David Leonhardt's time machine

David Leonhardt: This time machine would start its magic by taking us back almost a decade, to the days when everyone from senior Washington officials to ordinary Americans believed that house prices could never drop. We'd then have a chance to persuade Alan Greenspan and Ben Bernanke, the last two Federal Reserve chairmen, to stop saying that nationwide housing bubbles could not happen and to start cracking down on the wishful-thinking mortgages that were making that bubble possible.

We would also stop by the Treasury Department and Congress and ask them to give some more attention to the fact that incomes were stagnating and many Americans were using their credit cards to pay for higher living standards. Finally, we'd pay a visit Wall Street. We'd go to Lehman Brothers and explain to the bigwigs there why they might not want to be borrowing $33 for every $1 in assets they held. If they didn't listen to us, we'd go see a gentleman named Timothy Geithner, then overseeing the regulators at the New York Fed.

In every case, we would issue an urgent message: The United States economy is in the midst of creating the worst economic excesses since the 1920s. If allowed to continue, those excesses will do enormous damage -- damage that you won't be able to stop once it starts.

This damage, of course, is what we are living through right now. And as much as we all may wish they were an easy fix, there isn't. Financial crises cause spending to be depressed and unemployment to be high -- for years.

Are there steps we can take to mitigate the damage? Absolutely. An aggressive policy response in 2008 and 2009 helped prevent another depression. And a more timid response in 2011 has aggravated the problems.

But the economy was never going to recover quickly from the bubbles. That's why sales -- not just of houses, but of appliances, vehicles and even services like entertainment, are all still far below their pre-crisis levels. They will be for a long to come.

It's too late to prevent the last great financial bubble. It's not too late to ask whether we are taking substantial steps to keep the next bubble from being nearly so bad. Remember: there's always a next bubble.

Michael Shur of Parks and Recreation recently acquired film right to "Infinite Jest."

Team Debbie

Meredith Woerner recaps True Blood

Dean Baker on double-dip talk from reporters

The misplaced obsession with a double-dip has consequences because it creates a situation in which the slow growth that the economy is now experiencing appears to be good. For example, the July jobs report, which showed 117,000 new jobs, was widely seen as good news. However, this pace of job growth is only slightly faster than the 90,000 rate needed just to keep pace with the growth of the labor force. At the July rate of job growth it would take close to 30 years to replace the jobs lost in the downturn.

It would be helpful if reporters would try to discuss what the data show and not frame their story on misplaced optimism or pessimism from ill-informed commentators.

Hitchens on UK riots

Recap: True Blood trips balls on a V-juice hump-hump-fest by Meredith Woerner

The Hope that Flows from History: From World War II, Economic Lessons by Christina Romer

Krugman comments on it

Sometimes Inflation is Not Evil by Floyd Norris

The chaos that has engulfed financial markets, with new rumors of European bank failures, arose as it became apparent that recovery was unlikely until something was done to write down bad debts, whether American mortgages or Greek government loans, or to make them good again by raising asset values and thus increasing the ability to repay.

And yet the anti-inflation warriors continue to fight old battles. There were three dissents from regional Fed presidents when the Fed promised this week to hold down rates for at least two more years. The European Central Bank has been raising rates on the belief that it must vigorously fight any sign of inflation.

In the future, central banks will have to realize that debt-financed expansions in asset prices can be a threat. For now, it would be nice if they would at least recognize that major deflations in asset prices can be much more important than the relatively small gains in commodities that show up in the Consumer Price Index.

Steamroller Ben by Doug Henwood

Comment on today’s Federal Reserve policy decision today, which among other things, included the extremely unusual statement that they’re likely to leave interest rates close to 0 through mid-2013, from Ricardo Perli of ISI, a very mainstream Wall Street research operation:

For the first time in a long time, there were three dissents – Fisher (Dallas), Kocherlakota (Minneapolis), and Plosser (Philadelphia).  Up to now, FOMC chairmen strived to avoid more than two dissents.  The fact that this long-standing practice was disregarded means that Bernanke is becoming more determined to push through what in his view are the appropriate policy moves.  We would expect the influence of the hawkish minority to diminish as a result.

