J. Bradford DeLong's Blog, page 175

Chris Cook: Brussels Takes Control: "The EU���s initial...

Chris Cook: Brussels Takes Control: "The EU���s initial response to the referendum result said: 'Any agreement, which will be concluded with the United Kingdom as a third country, will have to reflect the interests of both sides and be balanced in terms of rights and obligations'. A few days on, it added: 'Access to the single market requires acceptance of all four freedoms'. This reflects a belief in what the EU is actually for. Those who know her have learned that when Merkel, who grew up on the far side of the Iron Curtain, says freedom of movement of people is a fundamental principle, it pays to take her seriously.... The statement was also intended to ram home the basic principle that the EU insists rights be balanced by obligations.... This has created fixed grooves that third countries must fall into. In return for unfettered access to its internal markets, they have to tick certain boxes. When the UK Treasury modelled possible outcomes of the Brexit negotiations before the referendum, it presented a discreet menu of options... Switzerland���s... Turkey���s... Canada���s... found the same likely range of options. This formula���'no cherry-picking'���was most clearly set out in a diagram released to modest fanfare in late 2017 by Michel Barnier, the EU���s chief Brexit negotiator. It became known as the 'staircase' diagram: https://delong.typepad.com/.a/6a00e551f0800388340240a4899366200d-pi...

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Bruce Springsteen & The E Street Band: Tenth Avenue Freeze-Out: For the Weekend

Bruce Springsteen & The E Street Band: Tenth Avenue Freeze-Out:

#fortheweekend

Rosa Luxemburg (1916): The Junius Pamphlet: "In the midst...

Rosa Luxemburg (1916): The Junius Pamphlet: "In the midst of this witches��� sabbath a catastrophe of world-historical proportions has happened: International Social Democracy has capitulated. To deceive ourselves about it, to cover it up, would be the most foolish, the most fatal thing the proletariat could do.... The fall of the socialist proletariat in the present world war is unprecedented. It is a misfortune for humanity. But socialism will be lost only if the international proletariat fails to measure the depth of this fall, if it refuses to learn from it. The last forty-five year period in the development of the modern labor movement now stands in doubt. What we are experiencing in this critique is a closing of accounts for what will soon be half a century of work at our posts...

...Marxist knowledge gave the working class of the entire world a compass by which it can make sense of the welter of daily events and by which it can always plot the right course to take to the fixed and final goal. She who bore, championed, and protected this new method was German Social Democracy... the purest embodiment of Marxist socialism. She had and laid claim to a special place in the Second International-its instructress and leader.... German Social Democracy, as the Vienna Arbeiterzeitung wrote on August 5, 1914, was ���the jewel of class-conscious proletarian organizations.���... Especially in the questions of the struggle against militarism and war, German Social Democracy always took the lead. ���For us Germans that is unacceptable��� regularly sufficed to decide the orientation of the Second International, which blindly bestowed its confidence upon the admired leadership of the mighty German Social Democracy: the pride of every socialist and the terror of the ruling classes everywhere.

And what did we in Germany experience when the great historical test came? The most precipitous fall, the most violent collapse. Nowhere has the organization of the proletariat been yoked so completely to the service of imperialism. Nowhere is the state of siege borne so docilely. Nowhere is the press so hobbled, public opinion so stifled, the economic and political class struggle of the working class so totally surrendered as in Germany.... Unsparing self-criticism is not merely an essential for its existence but the working class���s supreme duty. On our ship we have the most valuable treasures of mankind, and the proletariat is their ordained guardian! And while bourgeois society, shamed and dishonored by the bloody orgy, rushes headlong toward its doom, the international proletariat must and will gather up the golden treasure that, in a moment of weakness and confusion in the chaos of the world war, it has allowed to sink to the ground.

One thing is certain. The world war is a turning point. It is foolish and mad to imagine that we need only survive the war, like a rabbit waiting out the storm under a bush, in order to fall happily back into the old routine...

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Language, opposable thumbs, and erect posture���those are...

Language, opposable thumbs, and erect posture���those are the three keys to the kingdom: Doug Jones: Four Legs Good, Two Legs Better: "With Ardipithecus Radius (about 4.5 million years ago) we have the strongest evidence so far that hominins have adopted bipedalism.... Even... she had a somewhat diverging big toe, and arms and hands well-adapted for suspension, suggesting she was bipedal on the ground, but still spent a lot of time in trees.... Bipedalism allowed ancestral dinosaurs to overcome the tight coupling of locomotion and respiration that prevents sprawling lizards from breathing while they run. But human bipedalism, with no counterbalancing tail, is different. As far as we know it evolved only once...

