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March 2007

Economist's View: Frederic Mishkin: Inflation Dynamics

Mark Thoma quotes Federal Reserve Governor Rick Mishkin on the changing dynamics of inflation:

Economist's View: Frederic Mishkin: Inflation Dynamics: Anchoring of inflation expectations is not a deus ex machina. It must come from somewhere, and since Milton Friedman’s adage that “[i]nflation is always and everywhere a monetary phenomenon” is still true, monetary policy must be the source of the change in the evolution of long-run inflation expectations. During the 1960s and 1970s, the Federal Reserve and a number of other central banks maintained a policy stance that, inadvertently or not, was too easy... allowed both actual and expected inflation to drift up markedly.... Since the late 1970s, however, the Federal Reserve and many other central banks have increased their commitment to price stability.... The Fed pursued preemptive strikes against rises in inflation in 1994-95, 1999-00, and in 2004-06, as well as preemptive strikes against potentially deflationary forces in the fall of 1998 and in 2001-04. The result has been not only low and stable inflation but also, as we have seen, a strong anchoring of long-run inflation expectations.

The... achievement of anchored inflation expectations can also help explain the other stylized facts.... With expectations of inflation anchored, any given shock to inflation--whether it is from aggregate demand, energy prices, or the foreign exchange rate--will have a smaller effect on expected inflation and hence on trend inflation... [and] a much less persistent effect on actual inflation. The recent experience with surging oil prices seems consistent with this story....

Jean Boivin and Marc Giannoni (2006), and... John Roberts (2006) at the Federal Reserve Board... suggest that changes in the way the Federal Reserve conducts monetary policy--including changes in both the parameters of monetary policy reaction functions and the volatility of shocks to those functions--may account for most of the reduction in the coefficients on resource utilization in traditional Phillips curves....

[T]his one explanation covers so many of the stylized facts--an application of Occam’s razor. Indeed, I have always become more confident in a theory if it can explain a number of very different facts. This is why I am so attracted to the view that inflation expectations are a key driving factor in the inflation process. Of course, many other factors also influence inflation, and some of these provide other possible explanations for the recent changes in inflation dynamics....

These stylized facts--that inflation has become less persistent and now responds less to aggregate demand and supply shocks--can lead to inappropriate policy advice. If we take these facts to be structural... we might interpret them as suggesting that the Federal Reserve could respond less to shocks and yet be confident that inflation would remain at a low level.... [But] if we instead attribute the observed changes in inflation dynamics to better monetary policy and a resultant better anchoring of inflation expectations, then such policy conclusions are unwarranted....

[A] key benefit of establishing a strong nominal anchor... [is that] expectations now behave in a manner that makes the economy more stable to begin with.... [C]yclical movements in interest rates need not be as great as was necessary when expectations were unanchored.... At the Federal Reserve, we understand the importance to the health of the economy of anchoring inflation expectations. This is why Federal Reserve officials continually reiterate our commitment to maximum sustainable employment and price stability, why we have been willing to make preemptive strikes against both inflationary and deflationary pressures, and why we remain vigilant....

I have argued here that the most attractive explanation for recent changes in inflation dynamics is that expectations have become better anchored.... What implication does this have for forecasts of future inflation?... If we turn to the financial markets, we find that inflation expectations extracted from a comparison of the yields between Treasury inflation-protected securities (TIPS) and standard Treasury securities seem consistent with an anchor at or perhaps a little above 2 percent... In the case of households, long-term inflation expectations from the Reuters/Michigan survey have been running much higher for a number of years, at around 3 percent...


Impeach George W. Bush. Impeach Him Now

David Kurtz:

Talking Points Memo: by Joshua Micah Marshall: March 18, 2007 - March 24, 2007 Archives: The Patriot Act provision, in essence, transferred the power to appoint interim USAs from the federal district courts to the attorney general and allowed the attorney general to install interim USAs indefinitely, thereby bypassing the Senate confirmation process. Only the naive or willfully blind would see the Patriot Act amendment as a distinct and separate action from the purge itself. Indeed, vesting such powers in the attorney general was a... [precondition]. Otherwise, the Senate confirmation process would have made installing political hacks as USAs difficult...

So when William Moschella, who is now the principal deputy attorney general, recently told McClatchy "that he pursued the changes on his own, without the knowledge or coordination of his superiors at the Justice Department or anyone at the White House," the purpose of his comments was to decouple the Patriot Act provision from the purge itself....

But wait.

From the document dump last night, we learn, again from McClatchy, that Moschella sent an email to other Justice Department officials way back in November 2005 announcing support for the change to the law. Paul has more.

So contrary to earlier assertions, the attorney general was involved in the firings, and higher-ups in the Justice Department knew about the Patriot Act provision.

No surprise there, really. But keep this in mind. Everything the Justice Department has said that later turned out to be false was almost certainly known by the White House to be false, at the time the false statements were made, to the media, and most importantly, to Congress.

Let that sink in.


Bad News from Bolivia...

Hal Weitzman of the FT writes:

FT.com / World / Americas - Bolivia’s Morales may extend term of office: The governing MAS party’s representatives in an assembly that is rewriting Bolivia’s constitution have proposed that the new document allow presidential re-election. The MAS also confirmed that Mr Morales will be a candidate for the presidency in elections likely to take place next year, under new rules currently being discussed in a constitutional assembly. That appeared to contradict statements made last week by the president, who suggested he would not stand in the 2008 elections. But MAS politician Carlos Romero on Friday clarified that Mr Morales would also be allowed to stand for a third term as president in elections in 2013.

Mr Romero told the EFE news agency that “2008 would not be a re-election, but a new election” under a new constitution, implying that Mr Morales could seek re-election for another five-year presidential term, which would end in 2018. Venezuela’s constitution of 1999 allowed presidential re-election, as did a Colombian constitutional reform of 2004. Both countries re-elected their serving presidents last year by wide margins. The MAS proposal echoes the rule of Alberto Fujimori, the authoritarian leader of Peru from 1990 to 2000, who was able to override a presidential two-term limit to stand in the 2000 elections thanks to the congressional passage of a “law of authentic interpretation” which suggested that Mr Fujimori had in fact only run for the presidency once under the existing constitution.

It also heralds constitutional reform to come in Venezuela, where Mr Chávez’s supporters will push for a total ban on term limits as part of their forthcoming proposals for constitutional reform...


More Journamalism from the New York Times

What Eric Lipton and David Johnston wrote about the 18-day document gap, and Tony Snow's reaction to being questioned about it:

Democrats See a ‘Document Gap’ in Dismissal: Asked Wednesday about the apparent gap in the documents, Tony Snow, the White House spokesman, referred the question to the Justice Department.

What Tony Snow actually said when he "referred the question to the Justice Department":

Eschaton: I've been led to believe that there's a good response for it, and I'm going to let you ask [the Justice Department] because they're going to have an answer...

That's a very different message than the one Lipton and Johnston say Snow conveyed. "I'm not going to tell you what the Justice Department told me" is code for "The Justice Department wants me to lie for them."

This misrepresentation of Tony Snow is journamalism of a high order--journamalism reinforced by stating not that there is a suspicious in the documents but that "Democrats see" a 'gap':

And sure enough, the Justice Department was lying.

Here's the Justice Department's answer on Wednesday:

Brian Roehrkasse, a spokesman for the Justice Department, said, “The department has provided or made available to Congress all the documents responsive to Congress’s requests over the time period in question.” He added, “To the extent there was a lull in communications concerning the U.S. attorney issues, it reflects the fact that we have found no responsive documents from that time period, which included the Thanksgiving holiday.”

Here's the result from Friday's document dump:

Joshua Micah Marshall March 23, 2007 09:54 PM: From the AP...

Attorney General Alberto Gonzales approved plans to fire several U.S. attorneys in a November meeting, according to documents released Friday that contradict earlier claims that he was not closely involved in the dismissals.

Also worth noting, these new and very daming emails are from the 'gap'...

Gonzales Met With Advisers on Ouster Plan: The calendar entry [revealing Gonzales's meeting] was among more than 280 pages of Justice Department documents released Friday night.... Department officials said there had not been an intentional effort to delay the release of the new material. Instead, they said, the e-mail messages were overlooked in past searches of office files and computers...


Congratulations to Ms. Ana Marie Cox

I have never seen anybody be so completely pwned in such a short time as what Ana Marie Cox has done over the past week to Michael Kinsley:

A Question for Mr. Kinsley - Swampland - TIME: Is it a "scandal" yet?

Attorney General Alberto Gonzales approved plans to fire several U.S. attorneys in a November meeting, according to documents released Friday that contradict earlier claims that he was not closely involved in the dismissals.

Her earlier posts this week on the U.S. Attorney firing scandal:

http://time-blog.com/swampland/2007/03/re_politics_lies_and_93_v_8.html
http://time-blog.com/swampland/2007/03/meanwhile_back_on_the_hill.html
http://time-blog.com/swampland/2007/03/snow_jobbed.html
http://time-blog.com/swampland/2007/03/holding_the_chief_executive_ac.html
http://time-blog.com/swampland/2007/03/shorter_bush_statement_on_gonz.html
http://time-blog.com/swampland/2007/03/house_gop_leader_on_background.html
http://time-blog.com/swampland/2007/03/draft_of_222_letter_from_doj_t.html
http://time-blog.com/swampland/2007/03/from_dag_moschellas_testimony.html
http://time-blog.com/swampland/2007/03/stand_by_your_yes_man.html
http://time-blog.com/swampland/2007/03/documents_dumped.html
http://time-blog.com/swampland/2007/03/more_re_there_oughta_be_a_law.html
http://time-blog.com/swampland/2007/03/update_the_second_doj_document.html
http://time-blog.com/swampland/2007/03/re_there_oughta_be_a_law.html
http://time-blog.com/swampland/2007/03/doj_document_dump_update.html
http://time-blog.com/swampland/2007/03/iglesias_and_cummins_on_fns.html


Why Oh Why Are We Ruled by These Liars?

From Josh Micah Marshall's TPM Muckraker:

TPMmuckraker March 24, 2007 02:00 AM:

From:Scolinos, Tasia
Sent:Tuesday, November 21,2006 1 :20 PM
To: ''Catherine-Martin@who.eop.govl -
Subject:RE: USA replacement plan

Paul Charlton (D. Ariz.)
Carol Lam (S .D. Cal.)
Margaret Chiara (W.D. Mich.)
Dan Bogden (D. Nev. 1)
John McKay (W.D. Wash.)
David Iglesias (D.N.M.)

The one common link here is that three of them are along the southern border so you could make the connection that DOJ is unhappy with the immigration prosecution numbers in those districts.

