This Year, Change Your Mind Oliver Sachs, New York Times
Device mimics complex bird-song BBC
Chinese Intellectual Property Acquisition Tactics Exposed Slashdot
Japan population shrinks by record in 2010 Associated Press (hat tip reader May S) versus Contrary to the NYT’s Assertion, Japan Does Not “Face a Looming Demographic Squeeze” Dean Baker
The naked truth about scanners Politico (hat tip reader May S)
Computers That See You and Keep Watch Over You New York Times
What about those Option ARMs? Calculated Risk. Richard Smith notes:
Revisiting that old CS graph about Option ARMs. The old CS graph had a peak rate of $20Bn/month, the new one peaks at $15Bn/month or so. CR’s comments about a) loans having defaulted already, or b) having been modified, or c) having the recast delayed for another 5 years, imply the actual schedule won’t be quite so big, but anywhere near $15Bn/month is going to be a blow to anyone on one of these schemes I would have thought, given the way the outgoings increase once the loan is amortizing. Really we could probably do with a bang up to date graph.
Pseudorandom Financial Derivatives Alea
Public Workers Facing Outrage as Budget Crises Grow New York Times. The article dutifully mentions the factoid that critics try to deny, that adjusted for educational requirements (higher on average in the government sector than the private sector), public employees, even the with the push from the widely-hated teachers’ union, do not appear to be overpaid:
A raft of recent studies found that public salaries, even with benefits included, are equivalent to or lag slightly behind those of private sector workers. The Manhattan Institute, which is not terribly sympathetic to unions, studied New Jersey and concluded that teachers earned wages roughly comparable to people in the private sector with a similar education.
But what conveniently lost is….what exactly blew a gaping hole in state and local budgets? Let’s see, a big fall in tax receipts, mainly due to the fall in housing prices and the rise in unemployment, which were both the result of the financial crisis. But no, let’s not assign any blame to the plutocrats or their political operatives, let’s focus on the workers instead.
U.S. Seeks Chief For Financial Consumer Agency Wall Street Journal. Of course, as soon as any nomination process starts, if Warren is not the choice, she becomes a lame duck, which presumably is the point of floating trial balloons now.
Individual losses in a banking crisis have long-lasting effects on expectations and behaviour Shannon Mudd, Konstantin Pashev, and Neven Valev, VoxEU
Interview with Gary Gorton Federal Reserve Bank of Minneapolis (hat tip Richard Smith). From December, but I didn’t see this getting the attention it deserves.
Antidote du jour:
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Steve Waldman rings in the new year:
Those who overconsumed have mostly faced consequences for their misbehavior — they are either deeply in debt, or they have endured foreclosure or bankruptcy. But the people who invested absurdly, especially “savers” who lent money but permitted themselves ignorance and indifference to how their wealth would be mismanaged, have not suffered the costs of their recklessness. Instead, they have been almost entirely bailed out. It is lenders and investors more than any other group who determine the patterns of our macroeconomy. There are always people willing to overconsume or gamble on foolish enterprises. We do and must rely upon those with resources to steward to ensure those resources are used wisely. They did not, and their recklessness has brought us to catastrophe. But rather than condemn them for negligence and permit their claims to be appropriately devalued, we applaud them for “prudence” and let government action be bound by commitments to sustain their destructive and ridiculous claims. You don’t counter that sort of villainy with technocratic arguments about liquidity traps. You point out that the motherfuckers who are calling themselves prudent, who are blocking both writedowns and government action that might risk inflation, are hypocrites and thieves. You state clearly that their claims are illegitimate and will be written down one way or another, unless we can generate sufficient growth to ratify them ex post, which would require claimants to behave less like indignant creditors and more like constructive equityholders.[my emphasis]
Steve Randy Waldman, “Hangover theory and morality plays”
http://www.interfluidity.com/v2/1004.html
I found myself tearing my hair over that NYT article on ‘those goldbrickin’ public employees’ and another in the same issue. The way this particular article was slanted was . . . slimy, that about does it. A teacher used as a scapegoat for the issue cited for the invective she took in the leading paragraph—then never mentioned again, nor given a chance to tell her side of the budgetary issue. There’s a brief mention in the article (which would be inside the fold) that mentions in passing ‘no one’s blaming Goldman’s in New Jersey’ but the article then goes on to give a mouthpiece to working class anti-unionists. No mention of how many of them there are. No rebuttal.
This is what class warfare looks like as propagandized by The Man’s Media, picking a fight between have littles and have nots while the have it all are never brought into the picutre, nor anybody asking a relevant question.
The other article is even worse in its way. There, the lack of entry level jobs for educated Sourthern Europeans is profiled, with the leader a highly educated and articulate Italian who can’t get paid work. Blah-blah-blah, the issue is raised in Italy, Spain, et. al. with another well-educated woman going overseas for work. Why the problem? Well, the article even says why: Those neoliberal ‘flexible employment’ arrangements pushed through ten years ago that allow European employers to used no-benefit, no/low-pay ‘faux jobs’ for young workers “because of all those ‘high costs’ of regular employees” like pensions and health levies. So the young in these countries are on non-employment permatemp jobs where they’re shed after a few years for the next cadre of same. The article even says this. But what is the article’s slant?? “Anger is building at those older employees hogging full-time jobs and the union bosses who [fill in the smear].” Not at the politicos and shilonomists who pushed for those faux jobs but at the unions who had them shoved down their throats trying to hold on to existing wage and benefits for everyone. So the problem isn’t the bosses it’s ‘those selfish existing employees who won’t take less so the newcomers can take less too.’
