February Blogging

It's no accident February has only 28 days. It is half of *a Dickens opening: the worst of times. Specifically, it is the dregs of the calendar, the short, dismal month that connect the ass-end of Winter to Lent.

And that's in a good year.

This, my friends, is not a good year.

The worst month is now over.** Are things looking up?

Don't count on it. Unless you're looking for some time off.

__________________________________________
* The worse half
** This, in case you were wondering, is the actual point

Oh My Gawd ! Redux, Again

This, via one of the hundred most dangerous college perfessers.

Twittering for Twits.

Oh My Gawd ! Redux

Jim Dandy to the Rescue.

Go Jim Dandy!

Oh My Gawd !

You can't make this stuff up.

Wow. Just. Wow.

More on Smoot Hawley

In a comment to the last post, Ironman takes exception to my critique of his Nov. 13 post at Political Calculations, titled "A Tariff Sparked, Long Running Deflationary Event." My take was flippant, bordering on smarmy, and for that I apologize. But nothing so far has made me reconsider the content. There are two issues in dispute: the relationship of the Smoot-Hawley Tariff Act (SHTA) to the stock market crash that started in October, 1929, and my take on his graphs.

Here we will consider SHTA, vis-a-vis the stock market. Though it was one of many straws on an overburdened camel, SHTA is not generally considered to be a significant contributor to the Great Depression. Ironman mentions the roll of expectations in driving stock market prices. Fair enough. If SHTA was affecting expectations in the fall of 1929, there ought to have been reporting on that topic, especially in the financial press. This appears not to have been the case.

More Depressing Thoughts

Did anybody ever tell you the Smoot-Hawley Tariff Act was a cause of the Great Depression? It wasn't. It probably didn't help things, but as a cause - well, let's just say it showed up far too little, and a little too late.

This post at Political Calculations goes into it. It has some interesting graphs, along with some stunningly wrong-headed reasoning. First off, they posit that Smoot-Hawley was responsible for the stock market crash of October, 1929. This is pretty extraordinary, since Smoot-Hawley was passed by Congress on March 24th, 1930, and signed into law by President Hoover on June 17th, only a few days short of eight full months later. In fairness to the good people at Poly Calc, they blame the crash on the breakdown of an anti-tariff coalition in the Senate in Sept-Oct of '29. If you're willing to believe that an impending incremental increase in trade restrictions has a close tie to the vagaries of domestic corporate finance - OK, go for it. But still - the idea that the mere potential of a bill, with yet-to-be-determined-effects, passing at some time in the future could be the root cause of a devastating stock market decline is rather fantastic.

It gets better. Have a look at their graphs, Thing 1 and Thing 2.

First off, these are graphs of trailing 12 month stock dividend payouts. As a measure of economic activity, this will be a very late indicator, and it's not at all clear that it will be an indicator of any validity. In Thing 1, for example, they define a "dead zone" from late '32 through late '35, when dividend pay-outs were almost flat, following the big decline from the 1930 high. We already know that business investment hit rock-bottom in '32, and was rebounding quite vigorously by '35. In the absence of any specific knowledge, I'll guess that those investments were beginning to pay off, hence the desire (and the ability) to eventually increase dividends. A lag time of about two to three years from the bottom does not seem unreasonable, especially since it is trailing pay-out data.

Now look at 1939 through 42, the pre-WWII period they call "anemic growth." Compare it to the period beginning in 1943, when "Sustained recovery begins, and Great Depression ends." Notice anything odd about the next 5 or so years after 1943? Like, for example, that the growth rate is about half of what they called anemic! It has me scratching my head, for sure.

Thing 2 is absolutely stunning! Inflation adjusted dividend pay-out, after their Depression end date of 1943, stays in the range of the "dead zone" values all the way out through 1949. Wow!

I have no idea what point they are trying to make. Even a casual glance at Thing 2 refutes their wrap-up sentence. "The beginning and end of the Great Depression can be identified as the period from October 1929 through June 1943 as the period in which the real (inflation-adjusted) values of the S&P 500's dividends per share consistently exceeded their nominal (historic) values."

The graphs sure are pretty, but -- scratching continues . . .

Fairies - More Historically Important Than You Thought

The route in women's fashions from the gay 90's Gibson girl to the roaring 20's flapper was via the fairy! I had no idea. Really. But, especially in view of the Minnie Mouse connection, I think Tink would be proud.

Private Sector Investment in the 30's

The graph in the Delong Post I linked to recently seems pretty straight-forward. Private investment tanked from 1929-33, then recovered through 1937. After a slip in '38, it took off again. But even that is subject to controversy.

The chart you will find here at Econospeak shows net investment, calculated by subtracting depreciation from real investment. It has been reproduced and discussed at other places.

