"The programmers have another saying: ‘The question of whether a machine can think is no more interesting than the question of whether a submarine can swim.’"
--Charles Stross, Halting State
So here's another copy: 1014wkly.pdf
Frydman and Goldberg, Beyond Mechanical Markets http://tinyurl.com/dl20111017c, sends us to a 2005 interview of Thomas Sargent by Evans and Honkapohja. Here is the section on the origins of "calibration"--which Olivier Blanchard once defined as "a way of ignoring the fact that the data do not fit your model, and proceeding as if they did":
Evans and Honkapohja: What were the profession's most important responses to the Lucas Critique?
Sargent: There were two. The first and most optimistic response was complete rational expectations econometrics. A rational expectations equilibrium is a likelihood function. Maximize it.
Evans and Honkapohja: Why optimistic?
Sargent: You have to believe in your model to use the likelihood function. it provides a coherent way to estimate objects of interest (preferences, technologies, information sets, measurement processes) within the context of a trusted model.
Evans and Honkapohja: What was the second response?
Sargent: Various types of calibration. Calibration is less optimistic about what your theory can accomplish because you would only use it if you din't fully trust your entire model, meaning that you think your model is partly misspecified or incompetely specified, or if you trusted someone else's model and data set more than your own. My recollection is that Bob Lucas and Ed Prescott were initially very enthusiastic about rational expetations econometrics. After all, it simply involved imposing on ourselves the same high standards we had criticized the Keynesians for failing to live up to. But after about five years of doing likelihood ratio tests on rational expectations models, I recall Bob Lucas and Ed Prescott both telling me that those tests were rejecting too many good models. The idea of calibration is to ignore some of the probabilistic implications of your model but to retain others. Somehow, calibration was intended as a balanced response to professing that your model, although not correct, is still worthy as a vehicle for quantitative policy analysis....
Evans and Honkapohja: Do you think calibration in macroeconomics was an advance?
Sargent: In many ways, yes. I view it as a constructive response to Bob' remark that "your likelihood ratio tests are rejecting too many good models". In those days... there was a danger that skeptics and opponents would misread those likelihood ratio tests as rejections of an entire class of models, which of course they were not.... The unstated cse for calibration was that it was a way to continue the process of acquiring experience in matching rational expectations models to data by lowering our standards relative to maximum likelihood, and emphasizing those features of the data that our models could capture. Instead of trumpeting their failures in terms of dismal likelihood ratio statistics, celebrate the featuers that they could capture and focus attention on the next unexplained feature that ought to be explained. One can argue that this was a sensible response... a sequential plan of attack: let's first devote resources to learning how to create a range of compelling equilibrium models to incorporate interesting mechanisms. We'll be careful about the estimation in later years when we have mastered the modelling technology...
Yet that day of getting serious about building a model that could match the time series never came.
Moreover, I would say that it will not come.
Any rational-expectations model must match the ex post distribution of economic outcomes to the ex ante expectations of economic agents. Thus if it analyzes the post-World War II U.S., it must now must assume that 2008 was always in people's minds as a possible outcome that had some significant probability.
But, in fact, 2008 was a close-to-zero probability event.
James Cayne and John Fuld each lost about $1,000,000,000 and destroyed their firms in 2008--if they had seen any significant possibility of that coming, they would have acted very differently. The investors in and holders of options on Citigroup lost 93% of their money as a result of 2008. The investors in and holders of options on Bank of America lost 85% of their money as a result of 2008. The investors in and holders of options on Morgan Stanley lost more than 75% of their money.
It is not the case that the senior executives of these banks understood the risks that they were running, gambled, and lost. They had no clue that they were holding as much mortgage risk or house price risk or AIG risk as they were. They had little clue that the lower tail of the house price change distribution was as large as it turned out to be--and they confidently expected the Federal Reserve to save them and the economy and keep them out of that lower tail. They were not stupid. It was just that the world turned out to be stranger than they, given who they were and what their life-experience had been, imagined. As one former major Wall Street CEO once told me: you never know what your beta really is, because there is always some important of systemic risks that eludes you.
Any rational expectations econometric analysis of the U.S. financial sector will hae to assume that economic agents had an average expectation that 2% of the time the next year would be like 2008. And that is simply wrong: the expectation that 2008 would come was 0.02%, or at most 0.2%.
So it simply can't be done. The rational expectations assumption that agents anticipate the probability distribution of outcomes predicted by the correct economic model is simply wrong.
Sherman Miles:
Memorandum for the Chief of Staff:
Subject: Japan's New Premier.
The United Press reports that Lieutenant General Hideki Tojo, War Minister in the late Konoye Cabinet, has been designated Premier and ordered to form a new Cabinet.
General Tojo was born in 1884, the son of a Samurai. He has held several high offices in the Army, notably that of Chief of Staff of the Kwantung Army, Vice Minister of War and Inspector General of Aviation.
He has been called the father of modern Japanese Army strategy and is known to be anti-foreign, with a particular dislike for the Russians and an open admiration for German methods. He created a sensation in 1938 when, as Vice Minister of War, he predicted that Japan would have to fight Russia as well as China. He also warned that America would have to be watched. When the Axis Alliance was signed in September 1940 he said that the road Japan would follow had been "definitely decided" and there was no turning back. General Tojo is regarded by his associates as a man of unshakable determination. He cites reverence and filial piety as the two most important attributes of a Japanese soldier. He has little patience for arguments or other other people's views
Any cabinet selected by General Tojo may be expected to have Axis leanings but will be otherwise anti-foreign and highly nationalistic.
SHERMAN MILES
Brigadier General, U. S. Army,
Acting Assistant Chief of Staff, G-2.
https://twitter.com/#!/crookedfootball/status/125999249589665792
Anybody who knows him able to conduct an intervention, and get him the help he needs?
UPDATE: Chris Bertram claims that he is not in fact mentally ill, but that it "was pvt joke". Private? On Twitter?
Can anybody really be that clueless about what Twitter is?
Charlie Stross, July 12, 2007:
Social networks you won't find me on: If you're looking to link to me on the internet, this blog is my main presence. And if you don't have my email address, you can nevertheless send me email via the link in the right hand column, captioned "talk to me". I grudgingly use Facebook, but only because they have a proprietary email system with 700 million users and no gateway to the rest of the internet.
I do not and will not use the following social networks:
- MySpace (I am not a boy band)
- Google+ (One massively intrusive privacy-ignoring social network is one too many)
- LinkedIn (As much use as a chocolate manhole cover to a novelist)
- Twitter (My thoughts are not generally compressible into 140 characters — so sorry!)…
Charlie Stross, October 17, 2011:
Twitter: If you want to follow me on titter or witter or whatever it's called, glom onto @cstross.
That is all.
Glenn Greenwald is on the warpath:
What are those OWS people so angry about?: "Bill Keller’s column… is filled with characteristically vapid platitudes, but it also contained one deeply confused passage:
While his counterparts in neighboring Brazil and Ecuador have been flamboyantly consolidating their own power, nationalizing industries and picking fights with the U.S., Ollanta Humala, the new president of Peru, so far seems bent on a quiet, moderate pursuit of systemic reform. He has eschewed left-wing nationalist rhetoric, appointed an investment-friendly cabinet, and calls the U.S. a “strategic partner.”
As I noted, both in the update and on Twitter, Keller apparently thinks that Hugo Chavez is the President of Brazil, since Brazil’s actual government — both under its prior President and its current one — has been quite moderate, pro-market, pro-U.S., and very democratic, with extraordinary economic prosperity: far from the caricature of leftist tyranny Keller depicted (Lula left office after the Constitutionally mandated two terms despite more than an 80% approval rating). Keller’s column has now been quietly changed to replace “Brazil” with “Venezuela” without any note whatsoever of the change (h/t John McQuaid). Those are some very impressive editorial standards: you just obliterate glaring “mistakes” (much more likely: revealed ignorance) without any mention that it ever happened.
Indeed: no hint that this is a correction:
@johnmcquaid: "@johnmcquaid
@ggreenwald "Brazil" now changed to "Venezuela" in Keller column. No correction. nytimes.com/2011/10/17/opi…
UPDATE: There is now a--belated--acknowledgement of correction. There is, however, no acknowledgement of the current error: the claim that Peru and Venezuela are "neighbors". Peru borders Ecuador, Colombia, Brazil, Bolivia, and Chile, IIRC. It does not border Venezuela.
Bill Keller is bored by all your little protesting http://t.co/tHpy6End - He seems also to believe that Hugo Chavez is President of Brazil.
CANTOR STUMPED ON GOP JOB PLAN.:
House Republicans have come under fire lately from the president, who claims the party does not have a plan to create jobs immediately. House Majority Leader Eric Cantor, R-Va., countered that notion on Fox News Sunday, noting that his party has proposed tax incentives that would spur business growth. But Cantor could not answer host Chris Wallace when asked whether outside economists had reviewed Republican proposals and predicted the number of jobs they would create. “We believe the best way is to provide incentives for investment,” Cantor said...
In other words: "Not even John Taylor or Kevin Hassett are willing to claim that our bills will push the unemployment rate down over the next few years.
America needs this Republican Party to wither up and blow away as fast as possible.
RT @thinkprogress: "I'm not familiar with the neoconservative movement." -- Herman Cain, who says he would model John Bolton on foreign ...
RT @radleybalko: Texas prosecutor opposes post-conviction DNA testing because showing of innocence "overrides what a jury decided."
