I’m at a panel discussion on the fed right now. I was tempted to troll Matt Yglesias with some questions about barber licensing and what not, but the discussion has been excellent. Short version: the fed in the US is insanely focused on imaginary inflation, while it ignores real life mass unemployment. Worse still, it may take retaliatory action if elected government officials don’t give it the (austere) fiscal policy it wants
This is a very good description of the state of affairs (via) in Europe:
The problem here is that the ECB (European Central Bank)loses that power if it commits itself to implementing optimal policy. A central bank should be stabilizing the growth path of aggregate demand. But a central bank that’s actually doing that has no leverage over anyone else. It’s got an important job to do and it’s doing the job well. Here in the United States, the Pentagon’s Strategic Command has the power to launch nuclear missiles and destroy the world. In theory, that could give it enormous leverage over tax policy. In practice, the officers who run Strategic Command due their duty rather than threatening to unleash mass death on the planet unless they get their way on unrelated issues.
EDIT: OTOH, Matt Y just pronounced panacea pan-ASS-see-ya. It’s not “premia”, but it’s close.
Hunter Gathers
The beatings will continue until morale improves.
This is also good news for John McCain.
cathyx
I thought we were already practicing austerity here.
chopper
@cathyx:
the states sure as shit are. hence one reason why the unemployment rate is so high, due to mass layoffs of public workers at the state level.
Valdivia
Very appropriate tag, given how the ECB behaves.
eldorado
careful, pretty soon you’ll be reading nakedcapitalism.com and who knows where you will wind up after that.
Maude
@chopper:
You win the prize for saying that.
We don’t have austerity here as in Europe. Obama prevented that and McCain would have done exactly that.
The banks in Europe are in real trouble. More than ours were in 2008.
Hunter Gathers
Maybe if the ECB were flooded with hookers and blow, then they might be persuaded to actually do their fucking jobs.
Baud
@Maude:
And Romney and the Paul Ryan-led GOP are proposing that if they win in November.
Mark S.
It is? Aren’t interest rates as low as they can go at .25%, and have been there for a couple of years? What exactly can the Fed do? The interest rate is about the only tool they got.
How does the Chicago school explain this phenomenon? We should have inflation, but we clearly don’t.
Baud
@Mark S.: I think the idea is that the Fed should print more money and devalue the dollar.
I’ll let people smarter than me (pretty much everyone else) debate whether that’s a good idea.
Mojotron
…tempted to troll Matt Yglesias with some questions about barber licensing and what not.
Yglesias’ pet peeve about barbers is one of my pet peeves; I can’t figure out why he thinks a) DC has a barber shortage (we have a glut if anything), b) there’s a need to get rid of licensing and safety training for barbers (hint: just because you don’t use lye in your hair doesn’t mean no one else does, and there’s a reason we no longer have big lice and hepatitis outbreaks) c) we need an influx of barbers with felony convictions, and d) why we should be taking coiffure advice from someone with such a godawful ‘do.
Metrosexual Black AbeJ
@Mark S.:
Print more money. Not like they’ve done nothing, but we could use QE3.
schrodinger's cat
@Mojotron:
We shouldn’t unless we want to look like him. He does look like he gives himself a haircut doesn’t he? His friend McMegs also has an awful do, may be they give each other haircuts and revel in their rebellion against licensed barbers/stylists.
The Bearded Blogger
Maybe it’s time for modern economics to go the way of alchemy and phrenology?
Cluttered Mind
@Hunter Gathers: I think that’s the problem. They ARE doing what they consider to be their jobs. They think they’re doing what needs to be done and are totally absorbed in their own delusions of omnipotence.
beltane
My grandmother, still alive and lucid, was born in 1914 when Tsar Nicholas and Emperor Franz Joseph were seemingly safe on their thrones. Maybe today’s elites should consider that by working to liquidate the middle and working classes, they are dooming themselves to obsolescence. Nothing lasts forever, not even the reign of our Galtian geniuses.
Wouldn’t it be more than a little amusing if the 20th century paradigm began to unravel in the Balkans just as the 19th century one did?
Todd
@Mark S.:
Just call us Japan II.
The lesson to future historians (if there are going to be future historians) is that you don’t take your economic gains and plow them into an ever ballooning cache of investments in non-productive realty or an overequipped military with a bloated budget. You put it into infrastructure, you improve your human capital. You build lasting institutions, you clean up, you engage in “blue sky” scientific research.
I look at photos of Davis-Monthan and shake my head at the pity of it all. I look at the consumptive, reckless lifestyles of the MOUs and wonder why they can’t just pay their taxes and shut the fuck up.
The Bearded Blogger
@Baud:
There’s a better solution, but it involves making bankers poor and stopping the practice of money hoarding so it’s hard to put in practice:
en.wikipedia.org/wiki/Bernard_Lietaer
en.wikipedia.org/wiki/Ellen_Brown#The_Web_of_Debt
Metrosexual Black AbeJ
@The Bearded Blogger:
A friend of mine has said that to me for years…I’m actually not sure.
