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October 2012

Dudley Does Not Think the Mortgage Market Is Fixed

In contrast to Olivier Blanchard, who does. I'm with Dudley on this:

The very smart and hard-working Cardiff Garcia writes:

Dudley on mortgage market impairment: NY Fed president Bill Dudley weighs in on something written about here and many, many other places — the impairment of mortgage markets and how it affects monetary policy transmission:

One reason that monetary policy may have been less powerful than normal is that one of the primary channels through which monetary policy influences the real economy—housing finance—has been partially impaired. This has both quantity and price dimensions. Credit availability to households with lower-rated credit scores remains limited and households with homes that have fallen sharply in value have lost most or all of their home equity and this makes it very difficult for them to refinance these mortgages.

Federal Reserve MBS purchases have succeeded in driving down mortgage rates to historically low levels. But these purchases would have had still more effect on the economy if pass-through rates from the secondary market to the primary market had been higher. …

The incomplete pass-through from agency MBS yields into primary mortgage rates is due to several factors—including a concentration of mortgage origination volumes at a few key financial institutions and mortgage rep and warranty requirements that discourage lending for home purchases and make financial institutions reluctant to refinance mortgages that have been originated elsewhere. On a related note, higher guarantee fees charges by Fannie Mae and Freddie Mac have increased the fixed cost of originating loans and this has also increased the spread between primary and secondary mortgage rates. Factors limiting pass-through warrant ongoing attention from policymakers.

And Cardiff comments:

We’ll have more on this later, but to the above list we would add the heightened scrutiny in home appraisals, worries about the revival of securitisation markets as Fannie and Freddie (very) gradually pull away, and the awaited detail from regulators on the definitions of qualified mortgages and qualified residential mortgages. Thus far the surging mortgage origination business at banks has been concentrated in refinancing rather than purchases. The refi boom is great but can only last so long, as Dudley writes, and from a macroeconomic perspective has less of an impact than a housing purchase and construction rebound...


For the File: Dylan Byers Scared S#$&less by Nate Silver

Dylan Byers, taking on the role of a villain from Moneyball:

Nate Silver: One-term celebrity?: The New York Times's resident political predictor says President Barack Obama currently has a 74.6 percent chance of winning reelection. It's a prediction that liberals… want to take solace in, but somehow can't…. Prediction is the name of Silver's game, the basis for his celebrity. So should Mitt Romney win on Nov. 6, it's difficult to see how people can continue to put faith in the predictions of someone who has never given that candidate anything higher than a 41 percent chance of winning… [and now] gives him a one-in-four chance… as the polls have him almost neck-and-neck with the incumbent….

For all the confidence Silver puts in his predictions, he often gives the impression of hedging. Which, given all the variables involved in a presidential election, isn't surprising…. [T]his may shock the coffee-drinking NPR types of Seattle, San Francisco and Madison, Wis… more than a few political pundits and reporters, including some of his own colleagues, believe Silver is highly overrated.

If you tell me you think you can quantify an event that is about to happen that you dont expect, like the 47 percent comment or a debate performance, I think you think you are a wizard. Thats not possible…

Times columnist David Brooks, a moderate conservative, said on PBS earlier this month.

The pollsters tell us whats happening now. When they start projecting, theyre getting into silly land.

Brooks doubled-down on this charge in a column last week:

I should treat polls as a fuzzy snapshot of a moment in time. I should not read them, and think I understand the future. If there’s one thing we know, it’s that even experts with fancy computer models are terrible at predicting human behavior.

On MSNBC's "Morning Joe" today, Joe Scarborough took a more direct shot, effectively calling Silver an ideologue and "a joke."

