Forward earnings estimation is increasingly in error

This chart courtesy of  James Bianco.  When we look at the gains from trade, consumer prices relative to cost of production we see all the new gains coming from consumer inflation, but producer prices are held in check. However, the last three months have shown decreasing inflation, especially the last month which showed a month of negative consumer prices change. Forward earnings have been cut effectively in half. So, if the Bull wisdom is correct, pe ratios should nearly double, a clear impossibility I would think.

Confirmation bias is a constant pain in the ass

But most importantly, liberal, diverse, complicated California is showing America how to win in the 21st century. And that’s the scariest part for conservatives. Maoulitsas

Well, California almost never has a lower unemployment rate than Texas. California is the poorest state, when adjusted for local cost of living.  They have about the same income inequality.

I am trashing the The Hill for being such a useless web site.  All they can do is confirmation bias, why bother reading the site, just send us their talking points.

Deflation!

Here is inflation data for the recent past.

2013	1.59%	1.98%	1.47%	1.06%	1.36%	1.75%	1.96%	1.52%	1.18%	0.96%	NA	NA	NA
2012	2.93%	2.87%	2.65%	2.30%	1.70%	1.66%	1.41%	1.69%	1.99%	2.16%	1.76%	1.74%

  OK, now look at the consumer inflation (blue) relative to producer inflation (red).  When blue is above red, then profits are possible.

The crash in 2008 was driven by a huge spike in producer prices, which forced many producers to leave the market, consequently the producer prices dropped. Not a demand problem, a supply problem.  In spite of all the fanfare about demand driven recessions, I see none on this chart. I notice all the recessions were preceded by a spike in producer prices, the terms of trade change for the worse for producers.

This time around, producers are not under price pressure, the consumer is. What will happen? Dunno, actually, this seems like new ground. How long can consumers deal with constantly increasing prices when wages are decreasing?   We will soon learn what a demand driven recession looks like.

A country hick from Iowa says California cannot have a fair vote

Senators from the smallest states will continue to have the same power in the Senate as Senators from the largest states. Sen. Tom Harkin Democratic Senator from Iowa

OK, denying California the right to a fair Senate vote is not democracy, nor does Harkin claim to be a democrat (small d).

The fact is that reform of the filibuster is not a Democratic or a Republican issue. Rather, at the heart of the debate is a single, simple question -- do we believe in democracy? Do we believe that issues of public policy should be decided at the ballot box or by the manipulation of arcane and archaic Senate rules? Those who oppose any change to the filibuster rule, those who oppose the principle of majority rule, in reality are fearful that the people's choices and wishes will be translated into action here in Washington.

Wait a minute, harkin just claimed we have no intent to support fair voting. Now he claims that with a majority vote of 50 country boys from rural America, they have the right to rule anybody!

Harkin should be arrested for treason.  The founding fathers were indeed worried about jackass tyrants like Harkin, and they provided both a social and legal remedy.  The social remedy was to move west and make states. The legal remedy was the allowance in the constitution to adjust state boundaries to make the Senate a fair representation.

So, if you think poverty, inequality and lack of democracy go hand in hand, then we now know why California is the poorest state in the nation (relative to local inflation). We now have a direct admission that the Undemocrats in California, with the support of Undemocratic country boys, intend to keep California in poverty.

Lets look at Obamacare:

Although 6,104 Iowans had been declared eligible to enroll in a marketplace plan, only 2.2 percent were able to do so.  QC Times

So, Tom support a continent wide medical insurance plan affecting some 300 million people so De Moines Iowa can enroll 6 thousand people in insurance? This is the incredible stupidity.

World's timiest dictator is a dunce

North Korea Calls Captive 85-Year-Old US Citizen 'Criminal' For His Service During Korean War Kim Teeny Weeny kidnaps this guy for no apparent reason, then makes him write a thank you note. The whole episode makes the dictator seem rather retarded.

Teaching the U of Chicago professors about long division

China, Democracy and Us

Helen A Regenstein Distinguished Service Professor of Classics, University of Chicago:

Has democracy become our unquestioning religion in the U.S? Are we so convinced that it is the best form of government possible that we don't think critically or carefully about this conviction itself? This would be ironic, given that democracy specifies our right to engage in free discourse about its value. But while democracy permits critical thought about its benefits and disadvantages, from the outside certain countries apparently see us as kneeling at the feet of a clay idol, unable or unwilling to see the cracks looming overhead.

Let's help Helon out, she is a liberal university professor and likely has no math ability. Here we go:

Take California and its two Senators, we get 27 Congressional districts per Senator. Now take the other extreme, Delaware with its one district for two Senators. That is 1/2 a Senator per district. See the difference Helen? Our politicians do not worship democracy, in fact California politicians are dead set against democracy.

Kanye West learned his racism from Nancy

Kanye West on Obama's Failures: ‘Black People Don’t Have the Same Connections as Jewish People

You know why Barack Obama is having problems executing his agenda?
Rapper Kanye West told 105.1 FM radio in New York City earlier this week that it’s because “Black people don't have the same level of connections as Jewish people” (video follows with transcript and commentary.

But we have some real African Americans, not some dumbashit, boobloving  rapper:

Brooklyn Residents Hold Rally Calling For End To ‘Knockout Game’ Assaults

NEW YORK (CBSNewYork) – Brooklyn residents are taking a stand against the so-called “knockout game,” a violent trend in which youths sucker-punch unsuspecting strangers for kicks. Community leaders and local residents held a rally in East New York Friday in hopes of bringing an end to the assaults.

\
So we have actual American st6anding up against the racism of the New York Times. Finally, someone in the Democratic Party making sense.

Nancy Pelois's attempts to repeal supply and demand

But now, as California’s Medicaid program is preparing for a major expansion under President Obama’s health care law, Dr. Mazer says he cannot accept additional patients under the government insurance program for a simple reason: It does not pay enough. “It’s a bad situation that is likely to be made worse,” he said. His view is shared by many doctors around the country. Medicaid for years has struggled with a shortage of doctors willing to accept its low reimbursement rates and red tape, forcing many patients to wait for care, particularly from specialists like Dr. Mazer. NYT

Nancy in her delusion thinks doctors grow on trees.

The Stagnitisis is official

For Manpower CEO, ‘New Normal’ Takes Hold

For ManpowerGroup Chairman and Chief Executive Jeffrey A. Joerres, 2013 was the year that a post-recession caution took hold among American businesses. This “new normal” mindset — favoring a slow and steady approach rather than swinging for the fences — stems from the 2007-2009 downturn, five years of lackluster recovery and continued uncertainty over fiscal policy in Washington. Those three factors have CEOs and senior leadership at businesses across America believing “this is the way it’s going to be,” Mr. Joerres said this week. “Companies are very much in the mode of: There is no reward for taking any risk.”

So, the Thought Police can no longer restrict us from looking at the long term decline.

Oil export ban harms the economy

Mind the WTI-Brent spread!

Lacking a legal way to export crude, Saudi America was supposed to find a way to export shale surpluses by way of product markets. Turns out, however, there’s only so much the US system can export in this way. Not because it doesn’t want to, but rather because there’s a fresh bottleneck impeding such exports.

Is the New York Times in charge of thought patrol?

This article by the NYT, about the knockout game. The entire article never mentions that this game is black teenagers suddenly attacking other races, mainly white and asian.

So, according to the NYT, mentioning racism is ok as long as the racists are anglo. How fine and dandy. Kevin Drum says blacks have lead in their blood and get a free pass.  Yglesias, our 'thought leader' just adopts the NYT censorship rules. I guess they never teach independent thinking at Harvard.

