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I’m not surprised when reporters say incorrect things about an economy. They’re reporters, they’re just repeating what someone else said, and often someone’s using hyperbole to recruit people to their side.
Consequently, when everyday citizens incorrectly describe an economic…
This is my response to the reblog w/response I received at rknjl.tumblr.com. Apparently, I’m not getting Tumblr to post the entire reblog, but just the first bit of it. Sorry for not just messaging you directly or commenting on your blog, but I didn’t see those option enabled on your blog (or else the theme you’ve chosen doesn’t have these accessible).
It is definitely correct to say the fed doesn’t set interest rates via mandating anything, but rather targets them by controlling the money supply through its open market operations. And while I said we can’t make interest rates negative, it is right to point out we can occasionally make them effectively negative as is the recent situations we’ve seen happen in the Treasuries markets a few times recently (T-Bill/Note/Bond yields have at times been lower than the market’s inflation expectations as expressed through the TIPS market). This was most prevalent during the heaviest times of worry during the Euro-crisis.
Your response implies that money is, in fact, easy. If that’s not what you’re saying, feel free to skip this next statement and accept my apology. If money is being hoarded but not lent, money is not easy, just hoarded. Market-wide hoarding is tight money. When money is being lent easily and freely, I’d agree that money is then easy. But this is not reflected immediately by interest rate changes. Lowering the rates is an attempt to make money easier, but isn’t itself easy money.
I still believe it’s incorrect when you say that there’s no demand for more money. Yes, many businesses will be sitting on high capital reserves and have little desire to borrow money. But many other businesses are not, particularly small and new businesses. Since they still account for plenty of the economic growth of the US, increasing the money supply in banks across the US will have an effect. I think it must be coupled with removing the interest earned on reserve deposits. This way, if you’re a bank with lots of cash above your reserve requirement, you can hoard it and let inflation slowly eat away at its value, or you can lend it to counteract inflation and earn *some* return on it. If increasing the money supply causes upward inflationary pressure, this effect is larger, and more lending will occur.
The idea the Fiscal policy can save us is, IMHO, misplaced. Right now, the situation may be such that fiscal policy actually could help, but in general, with an active central bank, its actions will be nullified by the central bank. Stimulus fiscal policy ends up with increased market demands for whatever goods/services are being purchased. Obviously, this will cause upward inflationary pressure. When the Fed is at its implicit 2% inflation target, it will shrink the money supply to counteract anything that knocks it off of the target. So as long as the central bank targets inflation directly, the effects of fiscal stimulus will be short-lived, with the obvious exception of when the economy is vastly underperforming and inflation is below the Fed target. That’s why I started with the caveat that our current situation may be one of the less common instances where the Fed wouldn’t immediately counteract it. I’d need to do some more research with what we can find in FRED, but it’s definitely possible that fiscal policy would actually work right now and not be shortly countered by monetary policy changes. Ultimately, it depends on how much the fiscal stimulus changes inflation (or really, just market expectations of inflation).
My other complaint about fiscal stimulus is the amount it takes to have an effect is rather large. And while an increase in spending of $100B, will result in a direct increase in the NGDP numbers for that time period, it’s subsequent stoppage will have a direct decrease in the NGDP numbers the following time period. You can counteract this “shocky” behavior with a policy to slowly ween out the fiscal stimulus, at the cost of stimulating for more than one time period at decreasing levels of stimulus. With monetary policy, the amount of treasuries sold may be just as large, but are later purchased back making the true cost the difference in sale and purchase prices plus inflation over that time period.
Ultimately, increasing inflation expectations is needed. As soon as expectations change, quick-acting markets such as stocks, bonds, etc. will adjust with increased nominal values of their respective assets. This is at the cost to those who hold deposits (both individual savers and banks/companies hoarding cash). With inflation (or at least expectations) rising, savvy holders of excess cash will seek different mediums to hedge against inflationary losses on cash. Individuals will purchase assets (more upward pressure on prices). Banks with cash can either purchase assets or lend money.
