The Crystal Ball

Hari Seldon and the Psychohistorians.

As Yglesias and others argue, what's needed is better economic forecasting. Part of this I would argue is Risk Topography, something Alan Greenspan failed to do very well. Not only Greenspan though. The entire financial services industry nearly destroyed itself because of its rampant gluttony And of course the regulators and ratings agencies were bought-off enablers.

After election night, Nate Silver's The Signal and the Noise shot up 850% to 2nd place on Amazon.

3.31.13

Game of Thrones Season 3

New Cast Members

DeMarco should be fired STAT

Can the Federal Reserve Help Prevent a Second Recession? by William Greider

What’s missing from Fed politics is the left: the countervailing voices of progressives, liberals and labor, who could make the case for more drastic action by the Fed. In effect, they could put an arm around Bernanke and encourage him to try more aggressive measures. Liberal-labor advocates could also defend the Fed against its right-wing enemies and act as principled critics who can pressure the central bank’s governors and push them further in a sensible direction than they might want to go.
* * *
Joseph Gagnon, a twenty-five-year veteran of monetary policy at the Fed and now an economist at the Peterson Institute, lamented the one-sided nature of elite debate. “What bothers me,” he said, “is one side is nothing but critical of what the Federal Reserve is doing, and the other side is just silent. I just don’t understand. Why aren’t a lot of voices complaining that the Fed isn’t doing enough? The progressive side has been absolutely silent, and yet the conservatives have been jumping up and down. And this totally distorts the Fed’s environment.”

...

Joseph Stiglitz, a Nobel Memorial Prize–winning economist at Columbia University, and Mark Zandi, chief economist at Moody’s Analytics, propose an excellent use for Fed-created money: funding a massive refinancing of home mortgages, which would cut monthly payments dramatically and free personal income for consumption. “Housing remains the biggest impediment to economic recovery, yet Washington seems paralyzed,” the two wrote in an August 13 New York Times op-ed.

A plan proposed by Oregon Senator Jeff Merkley, they explained, could boost disposable income for some 20 million families with underwater mortgages, including those not backed by the government-sponsored housing enterprises Fannie Mae and Freddie Mac. A “government-financed trust” would buy up the refinanced mortgages, thus giving private lenders the capital to make more loans. Several federal agencies could handle this, but Zandi told me that using the Federal Reserve would be the most efficient way. “The biggest impediment is the banking system,” Zandi said. “The pipeline for origination of lending has shrunk—a lot of midsize banks and mortgage companies got out—so the big banks now account for even more of the volume. They manage the flow by raising their eligibility standards. That’s why they are making so much money.” 

The Federal Reserve could change that, Zandi said, but he added, “I think the Fed would never go down this path unless the national economy is sliding back into recession.”

Lizzy Caplan and Alison Brie on their new movie, Save The Date, and their TV shows by Nathan Rabin

Janet Yellen’s Game-Changing Speech for Monetary Policy by: David Dayen (at Firedoglake?)

I kind of view Firedoglake, Duncan Black, Digby and Crooked Timber as the pain-in-the-ass-but-in-the-right Tommy Lee Jones as Thaddeus Stevens. They're right but wrong.

Yglesias on the the payroll tax cut extension and the Austerity Bomb.

John Cassidy on the Austerity Bomb:

But has Obama given the Republicans sufficient reason to believe he won’t eventually roll over? 

At least to me, that’s not yet clear. During his press conference, a reporter asked the President, “(W)hy should the American people and the Republicans believe that you won’t cave again this time?” This was Obama’s reply:

Well, two years ago the economy was in a different situation. We were still very much in the early parts of recovering from the worst economic crisis since the Great Depression. And ultimately, we came together, not only to extend the Bush tax cuts, but also a wide range of policies that were going to be good for the economy at the point—unemployment-insurance extensions, payroll-tax extension—all of which made a difference, and is a part of the reason why what we’ve seen now is thirty-two consecutive months of job growth, and over five and a half million jobs created, and the unemployment rate coming down. But what I said at the time is what I meant, which is this was a one-time proposition. And you know, what I have told leaders privately as well as publicly is that we cannot afford to extend the Bush tax cuts for the wealthy.

