DeLong Smackdown Watch: Felix Salmon on the Hazards of Living in the Distant Past
California Republican Politician Failure

Worth Reading, Mostly Economics, for April 25, 2010

  • MY: "The John Birch Society was nuts, and it’s to... Buckley’s credit that... he tried to purge the Birchers.... Similarly... Rauch wants to bring the conservative movement into closer touch with external reality... laudable. But... [Rauch:] 'Buckley’s gambit succeeded. The Birchers and their conspiracy-mongering were banished... and the stage was set for the reality-based critique of liberalism that brought Ronald Reagan to power.' My impression is that Jimmy Carter’s 1980 re-election campaign more-or-less succeeded in planting serious doubts in the mind of the electorate about the wisdom of electing a rightwinger like Ronald Reagan.... If you look at the two-party split ... 1980 looks like a very typical election. Maybe there’s a case to be made that Buckley’s 1965 denunciation of the Birchers helped Reagan win the presidential primary 15 years later, but it seems doubtful... the main reason to sideline kooks... is that governing with kooky ideas is going to be bad for the country."
  • RR: "The Dodd bill now... is a step in the right direction... a very modest step... leaves out three of the most important things.... Require that trading of all derivatives be done on open exchanges.... Resurrect the Glass-Steagall Act in its entirety.... Cap the size of big banks at $100 billion in assets..."
  • RA: "Romer's comments almost exactly reflect ... Elsby, Hobijn, and Șahin... through the first quarter of 2009, unemployment behaved about as you'd expect... thereafter departures from normal... Okun's Law... and the Beveridge Curve... broke down a bit.... The rate of outflow from unemployment has fallen across all industries... skills mismatch isn't a major factor.... [No] disproportionate decline in... outflow... among the long-term unemployed.... Extensions of unemployment benefits... some upward pressure.... But... it's very easy to overstate the importance... the depth and length of the recession has shifted... workers into the category... of those who take a long time to find new jobs, and so the decline in unemployment across the labour force as a whole is quite slow. Ms Romer is suggesting that the way to fix this problem is to work at the demand side. There's nothing intrinsically unemployable about these folks..."
  • MS: "[African-Americans] really don’t have a reason to, to be honest — we haven’t done a very good job of really giving you one. True? True. For the last 40-plus years we had a ‘Southern Strategy’ that alienated many minority voters by focusing on the white male vote in the South. Well, guess what happened in 1992, folks, ‘Bubba’ went back home to the Democratic Party and voted for Bill Clinton.”
  • DD&Others: "A lot of the problem is that as well as the noted New Keynesian economist Greg Mankiw... s a dreadful Republican Party hack... Greg Mankiw.... Greg Mankiw writes things that are obvious errors and pointed out as such in Greg Mankiw’s textbook, and they get blamed on Greg Mankiw. There’s a sitcom in it.... Barry 04.19.10 at 6:37 pm: dsquared, there used to be a blog about it, hosted by ‘the noted New Keynesian economist Greg Mankiw’. IIRC one of the favorite methods used by Joe Random Internet Commenter to make ‘dreadful Republican Party hack, also called Greg Mankiw’ look like a fool or a liar was to quote from that book by ‘the noted New Keynesian economist Greg Mankiw’. Eventually, the comments were closed.... Hogan 04.19.10 at 9:03 pm: 'There’s a sitcom in it.' But they’re macroeconomists! Identical macroeconomists, and you’ll find They walk alike, they talk alike, sometimes they even think alike. You could lose your mind When macroeconomists are two of a kind!"
  • FS: "One of the more thought-provoking bits of the Shleifer paper on financial innovation is this part of the model: 'Optimism about the profitability of the new claim at t = 0 encourages the intermediary to over-inves.… Investment in A occurs only if new securities can be engineered, so financial innovation bears sole responsibility for unproductive investment....' To put it another way, it was the excessive and irrational demand for collateralized debt obligations which caused all those Miami condos and Phoenix tract homes to be built in the first place. That... raises an interesting question about the damage caused by synthetic CDOs.... Yves Smith... writes in her new book, “Econned,” that “Magnetar.... If the world had been spared their cunning, the insanity of 2006-2007 would have been less extreme and the unwinding milder.”... But... the Magnetar-driven boom in synthetic CDOs was actually preferable to the boom in RMBS-based non-synthetic CDOs which preceded it."
