"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, December 30, 2011
Did a 2011 overview here. Discussed The Girl With the Dragon Tattoo here.
Forgot to mention Johnny Depp's second Hunter S. Thompson movie The Rum Diary, where Thompson puts the bastards on notice. Also, there was the George R.R. Martin's A Dance of Dragons and HBO's Game of Thrones.
Tyrion Lannister was great and the scene of Eddard Stark's execution was the most shocking and heartbreaking scene I've witnessed in a while, with the man from the Nightswatch Yoren clutching Arya and yelling at her "Look at me! Look at me!" And afterwards she looks at the blue sky where a flock of birds flies.
The late, great Hitchens on Stieg Larsson, his books and Sweden, published in December 2009.
Wednesday, December 28, 2011
Richard Koo has another paper on balance sheet recession out (pdf), with good charts for a number of countries. I still have some differences with him over monetary policy — I still don’t understand why he doesn’t see debt-eroding inflation as something helpful in dealing with debt overhang — but his view of the sources of our Lesser Depression is completely right.
Tuesday, December 27, 2011
What a weird year 2011 was. The highlight was meeting Laetitia Sadier. Steely Dan at the Ravinia Theater was amazing. Also, Calexico covering Love was a great moment. Also, Archers of Loaf rocking out at the Onion Blockparty. The movie Drive was cool. Christina Romer wrote about NGP level targeting, Bernanke was annoyed when asked about it and a Time columnist wrote in support of it. Chicago Fed President Charles Evans stepping up and arguing that the Fed should do more.
The fall of Saddam led to Tahir square and Dan "Double D" Davies sparked Occupy Wall Street with a Crooked Timber post. The European Feedback Cycle of Doom kicks in after the ECB raised rates in April. Muammar Gaddafi, Osama bin Laden, Václav Havel, Kim Jong-il and Christopher Hitchens all die.
Pepper-spraying cop at UC Davis.
Hitchens on North Korea.
David Brooks is Projecting His Self Indulgence Again by Dean Baker
Sunday, December 25, 2011
In the early-to-mid 2000s, the Fed exacerbated the asset-shortage problem as its loose monetary policy got exported via fixed exchange rates to much of the emerging market world which in turn recycled it back to the U.S. economy via the "global saving glut" demand for safe assets. (For more on this point see this post and my paper with Chris Crowe.) Since late 2008, both the Fed and the ECB have worsened the asset-shortage problem by failing to first prevent and then restore nominal income in each region to its expected path. In other words, since 2008 both the Fed and the ECB have passively tightened monetary policy and this has caused some of the AAA-rated securities to disappear. (Yes, some of the AAA-rated MBS and sovereign debt would have defaulted on their own, but some of them like French sovereigns would have maintained their safe asset status were it not for insufficient aggregate demand caused by passively tight monetary policy.)I would look into the "loose monetary policy" and the context of it.
Thursday, December 22, 2011
Saturday, December 17, 2011
"Milosevic wasn't a mere regional thug with blood on his hands--he was a genocidal monster who, if left alone, would wipe out every Muslim and Kosovar he could catch."
Just like Saddam was a "mere" regional thug. Some on the left are very forgiving of the Empire's designated "thugs."
"The Srebrenica massacre, also known as the Srebrenica genocide,refers to the July 1995 killing, during the Bosnian War, of more than 8,000 Bosniaks (Bosnian Muslims), mainly men and boys, in and around the town of Srebrenica in Bosnia and Herzegovina, by units of the Army of Republika Srpska (VRS) under the command of General Ratko Mladić. The mass murder was described by the Secretary-General of the United Nations as the worst crime on European soil since the Second World War. A paramilitary unit from Serbia known as the Scorpions, officially part of the Serbian Interior Ministry until 1991, participated in the massacreand it is alleged that foreign volunteers including the Greek Volunteer Guard also participated.
In April 1993, the United Nations declared the besieged enclave of Srebrenica in the Drina Valley of north-eastern Bosnia a "safe area" under UN protection. However, in July 1995, the United Nations Protection Force (UNPROFOR), represented on the ground by a 400-strong contingent of Dutch peacekeepers, Dutchbat, did not prevent the town's capture by the VRS and the subsequent massacre.
In 2004, in a unanimous ruling on the "Prosecutor v. Krstić" case, the Appeals Chamber of the International Criminal Tribunal for the former Yugoslavia (ICTY), located in The Hague, ruled that the massacre of the enclave's male inhabitants constituted a crime of genocide. The forcible transfer of between 25,000 to 30,000 Bosniak women, children and elderly which accompanied the massacre was found to be confirming evidence of the genocidal intent of members of the VRS Main Staff who orchestrated the massacre."
Hitchens had been to Bosnia, unlike Perrin. He had also been to Kurdistan.
"The Anfal campaign began in 1986 and lasted until 1989, and was headed by Ali Hassan al-Majid (a cousin of then Iraqi leader Saddam Hussein from Saddam's hometown of Tikrit). The Anfal campaign included the use of ground offensives, aerial bombing, systematic destruction of settlements, mass deportation, firing squads, and chemical warfare, which earned al-Majid the nickname of "Chemical Ali".
Thousands of civilians were killed during the anti-insurgent campaigns stretching from the spring of 1987 through the fall of 1988. The attacks were part of a long-standing campaign that destroyed approximately 4,500 Kurdish village in areas of northern Iraq and displaced at least a million of the country's estimated 3.5 million Kurdish population. Independent sources estimate 1,100,000 to more than 2,150,000 deaths and as many as 860,000 widows and an even greater number of orphans. Amnesty International collected the names of more than 17,000 people who had "disappeared" during 1988. The campaign has been characterized as genocidal in nature. It is also characterized as gendercidal, because "battle-age" men were the primary targets, according to Human Rights Watch/Middle East. According to the Iraqi prosecutors, as many as 182,000 people were killed."