It would not be true, since it is an ex-post-facto rationalization. But you could make that connection if you were a lying Bush Republican swine.


links for 2007-03-24


Applied Materials

Mark Gongloff writes:

Energy Roundup - WSJ.com : Google is famously building one of the biggest solar installations in the U.S., adding 1.6 megawatts of solar photovoltaic panels at its Mountain View, Calif., headquarters. TreeHugger reports that, not to be outdone, Applied Materials is doing Google one better, with plans to install 1.9 megawatts of solar panels at its headquarters. “We’re excited to see the spirit of corporate dominance applying to solar panels,” TreeHugger writes. “Applied Materials, however, has an additional incentive…they make the solar panels they’ll be installing.” Of course, Wal-Mart’s solar plans could dwarf those of both Google and Applied Materials, TreeHugger notes.


The Penn Is Mightier than the Card Check

I don't believe in primaries. I believe that only in rare cases can voters gain enough information to be good judges about which candidate it would be best to put forward in the general election. And I definitely don't believe in negative campaigning for the primaries.

But this made me yelp:

Ezra Klein: The Penn Is Mightier Than The Card Check: Mark Schmitt writes:

The bottom line is I kind of keep track of [Hillary pollster Mark] Penn. And like every good Washingtonian with a few million dollars in mortgages, he seems to hold at least three jobs at once: He's Senator Clinton's pollster and political advisor. He runs his own corporate polling firm, Penn, Schoen and Berland. And, finally, he is the "Worldwide President and CEO" of Burson-Marsteller, the fifth largest public relations firm in the world. That's a big title, and it seems like it would be a big job. Prowl around the Burson-Marsteller web site, and you'll see that it's a company that does lots of things.

One that might be of interest to liberals thinking about whether to support Clinton is "Labor Relations." In this section, Senator Clinton's top advisor's company says, "Companies cannot be caught unprepared by Organized Labor's coordinated campaigns whether they are in conjunction with organizing or contract negotiating ... That is why we have developed a comprehensive communications approach for clients when they face any type of labor situation."

You're kidding me. Hillary Clinton's top pollster runs a public relations firm with a unionbusting department. Has anyone, you know, told the unions?


The Conspiracy to Keep Us Poor and Stupid Strikes Again!

I swear, I must have been very bad indeed in a previous life, and must be working off a huge karmic burden. Yes, it is Donald "George Soros Will Crash the Market to Elect Democrats!" and "Bond Yields Are Not Interest Rates!" Luskin--and once again he is far out of his depth:

The Conspiracy to Keep You Poor and Stupid: Brad DeLong sez....

[I]ndexation of benefits after retirement to the price level, not the wage level, adds a wedge between Social Security's costs and its resources roughly equal to half of life expectancy at retirement times the trend productivity growth rate. Each 0.1 percentage point increase in the growth rate of productivity reduces the long-horizon Social Security deficit by approximately 0.1% of taxable payroll.... Real wage and productivity growth of 3.0% per year (as opposed to the 1.1% per year assumed by SSA) would wipe out the 75-year deficit.

The system's unfunded obligation is $13 trillion.... Faster growth would increase both the future revenues and the future benefits in approximately equal measure. The revenues would arrive before the higher benefits must be paid, so there's an illusory improvement if you use a flawed metric like 75-year actuarial balance which counts the inflow but overlooks the outflow, but the actual total deficit, which is on the books already, isn't really affected.

The idea that faster economic growth will eliminate unfunded liability is simply incorrect, as Jagadeesh Gokhale demonstrates in a definitive paper...

Now that's not what the thoughtful and intelligent Jagadeesh Gokhale says. In an impressive and well-argued paper, Jagadeesh Gokhale (2006), "Wage Growth and the Measurement of Social Security’s Financial Condition," at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=920156#PaperDownload, Jagadeesh says two things:

  • In a year-by-year pay-as-you-go-balance system, faster real wage growth makes the state of Social Security look better: because it raises each year's wages relative to that year's benefits, it means we need a lower tax rate in each future year less above their current levels in order to balance that year's Social Security tax collections with that year's Social Security benefits.
  • In a substantially prefunded full-intertemporal-balance system with a sufficiently rapidly declining ratio of workers-to-beneficiaries, faster real wage growth makes the state of Social Security look worse: the declining worker-to-beneficiary ratio means that a larger share of workers than beneficiaries are in the near future (when faster wage growth makes relative wages lower) and a larger share of beneficiaries than workers are in the far future (when faster wage growth makes relative benefits higher), thus faster real wage growth raises average benefits more than average wages.

I have always thought that the right way to think about Social Security is as a system in which in the long run retirement age is a constant fraction of life expectancy, in which case faster real wage growth definitely helps the system. Jagadeesh taught me that things can work differently--if we assume that the retirement age will never rise, and that life expectancy will continue to grow, thus pushing the worker-to-beneficiary ratio downward.

But only somebody as far out of his depth as a Donald Luskin would ever say that the idea that faster real wage growth can help the Social Security system is "simply incorrect." If it is incorrect (which I don't think it is, not for the most relevant baseline), it is incorrect for a complicated, subtle, and debateable reason. Just listen to Jagadeesh Gokhale try to explain what is going on:

[A]nnual balance ratios... would be larger in all future years [with faster wage growth].... The infinite-horizon actuarial balance is usually interpreted as immediate and permanent payroll tax hike required to balance the system’s intertemporal budget constraint. A reduction in the actuarial balance under faster wage growth means that such a tax increase must be larger. However, an increase in each future year’s annual balance ratios under faster wage growth implies that the “pay-as-you-go” tax rate increase that must be levied in each future year would be smaller....

The conundrum mentioned earlier is resolved in the following sense. Although faster growth leads to smaller pay-as-you-go tax rate hikes in each future year, the share of future wages that is subject to larger tax pay-as-you-go tax rates (compared to the average rate under slower wage growth) increases. The latter (weighting effect) may be sufficiently large under faster wage growth to generate a larger actuarial balance.... The choice between pay-as-you-go and prefunding methods for resolving future financial shortfalls is no longer unambiguous...


The Turnip Disambiguation Page

Patrick Nielsen Hayden sends us to the Turnip Disambiguation Page of Wikipedia:

Turnip (disambiguation) - Wikipedia, the free encyclopedia:

Scientific term Brassica rapa rapa Brassica napus or B. napobrassica Pachyrhizus
Southern England, most Commonwealth countries turnip swede (= Swedish turnip) yam bean
United States turnip rutabaga or yellow turnip jicama
Ireland and Northern England turnip swede  
Scotland swede, tumshie or white turnip turnip or neep  
Cornwall white turnip turnip  
Malaysia, Singapore, and Philippines     turnip
Atlantic Canada   turnip jicama
also called white turnip or summer turnip yellow turnip or winter turnip sweet turnip

Brassica napus and B. napobrassica are called swedes (a shortening of Swedish turnip) in England, especially in the South, and in most dialects of the Commonwealth. Rutabaga is mostly an American word. The rutabaga or swede differs from the turnip (Brassica rapa) in that it is typically larger and yellow-orange rather than white.

However, in some dialects of British English the two vegetables have overlapping or reversed names. In the north of England and Scotland, the larger, yellow rutabagas are called neeps (from an Old Norse term, not a shortening of "turnips"), or turnips from folk etymology, while the smaller white turnips are called swedes.


Being Omnivorous

We turn left coming out of the driveway, and we are immediately confronted with: quail, seventeen adult quail, and deer, two adult does. The quail do not quail at the car: instead, they run aimlessly in rapid circles as the car approaches, and then take wing with a whir. The deer stare at us, as if wondering whether or not to approach the car for food. And then they amble off toward the lawns. In the distance there is the gobbling of turkeys--refugees seeking sanctuary from the retirement community of Rossmoor, where sharpshooters are hunting them with silenced rifles. My wife tells of once being in the car and running into a male turkey on the driveway, which looked at her and spread its tail feathers in a testosterone-crazed dominance display--thinking that it could drive off a Subaru, and thus preserve his exclusive sexual access to the hens. Truly a bird of very little brain...

Ever since my wife learned that I was on a committee with Michael Pollan, author of the truly excellent if slightly Berkeley twee The Omnivore's Dilemma, she has been pressing me to invite him to dinner. I have resisted, being scared that she would greet him at the door with a net, and say: "We're having quail this evening. Would you please catch us a dozen? They're under the blackberry bushes" or "Here's the dried corn, the mortar, and the pestle: would you please make us some masa?" or even worse, "Would you please evolve us some maize via selective breeding from this teosinte plant?"

But do go read The Omnivore's Dilemma. It is truly excellent.


Understanding Botswana

Seretse Khama vs. Colonial History in Accounting for Botswana's Relative Economic Success Scott Beaulier takes on Acemoglu, Johnson, and Robinson:

Scott A. Beaulier, "Explaining Botswana’s Success: The Critical Role of Post-Colonial Policy" sbeauli1@gmu.edu: We need not abandon the “good institutions” account [of Botswana's growth] provided by AJR.... [But i]f we are to make the story of Botswana’s explanation... more accurate... “inclusive pre-colonial institutions” and hands-off British policy needs to be downplayed... emphasis needs to be placed on the responsible and prudent policy choices made by Khama and his administration at the time of Botswana’s independence....

[P]ost-colonial leadership must be recognized as the key determinant of a country’s economic development. Each sub-Saharan African nation faced a crucial moment after independence: if these newly independent nations tried to implement Marxist ideas, no institutions could possibly constrain them.... Botswana’s crucial moment came in 1965 when the Botswana Democratic Party and Seretse Khama won their elections.... Unlike other African leaders, Khama’s program simultaneously adopted pro-market policies on several important margins... promised low and stable taxes to mining companies... opened the doors both to trade and to people... kept marginal income taxes low to deter tax evasion and corruption... signaled a commitment to markets.

In addition, Khama’s administration preserved many important indigenous institutions... encourages the proliferation of dissenting opinions.... Every African nation could have turned out like Botswana, but most newly elected leaders chose reform paths that were not conducive to long-term economic growth. Khama, by contrast, made good policy decisions during Botswana’s post-colonial transition....

If Khama was able to get Botswana on a high growth path, why have so many other leaders pursued predatory policies? Khama clearly had economic interests consistent with his people’s economic interests, but it is easy to find many corrupt African leaders who had a similar economic incentive[s]... every leader should have an incentive to compete for tax revenue and thereby offer a good set of policies; yet, when we look at current and past governments, we often see predatory states instead of proprietary ones....

Khama was educated at Fort Hare University in the 1940s... an anti-apartheid university with an explicitly “Euro-centric” vision for Africa... Balliol College... introduced to the British common law.... Khama’s policies in Botswana were successful in establishing a strong bond with white commercial interests.... Khama had an extremely cosmopolitan attitude... whites... viewed as an asset in development.... Perhaps this stems from Khama’s interracial marriage to Ruth Wilson....

For other African nations looking to develop, the policy decisions of Seretse Khama could serve as a useful guide....

