Yellen

House Republicans Press Janet Yellen on Stimulus Campaign By BINYAMIN APPELBAUM

WASHINGTON — House Republicans on Wednesday peppered Janet L. Yellen, the Federal Reserve chairwoman, with pointed questions about the central bank’s stimulus campaign and its responsibilities as a financial regulator.

Republicans, who control Congress but not the agencies that interpret and execute legislation, appear frustrated with the course of economic policy. They want the Fed to retreat more quickly from its stimulus campaign and to ease some of the restrictions that a Democrat-controlled Congress imposed on the financial industry after its 2008 collapse.

Ms. Yellen, for her part, pushed back more strongly than at past hearings, sometimes speaking over her questioners to make a point. She defended the Fed’s actions and warned against proposals to constrain its independence.

The hearing opened with a sharp exchange between Ms. Yellen and Jeb Hensarling, the Texas Republican who is chairman of the Financial Services Committee.

Mr. Hensarling backs legislation requiring the Fed to adopt a mechanical rule for setting its benchmark short-term interest rate. Such a rule would have limited the stimulus campaign the Fed has undertaken since the Great Recession.

He quoted a snippet of Ms. Yellen’s remarks at a 1995 Fed meeting at which she praised rules that mechanically dictate how the central bank should balance the sometimes-divergent priorities of moderate inflation and minimal unemployment. That, he quoted her as saying, “is what sensible central banks do.”

He then asked Ms. Yellen, “Do you no longer believe that a rules-based policy like the Taylor Rule is what sensible central banks do?” The rule is a formula written by the Stanford economist John Taylor that specifies interest rates based on inflation and the gap between actual and potential economic output.

But the context of that 1995 quote is important. Ms. Yellen was then pushing the Fed to pay more attention to job growth, and she was expressing a preference for rules that considered unemployment and inflation, as opposed to rules focused solely on the pace of inflation.

That, she said at the time, “is an example of the type of hybrid rule that would be preferable in my view, if we wanted a rule.”

She continued, “I think the Greenspan Fed has done very well by following such a rule, and I think that is what sensible central banks do.”

The Yellen Fed regards job growth as its priority, a transformation so complete that hewing to a Taylor-style rule actually would curb the Fed’s stimulus campaign. Ms. Yellen has said in other forums that she sees rules as useful reference tools, but that policy should be shaped by circumstances.

On Wednesday, pressed by Mr. Hensarling, she responded sharply.

“I don’t believe that the Fed should chain itself to any mechanical rule,” she said. “I did not believe that in 1995. I do not believe it now.”

Democrats argue that Mr. Hensarling’s proposal is an attempt by Congress to meddle in monetary policy.

“I think it’s important to have transparency but not at the expense of the independence of the Fed,” said Representative Al Green, a Texas Democrat.

Representative Scott Garrett, a New Jersey Republican, said in turn that Congress had intended to shield the Fed from political pressure “to juice the economy,” while in the current situation, Republicans were seeking to curb its stimulus campaign.

Like Ms. Yellen, he suggested that circumstances had changed and that the rules should adapt.

Greece

Reading The Greek Deal Correctly by James K. Galbraith

On Friday as news of the Brussels deal came through, Germany claimed victory and it is no surprise that most of the working press bought the claim. They have high authorities to quote and to rely on. Thus from London The Independent reported:

several analysts agreed that the results of the talks amounted to a humiliating defeat for Greece.

No details followed, the analysts were unnamed, and their affiliations went unstated – although further down two were quoted and both work for banks. Many similar examples could be given, from both sides of the Atlantic.

The New Yorker is another matter. It is an independent magazine, with a high reputation, written for a detached audience. And John Cassidy is an analytical reporter. Readers are inclined to take him seriously and when he gets something wrong, it matters. Cassidy’s analysis appeared under the headline, “How Greece Got Outmaneuvered” and his lead paragraph contains this sentence:

Greece’s new left-wing Syriza government had been telling everyone for weeks that it wouldn’t agree to extend the bailout, and that it wanted a new loan agreement that freed its hands, which marks the deal as a capitulation by Syriza and a victory for Germany and the rest of the E.U. establishment.

In fact, there was never any chance for a loan agreement that would have wholly freed Greece’s hands. Loan agreements come with conditions. The only choices were an agreement with conditions, or no agreement and no conditions. The choice had to be made by February 28, beyond which date ECB support for the Greek banks would end. No agreement would have meant capital controls, or else bank failures, debt default, and early exit from the Euro. SYRIZA was not elected to take Greece out of Europe. Hence, in order to meet electoral commitments, the relationship between Athens and Europe had to be “extended” in some way acceptable to both.

But extend what, exactly? There were two phrases at play, and neither was the vague “extend the bailout.” The phrase “extend the current programme” appeared in troika documents, implying acceptance of the existing terms and conditions. To the Greeks this was unacceptable, but the technically-more-correct “extend the loan agreement” was less problematic. The final document extends the “Master Financial Assistance Facility Agreement” which was better still. The MFFA is “underpinned by a set of commitments” but these are – technically – distinct. In short, the MFFA is extended but the commitments are to be reviewed.

Also there was the lovely word “arrangement” – which the Greek team spotted in a draft communiqué offered by Eurogroup President Jeroen Dijsselbloem on Monday afternoon and proceeded to deploy with abandon. The Friday document is a masterpiece in this respect:

The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions. This extension would also bridge the time for discussions on a possible follow-up arrangement between the Eurogroup, the institutions and Greece. The Greek authorities will present a first list of reform measures, based on the current arrangement, by the end of Monday February 23. The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review.

If you think you can find an unwavering commitment to the exact terms and conditions of the “current programme” in that language, good luck to you. It isn’t there. So, no, the troika can’t come to Athens and complain about the rehiring of cleaning ladies.

