Where the inflation may be hiding

When reality persistently challenges a deeply held belief, believers can get a little weird. Conservative economist Amity Shlaes, never the steadiest of heads in the best of times, recently joined the frustrated ranks of the inflation cranks with a bizarre rant in the National Review.

Shlaes is now convinced that the inflation which her models predict is being hidden somehow. Her evidence? Movie tickets, among other items, now cost more than they used to. Since data has abandoned her and rest of the true believers in right-wing economics, she has fled to the hills of anecdote where she can be safe from cognitive dissonance. Inflation is invisible to all but the pure at heart.

This development highlights the wider dilemma facing Economics as a discipline. Though it claims to be a science and sometimes pretends to be engineering, Economics at this stage of development is no more than a philosophy dressed up in equations. It may be possible to explain the mystery of the “missing inflation,” but only by stepping outside the quasi-religious boundaries of economists’ favorite models.

Since the Nineties, western governments have embraced monetary policies designed to stimulate their economies without the political complication and inflation risks of direct economic stimulus. By toggling the costs and availability of financial institutions’ access to wholesale lending, governments could influence the economy by adjusting access to capital rather than directly placing more currency in citizens’ pockets.

Funny enough it was conservative economists, particularly Milton Friedman, who pioneered this model. Since the financial crash we’ve seen the most aggressive use of monetary policy ever deployed in an effort to halt our terrifying deflationary cycle. In fairness to conservatives like Shlaes, it is perfectly reasonable to worry about how such an unprecedented and massive new intervention might impact the economy. No one really knows the implications of having the Federal Reserve purchase trillions of dollars of mortgage backed securities and Treasury Bonds. In theory, the Fed can simply hold them permanently with no economic impact, but that sounds a lot like simply printing money. Why wouldn’t that create inflationary pressure?

One explanation for the absence of inflation in response to the Fed’s loose money strategy is that the deflationary damage of the financial collapse was so severe that we haven’t fully “re-inflated” the economy yet. That is more or less the consensus view. However, there may be another explanation.

Perhaps the method chosen by Western governments to reinflate their economies has had a perverse effect. By pouring stimulus directly into financial institutions rather than into the hands of consumers those resources are fueling a different kind of inflation, inflated asset or capital values. Perhaps changes in the way our financial markets function over the past generation mean that this form of stimulus is becoming less and less effective as an economic tool. In other words, facts on the ground have broken the theoretical model. Again.

In theory, “capital inflation” should be impossible. Money made available to capital markets should flow directly into productive investment, creating new value in the economy. What if the funds being disbursed by the Federal Reserve are not going into productive investment in the way that we might expect? Once upon a time, banks made money lending to people who invested that money in capital improvements. If that model no longer exists, or is no longer the dominant explanation of how banks make money, then perhaps money poured into the banking system will not flow into productive investment. Maybe all we’ve done is put more chips on a casino table.

After juicing the system with trillions of dollars of Fed leverage, we are seeing no evidence of looming inflation or any accompanying boom in economic growth. We are however seeing a boom in asset prices. The economy has limped along for seven years, with sluggish employment growth and consistently weak GDP numbers. Weak economic indicators have been accompanied by a historic bull market in stocks, accompanied by booming values in a wide variety of asset classes. Even investment in Treasury bonds, which should sag in an equity boom, is high.

Just as in the last decade, an economist who opens a window and sees what’s happening anecdotally on “Main Street” might find some helpful clues. In my suburban Chicago neighborhood the housing market looks eerily like the nosebleed highs of 2006. Houses flip in days with offers exceeding asking prices. Rentals are tough to find.

Meanwhile just a few miles away lower income neighborhoods continue to slog through the long tail of the foreclosure crisis. Markets in DC, Northern California, Chicago, and the NYC suburbs have returned to boom conditions while elsewhere they remain largely stagnant.

Nearly anyone with good credit and/or significant exposure to capital markets is experiencing an economy completely removed from the experience of Americans who used to live in what we once called a Middle Class. Whoever had enough money to weather the financial collapse is now seeing boom conditions float them away to a better future. Those whose boats were wrecked are drowning on this rising tide.

Money flowing into capital markets does not seem to be fueling productive investment. It looks very much like we responded to the damage of the last market bubble by simply creating another one. The inflation that far right economists like Shlaes insist on finding does exist in a sense. They will not recognize it because it defies their models and leads to implications that they do not wish to acknowledge.

Fed stimulus has limited deflation only by propping up speculative markets in assets like oil, real estate and food which might otherwise have dropped even further and remained even lower. This intervention seems to have benefited the owners and speculators in those assets while accomplishing very little for people who have to earn a living from wages.

If this approach isn’t creating inflation, then what is the harm? Frankly, no one seems to know. Unprecedented acquisition of assets by the Fed and massive new money loaned into the banking system is an experiment and we haven’t yet seen the results.

We can predict that prolonged asset inflation will lead to asset crashes. We have been seeing these with increasing frequency over the past generation. Sometimes these crashes can have broad destabilizing effects, as in 2007. Other times, as with smaller collapses recently in gold, or cocoa, copper the impacts are more localized. The overall effect though, so long as this kind of economic juicing remains in effect, is a steady exacerbation of structural inequality and the occasional evaporation of accumulated wealth. Not exactly the kind of thing Amity Shlaes wants to talk about.