Nate Silver says this is a 73.6 percent chance that the president is going to win? Nobody in that campaign thinks they have a 73 percent chance — they think they have a 50.1 percent chance of winning. And you talk to the Romney people, it's the same thing. Both sides understand that it is close, and it could go either way. And anybody that thinks that this race is anything but a toss-up right now is such an ideologue, they should be kept away from typewriters, computers, laptops and microphones for the next 10 days, because they're jokes…


Mark Thoma vs. The Hax of Sol III: The Myth That Rising Consumption Inequality Is a Miss

Damned if I can figure out why anybody--especially Glenn Hubbard and Greg Mankiw and even John Taylor--ever puts their name on anything as an author next to Kevin Hassett. That is really bad karma, dudes, really bad.

Mark Thoma does the intellectual garbage collection:

Continue reading "Mark Thoma vs. The Hax of Sol III: The Myth That Rising Consumption Inequality Is a Miss" »


Liveblogging World War II: October 28, 1942

World War II Today on El Alamein:

By 28th October Montgomery’s offensive was beginning to stall. As he sought to regroup his forces for another push through the German lines there was a pause for the men on the front line, although it was far from being a quiet interlude.

James Ambrose Brown had left the front line in August when he fell ill and had spent time in Cairo and Alexandria convalescing. He was recalled to his South African unit and welcomed back on the 18th October with the words ‘You’re just in time for the bloodbath’. His diary, written just after the El Alamein battle, contains graphic descriptions of each day in the battle showing that this was an accurate prediction.

On the night of 27th-28th the his South Africans went forward to relieve a New Zealand unit which had suffered heavy losses. They occupied their positions in darkness and did not know what confronted them until daylight came:

Continue reading "Liveblogging World War II: October 28, 1942" »


inequality: Living in the Second Gilded Age

Mitt Romney on Obama Voters  YouTube

For the San Francisco Chronicle:

A third of a century ago, all of us economists confidently predicted that America would remain and even become more of a middle-class society. The high income and wealth inequality of the 1870-1929 Gilded Age, we would have said, was a peculiar result of the first age of industrialization. Transformations in technology, public investments in education, a progressive tax system, a safety net, and the continued decline in discrimination on the basis of race and sex had made late-20th century America a much more equal place than early 20th century America, and would make early 21st century America even more equal — even more of a middle-class society — still.

We were wrong.

America today is at least as unequal as, and may be more unequal than, it was back at the start of the 20th century when Republicans, such as President Theodore Roosevelt of New York condemned the power wielded by “malefactors of great wealth,” and Democrats such as perennial losing presidential candidate William Jennings Bryant of Nebraska denounced shadowy conspiracies that had somehow manipulated the financial system to rob the typical family of its proper share in America’s prosperity.

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**Sigh.** Why Oh Why Can't We Have a Better Press Corps?: Atlantic Monthly Edition

In the immortal words of the unforgettable Dan Quayle: How sad it is to lose your brain--or not to have a brain at all! How true this is!

Adam Hanft's piece isn't as bad as their publishing Glassman and Hassett's "Dow 36000" and Easterbrook's bizarre claim that the U.S. experiences a catastrophic mega-meteorite impact every 1000 years.

But this is bad:

Continue reading "**Sigh.** Why Oh Why Can't We Have a Better Press Corps?: Atlantic Monthly Edition" »


Why Oh Why Can't We Have a Better Press Corps?: Brendan Nyhan Muses on Why So Many Reporters Just Don't Do Their Jobs

Brendan Nyhan:

The momentum behind a misleading narrative: On Thursday night, Politico beat a retreat in the great momentum debate of 2012. The site’s Glenn Thrush and Jennifer Epstein opened… “In the past 10 days, Mitt Romney’s campaign has gone from Big Mo to Slow Mo”--and went on to note that “an increasing pile of polling data [is] pointing to a race that has stabilized since Barack Obama’s disastrous performance at the Oct. 3rd debate in Denver”… a dramatic about-face from a story published three days earlier (not ten!), in which Thrush and his colleague Jonathan Martin contrasted “a surging Romney” with a president who “is currently on the ugly end of Big Mo.” The new Politico story is also more accurate. The presidential race has been essentially static in the second half of October….