Bernanke is very concerned about economic weakness and wants the Fed to do everything it can to stimulate a return to growth. The release is full of unusual mentions of their "dual mandate," meaning boosting employment as well as keeping down inflation. This is not William Greider’s Fed.

John Burns and Alan Cowell on the UK riots.

Mr. Cameron had hesitated for two days to abandon his summer break at a villa in Tuscany as the looting and arson spread across London, and then to other cities, from its start in the Tottenham area in northeast London after Mark Duggan, 29, who was said by the police to have been a local gang member, was shot and killed by an officer last week.

On Tuesday, a police oversight body said that forensic tests had shown that both shots fired at the scene had come from a police officer’s Heckler and Koch submachine gun, and that the tests had so far shown no evidence that the loaded Italian-made BBM pistol carried by Mr. Duggan had been fired in the confrontation.

...

For the moment, though, the circumstances of Mr. Duggan’s death appeared to be remote from the forces driving the riots, at least in the assessment of many of those who are most familiar with the neighborhoods affected. Community organizers, neighborhood residents and members of Parliament who represent the districts, including several who, like Mr. Duggan, were of Afro-Caribbean descent, have said, overwhelmingly, that his death, while providing the original trigger for the violence, has had little or nothing to do with the looting and arson. 

The Keynes-Hicks Model by Krugman

FRED Excels! by Krugman

Half-measures from the Fed

For starters, the Fed could take modest steps, like shifting its portfolio toward bonds with longer maturities, which would help to keep long-term rates low and nudge investors into riskier investments. It could reduce the interest it pays on the banks’ huge reserves or even tax the reserves to try to encourage more lending. It could also resume buying Treasuries or other securities to provide additional monetary stimulus. A more aggressive strategy would be letting inflation rise above the Fed’s comfort level of 2 percent or so to, say, 4 percent. That could help the economy by easing the repayment of debt.

London Burning

White Riot


I Fought The Law

Career Opportunities

Team Debbie 

Meredith Woerner recaps True Blood.

Gateways to Geekery: Ween

state of the union by Krugman

The truth is that as far as the straight economics goes, America’s long-run fiscal problems shouldn’t be all that hard to fix. It’s true that an aging population and rising health care costs will, under current policies, push spending up faster than tax receipts. But the United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved.

So why can’t we do that? Because we have a powerful political movement in this country that screamed “death panels” in the face of modest efforts to use Medicare funds more effectively, and preferred to risk financial catastrophe rather than agree to even a penny in additional revenues.

The real question facing America, even in purely fiscal terms, isn’t whether we’ll trim a trillion here or a trillion there from deficits. It is whether the extremists now blocking any kind of responsible policy can be defeated and marginalized.

Fun with Thomas Friedman by Dean Baker

Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is

Obama Turns 50 Despite Republican Opposition

WASHINGTON—After months of heated negotiations and failed attempts to achieve any kind of consensus, President Obama turned 50 years old Thursday, drawing strong criticism from Republicans in Congress.

What Caused The Deficit? A Reply to Megan McArdle by Jonathan Chait

Hitchens on Oslo

David Leonhardt will be Washington bureau chief

Dean Baker on Obama's speech

Jared Bernstein blogs:

Also, we should implement this work sharing idea that Dean Baker’s been pushing for awhile.  What’s important about Dean’s take here is that he’s thought through some of the implementation challenges that keep employers from taking advantage of the option.  Remember, this is the main reason why German unemployment is back to pre-recession levels, even while their GDP losses were comparable to our own.

Larry Summers on the current predicament

(via Felix Salmon and Yglesias)

 
3 Men and a Trash Baby

Meredith Woerner recaps True Blood at io9.

Hitchens applauds the Guardian.

Corey Robin drops some names

Presumably because they are, in Yglesias’ eyes, the real movers and shakers of the economy, as opposed to the vast majority of middle- and working-class people or the government that represents them.

Presumably? Again it's no surprise that the left doesn't advance their/our policy goals. They're too busy calling people sellouts.

Dana Jennings reviews "A Dance with Dragons."

Best of all, "Dragons" puts us back in the company of Tyrion Lannister, a bitter but brilliant dwarf whose humor, swagger and utter humanity make him the (often drunken) star of the series. When Tyrion is present, "Song of Ice and Fire" becomes "A Rogue’s Progress, or the Further Ribald Adventures of Tyrion Lannister."

