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Friday, April 06, 2018

An economic education

Sometimes these jokers openly admit what is readily obvious to even the casual observer: the basis for their professed knowledge is remarkably shallow. In this particular circumstance, one might even say callow.
Jeffrey Gundlach warns we may be repeating the mistakes that led to the Great Depression. The bond investor was asked for his view on the rising trade tensions between the U.S. and China.

"It's not a positive. I mean it is really interesting when I was in elementary school and high school we talked about the Great Depression ... [What] my teachers told me was that the Great Depression was caused by the Federal Reserve raising interest rates prematurely in a not so strong economy and also the Smoot-Hawley Tariff Act," he said Wednesday on CNBC's "Halftime Report."
Well, if the opinions of public school elementary teachers from four decades ago aren't a sound basis for modern economic policy, I don't know what could be. Sure, my elementary school teacher didn't know the difference between a triceratops and an allosaur, but I'm confident her knowledge of economic history was considerably more sound.

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60 Comments:

Blogger Peaceful Poster April 06, 2018 11:14 AM  

"Bond King" my ass.

He's probably petrified of China dumping Treasuries, too.

Blogger lazlo azavaar April 06, 2018 11:16 AM  

Looks like they're running out of authorities to argue from.

Blogger Sevron April 06, 2018 11:17 AM  

It’s almost beyond parody.

Blogger JK April 06, 2018 11:18 AM  

I was just asked yesterday if I would teach an Economics course at a homeschool co/op. Just started thinking about it - immediately thought about Hazlitt's Econ in One Lesson, go over all of the schools, destroy Keynes & bring in some Human Action.

Any other ideas for an intro homeschool course?

Blogger Daniel April 06, 2018 11:24 AM  

Homeschool course? Return of the Great Depression as the source document, and then as economic concepts are mentioned, study them "backwards" so to speak. It is an outstanding textbook when supplemented that way.

Blogger Nate April 06, 2018 11:27 AM  

"I heard someone say something one time and I thought it sounded smart so I am gonna repeat it... so people will think I am smart." - Every Pop Financial Analyst Ever Every Day.

Blogger SDaly April 06, 2018 11:29 AM  

Who here doesn't remember their 4th grade class on rising interest rates and the Great Depression? It's a shame he didn't learn anything later during his studies at Dartmouth and Yale.

Blogger James Dixon April 06, 2018 11:29 AM  

Jeffrey Gundlach? Never heard of him. Now, if they had interviewed Bill Gross, I might be willing to listen.

Blogger L' Aristokrato April 06, 2018 11:36 AM  

But what if the triceratops identifies as an allosaur?

Blogger Dave April 06, 2018 11:39 AM  

What's the percentage of public school teachers that could even explain what the Federal Reserve is and what it does, maybe 10%?

Blogger Peaceful Poster April 06, 2018 11:46 AM  

Jeffrey Gundlach? Never heard of him. Now, if they had interviewed Bill Gross, I might be willing to listen.

Just be wary that Gross talks his book.

Blogger pyrrhus April 06, 2018 11:49 AM  

Well, if the opinions of public school elementary teachers from four decades ago aren't a sound basis for modern economic policy, I don't know what could be. Sure, my elementary school teacher didn't know the difference between a triceratops and an allosaur, but I'm confident her knowledge of economic history was considerably more sound.

In retrospect, it's amazing how much I was taught in grammar school that turned out to be 100% false...The exception was basic math....But then again, my introductory Psych course in college, taught by a world famous psychologist, wasn't much better.

Blogger pyrrhus April 06, 2018 11:51 AM  

What's the percentage of public school teachers that could even explain what the Federal Reserve is and what it does, maybe 10%?

Maybe 1%...Maybe 10% of Congress knows what the Fed really is, and what it actually does.

Blogger FUBARwest April 06, 2018 11:52 AM  

Where would one even go for an economic education. I recently had a conversation with an econ major at NYU in his third year and all he had read was Keyens and Karl Marx.

