* Oops, that reported 3.5% real GDP growth in the 3q is more like 2.8%. (So they exaggerated it by 25%, big deal.) I liked this line: “That was a touch below market expectations for a growth pace of 2.9 percent.” Does that mean investors were forecasting that the government had exaggerating the initial reading by that much? Did some new data come in? I don’t really know the mechanics of how they issue the different estimates.
* Guess how much FDIC has left in its coffers to bail out depositors whose banks fail? Go ahead, guess. If you said negative $8.2 billion, you’d be right. But don’t worry, the FDIC is fine, it will insist that the big banks prepay three years’ worth of insurance. I think I will do the same with my consulting services. Honey, we’re having steak again tonight!
* Bob Roddis sends this elitist article on the dumb Americans. Because they have the audacity to think that the deficit needs to shrink, it is evidence of their “illiteracy.” Seriously, just skim this thing. It’s incredible how condescending the Keynesians are. The guy thinks Americans must not even understand what a deficit is, since that’s the only possible explanation of their worry over trillion-dollar plus deficits.
You might think, “Ah sweet! That’s what we want, right?”
Well, yeah, sort of, except the reason we’ll get there is through a dollar collapse, not a Rothbardian revival.
MercedesRules sent me the below clip; start watching around 6:45. (And I forget how to get rid of the blank spaces below…)
(I know that post title is weak; I got nothin’.)
The Keynesians (e.g. Krugman and DeLong) have been high-fiving Dean Baker over his response to the NYT article which has the audacity to say that the federal government’s $1 trillion+ deficits may come with some strings attached. (BTW I like Baker; I debated him on the San Fran NPR outlet on Easter Sunday earlier this year.) So here’s Baker’s take on the NYT deficit fear-mongering:
In Just a Decade the U.S. Interest Burden Could Be as High as It Was in 1992!!!!!!!
That might not sound scary to most people, but this was the punch line of a front page NYT news story that included all sorts of unsupported assertions about the crisis posed by the government debt.
The fourth paragraph asserts that:
“Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.”
No, this is wrong. There is no evidence presented in this article that the rise in interest rates will place the U.S. government in a situation where it will be unable to pay its bills and no one cited in this article makes such a claim.
The article is also completely unbalanced in not presenting the views of any economist who could put the deficit/debt issue in perspective for readers.
None of the Keynesians explains where Baker got that figure. If you look at the NYT article, it says early on:
With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.
So presumably Baker is looking at $700 billion divided by the estimated GDP in 2019, and the resulting percentage is about the same as it was back in 1992. I haven’t verified that this is what Baker did, but that’s my guess.
Here’s my question: How can that be possible? The federal debt held by the public [.pdf] (which is what everyone is bandying about, I believe) was 48.1% of GDP in 1992. The CBO projects that the debt will break 80% of GDP by 2019.
Since the NYT article’s scenario involves interest rates “that are sure to climb back to normal,” how can it cost the same to finance 80% indebtedness as it did to finance 48.1%?
Again, I’m not accusing Baker of doing something fishy here, I think really what’s going on is that the projected interest payments of $700 billion must be assuming interest rates lower than what the government had to pay in 1992. (I am especially confident of this statement, since Baker didn’t pick the year with the highest debt/GDP ratio in recent vintage. 1993 and 1994 had higher ratios, for example. So presumably Baker picked the year with the highest interest payments as a share of GDP.)
In fact, if you check out the yields on 10-year constant maturity Treasurys, you’ll see that they were falling throughout the early 1990s and then spiked in 1994. So when the NYT talks about interest rates returning to “normal,” I think they mean, “The abnormally low yields of the 2000s.”
Final point: Don’t our Keynesian friends realize that they more they go nuts about “deficit phobia” etc., it will thereby neuter them all the more effectively when President Palin says we need to spend $1 trillion beefing up the military?
For a while I’ve been thinking that come January, we will be over the hump of the sharp CPI declines in 4q 2008. At that point the financial press won’t be able to point to year/year declines in prices, and I will be very curious to see if they finally admit we are not stuck in a deflationary trap.
But it occurred to me tonight that the December announcement might actually go positive, since a bunch of the decline happened in October and November of 2008.
I checked the numbers, and here’s what I found: The arithmetic mean (i.e. what the average person means by “average”) of one-month non-seasonally adjusted CPI increases in January 2009 through October 2009 was 0.28%. So let’s assume that the November CPI (which comes out in December) will be 0.28% higher than the October CPI, and that the December CPI (which comes out in January) will be 0.28% higher again.
