“We have seen institutions hurt
again and again

by events to which their models

implied probabilities

of less than

one in a million”

again larry scores heavily on his patrons

the whole smeeer

“First, there should be a strong presumption against having regulators competing to supervise particular institutions or activities. Experience suggests that even when firms do not have the option of switching, there are substantial risks that regulators will be co-opted. Adding “forum shopping” exacerbates the problem.

Second, it should be recognised that to a substantial extent self-regulation is deregulation. Allowing institutions to determine capital levels based on risk models of their own design is tantamount to letting them set their own capital levels. We have seen institutions hurt again and again by events to which their models implied probabilities of less than one in a million. Where it is desired to impose capital requirements, this should be done in a way that can be monitored by supervisors on the basis of balance sheet data.

Third, regulation must be premised on the inability of institutions or their regulators to predict future market conditions with much confidence. As obvious as the subprime crisis may look in retrospect, it was not widely foreseen 18 months ago even by those worried about complacency in credit markets. As the fact that the Dow Jones index was below 6,500 when Alan Greenspan famously spoke of irrational exuberance illustrates, it is also easy to see bubbles even when assets are undervalued or properly valued, as US stocks were in 1996. Rather than judging where and when the next crisis will occur, regulators need to try to assure the resilience of the system with respect to economic shocks or problems in any one sector or institution.

Fourth, the focus of regulation must shift from the prudential practices of individual institutions to the health of the financial system. The proper focus of government regulation is not on how good a job managements do of looking out for their shareholders and bondholders. It is on the potential external consequences of their actions. This will require efforts to limit excesses when times are good and institutions appear robust – and efforts to avoid deleveraging in difficult times if that increases pressures on others. Prudence at the level of any one institution does involve more leverage at times when volatility is low than when it is high. The problem is that when any institution seeks to do what is prudent for it and sell off assets, it impairs the environment in which all others are operating and creates the kind of vicious cycle, in which liquidations beget declining prices and further liquidations, that we have just been through.

Fifth, any regulatory regime must address the risks arising from “parallel banking activities” in a realistic way. We have been reminded by recent events of the old truth that borrowing short and lending long with limited capital is always at the root of financial crisis. This type of activity is not confined to banks and their offshoots. It is practised by bond guarantors, hedge funds, mortgage institutions and some insurance companies among others. If capital requirements are raised only on one set of institutions, problems may be exacerbated as activity migrates to those that are not regulated. On the other hand, regulating all potentially highly leveraged entities is a formidable task. There is no ideal answer. But the fear is that regulation that ensures the regulated can compete fairly with the unregulated is regulation that either promises government subsidy or does not raise capital requirements much above market levels.

Sixth, regulatory policy must to the maximum extent possible create a situation in which the failure of an individual institution is not itself a source of systemic risk. Only in this way is it possible to contain the moral hazards associated with government support. The authorities had no realistic choice but to provide support as Bear Stearns faced bankruptcy. They do have a choice as to whether to put in place a regime where such problems can be managed with no government financial support provided directly or indirectly to shareholders or unsecured creditors. A resolution regime that could apply to any financial institution that became a source of systemic risk should be an urgent priority”

Posted by js paine at 09:30 PM

here we go on the cap and trade carbon gimmick….

“OK, hold your nose, but Mankiw has this one right…”

enough reason to stop dead in ones tracks

this very clever fire imp

looks for the “better ”

way forward (or backward)

strictly from the plutocratic stand point

like a carnival sharpee
he works that intricate and feverish

diabalo's brain of his

often involving it

in hideously dry

and over long chains of deduction

but hell its all just
a walnut shell shuffle…

the ending is where he starts from

and that end

is always what's best for daddy big bucks

sure on occasion
he comes off like

he's found the cleverist

simplest

but still most innocent

most broadly benign most natural and rational

solution construction to any social task

but it only looks like that

crack the well covered hoodwinks

and its bogus venal purpose emerges…

till proven otherwise
i'll take the road to

a way up stream uncle permit auction

with a secondary market in permit trading

btw
this whole subject bored me

—-i'm solid brown guys—-

that is until i realized

its a proving ground

for many similar social market schemes

including the ultimo
cap and trade

the one that blocks wage price spirals

the price mark up cap and trade market
ala

lerners MAP

it makes me dismal

to see such careful thought on this

green earth blue sky issue

compare it to
the primitive briar patch obfuscatory

spacey gooo goo

we all produce here

on the endemic

wage price spiral

i guess this cotrast

fits the point

the more central to the system

the attcked target

the more pathetic

the recognized legtimate

discuss-able methods of attack

jv

i like your notion

of gubmint

it projects onto gub
the sin of the corporations

but with a nice situating twist

its a coven of imps

building vast towers of paper shuffling mummery

extracting punitive taxes

and using the proceeds

to feed their idle “voters”

dole add-ictions

and

to build vast towers of paper shuffling mummery

their personal incentive ???

