Practice Good Theory

It's a pleasure to teach, when the student is curious. This is the subject of a lyrical mood-study I wrote in 1988, reproduced with minor edits. To Teach To teach is to step into another man's thought, to hold with one hand some of his knowledge and with the other a source of new light, to draw these together as a new line, and to leave it there as a frozen principle upon which to base the next. To teach is to start a point & hold interest. Then, to continue the theme to a question mark. To raise an issue.  To pose a question that must be solved: NOW! It is to make visible, to the student, a contradiction. It means, to know the premises of the pupil --  and to propound an "impossibility"  that pleads for a new theoretical construct. It means forcing the mind to re-evaluate its principles, to see the chinks, to spot the gaps, in its hypotheses. It means the throwing up facts that are like lights showing the way. To teach is to catalyze anot...

Among Euro countries, Greece is seen as least creditworthy. It cannot "print" Euros -- that's the ECB's job. So, it cannot adopt a traditional Keynesian route to stimulus. Greece's  nominal GDP will soon have shrunk 20% ! They recently defaulted on debt, but must default once more on the 500 billion Euros still owed (of which  250 b is owed to European governmental  organizations .) They have started a little "austerity", but doing too little is a mistake: it drags out the recession, without fixing anything; and, in the end, everyone blames "austerity". The Greeks want the EU to help them out some more, while the EU (mainly the Germans) want the Greeks to do more to fix their economy. The major options facing Greece and the EU today are: Greece leaves : goes back to the Drachma, but everyone else stays in the Euro Euro unravels:  perhaps a few countries (Germany, Netherlands, etc.) keep the Euro, while most others leave Euro survives ...

In Jan 2009, proposing almost $1 trillion in new spending, President-elect Obama said : " ...at this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe. Only government can break the vicious cycles that are crippling our economy... " Obama's team released expectations of the unemployment rate with and without the stimulus. Their  prediction for the unemployment rate at the end of Obama's term with and without the stimulus , was -- drum roll -- 5.2% as against 5.5%! They also predicted that by 2014, we'll be about the same with or without the stimulus. Here are the options they offered us, using their figures and assumptions, not mine: without stimulus, ( red line ) unemployment will rise to 9% and go down slowly to 5% by 2014 with stimulus ( orange line ), unemployment will rise to 8% and go down much faster reaching 5% by 2014 Here is a graph of unemployment rates. Notice the...

No one person can be blamed for our great recession, but if one had to name a few of the most notorious, Alan Greenspan, Robert Rubin and Larry Summers would make the list. Not surprising that TIME magazine had them on its cover as the  "committee to save the world". That should read "Committee to Inflate the Next Bubble". This cover is from the   Fed 15, 1999 issue   (HT: James Grant's book " Mr. Market Miscalculates ") Yet, in 2009, Larry Summer was back on Obama's team to help with economic policy. Some people joke that this type of pop-magazine cover is a contrarian sign. Now, The Atlantic brings us this cover, depicting the latest savior. If history repeats itself, 10 years from now his name will be mud too. (For a 2006 view on Greenspan's legacy, check out this article by Richard Salsman .)