Wrap Up For September '14

While this month's wrap up doesn't have any particular theme, there were plenty of links to gather over the course of the month, and I've included further observations where possible. I hope that all of my readers had an enjoyable September!

In the future, healthcare options will likely include local settings which do not always involve the compromise of expensive - and often distant - hospital stays of which family members can travel for only so often. That can only be a good thing, especially given that infection risk during hospital stays is only growing over time.
http://www.hngn.com/articles/41668/20140908/infection-risk-increases-each-day-hospitalisation.htm

An interesting perspective with this link, but I was reminded of the "spin factor" which Kevin Erdmann attributed to article headlines in last month's wrap up! Hence the given inequality framing can be misleading. Such framing seems to suggest Piketty "solutions" which only make it more difficult to envision coordination strategies for resource needs.
http://www.washingtonpost.com/business/economy/income-inequality-is-hurting-state-tax-revenue-report-says/2014/09/14/12f31a8c-3c59-11e4-b03f-de718edeb92f_story.html

Speaking of state monies...
http://taxfoundation.org/blog/how-high-are-sales-taxes-your-state

"Labor Market Fluidity and Economic Performance" by Davis and Haltiwanger,
http://www.kc.frb.org/publicat/sympos/2014/083014-1.pdf
From the abstract:

These results suggest that the U.S. economy faced serious impediments to high employment rates well before the Great Recession, and that sustained high employment is unlikely to return without restoring labor market fluidity.

Arnold Kling noted that Davis and Haltiwanger mostly offered speculations as to why this was the case. Indeed much of what has occurred in recent decades is anecdotal and dependent on a range of circumstance which vary depending on income and region. What I have experienced in terms of economic change, is often different from that which readers have observed, for instance.

State unemployment rates for August:
http://blogs.wsj.com/economics/2014/09/19/this-state-had-just-2-8-unemployment-in-august-heres-how-all-50-states-fared/?mod=marketbeat

As it turns out, some property rights are better than others - a thoughtful article from Eli Dourado:
http://theumlaut.com/2013/12/11/property-rights-versus-property-institutions/

It's good to see that skills sets are being emphasized for resumes now. That goes beyond some of the old definitions: The resume section that matters more than you think

Of course in terms of skills arbitrage for knowledge use systems, it would be helpful to emphasize both hard and soft skill sets. Along these same lines in coordinated community settings: expanded versions of one's resume might include personal non fiction library favorites for those who are interested in pursuing what the time arbitrageur has already explored. Good non fiction has a wealth of information that schools cannot be expected to provide. Another option for self promotion in these kinds of environments might include semester "meets" days in which varying groups can promote the kinds of skills sets they would like to utilize with others in the coming months.

Tim Ferguson of the Forbes staff called this a great step toward an "inclusive" economy.
http://www.forbes.com/sites/instituteforjustice/2014/09/22/texans-created-over-a-thousand-local-businesses-after-texas-eased-restrictions-on-selling-food-made-at-home/

One of the questions floating around this month came from Peter Thiel: What important truth do very few people agree with you on? Regular readers probably suspect my answer: Voluntary time use in aggregate can be tapped as a new and direct source of wealth. Because evenly matched time coordination needs no support from redistribution or production residuals, what had been fiscal activity is possible to achieve as monetary activity instead. No more austerity necessary...among other things!

I wouldn't be surprised if some aspects of local job opportunities play into this as well...
http://blogs.wsj.com/economics/2014/09/25/student-loan-defaults-vary-wildly-by-state/?mod=WSJBlog

Lots of survey results in this Neil Irwin post. Not all of them what people might expect:
http://www.nytimes.com/2014/09/24/upshot/americans-are-ok-with-big-business-its-business-lobbying-power-they-hate.html?ref=business&_r=0&abt=0002&abg=1

Tyler Cowen highlights an article from Vaclav Smil. Just think how important a scarcely thought about product like wood chips actually is. How Prominent are European renewables?

Limit Markets? Limit Longevity

Fortunately, longevity is attributable to many things besides what gets offered up in the "usual circles". Not so fortunate, are tight marketplace definitions which can limit prospects of longevity in aggregate - that is, not just the expectations of traditional healthcare by any means. Just the same, some who once aspired to a long life might be thinking twice - given that what today's healthcare marketplace has on offer is slowly shrinking. Some of my readers have probably given some thought this week, to Zeke Emmanuel's recent article regarding 75 as an optimal age.

Could we have expected any other result, than these slightly unsettling new public arguments to live and enjoy life while we can? Some baby boomers now try to hold out for what might be expensive healthcare needs while they wait for the eventual (?) Medicare coverage. Meanwhile, social security gets pushed to an "optimal" (?) age where some lower income levels can't expect to live long enough for late life "repairs". How did anyone expect to extend longevity in aggregate much further, while strict limitations on physician quantities - let alone knowledge use constraints on drugs of all kinds - continue to exist?

Plenty of folk shifted their priors somewhat, after reading Emmanuel's article. As for myself, there were lingering questions whether I was strong enough to engage in certain workplace environments were I to take the plunge and seek a city with low unemployment statistics (I know, only useful to a point). Of course the possibility of early social security exists since I just turned sixty. But...argh. Like many, I always imagined living a long and full life, which included the idea of delaying social security as long as possible.

Sure "live for now" is the kind of philosophy that can help anyone. Even so, I remain uncomfortable about experts making longevity decisions for everybody. Yes, my mother's last year was quite rough, after an extensive surgery and the ever hopeful prognosis which had gone with it. But I would not have questioned any of the decisions she made, to extend her life to the best degree she was able.

How to slowly back out of an intense end of life support paradigm without leaving a void? That's the problem, because little really exists in any organized capacity which could provide what so many of these older patients seek. Hence we'll probably get more rationale for further cutting back, with too little thought how new doors can open as old ones close. Indeed, healthcare decline "inevitability" is closely linked to today's "limits on growth" mindset . Some arguments include studies showing that while longevity gains have occurred, not necessarily so quality of life. So it's surprising - given our lousy physicians to population ratio - that decades of dialogue assumed populations would have "ever growing" longevity statistics.

What about the missing healthcare marketplace which once tended not only to the needs of the poor, but others as well? Don Boudreaux highlighted a quote by William Easterly which seems apt:

The rich have markets, the poor have bureaucrats.

For healthcare in the U.S., fortunately this has not always been the case. Before the bureaucrats became heavily involved in the 20th century, there were small town healers and other health advocates who were sought out not just by the poor, but also people from all walks of life if they believed those individuals could help them. When lines became long for these healers, it was because of the degree to which they were able to directly prove their worth to a public which responded in kind. Sure, a few charlatans were out there. But the same is true today.

A rich and diverse marketplace in health options once assisted the poor - along with everyone else - for as long as anyone could remember. Finally representatives of this marketplace were driven underground or out of business, only to have many of their knowledge and skills sets resurface in altered form - often decades later - in "exclusive" clinics and equally exclusive remedies. Lower income levels are today expected to rely on whatever the physician decides - or not - to provide for them instead. So treatment options tend to be all or nothing. All too often, earlier methods of less invasive healing are no longer available to them. As it turned out, when "real" healthcare came to town in the 20th century, that often erased the memories how locals gained good results through knowledge and resources in their own midst.

Bureaucrats not only defined what healthcare is supposed to be, they have limited the available marketplace by doing so. Think of a giant supermarket of health options which - in aggregate - has purposely turned itself into a small grocery store. Maybe it does not seem so yet, but insurance offerings see little choice. Bureaucratic healthcare was able to win the day because special interests convinced the public that entire shelves of goods are worthless, then get to decide among themselves afterward whether that is really the case. They handily won the game of "What do you know??" This Cato article about a squeezed marketplace was difficult to excerpt, as it is worth reading in its entirety:

Medicine is simply no longer the profession it one was. In 1970, the average income of general practitioners was $185,000 (in 2014 dollars) Today, even though doctors now see nearly twice as many patients as they did back then, the average physician income has fallen to just $161,000. At the same time, the average medical-school graduate now begins his career with more than $170,000 in debt...Existing government programs already reimburse physicians at rates that are often less than the actual costs of treating a patient. Estimates suggest that on average physicians are reimbursed at roughly 78 percent of costs in Medicare, and just 70 percent of costs in Medicaid.

