Glittering Economic Generalities

I've always had a good laugh when listening to conservatives that were pretty much mum on economic issues for 8 years now fancy themselves masters in economic theory.



And while Palin was absent from the socio-political scene in the lower 48 until John McCain sealed his own fate by choosing Palin as his running-mate, you get the same sense from her - that she has no clue what she's talking about.

During the 10 years the Bush Tax Cuts were in place, incomes actually decreased by $2.7 trillion dollars, so to say that that the Obama administration is responsible for money not being about to be invested is to ignore even recent economic realities.

Secondly, in terms of "job creation", the unemployment rate during the Clinton era - when the marginal tax rate was reset to 34% - and that same group after the implementation of the Bush Tax Cuts is quite clear. So, to that end, I would ask Palin where were the jobs "created" during the tax cuts she is championing to extend?

This isn't to say that investment wasn't possible during Bush's tenure in office, just largely ignored or even muted by those that were able to invest and "create" jobs.

As an aside that I think should be hammered home by everyone that responds to allegations such as these by Palin - or any conservative the pretends to even marginally understand the complexities of the modern economic realm - what happened to those same conservatives complaining about Democrats engaging in "class warfare"? It's pretty obvious that that is precisely what she is doing and what Fox"Business" does on a daily basis.

Economics aren't cannot and should not be viewed through a conservative or a liberal lens. I think that that is where many people get off track when debating this topic.

Exit Question: If conservatives really wanted these cuts to be permanent, why did they set them to expire in 10 years?

The Politics Of Hedge Funds

As I've stated previously, I'm not an economist. But, I can tell when someone with a wealth of knowledge and experience in the financial realm lets their mask slip.

In a recent piece in the New York Times, hedge fund manager Hugh Hendry says something of Barack Obama that I have hypothesized many like him have said:

If there was a way to short Obama, I would.

And while many conservatives would attack liberals/progressives for highlighting this quote - even going so far as to insist that they were about to call Mr. Hendry a racist - it should be pointed out that this isn't exactly something to snort at.

Are hedge fund managers gaming the system against the Obama administration in order to create the illusion that the economy isn't rebounding as it should because of policies and practices by Democrats? I think it's a fair theory that requires more investigation.

Ignorance On A Global Scale

Love the "prom hair" Laura.



In case you were wondering, the economy is already "global". I'm no economist - and Michelle Bachman most definitely isn't - and I already knew that.

This is what happens when people that have no clue what they are talking about open their ever gaping maws even wider - they get to shove their feet in just a little farther.

The Foxes Ignore The Ebb And Flow

The Republican PR machine that is Fox"News" is still talking that same jive



I'm guessing that self-proclaimed economist masterminds Varney and Doocy haven't been paying attention to people like Mohamed El-Erain - perhaps because he has a terroristy-sounding name? Maybe?

The world of yesterday was a world of tidy categories. On the one hand you had industrial countries, advanced economies. On the other hand, emerging economies.
The first were the core of the system they held the system together. The second, emerging economies, were at the periphery and tended to be crisis prone.

You've likely heard economists and people on business networks talking about "the new normal". Well, that's El-Erain's term. Here's what NPR was talking about him and his vision of the world economy yesterday afternoon. It's certainly worth listening to, as El-Erain knows more than most people who claim to have all the answers on how to heal the economic crisises that are plaguing us now.

In the new normal, El-Erian says, the traditional major players like the U.S. and Germany will have less influence. And the likes of India, China and Brazil will have more.

The shift will be turbulent. But, El-Erian says, the end result will be a more stable global economy.

"It is better to have many locomotives of growth in the world," he says.

Modern American economic theorists thrive on this notion of mandatory growth, no back-sliding. And as I've stated before, I'm no economist, but you have to wonder what that type of pressure, when applied at a continual and fierce pace, does to the stability of not just your nation, but the entire world. The power structure shifts in all areas. There is a nuance to world economics, from my point of view, that people are ignoring and not even attempting to compensate for. Then again, far too many people in America get their financial advice from people like Stuart Varney, Sean Hannity, and Glenn Beck.

A Question Of Economics: Pt III

There's something eerily familiar about all this "buy gold now" shouting. Even Pat "9/11 happened because God hates gay people" Robertson is in on it too:



Again, I'm not an economist, but when I see people like Robertson, Beck, Hannity, Liddy, and various other conservative hacks pimping the precious metal I think one thing : bubble. And it's not going to be long before it bursts. And rest assured, when it does there's going to be some seriously enraged right-wingers.