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Why Oh Why Can't We Have a Better Press Corps? No, It Does Not Look Right Now as Though the Electoral College Is the Main Obstacle to a Romney Victory

On October 25, Greg Sargent wrote:

The Morning Plum: Republicans worried about Ohio and electoral math: In a must-read, Jeff Zeleny and Ashley Parker delicately point out that Romney’s outward projections of optimism about victory are studiously ignoring just how daunting the electoral math remains for him. This tidbit about Ohio is important:

Party strategists on both sides say the race appears to be remarkably close, but two senior Republican officials here said that they believed Mr. Obama had a slight advantage and that they worried that Mr. Romney’s gains had leveled off.

News outlets have been far too credulous about the supposed “momentum” Romney is enjoying, so it’s good to see the Times devote a stand alone story to Romney’s electoral math challenges.

Continue reading "Why Oh Why Can't We Have a Better Press Corps? No, It Does Not Look Right Now as Though the Electoral College Is the Main Obstacle to a Romney Victory" »


Robert Waldmann: Glenn Kessler's Nose Is Very Long Indeed...

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

Robert's Stochastic Thoughts:

Glenn Kessler has been... calling Romney lies lies. But he does feel the need for Ballance.  So in his latest he recalls giving the Obama campaign 4 Pinocchios for a claim about Romney and Bain which was supported by massive documentation.... Kessler fell for Romney lies and just won't admit he was wrong.  I also think he feels that he must Ballance his criticisms of Romney.... Kessler is also clearly wrong on the substance.  Also the June fact check which he brings up only for Ballance bases his decision on what "seems".... I give Kessler 4 Posties for arrogant refusal to admit he is fallible, stubborness and Ballance....

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Wonkette: Cato Institute Helpfully Makes Its Fake Climate Report Look Like Actual Climate Report, Except Fake

Wonkette:

Cato Institute Helpfully Makes Its Fake Climate Report Look Like Actual Government Climate Report, Except Fake: Remember a few months ago when hilariously titled fake ripoffs of bestsellers were all over Amazon’s e-book store — 35 Shades of Grey, or I am the Girl with the Dragon Tattoo, that sort of thing? The playful jokesters of the Cato Institute are using their Koch Industries Megabux to top that! They will soon release a delightful “spoof” of a 2009 US Government report on climate change, except that where the real report looks at real science, the fake “Addendum” contains the reassuring news that climate change is no big deal, hooray!

Indeed.

Continue reading "Wonkette: Cato Institute Helpfully Makes Its Fake Climate Report Look Like Actual Climate Report, Except Fake" »


Why Oh Why Can't We Have a Better Press Corps?: Why Can't Karen Tumulty Do Her Homework Weblogging

If Karen Tumulty did her homework, she would know that a plot electoral vote-popular vote decision is not a 50% probability but a 10% probability, and she would know that neither William Galston nor Mark Mackinnon is a reliable authority on this issue--or, indeed, on much of anything.

But she doesn't. So she doesn't:

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Liveblogging World War II: October 27, 1942

WWII+55:

6th Army also sends back its 150,000 draft horses, as well as oxen and camels, back to the rear, to save on fodder. Motor transport and repair units are also sent back behind the Don.

Operation Uranus in Detail:

XXXXVIII Panzer Corps [commanded by] General Heim [in reserve behind the junction of 6th Army and 3rd Romanian Army]… the German 22. Panzerdivision, the Romanian 1st Armoured Division and the armoured combat group of 14. Panzerdivision…. The 22. Panzerdivision [was to find] the majority of their tanks… immobilized…. [M]ice, which had nested in the covering straw on the engine decks, had chewed through the rubber parts of the electrical systems. This problem was not discovered beforehand because the 22. Panzerdivision hadn’t received enough gas to perform even basic maintenance checks. Inquiries and complaints about the supply situation sent by the panzer crews and commanders were totally ignored…

The Nazi 6th Army throws away all of its operational and strategic maneuverability. Its soldiers are now trapped and dead, although they do not know it yet.