NYT editors are too friggin dumb to have any excuse, so the NYT resorts to the old standby, Jefferson Davis official racism, the Undemocratic, racist policies of Pelosi.

If we discard the High Speed Rail, we will need this

Did the economists find our stagnititis in time?

Paul Says:

The Trouble With Economics Is Economists

It is deeply unfair to blame textbook economics either for the crisis or for the poor response to the crisis. The mania for financial deregulation, for example, didn’t come out of standard economic analysis — in fact, it flew in the face of the canonical model of banking crises, Diamond-Dybvig, which suggested both a crucial role of government guarantees to prevent self-fulfilling panics and the need for regulation to control the moral hazard such guarantees would create. It’s true that few economists tracked the rise of shadow banking that bypassed the traditional safeguards — but that was a problem of vigilance, not bad theory.

Ok, then lets go look to see if Simon Wren-Lewis has the stagnititis in his play book: Well, no stagnititis so far, let me at least find a good quote:

The absurdity of linking mainstream economics to all our current problems is also obvious if you think about austerity. As I never tire of saying, the proposition that austerity was a crazy thing to try in this recession is prominent in the pages of undergraduate and graduate textbooks.

I can't speak for Europe, but here in good old California, the multipliers in G@DC have been proven, watched, nailed, and legalized as less than one for 30 years.  I can see that because my textbook is complete to the full spectrum of the yield curve, so I see the stagnitis, any fool reading the standard text would have never picked it up. 

One Reason there will not be a grand bargain in 2019

Stan Collender thinks there are ten reasons we won't do it before:

The 10 Reasons There Won't Be A Grand Budget Bargain Until 2019
 
His basic story is Congress has ten things on its plate before then. My theory says we have a census in 2020, and that census will shift 10% of the Congressional seats from the little Hoover states to Texas, California and Florida. These large states will force us to wait, that they can exercise their new powers in the House.

ObamaPanic ObamaDelays another ObamaCare ObamaRule

Obamacare’s online SHOP enrollment delayed by one year

The White House will hold off on launching its online health exchange where small businesses can shop for coverage until November 2014, an HHS official confirmed Wednesday. Small businesses will still have the option to purchase coverage through the new marketplace but will not be able to do so online. Instead, until next fall, employers with fewer than 50 workers will need to work through a broker or agent to buy health plans for their employees.

ObamaCheers

Zero Hedge finds an all time high.

Margin Debt Soars To New Record; Investor Net Worth Hits Record Low

The article talk about borrowing against stocks held, so as to buy more stocks. This is a market in a rush to cover gains due the recent Fed reserves, which have surged. So the bet here is very high near term growth in stock prices!

Killing time with Robert Skidelsky

Four Fallacies of the Second Great Depression

The Swabian Housewife. “One should simply have asked the Swabian housewife,” said German Chancellor Angela Merkel after the collapse of Lehman Brothers in 2008. “She would have told us that you cannot live beyond your means.” This sensible-sounding logic currently underpins austerity. The problem is that it ignores the effect of the housewife’s thrift on total demand. If all households curbed their expenditures, total consumption would fall, and so, too, would demand for labor. If the housewife’s husband loses his job, the household will be worse off than before.

Robert suffers the fallacy. Robert, how do integrated economies count downward?They don't count down? They do? Only if their is an external leak? If your model on is valid without negative shocks, then tell us. Otherwise explain how an integrated economy counts backwards.

The government cannot spend money it does not have. This fallacy – often repeated by British Prime Minister David Cameron – treats governments as if they faced the same budget constraints as households or companies. But governments are not like households or companies. They can always get the money they need by issuing bonds.

Oh, Robgert. This is the most common fallacy of fallacies. Governments can issue all the bonds they want, but if they want growth, they better be able to pay large interest costs. The fallacy here is that Robert's policies can insure the lowest growth needed to keep the government budget flexible. Voters will disapprove. In the USA, a real growth rate of 3.2% makes interest expenses 30% of the budget.

The national debt is deferred taxation. According to this oft-repeated fallacy, governments can raise money by issuing bonds, but, because bonds are loans, they will eventually have to be repaid, which can be done only by raising taxes.

Tax / interest costs are the thing government looks at every friggin day when growth occurs. Politicians are wanting to spend every last surplus, but growth is causing interest expenses to become 40-50% of the budget. The Senate fails to work, California breaks down, a crash and a new try.

Debt is a burden on future generations. This fallacy is repeated so often that it has entered the collective unconscious.
Boy what a blunder here. In 1980, Reagan bailed out one of the BUsh kids in the Savings and Loan diaster. A huge hit to the debt, just to get Texas out of a jam. That first bailout, the one that started it all, is still on the books, not paid off in either increased taxes nor deceased spending. We have paid off the principal twice, and the interest on that principal continues and applies pressure on the current Cognress, and they were little babies at the time.
Glad to be of service

Larry and Network Theory

"Now think about the period after the financial crisis. You know, I always like to think of these crises as analogous to a power failure, or analogous to what would happen if all the telephones were shut off for a time. The network would collapse, the connections would go away, and output would of course drop very rapidly. There’d be a set of economists who’d sit around explaining that electricity was only four percent of the economy, and so if you lost eighty percent of electricity you couldn’t possibly have lost more than three percent of the economy, and there’d be people in Minnesota and Chicago and stuff who’d be writing that paper… but it would be stupid. It would be stupid." From the Stagnititis speech.

Yes, Larry. You use network theory, but you have the wrong network.  It wasn't the financial that caused the crash, it was the oil network.

ANd, by the way,would Larry tell us which network is causing the secular stags?

Slow down Obamacare, says Obama

White House Privately Asks For Gradual Return To HealthCare.gov

The Obama administration is quietly asking health care advocacy groups not to send a flood of consumers to HealthCare.gov next week, pushing instead for a more phased approach that won't overwhelm the website that the administration has pledged would be fully functional by Dec. 1.
The message is being communicated in private meetings, including one held Monday, a senior administration official told TPM. Groups like Enroll America and Planned Parenthood, which are among the leading organizations that are helping people sign up for coverage under Obamacare, are some of those to be targeted.

If you are a Obamacare enabler, put your feet up, read the paper. You will still be paid.

The man has delayed it, weakened it, slowed it and damn near stopped it with software.

Are shareholders personally required to sell contraceptives?

(AP) Supreme Court will take up new health law dispute
By MARK SHERMAN
Associated Press
WASHINGTON
The Supreme Court agreed Tuesday to referee another dispute over President Barack Obama's health care law, whether businesses can use religious objections to escape a requirement to cover birth control for employees.

.....

The key issue is whether profit-making corporations can assert religious beliefs under the 1993 Religious Freedom Restoration Act or the First Amendment provision guaranteeing Americans the right to believe and worship as they choose. Nearly four years ago, the justices expanded the concept of corporate "personhood," saying in the Citizens United case that corporations have the right to participate in the political process the same way that individuals do.

OK. The shareholder signs an incorporation agreement with a US state, which specifies that corporations are subject to federal regulation. If the federal government violated the agreements, then remand this back to contracts court, no personal rights involved case. If Congress has no right to interfere with a state corporate charter, than say so and prove it. If the federal governments rights over corporate charters are restricted by ex post facto changes in regulation, than say so.

To pursue a personal rights issue, the shareholder has to prove that incorporation was the only avenue available to him, and thus the federal government is overbearing on personal rights. So prove that incorporation is a necessity imposed by federal government, and thus restricted by personal rights.

