Economics, Climate ... & ... Learning from the Great Depression

 

William Nordhaus: Growth & Climate

The successor to Paul Samuelson’s text is (co-author) Nordhaus’s update. Samuelson's is the economics text I read in Econ 101. Nordhaus is a (Riksbank) Nobel winner for his work on the economic effects of climate change.

Excerpt:
 

But the business-as-usual baseline, against which costs of [climate related] action are measured, conveys a misleading message to policymakers that fossil fuels can be consumed in ever greater quantities without any negative consequences to growth itself.
 

Steve Keen, a heterodox economist, produced a blistering critique of IAMs and how they understate hugely the impact on global warming on economies and the planet. Keen says the IAM “assumed that empirical relationships derived from data on change in temperature and GDP between 1960 and 2014 can be extrapolated out to 2100—thus assuming that 3.2°C more of global warming won’t alter the climate! They have assumed that tipping points—critical features of the Earth’s climate such as the Greenland and West Antarctic icesheets, the Amazon rainforest, and the “Atlantic Meridional Overturning Circulation” which keeps Europe warm today—can be tipped with only minimal additional damage to GDP.”

The great merit of Nordhaus’ work is that he always tried to use empirical evidence to support his models; he was not just an arcane neoclassical micro theorist. However, what seriously weakened his contributions was his commitment to the unrealistic assumptions of neoclassical theory.


James Galbraith: What Can the Last Great Crash Say About the Next One? Oil, AI, and the Perils of Technological Revolution

This is a terrific article well worth reading in full. A few excerpts:

All life requires resources, which must be extracted from the environment, with a sufficient surplus so as to make it possible to work, develop, grow and reproduce. And this is no less true of any mechanical system, or of any economy. Access to resources requires energy, which comes in the first instance from sunlight, or from its stored forms, including wood, coal, oil, natural gas – as well as the nuclei of certain very heavy atoms. To get at the energy requires tools, which are built according to plans, and at increasing levels of complexity as technologies advance. But complexity is a two-edged sword. It permits ever-greater efficiency in the use of resources, thus ever-greater levels of production and the improvement in human life – but it induces fragility in the system as a whole. Once a system is built, it functions in a certain, predictable and predetermined way, so long as the conditions for which it was designed hold good. But those conditions may change. Simple systems are robust; complex ones are prone to major breakdowns and disasters.

Economic value arises because that which is necessary, or desired, is often scarce. And this is particularly true of goods or services that are newly created, imagined, or packaged in such a way as to appear to be new. Innovation is by definition recent, and by definition has a single originator. Innovation is usually achieved by introducing a new level of complexity, as well as other improvements of design or recombination of existing technical forms. During the window, however brief, when imitations are few, the originator enjoys a degree of market and monopoly power, enhancing the economic value associated with the scarcity of the innovation. This is the moment when fortunes can be made. And economic life is dominated by the search for fortune, arising from producing that which is new, better, or made more cheaply but just as well, than that which already exists.

These are the basic elements of what Jing Chen and I, in a small book published in 2025, have called “entropy economics.” Our goal was (and is) to bring economics into alignment with the understanding, now prevalent in every other field of human inquiry, of the second law of thermodynamics – the entropy law – which is the most fundamental law of nature. We believe that this is the key to understanding that there was, in fact, a precipitating technological event behind both the Great Crash and the Depression.

For mainstream (neoclassical) economics, technological change is a largely continuous process, with phases of acceleration and deceleration. It cannot make things worse. That is why mainstream economists are relentless techno-enthusiasts – they see the dynamism of capitalism as its principal justification, in the face of inequalities, environmental degradation, and the working population’s native suspicion of the capitalist class. Joseph Schumpeter, a conservative but definitely non-mainstream observer of the 1930s, took a much colder and more clear-eyed view, summed up in the phrase “creative destruction.” Schumpeter’s insight was that new technologies destroy older civilizations and ways of life, leading (he argued) to improvements for the survivors but not without severe costs for those invested in the previous systems and methods. Indeed for this reason peasant farmers and medieval guilds were by nature technologically conservative: they wanted to keep what they had and were not concerned about the great gains accruing later on to someone else. Schumpeter however, so far as I’m aware, did not specifically identify a new technology bridging the crucial moment in this story.

