June 2011 and the end of QE2

Krugman quotes Flyod Norris:

Mr. Bernanke makes clear there will be no QE3. And he hopes that it will not have much impact when the purchases end: "We are just going to let the purchases end. Our view is that the end of the program is unlikely to have substantial effects on the economy or financial markets."

He bases that on the fact that all this has been well telegraphed, which is true enough, and then goes into jargon. "We subscribe to the stock view," he says.

That is not the view held by the stock market. Rather it is the size of the Fed’s portfolio -- the stock of securities held by the Fed -- that matters. And that will not change because the Fed will reinvest proceeds from maturing securities.

That’s exactly what I was saying in this post. Like Bernanke, I don’t believe that the flow of Fed purchases has been an important factor holding bond rates down, and hence don’t believe that they will jump when the purchases end.

Bill Gross of PIMCO believes otherwise, but I believe Bernanke and Krugman are correct.

Liberalism's bumper sticker problem by Jonathan Chait

The Dead Milkmen are playing tomorrow night. The Chicago Reader says:

Listening to The King in Yellow, the first album of new Dead Milkmen material since 1995's Stoney's Extra Stout, is a lot like catching up with one of your cooler, smarter, and funnier friends from high school who managed to grow up without losing all the qualities that made him your friend in the first place. Their jangled guitars, their bitingly witty lyrics, their snotty Philly accents, their playful and iconoclastic version of hardcore--a reminder of a time when it actually had a sense of humor--make it clear what you've been missing in the years since. "Don't trust the happy / The happy are insane / If you see someone smiling / Run! Get away!" advise Rodney Anonymous and Joe Jack Talcum on the chorus of "Meaningless Upbeat Happy Song," between verses about what a still-fucked-up world we're living in. The Dead Milkmen remain best known for "Punk Rock Girl"--a song that became a left-field hit during the pop nadir of the late 80s--but albums like Big Lizard in My Backyard, Eat Your Paisley, Bucky Fellini, and Beelzebubba have held up better than much of the music of that time, both over- and underground. Furthermore, I'm hard-pressed to find a song more prescient than "Right Wing Pigeons."...

Q: Who's John Galt?

A: Some asshole.

The Onion's review for the film "Atlas Shrugged: Part I":

The turgid first part of a proposed three-part adaptation of Ayn Rand's novel feels like Tucker: The Man and His Dream, written and performed by robots. Grade: D+

Writing in the New York Times, Carina Chocano didn't like it either.

Bernanke Offers Little Help On Budget Deficit by Dean Baker

In 1996, the Congressional Budget Office (CBO) projected a deficit of almost $250 billion (@ 2.6 percent of GDP) for the 2000 fiscal year. The country actually had a budget surplus of almost the same size in fiscal 2000, representing a shift from deficit to surplus in the year 2000 of more than 5 percentage points of GDP.

Congress did not approve any major tax increases in this 4-year period, nor were there any major unscheduled cuts to spending. Rather this shift from deficit to surplus of more than 5 percentage points of GDP ($750 billion in today's economy) was attributable almost entirely to better than expected economic performance.

In 1996 CBO projected that the unemployment rate would be 6.0 percent in 2000. Unemployment actually averaged just 4.0 percent. This was due to the fact that Alan Greenspan ignored the overwhelming consensus in the economics profession and allowed the unemployment rate to fall below the conventionally accepted levels of the NAIRU.

This decision, which was made over the objections of the Clinton appointees to the Fed, allowed millions of more people to get jobs than would have otherwise been the case. It also allowed strong wage growth for people at the middle and bottom of the wage distribution as their labor was then in demand. And it reduced the budget deficit. Because Bernanke offered little hope of more aggressive Fed actions to reduce unemployment, he is not offering any similar growth dividend on the budget deficit.

Jon Stewart on Obama's non-bombshell and the Trump "Egometer"

Yglesias on the 1970s and inflation

Damn you, Carnival Barkers.

Bernanke* just gave the first ever Federal Reserve Bank press conference live on the Internet.

