26
Sep
2014
Potpourri
==> I excerpted some of the best parts of Larry Summers’ recent speech arguing for an end to the ban on crude oil exports. There is some new stuff in this one, if you’ve only been reading my posts on the topic.
==> Nick Rowe writes on everything in this post. If I were a tenured academic, I don’t know exactly what I would do with myself, but it would involve more cow bell and more Nick Rowe.
==> Like climate change, Michael Goldstein argues that when it comes to Bitcoin, the risk is in not acting.
==> Daniel McCarthy launches a counterstrike against Sheldon Richman and me regarding liberalism and empire.
“With this context, you can understand why today’s conservatives and libertarians look with great interest at the Canadian example: It seems to show that the Keynesian warnings about cutting government spending in the midst of a recession are bogus, doesn’t it?”
Only if, as pointed out before, your idea of Keynesian theory is a caricature. Keynesian theory does not say that contractionary fiscal policy will always lead to recession, when the domestic private sector or demand for exports might provide a sufficient level of aggregate demand.
Not to mention:
(1) that the US is Canada’s largest trade partner, taking most of its exports. But Canadian austerity began from 1995, and most of the depreciation in the Canadian dollar relative to the US dollar happened from 1991 to 1994 before the austerity.
(2) the loanable funds model of interest rates you use is false. Canada has an endogenous money supply and Bank of Canada sets the “overnight rate”.
(3) “crowding out” as in mainstream neoclassical theory and in your argument does not occur in Canada. The Canadian central bank effectively neutralises the effect of the government’s transactions with the private sector, by adding or draining reserves from the private banks when necessary during the course of the day.
Oops, I published this on the wrong thread. Apologies.
“The Canadian central bank effectively neutralises the effect of the government’s transactions with the private sector, by adding or draining reserves from the private banks when necessary during the course of the day.”
Crowding out in real terms always takes place with government inflation or spending.
Real resources are scarce. Either government controls them, or individual property owners control them.
This does not refute my counterargument made to bob about why his claim that austerity caused interest rates to fall is wrong.
But your counterargument is wrong.
How about no one controls them? What’s wrong with a little Joker-style chaos every once in a while?
Hey Bob,
Did you already have time to look into this nice story of what it means when the Fed actually “regulates” the big banks and shows how indipendent it actually is?
http://www.propublica.org/article/carmen-segarras-secret-recordings-from-inside-new-york-fed?utm_source=et&utm_medium=email&utm_campaign=dailynewsletter
About Nick’s thought experiment.
Rm comes ultimately from R. Wouldn’t it therefore be impossible to make Rm equal to R? If Rm is increased by the banks of both worlds, then capital is sold off to the bank/loses its value. But this also means with capital losing its value it isn’t used anymore, production sinks. To be honest I don’t even see why aggregate demand for consumption goods should fall, since Rm being the same as R doesn’t change consumption behavior but just what savings vehicle people use (money instead of assets). This in turn puts upward pressure on prices which does what? It increases R. So I would argue increasing Rm to reach R is a dog trying to catch its own tail scenario.
Rm equal R is akin to telling people, production isn’t necessary to have consumption goods, isn’t it?
I think Nick is a super smart guy, but honestly 90% of what he writes has no applicability to the real world.
His latest post not be any sort of deduction or proof that “we” should have fractional reserve banking as a practical matter or else it’s infinite interest rates or communism we go.
Perhaps he might want to read about the Bank of Amsterdam. Pretty much 100% reserves for almost 100 years, and it was not resembling anything like the “choices” Rowe presents. Sure, you can say it wasn’t perfectly 100% reserves, but being so close to it should have, if Rowe’s thought experiment is to have any practical applicability, resulted in quite obvious, visible movements towards the extremes Rowe lays out.
-Me too, MF.
I don’t want to be flip, but this is the central criticism leveled at Libertarian and Austrian systems. Now I read the Rowe piece and didn’t really understand it, but it reads very much like some of Bob’s thought experiments, but I had understood that Austrian economics doesn’t make predictions and doesn’t really have to apply to real world conditions, because there can’t really be a perfect free market in the real world as we know it. If Libertarian/Austrian ideas have to work or make sense in the real world, then I think empirical facts, including the way businesses and people actually deal with their contracts in the current “real world”, the way less regulated businesses seem to behave in a freer market (I.e., abuse of employees, etc.), problems with business combination in the real world and the tendency to antitrust conspiracies (this one I know a little about), as well as the highly significant problems of enforcing any Libertarian principles, I.e., the NAP, that we want enforced, without some kind of real enforcement mechanism, come immediately to the forefront. In other words, if it has to workable, or have something to do with the current (as opposed to far future), real world, I think that doesn’t just create problems for Nick Rowe.
not be = is not
In my thought experiment with JUST ONE BIG BANK, OWNED AND CONTROLLED BY THE GOVERNMENT, THAT ISSUES THE ONLY FORM OF MONEY, I keep thinking about the swarms of police and their truncheons, guns, tasers, handcuffs, paddy wagons, courts and jails and all the support staff (all with their large pensions) that such a regime would require to enforce such a system.
In my thought experiment about “fractional reserve banking”, I keep thinking about all those banknotes that promise on their face the very same thing promised by a 100% reserve banknote. And then I start thinking “False Prices!”
