02
Sep
2013
Potpourri
Some various YouTube links for you:
==> FEE president Larry Reed’s “Seven Principles of Sound Public Policy.” This is a talk that he’s been giving for years (I believe).
==> Louis CK versus Jay Leno. I was actually surprised by how well Leno stood up against the man who is, in my opinion, the world’s greatest living standup comedian.
==> I know it’s ridiculous, but what the heck: The original starship Enterprise encounters Miley Cyrus.
And perhaps more out-of-the-box and entertaining than any of the above:
==> Nick Rowe wonders how he could get an economy irreversibly stuck IN a liquidity trap. (This is kind of like how I used to think about how I could steal from the grocery store where I worked, when I was a cashier.)
Louis CK and Bill Burr are my top 2 comedians
burr is awesome. him an dipaolo on opie and anthony :
http://www.youtube.com/watch?v=YAeUtFEN2FE
Keep in mind that many comedians had that same opinion of Jay at one time. Like Louis, he was considered a comedian’s comedian, Jay simply got a break and conformed to that system (network late night).
I think that Louis will get that break, too, only he’s far more concerned with doing it unconventionally, so his break will probably be on his own terms.
Louis was also a writer for many of those late shows for a long time in his early career, but he didn’t like the process, so he left.
Miley meets her Starship
Strangely, there’s no happy ending in that video … well, not unless you count euphemisms.
Nick is being misled by price inflation premium interest rate models. They don’t work when price inflation is negative. In fact, this is part of the evidence that they are not universal, i.e. correct, interest rate models.
Interest rates are best viewed as related to sums of money lent versus sums of money returned. Individuals don’t actually exchange “rates.” They exchange money sums. Since time preference is everywhere positive, for all individuals, sums of money lent today tend to be smaller than sums of money returned later on.
If Nick somehow gets control of the printing press, and brings about a -10% NGDP annual change, then interest rates would not be negative, and they certainly wouldn’t be zero either.
No investor would PAY someone to borrow their money. Which investor would agree to essentially give you $100 now plus $5 for the trouble of owning that money? Investors would be better off hoarding.
No investor would lend money at a zero interest either. This is charity. A gift of free money to the “borrower”.
If price inflation is steeply negative, and Nick’s model outputs a negative set of “equilibrium” interest rates, then investors who might have otherwise lent their money, would just hold onto their money instead.
No, what would instead happen would be that lenders would still lend at positive rates. It is still mutually gainful for lenders to part with their money now, so as to gain a higher sum of money later on, and for borrowers to part with money later on, so as to gain a higher sum of money now, even in a context of falling prices.
Negative rates have actually appeared. Warehousing very large quantities of currency isn’t free.
Warehousing isn’t borrowing, but the service of rent.
The depositor considers the fee he will pay for renting warehousing space to be of less value than holding his own money.
For example, the depositor may believe he has a good chance of being robbed.
Warehousing is not a loan.
Real interest rates can never be negative, just as the price of cheesburgers will never be negative. That such a fact eludes these “economists” baffles me.
But then again, Nick buys into the broken window fallacy – even calls it “standard”: “standard models of investment say that investment demand is a negative function of the existing capital stock, so a war that destroys part of the capital stock causes a rebuilding boom and increases the natural rate of interest when the war ends.”
Break the rich guy’s windows, and the economy will boom!
Apparantly we can’t build new things with non-destroyed capital.
Have you ever seen Jim Gaffigan? At least as funny as Louis CK but not nearly as vulgar.
“He talks about food a lot.”
The best part of Nick’s article is that he gives the ONLY prescription for his ill. That is to stop low priced money creation and let entrepreneurs redirect capital to the most desired uses by consumers.
Also, it is not the zero bound on interest rates as the central bank could easily pay creditors to take on loans. Of course this would cause a massive expansion in the amount of debt and using fractional reserves, a corresponding increase in the amount of money and of course a massive decrease in the value of money.
The thing I found most disturbing about the Miley Cyrus performance was Robin Thicke. Am I the only one?