Friday, December 16, 2011
Most memorable was having a drink with him at Café Loup in Greenwich Village and attending a party at his DC apartment with a Pakistani politician, Grover Norquist, and a hot female conservative commentator among others.
We shared a great admiration for his friend Gene Genovese--a fervent Catholic, a man who at different times in his life was dedicated to a vision of the left and of the right that Christopher equally opposed. And we shared a fondness for one of Genovese's rather martial and uncongenial passages:In irreconcilable confrontations, as comrade Stalin...clearly understood, it is precisely the most admirable, manly, principled, and, by their own lights, moral opponents who have to be killed; the others can be frightened or bought.Just as Orwell, when an adult, was drawn to his old Etonian classmate, the high Tory Anthony Powell, not because of Powell's literary promise, but because of his military bearing and position, so Hitchens most cherished what he called (quoting his father) "sand"--grit. Christopher was haunted by his father--whom he called "the commander," and in a piece I asked him to write on Churchill, he wrote a throwaway line that I've always found hugely illuminating:My father, a Royal Navy commander, was on board H.M.S. Jamaica when it helped to deal the coup de grâce to the Nazi warship Scharnhorst on December 26, 1943--a more solid day's work than any I have ever done.
What Christopher Hitchens Held Sacred by Jennie Rothenberg Gritz at the Atlantic
Ta-Nehisi Coates links this video:
Ian McEwan and Labour MP Denis McShane.
Denis McShane on Hitchens
Daniel Davies retweets McShane:
Correction. Told Dr Who big export success. Good. Just no-one has ever mentioned Dr W to me abroad in contrast to Monthy P or Yes Min
Voltaire's works, especially his private letters, frequently contain the word "l'infâme" and the expression "écrasez l'infâme," or "crush the infamous". The phrase refers to abuses to the people by royalty and the clergy that Voltaire saw around him, and the superstition and intolerance that the clergy bred within the people. He had felt these effects in his own exiles, the burnings of his books and those of many others, and in the hideous sufferings of Calas and La Barre. He stated in one of his most famous quotes that "Superstition sets the whole world in flames; philosophy quenches them".I remember the Bosnian war being a big break from the left. And then of course Iraq.
Molti nemici, molto onore was the old Fascist slogan—many enemies, much honor. Christopher upset some people for bad reasons—others for good. I remember that Michael Foot, the Labour Party leader and veteran representative of what would come to be dismissed as the Old Left, Old Labour, quivering with fury when Christopher’s name came up in an otherwise friendly, private conversation.
It is very likely that the occasion for this fury would have been Christopher’s disgust at Foot for his loyal support for Mrs. Gandhi during her “Emergency.” Christopher hated—he was a great hater—the sentimentality of the left. He hated it while he was a part of it, long before he cut himself adrift from it.
Thursday, December 15, 2011
Wednesday, December 14, 2011
Fed Takes No Action, Citing Signs of Moderate Growth by Binyamin Appelbaum
Monday, December 12, 2011
Sunday, December 11, 2011
Saturday, December 10, 2011
Friday, December 09, 2011
"Tinker, Tailor, Soldier, Spy" got thumbs-up from the Ebert show and a "fresh" rating from Rotten Tomatoes. Like many Americans, I'm a sucker for a British accent and it has some of my favorite actors from the UK such as John Hurt, Gary Oldman, Mark Strong, Colin Firth, Ciarán Hinds, Toby Jones, Benedict Cumberbatch, and Tom Hardy.
Larry Summers, who was Treasury Secretary under President Clinton and a top Obama economic advisor, apparently has forgotten the IMF's role in the world economy. In an oped column he told readers that:
"From the problems of Britain and Italy in the 1970s, through the Latin American debt crisis of the 1980s and the Mexican, Asian and Russian financial crises of the 1990s, the IMF has operated by twinning the provision of liquidity with strong requirements that those involved do what is necessary to restore their financial positions to sustainability. There is ample room for debate about precise policy choices the fund has made. But the IMF has consistently stood for the proposition that the laws of economics do not and will not give way to political considerations."
This is arguably wrong as a general proposition, but it is certainly wrong in reference to the East Asian bailouts in 1990s that were largely engineered by Larry Summers and the U.S. Treasury Department, which controls the IMF. The conditions demanded in the East Asian bailouts required the countries in crisis in repay loans to western banks in full.
It allowed them to get the money needed to make the repayments by having the dollar rise in value against the currencies of the region (i.e. Robert Rubin's strong dollar policy).It was not only the East Asian countries that deliberately lowered the value of their currency against the dollar, developing countries throughout the world adopted a policy of accumulating massive amounts of reserves in order to avoid ever being in the same situation as the East Asian countries.
This led to the enormous trade deficits that the U.S. has incurred in subsequent years. This situation was not sustainable, contrary to Summers' assertion that the IMF puts countries on a sustainable course.
In fact, the trade deficit between the United States and the rest of the world was the major imbalance in the global economy in the last decade. It created the gap in demand that was filled by the stock bubble in the 90s and the housing bubble in the last decade. It is striking that the Post's opinion pages are only open to people who try to conceal this fact rather than economists who try to explain this history to readers.Italy was already letting the IMF look at its books and there were rumors of a deal. Summers is saying the IMF should apply a structural adjustment program to Italy if the ECB is accommodating. Summers writes,
Third, when engaging individual members of a monetary union, the IMF cannot assess the prospects of one member in isolation. If some countries are to enjoy reduced trade deficits, others, most notably Germany, must face reduced surpluses. If there is no clear path to reduced surpluses there is no clear path to reduced deficits and hence to solvency. More generally, the sustainability of any program must be assessed in the context of realistic projections of the economic environment. The IMF must not approve adjustment programs that are unrealistic.Twice, he emphasizes the point that European banks need to be recapitalized.
