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links for 2010-07-31

Friends Let Friends Read the Wall Street Journal Editorial Page Only If They Promise to Immediately Trade Against It

Interest rates: Question of the day | The Economist

Paul Krugman observes that the Wall Street Journal editorial page has one use: the fact that there are poor fools--whom we pity--who believe it opens up profitable trading opportunities for the rest of us:


Two Point Nine One: Remember this? May 29, 2009:

They’re back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. The vigilantes vanished earlier this decade amid the credit mania, but they appear to be returning with a vengeance now that Congress and the Federal Reserve have flooded the world with dollars to beat the recession. Treasury yields leapt again yesterday at the long end, with the 10-year note climbing above 3.7%, its highest close since November... as risk aversion subsides, and investors return to corporate bonds and other assets, investors are now calculating the risks of renewed dollar inflation.

Bond yield as of yesterday: 2.91 percent.

What I’ve never quite understood is why so many investors still loooove the likes of the WSJ editorial page, while they hate, hate, hate people like, well, me — when believing anything the former says has historically been a very good way to lose a lot of money.

Why oh why can't we have a better press corps?

Menzie Chinn: What the Data Tell Us About the Shape of the Recession

Econbrowser: The 10Q2 Advance GDP Release: Cautionary Notes from Revisions

A fine job of intellectual garbage collection by Menzie Chinn:

Econbrowser: The 10Q2 Advance GDP Release: Cautionary Notes from Revisions: The release was accompanied by an annual revision of data extending back to data for 2007Q1. This revision alters our understanding (or lack of understanding in the cases of certain people) of the evolution of this recession. Here are the points I gleaned.... First, it is generally unwise to make definitive statements such as Donald Luskin's September 14, 2008 assertion that "...anyone who says we're in a recession, or heading into one -- especially the worst one since the Great Depression -- is making up his own private definition of "recession."... Then CEA Chair Ed Lazear's statement "The data are pretty clear that we are not in a recession" is slightly less egregious because he was speaking on May 8, 2008, before a lot of the weak data had been reported. And implicit in his statement is the point that he was referring to the data at hand. But of course he knew the data were going to be revised ... repeatedly.... Second, this is indeed the deepest recession since the Great Depression, notwithstanding Professor Casey Mulligan's assertions.... this last recession was much, much worse than this 1980-82 "recession" Professor Mulligan alludes to. In addition, we came close to the 11 trillion (Ch.2000$) floor that he insisted we wouldn't breach (I calculate 2009Q1 GDP when expressed in Ch.2000$ was 11.378 trillion, using a conversion factor of 0.88648, as explained in this post.) And Professor Mulligan's October 2008 forecast was not conditioned on any stimulus package.... Finally, the revisions provide additional information regarding the amount of slack in the economy: namely the output gap is now bigger than we were given to understand before.... In 2010Q1, the output gap was 6% (in log terms) using the pre-annual revision data. Using the post-revision data, the 2010Q1 output gap is now 6.8%, using CBO's January 2010 estimate of potential GDP.... Given this, it is no wonder that inflation indicators are muted. As I said, we should've had a bigger stimulus....

To the extent that investment is rebounding that's a sign of some optimism about the future on the part of the private sector; increased capital goods imports is a reflection of that phenonenon -- that's about the only positive I saw in the report. However, even that positive is tempered by the fact that equipment investment remains 8.7% (log terms) below peak levels in 08Q1...

DeLong Smackdown Watch: Structural Unemployment Edition

Robert Waldmann is not alarmed:

This is really getting extreme.  All this discussion of the shift of the Beveridge curve is discussion of 1 (one) data point 2010Q2.  Earlier points are above the non-Beveridge line, but, you know it is (and always has been) a curve.  It is also not exactly the cutting edge approach to presenting data on vacancies and unemployment.  That would be the matching function.  Discussions of the vacancy rate and unemployment rate in 2010Q2 do not discuss gross flow -- hiring and job separations.  You and others assume that gross hiring is low for some reason, since, otherwise the unemployment rate would fall.  Some data on hiring and firing might be relevant no ?  It also should be available to the social security administration (I will try to find numbers -- I guess my complaint is about statistical agencies not economists).

A stable matching function implies counterclockwise cycles above the Beveridge curve.  Such cycles are visible in all data sets which include major recessions (I complain about too much attention to one number but also wonder why the graph I always see starts in 2000).  I am absolutely totally not at all convinced yet that there is a hiring anomaly.  I'd like to see a second data point before I read the hundredth post on v and u in 2010Q2.  I think I will have to avoid economics blogs to achieve this goal.

Now on the famous Ben Venue example (I haven't read a hundred posts about the datum 47 qualified applicants yet either but I'm getting there) I think the main point of the complaint was not the only 47 qualified applicants (which might just mean they were offering too low a wage) but the over 3,600 job applications.  Notice there is a news story with 2 numbers (maybe 3 counting the offered wage) and everyone ignores one of them.  My sense is that issue is that there are a huge number of desperate unemployed people who apply for jobs knowing they have only a tiny chance of being hired.  Normally people try to apply only for jobs for which they are qualified, but if there are no such jobs vacant, they have no choice but to bet on long shots.

Now this hord of desperate unemployed people might make it more costly and time consuming to hire and might reduce hiring as a function of vacancies and qualified unemployed people.  If so, the solution is to extend unemployment benefits to prevent people from making trouble by desperately clogging all paths to employment.  However, I'll wait for a second data point before speculating further.

Franz Halder Liveblogs World War II: July 31, 1940

General Franz Halder's war diary:

Britain's hope lies in Russia and the United States.  If Russia drops out of the picture America, too, is lost for Britain, because elimination of Russia would tremendously increase Japan's power in the Far East.  Russia is the Far Eastern sword of Britain and the United States pointed at Japan.... Russia is the factor upon which Britain is relying most.  Something must have happened in London!... With Russia smashed, Britain's last hope would be shattered.  Germany will then be master of Europe and the Balkans.  Decision: Russia's destruction must therefore be made a part of this struggle.  Spring 1941.  The sooner Russia is crushed, the better.  Attack achieves its purpose only if Russian state can be shattered to its roots with one blow.  Holding part of the country will not do.  Standing still for the following winter would be perilous.... Resolute determination to eliminate Russia.

What Is to Be Done About the Economy?