These two articles paired in the first Sunday NY Times of the year are as blatant as a dead canary in a cage: this will be the year the political class takes dead aim at union jobs period, starting with public employees because those are the ones that said polical class can fire directly. It’s a very worrisome sign but hardly a surprising one: the megarich are NOT going to let this crisis go to waste, but having already robbed the public to stay rich they are now going to use the pissantry of the political class and the lever of public governance near-bankruptcy to break the wage-and-benefit floors which these union jobs have benchmarked. Full on class war isn’t coming, _it’s here_. And all the working class can seem to bother to do in response is channel surf. Can’t Do Nation.
“Public unions have had no natural adversary; they give politicians political support and get good contracts back,” [Fred] Siegel said. “It’s uniquely dysfunctional.”
Damn straight, Fred!
Marie Corfield, the New Jersey teacher profiled at the beginning of the NYT article, is not mentioned again … but nor does the article explore in depth the long trail of abuses, many emanating from the education sector, which have led to New Jersey’s confiscatory property tax rates.
Did you know, for instance, that New Jersey was the origin of the national I&R (Initiative and Referendum) movement, then supported by none other than AFL founder Sam Gompers? Back then, the target of I&R was Standard Oil and other trusts.
But by the 1980s, the social pyramid had inverted. Taxpayers wanted I&R to limit the out-of-control public sector, but public employee unions twisted arms in the N.J. legislature to defeat it. Who needs increased democracy, when there’s turf to protect?
http://www.iandrinstitute.org/New%20Jersey.htm
One of the targets of NJ’s I&R movement in the 1980s was a massive expansion and equalization of public school funding ordered by the N.J. Supreme Court in its notorious 1973 Abbott v. Burke ruling. In a nutshell, the decision sought to expiate liberal guilt over de facto racially segregated urban schools by throwing huge gobs of money at them. An income tax was implemented in 1976 with the promise that it would solve the educational funding issue — but it didn’t. More court ukases led to a $21 billion capital program of school construction, passed by the N.J. legislature at judicial gunpoint. Again, so much for democracy!
As it happens, the N.J. constitution requires voter approval of debt issues. And voters weren’t about to approve the court’s exorbitantly-priced, pie-in-the-sky program of scholastic palaces in burnt-out cities. So again the ward-healing hacks in black stepped in — never mind the ‘rule of law’:
Thanks Richard.
Always nice to read a post that sums up my feelings exactly and saves me the time to post my own.
p.s. — ‘Sui generis’ — N.J. Supreme Court
Ha ha, ol’ Huey Long used to say that about hisself.
Throw in a little dog Latin to mystify the rubes; works like a charm!
Yes, our sleazy banking ‘elites’ trashed the economy of our wonderful country and have been permitted, so far, to get away with it, and now those same elites are working their PR brainchild to have us sub-consciously link the blame to the public unions.
Let us just point out that the banking cohort that got us into this debacle tends to vote to the right, and the public unions tend to vote to the left. Every time the banking elites can get rid of a teacher or other public worker, they are probably getting rid of a left-leaning voter. All this scapegoating of public workers takes the attention off the banking elites, and helps right-leaning party-building
Re the Slashdot article. The interesting thing in that snippet was not the Chinese finding ways to pilfer other’s technology for their usual hegemonous reasons, but that no US company was mentioned. In my experience, the US produces a lot of smart scientists and engineers, but a huge chunk of them are being wasted in the intellectual sinkhole of the MIC. So if you are concerned about “restoring America’s technological competiveness”, please have cutting the military budget by 90% on your to-do list.
That’s right. And add to that all the “quants” who went onto Wall Street, the GMO/biotech rathole, and many others.
To reapeat a characterization I’ve made before, the Krmer Rouge has nothing on today’s corporatization of the universities, of science and math, in terms of vaporizing intellectual potential. It’s destroyed as surely as if they shot them all.
This is worse in a way, however, since the potential talent is perverted into “talent” and put to aggressively malevolent use. In that case, it would indeed be much better if they just ceased to exist. We need to rethink our whole public investment in “education” now that’s it’s been turned into a corporate weapon against us. I just wrote a post about that a week ago.
http://attempter.wordpress.com/2010/12/24/what-does-the-class-war-mean-for-research-and-development/
As for the concept of IP itself, by now that’s clearly worthless and harmful to the people, and it’s a no-brainer that we should reject it as a principle and in policy. The individual inventor who makes good from a patent or copyright is another American Dream myth. In practice, by now all innovation which still occurs is a cooperative effort best enshrined as a commons. In practice this collective wealth is always stolen. In practice only the rentier rackets benefit. IP is a crime. Again, the concept itself is a weapon against us. (Look at how everywhere these proposed IP treateies are really stalking horses for censorship, police state expansion, using the courts as corporate assault weapons, and as the clear dividing line for all government policy:
proprietary = something to be given tyrannical powers;
non-proprietary = something to be wiped out;
The Seed War the pivotal example. There’s that biotech rathole I mentioned above.
That’s “Khmer” (and “repeat”).
Why in the US do we have people with scientific and technological talent entering the MIC or Wall Stret? I believe one of our political parties realized they could use goby funding and tax subsidies to swell their own ranks. My guess is that if you take math/science oriented 21 year old American college grad and have a good job slot for them in basic research at, say the old Bell Labs-style corporate research, or maybe basic medical research through the NIH, then you are probably more likely to produce a left-leaning voter. If you can take the same science/math grad, though, and offer good positions only in Wall Street firms or tech companies with virtually all their business from the US military, you are probably more likely to produce a right-leaning leaning voter.
One of our political parties has figured out how to use gov funding and tax subsidies as a way of procuring voters for their party.
That’s a good example of how “left” and “right” are no longer worthwhile categories to describe our situation. Those examples don’t really refer to political ideology, but simply to whether one thinks the point of cooperative society is cooperative benefit, or instead for parasitic rackets to monopolize that cooperative production.
