"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Saturday, June 26, 2010

Felix Salmon on l'affaire Weigel.
Meanwhile, a horrible little turd somewhere is gleefully if quietly celebrating his coup (I'm sure it's a guy) in leaking Weigel's private correspondence to Fishbowl DC and the Daily Caller. Maybe he's genuinely disturbed in some way. But, to coin a phrase, this would be a vastly better world to live in if he decided to handle his emotional problems more responsibly, and set himself on fire. 
(PS I've added Salmon and Martin Wolf to my links.)
Ben Sonneberg has died.
India Cuts Fuel Subsidies
By comparison, gasoline is not subsidized as much, and its retail price is already much higher than in the United States because of high taxes. Prices for it will increase 3.5 rupees a liter, or 29 cents a gallon, to about 55.7 rupees a liter, or $4.58 a gallon.

Democrats See Signs of Hope in Job Trends


New York Times writer Michael Luo is probably being a smart-ass. In the piece he argues that states with lots of close races this November are seeing job growth, even if unemployment overall remains near 10 percent, which is unbelievably high. (There have been three quarters of growth, but jobs aren't being created in net as states slash budgets and Europe's sovereign debt crisis keeps investors cautious.) Things could be worse. But this little opinion really bothered me:
While much attention has been paid to the nation’s stubbornly high unemployment rate, political scientists have found little correlation between that measure and midterm elections results. Instead, they have found more broad-based indicators, particularly real personal disposable per capita income, which measures the amount of money a household has after taxes and inflation, to be better gauges.
 The blog post he links to seems wrong to me. The "politcal scientist" blogger links to some left wing blogs (some I like - Talking Point Memo, Krugman, Nate Silver - some anti-Obama blogs I don't like - Lawyers, Guns and Money, Hullabaloo, Freakonomics - and some that are so-so - Eschaton.

The blogger pulls this out of his butt:
So why might income growth matter but unemployment not matter for elections? It's possible that unemployment fluctuations disproportionately affect people at the lower end of the income spectrum -- people who aren't terribly likely to vote in midterms and, if they do, are probably voting Democratic anyway. Growth in disposable income, however, affects everybody, including the moderate voters who will switch party allegiances from time to time.
It's also possible that high unemployment means low aggregate demand mean low growth which means low growth in disposable income.

High unemployment means a loose labor market. This guy just confirms my low opinion of "political scientists." I like "economists" much better and "political economists" most of all.

NB: I've included a new label "The Dark Ages" in honor of Professor Krugman, a true Hypatia for our time. (Looking forward to seeing the Rachel Weisz movie Agora. I did see Get Him to the Greek, which has a Krugman cameo, and thought it was pretty good.) Simon Johnson believes Krugman should replace the departing Peter Orszag as budget director. Yes we can!

South American teams are all doing well in the World Cup Tournament. Brazil and Argentina are leading contenders to win it. And no doubt Latin America has turned to the left since the Cold War. (I was led to believe that Capitalism would bare its teeth after winning the Cold War.)

Larry Rohter writes about Oliver Stone's new movie about Latin America. Tariq Ali helped write the screenplay.

But other questionable assertions relate to fundamental issues, including Mr. Stone’s contention that human rights, a concern in Latin America since the Jimmy Carter era, is "a new buzz phrase," used mainly to clobber Mr. Chávez. Mr. Stone argues in the film that Colombia, which "has a far worse human rights record than Venezuela," gets "a pass in the media that Chávez doesn’t" because of his hostility to the United States.

