How cool is Michelle Forbes? (She's an Emmy nominee for best supporting actress in a drama for her work in "The Killing.")

Q.You were also on “Star Trek: The Next Generation.” Do you still get cornered by Trekkies?

A. Yeah a little bit, all these years later.

Q. What’s that like?

A. It’s… It’s… You know… That’s nice [laughs]. It’s like talking about a different person — I was such a kid when I did that show.

Q. You had a stint on “Battlestar Galactica,” too. Are you actively seeking obsessive fan bases?

A. No, no. The fear with those massive, rabid fan bases is that they can also turn on you quite quickly.

Q. This is your first Emmy nomination — are you going to go to the ceremony?

A. Nah. [laughs] Of course I’m going! What’s so great about these things and the awards season is it feels like one big long reunion. You run into everyone you’ve worked over the past two-and-a-half decades. It’s great.

Q. Are there any television creators that you particularly admire right now?

A. Alan Ball [“True Blood,” “Six Feet Under”] is definitely one; I would jump to work with him again. Ron Moore, from “Battlestar,” I think is really kind of a genius in the way he wove that story. I hear Tom Fontana [“Oz,” “Homicide: Life on the Street”] is coming back with a series and I’m so happy, because I’ve missed his voice on television. Vince Gilligan [“Breaking Bad”] I really admire. There are so many.

Q. What about other actors?

A. One is Melissa Leo and one is Mary McDonnell. Edie Falco is another one. They’re just extraordinary actors and they’ve always stood by their work. They work on amazing projects and they’ve never lost their integrity throughout their careers.

Q.What do you watch on TV?

A.I’ve been watching “Game of Thrones,” and I can’t wait for “Bored to Death” to come back, it’s one of my faves. I’m not a huge fan of reality television but I just found a show that I think is really important for America called “Downsized.” It’s just about a normal American family and their kids aren’t drunks, and they’re not all going out to nightclubs. It’s just about a family trying to get through this painful and awkward time we’re in. I couldn’t believe that something this honest was around when everyone’s eyes are pinned to “The Jersey Shore.”

Q.“Important” isn’t a word that is often applied to reality shows.

A. Yes, most of them are only important in that they help us realize how far we’ve fallen.

Thomas Friedman is shrill.

Every time I listen to Gov. Rick Perry of Texas and Representative Michele Bachmann of Minnesota talk about how climate change is some fraud perpetrated by scientists trying to gin up money for research, I’m always reminded of one of my favorite movie lines that Jack Nicholson delivers to his needy neighbor who knocks on his door in the film "As Good As It Gets." "Where do they teach you to talk like this?" asks Nicholson. "Sell crazy someplace else. We’re all stocked up here."

Thanks Mr. Perry and Mrs. Bachmann, but we really are all stocked up on crazy right now... 

(via Dean Baker)

Proof is in the Pudding

Tyler Cowen has a go at the liberal economics blogosphere.

The old Keynesian approach has a major presence in the blogosphere but much less influence in current academic macroeconomics.  Whether Econ 101 sides with the Old Keynesians I am not sure (it depends who teaches the class), but Econ 2011 in many cases does not.=

There are enough AD-denialist arguments running around that the new and old Keynesian perspectives can forge an alliance on some major issues.  But as the downturn continues, this intellectual alliance will grow increasingly fragile, mostly over the question of whether long-run or short-run models are relevant.
Not long ago I tweeted this:

Confused by the Right on macro, you’re a New Old Keynesian; confused by the Left, you’re an Old New Keynesian.

I also see old Keynesians as believing that the IS-LM framework follows directly from the quantity theory of money, while new Keynesians are not committed to such a view and may even oppose it.  I may write a post devoted to this topic.

I am sort of out of my depth, but it appears the "old Keynesians" constitutes the DeLong-Krugman-Thoma axis and the "new Keynesians" are Cowen and his ilk.

I like this comment made at DeLong's blog from "RPL":

I have a suggestion for the commenter above, and in fact for most observers of the absurd stuff being written by the free market ideologues of the economics profession. Ignore the ideologues and take a look at the perspective of the economists who make their forecasts in the service of actually making money, i.el[sic], the economists of the asset management industry and of Wall Street. I assure you that for the most part they don't pay any attention to the rantings of guys like Barro, Cochrane, Mulligan and the rest of the University of Chicago gang. Hatzius of Goldman Sachs, Zandi of Moody's analytics, Harless of Atlantic Asset management analyze the economy from the perspective of what works, because they have to, it is not an intellectual hobby for them, they and their bosses are all trying to make money. And lo and behold what you will find is that their analysis has a lot more in common with Krugman, Delong, et.al., than it does the guys listed above. Why, because their stuff needs to work. As Barry Ritholtz points out all the time, successful investing requires fact-based analysis. How do I know? Because I am the retired Chief Investment Officer of a firm that ran and still runs well over $100 billion and I assure you there is no other way to be successful. I hope Barro has been trading on his beliefs, because it is certain that I now have some of his money safely locked away in my personal portfolio.

I haven't carefully documented it, but from my memory the "old Keynesians" have proven to be more correct than the "new Keynesians" starting with the housing bubble and through Lehman, the government's response (via the Fed and fiscal stimulus) and the weak recovery.

