May 30, 2013
Spurring growth in an era of constraints
From 30 'Memos to the Left' entitled 'Progressive Governance: The Politics of Growth, Stability and Reform'.
For over four years, the economies of the Euro zone, the UK, US and Japan have been mired in a slow and hesitating recovery from the deepest recession since the Great Depression. In the beginning, policymakers responded aggressively to both the illiquidity and insolvency problems in the financial systems, and the collapse in aggregate demand. ...
...However, in many instances, efforts to stimulate the economy were too soon withdrawn, or severely curtailed, despite the enormous amount of slack in these economies.
In the United States, Republicans stalled any substantial increments to the 2009 stimulus legislation; in the Euro zone, the absence of a centralised fiscal authority prevented an effective response to the sovereign debt problems that arose in the periphery countries. Can we stimulate growth at a time when traditional macro-economic management tools are restricted because of seemingly unsustainable national deficits?
I believe it is possible to accelerate growth in these hard-hit economies, now that the nostrums of expansionary fiscal contraction have been discredited, except all but the most ideologically blindered. However, doing so requires making some difficult choices. ...
This graphic illustrates the counterproductive aspects of the policies implemented in several countries.
Source: "Austerity Wins!" NY Times, 22 May 2013.
My recommendations include:
- Conditional inflation targeting, as argued in Chinn and Frieden (2012).
- Exploiting the balanced budget multiplier recognizing the shadow cast by extended periods of high unemployment.
- Spending smartly for the future, on infrastructure.
Posted by Menzie Chinn at May 30, 2013 01:30 AMdigg this | reddit
The primary constraint is oil, and that's about to get worse. The layoffs are beginning in Houston.
If you're looking for a policy constraint, it's clearly the Euro. It's been death for its weak members. Want better growth in Italy, Greece, Portugal, Cyprus, or heaven help us, France? Drop the Euro. That's the easiest path to growth.
Posted by: Steven Kopits at May 30, 2013 04:50 AM
As usual, I don't see any reference to constrained oil supplies, especially constrained global net exports of oil, which strongly contributed to annual Brent crude oil prices more than quadrupling from 2002 to 2012, with an average annual rate of increase of 15%/year.
The EIA has released their 2012 production and consumption numbers, but first some definitions:
GNE = Global Net Exports (Top 33 net exporters in 2005, EIA Data)
ANE = Available Net Exports (GNE less Chindia's Net Imports, CNI)
Net Exports = Crude Oil + Condensate + NGL's + Other liquids (EIA) less consumption
ECI = Ratio of production to consumption
Annual Brent Crude Oil Prices Vs. GNE/CNI Ratio, 2002-2011:
(Brent averaged $112 in 2012, and EIA data show that the GNE/CNI ratio fell to 5.0 in 2012, versus an annual Brent price of $25 in 2002 and a GNE/CNI ratio of 11.0 in 2002.)
Global Public Debt Vs. GNE/CNI Ratio, 2002-2011:
(The Economist Magazine shows that total global public debt rose to $48 trillion in 2012, as the GNE/CNI ratio fell to 5.0 in 2012, versus $19 trillion in debt in 2002 and a GNE/CNI ratio of 11.0 in 2002)
Based on EIA data from 2005 to 2012, the GNE/CNI ratio remains on track to approach 1.0 in about 17 years, when China and India alone would theoretically consume 100% of Global Net Exports of oil.
My thesis is that the net oil importing OECD countries are practicing "Fantasy Island Economics," as they go increasingly into debt, from real creditors and accommodative central bankers, trying to keep their "Wants" based economies going, in the face of a declining supply of global net oil exports available to importers other than China & India. On Fantasy Island, oil wells don't show production declines.
2012 Net Export Data:
2005: 45.5 mbpd & ECI of 3.7
2012: 43.0 & ECI of 3.1
2005: 40.7 & GNE/CNI of 9.5
2012: 34.4 & GNE/CNI of 5.0
The GNE/CNI ratio is still on track to approach 1.0, and thus zero ANE, in the year 2030, 17 years hence.
Production (P) - Consumption (C) = Net Exports (total petroleum liquids, mbpd)
ECI Ratio = P/C
2005: 11.09 - 1.96 = 9.13
ECI = 5.66
2011: 11.15 - 3.0 = 8.15
ECI = 3.72
2012: 11.54 - 3.22 = 8.32
ECI = 3.58
Note that the increase in Saudi net oil exports from 2011 to 2012 was only 170,000 bpd, and note that the ECI ratio declined from 2011 to 2012. So, despite a small increase in net exports from 2011 to 2012, Saudi Arabia remains on an undulating glideslope toward an ECI ratio of 1.0, when net oil exports be approach zero.
