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Krugman kicking some austerian ass this morning!

3 new posts:

Building A Mystery
Jared Bernstein shakes his head at what he calls “weirdness” at the Washington Post, citing an editorial and a commentary by Robert Samuelson. I second his views, but I’d like to point out something else about Samuelson’s piece.

What Samuelson does is to throw up his hands and declare that we just don’t understand what’s going on in the macroeconomy. How does he know this? He talks to several people who declare themselves deeply puzzled by events — notably, Lorenzo Bini Smaghi and Allan Meltzer.

But it’s no mystery why Bini Smaghi and Meltzer would find it all very puzzling — they personally got everything wrong. Bini Smaghi spent years sneering at anyone suggesting that Greece might need to write off some of its debts. Meltzer has been predicting runaway inflation for four years.

Some of us don’t find the macro developments puzzling at all; we applied basic IS-LM macro, understood from the beginning that monetary policy would have little traction, warned that austerity policies would have major negative effects. Basic textbook macro has in fact worked fine. And so you might think that Samuelson would ask the people who got it wrong why they got it wrong, and whether it might not be because they had the wrong framework while the Keynesians were closer to the truth.

But no; he acts as if these people are the authorities, and their personal predictive failures demonstrate that nobody can get it right.

Oh, and it goes without saying that these “experts” have not reconsidered their views at all.


Trap Denial
OK, probably going on too much about this, but I want to return briefly to the issue of puzzled economists, specifically Allan Meltzer.

Four years ago Meltzer and I effectively had a debate about the effects of the rapidly expanding Fed balance sheet. He (and others) warned of inflation ahead; I (and others) said that we were in a liquidity trap, so that the Fed’s bond purchases would basically just sit there.

So here we are four years later, the huge expansion of the Fed’s balance sheet has not, in fact, led to inflation. And Meltzer is puzzled by the fact that all those bond purchases just sat there:

Since late 2007, the Fed has pumped more than $2 trillion into the U.S. economy by buying bonds. Economist Allan Meltzer asked:
“Why is there such a weak response to such an enormous amount of stimulus, especially monetary stimulus?” The answer, he said, is that the obstacles to faster economic growth are not mainly monetary. Instead, they lie mostly with business decisions to invest and hire; these, he argued, are discouraged by the Obama administration’s policies to raise taxes or, through Obamacare’s mandate to buy health insurance for workers, to increase the cost of hiring.

He made a monetary prediction; I made a monetary prediction; his prediction was wrong. Therefore, it must be because of Obamacare!


A Heartbreaking Work of Staggering Folly

As I have been writing a lot lately, the clean little secret of the global economic crisis is that standard economic theory actually performed pretty well.

It’s true that few anticipated the severity of the 2008 crisis — but that wasn’t a deep failure of theory, it was a failure of observation. We actually had a pretty good understanding of bank runs; we just failed to notice that traditional banks were a much smaller share of the system than before, and that unregulated, unguaranteed shadow banks had become so important. Once that realization hit, as Gary Gorton (pdf) has documented, standard bank-run theory made perfectly good sense of the story.

And the aftermath of the crisis — persistent low interest rates despite high deficits, impotence of monetary policy, major negative impacts of fiscal austerity — may not have been what most economists or government agencies predicted, but it’s what they should have predicted; Econ 101 macroeconomics, as I often point out, has worked pretty well.

Even the euro area crisis made and makes a lot of sense in terms of standard optimum currency area theory.

The point is that radical new theories haven’t been needed at all; off-the-shelf economics, tools we already had, provided plenty of guidance.



Tuesday Toon Roundup 3- The Rest










Tuesday Toon Roundup 2- Bombers




Tuesday Toon Roundup 1- CONgress

What Mushroom Clouds Can Reveal About The Waco Explosion

By Kyle Hill |
On Wednesday night a fertilizer plant north of Waco, Texas, caught fire and exploded. The violent rupture shook the earth for miles around (the explosion was picked up by seismographs in Oklahoma), set fire to the surroundings, and collapsed nearby buildings.

Tragically, as you might suspect with an explosion this size, there are many suspected fatalities and hundreds have been admitted to area hospitals.

As chilling pictures like these rolled in, the comparison to an atomic mushroom cloud by the media was immediate. The Waco explosion was no hydrogen bomb, but the visual evidence does suggest a connection to a nuclear cloud. Looking at nuclear clouds might even be a good way to figure out how big the explosion in Waco was.

Over the decades, countries around the world have conducted nuclear explosion tests and recorded the effects. We’ve gathered so much data this way that researchers have discovered relationships between many of the bomb’s deadly variables. For example, when talking about atomic explosions, we know a general relationship between the height of the explosion’s cloud and the size—the explosive yield—of the event.