Yglesias blogs:

The key moment in Ben Bernanke’s press conference was when he explained that the Fed wasn’t doing more to ensure full employment because it’s worried that additional action might cause inflation expectations to come unmoored and "if inflation expectations were to become unmoored the cost of that in terms of employment loss in the future would be quite signifiant." In other words, he’ll make sure to err on the side of policy that’s too tight because if he tries to get policy right he might accidentally end up being too loose and then he’d need to tighten in response and that would be bad.

As a technical issue, the problem should be addressable with level targeting. But as an issue of priorities, there’s just no addressing it.

Imagine you’re teaching a kid archery. You tell him to aim for the bullseye. But you also warn him that if the arrow goes to the left of the bullseye, he’s going to be in big trouble while if it goes to the right of the bullseye you won’t really mind. Well, naturally the kid’s never going to hit the bullseye. He’s going to shoot too far the right. And that’s the Fed right now. They’ll act to prevent total collapse of output and employment but what really worries them is inflation. They’re so worried about inflation that they’re happy to have an output gap that persists for years and years and years.

----------------------
* Paul Giamatti is portraying Bernanke in the HBO movie "Too Big To Fail." William Hurt will play Hank Paulson. Geithner will be played by ... Billy Crudup.

Lollapalooza 2011 lineup

Foo Fighters, Eminem, My Morning Jacket, Coldplay, Deadmau5, The Cars, Ween, Bright Eyes, Big Audio Dynamite, Arctic Monkeys, Death From Above 1979, Grace Potter and the Nocturnals, OK Go, The Pains of Being Pure at Heart,* etc.

--------------------
*I'm seeing them play tonight at Lincoln Hall. I like the Foo Fighters' new album. Check out the similarity of the cover art with Love's "Forever Changes" and The Sounds' "Living in America."

"Holding Bernanke Accountable" by David Leonhardt

How the Arab Spring remade Obama’s foreign policy. by Ryan Lizza

During the peak of the protests in Iran, Jared Cohen, a young staffer at the State Department who worked for Slaughter, contacted officials at Twitter and asked the company not to perform a planned upgrade that would have shut down the service temporarily in Iran, where protesters were using it to get information to the international media. The move violated Obama’s rule of non-interference.

White House officials "were so mad that somebody had actually 'interfered' in Iranian politics, because they were doing their damnedest to not interfere," the former Administration official said. "Now, to be fair to them, it was also the understanding that if we interfered it could look like the Green movement was Western-backed, but that really wasn’t the core of it. The core of it was we were still trying to engage the Iranian government and we did not want to do anything that made us side with the protesters. To the Secretary’s credit, she realized, I think, before other people, that this is ridiculous, that we had to change our line." The official said that Cohen "almost lost his job over it. If it had been up to the White House, they would have fired him."

Clinton did not betray any disagreement with the President over Iran policy, but in an interview with me she cited Cohen’s action with pride. "When it came to the elections, we had a lot of messages from people inside Iran and their supporters outside of Iran saying, 'For heaven’s sakes, don’t claim this as part of the democracy agenda. This is indigenous to us. We are struggling against this tyrannical regime. If you are too outspoken in our support, we will lose legitimacy!' Now, that’s a tough balancing act. It’s easy to stand up if you don’t worry about the consequences. Now, we were very clear in saying, 'We are supporting those who are protesting peacefully,' and we put our social-media gurus at work in trying to keep connections going, so that we helped to provide that base for communicating that was necessary for the demonstrations."

Failing to ask Twitter to not make the upgrade would have been, in effect, interfering on behalf of the Iranian regime.

The French and the British were shocked by the quick turn of events. Instead of the President announcing the Administration’s position from the East Room of the White House, the U.N. envoy quietly proposed transforming a tepid resolution for a no-fly zone into a permission for full-scale military intervention in Libya. Some officials thought it was a trick. Was it possible that the Americans were trying to make the military options appear so bleak that China and Russia would be sure to block action?

