Posts Tagged ‘Mark Thoma’

What is the Role of the State?

What is the Role of the State?

Courtesy of Mark Thoma at Economist’s View

When I teach the History of Economic Thought, one thing we focus on is how views on the role of the state have changed over time. It has a natural cycle to it, with eras such as the highly interventionist Mercantilist years followed by Physiocratic and Classical views stressing minimal government intervention. This is followed by a rebound in the other direction, and so it goes with a Keynes followed by a Friedman in the 50s, a rebound back to Keynes in the 60s, to classical ideas following the experience of the 70s, and so on, and so on. We are involved in the same debate, and a smaller version of the grand historical lurches in each direction, yet again today:

What is the role of the state?, by Martin Wolf: It is … a good time to ask … the biggest question in political economy: what is the role of the state? This question has concerned western thinkers at least since Plato (5th-4th century BCE). It has also concerned thinkers in other cultural traditions… The perspective here is that of the contemporary democratic west.

The core purpose of the state is protection. This view would be shared by everybody, except anarchists… Contemporary Somalia shows the horrors that can befall a stateless society. Yet horrors can also befall a society with an over-mighty state. …

Mancur Olson argued that the state was a “stationary bandit”. A stationary bandit is better than a “roving bandit”, because the latter has no interest in developing the economy, while the former does. But it may not be much better, because those who control the state will seek to extract the surplus over subsistence generated by those under their control.

In the contemporary west, there are three protections against undue exploitation by the stationary bandit: exit, voice … and restraint. By “exit”, I mean the possibility of escaping from the control of a given jurisdiction, by emigration, capital flight or some form of market exchange. By “voice”, I mean a degree of control over, the state, most obviously by voting. By “restraint”, I mean independent courts, division of powers, federalism and entrenched rights.

This, then, is a brief background to … the problem, which is defining what a democratic state … is entitled to


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Is the Unemployment Problem Cyclical or Structural?

Is the Unemployment Problem Cyclical or Structural?

Courtesy of Mark Thoma, writing at CBS MoneyWatch

a young man lying on a sofa holding a glass of wine

As I noted in a previous post, economists define three types of unemployment: frictional, structural, and cyclical:

Frictional unemployment is defined as the unemployment that occurs because of people moving or changing occupations. Demographic change can also play a role in this type of unemployment since young or first-time workers tend to have higher-than-normal turnover rates as they settle into a long-term occupation. An important distinguishing feature of this type of unemployment, unlike the two that follow it, is that it is voluntary on the part of the worker.

Structural unemployment is defined as unemployment arising from technical change such as automation, or from changes in the composition of output due to variations in the types of products people demand. For example, a decline in the demand for typewriters would lead to structurally unemployed workers in the typewriter industry.

Cyclical unemployment is defined as workers losing their jobs due to business cycle fluctuations in output, i.e. the normal up and down movements in the economy as it cycles through booms and recessions over time.

In a recession, frictional unemployment tends to drop since people become afraid of quitting the job they have due to the poor chances of finding another one. People that already have another job lined up will still be willing to change jobs, though there will be fewer of them since new jobs are harder to find. However, they aren’t counted as part of the unemployed. Thus, the fall in frictional unemployment is mainly due to a fall in people quitting voluntarily before they have another job lined up.

But the drop in frictional unemployment is relatively small and more than offset by increases in cyclical and structural unemployment. One of the big questions right now is whether the US economy is suffering, for the most part, from structural or cyclical unemployment. If it’s cyclical, then there’s a good chance that government intervention can help. If it’s structural, i.e. a decline in automobile production and manufacturing more generally, a decline in home construction, and a decline in the financial industry all of which free workers that need to be absorbed elsewhere in the economy, there’s less that can be done and some do not think that government can do much at all about this type of problem (though as I…
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Never Let the Threat of a Manufactured Crisis Go to Waste

Never Let the Threat of a Manufactured Crisis Go to Waste

Courtesy of Mark Thoma, Economist’s View 

There’s been a lot of speculation about the motives of the Austerians — those who want to begin balancing budgets now because they believe that’s what markets want. For example, Paul Krugman attributes it, in part, to

moralizing and posturing. Germans tend to think of running deficits as being morally wrong, while balancing budgets is considered virtuous, never mind the … economic logic. “The last few hours were a singular show of strength,” declared Angela Merkel … after a special cabinet meeting agreed on the austerity plan. And showing strength — or what is perceived as strength — is what it’s all about.