George Will and Paul Krugman got into an on-air dust-up over the subject.

My comment at Econospeak:

The only way to actually get negative investment is to turn the hard asset into cash. The graphed calculation does not do that.

Has it occurred to anyone that net investment, using depreciation as the subtrahend, is a concept that doesn't actually mean anything real?

Investment is cash paid out in exchange for an asset - a real transaction. Depreciation is an accounting abstraction that allows for the amortization of investments made some time in the past over the presumed useful lives of the purchased assets.

The whole concept is ridiculous. Does the fact that they are both dollar denominated justify this kind of confusion? You might as well subtract a duck from an egg.

Krugman made no mention of this, refuting Will on a totally different basis. Am I wrong? Help me out, somebody.

Do Nothing: It's Good for you

Shorter Amar Bhide: Don't know much about economy. Doin' nuthin's good for you and me.

Slightly less short: Since we don't know what starts and ends recessions, depressions, and all sorts of economic nastiness, we shouldn't take any risky actions with unknown consequences. Because, "Hastily enacted programs jeopardize crucial beliefs in the value of productive enterprise."

I have come to believe that one of the cornerstones of the conservative Right-Wing mindset is magical thinking. The sentence quoted above is the inverse of Peter Pan begging the kids to chant, "I do believe in fairies," to save Tinker Bell's life. I'm all in favor of fairies in general, and Tink in particular. But, please, everything in its place. Let's not put the value of productive enterprise in Never-Land.

Bhide continues: "We believe that we can all get ahead through innovations because the game isn't stacked in favor of the powerful." This guy really is from Never-Land. If you think the game isn't stacked in favor of the powerful, I have some favorable power I'll sell you at a very reasonable price. Here's a bitter dose of reality.

Bhide also thinks the economic downturns of the 19th century, and the government's non-reactions to them, provide a good model: "The depressions and panics of the 19th century ended without any fiscal stimulus to speak of . . ." While it's true that all bad things must come to an end, is it always necessary for the end to be particularly bitter, and several years into the future, following riots, mayhem, and blood in the streets? Also, the government wasn't totally uninvolved, unless you believe, for example, that having the military massacre strikers is non-involvement.

The editorial page of the Wall Street Journal has always been a repository for far-right-wing demagoguery. It now often veers into the uncharted territory between the absurd and the insane.

Conservative Depression

I lament the demise of Conservatism in American politics. The place that should be occupied by genuine, thoughtful Conservatives has instead been co-opted by Right-Wingers. Here is the difference. As Russell Kirk describes it, the Conservative is never motivated by ideology, but rather by a responsible, cautious, conservative mindset. On the other hand, my observation is that Right-Wingers are strongly motivated by ideology, often to the exclusion of honesty, principle, and even patriotism.

As a corollary to Kirk, I'll add that the Conservative should have a deep respect, if not a reverence for American history, both as a store house for our national heritage, and as catalogue of valuable lessons learned in our past. But the Right-Winger is a historical revisionist, who is willing to cherry-pick data and skew the record of our past to promote a Right-Wing ideological agenda into the future.

A case in point is the recent Right-Wing meme that FDR's New Deal policies deepened and prolonged the Great Depression. This is further compounded by promoting the lie that the consensus view of economists and historians supports their meme. The statement about the New Deal, on its face, is highly questionable. There is not, and cannot be, any data to support the meme.

We can take a hard look at the New Deal and critically evaluate what worked, and what didn't. This, in fact, is what we should do. In 1933, there was no blueprint for dealing with the economic melt-down of 1929-32. FDR's administration tried a lot of things, in a more or less scattershot manner. They were pragmatic enough to keep the ideas that worked, and abandon the ones that didn't.

Some Right-Wingers point to the National Industrial Recovery Act (NIRA) of June, 1933 as proof that the New Deal failed. This is cherry-picking the available information. NIRA was probably the worst of all the New Deal Programs. It was abandoned (and even found to be Unconstitutional) in May, 1935. In crafting future policy, it is important to understand which New Deal programs were or were not effective. To refute the Right Wing meme that the New Deal deepened and prolonged the Great Depression, we need only look at the results.

One ploy is to say that the New Deal was ineffective at eliminating unemployment. This essentially silly argument can only be made at all by counting employees of Federal New Deal programs among the unemployed. There are official data series that do that, and there are other series that count the Federally employed among the employed. Take your pick. Then again, to Right-Wingers, the make work projects of the New Deal were boondoggles. By any measure, though, unemployment fell from the high of 1932 or 1933 (depending on the data series used) for the rest of the decade, except for a one-year increase in 1938. More on this later.