Christina D. Romer answers questions from the Wall Street Journal:

Q&A: Romer Reacts to GDP Data:

Q: What can be done to make things better?

A: Romer: There’s a lot that can be done. We had in our budget $267 billion of temporary recovery measures. So far, by kicking and screaming, we have only gotten a fraction of that. I think the additional state fiscal relief is absolutely essential. The FMAP extension. The $10 billion fund for preventing teacher layoffs. If you look at what’s happening at the state and local level, that’s a clear headwind to the recovery. Anything you can do to help ease that problem would be incredibly beneficial. We are working incredibly hard to get more credit and additional tax cuts for small businesses.

And Once Again, Paul Krugman Was Right. Sigh...


Inflationistas And Deflationistas: [I]t’s worth bearing in mind that the last year and a half has been a fairly clean test of alternative views about how the economy works. When the economy slumped, budget deficits skyrocketed, and the Fed began large-scale asset purchases, there were two kinds of people.... On one side were people who said that deficits would drive interest rates way up, crowding out private investment, and that all that money printing would lead to high inflation. On the other were those who said that we’d entered a Japan-type liquidity trap, which meant that (a) there was a savings glut, so deficits would not crowd out private investment and interest rates would stay low, (b) increases in the monetary base would just sit there, (c) the risk was deflation, not inflation.

And so far, the inflationistas have been completely wrong, the deflationistas completely right.

This wasn’t a coincidence. For the most part, the inflationistas basically argued that nothing changes when the economy is depressed and short-term interest rates are up against the zero lower bound: the quantity theory of money still rules, and interest rates reflect supply and demand in the loanable funds market. The deflationistas knew — based on study both of Japan and of the 1930s — that everything changes when you’re in the liquidity trap. And recent experience shows just how true that insight is.

DeLong Smackdown Watch: Andy Harless and Structural Unemployment Edition

Hoisted from Comments: Anderw Harless writes:

Is America Facing an Increase in Structural Unemployment?:Take a closer look at the data:

The rate of job openings (as of May, the last observation) is at 2.4%, back to where it was in October 2008. The rate of hires is at 3.4%, back to where it was in June 2008. These figures are not consistent with the story that says firms are having trouble hiring because the unemployed don't have the skills they need. Rather, the problems would appear to be (1) that people are still being laid off at a rate that is higher than normal for a recovery, so more hiring is necessary to raise employment, and (2) that changes in job openings lead changes in unemployment, because it takes time to hire. (The jump in job openings has been very recent and therefore hasn't had a chance to have a large effect on unemployment.) I see no evidence an increase in structural unemployment.

links for 2010-07-30

Sock Puppet Watch...

Why oh why can't we have a better press corps?

Mickey Kaus claims to have a mole inside Ezra Klein's Journolist, whom Mickey Kaus claims writes to him--for publication:

careerism... a very specific clique at the center of the washington journalistic ecology... an echo chamber... reified a worldview... matt yglesias and ezra were unqualified great successes... the ubiquity and centrality of ezra klein... a gateway, a common clique, the understood path... most people... didn't have real, full-time jobs... a specific social environment... ezra as a good cop, and brad delong and eric alterman and spencer ackerman etc etc as bad cops.... What it did do is boost the career of ezra klein

Let's see:

  • "The ubiquity and centrality" of Ezra Klein...
  • At the head of an internet listserve that is "a specific clique at the center of the washington journalistic ecology"...
  • But somehow made up of people who "did not have real full-time jobs"...

By now you should smell that there is something very wrong here.

If you go and google "'Ezra Klein' Kaus" you get 473 results. If you start reading them, the first things you find are:

  • Whippersnapper apparatchik Ezra Klein...
  • health care cheerleader Ezra Klein...
  • Ezra Klein, concern troll...
  • Ezra Klein, unreliable narrator...
  • With friends like Ezra Klein...
  • Ezra Klein's most cracked spin yet...
  • Is Ezra Klein the new William F. Buckley or the new Tim Russert, helping establish the boundaries of what's respectably thinkable?...
  • Ezra Klein seems particularly disingenuous...
  • Ezra Klein a "young punk toeing the Bob Kuttner line cluelessly"...
  • Is Ezra Klein young enough to be this pompous?...

It is clear that Ezra Klein is indeed ubiquitous and central--in the mind of Mickey Kaus.

A 59-year-old man who has decided to spend a large chunk of his career hating on a 26-year-old has already ridden the insanity bus to its final stop. What are the odds that there is a second person equally crazy? Who equally believes that Ezra Klein is ubiquitous and central? Is at the center of the Washington journalist ecology? And what are the odds then that this second person conceals his loathing for Ezra? And then that Ezra likes this second person? And that this person then decides to unburden his loathing of Ezra to... Mickey Kaus?

I am compelled to believe that Kaus simply made this up--that his claim to have received this email should be treated as as likely to be true as William Bennett's claim that he was not down $7,000,000 but had instead "broken even" in Las Vegas over the years. One crazy person I have the evidence of my eyes to attest for. But two sharing the same delusions? It is just too much for me to credit.

Occam's razor...

Tim Duy: Is the Long-Term Challenge Upon Us?

Tim writes:

Rising NAIRU?: [T]he long term challenge may already be upon us.  David Altig puzzles over the implications of a shifting Beveridge curve.... He... hones in on the possibility of a skills mismatch:

Now I realize that a few anecdotes don't make facts, but I have been in more than a few conversations with businesspeople who have claimed that the productivity gains realized in the United States throughout the recession and early recovery reflect upgrades in business processes—bundled with a necessary upgrade in the skill set of the workers who will implement those processes. This dynamic suggests that the shift in required skills has been concentrated within individual industries and businesses, not across sectors or geographic areas that would be captured by our most straightforward measures of structural change.

To be honest, I hear this complaint too, but have trouble swallowing it.  I believed it in the mid and late 1990's, but now?  The eight million people dropped into unemployment are all unemployable?   Firms are willing to lose profits than do the unthinkable, on the job training, actually invest in their employees?  I also have heard the opposite story, of overeducated temporary Census workers desperate for employment, completing assignments in a fraction of the expected time, not realizing that their productivity would only be rewarded with a shorter stint of employment.   And if we are experiencing all these magical productivity gains and a shortfall of workers, then wages should be rising quite smartly.  But from one of the articles cited by Altig:

Here in this suburb of Cleveland, supervisors at Ben Venue Laboratories, a contract drug maker for pharmaceutical companies, have reviewed 3,600 job applications this year and found only 47 people to hire at $13 to $15 an hour, or about $31,000 a year.

