Thursday, September 24, 2009

“Hurrah! We’re round the corner at last!”

From the learned MacDoctor comes what looks to me like  more wisdom on this “the-recession-is-over” nonsense than you’d see in an idiocy of economists (“idiocy” is the collective noun for economists, right?):

    “Economists are bouncing up and down with glee saying that the recession is over. I view all of this buoyancy with a great deal of skepticism, not it the least because few economists seemed to be able to predict the derivatives disaster that brought us to this pass. It would be nice if they are right, but the MacDoctor observes that the words “dead”, “cat” and “bounce” could be applicable here.
    “One of the hallmarks of the depression was that people kept thinking it was all over – and then things took a turn for the worst again. I am no economist, as I have repeatedly said, but it does not seem to me that the amount of correction that has taken place so far is anywhere near as large as the amount of imbalance that needed to be corrected. This is purely a subjective gut feel, but this just feels like the eye of the storm brought to you courtesy of Obama-nomics, Gordo-splurge and Ruddistribution. . . “

Sound about dead right to me.  And reminds me of a well-known cartoon from 1935 showing Prime Minister Forbes and Finance Minister Coates …

Coates_Corner And remember, New Zealand was one who emerged first from the Great Depression.

The letter for this quarter is ‘W’ – which describes the shape of the charts economists draw to show where things are going (and we’re only at the bottom of the first trough). 

You see, despite what you’ve heard, it’s the recession itself in which recovery actually happens, or is supposed to – the time when losing propositions are reined in, the malinvestments liquidated, cost structures rationalised, and resources entrepreneurially redistributed to more profitable pastures.

But none of that can happen successfully when the Stimulunacy of Obama-nomics, Gordo-splurge and Ruddistribution has been doing all it can to stop it happening.

No, the letter for some time to come is ‘W.’

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20 Comments:

Anonymous Sinner said...

So let's see:

* taxes slashed to boost productivity?
* civil servant numbers cut by at least half?
* socialist health and welfare eliminated?
* soup kitchens?
* dole & DBP eliminated?
* riots on the streets?
* armed police?

Nope. Not out of this yet. Not by a long long way!

9/24/2009 03:05:00 pm  
Anonymous Barry said...

Isn't it a bit against Libtertarian ideology to assume that humans cannot learn from mistakes?

Citing a 1935 example of error does not in any way imply that this will happen again or even that it would have any influence on current events.

You are only hurting yourself if you suggest that Humans cannot learn over a period of 50 years. Especially since the mass of inventions and advances in living standards would refute your claims.

And finally, especially since the actions taken during this crisis were directly influenced by what was deemed to have been sucessful in the last crises.

9/24/2009 03:10:00 pm  
Anonymous LGM said...

Barry

The same mistakes are being repeated by the same "experts" and authorities. To expect a different result is irrational.

Humans certainly can learn from mistakes, but that doesn't necessarily mean that they will.

LGM

9/24/2009 03:16:00 pm  
Anonymous Anonymous said...

Good news:
We are no longer in recession.

Bad news:
We are in a depression.

9/24/2009 03:21:00 pm  
Anonymous Russell W said...

Barry: all libertarian ideology has to say about mistakes is that individuals should be free to make them but must be responsible for the consequences - unfortunately when governments make mistakes, we all have to bear the consequences. As for your other comments: Capitalism has gone on in spite of government, but as the record shows at a much slower rate of improvement because of them, i.e., in comparison to when government was much smaller (mid18's- 19's). I think it was Freidman who said that "had the government not grown in scope since the war, the US economy would be 4 times larger than it is now"
Also, you have to be aware of what is seen and not seen. While all seems to be trundling along nicely, underneath the expansion of government our governemnt induced debt has been increasing at a great rate of knots & our real-money grows more worthless by the day; all, in the most part, as a consequence of the existance of central banking.
What they are doing is different than before in that they are pumping massive liquidity into the system early on. Hoover didn't do this but he & FDR did spend massive amounts on government programmes. Unfortunately this time they are doing both, on a scale unseen before.