  • CU: "If you remember, the Tea Parties were originally formed to protest the bailouts. They were so mad at the Wall Street bankers who destroyed the economy and then took our hard earned money for their efforts.... [But] they're going to sit out this fight on financial reform and put absolutely no pressure on Wall Street at all. Because they are tools easily manipulated by right-wing organizations funded by corporate America. I really feel sorry for them. They're dupes. They think they are so fiercely independent when in fact they are the most easily manipulated people in the country. All that anger toward the power establishment and what happened? They were used by that same establishment to fight against health care reform and to try to protect the health insurance companies. Suckers. Now, when it's time to fight the financial companies, where are they? Nowhere to be found. Why? Because FreedomWorks and Americans for Prosperity didn't organize any bus rides..."
  • Almunia et al.: "The Great Depression of the 1930s and the Great Credit Crisis of the 2000s had similar causes but elicited strikingly different policy responses. While it remains too early to assess the effectiveness of current policy, it is possible to analyse monetary and fiscal responses in the 1930s as a natural experiment or counterfactual capable of shedding light on the impact of current policies. We employ vector autoregressions, instrumental variables, and qualitative evidence for 27 countries in the period 1925–39. The results suggest that monetary and fiscal stimulus was effective -- that where it did not make a difference it was not tried.... They are consistent with multipliers at the higher end of those estimated in the recent literature, and with the argument that the impact of fiscal stimulus will be greater when banking systems are dysfunctional and monetary policy is constrained by the zero bound."
  • AM&AS: "[H]ousehold leverage as of 2006 is a powerful statistical predictor of the severity of the 2007 to 2009 recession across U.S. counties. Counties in the U.S. that experienced a large increase in household leverage from 2002 to 2006 showed a sharp relative decline in durable consumption starting in the third quarter of 2006 – a full year before the official beginning of the recession in the fourth quarter of 2007. Similarly, counties with the highest reliance on credit card borrowing reduced durable consumption by significantly more following the financial crisis of the fall of 2008. Overall, our statistical model shows that household leverage growth and dependence on credit card borrowing as of 2006 explain a large fraction of the overall consumer default, house price, unemployment, residential investment, and durable consumption patterns during the recession. Our findings suggest that a focus on household finance may help elucidate the sources macroeconomic fluctuations."
  • Time: "Bank deposit guarantee schemes have been tried in Nebraska, Oklahoma, Kansas, Mississippi, Texas, North Dakota, South Dakota and Washington... ended in failure and loss... scandal and default... weakened the moral fibre of bankers and served chiefly as a temptation to bad banking. Honest banking has been penalized for dishonest banking. Despite this evil-smelling State record Congress was determined to clamp a similar system down on all Federal Reserve member banks, make it optional with nonmember State banks. It was this arbitrary method of forcing big banks to stand sponsor for little banks that outraged Manhattan bankers. Big State banks in New York talked covertly of seceding from the Federal Reserve System rather than submit to such a levy. Even big national banks might exchange their Federal charters for State charters to escape from the Reserve. Such a withdrawal on a large scale might well wreck the whole Federal Reserve System"
  • AHR: "We believe this party was founded by Abraham Lincoln, a man who was instrumental in doing away with evils towards people of color.... Later, the Republican Reverend Martin Luther King Jr. picked up Abe’s mantle and helped fight the injustice of racism. Republicans in that era fought to free blacks from slavery, which gave people of color freedoms and citizenship. It is unfortunate that our own members of the Republican Party believe that we have to trample on our Constitution.... [W]e are ultimately holding President Obama accountable. Obama promised Hispanics that he would pass immigration reform within 90 days of his Presidency. Had Obama carried out his promises to Hispanics last year, the Hispanic community would not be experiencing the crisis we are experiencing right now.... McCain believes he is in the fight of his life.... McCain’s valuable experience contributed to Americans winning the Iraq war."