Mr. Martin is a literary dervish, enthralled by complicated characters and vivid language, and bursting with the wild vision of the very best tale tellers. And Tyrion is his grandest creation. A kin slayer and fugitive, Tyrion assumes manifold roles in "Dragons": mummer, soldier, paymaster, slave, river rat and captive. He’s in on the cosmic joke of being a "high-born dwarf" and is quick to give practical Westeros wisdom: "Trust no one. And keep your dragon close." He also notes that “a small man with a big shield will drive the archers mad"

Alyssa Rosenberg's review of "A Dance with Dragons" complete with spoilers.

NYTimes on the Debt Ceiling Clown Show*

Recounting how the 1995 government shutdown helped President Bill Clinton win re-election the following year, Mr. McConnell said any impasse that drove down the nation’s credit rating and led to government checks being delayed could have the same result for Mr. Obama.

"He will say Republicans are making the economy worse," Mr. McConnell said in an interview with the conservative radio host Laura Ingraham. "It is an argument that he could have a good chance of winning, and all of the sudden we have co-ownership of the economy. That is a very bad position going into the election."

Kristof Perpetuates the Clinton Budget Myth by Dean Baker

Nicholas Kristof is mostly on the mark in his column this morning, but he does repeat the Clinton fiscal responsibility balanced the budget myth. This is not true.

An examination of the Congressional Budget Office's (CBO) projections from the 1990s shows that in 1996 CBO still projected a deficit of 2.7 percent of GDP for fiscal year 2000. Instead, we had a surplus of 2.4 percent of GDP, a shift of 5.1 percentage points of GDP (@$750 billion in today's economy).

This shift did not come about from tax increases or spending cuts. CBO estimates that the tax and spending changes between 1996 and 2000 added $10 billion to the year 2000 deficit. The shift was entirely attributable to faster than expected economic growth and especially the decision by Federal Reserve Board chairman to allow the unemployment rate to fall to 4.0 percent.

CBO had projected an unemployment rate of 6.0 percent for 2000. This was the conventional estimate of the NAIRU (non-accelerating inflation rate of unemployment) at the time. It was only because Greenspan ignored this nearly universally held view in the economics profession (and the Clinton appointees to the Fed) that the economy was able to grow enough to get the unemployment rate down to 4.0 percent and to bring the budget from deficit to surplus.

This is an important piece of history that is routinely buried.

------------------
*"debt ceiling clown show" is Baker's coinage.

Owen Jones's Chavs: The Demonization of the Working Class reviewed by Dwight Garner

Here’s how Mr. Jones sets the scene. "Sitting around the table were people from more than one ethnic group. The gender split was 50-50, and not everyone was straight. All would have placed themselves somewhere left of center politically." Each guest "would have bristled at being labeled a snob." Disaster arrived, as it always seems to, with the black currant cheesecake. That’s when the talk turned to the economic crisis. One of the party’s hosts joked: "It’s sad that Woolworth’s is closing. Where will all the chavs buy their Christmas presents?" The other guests tittered. Mr. Jones stewed.

... 

The word chav, if your subscriptions to British periodicals have lapsed, is a noun that essentially means "ugly prole": loutish, tacky, probably drunken and possibly violent. The stereotypical chav is a hormonal 20-something lad in an Adidas tracksuit, sideways Burberry baseball cap and bling, but women can be chavs, too. Think of Snooki with a cockney accent.

...

Mr. Jones is very young (he’s 26) and hideously talented. Reading "Chavs," I often cursed aloud as if I’d banged my thumb with a mallet, which is how I express keen literary pleasure until I can arrive at something more coherent to say.

... 

The author notes how demonizing the lower classes makes it easier to make policy against them. "To admit that some people are poorer than others because of the social injustice inherent in our society would require government action," he writes. "Claiming that people are largely responsible for their circumstances facilitates the opposite conclusion."

...

The front half of "Chavs" is vastly superior to its back half...

This book could have been a rippling, rock-hard classic at 150 pages -- the book you’d see peeking out of every college student’s back pocket and rucksack during the summer of 2011. At nearly twice that length, it is still something to behold, a work of passion, sympathy and moral grace.

