EDIT: Because someone else linked it, I'm making this entry public. Also, understand that I'm not attempting to speak with great authority or finality, just pointing out a few things and giving my own take on it.

Once upon a time, people on the Internet figured out that you could have discussions about politics and religion, ( OR you could have civil conversations that don't descend into flamewars.Collapse )

This entry was originally posted at http://laudre.dreamwidth.org/719273.html. Comments either here or there. Go ahead and add me there so I can add you back if need be.

Viewpoint: Why the young should welcome austerity

When you follow a line of thinking that leads you to conclude, "[i]f young Americans knew what was good for them, they would all be in the Tea Party," you may wish to reexamine your assumptions. I may not be an economic historian at Harvard, but I do know what the fuck I'm talking about here nonetheless, and I'm doing my best not to let my ideology unduly influence my opinions on the matter. (And let's not even get into the condescension dripping from the phrase "knew what was good for them.")

Ferguson's entire rant is predicated upon two demonstrably and emphatically false assumptions:

- per se government debt is at the root of the euro crisis;
- government finances function like business and/or household finances in any meaningful way.

He does try to argue that it's not actually government debt that's the problem, since the fact that Japan's debt-to-GDP ratio is colossal even compared to Greece's would falsify that (i.e., why isn't Japan inthe same boat?), but deficit spending, ignoring the reality that they're essentially the same thing, especially when it comes to their impact on bond rates: in and of themselves, fairly little (otherwise Japan would have melted down completely ages ago, instead of just being slow and stagnant).

What's really driving the entire crisis is the belief, by investors, that these economies in the eurozone will not grow fast enough to enable them to pay off their debts. Why hasn't austerity restored confidence? Because austerity does not promote growth -- it stymies growth. Austerity, by definition, reduces government spending, which reduces GDP, which will, under the strictures of austerity, further reduce government spending, and so on, so forth, in a spiral Keynes first illustrated eighty fucking years ago, and bond buyers know this. (Well, to be fair, Keynes didn't explicitly link the spiral to deliberate austerity, but fiscal and monetary mechanisms at the time -- including the gold standard -- were functionally much like deliberate austerity now.) We even have a term that we teach in fucking introductory macroeconomics for policy regimes that, in some way or another, force government spending to drop when GDP drops (which is what Ferguson is arguing for -- he explicitly mentions a balanced budget amendment): they're "procyclical." As in, they make recessions deeper and longer, and make growth cycles more exaggerated and more bubble-like -- they exaggerate the business cycle (the cycle of boom and bust).

Keynes pointed out, decades ago, the "paradox of thrift": economy shows some sign(s) of recession, people fear that their income may drop (lay-offs, reduced work hours, etc.), and, in response, they cut back on consumption spending so that they'll have some money in the bank just in case. Get enough people doing it, and suddenly consumption drops, which in turn means the potential recession just became real. Without some kind of outside force to interrupt the cycle, Keynes argued, it would keep going on like this until it reached some sort of equilibrium, but at a much lower output level than before. Classical economics argued that there would be some sort of deflationary pressure on wages so that people who'd lost work would get back to work, but the experience of the Great Depression disproved that in the US; Keynes, however, was English, and the UK, like the US, had experienced a big recession at the start of the 1920s, in the wake of WWI. The difference is that the UK didn't experience a boom in the 1920s like the US -- it was just a two-decade-plus shitpile there, with high unemployment and not much growth. (And US growth in the 1920s was partially driven by a residential real estate bubble, which came out of some major innovations in mortgages. Another part of it was a boom in the finance sector, which was in no small part due to some shaky and dubious leveraged stock trading. Does any of that sound familiar?) So Keynes observed this, and that there was nothing in classical economics which could explain why the economy just failed to recover.

