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January 2018

Live from the Republicans' Self-Made Gehenna: IMHO, the most interesting thing about the SALT provisions in tax "reform" is who this one element of base-broadening is aimed at: squarely at those who used to be the core of the Republican base—Reagan's people, those who were not plutocrats but for whom America was working well: Marc Goldwein: @MarcGoldwein on Twitter: "Nearly ALL of the benefit of restoring State & Local Tax (SALT) Deduction would go to the top fifth of earners & more than half goes to the top 1%, per @TaxPolicyCenter. Those defending/encouraging workarounds to the SALT Deduction cap should keep this in mind..."

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Should-Read: The point of reporters quoting spin doctors is that they will then call the reporters again with a one-hour breaking of an embargo, and the reporters' editors will be pleased. The fact that the reporters are systematically misinforming their readers by, as Nick Confessore says, "cultivating sources", is, for Maggie Haberman and company, neither here nor there: Steve M.: DEAR MEDIA: WHAT'S THE POINT OF QUOTING SPIN DOCTORS?: "Maggie Haberman posted... on Twitter...

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Must-Read: Paul Krugman is, of course, right. Keynesian economists are much less sympathetic to monetarist positions—either with respect to the Great Depression or the Great Recession—than they were in 2007, much more confident in their own point of view, and also much more appreciative of Minskyite perspectives. Anti-Keynesian economists do not appear to have changed their minds at all: learning nothing, and forgetting much: Paul Krugman Notes on Farrell and Quiggin: "I’m not sure how many readers will realize the extent to which anti-Keynesian economic arguments, as opposed to those that Keynesians made, were invented on the fly...

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AAAAIIIIYYYYEEEE!!!!: Monday Smackdown—BitCoin Edition


Some people wish me ill. They keep emailing me things from John Cochrane. I wish they wouldn't. Or I wish I would develop some self-control. This is not making me happy:

First, let me set forth an intelligent, rational, measured assessment of BitCoin, made by somebody who was never a tenured finance economist at the University of Chicago:

Glenn Loury 2.0: @justabloodygame on Twitter: "Seriously, I read stories about people mortgaging their homes to buy Bitcoin and I want to rip my hair out..."

We can then compare this with the irrational word salad of John Cochrane. To the extent that there is an argument, it goes like this:

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Note to Self: Book haul of the day:


Should-Read: The big enchilada is, of course, the lack of affordable housing in California. It's a huge transfer to property owners and a huge tax on renters and on those who in a better timeline would move here, but cannot afford to in this one: Ian Perry: California is Working: The Effects of California’s Public Policy on Jobs and the Economy Since 2011: "Between 2011 and 2016, California enacted a set of 51 policy measures addressing workers’ rights, environmental issues, safety net programs, taxation, and infrastructure and housing...

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Should-Read: Question: has it always smelled like at least one of America's two parties is on the point of collapse and dissolution? I don't think so. But I would like somebody with more knowledge of the history to weigh in on whether this does feel like a party-breaking moment, like 1848-1854: Kevin Drum: The Republican Party Is in Full-On Panic Mode, and We Get to Watch: "Republicans are in panic mode over the possibility that Robert Mueller is about to start plowing relentlessly through the White House like a bulldozer leveling an old shack...

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Should-Read: How the Reagan Democrats (and non-rich Baby Boomer Reagan Republicans) hosed themselves—and their peers. There is an alternative America that went for a much larger Social Security system rather than the mirage of 401(k)s, and in which organizations like Mitt Romney's Bain Capital were not enabled and encouraged to exploit the gap between cash flow and control rights to expropriate the pension fund: Peter Whoriskey: ‘I hope I can quit working in a few years’: A preview of the U.S. without pensions: "Tom Coomer, 79... used to work at the McDonnell Douglas plant in Tulsa before it closed in 1994...