For AJR, good policy choice came about because of Botswana’s relatively favorable colonial experience, but we have seen that Botswana’s colonial experience was not conducive to the “good institutions” of private property and the rule of law. Botswana’s success was the result of good post-colonial policy choices.... If the wealth and poverty of most sub-Saharan African nations is largely the result of colonial and historical factors, then countries might be trapped by their past.... If, instead, the story of sub-Saharan Africa is one where foolish policy decisions were made by ideological leaders at the end of colonialism, then there is far more hope...

I find myself skeptical. The view that any post-colonial African leadership group could have made the decisions and followed the policies of Seretse Khama and his team is, I think, badly undermined by the fact that Seretse Khama and company are unique. But I share Beaulier's discontent with the AJR reliance on history: the historical differences between the British Empire in Bechuanaland and the British Empire elsewhere in Africa seem to me to be too small to carry the weight that AJR demand that they bear. So I am discontented.

And, of course, AIDS makes the future of Botswana look far from bright.


Private Equity! No! Public Equity!

Blackstone has built itself on the belief that the costs--transactional, organizational, and motivational--of engagement with the public markets outweigh the benefits to investors. Yet now Blackstone is going public--thus implicitly stating that in this case the benefits to insiders outweigh the costs. The natural question for outsiders to ask is the First Question of Wall Street: if it is a good idea for you to sell to me, why is it a good idea for me to buy from you?

FT.com / Comment & analysis / Analysis - What may underlie Blackstone’s new-found faith in public markets: Francesco Guerrera and James Politi: [U]nderneath the dealmaking machinations and behind-the-scenes lobbying lies an industry rocked by the revelation that one of its own is planning to ditch the cover of private ownership and list on the stock market. Last Friday’s news that Blackstone was in the final stages of preparing a New York listing that could value it at anything between $20bn and $60bn sent buy-out executives, investors and corporate leaders scurrying for explanations.

Is the planned listing an opportunistic move by the astute asset traders who own Blackstone – in particular Steve Schwarzman and Pete Peterson, its founders – to cash in their chips by tapping stock market investors at the top of an unprecedented private equity boom? Or is it another inevitable step in the industry’s coming of age, opening it up to new sources of capital and ushering in a more stable era in which its fortunes will no longer rely on flighty debt markets and the vagaries of the economic cycle?

Although Blackstone has remained characteristically tight-lipped about the initial public offering, the most likely answer is that a flotation would give it access to capital that, unlike the funds raised from private investors and pension funds, does not need to be returned to the source. The many attractions of “permanent capital” figured highly on the list of reasons given by Blackstone’s precursor in the public market arena – Fortress Investment Group, the hedge fund and private equity manager that floated last month.

For a seasoned investor such as Mohamed El-Erian, who manages Harvard University’s $29bn endowment, such a move would put buy-out groups on a firmer footing, ensuring that they have an adequate financial buffer when financial conditions are tough. “It is an evolutionary process, part of a restructuring of the industry,” he says. “Attracting permanent capital will give private equity groups access to a broader set of investors in times of financial distress.”

In theory, the ability to call on stock investors at will – as opposed to the three- or four-yearly fundraisings typical of private markets – ought to smooth out the boom-and-bust cycles private equity has been going through ever since its inception. A listing of some buy-out groups could also alleviate a much feared side-effect of the current deal bonanza: the risk of a stock market collapse caused by private equity firms’ need to sell their investments at the same time in a rush to return funds to investors.

Permanent capital and a vast crystallisation of wealth for the firm’s top brass may, however, come at the expense of Blackstone’s business model. Public company executives are quick to point out that a listing would undermine a cornerstone of buy-out funds’ arguments for taking over listed groups: the claim that private ownership helps companies by shielding them from the regulatory burden of the stock market and the short-term demands of impatient investors. “There is a huge irony here,” says an executive at a company that has received approaches from private equity groups. “If they dislike the markets so much, why go and raise funds there?”

In December, Mr Schwarzman himself told the Financial Times that the web of regulation, disclosure and quarterly earnings requirements was “a brake on American public companies” that was leading to a “going-out-of- business sale” for US corporations. In the same video interview, he also pointed out that any would-be listed buy-out fund faced the potentially insurmountable task of weaning stock market investors off their quarterly earnings fix in exchange for higher returns – sometimes. “The gains are periodic,” he said. “In some cases, firms like ourselves [make returns of] 30 per cent a year. Some years you get a lot of it, some years you get a little of it”...


Steve Stirling Is Having too Much Fun

Steve Stirling is having much too much fun writing his alternate-history book about the Cold War in the late twentieth century--and its spillover to an inhabited Mars:

smstirling.com : "I am glad that Your Supremacy is pleased with our fraternal aid," Lin Yu-Pei said, rather obviously translating too-literally from his native speech.

The courtiers tensed very slightly, adopting postures of disassociation, implying that they were not present. The guards reacted in a more unambiguous fashion, touching weapons.

"That is not the most appropriate of phrasing," Sajir said gently.

"Your Supremacy?"

Sajir sa-Tomond fell into the Terran language called Russian; they had a ridiculous number of them, and used them all simultaneously, but it was an ability he had thought it sufficiently useful to cultivate. Communication beyond the basics required more than translation of words; modes of thought and perception embodied in the underlying syntax must be understood.

"You implied a genetic relationship with myself, the Tollamune," he explained gently. "This is a serious breach of protocol and may not be done even as a matter of metaphor."

"My apologies, your Supremacy,"

"While not forgotten, the offense is allowed to pass without repercussion due to your ignorance of the Real World's usages," Sajir said formally.

Unnoticed by the Terran, the Expediter of Painful Transitions lowered the grub-implanter.

Forthcoming from Tor.


The Economic Outlook

Mark Thoma looks at the Federal Reserve Bank of San Francisco's "Economic Outlook":

Economist's View: FRBSF: The Economic Outlook:

Conventional wisdom holds that when the unemployment rate falls below the NAIRU, wage inflation increases, which eventually feeds through to price inflation. A key question for policymakers is whether this conventional wisdom remains relevant today.... [A] number of... factor... might [reduce] the relevance of this historical relationship... (1) mismeasurement of available workers, (2) mismeasurement of the NAIRU, and (3) changes in the sensitivity of wage inflation to the unemployment rate owing to the rising importance and stability of inflation expectations.

Although the measured unemployment rate is quite low, some would argue that it does not fully capture the population available for work. Relative to the late 1990s, the labor force participation rate (LFP) and the employment-to-population ratio remain low.... The NAIRU is difficult to measure and is affected by a number of demographic and institutional factors. There is a wide range of credible estimates....

The sensitivity of wage inflation to the unemployment rate depends in part on the inflation expectations of workers.... [I]nflation expectations remain well-contained, likely tempering the magnitude of cost-of-living based wage increases demanded by workers...

I tend to agree that the inflation outlook over the medium term is significantly better than the center of gravity of the FOMC appears to believe. But I'm not sure whether I'm just indulging in wishful thinking.


The Joe Klein Self-Massacre Continues... (Why Oh Why Can't We Have a Better Press Corps?)

One of the most amazing thing about America's hackiest journamalists is that they do not understand that their past writings are now on line. It used to be somewhat "clever"--or at least rhetorically effective--to misrepresent what you had said in the past, as long as you were one of the few people with a megaphone, and as long as your past clippings were buried in library basements where they were hard to find and where those who found them did not have access to the megaphones.

The world has changed.

Now it is just stupid and pathetic to misrepresent what you said in the past. Yet Joe Klein does it:

Let's turn the mike over to Greg Sargent:

Horses Mouth March 22, 2007 02:47 PM: Joe Klein takes Eric Alterman to task because he dug up a Klein quote from The New Yorker in 2000 and posted it on his Altercation blog: "Quote of the Day: 'Given the circumstances, there is only one possible governing strategy [for George W. Bush]: a quiet, patient, and persistent bipartisanship.' -- Joe Klein, The New Yorker."

Klein says that this demonstrates that Alterman is "still after me" and "still pathetic," then rejoins: "But I was right about that, wasn't I? Bush's idiotic right-wing governing strategy has turned out to be a historic failure, no?"

Klein pretends that what he said was that a "quiet, patient, and persistent bipartisanship" would be wise. That's not what he said: he said that "quiet, patient, and persistent bipartisanship" was inevitable, and that as a result there "will be no $1.3 trillion tax cut," that as a result the "winning coalition [on each issue] will be built from the center out," that as a result reality "will force the next President to extricate himself, on occasion, from the influence of his party's traditional interests."

Sargent has the context of the quote:

[T]he election's most important political lesson has been obscured, and may be lost, in the process: the need for humble and conciliatory leadership at a moment of clearly defined, if not philosophically profound, national division...

No matter the eventual outcome, the next President will struggle to establish his political authority. Given the circumstances, there is only one possible governing strategy: a quiet, patient, and persistent bipartisanship. This means that almost all the extravagant promises made during the campaign just ended are now officially inoperative. There will be no $1.3 trillion tax cut....

The winning coalition is likely to shift with each vote, but each coalition will be built from the center out. Building and rebuilding these coalitions will be a daunting political task, but also a potentially liberating one-political necessity will force the next President to extricate himself, on occasion, from the influence of his party's traditional interests. The bullies and extremists who have populated the congressional leadership of both parties -- not just conservative ideologues, like Tom DeLay, of Texas, but also obdurate liberals, like David Bonior, of Michigan -- could find themselves abandoned by moderate backbenchers more willing to compromise.

George Bush might seem better suited to this new political landscape than Al Gore.

Now if Joe Klein were setting out de novo to convince me that he is a mendacious hack, this is how to do it: to pretend that my past writings said something different than they actually did, and to do so in a context in which checking the real context is absolutely trivial.

Sargent goes on:

But here's the thing. The point isn't even so much whether Klein was right or wrong six years ago. I'm raising this in all sincerity to ask a larger question: Why is this "pathetic"? Why does Klein tend to react so violently when people quote his past work? I mean, if you're a pundit, you should want people to think your opinions are important enough to engage....

[L]iberals clearly think Klein is influential enough to be argued with -- often -- and hence quote his past work in doing so. Why does this seem to get Klein so ticked off so often? After all, the very premise of the pundit enterprise is that you get paid big money to tell people what to think because thanks to your superior interpretive powers, your opinions matter. You can't expect people to take your opinions seriously while simultaneously being a bad sport when people hold your words to account. On the other hand, if you think your opinions shouldn't be weighed against history, why be a pundit in the first place?


Robert Waldmann Is Shrill

He endorses the rule of law:

Robert's Stochastic thoughts: Over here in Italy: Warrentless wiretaps lead to arrests (and the investigating prosecutor was not appointed by politicians and can't be fired by politicians). "Ci sono anche poliziotti ed ex agenti segreti stranieri tra i nuovi arresti ordinati nell'ambito dell'inchiesta milanese sui dossier illegali... [including] John Paul Spinelli, ex agente Cia.

That is: "Police officers and foreign intelligence agents are among those named in new arrest warrents issued as part of the Milanese investigation of illegal dossiers... including ex CIA agent John Paul Spinelli."

If only the rule of law were respected in the USA the way it is respected here in Italy.

