The Dollar Llama

[hairyears]

Would you believe that someone's found a way of monetising the End of the World?

Enterprising Atheists are taking money from Christian Fundamentalists,offering a pet care service for the animals left behind when their owners ascend to Heaven in The Rapture

Comments

[jamesofengland]

Putting aside the hyperbole involved in suggesting that it's difficult to buy treasury CDSs from banks that are likely to survive for the next few years, in some form or another, I've got friends in Detroit, which has been having a pretty good recovery. For the first time since Schwarzenegger took office, Detroit's unemployment is lower than California's. There's a reasonably good chance that Michigan will fall below the US mean in the next few months. They're passing balanced budgets. Their gdp/ capita is low by US standards, roughly the same as the UK, but their growth has been beating the US mean for the first time in a while. I'd be surprised if MI was a leading producer of new shanty towns over the next few years; you're thinking about the MI of circa '08, when there were indeed many such horror stories (my friends were there then, too). It's in a good region, too, with all of its neighbors doing well. They're not doing as well as the flyover states; none of them are going to have North Dakota's 3.2% unemployment any time soon. They're doing a bunch better than the states you're likely to visit, though, or to discuss with respect.

I'm surprised by your aversion to Hoover's economic policies, though. I'd have thought you were all over public works programs and the like. Is it his opposition to free trade that you disagree with?

[hairyears]

Hoover's public works programmes... You are referring to the Emergency Relief and Construction Act? This is rightly regarded as 'too little, too late' and followed years of depressing economic rectitude in the form of a laissez-faire, low-tax, low-deficit, low-welfare policy that is - with one glaring exception - very much the contractionist policy of the Right.

The exception is, of course, the Republicans' avid enthusiasm for ever-expanding deficits. That being said, it's questionable whether the Bush-era war-and-pork-barrel GOPpers would be recognisable as Republicans in 1930, and it is chastening, in 2011, to discover that Hoover and Mellon's economic policies were overridden by Congress, who imposed the biggest tax increases in American history.

Feel free to expand on all of this: I have to admit that my knowledge of the period comes from sources that are somewhat partisan - and I have some doubts about the Wikipedia article, a summary which raises my suspicions in being all-too-closely in agreement with what I hear from economic liberals.

The article does, however, raise one clear point of agreement with you remarks about Hoover's attempt at intervention:
Even so , New Dealer Rexford Tugwell later remarked that although no one would say so at the time, "practically the whole New Deal was extrapolated from programs that Hoover started".

An interesting point, buried deep within the text, is that Hoover and Mellon failed to reinvigorate bank lending to small businesses, and failed to act effectively to mitigate the effects of a crisis in the secondary (ie: small) banking sector. That's a lesson in history with relevance to the United Kingdom, where even the nationalised banks are refusing to lend to businesses.

So, in answer to your point about Herbert Hoover's interventionism: I might speak in favour of the principle, but this action did not arise out of Hoover's principles - it was imposed on him, and enacted with reluctance - and, worst of all, it was implemented timidly and ineffective.

Had Hoover's principles and policies - any of them - proven to be effective, I would be all in favour of them: and I would hold him up as an exemplar of effective economic policy, rather than as he was, and as his latter-day successors are: politically-illiterate mediocrities pursuing economic contraction.

Meanwhile, would you care to offer any comment on an NYT article showing the growth trend in US GDP? It's interesting for a number of reasons, not least the omission of adjusting factors for standard of living, workforce participation, tax rates, etc, and somewhat disconcerting in that it shows 'the Great Moderation' up to 2007 to have been a period of below-trend growth.

Apologies for the delay in replying: I am in Darkest Somerset.

[jamesofengland]

Too little? I mean, in the same way as communism has never been tried...

http://www.gpoaccess.gov/usbudget/fy11/pdf/hist.pdf

The incoming FY budget was $3.1b. His final 2 years were $4.6b apiece. If a 50% budget increase/ term seems overly timid to you, I'm not sure that there's a president (or Prime Minister) in peacetime history who will live up to your demands. The tables don't show how ridiculous it is to call him a low-tax guy, because the tax base declined so steeply, but he was never that. He was not when he worked for Wilson, not when he promoted drastically higher tariffs while he was in Harding's government, not when he pushed up tariffs a little further as President, and not when he passed one of the largest tax increases in US history.

The ERCA was a part of his systemic massive intervention, but far from the bulk of it. The Hoover dam, for instance, was started a year before the ERCA.

Even the wiki article doesn't suggest that he was a Laissez Faire guy, noting that he repudiated it throughout his life. Mellon was, which is why Mellon was consistently overruled. Hoover was in Wilson's cabinet and it was to a reasonable extent his work on which the New Dealers based their "we planned in war" slogan for a recreation of "war socialism" based on the "moral equivalent of war" that formed the basis for a lot of the New Deal sloganeering. His Treasury secretaries were from the other wing of the party, but most of his cabinet, and his VP (if you're not familiar with Charles Curtis, I would recommend becoming so, starting with his wiki page), were ideological allies.