Few aspects of life are more politically correct than what people still expect of healthcare. Politicians of all stripes have not really sought to change the basic structure, which now makes the art of healing something that can only be practiced by the few and the privileged. No one can expect populations to maintain healthcare markets for the long run, under such circumstances.

It's perfectly understandable that we gained medical schools which expected their graduates to go above and beyond, who were capable of meeting exceedingly high standards. Who would not want the work of these graduates when they are waiting on the operating table for an important surgery? There's just one problem. The United States built and continues to back an exclusive system, yet still expects every citizen to be able to take advantage of it when the time comes...

I respect the thought processes that went into this logic. However now it is time to move beyond them, and allow education for healthcare of all kinds to once again flower, for all income levels, for all places that people desire to live. It's time to quit insisting that all populations depend on extremely limited markets. These are environments which mostly burn out the ones who still attempt to provide services as if they were superhuman. Let people practice healthcare in the ways that make sense to them and to those who seek their help. If some desire to live to 100 or beyond, by all means allow them to do so.

Money Can Become What We Want it To Be

Why is this significant? Some insist that money is incapable of representing more positive aspects of our lives, but I suggest there has only been a lack of consensus to make it that way. All too often, money gets the blame for the degrees of economic separation which people have unwittingly imposed on one another. What if populations decided it would be worthwhile, to make money capable of representing human effort as a whole? It's not impossible to do so. There would be far fewer people on disability today, if the focus was on keeping them economically engaged, instead of sending them a check because they were deemed "unsuitable" for some workplaces.

There's little progress to be had by insisting that money is mostly a tool for credit and finance, particularly when much about life should be livable without loans as a necessity. What's more, central bankers are the last ones who should be treating finance as the center of the economic universe, given the need for monetary stability. As a result, entire populations have been told that economic growth must be put on hold, indefinitely. What about the millions of people who happened to be born at the "wrong" time?

The definition of money is not set in stone, by those who continue to define present day circumstance for the public. It's hard to convey just how important this fact really is. After all, economies are supposed to be about what everyone does with a major part of their lives and in the same context, so is money.

Once, it worked relatively well to externalize monetary concepts beyond the personal level, when commodities were primary in the economy. Certainly large governments have benefited from the largess of commodities. But as services have grown with the spread of knowledge across the globe, money needs to be more closely associated with the time that we engage with others in the use of knowledge at local levels. When it comes to time use, money also needs to be recognized as an internal concept also capable of coordinating with the exogenous reality of the world's tradable goods.

This needed shift is all the more relevant, given the fact that too many services remain on the fiscal side of national ledgers - especially indirectly - as healthcare has been in the U.S. As a result, services are being blunted at the very moment when populations seek them out as primary goods. In mature economies such as Japan, the fiscal aspect of services means further attempts to spur growth can't readily percolate throughout the entire economy. Even in the midst of Japan's revitalization efforts there is now a broken labor equilibrium which is difficult to mend.

Nations may ultimately resort to some form of guaranteed income plan, for those who struggle to find gainful employment. But what would it feel like to find out early on, that one must become resigned to a minimal life? Only think about what people would choose instead at a young age if they had the chance, while it was still possible to think clearly about such things. If they were told there was no real room for the challenges they would seek through work...would they rather take money for not working, or would they rather be paid for finding ways in which to purposely engage with one another? I imagine that most would choose the latter.

It's not always easy to connect what we enjoy about life with others in meaningful ways. But I continue to believe it makes more sense to create compensated systems where individuals explore the possibilities, than it does to pay individuals to wander down lonely paths no one else can share.

Over time I hope to be able to explain my posts more plainly, for I need to become more directly engaged with everyone in what is becoming a growing search for labor participation solutions. Perhaps I need to put some outlines together, so that readers are able to review these concepts quickly. I really needed to set aside working on the book aspects of this ongoing project until at least a thousand posts were written - this coming week makes 500. Part of what makes it difficult to explain quickly of course, is that these are not corner solutions. If only that were all that was needed!

Can Aggregate Time Use Become Productive...Again?

Lack of real participation in the economy as a whole, remains a primary problem for the people of many nations. As individuals slowly fall away from any representation other than limited consumer roles, countries now suffer the vagaries of primary (fossil fuel) commodity availability and related political circumstance. I know it's only the opinion of a blogger but still...the current political mess which is starting to build up, never should have happened in the first place. Rant time...

It is the mistake of many a nation, to refuse their citizens the right to take part in primary economic roles - particularly the important services roles of the 21st century. One often gets the impression that certain folk in high places believe that value lies anywhere other than the productive capacity of people. It has been the mistake of governments, countries and other assorted nimby factions to blithely assume all will be hunky dory, if anyone who does not "measure up" right out the gate can be left out of the process altogether.

Had it not been for these kinds of elitist assumptions and fierce denials of innovative options, citizens had the chance to build a reality which would not have included the kinds of problems that are now surfacing. Had it not been for power mongers of all stripes who wanted nothing to change, growth would not have been stopped in its tracks. Citizens could have built a world in which their input matters even more than the fossil fuels that nations so rely upon. After all, central bankers in the U.S. sent out a message that people didn't matter, when they shorted aggregate spending capacity just because of a spike in oil prices, and the Great Recession was the result.

The problems of the new secular stagnation could still be overcome, by allowing individuals to locally negotiate for production roles in the services capacities that are important to them. This is a stabilizing growth option which has the potential to return economies to the earlier growth trajectory, because it generates what has been a missing marketplace. No "perfect" form of political organization can really measure up to local systems of coordination. Today's institutions cannot make productive use of knowledge for needed services to the degree that local economies would be able, were they given the chance.

There's no getting around the fact that aggregate time use has not been considered as a source of productive value. Hence, much of time and educational investments are increasingly left out of the economic equation. Some nations continue to put their "extras" in prison, while other groups just keep killing off the undesirables who get in the way of the latest power grabs. As Rana Foroohar said recently of the U.S., "Something is very, very broken in our economy."

When economic representation (aggregate time use) was largely a matter of land management, people had natural connections to resources - hence ways to be productive on their own terms for the full length of their lives. To be sure, their productivity may not have appeared substantial to others but at least the connections with resources in their own environment had not been completely broken. Hence those existing options could often generate means for survival.

Whereas today, our productivity tends to be defined on the all or nothing terms of employment by others, or else it requires a consumer base capable of supporting overhead for self employment. Since agriculture was transformed in the 20th century, few have considered how important it is for all to remain productive based on their own interactions with given resource sets wherever they live. Today, the primary resource sets that institutions utilize are knowledge and people. Commodities of all kinds are - and should be - the frosting on the cake. Just the same, fiat money tiptoed toward the reality of human potential, only to back off as it became more difficult to use people as mere loan recipients.

The lack of resource use options in local environments is the critical missing component of today's economic systems. That missing element could be recreated by reimbursing local groups as they seek ways to assist one another, and remain economically viable for one another. What's more, education needs to back this process instead of working against it. And most importantly, these group efforts would need to be recognized for the direct source of wealth creation (through direct time use matching) that they would in fact create.

Economic systems such as these could provide new hope for the many places which continue to lose control of their destinies. Some places around the globe can scarcely afford to lose any more than they already have. New economic beginnings need to be defined on simple monetary and social terms that people can get behind and support. Such systems need to provide sufficient benefit to individuals so that all have a chance to develop the character which others also need, to lean upon.

