Sunday, December 1, 2013

Greg Mankiw vs.The Pope

Greg Mankiw, chairman of Harvard's economics department, body slams the Pope and his economic views:
I see that the pope has decided to weigh in on economic issues:

“Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world,” Francis wrote in the papal statement. “This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacra­lized workings of the prevailing economic system.”

A few reactions:

First, throughout history, free-market capitalism has been a great driver of economic growth, and as my colleague Ben Friedman has written, economic growth has been a great driver of a more moral society.

Second, "trickle-down" is not a theory but a pejorative used by those on the left to describe a viewpoint they oppose.  It is equivalent to those on the right referring to the "soak-the-rich" theories of the left.  It is sad to see the pope using a pejorative, rather than encouraging an open-minded discussion of opposing perspectives.

Third, as far as I know, the pope did not address the tax-exempt status of the church.  I would be eager to hear his views on that issue. Maybe he thinks the tax benefits the church receives do some good when they trickle down.


  1. Good to see the Pope thrown to the mat, but point #3 requires elaboration: if society benefits from the church's tax exempt status, consider the even greater benefit if tax exemption were extended to every organization and individual. I would be eager to hear Mankiw's views on this.

    1. Why does society benefit from the church's tax exempt status? It's a good enough reason that the church benefits from it, but i certainly don't.
      All i see in it is the hypocrisy of both the government and the church. But then, they've almost always been two peas in a pod.

    2. yes throw all dissenters to the mat....

      Spanish government approves draft law cracking down on demonstrations
      Campaigners criticise legislation as attempt to muzzle protests against government's handling of economic crisis

      Spain has approved draft legislation for fines of up to €30,000 (£25,000) for offences such as burning the national flag, insulting the state or causing serious disturbances outside parliament.

      Opposition parties, judicial and social groups have heavily criticised the bill as an attempt by the conservative government to muzzle protests against its handling of the severe economic crisis.

      The measures, presented by the interior minister Jorge Fernández Díaz to update a 1992 law, also include fines of up to €1,000 for insulting or threatening police officers during demonstrations. Similar fines are planned for disseminating photographs of police officers that endanger them or police operations.

      Spanish cities have experienced weekly protests, the vast majority of them peaceful, since the start of the crisis in 2008.

      The conservative Popular party took office with Mariano Rajoy as prime minister in 2011 and issued a series of austerity measures and cutbacks in health and education and labour and financial reforms in an effort to refloat the economy and stave off a bailout.

      The measures triggered an increase in street protests, including several attempts to encircle parliament, some of which ended in clashes with police and rubbish containers being set on fire.

      "When more than 20% of people are unemployed, I don't think this legislation is what we require," said Alejandro Touriño, partner and information specialist at the law firm Ecija.

    3. Valid points, Tony. Historically, even non-adherents benefited from the Church's charitable mission, most notably with healthcare, and although as a boy I was one of these, it's certainly not the case now.

      My broader point was to assert that society would benefit if everyone, from Wal-Mart to you and me, were granted tax exempt status.

  2. Yes Mankow is a man for no season...

    It May Be Time for the Fed to Go Negative

    So why shouldn’t the Fed just keep cutting interest rates? Why not lower the target interest rate to, say, negative 3 percent?

    At that interest rate, you could borrow and spend $100 and repay $97 next year. This opportunity would surely generate more borrowing and aggregate demand.

    The problem with negative interest rates, however, is quickly apparent: nobody would lend on those terms. Rather than giving your money to a borrower who promises a negative return, it would be better to stick the cash in your mattress. Because holding money promises a return of exactly zero, lenders cannot offer less.

    Unless, that is, we figure out a way to make holding money less attractive.

    Mankow should get a real job.....

    1. Seems like you don't understand how a bank operates. A bank borrows short term and lends long term. A bank will lend if they can borrow at a negative real rate of 5% and lend at a negative real rate of 3%.

    2. Seems like you like raping savers and watching those on fixed incomes struggle and starve...

    3. "Seems like you don't understand how a bank operates. A bank borrows short term and lends long term. A bank will lend if they can borrow at a negative real rate of 5% and lend at a negative real rate of 3%."

      Let us know when you can score a 2.75% based on the current rate Jerry.(and it doesn't count if you are a banker)

      Also, maybe you can explain to us how bank cash flow/liquidity & profitability all remain positive under such an environment on the basis of prior fixed loan interest rates while you are at it.

      I've got a feeling Jerry's kids may have a better grasp on things than Jerry.

