Professor James Sturgeon


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From Jim Sturgeon

I’ll put in my two cents. The crooks should be convicted as a regular part of the legal system and examples set to deter future attempts. However, the acquisitive heart and I expect the felonious one, beats about the same from generation to generation (to paraphrase JKG the elder). It’s the institutions that change. We should have a way of dealing with crooks as a matter of institutional (no pun) policy. That much it seems goes without saying, although it seems to be rather more difficult to do than it should.

The most recent economic crisis, triggered by a rapid run-up in the nominal (money) price of various assets, is a more difficult institutional adjustment. Warren is correct that whatever real assets were created as we ran up the money price of debt and other monetary instruments are still in place. And whatever scientific/technological knowledge was created is still present and available for use. We are not now dumber than we were in 2000 or 2005. What has been lost is the balance sheet value of some (probably many) wealth holders. But of course if this was never a reflection of the real value of the assets then it is not so much a loss as a readjustment. People feel poorer because they once felt richer; buoyed by the fool’s gold in their portfolio. Feeling poorer, they now pull in on the reins of their consumption with all the well known results. Agreed there is a need for new rules and the enforcement of both old and new ones so as to control and regulate the financial sector. I also think we would benefit by reducing the strength of that sectors siren’s song that lures so many able minded to its call.

There is a relationship between the financial crises and the real economy, but it is of our making. By this I mean we have put in place a system of rules and policies by which the pecuniary forces in the economy animate or arrest the real forces. This frequently contributes to an already poorly functioning labor sector (market). What would help is to readjust this relationship with an eye toward lessening the impact on the real sector due to the exuberance (irrational or otherwise) in the financial sector. This is a matter of policy, law and regulatory changes necessary to adjust the institutional controls. The first and most obvious one is the labor market. The Full Employment Act of 2009 should be written and passed with an ELR provision (build a high speed rail system for openers and then I’ll add about 50 other obvious projects that would build real wealth in the US). This would significantly dampen the effect of the financial sector on the labor market and bring some stabilization to aggregate demand. Economists and others ought to give at least as much attention to the labor market and real sector as they have to the financial sector.

I don’t know if the above is what Warren has in mind when he says it is the response wherein the problem lies, but it seems to me the response so far is mostly framed with the same logic and played with most of the same players that have helped us misunderstand the relationship between finance and production.


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4 Responses to Professor James Sturgeon

  1. Curious says:

    “..if this was never a reflection of the real value of the assets then it is not so much a loss as a readjustment.”

    Agreed. The problem is how to determine the real value of an asset.

    “..there is a need for new rules and the enforcement of both old and new ones so as to control and regulate the financial sector.”

    If regulation is supposed to prevent bubbles/crashes (discrepancies between real and nominal values of assets) we have to have a way to determine the real value of an asset first. And if we can determine an objective real value of an asset, wouldn’t investors buy when nominal price goes below the real value and sell when it rises above it and thus keep the nominal and real values in sync without regulation?

    Reply

    Dissenting Comments Encouraged Reply:

    “Agreed. The problem is how to determine the real value of an asset.”

    Curious I need your help. My fat old girlfriend in NY city, with the 3 phd’s assures me her sex is priceless. She is a shopping machine who views all other humans as walking atm’s to support her boring conversation, large appetite, and purchases at macy’s.

    I took her to vietnam once after she read “the quiet american” as an adventure. There she saw beautiful young women who were more adventurous and exciting and valued thier sex asset for much less. She was so disgusted and outraged how this new “market” showed her how people there valued her as “worthless” that she cussed me for 2 weeks and then never talked to me again, later I heard she committed suicide. Sometimes bringing some people into the reality of the real market value of their assets can lead to death, murder, suicide, war etc etc etc – deal or no deal with howie mandel and mark to make believe is better for these people no?

    Reply

  2. Dissenting Comments Encouraged says:

    “I’ll put in my two cents. The crooks should be convicted as a regular part of the legal system and examples set to deter future attempts.”

    William Black has complained about the keating 5 for decades, warren got smart, the best way to rob a bank is to own one, how sad he decided if you can’t beat the crooks, to join them. Zorro is turning in his grave.

    “It’s the institutions that change.”

    We had laws going back to the 1930’s to handle too much leverage and financial innovation, that preserved the institutional memory that was lost on the lifetime memory of mere humans, each generation seems to require to relearn the old mistakes. At this rate humanity can never progress beyond what 1 human can learn in 1 lifetime, say 100 years. The AI robots are going to leave us in the dust.

    “And whatever scientific/technological knowledge was created is still present and available for use.”

    What a bunch of garbage, there is a rotting super collider sitting under texas that could have been teaching new physics. The shuttle program is going away for 5 years and maybe permanently while we rent taxi space service from russia and china will probably have the first moon and mars base. The kids today know a lot about brittney spears and deal or no deal, but they don’t seem to know a lot of hard math or science like those chinese kids do. Why did we drop that ball? Disgraceful.

    ” We are not now dumber than we were in 2000 or 2005.”

    LOL! BWAHAHA! What a fool! I just got back from the NEW star trek, and although we may not be dumber than 2000, the smarts we had in the 60’s and early 70’s spacewise and physicswise really seems to be going to other nations today.

    “I also think we would benefit by reducing the strength of that sectors siren’s song that lures so many able minded to its call.”

    It is a hopeless lost cause, I have told all the finance guys here to pick up a biology book and learn some genetics bio science so they can extend thier lives, if self survival is not enough motivator to get the dumb monkey off the bloomberg terminal what is?

    “The Full Employment Act of 2009 should be written and passed with an ELR provision (build a high speed rail system for openers and then I’ll add about 50 other obvious projects that would build real wealth in the US). ”

    LOL. the idiots in orlando, tampa just canned thier rail system, saying it costs too much, they need that money for food stamps for poor kids, good lord! The first emporer of china could have brought modern civilization to the entire globe, but he decided there wasn’t much out there and instead focused on internal issues and probably set back the development of humanity by thousands of years.

    Krugman sums it up nicely below, the idiots have gotten control of the asylum.

    http://www.businessinsider.com/krugman-yes-california-is-a-crisis-of-democracy-2009-5

    Life extension, space travel, does not happen from warren and mike norman and the rest of you clicking buttons on bloomberg terminals trading stocks and futures back and forth, pathetic.

    Reply

    Dave Begoka Reply:

    I believe if we ever get transparency of our government you will find the Shuttle and most of what you are speaking of is long out dated. I have seen some crazy stuff flying in Crawford TX while W was in office, and how old is David Rockefeller? 120? HW is getting up there too! And still skydiving?

    http://tinyurl.com/acp5uz

    Reply

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