Almost Classical

Absurdly high prices. Debt. Stocks in 1928. Tech companies in 1999. Housing in 2007. The 1637 Dutch Tulip Mania. These are the things people associate with economic bubbles. Ask most people and they will tell you a bubble is when people pay more for a thing than it is worth in a reasonable market. That's a simple model for demand bubbles, but not the complete picture. For many quantitative economists, the basic bubble is the speculative, positive price variance bubble. But, there are also negative bubbles, when pricing collapses yet producers continue to believe demand (and prices) will soon increase offset the oversupply. These are deflationary gluts. Bubbles, positive and negative, occur when the market price for any good or service rapidly departs from the long-term median trend of price stability. A severe bubble is when a significant number of consumers are willing to go into debt to obtain a good or service with the primary intention of selling the good (or serv...

I've long argued that it was not unions or government spending that produced the great post-war boom in the United States and much of the Western World. In December 2014, Tim Worstall published a column on The Register ("El Reg") that agrees with my basic theory: we had to rebuild after the war, and the U.S. was fortunate enough to be the one nation not destroyed during the two World Wars. Bring back big gov, right? If only the economics, STUPID, could tell us more Post-WWII growth rates? Paaah http://www.theregister.co.uk/2014/12/21/bring_back_big_government/ 21 Dec 2014 at 09:00, Tim Worst You don't have to go all that far leftward these days to find someone brandishing economic growth statistics at you. Proving that growth was higher in the 1945-1973 period than it has been in our own more neoliberal age. Thus, of course, we should bring back the signal economic and political policies of those days so that we can speed up growth again. Big Unions, gover...

I've long argued that the Great Banking Crash of 2007 was and is simple to explain: bad loans were made to people unable to repay the loans. In the United States, pressure from the federal government to create a "homeownership culture" backfired. Nonsense like the "Community Reinvestment Act" and other pressure to make questionable loans… resulted in defaults. Shocking, right? Well, the same problem struck in the United Kingdom. Bad loans were made. The crises was not about all the fancy financial instruments the U.S. Congress and the U.K. Parliament hope to regulate. Gov report: Actually, evil City traders DIDN'T cause the banking crash • The Register   The full report is only for masochists and journalists - to the extent that those are different groups, anyway. Below is, in full, what you really need to know about what happened: This was a traditional bank failure pure and simple. It was a case of a bank pursuing traditional banking activities and...

Yesterday (June 22, 2011) on MSNBC's "Dylan Ratigan Show" David Stockman stood up to the nonsense of the left, in the person of Jonathan Alter. Read beyond my discussion of yesterday's debate for additional perspective on the debate participants. Alter's biases, in particular, were on fine display on MSNBC as he completely ignored facts and instead embraced the mythology of an Obama Miracle. (see http://vodpod.com/watch/11561241-david-stockman-on-the-dylan-ratigan-show ) My favorite moment was when Alter asked Stockman if he knew GE's business better than Jeffrey R. Immelt, friend and advisor to President Obama. "Yes," Stockman replied and proceeded to explain precisely how GE Capital was a financial mess, bailed out by the administration. Alter quoted Immelt as saying GE was near collapse. Well, duh? It was. But it was near collapse because of stupid choices made by Immelt and others within the company. GE was invested heavily in credit default swap...

Something to consider: the entrepreneurs essential to the United States are increasingly concentrated in one political party. This plays into the narratives of both left and right. The left can argue that this trend proves the evil GOP is merely a tool of the business class. The right can argue that business is being vilified by the left, even though businesses and business owners pay the taxes necessary for our government to exist. W.W. writing "Democracy in America" at The Economist's website has the following entry, discussing the steady shift of both management and business owners towards the Republican party, while "routine" white-collar workers have shifted to the Democratic party: Uncertainty and economic recovery: Partisan animal spirits | The Economist Of course, whether entrepreneurs and small-business types see Washington as an adversary or partner is not entirely a matter of in-the-trenches business experience. It is at least partly a matter of ...