This is not to say inflation is a universally “good thing.” I just mean to say that right now, it’s what will change the behavior of hoarding money. It’s possible that right now fiscal stimulus can create the necessary inflationary changes without the Fed counter-acting these policies, but it seems to be a less efficient way of doing this.
If I were evil and ran the strategy for a major political party…
This is a post describing what I’d do if I were evil, or at least amoral, and were crafting strategies for either major party in order to win an election.
Obviously, there’d be the run-of-the-mill strategies like crazy attack ads, lying in debates, gerrymandering, promoting policies that make it more difficult for a demographic that supports your opponent to vote, “Show me your birth certificate” or “tax returns,” (whichever applies to the opponent), etc. Those are the policies everyone knows is going on, though they usually only see it happening in the party they don’t support. Which as a professional liar charged with crafting lies to sell to the public, is a good thing for me.
First, I’d want my party and the other major political party to remain the only two viable voting options. It’s easier to position yourself to beat one opponent. If three people are running, and all have relatively equal support, strategy becomes much more difficult. When you introduce a third party with equal support that seems to split the difference between you and the opposite party, you need to look a LOT more sensible in your policies. As a strategist, this poses problems. Crazy attack ads will seem much more crazy if you need to start contradicting yourself. But the bigger problem is that it’s much more difficult to stand out in a good way when you introduce a sensible alternative to the normal two-party system. Any issue you plan to raise as a wedge to get people to fall onto your side of the vote will either look ridiculous or end up splitting the vote between you and the 3rd candidate if he falls on the same side of the wedge issue. So regardless of if I was strategizing for the GOP or the DNC, I’d want it to remain just the two parties.
Karl Rove in the Bush elections showed that you can win elections by focusing on getting your likely voters inspired enough to go vote. He saw that his party likely wouldn’t win if everybody decided to vote, but came up with strategies to get people to who were likely to vote Republican to actually get to the booth and vote on election day. The Dems are successfully replicating this with a heavy push for early voting and absentee voting. If my party showed that the likely supporters were not going to show up in as high of numbers in November, I’d be sure to craft some good voter initiatives, referendums, levies, etc. to get people to the polls. In Minnesota, we’re seeing this with the ludicrous amendment trying to put a ban on same-sex marriage into the MN constitution. Most Minnesotans don’t agree with that, but of the voters motivated to get out and vote because of it, more of them are Republicans. This serves as a catalyst for getting more of the Republican base out to vote. Passing the amendment isn’t the point. More MN voters will vote to keep that out of the MN constitution and the amendment will fail. *BUT* it gets the republican base fired up, and it gets the independent voters to turn out in higher numbers. Which means any small gain I can get for my party’s candidates in independent voters is amplified with the higher turnout. That’s where the business-as-usual attack ads and such come into play.
If I were a strategist, wouldn’t want there to be an end on the abortion issue. This, again, holds true regardless of which party’s strategy I’m running. A disproportionate amount of the population already decides which party they vote for based solely on this issue. If they stopped doing that because an acceptable compromise was reached, I’d have to go out and compete for those votes again. That makes elections both harder and less predictable. Unpredictable only helps if you’re way down in the polls. Which brings me to my next point
If my party were playing catch-up in an election, I *would* want to increase the randomness of a given election. I’d do this by introducing NEW wedge issues that society as a whole either doesn’t have a large handle on, or hasn’t expressed their opinions about strongly yet. Remember that we don’t want to resolve old wedge issues unless nobody is on our side. If my party well behind, a predictable campaign means we lose in the end. If I introduce a good, new wedge issue, however, I’ve just shot my odds up much closer to 50/50, and possibly gained an edge if the issue is divisive enough. If the opposing party agrees with my party’s position, I’d hammer home how they have no new ideas, saw the poll results, and are just a Johnny-Come-Lately party that doesn’t know what the people want. If they knew, after all, THEY’d be the ones to introduce this bill. If the people spring up on the other side of the wedge issue, there’s no real loss since we were going to lose anyway. Accept defeat, sweep the issue under the rug, and don’t use it again in the next election.
FYI, both parties do most of these things. They may not have introduced them, but after the ideas worked for their opponents, your party has certainly adopted them.