RT @tommatzzie: ...And some are grumblin' and some are wonderin' If this land's still made for you and me...
RT @xenijardin: #OWS Fact: More people have now been arrested for protesting financial crimes than the # of bankers arrested for committ ...
Alameida: Maybe Other People Should Burn Other S*** Down? http://t.co/8ppxK6EW
RT @pdacosta: Monsieur Vigilance often wrong MT @rszbt CrisisNOT a matter of one country creating problems. Trichet blames #Greece
Ezra Klein on the Cleveland Clinic and Its Employees: The promise and peril of wellness http://t.co/a0r69p03
RT @hblodget: RT @JimPethokoukis: Big Bank lobbyist to me, in 2010: "Hey, we got no problems with Timmy {Geithner]."
RT @stephenfgordon: .@acoyne Always liked Martin Wolf's line that trade agreements were best viewed as non-aggression pacts between merc ...
RT @afrakt: Medicare’s past, present, & future, by Paul Starr | The Medicare Bind http://j.mp/oWB3IE
RT @JustinWolfers: Which leading Republican candidate said: “If you don’t have a job and you’re not rich, blame yourself.”
Dani Rodrik on Milton Friedman’s Magical Thinking http://bit.ly/ootNIY
RT @AndyHarless: I'm certainly not anti-rich or anti-bankers, but I'm anti-weak-macro-policy, and in this I find common cause with the # ...
RT @drgrist: Gregg Easterbrook, the worst science columnist ever, turns out to also be the worst political columnist ever: http://t.co/i
RT @xenijardin: FACT: getting RT'd by ppl with >1M followers increases # of lady-hater trolls all up in your streamhole. Dudes: eat a ...
Jan Hatzius and Sven Jari Stehn of Goldman Sachs: The Case for a Nominal GDP Target http://bit.ly/ndiDR1
We Are Not the 90%... http://bit.ly/qD12HO
RT @guan: A note from John Ritchie, brother of Dennis MacAlistair Ritchie. http://t.co/HPk0p0Xh
Frydman and Goldberg: Beyond mechanical markets http://t.co/bFBUc2Yb
Christina Romer's takes, at three different moments:
Christina Romer (February 27, 2009): "The Case for Fiscal Stimulus" http://t.co/Ci6N1Z3W
Christina Romer (September 24, 2009): "Back from the Brink" http://t.co/WPdhXbd3
Christina Romer (September 1, 2010): "Not My Father's Recession" http://t.co/4jACyXth
"Representative institutions are of little value, and may be a mere instrument of tyranny or intrigue, when the generality of electors are not sufficiently interested in their own government to give their vote, or, if they vote at all, do not bestow their suffrages on public grounds, but sell them for money, or vote at the beck of some one who has control over them, or whom for private reasons they desire to propitiate. Popular election thus practiced, instead of a security against misgovernment, is but an additional wheel in its machinery."
--John Stuart Mill, Considerations on Representative Government
The conclusion to their October 14, 2011 "U.S. Economics Analyst":
Not a Panacea, But Probably the Best Option:
Under our forecast of high (and gradually rising) unemployment coupled with renewed disinflation, further monetary policy easing would be appropriate. We believe that a nominal GDP level target paired with additional large-scale asset purchases would be a good framework to deliver such easing. Asset purchases enhance the credibility of the shift in the target, and the shift in the target raises the likelihood that the asset purchases will be effective. The whole is greater than the sum of the parts. The case for such a policy would strengthen further if inflation fell sharply and the risk of deflation reappeared clearly on the radar screen.
The credibility of the policy could be strengthened further via a broadening of the assets to be purchased and/or renewed fiscal expansion. But these policies would probably require the explicit cooperation of Congress, which seems unlikely for the foreseeable future. Thus, we believe that the Fed’s most promising option for delivering significant further policy easing would be a shift to a nominal GDP level target coupled with large-scale asset purchases.
They hope such a policy could lower the unemployment rate by two full percentage points--from 8.5% to 6.5%--as of mid-2013.
The whole purpose of an independent central bank is so that it can do the right thing with respect to its dual mandate, and nominal GDP level targeting plus quantitative easing now looks to be the right thing to do.
Jonathan Cohn:
From January 2009: Krugman's Eerily Prescient Prediction Of The Recovery Act's Limits And McConnell's Reaction: The political constraints on the Obama Administration in January, 2009, were very real. Even if the president had pushed for a much bigger stimulus, it's unlikely Congress would have passed one, at least as long as the filibuster remained in place. Still, this excerpt from a Paul Krugman column is downright eerie:
This really does look like a plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan’s perceived failure, if it’s spun that way, will be placed on Democrats.
I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”
Yup. The only thing Krugman got wrong was the unemployment rate. It peaked even higher, topping 10 percent.
Ian Millhiser:
Gingrich's Awful Speech Part V: Newt Responds!: week, former Speaker Newt Gingrich (R-GA) delivered a lengthy attack on America’s constitutional system of government where he ultimately concluded that, if elected president, he is free to openly defy the Supreme Court and wage a campaign of intimidation against judges who disagree with him. ThinkProgress responded with a four-part series criticizing the speech.
Today, the Gingrich campaign published a lengthy and rambling response to our critique…. [I]t does include what appears to be a clarification:
Gingrich is not saying that a President and Congress can simply ignore court rulings they don’t like. Instead, Gingrich is making the point that in those circumstances when federal judges issue decisions that the executive and/or legislative branches believe to be seriously in constitutional error, then the political branches may decide on such exceedingly rare occasion to take corrective action supported by the Constitution, including limiting the application of a decision, ignoring the decision of the Court, limiting the future jurisdiction of certain federal courts, impeaching judge(s) for unconstitutional rulings, and abolishing judgeships.
So Gingrich isn’t saying that the president may simply ignore court rulings they don’t like. He’s saying that presidents may simply ignore court rulings they really, really disagree with. That’s an entirely different standard!…
This… deserves nothing more than scorn and no response other than a firm reminder that Gingrich’s brand of authoritarianism has no place under the American system of government.
Dani Rodrik:
Milton Friedman’s Magical Thinking: At a time when skepticism about markets ran rampant, Friedman explained in clear, accessible language that private enterprise is the foundation of economic prosperity. All successful economies are built on thrift, hard work, and individual initiative. He railed against government regulations that encumber entrepreneurship and restrict markets. What Adam Smith was to the eighteenth century, Milton Friedman was to the twentieth....
But Friedman also produced a less felicitous legacy. In his zeal to promote the power of markets, he drew too sharp a distinction between the market and the state. In effect, he presented government as the enemy of the market. He therefore blinded us to the evident reality that all successful economies are, in fact, mixed. Unfortunately, the world economy is still contending with that blindness in the aftermath of a financial crisis that resulted, in no small part, from letting financial markets run too free.
The Friedmanite perspective greatly underestimates the institutional prerequisites of markets. Let the government simply enforce property rights and contracts, and – presto! – markets can work their magic. In fact, the kind of markets that modern economies need are not self-creating, self-regulating, self-stabilizing, or self-legitimizing. Governments must invest in transport and communication networks; counteract asymmetric information, externalities, and unequal bargaining power; moderate financial panics and recessions; and respond to popular demands for safety nets and social insurance.
Markets are the essence of a market economy in the same sense that lemons are the essence of lemonade. Pure lemon juice is barely drinkable. To make good lemonade, you need to mix it with water and sugar. Of course, if you put too much water in the mix, you ruin the lemonade, just as too much government meddling can make markets dysfunctional. The trick is not to discard the water and the sugar, but to get the proportions right...
Matt Rognlie writes:
What’s needed in a macro model?: Anyone who’s read a newspaper over the last few years has surely come across the notion of a flight to liquidity. When the economy dips, there’s an increase in demand for liquid assets that vastly outweighs whatever tiny drop you’d expect in transactions demand for money. In practice, LM probably slopes the wrong way…
Again, the problem is that Matt has not specified what interest rate he puts on the vertical axis of the IS-LM curve. We really need a model with five moving pieces:
Matt is saying that in practice shocks of type (1) and (2) as a rule come with shocks of type (5).
The right answer is that sometimes they do and sometimes they don't. Right now a more expansionary policy from the Federal Reserve would be unlikely to increase interest rates and reduce total spending. Better, I think, to say that we had a shock of type (5) which raised long-term real risky interest rates and lowered short-term safe nominal interest rates than to say that the LM curve slopes in the wrong direction.
Purge of the Red Army in 1941 - Wikipediaa:
Stalin executes 300 commanders, including Lieutenant Generals Nikolay Klich and Robert Klyavinsh and Major General Sergey Chernykh.
Plucky Tree:
plucky tree: the last time I saw Steve Jobs: I worked at Apple from April of 1999 through July of 2011.... After leaving my job at Apple, I dropped in for lunch one day. I was exiting the main building, Infinite Loop One, and just ahead of me was Steve Jobs, walking with the usual spring in his step that never seemed to go away even as he started looking more frail.... Steve was heading towards a car parked next to the curb with its door open, waiting for him. The car was idling. A family was standing near the Apple sign outside the building, a common site for people to take photos on their pilgrimages to Apple.
The father turned to Steve as he passed close by and asked, "Excuse me, sir, would you mind taking our photo?"
Steve paused for a moment as an iPhone was extended to him, realizing that they didn't seem to know who he was. With a hint of enthusiasm, he said "Sure!" as he took the iPhone into his hands.