We believe that the precipitating event, in this instance, was the announcement of the discovery, in Texas, Oklahoma and California, of vast reserves of oil.

[My addition: Which triggered a destruction of the old economy based on coal. Also helpful in making things worse: Coolidge and Hoover made national debt significantly smaller.]

 

 

 

Who controls bond interest?

 

Esto es rotundamente falso: el coste de la deuda pública no depende de los mercados, sino del banco central. Datos, no relatos. https://t.co/Mf6K8wij1O

— Eduardo Garzón (@edugaresp) November 2, 2026

English:
This is flatly false: the cost of public debt does not depend on the markets, but on the central bank. Data, not stories.
From the quoted Tweet: Escrivá warns of excessive public debt: "Markets may start to doubt and the situation could get complicated"

The domination of banks (UK edition)

 

Central banks have been handed independence and used it to become the unaccountable core of the system. This is what banking tyranny looks like , the literally domination of power by the banking elites taken to the point the country literally collapses . Liz Truss is right: they have grown megalomaniacal. The governor of the Bank of England can’t be sacked; a prime minister can. That is not a technical detail. It is the actual power arrangement. The mechanism and motivation is financialisation. It’s the core purpose of banking and in its current form it threatens the states existence . Basel rules force banks to hold far more capital against a factory loan than against a mortgage. Inflation targets treat rising house and land prices as “asset transfers,” not inflation, so rates never cool the boom. Credit is therefore created against the existing housing stock and financial assets, the renter class, while industrial capacity is starved. Bankers literally live in ivory towers so they don’t notice till late in the cycle . Workers’ wages are financialised into rents, mortgages and debt service. The West has been deindustrialised to the point it can no longer make what it needs. Bankers add no productive capacity to the society at all other than pulling forward production or asset inflation through debt . This is the Tindale Trap conceit : maintaining financial dominance together with a material conversion failure. This bifurcation literally leaves the state with no productive capacity to to maintain sovereign existence . Like draining blood you eventually get to weak to respond . Truss tried a growth agenda that cut against the orthodoxy. The Bank’s timing of gilt sales, the LDI structures it regulated, and the narrative that followed removed her. Independence was sold as insulation from politics. It has instead insulated a credit-allocation regime that privileges financialisation over production and protects itself against elected challenge. The direction of credit is the mechanism, and the political outcome is exactly what Truss is pointing to. We live under a global banking dictatorship

— 🇦🇺Craig Tindale (@ctindale) October 29, 2026

Who is really to blame?

 

“Russian interference” is thisclose to topping French pop charts! https://t.co/F1i3VuicmF

— Margarita Simonyan (@M_Simonyan) October 30, 2026

Productive and Unproductive "Lending" (Banks don't lend!!!)

 

🚨Brilliant interview! 💸💰💸💰💸💰💸 🚨How do banks create money ? 💸💰💸💰💸💰💸 🚨Prof Werner is incomparable. In the 5000 yr history of banking no-one has ever done an imperical study of banking to show where the money comes from- until now. Step up the rock star economist Professor Richard Werner. His amazing qualifications and held positions makes the eye water. He is truly the authority on this subject. Banks are thought of as deposit taking entities who lend money - but that is just wrong. His assessment - Banks dont lend money but they misrepresent (lie) to their customers and say that they do.

— Ignorance, the root and stem of all evil (@ivan_8848) October 26, 2026

Debunking "More Cops is Safer" / And Sacramento Fails to Hold Police Accountable

Alec Karakatsanis debunks Malcolm Gladwell’s plea for even more police.

Why is Everyone Lying?

