Laurel & Hardy? No Larry & Paul

As I frequently say, I am not the sharpest knife in the drawer.  In fact I reckon I take prided in how little I actually know.  But every now and then I am able to string together a couple a few thoughts and sentences in such a manner to express what I honestly and truly believe and this is one of those rare times. When it comes to economics, I am no economist but when I read what is proposed and written by many of the “so-called’ experts in this field regarding the present economic standing of the United States, in particular Paul Krugman and Larry Summers, I always think of what Milton Friedman once said: “If you put the federal government in charge of the Sahara Desert, in 5 years there'd be a shortage of sand.”

I would not be surprised if a lot of cats consider Paul Krugman and Larry Sumner’s as overly smart and learned men. I would agree and note there are several reason for this, inclusive of their Ivy league educations and their incessant habit of speaking in technical terms employed to make them seem smarter than they are and/or to confuse the listener when they are proven wrong and/or are just guessing about what they think versus what they actually know. I suggest this because both believe economic theory is ALWAYS right which herein my problem with them is. Let us start with Krugman, who clearly has no clue or understanding of middle and lower class Americans.

If you have ever heard Paul Krugman talk or read anything he has penned to paper, one halcyon observation that can be made is that in his astigmatic perspective, he is always right and never wrong. No matter the topic, especially when the subject is rooted in macroeconomics, if you disagree or refute his propositions, you are often accused of having bad data, reconstructing history or just being plane ole illogical. This unceasing proclivity of Krugman’s to be correct in theory but incorrect based on real world standards would be amusing if it were not so dangerous. For example Krugman frequently invents or pretends to have been the economist who predicted the housing bubble. What he forgets to add is that in 2002 he wrote that the Federal Reserve and Alan Greenspan needed to “create a housing bubble to replace the NASDAQ bubble” in order to combat the recession at the time. When this was pointed out, you guessed it, he explained away the unexplainawayable.

He also has a habit of taking credit for stuff that has nothing to do with him or his words like the fact that the U.S. has yet to experience any real increase in price inflation. This although he had stated and predicted that from 2010 on, the U.S. would experience an extended period of unending “process of disinflation.” One could go on and on: the zillion times he has said the Euro would collapse or how negative interest would never ever happen. Regarding the Euro, he even went as far as to put in writing that many of the peripheral countries of Europe would be unable to remain in the Eurozone, even predicting that Greece would be out along with Spain and Italy four years ago.

I won’t just focus on Krugman, for every slap-stick comedy duo has a sidekick and partner and there is no better person I can slot for this role (casting couch aside) than the one and only Larry Summers. Summers, former Treasury Secretary during the Clinton administration and former Director of the National Economic Council for President Obama has blessed the world with the already disjointed and discredited concept of "secular stagnation." Now to provide a little background, when Barack Obama was elected in 2008, he mounted Summers as head of the National Economic Council. This even after he made remarks suggesting that women were biologically and genetically inferiorto men and more so, had not done such a great job while in the Clinton administration with respect to the dotcom bubble and his advocacy for the Commodity Futures Modernization Act of 2000. The CFMA gave us financial derivatives, credit-default swaps and other complex papers which were basically unregulated and brought about the 2008 financial collapse. Although prior to this he regarded these new changes regarding securitization on Wall Street as being positive.

But I digress, back to secular stagnation. Summers believes that the U.S. economy is engaged in a new long-time trend or new normal that he has termed "secular stagnation." In simple terms, he suggests that without the existence of bubbles in any part of the U.S. economy, it is mathematically impossible for the economy to generate enough spending to get to full employment. For him, this is because since interest rates can't go below zero (Krugmanesque) and because the "natural interest rate “has been permanently lowered into negative territory such that real rates can't go low enough to keep the economy out of a protracted slump.

This all sounds good on paper but there are more than a few things wrong with this vision of Summers. The foremost is how one calculates real rates. How do we measure real interest rates or are we measuring real interest rates? When cats like Summers say that inflation-adjusted rates have been falling, most are just subtracting expected inflation from the nominal interest rate. The concern is that the way I see it, real interest rate is entirely different from the natural interest rate, which mean a more tenable explanation other than secular stagnation and the new normal of sub two percentgrowth, could be due to an unusual prolonged business cycle.

My question is how can cats like Krugman and Summers keep getting away with being so wrong so frequently yet venerated as economic Gods by the elite east and west coast press outlets and even many of our current politicians? Until we figure this out, it will be nearly impossible to have intelligent reasoned and fact based discussions or even arguments with such individuals on the topic of economics. I understand completely what Robert Skidelsky meant when he wrote: “Today’s professional economists, by contrast, have studied almost nothing but economics. They don’t even read the classics of their own discipline. Economic history comes, if at all, from data sets. Philosophy, which could teach them about the limits of the economic method, is a closed book. Mathematics, demanding and seductive, has monopolized their mental horizons. The economists are the idiots savants of our time.” 

