Saturday, December 9, 2023

When did things go bad?

The blue line on the graph shows household debt service since 1980. The red line is my estimate of household debt service going back to 1946:

Graph #1: Household Debt Service since 1980 (blue)
and my estimate back to 1946 (red)

My estimate is based on 4.6% of outstanding household debt being repaid each year. Less than 5%. Evidently the actual (blue) percentage varies some from year to year: When the blue line is higher than the red, we are repaying more than 4.6% of our outstanding debt; when the blue line is lower than the red, we are repaying less than 4.6%.

The red line starts in 1946 at almost exactly two percent. So, in 1946, my parents probably used about 2% of their disposable (after-tax) income to pay down their outstanding debt. The red line shows that by 1956 they were probably using more than 5% of their income each year to pay down less than 5% of their debt. And by 1965, when I turned 16, my folks may have been using almost 7.5% of their income for the debt service payment -- while still repaying less than 5% of their debt.

On average, by my estimate, each year people were paying down less than 5% of their existing debt. But by 1956, on average, people were using more than 5% of their disposable income to make the payment. Perhaps we should say that by 1956 people were already "under water" on their financial obligations. By 1956.

Wednesday, December 6, 2023


(Updated: November 2019)


The Bureau of Economic Analysis (BEA) makes the official estimates of the National Income and Product Accounts (NIPAs). Two key aggregates in these accounts are the nation’s gross domestic product (GDP) and the personal income of households. The rental value of owner‐occupied housing is an important component of both. It accounts for about 8 percent of GDP and largely determines the rental income of persons.


I had been looking at the relation between what we spend ("Personal Consumption Expenditures") and our after-tax income ("Disposable Personal Income") and I got some particularly interesting results because of a mistake in my calculation. So then I was being extra-careful, going over details...

The FRED graph page listed some tables for the data I was looking at. I've been discovering recently how useful such tables are: They show components that are added together (or subtracted out) to come up with the data; they identify all the datasets involved; and the tables even provide links to the data.

Turns out, it's not Disposable Personal Income minus Personal Consumption Expenditures that leaves us with Personal Saving. Nope. It's Disposable Personal Income, minus Personal Consumption Expenditures, minus Personal Interest Payments, minus Personal Current Transfer Payments -- and after that, what's left over is our Personal Saving.

So I checked the tables and gathered the data I should have been using. Then I had to go back and make sure that when they use a data series in more than one table, it is always the same dataset, not just the same description. Yup. I guess it has to be, or the tables would be more trouble than they are worth.

One of the things they subtract to get from DPI to personal saving is "Personal Interest Payments". I looked at the data: Personal interest payments are always less than 3% of Disposable Personal Income. I wish! If our interest costs were really that low, our economy would be healthy and vigorous. "Monetary Interest Paid: Households" hasn't been that low since the 1950s!

The interest cost measures I usually use are all subsets of "Monetary Interest Paid". The "Household" subset has two parts: the mortgage interest part, and the non-mortgage part. The non-mortgage part runs close to the the "personal interest payments" number, for some reason averaging roughly a quarter-point higher. But the two series follow the same path. I figure those two are the same.

That leaves the mortgage interest. Who pays that? We do -- but it's not counted as part of Personal Consumption Expenditures or Personal Outlays. Where is is counted? And why is it not counted as part of personal spending?

Well, I rummaged around the internet for half an hour before I found anything worth noting. In the glossary at BEA, "Personal interest payments" is defined as "Non-mortgage interest paid by persons." So I got that right. 

But to answer the question where is my mortgage interest counted? took another hour or more of rummaging.

I searched BEA for mortgage interest. There seemed to be a lot on "rental income of owner-occupied property" in the search results. That stood out when I saw it, because I remember Oilfield Trash telling me about it a while back. Finally, somewhere in the search results I found this:

"Note that mortgage interest paid by households is an expense item in the calculation of rental income of persons."

So, my mortgage payment comes out of the money I pay myself for renting my house to me.

After that, I searched BEA for rental income of persons, and then I started making progress.


As noted in “Chapter 2: Fundamental Concepts,” purchases of newly constructed housing are treated as private fixed investment rather than as consumption expenditures in the NIPAs, and the stock of housing is treated as fixed assets. The housing stock provides a flow of housing services that are consumed by persons who rent their housing and by persons who own the housing they occupy (referred to as “owner-occupiers”). In the NIPAs, owner-occupiers are treated as owning unincorporated enterprises that provide housing services to themselves in the form of the rental value of their dwellings.8 Thus, personal consumption expenditures (PCE) for housing services includes both the monetary rents paid by tenants and an imputed rental value for owner-occupied dwellings (measured as the income the homeowner could have received if the house had been rented to a tenant), and rental income of persons includes the monetary income earned by landlords and an imputed rental income earned by owner-occupiers.

Emphasis added. Their thought continues:

This treatment is designed to make PCE, GDP, and the incomes associated with them invariant to whether the house is rented by a landlord to a tenant or is lived in by the homeowner.

What, they do all this imputed-rent stuff to make life easier for the stats guys? Really? Or maybe, as footnote 8 says, they do it to be "consistent"  with the SNA. Footnote 8:

This treatment is consistent with that of the international System of International Accounts (SNA): “Households that own the dwellings they occupy are formally treated as owners of unincorporated enterprises that produce housing services consumed by those same households” (SNA 2008: 6.117).

Yup: My mortgage payment comes out of the money I pay myself for renting my house to me. It's like something out of Alice in Wonderland.

And what was it Arnold Katz said? "The rental value of owner‐occupied housing ... accounts for about 8 percent of GDP".

Sunday, December 3, 2023

"The Classical Dichotomy"

From LibreTexts -- Section 26.2: The Quantity Theory of Money

Prior to the Great Depression, the dominant view in economics was an economic theory called the classical dichotomy. Although this term sounds imposing, the idea is not. According to the classical dichotomy, real variables are determined independently of nominal variables. In other words, if you take the long list of variables used by macroeconomists and write them in two columns—real variables on the left and nominal variables on the right—then you can figure out all the real variables without needing to know any of the nominal variables.

Following the Great Depression, economists turned instead to the aggregate expenditure model to better understand the fluctuations of the aggregate economy. In that framework, the classical dichotomy does not hold. Economists still believe the classical dichotomy is important, but today economists think that the classical dichotomy only applies in the long run.

The classical dichotomy can be seen from the following thought experiment. Start with a situation in which the economy is in equilibrium, meaning that supply and demand are in balance in all the different markets in the economy. The classical dichotomy tells us that this equilibrium determines relative prices (the price of one good in terms of another), not absolute prices.

"If among a nation of hunters," Adam Smith wrote, "it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer."

Okay, that's relative prices.

Thursday, November 30, 2023

Balance of Trade

Three graphs today.