Gradually, it became clear that the U.S. was serious. Clinton spoke with her Russian counterpart, Sergey Lavrov, who had previously told her that Russia would "never never" support even a no-fly zone. The Russians agreed to abstain. Without the cover of the Russians, the Chinese almost never veto Security Council resolutions. The vote, on March 17th, was 10-0, with five abstentions. It was the first time in its sixty-six years that the United Nations authorized military action to preëmpt an "imminent massacre." Tom Malinowski, the Washington director of Human Rights Watch, wrote, "It was, by any objective standard, the most rapid multinational military response to an impending human rights crisis in history."

As the bombs dropped on Libyan tanks, President Obama made a point of continuing his long-scheduled trip to South America. He wanted to show that America has interests in the rest of the world, even as it was drawn into yet another crisis in the Middle East.

The key appears to be the Arab League's decision to get involved.

The Tyrants Strike Back by Juan Cole

Cripple Fight in Libya*

Go After Qaddafi by Hitchens

Finish the Job by James M. Dubik
--------------------
*I just finished reading a Jonathan Lethem book about John Carpenter's film "They Live" which contains the endless fight scene between "Rowdy" Roddy Piper and Keith David upon which South Park's "Cripple Fight" between Timmy and Jimmy was based. It's a brilliant book which touches upon Slavoj Zizek, Harry Dean Stanton, "Repo Man," Mike Judge's "Idiocracy," Alfred Hitchcock, Milan Kundera, Philip K. Dick, South Park, Stanley Kubrik, Roland Barthes's "Mythologies," Pauline Kael, Frances McDormand, and the Coen brothers' "Fargo" among other things.

The Beatings Will Continue Until Morale Improves

Krugman blogs about Ireland and Greece

Also, an excellent profile of Krugman by Benjamin Wallace-Wells

HBO ordered a second season for "Game of Thrones." Christopher Nolan's third and final Batman movie will come out July of next year and he's working with many of the actors from "Inception," including Joseph Gordon-Levitt, Marion Cotillard, Tom Hardy and Michael Caine who will play the butler Alfred again. The movie will also star Christian Bale as the Batman and Anne Hathaway as Selina Kyle.

Jenny Turner reviews David Foster Wallace's "The Pale King":

And the entire subject could scarcely be more of a political hot potato: most of these drafts were being written in the years of the George W. Bush tax cuts. 'There’s something very interesting about civics and selfishness, and we get to ride the crest of it. Here in the US, we expect government and law to be our conscience. Our superego, you could say ... Americans are in a way crazy. We infantilise ourselves. We don’t think of ourselves as citizens.' Or, a more WikiLeaksy approach: 'Consider ... the advantages of the dull, the arcane, the mind-numbingly complex. The IRS was one of the very first government agencies to learn that ... abstruse dullness is actually a much more effective shield than is secrecy.'

...

Wallace ironised the tendency, somewhat, through narrative refraction and recursion; but the problem must have worried him, and perhaps explains why he tried to interest himself in low-level fiscal bureaucrats, surely one of the least romanticisable social groupings imaginable on this earth. He may also have liked the element of self-mortification involved in this choice, or perhaps it was the challenge he found exciting: 'To function effectively in an environment that precludes everything vital and human,' he has a nameless character say at one point, 'is the key to modern life. If you are immune to boredom, there is literally nothing you cannot accomplish.'

The Wall Street Leviathan by Jeff Madrick

Congratulations to David Leonhardt for winning the Pulitzer in the commentary catergory for "his graceful penetration of America’s complicated economic questions".

Bill Gross and David Stockman versus the Fed by Ezra Klein

"When the Federal Reserve gets out of the Treasury market on June 30th, the question becomes who will buy them at these yields, and I don’t know who would." Gross, incidentally, has put his money where his mouth is by making a big and very public play against Treasurys.

 I'd take the Fed even though Gross is a player. The Fed can print money without an ensuing wage-price inflation spiral and the US government can raise taxes very easily if it has to. There are a lot of profitable US businesses. It could even stick it to China which would hurt some politcally-connected US firms and yet benefit the national economy as a whole.

