**24 July: 9:30 AM:** Welcome back for the second day of our conference.
This morning our keynote speaker, Professor Dani Rodrik of Harvard University, is somebody who is always worth listening to--in fact, worth traveling thousands of miles to listen to. There is so much--I did not know how to introduce him, so I asked him for advice. He replied: "You have said so many things about me over the years! Pick one!"
The one I will pick is this:
Even when it was unfashionable, Dani Rodrik still stuck to his mission and his principles of trying to create space for social democracy in a neoliberal age. The future he has been trying to design for the world is one of rapid growth and shared prosperity--not one in which winners win more, losers lose more, and the middle finds itself lagging behind and without the ability to design its own future. He did so when the global intellectual and political tide was running against his point of view. He continues to do so now. He is one of the few economists most entitled to say to many of the rest of us: "I told you so!" He did indeed. Now he is here to tell us yet more.
[Later] Thank you very much. Let me continue to use my position of power to retain hold of the microphone. Let me reemphasize two points made by Dani Rodrik and ask him one question.
[Later] We have some written questions--many of them very, very good. Let me just read out an inadequate few of them…
[Later] And that brings us to the end of our time for this panel, and to our coffee break…
**24 July: 10:45 AM:** If I might have your attention for the next panel…
Ever since the start of the British Industrial Revolution, a key element facing the economies of what we now call the Global South has been, on the narrowly economic side, the presence of growth or depression in the Global North and, on the political economy side, first, access or lack thereof to the markets of the global north, and second, the various forms of imperial reach exerted by the global north. As Barry Eichengreen and Wolfgang Munchau emphasized yesterday, the current state of the Global North is not something that we expected even five years ago. On this panel we have Vladimir Popov, Sunil Khilnani, and Ambassador Alfonso Celso de Ouro Preto to discuss these issues from the perspectives of Eastern Europe, India, and Africa. Let me ask each of them to consider yet another aspect of the situation. Michael Kremer of Harvard University and the Brookings Institution has been known to emphasize that even though the Global North's preferred piece of Dutch-Uncle advice is that emerging economies should follow export-led industrialization strategies, there is at any point in time limited space for countries to do so--and right now that space appears to be occupied by China. Can it share? What kinds of futures can these regions design for themselves given the state of the Global North--and given the standing-up and full emergence on the world sage of China?
Vladimir Popov is an advisor to DESA at the United Nations, a sector head at the Russian Presidential Academy of National Economy and Public Administration, and an Adjunct Profesor at Carleton University. I know him best for his unconventional view of global imbalances, for his keen analyses of whether China's path is in fact that special, and for his very skillful explications of the 1998 crisis and its aftermath.
So let me turn to Vladimir Popov…
[Digression on Stalingrad??]
[Later] Sunil Khilnani is Professor of Poliics and Director of the India Institute at Kings College in London. I know him from his very insightful *The Idea of India*. And right now on my bedside table at home is my copy of one of Amazon.com's best books of the month for February 2012, written not by Sunil Khilnani but his wife Katherine Boo, *Beyond the Beautiful Forevers: Life, Death, and Hope in a Mumbai Undercity*.
[Later] And back again, demonstrating his amazing diplomatic skills to speak on extraordinarily short notice about events in any and every region of the world, we have Ambassador Alfonso Celso de Ouro Preto to speak on Africa...
[Later] Let me ask each of our three panelists one question each...
[Later] Questions from the floor?
[Later] I wish that we could continue, but it is time for lunch…
**24 July: 1:30PM:** And now we get to the panel that is of the most immediate and practical interest to BNDES, to the Brazilian Development Bank. Latin America's development strategy in general and Brazil's in particular hinge on whether and what room there is in the broader context economy. And for this panel we have José Antonio Ocampo from Columbia University and our Luciano Coutinho from, well, here--from the Brazilian Development Bank.
Luciano Coutinho is our host. He is the President of the Brazilian Development Bank. I remember asking some Washington hands in early 2010 why Brazil had been, relatively, so little affected by the financial crisis. "Good Bagehot-rule central banking", they said. "When private finance vanished, public finance stepped in to keep the flows of finance going". And, they said, a very key player in this was not the central bank but rather the BNDES, the Brazilian Development Bank, and a great deal of the credit was due to Luciano Coutinho. In a very distinguished career in both government and academia, he brings a unique perspective as someone who has been, in universal estimation, extremely successful as both an analyst and practitioner of industrial policy.
Jose Antonio Ocampo was United Nations Undersecretary-General for Economic and Social Affairs, and is Professor of Professional Practice and Director of the Economic and Political Development Concentration at the School of International and Public Affairs of Columbia University. As I myself am Director of the International Political Economy Concentration at U.C Berkeley, I can only hope that Jose Antonio is a better academic bureaucratic infighter than I am and gets more support and funding from his university's central administration than I do. He would have been a very good person to break the United States's Bretton-Woods stranglehold on appointments to the Presidency of the World Bank.
[Later] President Luciano Coutinho--you are the only person here besides Dani Rodrik who I won't dare call time on…
[Later] If I may ask one question, addressed to the two of you…
[Later] Questions from the floor?…
[Later] If I do not call a halt to this session now, we will have no coffee break, and it is very embarrassing for the moderator to start to snore with his face on the table halfway through the final panel. Note that this coffee break is only fifteen minutes.
**24 July: 2:45 PM:** Now we are back for the final session of the conference. Let me start with a general orienting question, addressed to everyone in the round table. The issue is Brazil's place in the global politico-economic order of the future. What do your guesses as to you region's likely future tell us about what Brazil--and the Brazilian Development Bank--should do in order to hedge risks and grasp opportunities. And let me reserve President Luciano Coutinho to the end of this first round, and start with Dani Rodrik?
Real pode ser moeda internacional, diz Eichengreen - EXAME.com: Rio - Brasil e Índia são as apostas do economista Barry Eichengreen, professor de Economia e Ciências Políticas da Universidade da Califórnia (UC), em Berkeley, para fornecerem moedas de reserva internacional num prazo de 10 ou 20 anos. Em apresentação no seminário "O Brasil e o mundo em 2022", nesta segunda-feira, no Rio, Eichengreen discorreu sobre as dificuldades dos Estados Unidos, sua perda de peso relativo na economia global e como isso afeta o dólar e os sistemas financeiros...
July 23: 2:30 PM: We have many more excellent speakers to hear over the next two days time. Therefore let me skip my remarks on the BNDES, on the great city of the River of January, on Tom Jobim, and also João Gilberto and Johnny Alf, the bossa nova, and the 50th anniversary of the composition of "Garota de Ipanema".
Let me instead jump right into the economics:
The purpose of this conference is to bring together smart and thoughtful people many of whom spend less time listening to each other than they should, and ask them how to design our future. The Brazilian Development Bank designs--in fact we all design our futures, only not under conditions of our own choosing. The future that Brazilians and the Brazilian Development Bank will attempt to design for themselves are enabled, influence, and constrained by the futures other regions of the globe are attempting to design as well..
And here I find myself at a quandary. I do not understand the future that the North Atlantic, the global North, is designing for itself.
Five years ago I would have confidently predicted that the North Atlantic industrial core of the global economy would continue on its relatively-smooth path of 5%/year growth in nominal GDP, 7%/year growth in nominal imports and exports, with about 2.5%/year of real GDP growth and 2.5%/year of inflation in both the dollar and the euro, and with interest rates and asset prices undergoing no major and few minor disturbances--with perhaps the then-anticipated slow deflation of the property bubble and the gradual unwinding of the global imbalance of East Asia's surplus as minor disturbing factors. The 1930s and 1940s had, I thought, taught the North Atlantic both the political urgency of avoiding mass unemployment and the demand-management tools to do so. The 1970s had, I thought, taught the North Atlantic both the political urgency of avoiding chronic even moderate-level inflation nd the demand-management tools to do so.
I was wrong. Wow! I was wrong.
Barry Eichengreen of the University of California at Berkeley, the National Bureau of Economic Research, and the Center for Economic Policy Research is without a doubt the world's leading expert on the international monetary economics of the Great Depression of the 1930s and, by virtue of that expertise, an expert on today. He is the only one still living of the four economists--Bagehot, Minsky, Kindleberger, and Eichengreen--whom last year Larry Summers told Martin Wolf knew the most about what has happened to the world economy since 2007.