Recently, I've also came across the new verb (to me) "glassed" a couple times. "Game of Throne" actors Sean Bean (Ned Stark) and Jason Momoa (Drago) were both cut with broken bottles at bars, Bean recently in London and Momoa a while back in Hawaii.

Interview with Amy Poehler, Matt Besser, and Matt Walsh of Upright Citizens Brigade

David Brooks Says All We Can Do Is Sit Back and Throw People Off Medicare by Dean Baker

Joe Nocera exit-interview with Sheila Blair.

As she thinks back on it, Bair views her disagreements with her fellow regulators as a kind of high-stakes philosophical debate about the role of bondholders. Her perspective is that bondholders should take losses when an institution fails. When the F.D.I.C. shuts down a failing bank, the unsecured bondholders always absorb some of the losses. That is the essence of market discipline: if shareholders and bondholders know they are on the hook, they are far more likely to keep a close watch on management’s risk-taking.

During the crisis, however, Treasury and the Fed were adamant about protecting debt holders, fearing that if they had to absorb losses, the markets would be destabilized and a bad situation would get even worse. "What was it James Carville used to say?" Bair said. "'When I die I want to come back as the bond market.'"

Jared Bernstein on the exit interview.

Dean Baker on Clinton

The Armageddon Caucus by Krugman

article on Elizabeth Warren and the Consumer Financial Protection Bureau

It goes online July 21st.

(via Alyssa Rosenberg)

Michele Bachmann's Holy War by Matt Taibbi

But don't laugh. Don't do it. And don't look her in the eyes; don't let her smile at you. Michele Bachmann, when she turns her head toward the cameras and brandishes her pearls and her ageless, unblemished neckline and her perfect suburban orthodontics in an attempt to reassure the unbeliever of her non-threateningness, is one of the scariest sights in the entire American cultural tableau. She's trying to look like June Cleaver, but she actually looks like the T2 skeleton posing for a passport photo. You will want to laugh, but don't, because the secret of Bachmann's success is that every time you laugh at her, she gets stronger.

George Will Spreads Some Lies About the Economic Crisis by Dean Baker

Says Will,

In 1994, Bill Clinton proposed increasing homeownership through a "partnership" between government and the private sector, principally orchestrated by Fannie Mae, a "government-sponsored enterprise" (GSE). It became a perfect specimen of what such "partnerships" (e.g., General Motors) usually involve: Profits are private, losses are socialized.

Does Will agree that if losses weren't socialized that we would have had another Great Depression? (Next time there won't be bailouts so we'll find out.)

Should profits not be private then? Is that what he's saying?  I'm confused.

The Busts Keep Getting Bigger: Why? by Kruman and Robin Wells

Video of Krugman's Keynes talk with Q&A session

Interview with the cast and creators of Party Down

A Song of Ice and Fire saga's fifth book "A Dance with Dragons" to be published on July 12.

(via Charlie Jane Anders and i09)

payroll tax needs a vacation by Robert H. Frank

article on John Carpenter

A GREAT romance ended for the director John Carpenter 10 years ago on the set of his movie "Ghosts of Mars."

 His star Courtney Love was replaced one week before principal photography began, and after writing the script and the music as well as directing, Mr. Carpenter was bone tired. It was right in the middle of a scene when it hit him: "I don’t love her anymore."

Her is The Movies....

...

And while Mr. Carpenter likes to bring up the shellacking he received from critics after his remake of "The Thing" opened in 1982, the film is now regarded as one of the best horror remakes ever. There is also a revival of interest in his Reagan-era alien movie They Live, with rumors of a remake and a recent book about it by the novelist Jonathan Lethem, the winner of a MacArthur grant.

This seems to make Mr. Carpenter somewhat uncomfortable. After listening to a passage from Mr. Lethem’s book praising one famously long fight scene involving Keith David and the wrestler Roddy Piper, Mr. Carpenter scoffs. "Dude, he was a wrestler,"  he says. "I cast a wrestler. We just wanted to put on a show, because this was a wrestler. I like what this genius writer says."

The Feel Bad Movie of Christmas

trailer of David Fincher's Girl with the Dragon Tattoo

Lisbeth Salander will be played by Rooney Mara who played the girlfriend who dumped Jesse Eisenberg in The Social Network. Daniel Craig will play Blomkvist.