I was shocked but if it wasn't for this blog I wouldn't know any better. There doesn't seem to be many places where people can actually find the truth, or at least not falsehoods, in a time where information on the internet is so abundantly accessible.

Blogger lazlo azavaar April 06, 2018 11:56 AM  

pyrrhus wrote:but I'm confident her knowledge of economic history was considerably more sound.

Based on what?

OpenID widlast April 06, 2018 11:58 AM  

If there is one obvious characteristic of leftist academia (and those like them) it is their constant attempts to make themselves appear much more intelligent than they actually are.

It gets tiresome.

Thus the old saw "those of you who pretend to know everything are quite irritating to those of us who do".

Blogger Demonic Professor El April 06, 2018 12:10 PM  

@16 Widlast

Very true. To paraphrase Hemingway - they use ten dollar words to hide ten cent ideas.

I say this being formerly of academe. Most of them are really not very smart.

Blogger James Dixon April 06, 2018 12:16 PM  

> Just be wary that Gross talks his book.

I'm sure he does. But his historical knowledge of the bond markets is on par with anyone.

Blogger The Deplorable Podunk Ken Ramsey April 06, 2018 12:19 PM  

Even so, I bet you my grade school economics teacher could take down Paul Krugman.

Blogger Mr.MantraMan April 06, 2018 12:22 PM  

Gundlach can sell his bond stash to Soros, but I assume he just trying to flush out the weak hands

Blogger Dave April 06, 2018 12:24 PM  

my elementary school teacher didn't know the difference between a triceratops and an allosaur

And so it was the seeds were planted for Space Raptor Butt Invasion.

Blogger Crew April 06, 2018 12:28 PM  

Is all this talk about trade wars etc just smoke screens for their likely attempt to stop China and Russia from using the Yuan and Ruble to trade oil in, or even gold?

Every time some despot in the ME talked about not using the mighty dollar they were done away with.

What will be the excuse this time? Weapons of mass destruction in China and Russia. Oh wait. That happened long ago. Poisoning some people with weapons-grade nerve agents? Annexing a piece of territory that historically was theirs (Taiwan)?

Blogger LES April 06, 2018 12:33 PM  

A local news station interviewed a hazelnut grower who claimed that a Chinese 15% tariff on hazelnuts would reduce his income by 15%.

My understanding of a tariff is that if he sells his hazelnuts for $1.00 per pound and the Chinese impose a 15% tariff the cost to the Chinese consumer is $1.15. The grower still get his dollar and the Chinese government get the 15¢. Sure, he has to compete with other hazelnut growers from other countries, but they could underprice him anyway.

Do I have this right?

OpenID widlast April 06, 2018 12:45 PM  

@23 You got it right.

Blogger Blume April 06, 2018 12:49 PM  

Yes led that's how it works. I assume the farmer is saying he would have to drop his price to keep competitive.

Blogger Crew April 06, 2018 12:50 PM  

OT, but looks like McCabe is really in trouble:

https://theconservativetreehouse.com/2018/04/05/important-cth-confirmation-catherine-herridge-confirms-lisa-page-statements-contradicted-andrew-mccabe-ultimately-leading-to-his-firing/

Blogger Crew April 06, 2018 12:51 PM  

@23: As Vox pointed out yesterday on the other thread, a 25% reduction in the cost lead to a 30% increase in sales.

So a 15% increase in the cost will likely reduce your sales. Perhaps by as much as 15%.

Blogger Blume April 06, 2018 12:52 PM  

though doing the math it's roughly 13% to return to a price equilibrium.

Blogger Angantyr April 06, 2018 12:58 PM  

"Sure, my elementary school teacher didn't know the difference between a triceratops and an allosaur..."

I snorted my coffee when I read this - curse you!

At least *I* know the difference between these two magnificent, extinct critters (three horns vs. 3 fingered claws!)

Blogger James Dixon April 06, 2018 12:59 PM  

> My understanding of a tariff is that if he sells his hazelnuts for $1.00 per pound and the Chinese impose a 15% tariff the cost to the Chinese consumer is $1.15.

