Indeed. Saying that the visible universe is shrinking is not exactly accurate, but it captures the gist of what is going on according to current cosmological models, AFAIU. What's happening is that space itself expands uniformly, that is, the same amount of expansion happens at every point in space. Of course, this expansion adds up over long distances, so that regions very far away from us are receding at close to, and then faster than, the speed of light.

This means that we now receive light from galaxies that we will no longer see in the future. This is the sense in which the visible universe shrinks.

On the other hand, we can always see light from as far as the light could have travelled since the big bang, and in that sense, it doesn't really shrink, it just becomes less dense. It all depends on what type of coordinate system you're talking about, and what unit of measurement you're using.

That's a widely spread but IMO misleading popularization. When you read more about the many-worlds interpretation, all it's really saying is that the universe really is a unit vector in a (very high-dimensional) complex vector space. As such, many-worlds says that the universe really is a linear combination of all the many possible states that the universe could be in. The linear combination is the physical reality.

Popularization then calls each of these possible states a parallel universe. That's not completely wrong, but it is very misleading.

Arbitrage is certainly important, and it should happen on a time scale that is faster than ordinary economic events, because markets need some time to adjust [1]. But it is fairly obvious that there are strongly diminishing returns for society as arbitrage becomes faster. Imagine a hypothetical alternative market which operates on a one minute heartbeat, for example: the market algorithm simply runs a secret auction once per minute at a pre-determined time, with bid prices as fine-grained as one millionth of a cent to avoid some pathologies. My hypothesis is that such a market would be as inconsistency- and arbitrage-free as what we have today, to an accuracy where the difference simply doesn't matter to ordinary investors - where by ordinary investors, I mean actors with an investment horizon that is measured at least in months. So you would have the same benefit to the society while using less resources (resources that are currently used to get ping times down etc.).

At the same time, look at your last argument: HFT traders are basically competing among themselves, but since their response times have to be so fast these days, they are mostly competing to exploit each other's weaknesses and the weaknesses of the trading algorithms of larger investment funds.

In the hypothetical market, competition between algorithmic traders would still happen. But since there is now more time for computation, the emphasis shifts away from hacking to get short response time and instead towards making more intelligent decisions about price. There might be a shift towards more emphasis on evaluating fundamentals, and that can only be a good thing for the efficient allocation of capital.

[1] Incidentally, I suspect that the reason that much of what neoclassicals say about the macroeconomy is wrong precisely because they incorrectly assume fast arbitrage in macroeconomic events.

This is a good point. But then the question becomes: what good does HFT provide? A lot of smart people are sucked into that sector because of the money, where they are arguably causing a net loss to society by participating in an arms race that does not produce any real goods or services. Those smart people could in principle be contributing to research and development in areas that actually improve everybody's standard of living, such as medical research and robotics - or perhaps even in economics when it comes to analyzing long-term successes (after all, genuinely improving the capital allocation in the long-term could be beneficially to society, unlike the short-term gambling that is happening these days).

With that in mind, there needs to be a discussion on how best to disincentivize this kind of extremely short-term behavior, where it is via transaction fees or via trading on heartbeats.

That's pretty flamebaity, but let me try a reasonable response anyway.

As I see it, the military budget has two purposes: (1) prolong global US hegemony for as long as reasonably possible, (2) stimulate and maintain strategic domestic industries, both in terms of production facilities and in terms of R&D - basically, the military budget is Keynesianism in a guise that appeals to Republicans.

It seems fairly clear that goal (1) can be achieved on a much smaller budget, if that budget is used more intelligently, i.e. not wasted by getting into unproductive quagmires. We can argue about the exact numbers, but just compare the size of the US military budget to the next runner-up country. It's clear that there is much more than enough of a "safety margin".

Goal (2) can easily be achieved by an ambitious space program. Such a program could require domestic production of parts, as well as pretty advanced domestic R&D.

So, obvious political issues aside, I see no compelling rationally justified reason not to shift a pretty significant piece of the budget from the military to space exploration.

Skipping to what I think is really the crucial point.

I'm not exactly disagreeing with you. Rather, you seem to use "it's all about confidence" as an argument to contradict me. What I am saying is that one of the most important factors in confidence is the confidence of future income streams, i.e. demand.

In other words, it is completely misguided to use confidence-related arguments as a reason to ignore the issue of aggregate demand.

