Econ round-up: truncated version by Jared Bernstein

–But there are two notable tailwinds: gas prices and housing. The average price at the pump is down about 20 cents over the past few months. That’s big, and if it sticks, it will continue to help to offset the euro-drag.

I've read stories that say Iraq has been pumping a lot of oil, making up for Iran.

As Europe’s Currency Union Frays, Conspiracy Theories Fly by Floyd Norris

Conceivably, Germany learned three things from the 1992 experience, and mapped out a course with those lessons in mind. First, absent fixed exchange rates, its export-oriented companies faced the risk of periodic competitive devaluations from the rest of Europe.  

German exports had peaked in 1990, and did not fully recover until 1994. They would not fall again for an entire year until 2010, after the credit crisis devastated world trade. 

Second, a currency union could help German exports if the euro’s value were held down by less competitive economies. 

Italy had been forced repeatedly to devalue the lira as rising costs made its exports too expensive. A common currency would not stop the rising costs, but it would prevent a new devaluation.         

Finally, if Germany adopted a low-interest-rate policy, and superlow rates arrived in European nations accustomed to high rates, banks could open the credit spigot and create a debt-financed boom in much of Europe. That would invite a mushrooming of imbalances. Ultimately, deeply indebted countries would face a crisis, one that they could solve only if they acquiesced to German policies and surrendered a large part of national sovereignty.

Germany, China and the Republicans are the Axis of Fools.

Still a Phantom Menace by Krugman

To be fair, I and other have been surprised by the stubborn persistence of low core inflation; if you’d asked me three years ago, I would have predicted slight deflation by now. My current interpretation is that downward nominal wage rigidity is a bigger issue than we realized. But this is a relatively small failure of prediction compared with the dire forecasts of soaring interest and inflation rates.

Finally, I just want to flag this for the record:

Regardless of what the triumphant Keynesians would have you believe, my analysis continues to be that the current combination of monetary and fiscal stimulus is driving us toward disaster. Instead of a real recovery, the US will experience an inflationary depression. Europe, on the other hand, will suffer much less, precisely because it was not seduced by the short-term appeal of stimulus.

Yep.

The Stock Bubble Created the Budget Surplus: Not Bill Clinton's Tax and Spending Policies by Dean Baker

Lost Girl's Bo is pretty awesome. I like how she pulled a Galadriel in last night's episode. We need more Canandian TV shows here in the States!

"It's almost as if Europe is trying to start a bank run." by Matt O'Brien

True Blood starts the new season off with a bang. Banging siblings, that is (io9 recap) by Meredith Woerner(!)

audio of Adam Davidson interview with Doug Henwood

Pam! Pam! Pam! (or "One what?" as in Sookie will "owe one," a favor, to Pam.)

"Turn! Turn! Turn!" by Carrie Raisler (True Blood Onion recap)

I never understood why fans hate Tara (because she's unhappy?) or why people dislike True Blood enough to make negative comments.

In entertainment as in sports, is being a "hater" an essential part of being a fan? by Noel Murray

(excellent discussion in commment section. For instance:

According to Freud, who no one cares about anymore, we underestimate how much sadism and masochism underlies the average personality (because it is taboo in a 'civilization' and because it is a fundamentally infantile dichotomy of desire). I'm not crazy about Freud, but I think something like the popularity of '50 Shades of Grey', which gets pretty explicit in its descriptions of S&M sex, amongst the most normative demographic (Soccer Moms) is arguing for the possibility that Freud was right.)

and

Psychologists attribute anger to the feeling of being wronged by someone or something, internally or externally.  Ironically, pop culture provides an unusual number of opportunities for such anger.  Two specific cases come to mind.

First is the narcissism of small differences.  That is to say, we often get very angry when someone very similar to us disagrees strongly with us about something that is very similar to our own tastes.  The brutal competition in sports fandom is an example of this, as is Jezebel complaining more about the Daily Show than the Taliban.)

I hate "haters" of stuff I like! I am annoyed by "haters" of NGDP level targeting and unconventional monetary policy, Game of Thrones, and True Blood, etc.

A song featured in last night's True Blood season opener.

Updated this post on Prometheus.

Crucifying Mankind Upon a Cross of 2 Percent Inflation Targeting by Yglesias

I think the right way to think about this is that inflation and employment aren't two separate levers that the Federal Reserve addresses separately. Rather, the Fed impacts both inflation and employment by influencing aggregate demand. A years-long span of 8+% unemployment helps keep prices low. People who are broke or unemployed curtail their own consumption and thus alleviate scarcity. A tradeoff needs to be made in the short-term. If gas prices spike, people will be upset and many families' bottom lines will suffer. But is keeping the labor market weak in order to keep millions of people unemployed rather than commuting really a sound way of coping with the moderate scarcity of oil? I say no. Ben Bernanke seems to say yes. But he's getting away with not putting the issue squarely before the public.