To understand the issues actually at stake between Greece and Europe, you have to dig a little into the infamous “Memorandum of Understanding” signed by the previous Greek governments. A first point: not everything in that paper is unreasonable. Much merely reflects EU laws and regulations. Provisions relating to tax administration, tax evasion, corruption, and modernization of public administration are, broadly, good policy and supported by SYRIZA. So it was not difficult for the new Greek government to state adherence to “seventy percent” of the memorandum.

The remaining “thirty percent” fell mainly into three areas: fiscal targets, fire-sale privatizations and labor-law changes. The fiscal target of a 4.5 percent “primary surplus” was a dog as everyone would admit in private. The new government does not oppose privatizations per se; it opposes those that set up price-gouging private monopolies and it opposes fire sales that fail to bring in much money. Labor law reform is a more basic disagreement – but the position of the Greek government is in line with ILO standards, and that of the “programme” was not. These matters will now be discussed. The fiscal target is now history, and the Greeks agreed to refrain from “unilateral” measures only for the four-month period during which they will be seeking agreement.

Cassidy acknowledges some of this, but then minimizes it, with the comment that the deal “seems to rule out any large-scale embrace of Keynesian stimulus policies.” In what document does any such promise exist? There is no money in Greece; the government is bankrupt. Large-scale Keynesian policies were never on the table as they would necessarily imply exit – an expansionary policy in a new currency, with all the usual dangers. Inside the Euro, investment funds have to come from better tax collection, or from the outside, including private investors and the European Investment Bank. Cassidy’s comment seems to have been pulled from the air.

Another distant fantasy is the notion that the SYRIZA team was “giddy” with political success, which had come “practically out of nowhere.” Actually SYRIZA knew for months that if it could force an election last December, it would win. And I was there on Sunday night, February 8, when Prime Minister Alexis Tsipras opened Parliament with his version of the State of the Union. Tsipras doesn’t do giddy. And Yanis Varoufakis’s first words to me on arrival at the finance ministry just before we went over to hear him were these: “Welcome to the poisoned chalice.”

Turning to the diplomatic exchanges, Cassidy concludes that Tsipras and Varoufakis “overplayed their hand.” An observer on the scene would have noticed that the Greek government remained united; initial efforts to marginalize Varoufakis were made and rebuffed. Then as talks proceeded, European Commission leaders Jean-Claude Juncker and Pierre Moscovici went off-reservation to be helpful, offering a constructive draft on Monday. Other governments softened their line. At the end-game, remarkably, it was the German government that split – in public – with Vice Chancellor Sigmar Gabriel calling the Greek letter a basis for negotiation after Finance Minister Wolfgang Schäuble said it wasn’t. And that set up Chancellor Angela Merkel to make a mood-changing call to Alexis Tsipras. Possibly the maneuver was choreographed. But still, it was Schäuble who took a step back in the end. It seems that none of these facts caught Cassidy’s attention.

Finally, in the run-up to these talks did the Greek side fail to realize that they had no leverage, giving – as Cassidy writes – all the advantages to Schäuble once “he realized that Varoufakis couldn’t play the Grexit card”?   In truth the Greeks never had any intention of playing any cards, nor of bluffing, as Varoufakis wrote in The New York Times and as I had written two days after the election, in Social Europe:

What leverage does Greece have? Obviously, not much; the heavy weapons are on the other side. But there is something. Prime Minister Tsipras and his team can present the case of reason without threats of any kind. Then the right and moral gesture on the other side would be to … grant fiscal space and to guarantee Greek financial stability while talks are underway. If that happens, then proper negotiations can proceed.

That appears to be what happened. And it happened for the reason given in my essay: in the end, Chancellor Merkel preferred not to be the leader responsible for the fragmentation of Europe.

Alexis Tsipras stated it correctly. Greece won a battle – perhaps a skirmish – and the war continues. But the political sea-change that SYRIZA’s victory has sparked goes on. From a psychological standpoint, Greece has already changed; there is a spirit and dignity in Athens that was not there six months ago. Soon enough, new fronts will open in Spain, then perhaps Ireland, and later Portugal, all of which have elections coming. It is not likely that the government in Greece will collapse, or yield, in the talks ahead, and over time the scope of maneuver gained in this first skirmish will become more clear. In a year the political landscape of Europe may be quite different from what it appears to be today.

Varoufakis and Krugman

Afternoon Must-Read: Yanis Varoufakis: Confessions of an Erratic Marxist in the Midst of a Repugnant European Crisis by Brad DeLong

Greece Did OK by Krugman

Now that the dust has settled a bit, we can look calmly at the deal — if it really is a deal that survives through tomorrow, which some people doubt. And it’s increasingly clear that Greece came out in significantly better shape, at least for now. 

The main action, always, involves the Greek primary surplus — how much more will they need to raise in revenue than they can spend on things other than interest? The question these past few days would be whether the Greeks would be forced into agreeing to aim for very high primary surpluses under the threat of being pushed into immediate crisis. And they weren’t. 

One way to see this is through careful parsing of the language, as done here. That’s quite useful. But I’d argue that in an important sense we’re past that kind of word-chopping. Instead, we need to think about what happens substantively from here out. 

Right now, Greece has avoided a credit cutoff, and worse yet an ECB move to pull the plug on its banks, and it has done so while getting the 2015 primary surplus target effectively waived. 

The next step will come four months from now, when Greece makes its serious pitch for lower surpluses in future years. We don’t know how that will go. But nothing that just happened weakens the Greek position in that future round. Suppose that the Germans claim that some ambiguously worded clause should be interpreted to mean that Greece must achieve a 4.5 percent of GDP surplus, after all. Greece will say no, it doesn’t — and then what? A couple of years ago, when all the VSPs of Europe believed utterly in austerity, Greece might have faced retaliation thanks to wording issues; not now. 

So Greece has won relaxed conditions for this year, and breathing room in the run-up to the bigger fight ahead. Could be worse.

Greek Deal - Monday and four months

Naked Capitalism is pessimistic

Yves Smith:

"“Moreover, Syriza has already shown a propensity to overpromise and underdeliver.”"