the ghastly sweet vapors
rising off

the steamin' dung heep

that is our national over soul

yup
they get high

on

hard working

rule following

regular guys' misery

mark:

“the whole point of market-based regulation is to move away from older style command and control policy regimes since market based regulation has better incentive properties”

exactly

and the pigou presumption lacks flexible updating
multiple permitting

ie for various emission types and emission sources

prices remain responsive to market conditions
taxes don't

a permit retrade policy allows permit prices

to flex in value/cost

obviously this is not anything i've thought thru

specifically

but here's my 5 cent conjecture

the more one thinks into it
the more the cap trade approach

begins to dominate the tax approach

“It takes some hubris to predict the benefits of a a system that, to the best of my knowledge, has never been tried on any large scale.

“

lets plunge in rusty and find out

in either case
with a carbon tax

or a carbon cap

we still must openly argue

thru the social cost/benefit

of the targeted

carbon reduction amount x

with the cap we control the amount of carbon
with the tax we control the cost of carbon

at this level given the uncertainty of
how it will work its way out

neither path looks like the sure winner

to me the crucial point
given such an inevitable medley

of local knowledge and direct immediate feed back

vs intial global ignorance

and cumbursome global adjustments

this uncertainty

leads to a premium on flexibility and adjustability

so which has more f and a potential here

steering quantity thru a tax
with the correction in tax

if the target is not hit

or

after setting the quoat reduction schedule

directly changing the quota

if the real cost in higher prices

exceeds the estimated benefit

either way we'll need a path here
a sequence of changes

a series of quantity reductions

or a tax rate that changes to get to those quantity reductions

up front there'll be
big time calculations

complex

and full of assumptions

prolly

subject to wild swings

oh ya

if non linearity exists in the optimal incentives
the pigou tax as some simple linear rate

will be a poor second best

and if cross elasticity works its usual
unexpected magic

ramifications will surprise one and all

all this wild morphing
of mother earth's skin

over the last billion years

makes me hanker for a big one

like that abrupt snow ball to mud ball

methane gig

Posted by js paine at 07:47 PM

rogue offing the truth
at its finest

“If this inflation is allowed to continue and deepen, it is likely to have effects easily as pernicious as the exchange-rate appreciation the region's leaders are striving so hard to avoid”

while implying quite a pant load
does that say anything he could get indicted for

once proven as dead wrong as is likely to be the case

“Perhaps the most important positive effect of exchange-rate appreciation would be to help promote the development of domestically-oriented industries”

ie by being priced out of foreign markets
domestic “industry”

would turn to ….export substitution

will economic wonderlands never cease

and
isn't rk

a ghoulish clever naughty naughty guy

…
thinking over this rogue double talk

i'm reminded as we often are
by the equivalences in our models

because we assume the comp stat

of two clearing markets

with one parametric change

in this case relative domestic price inflation
and exchange rate appreciation

but we never face full adjustments
we never start from them or get to them

we're always on the fly

and in a second best kinda race

Posted by js paine at 07:46 PM

i know this is madly belated
but i gotta spit it out or i'll bust …

moveon.borg

needs a total head removal so bad

it makes me froth …..so if someone finds

that bloodless pumpkin of a head

where ever it is …prolly way up

its own ass somewhere

please i beg of you

do us all a good service and

chop chop chop 

i'll put this on the record
that fucking general be tray us gambit

—-i guess dreamed up by who ??
that berkley prof ..what's his name(doctor fructose ??? ) ——-

why that's gotta  rank
right up there with the greatest acts

of ruthlessly unintentional sabotage

in the history of american protest 

never has the domestic struggle
against uncle's empire

been anymore effectively

self clowned

correction:
strike the word unintentional

nope its too perfect ….