Wolfgang Munchau of the Financial Times is one of the very, very best real-time observers of the global economy we have. On the phone to me last week Paul Krugman expressed envy at how he could not write the kinds of columns that Wolfgang could write and had the freedom to write for the Financial Times. Three months ago at breakfast Wolfgang's boss Gillian Tett described him as one of the invaluable contributors to the FT that keeps it at the very top of the financial-journalistic league table.
But first--roll the video...
[Later] Friday afternoon I took a look at Barry's PowerPoint and was terrified--I did not see how he could do it in less than an hour. But he did. That was remarkable. I do find myself running backward in time: US dollar, British pound, Florentine florin, Venetian ducat, and then i get back to the Byzantine bezant under the reign of Irene Autocratix, who called herself equal to the Apostles--isoapostoles.
[Later] It was British 19th C. Romantic author Thomas Carlyle who famously complained that economists were no fun: dismal scientists. We have a couple of truly dismal scientists, here. Let me see if I can get either of these panelists to be more optimistic. Barry Eichengreen, if I could ask you--in two to five minutes--in your opinion, what did Wolfgang Munchau get wrong in the sense of being too gloomy?
[Later] Wolfgang Munchau, if I could now ask you, what in your opinion did Barry Eichengreen get right and what did he get wrong?
[Later] Before I ask for questions from the floor, I have a few questions of my own…
[Later] Questions from the floor?
[Later] That's the end of our time, and while I perhaps need coffee more than most--I left my home at 5 am yesterday yet did not get to Rio until noon today--the rule is that in Brazil you should never give up the chance to drink coffee…
July 23: 4:30 PM: It is now time for our second panel. If I might have your attention, please…
Let me start with two threads. The first--call it the neoliberal bet. The neoliberal bet starts from the observation that the market-heavy version of social democracy that evolved in the United States under the Progressive Republican President Roosevelt at the start of and the New Deal Democrat President Roosevelt in the middle of the twentieth century, and then spread to Western Europe after 1945 out of fear of Josef Stalin and desire to emulate Henry Ford. That--mode of production doesn't quite cover it--seemed to be the best institutional configuration for material prosperity and soft government we have yet seen. The neoliberal bet is the strong urging by the NAtl that other countries should emulate large chunks of its institutional setup and the promise that the NAtl economies will be prosperous and open enough to be importers of last resort--that what emerging markets make, the NAtl will buy. The conclusion i drew from the first panel is that the NAtl is drifting in the direction of welshing on its commitment to be the prosperous importer of last resort, as evidenced by a US presidential campaign in which two candidates who by advisors and intellectual pedigree are committed to free trade--these two candidates are competing to make the biggest product that no commodity currently produced in the US today will ever be produced in China...
In the very long-run sweep of history, Eurasian civilizations find themselves densest in first three and then four core regions--regions with rainfall and river valleys that provided sufficient water for the largest-scale effective farming. These are: East Asia--China--South Asia--India--the Fertile Crescent--the Arab Middle East--and, after the invention of the iron axe, the river valleys of northwest Europe. These economies have, since the invention of agriculture, dominated Eurasia and usually the world.
This session discusses the future economo-politic trajectories of two of these Eurasian core economies: China and the Arab world. Before the era of the Industrial Revolution these two core economies were crucial. It was only four centuries ago that we saw not English-speaking armies camped around Baghdad but a Turkish- and Arabic-speaking army camped around Vienna. The Ming Dynasty's voyages of exploration in the fifteenth century under Zheng He travelled as far as the Portuguese expeditions launched by the Infante Dom Henrique o Navegador--and did so with 20 times the number of ships.
Much of the history of the twenty-first century will be the return of these regions to their traditional relative influence within Eurasia--or their failure to do so, and the political consequences of economic events, and the economic consequences of political events.
We have asked Dr. FAN Gang and Ambassador Alfonso Celso de Ouro Preto here this afternoon. Among the ambassador's many accomplishments: being Brazil's Ambassador at Large to the Middle East from 2004-2009. They will speak on what futures China and the region that Europeans call the "Middle East" are going to design for themselves
Dr. Fan Gang of the National Institute of Economic Research is also Chairman of the China Reform Foundation. He is one of the world's top 100 global thinkers, according to Foreign Policy magazine.
Fan Gang? China: growth and overtaking, or relative stagnation a la Japan? Asset markets? Financial fragility? The drive to high mass consumption? International integration?
[Later] Mr. Ambassador? State, religion, society, and economy? The peculiar role of oil?
[Later] I know that there are many questions from the floor, but I am going to keep control of the microphone for a little while…
[Later] Questions from the floor?
[Later] And that reaches the end of our time for this panel. It is now too late for coffee--but it is not too early for cocktails
H-Net Reviews: Since the Wehrmacht had been unable to assemble the necessary forces by the time Blue was to start, the Army High Command (OKH) designed a complicated, staggered operation in which each phase had a specific goal, thus setting the stage for the achievement of the next step in the plan. The initial phase aimed at seizing the city of Voronezh, just east of the Don, which would allow flank protection to the forces advancing to the east (it also, in the event, sparked furious Soviet counterattacks, since German forces could easily turn north toward Moscow, as anticipated by Stalin). In the next stage, German forces would move south along the Don to trap and annihilate the bulk of Soviet forces in the region….
The events of July, and how they were interpreted, resulted in two key decisions late that month. Hitler, having concluded that the Red Army had at last been destroyed, issued the key directive of the campaign on July 23, the one which guaranteed that the Germans could not achieve their goals. Impatient at the slow pace of the step-by-step operation, and fully aware of the time pressures on Germany (that summer he constantly worried about an early second front in France), Hitler decided to speed things up by splitting the German attack: while Army Group B would continue to advance on Stalingrad, Army Group A would seize Rostov and leap into the Caucasus. Rather than the careful, step-by-step campaign in which each phase ensured the success of the next, the Führer had now sent two army groups off on their own, in diverging directions and with inadequate forces to realize their goals. The Germans had barely been able to supply one advance at a time; with the same catastrophic logistical system, they were now to supply two, with the second moving hundreds of miles into the trackless steppe of southern Russia. With their shoestring operation, all had depended on everything going according to plan; Hitler now changed the plan.
Econbrowser: High Inflation at the Gates?: The Federal Reserve needs to raise interest rates to stave off inflation, says Rep. Paul Ryan, R-Wis. "I'm worried they're not going to pre-empt inflation," the House Budget Committee Chairman tells CNBC…. "I'm worried they're going to see it too late and we're going to have a problem."
That's a quote from February 2011….
Note that three month headline inflation is negative, while m/m is zero. Three month core rates are slightly higher, although there is some dispersion.
While current inflation is moderate, one could argue -- as Representative Ryan has -- that future inflation is the concern. Survey based measures indicate little movement.
But marking his beliefs to market is simply not on Paul Ryan's agenda…
Bubbles and Bailouts: Why Some Economists Failed: [M]acroeconomists, as a group, did not see the signs of the disaster that was about to hit the economy. There were a few lonely voices who warned that a dangerous bubble was building in the housing market…. [I]t took macroeconomists longer than it should have to correctly diagnose the problem as a balance sheet recession. But once macroeconomists understood the nature of the difficulties we were experiencing, policies to effectively battle this type of recession were proposed. Unfortunately, the proposals were mostly ignored….
The question is why nobody listened.
For fiscal policy the answer is clear and simple. Congress is broken…. And that dysfunction coupled with the influence of big money interests caused Congress to listen to the wrong voices…. [T]he people who favored deregulation of the financial sector, assured us there was no housing bubble, and told us problems could be easily contained even if there was a bubble are the very same people who brought us the push for austerity, the fear of inflation, the fear of bond vigilantes, and so on, none of which was helpful.
These economists told Republicans and centrist Democrats in Congress what they wanted to hear… given prominence in policy discussions. The economists who got it mostly right disagreed with these policies in no uncertain terms, but Congress didn't want to hear what they had to say and fiscal policy suffered because of it.
But how can we explain the problems with monetary policy?… [T]he Fed has been much too timid and apprehensive in its response to the recession… is presently missing both its inflation and unemployment targets…. [T]he Fed has been sitting on its hands in the “wait and see” mode that has left it behind the curve again and again over the last several years….
