Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

22.4.09

no offense taken - 22/10/08

From Buck on October 22nd, 2008

No worries, no offense taken. I already knew your thoughts on those particular issues which you mentioned and, in terms of American hypocrisy and nuclear weapons positions, to pretty much all of it I agree. The real point of the article though is inexperience going into negotiations. I'll respond point by point.

1) About the anti-American propaganda: I got the impression that it was meant more as Krushschev more personally engaging in the anti-American propaganda, which would indicate him as being a difficult figure to negotiate with (which proved to be true). Also, you're right to point out that both countries engaged in the negative propaganda, which would mean that Khrushchev shouldn't have engaged in direct negotiations either... unless he felt that he was more experienced and could probably out match the other. It's dangerous and possibly detrimental to engage in negotiations at such a high level with someone who clearly and publicly has a very negative perception of you and your country. The advice that he was getting suggests a more gradual strategy, to improve relations from the bottom up before engaging in such high level meetings.

2) I totally agree about the hypocrisy of American foreign policy. It's something that I occasionally feel disappointed in my country over and I can put forward no defense of substance. I see that much is done to advance U.S. economic interests which helps American businesses and the American people. But as a believer in the free market, I believe that we should compete for our economic dominance, for example giving better economic incentives to trade with a latin american country for coffee... rather than use the C.I.A. to incite a revolt in favor of a U.S. friendly government. In the long run, I think this would help U.S. international business as it gives less of a platform for anti-american governments to run on (like many democrats strategies being something along the lines of "well hey, it doesn't really matter what I propose, it couldn't be worse than Bush...") like Chavez for example. Anyway, the main point I get from that quote is not "the hypocrisy of American foreign policy" but "Khrushchev lectured him" because when you go into negotiations you can't get pushed around or "get the hell beat out of" you. Because then it becomes a show of dominance rather than a negotiation. And as the following events showed, poorly held negotiations can result in the furthering and increasing of problems rather than at the very least a stalemate. The lecturing probably would not have occurred in negotiations at a lower level, or at least could not have been used as such powerful leverage because the pushing around of a low level diplomat has a much smaller impact than of those negotations held at the highest level. Kennedy should not have allowed it to become a lecture but rather a back and forth dialogue. There were plenty of things to bring up about Soviet Union hypocrisy, human rights violations, etc... To be the leader of a country and be lectured by someone else (from another country) on your own nations policies has a very demeaning effect.

3) Like I said, I totally agree with you on the hypocrisy of U.S. foreign and nuclear weapon policy. It's a really sad situation and ultimately self-defeating. But the point of this is that this was a negotiation that turned into not only a lecture but a "beating." This goes back to the problem that I said a while back about situations with arms races is that it's a game of chicken where you don't want to stop because you don't know if the other will stop too. For Kennedy to be negotiating, propositions have to at least be put forward and discussed, propositions where, presumably, both sides will have to make sacrifices. Simultaneously, the leaders respectively have to show clout in that if conditions are not met by one side, there will be repercussions. If the negotiator is not only unable to give off that impression but is even unable to put him/herself in a position to give off that impression then there are serious problems. As Kennedy admitted, "I’ve got a terrible problem if he thinks I’m inexperienced and have no guts. Until we remove those ideas we won’t get anywhere with him.” Thus you lose any opportunity to engage in negotiations because 1) the person who is doing the beating will sense a gaining of momentum and will not want to give that up as the situation could prove as vital in gaining ground even for positioning in future negotiations since in this game of chicken, since you can't be sure the other side will slow down if you slow down you need to take advantage of any opportunity to get ahead and 2) because perceived influence in enforcing agreements declines so why not try and win the arms race by out-gunning the other if it seems like you can. That's what the U.S. eventually did, and even though in terms of the world it's not preferable, we did end up as the only superpower. So the way I see it is it's a game of a chicken and without very skillful, delicate, and gradual negotiation will any side back down. I don't know a great deal about the Cold War, but at this time, there were no satellite states. They were recent results of the collapse of the Soviet Union when they broke off. I don't think there were any missile bases as close to Russia as Cuba, but I don't really know too much so if you have some information on that, feel free. Also, the Cuban missile crisis is pretty widely believed to have been the closest to an all out nuclear war between the two superpowers. It was a situation very similar to in Watchman, a sort of first strike scenario, where the U.S. thinks the Russians could fire so we should fire first and vice versa. The point the article was making is that this was almost a direct result of the disaster of a negotiation session, not so much: well it doesn't matter if we have nuclear weapons or not but you're not allowed. Poor negotiating can lead to things coming to a head much more quickly rather than improving things or a continuation of a stalemate. It would be a totally different article to focus on the rights of nations to have nukes, thus the author wouldn't want to focus on that. I actually didn't get much of an impression that the author favored one side or the other. It seemed pretty unbiased in describing the lack of judgement in rushing into high-level negotiations.