Recessions are defined in terms of GDP contraction. The Great Depression contained two recessions, 1930-33, and 1938. From 1934 on, with the exception of 1938, GDP growth throughout the decade was outstanding, far exceeding any growth rate that has happened since.

Another ploy is to suggest that Federal spending crowded out private sector investment, and prolonged the recession in that way. If that were the case, private domestic investment spending, which almost totally evaporated between 1929 and 1932, would have stayed low. The reality is that this spending recovered to the 1929 level by 1937. It took a hit again, in 1938, along with everything else, but by 1940 was well above the 1937 level.

Maybe best of all is the idea that the the New Deal prolonged the great Depression because hours worked per employee per week declined. Never mind that this statistic was in a multi-generational decline, due to a variety of social forces. Hours worked were fewer in the 50's than the 30's, and fewer still in the 80's. Hmmm. (Understanding the Great Depression Blogging: Labor Input and Its Trend)

Now, what about 1938? Even conservative economists like Ben Bernanke, Milton Friedman and Bruce Bartlett recognize that the greatest mistake of the New Deal was that, as Bartlett put it, "in terms of fiscal policy, Roosevelt's error wasn't that he spent too much, but that he didn't spend nearly enough." This was illustrated in the worst way when Roosevelt raised taxes and cut spending in 1937 in order to balance the budget. He met his target, but the result was the recession of 1938.

Global Warming On Ice

Should anyone be surprised when George Will gets it totally wrong?

Here is the reality.

The most recent decade was the hottest ever.

Polar ice area is 9% less than a decade ago.

What else is there to say?

Liberal Fascism

Some thoughts on Jonah Goldberg's magnum opus.

Not mine - other people's. They read it, so I don't have to.

Phila at Beuphonia compares Goldberg unfavorably to "Renaissance mystics and logicians."

David Neiwart at The American Prospect compares his book to "something from a comic-book alternative universe: Bizarro history." Neiwart's evisceration of Goldberg's incoherent, poorly researched rambling is thorough and unanesthetized.

Fred Siegel in the WSJ points out that Goldberg "demonizes American liberalism unfairly and ignores a counter-history."

Evidently, even Right-Winger Michael Ledeen also ripped it up, but his review seems to have disappeared from the face of the earth. But, at least, Matt Yglesias referred to it at The Atlantic before it disappeared, as did Daniel Koffler at Jewcy.

Imbedded links go to the Pajamas Media homepage. The Review of LF is nowhere to be found. I've scoured the Ledeen archive, and the place holder for his review leads to a basically empty page.

Go figure.

Historical GDP Growth

GDP growth from 1800 through approximately WWII was contained in an expanding envelope, indicated by the green lines. This is a companion to the previous post.

I have no idea what it means.

A Disturbing Look at GDP Growth

The yearly values for GDP growth since the 50's are contained in a collapsing envelope, indicated by the green trend lines. These lines converge at about 1.8% in 2028. Make of it what you will.

Red and blue line segments represent the terms of Republican and Democratic presidents, respectively. Heavy red and blue lines are average values for a presidential term. The continuous horizontal line is the historical average of 3.77%. The yellow line is a 21 year moving average. Note the disturbing trend. It has been below the long average since 1980, and is on a declining trajectory.

Three interconnected economic phenomena have characterized this period: major reductions in the marginal income tax rate, relaxation of regulations on industries of all kinds, and a massive transfer of wealth from the least to the most wealthy. We reap what we sow.

The data series ends in 2007.

Year over Year GDP Growth - 1900 to 1960

Depression Era GDP Growth in Perspective
The track record for GDP growth in the first half of the 20th Century was less than stellar. This graph shows Yr over Yr GDP growth per presidential administration from 1900 through 1960. Republican and Democratic administrations are indicated by red and blue line segments, respectively. Averages per presidential term are shown in Heavy horizontal lines covering the respective terms in office. The continuous horizontal line represents the average of GDP growth for the period 1800 through 2007 of 3.77%. The snaky yellow line is a 21 year moving average.
Note that the only periods of GDP growth that were significantly above the long average occurred during the terms of FDR and Truman. FDR term averages are broken into two segments, 1933 - 1940 and 1941 - 1948, though the averages of the two segments are nearly identical. Despite a nasty post-war recession, Truman’s elected term achieved close to the FDR average.
Note, in particular:
1) The roaring 20’s. From a high in 1923, DGP growth slid throughout the decade, then plummeted in 1930.
2) The recession of 1938, brought on by FDR’s scaling back on spending programs, and attempting to balance the budget. This brought him a chiding letter from John Maynard Keynes.
Data source

The Obama Recesson

With Home equity losses of over 6 trillion dollars from 2006 through 2008, Right-wingers are trying to blame the current recession on Obama.

The guy who took office in 2009.

Yeah, I get it. Not funny.