Wall Street Occupiers, Protesting Till Whenever

Henwood on protests over the NYPD's heavy-handed tactics

and a summary of sorts:

Can You Hear Them Now? by Peter Catapano

Jared Bernestein answers some questions

Q: What is the mechanism by which higher incomes from increases in productivity get back to workers?

A: Well, the problem is: it doesn’t.  I mean, sometimes it does, and it should, but in recent decades, productivity growth has diverged from the compensation and incomes of middle- and lower-income families.  This is really another way of saying inequality has grown.
...

But of course one of the characteristics of growing inequality is that the average is less descriptive of outcomes throughout the income scale.  For years, through the 1950s and 60s, real MEDIAN family income kept pace with productivity growth—both about doubled in those years.  But since then, median family income has grown about one-third as fast as productivity growth.

What changed?  A lot—fewer unions, the shift from manufacturing to service jobs (hastened by the increase in trade with lower wage nations), outsized returns to folks in certain sectors, like finance, and the growth of the educational advantage, to name some of the more important factors.

But no small part of this disconnect comes under the heading of “bargaining clout.”  The benefits of productivity growth don’t naturally flow to those responsible for said growth.  Some people have to fight for it.  And I’m not just talking unions here. 

I think one of the most important answers to your question is “full employment.”  Labor markets were much tighter during the period noted above when median incomes grew with productivity, and when they got that tight for a moment in the latter 1990s, low- and middle-earnings again begin to rise with productivity.

In those years, employers had to bid compensation up to get and keep the workers they needed.  In that way, low unemployment was the “mechanism” you seek.  And yes, it’s been very much missing ever since.

This is a "structural" problem. Funny how conservatives only refer to "structural" problems when they're used as reasons for the futility of government action. During the Presidential campaign Obama referred to this structural problem in interviews with business and economics reporters for newspapers and magazines.. Supposedly in the Suskind book Obama is quoted as saying there's a productivity problem with labor, but maybe he was referring to that.

Time to think the unthinkable and start printing again by Martin Wolf

(via Krugman)

Teaching Keynesian Economics to Your Bulldog by DeLong

Economics of Contempt disparages Suskind

Mortgage Debt is NOT the Main Factor Holding Back U.S. Growth by Baker

Yglesias reflects on the Internet bubble and 1998

People recall that the stock market went way down and then the economy never got as hot as it was in the late-1990s again, so the conventional thing is to say “bubble” and roll our eyes at all those old New Economy articles. But there was this deliberate decision to slow the economy down. And it’s not like having achieved whatever they were trying to achieve, the Fed then managed to flip the growth switch back on post-recession.

And links to a Justin Fox piece circa 1998:

If you look beyond postwar U.S. history, however, you can come up with very different patterns. Economist John Makin of the American Enterprise Institute sees the current expansion as an investment-led, inflation-free "golden age" similar to the U.S. scene in the 1920s and Japan's in the 1980s. Both those booms ended badly, of course--but they didn't end in bursts of inflation. James Paulsen, chief investment officer at Norwest Investment Management, looks back even further, to the U.S. in the second half of the 19th century. That was a period of no inflation, revolutionary technological advances, massive global capital flows, and rapid economic growth--and was also characterized by devastating spells of deflation.

What else happened in the 90s and early 00s? In 1997 there was the East Asian Financial crisis. And Long Term Capital Management hedge fund bust. China decided never to be put in the position to be forced to go to the IMF and so helped cause the Global Savings Glut. Could that be the x-factor? In 2000 Greenspan argued that the bubblicious Bush tax cuts were advisable because no government debt would be bad (Clinton had balanced the budget.) So is Yglesias saying the Fed didn't push down the accelerator in the Bush years? My guess is that he feels the Bush years were not boom years.

Plosser: Recent Stimulus Will Hurt the Fed's Credibility

(via Mark Thoma)

Maybe Fisher, Plosser and the other guy with the alphabet soup name drew short straws at a meeting of the FOMC. Maybe they're all in agreement but they drew straws to decide who would go out and give public speeches which reflect Republican wishes for inaction in order to avoid drawing political heat and maintain independence. Makes as much sense as the notion that they actually believe what they are saying.