Balance of trade seems a simple concept. If we buy more than we sell in international markets, we have a trade deficit. If we sell more than we buy we have a surplus. But maybe I have that all wrong, because I can never find useful graphs on the balance of trade. I'm going with what I found yesterday.

I found these three one after the other, just as I am showing them here. First, for the years 1866 to 1969, the excess of total exports over general imports during that century:

Graph #1

Here, the US shows a surplus of exports over imports. I see the growth of trade, as tiny jiggies get bigger in the 1870s and bigger yet in the 1890s. There is a significant increase during World War One, then a return to trend growth in the 1920s. The Depression and Smoot-Hawley stand out as a low spot in the 1930s. Then there is a massive increase during the Second World War. After that war, the massiveness continues (in hundreds of millions of dollars), with perhaps a hint of decline making an appearance during the 1960s.

The second graph shows total trade of goods for the United States, for 1960 to 2013. This dataset was "discontinued" in 2013:

Graph #2

This second graph appears to start out near zero, like the first one. Not so. Hovering the mouse over the graph at FRED shows the trade surplus in the early years runs in the neighborhood of a billion or two -- until 1967:

  • 1967 Q1: 1.024 billion
  • 1967 Q2: 1.380 billion
  • 1967 Q3: 0.774 billion
  • 1967 Q4: 0.622 billion
  • 1968 Q1: 0.256 billion

And it is all downhill from there -- with jiggies, of course (1968 Q2 = 0.442 billion; 1968 Q3 = negative 0.161 billion, a deficit). Unfortunately, this shift from surplus to deficit occurred only a few years before 1971, when Nixon "closed the gold window". People today all too often say that closing the gold window caused our trade deficits. No. The "gold window" thing was a canary in the coal mine. It was a warning of trouble to come.

The third graph shows the trade balance for goods and services, from 1992 to the latest data (September 2023):

Graph #3

This graph also appears to start near zero, but the first value shown is a two billion dollar trade deficit.


The data on the first graph is mostly above zero; on the second graph, mostly below; on the third graph, everything is below zero. So it goes.

The vertical scale of the first graph shows millions of dollars; the other two show billions. But the steps in vertical scale #2 are 40-billion-dollar steps; in #3 they are half as big. So I guess it's not time to "discontinue" the Graph #3 dataset. Not yet.

Friday, November 24, 2023

Household Debt since 1980

If we take Household Debt Service Payments as a Percent of Disposable Personal Income, multiply by Disposable Personal Income, and divide by 100 we get Household Debt Service Payments in billions.

By the way, I'm working in annual data, here. Default units, unless noted. And billions, unless noted.

If we take Household Debt Service Payments (in billions) and subtract Monetary interest paid: Households, we get Principle Repaid on Household Debt.

If we take Principle Repaid on Household Debt, divide by Households and Nonprofit Organizations; Debt Securities and Loans; Liability, Level, multiply by 100, and ignore Nonprofit Organizations, we get Principle Repaid on Household Debt as a Percent of Household Debt Outstanding.

Make that

divide by (Households and Nonprofit Organizations; Debt Securities and Loans; Liability, Level (in billions) less Households and Nonprofit Organizations; Debt Securities and Loans; Liability, Level (in "Change, Billions"), multiply by 100, and ignore Nonprofit Organizations

By this adjustment the calculation shows the interest paid each year as a percent of the outstanding debt at the start of the year for household debt.

That leaves us (as of 2021-22) with principle repaid on household debt around 6% of household debt outstanding. That's near the high end of the range of values since 1980.

The average for the 1980-2022 period is 5.123%, say five percent. Principle repayment on average runs about 5% of outstanding household debt.

For comparison, monetary interest paid on household debt works out to 7.71% for the 1980-2022 period. It reached a bottom in 2021 at 4.40%, and rose in 2022 to 4.49%

For the last couple of years, with principle repayment around 6% of outstanding debt and interest cost near 4.5%, the debt service total is running about 10.5% of debt owed.

This graph shows household debt service as a percent of DPI (blue) and as a percent of household debt outstanding at the start of each year.

Tuesday, November 21, 2023

FYI: Population

FYI: Writing about this stuff helps me remember it -- and helps me find it again later, when I can't remember!

They have their reasons, no doubt, but economists use a couple different measures of population.

At FRED, this Real gross domestic product per capita page links to Table 7.1, which identifies FRED series B230RC0Q173SBEA as the relevant population measure for the per capita calculation. FRED calls that measure "Population". But when I search FRED for population, I get 107,803 results. So I call it "B23". I checked the arithmetic. Yes, that's the right population data for per capita GDP.

So we know the population measure for per capita output. But economists use a different population measure to figure labor force size. When they figure the Labor Force Participation Rate, they divide the Civilian Labor Force Level by a measure called Population Level. I checked the arithmetic here, too. The numbers work out.

So using two different measures of population is standard practice. The "B23" measure, FRED's "Population", is now approaching 340 million people. I did a quick check; these three other population measures offer numbers in the same neighborhood as the B23, but vary in details like data frequency and the start- and end-dates of the data:

FRED's "Population Level" dataset is approaching 270 million people, far short of 340 million. According to ALFRED, until 2019 this Population Level dataset was called the "Civilian Noninstitutional Population". And according to FRED's notes on the series,

Civilian noninstitutional population is defined as persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

The "Population Level" dataset leaves out a lot of people that the "B23" dataset includes.


By the way: To figure the unemployment rate, they count up the number of people unemployed, and divide this by a third population measure: the Civilian Labor Force Level. I think of that measure as a subset of the population, and it is. But it is also a useful measure of population. This measure is presently approaching a count of 170 million -- half the level of the B23 series, at 340.

Again, I checked the arithmetic.

This I find interesting: Economists talk about the Labor Force Participation Rate quite often. The participation rate is the number of people who have a job or want one, as a percent of the "Population Level", the small population measure, people who could have a job or want one.

The story is that the participation rate increased all through the 1960s and '70s and '80s because of the baby boom after World War Two, and because of the increasing entry of women into the workforce.

That story continues: The participation rate continued to increase in the 1990s, but more slowly. Then after 2000, the participation rate started to come down: People who started working in the 1960s were starting to retire in the 2000s. Then, after the financial disruption of 2008, participation started coming down even faster. This graph shows that history:

Graph #1: The Labor Force Participation Rate

Graph #1 is based on population after excluding people under 16, and people who are not US residents, and people who are inmates of institutions, and people on active duty in the armed forces. If instead we use a more inclusive measure of population, the graph will look different. For the next graph I use the bigger measure, my B23, the one FRED calls "Population". Now the "participation rate" looks like this:

Graph #2: The Keep-This-In-Mind Participation Rate

By this measure, the participation rate is well below 40% in 1962. It rises rapidly from the early 1960s to 1990, just as the official measure does. But that's it. It reaches 50% and stays there. It doesn't fall after 2000, as the official measure does.

