Saturday, August 31, 2013

Why Didn't The Fed Bail Out Main Street, Instead?

Answers to this question are not as simple as they seem, in that it also depends on how one defines Main Street. While Main Street conjures up visions of vital centers where innovations happen, companies thrive and a recession in the rear view mirror, there is a different and in some ways more significant Main Street which dominates in the present. The second version is more akin to a sort of backwater - even at times rural interpretation - where wealth is not so much about innovation or cutting edge, as it is about preserving a status quo which has continued to grow in recent decades.

Because this second version of Main Street is presently more significant in terms of aggregate wealth - by far - it is also the one most closely aligned with governments and finance in general. How So? Wall Street holds this coalition of finance at the ultimate level. The same wealth that less prosperous towns and rural areas hold primarily in their home ownership, is defined by the same parcels and instruments that were adapted at the highest levels of finance. Europe adopted similar structures for its wealth holdings as well, which allowed it to integrated with our own.

In other words, the innovative Main Street that is primarily associated with thriving cities, wasn't actually the part of the economy in dire need of assistance. Given the degree of aggregate wealth that real estate holdings actually represent, the actions that the Fed took to bail out the banks and Wall Street start to make a bit more sense. In the run up to the financial crisis, it almost seemed as though a passive element of the economy could be turned into an active element, as technology hit speed bumps coming into the 21st century.

And banks, of course, were at the very center of this (essentially) passive form of economic activity. Some years ago, just before people from all walks of life starting talking about potential "helicopter drops" from the Fed for Main Street, I finally understood the "mystery" of new, nicely built banks, sprouting up like weeds in the most unexpected of places (cities, towns and countryside) at the very moment it was becoming clear that other businesses were not faring so well. In some instances, new banks in tourist areas even pulled out some of the same stops as local business Chambers of Commerce, by presenting a thriving business or tourist oriented front when other local retail locations were struggling to maintain what tourists were actually looking for.

Looking back, the fact that banks in the U.S. were expanding when housing growth was being called into question, only underlines their confidence that they would be taken care of in the event of any significant financial problems. After all, to undercut banks and leave them without help from government, was to undercut what government and citizens had upheld for so long - real estate as primary wealth. No wonder bankers could do basically what they wanted and get away with it! In a recent FT article, Tim Harford likens the bankers to toddlers which have gotten out of control. While it's tempting to think of "cutting them off at the knees" the problem is one of a fragile network of wealth definitions which institutions of all kinds continue to rely upon.

Just the same, this rowdy bunch - who are doing quite well, thank you - remains on everyone's minds: even if too few of those complaining about the bankers are able to offer solutions that make sense to other "camps". In an article for the Project Syndicate, Brad DeLong also questions who is going to be the focus of the central bankers - the macroeconomic camp, or the banker's camp. For the banker's camp has little to no interest now, in the growth that would really pull the economy away from the recent recession. Because of the banker's quest to make sure inflation doesn't grow, those who would remain economically engaged and open new businesses, are the ones that pay the price.

The real challenge for both camps is to pull away from the passive interpretations of what wealth has come to represent. What's more, a focus on fiscal assistance from government suffers the same problems in that it can not establish regenerative growth on its own. Brad DeLong believes that thinking in nominal terms is what causes the banker's camp to hold back, but he has misstated the problem.

Bankers don't have adequate reason to delineate wealth in nominal terms. If this is a "fixed pie" of wealth that they appear to be holding back, it is so in terms of the portion and definition of wealth they believe they have the right to represent. Nominal targeting would allow the public to discern the outsized portion of the economy which bankers desire to dominate. That in turn would allow the public to set about returning that ratio to more active and true growth based elements. A continued focus on government to "save the day" with fiscal policy only serves to keep the balance of power in the banker's hands.

Thursday, August 29, 2013

Imagine Free Markets in Services

Notes can "get away" from me: they'll pile up quickly if I'm not careful, so I try to keep the ones actually sitting on my desk to a bare minimum. As I try to stash yet another "finished" group into a nearby folder, some "scribble" consolidation has to happen. So I sometimes have to remind myself to use the organization strategies an English teacher taught me several years ago. This time I found - in the chaos - a post which has been "suggesting" itself for at least a week. thought this was easy, didn't you! (just kidding)

Some of the musings here are actually brought forward from my last post, in which I considered how people might eventually utilize online activities in more useful and beneficial ways. Ultimately, online time needs to count for more of what actually gets important things done. Also, it needs to account for better relations not just across nations, but for people who live across the street from one another, as well. In the present, such ideas remain a hindrance to many institutions who still try to go about their activities as though internet doesn't even exist in any practical sense. Doesn't that feel a bit odd?

Services of the present - bound as they are by the dictates of previous circumstance, often include some of the strangest default points imaginable for people to be enduring. Usually we don't give services a lot of thought until they impose upon - or perhaps some would say oppose - our daily reality. Generally our first reaction is to the inanity of the procedures we are expected to endure and the second reaction is...well there's no other way to overcome how this is going to be presented to us. Indeed the prevailing wisdom is: don't like this transaction where real human contact is not an option? Get used to it because there's more where that comes from tomorrow.

Readers may recall I was quite relieved that an automated procedure got me back online quickly when my internet connection was disrupted recently (although it doesn't usually go quite so smoothly). Some folk are so used to navigating automation procedures that they don't give them a second thought. When automation procedures take care of problems quickly, we'll take them any day over waiting 28 minutes for an actual person to actually pick up the phone. The problem comes in when we're calling with an issue that the ten "options" the automated system has, simply does not match up with. Searching online for answers helps sometimes, but not always. Do we really have to give up on solving what may be important issues re our ability to function well, when this is in fact the case?

In a sense, this is the same unfilled "hidden demand" that is the equivalent of the "hidden supply" problem of the present - i.e. the "not quite measured" unemployed who is weary of heading out the door for yet employment application drop off, because of the ZMP message he has already received several times over. We haven't quite figured out how to offer our skills sets in the present because our institutions have served to make them uneconomic. What's more, some of our "revered" institutions are presently fighting it out over who gets to "serve" us: the uproar over private and public school choice is running strong. By now the reader knows I don't think either one of these are workable in their present forms. We need the choice to provide services for one another on our own terms, in order to gain back our own humanity and self worth.

What do we want to accomplish - today, tomorrow, next year? In a practical sense or in a larger sense, institutions in their present forms are not structured to answer such questions. What interests us? Sometimes individuals create product which can reach over the "static" and provide something that does, but far more of us need to be able to do this regularly for one another, than is actually happening right now. There's the work we need to do for ourselves, the work we need to do for others, the learning we need to be able to take on for each. One of the first things we can do to imagine free markets in services is to calendar - and schedule - the possibilities we could try out in a local skills and knowledge use marketplace.

