Catastrophic Credibility by Krugman

Student debt up, all other kinds down by Doug Henwood

Obama may lose.

I'm betting Obama will lose now and Bernanke will have an awful legacy.

The Lousy Jobs Number & Obama's Original Sin by Noam Scheiber

Which, in the end, brings us back to the original sin of the Obama administration. As I report in my recent book on Obama and the economy, the administration’s top economists knew the amount of stimulus they were proposing was much too small to solve the unemployment problem within a few years. One reason they felt okay about this relates to a concept called “escape velocity,” which held that you didn’t need the full amount of stimulus your math suggested (something approaching $2 trillion). If you just provided an initial boost, the economy could take care of the rest on its own: Consumers would start spending, which would raise GDP, lower unemployment, and lead to further spending. And the whole process would accelerate as people gained confidence, leading to a self-sustaining recovery.

It was, in effect, a bet that you could get away with spending much less than necessary by manipulating mass psychology. And for a while it worked: The economy grew pretty rapidly in late 2009 and early 2010. But, as several administration economists have subsequently conceded to me, we never quite hit escape velocity, which is why we’ve been in stall speed more or less ever since.

A central-bank failure of epic proportions by Ryan Avent

The Austerity Agenda by Krugman

The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income.

So what happens if everyone simultaneously slashes spending in an attempt to pay down debt? The answer is that everyone’s income falls — my income falls because you’re spending less, and your income falls because I’m spending less. And, as our incomes plunge, our debt problem gets worse, not better.

This isn’t a new insight. The great American economist Irving Fisher explained it all the way back in 1933, summarizing what he called “debt deflation” with the pithy slogan “the more the debtors pay, the more they owe.” Recent events, above all the austerity death spiral in Europe, have dramatically illustrated the truth of Fisher’s insight.

And there’s a clear moral to this story: When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector can’t or won’t. By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity.

Really depressing stuff. Then I saw the movie Bernie and it cheered me up. If you like Jack Black, Richard Linklater and the South then you'll love this movie.

Game of Thrones Week 9: Bloody Hell! by Charlie Jane Anders

"Blackwater" (for experts) Onion recap

“Blackwater” (for newbies) Onion recap



                                                          

John Waters hitchhikes across America

Fiscal cliffs, multipliers, and the myth of central bank independence by Ryan Avent

Doug Henwood's talk in memory of Bob Fitch

Alexander Cockburn once said the mission of the bourgeois pundit is “to fire volley after volley of cliché into the densely packed prejudices of his readers.”

Cockburn's niece is House and Tron actress Olivia Wilde. His father was Claude Cockburn, a leader of the British Communists.

I've met Cockburn and the actor Iain Glenn who plays Jorah Mormont on Game of Thrones (and was on Downton Abby) reminds me of him with his accent, looks and confidence/bearing. Cockburn is more cheeky with an understated, mischievous smile.

Why Two Percent Inflation Targeting is the New Gold Standard by Yglesias

Game of Thrones Week 8: Siege Mentality by Charlie Jane Anders

Game of Thrones

"The Prince of Winterfell" (for newbies) Onion recap

"The Prince of Winterfell" (for experts) Onion recap

Lots of great scenes. I liked the one with Stannis and Davos. Also Tyrion with Bronn and Varys.

Game of Thrones Week 7: The More People You Love, the Weaker You Are by Charlie Jane Anders

How National Belt-Tightening Goes Awry by Robert J. Shiller

Keynes 1921 and the Euro Crisis by Krugman

Employment laggard: the public sector by Doug Henwood

The central banker's bogeyman by Ryan Avent

Then yesterday, Mr Altig (blogger at Atlanta Fed) addressed an argument made by economist Simon Wren-Lewis:

In another recent blog item (also with a pointer from Mark Thoma), Simon Wren-Lewis offers the opinion that acknowledging uncertainty about size of the output gap actually argues in favor of being "less cautious" about taking an aggressive policy course. The basic idea is familiar. It is a simple matter to raise rates should the Fed overestimate the magnitude of the output gap. But with the short-term policy rates already at zero, it is not so easy to go in the opposite direction should we underestimate the gap.