And no I never expected to write that ever.


Why Oh Why Can't We Have a Better Press Corps? (Washington Post Edition) 'Post' Finds Nothing 'Nefarious' in Attorney Firings -- AP Suggests Otherwise

Ruth Marcus of the Washington Post once asked me why I did not assume that the errors and inaccuracies at the Post were not honest mistakes by hard-working people trying their best.

This morning we have the staff of Editor and Publisher saying that the Post editorial board of which Ruth Marcus is a part as at a minimum incompetent and underbriefed.

Here's E&P's take on this latest act of journamalism from Fred Hiatt and company:

'Post' Finds Nothing 'Nefarious' in Attorney Firings -- AP Suggests Otherwise: The Washington Post in an editorial today declared that it saw nothing unusual or "nefarious in the dismissal process" in the recent firing of eight U.S. attorneys. It called it "the supposed scandal." At the same time, however, The Associated Press is out with a story that suggests that something fishy -- or political, as the Democrats charge -- does seem to surround the move.

The Post warned,

The stubbornness and overheated rhetoric on both sides threaten an unnecessary constitutional crisis that would only bog down the inquiry in a distracting fight over process.... Lawmakers would do well to demonstrate more understanding of the legitimate institutional concerns at stake here -- is the president not entitled to confidential advice on personnel matters? -- and to remember that the tables could easily be turned, as they were not so many years ago, with a Republican Congress eager to rifle through the files of a Democratic administration...

The AP story....

Six of the eight U.S. attorneys fired by the Justice Department ranked in the top third among their peers for the number of prosecutions filed last year, according to an analysis of federal records. In addition, five of the eight were among the government's top performers in winning convictions. The analysis undercuts Justice Department claims that the prosecutors were dismissed because of lackluster job performance....

Four of the prosecutors also rated high in pursuing drug cases, according to Justice Department data analyzed by the Transactional Records Access Clearinghouse at Syracuse University. Only one of the eight received a better-than-average ranking in prosecuting weapons cases.

Several of the attorneys who were told last Dec. 7 to resign complained their reputations were sullied when the Justice Department linked the firings to underwhelming results in each of the eight districts — in Arizona, Little Rock, Ark., Grand Rapids, Mich., Nevada, New Mexico, San Diego, San Francisco and Seattle. "I respectfully request that you reconsider the rationale of poor performance as the basis for my dismissal," Margaret Chiara, the former prosecutor in Grand Rapids, Mich., complained in an e-mail. The description, in part, she said, "is proving to be a formidable obstacle to securing employment."

Top Justice aide Michael Elston wrote back that "our only choice is to continue to be truthful about this entire matter. The word performance obviously has not set well with you and your colleagues," wrote Elston, chief of staff to Deputy Attorney General Paul McNulty. "By that word we only meant to convey that there were issues about policy, priorities and management/leadership that we felt were important to the Department's effectiveness."

The data on prosecutions and convictions, provided to TRAC by the Justice Department's executive office that oversees U.S. attorneys, indicates the majority of the fired prosecutors were hardly slackers. They show:

  • Except for Chiara and Bud Cummins in Little Rock, the group ranked in the top third among the nation's 93 U.S. attorneys in contributing to an overall 106,188 federal prosecutions filed last year.
  • Of those six, all but Kevin Ryan in San Francisco also scored among the top third in winning a collective 98,939 convictions.
  • Three districts — Arizona, New Mexico and San Diego — were among the five highest in number of immigration prosecutions. Given their proximity to the Mexican border, the results come as little surprise. The Justice Department, however, attributed former San Diego prosecutor Carol Lam's firing in part to lagging immigration prosecutions and convictions....

Justice officials have cited poor management skills, insubordination and, in Cummins' case in Little Rock, political favoritism for replacements as other factors that led to the firings. That underscores another apparent consideration in the dismissals: loyalty to the Bush administration, said former Justice Department inspector general Michael Bromwich. "The notion that the rug can be pulled out from under them because they may not toe the line on death penalty issues or their immigration prosecution statistics may not be high enough really undermines the system of independent U.S. attorneys," said Bromwich, inspector general during the Clinton administration and now a partner in Washington law firm Fried, Frank, Harris, Shriver and Jacobson...


Why Oh Why Can't We Have a Better Press Corps? (Michael Kinsley Edition)

Yet more journamalism this morning...

On March 13, 2007, I read this email from DOJ's Kyle Sampson to the White House's Monica Griffin of December 19, 2006 http://www.talkingpointsmemo.com/docs/important-to-karl/?resultpage=1&:

I think we should gum this [Arkansas U.S. Attorney situation] to death: ask the Senators to give Tim [Griffin] a chance [as US Attorney for Arkansas], [ask the Senators to] meet with him, [to] give him some time in office to see how he performs, etc. If they ultimately say, "no never" (and the longer we can forestall that, the better), then we can tell them we'll look for other candidates, ask them for recommendations, evaluate the recommendations, interview their candidates, and otherwise run out the clock. All this should be done in "good faith," of course.... [O]ur guy is in there so the status quo is good for us.... [P]ledge to desire a Senate-confirmed U.S. Attorney; and otherwise hunker down....

The only thing really at risk here is a repeal of the AG's appointment authority. We [need]... to work hard to preserve this... all we really need is for one Senator to object to object to language being added to legislative vehicles.... There is some risk that we'll lose the authority, but if we don't ever exercise it then what"s the point of having it? (I'm not 100% sure that Tim [Griffin] was the guy on which to test drive this authority, but know that getting him appointed was important to Harriet, Karl, etc.)

On March 19, 2007, Michael Kinsley wrote:

Swampland - TIME: Now to the Patriot Act business. I’m afraid I’m going to disappoint you. I’m dubious about that [whether the Bush administration has done anything wrong], too. For late arrivals: the administration snuck a provision into the odious Patriot Act that allows the Attorney General to fill US Attorney positions without Senate approval.... Help me out here, AnaMarie. I am confused about the administration’s use of this provision. Has it ever put a US Attorney in place and not submitted the name to the Senate for confirmation? There is one guy who is explicitly temporary, but they insist that they intend to get Senate approval for every US Attorney they put in place. Is that right? And have they kept their word on this, at least so far?

Comment seems superfluous.


Also worth noting are Kinsley's declaration that it is illegitimate and inappropriate for the Democratic congressmen and women to use their tools to try to find out what the Bushies have done and are doing:

Politics, Lies, and 93 v. 8 - Swampland - TIME: I stand by my description of the administration as “comically mendacious”—-anyone who hasn’t been entertained by the tango of mid-course corrections is missing a real treat. But it’s also serious. I do tend to think that the solution is in electoral politics—-punish liars by voting against them--and not in subpoenas and hearings and special prosecutors and impeachment talk and all the other paraphernalia of scandal...

And Kinsley's declaration that it is illegitimate for anyone to to jump from the fact that the Bushies are lying to the conclusion that the Bushies have done something of which they are ashamed which they don't want known:

Swampland - TIME: We’re all in agreement—-you, me, the Washington Post, even the Wall Street Journal—-that the administration’s response to this controversy has been comically mendacious. Volleys of lies come in wave after wave, like the trench soldiers of World War One. They get mowed down and the administration just sends in more. This is the best evidence that there is something simply and truly wrong going on. It’s not great evidence. The characteristic mendacity of the Bush administration is the pointless lie, uttered because telling the truth would be ever-so-slightly more trouble. (Like drinking a Bud within arm’s length because better beer is in the fridge ten steps away)...

Let me restrict myself to one comment on these last two. Kinsley's game appears quite clear: Place the burden of proof on the Democrats, and then say that until they have met that burden of proof any investigation to establish what really happened is illegitimate.


Maybe it's just that we have different standards out here in academia, and in weblogsville. My presumptions are that anybody worth reading will have briefed him or herself up on the issues before opining, and that anybody worth reading will be trying to understand reality rather than playing silly legal-counsel games with respect to shifting the burden of proof.

And I am still shocked each time I find out that my presumptions are false when applied to modern American journalism.


Bookmarked at Del.icio.us for 2007-03-23


Ummm... Externalities?

Ummmm... Perhaps there are powerful externalities to acquiring the knowledge about how to work with closed carbon cycle technologies? Balancing off the costs of market failures against government failures is fine. But David Boaz's assuming that there are no market failures anchors--well, this gets him classified as those off in the Gamma Quadrant whose works go to the bottom of the to-be-read pile:

Cato-at-liberty » But: On the way home, my mind wandered as “All Things Considered” reported on a biodiesel refinery in Washington state. And then I heard a familiar opening line from the tech millionaire who is now the CEO of Imperium Renewables, which built the refinery.

I’m a pretty conservative guy, generally. I’ve voted Republican my whole entire life. And I’m very skeptical of the government’s role in any kind of market.... But, in this case, there’s no other way to do it but with government support and mandates.

Turns out biodiesel is profitable with a federal tax subsidy of up to a dollar a gallon, and with the anticipation of restrictions on greenhouse gases. So a guy who’s normally “very skeptical of the government’s role” supports subsidies in this case because there’s “no other way to do it.” But that’s the whole point of markets and prices–to tell us what economic endeavors make sense. If Hawaiian sugar, or South Carolina textiles, or biodiesel fuel isn’t economically viable without subsidies, then that means it’s not the best use of our limited resources.

One of the values of a political philosophy--sometimes dismissed as “ideology” or “dogma”--is that it gives us a rule, a set of principles, for deciding such questions. We don’t have the time to look at all the data and decide what we think about every issue, and we’re certainly all subject to personal biases on the issues that touch us. There are lots of speakers I’d personally like to shut up, but if I remember that I do believe in the First Amendment, I realize I have to allow even offensive speech. I may want Amtrak to run fast trains between Washington and New York, or I may want to keep my own factory in business. But if I remember that the free-market economy produces the best results for all of us, then I will accept the outcomes of the market process.

People should think about the benefits of the whole libertarian system--free markets, free speech, freedom of religion, constitutional limits on government--whenever they’re tempted to say “I’m for freedom, but...”

I wouldn't call the fact that your ideology detaches you from reality a "value" of it, David. That's not the right word.


Fred Bergsten Tries (Politely) to Teach the Clown Show That Is the Bush Administration

Fred Bergsten writes a very good how-to manual for the Treasury Secretary and the Under Secretary of the Treasury for International Affairs.

One of the many, many things that the Clown Show that is the current administration appears incapable of learning is that our soft power is a great deal harder and more powerful than our hard power.

If China is a partner rather than an adversary in fifty years, it will not be because of the 101st Airmobile Division, it will be because the economic, social, and cultural links between the U.S. and China are so strong that its politics will have reshaped themselves to some degree in our image and its people will see how much they have to gain from peace and how much we all have to lose from confrontation.