After Hoover, the progressive wing of the GOP dies; he has no Republican successors to speak of; his biggest differences with FDR, who earlier offered to run on the same ticket as Hoover, were over trade, on which he took the modern union position. His differences with Al Smith were even smaller (much as the both major parties fielded conservatives in the '24 election). After FDR cuts the worst of Hoover's taxes, you see the pattern twice more of Republicans (Eisenhower, Nixon/Ford) raising taxes and regulating then Democrats (JFK, Carter) cutting taxes and deregulating, but Hoover is the last protectionist republican President and by the 60s Nixon's price controls and taxing were out of step with his party and base.

Before Hoover, the only free trading GOP president is Taft. The freedom agenda found some voice in Taft and Coolidge, but they had many progressives in their party caucus in Congress. It's Hoover who discredits the heavy hand of the state in his party. There's a sea change between the GOP congressmen who come before him and after (Robert Taft et. al.) Some people have derided Huckabee in '08 and Buchanan in '00 for being from the progressive wing, but their progressivism is a half hearted affair, limited to the occasional grand scheme, not the Hoover/ TR sort of crusade. There's a reason that you see defenses of Mellon, but none of Hoover from the right; all of his Hoover's fans are on the left. e.g. http://www.amazon.com/Herbert-Hoover-Joan-Hoff-Wilson/dp/0881337056

[jamesofengland]

I think that the NYT article has an oddly labelled axes, and that the below trend growth is an '07 thing. But, yeah, it's been a really terrible downturn, and things will get worse when terrible things happen in Europe and China.

[hairyears]

Other points:

I'm relieved to hear that there are signs of economic recovery in Michigan; from the media coverage in England, it sounded like some kind of 'Abandoned Area' from a dystopian science-fiction story. Nevertheless, I would urge you to examine the figures, and to consider the possibility that *any* bounce in the figures, from such a low base, looks like a good performance. Detroit is clearly not as prosperous as it was in its heyday: the numbers only look good if the baseline is from 2010, not 2005, let alone from1978.

Check your unemployment figures. Are they a claimant count, or do they measure the proportion of economically-active adults? I'd be particularly grateful if you could check that this drop in reported unemployment doesn't actually record the withdrawal of time-limited benefits: we get a lot of that kind of political distortion of labour force statistics in Europe and the UK, and it can be damnably difficult to get definitive statistics.

Meanwhile, I wonder where all the people who've left MI have gone *to*. That might tell us a lot about what and where the economic recovery actually is. Unless, of course, they've fallen so far into destitution that they're invisible to government.

As for hyperbole... What would you have called any 1970- or 1980's science-fiction author who predicted, even in parody, the current state of US politics, the brinkmanship over default, and our current state of indebtedness and industrial dependence on hostile foreign powers? I ask about SF writers, as no economist, politician or official could possibly have said such things and remained in work - or unmedicated - for long.

Some of the potential consequences of the political debacle of the 2011 budget were as severe, or worse, than anything the press have published. As it is, we now need an extra half-percent of economic growth just to stand still against the contractionary effect of a permanent rise in everyone's cost of borrowing: not a reassuring thought, when growth appears to have a 'stall speed'.

[jamesofengland]

MI's GDP's doing well. It's true that Detroit doesn't help, but even Detroit is being dragged along. It's also true that they're not going to get back to before they killed their golden egg laying goose any time soon, but they're diversifying and growing. Labor force participation is doing well. The people who are leaving are leaving for neighboring states, Texas, and the South, for precisely the reasons you suggest.

People in the '70s and '80s were excited about the unprecedented partisanship (e.g. Bork) and domination by foreign powers, too, although back then it was Japan rather than China. It's true that it would be hard to describe Japan as terribly hostile, but having worked in China, studied Chinese law and history, and worked with China from the other side of the table for the Iraqi government, I'm not too worried about Chinese economic success. I do worry about their failure; all economies have recessions, and China appears to have been papering over its problems with stimulus and whacky accounting for a long time, but things are generally a lot better than they were in the 70s. I can't tell you about Science Fiction authors; not my field. The debt problem and downturn is a bigger deal than the strikes and stagflation of the late 70s, but it's not that different. China is different from Japan, but not all that different. Iran/ North Korea are different from the Soviets, but not in a way that makes me think that science fiction authors would have to write much darker books to allow for the existence of people like Kim Jong Il. The downgrade is somewhat different, but hardly unimaginable in the late '70s. It is possible that something truly awful will happen, but the nuclear fears today were about as rational in the 70s, and were certainly felt, alongside all kinds of insane scares, from The Population Bomb to the Club of Rome. We live in a better, happier time today.