[Phil]

 hrothgar, on 2012-August-09, 08:54, said:

VPs are often capable of delivering specific states. The choice of Johnson is considered a prototypical example. There are definitely counter examples. (Hell, Gore wasn't able to win his home state in 2000)

The reason that I am so bullish on Portman is Romney's need to keep Ohio in play...

Betfair isn't too far off on your prediction:

Republican VP

[luke warm]

 hrothgar, on 2012-August-09, 07:08, said:

How about the following

I'll pay you 3:1 if anyone other than Rob Portman gets picked.

What say you to a $100 bet?

Easy opportunity for you to triple your money...

close to the right odds... close enough... you have pay pal, right?

[hrothgar]

 luke warm, on 2012-August-09, 10:36, said:

close to the right odds... close enough... you have pay pal, right?

I've paid other folks via Pay Pal. Don't have an account, however...
If I win, we can worry about how to set things up.

Just to be clear, you are accepting a bet in which:

I pay you $300 if anyone other than Rob Portman is chosen as Romney's running mate and
you pay me $100 if Rob Portman is chosen as Romney's running mate.

[luke warm]

 hrothgar, on 2012-August-09, 10:50, said:

I've paid other folks via Pay Pal. Don't have an account, however...
If I win, we can worry about how to set things up.

Just to be clear, you are accepting a bet in which:

I pay you $300 if anyone other than Rob Portman is chosen as Romney's running mate and
you pay me $100 if Rob Portman is chosen as Romney's running mate.

done, unless it was announced before 12:20 PM central time zone, Thursday, August 9th, 2012

what odds you giving on rubio? or ryan?

[phil_20686]

 awm, on 2012-August-08, 15:04, said:

In fact there is strong evidence (in the US anyway) that many workers are not paid close to their marginal productivity. Median wages have been stagnant (adjusting for inflation) for some 30 years while productivity (and GDP) grew substantially.

Right now there is an additional problem that the supply of (unskilled) labor greatly outpaces the demand. There are many people working at or near the minimum wage, and even very profitable companies (for example: Caterpillar, Verizon) are cutting wages and/or benefits.

In this environment the minimum wage is one of the few things keeping people above water. Raising it makes a great deal of sense. Such a change is unlikely to cause mass layoffs, since a lack of demand for goods is causing the unemployment (not a lack of corporate cash flow or profits).

The first two points are actually the same point. Marginal productivity wages only applies at full employment. At full employment it is hard for a business to replace you, so you a have strong bargaining position to drive up your wage, at low employment the business has a strong position, as they can easily replace you, and an unemployed person might do the same job for a lower wage. Nevertheless most economies operate close to full employment most of the time. It can also be hard for workers and employers to accurately measure their marginal product.

As for wage stagnation, what we are really seeing is convergence. There is currently an oversupply of unskilled labour, but that is caused by increasing integration. We are bringing millions of (essentially) unemployed people into the world economy every day, as india, china, brazil become more integrated. And they are demanding wage increases. The real story of stagnant wages is in declining labour share. If we consider only the manufacturing industry, we find that in the last twenty years labour share of output has fallen from 35% to 25%, but almost all of that fall has been due to rising commodity costs. The reality is, that a huge fraction of that money is going to pay rising wages in the developing countries which are doing all the mining, Brazil, china, etc. Between 1994 and 2002, the wages paid to brazilians for the manufacture of `basic metals' (which I think means mining, hard to read these transliterated terms), doubled. (Stats from here).

So, the reality is that productivity gains are being captured by workers, just not our workers. This is the reality of globalisation. On the other hand, most developing countries do not yet have the universities, business schools, and law schools, that we take for granted, and we are exporting their services to the rest of the world. Helped immeasurably by the information technology revolution, It is becoming possible to manage more and more people, and our skilled classes are reaping the benefits, which is driving inequality higher. This is a secular trend that it is beyond governments to limit, though they can possibly limit the absolute size. If you look at the trend lines for inequality they are identical from high tax places like sweden, through medium taxes like the UK to low taxes like the US. We were just starting at comparatively lower basis.

I think there is a cogent argument here for taxes to become more progressive, as we respond to these changing circumstances. However, like all trends it will not continue forever, wage convergence is proceeding apace. By the time I grow old, I think de-industrialised countries will be a thing of the past, at that point I would expect first world manufacturing wages to again track productivity growth.

ALso, since 1970 (ish) world inequality has been decreasing faster than anyone thought was possible. If this trend continues for another two decades, the world will be a very different place.