They've been in office three weeks!!!

Say Greece caved. We'll see if they're wrong again.

Greek Deal by Robert Waldmann

I am trying to understand what, if anything, was agreed by Greece and the rest of the EU yesterday. I’m not sure they even agreed to kick the can down the road.

I think Matt O’Brien wrote a very good explainer for wonkblog at the Washington Post (as usual — he is well worth following). His bottom line seems to be that, while the agreement presents itself as a Greek surrender, they haven’t conceded the key point.

Greece got Europe to concede that it “will, for the 2015 primary surplus target, take the economic circumstances of 2015 into account.” In other words, Greece won’t have to do the austerity it was supposed to this year.

However, the rest of Europe hasn’t conceded yet either, since they have not agreed to rollover any loans Liz Aderman and James Kanter report for the New York Times

On Monday, Greece must send its creditors a list of all the policy measures it plans to take over the next four months. If the measures are acceptable, European finance ministers could sign off on an extension of the bailout agreement on Tuesday.

So the result of the dramatic agreement is that Greece hasn’t promised further austerity in exchange for a bailout and the rest of Europe hasn’t promised a bailout. They have delayed for four more days deciding whether to delay for four more months the inevitable concession that Greece will not pay its foreign debts.

So all in all the best that could be hoped.

Frances Coppola:
Greece and the EU: a question of trust

http://coppolacomment.blogspot.co.uk/2015/02/greece-and-eu-question-of-trust.html

"I have been mulling over the terms of the agreement between Greece and the Eurogoup. Initially, I thought that Greece had ended up with an appalling deal, getting almost none of its aims and losing control of EFSF funding for its banks. The retention of future primary surplus targets under the November 2012 agreement - only the target for this year is under review - seemed particularly harsh.

"But then I listened to Pierre Moscovici explaining the thinking behind the deal, and suddenly the penny dropped. We've all been missing the point. Holger Schmieding of Berenberg Bank was on the right lines - he commented recently that the real problem in the Greek negotiations was that trust had broken down. Indeed it has. But not recently. Trust in Greece broke down a long time ago."

While this deal isn't the best one, or the most moral one, it was likely the best political deal to be had. Syriza will need the four months to attempt a restructuring of its fiscal management - no government could implement a fiscal plan in a few weeks. And the apparent Schaueble plan was an implicit ultimatum: Syriza U-turn to the status quo, or deal with the capital flight that would start in earnest next week.

So all in all, given the political reality, this was likely the best possible outcome. I hope Syriza will find a way to build on this moment.

Krugman on Greece

Germany is bringing on the Golden Dawn?

Insert German Curse Word Here

by Krugman

Germany says no to Greek request.To be fair, I think news reports describing the Greek letter as a complete u-turn and capitulation are wrong. I see this:

Photo

Credit

and it looks to me as if Greece is quite carefully not committing to the original fiscal targets; it will attain “appropriate primary fiscal surpluses”, which almost surely means less than 4.5 percent of GDP. So if the German complaint is that Greece is not agreeing to lock in total surrender to the preexisting austerity plan, this appears to be right. Instead, Greece appears to be seeking to buy some time to put together an economic strategy (remember, this is a new government without a deep bench of technocrats), and to negotiate terms later. Germany, on the other hand, is trying to force Syriza into complete abandonment of its election promises right now, today.

Do the Germans really think that’s a likely outcome? I suspect not. This looks to me like an attempt to force Greece out of the euro, right now. German policy is objectively pro-Grexit.

It’s also, given the likely fallout, objectively pro-Golden Dawn.

The role of the ECB is critical here, and Peter Doyle says what I’ve been meaning to say, but better:

[I]n the event that Euro-Greek negotiations fail, the ECB should unequivocally continue to provide full ELA to Greece. Furthermore, it should make that position clear now, while negotiations on the program continue. This would determine that Euro policymakers must not only resolve Greece without the ECB stick corralling them but must also find themselves another Euro enforcement mechanism.

Crunch time.

Economist comes out for NGDP path level target

Shit is getting real.

The economist on good and bad deflation by Scott Sumner

The Economist magazine has a very good editorial discussing good and bad deflation, and worries that the world is now experiencing (at least in part) the bad type. They conclude by urging central bankers to rely on a less ambiguous indicator:

Change the target

Policymakers should be more worried than they appear to be, and their actions to avert deflation should be bolder. Governments need to boost demand by spending more on infrastructure; central banks should err on the side of looseness. (Next month the ECB will start quantitative easing—and about time too.) Now is also the moment to consider revising the monetary rule book—in particular, to switch the central bankers’ target from the inflation rate that most now favour to a goal for the level of nominal GDP, the total value of spending in an economy before adjusting for inflation. With such a target there is no need to distinguish between good and bad price shocks. And the change in rules would itself send a signal that policymakers are serious about banishing the threat of deflation.

Central bankers change course slowly, and their allegiance to inflation targets runs deep. Conservatism often serves them well. But in this case it could cost the world economy dearly.

Notice that they advocate “level” targeting, which is very important in a world where the zero bound seems to occur with increasing frequency.

HT:  Peter Spence, Frank McCormick

PS. I also recommend Edward Hugh’s post on Spanish deflation.

Mad Men finale episodes

promo video

Garofalo on Broad City!

Pablo Iglesias

Pablo Iglesias is right to evoke the guillotine and the French revolution by Olivier Tonneau

preservation of money-claims

"The Idea Was to Create a Modern Gold Standard" by JW Mason

The euro is a project to roll back social democracy and to reimpose the "discipline of the market" on the state -- or in other words to restore the logic of the gold standard, whose essential condition was that preservation of money-claims had priority over democratic government.