The continued push from some economists for austerity, interest rate increases, and other policies that satisfy political and ideological goals but work against the recovery, and the failure of economists in charge of monetary policy to adopt policies consistent with the Fed’s mandate undermine any attempt to fully defend the economics profession.
We can fix our economic models, at least I hope we can, and maybe we can fix our political institutions, we shall see, but how do we fix the economists?…
The failure of many, many people to do their homework and the fact that others who were at least willing to try to do their job got so much so wrong is remarkable.
Even more remarkable is the extraordinary reluctance of those who did get so much wrong to mark their beliefs to market…
Robert J. Birgeneau Chancellor
We are writing to inform you, in advance of a public announcement to be released tomorrow morning, that UC Berkeley will be joining edX, the Harvard and MIT not-for-profit online learning collaborative. We have successfully negotiated a partnership with edX which is very favorable for Berkeley.
We have spent considerable time deciding the best direction for Berkeley for open courseware. I (Chancellor Robert Birgeneau) have been in conversation for the last year with former Provost and now President of MIT, Rafael Reif, as well as more recently with Harvard President Drew Faust. Our own faculty, especially in EECS, have been actively engaged with their colleagues at MIT and Harvard. We share edX commitment to a not-for-profit and open-platform model and are excited at the possibility of providing courses and new open source software to the partnership.
Two Berkeley classes will be offered on edX this fall and we will collaborate on the development of the technology platform. Participation by our faculty in edX is totally voluntary, and while we encourage faculty who want to have courses on-line on edX, this will be completely up to them. edX is open to anyone and free, and online learners who demonstrate mastery of the subject can earn a certificate of completion for which initially there will be no charge.
Participation in mass open online courses (MOOCs) is only one of many initiatives in on-line education that we are - or expect to be- undertaking as we continue to develop our aspirations and strategies for on-line education at Berkeley. Our partnership with edX is fully aligned with the Principles of UC Berkeley's Online Education Strategy and our commitment to access and excellence. It is exemplary of how our relatively new process for advancing on-line education can work. The initial impetus came from faculty working on open-source technology and developing courses. The central administration worked quickly and in consultation with Academic Senate leadership, taking into account important broader campus-wide issues, to bring this partnership to fruition. The edX partnership serves our public mission of distributing higher education more broadly, while at the same time enriching the quality of campus-based education by helping us improve research on how students learn and how technology can transform learning.
This announcement is embargoed until 12:01 a.m. Tuesday, July 24, 2012 Pacific Time. Please do not share it until the embargo lifts. A press announcement will take place at 11:30 a.m. Pacific Time. The press release and FAQ will be made available on the NewsCenter tomorrow.
Marshal List's Army Group A captures Rostov, the "Gate to the Caucasus", without much resistance. The Nazis continue to hold complete control of the skies above the southern battlefield. With the Don River crossing secured and Paulus's Sixth Army advancing only slowly toward the Volga River, Hitler reassigns the Nazi Fourth Panzer Army to Army Group B. Hoth's panzers stop driving southeast and reverse their tracks.
In the neo-Wicksellian framework that Krugman likes to use when the economy is at its zero nominal interest rate bound, the central immediate problem with the economy is that because private households want to deleverage--planned saving at full employment is high--and because private businesses do not want to leverage--planned investment at full employment is low--planned spending is less than expected income and the economy spirals downward.
So why in the Holy Name of the One Who Is does Steven Keen write:
The Crisis in 1000 words—or less: Rising aggregate private debt adds to demand, and falling debt subtracts from it. This point is vehemently denied on conventional theoretical grounds by economists like Paul Krugman…
The neo-Wicksellian framework is not a denial that times of falling debt are times of depression. The neo-Wicksellian framework is an explanation of why times of falling debt are times of depression.
"Explanation" ≠ "denial"…
Case Blue. German 6th Army reaches the great bend in the Don River (“Don Bend”) near Stalingrad, defended by Soviet Stalingrad Front.
At Rostov-on-Don, German 198th Infantry Division, 14th and 22nd Panzer Divisions and Czechoslovakian Mobile Slovak Division attack from North of the city.
My take: The Fed should announce that it will do $100 billion a month of quantitative easing until market expectations are for a rapid return of nominal GDP to its pre-2008 growth path.
And it should say that if that doesn't work, it will do $200 billion a month.
It might not work. But what is the downside?
The US will make little progress tackling high unemployment before 2014 unless the Federal Reserve eases policy further, one of the central bank’s leading officials has warned in the run-up to a meeting next week where the option of “QE3” will be on the table…. In an interview with the Financial Times, [John Williams] forecast that unless “further action” was taken, there would be a lack of progress in boosting the jobs market – where the unemployment rate has been stuck around 8.2 per cent since the start of the year – over the next 18 months….
Mr Williams warned of “pretty significant” downside risks to the US economy from the eurozone crisis, the looming “fiscal cliff” of spending cuts and tax increases, and the dangers of a global slowdown. If the Fed launched another round of quantitative easing, Mr Williams suggested that buying mortgage-backed securities rather than Treasuries would have a stronger effect…. He added that there would also be benefits in having an open-ended programme of QE, where the ultimate amount of purchases was not fixed in advance like the $600bn “QE2” programme launched in November 2010 but rather adjusted according to economic conditions…
I forgot to post this at the time...
How (not) to defend entrenched inequality — Crooked Timber: AcademicLurker 01.25.12 at 3:18 pm: [Tyler Cowen] is saying right out that Europeans have better lives than Americans do, yet doesn’t see this as a comparison in favor of Europe; if anything he seems to think it’s a defect. It’s interesting how conservative rhetoric has shifted during my lifetime. Conservatives used to claim that they had the same end goals as liberals (stable prosperous society, best outcomes for the largest number of people & etc.) but that they disagreed on the best way to reach those goals. More recently, they’ve tended to really let their sociopath flag fly and come right out and admit that they actively want bad outcomes for large numbers of people...
Case Blue. German 1st Panzer Army and 17th Army converge from the West, North and East on Rostov-on-Don, near the Black Sea coast. The city is surounded by 3 defensive belts (bunkers, anti tank ditches and wire entanglements) 40km in depth. German 73rd and 298th Infantry Divisions, supported by the 13th Panzer Division, advance from the West along the road from Taganrog into the first belt.
Invasion of Papua. At 2.40 PM, 3000 Japanese soldiers land at Buna and Gona on the sparsely inhabited North coast of Papua. Japanese troops move inland to prepare roads and supply lines, with 1000 native Tolai labourers brought from Rabaul, to prepare for an overland offensive over the Owen Stanley Mountains to Port Moresby on the South coast.
First Battle of El Alamein, Egypt. At 4.30 PM, New Zealand 6th Brigade attack from South of Ruweisat Ridge into the El Mreir depression and hold these positions overnight. British 2nd and 23rd Armoured Brigades are scheduled to join them at daybreak.
Alexander Cockburn, 1980:
if ever a country deserved rape it's Afghanistan. Nothing but mountains filled with barbarous ethnics with views as medieval as their muskets, and unspeakably cruel too…
Alexander Cockburn, 1993, on the death of Irving Howe, whose Steady Work, World of Our Fathers and Trotsky biography are still very much worth reading:
Alexander Cockburn: A Few Tasteless Words about Irving Howe: The slush about Irving Howe is ankle-deep. Tributes have run in The New York Times… New Republic, Newsday, The New Yorker and The Nation itself… a column on Howe in The Washington Post by E.J. Dionne, surely the most overrated political commentator of the late twentieth century, except for Sid Blumenthal, Joe Klein, Michael Kramer, Mark Shields and Charles Krauthammer, who, be it noted, is against intervention in Bosnia.
Howe's prime function, politically speaking, in the last thirty years of his life was that of policing the left on behalf of the powers that be… an assiduous foot soldier in the ideological Cointelpro campaign to discredit vibrant political currents electrifying America and supporting liberation movements in the Third World…. In his later years he would be wheeled onto the Op-Ed pages to announce what "the left" thought of Dukakis or Clinton, but by that time his prime sociological significance was as a magnet for money from the MacArthur Foundation…. Contrast Howe's unappetizing curriculum with the honorable career of Dave Dellinger, whose fine autobiography was just published and who, unlike Howe, has been a positive force down these tumultuous years.
