"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, November 26, 2011

Quiggin wrote
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.
Pepper-Spray Cop's Money Troubles
Blogging the Zombies: Expansionary Austerity - Life by John Quiggin

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

Death by Hawkery by Krugman
It Shouldn't Take a Panic to Spur Responsiblity by Floyd Norris
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

How Occupy stopped the supercommittee by Dean Baker
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.
Via Krugman,  Andrew Haldane, the executive director for financial stability at the Bank of England, says
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.
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.

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 Austerity Play: Euronomics of Speculative Attacks by DeLong

Black Wednesday

George Soros

European Exchange Rate Mechansim
Pepper-spray cop works his way through art history By Maura Judkis

Pepper Spraying Cop tumblr

Lt. Pike may be our 2012 Joe the Plumber.
When Did Liberals Become so Unreasonable by Jonathan Chait

(via Yglesias)
Revised GDP figures offer hope for final three months of 2011 by Neil Irwin

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.

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.”
West's Economic Slump Catching Up With Asia

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

Rules versus Discretion by David Glasner
Federal Reserve Rejects NGDP Targeting by Yglesias
Explaining Global Financial Imbalances: A Critique of the Saving Glut and Reserve Currency Hypotheses by Thomas Palley

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?

(via Thoma)

Global Banking Glut and Loan Risk Premium by Hyun Song Shin
The beatings will continue until morale improves.

Full Metal Jacket Private Pyle scenes via YouTube

Neo-Calvinists and the Euro Crisis by Krugman

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

Take back "contrarianism" from the resentful, humorless, dogmatic Left

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.
Central Bankers: Stop Dithering. Do Something. by Adam S. Posen

I'd add Posen to my League of Super Technocrats - reality-based policymakers trying to do the right thing. In a previous post, I mentioned Mervyn King, Governor of the Bank of England and Chairman of its Monetary Policy Committee. Also there was Charles Evans, President of the Chicago Fed, Christina Romer former chairwoman of the C.E.A., and Elizabeth Warren who is currently running for the U.S. Senate and so might become a politician.

Posen is extra cool in that somehow he's an American on the Bank of England's Monetary Policy Committee. Also he co-edited a book with Bernanke titled Inflation Targeting: Lessons from the International Experience.

I thought I had read he taught at Princeton with Krugman but can't find confirmation on the Internet.

Krugman on the debasement of the word "technocrat."

The Congressional Budget Office, for the most part, and the IMF - which has marked its beliefs to market - are positive examples of technocrats.

Bad examples would be the Bank of International Settlements and the O.E.C.D.

Sunday, November 20, 2011

Newt Gingrich and Medicare Part D by David Weigel
Heaven is a Place Called Elizabeth Warren

She needs like an iconic poster like the ones below:

The Mark-To-Market Amplification Of Financial Distress by Krugman
A nice phrase from my colleague Hyun Song Shin (pdf), describing what’s happening in Europe right now.

The paper covers much more ground than that, of course. This is the latest in a series of papers arguing that the U.S. shadow banking system consists in large part of … European banks. This suggests that the creation of the euro had large implications even in US capital markets; and of course it suggests that the financial fallout of the euromess could be very large here as well.

In short, the ECB could be in the process of destroying not just the euro, but the world.

I saw the movie Melancholia and liked it. It's about the end of world, too. I'll discuss it soon.

For a Changing Myanmar, the Real Tests Lie Ahead

A New Voice Grips South Korea With Plain Talk About Inequality and Justice
Department of "Huh?!": John Taylor and Milton Friedman's Monetary Policy Edition by DeLong

John Taylor, Allan Meltzer, and Amity Shlaes, welcome to my rogues gallery!
Bloggling the Zombies by John Quiggin