Sunday, October 10, 2004

Ranks of the Shrill Grow: MSNBC Answer Desk,

As any of my readers know, I regularly bash the pabulm that is the MSNBC Answer Desk. I bash it for giving technically correct answers to real readers concerns, that use technically correct language to deceieve them into thinking that their concerns are not justified. Usually they can be expected to give misleading answers to questions like this.

Spinning the numbers
Is it true that unemployment numbers nationwide are false? I have heard that once a person “exhausts” their benefits, then they are no longer counted as “unemployed”. They just fall into a big dark hole! … No wonder the numbers keep dropping: all the people out of work for more than 26 weeks are not being included in the numbers! So the economy is NOT turning around!
Cliff D. -- Kansas City

Actually, no. The national jobs data that are reported every month aren’t based on state unemployment insurance claims. And no one would suggest that the monthly numbers are “false” in the sense that unemployed workers are somehow being deliberately undercounted for political purposes. If they were, you’d expect to see much bigger increases in new jobs reported every month.

But the national numbers are being slanted, primarily because they are hiding increasing numbers of people out of work by increasing the non-labor participation rate. You can read Barry about writing about the weak jobs market here and aout the relationship to the labor participation rate here. Stirling talks about the structural aspects of why these jobs losses are not "temporary" here.

Stirling also reports on the possibility which the oldman has commented upon as well of a currency crisis, quoting a Fed insider, here.

However prophets crying in the wilderness are rarely heard. Which is why it was so shocking to see MSNBC Answer Desk descend to the depths of Shrillness. Read it for yourself.
Deconstructing the deficit
I’m a college student and am confused about something. How exactly does the federal budget deficit affect me as a civilian just try to live my life and pay my bills?
Sara Jasnow, Smithtown, N.Y.

You have every reason to be confused. There’s been an awful lot of hand wringing and doomsday predictions about the swelling federal budget deficit — despite very little agreement among economists about whether there’s really any reason to worry. Even those who are worried are a little fuzzy on just why...

It’s also important to look at where the money is coming from to pay for the federal budget deficit. If Uncle Sam borrows from you and me, and we buy Treasury bills with savings from our paychecks, that’s not such a bad thing. The interest we earn on those T-bills goes back into the economy and keeps it growing. And eventually we can cash in our T-bills and buy more stuff.

But what’s happening now is that more and more of those T-bills are being bought by people outside the U.S. — who are making more and more of the stuff we buy. That means 1.) Americans aren’t saving as much as they used to and 2.) we’re basically financing our appetite for imports with debt held by foreigners. In other words, the American economy is running up its credit card with money borrowed from the rest of the world.

That’s OK for now: much of the money foreigners lend to us goes right back to their economies when we buy stuff made somewhere else. So they like to keep lending, and we like to keep borrowing. But the trend is not sustainable. It could take decades, but sooner or later Americans will have to 1.) pay cash for what we buy from abroad and 2.) pay back all those foreigners who lent us money.

If that happens gradually, there’s no reason to think it will hurt the U.S. economy. But if the process happens too quickly — if for example, the dollar plunges and foreigners decide they’re not that interested in buying T-bills any more — that wouldn’t be good. A rapidly falling dollar could spark inflation (because you have to use more dollars to buy the same German car or Asian-made cell phone.) And the solution to inflation is higher interest rates. Which, once again, makes it harder for you to open up that new business or find one that’s hiring.

It's hard to read into text, but if you read this passage it begins with a long winding benign tone and then toward the end becomes increasingly and surprisingly shrill as it mentions that which the media has not dared mention to the American public - that yes Virginia that the party can not go on forever. That is surprising enough but the previous question fielded by MSNBC Answer Desk is similarly revealing that it begins in calm measured tones and by the end begins in sentiment stating increasingly high pitched "alarmist" outcomes when examined closely.
Sixth Grade solution
"Why can't the government just print more money and solve the U.S. deficit and debt problems?" I'm a middle school teacher, and every year a student will ask me this. Is there an easy way to explain why printing more money isn't an answer?
Roberta -- Kokomo, Ind.

The simplest answer is: it might work, but the cure would be far worse than the disease.

If you create more currency without raising the value of the whatever backs that currency, the value of the currency drops. That’s called inflation — you'll need more and more dollars to buy the same loaf of bread.

Currency is really just a piece of paper that stands for something of value. Increasing the amount of currency without increasing the value it represents just makes the currency worth less than when you started.

Here’s one way to get the message across. Tell your class: “I’ve got the last two tickets to a show starring (insert their favorite pop idol here). Suppose you could spend as much as you want on those tickets. Don't worry, your parents won’t mind. How much would you give me?” (Let them bid and then write down the winning price on the board.)

“Now, it turns out the star has canceled, but the principal has kindly agreed to stand in and play the saxophone. He's pretty good. I’ve got a ticket for every one of you. How much would you pay me now?” (Write down that price.)

“Okay, now I just went to the copier and made thousands of tickets for the same seat. What will you pay me now?”

My hunch is that the prices on the board will fall.

To show how the value of currency increases, tell them: “Wait a minute: I just looked at the tickets more closely. On of them is actually a VIP back stage pass … What would you pay for that?”

In the case of a country, the value backing its currency is (roughly) the strength of its economy and the size of its GDP, or all the goods and services it produces. (The dollar used to be backed by gold and silver; you could go to a Fed bank and exchange your paper for precious metal.)

If our economy grows, our dollar stays strong compared to other country’s currencies. But if we just started printing paper, the value of those dollars would fall and we’d see prices rise at the same rate.

So printing more dollars might help you pay a debt that was incurred in “old dollars,” but everyone would get hurt. People holding debt would lose because they'd get paid in worthless currency. Consumers would have to go shopping with a suitcase instead of a wallet. And the U.S. Treasury would have a hard time ever borrowing again. So as bad as deficits and debt are, inflation is worse.

Don’t forget to quiz them at the end of the week.

Now I don't think that something as Establishment as MSNBC Answer Desk has suddenly converted to revolutionary socialism. What is more likely is that people are starting to get scared, and as they get scared as they start contemplating the train-wreck that is American fiscal policy their anxiety begins to leak out - almost subconsciously they stop obscufating and obstructing the issues and lay them out clearly. Because it's easy to poo-poo the trainwreck when you are miles and miles away, but as the rushing thunder of the locomotive careens toward the dangling shattered bridge even the most cynical and jaded commentator when they realize that while they have a luxury car they are still on that doomed train then they can get, well, a bit shrill.

Watch out! OMIGAWD?!?! OH THE HUMANITY! Hyperinflation! Austerity Programs! Hyperinflation! OH THE TAX INCREASES!!! WHY GAWD WHY?!?!

Ahem. And if anyone has been wondering, yes it's been going on the whole time Clinton was in office. Kevin Drum's charts on family income and income volatility show unfortunately ironclad trends. The 90's were jsut a respite, a slowing of the carnage. Democrats are modestly more competent than the Bushies, but mostly their competence lay in covering up the threadbare robes of majesty that clothed America and being smart enough to realize that America had grown hollow so as not to push the limits. America had grown weaker than her reputation suggested, but the Clintonites were careful to perpetuate the illusion of American superpower status.

The post-conservative movement called the "neo-conservatives" were fools enough to actually believe their own press about American exceptionalism, unilateralism, and superpower status. They then tested their belief through Bush to destruction, revealing for all the true poverty of American power in the 21st century. Soon it will not just be poverty but bankruptcy.

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