The Iraq Effect: If Saddam Hussein were still in power, this year's Arab uprisings could never have happened. by Hitchens

American Thought Police by Krugman

Eyes Open, WaMu Still Failed by Floyd Norris

I’ll let the courts sort out whether Mr. Killinger will become the rare banker to be penalized for making disastrously bad loans. But I am fascinated by how his bank came to make those loans despite his foresight.

Answers are available, or at least suggested, in the mass of documents collected and released by the Senate Permanent Subcommittee on Investigations, which held hearings on WaMu last year. Mr. Killinger wanted both the loan book and profits to rise rapidly, and saw risky loans as a means to those ends.

Moreover, this was a market in which a bank that did not reduce lending standards would lose a lot of business. A decision to publicly decry the spread of high-risk lending and walk away from it -- something Mr. Vanasek proposed before he retired at the end of 2005 -- might have saved the bank in the long run. In the short run, it would have devastated profits.

Washington’s New Brat Pack Masters Media by Sridhar Pappu

Inflated Worries by Laurence Meyer


The Austerity Delusion by Krugman

Steampunk online series Riese: Kingdom Falling

Wikipedia entry

Hitchens on Egypt

Owsley Stanley, Steely Dan's "Kid Charlemagne" is dead at 76

Mr. Stanley, the [Grateful] Dead’s former financial backer, pharmaceutical supplier and sound engineer, was in recent decades a reclusive, almost mythically enigmatic figure. He moved to Australia in the 1980s, as he explained in his rare interviews, so he might survive what he believed to be a coming Ice Age that would annihilate the Northern Hemisphere.

Once renowned as an artisan of acid, Mr. Stanley turned out LSD said to be purer and finer than any other. He was also among the first individuals (in many accounts, the very first) to mass-produce the drug; its resulting wide availability provided the chemical underpinnings of an era of love, music, grooviness and much else.

His was the acid behind the Acid Tests conducted by the novelist Ken Kesey and his Merry Pranksters, the group of psychedelic adherents whose exploits were chronicled by Tom Wolfe in his 1968 book "The Electric Kool-Aid Acid Test."
...
In 1965, he met Mr. Kesey, and through him the Dead. Enraptured, he became their sound man, early underwriter, principal acolyte, sometime housemate and frequent touring companion. With Bob Thomas, he designed the band’s highly recognizable skull-and-lightning-bolt logo. Mr. Stanley also made many recordings of the Dead in performance, now considered valuable documentary records of the band’s early years. Many have been released commercially.

Mr. Stanley remained with the band off and on through the early ’70s, when, according to Rolling Stone, his habits became too much even for the Grateful Dead and they parted company. (He had insisted, among other things, that the band eat meat -- nothing but meat -- a dietary regimen he followed until the end of his life.)

The First Liberal: How Montaigne made us modern. by Kwame Anthony Appiah


Montaigne's Moment by Anthony Gottlieb

Fiddling While Libya Burns by Anne-Marie Slaughter

Don't Let Qaddafi Win by Hitchens

Chicago Tribune strikes out in Wisconsin by Michael Miner

Watch live streaming video from nytimes at livestream.com

Vive La Resistance!

93-year old hero of the French Resistance to the Nazis has a best-seller in France.

PARIS -- As a hero of the French Resistance, Stéphane Hessel was in exile with Charles de Gaulle in London, imprisoned in concentration camps, waterboarded in Nazi torture sessions and saved from hanging by swapping identities with an inmate who had died of typhus.

Now, at 93, he is the author of a best seller that has become a publishing phenomenon in France. It is not the story of his life (he wrote his autobiography years ago), but a thin, impressionistic pamphlet called "Indignez-Vous!," held together by two staples and released by a two-person publishing house run out of the attic of their home. It urges young people to revive the ideal of resistance to the Nazis by peacefully resisting the "international dictatorship of the financial markets" and defending the "values of modern democracy."

In particular Mr. Hessel protests France’s treatment of illegal immigrants, the influence on the media by the rich, cuts to the social welfare system, French educational reforms and, most strongly, Israel’s treatment of the Palestinians.

"When something outrages you, as Nazism did me, that is when you become a militant, strong and engaged," he writes. "You join the movement of history, and the great current of history continues to flow only thanks to each and every one of us"

Since its publication in October "Indignez-Vous!" has sold almost 1.5 million copies in France and has been translated into Spanish, Italian, Portuguese and Greek. Editions are planned in Slovenian, Korean, Japanese, Swedish and other languages. In the United States, The Nation magazine published the entire English text last month.

Though this world's essentially an absurd place to be living in
It doesn't call for (bubble withdrawal)

It said human existence is pointless
As acts of rebellious solidarity
Can bring sense in this world

La Resistance!

The Case for a No-Fly Zone by Nicholas Kristof

Flirting With a Repeat of a Stunted Recovery by Leonhardt

On the positive side, exports and consumer spending are up, and the job market finally seems to be improving. If anything, last week’s jobs report probably undercounted recent gains. That often happens early in an economic recovery because the Labor Department has a hard time keeping track of newly started businesses.

On the negative side, oil prices have risen more than 40 percent since September, and every level of government is considering spending cuts and layoffs.

All in all, the situation is uncomfortably reminiscent of last spring. Back then, companies were just starting to hire again, before a combination of events -- including Europe’s debt crisis and the fading of the stimulus program here -- spooked them and cut short the recovery. It’s easy to imagine how energy costs and government cuts could do the same this year.

  
Article on Edward Gorey:

NEWS bulletin from the spirit world: The specter of Edward Gorey, who died in 2000 at the age of 75, is haunting our collective unconscious.

In a sense that’s as it should be; Gorey was born to be posthumous. His poisonously funny little picture books -- deadpan accounts of murder, disaster and discreet depravity, narrated in a voice that affects the world-weary tone of British novelists like Ronald Firbank and Ivy Compton-Burnett -- established him as the master of high-camp macabre. Told in verse and illustrated in a style that crosses Surrealism with the Victorian true-crime gazette, Gorey stories are set in some unmistakably British place, in a time that is vaguely Victorian, Edwardian and Jazz Age all at once.
...
Gorey illustrations are even becoming voguish as tattoos. Last year the ninth-season "American Idol" finalist Siobhan Magnus had a biceps tattoo of Death playing nanny to a flock of soon-to-be-doomed children, from "The Gashlycrumb Tinies," Gorey’s grimly funny alphabet book.
...
Attendance has been climbing steadily at the Edward Gorey House in Yarmouth Port, Mass., and curators of the first major traveling exhibition of Gorey’s original art, "Elegant Enigmas" -- originally shown at the Brandywine River Museum in Chadds Ford, Pa., and now on view at the Boston Athenaeum -- have been stunned by the enthusiasm surrounding the show.

