"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Tuesday, September 01, 2015

Richard Muphy, Corbynomics and People's QE

I have added Richard (not Robert) Murphy's blog to my list.

Corbynomics 4 weeks on:

So, what of the most contentious one, People’s Quantitative Easing? Let’s break this down. For ease I will use The Economist again, but will refer to the many others who have made similar points.
First, the debate on investment has been welcomed, from the Economist, to the FT, to the Guardian and in the blogosphere: indeed, one of the criticisms is I have not made it strongly enough. As the Economist says:
As a percentage of GDP, Britain’s government investment is the seventh-lowest of 26 countries tracked by Eurostat (though it is higher than in some big economies, like Germany) and lower now than during the financial crisis.
The first success of this policy has been to put this issue back into debate.
Second, the idea of a National Investment Bank has been pretty widely welcomed. The Economist said:
To increase investment he wants to set up a “national investment bank”, which would, under government direction, spend on roads, houses and green energy. Nothing wrong with that.
Many agreed.
Third, the argument on Bank of England independence has been shown to be a red-herring. All QE has been Treasury approved: the idea that the BoE had operational control of this policy cannot be supported by any evidence. 
Fourth, it has been agreed, by Chris Giles in the FT and Larry Elliott in the Guardian for example, that PQE would have made sense in 2012 when stimulus was needed. In other words, PQE could have directed funds to the real economy more effectively then than actually happened at that time. Their argument is that PQE is, however, no longer relevant because we were now growing and they assume that will continue to be the case. Technically, the case was won at that point: the argument that PQE might work was over when it was conceded it was all down to timing.
Fifth, the argument that it is not legal has lost all head wind: it’s been effectively authorised in the UK and my design is Article 123 of the EU compliant. I have made clear I would expect some of the bond sales from the NIB, at least, to be held by the public, especially by pension saving institutions.
Sixth, some technical arguments on cost have been resolved: it is agreed that PQE would create new central bank reserves on which it has been conventional to pay bank rate interest, but as Adair Turner ha argued, that is just convention: there is no need to do so. Funding via PQE will then be cheaper than bond funding of the same investment and this matters when a significant part of UK gilts are owned overseas.
Seventh, the inflation argument got silly. The Telegraph turned up with the Zimbabwe argument, on cue. The fact that PQE is either clearly intended to stop if there is a risk of inflation because full employment is achieved, or would be countered (in that case only) by tax was not noticed by them. That’s just indication of the poverty of their thinking. There is no serious argument on this point: PQE is another tool in the armoury to create inflation when we do not have it, and need it.
Eighth, along came China. A week after I told the FT that another recession was likely and tools to deal with it would be needed China tried to deliver one. Now, of course, we have no clue what will happen as yet on that front, but markets are down and will stay down in my view, whilst people are very worried about what will happen if the Fed and BoE are daft enough to raise rates. Whether or not they do the risk of long term export of both recession and deflation from China itself via the emerging markets looks very real indeed. In other words, the need for a new fiscal tool when all monetary options have now failed became very starkly apparent and the prescient adoption of PQE by Jeremy Corbyn began to look like a good move: even the Telegraph seemed to note that.
Ninth, Mark Carney admitted monetary policy is near enough dead yesterday. He has said real interest rates of more than 1% (that means 1% over inflation) look unlikely for a long time to come. Thirty years ago real rates could be vastly higher: they have fallen 4.5% in real terms over that period, he says. The impact is significant. He is effectively saying that the room to manage the economy using interest rates has largely disappeared. With QE also largely discredited for creating asset price hikes, fiscal policy is now the only game in town. PQE is fiscal policy, but of course not the only fiscal policy. That is why it may well be important. What else is anyone going to use when the next crisis comes when no one else has suggested anything new: they just declare the cupboard bare?
Tenth, discussion of modern monetary theory has increased as a result, and that has clearly upset those dedicated to bond financing and / or central bank control of monetary policy. This is not an academic debate: it is about whether or not unelected people and bond markets control the choices governments make. PQE is not just a technical issue: it is about making clear who is in control, and I am emphatic it must be politicians accountable to parliament who are. PQE is intended to achieve that goal. No wonder that this has become a key point of contention. This is not about economics at all, per se: it is about the politics of power and in whose interests the economy is run. Difference here is not an issue of right or wrong: it is about belief. Many have not spotted this: I make it explicit.
And last, not everyone agrees on this issue. But haven’t you heard the one about asking two economists for an opinion and you will get three answers?
So, to summarise on PQE I suggest we’ve got somewhere near the following position:
1) Austerity can be opposed and PQE has fuelled that debate.
2) Investment is widely acknowledged to be needed. PQE delivers it.
3) A National Investment Bank is needed: PQE can help fund it
4) Private investors should not be excluded from these ideas: my suggestions on linking the NIB to pension saving as well as PQE should ensure that is possible. It also means the legality question goes away.
5) Questions of Bank of England independence have been raised but those doing so are going to have a much tougher time defending their case in future
6) Whether PQE is a policy only for recession is to be resolved: I certainly think it may have more use in that scenario but stress I do not think the state fills in the gaps left by the private sector. Sometimes it has to meet need and the curtail the private sector at the same time if social priorities are to be met. PQE and higher taxes can achieve that goal simultaneously. Those making the timing argument ignore this altogether and that is their mistake in my opinion.
7) The cost issue remains out there, although I am not sure why.
8) The bond preference issue is interesting, but is most often (but not always) used by those who have opposed their use for deficit funding, and so is in too many cases disingenuous. It also ignores the cost issue and the leakage out of the UK economy whilst still supporting the view that we are constrained by bond markets. We are not, and PQE indicates that fact. I fully admit that part of PQE is about changing narratives and power relationships and think that important.
I stress: I hope it is clear that I am listening and I do note the points made. But I also think PQE is still, very firmly, on the agenda after all that. It will change (it has already in some ways) but I can’t see it going away.
No doubt omissions will be pointed out. But please keep to the arguments: I am bored by the rest.
- See more at: http://www.taxresearch.org.uk/Blog/2015/08/30/corbynomics-four-weeks-on/#sthash.DG3hHVy3.dpuf