Added:

Stocks, Flows, and Pimco (Wonkish) by Krugman

... If you believe that it is obvious that rates will spike as soon as QE2 ends, you have to ask why investors aren’t moving out of US debt now in anticipation; you don’t have to believe in efficient markets to believe that totally obvious gains or losses will be anticipated.

I’d also add that if flows matter a lot -- if it’s hard to persuade investors to buy a suddenly increased quantity of newly issued Treasuries per month, as opposed to being willing to hold the total amount of Treasuries outstanding -- the big shift into budget deficits and the corresponding increase in Treasury issuance should have led to sharply rising interest rates.

And as you may recall, some people did predict just that -- and ended up not just with egg on their faces, but losing a lot of money for their investors.

So I don’t buy the notion that rates are low only because the Fed is doing QE2; if there were really a problem with the marketability of US debt, rates would be high regardless. And so I don’t expect rates to spike when QE2 ends unless there’s good economic news that gives us a reason to believe that the zero-rate policy on short-term rates will end sooner than expected.

My estimation of Bill Gross just took a hit.

 

(via Yglesias)

Dean Baker on Standard and Poor's rating agency, who downgraded* the United States' government's outlook to negative.

It is also worth noting that S&P has a horrible track record for judging credit worthiness. It rated hundreds of billions of dollars of subprime backed securities as investment grade. It also gave Lehman, Bear Stearns, and Enron top ratings right up until their collapse. Furthermore, no one was publicly fired for these extraordinary failures. Investors are aware that S&P's judgement does not mean very much.

-----------------
* the US still has a AAA rating, but S&P now says the outlook is negative, or not good. They did this to Japan, but nothing ever came of it and the market allowed the Japanese government to continue to borrow at low rates.

Revenge of the Global Savings Glut by Krugman

 David Foster Wallace: The Last Audit by Tom McCarthy

The first is as a coherent, if incomplete, portrayal of our age unfolding on an epic scale: a grand parable of postindustrial culture or "late capitalism," and an anguished examination of the lot of the poor (that is, white-collar) individual who finds himself caught in this system’s mesh. The setting that Wallace has chosen as his background (and foreground, and pretty much everything in between) could not be more systematic: the innards of the Internal Revenue Service -- the sheer, overwhelming heft of its protocols and procedures. If, as one of Wallace’s characters asserts, "the world of men as it exists today is a bureaucracy," then the I.R.S., "a system composed of many systems," not only represents that world but also furnishes the ultimate stage on which its moral dramas are enacted. In the words of Midwest Regional Examination Center Director DeWitt Glendenning Jr., one of the more shadowy (or pale) presences in this ­multicharactered and multivoiced book, "The tax code, once you get to know it, embodies all the essence of [human] life: greed, politics, power, goodness, charity."

To its own agents and enforcers, the I.R.S. even offers a role and status akin to that of the lone, righteous gunslinger in the Wild West or the caped crusader in Gotham. "Enduring tedium over real time in a confined space is what real courage is," accounting students are informed with evangelical zeal by their instructor. "To retain care and scrupulosity about each detail from within the teeming wormball of data and rule and exception and contingency which constitutes real-world accounting -- this is heroism." The proposition is comic (one of the novel’s would-be heroes practices saying "Freeze! Treasury!" in front of his mirror) but sincere as well: the instructor is a Jesuit priest, and the scene is redacted with a genuinely epiphanic air. In a universe of veiled and veiling numbers, the task of drawing the true ones out into the light and holding them up for inspection, clear and remainder-­less, really is a sacred one. "Gentlemen," the instructor rounds off his sermon by saying, "you are called to account."