"I knew Gorey had a wide following, but I had no idea of the mania," said David Dearinger, an Athenaeum curator, before the exhibition opened there in February. News media inquiries and calls from the public had been coming in for months, he said then, "and the show isn’t even here yet." Since the opening, he said last month, "the response has been phenomenal." 

...

Undoubtedly such romanticized visions of a more decorous, dapper past, which also inform the neo-Victorian and neo-Edwardian street styles of goths and steampunks, have as much to do with escapism as historical fact.

Inflation: "Empiricists" versus "Theorists" by Christina Romer

By 1933, short-term interest rates were near zero -- just as they are today. As I described in a 1992 academic article, Franklin D. Roosevelt took the United States off the gold standard in April 1933, and rapid devaluation led to huge gold inflows and a large increase in the money supply. Roosevelt also made it clear that the monetary expansion would not be reversed. Expectations of deflation, which had been enormous, abated quickly. As a result, with nominal rates at zero, real interest rates (the nominal rate less expected inflation) plummeted.

The first types of demand to recover were ones that were sensitive to interest rates. Automobile production, for example, jumped 42 percent from March to April in 1933. Inflation did pick up somewhat in the mid-1930s, in part because of other New Deal measures like the National Industrial Recovery Act. But the inflation was modest, and after the crushing deflation of the early 1930s, widely celebrated.

THE triumph of hawkish views on inflation means that there is no appetite today for a Roosevelt-style, inflationary monetary policy.

Bubblenomics

Dean Baker:

The collapse of the bubble in 2000-2002 gave the country what was at the time the longest period without job growth since the Great Depression. The economy only recovered from that slump as a result of the growth generated by the housing bubble. 

Foreign Investment Ebbs in India

Foreign direct investment in India fell more than 31 percent, to $24 billion, in 2010 even as investors flocked to developing nations as a group.

And in the last two months, foreign investors took $1.4 billion out of the Indian stock market, helping drive the country’s Nifty 50 stock index down 17 percent from the record high it set in early November.

Libya's Legacy by Michael J. Totten

When suits challenge the Defense of Marriage Act, the 1996 law barring recognition of same-sex marriages, federal lawyers will now tell judges it should be struck down.

Beating up on Brad DeLong by Dean Baker

(via ... DeLong)

Why Budget Cuts Don't Bring Prosperity by Leonhardt

"It’s really quite striking how well the U.S. is performing relative to the U.K., which is tightening aggressively," says Ian Shepherdson, a Britain-based economist for the research firm High Frequency Economics, "and relative to Germany, which is tightening more modestly." Mr. Shepherdson adds that he generally opposes stimulus programs for a normal recession but that they are crucial after a crisis.

The trick is finding the political will to end the stimulus when the time comes. That is not easy, especially for Democrats, given that stimulus programs tend to include policies they favor. But the wave of recently elected Republicans, in Congress and the states, will no doubt be happy to help summon that political will.

For the sake of the economy, the best compromise in coming weeks would be one that trades short-term spending for medium- and long-term cuts. Beef up the cost-control measures in the health care overhaul and add new ones, like malpractice reform. Cut more wasteful military programs, like the F-35 jet engine. Force more social programs to prove they work -- and cut their funding in future years if they don’t.

By all means, though, don’t follow the path of the Germans and the British just because it feels morally satisfying.

Fighting Near Tripoli

TOBRUK, Libya -- Col. Muammar el-Qaddafi of Libya kept his grip on the capital on Wednesday, but large areas of the east of the country remained out of his control amid indications that the fighting had reached the northwest of the country around Tripoli.

Libyans fleeing across the country’s western border into Tunisia reported fighting over the past two nights in the town of Sabratha, home of an important Roman archeological site 50 miles west of Tripoli. Thousands of Libyan forces loyal to Colonel Qaddafi have deployed there, according to Reuters.

"The revolutionary committees are trying to kill everyone who is against Qaddafi," said a doctor from Sabratha who had just left the country, but who declined to give his name because he wanted to return.

There were also reports of fighting in Misurata, a provincial center 130 miles east of the capital. A witness said that messages being broadcast from the loudspeakers of local mosques were urging people to attack government opponents, following Colonel Qaddafi’s defiant television address Tuesday night calling for ordinary citizens to assist in eliminating opponents, promising that the "cockroaches" would be tracked and killed "house by house."

Eat the Future by Krugman

Pew also asked people how they would like to see states close their budget deficits. Do they favor cuts in either education or health care, the main expenses states face? No. Do they favor tax increases? No. The only deficit-reduction measure with significant support was cuts in public-employee pensions -- and even there the public was evenly divided.

The moral is clear. Republicans don’t have a mandate to cut spending; they have a mandate to repeal the laws of arithmetic.

How can voters be so ill informed? In their defense, bear in mind that they have jobs, children to raise, parents to take care of. They don’t have the time or the incentive to study the federal budget, let alone state budgets (which are by and large incomprehensible). So they rely on what they hear from seemingly authoritative figures.

And what they’ve been hearing ever since Ronald Reagan is that their hard-earned dollars are going to waste, paying for vast armies of useless bureaucrats (payroll is only 5 percent of federal spending) and welfare queens driving Cadillacs. How can we expect voters to appreciate fiscal reality when politicians consistently misrepresent that reality?

A Tunisian-Egyptian Link That Shook Arab History

Just a few months later, after a strike in the Tunisian city of Hawd el-Mongamy, a group of young online organizers followed the same model, setting up what became the Progressive Youth of Tunisia. The organizers in both countries began exchanging their experiences over Facebook. The Tunisians faced a more pervasive police state than the Egyptians, with less latitude for blogging or press freedom, but their trade unions were stronger and more independent. "We shared our experience with strikes and blogging," Mr. Maher recalled.

For their part, Mr. Maher and his colleagues began reading about nonviolent struggles. They were especially drawn to a Serbian youth movement called Otpor, which had helped topple the dictator Slobodan Milosevic by drawing on the ideas of an American political thinker, Gene Sharp. The hallmark of Mr. Sharp’s work is well-tailored to Mr. Mubark’s Egypt: He argues that nonviolence is a singularly effective way to undermine police states that might cite violent resistance to justify repression in the name of stability.

The April 6 Youth Movement modeled its logo -- a vaguely Soviet looking red and white clenched fist -- after Otpor’s, and some of its members traveled to Serbia to meet with Otpor activists.

Everybody's waiting for the man to come down from the tower.

Anna Faris and Chris Pratt of Parks and Recreation fame are married in real life. The actress Teresa Palmer reminds one of Kristen Stewart.


Video for NWA's "Straight Outta Compton"

Wired and Shrewd, Young Egyptians Guide Revolt

"When people have been killed, from time to time you feel guilty," Mr. Lotfi said. "But after the war that night, we felt more and more that our country deserves our sacrifice."

