What if the Export-Import Bank expires?

Politico is now reporting this is very likely to happen.  That does not distress me, but if it bothers you I have a simple offset: a looser monetary policy.

The biggest recent “tax” on our exports has been the strong and rising U.S. dollar.  So a simple way to boost exports would be to depreciate the dollar.  Even a slight depreciation likely would offset the effects of Ex-Im expiration by more than a factor of one hundred, perhaps by more than a factor of one thousand.  Ex-Im is a relatively small program and it has nothing to do with more than 98 percent of American exports.  Many of its foreign beneficiaries, such as Pemex and Chinese state-owned enterprises, don’t need the subsidy to fund their imports.  Boeing is still reporting a robust demand for its planes.

Inflation has now undershot the Fed’s target for what — 36 months in a row now?  So a looser monetary policy will hardly bring hyperinflation down upon our heads.

Again, I am not saying we need to do this.  I am simply saying we could, and, if necessary, we could wash away all of your Ex-Im tears, just like that.

Comments

That's a link to Scott Sumner's continuous loop, not to Politico.

Art Deco's right, perhaps you meant the link to cover monetary policy.

Good to see you've finally caught on to the driver behind the USA's slowing economy:

http://marginalrevolution.com/marginalrevolution/2015/05/why-does-the-american-economy-seem-to-slow-down-each-first-quarter.html

The response will be "why not both?"

"Inflation has now undershot the Fed’s target for what — 36 months in a row now? So a looser monetary policy will hardly bring hyperinflation down upon our heads."

1. Are we certain that inflation (or "hyperinflation") is (are?) the only potential negative effect of persistently loose monetary policy?

2. How are we actually going to make monetary policy any looser than it is presently? Another QE? How do we calculate the amount of QE necessary to wipe away these tears?

3. Wouldn't direct export subsidies be more efficient then QE for this purpose?

4. Is this really Tyler or Tyrone?

Two helicopters dumping 100 dollar bills just the usual one.

1. No, but what are the possible downsides? Dogs and cats living together? Besides how can you call a policy that has undershot its inflation target for three years "persistently loose".
2. The Honda principle. If two is good, four is better. Just keep doing what they are doing but do more of it. When inflation consistently hits the stated goal or when NGDP goes back to trend are two good answers.
3. Loose monetary policy would help all exporters, not just ones that are politically connected. That is more efficient.
4. Tyler, Tyrone is more cynical.

Indeed, poor TC drinks the monetarist Kool-Aid. There are numerous problems with TC's analysis of 'looser money' affecting the exchange rate via changing the US price level relative to foreign prices (assuming all other factors stay the same, caeteris paribus). First, at the zero lower bound it has not been shown that printing money works to change prices (i.e., inflation is hard to generate). This is because money is neutral. All but diehard MMs believe money is neutral, so indeed a direct subsidy to the largest US exporters like Boeing (to the extent world trade rules can be bent or modified to do this) would benefit exports more than 'printing money'.

@myself - as I state at TheMoneyIllusion, where such MM nonsense is peddled, I do believe that persistent money printing (such as was done in Brazil for forty years after WWII) does damage the economy, but not as much as most people think, assuming you don't have runaway hyperinflation. For instance, from Calomiris' recent book "Fragile by Design" on banks, in Brazil money printing that had inflation in the high teens resulted in a drag on the economy (called the 'bank tax') of about less than 5% a year on GDP. This is not that big a number for a developing country (Brazil still had positive growth). Menu costs and shoe leather costs from inflation are not that big a deal, but the potential for panic, hoarding and hyperinflation are real.

1. Yes
2. Yes, pick some deep asset class (like 30 yr bonds), and buy them with money you print. For how much see below:
3. Yes, but full employment is a more valuable goal.

How much monetary loosening?
1. Print money.
2. Inflation, if yes go to 3, no go to 1.
3. Stop printing money.

Boonton and sourcreamus,

I am glad to know you have such confidence in the policy. Perhaps if you would share your reasoning, rather than just state your conclusions, more of us would be able to join you.

As to inflation being the only restraint on a "loose money" policy, what about the issues of malinvestment and inequality? Please note that during the current recovery (such as it is) capital investment has been bad, very bad, really historically very bad, while, at the same time, public corporations have been buying their own stock very aggressively. The reason for this seems to be that, given the ultra-low level of interest rates, it is easier for managers to improve profits per share by reducing the number of shares then by investing to increase profits. The already wealthy have disproportionately benefited from the resulting rise in equity prices but the lack of capital investment has meant that after six years we are only now reaching pre-recession levels on full time employment (admittedly, Obamacare is also restricting the creation of full time jobs to some degree). The lack of capital investment is also seems to be suppressing productivity gains. The past five years have seen total non-farm productivity gains of 3%. We can't continue with productivity gains this low for too much longer without becoming a third-rate economy.