You get what you pay for.  To put this into perspective, the average national wage for Wal-Mart was $11.24/hour in 2009.  I would hope, however, that Ben Venue Laboratories pays better benefits. I would really appreciate a good story that explained why we should be happy about high productivity growth if real wage growth is not surging.  The lack of the latter makes me question the reality of the former.... [I]f a skills mismatch is really a problem, then the solution is to ramp up activity until labor shortages raise wages and force employers to reach deeper into the barrel and in turn bring more people into the labor force to gain those missing skills.  Better to do it sooner than later.  If the productivity gains are real, the wage gains should not be inflationary.  This was the story of the 1990s. Otherwise, policymakers sit and wait as the potential structural rigidities deepen, thereby ensuring a higher NAIRU in the future.  And, driven by fear of inflation, this appears to be exactly what policymakers intend to do.

Deepwater Horizon Alarm Intentionally Disabled...

Brett Michael Dykes:

Deepwater Horizon worker: Fire alarm was intentionally disabled before explosion: Testifying before a federal panel investigating the Deepwater Horizon explosion, Transocean employee Michael Williams said that an alarm designed to warn the crew if combustible gases were in danger of igniting was deliberately disabled.

"The general alarm was inhibited," Williams testified. He went on to say that when he alerted his superiors about the extreme safety hazard, he was told that the men running the rig did not want any alarms going off while everyone was trying to sleep during the night.

Williams also told the panel that the computers used to control drilling operations on the rig froze regularly, resulting in blank blue screens, a phenomenon he said he and fellow employees ominously labeled, "the blue screen of death."

Back in May, Williams -- who was the doomed rig's chief electronics technician -- sat down with CBS' "60 Minutes" to share his harrowing tale of survival after the Deepwater Horizon exploded into a giant fireball. You can watch it here.

Economic Inequality in the Anglosphere

I am not convinced. The U.S. economy is so large, and barriers to upper-class labor mobility across the Anglosphere so small, that I think the U.S. drags inequality trends in other English-speaking nations along after it.

Via Henry Farrell, Andrea Brandolini:

Why Is Economic Inequality Higher in English Speaking Industrialized Democracies?: What I really find conspicuous in the comparison of top income shares across rich nations is the similarity of the patterns observed in English-speaking countries as opposed to those found in continental European countries. It is striking that, after a prolonged period of moderate decline, the income share of the richest 1 percent suddenly began to rise in the mid-1980s in the United Kingdom, Canada, Ireland, Australia, and New Zealand as well as in the United States, while it exhibited no upward trend in France, Germany, the Netherlands, Spain, and Switzerland.

The difference between these two groups of countries confirms that market and technological forces cannot be the whole story, but the similarity of trajectories, including the time of the turning point, in the English-speaking countries defies an explanation based only on the national characteristics of the U.S. political process. Hacker and Pierson recognize the potential problem, but play it down by positing that the close interdependence of the markets for top executives can largely account for the common trends in English-speaking economies. Perhaps, but why should interdependence be so much stronger between London and New York than between London and Frankfurt in today’s highly integrated financial markets? Can common language be the only critical factor, or are there more fundamental reasons?

DeLong Smackdown Watch: vtcodger on Chemists

Hoisted from Comments:

vtcodger said...: Re: "Chemists begin with what the Heisenberg and Pauli principles, plus the three-dimensionality of space, tell us about stable electron configurations."

No, I'm pretty sure they don't. Moreover, they developed the Periodic Table of Elements around 1870 -- roughly 30 years before Pauli and Heisenberg were even born. Understanding of why the Periodic Table works took another 80-100 years. They did not even mention Pauli and Heisenberg in 1961 when I got my BS in Chemistry at UCLA.

That's important, because it is one of many demonstrations that you can do useful science and successful prediction without understanding exactly why things work. Darwin and Wallace didn't know about genetics but still managed to work out evolution. They didn't do a half bad job. Gregor Mendel did know quite a lot about genetics by the time he died in 1884, but he did not know anything about DNA. (Neither would the knowledge have helped him much if it were somehow revealed to him).

If anything this supports your argument. You don't have to know how economics works to know that fiscal austerity during downturns and fiscal profligacy during booms are both bad ideas.

Is America Facing an Increase in Structural Unemployment?

Economics: Is America facing an increase in structural unemployment?

I think the answer is "yes"...

David Altig of the Federal Reserve Bank of Atlanta has just convinced me that the answer to this question is "yes": given the large recent increase in vacancies in the past two quarters, the U.S. unemployment rate ought to have started to fall. It did not.

That means that the chances are now very high that our cyclical unemployment is starting to turn into structural unemployment, as businesses that seek to hire and have the cash flow to hire still find that the currently-unemployed applying for jobs don't fit inside their comfort zones.

The solution? The last time the U.S. was in such a situation was at the end of the 1930s. Mobilization for total war cured the incipient structural unemployment problem with ease. The solution is to rapidly boost aggregate demand: quantitative easing, raising the Federal Reserve's inflation target, banking policy to take more risky assets onto the government's balance sheet, and fiscal expansion. Time is of the essence. For the odds are now better than 50-50 that two years from now we won't have the ability to quickly and cheaply reduce unemployment to normal levels through boosting aggregate demand.

It Always Looked Like Alan Simpson Was a Mistake to Co-Chair a Deficit-Reduction Commission. Now It Looks Like Erskine Bowles Was an Even Bigger Mistake

Numerology is not a science. And there is no reason to think that 21% is a particularly auspicious number.