Thursday, December 08, 2011
The Federal Reserve released the Q3 2011 Flow of Funds report today: Flow of Funds.
The Fed estimated that household net worth declined $2.4 trillion in Q3. Household net worth peaked at $66.8 trillion in Q2 2007, and then net worth fell to $50.4 trillion in Q1 2009 (a loss of $16.4 trillion). Household net worth was at $57.4 trillion in Q3 2011 (up $7.0 trillion from the trough, but down $2.4 trillion in Q3).
The Fed estimated that the value of household fell $98 billion to $16.1 trillion in Q3 2011. The value of household real estate has fallen $6.6 trillion from the peak - and is still falling in 2011.
This is the Households and Nonprofit net worth as a percent of
This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.
This ratio was relatively stable for almost 50 years, and then we saw the stock market and housing bubbles.
The last time I blogged on this subject, our astute commenter Bennett Haselton raised a very good question: Bear Stearns is presumably not just sitting on Fidelity’s money; they’re investing it somewhere. Why can’t that investment serve as Fidelity’s collateral? The answer, if I understand Gorton correctly, is that the repo market is a very short-term market, typically 24 hours. For Fidelity to verify the quality of Bear Stearn’s investment project would take a week or so, by which time it’s too late for the information to be of any use. Fidelity’s ongoing concern is that Bear Stearns is pawning off its shakiest investments; to allay that concern requires due diligence; due diligence takes time; the repo market is all about getting things done NOW.(via Thoma)
So what should we do about all this? Gorton, along with his colleague Andrew Metrick, argues that the repo market, like any banking market, is inherently susceptible to runs and therefore ought to be regulated. In this case, the regulations should focus on insuring the availability of sufficient high-quality collateral to keep depositors calm. Gorton observes that the existing policy responses to the crisis (e.g. the Dodd-Frank bill) do pretty much nothing to address this fundamental need. The Gordon/Metrick paper contains some specific proposals, which unfortunately Gorton never got to in yesterday’s talk.
(or maybe the Mayans were right)
From a NYTimes article on White House concerns over the European Feedback Cycle of Doom:
“It is absolutely an important assumption that if the economy really tanks, really tanks, as the result of strong headwinds coming from Europe, it would be a more challenging environment,” said Representative Steve Israel of New York, the chairman of the Democratic Congressional Campaign Committee.
While political analysts say Mr. Obama, as the incumbent, would bear the brunt of the political fallout of another economic crisis, some Republicans are fretting as well. At a Washington dinner party two weeks ago, David Smick, a Republican financial consultant, approached Karl Rove, the Republican strategist, with a provocative question. “What if I told you that given what’s happening in Europe, that whoever is president in 2013 might not see his party elected for another 30 years,” Mr. Smick told Mr. Rove, according to guests who were present. Mr. Rove, one guest said, “just listened.”
In an interview, Mr. Smick said that the European crisis, in his view, could eventually make another huge government bailout like the controversial bank rescue program of late 2008 and 2009 necessary. But most political analysts say that could be political suicide for the country’s leaders. On Wednesday afternoon, Mr. Obama was on the phone with Mrs. Merkel again. “As usual,” the White House said in a statement afterward, “the president expressed his appreciation for the efforts the chancellor and other European leaders are making to resolve the crisis.”
In the Hitchens article from yesterday, he discusses Nietzsche's episode in Turin where he had a nervous breakdown/psychotic break:
Eventually, and in miserable circumstances in the Italian city of Turin, Nietzsche was overwhelmed at the sight of a horse being cruelly beaten in the street. Rushing to throw his arms around the animal’s neck, he suffered some terrible seizure and seems for the rest of his pain-racked and haunted life to have been under the care of his mother and sister. The date of the Turin trauma is potentially interesting. It occurred in 1889, and we know that in 1887 Nietzsche had been powerfully influenced by his discovery of the works of Dostoyevsky. There appears to be an almost eerie correspondence between the episode in the street and the awful graphic dream experienced by Raskolnikov on the night before he commits the decisive murders in Crime and Punishment. The nightmare, which is quite impossible to forget once you have read it, involves the terribly prolonged beating to death of a horse. Its owner scourges it across the eyes, smashes its spine with a pole, calls on bystanders to help with the flogging … we are spared nothing. If the gruesome coincidence was enough to bring about Nietzsche’s final unhingement, then he must have been tremendously weakened, or made appallingly vulnerable, by his other, unrelated sufferings. These, then, by no means served to make him stronger. The most he could have meant, I now think, is that he made the most of his few intervals from pain and madness to set down his collections of penetrating aphorism and paradox. This may have given him the euphoric impression that he was triumphing, and making use of the Will to Power. Twilight of the Idols was actually published almost simultaneously with the horror in Turin, so the coincidence was pushed as far as it could reasonably go.This reminded me of the opening scene in Amazing Grace, a film about William Wilberforce, the religious friend of William Pitt who ended the the British transatlantic slave-trade. In the movie, Wilberforce, played by the kindly and sympathetic Ioan Gruffudd, halts his carriage to stop the beating of a horse and soon after has a similar "unhingement" and becomes a religious fanatic or fundamentalist. He also endeavors to end the British slave trade against great odds.
To me the idea of a horse being beaten for some reason always brings to mind Orwell's Boxer, who represented the Russian working class in his book Animal Farm. Loyal and hardworking, worked to death in fact.
