the strong usd

[Chomsky]

Re: the strong usd

No TSLA or UBER?!?!?!?

Thanks for these great links and info.

[Chomsky]

Re: the strong usd

here's another interview with viktor shvets. at 37min it's not as information dense as the one i posted above, but it is VERY interesting. he discusses how the ever lower cost of capital is in fact undermining capitalism, the [il]logic of negative rates as the reductio ad absurdum of monetary policy as stimulation, and how in fact monetary "stimulation" has become disinflationary and perhaps outright deflationary. he discusses monetary policy as increasing inequality. he sees a shift toward neo-keynesian and mmt policies, fiscal policy essentially, as where it's going, but the full transition will take decades. [i see the u.s.'s recent "temporary" abolition of the debt ceiling as a step in that direction]. in the meantime we have cross currents. a world of increasing "balkanization" [to use an old term] will tend to counter some of the current trends, increasing labor power at the expense of globalization, at least for those countries which are capable of implementing mmt. some, perhaps many, em's will revert to being called "underdeveloped" instead of "emerging." lots of interesting stuff.

https://www.bloomberg.com/news/audio...-world-podcast

This is an amazing interview.

[dcarrigg]

Re: the strong usd

I still haven't had time to watch the video. But hopefully tomorrow. If not, sooneafter.

This is real rough-and-dirty. Not prime-time for the kids. But roughly:

1. Keynes: Macroecon relationships between how economic goods interact with the money market. Basically, the way the price of stuff reacts to monetary policy.
2. Neo-Keynes: Keynes wrote before "the law" of supply and demand was an idea. The idea that supply and demand 'naturally' hit some kind of equivalent of a thermodynamic equilibrium came about in the late 40s. But only at small scales. This idea tries to build the physics equivalent of the unified field theory between the microecon idea of supply and demand equilibrium working at small scales and the Keynes idea of money markets and economic goods working at large scales. It's the professional standard theory use at central banks and other places. But the micro and macro scales don't actually jive in any way that makes clear sense.
3. Post-Keynes: These ideas start at Keynes but don't try to unify the field theory. Most accept that supply and demand neoclassical ideas work at small scales, but they think they don't explain macro phenomenon, and that there is enough work and evidence (Minsky looming large) to explain how at the macro level the micro foundations do not add up, cannot be unified, and functionally don't explain what we see.
4. MMT: Grows out of post-Keynesian ideas, but has chartalist roots, meaning they view money not as a means of barter, but as a means of state control of economic activity. In this view, money is not a commodity: A random fungible marketable object with a use-value, but instead a creature of law. The distinction might seem petty, but if money is not a natural commodity to be exchanged for goods and services that government may have some influence on, but rather a creature of the state, reflective of potential (not actual) taxing power, then Keynes' theory has fundamental problems. The existence of bitcoin (if it really is a currency and not an arbitrary commodity) and gold's power as a universal currency (outside of central bank support) cut against MMT fundamentally.

So that's the rough and dirty:
1. Keynesian: Money markets affect economic goods
2. Neo-Keynesian: Supply and demand relates to how money markets affect economic goods.
3. Post-Keynesian: Supply and demand actually doesn't explain how money markets affect economic goods. Nevertheless they do.
4. MMT: Post-Keynesian, but money still isn't actually a proper commodity, and that matters.

My weirdo theory of how institutions affect money markets might jive with some post-keynesian ideas. But no MMT is required. And post-keynesianism isn't even required. My own beef with the neo-keynesians is that one of their cornerstones whether they like it or not is that labor's share's a constant. But it ain't. They cannot argue that anymore. There's evidence from a hundred countries over 30 or 40 years. 10 or 20 years ago, maybe it's a fluke. An accounting error. But it's damn consistent now that labor's share has been declining across every developed nation, and for a long time. And a whole bunch of their modeling assumptions depend on labor's share being constant. More than they realize. Because they're working off ideas developed primarily in the 50s and 60s when labor's share was absolutely constant and had been so for the last 100 years.

The post-keynesian and MMT folk never get much oxygen in the real world. At least not on the operational level. The Austrian folk get more, although also not much. The standard of practice is neo-Keynesian and has been for some time. The post-Keynesians I think are fundamentally right in seeing the same thing Minsky saw: That adding in the neoclassical graph bullshit to Keynes' theory reduced the idea of it to a mere banality. It's marginal now. The supply and demand stuff rules. In physics terms, it's as if they all learn quantum theory real well, then learn relativity, but don't really ever take it too seriously, except to say its main concepts are true, if practically essentially useless. The alternative (post-Keynesian) view is that quantum theory is practically of very little use and relativity matters a lot and tells us things that don't jive with quantum theory that we should take seriously regardless, things that matter for our day-to-day lives. Or, simply, Are human lives macro, or micro events?