Hitchens's review of the book.

Profiles in Fed Cowardice by Krugman

Not really a surprise, but still shocking. The Fed predicts disastrously high unemployment as far as the eye can see (pdf):

Fed forecast of the unemployment rate 

And in response to this dire prospect, it declares its work done.

Notice that the Fed does not buy into the notion that there has been a large rise in the structural rate of unemployment, that 9 percent is the new normal. That stuff off to the right, labeled "longer run", is in effect the Fed’s estimate of how low unemployment could and should go without causing inflation problems. So the Fed agrees that something should be done to greatly increase demand.

But it washes its hands of the problem, even though Bernanke and his colleagues are well aware that nobody else will act.

I’m aware that there are doubts about how much the Fed could accomplish; I share those doubts. But that’s no reason not to try.

This display of passivity is awesome. And it’s shameful.

Krugman lecture on Keynes

How the Repo Market Ate Wall Street by Kevin Drum

PIMCO Founder To Deficit-Obsessed Congress: Get Back To Reality by Brian Beutler

Bill Gross is saying what Bernanke and other are arguing: stimulus now, mid-term deficit reduction later. Hopefully if the economy continues in the doldrums Bernanke will do QE3.

(via Krugman)


Maybe Gross is admitting he was wrong about rates shooting up once QE2 ends.

Dean Baker on Clinton

Dean Baker on Robert Samuelson

Greg Mankiw:

Democratic critics of the [Ryan] plan suggest that enacting it would be akin to pushing Grandma over a cliff. But they rarely point out that the premium-support model is in some ways similar to the system set up under President Obama’s health care law. If choosing among competing private plans on a government-regulated exchange is a good idea for someone at age 50, why is it so horrific for someone who is 70?

Obamacare was a political compromise. It's better than nothing and Medicare is better than Obamacare.*

---------------------
*My theory is that after winning in 2008, Obama's people decided Romney was their most likely opponent in 2012. After passing the ARRA, they went to work to pass Romneycare and drew out the process (town halls, lengthy committee debates) so that it would really sink in with the conservative base that they hate Romneycare and therefore Obama's strongest opponent in 2012 would be tainted by the association and have a more difficult time in the primaries. But man that Mankiw really is a hack, isn't he?

Joe Nocera on Glass-Steagall:

The first thing I realized is that all the horse-trading over the bill’s provision was done by Democrats. The Republicans, having been badly defeated in the 1932 election, had no ability to block it or even amend it. For instance, Republicans tended to view the creation of deposit insurance as "socialism." (Sound familiar?) But it didn’t matter: Steagall cared deeply about deposit insurance. Many community bankers -- as strong a force back then as today -- also supported the idea because they believed it would renew customers’ faith in the banks, and bring back deposits. (This turned out to be true.) Glass, though skeptical, went along so he could get things he cared about, mainly a stronger Federal Reserve with more power over the banks.

The second thing I realized was that, the Sisson speech notwithstanding, there was surprisingly little controversy over what we now think of as the law’s primary achievement: splitting commercial and investment banking. The fights were all over issues that seem inconsequential by today’s lights. It’s as if the notion of breaking the banking business into two was always a foregone conclusion.

David Brooks Discovers That It Was All Fannie Mae's Fault by Dean Baker

collection of macro readings by Krugman

Rule by Rentiers by Krugman

The Decline of PIMCO Macro by Krugman

I first talked to the Pimco people in, I think, 1991, when I was asked (and paid) to talk to them about economic issues; don’t remember the subject. It was a striking experience, sartorially: I showed up in Newport Beach in my gray business suit, and they were all in casual shirts and slacks, some (as I remember it) with fashionable stubble.

Since then, of course, Pimco has continued to be a huge success; Bill Gross is without doubt a great investor. I have often found the economic analyses coming out of Pimco deeply enlightening. And in 2009-2010 the firm won big by betting, correctly, on interest rates staying low.

