Monthly Archives: February 2012

An example from Mish on the uselessness of establishment economic statements

Analysis of Bernanke’s “Labor Weakness” Statements

Unfortunately, Bernanke’s statements offer surprisingly little economic insight.

For example, please consider the Fed’s estimate that the “unemployment rate will average 8.2 percent to 8.5 percent in the fourth quarter”.

Perfectly Useless Projection

Let’s assume Bernanke is correct. Is that a meaningful projection?

The short answer is the projection, even if totally accurate, is perfectly useless. Let’s analyze “why? in light of Bernanke’s estimate that it takes 125,000 jobs a month to keep up with demographics (birthrate plus immigration).

Three Cases In Which Unemployment Rate Stays Flat

  1. Is the Fed projecting 125,000 per month in line with expected demographics?
  2. Is the Fed expecting 200,000 jobs a month with a rising participation rate that holds the unemployment rate steady?
  3. Is the Fed expecting 50,000 jobs a month with a falling participation rate that holds the unemployment rate steady?

It would be more useful (assuming there is any use to Bernanke’s statements which is certainly debatable) to know just what he is thinking because those three scenarios are vastly different in terms of economic significance, even though they all project the same 8.2 percent to 8.5 percent unemployment rate prediction.

In other words, the Fed’s projection, even if accurate, is totally useless, not that anyone should be paying any attention to what he says in the first place.

via Mish’s Global Economic Trend Analysis: Bernanke Finally Says Something That Seems to Make Sense “8.3% Unemployment Understates Labor Weakness”; Critique of Bernanke’s 2014 Pledge; Perfectly Useless Projections.

Imperial work v. imperial conquest

“Taking dominion” sounds violent but in the Bible is is a primal description of working for a living and more than a living.

And God blessed them. And God said to them, “Be fruitful and multiply and fill the earth and subdue it, and have dominion over the fish of the sea and over the birds of the heavens and over every living thing that moves on the earth.” And God said, “Behold, I have given you every plant yielding seed that is on the face of all the earth, and every tree with seed in its fruit. You shall have them for food. And to every beast of the earth and to every bird of the heavens and to everything that creeps on the earth, everything that has the breath of life, I have given every green plant for food.”

When humanity sins, this work becomes much more onerous and required for survival. Nevertheless, even before sin is in the picture, humanities means of reaching their goal of rule and kingship is to spread out, work for a living, and have families.

That’s it.

Using weapons is not in the picture as a way of achieving these goals.

Of course, with sin in the world, and therefore soldiers, it becomes necessary to defend one’s family and fortune.

But even here one notices some interesting lessons in the Bible. Consider the book of Judges, which has many military conflicts.

After him was Shamgar the son of Anath, who killed 600 of the Philistines with an oxgoad, and he also saved Israel.

But Sisera fled away on foot to the tent of Jael, the wife of Heber the Kenite, for there was peace between Jabin the king of Hazor and the house of Heber the Kenite. And Jael came out to meet Sisera and said to him, “Turn aside, my lord; turn aside to me; do not be afraid.” So he turned aside to her into the tent, and she covered him with a rug. And he said to her, “Please give me a little water to drink, for I am thirsty.” So she opened a skin of milk and gave him a drink and covered him. And he said to her, “Stand at the opening of the tent, and if any man comes and asks you, ‘Is anyone here?’ say, ‘No.’” But Jael the wife of Heber took a tent peg, and took a hammer in her hand. Then she went softly to him and drove the peg into his temple until it went down into the ground while he was lying fast asleep from weariness. So he died.

Then Abimelech went to Thebez and encamped against Thebez and captured it. But there was a strong tower within the city, and all the men and women and all the leaders of the city fled to it and shut themselves in, and they went up to the roof of the tower. And Abimelech came to the tower and fought against it and drew near to the door of the tower to burn it with fire. And a certain woman threw an upper millstone on Abimelech’s head and crushed his skull. Then he called quickly to the young man his armor-bearer and said to him, “Draw your sword and kill me, lest they say of me, ‘A woman killed him.’” And his young man thrust him through, and he died. And when the men of Israel saw that Abimelech was dead, everyone departed to his home.

