In 1972, Hyman Minsky described the "period of financial distress," in a paper in a journal that no longer exists (Reappraisal of the Federal Reserve Discount Mechanism, vol. 3, pp. 97-136), "Financial Instability: The Economics of Disaster." Charles P. Kindleberger picked up on this and followed Minsky's analysis in his famous book, _Manias, Panics, and Crashes: A History of Financial Crises_, the 4th edn of which appeared in 2000 (the last one by him; he is now dead, but the pubbers have others hacking away at it for more editions, gag). The period of financial distress is a gradual decline after the peak of a speculative bubble that precedes the final and massive panic and crash, driven by the insiders having exited but the sucker outsiders hanging on hoping for a revivial, but finally giving up in the final collapse. According to Appendix B of Kindleberger's 2000 edition, 37 of the 47great historical speculative bubbles exhibited such a period before the final crash, even though all the theoretical models predict a crash immediately following the peak with no such period.
In 1991 I published the first mathematical model of such a phenomenon in my book _From Catastrophe to Chaos: A General Theory of Economic Discontinuities_ (Kluwer, Chap. 5), still my most cited work at over 150 according to Google Scholar, although nobody seems to have noticed this particular contribution in the book. In 1997, I published a paper describing this model (and related matters) in a paper that reproduced a plenary lecture given in 1996 in Berkeley, "Speculations on Nonlinear Speculative Bubbles," Nonlinear Dynamics, Psychology, and Life Sciences, Oct. 1997, vo. 1, no. 4, pp. 275-300. This paper has never been cited. More recently I have coauthored a paper that has been under long review by a journal (now under a long revise and resubmit, still waiting for an answer) with Mauro Gallegati and Antonio Palestrini, "The Period of Financial Distress in Speculative Markets: Interacting Heterogeneous Agents and Financial Constraints" (available at my website: http://cob.jmu.edu/rosserjb), that lays all this out in much more up-to-date mathematical modeling.
So, why am I boring all of you with this self-citation? Well, Dean Baker is constantly claiming credit for his forecasts of doom and gloom. It looks like we might be finally reaching the big crash in the US mortgage market after a period of distress that started last August (if not earlier). I and my coauthors are the only people to have provided actually formal models of this phenomenon, beyond the verbal and historical discussions provided by the brilliant Minsky and Kindleberger (both of whom I knew, but both of whom are now dead). I have been forecasting this in unpublished lectures all over the globe for years, but never have put it up into the blogosphere. So, I am claiming credit, to the extent it is due, although the basic ideas were clearly laid out earlier by Minsky and Kindleberger.
I will add one more story. Three years ago I presented an earlier version of the still-unpublished paper with Gallegati and Palestrini in Tokyo at Chuo University. In the middle of the presentation the biggest earthquake in 13 years hit Tokyo, in fact right at the moment I said the word, "crash." Some of the Japanese in the audience blamed me, not entirely humorously, for having caused it.
Saturday, July 12, 2008
Friday, July 11, 2008
Blackwater the Main Reason Iraq Wants US Out
Juan Cole reports that the main reason Prime Minister al-Maliki is holding up a Status of Forces Agreement with the US has been the refusal of the US to rein in its private mercenaries, especially the wildly overpaid and out-of-control folks at Blackwater. In September, 2007 Blackwater personnel gunned down 17 innocent Iraqis in Nisour Square, an incident that triggered outrage among the Iraqis and demands that the perpetrators be brought to justice. But they have not been as they have immunity under current agreements, something that now appalls the Iraqis of all factions. To add insult to injury, less than a month after this incident, the US State Department granted Blackwater a $92 million contract to guard US personnel in Iraq. Why are we hiring mercenaries at many times the salaries of US military to carry out functions that until very recently were always carried out by US military personnel?