Over time, things that "call" to us for further learning and sharing can be placed into semi-formal, but not rigid, institutional structures. These interactions can be validated by recording more relevant aspects of the transactions - what we gain from sharing interests, responsibilities and their related activities. Each new semester can provide the excitement of placing our present offerings before the public to see if enough will respond to make it worth our time and effort to pursue that particular activity right now.

Also - by way of example - affirmation of collective worth beats the heck out of piano teachers (for instance) having to put up piano lesson posters (for prospective students) at street corners alongside get rich quick schemes and weight loss posters...or, getting disparaging glances for advertising said piano lessons in public, when one isn't practicing in the "right system" with a teaching job from public or private whatever. Since when did education become about creating extra-institutional worthless skills sets except for the lucky few?

What's more, our governments need value in use structures for everyone's survival, value in use structures that don't get taxed so that people lose the ability - yet again - to help themselves when they need help the most. Taxation here would destroy the incentive for people to consider common need as surely as too heavy taxation destroys the ability of economic access in all its possibilities. Life is good when everyone allows the knowledge prior to win (for once) and an ultimate degree of knowledge utilization becomes possible.

Again, imagine services. What makes them group oriented or individual to individual service oriented? What service and production sets can be presented through informal group settings? What does a community need to do for itself, and especially how can it utilize the skills its institutions don't have room for? How then can a community also come into better balance with technology, so that monetary equivalence is possible with simple base representation instead of ""floor" wages?

How can communities create more value from what their citizens already have, thereby creating more value for all? Never assume that the right to produce lies only outside ourselves, because when we do, we get entirely too confused as to what consumption is actually possible. When we realize the right to production exists within ourselves, we can also envision how to present the product that works in the now. When we try to vote for the redistribution of scarce resources, we are voting for the wrong thing. Vote for skills and services potential - for that is something we can all provide, in abundance.

Wednesday, August 28, 2013

Midweek Market Monetarist Links and Summaries - 8/28/13

David Glasner is doing a series of posts which will help him prepare a paper for the Southern Economics Association, re the 100th anniversary of Ralph Hawtrey's "Good and Bad Trade". This is the first:

Lars Christensen also co-wrote a paper with several colleagues re who would be best suited for the position of Fed chair - Yellen or Summers: (looks like Obama has already made up his mind)

Nick Rowe asks, is money exogenous or endogenous?

Bill Woolsey, in this post on the Pigou effect, also gives consideration to exogenous or endogenous money:

Britmouse explains how the Riksbank are deliberately missing their targets:
and posts the nominal GDP numbers for Q2:

Evan Soltas posts on a "natural experiment" in North Carolina, where unemployment benefits are being reduced from 80 weeks to 19 weeks:

Marcus Nunes highlights the first "farewell" speech for Bernanke, by Binyamin Appelbaum:
Marcus also provides a link for the Robert Hall paper which got the Jackson Hole conference off to a not so good start:
Sometimes The Economist is convinced I've read my "monthly quota" of articles already, so I'm always glad when Marcus catches a good Ryan Avent post which I might otherwise miss!

How much does the Fed tapering actually affect other countries? Scott Sumner asks why it would be a concern in particular, for Indonesia:

Surprisingly, I'm in agreement with John Cochrane for once, and so is Lars Christensen. However in my case I should clarify that people need better life choices than the current crop of banking options! Or...make banks irrelevant instead of heavy handed Fed regulation, which also would not work out as intended.
Lars also has an oped on prediction markets, linked in this post:

Also, an essay from Deirdre McCloskey which I thought some of my readers would enjoy:

Tuesday, August 27, 2013

What Airbnb and Fast Food Strikers Tell Us About Local Economies

First, why might there be a connection between these seemingly different things? The reason I see the possibility of a link between the growing use of Airbnb for additional income support (by informal landlords) and the recent "fast food" worker (and related retail) strikes, was my own quest for living in a city on near minimum wage income, about fifteen years earlier. At the time it was still a fairly reasonable option to rent rooms from home or apartment dwellers - when one had a lower wage job - in many cities of the U.S., even though many apartments were already out of the reach of lower income individual renters.

Even as cities often struggle to limit the growth of Airbnb, they are partly responsible for the creation of these economic adaptations, by their own maximizing strategies of exclusionary policies. As a result, travelers now seek the same couch or bedroom spaces which were once rented to local lower income workers. An informal rental marketplace in cities which was once well within reach of the lower income worker, has come into an unexpected collision course with the budget conscious traveler.

While other living options still exist for lower income, they tend to be found where public transportation routes either didn't exist, or have faced cutbacks in recent years. That means the lower income worker also needs to be able to own and maintain a vehicle in order to take advantage of rental possibilities in outlying areas within commuting distance of work. Whereas travelers which now rent city spaces, have the nearby transportation routes as an additional perk, and they can pay a more significant price for the same space. What the traveler is able to pay, further assists the renting landlords who of course already have budgeting concerns which prompted them to open their homes to strangers.

By no means were informal landlords the only ones feeling the pressure, to choose the nightly traveler over someone they could build a more reliable relationship with. Travelers were willing to take their chances because of the growing expense of hotels. Now, the pressure gets "passed on" - in the form of strikes - to businesses which can ill afford to pay greater wages to low income workers. And of course the low income workers, who are simply trying to find a way to remain in the workplace, now find themselves incentivized - around the countryside! - to take the whole sorry proceedings out on their hapless employers, for lack of a better solution.

The primary reason I have the least sympathy for local municipalities in this growing lack of affordability for lower incomes, is the fact that municipalities are always the ones with the most leeway in provisions of choice sets for both production and consumption in any overall sense. They are the ones who can make the difference for all of us to have a better life through more reasonable zoning and regulation, and yet they choose not to and continue to get away with it. Every arbitrary zone or regulation only serves to lock out more possibilities for the ability of people to thrive.

At some point, local economies have to account for the fact that their citizens need to have a wider range of both consumer and producer options depending on actual income, which need equivalent offerings in the marketplace. Until such offerings are available, the call will always go out for wage increases which - today - only tend to stretch elements of existing systems further beyond their carrying capacity. What's more, efforts on the part of central bankers to cap the "inflation" which really originates in this escalation of unnecessary local requirements, mostly succeed at throwing even more people out of work, or out of business, to compensate for artificially inflated ideas as to what real wealth should represent.

There is a world of survivability options for all kinds of economic actors, which municipalities have simply left out as possibilities. Many businesses - which out of necessity pay lower wages - just don't have that kind of leeway in their choice sets for survivability. In the long run, such measures either force them to use more automation, or leave for more affordable environments. However, other local economic actors who take part in these settings, don't always have the option of starting over elsewhere. Over time, as these issues go too long without being addressed, the ramifications finally go well beyond the exclusionary circumstances which they begin with.

When municipalities choose the upper end of livability options out of convenience and the most wealth gain possible, that doesn't mean it is always possible for their local business and residents to do the same. In turn, that limits the number of businesses that can set up and offer work to local residents, and it also limits the number of potential residents who could come to live and work, which means they often remain unemployed because they can no longer afford to live where work is actually being offered.