David Koch
I knew you’d puss-out.
Gimme back my money!
The Bearded Blogger
@Metrosexual Black AbeJ: A good critique of modern economis is Schumacher’s “small is beautiful”. In essence, the basic assumptions of modern economis (e.g nature provides infinite resources) are wrong, which means playing around mathematically with corollaries is just mathsturbation.
Lurking Canadian
@Baud: The hypothesis is that if the Fed announced a new, higher inflation target, and double-dog swore not to raise rates, money would start burning holes in the pockets of those who have it after another round of QE.
As I understand it, economic theory right now predicts that the interest rate should be around -7%, if monetary manipulation is all there is. That being a trifle difficult to achieve, they need to get creative.
Maude
@Baud:
The prices of everything would skyrocket.
The wages would not go up and people would be up a creek.
Our problem is the Republicans in Congress blocking any Obama proposal that would help people in this country. No big infrastructure projects, No reversal of the offshore tax. No helping the states. It goes on and on.
NJ Christie cut the welfare cash allowance that was $149 a month. He cut day care so that women who do get jobs have No day care. He is an awful govenor.
They want Obama to lose and that is all they want.
Romney represents the class system in the US. It’s not based on bloodlines, but money. Thank you Ronald Reagan.
The Bearded Blogger
@Mark S.: Inflation is actually good if the problem with the economy is concentration of wealth and money-hoarding.
Wealth without work is one of Ghandhis seven deadly sins. As long as the fact that you have money makes you have even more, we are screwed.
(another of Gnadhis deadly sins is worship without sacrifice, those two alone cover the two wings of the modern GOP)
David Koch
@beltane: I blame Rahmsputin for that collapse.
Metrosexual Black AbeJ
@David Koch:
I’m only trolling someone if they’re asking for it. Matt tore the austerians a new one, so my correct response is “respect”.
Anoniminous
@Maude:
When the house is on fire you don’t worry about the leaky plumbing.
Martin
Inflation only benefits employment if wages rise with inflation. That doesn’t happen in this country due in part to dipshit policy like having to convince Congress to manually intervene in the minimum wage – which the GOP doesn’t even believe should exist, and due to the cost of healthcare inflation sucking up all the money that would be available for wages. We haven’t seen any evidence that wages will keep pace with inflation in, what, 3 decades now?
I agree it’s good to rattle the money hoarders, but it’s a real gamble whether it’d help any of us, or just leave everyone with $8 gallons of milk and the same shitty paycheck.
Maude
@Anoniminous:
I don’t understand what you mean.
piratedan
@Todd: they got Emperor-itis, they not only want to own and rule the world, they want to be adored too. It’d be different if they gave a shit about the trains running on time or getting the vegetables to the table, but that’s why they hire us little people to make sure that shit keeps on keeping on. I’m afraid that we’re going to devolve into a theorcratic fascist state because for some reason these asshats never equate what’s good for the people is also good for them. They’re locked into this zero sum mindset where the one with the most toys wins instead of realizing that if everyone has toys, more people are happy.
J. Michael Neal
@Martin: No. Wages can go up with inflation even if no one raises the minimum wage. The important question is whether or not labor markets get tight. If they do, wages will go up no matter what you do with the minimum wage. If they don’t, then raising the minimum wage won’t actually help you raise overall wage levels. There are very good reasons to have the minimum wage and to raise it, but that’s not really one of them.
So, creating inflation will help raise wages to the extent that it causes hiring. Whether it will is a more complicated question of what the underlying cause of weak labor markets are. Right now, there’s a lot of evidence that it would help.
burnspbesq
Dude, you really need to lock up your inner asshole and lose the key. What would you expect to gain by doing that?
PeakVT
Martin Wolf semi-fisks a German finance official.
Omnes Omnibus
@burnspbesq: Since he didn’t do it, why are you worried about his temptations? I was tempted to harm the slow-ass driver in front of me on the way home today, but I didn’t do that either.
Anoniminous
@Maude:
Very superficially:
Debt that cannot be repaid will not be repaid. Right now the global, not just the US’, economy is tittering on a Greater Depression style collapse.
So there’s two main choices:
1. Continue as we are and eventually cratering the US and global economy
2. Have the Federal government print money and use that money to stimulate economic activity through a “Newer Deal.”
#2 may increase the inflation rate (leaky plumbing), although it’s not a sure thing, and a wee bit of inflation is vastly better than another Great Depression (house on fire.)
Anoniminous
@J. Michael Neal:
Remember the “US” labor market includes 2 billion people in Asia willing to work for the equivalent of $15,000 a year. They can do quite well on these “poverty wages” by US standards because their Cost of Living is equally low.
Steeplejack
@Anoniminous:
Not just in Asia. Minimum wage in most states is under $8.00, which puts you right around $15,000 a year–if you are “lucky” enough to work full-time.
Tokyokie
@The Bearded Blogger: Hell, commerce without morality would cover all of them.