But I can hear you say, "but airon, gold hasn't dropped in value for over 10 years". That is actually very misleading, since as recent as last month, gold dropped by over 4% while the dollar increased in value. And won't it stand to reason that the more people invest in gold, the more that the market is flooded with it, that the value will decrease by larger amounts at a faster rate?

All this gold versus dollar hysteria is apparently driven from the hyper-inflated theory that the dollar is going to be removed as the worlds default-currency, that it's going to be replaced by a "mixed-bag" of currencies from other countries. Not only that, but since China is the largest gold-producing country in the world, this is incentive enough to get certain American twitching with fear, feeling like they have to invest millions in gold as soon as possible.

My theory for China is this, they don't have the luxury of letting the dollar fall off the international/world stage, as all the treasuries that they have purchased from us are valued in dollars, not gold. If the dollar is no longer the yard-stick of the world economy, it stands to reason that those treasuries will be devalued and China will take a huge loss.

Then again, I could be wrong.

Simulations And Misinformation

I can't count the number of times I hear Congressional Republicans, conservative pundits, and bloggers prattle endlessly about the economics of proposed healthcare reform. From the fear-laced rhetoric that grandma and your cousin with Downs are gong essentially be tossed to the wolves unless you can pony-up more cash than you can even afford right now.

But economics and conservatives have never been good bedfellows. The reason is that the later has little interest in hard data and more interesting in generating that one soundbite that will get them mentioned by either Fox"News" or Rush Limbaugh - preferably both.

And now, from sickness, comes word that the savings of proposed healthcare legislation are correct, as the CBO has reported.

The new document arms Democrats with a response to the contention of Senate Minority Leader Mitch McConnell (R-Ky.) that the bill would mean “higher premiums, higher taxes, and massive cuts to Medicare.”

The “microsimulation” analysis is by Jonathan Gruber, an economist at the Massachusetts Institute of Technology and a Treasury Department official under President Bill Clinton. Gruber used data from the Congressional Budget Office.

It's never been a secret that conservative Republicans will only agree with the CBO so long as the CBO agrees with them. And in reference to healthcare reform, the Republicans in both houses on Congress haven't had a many reasons to agree with the CBO.

I'm actually waiting for the moment when someone like Mitch McConnell actually claims that the CBO is now a liberal organization with an agenda that they are trying to set.

A Question Of Economics

Apparently Michelle Bachman's way of persuading the public to oppose the Obama administration's healthcare reform is to talk about how inexpensive it't going to be.

Approximately 114 million Americans are expected to leave private health insurance. Why? Their employers will drop the insurance because the taxpayer-subsidized plan will be 30 to 40 percent cheaper. This action will collapse the private health insurance market, and then the Federal Government will own the health provider game.

As stated before, I'm no economist. I took Micro Econ in college and made a solid B in the class, but that's it. However, I'm well away the first thing that you don't do when attempting to prevent someone from selling their product is telling their potential customer base that the new product is going to be less expensive.

Bachman's rationale appears to be that the higher the price, the better the care. This is about a valid a standpoint as saying that simply because Fox"News" has higher ratings that their reporting is proportionally more accurate and fair. The same excuses have been given in relation to the Bush administration's policies and how they have kept us "safe". I can take the standpoint that I have worn the same pair of shoes all year and haven't gotten cancer, so that must mean that Etnies prevent cancer in 100% of studies.

But lets postulate for a moment that all the hypothetical set that Bachman has mentioned are considering leaving their current provider for the government plan. Wouldn't that cause their current provider to lower their rates? Isn't this how businesses keep their customer base, incentives?

Conservatives That Deserve Awards

A nice compilation from Media Matters.



science, history, healthcare, basic tennets of law, and Economics have never been subjects that prominent conservative Republicans ( primarily within the media ) have been proficient in. You can usually tell who they are by how loudly and how often they speak about these subjects.

I'm starting to get to the point where I don't feel sorry for people that watch Fox"News" ( or any blatantly right-leaning program ) and/or listen to conservative talk-radio and consider them a primary, credible, news source. I used to feel bad that they were so willing to absorb all this misinformation and lies and then walk away from a discussion so confused and irrate when they couldn't stand up in a debate.

If this is what they want, I say let them have it.

Guns N Spreadsheets

I was once a huge Guns N Roses fan.