Cities have to realize that their citizens now need new strategies. As a series of graphs from a post at MacroMania aptly show, (especially graphs two and three as related to investment) citizens can not always be expected to spend us all back to prosperity, when local economies have already claimed too much of the take. In a recent post by Business Pundit, a series of illustrations indicated that 50% of income went to housing, education and healthcare costs in 1975. By 2013, 75% of income went to those same categories.

In other words, by the time the necessities of life are met, only a quarter of one's income is left for more discretionary purchases, and that is for the average consumer in terms of statistics - let alone the lower incomes. It is time for local economies to stop imploring Washington for ever more help, and start making life easier for their citizens on the terms they are actually still capable of. When cities begin to find more inclusive ways for all their citizens to participate in economic life, everyone will be the better for the effort.

Monday, August 26, 2013

Unemployment is Interdisciplinary

It occurs to me that my focus on unemployment today may appear as somewhat of an odd thing! After all, the beginning of new semesters has always been about starting fresh, and the hopes that go with such thoughts. In the context of making decisions about the future, and commitments to match, wouldn't it be great if students didn't have to think about the possibility of unemployment or - at the very least, if only there were classes someone could take on the subject itself! Especially when knowing the "right" courses to take to "avoid" it are not so simple as it may seem. Multiple rationale exist for what appears as a surface phenomenon. When one hears about high skilled jobs going unfilled, for instance: how easy is it for those with the "right" skills to be where they need to be, and when?

The ramifications of unemployment hit home for people from all walks of life in ways they may scarcely recognize. Indeed, making the greater effort for societal inclusion early on could be the best preventative measure of all. But when a nation chooses not to address the causes of unemployment head on, it's more difficult to undo the damage afterward. As for students, the possibility of unemployment remains as something that might have to be confronted after numerous parties have been thrown, notes and textbooks have been pored over, and tests have been taken. Isn't unemployment (or underemployment) just the back door of a house that one might see when the front door could not be taken?

Today, the possibility of unemployment is everywhere and always the front door: the place where dots connect, disciplines struggle to meet, and the forgotten crossroads where the underlying elements of a societal language emerge. Yes we have interdisciplinary studies and calls for more interdisciplinary skills in the workplace (something institutions tend to be a bit short on) but this isn't quite the same. Few institutions or groups look at unemployment in the same way, let alone have any strategy for dealing with its ramifications. From a big picture perspective, unemployment is a matter of societal imbalance. More importantly, it is a huge rip in the fabric of aggregate wealth that nations rely upon.

Already, the problems of unemployment in the 21st century are starting to change the way we think about education, and not in a good way. Supposedly - for instance - one isn't really "thinking straight" if they get an English degree. Luckily, this was not so true for a good part of the 20th century. After all, my father is living proof that one can be quite pragmatic by inclination, and yet still have a college degree in English to their credit. Even so, in the South, it has been true for a long time that anyone with "too many books" in their homes (particularly when they run well into the thousands) doesn't quite make sense to the population as a whole.

While the reader might wince at this reality, there is a good reason for it. Even though credentials matter, so too do personalities for the jobs that (once) lasted a lifetime, and anyone who stuttered in high school (like my Dad) or was shy, had a slight disadvantage coming out the gate. Being popular in the South, among other things, still means not spending an excessive amount of  time with books. Nevertheless, in demographic terms, Dad was fortunate indeed. There were lots of reasons he didn't have to worry at a young age about a good job that not only paid the bills, but also made it much easier to save money as well. Today that's not quite so easy. Saying it's not really so is not just beside the point, but also delays finding solutions.

What we need to do is quit pointing fingers at one another, and get to work on putting the pieces together, as to how people have gotten themselves into this predicament. Numerous factors contribute to unemployment and they all have their place in active consideration. Non solutions are when society tries to find ways to simply pay the people who aren't employed, which over time just makes economic systems even more unbalanced than ever.

Consider what happens today in community planning which mostly tries to focus on "green" this or that, or getting the "right" employers or the appropriate "mixed use" area that supposedly unleashes economic potential on its own. There is no economic potential to be unleashed until the reality of supply and demand in people based terms is addressed for the bulk of a population - and not just the ones with the pocketbook of the moment. In other words, the effort to address root issues of  unemployment and its associated living struggles, needs to be front and center of any community plan.

Such efforts to address unemployment can begin informally as well. That would allow people to move beyond present day constraints of getting the right information and knowledge to the places where it is needed most. For instance, countless papers are presented in higher education which don't necessarily have ways of matching up to other complementary work. People can be readily brought into informal processes who are not constrained by the missions in their formal job or career roles. Complementary research can be planned at the outset in many instances.

While there are numerous practical aspects of such efforts, the study of unemployment is especially about digging deeper to find out what people really want to do and how they want to go about it. Communities can start by forming virtual universities, which would include locals coming together to compare aspects of online discussions that particularly motivate them for local, national and international action. Plus, locals can work together to encourage dialogue that may be somewhat constrained online as well, in that the local focus allows more definite context in some circumstance.

We don't really know what kinds of product people actually want, in that institutions have had many limitations in the kinds of product they are capable of presenting to the public in recent decades. That alone is a big reason why unemployment is such a problem now. The important thing is to explore the kinds of product, services and experiences people have either come to expect or particularly need, which are not being met in present day institutional circumstance.

Only by discovering what some of these thought processes actually consist of, can the issue of unemployment be addressed in ways that suggest future solutions. To be sure, there are the immediate aspects of zoning and regulations which stop business formations, job potential and living solutions right now: all of which need to be addressed simultaneously. However there is no reason why short, medium and long range goals cannot be discussed as multi-setting considerations and active components with intersecting dynamics. Until now, unemployment issues have primarily been the province of monetary policy, but the reality is that unemployment needs to be everyone's concern, before greater expectations for the new century can truly materialize.

Friday, August 23, 2013

The Next Logical Question

Without a doubt, it must have lingered in the minds of some readers after my most recent post: "The Question"...that is, How? Sure, it's nice to think about making our constructive time use primary in monetary terms, whether or not it is recognized as such in present day institutional settings. Unfortunately, we live in a world which continues to demand more of us as consumers and yet - in the aggregate - attempts to reduce our role as producers (of anything), at the same time.

Turning that scenario around will take some thought, to say the least. We need to try though, because as a general rule: when too many of us reach a point where we don't actually produce anything, we're not inclined to be very nice to one another! Too many people are ready to pull their hair out over the fact that the human factor is missing from a lot of monetary equations.

Even as we contemplate the kinds of services others could benefit from, such offerings still need to really count for all involved. So it is worth stumbling about in the dark for a while - if need be - in the attempt to find those possibilities. In the same way that no one really knew which products would take off in the twentieth century, no one knows what services will be called for in the 21st, and we all need to take our turn at services entrepreneurship. The fact that people are fickle and ever changing about the products they go for, only tells us the sky is the limit in terms of what we would seek to provide and learn for ourselves along the way.