But as you say, the system tries to indoctinate its scientific cadres in the latter. I suppose they’re particularly susceptible to childish Randian lies at the same time they’re increasingly forced to grovel and lick boots for funding.
“…the GMO/biotech rathole…”
Heh.
How is cutting the MIC going to restore our technological prowess? A major reason why so many American scientists/engineers go into the MIC is that those are the only jobs available for them, as work that requires a clearance can’t be offshored or done by H1B/L1 guest workers.
And the other side of it is that a lot of the stuff the MIC does is actually pretty cool/interesting.
The work may often seem “cool” but it’s also so pointless. If you possess any perspective on life the latter must start to mean more eventually. As for the relation between ending the MIC and sci & tech competitiveness: If there were no MIC there would be nowhere for homegrown sci/tech types to escape from H1B and other imports courtesy of our beloved corporate overlords. You would then get a lot more pressure to end stuff such as this. Further, the culture would be different than it is now. Why should you and your friends spend your time thinking of ways to make this country energy self-sufficient when you’ve all got well paying, secure, “interesting” jobs evaluating explosive detection sensors. Why hassle with getting funding for the same reasons?
U.S. Seeks Chief For Financial Consumer Agency – Wall Street Journal.
Obama better take a good look at who is being proposed as a potential leader of the the FPB. He should table his subjective approach to U.S. fiscal policy, and recognize the implications of commissioning an individual who does not have a good sense of how the financial ecosystem functions (regardless of experience or age).
This could either be exactly what we need, or a massive setback for us all.
This is a Ph.D. level question: How do they count population in Japan?
If you are out of work, but not actively seeking work, you are not included in the calculation for unemployment.
In that case and if you are not actively living your life, does the Japanese government then exclude you from being counted in the living population?
At least in the 2 big states I’m familiar with, Texas and CA – a public pension is in lieu of Social Security. Even for people with many years of SS contributions due to private sector work there is a ‘double dipping’ penalty if one is also vested in the teacher’s pension. Basically, one is swindled.
Social Security benefits are loosely based on lifetime income subject to the FICA tax. But it is not a linear scale, it is skewed higher at lower benefit levels. Apparently this was done to provide some minimal support for those at the lowest benefit levels.
There were people who worked 30 year in public employment, earned a pension, and never paid a dime into Social Security. Then they would get a private sector job, pay into Social Security for 5 to 10 years and collect a windfall benefit because of that skewing at the lower benefit levels. The penalty which you describe was designed to compensate for the issue
If you think that is unfair then lobby your state government to pay into the Social Security system in addition to your pension fund.
Re “Public Workers…”
Academic credentials are correlated but do not entail a high salary. The problem is not that civil servants are highly educated, it is how productive they are. If someone else can do the same job for a cheaper price, or a superior job for the same price, (s)he should be given preference (Think volunteer firemen vs. professional).
Additionally, deflationary times (I.e. when one realizes that the economy and workers are less productive than expected) imply a change to a lower, but sustainable level of output. How different sectors share the burden of downward adjustment should be based on wealth generation merit order, not on political strength.
charles 2 said: “…deflationary times (I.e. when one realizes that the economy and workers are less productive than expected) imply a change to a lower, but sustainable level of output.”
There’s a built-in assumption here, which is that “deflationary times” are as inevitable and unavoidable as bad weather. This is ativistic thinking, a throw-back to a pre-modern (medieval) mentality.
charles 2 said: “How different sectors share the burden of downward adjustment should be based on wealth generation merit order, not on political strength.”
And how, pray tell, do you propose this Shangri-la be achieved? Are you suggesting that “free” markets can bring about this desirable outcome?
Did it ever occur to you that perhaps what you call a “pre-modern” mentality is one that fits the real world today better than some of our more “advanced” economic theories?
What is sustainable? That is the question. It appears the current system and current level of spending is not sustainable, which doesn’t mean the alternative you might propose would be.
“Value” is a judgment call. And I believe most people do not feel they are getting good value for the money spent on public employees’ salaries and benefits. The more we learn about the extent of those salaries and benefits, the more that view tends to be reinforced. Furthermore, there is an increasing sense that government is not even performing essential services very well. Witness the recent snow-clearing snafu in NYC. Add to this monies spent on studying fruit bat mating habits, or even local traffic light timing studies, and the result is an increasingly pissed off taxpayer.
Ordinary private-sector citizens have had more than enough, and you calling them Neanderthal (OK, that is hyperbole. You used the word “medieval.”) is hardly going to predispose them to reconsider your own view of the world.
Pre-modernism brought us fairy tales like creationism and the Garden of Eden.
Modernism brought us fairy tales like the invisible hand.
So while I might not go quite so far as to say that “a ‘pre-modern’ mentality is one that fits the real world today better than some of our more ‘advanced’ economic theories,” I certainly would agree that a pre-modern mentality fits the real world just as well as some of our more advanced economic theories.
Where modernism really shone, however, was in the physical sciences. Even though Newtonian physics got much wrong, it nevertheless got enough right so as to greatly improve, at least temporarily, man’s material existence on this earth.
But man’s ability to control his material existence may be coming to an end. There are indications that man may be pushing up against the limits of natural resources and the biosphere, not to mention human nature.
Could John Donne have gotten it right when in 1611 he wrote in An Anatomy of the World:
‘Tis all in pieces, all cohaerance gone;
All just supply and all Relation:
Prince, Subject, Father, Sonne, are things forgot,
For every man alone thinks he hath got
to be a Phoenix, and that there can bee
None of that kinde, of which he is, but hee.
Modernist fairy tales like endless growth and flying cars.
The fairy tale of growth is behind the problem of municipal worker benefits. The hope is for growth to restart tomorrow. Once it ‘gets going again’ things will ‘get back to normal’ and the workers will all be happy again.
