Apropos of Nothing but my Own Interest: Sticky Risk

FT Alphaville:

Economists are already familiar with the idea of sticky wages and prices, both of which adjust slowly to changes in the market environment. 

For instance, home owners resist cutting their asking price in the face of a slump, preferring to withdraw and not trade. Existing wages tend not to be cut, instead eroding via inflation while unemployment remains high. 

With sticky risk, its the assessment of risk that displays stickiness: individuals refuse to change their view of danger until the evidence becomes overwhelming. 

There is sound logic to acting in this way. In 2011, when the simmering European crisis and a US debt downgrade produced three months with wild swings in markets, the best response was simply to do nothing and wait it out. 

Like a ball sat in a bowl, a shove will send it spinning back and forth, but eventually gravity restores the ball to equilibrium.

... 

We think this helps to explain the current environment of what seems to be widespread but low-conviction optimism. To overgeneralise, the attitude is that while the central bankers are keeping interest rates down, take yield where you can find it. 

 

CNN: Good or Bad?

Hilarious (and depressing)

On the Unrealistic Expectations of Capital and the Rentier Class

The professor makes a(nother) good point.

This kind of behavior — ever-shifting rationales for an unchanging policy (see: Bush tax cuts, invasion of Iraq, etc.) — is a “tell”. It says that something else is really motivating the policy advocacy. So what is going on here? When I read Gross and others, what I think is lurking underneath is a belief that capitalists are entitled to good returns on their capital, even if it’s just parked in safe assets. It’s about defending the privileges of the rentiers, who are assumed to be central to everything; the specific stories are just attempts to rationalize the unchanging goal.

Defending the privileges of the rentiers has become the raison d'être of our entire governmental system.  The people who seek to "extract value" from others, the capitalists and their enablers, are responsible for the crash and the ongoing failed recovery under Obama who, despite his pseudo-liberal bona fides is as much an enabler of their greed as any Teabagging Republican.

What is the role of interest in this world? Interest, classically (and I do mean classically, as in Mr. Keynes and the), is the reward for waiting: there’s supposedly a social function to interest because it rewards people for saving rather than spending. But right now we’re awash in excess savings with nowhere to go, and the marginal social value of a dollar of savings is negative. So real interest rates should be negative too, if they’re supposed to reflect social payoffs.

But the baggers of tea and their economic enablers don't see it that way.  They want their money for nothing and their chicks for free...

Glenn Greenwald FTW

In a well-publicized online exchange with New York Times columnist and former editor Bill Keller, Glenn had this to say.

A journalist who is petrified of appearing to express any opinions will often steer clear of declarative sentences about what is true, opting instead for a cowardly and unhelpful 'here's-what-both-sides-say-and-I-won't-resolve-the-conflicts' formulation. 

That rewards dishonesty on the part of political and corporate officials who know they can rely on 'objective' reporters to amplify their falsehoods without challenge 

Worse still, this suffocating constraint on how reporters are permitted to express themselves produces a self-neutering form of journalism that becomes as ineffectual as it is boring 

... 

Worst of all, this model rests on a false conceit. Human beings are not objectivity-driven machines. We all intrinsically perceive and process the world through subjective prisms. What is the value in pretending otherwise?

...honestly disclosing rather than hiding one's subjective values makes for more honest and trustworthy journalism. But no journalism – from the most stylistically 'objective' to the most brazenly opinionated – has any real value unless it is grounded in facts, evidence, and verifiable data.

Well said, Mr. Greenwald.

Dead Cow Derp

Amazing levels of derp detected in South Dakota...

"We're just a bunch of ranchers from South Dakota — it's hard for our voices to be heard," he said, sitting at the kitchen table at dawn Friday, drinking coffee, fielding calls from fellow cattlemen. "You see crises across the country, the hurricanes and tornadoes, and officials are right on top of it. But something of this magnitude, that has just about leveled this part of the country, and there's nothing." 

Many residents in this conservative region had supported the government shutdown as a way to make Washington more fiscally responsible. "But one appropriate role for these guys is to lend a hand after disasters like this," Christen said, "and they're not here."

No, they're not.  Try to work out why.

Living on "Basic"

In the SF novel Leviathan Wakes, author  James S. A. Corey (pen name of Daniel Abraham and Ty Franck) describes a world where there simply aren't enough jobs to go around (sound familiar?) and that holding a job is a privilege and not a right (or even a requirement for survival).  Manufacturing is fully automated so there is no shortage of goods available.  Those who cannot secure employment live on what's called basic.  Essentially the government (in this case the U.N.) provides food, shelter, clothing and healthcare for every person on Earth.  People who hold jobs are paid above and beyond basic but they still receive the equivalent of basic from the government.  Everyone does.

Star Trek also described a world where money no longer served any meaningful purpose.

So what if we were to try this today?  Well, we might just find out.  Switzerland is voting on whether or not to provide every Swiss citizen $2,800/month.  The main reason the Swiss are embarking on this discussion is develop a leveling mechanism that should help alleviate the growing inequality they see as socially detrimental.

...[T]he basic idea is, no matter what you do, if you’re a resident — or in some cases, a citizen — you get a certain amount of money each month. And it’s completely unconditional: If you’re rich you get it, if you’re poor you get. If you’re a good person you get it, if you’re a bad person you get it. And it does not depend on you doing anything other than making whatever effort is involved to collect the money. It’s been a topic of discussion for several decades. Why is it happening right now? I think it’s obvious that it’s a reaction to the high level of economic inequality that we’ve seen. Most European countries haven’t had big increases in inequality at the same scale that we [in the U.S.] have, [but] some of them have had much more than they’re used to.

Nations with fiat currencies could all embark on this path with little or no risk of inflation.  There is more than enough to go around.