Steve took a great deal of care composing the photo, backing up a few steps several times, tapping the iPhone screen to lock focus, then said "Smile!" as he snapped the photo, grinning a little bit himself to encourage the family to follow suit.
He handed back the iPhone and they said "Thank you, sir" as Steve stepped into his car, closed the door, and was driven away. The family looked at the photo that Steve had taken and all agreed that it looked great. Then the iPhone was pocketed and they were on their way.
And that was the last time I saw Steve Jobs.
RT @TessRead: "The PM has full confidence in Mr Letwin"? (according to the FT) Well he's a bigger idiot than Mr Letwin then.
RT @TimHarford: Good point! RT @mattyglesias St Petersburg Paradox needs a better name. Not a paradox, has nothing to do with St Petersburg.
Matthew Yglesias: Endless Stagnation Is Bad For Banks http://t.co/JnnJZuLC
RT @dylanmatt: My iPhone auto-corrected "fair" to "GAO." #wonkliving about 5 hours ago from web
RT @mattyglesias: My iPhone 4S has made its way to Chek Lap Kok, Hong Kong. #trackingmania
Now one big thing wrong--or missing--with the IS-LM framework as Hicks set it out is his failure to specify what "th... http://t.co/Qviz3VcU
Edward Wolff: Recent Trends in Household Wealth levyinstitute.org/http://t.co/ck7ublI9 #recommended
RT @brianbeutler: Cheerio! RT @ElizabethDrewOH Well done. Jolly good. so impressed that we're emulating. Britain’s Self-Inflicted Misery ...
Uwe E. Reinhardt: Make-Work and the G.D.P. http://t.co/H1Ns3HzE
James Fallows: "False Equivalence" Reaches Onionesque Heights in the Washington Post http://bit.ly/oOZ0cH
@Bloachocinco iphone 3G with screen with 5 big cracks in it and pieces of the screen flaking off
If Only Our Spacetime Was Five Dimensional, We Could Do Our IS-LM Diagrams Right... http://t.co/v2dMifLe
RT @ptraughber: iPhone tried to autocorrect "hahaha" to "hahahahaha". It wasn't THAT funny, iPhone.
…and beg for expansionary economic policies to reduce unemployment.
Specifically, Morgan Stanley's economic forecasters like Richard Berner and David Greenlaw have long been advocates of a Housing Jubilee: use of the government's power and resources in the housing market for a reduction in the burdens of mortgage debts. Now Goldman Sachs's forecaster Jan Hatzius calls for the Federal Reserve to buy bonds and expand its balance sheet to $3, $4, $5 trillion--whatever it takes--to target nominal GDP to its pre-Lesser Depression path.
Joe Weisenthal reports:
Goldman Advises The Fed To Go Nuclear, And Set A Target For Nominal GDP: In his latest US Economics Analyst note, Goldman's Jan Hatzius offers up his suggestion for the next phase of Fed policy:
With short-term interest rates near zero and the economy still weak, we believe that the best way for Fed officials to ease policy significantly further would be to target a nominal GDP path… indicating that they will use additional asset purchases to help bring actual nominal GDP back to trend over time. The case would strengthen further if deflation risks reappeared clearly on the radar screen…. The specific path in Exhibit 1 is calculated as the level of nominal GDP in 2007 extrapolated forward at a rate of 4½% per year. We can think of this number as the sum of real potential GDP growth of 2½% and inflation as measured by the GDP deflator of about 2%. The specific numbers matter less than the Fed’s willingness to a target path that is anchored at a point like 2007, when the economy was near full employment, and that they indicate that they will pursue this target aggressively…
Or, to paraphrase, in the words of Dr. Ray Stantz:
CROSS THE STREAMS!!
Jim Bales:
“Precedent? Megan McArdle keeps using that word: Ms McArdle has a piece in which she claims that the Republican obstructionism in Congress to the Obama Administration has a precedent in Democratic obstructionism in Congress to the Hoover Administration.
Sadly, Ms McArdle presents no evidence to support her assertion.
The closest she comes to evidence is quoting Prof. David Kennedy, of Stanford’s History Department, as saying:
Hoover also faced a very obstructionist Democratic Congress–they understood, as these guys do today, that if they just go in the middle of the road and refused to move, that would benefit them at the next election. And it paid off….
A simple measure of obstructionism in the Senate is the number of cloture motions introduced over the two years of a particular Congress. (If one does not consider this a measure of obstructionism, then one needs to explain how filibustering is not obstruction.) As the Republican leader in the Senate, McConnell’s obstructionism in the 111th Congress (2009-10) led to a mere 136 cloture motions. So far (as of Oct. 12) the 112th Congress has had 32 cloture motions. This level of obstructionism is, according to Ms McArdle, “quite precedented“. In fact, she claims that the precedent can be found in the 71st and 72nd Congresses (1929-31 and 1931-33).
Just how obstructionist were those anti-Hoover Democrats? In the 71st Congress there was precisely one (1) motion for cloture. Such motions skyrocketed in the 72nd Congress, when those dastardly Democrats forced two (2) of them. If precedent means what the rest of us think it means*, Ms McArdle is claiming that forcing a motion for cloture three times over four years is precedent for forcing 136 such motions over two years (and 168 such motions in less than three). On the other hand, maybe precedent actually means whatever it is she thinks it means.
Damned if I can see what is was that Hoover wanted to do about the Great Depression that was "obstructed" by the Congress.
The Hoover proposals that Congress appears to have blocked were (i) Hoover's 1930 nomination of a racist Supreme Court justice, and (ii) Hoover's 1932 tax plan to try to balance the budget by imposing a nationwide sales tax on manufactured goods.
Hoover vetoed (i) the Bonus Bill of 1931 (overridden), and (ii) Wagner's bill establishing state-level employment agencies,
Congress and Hoover agreed on (i) the Smoot-Hawley tariff "reform" (albeit with "export debentures" that Hoover opposed), (ii) to establish the RFC, (iii) to fund the ERCA, (iv) Norris-LaGuardia, (v) the Home Loan Bank, (vi) the Glass-Steagal Bank Credit Act, and (vii) to reject the Bonus Army's demands in 1932.
Republicans controlled the House until 1933. Republicans controlled the Senate from 1929-1931, and then the Democrats gained a majority in 1933.
Hoover's nomination of John J. Parker to the Supreme Court, rejected by the Senate in early May 1930 with 41 Senators voting "no" and 39 voting "yes".
The Smoot-Hawley tariff bill rejected Hoover's desire to avoid "export debentures". Hoover, however, did not veto but signed Smoot-Hawley in June 1930.
Congress passed the Veterans' Bonus Bill in the winter of 1931. Hoover vetoed it. Congress overrode him.
Robert Wagner of New York sponsored bills for the collection of unemployment statistics and the planning of public works. Hoover signed them, but vetoed a third Wagner bill related to unemployment, which would have set up a system of employment agencies at the state level, was vetoed by Hoover.
Hoover called in June 1931 for a one-year moratorium on intergovernmental [international] debts.
In the early fall of 1931, Hoover convinced leading bankers to voluntarily organize the National Credit Corporation, which would use a $500 million reserve to aid small, insolvent banks…
The Democrats took control of the Senate for 1931-1933:
In late 1931, Hoover changed his approach to fighting the Depression. He justified his call for more federal assistance by noting that "We used such emergency powers to win the war; we can use them to fight the Depression, the misery, and suffering from which are equally great."… The National Credit Corporation quickly proved insufficient…. [T]he Hoover administration drafted legislation for the Reconstruction Finance Corporation (RFC)…. Congress created the RFC in early 1932…
Hoover also bowed to growing public and congressional pressure for emergency federal relief. In the summer of 1932, he signed the Emergency Relief Construction Act, which provided $2 billion for public works projects and $300 million for direct relief programs run by state governments. He also signed the Glass-Steagal Bank Credit Act and the Home Loan Bank Act…
*[I]n March 1932, Hoover signed the Norris-La Guardia Anti-injunction Act…
[I]n 1932… the President became embroiled in a political spat with Congress over taxes…. Hoover wanted to close the federal government's budget deficit… by raising taxes…. Hoover and his advisers did not want to raise taxes so much that wealthy Americans and businesses were discouraged from investing--an activity that, theoretically, created jobs… a plan in which half of the new tax revenues would come from a sales tax on manufactured goods…. The issue became a political firestorm. Opponents of the sales tax aggressively attacked Hoover, portraying him as a retrograde conservative…. [T]he Revenue Act of 1932 passed in the late spring of 1932 without a sales tax. Hoover signed the measure…
In late July 1932…. Hoover joined Congress in rejecting the demands of the "Bonus Army" marchers…. After Congress refused to grant the Bonus Army's demands, most of the protesters left Washington. Some, however, remained in the abandoned buildings, in nearby camps, and in hovels on the shores of the Anacostia River. The administration decided to remove the members of the Bonus Army…. MacArthur… attacked the veterans with tanks, tear gas, bayonets, and guns, burned the camps in Anacostia, and killed one Bonus Army member…
…to do IS-LM diagrams properly. We really need to be able to separate out (i) fiscal policy (and other IS shocks), (ii) conventional monetary policy (and other LM shocks), (iii) expected inflation, and (iv) credit-channel and risk tolerance banking phenomena. A two-dimensional diagram won't cut it. We need four dimensions of diagram--which requires a six-dimensional space-time...
in the work of David A. Fahrenthold, Paul Kane, and Aaron Blake. And, Fallows says, in the writings of Robert Pear of the New York Times, Patricia Murphy of the Daily Beast, Julianna Goldman of Bloomberg, Diane Rehm of NPR, and many others.