Carthaginian Peace

Athenae Delenda Est by Krugman

OK, this is amazing, and not in a good way. Greek talks with finance ministers have broken up over this draft statement, which the Greeks have described as “absurd.” It’s certainly remarkable. On my reading, here’s the key sentence:

The Greek authorities committed to ensure appropriate primary fiscal surpluses and financing in order to guarantee debt sustainability in line with the targets agreed in the November 2012 Eurogroup statement. Moreover, any new measures should be funded, and not endanger financial stability.

Translation (if you look back at that Eurogroup statement): no give whatsoever on the primary surplus of 4.5 percent of GDP. 

There was absolutely no way Tsipras and company could sign on to such a statement, which makes you wonder what the Eurogroup ministers think they’re doing. 

I guess it’s possible that they’re just fools — that they don’t understand that Greece 2015 is not Ireland 2010, and that this kind of bullying won’t work. 

Alternatively, and I guess more likely, they’ve decided to push Greece over the edge. Rather than give any ground, they prefer to see Greece forced into default and probably out of the euro, with the presumed economic wreckage as an object lesson to anyone else thinking of asking for relief. That is, they’re setting out to impose the economic equivalent of the “Carthaginian peace” France sought to impose on Germany after World War I. 

Either way, the lack of wisdom is astonishing and appalling.

It was pointed out that Varoufakis alluded to the Melian dialogue.

Greece

Yanis Varoufakis: No Time for Games in Europe

literary

Strange to learn that a favorite author is currently teaching at my alma mater.

Greece

Greece’s Excess Burden by Krugman

What’s the state of the Greek crisis? I have no idea, or at any rate no idea beyond what any diligent reader of press reports might glean. I do, however, have a pretty good idea of what Greece is asking for on the fiscal side, and it might be useful to talk about the arithmetic behind that position.

Here’s the basic point: Greece has, through incredible sacrifice, managed to achieve a primary budget surplus — a surplus excluding interest payments — despite a depression-level slump. That surplus is believed to be currently running at about 1.5 percent of GDP. The Greek government is not calling for a return to primary deficits; as I understand it, it is merely proposing that it be allowed to stabilize the surplus at that level, as opposed to raising it to 4.5 percent of GDP, a number that has few precedents in history.

Now, you might think that 3 percent of GDP is not that big a deal (although try finding $500 billion a year of spending cuts in the United States!) Given the macroeconomics, however, it is much bigger than it looks. Much like the reparations the Allies tried to extract from Germany after World War I — although for somewhat different reasons — forcing Greece to run huge primary surpluses at this point would impose a very large “excess burden” over and above the direct cost of the surpluses themselves.

First, austerity has a very negative effect on output in a country that does not have its own currency, and therefore cannot offset the fall in demand with monetary policy. The attached figure shows what was supposed to happen to Greek GDP according to the original 2010 request for a stand-by arrangement – that is, the original austerity-and-internal-devaluation plan — compared with what actually happened. There’s little question that the huge shortfall reflects the adverse effects of austerity, which the IMF admits it greatly understated. At this point a reasonable estimate for the Greek multiplier is on the order of 1.3.

This multiplier effect has immediate fiscal implications. Suppose that Greece were to spend somewhat more than contemplated under the current agreement; the primary surplus would surely be less than would otherwise be the case, but the effect would be much less than one-for-one. We can summarize the actual effect of higher government spending (ΔG) on the primary surplus (ΔPS) as follows:

ΔPS = -ΔG*(1-μτ)

where μ is the multiplier and τ is the marginal effect of a one-euro rise in GDP on revenues and/or cyclically linked spending like unemployment benefits. Say μ = 1.3 and τ=0.4, both more or less in the middle of the evidence; then higher spending would reduce the primary surplus by less than half the initial spending rise.

Or to turn this around, to achieve the extra three points of surplus the troika is demanding, Greece would actually have to find more than 6 points of GDP in spending cuts or tax hikes. And note that the multiplier is almost surely greater than one; this means that the fall in government spending would induce a fall in private spending too, which is an additional excess burden from the austerity.

The point, then, is that by demanding that Greece run even bigger primary surpluses, the troika is in effect demanding that Greece make sacrifices on the order of an additional 7.5 or 8 percent of GDP as compared with the standstill the Greek government proposes.

DeLong on Piketty

Over at Equitable Growth: The Three Must-Reads You Need to Understand Thomas Piketty and His "Capital in the Twenty-First Century": Focus by DeLong

Greece

Greece agrees to negotiate with the Troika on Friday.

The procedural step forward came after the ECB's Governing Council extended a cash lifeline for Greek banks for another week, authorizing an extra 5 billion euros in emergency lending assistance (ELA) by the Greek central bank. The council decided in a telephone conference to review the program on Feb. 18.

Monday was the deadline for the bridge deal, but apparently that's pushed until Wednesday. Euro zone finance ministers will meet Monday.

Daenerys Targaryen and Syriza

Khaleesi:

“I’m not going to stop the wheel, I’m going to break the wheel."

The landslide winner's curse by Daniel Davies

I imagine Dsquared looks and sounds like the Spice Trader of Qarth in this video who is mildly trolling Khaleesi. He's very eloquent in his writing and thinking!

The - strained - analogy is this. Magic is coming back into the world with Dany's dragons. The red comet was a sign of this. With Dany's dragons, the Warlocks' power is increasing as well. They symbolize the fascists. And the increase in magic is the failure of austerity in Europe and increasing economic distress. This increases the appeal of the xenophobes and neo-fascists. The Warlocks team up with the King of Qarth to depose the Spice Trader and the Thirteen, but Dany's magic is too strong for them as she escapes the House of the Undying.

N.W.A. movie

Aldis Hodge as MC Ren!

Neo-Paleo-Keynesiansim

Neo-Paleo-Keynesianism: A suggested definition by Roger Farmer

Stannis

Excerpt from "Winds of Winter" (Jan. 2, 2012)

...Theon's laugh was half a titter, half a whimper.  "Lord Ramsay is the one Your Grace should fear." 