Again, this post was one of those times when I had originally planned to write specifics re how people could learn to help one another locally. Except all of those notes got tossed, as I found myself drawn back into some of the important elements of the bigger picture. It's hard not to think about the primary issues right now, as negative world events continue to escalate.

Our time use - for all of us - has to be productive on monetary terms, if we are able to keep the very part of humanity which got us this far. Without the inclusion of our aggregate time use potential, it is hard to see how human capital will remain the catalyst for growth which it was so capable of, until the Great Recession. Do people still have the ability to build a better world? It's a question which all of us will need to respond to, if an affirmative answer is ever to be found.

Midweek Market Monetarist Links and Summaries - 9/24/14

At least it's not time to tighten...yet (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/09/17/economy-remains-under-the-considerable-time-umbrella/
The Fed was already overly concerned about price levels in 2008: http://thefaintofheart.wordpress.com/2014/09/18/four-years-and-things-havent-changed-much/
"What I'm arguing is that the big mistake of 2008...should not be allowed to fall into the 'bygone be bygone' category." Only think what 1.7 trillion dollars more could actually accomplish: http://thefaintofheart.wordpress.com/2014/09/23/some-bygones-should-not-be-left-alone/
This does not sound like it is going to end well...http://thefaintofheart.wordpress.com/2014/09/23/rbc-theory-ready-to-do-serious-damage-in-the-ez/
An Australian example: http://thefaintofheart.wordpress.com/2014/09/23/the-sorry-state-of-the-australian-economy-in-two-charts/

Lots of ideas...will anything "take"? (Benjamin Cole) http://thefaintofheart.wordpress.com/2014/09/20/serious-economists-are-everywhere-but-i-say-cut-fica-taxes-financed-by-qe/
http://thefaintofheart.wordpress.com/2014/09/24/use-me-a-modest-proposal-to-avoid-global-secular-economic-stagnation/

The Fed could make the same mistake with QE3 that it made with QE2 (Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2014/09/inflation-housing-qe-and-taper-in-august.html
Single unit real estate is still a problem: http://idiosyncraticwhisk.blogspot.com/2014/09/follow-up-on-august-inflation-etc.html

An odd headline from Yahoo (Scott Sumner) Readers of the Money Illusion are not confused
The FOMC has really suffered as a result: Yglesias on Obama's missed opportunity
Commenters debate the Scotland Vote: No!
Corner solutions are not optimal for either of these: Infrastructure or Entitlements? This was also a continuation of a discussion from post re Hong Kong at Econlog
"It was obvious from the beginning that Abenomics would both 'succeed' and 'fail': Twice is enough (and don't expect miracles)
Scott provides some clarification in this Econlog post: There is nothing tautological about market monetarism
Even though QE has helped, Japan exemplifies the fact that monetary policy needs assistance from combined efforts for structural change: Abenomics is doing better than I expected (shades of grey)

Is there a path in Nick's post which is capable of equilibrium? (David Glasner) http://uneasymoney.com/2014/09/17/nick-rowe-teaches-us-a-lot-about-apples-and-bananas/
The IS-LM model leaves no room for a process where expectations can be revised: http://uneasymoney.com/2014/09/21/krugman-on-minsky-is-lm-and-temporary-equilibrium/
A response to Krugman: http://uneasymoney.com/2014/09/23/temporary-equilibrium-one-more-time/

If Nick Rowe were an orthodox New Keynesian... http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/the-orthodox-new-keynesian-position-on-liquidity-preference-vs-loanable-funds.html
For a while, people made jokes about having to eat squirrels: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/how-scared-of-deflation-were-you-in-2008.html
At least Old Keynesians and Old Monetarists had a story... http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/inventories-of-goods-and-money-si-again.html

A declaration of...peace? (Bonnie Carr) http://dajeeps.wordpress.com/2014/09/18/the-feds-exit-strategy-fact-or-speculation/
Take our good moments where we can get them! http://dajeeps.wordpress.com/2014/09/22/pinch-me-charles-plosser-to-retire-effective-march-1st/

Monetary offset makes the difference (David Beckworth) http://macromarketmusings.blogspot.com/2014/09/the-love-affair-conservatives-should-be.html

Lars Christensen responds to the post by Greg Mankiw: http://marketmonetarist.com/2014/09/18/the-mankiw-darda-rule-tells-the-fed-to-wait-a-bit-with-hikes/
Lars finds some inspiration from Krugman and Mankiw: http://marketmonetarist.com/2014/09/20/there-is-no-bond-market-bubble/

Josh Hendrickson responds to a recent article from Mark Thoma: http://everydayecon.wordpress.com/2014/09/23/what-do-we-want-out-of-macroeconomics/

James Caton begins a series on nominal income targeting and free banking: http://moneymarketsandmisperceptions.blogspot.com/2014/09/two-roads-nominal-income-targeting-and.html

NGDPLT is the best way to avoid fiscal austerity (Britmouse) http://uneconomical.wordpress.com/2014/09/24/austerity-forever-or-4-inflation-your-choice-britain/

From the Minneapolis Fed, an interview with Michael Woodford: http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=5379&&

For Better or Worse: Born an American

In the early seventies, to be an American was to still be full of hope. Those bright expectations for the future were everywhere evident on the campus of Sam Houston State University, during my initial college days. And yet, some of what we wanted to accomplish was inextricably tied to the past. Those expectations for the future remained linked to earlier realities...

For instance, many music students "pined" for music which once existed in a world quite different from our own: the classical music which often represented "frivolous" projects on the part of royalty and the elite of earlier times. To a music student's way of thinking, classical music could feel more "evolved" than the music of the present. Of course a similar complaint has been lodged by baby boomers such as myself, about the music which followed that of the seventies and eighties! Fortunately, "frivolities" on the part of royalty remain with us today, caught as they are in the artwork and earlier music from the Old World.

Something about the love for classical music (on the part of music students), could be likened to a hidden desire for the old homelands of one's forebears. I once dreamed of flying (and dancing in the air) above an old warehouse full of the keyboards from Beethoven's time. Had a degree in music composition become a reality for me, the result probably would have been lots of modern day versions of Beethoven wannabee piano sonatas.

Consequently, it seems unusual that the symphony which stood out most in my mind during those college years, had little to do with sentimental concepts about the Old World, at all. Instead, someone "grabbed my arm" (and the arm of countless others) and said "Look at this". THIS is what's been happening in the world of the more recent present. Wow! In a single musical stroke, Antonin Dvorak generated a unique musical memento for the new realities starting to take shape, during the later years of his life when he lived in the U.S.

One might say that Dvorak made many of us proud to be Americans, by emphasizing in the most dramatic way possible, the feel of what was actually going on, through the New World Symphony. He was in a unique position to paint the reaction of all citizens to modernity, for he had aptly represented the folk music of the Old World as well. Dvorak was able to express - in musical form - the broadening economic horizon which was beginning to embrace not just the elite and the fortunate, but populations as a whole.

As a result, he could interpret not only the excitement of the new economic dynamism, but also the comforts and fears which resulted from the inevitable aftermath of creative destruction. This is why the template of Dvorak's New World Symphony provided such a rich mother lode for the American music which was to follow. It turned out to be one of those rare pieces of music which provides a centering point for individuals from all walks of life.

Perhaps most importantly: this still relevant piece of music manages to convey - in the space of  just under 43 minutes - more about the earlier economic dynamism of my country, than many a formulated school history textbook was ever able to describe. Fortunately, the New World Symphony provided a brief time capsule, for those of us who didn't experience firsthand what those tumultuous times must have felt like. Often, we never really know where our more valuable lessons about life might actually come from.

Monopoly and Competition: What Works?

While the post title certainly has few "ready made" answers, the issue is nonetheless thought provoking. Shane Parrish in this post, takes a look at Peter Thiel's views about monopoly and competition in Thiel's latest book. My post also serves as a response to the summary which Shane Parrish provides, where he stresses that progress comes from monopoly, not competition. I don't completely agree.