With repeated use, monetary policy may be losing some of its effectiveness. It seems to be generating unintended consequences which the economic models currently in vogue may be missing. That happens. Hopefully we won’t need another economic catastrophe to jolt economists into rethinking their models, but there is little sign of a major rethink on the horizon.

Chris Ladd is a Texan living in the Chicago area. He has been involved in grassroots Republican politics for most of his life. He was a Republican precinct committeeman in suburban Chicago until he resigned from the party and his position after the 2016 Republican Convention. He can be reached at gopliferchicago at gmail dot com.

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91 comments on “Where the inflation may be hiding
  1. tuttabellamia says:

    Lifer wrote: “Economics at this stage of development is no more than a philosophy dressed up in equations.”
    My reply: How do you define “philosophy” in this case? A vision of how things OUGHT to be — a form of activism?

    Or in the metaphysical sense — an attempt to define reality?

    I see it as a form of logic, in which all equations are a series of conditional sentences based on certain fundamental assumptions which have changed or are at least being challenged. No “dressing up” necessary. Economics IS a series of equations.

    • kabuzz61 says:

      OW! That hurt. 🙂

      • tuttabellamia says:

        Kabuzz, I have a question for you: How much money do you make off purchases of your ebook? What about the paperback version?

        Have you published just that one book so far, or can we expect to see the Complete Works of Kabuzz someday?

      • kabuzz61 says:

        Totally up to me about how much I want to make. I get about 35% of each copy sold.

        Another is coming out very shortly. It is being edited as I write this. Plus I started on the next one. Loads of fun and something to do while retired.

    • texan5142 says:

      I will bet it does, you are butt hurt from all the misinformation you have been posting that others are pointing out.

    • tuttabellamia says:

      I have nothing else to contribute to this thread. I’m clueless about economics, so I thought I might have something to say as a consumer, but even in that respect, my money habits are very simple. I’m not financially sophisticated in my personal dealings.

  2. Owl of Bellaire says:

    Here’s an article that might connect Chris’ thesis to another current news story:


    “Most all of the money for research and development in health comes from the private sector. They naturally have a singular focus — making money — and they do that by selling patent-protected products to many people who can and are willing to pay very high monopoly prices. Not by developing medicines and vaccines for the world’s poorest people, like those suffering with Ebola. Right now, more money goes into fighting baldness and erectile dysfunction than hemorrhagic fevers like dengue or Ebola….

    “So we can’t be surprised about the current Ebola outbreak. We can’t lament the fact that there’s no cure or that it’s an unstoppable and violent virus when remedies could be expedited; we just don’t prioritize them over other, more potentially profitable health problems.”

    • johnofgaunt75 says:

      Yes. I have read that a cure for Ebola (and many other diseases) have not been prioritized because a cure or immuization against the disease because it mainly effects poor people in poor countries. More profitable to make penis pills and sell them to rich Westerners.

      Maybe this outbreak will wake people up to how vulnerable we really are against these types of diseases. Climate change is only going to increase the risk (especially to the subtropical and very Republican South). How long before we start seeing diseases like dengue and yellow fever or malaria become endemnic in the Southern United States?

      And then maybe not. Collectively we have a history of “head in the sand” mentality. Better keep your OFF handy (and drink lots of gin and tonics).

      • kabuzz61 says:


        Please get a clue. I even linked to a left wing rag for you. Learn. It is good for the soul.

      • johnofgaunt75 says:

        It is relatively rare and difficult to study thus meaning it doesn’t make sense from a financial perspective for a private drug company to study it.

      • Owl of Bellaire says:

        Kabuzz, your article pretty much proves my point.

        Perhaps it had too many long words for you?

      • tuttabellamia says:

        I was listening to a BBC Radio segment on this very problem, and the interviewee brought up the possibility of Ebola being used in warfare, and that this would give the pharmaceutical industry an incentive to get more involved.

      • Owl of Bellaire says:

        Actually, it gives the Department of Defense a reason to get involved.

        The pharmaceutical industry would thus get the money they require for action.

        So it’s actually a justification for government research subsidies.

      • tuttabellamia says:

        Of course, it’s a shame that it would have to come to that to get the attention of the industry.

      • johnofgaunt75 says:

        But Ebola is not spread through the air, correct? Don’t you actually have to come in contact with actual fluids of the infected person to catch the disease?

        Maybe I am wrong (not a doctor or biologist) but you would think that would make it an impractical bug to weaponize.

      • tuttabellamia says:

        Mr. 75, I believe you’re correct that Ebola is transmitted via bodily fluids.

        Medical warfare and profitability aside . . . I’m guessing the WHO has gotten involved to help do whatever possible to keep this disease from spreading. This should be treated as a humanitarian crisis. It’s too bad superstition reigns in many of these communities, and health workers are being attacked for supposedly bringing the disease in with them.

      • kabuzz61 says:

        Acquired through bodily functions or consumed through animals and water.

        Very difficult to make a weapon out of unless a water source is poisoned.