A few days later, seven members of the group were abducted by the police after leaving a meeting at Mr. ElBaradei’s house and detained for three days.
... 

Most of the group are liberals or leftists, and all, including the Brotherhood members among them, say they aspire to a Western-style constitutional democracy where civic institutions are stronger than individuals.

The young Google exec was abducted by the police and held incommunicado for 12 days before being released.


Iran Presses Opposition to Refrain from Rally

Iran’s authorities have increased pressure on the country’s political opposition days before a rally proposed by opposition leaders in support of the popular uprisings in Tunisia and Egypt.

Fed Governor Kevin Wash resigns to "go work in the private sector"

Now Obama can nominate a governor who actually cares about the large output gap in the economy.

Meanwhile, Republican Senator(s) is(are) holding Noble Prize winner / Bernanke teacher Peter Diamond in limbo.

Dean Baker on Jacob Lew

Jacob Lew, the head of President Obama's Office of Management and Budget, had a column in the New York Times that should really scare the American people. While the purpose of the column was ostensibly to tell the American people that there are few easy budget cuts left, the scary part is that Mr. Lew seems to have little understanding of the economy.

Lew boasts about the huge budget surplus at the end of the Clinton administration. He shows no understanding of the fact that these surpluses were largely the result of a stock bubble, which was inevitably going to burst. The story of the economy's growth at that point was that the $10 trillion stock bubble fueled a consumption boom, which led to strong economic growth.

Of course the bubble was not sustainable, when it burst, the consumption it supported also disappeared. We only recovered from the recession when the housing bubble created enough demand to replace the demand lost from the collapse of the stock bubble.
The underlying problem was the over-valued dollar. This was a conscious policy of the Treasury Secretary Robert Rubin, who actively pushed a "strong dollar" policy. This policy effectively gave a large subsidy to imports and imposed a large tax on U.S. exports. The result was a huge U.S. trade deficit.

Given a large trade deficit, the economy needs either large government deficits or very low private savings to sustain high levels of employment. This is not a partisan issue; it is an accounting identity.

Mr. Lew shows no understanding of this basic point. Either this top Obama official is ignorant of basic economics or he is not being honest with the American people. Either way, it is an incredibly scary column.

The IMF's Epic Fail on Egypt by Yves Smith

Needless to say, there has also been a great deal of consternation as to how the West’s supposedly vaunted intelligence apparatus failed to see this one coming. This lapse is as bad as the inability to foresee the collapse of the Soviet Union (it’s arguably worse: a lot of people profited from the Cold War, and they’d have every reason to fan fears and thus look for evidence that would support the idea that the USSR was a formidable threat...

(And there was the CIA's George Tenet on the "slam dunk" of finding WMD's in Iraq)

If this isn’t bad enough, other sections of the report are downright embarrassing. The IMF does acknowledge that poverty is a bit of a problem, and look at the remedies it suggests:

Reforms for Sustained Growth
9. Continuing the reform momentum and reducing fiscal vulnerabilities remain the key medium-term challenges. Rapid growth is crucial to tackling poverty and the high level of unemployment. In this context, reinvigorating the structural reform agenda should help raise productivity and reinforce Egypt’s competitiveness.

Prioritizing reforms that promote macroeconomic stability and improve the investment climate will support the resumption of foreign direct investment. As noted, the planned fiscal adjustment and tax reforms are an important element of generating confidence, improving the business environment, and ensuring space for the private sector. Resumption of privatization and development of public-private partnerships (PPPs) will help mobilize private sector financing and know-how. Contingent liabilities associated with PPPs, however, should be monitored closely.

Reinforcing financial soundness and promoting financial sector deepening will help mobilize savings needed to finance private sector-led growth. The stability of the financial sector during and since the crisis is a testament to reforms since 2004. Staff supports the continuation of reform efforts with the CBE’s Phase II agenda. Introducing Basel II standards and supporting financial sector development will help facilitate intermediation of savings and increase private sector access to credit. Staff supports plans to adopt additional prudential measures to contain vulnerabilities that will arise with greater integration with the global economy and the introduction of new asset classes. Close coordination between the new nonbank supervisory authority and CBE will be a priority, and consideration should be given to introducing forward-looking risk management and developing global standards on liquidity and leverage.

Strengthening data quality and transparency will help improve the policy debate and business environment, and enhance Fund surveillance. The need for greater transparency and higher frequency data was underscored by the global financial crisis, and enhancements would help ensure that data availability is on par with other emerging markets. In particular, there is a need for more robust CPI and GDP deflators, and for publishing higher-frequency aggregate financial soundness indicators (as planned), and encouraging banks to make available detailed performance and soundness indicators.

This is all neoclassical trickle down twattle. People are hungry and can’t find work, and what does the IMF have in its toolkit? "Public private partnerships".

However Tunisia was a relatively wealthy Arab country and the Egyptian protesters were inspired by the successful Tunisian revolt.

The Shame Factor: When will dictators learn not to treat their people like fools? by Hitchens

Report From Cairo by Nicholas Kristof

How Much Is Too Much? by Benjamin Kunkel

The real test of Harvey’s 1982 theory of crisis is how well it serves in the face of the thing itself. The Enigma of Capital can be read as an effort to meet the challenge. Naturally, its success or failure depends on whether it can offer a more comprehensive and persuasive account than rival theories. On the score of comprehensiveness there can be little doubt that Harvey’s work and that of other Marxists goes beyond the alternatives. 'The idea that the crisis had systemic origins is scarcely mooted in the mainstream media,' Harvey writes, and that might be extended to include even the trenchant work of the neo-Keynesians. The crisis, after all, is that of a capitalist system, and no account of it, however searching, can be truly systematic if it neglects to consider property relations: that is, the preponderant ownership of capital by one class, and of little or nothing but its labour power by another.

Paul Krugman, discussing Roubini’s book in the New York Review of Books, agreed with him that what Ben Bernanke called the 'global savings glut' lay at the heart of the crisis, behind the proximate follies of deregulation, mortgage-securitisation, excessive leverage and so on. Originating in the current account surpluses of net-exporting countries such as Germany, Japan and China, this great tide of money flooded markets in the US and Western Europe, and floated property and asset values unsustainably. Why was so much capital so badly misallocated? In the LRB of 22 April 2010, Joseph Stiglitz observed that the savings glut 'could equally well be described as an "investment dearth"', reflecting a scarcity of attractive investment opportunities. Stiglitz suggests that global warming mitigation or poverty reduction offers new 'opportunities for investments with high social returns'.