Even though growth results from new perimeters which monopolies can make possible, monopolies are not always capable of providing full marketplace representation, no matter how viable they become as companies. Whereas competition attempts to generate growth through more inclusive - if marginal - means. Hence, competition at the margins needs greater overall support, in order for long term growth to reach full economic potential. Seeking means for more diversified competition would benefit cities, but doing so would particularly bring smaller communities back to life.

For instance: monopolies tend to define particular sets of infrastructure, which is why it's easy to see them as representative of progress or disruption - take your pick.  When do new monopolistic formations apply to regions as a whole? Are new monopolies capable of generating perimeters which extend well beyond that of the old boundaries? Consider the new taxi companies of the present, and the degree to which they are being limited in some major cities.

New taxi companies could vastly improve the marketplace in places which already face limitations in taxi services. However as far as I can tell, these services are primarily challenging preexisting structures in already diverse economies. In these instances, new monopolies might reduce costs without substantially increasing the size of the marketplace. That is a limited definition of progress. Done right, competitive environments sometimes have equal or greater capacity to generate growth and continued progress than monopolies.

Competition needs to be structured so that it is once again capable of flourishing at local levels. Anyone who has spent any amount of time in small towns, knows how limited their job markets really have become in recent decades. One way to think about this is to consider the means by which monopolies and competition might work better, than they presently do.

If a local economy could be likened to a tree, local monopolies might serve as "trunks", whereas local competition would become "branches" which carry economic activity beyond the certainty of infrastructure. Whereas trunks provide means by which to live one's life, the branches are the components which give life greater meaning, which is why they (competition) deserve our support in spite of their economically marginal nature.

The more basic functions of local monopolies (particularly land and building components) could be broken into more diverse components and widely held. The more trunks at the outset, the more branches will also become possible. Also, the more that local investment is dispersed through the trunks, the less problematic that local branches will be. In a sense, their primary purpose is to preserve economic diversity, social viability and identity.

Trunk "shares" in this instance are more practical than today's traditional building options for home or work, because holding shares in building components would provide economic autonomy for individuals as a whole. This in turn allows individuals to generate more meaningful contracts with their own communities over the course of a lifetime, whatever the personal circumstance of families might be.

Consider the restaurant model, which has faltered in many places which do not have enough local citizens to keep restaurants open. Part of the problem in this regard is the way the overhead is automatically structured for those who want to take part. Not enough locals want to eat out on an ongoing basis to keep a restaurant with a specific menu up and running. As a result, those who reach out to the public are forced to invest and work overtime for small odds of success.

How so? In order to pay the overhead, restaurants often need to stay open seven days a week. However, the response on the part of locals may simply be to stay home and cook their own meals (yes I've heard these discussions). They like the restaurant but it gets boring eating from the same menu that often. While eating at home is an understandable response, it means less economic choice and flexibility, and fewer occasions when neighbors are likely to even see one another in public. It can also mean a town remains or becomes a sleepy backwater - often unnecessarily!

In order to recreate Main Street, the marketplace needs to overcome these competition shortcomings at local levels. That means creating viable community spaces for shared competition, which can provide meaning for all local citizens. These forms of flexible investment could be coordinated by local entrepreneurs and citizens alike.  Even in small population densities, the economic variety which people naturally crave would continue to be possible.

Changing the Debt Equation

Complex debt issues have become a fact of life for both governments and individuals. Some formations in this regard aren't problematic, whereas other debt structures are aligned in ways that are not conducive to long term strategies. How to tell the difference? So long as government debt is acquired for circumstance with definite start to finish timelines. it remains amenable to the resource windfalls which can eventually whittle away past obligations.

However, when debt obligations become permanent in terms of provisions for retirement needs and expansive operating expenses, they can become problematic. That is particularly true, when debt is associated with aggregate time use negatives in populations which result from service structures. When too much government debt is forced to compensate for low skills valuations, it becomes difficult to detect the points where obligations can't be met through normal resource means.

Many primary debt formations are closely related to the non tradable equilibrium which represents assets to services flows. What's more, the real catch-22 for government debt loads is the lack of incentive for today's services structures to reform from the inside. For government, changing the debt equation means being able to adjust some services formations where they become capable of generating wealth directly, instead of through redistribution and production residuals.

For now, resistance to change on the part of special interests has also resulted in a backlash from the left. Calls for a debt jubilee on the part of the Occupy movement, are in a sense a reaction to the government generated equilibrium between asset and service formations. As Kevin Erdmann noted, the jubilee concept is conservative in the sense it seeks to preserve institutional formations as they have already existed. Of course the paradox is that much of the loan forgiveness would extend to portions of the marketplace (education and healthcare) which never had a chance to develop in free market terms in the twentieth century.

How to think about debt obligations in terms of family formation? It depends on income levels. While higher incomes can lose time use efficiency, particularly through tight definitions in asset formation (housing), debt related problems for low incomes tend to manifest as income deficiencies. Hence in debt based terms, the real scarcity tends to manifest in income among the poor, much as the same mechanism manifests in a lack of time for those with greater income. Timothy Taylor notes the similarity of higher and lower income response to this factor:

If you compare my own behavior in living deadline to deadline under a shortage of time, and the behavior of a low income person in living check to check with a shortage of income, some of the patterns look much the same.

This has bearing as to why so called "excess" debt structures are not obvious in terms of aggregate resource valuation. It makes little sense to insist on arbitrary divisions of resource use - for instance - which condemn individuals to live their lives within extremely limited social contexts. This is important if only for health reasons, in the sense that a life of solitude can decrease life expectancy to a greater degree than either smoking or obesity.

Hence, it can be difficult to disentangle what is necessary for anyone, from what may be construed as hedonic in measures of lifestyle gains. When we are forced to think about practical decisions for resource use, it makes more sense to consider one's time use perspective first. Otherwise, the arbitrary nature of hedonic measurement - enlightening though it may be in some respects, might not clarify societal needs. Also, it can be helpful to look at time use obligations for producer/consumer options at all income levels, so that changing the debt equation becomes possible in ways that all income levels have a chance to benefit.

For a low income family, government gains in the form of housing asset flows can sometimes be the family's loss, in that little is left for other necessities of life.  Mortgage and installment debt for families in the bottom quartile are far greater than credit card debt, for instance. Natalie Scholl's chart illustrating the leverage ratio of the poorest families, is a good indication that irresponsibility may be a smaller factor than it seems - particularly given the fact that installment debt is often necessarily to finance the car that gets one to their work destination.

If individuals are willing to commit to responsible processes more than they are given credit for, how can this be parlayed into constructive structural change? Many options exist at local levels to do so: if not where people live and work now, in new decentralized settings which can generate local investments to keep economic dependence on distant governments and cities to a minimum.

Not every city wants to take part in the methods that change debt equations, and understandably so. For instance, a news report on tiny houses came with a disclaimer from Austin, that structures such as this would be considered viable! I would have been quite surprised, had the news report been otherwise. Just the same, more cities and towns will find it in their best interests in the future, to seek new ways in which to change the debt equation.

