Tuesday, December 6, 2016

Bill Mitchell — Our affect is driving us back to a need for continuous fiscal deficits

The field of psychology is usually ignored by mainstream economists, which, in its typically arrogant and closed practice, adopts a series of a priori assumptions about human behaviour – the so-called Homo economicus – where were are always rational and self-interested and, as a result, always make choices that maximise our present and future well-being based on available market signals. Real world forces that condition actual human behaviour, such as cognitive biases and irrationality, in general, as well as cooperative and collective behaviour is ignored by mainstream neo-classical (free market) economic theory, because admitting its dominance in human decision-making would void the entire edifice of that theory and scuttle the authority that is given to the on-going narratives about deregulation, small government, privatisation, pernicious cutting of income support, and the rest of the economic policies that have defined this dysfunctional neo-liberal era. But humans do not behave in the way economists suggest. We are a complex mass of irrationality, custom, habit, and affect. We certainly use cognitive processes in our decision making but often we take shortcuts based on affect. These tendencies are pushing our behaviour back to what was normal before the credit binge that led to the GFC. This shift in our behaviour is associated with stagnation and entrenched mass unemployment. But the reason for these parlous outcomes is not that we have returned to more normal spending behaviour but, rather, because governments have not realised that they had to return to more normal behaviour as well. Instead of promoting the benefits of austerity (in the face of all evidence to the contrary), governments should have been promoting the benefits of continuous fiscal deficits to support non-government saving desires and maintain better employment outcomes and stronger income growth.….
The problem is not with the model based on homo economicus but with the scope of its application. The conventional interpretation of the model assumes the scope of the model is sufficiently congruent with actual affairs to approximate reality closely enough to be the foundation for policy analysis and formulation. However, outcomes reveal that the restrictive assumptions on which such models are based limit the scope so much that the model is not as representational as assumed and so the models fail as a policy tool.

There is also the issue of scale. The assumption is that the microfoundations of the model underlie macro behavior and can be used to project macro behavior. However, this involves the fallacy of composition, when it is assumed that what is true of a part of the whole is true of the whole. It also fails to take into account synergy, that is, the whole is greater than the sum of its part owing to relationships, interaction, feedback and reflexivity.

Modeling that restrictively assumes homo economicus, methodological individualism and a representative agent for tractablity fail owing to both scope and scale. Simple is a feature. Simplistic is a bug.

Some of the reasons for this failure of models based on homo economicus as policy tools are found in the psychological factors that Bill calls to attention. These psychological factors strongly influence individual preference and behavior and also underlie sociological effects that strongly influence group behavior.

Bill Mitchell – billy blog
Our affect is driving us back to a need for continuous fiscal deficits
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

MEPS: Steel price surge expected to continue

More evidence of 'liftoff'.  Fed (to them) behind the curve.

International flat steel product selling figures have been on an upward trend throughout 2016. Substantial hikes are anticipated when negotiations between mills and customers are concluded, in December. Further strong gains are likely in the first quarter of 2017. 
Spot coking coal prices have more than tripled to top US$300 per tonne in recent months, while iron ore values are fluctuating in the US$70-80 per tonne range. Due to the large rises in raw material expenditure, steelmakers are making concerted efforts to lift their selling figures.

Material Incompetent Left

More material systems textbook incompetency 101 on display here, President Obama:

"He says he is going to bring jobs back... well how are you going to do that? what are you going to do? There is no answer to it...there is no magic wand..."

He is not lying as part of the vast "neo-liberal conspiracy!", he literally has no idea how to do this.

Monday, December 5, 2016

Alex Christoforou — Did the US-led coalition give the EXACT coordinates of Russian Aleppo hospital to Al-Qaeda for a missile attack?

This becoming a very familiar pattern. Every time Lavrov and Kerry appear to be making some sort of progress on ending hostilities in Syria, an unwarranted, and oddly timed attack on forces sided with the Syrian government occur.
The Duran
Did the US-led coalition give the EXACT coordinates of Russian Aleppo hospital to Al-Qaeda for a missile attack?
Alex Christoforou


Bill Black — Jobs, Jobs, Jobs – Not Austerity

Democrats under the spell of Rubinomics consign themselves to the political wilderness.