        The difficulty of finding a vaccine is first and foremost the fast mutating ability plus the very limited facilities that can handle the virus.

        I am now on a nationwide call with CDC giving us an update on where we stand as far as the USA.

    • kabuzz61 says:

      To help the silly bird be more honest, it is not a question of poor. Only an imbecile would think that. In today’s ability to fly, a pandemic is not a theory, it can actually happen effecting literally the whole world. So you memo about pharma not caring is just bullshit. It is the fact that there is no cure for viruses period. Infections? Yes. Viruses? No. Gosh you liberals are a dense lot.

      • Owl of Bellaire says:

        kabuzz, I think you’re old enough that you may be vaccinated for smallpox. Know what smallpox is? A virus. Perhaps you get a flu shot every year. Know what the flu / influenza is? A virus.

        We have plenty of *treatments* (if not “cures”) for viral diseases. And we’re steadily finding ways to disrupt viral reproduction, which can result in something very like a “cure” (or, at least, a permanent remission through pharmaceuticals). We also have, despite your ignorance, vaccines for all manner of viral ailments.

        So, there’s one point knocked down. Treatments and cures and vaccines are all worthy components of an anti-viral arsenal, your own “density” notwithstanding.

        So does “Big Pharma” care? Oh, I’m sure they *care*. But they won’t actually *do* anything unless it makes them gobs of money. That is, after all, part of the driver of innovation in a capitalistic economy.

        If you have evidence otherwise, other than waving your hands and spouting lies and right-wing disinformation, by all means present it. But, of course, you won’t.

      • kabuzz61 says:

        Not fast mutating viruses. By the time one vaccine is discovered the virus has already mutated a dozen times.

      • Owl of Bellaire says:

        *Influenza* is a fast-mutating virus, you twit.

        It’s difficult, but not impossible. Of course, more people get the flu than get Ebola. And more people can *afford* flu shots (particularly through corporate subsidies) than the typical West African.

        God forbid facts should get in the way of your steadfast but wrong-headed claims.

  3. kabuzz61 says:

    Just for past support of what the Captain and I have been saying. Now even the NY Times is saying it.

    “…In the Senate, Harry Reid of Nevada, the majority leader, has virtually shut down the legislative process rather than subject politically vulnerable Democrats to Republican amendments intended to hurt them in November’s elections — and even Democrats are beginning to chafe….” [from NEW YORK TIMES today.]

    • desperado says:

      Just to support that what you and the captain have been saying is a crock of shit.
      “The House Intelligence Committee, led by Republicans, has concluded that there was no deliberate wrongdoing by the Obama administration in the 2012 attack on the U.S. Consulate in Benghazi, Libya, that killed Ambassador Chris Stevens and three other Americans, said Rep. Mike Thompson of St. Helena, the second-ranking Democrat on the committee.

      The panel voted Thursday to declassify the report, the result of two years of investigation by the committee. U.S. intelligence agencies will have to approve making the report public.

      Thompson said the report “confirms that no one was deliberately misled, no military assets were withheld and no stand-down order (to U.S. forces) was given.”


    • Owl of Bellaire says:

      Since Kabuzz is a dishonest shill, here’s a link and some other quotes for context:


      “The 113th Congress this week took another step toward ignominy as one of the least productive, most divided in history. Vocal Republicans were empowered, virtually dictating terms of two House border security bills even after party leaders had spent much of the year trying to marginalize them.

      “The results were bills with no chance of becoming law, and ones diametrically opposed to the direction party elders had advised Republicans to go after their losses in 2012….

      “In the House this week, the rush to accomplish even a relatively modest piece of legislation had a dramatic air, with closed-door meetings and members being summoned back from the airport as the new Republican leadership team worked to avoid embarrassment. Speaker John A. Boehner was swarmed on the House floor Thursday by angry members of his conference who demanded he keep the House in session for as long as it would take for them to vote on a bill….

      “As the bulk of Americans tune Congress out, the more ardent conservatives have become more emboldened, notably when a freshman senator, Ted Cruz, Republican of Texas, virtually took control of the House’s immigration bills.”

      Be honest, Kabuzz. Even if it’s a new idea for you.

      • Owl of Bellaire says:

        What, no response from Kabuzz? Of course not: that would require courage, virtue, and introspection.

        No, it’s just on to the next big lie. Cowardice, dishonesty, and stupidity: kabuzz offers the typical Tea Party blend.

      • bubbabobcat says:

        Thanks Owl. It’s a given like the sun rising in the east that buzzy will distort and lie and continue to do so. Even when easily caught in his lie over and over and over again.

  4. CaptSternn says:

    Meh, I am no accountant, that’s for sure. But I have learned a bit this afternoon, stuff like bank money, state money, paper money, total money, M0, MB, M1, M2, M3, M4, MZM, interest rates, inter-bank lending, quantitive easing, comodities, assets, inflation, hyper-inflation, value of the dollar … erg, my head.

    A couple of things seem to be consistent: Bank money grew a lot during the housing boom years, the federal government hasn’t printed enough and spent to offset that, but is very close to doing so. Once that tipping point is reached, major inflation but not necessarily hyper-inflation. Bottom line, it can still be avoided, maybe, if the federal government stops printing and seriously cuts spending in the very near future. But there are other imbalances that will be corrected at some point, and that could be as painful as the crash.