Matt Miller--like me, part of the sensible, technocratic bipartisan center--looks at what is coming out of the Obama deficit-reduction commission, and is as horrified as I am:

A spending goal too small for aging America: I don't want to overreact. I'd hate to prematurely diss President Obama's National Commission on Fiscal Responsibility and Reform, which held its fourth public meeting Wednesday. But the commission's Democratic co-chair, Erskine Bowles, may have already blown it.... Bowles suggested that the long-term goal the commission should adopt for federal spending should be 21 percent of gross domestic product. This sounds like a bookkeeping matter. But... federal spending under Ronald Reagan averaged 22 percent of GDP. Under Bowles's view, therefore, the outer limits of the Democratic Party's 21st-century aspirations would be to run government at a size smaller than did a 20th-century conservative icon. What's more, Reagan ran government at this size at a time when 76 million baby boomers weren't about to hit their rocking chairs. In 1988, 32 million retirees received Social Security and 33 million were on Medicare, our two biggest domestic programs. By 2020, about 48 million elderly Americans will receive Social Security, and 62 million Americans will be on Medicare (then the numbers really soar).... [Total] health costs in the Reagan era were around 10 percent of GDP, while they're now 17 percent, headed toward 20. Obviously we need a national crusade to make health-care delivery more efficient. But until there's progress on this front, the 21 percent goal would be tantamount to Democrats agreeing that Uncle Sam should handle health care, pensions, defense and little else.

And that's before factoring in the odds that corporate America will come to its senses in a few years and ask government to relieve it of its crazy health-cost burden, at which point the 4 percent of GDP that big companies now spend on health care might sensibly shift to public ledgers....

So what was Bowles thinking?

Perhaps he wasn't....

Let me be clear: I'm all for ending ineffective programs and reallocating the cash; trimming the bloated Pentagon; and reforming tax subsidies for mortgage interest and charitable contributions....

This fall we'll have a phony debate about extending the Bush tax cuts, when it's inevitable that taxes will rise as the boomers age.... If Bowles's Democratic colleagues don't make him walk back his blunder, the great debate this commission should spark about how to marry prudent public finance with America's values and aspirations will be lost before it's even begun.

John Stuart Mill vs. the European Central Bank

We are live at Project Syndicate: John Stuart Mill vs. the European Central Bank:

One of the dirty secrets of economics is that there is no such thing as “economic theory.” There is simply no set of bedrock principles on which one can base calculations that illuminate real-world economic outcomes. We should bear in mind this constraint on economic knowledge as the global drive for fiscal austerity shifts into top gear.

Unlike economists, biologists, for example, know that every cell functions according to instructions for protein synthesis encoded in its DNA. Chemists begin with what the Heisenberg and Pauli principles, plus the three-dimensionality of space, tell us about stable electron configurations. Physicists start with the four fundamental forces of nature.

Economists have none of that. The “economic principles” underpinning their theories are a fraud – not fundamental truths but mere knobs that are twiddled and tuned so that the “right” conclusions come out of the analysis.

The “right” conclusions depend on which of two types of economist you are. One type chooses, for non-economic and non-scientific reasons, a political stance and a set of political allies, and twiddles and tunes his or her assumptions until they yield conclusions that fit their stance and please their allies. The other type takes the carcass of history, throws it into the pot, turns up the heat, and boils it down, hoping that the bones will yield lessons and suggest principles to guide our civilization’s voters, bureaucrats, and politicians as they slouch toward utopia.

Not surprisingly, I believe that only the second kind of economist has anything useful to say. So what lessons does history have to teach us about our current global economic predicament?

In 1829, John Stuart Mill made the key intellectual leap in figuring out how to fight what he called “general gluts.” Mill saw that excess demand for some particular set of assets in financial markets was mirrored by excess supply of goods and services in product markets, which in turn generated excess supply of workers in labor markets.

The implication of this was clear. If you relieved the excess demand for financial assets, you also cured the excess supply of goods and services (the shortfall of aggregate demand) and the excess supply of labor (mass unemployment).

Now, there are many ways to relieve excess demand for financial assets. When the excess demand is for liquid assets used as means of payment – for “money” – the natural response is to have the central bank buy government bonds for cash, thus increasing the money stock and bringing supply back into balance with demand. We call this "monetary policy."

When the excess demand is for longer-term assets – bonds to serve as vehicles for savings that move purchasing power from the present into the future – the natural response is twofold: induce businesses to borrow more and build more capacity, and encourage the government to borrow and spend, thus bringing the supply of bonds back into balance with demand. We call the first of these “restoring confidence,” and the second “fiscal policy.”

When excess demand is for high-quality assets – places where you can park your wealth and be assured that it will still be there when you come back – the natural response is to have credit-worthy governments guarantee some private assets and buy up others, swapping them out for their own liabilities and thus diminishing the supply of risky assets and increasing the supply of safe assets. We call this “banking policy.”

Of course, no real-world policy falls cleanly into any one of these ideal types. Right now, the European Central Bank worries that continued expansionary fiscal policy will backfire. Yes, it argues, having governments spend more money and continue to run large deficits will increase the supply of bonds, and thus relieve excess demand for longer-term assets. But if a government’s debt emissions exceed its debt capacity, all of that government’s debt will become risky. It will have relieved a shortage of longer-term assets by creating a shortage of high-quality assets, and so be in a worse position than it was before.

The ECB contends that the core economies of the global North – Germany, France, Britain, the United States, and Japan – are now at the point where they need rapid fiscal retrenchment and austerity, because financial markets’ confidence in the quality of their debt is shaken, and may collapse at any moment. And policymakers are falling into line: in late July, Peter Orszag, Director of the US Office of Management and Budget said that the coming fiscal consolidation in the US over the next three years will be the country’s deepest retrenchment in 60 years.

Yet, as I look at the world economy, I see a very different picture – one in which markets’ trust in the quality of government liabilities of the global North’s core economies most certainly is not on the brink of collapse. I see production 10% below capacity, and I see unemployment rates approaching 10%. More importantly for near-term economic policy, I see a world in which investors have enormous confidence in core economies’ government debt – for many, the only safe port in this storm.

Liquidationism Further Refuted

Paul Krugman directs us to Heather Boushey:

his Has Been An Equal Opportunity Recession When It Comes To Job Losses Across Industries: Economist Paul Krugman highlights Raghuram Rajan arguing in today’s Financial Times that the Federal Reserve should begin raising interest rates because “the US had far too much productive capacity devoted to houses and cars, because consumers could obtain financing for them easily.” Essentially, Rajan is arguing that monetary tightening is necessary to shift resources out of the too-large housing and car sectors. Krugman points out that this makes no sense.... Let me add a bit more meat to this story... the Great Recession has been more of an “equal opportunity” recession than other recent recessions....

Certainly, construction has lost a significant chunk of jobs, but other industries — manufacturing, professional and business services, transportation and warehousing, financial activities, leisure and hospitality, and information services — have all lost a larger share. Much of financial activities could be considered tied to the run-up and bust of the housing market, but all the others? This Great Recession has had fairly broad, widespread job losses across industry, which contradicts the idea that there’s one or two sectors that U.S. workers need to transition out of.