The level of interest rates is an important consideration in most investment decisions. The distortion in interest rates must be making some otherwise bad investment ideas look good and some otherwise good investment ideas look bad. The uncertainty of not knowing how long current interest rate policy will continue, or what the effects will be when the policy changes, is also probably inhibiting some investments.

Also, I believe ZIRP (and any new QE) is actually producing a negative net effect on AD. Relatively, safe fixed income investments are the main vehicles for retirement savings. With a large demographic cohort approaching retirement, lower interest rates force boomers to work longer and save more than they would otherwise. At the same time, those that do retire must cut back on current spending to adjust for lower investment income. Taken together, I believe this must create a short fall in expected AD. Indeed, saving rates seem to be increasing again (or at least are not returning to pre-recession normal) despite lower rates and the lack of capital investment demand for savings. At least initially, lower interest rates probably do have the effect of stimulating demand since lower loan payments obviously facilitate big ticket purchases. However, after six years of ZIRP it is hard to believe there is much more of that type of benefit to be found in the policy. I assume there will be an "air pocket" in AD as rates return to normal. At this point, however, I think the net current effect of artificially lowered interest rates on AD is probably negative and is likely to stay that way (or get worse, baby boomers are only just starting to retire) as time goes on.

Based on your level of confidence that only inflation matters, I assume you have already considered all of the above. Although the foregoing is not a comprehensive list of the potential problems, how did you determine that none of this matters at all?

bmcburney

Let's say you are managing a large company and can borrow at very low interest rates...so does your twin brother. Your twin brother borrows money to make capital investments which raise productivity. You borrow money to buy back shares thereby raising earnings per share but not actually improving the return on the actual capital of the company or adding newer capital.

Over the long run, why would your brother not be more successful managing his company and why would not the shareholders of that company be more apt to keep him on as CEO? Again low interest loans are still loans that have to be paid back. It is easier to pay back a loan if you used the loan to buy something that produces a stream of income.

The same story applies to 'malinvestment'. The 'malinvestment' story seems to be if money is cheap, people will make low value investments. OK but what about high value investments? Suppose pizza ovens yield returns of 5% but cell phone chip making factories return 20%. Why would low interest rates cause someone to borrow money to buy pizza ovens while ignoring the opportunity in chip making?

"The distortion in interest rates must be making some otherwise bad investment ideas look good and some otherwise good investment ideas look bad "

Why? A bad investment is still a bad investment. Maybe a low interest rate makes the pain of paying off a bad investment a bit less but an investor is still going to be more attracted to the good investment over the less good. And what 'distortion' are you thinking of? By what mechanism do you declare current interest rates 'distorted'? People who talk about 'malinvestment' also like to claim interest rates were distortingly low in the 00's, yet since then rates have been lower yet. What exactly is the 'right' interest rate?

"Also, I believe ZIRP (and any new QE) is actually producing a negative net effect on AD. Relatively, safe fixed income investments are the main vehicles for retirement savings. With a large demographic cohort approaching retirement, lower interest rates force boomers to work longer and save more than they would otherwise "

But lower inflation also means the amount needed for retirement is rising slower. Savings is always problematic to model because the incentives cut both ways. Higher returns mean you don't have to save as much to reach a particular goal, but higher returns also mean the reward for savings is higher relative to the reward for consumption. It is hardly clear to me that lower interest rates are a net negative to consumption and real investment.

"Based on your level of confidence that only inflation matters, I assume you have already considered all of the above. Although the foregoing is not a comprehensive list of the potential problems, how did you determine that none of this matters at all? "

The analogy I like to use is calling a plumber to your house to find a leak when the town has shut off the water. Without water pressure, it would almost be impossible to see which, if any, pipe is leaking. Turn on the water, the plumber will say, and then it will be easy to evaluate the pipework. Take lower AD off the table by pushing fiscal and monetary stimulus until you get inflation. At that point you can sanely evaluate if other more complicated problems are present such as ZMP workers or whatnot.

Boonton,

Concerning my hypothetical brother, at most rate levels I would generally agree that lower interest rates should be advantageous for capital investment. At ultra-low rates, however, the relationship between lower interest rates and additional marginal capital investment appears to break down. Certainly, the ultra-low rates seen in recent years have not stimulated much in the way of additional capital investment or productivity growth in the US. The reason for this appears (to me anyway) to be that corporations find it easier to substitute debt for equity on their balance sheets because the cost of the debt is so very low it has essentially become "free" equity. Capital investment cannot compete as an "investment choice" with levering up the balance sheet. In any case, your analysis is clearly a counter-factual one. If any large number of corporate executives actually acted like my hypothetical brother, we would presumably have more capital investment and better productivity. We don't. It's hard for me to see why even more of the same will change that.