    … erg, my head.

    • bubbabobcat says:

      “Seriously cut spending” Cappy? You won’t let that delusional fallacy of a wingnut meme go despite the evidence.

      Including evidence that reduced government spending on all levels have contributed significantly to the sluggish recovery from Bush’s catastrophic recession.

      And it boils down to simply that when demand outstrips supply, inflation results. And again thanks to the Bush recession and the Republican insistence on “austerity” resulting in the American consumers’ (and producers’) bunker mentality, we haven’t had significant demand (ergo almost no inflation) for the entire Obama Presidency.

      • CaptSternn says:

        Very shallow, Bubba. But we wouldn’t expect any different from you. I didn’t even make my comment partisan, but now I will.

        Democrats have been in control of the federal government for over seven years now, since January 2007. That was when the economy was growing at 3.9% and unemployment was at 4.6%. The last republican deficit was $161 billion, and that includes funding for Iraq and Afghanistan.

        The republicans never had a super majority, they always needed democrats onboard, and the democrats were onboard. But when the democrats did gain a super majority, abe to pass anything they wanted with no republican votes, they went for the PPACA. The PPACA is so bad they the liberals and democats are trying to blame republicans for it, they took a collective dump on the people then hold their noses, walk away and point their fingers at republicans.

        Dempcrats would not even bother to pass a budget when they had the majority of both houses and held the oval office. Once republicans won the house, they did write and pass a budget. Democrats were so petty they shut down the government. Obama demanded a sequester and republicans compromised and gave it to him. When it came around, he went out of his way to hurt kids and again point fingers at republicans.

        A lot of you far left extremists want to come on this blog and post links about what he said or what she said. Forget about that, forget about what somebody said, just step back and look at what the far left extremists, democrats and their supporters, have actually done and continue to do. They never stop and consider the consequences of their actions. That’s why they support abortion so strongly, go out and kill some innocent people because they didn’t consider the possible consequences of their actions.

      • Owl of Bellaire says:

        And how are things in Bizarro World, Sternn?

        I suppose you would be a truth-telling genius there.

      • desperado says:

        Joseph Goebbels would be proud.

      • kabuzz61 says:

        Captain, notice the lack of addressing your points. Just attacking you. That means of course, you won. Also, don’t forget when the dem’s had a super majority one thing happened, the financial crisis and one thing didn’t happen, immigration reform. They are a petty lot.

      • Owl of Bellaire says:

        Sternn’s points have all been addressed many times before. Unwillingness to bash our heads yet against an unyielding, unresponsive wall of repetitive conservative cant and misinformation does not imply a surrender.

        Sternn is, of course, following a well-blazoned trail. “[I]n the big lie there is always a certain force of credibility…. [Those deceived] would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying.” (Adolf Hitler)

        Clearly, people like Sternn “follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous.” (Joseph Goebbels)

        Desperado has it absolutely right.

      • bubbabobcat says:

        Buzzy, as everyone has already noted, Cappy’s points have been addressed ad nausem and we are all too concussed to keep banging our heads against the wall.

        Note the first line of my response:

        “You won’t let that delusional fallacy of a wingnut meme go despite the evidence.”

        AND my supporting evidence link.

      • CaptSternn says:

        Been addressed? That’s funny. Now Owl is pretending that democrats didn’t win in the 2006 elections and that it was republicans that voted for the PPACA against the will of the democrats. Yes, bird, you know all about lies.

      • Owl of Bellaire says:

        Sternn, do you support legislation which receives votes from Republicans but not from Democrats? (The current House provides many such examples.)

        Oh, right. Hypocrisy is a Republican value.

      • CaptSternn says:

        Depends on the legislation in question.

      • johnofgaunt75 says:

        Stern is very busy right now making excuses for the murder of women and children.

      • CaptSternn says:

        You should tell Hamas not to militarize schools and hide behind children 75. But then you would rather defend them.

      • Owl of Bellaire says:

        Apparently Sternn believes that, in a hostage situation, the police should just shoot the criminals *through* the hostages.

        Not only is he stuck on a mental replay of *Babylon 5*, he’s mixing in episodes of *24*.

        But only Tea Party conservatives believe that real life works the same way as a TV script.

      • johnofgaunt75 says:

        They have other ways to respond Stern. You know that and I know that. They have an anti-missle shield. They have special forces soldiers. They have ways to respond to Hamas and their disgraceful tactics. Instead, Israel sinks to Hamas’ level and callously bomb women and children. They know where these shelters are Stern but they shell them anyway. It is simply cold blooded murder Stern and you are accepting it as fine and justified. That is vile and disgusting. Disgraceful that you value the life innocent child in such low regard. You fit right in with Likud and, yes, even Hamas.

      • CaptSternn says:

        And 75 once again sinks to the level of saying the U.S. was exactly the same as Nazi Germany. Do you ever bother to stop and think? Or is it that you just don’t like Jews?

      • johnofgaunt75 says:

        What in God’s name are you talking about? We aren’t even talking about the US. Are you hearing voices or something?

