"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, August 29, 2014

Thursday, August 28, 2014

Todd Glass

Glass was on Comedy Central two nights in a row. Tonight on Stewart's Daily Show and the night before on the Meltdown. I liked his jokes on the Meltdown even though he kind of freaked out at the beginning over a mike stand. I guess he was joking about it be he seemed pretty mad. Anyhoo on of his jokes was about being a "passive progressive" at Thanksgiving or something by asking someone making sexist/racist/homophobic etc comments, how old they are, because they sound like an old person. And he had another good one, but he didn't make any gay-themed jokes. On the Daily Show though he was promoting his new book about his 30 years in comedy and how he recently came out. Stewart also said the trailer for his new movie is out. It stars Gael García Bernal.



trade and exchange rates

Dethrone the Dollar, Bring Back the Jobs by Jared Bernstein

A candidate should explain how the Chinese do not allow us to buy Chinese debt. But there's a bipartisan consensus that it should be this way.


NAIRU



OVER AT EQUITABLE GROWTH: A NOTE ON THE CORE PCE INFLATION PHILLIPS CURVE: THE HONEST BROKER FOR THE WEEK OF AUGUST 30, 2014 by DeLong


Wednesday, August 27, 2014

the Senate

Could an Independent in Kansas Swing the Senate? by Sam Wang


Jon Stewart and priorities

Jon Stewart's Daily Show is back on and he started it off with a bang doing the "Ferguson Challenge" on YouTube which involved him getting pepper sprayed, etc instead of having having an ice bucket dumped on him to raise money for her charity.

Yes celebrities doing stuff for charity is good if it gets rich folks to give money they might not otherwise or might consume ostentatiously. It's good if it gets middle class folks to give instead of say, going to the movies or out to a restaurant or whatever.

But think about the trillion a year output gap. If the authorities were doing their demand management job, the economy would be producing a trillion more a year. Hypothically speaking that could be devoted to cancer research or whatever. That's a trillion a year that's being wasted while people are doing the ice bucket challenge. A trillion a year could be spent on improving the economy so place like Ferguson aren't so bad.

The Fed could be doing more. The government could be spending more. The trade deficit could be erased by lowering the value of the dollar.

French government collapses

Objecting to Austerity, French Style by John Cassidy



Dan Davies on the Swiss

The World Is Squared: Episode 1 – “Switzerland, Country of Joyce” by Daniel Davies



DeLong on Rowe and QE, monetary policy

THE TAPER, NICK ROWE, QUANTITATIVE EASING, AND INTELLECTUAL COORDINATION FAILURES: OVER AT EQUITABLE GROWTH: WEDNESDAY FOCUS FOR AUGUST 27, 2014/THE (NOT SO) HONEST BROKER FOR THE WEEK OF AUGUST 30, 2014 by DeLong

Tuesday, August 26, 2014

TV

Emmy Awards winners: Breaking Bad, Colbert Report, Julia-Louis Dreyfus for Veep, The Normal Heart, Sarah Silverman and Louis CK.

I also loved Game of Thrones, Orphan Black, The Americans, Person of Interest, The Knick so far, etc.

Coming in 2015: Wolf Hall

pressures on the currency

Austerity, France and Memories by Simon Wren-Lewis
Writing for the Washington Post recently, Matt O’Brien asks didn’t you guys learn anything from the 1930s? That the left in particular appears to ignore these lessons seems strange. In the UK part of the folklore of the left is the fate of Ramsay MacDonald. He led the Labour government from 1929, which eventually fell apart in 1931 over the issue of whether unemployment benefits should be cut in an effort to get loans to stay on the Gold Standard. The UK abandoned the Gold Standard immediately afterwards, but Ramsay MacDonald continued as Prime Minister of a national government, and has been tagged a ‘traitor’ by many on the left ever since.

Not that France needs to look to the UK to see the disastrous and futile attempts to use austerity to stabilise the economy in a depression. By at least one account, the villain in the French case was the Banque de France, which in the 1920s used every means at its disposal to argue the case for deflation in order to return to the Gold Standard at its pre-war parity, and it was instrumental in helping to bring down the left wing Cartel government. When it did rejoin the Gold Standard in 1928, the subsequent imports of gold helped exert a powerful deflationary force on the global economy.
So why has the European left in general, and the French left in particular, not learnt the lessons of the 1920s and 1930s? Why do most mainstream left parties in Europe appear to accept the need to follow the SGP straightjacket as unemployment continues to climb? Perhaps part of the answer lies in more recent memories. After many years in the political wilderness, François Mitterrand was elected President in 1981, and his government became the first left-wing government in 23 years. In the UK and US high inflation was being met with tight monetary policy, but he and his government took a different course, using fiscal measures to support demand, and hoping that productivity improvements that followed would tame inflation. Although the demand stimulus did help France avoid the sharp recession suffered by its neighbours, inflation remained high in 1981 (not helped by increases in minimum wages and other measures that raised costs) and rose in 1982, at a time when inflation elsewhere was falling. The sharp deterioration in the trade balance that followed led to pressure on the Franc, and the government’s fiscal measures were reversed. Economic policy changed course.
International traders dump the currency for other currencies as they see inflation ahead? It's where demand management policies meets exchange rate policy. There was a deterioration in the trade balance.