At the 2005 to 2011 rate of decline in the Saudi ECI ratio (EIA data), Saudi Arabia would approach zero net oil exports around 2030, in 17 years.
At the 2005 to 2012 rate of decline in the Saudi ECI ratio, Saudi Arabia would approach zero net oil exports around 2032, in 19 years.
Posted by: Jeffrey J. Brown at May 30, 2013 05:35 AM
My recommendations include: (1) sound money; (2) a balanced budget; (3) paring back government to optimal size; (4) rationalizing the tax code and eliminating corporate subsidies; (5) cutting regulations, finance and nuclear as exceptions; (6) policy to level the playing field on trade; (7) limiting national politicians to a single term; (8) fair, strict, efficient means-tested social safety net including work requirements for able-bodied; (9) diagnose, rank order, and then eliminate private and public sector impediments to growth.
The philosophical basis of these recommendations is to maximum the exercise of free will by all individuals.
Posted by: JBH at May 30, 2013 05:36 AM
Steven and Jeffrey, net oil imports for the US and China are now at par coincident with global oil production and oil exports falling per capita.
With respect to oil production and exports per capita, the world is now where the US was in the mid-1970s at the onset of US industrialization and financialization of the economy, only this time with unprecedented public and pricate debt and debt service costs to wages, profits, and gov't receipts.
Moreover, global food production per capita appears to have peaked coincident with Peak Oil in 2005-08, including declines per capita in agricultural land, machinery, and valued added per worker.
LTG projections in the 1970s were correct.
Printing trillions in bank reserves and running ongoing deficits/GDP of 5-6% to encourage asset bubbles everywhere will not solve the global structural constraints associated with population overshoot, Peak Oil, and too much debt.
Growth of real GDP per capita is no longer possible.
Posted by: Bruce Carman at May 30, 2013 06:30 AM
Re: Rising US Crude Oil Production to the Rescue
It's certainly helpful, and it's putting lots of people to work doing real jobs, but outside of Fantasy Island, and here in the real world, oil wells decline.
ExxonMobil put the annual decline rate from existing wellbores in the 4%/year to 6%/year range a few years ago. For the sake of argument, let's assume that the decline rate from existing US oil wells was about 5%/year in 2008, when the US hit the post-hurricane low production point of 5.0 mbpd (Crude + Condensate, mbpd, EIA).
Let's assume that US Crude + Condensate production averages 7.5 mbpd in 2013, and let's make (in my opinion a conservative) assumption that the decline rate from existing US wellbores is about 10%/year this year, as an increasing percentage of US production comes from high decline rate shale/tight plays.
At a 10%/year decline rate, in order to simply maintain a production rate of 7.5 mbpd out to 2023, the US oil industry would have to replace the productive equivalent of every single oil field in the United States of America, everything from Thunder Horse in the Gulf of Mexico, to the Eagle Ford Play, to the Permian Basin, to the Bakken Play to the North Slope of Alaska.
Or let me put it this way, at 5%/year decline rate, in 2008 the US lost 250,000 bpd per year due to declining production. At a 10%/year decline rate and a production rate of 7.5 mbpd, we would lose 750,000 bpd this year due to declining production.
In other words, a 50% increase in production + an increase in the decline rate from 5%/year to 10%/year would lead to a 200% increase in annual volume of oil lost to declining production from existing wellbores.
This why Peaks Happen (except on Fantasy Island), and it's why production peaks are inevitable (except on Fantasy Island). On the upslope, new oil wells can offset the declines from existing wellbores, but with time, new oil wells can no longer offset the increasing volume of oil lost to production declines.
The problem that net oil importing OECD countries are facing is that when production declines hit oil exporting countries, and if internal consumption in oil exporting countries does not decline at the same rate as the rate of decline in production or at a faster rate, the net result is an accelerating rate of decline in net exports, compounded by developing countries, led by China, so far at least consuming an increasing share of a declining volume of net oil exports.
For more info, search for: ASPO + Export Capacity Index.
Posted by: Jeffrey J. Brown at May 30, 2013 07:39 AM
Should have read above "deindustrialization".