Unfortunately most in the US are unaware of how outrageous Blackwater is, or the deep links of its founder and CEO, Eric Prince, to the current administration. So, in October 2007 a drunken Blackwater employee killed a bodyguard of the Iraqi Vice President, doing so by firing from a balcony in the Iraqi Ministry of Justice. Even more striking is that Blackwater personnel view themselves as superior to US military personnel. In 2007 there was an incident in the Green Zone where a Blackwater employee crashed an SUV into an army vehicle. The army seized the SUV, but the Blackwater employee disarmed the US army soldiers and forced them to lie on the ground until he recovered the Blackwater vehicle. All of this is simply outrageous and out of control (and Barack Obama has yet to speak against it). I fully sympathize with the demand by Ayatollah Ali Sistani of PM al-Mailiki that under these circumstances Iraq should not grant the US a Status of Forces Agreement that allows Blackwater personnel immunity from prosecution for this sort of conduct.
Unfortunately most in the US are unaware of how outrageous Blackwater is, or the deep links of its founder and CEO, Eric Prince, to the current administration. So, in October 2007 a drunken Blackwater employee killed a bodyguard of the Iraqi Vice President, doing so by firing from a balcony in the Iraqi Ministry of Justice. Even more striking is that Blackwater personnel view themselves as superior to US military personnel. In 2007 there was an incident in the Green Zone where a Blackwater employee crashed an SUV into an army vehicle. The army seized the SUV, but the Blackwater employee disarmed the US army soldiers and forced them to lie on the ground until he recovered the Blackwater vehicle. All of this is simply outrageous and out of control (and Barack Obama has yet to speak against it). I fully sympathize with the demand by Ayatollah Ali Sistani of PM al-Mailiki that under these circumstances Iraq should not grant the US a Status of Forces Agreement that allows Blackwater personnel immunity from prosecution for this sort of conduct.
Life in an Alternative Universe
The panel last night was very interesting. The hall was very, very big and quite full. I am guessing 600 people or more, which two large screens with projections of the speaker's image (or his power points). During my talk, I mostly focused on a couple people in the front row who were squirming and scowling with everything that David Himmelstein and I said.
We must've done quite well because the number of people sympathetic to single-payer rose by 400% after the talk -- from two to eight. Many people came up to congratulate David (who did an extraordinary job) and me. What I think they meant was that we did not sound like the caricatures that they would expect after having been immersed in Fox TV.
Seemingly thoughtful libertarians would come up and tell me horrendous things that the government is doing. My favorite was that California is imprisoning families for homeschooling because they refuse to submit to state indoctrination. These people seem quite intelligent, but live in an alternative universe in which there ideas go unchallenged.
The next debate will be a bit different since my "partner" will not be someone like David Himmelstein, but someone selected because is a black woman who works in the ghetto in New Orleans. She is also a Republican Party operative in a state.
We must've done quite well because the number of people sympathetic to single-payer rose by 400% after the talk -- from two to eight. Many people came up to congratulate David (who did an extraordinary job) and me. What I think they meant was that we did not sound like the caricatures that they would expect after having been immersed in Fox TV.
Seemingly thoughtful libertarians would come up and tell me horrendous things that the government is doing. My favorite was that California is imprisoning families for homeschooling because they refuse to submit to state indoctrination. These people seem quite intelligent, but live in an alternative universe in which there ideas go unchallenged.
The next debate will be a bit different since my "partner" will not be someone like David Himmelstein, but someone selected because is a black woman who works in the ghetto in New Orleans. She is also a Republican Party operative in a state.
Thursday, July 10, 2008
The Quiet Revolution
‘The Quiet Revolution’ was the title of a book written by former Australian Deputy Prime Minister and Treasurer Jim Cairns under the Whitlam Government (1972-1975). He was a prominent leader of the Australian anti-Vietnam war movement and a deep skeptic of conventional politics and economics.
The revolution Jim Cairn’s advocated in this book so many decades ago would be a timely, essential and peaceful one. Either we engage in one like this, he urged, or face unavoidable annihilation. On page 7 Cairns describes what he terms “four cataclysmic equations” of our time. These, he says, are:
1. Limited or finite material resources and unlimited human demands upon them;
2. Nuclear power – not just bombs – can destroy the human race;
3. Technological industrialism creates huge industrial structures which become more and more centrally controlled and democracy disintegrates; and
4. Technological industrialism creates human problems and needs faster than it solves them or can provide for them.
“There can be no solution at all to any of these problems until the mass of the people who have no, or little power, decide to get power in some way and exercise it. There can be no solution even if they get power and exercise it unless they do it with responsibility and humane values.” Cairns says.