Stannis bristled at that.  "I defeated your uncle Victarion and his Iron Fleet off Fair Isle, the first time your father crowned himself.  I held Storm's End against the power of the Reach for a year, and took Dragonstone from the Targaryens.  I smashed Mance Rayder at the Wall, though he had twenty times my numbers.  Tell me, turncloak, what battles has the Bastard of Bolton ever won that I should fear him?"

The link no longer works. Maybe Martin changed his mind.

Davies on Greece

Greece: looking on the bright side … by Daniel Davies

Midnight City

If you tolerate this your children will be next

The song's theme is taken from the Spanish Civil War, and the idealism of Welsh volunteers who joined the left-wing International Brigades fighting for the Spanish Republic against Francisco Franco's military rebels. The song takes its name from a Republican poster of the time, displaying a photograph of a young child killed by the Nationalists under a sky of bombers with the stark warning "If you tolerate this, your children will be next" written at the bottom.^[2]

Various works on the Spanish Civil War were the inspiration for this song, and certain lyrics pertain directly to these works. For example, the line "If I can shoot rabbits/then I can shoot fascists" is attributed to a remark made by a man who signed up with the Republican fighters to his brother in an interview years later. This was originally quoted in the book Miners Against Fascism by Hywel Francis. Another work George Orwell's first-hand account, "Homage to Catalonia". "I've walked Las Ramblas/but not with real intent" brings to mind the account in Orwell's book of fighting on the Ramblas, with the various factions seemingly getting nowhere, with the fighting and often a sense of camaraderie overriding the vaunted principles each side was supposed to be fighting for. Nicky Wire has also acknowledged that he was also inspired by a song by The Clash, "Spanish Bombs", which has a similar subject.

Release

The recording was issued as two CD singles: the first included versions of "Prologue to History" and "Montana/Autumn/78", and the second featured a remix by Massive Attack and a mix by David Holmes.

It became the first of the band's two number one singles in the UK Singles Chart. ^[1] It also became the group's biggest success on the Irish Singles Chart (where it reached number 3), and is the only Manic Street Preachers track to be released as a single in the United States.

In March 2009, it was discovered that the song was used on the website of the British National Party as the soundtrack of an article describing "the violence, hatred, fragmentation and despair" wrought on London by the "great multicultural experiment".^[3] The choice of this song was considered ironic by many, considering the song contains lyrics such as "So if I can shoot rabbits/Then I can shoot fascists". Record company Sony successfully had the song removed from the site on the grounds of unauthorised use.^[3] The BNP later released a press statement claiming that "the song had mistakenly been automatically streamed on to its site and had nothing to do with the official party", and that "you can interpret the lyrics any way you want".^[3]

Game of Thrones Season 5

Tywin Lannister is dead. Cersei, Littlefinger, Jaime, Sansa. Is that Bronn with the sword? Someone escorted by the Knights of the Eyrie and Vale. The three Sand sisters, daughters of the Red Viper of Dorne. Tommen and Margaery Tyrell marry. Tyrion and Lord Varys in Pentos. Jon Snow. Daenerys Targaryen. Jorah Mormont in the fighting pits. Olenna Tyrell. Melisandre the Red Priestess.

The Kingsguard sent to protect the Princess Myrcella in Dorne? Theon Greyjoy. Arya Stark in Braavos. The Flayed Man of the Dreadfort pawns on a map of the North. Selmy, Grey Worm, Daario Naharis with Daenerys still.

No Stannis or Davos? Brienne and Podrick Payne?

Germany is the problem

I Do Not Think That Number Means What You Think It Means by Krugman

"What we see is that Italy is somewhat out of line — but the real standout is Germany, which has had much too little wage growth. And this in turn suggests that if we’re looking for the key to European problems, it lies in Germany’s beggar-they-neighbor relative wage deflation — which is indeed a point made by economists like Francesco Saraceno."

Labour Costs: Who is the Outlier? by Francesco Saraceno

Democrats, Rattner and financiers

I Do Not Think That Number Means What You Think It Means by Krugman

What we see is that Italy is somewhat out of line — but the real standout is Germany, which has had much too little wage growth. And this in turn suggests that if we’re looking for the key to European problems, it lies in Germany’s beggar-they-neighbor relative wage deflation — which is indeed a point made by economists like Francesco Saraceno.

Arithmetic Is Very Simple, But It's Still True by Dean Baker

Greece and Rosser

I disagree with Rosser's prediction.

from the NYTimes:

""Creditors are demanding that Greece run a primary surplus of 4.5 percent of gross domestic product. Mr. Varoufakis, however, said Athens would propose to hold the level to 1 percent to 1.5 percent of G.D.P.""

Greece

Europe’s Greek Test by Krugman

Greece’s Feisty Finance Minister Tries a More Moderate Message by Liz Alderman

D-Squared gets trolley on Syriza

Greek games and scenarios by Dan Davies

my response to D-squared and stevejohnson

Wolf Hall

Wolf Hall on Masterpiece Theater starts on April 5th, a week before Game of Thrones.

Tony® Award-winning actor Mark Rylance (Twelfth Night) and Emmy® and Golden Globe® Award-winner Damian Lewis (Homeland) star in the six-hour television miniseries adapted from Hilary Mantel’s best-selling Booker Prize-winning novels: Wolf Hall and its sequel, Bring Up the Bodies. The television event presents an intimate and provocative portrait of Thomas Cromwell, the brilliant and enigmatic consigliere to King Henry VIII, as he maneuvers the corridors of power at the Tudor court. MASTERPIECE brings both of these works to life in Wolf Hall, airing on Sundays, April 5-May 10, 2015 at the special time of 9:55pm on PBS. 

Mark Rylance is Thomas Cromwell, a brutal blacksmith’s son who rises from the ashes of personal disaster, and deftly picks his way through a court where ‘man is wolf to man.’ Damian Lewis is King Henry VIII, haunted by his brother’s premature death and obsessed with protecting the Tudor dynasty by securing his succession with a male heir to the throne. 

