2008 Flying Monkeys of the FIRE Economy Award

[Spartacus]

Re: 2008 Flying Monkeys of the FIRE Economy Award

I've taken roughly the same road, with one (well, 2) small addition - the concept of "regulatory capture", through which industries and their putative regulators become so incestuously interbred and sharing so many incentives and dis-incentives that no effective regulation can happen, and in fact the regulators eventually help the industry fight off competition.

The FDA attempts to ban various supplements and herbs are a good example, just off the top of my head.

This seems to happen even if the regulators do not do the industry to regulator to industry to regulator revolving door shuffle, and even if the regulators don't get any laissez - faire religion. Bureaucratic rot?

I see no workable way around it, though - thus the 2nd addition alluded to above, excessive cynicism that the situation will ever get better.

grapejel
I have in a way come full circle on the issue of government involvement in markets, from believing that government can effectively allocate many economic resources in an economy, to believing only markets can do that and that less government is always better, to the point of finally coming to terms with the fact that there are many public goods that a society needs that can only be effectively provided by government, such as a clean environment, and many that can only be effectively provided by markets albeit with some degree of regulation.

[Slimprofits]

Re: 2008 Flying Monkeys of the FIRE Economy Award

This year's Flying Monkey of the FIRE Economy prize goes to the general of the army of FIRE Economy flying monkeys, US Treasury Department head and ex-Goldman Sachs CEO, Henry Paulson.

Have you considered awarding Goldman Sachs Group, Inc. the Lifetime Achievement Flying Monkey Firm prize?

If you haven't already read this:

Understanding US Economic Statistics, Sixth Edition, February, 2008 [PDF, 673 KB]

[Mega]

Re: 2008 Flying Monkeys of the FIRE Economy Award

Thank You EJ!

I quite enjoyed that, and for once i think i followed your line of thought here. Normaly i have to stop, think, use the dictionary,think, walk the dog, think and i might get an idea what your driving at.


Not like that @ Euro-pac, Schiff will cut up the info into little bite size bits, put a bib round my neck and spoon it up for me............you tend to got for a full 3 cource meal ( Black tie).

Cheers
Mike

[c1ue]

Re: 2008 Flying Monkeys of the FIRE Economy Award

The comments on the ideal system requiring a balance between regulators and entrepreneurs are spot on.

Human nature being what it is, my suspicion is that only a sufficiently long term mindset subclass with societal stability as its goal is sufficient for long term governmental success.

If you look at Rome, one thing stands out: despite several episodes where a dictator arose and had the opportunity to amass enough power to take over(i.e. entrepreneur turned regulator), for the first several thousand years said dictator either turned away or was whacked by the patrician class.

Looking at France as a more recent example: despite all of the seemingly odd behavior by de Gaulle and successors, France seems to be well positioned for today's world: military, economic, and energy wise. Even the troubles with North African immigrants and their children could be ascribed to growing pains; France is clearly far ahead of the game should this situation be a result of deliberate attempts to keep down the average age of the population.

While in the United States, there is a consistent upper class, unfortunately by and large they seem more intent on self aggrandisement, partying hard, making more money, and/or accumulating power rather than the governance of this nation.

Even looking at the post WWI to Vietnam era - when the United States gained its present position in the world - the advancement was primarily via accumulating advantage vis a vis the rest of the world rather than necessarily any inherent internal development.

It is this trend that disturbs me and prompts me to look elsewhere for a backup.

[phirang]

Re: 2008 Flying Monkeys of the FIRE Economy Award

The comments on the ideal system requiring a balance between regulators and entrepreneurs are spot on.

Human nature being what it is, my suspicion is that only a sufficiently long term mindset subclass with societal stability as its goal is sufficient for long term governmental success.

If you look at Rome, one thing stands out: despite several episodes where a dictator arose and had the opportunity to amass enough power to take over(i.e. entrepreneur turned regulator), for the first several thousand years said dictator either turned away or was whacked by the patrician class.