Abi Sutherland is smart:
Abi Sutherland: Cutting a great road through the truth to get to the Devil: Lately, my Twitter stream has been going through an iterative discovery cycle over “Shell’s Arctic Ready campaign”…. It turns out to have been a hoax by Greenpeace. So was the viral video and the gormless Twitter stream, neither of which particularly registered on my radar.
I have two problems with this.
The first one is that I don’t think portraying Shell as inept is a very wise choice…. The second, larger problem, is that Greenpeace lied to us. This wasn’t a nod-and-a-wink parody; this was a dedicated effort to deceive. They played the public for patsies and herded them like sheep. That kind of contempt for the people whose support (financial and otherwise) they need is inexcusable…. Basically, Greenpeace polluted the information stream. Now, I know that our common discourse is already thoroughly befouled. But that does not mean it’s OK to add yet another dose of rainbow-shining toxic sludge to the mix, not even in the cause of righteousness. Indeed, especially not in the cause of righteousness.
We need more truth, not less. Don’t lie to me for my own good and expect my support, Greenpeace. Just don’t.
America, I’m so in love with you: Mr Romney is a bona fide senior citizen – three years older than Dwight Eisenhower was when the former general was first elected president…. [T]he Romney campaign displayed a cultural sensibility that recalled the times in this country when the only way a Little Richard song could get on mainstream radio was to have Pat Boone sing it…. Mr Romney counter-attacked with a commercial… [that] concluded with the president singing “I’m so in love with you”, a line from the old Al Green hit “Let’s Stay Together”…. Viewed from a tactical standpoint, I was surprised that the Romney camp used Mr Obama’s performance. I could see why Mr Obama featured Mr Romney in his commercial; the Republican’s warbling suggested a lack of harmony between his rhetoric and his record in government and the private equity business. But unlike Mr Romney, Mr Obama sang quite well, raising the question of why the opposition would show him off to his advantage, even in this limited sense.
One of the better answers I have found comes from a well-known supporter of Mr Romney – Suzy Welch, former editor in chief of the Harvard Business Review, and wife of Jack Welch, former CEO of General Electric. In an appearance on CNN with her husband, Mrs Welch suggested that Mr Obama’s personal style and choice of musical material define him as a member of a “different America”. I would imagine this is why Mr Romney’s campaign included the snippet of Mr Obama singing “Let’s Stay Together” at the Apollo Theater in Harlem. They hoped it would convey his otherness. “It’s the difference between the songs that they’re singing,” Mrs Welch said. “Mitt Romney didn’t exactly do a beautiful job on that song, but think about what he’s singing, OK? I mean it’s that patriotic song and he goes all the way through it. Then you’ve got the very cool Barack Obama singing Al Green. That is the two different Americas. Isn’t it?”
Putting aside the question of what this kind of thinking means for America (I’ll stick to the singular), I think it spells trouble for Mr Romney’s strategic effort because you have to be really old – or, I guess, spend a lot of time with someone really old – to hear “Let’s Stay Together” and think of it as a symbol of a “different America”. Al Green’s song topped the US pop charts more than four decades ago, in 1972…. The song – a paean to monogamy, whether times “are good or bad, happy or sad” – is so middle-of-the-road it has become part of that canon of 1960s and 1970s hits…
Bob Reich gets it exactly right:
Robert Reich: The Problem Isn't Outsourcing. It's that the Prosperity of Big Business Has Become Disconnected from the Well-Being of Most Americans: Forget the debate over outsourcing. The real question is how to make Americans so competitive that all global companies — whether or not headquartered in the United States — will create good jobs in America. Apple employs 43,000 people in the United States but contracts with over 700,000 workers overseas. It assembles iPhones in China both because wages are low there and because Apple’s Chinese contractors can quickly mobilize workers from company dorms at almost any hour of the day or night. But low wages aren’t the major force driving Apple or any other American-based corporate network abroad. The components Apple’s Chinese contractors assemble come from many places around the world with wages as high if not higher than in the United States.
More than a third of what you pay for an iPhone ends up in Japan, because that’s where some of its most advanced components are made. Seventeen percent goes to Germany, whose precision manufacturers pay wages higher than those paid to American manufacturing workers, on average, because German workers are more highly skilled. Thirteen percent comes from South Korea, whose median wage isn’t far from our own....
Put simply, America isn’t educating enough of our people well enough to get American-based companies to do more of their high-value added work here. Our K-12 school system isn’t nearly up to what it should be. American students continue to do poorly in math and science relative to students in other advanced countries. Japan, Germany, South Korea, Canada, Australia, Ireland, Sweden, and France all top us. American universities continue to rank high but many are being starved of government funds and are having trouble keeping up.... China, by contrast, is investing like mad in world-class universities and research centers. Transportation and communication systems abroad are also becoming better and more reliable. In case you hadn’t noticed, American roads are congested, our bridges are in disrepair, and our ports are becoming outmoded.
So forget the debate over outsourcing. The way we get good jobs back is with a national strategy to make Americans more competitive.... But big American-based companies aren’t pushing this agenda.... They want lower corporate taxes, lower taxes for their executives, fewer regulations, and less public spending....
Mitt Romney’s Bain Capital is no different from any other global corporation — which is exactly why Romney’s so-called “business experience” is irrelevant to the real problems facing most Americans...
I would not say "irrelevant". I would say actively harmful.
This seems pretty evil to me:
Sparrow — Get mail done: We're excited to announce that Sparrow has been acquired by Google! We care a lot about how people communicate, and we did our best to provide you with the most intuitive and pleasurable mailing experience. Now we're joining the Gmail team to accomplish a bigger vision — one that we think we can better achieve with Google.
We’d like to extend a special thanks to all of our users who have supported us, advised us, given us priceless feedback and allowed us to build a better mail application. While we’ll be working on new things at Google, we will continue to make Sparrow available and provide support for our users.
We had an amazing ride and can't thank you enough.
Full speed ahead!
Dom Leca, CEO Sparrow
Traffic jam and logistical problems in the Don River bend: Shortages of fuel leave many Nazi units unable to execute their orders to advance. German troops are forced to recover fuel from damaged or abandoned vehicles, and in some cases, leave behind tanks and vehicles with heavy fuel consumption to continue their advance.
Noahpinion: Microfoundations would be nice if we had them: [T]he big problem with "microfounded" macro, as I see it, is that the "microfoundations" are bad: not credible, and generally not consistent with anything microeconomists have actually found. Bad microfoundations are worse than none at all.
Indeed. Equities are not claims to the fruit of a fixed number of trees with fruit amounts that drop according to a random walk with drift. The underlying technologically-limited potential productivity of workers does not drop in a recession. People are not trapped on islands, knowing their nominal wages but uncertain of the prices of the goods and services they will buy with those wages.
I have never understood why Tim Geithner did not work a lot harder to make people like Neil Barofsky and Elizabeth Warren happier. And now Neil is serving the dish cold:
Mark Gongloff: Timothy Geithner Peppered TARP Inspector General Barofsky With F-Bombs: "I never would have imagined that one day one of the most powerful government officials in the world would be dropping f-bombs on me."
That's Neil Barofsky's response to being on the receiving end of an epic tantrum by Treasury Secretary Timothy Geithner in the fall of 2009, after Barofsky dared to suggest that Geithner had perhaps not been the most transparent Treasury secretary in the entire history of the country.
Warning: Sailor talk ahoy!
"Neil, I have been the most fucking transparent secretary of the Treasury in this country's entire fucking history!" Geithner erupted, in an episode that had Barofsky wondering if Geithner was going to "throttle" him. At the time, Barofsky was the special inspector general in charge of oversight of the Troubled Asset Relief Program.
It's one of the juicier episodes in Barofsky's new book, "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street."… Congress created Barofsky's position of special inspector general to keep tabs on how TARP money would be spent. Though a Democrat who donated to President Obama's 2008 presidential campaign, Barofsky was appointed by President George W. Bush and had a cordial relationship with then-Treasury Secretary Hank Paulson. Barofsky hoped for even better things from the Obama administration. Instead, Geithner's treatment of Barofsky ranged from disdain to thundering rage….
"I said that I thought our capacity as a nation to deal with what could be a continuing financial crisis was being undermined by a loss of faith in government," Barofsky writes. "Then I said that the current loss of government credibility could be traced to Treasury's mishandling of TARP."