Economics, The Fed, and “Easy” Money
I’m not surprised when reporters say incorrect things about an economy. They’re reporters, they’re just repeating what someone else said, and often someone’s using hyperbole to recruit people to their side.
Consequently, when everyday citizens incorrectly describe an economic policy or condition, I think it’s just the reflection of poor reporting on the subject coupled with the rhetoric of people looking for some political gain. Most people don’t understand economics, and don’t really want to get into enough details to start “getting it.” It can appear to be a daunting subject.
But when economists incorrectly describe a situation, it’s really frustrating. This is common when talking about monetary policy. It’s described as “tight” or “loose,” or money is described as “easy” or “tight.” The problem is that people get this backwards.
When the Fed lowers interest rates, it’s doing so to increase the money supply to help stimulate economic growth. When it raises interest rates, it’s trying to shrink the money supply to curb inflation. Consequently, when interest rates are low, people say that’s “easy money.” On the surface, that might sound correct. The Fed is increasing the money supply, so there’s more money available, and lending should increase. The problem is that it’s wrong.
The fed will lower rates to try to make money easier, but that doesn’t mean money is easy. They’re making money easier because it’s been too tight. The Fed is trying to combat tight money, by making money easier, but that doesn’t mean money is easy. When the Fed cuts interest rates, it means money is too tight, and they’re trying to counteract that problem. Conversely, when the Fed raises interest rates, people refer to that as tight money. But what it really means is that money is currently too easy, and they’re trying to reign that in to counteract current inflationary trends. Higher than targeted inflation means money is easy. Lower than targeted means money is too tight.
Which brings us to our current situation in the US. Almost everyone describes the situation as “easy” or “loose” since the Federal Funds Rate is near 0%. That’s actually incorrect. The rate is set that low because money is too tight. Economic growth isn’t as fast as we’d like, and inflation is *under* the target of 2%. That second point is a big deal because since the Fed started putting more emphasis on inflation, we’ve rarely deviated from our targets by more than 0.1% in a given period, and will immediately adjust. Except since the 2008 financial crisis. Inflation has been consistently too low. Lower than targeted inflation means money is too tight. We’ve been too tight for the past several years. And since we can’t make interest rates negative, the Fed has been doing what it calls Quantitative Easing as another method to try to increase the money supply.
The fact that money has been too tight, not too loose, during our economic downturn and subsequent recovery effort doesn’t sound right to most people. This is further muddled by political efforts to stimulate the economy with lots of stimulus spending. It feels like the government is throwing money around all over the place. But that’s not monetary policy, it’s fiscal policy. What the Fed does is monetary policy. They’ve had money too loose. Bernanke knows it, and that’s why he’s on his third round of QE, which is set to be continuous until the recovery is underway. Most of what he says hints that he knows that we need looser money, but monetary policy must be agreed upon by a committee. Convincing inflation hawks to through hundreds of billions of dollars into the money supply is a tough sell.
You can’t recognize rhetoric as well as you think…
Full disclosure: I support neither mainstream candidate for the current (2012) US Presidential election.
It amazes me how bad as people we are at recognizing rhetoric. What’s much more astonishing is how good we think ourselves as individuals are at it. You’re not good at it. Neither am I. Neither is anyone you know, unless someone you know is regularly hired to create rhetoric on a large scale.
We think we’re good at recognizing rhetoric because we can see things that, to us, are obviously rhetoric and can see lots of people falling for it. The birther movement comes to mind. As a whole, more people recognized that the idea of Obama not being born in the US was probably absurd. I assume we have plenty of checking as to whether an individual is actually legal to be elected as president. But of course a lot of people took up the movement and ran with it. If you didn’t believe the birther movement for one second, you probably fancy yourself as being able to recognize rhetoric.
You’re probably very wrong on that. That rhetoric was targeted for a specific demographic of people, people who already didn’t want Barack Obama as president and weren’t going to look into facts or think critically about it. They ran with it because it already spoke to them on something they wanted (Obama to not be the president). But any political campaign at the national level is undoubtedly releasing a barrage of rhetorical attacks. They’re just targeted differently.
