The Economy

[kandrathe]

I don't know of a single former Soviet republic where they have not adopted their native language (or one of them) officially. Do you? There might be some that have kept Russian alongside it. (Apparently this is true of Belarus, and the Central Asian republics.)
I'm confused as to what you mean by this. What language should they be teaching in?

Vilnius used to be a Polish/Lithuanian city, until under the early Soviets (who were suspicious of the Poles) removed the taint of Polish-ness from Lithuania. Stalin made it clear throughout the Soviet empire that "Russian" would be the language of science/education and politics.

[Jester]

Vilnius used to be a Polish/Lithuanian city, until under the early Soviets (who were suspicious of the Poles) removed the taint of Polish-ness from Lithuania. Stalin made it clear throughout the Soviet empire that "Russian" would be the language of science/education and politics.

Did they not continue to teach in Lithuanian? The Soviets oppressed or removed the Poles (as did the Nazis during their stay, apparently) and the Polish side of the university was essentially eradicated. Not that this was undisputed before, there had been fifty years of bickering about Polish vs. Lithuanian before that. But, in the end, my understanding from scanning what I can find is that some subjects were taught in Russian, but that this was a Lithuanian-language university.

-Jester

[kandrathe]

Did they not continue to teach in Lithuanian? The Soviets oppressed or removed the Poles (as did the Nazis during their stay, apparently) and the Polish side of the university was essentially eradicated. Not that this was undisputed before, there had been fifty years of bickering about Polish vs. Lithuanian before that. But, in the end, my understanding from scanning what I can find is that some subjects were taught in Russian, but that this was a Lithuanian-language university.

My read on it was that Stalin trusted the Lithuanians more than he did the Poles, so the Soviets mounted a campaign to "de-Polanize" what they declared to be Lithuania. "Stalin resolved national questions by ethnic cleansing." It was really not so much pro-Lithuanian, as it was anti-Polish. Poland and Lithuania have a long shared history of cooperation going back to the 1300's.

Imagine going into Britain and deporting anyone with Angeln, Saxon, or Jutish blood. It's not unheard of... I recall El Cid. Or, closer to home, uprooting the Europeans from North America, Australia and New Zealand to return the land to the indigenous peoples.

[Ashock]

Vilnius used to be a Polish/Lithuanian city, until under the early Soviets (who were suspicious of the Poles) removed the taint of Polish-ness from Lithuania. Stalin made it clear throughout the Soviet empire that "Russian" would be the language of science/education and politics.

I spent my first 12 years under Brezhnev and not Stalin and in the Ukrainian schools, everyone spoke Russian and Russian was the language taught in and taught first, with Ukranian being taught as a 2nd language. My uncle who was born in Uzbekistan, was also taught in Russian, and Uzbekistan is so far away from Russia, that it might as well be Mars.

As far as the other Eastern block countries, maybe they still maintained their language as the primary, but I bet given another 50 years, that would have been fazed out also.

BTW, IMO what caused communist collapse in the 80s/90s is D-Day in '44. It should be celebrated not as the day of liberation of Europe from the Nazis (they were already dead by then), but as the day of prevention of Communism from spreading it's foul wings all throughout Europe, which it was fully intending to do.

[Jester]

Imagine going into Britain and deporting anyone with Angeln, Saxon, or Jutish blood. It's not unheard of... I recall El Cid.

I'm not going to defend the Soviets. Their policies ranged from the bunglingly stupid to the unthinkably cruel. I'm just saying their language policy didn't eradicate the national languages of the republics. We might live in a very different Europe if the Soviets had won, but Britain would still probably know how to speak English.

Or, closer to home, uprooting the Europeans from North America, Australia and New Zealand to return the land to the indigenous peoples.

What an odd analogy, given how little land has ever been given back, and how extraordinarily much was taken in the first place. Also notable is that these are democracies.

-Jester

[Jester]

I spent my first 12 years under Brezhnev and not Stalin and in the Ukrainian schools, everyone spoke Russian and Russian was the language taught in and taught first, with Ukranian being taught as a 2nd language. My uncle who was born in Uzbekistan, was also taught in Russian, and Uzbekistan is so far away from Russia, that it might as well be Mars.

