James Hamilton has somehow worked out how much the higher oil prices of recent months might affect the US economy.  You can’t be purely mechanistic about it – the hit to disposable incomes caused by having to send $$$s abroad – but also look at consumer shifts, caused by asymetric reactions to oil price changes.  His conclusions?

we wouldn’t have to worry about another oil shock until the oil price series in the top figure gets back above the values of 2008:M6 or until the 2008 highs recede farther into memory … I do have doubts that the mechanisms that were a factor in the first half of 2008 could operate with the same force in the current environment. I’m doubtful of a renewed plunge in light vehicle sales, in part because the levels are still so low and so many purchases are still being postponed …And with retail gasoline prices still a dollar a gallon below what consumers have recently seen, I’m doubtful that gasoline prices have the ability to induce as much consumer anxiety as we observed two years ago.

Paul C’s selective reading of Conservative policies is nevertheless an interestingway of organising the question: do a party’s policies restrict freedom for individuals or corporations?  I can’t say I like most of the policies he lists – not unambiguously.  But I don’t get the idea of treating corporations like they are people themselves – or somehow opposed to real people.  In terms of money, as Dillow points out, taxes on corporates often end up on employees*.  In terms of activities, when you restrict what a company could do – where and what and how it could sell, say – you are ultimately restricting the freedom of individuals at the company too – and the customers, and shareholders.  Companies are conduits between individuals.  Yes, they can agglomerate power.  But this ‘them ‘n us’ is not as clean as Marxists need it to be for their clockwork theories.

I can’t even remember what got me linked to Macroeconomic Resilience, but this post on the micro-economic foundations of the claim that a macro-economy can exhibit sudden fragility is, well, awesome.  The last few lines summarise the case:

If behaviour is a selected adaptation and not a specific application of a general logic of choice, then the introduction of substantial novelty – a change not of weather but of climate – is liable to be severely disruptive, as Schumpeter also insisted. In biological systems it can lead to the extinction of species, sometimes on a very large scale.” Extended periods of stability narrow the scope of events that fit the script and correspondingly broaden the scope of events that appear to be anomalous and novel. When the inevitable anomalous event comes along, we either adapt too slowly or in extreme cases, not at all.

Am I the only person to find this map rather pointless?  What is the point of a Global Debt Map without a Global Asset map as well?

*But (2nd Dillow post), the powerful workers get an increasing chunk.


8 thoughts on “If I were much, much brighter I would write posts like these …

    1. Don’t think so. Think Great Britain, 1913. Loads of claims on other countries. And think Iceland, nowish. But I see your general point.

      “The western world is over-assetted, help help” doesn’t have the same ring as “we’re all in too much debt”. What, all?

  1. That Cartogram is disastrous. You can’t use them for ratios, obviously. I’m a big fan of those, and use them quite a bit for things like oil consumption. Which make more sense, but even then worth always remembering that their entertainment/informative values comes from resizing the countries, and so assumes that the area size of countries is interesting to begin with.

  2. I don’t think sending $$$ abroad is the right way of thinking about the rising oil price ( a bit mercantilist ). They send them right back purchasing goods, services, assets and holding interest rates down. What is interesting is the inverse relationship to the dollar seems to have somewhat broken down with both moving higher. OPEC apparently have 6m bpd spare capacity so unless they make a move their members will start cheating. Previous OPEC statements seemed to indicate that they were happy with the mid $70 price range. Moreover, drastically lower interest rates must surely change the tipping point when petrol prices change consumer sentiment.

    1. OK, it is a bit simplistic. But when you have to pay someone for something and then rely on them to lend it back, you produce very different effects from keeping the money in the first place. Spain may send it to Saudi, who deposit it in London, who does not want to lend to Spain – is this not one of the factors at the heart of the crisis? And London may want assets not consumption, so the effect on AD may not be as clear.

  3. Surely if we had adequate wealth taxes, then we wouldn’t need corporation taxes?

    Also, doesn’t this back up the Lib Dem version of the banking tax (on profits), since if it will end up on employees, better known as “pinstripe Scargills”.

  4. On the cartogram I’ve just realised the colours refer to the debt as a % of gdp, not the size of the countries, which is net external debt. But yes you’re right about needing to take assets into consideration – Luxembourg is the 6th largest country in the world on that measure.

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