Oliver Sacks Shares Tales of Musical Hallucinations

By Ben Thomas | April 22, 2013 |

When the piece first premiered, critics called it “repellent,” “incomprehensible;” a “confusion.” The audience didn’t even call for an encore – a slight that threw the piece’s composer into a rage. He sneered that the masses were ignorant “cattle” and “asses” – and by that point in his career, few men would’ve refused him the right to shout such things. Though Beethoven’s hearing had been deteriorating for more than 20 years, many of his compositions still packed out auditoriums and commanded premium prices. Thunderclap symphonies like his Fifth and Ninth had carried the man’s legend to the farthest courts of Europe.

So why, when his Great Fugue premiered in 1826, did audiences react with such horror and disgust? And why, more than a century after the fact, do critics now hail this same piece as a stroke of genius; an idea that arrived decades before its time? The most obvious reason, in both cases, is that the Fugue looks much more pleasing on paper than it sounds to an unprepared ear. Though it remains one of the most intricate and technically demanding pieces in all symphonic music, its wild dissonance has led even fans who praise its “perfection of detail” to caution that it’s one of several Beethoven works that “should be excluded from performance.”

In short, musical compositions that look beautifully balanced – even ornamental – on the page can produce painful cacophonies when translated into sound. Unlike printed text, which can only be read aloud one word at a time, musical notes have to sound beautiful – or meaningful, at least – not only when played one-at-a-time, but when played in rhythm with every other note in the same beat or measure.

This is also one of the most striking difference between hallucinations of music – which often take the form of familiar or catchy songs – and the more unusual cases of patients who hallucinate musical notation. As neurologist Oliver Sacks, author of the recent book Hallucinations, has discovered as he’s studied these cases, even the most intricate and ornate hallucinated notation often translates to musical nonsense – which begs the questions of how and why people hallucinate such detailed notation in the first place.



Sex with Other Human Species Might Have Been Secret of Homo Sapiens’s Success

By Michael F. Hammer

It is hard to imagine today, but for most of humankind's evolutionary history, multiple humanlike species shared the earth. As recently as 40,000 years ago, Homo sapiens lived alongside several kindred forms, including the Neandertals and tiny Homo floresiensis. For decades scientists have debated exactly how H. sapiens originated and came to be the last human species standing. Thanks in large part to genetic studies in the 1980s, one theory emerged as the clear front-runner. In this view, anatomically modern humans arose in Africa and spread out across the rest of the Old World, completely replacing the existing archaic groups. Exactly how this novel form became the last human species on the earth is mysterious. Perhaps the invaders killed off the natives they encountered, or outcompeted the strangers on their own turf, or simply reproduced at a higher rate. However it happened, the newcomers seemed to have eliminated their competitors without interbreeding with them.

This recent African Replacement model, as it is known, has essentially served as the modern human origins paradigm for the past 25 years. Yet mounting evidence indicates that it is wrong. Recent advances in DNA-sequencing technology have enabled researchers to dramatically scale up data collection from living people as well as from extinct species. Analyses of these data with increasingly sophisticated computational tools indicate that the story of our family history is not as simple as most experts thought. It turns out that people today carry DNA inherited from Neandertals and other archaic humans, revealing that early H. sapiens mated with these other species and produced fertile offspring who were able to hand this genetic legacy down through thousands of generations. In addition to upsetting the conventional wisdom about our origins, the discoveries are driving new inquiries into how extensive the interbreeding was, which geographical areas it occurred in and whether modern humans show signs of benefiting from any of the genetic contributions from our prehistoric cousins.



#Freejahar Hashtag Rallies Emerging Cult of Boston Bomb Suspect

10:45 AM

Barely two days after cops apprehended Suspect #2 in the Boston Marathon bombings, supporters of Dzhokhar Tsarnaev are rallying online. A flood of Twitter, Instagram and web postings are mirroring the crowdsourced effort to find the bomb culprit, except this time they’re out to exonerate him. Analysts of online extremism are watching closely to see if Tsarnaev becomes a cult figure.

The #freejahar hashtag on Twitter is about what you’d expect after the most highly publicized manhunt in the country. It’s a mix of conspiracy theories, sympathy for Tsarnaev and skepticism of the official narrative surrounding the 19-year old’s arrest. Much of it is consumed with an effort to crowdsource Tsarnaev’s exoneration, pointing to photos from the scene and speculating about them — similar to what took place on 4Chan and Reddit to hunt the bombing perpetrators.