Iraq calls for change of Syrian Regime

Karl Smith on inflation

(via DeLong)

Tim Duy on one of the 3 Fed dissenters

Krugman:

Indeed, my sense is that international macroeconomists — people who followed the ERM crises of the early 1990s, the Latin American debt crisis, the Asian crisis of the late 90s, and so on — were caught much less flat-footed than economists who limited most of their interest to the United States. The now-infamous 2003 Lucas remark about how the problem of depression-prevention has been solved was not something you would have heard from an economist who had paid attention to Mexico, Indonesia, Argentina etc..

Unfortunately, many economists have not learned from the past. And that’s at least part of the reason we are apparently condemned to repeat it.

Fed's Rosengren: Housing and Economic Recovery by Calculated Risk

The little bit of good news is that Residential Investment will make a positive contribution to growth this year (mostly from multi-family and home improvement), and construction employment will probably increase this year (not much).

Richard Koo on government spending:

Indeed the key lesson from the Japanese experience is that fiscal support must be maintained for the entire duration of the private-sector deleveraging process. This is an extremely difficult task for a democracy in a peacetime, because when the economy begins to recover, well-meaning citizens who dislike reliance on government will argue that since fiscal pump-priming is clearly working, it is time to reduce (what they see as wasteful) government spending. But if the recovery is actually due to government spending and the private sector is still in balance-sheet-repair mode, premature fiscal reform will invariably result in another meltdown, as the Japanese found out in 1997 and the Americans in 1937…

Although government deficit spending should be avoided when the private sector is healthy and forward looking, once in several decades when the private sector gets carried away in a bubble and damages its financial health, a prompt and sustained fiscal medicine from the government is essential in minimizing both the length of recession and the eventual bill to the taxpayers.

(via Mike Konczal, via DeLong)

Blogs Yglesias: "John Judis in TNR, taking advantage of some kind of perestroika in the Richard Just Era: "In 1947, the United States faced a very similar situation in the UN and took exactly the opposite position—to the benefit of Palestine’s Jewish population."

New Republic intern Matt O'Brien writes on "Why Did Republicans Turn Against the Fed?"

As Ken Rogoff, a professor of public policy and economics at Harvard and the former chief economist of the IMF, told me, “If the shoe were on the other foot and a Republican were in the White House, we might see different rhetoric.” Similarly, Scott Sumner, a professor of economics at Bentley University and author of the influential blog The Money Illusion, pointed out that “people on the right were pushing for monetary stimulus in the 1980s when inflation was much higher than it is now”—and a Republican was, coincidentally, in the White House.

To others, however, a purely cynical explanation of Republican antipathy towards the Fed does not seem sufficient. Rather, deeper philosophical and psychological factors—and factions—unleashed by the Great Recession seem to figure in as well. For one, notes University of Oregon economics professor Mark Thoma, the latest financial crisis has empowered fringe elements of the GOP—those who ascribe pseudo-mystical properties to gold and the gold standard—to take center stage within the party. In particular, this libertarian faction has offered up an alternative explanation of the crash that, as Thoma explained to me, provides “a nice moral with a villain you can point to.” Whereas the Friedmanite wing of the GOP traditionally absolved markets from blame for financial crises by saying the Fed had failed to do enough, this faction preferred to blame the Fed and other government institutions for doing too much. According to this line of argument, Fannie Mae and Freddie Mac caused the housing bubble, Obamacare and Dodd-Frank legislation are holding back the recovery, and the Federal Reserve’s panoply of lending programs during the height of the panic merely bailed out Wall Street and forestalled the necessary restructuring of the banking system. It’s a seductive—and reassuring—argument for those who take as gospel the Reagan maxim that “government is not the solution to our problem; government is the problem.”

Of course, the Federal Reserve invited some of this backlash with the opaque nature of its emergency programs in late 2008 and early 2009. The urgency of the crisis made the Fed’s ability to act without Congressional approval attractive to policymakers, but in doing so, the central bank usurped some functions that typically are the province of the Treasury. “It’s absolutely true that the Fed made itself vulnerable to [attacks] by starting fiscal policy and preserving the banking sector,” says Rogoff. Republican leaders have harped on this notion that the Fed continues to overstep its mandate. For instance, the bank’s quantitative easing (QE) programs, which entail buying long-term bonds, have drawn ire from Republicans, as have other supposed instances of the Fed dabbling in fiscal policy. Representative Paul Ryan slammed the Federal Reserve in an op-ed for what “looks like an attempt to bail out fiscal policy” by purchasing longer-dated Treasuries. The implication was clear: Ben Bernanke is complicit in Obama’s interventionist, big government agenda.

