I rail against these guys and their ilk frequently on these pages (See last week's posts). But it seems to me they present themselves as scientists and hide behind unnecessarily high standards of scientific proof in order to promote an ideological Darwinian agenda.  At some point their position seems as fanatical and fantastical as the most devout follower of an extreme religion. Tyler's Great Stagnation (summary: inequality will inevitably increase and we can't do anything about it), for example - illustrates my point. A disingenuous viewpoint like this deserves contempt, ridicule and scorn.

Cowen's book is not a serious attempt to engage life's serious issues but rather he acts as a sock puppet for his billionaire master -Charles Koch. His thinking barely rises above Ann Coulter's insights.

First,  these guys said there was no intergenerational wealth mobility problem. Then they said it wasn't significant. Now they say nothing can be done (cost are to high etc). These guys aren't social scientists; they are Insurance Claim Processors (re:anti-tax lobbyists for the rich).  

Like Coulter, Limbaugh, and Beck, they sell their wares to a narrow minded echo chamber, that doesn't want to be confused with facts and lives in a world that has the nuance of Tolkien's' middle earth (a world where successful people worked hard and deserve their lot in life and those that didn't achieve just make excuses).  Adults can't be given a free pass for this type of thinking/speech that has to be labelled as either intellectually lazy or dishonest - pick one. 

 Either way scorn and contempt seem like appropriate responses to their offerings.

What happens if the central banks decide to provide a debt jubilee to their governments and openly acknowledge that they have been monetizing  the government's deficits?

This for me is one of the holy grail questions in economics. Saxo Bank predicts Japan will be first to take the red pill next year. Some commentators are saying this is just an accounting trick and no one gets hurt. Just cancel the debt! Others are less sanguine. I really don't know how the market will react when this happens. 

Can policymakers convince the public this will just be a one time thing? How much do expectations matter - if at all?

I am a  Bear. I have been wrong (in the main) about the following things (which I have copped to previously)

1. The stock market from Oct 2011 to present.

2. That the US was going to go into a recession by summer 2012.

The Fed by doubling down on QE prevented a recession and blew and stock market bubble.  

Things  I have been (mostly) right about.

China growth is slowing (will it come in for a hard landing?)

European malaise.

US growth coming out of the Great Recession has been much slower than anticipated.

Japan is still in an economic crisis.

Public debt continues to rise at a rate faster than GDP growth in OECD countries.

Income inequality-trade-intergenerational wealth mobility are significant and linked..

Oil demand volatility would be of significance and oil supply would abundant over the course of the next decade.

The basic bear position(at least mine on these pages)  is that monetary policy alone would not be sufficient to resolve global imbalances(so far true); that the global overreliance of extraordinary central bank intervention would lead to higher inequality less stable democracies (true so far), financial instability (we are seeing the plus side to variance now) and that the ultimate costs and unintended consequences of this free lunch (banquet) would cause significant ex-post regret (well the jury is still out but I don't think those in charge of policy at central banks are going to be putting up "mission accomplished" signs at the press conferences anytime soon -but if they do I want to record it for future reference on this blog.).

The fundamental issues that brought us to the Great Recession have not been resolved or addressed in a meaningful way by policy makers. Monetary policy has done all the heavy lifting. Will monetary policy alone be sufficient? This question still needs to be answered.

Liberal Economists are literally telling their conservative peers "here is the evidence now STFU!". The data show liberal policies are more pro growth than conservative policies, inequality is now holding back growth and there is statistical proof for our assertions.

Waldman eviscerates Ezra Klein's summary of Bernstein's paper that itself summarizes the literature on inequality.

"Klein sets up a straw man when he argues:

A world in which inequality is the top concern is a world in which raising taxes on the rich is perhaps the most important policy choice the government can make. A world in which growth and unemployment are top concerns are worlds in which very different policies — from stimulus spending to permitting more inflation — might be the top priorities.

One could make the world more equal just by burning everything down too! But no one advocates this. So obviously inequality doesn’t matter, right?

People concerned with inequality in fact argue not to tear down the rich but to raise up the rest — at the expense of the rich to the degree that is necessary, but not just because. We argue for policies like basic income, wage subsidies, and, yes, more inflation-tolerant macro policy and more fiscal stimulus where those policies help support the poor and middle. A focus on inequality sometimes does create wedges between us and other “progressives”. We might not be so excited, for example, by a fiscal policy that is “expansionary” by virtue of a deficit accounted for in large part by tax expenditures to the rich. We might celebrate less than a Democratic party that treats inflation in the price of real estate and financial assets as unambiguously good news.