John Brown was a religious fanatic too. In AMC's "Hell on Wheels," the preacher in the railroad camp road with John Brown during "Bloody Kansas." It's very interesting that Obama chose to give a speech in Osawatomie.
As I understand it, Nietzsche and Mencken had a very negative of religion as a sort of a slave mentality. On the Internets someone wrote:
[Nietzsche] thought Christian morals and asceticism rejected life. The good for him is only that which asserts his aristocratic, elitist ideal. Christian morals defend the opposite - the meek, impoverished, and lower class. He was also skeptical of the Platonic rejection of the material world common in Christianity.Hitchens writes Mencken believed in a sort of Social Darwinism. Christianity began as a slave religion under the Roman Empire. I share Hitchens's and Marx's view of it as an opiate. It's a less condescending, more sympathetic view, although maybe pity is ultimately condescending.
Religious suffering is, at one and the same time, the expression of real suffering and a protest against real suffering. Religion is the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the people. The abolition of religion as the illusory happiness of the people is the demand for their real happiness. To call on them to give up their illusions about their condition is to call on them to give up a condition that requires illusions. The criticism of religion is, therefore, in embryo, the criticism of that vale of tears of which religion is the halo.
Wednesday, December 07, 2011
Trial of the Will by Hitchens
(I take a slight interest in this, because not long ago I was invited onto a Christian radio station in deepest Dixie to debate religion. My interviewer maintained a careful southern courtesy throughout, always allowing me enough time to make my points, and then surprised me by inquiring if I regarded myself as in any sense a Nietzschean. I replied in the negative, saying that I had agreed with some arguments put forward by the great man but didn’t owe any large insight to him and found his contempt for democracy to be somewhat off-putting. H. L. Mencken and others, I tried to add, had also used him to argue some crude social-Darwinist points about the pointlessness of aiding the “unfit.” And his frightful sister, Elisabeth, had exploited his decline to misuse his work as if it had been written in support of the German anti-Semitic nationalist movement. This had perhaps given Nietzsche an undeserved posthumous reputation as a fanatic. The questioner pressed on, asking if I knew that much of Nietzsche’s work had been produced while he was decaying from terminal syphilis. I again responded that I had heard this and knew of no reason to doubt it, though knew of no confirmation either. Just as it became too late, and I heard the strains of music and the words that this would be all we would have time for, my host stole a march and said he wondered how much of my own writing on god had perhaps been influenced by a similar malady! I should have seen this “gotcha” coming, but was left wordless.)
The Most Important Economic Speech of His Presidency by Robert Reich
Obama gave a speech in Osawatomie, Kansas — where Teddy Roosevelt gave his “New Nationalism” speech in 1910. Roosevelt gave his speech at John Brown Memorial Park. I know Obama liked The Wire and his favorite character was Omar.
A similar show "Hell on Wheels" with many characters and plotlines is on AMC and stars Common.* I wonder if Obama's watching it - I doubt it but who knows?
On last week's episode John Brown was mentioned. One character is a preacher at the railroad camp. He used to ride with John Brown during Bloody Kansas. He tells the main character, a southerner bent on revenge against those who killed his wife, that in Kansas they used swords and axes on slave owners because they didn't deserve bullets, hence the "bloody" in "Bloody Kansas."
I wish the Obama administration wouldn't oppose a financial transactions tax.
The Robin Hood Tax.
Driven by populist anger at bankers as well as government needs for more revenue, the idea of a tax on trades of stocks, bonds and other financial instruments has attracted an array of influential champions, including the leaders of France and Germany, the billionaire philanthropists Bill Gates and George Soros, former Vice President Al Gore, the consumer activist Ralph Nader, Pope Benedict XVI and the archbishop of Canterbury.
“We all agree that a financial transaction tax would be the right signal to show that we have understood that financial markets have to contribute their share to the recovery of economies,” the chancellor of Germany, Angela Merkel, told her Parliament recently.
On Sunday, Mario Monti, the new prime minister of Italy, announced plans to impose a tax on certain financial transactions as part of a far-reaching plan to fix his country’s budgetary problems, and he endorsed the idea of a Europewide transactions tax.
So far, the broader debt crisis engulfing the euro zone nations has pushed discussion of the tax into the background. But if European leaders can agree on a plan that calms the financial markets, they would be in a stronger position to enact a levy, analysts said.
“There is some momentum behind this,” said Simon Tilford, chief economist of the Center for European Reform in London. “If they keep the show on the road, they probably will attempt to run with this.”
And Glenn Hubbard, who was chairman of the Council of Economic Advisers under President George W. Bush, said the Robin Hood tax is a “monstrously bad idea.”
“Such a tax isn’t really going to get at the banks,” added Mr. Hubbard, who is now an adviser to the Republican presidential candidate Mitt Romney. “It’s going to hit the people who own the assets that are traded,” like investors.
Supporters of a financial transactions tax note that Britain already imposes a levy of $50 per $10,000 of stocks traded, while Hong Kong and Singapore, with fast-growing financial markets, impose fees of $10 to $20 per $10,000 of the value of certain transactions.
The United States imposed a tiny tax on stock trades from 1914 to 1966.
The British actor Bill Nighy, who has made online videos promoting the tax, calls it a beautiful idea. “It would raise enough money to solve problems at home and overseas, and it could do it without hurting ordinary people,” he said.---------------------------------
*Common is from Chicago and belongs to Jeremy Wright's church. He sang at Obama's Inaugural Ball.
Tuesday, December 06, 2011
No, not Dianetics.
When asked his favorite novel in an interview shown yesterday on the Fox News Channel, Mitt Romney pointed to “Battlefield Earth,” a novel by L. Ron Hubbard, the founder of Scientology. That book was turned into a film by John Travolta, a Scientologist.
