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Climate change is the detonation of the Population Bomb

(Dan here…lifted from Bondadd blog)

by New Deal democrat

Climate change is the detonation of the Population Bomb

You know the drill … it’s Sunday so I speak my mind on things non-economic…..

Way back in the days of the dinosaurs when I was a young teen, I concluded that there were really only two extinction level threats to humanity:
1. Nuclear war
2. Overpopulation (a/k/a “The Population Bomb”)

As to the first, fortunately we have gone over 70 years since Hiroshima and Nagasaki. But I find it difficult to conclude that unless something changes, over a long enough time horizon, like 500 years, a nuclear war won’t happen. Just consider the likes of Donald Trump and Kim Jung Un with their fingers on the button, and wonder how long till someone like them makes a fatal mistake.

As to the second, we have the example of Easter Island, where the last tree is cut down, and the last food-source is exhausted. Humanity disappears.  All you need to consider is whether the Easter Island experience can be scaled up to the entire planet. I have thought a lot recently about climate change, and increasingly think it is ultimately a manifestation of the Population Bomb.


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Weekly Indicators for February 25 – March 1 at Seeking Alpha

by New Deal democrat

Weekly Indicators for February 25 – March 1 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

Last year the most significant developments were in the long leading indicators. Now that is translating into the short leading indicators.

As always, clicking and reading not only should be educational for you, but rewards me a little bit for my efforts.

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Visa Restrictions And Intellectual Degradation

Visa Restrictions And Intellectual Degradation

I am in New York attending the Eastern Economic Association meetings.  I was in an agent-based modeling session in which two partticipants participated by internet because they were both refused visaas to enter the US.  One was from Turkey, which I think is under strict review by the current administration.  The other, a woman from India, working for an American think tank in Toronto, may have simply been a victim of somebody messing up and being too slow in getting the appropriate application forms in on time.  But I am sure the deal on the Turkish participant was new policy.

Their presentations, on self-organizing hierarchies and cryptocurrency dynamics, mostly got through to us. But even with this high-tech ABM crowd there were problems and glitches and occasional disconnctions.  It should not have been this way.
This is just dumb obvious. You arbitrarily keep smart foreigners out of your country, this will lead to intellectual degradation.
Barkley Rosser

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Don’t blame me. Blame Noah Smith who asked me to write more about MMT. I don’t know much about MMT, but I am going to write about it anyway.

First, there seems to be an extremely important disagreement between MMTers. There are definitely some that argue that MMT implies the US Federal Government can (and should) spend more without taxing more.

In contast Stephanie Kelton who seems to be a rather prominent MMTer clearly asserts that a major increase in Federal Government spending should be accompanied by increased taxes here
“MMT would set public spending always to the level required to achieve full employment, and then accept whatever deficit may result.”

Now she might consider 4% to be higher than the current US non accelerating inflation rate of unemployment, but I don’t think she thinks it is much higher. Basically, her position is that the current amount of spending is about right. Low unemployment and stable inflation. As far as I know, MMTer’s accept that as a sign of good macro policy. So they should consider a big increase in spending inconsistent with MMT.

I think I understand what is happening here. There was a decade of high unemployment. People advocated policy based (at least in part) on the need for stimulus. Now the US has low unemployment. Serious policy analysts change their proposals given changing conditions. Many other people stick to a proposal when it makes no sense. I don’t want to be rude but consider the W Bush tax cuts which were proposed because the economy was booming, there was a surplus, and then justified as an anti-recession measure. They claimed that the same policy was perfect to solve different problems. He started with a decision to cut taxes on the upper tail (his words) and then looked for justification. Spend till we reach full employment, no spend a lot more on say a green new deal now that we have reached full employment may be “leftist,” but it has nothing to do with any economic theory (because the two statements are contradictory).

I think it is very very slightly unfortunate that MMT has been equated with “deficits are never a problem”. MMTers might say this from time to time, but they definitely also say that deficits can be a problem (when inflation is accelerating).

Given what I wrote above, the implication of MMT I have noted so far is that one should not impose austerity during a recession. Sadly, policymakers disagree. But conventional new Keynesians and conventional Paleo Keynesians agree. There is no daylight between MMTers and conventional Keynesians on what fiscal policy should have been in the recent past and should be now (although there is a huge range of views among MMTers — I mean differering by hundreds of billions a year).

OK what else. MMTers seem to argue that monetary policy is ineffective even when the safe nominal interest rate is positive. I think this is nuts. I think the evidence that it matters is overwhelming. US data from January 1 1980 throught December 31 1982 are enough to prove them wrong.

One of them wrote that monetary policy works by making people borrow. Notice that it is just assumed that macro policy is stimulus. The possibility that an economy might overheat and the policy aim to reduce demand has not come to the mind of the person whom I am quoting (whose name doesn’t come to my mind). Assuming that macro policy must or should always aim to stimulate demand is an embarrassing mental slip.

