no inflation prediction in UK

pgl said in reply to Barkley Rosser...

And the risk of high inflation in the UK is zero. People are in a panic over this vote sort of like those poor people that heard a firecracker in the NYC's subway this week. I'm not saying there will not be self inflicted wounds that follow this vote but the vote itself does not mean that much. Stupid trade protection would be a bad thing but it is odd that a lot of people who are off in this panic attack lauded protectionism here. Go figure.

Friday, June 24, 2016 at 07:04 AM

Mason and Foroohar

How Should We Count Debt Owed to the Fed? by JW Mason

Why the Creative Accounting in the Microsoft-LinkedIn Deal Is So Disturbing by Rana Foroohar

Finding examples of how companies use financial engineering—instead of the realengineer—to bolster their balance sheets is like shooting fish in a barrel. The latest involves the biggest deal of the moment: Microsoft’s acquisition of LinkedIn. 

One of the reasons that LinkedIn many have wanted to be acquired, as Andrew Ross Sorkin explained in yesterday’s New York Times, is that it has been using a rather deceptive method of accounting that allows employee compensation paid in stock to be ignored as an expense. That makes for a bottom line that looks better than it really is. (This is especially true given that the amount of stock based-comp paid out by the company in the last two years was nearly equal to operating revenue, according to an analyst source.) 

LinkedIn isn’t alone in this sort of crafty accounting–most companies in the S&P now do it. (This piece is a great primer on how the funny math works.) But recently, Facebook started including stock comp in its reporting, and there’s a big push within corporate governance circles to get more companies to do that in order to get back to a more realistic version of earnings. After all, employee compensation, whether paid in cash or stock, is obviously an expense that should go on the balance sheet. 

It’s worth understanding just why, and how, stock-based compensation became such a huge deal to begin with. It marked a turning point toward short-term decision-making in corporate America. Key legislative changes that fueled the trend happened under Democratic president Bill Clinton, whose administration passed a 1993 provision on corporate pay. The measure limited corporate tax deductions for regular salaried income to $1 million but exempted “performance-related” pay above and beyond that—pay that was typically awarded in stock options. Joseph Stiglitz, a former head of Clinton’s Council of Economic Advisers, remembers this move as “one of the worst things that the Clinton administration did.” 

That’s because it created a tremendous incentive for companies to pay more compensation in options. This further fed the cycle of short-termism since executives would from then on be focused primarily on boosting stock prices, by any means necessary. As Stiglitz puts it, “It just opened up this huge span of bonus pay which was not for performance. I had written a lot about this before, that it was largely phony. I argued very strongly during the nineties that the whole stock option pay trend caused a lot of incentives for non-transparency, and that it was directly responsible for what I call creative accounting.” It allowed firms not just to deceive the market but also to avoid paying the taxes that they should have paid. 

Why does this matter so much now? Because it contributes to growing inequality and a lackluster economic recovery, by putting more and more tax-free compensation into the hands of the wealthy (who tend not to spend it after a certain point, which is a problem in an economy based mostly on consumer spending). What’s more, says Stiglitz, the performance exception didn’t really reward “performance” as much as any number of other factors, such as monetary policy that boosted stock prices. “If you’re really talking about performance, you should not get higher pay when your stock price goes up because the interest rate goes down,” he explains. “I mean, maybe Janet Yellen should get higher pay for that, but CEOs certainly shouldn’t.” He wrote in his searing memoir of the time, The Roaring Nineties, that “as the Clinton years came to a close, I wondered: What message had we in the end sent through the changes that had been brought about in our taxes?”

The Microsoft-LinkedIn deal brings all this to the fore once again. It’s a topic the next president should tackle head on, no matter the party.

After the Thrones

Another good episode of HBO's After the Thrones, where they brought in expert Mallory Rubin early to discuss the epic penultimate episode of Season 6.

Rubin - who always sports a cool T-shirt - mentioned Daenerys's quote I have in my banner area about breaking the wheel. They had an interesting discussion of all aspects of the episode focusing on things that stood out for me as well: like the fact Rickon didn't follow a serpentine rout (like in the original In-Laws movie) when running from Ramsey's arrows; that Sansa didn't alert Jon Snow that the calvary might by coming; that Davos found Shireen's toy stag and he eyed Melisandre forbodingly. I wish they had done this show throughout the series. So good.

