Naked Capitalism has the article Is the Strong Dollar the Real Cause of the Collapse of US Manufacturing and Secular Stagnation?

The article was written by Douglas L. Campbell, PhD candidate in Economics, University of California, Davis.

My job market paper seeks to identify a causal impact of real exchange rate movements on manufacturing output in the US (Campbell 2014). I compare:

• The US experience in the early 2000s to the 1980s, when large fiscal deficits led to a sharp appreciation of the US dollar; and

• Canada’s experience in mid-2000s, when high oil prices and a falling US dollar led to an equally sharp appreciation of the Canadian dollar.

I am wondering if Campbell is suffering from the problem of equating correlation with causation.

I commented on the article with my initial reaction.

I am having a hard time wrapping my head around the idea that large fiscal deficits raise the value of a country’s currency. What’s the economic theory behind that idea?

Also, I am wondering how China benefits by holding large reserves of US money. They are giving us the benefit of their labor in trade for holding our currency that they cannot do anything with except leave it on deposit at the Federal Reserve. Oh yes, they are earning interest which just adds to the money they are holding that they cannot use.

How do they pay for the raw materials that go into the goods that they are selling us? Does that mean that their labor adds enough value to pay for the cost of the raw materials  and still have huge profits left over? And they can also pay for whatever raw materials they actually use domestically? Someone needs to figure out where is all the money we give to China going. Not all of it is being used to build reserves.

As I mulled this over the dawn started to dawn.  I also posted that as a comment.

I just think I figured out what China gets out of building all these reserves. It is exactly the same issue about what the .1% in this country get for accumulating all the wealth. Try as they might, they can’t possibly spend all the money they are raking in. If they were spending it, they wouldn’t be accumulating it. What they are getting and what China is getting is power and control.

You cannot come up with an economic value to explain the level of power and control that is being concentrated in the hands of fewer and fewer people. The value is psychological. If we continue to search for economic reasons for this accumulation of wealth, we will keep seeing correlations without finding the causation.

The Real News Network has the interview Guilty Verdict For Occupy Activist An “Attack On Dissent”.

Attorney Kevin Zeese discusses how the judge hearing Cecily McMillan’s case did not allow the defense to show images which would have proven that the activist was reacting to getting her breast grabbed.

Compare this story to my previous post No Evidence Justice Dept. Will Prosecute U.S. Banks Responsible for Financial Crisis.

It is worth noting that Cecily McMillan was protesting that U.S. banks responsible for the financial crisis were not being prosecuted. So as is typical with much of our government’s behavior in such cases, they responded “So you want prosecutions, do you? We’ll give you your stinkin’ prosecutions.”

I don’t know what Attorney Kevin Zeese is complaining about. It is clear that whether you are rich or poor, you don’t get to present a defense in front of certain judges. Of course the rich don’t get to present their defense because the justice system is afraid to prosecute them. The poor get prosecuted for what may not be crimes, but cannot present a defense. See, same treatment, no defense.

Warning, the above paragraph may contain some sarcasm.

The Real News Network has the interview No Evidence Justice Dept. Will Prosecute U.S. Banks Responsible for Financial Crisis. This interview is with William Black who, as a bank regulator, made thousands of criminal referrals to the Justice Department during the S & L crisis.

DESVARIEUX: Alright. And what about our viewers that might be listening to this and who are so frustrated with this current situation? What could they possibly do to maybe even push this along?

BLACK: Well, demand that they bring the criminal prosecutions. That had–what–is what produced Department of Justice action in the savings and loan debacle. Now, it was helped greatly by the fact that we had tens of thousands, ultimately, of criminal referrals piling up that were not being investigated by the Justice Department. But that became a political scandal. And so we need Elizabeth Warren to make this one of her leading things that she hammers them with basically every day and to hold hearings in the Senate about the failure to reestablish the criminal referral process and to provide the Justice Department both the expertise and kick in the butt that regulators have to provide if they want to get prosecutions.

Read my previous post Holder: No banks ‘too big to jail’ to see that Elizabeth Warren was one of the first to make sure we knew that Attorney General Holder had just endorsed prosecuting big banks.