L + R = J + M

New Game Of Thrones fan theory adds an “M” to “R+L=J” by AV Club

Saturday, August 29, 2015

Stannis is alive in the books.

via Salon:
While we never exactly saw Stannis Baratheon die on the show, we did see him get a sword to the head courtesy of Brienne of Tarth before the camera cut away, making it seem pretty clear that the disgraced Lord of Dragonstone was well on his way to a rendezvous with the Many Faced God. As episode director David Nutter said at Comic-Con, “From the beginning, and [through] the script process, that was the intent — he’s dead.”
But according to George R. R Martin, Stannis is alive and well — at least in the books. At the end of “A Dance With Dragons”, Ramsay Bolton sends a letter to Jon Snow saying he has killed Stannis, even though we never witness the actual death take place. But addressing a fan on his LiveJournal who asked whether Stannis was alive or dead, Martin responded definitively: “In my books? Alive beyond a doubt.”
Of course, the books and the show often diverge (remember the whole Lady Stoneheart debacle?) so it’s possible that Stannis is alive in the books and dead in the show. Or it is possible that Stannis somehow survived Brienne’s sword and he has a part to play in the great (onscreen) battle of ice and fire to come. But most importantly, it leaves open the option that Book-Stannis could be redeemed as a character — which would be a nice consolation prize for the fans still reeling from TV-Stannis’ arc at the end of last season.

Friday, August 28, 2015

Chris Giles is the worst, or how to be a bootlicker for the rich and powerful special interests

I'll never subscribe to the FT.

