Mason on Varoufakis and Europe

Austerity by Design by J.W. Mason

Baker on bond vigilantes

The Bond Vigilantes Are Dead! Even With Soaring Budget Deficits Interest Rates Are Stable

21 February 2018

In the last six months, Republicans gave up being a party that pretends to care about budget deficits as they happily pushed through large tax cuts (roughly 0.7 percent of GDP over the next decade) and big increases in spending (roughly 0.7 percent of GDP over the next two years). The deficit picture looks much worse today than it did a year ago. 

While the few remaining deficit hawks at the Washington Post and the Peter Peterson–funded organizations are screaming, the question serious people should be asking is: why don't the markets don't share their concerns? In particular, the bond market, where the "bond vigilantes" live, should be going nuts with much larger deficits now being projected for as far as the eye can see. 

It is true that rates have gone up. At just under 2.9 percent, the interest rate on 10-year Treasury bonds is almost half a percentage point higher than it was a year ago. But a 2.9 percent rate is still very low by any reasonable standard. After all, it was over 3.0 percent at the end of 2013 and it was over 5.0 percent in the late 1990s as the deficits were turning to surpluses. 

The current 2.9 percent rate is also well below what the Congressional Budget Office (CBO) had projected just a couple of years ago when it expected deficits to stay on their prior no tax cut path. In January of 2016, CBO projected that the interest rate on 10-year Treasury bonds would be 3.7 percent by now. This means that even with the recent run-up, long-term interests are still 0.8 percentage points below what CBO had projected without any major increases in the budget deficit. 

This might suggest that the concerns that deficits would send interest rates through the roof have little basis in reality. After all, long-term interest rates are driven by expectations, and unless investors in the bond market have hugely different expectations about the size of deficits than folks in Washington, they apparently don't believe that the larger deficits we are now looking at are that big a deal.

Baker on growth estimates

Trump's 3 Percent GDP Growth: Is It Crazy? by Dean Baker

Dayen on Buffett: monopoly investing

Special Investigation: The Dirty Secret Behind Warren Buffett’s Billions by David Dayen

Midwest deplorable - Uncle Tupelo - Whiskey Bottle

early 90s Midwest

Midwest deplorable - Uncle Tupelo - No Depression

Oh fear the hearts of men are failing 

These our latter days we know 

The great depression now is spreadin'

God's word declared it would be so

low unemployment experiment: Bernstein and Baker

The new asymmetric risk by Jared Bernstein

The Great Fiscal Experiment: Let's See How Low the Unemployment Rate Can Go by Dean Baker

Trump and Duy forecasts

forecasts

Tyler Cowen so wrong

Tyler Cowen 10 percent unemployment 2011

pensions and Karl Polanyi

Yes, Pensions Are Collapsing, And Progressives Can’t Remain in Denial BY DOUG HENWOOD AND LIZA FEATHERSTONE

The Man from Red Vienna by Robert Kuttner

The Dead Enders

THE DEAD ENDERS

Candidates Who Signed Up to Battle Donald Trump Must Get Past the Democratic Party First

by Ryan Grim and Lee Fang

within context of stagnating wages

What Steve Bannon gets right about Democrats — and wrong about Trump by Ezra Klein

establishment economics

Guest Contribution: “Trump’s Tax Cut Will Worsen the US Current Account Deficit” by Jeffrey Frankel

MLK's forgotten socialist history

The Forgotten Socialist History of Martin Luther King Jr.

King was an outspoken democratic socialist who believed that a multiracial working-class movement was required to overcome the failings of capitalism.

BY MATTHEW MILES GOODRICH

Germany moves one step closer to a new government

Germany moves one step closer to a new government

Basic Income

A Few Bad Arguments Against Basic Income by Matt Bruenig

Bank of Japan ETF purchases

Bank of Japan's $150 Billion ETF Binge Looks Likely to Slow Next Year

As stocks surge and consumer prices inch higher, investors say it’s time for the Bank of Japan to reduce equity purchases that have been criticized for distorting the market. 

Sometime next year, the BOJ will cut its annual buying target for domestic exchange-traded funds by as much as a third from the current 6 trillion yen ($53 billion), says Toru Ibayashi, head of Japanese equities at UBS Wealth Management in Tokyo. Soichiro Monji of Daiwa SB Investments Ltd. expects a similar reduction, but by the end of March. 

“Four trillion yen,” UBS’s Ibayashi predicted. “And everybody will understand.”