The neo-Keynesians’ 'savings glut' can readily be seen as a case of what a more radical tradition calls overaccumulated capital. But it is the broader and more systematic Marxist perspective that ultimately and properly contains Keynesianism within it, and a crude Marxist catechism may be in order. Where does an excess of savings come from? From unpaid labour -- for example, that of Chinese or German workers. And why would such funds inflate asset bubbles rather than create useful investment? Because capital pursues not 'high social returns', but high private returns. And why should these have proved difficult to achieve, except by financial shell-games? Keynesians complain of an insufficiency of aggregate demand, restraining investment. The Marxist will simply add that this bespeaks inadequate wages, in the index of a class struggle going the way of owners rather than workers.

In The Enigma of Capital, Harvey coincides with other Marxists in locating the origins of the present crisis in the troubles of the 1970s, when the so-called Golden Age of capitalism following the Second World War -- blessed with high rates of profitability, productivity, wage growth and expansion of output -- gave way to what Brenner named 'the long downturn' after 1973. Brenner argued in The Economics of Global Turbulence  that this long downturn, with deeper recessions and weaker expansions across every business cycle, reflects chronic overcapacity -- another variety of overaccumulation -- in international manufacturing, a condition brought about by the maturation of Japanese and German industry by the end of the 1960s, and later compounded by the industrialisation of East Asia. As competition to supply export markets increased faster than those markets expanded, the price of international tradeables naturally fell, reducing both the profits of manufacturers and the wages paid to workers. Such impaired profitability moreover discouraged further investment in production, so that finance capital turned increasingly to speculation in asset values. Yet this view, however formidably presented, doesn’t appear to have won general assent. Harvey, content to follow Brenner elsewhere, inclines towards a more conventional profit-squeeze explanation of the crisis of the early 1970s.

(via Yglesias)

Krugman: A Cross of Rubber

Can We Take Away Alan Greenspan's Pension? by Dean Baker

He discusses Joe Nocera's column on the F.C.I.C.'s report.

Commodities: This Time It's Different by Krugman

Now, what about food prices?

Not much evidence of hoarding, as far as I can tell. So this is straightforward supply and demand. Demand may be up to some extent because of that emerging-market boom. But if you look at the FAO reports it becomes clear that the key thing for cereals prices is that production is down in advanced countries, largely owing to terrible weather. And yes, it’s likely that climate change has played a role.

Oh, and what about Ben Bernanke? Well, to the extent that emerging markets are insisting on a fixed exchange rate against the dollar in the face of obvious overvaluation, that contributes to the boom and hence to demand. But I don’t think it’s reasonable to demand that the Fed stop fighting US unemployment in order to keep Chinese currency manipulation from leading to cotton hoarding by Chinese farmers.

So the story on commodity prices is somewhat different from the story during the last spike. As always, though, it’s crucial to keep your eye on the bale -- that is, whatever your logic, it must translate into actions that affect the physical supply and demand for raw materials.

As I watch the rioting in Cairo on CNN I think about the so-called "liberal left."

I've been following foreign affairs since the Cold War ended and have been disappointed with the so-called "liberal-left" on the subject. I agree on Vietnam, but most were uninspiring about Bosnia or Rwanda. They were good on South Africa but not much else. During the Naughties they mocked color revolutions. On Egypt they are silent.

David Weigel writes:

There's a lot of focus right now on what members of the administration have said publicly about the situation in Egypt; if you're a conservative, Joe Biden saying that Hosni Mubarak is no dictator, or Robert Gibbs meekly saying the country should turn the Internet back on, tell you everything you need to know about the weakness of the Obama administration.

It's rather worse than that. The Obama administration is flat-footed here, sure, but it's only acting out the role we've been playing with Egypt for decades. It continued sending $800 million in direct economic aid and $1.3 billion in military aid -- that's the military on your TV now, trying to break up riots. Mubarak has been an incredibly resilient and effective strongman who has kept us from worrying about a fundamentalist takeover of the country. It's worth reading the WikiLeaked cable our ambassador wrote in 2009:

He is a tried and true realist, innately cautious and conservative, and has little time for idealistic goals. Mubarak viewed President Bush (43) as naive, controlled by subordinates, and totally unprepared for dealing with post-Saddam Iraq, especially the rise of Iran,s regional influence. 

On several occasions Mubarak has lamented the U.S. invasion of Iraq and the downfall of Saddam. He routinely notes that Egypt did not like Saddam and does not mourn him, but at least he held the country together and countered Iran. Mubarak continues to state that in his view Iraq needs a "tough, strong military officer who is fair" as leader. This telling observation, we believe, describes Mubarak's own view of himself as someone who is tough but fair, who ensures the basic needs of his people.

The Obama administration's response to this has not been uniquely distaff. It's been traditional. It's worth reading Shadi Hamid on this.

President Obama has also weighed in, but more by what he chose not to say. On Jan. 18, he phoned his Egyptian counterpart, President Hosni Mubarak. They discussed a number of issues, including Iran and the Arab-Israeli conflict. They did not, however, discuss the need for political reform in Egypt.

The United States has backed its rhetoric, or lack of it, with action. On Jan. 12, more than three weeks into the Tunisia uprising -- and after protests had spread across the region -- the State Department granted $100 million in new funding to the Jordanian government to boost employment and strengthen the health and education sectors. Presumably, this will help the Kingdom diffuse popular anger over worsening economic conditions.

These actions have a clear intent -- to protect the stability of a state perceived as strategically vital to US interests.

Financial Crisis Inquiry Commission releases report:

Behind closed doors, Ben S. Bernanke, the Federal Reserve chairman, called it "the worst financial crisis in global history, including the Great Depression." 

He said that 12 of the country’s 13 most important financial institutions, including Goldman Sachs, had been on the verge of collapse "within a week or two." (The apparent exception: JPMorgan Chase.)

Krugman on FRED and Eurostat

Financial Crisis Inquiry Commission's report to be published Thursday

While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings, with embarrassing implications for both parties. But the panel was itself divided along partisan lines, which could blunt the impact of its findings.

...

The report does knock down -- at least partly -- several early theories for the financial crisis. It says the low interest rates brought about by the Fed after the 2001 recession; Fannie Mae and Freddie Mac, the mortgage finance giants; and the "aggressive homeownership goals" set by the government as part of a "philosophy of opportunity" were not major culprits.

Britain's economy stalls under austerity measures

The War on Demand by Krugman

It’s kind of shocking if you think about it. Here we have a huge, hard-won intellectual achievement, one that accounts very well for the world we actually see, and yet it’s being thrown away because it doesn’t go along with ideological preconceptions. Once that sort of thing starts, where does it stop? The next thing you know, the theory of evolution will get the same treatment. Oh, wait.

Seriously, though, this is truly sad -- and dangerous. Demand-side understanding, in my view, played a big role in helping us avoid a full replay of the Great Depression; if enough people had shared that understanding, we might have avoided even the minor-league Depression we’re going through. But willful ignorance is on the march -- and the odds are that we’ll handle the next crisis very badly.

