"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

Thursday, October 25, 2012

AV Club review of Alphas second season finale
Germany Has Outperformed the U.S. Because of Work Sharing by Dean Baker

Nov. 19 is Uranus Day

Our Debt to Stalingrad by DeLong
And so, 70 years ago this November – on November 19 to be precise – the million-soldier reserve of the Red Army was transferred to General Nikolai Vatutin’s Southwestern Front, Marshal Konstantin Rokossovsky’s Don Front, and Marshal Andrei Yeremenko’s Stalingrad Front. They went on to spring the trap of Operation Uranus, the code name for the planned encirclement and annihilation of the German Sixth Army and Fourth Panzer Army. They would fight, die, win, and thus destroy the Nazi hope of dominating Eurasia for even one more year – let alone of establishing Hitler’s 1,000-year Reich.
Together, these 1.2 million Red Army soldiers, the workers who armed them, and the peasants who fed them turned the Battle of Stalingrad into the fight that, of any battle in human history, has made the greatest positive difference for humanity.
Wikipedia entry for Battle of Stalingrad

"The battle took place between 23 August 1942 to 2 February 1943"

Uranus is the seventh planet from the Sun. It has the third-largest planetary radius and fourth-largest planetary mass in the Solar System. It is named after the ancient Greek deity of the sky Uranus (Ancient GreekΟὐρανός), the father of Cronus (Saturn) and grandfather of Zeus (Jupiter). Though it is visible to the naked eye like the five classical planets, it was never recognized as a planet by ancient observers because of its dimness and slow orbit.[16] Sir William Herschel announced its discovery on March 13, 1781, expanding the known boundaries of the Solar System for the first time in modern history. Uranus was also the first planet discovered with a telescope.
Uranus (play /ˈjʊərənəs/ or /jʊˈrnəs/Ancient Greek ΟὐρανόςOuranos meaning "sky" or "heaven") was the primal Greek god personifying the sky. His equivalent in Roman mythology was Caelus. In Ancient Greek literature, Uranus or Father Sky was the son and husband of Gaia, Mother Earth. According to Hesiod's Theogony, Uranus was conceived by Gaia alone, but other sources cite Aether as his father.[3] Uranus and Gaia were the parents of the first generation of Titans, and the ancestors of most of the Greek gods, but no cult addressed directly to Uranus survived into Classical times,[4] and Uranus does not appear among the usual themes of Greek painted pottery. Elemental Earth, Sky and Styx might be joined, however, in a solemn invocation in Homeric epic. 

Wednesday, October 24, 2012

The Corrections*

Or Minsky Moments when the music in musical chairs stops.
Liquidity, bubbles/ponzis/chain letters, and money by Nick Rowe

I might as well join in the fun. Along with Steve Williamson, Noah Smith, Karl Smith, Paul KrugmanDavid Glasner, and Steve again. [Update: and Brad DeLong and JP Koning. And David Andolfatto.] 
Some assets are more liquid than others (they have lower transactions costs of buying and selling). More liquid assets will have a lower desired rate of return than less liquid assets (that means people will be willing to own them even if they expect to earn a lower rate of return than less liquid assets).

Money (the good that is used as a medium of exchange) will be more liquid than other assets. (If some other asset were more liquid than money, people would switch to using that other asset as a medium of exchange instead of the existing money, and that other asset would become the new money).
I wonder if anyone wrote that the environment and climate change is a bubble in that it is unsustainable.

*If anyone doesn't know, this was the title of a Jonathan Franzen novel.
Standard of Living Is in the Shadows as an Election Issue by Leonhardt

Better Ways to Deal With China by Eduardo Porter

China and Protectionism: It Ain't Quite as Simple as They Tell Us by Dean Baker

Housing Was a Huge Headwind; Now It’s a Small Tailwind by Jared Bernstein

Tuesday, October 23, 2012

Busted: 75% of the Biggest Home Lenders in 2006 No Longer Exist by Matt O'Brien

Bernanke not coming back

The End of China Bashing: Toward a Serious Discussion of the Trade Deficit by Dean Baker
Paul Krugman and Ezra Klein both say, following Joe Gagnon, that the time for criticizing China for "currency manipulation" has passed. This is partly true in the sense that China's currency has risen substantially in real terms against the dollar over the last few years. However this does not mean either that the relative value of the dollar and the yuan is now at a sustainable level or that China is not continuing as a matter of policy to prop up the dollar against its currency. 
Thoma and DeLong seem to agree with Krugman and Klein. Is this a reaction to Romney's China bashing during the debates as the Presidential race tightens?