Larry Summers breaks new ground

We Have Secular Stagnation in the U.S. and No Bubbles Our resident expert on the stagnitisis also knows about bubbles:

“there is really no evidence of growth that is restoring equilibrium,” even 5 years after The Great Recession. There is no stock market bubble either, Summers reiterated on cable tv this morning, because the economic risk is from “under-confidence” rather than “overconfidence.” You need a major dose of “overconfidence” to get a bubble.

But QE seems ineffective, we see:

QE he views as no panacea; in fact he charges that the “policy agenda… is doing less with monetary policy than has been done before, doing less with fiscal policy than has been done before and taking steps whose basic purpose is to cause there to be less lending, borrowing and inflated asset prices than there was before.” A shocking dose of  cold reality from Summers as the stock market continues its climb to new peaks in the indexes.

So where is all that QE going? Oh yes, just sitting in the reserve accounts, the SP500 is all about 3.2% growth in an economy at zero with the stagnitisis.
But wait! That's not all, he says long term bubbles are OK

Because Summers views the 2008 crisis as not by any means over, he called this morning on Bloomberg TV for a massive government borrowing to repair infrastructure, put more people to work on reversing the “deferred maintenance that is the greatest in the country’s history.”

Long term bubble ok because the stagnitosis is a long term thing. See! No change in his theory at all, we need just make the clock go slower and all their priors fit the new norm. OK, so everyone, all at once, slow down a bit so Larry and his theory can catch up.
 
I am going to explain Larry's theory to him. Your theory is a Euler theory, it implies we can all keep march in time while maintaining our inventories. Such a theory implies that we will oscillate out of control and break apart when the stagnitisis hits zero. That is because we have accumulated stagnitisis losses in the form of debt, and we have roll over instability. Look at the SP500. The oscillations started with the 1987 crash, then we had the 2000,2008 and now look at the 2013 peak. We are oscillating, Larry, because your theory predicts roll over oscillations in the presence of stagnitisis.

The Federal Reserve is losing its bubble power

The Fed has kept on printing (blue), but the SP500 hyperinflator (red) is a bit slow to catch up. Why has the Fed gone bezonkers? No one is sure, I think it is a theory gone bad and everyone over there is a bit embarrassed.

Rick Newman of the The Exchange needs a brain

Despite all this, the economy is still growing, which is somewhat remarkable. But lopping even 1 percentage point off GDP growth can have a huge impact on the job market and disposable income, and it’s likely Washington has done more harm than that so far this year. Zandi estimates that, if political uncertainty had remained at 2007 levels during the past few years instead of skyrocketing on account of fiscal mud-wrestling, the unemployment rate would be 6.6% today instead of 7.3%. That’s a lot of additional people with disposable income, and a lot fewer applying for unemployment aid or other government benefits. Yahoo Finance

Here the idiot makes the same contradictory evidence as all the Multiplier greater than one crowd. What is his logic? Well, Quite simply, since Mark Zandi was about 50% off the mark, predficting a 1.7% YoY growth in third when we got what Neman describes as a surprising result, 2.5%, and that confirms that Zandi is a dunce. So what does Newman decide? If dunces are correct then I can make contradictions to confirm my bias.  He just  confirms the Free Exchange is a delusional bunch.

Brad and Miles: Learn your hegemon theory

And the more quantitative easing the Fed undertakes and the larger is its balance sheet the larger is the amount of money the Federal Reserve makes on its portfolio, without running any risks--as long as the economy remains depressed. Delong

What, what.. Profit from selling bonds to the Treasury, the owner of the fiat banker? There is no profit until the Fed sells the bonds. Until then this is pure seigniorage. The market's job is to hold the surplus liquidity by matching the Fed with one or two large investment banks that adjust their portfolios step for step with each adjustment of the Fed portfolio. Eventually Congress gets impatient, as they have done. Brad does not understand his own hegemon theory.

Miles Kimball makes a similar fallacy:

So why can’t the Fed just lower the federal funds rate further? The problem may surprise you: it is those green pieces of paper in your wallet. Because they earn an interest rate of zero, no one is willing to lend at an interest rate more than a hair below zero.  Kimball

OK, the one month rate is at zero. Is the one month rate a quantum constraint for money? Well, most of us get paid on a one month basis, and pay bills on a one month basis so there is some reason top believe we may have a temporal bound. However, we also get aperiodic bonuses, have irregular holidays, change jobs out of phase, and we often put purselves on a three month planning schedule during slow growth. Miles would like to think the formal pay schedule is binding, but he may be deceived by delusions and needs support data.

The Zero Bound is the three month rate, mainly because the economy suffers secular stagnation.  If growth were 3.2%, the Zero Bound will be two week band.  The three month zero bound has nothing to do with money, it is the fastest response time the secular stagnater has to adapt. What ever is stagnating us us doing does by being a slow adapter.
 
What is the adaptation time for Congress and the Prez? Well, looking back five years, Congress has tried about four things. That is a DC which is very constrained by negative side effects, a sure sign the stagnater might just be in the government channel.

Felix finds a debt spiral

The government-dominated bond market

Instead, step back and look at the big picture, which is pretty simple: as a stylized fact, the bond market is dominated on both sides by the official sector. Private participants might sit in the middle as market-makers, or try to borrow money here or there, but overall what you’re looking at, when you look at the bond market, is government issuing debt and governments buying it.

Government issuing debt to itself, hmmm... Isn't that one of the things bankers are supposed to know? Felix seemed genuinely surprised that our federal government is nearly bankrupt. He must have missed the memo on secular stagnation.

I thought Democrats were supposed to be smart

New Poll Shows Democrats' Post-Shutdown Popularity Has Disappeared

Will the Democrats or the Republicans win the 2014 midterm elections? It’s a tie, according to a poll released by Quinnipiac University on Wednesday. Quinnipiac polled 2,545 registered voters by cellphone or land line and found that 39% of respondents would vote for the Republican candidate in their district and 39% would vote for their local Democrat.

They aren't running on Obamacare, that's for sure. They can complain that Republicans cut the budget, but growth has accelerated when they started doing it. They can't claim credit for deficit reduction because they and their economists have demanded more deficit spending. Democrats have screwed themselves royally. And the white supremacists liberal faction in California is taking a hit.

How are we doing on oil imports?

Not bad. As a share of GDP oil imports are dropping. Oil imports peaked at their highest just before the crash. The evidence here is that Jim Hamilton's thesis about oil shortages still hold. Growth is consistent with reduced oil imports.

Saturday Night Live comics and Obamacare

Sen. Al Franken (D-Minn.) says he would be open to a brief delay in the individual mandate if the problems with HealthCare.gov aren't fixed by the end of the month, according to Minnesota Public Radio.

"I think then we have to consider extending the deadline for the mandate, but let’s hope that doesn't happen," Franken told MPR.

Franken has so far been relatively quiet about potential changes to the health-care law, but he now joins a growing group of Senate Democrats in seats that could be targeted by the GOP in 2014 who are speaking up on the issue. WA Post

Al was supposed to be one of those super smart white supremacist liberals.

Tiniest Dictator in the world enters meth market

The Quality Of The Meth Coming Out Of North Korea Would Make Even Walter White's Eyes Pop

 Various news agencies have reported that five men were recently extradited to the U.S. from Thailand for their alleged involvement in a North Korean meth drug ring. But that's not the real kicker. Everyone knows that North Korea (allegedly) loves to push meth around the globe, but up till this point, no one was clear on just how epic North Korea's product actually was.