Still, the short answer to "How?" is that it's going to take time to remedy the problem of inadequate economic participation. Even now, some who previously backed nominal targeting - for instance - have since become convinced that liquidity traps are real and there is little more that can be done. Waiting for "economic winter" to blow over is not just impractical. It is also foolish to just "wait things out", when doing nothing has the potential  to make matters even worse. Many policymakers see the present trajectory of unemployment and remain unconvinced that it can be substantially improved. Much of what we consider vital in the realm of work - and economic life in general - needs to be kept front and center in the years ahead.

In order to climb out of the collective stalemate that is the present, we also need to reassess the asset structures we utilize to create monetary flows for knowledge and skills use. It helps to remember that intent and purpose not only come before structure, but they also serve to maintain the structures that we create. We have to know what we want to accomplish in the world around us, before the rationale and ability to maintain what we already have is truly possible. No resource is truly a resource, or for that matter can remain so, until the mind and imagination remain ready to make that happen.

No society has the luxury to just rest on its laurels. When people forget the purpose for what they build, sometimes the purpose is lost. The benefits of past asset and wealth formations are not enough to sustain the patterns now necessary to maintain even the most basic of societal functions. Increasingly, the assets that are able to keep their value are those which remain close to areas of high knowledge use. If such vital knowledge use is not made available to more Main Streets in the years ahead, many asset formations remain in danger of greater instability.

Knowledge use and asset formation are simultaneously occurring structures which need one another, and neither will readily adapt to the separations and limitations people seek to impose on them now. Even though there is little about economic expectations which people presently agree on, that's no reason for anyone to feel smug about asserting it is irrational for us to expect continued progress. While yes, there could possibly be an element of  truth in such an assertion - just the same - that's nothing to feel proud about. Let's prove it wrong.

Thursday, August 22, 2013

Keep Time Use Commensurate With Money

What is it that makes our time use important, in monetary terms? The actual limitations and capacities of time use seem so basic, that one would think such a logical consideration would be part of any monetary policy in the present. After all, many individuals in society are now expected to carry their own weight in economic terms, as they go through the course of their lives. In recent decades we've increasingly accepted and even welcomed that role. What's more, in terms of societal expectations of the developed world, the reality of total economic participation is practically a cultural "given" which - with a little luck - will eventually play a greater role in legal definitions as well.

However, the reality of (expected) total economic participation in monetary terms still "feels" new, which could explain the reluctance of policymakers and central bankers to come to terms with its true significance. Certainly it explains the knee jerk response in the U.S. of throwing entirely too many people into prison, instead of seeking out more rational economic environments for them to survive in. That very "newness" of expected economic participation may lie behind some of the confusions surrounding representative anchors for money in the present. It is particularly unsettling to see how nominal targeting could assist economic stability, and yet know that policymakers at the highest levels remain adamantly opposed to the value of our own time use as an anchor for monetary policy.

Prior to the 20th century, only a small portion of individuals in society were expected to be responsible for both oneself and family, in what we would consider today's economic terms. Certainly, the limitations of gold standards made sense, when it was primarily governments and wealthy citizens doing the majority of the buying and recorded economic activity. Even the reality of income tax is but 100 years old in the U.S., and our government did not really discourage citizens from utilizing barter or other non monetary forms of sustenance until after the system was put into place.

While there were certainly no 100 year celebrations in 2013, the income tax was nonetheless an acknowledgement of the growing importance of every citizen in economic life. It would seem we all "got the memo" in the 20th century, and agreed with government that our time and skills were really starting to matter, in monetary terms. And every time central bankers considered our time use and its incremental value in nominal targeting, it appeared as though governments might actually keep what appeared as though a reciprocal monetary promise with their citizens. After all, the economic use of our time was the most reliable indicator for economic stability, of all the resource options available. More people than ever were starting to agree: time is money.

Even so, not everyone has been sold on the idea of our ability to participate in the economy as the "new" gold standard. How does anyone know if jobs remain available? What's more - so the reasoning goes - there's more money and gain to be had "at the top", for the not so incremental requirements of both higher education and "bigger is better" definitions for environment use. For one thing, the incremental nature of what our time can actually accomplish is too transparent, too indicative of where rational thought and action might lead, for some who gain from hijacking the value of our future time for their own ends.

People in power have multiple reasons for their desire to keep credit appropriations and balance sheets as primary - even going so far as to insist they belong in definitions of macroeconomics - which is certainly not the case. Alongside the bastions of credit and finance, go the unnecessary coercions of living and knowledge use standards, for those who can ill afford or scarcely need today's superflous signals of "wealth" with their actual incomes.

Because governments refuse almost all innovation and efficiencies in building and construction requirements, a hidden feudal system exists for lower to middle classes such as what once existed in the Old World, and is slowly destroying the middle classes as it continues. For the lower classes it is apparently not enough to work all day, as they also have to take on additional jobs just to be able to live in housing as it has been mandated as necessary for all, by government. One's time is increasingly given over to the mortgages and rents which are a prime means of governments everywhere for their own wealth appropriations. Landlords - for all the blame they get - are but a foil for the real "action".

As long as monetary policy is thought of primarily in credit based terms, and wealth in terms of inefficient housing, the time to money link which is so vital for economic prosperity, will struggle to materialize in a rules based sense. Even though nominal targeting corresponded with other policy instruments in the years of the Great Moderation, in retrospect it may not have even happened for the right reasons in terms of monetary stability. We are in danger of governments continuing to turn their backs on the time to money perspective they once encouraged in the 20th century, as knowledge and skills use continue to be pared back for budgetary balance.

Why so? Because in the last 100 years of income taxes, the things people used to do that provided value outside of monetary terms no longer exist as true possibilities. Even though some may think of farmland as a "hedge" for the future, the idea is silly in any aggregate sense. The family farm, for the bulk of populations, is no longer a true option short of complete breakdown of monetary systems - which a Market Monetarist such as myself seeks to avoid in any circumstance. We cannot afford for governments to give up on the skills of their populations at the very historical moment when populations have never been so dependent on said skills for their very survival.

By the same token, women cannot just automatically resume the homemaker role as in past days, in that many of the jobs of the 21st century demand two incomes for housing, especially as it is presently defined by governments. Or, if someone needs to stay home because there's not enough jobs, then allow innovative thus affordable housing, for Pete's sake. More realistically - and more ominously - the continued call of the left for "living" wages is a pipe dream in terms of real government objectives, which in the present are all about capping off inflation so that it doesn't "froth" or "bubble" too much!