Valued-added production in the US is down 90% per capita in terms of debt-money supply and GDP since the 1970s. For more than 40 years, the US replaced domestic investment, production, and employment with imported US subsidiaries' offshore production and increasing domestic debt-money liabilities, and thus claims on wages, profits, and gov't receipts.
Now cumulative compounding interest claims from total US credit market debt owed to term is equivalent to US GDP, meaning that the entire reported valued-added US output is pledged to debt service in perpetuity on the total credit market debt owed.
Put another way, that 40-85% of financial wealth is owned by the top 1-10%, most of the valued-added product of the US economy is pledged to the income and rentier returns on assets to the top 10% of US households such that real GDP per capita growth can no longer occur.
And this is not counting the worsening energy constraints per capita, Boomer demographic drag effects, and prohibitve costs to growth from imperial military overstretch and domestic infrastructure replacement.
Yet, given all of these factors, Neo-Keynesians, supply-siders, MMTers, and the rest think that we can tweak this policy or that, print trillions more bank reserves, look the other way when asset bubbles inflate, and borrow and spend a trillion a year indefinitely to "spur growth".
Posted by: Bruce Carman at May 30, 2013 07:46 AM
Jeffrey: "At a 10%/year decline rate, in order to simply maintain a production rate of 7.5 mbpd out to 2023, the US oil industry would have to replace the productive equivalent of every single oil field in the United States of America, everything from Thunder Horse in the Gulf of Mexico, to the Eagle Ford Play, to the Permian Basin, to the Bakken Play to the North Slope of Alaska.
Or let me put it this way, at 5%/year decline rate, in 2008 the US lost 250,000 bpd per year due to declining production. At a 10%/year decline rate and a production rate of 7.5 mbpd, we would lose 750,000 bpd this year due to declining production.
In other words, a 50% increase in production + an increase in the decline rate from 5%/year to 10%/year would lead to a 200% increase in annual volume of oil lost to declining production from existing wellbores."
Red Queen to Alice: “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to go somewhere else, you must run at least twice as fast as that!”
The chase continues for the white rabbit, only this time we are "feeding our heads" with trillions in fiat digital debt-money bank reserves and fiscal deficits to create still more asset bubbles to make us fell like we're ten feet tall . . . upside down the rabbit (wellbore) hole on "Fantasy Island".
Posted by: Bruce Carman at May 30, 2013 12:47 PM
Yet, there are pockets of prosperity where state government does not let the policies of the federal government screw the pooch.
I know, I know, it will only last 2 years. Yeah.
Posted by: Bruce Hall at May 30, 2013 04:40 PM
Menzie I wonder about the effectiveness of a conditions-based monetary policy. I'd like to believe it would work, but I think there's a risk that agents might interpret this as the central bank's promise to be responsible. Enter the Lucas critique. As Krugman points out, the Fed might be more effective if it could credibly promise to be irresponsible.
Steven Kopits Setting aside your implicit assumption that production functions are Leontief, it's important to understand that Menzie is talking about aggregate demand management to close the gap between actual output and potential output. Oil constraints would affect potential output, which I guess also "closes" the output gap, albeit in a very different way than Menzie proposes. You're talking about a different curve.
Posted by: 2slugbaits at May 30, 2013 05:06 PM
You can't print reserves. Reserves are useless. Carman, at some point, you will understand the "bubble" was a one time deal thanks to the glass steagall repeal.
That leverage ain't coming back in a huge way for years at closest.
Posted by: The Rage at May 30, 2013 06:11 PM
Aggregate demand was weakened by labor share dropping 4% to 5% too. The author of the article cannot blame the lack of follow through on stimulus. Corporations cut labor share too much and never raised it back it up. This lowered aggregate demand.
Posted by: Edward Lambert at May 30, 2013 07:53 PM
Re: The Best of Times & the Worst of Times
I certainly agree that the food & fuel producing areas in the US are doing much better than most of the rest of the country, and I think that we are in something like a long term boom environment for US oil companies.
However, as Steven Kopits has noted, rapidly increasing costs in the Oil Patch are a real problem, and we are seeing a narrowing gap between what the overall global economy can afford to pay for oil and the price floor necessary to justify continued massive drilling efforts in very expensive shale/tight plays.
In any case, for the overall US economy the fact remains that the annual price of Brent crude oil rose from $25 in 2002 to $112 in 2012 (and is still over $100 in 2013), as the developing countries, led by China, have (so far at least) consumed an increasing share of Global Net Exports of oil (GNE).
And for Americans who don't directly or indirectly benefit from high oil prices, rising US crude oil production is interesting--and beneficial to the economy--but not terribly relevant to them.