      • CaptSternn says:

        They bombed cities, we bombed cities. We even went so far as to use atomic weapons against the Japanese, they never did that to us or anyone else.

      • johnofgaunt75 says:

        Yes. We bombed cities but we targeted military and industrial targets and we flew raids DURING THE DAY TIME.

        In fact, we purposely flew day light bombing raids to avoid the inaccurate carpet bombing that would result from night raids. We did this DESPITE the fact that it put our air crews in greater dangers. The Nazis carried out raids during the evening against civilian housing estates in places like the East End.

        See, we went out of our way to avoid deliberately or recklessly killing civilians even though it put our own soldiers at greater risk. Why? Bacause that is what a civilized country does Stern that lives by the rule of law. Israel just bombed the school KNOWING there were children there because it was the easiest way to respond and because it had the added benefit of terrorizing the local population. See the difference?

      • CaptSternn says:

        We targeted whole cities, 75. Did you really think those atomic weapons were not aimed to destroy the entire city rather than a specific building? Seriously? And that blows your whole thing about only using the same amount of force the enemy uses. Kind of like laws in some European countries, if somebody attacks you with a knife, you can only use the same size and type of knife to respond. Idiocy to say the least. That’s also why al Qaeda is still functioning.

      • Owl of Bellaire says:

        So, according to Sternn, if someone attacks him with a knife, he’s justified in razing their entire neighborhood with a fuel-air explosive. At 4 am.

        Really, Sternn, if your entire ethical argument hinges on something the U.S. did seventy years ago, even before the civil-rights movement, then you’re even more of a goofball than usual.

      • johnofgaunt75 says:

        Have you ever heard of the Norden bomdsight Capt? Do you know how many American bomber crew members died preciously because we went out of our way to bomb as accurately as possible and thus flew bombing raids during the day? Was it perfect? God no but we did the best based on the technology at the time and our soliders paid for that WITH THEIR LIVES because that is what civilized countries do Stern. You need a SERIOUS lesson in history.

        The atomic bomb is a different story entirely. The bombs were dropped after the number of civilian deaths in the invasion of Okinawa. Civilians were literally throwing themselves off cliffs to their deaths. It was madness and an invasion of the main islands would have been 1,000’s of times worse. Those bombs SAVED LIVES, including civilian lives. Besides, ask yourself, why did we choose the cities we did? They were industrial centers Stern. If we wanted to target civilians we could have just dropped both on Tokyo.

      • CaptSternn says:

        We left those cities untouched to demonstrate the power of the new weapons. Bombing militarized sites saves lives in Israel. It just comes back to the fact that you don’t like Israel.

      • Houston-stay-at-Homer says:

        Stern’s rhetorical debate skills are interesting (here…interesting means “odd as heck”).

        If you criticize Israeli tactics, you are a Hamas supporter (or akin to a Nazi). No nuance, no points along a continuum…it can only be black or white.

        I’m dense, but I’m slowly coming around to seeing this as a theme.

        If you support requiring Denny’s to serve food to Black people, you must also support failed drug laws and sentencing guidelines. No nuance, no points along a continuum…it can only be black or white.

        A fertilized egg at the moment of fertilization is the same as a multicelled blastocyst which is the same as a 26-week fetus, which is the same as a two-year old toddler. No nuance, no points along a continuum…it can only be black or white.

        It is consistent with Stern’s appreciation of Bush II’s foreign policy “strategy” and his “you are either with us or against us” mentality.

        It is all one way or another. If you go from A to B, you are automatically at Z.

        It is an interesting approach to discussions and positions in a big messy world. My first reaction is that it is a simple and easy approach to have, but it has to be hard work to bend your brain around rationality and logic to support a black/white perspective.

        Rational people can (and actually must) believe both Israel and Hamas are doing bad things.
        Rational people can make an easy argument that Hiroshima and Nagasaki (maybe even more so Nagasaki) was an immoral act.
        Rational people can support the civil rights act and no bad drug policies.
        Rational people can see a difference between a fertilized egg and a 30-month fetus.

        With tacit permission from Ralph Waldo:

        “A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.

        With consistency a great soul has simply nothing to do. He may as well concern himself with his shadow on the wall.

        Speak what you think now in hard words, and to-morrow speak what to-morrow thinks in hard words again, though it contradict every thing you said to-day. —

        ‘Ah, so you shall be sure to be misunderstood.’ — Is it so bad, then, to be misunderstood?

        Pythagoras was misunderstood, and Socrates, and Jesus, and Luther, and Copernicus, and Galileo, and Newton, and every pure and wise spirit that ever took flesh. To be great is to be misunderstood.”

      • kabuzz61 says:

        Hamas does what they do on purpose to emotionally move the sheeple like 75. Israel just might be tired of the missles flying into their country. Maybe they are willing to push Hamas to the bargaining table. It seems to be working. They have agreed to meet. Who was it that said “Peace through strength”? Oh! A republican. Reagan.

        War is ugly, war is brutal and war is bloody. When I was in the service, they explain clearly what you may see and what you may have to do. You gain a perspective that those who do not serve don’t have.

        Homer, you are so boring.

      • CaptSternn says:

        If you support assumed and automatic guilt, you are supporting all that goes with it.