Well, we heard the call from William Black. Demand prosecution. Tell Elizabeth Warren to push harder. She is my Senator, and I will certainly do what Bill Black said. Who’s going to join me?

The climate change deniers have been saying that I need to see what Freeman Dyson has to say about global climate change.  I found two links in the article Freeman Dyson– ally in the Climate War on JunkScience.com All the Junk That’s Fit to Debunk. I was confused by this authors comments, but he did provide links to two good article.

The Case for Blunders by Freeman Dyson | The New York Review of Books

In Livio’s list of brilliant blunderers, Darwin and Einstein were good losers, Kelvin and Pauling were not so good, and Hoyle was the worst. The greatest scientists are the best losers. That is one of the reasons why we love the game. As Einstein said, God is sophisticated but not malicious. Nature never loses, and she plays fair.

after you read the next article, decide whether or not you think Freeman Dyson is a good loser, a sore loser, or if he is even a loser at all.

In The  New York  Times Magazine The Civil Heretic by Nicholas Dawidoff.

Climate-change specialists often speak of global warming as a matter of moral conscience. Dyson says he thinks they sound presumptuous. As he warned that day four years ago at Boston University, the history of science is filled with those “who make confident predictions about the future and end up believing their predictions,” and he cites examples of things people anticipated to the point of terrified certainty that never actually occurred, ranging from hellfire, to Hitler’s atomic bomb, to the Y2K millennium bug.

I always have to laugh at the people who cite the Y2K millenium bug as something that turned out not to be worth worrying about because the disaster never struck.  Of course it never struck.  People took note of the warning and spent billions of dollars fixing computer programs to remove the bug before Y2K hit.  Should we ignore the Global Climate Change warning this time  to see if it might turn out to be nothing?  Thank goodness people with computer programs did not take this attitude about Y2K.

Of course, there is much more in the two articles just above.  You can’t judge Freeman Dyson on just the quote that I have excerpted.

Read the article and judge for yourself as to how much weight you want to give Freeman Dyson’s opinion on Global Climate Change.  He may play a useful role in the debate and in the long run he could even turn out to be right, but I am still not on his side of the argument.  The proponents of Global Climate Change could prove to be wrong in the long run or could prove to be wrong on the magnitudes of what they are predicting, but I think the odds weigh on the side of taking out insurance on the likelihood that they are more right than wrong.

If you read about the puzzle posed to Freeman Dyson, you could spend some time thinking about it. Then you could look at the article Puzzle Answers From a 4th-Grader and Freeman Dyson By John Tierney.

The Real News Network has the final installment What to Do Next About Global Warming? – Alan Robock on Reality Asserts Itself (5/5) .

ROBOCK: That’s right. But, you know, California is one of the biggest economies in the world. I think it’s the seventh largest economy in the world. And they’re moving rapidly toward much more environmentally friendly actions. But they don’t have net metering in California, so people, when they build a–put solar panels on their roof, there’s no incentive to generate more than they use, because if they run the meter backwards, they don’t get paid for it, because the electric power companies are so strong.

JAY: How many states have that?

ROBOCK: I don’t know. I know in New Jersey we do have net metering. And one of the arguments is, well, you know, if you don’t pay anything to the electric power company, why should they provide you–serve as a battery for you? Why should they take your power and give it to you at night when you don’t need it? And one of the answers is, well, I generate electricity in the middle of the day when there’s the biggest demand, and they don’t have to build a new generator because of that. So up to a certain level it really helps them out

This episode of the series is another example of a fairly careful scientist sticking to what he knows despite invitations from the interviewer to speculate on the unknowable.

The Real News Network has the interview Nuclear Winter – Alan Robock on Reality Asserts Itself (4/5)

ROBOCK: Nuclear bomb dropped on a city would be horrible. It would kill hundreds of thousands, millions of people, the blast, the fires, and the radioactivity. There would be a plume of radioactivity going downwind for a couple of hundred miles, and people would be affected by that in the decades to come. But it wouldn’t be a global catastrophe in terms of radioactivity. The people that were targeted would die, but the rest of the world, these direct effects would leave them alone. There are no nuclear weapons in the southern hemisphere, so half of the world really wouldn’t have that much of an effect of the direct use.