Midweek Market Monetarist Links and Summaries - 9/17/14

You still want to talk about inflation? Okay...let's talk cars (Scott Sumner) The Great Inflation
At least the U.S. accounts for hedonics in its measurements...Further thoughts on "inflation"
Williamson's error is easier to forgive than the conventional wisdom "which views low interest rates as easy money" Williamson on monetary policy and interest rates
They have too much momentum to be losing ground now: China is still reforming
From Econlog Once again, tight money is the Achilles heel of the right

Nick Rowe and David Glasner agree that Walras' Law doesn't work but after that it gets confusing... http://uneasymoney.com/2014/09/11/nick-rowe-on-money-and-coordination-failures/
Scott Sumner asks David what is being differentiated, re the excess demand for money
And, http://uneasymoney.com/2014/09/14/responding-to-scott-sumner/

A response from Nick Rowe for David and Brad: non monetary shocks can still cause a monetary coordination failure: http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/whats-special-about-monetary-coordination-failures.html
How to think about differences between countries? http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/09/open-borders-for-land-too.html

When the specter of inflation destroys commitment (Marcus Nunes) http://thefaintofheart.wordpress.com/2014/09/10/many-still-believe-the-great-recession-was-the-result-of-a-modeling-error/

Who will step on the elevator next? (Benjamin Cole) http://thefaintofheart.wordpress.com/2014/09/14/elevator-qe/
History gets revised! http://thefaintofheart.wordpress.com/2014/09/16/a-long-ago-and-forgotten-episode-of-qe-the-fed-money-financed-uncle-sam-ious-in-late-1960s/

Their growth trajectory continues to flatline (Lars Christensen) http://marketmonetarist.com/2014/09/11/end-europes-deflationary-mess-with-a-4-nominal-gdp-level-target/
There has been a correlation between the dollar and the NGDP gap in the past five years: http://marketmonetarist.com/2014/09/13/the-feds-un-announced-4-ngdp-target-was-introduced-already-in-july-2009/
Scott Sumner responds to Lars: Level vs growth rate targeting
And, http://marketmonetarist.com/2014/09/13/certainly-not-perfect-but-fed-policy-is-not-worse-than-during-the-great-moderation-an-answer-to-scott-sumner/
Lars explains the Mankiw rule: http://marketmonetarist.com/2014/09/16/mankiw-rule-tells-the-fed-to-tighten/

"UK macro is really quite boring at the moment, and I cannot be happier to report that news." (Britmouse) http://uneconomical.wordpress.com/2014/09/12/the-creditable-dullness-of-being-mark-carney/

Bill Woolsey responds to the 4% post by Lars: The Fed's new 4% target

(James Caton) Endogenous credit creation and nominal income targeting: in defense of nominal income level targeting   Bill Woolsey also responds to Caton's post.
(Caton) Lesson of the gold standard: The central bank should target nominal income - revisions to my latest paper

This post includes a "cute" robot that a farmer would find most helpful...(Kevin Erdmann) http://idiosyncraticwhisk.blogspot.com/2014/09/the-new-economy.html
A thoughtful post about Jubilee: http://idiosyncraticwhisk.blogspot.com/2014/09/jubilee-is-most-conservative-economic.html

Also of interest:

U.S. has the 32nd most competitive tax code out of 34 advanced countries (James Pethokoukis)

Poverty has changed little since the Great Recession

Where is the Foundation? (A Response for Lars)

Does a reasonable argument for an undeclared nominal target already exist, tucked away within the corridors of central banking? Certainly, market monetarists could hope so. Perhaps the logic has really been there all along since the Great Recession and we just didn't realize it. Recent posts from Lars Christensen suggest that the present level target of 4% could be purposeful along those lines. More importantly, he reaffirmed his belief that we need to let bygones be bygones, thereby accepting both the lower output and the growth path which has resulted since the Great Recession.

Regular readers know that I'm not convinced. Not only do I feel that the present (unannounced) level target is too low by at least a percent, but I also believe it is a poor strategy for the Fed to give up on lost output. Who exactly took the vote...in which we all gave up on future growth? In this response for Lars, my first concern (and that of others as well) is whether market monetarists can rely upon the seeming "goodwill" of the Fed to maintain a steady level nominal target. Even if the Fed has inadvertently done since 2009, to a relative degree.

Of course it helps to remember that an approximation of said target, versus a well voiced commitment to a steady nominal level, are far and away not the same thing. If one was to think of this "fortunate" reality more concretely, it's not at all clear that the Fed is very enthusiastic about the implied relationship with market monetarist expectations. If it was, not only would a potential nominal target rule be under active discussion, the Fed would also make that clear to the public as well. Sometimes I wonder whether the public will eventually convince the Fed of the importance of a nominal target, instead of the other way around.

As a result, little about the hopeful assumption on Lar's part really feels solid. Granted, to outsiders the U.S. can appear economically healthy compared to other countries, but many of the positive statistics are coming from cities of which economic circumstance are quite different from the country as as whole. In the U.S., the Great Recession should have been a strong signal for our governments and business interests to get their acts together and overcome the obstacles which stand in the way of innovation and the potential of a digital age. Instead, we have been subjected to moral stories about finance over and over again, as if our economic lives are somehow supposed to consist of little else than bank loans.

Hence, should we rely on hopeful assessments? Or will the first sign of high winds (i.e. the next really negative supply shock) send central bankers running for cover, once again? Supply side issues concerning Obamacare are one thing, as frustrating as they are. However, a primary concern is whether the Fed believes that certain commodities are worth a lot more than the economic participation of actual human beings. Unfortunately, I suspect this still holds true. How does anyone know that central bankers will not overreact again, should oil prices suddenly spike?

Without a level targeting rule in place, it's difficult to assume anything! But if one is willing to settle for "comforting" numbers in the meantime, how exactly does that improve the chances of gaining a rule for a nominal target? In the meantime the Fed continues to take on roles which imply it is capable of doing much more than its assignment actually allows. Even though the Fed concentrates on aggregate demand issues, it spends quite a lot of time debating and studying supply side issues - whether or not it is not in a direct position to do anything about them.

Worse, no one else is in a position either, to be responsible for the supply side problems which continue to create economic gridlock in the present. In spite of ongoing papers which continue to get churned out regarding both demand and supply side conditions, no one is preparing to take real constructive action on supply side aspects of this work as far as I can tell. If they were, we would not have already "gotten the memo" that real growth is out of the question.The problem for both the Fed and the U.S. government is that too many special interests have become highly resistant to needed change. The only way to circumvent the resistance is to begin the process of experimentation around the edges. This needs to happen before the possibility of greater growth in the near future is completely ruled out.

The Fed needs to do its part to break the logjam between government and business interests, instead of contributing to it. This is what worries me most about any praise for the Fed, even though I do not judge them as harshly as I once did. There is a chance that praise for them now, will only be interpreted as an "all clear" signal to move ahead as though everything is back to normal...when it clearly is not. What is problematic for market monetarists is that the Fed is still working from a perspective which lines up with the needs and expectations of finance, rather than the public as a whole.

In short, this is no time to declare victory. Not only is the present growth trajectory far short of its potential, but the purpose and intent of a nominal target is not yet obvious to the public, as a true source of monetary stability. As long as people associate money with financial concerns instead of the reality of their economic lives, not much can change. One only hopes if and when a nominal targeting rule is finally adopted, that its adoption will be associated with success and renewed prosperity, rather than the lack of it. There is still much work to be done.

A Double Coincidence of Medium of Account

Yup, I didn't exactly make that clear in yesterday's post: new community "starts" would also rely on a local medium of account. It would represent time capacity separately for a monetarily compensated and aggregated base, whereas the primary monetary medium of account exists in normal economic context. This (still quite imaginary) reality of a double coincidence would exist for communities or local areas which would want to start fresh in economic terms. So how does one juggle the idea of money as central to the economy, while aggregate time use also holds a central function?

Aggregate time use would create a base in the form of a startup or entry (wealth creation) function, which then connects to local resource and investment potential. This is a better form of economic integration, than the base function a guaranteed income would provide for inadequate labor force participation.  Any form of guaranteed income is a static response, hence problematic in that it remains incapable of adaptation to constantly changing supply side conditions. One might say life isn't "fun", when populations end up arguing for improvements of underrepresented constituencies on their "behalf". What's more, this form of compassion does little to improve unresolved supply side issues.

