Skilled physicists do not know how to take nothing and turn it into matter and antimatter, but finance behaves as if it had the capacity to do something similar. Imagine a simple market economy about to create a bubble. I want to tell the story of this bubble, only to put the current, crazy stimulus package into perspective.
Somebody says to me they have a piece of paper worth $1 million. I can buy for half the price. I borrow the money to cover most of the cost. People are willing to lend me the money confident in the belief that my paper will increase in value. Other people are engaging in the same transaction, spreading confidence that these papers are now increasing in value, say to $600,000.
The seller of the paper now has a half-million dollars, having given up nothing but blank piece of paper. I have a capital gain of hundred thousand dollars. My lenders have a credit with a half-million dollars. We are all better off, even though nothing has been produced.
Feeling secure in the increasing value of our paper, I along with the other "investors" now start consuming more, spreading prosperity for the economy. Virtually everybody is enjoying the benefit of the bubble. Within a short period of time, people throughout the economy making decisions based on the increasing appearance of health and the economy.
At some point, people realize that this paper is nothing more than a blank sheet of writing paper. The bubble may have stimulated some investment that is capable of producing real economic benefits, but mostly it has induced people to consume and commit themselves to pay back debts.
Remember, this prosperity was built out of nothing. In the end, matter and antimatter collided. The lenders have lost their money. The speculators and consumers are in debt. Most lack the wherewithal to repay their debts. But in the case of the current bubble, the economy does not have the productive capacity to put everything together. The loans came from abroad and so did many consumer goods.
At the same time, the government loans are ultimately dependent on another set of loans, also largely from abroad. How will these loans ever be repaid? Will new loans keep coming as the bubble engulfs the rest of the world?
Should the government come in and give me a half-million dollars so that I can repay my loan? Should I be rewarded for my stupidity and naïveté? Will that policy really make the economy healthy? Or will it policy just facilitate the creation of even greater bubbles?
Obviously, the most sensible decision would be to put the money into making a more healthy economy, one less susceptible to speculation -- something impossible under capitalism, but that is another question. Eventually, somebody will have to pay the piper. The policy today seems to be an effort to shield the very people who created the crisis, placing the burden on the most innocent.
The graphic picture of the stimulus package that I posted yesterday suggests a government response just as foolish as the speculations that set off the bubble in the first place.
Happy Thanksgiving.
Thursday, November 27, 2008
EU Economic Orthodoxy Stumbles On
In the same survey of stimulus planning, the NY Times reported on the latest EU fiscal initiative, which calls for contributions of 1.2% GDP on the part of most member countries. This infusion, which is much too small relative to the impending output gap, will still bump up against the Maastricht criteria. What to do?
In other words: we know the criteria are absurd under the current conditions, but we will pretend that they still apply.
The EU has been built on a grand compromise, a broadly progressive stance in social and environmental policy and rigid orthodoxy in economic affairs. As in the academic version, the left got the sociology department and the right was given economics, finance and business. It was a bad deal, since misguided economics can do damage faster than the social workers can clean it up. So now Europe has a central bank with hardly any lender of last resort tools and fiscal guidelines that all but rule out serious countercyclical measures.
The current economic crisis should be put to positive political use. You can’t have a “Social Europe” with double-digit unemployment. (You also can’t have a sustainable Europe without getting the economic part of sustainability in place.) There needs to be a shift within the economic regime, and not just in the balance between “economic” and “social” interests. As for fiscal guidelines, they need to be flexible enough to permit rational economic management, and they also have to be responsive to regional trade imbalances. In fact, to constrain fiscal deficits without managing trade aggregates is to put all the recycling burden on private debt, and we are still in the process of finding out where that leads.
The monetary affairs commissioner, Joaquín Almunia, said that countries that breached the deficit ceiling of 3 percent of G.D.P. would face official reprimands, but would be given longer than usual to bring their budgets back into line because of the exceptional circumstances.
In other words: we know the criteria are absurd under the current conditions, but we will pretend that they still apply.
The EU has been built on a grand compromise, a broadly progressive stance in social and environmental policy and rigid orthodoxy in economic affairs. As in the academic version, the left got the sociology department and the right was given economics, finance and business. It was a bad deal, since misguided economics can do damage faster than the social workers can clean it up. So now Europe has a central bank with hardly any lender of last resort tools and fiscal guidelines that all but rule out serious countercyclical measures.
The current economic crisis should be put to positive political use. You can’t have a “Social Europe” with double-digit unemployment. (You also can’t have a sustainable Europe without getting the economic part of sustainability in place.) There needs to be a shift within the economic regime, and not just in the balance between “economic” and “social” interests. As for fiscal guidelines, they need to be flexible enough to permit rational economic management, and they also have to be responsive to regional trade imbalances. In fact, to constrain fiscal deficits without managing trade aggregates is to put all the recycling burden on private debt, and we are still in the process of finding out where that leads.
China and the US: Stimulus vs Bailouts
In its latest roundup of crisis management from around the world, the NY Times discusses Chinese monetary policy initiatives. Cutting reserve requirements for banks seems counterintuitive to me, but perhaps there are aspects of banking in China that justify it. What really jumped out, though, is this:
That does make sense, and it is exactly the opposite of policy in the US, where the Fed has raised the interest it pays on these reserves. But, of course, we need $400 billion in excess reserves to finance the bailout program, so that losses from bad investments can be transferred to the public. This is so much more important than getting new finance out into a frozen economy.