4) True, the rivalry between the U.S. and the U.S.S.R. and the U.S. and extremist Islam is different, but in terms of duration not so much. You can date this back to the 70's under Carter who had to deal with the holding hostage of the U.S. embassy in Iran. Then, closer to the present, you have the three bombings previous to 9-11 by Al-Qaeda: the U.S.S. Cole, the embassy in Kenya, and the truck bombing of the world trade center in the early 90's. So this is a very long term situation. Iran, Pakistan, Al Qaeda, etc... may not have the all out fire power that the Soviets had and that does change the nature of the conflict. There won't be the kind of Cold War style stand off but that doesn't mean there aren't serious threats. The difference between the two situations, though it does present different kinds of threats and may require different strategies, doesn't change the nature of the argument that rushing into high level negotiations, being relatively inexperienced, couldn't result in a worsening of the situation rather than an improvement. If Obama proves himself as impotent as it seems Kennedy did, maybe Iran will increase nuclear weapons research, funding anti-american terrorists (whether you like the U.S. or not, a lot of their targets/victims are Iraqis in a strategy to maintain Iraqi instability, and as is clear by the recent negotiations b/w Iraq and the U.S. if there is stability, we are willing to fully withdraw), etc... It's a lesson on being prudent, and that making hasty decisions, whether they are well intentioned or not, can have detrimental effects.

5) Love letters are awesome!

13.4.09

obama's tax-plan disaster - 15/10/08

From Buck on October 15th, 2008

And just to even it out...

Didn't necessarily mean to get the politics emails going again but this is too disturbing to skip.

http://article.nationalreview.com/?q=OGExY2UzNjQ5YjAyNWUzZmI2MDQyNmU4MmU2NGI3ZDg=


From Brent on October 17th, 2008

http://www.guardian.co.uk/world/2008/oct/17/uselections2008-barackobama1

What did you think of the debates? And I haven't got around to reading your links yet or posting my trip on rubberontheroad, been really busy past two nights. this weekend will be nice for catching up on that sort of thing.


From Buck on October 17th, 2008

Eh, that world opinion stuff is irrelevant, you haven't addressed my points on that yet.

Didn't get a chance to watch the whole debate cause I've been pretty busy with work. I watched certain parts, highlights and what not, looked pretty good. Definitely the best one and I think McCain did quite well from what I saw and heard.

9.4.09

those crazy latin commies - 11/10/08

From Buck on October 11th, 2008

In response to those crazy latin commies ; )

http://article.nationalreview.com/?q=YzZkN2YxMzVlZTBhOTNiMTBlODBhNDlkNGU4NmIwNTY=

And this is from a larger essay on the financial crisis. Gives a bit of an idea of what's at stake with having a far left president and far left congress:

Finally, on top of the survey in uncertainty and collapse in credit we also have the specter of a damaging political response. One of the major factors compounding the Great Depression was that politicians moved to hinder free trade and encourage anti-competitive practices. The infamous Smoot-Hawley Tariff Act of 1930 was introduced by desperate US policymakers as a way of blocking imports to protect domestic jobs, but helped worsen the recession by freezing world trade. At the same time policymakers were encouraging firms to collude to keep prices up and encouraging workers to unionize to protect wages, exacerbating the situation by strangling free markets. The current backlash against capitalism could lead to a repeat, with politicians swinging towards the left away from free-markets. This happened after the Great Depression, it happened after the major recession of 1974/75 and I think it will happen again now. This will lock in the short-run economic damage from the current credit crunch into longer run systematic damage from anti-growth policies.

This is a bit of an old article, but still kind of applies. Scary to think that had Obama been president starting in January 2008 or 2007, there could very likely be the next depression by now (this links into the above quote):


No rush to respond though, just enjoy the weather and the ride and happy (Canadian) thanksgiving!

3.4.09

this whole apocalyptic kind of lecturing - 10/10/2008


From Brent on October 10th, 2008:

Ok, before I finish reading this and respond to everything else (you've gotten a bit ahead of me here!) you need to read this so that you will believe what I've said with regard to Hamas' constitution: http://jmm.aaa.net.au/articles/17738.htm

I did believe you, I don't think I ever said that I don't...
C'mon, this is so one sided! This is against the founding principle of our party, the thing that the two of us are in total agreement, there are two sides to a story, and usually, both sides are to blame.
I don't send this stuff to you to try and say, "this is the way it is" ... I send it along to you to hear your opinion and take on it. You should feel proud that I'm asking you to respond to such material, as I really take your opinion seriously.

I don't know too much about the Palestine/Israel conflict either (this is why I'm exploring it), but I should mention that Chomsky is Jewish himself, and grew up in a "somewhat Jewish ghetto" in Philadelphia.

Have more to write but must leave office now. Talk to ya later!


From Buck on October 10th, 2008:

Haha, well I guess I came off a bit more aggressive then I intended. You know us crazy neo-cons!