Yet it turns out that fires started by the bombs would produce so much smoke that it would go up into the atmosphere, block out the sun, and make it cold and dark at the Earth’s surface, killing the crops, and famine would threaten the entire planet. The amount of cooling depends on how much smoke goes into the atmosphere.

If you are a winter sports enthusiast, maybe you would prefer a nuclear winter to counteract global warming.

If you are a global climate change denier, then the parts of this interview involving Fidel Castro ought to send a sensation of thrill up your spine.

If you are just a normal person, I don’t know what you might think about this interview.

Elizabeth Warren posted a link to the Politico story Holder: No banks ‘too big to jail‘.

You’re not holdering your breath waiting for a prosecution are you?

The Rachel Maddow Show blog has the article Divided Court backs town-meeting prayers.

Justice Anthony M. Kennedy, writing for the majority in the 5-to-4 decision, said “ceremonial prayer is but a recognition that, since this nation was founded and until the present day, many Americans deem that their own existence must be understood by precepts far beyond that authority of government to alter or define.”

In dissent, Justice Elena Kagan said the town’s practices could not be reconciled “with the First Amendment’s promise that every citizen, irrespective of her religion, owns an equal share of her government.”

The Real News Network has published the third part in the series – Answering Counter Climate Claims – Alan Robock on Reality Asserts Itself (3/5). My previous post Global Warming Theory Based on Evidence, Not Belief – Alan Robock on Reality Asserts Itself (1/5) actually covered the first two parts.

The part of the interview introduced here gets more to the point of explaining why the counter claims are easily disproved.

ROBOCK: There are over 150 claims that claim that people are not causing global warming, and they are all misrepresentations and cherry picking of the data. So it’s not challenging to answer them; you just have to tell the truth and tell what we actually know.
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ROBOCK: … By the way, I’m a skeptic. To be a good scientist, you have to be skeptical of all the evidence, of all the model results of your own work, and always ask questions and challenge it. A good scientist is a skeptic

This segment could only touch on a few of the counter claims, but Paul Jay explains how The Real News Network will give its readers the opportunity to send in their counterclaims and get responses from Alan Robock.  On the few issues that this interview does cover, Robock gives very good explanations of how scientists can compare the size of various effects and determine which ones are major at any specific time and which are minor.

Naked Capitalism has the article How Milton Friedman Fomented the Barmy “Corporations Exist to Maximize Shareholder Value” Myth  by Yves Smith.

One of my pet peeves is the degree to which the notion that corporations exist only to serve the interests of shareholders is accepted as dogma and recited uncritically by the business press. I’m old enough to remember when that was idea would have been considered extreme and reckless. Corporations are a legal structure and are subject to a number of government and contractual obligations and financial claims. Equity holders are the lowest level of financial claim. It’s one thing to make sure they are not cheated, misled, or abused, but quite another to take the position that the last should be first.

I am a sucker for any article that would call Milton Friedman or any of his ideas “barmy”. Later the article quotes a Friedman article that said the following:

In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.

Yves Smith then goes on to see how ill founded these thoughts are.

You can see how incoherent this is. Shareholder are not bosses of corporate executives. They are diffuse and large in number, and if you got them all in a room to tell the corporate executive what to do, you’d be more likely to see fisticuffs than agreement.

The trick that is being pulled on us here is the usual sophistry that gets the listeners into trouble.  The concept of boss and owner implies many characteristics.  The shareholder has some of the characteristics of a boss and some of the characteristics of an owner, but not all the characteristics of either one.  The sophist’s trick is  to get you to agree with the similarity of the shareholder with a boss or owner without specifying in what way they are alike and in what ways they are not alike.  The sophist makes an absurd point by  using aspects where they are not alike before you can realize how you are being duped.

It might be worth imagining why the citizens in a democracy would want their government to create the legal concept of a corporation.  Would the citizens of that democracy really want the government to set up a corporation for the sole purpose of making a few people wealthy, or would they want it done for some larger social purpose?