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Should-Read: My view is that it is more likely than not that the Never Trumpers have burned their careers as professional Republicans, as recipients of largesse from right-wing plutocrats, and that the Republican public intellectual future will belong to those who stayed quiet—neither conspicuously pro- nor anti-Trump. Which means, of course, that they will be of very low quality. The mainstream Republicans will say that the Never Trumpers overreacted: he is more public than second-term Reagan was, and much less disciplined, but it is not clear that he is any less of a chief executive than second-term Reagan was: Sam Tanenahus: On the Front Lines of the GOP's Civil War: "'Conservatives...' says Jennifer Rubin 'are not Americans first. They’re Trump defenders first'... ideological groupthink...

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Should-Read: The very sharp Matthew Yglesias is extremely frightened about the future of America. I am not so frightened of Trump—I think that even if Republicans holding on to both houses of Congress we will get checks and balances working either through Amendment 25 or through the Justice Department and the New York Attorney General. The thing that scares me more is the next Trump, the competent Trump, the fascist playing on ethno-cultural resentments and fueled by plutocracy. As Karl Marx wrote in his appallingly sexist way of what he saw as a similar episode with the rise of Napoleon III back in 1850: "It is not enough to say, as the French do, that their nation was taken unawares. Nations and women are not forgiven the unguarded hour in which the first adventurer who came along could violate them..." The very sharp Charlie Stross proposes that advertising-supported internet and cable have hacked our brains in the pursuit of, as Zeynep Tufekci puts it, "a dystopia to get people to click on ads", and that we are hosed. I find myself searching for analogous hackings by print post-Gutenberg, by pamphlet and folio in the Enlightenment, by the first mass media in the age of adult male suffrage, and by radio in the age of Nuremberg rallies and fireside chats—and how the public sphere developed defense mechanisms. But I do not have any answers here: Matthew Yglesias: 2018 is the year that will decide if Trumpocracy replaces American democracy: "Loyalty to Donald Trump is the new principle of Republican Party politics...

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Should-Read: Anybody know whether this is right? Whether Tether has actually managed to get a bunch of wanna-be arbitrageurs to implicity back it this way? Or, indeed, whether the Tether market issue figures are accurate? Chris Ellis (December 11, 2017): Bitcoin Only Has One Way To Go If This Is True-Winklevoss Bitcoin Trust ETF (Pending:COIN): "I believe that the fundamental value of the cryptocurrency is zero...

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Determining Bargaining Power in the Platform Economy: Reinvent Full Transcript


Reinvent: Determining Bargaining Power in the Platform Economy: Our political system has been hacked by time, circumstance, chaos, and disaster...

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Why Low Inflation Is No Surprise: Fresh at Project Syndicate


Project Syndicate: Why Low Inflation Is No Surprise by J. Bradford DeLong: BERKELEY – The fact that inflation has remained stubbornly low across the global North has come as a surprise to many economic observers. In September, the always sharp and thoughtful Nouriel Roubini of New York University attributed this trend to positive shocks to aggregate supply.... In my view, interpreting today’s low inflation as a symptom of temporary supply-side shocks will most likely prove to be a mistake. This diagnosis seems to misread the historical evidence from the period between the early 1970s and the late 1990s... Read MOAR at Project Syndicate

Should-Read: There are #actually two different issues that are labelled "r > g". The first is the sustainability of government debt: when the safe interest rate at which the government borrows exceeds the growth rate of the economy, government deficits heavily burden the future—as was the case before the South African gold rush of the 1890s, during the deflation of the 1930s, and from the Volcker Disinflation to the coming of the Global Savings Glut. In other times, a (well-managed and not imprudent) government debt serves as a national blessing—a source of safety for investors, and a source of financing for the government at negative overall taxpayer utility cost. The second issue is the Piketty issue: is the economy tending on its own to increase the salience of inherited wealth because the risky rate of return on passive investments exceeds the economy's growth rate—as has been the case save in periods of war, revolution, and the thirty glorious post-World War II years? But great work by: Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, Alan Taylor: The rate of return on everything: "Returns of major asset classes in the advanced economies over the last 150 years...

