Comments on: Economic and political disconnects (and the sociology of knowledge) http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/ Life, Culture and Politics from BrisVegas Tue, 14 Feb 2012 10:11:31 +0000 hourly 1 http://wordpress.org/?v=3.3 By: Katz http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184377 Katz Thu, 04 Dec 2008 21:55:38 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184377 <blockquote>Current events are underlining the fact that economies rely on the creation of shared realities and that the “laws” of economic behaviour are shaped and varied through perception and sentiment.</blockquote> This is the Wile E. Coyote hypothesis of economics. You'll recall that for so long as that disaster-prone canine succeeded in his struggle not to look down after he ran off the cliff overlooking the canyon, he remained magically suspended in mid-air. Only an acknowledgement of the absense of terra firma precipitated his plunge into the abyss. Unfortunately for most of us who live in the world not dictated by cartoon physics. The important shared reality is the collapse of credit markets. That reality lives like a canker worm in the brains of bankers. There is no wishing and hoping that will prevent severe consequences of widespread insolvency, lack of liquidity, and deep suspicion that debtors will be capable of keeping up payments. Thus, banks have lowered nominal interest rates but are now <a href="http://www.smartcompany.com.au/Free-Articles/The-Briefing/20081120-Deflation-is-our-new-risk-Kohler.html" rel="nofollow">rationing credit</a>. The bank manager smiles upon only those deemed to be very good risks. Gone are the days when teenagers could get credit card access to thousands of dollars. This may be a good thing. But let's not forget that those gormless teenagers and their equally improvident elders drove much consumer demand during the good ol' days. Moreover, lower nominal rates don't mean much in a deflationary environment. Debtors will be compelled to pay off old debts with new, scarce money that has appreciated in value. Once deflation becomes part of the new shared reality, the wheels of the economy will lock up because deflationary expectations recommend deferral of discretionary purchases.

Current events are underlining the fact that economies rely on the creation of shared realities and that the “laws” of economic behaviour are shaped and varied through perception and sentiment.

This is the Wile E. Coyote hypothesis of economics.

You’ll recall that for so long as that disaster-prone canine succeeded in his struggle not to look down after he ran off the cliff overlooking the canyon, he remained magically suspended in mid-air. Only an acknowledgement of the absense of terra firma precipitated his plunge into the abyss.

Unfortunately for most of us who live in the world not dictated by cartoon physics. The important shared reality is the collapse of credit markets. That reality lives like a canker worm in the brains of bankers. There is no wishing and hoping that will prevent severe consequences of widespread insolvency, lack of liquidity, and deep suspicion that debtors will be capable of keeping up payments.

Thus, banks have lowered nominal interest rates but are now rationing credit. The bank manager smiles upon only those deemed to be very good risks. Gone are the days when teenagers could get credit card access to thousands of dollars. This may be a good thing. But let’s not forget that those gormless teenagers and their equally improvident elders drove much consumer demand during the good ol’ days.

Moreover, lower nominal rates don’t mean much in a deflationary environment. Debtors will be compelled to pay off old debts with new, scarce money that has appreciated in value.

Once deflation becomes part of the new shared reality, the wheels of the economy will lock up because deflationary expectations recommend deferral of discretionary purchases.

]]> By: Adrien http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184376 Adrien Thu, 04 Dec 2008 07:30:47 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184376 Mark - <i>If employment holds up reasonably</i> . Don't you think that could be a big 'if'? . Apart from the fact that, despite our wonderfully functional financial system, we still have heaps of people in debt. There've been a significant number of foreclosures already and another reason we're small fish in the global economy is that a lot of the companies that we work for belong to America, (or Korea, or France, or China, or the UK, or Japan, or Botswana, or el Salvador). . Whatddyareckon? Mark – If employment holds up reasonably
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Don’t you think that could be a big ‘if’?
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Apart from the fact that, despite our wonderfully functional financial system, we still have heaps of people in debt. There’ve been a significant number of foreclosures already and another reason we’re small fish in the global economy is that a lot of the companies that we work for belong to America, (or Korea, or France, or China, or the UK, or Japan, or Botswana, or el Salvador).
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Whatddyareckon?

]]> By: j_p_z http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184375 j_p_z Thu, 04 Dec 2008 04:27:47 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184375 Interesting, thoughtful post, Mark. I don't really have anything to add, just wanted to say something complimentary. Interesting, thoughtful post, Mark.

I don’t really have anything to add, just wanted to say something complimentary.

]]> By: Patrick B http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184374 Patrick B Thu, 04 Dec 2008 04:09:56 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184374 "It’s almost a relief to sink into this weeks idiocy from Miranda." What the hell is a "conservative student" anyway is it just a synonym for stupid? Sorry for the OT outrage. “It’s almost a relief to sink into this weeks idiocy from Miranda.”

What the hell is a “conservative student” anyway is it just a synonym for stupid? Sorry for the OT outrage.