MMTers note that deficits can be monetized. They note that this implies that countries which borrow in their own currency are not anywhere close to risking default. I agree (the anywhere close is because I think a US debt of $ 1 quintillion in the form of 1 day notes would cause default — I am very reluctant to use the word “impossible”). Here again the position is completely conventional. Not only Keynesians but also Austerians think this. It is just that to Austerians fiscal dominance of monetary policy is a nightmare. I don’t think any macroeconomist thinks it is impossible.

So far we have conventional views and claims about monetary policy which might be accepted by fresh water fanatics but which are inconsistent with the historical evidence.

What’s left.

I think there is a lot of insisting on using words and phrases with unusual definitions. To most macroeconomics “deficit spending” means bond financed deficit spending. Monetized deficits are described as bond financed deficit spending combined with open market operations. In MMT deficit spending means monetized deficit spending and bond financed deficit spending is described as monetized deficit spending combined with bond auctions.

This is a distinction without a difference. It is purely semantic dispute about the definition of deficit spending. The disagreement does not imply different forecasts about observables. I think the fact that MMTers consider this a vitally important distinction implies that they won’t be able to make a useful contribution to the discussion.

Also I read things about the purpose of a bond auction and the natural gravitational effect of deficit spending. I think these are not meaningful statements in social science. I think there is no way to test if they are true. I think there is no way to get testable hypotheses using this kind of reasoning (I use the term “reasoning” in the broad sense of something that someone seems to think has something to do with useful thought).

I guess there is also a discussion of what comes first the bond sales or the government spending. Here I think I recall the word “first” but I know it isn’t about which happened at an earlier time (bond sales happen every week, government spending every minute). It isn’t a statement about causation either. I don’t think it is a meaninful statement.

So I see conventional views, confusing jargon, and meaningless distinctions. Also extreme rudeness. I don’t think that this is (or should be) typical academic debate

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The Lost People . . .

Over heard in the Comments Section:

EMichael: “I do love the term ‘Goober Safari’”.

“I am as tired as anyone else is at the seemingly endless Goober safaris into those benighted precincts of Americans who helped hand us El Caudillo del Mar-a-Lago as our president*. I am even more tired of being told that the prescription for getting rid of this guy is to romance the daylights out of the unreconstructed ignorami who voted for him in the first place.

So imagine my complete lack of surprise when The New York Times sent yet another expedition out into the hinter-boondocks to see what the plaid-cap and camo set is thinking these days.

‘But, listening to strategists and voters in a critical state for Democrats, the midterms feel like a long time ago. Instead, there are widespread worries that the momentum in Pennsylvania, and in other key Rust Belt states, could screech to a halt if the issues in the 2020 presidential primaries and the party’s eventual nominee stray too far left for the region’s many centrist voters. “The more we have presidential candidates or newly elected congresspeople talking about the Green New Deal, talking about ‘Medicare for all,’ talking about socialism, the more that plays into the Trump campaign’s hands,” said Ed Rendell, a former Pennsylvania governor and national Democratic chairman.’

Jesus H. Christ in a wax museum, have we not heard enough from Ed Fcking Rendell? No presidential candidate—except Donald Trump—is “talking about socialism.” The Green New Deal and Medicare For All are new policy proposals growing from policy positions and philosophies held by Democrats for at least 40 years.

Both are “a Yuengling order for a Pennsylvanian right now,” said Ryan Costello, a former Republican congressman from suburban Philadelphia. That is, someone as familiar as the beer brewed in Pottsville. Mr. Costello said that by nominating a progressive in 2020 — he named Mr. Sanders and Elizabeth Warren — the general election would become a referendum on far-left policies rather than the president.

“The whiplash on the left right now, it’s almost like they didn’t learn the lesson of why they were successful in 2018,” Mr. Costello said.

One of the reasons “they” were successful, of course, was that people like Costello ran like rabbits away from their congressional seats because they saw what was coming at them. So, sure, let’s make certain that Democrats listen to the likes of him. And, of course, there is that stubborn Economic Anxiety in some of these areas that just won’t go away.

We had eight years of nothing,” said Diane Pappert, 75, a retired school guard, referring to President Barack Obama, “and this guy’s trying to clean up everybody’s mess.” Her daughter Angie Hughes, 55, a nurse, had cast the first vote of her life for Mr. Trump. She said she would never vote for a Democrat because she believed that the party favored generous welfare benefits. “When you see people who have three, four, five children to different fathers, they have no plans of ever going to work,” she said.

and then there is . . .

Lou Iezzi, 68, who still works at an auto garage he opened at 19, had voted Democratic for decades before casting a ballot for Mr. Trump. He liked the way he sounded as if he were on the next barstool, and Mr. Iezzi chuckled approvingly recalling Mr. Trump’s dismissive remarks about the newscaster Megyn Kelly in 2015 that were widely interpreted as referring to menstruation. Mr. Iezzi could vote for a Democrat in 2020 if the nominee “sounds like he’s talking honestly,” he said. His choice of the male pronoun was deliberate: “I just can’t see a woman running this country.”