To give banks an extra incentive to lend money instead of hoarding reserves, the central bank also lowered by 0.27 percentage points the interest rates that it pays banks for reserves deposited with it.
That does make sense, and it is exactly the opposite of policy in the US, where the Fed has raised the interest it pays on these reserves. But, of course, we need $400 billion in excess reserves to finance the bailout program, so that losses from bad investments can be transferred to the public. This is so much more important than getting new finance out into a frozen economy.
The Absurdity of the Stimulus Package
Here is a graphic from the Wall Street Journal regarding the size of the stimulus package.
2.5 Million Jobs IV
From: AFL-CIO American Federationist | November 1962, pp. 19-21.
ECONOMIC TRENDS & Outlook
CREATING JOBS THROUGH SHORTER HOURS
ECONOMIC TRENDS & Outlook
CREATING JOBS THROUGH SHORTER HOURS
Employment Effects of Shorter Hours
If the workweek is shortened with no loss in pay, what effect will it have on unemployment? There is no firm answer nor can specific estimates be calculated reliably.
The answer depends in good part on how much the workweek is shortened, how and when it is done, how widely the reduction is applied—and on what other economic developments accompany it. Hours reduction will not take place in a vacuum; its effects necessarily are linked to whatever else is occurring before, during and after the reduction.
No one seriously considers it a magic solution to unemployment or the sole answer by itself. Its strongest advocates claim only that it is but one tool although a fundamental one.
There also are different views on whether its principal value is as a defensive or holding measure— one which prevents increased unemployment—or whether it is equally important as a stimulus, one which generates additional employment.
There is wide recognition, particularly at the individual plant level, that shortening of hours will help prevent layoff of more workers (“cutting hours means less cutting of men”). How effectively it does this depends largely on productivity changes and trends in demand.
The extent to which it will lead to hiring of additional workers is a more complex question. It depends on such factors as management attitudes and its judgment about future needs for labor, the level and trend in demand for the company’s products, the nature of its labor requirements and availability of appropriate types of workers in the area or elsewhere.
But under the most typical and likely circumstances, a company reducing its workweek by several hours ordinarily will have to immediately hire additional workers to provide those hours of work if it wants to maintain approximately the same output or service as before.
The longer-run effects then hinge on productivity movements and whether demand for its products increases sufficiently to enable savings from economies of increased production to finance continued payment to workers. In principle, the combination of the new hiring by this and other companies will build aggregate worker income and, in turn, demand for the products.
The pivotal question, of course, is to what extent, by serving to maintain and often to increase employment, shorter hours will be the dynamic new ingredient needed to bolster demand and increase it to the point where more and more companies have to expand employment further and thereby carry along an accelerating rate of economic and employment growth.
Although no reliable answers can be offered, some rough statistical estimates may be useful to show the potential magnitude and significance of hours reduction in relation to current unemployment levels.
Consider the most recent data available at the time of this calculation. Total employment of non-agricultural wage and salary workers in mid-1962 was 51.3 million (not counting the self-employed, domestic servants or unpaid family workers). Many of these workers (11.2 million) were on workweek schedules under 40 hours for various reasons. This left 40.1 million on workweeks of 40 hours or longer.
For every hour cut from the workweek of this fulltime wage and salary workforce, the number of new employees required to provide the same national total workhours is roughly one million. If 2.5 hours were cut from the workweek, the number of additional employees needed at a 37.5-hour week to maintain the same total workhours would be 2.7 million.
There obviously are many practical limitations in such calculations. It would not be feasible, for example, to reduce hours in all non-agricultural industries uniformly or at the same time.
There also are many factors affecting the actual number of new hires likely to take place immediately upon reduction of hours. The number of new hires would be reduced, for instance, to the extent that some companies made up lost hours by putting involuntary part-timers back on fulltime or by working present employees overtime. Another limitation on hiring is that reduced hours of present employees are not always directly replaceable by new employees. Much would depend on the extent to which work needed in the reduced hours coincided with the skills and geographical location of idle labor. Other significant factors also are involved, some making for even greater hiring. To the extent that new hiring occurs, for example, it would quickly increase demand and touch off additional production and hiring.
But even if the rough ratio of a 1-hour cut in the workweek to 1 million new jobs may be too high for practical purposes, it demonstrates the enormous potential of revision of the workweek as a force for enlarged employment.
If reduction took place for only half the fulltime non-farm workforce, for instance, the rough replacement ratio would be halved: One hour’s cut equals half a million new employed workers. A 5-hour cut to a 35-hour week for only half the workforce would release enough workhours for over 2.5 million jobs. [s-man: the punchline!]
What if similar rough calculations are made for manufacturing alone? There are roughly 14.3 million fulltime wage and salary workers on schedules of 40 hours a week or more (of 16.7 million total employment). The replacement ratio for a 1-hour cut in the workweek for these fulltime workers is 3 65,000 additional workers. For a 2.5-hour cut, it is 950,000 employees. For a 5-hour cut to a 35-hour week, it is over 2 million new employees.
