Mortgage Debt is NOT the Main Factor Holding Back U.S. Growth by Baker

Krugman on the real-time test of Keynesian versus classical economics.

James Surowiecki makes the case for inflation

(via Yglesias, Ezra Klein)

Let Them East Cake
(Or the Heartless Bastards)

Why I don't like Tyler Cowen:

Although the unemployed might prefer such a policy [of higher inflation and full employment], they are not well-mobilized politically. And President Obama is himself politically weak at the moment, so he cannot offer the Fed much cover.

The dubious assertion about Obama aside, full employment should be preferred by most voters in the country. Economists should know why. The only people who don't want full employment are those who prefer labor to have a weak bargaining position and prefer an increase in inequality and all that entails. Voters who don't have full employment as a priority are essentially saying they don't want a middle class. They want America to become a banana republic, with a tiny, greedy, corrupt elite and a mass of the desperate, working poor.

And this has been another edition of "Scapegoating during the Slump"

In America it's the "wetbacks" and Muslims. In Europe, it's the Muslims and Roma or "Gypsies." In England, it's the "Polish plumber."

The Chinese Communist Party deserves criticism, however. In other words they aren't being "scapegoated."

(A "New Beginning" indeed)

War on Poverty Over: Poverty Won.

Financial Times reports  "US workers’ poverty reaches 50-year high."

Poverty among the working-age population of the US rose to the highest level for almost 50 years in 2009, as the human cost of the deepest economic downturn since the Great Depression was laid bare in new census data.

Poverty among those aged 18 to 64 rose by 1.3 percentage points to 12.9 per cent -- the highest level since the early 1960s, prior to then-president Lyndon Johnson’s "War on Poverty. The overall poverty rate rose by 1.1 percentage points to 14.3 per cent, the highest since 1994.

Whereas the New York Times reported a 15-year high? According to Census data? Note the difference in the links.

Again you have to wonder about the efficacy of Bill Clinton's triangulating "welfare reform." Three members of his administration resigned over the signing of the "Personal Responsibility and Work Opportunity Act."

It was part of the reason I was for Nader against Gore and for Obama against Hillary, even if Obama has said welfare "reform" was a good thing.

Update: The Financial Times reports poverty "among those aged 18 to 64" is at a 50-year high. They don't say it, but much-maligned Social Security seems to have blunted poverty amongst those over 64, something the Catfood Commission intends to remedy.

Barry Ritholtz says the worst of the housing correction is behind us.

Prices certainly can fall much further; it is possible. However, I am making (what I believe is) a higher probability argument due to fair value. My basis for saying the worst is likely over are prices: We are off 33% from the peak, and as of the end of Q1, were ~5-15% over fair value by traditional metrics.  So a return to fair value -- even a 15% drop in 2011 -- still means the worst is (was) behind us.

If houses were to careen far below fair value -- they were about 40% overvalued, so in theory, they could overshoot 40% to the downside -- then my valuation thesis would be wrong. There are lots of ways house prices could drop much further: If jobs and income plummet from here, home prices will be too high. If interest rates spike, prices will adjust downward. If the mortgage deduction were to be eliminated, prices fall also. IMO, these are smaller possibilities -- say 20-25% chance -- then merely mean reverting towards historic relationships with median income, cost of renting, and home equity as a percentage of GDP.

(via Ezra Klein)