26 Nov 2012

Potpourri

Climate Change, Economics, Scott Sumner 23 Comments

==> David Beckworth says the Fed isn’t monetizing the debt, and has Tyler Durden destroy something beautiful. (Actually that joke fails on two counts, because it’s not Tyler Durden but a guest blogger, and it wasn’t Brad Pitt but Ed Norton who messed up the pretty boy’s face in the movie.)

==> Mark Spitznagel applies Austrian business cycle theory to the Obama reelection.

==> I’m on “expert” on climate economics. AOL said so.

==> Redmond Weissenberger is teaching a class on the politics behind global warming. Redmond is the founder of the Mises Institute in Canada, and he is very knowledgeable about these issues, though some of you would no doubt classify him as a “denier.”

==> Proving that His libertarian critics are right, God kills another 2.5 men.

==> NoahReadaFriedrich writes: “It was Robert Lucas and Edward Prescott who truly restored Hayekian “classical” economics to dominance in the macro field, with their models of frictionless economies and near-optimal business cycles.”

==> If any of you are bored, please go to this Scott Sumner post and figure out for me what the top marginal *income tax* (not including payroll tax) rate is, for someone making $275,000 in salary, but with $0 in investment income, in 2013. I am very fragile and can’t talk with those bullies in the comments anymore.

23 Responses to “Potpourri”

  1. Tom says:

    Oh yeah…….it was Edward Norton who smashed to face of the blonde haired guy. Good catch.

  2. Bob Roddis says:

    Noah Nothing also wrote this in the same article:

    This foreshadowed the unfortunate libertarian support for dictators like Augusto Pinochet, as well as more recent libertarian flirtations with “scientific racist” ideas.

    So, in response to me linking to Hayek’s interview on “Firing Line” in 1977 and posting a transcript in the comments, Gene Callahan wrote:

    It is true that Bob Roddis’s comments are much more disgustingly wrong than Noah’s were!

    FYI. For future reference.

    • Major_Freedom says:

      Roddis, don’t you know anything about libertarianism? The non-aggression principle implies racism and support for dictators.

      Thus, if anyone “flirts” with racism (weasel word “flirt” is needed for a weasel accusation), or supports dictators, then they are libertarians.

      We’ve won yet another round.

      • Joseph Fetz says:

        There actually is a pretty big debate going on about race on youtube and skype, and it’s been going for about a year or more. The main guy supporting the hereditary racism position is Ryan Faulk (aka, fringe elements), who happens to be a market anarchist. I don’t know if this is what Noah is referring to.

        • Major_Freedom says:

          Ryan Faulk isn’t racist because of his libertarianism. It would be like saying NoahPinion is ignorant because of his name.

          • Joseph Fetz says:

            I understand that, but this is the only example that I could think of that is even remotely related to what he said.

            • Major_Freedom says:

              Sorry, that comment I made was directed at the crowd, not you personally. I suspected you understood what I said.

        • Ken B says:

          What is the ‘hereditarty racism’ position?

        • AdrianC92 says:

          Is this the same fringe that rage quit after saying he could not define what race is, in a debate with SkepticalHeretic about racial differences? If it is then I wouldn’t call it a debate

  3. John S says:
  4. Matt Tanous says:

    “David Beckworth says the Fed isn’t monetizing the debt”

    Is it buying Treasuries? If so, it is monetizing the debt. Beyond that, it is merely a question of degree.

    “My first response is how can they can say this with historically-low U.S. treasury yields and muted inflation expectations?”

    Isn’t it common knowledge that this sort of thing doesn’t track 1-to-1 with the printing of money? I thought nearly everyone was aware that expectations and price inflation first lagged behind, then surged ahead of, the specific quantity of money injected? Thus, buying up Treasuries by the Fed would first cause yields to drop (as they have now), then skyrocket a few years later as it keeps going on.

    • Major_Freedom says:

      “David Beckworth says the Fed isn’t monetizing the debt”

      Is it buying Treasuries? If so, it is monetizing the debt. Beyond that, it is merely a question of degree.

      Precisely. Beckworth is wrong. His reasoning is very shaky. He claims that the Fed isn’t monetizing debt because:

      1. We don’t have 1970s style interest rates and inflation; and

      2. The Fed owns “only” around 15% of all maturities.

      But debt monetization isn’t debt monetization based on any outcomes of various statistics such as interest rates, price inflation, or percent of debt ownership. These would all be arbitrary criteria. E.g. Why 1970s style interest rates and inflation? Why is 15% of all maturities not monetization? There is no concrete, rigorous reasoning here.