NOT!
It’s now growth for the few and to hell with everyone else. Social Darwinism in the form of the neo- liberal political economy works against the counter- cyclical forces that are actually keeping the economy from plunging.
It really is different this time. Municipal pay/benefits are an artifact of sprawl which benefited workers in both suburbs and cities as wells as states and counties. The form that the struggle will take is going to be finding a profitable replacement for sprawl.
Peeps just want to keep clinging to sprawl which makes matters worse. The outcome is more dog vs. dog.
steve,
The problem doom and gloomers like you, charles 2 and Jim Haygood have is that the growth has been no fairy tale. Modernism has had an almost 200-year long record of delivering an ever increasing abundance of human goods—-increased comfort and reduced pain and sickness.
That’s what you’re up against, plus the fact that pessimists have been making these apocalyptic predictions since the beginning of recorded history.
Another problem you doom and gloomers are up against is that a lot of people like those human goods. I have no idea how broad the appeal of asceticism and flagellation might be, but I suspect it’s rather limited.
Someday people will realize that most progress has come despite the depredations of the elitists, not because of their Galtism. But time is running out for that. The panics (1988/1999/2006) are not only accelerating in their occurrence over time, but they are also relying more and more on indebted future generations farther and farther out. Punch a teacher today, the current scapegoated target of totalitarianism’s five minutes of hate. Yeesh!
http://www.bbc.co.uk/news/science-environment-12070732
Polar bears are the only animals that destroy spy cams. “What’s this? Can I stand on it?”
I seem to remember elephants destroying spy cams also, on a BBC documentary.
@pseudorandom derivatives
Can anybody translate this into English? I have no doubt it works in the computer lab. But if it was ever used in the real world, I have no doubt it would vaporize whatever it came into contact with like some Death Star.
But the quants would end up with massive bonuses.
Math confers a false profundity on utter nonsense. It’s like looking at Chinese. If you didn’t know better, you’d think somebody would have to be a genius to speak and understand all those symbols. How can a mere mortal makes sense of it? Isn’t it best to leave it all up to some priestly class of God-like intelligences?
And then if somebody translates it for you, it says “I’ve got to take a shit man, where’s the fu-king bathroom?”
bowahahahahahah
craazyman said: “Math confers a false profundity on utter nonsense.”
Along these same lines, I started reading Stephen Toulmin’s Cosmopolis: The Hidden Agenda of Modernism a couple of days ago. Here’s a quote that jives with your comment:
Hence the ambiguity over Descartes’ priorities: In his own mind, and those of his readers and successors, these two sides of his program—-are not clearly distinct. He may concede in theory that his arguments give his scientific conclusions no more than moral certainty. But (in Galieo’s words) he did not doubt that “the Book of Nature is written in mathematical symbols,” and he clearly assumed that mathameticians were able to decipher this Book univocally. Presumably, he had not hit upon one possilbe way of reading these symbols: if right, his method of cryptanalasis was extended to other fields of inquiry, one might reformulate those sciences, too, in terms of new concepts, whose clarity and distinctness yielded a new theory, with the same “self-guaranteeing” character as Euclid’s geometry.
It’s amazing how the physical sciences have evolved, but the social sciences, with economics being the most notable example, are still stuck in some 400-year-old paradigm that was thoroughly discredited in the first half of the 20th century.
Might I point you towards Bruno Latour’s 1999 book Pandora’s Hope? I find his kind of social science/sociology quite refreshing.
I’m amazed at how much gets published on quantitative
finance. There can be upsets when statistical models
are applied incautiously, for example Li’s Gaussian
copula model in estimating correlation risk in
asset-backed securities.
I think this is a great quote:
“Essentially, all models are wrong, but some are useful.”
(statistician George Box)
Today, I first read about Autoregressive
conditional heteroskedasticity (or ARCH) models,
used in modeling volatility in financial data.
There are many citations on ARCH and GARCH models.
Dean Baker in “Contrary to the NYT’s Assertion, Japan Does Not “Face a Looming Demographic Squeeze”” assumes 1.5% productivity growth to make the case that population decline is a good thing. But the question is can productivity grow when the number of workers is declining? Productivity is a function of capital growth, maintenance, and replacement but someone has to make and service the capital and Ben’s non-printing money creation just won’t cut it for this purpose.
http://www.buzzfeed.com/melismashable/the-most-beautiful-starfish
The first one is just too clever to believe.
Whenever you see phrases like “demographic crisis”, “aging population”, and “shortage of workers”, you’re seeing employer-class propaganda. From the employer class point of view, large numbers of poor young people is a good thing, because they work hard and cheaply; large numbers of prosperous old people are a bad thing, because they work less hard and for more money, if they work at all. They want old people to die without fuss and be replaced by cheap young people (but they don’t want to die or be cheap themselves).
I want to prosper, work less, and grow older. From my point of view, older people, higher wages, and more land per person are a *good* thing.
Re Dean Baker on Japan’s demographic squeeze (or absence thereof, as young Dean fancifully claims) — Japan publishes some handy statistics which parallel the figures described in the NYT article:
http://www.stat.go.jp/english/data/handbook/c02cont.htm
The same agency states a Japanese labor force participation rate of just under 60%. So I constructed a spreadsheet, taking the 15-64 age cohort and multiplying by 0.6 to estimate the employed population in 2010 and 2050. The retired population is straight from the site linked above.
I assumed an average current salary of US$ 50,000 (although the absolute amount doesn’t matter) and retirement/health benefits of $35,000 (70% of salary, per Dean Baker’s assumption). AND, I assumed 80% growth in salaries over the next four decades, thanks to the rising productivity that Dean Baker stipulates.