The Graph #2 picture of the participation rate looks like it has reached an upper limit, a ceiling of some kind. Oh, yes, it came down two percentage points after the financial disruption of 2008. But it leveled off in 2014 and started rising the following year. By the end of 2019 it was almost back to 50%. And yes, with covid in 2020 the participation rate came down a couple points once again. But after the Covid Shutdown Recession, the rate went up again, and rapidly this time. By the third quarter of 2023 it had reached 49.96%. It will almost certainly be back to 50% by the time the end-of-year data is in.

Is there an upper limit to labor force participation? If we get a couple of years without a pandemic and without a financial crisis, this non-standard measure of the participation rate might go above 50% and keep on going up. Or maybe it will sit at the 50% level until the economy improves or, god help us, until it gets worse again. If we can go two years without some kind of global emergency, we will see if the participation rate can go over 50%. 

Here's a thought: Maybe the Labor Force Participation Rate increases as the economy goes bad, because more people have more need for money at such times. If that is true, then both graphs above would indicate that the economy was going bad from the 1960s to 1990. I dunno if that's true -- and the two graphs disagree after 1990, so maybe not -- but going bad since the 1960s is a bedrock principle of my thoughts on our long-term economic decline.

PS: I'm not saying there is anything wrong with the official measure of the labor force participation rate. I just wanted to see how it would look if we used a measure of population that matches how I think of the US population: all of us.

Thursday, November 16, 2023

Still saying the same (after almost 14 years)

I re-post below mine of 20 February 2010, from my old blog, revised only slightly.

I should say that when I use the word "credit" you should understand me to mean "borrowed money". I use the word "credit" to distinguish borrowed money from earned money, because borrowed money comes with debt and the cost of interest. Earned money does not.

We use credit for money

I say debt is caused not by excessive spending, but by the use of credit. You think that's just silly. You think excessive spending causes the use of credit.

I agree: That can happen sometimes.

You: It happens all the time. It is why the federal debt is so big.

(I do not point out that if the Prodigal Son wastes his whole inheritance but not a penny more, he has spent excessively without using credit. Nor do I point out that the non-federal debt is bigger than the federal.)

Me: No. Excessive spending is just one cause of credit-use. There are other causes.

You: That cannot be. Excessive spending -- spending in excess of income -- always results in the use of credit. There is no other cause.

(I do not point out that if one saves 75% of one's income, and spends a frugal 30% of income by borrowing 5%, this also results in the use of credit.)

Me: Okay. But what you are telling me is: IF A > B THEN (B-A) < 0. That is a mathematical definition, and it is certainly true. But it is not a cause. The mathematical definition is true always -- even when we do not have a deficit. Why do we have deficits?

You: Well, the reason is corruption... the special interests... greed... liberal thinking... forgetting conservative principles. The reason is whatever causes spending to be more than government brings in.

Me: Oh, you are right about that: The reason is whatever causes spending to be more than government brings in. Yes, indeed. It may be that spending is excessive. Or it may be that spending is not excessive but is "greater than B" for other reasons. We will never solve these budget imbalances until we discover the real cause of excessive credit use, and fix that specific problem.

And what is the real cause of excessive credit use? The cause is economic policy:

  •  It is policy to minimize spending-money in the economy (to fight inflation).

  •  It is policy to encourage spending (to promote economic growth).

  •  It is policy to encourage the use of credit (as a source of spendable funds).

  •  It is policy to encourage accumulation of debt (by unintended consequence).


Why do we have all this debt? Because we use all that credit. It's policy.

Monday, November 13, 2023

Oatmilk Tea

Edit 17 Nov 2023 (Renamed); old name: "Not Economics".  

No econ today -- but what would we talk about anyway? Government shutdown, again?

When I was 15 or so, some 60 years back, I spent the summer on my uncle's farm. He had a horse -- Sally, her name was. He had a wooden bin in the barn where he kept oats for the horse. First time I had to feed Sally I lifted the lid of the bin and -- WOW! It smelled so good!

So that was my first impression of oats. It's still with me today.

I was a coffee drinker my whole life, until recently coffee started messing up my stomach. Looked for an alternative but kept going back to coffee because nothing else tasted right. But finally, my stomach made me quit.

Went with tea for a while, switching, peppermint tea and green tea and Celestial Seasonings Cinnamon Apple Spice and back. Eventually I stopped longing for the taste of coffee, and settled on green tea. It felt like I was home again then, for a while. But I must have been making it too strong, and my stomach started acting up again. So I stopped cold turkey.

I wanted to drink milk. But milk is cold, and I don't especially like the taste. And then we got oat milk. Planet Oat Oatmilk, the "extra creamy original". This stuff tastes good. I never thought I would say such a thing. Before long I was making oatmilk tea, hot water with a little oatmilk. So now I think about Sally and Uncle Cecil and his oats bin almost every day. And my stomach, so far, is okay.

Time for another cup.

Sunday, November 12, 2023

Intrinsic value

"But what was always true in the past, and will remain so in the future, is that the output of a free market economy and the notion of wealth creation will reflect the value preferences of people. Indeed, the very concept of wealth has no meaning other than as a reflection of human value preferences. There is no intrinsic value in wheat, a machine, or a software program. It is only as these products satisfy human needs currently, or are perceived to be able do so in the future, that they are valued."

Again, Greenspan says:

"There is no intrinsic value in wheat, a machine, or a software program. It is only as these products satisfy human needs ... that they are valued."


Wheat, machinery, software, gold, and irredeemable paper money. No intrinsic value. Value is in the eye of the beholder.

Saturday, November 11, 2023

Federal spending that counts in GDP

Federal spending that counts in GDP, as a percent of Total federal spending:

Graph #1: Federal Spending that Counts in GDP, as a Percent of Total Federal Spending

70% in 1960, 26% now. Check my work. First time I looked at this.


Table 1.1.10 shows "Percentage Shares of Gross Domestic Product".

Thursday, November 9, 2023

Shares in cost since 1987

Labor's share:


Capital's share:


"Share in cost" is at least approximately equal to Share of income:


Tuesday, November 7, 2023

A difference often overlooked

"It is useful to distinguish between supply and demand causes of rising inflation, because supply-driven (or cost-push) inflation is associated with a decline in output, while demand-driven (or demand-pull) inflation is associated with a rise in output."
from "Inflation in the U.S. Economy: Causes and Policy Options", Congressional Research Service

Wikipedia: "The Congressional Research Service (CRS) is a public policy research institute of the United States Congress. Operating within the Library of Congress, it works primarily and directly for members of Congress and their committees and staff on a confidential, nonpartisan basis. CRS is sometimes known as Congress' think tank due to its broad mandate of providing research and analysis on all matters relevant to national policymaking."

