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.