But there's a simple criterion to judge them. If public-private partnerships return more to the state treasury than the cost of borrowing, then it's legitimate. If not, then not. For example, if the state puts up $1M for one year at a time when it costs the state 5% to borrow, then the partnership had better return at least $1,050,001 to be called a partnership.

Jobs per se are not enough. We do not want to use taxpayer money to hire people to work in private industry. Only if the jobs return more in tax revenue than they require is this a legitimate use of public money.

Good highways and ports, the rule of law, and many other things are legitimate public-private partnerships. IRBs, on the other hand--which should be a good form of public-private partnership--are widely abused. For-profit prisons... that's national socialism.

It sounds like people were announcing an imminent debunking; any idea if that actually happened?

You're right, in that July, '09 WSJ article Yves Smith cited it did sound like a debunking was imminent. However, here we are in August, 2010 and the question remains a controversy among the experts.

Dan writes:

That doesn't negate her point that there was a price bubble, though.

The price of oil did spike (07/03/2008 $145.31/bbl.) and then collapse (02/12/2009 $34.03/bbl.) according to this Cushing, OK. spot price chart. The question remains: was that volatility caused solely by supply and demand fundamentals or were prices driven to their highs, in part, because of the speculation that was occurring in the futures market?

Consider this. The futures market might have been helping to bring additional oil production on-line faster than otherwise would have been the case as the demand rose through '07 and into '08 and, therefore, speculation might have been helping to keep the price of oil down during the period of the run-up. Whether or not we're bumping up against the peak oil ceiling (i.e. the maximum production rate we're ever going to achieve) certainly the Deep Water Horizon disaster has clued most of us in to the fact that bringing additional oil production on-line takes a lot of lead time and it is becoming more and more expensive.

Smith's argument crosses a political fault line because the idea that markets can be artificially manipulated is uncontroversial among reform advocates, but in this one particular case it involves a commodity that many of those same people would prefer to see us wean ourselves off of. The liberals' temptation is to respond: Hey, manipulated oil? Then let's go green - the sooner the better.

That doesn't negate her point that there was a price bubble, though. The sharp rise and fall in price is testament to that, even if long term trends can explain a smoother version of the same phenomenon.

The Krugman link is a bit of a face-saving walkback for him, and since he's been on the right side of so many issues I'm not inclined to rant and rave about it too much. It was more a response to his brief exercise in ego onanism.

Oh, and I think "the world was in a recession" and "the world was in recession" are both grammatically correct.

By October, prices had fallen to $64 a barrel. Bloomberg columnist Caroline Baum described the world as “drowning in oil.”

Well yeah, by October the world was in recession. Oil consumption-wise, it still is. The supply curve for oil only becomes highly price inelastic as it is reaching new peak consumption levels as was occurring in early to mid- '08. The two parts of Smith's book I disagreed with were her criticism of Paul Krugman's take on oil prices and that hard to take seriously demonstration in the appendix that economics in the real world is complex and dynamic and that economists who use models, like Krugman, don't understand that. (I don't have the book in front of me, both issues were referred to in Chapter II if I recall correctly. I think the appendix was written by some else.)

Anyway, Corrente hosted a book discussion with Yves Smith. I didn't show up until after she was gone but, in what is now the next to the last comment in the thread at 03/28/2010 - 9:46pm, I went on and on about why I disagreed with her, Taibbi, et al. on the matter of '08 oil prices.

Why I think this is important is that when we talk about economic recovery these days, we need to understand we don't really have anything to return to; not to a housing or a dot com boom, nor to the days of "happy motoring."

We buy into it. We grumble but we pay them to do it. We pay the subscriptions, the credit card interest. We defend the "need" to keep military industry in our struggling county, etc. etc.

The flawed system is sustained by our own flaws.