See also:
"The most important difference between cost-push and demand-pull inflation"

Monday, November 6, 2023

The wages of finance

Average Hourly Earnings of Production and Nonsupervisory Employees,
Financial Activities versus the whole Private Sector

The Difference in Average Hourly Earnings:

Graph #1: Difference between average wages in finance and the private sector overall
at the grunt level

I subtracted the "Total Private" average wage from the "Financial Activities" average wage to see the difference. The Financial Activities wage was less than the Total Private wage until 1992. Since 1992, the Financial Activities wage has been the bigger number.

In the 1960s the average hourly wage in finance was 25 to 30 cents less than the private sector average.

In 1979, finance was a dollar less.

In January 1982, finance was $1.15 less. That was the low point for finance.

In December 1991, the financial wage was two cents less than the overall average.

In February 1992 the financial wage was two cents more than the private sector number.

In July 1998 finance was a dollar more than the private sector average.

In August 2003 finance was $2.08 more.

In May 2012, $3.01 more.

In May 2014, $4.06 more.

And in August 2023, the average grunt-level financial wage was $5.07 more than the average for all the grunts in the private sector.

But if you ask me, none of these numbers matter. What matters is the unrelenting uptrend visible in every aspect of finance.

Sunday, November 5, 2023

Three from Paul Samuelson

"... there is only one valid reality in a given economic situation, however hard it may be to recognize and isolate it. There is not one theory of economics for Republicans and one for Democrats, not one for workers and one for employers." 


"Individual virtues can be restored to being social virtues, provided we are able to restore a healthy environment of adequate aggregate demand for the product of business."


"... the political health of a democracy is tied up in a crucial way with the successful maintenance of stable high employment and living opportunities." 


From Chapter 1 of Samuelson's Economics, fourth edition (1958).

Saturday, November 4, 2023

Thursday, November 2, 2023

This morning the Democrats have lost the November 2024 election

The news this morning tells of big-city mayors getting together to beg the federal government for money, because of costs related to the immigrants bussed out of Texas.

Government spending is NOT the cause of our continuing economic troubles, but PEOPLE THINK IT IS THE CAUSE OF THOSE TROUBLES. And the Democrats' questionable immigration policies now come down to a matter of government spending.

The only thing the Republicans need to say now is "I told you so" and the 2024 presidential election is theirs.

Tuesday, October 31, 2023


I found a site called USAFACTS. Lots of data & graphs. They say they are nonpartisan, and to me this looks pretty close to the truth. They say USAFACTS was founded by Steve Ballmer, former CEO of Microsoft.

They say "We exclusively use publicly available government data" and they mention their trust in that data. This is somewhat unusual by today's standards but I see it as a plus.

They say "We don’t make judgments or prescribe policies." This leaves me a little uneasy, because some combinations of the facts are more meaningful than others, and some combinations of the facts only convey false impressions. But what can you do?

They say: "Whether government money is spent wisely or not, whether the quality of life is improving or getting worse — that’s for you to decide." That leaves me nervous, given the way things are going.

They say: "Americans deserve unbiased facts straight from the government to have serious, reasoned, and informed debate." But of course they don't say it is almost impossible to make a dent in the massive machinery of that "informed debate" by adding even one more piece of information to it.

I sent em an email anyway.

Saturday, October 28, 2023

Dear Mr. Speaker:

Graph #1: US Federal Budget, 1901-1935

Economists say monetary and fiscal policy sometimes cooperate, and sometimes work against each other.

Milton Friedman said bad monetary policy caused the Great Depression.

But as the graph shows, fiscal policy cooperated, magnifying the effects of Federal Reserve policy.

Congress wants to cut spending, but they need to be careful. The fundamentals are not sound.

Friday, October 27, 2023

So the House has a new speaker...

In a speech given more than three years before the Great Depression, Keynes said:

As things are now, we have nothing to look forward to except a continuance of Conservative Governments, not merely until they have made mistakes in the tolerable degree which would have caused a swing of the pendulum in former days, but until their mistakes have mounted up to the height of a disaster.

Three years before the Great Depression, he knew. 

Sunday, October 22, 2023

Nothing could be finer than to be in your economic equilibrium

At JSTOR ...

From a review of Milton Friedman's "A Program for Monetary Stability" by Lawrence Ritter, from 1960:

Friedman argues that the economy has been and is now inherently stable, and that it would automatically tend to maintain high employment with a stable price level if only it were not being almost continuously thrown off the track by erratic and unwise monetary policies.

If economic equilibrium is as ridiculous as it seems to me, and if Lawrence Ritter's summary is correct, then Milton Friedman's argument is embarrassingly stupid.

I have never seen an argument depend so completely on the fantasy called equilibrium.

Thursday, October 19, 2023

Wrong-headed thinking


Wrong-headed thinking arises as the economy decays, as things more and more turn out worse than expected. The bad economy changes our approach to problem-solving. We come to position ourselves for the greatest advantage out of economic necessity, even if other people are hurt by it. More and more we think micro ("what's best for me") instead of macro ("what's best for us"). It puts neighbors at odds. And it is a source of polarization.
From mine of 7 Feb 2022 (revised)

Please note that by a "bad economy" I don't mean just a recession. Recessions only last a year or so. That isn't long enough to change our personalities and remodel our brains. However, when I google long-term economic decline, most of the results focus on recession, and only a few on depression. Finally, after three sittings, I found one search result that actually considers the long-term decline of growth.

That one hit is "Recessions are difficult, but stagnant growth could prove more challenging, Stanford economist warns", by Melissa De Witte in the Stanford News, dated 7 December 2022. The article is an interview with John Cochrane. You may know Cochrane from The Grumpy Economist blog.

From De Witte's article:

While recessions are difficult, they are temporary, says Stanford economist John Cochrane. What is more painful is long-term economic slowdown and stagnation.

My respect for Cochrane grew three sizes that day. I went back and read "Just how bad is the economy?", an old blog post of his from 2012. Cochrane says "long-run growth matters more than anything else." But, based on estimates of Potential GDP, he added: "All we can hope for is a modest recovery, and then anemic, sclerotic growth forever after that... We seem stuck at 2.4% growth forever."

Cochrane has a solution in mind. He does some simple growth accounting:

GDP = Productivity x workers

And he says "Rising productivity is the core of a 'growth' agenda as economists understand the word."

Concluding the post, Cochrane writes:

What to do? If only it were so simple as to have the Fed print up another two trillion dollars, or have the Treasury borrow another $5 trillion and blow it on stimulus boondoggles. We're stuck in sclerotic growth, and to everyone but a few die-hard extremists, that means growth-oriented policies are the only way out.

He doesn't believe printing money will do the trick. He wants more pro-growth policy.

Funny thing, though. The same sort of slowdown happened in the 1970s: a slowdown of growth along with a decline in productivity. The economist Scott Sumner wrote about it. Sumner said:

The neoliberal revolution occurred precisely because growth was slowing almost everywhere in the 1970s and 1980s, and after 1980 growth slowed the most in those countries that reformed the least.