can't be the pure act of unconcious forces

from deep down in the prog id

nope that's simply

not believable

it's like neil armstrong

” finding” a portait of dick nixon

made of moon dust

waiting up there for him

just two short steps

from the landing zone

Posted by pinky at 09:59 PM

wonderful meaty post

i completely lack its concern over
any global gathering wind storm called inflation

the dollar as imperial currency
needs to remain a cheap whore

if peggers inflate or tight assed floaters
crush themselves under the bulge of their

wildly positive real rates

that's the problem

the every man jack of us for ourselves
no concertation of policy

that is only rational if a co ordinated global policy

can not be found that is a win win all around

maybe so
but first lets define our domestic best options

the first is clearly NOT
allowing the dollar to rebound in value

against the euro and yen

as it did in the second phase

of correction this decade

at least

not until we have a north wide

consolidated co alition of the willing

ready and able to bust the south hemi

dollar peggers racket once and for all

and stop the galloping pace
of post industrialization

here in the north hemis western half

if we'll not pray together for planet wide guidance
then at least

might we not pause here

and take a fuller accounting

of what might have been lost

during this process

up here

by us of the preterite wagery

as well as what might have been gained

by our betters the stateless elites

mt

obviously under your hard bitten
cynics cap

you share

doctor t duy's

earth wide inflation wave phobics

i have a simple test for job holder friendly vs job holder dangerous
econ ocon thinking

its prolly as old as the left ricardians
if not babeuf

inflation is never never never to be feared
let alone taken seriously

or avoided by means

of any sacrifice of wage demands

or warnings of draconian price controls

strict rationing

possible dirth and starvation etc etc etc

like heaven
inflation for prices means going up

its going down that burns you

mt

since he or she don't
why should a pure jobster

care who owns the place

only gypt sellers care about price

not on lookers

in fact they might take a certain glee in it all

we need to identify who among foreigners are holding signifigant dollar piles
beyond the transaction needs

surely its only sovereigns …eh ??

and no one yet has a model of sovereign rationality

talk about a potential for far horizon thinking

after all

a sovereign looks at

the appreciation of taxable

income producing real assets

just an off hand example
people citizens subjects

tax payers etc

with skills aquired

while producing products

sold because of their dollar cheap wage cost

into sophisticated

world class north hemi markets

are appreciating in value

simply by what they are learning by doing

groucho
“The proper globalisation monetary policy(for the west) should have been a deflationary policy…”

do you also recommend
hair shirts

weaving by candle light

a thousand push ups a day

cold water baths in winter

and the occasional bout of self flagulation

“We may one day wake up to find that no saver is left who is willing to lend to us”

assuiming you mean foreign ….SAVERS

recall this fact

nations are not households
they live thru their people

if their people remain productive

who cares who owns the factory
if all i do is get hired to do work in it

focus on trade gaps
note

not payments gaps

once the whole damn place is sold off
except our over mortgaged house lots

then our foreign bought politicians

will suggest what ???

a licensed hunting season for aliens
wanting to shoot and eat

property free prole natives ???

yes trades the thing to trap the conscience of the foreign king

get us producing tradeable shit
and you'll reach the right

solution to the real national problem

…
“foreign investors may already have a signed contract to buy the highway to your heart”

my heart can only be reached on foot

and by tramping over some nasty broken ground

everything nice and nasty
eventually comes down to

boots on the ground

trade

let me het u to the full value of one point

there is no reason we can't balance trade

the dollar just has to fall till we're in balance

the social problem
real cost to households

of higher import prices

and higher prices

for domestic substitutes

for low dollar

rubbed out imports

but that to can be solved
at the national level

indirectly

by a hyper employment fiscal budget

a beefed up eitc /wage min pathway

and slashing payroll taxes

and a health sector

market anti inflation plan

no not thru hand outs

but higher total domestic output value

lets get fully back to job work

…

If retired citizens own the factories, they can live off of the profits

what ??
retired citizens

oughta live right

just off the transfer system

ie a system that extracts retirement for workers
off the wages of workers

that is our sacred our own job class contained
new deal social contract

run it big enough

and we won't

need no stinkin' property ownership income

…
“If foreign citizens own the factory, profits go overseas “

so what how does that effect your job work income ???