2012 May Lack Drama, but Not Significance

Will the Keynesian principles that have guided economic policy for generations be affirmed or replaced by a belief that smaller government will make room for a more vibrant private sector?

Should Social Security, under pressure from the ever-growing costs of an aging population, remain a government-run, taxpayer-financed, guaranteed-benefit program? Or should it be reinvented to allow workers to invest in, and assume some of the risk for, their own retirements?

Is it necessary for government to reshape the private health care system in order to bring insurance coverage to those who do not have it, or can tax incentives and other free-market principles take care of the problem?

Are banks and investment firms being stifled by over-regulation as they try to finance economic growth, or are they irresponsibly reverting back to the casino-like culture that brought us the last financial crisis?

Are we heating our planet at a rate that demands substantial and immediate changes in the way we use energy, or is the evidence still insufficient to require that we assume the costs of altering the way we live?

The list goes on, amounting to a huge ideological front in the combat over a long series of issues. And on many of those issues, time is fast running out for the nation to make up its mind about how to proceed, giving additional urgency to outcome this time around. 

...

“American politics sees this kind of dynamic happen every few generations, and it seems to sneak up on us,” said Anthony R. Dolan, who was Reagan’s chief speechwriter and served as an adviser this political season to Newt Gingrich. “A president governs in an unexpected manner, and it becomes a defining moment in our political history.”

The stakes for conservatives this year could be greater than in 1980, Mr. Dolan said, if only because much of the case against President Jimmy Carter back then was about competence, whereas with Mr. Obama the case is about fundamental philosophy.

“He’s decided he’s going to start a mission to change America and its bourgeois consciousness,” Mr. Dolan said of Mr. Obama.

lolwut?

In Era of Cheap Money, Consumers Are Shut Out

New data this week from the Federal Reserve shows that in the first quarter of this year, American businesses were taking on new debt at the fastest rate since the financial crisis in 2008. American households, though, were heading in the opposite direction, increasingly shedding debt.

Just as I had written Obama off...

Election Forecast: Obama Begins With Tenuous Advantage by Nate Silver

(via DeLong)

The Fed could determine the outcome at its next meeting. And Germany might have helped with its TARP for Spain. My guess is that the recent Greek and French elections combined with the June 17th Greek elections concentrated and focused the Germans' minds.

We'll see what happens with Greece.

Ryan McCarthy:

Twitter / mccarthyryanj:

It just occurred to me that I've been reading/editing "Bernanke calls on Congress to spend" stories for more than 3 years…

(via DeLong)
 

Federal Reserve Confirmation by DeLong

To my knowledge:

• Two people whom Obama intended to nominate or nominated to the Federal Reserve have been refused confirmation: Peter Diamond and Rich Clarida in 2010-2011.
• Two people whom George W. Bush intended to nominate or nominated to the Federal Reserve have been refused confirmation: Larry Klane and Randy Kroszner in 2008.
• Two people whom Bill Clinton intended to nominate or nominated to the Federal Reserve have been refused confirmation: Alicia Munnell and Felix Rohatyn in 2005-6.
• Before then… to my knowledge, at least, you have to go back to 1914 and President Woodrow Wilson and the first batch of nominations to get any other examples: Thomas Jones, Richard Olney, and Harry Wheeler.

It's the Fed's Time to Step Up by Christina Romer

Instead, the policy-making committee could adopt the proposal of Charles Evans, the president of the Federal Reserve Bank of Chicago, that the Fed pledge to keep rates near zero until unemployment is down to 7 percent or inflation has risen to 3 percent. Such conditional guidance assures people that the Fed will keep at the job until unemployment is down or the toll on inflation becomes unacceptable. 

(via DeLong)

Ridley Scott made two great sci-fi movies, Alien and Blade Runner, that brought more realism and philosophical depth to the genre. In his new sci-fi movie Prometheus, which I saw and enjoyed, he uses actors and actresses from some of my favorite shows and movies. Kate Dickie played Lysa Arryn in season one of Game of Thrones (fantasy). Idris Elba played Stringer Bell on The Wire (police procedural). Noomi Rapace starred in the original Swedish Girl with the Dragon Tattoo (detective film noir). Michael Fassbender was in the WWII war movie Inglorious Bastards.

Fassbender's android robot David's favorite film is Lawrence of Arabia. I'm not sure of the supposed significance of this. T.E. Lawrence led an Arab revolt against the Ottoman empire. Maybe David just likes Peter O'Toole's mannerisms and style. The writers are assosicated with the TV show Lost so there be no meaning and it was included with the sole purpose of giving the viewer somthing to think about and create the meaning for themselves.

