tag:blogger.com,1999:blog-6245381193993153721.post2279752705484773375..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: US Unemployment in the 1890sLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-6245381193993153721.post-63735348681355514962012-01-26T13:56:32.944-08:002012-01-26T13:56:32.944-08:00"There were a number of other factors that ex..."There were a number of other factors that explain the lack of severity [...]"<br /><br />And you forgot this one :<br />(5) massive post-war restructuration. And this [restructuration] is what we, austrians, called ... a malinvestment. That malinvestment requires a "shift" in relative demand.MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-18911470839736911872012-01-26T13:17:14.552-08:002012-01-26T13:17:14.552-08:00You assume the Walrasian myth of wage and price fl...You assume the Walrasian myth of wage and price flexibility causing market clearing (including the labour market). This is a fantasy.<br /><br />Anyway, it wasn't a short recession: it was 18 months.<br /><br />The GNP contraction may only have been 3.47% - a moderate recession, not a depression.<br /><br />There were a number of other factors that explain the lack of severity:<br /><br />(1) there was no huge debt-fuelled asset bubble collapsing<br />(2) no massive, excessive private debt<br />(3) no financial crisis or mass banking<br />collapse.<br />(4) positive supply shocks that benefited certain sectors of the economy.<br /><br />I've already exposed the Austrian nonsense about 1920-1921 here:<br /><br />http://socialdemocracy21stcentury.blogspot.com/2010/10/us-recession-of-19201921-some.htmlLord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-67092541866443483762012-01-26T12:34:29.396-08:002012-01-26T12:34:29.396-08:00"So you can get negative growth and rising un..."So you can get negative growth and rising unemployment, I suppose? "<br /><br />I don't think "unemployment rate" in a hunter-gatherer economy would be ten- or hundred- or thousand fold the usual rate of today modern economy. Slow- or negative-growth is a consequence, not causation. The slow growth may be due to a decline in aggregate demand (because of indebtedness), for example. The major cause of unemployment is "rigidity". Especially when prices are falling, and wages are sticky.<br /><br />"all completely consistent with the view that rate cuts were an important cause of the expansion."<br /><br />Again, correlation is not causation. The resolving of 1921 depression is due to a sharp decline in nominal wage. The economy immediately recovered after the post war restructuration.MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-52374282400566602062012-01-26T09:12:26.364-08:002012-01-26T09:12:26.364-08:00"Unemployment rate is not a question of growt...<i>"Unemployment rate is not a question of growth. Correlation is not (always) causation,"</i><br /><br />I see! So you can get negative growth and rising unemployment, I suppose? Pray tell me how that happens. Magic?<br /><br /><i>"Most of the effect on inflation is not apparent for between 18 and 24 months "</i><br /><br />(1) business expectations are subjective: a rate cut and the expectation of further rate cuts can induce hiring and borrowing for investment, the beginnings of investment and business confidence. You don't measure these things by mere inflation rates or even output indices.<br /><br />(2) And the recovery from 1921 continued in 1922, reaching a boom in 1923, as unemployment fell from its peak of about 8.8% to 5% by late 1922 - all completely consistent with the view that rate cuts were an important cause of the expansion.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-29707489128603618022012-01-26T08:50:56.074-08:002012-01-26T08:50:56.074-08:00"In fact, it is possible that positive growth..."In fact, it is possible that positive growth rates of 1%–4% may have been insufficient to maintain employment."<br /><br />Unemployment rate is not a question of growth. Correlation is not (always) causation, you know...<br /><br />Oh, and about the interest rate cuts (of "only" -0.5 percentage point) occurred in May 1921 ...<br /><br />http://www.bankofcanada.ca/monetary-policy-introduction/why-monetary-policy-matters/4-monetary-policy/<br /><br />"The Bank of Canada’s policy actions relating to the overnight interest rate have almost immediate effects on the exchange rate and interest rates, but current estimates suggest that it takes between 12 and 18 months for most of the effect on aggregate output to be observed. Most of the effect on inflation is not apparent for between 18 and 24 months (Duguay 1994). And even these estimates are subject to considerable variation. [...] In particular, these long time lags mean that central banks must be forward-looking in their policy decisions. [...] If, on 1 January 2005, the Bank of Canada observes an event in the world economy that is likely to reduce aggregate demand beginning in June of the same year, there is nothing the Bank can do in January to fully offset that shock. Even if it responded immediately and lowered its policy rate in early January, there simply would not be enough time for its policy to stimulate aggregate demand sufficiently to offset the effects of the shock by June."MHhttps://www.blogger.com/profile/10656881172906444719noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-72157526032418824862012-01-24T13:17:21.810-08:002012-01-24T13:17:21.810-08:00No.