9/24/2009 03:50:00 pm  
Anonymous Falafulu Fisi said...

LGM said...
Humans certainly can learn from mistakes, but that doesn't necessarily mean that they will.

Yep, this free-downloadable paper on Behavioral Economics agreed with that (see end of page 4 and beginnig of page 5 - I have pasted it below at the end of my message). The thing I see here is that Libz won't like the remedy suggested by behavioral economists, which is more government control because market players are idiots, ie, they don't learn from mistakes.

Quote from the paper:
=====================


The final argument is that individuals who systematically and consistently make the same mistake will eventually learn the error of their ways. This kind of argument has also not stood up well under theoretical scrutiny. First, the optimal experimentation literature has shown that there can be a complete lack of learning even in infinite horizons). The intuition here is simple: as long as there are some opportunity costs to learning or to experimenting with a new strategy, even a completely “rational” learner will choose not
to experiment. This player will get stuck in a non-optimal equilibrium, simply because the cost of trying something else is too high. Second, work on learning in games has formally demonstrated Keynes’ morbid observation on the “long run”. The time required
to converge to an equilibrium strategy can be extremely long. Add to this a changing environment and one can easily be in a situation of perpetual non-convergence. In practice, for many of the important decisions we make, both arguments apply with full force. The number of times we get to learn from our retirement decisions is low (and possibly zero). The opportunity cost of experimenting with different ways of choosing a career can be very high.


======= end of quote =====

I have been following closely the researches in behavioral economics recently because it's proposals are similar (or intersect) with those from econo-physics. Some called behavioral-economics as econo-biology (inspired by psychology and human socio-biology). I see these 2 related by different (by origin) as more generalization of neo-classical economics. They're akin to both General Relativity (GR) & Quantum Mechanics (QM) as more generalizations of classical Newtonian mechanics, ie, the equation of motions in GR is reduced to Newton laws when the speed of the object being concerned is much much less than that of light, ie, when v <<<< c. So, the same here with econo-physics and econo-biology, ie, they do reduce to the normal distribution (gaussian probability distribution or bell-curve) which is one of the foundation of neo-classical (ie, equilibrium stable region), when certain market conditions are met. Distribution of Real dynamics of markets are non-symmetric/non-gaussian/power-law (ie, fat-tail).I have seen some papers on the description of this switch between normal curve distribution and being fat-tailed distribution happening at certain time-regimes in market tradings.

9/24/2009 04:04:00 pm  
Blogger PC said...

FF: But if "market players are idiots," as you assert, "ie, they don't learn from mistakes," as you insist, then what makes the government "controllers" any different from them, huh?

9/24/2009 04:13:00 pm  
Anonymous Sinner said...

No, the letter for some time to come is ‘W.’
.
Nope. "L". or "Z" perhaps.


or the symbol "\"

9/24/2009 05:37:00 pm  
Anonymous Sinner said...

But if "market players are idiots," as you assert, "ie, they don't learn from mistakes," as you insist, then what makes the government "controllers" any different from them, huh?


market players can learn.

governments never can.


this is basically due to the dynamics of feedback loops: market plays can go bankrupt (if governments will "let" them) - but governments never can: they just start shooting people, and always the wrong people

9/24/2009 05:40:00 pm  
Anonymous Falafulu Fisi said...

PC, no I disagreed with behavioral economists proposed remedy here. I think that they should stick to theory rather than trying to defend idiots and people who didn't learn from mistakes by proposing political solutions to protect the idiots.

9/24/2009 05:53:00 pm  
Anonymous Sinner said...

I think that they should stick to theory rather than trying to defend idiots and people who didn't learn from mistakes by proposing political solutions to protect the idiots.

Great! Glad your joining my call for the immediate end to all benefits, state pensions, and the minimum wage


surprisingly enough, all benefits could be gone by monday, if we had a government with guts.

9/24/2009 06:46:00 pm  
Anonymous Barry said...

