The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Apropos of Everything”

1. curbyourrisk Says:
   April 7th, 2011 at 8:58 am

   Any way of reading htis where it is not blocked by Websense????

   My company won’t let me access sribd.

2. machinehead Says:
   April 7th, 2011 at 12:37 pm

   “Real” growth is calculated by subtracting the growth in the CPI from nominal output growth (GDP) … — Brodsky and Quaintance

   Nonsense. Real growth is calculated by adjusting nominal growth by the implicit price deflator for GDP, commonly called the GDP deflator. It is available here at bea.gov:

   http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=13&Freq=Qtr&FirstYear=2006&LastYear=2008

   The GDP deflator is NOT THE SAME as the CPI (Consumer Price Index), which is computed by a different agency (the BLS) for a different purpose:

   http://www.bls.gov/cpi/

   So while I agree with Brodsky and Quaintance’s criticisms of the CPI, their complaints are out of context in a discussion of real GDP.

   Authors who miss basic points like the difference between the GDP deflator and the CPI really haven’t done their homework. Their hearts are in the right place. But this is sloppy, verbose work.

   I give it a C-minus — do the research, fix the howlers, and cut the page count in half.

3. Dow Says:
   April 7th, 2011 at 4:23 pm

   The piece is a bit wordy. Interesting read. I got the feeling they don’t really understand today’s politics. (Hint: there is no ‘liberal’ or ‘left’ in Washington today.)

   I also found myself expecting the authors to address the growth of monopolies, the subsequent consolidation of power, the role of private equity firms in leveraged buyouts, and their role in getting us to where we are today.

4. socaljoe Says:
   April 8th, 2011 at 7:56 pm

   Outstanding publication… maybe they got a few details wrong, but the analysis appears sound… thank you for posting it, Barry… truly a big picture viewpoint.

5. StreetEye Says:
   April 10th, 2011 at 8:51 am

   Hi Barry -

   I had the misfortune of reading Brodsky’s stuff, interesting but there’s also a lot of gold buggery and cargo cult economics about how the currency system is going to collapse and we need to go back to the gold standard.

   I blogged the counterargument against the gold standard at streeteye.com, see below. If you’re so inclined feel free to consider it a contribution to your blog from an investor and longtime reader. I think it’s a little more balanced and pragmatic, and if nothing else it might stir up some discussion LOL.

   Why I am not a true gold bug, and the gold standard isn’t coming back

   ~~~

   Let me say at the outset that I am bullish on gold in the long run. US demographics, politics, debt levels, harder-to-extract energy, peaking of globalization’s labor supply shock: all these point to inflation in the long run. And central bankers have hardly covered themselves in glory lately.

   That being said, going back on the gold standard makes exactly as much sense as going back to horses and buggies.

   Here’s why. Gold enthusiasts point out that a good suit cost about an ounce of gold in Roman times, Revolutionary times, and (at least until the recent bull market) modern times.

   An observation, and then a question. From Roman times until the early 1800s, growth was low, then both populations and per-capita GDPs soared. Q: If the world was still on the gold standard, would gold be worth more, or less than it is?

   The answer is, a hell of a lot more. The dollars people now hold would need to be gold equivalents, and gold demand would be far higher. Back of the envelope estimates: since 1820 world real GDP has gone up by a factor of something like 60. The world’s inventory of gold has gone up 15 times (from the oft-quoted saw that 90% of the world’s gold has been mined since 1848).

   Therefore, if the relationship of gold supply to real GDP had stayed the same, the price of the suit in gold would have had to have drop to about 1/4.

   More here:
   StreetEye

6. Apropos of Everything – Parts II, III | The Big Picture Says:
   April 21st, 2011 at 8:31 am

   [...] is the follow up to Apropos of Everything by Paul Brodsky. It was one of themost popular pieces we ever published in the Think [...]

7. Must Read: Apropos of Everything (Continued) | The Big Picture Says:
   April 21st, 2011 at 9:16 am

   [...] this month, I published a piece in the Think Tank titled Apropos of Everything by regular TBP contributor Paul Brodksy of QB [...]

8. Math Teacher Says:
   April 21st, 2011 at 12:07 pm

   Despite a number of remarkable insights, AOE is undoubtedly the most sophisticated exposition of a dumb idea I’ve ever read.

9. druce Says:
   April 21st, 2011 at 2:07 pm

   Thoughtful answers to some of the points I made. (thanks for the link love Barry)

   I agree for the most part with the flaws pointed out in the current monetary system. The part I’m not really on board with is – the gold standard substitutes in place of the rather arbitrary and volatile machinations of the Fed what I think are the fairly arbitrary and volatile machinations of gold investors, traders and speculators. (If you read any you know what I mean, plus… anyone remember Drew, Fiske and Gould and the Hunts?)

   I also have a little difficulty with viewing permanent tight money, deflation, and the occasional panic and depression as a feature as opposed to a bug.

   Finally, I think the adaptability of the fiat regime is underestimated – Volcker pulled it together in the early 80s, and when things get sufficiently hairy, the public demands a better system, and the political will emerges, there are a number of regimes short of an old-style gold standard that would bring effective transparency and discipline to bear.

   For both political reasons and the legitimate issues, I feel on pretty solid ground saying that short of hyperinflation and complete collapse of the fiat currency system, central bankers would not willingly go back on the gold standard.

10. druce Says:
    April 21st, 2011 at 2:09 pm

    meant to post this on the followup – will post there