Mark Thoma: "we do not yet have the regulation in place that is needed to address the problem of bank runs of 'privately created bank money'"
Hard to Believe that There Are Still Economists Who I Thought of Note Five Years Ago Who Still Claim That Fiscal Expansion in a Depressed Economy in a Liquidity Trap Will Not Boost Production
John Maynard Keynes, May 23, 1939:
It is not an exaggeration to say that the end of abnormal unemployment is in sight. And it isn't only the unemployed who will feel the difference. A great number besides will be taking home better money each week.
The Grand Experiment has begun. If it works--if expenditure on armament really does cure unemployment--I predict we shall never go back all the way to the old state of affairs. Good may come out of evil. We may learn a trick or two which shall be useful when the day of peace comes.
If we can cure unemployment for the wasted purpose of armaments, we can cure it for the productive purposes of peace.
But, alas, it is true.
The Historical Examples Suggest a Bond Market Vigilante Attack Would Be Good for Workers and Manufacturers and Debtors and Equity Holders...
Franc Thoughts on Bond Vigilantes: Suzy Khimm writes about the contrast between what financial industry honchos say worries them and what financial markets seem to be saying. The honchos declare that failure to reach a Grand Bargain would "spark a damaging loss of confidence in the U.S. government’s fiscal prospects, a run on Treasury bonds, and a spike in interest rates." But the bond markets are saying what me worry, with long-term rates at near-record lows….
[I]t’s actually quite hard to tell a story in which a loss of confidence in U.S. bonds hurts the real economy. Why wouldn’t it just drive down the dollar, and thereby have an expansionary effect? Yes, I know, Greece — but Greece doesn’t have its own currency…. The closest I can come to anything resembling the danger supposedly lurking for America is the tale of France in the 1920s, which emerged from World War I burdened by large debt, and which did in fact face an attack by speculators as a result…. It’s important to note, however, that France wasn’t a depressed economy in the 1920s, and therefore didn’t look much like America today…. [T]he really big effect was a sharp depreciation of the franc, which made France highly competitive and strengthened the economy:
But what about the brief but nasty slump in 1927? That wasn’t caused by spiking interest rates; it was, instead, caused by fiscal austerity, by the measures taken to stabilize the franc. So even when we look at the closest thing I can find to the scenario the deficit scolds want us to fear, it doesn’t play out at all as described.
Tyler Cowen writes:
The new Thomas Nagel book: The title is Mind and Cosmos: Why the Materialist Neo-Darwinian Conception of Nature Is Almost Certainly False…. My bottom lines on it: (1) He is good on attacking the hidden hypocrisies…. He fully recognizes the absurdities (my word, not his) of dualism, and thinks them through carefully and honestly. Bryan Caplan should beware…. The most typical sentence I found in the book was: “We can continue to hope for a transcendent self-understanding that is neither theistic nor reductionist.”… He doesn’t take seriously enough the view: “The Nagel theory of mind is simply wrong.” People will dismiss his arguments to remain in their comfort zone, while temporarily forgetting he is smarter than they are and furthermore that many of their views do not make sense or cohere internally…
And here Tyler appears to me to have gone off the rails. Thomas Nagel is not smarter than we are--in fact, he seems to me to be distinctly dumber than anybody who is running even an eight-bit virtual David Hume on his wetware.
Originally planned for late-October 1942, but postponed until 25 November, Operation Mars was intended to be a companion piece to Operation Uranus, the code-name for the Soviet's Stalingrad strategic counteroffensive…. Zhukov considered… the Rzhev salient, a legacy of the chaotic fighting of winter 1941-42, which measured 150 x 150 kilometers and which contained Army Group Center's powerful German Ninth Army, represented a dagger aimed at Moscow. Therefore, argued Zhukov, the Soviet Union could best achieve strategic victory in 1942 by smashing German Ninth Army in the salient….
Is this the deal that will end the austerity crisis?: We’re 42 days away from the beginning of the austerity crisis, and the strangest thing is happening: Washington appears to be preparing to deal with it in a smooth, timely, reasonable way…. Dec. 21 is considered to be the deadline for a deal if you want to avoid even the slightest of economic disruptions…. [T]he key question in the deal was whether the Bush tax cuts expired for people making more than $250,000, as President Obama is insisting, and thus tax reform began from there, or whether there’s simply a framework with revenue and spending targets, as Speaker John Boehner has proposed….