As for malinvestment, it is always difficult to come up with examples of malinvestment in advance because it is hard to identify and account for all of the possible economic effects of the policy under discussion. If I could really do what you are asking on a reliable basis I would be much more wealthy than I am. As a somewhat speculative answer, however, I note there has been a lot of rapid investment in the energy sector recently which some investors may now regret. Those investments may have made sense at low interest rates (and at a certain price for oil). If interest rates had been left at somewhat higher rates, fewer such investments would have been made or, perhaps, they may have been made more slowly. If the investments had been made more slowly perhaps the price of oil would not have fallen so much, or so fast, and fewer losses would now be occurring.

In a sense, malinvestment is the whole point of financial repression. If you don't trigger some malinvestment, your attempt to manipulate the economy via "loose money" will fail. But if investors know you are attempting to trigger malinvestment, they will avoid investments which maybe sensitive to a change in policy. But it is hard for investors to know which investments will react badly to a policy change, so they may avoid all capital investments until they believe the "monetary policy risk" has stablized.

Modeling is always difficult but it seems to me that the effect of low risk interest rates on savings is only neutral if you assume that demographics are neutral. For someone in mid-career, higher returns on investment might produce a higher savings rate (but in mid-career you can produce a similar result by taking on more risk an, in fact, I believe that is the normal appoach people in mid-career take to the problem). For retirees or near retirees, however, savings must be increased if low-risk fixed income rates are low. If your population contains an unusually large cohort of retirees and near retirees, a reduction in low-risk interest rates should be expected to produce a reduction, rather than an increase, in AD. Moreover, the AD issues with lower interest rates are only made worse to the extent that the cohort considers the potential for future inflation. Low inflation today is very nice, but our boomer may plan to be retired for a long time. Lower inflation today does not mean that inflation will remain low tomorrow. Indeed, if our boomer knows that Fed policy is attempting to create additional inflation, they will have to save even more to hedge the risk that the Fed will succeed (or over-succeed).

I don't understand your analogy.

PS Boonton,

Never mind theory, which analysis best fits the facts of the past five to six years? Is cap-x high or low in the real world? Is productivity growth high or low? Do we have a continuing AD problem despite four trillion plus on the Fed's balance sheet or not? What is the savings rate doing?

Trading stock for debt on the equity side of the balance sheet seems like a wash to me. A company is buying shares from stockholders, stockholders are selling their shares and putting the money in the bank where it turns into loans to the companies. Dividend payments are simply converted to interest payments. One group of investors reduces their risk, the other takes on risk. If it was otherwise, if shareholders selling their stock wanted to buy other things with the cash then AD would be rising.

As a somewhat speculative answer, however, I note there has been a lot of rapid investment in the energy sector recently which some investors may now regret. Those investments may have made sense at low interest rates (and at a certain price for oil). If interest rates had been left at somewhat higher rates, fewer such investments would have been made or, perhaps, they may have been made more slowly -

This statement isn't consistent with your claim that AD isn't rising due to the low rates. If people are buying equipment in, say, fracking, then AD is rising.
If you have two investments, one would yield 10% and the other 5%. If rates are 7% only the first makes sense, if they are 2% then both make sense. In either case you have uncertainty. Are the people making these estimates right or too optimistic? That's always a risk for a lender. Whether rates are high or low you still want/need to get paid back.

Your story then isn't making sense. 'Malinvestment' means what exactly? An investment that doesn't turn out as good as people thought? Why is that a bigger risk at low rates than high ones? If rates are 9% then yes the 2nd investment won't get made, but at the same time the risk to the first investment is greater. If the return ends up being only 7%, then you have bankruptcy that wouldn't happen if rates are 2%.

I'm also not sure what you really mean by 'malinvestment'.

There is AD and AS. The concern about AD is whether or not it is sufficient to fully utlilize current AS. If it is not then you will have unemployment defined as current resources (people and/or capital) that could be used to make goods and services today but are left idle. AS is the amount of goods and services you could possibly make assuming demand was there.

Over time, we want to see AS growing since we need more goods and services to meet our needs. Investment (meaning the purchase of capital goods...goods for making other goods rather than final consumption goods) is part of demand but we hope intelligent investment will shift the AS curve outward in the future allowing us to enjoy more rather than less goods and services.

Malinvestment then doesn't make much sense as a concept. A poor investment may be bad for the investor today but tomorrow it can still be used to make goods and services. After the dot-com crash, for example, a lot of high end office furniture was sold at firesale prices and fiber optic cable access was to be had for cheap. This was bad for those who invested in such things, even worse for those who borrowed to invest in such things but great for the businesses that were able to pick up these assets at super cheap prices.

Malinvestment then makes absolutely no sense unless you mean some investment good that not only doesn't generate enough goods to pay for what its investor paid for it but actually subtracts from the goods the economy can produce. You need something that generates negative returns but even that is not good enough. If you had something, like a lemon of a car, that produced negative returns if nothing else you could just throw it away. But malinvestment would have to cost even more to throw away than to live with its negative returns.