In construction, comparable figures are more difficult to calculate because data on hours worked are often affected by weather and other factors. But very rough estimates indicate about 3 million construction industry workers are on workweeks of 40 hours or more. A 1-hour cut in their workweek would be equivalent to fulltime jobs for about 75,000 additional workers. A 5-hour reduction would be replaceable by over 400,000 new jobs.
In broad summary, then, reduction in hours without curtailment of weekly pay is looked to by the labor movement as a vital new tool to swing into action against excessive and rising unemployment.
Since 1953, after Korea, unemployment has doubled, from less than 3 percent then to nearly 6 percent today. For the decade ahead, with the labor force due to grow at a faster rate and advance in technology gaining momentum, unemployment is threatening to mount even more. If the economy does no better in creating new jobs in the 1960s than it did in the 1950s, the decade would close with an unemployment rate of nearly 10 percent—at least 7 to 8 million fully unemployed.
Wednesday, November 26, 2008
More from the NY Galbraith Conference
More from the Nov. 14 conference in New York organized by James Galbraith, as promised.
Bernard Schwarz called for the government to take over basic R&D for the Big Three automakers to come up with a truly green engine and to help reduce their expenses.
Bill Black supported bringing back the Glass-Steagall Act. I opposed this, but now seeing the collapse of Citibank am more open to the idea.
Pierre Calame called for the formation of regional monetary systems around the world.
Ping Chen called for a new relationship between the US and China in which the US would relax its restrictions on industries and firms that China can invest in, while China invests more directly in the building of US infrastructure and also in financially supporting its educational institutions.
George Papandreou, former foreign minister of Greece and president of the Socialist International, thanked James Galbraith for his father having saved the life of George's father, who was an economist and later prime minister, who was nearly executed by the junta. Papandreou called for a redistribution of wealth and power with green development to combat "barbarism on the planet."
(Happy Thanksgiving everybody)
Bernard Schwarz called for the government to take over basic R&D for the Big Three automakers to come up with a truly green engine and to help reduce their expenses.
Bill Black supported bringing back the Glass-Steagall Act. I opposed this, but now seeing the collapse of Citibank am more open to the idea.
Pierre Calame called for the formation of regional monetary systems around the world.
Ping Chen called for a new relationship between the US and China in which the US would relax its restrictions on industries and firms that China can invest in, while China invests more directly in the building of US infrastructure and also in financially supporting its educational institutions.
George Papandreou, former foreign minister of Greece and president of the Socialist International, thanked James Galbraith for his father having saved the life of George's father, who was an economist and later prime minister, who was nearly executed by the junta. Papandreou called for a redistribution of wealth and power with green development to combat "barbarism on the planet."
(Happy Thanksgiving everybody)
So Shrink the Beast, Already!
by the Sandwichman
A key element of Professor Victor's proposed low-growth economic strategy is reducing work time. Although the discussion of reduced work time doesn't show up until the final chapter, it is hard to imagine a viable alternative to endless economic growth without it. As Suzuki wrote in his column, "This current economic crisis provides an opportunity to re-examine our priorities." (See also the New Scientist on The Folly of Growth).
This current economic crisis... and the political transition in the US. Back in August the New York Times Magazine published an article by David Leonhardt on "Obamanomics." The dramatic climax appeared toward the end of the article when a press aide walked back to Leonhardt's seat on the Obama campaign plane to tell him that Obama had more to say.
"Something of a paradigm shift for economics" would require a move away from economic growth for growth's sake. Otherwise, it wouldn't be much of a paradigm shift. Managing without growth necessitates the reduction of working time. Otherwise, unemployment and poverty will destroy social stability.
The Sandwichman would like to call attention again to his "American Vision", submitted to the change.gov transistion website, of a Shorter Work Time Jubilee.
In the past, people trembled in fear of dragons, demons, gods, and monsters, sacrificing anything – virgins, money, newborn babies – to appease them. We know now that those fears were superstitious imaginings, but we have replaced them with a new behemoth: the economy. -- David SuzukiDavid Suzuki is the Canadian counterpart to Carl Sagan -- a renowned scientist turned TV and radio celebrity. He's also an outspoken environmentalist with his own foundation and a weekly column published in newspapers and magazines across Canada. In last week's column, Suzuki highlighted a new book by Peter Victor, Managing Without Growth: Slower by Design, Not Disaster.
A key element of Professor Victor's proposed low-growth economic strategy is reducing work time. Although the discussion of reduced work time doesn't show up until the final chapter, it is hard to imagine a viable alternative to endless economic growth without it. As Suzuki wrote in his column, "This current economic crisis provides an opportunity to re-examine our priorities." (See also the New Scientist on The Folly of Growth).
This current economic crisis... and the political transition in the US. Back in August the New York Times Magazine published an article by David Leonhardt on "Obamanomics." The dramatic climax appeared toward the end of the article when a press aide walked back to Leonhardt's seat on the Obama campaign plane to tell him that Obama had more to say.
"Two things," he said, as we were standing outside the first-class bathroom. "One, just because I think it really captures where I was going with the whole issue of balancing market sensibilities with moral sentiment. One of my favorite quotes is — you know that famous Robert F. Kennedy quote about the measure of our G.D.P.?"
I didn’t, I said.
"Well, I’ll send it to you, because it’s one of the most beautiful of his speeches," Obama said.