What I remember was you in response to me saying that Hamas had in their constitution that Israel needed to be wiped off the face of the planet and that Israel was willing to withdraw settlements if they would take that part out. Then what I remember you said (and there's a very good chance I might be wrong, or just misunderstood) was that it was ridiculous that someone could say that, or that it was a ridiculous notion, who would say that? Something along those lines. But anyway, you can see from that link what's playing a big part in mucking up the peace making process. Actually, there has been a lot of ground made up in deals with Fatah, the other major Palestinian political group, but they're the ones that got kicked out when Hamas won, so that doesn't matter much.

So yeah, and with the founding principle of the party stuff, guess I came across too strong with that one. I think on the one hand, I was a little resentful of Chomsky, this intellectual guy who was saying everything that's wrong with the world with such authority and superiority, stating things so matter of factly and yet missing crucial parts of the stories. So I was more trying to explain what I take issue with Professor Chomsky on rather than with you. I don't know if I'm really explaining myself well, I don't know quite how to explain it. But it's just this whole apocalyptic kind of lecturing as he looks down on the human race without any practical solutions of his own, only saying "well this is all we have to do, the U.S. has to admit how evil they are, forget about making money and the world will be saved." but of course all you learn in economics is how the environment doesn't matter as long as we're all making money... haha there I go again. So yeah, sorry if i came off like that, I am proud that you want to hear my response and I definitely know that you don't send stuff saying "this is the way it is." I'm a big fan of these kinds of conversations, as you know

I look forward to your full response!

31.3.09

we are witnessing the death of a nation - 10/10/08

From Brent on October 10th, 2008:

Lol, this made me chuckle: "Latin leftists gloating over 'Comrade' Bush's bailout"

And something else from Chomsky that is anti-Obama, concerning the Israel/Palestine conflict. Note I am transcribing this from a lecture of his ...
"
We are witnessing the death of a nation, something that doesn't happen very often, called 'politicide' ... What does Obama have to say about this? ... You can look at his website and you'll find this: "Our first and incontrovertible commitment in the middle east must be to the security of Israel, which is America's strongest ally in the middle east." Well there is a security problem, namely for the Palestinians. The question for them is survival and it isn't clear that they will survive. But there is nothing here about our commitment to security for the Palestinians, and for good reasons. They at most could be a weak ally of the USA, and there is a general operative principal that human rights are essentially determined by your contributions to power, privilege, and ideological needs, and Israel makes major contributions, so therefore they have rights, and Palestinians make no contributions, maybe even a negative contribution by their existence, so they have no rights. And Obama is quite clear about that.
Obama also tells you on his website that he favors increases in foreign aid, and gives his reason: "To ensure that funding priorities to Israel are met, military and economic, so for that reason we have to increase foreign aid. Also, Israels right to exist as a Jewish state must never be challenged." As far as I can tell, he's not on record saying that the existence of any country as a white state, or christian state, or muslim state, must never be challenged. You can check and see. But in the case of Israel, yes, it has to be. Can't be challenged.
Furthermore, we can't recognize Hamas, he says, which is correct. It is logically impossible for the USA to recognize Hamas, it would be like Germany recognizing the Democratic Party. It's a party, you can't recognize it. So we won't recognize the elected government in Palestine, which happens to be led by Hamas. And that makes sense on the basis of our conceptions of democracy, in fact it is very illustrative of them.
Palestinians voted the wrong way in a free election, therefore they have to be punished. That is so obvious that you can't even find a comment about it in the free press or anywhere else, cause it's obvious. You vote the wrong way in a free election you must be punished, that's democracy ...
It's totally irrelevant that Hamas has repeatedly called for a peaceful two state settlement of the Israel/Palestine problem, in accord with the overwhelming international consensus, which is barred and opposed only by the United States and Israel... Washington and Israel oppose it, therefore it doesn't matter if Hamas supports it along with everyone else ...
Where does this leave us with regard to the Palestinians? We have two possibilities: one is that the USA will join the international consensus, and Israel will go along with it, as it has no choice. Meaning the USA will accept a two state settlement on the international border, a position the USA has unilaterally blocked for 30 years, with very rare and brief exceptions, and Israel as well.
The other possibility is that the USA and Israel will continue doing what they are doing, right before your eyes, a policy that the Prime Minister of Israel called 'convergence' to rousing applause in the United States... meaning Gaza is turned into a prison where the people can rot, Israel can use it for target practice. As far as the West Bank is concerned Israel will annex everything inside the so called separation wall, which should be called the annexation wall, it's no longer in doubt, which includes valuable land and resources... All of this is totally illegal, there is an authoritative opinion in the world court, unanimous, including the US justice in a separate declaration, that any settlement in the West Bank is illegal in violation of International Law. No disagreement about this in the world, except the Israel High Court, and some people here, so it's all illegal... but that doesn't matter, the government supports it so it doesn't matter ...
"