Jo Cox, Labour MP

Jo Cox

Hiddleswift

Hiddleswift!

After the Thrones

I enjoyed After the Thrones with Mallory Rubin, @chrisryan77, and @andygreenwald. Rubin mentioned Jorah Mormont's quote which I have on my bannner:

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

They discussed the different fanatics, the Sparrows and Faith Militant, the followers of the Lord of Light, even Jaime who is fanatical about Cersei if not his House. They forgot to mention mention Daenerys Targaryan: "I will take what is mine!"

Go girl!

Feel the Bern

DeLong on Woodford

Must-Read: Michael Woodford: Quantitative Easing and Financial Stability by DeLong

Polanyi and Red Vienna

Karl Polanyi for President  by Patrick Iber and Mike Konczal

Red Vienna

Trump and democracy

What Trump’s Rise Means for Democracy by Jedediah Purdy

Jeremy Corbyn

Enter Left by Sam Knight

Thee astonishing political emergence of Jeremy Corbyn, the left-wing leader of the British Labour Party, is the sort of thing that passes for normal in Western democracies these days. Since the economic crash in 2008, anti-establishment types have cropped up everywhere. Corbyn, a sixty-six-year-old socialist, had never held a position of authority in his party or in government before being elected last summer on a platform of benign economic populism. He is Syriza in Greece; he is Podemos in Spain; he is Sanders in America. His politics rebel against a Britain that is eager to join foreign wars and pallid in the face of social inequality. “There has to be some kind of a reckoning,” Corbyn told me recently. “You actually have to run an economy for the benefit of people, not run for the benefit of hedge-fund managers.” 

...

McDonnell was Corbyn’s campaign manager last summer and is now the shadow Chancellor. (In British politics, the opposition creates a “shadow” cabinet to respond to the Government.) When I asked him if he could convey just how improbable it was that he and Corbyn were now in charge of Labour, McDonnell quoted Fredric Jameson, an American literary theorist and Marxist scholar. “It is easier for people to imagine the end of the earth than it is to imagine the end of capitalism,” he said. “And that is what we are about, aren’t we?”

Taibbi on the death of the GOP

R.I.P., GOP: How Trump Is Killing the Republican Party by Matt Taibbi

Varoufakis on HRC

Jared Bernstein on the costs of trade

Getting straight about the costs of trade by Jared Bernstein

Economic platitudes about how trade is always worthwhile as long as the winners can compensate the losers are an insult in the age of inequality, where the winners increasingly use their political power to claim ever more winnings. 

If we don’t deal with these costs by creating real, substantive, remunerative opportunities for those hurt by trade, some demagogue is sure to come along Trumpeting a case for xenophobia, walls, tariffs and protectionism. If he’s not … um … here already.

Jennifer Goines

Hillary Clinton could reform the Fed

Why It's a Big Deal Hillary Clinton Plans to Shake Up the Fed by Michael Maiello

Trump on torture

He should be defeated soundly, obviously.

Trump on torture: 'We have to beat the savages'

 Exactly What Kind of Torture Does Donald Trump Want to Use?

Donald Trump on waterboarding: ‘Torture works’

The Progressive Era

The Progressive Era (Wikipedia)

History of the U.S. (1865-1918) Progressive Era (Wikipedia)

Progressive Era website

The Progressive Era was one of general prosperity after the Panic of 1893—a severe depression—ended in 1897. The Panic of 1907 was short and mostly affected financiers. However, Campbell (2005) stresses the weak points of the economy in 1907–1914, linking them to public demands for more Progressive interventions. The Panic of 1907 was followed by a small decline in real wages and increased unemployment, with both trends continuing until World War I. Campbell emphasizes the resulting stress on public finance and the impact on the Wilson administration's policies. The weakened economy and persistent federal deficits led to changes in fiscal policy, including the imposition of federal income taxes on businesses and individuals and the creation of the Federal Reserve System.[80] Government agencies were also transformed in an effort to improve administrative efficiency.[81] 

In the Gilded Age (late 19th century) the parties were reluctant to involve the federal government too heavily in the private sector, except in the area of railroads and tariffs. In general, they accepted the concept of laissez-faire, a doctrine opposing government interference in the economy except to maintain law and order. This attitude started to change during the depression of the 1890s when small business, farm, and labor movements began asking the government to intercede on their behalf.[81] 

By the start of the 20th century, a middle class had developed that was leery of both the business elite and the radical political movements of farmers and laborers in the Midwest and West.