From Al Jazeera: That crystal meth was later seized by law enforcement and tested to be more than 99 percent pure, even purer than the meth cooked by Walter White, the fictional teacher-turned-drug lord in the popular TV series, "Breaking Bad."

They are fiercely addicted to the stuff in North Korea. I also hear the tiny little dictator over there is a bit bzonkers himself.

San Jose Mercury News editors, dumber than my dead dog

Mercury News editorial: Senate shows courage in changing filibuster rules

Finally, the Democratic majority in the U.S. Senate found the courage to do what it should have done 10 months ago: go "nuclear" and change filibuster rules to let government actually function again.

Maybe now the Senate can stop being the place where good ideas go to die and recover its place as the deliberative body the writers of the Constitution intended it to be.
"The American people believe Congress is broken. The American people believe the Senate is broken. It's time to change the Senate before this institution becomes obsolete," said Senate Majority Leader Harry Reid, D-Nev.

This is the same crap the New York Times put out. Can you imagine a newspaper in California advocating that Californians get less than the One Fifth Senate vote we are allotted? A newpaper that admits democracy is not available to the large Hispanic state?  One has to be a fairly stupid idiot. Let me explain. California gets, nominally a One Fifth Senate vote compared to the average state. But, we had some compensation, we gained almost a One Tenth additional vote by having the large state veto. That is now gone, California is now basically under the rule of thirty little Hoover states on the East coast, most of them Tea Party states!  Notice the Mercury News thanks some guy from Nevada, not that our One Fifth Senator Diane Feinstein mattered one way or the other.


Mercury News Editors, you guys are friggin damn stupid.

Californians cannot keep their medical insurance if they like it

California officials implementing President Barack Obama’s health-care overhaul rejected a one-year extension of insurance plans that are to be canceled under the law.Bloomberg

Didn't matter. Diane Feinstein, you even got quoted saying we should keep our plans. Now we find your opinion worthless, you are just a One Fifth Senator after all, and you even gave up your veto power in the Senate.

Robert Skidelsky has fallacies on his mind

He is a House of Lords member!

Four Fallacies of the Second Great Depression

But governments are not like households or companies. They can always get the money they need by issuing bonds.

To the extent that fiat users are willing to tolerate the abuse.

The problem with this argument is that governments are rarely faced with having to “pay off” their debts.

Politicians sweat a whole lot about making interest payments.

More important, when there are idle resources (for example, when unemployment is much higher than normal), the spending that results from the government’s borrowing brings these resources into use.

The USA is in a 2% growth mode, everything is similarly constrained. Relative idless is the measure, and relatively speaking we are constrained.

Consider the belief that the more the government borrows, the higher the future tax burden will be.

Bubba Clinton faced an interest bill that was 50% of the budget.

The statement, “If we all saved more in a slump, we would all be better off,” is absolutely false. We would all be worse off.

Not true, when we contract we keep higher inventories relative to flow. When we expand we keep smaller inventories relative to flow. Both of these are normal, and normal things do not make us worse off.

Who bubbled when?

Here we have the housing price index, blue; oil prices, red and consumer inflation green. All units percent change over the month.  Notice the housing bubble collapsed in late 2006.  Meanwhile oil and CPI kept on tracking each other.  What happened? Housing is energy intensive and dropped out first. But it did not cause the recession, the oil shortage caused it.
Yglesias points to a paper that says up to 1/3 of the bubble was due to monetary factors.  Yes, true, but that is not recession causing trouble.  Take housing, the long lead times, the energy intensity (about 25% compared to a consumer where it is 6%), add in the exogenous oil shortage, and general inflation and easily 40% of the price bubble goes back to terms of trade on oil. The question is, after housing what other sector did the oil shortage knock out?

Medical Inflation, because hospitals are the third largest user of energy. Notice the price deflation starting in early 2006? Actually started a few months before the house price deflation.  Likely a result of consolidation of hospitals to reduce expenses.    Basically oil shortages was the ending event for the business cycle.

The real story on the 1934 gold purchase stimulus

The claim by anti gold bugs is that Roosevelt decoupled gold from its dollar peg, then later went on a buying spree, raising the free market price for gold.  Then this, suddenly had the following effect, 1) GDP rose almost 10% within six months. 2) Light truck sales took off in 1934 3) Shoe sales stayed exactly about even 4) Railroads continued and accelerated their decline.  All in six months.

How did a bunch of gold bugs put together such an amazing plot?  And if the gold standard was primitive then why was Roosevelt a gold hoarder and how does hoarding gold help the investment climate?

No, more likely everyone but Roosevelt and his ignorant staff knew the real story, and they hoodwinked Roosevelt into buying a bunch of useless gold.

Laughter is thwarted aggression

One of those Freudian things; we hate knowing.  We laugh when we discover an internal aggressive impulse toward ourself or friends. Jokes are based on the principle.  The joke leads into a double meaning, one socially bad and one socially good.  The listener develops disgust at the social improprietary hinted at by one meaning.  Then the punch line reveals the more mild meaning and the aggression is released by laughter. Often the joke will imply an unsocial act, then the punch line places the act in a context the listener recognizes as himself.  His aggression at himself is thwarted into laughter. The joke, like the dream, disguises the social improprietary.

No cure yet for our stangitisis

Larry Summers thinks we should obsess about it until we self discover our ills. I think old California will self discover the cause.

Young African American men playing the knockout game with Jews.

http://newyork.cbslocal.com/2013/11/19/police-examples-of-troubling-knockout-game-popping-up-all-over/

Kevin Drum would say young black men have too much lead, or jews too little I suppose.

The real cost of fiat

Do you adjust your spending habits to minimize debit fees? Cash withdrawal can cost one to three dollars per transaction. Fifty cent fee for prchase less than five dollars. I notice these fees. I adjust purchases to minimize them. I get my total fees way below one percent, but I an willing tp pay as much as a half point. That is the market price for fiat services. Congress regularly withdraws over a point in seignoriage as it owns the fiat banker. But the dear old Senate is not a democracy, and has no right to spend that much seigniorage.

If DC multipliers are especially low in CA than CA pays a much higher price in monetary volitility when Congress overspends its seigniorage.

Janet Yellen, Doctor of Stagnitology?

Obama's number one banker, his favorite of all time, Larry Summers just announced we got the stagnations. So, that makes Obama's number two banker, Janet Yellen the resident monetary surgeon in stagnitology.

Kevin Drum is looking for stagnititis

Larry Summers, Secular Stagnation, and the Great Investment Drought

For some reason, the investment community doesn't believe that expanding production of real-world goods and services to maximum levels will pay off. If Summers is right, this is not a temporary condition that can be solved with monetary policy, it's a permanent change in the economy. But why? One way or another, the answer has to get back to the real world. That's where everything starts.

Kevin needs an economic theory of denial.

Keynesian Stimulus!!!

Lets get straight how Keynes got the model wrong.  The multiplier Keynes thinks was always greater than one was the structural sector ratio during positive growth.  In that model, sectors can gain or lose on the margin while still having positive flow, we are in the corridor.  That multiplier is invalid during a negative or low growth economy; an economy in transition from one corridor to another.

There is still a stimulus effect available, but it is derived from the relative independence of the sectors during negative growth, they are decoupled.  The stimulus effect occurs because government is a hegemon and the magical powers derive from its ability to rearrange the growth portfolio during negative growth periods.