I fondly remember the night that a severely inebriated Duf McKagan and Slash stumbled on stage to recieve their first major music award and the F-Bombs scattered out on live television for all to hear.

That was a fun conversation starter back in high-school.

Now, Duff has his sights set on something new. The financial world. And Playboy is giving him the outlet.

Answering critics who would doubt his expertise, McKagan said he began studying finance in 1994 after "I got sober."

With time on his hands, he said he rummaged a file drawer full of old financial statements covering a six-year period at Guns N' Roses, only to discover they were too confusing to comprehend and were "meant to mislead."

After plunging into the study of finance and economics at Santa Monica Community College - and later at Albers School of Business at Seattle University (he's just a few credits shy of a college degree) - the bass player became a widely quoted media source about the economics of music and rock bands.

More here.

Some may equate McKagan's freshman attempt at economic discourse with Joe "The Gimmick" Wurzelbacher, but there's a slight difference - Duff seems a bit humbled by the concept.

Granted he's no Krugman, but at least he knows a hack when he sees one:

McKagan admits, however, he doesn't understand all the technical ins and outs of high finance, but says TV's talking heads don't, either.

"Those boneheads on TV just want to make themselves come off as smart . . . I hope to shed some no-nonsense light on day-to-day money issues," he wrote, closing his salty commentary with a promise: "I will do my best to expose frauds and criminals, one at a time."

I don't expect to have Duff's economic theories quoted by a lot of people, but his specific focus and unique insight should be interesting. For what it's worth, I wish him luck.

"Dealing" With Revisionists

I'm not an economist.

Neither is George Will. And Ed Morrissey at HotAir is just plain stupid.

Considering that fact that so many within the conservative realm will take any and everything that Will says as gospel, it's no suprise that they jumped for joy when he pointed to FDRs "New Deal" as one of the ( if not THE ) root cause that The Depression lasted as long as it did. However, Paul Krugman ( you know, that guy that just won the Nobel Prize for Economics ) had a quick and truthful rebuttal to Will's right-wing nonsense:




Ed Morrissey comes into the equation not so much hanging on Will's coattails - though I would imagine that he felt a bit more comfortable knowing that Will initiated the talking-point - but in reference to a Washington Post article where writer Lori Montgomery speaks about the simularities between what Obama is postulating and what FDR did with the "New Deal".

Portion cited from Montgomery's article:

The campaign did not release an estimate of the number of jobs that his latest proposal would create. But congressional aides who have been involved in developing stimulus proposals said that any plan to create 2.5 million jobs is likely to be significantly larger — probably well over $200 billion, or between 1 and 2 percent of the gross domestic product.
Such a plan would be bold by historic standards. President Bill Clinton, facing a weak economy when he took office in 1993, proposed a $16 billion stimulus package, which was blocked in the Senate. Obama’s proposal would be an order of magnitude larger, even when adjusted for the larger size of today’s economy.
Some economists have compared Obama’s proposals to the spending spree President Franklin D. Roosevelt launched during his early months in office in 1933. Roosevelt offered jobs programs, such as the Civilian Conservation Corps, and cash for public-works projects, such as the Tennessee Valley Authority, in hopes of easing the pain of the Great Depression.

Ed Morrissey's predictable reaction:

Lori Mongtomery apparently took pains to use the phrase “in hopes of”. FDR certainly hoped to alleviate the pain of the Great Depression with his experiment in federal mobilization of the civilian workforce, but he failed to do so. FDR spent years pulling capital out of the private sector and creating civil-service jobs that underproduced and inefficiently utilized the capital. The end result was a prolonged depression that only ended when FDR was forced to partner with private enterprise on the war effort in the 1940s.

While Morrissey's schtick is more grounded in the "the media is in-the-tank-for-Obama" way of thinking, you can still feel the flow of what Will started.

So, what does all this mean?

How do we know that George Will and Ed Morrissey are drinking their own bathwater?

Just ask Brad Delong who offers up the chart below as proof.




He goes on to state the following:

I have never been able to make any sense at all of the right-wing claim that the New Deal prolonged the Great Depression by creating a "crisis of confidence" that crippled private investment as American businessmen feared and hated "that Communist Roosevelt." The crisis of confidence was created by the stock market crash, the deflation, and the bank failures of 1929-1933. Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect.