I find your lack of faith disturbing

Grand Moff Tarkin's team of rivals:

Nov. 19th is Uranus Day:

However, Hitler was so focused on the city itself that requests from the flanks for support were refused. The Chief of the Army General Staff, Franz Halder, expressed concerns about Hitler's preoccupation with the city, pointing out that if the situation on the weak German flanks was not rectified, "there would be a disaster." Hitler told Halder that Stalingrad would be captured and the weakened flanks would be held with "...national socialist ardour, clearly I cannot expect this of you (Halder)," and replaced him with General Kurt Zeitzler in mid-October.

And there's a new movie about about another "hinge moment" in history.  The reviewers are saying Spielberg's Lincoln is pretty good. Tony Kushner's script has a scene where Union soldiers are quoting the Gettysburg Address back to the celebrity Lincoln:

Four score and seven years ago our fathers brought forth on this continent a new nation, conceived in liberty, and dedicated to the proposition that all men are created equal. 

Now we are engaged in a great civil war, testing whether that nation, or any nation, so conceived and so dedicated, can long endure. We are met on a great battle-field of that war. We have come to dedicate a portion of that field, as a final resting place for those who here gave their lives that that nation might live. It is altogether fitting and proper that we should do this. 

But, in a larger sense, we can not dedicate, we can not consecrate, we can not hallow this ground. The brave men, living and dead, who struggled here, have consecrated it, far above our poor power to add or detract. The world will little note, nor long remember what we say here, but it can never forget what they did here. It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us—that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion—that we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government of the people, by the people, for the people, shall not perish from the earth.

"When my information changes, I change my opinion. What do you do, sir?" 

- Keynes

PUBLIC DEFENDER: Diane Ravitch takes on a movement. by David Denby

Sounding like Charles Evans, Minneapolis Fed President Narayna Kocherlakota at a town hall in Duluth on October 30th:

In light of the unusually large macroeconomic shock, I believe that it is misleading to assess the FOMC’s actions by comparing its current choices to policy steps taken over the past 30 years. Instead, we have to assess monetary policy by comparing the economy’s performance relative to the FOMC’s goals of price stability and maximum employment. In particular,if the FOMC’s policy is too accommodative, that should manifest itself in inflation above the Fed’s target of 2 percent. This has not been true over the past year: Personal consumption expenditure inflation—including food and energy—is running closer to 1.5 percent than the Fed’s target of 2 percent.¹

But this comparison using inflation over the past year is at best incomplete. Current monetary policy is typically thought to affect inflation with a one- to two-year lag. This means that we should always judge the appropriateness of current monetary policy using our best possible forecast of inflation, not current inflation. Along those lines, most FOMC participants expect that inflation will remain at or below 2 percent over the next one to two years. Given how high unemployment is expected to remain over the next few years, these inflation forecasts suggest that monetary policy is, if anything, too tight, not too easy.

He used to talk about structural unemployment. What changed his mind? Perhaps it was the visit to the North Dakota "mancamps."

Risk Topography

Found it. My blogpost on Robert Shiller's "risk topography" piece "Needed:  a Clearer Crystal Ball."

Is this the actuarial science, something the ratings agencies (Moody's, _____, _____ ) failed at by giving toxic sludge AAA ratings?

Yglesias's review of Nate Silver's new book urges the "curious fox (not hedgehog)" to look into economic forecasting. It's hard because as Yglesias says future economic conditions depend upon political outcomes.

Ygelsias also wrote about this research paper put out by the Reserve Bank of Australia, which says that central banks are poor forecasters. From the paper:

Our estimates suggest that uncertainty about forecasts is high. We find that the RBA's forecasts have substantial explanatory power for the inflation rate but not for GDP growth.

Probably because central banks target inflation rates and not GDP growth/full employment.

Zombie-killer Krugman says Brian Beutler was the one to coin "austerity bomb."

Michonne is my new favorite on The Walking Dead. The show has motivated me to pick up the graphic novel series.

In the latest episode, she left The Village - Woodbury - and Andrea stayed.