I'm less concerned with the distinction and the academic debates. I'm personally more concerned that the prevailing theory of the day is built on a foundation of a constant labor share that hasn't been constant in decades. All the models and all the king's horses cannot change that fact. There may be something to Neo-Keynesian theory, in fact, central bank successes suggest there probably was. But it still has fundamental pieces that are wrong. And even practitioners admit it. They just don't seem mostly to have leaped to the consequences.

I don't know that any of them prove post-Keynesian theories or MMT or any of that. I don't think they do. But one thing those suckers have going for them is not being blinded by supply and demand. Money has power. It's not a neutral commodity. And that gets them closer to right at the macro level than the true believers. At least that's my take. Still, I don't really fully buy into either popular school. And I do think the neo-Keynesian folks have been onto something. I just think the neoclassical turn missed the point of economics: power. And it assumes it away at its own peril. Kenyes, despite the age of his work, never did.

[dcarrigg]

Re: the strong usd

By the way, the practical upshot of all my babbling is that I don't really play commodities, but if I did, I'd ask a farmer or an oil worker. Grg nailed a huge movement by knowing the industry I reckon, and it tells me that a lot of the stuff you're on about might have more to do with WTI vs Shanghai's new index's spreads than overall price levels. Maybe I'm wrong there. And grg or someone might know a good reason why I am. But my instinct is that FX movements matter, but the bigger variable is the micro-level stuff. Now with gold and bitcoin etc. that may not be the case at all, and if anything is going to be the Austrians' last laugh, even if it's self-fulfilling, it's those.

[jk]

Re: the strong usd

couple of comments on theory here:

1. my inability to distinguish between neo/post keynesian and mmt policy is at a practical level- in our current context they both seem to be rationalizations for the gov't creating a lot of money [or credit if you prefer]- doing a ton of spending or sending out checks without worrying about deficits. the difference seems to be whether the feds go through the charade of issuing paper for the fed to buy and monetize, thus maintaining the fig leaf that they're doing conventional accounting, versus just using the treasury's constitutional power to create money. bottom line, i'm not sure i see any difference in practical terms.

2. everyone but minsky seems to ignore the financial system and its effects on the economy. while most behavioral economics seems micro-focused [am i too fixated on kahnemann and tversky in this statement?], minsky is really macro behavioral economics channeled through the financial system. how can irrational creatures such as ourselves ever create "efficient" markets? pace mackay we lose our senses in herds but only recover them slowly, one by one: hardly efficient. i think it was keynes who coined the term "animal spirits." that's not something easily plugged into an equation. it appears that it could only be "calculated" post hoc, like velocity. anyway, the financial system matters. we've certainly seen evidence of that in recent years. jeff snider's work on the gradual and persistent, if irregular, contraction of the eurodollar system seems to me to point to a long, stretched out reaction to the debt bubble revealed in 2007. snider's recent piece noting the 12th anniversary of aug 9, 2007 really seemed to be saying that. the bail outs didn't work, at least not to the point of restoring a healthy economy. [when did we have a healthy economy?]. the bail outs have just served to stretch out the pain over many years, and we're still not nearly done with it.

3. [as you've pointed out, dc] the theories seem to ignore monopolization and informational disparities. arrow won a nobel prize for studying asymmetric information [or was it for his other work?], but look at information asymmetry in the age of the internet! axciom probably knows what i ate for breakfast this morning. also the bigger the employers, the more the employers are a monopsony for labor, arbitraging their employees against the cheapest labor on the planet. "balkanization", i.e. trade barriers, will hopefully re-empower labor to some degree.

4. all the theories seem to ignore regulatory capture and, more generally, the role of gov't in the economy except in the most general monetary and aggregated fiscal terms. and of course to study that would be to also study the role of money in politics and gov't.

i don't think all this is going to be captured in a system of [non]equilibrium equations. paging hari seldon.

[dcarrigg]

Re: the strong usd

1. I think the practical upshot is whether one assumes there's a 'natural rate' of unemployment and that DSGE models can predict policy effects on inflation and growth, or not. If there is no 'equilibrium level' of unemployment, then it's a condition largely created by government policy, and potential output suffers due to the relative austerity. Basically the post-people generally say looser policy is not only sustainable, but actually probably better for growth.

2. My inclination is to agree with you and go one further and suggest that behavioral-based models that ignore institutions and laws are a kind of madness. The nutty thing to me about behavioral econ, prospect theory, etc. is that the mainstream econ thinking had already turned exclusively behavioral, just with bad assumptions about human behavior that psychologists could prove don't hold. The models are all agent-based. Households, firms, central banks. They can't speak to the shape of the playing field. The materials it is made out of. How it changes over time.