29.3.09

an incredibly optimistic view of the world - 9/10/08

From Buck on October 9th, 2008


So first off, I think it's an incredibly optimistic view of the world to think that China is only going after the weaponization of space in reaction to the U.S. Granted that is part of it, but I can tell you from my experience with China, the Chinese, and studying its people and culture (especially in modern times), there is a very good chance, almost guaranteed, that China would pursue it regardless. China is extremely nationalistic and has had a kind of inferiority complex ever since about the mid 19th century as a result of the west not only having surpassed them technologically and economically but also having effectively colonizing. Ever since, there's a very strong effort to define what is China and to ensure that what is China is the best or among the best in the world. You can see this with Tibet, the huge exhibitions of pride when they gained control of Hong Kong, their relations and threats toward Taiwan, their total disregard for the environment (another kind of Chicken race), and the whole mind set of their olympic games. And that's where the game of chicken comes in. The U.S. is not willing to take the risk that China will end their space race if they do it first.

As for the polls, it's true that the poll is straight forward but I would argue that its significance is not so much. First, like I said I believe that those opinion polls would only be reflected within the first few months after the election, if Obama were to win it would jump initially with McCain it would drop or stay flat. Then it would come back to an equilibrium, because as we seem to agree, there seems to be little actual difference between the two in terms of actual policy which is what ultimately will have the largest impact on opinion. Also it seems that there is a general optimism about both candidates, and for myself I'm pretty happy with the choices we have (at least with regard to foreign policy and world opinion). The real way to see how they would affect international opinion in the long run is to see their record in foreign policy. McCain has a very strong record, he's had good associations with foreign leaders for example, and is generally seen in a favorable light. He is also in favor of diplomatic strategies and would like to begin pulling out of Iraq because of the stabilization that has been happening there, not to mention what I said about his nuclear policy.

Second, in terms of the international polls, I think it's a really bad idea to base a decision based on those polls. Like I said there are other things that would determine long term public opinion. Second, as much as the international community may have invested in this election, the U.S. and American citizens have much much more. For example and most importantly at the moment, the economy, which I think Obama would not be very good for. It is especially not a good idea to be looking at international (particularly european) choices in this election just by looking at the point they're in. They're financial situation and political situation is a mess, a complete mess. Nobody knows what to do or is putting forward any ideas. There was a big summit called yesterday I believe, and Germany, the biggest economy in the EU didn't even show up! Not only that, but you have to look at what effects public opinion. The U.S. itself has a generally very left leaning media not to mention an entire entertainment industry that literally is in love with Obama. A good example to see how controlled the information is, I had a friend in San Diego that had just spent 4 months in Europe, and you know she said that most Europeans she met thought the election for president was between Obama and Clinton?? Even you, as a Canadian that is extremely interested in american politics, wasn't aware of Obama's blatant refusal to have any kind of debates or town hall meetings prior to the conventions, or McCain's desire for Nuclear disarmament, and I don't think you knew much about McCain's green ambitions either (McCain-Lieberman for cap and trade). So how straightforward really is the significance of the foreign polls, when people are so ill-informed?

Now I'm slacking from lunch! I'm starving and gotta head off to work soon. Stayed up til 5:30 last night too writing a paper, jeesh. But political e-mail debates always come first!

23.3.09

economic guru - 8/10/08

From Brent on October 8th 2008

I did read the article. I read the part you quote, too. And, as I said, I don't think either of the candidates represent real change, but that given the choices, as usual we (and by we I mean you and the rest of the eligible US voting population) must choose the least of all evils, and in my humble opinion, in terms of foreign policy and global opinion, Obama would be that choice.

What I meant by that comment ("I think it is a trend that might spread...") is that I have read, in the past, theories that the US dollar will not be the globally accepted currency for much longer. I don't know if they were credible sources or if it will happen, but when I read that article I was thinking "I've read something like that before"...

You are the economic guru, lol. I don't claim to know too much about it (although I can offer my utopian view), but I do think I have some knowledge of social and environmental issues, domestic and otherwise.

By the way, my girlfriend was wondering if you and your girlfriend would be up for a Euchre night? I've never played but she thought it might be something we could do unrelated to politics lol.


From Buck on October 8th 2008

That's alright, but your humble opinion is WRONG! Haha, just kidding. "I don't know if you noticed but we have lights..." debating can be fun!

I've read that theory too. Actually, there were talks last year of shifts towards the Euro when the dollar was becoming increasingly weak. The reason other countries use the U.S. dollar is less political and more strategic, to avoid volatility. The U.S. has very little chance of experiencing any hyper-inflation so countries will use dollars or peg the exchange rate just so that when a government says there won't be hyper-inflation, it'll be credible. Credibility has a large effect on currency rates, it's pretty interesting actually how much whether people believe if the treasury secretary/Fed chairmans say they want to lower inflation actually effects things.
Euchre night sounds great, we are down! (can we still talk politics though... :( haha)


From Brent on October 8th 2008

Euchre night sounds great, Rosario and I are down! (can we still talk politics
though... :( haha)

Lol, thats what I said!