SPOILERS

The movie opens with a shot of some landscape which may or may not be Earth. (In actuality, Scott - like Benioff and Weiss of Game of Thrones - used Iceland.)  A humaniod alien on the surface commits suicide via bioweapon with a giant spaceship overhead. Why? What happened?

They don't expain it. Next two scientists discover an archaelogical finding in Scotland which has a map of planets (or star systems?) that corresponds to maps found at archaeological sites of other ancient civilizations. These civilizations couldn't have been in contact and had no way to discover this particular map of planet or starts which turns out to exist many light years away. The only conclusion that makes sense is that aliens gave them the map.

The scientists take it as an invitation, but maybe the aliens were just describing where they were from, who knows? The movie takes place in the year 2089 and so humanity does have the technology to find the particular set of planets (or star systems?) the map shows and to figure out tha one of the moons orbiting one of the planets is capable of supporting life. Humanity also has the technology to send a crew on a spaceship to the planet if a corporation was willing to finance the trip (apparently NASA remains defunded in 2089) and one is. I believe they say it cost a trillion dollars which wouldn't be a lot if inflation held at its 2 percent cross of gold rate these next 77 years. Or maybe a new global currency union has been constructed by then, who knows? Lost writers aren't know for having a tightly construed, logical mythos.

Anyhoo, the crew arrives at the moon to discover that A) the aliens share our DNA and so probably created humanity and B) the moon actually isn't the aliens' homeworld but rather is a bioweapon storage facility with many spaceships buried just below the surface. The ships' cargoholds are loaded with deadly bioweapons the scientist learn to their dismay. (I kept wondering about their lax safety protocols. Had OSHA been defunded like NASA?) They also discover many dead aliens and homemovies of the aliens fleeing in panic.

But not all of the aliens are dead. One is found in suspended animation or cyrogenic sleep. Making yet another mistake, the crew wake the alien who is very large, strong and violent. He immediately attacks them and rips off their android David's head. Then he jumps in the cockpit pilots the ship to lift off and head to Earth. How the remaining scientist know this I forget, but they are conviced their/our makers are going to to try to destroy us. They also believe the aliens were preparing to wipe out humanity before but they botched the handling of the bioweapons and killed almost all of the spaceships' crews.

Why would they want to kill their creations? There could be a few reasons like they were concerned that humanity would evolve to such an extent that they'd conquer their creators.

Or there could be multiple factions of aliens. Maybe some created humanity an act which was illegal and so the alien government was sending bioweapons to correct the illegal act? But the rebellious aliens sabatoged the aliens' spaceship with their own bioweapons. You would think that an alien race with the technology to create new species as complex as humanity would have some pretty thorough safeguards on their bioweaponry.

Or the aliens could have created multiple species which shared their genes but the aliens couldn't  completely control the evolution of these species and at some point - a couple thousand years ago when monotheism conquered polytheism - they deemed humanity a dangerous failure.

But why the alien suicide? My guess is that he sabotaged the spaceships and then killed himself. Hopefully there will be a sequel and we'll find out. The film ends with Noomi Rapace's scientist and the dismembered body of Fassbender's David flying an alien ship to the alien homeworld. Good luck, girl with the dragon tattoo, you're going to need it judging by the reaction of the live alien they found.

Money Still Matters by David Beckworth

(via DeLong)

Artsie non-linearity, economics, and the concrete steppes by Nick Rowe

(via Thoma)

Ben Bernanke Says Ben Bernanke Could Reduce The Unemployment Rate But He Prefers Not To by Yglesias


Bernanke Offers No Clear Sign of New Action by Binyamin Appelbaum

Republicans on the committee pressed repeatedly for Mr. Bernanke to make a clear commitment that the Fed would take no further action to stimulate growth.

“I wish you would look the markets in the eye and say that the Fed has done too much,” Representative Kevin Brady of Texas told Mr. Bernanke.

Democrats, by contrast, inquired politely after the Fed’s plans and showed surprisingly little interest in urging the Fed to expand its efforts.

Representative Carolyn B. Maloney, a New York Democrat, made the nearest approach, calling on the Fed to act forcefully, but she did not ask Mr. Bernanke to commit to such a course of action, nor to explain why he has not done so.

downward nominal wage rigidity

DeLong links to Tim Duy:

And she dismisses the idea that a large output gap is inconsistent with current inflation:

…substantial cross-country evidence suggests that, in low-inflation environments, inflation is notably less responsive to downward pressure from labor market slack than it is when inflation is elevated. In other words, the short-run Phillips curve may flatten out. One important reason for this non-linearity, in my view, is downward nominal wage rigidity–that is, the reluctance or inability of many firms to cut nominal wages.

To put in crude terms if it wasn't for downward nominal wage rigidity we'd have deflation. Right?