Correct. There are two reasons his sales will decrease. 1) At $1.15 there will be fewer buyers than there were at $1.00. 2) Sellers from other countries will still be priced at $1.00.

This is a purely static analysis, of course. There's actually always interplay between the various factors. Some other sellers will use he opportunity to push their price up to $1.05 or $1.10 and still undercut him. A few buyers will consider the higher price a mark of quality and buy in preference. Etc., etc. The interactions are almost endless.

But the general rule is that when your price goes up, all other things being equal, you lose market share.

Blogger VFM #7634 April 06, 2018 1:38 PM  

"Sure, my elementary school teacher didn't know the difference between a triceratops and an allosaur, but I'm confident her knowledge of economic history was considerably more sound."

(snort)

Blogger VFM #7634 April 06, 2018 1:40 PM  

"At least *I* know the difference between these two magnificent, extinct critters (three horns vs. 3 fingered claws!)"

@29 Angantyr
I have more difficulty telling the difference between a triceratops and a rhinoceros, personally.

Blogger YIH April 06, 2018 2:27 PM  

Crew wrote:@23: As Vox pointed out yesterday on the other thread, a 25% reduction in the cost lead to a 30% increase in sales.

So a 15% increase in the cost will likely reduce your sales. Perhaps by as much as 15%.

Though the US is ranked third in the world, it's a rather distant third: https://infogalactic.com/info/Hazelnut. By a huge margin Turkey is the most, seconded by yes, Italy. So unless he's a 'boutique' farmer (all ''organic'' or something else worth charging a premium for) the tariff probably won't have much of an impact at all.

Blogger SciVo April 06, 2018 2:42 PM  

YIH wrote:Though the US is ranked third in the world, it's a rather distant third: https://infogalactic.com/info/Hazelnut. By a huge margin Turkey is the most, seconded by yes, Italy. So unless he's a 'boutique' farmer (all ''organic'' or something else worth charging a premium for) the tariff probably won't have much of an impact at all.

99% of U.S. hazelnuts are grown in Oregon, and Oregon hazelnuts are branded as a premium product, but I would expect that to result in less price sensitivity rather than more.

Blogger Wynn Lloyd April 06, 2018 2:43 PM  

The universities are lost. It's only a matter of time to where a humanities phd means absolutely nothing. Sucks very much. But that's what happens with convergence, the institution stop its primary function and dies.

Blogger Wynn Lloyd April 06, 2018 2:44 PM  

That's excellent.

Blogger Josh (the sexiest thing here) April 06, 2018 2:44 PM  

Jeffrey Gundlach? Never heard of him. Now, if they had interviewed Bill Gross, I might be willing to listen.

He replaced Bill Gross as the bond king after Gross got kicked out of pimco:

https://www.forbes.com/sites/schifrin/2014/11/05/jeffrey-gundlach-king-me/#4f8391b17212

Blogger Warunicorn April 06, 2018 2:46 PM  

Shorter Jeffrey Gundlach: "Tariffs are bad, m'kay?"

Sure, let the Chinese get away with economic murder. It's worked out swell for the USA so far.

F*ck, I hate these idiots.

Blogger SciVo April 06, 2018 2:53 PM  

Bloomberg is quaking in its boots that...a social media star could use Weibo to call for a boycott of American goods, and angry mobs might get whipped up by nationalist fervor and ransack our factories there? It wasn't so much an "argument" as a series of anecdotes followed by a conclusion.

Blogger Steampunk Koala April 06, 2018 2:56 PM  

This is extremely, hilariously timely for me, as our teachers here in Oklahoma have been on strike (after receiving a $5,000 raise, but that wasn't enough) and spent the better part of yesterday screaming "where's my car?" at the capitol building. And yes, there were the obligatory "Harry Potter did X, so legislators can do Y" signs. Nobody is really talking about the fact that CAIR and the ACLU and several out-of-state unions are also present, and apparently involved at the ground level of all this.