The arguments that the stimulus or quantitative easing didn't work are harder to contradict because these policies have prevented things from getting worse but conditions are still bad. It's there in the data, but critics refuse to engage the data with an open mind.

Bigger Economic Role for Washington by Jackie Calmes and Binyamin Applebaum

Fed officials will consider several options when the central bank’s policy-making committee meets for two days next week. The leading contender is a plan to shift the composition of the Fed’s $2.6 trillion investment portfolio, selling short-term Treasury securities and using the money to buy longer-term securities.

If it works, the shift should modestly cut credit costs for businesses and consumers. Macroeconomic Advisers estimated that the Fed could raise gross domestic product by about 0.4 percentage points over two years, increasing jobs by about 350,000 over the same period.

An impact of that magnitude would be roughly the same as the Fed achieved through its recently-completed purchase of $600 billion in Treasury securities, popularly known as QE2.

Under the new plan, the Fed would be absorbing more risk for each dollar it invests; 10-year Treasury securities are riskier than one-year securities because the investor makes a longer commitment. By shifting its portfolio, the Fed would seek to drive investors into even riskier assets, reducing borrowing costs.

Charles Evans, president of the Federal Reserve Bank of Chicago, said in a speech in London last week that the central bank had an obligation to ratchet up its efforts. With an unemployment rate of 9 percent, he said, Fed officials should be "acting as if their hair was on fire."

But Richard Fisher, president of the Federal Reserve Bank of Dallas, said Monday that the Fed already had "filled the gas tanks of the economy," that he doubted its ability to do more, and that the responsibility now fell on the rest of the government.

via quasi-monetarist Scott Sumner, a National Review piece advocating that the Fed target nominal GDP.

Finally, a nominal-income target not only has economic advantages but is also politically feasible. Replacing the Fed’s dual mandate of promoting low inflation and full employment with an inflation target would be met with strong resistance by left-leaning politicians. However, a nominal-income target would implicitly respond to fluctuations in both prices and real output (and therefore unemployment) in the short run while maintaining a commitment to low and stable inflation over the long run.

Congress has the power to change the Federal Reserve’s mandate. It’s time for conservative politicians to be bold and serious about monetary policy and not simply use rhetoric to capitalize on a popular view of the conservative base. Republican presidential candidates would do well to seize the opportunity of the public’s dissatisfaction with the Federal Reserve and make it part of their campaigns to push for significant and meaningful reform of monetary policy. It is time that the Fed had an explicit target for policy, preferably one for nominal income.

Talk of replacing the Fed's dual mandate makes me nervous. A call for Republican politicians to focus on the Fed makes me nervous. Granted, if the Fed had an explicit target it could be held accountable for not meeting that target and the target itself could be democratically debated.
-----------------
Update: Reading the comments to the National Review piece reassures me that at least the quasi-monetarists are better than Ron Paul and the Austrians. One commenter says, "Certainly the fed shouldn't be worried about unemployment."  Another pissed-off commenter writes

I see that Ponnuru finally got his guru a guest spot on NRO. His arguments still suffer from the same flaw when he delivers them himself as when Ramesh repeats them: An increased demand for money balances is not a demand for a certain number of pieces of paper with presidents on them; it's a decision about how to allocate one's (limited) wealth. If this shift is economy-wide, then the economy *should* shrink temporarily, until there are enough positive-net-present-value investment opportunities that people choose again to deploy their cash reserves.

and

Most irritating is the dishonesty of it. Hendrickson doesn't come out and say, "We should manipulate people into spending or investing now, against their better judgment, by scaring them with the threat of future inflation". Instead, he talks about a "deviation between actual and desired money balances" as though it's some sort of distubance in the Force that we need to correct. Monetarists like Hendrickson are manipulators just like Keynesians; the only difference is that they want to use monetary instead of fiscal policy.

So what should the Fed do? Assuming we have to have a Fed, it should increase the money supply mechanically, with zero discretion, to match long-term average growth rates determined in advance according to a set formula, regardless of short-term fluctuations.

It sounds like the Treasury view and the view held by Treasury Secretary Andrew W. Mellon who supposedly advised Herbert Hoover to "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate... it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

Martin Wolf on Germany and the European Union

This is what I heard from an Italian policymaker: "We gave up the old safety valves of inflation and devaluation in return for lower interest rates, but now we do not even have the low interest rates."

and

For small open economies such as Latvia and Ireland, regaining competitiveness and growth through deflation might work. For a big country such as Italy, it is too painful to be credible.

How would deflation work for a small open economy?

Zombie vs. Shark fight




Reminds me of the Romney-Perry debate. The YouTube commenter reactions are hilarious.

(via Crooked Timber)

Olivia Wilde, daughter of Andrew Cockburn, niece of Alexander and Patrick. She starred in Tron: Legacy alongside Jeff Bridges who played Rooster Cogburn in the Coen brothers remake of True Grit.

Interestingly, "quasi-monetarist" Scott Sumner approvingly links to a good bloggingheads discussion with Dean Baker and Brink Lindsey.

Krugman blogs about monetary policy here, here, and here.

Sumner responds here.

Nick Rowe responds here. It's just hard for me to take Sumner seriously given that he believes that the American Jobs Act legislation Obama just presented to Congress isn't worthwhile.