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Spain and the Erdogan Playbook

Over the past decade many have openly complained about the brutal and authoritarian political moves of Turkish President Recep Tayyip Erdogan.  From his alleged supplying of ISIS jihadist in their effort to assist in the overthrow of Syrian leader Bashar al-Assad and his helping them to smuggle oil from Iraq and Syria to world markets, to the way in which he dealt with the failed coup attempt against him by arresting his opponents, and closing all their affiliated institutions. There is also the referendum he won to serve both as head of government and the head of state at the same time. However even before this, many came to learn and understand his ruthlessness through his interaction with the Kurdish minority of Turkey, their political representation the Halkların Demokratik Partisi (HDP) and more notably, the Kurdistan Workers, party.

Recently he detained two leaders of Turkey’s pro-Kurdish HDP along with many others accusing them of being supportive of the Kurdistan Workers party (PKK) and spreading propaganda. Instead of addressing the vile hazardous actions of ISIS, Turkey under Erdogan has selected to go to war with the Kurds and has been on a continuous exercise attacking Kurdish militias in Syria and bombing Kurdish villages in the region. This is Turkey and how the Turks and Erdogan express their fear of Kurdish independence and self-determination for an ethnic group that make up between 15 and 25 percent of Turkey’s population (8 to 9 million) with an equally long and storied history. 

Now let us imagine a similar ethnic group both in number (6 to 7 million) and disposition with an equally long and storied history (1100 ACE), however they comprise 28 percent of the population. Like the Kurd’s they have their own language and seek to be independent, and practice self-rule. Moreover, as in the case with the Kurds, they have faced continuous opposition  for having such a desire and even more so for promoting the use of suffrage to determine such. This group of people since then has had many local elected officials arrested by the state government, with the regional police force under orders to arrest mayors if they refuse to appear for questioning by the state investigating their desire to hold a vote for independence.  In addition, the nation’s constitutional court has suspended the prosecutor of the region and central authorities have taken over all spending. Although this ethnic region of the nation is responsible for more than 20 percent of the more than 1 trillion-euro economy, the state central government has threatened to take away all its spending and budgetary authority.  This is Spain and this is how the central government in Madrid and Spanish Prime Minister Mariano Rajoy express their fear of Catalonian independence and self-determination.

Historically, Catalonia is not a part of Spain just as Kurdistan was not a part of Turkey or Iraq.  This isn’t a new proposition for as in both cases war dictates who draws the boarders of conquered, occupied or colonialized nations. This was true with Catalonia as it was with Turkey, Iraq and Kurdistan after the Ottoman Empire’s defeat in World War I and both nations’ modern borders being demarcated in 1920 by the League of Nations via the Treaty of Sèvres.  However, just as in Turkey, likewise the Spanish government consider holding an independence referendum illegal and that such a vote would be in violation of the Spanish Constitution. To accentuate his point, the federal authorities have arrested scores of local politicians, seized tens of thousands of ballots and are continuously trying to block the official web site for the independence referendum.

It appears as if Spain under the direction of Prime Minister Rajoy is following the script designed and practiced by Erdogan word for word and action by action. Just this week in a speech to the United Nations General Assembly on Tuesday, Turkish President Erdogan warned that an independence referendum among Iraqi Kurds would have serious consequences. He stated, “Steps such as demands for independence that can cause new crises and conflicts in the region must be avoided. We hereby call on the Iraqi Kurdish Regional Government to abort the initiative they have launched in that direction.”  Not to be out done in dictatorial prowess, Spanish Prime Minister Rajoy and his Constitutional Court has not only suspended the Catalonia and legislature but has also blocked all and any measures taken by the pro-independence Catalan government. These strong-armed tactics of intimidation did not end there. The Constitutional Court also levied fines of up to €12,000 a day on members of the Catalan electoral board and Prime Minister Rajoy defends detaining accused separatist politicians for promoting “civil disobedience” and acting “profoundly antidemocratic.” Rayjoy has also ordered all Catalan mayors to appear before the state to answer questions about the move toward independence, however the majority have declare exercised their right to remain silent before the court.

One consistent perspective presented by the Spanish authorities is that the referendum would be unconstitutional because all Spanish citizens would not be able to vote.  This is strange since the Spanish Government along with other western nations supported the 1991 Kosovo, Slovenia and Croatia referendums for independence in which Serbian’s were not allowed to vote, nor did they make this sort of argument when the South Sudan was created without all Sudanese not being allowed to vote. In fact, since this time, the Spanish Government has recognized 26 new states the majority which were established independently (a unilateral referendum) of the input of others since that time.

Then there is the issue of when did this become unconstitutional. Some have advocated that the Spanish Constitutional Court’s decision to strike down key elements of the 2006 Catalan statute of autonomy was the actual unconstitutional action that has resulted in what is happening between Spain and Catalonia presently.  Since then, like the big neighborhood bully, Spain has refused to even talk or discuss anything regarding politics (including possible Catalonian succession) with the people of Catalonia and instead forced its opinions and decisions on the citizenry of Catalonia by fiat (speaking of undemocratic).

I used to believe that one of the foremost tenants of democracy was self-determination. The people of Catalonia think in this vein or else they would not have (through their vote) given the Parliament of Catalonia a mandatefor a Proclamation of Independence. Spain and Rajoy may need to find another path of action, for the more they stay on this road, the more they become the mirror image of Turkey and Erdogan.

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