[awm]

Right now we are very far from full employment. Unemployment causes downward pressure on wages, which increases inequality, which reduces demand, which causes unemployment. Government needs to step in and break this cycle.
If government acts to directly increase demand and/or employment, this means a massive increase in government. That is politically untenable and also creates massive opportunity for graft. Raising the minimum wage would seem to break the cycle without most of the issues. Its also easy to justify morally, since it directly helps only people who work and the minimum wage has not kept up with inflation and really is not a "living wage." A similar suggestion is to mandate paid vacation days.

[phil_20686]

 awm, on 2012-August-09, 15:12, said:

Right now we are very far from full employment. Unemployment causes downward pressure on wages, which increases inequality, which reduces demand, which causes unemployment. Government needs to step in and break this cycle.
If government acts to directly increase demand and/or employment, this means a massive increase in government. That is politically untenable and also creates massive opportunity for graft. Raising the minimum wage would seem to break the cycle without most of the issues. Its also easy to justify morally, since it directly helps only people who work and the minimum wage has not kept up with inflation and really is not a "living wage." A similar suggestion is to mandate paid vacation days.

Downward price ridigity is a feature of our economy. No one takes pay cuts. Instead they fire people and hope to rehire at a lower wage. Imagining a higher minimum wage will make a significant impact on this cycle is fairytale economics. If you believe that minimum wages are insufficient, direct transfer payments based on hours worked is more efficient, and has none of the negative impacts.

Or alternatively, the Fed could do its job.

Aggregate demand is really a statement about the price level. Everything is in demand at the correct price. This is the central (new) Keynesian insight; Prices clear markets, a demand side recession is when markets fail to clear, ergo the the price level is wrong. The easiest way to reset the price level is through moderate controlled inflation.

For the third time in a century, we are suffering through needless economic hard ship because central bankers cannot tell the difference between demand side and supply side problems. There was the great depression, then there was stagflation when the central bank thought that high inflation would cure unemployment, when that trade off only applies if the short fall in production is demand side. Supply side problems require innovation, and increase in production. Demand side problems just require appropriate policy.

Now they are pursuing price stability while millions suffer, because that was the solution the last time around. Its like a sick joke. Millions of people are suffering because the ECB is allowing the periphery to slip into outright deflation. The Fed, whose dual mandate specifically authorises it to allow above two percent inflation in times of high unemployment, is now a cumulative 5% below its two two percent target over the time since the financial crises. This is a scandal.

The hard money lunatics have taken over the asylum. Only in this case, the asylum are the biggest players in the world economy. Bring on high inflation. Let the unemployment rate fall. It is the only realistic chance the developed economy has to avoid decades of lost production as the price level slowly adjust through high unemployment and lower wages. In the absence of higher inflation, every peripheral country in the EU will follow spain into a black hole of unemployment that may take decades just to return to normal.

Fiscal policy will do nothing if the the central banks do not allow inflation to rise. If they were happy for it to rise to lower unemployment, why don't they make it rise? If they want to keep inflation below two percent, they will act to tighten money in response to fiscal policy, and you will have larger deficits and no gain. If the government gets into a tug of war with the Fed over fiscal vs monetary policy. The government will lose. The Fed controls the path of aggregate demand. In can increase demand, at will, by lowering the price of money. The federal reserve statement came out and said, for the sixth, successive quarter, the path of the economy was yet again below their predictions, but that there was still no need for the fed to change course. If the fed's policy forecasts are less than it hopes for, that is the perfect reason to do more.

It makes me so angry. Millions of people are suffering, and our political classes are wholly oblivious to the actual problem. Those countries who are doing ok out of this recession have exactly one thing in common, their central banks have acted aggressively to keep NGDP on growth, by allowing high inflation through the aftermath of the recession. Australia: 5% inflation, to keep NGDP at 8%. New Zealand: 5% inflation, Iceland, inflation peaked at 17% for a few months post crises: result, unemployment fell 3% in six months. Sweden, inflation peaked at four %, and knocked two percent of the unemployment peak. In the united states, the inflation rate was negative two percent. NEGATIVE TWO PERCENT. And you wonder why there is a problem.

My dad told me once (I paraphrase) that every generation starts off optimistic about the future, imagining that they will not repeat the mistakes of the past, and then they have a WTF moment when they realise that the world government is run by a collection of pretty faces in fancy suits, and they they descend into cynicism and conservatism, because better the suffering you know than the cluster**** that they made of their last `good idea'. I was just hoping to get to thirty before I became a cynical old man.

[Winstonm]

Quote

I was just hoping to get to thirty before I became a cynical old man.

Me, too, but along came My Lai, the Tet offensive, and then Watergate. An 18-20 year old American male had no choice but to cash that trifecta of cynicism ticket.

[blackshoe]

How does the Tet Offensive fit in there?