You can't blame them in that this election is very important.

Who will be the next Fed Chair (Applebaum piece) or Treasury Secretary (Sorkin piece) According to Sorkin: "If Mitt Romney wins the presidency, he has already pledged he will replace Mr. Bernanke, whose term as chairman ends in January 2014, in just over 15 months. However, Mr. Bernanke has told close friends that even if Mr. Obama wins, he probably will not stand for re-election."

Or Supreme Court judge?
minutes later, however, it became clear that while the court had rejected an expansive view of the Constitution’s commerce clause (which the administration had argued gave Congress the power to make people buy health insurance), it had in fact upheld the health care law on grounds that the individual mandate fell under Congress’s broad power to levy taxes.

Monday, October 22, 2012

Good insight from Krugman.

Is fiat money a bubble in this sense? Not at all. It’s true that green pieces of paper have no intrinsic value (except that they can be used to pay taxes, which is actually important), so that my willingness to accept green paper from you is based only on my belief that I can in turn hand that green paper over to someone else. But there’s nothing to prevent that process of monetary circulation from going on forever. 
So what is fiat money? It is, as Paul Samuelson put it in his original overlapping-generations model (pdf), a “social contrivance”. It’s a convention, which works as long as the future is like the past. Obviously, such conventions can break down — but then so can things like property rights. In fact, you could argue that almost every asset in a modern economy owes its value to social convention; green pieces of paper could become worthless, but then so could any paper claim, which is, after all, worth something only because laws say it is — and laws can be repealed. 
And once you realize that a social convention is not at all the same thing as a bubble, several related fallacies fall into place. 
Take the common claim on the right that Social Security is a Ponzi scheme because the system has few real assets. It’s true that Social Security is mainly a system in which each generation pays for the previous generation’s retirement, in the expectation that it will receive the same treatment from the next generation. But like monetary circulation, this process can go on forever; there’s nothing unsustainable about it (yes, demography, but that’s about the levels of taxes and benefits, not the fundamental nature of the scheme). So there’s nothing Ponziesque at all. 
A final thought: the notion that there must be a “fundamental” source for money’s value, although it’s a right-wing trope, bears a strong family resemblance to the Marxist labor theory of value. In each case what people are missing is that value is an emergent property, not an essence: money, and actually everything, has a market value based on the role it plays in our economy — full stop.
Conservatives assert that social contrivances are "bubbles," things like fiat money, property rights, and Social Security. Is this a category mistake?

Bubbles are "unsustainable."


Sunday, October 21, 2012

Krugman sort of agrees with Baker
The Financial Industry and Financial Crises by Krugman 
Yet the economy remains depressed, with recovery far from complete. My current modeling approach stresses the overhang of household debt as an explanation; it’s not about the financial system any more. 
By the way, way back when, when I was worrying about Japan, I quarreled with the common argument at the time that Japan’s problem was “zombie banks”, and that once the banks had been recapitalized all would be well. They were, and it wasn’t, and much the same has been true for us now. 
So Dean and I agree; maybe I shouldn’t use the term “financial crisis” at all, but it’s the terminology people know. 
Now, there is, I suppose, a hint of disagreement about what would have happened if we hadn’t bailed out the banks at all. Dean thinks we’d be in the same place; I think we would have had a second major round of damage, which we’d still be feeling. In other words, I think that something like the TARP was necessary — just not sufficient. 
Anyway, just to be clear: we may have had a banking problem in 2008-2009, but now we have a burst bubble problem, I’d say in the form of a household balance sheet problem. And a bank-centered view is indeed misleading.