Laugh­ing at Mankiw

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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.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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  • mahaish

    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

  • sum

    I remem­ber this. I use his def­i­n­i­tion of macro and micro all the time when talk­ing to econ­o­mists.

  • Rooster

    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.

  • alain­ton

    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

  • SeanS

    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 .