Lewis Alexander On The Debt Ceiling: Top Nomura US economist Lewis Alexander... identifies four key points where the two sides remain far apart:
- Still no actual agreement on tax rates.
- Still no sign that Democrats will give any ground on entitlements.
- Still not clear that the Democrats and Republicans are close to a number on revenues.
- Other spending cuts not agreed to.
Those might sound obvious, but he adds some more meat to his argument:
Economist's View: More on Broadening the Base versus Raising Tax Rates: The Democracy in America blog at The Economist responds to recent posturing on taxes by Glenn Hubbard and John Boehner:
Elections have consequences, redux, by M.S: John Boehner [and] Glenn Hubbard, formerly Mitt Romney's chief economic adviser…. Mr Hubbard has a fundamental and difficult realization ... to make, to wit, that the candidate he supported lost the presidential election. The proposals he embraces here, like those outlined by Mr Boehner, were advanced by Mr Romney during the presidential campaign…. Barack Obama won the presidential election running on an explicit platform of hiking the top marginal income-tax rate… Americans want the wealthy to pay a higher tax rate…. Republicans appear to think that by merely stating that they are not in principle opposed to the federal government getting more revenue, they are entitled to be congratulated for their conciliatory approach…. What we're seeing here, in sum, isn't compromise; it's posturing…. [T]he idea that Democrats will accept the implementation by Barack Obama of Mitt Romney's economic philosophy is ridiculous. ...
The old political journalism was one based on the active pursuit of misinformation. The Gallup poll swings from +4% to +1% and back to +4%--and National Journal Hotline writes breathless stories about what happened. Rasmussen says +3% and Pew says -1%--and Politico writes earnestly about how savvy insiders disagree. All that is going on is that with the small size of polls, especially tracking polls, sampling error and the house effects it shields have their day.
Thus we have a world in which Peggy Noonan writes easily about how magic dolphins have told her that Romney will win, Joe Klein is held up as an authority on the effect of Sandy on Pennsylvania turnout and thus margin, Karen Tumulty seeks out Bill Galston and Mark Mackinnon as experts on the likelihood of a popular-electoral vote split, David Brooks denies the possibility of forecasting in a world in which anything can happen, Joe Scarborough dumps on the idea of an odds ratio, Ramesh Ponnuru asks "who are you going to trust: the voters as interviewed by the pollsters or the Romney campaign operatives who talk to me?", George Will knows that he knows much less than Michael Barone but doesn't think he can say so and so decides to break with Michael by calling Minnesota for Romney, Michael Barone calls Pennsylvania and Wisconsin for Romney and afterwards claims that his prediction was "reasonable, just as other predictions that either Obama or Romney would win, or would win with more than 300 electoral votes, were reasonable; you could look at the polling data… and come up with pretty different conclusions".
Jeff Bercovici says that that day of mindless incoherent blathering is over:
What Tim Geithner ought to be saying:
"In December 2008, it was clear that the economy needed (1) stabilization of the banking sector, (2) expansionary fiscal policy, (3) the rescue of Detroit, and (4) support for the Federal Reserve's low-interest rate policies. Via the TARP, the stress tests, the Recovery Act, and through the actions of the Federal Reserve, we accomplished those goals.
"As a result, the bad times of 2008-13 have been less bad in the United States than elsewhere in the North Atlantic.
"But what I did not understand, and should have understood, was that there was a very good chance that more would be needed to generate a strong recovery.
"I should have pressed hard for a Director of the FHFA who would understand the importance of refinancing mortgages to keep foreclosures from dragging down housing construction and employment.
"I should have pressed for Federal Reserve governors who would have adopted in late 2009 the open-ended quantitative-easing policies adopted three years later.
I think we need to deal with some more important questions first:
- Who has a “favorite” orange?
- Why do you have a favorite orange?
- How long have you had this orange that you’ve bonded with it so much?
- Who has an equation to calculate the weight of an orange?
- Are you sure that it is an orange and not a pumpkin?
- Is it your favorite because it happens to weigh nine pounds!?
"Another Fun Fact Is Ben Franklin Originally Suggested That We Eat the Bald Eagle for Thanksgiving Instead of the Turkey!"