If you want further comments published then cr...No.<br />If you want further comments published then criticise the arguments of the post above, as it stands. I will then reply if I think they make a contribution.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-22487995941584545312012-01-24T13:11:41.556-08:002012-01-24T13:11:41.556-08:00Lord keynes, can you post my replyLord keynes, can you post my replyPatchnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-74919676837057164232012-01-24T13:05:01.493-08:002012-01-24T13:05:01.493-08:00Let's look at your idiocy:
(1) "You asse...Let's look at your idiocy:<br /><br /><b>(1)</b> <i>"You asserted that an 18 month recession should be defined as "long", and not "short", without even explicitly defining what exactly constitutes "short" and "long""</i><br /><br />The usual lies, I see.<br /><br />1920-1921 was long <i>relative</i> to the post-1945 business cycle, as I said quite clearly in the original post.<br /><br />Averages for US business cycles<br />1919-1945 (6 cycles) 18<br />1945-2009 (11 cycles) 11 <br /><br />http://www.nber.org/cycles/cyclesmain.html<br /><br />The average length of US recessions from 1945-2009 is 11 months, including the great recession (December 2007- June 2009).<br /><br /><b>(2)</b> <i>"Fail to recognize the fact that ABCT tells us that the 1920-1921 recession would have been even longer if the government used monetary and fiscal stimulus to stop the needed corrections. "</i><br /><br />I see! So in 1945-2009 when governments used monetary and fiscal stimulus recessions were shorter, yet somehow in 1920-1921 this would not have worked. More idiocy on display.<br /><br /><b>(3)</b> <i>"Whatever you want to call it, it was not as "severe" as the Keynesian controlled Great Depression."</i><br /><br />Hoover didn’t use an effective Keynesian stimulus to end the contraction of 1929-1933, and anyone who says so is ignorant. In fiscal year 1930, Hoover actually ran a budget surplus, not a deficit. Federal policy was contractionary in this fiscal year.<br /><br />In fiscal year 1933, total federal spending was cut in relation to fiscal year 1932. Hoover introduced the Revenue Act of 1932 (June 6) which increased taxes across the board and applied to fiscal year 1932 and subsequent years. These were highly contractionary measures, and these two policies are the very antithesis of Keynesianism.<br /><br />So all you’re left with is fiscal year 1931 and 1932: Hoover did indeed raise federal spending in these years (especially in 1932), but it was woefully inadequate. In no sense do these miserable increases compared to the scale of the GDP collapse contradict Keynesian economics. Once you factor in state and local austerity and surpluses total federal spending barely moved.<br /><br /><b>(4)</b> This is straw man nonsense.<br /><br /><b>(5)</b> <i>"Assert the silly belief that because there were no widespread bank failures,"</i><br /><br />There were no mass bank failures. That is a fact, and significant. Unless you believe the bank collapses in 1929-1933 had no effect on the economy, it is highly relevant to why 1920-1921 was not such a serious contraction.<br /><br /><b>(6)</b> <i>"Fail to recognize that the economy recovered in July 1921."</i><br /><br />Laughable nonsense. The economy recovered some months after monetary loosing began, and contined to recover under further rate cuts. <br /><br />In all other circumstances, Austrians would be screaming that this would have caused a "false" recovery and an ABCT. But for some reason - it didn't in this case. This is absurd special pleading.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-31393455050578668672012-01-24T12:43:26.766-08:002012-01-24T12:43:26.766-08:00"Various Austrians are asserting that 1920–19..."Various Austrians are asserting that 1920–1921 proves that austerity can “quickly” end a recession. I have debunked that nonsense here"<br /><br />LOL you have done no such thing. All you did in that pathetic post was <br /><br />1. Argue over the definitions of "short" and "long." You asserted that an 18 month recession should be defined as "long", and not "short", without even explicitly defining what exactly constitutes "short" and "long".<br /><br />2. Fail to recognize the fact that ABCT tells us that the 1920-1921 recession <i>would have been even longer</i> if the government used monetary and fiscal stimulus to stop the needed corrections. ABCT makes no claims to actual time periods of boom or bust.<br /><br />3. Argue over the definition of "severe." You asserted that the recession should not be defined as "severe", contrary to the Austrians who defined that period as a "depression." Whatever you want to call it, it was not as "severe" as the Keynesian controlled Great Depression.<br /><br />4. Assert that falling prices based on increased production are somehow anything other than completely consistent with Austrian economics.<br /><br />5. Assert the silly belief that because there were no widespread bank failures, it somehow constitutes a counter-point to Austrian economics, when the reality is that because fractional banks in 1920-1921 were not so overextended so as to lead to a domino effect of bank failures across the economy, it vindicates the Austrians who argue against FRB.<br /><br />6. Fail to recognize that the economy recovered in July 1921. Monetary loosening of the Fed post May-1921, which always has a delayed effect on (false) economic recoveries, usually around 6 months to a year, depending on the specific circumstances, means that by the time the economy was recovering, it wasn't because of monetary easing. Monetary easing could only have generated a (false) recovery farther into the future, but by that time, the economy was ALREADY recovered, without Fed stimulus. The monetary stimulus of the Fed after May-1921, which was by the time the economy was already recovered, began a decade of loose monetary policy, which of course fueled the next artificial boom, and once the Fed tightened up again to avoid consumer prices getting too high, the economy again collapsed, and the Great Depression followed.Christofnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-80718871628753445882012-01-24T11:27:15.294-08:002012-01-24T11:27:15.294-08:00"I have yet to read vernons paper, and am uns...<i>"I have yet to read vernons paper, and am unsure of how he derives his figures, but my point in our debate, which you utterly refuse to mention still stands.</i><br /><br />That is rubbish.<br /><br />Even by Vernon's figures unemployment soared.<br /><br />I note how Austrians today declare that America is in a depression because the unemployment rate is 9%.<br /><br />By the same criterion, America was also in a depression in the later 1890s slightly less bad than today, even by Vernon's estimates. <br /><br />By Romer's its depression was much worse.<br /><br />And I already answered your criticisms on GNP: it is clear that the US was a newly industrialising economy in the late 19th century, and in this respect was very much like modern China, as I have said above.Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-74778950674649586102012-01-24T11:15:21.704-08:002012-01-24T11:15:21.704-08:00See my response on kuehns page, and mine which is ...See my response on kuehns page, and mine which is awaiting moderation on murphys. And slowly we arrive at vernons unemployment figures, which show a much more modest unemployment rate. Funny how balkes GNP contractions are troublesome for the 1890s, but nothing of consequence for 20to 21. I have yet to read vernons paper, and am unsure of how he derives his figures, but my point in our debate, which you utterly refuse to mention still stands.Patchnoreply@blogger.com