If that happens, then on December 16, the BLS will announce that the November 2009 CPI is
1.02% 2.1% higher than the November 2008 CPI. In other words, the media will have to report that the monthly figure rose 28 basis points, and year/year prices are up 2.1%. Now maybe they’ll use some seasonal jujitsu, or switch to a goods basket that excludes turkey and Christmas lights, but I think it’s going to be hard for them to say, “At some point down the road, Bernanke will have to think about raising interest rates to contain inflation.”
Then, come mid-January, the press will report on the December 2009 CPI, which again (in our scenario) will be 28 basis points higher than the last month’s. This time, however, year/year CPI will have jumped by 3.4%. Then the analysts will probably freak out and say, “Oh my gosh!! Inflation has risen by more than 50% in one month! Aaaaagh!! It must have been consumers going crazy for Kwanzaa!!”
Then it’s just a matter of time before we’re all using ameros.
The quote right now is $1169.90, but the headline on CNBC said gold had broken $1,170 / oz.
Incidentally, can the Mishites (followers of Mish) explain why other commodities are doing pretty well too? I.e. my very crude understanding is that Mish is saying something like, “Our economy runs on credit. There is a huge debt overhang that needs to be worked off before you’ll see prices rise. The one exception is gold, which is money, and everybody flocks to it in times of crisis. Only with my analysis could you have gotten everything right: falling prices (except gold) and falling interest rates.”
OK, and the Murphy hypothesis (in equally crude terms) is: “Yeah we had (price) deflation until December. Since then we’ve had price inflation. It’s true banks create money by advancing new loans, and those loans are way down. However, Bernanke has made sure to offset this force by holding M1 and M2 constant. We haven’t seen massive price inflation yet because the banks are sitting on reserves, but we do see the dam beginning to break with the price of commodities, especially gold. Why did this huge wave of deflationary pressure stop on a dime in December 2008? Consumers have been paying down credit cards etc. since then.”
I’m not being sarcastic, I would really like to know if Mish somewhere predicted back in late December that oil would more than double in price over the next 11 months. Did he?
The buzz is justified: This SNL clip really is surprisingly good in terms of the political economy. It’s pretty funny too. (HT2LRC)
I heard about this on Glenn Beck. Check out the bombshell hedge fund manager Damon Vickers drops, and how the CNBC guy brushes it off.
A few possibilities occur to me:
(1) The guy just didn’t even process what Vickers was saying; he was so tuned into financial analysis that the “crazy talk” went right by him.
(2) He couldn’t believe what a nutjob they had booked, and when it was his turn to talk he decided to pretend nothing important had just happened so that most viewers wouldn’t notice.
(3) CNBC is a fully briefed partner in the conspiracy to usher in the New World Order, and the anchorman forgot to feign surprise. The alien lizards ate him after the interview as a warning to the other quislings not to slip up again.
I’m leaning towards explanation (2).
In recent weeks I have annoyed my atheist readers by declaring that God owns the universe, and I have annoyed some of my libertarian readers by declaring that ideas can’t be owned. So I thought I would try to be doubly annoying today: Can God own your soul?
This question is interesting for those of us who are (a) libertarians, (b) Christians, and (c) Kinsellians on IP. I think the 3 of us will agree that thinking of God and your soul leads to some problems no matter which way you go.
In the present post I’m not going to come down on one side or the other; I just want to make some observations that a coherent theory must address.
* I loved C. S. Lewis’ line: “You don’t have a soul, you are a soul. You have a body.” So when it comes to us being “really” free etc., I think it ultimately has to do with our wills or souls, not our physical bodies. This is part of my problem with some libertarian arguments over self-ownership; they often seem to conflate one’s physical body with one’s ego.
* As a Christian who believes God created the physical universe out of nothing (physical), I think He has every right to kill you with a tornado, to sit back and allow the Nazis to gas you, etc. Now we of course don’t fully understand His plans and some of His decisions seem outrageous, but ultimately He has the right to do whatever He wants. He is not a monster for causing kids to get born with birth defects, anymore than a human novelist is a monster for creating characters who commit crimes.
* The anti-IP person might be tempted to say, “Ah! Ideas can’t be owned. God owns your physical body, but ultimately He doesn’t own you. So by opposing the notion of IP, we ensure the metaphysical freedom of the human will, which is just what God wants. Thus not only do statists enforce IP in violation of physical property rights, but they lay the principle of the supreme enslavement of our souls.”
* However, if God doesn’t own your soul, then what do we make of Jesus’ warning? “Do not be afraid of those who kill the body but cannot kill the soul. Rather, be afraid of the One who can destroy both soul and body in hell.”