Told from Cromwell’s perspective, Wolf Hall follows the complex machinations and back room dealings of this pragmatic and accomplished power broker – from humble beginnings and with an enigmatic past – who must serve king and country while dealing with deadly political intrigue, Henry VIII’s tempestuous relationship with Anne Boleyn and the religious upheavals of the Protestant reformation. 

A historical drama for a modern audience, this unromanticized re-telling lifts the veil on the Tudor middle class and the internal struggles England faced on the brink of Reformation. At the center of it all is Cromwell, navigating the moral complexities that accompany the exercise of power, trapped between his desire to do what is right and his instinct to survive. 

The cast also includes Claire Foy (Little Dorrit) as the future queen Anne Boleyn, Bernard Hill (Five Days) as the king's military commander the Duke of Norfolk, Anton Lesser (Endeavour) as Thomas More, Mark Gatiss (Sherlock) as Cromwell’s rival advisor Stephen Gardiner, Joanne Whalley (The Borgias) as Henry’s spurned first wife, Katherine of Aragon, and Jonathan Pryce (Cranford) as Cardinal Wolsey, the powerful Lord Chancellor who recognized Cromwell’s potential.

Kevin Kline in Dave calls for full employment

Kyle Kinane

A ‘Scumbag’ Story: Kyle Kinane is the cult hero of stand-up comedy by JUSTIN HECKERT ON JANUARY 22, 2015

From my neck of the woods, western suburbs of Chicago then Chicago. Then he moved to Los Angeles eleven years ago when he was twenty-six.

Green Lanterns

If what they say is true, then the 1950s, 1960s and 1970s in the U.S., Europe and Japan wasn't possible. But it did happen so they are wrong.

O'Brien on ECB QE

The ECB takes out the bazooka: It’ll buy over 1 trillion euros of bonds to save Europe’s economy by Matt O'Brien

And finally, QE is a little bit of a bailout, but not in the way that Germany's afraid of. Think about it like this: When a country buys its own bonds with newly printed money, it doesn't have to pay interest on that debt anymore. Now it still does, but this is just an accounting fiction. It's moving money from your right hand to your left hand, and then back again to your right. That's because the government pays the central bank the interest that's owed on the bonds, but the central bank turns around and gives the government all the money it just got paid. 

As economist Paul De Grauwe points out, this wipes out each country's interest payments, so it's not as if Germany is bailing out everyone else. They're all bailing themselves out in equal measure. And this matters a lot for a country such as Italy, which would be running a surplus if not for all the interest it owes on its debt. Those payments, together with its still-shrinking economy, are why Italy's debt burden has actually increased despite all its austerity. QE will help this. 

But it might be too little too late. Or maybe too late too little. It's hard to tell in Europe.

Glanser on Nick Rowe, Friedman and Meade

Nick Rowe Goes Bonkers over Milton Friedman by David Glasner

In his 1977 Nobel Lecture, as Marcus Nunes informed us a few days ago, Meade explicitly advocated targeting nominal GDP writing as follows: 

I have told this particular story simply to make the point that the choice between fiscal action and monetary action must often depend upon basic policy issues which should certainly be the responsibility of the government rather than of any independent monetary authority. Perhaps the best compromise is an independent monetary authority charged so to manage the money supply and the market rate of interest as to maintain the growth of total money income on its 5-per-cent-per-annum target path, after taking into account whatever fiscal policies the government may adopt. 

So let me ask Nick the following: Was Meade right or left? And was he on the winning side or the losing side?

James E. Meade

"monetary socialism"

My new banner. I welcome the Green Lanterns' hatred.

Via Tony Yates

The best that is to be said for EZ QE is that will probably do no harm, and is worth a shot. Unless its labelling as ‘monetary socialism’ [Tweeted extract from German press, HT Mark Shieritz/Christian Odendahl] leads Northern politicians to redouble their opposition to good old fiscal ‘socialism’, which would, in fact, be a much better bet right now.

We prioritize fiscal policy but understand it's a fiscal-monetary mix. NGDP path level targeting will highlight the failures of Kaleckian Central Banks who are in no rush to tighten labor markets.

We don't view it as giving money to the financial sector. We consider it to be the euthanasia of the rentier. They ration credit as to keep labor markets loose and wages stagnant.

DeLong and QE

Morning Must-Read: Paul de Grauwe: Quantitative Easing and the Euro Zone: The Sad Consequences of the Fear of QE by DeLong

Over at Equitable Growth: From my perspective, QE has always seemed to me to be likely to be:

1. Very effective if it changes expectations of the future price level--that shakes rates rates of return significantly, and gives real people powerful incentives to spend their cash now.
2. But setting up QE in such a way that it changes expectations of the future price level is difficult: the problem is that QE transactions are easily undone in the future, and there is every reason to think that an inflation-targeting central bank will undo them in the future.
3. And if QE does not change expectations of the future price level its effects on real rates of return are minimal. READ MOAR

Think of it: for the ECB to buy €1 trillion of ten-year EU government bonds which have a term premium of 0.1%-point per year of duration means that the ECB takes duration risk off of private-sector balance sheets that the private market currently charges €10 billion/year to bear. It frees-up that risk-bearing capacity to be deployed elsewhere. In a €20 trillion/year Eurozone economy that is 0.05%. You can blather about financial accelerators and credit multipliers all you want, but it is a very uphill task to convince me that that is a big deal.

So why do it?

1. It is a small plus.
2. It might become part of a process that moves expectations and turns into a big plus.
3. There is nothing else politically practical on the agenda that might be done that QE takes attention away from.

The very sharp Paul de Grauwe:

Paul de Grauwe: Quantitative Easing and the Euro Zone: The Sad Consequences of the Fear of QE: "I see two reasons why the case for [Eurozone] QE is overwhelming...