Why oh why can't we have a better press corps?
James Fallows has:
A Modest Proposal: Call Obstruction What It Is: Here is the headline in the online home page of the NYT, about Obama's "pass this jobs bill, pass it now" proposal. Note the word "fails":
Obama's Jobs Bill Fails in First Legislative Test
The subhead and the rest of [Robert Pear's] article make clear that more Senators voted for the bill than against it -- 50 to 49. It would have been 51-48 except for a parliamentary ruse by Majority Leader Harry Reid, who switched to a "No" vote so that he would later be able to call it up for reconsideration. We have gone so far in recent years toward routinizing the once-rare requirement for a 60-vote Senate "supermajority" into an obstacle for every nomination and every bill that our leading newspaper can say that a measure "fails" when it gets more Yes than No votes. (For background on mounting abuse of the filibuster, see accounts from late 2009, early 2010, and late 2010.)
Again, the subhead and story make the real situation clear. So how about a headline that says plainly what happened?
Obama's Jobs Bill Blocked by GOP in Procedural Move
Fallows finds a:
much worse headline and presentation [by Patricia Murphy of] the Daily Beast:
Obama Loses Big on Jobs Bill
And Fallows piles on:
Chronicles of False Equivalence, Chapter 2,817: Yesterday I mentioned that a NYT headline proclaimed that the Obama Administration's jobs bill had "failed" in the Senate, even though more senators voted for the bill than against. What really happened, of course, was that Mitch McConnell's GOP minority threatened (of course) to filibuster to block consideration of the bill, and the Democrats (of course, with 53 Dem + Independent votes) could not amass a 60-vote supermajority to break the filibuster.
Today there was a more startling illustration of faux "even-handed" reporting. It was in the Washington Post, it was by two veteran reporters [David A. Fahrenthold and Paul Kane], and this was its headline both in print and online:
Senate Has Become a Chamber of Failure
Here's the reality behind the (undoubted) Senate failure-to-function that the story concerns:
In the past four-plus years, since the Democrats took control of the Senate, Mitch McConnell's Republican minority has used -- and abused -- the filibuster to a degree unprecedented in modern history…. [R]equiring 60 votes for everything is new, and it is overwhelmingly a Republican tactic.
Unfortunately you would get no hint of that from today's WaPo story. Every line in it was in keeping with the implication of the photo: partisanship and extremism "on both sides" was bogging the Senate down…
And trebles down:
One More Note on 'False Equivalence' and the Filibuster: I don't mean to run this into the ground, but -- well, actually I do mean to run it into the ground. This week's news really is a perfect distillation of a long-standing problem we generally just assume to be part of the landscape and yet matters more and more.
Main problem: the decision by Mitch McConnell's GOP Senate minority, once they lost their majority status in the 2006 elections, to filibuster nearly every item of public business. Nominations, routine appropriations, standard business, not to mention any genuinely controversial proposal. What had been for 200 years an exceptional tactic has become an everyday impediment. De facto, the Constitution has been amended to change the Senate from a majority-rule body to one requiring a 60-vote "supermajority." And since the Senate already heavily over-represents small-population states, in effect Senators representing a quarter to a third of the nation's people hold a veto over all items of public business, and have repeatedly exercised it.
'Enabler' problem: The reluctance of the mainstream media to call this what it is, and instead to talk about "partisanship" and "logjam" and "dysfunction." Yes, those are the results. But the cause is intentional, and it comes overwhelmingly from one side.
We had illustrations in the past few days from the NYT and, in jaw-dropping fashion, yesterday from the WaPo. And earlier this morning I was listening to [Julianna Goldman of Bloomberg on Diane Rehm's] political "analysis" show on the radio that was all about this sad modern predicament of Congressional gridlock. The word "filibuster" was not used in that hour….
The problems created by a sophomoric conception of "objectivity" are hardly unknown. Jay Rosen, for instance, has written about this pathology for eons. As has Dan Gillmor. But jeesh! It doesn't go away.
And goes to the limit:
'False Equivalence' Reaches Onionesque Heights, but in a Real Paper: I've heard angrily from a number of reporters in the last few days. They are objecting to my claims that mainstream journalism is "enabling" Senate dysfunction by describing it as dysfunction plain and simple, rather than as the result of deliberate and extremely effective Republican strategy. That strategy, over the past four-plus years, has been to apply the once-rare threat of a filibuster to virtually everything the Administration proposes. This means that when the Democrats can't get 60 votes for something, which they almost never can, they can't get nominations confirmed, bills enacted, or most of what they want done.
You can consider this strategy brilliant and nation-saving, if you are a Republican. You can consider it destructive and nation-wrecking, if you are a Democrat. You can view it as just what the Founders had in mind, as Justice Scalia asserted recently at an Atlantic forum. You can view it as another step down the road to collapse, since the Democrats would have no reason not to turn the same nihilist approach against the next Republican administration. Obviously I think it does more harm than good. You can even argue that it's stimulated or justified by various tactics that Democrats have used.
But you shouldn't pretend that it doesn't exist. That was my objection to a recent big Washington Post story [by David A. Fahrenthold and Paul Kane] on what is wrong with the Senate, which did not contain the word "filibuster." And there is an example again this very day [by Aaron Blake]. I wish to Heaven that the item had appeared somewhere else, but it happens that it's also in the Post. A story on what happened to Obama's jobs-bill proposal in the Senate concentrates on the two Plains States Democrats, Ben Nelson and Jon Tester, who defected during the cloture vote -- and not on the 100% Republican opposition to even bringing this bill up for consideration. You should read the whole story to savor it, but I will point out these features:
Like the previous one, it manages not to use the word "filibuster" while describing why the Administration's programs have not gotten through a Senate that the Democrats "control." The Democrats would actually "control" the Senate if a 51-vote majority were enough to pass most measures. But they don't control it, with 53 Dem+Indep seats, when the 60-vote standard becomes routine. This is too important a fact to be left out of accounts of what is happening in the Senate.
It reflects so thorough an absorption of the idea that the filibuster-threat is normal business that it describes the latest cloture vote as a vote on the bill itself: "Democratic Sens. Ben Nelson (Neb.) and Jon Tester (Mont.), who are both up for reelection next year, took to the Senate floor and delivered a sizeable blow to the bill's prospects by voting against it." No, they voted against the cloture measure, which they knew had zero chance of getting the necessary 60 votes. Several other Democrats with doubts about the bill itself nonetheless were persuaded to vote for cloture, so that it would end up with a symbolic but ineffective 51-vote majority.
And the story has this virtuoso suggestion that Democratic wavering really explains why the Republicans don't vote for Administration proposals. Emphasis added:
But if incumbent Democrats in Montana and Nebraska don't see the bill as a viable vote for their political futures, then it should come as no surprise that neither do many - or possibly any, considering Massachusetts Republican Scott Brown's 'no' vote on the jobs bill - Republicans. With Nelson's and Tester's votes opposition to the bill, Republicans who may have been concerned about its popularity suddenly have an escape hatch. Because if these Democrats think a 'yes' vote is a bad move, how could it be smart for a Republican with an even more conservative constituency to support the same legislation?... GOP members of Congress will now feel a little safer about voting 'no" on a bill that is polling quite well.
"Escape hatch"? "Feel a little safer"? How "could it be smart" to support an Obama plan? It should "come as no surprise" that all the Republicans end up voting against the bill, because that is the Republican strategy. You don't have to present this as some inside-dope subtle game-theory problem, with wavering Republicans watching Nelson and Tester for cues. The explanation is simpler: Mitch McConnell's Senate Republicans have been rock-ribbed in enforcing their strategic choice that opposing the Administration makes policy and political sense.
To anticipate the next round of notes from mainstream reporters: No, I am not suggesting that the polarization and obstruction would go away if reporters began describing it more clearly. At root this is a political problem. But it's a media failure too, and the political problem is all the harder to solve if the media act as if it doesn't exist.
Now one big thing wrong--or missing--with the IS-LM framework as Hicks set it out is his failure to specify what "the" interest rate that goes on the vertical axis is:
Is the interest rate the current instantaneous nominal safe Treasury bill rate? Then the LM curve is derived from the instantaneous demand for today's money stock--and everything else in the economy is loaded into the IS curve.
Is the interest rate something like the five-year nominal safe Treasury note rate? Then the LM curve is some average of current and expected monetary conditions over the next half decade--and everything else in the economy is loaded into the IS curve.
Is the interest rate something like the ten-year real risky interest rate for BAA corporate borrowers? Then the IS curve is derived from something like business demand for investment as a function of that interest rate and expectations as fed through the Keynesian cross--and everything else is loaded into the LM curve.
The fact is that if the LM curve comes from the money demand equation, then the interest rate on the IS-LM diagram is the short-term safe nominal interest rate. The fact is that if the IS curve comes from business demand for investment as a function of expectations and long-term borrowing costs as fed through the Keynesian cross, then the interest rate on the IS-LM diagram is the long-term real risky interest rate.
That means that everything that affects:
has to show up in the IS-LM diagram somewhere, but has no single and natural home. Each of these can be put into the LM curve. Each of these can be put into the IS curve. Or you could put both the short-term safe nominal LM interest rate and the long-term real risky IS interest rate on the vertical axis, and define a set of factors that are neither "IS" nor "LM" but rather "spread". (I prefer to do it that way.)