...
All of recent history, in other words, suggests that Mr Wren-Lewis is exactly right: it's much easier for central banks to go in one direction than in the other. Now one could, as Mr Altig says, come up with a "plausible argument" in which things don't work like that. Given the very large and ongoing costs of labour-market weakness, I would certainly expect America's central bankers to do better than that. I would like to see some very clear evidence that a year or two of 4% inflation poses more of a threat than at least a year or two more of unemployment well above the natural rate. What we're getting instead is little more than hand-waving.

A Man Without Honor (for newbies) Onion recap

A Man Without Honor (for experts) Onion recap

Good comment sections for both.

The Human Disaster of Unemployment by Dean Baker and Kevin Hassett

Thankfully, there is some effort to learn from this model. The recent bill that extended the payroll tax cut included a provision that covered the cost of work-sharing programs in the 23 states that already had them as part of their unemployment insurance systems, and it helped other states start such programs. This should slow job destruction in those states, which will improve chances for all workers seeking employment. From now on, the first line of defense during a recession should be to expand work sharing rather than simply extend unemployment benefits.

Joe Weisenthal vs. the 24-Hour News Cycle by Binyamin Appelbaum

Unemployment Rate Without Government Cuts: 7.1% by Justin Lahart

The Labor Department’s establishment survey of employers — the jobs count that it bases its payroll figures on — shows that the government has been steadily shedding workers since the crisis struck, with 586,000 fewer jobs than in December 2008. Friday’s employment report showed the cuts continued in April, with 15,000 government jobs lost.

But the survey of households that the unemployment rate is based on suggests the government job cuts have been much, much worse.
In April the household survey showed that that there were 442,000 fewer people working in government than in March. The household survey has a much smaller sample size than the establishment survey, and so is prone to volatility, but the magnitude of the drop is striking: It marks the largest decline on both an absolute and a percentage basis on record going back to 1948.

Moreover, the household survey has consistently showed bigger drops in government employment than the establishment survey has.
The unemployment rate would be far lower if it hadn’t been for those cuts: If there were as many people working in government as there were in December 2008, the unemployment rate in April would have been 7.1%, not 8.1%.

Ceteris is rarely paribus, of course: If there were more government jobs now, for example, it’s likely that not as many people would have left the labor force, and so the actual unemployment rate would be north of 7.1%.

It's regressive tax on the middle and lower classes as bargaining power is reduced because of a weak labor market. Cyclical unemployment is transformed into long-term unemployment as the nation's human capital and productive capacity is degraded. It's effective class warfare in the wake of a financial crisis caused by the finanical-system-casino being left to its own devices sans regulation.

Dean Baker reduces uncertainty

Spanish Debt, the European Central Bank, and the Maginot Line by Dean Baker

Problems arise due to the distribution of the debt. If every third household borrowed $600,000, which was lent by the other two households, then this third household is getting deep in debt, with the other two are appearing to build up large amounts of assets.

This is what happened to Spain, the United States and other countries with serious housing bubbles. The other two households were willing to lend money to the third household because they thought it held an asset (a house) of great value. When this turned out not to be true, the third household found itself with an unsustainable debt burden and the other two households found themselves with assets of questionable value. If the third household can't repay its debt, then the loans are no longer worth their face value.

Central banks should be paying attention to the buildup of such unsustainable debt burdens. Unfortunately, the European Central Bank (ECB) was focused on building up its Maginot Line, being vigilant in its fight against inflation.

The problem now is to try to correct the imbalances created by growth of the housing bubble. Spain and the rest of Europe is getting little help from ECB which is still focused on reinforcing the Maginot Line rather than promoting growth in the euro zone.

The problem I have with the MMT/Monetary Mystics is that they believe all debt its bad.

Econoblog commenters like Troy at DeLong's blog, Dan Kervick, noncents, etc.

Question:

Which actor has appeared or is appearing on two of the best television shows ever?

Answer:

Aiden Gillen who plays Littlefinger on Game of Thones and played Councilman Carcetti on The Wire.

I am liking the Hound especially after this past episode. He cut his way through those rioting peasants pretty easily to save Sansa. "Put the bird back in her cage."

As someone said it's not that he doesn't like Tyrion Lannister in particular, he hates everybody.

R.I.P. Adam Yauch of the Beastie Boys (1964-2012) by Nathan Rabin

Was Paul’s Boutique Illegal? How dumb court decisions and bad laws have made it all but impossible for musicians to sample the way the Beastie Boys used to. by Yglesias