Sanders's legacy: left no longer needs the rich

Corey Robin:

NYT comes around to @karpmj's argument two months later.


Bernie Sanders’s Legacy? The Left May No Longer Need the Rich by Nate Cohn

When Bernie Sanders started gaining in the polls, it was easy to place him in a long line of idealistic insurgents like Barack Obama, Howard Dean, Bill Bradley or Jerry Brown. 

They built strong bases of support among white liberal voters, excelling in places like Boulder, Colo., and Vermont, but their chances of being nominated hinged on building a broader coalition that included nonwhite voters. Only Mr. Obama managed it. 

Mr. Sanders, despite his success in Indiana this week, has effectively lost the Democratic nomination, and for a familiar reason: He didn’t do well enough among black voters. But he gained the enthusiasm of a subtly different — and potentially larger — coalition than his liberal predecessors. 

His brand of progressivism played far better among white working-class voters than that of past liberal outsiders. At the same time, he fared far worse among the affluent Democrats who represented the core of Mr. Obama and Mr. Bradley’s coalitions. 

Mr. Sanders’s weakness among affluent Democrats and his strength among working-class Democrats might seem unsurprising, given his class-focused message. Mr. Sanders himself anticipated it in an interview with The Upshot in July. 

But in broader historical terms, it might be something of a turning point in Democratic politics: the moment when the party’s left no longer needs an alliance with wealthy liberals to compete in national elections. 

Connecticut, which held its primary April 26, vividly illustrates the huge difference between Mr. Sanders’s coalition and that of past liberal challengers.

In 2000, a flagging Mr. Bradley lost the state by 13 percentage points to Al Gore. He lost badly among nonwhite voters — losing cities like Bridgeport and Hartford by more than 40 points. He lost by more modest margins in the rural, white, working-class eastern part of the state. But he won many of the state’s affluent areas — like Greenwich and New Canaan, along with much of the traditionally liberal western and northwestern part of the state near the border with New York and Massachusetts. 

Mr. Obama won almost all of the same areas in 2008, but then added strong support from nonwhite voters — enough to give him a narrow victory over Mrs. Clinton in the state. He won places like Bridgeport and Hartford, even as he fared similarly to Mr. Bradley in places like Greenwich and New Canaan. He fared little or no better in the white, working-class parts of eastern and central Connecticut. 

The Sanders-Clinton race reversed this map. Mrs. Clinton lost almost all of the white, working-class areas of rural eastern Connecticut to Mr. Sanders, even though she had won most of it in 2008, as Mr. Gore had in 2000. But she beat Mr. Sanders by huge margins in the affluent parts of western Connecticut where Mr. Obama and Mr. Bradley fared well. She won back the nonwhite voters she lost to Obama in 2008, giving her wins in Bridgeport and Hartford that nearly matched Mr. Gore’s victory in 2000. It was enough for a clear if modest 5.4-point victory. 

It’s a pattern that has repeated itself across the country. Mr. Sanders was routed in the wealthy, liberal parts of New York where recent progressive heroes such as Bill de Blasio or Zephyr Teachout fared well — like the Upper West Side, Greenwich Village and parts of Brooklyn. 

In Massachusetts, Mr. Sanders lost the affluent, liberal voters in the Boston area, and he might well lose the Bay Area, another enclave of the wealthy and liberal. 

This is the first time since 1992 that there’s been a real split between the progressive left and affluent liberals in a Democratic primary. In that race, an iconoclastic outsider, Mr. Brown, excelled among liberals in places like Ann Arbor, Mich., with a progressive message (including opposition to trade agreements), while a more technocratic candidate, Paul Tsongas, won in wealthy liberal areas like Montgomery County, Md., which includes many suburbs northwest of Washington. Bill Clinton easily prevailed over a divided left-liberal wing of the party with strong support among working-class white Democrats and black voters. 

Why did affluent liberals support Mrs. Clinton? 

One possibility is simple class politics: Mr. Sanders’s class-oriented message didn’t resonate among this group. If true, a candidate of the progressive left would struggle to reunite the left-liberal coalition against an establishment challenger in future Democratic primaries.
But the left might have a better opportunity to reassemble the left-liberal coalition with a different progressive candidate if the problem were Mr. Sanders, not his views. (Anecdotally, I run into a lot of Hillary Clinton supporters who supported Mr. Obama in 2008 and say they would have supported Elizabeth Warren, who’s more technocratic and policy-focused than Mr. Sanders.) 