It may not be clear to many people but Jim Cairn’s revolution did not cease when undemocratic right-wing forces ousted Cairns and his government from power. (See my previous post on Econospeak ‘A Coup in Australia and the CIA). He warned that the changes to the economic structure would occur regardless of who was in power and probably only when people were forced to change their values and way of life by the very circumstances we create.
I note that Wikipedia has an article also called“The Quiet Revolution” that refers to “the 1960s period of intense change in Quebec, Canada, characterized by the rapid and effective secularization of society, the creation of a welfare state (État-providence) and a re-alignment of Quebec's politics into federalist and separatist factions…”
Wikipedia also has a somewhat inaccurate article on Cairns. (The Khemlani loan affair paragraph does not mention the forged documents employed by the CIA and fed to the hostile mainstream press as a scheme to get rid of Cairns).
'The Quiet Revolution' by Jim Cairns. First published 1972. Revised edition 1975. Widescope International Publishers Pty Ltd. PO Box 339 Camberwell, Victoria, Australia, 3124. National Library of Australia card number and ISBN 086932 007 6
The revolution Jim Cairn’s advocated in this book so many decades ago would be a timely, essential and peaceful one. Either we engage in one like this, he urged, or face unavoidable annihilation. On page 7 Cairns describes what he terms “four cataclysmic equations” of our time. These, he says, are:
1. Limited or finite material resources and unlimited human demands upon them;
2. Nuclear power – not just bombs – can destroy the human race;
3. Technological industrialism creates huge industrial structures which become more and more centrally controlled and democracy disintegrates; and
4. Technological industrialism creates human problems and needs faster than it solves them or can provide for them.
“There can be no solution at all to any of these problems until the mass of the people who have no, or little power, decide to get power in some way and exercise it. There can be no solution even if they get power and exercise it unless they do it with responsibility and humane values.” Cairns says.
It may not be clear to many people but Jim Cairn’s revolution did not cease when undemocratic right-wing forces ousted Cairns and his government from power. (See my previous post on Econospeak ‘A Coup in Australia and the CIA). He warned that the changes to the economic structure would occur regardless of who was in power and probably only when people were forced to change their values and way of life by the very circumstances we create.
I note that Wikipedia has an article also called“The Quiet Revolution” that refers to “the 1960s period of intense change in Quebec, Canada, characterized by the rapid and effective secularization of society, the creation of a welfare state (État-providence) and a re-alignment of Quebec's politics into federalist and separatist factions…”
Wikipedia also has a somewhat inaccurate article on Cairns. (The Khemlani loan affair paragraph does not mention the forged documents employed by the CIA and fed to the hostile mainstream press as a scheme to get rid of Cairns).
'The Quiet Revolution' by Jim Cairns. First published 1972. Revised edition 1975. Widescope International Publishers Pty Ltd. PO Box 339 Camberwell, Victoria, Australia, 3124. National Library of Australia card number and ISBN 086932 007 6
A Stranger an a Nearby Land
We just returned from Mexico, but Las Vegas seems much more foreign to me. The airport with a casino with loud and glaring videos advertising the main casinos in town. The lobby of the hotel is a casino. I see people sitting on top of their slot machines putting money in, but nobody looks very happy. Many of the other casinos look like a larger version of something that parents would set up for a children's birthday party -- gaudy and patently phony. I have a hard time imagining what the attraction would be.
There are two other large conventions in the hotel. The National Strength and Conditioning Association and a national pawnbrokers association. I was talking to a fireman from the first convention, or just got back from Chico. Incidentally, the awful picture that was on the main page of the Washington Post was from Paradise, about 12 miles from Chico. Much of the town is under evacuation orders. Driving to the Sacramento Airport, when we got a little closer to the fire, the visibility was not much more than 100 yards.
Last I heard, Freedomfest had 1300 paid participants at almost $500 apiece. The meeting has 120 booths. Some are people making investment pitches, but most are very conservative organizations, such as Cato and Heritage Foundation. Both Ron Paul and Bob Barr have booths as well.
I know almost nobody here. I did spend a couple of afternoons with Milton Friedman's son, David, when he was younger and less famous. In later years, he showed no sign of recognition when I encountered him.