Austerity Bomb (see the European Feedback Cycle of Doom)

Robert Reich:

This is why any “grand bargain” to avert the fiscal cliff should contain a starting trigger that begins spending cuts and any middle-class tax increases only when the economy is strong enough. I’d make that trigger two consecutive quarters of 6 percent unemployment and 3 percent economic growth.

To make sure this doesn’t become a means of avoiding deficit reduction altogether, that trigger should be built right into any “grand bargain” legislation – irrevocable unless two-thirds of the House and Senate agree, and the President signs on.

(via Thoma)

The Progressive Echo Chamber

Which popular blogs are predicting a sell-out by Obama over the Grand Bargain?

Crooked Timber? Firedoglake? Digby?

Unrelated:

Janet Yellin Says She's "Strongly Supportive" of Evans-Style Approach To Monetary Stimulus by Yglesias

The Signal and the Noise

Good name for a band.

Central Banks Aren't Very Good at Macroeconomic Forecasting by Yglesias

Yglesias's review of Nate Silver's book.

What we need is a Nate Silver of forecasting. Robert Shiller had a NYTimes article on forecasting a while back. Need to look it up.

Nov. 19 is Uranus Day

Nov. 19 is Uranus Day

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. 

The Battle of Stalingrad 

The German offensive to take Stalingrad had been halted by a combination of stubborn Red Army resistance inside the city and local weather conditions. The Soviet counter-offensive planning used deceptive measures that eventually trapped and destroyed the 6th Army and other Axis forces around the city, becoming the second large scale defeat of the German Army during World War II.^[30] 

During the siege, the German and allied Italian, Hungarian, and Romanian armies protecting Army Group B's flanks had pressed theirheadquarters for support. The Hungarian 2nd Army, consisting of mainly ill-equipped and ill-trained units, was given the task of defending a 200 km (120 mi) section of the front north of Stalingrad between the Italian Army and Voronezh. This resulted in a very thin line, with some sectors where 1–2 km (0.62–1.2 mi) stretches were being defended by a single platoon. Soviet forces held several bridgeheads on the western bank of the river and presented a potentially serious threat to Army Group B.^[13]:p.915 

Similarly, on the southern flank of the Stalingrad sector the front southwest of Kotelnikovo was held only by the Romanian 7th Army Corps, and beyond it, a single German division, the 16th Motorized Infantry.

However, Hitler was so focused on the city itself that requests from the flanks for support were refused. The Chief of the Army General Staff, Franz Halder, expressed concerns about Hitler's preoccupation with the city, pointing out that if the situation on the weak German flanks was not rectified, "there would be a disaster." Hitler told Halder that Stalingrad would be captured and the weakened flanks would be held with "...national socialist ardour, clearly I cannot expect this of you (Halder)," and replaced him with General Kurt Zeitzler in mid-October.

David Brooks Is Worried About Non-Existent Economic Crises by Dean Baker

Krugman had this nailed. All of the sudden deficit scolds are worried about the austerity bomb.

@RORTYBOMB RELAYS @MAXBERGER 'S SUGGESTION: WE SHOULD CALL THE "FISCAL CLIFF" THE "AUSTERITY BOMB." I CONCUR by DeLong

HOW TO GOVERN AMERICA IN 2013 I: LIMING THE PLAYING FIELD WEBLOGGING by DeLong

Now tell me why Ed DeMarco is still head of the Federal Housing Finance Administration?

Class

Bottom half gained a year, top half gained 5 years, while the deficit scolds argue life expectancy overall has been extended by 2-3 years, writing out the class issue.

Life Expectancy of the Living Dead by Krugman

Michonne

AV Club reviews The Walking Dead, "Say the Word"

Which Polls Fared Best (and Worst) in the 2012 Presidential Race by Nate Silver

Among the more prolific polling firms, the most accurate by this measure was TIPP, which conducted a national tracking poll for Investors’ Business Daily. Relative to other national polls, their results seemed to be Democratic-leaning at the time they were published. However, it turned out that most polling firms underestimated Mr. Obama’s performance, so those that had what had seemed to be Democratic-leaning results were often closest to the final outcome.

Rasmussen was Republican-biases as I have always thought.