New Economic Perspectives
Jobs, Jobs, Jobs – Not Austerity
William K. Black | Associate Professor of Economics and Law, UMKC

Xinhua — China issues first white paper on traditional Chinese medicine

The Chinese government published its first white paper on traditional Chinese medicine (TCM) on Tuesday, detailing policies and measures on TCM development and highlighting its unique value in the new era.
"TCM has created unique views on life, on fitness, on diseases and on the prevention and treatment of diseases during its long history of absorption and innovation," said the white paper, Traditional Chinese Medicine in China, published by the State Council Information Office.
As ideas on fitness and medical models change and evolve, traditional Chinese medicine has come to underline a more and more profound value, according to the document.
Boasting the establishment of a TCM medical care system covering both urban and rural areas in China, the white paper said there were 3,966 TCM hospitals, 42,528 TCM clinics and 452,000 practitioners and assistant practitioners of TCM across the country by 2015....
Western allopathic medicine is particularly suited to acute conditions, whereas traditional health care approach like TCM are suited to chronic conditions.

However, traditional health approaches emphasize perfection, prevention and treatment in that order.

The objective is maintaining excellent health and preventing ill health from arising. Treatment is the last resort.

According to traditional wellness approaches, the four pillars of health are diet, exercise, rest and life style. Intervention is only needed in the case of accident or imbalance if one adheres to a healthy regime.

In the West this approach is called holistic health.

China issues first white paper on traditional Chinese medicine

Michael Brenner — Washington's Putin Obsession

Emeritus Professor of International Affairs Michael Brenner unloads on the American elite and the US foreign policy establishment. Having studied international relations for decades he is aghast at recent developments and immediate prospects. The US elite is plagued with imperial pretensions and is exhibiting a dangerous level of hubris. And the US public is being kept in the dark about through media control of the narrative.

Washington's Putin Obsession
Michael Brenner | Professor of International Affairs, Emeritus University of Pittsburgh

Tobias Konitzer — Obamacare is very popular

This deep dive into our polling data shows that people are demanding the impossible: cheap, comprehensive health insurance that they can purchase only when they need it. Unable to accomplish universal health insurance, Democrats took the unpopular step of mandating health insurance because they recognized it was necessary for the marketplaces to function. To date, Republicans have avoided making explicit how they will negotiate the popular and unpopular provisions of Obamacare, preferring to promise, in Trump’s words, “something terrific”. Now that they have full control of the Presidency and Congress, Republicans have tough choices to make. The majority of Americans might support Trump’s healthcare plan now; do not be surprised if that changes quickly when they find out how much they actually like Obamacare!
Obamacare is very popular
Tobias Konitzer | PhD candidate in communication at Stanford University

Nsikan Akpan — The very real consequences of fake news stories and why your brain can’t ignore them

Fakery aka persuasion, sophistry, and rhetorical artifice has long been the basis for advertising, PR and propaganda, as well as the tabloid press before infotainment went mainstream and profits were counted base on the number of eyeballs. Now with the Internet, many have discovered that it is possible to get rich quick by planting fake news and reaping the benefits of the advertising windfall.

What's behind that? Cognitive-affective biases. Humans are easy to manipulate for anyone who understand how to use them.

There is so much noise now that the signal is difficult to detect.

Larry Johnson — Trolling Russia for Trump? Really?

The propaganda drum beat against Russia by US pundits, media and academics is loud, intense and widespread. One of the more recent examples is a piece at WarOntheRocks.com, TROLLING FOR TRUMP: HOW RUSSIA IS TRYING TO DESTROY OUR DEMOCRACY by ANDREW WEISBURD, CLINT WATTS AND JM BERGER. I want to address this piece very systematically.…
Another smackdown.