Josh Marshall: "Top Romney advisor Dan Senor says the election result shows there is “some kind of systemic crisis today in the world of polling.”
There is some kind of systemic crisis today in the world of polling, I think particularly on the right-of-center polling. The modeling was way off.
Indeed! You can't get hired as a pollster by Republicans these days unless you produce a Republican-friendly likely voter pool!
I understand that CMS has absolutely no desire to encourage more cream-skimming, and every desire and internal incentive to make sure that those who treat more difficult patient populations are not financially penalized by doing so.
I understand that as a country we are spending twice as much as western European countries while lagging 2 years behind them in life expectancy and 20% behind them in treatment coverage. I understand that the hope is that it will be cheaper and quicker to treat your 32 million new Medicaid and exchange-based insured now that they are showing up regularly with insurance rather than showing up in severe crisis only.
But Massachusetts has been walking down this exchange-and-public-program-expansion road for six years now, since Mitt Romney signed RomneyCare. Massachusetts has been vacuuming up doctors and nurses from Costa Rica and elsewhere and still has been finding that the cost of treating your state population is higher when 97% are insured than it was when 88% were insured. And there aren't enough loose doctors and nurses in the rest of the world for the ACA to vacuum up enough of them to meet the needs of not 1 state but 50 states.
The investments in medical infrastructure and workforce--less than $30 billion for 32 million newly insured, less than $1000 for newly insured--seem an order of magnitude low.
What is your guess as to what will happen if the ACA works for access, works for quality, works for coverage--but the extra health-care workforce needed isn't there, and the lines start to get longer?
Sixth Army was surely to be cut off and left with two alternatives: stand and fight or attempt a fighting retreat towards Kotelnikovo or Nizhne Chirsk. Both options posed separate, distinct problems for the tactical air forces. Hitler chose to emulate the success of the previous winter at Demyansk and form a hedgehog. To understand how he arrived at this decision despite almost every subordinate commander's objections, we must look back briefly to the Demyansk airlift and the role tactical airpower played in its success….
Barney Frank: Obama Rejected Bush Administration Concession to Write Down Mortgages « naked capitalism: Here’s Barney Frank, in an exit interview recently in New York Magazine, revealing unwittingly that Obama during the transition rejected a Bush administration concession to write down mortgages. Here’s what Barney said.
The mortgage crisis was worsened this past time because critical decisions were made during the transition between Bush and Obama. We voted the TARP out. The TARP was basically being administered by Hank Paulson as the last man home in a lame duck, and I was disappointed. I tried to get them to use the TARP to put some leverage on the banks to do more about mortgages, and Paulson at first resisted that, he just wanted to get the money out. And after he got the first chunk of money out, he would have had to ask for a second chunk, he said, all right, I’ll tell you what, I’ll ask for that second chunk and I’ll use some of that as leverage on mortgages, but I’m not going to do that unless Obama asks for it. This is now December, so we tried to get the Obama people to ask him and they wouldn’t do it.
Joe Weisenthal on Bill McBride aka Calculated Risk: "The Genius Who Invented Economics Blogging Reveals How He Got Everything Right and What's Coming Next"
Bergljot Barkbu, Barry Eichengreen, and Ashoka Mody: Financial crises and the multilateral response: What the historical record shows
[O]n economic issues the modern Democratic party is what we would once have considered “centrist”, or even center-right. Obama’s Heritage-Foundation-inspired health care plan is to the right of Richard Nixon’s. Nobody with political influence is suggesting a return to pre-Reagan tax rates on the wealthy. Fantasies about Obama as a socialist, redistributionist hater of capitalism bear no more resemblance to reality than fantasies about his birthplace or religion.
Second, today’s Republican party is an alliance between the plutocrats and the preachers, plus some opportunists along for the ride — full stop….
And Matthew Yglesias performs the intellectual garbage collection:
What Job Does Stephen Williamson Think Narayana Kocherlakota Is Angling For?: Williamson… doesn't buy the idea that [Minneapolis Federal Reserve Bank Narayana] Kocherlakota was persuaded to change his mind [on the desirability of more quantitative easing by the Fed] by evidence. Rather, he states that… "ambition collides with economic science" (in general my impression is that people who run around talking a lot about "economic science" are generally engaged in an unscientific level of self-puffering and BS). But… Williamson doesn't offer any theory as to what the nature of the ambition….