3. Was that it? Or was Arrow's nobel about the impossibility theorem? I don't recall. I have no doubt a lot of the stuff you're mentioning matters. My own view is that laws again are probably the bigger issue. Wages, I think, probably have very little to do with 'market rates,' except maybe in failed states where they are at or near zero. In all other cases, laws more or less dictate wages. Not just the obvious wage floor and FLSA type of stuff. But a much more complicated series of licensure, education requirements, contracts, hiring policy, apprenticeship requirements, more obscure regulatory requirements, davis-bacon-type stuff, etc. etc. A computerized vending machine could pretty effectively do the job of a retail pharmacist for much cheaper than the six figures per year they're paying PharmDs now to count pills into a bottle and check for interactions. But they don't. The law basically creates a six-figured role to do the robot's job in every little village from sea to shining sea.

4. Bingo. In my mind, I'll happily go one further than MMT and say that economies generally are creatures of governments and law. Even black markets. It's all either directly or indirectly affected by the rules we (as in people) made up. Is land a 'natural commodity?' Or did advances in cartography, optics, surveying, banking, etc. allow for plots to be surveyed, mapped, and capitalized and sold sight unseen, and were laws changed to create a 'market' for that? Maybe Adam and Eve were swapping dirt for apples in Eden, but somehow I doubt it. Nevertheless, it's still the largest sole source of capital in the world. So either buying and selling land is a natural thing. Or laws essentially created capital out of thin air. Imagine if everyone decided to carve up and sell the sea tomorrow? Or the moon? Or the air itself? It's kinda what cap and trade markets are. There's another bunch of capital created out of thin air. We could create a futures exchange tomorrow based on how many leaves that oak tree out your window will have on it in any given time in the future, and use some cocked up combo of lidar and algorithms to spit out the answer. Better still? We could create a futures exchange based on how many leaves a virtual oak tree in a video game will have on it in any given time. As long as cops will still come and throw cuffs on you if you steal the virtual oak leaves, they have value. That's the power of the law, right?

[jk]

Re: the strong usd

re land as capital. we can't forget history. modern land ownership in the west has to go back at least to the feudal system or maybe the roman empire. ultimately, at the beginning it was who could bludgeon someone else most effectively, or convince the tribe to do it. "consciousness" and "thought" seems to trail behind the neural processes that drive behavior, and may exist solely to weave stories to explain ourselves to, and perhaps convince, the other hairless apes.

While proximity to others is the key to acquiring information, research shows that accessing food depends on the complex hierarchies of a baboon troop, and those lower down the pecking order can end up queuing for leftovers. ... Once they do, baboons will head towards the food.


i wish people owned air. if they did smokestacks wouldn't be producing externalities- someone would have the right to demand payment or a cease-and-desist.

[dcarrigg]

Re: the strong usd

It's actually a good example because the clean air act provides a mechanism to make those kinds of civil demands without ownership under 42 usc 7604. The thrust of what I was saying is that the detail of the law matters. Ownership isn't intrinsically good or bad, it can be either or both, but the texture of the laws and the institutions that enforce them matters a lot. With the stroke of a pen, markets can be created or destroyed. Presuming they exist independently and running models which assume laws away, at least to me, seems like madness. There's a reason big economic players all hire armies of lawyers and lobbyists...

[thriftyandboringinohio]

Re: the strong usd

The dollar may be strong compared to other currencies but today it takes 1,500 of them to buy an ounce of gold.

[jk]

Re: the strong usd

Why You Should Care Germany More and More Looks Like 2009

https://www.alhambrapartners.com/201...oks-like-2009/

germany's zew survey came out this morning- terrible

[Chomsky]

Re: the strong usd

Why You Should Care Germany More and More Looks Like 2009

https://www.alhambrapartners.com/201...oks-like-2009/

germany's zew survey came out this morning- terrible

Saw that, good one.

On another note, it's funny when worlds collide:

https://twitter.com/LukeGromen/statu...40477339308034

[jk]

Re: the strong usd

Saw that, good one.

On another note, it's funny when worlds collide:

https://twitter.com/LukeGromen/statu...40477339308034

wow! i monitor gromen's twitter feed but hadn't checked it since this morning. yes, it appears ej was absolutely right about the process, just not about the timing.

[kbird]

Re: the strong usd

On another note, it's funny when worlds collide:

https://twitter.com/LukeGromen/statu...40477339308034

Is Luke Gromen Lukester?

[Chomsky]

Re: the strong usd

Is Luke Gromen Lukester?

Mind blown.

Lukester's username changed to "Contemptuous" at some point: http://www.itulip.com/forums/search....archid=3462513

[jk]

Re: the strong usd

no. lukester told me his real name in a pm exchange. not luke gromen.