remember they can take it home
but they got to buy something we make with dollars

or trade em to some one else who will buy our stuff

with the dollars

man you gotta get with the full circle here

…
if you want property income then socialize the process

set up personal accounts

with a hunk of the payroll tax

call it forced savings

trick is
don't let private hi fis in on this

it all gets bought for uncles account by uncle himself

but

uncle lets you choose your investments

off a list of acredited investments

virtual ownership

side bar :
imagine a weird economy where pq= y*

( where y*= 14 trillion… a constant )

the hyperbolic trade off would hold y constant

as the two p and q moved 

now lets make that y* into y*(t)
with its value rising as t goes from zero to n

and rising at a constant percentage rate

but only because all p's are changing at some constant rate

the ie the real economy potential stays exactly the same over time
and credit policy each period can move

around the p and the q

but can't change the t to t p percent change

which changes all the next period ps

all along the whole run of the policy combo function

now trendify q too

only it gets tied into actual prior period performance

throw this thru a credit policy randomizer
and maybe this idiotic model generates

all sorts of reality like number relations 

Posted by js paine at 07:48 PM

greg mephisto
has had better innings

this is pretty close to a pure “phone in “
on the dynamic scoring front

and the burst of growth front

and most growth gets paid out in higher wages front etc etc

this wonderland set of logic traps
catch fewer and fewer of us boverats these days

i like his ending o'henry twist though

a beelezabub swap

accept a far far higher federal gas tax
in exchange for striking out

the present

federal corporate income tax

forms a nice green green dual class alliance
between the rent seeking caps

and the merit class fee seekers

by appealing to the do good in all meritoids

oh you little imp greg

Posted by js paine at 06:11 PM

bliss- ex
nice comment

much to chew

full of good stuff

and bad ….

good:

weagery be cows to capital

indeed they are milked
for the profit of others

of course the wagery are not property

of any one milker like cows

they're wild free range sacred cows

the milker buys and sells only their product
not they themselves

and

if the cows don't like their feed alottment

they can seek more by offering their utters output

to other milkers

who might up their feeding …..

but this is maybe bad :

“At some point if the distribution of income favours labor too much, the rate of profit becomes too low to motivate entrepreneurs and capitalists.”

dangerous mass “thinking guy ” delusion
from which hangs many a sour tale

of capitulation to such monstrous frauds as

the natural rate of exploitation

the functionally irreplaceable
socially ” progressive ”

act of private accumulation

we are not for all time
socially dependent

on private capital formations

for our innovation or progress

the incentive to produce new more and better products

need only be a reward adequate

to evince that activity and a structure open to

such activity

economic rents and such

are at least in principle

an un necessary if often unavoidable

component of a rising social destiny

to make the capitalists and their system of exploitation
sacred and glorious

and pretend

their rewards are 100 % causal

when they are often merely coincidental

and never a necessary means to any end …

yes smith showed us

(as had others)

the social worth of acts by private profiteers

—-like harris showed the social worth of scared cows —-

the bastards in a spontaneously forming open system
of wage based production

ie modern free industrial enterprise

—bda “the anarchy of production”—-

thru their acts of greed and guile

perform independently of these selfish ends

indeed despite their intended ends

many ends of unintended social goodness

mostly arising from — and surely always requiring—

their unfettered savaging of each others profit projects

on the wide open market place

in simple terms

comrade
there are more direct ways to accomplish these ends

ways that minimize “the producers surplus “

or at least that part

that don't go to the producers themselves

but to those who hire the producers exploit the producers

gyp the producers defraud the producers ….

producers surplus that instead of becoming consumers surplus thru lower prices
is converted into the profane milk and honey

of private wind fall profit

(aka economic rents

Posted by js paine at 06:08 PM

stagflation
quick and dirty answer:

a feint hearted job recession
engineered by credit policy

not sharply contractionary enough

to wring the unacceptably high

trend rate of wage inflation

out of the economy

result for society at large
an increased secular output gap

and a forstalling of capacity exspansion

ie

a system that must operate

at seriously reduced macro speed

because of the threat of first

over tight job markets

and eventually

a vicious stagflation

the whole cycle
is obviously

a key registration

of the sub optimality

of our present system

of corporate exploitation

we remain
despite “good will ” on all sides

hopelessly entwined

in deeply embedded class contradictions

“In practice, what happens is that central banks deliberately cause a recession”

the failure of the system laid barest

wage increase trends are sticky trends
they keep going

potentially faster and faster

till they hit a recession

job markets
not house lot markets

are the seriously controled markets

the fed in alarms
goes out and commits

intentional pre meditated

massive jobicide

why is this reality never hammered home ???

economic rent controls ????

wind fall profit controls ????

never !!!!!

wind fall wage controls ???