The problem, as I.R.S. recruits soon discover, is that neither moral nor heroic codes hold true anymore. The bulk of "The Pale King" takes place in the mid-1980s, as the Spackman Initiative is being implemented. Pure invention (as far as I can tell) on Wallace’s part, the initiative nonetheless describes an all too recognizable shift in administrative culture, with the supplanting of a public service ethos (tax enforcement is an affirmation of all citizens’ duties toward others) by a free-­market one: the I.R.S. is a revenue-­generating business and, as such, should audit only those returns that promise the highest yield-to-man-hour-spent-­investigating ratio. Post-Spackman, the tax agency is a godless space whose commandments are simply those of the profit motive, and whose driving logic is being automated at an alarming pace thanks to emerging software. "It was frightening," writes David Wallace (a character who shares his name not only with the author but also with another David Wallace at the I.R.S., causing yet further blurring of identities and voices), "like watching an enormous machine come to consciousness and start trying to think and feel like a real human."

The Power of Mockery by Kristof

The juiciest story behind the Middle East uprisings doesn’t concern Col. Muammar el-Qaddafi’s "voluptuous" Ukrainian nurse or C.I.A. bags of cash. Rather, it’s the tale of how a nonviolent revolutionary strategy crafted by Serbian students and an octogenarian American scholar came to challenge dictators in Egypt, Tunisia, Bahrain and many other countries.

This "uprising in a bottle" blueprint was developed by the Serbian youth movement, Otpor, to overthrow Slobodan Milosevic in 2000. One of Otpor’s insights was that the most effective weapon against dictators isn’t bombs or fiery speeches. It’s mockery. Otpor activists once put Milosevic’s picture on a barrel that they rolled down the street, inviting people to hit it with a bat. 

The Pains of Being Pure at Heart

Ginia Bellafante:

"Game of Thrones" is boy fiction patronizingly turned out to reach the population’s other half.

I wish the Times had assigned someone who had read the books to review the show. The first book is in part about Eddard (Ned) Stark (played by Sean Bean in HBO's 10 episode series) who took part in a successful rebellion against a King Aerys (called the "Mad King"). His childhood friend Robert Baratheon led the revolt and became the new king. Baratheon is the loutish type of man all right-thinking women hate: a man's man with little introspection and large appetites. In the war which deposed the mad king Aerys, Baratheon cut a heroic and dashing figure but after years of power he has become fat and complacent. He's was better at leading a revolt than being the king.

Ned Stark suffers from being pure at heart. He is loyal and honorable to a fault. He has a code and sticks to it, come what may. The Stark clan rules from a castle far in the north and the saga begins with Baratheon asking Stark to take over as his "Hand" or right-hand man / chief-of-staff. The previous Hand of the King had been poisoned. Stark has no desire to be Hand, which means court politics (i.e. dishonesty and backstabbing) and ruling in effect for a King who has little interest in the more mundane matters of being a King. His wise wife advises against it.

Stark believes one can't be pure at heart and also be successful at ruling and playing the political game, but he agrees anyway to become Hand out of loyalty to his old friend Robert Baratheon.

Chicago Fed paper on commodity prices and inflation by Charles Evans.

(via Krugman)

New York article on Peter Orzsag:

And while the crash dented the confidence of the Wall Street-Washington policy elite, the blow was far from fatal. In November 2008, Rubin attended an economic-policy meeting with Obama and senior aides in Chicago. Reich was there, and he told me that after the meeting, he confronted Rubin about the meltdown. "I asked him why did the crash happen? He said, 'It was a perfect storm. It was a once-in-a-lifetime event.'" Reich, like many progressives, sees 2008 as a reassessment of the Rubin way. "Why was there a complete implosion, if Wall Street is so smart, if markets work so well?"

(via Yglesias)

Larry Summers event at Bretton-Woods:



(via DeLong)

Krugman wins the thread

So, we have a plan that proposes to cut spending to Calving Coolidge levels, without explaining how it will do that; that includes $2.9 trillion in tax cuts, but asserts that it will make that up by broadening the base -- yet says literally nothing about what that means; and has as its centerpiece a Medicare plan that will collapse as soon as seniors start getting their grossly inadequate vouchers.

Oh, and it directs us to a totally ludicrous Heritage Foundation analysis for support.

There’s nothing serious about this plan. And the way our pundit class swooned over this fantasy document suggests that all those people lecturing the American people about our unwillingness to face up to reality and make hard choices should spend some time looking in the mirror.

