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Editorial See other Editorial Articles Title: No Rich People were harmed in making this recession We got a federvention last night. Wages bad? Wish the recession shorter, the way the NBER did. Inflation takes off - simply ignore the parts you don't like and call the rest "core" inflation. But a stock market correction that threatens to unravel the lives of thousands of future Republican donors and the arabs they will work for... Panic! In 2001 I told everyone that Bernanke was going to be the next Chairman of the Fed. Unlike most people, it seems, I and whoever is in charge in the White House had actually read Bernanke's papers - he basically writes about how a conservative Fed could have bailed out the conservative political order in 1930, and how conservatives can hamstring liberal monetary policy with all kinds of fake devices that magically evaporate whenever conservatives are in control. Given his writings, I said "there is Bush's conservative inflationist." Now conservatives have been anti-inflation for about 200 years in the West, that's a long time. However, historically, conservative inflationists are rather normal. Once upon a time when a king needed money, he printed more of it, or debased the coinage and coined more of it, or looted someone and coined more of it. We are just going back to the historical norm. The other lesson here is that economics isn't what it thinks it is. It wants to be the physics of social sciences. Instead, it is the study of games. The key thing to remember is that games have players, and when players think they are going to be obliterated, they stop playing, or they stand around like victims at a massacre. Either way, something changes dramatically. This makes the study of disequilibrium in economics one of the single most important topics, because - and this wisdom is lost on economics as a whole - it is the points of disequilibrium which shift people from being "rational economic actors" into other things. Large and small, disequilibrium is where the action really is. This is the correction we should have had a couple of months ago, but there is a bi-partisan consensus in Washington to dump the recession on the next President and next Congress. Hence Nancy and Harry bailed Bush out, and will do so again next year. But next year it won't work, because Cousin Ben is bailing out the markets this year. Either Ben is going to have to throttle the economy back to precisely the tune of what Bush is pumping into the economy - meaning that all Nancy and Harry are doing is voting a subsidy for Republican donors to dump into the system to elect Republicans - or he is going to have to allow energy inflation to kick into high gear. Early this week global models made Erin a danger to oil and Dean a fish spinner - those are Atlantic tropical storms. But events unfolded differently, and Erin formed way too far north to get going, but Dean is now on track to play ten pins across the Gulf of Mexico. If not Dean, then some other storm could do it at any time. This, combined with the foolish bail out of an inflationary economic cycle by Harry, Ben, George and Nancy, could lead to that long awaited day when oil is one hundred bush bucks a barrel.
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