The real issues for our economic futures go well beyond the realm of politics, which is now mostly about fighting over the pie of static wealth that governments and their financial advisors have already envisioned. We know why monetary ideas evolved away from the use of the gold standard in the 20th century, for as populations became more involved in the economic life of nations, fiat money became ever more important for their actual representation. What perhaps was not so obvious? The degree to which finance and credit use, with tight definitions of wealth all around, could completely hijack the entire process.

Governments in particular need to let up with the silly staged hissy fits every time finance "gets out of control". Just allow affordable living and working conditions so that people don't invariably have to rely on credit use in the first place. What's more, if governments would get real about their special relationship with finance instead of pretending it's some kind of monster when the *** hits the fan... people might actually start to believe - once again - that it pays to be responsible in life...that it pays to be accountable and trustworthy.

If we can only convince our governments to keep time use commensurate with the true capacity of money, the mysteries of the "disappearing" middle class will finally be a thing of the past. And - by so doing - a thousand other confusions can also be laid to rest.

Wednesday, August 21, 2013

"Fresh Starts" - Some Takeaways

Recently, Paul Graham was highlighted (HT Newmark's Door), and while he routinely writes great essays, in this particular one his main subject matter was...essays so I'll link it again here. One of the elements which stood out: people want to be surprised, and so they naturally seek out the things which surprise them. That line of thought also applies here, in terms of my not being sure where this little sequence of posts would take me, for in some ways they were a pleasant side trip down memory lane. But - and much more importantly - the element of surprise is what our institutions unfortunately tend to process out of their goals and missions.

People aren't convinced that growth and progress are still desirable, in part because too many institutions are invested in their self preservation above all else - something that doesn't mix well with surprises of any kind. It is tempting to believe that remaining "in place" by way of total predictability is both feasible and desirable. But, just as a plane needs momentum in order to stay airborne, people need continual momentum and new elements in their lives. In the same manner, their economies also need continual momentum so as not to fall back. That is the prime problem with excessive focus on credit in the present. Those who are invested in credit as primary, attempt to preserve already defined wealth by paring back the very momentum which makes it possible for economies to continue thriving.

The ways we envision our institutions at local levels, also affect how economies play out at larger levels. When our local institutions become insular and exclusive, the larger institutions of nations which reflect those local institutions, do the same. If all this were simply about the loss of new experiences and surprises, that would be one thing.  But it doesn't take long for people to rebel, to lose hope, to become angry and seek justice through their own interpretations as to what justice actually looks like.

How does a stalling economy play out in real life? For one thing, the pulling back on the part of institutions to protect themselves means reduced porosity between all of them, and consequently less interaction between all of us. At local levels, that tends to manifest in fewer observable areas of general public activity, something I especially thought of after a recent Yglesias post about outdoor areas (also a part of the inspiration for this little group of posts). However some nations are concerned about a growing tendency for their youth to remain behind closed doors, and indeed, being outdoors was once the way most of us met new friends and started new chapters in our lives.

Not so long ago, less insularity between institutions meant that people didn't think twice about sharing open spaces with one another. That, in turn, generally meant less need to be concerned about who would be standing or walking nearby. Automobiles, unfortunately, provided  means for institutions to become more closed off, for one could readily avoid interacting with other groups if they so desired. In real life that translated into mostly empty streets or heavily trafficked areas. What's more, those who continue to walk along streets without the benefit of transportation create uncertainly on the part of others, as to why they are actually there. Particularly in many areas of the southern U.S., people will drive even to designated walking paths, as being on foot in other areas sends out the "wrong" signal.

Before anyone can realistically hope for the mixed use settings and open environments which are once again being debated in some circles, greater openness between institutions also needs to be a part of the mix. Both the opera house and the macrobiotic center were - in any number of ways - open to all comers. Just as the opera house was a place where people from most any institution could come together, the center was a place where patients also freely mingled with those who were primarily health oriented or otherwise interested in alternative healing. What's more the center also emphasized a coming together of eastern and western cultures as well. The broadly representative nature of these groups, meant that those who participated were free to pursue other opportunities for connecting points and experiences.

The future communities we build need to give us real choices as to whether we want to strive for the signals of wealth, or whether we want respect and dignity in settings that see a small income with the same impartial glance as the large income. People need communities which encourage the skills and  knowledge use which actually matters - not just for consumption purposes or in hopes of catching the elusive job, but in everyday use with one another. In other words, we structure our environments so that people are encouraged to reach across their institutions, instead of hiding behind artificially imposed barriers.

We can create meeting places - outdoors and indoors, where multiple missions and cross fertilization of ideas are not just possible but everyday occurrences. Fewer mandates in life, more surprises. More spontaneous and planned time with one another so that we remember faces, names and what others actually enjoy doing. More "work" that feels like play. More broad smiles on the faces of those who take part in what have been overly solemn or serious rituals, and yet still choose to partake in them just because it feels good to do so. More "skipping" on the meandering sidewalk, to the next board meeting.

Tuesday, August 20, 2013

Midweek Market Monetarist Links and Summaries - 8/21/13

Yep, it's been one of those weeks where the reality of throttling back on growth around the world is settling in - with any number of takes on national turmoil to tell the story. Unfortunately it seems a crisis was a "perfectly good thing to waste" after all, in that far too many people remain convinced the best thing to do is just sit on one's hands. Apparently, some "lucky duckies" even get paid for doing so! Here in the U.S., few are encouraged by the fact that whoever follows Bernanke will likely not be as well versed in Great Depression studies, among other pertinent monetary policy issues. Anyway, here goes...

Yichuan Wang provided a thoughtful post this week:
"A Practitioner's Thoughts on Market Monetarism"
In comments at The Money Illusion, Scott Sumner pointed to an older post which dealt with this same topic, and also noted that it was more timely than ever:
"Fiscal multipliers are zero with inflation targeting central banks"

I agree wholeheartedly with Nick Rowe, that models which don't include money can portray a mixed up view of the world. In this post, Nick Rowe explains how New Keynesians really need the Pigou effect: provides a wrap of the recent discussion around the web, regarding the intellectual legacy of Milton Friedman, of which David Glasner has contributed further posts recently as well:

Market Monetarism - strictly speaking - is not about measuring the activity of banking, and yet banking activities greatly affect multiple aspects of economic activity in ways not even close to reconciliation or structural change. Here's two takes from the week which consider banking aspects. The post by Lars Christensen includes links for papers re banking and financial reform:
Also, this apt quote from Koning: "Whether there is a banking system or not in the picture will interfere in no way with a central banker's Archimedean lever."

Regarding the second link above, JPKoning was responding to this post in which Scott Sumner (also) explained to Cullen Roche in comments that banking is not a part of monetary policy:

Marcus Nunes takes note of the fact that Paul Krugman believes interest rates to be a good indicator of the stance of monetary policy:
In this post, Scott Sumner responds, and also lists ten possible indicators for monetary policy:

Update: Pardon the date glitch! I had a couple of issues yesterday with the Blogger format (or it had issues with me),  and at one point when I tried to back up, the program thought I'd given the command to publish an unfinished post. Also, I wanted to link to Ryan Avent this week, and this is one of those times when The Economist thinks I've hit my page view limit for the month.