Equally important to the future of progressives in the Democratic Party is Mr. Sanders’s strength in the white working-class areas where Mr. Bradley, Mr. Obama, and both Mr. Brown and Mr. Tsongas faltered. It was Mr. Sanders’s strength among these voters that let him stay fairly competitive, even though he lost half of the traditional left-liberal coalition.
Mr. Sanders won white voters without a college degree by a double-digit margin in Connecticut, as he did in Maryland, Wisconsin, North Carolina, New Hampshire, Illinois, Oklahoma, Indiana, Vermont and Michigan. He probably did so in Rhode Island as well (no exit polls were conducted there). 

Outside the South, Mrs. Clinton probably won white voters without a college degree only in Ohio (the exit polls there show she prevailed with that group by one point). 

One possible explanation, again, is policy. Income inequality has become a vastly more important issue to Democrats since the Great Recession, and it’s reasonable to assume that white working-class Democrats might be especially drawn to the issue. This is the best case for the progressive left; it would mean that a future progressive populist could count on similar levels of support with a strong, class-oriented message. 

The evidence for this view is somewhat mixed. According a compilation of exit polls, around 40 percent of white voters without a college degree wanted more liberal policies than those of Mr. Obama, and Mr. Sanders won these voters handily. The highest number was in Vermont, where 46 percent of white voters without a degree wanted more liberal policies than Mr. Obama’s. 

That’s a big bloc that progressives can count on in the future, but it’s not a majority and it’s less than Mr. Sanders’s share of white voters without a degree. That’s in part because Mr. Sanders also won among those white working-class voters who wanted less liberal policies than those of Mr. Obama, a fact that makes Mr. Sanders look as much like a protest vote against Mrs. Clinton as the harbinger of a new Democratic socialism. 

But it is nonetheless striking that so many white Democrats without a degree wanted more liberal policies than Mr. Obama’s. In fact, white voters without a college degree were often more likely than either college-educated white voters or minorities to support more liberal policies. 

That’s consistent with the notion that white working-class Democrats really have become more receptive to a progressive candidate over the last decade, in some cases even going from being the principal impediment to a left-liberal coalition to the strongest bloc in favor of a more progressive agenda. 

According to exit poll data, liberals represented a majority of white Democrats without a college degree in nearly every primary contest. It’s a huge change from just a decade or two ago, when so many white working-class Democrats were conservative (check out this 1995 Pew Research typology of voters if you want to see what the Democratic base used to look like). Mrs. Clinton tended to win “moderate” white voters without college degrees in these states, but she lost among the self-described liberals. 

A lot of this is a generational divide. Mrs. Clinton won among white voters without a college degree who were over age 30, but she was pummeled among those who were younger. 

Whether Mrs. Clinton was so weak among young white voters because of her weaknesses or the appeal of Mr. Sanders’s policy message will probably decide whether the “Sanders Coalition” can be replicated in a future Democratic primary. 

The exit polls, again, send a mixed message. Around half of young white voters didn’t think that Mrs. Clinton was liberal enough, or they wanted policies that were more liberal than Mr. Obama’s. But Mr. Sanders also won among those younger voters who thought Mrs. Clinton and Mr. Obama were liberal enough; her weakness might have had as much (or more) to do with questions about ethical governance as about policy. 

Either way, Mr. Sanders’s success — in spite of weakness among wealthy Democrats — is important. There hasn’t been a viable candidate of the progressive left in a Democratic primary in a long time. 

Elite Democrats in places like Manhattan; Cambridge, Mass.; and Santa Monica, Calif., have been anchors of liberal politics in the United States for decades. The ability to build a robust progressive coalition without these voters — or their donations — is a new phenomenon, and it could free candidates to pursue progressive policies in future Democratic primaries, and win. 

The Democratic Party has moved far enough to the left where it’s possible to imagine a candidate of the progressive left cobbling together a majority without much support from affluent liberals. It isn’t easy — Democrats are basically satisfied with Mrs. Clinton and Mr. Obama’s positions — but it’s possible.

Sadiq Khan elected first Muslim mayor of London

Sadiq Khan Elected in London, Becoming Its First Muslim Mayor