The NORQUIST SCAM =versus= Macroeconomic Experience and K.I.S.S. Testing

[vets74]

Modern economics is perfectly capable of testing whether practice matches projection.

We have computers. We have terabyte databases for detailed economic transactions and asset holdings.

Dr. Richard Koo, in the early 2000s, finally tied together the main quantitative and qualitative results from the various schools of economics. He validates the Keynesian (jobs/bank_stability/private_debt_repair) responses to bank crises. He also validates the "normal" fine tuning (interest_rate tweak) methods of the Friedman group. Koo's econometric modeling is the basis for technically competent EU, American, and Asian macroeconomic planning.

At the same time, America is threatened politically with a scam from a lobbyist named Grover Norquist than masquerades as an economic theory.

Compared to modern macroeconomics, the Norquist Scam combines over simplification with non-logical paranoia.

“
The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

-- John Maynard Keynes

At present, the Republican Party claim to be the party of business, but are in their votes mere slaves to this Norquist Scam.

Norquist's tool is not any part of macroeconomics -- all he uses is a spreadsheet graphics package and its Pie Chart tool. The Norquist fantasy world imagines that government and private enterprise are engaged in a FIXED-SUM GAME war with each other.

Norquist and his paranoid benefactors believe that any government spending -- anything, at any time -- is taken away from the private sector. Government contributes nothing. Banking crises and corporate and individual debt do not exist.

Norquist's Pie Chart has one section for red and one section for blue.

This is not economic analysis. There is not one "defunct economist" behind it.

There is no blundering mathematics. There is nothing to Norquist's scam but an assertion that an economy is a fixed-sum game where government is a one-way street that pays for its resources by stealing from private pockets.

This is nothing but a scam.

Norquist is a con man. He generates a simple minded, non-logical assault on government. He appeals to the John Birch Society (relabeled "Tea Party") financiers in the Koch family. At this point his scam has spread to two-thirds of the Republican Party's high-roller contributors.

Even apart from Norquist, Right Wing business thinking is often tied to an older, non-mathematical (a.k.a., "defunct" economics) fantasy that they associate with the 19th Century's version of the Austrian School of Economics. Wiki is accurate:

Austrian economists argue that mathematical models and statistics are an unreliable means of analyzing and testing economic theory.... Additionally, whereas experimental research and natural experiments are often used in mainstream economics, Austrian economists contend that testability in economics is virtually impossible since it relies on human actors who cannot be placed in a lab setting without altering their would-be actions. Austrian School economists generally advocate a laissez faire approach....

The first of these Austrians back in the 19th Century had no idea that we'd get computers.

This is an a priori system. The capitalist wing of Austrian thinking worship a "rugged individualist" "industrialist" viewpoint and then tie policy claims back to their "libertarian" assertions. Readily-available recorded data is ignored. Modern Austrian School adherents are only rarely employed by the major banks and international investment firms.

Norquist borrows propaganda lines from the Austrians. The most of that goes to microeconomics. Of course he and his supporters avoid the most enduring legacy from the Austrian School, the work of Friedrich Hayek, a Nobel Prize winner. Social investments for public health, science, education, and old age security -- all are identified as critical functions that will be short changed in laissez faire environments. Hayek's response to the Great Depression included all-out support for the New Deal.

That Red-Blue Pie Chart is another of the rightie propaganda lies that is so bad, it's not even wrong. It's not up to the level of the Birther "Born in Kenya" denial scree.

The situation following Big Bust 2008 combined specific, well-documented economic challenges. Business and household balance sheets were broken by a banking catastrophe:

-- America faced a crushed residential housing market. Declining post-Bubble prices and next to no new construction.
-- Corporate assets purchased during the Big Bubble 2003-2008 carry payment burdens far in excess of current value
-- Private households had carried $4.9-trillion in mortgage debt in 2003. At the peak of the Bubble this rose to $10.6-trillion for less than a 10% increase to the number of primary residences
-- $1.5-trillion in nonperforming business loan rollovers
-- Employment in January 2008 was still declining by more than 700,000 jobs a month
-- Price deflation had entered a classic downward spiral associated with depressions

As with 1929 and Japan in the 1990s-to-2002, this systemic collapse threatened to push America and the world society toward 10- to 15-years of a "Weekend at Bernie's."