...Human bipedalism is... related to tradeoffs in locomotion.... Other great apes pay a big price for being the largest animals well-adapted for moving around under and among branches: great ape locomotion on the ground is particularly inefficient. Chimpanzees spend several times as much energy knuckle-walking on all fours as you would expect based on comparisons to similar sized quadrupedal mammals.... Humans by contrast take a little less energy to walk around than a same-size four-legged mammal.... And a study that came out just last year shows that the same was true of Ardipithecus: she was an efficient bipedal walker.... That said, efficiency isn���t everything. Human beings are lousy at sprinting���try outsprinting your dog, or a squirrel....

It may be that bipedalism evolved initially in an environment where predation pressure wasn���t very intense, and the need for speed was not as great. This argument has been made for Oreopithecus, living on an island in the Mediterranean. Perhaps Graecopithecus initially enjoyed a similar isolation, and freedom from predation, associated in some way with the drying and flooding of the Mediterranean...

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Rosa Luxemburg (1916): The Junius Pamphlet: "The Crisis o...

Rosa Luxemburg (1916): The Junius Pamphlet: "The Crisis of Social Democracy.... Socialism is the first popular movement in world history that has set itself the goal of bringing human consciousness, and thereby free will, into play in the social actions of mankind. For this reason, Friedrich Engels designated the final victory of the socialist proletariat a leap of humanity from the animal world into the realm of freedom.... Friedrich Engels once said: 'Bourgeois society stands at the crossroads, either transition to socialism or regression into barbarism'. What does ���regression into barbarism��� mean to our lofty European civilization?... This world war is a regression into barbarism. The triumph of imperialism leads to the annihilation of civilization..... We face the choice... either the triumph of imperialism and the collapse of all civilization as in ancient Rome, depopulation, desolation, degeneration���a great cemetery...

...This is a dilemma of world history, an either/or; the scales are wavering before the decision of the class-conscious proletariat. The future of civilization and humanity depends on whether or not the proletariat resolves manfully to throw its revolutionary broadsword into the scales. In this war imperialism has won. Its bloody sword of genocide has brutally tilted the scale toward the abyss of misery. The only compensation for all the misery and all the shame would be if we learn from the war how the proletariat can seize mastery of its own destiny and escape the role of the lackey to the ruling classes.

Dearly bought is the modern working class���s understanding of its historical vocation. Its emancipation as a class is sown with fearful sacrifices, a veritable path to Golgotha. The June days, the sacrifice of the Commune, the martyrs of the Russian Revolution���a dance of bloody shadows without number. All fell on the field of honor. They are, as Marx wrote about the heroes of the Commune, eternally ���enshrined in the great heart of the working class.��� Now, millions of proletarians of all tongues fall upon the field of dishonor, of fratricide, lacerating themselves while the song of the slave is on their lips. This, too, we are not spared. We are like the Jews that Moses led through the desert. But we are not lost, and we will be victorious if we have not unlearned how to learn. And if the present leaders of the proletariat, the Social Democrats, do not understand how to learn, then they will go under ���to make room for people capable of dealing with a new world���...

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May 24, 2019: Weekly Forecasting Update

The right response to almost all economic data releases is: Next to nothing has changed with respect to the forecast���your view of the economic forecast today is different from what it was last week, last month, or three months ago in only minor ways. About the only news these past two weeks is an 0.8%-point decrease in our estimate in what production will be over April-June, driven by a reduction in estimated durable goods orders and capacity utilization. This might be an impact o Trump's trade war.

Federal Reserve Bank of New York: Nowcasting Report: May 24, 2019: "The New York Fed Staff Nowcast stands at 1.4% for 2019:Q2. News from this week's data releases decreased the nowcast for 2019:Q2 by 0.4 percentage point. Negative surprises from the Advance Durable Goods Report drove most of the decrease...

 

Key Points:

Specifically, it is still the case that:

The Trump-McConnell-Ryan tax cut:

To the extent that it was supposed to boost the American economy by boosting the supply side through increased investment in America, has been a complete failure.

To the extent that it was supposed to make America more unequal, has succeeded.
Delivered a substantial short-term demand-side fiscal stimulus to growth that has now ebbed.

(A 3.2%/year rate of growth of final sales to domestic purchasers over the seven quarters starting in January 2017,
pushing the level of Gross National Income up from 2.0%/year from this demand-side stimulus.)



U.S. potential economic growth continues to be around 2%/year.
There are still no signs the U.S. has entered that phase of the recovery in which inflation is accelerating.
There are still no signs of interest rate normalization: secular stagnation continues to reign.
There are still no signs the the U.S. is at "overfull employment" in any meaningful sense.

A change from 3 months ago: The Federal Reserve's abandonment of its focus on policies that are likely to keep PCE chain inflation at 2%/year or lower does not mean that it is preparing to do anything to avoid or moderate the next recession.