        Israel acts in defense, Hamas is on the offensive.

      • Houston-stay-at-Homer says:

        Oh no…Buzz, the king of six word comments, disappearing, and hiding rather than supporting his position, thinks I’m “so boring”.

        What on earth shall I do with my now shattered self esteem?

        Buzz…please like me, please.

      • Houston-stay-at-Homer says:

        And Stern continues the black/white, all or nothing. If Point A is supported, you must also support absurd Point Z.

        Now, this is only true regarding points with which Stern disagrees. When it is an issue he supports, he sees all sorts of nuance, even when none exists.

        For instance, Tea Party candidates are consistently against formal recognition of gay marriage, but the “tea party” does not have positions on social issues, but there really is no “tea party” but rather a grass roots movement with people who have similar concerns, but not when those concerns are about social issues, except when they are.

      • CaptSternn says:

        TThor and I don’t agree on abortion laws, a social issue to many, but we both consider ourselves part of the tea party movement and neither of us says the other is not because of that disagreement.

        Many in the movement would not agree with my views f having states recognize same-sex marriage, but we are still part of the tea party movemment.

        Now we come to something like Hamas and Israel. Hamas is responsible for all the death that occurs on both sides as they are the aggressor. It’s kind of like that shooting of a pregnant woman Turtles mentioned a while back, her partner in crime was caught and he is the one that got charged for murder because she was killed, not the homeowner. But as so many on the left so often do,m they wanted to crucify the homeowner and excuse the criminals, like with Israel and Hamas.

      • texan5142 says:

        Tea party “movement” is the same as a bowel movement, same result, shit that needs to be flushed down the toilet.

      • johnofgaunt75 says:

        So Sternn, in you mind, is there any limit to Israel’s actions to stop Hamas firing rockets? Since Hamas is the aggressor (and, in your mind, responsible for all deaths no matter who does the actual killing), can Israel do anything they want? Could they nuke the Gaza strip? Would that be justified?

      • CaptSternn says:

        Israel should simply annex it, along with the rest of their traditional territory.

      • johnofgaunt75 says:

        Nice avoiding the question. Why should I expect anything less from you.

        Annex the Gaza and grant the entire population citizenship? Bye-bye Jewish state. Or would you refuse them civil rights and bring about a new apartheid? Can you answer that question Sternn?

      • johnofgaunt75 says:

        Thanks for the link. Yes. I know there are a small number of Arab citizens of Israel. By and large, Arabs in the West Bank and Gaza are not citizens unless they have ties to Arabs who remained in Israel after the Israeli War of Independence. This does not address the question.

        Following your proposed annexation, what would you do with the population of Arabs living in Gaza? Grant them citizenship and civil rights due to them as residents of Israel? As mentioned, this will lead to the end of Israel as a Jewish state. What’s your solution Sternn? We are waiting.

      • CaptSternn says:

        Might have helped you if you had actually opened and read the link …

        “Most of the Arabs living in East Jerusalem and the Golan Heights, occupied by Israel in the Six-Day War of 1967 and later annexed, were offered Israeli citizenship, but most have refused, not wanting to recognize Israel’s claim to sovereignty. They became permanent residents instead. They have the right to apply for citizenship, are entitled to municipal services, and have municipal voting rights.”

        Suppose I overestimated you, or was it you that “misunderestimated” me? Notice the words “annexed”, “offered”, “refused” and “apply”? How about “municipal voting rights”?

      • johnofgaunt75 says:

        Yes. I know the Arab residents of East Jerusalem and the Golan were offered citizenship. This is only a small fraction of the Arabs resident to the greater occupied territories. Are you proposing that Israel make such an offer after annexation? If so, say it. Why dance around it? Is it that you lack the ability to effectively advocate and defend your beliefs without playing games? Or perhaps you lack the confidence your beliefs to actually stand up for what you actually believe? Maybe it’s just cowardice?

        If you think that annexing the Gaza (and presumably the West Bank) and making a similar offer of full Israeli citizenship to the residents of these areas is the solution to this never ending problem, then just say it.

      • Owl of Bellaire says:

        Sternn simpers, “If you support assumed and automatic guilt, you are supporting all that goes with it.”

        And yet he supports the “collective punishment” which the Israelis are visiting upon innocent inhabitants of the Gaza Strip, a case of “assumed and automatic guilt” if there ever was one.

        Y’know who else was really into “collective punishment”? Nazis. And y’know who else was intent on banning abortions for their women? Nazis. And y’know who else had a fetish for military displays of strength and a deep hatred for undesired immigrants? Nazis.

        I’m starting to see a definite pattern here. Just sayin’.

      • Owl of Bellaire says:

        Oh, and who was really into men wearing formal capes? Nazis. And what does “Superman” translate into in German? “Übermensch”. And what’s “Sternn” awfully close to? The German “Sternen”, meaning “stars”. And what did Nazis force those they disliked to wear? Uh-huh. Stars.

        Just sayin’. And only partly in jest.

  5. “Economics at this stage of development is no more than a philosophy dressed up in equations.” Indeed. The same may be said of climate ‘science,’ but I digress.

