Via Noahpinion. Seems to me that new RBC research is a justification for MM in that NGDP targeting would decrease information asymmetries across the economy and would constitute the policy action of providing more information to the economy. These MM contribution to providing information should be greater than a money growth rule or inflation targeting.

I went to an exhibition on Georgia O'keeffe in Las Vegas (with Brent) that moved me deeply. She was a true vanguard and independent spirit.

Via Vox

"This analysis therefore reveals an important tradeoff in the debate over grade inflation. Allowing grade inflation increases investment in education (by both schools and students), increasing average graduate ability. But at the same time, it introduces noise into transcripts, making it more difficult for employers or other evaluators to identify the most qualified graduates for their positions. We show that the beneficial effect on investment may dominate the costs of increased noise. Allowing grade inflation may actually increase the chance that the employer selects a high-ability graduate. That suggests that even if a policy intervention could eliminate grade inflation, doing so is not necessarily the most socially desirable course of action.

Therefore, the central concerns over grade inflation may not be valid once incentives for schools to invest in the quality of education are taken into account. Although the freedom to grade strategically allows schools to distort the informational content of grades (which they do in equilibrium), it also creates additional incentives for schools to improve the quality of education and students to increase effort. Compared to a setting in which grades are necessarily fully informative, the increase in education investments can lead to employers, graduate schools, and other evaluators being better off."

China looks bad, Japan and Europe are high but have decreased. Via Econobroser. (Thanks again Brent)

WSJ  (Thanks Brent) 

So, how is China achieving 7.5% growth if it is powering down steel plants and letting copper stockpiles build up? With debt.

Despite official instructions to banks to curtail lending to overstretched developers and municipalities, loans are still increasing at rates twice as fast as the economy—and those numbers exclude a so-called shadow-banking lending system estimated at more than $5 trillion, or 80% of gross domestic product.

“That doesn’t make sense,” says PNC Financial economist Bill Adams. “Eventually, sustainability concerns will either cause Chinese policy makers to slow credit growth or investor risk aversion will cause less credit to flow through the trust companies” that manage the shadow lending programs.

Via LinkedIn and the NYTimes.

The scientific justification of three years of typos on these pages. Via Wired.

"The reason typos get through isn’t because we’re stupid or careless, it’s because what we’re doing is actually very smart, explains psychologist Tom Stafford, who studies typos of the University of Sheffield in the UK. “When you’re writing, you’re trying to convey meaning. It’s a very high level task,” he said.

As with all high level tasks, your brain generalizes simple, component parts (like turning letters into words and words into sentences) so it can focus on more complex tasks (like combining sentences into complex ideas). “We don’t catch every detail, we’re not like computers or NSA databases,” said Stafford. “Rather, we take in sensory information and combine it with what we expect, and we extract meaning.” When we’re reading other peoples’ work, this helps us arrive at meaning faster by using less brain power. When we’re proof reading our own work, we know the meaning we want to convey. Because we expect that meaning to be there, it’s easier for us to miss when parts (or all) of it are absent. The reason we don’t see our own typos is because what we see on the screen is competing with the version that exists in our heads."

Via Reuters.

Now for the bad news. While the steady or slightly accelerating global growth rates predicted by the IMF is the most likely outcome, it may not be achievable because of three imbalances: social, geographical and demographic. These seem deeply embedded in the structure of global capitalism today. They are weakening demand, creating excess savings and driving the buildup of borrowing and lending that has been both a cause and consequence of the global financial crisis.

The most dangerous imbalance is in the distribution of wealth and income. Income disparities have become a source of political and moral controversy, but their macroeconomic effects have attracted less attention. The mechanism whereby income inequality causes economic stagnation was recognized by Karl Marx and other 19th-century writers.

