Rolling US Economy Into The Shitbin Thread

tyler durden 1835-1872 rolling in his grave.

for tech stuff, i feel like github contributions might have more of an influence on hiring than most college stamps anyway.

I've filled out several job apps with a "please list your GitHub address" already.

if someone cracks the code to successful vocational training via online classes, i think that would be a genuine boon that has nothing to do with credentials.

― Philip Nunez, 08 April 2013

this imo

we have gone through the third level/college boom here, it's essentially free (or at least affordable to the vast majority) through grants. it's just led to the cheapening of the standard in and currency of a college education, now you need a phd. we have a lot of shitty third level institutions, the better ones seem to be just as elite as before.

https://threesixty360.wordpress.com/2013/03/29/third-derivatives-in-the-news-again/

http://www.investopedia.com/terms/b/biflation.asp

^ even if this were true, can someone explain to me why the price of food would go up? on one obv if gas goes up food prices will also rise, but i understood that food is heavily regulated by the government and if prices rise can't the government just allow more food to enter the market to somewhat stabilize the price?

I thought a lot of the rise in food/gas prices was attributable to greater global demand. Which is not to say there isn't "biflation," but I would think you would need some mechanism to explain how that "greater amount of money" in the system winds up actually "chasing" those goods -- if it's not finding its way into the hands of ordinary consumers, either in the form of higher wages or greater credit, it doesn't seem logical to me that the rise in prices of basic goods is a monetary phenomenon. Or if it is, there must be a more complex explanation.

does that make sense re food though? i thought we grew enough food to feed the world (and the government paid farmers not to harvest fields to keep prices stable?)?

I mean, one theory I have heard is commodity speculation. And that seems like it could actually be partly a monetary phenomenon. But I haven't heard a clear explanation of how that would work -- commodity futures are limited in terms of ability to speculate long-term, no? Maybe there are advanced derivative products that I don't even understand. Maybe there are vast hidden warehouses of stored oil.

ok but commodity speculation would be a different explanation than biflation (not discounting that there may be overdetermination going on)

well, on the most literal level, yeah, because it seems like biflation assumes the money "chasing" the goods is coming from consumers, not wall street types.

commodity speculation doesn't need long-term ability, i don't think. not when you just keep rolling your bets over.

this was a decent article as i recall: http://www.foreignpolicy.com/articles/2011/04/27/how_goldman_sachs_created_the_food_crisis

dang, paywalled

here's the key bit:

But Goldman's index perverted the symmetry of this system. The structure of the GSCI paid no heed to the centuries-old buy-sell/sell-buy patterns. This newfangled derivative product was "long only," which meant the product was constructed to buy commodities, and only buy. At the bottom of this "long-only" strategy lay an intent to transform an investment in commodities (previously the purview of specialists) into something that looked a great deal like an investment in a stock -- the kind of asset class wherein anyone could park their money and let it accrue for decades (along the lines of General Electric or Apple). Once the commodity market had been made to look more like the stock market, bankers could expect new influxes of ready cash. But the long-only strategy possessed a flaw, at least for those of us who eat. The GSCI did not include a mechanism to sell or "short" a commodity.

This imbalance undermined the innate structure of the commodities markets, requiring bankers to buy and keep buying -- no matter what the price. Every time the due date of a long-only commodity index futures contract neared, bankers were required to "roll" their multi-billion dollar backlog of buy orders over into the next futures contract, two or three months down the line. And since the deflationary impact of shorting a position simply wasn't part of the GSCI, professional grain traders could make a killing by anticipating the market fluctuations these "rolls" would inevitably cause. "I make a living off the dumb money," commodity trader Emil van Essen told Businessweek last year. Commodity traders employed by the banks that had created the commodity index funds in the first place rode the tides of profit.

...

What was happening to the grain markets was not the result of "speculation" in the traditional sense of buying low and selling high. Today, along with the cumulative index, the Standard & Poors GSCI provides 219 distinct index "tickers," so investors can boot up their Bloomberg system and bet on everything from palladium to soybean oil, biofuels to feeder cattle. But the boom in new speculative opportunities in global grain, edible oil, and livestock markets has created a vicious cycle. The more the price of food commodities increases, the more money pours into the sector, and the higher prices rise. Indeed, from 2003 to 2008, the volume of index fund speculation increased by 1,900 percent. "What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets," hedge fund Michael Masters testified before Congress in the midst of the 2008 food crisis.

huh, so it's basically old-fashioned churning + finding a bigger sucker, or am I misunderstanding? I had that thought at one point a while back, but then thought "nah, that's too simple."