To boost economic growth, John Cochrane wants another neoliberal revolution. I have a problem with Cochrane's solution: It didn't work the last time we tried it. Scott Sumner explains:

I am not denying that growth in US living standards slowed after 1973, rather I am arguing that it would have slowed more had we not reformed our economy.

Sumner is saying that economic growth remained slow despite the neoliberal reforms. They only helped a little, he says. I would say it this way: Those reforms did not solve the problem. But Cochrane, who says long-run growth matters more than anything else, only wants more neoliberal reform. Cochrane wants pro-growth policy from the start. He doesn't want to think any more about it.

The problem I have with Cochrane is that his thinking is exactly the opposite of the thinking that is needed.  

Cochrane's plan is based on pre-existing knowledge. How did he put it? "Rising productivity is the core of a 'growth' agenda as economists understand the word." But that plan didn't work back in the 1980s, so we should not expect it to work now. What we must do is re-think the problem: Why is growth slow? If we don't ask the question and come up with a better answer, then we are only fighting the last war -- and we didn't win that time, either: "I am not denying that growth in US living standards slowed after 1973".

And so I say again:

There is a lot of that these days, a lot of evaluating the expected result and basing one's view on the expected outcome. This is exactly the opposite of the thinking we need. We need first to understand problems in terms of their causes, not in terms of the imagined result of some potential solution. The time for thinking about solutions is only after we grasp the causes.

Monday, October 16, 2023


Sidney Ball, reviewing Franklin Giddings's 1896 book The Principles of Sociology, offers some entertaining criticism:

The book is simply strewn with generalizations,  many of which are more than doubtful, or, if true, carry us a wonderfully little way.

Ball makes his praise for the book as empty as the book itself: "On the other hand ... the author's references to theoretic economics are generally happy and pertinent."

Even more striking, Ball uses the review as an opportunity to praise a different writer's work:

But it is surprising that an author who seems so thoroughly conversant with the literature of the subject should not have recognized -- even to the extent of discussing its "errors" in a footnote -- what we may call the school of Economic Sociology, of which Professor Achille Loria is the most distinguished representative. Some account should be taken, at least, of the view that all social causation is ultimately economic, and that all social institutions -- moral, legal, and political -- have their origin in the economic relations of the different social classes. This view may be a great abstraction, but it is at any rate a more positive working conception than any we can find in the kind of vague and abstract sociology of which Professor Giddings is a representative.

This was my introduction to Achille Loria, for whom all social causation is ultimately economic.

All social causation is ultimately economic. That's how I see things too, you know. So I sort of dropped everything and went looking for Achille Loria.

Wikipedia says Loria (1857 – 1943) was an Italian political economist who

developed an original deterministic theory of economic development. It is based on the premise that the relative scarcity of land leads to the subjugation of some members of society by others, a mechanism that works differently in different stages of development.

The scarcity of land leads to subjugation? That escapes me. But change "the relative scarcity of land" to "the relative scarcity of wealth" and I see it clearly. Loria's theory

  • describes "a mechanism that works differently in different stages of development." I see that. Arnold Toynbee identifies the stages of civilization as genesis, growth, breakdown, disintegration, and the universal state. Carroll Quigley identifies them as mixture, gestation, expansion, conflict, the universal empire, decay, and invasion. Werner Sombart and Ernest Mandel studied the stages of capitalism; Sombart's study goes back to the proto-capitalism of the Early Middle Ages -- the Dark Age, where civilization begins. And Keynes himself identified the high point of civilization (and capitalism), writing of "a period of almost one hundred and fifty years" which he described as "the greatest age of the inducement to investment", a time when employment was "reasonably satisfactory" and  "not intolerably low".

  • The theory ties the various stages together by identifying a mechanism that drives the process of change. For Loria, that mechanism is the scarcity of land. (For me, the mechanism is the concentration of wealth.)

  • Loria's theory is "deterministic" one, meaning things could not happen any other way -- but, as I believe, if we know and understand the problem we can change the outcome. We can pause the "mechanism" at an opportune moment, before the fall-of-Rome stage. Maybe we can even turn downtrend into uptrend, which is really what needs to be done. "Challenge and response," Toynbee said: If our response is successful, our civilization survives. If not, then not.

And yes, Loria's theory may be "a great abstraction", as Sidney Ball said. But we are certainly capable of ignoring, denying, and not seeing half a century or more of dramatic decline in our own economy

Are we not capable of recognizing it when we finally do see it? Are we not capable of turning the trend around? We do not have to go the way of Rome and the other ancient civilizations. But we have to know about the problem, and we have to understand the problem. The difficulty is not in solving the problem. The difficulty is in understanding it. Once the problem is correctly understood, solving it is the easy thing.

Just to be clear on this, neither the Democrats nor the Republicans understand the problem. The hard work is yet to be done.


In the October 1950 edition of the journal *Agricultural History*, one finds Lee Benson's article "Achille Loria's Influence on American Economic Thought". JSTOR provides access to the article at no cost. Below is Benson's opening paragraph:

In recent years a mantle of obscurity has fallen over the name and reputation of the Italian economist, Achille Loria. Yet, in the last two decades of the nineteenth century, his system of "economic sociology" was of primary importance, and contemporary observers placed him among the foremost academicians of the time. His contributions to the economic interpretation of history and his theories concerning the role of land in the social process profoundly influenced both European and American thought. Thus there is a warrant for attempting to rescue him from an undeserved obscurity.

That's great, and maybe I can help rescue Loria from that obscurity. But my purpose here is to repeat Sidney Ball's description of Loria's view

that all social causation is ultimately economic, and that all social institutions -- moral, legal, and political -- have their origin in the economic relations of the different social classes.

When you turn the news on and it is all politics, try to remember: the underlying cause of it all is that our economy is in decline. When you turn the news on and it is war over Gaza and war over Crimea -- war over land, Loria would point out -- remember what people say: "War is politics by other means." Politics by worse means. Things get worse. And the root of it all is economic decline.

Long-term economic decline is indistinguishable from the decline of civilization. If it continues, long-term economic decline creates the decline of civilization. If we solve the economic problem, it doesn't.

Saturday, October 14, 2023

Parallel argument

When I was little I was talking too much and my mommy said there are only so many words in your voice box and if you use them all up you can't talk any more.

Congress seems to be thinking that there is only so much spending in the economy and if government does it, then business cannot.