Howard Davies: Economics Needs to Be Reformed...

Howard Davies: "Economics in Denial":

In an exasperated outburst, just before he left the presidency of the European Central Bank, Jean-Claude Trichet complained that, “as a policymaker during the crisis, I found the available [economic and financial] models of limited help. In fact, I would go further: in the face of the crisis, we felt abandoned by conventional tools.” Trichet went on to appeal for inspiration from other disciplines – physics, engineering, psychology, and biology – to help explain the phenomena he had experienced. It was a remarkable cry for help, and a serious indictment of the economics profession, not to mention all those extravagantly rewarded finance professors in business schools from Harvard to Hyderabad….

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DeLong Smackdown Watch: Schtevie Plumps for Sam Wong Over Nate Silver Weblogging

Re: Brad DeLong: Is Mike Allen Really This Ignorant? Assessing Polls Weblogging. Schtevie said:

Brad, are you implicitly saying that you prefer Nate Silver's approach to that of Sam Wang? There is a pronounced difference in suggested certainty between the two and both cannot be correct.

Election Forecasts  FiveThirtyEight Blog  NYTimes com 1

Today s electoral vote histogram

These electoral-vote now-cast point estimates are very similar: they are both aggregating the state-level polls and the national polls, and they are both reaching almost exactly the same conclusions.

The difference in the now-casts is that Wong gives Obama a 95% chance while Silver gives Obama only a 76% chance. The difference in the forecasts is that Wong gives Obama a 90% chance while Silver gives Obama only a 73% chance.

Silver's individual state-level effects appear to be much more correlated than Wong's--Silver believes that if something is leading pollsters to overstate Obama's true strength in Florida his true strength in Ohio is probably overstated as well, while Wong appears to believe that state-level variation is much closer to being independent.

Why this is the case I do not know...


Is Mike Allen Really This Ignorant? Assessing Polls Weblogging

Election Forecasts  FiveThirtyEight Blog  NYTimes com

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

Nate Silver aggregates all the information from all the polls--uses changes in all polls to estimate a trend, uses that trend to "age" all polls taken up to the present, adds them together, and then combines that average with the "fundamental" produced by economic factors. Gary Langer looks at one and only one poll and spins a plausible story from it--pretending that no other polls exist.

Yet Mike Allen sees both--the one based on intelligently aggregating all polls, and the one based on one single poll--as equally authoritative:

THE WAY TO WIN: Obama, Romney aides make state-by-state case: MORNING MINDMELD: If you’re a political junkie, enjoy it, soak it in: In our lifetimes, there may never be another  race that looks this close for the final two weekends. Yesterday, two of the most widely followed polling analysts drew opposite conclusions about who has Big Mo:

  • Nate Silver, who gives Obama a 73% chance of winning, argued in the morning that the move to Romney had “stopped”: “What isn’t very likely … is for one candidate to lose ground in five of six polls if the race is still moving toward him.…"

  • ABC’s Gary Langer popped his analysis of the latest ABC-WP tracking poll, which had: “[T]he momentum on underlying issues and attributes is Romney’s. Romney’s gains are clear…"

So how did Mike Allen get this pig-ignorant? How does he stay this pig-ignorant?


Piglet on Hayek and the Welfare State

It's amazing how much better our discourse would be if the major newspaper op-ed pages were turned over to Winnie-the-Pooh characters...

Piglet says:

Hayek and the Welfare State: This is such a pointless debate. Right-wingers always want to have it both ways. This is most obvious with respect to Hayek’s explicit support for universal health insurance. Hayek, says the reasonable right-winger, wasn’t making the obviously crazy argument that any kind of welfare policy will lead to serfdom. Proof, he supported universal health insurance. At the same time, that very same right-winger will cite Hayek in support of claiming that Obamacare IS the road to serfdom....

Physically impossible...

Bruce Baugh says:

Piglet wins.