24 /7 /365

bupa

you are reading
the class advantage meter upside down

the EURO BANK is a wage squeezer
commodity and product inflation

are not the enemy of the job class

the macro methods used to kill inflation are

secondary effect of policy induced recession:

(ie besides the chastened job force
that emerges at wage time

if rampant corporate job slaughter rages outside )

to wit ..
oligop sectors with serious visible corporate pricing power

need the external discipline of a general recession

to gain the “no opportunity cost moment ”

to stare down their job force

and curb their now non validated pricing pass thrus

any wage increases above productivity gains
are fought like the very devil himself

Posted by: paine | Link to comment | May 31, 2008 at 07:53 PM

paine says…
“Better for workers to systematically lose some of the productivity gains so that borrowers don't have to pay back all that they borrowed”

yumpin' yimminy

blunt tool
i fear

your implement

operates not only with bluntness

but

with chaotic cross purposed spasms

what a hopeless thicket of confusion
and briary self contradiction

its like a bunch of econ con jargon

got fed thru a randomizer

“that sounds vaguely like a formula for stagflation to me”

the fed wants to put the job stag back together
with both

flation twins

kot prices must come down
service prices flat line and

domestic industrial product prices oughta rise

how all at once ???

bingo
the seemingly conflicting remedy

weaker dollar tighter credit
bupa

you got the bankers double deal right

stagnation both here and over there

the problem from the board room point of view
is

wage driven prices

not commodity wind fall driven prices

answer

real wage decline

or higher unemployment

take your pick
mikki clear so far as you go

but …this !!!1

“You don't have to be austrian to understand such a simple thing”

ahhh but have u understood enough ???

various firms in various market structures
with various commodity types

produced and /or sold in them

form their prices how ???….

that is not a simple or well enough modeled
set of processes

and inflation is about the pricing processes

the marvel of smplicity
the cantillon-hume theory of money

though extendable past commodity money

to pure credit money

still has no “built in ” adequate model of price formation

Please follow the chain of causation”

are u claiming
the wage zoom of the mid 70's was caused by opec produced shocks …. hitting a pass thru to pricing system

that passed thru wage catch up increases

that got a momentum of their own

and kept going because accommodating credit flow policy by the fed failed to stop the knock on and on process of pass thru feeding on itself ??

well i think there's a few very serious missing links
you need to fill in

to get from plausible to causible

starting with
the price algorithm used by these firms

doing the pass thru

and how that algorithm

got changed by the volckerdammerung

how did recession lead to “no more pass thru “

—————-
“Depending on at what level of capacity utilization the economy is at determines whether an increase in the money supply is expansionary or inflationary… “

y==pq
now is it all q up to some point

and all p after some point

each point perhaps different from sector to sector ??

what if both p's and q's move all the time … ??

then what
as you move towards tighter job markets

and or commodity markets

p's move faster and q's slower

and as you move toward ever looser job markets

q's move faster and p's slower

at some point these two changes might turn nearly pure

and even accelerate sharply

lerner drew such a dynamic slider
with price along the horizontal axis

and output along the vertical

the locus of possible points

looked like a set of cattle horns

with one horn twisted around and pointing straight down

his comment was to the effect

for the world to work
like milton friedman thought

there would have to be

no serious middle interval

just the two horns one pointed up

the other down

butted up against each other

the exact natural rate on a knarrow plateau

too much stimulus

and u set off a zooming up of prices

and too little stimulus and

u're plunging into depression

the economy procedding

like a man traversing a narrow corridor

by bouncing from wall to wall

whereas
he abba l magician of the macro margin

saw lots of middle ground

and thus

lots of sub optimal output points along the way

——-

…

imidc

your comment is quite a jumble

falling real wage rates is not deflation
the falling dollar stimulates exports and curbs imports

creating domestic jobs

are you suggesting that the financial system would have functioned adequately even if the fed pulled a hands off

like the cries of diet and exercise
do you think tight credit and lower house lot values

is good for us jobbler householders

do you think
the victims of inflation …

the little guys are primarily

“those on small fixed income

not

job holders

or that such chitter is a plain dodge
like the appeal to stockholders

that are …widows and orphans

…
ps

with all this institutional house cleaning

and corporate culling

you really want to have

the outcome of a major correction

without the major correction

so would all of us but …
———————

“the equation
which you were groping for is

y=pq=mv.”