Sunday, October 1, 2023

"The Economic Roots of the Rise of Trumpism"

"The Economic Roots of the Rise of Trumpism" (23-page PDF) by John Komlos

Here's the Abstract:

Donald Trump won the election in 2016 largely because enough voters in three states, all in the Rustbelt, who had voted for Barack Obama in both 2008 and 2012, switched their vote from Democratic to Republican. Economic dislocations played a crucial role in these swing states or democratic strongholds to persuade many voters to take the dramatic step to vote for an anti-establishment candidate even if that meant a leap of faith into the unknown. The sources of the dislocation were the development of a dual economy characterized at one end by low and stagnating wages, increasing debt, downward social mobility, declining relative incomes, and the hopelessness accompanying them while at the other end of the income distribution the economy was simply booming. This was longer than a three-decade process that started with Reaganomics and its tax cuts that privileged the rich and conferred immense wealth, and its concomitant, political power, on them. Reaganomics also accelerated the decline in the power of unions which had supported the middle class. The process continued under Bill Clinton’s administration and its continuing both financial deregulation and of hyper-globalization. George Bush continued to pamper the superrich with his tax policies. The process culminated with Barack Obama’s bailing out the superrich and his benign neglect of Mainstreet. Five administration’s disinterest in the social group Hillary Clinton referred to flippantly as “the deplorables” culminated in the revolt of the masses in favor of an incompetent strongman by overthrowing the establishment captured by such chants at Trump rallies as “Lock her up!”, “USA!”, “Build the wall”, or “Drain the swamp” (i.e., in Washington D.C.)

CESifo Working Paper No. 6868.

Saturday, September 30, 2023

Motor Vehicle Manufacturing in Michigan: Employment

Graph #1

Dunno how much of US auto manufacturing is done in Michigan, nor the reason for the 2000-2010 decline, but I think the graph shows an interesting picture. Employment shown on the graph fell from 90,000 to 30,000 in ten years.

Wednesday, September 27, 2023

Seven good years...

Note the sequence: First the low spot, then the good years of the latter 1990s. Then too much of a good thing, followed by hard times:

Graph #1: Ratio of Credit to Money

Saturday, September 23, 2023

Same graph as yesterday, but showing natural log of the values

Natural Log of the federal spending data shown yesterday:

Graph #1: Natural Log of federal current spending

The slope of the line indicates the rate of growth.

From say 1952 to 1965 the line goes up.

From 1965 to around 1983 it goes up a lot faster: this was during the "Great Inflation".

After 1983 it goes up about as fast as it did from 1952 to 1965. In other words, since the 1980s federal spending has been increasing about as fast as it did during the "golden age" that followed World War Two.

Friday, September 22, 2023

Federal Government: Current Expenditures 1947-2023

See those sharp points there on the right?

Graph #1: Current expenditures of the federal government

Republicans don't like sitting on them.

But even those of us on the left should be able to sympathize.

Sunday, September 17, 2023

Labor Cost and Profit since 2018

Comparing the labor cost of Nonfinancial Corporate Business (NCB) to NCB profits since 2018. The vertical gray bar during 2020 shows the recession we had during the covid-19 shutdown:

Graph #1xxx

The values are "indexed" so that labor costs and profits both start at the 100 level in 2018. When they start out the same, it is easy to see how they vary as time goes by.

Before the covid recession, profit (red) varies more than labor cost (blue), but they do run more or less together. After the covid recession profit goes high, and since that time profit has been running about 25% higher than before.

Tuesday, September 12, 2023

Political irony on a massive scale

I don't know, but Milton Friedman did speak of "long and variable" lags in the effects of policy on inflation. Specifically, he observed lags as long as two years and more.

It would be political irony on a massive scale if the covid shutdown of 2020 caused the inflation of 2021-2023, and Biden took the hit for it in 2024.


From the CDC's Covid Timeline:

  • December 12, 2019: A cluster of patients in China’s Hubei Province, in the city of Wuhan, begin to experience the symptoms of an atypical pneumonia-like illness that does not respond well to standard treatments.
  • March 13, 2020: The Trump Administration declares a nationwide emergency...
  • March 15, 2020: States begin to implement shutdowns in order to prevent the spread of COVID-19.


Milton Friedman (1961):

The central empirical finding in dispute is my conclusion that monetary actions affect economic conditions only after a lag that is both long and variable.

Axios (July 2023): 

In Central Banking 101, there is frequent talk of "long and variable lags" — the idea that after making an interest rate move, there is a delay of uncertain length before it really affects the economy. (Jan 2023):

Raphael Bostic, President and Chief Executive Officer Federal Reserve Bank of Atlanta said,

A large body of research tells us it can take 18 months to two years or more for tighter monetary policy to materially affect inflation.

The Hill (March 2023):

Citing the findings from his joint work with Anna Schwartz, Friedman goes on to state: “For individual cycles, the recorded lead has varied between 6 and 29 months at peaks and between 4 and 22 months at troughs.”

Sunday, September 3, 2023

It depends what you mean by "influenced by"

I came upon this just now in Google Search:

They are right, of course. The one they call "Real GDP" changes because of changes in the output we produce, but not because of changes in prices. The one they call "Nominal GDP" changes because of changes in output and because of changes in prices. 

If we say Nominal GDP is all of the output purchased in a year, measured at that year's prices, then Nominal GDP is a measure of actual spending. If we say Real GDP is all of the output purchased in a year, measured at 2012 prices, then Real GDP is a measure of what that spending would have been if prices never went up. Actual things are called "nominal", and fantasies are called "real". This, it seems, is the way economists think. That being the case, it must be easy for them to say Real GDP is "not influenced by changes in prices."

As for myself, I understand that raising interest rates slows the economy and reduces inflation. I understand this is the preferred economic policy of many nations. I do not think it is the best way to reduce inflation, nor even a very good way, but that is not my topic here. So I say, without complaining, that raising interest rates slows the economy and reduces inflation.

Now, Nominal GDP measures changing output at changing prices. And Real GDP measures changing output at unchanging prices. But to get prices to be really "unchanging" we would have to reduce inflation. 

And reducing inflation slows the economy.

And "slowing the economy" means reducing the amount of output we produce. So, if the question is Do changing prices influence Real GDP? then the answer is Yes, absolutely, they do.

To expand on that thought: If by "price changes" we mean either "prices going up because of inflation" or "policies that reduce inflation", again I have to say yes, such changes in the price level do influence Real GDP growth. Yes, absolutely.

That's my short answer.

Wednesday, August 23, 2023


Resilience: the ability to bounce back; for example, from a loss or from hard times.

Resilience is good, of course: The ability to "bounce back" is good.

On the other hand, excessive concern with resilience -- among writers and their readers, for example -- would likely be a sign of insufficient resilience (or excessive troubles) and not a good thing at all.

Wednesday, August 16, 2023

Good answer!

I found a site the other day that gave me an unexpectedly good answer. The site is called Student Hub. They show questions and provide one or more answers for each. One question of theirs turned up in my search results:

Why did John Maynard Keynes support the idea of pump priming, despite increased federal budget deficits?

