The inflation of the 1950s and 60s and 70s wasn't wage-push inflation. It was finance-push

The first graph shows corporate interest costs (red) and corporate employee compensation (blue), with each shown as a percent of total corporate deductions. (I'm using total corporate deductions as a proxy for total corporate costs.)  Compensation costs run much higher than interest costs; that is as it should be.

However, as you can see, compensation falls while interest costs rise:

Look at the same data with the red shown as an addition to the blue:

The blue region on the second graph shows employee compensation. The red region shows interest costs. 

The blue line shows the total of everything below it. It shows employee compensation just as we saw it on the first graph.

The red line on the second graph shows the total of everything below it. In this case, it shows the total of the two regions -- interest and compensation costs, combined.

The red line runs close to horizontal: Combined, the two costs make up close to 25% of deductible corporate expenses. But the blue line falls five percentage points, from near 25% to near 20% of corporate costs

Essentially, during the three decades from 1950 to 1980, employee compensation fell by 5% of corporate expenses. At the same time, interest costs increased by 5% of corporate expenses. Essentially, all of the money for the interest cost increase came out of wages.

Economists have always said that rising wages caused the inflation of the 1960s and 70s. It is simply not true. Increasing financial cost caused that inflation.

"Behaving like Mussolini". Unfortunately, some people like the idea

Business Insider -- Historians and election experts warn Trump is behaving like Mussolini and despots that the US usually condemns by John Haltiwanger:

President Donald Trump is refusing to commit to a peaceful transfer of power, threatening to shatter a tradition that lies at the heart of the democratic process in the US. There are serious concerns among scholars that Trump is putting America's democracy in mortal danger. 

Combined with Trump's relentless disinformation campaign, celebration of violence against journalists, and incitement of armed militias, historians and election experts warn that the president is mirroring the behavior of despots that the US generally leads the way in condemning before the world. 

"I've been an election observer in broken authoritarian countries, and let me tell you: Trump's behavior would be swiftly and unequivocally condemned by all international election monitors if it was happening elsewhere. He is behaving like the despots past presidents condemned," Brian Klaas, a political scientist at the University College London, tweeted on Friday.

There is more, but you get the idea.

It's been over a year since I posted this, from Franklin D. Roosevelt and the New Deal by William E. Leuchtenburg:

It was frequently remarked in later years that Roosevelt saved the country from revolution. Yet the mood of the country during the winter of 1932-33 was not revolutionary. There was less an active demand for change than a disillusionment with parliamentary politics, so often the prelude to totalitarianism in Europe.

Many Americans came to despair of the whole political process, a contempt for Congress, for parties, for democratic institutions, which was caught by the relentless cynicism of Of Thee I Sing. "There is no doubt in the world," wrote William Dodd, "that both political parties have been bankrupted." The "lame duck" session from December, 1932, through February, 1933, further damaged the prestige of Congress. At a time of mounting crisis, Congress failed to produce a single important piece of economic legislation.

Many argued that the country could get out of the morass of indecision only by finding a leader and vesting in him dictatorial powers. Some favored an economic supercouncil which would ignore Congress and issue edicts; Henry Hazlitt proposed abandoning Congress for a directorate of twelve men. Others wished to confer on the new president the same arbitrary war powers Woodrow Wilson had been granted. Even businessmen favored granting Roosevelt dictatorial powers when he took office. Distressed by the chaotic competition in industries such as oil and textiles, alarmed by the outbursts of violence, convinced of the need for drastic budget slashing, they despaired of any leadership from Congress. "Of course we all realize that dictatorships and even semi-dictatorships in peace time are quite contrary to the spirit of American institutions and all that," remarked Barron's. "And yet -- well, a genial and lighthearted dictator might be a relief from the pompous futility of such a Congress as we have recently had... So we return repeatedly to the thought that a mild species of dictatorship will help us over the roughest spots in the road ahead."

What amazes me is that this was written in the early 1930s or before

When we Westerners call people ‘natives’ we implicitly take the cultural colour out of our perception of them. We see them as wild animals infesting the country in which we happen to come across them, as part of the local flora and fauna and not as men of like passions with ourselves. So long as we think of them as ‘natives’ we may exterminate them or, as is more likely to-day, domesticate them and honestly (perhaps not altogether mistakenly) believe that we are improving the breed, but we do not begin to understand them.

-- Arnold J Toynbee, A Study of History.
From page 36 in the Introduction

Feeling ignored of late?