No Quarter
Trolling Russia for Trump? Really?
Larry Johnson

Charlie Warzel and Lam Thuy Vo — Here’s Where Donald Trump Gets His News

@realDonaldTrump's twitter feed

Here’s Where Donald Trump Gets His News
Charlie Warzel, BuzzFeed News Reporter, and Lam Thuy Vo, BuzzFeed Open Lab Fellow

Peter Lavelle — Donald Trump vs. the media: 4 years of total war ahead

Knives have been drawn and targets carefully selected. To ask what kind of relationship President Donald Trump and the corporate mainstream media will have is a non-starter. We already know the answer: unrelenting trench warfare with no prisoners taken. Both parties take this state of affairs for granted and both are prepared. Prediction: the loser in this contest will be the legacy media....
The Duran
Donald Trump vs. the media: 4 years of total war ahead
Peter Lavelle

Yves Smith — PropOrNot’s Grandiose Fabrications

The intended mission of PropOrNot revealed. Not only intimidation but also censorship. Admit the error of your ways and you will be removed from The List.
PropOrNot has been eager to get sites to contact them to engage in “constructive conversation,” as they suggested in Reddit that it would be just peachy if TruthDig “were to reach out to us, though, we would probably have a constructive conversation with them that would result in their removal!”
In other words, PropOrNot, contrary to its claims of merely providing analysis, is seeking to act as a censor. In corporate-speak, “constructive conversation” is the sort of thing one has with an employee who is being put on warning for possible termination.
Naked Capitalism
PropOrNot’s Grandiose Fabrications
Yves Smith

Yves Smith — We Launch PropOrNot.Org To Identify Inept Propagandists and School Amplifiers Like The Washington Post on How to Spot Them

We trust readers will enjoy and link to our new site, PropOrNot.org: Your Friendly Guide to Better Propaganda. Its aim is to combat serious deterioration of the standards of American propaganda, with the ultimate goal of restoring the US to its standing of a propaganda export powerhouse....
Humor is often the best weapon.

Naked Capitalism
We Launch PropOrNot.Org To Identify Inept Propagandists and School Amplifiers Like The Washington Post on How to Spot Them
Yves Smith

Yves Smith — We Demand That The Washington Post Retract Its Propaganda Story Defaming Naked Capitalism and Other Sites and Issue an Apology

As the lawyers like to say, res ipsa loquitur. Please tweet and circulate this letter widely. You will notice that our attorney Jim Moody is a seasoned litigator who has won cases before the Supreme Court. He has considerable experience in First Amendment and defamation actions. Past high profile representations include Westomoreland v. CBS and defending Linda Tripp.
I also hope, particularly for those of you who don’t regularly visit Naked Capitalism, that you’ll check out our related pieces that give more color to how the fact the Washington Post was taken for a ride by inept propagandists, particularly our introduction to our spoof PropOrNot.org site, which uses the PropOrNot project as an example of sorely deficient propaganda and shows where it went wrong, or the humor site itself. Be sure not to miss its FAQ.

We have another post today that describes how the few things that are verifiable on the PropOrNot site don’t pan out, as in the organization is not simply a group of inept propagandists but also appears to deal solely in fabrications. If the site is flagrantly false with respect to things that can be checked, why pray tell did the Washington Post and its fellow useful idiots in the mainstream media validate and amplify its message? Strong claims demand strong proofs, yet the Post appeared content to give a megaphone to people who make stuff up with abandon. No wonder the members of PropOrNot hide as much as they can about what they are up to; more transparency would expose their work to be a tissue of lies.

Naked Capitalism
We Demand That The Washington Post Retract Its Propaganda Story Defaming Naked Capitalism and Other Sites and Issue an Apology
Yves Smith

Norman Solomon — WPost Won’t Retract McCarthyistic Smear

The Post doubles down. Opposition gears up.

The takeaway is twofold. First, the Clinton backers are not only in deep denial but don't accept the legitimacy of the 2016 US presidential election. They have become unhinged and are dangerous.