For the past year or so, however, Pimco seems to me to have been making less and less sense. Gross bet big on the idea that rates would spike when quantitative easing ends; I guess he has three weeks to be vindicated, but it sure doesn’t look like it. And the economic logic was all wrong. Now Mohamed El-Erian is claiming that inflation in China and Brazil is Bernanke’s fault; again, the economic logic is all wrong.

What’s strange about this is that nobody was better at laying out the logic of deleveraging and its consequences than Pimco’s Paul McCulley. But maybe that’s the explanation: McCulley has moved on.

Anyway, El-Erian’s latest sort of shocked me; it sounds as if he’s making up his own version of macroeconomics. And that’s not something you should do unless the existing models have failed -- which they haven’t.

Krugman, Jared Bernstein, Kenneth Rogoff and David Walker on Charlie Rose

David Leonhardt on Germany's economic successes

Woody Allen's new movie Midnight in Paris is really good. It was easy for me to identify with Owen Wilson's character. Back in 1999 when I was 29 I went on a fund-raising cruise for The Nation magazine and had the chance to hang out with some of my favorite writers and editors at that time like Hitchens, Cockburn, Pollit, Navasky and Vanden Heuvel. It wasn't exactly like Midnight in Paris, but they were charming and friendly like Hemingway and Fitzgerald are to Wilson in the movie and I was blown away.

Krugman on Fatal Fatalism

Our current economic discourse is pervaded by fatalism. Leave aside the people who insist that somehow Obama has destroyed capitalist incentives by passing Mitt Romney’s health care plan and threatening to raise tax rates to Clinton-era levels. Even among people who should be sensible, you hear many assertions that run something like this: historically, recovery from financial crisis is usually slow, so we have to accept a slow recovery this time around too. Actually, that’s more or less what Obama has been saying.

Gavyn Davies* writes in the Financial Times about Robert Lucas and the classical view of the global recession.

--------------------
*Gavyn Davies is a macroeconomist who is now chairman of Fulcrum Asset Management and co-founder of Prisma Capital Partners. He was the head of the global economics department at Goldman Sachs from 1987-2001, and was chairman of the BBC from 2001-2004.
     He has also served as an economic policy adviser in No 10 Downing Street, an external adviser to the British Treasury, and as a visiting professor at the London School of Economics.

Ratko Mladic caught

Jared Bernstein has a blog.

Single-payer health care in Vermont

Needed: Plain Talk About the Dollar by Christina Romer

Why Greece Should Reject the Euro by Mark Weisbrot

Krugman links to the piece approvingly, but discuses how the Greek and Argentinian situations are different.

Krugman on Casey B. Mulligan an economics professor at the University of Chicago

If Mulligan wants to argue that point, fine -- but he presents as "the New Keynesian position" something that is just what he imagines, on casual reflection (or, again, maybe after talking to some guy in a bar) to be the New Keynesian position.

OK, so from now on I’ll assert that the Chicago position on unemployment is that we can cure it by sacrificing goats. Hey, I heard that somewhere -- no need to actually read anything they say, right?

The Post-Bin Laden World by Roger Cohen

Death of a Madman by Hitchens

Osama dead says Obama

Needed: A Clearer Crystal Ball by Robert J. Shiller

or "Risk Topograhy"

In fact, some people view the recent crisis as just another "black swan event," one of those outliers, as popularized by Nassim Taleb, that come out of the blue. And it’s clear that a lot of smart people simply didn’t see the housing bubble, the instability of our financial sector or the shock that came in 2007 and 2008.

But the theory of outlier events doesn’t actually say that they cannot eventually be predicted. Many of them can be, if the right questions are asked and we use new and better data. Hurricanes, for example, were once black-swan events. Now we can forecast their likely formation and path pretty well, enough to significantly reduce the loss of life.

Such predictions are a crucial challenge in economics, too, and they are why data collection need not be a dull or a routine field. If done correctly, it can be very revealing. ...

...

The Federal Reserve started work on its Flow of Funds Accounts in the Depression as well. These accounts, which go beyond G.N.P. and show the flow of funds from each kind of financial institution to another, offer a much better picture of the kinds of instabilities that led to the Depression. This innovation took a long time, too. The Fed didn’t begin publishing these accounts until 1955, backdating them to late in the Depression, in 1939. 