"Houses Have Increased Their Preference for Being Vacant"

Ryan Avent reads Alex Tabarrok:

Aggregate demand: Think of the unemployed houses: THIS is an interesting thought experiment, courtesy of Alex Tabarrok, who notes that America's housing vacancy rate is at record highs and writes:

House prices may be sticky but they have fallen a lot--maybe not enough--but they have fallen a lot more than have wages.  On the other hand, house prices rose a lot more than wages. Maybe house prices are sticky relative to the required variation in market clearing levels.... Is the problem structural?  It does seem that we have too many houses in the South and the West where the boom was concentrated.  If we think of the unemployment rate as a measure of where there are too many houses then the following figure shows that there is a positive correlation between the home vacancy rate and the unemployment rate.  It's not as tight as one might expect, however.  California, for example, has a high unemployment rate but a home vacancy rate slightly below the national average and many states such as Wisconsin have plenty of unemployment but a very low home vacancy rate.

Mr Tabarrok concludes, "My guesstimate is 50% AD, 25% sticky prices, 25% structural." There are plenty of ways to play around with this version of the underemployed resources scenario, and I encourage you all to do so. But I have to say, I'm rather partial to this explanation, from Mr Tabarrok's comment section:

Houses have increased their preference for leisure.

Paul Krugman Wonders What Raghuram Rajan Is Talking About

The Work Of Depressions - Paul Krugman Blog -

Paul Krugman:

The Work Of Depressions: OK, I actually haven’t taken cars into account; someone with more time can do that. But let’s look at the role of job losses in construction versus other sectors.... If high unemployment were largely about shifting workers out of an overblown construction sector, wouldn’t you expect job losses to be concentrated in that sector? Wouldn’t you expect employment elsewhere to be, if anything, rising? In fact, however, the vast majority of job losses have occurred in parts of the economy with little direct connection to the housing bubble. Yes, as a percentage job losses have been much larger in construction; but nothing in Rajan’s argument explains why we shouldn’t be using policy in an attempt to prevent vast job losses in parts of the economy that aren’t overblown.

I’d add that even if you think structural unemployment has gone up, it clearly hasn’t risen enough to stop a slide toward deflation — and if it has risen, the slump is arguably a cause, not an effect, of that rise.

Anyway, to go back to the beginning: it’s amazing, and depressing in multiple senses, that we’re having to replay all these old debates.

The way Robert Hall puts it, until mid-2008 we had an autos-and-construction recession--the problem was one of expanding other sectors to soak up labor that had previously been employed in autos and construction. Since the fall of 2008 we have had something very different...

Steve M. on Why Friends Don't Let Friends Read Politico

No More Mister Nice Blog

It takes years of training and practice to be this clueless and blind to reality.

Steve M.:

No More Mister Nice Blog: It was the front page of Politico a little before 7:30 this morning.... Notice what was shown as an illustration of "rage"? Peaceful marchers demanding the reinstatement of Shirley Sherrod. Could any demand be more reasonable at this moment?

Oh, but they're from Code Pink.... [B]ut this picture shows what seems to be the epitome of peaceful protest.

And, oh, the person in the center of the photo is clearly supposed to be read as an Angry Black Man. Eeek! Eeek! (Though to me he looks far more thoughtful than angry.)

The article, by John Harris and Jim VandeHei... engage[s] in the usual willful refusal to apportion blame accurately. Everyone is at fault, or the culture is at fault, not the left or (heaven forfend) the right (although the linguist Deborah Tannen is quoted and we're told, with some bafflement, that she "puts the emphasis on conservative ideological activists as much as on the new media environment," though according to the authors that's clearly because she's "a more liberal voice" and not because she's right)....

I guess it's all the same, then, over four presidencies, and there's no point examining any of it further. Anger at George W. Bush's inept, bloody, and ruinously expensive war in Iraq is morally equivalent to Andrew Breitbart's anger at Shirley Sherrod and the NAACP. Anger expressed in purely verbal form on a private listserv is equivalent to a deliberate (and successful) act of personal destruction waged with depraved indifference to the facts. What's the diff, hunh?

links for 2010-07-28

If Paul Krugman Is Going to Be Always Right, I Really Wish He Would Be a Little More Optimistic...

Paul Krugman compares:

Ezra Klein:

What went wrong with stimulus: The original stimulus package should've been bigger. Rep. David Obey, chairman of the House Appropriations Committee, says the Treasury Department originally asked for $1.4 trillion. Sen. Kent Conrad, chairman of the Senate Budget Committee, wanted $1.2 trillion. What we got was... more like $700 billion when you took out the AMT patch that was jammed into the package. So we knew it was too small then, and the recession it was designed to fight turned out to be larger than we'd predicted. In the end, we took a soapbox racer to a go-kart track and then realized we were competing against actual cars. This was a mistake.... I wonder if it wasn't fed by a belief that there'd be other chances.... No one in the political system could possibly look at 10 percent unemployment and walk away from it, right?

Wrong. Ten percent unemployment and a terrible recession ended up discrediting the people trying to do more for the economy, as their previous intervention was deemed a failure. That, in turn, empowered the people attempting to do less for the economy. So rather than a modestly sized stimulus leaving the door open for more stimulus if needed, its modest size was used to discredit the idea of more stimulus when it became needed.

Paul Krugman, March 2009:

Behind the Curve - President Obama’s plan to stimulate the economy was “massive,” “giant,” “enormous.” So the American people were told, especially by TV news, during the run-up to the stimulus vote. Watching the news, you might have thought that the only question was whether the plan was too big, too ambitious. Yet many economists, myself included, actually argued that the plan was too small and too cautious. The latest data confirm those worries — and suggest that the Obama administration’s economic policies are already falling behind the curve....

There are now three big questions about economic policy. First, does the administration realize that it isn’t doing enough? Second, is it prepared to do more? Third, will Congress go along with stronger policies?...