But the current administration cannot grasp an idea that Fred Bergsten grasps very well: that it was George Marshall's economic aid plan, and not John Pershing's or Dwight Eisenhower's armies, that made and keeps wester Europe our allies and partners. They see trade as a source of weakness: as a way of creating potentially traitorous interest groups inside the U.S. that will block attempts to "get tough."

They remind me of nothing more than Admiral Tirpitz and the German Navy League before World War I, with their insane belief that if only the German Empire built a battlefleet strong enough to cause Britain real problems, then the British would respect and like them.

Fortunately, this particular Clown Show will almost surely have much less damaging effects than von Tirpitz's did. The overall international situation is much less dangerous.


The Monetary Economics of China

Guesses:

Rough Orders of Magnitude:

  • China's money stock (M2) is equal to 200% of annual marketed GDP--close to $4 trillion, RMB 30 trillion--and is expanding at about 17% per year...
  • China's monetary base is roughly 20% of annual marketed GDP--close to $400 billion, RMB 3 trillion--and is expanding at about 17% per year...
  • China's annual marketed GDP is currently about $2 trillion, RMB 16 trillion--and is growing at about 10% per year...
  • China's liquid foreign assets are roughly 60% of annual marketed GDP--$1.2 trillion, RMB 10 trillion--and are growing at $400 billilon, RMB 3 trillion a year...

The current configuration appears to be that China's exporters pile up a net trade surplus of RMB 3 trillion a year in foreign currency, which the central bank buys for RMB in order to maintain the exchange rate value it wishes. The exporters than deposit this cash RMB 3 trillion a year in the banks of Shanghai. The People's Bank of China then buys RMB 2.5 trillion of this cash for 3% not-very-tradeable bonds plus a promise of future capital injections should the banks get into trouble as long as they play ball, leaving RMB 500 billion to increase the monetary base and so support the growth of M2...

What Does the Banking Sector Look Like?

  • Liabilities (deposits) of RMB 30 trillion...
  • Assets
    • Reserves of RMB 3 trillion
    • Non-marketable low-interest state bonds of RMB 10 trillion
    • RMB 17 trillion in loans and private bonds...

China and India: Credit, Politics, Environment

Willem Buiter is more pessimistic about China and India:

Willem Buiter http://blogs.ft.com/wolfforum/2007/03/in_this_brave_n.html#comments: Both India and China are in the terminal stages of a credit boom.... If the monetary and fiscal authorities act in time (they appear to be well behind the curve in both countries) and if they have the right instruments and the political will and freedom to use them (doubtful in both countries) the credit boom can end with a whimper. A hard landing seems more likely, however.

Second, a domestic political question mark... political risk to growth is seriously under-priced by the domestic and global communities of investors. In China economic liberalisation is proceeding side by side with continued political repression through the monopoly on political power of the Communist Party.... The sustainability of such a social-political-economic configuration has never been tested. India has had an open and representative form of government for sixty years. I believe this to be an important socio-political safety valve....

Third and probably most importantly, an environmental question mark. Environmental supply-side constraints on growth in Chindia... invalidates the growth accounting exercise by Bosworth and Collins, reported by Martin [Wolf].... [O]utput is seriously mis-measured and a key input - the services yielded by the stock of environmental capital - is ignored completely. For Chindia, this omission matters even in the medium run.... It is the local (national) natural resources of clean fresh water and fertile land (some would add clean air as well) that are not only important domestic ‘consumer durables’ but also key inputs into the production of the goods and services that are captured by conventionally measured GDP indices.... The water constraint is likely to be the first one to become binding in both China and India, certainly within 10 years. It will impair even the production of those goods and services included in conventional GDP measures....

Chindia urgently needs to re-orients its growth policies towards environmental sustainability. Pricing all water and power use (including agricultural) at long-run marginal social cost would be a good start. Without such a radical re-orientation, the 21st century may well become the century of China and India for a very different reason from the one prophesied by the current uncritical Chindia cheerleaders...


What Inside Here, Exactly, Knows the First Name of the Attorney General?

What Inside Here, Exactly, Knows the First Name of the Attorney General?

It was about a week ago. I was in a subway train underneath San Francisco Bay, writing a weblog post about Attorney General Alberto Gonzales. But I wrote not Alberto Gonzales but Henry Gonzales--and when I proofread it twice for typos, grammaros, and mindos, I decided both times that Henry Gonzales was correct, what I wanted to write.

So why did I think, while underneath San Francisco Bay, that Henry Gonzales was the name of the Attorney General?

The answer is in where I was going: I was going to a meeting at the Federal Reserve Bank of San Francisco. The late Henry Gonzalez (he died in 2000) was a congressman. He was one of the last honest Texas populists, and was chair of the House Banking Committee and a strident and effective critic of the Federal Reserve during the 1990s. Do any kind of concept search on "Federal Reserve" and "last name Gonzalez" and the first name "Henry" will pop up.

So there I was, underneath San Francisco Bay, trying to write about the U.S. attorney scandal and Alberto Gonzales while part of my brain is thinking about the fact that I am going to the Federal Reserve. When it comes time to tell my fingers whether to type A-l-b-e-r-t-o or H-e-n-r-y, that part of my brain that is thinking "Federal Reserve" votes that "Gonzales" goes with "Henry," while that part of my brain that is thinking "Bush administration" votes that "Gonzales" goes with "Alberto," and the first part of my brain is larger and stronger and remains larger and stronger as I proofread the post, come out of the subway, and stop off to borrow Starbucks's electrons to send the post out onto the internet...

The interesting thing, from my perspective at least, is that it doesn't seem like there was any thought going on here. I didn't (mistakenly) think that "Henry Gonzales is the Attorney General." I didn't think about it at all. There was just a bunch of neurons sending electrical signals to one another that culminate in impulses out to the fingers on the keyboard--a bunch of neurons that most of the time present a convincing simulacrum of sentient intelligence, until the mask slips.


More Journamalism from the Washington Post

If the Washington Post wants to survive five years, it needs to fire Fred Hiatt and the rest of its editorial board today.

Jonathan Chait is on the case:

http://www.tnr.com/blog/theplank?pid=91324: The Washington Post editorializes today on the prosecutor scandal. It turns out, as with most issues, that the blame here can be apportioned between the two parties in precisely equal measures. Funny how that keeps happening. The key part of the Post's Solomonic compromise is explained in this passage:

If questions remain, Mr. Rove and Ms. Miers should be interviewed. They don't have to testify under oath, since lying to Congress is a crime.

I don't don't which is funnier: the Post's casual, unstated assumption that Miers and Rove will lie, or its casual, unstated assumption that this is perfectly OK. I look forward to the Post applying this logic to other areas of our legal system. ("Mr. Escobar's runners should not be searched for drugs at the airport, since importing cocaine into the United States is a crime.") Hey, I have a suggestion: What if they just don't lie? Furthermore, maybe, just maybe, the possibility that they could be prosecuted if they do lie--i.e., perjury--would help ensure that they don't lie. Perhaps this would work even better than the honor system...


Why Oh Why Can't We Have a Better Press Corps?

I give the New York Times a decade if it continues to employ journamalists like William Broad, whose hit piece on Al Gore has attracted some attention:

Letters - New York Times: The National Academy of Sciences, the American Geophysical Union, the American Meteorology Society and the American Association for the Advancement of Science have all issued statements stating that climate change is: a) occurring, b) largely caused by humans and c) likely to continue with large negative consequences for natural and human socioeconomic systems unless we rapidly decarbonize our global energy systems. People who have evidence that contradicts these statements can publish their findings in scientific journals, after which the public might expect to see this work discussed in Science Times. In the meantime, if you feel obligated to publish what are simply opinions, please use the opinion pages rather than the science section. James J. McCarthy Cambridge, Mass. The writer is the president-elect of the American Association for the Advancement of Science....

William J. Broad states that the latest I.P.C.C. report has lowered its estimate of future sea level rise, apparently exposing Al Gore as a “shrill alarmist.” This is dead wrong. The reason for the lower estimate is that the I.P.C.C. report now excludes the full effects of ice sheet melting. What they’re saying is not, “Sea level rise is going to be less than we thought.” They’re saying, “We just can’t predict what the ice sheets are going to do.” The article concludes that the I.P.C.C. portrays climate change as a “slow-motion process.” The I.P.C.C. estimates that under a business-as-usual scenario, global temperatures may rise more than 7 degrees by 2100. That’s more than half a degree per decade. Phil Mitchell Seattle....

With “From a Rapt Audience, a Call to Cool the Hype,” The Times missed an excellent opportunity to explore the difficulties of communicating science in a way that is both accurate but understandable. Instead, you advanced the specious criticisms of a few well-known contrarians who wouldn’t have agreed with Al Gore had he read aloud from a textbook. We direct readers to our blog RealClimate (www.realclimate.org) for a scientific review of the movie last May by our colleague Eric Steig, which concludes that Gore on the whole got the science right. Michael E. Mann University Park, Penn. Gavin A. Schmidt New York


Impeach Alberto Gonzales

The Carpetbagger Report:

Gonzales was ‘extremely upset’ when his deputy acknowledged reality: Attorney General Alberto R. Gonzales was "extremely upset" that his deputy told Congress last month that a federal prosecutor had been fired for no reason.... Mr. Gonzales believed that the prosecutor, H. E. Cummins III, the United States attorney for Arkansas, was dismissed for performance reasons, the e-mail suggested. But his deputy, Paul J. McNulty, testified that Mr. Cummins had been replaced to create a vacancy for J. Timothy Griffin, a political ally of the White House political adviser Karl Rove...


links for 2007-03-22


The Best Bunch of Prosecutors You Would Ever Want to Fire

Paul Kiel:

TPMmuckraker March 21, 2007 09:03 AM: [T]he Justice Department didn't select a group of mediocre prosecutors and then try to smear them as underperforming -- oh, no. They chose from among the most distinguished U.S. attorneys in the country (by the DoJ's own admission), and then announced to the world that they'd canned them for "performance related" issues.

Let's go down the list, shall we?

New Mexico's David Iglesias, we pointed out yesterday, was considered for a promotion in 2004 to head up the office that oversees all U.S. attorneys. And that wasn't the only promotion for which he was considered. As The Washington Post points out this morning, he was also considered for the position of the U.S. Attorney for the District of Columbia (the crown jewel of the U.S. attorney offices) and U.S. Attorney for Manhattan.... [F]ormer Deputy Attorney General James Comey (he left in August of 2005), has called Iglesias "was one of our finest and someone I had a lot of confidence in as deputy attorney general."

And then there's Arizona's Paul Charlton.... "'I considered you a star among U.S. attorneys'," Comey told Charlton in [a Feb. 9 e-mail]. 'You ran an office with a staggering caseload, in both numbers and variety, and did it beautifully'." Comey added that he knew of "no performance issues" with Charlton. "In fact, quite the contrary."... And Seattle's John McKay. Here's Kyle Sampson, Alberto Gonzales' right hand and the point man for the purge, writing about McKay in August, 2006: "re John, it's highly unlikely we could do better in Seattle."... And then there's the case of Daniel Bogden of Nevada, the one Deputy Attorney General Paul McNulty got cold feet about.... [T]he Justice Department is currently helping him get another position at the DoJ.