no it wasn't

the pq = mv
has pretensions

to an insight

beyond tautology

mine doesn't

it simply splits y into two

rather problematic components

after all y leaves one clear of all
real problems

don't it

but
by plucking it apart

and pulling out a q

the problems

come roaring back at u

notice the tough task this produces

take q and brake it into 
its n independent commodity pieces

now re aggrgate

yup hard to put back together
without prices

humpty dumpty
apres his chute

(q)uarks anyone

but thanx for the intention to enlighten
mt

obviously under your hard bitten
cynics cap

you share

doctor t duy's

earth wide inflation wave phobics

i have a simple test for job holder friendly vs job holder dangerous
econ ocon thinking

its prolly as old as the left ricardians
if not babeuf

inflation is never never never to be feared
let alone taken seriously

or avoided by means

of any sacrifice of wage demands

or warnings of draconian price controls

strict rationing

possible dirth and starvation etc etc etc

like heaven
inflation for prices means going up

its going down that burns you

Posted by js paine at 06:05 PM

“it is good to be king, but not so good to be soon no longer king. (A comment on the status of the U.S. as a world power.)”

i'd like to believe this

my preference
would be to look ahead

to a chastened

back home and back to basics

republican america

full of the new yeoman class

of independent hu caps

doing creative inventive work

turning out

“uniquery”

for an advance thanks to a grant

or for a time and materials fee

or even a sacrifie all to win a prize or something

but its beyond my imaginary horizon
to see this candy cotton cloud filled future

with pie in the sky

and multi colored memes

dazzling in their newness

sprouting from nearly ever american born head

Posted by js paine at 06:04 PM

as to the existence of rapidly rising
oil storage

as a necessary tell on the price rise source

forget is there enough storage availible

this would happen all on paper unless …

i'll drop back
obviously with assured fast enough rising

spot prices those not able

to just keep it in the ground

would profit by holding back supply and letting

it accumulate making a profit above carrying cost

on sale of the stored supply

at the higher price on the 'morrow

but think this thru
how might it happen ??

is the spot price
rise

assured to continue at a sufficient rate ???

and more importantly
if you know prices are going to rise

who else knows ??

if enough do and just play the futures/spot market …

poof your hord might as well get sold now

because the spot price contains the content of collective wisdom on futures prices

that spot price permium induced by arbitage

the futures price

amounts to virtual storage anyway

and its much more efficient and comprehensive

then the real thing

since the immediate impact on spot prices

ought to slow demand causing a build up

spontaneously as sales drop off

…oh ya in this case with elastcity so low

quantity demanded can't appreciably slow

in the short run

so what sets the upper bound here ??
the spec drives ahead on its own spirits

fulfilling itself so long as confidence

in the rise continues

sum up:

are the pull of futures markets
on spot markets so tight

no rational expectation of profit in storage

can long or reliably exist ??

oil is not like
availible electricity or availible man hours

it can be pumped and held

but is it ??

as to the morality play here

whast happens if the grifters
get caught at it ???

hording is a crime against humanity
if not society …eh ???

sorry my thoughts are so scattered shot on this
and spread over several comment squares

even by my standards but …

this is huge and krug et al
have got it wrong i think

as have those trying to analogize the mid to later 70's with now

is it worth pointing out

the oil in the ground is not owned
by the folks doing the processing and distribution

important
because of course the optimal spec

if you own the whole system from in the ground to in my gas tank

is to accumulate supply

at the least cost state

in this case that would be still in the ground

so yes if you own it all

there'd be nothing but less pumping

so long as you owned it all both vertically

and horizontally

if the industry was made up of a series of vertically integrated but independent producers
then maybe there'd be no spec storage down the line

either but ..

what if you can't pump it at a high enough rate

come price peak time

then you might want to store some too

would the one and all system parallel world
look different

obviously we are into the calculus of variations here

i now

leave that department to my daughter

the last living descipline of Hoteling …

BACK TO THE INDEPENDENT

later stage owners

these folks might want to make windfalls on existing
inventory …eh ??