I doubt there will be bailouts next time, a scary thought. Anyway, Krugman's post reminded me of "Agora."

Global Savings Glut

Dean Baker:

In the Clinton years, Robert Rubin had a policy of pushing up the value of the dollar. He put muscle behind this effort through the U.S. control of the IMF at the time of the East Asian financial crisis. The conditions that the IMF imposed were so onerous that developing countries decided that they needed to accumulate massive amounts of reserves in order to avoid being put in a similar situation. This meant accumulating large amounts of dollars. They did this by keeping down the value of their currencies against the dollar (i.e. raising the value of the dollar).

It is very misleading to assert that the value of the dollar is outside of the government's control. President Obama, like his predecessors, has allowed the dollar to remain over-valued. An over-valued dollar effectively subsidizes imports and imposes a tariff on exports. There is nothing that President Obama's new competitiveness panel can realistically hope to do that would come close to offsetting the competitive disadvantage created by an over-valued dollar.

Global savings glut Wikipedia entry

Decent column by Robert J. Samuelson (yes him) but it fails to mention the East Asian financial crisis.

"The Global Saving Glut and the U.S. Current Account Deficit" given March 10, 2005 by Bernanke

"Revenge of the Glut" by Krugman

Frank Rich on True Grit and The Social Network.

More than the first "True Grit," the new one emphasizes Mattie’s precocious, almost obsessive preoccupation with the law. She is forever citing law-book principles, invoking lawyers and affidavits, and threatening to go to court. "You must pay for everything in this world one way or another," says Mattie. "There is nothing free except the grace of God."

That kind of legal and moral cost-accounting seems as distant as a tintype now. The new "True Grit" lands in an America that’s still not recovered from a crash where many of the reckless perpetrators of economic mayhem deflected any accountability and merely moved on to the next bubble, gamble or ethically dubious backroom deal. When Americans think of the law these days, they often think of a system that can easily be gamed by the rich and the powerful, starting with those who pillaged Lehman Brothers, A.I.G. and Citigroup and left taxpayers, shareholders and pensioners in the dust. A virtuous soul like Mattie would be crushed in a contemporary gold rush even if (or especially if) she fought back with the kind of civil action so prized by the 19th-century Mattie.

Talk about Two Americas. Look at "The Social Network" again after seeing "True Grit,"and you’ll see two different civilizations, as far removed from each other in ethos as Silicon Valley and Monument Valley. While "Social Network" fictionalizes Mark Zuckerberg, it mines the truth of an era -- from the ability of the powerful and privileged to manipulate the system to the collapse of loyalty as a prized American virtue at the top of that economic pyramid.

In contrast to Mattie’s dictum, no one has to pay for any transgression in the world it depicts. Zuckerberg’s antagonists, Harvard classmates who accuse him of intellectual theft, and his allies, exemplified by a predatory venture capitalist, sometimes seem more entitled and ruthless than he is.

China Goes to Nixon by Krugman

The Socialists are playing Reggie's Rock Club Saturday Night.

New Parenting Book Sparks Outrage

Last week, Penguin Press published Amy Chua's book Battle Hymn Of The Tiger Mother, which criticizes "Western" parenting and advocates an "Asian" approach that includes forbidding playdates and being highly critical of children in order to make them more successful. Here are some other tips from the book:

• Take your children to Chuck E. Cheese's and let them play any game they choose, then make them watch as you burn their tickets
• Ice cream is a great motivator for kids; promise them that if they do everything you ask, they can have some when they turn 18
• Inform your child that televisions receive all of their power from flawless renditions of Brahms' Violin Concerto in D
• Only let your children have a pet dog if they can tame the most rabid dog at the pound
• Should your child express interest in spending more time with his or her friends, simply pack up and move several hundred miles away
• To ensure academic excellence, inform your children that there is a mark higher than an A-plus and then shame them for failing to attain it
• Replace their frail little limbs with less fragile prosthetics
• Remember, you may have to put up with one or two suicides before you finally craft that perfect child you've always wanted

What Have We Unlearned from Our Great Recession? by DeLong

In Wreckage of Lost Jobs, Lost Power by David Leonhardt

The column of the year so far. It hits on the issue. What he doesn't mention is that Bernanke and the Federal Reserve Bank are failing miserably at their mission.  They have gone above and beyond, but it hasn't been enough.

The unemployment rate is higher in this country than in Britain or Russia and much higher than in Germany or Japan, according to a study of worldwide job markets that Gallup will release on Wednesday. The American jobless rate is also higher than China’s, Gallup found. The European countries with worse unemployment than the United States tend to be those still mired in crisis, like Greece, Ireland and Spain.

Economists are now engaged in a spirited debate, much of it conducted on popular blogs like Marginal Revolution, about the causes of the American jobs slump. Lawrence Katz, a Harvard labor economist, calls the full picture "genuinely puzzling."

Tyler Cowen at Marginal Revolution and libertarians of his type leach politics out of their discussion. What would he think of Leonhardt's pitch-perfect column?

Why? One obvious possibility is the balance of power between employers and employees.

Relative to the situation in most other countries -- or in this country for most of the last century -- American employers operate with few restraints. Unions have withered, at least in the private sector, and courts have grown friendlier to business. Many companies can now come much closer to setting the terms of their relationship with employees, letting them go when they become a drag on profits and relying on remaining workers or temporary ones when business picks up.  

Just consider the main measure of corporate health: profits. In Canada, Japan and most of Europe, corporate profits have still not recovered to precrisis levels. In the United States, profits have more than recovered, rising 12 percent since late 2007.

For corporate America, the Great Recession is over. For the American work force, it’s not.

Yglesias had a post on this subject yesterday, where he linked to Krugman's speculations on "postmodern" recessions, that is ones not caused by the Fed hiking interest rates.

Leonhardt:

Germany’s job-sharing program -- known as "Kurzarbeit," or short work -- has won praise from both conservative and liberal economists. Senator Jack Reed, Democrat of Rhode Island, has offered a bill that would encourage similar programs. So far, though, the White House has not pursued it aggressively. Perhaps Gene Sperling, the new director of the National Economic Council, can put it back on the agenda.

Restoring some balance to the relationship between employers and employees will be more difficult. One problem is that too many labor unions, like the auto industry’s, have been poorly run, hurting companies and, ultimately, workers. Of course, many other companies -- AT&T, General Electric, Southwest Airlines -- have thrived with unionized workers, and study after study has shown that unions usually do benefit workers. As one bumper sticker says, "Unions: The folks who brought you the weekend."

Today, unions are clearly playing on an uneven field. Companies pay minimal penalties for illegally trying to bar unions and have become expert at doing so, legally and otherwise. For all their shortcomings, unions remain many workers’ best hope for some bargaining power.