Looking at France as a more recent example: despite all of the seemingly odd behavior by de Gaulle and successors, France seems to be well positioned for today's world: military, economic, and energy wise. Even the troubles with North African immigrants and their children could be ascribed to growing pains; France is clearly far ahead of the game should this situation be a result of deliberate attempts to keep down the average age of the population.

While in the United States, there is a consistent upper class, unfortunately by and large they seem more intent on self aggrandisement, partying hard, making more money, and/or accumulating power rather than the governance of this nation.

Even looking at the post WWI to Vietnam era - when the United States gained its present position in the world - the advancement was primarily via accumulating advantage vis a vis the rest of the world rather than necessarily any inherent internal development.

It is this trend that disturbs me and prompts me to look elsewhere for a backup.

France is great, but there are way, way more opportunities in the US. The money in Europe is tied up in old, tenacious hands and government-subsidised mafias(aka Dassault, EDF, Suez, etc).

[Jay]

Re: 2008 Flying Monkeys of the FIRE Economy Award

I'm going to assume you spend very little time around hospitals. For my job I do. There's generally a crowd of docs and nurses puffing away outside that you need to push through to get in. Your assertion would appear to be wrong in my experience.

Don't underestimate the power of a good addiction. Common sense, knowledge, and rationality have nothing to do with it.

Art, I am a physician.

[grapejelly]

Re: 2008 Flying Monkeys of the FIRE Economy Award

EJ, let's look at an historical example.

The market was more free in the USA in the 19th century compared to any other place or time in the world. And the US had a remarkable combination of personal freedom and economic growth never seen before or since, really.

Almost as soon as the ink was dry on the paperwork, those in power began to try to set up banks and finance government spending on their favored projects, including of course war.

And government allowed banks to reneg on their promise to redeem their notes for gold.

Things started to go rapidly downhill after Lincoln established a central currency and undermined state-chartered bank note issuance. The money center (mostly New York) banks were allowed to buy government bonds and use those same as cash reserves...the founding of the Federal Reserve was inevitable at this point.

And now, the government could reward private individuals with fat contracts and wage war without taxing the people commensurately with those expenditures. Just rack up the debt, because the banks are the ready government-licensed buyer of that debt.

That is probably the worst of it, I think -- that the central banks allow government to favor the few in power and wage limitless, unending war. It is no coincidence that the US has been almost continuously at war since 1913.

It is a problem of education. True. People don't understand what is happening with their money. And that I think is purposeful. It must be. As you have I think pointed out, the economists are beholden to a monetarist, floating fiat currency central bank point of view in order to get and keep a job. And nobody receives any real economics education K-12 in the US.

But my thinking has come around to an awareness of the following cycle, repeated closely in Greece, Rome, Spain, England, and China...

1. That the government which lets people keep the most surplus of what they create, will result in a country that is most economically successful. That results in spending more than it takes in, chronically, especially under "democracy".

2. That government will debase its money and begin to finance imperial ambitions.

3. That government will conquer other countries and then suck the surplus out of other countries.

4. Eventually, the result is an empire that briefly expands like a balloon and then pops like a balloon.

Because of lack of education, people are somewhat stupid. So they stand by and let this happen. They don't learn history properly in school so they can be forgiven. They are innocent. They do not understand that it isn't how the king is elected or appointed that matters, but instead it's the limitations that are placed on the king's power that count.

That is the lesson of the Founding Fathers but it has been lost in education today. No wonder. It doesn't appeal to the strong central imperial government we have.

The lesson today, would be to abolish the Federal Reserve. Abolish banks for that matter.

The technology is so simple today. Think about brokerage accounts versus banks. And Bullionvault versus GLD. The securities you have in a brokerage account, the gold you hold at Bullionvault, are yours. They are merely holding it for you under a bailment.

There is no need for banks. You could in fact invest your brokerage account money in pools of loans run for a very small fee by a trustee.

This whole economic mess will at some point blow up so much that banks go under and the US government goes broke. Foreigners will stop accepting US fiat.