but isn't all anticipateable rent
swallowed up at the first step

by crude producers

how and why ???

is spec storage down the line
dramatically more costly

above some normal level ….???

if you can't pump it at any rate you want
but only at a set rate

once you hit pumping capacity… ???

gadzzz zzzoooks

Posted by js paine at 06:03 PM

“money…is also a store of value”

can be
even for foreign sovereign holders

who can print all they want of their own kind

but t'ain't the purpose for the asian aces

their accumulations lately
are largely

a biproduct of their dollar peg forex fiddles

now do they estimate the annual loss in stored value ??

prolly

but it hardly equals the long run value
of their technical aquisitions

their hu cap development etc etc

their product quality made world class …

u add the rest of the benes

all this is gleened from
participation in world markets

along side their trans nat

limited liability co-e-laborators

which in the final accounting
is all made possible

only by the much belower relative wages

the forex fiddle induces

belower
enough to give the fiddlers

a premium social return on

the cost in declining value

they get on their

“investment “

in an over sized dollar horde

while also providing

their trans nat partners

super profits along the way

the fierce merciless and savage
penetration of north industrial markets

made possible by this ever growing

ever declining in value

sovereign dollar reserve

are they willing to seek higher returns in various dollar based asset markets??

of course
up to a point

pure sterilization is not necessary

but to demand higher returns
can't come at the cost

of eventual hyper inflationary disruptions

of those markets

—-

btw

with all his litany
of three letter security forms

seems our mother t

knows too much about trees
not enough about forests

“The turning point about US indebtedness happens when it becomes cheaper and thus popular to borrow in foreign currencies than in greenbacks. We can't inflate those debts away as we can today's.”

who would need to inflate em away ??

larry you lost me here

are u talking about
a limit on borrowing in foreign currency by uncle

why would he face one ???

yes otherwise
his cost of funds

is zero

but are you suggesting

the exchange market for dollars might collapse

any other borrowing by domestics
is a private affair

not directly of policy concern

note ..directly

still and all
what are these privates borrowing for …

obviously we might need to earn our way more or less

down the road

by balancing our trade

but are you suggesting a period of surplus trade

to pay back hard borrowings ??

only if u foresee a time

when uncle himself

can't buy other currency at some exchange rate

with his own dollars ….

would it be fair to speak

of a deep cataract ahead

Posted by js paine at 05:55 PM

” We have become utterly dependent upon foreign savings “
we ???

who among us
made this profligate decision ??

please call a spade a spade

when production exchanged
thru cross border markets

is out off balance

some one's sovereign credit

makes up the difference

in our case uncle sam's credit

is our ultimate means of purchase

is this activity

“dis savings ” ??

not in any sense beyond the metaphorical

is it an analogy ??
no

the words saving /dis saving
properly used refer to

the activity of households not nations

in my estimation

its a serious miss use of the word's

deeper subjective associations

of homely virtue and vice ….

households have no money mine
and the dollar will be held

by sovereign outfits

for other reasons then rate of return

the real point

is an optimal reserve currency
the slowest expanding of the worlds currencies ???

i sugest to the contrary it oughta be a fast enough expander

silver vs gold comes to mind
when dollar and euro are compared

until we have
a world money

the dollar best serves and most likely will keep serving if its value secularly falls

against all other trade weighted currencies

back our national dis-savings

how dare any one use ” we “
when the bottom half of real wages are stagnating

and in part because foreign currency values are manipulated to creat an unfair competitive advantage

and a chronic industrial trade gap

in fact
to use savings dis savings

about a trade gap that is as much

a product of currency manipulation

as anything else

is a groos injustice to most of us that make up your “we”

and these manipulations
necessary eating of excess trade dollars ….

is in fact a system approved aided and abetted by wall streettycoons

and the various “inside owners and runners”

of the n giant cross border

laputa corporations

larry summers calls

“our stateless elites “

i won't belabor the point any further

but polonian suasions
piss me off

no sooner done with that and this flies by

“rates need to be restored,
if for no other reason,

to give American individuals and institutions

a reason to save money”

pure criminal idiocy

and now they throw some new
suzzane savings pig at me

who ever liz warren is

i'm guessing she's
a household debt level alarmist

bottom half household debt
is as much

the product of thirty years

of too low wages

as ten years of too high credit lines

brother t

“explain to me how the American taxpayer is better off because of Bernanke's maneuvers. Have his wages gone up? Has his cost of living gone down?”