Welcome to capitalism's greatest debacle: the Balance Sheet Earthquake.

All of pre-computer economics agreed on the severity of these Depressions. Austrians, Keynes, Friedman -- no one advised adopting psychological denial. Milton Friedman was adamant that "we are all Keynesians." Where normal profit-seeking investment behavior is damaged, the government really has to step in.

Dr. Richard Koo -- Chief Economist for Nomura Research Institute, Tokyo -- achieved a striking, singular consolidation of all the parts that work in testable ways within Political Economy. Dr. Koo differentiates the normal profit-driven modes of behavior from fear-driven behaviors. He started from a massive data bank -- all of the mid- to large-scale business records of Japan from 1990 forward -- and then combined statistical modeling with the Yin-Yang wisdoms of Asian philosophy.

Fear-driven behavior matches perfectly with Yin. The company or individual is afraid of bankruptcy, of going out of business, of losing everything. Where the whole national system falls to this Yin state, as in a banking collapse, that's the Balance Sheet Earthquake. (Technical economics term: Balance Sheet Recession.) Here's a chart from Dr. Koo -- NPL = Non-Performing Loans:



Normal times are Yang.

Post-Bubble busts are Yin. Banks that are threatened with Non-Performing Loans are cast bodily into Yin behavior. Households that are non-performing become hyper-Yin. Businesses find themselves afraid of everything -- every monthly economic stats release triggers a "double dip" panic attack.

http://www.scribd.com/doc/13970982/Richard-Koo-Presentation|DR. KOO'S PROFESSIONAL POWERPOINT PRESENTATION FOR BANKERS & INVESTMENT ANALYSTS>

34 .PPT slides. Even if you've never taken a business or economics course before, this is A-1 Keep It Simple Stupid presentation work.

Go through the 34 slides and you'll know more about capitalist macroeconomics than Grover Norquist or any of the other Tax warrior mad men. For the full introductory educational treatment:

Preliminary info:

-- First: "NPL disposal" refers to Non-Performing Loans. Loans that are not getting their payments made, plus loans that are coming due but cannot qualify for a "baloon" rollover. Bad loans. The "disposal" process refers to doing massive write-offs so that the banks' balance sheets are revalued at current market values. "Mark-to-market" is the accounting term. A clean end point would force "disposal" of bad loans with auctions or distressed sales for the assets that back these non-performing loans.

In 2011 there are more than 1,000,000 residences foreclosed by banks that are not occupied. These 1,000,000+ houses are an "overhang" that simply kills the new construction housing market. Resale house values are pumped up closer to Big Bubble artificial price levels. But the cost is added unemployment: 2% to 3% nationwide.

-- Second: "GDP" refers to Gross Domestic Product. The value of all goods and services produced in a country for a given year.

-- http://media.csis.org/er/090326_koo.mp3">Audio presentation for this PowerPoint with Dr. Koo speaking slide-by-slide to an audience of Yin-to-the-max bankers.

With John Maynard Keynes, Naomi Klein, and Nassim Taleb -- a foursome.

Dr. Koo answered long-standing questions: How systemic earthquakes devalue assets and force iterative downward spirals. Why we flip from normal "Yang" economics over to a fear driven "Yin" dysfunction.

Plainly, government spending is necessary to halt the downward spiral. Koo goes to great lengths to analyze the Japanese experience in the 1990s and the 1937 back-slipping by FDR. The full treatment is in Dr. Koo's book --

The Holy Grail of Macroeconomics, Revised Edition: Lessons from Japans Great Recession

Government programs such as the Bush Administration TARP Program and the Obama Stimulus produce jobs and keep businesses functioning.

Any country suffering a Balance Sheet Earthquake would have to be hopelessly ignorant to implement a Norquist plan. Listening to House Republicans, for example. Koo's work documents in detail why this madness is functionally the same as the Hoover & Mellon Plan of 1929-1932.