In it, Kennedy argues that a country’s health can’t be measured simply by its economic output. That output, he said, "counts special locks for our doors and the jails for those who break them” but not "the health of our children, the quality of their education or the joy of their play."
The second point Obama wanted to make was about sustainability. The current concerns about the state of the planet, he said, required something of a paradigm shift for economics. If we don’t make serious changes soon, probably in the next 10 or 15 years, we may find that it’s too late.
"Something of a paradigm shift for economics" would require a move away from economic growth for growth's sake. Otherwise, it wouldn't be much of a paradigm shift. Managing without growth necessitates the reduction of working time. Otherwise, unemployment and poverty will destroy social stability.
The Sandwichman would like to call attention again to his "American Vision", submitted to the change.gov transistion website, of a Shorter Work Time Jubilee.
Five versions of ‘truth’ for the Three Mile Island nuclear disaster.
I had a phone call from a member of the Australian Citizens' Electoral Council this morning. The CEC is the Australian arm of Lyndon La Rouche's group and, as such, this branch is also heavily involved in the promotion of the expansion of nuclear power across the globe. When I questioned the wisdom of promoting such a dangerous and unsustainable form of energy I was assured by the caller that the science surrounding nuclear power is sound. I decided to have yet another look at some of the studies done. To simplify, I focussed on those related to Three Mile Island and specifically on the way the exposure levels of radiation were determined. What I found was a divergence of 'objective' observations clearly at odds with each other. (References 3, 4 and 5 all refer to the one report, the 1990 Hatch-Susser study.]
Harold Denton, Director of the Office of Nuclear Reactor Regulation ““They are getting 63 curies per second…[in] the order of three times what they were yesterday, which would put us in the 1200 millirems per hour." [1]
Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation: “To a distance of about five miles. I have got a reading. During one of these burst, releases up over the plant several hours ago, up over the plant about 1200 millirems per hour which seems to calculate out, by the time the plume comes to the ground where people would get it, would be about 120 millirems per hour. Now, that is still below the EPA evacuation trigger levels; on the other hand, it certainly is a pretty husky dose rate to be having off-site [2]
The American Nuclear Society: “in every instance, the level of exposure was deemed to be very low” – an average of approximately 10 millirems and projected maximum dose of 100 millirems. [3]
Jan Beyea (nuclear physicist involved in the Hatch-Susser study): He estimates the maximum was 200 millirems. He said the figure could be up to four times that much, but said that was "very, very unlikely." Average doses in the area northwest of the plant - the direction in which the radiation plume traveled - were about 28 millirems, he said….. Some of the gauges simply were not able to measure amounts as high as what was released, said Jan Beyea…"It was insane," Beyea said of the inadequate monitoring. "It was sort of a sign of the optimism that nothing would ever go bad." [4]
Text from the scientific abstract of the Hatch-Susser study as published in the American Journal of Epidemiology: “the model of accident emissions was validated by readings from off-site dosimeters.” [5]
It is alarming to witness the parallels occuring in the fields of enviromental monitoring with that of the pesticide industry. Industry and government technicians seek out the areas where toxins are most likely to be watered down and base their observations and conclusions on studies in those areas. The vulnerability of individuals to narrow swathes of intense bands of poisons is ignored completely.
At this juncture in time I believe that it is justifiable for one to conclude - on the basis of a long history of disasters and accidents - that nuclear technology has been truly tested 'in the field'. Like many other industrial sectors it has been found wanting and so have the associated regulatory and academic institutions. Governance has simply not kept pace with the dangerous technologies employed by the world's transnational corporations.
[1] Pittburgh Post-Gazette Monday, April 16, 1979. The newspaper published a special report from the Associated Press that included excerpts of tape recordings of the proceedings of the Nuclear Regulatory Commission including the transcripts of the taped voices of Harold Denton, Director and Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation. Their voices were taped on 30th March 1979 as they responded to the enormous release of radioactive gases at the Three Mile Island nuclear power plant in the US. As published in ‘SECRET FALLOUT - LOW-LEVEL RADIATION FROM HIROSHIMA TO THREE-MILE ISLAND – Chapter 18 ‘Too Little Too Late’ by Ernest Sternglass.
http://www.ratical.org/radiation/SecretFallout/SFchp18.html
[2] Pittburgh Post-Gazette Monday, April 16, 1979. The newspaper published a special report from the Associated Press that included excerpts of tape recordings of the proceedings of the Nuclear Regulatory Commission including the transcripts of the taped voices of Harold Denton, Director and Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation. Their voices were taped on 30th March 1979 as they responded to the enormous release of radioactive gases at the Three Mile Island nuclear power plant in the US. As published in ‘SECRET FALLOUT - LOW-LEVEL RADIATION FROM HIROSHIMA TO THREE-MILE ISLAND – Chapter 18 ‘Too Little Too Late’ by Ernest Sternglass.
http://www.ratical.org/radiation/SecretFallout/SFchp18.html
[3] Health Studies Find No Cancer Link to TMI. From the American Nuclear Socity website. Accessed on 26th November 2008.