Brink Lindsey tries to criticize Paul Krugman. Lindsey says the aggressive expansion of government spending on infrastructure and the incentives to push forward technology and organization under the forced-blast of the government's redirection of spending during World War II set the stage for very rapid post-WWII Growth:
Nostalgianomics: Economic performance is a function of both economic policies and the underlying conditions for growth. When conditions are highly favorable (as, in China’s case, when relative backwardness creates the possibility for rapid catch-up growth), even fairly bad policies (like China’s) can produce good results. And it turns out that the conditions in the United States during the early post-WWII decades were highly favorable indeed…. [S]everal factors were especially conducive to strong performance at that time. There was a pent-up demand for goods and services after the privations of the Great Depression and the mobilization of World War II. There was also a pent-up supply of new products that couldn’t be brought to market during the depression and war years. That pent-up supply was augmented by technological and organizational breakthroughs accelerated by the imperatives of total war.
Sounds to me like Lindsey is saying that the policies of the New Deal and of Franklin Roosevelt's war were a solid home run, and did much more good for America's economic growth than any drag from post-World War II social democracy did harm.
I think Paul Krugman could live with that...
Blue States Are From Scandinavia, Red States Are From Guatemala: BTHIS In blue America, state government costs more—and it spends more to ensure that everybody can pay for basic necessities such as food, housing, and health care. It invests more heavily in the long-term welfare of its population, with better-funded public schools, subsidized day care, and support for people with disabilities. In some cases, in fact, state lawmakers have decided that the social contract provided by the federal government is not generous enough. It was a blue state that first established universal health insurance and, today, it is a handful of blue states that offer paid family and medical leave. In the red states, government is cheaper… people… pay lower taxes. But they also get a lot less in return….
I may think that the Obama economic team made a number of wrong decisions, but I know that they were and are among the best in the world for their jobs. But the political operatives?
The reelection of a president who is not caught by an unanticipated business-cycle blowout and who does not follow obviously stupid and destructive policies ought to be a blowout--like Eisenhower, Johnson, Nixon, Reagan, Clinton.
Here is one reason that is wasn't:
Paul Krugman, last spring: Political Malpractice, Deficit Edition:
Greg Sargent has more bang-your-head-against-the-wall material about the Obama administration’s “pivot” to deficits. Quoting... David Corn:
Chief Justice John Roberts argued, in NFIB v. Sebelius, that the Affordable Care Act exceeded Congress’s commerce power. The individual mandate to purchase insurance was not authorized by the Necessary and Proper Clause, he reasoned, because it involved a “great substantive and independent power.” He did not explain how one could tell what constituted such a power. This limitation was worked out in more detail by amici, and Roberts may have been gesturing toward their argument.
An essay that I have just posted on SSRN looks to the antecedents of Roberts’s argument to try to make better sense of what he said. This strategy fails. There is no way to make this argument look good. It is a placeholder for a raw intuition that the law’s trivial burden on individuals was intolerable, an outrageous invasion of liberty, even when the alternative was a regime in which millions were needlessly denied decent medical care.
The essay focuses on one aspect of a complex case. The whole story is elaborated in my forthcoming book, The Tough Luck Constitution and the Assault on Health Care Reform, forthcoming in February from Oxford University Press.
Hoisted from the Archives: Tim Russert on How It Should Be Illegal for Congress to Investigate the Lies of Republican Presidents
Why oh why can't we have a better press corps?
Rep. John Conyers (2006): It's Checks and Balances, Mr. Russert: While interviewing my Leader, Nancy Pelosi, Russert intoned ominously:
The chair of the Judiciary cmte would be someone named John Conyers, I went to his website and this is what was on his website.
He then showed the headline of my website where I call for the creation of a Sam Ervin-style bipartisan Committee, equally composed of Democrats and Republicans, to investigate pre-war manipulation of intelligence and other matters and, if warranted, to make recommendations to the Judiciary Committee on possible grounds for impeachment.
"That's the man who would be Chairman of the Judiciary Committee," Russert ominously declared. He then asked if "John Conyers should take down his website."