The only thing that fits the bill, that I can think of, would be some type of environmental crises but beyond that even the silliest investments imaginable still leave assets that more intelligent owners can utilize to make useful things if they can pick them up for the right price.

Boonton,

Malinvestment is a fairly well defined term and I believe I am using it in its conventional sense. Why don't you just google it?

It would be a fair question to ask whether share buy-backs are really best described as a form of "malinvestment" or disinvestment (this activity is frequently described as returning capital to shareholders) or, perhaps, something else. Regardless of the terminology, it is an activity which mimics some of the effects of capital investment without producing the broader economic benefits. I believe any capital investment, including malinvestment, generally does increase AD (at least in the short term) but share buy-backs don't (or don't seem to and its hard to see how they would).

It appears to me that the past five or six years have seen share buy-backs being used as a substitute for actual capital investment. I believe this occurs, at least in part, because corporate managers are unwilling to make capital investments while the Fed remains a strong presence in the market because they are afraid they will be deceived by manipulated price signals caused by Fed policy. They are afraid that, once policy changes, they will be left with investments which don't work. They believe buying back share is the safer alternative, at least until the Fed "takes its thumb off the scale." That belief is certainly not universally held but it appears to be widespread enough to restrict capital investment. Thus, more QE cannot reverse the shortfall in capital investment (and productivity) because QE is a reason for the shortfall. But perhaps this is wrong. What do you think has depressed capital investment? How is doing even more QE going to change the capital investment outlook considering the results achieved by the same policy in the recent past?

The recent capital investments in the energy sector probably did increase AD in the short term but that is not a contradiction. Malinvestment (assuming these investments turn out to be malinvestment) has a long term negative effect on AD and otherwise. At a micro level, the investors will lose money and they will need to save more to just to recover to their prior position. Even if the losses are "socialized" (to reduce the AD effects or for other reasons), if the investments are unproductive, they will not increase productivity and other investment opportunities which might have done so will be lost. Price signals are essentially for the efficient allocation of capital. When price signals are distorted, capital is not allocated as efficiently as otherwise. The economic failure of the Soviet Union was the result of this same process (albeit on a massive scale).

Of course, malinvestment (and the threat of malinvestment) is just one of several reasons why more QE might be counter-productive. There are others.

It seems like you are now just trying to win the comment thread rather than have a serious discussion. Please don't do that. It's a waste of everyone's time.

Malinvestment is a fairly well defined term and I believe I am using it in its conventional sense. Why don’t you just google it?

I don't buy that it is, like the Austrian definition of 'inflation', I think there's a habit here of using terms in a manner that is quite different form the common sense usage of the term. So I have to insist that you spell out exactly what you mean here.

It would be a fair question to ask whether share buy-backs are really best described as a form of “malinvestment” or disinvestment (this activity is frequently described as returning capital to shareholders) or, perhaps, something else. Regardless of the terminology, it is an activity which mimics some of the effects of capital investment without producing the broader economic benefits. I believe any capital investment, including malinvestment, generally does increase AD (at least in the short term) but share buy-backs don’t (or don’t seem to and its hard to see how they would).

I have no idea what this means. Keep it simple. Company A borrows $100 to buy back its shares. There's no capital investment here, no consumption increase. Before this transaction the company was 'owned' by a shareholder, after it was 'owned' by the bank that made the loan to it. Now if the shareholder puts his money in the bank, the cirle is complete. Just an accounting change. If the shareholder has sold his share because he wants to go on a spending spree for himself, then consumption demand increases. Why is any of this 'malinvestment'? Is the shareholder investing the $100 in some poorly thought out investment that the company itself wouldn't have done?

Your second paragraph sounds like you are describing the classic Keynesian liquidity trap. In that the gov't prints a lot of money but because of the great uncertainity in the economy people 'stuff it into their mattresses'. The problem there is not really the creation of money, it is overcoming the psychological trap that fear creates that inhibits spending (both consumption and investment).

The recent capital investments in the energy sector probably did increase AD in the short term but that is not a contradiction. Malinvestment (assuming these investments turn out to be malinvestment) has a long term negative effect on AD and otherwise. At a micro level, the investors will lose money and they will need to save more to just to recover to their prior position.

Missing from this story are two other elements. First, if fracking investment turns out to be unwise, then what investment would turn out to be wise? Let's say investors should have been putting their money in opening more Starbucks shops. Well some investors did and since that is where demand was instead of oil and gas, they will see returns above what they expected. Why would they not then be demanding more since their luck has left them richer than they thought they would be? Second, how about future investors who will benefit from the poor decisions made by today's 'malinvestors'? If people are overinvesting in fracking equipment today, then tomorrow expect some excellent deals on used fracking equipment. Since future oil investors will have to lay out less money to get in the game, why wouldn't their consumption rise as well?

if the investments are unproductive, they will not increase productivity and other investment opportunities which might have done so will be lost.