McCarthy’s points on WWII seem to be pretty reasonable: the most likely scenario had the U.S. not entered either theater of WWII would have been a strong Japanese Empire that might have at some point conquered New Zealand and Australia combined with an even stronger Soviet Union that would have had its sphere of influence extending into Italy (definitely), West Germany and France (probably), and quite possibly Spain, Denmark, and the Netherlands. Perhaps with most of the French colonies becoming Communist as well. Not exactly the best of all possible worlds.
The only reason why the Soviet Union did not conquer the whole of Europe, and by implication, most of the world as well (Western colonies) was that Hitler preempted Stalin’s attack on Germany by two or three weeks. It does not have anything to do with American policy at all. If Stalin succeeded in delivering the first blow, Germany with its lack of mineral reserves and material resources to wage a long war on its territory will be conquered easily by a far superior Russian army. And all the peoples and the states conquered before by the Nazi’s would receive the Russians as “liberators”. And FDR would cheer the “victory of democracy” in Europe and in the world. There would be no alliance with Hitler against Stalin. If anyone in the Eastern hemisphere remained free after 1945, the only man who deserves the credit for that is Hitler. By an accident of history he inadvertently saved Western Europe from communism by attacking Stalin in June 1941
1. Stalin wasn’t planning to attack Nazi Germany in 1941.
2. In 1941, the German army was much superior to every other one on the European continent, as demonstrated by the German invasions of France and Norway.
3. If Stalin struck first, America would still have went into the war to aid the U.K. and Western Europe would still have been saved from Communism.
The only reason why the Soviet Union did not conquer the whole of Europe, and by implication, most of the world as well (Western colonies) was that Hitler preempted Stalin’s attack on Germany by two or three weeks. It did not have anything to do with American policy at all. If Stalin succeeded in delivering the first blow, Germany with its lack of mineral reserves and material resources to wage a long war on its territory would have been conquered easily by a far superior Russian army. And all the peoples and the states conquered before by the Nazi’s would receive the Russians as “liberators”. And FDR would cheer the “victory of democracy” in Europe and in the world. There would be no alliance with Hitler against Stalin. If anyone in the Eastern hemisphere remained free after 1945, the only man who deserves the credit for that is Hitler. By an accident of history he inadvertently saved Western Europe from communism by attacking Stalin in June 1941
Similarly, what did FDR and the USA do for humanity by recognizing Stalin’s Pol Pot regime, denying its horrors and allowing 10,000 Americans trapped there to be slaughtered along with the other tens of millions?
Read “The Forsaken: An American Tragedy in Stalin’s Russia” by Tim Tzouliadis:
http://tinyurl.com/m99b4cn
Apparrently realpolitik is a foreign notion to you.
What were the statistics in the Winter War, Ivan? Wiki says five dead Russians for every one Dead Finn.
The Germans regarded the Finns about the same way as “Good Old Boy” Americans regard hillbillys from Arkansas or Florida swap folks… basically OK but very backward. When Hitler studied the results from the Winter War, he rightly concluded that the Russian Army was a pile of crap. When Stalin studied the same results he rightly concluded the same thing.
Stalin went about improving his army, while Hitler got to thinking that superior Germans should be able to get stats at least twice as good as the back-woods Finns (actually the Germans didn’t do as well as the Finns, but Russians lost a very large number of people in the battle against Germany).
From the perspective of Western Europe, the whole purpose of Nazi Germany was to get in the way of Russia. That’s why Chamberlain was so reluctant to declare war. If the Soviets had made an early strike, The UK would have ensured just enough resources were delivered to stop the Russians dead in their tracks, but not enough to give Hitler any advantage. That was their plan A, that was what was supposed to happen.
At any rate, there was no sign of inferiority in the German troops during Operation Barberossa, every time they met head to head with Russians, the Germans always won the battle. The invasion failed because the Germans were too slow, and knowingly overstretched their supply lines. Starving and freezing troops can’t fight. Also, for some stupid reason, Hitler got bogged down trying to capture Stalingrad which wasn’t even a strategic target. Very stupid leadership, but top class troops. Read Tooze who explains the situation pretty well. None of this would have happened if Russia had made an early attack against Germany.
Russia is simply too big to invade in one Summer, geography saved them, and Russia simply had more people they could afford to lose. The “far superior Russian army” is just your imagination.
Yeah, from a historical perspective, the notion that Russia was about to attack Germany in 1939 or 1941 or whenever and would have rolled over the German army and then conquered Europe is I think simply untenable. All evidence available, some of which is described above, points against it.
It’s a Bircher fantasy.
It would have been able to do so, I think, but only the way it actually happened-through years of fighting and a wildly excessive number of Soviet deaths. It certainly would not have been able to do so very quickly.
Summing up Michael Goldstein’s bitcoin article:
1. Bitcoin is going to go up a lot more, and I mean a lot. [Proof offered: None.]
2. Thus, only an idiot would let it slip through his fingers.
And he wrote this on September 11, when bitcoin had been going down down down continuously, losing 65% of it’s value in mere months. And it’s still going down as we speak.
Bob, your slipping, linking to that kind of garbage. How much more intelligent you will look if you linked to my series of articles on bitcoin, say here: http://smilingdavesblog.wordpress.com/2012/08/03/bitcoin-all-in-one-place/