"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, March 03, 2012

Valar Morghulis

Kenyan Socialism has two mottos. Eppur Si Muove and Valar Morghulis (Old Valyrian for: "all men must die").
"Dornish law does not apply." Tyrion had been so ensnared in his own troubles that he'd never stopped to consider the succession. "My father will crown Tommen, count on that."

"He may indeed crown Tommen, here in King's Landing. Which is not to say that my brother may not crown Myrcella, down in Sunspear. Will your father make war on your niece on behalf of your nephew? Will your sister?" [Oberyn] gave a shrug. "Perhaps I should marry Queen Cersei after all, on the condition that she support her daughter over her son. Do you think she would?"

Never, Tyrion wanted to say, but the word caught in his throat.... "I don't know how my sister would choose, between Tommen and Myrcella," he admitted. "It makes no matter. My father will never give her that choice."

"Your father," said Prince Oberyn, "may not live forever."

Something about the way he said it made the hairs on the back of Tyrion's neck bristle. Suddenly he was mindful of Elia again, and all that Oberyn had said as they crossed the field of ash. He wants the head that spoke the words, not just the hand that swung the sword. "It is not wise to speak such treasons in the Red Keep, my prince. The little birds are listening."

"Let them. Is it treason to say a man is mortal? Valar morghulis was how they said it in Valyria of old. All men must die. And the Doom came and proved it true."
        George R.R. Martin -- A Storm of Swords
It's Halftime in America ... and We're Winning by Yglesias

review of Scheiber's The Escape Artists by Yglesias

Why We Need A Volcker Rule by Mike Konczal

Friday, March 02, 2012

Lula's Brazil by Perry Anderson (31 March 2011)
DeLong on Glasner by Daniel Kuehn

DeLong writes
As I have said before, IMHO Cassel and Hawtrey see a lot but also miss a lot. The Bagehot-Minsky and the Wicksell-Kahn traditions have a lot to add as well. And Friedman was a very effective popularizer of most of what you can get from Cassel and Hawtrey.
But, as I have said before, those of us who learned this stuff from Blanchard, Dornbusch, Eichengreen, and Kindleberger--who made us read Bagehot, Minsky, Wicksell, Metzler, and company--have a huge intellectual advantage over others.

Thursday, March 01, 2012

Realism and Utopia in The Wire by Fredric Jameson (pdf download)

(via David Haglund)
Mike Konczal at Rortybomb on February auto sales:
As auto sales per capita go up, unemployment goes down.  And we just saw a major jump in auto sales.  Eric Platt at Business Insider: ”As predicted by Business Insiderstatistics firm Autodata Corp. is calling the February seasonally adjusted annual rate of sales at 15.1 million units for the U.S. auto industry.  Earlier in the afternoon, Business Insider forecast the rate for February would come in at 15.1 million, a substantial jump from January’s 14.1 million pace.”
And plugging an extra million into the equation means that unemployment should drop around 0.3% – to a rate of 8%.  We need to be talking 300,000+ jobs to get to that rate.
All kinds of caveats – no idea if the auto sales relationship holds up, lots of unemployed are on the sidelines, which means the unemployment rate may go up even with job gains as people re-enter the work force, etc.  But still promises to be a monster next Friday.  We’ll be covering it on twitter starting at 8:30am sharp.
False Starts by Kash Mansori
But over the past couple of months we have now been experiencing a third round of positive signs on the recovery in the US. Is this spring likely to reveal yet another false start for the US economy?

I don't think so. I think this time the improvements are for real, and more sustainable. There are two primary reasons that I say this (putting aside the obvious one, which is "third time's the charm"). First, the housing market finally appears to be well and truly near its cyclical bottom. Yes, house price indexes are still showing some declines, but there is good reason to think that there's very little further for house prices to fall. House price-to-rent ratios and real housing prices are just about where they were in the late 1990s, before the housing bubble was even a glimmer in any home-owner's eye. It's not likely that prices will fall much further. And construction activity has already bottomed out, with changes in real estate construction now adding to economic growth rather than subtracting from it.