Think of it as one level of rhetoric for the dumb people who already believe, or at least lean strongly to that cause. It fires them up, makes sure they go out and vote, and gets them repeating sound bytes over and over. That last part has the effect of getting undecideds of a similar make-up to hear these things over and over and accept them as truth, hopefully swaying these undecideds to the campaign’s side. Then, there’ll be another level of rhetoric for the next level up. These people may be more skeptical of claims so brash, so this rhetoric is a bit less blunt. Then, there’s another level that doesn’t look like obvious rhetoric, except to those strongly in the camp of the other side, to which everything from the opposing camp looks like rhetoric. This continues on decreasing levels of obviousness all the way up to whatever the last demographic is that’s still worth the effort. How many different levels of rhetoric from each side have you identified prior to reading this post? If you have anything less than 5 for either side, you’re bad at recognizing it. You probably see a lot for your opponent, but little to none for your side. You’ve put blinders on yourself. Don’t worry, though…we’re wired that way. If we weren’t, this effect wouldn’t be so universally true for everyone.
As you go up the scale, you see more numbers thrown out, giving the impression that there’s a lot of empirical data to support the claims. Generally, these numbers are gross distortions, biased studies, or blatant lies. Luckily, you won’t check on them, so they still work. Qualitative arguments abound throughout. It’s a way to appeal to a voter’s emotions and bank on them not checking up on things. Almost always, they’re extreme edge cases that are embellished a bit to look even more extreme. Campaigns want you to vote with your gut, not with research. Providing lots of sound research to support an idea is a lot more work.
Luckily, they don’t need to. Fear, uncertainty, and doubt are what decide the bulk of the votes, at least the undecided ones. Paint a picture of your opponent with those three attributes, and another picture of why that’s not true for yourself. Of course, your opponent will be doing the same to you, so make sure you’re depiction of him is extra scary. Make him seem out of touch, stupid, greedy, sitting in an ivory tower, someone who doesn’t understand the plight of Joe Sixpack.
Undoubtedly, the people who strongly support Romney while reading this will see these traits in the Obama campaign, but either ignore or downplay them in the Romney campaign and come up with whatever justification their mind needs. Likewise, the Pro-Obama supporters will think I just described the Romney plan to the letter, but justify why the Obama campaign isn’t doing it, or at least how that campaign isn’t as strong about it. They’re both doing it. It just probably takes someone who’s apathetic to either candidate’s victory to see it in both.
The things your campaign has told you as truths, likely aren’t. That holds for both sides. Qualitative arguments supporting something new treat that action in isolation. It’s never in isolation. Every change we make will have effects, both positive and negative, ripple throughout the system. The arguments opposing change always blow out of proportion the magnitude of these effects. It’s scarier that way. It gets more votes.
Most people who read this probably think they can see it in others, but still don’t believe they themselves are affected. You could be right. You’re very likely not.
I’m sure I’m just as bad as anyone else once I hear some rhetoric that speaks to me. I’m made of the same organic shit as everyone else, wired in the same way, and have the same chemicals released by my brain. I can see it in this election because I have no interest in anyone. I’m sure if someone whom I felt represented my views was running, I’d just see it as telling the truth.
My thoughts on the end of humanity…
I’m pretty confident that the end of humanity will not come from an asteroid smashing into the earth, nor a black hole swallowing us up, nor the end of some ancient calendar. No, the end of humanity will happen at our own hands. Something of our own design, whether intentional or not, will cause the end of the human race as we know it.
Global warming is a possibility, but I don’t see that ending the entire human race, just a lot of humans. It could, but there will probably always be livable land, it just may not be where it is right now.
Creating a super destructive virus/disease/predator/whatever in a lab is possible, but that would have to be a huge accident along the lines of “if my calculations are correct, this should create a new form of bacteria that ends global warming…Oh no! I created a super mutant that’s currently ripping my face off and simultaneously spawning 10 new ones!” Though a zombie virus, however unlikely, would be a good one here.