]]> By: Patrick B http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184373 Patrick B Thu, 04 Dec 2008 03:43:05 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184373 Nixon always said the public doesn't give a toss about inflation, it's a recession that spells political death. He was pressuring his Fed chief Arthur Burns to drop interest rates during 70-71 to stave off a rise in unemployment. Burns wasn't exactly taken with the idea and I think the administration did something with the postal service that pumped billions into the system. Deficits, inflation, who cares so long as we have a job. Nixon always said the public doesn’t give a toss about inflation, it’s a recession that spells political death. He was pressuring his Fed chief Arthur Burns to drop interest rates during 70-71 to stave off a rise in unemployment. Burns wasn’t exactly taken with the idea and I think the administration did something with the postal service that pumped billions into the system. Deficits, inflation, who cares so long as we have a job.

]]> By: Lloyd http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184372 Lloyd Wed, 03 Dec 2008 20:49:29 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184372 The Australian is at it again this morning. Another desperate attempt to shape the narrative "Rate rises smashed the economy" screeches the headline. "It's Rudd's fault" intones Malcolm. "A rethink of Fair Work is warranted" dribbles the editor. It's almost a relief to sink into this weeks idiocy from Miranda. Those poors sods that are right wing students are too scared to put their heads above the parapet. The Australian is at it again this morning. Another desperate attempt to shape the narrative

“Rate rises smashed the economy” screeches the headline. “It’s Rudd’s fault” intones Malcolm. “A rethink of Fair Work is warranted” dribbles the editor.

It’s almost a relief to sink into this weeks idiocy from Miranda. Those poors sods that are right wing students are too scared to put their heads above the parapet.

]]> By: grace pettigrew http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184371 grace pettigrew Wed, 03 Dec 2008 19:42:16 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184371 You are so right about the "disconnect" Mark, and its lethal effects on public discourse. Just look at the way the media reports endless reams of financial market information that is simply double dutch to most ordinary listeners and viewers. Its either aimed at the high fliers (what are they listening to the radio for?) or at those illusory "mum and dad shareholders", a fantastic creation of the Howard hegemon. At ground level, lower interest rates, lower petrol prices, and Rudd's chrissy cheque in the mail, are right now cheering the voters up no end, but the news media tell us that the financial wizards and the politicians are very depressed and gloomy about the future. Big deal and a shrug of the shoulders, nothing to do with me... For the past decade the media in this country has lost its way in assuming the interests of the financial markets are the same as the interests of their own readers and listeners (and its much easier just to read off a set of numbers). A dumbed down media is now unable to straddle the divide intelligently and so the "news" is not the news for most of us any more. No wonder newspapers are dying. You are so right about the “disconnect” Mark, and its lethal effects on public discourse. Just look at the way the media reports endless reams of financial market information that is simply double dutch to most ordinary listeners and viewers. Its either aimed at the high fliers (what are they listening to the radio for?) or at those illusory “mum and dad shareholders”, a fantastic creation of the Howard hegemon.

At ground level, lower interest rates, lower petrol prices, and Rudd’s chrissy cheque in the mail, are right now cheering the voters up no end, but the news media tell us that the financial wizards and the politicians are very depressed and gloomy about the future. Big deal and a shrug of the shoulders, nothing to do with me…

For the past decade the media in this country has lost its way in assuming the interests of the financial markets are the same as the interests of their own readers and listeners (and its much easier just to read off a set of numbers). A dumbed down media is now unable to straddle the divide intelligently and so the “news” is not the news for most of us any more. No wonder newspapers are dying.

]]> By: zorronsky http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184370 zorronsky Wed, 03 Dec 2008 09:55:04 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184370 looked in on Kerry tonight expecting more of the same and instead watched the Woody Allan interview. Like he said 'life's random'. The expanded interview is on the ABC site. looked in on Kerry tonight expecting more of the same and instead watched the Woody Allan interview. Like he said ‘life’s random’. The expanded interview is on the ABC site.

]]> By: Adrien http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184369 Adrien Wed, 03 Dec 2008 07:45:25 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184369 <i>I don’t ever get a meaningful response from simple questions of import. </i> . Of course not. They're professionals. . <i>I don’t think he has the skills or experience to do the job well.</i> . Swan has excellent skills at his <a href="http://images.businessweek.com/ss/06/10/scary_coworkers/image/slide8.jpg" rel="nofollow">job</a>. There's no-one better. :) I don’t ever get a meaningful response from simple questions of import.
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Of course not. They’re professionals.
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I don’t think he has the skills or experience to do the job well.
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Swan has excellent skills at his job. There’s no-one better. :)

]]> By: JohnL http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184368 JohnL Wed, 03 Dec 2008 06:58:15 +0000 http://larvatusprodeo.net/2008/12/03/economic-and-political-disconnects-and-the-sociology-of-knowledge/#comment-184368 Just another point that suggests there could be more disposable income to spend – petrol prices. I have a car with a fuel tankf capacity of around 60 litres and about 4-5 weeks ago it was costing $80 to fill (I don't let it get too empty). As of today (using the same amount of petrol) it was about $50. That saving of $30 (weekly for some, fortnightly for many) is money that will probably be spent rather than saved. Just another point that suggests there could be more disposable income to spend – petrol prices. I have a car with a fuel tankf capacity of around 60 litres and about 4-5 weeks ago it was costing $80 to fill (I don’t let it get too empty). As of today (using the same amount of petrol) it was about $50. That saving of $30 (weekly for some, fortnightly for many) is money that will probably be spent rather than saved.

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