"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, November 08, 2013

health care reform

This chart should be getting more attention by Adrianna McIntyre



written and directed by Lawrence Kasdan

The film co-stars Jane Adams, Ted Danson, Hope Davis, Loren Dean, Zooey Deschanel, Dana Ivey, Jason Lee, Mary McDonnell, Elisabeth Moss, David Paymer, Jason Ritter, Martin Short, Kevin Tighe, Pruitt Tayor Vince, and Alfre Woodard.


directed by Tanya Wexler

The film co-stars Hugh Dancy, Maggie Gyllenhaal, Felicity Jones, Jonathan Pryce and Rupert Everett.

Wednesday, November 06, 2013

Japan's current account balance

Japan's Missing Wall of Money by  Thomas Klitgaard
Market commentary at that time suggested that flooding the economy with liquidity would lead to a “wall of money” flowing out of Japan in search of higher yields, affecting asset prices worldwide. So far, however, Japan’s wall of money remains missing in action, with no pickup in Japanese foreign investment since the April policy shift....
...The Bank’s asset purchase program set off no wall-of-money outflow from Japan. Instead, funds were brought back into the country.

Cross-border inflows and outflows typically move in tandem because net financial flows are tied to the current account balance. There could be a surge in outflows if the current account surplus were also to surge, but current account balances tend to be sticky. The weakening in the yen since the April meeting will boost exports, but it will also boost import prices in yen terms, leaving Japan’s current account balance largely unaffected. Given the stickiness of the current account, there can be no wall of money flowing out of Japan without a wall of money flowing into Japan.
(via Thoma)

economics as science

Is Economics a Science? by Robert J. Shiller

de Blasio

Brooklyn Calling: From the Beastie Boys to Bill de Blasio by John Cassidy
Last night, as I left Bill de Blasio’s victory party at the Park Slope Armory, the sound of the Beastie Boys’ “No Sleep Till Brooklyn” was streaming through the loudspeakers, which seemed fitting. When I first moved to New York, almost thirty years ago, the white-boy rappers were setting out to put their home borough on the rock-music map. (At The World, in Alphabet City, I was lucky enough to see some of their early gigs.) And now, another Brooklynite, not a native but not exactly a blow-in, either, has won the biggest landslide by a non-incumbent since the five boroughs were united in 1898. 
Why (and when) interest-on-reserves matters... by Steve Randy Waldman

Tuesday, November 05, 2013

After the Music Stopped

You Got Me Feelin Hella Good So I'm Gonna Keep on Dancing: Alan Blinder: "After the Music Stopped": Tuesday Book Reviews Extended Version Weblogging by DeLong

If fiscal policy was similar to the way it was during previous downturns we'd be at 6 percent unemployment if the Fed performed the same actions. The private sector deleveraged, badly scared after the financial crisis. State governments were like 50 little Hoovers. Then came 2011 and the sequester and government shutdown. Bernanke threw a bone to the hawks in June with his taper talk and that slowed the momentum of the economy as well. Japan is using activist monetary policy to good effect and hopefully continues. There is no danger of another bubble anytime soon. If the House goes Democratic, things could turn around somewhat. If the Democrats win in 2016, likewise. Commenter bakho: "Our big hope going forward is that the ACA will unchain employees (shackled to their jobs by health care benefits) to strike out on their own, wrest control from the one percent and revive the economy. Hopefully the availability of affordable health care will give more power to labor and bid up wages."

DeLong is right. Blinder and Gorton are good on the crisis. Bernanke referenced Gorton in Congressional testimony. We know what to do. Bernanke and other central banks flooded the financial system with liquidity preventing another banking crisis. The U.S., Germany, China, etc. all did fiscal stimulus programs to help the central banks with the turn around. They all retrenched too quickly because of politics.