If too much of the income created by capitalism’s capacity to increase production flows to people who are already rich and likely to save rather than spend, then crises of under-consumption become almost inevitable, as described by Marx in Das Kapital and analyzed more rigorously by John Maynard Keynes in the 1930s. The only way to avert such crises is to create financial systems that recycle excess incomes from rich savers to poorer consumers via a buildup of debt.

Geographical imbalances are a second major cause of weak demand. The global imbalance that generated controversy before the crisis was between the United States and Asia. This has largely disappeared as U.S. consumption and borrowing have subsided, while China and Japan have shifted away from export-driven growth models.

In the meantime, however, an equally troublesome imbalance has emerged between Germany and the rest of the Europe. Germany’s current account surplus of 7 percent of GDP is now larger and more persistent than the Japanese or Chinese surpluses before the crisis. Yet on the global stage, Germany is not subjected to the same sort of pressures. Germany’s political dominance in Europe also makes it immune to the kind of demands for policy changes that Washington applied to Japan and China, while the existence of the euro rules out the currency adjustments that ultimately removed the imbalances between Asia and the United States.

The third imbalance is demographic. Believers in secular stagnation have drawn attention to the downward pressure on labor supply as baby boomers retire. But this is unimportant in a period of high unemployment, when there is no shortage of workers to limit economic output. The bigger impact of demographic aging is on macroeconomic demand. Particularly when this problem is aggravated by Social Security and labor policies that shift incomes and economic opportunities in favor of retirees and older workers at the expense of younger generations.

After a long illness, my brother passed away last Thursday.  Amongst some of his items, I found some poetry he had written which I post below. My brother, like myself, had a difficult time integrating into society as his poem, Alienation, suggests.

I recently reflected on a health issue that has plagued me my entire adult life -problems with my feet. As a teenager, I played many sports and even averaged 42 miles a week running without problems. When I got older, however, I started to have all kinds of problems with my feet. Ingrown toe nails that eventually required surgery, heel problems where I had cortisone shots to get rid of the pain and inflammation, acupuncture treatments to get rid of my heel pain. I finally solved the heel problems, a year ago,  by adopting a lower elevation shoe (courtesy of a link sent to me by Brent) . But then last year, I developed a painful neuroma. Needless to say all of these painful foot maladies have combined with my penchant for food and I now weigh 290 lbs.  To get through a week of teaching last year I was taking powerful anti-inflammatories on off days that dulled my senses. One late night last fall, I found a podiatrist for the American Northwest that did this series of videos which purported that the cause of most feet maladies was an improper (overly narrow) toe box.

The solution itself was a problem. I have size 15 triple E feet and most of the sellers of the proper toe box footwear don't make a shoe for the size of my foot. I managed to find one and for the most part my foot problems have disappeared.

One day in reflecting on my experience, a 20+ year struggle with my feet, I realized that my feet weren't he problem. I wasn't the problem. I had tried everything to fix them and the real issue was the shoes that world provided me didn't fit my feet.

I feel like this would be my message to my brother, John you may not have fit in this world very comfortably but there was nothing wrong with you.




Alienation

How long must I go on,

Until I feel that I will belong,

Somewhere on this earth?

When will I know,

Where to stay or where to go?

And show what I’m worth.

I just want to know that I belong

Like the ugly duck that becomes a swan

Like the frog that became a prince

I want to find my happiness.




If I Knew Then What I Know Now

If I knew then what I know now,

I wouldn’t make the same mistakes,

I’d say “I love you” more than ever,

I’d cherish the time we spent together,

Even through the nasty weather,

If I knew then what I know now, 




If I knew then what I know now,

I’d be much more forgiving,

Sins that happened in the past,

Would be forgiven very fast,

Bitter feelings would never last,

If I knew then what I know now,




If I knew then what I know now,

I’d recognize your efforts,

All the tears and all the pain,

You suffered not in vain,

As you stumbled in the rain,

If I knew then what I know now,




I’d be there for you always,

Through the good times and the bad,

When you’re happy and you’re sad,

I’d have given all I had, just to be with you.

If I knew then what I know now.