tag:blogger.com,1999:blog-2546602206734889307.post1633953878434244273..comments2024-03-28T04:29:22.717+00:00Comments on mainly macro: No basis in economicsMainly Macrohttp://www.blogger.com/profile/09984575852247982901noreply@blogger.comBlogger32125tag:blogger.com,1999:blog-2546602206734889307.post-53116481052156353242015-06-22T17:31:21.126+00:002015-06-22T17:31:21.126+00:00You reduce inflation by reforming areas of the eco...You reduce inflation by reforming areas of the economy that have price or cost pressure.<br />Not by jiggling around with govt policy!Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-42918677582485831612015-06-19T09:28:49.457+00:002015-06-19T09:28:49.457+00:00Yes, and the bill doesn't say anything about t...Yes, and the bill doesn't say anything about this year. It just talks about good times in general. Presumably a few years down the line. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-26449475856644742452015-06-18T07:59:17.961+00:002015-06-18T07:59:17.961+00:00George Osborne, the Manchurian candidate
If indee...George Osborne, the Manchurian candidate<br /><br />If indeed “the government would have to aim for surpluses somewhere around 2% of GDP, to provide a sufficient buffer to absorb those shocks and forecasting errors” and if abnormal times are sufficiently unusual, the State will have no debt left within several decades and will own the country’s capital stock within several generations. <br /><br />And for all we know, because of the more violent business cycle – no automatic stabilisers left – and accompanying immiserisation, the Manchurian candidate may even reach his goals within his own life time.<br />Mauritshttps://www.blogger.com/profile/12873822622294645312noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-853966004580363212015-06-17T14:32:55.024+00:002015-06-17T14:32:55.024+00:00There is an old literature on the 'twin defici...There is an old literature on the 'twin deficits' - to what extent do budget deficits go hand in hand with current account deficits. This is the same question in reverse. And what that literature comes down to is that you cannot say anything precise until you know how the budget deficit is changing. <br /><br />For example, if the surplus is achieved by cutting child benefits for the well off, the impact on consumption could be quite small, and so the surplus would largely be met by a larger personal sector deficit. Other means of achieving a surplus could involve a real depreciation, and therefore a move to current account surplus.<br /><br />So the argument that a budget surplus will lead to an increase in the consumer deficit is not obviously silly. This in turn may increase the likelihood of personal debt problems. It is not in my view the most important reason why going for surpluses makes no sense, but it is not a stupid concern either. I seem to remember a number of people noting the personal sector deficit projections the OBR has been making with concern. <br /><br />I personally would place more emphasis on short term ZLB issues and medium term inflexibility, which the letter also mentions.<br /><br />But I would make an additional, very important point. What the letter has succeeded in doing is getting across the message that there is no obvious economic rationale in favour of Osborne's policy. The IEA does not seem to be defending the policy itself: they are more interested in picking apart the details of a letter that no doubt was drafted by a committee. That in itself is a ploy. We should be talking about the policy, and the fact that - for the moment at least - no economist seems to want to defend it.Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-86784054349013841082015-06-17T13:45:42.437+00:002015-06-17T13:45:42.437+00:00Good times? Interest rates at 0.5% almost by defin...Good times? Interest rates at 0.5% almost by definition imply these are not good times. I have set out what a reasonable path for deficits might look like in average times here:<br /><br />http://mainlymacro.blogspot.co.uk/2014/06/uk-fiscal-policy-from-2015.html<br /><br />Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-85807270272439430452015-06-17T12:15:01.395+00:002015-06-17T12:15:01.395+00:00And if multipliers are near 1 then the cuts will h...And if multipliers are near 1 then the cuts will have to be quite a lot bigger than the deficit. Sounds like a recipe for making recessions worse.. and for the government to only be allowed to invest in boom times.<br />Andrewhttps://www.blogger.com/profile/02729454651003425550noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-46899835430573812812015-06-17T11:58:51.207+00:002015-06-17T11:58:51.207+00:00You are a joke. For years you've been arguing...You are a joke. For years you've been arguing for increased borrowing during the bad times and running surpluses and balanced budgets in the good times. Now, you are arguing that running surpluses in the good times is a bad thing. It's obvious what's going on. You're just adjusting your economic opinions to bash the Torys based on your left wing views. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-69189938851148268212015-06-17T10:14:05.187+00:002015-06-17T10:14:05.187+00:00Simon, I am referring to this passage:
"This...Simon, I am referring to this passage:<br /><br />"This might be true under one very strict assumption – that the foreign sector is irrelevant to this process. Given that the foreign sector holds 33 per cent of UK government debt, this is a really rather implausible assumption. A government surplus could – indeed, probably would - lead directly to reduced capital inflows which are necessary to finance borrowing, in turn this would precipitate a fall in the exchange rate and possibly a consequent improvement in the balance of payments.<br />This might not happen, all sorts of other things could happen too, but, even if we assume away the 6,940m people who do not live in the UK, the chain of events that the 79 propose is highly unlikely to happen. What might be the result of a budget surplus in the absence of any foreign capital flows? The most likely scenario is that the government would begin to redeem its bonds or issue fewer bonds to fund redemptions. Around 60 per cent of government bonds not held by overseas lenders are owned by UK life and pension funds. Most of the rest are held by non-bank financial institutions. So, the government will redeem bonds and UK life and pension funds, for example, will invest in other financial instruments.<br />This may lead to various consequences, such as increases borrowing and equity issuance by corporations. This may represent an increase in net investment or a reduction in net saving by the UK non-government sector as the 79 suggest but the intellectual somersaults you need to jump through to turn this into a banking crisis are extraordinary. If this group of economists believe that the next banking crisis will be caused by the government running a small surplus, then they can no longer see the wood for the trees."<br /><br />Ari you have partially addressed the issue but I don't feel you have addressed Booth's arguments head on.Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-35541513301537913482015-06-17T07:39:13.034+00:002015-06-17T07:39:13.034+00:00Ignore Skidelsky.Ignore Skidelsky.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-10325705431568755932015-06-17T07:36:27.607+00:002015-06-17T07:36:27.607+00:00Random16 June 2015 at 09:31
"You can't a...<br /><br />Random16 June 2015 at 09:31<br /><br />"You can't apply household analogies to government. It just does not work - at all."<br /><br />That's what you believe.<br /><br />You probably also believe thatinflation is the cure, not the disease.<br /><br />Dream on.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-27696226223248911362015-06-17T02:38:57.389+00:002015-06-17T02:38:57.389+00:00So whenever there's a demand fluctuation and a...So whenever there's a demand fluctuation and a small temporary deficit arises we'll have a permanent cut in benefits because it's the "only way we can stick to our fiscal rules". Great plan for gradually shrinking the state.Jamesnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-89126203096763389562015-06-16T22:13:21.401+00:002015-06-16T22:13:21.401+00:00forgive me for being off topics but your link to t...forgive me for being off topics but your link to the niesr blog doesn't work.<br /> The blogs you regularly read are outstandingNot Trampishttp://nottrampis.blogspot.com.aunoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53529960089723702772015-06-16T21:19:05.767+00:002015-06-16T21:19:05.767+00:00Yes you're probably right. I suppose I see all...Yes you're probably right. I suppose I see all policy rhetoric as a means of getting re-elected rather than an end in itself. But then, when thinking of politicians, I do use Jim Hacker as my yardstick.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-57665821615941674192015-06-16T19:15:25.208+00:002015-06-16T19:15:25.208+00:00The foreign sector is really quite a red herring h...The foreign sector is really quite a red herring here. While it is true that the government deficit was approximately equal to the current account deficit this year, there is no direct causation running from government deficit to current account deficit. <br /><br />There is a certain proportion of government money that will be spent on imports but it is considerably less than 100%. Demand for imports would go down a little but so would demand for domestic goods and therefore GDP.<br /><br />In order to get the current account deficit to zero, the UK would have to follow the same demand destroying, savings enhancing, policies as the surplus countries. This race to the bottom would be bad for everyone.<br /><br />Maybe the Bank of England could print new GBP in the amount of the current account deficit and sell them for foreign exchange. This would reduce the value of the pound, acting as a tax on uk citizens, reducing demand for imports. <br /><br />But to talk about the foreign sector as if it has a serious impact on the budget deficit question is ridiculous. They are two separate issues.Ari Andricopouloshttps://www.blogger.com/profile/00181838814176635218noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-71863104397566694902015-06-16T18:29:17.676+00:002015-06-16T18:29:17.676+00:00Looked like much the same to me: "Perhaps tho...Looked like much the same to me: "Perhaps those academics were just ignorant of developments in their field." That kind of thing is just pathetic - the monetarist policy he is referring to failed dismally and was abandoned with a few years. Perhaps I could ask you to pick out the points you think need responding to - I just find this kind of political polemic too annoying!Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-32889500110499739232015-06-16T18:03:20.399+00:002015-06-16T18:03:20.399+00:00I agree with what you say, just to add that the ic...I agree with what you say, just to add that the icing on the cake of getting re-elected is that of the ideological goal of a smaller state.Simonhttps://www.blogger.com/profile/01453060744510427275noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-20142762850867528772015-06-16T16:31:51.990+00:002015-06-16T16:31:51.990+00:00The QE programs from the central bank did not bene...The QE programs from the central bank did not benefit the recovery.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-1036156608500803532015-06-16T16:31:00.409+00:002015-06-16T16:31:00.409+00:00You can't apply household analogies to governm...You can't apply household analogies to government. It just does not work - at all.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-81613543549683158762015-06-16T16:21:35.109+00:002015-06-16T16:21:35.109+00:00Not quite true for net investment, but just true f...Not quite true for net investment, but just true for gross investment. My statement is true for both. Reason both statements are true is that investment in the first few of the Brown years was very low. In terms of gross investment, plans average 3.5% of GDP. Average from 1948-1996 was 7.2%. Suggests massive under investment in public capital. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-65209444137831711052015-06-16T16:14:13.404+00:002015-06-16T16:14:13.404+00:00I agree with the gist of your argument, but would ...I agree with the gist of your argument, but would argue that whilst SWL basis his arguments on an attempt at rationally choosing optimal economic policies, Osborne is rationally choosing optimal policies to get himself re-elected. <br />Osborne is aiming his message (which btw, I believe is nonsense) at his target audience. There is that sector of the UK electorate that want to hear that sort of stuff – they will never get beyond seeing the economy as a whole in terms of a household budget and see borrowing as bad – saving good – end of. SWL can put forward all the arguments he wants – they aren't listening and never will – Osborne knows it and so doesn't have to argue back. <br />It is about creating a general sense of Conservative branding that is an attempt to reinforce the impression that they are prudent etc….<br />Osborne's ideology is to get re-elected. <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-49607118540402447182015-06-16T16:13:01.634+00:002015-06-16T16:13:01.634+00:00Yes, Simon, I would also like to see you respond t...Yes, Simon, I would also like to see you respond to Booth's other arguments, particularly about the foreign sector. There's also an article by Ryan Bourne here:<br /><br />http://www.cityam.com/217985/hysterical-keynesians-need-ditch-hyperbole-if-they-don-t-want-be-ignored<br /><br />I'm not saying these articles are great throughout, but think some of the points are worth responding to.Unlearningeconhttps://www.blogger.com/profile/13687413107325575532noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-57332910101695996062015-06-16T16:04:37.539+00:002015-06-16T16:04:37.539+00:00My original post commenting on Ferguson's FT a...My original post commenting on Ferguson's FT article has now risen to number one in my most read posts of all time chart. He has a big audience, and so cannot be ignored. I hardly ever comment on IEA posts. Mainly Macrohttps://www.blogger.com/profile/09984575852247982901noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-53610718725579766392015-06-16T15:32:25.617+00:002015-06-16T15:32:25.617+00:00What Osborne is saying then is "We won't ...What Osborne is saying then is "We won't mend the roof when prices are low, we'll wait until they cost a lot."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-11754515799336652922015-06-16T15:12:55.537+00:002015-06-16T15:12:55.537+00:00"...the government plans to keep public inves..."...the government plans to keep public investment on infrastructure lower than at any time over the last twelve years." Does this contradict the Conservatives' manifesto pledge page 14: "Public investment will be higher on average over this decade as a percentage of GDP than under the whole period of the last Labour government"? I suspect both statements are truthful but it would be interesting to see a reconciliation of the numbers. Andrew Maclarenhttps://www.blogger.com/profile/15707368897094597072noreply@blogger.comtag:blogger.com,1999:blog-2546602206734889307.post-61323660394568644232015-06-16T14:54:07.478+00:002015-06-16T14:54:07.478+00:00In the U.S., the states have to balance their budg...In the U.S., the states have to balance their budgets and so we see how this harms their economies during recessions when tax revenues dry up and they have more social spending. Growth slows and unemployment goes up, etc. They lay off public employees.<br /><br />During recessions, the Federal government would include financial aid to the states as part of their countercyclical stimulus packages. In the past these worked quite well.<br /><br />With the Obama stimulus after the financial crisis, the aid was meager because Republican Senators didn't want to let state governments off the hook and Democratic Senators didn't want to help Republican governors who might run for the Senate. In the end, the Obama stimulus's economic effects was canceled out or negated by the "50 little Hoovers" balancing their budgets and so the recovery was long and slow and the central bank had to work harder to meager effect.<br />Peterhttps://www.blogger.com/profile/08272747870634233567noreply@blogger.com