"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

Friday, October 22, 2010

Michael Tomansky on Juan Williams.

Because what sort of non-conservative - one perceives Williams to be some degree of liberal; he'd probably protest that he's just a reporter; in either case, he's not a conservative - agreed to be an in-house flunky at Fox? I'm sure they offered him nice money, and money is money, and I can't say with certainty that I'd have turned it down if Rupert had waved it under my nose.
But if you're any kind of liberal at all, even in the softest and most non-political possible sense, it's basically an indefensible thing to do. Fox News wants liberalism to perish from the face of the earth. Going on their air on a regular basis and lending your name and reputation to their ideological razzle-dazzle is like agreeing to be the regular kulak guest columnist at Pravda in 1929. For "balance".
I disagree. That analogy is wrong. Plus Williams was better than Colmes. Colmes is/was horrible.
Krugman on Austerity in the UK
Indeed, there has been a noticeable change in the rhetoric of the government of Prime Minister David Cameron over the past few weeks -- a shift from hope to fear. In his speech announcing the budget plan, George Osborne, the chancellor of the Exchequer, seemed to have given up on the confidence fairy -- that is, on claims that the plan would have positive effects on employment and growth.
Instead, it was all about the apocalypse looming if Britain failed to go down this route. Never mind that British debt as a percentage of national income is actually below its historical average; never mind that British interest rates stayed low even as the nation’s budget deficit soared, reflecting the belief of investors that the country can and will get its finances under control. Britain, declared Mr. Osborne, was on the "brink of bankruptcy"
What happens now? Maybe Britain will get lucky, and something will come along to rescue the economy. But the best guess is that Britain in 2011 will look like Britain in 1931, or the United States in 1937, or Japan in 1997. That is, premature fiscal austerity will lead to a renewed economic slump. As always, those who refuse to learn from the past are doomed to repeat it.

Thursday, October 21, 2010

Dean Baker's entire post on the "currency wars" is excellent, so I'll repost the entired thing.
The NYT had a piece on the recent decline in the value of the dollar and effort by other countries to offset its impact. The article noted in particular developing country efforts to reduce capital inflows that are raising the value of their currency.
It would have been worth noting that in standard economic theory, developing countries are supposed to be borrowers. The logic is that capital is relatively scarce in the developing countries, which means that it gets a higher return. Capital therefore should flow from relatively to slow growing rich countries to more rapidly growing developing countries.
This was the direction of flows until the East Asian financial crisis in 1997. The harsh conditions that the IMF imposed on the East Asian countries led developing countries throughout the world to focus on building up reserves so that they would not have to deal with the IMF. This reversal coincided with the "high dollar" policy touted by then Treasury Secretary Robert Rubin. It helped to lay the basis for the imbalances associated with the stock and housing bubbles.
To a large extent, the decline in the value of the dollar would effectively reverse the distortions to the world economy resulting from the IMF-Rubin policy of the late 90s. It is also worth noting the recent decline in the dollar is largely just reversing its run-up as a result of the financial crisis in 2008. Money flowed into the U.S. as a safe haven, pushing the dollar well above its pre-crisis levels. It is now falling back toward the level it was at before the crisis.
What would you call the reasonable reaction of China and others to the harsh conditions imposed by the IMF in the wake of the 1997 crisis? It would be the opposite of morale hazard. Once can be too indulgent and too harsh or strict.

This New York Times piece argues that England's current austerity measures are partly due to memories of the IMF bailing them out in the 1970s.

Tuesday, October 19, 2010

Of Turning Japanese

A scary chart from Mary Daly, vice president of the Federal Reserve Bank of San Francisco. (via Krugman, via Mark Thoma)

Brad DeLong doesn't believe the QE2 will be enough. (sorry no link) Dean Baker argues that we are already - as they used to say in Vietnam - in the shit. (sorry no link) If we cross past zero, it won't mark anything new just that we are continuing our descent of disinflation. The point when we entered a Keynesian situation is where we crossed the rubicon.

What is needed is a larger QE and more fiscal stimulus.

Democrats, the election, the stimulus and Keynes by Sewell Chan
But that seems unlikely, as long as the recovery plods along slowly. "It would be a mistake to attribute the distancing from Obama’s stimulus entirely to political caution or opportunism," said Robert S. Weisbrot, a historian at Colby College. "As much as those factors may be important, it is dismaying how little evidence there is to show for it. Maybe we need even more, but surely $800 billion should have counted for something"

Krugman blogs

During the pre-crisis period, spending grew slightly faster than GDP --that’s Medicare plus the Bush wars -- while revenue grew more slowly, presumably reflecting tax cuts.
What happened after the crisis? Spending continued to grow at roughly the same rate -- a bulge in safety net programs, offset by budget-slashing at the state and local level. GDP stalled -- which is why the ratio of spending to GDP rose. And revenue plunged, leading to big deficits.
But I’m sure that the usual suspects will find ways to keep believing that it’s all about runaway spending.
What the usually good Sewell Chan fails to report is that the much of the stimulus was ineffective tax cuts and that much of the rest was canceled out or negated by the anti-stimulus of the 50 state governments and the stalling of GDP growth. Currently the economy is growing too slow to create enough jobs and aggregate demand which is why we'll see more action from the Fed.