To the student of Graeco-Roman history, on the other hand, both the Christians and the Barbarians would present themselves as creatures of an alien underworld — the internal and the external proletariat, as he might call them, of that Graeco-Roman (or, to use a better term, Hellenic) Society in its last phase. He would point out that the great masters of Hellenic culture, down to and including Marcus Aurelius, almost ignore their existence.

-- Arnold J Toynbee, A Study of History.
From page 11 in the Introduction

We might take it as a warning

"... when a frontier between a more highly and a less highly civilized society ceases to advance, the balance does not settle down to a stable equilibrium but inclines, with the passage of time, in the more backward society’s favour."

-- Arnold J Toynbee, A Study of History. 
From page 10 in the Introduction

She's not even cold yet

 

"Help support local business"

It was a Google ad (I think) during the Jets/Bills game on the 13th. "Help support local business", it said. Nice sentiment, right? 

Yeah, but it's the biggest scam going.

The message is that if we patronize local business, or small business, then small, local businesses will survive and do well.

The assumption is that it's on us -- that the playing field is level, and that if small, local businesses don't do well it's only because we don't go there very much.

In fact, the playing field is not level, and that is why we don't go there very much.

The business income tax is a tax only on profit, not on total business revenue. This means the revenue that a business spends, in general and as a rule, is not subject to income tax. Only the part that remains of revenue after business spending is subtracted, is subject to the income tax. That's why businesses get receipts when they spend. Only the net income, or pre-tax profit, is taxed.

Again, in general and as a rule, this means that the more a business can afford to spend, the more of a tax break the business gets. There is a reason for this, of course: It encourages businesses to spend, which is good for economic growth.¹

But there's a catch. Big business, which can afford to spend a lot, gets a big tax break. Small business only gets a small tax break. And big business gets a big boost from the tax code, while small business only gets a small boost.

The playing field is not level. It favors big business. Small business gets screwed.

1  Note:

Business spending is good for economic growth... or is probably good for economic growth. But far as I can tell, the idea that business spending is good for growth has been embraced religiously for a couple hundred years now. I'm not saying it's not true. But I am saying that people who know more than I do should drop the religious embrace, and evaluate the idea in the context of today's economy.

Two hundred years ago, business activity was too small to satisfy the wants and needs of society. At that point in time, expanding business activity was a very good idea.

But now, because the business tax encourages growth, business activity has grown faster than society has grown, and it may be just about the right size to satisfy the wants and needs of society. If so, maybe we no longer need a business income tax that helps business activity grow. At least, not one that favors bigness.

Or, maybe business activity is now too big, and we need a business income tax that hinders the growth of business activity? No, I hardly think so.

But maybe, as I think, there is an imbalance: Business activity has outgrown consumption activity. Business activity is too big to service consumption activity because the latter is too small. The one has to fit the other. The tax code has created this imbalance.

The business income tax favors big business. Small business gets screwed, and consumers get screwed.

Whatever. Do what you want. Just remember, the business tax favors bigness, so there is nothing you can do to "support local business" -- nothing that will fix the problem that Google brings to our attention -- until we change the business income tax so that it no longer favors bigness. And while we're at it, so that it no longer favors business over consumers.

If this doesn't completely blow your mind, maybe you should read it again.

"A" as in "Keynes"

Remember Herman Cain? Following the Tulsa campaign rally, death by covid. Human sacrifice at the altar of President Donald J. Trump.
Anyway, "Cain". Put an "s" on the end of it and say it. That's how you say the name "Keynes". You can hear it at Oxford Learner's Dictionaries, and you can see it in their phonetic spellings of "Maynard" and "Keynes" where, for both words, the vowel sound in the first syllable has the same spelling. Sounds like Maynard and Kaynes.
You can read it in an article from Time magazine, 31 December 1965:

"... Keynes (pronounced canes) ..."

Say it with me now: Cains... canes... Keynes.

In Silent Witness season 1 episode 2 (from 1996) there is mention of a town in England, Milton Keynes, pronounced "Milton Keens". That's probably the correct pronunciation of the town's name. And it could be a source of the mispronunciation of the name of John Maynard Keynes.
Mispronunciation? At Khan Academy, Keynes has been pronounced Keens. (I thought I wrote about this, but I can't find it. Nor can I find the text at Khan Academy where that pronunciation was given. It's all video now, Khan.)
I find in the first 17 seconds of the Keynesian Economics video at Khan Academy a correction:

In the transcript, the two spellings are identical. But in the audio you hear "I often mispronounce him as Keens" for the one, and you hear "but it's John Maynard KAYNES" for the other. The speaker makes the correct pronunciation twice as loud as everything else. It's quite obviously a correction of what Khan had done before.
To beat this dead horse once again, consider Risks of Keynesian thinking, which is identified in Khan's sidebar as the follow-up to the Keynesian Economics video noted above.