Agree, this is opportunity cost...or what you could have had if you had followed your grandmother's advice and became a lawyer/doctor/whatever. But here you are talking about actual realized costs. Recessions are periods of negative growth, not simply growth that could have been better.

Price signals are essentially for the efficient allocation of capital. When price signals are distorted, capital is not allocated as efficiently as otherwise. The economic failure of the Soviet Union was the result of this same process (albeit on a massive scale).

Again I agree with this, but you haven't shown a price distortion. If investment A is better than investment B, then it holds that A is more attractive than B at any interest rate. A low interest rate isn't going to make B look better than A. So your distortion argument doesn't follow.

AND the symptoms of misallocation would be a negative shift in the supply curve. The USSR suffered a big AS problem. People would go to the stores and wait in line for the goods they wanted or pay inflated black market prices because the USSR could not get the right mix of capital it needed and/or it could not use what capital it had efficiently. The only difference is that the inflation was hidden from 'official numbers' since the gov't controlled the price stickers in the store. So if we are suffering a problem of 'malinvestment' why would that not show up as a shift in the AS curve resulting in not unemployment and recession but inflation and shortages?

The Fed has a monetary noose around the economy's neck. Even the 2% IT is too tight and it is undershooting that. Robust real growth should be the goal of every federal macroeconomic policy, until the house in on fire. Then we can adjust from there.

O agree with the recommendation, but there are zillion other reasons for the Fed to go back to QE-ing. Or one: NGDP is still below its 2008 trend.

This has been an interesting episode illustrating how hard it is to kill a government program. We were driving through Texas in April and we heard radio ads urging listeners to call their congressman (he was specified by name) to support reauthorization, or jobs would be lost. Cronyism dies hard.

What I find hilarious is that libertarians like Veronique de Rugy (spelling? Not looking it up) will smugly assure us that changing the nature of marriage, or amnestying millions of illegal infiltrators is some small trifling affair not worth getting worked up abou, but will then spend six months churning out endless articles about why the Ex-Im bank needs to be stopped. How is anyone that crippled when it comes to a sense of perspective. I don't really have an opinion on Ex-Im, but the urge to say Tant pis Veronique is a strong one.

Changing the nature of marriage, as in limiting it to 1 man - 1 woman? because historically it's been 1 man all the women he wants.

The fight against gay marriage is so dumb. Why are you so concerned with other people's relationships? What is about other people's genitalia that so fascinates you?

Wompwompwompwompwomp.

One man and all the women he wants? Not in the West it hasn't.

The economic and social impact of the decline of marriage is second to none in the modern West. Except perhaps immigration. It means more crime, more child abuse, more failing schools, and so on through pretty much every bad demographic we can measure.

This is why the fight against Gay marriage is important. Marriage is collapsing but it collapses faster when Gay marriage is introduced. It is not as if men want to get married in the first place, but turn marriage ceremonies into something that looks like Priscilla Queen of the Desert and men will just refuse.

Civilization is only possible if men do what men have always done - suck it up, forget their dreams and opportunities, and go to work in a cubicle for 40 years to support their wives and children. We have done this experiment. We made marriage irrelevant to African Americans. How is that working out? Working class Whites are not far behind them. Middle class Whites won't be much further behind them.

It is not as if any number of Gay people want to get married. It was solely an excuse for the Social Justice Warriors to bully everyone else into submission.

"The economic and social impact of the decline of marriage is second to none in the modern West. ... It means more crime, more child abuse, more failing schools, and so on through pretty much every bad demographic we can measure."

Yes, that's why crime in the U.S. has skyrocketed since 1990.

http://www.aei.org/wp-content/uploads/2014/07/crime.jpg

Most of the decline in marriage happened before 1990.

Something like 38% of African American men have a felony conviction. It is true that crime has gone done since the 1990s. At the price of jailing some significant percentage of sons of single mothers.

The cost of that when it is mainly African American is bad enough. No one can afford to jail 38% of *all* men. The collapse of marriage in the White community will result in the collapse of the economy.

This is why the fight against Gay marriage is important. Marriage is collapsing but it collapses faster when Gay marriage is introduced -

Massachusetts has had SSM for over a decade now yet the data shows no measurable difference in the health of marriage as can be measured by any rational metric (divorce rates, domestic violence, birth rates, etc.).

Likewise multiple jurisdictions enacted various types of SSM bans to emphasize how important marriage is to them and no evidence exists that such bans reversed or slowed down 'the decline in marriage'.

Since the evidence contradicts your assertion, we can safely disregard your comment.

Boonton June 7, 2015 at 11:28 am

Since the evidence contradicts your assertion, we can safely disregard your comment.

Oh go on. You were going to disregard it anyway.

Nationally marriage continues its collapse. In 2000 the marriage rate was 8.2. In 2012 it was 6.8. In 2007 Massachusetts had a significantly lower marriage rate - 5.9 when then national average was still 7.9.