Of course, everyone knows how Carol Lam distinguished herself, but despite bringing the highest profile case in the Justice Department's recent history (with the exception of the Abramoff investigation), she doesn't seem to have had any champions inside the Gonzales Justice Department. Funny...

Impeach Alberto Gonzales. Impeach Richard Cheney. Impeach George W. Bush. Do it now.


"The Firehose Economy"

Josh Quittner: January 23, 2007:

Netly News: Last Thursday morning, the B2 blog network, less than 3 months old, hit a milestone of sorts: Though January was only half over, our little cooperative had already garnered a million pageviews. (Actually, it was 1,006,433, at that moment, to be precise.) Now, I know that's teensy compared to established, first-tier blogs. And it doesn't even bear mentioning next to the likes of, say, our big brother, CNNMONEY, which does 300x that much per month; 101 Dumbest Moments in Business got over 6 million pageviews within 5 hours of its launch this morning. But it illustrated an important point and ratified our idea for a blog network: The content game has rapidly become one, giant Firehose Economy...


Fifty Weblog Style Points to Alex Tabarrok!

Alex takes the offensive:

Marginal Revolution: The Credit Snobs: I rather like the title "voodoo priest of free market economics," so I am happy to take the blame for the sub-prime mortgage defaults and at the same time stick a few pins in Nouriel Roubini. Roubini and others generating hysteria about defaults in the mortgage market are credit snobs - they think credit is something that only the rich can handle...

If I didn't have other things that I can no longer procrastinate on, I would love to get into this. But alas, I have no time...


China's Foreign Asset Position and Its Missing Domestic Inflation

Brad Setser writes:

RGE - $1.5 trillion, not $1.1 trillion – and rising fast: China formal reserves were a bit under $1.1 trillion – think $1.066 trillion – at the end of last year.  No doubt they are close to $1.1 trillion, if not above it, now. No wonder China’s central bank government just made it quite clear that the PBoC doesn’t really want any more reserves. Zhou, quoted by Reuters:

Many people say that foreign exchange reserves in China are (already) large enough.... We do not intend to go further and accumulate reserves...

Zhou’s statement is probably yet another sign that the growth in China’s reserves this year has been kind of fast -- and that the PBoC doesn't really want to continue to absorb the lion's share of the all the dollars that are now piling up in China. But even now, the PBoC (though SAFE) is not the only Chinese institutions that have been adding to their foreign assets.   James McCormack of Fitch just released a quite interesting new report (registration with Fitch required) that estimates that China now holds $1.55 trillion in foreign assets.    And by China, Fitch effectively means China, Inc.   Most foreign assets not held by SAFE are held by various state companies and state banks.   Especially the state banks – Fitch, drawing on data from IMF, estimated China’s banks hold $273b in foreign assets, a $50b increase last year.   And it isn’t clear if that total – or for that matter China’s balance of payments data – counts the funds the banks raised in their offshore IPOs.... McCormack estimates that China added $342b to its foreign assets last year.  And even before China created the “People’s Investment Company” nearly $100b of the increase was coming from outside the central bank and wasn’t taking the form of reserves.    

That squares with my own estimates – Chinese reserve growth, as large as it was, has been well below what it should be, given China’s burgeoning current account surplus and ongoing net inflows of FDI.    Large hot money outflows could explain the difference, but, well, all the evidence suggested that private money wanted to get into China and its booming equity market, not get out.   The other explanation: the state banks, state insurance companies, state pension funds and state companies all helped the PBoC out....

I don't think the pace of growth in China’s foreign assets has slowed.  If anything it probably picked up on the back of the still growing trade surplus.   So keeping something like the status quo in place – and by status quo I mean the current  exchange rate regime and ongoing Chinese openness to greenfield FDI – requires that someone in China add $400b or more to their stock of foreign assets. Private Chinese citizens don’t seem very keen on adding to their foreign assets.  Not when those assets yield even less -- in RMB terms -- than domestic deposits. And if the PBoC doesn’t want to add to its foreign assets either, well, the People’s Investment Company will get really big fast...

But it's not just that the state, the semi-state, and the state-owned-enterprises are acquiring enormous dollar denominated assets. They are acquiring enormous domestic renminbi liabilities as well. And I can't figure out why it hasn't produced a big burst of domestic inflation yet. I understand that debt isn't very much like money, but it is somewhat like money.

Maybe I can corner Galina Hale on Friday and make her tell me, if she understands...


Eddie Lazear: Social Security Crisis Postponed...

Or so Eddie implicitly says. Ampersand writes:

Alas, a blog » Blog Archive » Bush’s Chief Economist Predicts Social Security “Crisis” Will Never Happen: Capital Commerce1 quotes Edward Lazear, the Chair of Bush’s Council of Economic Advisers, answering a question about productivity growth:

I wouldn’t necessarily say 3 percent. But I would expect that we could expect to see high rates, perhaps not quite at the 3 percent level, but somewhere higher than 2 percent. I would expect somewhere closer to 3 percent … If I’m thinking about long-term productivity growth and asking, “Do the fundamentals exist for persistent high productivity growth in the upper 2 percent range?” I think we can still be there, again as long as we continue to maintain policies that are consistent with an open economy.

If Bush’s chief economist is right, then there’s no Social Security shortfall [over the next 75 years].... Predicting the future isn’t simple; the Trustees have to make certain assumptions. One of their assumptions is that productivity increases for the next 75 years will be, on average, 1.7% a year. If they’re right, then the next 75 years will feature the lowest productivity gains in American history....

But what if the next 75 years aren’t actually the worst 75 years in US economic history?... That brings us back to Edward Lazear’s prediction of near-3% growth in productivity. If he’s right, then maybe there won’t be any Social Security shortfall. Higher productivity means, at least in theory, that workers earn more; workers earning more means that, without raising taxes, payroll tax revenues go up...

And he cites me from January 11, 2005:

Brad DeLong's Semi-Daily Journal: A Weblog: Why Oh Why Can't We Have a Better Press Corps? (Why Haven't National Review's Funders Pulled the Plug? Edition): [C]onsider two alternative worlds--one with zero and one with two percent per year productivity growth--and look at the situation halfway through her retirement, when she reaches 73. And let's suppose that in alternative world 1, the world with zero percent productivity growth, her share of the taxes that Social Security collects cover only 90% of her benefits: with zero percent productivity growth, the Social Security system is running a deficit.

Now let's look at what happens in alternative world 2, the world with two percent per year productivity growth. The economy has been growing 2% faster for 11 years. That means that wages and the Social Security tax base are 22% (actually 24%--compound interest you know) higher than in alternative world 1. Instead of collecting revenues that cover only 90% of her benefits, the Social Security system collects revenues that cover 112% of her benefits: no Social Security deficit. No Social Security problem.

Faster productivity growth affects the cost of Social Security (initial benefits go up faster the faster is productivity growth). And it affects the revenues of Social Security (a richer economy pays more in Social Security taxes). But it affects revenues more.

The key is that the indexation of benefits after retirement to the price level, not the wage level, adds a wedge between Social Security's costs and its resources roughly equal to half of life expectancy at retirement times the trend productivity growth rate. Each 0.1 percentage point increase in the growth rate of productivity reduces the long-horizon Social Security deficit by approximately 0.1% of taxable payroll.... Real wage and productivity growth of 3.0% per year (as opposed to the 1.1% per year assumed by SSA) would wipe out the 75-year deficit.

Of course, after 2082 there is still in all likelihood a Social Security problem. And before 2082 there is a chance there will be a problem of Eddie's productivity forecasts (and mine!) turn out to be too high. And there is the question of whether pay-as-you-go is the right way to fund social insurance for retirement (I think probably not). And there is the question of the implications of a pay-as-you-go system for the rest of the government given our current political institutions and the overwhelming fecklessness of politicians, primarily Republican politicians. So that the fact that Social Security is not in crisis does not mean that all is for the best in this the best of all possible worlds.

But it is interesting to note that the crisis is, in Eddie Lazear's judgment as well as in mine, more likely than not to be postponed until the next century.


Why Oh Why Are We Ruled by These Idiots? (Tony Snow Edition)

White House Press Secretary Tony Snow on executive privilege:

The Swamp - Chicago Tribune - Blogs: With credit to Olivier Knox of Agence France-Presse for a deft piece of document research, here is a copy of the column that Snow published in the Detroit News on March 29, 1998:

In order to exonerate the chief, aides have made fantastic claims.... The courts have said a president generally can shield communications that reveal fundamental deliberative processes. That includes communications between aides as they try to develop recommendations for their boss. But protected conversations involve predictable categories.... Jurists haven't found a constitutional writ for protecting damage-control meetings....

[The president] wants to shield virtually any communications that take place within the White House compound on the theory that all such talk contributes in some way, shape or form to the continuing success and harmony of an administration. Taken to its logical extreme, that position would make it impossible for citizens to hold a chief executive accountable for anything. He would have a constitutional right to cover up.... One gets the impression that [the president's team] values its survival more than most people want justice and thus will delay without qualm. But as the clock ticks, the public's faith... will ebb away.... Most of us want no part of a president who is cynical enough to use the majesty of his office to evade the one thing he is sworn to uphold: the rule of law...


The Bushies Try Running Out the Clock

Michael Froomkin writes:

The Cocktail Party Strategy: The White House's offer to the Senate that it would make Rove and Miers available only for a secret off-the-record no-oath "chat" is risible.... [S]urely Fred Fielding understands that.... Which raises the question of why the White House is proffering such a silly idea....

I've heard a fourth explanation, but it's so crazy, that only someone who thought that the administration was hell-bent on creating disasters would believe it:

The administration wants to create a constitutional crisis. It thinks it will win any votes in the Senate as it only needs a third plus one, and also win the in court of public opinion just like Clinton did.... And the hardliners (Cheney) think that the precedents set by previous administrations of recognizing that senior appointees can be required to testify was mistaken; what's more, they think that their hand is strong enough to allow them to rectify this. In short, they see Congress much as they saw Iraq.

Say it ain't so.

I think that it's not a "create a constitutional crisis" strategy. It's a "run out the clock" strategy. By July of 2008 the focus of attention will be on November. So all the Bushies have to do is stonewall and delay to prevent the emergence of a 2/3 majority for impeachment until July of 2008. They will do it, too--Republicans are saying that Gonzales should resign, but no Republicans are voting to subpoena White House staffers.

Thus I think that Leahy should introduce a resolution impeaching Alberto Gonzales for obstructing justice today. Get the ball moving.


China and India: Past and Future (Brad DeLong's Morning Coffee)

The ongoing industrial revolutions in China and India are the most extraordinary, hopeful, and exciting things happening in the world economy today. Moreover, the future for both countries looks relatively bright: odds are economic success will continue.