The second reason is that the process of debt deleveraging by American households is further along than it was during the false economic starts of 2010 and 2011.
(via Thoma)
Secret Commerce Department Report Shows the Economy May be Faltering by Dean Baker
In short, this is an unambiguously bad report. My view is that it is probably an anomaly. We will perhaps see upward revisions in the second report for January or a big bounceback in the February numbers. But, this report definitely deserved some attention. It might seem rude to spoil the celebrations over our 3.0 percent growth rate last quarter, but that is what reporters are supposed to do.
E.U. Leaders Challenged by Rise in Joblessness
The jobless rate in the 17 euro zone countries rose in January to 10.7 percent, from 10.6 percent in December. It reached the highest level since 1999, when the euro was introduced, according to Eurostat, the European Union’s statistics agency. Flagging economies like Italy and Greece were responsible for much of the increase. For all 27 E.U. countries, the rate ticked up to 10.1 percent in January from 10.0 percent in December.  
European countries nonetheless diverged widely: Spain again topped the list with a 23.3 percent jobless rate, followed by Greece, at 19.9 percent in November. That compared with 4 percent unemployment in Austria and 5 percent in the Netherlands.
Federal Reserve Chairman Sees Modest Growth by Binyamin Appelbaum
But the Fed has remained cautious, and Mr. Bernanke repeated a familiar list of reasons for that stance, including the depressed housing market and turbulence in Europe. The Fed also has overestimated the pace of recovery several times in recent years.
“The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards,” Mr. Bernanke said. He noted that the Fed did not expect “further substantial declines” in the unemployment rate this year.
As a result, he said the Fed remained committed to continuing its economic stimulus efforts, keeping short-term interest rates near zero and maintaining a large portfolio of Treasuries and mortgage bonds to further reduce long-term rates, holding down borrowing costs for businesses and consumers.
Mr. Bernanke gave no indication that the Fed was considering new efforts, like increasing its holdings of mortgage-backed securities to bolster the housing market. Indeed, his remarks suggested that the Fed’s attention was shifting to the possibility that the recovery is outpacing its expectations.

Wednesday, February 29, 2012

Grading the Obama Economic Record by David Leonhardt
Excellent, thorough commentary by Eduardo Porter:
Stimulus Is Maligned, but Options Were Few
It has three main shortcomings, though. 1) No mention of the Federal Reserve 2) no mention of aid to state and local governments. In the December 2008 Larry Summers memo to Obama, they mention Bush's 2003 aid to the states program as being effective. 3) Porter quotes Kenneth Rogoff as saying Obama was given an "'only move,' a move forced by circumstance." In one sense this is right in that government activism was required because of massive private market failure. People who hate government probably felt "forced." On the other hand, Obama should have done more. He should have had a plan B.