That collapse in marriage is especially strong among people most supportive of Gay marriage - the young:

According to census data cited in the report, barely half of adults ages 18 and older are married— 51% in 2010, compared with 72% in 1960. This decline is especially notable for young adults: 20% of 18- to 29-year-olds were married in 2010, compared with 59% in 1960.

Now we all know you really know anything about marriage in Massachusetts. You just quoted the Hive Mind without thinking for yourself or doing any research. But perhaps you might like to explain why you think marriage in the Commonwealth is still robust?

Nationally marriage continues its collapse. In 2000 the marriage rate was 8.2. In 2012 it was 6.8. In 2007 Massachusetts had a significantly lower marriage rate – 5.9 when then national average was still 7.9.

Intellectual failure here. If your theory is SSM causes a lower marriage rate then what you want to see is decreasing marriage rates in pro-SSM states and increasing ones in anti-SSM states. Knowing a particular state at a point in time has a higher or lower rate than the national average says nothing.

But thank you for helping me not only win on this argument but piss on your lifeless intellectual corpse.

http://www.census.gov/compendia/statab/2012/tables/12s0133.pdf

Mass's marriage rate in 1990 was 7.9 versus the national average of 9.8. In 2000 it had fallen to 5.8 while the nation had fallen to 8.3. SSM came to Mass in 2004. By 2009 the rate was 5.5 so a slight decline there but the nation had fallen to 6.8.

So while Mass had SSM but the nation didn't, we see the decline of marriage still going quickly in the nation but slowly in Mass.

Likewise the divorce rate in Mass actually fell from 2.5 in 2000 to 2.2 in 2009.

Now consider an anti-SSM state. Mississippi, for example, had a marriage rate of 9.5 in 1990 and 9.4 in 2000. By 2009 they were at 6.4. How about Louisiana with Bobby Jindal's pro-family prayers? 9.6 to 9.1 to 7.1.

The pattern, if anything, appears to be the more anti-SSM a state is, the more in trouble marriage is. If I didn't know better, I'd say anti-SSM activism was a lot of sound and fury to cover up the failure of anti-SSM big mouths to sustain healthy marriages and make them thrive.

Boonton June 7, 2015 at 8:18 pm

Intellectual failure here. If your theory is SSM causes a lower marriage rate then what you want to see is decreasing marriage rates in pro-SSM states and increasing ones in anti-SSM states. Knowing a particular state at a point in time has a higher or lower rate than the national average says nothing.

Well no. You need to construct a strawman, I know, but I do not want or need to see that. Because anti-SSM states do not live in isolation. What happens in other states affects them too. People in Louisiana watch Will and Grace too.

But thank you for helping me not only win on this argument but piss on your lifeless intellectual corpse.

My pleasure.

So while Mass had SSM but the nation didn’t, we see the decline of marriage still going quickly in the nation but slowly in Mass.

Cause and effect is always hard. However we need more up-to-date figures than that before we can say anything much. Except that SSM goes hand in hand with the collapse of marriage.

Likewise the divorce rate in Mass actually fell from 2.5 in 2000 to 2.2 in 2009.

Which is what you expect if in fact people are refusing to get married or are dying before they get around to divorcing.

The pattern, if anything, appears to be the more anti-SSM a state is, the more in trouble marriage is.

Some of this may be a temporary effect due to the Obama recession. We will have to see when economic growth picks up. It is certainly true that Red States are not as socially conservative as they used to be. After all, everyone across the country watches Will and Grace.

If I didn’t know better, I’d say anti-SSM activism was a lot of sound and fury to cover up the failure of anti-SSM big mouths to sustain healthy marriages and make them thrive.

I would agree with that actually. But what it takes to sustain healthy marriages is the respect accorded Fathers and Husbands. Which is incompatible with making marriage look like a scene from Priscilla.

So I am looking forward to this corpse-p!ssing thing.

Because anti-SSM states do not live in isolation. What happens in other states affects them too. People in Louisiana watch Will and Grace too.

Most likely Will and Grace was more popular in Mass than Louisianna. In either case you have a problem. You asserted a causal relation between marriage and the legality of SSM. Well the relationship does not appear to hold with real world data. If you now want to make this about a relationship between marriage and the # of popular gay TV fictional characters....well you have already failed here once. We have a right to demand the next time you assert some causal relationship you do the work of providing the actual data.

Which is what you expect if in fact people are refusing to get married or are dying before they get around to divorcing.

In Miss., the marriage rate and divorce rate is about 30% lower in 2009 than 2000. So in that case you could say the only reason the divorce rate went down is because marriage in general went down. In Mass., the marriage rate fell by about 5% while the divorce rate fell by 12% between those two years.

You could argue that a higher divorce rate is actually a metric for healthier marriages (the logic would be that unhealthy marriages would not be around very long while the healthy ones would remain). But the numbers simply do not move in the right directions to support your SSM theory.