Blogger James Dixon April 06, 2018 2:58 PM  

> Bloomberg is quaking in its boots

Yeah, we covered that fairly well in the previous thread. China cannot win a trade war with us. They can hurt us, but we'll destroy their economy in return.

Blogger James Dixon April 06, 2018 2:59 PM  

> This is extremely, hilariously timely for me, as our teachers here in Oklahoma have been on strike

I hope your legislature has more guts than the WV legislature did and fires them all.

Blogger Tatooine Sharpshooters' Club April 06, 2018 3:01 PM  

"And I always remember this brilliant economic insight because we were making hand turkeys at the time. I love hand turkeys, I draw them all day, while the pretty lines on the computers go up and down."

OpenID markstoval April 06, 2018 3:43 PM  

@4 JK

"Any other ideas for an intro homeschool course?"

On economics I would include Rothbard's "History of Money and Banking in the United States: The Colonial Era to World War II" and also "America's Great Depression".

Good luck. Working with kids is great fun. Especially the bright ones --- and the home schooled ones. (often the same of course)

Blogger Steampunk Koala April 06, 2018 3:44 PM  

James Dixon wrote:

I hope your legislature has more guts than the WV legislature did and fires them all.


Not likely. There's been a little cuck finger-wagging, but this is a legislature that passed a tax bill last session so outrageous the state supreme court declared it unconstitutional, so they called a special session and passed a bill twice the size to replace it. They can't steal our money fast enough.

Blogger Blastmaster April 06, 2018 5:08 PM  

My mom told me that FDR saved us from the great depression. As opposed to extending due to constant meddling and uncertainty. She voted for obummer and the &unt.

Blogger Zeroh Tollrants April 06, 2018 6:25 PM  

When I was in my first years of elementary school back in the early 70s, we were given a little piece of wicked propaganda each week called The Weekly Reader. I'm sure Vox remembers these, I think all public school kids got them. Anyhoodle, they contained "news" items for kids and the teacher would have us read them & then discuss what we had read & sometimes make us answer questions about the material.
A few stand out in my mind.

1)The coming Ice Age. This was depicted on the cover as a scary frozen over world. I remember being genuinely disturbed by this. The basic premise was, the world would soon freeze over, we'd all starve to death.

2) We would soon be running out of oil. Very soon. It was delivered to us in a panicked manner. There were probably no real solutions, we might die.

3) Drug resistant flu. I don't remembwe much about this one, but yet again, we were all going to die soon, most likely.

4) Windmill farms as far as the eye could see would be taking over America. Everyone would have one, or 50 in their yard. Inevitable, what with there being no oil & all. Otherwise, yep, death.

5) Women would be doing manual, blue collar, labor type jobs in equal proportion to men. There were numerous stories about women as linemen for the power company, roofing contractors, ship builders, on road crews, riding on the back of garbage trucks, alongside glossy types of stories of women as newscasters, CEOs, and politicians. I remember the lineman story especially well, because it had pics of this short, squat chick with a fat butt hanging off of a pole, & even as an eight year old girl, I thought it was asinine, so I was giggling & making fun of her & got in trouble by my mini skirted/frosted eye shadow wearing feminist teacher.
That never ended up getting married, BTW.

At one time, my mom had a trunk of my old things from elementary school and I think a few of those survived. I will see if I can find them. You guys can see that brainwashing kids is not a new biz for the Commies. It started long, long ago.

They did all kinds of fun experiments w/us, like- "hey, let's not have actual grades, and put kids in something called 'units' based vaguely on where we think they best fit,"
And another idea was, "hey, let's remove all these walls in between individual classes & (& also all these desks), & just have the kids sit in groups in the floor spread out in this huge open space."

There was more, much, much more. The 70s were insane. Like many bad lab experiments gone wrong. And this was when the school was 100% white, Christian, & wholesome.
We even had a 30 minute Bible class and breakfast, before school started, if you got there early.




