Answer to Austrian Economists

I wrote a piece called "The Great Recession." It prompted a follower of the "Austrian Economists" (A Libertarian group) to ask whether the Federal Reserve was pumping too much money into the economy and whether that was causing recessions.
I said I'd look into it and finally went to my local library after a few unsuccessful internet searches and asked about Federal Reserve Board interest rates going as far back as possible (It was easy to find rates going back a few weeks or months, but the librarian had to search for a bit to find them going back further) and I then pulled up a list of recessions (That wasn't hard at all).

Recession of 1953

1951 1Q1951 2Q1951 3Q1951 4Q1952 1Q1952 2Q1952 3Q1952 4Q

Recession of 1957

1955 1Q1955 2Q1955 3Q1955 4Q1956 1Q1956 2Q1956 3Q1956 4Q

Recession of 1960

1958 1Q1958 2Q1958 3Q1958 4Q1959 1Q1959 2Q1959 3Q1959 4Q

Recession of 1980

1978 1Q1978 2Q1978 3Q1978 4Q1979 1Q1979 2Q1979 3Q1979 4Q

Recession of 1990

1988 1Q1988 2Q1988 3Q1988 4Q1989 1Q1989 2Q1989 3Q1989 4Q

Recession of 2001

1999 1Q1999 2Q1999 3Q1999 4Q2000 1Q2000 2Q2000 3Q2000 4Q

Recession of 2007

2005 1Q2005 2Q2005 3Q2005 4Q2006 1Q2006 2Q2006 3Q2006 4Q


Non-recession of 1970

1968 1Q1968 2Q1968 3Q1968 4Q1969 1Q1969 2Q1969 3Q1969 4Q

Non-recession of 1996

1994 1Q1994 2Q1994 3Q1994 4Q1995 1Q1995 2Q1995 3Q1995 4Q

Non-recession of 2006

2004 1Q2004 2Q2004 3Q2004 4Q2005 1Q2005 2Q2005 3Q2005 4Q

So what do we have?
1953, interest rates in the two years beforehand were completely flat.
1957, we see what looks like a classic rise with rates going from 1.50 to 3.00.
1960, rates wobbled from 2.94 to 1.75, but then rising from there to 4.00.
1980, 6.37 to 11.27 in a straight line upwards.
1990 saw a very gradual rise from 6.00 to 7.00.
2001 saw another gradual rise from 4.50 to 6.00.
2007 saw a rise from 3.25 to 6.25.
With the non-recessions, we see a rise from 4.50 to 6.00 in 1968-69 not leading to a recession.
1994 to 1995, a rise of 3.00 to 5.25 did not lead to a recession.
2004 to 2005, a rise of 2.00 to 4.75 did not lead to a recession.

So, the initial question I received after I wrote my piece on the economy was "Why didn't I account for the actions of the Fed?" What does the Fed do? Basically, it sets the interest rate. The reason why the economists I read did not account for the interest rate set by the Fed appears to be that there's really not much of a connection between what interest rate the Fed sets and how the economy reacts (Note that the list of recessions I linked to above lists a different reason for each recession). It appears there's usually a rise in the interest rate in the two years before a recession, but not always and sometimes it's a steep rise and sometimes it's a gradual one. 1950-1970, rises tended to be extremely gradual with not much change from quarter to quarter at all. That period saw three recessions.
The early 1980s saw extremely high interest rates, going up as high as 14.00, as Paul Volcker was using those rates to eliminate the inflation that had persisted so stubbornly up to that point.
So I find the explanation that the Fed plays an extremely decisive role in the ups and downs of the economy to be an unconvincing one. Obviously it plays a role, but there appear to be many other meaningful factors that also affect the economy.


Conversation with a conservative: political behavior comparable?

I challenged a conservative on an online discussion board following an article on which lefty sources he was familiar with as he kept complaining that I wasn't well informed and that I kept making old, discredited arguments.

rich 2056, I have read Saul Alinsky's "rules for radicals". What else is there to read. It lays out Obama's campaign stratagy and defines the moves he is making since taking office. As far as I am concerned any progressive is just someone that can't make it on his own. Got a job yet? He talks about how he will change the universe for the better, but what he really means is that he will stifle debate, defame excellance and reward mediocrity. He does not know how to make money but is very good at taking it from those that have it. The progressive movement is probably the greatest threat this country has ever faced. No, Rich, I am familiar with "your kind" and I would hope that you would go somewhere else with your drival.

My answer:

Here's a summary of "Rules" Nothing here about radicals being dishonest or deceptive. Alinsky even advocates that radicals have alternative solutions available for the problems they call attention to. [The discussion board generally doesn't allow links, but they allowed my follow-up with the link to be posted as it was clearly relevant to the discussion]

Now, folks in the traditional media like to assume the attitude of "A pox on both your houses" and many, many times it's completely inappropriate. Here's a piece on two sets of political ads. In the first set, former PA Senator Rick Santorum makes factually incorrect suggestions, the other set of ads are entirely accurate. Both sets of ads are "tough," but otherwise are quite different. The problem that the piece points to is that the reporter treats them as equivalents, which they very clearly aren't.