Monday, November 04, 2013

German current account surplus link list

Edit: added
Europe’s Macro Muddle (Wonkish) by Krugman

Nov. 11, 2013

Sadowski on sterilization
Nov. 4 at 1:34 pm

How Do Those Germans Do It and What Does it Mean for the US? by Jared Bernstein
Nov 04, 2013 at 12:12 pm

China and the EU: Beggaring Neighbors by Dean Baker
Sunday, 03 November 2013 16:26

Eureka! Paul Krugman Discovers the Bank of France by David Glasner
Published November 3, 2013

The real problem with German macroeconomic policy by Simon Wren-Lewis
Sunday, 3 November 2013

Blame Germany, or Frankfurt? by Ryan Avent
Nov 3rd 2013, 21:41

Europe’s Inflation Problem by Krugman
November 4, 2013, 10:20 am 

The Changing Geography of Beggar-thy-Neighbor by Krugman
November 3, 2013, 3:16 pm

German Surpluses: This Time Is Different by Krugman
November 3, 2013, 6:41 am

Those Depressing Germans by Krugman
Published: November 3, 2013

Is the Paradox of Thrift Actually a Paradox? by Henry Farrell
Nov. 2, 2013

France 1930, Germany 2013 by Krugman
November 2, 2013, 6:00 pm

Sin and Unsinn by Krugman
November 2, 2013, 4:35 pm 

Germany's Export Obsession Is Dooming Europe to a Depression by Matt O'Brien
Nov 2 2013, 9:30 am

Defending Germany by Krugman
November 2, 2013, 9:23 am

Fawlty Europe: Will the European Commission dare to utter the unmentionable to the Germans? by Charlemagne (The Economist)
Novemeber 2, 2013

More Notes On Germany by Krugman
November 1, 2013, 4:54 pm

The Harm Germany Does by Krugman
November 1, 2013, 11:41 am

Germany’s Blind Spot by New York Times Editorial Board
October 31, 2013

Raw Nerve: Germany Seethes at US Economic Criticism  By Christopher Alessi (Spiegel Online)
October 31, 2013 – 06:26 PM 

U.S. Accuses Germany of Causing Instability by Sarah Wheaton
October 30, 2013

Semiannual Report on International Economic and Exchange Rate Policies by U.S. Treasury
October 30, 2013

industrial policy, ULC and macro/accounting

How Do Those Germans Do It and What Does it Mean for the US? by Jared Bernstein


Mark A. Sadowski comments:
"The U.S. could weaken the currency and help exports however. That's what Japan is doing as Krugman has said."

It's important to distinguish between currency manipulation and expansionary monetary policy.

China engaged in currency manipulation and I suppose an argument could be made that the German/eurozone situation is effectively currency manipulation in Germany's favor. But Japan has simply conducted expansionary monetary policy.

You can see this in terms of the differing impacts on their respective trade balances.

Both China and Germany have had large trade surpluses. But Japan has a trade deficit, and since the latest QE was initiated, both imports and exports have grown quickly with imports growing even faster than exports.

So Japan's trade balance has actually grown worse. The benefit of expansionary monetary policy comes from increased aggregate demand, not from higher net exports. China (and perhaps Germany) has held the value of its currency low while sterilizing the effect of this policy on domestic demand.

Both policies result in lower exchange rates, but one allows domestic to demand to rise and one does not. That's why currency manipulation is "beggaring thy neighbor", and expansionary monetary policy is not.
Japan allowed inflation to rise, while China and Germany did not.

Iran and Homeland

Talk to Iran, It Works by Ryan Crocker

Compared to the TV show Homeland where Iran is the bad guy. Or at least they have a rogue agent who's embezzling money from the Revolutionary Guard.

Baker on Germany

Paul Krugman is wrongly beating up on the EU for its current account surplus, showing that it is now larger than China's. The problem with the comparison is that China is an extremely fast growing developing country. This is the sort of place that in the good old days we expected to run trade deficits.

The EU on the other hand is a bloc of slow growing rich countries. We would expect them to be running trade surpluses. This does not negate the fact that the EU could and should be doing much more to stimulate its economy with larger budget deficits and more aggressive monetary policy, but that fact that it has a larger trade surplus with the rest of the world than China really doesn't tell us much of anything.

I'm not gratuitously beating up on Krugman here, there is a real point. If a country is growing rapidly, like China, we would expect it would have a high return on capital. On the other hand, the return on capital is likely to be lower in low in the slow growing rich countries. This means that we should see a flow of capital from rich countries to developing countries. That would imply a trade surplus for the rich countries and a trade deficit for developing countries.

Another way to think about this is that the developing countries need to both build up their capital stocks at the same time that they continue to feed and house their people. By running trade deficits with rich countries, they can get the extra goods and services that allows them to do both simultaneously.

In reality, the capital flows from rich to poor countries have been at best uneven. This is a case where the real world has stubbornly resisted the textbook story. To my mind this is an indictment of the international financial system which has not generally accommodated this flow of capital from rich countries to poor countries. This is quite evident in the most recent reversal, which followed the botched bailout by the IMF-U.S. Treasury form the East Asian financial crisis in 1997.