Dean Baker gives the column a thumbs-up.

Why Jobs Haven't Come Back

Verizon Deal May Expose iPhone Flaws by Joe Nocera

Rebekah Frumkin writes about David Foster Wallace

Amy Poehler on sad movies.

You Can Count on Me was sad. Saddest movie of all time is The Sweet Hereafter.

The Beatings Will Continue Until Morale Improves

Can Europe Be Saved? by Krugman

Send Huck Finn to College by Lorrie Moore

I didn't imagine Mark Wahlberg's The Fighter would be so funny. A great cast including Christian Bale, Amy Adams, Melissa Leo and many others. Jamming soundtrack too!

I really, really liked The Fighter, The Social Network and True Grit. King's Speech was good also. As Daniel Davies wrote, The Black Swan was nothing like the book.

Battle Is Set as Verizon Adds iPhone by Jenna Wortham

Should I Buy a Verizon iPhone? by Farhad Manjoo

Insanely Savvy: Why Verizon's decision to pass on the iPhone six years ago is looking better and better by Annie Lowrey

The Politicized Mind by David Brooks

Good piece by Brooks but I would just say that Brooks's championing of the establisment's program of "socialism for the rich, austerity for the rest" falls very hard on the seriously mentally ill and their families. He should take a serious look at that and his deficit hawkery.

Reflections on Political Violence by Hitchens

Q & A with Gary Gorton

(via Yglesias)

Who Wants a 30-Year Mortgage? by Bethany McLean

I've been reading the book she wrote with Joe Nocera. Also about the housing market:

Postcrisis, A Struggle Over Mortgage Bond Ratings by Jesse Eisinger

Overweight, Out of Work at Rail Yard by Kari Lydersen

Resolved: Fix the Filibuster by Walter Mondale

When Harvey Met Bob

True Grit, Odd Wit: And Fame? No, Thanks by Charles McGrath

Explaining the Crisis with Dogma by Joe Nocera

I hope this is an eye opener for young people with functioning brain cells who are trying to figure out what's going on instead of just focusing on getting by.

I like Nocera and agree with his openly stated views but it wasn't very smart of him to bash Hewlett Packard's board in his column while his wife was working as a lawyer against those same people.

And yet he was very smart to team up with Bethany McLean and I am looking forward to reading their book.

I always cut people who I admire a lot of slack. (Although I never cut Clinton much slack, I do cut Obama some). They're human.

Krugman once consulted for Enron, but he learned from his mistake - although I'm not clear on the details - and will write: 

Or consider the California electricity crisis of 2001-2002. Years after we actually had tapes in which Enron traders could be heard telling power plants to shut down, news reports continued to repeat the conservative line that it was all about excessive regulation that wouldn’t let the power companies build capacity -- with no mention at all of the market manipulation.

In the same blog post, a good reference:

Put it this way: I’ve been rereading George Orwell’s Looking Back at the Spanish War, and it feels familiar.

Wall Street Whitewash by Krugman

Take a Load Off Fannie: Why won't the GOP's financial-crisis report follow the money? by Bethany McLean

Leonhardt on legal opposition to health care law

"We are against forcing all citizens, regardless of need, into a compulsory government program," said one prominent critic of the new health care law. It is socialized medicine, he argued. If it stands, he said, "one of these days, you and I are going to spend our sunset years telling our children, and our children’s children, what it once was like in America when men were free."

The health care law in question was Medicare, and the critic was Ronald Reagan. He made the leap from actor to political activist, almost 50 years ago, in part by opposing government-run health insurance for the elderly.

Today, the supposed threat to free enterprise is a law that’s broader, if less radical, than Medicare: the bill Congress passed this year to create a system of privately run health insurance for everyone. On Monday, a federal judge ruled part of the law to be unconstitutional, and the Supreme Court will probably need to settle the matter in the end.

What Progressives Don’t Understand About Obama by Ishmael Reed

Deeper Looks at the Crisis of ’08 and the Oval Office by Michiko Kakutani

Echoing what Jonathan Alter wrote about the president in his recent book, "The Promise," Mr. Wolffe writes that "there were few around him who thought health care was the right way for Obama to define his first year," especially given the state of the economy. But the president pushed ahead anyway: in part, Mr. Wolffe suggests, because of memories of his mother’s worries about medical insurance in the months before her death from cancer; in part because it was a priority for the first lady; in part because he aspired to be a great, history-making president and liked to "take on the toughest political challenges he could find"

Reading David Plouffe's book, I learned that heath care reform was the number one priority for Democratic party primary voters.

True to 'True Grit' by Carlo Rotella

The Coen Brothers, Shooting Straight by David Carr

Krugman on Charles Stross and the amoral corporation

One thing I like about blogs is when writers I admire discuss other writers from other fields who they admire. And one of the things I like about Krugman and DeLong is that they're polymaths and not soley focused on economics. Krugman blogs:

If you ask how it’s possible that a handful of bad actors can get their way so often, the answer has to be, wasn’t it ever thus? What we call civilization has usually been a form of kleptocracy, varying mainly in its efficiency (the Romans were no nicer than the barbarians, just more orderly). Yes, we’ve had a few generations of government somewhat of, by, for the people in some places -- but that’s an outlier in the broader sweep of things.

So never mind the hive-minds; good old greed still rules.

Yes but there is progress. Often the kleptocrats are helped by red herrings and distractions like racism and clerical demogoguery.

Hitchens writes about the Tea Party.

Nixon resigned when I was almost 4 years old. Recent released tapes of years in Presidency reveal his prejudice against Jews, blacks, Irish, and Italians. No doubt the Republican elite knew of it and probably shared his hate for the most part. Same thing with the voters and many Democrats.

And almost 40 years later we have a black President. That's progress.

"We need a tow, not a jump-start."

Obama referenced Mark Zandi in defending the stimulus component of the tax cut deal.

Krugman responds that we're in a process of deleveraging at his blog here and here.

I disagree with Krugman's criticisms of Obama, but Krugman could be right if the engine of the private sector doesn't get going. My view is that he's wrong to personalize the issues when it comes to Obama by saying stuff like Obama isn't a fighter. He isn't tough enough? The first black President? The man has no fear. Obama, Axelrod, and Plouffe took on the Clinton machine in the Democratic primary and dealt with their hard ball  tactics with "dirt off the shoulder."



It gets me down when he links to Digby or DeLong links to Jane Hamsher or Atrios.

G.E. and JPMorgan Got Lots of Fed Help in ’08 by Sewell Chan and Jo Craven McGinty

The two companies received help even as their chief executives, Jeffrey R. Immelt of G.E. and Jamie Dimon of JPMorgan, sat on the nine-member board of the Federal Reserve Bank of New York.