Okay, the above paragraph also includes an idea why I believe a double coincidence of medium of account would be worth the bother. Time use aggregates allow producer and consumer functions at individual and local levels which are otherwise not possible. Instead of a static afterthought of an income base, create a dynamic time use base. The (parallel) medium of account function provides a direct monetary anchor for what otherwise does not always appear as monetary activity - given the barter aspect of coordinated time use. When I titled this post, a quick look at Wikipedia made me recognize my post title as an attempt to solve a double coincidence of wants:

The coincidence of wants problem...is an important category of transaction costs that impose severe limitations on economies lacking money and thus dominated by barter or other in-kind transactions.

Wait...what? This description is quite useful but our problem is not for want of money - it's for want of time. There's plenty of money to be had for overall resource representation, and yet it continues to exist in tight monetary conditions in that time is not well represented. Small wonder these discussions can get so confusing. Hence my suggestions for coordinated time arbitrage alongside the production residual which provides abundant money...if somehow inexplicably limited output, as recent blog "battles" can attest. It's difficult to imagine aggregate time constraints as a central factor in all of this. And understandably so, because most individuals who participate in these dialogues already receive adequate time compensation though additional resource aggregates.

Once and for all: I need to disassociate the idea of time use or skills arbitrage from barter in general. What's more, that holds true either in terms of time or resource use. The above linked Wikipedia source explains a bit of the friction involved, particularly in resources or commodities separate from time:

In-kind transactions have several limitations,  most notably timing constraints. If you wish to trade fruit for wheat, you can only do this when the fruit and wheat are both available at the same time and place...

Fortunately, this is the kind of constraint that pricing mechanisms have overcome so well for goods and commodities. On the other hand, service functions have suffered in that we attempt to provide them by generating time use negatives (gross skills devalue) within aggregate settings. In some circumstance, surplus resources (and the money which represents them) are capable of substituting for unnecessary time deficiencies.

Often however, not so much. Since the Great Recession, resource substitutions for aggregate time loss are less effective, hence the painful pullback in output potential. Monetary policy could have maintained output on a steady trajectory in 2008. Instead, the Fed and other central bankers strongly overreacted to a general perception that it is impossible to reconfigure the services supply side, for continued growth in the long term.

Growing use of a double medium of account, could eventually recapture the earlier growth trajectory. What's more, accounting for time use in a direct monetary sense (even in limited scenarios) can shift pubic perception regarding time use as central to monetary representation. This is important within the context of income or wage targeting. Over time, the resultant increase in production/output, would give impetus to real GDP formation that could eventually close the output gap and give further credence to the option of a nominal targeting rule.

How might one consider the possibility of inflation in the interim, as knowledge use systems gain public acceptance and start to multiply?  Chances are, this would not be problematic, because monetary compensation for time arbitrage is more direct than the open market operations which have attempted to compensate for inadequate labor force participation. As time arbitrage becomes integrated into the overall economy, greater demand alongside further asset formation would follow. While various forms of guaranteed income (on the other hand) could provide economic "relief" they would not be capable of integration at this level.

Let's consider some long run implications of time use arbitrage. Perhaps the most important is that a growing use of time arbitrage would make it possible to shift economies toward time use and knowledge use as primary wealth. This is particularly important in the face of gradually declining fossil fuel consumption, for time use aggregates also mean the capacity to reach economic goals in smaller population densities. The creation of high density knowledge use environments is a step in the right direction, to maintain a strong GDP growth trajectory, well into the future.

What about the sticky wages aspect? In a short term sense, time arbitrage appears as though a partial solution for sticky wages but this is understandably a tough selling point. Time use arbitrage is likely not for most individuals who have a good chance of turning an expensive college degree into a well paid career. Rather, those at the margin in income based terms would have greater incentive to seek alternative economic strategies.

What happens if these new economies become prosperous over time? Their compensated time use base becomes more substantial, thus new entries into these original formations become more limited - just like today's existing desirable cities which can only take so many comers. The solution is generating further knowledge use economies which work towards the same forms of prosperous maturity. One could imagine a long term scenario for some new communities, in which local production becomes so substantial that even the local time use base approaches median income levels. A time use medium of account acts as starter fuel for new communities, where others have already matured.

Last but not least I need to explain why I have gradually moved from the definition of skills arbitrage towards time arbitrage. Certainly, the arbitrage of skills sets - as composites of education, local production aggregates and life experience, are primary. However, skills sets are but a medium of exchange within a potential medium of account framework. Community based time optimization seeks to provide greater value for skills sets than they might realize in today's institutional settings. That is, communities would seek to build a greater medium of account, through the medium of exchange which skills sets can offer. This is why I have gradually moved the framing of skills arbitrage towards a time arbitrage, medium of account framework.

More Thoughts on Inflation

Inflation is such a tricky subject to discuss, in part because as a term it is too broad and difficult to explain. Some of the latest "fallout" continues because of a recent post from David Glasner, which highlighted continuing resistance to inflation as means to grow the economy. For the benefit of the population in general, it would greatly help to discuss monetary policy in terms of total spending capacity. Unfortunately, there are plenty of reasons why this has not happened. Many individuals and constituencies alike remain convinced that finance is central to monetary activity, when in fact it is an important but peripheral component.

Another problem for me: in my last post - I complained about housing inflation and perhaps sounded a lot more Austrian than I actually am. And too many internet Austrians simply use the plight of the poor as another excuse for further restricting monetary flows. I would not want to see aggregate spending capacity reduced because of housing prices. Local property values always represent a confluence of local aggregated time use value, local resource use representation and geographic identities within economic contexts.

For anyone with a relatively "normal" income, i.e. full time and approximately middle class, housing is no more of a problem than it has ever been. That is, unless one seeks to live in cities which are limited by their geographic desirability which is altogether another aspect of the marketplace. Much of the discussion online takes place about these realities, rather then the lower or no income reality I continue to highlight on this blog.

Where problems exist in housing based terms are at the margins: individuals who have no income at all and no government support, individuals with less than full time work at low wages, and individuals who make minimum wage. These are the three areas in which for the most part, one either lives with family through necessity, rents a room, or ends up homeless on the street. Unfortunately, this is not generally discussed in depth online, because most bloggers have little direct contact with this reality, and few commenters for that matter as well. Hence discussion about poverty tends to take place mostly in a political context which is not the same at all.

Were it just a matter of individuals in these circumstance, perhaps my concerns would not represent such a big deal. What I sought to get across in yesterday's post is that many communities are also having problems which are directly related to these margins as well. That makes many communities in the U.S. progressively more dysfunctional with the course of time. Many municipalities are simply not prepared for the lower end of income realities. They need to just say no, to the kinds of regulations which only make things worse and stand in the way of these individuals maintaining full ability to participate and remain responsible citizens. No municipality can expect to survive for any length of time by benefiting from the poverty of their citizens, as some are presently attempting to do.

What concerns me now as an advocate for continued economic growth and prosperity, is too many citizens remain convinced that prosperity is only possible through financial means. This is why I have such a problem with inflation as central to the conversation, because the dialogue becomes controlled to such a degree that no one can even imagine a role for aggregate spending capacity. From day one of this blog, I have emphasized the nominal target as representative of our time, because otherwise there is no way for the general public to make a real association with the value of money as important to their own destiny.

If no one can see the value of their time in association with money, no one can see the value of their interaction with resource use as central to economic activity, either. These images need to be uppermost within the context of aggregate spending capacity. Time is growing short, and we can ill afford the very definition of money value to be stripped away by financial interests. Even though my perspective scarcely makes sense to any more than a few in the present, I will continue in my efforts as long as I can.

Who Wants Inflation?

Today it occurred to me after a recent spate of posts regarding inflation, that something about housing and healthcare appear to be different from the rest of us. Hmm...do they "like" inflation? Okay that's a little sarcastic, but...you betcha! Of course those special interests don't need to publicly "fess up", for it's not difficult to see where their demands only serve to dampen other existing demands in the marketplace. Still, their claims on the economy affect overall spending capacity. Growth is limited in part to their terms of definition, even as the rest of the economy is expected to remain on indeterminate hold.