I've compared the global oil export market to a commercial airliner in an ever-steepening dive toward a non-survivable point of impact, while the passengers on the plane talk about dinner plans, oblivious to the ever-steepening dive.
Extrapolated decline in the ratio of GNE* to Chindia's Net Imports (CNI), with actual data for 2002 to 2011:
EIA data put the ratio at 5.0 in 2012, on track to approach 1.0 in about 17 years, when China & India alone would theoretically consume 100% of Global Net Exports of oil.
*Top 33 net exporters in 2005, BP + EIA data
Posted by: Jeffrey J. Brown at May 31, 2013 05:10 AM
And regarding the Global Public Debt data versus the GNE/CNI ratio graph and data up the thread, note that the absolute value of the 10 year (2002 to 2012) rate of increase in Global Public Debt (9.3%/year) is quite similar to the absolute value of the 10 year (2002 to 2012) rate of decline in the GNE/CNI ratio (7.9%/year).
Of course, the $64 trillion question is what happens from here, heading toward 2022. If we extrapolate the 2002 to 2012 trends, Global Public Debt in 2022 would be up to $122 trillion and the GNE/CNI ratio would be down to 2.3, versus $19 trillion and 11.0 respectively in 2002. (At a GNE/CNI ratio of 2.3, China & India would be consuming 44% of Global Net Exports of oil, versus 9% in 2002.)
Posted by: Jeffrey J. Brown at May 31, 2013 08:41 AM
Jeffrey: "[A]s Steven Kopits has noted, rapidly increasing costs in the Oil Patch are a real problem, and we are seeing a narrowing gap between what the overall global economy can afford to pay for oil and the price floor necessary to justify continued massive drilling efforts in very expensive shale/tight plays."
Indeed. To support your point, see the charts at the links below:
Real US GDP per capita and the real oil price:
Price of oil and US real GDP per capita since 1880:
World real GDP per capita since 1970:
World oil production and exports per capita:
It should be readily apparent the price of oil that coincides with US real GDP per capita ceasing to grow (hint: above $30-$40).
Moreover, it should be no less obvious that Peak Oil occurred in 2004-05 in per-capita terms and on a rate-of-change basis.
Again, we can't have our profitable extraction of tight, deep, and tar oil at $90-$110/bbl AND grow real GDP per capita. The boom in the oil patch is a net negative to real GDP per capita, i.e., the industry's gain is a net loss to real GDP per capita for the US, EU, and Japan.
The world is now where the US was in terms of per-capita oil production and the onset of US deindustrialization, falling wages/GDP, and financialization of the economy (culminating in today's hyper-financialization and dubious "wealth effect" from bubbly financial asset prices).
The world now faces the prospect of a marked Peak Oil-related deceleration of real GDP per capita and eventual post-Oil Age contraction.
There are no Keynesian, supply-side, monetarist, and MMTer prescriptions for the chronic syndrome associated with population overshoot, global Boomer demographic drag effects, Peak Oil, record public and private debt to GDP, and the coincident EXTREME Third World-like wealth and income concentration to the top 0.1-1% to 10% of US households.
Finally, without sustained growth of real GDP per capita, we cannot afford as a society to build out and maintain an "alternative energy" infrastructure at necessary scale AND continue to sustain the fossil fuel infrastructure, including a global imperial military superstructure to secure oil supplies, shipping lanes, and US supranational firms' investments the world over.
Posted by: Bruce Carman at May 31, 2013 09:19 AM
CPI and wages plus commodity import prices:
The annual change of real imports suggests an increasing risk that the US economy joined much of the rest of the world in recession in Q1, which is consistent historically with bubbly house and stock prices, a peak in consumer sentiment, and a bottoming of the U rate.
Of course, the BEA can always "manage" the deflator, inventory, and capital consumption figures to disallow a reported real GDP contraction to avoid the political inconvenience.
Posted by: Bruce Carman at May 31, 2013 10:55 AM
I am struck by how weak these suggestions sound. I am all for infrastructure spending - but that spending is far more capital intensive than it was during the New Deal - and I really doubt it would make much of an impact on the overall gap between what we produce and what we are capable of producing.
In general the debate seems out of scale to the problem at hand.
Posted by: fladem at May 31, 2013 02:13 PM
If you want to call it an elastic Leontief approach, I could live with that. This argues that certain inputs cannot be easily substituted for other inputs, and that the rate of substitution is capped, if not fixed.