Excerpt:

Promoting ineffective policies that expand corporate-government surveillance and violence—and then telling people it’s good for them—falls well outside the bounds of reasonable massaging of “messaging.” Because once people on the left start repeating the fascist mantra that 2+2=5—in this case that more authoritarian policies, profitable surveillance, militarized policing, targeting of immigrants, etc. will create a safer and better society—it will become difficult or impossible to dislodge that framework in the future. That’s true not only from a communications perspective, but also because that same police and surveillance infrastructure will be used to hobble or eliminate the left in the meantime. 

Update: Lee Fang debunks Gladwell too...

Excerpt:

And then his final point is that he says preventing violence matters more than responding after. Well, that is true. But all the studies that have been done on preventing violence have shown that what prevents violence the most is the things that mostly police don’t do. It’s things like keeping youth in school or, when they’re out of school, giving them programs to do—all of those things that are not policing.  

 

...and locally: 

Sacramento Decreases its Police Oversight/Accountability 

Excerpt:

When the county grand jury concluded in June that the Sacramento Community Police Review Commission had become largely “window dressing” and recommended reforms to strengthen civilian oversight, City Hall rejected or disputed most findings when approving Mayor Kevin McCarty’s response Sept. 15. The response treated grand jury recommendations no differently than those of the review commission itself.

Of 178 recommendations submitted by the commission since 2016, the Sacramento Police Department voluntarily implemented 10 and the council formally approved one, according to the grand jury.

Nothing has prevented the city from taking up a recommendation from its own police review commission, voting on it or explaining publicly why it would not.

The grand jury report arrived nearly two years into McCarty’s tenure amid a systematic dismantling of Sacramento’s police oversight infrastructure.

The mayor was asked for his vision of police accountability and his response to critics who say civilian oversight has moved in the wrong direction during his time as mayor.

McCarty instead detailed the commission’s current authority and stressed that it operates with transparency.

“We are working to continue improving the committee’s efficacy, to strengthen commissioner training, and to better leverage existing public engagement tools,” McCarty finished. He did not acknowledge changes to both the Office of Policy Safety Accountability (OPSA) and the commission since he took office.


Half of the commission’s members have been replaced over the past two years. One persistent police critic was replaced by the mother of an officer, and McCarty proposed allowing former law enforcement officers to serve on the civilian panel.

Meanwhile, Dr. LaTesha Watson, longtime director of the OPSA, departed under a roughly $271,000 separation agreement, and the office has since lost critical positions to budget cuts.

OPSA provides independent civilian oversight of the Sacramento Police Department and Sacramento Fire Department, investigating officer-involved shootings and reviewing misconduct complaints.

....

[Conclusion]

Since 2025, key leaders have been replaced, oversight staff eliminated, and major findings by the grand jury rejected or disputed.

Sacramento spent years building a civilian police accountability system. Under McCarty and this City Council, much of what was built has been systematically dismantled.

 

 