Here are the results. In 2010, a Japanese workforce of 38.1 million, salaried at $50,000, receives $1.905 trillion in income. Meanwhile, 23.1 million retirees (divided by 1.5, assuming that half are couples and half are singles) with household benefits of $35,000 receive $539 billion in transfer payments. If these benefits were all paid from individual income tax, it would imply a stunning 28.29% overall (not marginal) tax rate just for old age benefits — never mind interest!
In 2050, 31.1 million workers salaried at $90,000 pull in $2.797 trillion in income. Boom times, right? Not so fast — now an army of 39.6 million retirees (again divided by 1.5 to reduce it to households) pulling in $52,500 in benefits (per Baker’s assumption of a 50% increase from 2010) consumes $1.386 trillion in transfer payments. Despite the 80% growth in salaries, this now implies a crushing 49.55% OVERALL tax rate on the luckless workers.
So here’s how it shakes out for a 20-year old Japanese, starting his career this year and retiring in 2050 at age 60. (Women are still squeezed out of the Japanese workforce by their late 20s to get married; very few of them ever work full careers in Japanese companies. Thus, ‘his.’) His gross salary increases from $50,000 to $90,000, but his net income after old age tax only rises from $35,850 to $45,400 over four decades — meaning that fully half his income is going to support the elderly by 2050.
Add in the taxation required for debt service, and what Dean Baker is really proposing is for Japan to mutate into an Asian Sweden, with near 100% tax rates and all necessities provided by government.
Is productivity really going to keep chugging uphill at 1.5% annually when most of the fruits of income growth will, by social necessity, be confiscated for the common good?
I reckon not! But it’s mighty hard to talk sense into Obamunist ideologues …
I can’t for the life of me figure out what your beef is, unless you are bemoaning the fact that fewer workers in the workforce tilts the supply/demand balance in favor of the workers and away from the rentiers.
Declining population never works to the benefit of rent-seekers.
Historically, the rentiers have been quick to replace “free market” labor policies with forced labor policies in times of decling population. Free markets, when it comes to labor at least, are something that rentiers favor only when the supply-demand situation works in their favor.
Alright, I’ll spell it out for you:
I’m saying (as another commenter did above) that Dean Baker’s assumed 1.5% annual productivity growth ain’t gonna happen.
Rent-seeking is entirely beside the point.
How can you be so sure that “1.5% annual productivity growth ain’t gonna happen”? Maybe it will. Maybe it won’t.
Then you state that “Rent-seeking is entirely beside the point.”
But the distribution of resources within a society is the very heart and soul of politics. And this distribution is hardly “beside the point.” If the distribution is perceived to be fair and equitable, this greatly enhances social capital, which pays huge dividents in the form of material capital. Moral capital and material capital do not operate independent of each other, regardless of what some antiquated, discredited economic theory stipulates.
Jim Haywood says: “Is productivity really going to keep chugging uphill at 1.5% annually when most of the fruits of income growth will, by social necessity, be confiscated for the common good?”
From: http://www.taxfoundation.org/publications/show/151.html
Look at this these tax brackets from 1931 to 1951.
Year__Tax Rate Over $4000 Highest tax rate For Income over
1931_________3%___________25%________$100,000
1932_________8%___________63%_______$1,000,000
1936_________8%___________79%_______$5,000,000
1941________17%___________81%_______$5,000,000
1942________25%___________88%________$200,000
1944________29%___________94%________$200,000
1946________26%___________91%________$200,000
1951________27% ___________91%________$200,000
1952________29% ___________92%________$200,000
1954________26% ___________91%________$200,000
1964_______23.5%___________77%________$200,000
Note : The rates stayed the same between the years shown.
Gee, a lot of the fruits of income growth were going to the majority during those years! Looking at those rates, would you have predicted that the US economy was in a boom in 1946 and would be in a boom for decades? What would be your prediction for productivity for the nonfarm business sector?
Here is a chart at the Bureau of Labor Statistics.
http://www.bls.gov/lpc/prodybar.htm
Years________Average Annual Percent Change
1949-1973_____________2.8 Hey not too shabby!
1973-1979_____________1.1 Gee the price of oil dinged the economy!
1979-1990_____________1.4 Could this rise be due imported parts?
1990-2000_____________2.1 Gee imported parts were increasing.
2000-2007_____________2.6 Gee imported parts and low tax rates
2007-2009_____________2.3 but still couldn’t reach 1949-1973 levels
Sir, I think you may have taken one too many economics classes.
I appreciate your basing your opinion on best estimates and calculations but you answers must be ignoring too many variables! And unfortunately you seem to have internalize the propaganda over the last 30 years.
Oops, I was very clear about the chart. That chart at the BLS shows changes in productivity for the nonfarm business sector.
This is pretty funny:
http://crookedtimber.org/2011/01/02/drought-fire-floods-and-now-secession/
From the Gorton interview:
” If you put a dollar in your checking account and the bank has to keep 10 percent of it on reserve, they lend out 90 cents.”
Wrong. Loans create deposits.
Resp,
Don’t go getting all MMT on us now. Next thing you know, you’ll be saying deficits fund taxes.
Oh, wait! They do.
Yes!, Benedict here is another Ivy Leaguer (Gorton) that needs an updated macro course for his transcript.
Matt Taibbi deconstructs the recent WaPo piece on MERS: http://bit.ly/hhB9Tz
@Gary Gorton interview
This form of thinking doesn’t seem like progress. The entire notion of “information assymetry” is really hard to swallow.
It’s not credible to me that buyers of securitized sub-prime and other toxic loans could not deduce a priori that they were buying trouble. It’s not credible that they didn’t have all the information they needed to know they were heading for a brick wall at 70 mph. It’s not credible that “all the sudden” these securities became information sensitive and lost their luster.