In this context, one might say that real estate and healthcare interests not only "want" inflation, they'll continue to get it. But what a paradox this sets up for everyone else, as finance structures remain heavily weighted with these existing realities.

This post mostly serves as a way to wrap my head around some issues which have puzzled me for a while. Why should the positional advantages of these non tradable sectors continue to stand in the way of progress? To what degree will they continue to affect political realities regarding aggregate spending and the potential of income or wage targets? Only consider that Americans expect to continue to spend more on housing and healthcare as wages remain flat. How does this square with the future trajectory of consumption patterns, particularly as populations seek greater "person to robot" representation in an automated economy?

Governments continue to throttle back growth, in part because no one is in a position to implement needed changes in supply side structures which could lead to innovation and progress on more balanced and inclusive terms. Such implementation needs to take place across a wide spectrum. In the meantime, economists are realizing that further monetary printing has fewer advocates by the day. David Glasner noted in a recent post that economists have viewed inflation skeptically for quite some time. Err,"warm fuzzies" over a "reasonable" number? Oh well. Keynes favored price stabilization. While Ralph Hawtrey favored monetary stimulus as necessary to overcome deflation, he

favored a monetary regime aiming at stable money wages, a regime that over the long term would generate a gradually falling output price level.  

Yes, but...but...Glasner continues:

So I fail to see why anyone should be surprised that a pro-inflationary policy would be a tough sell even when unemployment is high. 

Small wonder that few want to use inflation to tend to unemployment when the correlation between monetary policy and employment gains is not strong enough, to begin with. However, this issue is not only problematic in the sense of a still declining labor force participation rate. It is also problematic for the idea of aggregate spending capacity at the very moment when wealth continues to be defined outside the perimeters of personal engagement in the marketplace. These supply side structures need to be closely reexamined, for they continue to place roadblocks in the way of future growth.

Only consider what Giles Wilkes wrote, as ramifications of the inflation debate started to sink in:

But just about every section of society can be brought to campaign against it.

And the title of his post gives a clue to the problem: Is weak demand a conspiracy of the scheming rich? This is a good way to think about the problem, for it's not a conspiracy, so much as a strong desire to simply keep things the way they are. Demand - while it is held back in monetary terms, is particularly held back in terms of the marketplace which special interests actually want.

This tight definition of marketplace conditions is impossible to maintain in the long run. Spillovers include everything from more homelessness and lower life expectancy to increased servitude and less societal trust. What's more, this tight hold on demand through supply side limitations, is proving increasingly impractical in the short run. The inflation which is held back by central bankers, remains in place in the sectors which have refused to free knowledge use for the masses or allow them to live on more innovative terms.

While healthcare and housing in their present incarnations continue to thrive, municipalities are increasingly stymied by their demands - both directly and indirectly through the needs of pensions and budgeting for retirement. As a result, local governments in the U.S. are finally becoming cannibalistic, to the point of allowing their police forces to confiscate money and property from their own citizens - particularly the poor - in an effort just to keep up with municipal bills. Many institutions struggle to maintain the payments on building structures of which no one has allowed substantial innovation for centuries.

Even as tradable goods continue on the trajectory which should generate a gradually falling price level over time, local economies have continued to move in the precise opposite direction with services and asset formations, as they have failed to incorporate either the wealth capacity or needs of the citizens in their midst. How can there be any hope of an income anchor to realistic production norms given these conditions? Economists of every stripe have been fooled by the needless runaway aspects of non tradable sectors. Hence today's cap on inflation continues to impart heavy damage to the productive capacity of economies everywhere.

Behind the resistance to inflation in aggregate, is especially the resistance to the new wealth capacity of the present. What's more, this is a capacity which now exists in the potential time value of citizens, the digital realm, and the innovative product that could generate living conditions within the affordability range of all who would be allowed to utilize these gains.

Indeed, were populations to embrace innovation and comprehensive knowledge use, inflation would not even be needed to keep progress on track and a nominal target would become a highly reasonable option. If non tradable goods were transformed, tracked and targeted alongside the capacity of tradable goods, a production norm would also be possible.

In the meantime, substantial "inflation" will continue to be needed indefinitely, as monetary policy is delivered to the profits of healthcare and housing through the cover of night inflation targeting. So long as these special interests get their way in keeping things the same, a cap on inflation only means fewer musical chairs, every time the music stops. Who wants "inflation" all to themselves, even if they have to decrease aggregate demand in order to reap the rewards? I think we know.

Midweek Market Monetarist Links and Summaries - 9/10/14

If lawyers are going to run the country...(Nick Rowe) Why are lawyers against higher inflation?
"When I hear the word 'neoliberal' I normally reach for my shovel": How to destroy the neoliberal consensus
Lots of money was printed because things were not equal: Three meanings of printing money causes inflation
Yes, there is a reverse gear: Suppost that printing money were irreversible
A thought experiment for two extremes: Fractional reserves, capital, communism and the optimum quantity of money

Has she abandoned NGDP as an intermediate target? (Lars Christensen) http://marketmonetarist.com/2014/09/07/is-karnit-flug-jeopardizing-stan-fischers-straight-line-policy-not-yet-but/

Three cheers for Kocherlakota:
(Benjamin Cole) http://thefaintofheart.wordpress.com/2014/09/06/all-hail-kocherlakota-but-did-dr-k-have-to-say-inflation/
(Bonnie Carr) http://dajeeps.wordpress.com/2014/09/05/kocherlakota-perplexed-about-the-taper/
(Marcus Nunes) http://thefaintofheart.wordpress.com/2014/09/06/some-look-at-the-evidence-some-dont/

Even though infrastructure may be needed, it does not serve as monetary stabilzation (Marcus Nunes) Is Infrastructure Spending the Way Out
Heh, luck ran out, for playing NICE! What the World Needs Now...
The Fed is guilty, but not for the reasons people think: Austrians get terribly confused but so does the Fed
How far will Draghi go? And they called it puppy love
Still insisting that QE won't help: Germans preach
Things could have been different..To avoid having two or three inflation points above target is worth taking a lot of pain
Employment gains below expectations: Labor market blues
Higher than "ideal output"?? Missing the point
Seniors want to work, they need to work...singing off key
The long term bond yield isn't "every other data point": Wishful thinking cum confirmation bias

(Scott Sumner) The Keynesian model continues to unravel
Back from a Mount Pelerin conference in Hong Kong The evil that men do
To QE or not to QE, that is NOT the question (Reply to Simon-Wren Lewis)
Not a good description of MM...Maybe it was better when they ignored us
Criticism and praise continue through life: We never grow up
The QTM hasn't changed: Base money is just as special s it ever was

(Scott at Econlog) demand shifts also affect micro, supply shifts also affect macro Never reason from a wage change
A response to Andolfatto: Is deflation bad?
Sometimes the WSJ can't tell the difference: The Wall Street Journal must think Milton Friedman was a Keynesian

In response to David Glasner, Brad Delong thinks "that Friedman's paper has somewhat more coherence than David does." http://equitablegrowth.org/2014/09/03/equitable-growth-milton-friedman-david-glasner-real-pseudo-gold-standards-thursday-focus-september-4-2014/
Oh my...(David Glasner) http://uneasymoney.com/2014/09/07/hey-look-at-me-i-turned-brad-delong-into-an-apologist-for-milton-friedman/
Is aversion to inflation the natural order of things? http://uneasymoney.com/2014/09/09/explaining-post-traumatic-inflation-stress-disorder/

Andy Harless takes a closer look at structural unemployment: http://blog.andyharless.com/2014/09/despite-tasci-and-ice-i-still-see.html

Also of interest:

Atlanta Fed: What kind of a job for Part time Pat?

Local Economies as Investment Opportunities

How can communities prepare for an uncertain future, particularly when central bankers remain reluctant to encourage further prosperity? This post looks at a few possibilities for "starting from scratch". Consider: even a recent Forbes article noted that new housing options are needed for an aging population - an argument I didn't expect from them!