The Beatings Will Continues Until Morale Improves*

The Death of Confidence Fairy by Krugman

*via Wikipedia. "The beatings will continue until morale improves is a famous quotation of unknown origin. It literally denotes how morale, such as within a military unit or other hierarchical environment, will be improved through the use of punishment. More importantly, the phrase is used sarcastically to indicate the counterproductive nature of such punishment or excessive control over subordinates such as staff in the workplace or children living at home. The most commonly cited story for the origin of the phrase comes from the Japanese Imperial Navy during World War II. Supposedly, the phrase was first used by a commander of the Japanese Submarine Force. The quotation was not meant to be taken literally but instead was facetious. Another story relates to a case in Canada over a military officer fired for political reasons in which he uttered a similar quotation."

Meredith Woerner recaps True Blood season finale

Looking forward to next season!

A Few Good Men (see below) sums up my thoughts pretty well about 9-11, except for the fact that religious fanatics brought it on. Cheney, etc. overreacted with torture, the Patriot Act, renditions, Guantanamo, Abu Graib, warrantless wiretapping etc. However I have the heretical view that the downfall of Saddam Hussein, however poorly executed, helped bring about the Arab Spring. 9-11 made me develop a more negative view of the left (my side) as well as the right. In the link below, I think Ahmed Rashid is right that the advanced countries have failed to build up the institutions and economies of Afghanistan, Pakistan, and Iraq.

I celebrated 9-11 yesterday by attending the Onion A.V. Club's first annual blockparty at the Hideout. The headliner was 90s indie rock band Archers of Loaf who were amazing. Before them was the Tokyo Police Club who sounded great under the dusk sky and a full moon.

FT Alphaville on Trichet:

Reporter: What is your answer to German people and economists who want the return of the DM?
Trichet: You want answers?
Reporter: I think the Germans are entitled.
Trichet: You want answers? (SHOUTING)
Reporter: Germans want the truth! (SHOUTING)
Trichet: *You can’t handle the truth!*  (SHOUTING)
[pauses]…
Trichet: Son, we live in a world that has prices, and those prices have to be guarded by men with bonds. Who’s gonna do it? You? You, Sylvia Wadhwa? I have a greater responsibility than you could possibly fathom. You weep for Lehman Brothers, and you curse Ben Bernanke. You have that luxury. You have the luxury of not knowing what I know. That Lehman’s collapse, while tragic, probably saved banks. And my existence, while grotesque and incomprehensible to you, saves banks. You don’t want the truth because deep down in places you don’t talk about at parties, you want me on that committee, you need me on that committee. We use words like rate, target, expectation. We use these words as the backbone of a life spent defending something. You use them as a profitline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of price stability that I provide, and then questions the manner in which I provide it. I would rather you just said congratulations and went on your way. Otherwise I suggest you pick up a Greek bond, and suffer a haircut. Either way, I don’t give a damn what you think you are entitled to!

(via Krugman)

Steve Pearlstein is shrill



(via Mark Thoma)

Jonathan Chait leaving the New Republic

What Caused the Recession of 1937-38? by Douglas Irwin

If we are to avoid the mistakes of the past, it is important to have an accurate assessment of what those past mistakes were. The severity of the Recession of 1937-38 was not due to contractionary fiscal policy or higher reserve requirements. By contrast, the policy tightening associated with gold sterilisation was not modest – it did not simply reduce the growth of the monetary base by a few percentage points, it stopped its growth altogether. While the Federal Reserve is often blamed for its poor policy choices during the Great Depression, the Treasury Department was responsible for this particular policy error.

The recession of 1937-38 occurred long ago, but it does have policy lessons for today. It suggests that, in a weak recovery, a pre-emptive monetary strike against inflation (which was very low at the time, as it is today) is capable of producing a devastating recession.     

(via Mark Thoma)

The Spanish Prisoner by Krugman

And Hate Begat Hate by Ahmed Rashid

First R-rated movie

Steve Bennen on Obama's speech about the American Jobs Act

David Brooks is afraid of a double-dip.


Dean Baker says it's unlikely. The Fed engineered the last one in the early 80s.

Brooks:

A few years ago, Kenneth Rogoff and Carmen M. Reinhart wrote the definitive guide to the current economic downturn, a book called “This Time Is Different.” Rogoff and Reinhart studied data from eight centuries of financial crises. They found that banking-crisis recessions are worse than normal recessions. They last longer.

In these recessions, it took an average of six years for housing prices to stop their decline. Unemployment rates were high or rising for an average of five years. Government debt increased by an average of more than 86 percent.

The general lesson I take from this history is that policy makers stuck in a financial recession should probably think about the long term. You’re going to be stuck with a lousy economy anyway.

When asked about Reinhardt and Rogoff's study at a press conference, Bernanke deadpanned that "policy makers stuck in a financial recession" haven't performed well in the past. They were too complacent or made mistakes in other words. In a recent speech, Chicago Fed President Charlie Evans said the same thing.

The title of the book is referring to the manner in which people explained away the housing bubble and past bubbles, people like Greenspan and Bernanke. Baker didn't and I'm willing to bet Brooks did, or else ignored the issue, so Baker's probably right here.

Just saw for the first time a 1990 movie titled "Windprints" with Sean Bean and John Hurt. Also saw for the first time a 2003 movie titled "All the Real Girls" with Zooey Deschanel and Parks and Recreation's Paul Schneider. Deschanel will have a new sitcom on Fox this month.