Where in Ukraine was this? There have always been areas of Ukraine, from long before the Soviets until present, where Russian was the cradle tongue of the majority of people. If I understand correctly, if Yanukovich, rather than Yushchenko, had won the 2004 election, Russian would probably be a joint official language there. But that tension has been simmering since the days of Bogdan Khmelnytsky.

As far as the other Eastern block countries, maybe they still maintained their language as the primary, but I bet given another 50 years, that would have been fazed out also.

Could be. It's tough to say what would have happened, given such a radical counterfactual. Rising nationalist tensions were one of the major problems facing the Soviets in the 1980s - could they really have not only kept a lid on it, but rolled it all back, in 50 years?

BTW, IMO what caused communist collapse in the 80s/90s is D-Day in '44.

That seems a little far back to draw the causation. Certainly things would be very different if the Allies had never landed in Europe, and the Soviets had rolled across the whole continent. I think it would have made the Soviets less stable rather than more, by diminishing the relative influence of Russia proper as a power base. Tensions with the US would have become extreme, and I think the US could have (would have?) beaten the USSR in a 1946-1950s war in Europe, with their industrial base and their nuclear bomb. Plus, the USSR was still relatively reliant on US aid to keep its war machine going, even by the end of the war. But that's all just guessing. My counterfactual crystal ball just tells me "Outcome murky, try again."

-Jester

[kandrathe]

I'm not going to defend the Soviets. Their policies ranged from the bunglingly stupid to the unthinkably cruel. I'm just saying their language policy didn't eradicate the national languages of the republics. We might live in a very different Europe if the Soviets had won, but Britain would still probably know how to speak English.

I agree. It would take at least 3 generations (60 years) to eradicate a spoken language, and much longer for one as ubiquitous as English. The surest way is to institutionalize the children and limit their exposure to their former culture, teaching them only the new language and culture.

What an odd analogy, given how little land has ever been given back, and how extraordinarily much was taken in the first place. Also notable is that these are democracies.

It is interesting and shocking really to look at human population displacements in history, up to the modern age. I watched a "biography" of the Hebrew king David the other day. In modern parlance he made Stalin look like a girl scout, but in his day, he was probably par for the course. The Palestinian problem of our day is another legacy of displacement.

I'm not in support of rolling back the clock by hundreds or thousands of years, but issues of territorial displacement do need some peaceful and permanent reconciliations and resolutions.

[Jester]

I'm not in support of rolling back the clock by hundreds or thousands of years, but issues of territorial displacement do need some peaceful and permanent reconciliations and resolutions.

Heh. The present would be so easy, if it wasn't for the past.

-Jester

[kandrathe]

Heh. The present would be so easy, if it wasn't for the past.

... and, some level of forgiveness for the sins of our forefathers. One of my recent gigs was at college where they had a huge rift between white students, and students of color. The situation was resolved through a multi-week assembly where the students discussed the idea of multi-generational guilt and contrition. The white students needed to understand the crimes and guilt that our culture is burdened with, and the minority students needed to be willing to try to absolve the past and move on to the future. Racism (overt of institutional) is still a threat to their harmony, but so also the fear of (or false perception of) racism which can alienate the minorities and demoralize them. Once they were able to get past the "them" aspect, and really meet and know each other as individuals, they soon found what they had in common was more important than their differences. It was inspiring to see on a person by person level, which then summed up to this college population. Again, this is a limited environment peopled with those who are aspiring to improve themselves and almost by definition have open minds, and not rife with politics, nationalism, and media propaganda.

My opinion is that most of these conflicts are resolvable and that reconciliation is possible, but it must be actively engaged. The head in the sand, or passive approach to cultural integration will not work.

A larger question I have philosophically is whether, as a modern society, we can ever get past the intentional set up of systems where individuals are put in competition for resources. It ultimately results in conflict.

[Jester]

A larger question I have philosophically is whether, as a modern society, we can ever get past the intentional set up of systems where individuals are put in competition for resources. It ultimately results in conflict.

Can we eliminate the problem of scarcity? No.

Can we develop mechanisms for resolving conflicts that are relatively stable in the long run? Maybe. I hope so.