  3. free-market capitalism has been a great driver of economic growth...yeah right....we'll see when the whole interest rate suppression game falls apart:

    FLASH: China knows about gold price suppression, and U.S. knows China knows

    Back in October gold researcher Koos Jansen and Jan Skoyles of The Real Asset Co. in London called attention to commentary by Zhang Jie, deputy editor of the Chinese publication Global Finance and a consultant to the China Gold Association, which cited the Federal Reserve's manipulation of the gold market to protect the U.S. dollar's standing as the world reserve currency.

    Jansen has obtained a much better English translation of this Chinese commentary, and it includes this observation about gold leasing by Western central banks: "Through continuous gold leasing the gold in the market can be circulated and produce derivatives, creating more and more paper gold. This is very significant for the United States. Gold leasing is a major tool for the Federal Reserve and other central banks in the West to secretly control and regulate the gold market, creating gold credit derivatives and global credit conflict."

    That is, China knows all about Western gold price suppression and the U.S. government knows that China knows.

    Indeed, while financial authorities and mainstream financial journalists in the West just scoff at complaints of gold price suppression when they even deign to take notice of them, China understands gold price suppression to be the primary objective of Western central banking and is designing its own policies to overthrow it.

    CHRIS POWELL, Secretary/Treasurer

    Gold Leasing Is A Tool For The Global Credit Game

    Below a translation of an article on gold price suppression by global finance expert from the China Gold Association Zhang Jie, published on April 15, 2013. We have posted a Google Translate version of this article on August 13, but because of the significance of the insights of the writer we searched for real translators to make it into a more clear and understandable read. The result is a very interesting analysis of a monetary game played by the US and other countries through gold leasing and derivatives.

    1. Gold prices are not being suppressed.

    2. really? I guess like Yul Brynner as he portrayed Rameses we should all heed what you say?

      So let it be written. So let it be done.....? that only works in the movies, Jerry.

      The purpose of gold leasing is not just to receive a rent, but it also provides the ability to short-sell gold, which allows central banks to interfere in the currency market. As a result of central banks printing more money, the EU insists on a stable currency mechanism, the United States launched QE3 and QE4, and Japan is expanding its supply of money. These countries can continue to print more money as long as they can keep their commodity prices stable to ensure the trust in their currency, and therefore effectively suppress inflation panic. Whoever can persist to the end, persevering until all other money-printing countries have collapsed, is the winner.

    3. neither are platinum prices?

      Bright spotlight needs to be shone on how the platinum price is determined

      Despite the major undersupply of platinum and strong upcoming demand, platinum prices remain at levels that leave many South African mines under water.

      Exactly how the price of platinum is determined – particularly in futures markets – needs to come under scrutiny.

      A futures market record sent to Mining Weekly points to negligible near-term trading but hectic futures trading.

      Thousands of contracts – representing multiples of annual supply – are being traded backwards and forwards, several months out from now.

      Will these trades be accompanied by the delivery of physical platinum metal?

      One observer questions whether, in the absence of physical delivery, these trades can really be classified as trades at all.

      It is alleged that the current registered, available-for-sale, physical volume of platinum on the Nymex is miniscule – something like 1/160th of annual demand.

      If so, is a tiny volume of physical metal supporting the global platinum price – at virtually no cost to the controlling bankers?

      Are the futures markets dominating the physical markets, rather than the other way round?

      Does this mean that futures markets can basically set the price at any level?

    4. jerry-rigging?

      FCA Faces Calls for More Disclosure on Currency-Rigging

      The U.K.’s Investment Management Association, whose members oversee about 4.5 trillion pounds ($7.4 trillion) of assets, is pressing regulators to provide more information about the alleged manipulation of the foreign-exchange market, said two people with knowledge of the matter.

      The trade group wrote to the Financial Conduct Authority in recent weeks, asking how it should respond to clients’ inquiries about whether currency markets are being rigged, said the people, who asked not to be identified because the correspondence is private. The FCA replied that it couldn’t comment on a current investigation, one of the people said.

      Fund managers are among the biggest clients of banks’ foreign-exchange desks and are at risk of being the biggest losers from any rigging of the $5.3 trillion-a-day market. The FCA opened a formal probe on Oct. 16, four months after Bloomberg News reported that some traders had pooled information about their positions with counterparts at other firms and tried to manipulate the benchmark WM/Reuters rates.

      “We deserve to know which mechanism is involved in any wrongdoing,” said Colin McLean, founder and chief executive officer of SVM Asset Management Ltd. in Edinburgh, which oversees about $970 million and is a member of the IMA. “Even very small errors or issues could involve large sums of money in absolute terms and that is why it’s a concern.”