and also, is an expanded money supply helping to fuel that kind of trading/speculation (which, btw, does not strike me as "different" somehow than other speculation based on this description -- you only ever buy something because you think the price will be higher tomorrow than it is today. That's all "buy low and sell high" is, it's not categorically different from "buy high and sell higher" or whatever this is)

still don't understand the fascination with 'expanded money supply' here. the big commodity runup described here was in the immediate aftermath of the crisis, some years before QE even started.

yeah true, it's probably more a function of money that fled other assets looking for somewhere to go

tbc my only fascination with "expanded money supply" is a general attempt to understand where did it all go

a lot of it went here

http://www.amazon.com/740-Park-Richest-Apartment-Building/dp/0767917448

Fascinatin'.

http://nymag.com/daily/intelligencer/2013/04/grad-student-who-shook-global-austerity-movement.html

that's one of the great stories of this week, tipsy

the original paper was so shoddy regardless that even if the results 'were real' they were meaningless

I think there's been a little exaggeration when it comes to how important that result was - I def remember it being cited, but you can pretty much come up w/ a 'serious economics paper' that supports any political view. it's not like this made paul ryan decide to be a lol 'deficit hawk' it was just the latest bit of nonsense in a long stream of nonsense

some details http://retractionwatch.wordpress.com/2013/04/18/influential-reinhart-rogoff-economics-paper-suffers-database-error/

When a paper becomes widely cited and influential because it is the strongest available defense of a political position, then finding out that it botched its math and left out a big bunch of numbers that contradict its most basic assertion, that's a nasty blow to the authors. They are now extremely embarassed and must live this down.

It only becomes a nasty blow to the politics of the situation if the media start to blow it up into one, such as what happened to the accusation (later proved false) that some scientists in Britain were falsifying their globla warming data. The right wing press pounded that HARD and it did a lot of damage.

The chances that liberals will use this to smash their opponents in the mouth repeatedly and as viciously as possible are vanishingly small. Liberals are no good at street fighting.

anybody who could understand the significance of this already has entrenched views on austerity

that's kind of true on all polarizing issues to a degree tho

and austerity is def a polarizing issue

yep, which is why msot of these news stories aren't of much significance. I mean 'we won' yeah cool, it's a shame these guys don't work somewhere where they can get fired.

The bulk of electoral politics rests upon people who do not understand much of anything outside their daily work. They would be the ones you'd be trying to persuade that austerity is a crock by oversimplifying this story and hitting it over and over and over. But for that you need a vehicle like the right wing talk radio noise machine to be really effective.

this isn't a story you can oversimplify when most people don't even really understand what austerity is, that govt spending has gone down under obama etc.

I mean don't get me wrong anytime there is a scandal involving harvard something is going right with the world

any story can be oversimplified, if you don't mind introducing huge distortions, bcz distorting the story is the whole point of reporting it.

I'm just saying it's really hard to get very far w/ 'big academic economics scandal' when most people in this country don't know what gdp is

I think you are arguing about this wrong -- a widely cited study like this is not for the purpose of convincing the electorate, it's for the purpose of convincing legislators, pundits, etc. -- people who have power and or do the convincing. It's not like the electorate ever got or will get a direct vote on government spending anyway. And I'm not saying it converted someone like Paul Ryan into a defecit hawk. But a study like this can make a big difference at the margins -- moderate democrats or republicans otherwise conflicted about whether to cut govt spending now or later etc.

I don't actually think that 'otherwise conflicted' group is especially large in 2013. even 'moderates' approach these things looking for support for their preconceived opinions.

I mean 'serious moderate people rly care about the deficit'...that's almost how they self-define themselves

you can make the argument that small battles are part of the war but timing is everything

nobody on the margins cares about this

this issue is nice fodder but it's not like it's a solid debunking of some widely held belief. It's a pebble in the dam.

Krugman thinks it's both a big deal and not: http://www.nytimes.com/2013/04/19/opinion/krugman-the-excel-depression.html?hp

So will toppling Reinhart-Rogoff from its pedestal change anything? I’d like to think so. But I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and on.

Just the talking point of the mistake makes a nice mini-catalyst to reenergize the anti-austerity side imo. With a lot of close political issues, just sewing confusion and malaise on your opponent's side gives you enough of an advantage to get something done.

nothing is going to get done because we don't control congress

this is just a win for some bloggers

I mean I'm cool w/ that I read blogs

small victories are generous doses of confirmation bias

so was the study before it was debunked

my supervisor & i found a bunch of these types of errors when we were replicating results last spring. we kind of just shrugged & moved on tho, guess i missed my chance

the story here i think is that excel makes it easy to screw up and people should use more trustworthy systems for crunching publishable numbers.

I vote mechanical pencils and graph paper