"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, September 14, 2013

Lehman 5 years on

What we get wrong when we talk about ‘the financial crisis’ by Mike Konczal

Back to Boehner by Gail Collins
Jan. 1: New sequester cuts really kick in and first Obamacare insurance policies go into effect. The moon turns to blood. Thor, son of Odin, fights in combat with the serpent Jörmungandr. The president contemplates the fact that he has three more years in office.       

duty to protect

The Duty to Protect, Still Urgent by Michael Ignatieff

Hitchens once called UN Representative Samantha Power a disciple of Ignatieff. I couldn't tell if it was a criticism or what.

good chart on Lehman + 5 years

The Arguments of the Great Recession Are Over. Hooray by Jonathan Chait

From July 1, 2007 to today:

Financial profits: +59 percent
Corporate profits: +42 percent
S&P 500: +8
Employment/population ratio: -6.7 percent

(via DeLong)

Friday, September 13, 2013


The line from 9/11 to Lehman to Syria by Greg Ip 
How long will the divisive effects of the financial crisis last? No country is the same, and in America, polarisation has many causes that predate the crisis: rising income inequality, gerrymandering and the continued post-civil rights migration of southern voters from the Democratic to the Republican Party. But I see two plausible answers to that question when it comes to economic matters.

One, a fully recovering economy will restore private and public balance sheets, erasing the divide between creditors and debtors and obviating the need for zero-sum austerity. Or two, the economy will stagnate for years until the country coalesces behind a single, bolder vision for economic reform. I used to think Japanese voters would never vote for higher inflation because as its population ages, the proportion of voters who favour falling prices expands. Happily, I may soon be proven wrong. Shinzo Abe seems to have united the country behind a call for fiscal, monetary and structural stimulus. Japan, which showed the way in to post-crisis politics, may yet show the way out.

insane clown posse debt ceiling clown show (ICPDCCS)

Boehner to Obama: Can I Please Take You Hostage? by Jonathan Chait
But Boehner isn’t proposing to attach a perfunctory debt-ceiling hike to “bipartisan solutions,” as has happened in the past. He is proposing that the opposition party extract unacceptable conditions as the price of lifting the debt ceiling. That is an unprecedented demand. Under the Bush presidency, Democrats objected that tax cuts had created un unsustainable fiscal position for the government, but it never even occurred to them to threaten to trigger a debt default to force Bush to repeal his tax cuts. Before 2011, the debt ceiling was an occasion for posturing by the out-party and was sometimes raised in conjunction with mutually agreeable policy changes, but the opposition never used the threat of default as a hostage.

Godley and Krugman

Wynne Godley and the Hydraulics by Krugman
The second big problem involved inflation. We can argue how many economists really believed in a stable tradeoff between inflation and unemployment, but that’s certainly what got taught to many students. In came Friedman and Phelps to argue that rational price-setters would build expected inflation into their choices, so that sustained low unemployment would produce accelerating inflation. And the stagflation of the 70s seemed to vindicate their argument.
Did it vindicate their argument though? Possibly Arthur Burns allowed inflation to accelerate because the alternative - allowing a steep rise in unemployment during the uppity 70s - was politically undesirable. As Steve Randy Waldman argues, by the time Volcker comes on the scene, the demographic goat has mostly passed through the snake.


Paul Krugman Won the Crisis—and Lost the Argument by Peter Coy
As of 2013, End This Depression Now! has been translated into 25 languages. “Paul is a rock star overseas,” says Drake McFeely, president of W.W. Norton, his U.S. publisher.

The Rise of the New New Left by Peter Beinart

Wednesday, September 11, 2013

1970s and Arthur Burns reconsidered

Terminal demographics by Steve Randy Waldman

He links to multiple responses.

On the meaning of inflation by Ryan Avent

"auto" correction and the deadly zero

The Deadly Zero Holding America Back by Yglesias

Original memestarter blogpost.