Perhaps Mr. Russert has forgotten, but I have been a Chairman before. For five years, from 1989 to 1994, I was the Chairman of the House Government Operations Committee…. That was back when Congress did something called "oversight." You know, in our tri-partite system of government, when Congress actually acted like a co-equal branch. The Republican Congress decided to be a rubber stamp for President Bush instead.
Perhaps, if we had a little oversight, we wouldn't be mired in a war based on false pretenses in which we have lost thousands of our brave men and women in uniform and tens of thousands of innocent Iraqis…
Germany and the Second World War, volume VI:
A provocative discussion with Marc Andreessen and William Janeway
Tuesday, November 27 5:00 - 7:00pm
Join Marc Andreessen and influential economist, investor and entrepreneur William H. Janeway for a provocative conversation about the intersection of economics and innovation. Based on a lifetime of invaluable experience, Janeway, a self-described “theorist-practitioner”, will discuss his new book, Doing Capitalism in the Innovation Economy, and challenge entrenched ideas about the role of financial bubbles, busts and rebirths in fueling economic growth.
Marc has described Doing Capitalism in the Innovation Economy as "essential to anyone who wants to understand technology and how its creation will be financed for decades to come."
Kindly RSVP by November 15. Space is limited.
There are an astonishingly large number of things wrong in this statement -- some which mark Rubio's greenness on the national stage, and some that merely show the extent to which biblically-literal conservatism continues to hold sway over the GOP…. Rubio's remarks are not even an accurate description of what's laid out in the Bible…. The Earth itself was made on the first day, though it took until the third day for the waters to be gathered together and dry land to emerge…. Secondly, scientists estimate the age of the Earth from geological research on rocks from this planet, the moon, and from meteorites -- not from "recorded history."… The dispute is between science and an anti-modern strain of Christian theology rejected by leaders of a number of the major Christian denominations, including Pope Benedict XVI, who has said, "there is much scientific proof in favor of evolution, which appears as a reality that we must see and which enriches our understanding of life and being as such."… [W]hile there is necessarily always a certain humility involved in an endeavor like estimating the age of the universe, it is now calculated to be 13.7 billion years old, with an uncertainty of only 1 percent…. [I]t's not unreasonable to expect enough of an allegiance to reality to be able to acknowledge that the science is based on solid ground and should be treated as such by our public education systems…. "I don't think I'm qualified to answer a question like that," Rubio told GQ. But if he wants to oversee the world's premiere space program, the high-tech U.S. military, the education of America's youth, and policies to address our climate changing climate, he is going to need to be.
Okay, so the Republicans were demanding big tax cuts for the rich — lower income tax rates, and keeping in place the tax breaks that most benefit the rich, thereby insuring that the burden of any higher revenue would fall on the non-rich. Obama, incredibly, agreed to that….
The incredible thing is that even this offer was not enough.
Silver said most of the major network polls — NBC/Wall Street Journal, ABC/Washington Post, CBS/New York Times — are “pretty good," while the polls that faltered made too many assumptions about the population.
"The poll-only forecasts [of the Senate] — especially the Wang, RCP and Pollster forecasts — perform better than Nate’s mélange of state polls and economic fundamentals"
A Look Back at the airlift into the Demyansk Pocket:
The encirclement began as the Demyansk Offensive Operation, the first phase being carried out from 7 January-20 May 1942 on the initiative of General Lieutenant Pavel Kurochkin, commander of Northwestern Front. The intention was to sever the link between the German Demyansk positions, and the Staraya Russa railway that formed the lines of communication of the German 16. Armee. However, owing to the very difficult wooded and swampy terrain, and heavy snow cover, the initial advance by the Front was very modest against stubborn opposition. On 8 January, a new offensive called the Rzhev-Vyazma Strategic Offensive Operation started. This incorporated the previous Front's planning into the Toropets-Kholm Offensive Operation between 9 January and 6 February 1942 which formed the southern pincer of the attack that, beginning the second phase of the northern pincer Demyansk Offensive Operation between 7 January and 20 May, which encircled the German 16th Army's (Generaloberst Ernst Busch) IInd, and parts of the Xth Army Corps (General der Artillerie Christian Hansen) during winter 1941/1942.