How to be hard left without being stupid by Chris Giles
There is no left-right dividing line in sensible economic policymaking. Everyone needs to define their ambitions, understand how policy might achieve goals and recognise constraints. Mr Corbyn’s ambition is clear: he wants a more equal and a more prosperous society
Since this desire is shared across the political spectrum, the radical left must demonstrate its ability to act where other, more conservative forces, are constrained.
Not true. There is a left-right divide and that desire is not shared. They may say that, but their actions belie what they say.
All of this is economically literate, radical and left wing. Little of this is Corbynomics. For him, there are vast untapped pools of free money, to be accessed via setting up a national investment bank, attacking so-called “corporate welfare”, engaging in quantitative easing “for the people” or simply ending austerity.
Again, not true. This is the guy who attacked Piketty in a vague fashion.

Wednesday, August 26, 2015

Lisa Belkin on the Yonkers Housing Crisis

The Painful Lessons of the Yonkers Housing Crisis by Lisa Belkin
Crime has not increased. Property values have not decreased. Life is pretty much the same for those who lived on these blocks before the townhouses were built. And for those who moved in from the projects? The change of address didn’t solve all their problems, but it did make their lives safer, cleaner and measurably better.

Last month, the Obama administration announced that it would put teeth behind a policy making federal housing funds conditional on a city’s demonstrated efforts to reduce housing segregation. It won’t be easy. 
Already in Westchester County, not far north of Yonkers, local politicians are sounding exactly like those here in the 1980s. Ordered to build 750 units of affordable housing in 31 of its wealthiest, whitest towns, Westchester’s county executive, Rob Astorino, staged a photo op at Hillary Clinton’s front gate in Chappaqua, warning: “This is happening right here in Westchester County, and if you live in Ohio, if you live in Florida, if you live in Maine — wherever you live in the United States — you are next.” 
But if there is a new commitment from the federal government, and the longstanding but deeply frayed rules are actually (and finally) enforced, then perhaps the legacy of Yonkers can be more than Pyrrhic. Maybe we’re a few steps further along than we thought.

Tuesday, August 25, 2015

The Men in Blazers with David Simon

The Men in Blazers Show: David Simon Interview

I've been getting into Premier League Football/Soccer via NBCSN and USA. These guys had a funny interview with David Simon who was promoting Show Me A Hero.

Sunday, August 23, 2015

safe assets and the natural rate

My Quiz for Wannabe Keynesians by Roger Farmer

A Tale of Two Natural Rates by Roger Farmer

Farmer disagrees with Krugman who agrees with Williamson.

The Natural Rate Hypothesis: an ideapast its sell-by date by Roger Farmer

Why financial markets are inefficient by Roger Farmer

Wow Farmer predicts a Great Depression. A little alarmist.

Saturday, August 22, 2015

German wage repression

German Wage Repression: Getting to the Roots of the Eurozone Crisis By John Miller