Secondly, the Establishment is gearing for a media war with the new president, who has a reputation for getting even and has his own media arm in the person of Steve Bannon and in Breitbart News. Donald Trump is also adept at social media and is unlikely to abandon it as a tool. 

Expect the Establishment media that doesn't fall into line to discover that they no longer have access and are shut out in the cold, having to get their news from other sources. The result will be an increase in fake news as the Establishment attempts to recapture dominance of the narrative.

Consortium News
WPost Won’t Retract McCarthyistic Smear
Norman Solomon | co-founder of the online activist group RootsAction.org

Reuters — Trump Advisors Aim to Privatize Untapped Oil Reserves

Native American reservations cover just 2% of the United States, but they may contain about a fifth of the nation’s oil and gas, along with vast coal reserves.
Now, a group of advisors to President-elect Donald Trump on Native American issues wants to free those resources from what they call a suffocating federal bureaucracy that holds title to 56 million acres of tribal lands, two chairmen of the coalition told Reuters in exclusive interviews.
The group proposes to put those lands into private ownership – a politically explosive idea that could upend more than century of policy designed to preserve Indian tribes on U.S.-owned reservations, which are governed by tribal leaders as sovereign nations. 
Trump Advisors Aim to Privatize Untapped Oil Reserves

Washington's Blog American Alternative Media Threatens Defamation Lawsuit Against Washington Post for Red Baiting

Yves Smith – who runs the respected liberal website Naked Capitalism – has retained a top gun lawyer to sue the Washington Post for defamation unless it retracts its smear piece calling alternative media sites “Russian propaganda.”
Smith has also launched PropOrNot.org … a satirical site complaining about the lack of first-rate propaganda by the powers-that-be.
Ha ha. They crossed the wrong woman. I'm sure we will be hearing a lot more about this.

This is likely also a boon for MMT. It will drive a lot of traffic to Naked Capitalism, which is MMT-friendly.

Washington's Blog
American Alternative Media Threatens Defamation Lawsuit Against Washington Post for Red Baiting

Jeremiah Jones — Oil Company Responds To US Army Corps’ Announcement, Will Continue To Proceed With Pipeline

Don't celebrate the Army Corps of Engineers decision too early.

The flip side is that this is shaping up into something like the civil rights movement of the Sixties with both national and international implications. Occupy was just the first gun being fired in a conflict that is likely to take place over the 2020's that reshapes the face of US politics and culture.

Counter Current News
Oil Company Responds To US Army Corps’ Announcement, Will Continue To Proceed With Pipeline
Jeremiah Jones

Keith Hart — Preface to the Coming World Crisis

Why history is important and WWIII will be difficult to avoid. 
Does anyone sincerely believe that the West (the Whites) will peacefully hand over world leadership to the non-white global majority, led by the BRICS, whom they coerced into joining the world society they made, while they had a virtual monopoly of capital, industry, markets and transport and had mastered genocide by remote means? Or that the United States would relinquish its empire without a fight, when it holds so many of the world’s winning cards listed above?
Human Economy Blog
Preface to the Coming World Crisis
Keith Hart | International Director of the Human Economy Programme at the University of Pretoria

Andrea Shalal — U.S. reshaping budget to account for Russian military threat

Ramping up the "threat" (fear factor) to justify increasing "defense" spending. This is a self-augmenting system. As one side (US allies) ramp up the other side (Russia & China) also ramp up. Welcome to the new arms race.

It's looking like Donald Trump may be facing a similar dilemma that Lyndon Johnson faced in trying to achieve the Great Society will simultaneously funding an increasingly costly Vietnam War.

U.S. reshaping budget to account for Russian military threat
Andrea Shalal

Jason Smith — Stock-flow consistency is tangential to stock-flow consistent model claims

Critique of Godey & Lavoie and MMT based on an analogy with electrical circuitry.
As I mentioned above, the results of SFC analysis have little to do with the SFC itself, but instead depend on the assumptions about the behavior of the "circuit elements" (firms, households, government) about which SFC analysis tells us almost nothing. 
SFC is an operational description of financial flow — LHS and RHS must balance just as electrical charge in a circuit, that is, sum to zero. No causality implied.

