"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, May 31, 2013

the contradictions of contemporary capitalism and a review of "The East"

Falling for the Anarchy She Was Sent to Fight by A.O. Scott
Back home in Washington, Jane has a scruffy, sensitive, bland boyfriend. Out in the woods, she falls under the spell of Benji (Alexander Skarsgard), who is scruffy, sensitive and dangerous. While the East, being a group of anarchists, has no formal leader, Benji is clearly the alpha dog. His main lieutenants are an elfin zealot named Izzy (Ellen Page) and Doc (Toby Kebbell), a troubled former medical student. All of them come from relatively privileged backgrounds and have painful, intimate reasons for taking up the cause.
I wish Benioff and Weiss would cast Kebbell as Oberyn Martell, the Red Viper of Dorne.
This intimation of large, lurking danger is appropriate to this movie’s vague environmental theme. The damaged, idealistic young people plotting to terrorize the wealthy and comfortable are seen as canaries in the coal mine, their rage a sign that something is terribly wrong. But their animus is also explained in ways that strain credibility and undermine the film’s topicality. Benji, Izzy and Doc are motivated by grief, filial resentment and a desire for revenge. For them the political is personal, which makes it a little less urgent for everybody else. 
But it may be asking too much of “The East” — which is, after all, a twisty, breathless genre film — to wish that it would frame the contradictions of contemporary capitalism more rigorously. The movie is aware that they exist, and wishes that they could be resolved more or less happily, which is hard to argue with, though also hard to believe.

Is Japan a Currency Manipulator? by David Glasner

What’s with Japan? by David Glasner

I'm still hopeful about Abenomics.

Wednesday, May 29, 2013

This Time is Not So Different: The Euro Crisis and the 1840s by Carola Binder

Central Banks Act With a New Boldness to Revitalize Economies

Don't Forget the Fed! by Jared Bernstein

Rate Stories by Krugman

In monetary economics the simplest model is the bare two-good one-period quantity theory of money model:
  • There is a peculiar commodity called "money".
  • Total economy-wide spending is roughly proportional to it.
There are lots of valid insights to be gained from this model. But does it help us understand the real world today enough to satisfy us? No: the money stock is very large, but the flow of spending is not.
So we complicate the model:

  • The incentive to spend money is lower when the short-term safe nominal interest rate is low.
  • For each counterfactual level of the money stock there is a curve, with total spending on the horizontal axis and the short-term safe nominal interest rate on the vertical axis, that tells us how the level of spending varies with counterfactual variations in the short-term safe nominal interest rate.
  • We call this family of curves--one for each counterfactual level of the money stock--the LM relationship.
  • But this is not a complete model: we need to figure out what the short-term safe nominal interest rate is. So we add a bond market to our model and look at its equilibrium level of asset prices to pin down the interest rate.
  • We call that pinning-down the interest rate by the name of the IS relationship.
  • That is the IS-LM model.
It is a three-good one-period model.
(post-Keynesian?) commenter chris:

John Hicks: IS-LM: An Explanation

I liked Drive, the Nicolas Winding Refn/Gosling collaboration. Their new movie was booed at Cannes. I love the Coen brothers and their new movie Inside Llewyn Davis is said to be their best yet. So I'm excited.

Coincidently, the lead in the Coen's new movie, Oscar Isaac, was in Drive. He played Carey Mulligan's ex-con husband. He has been in Che: Part One, The Bourne Legacy, Body of Lies, Agora, Robin Hood and Sucker Punch.

Tuesday, May 28, 2013

wherein I take Escaton off the blogroll again

Since Atrios says John McCain is worse than Bashar al-Assad.
Several Hours 
I have no idea what the point of John McCain going to Syria is, though at least now his conspicuous absence from the Sunday shows has been explained. 
I'm sure he's an expert now. 
by Atrios at 17:33
I remember a time when the liberal-left or some of it at least was concerned about humanitarian disasters and the fates of foreigners.  I see the humanitarian disaster in Syria as not just a pre-text for war and as worse than John McCain or the Republicans.

If you just read DeLong, Yglesias, or Krugman you would never know there's an ongoing disaster in Syria which is spreading.

exit strategy (Yoda Kuroda)

Nikkei Sinks Again Amid Mixed Signals From Central Bank
In Tokyo, the minutes of the Bank of Japan’s policy meeting on April 26 revealed a degree of doubt about the bank’s ability to inject a healthy dose of inflation into an economy that has suffered from crippling deflation for years. 
According to the minutes, “a few members” pointed out that the goal of 2 percent inflation appeared “difficult to achieve” in the planned time frame of about two years, “since it was highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation.” 
Some board members also noted that the bank’s aggressive easing policies appeared to have been perceived by the markets as “contradictory” — comments that highlighted the challenges that the bank and policy makers are wrestling with. 
The bank, on one hand, has committed to ending deflationary expectations and starting an economic recovery by flooding the economy with money, which would cause long-term interest rates to rise. But the bank has also committed to keeping those interest rates in check, partly by buying large amounts of government bonds. That has sowed confusion among market players over whether they should welcome or worry about the recent rise in long-term rates.
Haruhiko "The Keymaster Yoda" Kuroda should say "we want long-term interest rates to remain low until we hit 2 percent inflation, with the economy running at full capacity and potential levels and with the output gap closed. This means 2 percent inflation, not runaway inflation. To prevent runaway inflation we'll allow long-term rates to rise at the appropriate time. This will contain inflation. Hope that clears things up. Market players should look for signs that the output gap is closed. That's when rates will rise. We estimate output gap closure in two years depending on the international economic context (see China, the U.S. and Europe.)"