Likewise you can spin out lots of alternative theories about recessions that hit just SSM states or anti-SSM states thereby confusing the relationship between SSM causing marriages to decline and the data. But ultimately you have failed to support your theory with the data available. If you want us to take this seriously I suggest you present actual predictions of what you think would happen over the short, medium and long term in states and countries that adopt legalized SSM. A larger sample size should solve your problem with 'bad luck' causing the relationship you say is there being hidden in messy data.

We have done this experiment. We made marriage irrelevant to African Americans. How is that working out?

On the other hand, their living standards rose faster than whites' during the period where their families fell apart, and iirc they have a lower ratio of gay marriages.

I'm increasingly convinced outcomes are a proxy effect: the kind of father that abandons their kids is usually not the kind of father who was doing his kids any favors by being around anyway, and might have ended up killing them. It's not a black thing, it's a low-income culture across ethnic boundaries with cultural norms that don't favor those outcomes, basically the same problem of low income people everywhere in the world.

Also, not sure gay why marriage changes anything, it's only 1-2% of the population anyway. It's not like principled behavior and gay marriage are incompatible.

There's a much simpler, and baser, explanation.

The Ex-Im bank is essentially the Boeing Bank. It provides a massive subsidy to Boeing (a company based in a solidly blue state) and Boeing's customers (foreign airlines). The competitors to Boeing's customers (US airlines) are mostly headquartered in red states.

If you're a Republican politician, shutting down the Ex-Im bank allows you to score ideological points (shutting down corporate welfare) while also providing benefits to your constituents. The losers (Washington State and foreigners) wouldn't vote for you.

Not sure why this is a base motive? Are Republicans just suppose to subsidize Democratic states (keeping in mind that solidly blue Washington's governor won election with a whopping 51 percent of the vote). Fifteen years from now Washington will almost certainly vote Republican in presidential elections.

one average, it's blue states that subsidize red states. washington (state) is a net loser from federal transfers on a 20 year time horizon, according to that well known left wing magazine, *the economist*
http://www.economist.com/blogs/dailychart/2011/08/americas-fiscal-union

This nonsense has been debunked over and over. I'm surprised it keeps getting repeated.

1.) "States" are not the ones paying taxes. Taxes are paid by individual taxpayers. Democratic-leaning states are full of Republicans, and vice-versa. A typical "blue" state probably votes at least 40% Republican most years, and a "red" state 40% Democrat. Look at individual people and the results look completely different- the poorest voters overwhelmingly tend to vote Democrat. Looking at election exit polls by income levels, it's probably safe to say a typical "red" voter pays more taxes than a typical "blue" voter.

2.) People move. A huge percentage of these federal transfers are things like Social Security and Medicare- programs workers pay into when they are younger, and then collect from when they are older. Think of a New Yorker who retires to Florida. If a state has more people moving out than in each year, that means there are people who paid taxes in that state for some period of time, but are no longer live there by the time they are old enough to collect. This isn't a subsidy. It's just a change of location.

3.) These studies also tend to ignore how much of that money is going to federal land and employees. Look at New Mexico.

+1

Fantastic post. This needs more coverage.

"Taxes are paid by individual taxpayers"

And I'm so old. Why, I can remember when corporations too paid tax!

http://www.smh.com.au/business/comment-and-analysis/chevrons-tax-whinge-doesnt-stack-up-20150607-ghik39.html

There's also GE and Caterpillar -- like Boeing, successful exporters. Looks like another effort by red-state moochers to vandalize the successful parts of the economy.

If they're truly successful firms then they don't need ongoing subsidies, and if they are only successful because of the subsidies they need to undergo some creative destruction.

The losers (Washington State and foreigners) wouldn’t vote for you.

You do realize that Washington is only blue in presidential years, right? Like a lot of states, Wisconsin for one, it's not that blue in mid-term elections. Just putting that out there.

The benefits from shutting down such are so small and diffuse that it's hard to see how they could make a difference to Republican voters. And anyway, politics isn't about policy.

Mere words can't express my delight with Maria Cantwell's (D-Boeing) comment, quoted in the Politico piece: "The Republican Party has to stop being so anti-small business."

An we learned on Monday, a "looser monetary policy" is redistributive downward, so who's to object: Krugman? Sumner? Boettke? Ecumenism among the preachers.

Well, at least monetarists seem to be starting to figure out that the biggest power QE would have in the US now is to weaken the dollar.

I agree that the Ex-Im Bank is an inefficient subsidy and don't at all mind shutting it down, but devaluation, especially a one-off devaluation as implied here, is nothing at all like a substitute for a permanent export subsidy.

I am not an economist. I understand the idea about helicopters dropping money, but my question is why it must be in the form of buying MBS, or other bonds from banks?

Specifically, why could't Treasury issue "tax-rebate bonds" which would be rebated to every taxpayer and then the Fed buys those. This would get the money to actual taxpayers who could spend it, pay down debts (deleverage) or save it. It would seem to be more democratic and less likely to cause financial asset bubbles. Now, I can see why re-flating the housing market was useful, and that;s been done already.