A number of sessions are devoted to debunking environmentalism. I do not know if the people are offended by the idea of environmental disruption or government programs to supposedly mitigate the problem. Gold and the dollar seem to be of major concern. People like Steve Forbes and Richard Viguerie will be talking about politics.
There is a strange feeling in being immersed in an alternative universe -- stranger still in an environment like Las Vegas.
There are two other large conventions in the hotel. The National Strength and Conditioning Association and a national pawnbrokers association. I was talking to a fireman from the first convention, or just got back from Chico. Incidentally, the awful picture that was on the main page of the Washington Post was from Paradise, about 12 miles from Chico. Much of the town is under evacuation orders. Driving to the Sacramento Airport, when we got a little closer to the fire, the visibility was not much more than 100 yards.
Last I heard, Freedomfest had 1300 paid participants at almost $500 apiece. The meeting has 120 booths. Some are people making investment pitches, but most are very conservative organizations, such as Cato and Heritage Foundation. Both Ron Paul and Bob Barr have booths as well.
I know almost nobody here. I did spend a couple of afternoons with Milton Friedman's son, David, when he was younger and less famous. In later years, he showed no sign of recognition when I encountered him.
A number of sessions are devoted to debunking environmentalism. I do not know if the people are offended by the idea of environmental disruption or government programs to supposedly mitigate the problem. Gold and the dollar seem to be of major concern. People like Steve Forbes and Richard Viguerie will be talking about politics.
There is a strange feeling in being immersed in an alternative universe -- stranger still in an environment like Las Vegas.
An Advisory to Intro Macro Teachers
Tuck away this latest post by Menzie Chinn, who has illuminating things to say about the reliability of GDP and CPI estimates.
Wednesday, July 9, 2008
300
Tyler Cowen on his blog links to a statement of 300 economists for McCain and wonders if there is an allusion to the movie intended. I would just point out that Thermopylae was a defeat for the Greeks. I'm forming an Economists for Xerxes group. Any takers?
So who do we find among the doomed Spartans? Becker, Lucas, Mundell - no surprises really.....Bring It On!
So who do we find among the doomed Spartans? Becker, Lucas, Mundell - no surprises really.....Bring It On!
No Limit to the Supply of Dumb Oil Ideas
I could blog every day on the harebrained schemes being cooked up to deal with rising oil prices, but in the interest of efficiency I’ll focus only on the worst. Certainly holding its own among the goop at the bottom of the $136 barrel is this suggestion from Harry Reid, according to today’s New York Times:
How patriotic this sounds, until you realize that the US exports virtually no oil, consuming all it produces and then another 150%. But even if we did export some of the off shore supply, so what? Suppose we export 100,000 barrels we would have consumed and then import an extra 100,000 barrels to make up for it, how would this affect energy prices, the current account, global warming or Reid’s majority in the 111th congress?
He [Reid] also hinted at a potential element of compromise legislation: that any oil produced from wider access to federal lands off shore be reserved for domestic use and barred from export.
How patriotic this sounds, until you realize that the US exports virtually no oil, consuming all it produces and then another 150%. But even if we did export some of the off shore supply, so what? Suppose we export 100,000 barrels we would have consumed and then import an extra 100,000 barrels to make up for it, how would this affect energy prices, the current account, global warming or Reid’s majority in the 111th congress?
Tuesday, July 8, 2008
Neoliberal Priorities
The air continues to be horrible, filled with ash as well as smoke. Today the fire crew lost control of one of the nearby fires. I assume it will get worse today since the temperatures between 108 and 110.
People are being evacuated. Dormitories are being opened for the evacuees.
I had to go to the dentist about 5 miles away. Even though I wore a mask and peddled slowly, I still felt tired when I came home.
Close to 20,000 people are fighting fires in the state, and the fire season is not yet begun.
A few National Guard people have been assigned to the fires, but we know where many of the rest are.
The state faces a $15 billion deficit. No stimulus package here. The Republicans have enough votes to block any tax increases and vowed to do so.