But if we could somehow get things right and create a mechanism whereby excess capital in the EU and other rich countries helped finance investment in the developing world, that would be a good thing. This is why showing that the EU has a larger trade surplus than China does not necessarily mean that the EU is a bad actor in the world (although it is).
Baker says normally China would be running trade deficits since it should have a high return on capital. Slow growing rich economies like those of the U.S. and the E.U. would have trade surpluses because of a low return on capital. "To my mind this is an indictment of the international financial system which has not generally accommodated this flow of capital from rich countries to poor countries. This is quite evident in the most recent reversal, which followed the botched bailout by the IMF-U.S. Treasury form the East Asian financial crisis in 1997."

4% / 6%

from the German link list in the post below:

Fawlty Europe: Will the European Commission dare to utter the unmentionable to the Germans?
Many urge Germany to stimulate its economy to help its crisis-hit partners. On October 30th America’s Treasury Department criticised Germany’s export-led growth model, in unusually sharp language, as a reason for the weakness of the euro zone’s recovery. But in an open trading area the connection between one country’s surplus and another’s deficit is complex. Boosting demand in Germany may suck imports from America, China or eastern Europe, more than from the Mediterranean. Even so, say Eurocrats, that would help indirectly. Buying more imports could help arrest the rise of the euro, which is making it harder for southern countries to rebalance their economies.

The euro zone’s toughened rules of “economic governance” are lopsided. Under the so-called macroeconomic imbalances procedure, a current-account deficit greater than 4% of GDP can trigger an alert, possibly followed by “in-depth analysis” carried out by the European Commission, policy recommendations and, ultimately, the threat of sanctions. Yet a country’s surplus must rise above 6% of GDP before Eurocrats start to take notice. Germany was let off last year because its surplus (averaged over three years) was a shade below the warning threshold and was expected to shrink. Now statisticians have revised that figure to 6.1%, and it has grown since then. It stood at 7% in 2012.

So will the EU dare to mention the surplus? The test will come later this month, when the commission issues its latest economic forecasts and launches the “European semester”, an annual cycle of economic and budgetary assessments that culminate in the spring with “country-specific recommendations”. These edicts from Brussels have already irritated France, which told the commission not to “dictate” reforms. But given France’s slow progress in pension and labour reforms, more criticism is inevitable. Now that America’s Treasury has blazed a trail, can the commission afford not to speak out if it wants to be seen as independent?
 And yet the commission is wrong about France.

positive outlook: Kocherlakota

There’s an interesting contrast with one of the real intellectual heroes here, Narayana Kocherlakota of the Minneapolis Fed, who has actually reconsidered his views in the light of overwhelming evidence. In our political culture, this kind of switch is all too often made into an occasion for gotchas: you used to say that, now you say this. But learning from experience is a good thing, not a sign of weakness.
Eureka! Paul Krugman Discovers the Bank of France by David Glasner

I believe he has discussed it before.

Germany and economic myths

The real problem with German macroeconomic policy by Simon Wren-Lewis

The Walking Dead

AV Club reviews "Indifference" from The Walking Dead

Sunday, November 03, 2013

monetary policy

Blame Germany, or Frankfurt? by Ryan Avent

Obama Administration Government Failure: Hoisted from the NEC Archives from May 11, 2010: ObamaCare Implementation Weblogging: Noted by DeLong
In the "blue states"--where 60% of the country's population making 70% of the nation's income and owning 80% of the nation's wealth live--the implementation of the Affordable Care Act is likely to be like the implementation of RomneyCare was in Massachusetts: a somewhat bumpy ride, but a clear success that nobody wishes to repeal after the fact. In the "red states" where the Republican political infrastructure digs in its heels? Who knows?

positive outlook

Economy keeps plugging along despite shutdown and sequester.* Deficit is down to ~$650 billion/year. Debt is up but deficit will continue to shrink as economy grows faster.

Snapshot: November gets off to healthy start
The stock market started November on a strong note as investors reacted to an expansion in US manufacturing last month. The improvement came during what could have been a difficult month for the economy, with a partial government shutdown. The Institute for Supply Management said its manufacturing index rose to 56.4, the highest since April 2011. The positive start to this month’s trading follows a strong October. But some investors are skeptical stocks can keep up this pace. Stocks are also starting to look expensive by some measures. Investors are paying more than $16 for every $1 of earnings in the S&P 500, the most since February 2011.
*That is despite the Republicans' best efforts. And if they gain power they'll try to cut taxes for the rich, deficits be damned. See the Bush tax cuts.