A spokesman said later it was one of Mr. Romney’s favorite novels.
“I’m not in favor of his religion by any means,” Mr. Romney, a Mormon, said. “But he wrote a book called ‘Battlefield Earth’ that was a very fun science-fiction book.” Asked about his favorite book, Mr. Romney cited the Bible.(via DeLong)
Fed must act now to boost economy, Evans says
While 3-percent inflation may sound "shocking," he said, research shows that central banks should fight liquidity traps by allowing inflation to run above target over the medium term.
Since high U.S. unemployment is probably due to the effect of a liquidity trap rather than a structural shift in the economy, Evans said, added monetary stimulus is justified.
And if it turns out, he said, that the real problem was indeed structural and easier monetary policy sparks a rise in inflation, the Fed can simply tighten policy before it threatens to reach the hyperinflationary levels of the 1970s.
(Via DeLong twitterstorm)
The audience of several hundred entered the large convention center where Evans spoke under the watchful eyes of half a dozen armed members of the county sheriff's department, who were on site because of a threatened demonstration by Occupy Muncie.
Evans had previously suggested setting the unemployment trigger for monetary policy tightening at 7 percent but did not mention any specific figure in his prepared remarks on Monday.
The Fed's policy-setting panel meets next week to discuss what, if any, action to take to boost the economy. While many Fed officials appear to support some change in Fed communications, only a few have said they would support Evans' proposal.
Next week will be the last time Evans votes on the panel until 2013.
Monday, December 05, 2011
Friday, December 02, 2011
Profligate Zombies by Krugman
David Brooks: making stuff up, again by Doug Henwood
Godzilla vs. Bambi, Op-ed edition by Jonathan Chait
Killing the Euro by Krugman
But to close the gap through rising prices in the north, policy makers would have to accept temporarily higher inflation for the euro area as a whole. And they’ve made it clear that they won’t. Last April, in fact, the European Central Bank began raising interest rates, even though it was obvious to most observers that underlying inflation was, if anything, too low.
And it’s probably no coincidence that April was also when the euro crisis entered its new, dire phase. Never mind Greece, whose economy is to Europe roughly as greater Miami is to the United States. At this point, markets have lost faith in the euro as a whole, driving up interest rates even for countries like Austria and Finland, hardly known for profligacy. And it’s not hard to see why. The combination of austerity-for-all and a central bank morbidly obsessed with inflation makes it essentially impossible for indebted countries to escape from their debt trap and is, therefore, a recipe for widespread debt defaults, bank runs and general financial collapse.
I hope, for our sake as well as theirs, that the Europeans will change course before it’s too late. But, to be honest, I don’t believe they will. In fact, what’s much more likely is that we will follow them down the path to ruin.
For in America, as in Europe, the economy is being dragged down by troubled debtors — in our case, mainly homeowners. And here, too, we desperately need expansionary fiscal and monetary policies to support the economy as these debtors struggle back to financial health. Yet, as in Europe, public discourse is dominated by deficit scolds and inflation obsessives.
So the next time you hear someone claiming that if we don’t slash spending we’ll turn into Greece, your answer should be that if we do slash spending while the economy is still in a depression, we’ll turn into Europe. In fact, we’re well on our way.
Christa Wolf Dies at 82
Christa Margarete Ihlenfeld was born on March 18, 1929, in Landsberg, a Silesian town that was renamed Gorzow when it was incorporated into Poland after World War II. Her father, Otto Ihlenfeld, a grocer who had been a Social Democrat before Hitler took power, joined the Nazi Party. She herself was a member of the girls’ version of the Hitler Youth.
After the war, the family was expelled from their home. In “A Model Childhood” Ms. Wolf described a refugee life of sleeping outdoors or in attics and of being rescued from that fate by the Russians and the German Communists who had taken over East Germany.
She joined the Socialist Unity Party in 1949 and studied German literature at universities in Jena and Leipzig.
Thursday, December 01, 2011
via Krugman, Jean-Claude Trichet, June 2010:
One cut after another: many economists say that there is a clear risk of deflation. What are your views on this?
“I don’t think that such risks could materialise. On the contrary, inflation expectations are remarkably well anchored in line with our definition – less than 2%, close to 2% – and have remained so during the recent crisis. As regards the economy, the idea that austerity measures could trigger stagnation is incorrect.”
“Yes. In fact, in these circumstances, everything that helps to increase the confidence of households, firms and investors in the sustainability of public finances is good for the consolidation of growth and job creation. I firmly believe that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”
How Does the Economy Choose Which Equilibrium to Settle at?: Praying for the Confidence Fairy to Rescue Italy Edition by DeLong
Martin Feldstein claims that Italy does not need anybody else's help:
Ricardo existed at a particular point when English history was going round a corner so sharply that the progressive and the reactionary positions changed places in a generation. He was just at the corner where the capitalists were about to supersede the old landed aristocracy as the effective ruling class.(via DeLong)
Ricardo was on the progressive side. His chief pre-occupation was to show that landlords were parasites on society. In doing so he was to some extent the champion of the capitalists. They were part of the productive forces as against the parasites. He was pro-capitalist as against the landlords more than he was pro-worker as against capitalists (with the Iron Law of Wages, it was just too bad for the workers, whatever happened).
Ricardo was followed by two able and well-trained pupils – Marx and Marshall. Meanwhile English history had gone right round the corner, and landlords were not any longer the question. Now it was capitalists. Marx turned Ricardo’s argument round this way: Capitalists are very much like landlords. And Marshall turned it round the other way: Landlords are very much like capitalists. Just round the corner in English history you see two bicycles of the very same make – one being ridden off to the left and the other to the right.