...First, QE is merely a correction for... the last two years... [when] the ECB withdrew about €1 trillion out of the euro-zone economy.... Second, the euro-zone economy is not getting off the ground.... Since Milton Friedman we have all become monetarists. In order to raise inflation it will be necessary to increase the growth rate of the money stock. This requires that the ECB increase the money base. And to achieve the latter there is only one practical instrument, ie, an open-market purchase of government bonds.... But... QE... is necessary but not sufficient. The fact that it is not sufficient, however, should not lead to the conclusion that it can be dispensed with....

There is much misunderstanding and fear regarding QE, especially in Germany. There is the fear that... German taxpayers risk having to foot the bill.... [But] if... say the Italian government were to default... [it] would stop paying interest but at the same time (applying the 'juste retour') it would not get any interest refund... no fiscal transfers.... [Any] write down ]of] the Italian bonds... [would be] purely an accounting operation.... A central bank... does not need equity.... This confusion between accounting losses and real losses... has led to long hesitation to act... leads to bad ideas and wrong proposals...

Krugman on Swiss peg

Switzerland: QE Too
by Krugman

OK, arrived in Hong Kong, and IT is working a lot better. So let me weigh in a bit more on the Swiss miss. Basically, my take is the same as Brad DeLong’s: what we have here is a central bank that let itself be bullied by the balance sheet bugaboo brigade. 

The way to think about the franc peg, I’d argue, is to view currency intervention as essentially a form of quantitative easing. What we mean by QE is open-market operations in which the central bank buys stuff other than the usual purchases of short-term government debt. This could be long-term assets, it could be private-sector debt, or it could be foreign securities. Obviously the channels of influence depend to some extent on which route you choose, although remember that the Fed was accused of waging currency war when it was only purchasing domestic assets, and the main clear effect of Abenomics so far has run through the exchange rate. But the main point is to think of any kind of non-Treasury-bill open market operation as a form of QE. 

This in turn helps us put the explicit exchange rate target into the right slot: it was about making QE effective through commitment, so that you got the maximum impact on expectations. Actually, the success of the currency program suggests that other central banks might want to try things like setting a ceiling on some long-term interest rate. 

But back to Switzerland: they had a policy that was working, so why did they stop? And the answer, Brad and I both suspect, is that the SNB, like the Fed, faced constant pressure from finance types saying “Your balance sheet is too big! Debasement! Inflation! Unnatural monetary acts! Francisco d’Anconia!” But unlike the Fed, the SNB lacked the intellectual self-confidence (and perhaps the institutional strength, seeing as how it’s partially privately owned) to stand up to that pressure. 

The irony is that having been bullied into worrying about its own profitability, which is not what central banks should do, the SNB ended up imposing huge losses on itself. But that’s neither here nor there for Swiss national interests. The main thing is that the credibility essential to getting traction at the zero lower bound has been dissipated for Switzerland, and damaged for everyone else.

Expenditure changing versus expenditure switching

Expenditure Changing and Expenditure Switching policies

In an open economy setting, policymakers need to achieve two goals of macroeconomic stability, viz. internal and external balances. Internal balance is a state in which the economy is at its potential level of output, i.e., it maintains the full employment of a country’s resources and domestic price levels are stable.

External balance is attained when a country is running neither excessive current account deficit nor surplus (i.e., net exports are equal or close to zero). Attaining  internal and external balances requires two independent policy tools (also see Swan diagram). One is expenditure changing policy and the other is expenditure switching policy.

Expenditure changing policy aims to affect income and employment with the goal of equating domestic expenditure or absorption and production and takes  the form of fiscal or monetary policy. Expenditure switching is a macroeconomic policy that affects the composition of a country’s expenditure on foreign and domestic goods. More specifically it is a policy to balance a country’s current account by altering the composition of expenditures on foreign and domestic goods (see Balance of payments account). Not only does it affect current account balances, but it can influence total demand, and thereby the equilibrium output level.

more on the Swiss Peg

Switzerland drops its currency peg by James Hamilton

Reply to Tyler Cowen by Scott Sumner

Chaos in the Currency Markets by John Cassidy

Switzerland ends its peg fest

Sokrates and Friends in Davos, or, the SNB and the Berne Whale: The Honest Broker for the Week of January 18, 2014 by DeLong

If you do it they will believe by Scott Sumner

Felicia "Snoop" Pearson on The Wire

video of Snoop

Obama said his favorite character was Omar Little. Snoop and Bodie were good too. So many.

Robert Wisdom and The Wire coincidence

Yesterday I had this post about The Wire and Colvin's Hamsterdam.

Tonight, Robert Wisdom the actor who played Colvin was on SyFy's show 12 Monkeys. His character mentions a "Senator Royce" who of course shares a name with The Wire's Baltimore Mayor Royce.

Swiss, Baker versus Krugman

I think Dean Baker is wrong.

Paul Krugman and the Swiss Movement

Friday, 16 January 2015 06:01

It isn't often that I think Paul Krugman gets one wrong, but I think he wrongly attacks those chocolate loving cuckoo clock making Swiss in his column today. His complaint is that the Swiss central bank abandoned its commitment to keep down the value of the Swiss franc against the euro. Krugman sees this a failure of will, with the central bank giving up a commitment to pursue an inflationary policy. This is part of a larger saga of feckless central banks that continue to obsess about inflation when the real problem facing world economies is an inflation rate that is too low.

While the general point is right, it is hard to see how this story applies to Switzerland. Switzerland did not see the same sort of downturn as the rest of the OECD in 2008. Furthermore, it has fully recovered from its downturn with a GDP that is 8 percent above its pre-recession level and an unemployment rate of 3.5 percent.

In this context, it is actually doing what we should want Switzerland to do as a good world citizen. By allowing its currency to rise, it will make its goods and services less competitive internationally. This means it will import more from its trading partners and export less, effectively providing them with an economic boost. This is what we should want to see. The countries that are at or near full employment should be running larger trade deficits or smaller surpluses.

So give the Swiss a gold star. They called this one right. (Now if we can get them to talk to China ....)