That way we have "fiscal policy" and related issues that affect the location of the IS curve (with the long-term real risky interest rate on the vertical axis); "monetary policy" that affects that the location of the LM curve (with the short-term safe nominal interest rate on the vertical axis); and the expected inflation rate and "banking policy" that affect the spread between the two interest rates.
In order to summarize all this in a readily comprehensible manner, we need to draw diagrams that have not two axes on a flat piece of paper but rather three axes in a cube--which we could do if we lived in a five-dimensional space-time universe with four spacelike dimensions.
But alas!...
Milton's freedom of religion does not include Roman Catholics:
Areopagitica: [I]f all cannot be of one mind--as who looks they should be?--this doubtless is more wholesome, more prudent, and more Christian: that many be tolerated, rather than all compelled. I mean not tolerated popery, and open superstition, which, as it extirpates all religions and civil supremacies, so itself should be extirpated, provided first that all charitable and compassionate means be used to win and regain the weak and the misled…
John Locke's "toleration" excludes a great many: Catholics, Muslims, atheists, and God alone knows who else:
John Locke: A Letter Concerning Toleration: What else do they mean who teach that faith is not to be kept with heretics? Their meaning, forsooth, is that the privilege of breaking faith belongs unto themselves; for they declare all that are not of their communion to be heretics, or at least may declare them so whensoever they think fit. What can be the meaning of their asserting that kings excommunicated forfeit their crowns and kingdoms? It is evident that they thereby arrogate unto themselves the power of deposing kings, because they challenge the power of excommunication, as the peculiar right of their hierarchy. That dominion is founded in grace is also an assertion by which those that maintain it do plainly lay claim to the possession of all things…. I say these have no right to be tolerated by the magistrate….
Again: That Church can have no right to be tolerated by the magistrate which is constituted upon such a bottom that all those who enter into it do thereby ipso facto deliver themselves up to the protection and service of another prince. For by this means the magistrate would give way to the settling of a foreign jurisdiction in his own country and suffer his own people to be listed, as it were, for soldiers against his own Government….
It is ridiculous for any one to profess himself to be a Mahometan only in his religion, but in everything else a faithful subject to a Christian magistrate, whilst at the same time he acknowledges himself bound to yield blind obedience to the Mufti of Constantinople, who himself is entirely obedient to the Ottoman Emperor and frames the feigned oracles of that religion according to his pleasure. But this Mahometan living amongst Christians would yet more apparently renounce their government if he acknowledged the same person to be head of his Church who is the supreme magistrate in the state.
Lastly, those are not at all to be tolerated who deny the being of a God. Promises, covenants, and oaths, which are the bonds of human society, can have no hold upon an atheist. The taking away of God, though but even in thought, dissolves all; besides also, those that by their atheism undermine and destroy all religion, can have no pretence of religion whereupon to challenge the privilege of a toleration…
Add them to Lord Acton's declaration that slavery was on balance a healthy influence in early nineteenth-century America:
The Southern slave owner… denied the absolute essential equality of all men in civil rights; and he denied the justice of the doctrine that the minority possesses nothing which is exempt from the control of the majority…. [T]he very defect of their social system preserved them from those political errors which were transforming the original characters of the Northern republics. The decomposition of democracy was arrested in the South by the indirect influence of slavery….
[O]ur verdict ought… to be that by one part of the nation [slavery] was wickedly defended, and by the other as wickedly removed…. When the Confederacy was established on the right of secession, the recognition of that right… [was] a distinct repudiation of the doctrine that the minority can enforce no rights…. It is like passing from the dominion of an able despot into a constitutional kingdom….
These were the political ideas of the Confederacy…. [H]istory can show no instance of so great an effort made by republicans to remedy the faults of that form of government…. The spurious liberty of the United States is twice cursed…. By exhibiting the spectacle of a people claiming to be free, but whose love of freedom means hatred of inequality, jealousy of limitations to power, and reliance on the state as an instrument to mould as well as to control society, it calls on its admirers to hate aristocracy and teaches its adversaries to fear the people. The North has used the doctrines of democracy to destroy self-government. The South applied the principle of conditional federation to cure the evils and to correct the errors of a false interpretation of democracy…
Lord Acton:
American Federalism and the Civil War: [C]omplete equality is the ruin of liberty…. That was, until a generation ago, the verdict of history; whose decision the Americans have undertaken to reverse….
[Europe's] institutions have grown old, and their old age is vigorous, because we are confident that they will stand the tests of expediency and right, because they are either necessary or conducive to the general advantage. But if America should destroy the validity of that defense, then the only inducement by which the masses of mankind will be made to tolerate the evils and injustice incident to our system of society, will be the short-lived argument of force….
The time has come for all men to perceive that these judgments were premature. Five years have wrought so vast a change…. [America's] debt now imposes a heavier charge than that which England contracted… it has been incurred… to slaughter fellow citizens, and carry fire and sword over the cornfields and the homesteads of a country which is their own…. Their prisons have been peopled with disaffected citizens. Part of their territory has become desolate… the armies laid it waste. The Union… has been restored by force, and the Constitution… is obeyed by millions of humbled and indignant men, whose families it has decimated, whose property it has ravaged, and whose prospects it has ruined forever….
The unity of monarchy gravitates towards,,, despotism of a single will. Aristocracy… inclines to restrict that minority into an oligarchy. In pure democracies… the dominion of majority asserts itself more and more extensively and irresistibly… this illiberal and tyrannical principle….
In a great speech at the beginning of the movement, Mr. Stephens, the Vice President of the Confederacy, spoke these words:
The corner stone of our new government rests upon the great truth that the Negro is not equal to the white man; that slavery, subordination to the superior race, is his natural and normal condition. Our new government is the first in the history of the world based upon this great physical, philosophical, and moral truth.
Here, then, was a society adopting inequality, not as the natural product of property, descent and merit, but as its very foundation — a society, therefore, more aristocratically constituted than those of feudal times. The Southern slave owner… denied the absolute essential equality of all men in civil rights; and he denied the justice of the doctrine that the minority possesses nothing which is exempt from the control of the majority…. [T]he very defect of their social system preserved them from those political errors which were transforming the original characters of the Northern republics. The decomposition of democracy was arrested in the South by the indirect influence of slavery….
[I]n the United States… the work of emancipation… has been an act of war, not of statesmanship or humanity. They have treated the slave owner as an enemy, and have used the slave as an instrument for his destruction. They have not protected the white man from the vengeance of barbarians, nor the black from the pitiless cruelty of a selfish civilization.
If, then, slavery is to be the criterion which shall determine the significance of the civil war, our verdict ought, I think, to be, that by one part of the nation it was wickedly defended, and by the other as wickedly removed…. When the Confederacy was established on the right of secession, the recognition of that right… [was] a distinct repudiation of the doctrine that the minority can enforce no rights…. It is like passing from the dominion of an able despot into a constitutional kingdom….
These were the political ideas of the Confederacy, and they justify me, I think, in saying that history can show no instance of so great an effort made by republicans to remedy the faults of that form of government….
The spurious liberty of the United States is twice cursed…. By exhibiting the spectacle of a people claiming to be free, but whose love of freedom means hatred of inequality, jealousy of limitations to power, and reliance on the state as an instrument to mould as well as to control society, it calls on its admirers to hate aristocracy and teaches its adversaries to fear the people. The North has used the doctrines of democracy to destroy self-government. The South applied the principle of conditional federation to cure the evils and to correct the errors of a false interpretation of democracy…
"In the purer ages of the commonwealth, the use of arms was reserved for those ranks of citizens who had a country to love, a property to defend, and some share in enacting those laws, which it was their interest as well as duty to maintain. But in proportion as the public freedom was lost in extent of conquest, war was gradually improved into an art, and degraded into a trade."
--Edward Gibbon: History of the Decline and Fall of the Roman Empire
Investors in Goldman Sachs have lost more than half their money since 2007:
Investors in Morgan Stanley have lost more than three-quarters of their money since 2007:
Investors in Citigroup have lost 93% of their money since 2007:
Investors in Bank of America have lost 85% of their money since 2007:
Investors in Bear Stearns, Lehman Brothers, and Merrill Lynch lost more than 90% if their investments as well…
Talk about a bunch of people who had a really strong financial incentive for reflation...
Chris Giles and Hugh Carnegy:
US-UK rule out wider IMF powers: The US and UK rejected suggestions from emerging market countries that the International Monetary Fund needed more firepower to fight the eurozone crisis, creating a discordant start to the Group of 20 finance ministers meeting in Paris. Tim Geithner, US Treasury secretary said the Fund had “very substantial resources that are uncommitted”, while other non-eurozone countries insisted that it was for Europeans to resolve the crisis themselves….
The emerging economies’ offer put the UK in a particularly difficult position because David Cameron, prime minister, called this week for a much bigger “bazooka” to prevent contagion spreading from Greece, through Spain and Italy to the rest of the world economy, but does not want to commit UK funds to the effort. Opposing new funds for the IMF, finance ministers from the US, UK, Japan, Canada and Australia rejected the idea of indirectly committing more of their own taxpayers’ resources to fight fires in the eurozone….
A UK Treasury official insisted there was no proposal yet on the table for an IMF “bazooka” to support the eurozone and the official refused to say how the UK would respond to any IMF action to underwrite the debts of Spain and Italy alongside the European financial stability facility.