He argued for what we call sticky wages (I think he invented the term, but I'd have to go digging to say for sure), which was an early inroad into showing how the nominal economy could affect the real economy, and that, consequently, government spending -- even at a deficit -- could break the cycle and restore growth by boosting aggregate demand. That is, it could get people spending more, by putting money in their pockets, and in turn end a recession and jump-start growth again. Debts incurred could be paid off as government revenues increased due to GDP growth, thus moderating both parts of the business cycle. Work that built on Keynes led to certain assumptions about the relationships between monetary policy and unemployment; these assumptions were proven false by the events of the 1970s, which led to some further innovations in macro theory. The Great Moderation -- the time from the end of the 1981 - 1982 Volcker-induced double-dip recession to the start of most recent recession in December 2007 -- earned its name because of how mild both booms and busts were compared to previous cycles (yes, even NASDAQ imploding), and at least some macroeconomists believed they'd solved the business cycle once and for all. The Great Recession, of course, has sent people back to the drawing board, but many of them -- like Ferguson -- are discarding the lessons of history to an absurd degree.

Here's a few graphs, generated with the St. Louis Fed's FRED database and graphing tool.



That's surplus and deficits, in millions, nominal, from 1940 to now. Note how infrequently it strays into surplus territory -- most of the time, it's deficit. Taking Ferguson at his word, his argument seems to be that there has to be an overall balance on some sort of long-term scale, possibly a generation, between surplus and deficit.

To which I can confidently say: bullshit.



That's gross federal debt over GDP, or the debt-to-GDP ratio. From 1945 or so (the first year for which FRED has this statistic) to 1981, it's falling. A lot. It goes from over 100% of GDP to under 30%, but notice that at no point in that time period was there a sustained period of budget surplus to make that happen.

In fact, let's demonstrate it.



There is no discernable relationship between US federal surplus/deficit and the debt-to-GDP ratio. None. For the bulk of the period above -- before the debt-to-GDP ratio started climbing again, during the Reagan adminstration -- the federal government was engaged in deficit spending, but debt as a percentage of GDP was falling. The reason this was happening? Because the US economy was growing faster than total US federal debt. This was happening even in the 1970s, a period of utterly lackluster economic performance here.

Austerity policy is an utter and demonstrable failure everywhere it's been applied since 2008. Yes, there were deep structural problems in the eurozone which the crisis brought to light -- but they were essentially swept under the rug to make the euro happen, and, now that they've come to light, moralizing and ideology are displacing any sort of growth-oriented policy which might actually help. Yes, US fiscal policy also needs some structural work, to prevent debt from becoming an actual problem instead of just a conservative talking point. But doubling down on policies that have not delivered on any of their promises after years of making people's lives unilaterally shittier, without so much as a glimmer of a light at the end of the tunnel? There's a word for that. "Stupid."

Ferguson should be ashamed of himself. He's an economic historian, and even a glancing acquaintance with the economic history of the 20th century should make it abundantly clear why what he's arguing is colossally and disastrously idiotic. Instead, however, I have no doubt he'll be clamoring in this vein for years to come, and politicians who listen to him will push for policies that'll do nothing but slow us down, all the while arguing that we're not austerifying hard enough, and that we should all be more deferential to the nobility our betters the "job-creator" 1%. (Who really do not and, in fact, cannot make a meaningful dent in unemployment.)

This entry was originally posted at http://laudre.dreamwidth.org/694416.html. Comments either here or there. Go ahead and add me there so I can add you back if need be.

Pepsi releases iPhone app that dehumanizes women to a vile and disgraceful degree.

I've already written to Pepsi (via their web-based contact form) to explain to them that I will not consume any products of Pepsico or its subsidiaries, nor will I patronize any restaurant that serves Pepsi products, including KFC, Taco Bell, or Pizza Hut, until such time as they withdraw this ... this insult and issue a formal apology in a press release. I also informed them that I'd be spreading the word about it, and telling others to do the same by way of the wonderful social media of this day and age.

Today is Election Day. The polls open in a few hours on the east coast.

Make me proud.