"Geithner got dramatic," Barofsky writes: "'Neil, you think I don't hear those criticisms? I hear them. And each one, they cut me,' he said, pausing and then making an emphatic cutting motion with one hand as he said 'like a knife.'" After a Geithner subordinate in the room, Herb Allison, expresses personal offense at Barofsky's suggestion that Geithner has not been fully transparent, Barofsky responds:
I am not suggesting that the secretary has failed in transparency, I am stating it. Mr. Secretary, you've failed to be sufficiently transparent, and that is one of the reasons why people are so angry. But you can still fix it.
And that's when the ticking time bomb that was Geithner erupted, says Barofsky: "'No one has ever made the banks disclose the type of shit that I made them disclose after the stress tests. No one! And now you're saying that I haven't been fucking transparent?'" Barofsky writes that he'd heard about Geithner's propensity for potty talk, but was still taken aback. Barofsky writes that he responded to the meltdown with some mollifying words, but without backing down: "'Mr. Secretary, you've done some good things, to be sure,' I responded, and after a pause, I said slowly, 'but you could do so much more.'" At that point in the meeting, Barofsky says, "Geithner looked as if he was going to get out of his chair and throttle me."
Cooler heads prevailed, and the meeting went on, but Geithner never really came fully off the boil, Barofsky writes:
As we parried back and forth, Geithner repeatedly reached a pitch of anger, regaling me with detailed expletive-filled explanations that established my apparent idiocy. He would then calm himself down and give me a forced, almost demonic smile.
The meeting ended on a relatively cordial note, but that did not change Barofsky's assessment of the meeting: "It was the weirdest meeting of my life." After the meeting was over, Barofsky and his deputy, Kevin Puvalowski, had a big laugh about it: "'In all honesty, I think he was about to come out of his chair and beat the living shit out of you,' Kevin said. ... 'That was fantastic.'"
The Treasury Department was not immediately available for comment about the episode, or about the more-damning allegations of the book: that Geithner's Treasury Department repeatedly tried to undermine Barofsky's authority, ignoring his warnings about the risk of fraud in TARP programs and generally carrying water for the banking industry.
I would note that when I talk to Wall Street banker types, they are even angrier at Geithner than Barofsky is...
Samuel Goldwyn goes too far:
Germany Outlaws Judaism: Well, not quite. But a ruling from a court in Cologne… circumcision is serious physical damage that can be justified only by the informed consent of an adult…. The convenant of Abraham is now against the law in Cologne.
[T]he ruling is the logical consequence of a concept of religion implied by Protestantism and articulated philosophically by Benedict Spinoza and John Locke…. [R]eligion is rooted in private belief. Associations and rituals are legitimate only to the extent that they are submitted to voluntarily by consenting adults, who can withdraw their consent at any time. And religious obligations can never trump the civil law.
There are good reasons that this position was appealing in the 17th and 18th centuries. Trouble is, we’ve forgotten not only that it doesn’t fit many older traditions, including Judaism and Roman Catholicism, but that it was specifically designed to exclude them. The understanding of religion’s legitimate sphere that informed the Cologne court’s ruling, in other words, is not theologico-politically neutral. It was, and remains, a polemical concept that elevates state over church, individual over community, consent over continuity in ways that traditional Catholics and Jews find hard to accept….
[M]odern liberalism... requires that every religion transform itself into a variant of Protestantism--or find itself on the wrong side of the law.
I must say that I find Samuel Goldwyn's idea--that a theologico-politically neutral politics of religion would accept as legitimate associations and rituals that are involuntarily imposed on unconsenting adults, who cannot escape no matter what they wish--distasteful.
Your children are not your chattels.
They make their own choices about who to be and what to do.
And if you try to act as though your children are your chattels, then you are the kind of parent who when your children ask for bread give them stones, when your children ask for fish hand them serpents...
The fiscal cliff and the economy: Pointless, painful uncertainty: Everyone agrees uncertainty is bad for the economy…. I have my own back-of-the-envelope exercise. I count mentions of the word “uncertainty” in the Federal Reserve’s “beige book”… uncertainty has shot up in the last month…. The beige book is a narrative based on conversations between analysts at the Fed and business contacts throughout the country. While this means it's not well suited to quantitative analysis such as mine, it does allow you to isolate the source of the uncertainty.
Usually, it's the economic or sales outlook. Often, it's an event beyond America’s control: the European crisis, higher petrol prices, Japan’s tsunami, and so on. Some months, though, the source is clearly exogenous policy decisions. In April of 2011, the federal budget was cited in three of that month’s 15 references to uncertainty. Recall that that month the government was on the verge of shutting down over Republican pressure for cuts to discretionary spending…. Uncertainty rose again in July; four of 14 references were related to fiscal policy, almost certainly because of the fight over whether to raise the debt ceiling…. Uncertainty appears more often in this month’s beige book than any month since September. Five of 30 references cite fiscal policy, apparently a reference to the fiscal cliff….
[I]n terms of economic impact, fiscal policy trumps all other exogenous sources of policy uncertainty. Why does this matter? Because it’s so pointless. It’s not surprising or even necessarily bad that tighter fiscal policy leads to weaker growth…. [T]he disincentives to hire and invest brought on by the debt ceiling battle and now the fiscal cliff aren’t the result of fiscal policy per se, but by the reckless and confrontational way that America makes it. Little wonder Ben Bernanke, the Fed chairman, spent so much of the last two days begging Congress to act on the cliff. Such action is not a substitute for more quantitative easing; but the stimulative impact would so much greater, with far fewer side effects.
Fecklessness: Asymmetric pressure: ONE hardly knows what to say:
Other Republicans cautioned that an expansion of the Fed’s existing efforts could deepen the nation’s financial challenges by postponing a necessary reckoning and eventually accelerating the pace of inflation. Democrats made no similar effort to convince Mr. Bernanke that he should take additional action. They congratulated the Fed chairman in the manner of people confident that they are speaking with an ally.“I want to thank you for your steadfast commitment to taking action as you deem appropriate,” said Representative Michael E. Capuano, Democrat of Massachusetts. “Thank you for not giving up.” Representative John Carney, Democrat of Delaware, went one step further.“The Fed is doing everything it can to address the unemployment part of your mandate, is that correct?” he asked Mr. Bernanke. Mr. Bernanke, momentarily startled, responded that the Fed could do more, and was considering whether it should.
Well, Scott Sumner knows what to say:
The GOP is evil, the Dems are morons, and the public is screwed.
Eventually, these mistakes will be understood, long after the realisation could have done any good.
Expansionary austerity: The cupboard is bare: GLENN HUBBARD is by many accounts a sensible economist. But he is currently advising Mitt Romney, and political entanglements often nudge sensible people toward curious arguments. In a recent Financial Times piece outlining "a conservative growth agenda for the US economy", Mr Hubbard writes:
High and rising debt burdens are a structural impediment to growth…. Gradual fiscal consolidation may also be stimulative in the short run. Research by Hoover Institution economists concludes that reducing federal spending relative to GDP to pre-financial-crisis levels over a decade would increase GDP in the short and long term….
The economics of the growth impacts of austerity is a subject to which this newspaper has paid considerable attention over the past few years…. [T]he evidence on the precise level of debt at which growth impacts become severe is fairly uncertain, and there is good reason to suspect that America can sustain higher debt loads at little cost than most other economies. Episodes of austerity with higher ratios of spending cuts to tax increases are associated with better growth performance, but—crucially—much of that effect can be chalked up to difference in central-bank willingness to accommodate the two strategies: central banks do more to offset spending cuts than tax rises.
Most importantly, episodes of expansionary austerity are clearly associated with two dynamics: large declines in interest rates and big currency depreciations. America would derive zero benefit from the first effect; the real yield on the 20-year Treasury is now...0.0%. It couldn't expect to get much of a boost from the second effect either….
[T]he only thing conservative politicians seem to hate more than tax increases is the idea of a falling dollar. And as recent events demonstrate, Republican legislators miss few opportunities to demand tighter policy from the man who could do most to cushion against the impact of austerity.