But it seems to me that reading the quickie summary of Saul Alinsky's "Rules for Radicals" and reading the frames within which a typical Daily Kos post looks at a public meeting (at which the issue of gays is discussed) that "A pox on both your houses" is a pretty good way to look at the issue.

On points, the hearings were a resounding victory for the pro-equality side. There's simply no other way to judge it. Our side was on-message, tightly-focused, full of emotional and often-heartbreaking stories, and at the same time respectful of religious groups, who will be affected not a whit by the bill.
The other side came off as a ragtag bunch of whiners and fearmongers and faux-experts citing crappy science. Crappy, crappy, crappy science. Listening to audio only, I had to occasionally check to make sure I hadn’t time-warped back to the 1960s. By late afternoon, the anti-gay crowd could barely muster the energy to clap for their own speakers. It was...kinda pathetic, really. [emphasis in original]

This post views politics in much the same way that Alinsky suggests. Words are viewed as useful tools with which to persuade people. Both sides present their positions with all of their agonizing and debating in the past. For the activists, all of the pertinent questions have already been answered to their satisfaction. The purpose of the debate is not for us all to sit and reason together, but to sell a position to the public at large.

It's of course pretty ludicrous to suggest that the party of Richard Nixon's chief political dirty tricks strategist Donald Segretti, Ronald Reagan's William "October surprise" Casey, the elder George Bush's Lee Atwater and the younger George Bush's Karl Rove is in any way a moral paragon that liberals compare at all badly to. But manipulating information in order to present it in the best, most politically effective light is not necessarily a bad thing. Let's recognize that there's absolutely no necessity, whether we're using Saul Alinsky or not, to be dishonest. The current debate over torture is an instructive case. Former VP Cheney gave an interview in which he claimed that there were still-secret documents that exonerated the Bush Administration on torture.

The Bushies want this question — “did torture stave off terror attacks and save lives?” — hovering in the air. There’s plenty of evidence that torture hasn’t worked at all and has done more harm than good. Even some former Bush administration officials have conceded it hasn’t done anything to stop terror attacks.
But it’s easy for the Cheney camp to muddy the waters and turn this into a matter of debate by citing unspecified classified info that supposedly supports the claim that it has saved lives — info that we’ll never see.

So no, the former VP isn't precisely lying. He's just making misleading statements that are difficult to disprove. This was a tactic used constantly during the Bush years, the continual referencing to information that very few people had access to. "Yeah, yeah. The info's solid. Just trust us!" Of course, all of the secret information turned out to be just so much nonsense. Do groups on the political left have that option? No, such groups don't have the option of keeping crucial information on national security threats inaccessible to the government of the United States. If they have important information and don't share it with the government, they're then criminally liable if an attack occurs. "Radical" groups don't have the same option to get away with being able to mislead the public as groups in charge of the government do. It's also useful to keep in mind the fact that the government has become much more close-lipped with information since Alinsky's book was written and that the internet has made it much easier to double-check partisan claims.

Is there anything to the idea that if "radicals" take over the US, that the US will experience a repeat of Cambodia 1975, with the cities emptied and intellectuals forced to work on farms in order to punish them for being snobs? I don't think people on the left are naturally or inherently superior to those on the right, but something very crucial happened between the time Alinsky wrote his book and today.

The Soviet Union collapsed.

One of Karl Marx's ideas was that states could transform. That a state could start out as capitalist, become socialist and proceed to being communist. Not only did capitalism prove to be far more durable than Marx thought, but the Soviet Union started out being a centralized, militaristic and tyrannical system. What was it when it collapsed? It hadn't changed a bit. It was still a centralized, militaristic and tyrannical system.

What lefties, liberals and progressives concluded from that was that political systems, as they grow from being small political groups to running whole states, don't change. They change scale, but they don't change their essence. If we want to end up with a system that's egalitarian, that takes advice from all quarters, that respects the contributions of everyone and allows even opponents to make the occasional contribution, then we have to begin that way. It has to be built that way from the ground up.

Obama "talks about how he will change the universe for the better, but what he really means is that he will stifle debate, defame excellance (sic) and reward mediocrity." Of course all of that is merely guesswork, a presumption that our president will ever be so powerful that he can simply disregard the desire of the people that form his political base. Sorry, but after working with progressives for several years, I just don't see us as "stifling debate." The right-wing pundit and occasional Bill O'Reilly guest Michelle Malkin used to work as a reporter under the editorship of the highly respected progressive writer David Neiwert and refers to him as a "free speech absolutist."