-Jester

[kandrathe]

Can we eliminate the problem of scarcity? No.

We can lower demand.

Can we develop mechanisms for resolving conflicts that are relatively stable in the long run? Maybe. I hope so.

If you look at the mechanisms for our societies, from employment, to schooling, to commuting, to even health care, aging and dying, we are locked into systems designed around competing with each other. This has been at least a twenty year discussion I've had with various people, but if you have the ability to step back and look at our "systems" they mostly focused around the notion of survival of the fittest. Or, the one who fights the hardest wins the most (my wife calls this the P_nis factor). We tend not to trust systems built around team work, and instead decompose risk and reward to an individual level. I guess I started thinking this way from computational research into cooperative systems modeling, and building free roaming, actor/rules based simulations.

So here is the weird part of me the Libertarian... I believe in high levels of social cooperation, just not anything where any level of government is involved (which I equate with "force"). More local and private, than State, and more State, than Federal. I guess you might call that voluntary socialism, or libertarian socialism, although unlike Chomsky, I'm not an advocate of anarchy. Although I would favor anarchy over Fascism. I do believe in the limited federal government envisioned by the framers of the US Constitution. One reason that I fear China economically is that they have a societal understanding of the multiplying power of cooperation.

Edit: Afterthought, this made me think of old Chester I. Barnard and his writings about "organizational theory" as well. We tend to try to order things as hierarchies, yet other structures may be more efficient and effective.

[Jester]

So here is the weird part of me the Libertarian... I believe in high levels of social cooperation, just not anything where any level of government is involved (which I equate with "force"). More local and private, than State, and more State, than Federal. I guess you might call that voluntary socialism, or libertarian socialism, although unlike Chomsky, I'm not an advocate of anarchy. Although I would favor anarchy over Fascism. I do believe in the limited federal government envisioned by the framers of the US Constitution. One reason that I fear China economically is that they have a societal understanding of the multiplying power of cooperation.

I'm afraid that sounds rather utopian, even to my relatively radical ears.

Cooperative structures must be created, developed, and enforced. Unless we come to live in a much rosier world than the one we have traditionally lived in, the gains from defection in social games are simply too high. The free rider problem crushes large-scale voluntary socialism to death, and usually small-scale as well, given enough time. Either there needs to be some enforcible power given to groups, which conflicts with radical individualism, or you need to accept strong competition as inevitable. People will only get together when they see the gain outweighs the alternatives, and will defect when they no longer do.

Not that this should be news to anyone who lists Hayek in the pantheon of their intellectual heroes, but capitalistic self-organization (Catallaxy is such an ugly word) is about as good as it's going to get, from an individualist standpoint. :)

-Jester

[kandrathe]

Cooperative structures must be created, developed, and enforced. Unless we come to live in a much rosier world than the one we have traditionally lived in, the gains from defection in social games are simply too high. The free rider problem crushes large-scale voluntary socialism to death, and usually small-scale as well, given enough time. Either there needs to be some enforcible power given to groups, which conflicts with radical individualism, or you need to accept strong competition as inevitable. People will only get together when they see the gain outweighs the alternatives, and will defect when they no longer do.

I've been thinking about this from the "individual", on up through family, to neighborhood, to community. I think much above community, you will start to see defections of "free riders". But, in all societies, you have had "free riders" in that there are some too sick, too young, or too old to care for themselves. If we accentuated our social structures at a level where interdependence was personal, then I think you would have far more motivation for participation, and far less motivation for ditching responsibility. I think you are right though, that at the community level there needs to be accountability for participation and social service. I would not want it to be "enforced" however, other than that like the "little red hen", if you are able bodied and don't help out in the baking, you don't get to help out in the eating. So, that allows for the radical individualist to go it alone if that is their wish (live and let live).

Our modern society's social organization is optimized for industrial labor utility, where workers and families are mobile to move to where employment is needed. We warehouse our children from age 5 through 18 in institutions that provide more hours of care and oversight than do their parents. And, after the worker is worn out to the point where their body begins to fail, we warehouse our elderly in institutions that tend to them until they die. I just think we have depersonalized "living" for the expedience of industrialism.