21 seconds in, the word "Keynesian" is pronounced with no more than a tiny hint of the "A" sound in that first vowel. Then, 25 seconds in, the same word is pronounced with a pure "E" sound. The speaker stops mid-word and adjusts the vowel, but he obviously can't help himself: As he says in the earlier video, "I often mispronounce him as Keens".

But I have to forgive him all that, because he does make the correction and he does want us to know the correct pronunciation.
And note that the spelling is KEYnes even though the pronunciation is KAYnes.

From a google search:

From Wiktionary:

Etymology

From an earlier "Middleton Caynes" when the village was in the manor of the "de Cahaines" family.^[1]

And, golly, the footnote reads:

As seen in a legal record of the 15th century: National Archives; Plea Roll, court of Common Pleas; CP 40 / 0717, for 1440; third entry, first line.

From 50 reasons to love Milton Keynes (what, only 50?)

Milton Keynes was originally envisaged as a London overspill zone, following the recommendations of governmental studies in 1964 and 1965 to build “a new city” incorporating existing towns such as Bletchley, Stony Stratford and Wolverton.

And this:

Unfortunately, it’s not true that Milton Keynes was named after two great, if ideologically opposed, economists. Nor is it true that the other name considered in 1967 for the city was John Maynard Friedman. However, the village of Milton Keynes – from which the 50-year-old city gets its name – was once Middletone, and owned by a Norman family named de Cahaines, from whom Keynes may have descended.

The article, written in 2017, puts the founding of the 50-year-old city at 1967. By the 1970s John Maynard Keynes was disliked and disrespected by many economists, and by the end of that decade Keynesian economics was generally rejected. It wouldn't surprise me if the man's name was mispronounced on purpose. (A teacher back in my college days pointed out that mispronouncing someone's name is a way to show disrespect. He was an interesting guy, that teacher, but finesse in showing disrespect was not one of his better qualities.)
 Mispronounced on purpose, just as the word Federal used to be capitalized but it no longer is because people no longer hold our government in such high esteem. Or so I once read.
From the Daily Mail, 9 Feb 2020:

Rep Alexandria Ocasio-Cortez made an awkward blunder when she mixed-up two economists while addressing the benefits of a four-day work week in a video shared on Instagram. The 30-year-old was asked by one of her followers to discuss the benefits of a shorter work week when she misspoke and referred to 'Milton Keynes'. Ocasio-Cortez later said she had confused a British economist, John Maynard Keynes, with Milton Friedman, who won the 1976 Nobel Prize.

At Fodor's, under Origin of town name Milton Keynes, Andrew asks:

To settle a debate we are having at work does anyone know how the town Milton Keynes got its name - was it something to do with economists Milton Friedman and John Maynard Keynes?

Jen replies:

Sorry, no economists. When the New Town was being planned in the late 60s, it absorbed a variety of villages and hamlets, and the name derives from the smallest of the lot.

DavidBaily adds:

There's a little more to the name: going back a few hundred years the village was named Middleton and the dominant family was the Cahaines and the two names became corrupted to become Milton Keynes

Sorry, AOC, no economists. Milton Keynes is a town in England.
Oh! And watch your pronunciation.

Log scales, rounding errors, and debt

Well, it occurred to me that I can get GDP all the way back to the start of the USA (from MeasuringWorth) and that I have data on public and private debt going back to 1834 (from Steve Keen) so I thought I'd do a graph showing the private-to-public (P-to-P) ratio and how it influences GDP growth. That was a mistake.

I can't start by showing you how P-to-P influences growth. I have to start by looking at it.

So here is a graph that shows the P-to-P ratio, the Real GDP growth rate, and an HP-smoothed version of that growth rate:

Graph #1

Impressive, huh?

Andrew Jackson was elected President in 1828 [note 1: For those concerned about having enough time to count the votes in our upcoming Presidential election, Wikipedia points out that the 1828 election "was held from Friday, October 31 to Tuesday, December 2, 1828."]

NPR tells us that

When Jackson took office, the national debt was about $58 million. Six years later, it was all gone. Paid off. And the government was actually running a surplus, taking in more money than it was spending.

By 1835, the Federal debt was all gone, and that year the government ran a surplus.