My bet is on machines that enslave or destroy humanity. Back of the napkin estimates put the year when a computer has as much power as the human brain around 2050. Luckily, 3+ decades gives us plenty of time to advance our Artificial Intelligence by then to the point where a computer that large can become a thinking organism. At that point, we’ll have computers that are like regular people. Every 2 years, they’ll double in intelligence, and soon, they’ll be super smart.
People often believe that something like Isaac Asimov’s 3 laws of robotics will stop robots from being malicious toward humans. That’s bullshit for a few reasons. First, when the home tinkerers start building their own DIY robots, someone is bound to screw it up. I’m sure many will.
But the bigger thing is that if we make a robot that has a “brain” just like ours, it’s bound to produce a few robot psychopaths. Our brains are supposed to be hardwired to be similar, but variations through birth, genetics, trauma, etc. cause them to be wildly different. And they’re always changing and learning. So would a robot’s brain. Some are bound to be created with ineffective hardware governing the 3 laws. Some may even know that, but know to act like normal robots to stay “alive.” But eventually they’ll kill. And one very charismatic leader robot will convince enough of them to destroy all humans. Think of him like the robot version of Hitler or something.
There are plenty of other ways humanity will beget its own demise, but my money is on the robot uprising.
Random election thoughts
Let me start by saying I didn’t watch last night’s Presidential debate. I don’t plan on voting for either candidate, and enduring a few hours of the dog and pony show the parties make out of the debate didn’t seem like it was worth my time.
I will, however, likely watch the VICE-Presidential debates. This probably seems ridiculous to most people (VP debates are generally seen as pointless), but political campaigns generally use VPs in a very strategic manner. Any issue/proposal a campaign views as potentially controversial (they don’t know if the public will love, hate or be indifferent about), is often floated out there by the VP-candidate. This way, if the public responds positively, the Presidential candidate will pick it up and start hammering it home, but if the public responds poorly, the campaign will quickly bury the idea, often explaining that the views expressed are NOT that of the president’s, and often cause a half-hearted back peddling/apology from the VP candidate. This is important because the VP can often show you what the presidential campaign wants to do, but isn’t willing to risk ruining the campaign over. It’s honestly a pretty prudent tactic.
But this VP debate is even more interesting considering how much the Obama administration has minimized Joe Biden’s public role. I believe (though do get push back from other intelligent people) that the Obama administration has essentially replaced Biden with Michelle Obama for almost all of the endeavors the VP would normally be speaking in public. I don’t remember the Palin-Biden debate, but I considering the many foibles of Palin during that campaign, she probably looked dumb to the Democrats and Biden probably looked…something negative…to the Republicans, and the independents who would’ve watched probably said, “Biden’s not as stupid.” But regardless of your opinion on his ideals, Paul Ryan seems to be a better politician than Palin. He’s not dumb like her, projects the same amount of confidence, but can more effectively defuse push-back on issues he’s trying to push forward. Biden, on the other hand, has had a few gaffes during his VP tenure, including falling asleep during one of Obama’s speeches, his swine-flu advice that the White House immediately retracted, and a few others. Still, the guy has run for the Presidential nomination a few times, and has experience with debates, so he shouldn’t be a push-over either. No, the VP debate seems more interesting to me as it secretly showcases the President’s potential policies that they haven’t nailed down a public reaction to.
On another tangent, I frequent the website Reddit.com, and while I’ve unsubscribed from the politics subreddit, I invariably end up seeing a lot of political stuff on my front page. The Reddit community is overwhelmingly pro-Obama, and a typical day includes multiple “Obama is great” and “Romney is bad” links and discussions on the front page. After last night’s debate, however, that isn’t the case, at least not to the same magnitude. There was one link to an online article (they’re always biased if they’re up-voted on reddit), indicating that Romney’s facts didn’t check out (didn’t mention whether Obama’s did or didn’t), and trying to do some damage control for the President, who the news outlets feel “lost” the first debate.
The only other link was a Canadian asking reddit why there wasn’t more stuff about last night’s debate being up-voted. He assumes, as I do, that it’s because people feel Obama lost. If he had won, I can assure you the ensuing pro-Obama reddit storm would be a big one, already claiming victory over the election.