The whole tragedy seems to be an experiment in neoliberalism: inadequate public resources to meet unexpected problems, fires here, flooding in the Midwest, inadequate regulation of everything from food to finance. We are in an election year and I have not heard one politician saying anything reasonable.
People are being evacuated. Dormitories are being opened for the evacuees.
I had to go to the dentist about 5 miles away. Even though I wore a mask and peddled slowly, I still felt tired when I came home.
Close to 20,000 people are fighting fires in the state, and the fire season is not yet begun.
A few National Guard people have been assigned to the fires, but we know where many of the rest are.
The state faces a $15 billion deficit. No stimulus package here. The Republicans have enough votes to block any tax increases and vowed to do so.
The whole tragedy seems to be an experiment in neoliberalism: inadequate public resources to meet unexpected problems, fires here, flooding in the Midwest, inadequate regulation of everything from food to finance. We are in an election year and I have not heard one politician saying anything reasonable.
Obama versus McCain on Social Security
This morning's Washington Post has a front page, above the fold story by Perry Bacon, Jr. on "Candidates Diverge on How to Save Social Security." The story does briefly quote Dean Baker to the effect that it does not need "saving" now, a view I hold along with Bruce Webb and others on the basis that reality has more closely tracked the low cost projection under which there are never even any deficits, in comparison to the MSM blared intermediate cost projection under which they appear in 2017, with "bankruptcy" in 2041. The storyline hews to this, quoting unnamed "experts" to criticize Obama for "only covering half the cost of the 75 year shortfall." As it is, Obama is sticking with his primary season proposal, to charge social security taxes on those making more than $250,000 per year, otherwise no changes, no benefit cuts, no privatization. McCain is for some muddled version of Bush's muddled plan: raise the retirement age, cut future benefits, "allow" young people to transfer their taxes into private accounts, but no tax increases.
While I support no change, Obama's plan is the least damaging of any put forth by any of the candidates during the primary season. McCain's plan is a route to destroying social security as his allowing of private accounts with no tax increases will certainly bring on a fiscal crisis for the system, which will probably not happen at all if it is just left alone. We already have the voluntary tax-incentivized IRAs and so forth, but the privatizers want a mandatory private accounts system for their Wall Street buddies to manage. I say, if we insist on having mandatory private accounts, then do it as the Swedes do, a separate add-on system to social security, supported by its own set of new taxes, which is certainly not what McCain is proposing.
While I support no change, Obama's plan is the least damaging of any put forth by any of the candidates during the primary season. McCain's plan is a route to destroying social security as his allowing of private accounts with no tax increases will certainly bring on a fiscal crisis for the system, which will probably not happen at all if it is just left alone. We already have the voluntary tax-incentivized IRAs and so forth, but the privatizers want a mandatory private accounts system for their Wall Street buddies to manage. I say, if we insist on having mandatory private accounts, then do it as the Swedes do, a separate add-on system to social security, supported by its own set of new taxes, which is certainly not what McCain is proposing.
Monday, July 7, 2008
My idea of freedom
Here is my contribution for the panel on freedom, which got hammered out today after I cleared my head with an hour and a half of basketball, mostly unsuccessfully trying to keep up with a 20-year-old Vietnamese kid. My goal here was to speak against the idea of individual responsibility.
Here is the link:
Saturday, July 5, 2008
Healthcare follies
I am getting ready to leave for my final summer trip to Las Vegas, where it will be appearing with a host of conservative luminaries, such as Ron Paul, Bob Barr, Steve Forbes, Christopher Hitchens, and Dinesh D'Souza. I will be in two debates beginning next Thursday. David Himmelstein and I will be debating single-payer with John Mackey, the head of Whole Foods and John Goodman, the man who invented health savings accounts. Here is what I whipped up today. I would very much appreciate any comments.
The second debate will concern the nature of freedom. There, I will be debating John Mackey again and two others whom I do not know. I will call for help again on that one is in his I get something prepared. Here is my paper.
http://michaelperelman.files.wordpress.com/2008/07/health.doc
Here is the website for the conference.
http://freedomfest.com/
The second debate will concern the nature of freedom. There, I will be debating John Mackey again and two others whom I do not know. I will call for help again on that one is in his I get something prepared. Here is my paper.
http://michaelperelman.files.wordpress.com/2008/07/health.doc
Here is the website for the conference.
http://freedomfest.com/
A Coup in Australia and the CIA
Many Australians, predominantly of the baby boomer generation, believe that a US-backed coup occurred in Australia on the 11th of November 1975. Thirty years after the downfall of the Whitlam Government, archival work established "the ready complicity of the Australian press and a role for the US National Security Council in Whitlam's demise" according to Associate Professor Stephen Stockwell from Griffith University in Queensland.