    Speaking of cognitive dissonance, the following says it all: “We are however seeing a boom in asset prices. The economy has limped along for seven years, with sluggish employment growth and consistently weak GDP numbers. Weak economic indicators have been accompanied by a historic bull market in stocks, accompanied by booming values in a wide variety of asset classes.”

    The Fed has pumped trillions into the economy, and it’s ended up in two places: 1) bank reserves, and 2) the equities market. In the absence of any ‘real’ economic improvement to speak of, the bull market run of our so called ‘recovery’ can *only* be regarded as “capital inflation.”

    At this stage of the game the Fed teeters on a knife edge, with the narrowest of paths leading to a soft landing. Asset bubbles eventually pop. The Fed needs to allow the ‘real’ economy to ‘catch up’ to the equities market before that bubble pops. At the same time, the Fed needs to ensure that the ‘real’ economy doesn’t heat up too quickly, because that will make it impossible to reel in all the dollars spread hither and yon by QE before traditional inflation rears it ugly head. And as last week’s events pointedly illustrate, it doesn’t take much in the way of external events to perturb what is in effect a super saturated solution in an undesired direction.

    My recommendation: Pray for Janet Yellen.

    • BTW, Chris, I don’t really find find Shlaes’ rant all that “bizarre.” She’s merely pointing out that over the past few decades we’ve transmogrified the CPI into something that is largely meaningless, and can be manipulated at will by those entrusted with calculating inflation. The everyday experience of most Americans coincides with that of Shlaes – stuff costs more than it used to, in many cases a lot more than it used to. When wages and salaries are not going up, that’s hurts. 2% inflation doesn’t sound like much, but compound it for seven years against flat wages and your effective buying power is down by 15%. OUCH.

      Shlaes neglects to point out the obvious regarding items whose costs have outpaced inflation, e.g. health care and higher education: Namely, if you subsidize something, it will become more expensive. This is all well and good for those being subsidized, but for those doing the subsidizing and/or paying their own freight (you know, the 53%) it’s a double whammy. And then when you find out you can’t get access to that $87K Hep-C treatment (or, in my case, a statin I’ve taken for years), or that your kid’s transgendered Islamic women’s studies degree isn’t worth the parchment it’s typed on, well, that’s enough to *really* elicit a rant. No wonder Obama would rather be on the links.

      • Owl of Bellaire says:

        “Baumol’s Cost Disease” also offers an explanation for some of the price increases, in areas (like health care and education) where individual human interactions can’t as easily be automated.

      • Owl, I think the Baumol effect would only be applicable were the sectors mentioned (health care and higher ed.) merely keeping place with overall inflation. They are, in fact, outpacing overall inflation cost-wise. Also, both these sectors *are* experiencing productivity gains – think MOOCs, or computerized health records. In this respect one would expect per unit costs to be going down, not up.

        My daughter graduated from UT some years back; during her freshman year she was housed in the Littlefield women’s dorm. Littlefield (built in 1927) serves up glorified barracks living; there is one communal bathroom per floor, and students bunk two to a (very small) room. Littlefield accommodations are actually somewhat more primitive than those of King Hall at USNA (from whence my son graduated).

        This year the daughter of a close family friend will be starting at UT and residing in Duren Hall (opened in 2007) in a single space room with a private bath, and enjoying various amenities including a very nice exercise room. In fact, the accommodations at Duren are considerably nicer than anywhere I lived in during my entire academic career, and are in fact nicer than the apartment my beloved and I inhabited as newlyweds.

        This lovely UT housing facility was paid for via the proceeds of student loans. It will not facilitate (except peripherally) a better education for my friend’s daughter, but it will considerably raise the cost of this young woman’s education relative to my daughter’s. Of course, she (and many like her) won’t really experience the impact of that cost increase until she hits the workforce and has to begin repayment on her college loans.

        The easy money of our federal student loan program subsidizes higher education institutions in much the same way QE subsidizes the stock market. In neither case does the largess of these subsidies produce any real value; the subsidies merely serve to inflate a bubble. Sooner or later will come a reckoning.

      • Crogged says:

        So this is because of federal loan programs?


      • Owl of Bellaire says:

        You’re right that Baumol only provides a partial answer (though MOOCs are not yet widely viable financially, nor is it easy to computerize grading essays).

        Inflation is a general measure. Yes, pay is static or crimped, and times are tough, for hourly employees, plenty of other service workers, adjunct faculty, and so forth. Yet, somehow, many CEOs and day-traders and lawyers and doctors and college administrators see their salaries and bonuses continuing to rise, further exacerbating our already-dangerous degree of income inequality.

        Yes, many colleges are building lavish facilities; Rice is doing the same. And many schools claim (though I have no data on their success) that they are addressing ever-rising tuition costs by charging full fare to those who can afford it, and offering financial aid to an increasing fraction of applicants. So, in part, the behavior mirrors that same issue of income inequality and skewed gains.

        Do I think that’s prudent, moral, or wise? No. But it’s where they’re being driven by the capitalist “free” market. So why aren’t you sitting back and applauding?

      • Owl of Bellaire says:

        At least one college president sees the problem:


        “Raymond Burse, interim president of Kentucky State University, has given up more than $90,000 of his salary so university workers earning minimum wage could have their earnings increased to $10.25 an hour…. Burse’s annual salary had been set at $349,869.”

