Friday, November 25, 2011

Hope Your Thanksgiving Went Well

    Mine was good for the most part. I had some good food and got a good laugh...  The thing is that my brother is gonna be a father, which is in itself crazy to me. My little brother is gonna be a dad! Before his big brother I should add. I'm gonna be an uncle.  Anyways, for whatever reason my parents, especially my mother, insisted they don't want to know the sex of the baby due in January.

    My sister in law got the "gender test" done months ago. I of course wanted to know the gender as soon as possible. I was very happy to learn it's a girl as we had no girls in our family just my brother and me. However for 2 months I was careful not to give away that it's a girl to my mother even when she asked me questions or made comments that if I wasn't careful I could have revealed the sex. Keep in mind that I'm currently living with my parents-the wonderful economy, hopefully not too much longer... So there are plenty of chances to spill the beans.

    Last night though my sister in law right away let's the cat out of the bag revealing it. My brother was like "you have no tact" but honestly from my point of view, I kind of got a kick out of it.

     Sorry my friends Laura Superhero and MotorCityLiberal-please check out his excellent blog about all things political in the Michigan area at -but the Lions were not quite up to it though they did at least come back a little at the end. I think that at 24-0 they were a little demoralized but by putting up a little fight even in a losing cause they have something to take with them going forward. The won't catch the Packers but are a solid chance at a wild card.

     The real heartbreaking moment though for me was seeing the Miami Dolphins fail to upset the Dallas Cowboys after coming so close losing 20-19. Miami however has its offense to blame. Prior to Dallas's game winning drive the offense was able to gain just 3 yards before punting after the defense had shut down the Cowboys on the previous possession. You just can't do that. You give the defense nothing, not even a single first down to wind down the clock and put them right back out there on the field. You can't keep putting the ball in Tony Romo's hands and think he won't beat you giving him enough chances.  Let's face it though, as a Giant fan I know the Giants have to win on their own this Monday at New Orleans. Hoping the Maima Dolphins do their job for them isn't going to get it done.

    I am right now in the middle of an excellent book by the liberal economist Dean Baker which he has given us a free pdf version. This is a must read for any liberal who wants to properly understand the economic issues we must be front and center on. While I will get into it in more depth later for now the two things which he does very well is point out that monetary policy may be ignored by many liberals but it is vitally important. What Paul Volcker did in the early 80s had a worst impact for employment than Reagan's regressive tax cuts. This is a point I have seen only one other liberal make-James Galbraith. As long as the Fed places price stability on a higher level than full employment-its other half of the mandate-underemployment will be the result by design.

   How many people understand that many people at the Federal Reserve consider low unemployment problematic? But what NAIRU-the non-inflation rate of full employment-amounts to is that we can't have unemployment beyond the point that the inflation rate rises at all. And honestly the current 2 percent target(which is assumed though Bernanke has considered making it official) is too low. As even many at the Fed know, an inflation rate of 3-4 percent would hardly be dangerous. In addition a 2 percent annual rate is actually lower than the average inflation rate even during the Great Moderation that they are so unduly proud of. Remeber the (assumed) target is 0-2 percent inflation. Even if they made it 2-4 that would be a major improvement

   The other issue that Baker talks about and on this while Galbraith has mentioned it, Baker here more fully expounds on it than Galbraith did at least in the main work of his I have read, his 1997 book "Born Unequal."  This issue is of relative value of the dollar. As Baker-Galbraith touched on it in 1997-shows the real issue is not about opposing Free Trade but rather the parameters of trade. The real problem with our participation in the global system is that the dollar has been consistently overvalued. This is the due to the actions of the U.S. Treasury.

    In these terms the real failing of Clinton was not that he signed Nafta-and for the record he did impose some labor and environmental standards and protections-but that his Treasury Department consistently promoted an overvalued dollar. With Paulson too we always heard the declaration "We support a strong dollar." A strong dollar however, Baker shows is responsible for our trade deficit and consequent rise in U.S. unemployment.

    These are the two issues that liberals most need to fight on even if it's unclear exactly how you can effectuate change there. If the Fed returned to the Full Employment policies it had especially (pace Galbraith) prior to 1970 but really reneged on with Volcker and the Taylor Rule and the Treasury would no longer allow the overvaluation of the dollar this would do more to bring down the unemployment rate than any of the fiscal issues that most liberals are much better aware of. As Baker points out, while eliminating the Bush tax cuts on the wealthy is desirable it is a drop in the bucket compared with the bang for your buck we would see by reforming the Fed and Treasury.  This is also the method in Krugman's madness in the recent China bill which many criticized as either protectionist or simply jawboning China. Whether or not you like how that bill approaches it, Krugman is focused on the correct issue

    I will get into this more soon but for now let me just be clear that what is needed is not to "abolish the Fed" as Ron Paul and Murray Rothbard want-why do liberals fail to realize that this is a libertarian argument that the market can do it all, regulate itself, promote it's own stability-but rather to reform it. Barney Frank recently had some proposals that are on the right track. What we want is not to abolish the Fed but rather its vaunted "independence."

     The fact is we have had much better economic and financial stability subsequent to the Federal Reserve Act of 1913. The claim that the Fed is only about the banks obscures the fact that we have had a much more stable economic system since the Federal Reserve came into existence. If the Fed is reformed this will do more to bring down unemployment than any fiscal issue that liberals are much more focused on.


  1. You wrote: "But what NAIRU-the non-inflation rate of full employment-amounts to is that we can't have unemployment beyond the point that the inflation rate rises at all. And honestly the current 2 percent target(which is assumed though Bernanke has considered making it official) is too low. As even many at the Fed know, an inflation rate of 3-4 percent would hardly be dangerous." The late Bill Vickrey, Nobel Laureate, argued in his 15 Fatal Fallacies of Financial Fundamentalism, that being over concerned with the rate of inflation and the NAIRU is wrongheaded. Here's an excerpt from Fallacy #6: .......What may be needed is a method of directly controlling inflation that do not interfere with free market adjustments in relative prices or rely on unemployment to keep inflation in check. Without such a control, unanticipated changes in the rate of inflation, either up or down, will continue to plague the economy and make planning for investment difficult. Trying to control an economy in three major macroeconomic dimensions with only two instruments is like trying to fly an airplane with elevator and rudder but no ailerons; in calm weather and with sufficient dihedral one can manage if turns are made very gingerly, but trying to land in a cross-wind is likely to produce a crash......
    There's more to his argument as you can see here:

  2. Thanks for the link nanute. I definetely like the idea of using a different method than raising the unemployment rate.

    That link looks just up my alley. Cheers!