http://www.ans.org/pi/resources/sptopics/tmi/healthstudies.html
[4] Gaps in research have angered some who were there in 1979
TOM AVRIL / Philadelphia Inquirer 26mar04
http://www.mindfully.org/Nucs/2004/Three-Mile-Island26mar04.htm
[5] American Journal of Epidemiology Vol. 132, No. 3: 397-412
Copyright © 1990 by The Johns Hopkins University School of Hygiene and Public Health
research-article
CANCER NEAR THE THREE MILE ISLAND NUCLEAR PLANT: RADIATION EMISSIONS
MAUREEN C. HATCH1,, JAN BEYEA2, JERI W. NIEVES1 and MERVYN SUSSER1,3
http://aje.oxfordjournals.org/cgi/content/abstract/132/3/397
1Division of Epidemiology, Columbia University School of Public Health New York, NY
2National Audubon Society New York, NY
3Gertrude H. Sergievsky Center, Columbia University New York, NY
Harold Denton, Director of the Office of Nuclear Reactor Regulation ““They are getting 63 curies per second…[in] the order of three times what they were yesterday, which would put us in the 1200 millirems per hour." [1]
Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation: “To a distance of about five miles. I have got a reading. During one of these burst, releases up over the plant several hours ago, up over the plant about 1200 millirems per hour which seems to calculate out, by the time the plume comes to the ground where people would get it, would be about 120 millirems per hour. Now, that is still below the EPA evacuation trigger levels; on the other hand, it certainly is a pretty husky dose rate to be having off-site [2]
The American Nuclear Society: “in every instance, the level of exposure was deemed to be very low” – an average of approximately 10 millirems and projected maximum dose of 100 millirems. [3]
Jan Beyea (nuclear physicist involved in the Hatch-Susser study): He estimates the maximum was 200 millirems. He said the figure could be up to four times that much, but said that was "very, very unlikely." Average doses in the area northwest of the plant - the direction in which the radiation plume traveled - were about 28 millirems, he said….. Some of the gauges simply were not able to measure amounts as high as what was released, said Jan Beyea…"It was insane," Beyea said of the inadequate monitoring. "It was sort of a sign of the optimism that nothing would ever go bad." [4]
Text from the scientific abstract of the Hatch-Susser study as published in the American Journal of Epidemiology: “the model of accident emissions was validated by readings from off-site dosimeters.” [5]
It is alarming to witness the parallels occuring in the fields of enviromental monitoring with that of the pesticide industry. Industry and government technicians seek out the areas where toxins are most likely to be watered down and base their observations and conclusions on studies in those areas. The vulnerability of individuals to narrow swathes of intense bands of poisons is ignored completely.
At this juncture in time I believe that it is justifiable for one to conclude - on the basis of a long history of disasters and accidents - that nuclear technology has been truly tested 'in the field'. Like many other industrial sectors it has been found wanting and so have the associated regulatory and academic institutions. Governance has simply not kept pace with the dangerous technologies employed by the world's transnational corporations.
[1] Pittburgh Post-Gazette Monday, April 16, 1979. The newspaper published a special report from the Associated Press that included excerpts of tape recordings of the proceedings of the Nuclear Regulatory Commission including the transcripts of the taped voices of Harold Denton, Director and Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation. Their voices were taped on 30th March 1979 as they responded to the enormous release of radioactive gases at the Three Mile Island nuclear power plant in the US. As published in ‘SECRET FALLOUT - LOW-LEVEL RADIATION FROM HIROSHIMA TO THREE-MILE ISLAND – Chapter 18 ‘Too Little Too Late’ by Ernest Sternglass.
http://www.ratical.org/radiation/SecretFallout/SFchp18.html
[2] Pittburgh Post-Gazette Monday, April 16, 1979. The newspaper published a special report from the Associated Press that included excerpts of tape recordings of the proceedings of the Nuclear Regulatory Commission including the transcripts of the taped voices of Harold Denton, Director and Joseph M Henri Chairman of the Office of Nuclear Reactor Regulation. Their voices were taped on 30th March 1979 as they responded to the enormous release of radioactive gases at the Three Mile Island nuclear power plant in the US. As published in ‘SECRET FALLOUT - LOW-LEVEL RADIATION FROM HIROSHIMA TO THREE-MILE ISLAND – Chapter 18 ‘Too Little Too Late’ by Ernest Sternglass.
http://www.ratical.org/radiation/SecretFallout/SFchp18.html
[3] Health Studies Find No Cancer Link to TMI. From the American Nuclear Socity website. Accessed on 26th November 2008.
http://www.ans.org/pi/resources/sptopics/tmi/healthstudies.html
[4] Gaps in research have angered some who were there in 1979
TOM AVRIL / Philadelphia Inquirer 26mar04
http://www.mindfully.org/Nucs/2004/Three-Mile-Island26mar04.htm
[5] American Journal of Epidemiology Vol. 132, No. 3: 397-412
Copyright © 1990 by The Johns Hopkins University School of Hygiene and Public Health
research-article
CANCER NEAR THE THREE MILE ISLAND NUCLEAR PLANT: RADIATION EMISSIONS
MAUREEN C. HATCH1,, JAN BEYEA2, JERI W. NIEVES1 and MERVYN SUSSER1,3
http://aje.oxfordjournals.org/cgi/content/abstract/132/3/397
1Division of Epidemiology, Columbia University School of Public Health New York, NY
2National Audubon Society New York, NY
3Gertrude H. Sergievsky Center, Columbia University New York, NY
2.5 Million Jobs III
From: AFL-CIO American Federationist | November 1962, pp. 19-21.