But there is another argument based upon the notion of "never let a crisis — or the manufactured threat of one — go to waste." This is an opportunity to "starve the European Beast" in the eyes of many European conservatives, and there are those who are using the "that’s what markets want" argument as cover for an ideological agenda:

The spectre of laissez-faire stalks Britain, by Jeremy Seabrook, CIF: The relish with which David Cameron announced that our whole way of life would be affected for years by impending cuts, and no one in the land would be exempt from the asperities about to be inflicted, suggested to many that he and his fellow cabinet-millionaires will probably weather the coming storm better than the rest of us.

His parade of Margaret Thatcher, who resembled nothing so much as a faded kabuki performer, outside 10 Downing Street, was also highly symbolic. It was a redemptive moment, the "ultimate" triumph of policies she advocated (but did not entirely follow) 30 years ago. It exhibited the qualities of purification ritual, reversion to a more severe form of capitalism; and in the process a transformation of nanny state into stepmother state.

Nick Clegg’s pious assertion that cuts would be fair and compassionate was at odds with Cameron’s gusto, which is familiar enough in Conservative rhetoric: Cameron confronting an overweening state, which will be shrunk so the private sector might flourish once more. When he said the effects of his policies would be felt for decades to come, he meant something more than a mere diminution of the structural deficit. He admitted as much… 

While cutting back big government may appear a


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On kleptocracy and the sense that we have a one-party system

On kleptocracy and the sense that we have a one-party system

Matt TaibbiCourtesy Edward Harrison at Credit Writedowns

As a writer, Matt Taibbi is a lot more vitriolic than I am. He curses, makes some pretty over-the-top personal attacks, and divines a policymaker’s intent where I don’t think he can. But, this goes mostly to style.  Substantively speaking, he has a lot to say and we should take notice. 

I wanted to highlight a piece he wrote yesterday called Fannie, Freddie, and the New Red and Blue. The crux of his argument is this: The partisan rhetoric is on full display in the dust-up over the unlimited liabilities coming from Fannie and Freddie thrust upon taxpayers on Christmas Eve. This rhetoric is not just beside the point, it is specifically designed to obscure the point, namely that both Democrats and Republicans, private industry and the government are culpable in the shambles our economic system has become.

Taibbi says:

Over the Christmas holiday a nasty thing happened: Tim Geithner’s Treasury Department decided to lift the cap on aid to the Government-Sponsored Entities, Fannie Mae and Freddie Mac, apparently in response to Obama administration fears that the two agencies would become insolvent. The cap was raised from $200 billion on each and government backstopping of the mortgage market will apparently now extend into infinity for at least three years, through 2012.

The move has already inspired a mini-firestorm, with several outlets delving deeply into the recent history of the GSEs and uncovering some disturbing new facts…

Sometimes I’m amazed at the speed with which highly provocative information like this GSE business can be converted into distracting propaganda in this country…

What worries me is that we’re… starting to see fault lines develop, where one side blames the government while another side blames Wall Street for the messes of the last two decades…

Everyone was involved in the mortgage scam. At the lender level the deceptions were myriad; liar’s loans, fraudulent income documentation, negative amortization loans, HELOCs, etc. The rush to get as many loans written as possible and then get those hot potatoes moved to the next sucker in the line was furious and extended from coast to coast, sinking one lender after another in Ponzoid debt and indictments….

Everyone had a hand in the bubble,


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Mark Thoma: Libertarians and populists are against Bernanke

Mark Thoma: Libertarians and populists are against Bernanke

Courtesy of Edward Harrison at Credit Writedowns

Mark is right that time is not on Chairman Bernanke’s side. If you saw the Ron Paul video earlier today, you can see what’s happening. I don’t have a strong view, although I believe most of the other bloggers are against.

Reminder: This is what Mark wrote about the Chairman’s being re-appointed in June.

Bernanke, Summers, or Yellen? None of the Above?

I’d reappoint him. If forced to choose between Yellen and Summers, I’d choose Yellen.

Question: are these still the alternatives if Bernanke is not confirmed?

