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Monday, July 29, 2013

The Keynesian Track Record

Keynesian Economics is all the rage these days, especially since the global financial crisis that began in 2008. The basic gist of Keynesian Economics is:
"...that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, in order to stabilize output over the business cycle."
In practice, on the fiscal policy side, this amounts to calls for increased government borrowing and spending, and sometimes reduced taxation.

One important part of the Narrative for those who believe (or believe in) Keynesian Economics is that what brought the world in general, and the United States in particular, out of the Great Depression, was the stimulative effect of the greatly increased federal government spending due to WWII.

Maybe so (or maybe not), but let's consider the other side of the equation.  In 1943, during the midst of WWII, Paul Samuelson (Nobel Prize in Economics, 1970) wrote[1]:
"When this war comes to an end, more than one out of every two workers will depend directly or indirectly upon military orders. We shall have some 10 million service men to throw on the labor market. ... The final conclusion to be drawn from our experience at the end of the last war is inescapable ... were we again planning  ... to shift from astronomical deficits to even the large deficits of the thirties–then there would be ushered in the greatest period of unemployment and industrial dislocation which any economy has ever faced."
That is what Keynesians believed - that we faced the "greatest period of unemployment and industrial dislocation which any economy has ever faced."

Yet, we did "shift from astronomical deficits to even the large deficits of the thirties" (spending dropped from 43% to 14% of GDP) and what happened?  I'll let President Truman answer [2]:
"During 1946, civilian employment approached 58 million. This was the highest civilian employment this Nation has ever known— 10 million more than in 1940 and several million higher than the wartime peak. If we include the military services, total employment exceeded 60 million. ... 
"Thus, at the end of 1946, less than a year and a half after VJ-day, more than 10 million demobilized veterans and other millions of war- time workers have found employment in the swiftest and most gigantic change-over that any nation has ever made from war to peace."
Samuelson's prediction based on the Keynesian narrative simply couldn't have been more wrong.  Instead of the "greatest period of unemployment and economic dislocation" we had "the swiftest and most gigantic change-over that any nation has ever made from war to peace."

The Keynesian narrative was extended to handle this and other rather significant exceptions.  Nonetheless, for those of us who haven't swallowed it hook, line, and sinker, it looks like the Keynesian narrative explains the relationship between government spending and economic health - except when it doesn't.

References
[1] Paul Samuelson, “Full Employment after the War,” in S.E. Harris, ed., Postwar Economic Problems, 1943.
[2] Harry Truman, "The Economic Report of the President", page 1, issued January 8, 1947

60 comments:

Bret said...

I created this post to address the discussions about Krugman, who's the modern era's most vocal proponent of Keynesian Economics.

Annoying Old Guy said...

Let's also note that no politician has actually been a Keynsian, because that involves cutting spending during boom times. In actual practice, economic booms have lead to increased spending, while downturns have lead to ... increased spending. I think we can see how seriously these people take the actual theory.

In terms of former Enron adviser Krugman being someone normal people should point at and laugh, for me it's certainly been not one incident but numerous ones over the years. Let me pick one illustrative one of Krugman putting partisanship over economics.

P.S. Only one because this software gets upset with me if I do more.

Bret said...

aog wrote: " I think we can see how seriously these people take the actual theory."

Well, that's why I've said that Krugman, other than defense, has never met government spending he didn't like.

aog wrote: "...this software gets upset if I do more [than one link]."

What happens (i.e. what does "upset" mean)?

Annoying Old Guy said...

Such a comment will get moderated or junked, I'm not sure which, but it will rarely end up published.

Here's a link about Krugman mistating someone else's claim in order to debunk the strawman created by thereby.

I would point out that getting detailed and possibly esoteric economic facts wrong might be something you could overlook in a basic pundit, but for someone whose claim to fame is economic expertise, no. If Krugman isn't good at that sort of thing, what's the point of paying any attention to him?

Annoying Old Guy said...

Bret wrote "Krugman, other than defense, has never met government spending he didn't like"

Krugman likes defense spending when it's not actually defending out nation. Apparently he's an anti-utilitarian and thinks government waste is the goal, not a problem.

Bret said...

aog wrote: "Krugman likes defense spending when it's not actually defending out nation."