I recommend that you go through publicly available data sets, and just look at the scale of the accumulated private debt that collapsed due to the GFC. All that debt recorded previous "stimulus" by private households spending more than their income, and all this "stimulus" then stopped abruptly. We can throw numbers around here, but I think the best approach is for you to just take a look yourself. A lot is available from the St. Louis Fed's FRED database, for other, aggregated data, you might want to look at some of the things that Richard Koo and Steve Keen have collected.

In any case, the scale of the problem was truly mind boggling, and you really have to take a rational thinker's approach to judging how big those numbers are in relation to each other.

You're missing the point.

To paint an obviously exaggerated picture, if a prolonged global depression causes so much social unrest that the global supply chain disintegrates, then what good does it do if uncertainty goes away afterwards? When living standards declined after the fall of Rome, do you really think people thought that was just fine, since after all, uncertainty eventually went away?

Now of course nobody expects anything quite so stark, except perhaps limited to countries like Greece and Spain. But the point still stands: prolonged recessions can decrease the long-term trajectory of an economy. It's called hysteresis.

Frankly, you're letting your politics cloud sound judgement (bringing suspicions about future behaviour of one specific politician into the discussion is a sure sign of that). It is a pity that I cannot find the link right now, but a survey among small businesses around 2010-2011 clearly indicated that what they were most worried about was finding customers for their products and services.

Regulation can be troublesome, I give you that, but individual pieces of regulation are mostly confined to a very narrow segment of the economy, and the problem we're talking about here is obviously at a macro level.

It didn't help those on the lower end of wealth spectrum as much though, like all those people whose mortgages were under water. Rate of savings matter a lot.

That's where you're letting your politics cloud your judgement. Demand-side economists can almost as easily be used to justify tax cuts, and many demand-side economists indeed argue for income tax and tax roll cuts for lower-income brackets.

The subtle issue here is that tax cuts are only really effective when they affect low-wealth/income households, as those are the ones that are most likely to go out and spend the additional available income on real goods and services.

But what kind of confidence are we talking about here? Mostly, we are talking about confidence in future income streams. If, as an employee, I worry about being laid off in the next few months, then naturally I am going to save more - if possible - to have some savings as buffer. Similarly, as an employer, if I worry about landing enough contracts over the next months, I am not going to employ more people. It's all about income streams.

In a sense, demographics are central to the explanation of the cycle that is proposed in the article. 50 years is about the time it takes for lessons to become lost because the people who experienced them personally are dead or too old to affect the course of events.

There are two things to keep in mind here. First of all, there wasn't that much stimulus happening in the first place. All those huge sounding numbers that the Fed throws around with various QE activities does almost exactly zero to stimulate the demand, and economists who focus on how the financial sector works have been able to predict that quite accurately.

Second, the Obama stimulus has in fact helped soften the recession according to most simulations, including those of the CBO. The stimulus simply wasn't very big compared to the overall size of the problem. (Yes, the problem was that huge.)

As for the whole uncertainty thing, look: Of course this is largely a chicken-and-egg problem. You are of course right that uncertainty leads to individuals spending less. But then this reduction in demand causes uncertainty in the first place. So the non-partisan question here is how to best break that cycle. It is obvious that if you inject more demand into the system, this eliminates many reasons for uncertainty for individual spending decisions.

Outside of neoclassical economic models, expectations follow reality more than the other way around.

That's an interesting line of thought, though I would ask just how many cycles you would need to find the right price. The market may see some over- and undershoots in the valuation, but it seems like no more than a handful cycles would be needed. Then each cycle might require several "ticks" to work its way. In any case, even if the length of a tick were a minute, it should take much less than a day for the price to settle.

I suspect you are replying to people who have in mind a definition that "inflation = increase of the money supply". Needless to say that this is a ridiculous definition to start from in modern days, since the size of the money supply is not a thing anybody cares about as a primary indicator; the only reasonable definition for inflation is via the price level. But old habits die hard, and the nuts who want the world to work differently are very vocal in this small corner of economics. Don't sweat it ;-)

Actually, math is saying the opposite. Since the US federal government is monetarily sovereign (it is a currency issuer), math is saying that the US federal government is able to forever spend an arbitrary amount of US$. There are no limits. As long as there is somebody willing to sell a good or her services for US$, the US federal government can buy them.

Now obviously, running a too large deficit for too long will have inflationary effects. But how large is too large? There is no general rule for where the inflation-neutral point is. In fact, there are good arguments that the inflation-neutral point is a steady, long-run deficit to compensate for private sector net financial assets saving desires.

As an addendum: Vickrey got it wrong in the short term because he did not foresee the expansion of private credit. In the long term he got it right because this expansion of private credit was not sustainable.