Hertiage report forecasts that Paul Ryan's budget* if enacted would lower the unemployment rate to a miraculous 2.8 percent in 2021.

-----------------------
* tax cuts for the rich  / the elderly would end up spending most of their income on health care.

(via Krugman)

The Achilles Heel Of The Path To Prosperity by Jonathan Chait

And certainly some level of cutting is necessary. But Ryan's level of cutting goes far beyond what's needed to preserve those programs, and it does so in order to clear room for a very large, regressive tax cut. He is making a choice -- not just cut Medicare to save Medicare, but also to cut Medicare in order to cut taxes for the rich.

Ryan does not want to debate that choice, but he ought to be forced to do so. That is exactly what Bill Clinton did to defeat the Republicans in 1995. Indeed, the debate was virtually identical. Republicans insisted the debt constituted an existential threat. They proposed to "save" Medicare by privatizing it. And Clinton pointed out that their plan cut Medicare in order to finance a regressive tax cut. He won the argument because Medicare is highly popular and tax cuts for the rich aren't. 

Indeed, the divide on this issue is so overwhelming that Republicans simply refuse to acknowledge their position.

(via DeLong)

Ryan to 32M Americans: No Insurance for You by Jonathan Cohn

David Brooks Is Excited: Paul Ryans Kicks the Elderly While Protecting the Wealthy by Dean Baker

Krugman on the transmission mechanism for Quantitative Easing

Alessandra Stanley reviews The Killing

Sergio Leone gave cinema the spaghetti western, but there isn’t yet an equivalent term for Scandinavian riffs on the classic hard-boiled detective yarn. "The Killing," a fantastic new AMC adaptation of a popular Danish television series, certainly qualifies as a smorgasbord thriller. It’s unnerving how well the Nordic sensibility fits a genre that for a long time seemed indisputably and inimitably violent and American, particularly given that Sweden, Norway and Denmark have homicide rates that suggest that they have more mystery writers per capita than murders.

There are so many Scandinavian crime solvers besides Henning Mankell’s gloomy detective, Kurt Wallander, or Steig Larsson’s hacker heroine, Lisbeth Salander. Yet even among all those popular imports, "The Killing" stands out -- it is as scary and suspenseful, but in a subdued, meditative way that is somehow all the more chilling. 

 AMC and FX have really progressed.

Why Obama Had to Act in Libya by Marc Lynch

Answer to Glenn Greenwald by Juan Cole

Whit Stillman's Barcelona. He has a new movie with Greta Gerwig titled "Violet Wister's Damsels and Distress" coming out later this year. I like that scene in the movie Greenberg where Gerwig sings along to "Uncle Albert/Admiral Halsey" while drunk on champagne.

Article on Samantha Power

Calculated Risk: ADP: Private Employment increased by 201,000 in March

Private-sector employment increased by 201,000 from February to March on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from January 2011 to February 2011 was revised down to 208,000 from the previously reported increase of 217,000.
...
The average monthly increase in employment over the last four months --December through March -- has been 211,000, consistent with a gradual if uneven decline in the unemployment rate...

(via DeLong)

Still the Fed has failed, as writes David Leonhardt.

One group of Fed officials and watchers worries constantly about the prospect of rising inflation, no matter what the economy is doing. Some of them are haunted by the inflation of the 1970s and worry it may return at any time. Others spend much of their time with bank executives or big investors, who generally have more to lose from high inflation than from high unemployment.

There is no equivalent group -- at least not one as influential -- that obsesses over unemployment. Instead, the other side of the debate tends to be dominated by moderates, like Ben Bernanke, the Fed chairman, and Mr. Meyer, who sometimes worry about inflation and sometimes about unemployment.

The result is a bias that can distort the Fed’s decision-making. Just look at the last 18 months. Again and again, the inflation worriers, who are known as hawks, warned of an overheated economy. In one speech, a regional Fed president even raised the specter of Weimar Germany.

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.