Saturday, August 17, 2013

Macroeconomics is Real

Does this seemingly obvious element of life even need to be asserted? Apparently it does, because even as nations everywhere grapple with budgets and monetary concerns, there are those who insist that macroeconomics as a discipline is not real. Somewhat misguided in the present? Of course. Something to be done away with? Certainly not. As long as there are nations, and nations are in fact a part of the budget coordination and consideration of any group of people,  there are going to be economic issues which fall under the rubric of macroeconomics.

How could it possibly be any other way? And yet, people - quite often serious scholars who really should know better - try to insist that macroeconomics is not real. What's more, macroeconomics is monetary, as Marcus Nunes pointed out in this post as a reply to Robert Higgs. Monetarism matters now more than ever, because it continues to utilize a dynamic concept of economic thought which allows a focus on future potential.

Whereas older forms of monetarism often focused on the gold standard and other aspects of resource use which readily aligned with the standard, Market Monetarists now focus on aggregate spending as measured by the time elements of individual participants. This active conception of economic activity is presently missing from both Keynesian and Austrian thought, which both assign a greater role to credit allocation in the marketplace.

Sometimes we hear that nations are losing their "importance", a sentiment illustrated in discussion of growing state and local importance in economic affairs. However there are some serious concerns with that perspective, in that both state and local economies closely reflect the same valuations and definitions of resource use which nations have previously defined. That, in turn, continues to make local and state economies quite dependent on the national redistribution that such definitions all but made mandatory, even as states express unwillingness to go along with national programs as they are now evolving.

Protection of special interests - which make so much redistribution necessary to begin with - remains just as strong at local and state levels as it is at national levels. Keynesianism in turn is closely connected to those same redistribution patterns. Even as many on the hard right seek to deny the redistribution they rely on, they still offer practically no reflection as to what might take their place. The more that states attempt to deny federal aid because of the impositions it creates, the more class polarization they will experience from their own limitations to choice.

The point is not to negate national identity because it appears helplessly misguided, even if it presently does. Rather, the point is to find new avenues of economic intersection between local and national concerns which make sense.  Knowledge use and services need to be thought of in local terms of wealth creation, while scarce resources need to be able to utilize national coordination strategies, without the excess destruction of free markets which has been going on for so long.

How might local to national avenues of economic activity be reconstructed so that they actually work with one another, instead of fighting with and taking advantage of one another?  National and ongoing conversations in this regard are rapidly becoming necessary, and summits to make this possible really need to happen before the U.S. becomes more divided than ever. Too many people in the U.S. are invested in spreading blame, lies and even historical distortions now - activities which have to be turned around and soon, if in fact they are not going to escalate further.

What's more, macroeconomic realities need to reflect the rationale for realignment, rather than continuing to detract from the potential of realignment. If people are willing to utilize knowledge in more direct ways and establish understandable frameworks for doing so, governments can work with their own citizens to help them become more self sufficient. It would be far preferable to include such coordination strategies into monetary representation than to simply assign a bare minimum of money to people "at the bottom" who supposedly have no rational place in society. The longer government assumes it can take care of citizens when special interests are completely in the way, the more citizens become endangered as to the services they actually need.

Thursday, August 15, 2013

How Much Income is Actually Discretionary?

How much are our incomes actually affected by the ways governments define our economic lives? Turns out, quite a lot, for how else in an era of incredible productivity and technological gains, would we have ended up with a hollowed out middle class? This set of circumstances is something which - in terms of true productivity and freedom of knowledge use - never should have happened. The fact that it happened just the same, also means a lot more needs to be reassessed for monetary policy than is currently happening in Washington. What might be different, if the Fed targeted not the terms and dictates of bankers (for the mutual gain of government and finance), but rather the actual terms and capacity of our own economic participation?

While nominal targeting would not be able to account for supply side issues on its own (strictly speaking), it still has the capacity to affect and highlight many elements of aggregate spending which otherwise would not be noticed in the same context at all. That unique focus - in turn - makes it possible for a nominal targeting rule to hone in on some problems which are otherwise not as obvious for potential supply side reforms. For one thing, people are not used to thinking about monetary matters in terms of their own consumption or production capacity.

Thus, many have been lulled by the reassurances of too many policy makers who have indicated (each in their own way) that the public shouldn't have to "worry their little heads" about such things anyway. That is going to change - hopefully sooner rather than later. Governments don't have adequate incentive to be reasonable about monetary matters, until the public starts to understand how bureaucrats and special interests benefit from cloudy interpretations of monetary policy in the first place.

Even though nominal targeting would be less expansionary than other anchors in the event of "animal spirits", the incremental nature of a level target means greater economic stability, for lending and credit use have less of a chance to get out of control. The actual spending capacity of individual actors has a greater chance to be taken into account - both in terms of consumption potential and the degree of discretionary income that actually exists. Importantly, governments have usurped (through tight definitions of environment and knowledge use) far too much of the discretionary portion of income in recent decades.

However that appropriation isn't easy to directly associate with the struggles of the middle class, because it is so pervasive and hidden in private business formations which do not represent free markets at all. Indeed, the fact that government supported healthcare caved in to special interests of all kinds - when it was once mostly beholden to the interests of physicians - is a major part of why today's definition of healthcare no longer works.

What of the discretionary aspect of income that has been lost to building and construction interests? Even though Fannie and Freddie may become a part of the past, and rightly so, they were nonetheless a temporary bit player in the recent housing boom. The fact remains that numerous governments continue to benefit from restricted definitions of building environments for their tax base, as builders, local realtors and associated financiers continue to diminish other forms of economic activity.

While higher real estate valuations (than some homeowners or businesses would choose were efficient structures available) bring in more money for municipal governments, such a strategy is destabilizing over time because higher housing costs mean larger incomes and pensions are also necessary for city employees, and so the cycle continues. Businesses with their higher overhead and construction costs, cannot pay enough in turn to their employees to compensate housing costs for them. Cycles such as this which become more noticeable in recessionary times, also make it difficult for temporary measures in monetary policy (QE) to have the desired effect.

As Scott Sumner has often indicated, temporary expansions in the monetary base don't do anything in the sense of overall equilibrium, whereas permanent expansions have the capacity to do so (also the difference between QE and a level target). Every new or added on cost for the operations of local economies, means more money has to be printed just to keep a relative equilibrium. What's more, those costs become part of even more non discretionary spending. Which in turn means less discretionary spending than before on anyone's part, and discretionary spending is unfortunately the primary income which actually promotes the positive aspects of free markets.

Thus while a temporary expansion of the monetary base for of QE might not go far to begin with, it becomes even more constrained, given the circumstance of pre-existing requirements and definitions of spending that governments impose on their citizens. Every time another fee or tax is factored in, it needs to also be accounted for in the form of what should be a permanent addition to the monetary base, in order to not take away from other discretionary spending. But when that doesn't happen, more jobs are lost and more businesses closed.