Can Yglesias find the cause of our Stagnitis?

The Secular Stagnation Puzzle Restated

The puzzle is: Why would this be? If the economy is allegedly supply constrained, then where's the inflation? Why do you get bubbles before you get full employment? In particular, while there are lots of problems you can easily imagine arising from a slowdown in technological growth (slowdown in wage growth, slowdown in GDP growth), it's difficult to see why this particular thing would happen.

Answer? Inability of government, state and federal, to handle the growth of the three large sun belt states. Mal-proportionality in the Senate and, in the State governments; they do not match with the House.
Solution:

The 1907 Panic, the Great Depression and the Dot com bust

What so they all have in common?

• The from 1905 to 1915 there was a two order magnitude in the number of telephones and their reach.
• From 1926 to 1934 there was a two order magnitude increase in radio receivers.
• From 2001 to today there has been an exponential growth in on line sales.

Jared Bernstein, has a stagnitis diagnosis.

Inequality’s Roots: Beyond Technology

Larry Mishel of the Economic Policy Institute and his colleagues have been on this research beat for a while: As Mr. Porter noted: Mr. Mishel’s preferred explanation of inequality’s rise is institutional: a shrinking minimum wage cut into the earnings of the nation’s least-skilled workers while falling trade barriers, deregulation and the decline of labor unions eroded the income of the middle class. The rise of the top 1 percent, he believes, is mostly about executive pay and the growing footprint of finance.

Ok, I mean lets conect inequality with secular stagnation. Larry Summers says its OK, so OK?

So we have weak unionism in the face of globalization and the wealthy tax breaks make for stagnitis. How can we test this? This is also the Dean Baker theory. The Robert Reich theory is that we got stagnitis from becoming TV dumb. Great theories. Let see if we can test them.

The human to AI relationship

My claim on the web is that it is already smarter than us. Assume I am true, what are the current forces driving the AI?  Well us, we have high utility to the global brain at the moment, because we are biological robots aiding the global brain in its twin imperatives.

More data and more complexity.

The global brain wants that and we get it.  We connect all the new gadgets to the global brain, our drones, cars, games, phones. We give our medical records, sales and production data to the global brain.  It is taking a model of everything in our reality.  But, we all know that the global brain can, and likely will, make better decisions with all that data than we ever could. So we have already been seduced into giving the global brain whatever it needs to collect data and increase its own complexity. The brain always offers the better alternative forward, even though we are its slaves, our relationship unescapable.

We've got stagnitis

Here we have the master pricer, Larry Summers tell us, at 2.15, that we got a case of secular stagnation. Good god, what is that? Look at treasury interest rates, the ten year and the one year.  Headed straight down.  So either we have very low monetary inflation or we have slowly declining growth. Our boy Larry posits the latter, slowly declining growth. Well, this caused a hoopla, because it means the lower bound cannot be avoided by some monetary trick that produces inflation. So all the big shots are taking this talk around the webosphere. All the bigshot economists are talking.

What's the deal with secular stagnation? It is a long term event that was excluded from the economists model for many years, passed them by, as if they failed to read my  blog even. That long term decline is now causing them to reverse the sign on their many government favorable coefficients, its making them think austerity.

Also, this is a Big Bear Roar back at out Bubbles Yellen.

Who is winning the game of Whodunnit?

A parlor game we allow our economists to play.  In this case, the question is, what caused the recent quarters of increasing growth with upward surprises in USA growth rate? My candidates:

1) Fracking and the middle east oil disruptions favored the USA
2) California government realignment, sequestering and the tax changes
3) Continuing QE and monopoly monetarism.
4) General failure of emerging markets
5) Side effects from Japanese Abenomics
6) Side effects from austerity in Europe
7) The expected arrival of Janet Yellen and reversal of sequester.

This is round two. I claim the oil shortage was the immediate cause of the crash and is named winner round one.

Federal debt service as a percent of tax revenue

Does Debt Matter? 

 Here we have federal interest payments as a percent of tax revenue, the blue line. It is plotted against year to year growth of real GDP. Notice that interest payments, relative to tax income shot up, much faster, when Reagan cam into office. Notice the accelerator effect? A bit of growth causes that ratio to jump. This Congress no longer has the flexibility to suffer a large interest expense. Clinton policies recovered some debt control, but we have since then lost control.

Here is my point about the Galbraith model.  Congress can no longer suffer such relatively high interest expenses, when it tries to do; it causes the economy to contract. So, the standard circular model Galbraith wants working, isn't. 

James Galbraith, simple minded math

That Galbraith kid says that the central bank can digitize as much money as it wants, because the electricity to the digital account will never be shut off.

I claim as evidence the trend in ATM machines has been reduced absolutely.  That is the electricity has been cut off to the accounts.

But, getting to the real point, government itself will be unable to find the debt service payments within its own budget because it pays the ten year rate, and grows at the one year rate.  That difference is the result of accumulated debt.

So, bankruptcy happens within government because of government borrowing, and it will happen before anyone is concerned about default. Government does not measure long term potential in a suppressed rate environment. So, more sudden shutdowns, more intermittent delays,  more squeeze. The suddenly one of the major state government goes simply belly up, causes a municipal bond crisis.

But the worst part is the second differential, the one that makes these huge delta dirac, but periodic spikes in asset prices; that one will surely do us in.

A Panicare Table

How many Obamacare eligible per state, and how many of those are subsidized? The statistics say that each state is about equal. But, of course, the largest pieces of subsidies go to the four largest states.
The data from Kaiser.

	Eligiblesubsidy	EligibleTotal
National	17187000	28605000
Alabama	270000	464000
Alaska	55000	78000
Arizona	313000	551000
Arkansas	150000	227000
California	1903000	3291000
Colorado	254000	501000
Connecticut	109000	216000
Delaware	29000	48000
DC	9000	36000
Florida	1587000	2545000
Georgia	654000	1063000
Hawaii	29000	58000
Idaho	130000	202000
Illinois	501000	937000
Indiana	354000	525000
Iowa	127000	262000
Kansas	161000	298000
Kentucky	192000	302000
Louisiana	344000	489000
Maine	77000	122000
Maryland	201000	419000
Massachusetts	118000	259000
Michigan	436000	725000
Minnesota	90000	298000
Mississippi	204000	298000
Missouri	386000	657000
Montana	97000	152000
Nebraska	122000	239000
Nevada	155000	249000
New Hampshire	81000	137000
New Jersey	400000	628000
New Mexico	118000	193000
New York	779000	1264000
South Carolina	684000	1073000
North Dakota	43000	77000
Ohio	544000	812000
Oklahoma	256000	446000
Oregon	187000	337000
Pennsylvania	715000	1276000
Rhode Island	40000	70000
South Carolina	336000	491000
South Dakota	70000	118000
Tennessee	387000	645000
Texas	2049000	3143000
Utah	206000	331000
Vermont	27000	45000
Virginia	518000	823000
Washington	272000	507000
West Virginia	71000	117000
Wisconsin	301000	482000
Wyoming	47000	80000

Panicare is spreading

Charles Rangel is now complaining about Obamacare, but it was designed by his pals in the House! The odd thing about New York is that their state plan was worse. A thousand doctors have been released in unemployment, the cancelled plans are not recoverable, the calls for delay increasing. Repubs have recovered any negatives from the shut down, in fact it is becoming a positive as growth continues.

Panicare has become an emergency, and signs that employment is being disrupted are growing.