Oxgoads, hammers and pegs, and millstones are the tools of production, not professional warcraft. The implements of real dominion are used to overcome the weapons of warriors. Don’t trust in chariots or horses.

(Of course, with the walls of Jericho and many other stories, we also see God granting victory through prayer.)

“Guest Post” by J. Gresham Machen: by a piece of news

…we do not mean that if doctrine is sound it makes no difference about life. On the contrary, it makes all the difference in the world. From the beginning, Christianity was certainly a way of life; the salvation that it offered was a salvation from sin, and salvation from sin appeared not merely in a blessed hope but also in an immediate moral change. The early Christians, to the astonishment of their neighbors, lived a strange new kind of life—a life of honesty, of purity and of unselfishness. And from the Christian community all other types of life were excluded in the strictest way. From the beginning Christianity was certainly a life.

But how was the life produced? It might conceivably have been produced by exhortation. That method had often been tried in the ancient world; in the Hellenistic age there were many wandering preachers who told men how they ought to live. But such exhortation proved to be powerless. Although the ideals of the Cynic and Stoic preachers were high, these preachers never succeeded in transforming society. The strange thing about Christianity was that it adopted an entirely different method. It transformed the lives of men not by appealing to the human will, but by telling a story; not by exhortation, but by the narration of an event. It is no wonder that such a method seemed strange. Could anything be more impractical than the attempt to influence conduct by rehearsing events concerning the death of a religious teacher? That is what Paul called ‘the foolishness of the message.’ It seemed foolish to the ancient world, and it seems foolish to liberal preachers today. But the strange thing is that it works. The effects of it appear even in this world. Where the most eloquent exhortation fails, the simple story of an event succeeds; the lives of men are transformed by a piece of news.

Should the police get to keep the loot of a bandit who robbed me?

Let’s imagine the following event: You are walking down the street with your purse on your arm or, if you are a man, you have your wallet in your hand–say you left a note in it and you needed to read it to remind yourself what it said.

Fill in your own details.

So there you are minding your own business and not minding anyone else’s, or aware of much else.

Suddenly a hand reaches out and grabs your purse/wallet. You look up to see a man running away with your money. You yell in panic…

…and hear the gratifying reply of a police whistle!

One of the city’s finest races past you and overtakes the robber. Within seconds the robber is lying prone on the ground handcuffed. The cop has retrieved your wallet. He turns and doffs his hat to you. “No need to thank me. Just doing my job.”

Then he puts your wallet in his pocket and walks away.

I think of this scenario often. For example, when I heard this in an interview:

I would like to see capitalism in America prevail, but capitalism with a human face. And not a capitalism in which some speculators in the financial world nowadays make 325 times more money than the average wage of an average American. And we have created an extremely unfair capitalistic system. These things have to be addressed…

Beyond that we do have this wave of increasing — mindlessly increasing executive compensation irrespective of executive performance. I think both more regulation and a fairer tax system would go a long, long way in addressing these problems. And actually Romney is beginning to talk about that, in part because I think he realizes that the amount of wealth he himself has should not be affected by one of the lowest tax levels that you can have when it comes to income.

via Zbigniew Brzezinski: “Strategic Vision: America and the Crisis of Global Power” | The Diane Rehm Show from WAMU and NPR.

I’m completely open to the possibility that executive compensation is the result of a misallocation of resources. I would love to see an investigation that searched out the causes what is happening and proved the case.

But the idea that the “crime” (if it be one or should be one) of taking away money out of the economy should be addressed by confiscating that money to give to politicians calls out for the proverb, “two wrongs don’t make a right.”

If people are draining the economy we need to fix it. Pretending that hiking up the tax code on such people really addresses the issue just replaces one parasite with two.

On what grounds of justice can anyone claim that an “unfair” income on the part of one person or corporation is fixed when matched by distributing that income to another person or corporation? And the US Federal Government is only different from a normal corporation in that it is permitted to use guns in its operations.

Of course, I doubt the “injustice” of CEO pay is as egregious as that of the robber in my story. That is why it is all the more unjust for the state to match one questionable injustice by committing an undoubted one of its own.

In fact, this idea is doubly perverse since the state would be gaining revenue from an injustice and would have even less incentive to fix the problem.

Fix it; don’t just add real robbery to possible robbery.