I'm sure there is something wrong with my idea here, so have at it.

I'm just imagining helicopters that don't hover over Manhattan.

Central banks want to be able to both inject and extract money from the economy. When a Central bank buys something like a 3 month Treasury bill, it injects into the economy the price it pays to buy the bill. In 3 months that cash will automatically be pulled out of the economy since the Treasury will pay off the 3 month bill by either taxing or borrowing the principle. If the central bank wants to pull the money out faster, it could sell the bill before it matures. Therein is a small danger. If markets are going crazy, the price of a 3 month bill may not be as much as the bank paid for it. But since 3 months is a short period of time, price swings tend to be very small.

Longer term things like MBS's and bonds take longer to mature so it is no longer a short wait for the cash to come out of the economy. Even worse, the main reason to pull cash out would be inflation but increasing inflation lowers the price of bonds so if the Central bank tried to pull out cash by selling its long term bond inventory, it may not get anywhere near the amount of cash it wants.

Just giving taxpayers money would be even more extreme. The Central Bank has no taxing power so it cannot pull the money back in any conventional way. This is also pretty undemocratic, the Central Bank is essentially deciding who gets money and who doesn't. In the above cases it is the market. Yes the Central bank is buying stuff from the market but to the seller there's nothing special about that. The bond it buys could be owned by a bank, or an investor, or a mutual fund, pension fund etc. The price is nothing more than the market price at that given moment.

If the Central Bank is just going to pass out money then really the more democratic thing would be to do this with fiscal policy. Let the Federal gov't do a stimulus program and then decide how it will work....will people all get a flat tax credit or will some people get extra help? People who advocate Central Bank 'helicopter drops' are essentially advocating Keynesian stimulus policies.

If the Central Bank is just going to pass out money then really the more democratic thing would be to do this with fiscal policy.

The more democratic thing to do would be to just hand out the money and let people vote with their wallets.

Buying an existing asset in a large open marketplace and holding it for some period of time is less distortionary than trading people money for nothing.

Also, if the Fed buys gov't bonds, it essentially monetizes the debt as long as they hold it, because the interest is returned. This is something the Fed should be cautious of but not afraid of (they are a little too afraid, really).

For MBS this is a little less true, but it's a huge market and the government, for better or worse, wants to interfere in this market.

"Democratic" is often not a good thing (this is after all the fundamental basis of the Bill of Rights). One could argue a minimum income via the Fed might be a good idea from a social welfare perspective, but there's a reason CBs claim to be insulated from such pressures, and you can see it on display in places like Venezuela.

Channeling Dean Baker?

Can Tyler simply say he wants the Fed to buy the factored AR of exporters?

What I want is for the Fed to buy the bonds issued to build roads and bridges at 0% for 50 years which is the useful life of most bridges and of proper road bed preparation: right-of-way, grading, drainage, clearance, noise abatement. And buy bonds for rerouting rail lines to not interfere with road traffic by eliminating grade crossing in city and suburban areas by routing around instead of through and using underground or elevated rail.

For every trillion in such bonds, require one trillion in US wages, employment taxes, and benefits be paid, so the project sponsor would simply pay all land acquisition, overhead, profit, and legal fees.

I have a small question: since ending corporate welfare is at stake here (per the Koch bros' outfit), then I wonder about philosophical and policy consistency. Who are the largest beneficiaries of corporate welfare and government-sanctioned market distortions? I do not know, I am just asking. Is it Northrop Grumman? Boeing? ExxonMobil? Chevron? Google and Uber (after all, access to the GPS constellation is provided for free by the US of A)? So yes! Please let's end corporate welfare, but maybe let's look at the real moochers here - otherwise it makes the party of so-called economic freedom look indistinguishable from the party of tax evasion. Just sayin'

a tool of the multinational corporations, one used against the white working class, going away, you say?

This IS a sad occasion.

Noooooo! Logic and rational thought can not interfere with politics! No government agencies must be allowed to end , ever! This may start Armageddon - repent now small government sinners!

Politico is now reporting this is very likely to happen. That does not distress me, but if it bothers you I have a simple offset: a looser monetary policy.

Yes, this. The Fed should not be talking about tightening when last quarter was ~4% below a healthy NGDP trend.

BTW, note this is yet another uncelebrated victory for the .Tea Party, America's strongest reform movement.

These movements often have long-term ideological successes that are still felt long after they're forgotten. Hardly anyone remembers the Greenbacks Party of the 1800s, but look around, today everyone uses fiat money.

We should not really go so far into thinking and its better that we stick to simple things instead of making it complicated. If there is a rise in US then we will see but at the moment it’s not the case. For me there is never a major concern over these news since my broker OctaFX always keep me updated with latest situation with their analysis and news update, it’s really awesome with also been completely free to use.

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