I had forgotten about that one. That one was bizarre even by Krugman's standards. I have to admit it made me laugh when I read it.

Bret said...

aog wrote: "I would point out that getting detailed and possibly esoteric economic facts wrong might be something you could overlook in a basic pundit, but for someone whose claim to fame is economic expertise, no."

You're preaching to the choir here. I quit voluntarily reading things by Krugman a long time ago. Though it's amazing how many of his columns people (generally friends of the left) send me to "prove" that my viewpoint on something or other is wrong. I nearly always patiently point out the numerous misleading statements that Krugman makes that made them think he was proving me wrong, when in actuality he didn't say what they thought he did. Krugman is rather a master at that.

Harry Eagar said...

You left out the explanatory fact: Americans saved $140 billion during the war and spent it all by about 1952, on houses, cars, televisions, furniture etc.

That did not happen after World War I, where the cancellation of munitions contracts did indeed lead to contraction and joblessness.

Simple, really.

erp said...

We were fortunate that Frankie went on to that big socialist paradise in sky before the war ended or we would have relived the thirties ... well that and the G.I. Bill.

I was in college with those guys and they were awesome. Made the college boys look like little kids in knickers ... and Harry before you blather on that it was no diferent than welfare, I hope even you can see that the soldiers earned everything a grateful country could shower on them.

Harry Eagar said...

How socialism works (capitalism, too, if you count Greece) (from Bloomberg today):

'The Shanghai Composite Index (SHCOMP), which doubled in 10 months through August 2009 as the government poured $652 billion of stimulus into building roads, railways and housing, has tumbled 43 percent from its high, destroying $748 billion in market value. Only Greece’s ASE Index (ASE) has fallen more in percentage terms. The Standard & Poor’s 500 Index, the benchmark gauge of American equity, erased all of the losses from the worst recession since the Great Depression and has gained 68 percent since the China peak, reaching a record this month.'

erp, you have no idea what socialism is. In any event, to not mention the stimulus of savings and deferred spending after 1945 suggests somebody is doing some special pleading.

erp said...

I not only know what socialism is, I know enough to be frightened out of my wits of it.

Why should I repeat what's already been said been said about the postwar recovery.

Clovis e Adri said...

Bret, it is a pitty you touched the topic while I am on holidays, I'd like to comment more.

But a few fast ones:

I think it is a little bit unfair to take one economist's misguided prediction and imply the whole subject is wrong. No economic theory would survive then. BTW, your final comment that Keynesianism works until it doesn't is pretty much the bottom line of economic science as a whole.

AOG: not true that governments only spend more independent of times being good or bad. Take the Clinton years as example. I remember this point was treated in detail by Krugman in some column, google it please.

One thing Krugman repeats every other column is how new Keynesianism correctly predicted the last five years of economic development, while many other people have been wrong. Before you discard that as self promotion, you may well try to take a look on how many conservative economists really got it wrong indeed.

Clovis e Adri said...

Ops, I forgot one more point, Bret. Another thing Samuelson did not foresee is how Europe would be devastated, hence buying everything and more from the USA.

The Americans were very, very smart in recognizing that, by lending a lot to Europe, it would very much benefit as their main provider of goods. And that is perfectly clear within a Keynesian model. So, again, to blame Keynes on behalf of Samuelson's error is not fair.

BTW, further on, when Europe's industries recovered, the effect was also measurable for America's exports.

Annoying Old Guy said...

"not true that governments only spend more independent of times being good or bad. Take the Clinton years as example."

Since federal spending increased every year during the Clinton Administration during a major economic boom, I considered myself vindicated.

"I remember this point was treated in detail by Krugman in some column, google it please."

Uh, no. You demanded we provide specific examples and links, so I feel no hestitation in responding in kind. I certainly wouldn't be surprised, though, that Krugman treated in very wrong detail.

"One thing Krugman repeats every other column is how new Keynesianism correctly predicted the last five years of economic development"

Keynesianism utterly failed to predict the last five years of economic development. Go back and check the links I already put in this post, one of them addresses exactly that point and how Krugman still gets it wrong. That Krugman repeats that every other column is a big reason I consider him a partisan idiot. The conservative economists got it right.