Yes, the website Daily Kos (DKos' "Vision for America") deletes the comments of people they call "trolls." These are comments that are simply disruptive. Comments that a moderator disagrees with politically can only be combated by making a disagreeing comment after it. We as moderators for PhillyIMC and the IMC community in general observe much the same set of rules. So no, the left community in America does not quite come up to Neiwert's standard, but I don't think we fall much short of it and I don't think there's much risk of our copying the Khmer Rouge upon taking control of America.


DNI McConnell's credibility

Director of National Intelligence Mike McConnell claimed a little over a year ago that Khalid Sheikh Mohammed was being uncooperative:

DIRECTOR McCONNELL: Let’s take it from the beginning. Has waterboarding ever been used by a professional organization whose mission is to extract information? The answer is yes. You might ask what are the circumstances? Three times. Situations where there’s been interrogation over a period of time. It was unsuccessful. Water boarding was used and then information started to flow.

This testimony, the "only three times" claim was produced many times by conservatives seeking to minimize US culpability.

But now we have access to the 2004 CIA Inspector General's report. In it, the CIA IG John Helgerson details that actually, KSM was waterboarded a total of 183 times and another suspect, Abu Zubaydah was waterboarded 83 times.

Indeed, before the CIA used enhanced techniques in its interrogations of KSM, KSM resisted giving any answers to questions about future attacks, simply noting, "Soon, you will know." Id. We understand that the use of enhanced techniques in the interrogation of KSM, Zubaydah, and others, by contrast, has yielded critical information. See IG Report at 86, 90-91 (describing increase in intelligence reports attributable to use of enhanced techniques). (emphases added)

As the blogger Marcy Wheeler points out, Steven Bradbury (Who wrote two of the "Torture memos" released by the Obama Administration on 16 April) is conflating effective interrogation with the sheer number of reports. Waterboarding KSM and Zubaydah produced lots and lots of reports, but it's far from clear that it produced any useful intel. In fact,

By CIA's own admission, they used waterboarding with Abu Zubaydah at a time when he was already completely compliant with interrogators.

And as was pointed out in 2007,

....Under this duress, Zubaydah told them that shopping malls were targeted by al Qaeda....Zubaydah said banks — yes, banks — were a priority....And also supermarkets — al Qaeda was planning to blow up crowded supermarkets, several at one time. People would stop shopping. The nation's economy would be crippled. And the water system — a target, too. Nuclear plants, naturally. And apartment buildings.
Thousands of uniformed men and women raced in a panic to each flavor of target. Of course, if you multiplied by ten, there still wouldn't be enough public servants in America to surround and secure the supermarkets. Or the banks. But they tried.

So, it's hardly the case that "breaking people" will produce useful, actionable intel. In Zubaydah's case, we saw just the opposite, we saw wild goose chases where law enforcement personnel were kept busy chasing all sorts of improbable leads.

In other words, no, waterboarding (Controlled drowning) is NOT an effective method for getting uncooperative suspects to talk. What it produces is garbage.
Unfortunately, although the Obama Administration deserves great credit for doing as much as they have, they don't appear inclined to punish the torturers. Here's a petition folks can sign to encourage them to do so.


Heads up on release of documents

By this afternoon (Apr 16th), the Obama Administration will decide whether or not to release four Bush Administration documents and whether to release them in a complete form or as heavily redacted documents, with large areas blacked out. Understand, these are legal opinions on the issue of interrogation and torture, they're not intel or operational reports. There's absolutely no legitimate reason to redact or withhold a single word of the documents.
As to how newspapers will treat the story tomorrow, it's a good bet they'll try to place it on page A5 or A7. It's doubtful they'll cover it with any due diligence.
Secret law is a serious threat to democracy. There's absolutely no reason as to why, in a democracy, a secret law should ever exist. If the Obama Administration endorses keeping these four laws secret, our president will deserve the insult of being called Barack "W." Obama.


Fascinating other side to the story

We in the progressive community have long been very, very sour on the idea of the Bush Administration following up the occupation of Iraq by invading Iran. Very shortly after the fall of Baghdad, a Bush official boasted "Anyone can go to Baghdad. Real men go to Tehran." He was expressing a view that had deep roots. Both Israel and the US have been eager to take out Iran since the 1978 Iranian Revolution that had overthrown the Shah and that put the Ayatollah Khomeini in power. In early 2006,

Nearly three years after the Iraqi invasion, the real men are still stuck in Baghdad. Yes, there has been a great deal of talk about attacking Iran: plans in place for air strikes on Iran's revolutionary guards, on its nuclear installations and other WMD sites, and even talk of a ground invasion. There have been reports of spy flights over Iran and operations by special forces inside Iran. Israel too has been goading the US to strike, and if the US shrinks from this duty, threatening to go solo.