NPR says "about $58 million" debt in 1829. Steve Keen has $60.09 million at the end of 1828 and $50.12 at the end of 1829. NPR's number is close to Keen's.

Keen shows the government debt falling to $4.95 million by 1833, and $0.71 million (or $710,000) by 1834. For private debt in 1834 Keen has $625.10 million. For the P-to-P ratio I divide 625.10 by 0.71 and get 880.4. So in 1834, private debt was 880.4 times as big as the government debt.[Note 2: In this text I'm using the numbers as shown to do the calculations. These numbers are rounded to two decimal places. But in the spreadsheet, there are more than two digits to the right of the decimal point. In the spreadsheet, I don't get "880.4 times as big as the government debt". I get 874.6 times as big. You've heard of "rounding errors"? This is one.]

By the way, we're looking at debt here and using numbers like "about $58 million" to describe how much we're in the hole. We're using positive numbers to describe how much we're in the hole. So then, if the government has the debt all paid off and has a surplus, we have to use a negative number to indicate the size of the surplus. A negative number to describe how far out of the hole we are. Weird, but it makes sense in a mathematical sort of way.

In 1835 Keen has private debt at 782.45, and government debt at -0.15 million, a surplus of $150,000. For the P-to-P calculation I divide 782.45 by -0.15 and get -5216.33: Private debt was 5216.33 times bigger than the government surplus that year. (Or in the spreadsheet, 5217.6 times bigger.)

Anyway, that's why the graph starts out just below a thousand, then drops to a little below -5000 the next year, and then back up to over 3000 in 1836 when private debt was 912.31 million and government debt was 0.30 million. After that, the numbers move in smaller steps. But in the first three years the P-to-P numbers are so big they make the numbers that come later look like zeroes.

But a graph that seems to show nothing is not very interesting. So I changed the vertical axis to a log scale:

Graph #2

I didn't change any of the debt numbers. I didn't change any of the GDP numbers. Only the numbers on the vertical scale are different. Each number on the vertical scale is ten times the number below it, and those numbers are equally spaced. The distance from 1 to 10 is the same as the distance from 10 to 100 for example. This gives more space on the graph to small numbers, and less space to big numbers. So the numbers between zero and 100 on my graph now have some room to breathe, and we can see that they're not all zero.

Each number on the vertical scale is ten times bigger than the number below it. Starting at the top, we go from 10000 to 1000 to 100 to 10 to 1 to 0.1. Below 0.1 is 0.01 and below that is 0.001. But I only allowed one decimal place for numbers on the vertical scale, so both the 0.01 and the 0.001 got chopped off at 0.0. So it goes.

Those two numbers cannot both be zero. That would be like the first two inch-marks on a tape measure both being one inch. That would be unacceptable.

Actually, neither of those numbers can be zero, because each number on the vertical scale is ten times smaller than the number above it. For any number on this vertical scale to be zero, the number above it would have to be zero. And as you can see as you go up the vertical scale, those numbers are not zero.

See, this is my idea of something more interesting than my first graph.

Oh yeah... the low, jiggy line, the kinda reddish line on Graph #2, that's percent change in Real GDP, rather like this one from FRED. But there are a lot of missing pieces in my red line. Yeah. Because as Excel says,

"Negative or zero values cannot be plotted correctly on log charts. Only positive values can be interpreted on a logarithmic scale."

It's obvious if you think about it. Each value on the log scale is one-tenth the size of the value above it. If you start with a dollar, the next number down the scale is a dime and the next below that is a penny. Below that, one-tenth of a penny. There is no such coin but if there was, and if  you had a million of em, it would be a lot of money. Certainly not zero.

Take one-tenth of a penny, and take one-tenth of it. It's still more than zero. Take one-tenth of one-tenth of one-tenth of one-tenth of one-tenth of it, and it's still more than zero. It isn't much, but it's more than zero. Yeah, we can just call it zero, and that works in the real world, but it is not proper arithmetic.

If you do proper arithmetic, like for a graph, you can keep going down the log scale forever, getting smaller and smaller values, and you never get to zero. Simply put, there is no zero level on a log scale graph. And if you can't get to zero, you can't go below zero to the negative numbers. Not on a log scale graph.

And that is why Excel says "Negative or zero values cannot be plotted correctly on log charts." Now you know.

And that's why there are missing pieces on the red line. When the RGDP growth number is zero or below, that piece of the red line cannot be plotted.