Another concept that has shaped my thinking in this is "tribe", and what that means for a modern society. It is interesting to me that "outlaw" organizations develop into "tribes" whether they be bikers, mafioso, or street gangs.

[kandrathe]

Here is another interesting tidbit, in case you might have thought that these times are like any other recent recession.

A chart of the M1 - Money Multiplier Chart, released by the Fed. It in essence shows the impact of the "velocity of money". What does it mean when M1 drops below 1? When the multiplier is less than one, the effect adding money (from debt) to the economy worsens the impact on the economy. You get less impact for each additional dollar added. It indicates that we've probably reached that tipping point when the Federal Debt no longer adds to GDP. <blockquote>"In 1966, $1 of debt used to increase GDP by around 90 cents. With so much more debt taken and enormous amount of money printed since 2007 for which I provided the data above, it is very probable that currently $1 increase in debt is contributing almost nothing to GDP increase."

"When additional debt has no positive impact on the GDP then all the incremental debt leads to price increases. In other words, when Zero Hour is reached additional debt will just lead to price increases or inflation."</blockquote>
<blockquote></blockquote>

http://research.stlouisfed.org is an interesting web site. I spent a couple hours just wandering around the vast amounts of economic data here.

[Jester]

I know where I've seen that graph before. It's from Krugman's argument about why a fiscal stimulus is necessary, because monetary expansion no longer has traction. Banks are being given reserves, and they're just sitting on them, rather than using them to increase the amount of circulating currency.

-Jester

[kandrathe]

I know where I've seen that graph before. It's from Krugman's argument about why a fiscal stimulus is necessary, because monetary expansion no longer has traction. Banks are being given reserves, and they're just sitting on them, rather than using them to increase the amount of circulating currency.

The Reserve banks have been given unprecedentedly huge reserves, to cover the unprecedentedly huge amount of risk (of insolvency). Don't blame the banks. The people, the businesses, and the government are bad credit risks.



Some other peoples opinions (besides the die hard Progressive Socialist Keynesian, Krugman :D). This article of his, from Sept 2008, mentions Fischer, and comes his usual conclusion (it's Bush's fault) about the coming crisis. The solution he invariably calls upon is *massive* government spending to act as an economic stimulus. But, what he fails to acknowledge, or maybe understand is that the market first needs to correct itself and become a viable platform upon which to rebuild.

Also, if it were to work at all, the projects the government invests in need to be those infrastructure projects that result in economic vitality. In other words, not socialist spending projects that result in no foreseeable return on investment. The Obama $787 Billion Dollar "stimulus bill" had very little stimulus spending, and very very little 2009 spending at all. The epitome of zero GDP return on Debt driven spending. Where is Krugman's criticism and contempt when you need it?

<blockquote>"The Federal Reserve stopped paying much attention to the data a long time ago. It has abolished M3 altogether. The US economic consensus is New-Keynesian (dynamic stochastic general equilibrium model). Delving into the money entrails is derided as little better than soothsaying."</blockquote>
[url=http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf]The Debt-Deflation Theory of Great Depressions by Irving Fischer (who was no friend of Libertarians :))

According to the debt deflation theory, a sequence of effects of the debt bubble bursting occurs:

<blockquote> 1. Debt liquidation and distress selling.
2. Contraction of the money supply as bank loans are paid off.
3. A fall in the level of asset prices.
4. A still greater fall in the net worth of businesses, precipitating bankruptcies.
5. A fall in profits.
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence.
8. Hoarding of money.
9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.</blockquote><blockquote>"32. And, vice versa, deflation caused by the debt reacts on the debt. Each dollar of debt still unpaid becomes a bigger dollar, and if the over-indebtedness with which we started is great enough, the liquidation of debts cannot keep up with the fall of prices which it causes. In that case, the liquidation defeats itself. While it diminishes the number of dollars owed, in may not do so as fast as it increases the value of of each dollars owed. Then, the very effort of individuals to lessen their burden of debts increases it, because of the mass effect of the stampede to liquidate in swelling each dollar owed. Then, we have the great paradox which, I submit, is the chief secret of most, if not all, great depressions: The more the debtors pay, the more they owe. The more the economic boat tips, the more it tends to tip. It is not tending to right itself, but it is capsizing."</blockquote>London Banker <blockquote>"Had Fisher observed the Greenspan/Bernanke Fed in action, he might have updated his theory with a revision. At some point, capital betrayed into unproductive works has to either be repaid or written off. If either is inhibited by reflation or regulatory forbearance, then a cost is imposed on productive works, whether through inflation, higher interest, diversion of consumption, or taxation to socialize losses. Over time that cost ultimately hollows out the real productive economy leaving only bubble assets standing. Without a productive foundation, as reflation and forbearance reach their limits, those bubble assets must deflate."</blockquote>I think the most sensible thing I read in all of this was that ultimately, the US and UK economies need to transform their basis from consumption to production. Do we have the guts to do it? This transformation would result in a 2nd great depression, where assets and valuations are freely allowed to find their true levels without government interference. The alternative would be to try to re-establish the consumer debt driven economy, where no one has the assets to secure their ballooning debt.