Despite these shortcoming, the commentary is more informative than usual:
It was the winter of 2009 and the United States economy was shrinking. In the last three months of 2008 the economy had contracted at an annual rate of 8.9 percent, the sharpest decline in more than half a century. It shrank at a 6.9 percent rate the next quarter. By February 2009 the country had lost more than five million jobs.
We know what President Obama did. In February, he pushed Congress to pass the American Recovery and Reinvestment Act, an $831 billion fiscal stimulus package aimed at creating demand for goods and services to reignite growth and stop the downward spiral.
Only three Republican senators voted for the bill — Susan Collins, Olympia Snowe and Arlen Specter (who as a result of the vote had to change parties). Since then, Republicans have condemned the legislation as an unmitigated disaster. “These policies have made our economic woes worse,” the House speaker, John Boehner, wrote earlier this month on the third anniversary of the bill’s enactment. They “left millions of Americans out of work and made the future of job-crushing debt even more daunting for our children and grandchildren.”
The attack hardly fits an economy that appears finally to be gathering steam. By the end of last year the economy had recovered to its peak size in 2007, before the recession. Employment is growing at a steady, though modest, clip. The jobless rate is 8.3 percent, down from 10 percent at its peak in October 2009.
Perhaps more intriguingly, the Boehner attack suggests a question: Were there other plausible choices? And would they have fixed the economy sooner?”
Around the world, governments were trying to stimulate their economies at the time — on the right as well as on the left, totalitarian autocracies and parliamentary democracies. By early 2009, China had announced stimulus policies amounting to 4.8 percent of its gross domestic product. The austere Germans put in place measures worth about 3.4 percent of their G.D.P. to bolster flagging demand. A study published by the New York Fed found the average fiscal stimulus in a group of some 40 developed and developing countries was slightly less than 3 percent of national output.
There were alternatives. After an initial experiment with government stimulus in 2009, many European countries reversed course and slashed their budgets to try to restore fiscal balance, in the expectation that this would reassure businesses and investors that government finances were under control, and give them the confidence to invest and bolster the economy. But so far, these policies have proved to be an unmitigated disaster.
Britain — which has its own currency and enjoys low interest rates — offers perhaps the best parallel to the United States. In 2010 the coalition government of David Cameron came into office promising to undo the stimulus policies of its predecessor. It cut spending across the board, asking government departments to slash budgets by 25 to 40 percent. And it shot Britain’s incipient economic recovery in the foot.
By the end of last year the British economy was still 4 percent smaller than it was before the recession started four years earlier. And it is expected to contract a little more this year. Even after budget cuts, the government’s debt is bigger, compared with the size of the economy, than when Mr. Cameron took office.
By comparison, despite criticism of its size and composition by both the right and the left, the stimulus by the Obama administration did add to jobs and growth. The nonpartisan Congressional Budget Office estimates it will have contributed at least 1.6 million jobs and perhaps as many as 8.4 million by 2013.
This month, the Booth School of Business at the University of Chicago surveyed a panel of economic experts of different political persuasions about the impact of the president’s stimulus package: eight out of 10 said it had contributed to lower unemployment by the end of 2010. There was less consensus on whether its benefits would exceed its long-term costs, including higher taxes to pay for the spending. Still, when asked if the policy was worth it, four times as many economists agreed as disagreed.
Regarding the children crushed by debt, no plausible economic strategy would have kept the budget deficit from mushrooming. President Obama’s fiscal stimulus package of February 2009 cost the equivalent of about 5 percent of the nation’s yearly output, most of which was spent over four years. Wrapping in other attempts by the Obama administration to ignite demand — from the payroll tax cut and extended unemployment assistance to the “cash for clunkers” program to encourage drivers to buy a fuel-efficient car — the cost rises to some $1.25 trillion, which amounts, on average, to about 2.1 percent of the nation’s annual output from 2009 through 2012.
While this is not cheap, it accounts for a small share of the budget deficit, which topped 10 percent of the country’s G.D.P. in 2009 and remained at 8.7 percent last year, swollen by plummeting tax revenue and mandatory expenditures as the country sank into recession and unemployment surged. (emphasis added)

International comparisons are explored. Empirical data considered. Republican politicians' claims debunked.

I first learned of the Booth School survey via DeLong. Maybe Porter got the info from the "Econosphere." If so, it would represent another triumph. 

The first instance of the econosphere's triumph is probably the fight against the privatization of Social Security during the Bush Presidency. Dean Baker recently discussed it here:
I recall an extreme version of this back in the debate over privatizing Social Security. I made what should have been a fairly simple point: it was impossible to get 7 percent real returns in a stock market with a price to earnings ratio well over 20 and a projected real growth rate of 2.0 percent. This was simple arithmetic, but all the big names in economics, including the non-partisan professionals at the Congressional Budget Office and the Social Security administration continued to write 7.0 percent real returns into their projections.
We were finally able to score some points on this issue with the “No Economist Left Behind” test, which asked economists to write out a set of dividend yields and capital gains that added to a 7 percent real return. (in other words, they had to write down two numbers that added to 7.) Using the Social Security trustees profit growth projections, 7 percent real returns would have required either paying more than 100 percent of profits out as dividends or having price to earnings ratios of 300-400.
 However, even our limited success in this case (no one in a position of authority acknowledged their error) was only accomplished after Paul Krugman wrote about the issue in his NYT column and the no economist left behind test caught fire in the blogosphere.
My point here is that anyone challenging the status quo is almost completely excluded from public debate. This was third grade arithmetic – the bad guys were just simply wrong – and we could not get people like the Washington Post editorial board and columnists to recognize this simple fact.
I don't remember the episode that well even though I was reading the econosphere back then. It seemed to be that Bush was lackluster in his efforts - which failed miserably - and that the econosphere put up a good fight but I don't recall how much of an effect it had.