There is at least one chance in four that in six months the U.S. will be desperate for an IMF with more firepower than it currently has.
Think probabilistically, people. Prepare for the lower tail.
Mike Konczal on the Obama administration:
Was This Time Different On the Economy?: Ezra Klein wrote a 7,000 word summary of what went right and wrong on economic policy during the first three years of the Obama campaign. It’s well-reported and fun to read.... I’m going to throw out some critical thoughts....
Obama is much more of a fiscal conservative than I had imagined.... Noam Schieber at the New Republic was getting word from Treasury as early as late 2009 that they thought that they needed “some signal to U.S. bondholders that it takes the deficit seriously” and “spending more money now [on stimulus] could actually raise long-term rates, thereby offsetting its stimulative effect.” This naturally lead to wanting to strike “grand bargains” with the other side, a path that lead the administration down some bad roads in terms of the agenda. The flip side of this is the administration’s focus on “confidence” – financial markets, Wall Street and business community – as a way of bringing growth up and unemployment down. This has most obviously driven policy in regards to Wall Street and the financial markets (more on that in a second), but we see this in terms of dealing with the deficit. It has also brought in approaches emphasizing positions that are much more “supply-side” – patent reform, regulation cutting, appointing senior business leaders to key positions, a key State of the Union based on “Winning the Future” through education investments – that can’t be justified as getting us back to full employment. By the debt ceiling fight these administration talking points were becoming a parody of right-wing talking points and Hooverism....
I’ve had staffers tell me on background that members of Congress would approach the administration in 2009 looking to build out huge, New-Deal style infrastructure as a separate track, only to be told that the recovery would be fully underway by the time it kicked in – thus wasted. There was no response to this....
Ryan Avent has tackled the Federal Reserve problem here. There’s a new Federal Reserve iPad app. It is pretty rad. You can click on all the members of the FOMC. You can also click on the two vacant seats and it says that they are vacant. Even iPad apps are mad at Obama for not being aggressive on the Fed appointments!...
Housing.... The Obama administration was either indifferent or hostile to changes in the bankruptcy code – cramdown – following this crash, even though Obama campaigned on it. Technical: cramdown isn’t about making the banks eat the loss, it’s about the loss coming from credit writedowns versus a firesale of a house in foreclosure – hence evidence that cramdown wouldn’t raise costs. But either way, in addition to forgetting things since Keynes, we are also in the business of forgetting things from the 19th century.... The Administration set aside $75 billion through TARP for HAMP, and to date have used $1.6 billion or so on a program that is effectively irrelevant at this point (and they have cleverly revised history to claim that it was only a $50 billion allotment, to make this look a little better). Without any need to clear Congress, the Administration had all the authority they needed to put this $75 billion to work, including the ability to punish servicers who failed to comply with guidelines….
Then, for two years, Treasury swore up and down there was nothing they could do to punish servicers who didn’t comply. Finally, a few months ago, they started withholding incentive payments for noncompliance, as if they just magically acquired the power. It turns out, as Paul Kiel from Pro Publica displayed in a story this week, that Treasury wasn’t even checking on servicer compliance for at least the first year of the program…
The truth that emerges from all of these facts is that the Administration had no interest whatsoever in using more than a token amount of the TARP authority they had already husbanded for mortgage relief and foreclosure mitigation…
@mattyglesias @NeilIrwin Why would he say that? It's clearly wrong--the bond market thinks things could get a lot worse...
RT @TPM: Fox & Friends: We prob should have clarified that our story on Obama apologizing to Japan was false http://tpm.ly/prpCe7
RT @dismalscientist: #Brazil's central bank has reversed its earlier tightening, but will have to do more to undo the damage.
RT @mattduss: Important to remember that, in addition to being an old racist douche, Marty Peretz is just an impressively bad writer
RT @ThePlumLineGS: RT @kdrum When is a Jobs Plan Not a Jobs Plan? http://mojo.ly/oGruj4
RT @JeffreyFeldman: Reuters coverage of #OWS so laced with bitterness it's entertaining... http://reut.rs/qDUurg
RT @tomdale: It's surprising that Apple and UPS can physically deliver more phones than AT&T can load balance activation servers for.
RT @9to5mac: "just spoke to a manager at one of my apple stores here. AT&T/Sprint servers down, VZW still up."
RT @ppppolls: When you know the tide is turning- 52% of Nebraska Republicans support legal recognition for gay couples: http://tinyurl.com/3serq5g
RT @owillis: Kansas City Bishop Indicted in Reporting of Abuse by Priest http://nyti.ms/pS3b6w
RT @EricBoehlert: yeah, @Reuters is hopeless: Soros article editor says she's "unaware" of any criticism of the reporting
RT @realUS232: @EricBoehlert yea, Reuters knows that article is indefensible! #ReutersFail
RT @davidmwessel: White House makes it official. The long-term care insurance slice of Obama health plan is dead. http://is.gd/EMiBjn
RT @michaelscherer: RT @MelindaDC: Wehner on Anita Perry : U know u've created God in ur own image when it turns out God hates all the s ...
RT @aterkel: RT @daveweigel: Ughhhhh RT @thegarance: Anita Perry: We know pain of unemployed because our banker son quit his job bit.ly/ ...
RT @owillis: somehow i get the feeling the perry campaign will begin limiting access to anita perry going forward #notreadyforprimetime
RT @BetseyStevenson: If this was 1911 replace college w/ high school & same debate RT @ezraklein: Do too many kids go to college? A deba ...
RT @ggreenwald: Nothing excites reporters like palace intrigue and royal court gossip: http://is.gd/EbMnDr
Andrew Gelman learns of the existence of Gregg Easterbrook, and recoils in horror:
The most clueless political column ever—I think this Easterbrook dude has the journalistic equivalent of “tenure”: I don’t know when I’ve seen political writing quote so misinformed as this. It’s a bizarre mixture of cliches, non-sequitors, and outright mistakes. The author is Gregg Easterbrook and he’s writing for Reuters. First, the cliches:
Right now Romney seems to be the frontrunner, which, of course, is a mixed blessing. His aura of experience and reasonableness could prove quite appealing to voters. Perry continues to have the potential to light a populist fire. . . . Of all the 2012 candidates, Huntsman is the one who is Not Just Another Politician.
And now the errors.
At this point in the 1992 election cycle, the elder George Bush held an 89 percent approval rating. . . . Clinton beat a popular incumbent with a fantastic approval rating. For the 2012 election, Barack Obama is just as vulnerable as the elder Bush, if not even more so. Obama currently has an approval rating of 23 percent.
This is all fine, except that:
It’s not true that at this point in the 1992 election cycle, the elder George Bush held an 89 percent approval rating.
It’s not true that Obama currently has an approval rating of 23 percent.
Now let’s move from Easterbrookworld to reality.
According to Gallup, on 13 Oct 1991, George H. W. Bush’s ratings (data from the Roper Center) were 66% approve, 28% disapprove, 7% no opinion (not adding to exactly 100% due to roundoff error, I assume).
Gallup estimates Obama’s job approval as of 11 Oct 2011 as 38%.
So where did Easterbrook get his numbers? 89% was George H. W. Bush’s highest approval rate ever, and it was at the beginning of March 1991. As for Obama’s 23%, this comes from a Rasmussen report that Easterbrook linked to but misread: 28% “strongly approve” of Obama’s job performance but about 45% approve in total, according to Rasmussen’s own graph.
But wait, there’s more!
Easterbrook continues:
But don’t sell Huntsman short because he is low in the polls – Obama had been at that point, too.
That would be interesting—if true. But at this point Easterbrook is 0 for 2 on truth, so I’m not inclined to trust him. Instead, I’ll look the numbers up myself. Luckily I have an internet connection:
As of 14 Oct 2001, Gallup gives Huntsman 2% support among Republicans. That puts him behind the leaders: No Opinion and Mitt Romney (tied at 20% each), Herman Cain, Rick Perry, Ron Paul, Newt Gingrich, and Michele Bachman. Rick Santorum is ahead of Huntsman, for chrissake. Google that, pal!
What about Obama? How was he polling in October, 2007? He was in second place with 21% support (compared to Hillary Clinton at 50%). So, yeah, anything could happen—but there’s a big difference between 21% and 2%.
The real mystery here is how this got published by Reuters. They’re a reputable news organization, right?
Easterbrook is listed as “a contributing editor to The Atlantic, The New Republic and The Washington Monthly, a former visiting fellow at the Brookings Institution and distinguished fellow of the Fulbright Foundation, and writes the Tuesday Morning Quarterback column for ESPN.”...
P.P.S. Why do I waste my time commenting on this stuff? We spend so much time gathering and understanding these data, it’s just depressing to see people just make poop up and then spread it around like this…. Easterbrook is so well-connected that he can continue publishing forever in top outlets. I can only assume that nobody edits his pieces for content, just as nobody sits in on my classes to check that I’m actually teaching what I say I am. All Easterbrook has to do is show up on time and he gets the job. I know some people criticize Thomas Friedman (say) on the same grounds, that he can just publish whatever half-baked ideas he wants and get it in the New York Times. But I think Easterbrook is much much worse than Friedman…. Easterbrook is just spouting cliches that would make Theodore H. White spin in his grave. And supporting it with numbers that are so wrong as to be beyond garbled. Can’t Easterbrook do like a real journalist and interview some cab drivers or something?