Bretton Woods

(via Thoma, via Cecchetti and Schoenholtz)

The New York Sun longs for the days of Bretton Woods:
We hope they get around to the pattern of unemployment that has come ever more clearly into focus with each passing season of the age of fiat money. Between 1947 and 1971 — that is, in the first generation of the Bretton Woods agreements, under which America defined the dollar as a 35th of an ounce of gold —the unemployment rate in America averaged but 4.7%. Since 1971 —that is, since America’s abandoned Bretton Woods and opened the age of fiat money — unemployment has averaged 6.4%. 
Now we understand that the above-described coincidence does not establish causality. But what a job for all the Ph.D.s among those who manage what James Grant likes to call the Ph.D.-backed dollar. Let them look, too, to whether the Humphrey Hawkins Full Employment Act of 1978 turns out to have been a good idea. It was the law that gave the Fed its jobs mandate. When President Carter signed that dog’s breakfast, unemployment was 5.8%. It hasn’t been that low in the entire Obama presidency.
 Why did Nixon give up on the Gold Standard? It was too deflationary given the rest of the demand the economy was supplying?

In order to maintain the price of gold, the Treasury had to say it would pay a certain price of gold, but Nixon no longer wanted to do that because things would have been too volatile.

Piketty's argument is that inequality increased a politics moved to the right with Reagan and vice versa.

The social democratic state of 1947-1971 had high taxes and government spending and strong unions. That slowly went away as we entered the neoliberal era. Fiat money lessened the volatility.

Monday, August 25, 2014

Fed and poverty reduction


NYT on the Mark on the Fed and Interest Rates by Dean Baker
First, the Fed's actions on interest rates swamp the importance of almost every government spending program designed to help low and moderate income people. There were big battles in Washington in the last couple of years over Republican proposals to cut food stamps by $4 billion a year. If the Fed keeps the unemployment rate one percentage point higher than a level it could reach without triggering an inflationary spiral then it would be preventing close to 3 million people from working. (A rule of thumb is that for the number of people not currently in the labor force who find a job is roughly equal to the number of unemployed people who find a job.)
...
We have been here before. Back in the mid-1990s the absolute consensus in the economics profession was that the unemployment rate could not get much below 6.0 percent without triggering inflationary pressures. This was a view held not only by conservative economists, but by liberals like Janet Yellen, Alan Blinder, and Paul Krugman. Fortunately, Federal Reserve Board Chair Alan Greenspan was not a mainstream economist. He argued there was no evidence of inflationary pressures, therefore he saw no reason to keep the unemployment rate from falling below the 6.0 percent threshold.

The unemployment rate fell below 5.0 percent in 1997 and was at 4.0 percent as a year-round average in 2000. Not only were millions of people to get jobs who would not have otherwise been able to work, workers at the middle and bottom of the wage ladder saw sustained real wage growth for the first time since the early 1970s. And, there was a huge swing from budget deficits to budget surpluses, giving the country the budget surpluses that the Clintonites always celebrate.

welfare reform

DeLong quotes Kevin Drum against his own instance that blue states did well with welfare reform while only red states didn't.
Kevin Drum: Welfare Reform and the Great Recession “CBPP…. Welfare reform… in its first few years… 
…seemed like a great success… but it was a bubbly economy that made the biggest difference. So how would welfare reform fare when it got hit with a real test? Answer: not so well. In late 2007 the Great Recession started, creating an extra 1.5 million families with children in poverty. TANF, however, barely responded at all. There was no room in strapped state budgets for more TANF funds…. This is why conservatives are so enamored of block grants. It’s not because they truly believe that states are better able to manage programs for the poor than the federal government. That’s frankly laughable. The reason they like block grants is because they know perfectly well that they’ll erode over time. That’s how you eventually drown the federal government in a bathtub. If Paul Ryan ever seriously proposes—and wins Republican support for—a welfare reform plan that includes block grants which (a) grow with inflation and (b) adjust automatically when recessions hit, I’ll pay attention. Until then, they’re just a Trojan Horse…. After all, those tax cuts for the rich won’t fund themselves, will they?