As Mr. Stone begins to speak, the logo of Human Rights Watch, which closely monitors the situation in both Colombia and Venezuela and has issued tough reports on both, appears on the screen. That would seem to imply that the organization is part of the "political double standard" of which Mr. Stone complains.  
"It’s true that many of Chávez’s fiercest critics in Washington have turned a blind eye to Colombia’s appalling human rights record," said José Miguel Vivanco, director of the group’s Americas division. "But that’s no reason to ignore the serious damage that Chávez has done to human rights and the rule of law in Venezuela," which includes summarily expelling Mr. Vivanco and an associate, in violation of Venezuelan law, after Human Rights Watch issued a critical report in 2008. 
A similarly tendentious attitude pervades Mr. Stone’s treatment of the April 2002 coup that briefly toppled Mr. Chávez.
Stone sort of exemplifies the problem of the "anti-war" Left here.
Initial reviews of "South of the Border" have been tepid. Stephen Holden in The New York Times called it a "provocative, if shallow, exaltation of Latin American socialism," while Entertainment Weekly described it as "rose-colored agitprop."
Libertarian Julian Sanchez writes about libertarian Dave Weigel.

I have an unfortunate tendency to call liberatarians "glibertarians," but theses two guys are much, much better than your typical "conservative" or Republican.

You know that feeling you get when a melodramatic soccer player flops to the ground in a World Cup match? I get sort of offfended and disappointed, like "that's unsportsmanlike and cheap." It brings the whole proceedings down a notch. That's what I feel about the Journolist leaker and Tucker Carlson and his website and Fishbowl DC. As Sanchez points out the leaker could have been someone from the extreme partisan left or simply someone with a grudge against Weigel and/or the Washington Post.

Friday, June 25, 2010

House and Senate FinReg bills reconciled.
On a party-line vote, the House conferees voted 20-11 to approve the bill; the Senate conferees voted 7-5 to approve.
At two minutes before midnight Thursday, some 14 and a half hours after they began work Thursday morning, members of the House-Senate conference committee approved a final revision of the measure known popularly as the Volcker Rule.
The rule, named for Paul Volcker, the former Federal Reserve chairman who proposed the measure earlier this year, restricts the ability of banks whose deposits are federally insured from trading for their own benefit. That measure had been fiercely opposed by banks and large Wall Street firms, who viewed it as a major incursion on some of their most profitable activities.
"One goal of these limits is to reduce participation in high-risk activity that can cause significant losses at institutions which are central to the financial system," Senator Christopher Dodd, the Connecticut Democrat who shepherded the financial bill through the Senate, said. "A second goal is to end the use of low-cost funds " to which insured depositories have access -- to subsidize high-risk activity."
Banks managed to wrangle limited exceptions to the rule that would allow them to continue some investing and trading activity. The agreement limits banks’ investments in hedge funds or private equity funds to no more than 3 percent of a fund’s capital; those investments could also total no more than 3 percent of a bank’s tangible equity.
Many Wall Street firms, including Goldman Sachs, Morgan Stanley and others, have long engaged in significant amounts of trading for their own accounts, a practice that commercial banks and their parent companies were traditionally less inclined to adopt.

 The Wall Street institutions might not have been subject to the new rules except for their decisions during the 2008 financial crisis to convert themselves into bank holding companies in order to gain access to the emergency lending authority of the Federal Reserve.
That was funny when the Masters of The Universe went running to the government for protection.

Regarding Blanche Lincoln's banning of derivative trading by banks, a group of centrist House Democrats held the entire package hostage over loosening the restrictions. Centrist pro-business Melissa Bean of Illinois and several members from New York (i.e. Wall Street) led the good fight . It has always been a source of confusion to me how Wall Street backs Democrats, even though lately they've been tipping towards Republicans.

Thursday, June 24, 2010

The Crash Years

David Leonhardt has a nice piece* about Bernanke and When Caution Carries Risk:
The main historical lesson of financial crises is that governments are usually too passive. They respond in dribs and drabs, as Japan did in the 1990s and Europe did in 2008. Or they remove support too quickly, as Franklin Roosevelt did in 1937, and then the economy struggles to escape its funk.
Look around at the American economy today. Unemployment is 9.7 percent. Inflation in recent months has been zero. States are cutting their budgets. Congress is balking at spending the money to prevent state layoffs. The Fed is standing pat, too. Bond investors, fickle as they may be, show no signs of panicking.
The reason the states' budgets are bad is the recession and high unemployment, not that they spent too much in the good years. The recession and high unemployment is a result of the bursting of the housing bubble. The markets should know this.