[xchrom]

1. Recommend

[vets74]

5. The TAX FAIRY and FOLLOW THE MONEY graphics

Here's some more:



And the real deal for Republican Whoresonism:



(If you're not familiar with "whoreson," see some Shakespeare. The Henrys make a trio. "Ugly and unpleasant" is the gist of it.)

The total theft from the Middle Class due to Republican policy over the past 30 years runs to $17-trillion. All of it transferred to the Top 1% of wealth holders:

-- Reagan tax giveaways
-- Big Bubble I 1994-2000
-- Bush tax giveaways 2002,2003
-- Big Bubble II 2003-2008

Typical criminal-business scams also include the mortgage burden: up from $4.9-trillion in 2002 to a max at $10.6-trillion. That increase reflects only a 10% increase to housing stock.

We have to grok today's Federal Reserve as the prime engine for creating an economic oligarchy, a.k.a. a plutocracy.

Between Greenspan and Bernanke, there have been weak, if any limits placed on The Fed handing out very low interest rate money to the international banking community. The Fed has made rich bankers filthy rich... all over the world. $16-trillion is one officially presented total for this effort, but the real number could be damn near anything.

They call it ZIRP. Zero Interest rate Policy -- zero interest, net the inflation rate. How'd you homeowners like some of that ?

[Hawkowl]

2. Excellent.

Outstanding. This is something Obama could use to make himself a bit coherent on economic policy.

[delete_bush]

3. Thank you.

Very informative and well written.

Some good reading for later this weekend.

[vets74]

4. You are welcome.

When you do have the time Richard Koo's PowerPoint and audio pair (in the links) do a solid job of explaining the economics. Keeping in sync is no problem.

As for Norquist, his scam needs be transparent except to paranoid inheritors. The servile elected Republicans ? They are whores.

[zippytheplatypus]

6. of course its a scam, data & statistics are meaningless

This is going to get very preachy but so be it. Economics has nothing to do with numbers at its core. Economics is where philosophy meets political science. It is a series of models for maintaining order within a society. Any economic system will ultimately fail from time to time. Man is flawed and anything created by man will be in man's image and thus also be similarly flawed. Capitalism is an economic system, arguably the best system ever devised by man and it has been around without a whole lot of changes for well over 5000 years. Before there was money there was capitalism, money & accounting really just makes it more complicated and much less enlightened and far easier to break. No one needs money in a society. What is necessary is trust and willingness to engage in activities for both personal satisfaction and in the greater good. That's it.. the system never has to fundamentally change, not in the year 3500bc, 780bc, 1787ad or 2012ad. Nothing has changed except the willing substitution of raw data for enlightenment.

The systemic way capitalism breaks is by creating far more debt than real capital. You can create all the currency you want but it will never catch up to the abundance of debt because currency is not capital. Capital is finite and all currency ever can be is a vehicle to transfer capital from one party to another. When the system gets overloaded by debt, when everyone owes everyone else so much more than there are real items in the system itself the trust breaks between people to engage each other in fair transactions which will provide equity and security on both sides of the transaction. If there is no trust there is no society, only chaos. This is where we are going if the systemic overleveraging is not reset.

If we are going to have money and a banking system most of them need to default and eliminate the debt. Complete reboot with clean balance sheets, including the Federal Reserve. It is viable, the theory behind it is sound but it is way in over its head. In any system there will be systematic breakdown, attempts by economists to create systems that cannot break down are fallacy and delusion. Breakdown from time to time are innately necessary in order to rid the system of corruption and weak parties, lord knows there are many in this system. Its not a time to freak out, its a time to be responsible, enlightened and make it better than it ever was before. Nothing has to be reinvented, it needs to be properly adapted for the times and brought back in line with the principles of fair trade, transparency & the benefits of society. Keynes was a fairly good enlightened economist, he generally got it very well. His theories though have Ben grossly manipulated and taken out of context and thoroughly warped just like all these awful statistics. Friedman on the other hand was for my money the economist's equivalent of Hitler. There is nothing there but a base power play and systematic elimination of the underclass. The Austrian school is interesting but far too nuanced to be taken seriously for actualization in society. I think the idea of value being dependent on the use by the individual is interesting and worthy of intellectual consideration but it is impossible to ever implement in any real way, at least at this point in human history.