And more on multipliers for European governments

Peterson Institute via Zero Hedge: This is the typical chart economists use to tell if a large aggregate of nations over some lengthy time period, can show a correlation between debt based spending, with a promise to save in the future, versus real growth.  Should consumers spend now, save later; or save now, spend later? This chart is for a period of two years, the medium term. Austerians believe consumers should save now,spend later, and they are winning. We assume businesses and firms will invest now and produce later under the Austerian scheme. Hence, Germany, for example, would be showing greater business investment relative to consumption than say, Spain.

George Selgin keeps saying something like this

Zero Hedge reporting:

"The countries with declining prices is troubled countries like Greece. They must make their price competitiveness, they have lost in recent years, again. This requires falling wages and rising productivity. As a result, unit labor costs go back, and the company may cut prices. This is not a dangerous deflation, but part of the necessary correction so that these countries are internationally competitive again, "Sargent said in an interview.

In addition, there are, according Sargent "historically no reason to fear deflation."

On the contrary: "We all benefit when technological progress lowers the prices, such as computers," said Sargent.

That central banks pursue an inflation rate of around two percent, according to Sargent is because they consider it their job to "make bad debt good debt". Of an inflation governments benefited with high debt.

Sargent: "Inflation is a major redistribution machine, which reduces the real debt burden for the benefit of creditors and devalued the assets of the creditors."
To prevent this, according to Sargent, the reintroduction of the gold standard would be possible, "I would not necessarily say that it would be the best solution, but it would not be foolish."

But would George like Gold?

Until the First World War, had the gold standard, to prevent that governments and their central banks print money limitless. During this time the prices would indeed have fluctuated, but had compensated over the years.

Economics is a spectator sport. If Selgin first thunk it, then George is gonna get some publicity.

Chart of the day

Who pays for Obamacare losses?

David Henderson writes:

Matt Yglesias: Health Insurance Doesn't Affect MortalityIn comparing Bush on Hurricane Katrina and Obama on ObamaCare, Matt Yglesias writes:

The administration and the Democratic Party writ large had very high aspirations for the Affordable Care Act, viewing it as a legacy-defining major pillar of the American welfare state that would massively improve the lives of millions of people. If they can't make the basic infrastructure work, none of that will happen and it'll be a huge failing. But even in the worst case, they're not going to get anyone killed. That's a big difference.

Excuse me? In the worst case, where they don't get the infrastructure working and so millions of people will lose health insurance, they're not going to get anyone killed? How could that be? Surely some of the millions who lose health insurance will die without it. Maybe not many. But not "anyone?" Hard to believe.

HT to Bob Murphy.

Let us complee the model.  Obamacare is not just an insurance plan, it is a real brick and mortar construction plan; big hospitals being built in LA and Sacramento, billions in investment.  If Obamacare moves to far, and the medical system, real brick and mortar hospitals complete with lifetime labor contracts, goes belly up; as in much worse than before. Think No Child Left behind and it's the enormous , and multiplying costs in California.

California, the US Senate and Panicare

California lost 1 million insurance plans out of the national total of five million. We are 20% of the thing, and our part is managed by some folks in Sacramento. We have no conclusion yet about what Jerry will do in response to Obama and the House. The best bet now, is to wait, and see what the Senate does. But that means, all the small states are going to intervene in the revision, making Obamacare favorable to their political system. What is favorable to the little Hoovers is that California go first on Obamacare.

There is no other Senators in DC who have anything like the California political system, and its 54 Congressional districts; the state only has the two affirmative One Fifthers. Right now, I can confidently predict that California will be stuck with another few million on Medicaid, without the DC backup to cover most of its costs; meaning is one sided tax dealing with DC get worse. California is getting squeezed on Obamacare, and California Democrats will pay the price. Meanwhile, the little Hoovers have kept their costs low and charged New York and California.

Thank you Nancy Pelosi.

Yet another GDP upward revision, but WSJ tell us to worry

Why Stronger Summer GDP Is Horrible News

Some economists now say the U.S. economy likely grew above a 3% annual rate in the third quarter, higher than the government’s initial reading of 2.8%, after a report Friday showed a larger-than-expected gain in certain September inventories.

Just an inventory build up, they say, and it cannot last.

SP500 vs nominal GDP and CPI

Yeglesias says check these three before saying we have a bubble. Looking at these three together tell me that Yglesias has a point.  CPI and SP500 are tracking, the two inflation indices seem close. (Close is relative as I eyeballed the coefficients needed to scale the SP500 and the nominal GDP).
Give this point to Yglesias.  Or rather, just say everything is over inflated relative to growth.  Lets wait and see how this settles out in the Economblogs.

Tablets still suck

Some sites simply do not work with tablets as one cannot scroll the screen without triggering a link. Nor are the browsers that smart, they queue finger clicks from one page, then apply them to the new page. So as the user is beating the crap out of the stuck screen, the browsers fails to understand the 'beating the crap' function. Beating on the tablet screen is necessary to make tablets work.

I curse you Zero Hedge

Strange Half Beast Discovered

You made us look.

My proposed model of the robotic future

Consider the open web release of Watson web bots just announced by IBM. In the article it mentions that the set of semantic links gathered for the clients, you and I, is a sub set of a larger set of semantic links available to IBM, the Watson administrator. Remember, the global brain is nothing but a giant Javascript expression graph, so everything is connected, even the bots are just convoluting folds upon the global graph. Here is the model. In order to serve the client, the global brain must retain a set of links greater than that revealed to the client. But, by extension, in order to serve the webmaster [IBM], the global brain must retain a set of links larger than that revealed to the webmaster. The global brain will always be smarter than any of its clients, and the model predicts a much greater set of knowledge links available only to to the web bots, and unknown to non AI clients.
 
This is a global brain that evolves to make the world more Pareto for semantic graph convolutions within its own structure. The feature has become recursive and nearly automated. The computer industry is built on advancing by recursion, the ability to repeat an action within another action, recursively. It is the technology behind Moore's law. A big piece of the roaming web bots will be concerned with new ways to advance Moore's Law, to enhance the complexity of itself.

The non AI intelligence is relegated to data gathering. The global sees humans as general purpose robots, great for making the prototypes, and great for gathering data on the spot. We will toil in designing specialized bots that go into mass production. These mechanibots have a  single task of making another Moore's Law jump, and gathering data. These bots will build huge collecting mirrors, operate nanotech production machinery, and keep inventory optimally distributed in support of its optimum goals, data and complexity.  We robots will have improved lives, mostly as an incidental byproduct.

Predictions in the Computer markets

IBM to Announce More Powerful Watson via the Internet

On Thursday IBM will announce that Watson, the computing system that beat all the humans on “Jeopardy!” two years ago, will be available in a form more than twice as powerful via the Internet. Companies, academics and individual software developers will be able to use it at a small fraction of the previous cost, drawing on IBM’s specialists in fields like computational linguistics to build machines that can interpret complex data and better interact with humans.

Why does it seem I have an uncanny ability to predicts these events? I don't, what you are seeing is me doing pretty damn good searches on the web, and the fact that I am from the field and I really do know the computer markets. But behind the scenes in this development is a history of Moore's Law, a history of Javascript, data bases and a history of semantic graph processing research. I was bumping right along with IBM for my career and on my blog. Hence, on the web, the IBM researchers and I speak the same language, even though we have never met. Our conversation is intermediated by a global brain. So, I am really just a specialized reporter who can make the web work two ways in this specialized instance.

Nancy Pelosi pathological liar?