I thought it might be worth following up. What I found was awesome:

Answer 1
Despite increasing federal budget deficits, and enlarging the functions of the State, Keynes believed that his theory was the only way to save capitalism from totalitarianism. And the only practicable way of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative.

The answer floored me. Seldom do I find people quoting Keynes to explain Keynes; but almost never do I find someone quoting Keynes in regard to "avoiding the destruction of existing economic forms in their entirety". To be clear, Answer 1 recalls these words from Keynes

"of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative."

which can be found in Chapter 24 of The General Theory or as part of the full text of the book. 

Keynes's thoughts on saving capitalism from totalitarianism can also be found in Chapter 24.

Answer 1 at the Student Hub ends with this thought:

The popular and widely held misconception of Keynes theory is that he simply prescribed that States operate national deficits in times of economic recession in order to stimulate demand.

Following Answer 1 we find

Answer 2
He believed that deficit spending would create more jobs, therefore, stimulate the economy.

But of course Answer 2 is the popular and widely held misconception that Answer 1 alerts us to.

Sunday, August 6, 2023

Inflation is "now coming down" they say

In the Google News this morning, "The Fed may have saved the economy by hiking rates for 18 months—and may have guaranteed crisis for emerging markets" by Cristina Bodea and The Conversation; August 5, 2023 at 3:48 PM EDT at Fortune.

The second paragraph:

On July 26, 2023, the Federal Reserve announced another quarter-point hike. That means U.S. rates have now gone up 5.25 percentage points over the past 18 months. While inflation is now coming down in the U.S., the aggressive monetary policy may also be having significant longer-term impact on countries across the world, especially in developing countries. And that isn’t good.

Before we get into whether monetary policy of the past 18 months has been good or bad, can we take a moment to get our facts right?

Here's a look at US inflation since 2010:

Graph #1

In blue, the graph shows CPI inflation as commonly reported in the news, measured as the percent change from a year ago.

In dull red the graph shows CPI inflation measured as the percent change from the previous month. To scale these monthly values up and make them comparable to the "change from year ago" numbers, I multiply FRED's monthly values by 12.

The dashed line, bright red, shows the 2% level. Two percent is the "inflation target". When inflation is above the target, monetary policy will want to bring inflation down.

Judging by the blue line, the rate of inflation started rising in early 2021. It has been falling since June 2022. And as of June 2023 it reached 3.09%, approximately one percentage point above the target rate.

The dull red monthly data shows a similar pattern: rising since early 2021, then falling since mid-2022, and now very close to the inflation target.

According to the Fortune article, dated 5 August 2023, "inflation is now coming down in the U.S." That's not how I see it. As I see it, inflation HAS COME DOWN. Inflation IS down. It has not stabilized yet, or it is still too soon to say that it has stabilized, but inflation is back down to the Fed's 2% target or within a hair of it.

The media in general seems to have completely missed the fall of the rate of inflation that began in mid-2022. Month after month they reported the "percent change from year ago" rate, as if prices were rising at that rapid pace every month. No. Prices did rise at an increasingly rapid pace until mid-2022, but since that time prices have increased at a decreasingly rapid pace.

Their reporting was apparently designed to create the biggest bang-for-the-buck the media could get out of the inflation story. (You should be at least as angry about the reporting as you have been about the inflation.)

It is true of course that prices were still rising in the months after June 2022. But prices were rising less rapidly; progress was being made. The media couldn't trouble itself to report that one little fact.


Just so you know: Prices would still be rising even if inflation was exactly on target, the 2% target. That's what the "2%" means: a price increase of two percent per year. That is the goal of monetary policy. Just so you know.

As a reminder, the dull red inflation value as of June 2023 was 2.16%. That's not even newsworthy, unless you want to talk about this period of high inflation being at an end.

PS: Cristina Bodea is probably right: The Fed's anti-inflation policy probably was not "good" for other nations, especially developing nations. As for myself, in the fight against inflation I think we should depend less on monetary policy, and more on fiscal policy.

Wednesday, August 2, 2023

Debt and Civilization

"Brilliant plan, Pinky! Oh, no, wait.
What if we want to use a plan that works?"

You are probably aware of my persistent focus on debt-as-a-problem, and also of my view that civilization-is-in-danger. So it is worth pointing out that my Google Search for "debt and civilization" (in quotes like that) turned up just nine results or, as Google says, about 9 results:

Graph #1: Slide the ScrollBar Down to See More

Only nine occurrences of those three words in that particular order on the whole internet? That's hard to believe. So a few days later, I searched again. This time, Google reported 8 results.

Obadiah Mailafia

Obadiah Mailafia was a "Deputy Governor of the Central Bank of Nigeria", a separate search tells me.

The first of the nine results shown above ("Debt and civilization (1) – By Obadiah Mailafia") gives an error. Firefox says "We can’t connect to the server at"

Note the "ng" there in the link. Are Nigerian links still "suspicious"? Caution is advised.

The second of nine ("Debt and civilization (2)") gives the same error. So now it might be important for me to note what the "Mailafia" search turned up: Mailafia is dead; he was murdered. The thought briefly crossed my mind that the murderers are now killing off access to Mailafia's writing.

You'd think there would be a collection of Mailafia's writings at the central bank of Nigeria. But I'm not gonna look right now.

Criton Zoakos

Criton Zoakos is "President of Leto Research, Inc., an economic research and consulting firm in Ft. Lee, NJ."  That's according to The Globalist. And now I have to caution myself that Zoakos might be a "globalist".

But that page is 20 years old. More current are the Leto Postscripts, offered as "Criton Zoakos' Explorations into the Roots of the Crisis in Western Civilization". This could be useful.

The author page at Leto Postscripts grabs my attention. Zoakos says he has been "investigating the relation between the crisis in fundamental science and the broader crisis in Western civilization" since 2008. I'm a little fuzzy on the meaning of "fundamental science" in that context, but at least Zoakos and I both still use the phrase "Western civilization". A lot of people don't.

Below the notes on the author page are three comments: a question from Ryan M, and two replies from Zoakos, who calls himself "Criton". Criton's two replies are each more interesting than the other. Also, there is about a year between the replies, suggesting that Zoakos thought about the question more than once. I like it when I see a blogger doing that.

The fourth of nine results for my "debt and civilization" search brings up four posts in the "Worldview and Social Behavior" category at Leto Postscripts. The first of these posts is "Taking the long view of geopolitical developments". In a paragraph that Criton thought important enough to display as bold red text (and one that I find important enough to repeat) he writes:

Contrary to the dominant views and practices of modern academia, what drives the longterm political and cultural behavior of a civilization is not the ideological narrative or the political philosophy behind it. Instead, the ultimate driver is that mental image of the physical world that the physical sciences of the civilization impart – by teaching and by osmosis – to that civilization’s general population.