Paul Krugman's Presidential Address to the Eastern Economic Association

(via Mark Thoma)

Chicago Fed President Charles Evans's speech in London

(via Yglesias)

The TV on the Radio video I just linked reminded me that my favorite music videos are either live versions or contain little stories, usually with subtitles.

For example, The Offspring's "You're Gonna Go Far, Kid" and Alice in Chain's "Your Decision."

What the Left Doesn’t Understand About Obama by Jonathan Chait

Hitchens on 9/11 ten years later

Treasuries, TIPS, and Gold (Wonkish) by Krugman


Currency Wars Could Save the World by Yglesias

When the moon is round and full, gonna teach you tricks that will blow your mind

Rosenberg on True Blood:

I did actually think that moment in the show was handled well, with some real emotional grounding and force. Alcide’s efforts to stay with Debbie have been one of the most consistently-rendered storylines this season, each time bringing Alcide closer and closer to his limits. First, he’s joining a new pack, even if he’s not particularly comfortable with the people in it, as a way to try to help Debbie stay clean. He’s resisting Sookie, even though she might be an easier partner. And he’s stood by Marcus up to the point when it became clear that his packmaster wasn’t man enough to do his own fighting, much less enough wolf. But Debbie’s infidelity, her role in stealing someone else’s child, are too much, and True Blood made us feel the force of Alcide’s ritual without explaining it into the ground.

Meredith Woerner:

Pro: In spite of Debbie's GIGANTIC flaws and mistakes, she insists that she loves Alcide. I know I'm a Debbie sympathizer, but out of all the incredibly unrealistic turns and twists a show about vampires having sex inflicts on its audience week after week, Debbie does appear to act like an actual human being. She's an addict, she makes horrible decisions, she plagued by her past, and hounded (GET IT?!?) by Alcide's obvious infatuation with Sookie. Yes, OF COURSE she was going to fuck this all up. I'm not making excuses for her, I'm just happy that out of all the jumbled plots on this show, Debbie's continues to be the most surprisingly realistic (again, for a show about vampires that have sex with each other). Of course she's not going to run away with Mr. He-who-pauses-awkwardly-in-speeches, Marcus. She's in love with Alcide. Debbie is going to do everything in her power to try and fix their relationship, which probably means burning whatever little bits of happiness they have left to the ground and then pissing on the embers. As messed up as she is, everything she does makes sense for her character.

Two Views of Fiscal Headwinds by Jared Bernstein

True Blood recap (last show before season finale) by Meredith Woerner

Krugman: the beatings will continue until morale improves

When the recession officially ended, [government] spending was rising at an annual rate of around $60 billion; now it’s declining at an annual rate of $60 billion. That difference is around 1 percent of GDP, and maybe 1.5 percent once you take the multiplier into account. That makes the turn toward austerity a major factor in our growth slowdown.

Debt, Deleveraging and the Liquidity Trap

LIBOR

What's in a number?

Team Debbie

Not wonkish, but too-much-information-ish ... I ran across a bad-ass ex-girlfriend at the local Starbucks this morning. Hadn't seen her in years. She sort of reminds me of Debbie Pelt and vicey versey. Since we broke up, she had gone to rehab and hooked up with one of her bad-ass ex-boyfriends that she used to date before we had met. He's her age whereas I'm 8 years older.

On True Blood, Alcide seems more interested in Sookie and helping other people like Sam, than in Debbie. With me, I'm too interested in the things I blog about, like True Blood, politics and economics, things which didn't interest my ex. Plus she ran with the pack who work bars and restaurants and stay out all night, while I had a 9-5 office job.

DeLong on Gauss (wonkish)

Johann Carl Friedrich Gauss said that when you are analyzing variability, you should measure it by squaring deviations from the average and then averaging those squared deviations.

Jonathan Chait on FDR and Reagan's re-elections.

... That caveat aside, this sounds like pure delusion. Roosevelt in 1936 and Reagan in 1984 had high unemployment, yes. But they also had very rapid economic growth. Here's the picture in 1936:

And 1984:

These were situations where the public could discern rapid improvement from a bad situation. No such thing is likely to be the case next year. 1936 and 1984 are not good lessons. They're counter-examples, like learning how to handle a drought by studying what happened during Hurricane Katrina.

Dennis Lockhart, President and CEO of the Atlanta Fed discusses the structural adjustment of deleveraging

Men and Women to Avoid

Match them up

Bank of England's Adam Posen backs more QE

(via Yglesias)

Part 1 of CNBC interview with Charles Evans, President of the Chicago Fed

Part 2

This summary is not available. Please click here to view the post.

Charles Evans of the Chicago Fed is a Mensch, and He Sees the Situation Clearly by DeLong

Martin Wolf on the "second great contraction"

(via Krugman)

Yes, We Can Do Stimulus Without Adding Debt. Here’s How. by Robert Shiller

Dean Baker has a new book

True Blood recap by Meredith Woerner, complete with Zoolander clip

Give Marx a Chance to Save the World Economy by Geoge Magnus

(via Yglesias)

Alan Krueger picked to lead the Council of Economic Advisers by Jackie Calmes

The cooler reception came from some on the left, who said the moment called for a big-picture macroeconomist who would push for more ambitious initiatives to reduce unemployment. "The kind of action he’s an aggressive and creative thinker about is relatively small bore, supply-side changes rather than big-picture efforts to fill the gap," Matthew Yglesias, a senior fellow at the liberal Center for American Progress, wrote in a blog.