The author details the many obstacles that have held back that invasion. A very primary reason it has never taken place is that the US Army in Iraq is essentially hostage to an Iranian counter-strike. Iran is right over the border and has had a healthy cross-border trade with Iraq for as long as both countries have existed. Iran has much more internal cohesion than Iraq and is a great deal stronger. The US Army, not wanting a draft (Which would energize the peace movement back home in any event) and being stretched to the max, would very quickly find itself in severe trouble if Iran were to launch guerrilla attacks in Iraq on US troops.

Time Magazine noted in mid-2004 that

...despite the enthusiasm of those who most aggressively championed the Iraq war for taking on Iran, the results of the Iraq war may, paradoxically, have actually strengthened the position of the Mullahs in Tehran, by making their cooperation essential to achieving U.S. objectives.

Time Magazine also took note of the Colin Powell camps' lack of enthusiasm for an invasion of Iran and their preference for a negotiated solution. Even so, as late as mid-2008, VP Cheney's daughter, undoubtedly speaking for her father as well as many other frustrated neo-cons, declared to Iran:

"[D]espite what you may be hearing from Congress, despite what you may be hearing from others in the administration who might be saying force isn't on the table... we're serious." Asked about an Israeli strike on Iran, she said: "I certainly don't think that we should do anything but support them."

Fortunately, the Obama Administration has made it quite clear that force is indeed "off the table."

Very interestingly, it now appears that the lack of enthusiasm for invading Iran was one that many other countries shared. Bush Administration official David Wurmser describes the reaction he got in European capitals when he brought up the subject of a US attack on Iran:

“Every time in this period I landed in a European capital at [U.N. Ambassador] John Bolton’s request to discuss Iran, the first thing I got was: ‘What is your end game here; are you going to use the information to pull another Iraq? Tell us where you are going with this before we tell you how much we will admit Iran is going down the path to a bomb in the U.N.’ When I failed to give them a guarantee that we will not strike Iran, they stalled on moving ahead with acknowledging or using the evidence in public which in private they accepted.” [emphasis added]

As Iran is much closer to Europe than it is to the States, it may very well be that Europe was primarily interested in self-preservation, but I find it very highly interesting that Europe prevented the US from making what could have been a very costly mistake, a mistake that could very well have ranked with the utterly disastrous Athenian attack on Syracuse of 415-413 BC.


Question on Atlas Shrugged

The question was posed "What's so awful about Ayn Rand? Is this woman regarded as evil?" My impression from people in the left blogosphere who have talked about her is no, not exactly. I'd say that the general impression of her is that if you've read Atlas Shrugged in high school or college and you think she's wonderful, not a problem. If you've been out of college for a few years or are in your mid-20s in any event and you still think she's wonderful, you've got a problem.
Back during the Roman Republic, the Plebeians and the Patricians also had a problem. From 494 to 287 BC, the Plebeians took off a total of three times and the Patricians had to make do without their labor until they said "Uncle!" and the Plebeians then returned under new conditions.
In the modern era, the Knights of Labor won a strike against the railroads in 1884. The idea of having labor unions (As opposed to the craft unions of the Medieval era) caught on and striking, or withdrawing one's labor from the company, became a popular means for winning concessions.
Rand extended the idea of denying ones' labor to intellectual work and the hero of Atlas Shrugged, an architect, denied his intellect to society until society begged him to come back under better conditions. And wel-l-l-l, that's a nice idea, but personally, I've worked in both military and civilian departments where we had to do without a leader for awhile and we usually weathered the period just fine. That's not to say leaders are useless. But it is to say that followers, laborers, are more indispensable than leaders are. Intellects are crucially important when one is building something new, they're not so critical when one is simply trying to maintain ones' situation as is.
I went to a presentation on Venezuela, where we were told that the oil field technicians and executives took off to protest the presidency of Hugo Chavez. The workers who were left got to work, analyzing and reverse-engineering and figuring out how the process was designed. A few months after the intellectually bright people had left, the oil fields were pumping just as much oil as before. This suggests that if Rands' imagined scenario occurred in real life, society would have hit a "bump in the road" but it would have ultimately gotten along just fine.
So I really don't buy a crucially important tenet of Rand's philosophy. She seems to believe (No, I never actually read the book, I'm just passing along "received wisdom" from writers of the left blogosphere) that "extreme capitalism" is a good thing. Being an adherent of the "anti-globalization" and "fair trade" (As opposed to "free trade") movements, I don't agree with that at all.
Not sure that my economic philosophy falls into any easily-defined category. People have described me as a standard "plain vanilla" leftist. I'm aware that both classic Russian communism and classic Barry Goldwater/Ronald Reagan/Grover Norquist capitalism have failed (Not that I subscribed to that "flavor" of capitalism since a year or two after Reagan took office in any event). I've tried to define my philosophy more with specific real-world examples than by naming any particular people I've taken after.