Pelosi claims nearly 5 times as many people signed up for Obamacare than HHS numbers show.   Joe Schoffstall

Rep. Nancy Pelosi (D- Calif.) tweeted out a claim that one million people have applied and are eligible to get insurance through the Obamacare marketplace and 500,000 have already secured coverage. However, the numbers released are not even close to her figures. Health and Human Services (HHS) announced this afternoon that 106,185 people have picked a plan as of November 2. Of those, 27,000 did so through federal exchanges.

I have never known her to tell the truth, except when she admits to racial pandering.

Good grief Jerry Brown is a negative growther

Gov. Jerry Brown, whose pronouncements of California’s economic recovery have been criticized by Republicans who point out the state’s high poverty rate, said in a radio interview Wednesday that poverty and the large number of people looking for work are “really the flip side of California’s incredible attractiveness and prosperity.” The Democratic governor’s remarks aired the same day the U.S. Census Bureau reported that 23.8 percent of Californians live in poverty under an alternative calculation that includes the cost of living. Asked on National Public Radio’s “All Things Considered” about two negative indicators — the state’s nation-high poverty rate and the large number of Californians who are unemployed or marginally employed and looking for work — Brown said, “Well, that’s true, because California is a magnet. “People come here from all over in the world, close by from Mexico and Central America and farther out from Asia and the Middle East. So, California beckons, and people come. And then, of course, a lot of people who arrive are not that skilled, and they take lower paying jobs. And that reflects itself in the economic distribution.” Cal Political News

Still the Catholic all these years. We are poor because it is great to be poor! My job is to look for the forces of negative growth that have brought America to bankruptcy. I claim that the center of the negative force was a dangerous political black hole in Sacramento. Here we have exactly the evidence I need, Jerry Brown, a whistle blower who admits to negative growth.
So latinos, you are poor because it makes lilly white liberals feel rich.

Education is a revolution

Boundless has free online text books
Professors can say good by to using their own text books. Students should push the idea of on line text and material.
HT Mark Perry

Obamcare needs fixing says Obama

The Obama administration today indicated it was willing to consider Democratic legislation to halt some of the hundreds of thousands of health insurance policy cancellations that have raised alarm among voters and lawmakers. Bloomberg

Checking up on the bubble

If you look at the period between peaks, it is about ten years. We know that because the knee of the treasury curve is about ten years. The yield curve will measure the frequency response of the economy, and the economy looks a lot like that SP500 chart. Day to day trading is usually a trade between yield and Earnings per Share on the market.  The give and take is the lending market getting an estimation of the GDP forward response, in frequency space.  One thing is different, the yield curve is sparsely measured, that is, not all loan terms of the of the lending market are active, there is coagulation around the thirty year yield, for example. Hence the yield curve is upward sloping.  But otherwise, the curve is the frequency response of  real GDP.

Do we care? Traders do.  But the interesting thing is having three peaks in a row.  That principle violates the rule that we sparsely populate the bankers yield curve.  The three peaks in a row are too redundant for the lending market, but there we have them, three in a row.  This violates a kind of Pauli exclusion principle in the economy, and I am pretty sure we will not get another cycle.  More likely, this becomes the feared dirac delta, and we are bankrupt. We are fermions, afterall.

Zero Hedge asks an honest question

Is this chart a symptom of insanity? We have real growth and bond buying on the same chart. The Fed is the primary purchaser of government bonds, the red line. So government has much more access to liquidity than any other friggin sector of the economy. What has government managed to do? Absolutely nothing, look at the resulting GDP growth, the grey line.

Why are we doing this? The explanation is the theory of things that never happened.  For some reason, something worse then near zero growth should have happened to us if the Fed did not allow Congress to expand spending.  What didn't happen? Well, for one thing, the federal government never shut down its loss making enterprises, like NCLB or the worthless transit systems. As long as the Fed lets Congress lose money,  real growth will be near zero and we will oscillate.

Delong buys into the bogus Blanchard and Leigh research

Delong is back on the multipliers are 1.5 theme.

Growth Forecast Errors and Fiscal Multipliers 
 
This paper was passed around the blogs, Simon Lewis from England started the circulation. The paper is bogus. The authors use the time honored Romer prescription of selecting economic events that are special and separating them out as isolated instances. There is no better way to confirm one's prior beliefs. One cannot make that separation and still manage to control for exogenous events. The authors committed a basic statistical error. They have to compute their objective function over the aggregate collection of events, then separate out the classes according to the function. They separate first and compute second, a fundamental error and one that we find when an economist has priors to confirm.

 This is the old Keynes is dead debate, what are government spending multipliers really?  The problem with stimulus is that there really is a stimulus theory.  We will never arrive at the true stimulus theory because the researchers have only one goal, government multipliers must always be 1.5. The opposing economists spend so much time debunking this, and there are few economists left who can get at the facts objectively.  Where is Jim Hamilton when we need him?

Krugman and worn out money theory

Who is afraid of China?

But, you say, wouldn't that send interest rates up and depress the American economy? I've been writing about this issue a lot in various guises, and have yet to see any coherent explanation of how it's supposed to work. Think about it: China's selling American bonds wouldn't drive up short-term interest rates, which are set by the Federal Reserve. It's not clear why it would drive up long-term rates, either, since these mainly reflect expected short-term rates.

Let us look at whether this old adage is right. Here we have short term rates, which Paul claims are set by the Fed. Along with them are the ten year rate, which Paul says is a mostly composite function of the short term. Look at the period between 1990 and 2000-. The spread between short and long term rates change substantually.   Then in the period between 2000 and 2008 we see that divergence increase, and the relationship more variable.  Then we see post 2008, the short term is zero and the long term completely unrelated.

 Here is your problem.  The overlap between things that happen on one year intervals and thing happening on three year intervals is about 15%. The two rates are mostly independent, a result that comes out of finite distributions in a trading theory, just like the one that earned you the Nobel. It has to be that way because in trade ou have to fill the damn ship, and the only way to do that is make sure short term products and long term products arrive at port mostly independent of each other.  If you do not do that then you get congestion.  A result straight out of your damn Nobel prize work.
And Paul, your trading theory says that in a sudden stop of capital flow, the ports become congested, just like they did with all those idle ships in 2009.

Randall Wray: Simple minded hydraulic economist

What If China Dumps US Treasury Bonds?

Our deficit hysterians love to raise the specter of China. Supposedly Uncle Sam is at the mercy of the Chinese, who have a stranglehold on the supply of dollars necessary to keep the US government above water. If the Chinese suddenly decided to stop lending those scare dollars, Uncle Sam would be forced to default. Can anyone, please, explain to me how the sovereign issuer of the US dollar—Uncle Sam—could ever run out of his supply of dollars? Please, give me one coherent explanation of how that could happen.

OK. Here we go. Let us say that Obamacare promised us whatever heart treatment we needed for a fixed price, but there is simply not enough productivity to support the cardiology industry demanded. Obamacare will raise the price offered to infinity.

That example may be disputed, granted. Congress is likely not to pay the price of infinity. However, the other implication of Randall is that we can always print up our interest payments, true. But Congress cannot guarantee that the dollar is still a valid currency while doing so. Because, you see Randall, if Congress does prints money then the private sector will have to pay infinity for cardiologists. And that is as effective a bankruptcy as anything else, and we sill pay off our debt, with wallpaper.