Changes from 1 month ago: The U.S. grew at 3.2%/year in the first quarter of 2019���1.6%-points higher than had been nowcast���but the growth number you want to put in your head in assessing the strength of the economy is the 1.6%/year number that had been nowcast. The falling-apart of Trump's trade negotiating strategy with China will harm Americans and may disrupt value chains, and the might be becoming visible in the data flow.

A change from 1 week ago: Industrial production appears to be falling as new durable goods orders come in below expectations. Industrial production may have peaked last December:

 

Over the past 20 years: United States manufacturers are ordering no more in the way of the nominal value of capital goods than they ordered two decades ago. Deflators here are very hazardous, but I believe that translates to a zero increase in real orders as well. This is unprecedented for the U.S. economy: nothing like it has happened before.

#macro #forecasting #highlighted

Dwight D. Eisenhower (1954): Letter to Edgar Newton Eisenhower: Weekend Reading

Dwight D. Eisenhower (1954): Letter to Edgar Newton Eisenhower: "The Federal government cannot avoid or escape responsibilities which the mass of the people firmly believe should be undertaken by it. The political processes of our country are such that if a rule of reason is not applied in this effort, we will lose everything���even to a possible and drastic change in the Constitution. This is what I mean by my constant insistence upon ���moderation��� in government. Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid...

#weekendreading

John Maynard Keynes (1926): From "The End of Laissez-Faire": Weekend Reading

John Maynard Keynes (1926): from The end of Laissez-Faire: "The early nineteenth century... harmonised the conservative individualism of Locke, Hume, Johnson, and Burke with the socialism and democratic egalitarianism of Rousseau, Paley, Bentham, and Godwin.... The idea of a divine harmony between private advantage and the public good is already apparent in Paley. But it was the economists who gave the notion a good scientific basis.... To the philosophical doctrine that the government has no right to interfere, and the divine that it has no need to interfere, there is added a scientific proof that its interference is inexpedient.... The principle of laissez-faire had arrived to harmonise individualism and socialism.... The political philosopher could retire in favour of the business man.... Thus the ground was fertile for a doctrine that, whether on divine, natural, or scientific grounds, state action should be narrowly confined and economic life left, unregulated so far as may be, to the skill and good sense of individual citizens actuated by the admirable motive of trying to get on in the world.... By the time that the influence of Paley and his like was waning, the innovations of Darwin were shaking the foundations of belief..... Survival of the fittest could be regarded as a vast generalisation of the Ricardian economics. Socialist interferences became, in the light of this grander synthesis, not merely inexpedient, but impious, as calculated to retard the onward movement of the mighty process by which we ourselves had risen like Aphrodite out of the primeval slime of ocean...

#weekendreading #moralphilosophy #poiticaleconomy

Martin Wolf: The US-China Conflict Challenges The World: ...

Martin Wolf: The US-China Conflict Challenges The World: "Historic allies of the US... would stand beside it..... Yet these are not normal circumstances. Under Donald Trump, the US has become a rogue superpower, hostile, among many other things, to the fundamental norms of a trading system based on multilateral agreement and binding rules.... We are also seeing a big shift in conservative thinking.... The US no longer sees why it should be a 'responsible stakeholder'.... Some might conclude that the high costs mean that the conflict cannot be sustained, particularly if stock markets are disrupted. An alternative and more plausible outcome is that Mr Trump and China���s Xi Jinping are 'strongmen' leaders who cannot be seen to yield...

...It should be possible to sustain liberal trade, at the expense of the US and China. Anne Krueger, former first deputy managing director of the IMF, notes in a column that, by its own foolish decision to reject the Trans-Pacific Partnership, the US suffers from WTO legal discrimination against its exports to members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which replaced TPP. The EU also has free trade agreements with Canada and Japan. This is good. But they can go further. Countries that see the benefits of a strong trading order should turn such FTAs into a ���global FTA of the willing���.... Others can step in. They are, in aggregate, huge players. They should dare to act as such.

#noted

Adam Smith: An Inquiry Into the Nature and Causes of The ...

Adam Smith: An Inquiry Into the Nature and Causes of The Wealth Of Nations: "The first duty of the sovereign... protecting the society from... other independent societies... by means of a military force.... The second duty... of protecting... every member... from the injustice or oppression of every other member.... The third... of erecting and maintaining... institutions and... public works... in the highest degree advantageous... [but] of such a nature, that the profit could never repay the expense to any individual, or small number of individuals.... [These] works and institutions... are chiefly for facilitating the commerce of the society, and... promoting the instruction of the people.... Of the public Works and Institutions for facilitating the Commerce of the Society.... Of the Expense of the Institution for the Education of Youth.... Of the Expense of the Institutions for the Instruction of People of all Ages... chiefly those for religious instruction...

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