06
Oct
2012
Potpourri
==> I finally give my thoughts on Krugman and the iPhone5.
==> I know this is “Dark Age of Macro” thinking according to Krugman et al., but I really liked this WSJ op ed on “the mess we’re in.”
==> The video of my recent participation in the discussion, “Is Capitalism Moral?” at IUPUI. If you click through, you’ll have to move the pointer to about 5 or 6 mins in, when the evert starts. (There wasn’t a camera guy; they just flipped on the camera in the back of the room.) First a literal socialist professor presents for about 25 mins, then I go for about 25 mins, then a traditional conservative (from ISI). Then Q&A.
==> My recent appearance on the Power Trading radio show.
“Some experiments fail” ? Wow. Way to just write off 100 million+ innocent lives you socialist sleazebag. .
As a father myself, I liked the playground example. That’s an easy way to explain property rights.
The amount of debt is one thing. The burden of interest payments is another. The Treasury now has a preponderance of its debt issued in very short-term durations, to take advantage of low short-term interest rates. It must frequently refinance this debt which, when added to the current deficit, means Treasury must raise $4 trillion this year alone. So the debt burden will explode when interest rates go up.
Still amazed at how people don’t appreciate this.
Businesses in generally didn’t appreciate the importance of being liquid, but I guess that’s the right strategy when the Fed and major policymakers believe you have an inalienable right to always get new financing at about the rate you had before. I remember when the financial pundits were having life-threatening panic attacks simply because the overnight lending rate went from 2-4% … per year.
Yes, they think it’s perfectly normal for a blue chip company to be crippled by a temporary increase in borrowing costs of 1.04^(1/365) – 1.02^(1/365) = 0.0053%.
The FED keeps rates low until 2015, so what?
Nothing special with borrowers of which the relative debt increased in the last 30 years steadily, the interest to pay for new debt steadily decreased accordingly. It’s just like a salesman who sells fruits for ever higher prices the more they decay. Perfectly normal.
“In an advanced economy, my deciding to spend less would reduce your income, which would encourage you to spend less, which would reduce my income, and so on”
I found this “gem” in the comments to your iPhone response. Can this be dispensed with? It’s absolute nonsense. The only way it could make any sense is if the economy is in fact NOT advanced… consisting only of Crusoe and Friday on an island.
For instance, I work for a company making hard drives. Let’s say that Bob decides he has enough hard drives, and doesn’t want to buy hard drives this year. My company makes, let’s say, ~$200 less that year. Even if this is enough to affect actual pay, it can only do so by $200 MAX. Should that ALL come out of my salary (ludicrously), I would lose less than 1% of my pay. No crisis here.
The “my pay dependent on your spending” argument proves too much. What if people stop buying some good (like floppy drives) to buy other stuff (like optical drives)? Tons of people will have pay cuts or get laid off! Guess we need government to come in and make everyone buy DVDs along with their Blu-rays so the DVD producers can keep their pay up. After all, the argument doesn’t apply just to “aggregate demand”, but also SPECIFIC demand.
Economies adjust to meet demand. That’s the whole purpose of them. And it is irrelevant whether it is a change in relative demands for specific goods or a drop in “aggregate demand”. The latter will be the result of increased saving, and thus an increased demand at some future point, as no one saves merely to save – they save to buy more later than they can now.
Ah, but don’t you see, if the government spends money on paying people to dig ditches and fill them back up, then other people will see this, and will invest in the production of shovels, or they may be inspired by animal spirits to stop saving and buy for themselves ditch-digging/filling services, thus growing the economy organically.
“Animal spirits” ranks right up there with “God did it” and “multiple universes exist simultaneously and undetectable, but magically coalesce into only one we can detect upon an event” as anti-science inquiries into the cause of things.
“multiple universes exist simultaneously and undetectable, but magically coalesce into only one we can detect upon an event”
Er, that’s splicing two rival quantum mechanics interpretations together.
The “multiple universes” interpretation (better referred to as the “universal wavefunction” interp, as it does not have a primitive “universes” concept in its fundamental equations) holds that the “universes” keep existing. The Copenhagen interpretation, in contrast, claims that there are a bunch of “possibilities” that collapse to one one “measurement.
The former actually follows directly from “The Schrodinger equation applies uniformly, continuously, everywhere, without exception.” The latter requires that “well sometimes it has sharp discontinuities that depend on when we look”.
As explained to me in my college physics courses, the “multiple universes” interpretation collapses into one from the point of view of the experimenter/observer, even if the others keep existing.
Before observation, the universes are all somehow “overlapping” or “probable”, but one is mystically “selected” as the one you are in now.
And to say this follows from the Schrodinger equation is merely to say that because we can’t figure out the math, it must be true. It is a classic example of defining “reality” to fit the math, instead of the other way around. In other words, “this doesn’t quite match reality, but if we assume this metaphysical construct, it does!” Or, in layman’s terms, “not-God” did it.
I liked the conservative guy. He ended up mentioning more Austrian economists than you did haha.
I just had a general question, wondering if anyone might know the answer, or has at least given thought to it.
What would be the effect(s) if Federal Reserve Notes were not tied to debt? What if they just created money, called it legal tender, but there was never any debt involved? Could the results be much worse than what we are seeing now?
I’ve recently grasped the concept of interest rates, or rather the Austrian interpretation of what interest rates are supposed to represent. But in the case of FRNs, there is no existing real capital to legitimately charge interest for using, other than the abstract sense of providing a service.
So with that in mind, why do FRNs have to be “paid back”.. Would inflation be terrible if not? If “they” are just going to create money willy-nilly, then why does it matter if it’s tied to debt? Is it all really just a game?
Just thoughts I’ve had recently. Any enlightenment would be appreciated.