Mark Thoma, Jared Bernstein, DeLong and Krugman are happy with the choice.

Brief Hiatus by Tim Duy

The failure of Bernanke to push for more aggressive action is even more puzzling in the wake of this speech. According to the Fed chair, the situation is becoming urgent:

Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well. In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow. In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment.

I suppose I should be happy that someone in Washington considers unemployment to be a crisis, both near and long term. That said, Bernanke follows up with this:

Notwithstanding this observation, which adds urgency to the need to achieve a cyclical recovery in employment, most of the economic policies that support robust economic growth in the long run are outside the province of the central bank. We have heard a great deal lately about federal fiscal policy in the United States, so I will close with some thoughts on that topic, focusing on the role of fiscal policy in promoting stability and growth.

So he passes the ball to fiscal policy. With good reason, to be sure. Congress and the Administration are failing miserably at macroeconomic policy.

(via Mark Thoma)

Five Trillion Dollars by Krugman

A couple of notes on the most recent Congressional Budget Office Projections:

1. They offer a portrait of an economic catastrophe. Here’s the CBO estimates of potential real GDP — the amount the economy could produce without causing inflationary pressure — and actual GDP, in trillions of 2005 dollars per year:

 

No, I don’t know where that recovery in 2015 is supposed to come from; my guess is that it’s basically the CBO unwilling to project a depressed economy more or less forever. But even with that bounceback assumed, the projection says that we’ll have a cumulative output gap of $5.1 trillion, with $2.8 trillion of that having already happened.

Surely it would have been worth making an extraordinary effort to avoid this outcome[....]

Dissecting the Mind of the Fed by David Leonhardt

But you would also find a sizable group of economists who thought the Fed could and should do far more than it was doing. This group, known as doves, tilts liberal, though it includes conservatives as well. If anything, it can probably claim a larger number of big-name economists -- J. Bradford DeLong, Paul Krugman (an Op-Ed columnist for The New York Times), Christina D. Romer, Scott Sumner and Mark Thoma, among others -- than the camp that believes the Fed has done too much.

...

David Levey, a former managing director at Moody’s and another critic of Fed inaction, points out that banks often have more to lose from inflation than from unemployment. Inflation reduces the future value of the money that their debtors — homeowners, car buyers, small businesses and the like — will repay them.

...

"The Fed regional banks represent, in essence, the banking community, which tends to be very conservative and hawkish," Mr. Levey says. "Creditors don’t like inflation -- it’s good for debtors." Indeed, the three recent dissents all came from regional bank presidents: Richard W. Fisher of Dallas, Narayana R. Kocherlakota of Minneapolis and Charles I. Plosser of Philadelphia.

The Crimes of Col. Qaddafi: In the euphoria of the current celebrations, we must not lose sight of the former leader's foul deeds. by Hitchens

Krugman on QE

Well, here we are: Ben Bernanke is now Master of the Universe Fed chairman, and he has just conducted an experiment — QE2 — in asset purchases. That experiment is now widely viewed as a disappointment; to the extent it worked, it did so mainly by changing expectations, and once markets realized that the Fed wasn’t actually going to sustain expansion, the expectational effects wore off.

So now we have Woodford (not a household name, but one of our leading, perhaps the leading, macro theorist working now) arguing in the FT that Bernanke needs to stop fiddling with balance sheets and start making explicit announcements about future policy. The key thing to understand, reading Woodford, is that this isn’t some shoot-from-the-hip piece, it’s the culmination of a debate that goes back more than a decade.

Meanwhile, Cullen Roche makes much the same argument, although he insists that you need MMT to make it, which would be news to Woodford (and me).

I’ve labeled this post wonkish, because it is. But this is really important. And as FT Alphaville says, all the fears about QE have been misplaced. The danger isn’t that it’s wildly inflationary; it is that it’s symbolic rather than real, at a time when we desperately need substance.

A New York Times editorial:

A Lifeline for Underwater Homeowners

The basic notion is to ease refinancing rules for borrowers who are current in their payments but can’t qualify for new lower-rate loans because their home values have declined. The looser loan standards would not increase the risk of default. By lowering the borrowers’ monthly payments, refinancing would make default less likely. It would also free up potentially tens of billions of dollars for consumer spending, helping to ensure that today’s low interest rates stimulate the economy as intended. It could even help underwater borrowers restore equity in their homes if borrowers used some of their savings to pay down their loan principal.

The Truth about Bank of America by Henry Blodget

Mass Mortgage Refinancing Is A Good Idea by Yglesias

Housing and Arithmetic: Why Do They Never Appear Together by Dean Baker

book review on Arthur Rimbaud by Carlin Romano

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

What Should We Have Known About Fiscal Stimulus? by Krugman

I’ve noticed a number of people arguing that the original Obama stimulus was underpowered because at the time nobody realized how deep a hole the economy was in. And it’s true that revised GDP numbers have shown that the 2007-2009 recession was even deeper than we thought. But the basic line of thought here is wrong: there was plenty of information in January 2009 indicating that the economy needed a lot more help than it was about to get.