And as Krugman points out:
I hold no brief for weak financial regulation in America. But it’s a bad sign that Germans still think of this as a made-in-America crisis. The truth is that the European housing bubble was as big or bigger than the US bubble; not in Germany, true, but it was German capital exports that fed the bubbles in Spain and Ireland. This was a North Atlantic crisis, roughly equally severe on both sides of the ocean.
True, Europe has better automatic stabilizers whereas our Senate won't do anything more about high unemployment. Ezra Klein reports the "tax extenders" bill failed to pass:
A quick list of presidents who wouldn't have been inaugurated if 57 percent of the vote was insufficient: Barack Obama, George W. Bush, Bill Clinton, George H.W. Bush, Ronald Reagan, Jimmy Carter, Richard Nixon, Lyndon Johnson, John F. Kennedy, Dwight D. Eisenhower, Harry Truman ... I could go on.
But the tax extender bill failed in the Senate today. It only got 57 percent of the vote. If there's anything encouraging here, it's that Olympia Snowe is making noises about a standalone vote for unemployment benefits. But there's really not much that's encouraging here, and that's particularly true if you're a small business that can't find a loan, or an unemployed person who can't find work. As far as the Senate is concerned, the recession is over. The election has begun.
At least Bernanke has performed better than the European Central Bank has, but he could be doing much better and as Leonhardt writes, is risking an awful lot over mythical concerns that the "market" will lose confidence. But as people keep pointing out, the market should recognize that the deficits are a result of the bursting of the housing bubble; the recession - less tax revenue, more outlays - and emergency measures, not a recklessly wasteful and out-of-control government. It was not "fiscal excess" as Alan Greenspan and David Brooks baselessly assert.

Former deputy secretary at the Treasury Brad DeLong says, "Confidence in the safety and soundness of U.S. Treasury bonds is greater than--well, greater than it has ever been in my lifetime."

The blowers of the housing bubble are ultimately responsible for the deficits and debt - along with those who refuse to reform health care and/or voted for Bush's budget-busting tax cuts for the rich. (Bill Clinton showed us how to get to budget surpluses during his Presidency, which wasn't that long ago. You need a growing economy. It's not that hard.)

Martin Wolf writes:
Festina lente - hurry slowly - is advice we have inherited from the ancient Romans. Western policymakers should now take it to heart. Confronted with huge fiscal deficits, many have concluded that they should hurry fiscal tightening on as fast as possible, in the hope that it will prove expansionary. What are the chances that they will be right? Small, I believe. Moreover, rather better alternatives are on offer. But their drawback is that they are unorthodox: alas, many "sound" people prefer orthodox recessions to unorthodox recoveries.
Krugman approvingly quotes Adam Posen (pdf) of the Bank of England’s Monetary Policy Committe. "On those claiming that the ECB [European Central Bank] has lost its purity by buying bonds to help avert economic catastrophe:
Cultures which make a public fixation of virginal maturity, of a stylized maiden’s reputation, tend to be backward superstitious cultures that impede people exercising autonomy and making responsible choices.
At least the Chinese are making noises about allowing their currency to rise, which means they're gaining confidence in the global economy. It's not a sure thing, like Obama's July 2011 pullout date for Afghanistan, but they're talking about it. It's possible.
* Dean Baker has a quibble with it.
Is Mark Kirk Blowing the Illinois Senate Race? by Eric Kleefeld
With the situation getting worse, Kirk found himself this week in a situation that no politician wants to be seen in -- apparently avoiding reporters, after he quickly left an appearance in Chicago by going out of the back door of the hotel, with reporters chasing after him.

As the NBC station in Chicago reported: "A pack of about 20 reporters at the event, expecting Kirk to stay for questions (as his opponent, Alexi Giannoulias did), ran after him through the crowded lunch tables, shouting his name. Kirk ran through the kitchen and into the back loading area, where he jumped into an SUV which was idling with its engine on. Despite the calls of reporters, the SUV then sped away."