O'Brien on Bitcoin

Bitcoin is teaching libertarians everything they don’t know about economics by Matt O'Brien

Sandbu on battles of ideology

The battles of ideology that will define our age by Martin Sandbu

Martin Sandbu 

DECEMBER 26, 2017

If 2016 was the year that opponents of the liberal, rules-based world order built up over 70 years won stunning national victories — in Britain and the US — then 2017 was the year in which the supporters of liberal openness scrambled to mobilise. 

2018 is set to be the year they confront one another. As governments harness state power for their respective sides, tension long simmering within each country morphs into a conflict between nations. 

Profound structural economic change in almost all rich countries had increasingly separated those who reaped the benefits from those of their fellow citizens the transformation had left behind. 

In Brexit and Donald Trump’s election victory, self-declared champions of the left behind took control of the national agenda with a promise to break with the internationalist liberal order. In reaction, centrist leaders elsewhere — most explicitly, Emmanuel Macron in France — have had to define themselves as that order’s defenders. 

EU institutions and many European governments, together with Canada and Japan, now make up an avowedly liberal internationalist camp working to defend a multilateral system of collaborative rules-based governance for economic openness to mutual advantage. 

The anti-liberal front’s undisputed leader, meanwhile, is the US under President Trump. The best guide to his goals is a plain reading of his statements from the inaugural speech to the recent update of the national security strategy. It is a zero-sum world in which there cannot be economic winners without losers, and it is each country for itself. Both camps want to make, or remake, the world in their image. 

It is not the first time that whole nations have had to choose which ideology to rally behind. The same happened in the 1930s, and again during the cold war. Then, too, countries aligned along ideological divides, partly fuelled by economic and social conflict that had previously riven their domestic politics. As a result the battle shifted to the international stage where it was waged by all means including war, direct or by proxy.

Within countries the conflict was to some extent repressed, as governments tried to ensure the side they had picked internationally was not undermined at home. For liberal states, this meant varying degrees of suppression of sympathy with fascism or communism. In dictatorships of the right and left, the elimination of dissenting views was total. 

There is no sign that the current global realignment will cause war between the camps; and we may still hope that political violence within nations can be avoided. But in three other arenas, the battle is on. 

One is international institutions, in particular those in charge of global economic governance. The Trump administration seems determined to undermine the World Trade Organization, whose arbitration function it is sabotaging by frustrating the appointment of judges to the appellate panel. Conversely, the EU and Japan are trying to demonstrate the organisation’s value to US interests by offering a united front in a WTO context against a perceived abusive trade policy by China. 

Another arena is alliance building. The shock of isolationist victories accelerated work on deepening the existing global economic order. The EU has completed free trade agreements with Japan and Canada, and intensified talks with Mexico, Australia and New Zealand. Japan and Canada, besides tying up with the EU, are pushing forward the Trans-Pacific Partnership with the remaining 11 members after the US abandoned it. 

As for Mr Trump, he seems more eager to build bridges with Vladimir Putin’s Russia and befriend autocrats from the Philippines to Saudi Arabia than to shore up relationships with allies or maintain the political unity of Nato. In Europe, Hungary and Poland — the jury is out on Austria — are tilting towards his camp. 

Paradoxically, the most important arena for governments engaged in a global ideological battle remains their own public at home. This third dimension is decisive if the cold war is anything to go by. Communism was boosted by the great depression, but later could not indefinitely survive the evidence that it simply did not perform as well for its people as liberal-democratic capitalism. Conversely today, populist nationalism derives much of its strength from a mishandled financial crisis and mismanaged (often non-existent) policy responses to rapid structural change. 

In the long term, liberals have cause for hope: withdrawing from the liberal order will surely bring lasting harm to countries where isolationists are now in charge. But that hope is vulnerable to two threats. First, if the liberal order unravels, early withdrawers may hold the advantage. Second, the anti-liberals may show short-term economic results for longer than liberals can stay in power — in part because they are free from the pieties of conventional policy. 

While conflicts remained domestic, caution was harmful but sustainable. That luxury is gone. In a global battle of ideas, liberals must show urgently that the existing order can be made to work for everyone. The 1930s and the cold war both saw economic liberalism survive by becoming radically more progressive than before. It is time for such a bold, centrist radicalism again.

ACA and inflation

[links don't mean endorsement. Some reading]

Why does money inflate? by JP Koning

The Growing Problems With Rural Healthcare Exchanges by Megan Stanley