And then, finally, there are the inflation hawks. The idea that inflation can be too low is counterintuitive to the average voter, who associates inflation with less discretionary income. The simple calculus, as Sumner told me, is that “more inflation is bad and less is good.” The psychological scars of the stagflationary 1970s magnify this predisposition. “Most of the people in power remember waiting in gas lines,” says Thoma. The result, in Thoma’s estimation, is that “our collective memory is more European than it’s ever been, in terms of remembering the evils of inflation.” This thinking epitomizes what National Review senior editor Ramesh Ponnuru told me amounts to “an ongoing calcification of conservative economic thought.” Ponnuru describes this mindset as the idea that “the solution to a weak economy in the late 1970s, when the economic views of today’s conservatism formed, was cutting the top marginal tax rate and tightening money; therefore it must be the solution today.”

It is not clear if this intellectual Dark Age will pass. Bernanke has become such a persona non grata in Republican circles that it is easy to forget he is a Republican. Among these competing theories for Republican Fed-bashing, the scariest, of course, is that the attacks are not just cynical, but represent genuine belief. It’s enough to make a liberal long for Milton Friedman.

Roubini calls the double-dip
(via DeLong)*

Along with the Clash, one of my favorite bands** is Stereolab. This past Sunday I saw Stereolab's lead vocalist Lætitia Sadier play a small venue. On Monday she opened for Beirut at a much larger concert hall. The crowd Monday was very young and had maybe a 60-40 female-male ratio. Both nights Sadier played a solo version of the Stereolab tune "International Colouring Contest." "Ping Pong" appears on the same album and the lyrics seem relevant:

it's alright 'cos the historical pattern has shown
how the economical cycle tends to revolve
in a round of decades three stages stand out in a loop
a slump and war then peel back to square one and back for more
bigger slump and bigger wars and a smaller recovery
huger slump and greater wars and a shallower recovery
you see the recovery always comes 'round again
there's nothing to worry for things will look after themselves
it's alright recovery always comes 'round again
there's nothing to worry - things can only get better
there's only millions that lose their jobs
and homes and sometimes accents
there's only millions that die in their bloody wars,
it's alright
it's only their lives and the lives of their next of kin
that they are losing
it's only their lives and the lives of their next of kin
that they are losing
it's alright 'cos the historical pattern has shown
how the economical cycle tends to revolve
in a round of decades three stages stand out in a loop
a slump and war then peel back to square one and back for more
bigger slump and bigger wars and a smaller recovery
huger slump and greater wars and a shallower recovery
don't worry be happy things will get better naturally
don't worry shut up sit down go with it and be happy
dum, dum, dum, de dum dum, de duh de duh de dum dum dum... ah ah
dum, dum, dum, de dum dum, de duh de duh de dum dum dum... ah ah

------------
* I doubt it. The Fed caused the last two double dips in the late 50s and early 80s and the authorities have learned their lesson over Lehman and won't allow Greece to be another Lehman.
**probably my favorite band

I saw Moneyball which was funny. Interesting that Billy Beane's office had a photo of a mohawked Joe Strummer and a Clash poster.

Jonathan Lehman on Moneyball.

The End of History?

As Scorn for Vote Grows, Protests Surge Around Globe

Saudi Men Go to Polls; Women Wait

CAIRO — Saudi men voted in local elections on Thursday for just the second time in the history of the conservative kingdom, but the polls remained closed to a majority of the Saudi population, including women, who were promised the right to vote in municipal elections scheduled for 2015 in a royal decree issued last week.

The elections were for local advisory councils with no lawmaking authority or ability to alter the status quo in one of the world’s few remaining absolute monarchies. Also barred from voting were men employed by the police and security forces as well as all men under the age of 21. Official figures estimate the number of eligible voters to be 1.2 million out of more than 18 million Saudi citizens.

Tinker, Tailor, Soldier, Spy

Love Again.

China, Driver of World Economy, May Be Slowing

America's Chinese disease by Krugman

Obama's Jobs Plan Deserves a Hearing by Christina Romer

Come Down to My Level

Whatever Happened to the American Left by Michael Kazin

But who's the real criminal? It's me, isn't it? by Daniel Davies

The Era of Ever-Falling Inflation Expectations by Yglesias

Looks like the chart of the decline of organized labor or of the influence of the Left.