Liveblogging World War II: October 26, 1942

Santa Cruz: October 26, 1942:

The fighting around Guadalcanal steadily intensified. Nearly every night, more Japanese soldiers were landed on the island, and the daily air raids and nighttime bombardments from Rabaul-based planes and ships continued. The attacks were not made with impunity: between October 16-25 alone, Marine and Navy pilots downed 103 enemy planes and sank a cruiser, losing only 14…. [T]he night of October 11-12… Rear Admiral Norman Scott, having drilled his force in night combat techniques for weeks, blasted a Japanese cruiser and destroyer force off Cape Esperance, west of Savo Island…. [T]he U.S. positions on Guadalcanal came under severe shelling from Japanese battleships and cruisers the nights of October 14 and 15. Over half of the 90 planes at Henderson field were destroyed, and the aviation fuel was practically gone. Japanese control of the area was so complete that on the 15th they were able to land nearly 4500 troops in broad daylight….

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It Is Starting to Look as Though the Obama Third-Debate Bump Was Huge

American Life Panel

When something does happen to suddenly and discontinuously shift the electorate--a good performance in a debate, say--a seven-day moving-average poll dribbles the effect of that shift out into its estimates in little pieces over the next seven days.

This creates the illusion of momentum: the line goes up, and keeps going up. But it actually is not momentum: it's simply that the share of the poll results that are pre-event and thus stale drops only gradually.

There are much better ways to handle estimating the current level when a process is potentially subject to discontinuous shocks and you know when they are than a seven-day moving average. But the RAND organization--and the Gallup organization, and others--don't use them. Intellectual malpractice.

Now 3/7 of the RAND panel is post-third debate. Obama now has a lead of 5.92%. Back when 0 of the RAND panel was post-third debate, Obama had a lead of 1.90%.

The point estimate of what Obama's RAND panel lead will be when the entire RAND panel is post-third debate is now… 11.28%


Fidel Castro: I Was Wrong to Tell Khrushchev to Obliterate the U.S.

Fans of the dictatorial and short-sighted Fidel Castro should think that he really wanted to climb the ladder of thermonuclear escalation all the way to the top back in 1962. Effectively halting economic growth in your country for two generations with nothing to counterbalance it is a heavy burden to plead before the Bar of History. Thank God he didn't actually have his finger on any of the buttons...

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The Second Gilded Age Once Again

The United States: The rich and the rest:

During the 1980s the least-educated Americans fell behind those in the middle. As the computer revolution increased the demand for skilled workers and old manufacturing industries crumbled, those with just a high-school degree or less saw their relative earnings sink. Over the past decade the squeeze moved to the middle of the income distribution…. Incomes at the top, meanwhile, rose smartly during the whole period. The result was a dramatic divergence in fortunes. Between 1979 and 2007… the real disposable income after taxes and transfers of the top 1% of Americans more than quadrupled… the bottom fifth’s income rose by only 40%…. What lies behind these widening gaps? A big reason, particularly in the bottom half, is education, or rather the lack of it…. Both the soaring cost of a college education and the shortcomings of America’s schools system played a part….

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Lawrence Summers Is Chopped Liver?

I have sometimes been referred to as if my name were "Coauthor"--as in "Lawrence Summers and Coauthor argue". And I have even--once or twice--seen Larry referred to as "Coauthor".

But I have never before seen Larry edited out of existence completely. But here it is:

Tyler Cowen: When it comes to the lacklustre recovery from the financial crisis, the dominant left-wing narrative has been shaped by Paul Krugman and other Keynesians. The main villain in the piece is austerity. In this view, if only Western governments had the guts to borrow and spend more money, economic recovery would have been much quicker. Instead, the doctrines of the "Austerians" have ruled, and spending cuts have left much of the West in an economic torpor or even brought a downward spiral. It has become a common view - promoted by the University of California at Berkeley economist Brad DeLong - that more government borrowing and spending might have paid for itself through boosting economic growth, a kind of "Laffer Curve" for the Left…

The paper is:

J. Bradford DeLong and Lawrence H. Summers (2012), "Fiscal Policy in a Depressed Economy", Brookings Papers on Economic Activity 2012:1 (Spring) http://www.brookings.edu/~/media/Files/Programs/ES/BPEA/2012_spring_bpea_papers/2012_spring_BPEA_delongsummers.pdf


It Look Like Mitt Romney Lied Under Oath on the Witness Stand About a Material Fact...