Eventually, these advances led to quantitative macroeconomic models with substantial predictive power -- and to a better understanding of the economy’s instabilities. It is likely that the "great moderation," the relative stability of the economy in the years before the recent crisis, owes something to better public policy informed by that data.

Since then, however, there hasn’t been a major revolution in data collection. Notably, the Flow of Funds Accounts have become less valuable. Over the last few decades, financial institutions have taken on systemic risks, using leverage and derivative instruments that don’t show up in these reports. 

Some financial economists have begun to suggest the kinds of measurements of leverage and liquidity that should be collected. We need another measurement revolution like that of G.D.P. or flow-of-funds accounting. For example, Markus Brunnermeier of Princeton, Gary Gorton of Yale and Arvind Krishnamurthy of Northwestern are developing what they call "risk topography." They explain how modern financial theory can guide the collection of new data to provide revealing views of potentially big economic problems.

Exclamation point within parantheses

Ah, Charlie Jane Anders has a website(!) and I had assumed Charlie's a he but she's not.(!)*

And she has a review of  the movie Dylan Dog over at io9,** which is currently sponsored by Dylan Dog:

We've talked a lot lately about the fact that urban fantasy and noir detective stories have been converging, and urban fantasy is where a lot of the most interesting noir writing is happening. But the danger with both those genres -- either together or separately -- is that they'll devolve into pastiche. The worst case scenario with the cliches of tormented loner detectives, and big-city vampires, is that they'll become endlessly self-referencing and fatally mindless.

If you want to see that threat made real, just watch Dylan Dog. It's either a very unfunny comedy, or a very inactive action movie, one or the other.

There's nothing in Dylan Dog that you haven't seen a million times before. Except that you've probably never seen it done this inertly.

Anders penned two of my favorite recent reviews:

5 Theories That Explain Why Avatar Was Such a Huge Hit

Michael Bay Finally Made an Art Movie

Imagine that you went back in time to the late 1960s and found Terry Gilliam, fresh from doing his weird low-fi collage/animations for Monty Python. You proceeded to inject Gilliam with so many steroids his penis shrank to the size of a hair follicle, and you smushed a dozen tabs of LSD under his tongue. And then you gave him the GDP of a few sub-Saharan countries. Gilliam might have made a movie not unlike this one.

And the true genius of Transformers: ROTF is that Bay has put all of this excess of imagery and random ideas at the service of the most pandering movie genre there is: the summer movie. ROTF is like twenty summer movies, with unrelated storylines, smushed together into one crazy whole. You try in vain to understand how the pieces fit, you stare into the cracks between the narrative strands, until the cracks become chasms and the chasms become an abyss into which you stare until it looks deep into your own soul, and then you go insane. You. Do. Not. Leave. The Cabinet

Twitter is slowly sucking me in. I discovered Anders website, because Matt Yglesias RT/"retweeted" a tweet from Jamelle Bouie who retweeted @arjache

Why won't the President disclose the results of his Voight-Kampff test? How do we know he's not a replicant?

On arjache's twitter page, I found a "RT" from Anders, who retweeted

RT@DalekThay: THE DALEKS WOULD LIKE TO SEE THE DOCTOR'S BIRTH CERTIFICATE, BUT WE WOULD SETTLE FOR HIS DEATH CERTIFICATE.

---------------------
*Then I looked her up on Wikipedia and learned she's transgendered (!) and co-edits io9 with her partner Annalee Newitz (!)
** "Michael Moran of The Times' Eureka Zone blog, wrote, "Ostensibly a blog for science fiction enthusiasts, io9 finds space for pieces on cutting-edge technology, the wilder fringes of astronomy and the more worrying implications of grey goo."***
***Grey goo: " is a hypothetical end-of-the-world scenario involving molecular nanotechnology in which out-of-control self-replicating robots consume all matter on Earth while building more of themselves,(!) a scenario known as ecophagy ("eating the environment"). Self-replicating machines of the macroscopic variety were originally described by mathematician John von Neumann, and are sometimes referred to as von Neumann machines. The term grey goo was coined by nanotechnology pioneer Eric Drexler in his 1986 book Engines of Creation, stating that "we cannot afford certain types of accidents." In 2004 he stated "I wish I had never used the term 'grey goo'."

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.

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*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
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*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.

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* 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.

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* 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