Of course, the elderly are far from the only populations which need real innovation in building components. Many job offerings in the coming decade do not come with the income levels which are associated with much of today's housing stock. Nor does "build it and they will come" necessarily pan out, when solid structure building decisions turn out to be more burdensome than the income flows they can generate.

In many instances, people are looking for a fresh start in communities which are already weighted heavily toward housing assets, rather than coordinated environments for living and working. What's more, services and knowledge use systems need to be in effect at local levels, so that communities are not forced to rely on distant cities for either livelihoods or lifestyle options. Future action should reduce the government assistance (services in city environs) which has been stretched to the breaking point. Less government planning is needed, wherever locals can take part in relatively informal planning for structural needs. Also, from yesterday's post re existing government redistribution:

The first priority is to allow local investment potential to bring the marginalized back into existing systems, so that their disadvantages do not continue to accumulate over time.

Government assistance only keeps people from being able to help themselves, and further polarizes differences in skills capacities indefinitely. Future investment needs to revolve around interlocking strategies with substantial local components for entire populations, so that individuals will not need to rely on far flung governments for up close circumstance.  Local investment especially needs to change the nature of today's non tradable goods into more liquid forms of wealth. The best results come from long term strategies, and there is a lot to be said for hunter gatherer forms of business dynamics.

In many instances, the ways in which living and working arrangements are currently structured, need to be reconsidered. For instance, many more individuals in the U.S. are looking for walkable communities than actually exist, and until now, communities have been slow to adapt. In order to do so, changing conditions have to not just be recognized, but acted upon with more inclusive investment strategies.

Private property needs to enter a more vital phase. All too often, optimal property use is constantly limited by contrasts and constraints in expectations which prove impossible to meet.  Public, private, and personal properties too often become hostage to competing visions and desires, hence incapable of fulfilling productive intent and purpose.

Local investment could in some respects resemble a game board in which the game players buy their parts in the game. Often, "losing a play" in either personal or business terms would mean restructuring within other holdings within the game, instead of bankruptcy. What's more, holdings can be quite fluid in terms of commitment levels, which could be utilized along varying commitment scales and their pricing mechanisms. This would also allow risk takers - some of which hold smaller income levels as a result - to retain ownership in the property use game. In turn, individuals would retain greater control (and liquidity) over their destinies, and enough leverage to remain at the table for more "games".

How might building and land components be defined? In part it depends on the formations of the landscape, as well as preexisting commitments for land use that often naturally follow. Some preexisting land commitments could still be treated as traditional real estate (within unconventional land shareholding structures), which makes sense when they remain capable of productivity and/or their intended use over time. So long as resources exist to maintain "basic" real estate holdings, they can coexist with alternate structures. Land banks in some municipalities are (delicately) beginning to deal with similar land issues already, for abandoned properties.

Fortunately, there are multiple property options throughout the U.S. which contain neutral aspects - that is, they're not visually "special" other than what occurs through tender loving care, for instance. These properties would particularly lend themselves to flexible land and property use designations with portable building and environment components.

This would allow land and property holdings to become fluid, dynamic and often interchangeable components for the populations which utilize them. A primary goal would be to make certain that these land parcels would not be underutilized, poorly maintained or otherwise neglected because of discrepancies and disagreements.

Some land parcels would remain completely flexible (i.e. "unimproved") while these parcels could be accompanied by semi improved infrastructure grids at ground level. The combined setting would allow property to be adapted as needed in multi purpose groupings. This would especially be helpful as communities seek out service and production options they feel comfortable with, which would often change over time.

Here is where density advantages of time use optimization start to come into play. Time optimization means that individuals can come together for group projects - both services and other forms of production - in close proximity. Environments would be structured so that individuals close to the core could utilize multi purpose spaces, for both social and work related activity.

Land shares for local community building could become available - hence directly linked - through one's time use participation over the years. As time participation (skills arbitrage) lessens with age, built in "grace periods" for land holdings could assist in retirement needs. Some who are short in holdings late in life, could share a portion of their personal holdings for services needs. By the same token, other local investment options could be made available for investment in the same fashion, depending on one's level of economic interaction with others on an ongoing basis. Another possibility for local shares would be voter pricing for shares that allow direct votes for resource use.

One of the most important aspects of these structures is that they would need to remain completely transparent. This way, local shareholding structures would not work against the people with lower income levels who need them most. By utilizing these types of structures, individuals would not only need less assistance from others in the course of their lifetimes, but could also keep legal representation to a bare minimum as well.

Ultimately any community has the capacity to become as strong as the inhabitants in its own midst. Where to start? In the planning stages, there are numerous sources which individuals can draw from, to create templates which work for different lifestyle choices and needs. Domestic summits would be a part of this process. But even these would be a result of earlier efforts to find commonalities among potential groupings, who desire lifestyle options which are not readily available in existing communities.

Moving Beyond Government Redistribution

One of the biggest arguments against present forms of government redistribution in the U.S., could be that resulting wealth flows have fallen out of balance. However, not in the sense of income differences which frequently accrue to patterns within economies of scale. Rather, due - at least in part - to the moral reasoning by which age related redistribution needs have evolved.

Housing generates redistribution flows for youth and local education, at local levels in the U.S. Whereas nationally, the needs of the elderly take a top priority for government redistribution. While the scope of the national priority was not entirely intentional, it nonetheless became a natural extension of special privileges and knowledge use rights for the medical establishment in the 20th century. Old/young distribution patterns have become exacerbated, in that neither group is expected to directly contribute to or take part in the economy. This loss matters on a number of levels.

The mental and emotional capacity of both groups would become stronger, were they able to engage with others on economic terms. What's more, there would be little remaining economic burden for the remainder of the population, should the young and old become able to do so. Everyone would gain better work life balance.

When work meant primarily physical burdens, it was quite understandable that younger and older citizens needed relief. But work - and culture as well - has radically changed. Even though knowledge work is not yet widely shared among citizens, the digital capacity for this potential development is already in place. People are anxious to be a part of knowledge work, and the only thing holding back their desires are the limits of today's institutions.

While physical work often wasn't desirable in the same sense as knowledge work, people left physically demanding jobs - for the most part - only when necessary. After all, work loss of any kind generally meant the loss of identity and social status. Think how much greater, is the loss of skills capacity on the part of those who now wait for a chance to contribute. Even though other citizens are "carrying their load", it's not that the young and old want to remain on the sidelines.

No one should have to be limited to the role of a passive consumer at any age. Services resources for the old and the young, have fallen into consumption patterns which neither group are expected to negotiate for, or directly take part in. That is the very antithesis of a free market.

Granted - this is a different argument than what normally gets presented. However I feel it to be important, in that the tax code has been beaten to death with no mercy for the redistribution needs of the present. To be sure, solutions are not at all easy to determine when tax complexity is running rampant. But at the very least, the debt loads of redistribution suggests that societies start fresh, where it is possible to do so. How might populations generate redistribution through greater skills liquidity, so that citizens can assist one another through the course of a lifetime?

Communities need to be able to more effectively utilize their resources, so that populations of all ages can benefit. Government taxation began with the best of intentions, but much of the present methodology needs to scrapped. While that sounds extreme, one can at least start with small projects so that populations need not be overwhelmed by growing debt in the years ahead.

What is needed? In my next post I want to revisit local investment potential which could work in tandem with new service infrastructure settings. The first priority is to allow local investment potential to bring the marginalized back into existing systems, so that their disadvantages do not continue to accumulate over time. When governments attempt to compensate the disadvantaged through tax credits and the like, that only exacerbates the differences between members of society in ways that become progressively more difficult to resolve.

Local services systems could disperse knowledge use more effectively, and be the first point of entry to bring underutilized resources back into the mainstream of economic life. Ultimately, this is a better strategy for governments, than constant attempts to juggle between the needs of those in power, and the needs of those who are disadvantaged.