1) Matthew Yglesias: All Hail Bernanke!:
Time giving Ben Bernanke its Person of the Year honors seems to me to say a lot about where we are as a society. Bernanke... follows basically conventional thinking and doesn’t make any unusual errors. Unfortunately, conventional thinking and normal errors lead into a major financial panic and the worst recession in 70 years. Then during the desperate fall of 2008 Bernanke takes decisive action and helps put a floor on the collapse. By spring 2009 it’s clear that this will be the worst recession since the end of the Great Depression.... At this point he basically unfurls a “Mission Accomplished” banner, says ten percent unemployment is okay by him, and if congress wants to do anything fiscally it should look at cutting Social Security benefits.... [That] demonstrates a very specific class skew—extraordinary intervention into the market place just long enough to fix the situation from the point of view of asset-owners while leaving wage-earners holding the bag. But the owners and managers and editors of Time Magazine and the companies that advertise in it probably don’t care so much about that. In a lot of respects it strikes me as the most fitting possible choice, an eloquent statement about where America is in 2009...
2) Paul Krugman: Throwing Momma from the train:
I warned you, back in 2001! "So in the law as now written, heirs to great wealth face the following situation: If your ailing mother passes away on Dec. 30, 2010, you inherit her estate tax-free. But if she makes it to Jan. 1, 2011, half the estate will be taxed away. That creates some interesting incentives. Maybe they should have called it the Throw Momma From the Train Act of 2001." And it’s happening: "At the beginning of 2010, the Bush estate tax plan is scheduled to change such that all estates, up to any value, are excluded. Because the tax bill was passed through reconciliation, however, it has a ten-year time frame, meaning that the law expires at the end of 2010. And that means that the heirs of fortunes received in 2010 will pay no tax, while heirs getting theirs in 2011 will pay 50% of the value of the estate to the Internal Revenue Service. Perhaps you notice the uncomfortable incentive structure here."...
3) Felix Salmon on Ben Bernanke:
[T]he people lining up to praise Bernanke include Stanley Fischer; Mervyn King; monetary historian Liaquat Ahamed (who wrote the book Bernanke “wishes he had written himself”); Alan Greenspan; Frederic Mishkin; Jean-Claude Trichet; Kevin Warsh; Tim Geithner; and Hank Paulson. It’s heavy on Davos-circuit central bankers — the kind of men who instinctively circle their own wagons in times of crisis and will always say nice things about each other if asked. Besides, substantially all of them, bar Ahamed, would implicitly be criticizing themselves if they said anything bad about Bernanke’s decisions: they all signed on to what he did. Grunwald himself has clearly decided that Bernanke is a hero, dismissing serious criticism of say the decision to let Lehman fail by simply saying that “it’s not clear how the Fed could have saved Lehman without a buyer”. (Of course there was a buyer — Barclays — and it’s precisely by stepping in with some short-term Bear-style financing that the Fed and Treasury could have allowed a smooth acquisition to proceed.)...
4) STUPIDEST THING I HAVE READ TODAY: Jonathan Adler: The Volokh Conspiracy: Over the Limit:
CBSNews.com reports that, at least by some measures, the U.S. has exceeded the legally authorized debt limit.... The ceiling was set at $12.104 trillion dollars. The latest posting by Treasury shows the National Debt at nearly $12.135 trillion... [No it has not: as the Treasury says, the National Debt is a different debt concept than the debt subject to the Congressionally-mandated limit: the difference is made up of "unamortized discount[s] on Treasury bills and zero coupon Treasury bonds, miscellaneous debt (very old debt), debt held by the Federal Financing Bank[,] and guaranteed debt...]
5) FROM THE ARCHIVES: Safeguarding America's Economy from Adverse Consequences of Financial Crisis (March 30, 2008):
What do we do now?... We do two things. First, we have the Federal government reduce the supply of risky financial assets by having the government buy or guarantee (thus making the assets no longer risky, you see) or support the purchase of mortgages (and other things) and so push the private financial-sector supply of financial assets to the left. Second, we have the Federal government "encourage" the financial sector to recapitalize itself, thus pushing the supply up and to the right... pushing up the prices and reducing the interest rates charged on financial assets, making the good equilibrium reappear, and keeping us out of depression.... That, in a nutshell with simple graphs, is what Larry is saying, with the addition that he thinks that we now have in motion enough policy moves to resolve the crisis and save the world economy from depression...