Anyway there were three other recent econosphere victories which should be remembered.

One, NGDP level targeting. Christina Romer wrote an editorial in favor of it and Bernanke was asked about it by Binyamin Appelbaum at a press conference.

Two, St. Louis Fed President James Bullard responds to Tim Duy about the econosphere's discussion of the "output gap."

Three, worksharing. Dean Baker writes about the worksharing measures in the new payroll tax law here. Baker has blogged regularly about Germany's success with worksharing (I believe Thoma has linked to him.) I've read mentions of it in the NYTimes and Wall Street Journal in the German context.) The provision is based on a bill introduced in the Senate by Jack Reed and in the House by Rosa DeLuaro. It's possible they got the idea via the econosphere or by journalism inspired by the econosphere.

There has been much discussion about David Graeber's Debt, some of it focused on his unworkable anarchist policy prescriptions. Some of these criticism may be right, but I do think the econosphere demonstrates a successs of the anarchist principle even though many members may not see themselves as anarchists and are quite critical of Graeber.

Tuesday, February 28, 2012

Michiko Kakutani reviews Noam Scheiber's 'The Esacpe Artists'
Echoing other commentators on the left, Mr. Scheiber also argues that the White House was slow to realize that “the G.O.P. had no interest in compromise,” and that it repeatedly caved to the Republicans over taxes, the deficit and the debt ceiling. He contends that Mr. Obama did little to line up Democratic support in Congress for his jobs bill and other policies, and that he “rarely exploited the massive stature of his office as a tool for influencing legislation” during the making of the original stimulus in 2009, during the initial push for health care reform, or during bargaining over the Bush tax cuts and the standoff over the deficit.
Mr. Scheiber’s conclusion? “That Team Obama helped avert catastrophe” — that is, a slide into another Great Depression — is “beyond question,” but despite its heroic efforts, “the Obamans nonetheless failed at the task they set for themselves — of restoring the economy to something resembling its precrisis vitality.” Given that a lot of pre-2008 prosperity rested on shaky grounds (a housing bubble, huge amounts of leverage and deregulatory policies that fueled the Wall Street meltdown), and given recent sprouts of hope on the economic front (a rising Dow, an improving jobs picture), it feels like a glib and premature conclusion to what is a revealing, if polemical, book.
How is this glib? How is it premature? Why was there no plan B? There was a bubble but there was also a boom. Then there was a downturn. Kakutani doesn't appreciate how bad the downturn has been.

Team Obama could have done a number of things which they didn't do. If Obama is re-elected it's because the Republican field is so bad.
Quick Thoughts on Modern Monetary Theory by Dean Baker
The Payroll Tax Law's Best Measure by Dean Baker

Monday, February 27, 2012

A Song of Ice and Ire

Iceland Recovers from a Financial Crisis with Debt Writedowns by Mike Konczal

What Ails Europe? by Krugman
Things are terrible here [Lisbon, Portugal], as unemployment soars past 13 percent. Things are even worse in Greece, Ireland, and arguably in Spain, and Europe as a whole appears to be sliding back into recession. 
In other words, the Hellenization of our economic discourse, in which we’re all just a year or two of deficits from becoming another Greece, is completely off base.
So what does ail Europe? The truth is that the story is mostly monetary. By introducing a single currency without the institutions needed to make that currency work, Europe effectively reinvented the defects of the gold standard — defects that played a major role in causing and perpetuating the Great Depression.
More specifically, the creation of the euro fostered a false sense of security among private investors, unleashing huge, unsustainable flows of capital into nations all around Europe’s periphery. As a consequence of these inflows, costs and prices rose, manufacturing became uncompetitive, and nations that had roughly balanced trade in 1999 began running large trade deficits instead. Then the music stopped.
If the peripheral nations still had their own currencies, they could and would use devaluation to quickly restore competitiveness. But they don’t, which means that they are in for a long period of mass unemployment and slow, grinding deflation. Their debt crises are mainly a byproduct of this sad prospect, because depressed economies lead to budget deficits and deflation magnifies the burden of debt.
Game of Thrones Season 2: Power and Grace