sachs blows his conch

By Owen Paine on Friday July 13, 2012 02:18 PM

jeff is really feeling his sea grapes recently

here's a chunk from a recent guest column at FT :

In todays "... simplified Keynesian worldview,

there are no structural challenges, only shortfalls in aggregate demand.

There is no public debt problem.

There is no global competitiveness challenge,
since “competitiveness” is a myth when applied to national economies.

Fiscal multipliers are predictable, timeless, persistent, and large.

All growth reversals can be solved through larger deficits.

Politicians can be trusted to design short-term stimulus spending programmes
of hundreds of billions of dollars.

Tax cuts are about as good as increases in government spending

short-term boosts in spending are about as good as
long-term public investments.

Not one of these conclusions stands scrutiny. "

"Why have we come to this vacuous debate between
a free-market extremism and a Keynesian superficiality
that addresses none of the subtleties, trade-offs, and uncertainties of the real situation?"

" the world is facing novel problems at the global level,
and novelty is hard to factor into economics,
which is a rigid, ideological, theoretically based, and largely backward-looking field…"

wow !


its rare a hated ass hole bends over for you like this

i get so excited by the above passage
i really can't subdue my giddiness

father likes the phrase "where does one begin "

hell i can't even consider that question here

but i'll focus on one tiny phrase

"There is no public debt problem"

obviously Jeffrey is afraid of the big bad debt wolf

hence no fiscal deficit binge for him

implicit in this is a set of implied nominal constraints
on product prices and wages

ie a lid on inflation paths

i guess sachs doesn't want us to consider
"the real value" of existing nominally "fixed " obligations
as a macro policy variable

to him its a sacred policy obligation to keep that set of nominal obligations
as high in real value as possible

socially optimal inflation for Sachs ?

must be as close to zero as practicable

now anyone with a phd in modern macro will tell you that is ridiculous

in fact most macronauts these days are so afraid of deflation
the notion of targeting a zero rate strikes them as intentionally
dancing at the edge of an abyss

one slip and we're in the deflationary death spiral

common elite wisdom 's optimal then ?

a steady 2% range or so
in other words a hideous straight jacket given the amplitude of our system swings

consider the promethean hypothesis :

inflation like fire can be a tool of policy

not all inflations are like wild fires in a tinder dry gusty forest

if we need to run a huge string of federal deficits
to return to Full Employment and stay there
perhaps while serious structural repairs proceed
at their complex uncertain and iffy pace
well we can and without fear of excess debt build up

that is
so long as we are prepared to adjust the rate of product price changes and wage changes
to re align this debt pile over time
to an optimal debt to gdp ratio

of course what the optimal long run ratio
of total debt (pub and pri ) to gdp might be

is still up for grabs

Comments (8)


Y'know, I almost think I get this. If I do, I agree.


A more comprehensible economist.


are you agreeing
with sachs... or with me ?


this guy yanis
is a fine fellow

but what precisely is so incomprehensible about this post's comments ?

"inflation like fire can be a tool of policy
not all inflations are like wild fires in a tinder dry gusty forest "

is that proposition hard to grasp ?

we can use the rate of inflation to control the value of outstanding debt ?

hard to comprehend ?

there is no abolute limits on fiscal dabt accumulation

only the implied rates of wage and product inflation that are necessary to keep that fiscal debt burden in an acceptible ration to gross dmonetsic product
ie the size of the economy as a whole

if yani is clearer then that
he must be saying something so obvious
you are just happy reading it
because it confirms your own thinking


this is yani's sunday punch

to knock out the euro zone crisis

it has three points

number two looks fine fact very fine

number one is also okay
since it simply formalizes
the reality of ECB hegemony over the zone's private banking system
ala our dear FED
it essentially turns the national CBs into analogues to our dear FED's regional outfits

this proposal raised without
adding any specific policy path
seems fine
sdo far as
i understand the proposal
to re assign the direct obligation
to maintain zone wide private banking
and credit flow stability to the ECB
ala our dear FED's central Board of Governors
and its executive entity the FOMC
point thre fuzzes off into feel good prog babble
i'd prefer some nation by nation Balance of Payments buffer
and euro forex rate reductions
that nicely compells germany
and the other internal surplus members
to accelerate their nominal gdp expansion
up to a rate that allows the piigs to close their BOP gaps without stagnatory policies
but in fact with fast recovery fiscal policies

yani is a bright chap with a well intended plan

that he obeys the constraints imposed by the ECB is crack pot realism

even if only to make a point about what's possible
better to flat out recommend the piigs call
the ECB's bluff
like our great hero
and man of and for the people
general jackson would
though here we need 5 general jacksons
one for each of the piigs


oh ya

point two as i understand it
takes the various national governments off the hook for any bank failurres inside their bordrs

and of course this potential has sent sovereign rates soaring in the piigs
precisely because private banks hold tons of bad real estate paper and by doubling down
tons of each other's piigs quality
sovereign debt
a fine positive feed back loop in place here
needs a free thinking policy babbit of an Alexander
to hack it apart


its not
from bulls
not even
from cows
but rather is
existence itself
on display
framed by the dollar
for the dollar
as the dollar
gimme a holler!f"

society's reproduction of itself

everyday life within which nearly all material and not has become commodified/alienated

what better - in hicky dicky tricky near-criminal fashion - to frame and display such condition than as the universal equivalent underlain by global value but claimed by national hegemonic power

PS - Been okay owen??


Speaking of Evil, Uuugh, seems like Cali has done a good job, at least in some areas, of putting thugs into control at libraries.(after all, to work in the Cali Government System, one is forced to take an oath of Loyalty to the $tate.of Cali).almost as if to want sane people to shut libraries down and promote a Kind[l]e[ing] (Burning) of Books.

Recent experiences:

1. Had long talks with a homeless woman (who worked in engineering firms all her life, yet was dumped, with no safety net, and now lives out of her car with her two cats ...I saw the car and the cats and her “car bed”) who sometime innocuously (never says anything, unless you speak to her first), sits on a bench at the library with a homeless sign on her lap (the sign doesn’t request money). She told me one of the Library employees told her to leave (wouldn’t want Sunny Cali (‘Sunny’ for monsters like Peter Thiel, et al) to look gloomy!).

2. The Library never has any books critical of the Inhumane Ayn Randian S&M Silicon Valley Reality, I always have to ‘order’ them , usually from a school.

3. A library, right in the gut of Silicon Valley, was filled with people on puters who clearly have no home computer, despite the absence of that admission in California, or for that matter ‘The Net Virtual World!’ at large.
3a. in order to use the puters, the victims must enter their library card pin number, based on their birthday.

4. A stern, chilling faced librarian (likely the one who told the homeless woman to get lost), replete with Ayn Randian $$$$Visa[d]/Imported$$$$ Czarist Russian accent, basically referred to humans as computers.

5. Perfunctory upper echelon looking male library overseer tried to intimidate me into using a scanner bot, versus keeping someone at the library employed, despite the fact that I had been previously given hardy assurance by a nobody librarian that I could choose to stand in the line I was in if I didn’t want to deal with a bot. I let the Mother Fucker Have it – I come to the Library for its Humanity (not its Bots!) - I almost hope he has a heart attack and disappears from the face of the earth (along with the Ayn Randian accented woman who told the homeless woman to get lost). The now old saying, about watching silently (and worse, aiding and abetting) as others are written off to doom, still applies.


(oh, and must fill out an online form, with pin number, to request a certain book be purchased. Not allowed to speak to any of the Library Book Deciders (despite the fact that at least one of them is in the library at all times) nor fill out anything suggestions on paper.)

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