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Should-Read: The cross-breeding between the white Bourbon Democratic Party Herrenvolk South and the old-line Republican Party—the curse of Goldwater, Nixon, and Reagan—has produced something uniquely toxic in American history. The old-line Republican Party was the party of wealth and enterprise. It valued the rich and their wealth, yes, but its need for a mass base drove it to be the party of upward mobility and creative destruction—of those for whom the American economy had not yet worked but was working, and of those who expected the American economy to work for them. Strivers, not inheritors. Creative destruction, rather than ossified wealth. But when they discovered that playing on ethnic animosity and cultural fear could work and bring a mass base of activists into the tent, all of a sudden the party shifted its policies from seeking to advance those who expected to gain something to seeking to protect those who feared to lose something: Paul Krugman: "The central fact of U.S. political economy, the source of our exceptionalism, is that lower-income whites vote for politicians who redistribute income upward and weaken the safety net because they think the welfare state is for nonwhites...

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Must-Read: "A new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal. Now we are engaged in... testing whether that nation, or any nation so conceived and so dedicated, can long endure..." I have one big disagreement with Jonathan Kirshner. The America of Joe McCarthy, Massive Resistance, William F. Buckley, and George Wallace was the same public sphere as we see now in Facebook—don't blame the Internet for echo chambers and motivated reasoning, for it simply makes what was always going on more visible. Do blame Rupert Murdoch, Robert Bartley, Paul Gigot, and Rush Limbaugh. And blame more the professional Republican establishment that fell in line—behind Donald Trump and behind Roy Moore. But Kirshner is right in saying that henceforth America will always be the nation that elected Donald Trump, and the damage from that cannot be reversed: Jonathan Kirshner (January 15, 2017): America, America: "Consider what it took in Germany to bring about a Hitler...

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Comment of the Day: This is really nuts! When's the crash?: Spike: Ethereum! Blockchain! BitCoin!: "There is a nut of some interesting technology ideas involving blockchains that could potentially have applications that would be useful to explore...

...In short, by allowing for the synchronization of data structures across a multitude of systems without requiring any single one of those systems to be "in charge," the tech enables the development a unique class of applications, the properties of which we don't yet understand. The first of these applications to be developed involved a system for tracking and transferring the the ownership of digital pogs-aka, Bitcoin. This capability was latched on to by crazed Ron Paul fans who see it as a tool for overthrowing the Fed, as well as by online drug dealers.

It was the online drug dealers who found the most actual use for it, and for a time the thing actually worked as a semi-functional currency given that specific context. The Ron Paul fans, for their part, were content to just keep buy the stuff and never sell it. It's digital gold! However, it was not libertarians or drug dealers that actually created this wealth, except to the extent that many people from those groups also belong to the group that is now running the show: outright charlatans. These are the people who have basically figured out how to manipulate prices on the various cyrptocurrency exchanges, in large part by "printing money" in a way that would make the Fed ashamed.

The dirty secret that everyone knows is that a huge portion of the various cryptocurrency being traded is not being exchanged for actual money, but rather for something called "Tether," which have been created on the premise that every Tether in existence is backed by hard fiat currency in the form of a US dollar sitting in a bank account somewhere. Oddly enough, that bank account has never been audited, but the full faith and credit of the Tether Company seems good enough for teh market.

And yet, somehow a whole bunch of Tethers magically come into existence before every hike in the price of Bitcoin. So, these Tethers have been used to bid up the price of cryptocurrencies beyond all reason, and this has been magnified by a level of media hype that has brought in dumb-money "investors" out of the woodwork. This has had the infuriating effect of making Ron Paul fans very rich - at least on paper.

However, the cracks in the whole thing are showing as it becomes more and more apparent that actually extracting money from this system is very difficult. Bitcoin's usefulness as an actual currency went out the window months ago, as the price of conducting transactions has gone through the roof. And of course, the computers behind it use as much electricity as Ireland.

The whole thing is so goddamn unsustainable.