A policy apparatus for which inequality is not a “top concern” might content itself with spurring demand by protecting and increasing the wealth of the politically-connected rich, on the theory that anyone’s misfortune hurts at the margin and providing support to the non-rich is politically impossible. But that’s, like, totally science fiction, right?"

That last paragraph sums up more or less what I have been FUCKING saying on these pages for the last two years.

From another of Steve's posts:

"But the reality of MPC effects means that, along with all those other possibilities, broadening the distribution of income would be expansionary and narrowing that distribution would be contractionary, ceteris paribus. If, like Larry Summers, it pains you that maybe the “natural interest rate” is negative now, the reality of MPC effects means that policy which broadens the distribution of income would help push it positive, and put us back into more comfortable territory. If, like me and Pope Francis, you think that present levels of inequality are horrific for human and communitarian reasons, then among the many macro policies that might support demand, it is rational to tilt towards those more likely to engender a broad distribution. It is quite irrational, as I think some well-meaning economists do, to hold MPC effects to much higher standards of evidence than the mechanisms that justify other interventions, because “economics is not a morality play” and reducing inequality would be the moral thing. Better to err on the side of human welfare rather than reputational purity.

I happen to think that the macroeconomic case for reducing inequality is much stronger than the case I’ve made here. I think the character of growth is badly misshapen when demand is narrowly sourced, that technological stagnation is mostly a distributional problem, that institutional correlates of growth are harmed by increasing inequality. But those are all more speculative claims. You can tell me the “jury is still out” on those. But the jury is not out, it never reasonably has been out, on the reality of distribution-related MPC effects. I’ll disagree, respectfully, if you claim that for supply-side or libertarian reasons we should ignore that reality and prefer other means of supporting demand (or that we should not worry about supporting demand at all). But don’t say “it’s unclear” whether income distribution affects aggregate demand, holding other factors constant. Of course it does."

And I would like to send a special STFU to Scott Winship and your fellow econowhores at Marginal Revolution, the National Review etc. Your statistical (and logical) arguments are bullshit.

I am glad that economists who matter (admittedly I don't) are finally making their points more forcefully. Its time to stop apologizing for the obvious.

Tyler Cowen is Chairman Director of the Mercatus Center funded by Charles Koch (who also funds the Tea Party). Any wonder that Tyler's "great" insight is that the US is headed for even higher inequality and nothing can be done about it?

But tonight we are going to party like its 1999.

Another brilliant investment letter. Via Zerohedge. If I understand his views correctly, I think this is my new viewpoint of how the world will unfold over the course of the next decade.

I summarize what (I think) Hugh's current investment views are....

I love the article and I think what he is saying is that his current view is that the game of one central bank responding by trying to outdo the next central bank by way of looser monetary policy is going to continue for the foreseeable future. The Japanese are the ones, because of their fragile situation, who will have to respond most aggressively to the game of competitive devaluation which should be good for Japanese equities but bad for the yen.

The world suffers from overcapacity and China, by doing more investment in the last decade than the US did in the last century, has added to the global overcapacity that already existed as a result of the thirty year debt super cycle.

Reforms will fail in China, Japan, Europe and the US. IE, politicians will fail to make the proper adjustments that that would stem inequality and unemployment in their country and that after several years would lead their economies to be self sustaining. This will cause central banks the world over to incrementally ratchet up (or perhaps in the case of the US Fed -fail to taper) their extraordinary policy response to new levels.

The results will be uniformly good for asset prices for the medium term. In the long run we will see a global macroeconomic crisis of unprecedented levels. In the mean time being long just about anything will yield you great returns.

Hendry is saying to his investors "I am joining the party" and will be a trend following lemming like everyone else, but I will also provide some disaster insurance that will offset the big collapse when it comes -so much so that you will make money f you are with me even when the world comes to an end - which it will with 100%  probability.

Favorite line from the article (this is like asking me to chose b/n Beyoncé and Rhianna)

"The monster has to grow. Note that since the Fed turned the tables with its QE policy in 2009, China has had to consume more concrete in its roads, rail projects, bridges, factory construction and new buildings than the US did during the entire 20th century."