"The Americans were very, very smart in recognizing that, by lending a lot to Europe, it would very much benefit as their main provider of goods"

erp, you are correct, we need to introduce Clovis to Orrin Judd, who believes that the Marshall Plan was in fact a devastating economic attack on Europe by the USA.

Clovis, I'm curious - how much was the Marshall Plan? Was it really "a lot", and was it lending?

erp said...

aog, the Marshall Plan is one big thorn in the left's side. Without it, all of Europe would have been just another "S" in the USSR. As it was, it took another 50 years or so before they reached the same degree of socialism as the Ruskies.

Kinda funny how things work out dontcha think?

Harry Eagar said...

Poor,poor Europe. They are only the biggest economy, with the most prosperous people.

Boo freakin' hoo.

Annoying Old Guy said...

"most prosperous people"

Romney right, Eagar wrong. How unexpected.

Bret said...

Clovis wrote: "I think it is a little bit unfair to take one economist's misguided prediction and imply the whole subject is wrong."

That was the overwhelming consensus of the Keynesians at the time. That nobel prize winner's quote happened to be a handy illustration.

Clovis wrote: "Keynesianism works until it doesn't is pretty much the bottom line of economic science as a whole."

Yes, that's why I greatly prefer freedom instead of government meddling and regulation of the economy - they don't and can't know what they're doing.

Clovis wrote: "Another thing Samuelson did not foresee is how Europe would be devastated, hence buying everything and more from the USA. "

At that point in WWII it wasn't clear that Europe would be devastated?

Okay, let's assume Samuelson was somehow that out-of-touch with reality. European government spending also plunged after the war.

The main point I'm making here is that the favorite Keynesian remedy of government spending does not have the effect they claim. Government spending dropped everywhere (except the socialist bloc), yet prosperity soared everywhere.

Bret said...

Harry Eagar wrote: "Americans saved $140 billion during the war and spent it..."

Yes. That's basically just saying that there is enough money for the economy to operate. Also, note that it is not government spending.

Harry Eagar said...

Money stopped being fungible, Bret? If there had not been an overhang of savings, then what do you suppose would have happened?

Oh, wait, wait, teacher, I know. The magic of the market would have created buying power, just like in 1931-2.

Sheesh.

Harry Eagar said...

'prosperity soared everywhere'

Really? Not true for England or Japan.

There are other ways to measure 'prosperity' than GDP. Even after paying high taxes, Europeans have access to things most Americans only can dream about (because of high services).

erp said...

Harry, what things do Europeans have that we can only dream about?

Howard said...

Money stopped being fungible,

Dollar bills are fungible compared to each other. They are readily exchangeable for real goods and services under most circumstances. You can appreciate that this is different from being fungible if you eat dollar bills for lunch. Likewise money is not real savings or real wealth, it is a medium of exchange. Under the best of circumstances it can be a crude and imperfect representation of these things, but it is not the real thing. The inability to grasp this distinction is a common source of confusion in economic reasoning.

As for the 1930s, any problems appearing as demand shortfalls were a reflection of other more significant problems. The failure to grasp that is a reflection of a poor understanding of economics and of history.

Hey Skipper said...

[Harry:] You left out the explanatory fact: Americans saved $140 billion during the war and spent it all by about 1952, on houses, cars, televisions, furniture etc.

Okay, let's take that as read. That means Samuelson was woefully ignorant of a salient, and obvious fact that given wartime rationing, there would be a large overhead of private savings.

IOW, Keynesian theory is correct except when it isn't.

It is also worth noting that thanks to this own goal, Congress enacted wage controls following WWII.

Unfortunately, because what happened was precisely the opposite of what Samuelson predicted, companies were forced to rely upon other means of compensation to lure workers.

Which is how we came to the insane state of affairs where companies are somehow on the hook to buy health coverage for individuals.

Harry Eagar said...

Health care, education.

The worst off European gets better health care than at least 50 million Americans.

Howard, please explain how demand failure in the farm sector in the '20s (when the depression began) was the result of other factors.

As I have noted often, people who think the Depression began in the '30s have not paid attention.

erp said...

Skipper, don't forget the socialist Nixon's wage and price controls and how it led to that fashion statement, Ford's WIN (Whip Inflation Now) buttons!

They never never learn.

Bret said...

Harry wrote: "Not true [that 'prosperity soared everywhere'] for England or Japan."

