« The benefits of Chinese economic growth | Main | Is the world economy more bubble prone? »

Friday, August 12, 2005


Gary lammert

Blogging is a wonderful tool to present different perspectives to a wide audience.
The last last five years represent an extreme experiment in US macroeconomics. The Federal reserve lowered fed fund rates after March 2000 to around one per cent . LIBOR loans, ARM's, and non principle payment loans remarkably amplified the effects of these ultra low interest rates resulting in an echo housing bubble of greater magnitude and much greater private citizen import than its immediate information technology predecessor. Hundreds of thousands of construction, real estate, and mortgage processing jobs have been created. The profound tax cuts lowered federal revenue collections to multi-decade record percentage lows of the GDP and placed billions of dollars back into the able spendthrift consumer hands. Wartime borrowing and spending created hundreds of thousands of jobs for both lucrative civilian contracting at-home and in-theater support and back-fill positions of reservists off to war for 12-18 months at a time. Low cost foreign manufactured goods were imported by debt driven dollars at a rate of 4-5 percent of the GDP per year. Emerging from all this incredible stimulation and imbalance, the American real GDP eked out an average 2-3 percent growth over the last five years. So much debt for so little gain. What would have happened if the variables of the grand experiment were changed? What would have happened had fed funds rate been lowered to only two and a half percent at the nadir or if tax cuts were only given at a rate of 50 percent of the actual and only to those earning less than 60, 000? What if there were intelligent and proactive regulatory guidelines requiring 15 percent down on housing and requiring payment on the principal? What would the effect have been had 300 billion not been spent on operation Iraqi Freedom? Finally, are the gains self sustaining? Was the debt incurred worth the GDP gain? Will the 'investment' in the current years translate to continued growth in the out years? The common denominator for all of the growth that has occurred in the last five years is not new self sustaining capital investment in machines, nor in equipment, nor in R and D, nor in improved public works, water, roads, or energy, nor in productive entrepreneurship. The common denominator in the five years of anemic resuscitation of the US GDP has been through the common end process of maximal facilitation of federal and private debt creation for a one time bang. Federal deficit spending and private debt accumulation, the latter related to unimaginable - referenced to wage income - bank, GSA, second mortgage, and credit card borrowing for housing, leisure, and the 700 billion a year current account deficit spending, have been firing on all eight and one half cylinders. Gasoline had been poured onto the smoldering and dying 2002 NASDAQ ashes that turning into charcoal after the saturation point of the tech bubble had been reached in March 2000. The over-stimulated economy is now at another saturation point with regard to housing, equity and the leading commodity entities. Many pointing out global productivity gains fail to realize that it is ultimately overcapacity that is driving workers out of individual areas resulting in those productivity gains. Fractal analysis of market valuations and saturation macroeconomics suggest that the next few months will involve a phase transition of historical magnitude. The economic imbalances; the high or near highs in equities, certain commodities, and the housing bubble arena as well as the intermediate highs in the short term and long term debt markets; and the relative over saturations of markets, forward consumer consumption, overcapacity, record private, corporate and governmental indebtednessed, US historical null savings, and market euphoric optimism suggest that the timing for such a fractal phase transition should and will not, retrospectively, be inappropriate or unexpected . For linear thinkers and market analysts looking at the continuous and ever steady progress of a infallibly expanding money supply and its dependent recipient incresing market valuations, this might be a time to reevaluate - and - expect the unexpected. Gary Lammert http://www.economicfractalist.com/

Edward Hugh

"Blogging is a wonderful tool to present different perspectives to a wide audience"

Yes, but what's lost on me is what the relevance of what follows is to the main point of the post.

Whilst I think the WSJ article is interesting, as so often with that source things get wildly overstated.I do think that when compared with two or three years ago, the quantity and quality of economics blogging has definitely improved.

I agree largely with the assessment in the post that we have some way to go before we generate our own autonomous discourse of new ideas (although some of us are trying, hint, hint). I think one of the issues we have yet to resolve is how to generate more of a conversation between us economics bloggers ourselves. I know we inter-link a lot, but this tends to be hat-tip type stuff, rather than serious critical engagement of ideas.

As for Nouriel Roubini and libraries, I couldn't agree more. I spent the first 15 years of my adult life glued to the shelves in various library stacks, and during the last 5 I haven't even entered one.

I also used to collect books, in quantity, and have just this summer finally managed to identify a loving home for the last of them. These days I acquire a book on a stricly need to read basis (normally novels) and promptly try to pass them on again as quick as I can. Otherwise they just produce a lot of work with all that dust they accumulate :).

Edward Hugh

Being greedy, and since you seem to be in absentia, I'm going to make a second comment on this post :).

Thinking about this point:

"Most blogs most of the time rely on mainstream media reports for their raw copy."

Ithought it might be worth taking a second bite of the cherry. What about niche blogging? Being a good Darwinian maybe econ blog evolution is to do with speciation and specialisation. What I'm getting at is that if you want to know about China or the US deficit maybe you go to Brad Setser, if you want to know about oil economics and peak output maybe you go to James Hamiltonat Econbrowser, if you want to know about Fed policy maybe it's Dave Altig at MacroBlog, and I'd like to think that if it's the euro or demography you are interested in you come to me. Then there is The Big Picture and US housing, or General Glut for glut related topics, and Calculated Risk and Sceptical Speculator for the risk related items. Indeed if you want to know about the fractals of economics, or the economics of fractals (damn, I always get these two mixed up) you have the man himself above.

Which of course brings us to you. Despite the name, you hardly specialise in New Economy topics, and unfortunately there may not be an extensive market for sensitive reflections on how Taylor rules work. So maybe you need to find a niche (and not a nincho) for youself since this is a super and very enjoyable blog.

Brad Delong of course is the exception which proves the rule, the rule that what is quintessentially human is world open-ness and absence of specialisation (oh dear, shades of Max Scheler). Brad is effectively the 'Giant Node' (only a vague physical reference intended here) which acts as the social glue holding the thing together - or perhaps Brad is The Node (like the dude in the Big Lebowski) and we are the nodettes :).

Anyway, wherever you are, I hope you're having a very good time of it.

New Economist

Edward. Thanks for the comments. I quite agree this weblog covers a broader range of topics than is usual for econobloggers. The reason is not that I am trying to emulate Brad DeLong, but rather that my interests are fairly varied.

As I say in the About me page: "I've worked over the years for several governments, an investment bank and a think tank." To clarify things a little, I have changed my tag from:
Musings from a London-based economist and policy wonk
New economic research, data, events and analysis from a London-based macroeconomist

Less sexy, but more accurate. More dramatic changes may be in the offing. We'll see.

The comments to this entry are closed.


  • TEST

  • Subscribe in NewsGator Online

Economist Weblogs



  • This is a personal web site, produced in my own time and solely reflecting my personal opinions. Statements on this site do not represent the views or policies of my employer, past or present, or any other organisation with which I may be affiliated. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.