Now, I think you could get a lot of Democrats, including Barack Obama, to sign on to a broad tax reform with an eye toward improving the medium-run deficit, so long as the reform wasn't regressive and raised revenues on net. And that should have a positive impact on growth over the longer run. But there is very little reason to think that a conservative plan to come in and begin slashing deficits would be good for short-run growth.
The Mad Dream of a Libertarian Dictatorship: In her 1926 book Concerning Women, the libertarian writer Suzanne LaFollette had some surprisingly sympathetic words for the Bolshevik regime in Russia. She nodded briefly to the Soviets' "alleged mistreatment of political dissenters," but she concluded that "Whether or not the Soviet Government succeeds in getting beyond dictatorship to the establishment of economic justice in Russia is not really important." The important thing, she felt, was that "the idea released by the Russian Revolution will prevail over the combined forces of European and American imperialism."
There has long been a strand in the classical liberal tradition that dreams a temporary dictatorship could be a stepping stone, even a shortcut, to reform…. LaFollette wasn't the only pro-market writer with a soft spot for a dictatorship of the left: As late as 1970, you could see a future president of the Mont Pelerin Society writing kindly about Lenin, Tito, and Mao. Other classical liberals, alarmed at the realities of red rule, swung the other way and endorsed authoritarian governments of the right. Jorge Luis Borges, to give one infamous example, supported the Argentine military regime that seized power in 1976.
And then there are the admirers of Gen. Augusto Pinochet, iron-fisted ruler of Chile from 1973 to 1989. A new paper in the American Journal of Economics and Sociology, written by Andrew Farrant, Edward McPhail, and Sebastian Berger, explores the free-market economist F.A. Hayek's opinion of the Chilean dictatorship… the most exhaustive job I've seen of tracking what precisely the Austrian intellectual said about Chile. Farrant and company debunk some of the claims that have been made against Hayek, but they make it clear that he combined an appreciation for Pinochet's economic policies ("From the little I have seen, I think it is no exaggeration to talk of a Chilean miracle") with a belief that a temporary dictatorship could be a salutory thing (Hayek said he would "prefer to sacrifice democracy temporarily, I repeat temporarily, rather than have to do without liberty, even if only for a while"). In Pinochet's Chile, Hayek predicted, "we will witness a transition from a dictatorial government to a liberal government...during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement."
That may not be full-throated praise, but it's an awfully sanguine way to talk about a state that tortured its opponents, censored the press, and imprisoned and murdered people for their political views. Hayek may have "prefer[red] to sacrifice democracy" if the alternative was "to do without liberty," but Pinochet restricted liberty in intolerable ways….
[M]any myths about the dictatorship still circulate, mostly among conservatives but also sometimes among libertarians. I periodically hear it claimed, for example, that Pinochet was a reluctant ruler who stepped down from power of his own free will, a Cincinnatus who did what he must to set the stage for freedom. (Here's George Reisman: "General Pinochet was thus one of the most extraordinary dictators in history, a dictator who stood for major limits on the power of the state, who imposed such limits, and who sought to maintain such limits after voluntarily giving up his dictatorship.") In fact, when Pinochet lost a plebiscite that he had expected to win, the alleged Cincinnatus reacted by ordering his armed forces to impose martial law. His dictatorship ended because they refused to obey him.
Yet the legend persists. And it persists in part because of that fantasy of a benign temporary dictatorship—a "liberal dictator," in Hayek's phrase.
It is certainly true, as Hayek argued, that liberty and democracy are not the same thing…. But dictatorships tend overwhelmingly to be illiberal as well as undemocratic; if you search for examples of liberal dictators, you'll come up almost entirely dry. Hayek cites Oliver Cromwell, who wasn't really all that liberal, and Ludwig Erhard, who wasn't a dictator…. This paucity of examples should not be a surprise. As Farrant, McPhail, and Berger point out in their paper, Hayek's idea of a temporary liberal dictatorship was inconsistent with his other arguments:
Hayek's defense of transitional dictatorship appears to assume away a bevy of public choice warnings about the self-interest of political actors. Moreover, it is unclear why Hayek's argument about the supposed capture of the planning bureaucracy by "bad" planners would not similarly apply to the dictatorial bureaucratic machinery—supposedly a merely temporary expedient—that is created by Hayek's "liberal" dictator. Indeed, public choice reasoning suggests that any would-be "illiberal" dictator who can overthrow Hayek’s "liberal" dictator will seize control over whatever dictatorial machinery is already in place (the bureaucracy and the military) and—once in power—nationalize vast swathes of the economy to squarely cement their position as dictator and to greatly strengthen their ability to extract rents from the private sector….
The classical liberals who defended dictatorships often came to regret their enthusiasm. Borges finally signed a statement opposing the Argentine junta's habit of disappearing its opponents. LaFollette managed to move too far from her soft-on-the-Soviets stance, becoming a McCarthyist. But the dream of the liberal dictator persists in some corners of the libertarian universe. It is a dream that deserves to die.
Free Law School Casebooks For Everyone?: John Mayer, the Executive Director of CALI, has a post suggesting a way to generate free law school casebooks for every law student. Under the current system, professors who want to write casebooks can write the books on their own and can then make a deal with publishers to bring the books to market in exchange for royalties. Mayer has a very different proposal…. [E]ach law school community will put forth a worker who will participate in a collective. Members of the collective will share the workload and collaborate on the making of products. They will then be required to share their products to allow use by anyone else according to their needs.
Interesting idea. If only we had some experience in the 20th century to know if it might work: Why Socialism Failed | The Freeman | Ideas On Liberty.
The most interesting thing from my economist's perspective is that dollars will get you doughnuts that at some point in his life Orin Kerr took a microeconomics course. One of the things that microeconomics course did was give Orin Kerr the tools to reach the conclusion that the market for legal textbooks fails:
Price is far in excess of marginal cost, so a great deal of what in a well-functioning market ought to be consumer surplus is transferred to producers with market power.
But it is not as though producers are enriched by the market either: the incentives create a situation in which the social surplus is dissipated by the writing of far too many textbooks.
The right thing for Orin Kerr to say would be: "Meyer's proposal looks unworkable to me. The right thing to do would be to have, as a condition of accreditation, law professors hand out the textbooks for free on the first day of class; then law schools would give professors an extra $50 per student to buy textbooks and tell the professors to keep the change. That would eliminate the market failure."
But it doesn't occur to Orin Kerr to suggest that--or, indeed, to make any suggestion to align incentives in such a way as to push prices to marginal costs and eliminate the incentive to overproduce textbooks. The economics he took simply did not take.
Order by Himmler on July 19, 1942, for the Completion of the "Final Solution" in the Generalgovernment of Poland:
I herewith order that the resettlement of the entire Jewish population of the Generalgovernment be carried out and completed by December 31, 1942. From December 31, 1942, no persons of Jewish origin may remain within the Generalgovernment, unless they are in collection camps in Warsaw, Cracow, Czestochowa, Radom, and Lublin. All other work on which Jewish labor is employed must be finished by that date, or, in the event that this is not possible, it must be transferred to one of the collection camps.
These measures are required with a view to the necessary ethnic division of races and peoples for the New Order in Europe, and also in the interests of the security and cleanliness of the German Reich and its sphere of interest. Every breach of this regulation spells a danger to quiet and order in the entire German sphere of interest, a point of application for the resistance movement and a source of moral and physical pestilence.
For all these reasons a total cleansing is necessary and therefore to be carried out. Cases in which the date set can not be observed will be reported to me in time, so that I can see to corrective action at an early date. All requests by other offices for changes or permits for exceptions to be made must be presented to me personally.
Whatever will the Republican slime machine think of next?
I don't think America needs to be rescued from this Republican Party. I think America need to be rescued from any attainable Republican Party. They are so done...
The very thoughtful James Surowiecki: How Private Equity Firms Like Bain Capital Earn Profits:
In 2004, for instance, Wasserstein & Company bought the thriving mail-order fruit retailer Harry and David. The following year, Wasserstein and other investors took out more than a hundred million in dividends, paid for with borrowed money—covering their original investment plus a twenty-three per cent profit—and charged Harry and David millions in “management fees.” Last year, Harry and David defaulted on its debt and dumped its pension obligations. In other words, Wasserstein failed to improve the company’s performance, failed to meet its obligations to creditors, screwed its workers, and still made a profit. That’s not exactly how capitalism is supposed to work.