22.3.09

the view of the people can be manipulated - 8/10/08

From Buck on October 8th, 2008

Pretty interesting to me. I think it is a trend that might spread...

A trend of countries using similar currencies to strengthen political ties? It even says in the article that the motivation is not that they think the U.S. dollar is weak (in fact it's actually been continuing to get stronger against foreign currencies throughout the financial crisis) and that they think the U.S. dollar is still more stable than their own. It's just as a way to strengthen political ties.

I agree about Obama having a better impact on foreign perception. However, I believe that that kind of thing can be fleeting.

It'll last a few months, maybe a year, and that's about it since Obama probably won't take a radically new direction. Also since I believe McCain would be very strong in foreign policy, and would rely much more on diplomacy than Bush and more than what Obama and his supporters would lead you to believe.

You say you have a problem with the foreign policy of the U.S. If you haven't yet, you really should read that article I sent you from the Australian (http://www.theaustralian.news.com.au/story/0,25197,24467159-5013460,00.html) But here's the quote that pertains to how you think Obama will be better for foreign policy:

"Obama is, formally at least, now terrifically hawkish on the use of force. Iran must not be allowed to get a nuclear weapon. No military option will be taken off the table. The UN cannot have veto power over US action. He will support Israel, one of America's closest allies in the world. He will attack in Pakistan if there is solid evidence of the presence of an important terrorist. Hunting down and destroying al-Qa'ida must be America's No.1 national security priority. Every time genocide or ethnic cleansing occurs and the US doesn't intervene militarily, it is diminished.Good grief. If George W. Bush were still saying things like that there would be a warrant issued for his arrest at The Hague. In response to Obama's alpha-dog swagger on national security, McCain read him a little lecture on the limits of US power and the need to intervene only when it can clearly do some good. Presumably Obama wanted to look tougher and McCain less threatening."


You really should read the article, it's pretty short and it's fantastic.

Yeah, unfortunately I don't really have time even to watch the 14 minute clip right now. I will get to it by this weekend though. It's true that government should represent the view of the people, that's the great thing about democracy. The problem with that though is that the view of the people can be manipulated (as I believe it is in the case of Obama). Also, it's not just the president that doesn't represent the view of the people, congress in the U.S. also has the lowest approval rating in history.

17.3.09

after the presidential debate - 8/10/08

From Brent on October 7th, 2008

http://news.xinhuanet.com/english/2008-10/07/content_10159106.htm


From Buck on October 8th, 2008

Well, this Argentina & Brazil thing doesn't seem like that big of a deal. They're still tying the exchange rate to the U.S dollar anyway. Good for them that they want to start using their own currency.

This link (http://www.theaustralian.news.com.au/story/0,25197,24467159-5013460,00.html) is really good. It's pretty in the middle, criticizes both sides, and pretty much expressed my feelings exactly on the economy, etc...

Also I'd like to say that I think Obama is 95% hype. What makes you think that he'll bring change or improve things? And if the answer (as with most people I believe) starts with "he says" or "he said" or some other version of him saying something, well you can guess where I'm gonna go with that...

Haha, sorry I was just brooding a bit over it, thought I'd vent.


From Brent on October 8th, 2008


Well this Argentina & Brazil thing doesn't seem like that big of a deal. They're still tying the exchange rate to the U.S dollar anyway. Good for them that they want to start using their own currency.

"Although the SML seeks to gradually eliminate the dollar from the bilateral trade, the currency will continue its presence in transactions between Brazil and Argentina, as their central banks will set the exchange rate for the real and the peso with respect to the dollar."

"The new paymnet system has more political importance than technical importance because it will strengthen ties between Argentina and Brazil, the biggest economies of the Mercosur."

"If the mechanism works out without incidents between Brazil and Argentina, it will be adopted by other countries of the Mercosur, like Paraguay and Uruguay, Brazilian authorities said."

Pretty interesting to me. I think it is a trend that might spread...

Also I'd like to say that I think Obama is 95% hype. What makes you think that he'll bring change or improve things? And if the answer (as with most people I believe) starts with "he says" or "he said" or some other version of him saying something, well you can guess where I'm gonna go with that...

Well, Obama said ... lol. Just teasing.

I don't think he'll necessarily improve things or make 'big' change, but I think he will do more for global perception of the USA than his rival. This is coming from someone who has a strong opposition to US foreign policy - particularly over the past 8 years.

If you have time, check out this lecture from Noam Chomsky (I think it is almost 2 hours but is definitely worth a watch. You can get it as a podcast from the iTunes store for free as well):


If you don't have time to watch that, there is a little clip here of more or less the same stuff:


A particularly strong point I think he presents is that policy should reflect the opinions of the population. He also points out that this is not the current state of things, and that the opposite is actually true. This is one of the things I think should change, but I don't think either candidate will do that.