[mike777]

 phil_20686, on 2012-August-10, 04:05, said:

Downward price ridigity is a feature of our economy. No one takes pay cuts. Instead they fire people and hope to rehire at a lower wage. Imagining a higher minimum wage will make a significant impact on this cycle is fairytale economics. If you believe that minimum wages are insufficient, direct transfer payments based on hours worked is more efficient, and has none of the negative impacts.

Or alternatively, the Fed could do its job.

Aggregate demand is really a statement about the price level. Everything is in demand at the correct price. This is the central (new) Keynesian insight; Prices clear markets, a demand side recession is when markets fail to clear, ergo the the price level is wrong. The easiest way to reset the price level is through moderate controlled inflation.

For the third time in a century, we are suffering through needless economic hard ship because central bankers cannot tell the difference between demand side and supply side problems. There was the great depression, then there was stagflation when the central bank thought that high inflation would cure unemployment, when that trade off only applies if the short fall in production is demand side. Supply side problems require innovation, and increase in production. Demand side problems just require appropriate policy.

Now they are pursuing price stability while millions suffer, because that was the solution the last time around. Its like a sick joke. Millions of people are suffering because the ECB is allowing the periphery to slip into outright deflation. The Fed, whose dual mandate specifically authorises it to allow above two percent inflation in times of high unemployment, is now a cumulative 5% below its two two percent target over the time since the financial crises. This is a scandal.

The hard money lunatics have taken over the asylum. Only in this case, the asylum are the biggest players in the world economy. Bring on high inflation. Let the unemployment rate fall. It is the only realistic chance the developed economy has to avoid decades of lost production as the price level slowly adjust through high unemployment and lower wages. In the absence of higher inflation, every peripheral country in the EU will follow spain into a black hole of unemployment that may take decades just to return to normal.

Fiscal policy will do nothing if the the central banks do not allow inflation to rise. If they were happy for it to rise to lower unemployment, why don't they make it rise? If they want to keep inflation below two percent, they will act to tighten money in response to fiscal policy, and you will have larger deficits and no gain. If the government gets into a tug of war with the Fed over fiscal vs monetary policy. The government will lose. The Fed controls the path of aggregate demand. In can increase demand, at will, by lowering the price of money. The federal reserve statement came out and said, for the sixth, successive quarter, the path of the economy was yet again below their predictions, but that there was still no need for the fed to change course. If the fed's policy forecasts are less than it hopes for, that is the perfect reason to do more.

It makes me so angry. Millions of people are suffering, and our political classes are wholly oblivious to the actual problem. Those countries who are doing ok out of this recession have exactly one thing in common, their central banks have acted aggressively to keep NGDP on growth, by allowing high inflation through the aftermath of the recession. Australia: 5% inflation, to keep NGDP at 8%. New Zealand: 5% inflation, Iceland, inflation peaked at 17% for a few months post crises: result, unemployment fell 3% in six months. Sweden, inflation peaked at four %, and knocked two percent of the unemployment peak. In the united states, the inflation rate was negative two percent. NEGATIVE TWO PERCENT. And you wonder why there is a problem.

My dad told me once (I paraphrase) that every generation starts off optimistic about the future, imagining that they will not repeat the mistakes of the past, and then they have a WTF moment when they realise that the world government is run by a collection of pretty faces in fancy suits, and they they descend into cynicism and conservatism, because better the suffering you know than the cluster**** that they made of their last `good idea'. I was just hoping to get to thirty before I became a cynical old man.

not sure what is your recommendation.......allow inflation to rise ok...but fed do what that it does not do?

bank of england to do what that it does not do?


"It makes me so angry. Millions of people are suffering, and our political classes are wholly oblivious to the actual problem"


As a noneconomist...monterist/friedman.........I guess I show my bias that in general i dont care about budget deficits......in general

--



I also get the impression, strong impression that macroeconomics is a science in need of a savior

[phil_20686]

 mike777, on 2012-August-10, 22:37, said:

not sure what is your recommendation.......allow inflation to rise ok...but fed do what that it does not do?

bank of england to do what that it does not do?

Central banks control the price of money. They can cause inflation by lowering the price of money by increasing supply. They just need to print money and buy things. They should start by monetising the entire US treasuries market. If inflation still hasn't risen, then you have just got rid of your debt load, for free. If it does rise, then you are out of your liquidity trap.

Its impossible to be against quantitative easing at this stage. If you don't think it will work, you get rid of your debt for free, if you do think it will work, you raise the inflation rate and lower unemployment. ONLY GOOD THINGS CAN HAPPEN.

The idea that inflation can get out of control is the religious doctrine of hard money lunatics. The seventies were a supply side issue, and central bank policy could not easily contain it. The inflation was largely caused by real factors. Here, if there is inflation, it will be entirely caused by monetary factors, and the central bank can reign it in easily.