Neither executive was involved in creating the emergency programs, which were approved by the Fed’s board of governors in Washington. Both companies also disclosed that they were among scores of institutions that received support from the Fed. Nevertheless, some policy experts expressed discomfort with the situation.

"In my view, it is an obvious conflict of interest for C.E.O.’s of banks and large corporations who serve on the Fed’s board of directors to have received cheap loans from the Fed," Senator Bernard Sanders, a Vermont independent who wrote the legal provision requiring the Fed to make the disclosures, said in a statement on Sunday.

...

Goldman, previously an investment bank, became a Fed-regulated bank holding company during the crisis. It tapped the Fed program to help investment banks 52 times, owing $18 billion to the Fed at one point -- receiving far greater support than JPMorgan.

The chairman of the New York Fed at the time, Stephen Friedman, was a Goldman director and former chairman of Goldman. The Fed granted Mr. Friedman a waiver so he could continue serving as chairman of the New York Fed.

While awaiting the waiver, Mr. Friedman bought shares of Goldman around the time the bank received Fed support. After The Wall Street Journal reported on the purchases, Mr. Friedman stepped down, saying the Fed "does not need this distraction." The New York Fed’s top lawyer said at the time that Mr. Friedman "did not violate any Federal Reserve statute, rule or policy."

Mr. Friedman’s successor as chairman of the New York Fed was Denis M. Hughes, president of the New York State A.F.L.-C.I.O. Fed observers say it is unlikely that a former banker will serve as the agency’s chairman any time soon.

Jamie Dimon: America’s Least-Hated Banker by Roger Lowenstein in the New York Times Magazine:

TARP became a symbol of bailout policy gone awry. Actually, the program has succeeded for banks and, thus far, for the government. Taxpayers earned $795 million on the J. P. Morgan stake. Dimon is upset that people think he was bailed out. But there is at least some truth to the view of Christina Romer, a former economist for President Obama, who notes that Dimon "was part of the system that gave rise to the crisis. He certainly benefited. If the system went south, he’d have gone south with everybody else."

Christina Romer on uncertainty in the economy

The deepest and most destructive uncertainty we face centers on the overall health of the economy and its prospects for growth. Unlike other postwar recessions that were caused by tight monetary policy and high interest rates, the recent downturn resulted from the bursting of a housing bubble and a financial crisis. Because we are in largely uncharted territory, figuring out how and when the economy will recover is much harder than usual.

I think we know what to do, it's Republican opposition that is the problem (see for example the lunacy Rep. Mike Pence of Indiana and Senator Corker of Tennesse about how the Fed shouldn't concern itself about unemployment. And so Republican Bernanke has to go on 60 Minutes to defend the Fed.) Othewise I agree strongly with Romer's Op-ed.

Also in the New York Times Magazine, Daniel Bergner on John Pendergrast:

"I do human rights the way I played basketball," John Prendergast said. We were sitting in the outdoor restaurant of an unfinished hotel in Juba, a boomtown of mud and shanties beside the White Nile in southern Sudan. It’s a restaurant where the South’s liberation leaders tend to gather, and these days they are in a buoyant mood. They have traded their fatigues for dress shirts and suits. A half-century of civil war seems to be culminating in independence. If a referendum on Jan. 9 goes as expected, the map of Africa will be redrawn " with a new nation around the size of Texas. But for the moment, Prendergast, who is America’s most influential activist in Africa’s most troubled regions and who huddled on a White House patio with President Barack Obama a few days earlier, talked about basketball guards.

...

One way to understand Prendergast’s influence, suggested Samantha Power, who is the National Security Council’s senior director for multilateral affairs and human rights and who counts Prendergast among her close friends, is not to see Obama as lacking a sense of urgency on Sudan were it not for Prendergast’s recent activism, but rather to view the president as long-engaged on Sudan partly because of the highly successful advocacy movement Prendergast helped to start several years ago around the crisis in Darfur. And now, she continued, on North-South peace, Prendergast is "creating a political space; he’s putting political wind in the sails of people who care about this issue: the president, Denis" -- she nodded toward McDonough, the deputy national security adviser -- "me. He’s elevated Sudan to Himalayan proportions on the mattering map in Washington." While this may be an overstatement, Prendergast has surely helped to pull an expanse of scrub and swamp, and the people who live upon it, into American sightlines.(emphasis added)

Krugman on Poland and the euro

Good piece in the Times about the advantages Poland is deriving from not having adopted the euro (yet):

The floating zloty, which has fallen about 18 percent against the euro since early 2009, acted as a pressure release valve, helping to keep Polish products competitive on world markets and insulating Poland from the effects of the sovereign debt crisis.

Poland has proved itself to be Europe’s most dogged economy during the last two years. It was the only member of the European Union to avoid recession, soldiering on even after a plane crash in April killed much of the political elite, including the president and the central bank governor. No banks needed to be rescued.

You want to think about just how hard it would be to cut wages 18 percent, as opposed to achieving it automatically via depreciation.

Movie about the Clash in the works

Just the other a day an employee at the local used book store in my neighborhood was shocked when Mick Jones and Paul Simonon entered the store, browsed and asked if they had a certain book. They were playing with Gorillaz who were performing at a local music venue that night.

Coen Brothers' True Grit remake coming soon

With a sly hipness that is the trademark of Joel and Ethan Coen, a billboard just outside the Melrose Avenue gate at Paramount Pictures promotes their next film, "True Grit," with a promise: "Retribution. This Christmas."

It's funny but is it "hipness"?

But other film devotees were less charmed, particularly when they viewed "True Grit" through the filter of Vietnam-era politics and Wayne’s conservative principles -- which he had said were illustrated by a scene in which Cogburn shoots a rat after demonstrating the futility of trying to treat it under due process of law. (The new film has no such moment.)

Writing in The New Yorker, Penelope Gilliatt complained of the movie’s "very right-wing and authoritarian tang." She was particularly put off by the frontier stoicism, which she described as "near-Fascist admiration for a simplified physical endurance of pain"

In The New Republic, Stanley Kaufman said of Mr. Portis’s novel, "Although it was short it was overlong by about a third." The film’s director, Henry Hathaway, he described as "an old workhorse" who "hasn’t had a new idea since the beginning of his career"

President Richard M. Nixon, for whom Wayne had campaigned, apparently felt otherwise, if a snippet of conversation caught by his Oval Office taping system in February 1971 is any measure. Greg Cumming, an archivist with the Nixon Library, said that the audio quality of the tape was bad, but that he could make out Nixon’s discussing "True Grit: with his chief of staff, H. R. Haldeman. They talk of someone’s having gone "out in a blaze of glory," according to Mr. Cumming.

Of course, Wayne went on to make about 10 or so more films, including the 1975 sequel "Rooster Cogburn," before his death in 1979.