England averaged 3% to 4% per year real GDP growth rate in the decade after the war. Japan averaged closer to 10%.

Soaring is a subjective term I suppose. So okay, change it to prosperity increased at a clip of greater than 3% real GDP per year nearly everywhere (outside the socialist block) and 10% in many places.

erp said...

Harry:

I don’t agree that European health care is better. My husband was taken sick in Paris and was taken to a hospital that could have been in a Soviet gulag. We found out quick why people get on a plane and come home no matter how sick they are. That’s certainly what we did.

One thing where I’m sure we’re way ahead of Europe, we spend a lot more for our downtrodden’s health and “education.” It’s your side that’s been in charge of that for four or five decades now, so if it’s lacking, it ain’t because we’re begrudging them the funds.

Remember Johnson’s War on Poverty. Multiple trillions later, how can anyone still be poor? It sure is a puzzler.

Howard said...

please explain how demand failure in the farm sector in the '20s (when the depression began) was the result of other factors.

Keep in mind that there are some interesting episodes of monetarily generated economic disruptions that predate this period. Also remember that the period leading up to WWI was preceded by creation of significant international economic linkages as a part of the wave of globalization.

Looking specifically at agriculture, the federal government aggressively encouraged farmers to ramp up production to ensure adequate provisioning for the war. Furthermore, a significant portion of the war financing was managed by monetizing. Commodities in general and particularly agricultural product prices are very sensitive to any monetary disequilibrium. Soaring prices during the war were followed by crashing prices and then roughly level prices throughout the broad economy. But those monetary conditions were too deflationary for the sensitive ag sector. Not identical to but similar to the latter stages of the post civil war period, farmers could not bring themselves to cut back production in the face of falling income. In some sense you could say that farmers were sucker punched by the policy mix.

Throughout the 1920s monetary authorities from the major central banks tried to get monetary conditions back on track but they obviously failed. Here are two books that describe some mistakes and the failed attempts: Lords of Finance and Gold, France and the Great Depression.
When Money Dies describes the mess in Weimar.
A book that focuses on the matter of monetary disequilibrium is The Fluttering Veil. Some of the essays in that book could be tough sledding for anyone just starting to delve deeper than conventional understanding of money in the economy.

Harry Eagar said...

Well, I'm not just starting. This ain't my first rodeo.

Why were farmers unab;e/unwilling to adjust output? That's a market failure,isn't it?

Rather than abstractions, you might want to read some memoirs of farm families covering the era.

Of course, you are talking about capitalists. There was also the matter of some 20,000,000 or so debt peons, whose ability to adjust to 'conditions' was limited.

I have no idea why you want to drag Weimar in. Wiping out the savings of the German middle class turned out to be a political mistake, didn't it? But it didn't have any effect on US policy, except that the government encouraged Wall St. to make some more bad loans.

erp, I am sure you are now going to explain why European maternal death rates are so much lower than ours.

Since French hospitals are as advanced as any in the world, I imagine you an your husband were running away from more imaginary trouble.

Harry Eagar said...

'Japan averaged closer to 10%.'

Not until the Keynesian kick start in late 1950.

Annoying Old Guy said...

Let's get back to the three faces of Krugman and also touch on the issue of European prosperity which is wonderful or a failure, depending on which Krugman column you read. I could have an amazing record of prediction too if I were allowed to write on all sides and then pick after the fact which ones to remember.

Annoying Old Guy said...

One last Krugman on all sides shot before I go off for the weekend.

Howard said...

Guys, I found a neat video that demonstrates what happens when a progressive tries to absorb any idea that doesn't fit their narrative. Just like the plunger they remain uninfected by things like common sense or accurate historical perspective. Naturally Harry uses the most advanced version of this technology.

Annoying Old Guy said...

Howard;

I think Eagar's point about the 1920 crash is very illustrative of his world view. Note that the government in that case did little or nothing, and in short time (less than 2 years?) the economy recovered and went on to new heights. In contrast, in 1929, the government intervened massively and the result was 10 years of even more widespread poverty and misery. Eagar explicitly prefers the latter outcome. What inferences can we draw from that?

Harry Eagar said...

The government did little or nothing, and the farm economy did NOT recover.

40% of the economy had collapsed and it stayed collapsed.