Piketty and DeLong

Link

Over at Equitable Growth: Thomas Piketty: On the Elasticity of Capital-Labor Substitution

Over at Equitable Growth: As I have said before in Very Rough: Exploding Wealth Inequality and Its Rent-Seeking Society Consequences (backed up by the numbers of "Roughing Out a Piketty Model") and elsewhere, in my view Thomas because he really needed a rent seeking society chapter in his Capital in the 21st Century. The underlying logic of his argument seems to be that wealth can take two forms: investments in capital-embodied technological wealth that boost wages in the economy, or investments in rent-seeking wealth that erode wages in the economy. And, I think, his argument is that we are headed for a society with a higher wealth-to-income ratio, and in such a society a greater share of wealth will find its way into the second channel. READ MOAR

Maybe that is not what Pikitty's argument is. But I at least think that it is what Piketty's argument should be--because I think it is highly likely to be true...

Thomas Piketty: On the Elasticity of Capital-Labor Substitution: "I do not believe in the basic neoclassical model...

...But I think it is a language that is important to use in order to respond to those who believe that if the world worked that way everything would be fine. And one of the messages of my book is, first, it does not work that way, and second, even if it did, things would still be almost as bad....

My response to Summers and others is... what we observe... [is] a rise in the capital/income ratio and a rise in the capital share... [in] the standard neoclassical model... the only possible logical... expla[nation]... would be an elasticity of substitution somewhat bigger than 1... that there are more and more different uses for capital over time and maybe in the future robots will make substitution even more.... Now, does this mean that it is the right explanation for what we have seen in recent decades? Certainly not....

All I am saying to neoclassical economists is this: if you really want to stick to your standard model, very small departures from it like an elasticity of substitution slightly above 1 will be enough to generate what we observe in recent decades. But there are many other, and in my view more plausible, ways to explain it.... It is perfectly clear to me that the decline of labor unions, globalization, and the possibility of international investors to put different countries in competition... have contributed to the rise in the capital share...

Cf.: Suresh Naidu: Capital Eats the World, and The Slack Wire: Notes from Capital in the 21st Century Panel; and me: The Hourly Piketty: Paul Krugman, "Gattopardo Economics", and Economic Modelling, and The Honest Broker: Mr. Piketty and the “Neoclassicists”: A Suggested Interpretation: For the Week of May 17, 2014.

The Wire and legalization

HBO ran all 5 seasons of the Wire in 5 days. I recorded them and have been re-watching the show at a leisurely pace. Season 3 had the plot line with Major Colvin, Hamsterdam, and drug legalization. That was in 2004 and ten years later pot is legal in Colorado, Washington, Oregon and Alaska.

Obama is right, it's one of the best shows ever on television and Omar Little is probably my favorite character too although there are a lot of good characters. The creators of Game of Thrones explicitly said they modeled their vast canvas on The Wire.

JW Mason on asymmetry

Discussion on Wolfers

when the wage share falls, this is attributed to "technology" and is seen as inevitable, while when the wage share rises, this must generate inflation and should be prevented

That's a good point. There is a funny asymmetry in the mainstream discussion of wages. For liberals like Wolfers, if wages are rising faster labor productivity, that's a sign of excess demand that the Fed needs to do something about. But if wages are rising more slowly than productivity, as they most have been for decades, that's a sign of technological change, or China, or something else that has nothing to do with demand.

wage growth

The Non-Accelerating What Now Rate of Inflation by JW Mason

Justin Wolfers tweeted:

Annual wages growth is running at 1.7%. Yellen says "normal" is 3.5-4%. The recovery has a long way to run before the Fed needs choke it off

Philomena

Philomena

growth and wages

Captain Recovery gets awfully close to liftoff but is held back by stagnating wage growth  by Jared Bernstein

But policy makers who want our support must articulate the policy architecture — the connective policy tissue — that will reunite growth and broadly shared prosperity.

wages and inflation

Economists Should Not Have Been Surprised by the December Drop In Wages by Dean Baker

Golden Globes

Best Drama: Imitation Game, Selma, Boyhood

Actress Drama: Rosamund Pike (Gone Girl)

Actor Drama: Cumberbatch (Imitation Game), Oyelowo (Selma)

Best Comedy: Grand Budapest Hotel

Actress Comedy: Amy Adams (Big Eyes), Emily Blunt (Into the Woods)

Actor Comedy: Michael Keaton (Birdman), Joaquin Phoenix (Inherent Vice)

Director: David Fincher (Gone Girl), Richard Linklater (Boyhood), Ava DuVernay (Selma)

Screenplay: Anderson (Grand Budapest Hotel), Flynn (Gone Girl), Linklater (Boyhood), Moore (Imitation Game)

TV Drama: Game of Thrones

Drama Actress: Viola Davis

Drama Actor: Clive Owen

TV Comedy: Silicon Valley

TV Comedy Actress: Juliet Lous-Dreyfus

Mini-series: The Normal Heart

Mini series actor: Mark Ruffalo

Mini series supporting: Matt Boemer

Mini series actress; Maggie Gyllenhal (An Honorable Woman), Frances McDormand (Olive Kitteridge)

Fed Fail: labor force participation rate edition

America’s Workforce: The Mystery of the “Missing Millions” Deepens by John Cassdiy

The Labor Department’s participation-rate figures tell the story, but they don’t really convey what it means in human terms. For that, it’s useful to do a bit of back-of-the-envelope arithmetic and convert them into an estimate of the number of workers who have gone “missing” from the labor force, for whatever reason. Early last year, based on a report from the Congressional Budget Office, I did that exercise and came up with a figure of roughly six million, which isn’t much short of the entire population of the Dallas-Fort Worth metropolitan area. 

Based on the latest job figures, six million might even be an underestimate of the number of missing workers. In December, 2007, the participation rate was sixty-six per cent, more than three percentage points above the current figure of 62.7 per cent. If the rate had rebounded to its pre-recession level, there would now be roughly eight million more people in the labor force.