- Could our society implode on the race issue?
- Business becomes the villain? Is Hollywood Making money from Financial Crises?
- Limited best seller Inside Job: The Looting of the American Savings and Loans
- Now, AT&T, the once proud flagship of American commerce uses outright fraud to boost earnings
- Another New Thought: Helicopter money and fiscal rules
The New Year is here. . . ????
It should be interesting to see how the US Stock Markets put their recent program of misdirection to work from this point in time on. Do they entice the gullible back into the game long term, or is this no more than the hour or two of wandering in the wrong direction before the hammer descends and shuts off any hope of escaping a scalping?
The track of the indices to this early point in the New Year, leaves not much to the imagination. It begins its daily journey heading upward when they mean to push it down, plunges before the exuberant climb to the top and toys with the limits - top or bottom - leaving the outsiders in confusion as they attempt to go opposite to the planned finishing point for the day. It matters little that the plan is transparent, the amateur players still working on their wrong turn losses are desperate and in need of vindication. The market must be predictable without the road map the insiders work with. But, that road map is little more than intuition, or some mysterious means of sensing what is in the air that day - morning or afternoon.
Some may interpret the above introduction as a fanciful bit of imaginative play on serious minds at work in sorting out the advantages over the trash in play, but is it much more than that simplistic reality?
Voxeu has produced a new e-book on Quantitative Easing, an analysis before the script has played out. There is not yet any conclusion to the play acting drawn up much less to draw conclusions while the play is still in operation. The market has no firm concept of what the fundamentals of the economic mechanism are and feels no need for understanding the very real simplistic base behind "progress" or "growth" and go off winging through the series of short-lived ideas behind the professional explanation of why the market moves - perhaps every five or ten minutes (!). . Using the Hayekian mechanism that we act, then assign reason to the actions leaves us far behind the ambitious, fast churning mental schemes. Get the money! There is no follow up or second part of the phrase! . . Or purpose!
Without having read the vox e-book, with Wooten den Haan compiling the works of several dozen contributors to the voxeu.org site over the years past, from what appears to be 2010 on, and without a final unveiling of how and when the mystery of an ending will emerge, it's presumed that we'll encounter suggestions and more positive declarations of how effective the QE's - from QE1 ad infinitum - will finally be judged. In this case, a wing and a prayer are much more substantial than would be the opinions. If QE's were built on the foundation of real impeti (?) in economics, we might find some solace in looking at the (Friedman) "helicopter" money tossed willy-nilly at the markets. But, when used in the past, under other names, the money tossed out carelessly did no more than raise false hopes which led to another trap and more inflation. But, then, inflation is the basis or our "progress" so the hope is that the symptom can be turned around to become the cause of "growth".
The central idea of QE's then may be - Fabricate inflation and we are duplicating growth. The problem is, there is only one impetus for growth - population increase. All the rest is window dressing and delusion. Technical innovation is an appeal to the imagination of the consumer which can be misleading and destructive as well as beneficial - be that consumer in the household or in industrial production. Dreams that this is a new vista we are entering - the new paradigm, the new world order, or some such fancy, are no more than that - Dreams! And, stirring up the dust on the field of stagnant playgrounds is not a serious surge forward; it's more a promise that will be met with just another round of the enticement/disappointment sequence we call Boom/Bust following a trend line with a downward tilt more likely than an incline.
[One paragraph footnote insertion is at the end of this posting - of later developing thoughts a propos population increase.]
In the longer view of working economists, we're almost led to believe, they operate with the concept that one direction is as good as the other as long as the populace can be convinced that the economy is moving. With that outlook, down is better than stagnant every time. . . and the public ends up shorn of gains they believed they "progressed" toward, pushed down into desperation with the need to get back to work and rebuild their meager reserves.
Is that a viable scenario? Are we working toward the same end regardless of which way we move. If the path is incline or decline how do we escape the boom/bust denouement that lies ahead either over the hill ahead or descending in the other direction, straight down into the valley beyond - the one path being direct and the other slightly more drawn out and wandering? Does the more indirect seem more rewarding strictly on a time line that delays the introduction of the Bust phase? The more time we spend getting to the same point, the more opportunity for servicing that goal of more "reserves" - essential for "feeling good" about ourselves? But, then, the longer we spend between the two poles, it would seem, the more disastrous and expensive the descent and recovery. . . And, often, the more destructive of resources is the result of the struggle to recover. Assets are set back to a previous level, depleted, and the future has a bleaker appearance in our minds eye. Is that the REAL difference between a Recession and a Depression? It must have a foothold in human behavior mechanism since the two words are more a description of human emotions or perceptions than of inanimate mechanisms. . . And, when if ever is economics anything other than a matter or Marshallian "human activity"?
So, where is that New Year taking us. . . Or, rather what do the players on the practical or theoretical side have in store for us. Will either or both sides emerge from this mess with prestige intact? Or, will both suffer a loss in standing? Will the public go on with a policy of paying with no end or will the politicians ever see the light and intervene in the general public's favor? Does the dollar gain from the dilution we face from inflation - which is certainly on us - have meaning and/or the opposite - a promise of yet more devastating effect? Enough to justify the reliance on QE's? Does that inflationary effect measure a backward movement in stripping away value and resulting in little more than frustration for the majority and gains for the few?
Can't wait to get to the e-book to see if there is a "consensus" of opinion as to the benefits of the QEs. It will need to be an impressive work to overcome the doubts that have germinated in this old mind since the beginning of these posts over the last seven - going on eight next month - years and which seem to indicate a heading toward a less constructive destination than either Minsky or Kindleberger envisioned. The central question being, how do we redirect human mental activity based on "grasping" toward the seemingly impossible goal of "helping"? Or, can that not be seen as "progress" either?
On re-reading this post O&G's memory kicked into recall mode and ran off a distant awareness of sociological studies of several decades ago (1950s or 1960s(?)) which concentrated on the notable oddity that when nations experienced severe downturns, population growth was stunted; new families started building later when better circumstances were presented and/or established families ceased additional growth. Which would indicate how apprehension under stress can induce a certain amount of self-sustaining and continuing decay in real economic growth based on population numbers. It might also add some consideration to population about how emigration/immigration movements contribute to area growth restricted to certain nations. , , such as the benefits immigrants brought to the US in large numbers from its beginning through the period following WWII with some notable ups and downs along the way. . Nothing similar has been encountered in recent papers so either of three options may be true - perhaps all three: (1) sociologists are no longer holding to that idea, or (2) no longer interested in the repercussions, or (3) O&G is not encountering the same literature these days; meaning they could still be of the same mind, but O&G is occupied with different matters. Nevertheless, it seemed appropriate to include the thoughts here. It would seem that immigration holds out some promise, yet,there is a point at which Shangri-La is no longer attractive or supportive of immigration and the trend and any of its benefits come to an abrupt ending. As an example, Florida has reversed its growth due to immigration; it has been on a reverse trend - emigration - for a few years now. Part of the current surplus of available housing and its damping effects on new construction may be due to that effect.