Even on a completely superficial level (which you know I don't prescribe to) having Obama in office would be a major boon to America in terms of global opinion. Admittedly this is a sad point that I wish were not true, but the choice between him and an old, wealthy, white, ex-military man with a not so stellar academic record (never mind him joking about making North Korea extinct, bombing Iran, and "never forgiving gooks") - I think the point I'm trying to make is obvious.

Haha, sorry I was just brooding a bit over it, thought I'd vent.

Fair enough! I too was brooding last night and decided not to be so inciteful, particularly when it is not a point I agree with, and that we should not bicker unless it has a beneficial direction.

And it is funny because I can't vote.

16.3.09

what's wrong with economics - 7/10/08

From Buck on October 7th, 2008

This is an article I think you'll like. It's called, "What's wrong with economics" by Robert Waldmann:

What's Wrong with Economic Theory as Presented to the Public? by Robert Waldmann: I have a very low opinion of economic theory. I think that its survival is the result of a bait and switch where the core principles (roughtly Nash equilibrium) can't be proven false, because they have no implications, and, given the fact that they have not been proven false, economists attempt to convince people of the joint implications of the core principles and further assumptions which are known to be false. Fortunately, very few people pay much attention to economic theory.

To continue the diatribe, the implications of economic theory as presented by right wing economists are the implications of models which are about 50 years old now. They depend on assumptions which no one claims are approximately valid. In particular, the traditional application to finance of economic theory, that is general equilibrium theory, (generically) gives the standard results only if markets are complete -- that is there is a contingent claim for every conceivable contingency (including say this pays 1 unit of numeraire good if it is snowing on Mars or if Robert Waldmann stubs his toe between 6:55 EST of October 3 2008 and 7 EST).

With incomplete markets, the market outcome is generically (that is except for a set of economies with measure zero) constrained Pareto inefficient (that means that there are legal restrictions on peoples positions in financial markets which make everyone better off).

Also, there is no claim based on economic theory that financial market prices reflect fundamentals. A large set of general equilibrium economies *with complete markets* have multiple equilibria. Which equilibrium occurs is not determined by fundamentals (tastes and technology). With incomplete markets payoff irrelevant signals (sunspots) can affect prices in general (I think generically).

The conclusions of economic theory as presented by many or perhaps most economists do not follow from current economic theory, but rather from the 50 year old efforts at mathematical economic theory.

Thus the New York Times Op-ed page is not to be blamed for publishing an op-ed full of false claims about economic theory written by Mark Buchanan a physicist. I won't excerpt, read it if you want.

Bachman has no idea what he is talking about.

First he has no idea of what economists mean when we say "equilibrium". He just assumes that we mean stable steady state (which is what we used to mean 50 years ago). Now we mean Nash equilibrium or Walrasian General equilibrium which is nothing of the kind. He should check on recent developments in general equilbrium theory in the past 30 years. He will find the word "sunspot". He will find that general equilbrium theorists argue that there are "equilibria" in which market prices jump around ... based on irrelevant news that has nothing to do with tastes or technology... That is, the view of general equilibrium theorists is the exact opposite of the view Buchanan attributes to them.

He will also note that general equilibrium theorists conclude that market equilbria are generically not constrained Pareto efficient -- the theorists who showed that are Herakles Polimarchakas and John Geanokoplos (hey where did I just read that name ?).

Finally the bit about how economists don't use computer simulations is, if possible, even more wrong than the rest of the op-ed. It is like saying economists refuse to use mathematics or have no use for the theory of statistics.

I'd say that Buchanan demonstrates complete ignorance about what economic theorists have been doing in the ... past 30 to 50 years. ...

The problem is, I think, that when they talk to non economists, many economists pretend that traditional economic theory is a good approximation to reality. By "traditional" I mean 50 year old. The fact that the conclusions are the result of strong assumptions made for tractability and are known to not hold without these assumptions is irrelevant. In the case of financial market equilibrium, the assumptions are not just the core assumptions of rationality and old assumptions of perfect competition but the totally crazy assumption of complete markets....

Buchanan should have talked more to Geanakoplos before shooting his keyboard off. The Times should have checked claims about current economic theory with an economist before printing them, but I think the worse problem is that economists who are also libertarian ideologues are lying about the current state of economic theory, not only its very weak scientific standing, but the fact that, even if it were all absolutely true, their policy recommendations do not at all follow from current economic theory.

15.3.09

debate night - 7/10/08

From Buck on October 7th, 2008

Haha, yeah I guess you did hit a bit of a nerve. I actually didn't watch it either, but I read what it said on the side and dismissed it pretty quick. As I said, this "Keating 5" scandal is history, something that McCain was found innocent of and he personally admitted the mistakes he made. The New York Times wrote a big article a while back when he clinched the nomination trying to bring it back up, bundling it with a totally unfounded accusation of adultery... they were attacked pretty hard for the blatant biased slander and they never did a follow up story. There's a reason the media's not talking about it.