[phil_20686]

 mike777, on 2012-August-10, 22:37, said:

I also get the impression, strong impression that macroeconomics is a science in need of a savior

We are in the dark ages. All of what I have written has been well understood in the past, but monetary solutions were not readily available under the gold standard, when the last major demand side recession came up, so we had to go to the second best remedy of fiscal policy. (Although they did reduce the gold peg, which lowers the price of money, which is essentially inflation).

The problem was that demand side economics was solved. Then came the supply side problems of the seventies, and that is all anyone has worked on. That, optimal currency areas, and international trade have dominated the profession to the extent that they have forgotten that demand side economics was essentially solved.

[hrothgar]

 hrothgar, on 2012-August-09, 10:50, said:

I pay you $300 if anyone other than Rob Portman is chosen as Romney's running mate and
you pay me $100 if Rob Portman is chosen as Romney's running mate.

Looks like Romney went with Ryan which I find quite surprising.
Congratulations and please let me know how you'd prefer to be paid.
I'm happy to send you a check or do paypal or whatever.

FWIW, I'm quite surprised at this turn of events.

This is going to make it very easy to tie the Ryan budget around Romney's neck.
You might view this as a good thing, however, I think that the budget is going to get a lot closer scrutiny and I don't think that folks are going to like what they see.

[luke warm]

 hrothgar, on 2012-August-11, 05:51, said:

Looks like Romney went with Ryan which I find quite surprising. Congratulations ...

thanks me too, a little bit... there was a real danger he'd go with portman or even someone like pawlenty... just hold on to it, i'm sure there will be something else we'll disagree on, monetarily speaking, in the future... maybe even a pats/saints football game (btw, the odds on the pats winning would be about the same as their score a couple of nights ago - 7:6)

Quote

This is going to make it very easy to tie the Ryan budget around Romney's neck. You might view this as a good thing, however, I think that the budget is going to get a lot closer scrutiny and I don't think that folks are going to like what they see.

i agree, it will be scrutinized... how americans view it depends on how well romney/ryan can explain it and how many lies obama is willing to tell about it... if recent history is any example, the lies and nastiness will get much worse...

obama has already shown how adept he is at scorch the earth, dishonest, chicago-style politics and i have no doubt that ryan is in for the worst possible character attacks... second only, perhaps, to those launched against romney himself (a felon? killed a man's wife? hasn't paid *any* taxes?)... people who believe obama and his people have to be complete morons

[hrothgar]

 luke warm, on 2012-August-11, 07:42, said:

just hold on to it, i'm sure there will be something else we'll disagree on, monetarily speaking, in the future...

Very gracious of you

[lalldonn]

 luke warm, on 2012-August-11, 07:42, said:

people who believe obama and his people have to be complete morons

I knew it wouldn't be long until this 'argument' came out, though to be honest I expected it from the other side so I'm a bit surprised.

[blackshoe]

You can probably substitute "almost any politician" for "Obama and his people" and not be far wrong.

[luke warm]

 lalldonn, on 2012-August-11, 11:10, said:

I knew it wouldn't be long until this 'argument' came out, though to be honest I expected it from the other side so I'm a bit surprised.

do you disagree that anyone who believes romney caused someone's death is a moron?

 blackshoe, on 2012-August-11, 12:38, said:

You can probably substitute "almost any politician" for "Obama and his people" and not be far wrong.

almost assuredly... but just almost

[PassedOut]

 luke warm, on 2012-August-11, 07:42, said:

people who believe obama and his people have to be complete morons

Of course neither Romney nor Obama controls the content of super-pac ads. I guess it will come down to which ads influence the most voters in a few swing states.

[awm]

 luke warm, on 2012-August-11, 17:31, said:

do you disagree that anyone who believes romney caused someone's death is a moron?

No one has suggested that Romney caused anyone's death. One of the Super-PACs supporting Obama released an ad saying that Bain Capital (with Romney at the helm) closed a factory and laid a lot of people off. Those people lost their jobs, their employer-provided health insurance, and a significant portion of their pensions. Losing these things can have serious (if indirect) effects on their quality of life, including contributing to a premature death (from lack of health care) as in the case of the wife of the man in the ad.

Romney didn't kill anyone, and the ad doesn't say that he did. But this is part of a pattern of Romney enriching himself (and his investors) at the expense of working-class people. There are many indications that Romney doesn't really care about "ordinary folks" -- he was a bully in grade school, he made a fortune shutting down factories and outsourcing jobs, he doesn't seem to feel it's his responsibility to pay taxes, his policies include massive tax cuts for the investor-class paid for by slashing deductions that the middle class relies on and cutting programs for the poor. And in person he doesn't come off as someone who empathizes with regular folks.