It began recovering under the AAA, but the rightwing Supreme Court stopped that. It did not recover until 1940.

Coolidge Prosperity is a myth. It never happened.

Peter said...

Not until the Keynesian kick start in late 1950.

Thus in one sentence does Harry illustrate why it can be impossible to argue with dogmatic Keynsians. The "kick-start" imagery (a.k.a. the "prime-pump") is simply too addictive. Trouble is, they always want to kick-start the economy no matter what the circumstances. It's a bit like having your garage mechanic say that the solution to your car's repeated stalling is to just keep hot-wiring it.

Harry, old swot, do you not think the fact that Japan and Germany were obliterated in the forties had something to do with the timing and nature of their recoveries? How about their cultures?

What I don't understand is why Keynsians don't boast more about the most successful example of state economic kick-starting--the Nazis. They made FDR look like a libertarian.

Annoying Old Guy said...

Krugman fails again on basic math. I just can't imagine taking this guy seriously.

Clovis e Adri said...

My answers come late (sorry, traveling), but here they go:

AOG: I guess you imply the Marshall plan was not that much of money (it was aprox. 5% of American GDP at the time), but it only shows how self centered in America you are. For Germans for example, the Plan, together with the pardon of debts, was hugely important.

BTW, while living in Germany, it was very common to hear gratitude from Germans towards the US up to this day. Even liberal/leftist Germans, when heavely criticizing the current role of the US (Iraq war, etc) in the world, would stop to reference your previous kindness and... the Marshall plan.

About Krugman, I could not find exactly what I meant, but one grap of US debt that he shows is here:

http://krugman.blogs.nytimes.com/2013/02/07/the-undecade/

It is standard practice, AOG, when discussing government spending, to refer to his debt in relation to his GDP.

Clovis e Adri said...

Bret:

On Samuelson, if his phrase is indeed from 1943 (as you posted), it is fair to say he could predict thhat Europe would be devastated - but he could hardly predict that the US would be selling to them!

For example, if the Nazis had won, I would say that they could very well build back their strength within the huge empire they would have conquered.

Historic would-be apart, the point is that you condemn the guy for not having a crystal ball.

You infer that limitations of economic science should imply that governments ought not meddle with the economy based on their theories. I offer you a corollary: since our theories in medical science only work until they don't, we should never let any doctor ever touch us.

Good luck after your next accident. I still prefer to look for some medical opinions - and some economic ones as well in our next crisis.

Clovis e Adri said...

AOG: it is time consuming, and I do not even have the intention of playing Krugman defender here. But your last link above (12:31 PM) does not really show a contradiction between Krugman 2011 and Krugman 2003.

Read carefully, and you will see that Krugman was careful enough, back in 2003, to add that little phrase "But unless we slide into Janapese-style deflation"...

For the one thing that Krugman repeats over and over is how US now has much in common with the Japan of 80-90's, and how this special condition is what grants its relative immunity from inflation in the face of a huge increase of money supply.

That inflation has not materialized is one of the points that Keynes got it right, while many non-Keynesian economists got it wrong lately.

Annoying Old Guy said...

"It is standard practice, AOG, when discussing government spending, to refer to his debt in relation to his GDP. "

Not for me. When I discuss government spending, I am referring to spending. If I mean the debt to GDP ratio, I say so.

"the Marshall plan was [...] aprox. 5% of American GDP at the time".

Hmmm, that is quite a large amount of spending. I will note that if we're judging it as American foreign policy, then the correct measure is the cost from the American perspective, not what it looks like on the other side.

"You infer that limitations of economic science should imply that governments ought not meddle with the economy based on their theories. I offer you a corollary: since our theories in medical science only work until they don't, we should never let any doctor ever touch us."

It's easy to demonstrate how much more accurate and useful medical theory is than economic theory, and how it has rapidly improved over the decades. That's no small difference.

"Krugman was careful enough, back in 2003, to add that little phrase "But unless we slide into Janapese-style deflation"

So, "interest rates will go higher, unless they don't". Yeah, that's the kind of keen insight and bold prediction one expects from former Enron advisor Krugman. As I said, if I could make all prediction like that and just keep the ones that worked, I'd be as highly lauded.

"That inflation has not materialized"

That is a fact not in evidence. The data is ambiguous but one can make a good case for quite a bit of inflation over the last half decade or so (e.g., stock prices, gold, gasoline, food).