What drives behavior in a civilization, Zoakos says, is not ideology or politics. The ultimate driver, he says, is the mental picture of the world that the physical sciences create. This, apparently, is the "fundamental science" noted above, that I was fuzzy on.

I am trying to imagine the "mental picture" Zoakos mentions, and how it may be important:

  • If the "mental picture" changes over time time, we may find "red states" turning deep red while "blue states" turn purple.
  • A historian like Rostovtzeff may describe the change:

    What happened was a slow and gradual change, a shifting of values in the consciousness of men. What seemed to be all-important to a Greek of the classical or Hellenistic period, or to an educated Roman of the time of the Republic and of the Early Empire, was no longer regarded as vital by the majority of men who lived in the late Roman Empire and the Early Middle Ages.

  • And Hari Seldon may tell us:

    The feeling will pervade the Galaxy that only what a man can grasp for himself at that moment will be of any account. Ambitious men will not wait and unscrupulous men will not hang back. By their every action they will hasten the decay...

Our mental picture depends on the physical sciences, Zoakos says. I see what he's saying. But as I see it, our mental picture of the world depends primarily on the state of the economy. Long-term economic decline can turn a blue nation red and a red one blue. Continued, that decline can turn civilization into a stain on the pavement.


Again, my view is that it is the economy, not politics, that drives our behavior. These days, however, almost everyone does see politics as the driving force. And people have taken sides, the one side or the other. Each side disagrees with the other, and the two sides cannot agree on anything except that the other guys are wrong.

My take, as presented in "The Tides of Prosperity" (and related posts) a couple months back, is that the economy is not good and people know it in their bones, and that our bad economy is the source of our extreme political differences and our inability to resolve them. And yet, restoring economic health and vigor will reduce our political differences -- which shows that the problem is not political at all, but fundamentally economic.

One side says we need more government spending (and more government debt) to make things better. The other side says we have too much government debt (and too much government spending) already. My response is to offer a third view, a third "mental image of the physical world that is created" by science -- in this case, by the science of economics, my economics: There is too much debt other than federal. There is too much private sector debt. Private sector debt weighs down the private sector so that it cannot grow. The slow growth activates automatic stabilizers (and other responses) which add to the government spending and debt. But the private sector still cannot grow. I conclude that both the need for more government spending and the ineffectiveness of that spending are consequences of excessive private-sector debt, and that the solution is to reduce private-sector debt. This view that I offer is an alternative to the economics of both the Right and the Left, but no one seems to have noticed.

After Criton's bold red text, two sentences follow:

Populations understand their lives by situating themselves in a physical world, but they understand that physical world according to what physical science teaches about it. Their judgments and their actions are based on these understandings.

I think Criton is onto something. I think I might agree with him. I think what I was doing in those "prosperity" posts and in my alternative view was that I was trying to change people's understanding of the physical (or as I see it, the economic) world, based on what economic science should be saying about public and private debt. So it seems to me that I agree with Criton, more or less -- or with this part of what he says, anyway. 

It's early yet. I'll be reading more of the Leto Postscripts.

The Rum Soaked Fist

The fifth of the nine "debt and civilization" search results is a link to a page of discussion at The Rum Soaked Fist, a site that calls itself an "internal martial arts forum". Martial arts? They discuss economics with more intensity than I do on my econ blog!

  • This, for example, by oldEurope: "... the bad news is: Money, debt and civilization are interlinked since the beginning ..."
  • This, written by everything: "The other way to get revenue when income tax and payroll tax doesn't prove to be enough (remember that corporate tax is low) is to issue debt...."
  • And, from Michael, this is especially good: "I agree that debt is a normal part of the economy, but I am concerned with how much of it that there is..."
Keep in mind that if they're talking about debt, they're talking about debt and civilization.

David Petraitis

The next two search results for "debt and civilization" lead to blog posts by David Petraitis. First, in his post (titled "Debt and civilization") he summarizes a Michael Hudson interview. Hudson is great! He always delves into the past and pulls out sweet, juicy peaches of economic history. Petraitis's post is a pleasure to read.

Second, Petraitis follows up with another post, "Debt: The First 5000 Years", where he reviews the David Graeber book of that name. Petraitis says it is "a very important book." Apparently, some 4000 reviewers said the same of Graeber's book. But it is hard to find one who can say what is important about it.

According to Petraitis:

It lays out a case ... that debt, as a human construction, is something which has been overlaid on our social relationships in such a way as to produce confused mixtures of morality and economics.

Not just debt, but all of economics is too often confused with morality. That's how you can tell econ is important: because people too often see economic problems as moral issues. But any book that dwells on this confusion has the wrong focus. And any review that dwells on the confusion has missed the primary importance of understanding the economy.

Morality is useful for establishing economic objectives. Morality is not useful for economic analysis. Morality diverts attention from the effort to understand and solve economic problems. It is noteworthy and probably significant that, despite all the attention Graeber's book received, only one Graeber-related result turned up in my search for "debt and civilization". 



This conclusion depends mostly on the thinking of Criton Zoakos, or I should say, on my interpretation (or misinterpretation) of his thinking. I plan to read more Zoakos, but not before I conclude this post.

There is a lack of trust these days, a lack of trust in internet links for example and in "globalists". But Zoakos seems to see the lack-of-trust as evidence of a larger problem that he calls a crisis in Western civilization. I find myself agreeing with him on this point.

A view of the world emerges from the science a civilization develops, he says, and this view of the world drives "cultural" behavior, the behavior of the civilization. This behavior, to me, is like macro-economic as opposed to micro-economic behavior; what Zoakos says makes sense to me.

The mental picture that emerges, according to Zoakos, arises from the "physical sciences". I'm still a little fuzzy on that but it seems to me that our everyday mental picture of the world emerges less from science than from living conditions, actual conditions like long-term economic improvement or long-term economic decline. I certainly agree with Zoakos when he says it is not politics or ideology that drives cultural behavior.

Again, taking the views of Criton Zoakos as a vague framework for my own (and promising to read more Zoakos, later) I conclude that the "mental image" which drives "cultural behavior" emerges from actual economic conditions and our understanding of the thinking that drives those conditions.

I should say also that we are not likely to be long deceived by actual economic conditions. The error, if there is an error in our mental picture, is far more likely to arise from flawed economic thinking. Despite what mainstream economists may want us to think, they do not yet know everything about policy, economics, and the economy.

Nor do the rest of us.

To make the economy do what we want, we have to understand what it wants. We have to understand how it works. If the economy is not giving us what we want, it is because we have failed to understand it. 

If the economy isn't doing what we want, something is wrong with policy. If something is wrong with policy, it is because something is wrong with the thinking that created the policy. If you want to get to the moon, you have to do the science. If you want to rule the world, you have to understand the economy.

I'm not offering here a solution to any economic problem. I'm talking about a way to find the good solutions. Probably, no one will notice.