      SVM hasn’t been in contact with the IMA regarding currency rigging, nor has the firm been contacted by any regulator in relation to the probe, McLean said. Annette Spencer, a spokeswoman for the IMA, said the industry group had contacted the FCA about the probe, but declined to comment further. David Cross, a spokesman for the regulator, declined to comment.

    5. "free-market capitalism has been a great driver of economic growth...yeah right....we'll see when the whole interest rate suppression game falls apart:"

      It is. If only we has it.

    6. Intelligence Gathering Plays Key Role at New York Fed’s Trading Desk

      By Pam Martens: December 2, 2013

      In a Neil Irwin article in 2009 in the Washington Post, economist Simon Johnson is quoted as worrying that the New York Fed “pays too much deference to the expertise and presumed wisdom of a sector that screwed up massively.” The article goes on to note that “experts worry that the New York Fed has adopted the mindset of a trading floor: well attuned to ripples in financial markets but not to long-term trends and dangers.”

      What the New York Fed is doing in its daily routine is the strongest proof yet that we have lost any semblance of fair and efficient markets. The stock and bond markets are supposed to exhibit, through their price action, the sum total of knowledge of all market participants. The price action is supposed to be there, minute by minute, second by second, for all market players to observe on a level playing field.

      Certainly, the average American investor does not have a direct phone line to Wall Street traders to pick their brains for behind-the-scenes intelligence. If the price action of the individual securities or sectors is no longer adequate to discern what is happening in the market, why should the little investor participate?

      The New York Fed is obviously battle-scarred from the 2008 crash and attempting to comfort itself through increased intelligence efforts. The irony is that its intelligence is coming from the very Wall Street firms that have lobbied Congress to build this opaque and inefficient marketplace.

      All of these efforts at super-sleuthing (which are destined to fail because of the source of the intelligence) would be unnecessary if the trillions of dollars of derivatives now traded in the dark were moved onto transparent exchanges; if Wall Street firms were forced to stop internalizing their order flow and subject buy and sell orders to the light of day; if traders from across multiple firms were prohibited from colluding in chat rooms on Bloomberg terminals; and if Wall Street’s private justice system, which ushers customer complaints and compliance issues into the darkness of mandatory arbitration hotel rooms, was restored to the disinfecting sunlight of our Nation’s courts and an inquiring press.

      I hate to be the one to tell those early risers at the New York Fed, but this is a game of folly that will not end well for any of us.

  4. The pope is following the Bible and the teachings of Jesus Christ. If you want to "body slam" the Pope, you need to address his statements within that context.

    1. This Pope, and all his predecessors, are as easily body slammed on this as you. Were they following the teachings of Christ, they would never have amassed such a wordly fortune for themselves. Since your ignorance of the Bible seems equal to your grasp of economics, start with Matthew 19:16-30, Mark 10:17-25, and Luke 18:18-30.

    2. "The pope is following the Bible and the teachings of Jesus Christ. If you want to "body slam" the Pope, you need to address his statements within that context. "

      Irrelevant. The little shit needs to be body slammed on his economic stupidity whether or not he believes in Christ.

    3. Jerry probably thinks Jesus was a Socialist. Unfortunately for Jerry & the Pope, no where in the bible does it say "Thou shall not steal unless you are gov't."

      "Charity" is different from theft on the most basic of levels when you distinguish voluntary from involuntary giving.(as if there is such a thing as voluntary giving, but I digress)

  5. All bow towards Mankiw....maybe not...............

    Pope ramps up charity office to be near poor, sick

    “Above all, poor people need to be listened to.”

    “And when we say we’re from the Vatican, and that we’re doing this in the name of the Holy Father,” he said, “their hearts open up more.”

    Krajewski is the Vatican Almoner, a centuries-old position that Francis has redefined to make it a hands-on extension of his own personal charity. When he was archbishop in Buenos Aires, then-Cardinal Jorge Mario Bergoglio used to go out at night, incognito, to break bread with the homeless on the streets of the Argentine capital to let them know that someone cared for them.

    He can’t do that so easily now that he’s pope, so he has tapped Krajewski to be his envoy, doling out small morsels of charity every day: sending a 200 euro ($260) check to a woman whose wallet was stolen, visiting a family whose child is dying.

    “My job is to be an extension of the pope’s arm toward the poor, the needy, those who suffer,” Krajewski said. “He cannot go out of the Vatican, so he has chosen a person who goes out to hug the people who suffer” in the pope’s place.

  6. All the pope is doing is going on a charm offensive. Nothing is going really change in the Catholic Disneyland. They are setting their own narrative rather than stories of former abused kids or the age old story of priests with their fingers in the till. Now we have to endure pious lecturing about letting your pockets be picked on behalf of the 'poor'. But then the Church has always been a tool of the elite since Constantine's time.