ECONOMIC TRENDS & Outlook
CREATING JOBS THROUGH SHORTER HOURS
ECONOMIC TRENDS & Outlook
CREATING JOBS THROUGH SHORTER HOURS
The Government’s Role
The government could encourage bargaining to reduce hours, set an example by adjusting hours on government work and/or enact new workweek legislation. A positive policy would require specific announcement that the Administration would not discourage reductions in hours and would welcome this, at least in particular industries, as one of the variety of measures individual industries might use to bolster employment security.
Setting an example, in its role as an employer as it has done in the past. would require establishment of new reduced workweeks for employees to serve as an experiment and broad guide for private industry. It is worth noting that about a third of U.S. municipal governments already have fulltime workweek schedules shorter than 40 hours for their administrative and clerical employees.
New workweek legislation could of course take many forms. The principal approaches suggested have called for a reduction in the 40-hour standard established by the Fair Labor Standards Act, either immediately or in several steps spread over a period of time and either uniformly for all covered industries or through a special industry committee procedure functioning on an industry-by-industry basis. Each of these alternatives has some past legislative precedent.
Another major suggested legislative approach is a flexible workweek to be adjusted according to changes in the unemployment rate. A federal fund financed by a tax on employers could be established to help maintain weekly pay and national consumer purchasing power upon such reduction in hours. If the payments from the fund were scaled according to whether the employer hired more workers when he reduced hours, there would be an additional incentive for increased employment.
Tuesday, November 25, 2008
The Return of Rubinomics
As the President-elect announced the appointment of Peter Orszag as head of OMB, he said something that might cheer up those deficit hawks:
Rubinomics – at least as I understood it – meant that we accelerate Federal spending in the midst of a recession but tell Wall Street over the long-term, we are serious about long-term fiscal restraint. We might also give tax cuts to liquidity constrained people such as the working poor but raise taxes on those who are not liquidity constrained – such as Bill Gates and Warren Buffet. In other words, short-term fiscal restraint to actually REDUCE national savings with some assurance to Wall Street that once this recession is over, we restore a commitment to increasing savings and investment.
While John Taylor seems confused about this one, Paul Krugman gets it:
In just a few weeks, we will finally have a President who also gets it even if that lame duck never did.
In these challenging times, when we are facing both rising deficits and a sinking economy, budget reform is not an option. It is an imperative," Obama said in the statement. "We cannot sustain a system that bleeds billions of taxpayer dollars on programs that have outlived their usefulness, or exist solely because of the power of a politician, lobbyist, or interest group," he said. Obama said he would ask his economic team to "think anew and act anew" to meet new challenges. "We will go through our federal budget -- page by page, line by line -- eliminating those programs we don't need, and insisting that those we do operate in a sensible cost-effective way," Obama said.
Rubinomics – at least as I understood it – meant that we accelerate Federal spending in the midst of a recession but tell Wall Street over the long-term, we are serious about long-term fiscal restraint. We might also give tax cuts to liquidity constrained people such as the working poor but raise taxes on those who are not liquidity constrained – such as Bill Gates and Warren Buffet. In other words, short-term fiscal restraint to actually REDUCE national savings with some assurance to Wall Street that once this recession is over, we restore a commitment to increasing savings and investment.
While John Taylor seems confused about this one, Paul Krugman gets it:
Thus, John Taylor — a very good economist, when he wants to be — insists that we must respond to the economy’s temporary weakness with a permanent tax cut. Let us reason together. Does it make sense to let one recession dictate tax policy in perpetuity? What happens if there’s a boom; can we increase taxes (no, because then the cut wouldn’t have been permanent.) What if there’s another recession? Do we permanently cut taxes again? Is there a tax-cut ratchet (or maybe racket)? Think this through, and it makes no sense at all. And Taylor’s argument against the obvious answer — government spending as stimulus — is pure gobbledygook
In just a few weeks, we will finally have a President who also gets it even if that lame duck never did.
Greg Mankiw on Obama’s Fiscal Stimulus Proposal
Does Greg Mankiw have a good point here:
Greg is reviewing to this:
To be fair, I praised the size of the proposed stimulus and I also wondered why there was such a low bar for job creation over the first two years.
But let me suggest an alternative explanation (as opposed to low multipliers) based on something the President-elect has said about things getting worse before they get better. Could it be that his economic team expects employment to fall even further before this proposed stimulus turns things around? For example – suppose we wake up in the New Year to an 8 percent unemployment rate which would translate into about 3.5 million jobs lost. To get a net increase of 2.5 million new jobs would mean we would have to see 6 million jobs created over the next two years. If the actual fiscal stimulus were $500 million, then we are talking about $83 thousand not $280 thousand. And the implied multiplier would be closer to 1.2 not 0.36.
Dividing one number by the other, that works out to $280,000 per job. What is going on here? Logically, it must be one of three possibilities: 1. The fiscal stimulus is going to be much smaller than is being reported. 2. The new administration is setting a low bar for itself when it comes to job creation. 3. The Obama team believes in very small fiscal policy multipliers.