Obama’s latest interview with The Times [is] anything but reassuring. “Our belief and expectation is that we will get all the pillars in place for recovery this year,” the president declared — a belief and expectation that isn’t backed by any data or model I’m aware of. To be sure, leaders are supposed to sound calm and in control. But in the face of the dismal data, this remark sounded out of touch. And there was no hint in the interview of readiness to do more... he went on to dismiss calls for decisive action as coming from “blogs” (actually, they’re coming from many other places, including at least one president of a Federal Reserve bank), and suggested that critics want to “nationalize all the banks” (something nobody is proposing). As I read it, this dismissal — together with the continuing failure to announce any broad plans for bank restructuring — means that the White House has decided to muddle through on the financial front, relying on economic recovery to rescue the banks rather than the other way around. And with the stimulus plan too small to deliver an economic recovery ... well, you get the picture.

Sooner or later the administration will realize that more must be done. But when it comes back for more money, will Congress go along? Republicans are now firmly committed to the view that we should do nothing.... So here’s the picture that scares me: It’s September 2009, the unemployment rate has passed 9 percent, and despite the early round of stimulus spending it’s still headed up. Mr. Obama finally concedes that a bigger stimulus is needed. But he can’t get his new plan through Congress because approval for his economic policies has plummeted, partly because his policies are seen to have failed, partly because job-creation policies are conflated in the public mind with deeply unpopular bank bailouts. And as a result, the recession rages on, unchecked.

O.K., that’s a warning, not a prediction. But economic policy is falling behind the curve, and there’s a real, growing danger that it will never catch up.

The ARRA: Underpowered from the Start

The ARRA was--I thought--supposed to be only one of three big stimulative policy moves that was going to be undertaken in 2009. The ARRA, use of the TARP money to fund a very large risky asset purchase program by the Treasury, and quantitative easing by the Federal Reserve in order to restor confidence that there was no chance of deflation. Only the first of these happened at any scale.

And we were unlucky.

Paul Krugman:

How Did We Know The Stimulus Was Too Small?m: Those of us who say that the stimulus was too small are often accused of after-the-fact rationalization... But the... answer is that it’s all in the math: Keynesian analysis provides numbers as well as qualitative predictions, and given reasonable projections of the economy’s path in January 2009, the proposed stimulus just wasn’t big enough. Let’s go back to the tape, January 9, 2009:

Even the C.B.O. says, however, that “economic output over the next two years will average 6.8 percent below its potential.” This translates into $2.1 trillion of lost production. “Our economy could fall $1 trillion short of its full capacity,” declared Mr. Obama on Thursday. Well, he was actually understating things. To close a gap of more than $2 trillion — possibly a lot more, if the budget office projections turn out to be too optimistic — Mr. Obama offers a $775 billion plan. And that’s not enough.... [T]he Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job.

In practice, it was even worse, because one of the key elements of the plan — aid to state and local governments — was cut back sharply in the Senate. We ended up with only about $600 billion of real stimulus over that two-year period.

So this wasn’t a test of fiscal stimulus, even though it has played out that way in the political arena: the whole thing was obviously underpowered from the start.

The No-Stimulus Baseline

David Leonhardt writes:

The Impact of Another Kind of Stimulus: On Wednesday, Alan Blinder, the Princeton economist and former Federal Reserve vice chairman, and Mark Zandi, chief economist of Moody’s Analytics, will release a new analysis of the federal government’s response to the Great Recession. As far as I know, it’s the first serious attempt at analyzing the effect both of the stimulus programs passed by Congress and of the various financial-market policies put in place by the Fed, the Treasury and Congress....

We find that the effects on real GDP, jobs, and inflation are huge, probably averting what would have been called Great Depression 2.0. For example, we estimate that, without the policy responses, GDP in 2010 would be about 6½% lower, payroll employment would be about 8½ million jobs lower, and the nation would now be experiencing deflation.

When we divide these effects into two components, one attributable to the various rounds of fiscal stimulus and the other attributable to the panoply of financial-market policies (including the TARP, the bank stress tests, and the Fed’s quantitative easing), we estimate that the latter are substantially more powerful than the former. Nonetheless, our estimated effects of the fiscal stimulus policies alone are very substantial: In 2010, real GDP that is about 2% higher, an unemployment rate that is about 1½ points lower, and almost 2.7 million more jobs...

As Mr. Blinder and Mr. Zandi note, their estimates of the fiscal stimulus are similar to the estimates of others — including the Congressional Budget Office. The program has had a very large, and positive, effect on the economy. And the effect of the the policies aimed at financial markets seems to be even larger.

It is very nice to see that they are attempting this. The hard part of it, of course, is figuring out what would have happened to the flow-of-funds through financial markets in the absence of TARP, of quantitative easing, and of other extraordinary financial policy interventions. That they were, collectively, about twice as big as the ARRA smells right to me, but the only pieces of information I have to support that are even shakier than back-of-the-envelope calculations.

links for 2010-07-27

Richard Schmalensee and Rob Stavins Are Horrified by the Republican Party

They provide yet another set of reasons why it would be good for all of us if we were to dry it up and let it blow away right now:

Beware of Scorched-Earth Strategies in Climate Debates: [C]onservative Republicans... should resist demonizing market-based approaches to environmental protection and reverting to pre-1980s thinking that saddled business and consumers with needless costs.... [M]arket-based policies should be embraced, not condemned by Republicans.... Ronald Reagan’s Environmental Protection Agency successfully put in place a cap-and-trade system to phase out leaded gasoline... at a savings of some $250 million per year.... George H. W. Bush... a cap-and-trade system to cut by half sulfur dioxide emissions... has cut sulfur dioxide emissions by 50 percent, and has saved electricity companies... some $1 billion per year compared with a conventional, non-market approach.... If some conservatives oppose energy or climate policies because of disagreement about the threat of climate change or the costs of those policies, so be it. But in the process of debating risks and costs, there should be no tarnishing of market-based policy instruments....

Conventional approaches advanced as “painless alternatives’’ — a plethora of standards, special-interest technology subsidies, and tax breaks — won’t do the job, and will be unnecessarily expensive.... A price on carbon is the least costly way to provide meaningful incentives for technology innovation and diffusion, reduce emissions from fossil fuels, and drive energy efficiency.... Demonizing cap-and-trade in the short term will turn out to be a mistake with serious long-term consequences...

DeLong Smackdown Watch: Beveridge Curve Edition

Robert Waldmann:

David Altig Says That Our Cyclical Unemployment Has Started to Turn Structural: Shorter Brad DeLong:

Terrible news, there are lots more job openings in the USA than there were a year ago.