The Changing Geography of Beggar-thy-Neighbor by Krugman

German Surpluses: This Time Is Different by Krugman
There’s a tendency, in discussing Germany’s position in world trade, to assume that massive surpluses have always been the German norm — that the country’s high-quality products have always fueled an export engine that inevitably sold much more abroad than Germans bought. But it’s not true. Here’s Germany’s current account balance as a percentage of GDP since 1980:  

There was an earlier period of surpluses in the mid-80s, largely the counterpart of America’s Reagan-era deficits. But Germany didn’t run a surplus at all in the 90s. Its big move came with the introduction of the euro, and corresponding huge capital flows to the European periphery.

Along with this move came a sharp decline in German relative labor costs; here’s the OECD number:

Again, the point is that this made sense during the great euro area capital transfer. The problem is that Germany has continued to maintain highly competitive labor costs and run huge surpluses since the bubble burst — and that in a depressed world economy, this makes Germany a significant part of the problem.


Adjusting the Taylor Rule for the Unemployment Rate Bias by Jared Bernstein
There are various different rules and techniques for estimating the optimal FFR (Federal Funds Rate), but John Taylor’s rule is probably the most common.*

*Janet Yellen’s recent “optimal control” work is also gaining prominence in this space.  By simulating a path toward a goal like full employment, optimal control techniques return both a path for the FFR and inflation (other variables could easily be included but these are the key ones).

See the figures on pages 28-30 from this Yellen paper.  Relative to various Taylor rules, the technique allows inflation to temporarily exceed the target rate (2%) as the unemployment rate falls (I should note that optimal control assumes inflation expectations remain well-anchored, an assumption that will produce agita for some price hawks).
 agita - heartburn


The first point, of course, is that subprime mortgage-based securities in the hands of Fannie Mae and Freddie Mac were not a source of systemic risk, and not a source of the financial crisis and Lesser Depression

And the second point is that Alan Greenspan cannot, on the one hand, say "it's all the fault of the U.S. guviment!" and on the other hand say "the housing bubble looks the same whether you're going to Canada, Australia or any of 20 other countries". That just does not compute.

a split: is their a parting on the right? Is there a parting on the left?

Republican Campaign Committee Pushes Back Against Conservative Group
In a warning shot to outside conservative groups, the National Republican Senatorial Committee this week informed a prominent Republican advertising firm that it would not receive any contracts with the campaign committee because of its work with a group that targets incumbent Senate Republicans.

Even more striking, a senior official at the committee called individual Republican Senate campaigns and other party organizations this week and urged them not to hire the firm, Jamestown Associates, in an effort to punish them for working for the Senate Conservatives Fund, a group founded by Jim DeMint, then a South Carolina senator, that is trying to unseat Senator Mitch McConnell of Kentucky, the Republican leader, and some other incumbents up for re-election next year whom it finds insufficiently conservative.

“We’re not going to do business with people who profit off of attacking Republicans,” said Brad Dayspring, a spokesman for the committee. “Purity for profit is a disease that threatens the Republican Party.”
And on Friday, one of Mr. McConnell’s closest aides offered a vivid metaphor about the leader’s determination.

“S.C.F. has been wandering around the country destroying the Republican Party like a drunk who tears up every bar they walk into,” said Josh Holmes, Mr. McConnell’s chief of staff, now detailed to the National Republican Senatorial Committee through the election. “The difference this cycle is that they strolled into Mitch McConnell’s bar and he doesn’t throw you out, he locks the door.”


Insurance Policies Not Worth Keeping by NYTimes editorial board

Most people in Medicare, Medicaid or employer coverage. People in substandard individual plans may lose them but will be offered better plans which may cost a little more if people can afford them. Overall though, the ACA should work and help to bring down costs, make people more healthy and financially secure. Republicans don't like it because it involves government regulations and intrusion into the atypical health care market.

This Is Why We Need Obamacare by Nicholas Kristof

plutocrats versus populists

Plutocrats vs. Populists by Chrystia Feeland

De Blasio will probably be elected Tuesday Nov. 5. Democratic Senators blocked Larry Summers, Obama's pick.

Changing Her Game: Actress to Author: Amanda Peet