35 percent

No Villagers, this is not a center-right country by digby
CNN with the latest polling on Obamacare: 
Fifty-four percent of Americans oppose President Barack Obama’s signature domestic policy achievement, according to a CNN poll released Monday, while 43 percent support the law. 
But, for once they asked the most relevant follow-up question: 
Thirty-five percent of the country opposes the law because it’s too liberal, while 16 percent argues it isn’t liberal enough. 
That's right. It is not a majority position against a national health care plan or "big gummint" or any other of the typical beltway signifiers of a "center right nation." It turns out that only 35% of the country has that attitude. The majority either support the plan or want more. I doubt that most people every understand that from the way the polls are presented.
(via Thoma)

Monday, May 27, 2013

Robert Samuelson Mostly Right on Over-Valued Dollar by Dean Baker
The part of the story that Samuelson misses is that the over-valued dollar is a relatively recent phenomenon, not something that dates from the U.S. becoming the world's leading reserve currency. The dollars soared in 1997 as a result of the U.S. government and IMF"s mismanagement of the East Asian bailout from the financial crisis.

The conditions they imposed on the countries of the region led developing countries around the world to begin to accumulate massive amounts of dollars as a cushion so that they would not ever be in the situation that the East Asian countries found themselves in 1997. This means that the imbalances of the last 15 years can be directly attributed to the failures of the Greenspan-Rubin-Summers team (a.k.a. "The Committee that Saved the World") that directed the bailout.

Sunday, May 26, 2013

AV Club reviews "Unconscious Selection" from Orphan Black

Monetary Policy

Mixed feelings. I consider myself liberal/progressive/left-of-center. But I'm in favor of monetary policy and humanitarian intervention. (See Bosnia and Rwanda and Darfur. Syria now is what Iraq would have been like without intervention. Probably worse.)

Waldmann's jihad against monetary policy.

I didn't get this first time around. Mike Konczal was reacting to Ramesh Ponnuru and David Beckworth in the worse and worse New Republic. They say fiscal policy doesn't work. He says monetary policy doesn't work. Krugman agrees saying that monetary policy hasn't offset austerity. But could it? Could if they set a 4 percent inflation target?

(What would it take for Ponnuru and Beckworth to be convinced that the focus on debts and deficits now is wrong and fiscal policy can help?)

The Four Percent Solution by Krugman
Larry Ball makes the case that we would be a lot better off with a 4 percent inflation target rather than the 2 percent that is now central bank orthodoxy. Intellectually, this position is hardly outlandish; indeed, Ball’s case is very similar to the case Olivier Blanchard made three years ago, just stated more forcefully and with more evidence. 
The basic point is that a higher baseline for inflation would make liquidity traps, in which conventional monetary policy is up against the zero lower bound, less likely and less costly when they happen. Ball estimates that if we had come into this crisis with an underlying inflation rate of 4 percent, average unemployment over the past three years would have been two percentage points lower. That’s huge — it amounts to millions of jobs and trillions of dollars of extra output. 
There are two main arguments against a higher inflation target. One is that events like the current crisis almost never happen. My view would be that the costs of this crisis are so large — and the difficulties we’ve had in responding so grotesque — that even if they were once-in-75-year events, that should be enough to warrant different policies. But Ball also argues that the risk of liquidity-trap events is much greater than conventional wisdom would have you believe. Just looking at US experience, the last three recessions were all “postmodern” recessions caused by private-sector overreach, not Fed tightening — and in each case the Fed had a very hard time getting traction. Both 1990-91 and 2001 were near misses in terms of the liquidity trap; 2007 onwards was actually in line with what had become the normal pattern, not a bizarre exception. 
By the way, one point Ball doesn’t mention is that to the extent that we consider Japan’s issues partly demographic, that’s becoming the norm too: low fertility and, perhaps, low resulting investment returns are also becoming standard among advanced countries. Again, this calls for a higher inflation target. 
The other argument is some kind of slippery slope thing: you decide that 4 percent is OK, and the next thing you know you’re Jimmy Carter, or maybe Weimar. As Ball says, there is really no evidence for this fear. It’s true that it’s what almost all central bankers believe; but they can’t really explain why, and we should never forget that there was once a time when almost all central bankers believed that going off the gold standard would mean the end of civilization. 
The point is that the conventional 2 percent target is a prejudice, nothing more; it once rested to some extent on studies suggesting that 2 percent was enough to make the zero lower bound a non-problem, but we now know how utterly wrong that view was; so we’re left with a target that’s considered respectable because it’s what all the respectable people say, and is what all the respectable people say because it’s considered respectable. 
What do we want? Four percent! When do we want it? Now!
My take is that monetary policy could have offest austerity. This doesn't mean fiscal policy won't work better.

Words are Wind and Empty Air