refer yourself to any half decent
intro macro text

of new keynesian conventional wisdom tilt

btw

why conflate tax payer with wage earner ???

indeed pay roll taxes are king hell 'round here
but other sources are still taxed

in this case to service borrowings by uncle to cover

his losses from bad bail out investments

or
are u already forseeing the era

of zero capital income taxation ???

anne and blah blah blah don't mix in my book

Posted by js paine at 05:52 PM

krug rightfully
and righteously

asks “where are the unions “

indeed the cola wars of the late 70's
required a market structure long gone

indeed indeed indeed

but then again
on the two posed battle fronts

do we have an adequate model of
non organized job markets' ” wage setting processes “

and do we really know
what we're doing

when we increase the “price of money “

on the former
reigns the “everywhere and no where”

sources

of the spontaneous

bubble froth and pop

unlike say the oli vs oli of
one union vs big three

monopolistic comp is a bitch to model

krug holds tightly to the main contradiction
the very extensive and fairly large

adjustments underway in relative prices

(stripped naked …barter ratios)

all this coming not from inside the product pricing system
so dominated by wage costs and not from

excessive flows of credit into the system

but from a few outside

but basic and pervasive surging commodity prices

and their ” cost of everything else “effects

as they feed thru “the production matrix “

obviously if prices change
their rate of adjustment speed sluggishly

in either direction

and in particular sluggishly downwards

add a trend rate that is slow and

you have a dilemma

to minimze real output effects
credit policy needs to accomodate

the adjustments by allowing

rising aggregate prices to temporarily accelerate

to allow the non raging product prices

to adjust without declining

while giving the raging commodity prices room enough

to soar “relatively”

clear as mud eh ??

reason writes:

“why don't you just say you need some inflation because of the combination of sticky nominal prices and dramatic relative price changes “

i agree it amounts to a make room
burst of price level rise

i guess i was trying to emphasize
he 60-70's update to keynes

that “there is no “natural ” trend rate
in “spontaneous ” price level change

the trend rate can be any positive rate

so long as policy accomodates

this trend rate

the system will settle towards

a “natural ” out put rate

i think this model
is dangerously mis leading

there's nothing “natural” about any of it
let alone optimal

abba lerner
as far back as the late 40's

realized

the go slow policy required to avoid wage push

in a oli type set of markets

was not a feature but a god damn bug

he devised his MAP system
to sublate this “natural”

systemic secular performance limitation

the state of the job market as a feed back mechanism
is a blight

imagine the forgone output all put toward
supporting additional r and d

or

accelerated automation of production

after fifty years the two possible worlds
could show a comparative diff

huge enough to convince the AEI

“ultimately these markets are tied to reality through spot markets”

reason

spot markets can't drift below futures markets plus carrying cost

krug tried to find inventory build up
but in the extreme perfectly in-elastic demand

leaves no inventory build up

if out put is maintained at
supply filling levels

u end up with higher producer surplus and lower consumer surplus

a straight transfer

the real question
what then determines the crude price 24/7 /365

obviuosly something “willed ” and intentional
something not always into

short run rent max

even if collective and partly hap-hazard

tm

reason is a very thoughtful sharp
noetically gifted commenter

like anne

btw
your

” Show me how, in the last 10 years, the spot prices of oil and other commodities have been indexed to world supply and demand requirements.”

seems a tad petulent
since no one really makes sense of the numbers

at least with any model i know of

enlighten me as to the source of your convictions ???

to answer laffs question
the diff between the pre volckerdammerung

low 70's and ever after

the radical openning of the domestic markets
to global comp

a force at work since the early 70's
but only able to take command

in reagan's master piece

“redawn of the profit zombies
oupoot

“keep US interest rates relatively low for the next 6-9 months in order to restore the health in the US economy somewhat, but ideally the US should raise interest rates gradually by say 1% point over the next 12-24 months and 2% points over the next 3-4 years”

your nearly precise numbers
for policy rate change and timing

imply

a vast econometric model

where resideth same ???
to me its beyond our existing

models and simulations

in the hands of clio

Posted by js paine at 05:48 PM