Why Apartments Deteriorate When Interest Rates Rise

If your landlord keeps ignoring a leak in your apartment, there's a decent chance it's on purpose. For a lot of owners right now, paying to fix it just hands money to their bank. An exec who oversees 150,000 apartments says buildings are falling apart fast because of it. Here's how a landlord ends up there. Back in 2021, investors were paying crazy prices for apartments. A $100 million building might only bring in about $3.8 million a year after expenses, and people paid it anyway because money was basically free. The buyer puts down $30 million, borrows $70 million at around 3% on a loan whose rate moves with the Fed, and pays about $2.1 million a year in interest. The building covers that almost twice over and everybody feels like a genius. Then the Fed jacked rates up more than 5 points in about a year and a half. Now buyers want something like a 5.5% return on that same building. Same $3.8 million in income, but at 5.5% the building's only worth about $69 million. And the owner still owes $70 million. So the $30 million they put in is gone, and not one tenant moved out. It gets worse because the loan floats. The interest bill is now over $4 million a year on $3.8 million of income, and rents in Phoenix, Denver and Austin are down 5 to 6% since 2023. Every month the owner has to pick. Write a check out of pocket to cover the hole, or stop spending money on the building. Economists have had a name for this since 1977. Stewart Myers called it debt overhang. When you owe more than something is worth, any money you put into it makes it more valuable for whoever ends up owning it, and if the bank forecloses, that's the bank. Spend $500,000 on a new roof and you've basically handed the bank $500,000. So a lot of owners just sit on their cash and let the leak become water damage, then mold, then a building nobody can live in. The bank is doing the same math from the other side. If it forecloses, it gets a $69 million building with mold in the walls and has to eat the loss right now. If it extends the loan, it can keep carrying it near full value and hope rates come down. Lenders extended a record $384 billion in commercial real estate loans heading into 2025. The exec says some big-name funds haven't paid their mortgages in two or three years and their banks still haven't foreclosed. The official numbers are finally starting to show it. Freddie Mac's apartment loan delinquency rate is higher than it was at the 2011 peak, the worst in over 20 years. Apartment loans in commercial mortgage bonds hit 8.04% delinquent in September, up from 6.59% a year ago. Then on September 16 the Fed raised rates for the first time since 2023, and every one of those floating-rate loans got more expensive the next month. Asked how this all ends, the exec said there's a chance it's just "a decade of tolerable pain," and they're praying for that. Honestly, I get why. A slow decade lets the owner and the bank put off the loss for as long as they want. The people living in those buildings are stuck waiting it out, and the roof keeps leaking the whole time.

— Aakash Gupta (@aakashgupta) October 23, 2026

Here's the whole Tweet so you don't have to expand it:

 

If your landlord keeps ignoring a leak in your apartment, there's a decent chance it's on purpose. For a lot of owners right now, paying to fix it just hands money to their bank. An exec who oversees 150,000 apartments says buildings are falling apart fast because of it.

Here's how a landlord ends up there.

Back in 2021, investors were paying crazy prices for apartments. A $100 million building might only bring in about $3.8 million a year after expenses, and people paid it anyway because money was basically free. The buyer puts down $30 million, borrows $70 million at around 3% on a loan whose rate moves with the Fed, and pays about $2.1 million a year in interest. The building covers that almost twice over and everybody feels like a genius.



Then the Fed jacked rates up more than 5 points in about a year and a half. Now buyers want something like a 5.5% return on that same building. Same $3.8 million in income, but at 5.5% the building's only worth about $69 million. And the owner still owes $70 million.

So the $30 million they put in is gone, and not one tenant moved out. It gets worse because the loan floats. The interest bill is now over $4 million a year on $3.8 million of income, and rents in Phoenix, Denver and Austin are down 5 to 6% since 2023. Every month the owner has to pick. Write a check out of pocket to cover the hole, or stop spending money on the building.

Economists have had a name for this since 1977. Stewart Myers called it debt overhang. When you owe more than something is worth, any money you put into it makes it more valuable for whoever ends up owning it, and if the bank forecloses, that's the bank. Spend $500,000 on a new roof and you've basically handed the bank $500,000. So a lot of owners just sit on their cash and let the leak become water damage, then mold, then a building nobody can live in.

The bank is doing the same math from the other side. If it forecloses, it gets a $69 million building with mold in the walls and has to eat the loss right now. If it extends the loan, it can keep carrying it near full value and hope rates come down. Lenders extended a record $384 billion in commercial real estate loans heading into 2025. The exec says some big-name funds haven't paid their mortgages in two or three years and their banks still haven't foreclosed.

The official numbers are finally starting to show it. Freddie Mac's apartment loan delinquency rate is higher than it was at the 2011 peak, the worst in over 20 years. Apartment loans in commercial mortgage bonds hit 8.04% delinquent in September, up from 6.59% a year ago. Then on September 16 the Fed raised rates for the first time since 2023, and every one of those floating-rate loans got more expensive the next month.

Asked how this all ends, the exec said there's a chance it's just "a decade of tolerable pain," and they're praying for that. Honestly, I get why. A slow decade lets the owner and the bank put off the loss for as long as they want. The people living in those buildings are stuck waiting it out, and the roof keeps leaking the whole time.