Greg is reviewing to this:
Facing an increasingly ominous economic outlook, President-elect Barack Obama and other Democrats are rapidly ratcheting up plans for a massive fiscal stimulus program that could total as much as $700 billion over the next two years ... Obama has set a goal of creating or preserving 2.5 million jobs by 2011.
To be fair, I praised the size of the proposed stimulus and I also wondered why there was such a low bar for job creation over the first two years.
But let me suggest an alternative explanation (as opposed to low multipliers) based on something the President-elect has said about things getting worse before they get better. Could it be that his economic team expects employment to fall even further before this proposed stimulus turns things around? For example – suppose we wake up in the New Year to an 8 percent unemployment rate which would translate into about 3.5 million jobs lost. To get a net increase of 2.5 million new jobs would mean we would have to see 6 million jobs created over the next two years. If the actual fiscal stimulus were $500 million, then we are talking about $83 thousand not $280 thousand. And the implied multiplier would be closer to 1.2 not 0.36.
An Appeal to Reason on Iran
On November 21, the inimitable Juan Cole (http://www.juancole.com) posted an appeal from 20 experts on Iran from both parties with a variety of backgrounds, including three ambassadors, for a more reasonable policy on Iran. One should go to his site to see the full discussion, but the highlights are five recommendations and the deconstruction of eight myths. I list them without details. Cole called for others to publicize this, and so I am doing so here a few days late, and making clear my agreement with and support of this appeal.
The five recommendations:
1) Replace calls for regime change in Iran with a long term strategy.
2) Support human rights through effective international means.
3) Allow Iran a place at the table in determining the future of Iraq and Afghanistan, along with other key states.
4) Address the nuclear issue within the context of a broader US-Iran opening.
5) Re-energize the Arab-Israeli peace process with the US being an honest broker.
The eight myths:
1) President Ahmadinejad calls the shots on foreign and nuclear policy.
2) The political system in Iran is frail and ripe for regime change.
3) Iranian leaders' religious beliefs render them undeterrable.
4) Iran's current leaders are implacably opposed to the US.
5) Iran has a declared intention to attack Israel to "wipe Israel off the map."
6) US sponsored "democracy promotion" can help bring true democracy to Iran.
7) Iran has clearly and firmly committed to developing nuclear weapons.
8) Iran and the US have no basis for dialogue.
The five recommendations:
1) Replace calls for regime change in Iran with a long term strategy.
2) Support human rights through effective international means.
3) Allow Iran a place at the table in determining the future of Iraq and Afghanistan, along with other key states.
4) Address the nuclear issue within the context of a broader US-Iran opening.
5) Re-energize the Arab-Israeli peace process with the US being an honest broker.
The eight myths:
1) President Ahmadinejad calls the shots on foreign and nuclear policy.
2) The political system in Iran is frail and ripe for regime change.
3) Iranian leaders' religious beliefs render them undeterrable.
4) Iran's current leaders are implacably opposed to the US.
5) Iran has a declared intention to attack Israel to "wipe Israel off the map."
6) US sponsored "democracy promotion" can help bring true democracy to Iran.
7) Iran has clearly and firmly committed to developing nuclear weapons.
8) Iran and the US have no basis for dialogue.
2.5 Million Jobs II
From: AFL-CIO American Federationist | November 1962, pp. 19-21.
ECONOMIC TRENDS & Outlook
CREATING JOBS THROUGH SHORTER HOURS
ECONOMIC TRENDS & Outlook
CREATING JOBS THROUGH SHORTER HOURS
The relative merits of alternative economic approaches are not evaluated here. The points below may be useful, however, in assessing the wisdom of hours reduction as against other measures generally:
1. Shortening of hours does not need pinpoint timing for full effectiveness but is practicality and value diminish once a full-fledged recession is in process. The workweek can best be reduced with no loss in weekly pay while the economy is still comparatively prosperous, before unemployment pressures have mounted to become the dominant economic force. If the shorter hours tool is held in reserve too long and turned to only after the full shock of recession or immense load of unemployment arrives, its practicality and positive benefits will be severely blunted. Shorter hours would likely come then largely in an undesirable worksharing, cut-wage form force by overwhelming unemployment and would not be adequate to the task of contributing substantial momentum to employment upturn.
2. Advocacy of shorter hours does not mean rejection of other measures to increase employment. The choice need not and should not be an either/or proposition. Reduction of hours should be one of many steps applied to control unemployment, with the size of the reduction determined by the effectiveness of the overall program. If other measures prove effective in providing needed jobs, hours reduction can of course proceed more gradually.
3. Shorter hours are increasingly recognized by most workers and the public generally as directly related to the unemployment problem. This is not true to the same extent for other measures, such as government fiscal or monetary policies. Because so many workers would be directly or consciously involved in a general shortening of hours, there likely would be a wide sense of participation and appreciation of the anti-unemployment campaign, with accompanying psychological benefits for the economy.
4. Many of the collective agreement and government measures used to ease unemployment effects are geared to helping the unemployed worker hunt for a new job. These include private public retraining programs, relocation aid, counseling, severance pay and approaches. A major objective of shorter hours, on the other hand, is to reduce the need for layoffs and thereby encourage retention of workers in the type of work and industry to which they are already attached and in which they have already acquired training.
5. There is rather wide recognition that rapid technological strides will enable or force radically shorter hours at some point in the future, perhaps not all distant. Reduction in typical hours of work in the present period are necessary to aid in the economic and social transition to increased reliance on technology in place of manpower.