I think there is life after that -- a good life. Think Argentina in 2002. In a surprisingly short period of time, American manufacturing will gear up. Imported goods will be very expensive. A short lived depression will result and then very good times ahead.

[Jay]

Re: 2008 Flying Monkeys of the FIRE Economy Award

Great question, Jay.

My uncle was a doctor. He once told me it was always known by most doctors that cigarette smoking was dangerous, but some doctors did it anyway and doctors who tried to get their patients to stop were up against beliefs that pervaded society that smoking was rebellious, cool, tough, and so on, that was accomplished primarily through advertising and product placement in movies and television shows. It's really quite incredible what masses of people can come to believe. That's one of the reasons smoking makes a good analogy to debt.

EJ, I still ask you, were they intentionally misinforming the public? It is quite a leap to go from most doctors knew cigarette smoking was dangerous (which I will add is anecdotal on your part and doesn't maintain the laudable and rigorous practice of using data for almost every other theory you espouse) to say they were misinforming the public as a profession. All based off of a story your uncle told you. Did no doctors stand up and say not to smoke? If that's not the case, how many did and what dates? When you say they knew it was dangerous, what does that mean? Early COPD, lung cancer, heart disease? In what populations? What other shared risk factors for those same diseases did those people have? What percentages went on to have disease? And why the hell didn't they push seat belts harder too! And laying off the booze! And condoms!

Social belief systems, when there is money involved, are more complex than can be described by a short article like this. Many of the economists who denied the housing bubble (e.g., Are We Idiots?) actually believed the things they said, just as Greenspan actually believed the things he said about allowing lenders to operate without regulation. He really believes that all regulation is bad. That is a religious belief not the basis of sound policy. No one believes that highways will function better if the lanes and speed limits are removed, but we are supposed to believe that markets will. It's an idiotic idea, and will come to be understood as such in time – again.

Yes, social belief systems are complex beasts. Trying to lump physicians attitudes about tobacco in with the attitudes of economists on the housing bubble is clunky at best. There is also a huge difference in the financial incentives between the two groups. Any member of the FIRE economy makes their money in perpetuating the bubble. To think that a few cigarette advertisments in a medical journal is even remotely close to the same financial incentive is silly. Physician's livelihoods depend on medical billing not adds. Lastly, to only focus on the financial aspect of social behavior is typical in an economic forum, and limiting. Most physicians, and certainly the good ones, are also driven by the desire to heal. What FIRE economist has that motive?

[Sapiens]

Re: 2008 Flying Monkeys of the FIRE Economy Award

Surely there is a middle ground between too little and too much government. My belief is that the middle ground is in a healthy society arrived at via a continuous process of dynamic political tension.

I am glad you comprehend the above, as it is profound.

In order to maintain a political healthy society the majority of the population must be willing to defend its vested interest. If the majority of the population is left ignorant and delusional, it will only result in repression.

If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be."

[EJ]

Re: 2008 Flying Monkeys of the FIRE Economy Award

EJ, I still ask you, were they intentionally misinforming the public? It is quite a leap to go from most doctors knew cigarette smoking was dangerous (which I will add is anecdotal on your part and doesn't maintain the laudable and rigorous practice of using data for almost every other theory you espouse) to say they were misinforming the public as a profession.

The message is that members of any profession can be co-opted by an industry, not that all of them are. Dean Baker is among economists who did not support the idea that home prices only go up and that home prices will not fall nationally. Perhaps we should add a more positive award. What shall we call it?

[Jim Nickerson]

Re: 2008 Flying Monkeys of the FIRE Economy Award

The message is that members of any profession can be co-opted by an industry, not that all of them are. Dean Baker is among economists who did not support the idea that home prices only go up and that home prices will not fall nationally. Perhaps we should add a more positive award. What shall we call it?

Common cents.