Huh? I'd say that job openings are good news. Would you rather there were fewer? One might imagine that high unemployment and high vacancy rates are, as you directly state, a bad sign as high unemployment combined with high vacancies lasts longer -- that the combination is a sign of hysteresis from a) deteriorated jobs skills, or b)deteriorated work habits, or c) irrational stigma due to employers assuming a or be or d) missmatch. I recall such a graph. It was the terrifying UK Beveridge curve from 1988-9 (look it up). The word (from among others Layard) was that unemployment had become almost impossible to fight as the long term unemployed were discouraged. Then employment took off.

The Beveridge curve is the lower envelope of a slightly more complicated dynamic with counterclockwise cycles above the curve.... My reading is that when the market crashed in 87, Thatcher panicked and allowed the (not independent) bank of England to stimulate. So the economy took off. It took a while to into work down the huge stock of unemployed, but there was no sign of a bad tradeoff. Just further proof that her insane policies (until she missinterpreted the crash of 87 as the crash of 29) were the problem.

Krugman shares your view and he does tend to be right, but still, I'm tempted to make a prediction...

Yes, the Daily Caller Is Completely Insane. Why Do You Ask?

Tucker Carlson and Jonathan Strong reveal that:

Harold Pollack of the University of Chicago is the real brains behind the American left--the only person smart enough to think that the right left-wing line was to criticize 72-yr-old John McCain for nominating an unqualified running mate when the life tables alone told us that there was a significant chance that that running mate would ascend to the presidency in the event of a Republican election victory.

No, I am not going to link--they don't deserve the traffic.

David Altig Says That Our Cyclical Unemployment Has Started to Turn Structural

This is bad news: very bad news:

macroblog: A curious unemployment picture gets more curious: Since the second quarter of last year, the unemployment rate has far exceeded the level that would be predicted by the average correlation between unemployment and job vacancies over the past decade. Tuesday's report indicates that the anomaly only deepened in the first two months of the second quarter.

macroblog: A curious unemployment picture gets more curious

Liveblogging World War II: July 27, 1940

Winston Leonard Spencer-Churchill:

During this month of July American weapons in considerable quantities were safely brought across the Atlantic.... Prime Minister to First Lord [of the Admiralty]: The great consignments of rifles and guns, together with their ammunition, which are now approaching this country are entirely on a different level from anything else we have transported across the ocean except the Canadian Division itself. Do not forget that 200,000 rifles mean 200,000 men, as the men are waiting for their rifles. The convoys approaching on July 31 are unique, and a special effort should be made to ensure their safe arrival. The loss of these rifles and field-guns would be a disaster of the first order...

links for 2010-07-26

Econ 1 Summer Assignments...

From: Brad DeLong
To: Fall 2010 UC Berkeley Econ 1 Students
Subject: Summer Assignments for Econ 1, UC Berkeley Fall 2010

Before you show up here in the fall for Econ 1, please read:

  1. The whole book of Partha Dasgupta, Economics: A Very Short Introduction (ISBN #: 0192853457 Publisher: Oxford)

  2. The "Introduction" and chapters 1 through 5 of Book I (i.e., I:1-5) of Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (available for free on the web or free for Amazon Kindle or Apple iBooks; you can also buy a copy)

  3. Pp. 1-31 of Paul Seabright, In the Company of Strangers: A Natural History of Economic Life (ISBN #: 978-0691146461 Publisher: Princeton)

  4. Pp. ix-69 of Milton Friedman and Rose Director Friedman, Free to Choose (ISBN #: 978-0156334600 Publisher: Mariner)

Yes, there will be a quiz.


Sincerely Yours,

J. Bradford DeLong
Professor of Economics

Why Is Ross Douthat on the New York Times's Editorial Page?

Why oh why can't we have a better press corps?

Is there any respect--any respect--any respect at all in which the New York Times would not be a better publication if Ross Douthat were removed, and replaced by David Leonhardt?

I cannot think of any.

Here's David Leonhardt explaining why what the New York Times prints from Ross Douthat on its op-ed page is worse than tripe:

Armageddon Wars: I — like many others, I imagine — would be thrilled if [global cooling] were what the future held. But I think there are two big reasons to doubt that... The first is basic economics. When the problem is resource scarcity, companies and individuals have a powerful incentive to become more efficient. It keeps their costs down. Mr. Simon understood this, and it’s the fundamental reason he won the [resource price trend] bet [with Ehrlich]. But global warming is different. The fact that carbon emissions are warming the planet doesn’t make it more expensive to produce those emissions. So companies do not have an ever-increasing incentive to emit less — the way they would if the problem were, say, a lack of oil. Global warming doesn’t solve itself the way that resource scarcity does.

The second reason is the accumulation of evidence. Almost as soon as Mr. Ehrlich and Mr. Simon made their bet in 1980, Mr. Simon’s prediction started looking good.... In recent years, though, anyone who had bet against global warming would look as wrong as Mr. Ehrlich did. The Greenland and Antarctic ice sheets are shrinking at an accelerating rate. Scientists have recently revised upwards their predictions of sea-level rises. The planet’s 10 hottest years on record, according to NASA, are: 2005, 2007, 2009, 1998, 2002, 2003, 2006, 2004, 2001 and 2008. This year is on pace to displace 2005 as No. 1.

The ultimate goal of climate legislation — be it the bill that the House passed last year or the bill that died in the Senate last week — is to align the incentives better, so human ingenuity can be harnessed to fight global warming. The bills would increase the cost of emitting carbon, thereby giving companies reason to emit less. Absent that, the best bet seems to be that emissions will keep rising and the planet will keep getting hotter.

Matthew Yglesias and Ryan McNealy: Niall Ferguson Debates Himself

As Tim Harford says, "my new maxim is never to stand in the middle of a fight between Niall Ferguson and Niall Ferguson." This is a thing of beauty:

Matthew Yglesias and Ryan McNealy: Niall Ferguson Debates Himself: I’ve been known to remark on the conservative movement’s strong adherence to Keynesian arguments as a justification for tax cuts in the wake of the mild 2001 recession, adherence that seems puzzling in light of their contrary rhetoric in the wake of the cataclysmic 2008-2009 downturn. Brad DeLong observes that one particularly hilarious example of this is historian-turned-pundit Niall Ferguson who wrote a December 12, 2003 article on the Bush administration that’s in considerable with his contemporary take on things. DeLong requests a Ferguson v Ferguson debate, and with assistance from Ryan McNeely I’m prepared to unveil one. 2003 Ferguson is in boldface, 2010 Ferguson is in italics:

Certainly. Long before Keynes was even born, weak governments in countries from Argentina to Venezuela used to experiment with large peace-time deficits to see if there were ways of avoiding hard choices. The experiments invariably ended in one of two ways. Either the foreign lenders got fleeced through default, or the domestic lenders got fleeced through inflation.