First, even in January 2009 the CBO was forecasting an “output gap” — a shortfall of the economy’s actual production over what it could and should be producing — of more than $2 trillion over 2009-2010. That told you right there that an $800 billion stimulus, much of it consisting of tax cuts of dubious effectiveness, was likely to fall short.

There were also good reasons to believe that the slump would be prolonged, that the economy would need help over a protracted period.

After all, the two previous recessions had been followed by long periods of jobless recovery, and there was every reason to expect a repeat. Moreover, we had international evidence showing that the aftermath of financial crises is a long period of high unemployment.

The point is that even in January 2009 it should have been obvious that the economy probably needed a really major push. Maybe that wasn’t possible politically; but it’s clear that there was a complacency in the White House that remains very hard to understand.

Brad DeLong on what Obama could have done:

1. Use Reconciliation to get a second stimulus through Congress in the fall of 2009.
2. Expand the PPIP to do $3 trillion of quantitative easing through the Treasury Department.
3. Have a real HAMP to refinance mortgages.
4. Use Fannie and Freddie to (temporarily) nationalize mortgage finance, refinance mortgages, and rebalance the housing market.
5. Announce that a weaker dollar is in America's interest.
6. Nominate a Fed Chair who takes the Fed's dual mandate seriously and pursues policies to stabilize the growth of nominal GDP.
7. Appoint Fed governors who take the Fed's dual mandate seriously and support policies to stabilize the growth of nominal GDP.
8. Take equity in the banks in January-March of 2009 and keep them from lobbying against financial reform.
9. Use Reconciliation to pass an infrastructure bank.
10. Use TARP money as a mezzanine tranche to fund large-scale additional aid to states and localities to reduce their fiscal contractions.

David Leonhardt's time machine

David Leonhardt: This time machine would start its magic by taking us back almost a decade, to the days when everyone from senior Washington officials to ordinary Americans believed that house prices could never drop. We'd then have a chance to persuade Alan Greenspan and Ben Bernanke, the last two Federal Reserve chairmen, to stop saying that nationwide housing bubbles could not happen and to start cracking down on the wishful-thinking mortgages that were making that bubble possible.

We would also stop by the Treasury Department and Congress and ask them to give some more attention to the fact that incomes were stagnating and many Americans were using their credit cards to pay for higher living standards. Finally, we'd pay a visit Wall Street. We'd go to Lehman Brothers and explain to the bigwigs there why they might not want to be borrowing $33 for every $1 in assets they held. If they didn't listen to us, we'd go see a gentleman named Timothy Geithner, then overseeing the regulators at the New York Fed.

In every case, we would issue an urgent message: The United States economy is in the midst of creating the worst economic excesses since the 1920s. If allowed to continue, those excesses will do enormous damage -- damage that you won't be able to stop once it starts.

This damage, of course, is what we are living through right now. And as much as we all may wish they were an easy fix, there isn't. Financial crises cause spending to be depressed and unemployment to be high -- for years.

Are there steps we can take to mitigate the damage? Absolutely. An aggressive policy response in 2008 and 2009 helped prevent another depression. And a more timid response in 2011 has aggravated the problems.

But the economy was never going to recover quickly from the bubbles. That's why sales -- not just of houses, but of appliances, vehicles and even services like entertainment, are all still far below their pre-crisis levels. They will be for a long to come.

It's too late to prevent the last great financial bubble. It's not too late to ask whether we are taking substantial steps to keep the next bubble from being nearly so bad. Remember: there's always a next bubble.

Michael Shur of Parks and Recreation recently acquired film right to "Infinite Jest."

Team Debbie

Meredith Woerner recaps True Blood

Dean Baker on double-dip talk from reporters

The misplaced obsession with a double-dip has consequences because it creates a situation in which the slow growth that the economy is now experiencing appears to be good. For example, the July jobs report, which showed 117,000 new jobs, was widely seen as good news. However, this pace of job growth is only slightly faster than the 90,000 rate needed just to keep pace with the growth of the labor force. At the July rate of job growth it would take close to 30 years to replace the jobs lost in the downturn.

It would be helpful if reporters would try to discuss what the data show and not frame their story on misplaced optimism or pessimism from ill-informed commentators.

Hitchens on UK riots

Recap: True Blood trips balls on a V-juice hump-hump-fest by Meredith Woerner

The Hope that Flows from History: From World War II, Economic Lessons by Christina Romer

Krugman comments on it

Sometimes Inflation is Not Evil by Floyd Norris

The chaos that has engulfed financial markets, with new rumors of European bank failures, arose as it became apparent that recovery was unlikely until something was done to write down bad debts, whether American mortgages or Greek government loans, or to make them good again by raising asset values and thus increasing the ability to repay.

And yet the anti-inflation warriors continue to fight old battles. There were three dissents from regional Fed presidents when the Fed promised this week to hold down rates for at least two more years. The European Central Bank has been raising rates on the belief that it must vigorously fight any sign of inflation.

In the future, central banks will have to realize that debt-financed expansions in asset prices can be a threat. For now, it would be nice if they would at least recognize that major deflations in asset prices can be much more important than the relatively small gains in commodities that show up in the Consumer Price Index.

