[OPE] Punk economics - there's something to it, even Paul Krugman has a go in his blog

From: Jurriaan Bendien <adsl675281@telfort.nl>
Date: Tue Jan 06 2009 - 18:35:17 EST
In his blog, Paul Krugman wagers a few off-the-cuff calculations, to cut down the signal-to-noise ratio about "stimulus":


His numbers look somewhat different from my previous guesstimates, e.g. on OPE-L I previously projected ( http://archives.econ.utah.edu/archives/ope-l/2008m11/msg00249.htm ) a possible US unemployment peak of about 10% as against his 9%, but on the whole I think his assessment is fairly much in tune with how it is in reality. He ends his piece saying sincerely, "I hope I am wrong" (because, who wants a lot of unemployment) but most likely I think he is right in his appraisal, or fairly close to it.

What is specific to the current world recession, so far, is among others things:

- you cannot blame it on the workers asking for too much pay, because average real wages and the majority of real disposable incomes are stagnant or declining, except at the top end.
- economists cannot agree anymore on "what causes what" in the economy or who exactly they should blame.
- free market theories of finance were clearly proved wrong.
- there is a lot of more mystique about "risk-taking" although the wealthy over-insure themselves against every possible risk and massively divert capital to ultra-safe placements.
- there is no strong mass protest against rising unemployment or wage moderation.
- just about all countries are hit by recession at the same time, due to the global integration of financial markets and other trading relations.
- there is less and less attempt at any honest discussion about what is really happening in the economic system.

Labour unrest in Greece and Italy does not reflect a more general increase in militancy across Europe as workers are more concerned about keeping their jobs in the economic downturn, according to John Monks, general secretary of the European Trade Union Confederation (ETUC). “For the moment, the mood is worry and how can we work things out together rather than ‘these bastards have let us down’,” Mr Monks said in an interview with the FT. However, Mr Monks warned that mood could change if governments failed to sustain demand and Europe’s economy fell into deep recession. http://www.ft.com/cms/s/0/ac2db56a-c6ec-11dd-97a5-000077b07658.html

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks. “Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security,” said the War College report. The study says economic collapse, terrorism and loss of legal order are among possible domestic shocks that might require military action within the U.S.

International Monetary Fund Managing Director Dominique Strauss-Kahn warned Wednesday of economy-related riots and unrest in various global markets if the financial crisis is not addressed and lower-income households are hurt by credit constraints and rising unemployment. U.S. Sen. James Inhofe, R-Okla., and U.S. Rep. Brad Sherman, D-Calif., both said U.S. Treasury Secretary Henry Paulson brought up a worst-case scenario as he pushed for the Wall Street bailout in September. Paulson, former Goldman Sachs CEO, said that might even require a declaration of martial law, the two noted. http://phoenix.bizjournals.com/phoenix/stories/2008/12/15/daily34.html  

"In too many areas of the world, countries have not undergone the processes fundamental to the creation of a modern nation-state. Many of these states are comprised of diverse ethnic, religious, and cultural
communities. In the absence of functioning institutions that reflect a working consensus within these societies, state coercion is relied upon to maintain the grip on power by the group in control. Even when there is
voluntary cooperation among and between diverse elements within a state, this cooperation is vulnerable to stress, no matter what the source (such as competition for limited resources, environmental degradation,
corruption, and impunity), and can be the spark that sets off violent conflict. In both instances, coercive state institutions or voluntary cooperation, the status quo is vulnerable to complete breakdown."

- Richard McCall, "Building Failed States", in Joseph R. Cerami, Robin Dorff, Lisa M. Moorman (eds), LEADERSHIP AND NATIONAL SECURITY REFORM: THE NEXT PRESIDENT’S AGENDA
Colloquium Report, US Army War College, October 2008.

"Following responses to ORB’s earlier work, which was based on survey work undertaken in primarily urban locations, we have conducted almost 600 additional interviews in rural communities [in Iraq]. By and large the results are in line with the 'urban results' and we now estimate that the death toll between March 2003 and August 2007 is likely to have been of the order of 1,033,000. If one takes into account the margin of error associated with survey data of this nature then the estimated range is between 946,000 and 1,120,000." http://www.opinion.co.uk/Newsroom_details.aspx?NewsId=88


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Received on Tue Jan 6 18:43:37 2009

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