Similarly, the electrical charge in every operable circuit must sum to zero — positive and negative charges much cancel.

But in every circuit the actual components have a use to perform that his not revealed by the circuit diagram but the use to which the circuit is being put.

This corresponds to the theoretical aspect in economics. Accounting identifies are the boundary conditions and reveal nothing about causality. Causation requires theoretical interpretation.

The point of using SFC models, like drawing circuit diagrams in electrical and electronic systems, is to ensure that the boundary conditions are observed on the analogy that Jason Smith provides in terms of conservation in physics.

But to say that SFC is a truism and dismiss it as irrelevant would be applicable only if there were not violations in attempted applications.

Just as conservation laws are the framework for theories about natural sciences, so to is accounting with respect to finance. Economics uses finance as its basis insofar as it uses monetary units —economic units (actual) are converted to financial expressions in a unit of account. Finance underlies economic in in a monetary production economy. For one thing, it is not possible to do mathematical calculations with different real units — add apples and oranges — but it becomes possible by reducing both to price.

This relationship between economics (actual entities like goods and workers) and finance (nominal and real value expressed in price and wages) is where many of the issues in economics arise. to begin with, nominal value is an observable, while real value depends on calculation based on assumptions.

SFC deals with the financial side of economics expressed in nominal units, the operational basis of which which many economist not only do not pay much attention to but also don't seem to understand very well.

For example, at the macro level conventional economics doesn't take history into consideration, e.g., the result of switching from a gold standard to a fiat monetary regime regarding monetary and fiscal policy. This was a chief MMT criticism of the Reinhart & Rogoff study that was used to argue for the fiscal austerity that undermined demand prolonged the Great Recession. Because the monetary units were the same, R&R assumed that conditions were comparable, which they were not, as the MMT economists pointed out.

Under a fixed convertible system, monetary policy takes precedence of the currency issuer will lose control of the value of the currency. This doesn't apply in a fiat regime, greasy increasing fiscal space. This has nothing to do with individual agents or their behavior since it is a policy choice. However, it has a great deal to do with what individual agents can do based on policy choice consequent on that initial policy choice.

Fixed and floating rate monetary system operation under the same SFC principles, however, they different theoretical in terms of causality. In a fixed rate system, the currency issuer is constrained operationally in a way that it is not in a floating rate system. That is to say, different initial policy financial choices impact non-financial behaviors.

For instance, the ideal of macro as a policy science is to reconcile the trifecta of growth, employment and price stability. This is impossible in a fixed rate system where the currency issuer must protect the value of the currency using the interest rate. However, it becomes possible in a floating rate system where that constraint is removed, as MMT analysis shows based on the government balance being the inverse of the nongovernment balance at full employment using functional finance and an ELR (employer of last resort),with the fiscal authority  operating similarly to the monetary authority (central bank) acting as LLR (lender of last resort).

While an electrical circuit diagram may look the same for different devices, the actual devices and components and what they can do will be different in the case of different power sources and inputs. The laws of electricity that apply are the same across devices, similar to the financial conditions applying to SFC, but the uses are varied and must be approached specifically.

Similarly, a monetary production economy is powered economically by energy, work, and natural resources and financially by money. Insufficient funding results in idle resources and deflationary pressure, while funding in excess of production increase results in inflationary pressure building. SFC models are useful in modeling this.

Perhaps most important for the study of economics, physical laws are applicable always and everywhere — they are timeless. But since economics in monetary production economies is based on finance and finance is based on institutional arrangements that are arbitrary rather than fixed, there are no financial laws that natural rather than positive, hence to economic laws that are natural to the degree that finance (nominal values based on a unit of account) that are natural rather than positive either. Economics is not a natural science or even like a natural science. It is social and historical.