Penn World Table 6.2: http://pwt.econ.upenn.edu/php_site/pwt_index.php

Martin Wolf: In this brave new world, Chindia's uneven rise continues: http://www.ft.com/cms/s/1bbe1d5c-d711-11db-b9d7-000b5df10621.html


Why Oh Why Are We Ruled by These Liars?

With respect to the U.S. Attorney Firing, Donp, commenting at http://www.tpmmuckraker.com/archives/002809.php, notes that 18 days' worth of documents have been pulled by the Justice Department from its release:

TPMmuckraker March 20, 2007 12:51 AM: The email of Nov 15 ends with "Who will determine if this requires the President's attention" and Meiers says it will take a while as he is gone. The plan attached (page 15) to that says to begin making calls on Nov 15. Sampson had also recommended informing Karl.

The next email is dated Dec 4! From William Kelley at 4:48 pm it says: "We're a go for the US atty plan. WH leg, political, and communications have signed off and acknowledged that we will have to be committed to following through once the pressure comes."

(so Nov 15 says it's time to talk to Karl and maybe the President, but that would take time...and the plan had been to start Nov 15. In this email, the plan has been changed to start calls Dec 7 - 2-1 page 20)

What happened between Nov 15 and Dec 4 to hold up the plan and require a change in execution from Nov 15 to Dec 7? The answer is from Kelley: We're a go for the US atty plan. WH leg, political, and communications have signed off"

Posted by: Donp. Date: March 20, 2007 02:19 AM

And Josh Micah Marshall says http://www.talkingpointsmemo.com/archives/013171.php:

The firing calls went out on December 7th. But the original plan was to start placing the calls on November 15th. So those eighteen days are pretty key ones.

Impeach Alberto Gonzales. Impeach Richard Cheney. Impeach George W. Bush. Do it now.


Bookmarked at Del.icio.us for 2007-03-21


A Monetary Free Lunch?

Sam Brittan writes:

FT.com / Columnists / Samuel Brittan - Money is making a comeback: Any IoU that is accepted in payment for services rendered can be regarded as money. There is a legendary exam question about a traveller who paid for a meal on a remote island by cheque. The natives were so impressed by this strange piece of paper that they passed it from hand to hand without anyone attempting to cash it. Who then paid for the traveller’s meal? (Please don’t tell me)...

Ha! I'm going to tell you whether you want me to tell you or not!

There are three possibilities. The check could serve as an expansion of the real money supply, if it is sufficiently easier to carry around and keep track of then previous moneys--previous markers of claims to purchasing power. If so, then nobody pays for the traveller's meal: the traveller's writing the check increased social wealth by more than the resources consumed, and everybody is better off. It is a free lunch.

A second possibility is that the check--being easier to carry around and keep track of--could crowd out and displace some other asset used as money. Say that the nominal (and real) money supplies remain fixed, and that the circulation of the check means that somebody loses their job stringing cowrie shells together, and has to get another lower-paying lower-value job doing something else. In this case, part of the lunch is paid for by the dismissed worker who loses his or her best opportunity. The rest of the lunch, however, is still free.

A third possibility, however, is that the check increases the nominal but not the real money supply. People are happy to hold the check, but the check is no easier to use than other forms of money, which are in fixed supply. In this case the price level rises, and everybody else with money in their pockets finds that their money buys less. In this case their is no free lunch: the lunch is paid for by an inflation tax implicitly levied on other money holders.

Those are the three possible answers. There will be a test.


Ana Marie Cox Is Really Shrill!

She writes:

Draft of 2/22 Letter from DoJ to Senator Reid, Addressing Concerns About Hiring of Tim Griffin - Swampland - TIME: "The Department [of Justice] is not aware of Karl Rove playing any role in the decision to appoint Mr. Griffin." Uhm, wow. Just... AM I TAKING CRAZY PILLS? It's like a lie so blatant you have to make sure you're not wrong yourself.

From this group of docs. Pg 10 or so. And, for the have-to-see-to-believe folks:

The Department is not aware of Karl Rove playing any role in the decision...

...From a Dec. 19, 2006 email from Kyle Sampson to Monica Goodling (in the WH): He "know[s] that getting [Griffin] appointed was important to Harriet, Karl, etc."... Page 65 of part three of last week's DoJ document dump.

Impeach Alberto Gonzales. Impeach Richard Cheney. Impeach George W. Bush. Impeach them now.


Housing Starts and Completions

Calculated Risk writes:

Calculated Risk: Housing Starts and Completions: As expected, Completions are now following Starts "off the cliff". Completions are the key number in this release, since employment follows completions.... Based on historical correlations, it is reasonable to expect residential construction employment to follow Starts and Completions "off the cliff"... expect significant residential construction job losses over the next several months...


Mike Allen Drives Oliver Willis and an Unnamed Washington Post Reporter Shrill!

Oliver Willis writes:

The Politico's Mike Allen: Democrats Are Bloodthirsty Dogs, Gushes Over Fox News & Matt Drudge, Makes Fat Jokes About Al Gore [Oliver Willis: Like Kryptonite To Stupid]: Mike Allen... appears on Matt Drudge's syndicated radio program. Ok, fine. Drudge reaches an audience and Allen's function is to get the Politico's name out there. But then... Allen calls Democrats bloodthirsty for having the nerve to serve their oversight function. He squeals like a schoolgirl with a crush when he tells conservative gossipmonger Matt Drudge that Drudge is an idol... he gushes about the success of Fox News.... Then the cherry on top, Allen simply dismisses the substance of why former Vice President Al Gore is testifying in front of congress on global warming - why bother, there are fat jokes to be made, and attacks on Gore's speaking style to be done.

This isn't the first time Allen and the Politico have carried water for the right. And it won't be the last, but this is the sort of "journalism" that passes for being fair in the modern world. You've got to kick Democrats in the teeth and kiss the rear end of Republicans in order to be seen as "serious". Something smells.

And an unnamed source within the Washington Post newsroom writes:

Something very weird has happened to Mike.

At The Post, he was "good cop" to Dana Milbank's "bad cop" with the White House press office, and was very effective.

The Post didn't much encourage reporters to go on TV, so for Mike that became a big factor when he arrived at Time. I guess that the cable/TV nexus corrupted him. He realized that in that world there was no margin in being reasoned or responsible: doing so would get you mocked as a shill and sneered at as a liberal.

Now he is at Politico, a place that is desperate to be loved and judged by the attention it gets. He has become a conduit for the snark that infests the political sewer-class.


Another Reason to Vote Against Mitt Romney

Isaac Chotiner:

The Plank: BEYOND OUR BORDERS: Mitt Romney and his wife were on 'Larry King Live' last week, and the former governor discussed his Mormon mission overseas:

Oh, it is a fabulous experience. Look, I was sort of having fun going to college and not worrying about the future. And then I went to a different country and saw how different life could be if we didn't have the values and the kinds of opportunities that exist in America.

It is indeed tragic that so much of the world doesn't have the same freedoms and conveniences that America does. Whole continents are filled with the scourges of disease and poverty. I'm just glad that Romney got a small taste of how so much of humanity actually lives.

Anyhow, where exactly was he?

I was in France. Bordeaux, Paris, all over France. A great learning experience to live overseas.


International Capital Mobility Once Again

Mark Thoma points us to David Wessel asking Stanley Fischer about the benefits of international capital mobility:

Economist's View: Diminished Expectations: David Wessel of the Wall Street Journal says expectations of benefits from allowing financial capital to flow freely between countries are fading:

Ten years ago, with spectacularly bad timing, finance ministers and central bankers gathered in Hong Kong and declared that encouraging the free flow of capital across borders should become as much a part of the International Monetary Fund's mission as encouraging trade in goods and services. That was in September 1997, in what turned out to be the opening act of the Asian financial crisis...

[A]nxiety about unfettered flows of money could return if recent market turmoil persists, economies falter and politicians react to public suspicion... that globalization means huge profits for Wall Street, hedge funds and private-equity investors and uncertain benefits for workers. Amid all this, intellectual architects of the world financial order are rethinking the case for allowing money to move wherever it wants.... The theory was that capital would flow from rich to poor countries because returns would be higher there, and that would spur growth in the poor countries.... But money is actually flowing heavily from poor nations (China) to rich countries (the U.S.), the reverse....

The rationale for free flows of capital is undermined and the advantages are less than evident. So are the benefits worth the risks.... Stanley Fischer says they are.... [T]he benefits "have much more to do with your world view, how your people look at the world, and what they need to do to prosper."... In short, exposure to global capital markets... forces financial markets and firms to be more efficient, offers businesses and consumers better terms for borrowing and lending, reduces openings for corruption and discourages short-sighted domestic economic policies. It isn't the money; it's the collateral benefits...


What Does the Internet Think Is Worth Reading by Brad DeLong?

What does the global distributed hive-mind consciousness of the internet think is worth reading by and about Brad DeLong? Let me peek and see...

Top for "Brad DeLong" at Google Blogsearch:

Google Blog Search: Brad DeLong: http://delong.typepad.com/sdj/2007/02/special_super_j.html: Special Super Journamalism Barack-Atah-Adonai-Elohenu-Melech-Ha ...9 Feb 2007 by Brad DeLong: Friday at sundown is a fitting moment to take note of a particularly pathetic piece of Journamalism from Mike Allen at the Politico. You see, Mike Allen begins his trashing of Barack Obama. Understand: Mike Allen isn't doing the trashing--oh no no no. Mike Allen is just saying what the critics of Obama will say. Let's give Mike the mike, and watch him take his dive...

Top for "Brad DeLong" at Google News:

Brad DeLong - Google News : http://blog.risk.net/2007/03/speech_material.html Speech materialRisk.net (subscription), UK - Mar 8, 2007: Given the time [1924] he [John Maynard Keynes] wrote it [the Tract on Monetary Reform], that's understandable; as Brad DeLong explains, his concern was to argue against a return to the gold standard, abandoned during...

Top substantive result for "Brad DeLong" at Google:

Brad DeLong - Google Search: http://chronicle.com/free/v52/i47/47b00801.htm: The Chronicle: 7/28/2006: The Invisible College: J. Bradford DeLong is a professor of economics at the University of California at... His blog can be found at http://j-bradford-delong.net/movable_type...


The next ten substantive results from Google:

Time to Pound My Head Against the Wall Once Again: June 07, 2003: The Economist's Lexington correpondent devotes a full page to Hillary Rodham Clinton (with a time out for slams at Sidney Blumenthal for being a "brown-noser" and Paul Krugman for being "shrill")....

Read the column--it's a long column. Reflect upon several facts. First, almost all of the column is "inside political baseball" of little use to anyone who is not a serious political junkie. Second, "Lexington" doesn't like Hillary Rodham Clinton or Bill Clinton or Paul Krugman or Sid Blumenthal--but doesn't bother to say why. Third, there is nothing in the column to give the reader any information about whether Hillary Rodham Clinton would make a good president, or about whether "Lexington" thinks Hillary Rodham Clinton would make a good president.