Perjury time, anybody?

Callum Borchers:

Mitt Romney vouched for low price on Staples stock that traded 10 times higher a year later: CANTON, Mass. — Mitt Romney testified under oath in 1991 that the ex-wife of Staples founder Tom Stemberg got a fair deal in the couple’s 1988 divorce, even though the company shares Maureen Sullivan Stemberg received were valued at a tenth of Staples’ stock price on the day of its initial public offering only a year later.>At the time the Stembergs split, Romney suggested, there was little indication that Staples’ value would soon skyrocket.

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Cycle and Structure

Mark Thoma:

Cyclical Zombies: Stephen Roach argues in this article that the "current medicine being applied to America's economy" is wrong. The real disease is a:

protracted balance-sheet recession that has turned a generation of America’s consumers into zombies – the economic walking dead. Think Japan, and its corporate zombies of the 1990’s. Just as they wrote the script for the first of Japan’s lost decades, their counterparts are now doing the same for the US economy.

This is an argument that has been used before during the current crisis: we are trying to fix a structural problem with medicine that can only deal with cyclical misalignments....

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As of the evening of October 24, Nate Silver has a 25.9% chance of a Romney electoral-college victory and a 29.7% chance of a Romney popular-vote victory

What are the odds that the David Brooks column on November 7 will read: "In January 2001 America made the mistake of installing the popular-vote loser George W. Bush as president. We must not repeat this mistake by installing popular-vote loser Barack Obama"?


Jamie Dupree Says That Paul Ryan Has Given Up, and Is Playing for 2016

Why is Paul Ryan in states that don’t matter? | Jamie Dupree Washington Insider:

[W]hy is GOP running mate Paul Ryan spending so much time this week still raising money?… [E]very minute you don't spend shaking hands or talking to key voters is a minute you can never get back….

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Stalingrad at 70

Perhaps we should turn our historical-memory attention here a little bit away from the Cuban Missile Crisis at 50...

Google Image Result for http www ineer org iscmeet 2004 09 19 013 jpg

Our Debt to Stalingrad by J. Bradford DeLong - Project Syndicate:

BERKELEY – We are not newly created, innocent, rational, and reasonable beings. We are not created fresh in an unmarked Eden under a new sun. We are, instead, the products of hundreds of millions of years of myopic evolution, and thousands of years of unwritten and then recorded history. Our past has built up layer upon layer of instincts, propensities, habits of thought, patterns of interaction, and material resources.

On top of this historical foundation, we build our civilization. Were it not for our history, our labor would not just be in vain; it would be impossible.

And there are the crimes of human history. The horrible crimes. The unbelievable crimes. Our history grips us like a nightmare, for the crimes of the past scar the present and induce yet more crimes in the future.

And there are also the efforts to stop and undo the effects of past crimes.

So it is appropriate this month to write not about economics, but about something else. Seventy-nine years ago, Germany went mad. There was delinquency. There was also history and bad luck. The criminals are almost all dead now. Their descendants and successors in Germany have done – and are doing – better than anyone could have expected at grappling with and attempting to master their nation’s unmasterable past.

Seventy years ago, 200,000 Soviet soldiers – overwhelmingly male and predominantly Russian – crossed the Volga River to the city of Stalingrad. As members of Vasily Chuikov’s 62nd Army, they grabbed hold of the nose of the Nazi army and did not let go. For five months, they fought. And perhaps 80% of them died in the ruins of the city.

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