Marshall did something much more effective than changing the answer. He changed the question. For Ricardo the Theory of Value was a means of studying the distribution of total output between wages, rent and profit, each considered as a whole. This is a big question. Marshall turned the meaning of Value into a little question: Why does an egg cost more than a cup of tea? It may be a small question but it is a very difficult and complicated one. It takes a lot of time and algebra to work out the theory of it. So it kept all Marshall’s pupils preoccupied for fifty years. They had no time to think about the big question, or even to remember that there was a big question, because they had to keep their noses right down to the grindstone, working out the theory of the price of a cup of tea.
Keynes turned the question back again. He started thinking in Ricardo’s terms: output as a whole and why worry about a cup of tea? When you are thinking about output as a whole, relative prices come out in the wash – including the relative price of money and labour. The price level comes into the argument, but it comes in as a complication, not as the main point. If you have had some practice on Ricardo’s bicycle you do not need to stop and ask yourself what to do in a case like that, you just do it. You assume away the complication till you have got the main problem worked out. So Keynes began by getting money prices out of the way. Marshall’s cup of tea dissolved into thin air. But if you cannot use money, what unit of value do you take? A man hour of labour time. It is the most handy and sensible measure of value, so naturally you take it. You do not have to prove anything, you just do it.
6 Central Banks Act to Buy Time in Europe by Binyamin Appelbaum
“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” said a statement released by the Fed, the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Canada and the Swiss National Bank.Head of ECB hints at more bank action if euro countries curb spending by Anthony Faiola and Neil Irwin
The Fed’s policy-making committee approved the arrangements during a videoconference Monday morning by a vote of 9 to 1. The dissenting vote was cast by Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, who said in a statement that the program amounted to an act of fiscal policy, which is the responsibility of the Treasury Department.
The arrangements carry little risk for the Fed, which receives an equal amount of the currency of the borrowing country together with a commitment to reverse the transaction at the same exchange rate. The loans also are modestly profitable, as the foreign central banks pass on to the Fed the interest payments that they collect from borrowers.
Wednesday, November 30, 2011
During boom times when speculative bubbles form, central banks are supposed to "take away the punch bowl." During times of gloom, when interest rates of Italian, Spanish and German debt are going up beyond sustainable levels, central banks are supposed to provide liquidity.
Europe will show us what it looks like when the bailouts aren't sufficient. Will the Austrians and less-focused OWS types pay attention?
European banks were bailed out today.
Central Banks Take Joint Action to Ease Debt Crisis by Binyamin Appelbaum
Central banks expand system of ‘swapping’ money to ease credit crunch by Neil Irwin and Michael Birnbaum
Central Banks Aim Bazooka Of Cheap Dollars At European Banks by Yglesias
Tuesday, November 29, 2011
Ken Russell, the English filmmaker and writer whose outsize personality matched the confrontational brashness of his movies, among them “Women in Love” and “The Devils,” died on Sunday at his home in Lymington, England. He was 84.
“Women in Love” became infamous for an extended wrestling scene between the two male stars, Oliver Reed and Alan Bates, that showed full-frontal nudity. It made it past the British censorship board only after Mr. Russell agreed to trim a few shots, though nudity remained.
“The Dance of the Seven Veils,” a broad television drama from 1970, emphasized the connections of the composer Richard Strauss to the Third Reich. The Strauss estate withdrew the music rights, and the film, the last that Mr. Russell made for the BBC, remains out of circulation.
“The Devils,” based on real events that had inspired a play by John Whiting and a book by Aldous Huxley, tells the story of demonic possession at a French convent, complete with exorcism rituals and blasphemous orgies. Mr. Russell, who converted to Roman Catholicism in the 1950s, saw the film as an attack on corruption between the church and state.
Despite his affinity for classical music, Mr. Russell gravitated toward the flashy British rock scene of the day. The connection was made explicit with “Tommy” (1975), his frenzied film version of the Who’s rock opera and concept album. He combined classical and rock music in the follow-up, “Lisztomania” (1975), which starred the Who’s lead singer, Roger Daltrey, as Franz Liszt and featured a cameo by Ringo Starr as the pope.
He had a knack for casting ascendant stars (Vanessa Redgrave, Glenda Jackson), and he sought out talented collaborators. Two of his ’60s films were scored by the French composer Georges Delerue, and he hired the young Derek Jarman as a production designer on “The Devils.”
He ventured into the American studio system with “Altered States” (1980), a hallucinogenic science-fiction film starring William Hurt. In his autobiography, Mr. Russell revealed that he had been hired by Warner Brothers only after 26 other directors had passed on the project. He feuded with the screenwriter Paddy Chayefsky, who took his name off the project, but “Altered States” earned him some of his best reviews and has since developed a cult following.
Monday, November 28, 2011
An epidemic of extreme poverty among American children was a predictable consequence of the AFDC repeal that Newt Gingrich designed and Bill Clinton signed in 1996.Mary Jo Bane and Peter B. Edelman resigned over it.
One thing that makes me immensely proud to have worked for Alicia Munnell is that she held up Clinton's "ending of welfare as we know it" for months in 1995-6...