Perhaps unsurprisingly, I'm firmly in the Obama camp this fall; while Obama isn't a perfect choice by my lights, he's an actively good choice and not merely the least bad, as is often the case in presidential candidates. I voted for Gore in 2000, but not because I believed he was actively good so much as a vastly superior choice to President Vegetable, which the past eight years have wholly justified. I voted for the Libertarian candidate in 2004, partly because I was still in that libertarian fugue and partly because... well, while a trained monkey would have been a significant improvement over Shrub, I just didn't find the Kerry-Edwards ticket even remotely appealing, especially given that I lived in a state that I knew would vote red anyway. This year? That's not a sure thing, which is why my voting for Obama is important -- North Carolina is a battleground state. What that says about the appeal of the McCain-Palin ticket is pretty significant, too.

What makes this decision of mine even more reinforced, though, is this continued display of startling incompetence coming from McCain's direction. Sometimes I wonder if he truly is going senile (as opposed to Mel and I just joking about it), or if there is a person or group of people working to undermine his campaign to get someone more electable nominated in 2012. (McCain truly was the best of a bad batch, in terms of voter appeal. Well, perhaps Fred Thompson was a bit more charismatic, but he could play Homer Simpson in a live-action Simpsons... I'm just saying...)

It was brought into pretty sharp focus by VP picks. Obama's pick is typical of the way he seems to conduct himself in public: careful, methodical, very well-thought out, not exciting but inspiring confidence. He was very conservative in his early years in the Senate -- not in a political way (obviously), but in a personal conduct way; he spent a good bit of time playing it safe.

Playing it safe is what we need right now. I'm not saying his message of change and hope is a lie -- not at all -- but he moves forward in careful, measured steps, making sure the ground is steady before he shifts his weight, so to speak. In a nutshell, he looks before he leaps.

McCain's pick, OTOH, is exactly typical of what we don't want. It's flashy, daring, and ultimately, proven to be very poorly thought-out and ultimately backfiring badly.

McCain is freaking Wile E. Coyote chasing the Road Runner off a cliff. He seems rather startled to be plummeting now.

And it just keeps getting better.

This weekend, the McCain campaign started going completely apeshit, with Palin throwing out that terrorist idiocy about Obama, and the Associated Press -- despite the claims of Fox News and their ilk, not a partisan organization -- pointed out that this was a pretty huge stretch. (The unforgiving, black-and-white judgmental morality implied by Palin's statement is also pretty damned chilling, coming from a possible future President of the US. We've already had eight years of that and it hasn't worked out very well, thanks.) Her response?

"The Associated Press is wrong."

... What. The. Flaming. Fuck.

Who the fuck in their right mind goes and calls the damned AP wrong without extremely strong and concrete evidence?

Wait. "Right" mind. Maybe that's the problem.

And then, just for extra lulz for the Internet generation, someone in the McCain campaign describes the various smears they've been throwing out as "true facts."

"True facts."

"True facts."

... Are those like True Chuck Norris Facts?

Here's a challenge to you, if you're interested: let's see if we can't come up with some True Barack Obama Facts to counter the True Barack Obama Facts the McCain campaign is throwing around. Should be entertaining, anyway.

A rare, completely public post from me.

Ernest Gary Gygax has gone to the halls of his ancestors. Love or hate his work or his ethos, there are so many of us out there who owe him a great deal, because he and Dave Arneson started this whole RPG business here in the States.

I'd known for a while that his health was not great, but 69 is still far too young to be shuffling off this mortal coil, especially since he was still working.

May your journey into the higher realms be smooth, and may you be welcomed with great honors at the feasts in the halls of your ancestors. You deserve it, for all the joy and wonder you brought to this world.

As a public notice:

I am pursuing a career that, if successful, brings with it some modicum of fame. This means that privacy and anonymity are going to become more difficult for me to come by, if I do manage to achieve what I am seeking.

Because of this, I'm taking this journal -- my long-standing personal journal -- friends-only, in the LJ sense of the word. It is to keep in touch with my friends who use LJ, and continue to make use of LiveJournal's social networking/community nature for my personal enjoyment and enrichment.

However, I will no longer have publicly-viewable posts on this LJ, aside from this one, for the reasons given above.