I am suggesting that any economic or ecological system will continue to grow until it hits a binding constraint. Labor and capital are common constraints, but there are many others, including land, temperature, water, and energy. Any of these can be a binding constraint. Water, for example, is a binding constraint on economic activity is parts of the world. Oil looks to be another potentially constrained commodity in this list.
Posted by: Steven Kopits at May 31, 2013 02:45 PM
Pipe and rail safety for oil,
from Upstream Online
"US pipelines carried about 11.3 billion barrels of crude and petroleum products in 2012 and reported less than 55,000 barrels spilled, according to John Stoody, a spokesman for the Association of Oil Pipelines.
In the 10 years through 2012, railroads hauled 267 million barrels of crude with about 2268 barrels spilled. Most of that came from a single incident in Oklahoma in 2008, when about 1931 barrels leaked, according to the rail association."
Spill rate for pipelines is 0.0005%, and for rail, 0.0008%.
Pretty miniscule, in other words.
Posted by: Steven Kopits at May 31, 2013 02:55 PM
"am struck by how weak these suggestions sound. I am all for infrastructure spending - but that spending is far more capital intensive than it was during the New Deal - and I really doubt it would make much of an impact on the overall gap between what we produce and what we are capable of producing."
right, but capital intenstiveness is not something the public should worry about. Infastructure upgrade and overhaul would definitely punch a hole into the gap, not thinking that represents part of the problem.
It won't be revolution that destroys capitalism but a reaction as a new breed(really old breed) of conservative abolishes the free enterprise system because it can no longer maintain the lifestyle needed to survive.
Posted by: The Rage at May 31, 2013 05:46 PM
lol, those "states" Bruce are some of the biggest federal cash cows there are.
You mean those states are messing up what the federal government needs to solve for the country as whole.
Being a internationalist Bruce, is not necessary. Globalism has failed.
Posted by: The Rage at May 31, 2013 05:49 PM
Steven Kopits: "US pipelines carried about 11.3 billion barrels of crude and petroleum products in 2012 and reported less than 55,000 barrels spilled...Pretty miniscule, in other words."
I leave others to decide if 55,000 barrels spilled, 10 killed, 55 injured and $180 million in property damage in 2012 is miniscule.
Heck, that's barely a penny a barrel. Why would oil execs even care? As the CEO of BP complained, after the deaths of 12 workers, he just wanted his life back so he could go sailing.
(Incident data from Department of Transportation, Pipeline and Hazardous Materials Safety Administration
Posted by: Joseph at May 31, 2013 10:06 PM
Joseph, Joseph! You are showing your age. Hating oil companies is SOOO over. It's banks now. Please catch up.
Posted by: c thomson at June 1, 2013 06:38 AM
Jeffrey: "EIA data put the ratio at 5.0 in 2012, on track to approach 1.0 in about 17 years, when China & India alone would theoretically consume 100% of Global Net Exports of oil."
Honestly, does anyone believe in those sorts of projections. That's equivalent to, "I ate a four-pound meal an hour ago, so at 12 lbs. per day, I will weigh over a two tons next year."
Posted by: Bruce Hall at June 1, 2013 06:58 AM
You also need to consider the (vast?) majority of cost is politically manufactured.
Posted by: aaron at June 1, 2013 09:55 AM
Edward: "Aggregate demand was weakened by labor share dropping 4% to 5% too. The author of the article cannot blame the lack of follow through on stimulus. Corporations cut labor share too much and never raised it back it up. This lowered aggregate demand."
Edward, here is support for your point:
The last time the 5-yr. rate of reported CPI was where it is today was in the mid-1960s when the 5-yr. rate of nominal wages was growing at 6-7%/yr.
Today, the 5-yr. rate of real wages remains negative since 2010-11, and the 10-yr. rate of real wages is below 1%. Any real gains to wages over the past decade have been more than offset by higher incremental costs for energy and medical services.
The avg. of the 5- and 10-year rates (1.49% and 3.31% today respectively) of nominal wage growth is 2.4% (vs. the long-term avg. 6.45%). Nominal avg. wage rates tend to track nominal GDP and the 10-yr. Treasury yield.
Now add the structural drag on wages from public and private debt and debt service to wages and GDP, energy costs to marginal wages and GDP, AND the increasing acceleration of automation of the services sector now underway.
There exists currently no prospect for accelerating wage gains to thus increase wages/GDP vs. returns to capital/GDP, i.e., increasingly rentier profits to the financial sector from the banks printing themselves digital book entry profits at 50% of total corporate profits to date.