Europe's New Plan: Procyclical Fiscal Policy plus Hope by Yglesias
Meanwhile there are rumors that the IMF and Italy are making a deal.In terms of Europe's actual economic problems, however, this idea will make things worse not better. The big problem with the Eurozone is that the underlying economy simply isn't that integrated. The Portugese economy is very different from the Dutch economy, and Portugese workers face a lot of hurdles in relocating to the Netherlands or Finland where suddenly they'd be inconveniently illiterate in the local language. That means it's objectively difficult for the European Central Bank to set monetary conditions that are equally appropriate for all countries. During the credit boom, the ECB pursued policies that were too loose for southern Europe's economies. Then during the contraction, it's pursued policies that are too tight for southern Europe. It's not possible to target all the countries appropriately. The proposed continent-wide fiscal straightjacket will exacerbate the problem. If Eurozone-wide conditions warrant monetary policy that pushes Finland into recession, the new rules will mandate that Finland undertake sharp tax hikes and spending cuts that further deepen the recession. Thanks to balanced budget rules, American states already operate this way and it's a pretty serious problem. The good news for America is that we have a federal government with the ability to smooth out some of the pro-cyclical impacts of state and local budget. Europe has no such thing.
UPDATE: Henry Farrell's excellent review essay on the problematic evolution of European institutions (PDF) is very relevant here. Once again when faced with a political problem, the EU's lack of legitimacy is forcing it to reach for a "techical" solution that will further undermine its legitimacy.
We need equality under the law. From now on, laws that apply to the private sector must apply to Congress, including whistleblower, conflict-of-interest and insider-trading laws. Trading on nonpublic government information should be illegal both for those who pass on the information and those who trade on it. (This should close the loophole of the blind trusts that aren't really blind because they're managed by family members or friends.)
No more sweetheart land deals with campaign contributors. No gifts of IPO shares. No trading of stocks related to committee assignments. No earmarks where the congressman receives a direct benefit. No accepting campaign contributions while Congress is in session. No lobbyists as family members, and no transitioning into a lobbying career after leaving office. No more revolving door, ever.
This call for real reform must transcend political parties. The grass-roots movements of the right and the left should embrace this. The tea party's mission has always been opposition to waste and crony capitalism, and the Occupy protesters must realize that Washington politicians have been "Occupying Wall Street" long before anyone pitched a tent in Zuccotti Park.(via Nancy Folbre)
Sunday, November 27, 2011
Saturday, November 26, 2011
The finance minister, Rudolf Hilferding was a leading Marxist theoretician, but in matters of macroeconomic management Marxist orthodoxy coincided with the Treasury view. Hilferding argued that, while crises and depressions would inevitably bring about the downfall of capitalism in due course, in the meantime, there was nothing to do but to follow the dictates of capitalist sound money.Brad DeLong unfinished paper on "liquidationism."
Wikipedia article on Hilferding
Wikipedia is pretty weak on "liquidationism." In its article on the Great Depression, it has:
The crisis had many political consequences, among which was the abandonment of classic economic liberal approaches, which Roosevelt replaced in the U.S. with Keynesian policies. These policies magnified the role of the federal government in the national economy. Between 1933 and 1939, federal expenditure tripled, and Roosevelt's critics charged that he was turning America into a socialist state.
The Depression hit the government hard, and provoked a demand for austerity policies, most notably a cut in unemployment benefits. The finance minister, Rudolf Hilferding was a leading Marxist theoretician, but in matters of macroeconomic management Marxist orthodoxy coincided with the Treasury view. Hilferding argued that, while crises and depressions would inevitably bring about the downfall of capitalism in due course, in the meantime, there was nothing to do but to follow the dictates of capitalist sound money.
As in Britain, the government split and fell, and was replaced by a conservative government led by Heinrich Bruning. Bruning pushed austerity policies even harder, steadily losing public support and driving the growth of the extreme parties, most notably the Nazis. By the time he fell from office in 1932, Hitler was unstoppable.
Much the same story played out in Japan. As the Depression intensified, the civilian governments imposed austerity measures that produced a sharp deterioriation in living standards. After a period of chaos, with growing political violence and assassinations, the military took over government, using the time-honored policy of international aggression to cement domestic support. The invasion of Manchuria in 1931 was the first in a series leading up to the Pearl Harbor attacks of 1941, and Japan’s entry into World War II.
Friday, November 25, 2011
It may be true that the European Central Bank lacks specific legal authority to perform as a central bank should in a crisis. But there is nothing new to that.
Brad DeLong, an economist at the University of California, Berkeley, points to comments made in 1844 by Sir Robert Peel, then Britain’s prime minister, explaining why he had not sought specific legislation to authorize the bank to step in during a panic:
“My confidence is unshaken that we have taken all the precautions which legislation can prudently take against a recurrence of a pecuniary crisis,” he wrote in a letter. “It may occur in spite of our precautions; and if it does and if it be necessary to assume a grave responsibility, I dare say men will be found willing to assume such a responsibility.”
In Europe, it is high time for such men, or women, to be found.
Wednesday, November 23, 2011
via DeLong twitterstorm:
drgrist David Roberts Newt looks like he is disgusted at having to share a planet with all these other human beings. He is a being of Pure Thought, dammit! 1 minute ago Retweeted by delong
ryanavent Ryan Avent "Going off gold isn't a practical option for the Fed right now. Too much policy uncertainty involved." #1930s #ngdp 5 hours ago Retweeted by delong
RBReich Robert Reich WH hoping Gingrich gets nomination because he's out of his mind. But what happens if he actually wins? 22 hours ago Retweeted by delong
commiegirl1 Rebecca Schoenkopf @ Yes, but the other 17 percent are all on my fb feed. // @delong MT @EricBoehlert Straw man? @NYMag 83% libs support Obama.If Gingrich won, I would try to find a way back to my own timeline.
Many people say that the problem of the 2000s was an easing of credit. How much of that was the increase of risk and leverage, that is, credit created by the private market? It also created a boom and housing bubble.In fact, high pre-crisis returns to banking had a much more mundane explanation. They reflected simply increased risk-taking across the sector. This was not an outward shift in the portfolio possibility set of finance. Instead, it was a traverse up the high-wire of risk and return. This hire-wire act involved, on the asset side, rapid credit expansion, often through the development of poorly understood financial instruments. On the liability side, this ballooning balance sheet was financed using risky leverage, often at short maturities.