It starts with need for a real item or a service. Go from there and eliminate everything that isn't absolutely necessary.

Again sorry for the lecture but its the teacher in me..

[vets74]

7. Without "data & statistics" we're suckers for Alan Greenspan and such

Bush Tax Cuts were the very worst of Greenspan dishonesty.

The country had a surplus in 2000 and lots of empty dreams going into January, 2001. The Clinton plan was to use the 2000 surplus to pay off a slice of the Federal debt.


-- February 2000 - Greenspan testified to Senate Banking Committee: “The growth potential of our economy under current circumstances is best served by allowing the unified budget surplus... to materialize, thereby reduce Treasury debt held by the public.” This translates to mean that we use surpluses to reduce the Federal debt. President Clinton never proposed using the surplus for a tax cut.

-- January 2011 - Five days after the Inaugural this same Greenspan went to the Senate Budget Committee and called for massive tax cuts. The Federal debt had disappeared from his agenda. As well, an obscure CBO projection put the federal budget surplus for the period of 2002 through 2011 at $5.6 trillion. Greenspan worried that the Federal government had to cut taxes, as otherwise there would be no Federal debt and the Treasury would be forced to buy stock and bonds in the open market. Bush & Co. sho' did cure that 'un.


Greenspan also said that these tax cuts would be temporary.

Both the 2002 and 2003 tax cuts were marketed as emergency measures to absorb the budget surpluses.

Greenspan was up to his eye balls in that sales job, as well. None of it was real, including extension of the 2000 surplus which had ended with the Dot-com crash:

Whether Greenspan’s audience succumbed to his flight of fancy, another statement should have awakened its curiosity. Greenspan prefaced his tale of woeful surpluses by discussing “recent projections … make clear that the highly desirable goal of paying off the federal debt is in reach before the end of the decade. This is in marked contrast to the perspective of a year ago when the elimination of the debt did not appear likely until the next decade.” Since “a year ago” (actually, the 10 months between March 10, 2000 and when he spoke in January 2001), the Nasdaq had fallen 43%. Tax revenue had risen from 12.5% of personal income to 15.4% during the boom years. In 2000, this 2.9% increase equaled $237 billion – precisely the same as the total 2000 budget surplus. It suited Greenspan’s purposes to express mystification during testimony: “We still do not have a full understanding of the exceptional strength in individual income tax receipts during the latter 1990s.”

Greenspan could not have been blind to the source of the budget surpluses: capital gains, exercised stock options and bonuses. These tributaries had dried up. Without these flows, his fear of paying down the national debt, or even running a balanced budget, made no sense. And, while Alan Greenspan could claim that paying down the debt was a bad thing, it is a tribute to the man’s sway that his audience accepted such a silly pretense approvingly.

-- Frederick Sheehan

Of course these Senatorial and very well paid off audiences accepted damn near anything. Gee,whiz... the Republicans and the Lieberman crew accept even now that "getting rid of Saddam Hussein" was worth $1-trillion dollars.

Please, give me data and statistics. Those damn a priori systems suck at engineering, science, and economics.

BTW: Greenspan admitted he was wrong in 2005. News item :::

::: FROM 2005 :::

The chairman of the US Federal Reserve, Alan Greenspan, has admitted he made a mistake in 2001 when he defended President George Bush's tax cuts, which led to the turnaround of a large budget surplus at the end of the Clinton presidency to a budget deficit this year of more than $US400 billion ($506 billion).

Instead of a projected surplus of $US5.6 trillion by 2011, the budget deficit is now expected to be $US4 trillion by that date if the tax cuts become permanent. Dr Greenspan's defence of the tax cuts was always viewed as highly unusual for a Reserve chairman who is mandated to be non-political and whose main responsibility is to determine US interest rates and help keep inflation in check.