Whadda guy! Buy him a Yuengling. But, for the love of god, don’t tailor a single policy position toward gaining his support. He’s hopelessly lost.”

These People Are Lost. Democrats Shouldn’t Bother Chasing Them., Charles P. Pierce, Esquire Magazine

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December housing permits and starts mixed, support slowdown scenario

December housing permits and starts mixed, support slowdown scenario

This morning we finally got December housing permits and starts. Remember that starts are more volatile than permits, and single family permits are the least volatile of all.

Here’s what the overall data looks like:

While starts and completions laid an egg, permits actually went up a little bit.

In particular, for housing to be outright recessionary, I would want to see single family housing permits down -10% from peak at minimum. This morning’s data has them down only about -6.5% off peak, just slightly above their worst showing of 2018.

In other words, this morning’s report says slowdown rather than recession to me.

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Paul Krugman has some tweets harshly criticizing this article by Stephanie Kelton.

His claim appears to be that, as a Modern Monetary Theorists, she asserts that there are two schools of macroeconomics MMT and “the mainstream” which includes Paul Krugman. I am kicking myself for deciding to read the article to find if it is as horrible as he asserts. I think it is.

She wrote “There is a doctrine among mainstream economists holding that: (1) government deficits push interest rates higher and (2) rising interest rates crowd out private investment. The government can take more of the economy’s financial resources, but only at the expense of lost private investment. This means that running budget deficits has at least some downside.”

This proves that, by her definition Krugman isn’t a mainstream economist. He wrote this. For 20 years he has asserted that sometimes fiscal stimulus does Not cause higher interest rates and that, in those cases, it has no downside.

More generally, even when criticizing vulgar Keynesians (before the acronym MMT was coined) he stressed that the monetary authority can, and often will, cancel the effects of fiscal stimulus. Nothing about what must be true as in “at least some”. I don’s see how anyone who has read anything written by Krugman could type the quoted passage. I am extremely confident that Kelton has read almost exactly nothing Krugman has ever written on macroeconomics.

I don’t know what she means by federal funds, but I guess that would be loans on which the federal funds rate is paid. Since those are interbank loans, banks total demand for funds on which the federal funds rate is paid is always exactly zero. This is an accounting identity. I think she means banks borrowing at the discount window. I don’t think she knows that this was almost exactly zero until 2008 — it just isn’t important. Untill 2008 they borrowed from each other at the slightly lower federal funds rate.

Here I crop so you can see the numbers. An amount of money which it would be nice to have, but trivial compared to GDP, Bank assets, Fed liabilities or M1.

I have to pick up the pace and now flag every howler (after the jump)

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It is anti semitic to assert that lobbyists influence politics ?

“she was condemned by bipartisan leadership for suggesting pro-Israel lobbying groups … influence American politics.”

Front page of, Deanna Paul does not seem to notice that the events she describe are insane.

It is, in fact, true that it is not allowed to note that AIPAC is a lobby or that it influences politics. This shows that it is a lobby with huge influence on politics.

This is bipartisan insanity.

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Q4 GDP: mixed signals for the future (UPDATED with graphs)

Q4 GDP: mixed signals for the future (UPDATED with graphs)

I didn’t post anything yesterday, so I’ll make up for it with two posts today.This morning we finally got the very delayed first look at Q4 GDP. As per my usual practice, I am less interested in what happened in the rear view mirror, which was an annualized gain of +2.6%, than what the number tells us about what lies ahead.

The two forward-looking components of GDP are (1) private fixed residential investment, and (2) corporate profits. Both of these are long leading indicators, I.e., giving us an idea about where the overall economy will be a year or more out from here.

In that regard, the news was mixed.

Private residential fixed investment declined -0.9% q/q. This is in keeping with the downturn in housing construction that we have seen in the monthly data. Note that residential investment as a share of GDP declined in both nominal (blue) and real (red) terms:

Meanwhile, corporate profits as is usual won’t be reported until the final revision in GDP one month from now, but proprietors’ income rose, was. While it does not always move in the same direction as corporate profits, and sometimes lags, it a good placeholder.  Here the news was positive, as proprietors’ income rose +2.6% q/q:

I’ll supplement the above with graphs later. (UPDATE: DONE)

But the takeaway is, that in the rear view mirror, there was no recession in Q4. While one important leading sector of the economy, housing, continued to deteriorate, the producer side of the economy in the form of proprietors’ income, kept humming along. While enough long leading indicators of the economy did decline in 2018 to continue to justify being on “recession watch” for later in this year, and particularly Q4, there is no sign of deterioration on the producer side of the economy, so if a recession does develop, it will likely be centered on consumers and secondarily on manufacturing.

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