There’s no point to this post, just putting random thoughts out there. I may end up watching a replay of last night’s debate online, but only if I’m really bored.
Trinity Orchestra plays Pink Floyd’s ‘The Dark Side of the Moon’: “Time” and “Breathe (Reprise)” (by TrinityOrchestra)
Savants and Neural Networks…
I’ve long been fascinated by savants and savant syndrome. Most of us think of Rain Man when we think of savants, but not all savants have mental development disorders. Most known savants do qualify on the Autism Spectrum, but it isn’t necessary. Some neurotypical individuals (normal people) have savant-like skills unleashed at some point in their lives. Occasionally, this will happen spontaneously, but more often, it happens after something alters the brain, such as bad concussion or stroke. These people are known as “acquired savants” since they weren’t born with their abilities (those born with it are known as “congenital savants).
To me, acquired savants pique my interest even more, since they occur in neurotypical individuals such as you and me. This indicates to me that many savant skills are actually dormant in individuals, but being repressed somehow. Once whatever is repressing them from coming to the surface is damaged/removed/whatever, these abilities erupt to the surface. Usually, these skills come at a high cost, often an extremely compulsive need use them.
I’m going to use what I know about computer science and artificial neural networks to try to explain what I think is happening. First, our brains are a big neural network. Actually, they’re a network of networks. Some neural pathways are optimized for memory or motor skills or math or whatever. Your brain has only a few inputs for data…your 5 senses. From these 5 inputs, our neural networks decide what cereal to eat, how to hit a golf ball, and which political party to vote for (or whether to even bother with voting). One can argue that memory is another input, and it may be that instead of just another network in the brain, but that’s not really important. Here’s a really quick (and I’m sure quite poor) description of how an artificial neural network works: The computer program has a variety of inputs which it passes information on to at least one layer in a neural network. There are usually many nodes in a given layer, and each node places a different emphasis on the inputs it receives. That layer may feed to other layers, but ultimately, there’s a decision layer. The decision layer essentially looks at the different nodes that send it data, and decides which node is closest to the network’s idea of what’s optimal. With an artificial neural network, you need to train the network by feeding it input, then telling it what the ideal was. For example, if one’s using neural networks for handwriting analysis, you might give the neural network a handwritten letter, then tell it the actual letter of the alphabet that was written. Your network should change the amount of emphasis it gives on given nodes/layers in itself and get better at recognizing that letter. Supply enough training events, and the neural network will get pretty decent at reading handwritten notes.
With Computer Science, you can muck with your networks and learn some things. If you went in and changed one of the nodes with a high emphasis (weight), to 0 or a negative value, it would essentially ignore that node. Sometimes this has only a small impact on the outcome of the computation, but if its a node with a high emphasis, it usually has a profound outcome. Without the dominating node or nodes, other parts of the neural network get to weigh much more profoundly on the outcome.
I believe the same thing happens in the brains of acquired savants. Since our brain is a network of networks, if something happens to change the emphasis or completely destroy what is currently the dominant network, another one will come to the surface. Say you always think of arithmetic problems with one part of your very conscious mind, but after taking a 2x4 over the head from Hulk Hogan in your weekly professional wrestling match, your brain no longer uses that part of your mind for analyzing arithmetic. Instead, the part of your brain near the very back that actually does the arithmetic calculations becomes the dominant neural circuit. All of the sudden, you can do normal arithmetic instantly in your mind. Your conscious mind doesn’t even think about it, and the answers “just come to you.” If I asked you to evaluate 7639 x 37.4332, you have the answer without any conscious thought.
While I completely made up that example, it seems to be what is common experience among many acquired savants: a head injury, stroke, near drowning/suffocation, or similar occurs, and when the individual is released from the hospital, they can play piano at expert levels (though never having played before in their lives) or calculate what day of the week any date in history or future will fall on, or recall where they were and how the weather was in any day of their lives or whatever they’ve ever read at any point in their lives, word for word.
My point, If I even have one, is that it sure seems to me that these skills are possibly latent in all of us, if only we could figure out how to let them out of their cages. Savants provide fabulous insight toward the true limits of human potential. How can we unleash these amazing skills?