Looking into the scandal, you'll see that it doesn't so much show his probable approach to the current crisis but more how politics can get messy and sometimes people make mistakes. What will more accurately show probable approaches is what they have actually done, and even before he was running for President or the crisis blew up McCain was leading the call for more oversight. You should at least look at the last link I sent you because it's short and it shows what McCains actual (not probable) approach was. Also if you can, see if you can see which way Obama voted.

Yeah, I realized afterwards that it wouldn't make much sense to send each other stuff that supports the others view. So yeah I think I was just tired after working last night haha. I just don't like those sort of independent websites, conspiracy theory type places, for both sides. They're just too biased and not at all credible.

I actually just had the bike out cause I had work immediately after class so needed to get there fast. Took a coworker home though after. Fun drive at 1 in the morning, for sure.

See you tonight then. Should be a good debate too, townhall-style!

14.3.09

strike a nerve - 7/10/08

Sent by Brent on October 7th, 2008

Oh, did i strike a nerve here? You seem quite upset over this one, and I haven't even watched the video yet lol ...

You got to read both sides, and something like this is just pure propaganda.

I might say the same to you ... a quick review of what we have sent back and forth shows you've sent nothing critical of McCain. I do read both sides (admittedly more lefty) but I just don't see the fun in sending you pro-McCain articles. We both know that all sides are guilty of slandering the opposite side (for example, http://www.factcheck.org/elections-2008/dishonorable.html and http://www.factcheck.org/elections-2008/obamas_stem_cell_spinning.html) ...

The intro to the website you sent says: "The current economic crisis demands that we understand John McCain's attitudes about economic oversight and corporate influence in federal regulation. Nothing illustrates the danger of his approach more clearly than his central role in the savings and loan scandal of the late '80s and early '90s." This implies that McCain was negligent towards oversight and regulation and therefore played a very important role in the current financial crisis.

I think, rather than accusing him of "play(ing) a very important role in the current financial crisis", it demonstrates his approach to such matters and his probable approach to the current financial crisis. Again, I'm not saying that either candidate has a better approach as I haven't studied them, but that's the way I read it ...

Were you out on the motorcycle last night? I was and took a ride by your place - your Harley was gone ... good day for a ride! We still on for the debate?

keating economics - 6/10/08

From Brent on October 6th, 2008

http://www.keatingeconomics.com/??

From Buck on October 7th, 2008

You got to read both sides, and something like this is just pure propaganda. Unfortunately in politics, when you're in the game for a long time, you can sometimes get mixed up in things by mistake. McCain was cleared of involvement in the Keatings scandal and found to have the least involvement whatsoever of the 5 senators involved. Here's a little of what Obama has had his hand in his only short time in politics:

http://www.theaustralian.news.com.au/story/0,25197,23643866-5013948,00.html

The intro to the website you sent says: "The current economic crisis demands that we understand John McCain's attitudes about economic oversight and corporate influence in federal regulation. Nothing illustrates the danger of his approach more clearly than his central role in the savings and loan scandal of the late '80s and early '90s." This implies that McCain was negligent towards oversight and regulation and therefore played a very important role in the current financial crisis.

Check this out:
http://bellalu0.wordpress.com/2008/09/17/bush-and-mccain-proposed-oversight-of-fannie-mae-and-freddie-mac/

and this:
http://corner.nationalreview.com/post/?q=YTBiMjNlZjQzNTM4OGIwMTE3YTU5MjM2ZGVhYzY4NWU=

and then there's this, what he actually said in 2005, 2 years before any of this started (Obama was already in the senate for this, it would be interesting to see which way he voted, I'll look it up when I have more time):

http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190

13.3.09

"Failure to pass bailout threatens all Americans" - 3/10/08

From BUCK on October 3rd, 2008

Begin forwarded message:

Date: October 1, 2008
3:15:00 AM EDT
Subject: "Failure to pass bailout threatens all Americans"
Source: Economist's View
Author: Mark Thoma

Jonah Gelbach:

Failure to pass bailout threatens all Americans, by Jonah B. Gelbach, Arizona Daily
Star: The U.S. House on Monday rejected the Wall Street bailout. This mistake threatens all of us, on Main Street, Speedway, Campbell, Golf Links and Oracle.

I'll make five main points.

First, we got into this situation because ... housing prices rose too high. Banks and
other investors made bets that could pay off only if the market kept rising. Now those bets are underwater.

Second, what if we don't pass a bailout? Our financial sector is caught in a trap. No one's sure which borrowers ...[are] going belly up. Even healthy banks won't lend to other banks.

