You might (not) be surprised to find out I think it's just a place with a lot of money.
But, living in Moscow really prepares you for it! I'm here as a visiting researcher with the Bank of Finland's Institute for Economies in Transition (BOFIT) through December, and settling in nicely today. I haven't been to Helsinki since 1996, and so was pretty surprised at how small the city seemed. Once again, living in Moscow appears to have warped my view of the world.
The US newspaper the Washington Post has the text of the bill passed by Congress in the wee hours (Eastern Standard Time) last night ending the government "shutdown" and increasing the debt limit. As with all legislation, it is NOT riveting reading. As they say, two things you never want to see being made are laws and sausages. At least sausages give some pleasure, though!
Here at IEMS, it's been a hectic day. Apparently all of Russia wants to know about the coming collapse of America and the whole debt battle/government shutdown/dogs and cats living together malarkey that's still ongoing in the US. I gave a short talk to slon.ru (link up when available), my colleague Bill Wilson gave a talk on RT, and both of us have contributed to another online Russian publication. Perhaps not surprisingly, the Russians are eating this up, mainly because the US looks like a big dysfunctional Taiwan (you know, without the stellar growth rates). Of course, as noted on these pages and elsewhere, Russia has nothing to be proud of: onerous bureaucracy, resource dependency, an aging population, and a political culture just above "caveman" leap immediately to mind. But Schadenfreude is powerful in this one.
Oh, and to not give too much away, my own predictions for the rest of the "political crisis" in the US:
1. The Republicans will cave (as usual)
2. Any short-term turmoil will be swamped by the reality of perpetual deficits and an ever-more intrusive state in the long-run
3. Any problems that come from this ever-intrusive state will be blamed on the market. And Republicans. But not for caving.
4. Actually, it's all the fault of the Republicans. Thank you, media!
I guess the key takeaway is EVERYBODY PANIC! (just kidding. For the short-term, anyway).
I think they got me and my colleague's pessimism about the BRICs exactly wrong. I think our point was that the potential of the BRICs was pretty exhausted, the BRIC label is fairly meaningless, Brazil, India, Russia, and China have some pretty big problems in the years ahead, and just being large won't save an economy if it doesn't reform. Other than that, spot on!
Thanks to my lovely wife, who found this written article on an interview I gave to RT over the summer regarding bitcoin and how governments hate alternative currencies. Long and short of it, bitcoin probably won't survive, but so long as the statists debauch the currency, the market will be shopping for other stores of value.
I enjoy Niall Ferguson's books and think he has a real story to tell; in fact, his "the Pity of War" was one of my first forays into publishing on the web, as I reviewed it for the now-defunct intellectualcapital.com way back in 1999. And while I don't always agree with Ferguson's views on economics (he comes at it from the point of view of a historian, rather than an economist, which makes sense, because that's what he is), he always writes in an interesting manner with quite novel insights.
But now, Ferguson has gone up a notch in my estimation, penning a lengthy tirade against Paul Krugman for, well, basically being a know-it-all jerk. And he's 100% right on Krugman, a man who was respectable in the 1990s and did some excellent work on trade and economic geography and development (who can forget his work bringing Alwyn Young to the masses in Foreign Policy, where they challenged the myth of East Asia's rise?). Once George W. Bush won the White House, though, and Krugman was accepted into the liberal glitterati with a recurring column in the New York Times, he went off the deep end. Indeed, he was no longer an economist (or even someone with a passing knowledge of economics), but a full on ranter with a serious case of Bush Derangement Syndrome. And, while I have no knowledge of if he was a jerk before this (based on my own experience with both high-powered academics and people from Princeton, it could go either way but wouldn't surprise me if he were a jerk), he certainly was afterwards.
Now, of course, that's not the point of Ferguson's article - the point is that Krugman was a jerk even when he himself was wrong, that he was accusing people of doing what he actually was doing all along, and that his jerkiness covers the fact that he doesn't do analysis any more, that he just rants and screams from his elfin, spittle-flecked mouth (much like in this clip from Scrubs). Ferguson goes into pretty good detail on where Krugrman's analysis has gone off the rails (and, to be fair, I agree with Krugman on the prospect for the euro and myself thought it couldn't survive in present form), but it's a better analysis of what drives someone to be, you know, a jerk.
Now we just need a similar article on Joe Stiglitz, and all gloves are off!
That the next chairman of the Fed will be a woman, the orthodox Keynesian Janet Yellen. Nothing really says more about the catastrophe that is Obamanomics than this choice, either from the fact that so much of this pick was driven by gender (see Democrat Sherrod Brown's quote that “Today is a historic moment for the Federal Reserve, for women everywhere, and for all of us who care about job creation") to the reality that Yellen thinks the printing presses haven't been run enough to "create jobs."
As I've argued before, if the Obama administration was motivated by gender considerations alone, they should have chosen Esther George of the Kansas City Fed; as this article notes, she's an inflation hawk and critical of the zero-interest-rate policy. But her beliefs don't fit in with the Keynesian orthodoxy that grips the ruling caste - those of the "things are bad now but they could have been much worse if we hadn't dug a bigger hole." And besides, why should gender considerations factor into who runs the printing press?
Instead of a new direction and a Volcker-like leader, we're going to get more of the same, much much more. A new Fed chair who believes that the Fed should tinker with the money supply as a means to a whole slew of policy objectives, including growth, employment, inflation, hell probably even the exchange rate (this must be what's meant by the fungibility of money - if you print more of it, it can take care of everything!!). Central bank independence, as I've argued elsewhere, really doesn't matter if the policies are going to be horrific no matter who carries them out (man or woman, Republican or Democrat). And that's what we're looking at right now - a Central Bank that's actually taking its "independence" to agitate for even worse policies.
To paraphrase Ben Franklin, those who sacrifice price stability for higher employment get neither.
My latest article is up at 4liberty.eu on the middle income trap and how crucial it is how we measure growth; basically, if you don't know what you're looking for, how will you know that you've found it?
Quite an interesting "human interest" piece today that the AP has put out, looking at what sounds like a "paradox of thrift" moment, but from the point of view of individuals. Basically, the article, entitled "Families Hoard Cash 5 yrs After Crisis," shows how specific individuals across the world are holding onto their money and avoiding debt and consumption. It does indeed take a quasi-Keynesian look at the problems that come about when all these thrifty people start not spending their money:
The implications are huge: Shunning debt and spending less can be good for one family's finances. When hundreds of millions do it together, it can starve the global economy.
The whole article may have misguided analysis, but it's a good read. Indeed, it's a fascinating look at the effects of policy uncertainty (an issue that I have written about before), but without ever calling it by its name. While the authors try to pin everything down to Lehman Brothers (hey, isn't there an anniversary of sorts about that coming up?) and the epoch-changing event it heralded, it would be better if they examined what has happened since then: gigantic fiscal stimulus plans, loose monetary policy, aggressive interventions by central banks, attempted increased taxation in all walks of life, and crackdowns on any sort of entrepreneurship. This policy uncertainty has made people less sanguine about any form of investment (because of increase volatility), it's reinflated the stock market bubble (which people are understandably wary of jumping back into), and it has kept unemployment at high levels.
This is less a misguided analysis of "damn those hoarders" than it is concrete evidence at the individual level of how policy uncertainty filters through the economy.
Dr. Christopher Hartwell is an institutional economist and President of CASE Warsaw. All commentary on this page is exclusively his own and in no way represents the views of CASE, his wife, his dog, or anyone else. Especially not his wife or his dog.