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

Alessandra Stanley reviews The Killing

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

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

 AMC and FX have really progressed.

Why Obama Had to Act in Libya by Marc Lynch

Answer to Glenn Greenwald by Juan Cole

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

Article on Samantha Power

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

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

(via DeLong)

Still the Fed has failed, as writes David Leonhardt.

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

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

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

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

American Thought Police by Krugman