What’s more credible is that either they refused to look at the wall coming or they thought they could bail out of the car before the crash — DB Cooper style.
http://en.wikipedia.org/wiki/D._B._Cooper
And it’s not credible that any bond produced by some future form of wanton lending can ever be information insensitive without there being an implied social cost that’s captured by private marketmakers in the form of profit until the inevitable blow up.
It seems to me that this man is still stuck in the jargon of his discipline, which seems implicitly committed to the plausibility of a financial system in which responsibility is stripped from action in a systematic way, and where the strippers extract wealth from the strippees. This is what securitization is and does. And he wants to try to resucitate as if it weren’t some dead Frankenstein. It’s a monster, that’s all.
If there’s anything this endless stream of boom-and-bust bubble cycles teaches me, is that you keep dancing while the music’s playing.
Suspension of disbelief is a renewable resource.
Hello Liberals,
You have destroyed the country, it is all over, you have got your wish and made everybody dependent on the Federal governement. Thank you very much.
We are now a banana republic thanks to you, shortly we will not be able to defend ourselves from foreign aggression,the only thing the US Consitution says the Feds should be allowed to do, ( not health care, not education, not food stamps, not corporate subsidies)so good work, you got your wish.
Soon the end game will begin.
Before the end begins please Google Cloward-Piven.
You deserve applause, with the help of union thugs and gutless politicans you have succeed to pile drive the US into the ground just like Stalin said you would do.
Good luck fending for yourselves when the system known as the US Government collapses.
Actually, what’s driving the US into the ground is (1) bloated military budgets and pointless wars in Asia, (2) treasure being leached off the real economy by the FIRE sector, due to “free” market reforms started in the Reagan era and continuing thereafter, (3) “free trade” treaties which have led to the gutting of our manufacturing base.
(1) and (2) are the handiwork of so-called conservatives. (3) is the handiwork of conservatives and neoliberals.
The idea that labor unions are at all responsible is laughable considering the decline in their numbers and political sway.
I would suggest that (1) can also be laid at the feet of the Israel-first neoconservatives who want perpetual war with Islam.
Hello Dave Trapped in NYC,
“Liberals” (you mean Democrats?) did not do it alone.
Unless you think “unfunded tax cuts”, “unchecked military spending”, “more ‘free’ trade with eco-arbitraging/non-floating currency countries”, and “gutted finance regulation” just passed themselves.
And that would make you an f’ng idiot.
There are more enemies within the US that threaten life, liberty, and the pursuit of happiness than any from the outside. Thanks to the rule of law, we have, despite ourselves, amended things to address them. Fair public/private partnerships may still bring sustainable opportunity to the distant corners of this greed-ravaged land.
@ Gary Gorton
Agree with Craazyman above. Gorton is nothing more than an apologist for the securitization swindle. You do not have to be a lawyer to recognize the frauds we went through. More and more of it comes to light even with Government and Press neglecting the issue. NY trust law for once, or the Clayton Due Diligence hoax. “Information asymetry” is a very nice word for blatant fraud.
As Gorton seems to have no opinion on Real Estate, he certainly will not have in law or morals – not part of an economists job to measure.
Seems to me Hubert and Craazyman are reading something into Gorton that isn’t there. He’s not operating as an apologist for any “swindle” when he separates the question of whether we need a well-functioning securitization market from the question of how to police the thieves who seek to game it.
IMO that Gorton link (together with the links to his other recent comments at the end of the interview) is one of the most useful items on the financial crisis that Yves has put up – and that’s saying quite a lot. It’s a nice companion piece for anyone reading Chris Whalen’s book.
Hubert,
Re: Gary Gorton
Gorton says very little, which is why its posted on the Minn Fed website. I agree he’s an apologist for securitization practice which is born out when he states the shock that caused the crisis was the failure of home prices to keep appreciating, he then downplays the integral rile that excessive leverage played as a cause and then states the fact that the system imploded was that people started catching on to the fraud (i.e. people figured out that the collateral underlying the repo system was overvalued as it was poorly underwritten and demanded more ). But he purposely fails to connect these ideas is a snake oil salesmen. He’s no dummy. Any system that needs an asset to keeping growing or implode is one with major structural problems, in our case predicated on fraud. Any system which allows the underwriter of loans to sell them to a SPV and, in doing so, insulate themselves from the consequences of predictably poor underwriting is to invite fraud. WHy would anyone making money on this process care about good underwriting, its not in their financial interest to care, their insulated. Then when the cash streams from the loans sold to the SPV are insufficient to meet coupon obligations you advance principal, how is that sustainable. Someone explain to me how that’s not a Ponzi scheme. Off balance sheet vehicles should not be GAAP acceptable, nor should securitization. You don’t need more oversight of fraud you need to write laws that prevent fraud from occurring. Securitization, by design, is fraudulent. Gorton’s a first class apologist.
@gary Gorton
To finish my thoughts on the apologist Gorton and why economists use jargon to hide the truth from regular people and provide an illusion of credibility to the ideologies of thieves and liars. He discusses his idea that the repo market can only operate properly when no one injects “private information” about the nature of the collateral. Huh, injecting “private info”? what?
Oh, you mean when repo depositors learn that the collateral they are being offered in exchange for cash were poorly underwritten and are deteriorating by the month and predictably demand a 20% premium. You mean when they discover they are being lied to. Gorton is communicating the obvious point that a market works only for as long as one of the parties doesn’t find out that the subject matter is damaged or doesn’t exist. Next Mr. Gorton will embark on a discussion of how “private information” caused a “liquidity crisis” in the market for fairies.
ha ha. I would go so far to say the market for information about fairies is indeed more rational. I refer the interested reader to the books of Dr. Jacques Valee, Mr. W. Y. Evans-Wentz, Mr. John Keel, Dr. John Mack and the anthropological histories of the so-called “little people” of Native American cultures, including Henry Hudson’s (of the Hudson River) legendary encounter near Catskill New York in the early 1600s. There is much there of interest to the sincere inquisitor.
