting blog post by Timothy Taylor:

http://conversableeconomist.blogspot.com/2013/03/snowbank-macroeconomics.html

Basically, Timothy Taylor argues the US has been using Fiscal and Monetary policies as hard as could reasonably be expected (especially given the actual political landscape) and their relative lack of success (pulling the USA off the brink of a disaster but not much more) ought to tell us to try something different.

STICKY WAGES? I DON'T THINK SO...

This is a very quick post, to link something I thought interesting and worth preserving: 

http://economix.blogs.nytimes.com/2013/03/28/median-household-income-down-7-3-since-start-of-recession/

"Median annual household income in February 2013 was $51,404, about 1.1 percent (or $590) lower than the January 2013 level of $51,994. The numbers are all pretax, and are adjusted for both inflation and seasonal changes

The longer-run trends are even more depressing.

February’s median annual household income was 5.6 percent lower than it was in June 2009, the month the recovery technically began; 7.3 percent lower than in December 2007, when the most recent recession officially started; and 8.4 percent lower than in January 2000, the earliest date that this statistical series became available".

For the pointer, I thank "Calculated Risk": http://www.calculatedriskblog.com/2013/03/friday-personal-income-and-outlays.html

CYPRUS - WHY OH WHY?

There's been lots of excellent summary of the situation so I don't believe that I would achieve much by repeating what has been said better elsewhere.

I think Matt Yglesias does a good job of summarizing it all but so does Kevin Drum and so does Felix Salmon too. And Yves Smith has insightful numbers.

However, there is something I did want to add to the conversation.

What has truly surprise me in this tragi-comedy is the inability of the Cypriot leaders to recognise that their offshore banking center dreams were over.

REFRESHING MACRO, PART 4: PROFIT MATTERS

This ought to be a fairly short post.

I got the idea of it long ago while re-re-reading the excellent "The Death of Economics" by Paul Ormerod. This book, if you haven't read it already (and you should) is, as per the Wikipedia description linked above, constituted of two distinct parts. The first part is a long list of the short comings of various aspects of orthodox economics. It will come as a surprise to no one that I am more or less in total agreement with everything Ormerod says in that part.

In the second part, and very courageously, Ormerod tries to describe what a macro-economic model should look like. Again, the wiki article summarizes the thesis well: 

"Three properties are identified as essential to any model seeking to explain unemployment. First the model should be capable of settling into long periods of regular fluctuations; second, such fluctuations should be sensitive to the initial values of the system; thirdly, following a major shock, there should be no tendency to settle back to the regular behaviour previously seen".

 Again, I have no dispute with such properties describing not only unemployment but a variety of economic phenomenons. So, should you just stop reading my stupid blog, buy the book and be done?

Well, not quite.

INFLATION OR DEFLATION; REFRESHING MACRO, PART 3

INTRODUCTION

As a part of my on-going series on Macro-economics and what I understand of it, here is my take on a subject that was quite popular a couple of years ago, inflation (and deflation).

I think this is still relevant because like austerity versus deficit, the debate still heats up from time to time.

As with any good introduction, I will give you my conclusion straight out. The truth is that they are several types of inflation (I count three) and deflation (I count two). And those differences are important because they (ought to) determine our macro-policies rather than simply stating inflation above 2% is baaad and deflation (anything below 0%) is also very very baaad...

IRAQ WAR - 10 YEARS ON...

I didn't really planned on writing a post on the subject.

The main reason was that no-one likes a smart-ass and, while it can be self-gratifying to say "I told you so", it never makes you any friends.

COMMENT ON NOAHPINION LATEST

Noahpinion: How is Abenomics doing?: Last December, Shinzo Abe swept to power, promising to force the Bank of Japan to re-inflate the economy at any cost, boost stimulus spe...

My take? Read the whole thing and you'll see why I am suspicious about the capacity of central banks to do all that much when they hit the ZLB. Sure, QE does stuff. But not stuff that truly changes the game in the real world.

That's the domain of fiscal and budget policies. And that's what we're not seeing in our world.

I think Bernanke would agree: "[The Fed] cannot carry the entire burden of ensuring a speedier return to economic health."

DISAGREEING WITH MATT YGLESIAS

Quick reply to a post from Matt Yglesias I just read on Moneybox, another of my quickly expanding list of favourite blogs (Honestly, one thing that would deserve its own blogpost is how come that you have such good political or economical opinions out there and so little is actually being implemented or even seriously discussed in the public square).

Anyhow, here, I disagree with Mr. Yglesias. In his post , he essentially argue that "To raise real wages across the economy rather than for some favored group of insiders, what you need to do is make things cheaper".

AUSTERITY VS. STIMULUS - SOLUTIONS TO OUR DOLDRUMS

There's a general debate going on as to what to do, short term, with regards to the crisis that is still affecting our benighted economies.

Painting things with a broad brush, two main strategies are being discussed or being implemented. The first one, Keynesian-inspired, recommend running large deficits to compensate the drop in private demand till such times private consumers and private companies resume spending and investing. The second one, often dubbed "Austrian" (supply-siders could often be just as or even more correct but it hasn't quite caught on), insists that we need to cut public deficits by cutting public spending, to avoid an excessive and ballooning debt provoking a sovereign crisis.

INEQUALITY AND GROWTH, A SEQUEL

This a quick post following my linking of a Boston Review article on Inequality on Facebook.

The article I linked is here: http://www.bostonreview.net/BR38.1/emmanuel_saez_david_grusky_income_inequality_taxes_rent_seeking.php

 

Last month, U.C. Berkeley economist Emmanuel Saez spoke [See video below] to the Center for Ethics in Society at Stanford University about his pioneering research into global income inequality. A critical question his work raises is whether high taxes on the wealthy can curb inequality. Before his talk, Saez sat down with Stanford sociologist David Grusky to discuss further why taxation, though a blunt instrument, might be the best available solution.

CONSERVATIVES: TALK BY THE FIREPLACE (WITH JAMES, PART 3)

This is the on-going discussion James and I are sharing on Conservatism and what motivates people who do not immediately stand to gain from tax cuts designed to favour the top 1% (at most. It's really benefiting the top 0.01%) to vote for conservative policies (especially the US case, though the conversation has drifted towards UK and France as well).

This is a pretty long post so, if you're in a hurry, you can jump all the way down to my conclusions ('till James' replies)...

By the way, if you think I am exaggerating about this 0.01% thing, please look at the following graph: The rich are certainly doing better than the rest of us but it is the super-rich who are gathering speed and pulling away from even the rich (let alone, of course, the rest of us). Welcome back the plutocracy...

But, anyhow, back to James' comments!