Unfortunately this is not the way the public receives information as to what money the Fed actually needs to print. As a result, if NGDPLT is not adequately considered, more economic exclusion results as it becomes necessary to allocate monetary printing primarily for pre existing government created economic circumstance. Every additional government expense can further distort the equilibrium overall, if in fact these effects are not considered in their relation to the monetary base.

Wednesday, August 14, 2013

Midweek Market Monetarist Links and Summaries - 8/14/13

Lots of links and dialogue of late. Perhaps I should start with David Glasner's series of posts in which he tries to get at the heart of his own issues with Milton Friedman, as this debate continued at various blog sites through the week.

Here, Scott Sumner responds to the Krugman post which puts Friedman in an unfavorable light:
A Future Extended Footnote Kicks an Economic Giant
And then Scott Sumner responds to David Glasner regarding Friedman
Mr. Friedman and the Classics
Tyler Cowen takes issue with Krugman's interpretation of Friedman, and offers a series of helpful links in this Marginal Revolution post, as well:
How would monetarism have fared against the Great Depression?

Lots of disappointment this week in the UK, re the BoE and Mark Carney. Britmouse at Uneconomical did some thorough reporting, and also included this "roundup" with additional links and coverage: a follow up the next day:

Ryan Avent looks at the fact that Market Monetarism is still an unfinished revolution:
Scott Sumner offers some clarification for Ryan Avent's post:

Nick Rowe has certainly been "back in action" this week with some pertinent posts. I particularly liked the first one, where he knew there was no convincing his mother about inflation:

Bill Woolsey highlights Scott Sumner's article in the FT this week, along with the work by David and Christina Romer which explains the greatest mistakes by the Fed: the Great Depression, the Great Inflation and the Great Recession: Sumner on Summers

Two more, recently posted by Scott Sumner:
Money and libertarianism
And this is quite encouraging:
Other Fields are Taking Notice

Monday, August 12, 2013

Wealth Creation Through a Knowledge Centered Economy

What is actually missing from knowledge wealth in the present? How does one envision true growth in knowledge use in and across disciplines, when no one can be certain what areas would especially be affected by knowledge use rights? It would also take time to include such progress in today's definitions of wealth, without unduly antagonizing those who utilize knowledge primarily for upper income levels. The problem with present day knowledge use formations, is that they were not really designed to create the knowledge centered economy which people now need. This in turn prevents adequate representation of knowledge in the economy in a monetary sense.

Earlier methods of knowledge wealth capture have lost their regenerative capacity in recent decades, what with patent thickets and governments finding themselves needing to trim budgets for the services they were previously able to offer, especially in the 20th century. The larger problem - as services continue to be scaled back - is a loss of specific avenues of knowledge use planning and organization between public and private institutions, which consequently need to be envisioned in new ways.

Of course, one can still point to skills use capacity which still gets funded in some form or fashion, let alone the degree of knowledge actually required in any number of careers in both the public and private sectors. However, the fact remains that much knowledge today tends to be utilized in extractive and exclusive formations.  Knowledge presently serves the greater purpose of the organization, which may or may not produce an actual consumptive good for the public. Or - in the case of medicine and healthcare, the extractive burden is also imposed on the broader society, due to licensing requirements of extended education and limitations into the educational process itself.

Much of the actual economic interaction which once happened individual to individual needs to be restored, along with flexible and evolving concepts of services considered negotiable for actual needs. Plus, services need to be distinguished from the often impersonal product of the corporation - also delivered in impersonal environments which have had considerable psychological ramifications. Already, generations have grown up with numerous product which are not really "supposed" to be associated with personal or individual effort. Without the economic points of references which earlier generations had, youth in any number of nations struggle with social relationships to a greater degree than the generations before them. This is one vital area that a new knowledge centered economy especially needs to address.

As a result, it has become more difficult over time to utilized knowledge in the ways we actually need it to work, for us. It is commonplace to think that property rights need to be enforced, in order for such rights to even be relevant. How did we understand this with physical or real properties, and yet completely miss it with knowledge? Perhaps it is the fact that real property was there all along, but knowledge in the ways we think of it now, was not.  A big part of we think of as knowledge use "grew up" in institutions. That's why many find it difficult to imagine bringing knowledge out into the open now, to assist one another or to assist our governments as they struggle with today's limitations in societal coordination.

Before real value can be assigned to knowledge in an aggregate sense, we have to be able to understand how to tap into it directly, so as to activate services when institutions cannot, and activate negotiations and plans for resource use when our governments cannot. We also need to be able to utilize knowledge to begin anew in legal areas which are no longer truly addressable by the legal system as it now stands. But before we can do any of this, we have to assign property rights to knowledge use, as well as record and measure its use in time increments validated by the participants themselves. Presently, the most important work of our society is being left undone because it has become difficult for our institutions to hire individuals in the ways they are actually needed, either to help one another or to reach across the gridlock that has spread between institutions in many forms.

What are the monetary ramifications of such a restructuring over time? Even though it is difficult to imagine such knowledge use dispersal and rights in the beginning, ultimately to do so allows a far greater degree of wealth than which is actually possible in the present. What's more - where knowledge and skills sets and valuations are spread across populations to a far great degree, it also becomes easier to represent hard assets with such income (soft assets) in ways that are not forced to overstretch, in that all are actually engaged in wealth creation processes.

This simple fact of inclusion makes much of the governmental debt load for those left out of the process, largely unnecessary. When technology is allowed to innovate environments, not only does credit become a smaller factor in the economy overall, but the income to consumption ration becomes diminished in such a way that the illusion of poverty in the developed world would largely disappear. By making services skills immediate, many of the demographic issues of today would become less cumbersome as well. By shifting knowledge use in services to equal hour access, much of the economy would shift back to an active state, and flexible building components could readily reflect the flexible time arrangements which communities are able to arrange amongst themselves.

Ultimately, wealth is a combination of what we want it to be, what we need it to be, and what we imagine it could be. It becomes most active when we are inspired and break down the barriers to our own inspiration. In the long run, wealth can only rise to the degree that we are willing to take a chance on aggregate knowledge use. All of the assets that remain in our environment over time - all of the maintenance and care we are able to provide for them, depend on the degree to which we are willing to believe in our own self worth, our own participation and the creation of our own value in ways not just recognizable, but legitimately framed as well.

Wednesday, August 7, 2013

Midweek Market Monetarist Links and Summaries

This is the start of a new weekly feature for early Wednesday mornings, and any suggestions are certainly welcome - just leave a note in the comments (by Tuesday evening) if something has caught your attention. Mostly these links are a way for those presently busy with other things to "catch up", but it's also a chance for my readers not as familiar with Market Monetarism to take in some noteworthy blog posts, articles and other related items. While most of these particular posts will be happenings from the previous week, occasionally there'll be links to earlier items as well.