Paul Krugman:
Why Believe In Keynesian Models?: [W]hat evidence makes me believe that Keynesian economics is broadly right, given the relative absence of experience with large fiscal stimulus programs?...
First, we’re talking about a model.... So you can ask about the ancillary predictions of that model as opposed to rival models. Anti-Keynesians assured us that budget deficits would send interest rates soaring; Keynesian analysis said they’d stay low as long as the economy remained far from full employment. Guess who was right?... Keynesianism isn’t just about sticky prices, but it does generally assume sticky prices — and there is overwhelming evidence, from a variety of sources, that prices are indeed sticky. Also: there’s plenty of evidence that monetary policy can move output and employment — and it’s very hard to devise a model in which that is true that doesn’t also say that fiscal policy can be effective, especially when you’re up against the zero lower bound.
Second, while we don’t have a lot of postwar experience with fiscal stimulus, we do have a lot of experience with anti-stimulus, that is, austerity — and that turns out to be reliably contractionary. Again, it’s hard to think of a model in which austerity is contractionary but stimulus isn’t expansionary.
Finally, there is evidence from fiscal expansions in the 1930s, which actually did lead to economic expansion too.
Mainly I’d stress the first point. We have a model... an implication of that model is that fiscal stimulus will work under conditions like those we face now. If interest rates had soared, if the rise in base money had led to rising GDP and/or soaring prices despite the zero lower bound, I would have sat down to reconsider what I thought I knew about macroeconomics. In fact, however, my preferred model has passed the test of events with flying colors, while the other guys’ models have been totally wrong.
Miguel Almunia, Augustin S. Bénétrix, Barry Eichengreen, Kevin H. O’Rourke, and Gisela Rua: 18 November 2009:
The effectiveness of fiscal and monetary stimulus: There is one important source of information on the effectiveness of monetary and fiscal stimulus in an environment of near-zero interest rates, dysfunctional banking systems and heightened risk aversion that has not been fully exploited: the 1930s.... [W]here fiscal policy was tried, it was effective.
The Keynesian argument for expansionary fiscal policy – whether right or wrong – was not known in this pre-Keynesian era. Hence there was relatively little variation in fiscal stance, with conservative policies being the default option. The aggressive use of discretionary monetary policy was also relatively unusual, as central banks were wedded to gold-standard ideology. But there were exceptions. Japan’s aggressive use of monetary policy under Takahashi was one, Italy’s large budget deficits under Mussolini another. And there were good – exogenous – reasons for this variation. Fiscal impulses were generally governed by forces other than immediate economic conditions; Italy’s war in present-day Ethiopia, Hitler’s rearmament, the approach of World War II. Who responded to the crisis with monetary stimulus depended heavily on prior monetary experience; counties that had suffered high inflation in the 1920s tended to be reluctant to abandon the gold standard in the 1930s.
Cross-country comparisons can thus help us untie the Gordian Knot and move the debate from the realm of ideology to that of evidence. Our project therefore focuses on assembling annual data on growth, budgets and central bank policy rates, mainly from League of Nations sources, for 27 countries covering the period 1925-39....
We use panel vector autoregressions (VARs) with conventional assumptions about the “ordering” of the variables (whether a variable affects the others contemporaneously or only with a lag). We consider alternative orderings, and also run panel VARs with defence expenditure entering the equations as an exogenous variable. We run panel instrumental variables regressions using defence spending as an instrument for fiscal policy and gold standard membership as an instrument for monetary policy. And we run alternative panel regressions looking at the impact of fiscal and monetary shocks, the latter calculated by running simple autoregressions and extracting the residuals.
The details of the results differ, but the overall conclusions do not. They show that where fiscal policy was tried, it was effective. Our estimates of its short-run effects are at the upper end of those estimated recently with modern data; the multiplier is as large as 2 in the first year, before declining significantly in subsequent years....
The results for monetary policy are less robust but point in the same direction. A positive shock to the central bank discount rate leads to a fall in GDP... [that] just misses statistical significance at conventional levels.... This result is notable, given the presumption, widespread in the literature, that monetary policy is ineffective in near-zero-interest-rate (liquidity trap) conditions. On the contrary, in the 1930s it appears that accommodating monetary policy helped, by transforming deflationary expectations (Temin and Wigmore 1990) and by helping to mend broken banking systems (Bernanke and James 1991). Given the prevalence of both problems circa 2008, we suspect that the results carry over...
Ryan Avent does the pickup:
Business cycles: Things could actually get a lot worse: "NEIL IRWIN has written a piece in the Washington Post today on the case for optimistic pessimism. Things are now so bad, he writes, that they're unlikely to get much worse…. [T]his seems like a fundamentally flawed view of the economy:
The U.S. economy has been through a lot in the past few months — an unprecedented downgrade of the government’s credit rating, a debt crisis in Europe that threatens to spread across the Atlantic, and a steep decline in financial markets. Yet most economic indicators have pointed to continued, albeit slow, growth.It isn’t the resilience of the U.S. economy. Rather, it’s a sign of how bad things have already become. Many of the key sectors that usually cause economic contraction, including housing and durable goods such as automobiles, are already at such low levels that they don’t have much more room to fall….
Instead, America typically finds itself in recession because there is a drop in demand. There are lots of things that might trigger a demand shortfall. The Fed might signal its intention to induce a recession to fight inflation. Instability in financial markets might lead to a surge in money demand. An intense bout of political brinksmanship over debt default could conceivably have the same effect. In all these cases, the source of the recession is a sudden decision across the economy to simultaneously increase saving….
As far as I can tell, there's almost no one who assigns primary blame for the deep drop in output in late 2008 and early 2009 to that slowdown in the auto industry. They blame the panic-induced drop in demand associated with the October financial crisis…. Falling auto output didn't cause the recession. It was symptomatic of a gut-wrenching decline in demand.
In considering the path of future output, the question is: what's demand likely to do? My sense is that it's likely to rise slowly, at or just below real potential growth plus an inflation rate around 2%…. But we have no guarantees about that, and we certainly can't take much comfort in the low level of sales in housing and durable goods. They'll grow as quickly as the Fed allows. Should the Fed make an error of some sort, they'll fall….
When systematic policy error results in low demand, it's as likely that the error will be sustained or compounded as it is to be rectified. In such cases, every bottom is ephemeral, and there is no darkness that can't grow darker still.
PACIFIC FLEET CONFIDENTIAL LETTER NO. 2CL-41 (REVISED):
From: Commander-in-Chief, United States Pacific Fleet.
To: PACIFIC FLEET.
Subject: Security of Fleet at Base and in Operating Areas….(2) The security of the Fleet, operating and based in the Hawaiian Area, is predicated at present, on two assumptions:
(a) That no responsible foreign power will provoke war, under present existing conditions, by attack on the Fleet or Base, but that irresponsible and misguided nationals of such powers may attempt
(1) sabotage, on ships based in Pearl Harbor, from small craft.
(2) to block the entrance to Pearl Harbor by sinking an obstruction in the Channel.
(3) to lay magnetic or other mines in the approaches to Pearl Harbor.(b) That a declaration of war may be preceded by;
(1) a surprise attack on ships in Pearl Harbor,
(2) a surprise submarine attack on ships in operating area,
(3) a combination of these two.(3)The following security measures are prescribed herewith, effective in part in accordance with enclosure (B) or in their entirety as may later be directed by the Commander-in-Chief, U. S. Pacific Fleet, or the Senior Officer Present Afloat in the Hawaiian Area...
Counterparties: Megan McArdle wonders why people aren't hiring more servants...
@owillis Amazing. "My poor son lost his job! Well, actually, he quit to join his father's presidential campaign. Just like you folks!"
MacRumors:
AT&T Activations Servers Overloaded with iPhone 4S Launch: AT&T's activation servers are having problems with the large influx of activations with the iPhone 4S launch. A quick search of Twitter shows many having problems activating their AT&T iPhone 4Ss due to server issues. A discussion thread in our forum also mirrors the complaints. With the iPhone 4S launched now across the entire U.S., we are at the peak of simultaneous AT&T iPhone 4S activations. AT&T has had similar issues in previous launches. Japanese carrier Softbank was reported to have similar issues during their launch this morning.
Greg Sargent:
Economist: Senate GOP jobs plan wouldn’t help economy in short term, and could even hurt: Yesterday, Senate Republicans released an economic plan called the “Jobs Through Growth Act.” Senator Rand Paul said it would create five million jobs without specifying a time frame. Though the plan repackaged previous GOP ideas we’ve heard before, Republican Senators argued that releasing the ideas as a plan would restore business confidence, leading to investment, growth, and job creation. The GOP unveiling of the plan was widely treated as major news, and Republicans are challenging Obama to respond to their plan — a challenge that’s also garnering widespread coverage.
But an economist I spoke to just now said there isn’t enough information in the plan to evaluate whether it could even achieve its goals as Republicans themselves have defined it. He said it won’t help the economy in the short term, and could even make matters worse. “I don’t have enough detail to evaulate how many jobs this would create,” Gus Faucher, the director of macroeconomics at Moody’s Analytics, told me. “I could say, `My plan is to do nothing, and it will create five million jobs.’ And it could work, particularly if I don’t say over what time period.”
Moody’s recently estimated that Obama’s jobs plan, if passed, would add two percentage points to economic growth next year, add 1.9 million jobs, and cut unemployment by a full percentage point. By contrast, the Senate GOP plan wouldn’t help the economy in the short term, Faucher said….