The people who ran Harry and David into the ground have a defense: economic conditions changed in unforeseeable ways. But that’s precisely why loading firms with debt in order to reap short-term benefits is bad. It leaves companies unable to weather tough times, and allows private-equity firms to make money even if things go wrong.
As if this weren’t galling enough, taxpayers are left on the hook. Interest payments on all that debt are tax-deductible; when pensions are dumped, a federal agency called the Pension Benefit Guaranty Corporation picks up the tab; and the money that the dealmakers earn is taxed at a much lower rate than normal income would be, thanks to the so-called “carried interest” loophole. The money that Mitt Romney made when he was at Bain Capital was compensation for his (apparently excellent) work, but, instead of being taxed as income, it was taxed as a capital gain. It’s a very cozy arrangement.
If private-equity firms are as good at remaking companies as they claim, they don’t need tax loopholes to make money. If we capped the deductibility of corporate debt, and closed the carried-interest loophole, it would not prevent private-equity firms from buying companies or improving corporate performance. But it would reduce the incentives for financial gimmickry and save taxpayers billions every year. Private-equity firms are excellent at gaming the rules. Time to change them.
David Wessel alone is worth the price of the Wall Street Journal:
Oops: What Bernanke Said Five Years Ago Today: Five years ago, July 18, 2007, Federal Reserve Chairman Ben Bernanke testified before the House Financial Services Committee as he is today. The housing bubble was bursting, cracks in the global financial system were just beginning to appear, but Bernanke didn’t sound terribly worried or prescient…. A look back at what Bernanke said then….
On mortgage markets:
Conditions in the subprime mortgage sector have deteriorated significantly reflecting mounting delinquency rates on adjustment rate loans. In recent weeks, we have also seen increased concerns among investors about credit risk on some other types of financial instruments. Credit spreads on lower quality corporate debt have widened somewhat and terms for some leveraged business loans have tightened. Even after their recent rise, however, credit spreads remain near the low end of their historical ranges and financing activity in the bond and business loan markets has remained fairly brisk.”
The pace of home sales seems likely to remain sluggish for a time, partly as a result of some tightening and lending standards and the recent increase in mortgage interest rates. Sales should ultimately be supported by growth in income and employment, as well as by mortgage rates that — despite the recent increase — remain fairly low relative to historical norms. However, even if demand stabilizes as we expect, the pace of construction will probably fall somewhat further as builders work down the stocks of unsold new homes. Thus, declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth should diminish over time…. One risk to the outlook is that the ongoing housing correction might prove larger than anticipated with possible spillovers onto consumer spending.
Get your plugins under control, Google!
Romney has not disclosed all of his tax documents for 2010 itself -- the only year for which the GOP presidential nominee has presented any final tax forms…. Swiss bank account and financial activities in Bermuda and the Cayman Islands… required to file a… Report on Foreign Bank and Financial Accounts, or "FBAR" in accountant slang….
Although Romney's campaign declined to comment for this article, in January, Brad Malt, the manager of Ann Romney's blind trust, told reporters the Romneys had an account with Swiss bank UBS worth about $3 million, which generated roughly $1,700 in interest. Malt said the account was set up for "diversification" in 2003 -- a claim that puzzles tax and investment experts, who note that all of the investment options available in Switzerland are available in American accounts. Malt said the account was closed in 2010….
That Romney's disclosed account was with Swiss bank UBS has also raised eyebrows. In 2008, a whistleblower at the bank informed the IRS of thousands of accounts being operated by American clients to avoid paying U.S. taxes. For Americans, the coveted Swiss secrecy suddenly became a legal liability…. [T]he IRS established a special tax amnesty program, which allowed those who voluntarily turned themselves in to remain anonymous and pay limited penalties….
"It's unclear why he would have valued the Swiss bank account secrecy, and it wouldn't have enabled him legally to avoid U.S. tax," said Daniel Shaviro, a tax professor at New York University School of Law. "This is why there's speculation that he was into the amnesty program."
He sends us to the very worst people in the world:
Jamelle Bouie: The Beltway's Destructive Obsession with the Deficit: Yesterday afternoon at the National Press Club (the standard Washington venue for events that need a little class), the Committee for a Responsible Federal Budget—a bipartisan debt-reduction group—rolled out its “Fix the Debt” campaign, an attempt to push deficit reduction to the top of the congressional priority list. It's hard to overstate the extent to which this was an almost stereotypical gathering of Beltway deficit scolds. The event featured Pete Peterson—businessman and former Commerce secretary in the Nixon administration—who funds the Committee, as well as members of the Bowles-Simpson fiscal committee—including the titular Erksine Bowles and Alan Simpson—along with former New Hampshire senator Judd Gregg, former Pennsylvania governor Ed Rendell, and former OMB director Alice Rivlin.
Despite the subject, policy recommendations were not the focus of this event; at most, the panelists praised Bowles-Simpson for its “boldness”…. Instead, the bulk of the conversation was devoted to hyperventilating over the threat of the federal debt, and indulging the centrist conceit that both parties are responsible for the impasse in Congress….
The astounding thing about this entire show was the extent to which unemployment went unmentioned. Each panelist spoke about how economic growth was paramount, but none seemed aware of the country’s employment crisis. Indeed, listening to the panelists, you wouldn’t know that 12.7 million Americans are unemployed, and that millions more have dropped out of the workforce altogether. At most, you had fact-free statements about how debt reduction was a necessary precondition to economic expansion.
“Fixing the debt and growing the economy are tied together,” said Alice Rivlin. “We can’t grow the economy without fixing the debt.” Of course, this isn't true: As we saw to a limited extent with the stimulus, you can improve the economy by taking on debt, as long as that debt is used to finance consumer spending. A second, $1 trillion spending program would increase the debt, but would do more for jumpstarting the economy than any agreement on long-term budgets. This isn't hard to see. But in the Beltway, among the permanent establishment, there is a dangerous myopia that leads to the conclusion that our short-term budget deficit—and a hypothetical, long-term debt problem—is the greatest threat to our continued economic health…
And asks the question: "Does the Fed think they're doing their job? Or are they afraid of looking like they're helping Obama? Or are they not afraid of looking like they're helping Obama but just unwilling to do something that might help Obama even when it is the right thing to do? His bottom line:
Tribal loyalty is strong, even for highly educated technocrats.
And he sends us to Paul Krugman:
Paul Krugman: The Feckless Fed: Hmm. When I published a critique of Ben Bernanke’s recent performance, suggesting that he should reread his own critiques of the Bank of Japan, there were a fair number of people saying that I was just a big meanie. But my sense is that his latest testimony, in which he declared that the Fed has the power to take action, that the economy is in really bad shape, but declined to, you know, actually take action, has left even his usual defenders more or less speechless. It really makes no sense — except in terms of politics. I really believe that we have reached a point where the Fed is afraid to do its job, for fear of being accused of helping Obama.
uly 18, 1942: World's First Operational Jet Fighter Takes Wing: 1942: The third prototype of the Messerschmitt 262 becomes the first true operational jet plane when it takes to the skies over Bavaria at the height of World War II.
Engine problems, other teething difficulties and political bungling delayed its debut as a combat aircraft until 1944, but when it arrived, the twin-jet Me 262 showed that with an experienced pilot at the controls, it was more than a match for the best Allied fighters, including Britain's own jet, the Gloster Meteor.
In truth, the Me 262 should have been ready for front-line service much earlier. The original design, which, in the end, looked a lot like the finished product, existed as early as April 1939. But high costs and the belief of many high-ranking Luftwaffe officers that conventional aircraft could win the war prevented Germany from making the Me 262 a priority.
Daniel Kuehn sends us to the eloquent George Selgin:
Free Banking » Banknotes Are Not, and Have Never Pretended to Be, Warehouse Receipts: [O]ne of the loci classici of the belief, now widespread among fans of a certain sort of Austrian economics, that fractional reserve banking is fraudulent… is that the notes issued by fractional reserve banks have been indistinguishable from warehouse receipts. After all, if you are going to swindle people by "counterfeiting" something, you wouldn't be inclined to make the fakes obviously unlike the genuine articles, right?
Here are some images of (1) various warehouse receipts and (2) various banknotes. I draw my readers' attention to the language common to the specimens in each set. They will note how items in the first all make specific mention of the fact that valuables have been received "for storage" (or something like that); while those in the second merely "promise to pay" a sum on demand, making no reference to storage at all.