[World Traveler]

FIRE Rent Skims Medicare

Bloomberg article: try to cut FIRE Economy rent extraction and get a presidential veto. Note that Medicare can also provide the same services directly, 13% cheaper. It's all gravy for the insurance companies. From article:

"Doctors who treat Medicare patients will get a 10 percent cut in their payments on July 1 unless Congress finds money to make up the difference.

Democrats want to reduce payments to UnitedHealth Group Inc., WellPoint Inc., and other insurers that provide benefits through a program called Medicare Advantage. The companies get, on average, 13 percent more than it costs Medicare to offer services itself, according to a congressional advisory commission.

The Democratic-backed measure passed today, 355-59, giving supporters more than the two-thirds margin that would be needed to override a threatened veto by President George W. Bush. The Senate has yet to act on similar legislation."

Comments:
When Medicare cuts re-imbursements to doctors and hospitals, since the costs of providing those services do not decline, rates and fees for the rest of us go up. All so that insurance companies can continue high levels of profitability (otherwise known as rent extraction).

A very powerful lobby indeed.

http://www.bloomberg.com/apps/news?p...rRo&refer=home

[Serge_Tomiko]

Re: 2008 Flying Monkeys of the FIRE Economy Award

The lesson today, would be to abolish the Federal Reserve. Abolish banks for that matter.

If I may be so bold, I believe it is about time for democracy itself to be abolished. Worldwide evidence is quite clear, democracy is a best plutocracy (as Oswald Spengler made clear) perpetuated by covert and overt propaganda - and at worst a theatrical sham with electors pursuaded by anarchy and civil war.

A new system of government must be implemented, which inherently does not allow for those with financial or military power undo influence.

I propose a new senate, whereby senators are chosen by specific trades. That is to say, rather than election districts being chosen along geographic lines - a relic of our agrarian past - people of certain expertise would vote for a senator that represents the best of their profession. There would be a doctor senator who represents medical doctors, an engineer for electrical engineers, and so on.

The honest truth is the complexity of the modern world is such that no one man can possibly understand the various issues that plague our nation. Further, the average citizen can possible appraise the competency of a general candidate. A system such as this would allow people to focus their energies not on watching debates and listening to soundbites, but analyzing the experience and analyzing the productive output and perhaps managerial skill of the giants of their respective industries.

This system would break the grip on the law by lawyers first and foremost - as an entire branch of our legislature would essentially be out of their control. Lawyers would be restricted to just a few seats as with all other industry organizations.

It would also give a greater voice to important, yet marginal groups - such as members of the arts. The rise of international finance capital has resulted in a wholly materialistic system of governance. Considering the aesthetic implications of public policy has hitherto been nearly impossible.

Scientists would also have a much more important role in the government. I follow the climate debate with great interest, but the fact remains I am not trained in such matters. No matter how much I listen to the pundits spout off their arguments, I am simply not qualified to properly analyze their veracity. How fabulous it would be if all the climatologists in the nation had their own representative. They could argue amongst themselves who is most qualified to represent them in the Senate. That senator would then be charged with presenting the sum of the body of knowledge of climatologists throughout the nation.

The common man would likely have a greater voice as well, as groups without much financial clout would suddenly have a guaranteed place within the framework of the state.

Anyway, enough for now. What I believe is clear is that democracy, such as it is, can only be described as a failure. The time has come for an entirely new system of government that breaks from the universalism of the past.

[GRG55]

Re: 2008 Flying Monkeys of the FIRE Economy Award

If I may be so bold, I believe it is about time for democracy itself to be abolished...

"Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time."

Sir Winston Churchill, Hansard, November 11, 1947
British politician (1874 - 1965)

Of course he is also credited with this alternate view of democracy:

The best argument against democracy is a five-minute conversation with the average voter.

[Andreuccio]

Re: 2008 Flying Monkeys of the FIRE Economy Award

"Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time."

Sir Winston Churchill, Hansard, November 11, 1947
British politician (1874 - 1965)

Of course he is also credited with this alternate view of democracy:

The best argument against democracy is a five-minute conversation with the average voter.

Great quotes. Not necessarily mutually exclusive viewpoints.