Harry Eagar said...

It is hard to be dogmatic about how or at what rate a completely devastated economy should be expected to recover, but the list of instances in which it happened without a kickstart is short.

Japan's takeoff was goosed by US military procurement after war began.

Liberals are, of course, well aware of the recovery of Germany, and also of the fact that much of the spending was unproductive. To say that Keynesians don't boast about the Four-Year Plan is the equivalent of asking rightwingers why they don't boast about Mussolini's trains.

And it indicates you are not familiar with econometric writing about the German economy.

Harry Eagar said...

In passing, I would like to nominate erp's statement that the Marshall Plan is 'a thorn in the left's side,' as the most unhinged of all her delusional statements.

The left loves the Marshall Plan; it was a left idea, based on left analysis.

But even many rightists admire it. Orrin and the libertarians are the only people I know who disparage it. And Stalinists.

erp said...

Harry: Please substitute fascist for rightwinger. Your sentences don't make sense the way they are written. No conservative which is what I assume you mean by rightwinger ever thought the way you do.

Of course, the Marshall Plan was a thorn in the side of the lefties. Without it, all of Europe have been just another 'S' in the USSR. As it was, it was touch and go, especially in Greece and Italy.

How can that be denied?

Clovis e Adri said...

AOG:

What most "conservative" economists usually were afraid of, when the FED started to hugely increase the monetary sheet, was really hihg inflation. Almost German in 20's style, or at least 70's style. None of that materialized. In fact, inflation in the last 5 years was trivial. So, no, you can not really make the case that inflation was high. Keynesians got it right, it is a fact. You may think they are still wrong, but you will need to find a better argument.

Harry Eagar said...

erp, you cannot have it both ways. It cannot be that the State Department was run out of the Kremlin, and that the State Department was torpedoing the commies, all at the same time.

So, which was it?

Hey Skipper said...

[Harry:] Inflation has not materialized.

[AOG:] That is a fact not in evidence. The data is ambiguous but one can make a good case for quite a bit of inflation over the last half decade or so (e.g., stock prices, gold, gasoline, food).


I have to agree with Harry on this. Inflation is a very slippery concept which, IMHO, is misused or misunderstood by nearly everyone.

Take gasoline (or, more appropriately speaking, oil). The price of oil is dependent upon two things: the cost to bring it to market, and demand vs. supply. The fact that the price of oil has increased over the last decade is not inflation; rather, it is simply the result of market forces at work.

By extension, that commodities with a significant energy component also increase in price is also not inflation.

More properly understood, there are three kinds of inflation: cost-push, demand-pull and hedonic.

At first glance, I have just shot down my ow argument; after all, the increase in the market price of oil is a cost-push phenomena.

However, that isn't the case, because the operation of the market will compensate for commodity price changes: more efficiency, product substitution, increase supply, etc.

The problematic kind of c-p inflation is a wage-price spiral. That disappeared in the '80s, probably due to the decreased impact of labor cartels (aka, unions).

The other kind of inflation, demand-pull, is the kind that needs thinking about. If there is more money in the economy generating demand that the economy can't supply, then consumers will compete prices upwards.

IMHO, (and gold prices back me up) there is almost no possibility of d-p inflation.

On the contrary, our biggest worry should be deflation. The CPI seriously overstates the secular change of prices because it almost completely fails to take into account hedonic inflation; i.e., the change in price of a good due to changes (most importantly, technological) in the good.

The cost of owning and operating a car is a significant component of the CPI. Yet there is no way to calculate that number.

In the '70s, the average new car was about $5000; today, about $20,000.

So, 400% inflation over that time, right?

Look at the question from the other direction. How much money would it take to buy the average new car of today in 1975?

There is no answer to that question, because all the money in the 1975 world wouldn't be able to purchase something as good as today's Ford Focus.

I'm taking to long to get around to my two main points.

1. There is no possibility of demand-pull inflation in even the medium term.

2. Leftists love to use the CPI when they are attacking wages, and ignore it when they want to set giant piles of money on fire.