Monday, November 24, 2008
1979: A Warning and a Prophecy for America
"Washington must realize that the dollar can no longer act as the sole reserve currency in the world. The dependence of the world on the dollar is not a blessing but a curse for America."
.....Nobody knows how Turkey Zaire, Peru and many other impecunious countries will ever pay back their loans to Citibank, Chase or the rest of the big U.S. lenders. The debtor countries, pleading poverty, could indefinitely defer repayment. Then the Federal Reserve Board would have to cover those bad debts, meaning that the U.S. taxpayer would finance the bailout. Says Zombanakis: "We have created a system in which almost the entire debt of the world rests on the Federal Reserve."[1]
These are the words of 'gunslinger' loan shark that sold syndicated loans [2] to the third world at an astronomical rate, according to economic historian and author Michael Moffitt [3].
"...Zombanakis did not invent the syndicated loan, but he is the one who put real flesh and blood in the market. Zombanakis brought numerous countries to the market who had never borrowed in international money markets before. Jetting around the world he dropped in on companies and finance ministries drumming up loan business for Manufactures Hanover, in the late 1960s when the Shah of Iran was virtually unknown outside the Middle East, he was introduced to Europe’s banking elite by Minos Zombanakis. As one banker told ‘institutional investor’ Zombanakis almost single-handedly got Manufacrturers to make a loan to Iran when it did not even have enough reserves to cover a month’s imports.” Loans like these were extremely risky and were sold more on Zombanakis’ bravado than on Iran’s credit-worthines...."[4]
[1]
The Saudis and the Dollar
By Marshall Loeb. Monday, Mar. 26, 1979
http://www.time.com/time/magazine/article/0,9171,916691,00.html
[2] "Rather than assuming the whole risk of, for example, a $100 million loan to Mexico, the lead bank will telex a hundred others and offer them a piece of the loan. Syndicated loans are priced at the going interest rate, known as LIBOR, (London Inter-Bank Offered Rate) plus a margin known as a spread, which is inevitably proportional to the perceived creditworthiness of the borrower. For years, Brazil borrowed a tiny fraction over LIBOR. Once bankers got wind of Brazil’s smoldering debt problems, its spreads quickly soared over 2 percent. "‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk.
[3] ‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk. Pages 57 - 61
[4] ‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk. Pages 57 - 61
.....Nobody knows how Turkey Zaire, Peru and many other impecunious countries will ever pay back their loans to Citibank, Chase or the rest of the big U.S. lenders. The debtor countries, pleading poverty, could indefinitely defer repayment. Then the Federal Reserve Board would have to cover those bad debts, meaning that the U.S. taxpayer would finance the bailout. Says Zombanakis: "We have created a system in which almost the entire debt of the world rests on the Federal Reserve."[1]
These are the words of 'gunslinger' loan shark that sold syndicated loans [2] to the third world at an astronomical rate, according to economic historian and author Michael Moffitt [3].
"...Zombanakis did not invent the syndicated loan, but he is the one who put real flesh and blood in the market. Zombanakis brought numerous countries to the market who had never borrowed in international money markets before. Jetting around the world he dropped in on companies and finance ministries drumming up loan business for Manufactures Hanover, in the late 1960s when the Shah of Iran was virtually unknown outside the Middle East, he was introduced to Europe’s banking elite by Minos Zombanakis. As one banker told ‘institutional investor’ Zombanakis almost single-handedly got Manufacrturers to make a loan to Iran when it did not even have enough reserves to cover a month’s imports.” Loans like these were extremely risky and were sold more on Zombanakis’ bravado than on Iran’s credit-worthines...."[4]
[1]
The Saudis and the Dollar
By Marshall Loeb. Monday, Mar. 26, 1979
http://www.time.com/time/magazine/article/0,9171,916691,00.html
[2] "Rather than assuming the whole risk of, for example, a $100 million loan to Mexico, the lead bank will telex a hundred others and offer them a piece of the loan. Syndicated loans are priced at the going interest rate, known as LIBOR, (London Inter-Bank Offered Rate) plus a margin known as a spread, which is inevitably proportional to the perceived creditworthiness of the borrower. For years, Brazil borrowed a tiny fraction over LIBOR. Once bankers got wind of Brazil’s smoldering debt problems, its spreads quickly soared over 2 percent. "‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk.
[3] ‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk. Pages 57 - 61
[4] ‘The World’s Money – International banking from Bretton Woods to the brink of insolvency’ by Michael Moffitt. Touchstone Book, Simon and Schuster New York. 1983. ISBN: 0-671-50596-3 Pbk. Pages 57 - 61
Is the US Treasury Getting too Big to Fail?
For an administration based on an ideology of untrammeled capitalism and which demands that all socially useful programs meet cost-benefit calculations heavily tilted toward inaction, the government seems to be getting little bang for its buck. Here is a Bloomberg estimate of a commitment of $7.7 trillion. Yes, the government can recoup some of this money, but probably not a lot.
Pittman, Mark and Bob Ivry. 2008. "U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit." Bloomberg.com (24 November).
Pittman, Mark and Bob Ivry. 2008. "U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit." Bloomberg.com (24 November).
The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.
The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.
[...]
The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.
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