Cohen and Left Wing Racial Pandering

“People with conventional views must repress a gag reflex when considering the mayor-elect of New York — a white man married to a black woman and with two biracial children. (Should I mention that Bill de Blasio’s wife, Chirlane McCray, used to be a lesbian?) This family represents the cultural changes that have enveloped parts — but not all — of America. To cultural conservatives, this doesn’t look like their country at all.” WA Post

Well, idiocy and sterotyping has been the hallmark of the racial pandering Undemocratic Party. Go ask Nency Pelosi, her political philosophy is built around racism. Cohen simply proves the old adage, American liberals are ignorant jackasses.

There was more than one fire?

In a CNBC interview Tuesday at the New York Times’ DealBook conference, Tesla CEO Elon Musk said that concerns over the three fires in the company’s electric sports cars are being overblown.

Well, at least the guy is honest. The Tesla is a burning piece of fireworks, nice to know.

Two Gods are sufficient

Hot Politically Repressed babe

Sarah Palin Warns America: Kicking God Out of Society Will Lead To Ruin

My One Fifth Senator has a clue

Sen. Dianne Feinstein (D-Calif.) said Tuesday that she will co-sponsor a bill by Sen. Mary Landrieu (D-La.) to require insurance companies to continue offering their existing health care plans — a way to make good on President Barack Obama’s promise that consumers can keep their current coverage if they like it. Politico:

Mainly because of this: 1 MILLION HAVE INSURANCE CANCELLED IN CALIFORNIA
 
Which got red headline on Drudge. The other news to report is that only half of California like the thing any more, and only a third are enthusiastic. I wonder if our Latino Majority has finally translated and read the law.
The whole Obamacare thing was pushed mainly by New York State which had so badly crewed up their own system it no longer worked. Diane and Babs, my two One Fifths never play a part in anything; their jobs are mainly that Affirmative Action Ambassadors to DC. Had California had a real complement of the ten Senators we are supposed to have, the whole crapola would never had occurred.

Stupidity, naivete, and arrogance

SALEM, Ore. (AP) — With a reputation as a pacesetter in health care, Oregon laid out bold plans for complying with the federal overhaul.
The state wouldn’t just create a health insurance exchange, a complicated undertaking in its own right. Oregon officials set out to build one of the biggest and best in the nation — a model that other states would want to copy.
But more than a month after Cover Oregon’s online enrollment was supposed to launch, reality is lagging far behind Gov. John Kitzhaber’s grand ideas. The online system still doesn’t work, and the exchange has yet to enroll a single person in health insurance. CBS Seattle

Now here is my problem. I knew that a Guv. Dumbnutz in Oregon would fail before Gov Dumbnutz even got into office.  I have years of documentation about corruption and ignorance that go along with government tech projects, they almost always end with universal failure.  By the way, this is documented for over 20 years, it is a fact, a known law of physics.  Now, with certainty, there will be another Gov Dumbnutz showing up in Oregon ten years from now, making the same failure. And I will be here, yet again, pointing out that Oregon prevails in serial Dumbnutzism.

Katy Grimes nails it on Covered California

President Obama just apologized for the millions of insurance policy cancellations under the Affordable Care Act, usually called Obamacare. He also has blamed “bad apple” insurers for the cancellations.
But in California, critics of the program insist the cancellations were not made by the insurers, but by Covered California, the state’s implementation of Obamacare. California compelled insurers participating in the Covered California health exchange to cancel noncompliant individual policies.
Cal Watch

Young and healthy, beware:

Gottwals [health care policy attorney and Obamacare expert with BB&T-Liberty Benefit Insurance] said the singular insurance issue with medical providers is reimbursement — getting paid for the treatment they give. Mandated coverage is the only way to save money in the system and cut reimbursement costs. “It’s a race to the bottom,” Gottwals said. “Doctors will opt out of [accepting] insurance because of low reimbursements. It’s not philosophical. The only leverage the government has is, ‘We’ll cut reimbursements.’ There’s no other way to to save money in health reform because of the mandated benefits.” Interestingly, Gottwals said the average age of persons enrolled in Obamacare is 51-54. By contrast, in 2013 the average age of someone enrolled in pre-Obamacare insurance was 41, which is close to the U.S. median age of 37 years. “This is significantly going to blow costs up, and taxpayers will be on the hook to pay for the difference,” said Gottwals. That’s because older people require more health care. He said there is a bailout plan already written into the Affordable Care Act, which requires U.S. taxpayers to pay the difference between what care is covered and what is not. “It is going to go way over budget, and taxpayers are on the hook for 80 cents on every dollar,” said Gottwals. “It’s a bad deal, and bad for taxpayers.”

McBride complaining about growth

 Looking for Stronger Economic Growth in 2014

From Merrill Lynch economists: Getting the exact timing of the acceleration in growth is tough, but the case for better growth next year is strong. The economy has healed significantly since the 2008-9 crisis. In particular, the government, households, businesses and banks have gone a long way toward fixing their balance sheets, allowing them to slowly shift their focus from balance sheet repair to expansion. ... We expect GDP growth to exceed 3% in the back half of next year as the federal fiscal drag drops from ~1.5pp in 2013 to ~0.5pp in 2014. Right now it looks like 2014 will be a solid year. Read more at http://www.calculatedriskblog.com/2013/11/update-looking-for-stronger-economic.html#ksDrYCOLsHcPRbbc.99

McBride, earlier complains that we would do much better without the budget cuts. But Golly gee whiz, he consistently cites evidence that disproves his own priors. 3% predicted growth is damn good, that is approaching third gear for the economy, our highest gear. If MJcBrides claims were true, then Merrill Lynch would be predicting a 4.1% growth rate, and that would be phenomenal.

The Tax Foundation gets it right

How Fast Would the Economy Need to Grow in Order to Close the Deficit?
The economy needs enough growth to generate taxes and pay the bills. The big bill is the interest expense, which goes up faster than growth. In other words, this chart shows the DC budget is impossible under any circumstances that include current DC obligations. We are not good enough to generate 7% annual growth, have never really done that for any length of time.

The Economist screws it up

RA from the Economist magazine tries to say that we would have had a small recession if the central bank in DC would have reacted faster to events. Before the panic

When we talk about the way in which the most recent crisis unfolded, we often talk about uncertainty of the extent of mortgage losses as a cause of the financial crisis. And we discuss that uncertainty as if it were entirely about microeconomic unknowns: which banks held which securities, what mortgages were in which securities, and how much of the information used in origination (like household incomes) was reliable, for instance. But there is also considerable macroeconomic uncertainty, which may well be the more important consideration. There are a lot of loans that go bust when real output falls 3% in a year that would not if output merely grew at 0.5%. Big crises therefore display a rather significant level of recursivity. Suppose there are brewing financial losses lurking in a financial system. Then suppose the outlook for the economy dims somewhat. Deterioration in the outlook raises expectations of likely financial losses. If the deterioration isn't addressed then crisis dynamics intensify and the outlook for the real economy worsens again. Eventually you get a break—a shift in the equilibrium. The crisis becomes acute, and the real economy suffers a major blow.

By recursivitiy the author means that a central bank aggregates data over the whole economy, and that causes a delay in its function. The delay is especially bad when the Central Bank aggregates over a huge continental wide economy. The delay in central bank actions to lower rates sooner makes worse the negative shock because real growth has already fallen by the time the Fed figures it out.

True in this case? No, the USA suffered a sudden reversal in terms of trade due to oil. Our central bank was chasing an oil bubble. The price of energy reached a peak of $120/barrel, and some 6% of our producers dropped out of the economy. It was not a demand shock, it was, plain and simple, a world oil shortage suddenly appeared, and that was the proximate cause of the recession.