Steamroller Ben by Doug Henwood

Comment on today’s Federal Reserve policy decision today, which among other things, included the extremely unusual statement that they’re likely to leave interest rates close to 0 through mid-2013, from Ricardo Perli of ISI, a very mainstream Wall Street research operation:

For the first time in a long time, there were three dissents – Fisher (Dallas), Kocherlakota (Minneapolis), and Plosser (Philadelphia).  Up to now, FOMC chairmen strived to avoid more than two dissents.  The fact that this long-standing practice was disregarded means that Bernanke is becoming more determined to push through what in his view are the appropriate policy moves.  We would expect the influence of the hawkish minority to diminish as a result.

Bernanke is very concerned about economic weakness and wants the Fed to do everything it can to stimulate a return to growth. The release is full of unusual mentions of their "dual mandate," meaning boosting employment as well as keeping down inflation. This is not William Greider’s Fed.

John Burns and Alan Cowell on the UK riots.

Mr. Cameron had hesitated for two days to abandon his summer break at a villa in Tuscany as the looting and arson spread across London, and then to other cities, from its start in the Tottenham area in northeast London after Mark Duggan, 29, who was said by the police to have been a local gang member, was shot and killed by an officer last week.

On Tuesday, a police oversight body said that forensic tests had shown that both shots fired at the scene had come from a police officer’s Heckler and Koch submachine gun, and that the tests had so far shown no evidence that the loaded Italian-made BBM pistol carried by Mr. Duggan had been fired in the confrontation.

...

For the moment, though, the circumstances of Mr. Duggan’s death appeared to be remote from the forces driving the riots, at least in the assessment of many of those who are most familiar with the neighborhoods affected. Community organizers, neighborhood residents and members of Parliament who represent the districts, including several who, like Mr. Duggan, were of Afro-Caribbean descent, have said, overwhelmingly, that his death, while providing the original trigger for the violence, has had little or nothing to do with the looting and arson. 

The Keynes-Hicks Model by Krugman

FRED Excels! by Krugman

Half-measures from the Fed

For starters, the Fed could take modest steps, like shifting its portfolio toward bonds with longer maturities, which would help to keep long-term rates low and nudge investors into riskier investments. It could reduce the interest it pays on the banks’ huge reserves or even tax the reserves to try to encourage more lending. It could also resume buying Treasuries or other securities to provide additional monetary stimulus. A more aggressive strategy would be letting inflation rise above the Fed’s comfort level of 2 percent or so to, say, 4 percent. That could help the economy by easing the repayment of debt.

London Burning

White Riot


I Fought The Law

Career Opportunities

Team Debbie 

Meredith Woerner recaps True Blood.

Gateways to Geekery: Ween

state of the union by Krugman

The truth is that as far as the straight economics goes, America’s long-run fiscal problems shouldn’t be all that hard to fix. It’s true that an aging population and rising health care costs will, under current policies, push spending up faster than tax receipts. But the United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved.

So why can’t we do that? Because we have a powerful political movement in this country that screamed “death panels” in the face of modest efforts to use Medicare funds more effectively, and preferred to risk financial catastrophe rather than agree to even a penny in additional revenues.

The real question facing America, even in purely fiscal terms, isn’t whether we’ll trim a trillion here or a trillion there from deficits. It is whether the extremists now blocking any kind of responsible policy can be defeated and marginalized.

Fun with Thomas Friedman by Dean Baker

Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is

Obama Turns 50 Despite Republican Opposition

WASHINGTON—After months of heated negotiations and failed attempts to achieve any kind of consensus, President Obama turned 50 years old Thursday, drawing strong criticism from Republicans in Congress.

What Caused The Deficit? A Reply to Megan McArdle by Jonathan Chait

Hitchens on Oslo

David Leonhardt will be Washington bureau chief

Dean Baker on Obama's speech

Jared Bernstein blogs:

Also, we should implement this work sharing idea that Dean Baker’s been pushing for awhile.  What’s important about Dean’s take here is that he’s thought through some of the implementation challenges that keep employers from taking advantage of the option.  Remember, this is the main reason why German unemployment is back to pre-recession levels, even while their GDP losses were comparable to our own.

Larry Summers on the current predicament

(via Felix Salmon and Yglesias)

 
3 Men and a Trash Baby

Meredith Woerner recaps True Blood at io9.

Hitchens applauds the Guardian.

Corey Robin drops some names

Presumably because they are, in Yglesias’ eyes, the real movers and shakers of the economy, as opposed to the vast majority of middle- and working-class people or the government that represents them.

Presumably? Again it's no surprise that the left doesn't advance their/our policy goals. They're too busy calling people sellouts.

Dana Jennings reviews "A Dance with Dragons."

Best of all, "Dragons" puts us back in the company of Tyrion Lannister, a bitter but brilliant dwarf whose humor, swagger and utter humanity make him the (often drunken) star of the series. When Tyrion is present, "Song of Ice and Fire" becomes "A Rogue’s Progress, or the Further Ribald Adventures of Tyrion Lannister."