The Coens said they only dimly recalled having seen the earlier movie when they were young, and they did not watch it in preparing their own. "We didn’t do our homework," Ethan Coen said.

Joel Coen said they were drawn to the underlying book a few years ago after he had "re-read it out loud to my kid."

1969 trailer:

Sewell Chan on the Fed data dump

From December 2007 to October 2008, the Fed opened swap lines with foreign central banks, allowing them to temporarily trade their currencies for dollars to relieve pressures in their financial markets.

The European Central Bank drew the most heavily on these currency arrangements, the records show, but nine other central banks also made use of them: Australia, Denmark, England, Japan, Mexico, Norway, South Korea, Sweden and Switzerland.

The Spanish Prisoner by Krugman

But problems were developing under the surface. During the boom, prices and wages rose more rapidly in Spain than in the rest of Europe, helping to feed a large trade deficit. And when the bubble burst, Spanish industry was left with costs that made it uncompetitive with other nations.

Now what? If Spain still had its own currency, like the United States -- or like Britain, which shares some of the same characteristics -- it could have let that currency fall, making its industry competitive again. But with Spain on the euro, that option isn’t available. Instead, Spain must achieve "internal devaluation": it must cut wages and prices until its costs are back in line with its neighbors.

And internal devaluation is an ugly affair. For one thing, it’s slow: it normally take years of high unemployment to push wages down. Beyond that, falling wages mean falling incomes, while debt stays the same. So internal devaluation worsens the private sector’s debt problems.

What all this means for Spain is very poor economic prospects over the next few years. America’s recovery has been disappointing, especially in terms of jobs -- but at least we’ve seen some growth, with real G.D.P. more or less back to its pre-crisis peak, and we can reasonably expect future growth to help bring our deficit under control. Spain, on the other hand, hasn’t recovered at all. And the lack of recovery translates into fears about Spain’s fiscal future.

The Instability of Moderation by Krugman

Lands of Ice and Ire by Krugman

Iceland versus Ireland; heterodox versus orthodox.

What’s going on here? In a nutshell, Ireland has been orthodox and responsible -- guaranteeing all debts, engaging in savage austerity to try to pay for the cost of those guarantees, and, of course, staying on the euro. Iceland has been heterodox: capital controls, large devaluation, and a lot of debt restructuring -- notice that wonderful line from the IMF, above, about how "private sector bankruptcies have led to a marked decline in external debt". Bankrupting yourself to recovery! Seriously.

And guess what: heterodoxy is working a whole lot better than orthodoxy.

What Good is Wall Street by John Cassidy

(via Yglesias)

Stereolab has new album out even though they are on hiatus

Dean Baker: Robert Samuelson Does the Big Lie, Big Time

Competent budget analysts know that the long-term budget problem is a health care cost problem. If U.S. per person health care costs were comparable to those in any other wealthy country, we would be looking at huge projected surpluses not deficits. Because health care costs are rising rapidly in the private sector, it means that the public sector programs that pay for these benefits (most important Medicare and Medicaid) also have rapidly rising costs.

If Medicare and Medicaid are lumped together with any other programs then the combination of Medicare, Medicaid, and the other program will be the cause of the deficit. For example, the categories of Medicare, Medicaid, and foreign aid explain the vast majority of the projected increase in the deficit over the next quarter century. Similarly, the combination of Medicare, Medicaid, and school lunch programs also explains the vast majority of the projected increase in the deficit over the next quarter century.

Robert Samuelson throws in Social Security as the third program so that he can tell readers:

"America's budget problem boils down to a simple question: How much will we let programs for the elderly displace other government functions."

Social Security does not in any honest way since it is fully financed over the period in question by the designated Social Security tax. But Samuelson does not feel bound by such details.

Of course there are easy ways to prevent health care costs from bankrupting the country, most obviously by taking advantage of the lower cost health care available in other countries. But, Samuelson never discusses such possibilities, focusing exclusively on cutting benefits on which the vast majority of retirees depend.

via Yglesias, Joe Klein on the Pain Caucus's focus on "fiscal resposibility":

here is, for example, Glenn Hubbard, who was featured on the New York Times op-ed page recently in defense of the deficit commission, describing the problem this way: "We have designed entitlements for a welfare state we cannot afford." This is the same Glenn Hubbard who served as George W. Bush’s chief economic adviser when Dick Cheney was saying that "Reagan proved deficits don’t matter." One imagines that if Hubbard was so concerned about deficits, he might have resigned in protest from an Administration dedicated to creating them. But, no, he’s here to speak truth to the powerless -- to the middle-class folks whose major asset, their home, was trashed by financial speculators, thereby wrecking their retirement plans and creating the consumer implosion we’re now suffering. Hubbard is telling them they now have to take yet another hit, on their old-age pensions and health insurance, for the greater good.

Professor predicts Obama will win in 2012 because economy will be better.

His model forecasts real annualized growth in gross domestic product of 3.69 percent for the first three quarters of 2012. A survey of leading economists by Blue Chip Economic Indicators shows an average forecast of 3.2 percent growth in real G.D.P. in 2012, while the Congressional Budget Office estimates 3.4 percent. Plug either of these estimates into his election algorithm and the result is the same: President Obama wins.

He believes the Fed will keep policy stimulative.

Paul Barrett reviews "All the Devils Are Here: The Hidden History of the Financial Crisis." by Bethany McLean and Joe Nocera.

Others have illuminated facets of the crisis in more depth. John Cassidy’s "How Markets Fail" explained the economic history and theory with greater sophistication. Gillian Tett’s "Fool’s Gold" offered a journey into one investment bank, J. P. Morgan, and a close look at how it helped create a financial instrument, the credit derivative, that amplified risk rather than minimizing it. "In Fed We Trust," by David Wessel, took the reader behind the scenes in Washington, where politicians and regulators missed all the warning signs. For their part, McLean and Nocera concentrate on the basics and bring them together in brisk, well-organized chapters.

I've read Cassidy's book and Wessel's book, but need to get Tett's.

Barrett writes

Another public quarrel McLean and Nocera bring into focus is the esoteric debate about Federal Reserve monetary policy. Ben S. Bernanke, the chairman of the Federal Reserve, has pushed interest rates practically to zero to try to stimulate growth and reduce an unemployment rate that currently hovers near 10 percent. Dissenters from this policy, like Thomas M. Hoenig, the president of the Kansas City Federal Reserve Bank, warn that Bernanke is repeating the mistake of his predecessor, Greenspan, who employed similar measures to combat the recession that followed the dot-com crash of 2000.

There are two different issues about Greenspan. His approach to regulation and his approach to interest rates. Hoenig and Barrett erroneously conflate the two.

Bernanke and Krugman point to the global savings glut rather than the Fed's policy of keeping rates low after the dot-com crash of 2000 as the source of the housing bubble which took on a life its own once it had momentum.