Senate Republicans said the release of the new plan — by repackaging previous ideas in one place and pushing them in public — would create certainty and confidence and lead ultimately to five million new jobs. Faucher said he had no way to evaluate the idea that the release of the plan itself could create confidence and certainty. “That’s not an economic argument,” he said. “I do think the lack of confidence is a problem, but again, the way to get over that problem is by having strong near term growth, and this proposal isn’t focused on that.”
Fauscher also said the Senate’s plan inclusion of a Balanced Budget Amendment could hurt the economy in the near term. “Putting the emphasis on balancing the budget now is likely to push the economy back into recession,” he said. “We’re seeing the impacts of that in Europe, where governments are undertaking fiscal austerity and their economies are struggling.”
"I will say then that I am not, nor ever have been, in favor of bringing about in any way the social and political equality of the white and black races, [applause]-that I am not nor ever have been in favor of making voters or jurors of negroes, nor of qualifying them to hold office, nor to intermarry with white people; and I will say in addition to this that there is a physical difference between the white and black races which I believe will forever forbid the two races living together on terms of social and political equality. And inasmuch as they cannot so live, while they do remain together there must be the position of superior and inferior, and I as much as any other man am in favor of having the superior position assigned to the white race.
"I say upon this occasion I do not perceive that because the white man is to have the superior position the negro should be denied every thing. I do not understand that because I do not want a negro woman for a slave I must necessarily want her for a wife. [Cheers and laughter.] My understanding is that I can just let her alone. I am now in my fiftieth year, and I certainly never have had a black woman for either a slave or a wife. So it seems to me quite possible for us to get along without making either slaves or wives of negroes.
"I will add to this that I have never seen, to my knowledge, a man, woman or child who was in favor of producing a perfect equality, social and political, between negroes and white men. I recollect of but one distinguished instance that I ever heard of so frequently as to be entirely satisfied of its correctness-and that is the case of Judge Douglas's old friend Col. Richard M. Johnson. [Laughter.]
"I will also add to the remarks I have made (for I am not going to enter at large upon this subject,) that I have never had the least apprehension that I or my friends would marry negroes if there was no law to keep them from it, [laughter] but as Judge Douglas and his friends seem to be in great apprehension that they might, if there were no law to keep them from it, [roars of laughter] I give him the most solemn pledge that I will to the very last stand by the law of this State, which forbids the marrying of white people with negroes. [Continued laughter and applause.]
"I will add one further word, which is this: that I do not understand that there is any place where an alteration of the social and political relations of the negro and the white man can be made except in the State Legislature-not in the Congress of the United States-and as I do not really apprehend the approach of any such thing myself, and as Judge Douglas seems to be in constant horror that some such danger is rapidly approaching, I propose as the best means to prevent it that the Judge be kept at home and placed in the State Legislature to fight the measure. [Uproarious laughter and applause.] I do not propose dwelling longer at this time on this subject…."
--Abraham Lincoln, Fourth Debate with Stephen Douglas
I dropped my iPhone 3G. The screen now has five big cracks in it and fragments are falling off.
I guess I will have to get a new one...
Why oh why can't we have a better press corps?
Larry Mishel attempts to do damage control:
Clive, don’t change the subject: Crook [says]….
[T]he idea that regulatory uncertainty as opposed to weak demand is the cause of slow growth–is a straw man. Who is denying that weak demand is a factor, or even the larger factor of the two?...
[A] ton of important people denying that there is any demand problem…. How else can there be an essentially uniform view among the Republicans that the initial stimulus had zero effect? How else to explain that the program of each candidate for the Republican presidential nomination has an exclusively ‘supply-side’ approach?… How else to explain the recent contention by the top four Republican leaders in Congress that the Federal Reserve should take no further policy actions to expand demand?… Crook should supply some examples of leading conservative economists and Republican leaders saying there is a demand problem, that it is a ‘larger factor’ than uncertainty, and of the proposals they are advancing to address the demand shortfall….
Crook suggests a broader uncertainty lens, which to me is changing the topic. He points to a recent paper by Scott Baker, Nicholas Bloom and Steven Davis which attempts to measure uncertainty and finds:
Index values are high in recent years and show clear jumps associated with the Lehman bankruptcy, the 2010 midterm elections, the Euro crisis and the U.S. debt-ceiling dispute. … Greater policy uncertainty in 2011, relative to 2006 levels, lowers GDP by about 1.4 percent and employment by about 2.5 million….
[T]he paper’s results in no way support the conservative/Republican/business association claim that Obama’s policies have inhibited job growth… spikes in "policy uncertainty"… are… the Lehman implosion, the TARP legislative debate… the banking crash… [and] the ‘debt ceiling dispute’… a crisis totally manufactured by Republican politicians….
Crook has clarified one thing for me. Anyone claiming uncertainty is holding back the economy needs to identify the particular types of uncertainty and who’s responsible…. [T]he intense emphasis by conservative/Republican/ business association leaders on tax and regulatory uncertainty is a counterproductive distraction from advancing the demand-side policy changes necessary to move the economy forward.
It is true that Romney must be conning somebody. But does anybody have any evidence that we rational bipartisan technocratic centrists are the ones who are in on the con?
Josh Barro: Our best hope is that Romney has a secret plan: Tuesday's GOP debate was a parade of one-trick ponies. Herman Cain took every question as an opportunity to pitch his "9-9-9" tax plan (pdf) as a jobs engine. Rick Perry kept coming back to increasing oil and gas exploration – hey, it's worked for Texas. Rick Santorum hopes to revive the Rust Belt's struggling manufacturing base – with targeted tax breaks, of course.
Cain even attacked Mitt Romney for not being a one-trick pony. Cain complained that Romney's economic plan, at 59 points and 160 pages, is too long and complicated.... Romney then called out the one-trick ponies, saying that while tax policy (Cain) and energy policy (Perry) are important, they're only some of the many things we must fix to keep the economy moving again.
Unfortunately... Romney's plan... does not contain all the right details. Many of the ideas in Romney's plan, from tax reform to free trade to revamping job training, are good. But they would also have been good ideas in 2007. What Romney's plan lacks are ideas that relate to the housing bubble and the prolonged economic crisis that it sparked. Amazingly, none of Romney's 59 economic proposals addresses housing policy or monetary policy. We've been in a three-year rut of high unemployment, low demand and unmanageable mortgage debt, and these candidates are arguing about tax cuts. This entire field has lost the plot....
While Republicans push in the wrong direction on monetary policy (that is, for tightening), Obama has failed to talk about monetary policy at all, or to advocate for his nominees to the Federal Reserve. He also failed to push for truly bold housing reforms – such as mortgage modifications along the lines of Eric Posner's and Luigi Zingales' proposal – that would help Americans climb out from under mortgage overhangs and start consuming again.
With an incumbent administration out of ideas, now more than ever we need bold Republican ideas about getting the economy moving again. Our best hope – and not an entirely implausible one – is that presumptive-nominee Romney has a secret plan for the economy. If he doesn't, we may be in for years' more stagnation.
RT @AmandaMarcotte: http://bit.ly/nCLv9w OMFG this wingnut DOESN'T GET TO EAT OUT EVERY DAY. Oh, the suffering! The pain!
RT @robertwaldmann: Hey hey, ho ho, risk-based capital has got to go, and it should be replaced by a simple leverage ratio of at least 1 ...
RT @attackerman: David Ignatius: The Horseshit Whisperer: http://bit.ly/nZvsGa (apologies to @OrrChris, who coined that term years ago, ...
RT @ModeledBehavior: Hubbard, Feldstein, who are the other major conservative economists with a significant housing market plan?
RT @TheStalwart: Dimon: The US constitution allows for demonstrations (via Bloomberg)
RT @EricBoehlert: Oh look, Christie lies about RomneyCare; http://bit.ly/qXXTgf
Shit That Siri Says http://shitthatsirisays.tumblr.com #interesting
Lawrence Mishel: Clive [Crook], don’t change the subject http://tinyurl.com/dl20101013a #recommended
Matthew Yglesias: Destroying The Housing Stock http://thinkprogress.org/yglesias/2011/10/13/342788/destroying-the-housing-stock/ #recommended
RT @michaelscherer: Anita Perry claims other GOP candidates attacking her husband, Rick, because he's Christian. http://tinyurl.com/455qkgb
RT @blakehounshell: RT @fmanjoo: One Year-Old Baby Thinks Magazine Is an iPad That Does Not Work http:/bit.ly/oRdWAo
RT @conor64: Once upon a time, Herman Cain blamed Wall Street and its CEOs for the crash http://bit.ly/qzflBR
RT @drgrist: According to NASA, 2000-2009 was the warmest decade on record since 1880. Probably nothing, though.
I am the 2% :-) http://tinyurl.com/20111013b
RT @jayrosen_nyu: "There was no story, and nothing to report." http://jr.ly/uzxn @FelixSalmon (of Reuters) on Reuters linking Soros t ...
RT @dealbreaker: Erasing Your Hard Disk And Dumping It In A Canal Turns Out Not To Be As Wise A Move As It Sounds http://bit.ly/mQyVAr
RT @pwire: If Lugar doesn't win, it's the end of the "wise men" in the GOP foreign policy establishment... http://pwire.at/qjHabX
RT @DavidCornDC: High-speed railing it out of town? RT @TPM: Ray LaHood won't stay on for second term: http://tpm.ly/oA5QYi
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