Mr. Martin is a literary dervish, enthralled by complicated characters and vivid language, and bursting with the wild vision of the very best tale tellers. And Tyrion is his grandest creation. A kin slayer and fugitive, Tyrion assumes manifold roles in "Dragons": mummer, soldier, paymaster, slave, river rat and captive. He’s in on the cosmic joke of being a "high-born dwarf" and is quick to give practical Westeros wisdom: "Trust no one. And keep your dragon close." He also notes that “a small man with a big shield will drive the archers mad"

Alyssa Rosenberg's review of "A Dance with Dragons" complete with spoilers.

NYTimes on the Debt Ceiling Clown Show*

Recounting how the 1995 government shutdown helped President Bill Clinton win re-election the following year, Mr. McConnell said any impasse that drove down the nation’s credit rating and led to government checks being delayed could have the same result for Mr. Obama.

"He will say Republicans are making the economy worse," Mr. McConnell said in an interview with the conservative radio host Laura Ingraham. "It is an argument that he could have a good chance of winning, and all of the sudden we have co-ownership of the economy. That is a very bad position going into the election."

Kristof Perpetuates the Clinton Budget Myth by Dean Baker

Nicholas Kristof is mostly on the mark in his column this morning, but he does repeat the Clinton fiscal responsibility balanced the budget myth. This is not true.

An examination of the Congressional Budget Office's (CBO) projections from the 1990s shows that in 1996 CBO still projected a deficit of 2.7 percent of GDP for fiscal year 2000. Instead, we had a surplus of 2.4 percent of GDP, a shift of 5.1 percentage points of GDP (@$750 billion in today's economy).

This shift did not come about from tax increases or spending cuts. CBO estimates that the tax and spending changes between 1996 and 2000 added $10 billion to the year 2000 deficit. The shift was entirely attributable to faster than expected economic growth and especially the decision by Federal Reserve Board chairman to allow the unemployment rate to fall to 4.0 percent.

CBO had projected an unemployment rate of 6.0 percent for 2000. This was the conventional estimate of the NAIRU (non-accelerating inflation rate of unemployment) at the time. It was only because Greenspan ignored this nearly universally held view in the economics profession (and the Clinton appointees to the Fed) that the economy was able to grow enough to get the unemployment rate down to 4.0 percent and to bring the budget from deficit to surplus.

This is an important piece of history that is routinely buried.

------------------
*"debt ceiling clown show" is Baker's coinage.

Owen Jones's Chavs: The Demonization of the Working Class reviewed by Dwight Garner

Here’s how Mr. Jones sets the scene. "Sitting around the table were people from more than one ethnic group. The gender split was 50-50, and not everyone was straight. All would have placed themselves somewhere left of center politically." Each guest "would have bristled at being labeled a snob." Disaster arrived, as it always seems to, with the black currant cheesecake. That’s when the talk turned to the economic crisis. One of the party’s hosts joked: "It’s sad that Woolworth’s is closing. Where will all the chavs buy their Christmas presents?" The other guests tittered. Mr. Jones stewed.

... 

The word chav, if your subscriptions to British periodicals have lapsed, is a noun that essentially means "ugly prole": loutish, tacky, probably drunken and possibly violent. The stereotypical chav is a hormonal 20-something lad in an Adidas tracksuit, sideways Burberry baseball cap and bling, but women can be chavs, too. Think of Snooki with a cockney accent.

...

Mr. Jones is very young (he’s 26) and hideously talented. Reading "Chavs," I often cursed aloud as if I’d banged my thumb with a mallet, which is how I express keen literary pleasure until I can arrive at something more coherent to say.

... 

The author notes how demonizing the lower classes makes it easier to make policy against them. "To admit that some people are poorer than others because of the social injustice inherent in our society would require government action," he writes. "Claiming that people are largely responsible for their circumstances facilitates the opposite conclusion."

...

The front half of "Chavs" is vastly superior to its back half...

This book could have been a rippling, rock-hard classic at 150 pages -- the book you’d see peeking out of every college student’s back pocket and rucksack during the summer of 2011. At nearly twice that length, it is still something to behold, a work of passion, sympathy and moral grace.

Recently, I've also came across the new verb (to me) "glassed" a couple times. "Game of Throne" actors Sean Bean (Ned Stark) and Jason Momoa (Drago) were both cut with broken bottles at bars, Bean recently in London and Momoa a while back in Hawaii.

Interview with Amy Poehler, Matt Besser, and Matt Walsh of Upright Citizens Brigade

David Brooks Says All We Can Do Is Sit Back and Throw People Off Medicare by Dean Baker

Joe Nocera exit-interview with Sheila Blair.

As she thinks back on it, Bair views her disagreements with her fellow regulators as a kind of high-stakes philosophical debate about the role of bondholders. Her perspective is that bondholders should take losses when an institution fails. When the F.D.I.C. shuts down a failing bank, the unsecured bondholders always absorb some of the losses. That is the essence of market discipline: if shareholders and bondholders know they are on the hook, they are far more likely to keep a close watch on management’s risk-taking.

During the crisis, however, Treasury and the Fed were adamant about protecting debt holders, fearing that if they had to absorb losses, the markets would be destabilized and a bad situation would get even worse. "What was it James Carville used to say?" Bair said. "'When I die I want to come back as the bond market.'"

Jared Bernstein on the exit interview.

Dean Baker on Clinton

The Armageddon Caucus by Krugman

article on Elizabeth Warren and the Consumer Financial Protection Bureau

It goes online July 21st.

(via Alyssa Rosenberg)