Sunday, August 24, 2014

safe assets

After Clinton, Greenspan and the tech stock boom/bubble balanced the budget there was a shortage of safe assets, to the private market in collusion with the ratings agencies created the shadow banking system with mortgage-backed securities and sold them as safe.

Bernanke has said he might have been wrong to call this a "global savings glut." There's something else going on on the flip side, a dearth of investment and asset prices move higher. Interest rates move lower. But Beckworth says interest rates remain the same, it's just the risk premium goes up.


monetary policy

NYT on the Mark on the Fed and Interest Rates by Dean Baker
We have been here before. Back in the mid-1990s the absolute consensus in the economics profession was that the unemployment rate could not get much below 6.0 percent without triggering inflationary pressures. This was a view held not only by conservative economists, but by liberals like Janet Yellen, Alan Blinder, and Paul Krugman. Fortunately, Federal Reserve Board Chair Alan Greenspan was not a mainstream economist. He argued there was no evidence of inflationary pressures, therefore he saw no reason to keep the unemployment rate from falling below the 6.0 percent threshold.

I wonder if Yellen, Blinder and Krugman preferred more government spending in comensation for rising rates, i.e. they wanted more government.

Better late than never but early is better still by Scott Sumner

Monetary and Fiscal Policy

Basically the Fed prints money and gives it to the banks. It borrows from the private sector rather than taxing them outright. With the interest the private sector earns from government debt, it allocates new demand.

Lately the private sector hasn't been investing enough to maintain full employment and the jobs it creates are not as high paying as they once were, damaging aggregate demand further. The main focus of the corporate sector is profits and rent extraction.

The private sector doesn't allocate demand very well at all. Exhibit A is the housing bubble and financial crisis. Exhibit B is the low quality of jobs being created. Much better to tax and spend instead of borrow.

In the meantime, however conservatives need to be beaten into obscurity as they were in the 40s, 50s and 60s and the Rubinite neoliberals need to be purged from the Democrats.

In the meantime Fed policy can promote wage inflation. Government can borrow cheaply and invest as the euthanasia of the rentiers continues apace. The capitalists and liquidity specialists are their own gravediggers(TM).

In the meantime ultimately a social movement is needed. International and based on the labor movement and OWS, incorporating those "interest groups."

Abenomics

"Asked about potentially more aggressive approaches to monetary easing, such as targeting a price level or a rate of growth for nominal gross domestic product, Mr. Kuroda said he thought they were reasonable steps to consider but that the Bank of Japan would stick to its current policy for now. "

Japan Escaping Deflation Trap, Central Bank Chief Says
JACKSON HOLE, Wyo.–Japan is gradually escaping a prolonged period of deflation that has impeded economic growth, stifled investment and put downward pressure on wages, Bank of Japan Gov. Haruhiko Kuroda said Saturday. 
Speaking at the Kansas City Federal Reserve’s Jackson Hole, Wyo., conference, Mr. Kuroda said that, unlike the U.S. and Europe, Japan isn’t struggling with unemployment, which currently stands at 3.7%. 
However, he said deflation had led to other forms of economic malaise that continue to plague the Japanese economy, but which Mr. Kuroda said is gradually healing as aggressive economic policies take hold. 
“Wage-setting practices have changed during the prolonged period of deflation. Wages of regular employees tend to reflect labor market conditions only quite slowly,” he said. “Some kind of mechanism, a ‘visible’ hand, is necessary for wages to rise.” 
Part of such a mechanism is the central bank’s aggressive monetary easing, which includes an indication that it will take all steps necessary to return Japan’s inflation rate back up to 2% after two decades of falling prices and wages. 
“The Bank of Japan’s price stability target can serve as a benchmark for firms’ wage setting,” Mr. Kuroda said. 
He added the policies were having a tangible impact on economic conditions, with labor market conditions improving and firms showing a greater propensity to invest. 
Still, Mr. Kuroda acknowledged that it could change some time to push up Japanese consumers’ inflation expectations after so many years of deflation. 
Asked about potentially more aggressive approaches to monetary easing, such as targeting a price level or a rate of growth for nominal gross domestic product, Mr. Kuroda said he thought they were reasonable steps to consider but that the Bank of Japan would stick to its current policy for now. 
“Maybe in the future. But at this stage I don’t think we should change our plan,” Mr. Kuroda said. 
Under price-level targeting, a central bank would promise to overshoot its inflation target to make up for any period of undershooting. Under nominal GDP targeting, the central bank would target a constant growth rate in noninflation adjusted GDP. 
Mr. Kuroda vowed to maintain Japan’s aggressive monetary-policy easing until the country reaches its 2% inflation target, which he said could happen as early as this fiscal year. 
Mr. Kuroda said that once inflation starts moving higher, 10-year government bond rates around 0.5% will not be sustainable.