For example, read the concluding para in this recent NYT article on Keynesian economics:

The Fed had other options. It could have put cash directly into the hands of consumers who needed it. Under the Federal Reserve Act, it can print and lend any amount of money for any length of time to any person or entity, as long as it is satisfied that it is likely to be repaid. With $800 billion, for example, the Fed could have given every homeowner in the country a $10,000 loan at a near-zero rate of interest. Think of what that might have done for the economy.

One wonders whether the author took her own advice.

erp said...

Clovis, depends on the administration. Wilson, FDR were run by commies, the cultural revolution and anti-Vietnam war protests ditto. After Reagan, the left reorganized and yes we can have both ways because our history is not a straight line.

erp said...

My apologies to Clovis. I didn't expect a question about the differences in U.S. administrations from you Harry. Answer stands as written.

Clovis e Adri said...

Erp,

The funny thing is that you and Skipper changed my name for Harry's (or vice versa) at the same time.

I wonder if your brains are grouping us under the same label "Leftist", leading to the involuntary confusion. Like when we tend to group all Japaneses as having the same face.

BTW, did you know that the Japanese tend to have the same difficulty for recognition of western faces?

There is much talk nowadays on how the difference between a right-winger and a left-winger is related to aspects of the brain too.

Well, I drift away. It must be the warm day...

My point was in fact only to reply Skipper: deman-pull inflation continues to be the main component of inflation in Brazil, contrary to the US, so it still happens in many places around the world I guess, although inflation itself has been less and less of the problem it used to be a few decades ago.

Hey Skipper said...

[Clovis:] The funny thing is that you and Skipper changed my name for Harry's (or vice versa) at the same time.

I wonder if your brains are grouping us under the same label "Leftist", leading to the involuntary confusion.


Nothing more than a simple mistake. Your assertion was factual, and with which I agree. In this case, at lest, wasn't merging you into some nameless ideological mass.

My point was in fact only to reply Skipper: deman-pull inflation continues to be the main component of inflation in Brazil, contrary to the US, so it still happens in many places around the world ...

I am far from well enough read about Brazil's economy to know one way or the other, but perhaps the Real's 12% exchange rate decrease in the last year has something to do with it.

erp said...

Clovis, you and Harry are very different in your comments. I took the last one of Harry's for your probable imprecise take on our presidential succession and Harry's comments seldom have anything factual other than references to obscure books and articles he takes as gospel.

Left and right differences: The left feel they have the answers for us all in a very tight framework and the right feel that everybody should find their own answers within a very loose framework.

So far as I know, only the right has had any real success in a free society. Interestingly (don't remember where) I just read this morning that one of the left's leading examples of successful socialism, Norway, is rethinking and Sweden, the other usual example has already started moving away from cradle to grave welfare.

Don't discount inflation as being a non-issue. I'm sure it's in the Obama et al.'s bag of tricks if and when all else fails to scare us into submission.

It ain't over, as you know, until the fat lady sings, and she ain't even on stage yet.

Hey Skipper said...

In this case, at least, I wasn't ...

Since I used preview, there must be no hope for me.

Harry Eagar said...

Not a great deal of inflation in gold, and especially silver.

Petroleum is interesting. Extrmely lucrative for producers whatever the nominal price. Yergin argues, correctly I think for all periods up to 2000, that oil has been THE most profitable enterprise, creating a serious problem for stock companies -- what are they to do with their profits?

Clovis e Adri said...

Skipper:

You may have your answer on Brazilian Real devaluation by reading this nice work by an economist of the Brazilian Central Bank (our FED). See the paper 314 in this list:

http://www.bcb.gov.br/?WORKINGPAPERS

BTW, the author is a personal friend.

The short answer is: the main driver for the Braz. Real is the stock market value of 5 main commodities we export.

Clovis e Adri said...
This comment has been removed by the author.
Clovis e Adri said...

Erp:

Now you've hitted a figurative speech I did not know: "It ain't over, as you know, until the fat lady sings, and she ain't even on stage yet."

I get the meaning but what is the origin? Who used to be the fat lady?

Clovis e Adri said...

BTW, I realize there is no conjugation of the verb 'to hit' as "hitted". Gosh, ignore my ignorance.

erp said...

The fat lady refers to the soprano in an opera who in earlier years was usually a fat lady and her final aria was usually the (melo)dramatic end of the performance.

Hence an opera isn't over until said lady sings her last gasps.