Scott Sumner says the real Summers/Yellen debate is about how monetary policy should steer the economy at the zero bound, and Matt Yglesias had an interesting take on that thought process:
Here's Scott's post:

Britmouse "sets Tyler Cowen straight", as to what the UK should be able to expect in terms of a recovery:

Those who caught my firefighter as arsonist post a few days back, know that I liked Lars Christensen's post which encouraged my own:

Marcus Nunes has links to two articles by Robert Hetzel, "Does Monetarism Retain Relevance?" and "ECB monetary policy in the recession".
Also, for those of us who would like to see Christy Romer get the job as Fed Chair, he lists some of her articles in this post:

David Beckworth spoke of Abenomics as a fulfillment of Milton Friedman's policy prescriptions on what would have been Friedman's 101st birthday.

Justin Irving (Economic Sophisms) has built a market-driven, intraday NGDP indicator at

George Selgin recently wrote an interesting historical paper, "The Rise and Fall of the Gold Standard of the United States".

Before wrapping up MM links for the week, I do have a request for Bill Woolsey: more blog posts please! Of course if you're on vacation right now, we understand. However Bill has not been completely "missing", as we've found any number of good comments from him at several blogs recently. Oh yes, I would be remiss if I don't ask: Mark Sadowski, when will you start your blog?

Tuesday, August 6, 2013

Do Local Economies Negate Comparative Advantage Over Time?

Presently, I'm just considering some of the correlations, because this is an area I'd like to return to and explore at some point. While it's hard to tell whether any of these musings might involve any "dreaded" causations, the effects over time of locked in market product definition are striking. Every day people are convinced they can't find a way to survive, when in fact the means of survival are everywhere around them - if not really arranged in very usable ways. Just the same, I have a little "stumbling in the dark" confusion about the apparently Keynesian notion of cost-push inflation. After looking at Wikipedia's definition, I groaned when I realized that monetarists don't believe in cost-push inflation and so add this to studies... Argh, some days I really wish I could actually think like a normal economist but there's no "hope" in that regard. As it is, all I can see is local economies unnecessarily adding to their costs and so I have to move forward with that for now.

However, the reason it feels necessary to explore this seemingly frightful area, is the fact that a growing consensus is essentially building on the left and the right, around the idea that imports hurt the U.S. Certainly the evening news has sounded rather protectionist for a long time. As a person who needs to be able to make a dollar stretch, and really appreciates the fact that low income countries often provide goods I can afford - "cheap" goods that local economies sometimes like to "hold their noses" over, all I can say is uh-oh. But let's look at some of the "evidence", as this latest article from Nancy Folbre at the NYT (could be gated) in "The Free Trade Blues" points out:
A growing body of research points to the adverse trade effects of lowered trade barriers on manufacturing workers and their communities. Whether or not the losses are beginning to outnumber the winners, free trade is increasing the economic distance between the two. Many economists continue to believe that increased foreign trade is a rising tide that will eventually lift all boats... 
Folbre adds that interpretations of trade theory now challenge the rising tide view, and cites a recent study (lots of options - YouTube link here). However, if this is true, here's my first thought: if indeed comparative advantage does not work as stated, what on earth does? For a dunce like myself, comparative advantage is about as basic as it gets. In a recent post I discussed the breakdown of the old consensus and why it is so hard for some on the left to be on the "losing" end - understandably so. But wishing the previous (political/social) consensus wouldn't go away - and then trying to block economic access to newer formations of production only makes things worse. Yes, there are lots of "holes" in the ocean bed that keep a rising tide from happening, but it's not the imports that are the problem.

For me, the "holes" exist in large part because of time utilization differences we create between ourselves at the most basic levels - which can never be correspondingly filled by one another's time as a result. Because we scramble to give our time to others and yet still come up with negative effects, we remain on a negative infinity path. We keep trying to rearrange wealth to fill the holes but because of the negative infinity, the tide never gets a chance to rise.

Also - in spite of myself - I have to follow the "get rid of international competition" to its logical conclusion: where, exactly, do we "draw the line" and happily revert back to "earlier" forms and times of production? Does that actually leave time for the pursuits of the mind, i.e. the most valuable aspect of all the creation of tangible wealth? Do we all discuss the mysteries of life while we sit on the porch stoop and shell the peas? While I enjoy "slow" production as much as anyone, and so leave time for it whenever possible, I have little doubt I would "chafe at the bit" if that became the primary life option left to me. Hint - whenever we want to go "back in time", something to consider first: aggregate realities of inclusivity.

Let's consider that aggravating hole filling problem. As long as older, more labor intensive definitions of manufacturing remained local, it was possible to fill many holes with this additional wealth. But as it slowly disappeared, local economies were faced with the need to maintain definitions of wealth as they had previously emerged, in order to continue funding services. The only way to do this - seemingly - was to take much of the negotiable or choice factor out of environment options to maintain an appropriate tax base. In the process, "productive" investment came to be identified more with passive forms of investment (the local mandates of Neanderthal low tech environment) and less with speculative investment, as before.

Just the same, those speculative investments (that often "heart" global cheap goods) tended more towards what was not government backed. Which also meant they didn't have the government inflated price tag: hence proved more dynamic than such "spurious" and "cavalier" spending might have seemed. This last thought is also a quick take on Jonathan Finegold's post on productive versus speculative investment, and my readers know that I often look at these in terms of passive (non tradable) goods or the active tradable goods of globalization. I also consider equal time service arbitrage as a potential active tradable good, instead of acting as a drag in its present passive role. Today, services are the mirror image of the much maligned, interest on reserve backed rendition of Neanderthal living and working environments.

Something important needs to be stressed about the broken consensus between the so called "makers and takers", icky though that phrase may be. They certainly are not happy with one another, these denizens of left and right, but they are still very much married to one another and do not really know how to break the chain. In their effort to maintain wealth as much of its dynamic aspects left for more affordable shores, they propped up even further the very environment that economic dynamism was forced to abandon. Through the valuations of the most engaged participants, the stage was set for the services that could flow from the agreed upon definition of wealth. IOR is in a sense the agreement, the "chain" between left and right, who forgot that dynamism was born of the efficiency that included the most economic actors possible.

Before wrapping up this post, I should add that I (somewhat) reluctantly supported interest on reserves initially as a stopgap solution. However, I believe that it needs to be phased out over time as local economies find ways to return to more sustainable and inclusive means of economic activity. That includes acknowledging the gains of  globalization (granted, not all financial was beneficial here...) where they actually exist - the creation of product which makes greater economic inclusion possible. To be able to phase IOR out over time would also make clear what the benefits of nominal targeting actually are. Without the overhang of IOR, one has a real chance to ascertain what different consumption paths between upper and lower income might actually consist of. Local economies would not only be able to follow through on new paths, they could once again embrace comparative advantage in the process of doing so.