"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 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

Aggregate Demand and the Global Economic Recovery by Janet Yellen

(via Thoma)
Heartless Bastards announces tour dates and provide tracks off new album. Tickets go on sale this weekend.

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:
Joan Robinson’s “Open letter from a Keynesian to a Marxist” by Mike Beggs
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.

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.
(via DeLong)

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.
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.

Head of ECB hints at more bank action if euro countries curb spending by Anthony Faiola and Neil Irwin

Wednesday, November 30, 2011

Rereading Liaquat Ahamed's Lords of Finance, I came across the interesting phrase "the obverse of a bubble." It's what the coordinated actions of the advanced economies' central banks today were designed to prevent.

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.
xlcd cartoon on Von Braun and the Saturn V rocket.

Makes me think of Pynchon.

(via Daniel Kuehn.)
Krugman on Sound Opinions

ADP today reported that employment in the U.S. nonfarm private business sector increased by 206,000 from October to November on a seasonally adjusted basis
Progress in Economics Education Department: Yes, a Temporary Fiscal Expansion Would Be a Good Thing by DeLong
Yes, Virginia. The banks really were bailed out. by Steve Randy Waldman

(via Thoma)

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.

Confessed 4 Life

Bridget Regan on TNT mystery movie next Sunday.

Germany Cuts Off Its Nose by Joe Nocera

The ECB's Reverse FDR by Krugman

Monday, November 28, 2011

The Wages of AFDC Repeal Is Children Living in Cars by DeLong
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.

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...
Mary Jo Bane and Peter B. Edelman resigned over it.

Europe's New Plan: Procyclical Fiscal Policy plus Hope by Yglesias
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.
Meanwhile there are rumors that the IMF and Italy are making a deal.

He reads like an Ezra Klein column during the health care reform debate except at the end he seems to be flogging a President Romney /Glen Hubbard voucher alternative to Obamacare. Samuelson may exit my rogues gallery if he keeps this up. In his column he mentions OECD figures which shows how they can be good technocrats. In response to a Krugman blog post I mentioned how they have recently been bad technocrats who pushed the expansionary austerity snake oil. Here, Krugman writes about how the OECD has come to realize the urgency of the situation in Europe and so are once again good technocrats.

How Congress Occupied Wall Street by Sarah Palin
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