      Debt monetization is debt monetization because of what you said: the Fed is buying Treasuries with newly created money. The only question is how much they are monetizing. The effects on interest rates, inflation, or percent ownership, are derivative phenomena only.

    • anon says:

      Matt, the Fed is buying treasuries but those treasuries still have to be paid back.

      My understanding is that it’s not monetizing the debt unless the government increases spending based on higher revenues flowing to the treasury.

      This is where an MMT understanding of the economy may make more sense. If you view the money the government collects in taxes as destroying money then it’s not monetizing, but if you view the money as surplus funds that must be spent it is.

      This is why the MMT types talk about “functional finance” and inflation being the most important measure of solvency. (Interest payments are important too.)

      But inflation and interest payments are both low as well as the cost of new borrowing. (And I think no large new spending programs.)

      • Matt Tanous says:

        “Matt, the Fed is buying treasuries but those treasuries still have to be paid back.”

        Yes, but the Fed buys them with money it creates out of thin air. The Treasury floats debt, and the Fed goes ahead and “prints” up some (electronic) money to buy it – monetizing the debt.

        “My understanding is that it’s not monetizing the debt unless the government increases spending based on higher revenues flowing to the treasury.”

        According to who?

        “This is where an MMT understanding of the economy may make more sense. ”

        Nothing about the MMT understanding of economics makes anything resembling sense. The first rule of being an MMT theorist is to leave all logic at the door before entering.

        • anon says:

          According to who?

          As far as I know this is just accounting. If the Fed swaps cash for bonds then collects taxes to pay for the bonds then refunds the money to the treasury it nets to zero new money if the money is destroyed or otherwise “saved”.

          However if the government increases it’s spending (or lowers taxes) based on higher revenue flowing toward the treasury then this would be a net increase in money and could be called “monetizing”.

          • Matt Tanous says:

            “If the Fed swaps cash for bonds then collects taxes to pay for the bonds then refunds the money to the treasury it nets to zero new money if the money is destroyed or otherwise “saved”.”

            A complex procedure that takes place over many years that has no bearing on the situation at hand. Where bonds are placed with the central bank, the central bank will create the needed money by conducting an open market purchase, i.e. by increasing the monetary base through the money creation process. This process of financing government spending is called monetizing the debt. Whether government increases spending or lowers taxes doesn’t matter here.

            Only if the debt is lowered by paying off central bank held bonds and destroying the currency that is returned to the bank is the debt “demonetized”. That almost never happens.

  5. Tel says:

    I’m not an expert on US income tax by any means, but I can punch numbers into a website:

    http://easycalculation.com/tax/usincome.php

    For $275000 income…
    A single individual would pay: $75892.50
    The head of a household would pay: $72569.00

    For $275001 income…
    A single individual would pay an extra 33 cents on the extra dollar.
    The head of a household would also pay an extra 33 cents on the extra dollar.

    Result: 33% marginal tax.

    • Bob Murphy says:

      That’s not for 2013 though Tel. The dispute is over what will happen when the “Bush tax cuts expire” etc.

      • Tel says:

        http://taxes.about.com/od/Federal-Income-Taxes/qt/Tax-Rates-For-The-2012-Tax-Year.htm

        The tax rates for 2013 are scheduled to change as follows: the 10% rate will be collapsed into the 15% rate; the 25% rate will become 28%; the 28% rate will become 31%; the 33% rate will become 36%; and the 35% rate will become 39.6%. These tax rate changes will take effect beginning in 2013 absent further legislation.

        So instead of 33%, make that 36% for next year.

        The moneychimp says:

        All tax cuts since 2000 are due to expire at the end of 2012, which would mean a big tax increase for practically everybody. But nobody seriously expects that to happen; the most likely scenario is a “temporary” extension of the current tax brackets until after the next election cycle in 2014. (You heard it here first!)

        But they also list a transition from the 33% marginal rate over to 36% marginal rate (with question marks next to it).

      • Transformer says:

        My interpretation is that the new tax only applies to people on high incomes, and only to investment income. So someone who earns $400,000 but has no investment income will not pay the new tax.

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