Link
The Whitlam Government was the first Labor (and Social Democratic) government to be in power in Australia for 23 long years. There has not been a Social Democratic government here since. It was elected by the Australian people on 2nd December 1972 and again on 18th May 1974. But it was dismissed by the Governor General, Sir John Kerr, on 11th November 1975; one day after ASIO (Australian Security and Intelligence Organisation) received a a cable from the CIA's Theodore Shackley "which was a virtual ultimatum to the head of ASIO to do something about the Whitlam Government."
Link
This document reached its target a month or so after George Bush Senior became Director of the CIA.
Link
The Whitlam Government was the first Labor (and Social Democratic) government to be in power in Australia for 23 long years. There has not been a Social Democratic government here since. It was elected by the Australian people on 2nd December 1972 and again on 18th May 1974. But it was dismissed by the Governor General, Sir John Kerr, on 11th November 1975; one day after ASIO (Australian Security and Intelligence Organisation) received a a cable from the CIA's Theodore Shackley "which was a virtual ultimatum to the head of ASIO to do something about the Whitlam Government."
Link
This document reached its target a month or so after George Bush Senior became Director of the CIA.
Thursday, July 3, 2008
Kurds and Central Government Sign Secret Deal on Oil
Azzam in English reports that Jaber Khaleefa of the Iraqi parliament's Oil and Gas Committee has said that a secret deal has been signed between the Kurdish Regional Government (KRG) and the Iraqi central government, presumably the Oil Ministry, on oil deals. This deal allows the Kurds "to extend their political autonomy over their oil riches." This deal reflects on the one side an inability to get an oil bill passed in the central parliament, while on the other hand there is not enough support in the parliament to block any deals being signed by the executive authorities of either government. So far the KRG has 17 such deals and the central government now has 35. Generally, the central government tends to sign with big major firms like Exxon Mobil, while the Kurds tend to sign with smaller minors, with the biggest fuss having been about their deal last year with Hunt Oil, owned by strong Bush backer, Ray Hunt, also a member of his Foreign Intelligence Oversight Board.
Regarding the central government deals, much of the focus in recent days has been on no-bid short term contracts that have been signed with five big majors, including Total of France, as well as such old Seven Sisters as Royal Dutch Shell and BP, in addition to Exxon Mobil and Chevron (the latter having swallowed up the other two, Gulf and Texaco). However, officially rules for longer term contracts are supposed to be set by an official law, but none has been passed, and for now it looks like none will be passed. What seems to be operative is this secret deal.
Regarding the central government deals, much of the focus in recent days has been on no-bid short term contracts that have been signed with five big majors, including Total of France, as well as such old Seven Sisters as Royal Dutch Shell and BP, in addition to Exxon Mobil and Chevron (the latter having swallowed up the other two, Gulf and Texaco). However, officially rules for longer term contracts are supposed to be set by an official law, but none has been passed, and for now it looks like none will be passed. What seems to be operative is this secret deal.
Miscellaneous
I had the pleasure of meeting fellow blogger Michael Perelman at the History of Economics Society meeting in Toronto this past week-end. Michael gave a fascinating paper, "The Economics of Guano," which made the case for a 19th Century proto-environmentalism in the work of the American economist Matthew Carey. Marx made an appearance (in the paper, not at the conference). At one point, Michael suggested that economists, having spent so much time on the analysis of marginal increments, may want to focus for a change on marginal excrement. I guess you had to be there.
Meanwhile: Breakfast in Wimbledon this Saturday with Venus and Serena in the Women's Finals! I'm there.
Meanwhile: Breakfast in Wimbledon this Saturday with Venus and Serena in the Women's Finals! I'm there.
Subscribe to:
Posts (Atom)