Yours truly,
Prof. DT Tremens, GED, NFL
University of Magonia
Center for Contemporary Analysis
I was quite remiss in not also including Mr. Patrick Harpur’s “Daimonic Reality” — a true metaphysical broad axe leveled upon the Western Rationalist World View. Just don’t read it alone on a dark and stormy night. ha h aha haha haha.
Actually the NYTimes article on states hinted at the base of the problem, the politicians make promises they are not prepared to pay for. In NJ for example the state makes big pension promises but refuses to put the money up to pay for them. (Christie chose not to make a 3.5 billion pension contribution). The 9% increase in the mid 2000s was a perfect example of giving in, and not funding. Of course everyone thought that wall street was a way to get rich, forgetting that only the house in the great wall street casino makes money, unless you talk over 40 years or so. (And even then it has worked only in the US).
Right, the problem is two-fold.
First, Politicians overpromised thinking that current income levels in the mid 2000s were “real”. Had the subprime lending never happened, the US economy would probably be at the tail end of a decade long very slow growth period and expectations would have been ratcheted much lower than they were at the height of the bubble. Asia and the Internet are profoundly deflationary on multiple levels, so the massive increase in consumer lending masked severe adjustments that needed to be made over time. Instead we got it all at once.
Second, pension and health promises don’t have to be paid for “today”. But it’s an exponential function, and we are now in the beginning of the hockey stick. If you want to see something really scary, look at nominal social security payments estimated for 2030.
Public Workers Facing Outrage as Budget Crises Grow:
Modern life generates new levels of nonsense in its government structure as public service morphs into a predatory lifestyle dependent on expanding economic growth for its financial life. Building roads,teaching children, banking regulation, military service,intelligence gathering all bind towards the same goal of greater economic growth providing the dollars necessary to expand their financial base, the ever growing government. The individual workers reflect the normal society stratum and are always just doing there jobs.
Ron says: “Modern life generates new levels of nonsense in its government structure as public service morphs into a predatory lifestyle dependent on expanding economic growth for its financial life. Building roads,teaching children, banking regulation, military service,intelligence gathering all bind towards the same goal of greater economic growth providing the dollars necessary to expand their financial base, the ever growing government. ”
Very well said! Let’s stop building roads and banks should regulate themselves, they have managed their businesses so well. ‘All we are saying is give peace a chance’, disband the military and then we won’t need intelligence gathering! ‘Hey, teachers leave them kids alone’, stop educating our children!
You write like a disillusioned boomer! :^)
Here in Sonoma after years of paving new roads to promote growth the county has decided to turn many rural roads back to gravel! The Calif educational system has used bond measures to build school infrastructure and promote greater urban growth in rural counties suddenly doesn’t have funds to pay for the continuing maintenance,pensions,salaries etc for all these,university,state college, community college and high schools, but commercial construction companies,bond issuers,unions that promoted these build outs got their money but in reality they never gave a shit about the longterm cost of these build outs nor what they would require in longterm financing.
The Northern salmon fishery has collapsed due to excessive drainage of existing water ways for commercial and Ag uses such as swimming pools in Southern Calif or massive cotton production in the Central Valley. The manufacturing cycle has gone from labor intensive to high speed robotic with billions spent of making the process faster only to see idle plants due to excessive inventory as the output is beyond what the world population can adsorbed or needs.
I am not disillusioned only tired of hearing the same nonsense and chatter from various groups promoting growth as a lifestyle as if that should be our Nations purpose. Sooner or later these endless build outs schemes generated by well meaning citizens such as yourself run into the wall of reality and produce nothing more then short term profits for a tiny minority.
First Yves goes off on the public worker pay and benefits and then presents the offerings of someone who consulted for the AIG financial products group.
This is not rocket science. The wage income pie is smaller but there are fewer people at the table. While the average pie slice gets bigger, ( read banksters and public workers ), the US economy can’t even keep up with those entering the work force.
Those in favor of maintaining the current level of wages and benefits in the face of the US unemployment rate would likely have the government pay GM to maintain a stable workforce and pay while the workers play cards.
The NYTimes piece did put a slam in on NJ freeholder politicians and public administrators who are the most engorged at the public trough.
Matt says: “First Yves goes off on the public worker pay and benefits …”
Sir, you obviously disagree with Yves. I believe that she cited data, where is your data?
You equate public employees to banksters. How many foreclosures, erroneous evictions, and fraudulent affidavits did public employees make? Banksters had outrageous increases in compensation over the last decades. What were the outrageous pay increases to public employees?
Look, I get it, you are mad as hell and looking for someone to blame! :^)
But could we please stick to some verifiable facts here?
Verifiable facts.
Peak US employment down from 145 million to 137.3 million from October 2007.
Full time employed down an additional 5 million.
From 2007 government employees are down 1.0 to 1.5 percent.
Total employed are down 3 percent in 3 years, with an additional 2.8 percent forced into partial employment.
US wage income down 3 per cent as paid by Medicare taxes.
http://www.bls.gov/webapps/legacy/cpsatab8.htm
Government employees felt less than 1/3 as much pain in employment.
My anger is directed not at workers but at the US debt as money debt slavery inevitable catastrophic collapsing financial cycle.
I do not even envy government employees position in the rear seats on the roller coaster train.
The Federal government, many states and localities have already instituted pension reform in the last 20 years. The unreformed pension plans, whether they be for executives, the UAW or privileged employees are an unfair burden. Even the PBGC fixed annuity is too generous when inflation is low.