Because economics is social an historical, there can be no timeless laws regarding causation that obviate assessment of changing conditions (context). SFC states no more than that the accounting procedures in force in a jurisdiction must be adhered to.

While these may differ among jurisdictions, there is common agreement that accounts must balance in accounting periods, e.g., for financial institutions that generally means daily. While variations may exist over the day, at the end of day accounts are settled and must balance. Bank tellers don't do home until they do.

Information Transfer Economics
Stock-flow consistency is tangential to stock-flow consistent model claims
Jason Smith

Sashi Sivramkrishna — What Does Modern Money Theory Tell us About Demonetisation?

Introducing India to MMT.

The Wire
What Does Modern Money Theory Tell us About Demonetisation?
Sashi Sivramkrishna | Professor of Economics at Narsee Monjee Institute for Managment Studies, Bengaluru, and author of In Search of Stability: Economics of Money, History of the Rupee, Manohar, New Delhi, 2015

Sunday, December 4, 2016

Does Putin really intend to restore the Soviet Union? — Interview with Richard Sakwa

RD Interview: Professor Richard Sakwa from the University of Kent talks about Russia’s foreign policy and explains why Russia is creating alternative regional institutions such as the Eurasian Economic Union.
Short and important.

Paul Rosenberg — The moral foundations of fascism: Warring psychological theories struggle to make sense of Hitler, Mussolini and you-know-who

Comparison and contrast of Jonathan Haidt's Moral Foundations Theory (MFT) and Jeffrey S. Sinn and Matthew W. Hayes's Evolutionary-Coalitional Theory (ECT).

Interesting from the POV of exploring the conservative and liberal mindsets. Lots of fancy words and acronyms.


Press conference Trump style

Press conference Trump style.

The Hill
Trump slams China on Twitter
Mallory Shelbourne

Crooks & Liars
Ministry Of Propaganda: Dick Cheney Tells CNN 'We Don't Need You Guys Anymore' Because Trump Has Twitter
By David

Albert R. Hunt — Republicans Prepare Extravaganza of Tax and Spending Cuts

Republican congress versus Donald Trump. Who wins?

Bloomberg View
Republicans Prepare Extravaganza of Tax and Spending Cuts
Albert R. Hunt

Vitor Mello — Using Minsky to Better Understand Economic Development – Part 1 & 2

This year the global system has seen two major shocks: Brexit and Trump. What these events have in common is their populist rhetoric that promised to bring back jobs, while also making xenophobic statements. These elections have tapped into growing anxiety over job security, which has not been addressed by most governments and has given room for demagogues to tap into the anger of the people. They reflect a problem that transcends the boundaries of any single nation: the global economy has been in a slump for almost a decade. Governments need to create jobs, and public fiscal stimulus is the way to do so. To allow it, we must rethink that system.
The Minsky's

Tim Duy — Desperately Searching For A New Strategy

Interesting analysis. Tim Duy concludes with:
The dry statistics on trade aren’t working to counter Trump. They make for good policy at one level and terrible policy (and politics) at another. The aggregate gains are irrelevant to someone suffering a personal loss. Critics need to find an effective response to Trump. I don’t think we have it yet. And here is the hardest part: My sense is that Democrats will respond by offering a bigger safety net. But people don’t want a welfare check. They want a job. And this is what Trump, wrongly or rightly, offers.
Trump has at least correctly diagnosed the issues. Now comes the test of whether he can address them successfully. Krugman and the Democrats have lost the plot.

Tim Duy's Fed Watch
Desperately Searching For A New Strategy
Tim Duy

Pat Lang — The WaPo thought Mattis was a retired BG

Ha ha. Washington Post commits yet another "crime against truth," this one just a moronic gaffe that underlines just how unprofessional their operation is.

Sic Semper Tyrannis
The WaPo thought Mattis was a retired BG
Col. W. Patrick Lang, US Army (ret.), former military intelligence officer at the US Defense Intelligence Agency