The interruption of the Roosevelt Recovery in 1937-1938 is, I think, wel understood: Roosevelt's decision to adopt more "orthodox" economic policies and try to move the budget toward balance and the Federal Reserve's decision to contract the money supply by raising bank reserve requirements provide ample explanation of that downturn. And once those two factors had run its course the continuation of Roosevelt's policies was no obstacle to an investment recovery driven by war-related exports monetary expansion produced by capital flight from Europe.

You can argue--and I occasionally do--that had the Supreme Court not ruled the NIRA unconstitutional it would have exerted a significant drag on medium-run economic recovery. But the Supreme Court did rule the NIRA unconstitutional, 9-0, Brandeis voting alongside MacReynolds.

Guess what Mr. Delong does - he's an economist.

Is Justin Danhoff Really That Dumb? Of Course He Is.

Don't feel bad if you don't know who Justin Danhoff is. I had no idea who he was either until I read his piece that was featured in the Christian Science Monitor about Congress, gas prices, movie theatres, and "oil profiteering".

With this summer's high gas prices, Americans are trading in their traditional vacations for "staycations" – vacations much closer to home.

But compared with other things Americans might do, driving is still a bargain.

Consider, for example, the costs of going to a movie:

Oh, great. Here we go again.

To say that conservative writers use Hollywood as a boogie-man is to overstate the obvious. What isn't as obvious is that these same writers are exploiting an ignorance within certain segments of the American population that helps further their cause, helps elect their officials, helps keep people in line.

But, as much as exploitation is a standard operating procedure within the conservative movement, let me take a moment to highlight Justin Danhoff's ignorance regarding movie theatres.

To say that Danhoff is comparing apples to oranges is bit of an understatement.

In the first quarter of 2008, Big Oil had a profit margin of 7.4 percent. Over that same period, the pharmaceutical and medicine industry earned a 25.9 percent profit, the chemical industry earned 15.7 percent and the electronic equipment industry earned 12.1 percent.

What about those movie theater refreshments? Four large popcorns and four large sodas cost $31.50. The total raw ingredient cost is approximately $7.56. That equals a 76 percent gross margin. Where is the political outrage over that figure?

That's not exactly the most clever way to present an argument, as Danhoff is stacking the "percentage" of oil profits directly against the "cost" of refreshments at a theatre without backing up where he got his theatre-snack cost.

At the time of the writing, the cost of a barrel of oil is below $120.00 per barrel.

The average ticket price for a movie, as of the middle of 2008, is $7.08.

Let's say the average price for a small bag of popcorn and a soda ( also small ) is about $10. Fair?

You see, this is where Danhoff's piece starts to fall apart.

You don't have to buy snacks at a movie theatre. So, for the average family ( mom, dad, 2 kids ) the price is only $28.32. If everyone got a soda, and there were 2 bags of popcorn to share, that would make the price $48.32. That's dangerously close to the cost of a full tank of gas for a mid-sized, American-made car.

Can't make it through a movie without snacks? There's an easy solution - bring your own. I've been doin it for years. It's easy.

There is a reason that snacks cost more at movie theatres. If a theatre can't sell snacks, there's no theatre. Pretty simple to understand.

Most of the money from ticket sales goes back to the movie studio. A film booker leases a movie to a particular theater for a set period of weeks. The percentage of ticket sales that the studio takes decreases on each week that a movie is in the theater. If the screening was arranged by an independent middleman, he also takes a slice. So the movie has to pull in sizeable audiences for several weeks in order for theater owners to make any serious profits.

"Surveying about 1,000 U.S. consumers, ages 18-54, Interpret found that 52 percent of respondents said they were seeing fewer movies at the multiplex, significantly more than the 35 percent of respondents who said they were attending fewer live sports events," according to a Wall Street Journal report about the survey, which was conducted by Interpret LLC.

more here.

Movies are a "choice". Using oil isn't much of a choice for many people. Even if you don't drive, you're still using gas in some fashion. You can wait for a movie to come out on DVD and rent or buy it, but you can't just "magically appear" at work, or make it to your moms, or go to the concert without using gas to power the vehicle to get you there.

Here's some other things that Danhoff can't seem to wrap his head around:

You don't get a "matinee" price on gas before 5pm.

The comparison of gas prices to the Grand Canyon or Disneyworld versus the cost of a movie with snacks might sound impressive, but what about admission to those vacaion spots? What about food? What about people that have further to travel to "vacation destinations" - don't they have lodging costs?

Danhoff's piece is easily seen for what it is when someone with a rational thought process reads it - conservative drivel.