Nov05
A reader just alerted me to this hilarious spoof of Mankiw’s “Ten Principles of Economics” from early 2007:
I’d give Mankiw a harder time than this guy does–and the opening joke would need to be updated (for the post-economic crisis world) that macroeconomists have predicted 9 of the last 3 booms–but it’s still a very good laugh.
The comedian is Yoram Bauman, The Standup Economist. I might check his website out after this.
hillarious,
although that joke about the 9 out of 5 economists is an oldie
benanke and lloyd blankfien( head of goldman sachs) both are harvard alumni,
should really knock the whole economics faculty down and build something more usefull,
like a type writer factory
I remember this. I use his definition of macro and micro all the time when talking to economists.
Steve I think you are going a little soft in your housing predictions, maybe due to criticism you have recieved for going to early previously. The chart you provide showing house prices versus fhog is as clear as day, and one can think conceptually about how the extra money flows through the housing structure from the first vendor who recieves more for their sale and that vendor taking that money and leveraging etc. Do you have a chart showing stamp duty concessions as well? I ask that because in nsw, the biggest market, we have stamp duty concessions for first home owners coming to an end except for new housing. This means a first home buyer who needed 18th to buy a 500th house (95% lvr, 7th fhog plus 18th=25, that 18th will go to stamp duty and they will need another 18th. 2 years ago they only needed 11th when the fhog was 14th, now they need 36th.
There is no chance of an increase in the fhog as the federal deficit is blowing out, and they have sworn to get into surplus, and budget austerity is the global trend and the trend here as well. The opposition would tear them further to pieces if they introduced it.
Official interest rates could probably go no lower than 2.5% in oz. otherwise the AUD would go into freefall. That is 2% lower than here. At best 1.5% of that would be passed on. That is not going to make a huge difference. There is a strong case to suggest much less will be passed on and that our banks will be unable to raise capital at all to lend. Credit markets are mostly frozen. European banks need to raise tier 1 to 9% by june. That mostly involves not renewing loans, i would assume some of those are our banks loans which are coming due in 2012. Covered bonds may help, though the media attention our housing gets could see foreign banks stop lending altogether, and it could all fall apart very quickly.
Events are moving with some speed in China’s shadow banking and property collapse. It should come to a head in Q1 2012, around the same timescale we are likely to see multiple sovereign defaults in Europe – not a pretty time.
For example in the city of Wenzhou 1/5th of its 350,000 SMEs have gone under in the last few months, because of the collapse in its shadow banking sector, meanwhile the property boom which fuelled that sector in now firmly in reverse leading to large scale deleveraging. The size of Chinas shadow banking sector is estimated at 2.6 trillion dollars. None of the official statistics on Chinese state or household indebtedness cover shadow banking debts or municipal debts.
http://andrewlainton.wordpress.com/2011/11/06/shadow-banking-debt-crisis-hits-chinese-small-business/
Now a good question is how far shadow banking entities – including the creation of paper gold – can endogenously create money like banks can?
Clearly when you commence in cash and a shoebox ‘vault’ you are behaving exactly like a full reserve bank – but with loan shark interest rates the flow of profits will be sufficient to fund a flow of loans many times greater than your ‘stock’ of capital reserves. In the late 19th century many economists criticised the ‘English’ classical theory that investment and wages was funded from a fixed stock from previous capital accumulation, arguing instead that during periods of strong growth it was the ‘flow’ of current and future profits that funded it – exactly the same argument here.
But as long as you operate exclusively in cash any increase in your profits must come from a withdrawal of liquidity elsewhere in the economy – there can be no net endogenous creation of money in the economy as a whole? Correct me if im wrong. With electronic creation of money you can create money net though limited both by capital reserve requirements and the liquidity preference of your customers. If this rises and a bank faces a run central banks can provide liquidity – through expansion of high powered money. In this schema then banks create money but their ability to do so is regulated by the ability of central banks to exogenously expand the money supply. Central banks can also regulate bank lending through raising or lowering interest rates on money leant to banks.
Shadow banking facilities however have no access to central bank lending. They can create moneys endogenously however if they face a ‘run’ they simply go bankrupt – a return to wildcat banking – unless as above the State simply takes over the shadow banking institutions or orders banks to do so. But in doing so non liquidated debt simply cranks up, shifted from the private to the public sector.
Sort of true Rooster–basically I’ve had it with the bulls on that issue and I’d rather let the numbers speak for me from now on (and also let the causal analysis of the credit accelerator do its bit as well).
Yes, Melbourne in particular could have a real bust–I may well comment on “1890s” again? as that starts to unfold.
Hi Steve…had to crash a Mankiw’s defence party and reestablish some things in one of the neoclassics spoofs here in New Zealand from a Matt Nolan…
here :http://www.tvhe.co.nz/2011/11/04/more-protesting-for-the-sake-of-it-economics-students/
You don’t need to add a touch…but it may be fun, as he rapidly backed off sneakily from criticising “debunking economics” when I told him he could do that only after reading it and not reading self appointed “reviews”…they went on unchallenged for a while…but rather faded after a good drubbing…Mau is my nickname there.
the darn blog is just a rumble of conservative self referentials…but gets attention from the NZ Herald from time to time.
Felt obliged to spoil the party…LOL
RE the video.
Very clever and funny guy. A great watch.
Re housing price predictions.
Interested to hear more about a potential price bust in MEL Steve. I’m sure there are plenty of potential buyers out there who would like to see this happen. Waiting …and waiting ….and waiting……
We are going to need a credit squeeze, a recession and significantly higher unemployment to have any “major” negative broad impact on the ludicrous housing prices in SYD and MEL metro areas IMHO. We are also going to need to substantially cut net migration numbers and I do not see this happening in the next 5 years.
It’s the ridiculous migration numbers (in terms of total population) and the availability of cheap credit predominantly underpinning demand and the prices. Nothing new there. Now the RBA has slightly lowered the cash rate again it is a plus for buyers. This was premature and a mistake and the RBA seems to have been reacting to Federal Government and international pressure with their Nov rate decision. Our domestic banks are predicting more of these adjustments in 2012. Tough for the savers.
On top of this the inept national Government (so called) we have here will do almost anything IMHO to put a stopper under any major general/broad deflation in housing prices, especially given the negative impact on confidence. Additionally, just watch the RE Industry scream like little girls for a box of new or adjusted buyer incentives. You do not even need a major move to get these guys going.
The Government is continuing to spend (and borrow) cash like there is no tomorrow and this is ultimately going to help feed inflation generally through out the economy. (The official inflation numbers are highly manipulated and lack credibility).
Events in Europe (a total debacle to say the least) and the US and the resultant impact on inter bank lending should provide for some interesting future developments in terms of Aust. banks uninterrupted access to international credit which is a major funding source for them. Still – they are a better risk than any European or US bank despite their Aust. residential mortgage exposure .