But the United States has broken the guns or butter rule before. Under President Ronald Reagan, substantial increases in military spending coincided with comparable increases, relative to gross domestic product, in personal consumption — that proportion of G.D.P. that the public, as opposed to the government, spends. The crucial point, of course, is that in the short term at least, fiscal policy is not a zero-sum game.

But this doesn’t respond to long run inflationary fears. When economies were growing sluggishly, that could be slow in coming. But there invariably came a point when money creation by the central bank triggered an upsurge in inflationary expectations.

But, as Keynes remarked, in the long run we are all dead! Aren’t these “inflationary expectations” priced into the markets?

New York Times columnist Paul Krugman, who likens confidence to an imaginary “fairy” have failed to learn from decades of economic research on expectations. All it takes is one piece of bad news – a credit rating downgrade, for example – to trigger a sell-off.

But this will not be the kind of inflation experienced in the 1970’s and 1980’s. So powerful are the deflationary forces today (notably in the second and third biggest economies, Japan and Germany) that Washington can splurge on its military and social services with only a modest impact on expectations of inflation.

But it is not just inflation that bond investors fear. Foreign holders of US debt – and they account for 47 per cent of the federal debt in public hands – worry about some kind of future default.

But the United States has a unique advantage over all other sovereign borrowers: central banks and other institutions around the world need to hold dollars as the currency most frequently used in international transactions. While this is true, America can count on selling large amounts of dollar assets, like 10-year Treasury bonds, to foreigners — very large amounts.

But for how long? The evidence is very clear from surveys on both sides of the Atlantic. People are nervous of world war-sized deficits when there isn’t a war to justify them. According to a recent poll published in the FT, 45 per cent of Americans “think it likely that their government will be unable to meet its financial commitments within 10 years”. Surveys of business and consumer confidence paint a similar picture of mounting anxiety.

The only imminent danger is that the dollar could slide sharply against Asian currencies, as it has against the euro. But the chief losers then would be the Asians. And those who panicked about the debt under President Reagan failed to see how manageable it was. It’s even more manageable today.

Hogwash. It was said of the Bourbons that they forgot nothing and learned nothing. The same could easily be said of some of today’s latter-day Keynesians!


Now, oh Lord, lettest thou thy servant depart in peace, for mine eyes have seen the salvation of the Lord!

In Which Andrew Sullivan Hits Every Single Branch of the Crazy Tree on His Way Down...

On Mon, Jul 26, 2010, XXXXX wrote:

Andrew Sullivan pointed to a Caller email dump [from Journolist] to illustrate that the left-partisan media conspired to not discuss Trig-gate because the backlash would hurt Obama. See, only he has the moral courage to take on the real issues of the day...

On Mon, Jul 26, 2010, XXXXX wrote:

Shorter And[rew Sullivan]:

When Ezra Klein writes [on his Journolist]:

By all accounts [Sarah Palin] is a wonderful mother, and devoted to her fifth son. Leave this be...

he is pushing a corrupt partisan liberal agenda....

No, it doesn't make any sense to me either.

A Vote for Elizabeth Warren

Buce writes:

Underbelly: The Shadow Government: I've known Elizabeth Warren (not well) for something like 30 years now. Like almost everyone who ever met her, I've enjoyed her company: she's enthusiastic, energetic, warm-hearted and mostly on the side of the angels. And she has done me the occasional favor. I haven't weighed in on the great Warren Kerfuffle because I am too far out of the action to count...

But does she have the administrative chops to successfully start an agency? It's a hard thing to do--I know that I don't have them...

Ryan Avent Reads Greg Mankiw

I am not sure that "interesting" is the word, Ryan.

Ryan Avent:

Fiscal policy: When does fiscal stimulus work?: Greg Mankiw has produced an interesting assessment of fiscal policy in National Affairs. He is perhaps a little unkind toward last year's stimulus package. Contra his assertion, tax cuts played a significant role in the stimulus package, and the models used by administration economists called for a larger bill than subsequently passed. It also seems odd to knock the Obama Administration for not taking into consideration the negative effects of stimulus on long-term interest rates, when long-term interest rates remain at rock bottom levels...

"But," Ryan goes on to say:

his broader point is one worth thinking about...

Mankiw's broader point is that since we have seen nothing like this before except for the Great Depression, we should be humble and risk averse--and hence have the government stand back and wash its hands of the situation.

However, even a minor and hasty acquaintance with the Great Depression teaches that the belief that the government should stand back and wash its hands because the self-regulating market quickly returns to full-employment equilibrium is the most arrogant belief possible.

And even a minor and hasty acquaintance with the Great Depression teaches that having the government stand back and wash its hands is the most risky strategy conceivable.

We Must Reopen the World's Stupidest Man Alive Contest for Jeffrey Lord of the American Spectator

Neddy Merrill:

Your idiolect is not the language « The Edge of the American West: It’s only Monday morning, but I hope this is the stupidest thing I read all week. Jeffrey Lord: Sherrod’s story about a lynched relative is false--the man was merely beaten to death after being arrested. No, seriously, that’s what it says.

A Task for Somebody Less Lily-Liverish than I Am and with More TIme than I Have...

It would be a mitzvah if somebody took:


and cut-and-pasted them into a Niall Ferguson vs Niall Ferguson debate...

UPDATE: Matthew Yglesias and Ryan McNealy have answered the call: Now that's what I call message coordination!

Liveblogging World War II: July 26, 1940

July 26, 1940:

World War II Day-By-Day: At 2.47 PM, 320 miles West of Ireland, U-34 fires three torpedoes at convoy OB-188, sinking British passenger ship Accra carrying 1700 tons of general cargo (24 dead). 465 survivors are rescued by British steamer Hollinside, Norwegian steamer Loke, sloop HMS Enchantress and corvette HMS Clarkia and landed at Liverpool. British MV Vinemoor is hit and sinks the next day (all 32 crew picked up by HMS Clarkia, transferred to steamer Hollinside and landed at Liverpool).