At least a decade ago, I suggested that one option the US government might use to reduce the impact of down turns in business cycles (as well as petty dictators holding our economy hostage) would be to buy oil when it is "cheap", and store it in expanded strategic reserves. When the prices rise beyond the economically viable level, the US government would begin selling their reserves. In the end, however, this can only moderate the problem, and not resolve it. We won't escape the frequency and intensity of these bust cycles until we get off the oil standard (and eliminate its crucial nature for our well being).

[Jester]

This isn't about oil. Oil is as cheap as it's been in quite some time. Things are not yet recovering. (Actually, if we take your idea about an "oil standard" seriously, the US debt (denominated in oil) just about halved during this crisis. Cause for celebration, no?)

This is about what is better in the short run, what is better in the long run, and whether those things are the same. The updated, monetarily-aware pseudo-Keynes (Krugman, really) would argue that, given the maxing out of monetary policy to comparatively little effect, the correct answer is fiscal stimulus. Arguing about malinvestment and inflation and the whole lot is missing the point: people are scared, and until they see a reason to have courage and invest rather than withdraw, banks as much as individuals, the economy is going to stay depressed. An exclusively market-driven solution could be years or decades away. Yes, if spending today is misplaced, that will be inefficient for tomorrow. Yes, debts ran up today will have to be paid off tomorrow. But inaction today results in inefficiencies as well: labour and capital that could be profitably employed is sitting idle for want of investment funds that are not available, since banks and savers alike are fearful.

Government is the only entity with the credit and the power to break the fear, and help things gear up again. This will cause problems for the future. There is no free lunch. But those problems, at least in the Krugman analysis, are dwarfed by the immediate problems of how to get the economy out of the deflationary trap. Fix the immediate problems. Then when things are no longer spiralling out of control, regulate monetary policy and the financial sector so that they cannot fail in the same way again. Then start paying down the debt. Trying to do any of this in reverse order will inhibit recovery and cost the economy in the long term.

-Jester

[kandrathe]

This isn't about oil. Oil is as cheap as it's been in quite some time. Things are not yet recovering. (Actually, if we take your idea about an "oil standard" seriously, the US debt (denominated in oil) just about halved during this crisis. Cause for celebration, no?)

Look up the Bretton-woods gold-dollar exchange, and what happened when Nixon shut down the gold window refusing to pay $300 million as ounces of gold. The world moved to use "petrodollars" as a medium of exchange. Every recession since the 1970's was preceded by a severe spike in oil prices.

Also, check out the price graphs for *all* commodities. This is what I would call an economic crash, not just a normal correction on wild speculation of the crude oil market.

This is about what is better in the short run, what is better in the long run, and whether those things are the same. The updated, monetarily-aware pseudo-Keynes (Krugman, really) would argue that, given the maxing out of monetary policy to comparatively little effect, the correct answer is fiscal stimulus.