I am not in any way claiming that the government didn't cause the crisis. Because I know that it did as do you know.

But what I am saying is that having read up about the previous financial crises and especially the depression it seems to me that the government has been very wary of these events and their outcomes.

Because someone is too stupid to avoid doing something doesn't directly imply they are too stupid to learn how to get themself out of it.

Although the two situations are linked, they are not the same.

Finding better ways to prevent a financial crisis are far more of a paradigm shift than the measures needed to fix one that has begun.

Preveting a crisis will require a complete reweiting of the monetary system.

Getting out of one simply involves better choices aroung government spending and that is what has occured.

Of course the next crisis will come again...soon enough

9/24/2009 08:17:00 pm  
Anonymous Sinner said...

Finding better ways to prevent a financial crisis are far more of a paradigm shift than the measures needed to fix one that has begun.


Financial "crises" are good, not bad.


They are there to wipe out the losers and the bludgers, and send the non-productive to the wall - all of which are good things.


We do not want to "prevent" crises: we want to encourage, intensify, and deepen them. If were were up to 25-30% unemployed in NZ, with widespread riots and starvation, then we might be able to make the changes to repair the economy. As it is, well, we're fucked. We'll get there sooner or later, but we'll have less pain overall if we get there sooner!

9/25/2009 12:19:00 am  
Anonymous LGM said...

FF

From the quote you posted:

"The intuition here is simple: as long as there are some opportunity costs to learning or to experimenting with a new strategy, even a completely “rational” learner will choose not
to experiment. This player will get stuck in a non-optimal equilibrium, simply because the cost of trying something else is too high."

Can it ever be said to be "completely rational" to avoid experimenting with a new strategy or even to carefully consider such strategies? In other words, is it "completely rational" to be too lazy to observe reality, learn from it and adjust one's behaviour to suit?

Looks like the author's definitions are suspect. That wrecks his conclusion some.

Also from the quote:
"This player will get stuck in a non-optimal equilibrium, simply because the cost of trying something else is too high."

This particular individual may well get "stuck", but that is not true for ALL individuals in ALL circumstances.

Note: Interestingly it is also possible for one to observe and learn from the mistakes of others. Certainly that is one reason why I am concerned about saving for retirement.

LGM

9/25/2009 08:23:00 am  
Anonymous LGM said...

Sinner

"They are there to wipe out the losers and the bludgers, and send the non-productive to the wall - all of which are good things."

And they also wipe out much of the good. For example, productive entrepeneurs and businessmen and savers and workers who have made decisions based on the signals sent by an unsustainable economic system during its expansion phase.

An analogy made by a colleague was that "when the convist ship sinks, not all who drown are convicts."

LGM

9/25/2009 08:26:00 am  
Anonymous Elijah Lineberry said...

Just before everybody engages in a wankfest of having turned the corner...

The OM Financial segment on NZI Business this morning was worth watching for once.. (the odious Kevin O'Sullivan is normally even more of a bore on television than he is in person)..and pointed out that Japanese fund managers have bought several hundred million dollars worth of put options on US shares this week, which means put options of several billion dollars worth of shares.

This means they can 'lock in' current share prices if share prices go tits up... (e.g a share is trading at $35, you buy a 'put option' at $35; if the share price falls to $25 you can still sell your shares for $35)..what is significant about this is they are January 2010 options; in other words the Japanese think there is a significant risk of the 6 month rally ending very, very soon.

A little bird tells me a certain person has been doing much the same thing in Australia in the last couple of weeks

9/25/2009 09:20:00 am  
Blogger PC said...

Barry, I'm not sure I can agree with anything you've said here.

". . . having read up about the previous financial crises and especially the depression it seems to me that the government has been very wary of these events and their outcomes."

Well yes, but being wary is no guarantee you've learned the right lessons to avert the same outcomes. And they hadn't learned the right lesson, and in any case the motivations for doing otherwise were still too politically powerful.