(video embedded above)

See also Bernanke’s nomination approved by Senate banking panel from the BBC

 


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Zero Hedge

Audi Will Be All Electric By 2026

Courtesy of ZeroHedge View original post here.

The death march for internal combustion engine vehicles continues...

Audi has been the latest automaker to express its intent to completely end building combustion engine vehicles, stating this week that they would stop building gas and diesel vehicles by 2026. There will also be no more hybrid vehicles from that point forward, the automaker said. 

Audi board chairman Markus Duesmann offered the deadline to company executives and labor representatives this week, according to The Drive. T...



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Phil's Favorites

A Reluctant Optimist

 

A Reluctant Optimist

Courtesy of Scott Galloway, No Mercy/No Malice@profgalloway

Optimists are overrated. With Big Tech, Covid-19, or Putin, would we have been better off listening to the optimists or the pessimists? People think it takes optimism to be an entrepreneur. Not so — in my case, it just required the self-awareness to know I didn’t have the skills to succeed in a big company. Optimism is required to be an early stage investor, however. I typically invest in later stage growth firms, as my reaction to every startup idea is “there’s NFW that will work.”

I believe pessimists make better operators. I, no joke, sit awake at night and imagine everything that ca...



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Biotech/COVID-19

Counterfeiting - the underworld threat to beating COVID-19

 

Counterfeiting – the underworld threat to beating COVID-19

Counterfeit vaccines, testing kits, and vaccine passports are undermining the global fight against COVID-19. AnaLysiSStudiO/Shutterstock

Courtesy of Mark Stevenson, Lancaster University

While the word “counterfeit” may conjure up images of fake cash and knock-off handbags, the pharmaceutical industry – and with it, the fight against COVID-19 – has been significantly affected by illicit goods.

In a major operation, Interpol recently ...



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Chart School

RTT Plus Bulletin

Courtesy of Read the Ticker

RTT Plus private blog answer these questions over the last two weeks.

Ending: 2021-06-19

- Metal stocks very bullish after gold smash
- FED taper talk vs Basel 3
- Dollar devaluatioin before end of 2021
- COVID, Vaccine insight (off topic)
- The next play for the deep sate (off topic)
- The debt loaded USA can not break these economic stats


RTT Plus membership required to review.

RTT Plus members can include chart building services if you wish. If you you do not want chart building services select 'RTT Plus' only during the membership sign up process.

Sign up now!






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Politics

The Ukraine Fallacies (with Victor Rud)

 

The Ukraine Fallacies (with Victor Rud)

Americans are confused about the history of Ukraine. That's just how Russia wants it.

Courtesy of Greg Olear, at PREVAIL

Greg is the author of Dirty Rubles: An Introduction to Trump/Russia 

...

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Promotions

Live Webinar with Phil on Option Strategies

 

June is TD Bank's Option Education Month, and today (Thursday, June 10) at 1 pm EST, Phil will speak with host Bryan Rogers about selling options and various option strategies that we use here at Phil's Stock World. Don't miss this event!

Click here to register for TD's live webinar with Phil.

 

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Digital Currencies

Crypto: Congress Dawdles as $1.7 Trillion Con-Game Goes Unregulated, Threatening Reputation of U.S. Markets

Courtesy of Pam Martens

If you want to get your hair cut outside of your home in the United States, the job has to be done by a licensed worker at a regulated business. The same thing applies to plumbers, electricians, home inspectors, real estate and insurance agents. They all require a license and are subject to regulatory scrutiny.

Likewise, commodities like corn, sugar, wheat, lumber and oil are all traded on regulated exchanges which are overseen by a federal regulator.

But, for reasons that have yet to be explained to the American people, when it comes to the $1.7 trillion cryptocurrency market – which is effectively a con-g...



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Kimble Charting Solutions

Crude Oil Cleared For Blast Off On This Dual Breakout?

Courtesy of Chris Kimble

Is Crude Oil about to blast off and hit much higher prices? It might be worth being aware of what could be taking place this month in this important commodity!

Crude Oil has created lower highs over the past 13-years, since peaking back in 2008, along line (1).

It created a “Double Top at (2), then it proceeded to decline more than 60% in four months.

The countertrend rally in Crude Oil has it attempting to break above its 13-year falling resistance as well as its double top at (3).

A successful breakout at (3) would suggest Crude Oil is about to mo...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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