Usually, when banks can't borrow, they sell off healthy assets. But if everyone sells at once, everyone spirals into free-fall. Since all sectors of our economy depend on credit availability, massive layoffs will occur if this situation lasts much longer. It would take years to recover.

Third, the current bill is a big improvement over Treasury Secretary Henry Paulson's initial legislation. It adds oversight and seeks to limit compensation paid to the Wall Street executives who made bad bets. Most importantly, the new bill limits the bailout's cost by giving us, the taxpayers, a stake in companies that get help. The bill isn't perfect, but it's good enough.

Fourth, many are understandably outraged. After years of billion-dollar compensation for a few would-be whiz kids, financial firms now want help from ordinary working people.

But look at it this way. Imagine your child stands wrongly accused of murder. Along with a co-defendant, she faces execution. You can prove your child's innocence. But if you testify at trial, your child's co-defendant will also go free, even though you know he's guilty. Would you allow your child's execution to convict the guilty guy?

This bailout will help some who have caused the mess, but that's an unavoidable part of helping everyone else. Don't cut off your paycheck to spite a financial executive.

Fifth, this bill isn't nearly as expensive as people seem to think. First, $700 billion is less than some realize. Imagine you run a delivery business that makes $60,000
annually and your van breaks down. It will cost you $3,000 to fix it. Should
you fix the van or close down the business? That's a no-brainer.

It's also similar to the bailout, because $700 billion is 5 percent of our economy's 2007 income, $14 trillion, and we'll lose an awful lot more than $700 billion if we let the economy tank. And we'll lose it repeatedly for several years.

Moreover, we're not just going to hand over the cash. The original Paulson plan would have allowed that, but Monday's bill wouldn't. Taxpayers would get a stake in any gains from future sales of the assets the government will buy. And because the government will wait to sell these assets until financial markets have enough capital to operate healthily, these assets might be sold for more later than now. We're putting up $700 billion now, but we'll get some, all or maybe more back later.

There'll be plenty of time to hand out blame. But let's make sure we do that after banking hours — instead of in the unemployment line.
Financial markets and financial intermediaries bring together people who have an excess supply of loanable funds with those who have an excess demand. But why do those with excess demand want the money? They want it because they believe they can use it to make profit through some business venture.

They wouldn't borrow the money if the expected payoff didn't exceed the cost of the loan.

So financial markets channel money to the real economy, and that is the source of the profits you see on Wall Street (beyond the zero sum game among some traders). Loans are paid back - with interest - from the profits the borrower made with the money. Money doesn't breed, simply taking out a loan from a bank won't make you wealthy, you have to do something productive with that money, that is where you get the profits to cover the loan and interest.

So the ultimate source of profits on Wall Street is the real economy (though occasionally, i.e. when there is a bubble, the profits are based upon false valuations in the real sector). Profits come from people doing productive things with the loans that take out, and those productive things employ people and make the economy grow faster. Wall Street is a conduit to the real economy, it is not an end in and of itself, and when that conduit is not functioning properly - when money stops flowing through financial markets - productive activity is diminished and growth and employment pay the cost.

12.3.09

let the bailouts begin! - 3/10/08

From Brent on October 3rd, 2008

http://www.fool.com/community/pod/2008/080919.htm

From Buck on October 3rd, 2008

Unfortunately there's a misconception that this bailout is only helping out the people that made bad choices at the expense of people who didn't.

Fortunately, that's not true.

The people that did make mistakes are going under, being taken over by the better run companies, and in some cases (as in AIG) the government is taking over the company (at a major loss for CEO's and stock holders). For AIG it's an 80% stake. Also, there's a very good chance that tax payers will actually make a profit from this bailout, as long as the bad assets are bought at market value (and not above).

The 700 billion dollars is a max that may need to be spent. The number was actually picked high enough to induce confidence that this plan would be enough. It may not all be used. A similar plan was actually used in the 80's for a similar crisis they had at that time, and in the end the government and taxpayers (like dlbuffy from the article) made a profit.

The free market is like evolution, it's a survival of the fittest type of system, problems come along and the weakest of the gene pool get weeded out, and at the same time things get changed and fixed to adjust to the new atmosphere and new threats. If this had been the 1930's we'd be in a great depression already but people, companies, and governments have learned their mistakes. There are organizations in place like the FDIC to help make the recession as smooth as possible. A lot of why this stuff happened is there were new financial systems built in the last 80 years, whose risks and benefits weren't quite understood yet. Now they're much better understood and companies and government are changing accordingly, like how I told you that Morgan Stanley and Goldman Sachs applied to be bank holding institutions which means they will be more regulated and won't be able to take as big risks, but have more access to assets. The free market didn't fail, it's working perfectly. We're in the downside of a business cycle, which, though can be painful, hypothetically should allow the bad companies to fail or at least restructure and for the good, strong, innovative companies to retrench and prepare for a more prosperous future. Many of the major companies that exist today actually were started during recessions.