"Because someone is too stupid to avoid doing something doesn't directly imply they are too stupid to learn how to get themself out of it."

But it looks to me like the world's govts and their central bankers (and the mainstream economic theory that backs them up) is too stupid to do both properly. Just see Ben Bernanke for example, who is still labouring under the delusion that the Depression became great because the Fed failed to inflate after the crash, not because of what it did to cause the crash, and not because Hoover did everything he could to keep prices and wages above their sustainable level.

"Finding better ways to prevent a financial crisis are far more of a paradigm shift than the measures needed to fix one that has begun."

No, not at all. Getting the Fed out of the money business altogether is the repair that's needed for both. And Ron Paul is getting the necessary political support needed to introduce his bill to Audit the Fed, and the traction for his call to End the Fed.

Both are on the cards, and both should be considered here to trim the sails of NZ's Reserve Bank.

"Preventing a crisis will require a complete rewriting of the monetary system."

Now that much is true. As Louis Boulanger said at his recent seminar, we shouldn't be calling this an economic crisis or a financial crisis - given its causes, (mostly an over-inflation of "counterfeit capital" by the Fed) we should be calling it a monetary crisis.

That much is true.

9/25/2009 10:14:00 am  
Blogger PC said...

"We do not want to "prevent" crises: we want to encourage, intensify, and deepen them. If were were up to 25-30% unemployed in NZ, with widespread riots and starvation, then we might be able to make the changes to repair the economy."

What's this "we," hard man?

Neither 25-30% unemployed, widespread riots nor starvation are necessary -- simply letting princes and wages find their own sustainable levels without interference so businesses are able to do more with less, while they reallocate their resources to more profitable directions.

This is what happened in the Great Depression of 1920, after all. What's that, you haven't heard of the Great Depression of 1920? Know why? Because when the world's economies crashed, and the crash was greater even than the one in 1929, their economies were allowed to recover instead of that recovery being stifled by deficits, monetary inflation and other stimulunacy.

Mind you, this was before the politics of economic meddling became popular.

9/25/2009 10:24:00 am  
Anonymous Elijah Lineberry said...

Gosh, it is amazing who reads pc.blogspot.com! HAHAHAHAHAHA!!

In response to my previous post I received a strongly worded email from OM Financial..(calling me a 'f**ing c**t', 'arrogant smart a**e' and 'pompous d**khead' amongst other things).. due to my comments about Kevin O'Sullivan.

I shall therefore apologise for calling Mr O'Sullivan 'odious' and a 'bore'.

Now that everybody has gotten that off their chests and hopefully untangled their panties... the adults will continue discussing the topic at hand.

9/25/2009 10:26:00 am  
Anonymous Sinner said...


Neither 25-30% unemployed, widespread riots nor starvation are necessary -- simply letting princes and wages find their own sustainable levels without interference so businesses are able to do more with less, while they reallocate their resources to more profitable directions.


Not "necessary" no, but not avoidable in NZ.
You are forgetting the socialists - and the fact that at least half of NZ, probably more, simply cannot sustain their current (albeit pathetic) standards of living without government intervention. The fact of the matter is that at least 30% of the country is on benefits of one kind or another; another 30% relies on the state for healthcare and education. There will surely be transitive effects: the will also be permanent effects for that 60% as their living standards reduce to a level commensurate with the international competitiveness! Hell, even Don Brash admitted has as much!


And the socialists, laborites, and unionists will not tolerate this. They will bring people out onto the streets, the will discourage endeavor and enterprise and work to destroy it at every turn. There will be riots, there will be starvation, unless the forces of law act preemptively to prevent it. But the likes of Ulrike Bradford, Uncle Joe Anderton, Chris "Walter Ulbricht" Hipkins, Trevor "Willi Münzenberg" Mallard and the rest are not kidding when they say reform will happen over their dead bodies.


It will happen, and it will happen over their dead bodies. And, I'm sorry Peter, if you think is possible, any other way.

9/25/2009 09:17:00 pm  

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