Is there anything else that readers--most of whom are Americans, most of whom vote--more need to learn than whether Hillary Rodham Clinton would make a good president? No, there isn't. So why does "Lexington" spend so much time on insider political baseball and trying to settel scores? Why doesn't he do something useful with his space--like tell us whether he thinks Hillary Rodham Clinton would make a better president than George W. Bush (almost surely [Lexington must think]) or would make a good president (almost surely not [Lexington must think])?...

J. Bradford DeLong - Wikipedia, the free encyclopedia: J. Bradford DeLong (b. June 24, 1960, Boston) is a professor of economics at the University of California, Berkeley and a former Deputy Assistant Secretary of the U.S. Treasury in the Clinton Administration. He writes a popular blog, ([1]) Brad DeLong's Semi-Daily Journal, which covers political, technical, and economic issues as well as criticism of their coverage in the media. He is also the author of a textbook, Macroeconomics, the second edition of which he coauthored with Marty Olney. DeLong is an editor of ([2]) The Economists' Voice, and has in the past been co-editor of the widely-read Journal of Economic Perspectives. He is a research associate of the National Bureau of Economic Research and a visiting scholar at the Federal Reserve Bank of San Francisco.

As part of the Treasury Department in the Clinton administration, he worked on the 1993 budget, on the Uruguay Round of the General Agreement on Tariffs and Trade, on the North American Free Trade Agreement, on the unsuccessful health care reform effort, and on other policies. DeLong is both a liberal in the modern American political sense and a free trade neo-liberal. He is part of an increasingly influential group of center-left bloggers who include Kevin Drum (formerly "CalPundit") and Matt Yglesias of The American Prospect...

Brad DeLong's Website: Dogs vs. Cats, Treasury vs. State, Economists vs. Diplomats: February 28, 2005: Once again today I had my nose rubbed in a fact of life...

When economists talk about international trade and finance, they talk--first and most importantly--about building institutions to allow for mutually-beneficial acts of economic exchange. They talk about diminishing barriers and increasing confidence. They talk about playing positive-sum games with people in other countries that increase wealth, trust, and confidence and that ultimately align interests: the larger is the surplus from international trade and finance, the bigger is that stake that everyone has in continuing the free-trade-and-finance game.

When diplomats talk about international trade and finance, they talk about them as carrots and sticks: we give people we want to reward access to our markets; we punish people who we want to punish by slapping on trade embargos. "Economic diplomacy" is like bombing, only less so. And arguments that it is much more important to build large and profitable positive-sum games that align interests than to win zero- (or negative!) sum games that lead to the domination of one government's conception of its momentary interest over another's? They blow right past the diplomats, the State Department people as if they were just gentle breezes...

Torture and Rumors of Torture: June 10, 2004: Torture and rumors of torture. In my email inbox this morning...

If what it reports is true, then once again it looks like the Bush administration is worse than I had imagined--even though I thought I had taken account of the fact that the Bush administration is always worse than one imagines. Either Seymour Hersh is insane, or we have an administration that needs to be removed from office not later than the close of business today. The scariest part: "[Hersh] said he had seen all the Abu Ghraib pictures. He said, 'You haven't begun to see evil...' then trailed off. He said, 'horrible things done to children of women prisoners, as the cameras run.' He looked frightened." UPDATED: I failed to note that the taker of these notes is the excellent Rick Pearlstein, whose book about Goldwater is in my to-read pile...

A man who hated government | Salon News: Nov. 17, 2006: "Lord, enlighten thou our enemies," prayed 19th century British economist and moral philosopher John Stuart Mill in his "Essay on Coleridge." "Sharpen their wits, give acuteness to their perceptions, and consecutiveness and clearness to their reasoning powers. We are in danger from their folly, not from their wisdom: their weakness is what fills us with apprehension, not their strength."

For every left-of-center American economist in the second half of the 20th century, Milton Friedman (1912-2006), Nobel Prize winner, founder of the conservative "Chicago School" of economics and advisor to Republicans from Goldwater to Reagan, was the incarnate answer to John Stuart Mill's prayer. His wits were sharp, his perceptions acute, his arguments strong, his reasoning powers clear, coherent and terrifyingly quick. You tangled with him at your peril. And you left not necessarily convinced, but well aware of the weak points in your own argument...

The odds of economic meltdown | Salon.com : Aug. 3, 2006: Forecasting recessions is a fool's game. If there is enough solid economic information to make it appear highly likely that a recession is coming -- that production, employment and consumer demand will actually fall -- then it is highly likely that there already is a recession. Businesses are not stupid, and they don't have to wait for economists to tell them what they already know. By the time a gloomy forecast has been issued they've probably already noticed a drop in consumer demand and responded by firing workers and reducing production.

So: Never say that a recession is coming. Say only that a recession is here, or that there might be a recession on the way. Which, in fact, is what I'm saying today. As of the beginning of August 2006, a recession is not here, and I'm not going to violate my own rule by saying one is coming. But there is a good chance -- for the first time since 2003 -- that there might be a recession in progress six months from now...

Friedman completed Keynes: Nov. 29, 2006: The most famous and influential American economist of the past century died in November. Milton Friedman was not the most famous and influential economist in the world — that honour belongs to John Maynard Keynes. But Milton Friedman ran a close second.

From one perspective, Friedman was the star pupil of, successor to, and completer of Keynes’s work. Keynes, in his General Theory of Employment, Interest and Money, set out the framework that nearly all macroeconomists use today. That framework is based on spending and demand, the determinants of the components of spending, the liquidity-preference theory of short-run interest rates, and the requirement that government make strategic but powerful interventions in the economy to keep it on an even keel and avoid extremes of depression and manic excess. As Friedman said, “We are all Keynesians now.” But Keynes’s theory was incomplete: his was a theory of employment, interest, and money. It was not a theory of prices. To Keynes’s framework, Friedman added a theory of prices and inflation, based on the idea of the natural rate of unemployment and the limits of government policy in stabilising the economy around its long-run growth trend...

Nieman Watchdog > Ask This > Missing the story of structural change: May 21, 2004: Economics professor and blogger Brad DeLong says reporters aren’t getting to the bottom of the defining economic story of the past four years: a boom in the productive potential of the economy. First of a series.

Q. In what businesses are people working much harder than they did five years ago, and what’s making them work so much harder? Q. In what businesses are people working much smarter than they did five years ago, and what’s letting them work so much smarter? Q. In what businesses are productivity gains due primarily to people figuring out how to use all the computers they bought in the late 1990s, and how are people using computers and related gear to boost worker productivity? Q. As the price of information technology capital continues to fall, are there any signs of another boom in information technology investments that will greatly boost the productivity of IT-using industries yet further? Q. What new jobs or industries are being created because of the falling price of information technology?...

Sailing into Harm's Way versus the Dangerously Eloquent Jeff Faux | TPMCafe: Feb. 27, 2007: I had written: "Is there a way to interpret Jeff other than as a call to keep China a society of poor subsistence rice farmers as long as possible--keep them poor, barefoot, uneducated, and by no means allow them to work at any of the high-value manufacturing occupations we want to keep in the United States?"

Jeff Faux writes back: "Brad missed the point. There are rich people in poor countries and poor people in rich countries. China is not just a society of poor, barefoot, uneducated peasants. At the top, China is a place of immense wealth.... Why is it that it is the responsibility of $40,000 year American working families to sacrifice their future in order to raise up the living standards of poor Chinese, when commissars turned capitalists ride around Shanghai in a different Rolls every day?..."

I think it's time to put myself seriously in harm's way here...I reply: There aren't many commissars-turned-capitalists. Scratching on the back of my envelope, I find that at current exchange rates, China's GDP per worker--and there are 800 million workers--is $3,000 per year. (In 1990 it was $1,100 of today's dollars per year.) According to Piketty and Qian's guesses, the top 0.1% of China's workers get an average of $30,000 per year at current exchange rates. This elite of some 800,000 do live considerably better in their homes in Shanghai than Americans with $30,000 do--unskilled labor and the services it provides are really cheap in Shanghai because China is still really poor (perhaps at a level equivalent to $100,000 per year if you like being waited on and having a household staff; much less if you don't). Redistribute all the income of the 800,000 commissars-turned-capitalists back to the masses, and you boost median standards of living in China by 1% above current levels...

The American Prospect: Robert Rubin's Contested Legacy: Rubin's Remarkable Achievement: Volume 15, Issue 2. February 1, 2004: In an Uncertain World: Tough Choices From Wall Street to Washington By Robert Rubin and Jacob Weisberg, Random House, 448 pages, $35.00.

In 1992 the incoming Clinton administration had, broadly speaking, two strategic options for domestic policy. The first was a double-or-nothing "social democracy" strategy. Federal spending at the time was running at 22 percent of gross domestic product, hardly changed from 1980. Contrary to conservative mythology, the Reagan revolution hadn't shrunk the government, but it had changed its shape: As a share of federal spending, domestic expenditures outside of the entitlement programs were down by one-third, while debt interest and military spending were up. Forecasts showed deficits continuing -- indeed, rising -- as far as the eye could see. If policy had stayed unchanged, the federal debt -- which had already risen from 26 percent of GDP in 1980 to 48 percent in 1992 -- would have continued climbing to 72 percent in 2000.

Bill Clinton could have said: Let the deficit problem be the responsibility of some future Republican administration. We'll pursue Democratic priorities while keeping the deficit constant, or maybe even allowing it to grow a bit in relation to the economy. Spend more to give every American good medical care (instead of using health-care reform for cost containment). Raise public investment in roads, bridges and other crumbling infrastructure. Expand social insurance to provide better benefits and retraining for workers who lose their jobs. Provide incentives -- such as a carbon tax -- for industry to rest lightly on the environment.

Some liberals will not forgive Clinton for failing to pursue this approach, but it was politically infeasible. In Congress, the Democrats had an organizational but not an ideological majority. Many centrist Democrats would not support a social-democratic program, as was evident in the spring of 1993, when Clinton's short-term economic stimulus program (which included money for infrastructure) went down to defeat...


Scary...

Did that form from http://ft.com really just ask me to type in my "house name"?

I suppose I should name my house then:

  • Turkey Roost?
  • Stucco Hill-Climbing Exercise Machine?
  • Rational Expectation?
  • Hidden-in-the-Blackberry-Thicket?
  • And Just What Are the Civilian Applications?

Legal Realism vs. Legal Formalism, William Douglas vs. Felix Frankfurter, Fred Rodell vs. Alex Bickel

I am told that somewhere in the back issues of the Yale Law Report there is a reminiscence of a dinner party conversation between Alex Bickel and Fred Rodell:

Alex: "Well, Fred, I may be naive, but I think that when the Supreme Court says something it means what it says."

Fred: "Well, Alex, we agree on this at least: you are naive..."

Does anyone have a more solid cite to this interaction between these two rare jackasses--from each of whom, however, one can learn a great deal?