“He’s fucking innocent. If he were “guilty”, it wouldn’t take this long to fucking prove it, and there would actually be evidence,” says one supporter, although the government has yet to charge the incapacitated, hospitalized Tsarnaev with a crime.

@J_Tsarsupport posted a photo (warning: graphic) claiming “proof that half the ‘victims’ are fake” based on a suspicion that there ought to be more blood. Links to conspiracy accusations on Infowars — which disrupted an FBI press conference on Thursday — proliferate. Photos circulate purporting to show, as with this one, that the backpack containing the bomb matches one carried by a different individual. “We The Private Eye have Proven Jhar innocent an soon he will publicly be innocent ..Keep up the great job campaigners,” tweeted another advocate using the hashtag #TroyCrossleyTruth. Compressing the cycle of accusation and refutation online, the hashtag is already getting trolled

Similar material is emerging on Instagram and the web. On the popular photo-sharing network, @Freejaharheda posts a tinted photo of Tsarnaev declaring his innocence; disbelievers “are NASA, GOVERMENT , CSI, NSI, ARMY etc. It is those who is dealing with satan.” A Change.org petition to President Obama starts out with the consensus petition that Tsarnaev, who has yet to be charged, receive a fair trial. Then it slips into more curious territory: “It is vital to end this persecution, as all the conflicting information shown by the media, and footage from the incident, seen by people from all corners of the world, doesn’t manifest itself as enough evidence to condemn Dzhokhar Tsarnaev of this heinous crime.”


People are sick

How Did the World's Rich Get That Way? Luck

By Charles Kenny

Why are some people so rich and others so poor? Is it from good choices or good luck? Hard work, smarts, and ability—or something else? That depends who you are comparing yourself to. If you are more successful than your friends, colleagues, and family members, surely a lot of it is because you are better at what you do, or have made better choices, or have worked harder to get where you are. Think former President Bill Clinton, compared to his somewhat less successful brother.

But as the scale of comparison widens, the amount that’s due to the choices you made—compared to the uterus you gestated in—drops dramatically. That suggests we are a long way from equality of opportunity and that the rich are rewarded for the same effort far more than are the poor. It’s time to fix that.

The United States is an unequal society. According to the Congressional Budget Office, the top 20 percent get about half the nation’s income, compared to the 5 percent of all income shared among the bottom fifth of households. The top 10 percent of the population controls about 70 percent of the wealth. Among rich countries, America’s inequality is certainly extreme. But the world as a whole is an incredibly unequal place. Norway—held up as a model of equality—still sees the bottom fifth of households with incomes less than a third (PDF) those of the top fifth.

Why is there such inequality? The choices we make as individuals can put us considerably above or below our peer average in terms of income or happiness or status. But our peer average itself is set by forces beyond our control—factors such as to whom we were born. And our peer average explains our relative standing against national averages far more than our own choices.


Krugman strikes a nerve- "Very Sensitive People"

When it comes to inflicting pain on the citizens of debtor nations, austerians are all steely determination – hey, it’s a tough world, and hard choices have to be made. But when they or their friends come under criticism, suddenly it’s all empathy and hurt feelings.

We saw that in the case of Olli Rehn, whose friends at the European Commission were outraged, outraged when I pointed out, using slightly colorful language, that he was repeating an often-debunked claim about economic history. And today we see it in Anders Aslund’s defense of Reinhart and Rogoff against what he calls a “vicious” critique by Herndon et al.

Aslund praises R-R for providing

an important corrective to the view that fiscal stimulus is always right – a position that is common across the Anglo-American economic commentariat, led by Paul Krugman in the New York Times.

This is a curious thing for him to say, because it’s an outright lie; as anyone who has been reading me, Martin Wolf, Brad DeLong, Simon Wren-Lewis, etc. knows, our case has always been that fiscal stimulus is justified only when you’re up against the zero lower bound on interest rates. I can’t believe that Aslund doesn’t know this; why, then, would he discredit himself by repeating an easily refuted falsehood?

But then, why would he describe Herndon et al as “vicious”? Their paper was a calm, reasoned analysis of how R-R came up with the famous 90 percent threshold; it came as a body blow only because of the contrast between the acclaim R-R received and the indefensible nature of their analysis.

What I think is happening is that austerians have put themselves in a box. They threw themselves – and their personal reputations – completely behind the various elements of anti-Keynesian doctrine: expansionary austerity, critical debt thresholds, and so on. And as Wolfgang Munchau says, the terrible thing was that their policy ideas were actually implemented, with disastrous results; on top of which their intellectual heroes have turned out to have feet of clay, or maybe Silly Putty.

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