Then consider the implications for the trend for nominal GDP and the 10-yr. Treasury yield hereafter, as well as the long-term deceleration of growth (and eventual contraction) of social insurance receipts for Social Security and Medicare.
Real equipment and software investment as a share of the private sector is peaking again for the cycle
The rate of real consumption of fixed capital is at the slowest rate in 20 and 50-55 years:
The change rate of real private non-residential investment to private employment and to depreciation is not fast enough for growth of and employment, personal consumption, and GDP:
Because of total debt to wages and GDP, energy constraints per capita, post-Boomer demographics, and labor having to compete with cheap offshore wages and now services automation, the US economy is now structurally incapable of a net increase in private living-wage employment.
The globalized housing-, auto-, and oil-based, mass-consumer economy based on growth of public and private services employment and wages, salaries, and fee income is no longer viable.
Unless those in the top 0.1-1% to 10% of households who own 40% to 85% of financial wealth and receive 20% to 45% of US income cease hoarding in the form of historically overvalued corporate equities and bonds and deploy a growing share of their investable private wealth to private domestic investment "at labor returns" instead of rent seeking at unrealistic 7-10% returns from financial asset inflation, there will be no growth per capita of private employment, demand for goods and services, and overall GDP.
Posted by: Bruce Carman at June 1, 2013 11:38 AM
I guess we can just take a year at time and see what happens, but what has happened is pretty clear.
The following chart shows normalized liquids consumption, with 2002 consumption set equal to 100%, for China, for India, for the (2005) Top 33 net exporters and for the US, from 2002 through 2011, versus annual Brent crude oil prices, shown as a red bar chart:
As Brent prices more than quadrupled from 2002 to 2011, here are the 2011 consumption levels as a percentage of 2002 consumption:
(2005) Top 33 Net Exporters: 129%
As Brent prices stayed high in 2012, averaging $112, here are the 2012 consumption levels as a percentage of 2002 consumption:
China: 193%, versus 185% in 2011
India: 152%, versus 146% in 2011
(2005) Top 33 Net Exporters: 135%, versus 129% in 2011
US: 94%, versus 95% in 2011
In other words, a continuation of recent consumption trends, but of course, the $64 trillion question is what happens between 2012 and 2022.
I don't think that China and India will actually be consuming 100% of Global Net Exports of oil (GNE) in 2030, but I do expect recent trends to more or less continue, as developing countries, led by China, continue to consume an increasing share of a declining post-2005 volume of GNE. The flip side of that is that developed net oil importing countries like the US would continue to be gradually shut out of the global market for exported oil.
Of course, you are right about beliefs. The conventional wisdom appears to be that there is no problem with a virtually infinite rate of increase in our consumption of a finite fossil fuel resource base. To use a version of your metaphor, it's equivalent to believing that a fixed supply of 4,000 pounds of food, consumed at the rate of 12 pounds per day, will last forever.
A link to and an excerpt from my recent paper on the Export Capacity Index (ECI):
My basic premise is that the net oil importing OECD countries are maintaining something resembling “Business As Usual” only because of huge and almost totally overlooked rates of depletion in post-2005 Global and Available Cumulative Net Exports of oil.
I have frequently used the Titanic metaphor. The Titanic hit the iceberg at 11:40 P.M. on the evening of April 14, 1912. At midnight, only a handful of people on the ship knew that it would sink, but that did not mean that the ship was not sinking. The Titanic’s pumps helped, but they could not fully offset the flow of seawater into the ship. In my opinion, rising US crude oil production is to the ongoing decline in Global and Available Net Exports as the Titanic’s pumps were to the flood of incoming seawater, i.e., the Titanic’s pumps made an incremental difference, but not a material difference.
Posted by: Jeffrey J. Brown at June 1, 2013 11:54 AM
I heard an interview on Bloomberg this morning that made me fall out of bed laughing. The "expert" was asked about the problem in Japan with conditions getting worse since Abe announced his massive yen debasement. The "expert" said the BoJ did exactly what it should have. The problem waa that the markets reacted too soon and screwed things up. Solution, more control of the markets.
These guys pound the markets with their schemes and then blame the victim for getting bloodied.
As Jude Wanniski used to say, the problme is not the fact that Keynesian theory is wrong, the problem is how they screw things up when their predictions don't come true.
Posted by: Ricardo at June 3, 2013 04:22 AM