sectoral modeling

Embracing Wynne Godley, an Economist Who Modeled the Crisis by Jonathan Schlefer

Greatest show that ever was or will be

Game Of Thrones' next season will have Sigur Rós, as well as Mark Gatiss and Michiel Huisman in familiar roles
Following third-season cameos in which the frontman of Snow Patrol and the drummer from Coldplay appeared on Game Of Thrones then were immediately killed, ending those bands’ careers forever, Entertainment Weekly has announced that Sigur Rós will appear on, then likely die in, the show’s fourth season. The band is reportedly a favorite of showrunners David Benioff and Dan Weiss, as EW notes that the duo “would often listen to their music while shooting in Iceland,” as Sigur Rós is broadcast on a constant loop from speakers embedded in the nation’s mountains. Like their songs, their death cries will no doubt be hauntingly beautiful, though you won’t understand a word. 
While the exact nature of the band’s role remains a secret, Winter Is Coming claims to have uncovered the mystery of another recent Game Of Thrones casting—that of Sherlock’s Mark Gatiss. According to the actor’s own résumé, Gatiss will play the role of Tycho Nestoris, a representative of the Iron Bank of Braavos, the financial institution with a terrifying reputation for always collecting its debts, like a slightly less fearsome Wells Fargo. Fans will note that Nestoris is being introduced a bit ahead of schedule than he appears in the books, presumably as part of HBO’s strategy to start burning through them faster and faster and force George R.R. Martin to finish some new ones already.  
And finally, The Hollywood Reporter recently cleared up the casting of Michiel Huisman, better known as that guitar-wrangling bad boy whom you should know better than to get involved with on Treme and Nashville. According to its report, Huisman will actually be taking over the role of Daario Naharis from Ed Skrein, replacing Skrein as Daenerys' love interest for as-yet-unknown reasons. Though most likely he just pulled out a guitar and acted all sweet yet tormented and the show just fell for him, like so many before it.

Rooseveltian lack of resolve (circa '37) or dithering

Make Japan Chaste and Continent, But Not Yet by Krugman

Japanese Q2 growth revised upwards but Abe might enact sales tax.

stagnation, Fed Fail, and auto-correction

License To Stagnate by Krugman
So what’s wrong with this pretty picture? Two ugly zeroes.

First is the zero lower bound on the interest rate: after a sufficiently large shock, the Taylor rule may say that you should keep cutting rates, but you can’t. Second is downward nominal rigidity, which isn’t quite as binding a constraint, but does lead the Phillips curve to be non-vertical in the face of very low inflation; as an
IMF study of persistent large output gaps found, even years of a deeply depressed economy tend to produce at most slow, grinding deflation, and more usually slight positive inflation, not the ever-accelerating deflation the standard model would have predicted.

So here’s what happens after a large negative shock to the economy: the central bank finds itself up against the zero lower bound, so that all it can do is resort to controversial unorthodox measures. It might do that, or fiscal policy might be forced into action, if the economy really were suffering from accelerating deflation; but instead all you see is low inflation, which might even lead some central bankers to declare that they were doing their job just fine.

In the Bond movies, two zeroes meant a license to kill. In monetary policy, two zeroes — the hard zero on interest rates and the soft zero on wage changes — can, all too easily, give central bankers a de facto license to let the economy stagnate, remaining far below potential for an indefinite length of time.

Original memestarter blogpost.

Monday, September 09, 2013

post-modern recoveries

C’est La V No More by Krugman

Business cycle recessions used to be induced by the Fed raising rates. Fiscal spending and consumer demand (wage inflation) would drive inflation. Until the late 80s S&L recession and the dot com bubble recession.

Ever since Reagan broke PATCO and the Japanese came online, inflation and the overheating of the economy  wasn't being driven by wage demands and consumer demand. The problem was popped asset bubbles. Recession were now balance sheet recessions. Deregulation and the upward redistribution of weath was the cause of the overheating, not wage inflation, trade or fiscal policy.

Original memestarter.

Sunday, September 08, 2013

New vs. Old Keynesians and self-correction

Why Keynes wouldn’t have too rosy a view of our economic future by Mike Konczal

Auto-Corect Nt Wokring (Wonkish) by Krugman

Cheap Thoughts on the Self-Correcting Economy: Konczal vs. Krugman by Dean Baker
In short, it doesn't look like the long-term holds out much hope for much of a rebound in these components of private sector spending. Net exports, the one major item that both Konczal and Krugman left out, is more promising. We continue to run a trade deficit of more than 3 percent of GDP, which would likely be over 4 percent of GDP if we were at full employment. This is sustained by developing countries buying up vast amounts of dollars to hold as reserves. This props up the dollar and allows them to keep their export markets in the United States. In effect, they are paying us to buy their stuff.

At some point developing countries will realize that they don't have to pay us to buy their stuff, they can pay their own people to buy their stuff. When they come to understand this fact, they will stop buying dollars and the dollar will fall against the currencies of our trading partners. This will make U.S. goods more competitive internationally, leading to more exports and fewer imports, and a return to full employment.

Anyway, this is the happy long-run story, but don't hold your breath on it. If you want to see people get back to work anytime soon the government is going to have to do it. And that's true no matter how much you like the private sector.
UPDATE: More here (Krugman), here (Baker), here (Rowe), here (Yglesias) and here (more Krugman).

baby boom and the 1970s

Agreeing in Different Languages by Steve Randy Waldman

Waldman comments:
...But based on the same experience, one might argue with Burns that inflation was a “wage-price” “cost-push” effect of labor bargaining power, a phenomenon addressed by Reagan and Japanese auto manufacturers more Volcker. We only have one dramatic disinflation experiment, and despite the self-congratulation of some economists ex post, Burns’ view of inflation an multi-causal remains current and wins on parsimony.

Demographics and inflation: international graphs by Steve Randy Waldman