I leave it to those readers to then determine for themselves whether the evidence is consistent with the "clever swindle" theory of fractional reserve banking.
I think that George is largely right. But there is a ghost of a problem here: everybody said "I have $2,963,000 in my Bernie Madoff account" when they should have been saying "Bernie Madoff owes me $2,963,000".
Writing checks, delivering take-out dinners, and trying to fit in 20 minutes of quality time with my empty-nester mom shook those fantasies out of me. We told ourselves all sorts of things while I was growing up, but my mother would have been happier, healthier, and more secure with a man to love, and with one who loved her. She would have had more of that if she had more children too.
So do I wish there were more social stigma, the “retrograde and ugly moral judgements” that surround decisions about sex and family? Absolutely. And yes, it would have cost her something if she indeed fell on the wrong side of those taboos. And it would cost me something to be a “bastard” if that word could still wound. People are nasty about social taboos, and I don’t sanction that. But my mother faced plenty of indignities without those moral judgements. If we got do overs, I’d be willing to risk it.
From my perspective the sexual revolution liberated men to abandon the mothers of their children, defining fatherhood down to an alimony payment and maybe state-defined visitation. Women like my mother were expected to raise families entirely on their own emotional and financial resources, however meager. The answers given to the problems that this social revolution caused tend to be curt and unhelpful: contracept better. Or as my mother was ominously told by some upon my conception, “Just take care of it.” Those seem like the “retrograde and ugly” moral sentiments to me.
Just because I turned out fine doesn’t mean that everything is fine.
The astonishing thing, for me, is that Michael doesn't see that the retrograde and ugly moral judgments condemn the mothers as sluts and the children as bastards--and largely leave the men close to scot-free.
It is not Mr. Wickham who faces the threat of lifetime ruin when he runs off with Lydia Bennet, is it?
Nice to see:
Release the Returns - The Editors: The Romney campaign says he has released as many returns as candidate John Kerry did in 2004, and cites Teresa Heinz Kerry’s refusal to release any of her tax returns. Neither is an apt comparison. John Kerry actually released returns from 1999 through 2003, and also released tax returns during his Senate runs. As for Teresa Heinz, Romney isn’t the wealthy spouse of a candidate, but the candidate himself.
He says, yet again:
Note what Rizzo is not saying. Rizzo is not saying:
Before you get into a taxicab, warn the driver that you don't tip so he can decide whether he wants to accept your custom or go on to the next fare.
Rizzo is saying:
Get into the taxi without warning him that you don't tip--and then at the end of the ride, when it comes time for you to honor the contract of meter fare plus tip for reasonable service that you had entered into, stiff him instead.
I never will understand these people. Never. If they ever wind up in your house, strip-search 'em as they leave. Just saying...
The Romney campaign, in the person of Ed Gillespie:
[Romney] took a leave of absence and in fact, ended up not going back at all and retired retroactively to February 1999 as a result.
Nobody in 1999 or 2000 or 2001 thought that Romney had left the helm of Bain Capital--his chair was still there for him; nobody else was sitting in it; Bain statements identified him as CEO on part-time status as he also ran the Salt Lake City Olympics.
It is now 57 hours since Glenn Kessler wrote, on July 13, 2012:
The Fact Checker: [W]e are standing with our assessment that Mitt Romney left the helm of Bain Capital in 1999…. We had examined many SEC documents related to Romney and Bain in January, and concluded that much of the language saying Romney was “sole stockholder, chairman of the board, chief executive officer, and president” was boilerplate…. [T]here is no standard definition of a “chief executive,” securities law experts say, and there is no requirement for anyone to have any responsibilities even if they have that title…. If Romney left Bain in February 1999, when he departed to run the Olympics, then a number of business deals that went sour (such as KB Toys) can’t be counted as part of Romney’s tenure. If he actually left in 2002, as the Obama campaign alleges, then those deals are fair game…
Why oh why can't we have a better press corps?
Nazi Sixth Army begins its drive westward into the Great Bend of the Don River, with Fourth Panzer Army trying to cross behind it to reinforce the drive into the Caucasus by Seventeenth Army, Fourth Panzer Army, and Third Romanian Army.
Traffic jam ensues.
Eleventh Army does not cross over the Kerch Strait to reinforce the Caucasus drive, but instead heads north to Leningrad.
Second Army along with Second Hungarian Army, Fourth Romanian Army, and Eighth Italian Army tasked with holding the Don River line from Voronezh to Sixth Army's left flank...
…and Tyler Cowen is annoyed because Aaron Carroll does not engage his main conclusions but rather picks on the little bitty "facts" he published in thee New York Times.
Aaron explains. I call this for Aaron, 6-0, 6-0, 6-0:
Tyler Cowen on me on Medicaid Wars talks about his belief that Americans will someday vote to rebel against Medicaid… says Republicans might try to take it apart… [proposes how to] alter the Medicaid expansion… [calls for] a subsidized and mandated catastrophic plan with a free market for everything else. None of that is “wrong”; it’s opinion. That’s not what annoyed me, so I didn’t write about it…. I welcomed the above.
What bothered me were [Tyler's] little snippets of information along the way….
I read in Cowen’s piece the idea that single payer systems lead to longer lines. I dispute this. Doctor shortages and an underfunded systems lead to wait times. We always point to Canada, but their wait times (overblown) are because they keep the budget down. You can have a single payer system and no wait time problem (see Medicare)…. [A]ny increase in patient coverage without increasing the doctor supply will potentially lead to longer wait times. It doesn’t matter if the coverage comes from Medicaid, Medicare, or private insurance.
I read in Cowen’s piece the idea that Medicaid has never been popular…. Does he mean Republican governors don’t like it? I agree. Does he mean there will be a political battle over it? Sure. But those are not traditional meanings of “unpopular”…. Ezra Klein says… "A recent Kaiser tracking poll found that 88 percent of Americans wanted either no reduction or small reductions in Medicare funding. At 83 percent, Medicaid was close on its heels." I don’t see that as “unpopular”….
I read in Cowen’s piece the idea that docs don’t accept Medicaid…. There’s a doctor shortage in the US, period. Lots of doctors aren’t taking new patients, period. Medicaid isn’t the worst offender here. Moreover, this issue is all about reimbursement. Medicaid gives too little. It doesn’t make me an ACA “apologist” to note that the law tries to fix that. It might work.
I read at the end of Cowen’s piece a preference for a more free market system on top of catastrophic insurance. I see no evidence for why that would be superior on cost control…. I see it as trying to move in the opposite direction of nearly every other country, and they are cheaper, universal, and often just as good.
Bottom line… memes like these… are the equivalent of “all insurance companies are evil” and “the pharmaceutical companies just want to make money and screw you”…. [T]hese [are] “zombie ideas”. I think we could make our arguments without resorting to them. I wish everyone (including Cowen) would stop using them and stick to facts.
J. Bradford DeLong—that's me—is a professor of economics at the University of California at Berkeley, a research associate of the National Bureau of Economic Research, a weblogger for the Washington Center for Equitable Growth, and was in the Clinton administration a deputy assistant secretary of the U.S. Treasury.
My best work extends from business cycle dynamics through economic growth, behavioral finance, political economy, economic history, international finance to the history of economic thought and other topics.
Among my best works are: "Is Increased Price Flexibility Stabilizing?" "Productivity Growth, Convergence, and Welfare," "Noise Trader Risk in Financial Markets," "Equipment Investment and Economic Growth," "Princes and Merchants: European City Growth Before the Industrial Revolution," "Why Does the Stock Market Fluctuate?" "Keynesianism, Pennsylvania-Avenue Style," "America's Peacetime Inflation: The 1970s," "American Fiscal Policy in the Shadow of the Great Depression," "Review of Robert Skidelsky (2000), John Maynard Keynes, volume 3, Fighting for Britain," "Between Meltdown and Moral Hazard: Clinton Administration International Monetary and Financial Policy," "Productivity Growth in the 2000s," "Asset Returns and Economic Growth."
I have signed up with the Leigh Speakers' Bureau for non-academic and non-public service talks...
"I now know it is a rising, not a setting, sun" --Benjamin Franklin, 1787