Blogger eclecticme April 06, 2018 6:52 PM  

@4 JK

"Any other ideas for an intro homeschool course?"
1. Make it clear that the difference between cavemen and ourselves is the ability to produce, not demand. Demand (whining) produces nothing.

2. Teach them the proper respect for economic'experts' i.e. very little. See below.

3. Produce quotes from 'expert' economists which turned out wrong e.g. Bernanke in 2008. LTCM.

4. Show them the growth of the US under tariffs. Show them the growth of the US during deflation. Show them the policies of FDR when people were going hungry; to destroy food.

5. Teach them the difference between theory and reality. Read Taleb for good stories.

Blogger Allen L. April 06, 2018 7:00 PM  

Zeroh Tollrants, yes indeed, up until about the late 80's, early 90's, all the climate research indicated a coming ice age. One guy I went to college with spent every summer (cough cough) in Antarctica. This was the consensus view according to him. It's still the more probable near-term climate shift.

Fortunately for me, my demise due to planetary hi-jinks will probably be from a volcano or an earthquake. Teachers teach only what they are given. It's a true GIGO system.

OpenID markstoval April 06, 2018 7:18 PM  

@49

"Teachers teach only what they are given. It's a true GIGO system."

So far, those of us who teach math in private schools have escaped the madness. They are coming for us too of course; but so far we are teaching the right stuff.

Blogger TontoBubbaGoldstein April 06, 2018 7:37 PM  

This comment has been removed by the author.

Blogger TontoBubbaGoldstein April 06, 2018 7:40 PM  

@4

Basic Economics:A Citizen's Guide to the Economy

Blogger Allen L. April 06, 2018 8:42 PM  

markstoval, what can most teachers really do about it even if they wanted to? How long will they last if they don't teach the received material? Not long is my bet. It's only harder to screw with mathematics, it's not for lack of those people trying..

Blogger Anne April 06, 2018 8:49 PM  

That's not so easy since it isn't actually a strike. Their school boards gave them permission to walk out and sent the students home. It is unclear what will happen when they run out of snow days and the teachers actually stop getting paid to walk out.

Blogger tz April 06, 2018 9:31 PM  

We need to go back to Scopes - we had a trial - and reintroduce "A Civic Biology" with its 5 races of humans and observations (which are true - white privilege is in your mind, because it works faster and better than other races).

Blogger (((Rambam))) April 06, 2018 11:35 PM  

When it comes to economics this is the best source on the internet. VD has a B.S. in Economics. I'm assuming with honors.

Blogger Thucydides April 07, 2018 12:13 AM  

When I was in school, we were confidently told the cause of the Great Depression "was a mystery".

It took decades of slow self education to understand the ultimate cause was the massive debt overhand the Great Powers created financing the "Great War", and their attempts to recreate the "old order" without taking the debt overhang into account (i.e. the UK attempting to repel their currency on a pre-war gold standard).

Now we have a debt overhand which is orders of magnitude greater, but this time we have quack economics like MMT and QE to mask the sorts of information the market and investors need to make rational choices. The most interesting posts on VP for me are the ones where Vox shows us where economic theory is expanding beyond the paradigms that we were mostly taught, Keynesian, Austrian, Chicago or other economic schools.

Of course the cruel irony is there may never be an opportunity to actually put much of this new knowledge into practice as we stumble towards disaster......

Blogger Ceerilan April 07, 2018 12:57 AM  

In speaking of high school economics, I was shocked that the EU organized itself under the inherently unstable system of one currency subject to many different monetary policies. Observable fact says that either the creators of the EU had less sense than a high school economics student, or planned an economic bomb in the very fabric of their state as a way of justifying further power grabs.

Blogger The Stygian April 07, 2018 1:49 AM  

How come the central banks always manage to survive such extreme conditions like the Great Depression--never mind the imaginary money is still there. Lol

Blogger tweell April 07, 2018 9:57 AM  

I do believe there's a comic book produced by Castalia that would help. Sowell's basic economics book may be useful as well.

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