Matt says: “From 2007 government employees are down 1.0 to 1.5 percent.”
Public employees generally hold jobs providing services that are difficult to eliminate or to replace. So I am not sure what the appropriate reduction in employees would be. And any discussion of cutting public safety employees will bring out the crowds to any public meeting. Reducing the number teachers gets a strong reaction.
But at a minimum there should have been rigid hiring freezes, which reduces employment numbers as employees retire, quit, or are fired. It’s not easy to reduce public employment but it is not impossible.
I live in Kentucky where some state employees have been laid off for the first time and all state employees were to be furloughed 6 days in the current fiscal year. There has been some discussion by the Ky Speaker of the House as to whether that was a good idea which kind of surprised me. KY state employees are not in unions which are allowed to strike. So I guess he has other concerns.
A better way to think about the problem of government spending is to home in on the individual programs. When times were good, we added more and more government services. All those programs have constituents who would be resist any reductions. As an example, in good times we paved rural roads and now some states are going back to gravel on those roads. There are pitfalls, a decade ago a Governor gave early release to some prisoners as a cost saving tactic and two of them killed citizens. The public was extremely angry. My candidate to cut or eliminate is the federal Department of Education, education is a state responsibility, but cutting it is going to be just about impossible because of the number of it’s constituents.
The starting point should be a freeze in funding to all federal or state agencies or departments. Social Security recipients did not get a cost of living raise this year, so why can’t government continue at last years funding levels. Then go after fat if you can find any and expect a fight.
One thing we agree on, government spending has to be reduced.
Gorton’s candor toward economists and their understanding of the structural operation of the repo/securitization markets is damning.
My reading of the following is Gorton is arguing that his fellow scientists/economists are unaware of the structure and operation of a major component of their field of study. In addition, he claims most of his fellow scientists find the effort needed “painful.”
Later he claims economists don’t even have the ability to quantify the size of the repo/securitization markets.
Other than repeating dogma, what do economists do?
“Region: Is this a preview of what you’ll be covering in
your keynote tonight [at the University of Wisconsin School
of Business Conference on Money, Banking and Asset
Markets]?
Gorton: No. I’ll try to convince people of a few things
about the crisis in my talk tonight—in particular, that the
panic is not a special, one-off event, but is due to this
structural feature of bank money that we have been talking
about. But to understand that requires doing some things
that are painful for most economists.
One thing is that you have to understand a lot of
institutional detail. It’s important to do that so you can
understand what’s really going on. It’s not that the
institutional detail per se is so valuable to understand.
We’re not consultants. But to penetrate the details to the
point that you can see the commonalities between, say,
different forms of bank money, so you can see what’s really
going on, requires an understanding of the institutional
detail which is not, I think, widely appreciated.”
One thing that I have not heard about in all the MERS mess is title insurance. I would think that title insurers would either be unwilling to insure deals due to the lack of clarity of who the true title holders is or that they would start asking for a good deal more money. Has anyone heard of a title insurer being sued or whether they are worried about liability for defective title?
Some title insurance companies are writing restrictive title insurance for REO or short sales and even normal title ins may not be as inclusive as one might think. I have been told to consider an “Eagle Policy” which does have exclusions so if you don’t know what the exclusions mean, take them to an attorney and spend $100. Eagle policies are a few hundred bucks more, but they cover a bunch of things (like correcting permit violations, setback or property line disputes, post issuance claims against title, etc.,) that a standard title policy doesn’t cover.
Yves:
One can blame the financial elite for the bubble, but one can also blame politicians for believing, and spending, as though the bubble would be eternal.
Either way, the bubble economy of the 2003 – 2008 was a chimera, a fiction. Everyone — including governments — needs to adjust accordingly.
Yes, but that’s a vicious circle. The elites buy off the government officials to run the country according to their interests — anti-union, anti-taxes, anti-regulation, anti-democracy, anti-worker, anti-safety, but with perverse incentives to reward accounting tricks, fee pumping, subsidy seeking, and loophole diving, defended by legal fictions, fine print, stealth provisions, bought judges, bought academics, FUD spreaders, and goons commissioned as police.
And while the elites know they can’t thrive in real anarchy, they know they can’t steal under a real economy defended by real rule of law. So right now we’re in that balancing act. Government, which could be a defense against the elite is their tool.
John Dean’s Broken Government: How Republican Rule Destroyed the Legislative, Executive, and Judicial Branches has the well known information on the sections on the Legislative and Executive branches being damaged by rule of the elite. The section about the courts, and the unrelieved parade of right wing dolts being put on the bench is the most sobering part.
A couple of thoughts on the public employee article in the NYT.
1. Job security is a major issue that needs to be factored in. Effectively, their jobs are essentially the equivalent of high-quality bonds with a fairly high degree of certainty. That certainty by itself is worth real money which is why historially bonds do not return as much as equities.
2. The public union leadership are about to cause a similar problem similar to what the private unions have had. Union leadership has been focused on “us vs them” without helping to ensure that there would be a viable entity to pay the bills down the road. They forgot that lifetime benefits mean that there have to be lifetime resources. The pub;ic union leadership should have been insisiting on revised accounting to make sure that pension funds and retirement medical costs were adequately funded. Instead, they pocketed their large salaries and will probably end up sacrificing their members the way that UAW and other unions did.
3. Many public administrations have serious problems with competency. My spouse is a teacher. The stories that she brings home about how her school district is managed are appalling. Companies that are run that way would be entirely out of business within a few years. There is little done to improve how teachers can function in the schools with numerous policies that actively get in the way of them doing a better job.
We don’t hear much about the proliferation of small suburban communities as a result of white flight. This creates a lot of overhead in the budgets.
NYC has cut crime rates with one police force for more than 8 million people; why does NJ require thousands of police forces?