Ann Marie Marciarille:
Missouri State of Mind: Missouri's Scope of Practice Wars: Missouri… one of the most restrictive… scope of practice for APRNs (advance practice nurses)… greatly underserved by primary care practitioners (PCPs)…. [I]t might get much worse with the addition of a further 17 million Americans moving into insured status under the Affordable Care Act. If we are stressed to provide PCP services in rural Missouri under the status quo (where an estimated 13 counties have only a CRNA -- Certified Registered Nurse Anesthetist-- to provide anesthesia services) what will happen if we expand Medicaid? Is this a reason not to expand Medicaid?
War on Nate Silver: Final After-Action Report: The Flag of Reality Flies Uncontested Over Silvergrad Weblogging
Two criticisms of Nate Silver that may be valid:
Silver introduces noise into his estimates by placing weight on a not very well-founded model of fundamentals-- witness his failure to get the North Dakota Senate race right.
Silver's model on election eve did not say that Obama had a 90% chance, it said Obama has a 99% chance. But Silver introduced a fudge factor: a
completely arbitrary20% chance based on the scanty history of state-level polling that the state-level polls were all substantially wrong in the same direction, and hence a 10% chance of a Romney victory. He would have been better advised to say: "My model says Obama has it nailed, but my model might be wrong--pulling a number out of the air, if you think there's a 20% chance that I have my head completely up my #%$, you can assign Romney a 10% chance. That would have aided communication.
And, below the fold, a bunch of criticisms of Silver and hunch-based forecasts that are not valid:
Deficit Hawks and Hypocrites: Back in 2010, self-styled deficit hawks — better described as deficit scolds — took over much of our political discourse. At a time of mass unemployment and record-low borrowing costs, a time when economic theory said we needed more, not less, deficit spending, the scolds convinced most of our political class that deficits rather than jobs should be our top economic priority. And now that the election is over, they’re trying to pick up where they left off.
Jonathan Portes: Not the Treasury view...: The Treasury Committee, cont: "My concern is not the economics"
Nelson, King, and Nicholas recall how much better Romney did than your average Republican senate candidate. And watch them give the "Stand fast! Not a step back!" order:
GOP Leaders' Debate: Change Message or Candidates?: "It is critically important we remain true to who we are," Virginia Gov. Bob McDonnell said in an interview here at the meeting of the Republican Governors Association. "We have to figure out how to make our principles more attractive to emerging voters. But if we abdicate those, we become a very different entity."… "America doesn't need two liberal political parties," said Louisiana Gov. Bobby Jindal, incoming chairman of the Republican Governors Association. "I think we need to be true to our principles."… In Florida, the Romney state campaign manager, Brett Doster, blames Mr. Romney's loss there on the campaign missing its targets in just three key counties, thus losing the state by 70,000 or so votes. "We fell short on registering and rallying voters and really building up the party. That's where we need to turn now," Mr. Doster said…. Gary Bauer said Republicans would be drawing the wrong lessons if they scrap long-held positions. "Panic is always a bad idea in politics," he said. And providing citizenship to 10 million or more illegal immigrants, he said, would boost the vote count for the Democratic Party. Iowa Gov. Terry Branstad joined others in dismissing suggestions that Republicans lost on the issues on Nov. 6. But like many GOP leaders, he faulted some of the party's candidates for remarks that alienated women and other groups. "We need candidates that don't say dumb things," he said.
Views Differ on Age of Planet - NYTimes.com: Quite a few bloggers are having fun with Marco Rubio’s bobbing and weaving in response to a question from GQ: "How old do you think the Earth is?"… As I like to say, the GOP doesn’t just want to roll back the New Deal; it wants to roll back the Enlightenment. But here’s what you should realize: when Rubio says that the question of the Earth’s age “has zero to do with how our economy is going to grow”, he’s dead wrong. For one thing, science and technology education has a lot to do with our future productivity — and how are you going to have effective science education if schools have to give equal time to the views of fundamentalist Christians?More broadly, the attitude that discounts any amount of evidence — and boy, do we have lots of evidence on the age of the planet! — if it conflicts with prejudices is not an attitude consistent with effective policy. If you’re going to ignore what geologists say if you don’t like its implications, what are the chances that you’ll take sensible advice on monetary and fiscal policy? After all, we’ve just seen how Republicans deal with research reports that undermine their faith in the magic of tax cuts: they try to suppress the reports…. So don’t laugh over Rubio’s young-earth apologetics. If he, or anyone else from his party, wins in 2016, the joke will be on us.