And it's why the blue line on Graph #2 starts at the year 1836. The line that goes from 1834 to 1835 ends at the -5000 number, and the line that goes from 1835 to 1836 starts at the -5000 number, and neither of those lines can be plotted on a log scale graph. So the blue line starts at the 1836 value, at a value that's something over 3000, not zero, and not below zero.

Confused? It's all Andrew Jackson's fault!

Gold and the panics of yore

From A Brief History of Panics in the United States by Clement Juglar; Third Edition by DeCourcy W. Thom, 1916. Beginning on page 26:

Upon the adoption of the United States Constitution the issuing of paper money ceased, and gold and silver were the only means of circulation. Thence arose great embarrassment for the Bank of North America, which, hampered by its loans to the Government, increased its note circulation to an enormous proportion. The ebb of paper through every channel finally aroused the public fears, and people refused the notes. Every one struggled to obtain metallic money, hence it became impossible to borrow, and bankruptcy followed.

I was confused by the word "ebb" there, as "ebb" means going away or receding or a lessening. But it seems if the Bank of North America "increased its note circulation to an enormous proportion" then there would have been an increase in paper money, not a lessening.

That's not it.

Because of the adoption of the Constitution, the issuing of paper money ceased. That was the "ebb" of paper. I get it now. And the enormous increase in Bank of North America note circulation would have been an obvious "fix" for the problem, and would have been obviously NOT gold or silver. No wonder there was panic.

Back in 2011 I wrote:

I can imagine people reacting -- perhaps to a perceived shortage of gold, created by the relative increase in use of paper money -- by demanding gold, and holding gold, creating the situation where there was in fact a shortage of circulating gold and a shortage of gold backing for paper money.

I think that's more or less what happened after the Constitution was adopted, as described in the History of Panics.

Who the fuck do these people think they are?

Gathering up some data from different sources into an Excel file.
Went as far with it as I could, then took a break.
Came back after an hour, opened the file, and got this message:

That's one I've never seen before. I shoulda just clicked Enable Content but I didn't because it rubbed me the wrong way.

The "Automatic update of links has been disabled" text is a link. I clicked and got this:

Ah, so now I know that the "workbook links" have been disabled.

I didn't know I put any "workbook links" in the file. Don't think I did. What is that anyway, links to other workbooks?

I'm not finding any.

After the security warning about workbook links, there are other pathetic rectangles of fear:

• Compatibility mode (because I insist on using the XLS file format, not the newer one).
• Permissions (which warns me that "Anyone can open, copy and change any part of this workbook").
• Prepare for sharing (which includes a "check for issues" button) and
• Versions (which reports that Autosave occurred at 5:45 PM).

None of these warnings trouble me except the last one. I'm gonna have to turn Autosave off.

//

I clicked "Learn more about Active Content". I got an Excel Help window.

You ever find yourself getting exasperated by Excel Help, closing it, turning to Google Search, and finding a great answer from Stack Overflow almost immediately? Me, all the time. Anyway, here's how Excel's "Learn more about Active Content" help page begins:

"Hideatsu works..."

Hideatsu?
Hide at su?
Hid eat su?
What is this?
"Hideatsu works collaboratively with several co-workers..."
Oh, Hideatsu must be a worker, because he, or she, or it, or, probably, they have co-workers.

Having spent more time and energy than I would have wanted on the first part of the first line of the first paragraph of this Help, I can only say Why would I give a shit?

He knows -- oh, Hideatsu is a he -- he knows he can trust the files from his co-workers, but files arriving by e-mail with active content (macros, for example) can make the Security Warning message appear.

Yeah, but I didn't get this file by e-mail. I created it. And if there are macros in it, I put them there.

Why are they warning me about my own work? What's wrong with these people?

//

One more thing. The last sentence of the "Hideatsu" paragraph:

"Once he trusts the documents, he is not promted enable content for those files the next time he opens them."

There are two pees in "prompted". And shouldn't it be "prompted to enable content"?

The Excel Help page continues:

There is a menu after the first paragraph. That's so stupid I can't find anything to say about it.

After the menu:

"The message bar appears because active content may contain viruses".

Not "DOES contain viruses". Only "MAY contain" them.

But I don't know very many computer users who are competent enough to determine whether a file actually does contain a virus. Sure, they can run a virus checker and the computer can tell them if there is a virus.

That works. So why doesn't Excel Help just run a virus scan on the file in question? It would be much quicker than letting users run a virus scan on all their files. And this way, Excel wouldn't be putting the Fear of Virus into people for no reason.

According to the menu, there are four more agonizing paragraphs to read.

Let's don't.