Ok, here is what I would do if I were king of America. Help the people. Forget about the failing companies, and let markets, analysts, bankers, and businesses recalculate, go bankrupt, and figure out how to recover whatever *real* capital they have left. Ok, so how do we help the people? First, let's go to the lowest level of "Maslow's pyramid of need", where unemployed people are concerned about losing their homes, feeding/clothing their families, and having access to important services like health and dental care. Here is where you focus your *damn* stimulus. Then, if you haven't entirely bankrupted the nation, work with the SBA to provide venture capital and low interest loans to small businesses to help encourage new business growth. Left the dinosaurs go extinct, and let a new wave of innovation take over the capital, and labor that they shed in their death throes.

Arguing about malinvestment and inflation and the whole lot is missing the point: people are scared, and until they see a reason to have courage and invest rather than withdraw, banks as much as individuals, the economy is going to stay depressed. An exclusively market-driven solution could be years or decades away. Yes, if spending today is misplaced, that will be inefficient for tomorrow. Yes, debts ran up today will have to be paid off tomorrow. But inaction today results in inefficiencies as well: labour and capital that could be profitably employed is sitting idle for want of investment funds that are not available, since banks and savers alike are fearful.

I agree with this whole-heartedly, but I don't see any leadership in this direction from the POTUS or US Congress.

Government is the only entity with the credit and the power to break the fear, and help things gear up again. This will cause problems for the future. There is no free lunch. But those problems, at least in the Krugman analysis, are dwarfed by the immediate problems of how to get the economy out of the deflationary trap. Fix the immediate problems. Then when things are no longer spiraling out of control, regulate monetary policy and the financial sector so that they cannot fail in the same way again. Then start paying down the debt. Trying to do any of this in reverse order will inhibit recovery and cost the economy in the long term.

You (or Krugman) is right in that we cannot do anything to the debt until we do something about failing revenues, and we cannot use taxation to shore up revenues when staring at a crisis of credit (debt), and business losses and bankruptcies. I don't have faith in the government to make good decisions on spending more borrowed money.

To me, its like a gambling addict who has run up a $100 grand tab, which is too big for him to pay for, asking to borrow another $10 grand to pull himself out of the hole. If it was the government (partly at least) that got us into this mess, why do we think it will be government who gets us out of it? I don't advocate letting Vito break our knee caps, but perhaps we need at least a round table of the worlds best and brightest economists (which would not include Nancy Pelosi, or Harry Reid, the authors of the last stimulus bill) to come together and form a rough consensus on the best course of action. Keep the conservative/progressive politics at home on this one. Let's go save some lives.

[kandrathe]

I found this article today, where Paul Krugman basically claims that macroeconomics is useless.<blockquote>If zero interest rates cannot get consumers to spend, then governments must spend instead. That remedy comes from economics so the discipline is not without merit. The trouble is, “the analysis we’re using is decades old”. It dates back to Keynes, one of the few economists whose reputation has been burnished by the crisis. (Another is Hyman Minsky, whose main insight was that stability leads to too much debt, and then to collapse.) Most work in macroeconomics in the past 30 years has been useless at best and harmful at worst, said Mr Krugman.</blockquote>I suspect by "we", Krugman means his cronies at the NYT or his neo-Keynesian friends, rather than those radical economists who predicted the crisis. Here is a Dutch economist who predicted this mess back in 2006.<blockquote>The most important lesson is that policy changes now could stop the mania and herding behaviour before the problem gets even bigger. Stopping the housing market from continuing its reinforcing process until an even bigger and less controllable bust would occur would therefore be advisable, whereas a gentle policy response should be incorporated.</blockquote>In fact, even "I" (who am merely a business savvy executive) counseled my clients in January of 2008 to prepare for a crisis by cutting their FY 2008/2009 plans because the economy was being squirrelly just as it was before the recession of 2001. The storm is here, but only a few ignored economists knew it would be a hurricane.

[Jester]

What are you arguing for or against here? Krugman wasn't exactly optimistic by the end of 2006. He was pretty much in full panic by 2007. What are you trying to demonstrate, other than that you don't like Paul Krugman?

Krugman is saying that most of the macroeconomic work in the last 30 years failed to produce models that predicted this crisis, or offer much help in getting out of it. You apparently agree.

Some economists predicted the coming crash. The vast majority did not. Krugman agrees.

Stopping this kind of thing from happening again would be a fantastic idea. Krugman says the same, that finance needs to be a boring profession again.

So, in short, what's your point?

-Jester