In what sense is increased risk-taking by banks a value-added service for the economy at large? In short, it is not.
Better regulation could have forestalled this "easing." How about Greenspan raising rates? But he had lowered rates to prevent a double-dip.
Did the "easing" help create the savings or banking glut?
The revision, however, stemmed from businesses running down their inventories by $8.5 billion, which means that the nation’s factories may need to ramp up output to meet demand for their products. Revised figures for final sales, which reflect growth excluding inventory fluctuations, remained the same as originally estimated.
Fed plans second stress test for big banks by Neil Irwin
Taking No New Action, Fed Hopes for More Policy Mileage From Clearer Communication by Binyamin Appelbaum
The minutes from the Nov. 1-2 meeting were released.
While the economy remains weak and more than 25 million Americans cannot find full-time work, the Fed has taken only small steps to stimulate the economy since June. And the minutes — actually an extended description of its Nov. 1-2 meeting rather than a transcript — make clear that a broad majority of the 10 voting members of the committee does not support more drastic action at the present time.Emphasis added.
“Participants generally agreed that, even with the positive news received over the intermeeting period, the most probable outcome was a moderate pace of economic growth over the medium run with only a gradual decline in the unemployment rate,” the minutes say.I'd replace "gradual decline" with "glacially slow decline."
The document also notes that events in Europe could undermine the health of the domestic economy.West's Economic Slump Catching Up With Asia
Only one of the committee’s 10 voting members dissented from this logic. Charles L. Evans, president of the Federal Reserve Bank of Chicago, reiterated his public position that the high rate of unemployment required more immediate and forceful action by the central bank. He said the Fed should commit to maintaining low interest rates until unemployment drops below 7 percent.
There is less agreement about proposals to formalize rules for the management of monetary policy. Some Fed members, including its chairman, Ben S. Bernanke, have long favored the idea of formalizing a long-term inflation target of 2 percent. Others, including Mr. Evans, are pushing for temporary targets for unemployment and inflation to clarify the Fed’s near-term objectives.
The committee dismissed the idea of adopting a new benchmark, like a commitment to pursue stimulus until the nation’s economic output recovers from the recession. Such an approach is favored by a vocal chorus of outside economists, but has little support inside the institution, because of concern about the consequences of accepting more rapid inflation.
The verdict was reported in the Fed’s typically understated style: “Participants agreed that it would not be advisable to make such a change under the present circumstances.”
China depends on the U.S. consumer market -Europe has a trade surplus with the U.S. as well. Another way to put is that China depends upon the aggregate demand supplied by the United States.
Tuesday, November 22, 2011
I don't know what to make of his critique. Wages haven't kept up with productivity gains.
With regard to policymakers, pre-1980 economic policy was framed by Keynesian logic and policymakers viewed trade deficits with concern as they represented a leakage of aggregate demand (AD). After 1980, policymakers increasingly turned a blind eye to trade deficits and even started viewing them as semi-virtuous because trade helped constrain inflation.Interesting analogy here:
Second, it is theoretically incoherent. That is because the saving glut hypothesis is simply an updated global statement of 1930s classical loanable funds interest rate theory that Keynes discredited in his General Theory. Loanable funds theory claims interest rates are determined by demand and supply of real saving; trade surpluses are accounted for as real saving, and ergo they affect interest rates in an integrated global economy: hence, the claim that China’s trade surplus significantly determines US interest rates and China injured the US by distorting US interest rates.I don't know. The global savings glut theory still makes sense to me and it seems like Bernanke's savings glut theory doesn't contradict what Palle is arguing in his countertheory of neoliberal globalization.
For instance, the trade deficit holds down inflation, but wouldn't inflation be held down in any event by the Federal Reserve even if there wasn't a trade deficit? Is it just that it gives the Fed more room to maneuver?
Global Banking Glut and Loan Risk Premium by Hyun Song Shin
John Neville dies at 86
John Neville, who played Romeo to Claire Bloom’s Juliet, Hamlet to Judi Dench’s Ophelia and Othello to Richard Burton’s Iago (and vice versa), but who may be best known in the United States as the title character in the exuberantly loopy film “The Adventures of Baron Munchausen” and a recurring one in the television series “The X-Files,” died in Toronto on Saturday. He was 86.
The British-born son of a truck driver who as a youth spoke with a distinct working-class patois, Mr. Neville was an unlikely candidate to become a Shakespearean matinee idol, but in his early performing years that is exactly what he was. Slender, fluidly athletic and possessed of a voice known for its crisp diction and beautiful modulations, he appeared in the 1950s with London’s Old Vic Company in numerous Shakespearean roles.
In an interview with Canadian television not long ago, Mr. Neville recalled that during a six-year period in the 1950s he appeared in all of Shakespeare’s plays — he considered this both his training period and his greatest achievement — and that the very first thing he was asked to do afterward was to create the role of the callous young womanizer Alfie for the stage, the same role that would later propel Michael Caine to movie stardom. “The critics were sort of astonished at it,” he said. “ ‘This guy is a classical actor. What’s going on here?’ They didn’t know I had grown up with a cockney accent and had to get rid of it.”
Monday, November 21, 2011
Yglesias's first day at Slate.
Class Warfare Takes To The Skies
Don't Blame Apple for Inequality
Italy's Forgotten Era of Debt Reduction
Also at Slate, John Waters discusses staying in Baltimore, becoming a capitalist, and The Wire.
Hitchens on the notion of American exceptionalism and conservatives' solipsism.