      • Crogged says:

        If the difference between ‘subsidy’ and ‘investment’ were explained I might understand what the point is. Are all public spends ‘subsidy’?

    • CaptSternn says:

      TThor has the floor, Sternn has left the building.

    • Owl (and Crogged), the higher education market is *not* an example of free market capitalism; that’s precisely my point. The federal loan program is in effect pumping gobs of capital into university coffers; tuition continues to rise because readily available student loans remove constraints on tuition costs. There are no free market constraints on tuition cost; tuition is paid for with ‘free’ money.

      Tuition subsidies in the form of readily available student loans are resulting in massive misallocation of capital. If your ‘business mission’ is to provide advanced education, how does building resort-style dormitories further that mission? It doesn’t; it serves only to further an artifiicial, self-perpetuating money chase. The goal of the university administrator is no longer to provide the best education possible. Rather, it’s to run massive capital improvement programs funded by a gusher of loan-fed tuition dollars, not to mention lucrative collegiate sports media contracts. It’s big business in the crony capitalism sense, and it’s rather perverse.

      • johnofgaunt75 says:

        And subsidized federal student loans have also provided millions of people with access to higher education that otherwise couldn’t afford it. I include myself in that category.

        So what is the answer? Eliminate the program so only the wealthy can afford a college education? Only the wealthy or the select few who can qualify for scholarships can afford graduate school and a chance to move into the upper middle class? Back to the “good ole days” where the market ruled? And people complain about inequality now. Just wait….

      • Crogged says:

        What is required for a free market to deliver goods at the best ‘market clearing’ price for the average consumer? Buyers and sellers of equal power (eg NYMEX/Chicago) and a fungible product (oil, natural gas, futures). Yes, commodity markets work the best for consumers in a capitalist economy, but not all markets involve commodities and buyers and sellers of equal power. Medicine and education can’t be ‘free markets’-we have to subsidize, or to the extent that the ultimate consumer of education generally is able to work better jobs, realize to society this ‘subsidy’ is an ‘investment’.

      • Owl of Bellaire says:

        Is a “loan” really a “subsidy”? That’s a novel way of looking at it. After all, the money is supposed to come back, some time or other. Only if you insist on looking at lost opportunity costs compared to other forms of investment is it really an expense. (And, yes, there’s the expected loss from defaults, etc. — but, last I checked, the federal student loan program was *still* operating at a profit….)

        And, of course, if we’re to gripe about such government distortions of the free market, then we have to consider goring the ox at which Tracy suckles. (Now, that mixed metaphor *really* didn’t come out right….) What about government subsides or sweetheart deals for the petrochemical industry? Why shouldn’t those *also* be considered to produce “misallocation of capital”?

        Oh, right. Because hypocrisy is a Republican value.

      • johnofgaunt75 says:

        My loans were certaily subsidized. I looked at private student loans and the interest rates were outrageous. They are also highly regulated by the government.

        All things I support by the way as I think encouraging higher education is the best way to guarantee social advancement. I do admit that such loans are probably also driving up the cost of education although I think another factor is that many middle class jobs that did not require a university degree are now disappearing. We are increasingly becoming a society of “have’s” and “have nots.” And if you don’t have a degree, you will almost certainly be one of the “have nots.”

      • objv says:

        Rice Owl, I may not have grown up on a farm but the idea of sucking a gored ox is highly disturbing and alarming. You may need to consider taking remedial agricultural classes at A&M. Thanks for the chuckle of the day. 🙂

        My kids are five years apart Although we sent our first child off to college in 2005, we won’t finish with college tuition payments (at the same university) until next year (an extra year for a change in majors).

        During the last nine years, costs have risen steeply. A rough guess is that they have doubled. However, the quality of education has not improved and I doubt the professors or nice cafeteria ladies are being paid twice as much, Like Tracy, I have noticed many new, impressive edifices on campus over the years. One of the new structures looks like Harry Potter’s Hogworts – a bit out of character for central Texas if you ask me (no one did).

        Clearly costs can’t continue to go up. Some students are swimming in debt. A friend of my daughter says she has $200,000 of debt after getting her master’s degree – a true horror story – especially since she works in a field where it will be difficult to pay off her loans. She is working on finding a rich husband now. Good luck to her!

        While JoG75 is right in that student loans have enabled many to afford college (including my husband), Tracy has a point. The large amounts loaned to students nowadays are causing the costs of attending college to skyrocket. Colleges know that loan money is available. They charge what the market will bear.

        More stringent loan limits need to be set. This might entail the student going to community college for the first two years.

        Online classes should become more prevalent. There is no reason some colleges can’t offer basic classes online. Books are also a huge expense. More should be available as eTexts. As the pot of available money shrinks, colleges will have to adjust and innovate. This would definitely be a positive turn and lead to less long term debt.

      • Owl, I’m an ox suckler from way back. 😉

        I don’t have a problem “investing” in education. As with most things, the trick is in recognizing when the shark has been jumped.

  6. johnofgaunt75 says:

    Given the amount of private debt in this economy and the effect it has had on domestic spending (and thus the economy as a whole), a little inflation would be a good thing.

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