Germany has been insistent that the so-called peripheral countries increase their competitiveness through slower wages rises or even wage cuts. Wage increases in Germany are an equally important, and symmetrical, part of this necessary adjustment process.
The wage increases are steps in the right direction, but relatively small steps. More gains for German workers in the future would be both warranted and a win-win proposition for Germany and its trade partners.
— Ben Bernanke, “German wage hikes: A small step in the right direction,” Brookings Institution, April 13, 2015.
Ben Bernanke not only supports recent German wage increases, he also thinks further wage increases for German workers are “warranted and a win-win proposition for Germany and its trade partners”?
Now that’s a jaw-dropper. Has the former head of the Federal Reserve Board—the guardian of “price stability,” which makes policy designed to keep U.S. wages in check—switched sides in the class war, now that he is retired?
Hardly. Rather, it’s that catering to the demands of German high finance and other elites has been so disastrous that even the former chair of the Fed cannot deny the undeniable: unless Germany changes course and boosts workers’ wages, the euro crisis will only worsen.
Let’s look more closely at just how German wage repression and currency manipulation pushed the eurozone into crisis, ignited a conflict between northern and southern eurozone countries (with Germany as the enforcer of austerity), and left Greece teetering on the edge of collapse.
From “Sick Man” to Export Bully
In 2000, Germany was widely considered “the sick man of Europe.” Through much of the previous decade, the German economy had grown more slowly than the European Union average, its manufacturing base had shrunk, and its unemployment rate had risen to near double-digit levels. Nor was Germany an export powerhouse, with its current account (the mostly widely used and most comprehensive measure of a nation’s financial balance with the rest of the world) showing a modest deficit in 2000.
Adopting the euro as its sole currency, in January 2002, was no panacea. For the next two years, Germany’s economy continued to stagnate. But converting to the euro—whose value was more or less an average of that of the stronger and weaker former currencies of the member countries—soon did improve Germany’s competitive position internationally. German exports, no longer valued in strong deutschmarks, but in weaker euros, became cheaper to buyers in other countries. At the same time, the exports of countries that used to have weaker currencies, such as the Greek drachma and the Spanish peseta, became more expensive. That alone transformed Germany’s current account deficit into a surplus.
China is widely accused of “currency manipulation,” keeping the renminbi weak to boost its exports. But few see that the eurozone—the now 19- country bloc sharing the euro as its common currency—has functioned for Germany as a built-in currency manipulation system. And much like China, Germany used a lethal combination of wage repression and an undervalued currency to boost its exports and output at the expense of its trading partners.
Following the adoption of the euro, Germany instituted a set of “labormarket flexibility” policies intended to further improve its international competitiveness. Known as the “Agenda 2010 Reforms,” the new policies reduced pensions, cut medical benefits, and slashed the duration of unemployment benefits from nearly three years to just one. They made it easier to fire workers, while encouraging the creation of parttime and short-term jobs. The Organisation for Economic Co-operation and Development (OECD) reports that, from the mid-1990s to 2008, the incomes of the poorest 30% of Germans actually declined in real (inflation-adjusted) terms. Germany’s repressive labor policies kept a lid on wage growth. In every year from 2000 through the onset of the financial crisis in 2009, German compensation per employee increased more slowly than the eurozone average, and less even than in the United States.
During the 1990s, German workers’ real (inflation-adjusted) wages rose along with productivity gains, meaning that employers could pay the higher wages without facing higher labor costs per unit of output. After 1999, wage gains no longer kept pace with productivity, and the gap between the two widened. As wages stagnated, inequality worsened, and poverty rates rose. Total labor compensation (wages and benefits) fell from 61% of GDP in 2001 to just 55% of GDP in 2007, its lowest level in five decades.
German wage repression went even further than necessary to meet the 2% inflation target mandated by the eurozone agreement, and insisted upon by German policymakers. Unit labor cost (workers’ compensation per unit of output) is perhaps the most important determinant of prices and competitiveness. Unit labor cost rises with wage increases but falls with gains in productivity. From 1999 to 2013, German unit labor cost increased by just 0.4% a year. The reason was not German productivity growth, which was no greater than the eurozone average over the period; rather, it was that German labor-market policies kept wage growth in check.
This combination of a built-in system of currency manipulation afforded by the euro and labor-market policies holding labor costs in check turned Germany into the world’s preeminent trade-surplus country. As its competitive advantage grew, its exports soared. Germany’s current account surplus became the largest in the world relative to the size of its economy, reaching 7.6% of the country’s GDP, more than twice the size of China’s surplus compared to its GDP.
Beggar Thy Neighborhood
Germany’s transformation into an export powerhouse came at the expense of the southern eurozone economies. Despite posting productivity gains that were equal or almost equal to Germany’s, Greece, Portugal, Spain, and Italy saw their labor costs per unit of output—and in turn prices rise— considerably faster than Germany’s. Wage growth in these countries exceeded productivity growth, and the resulting higher unit labor costs pushed prices up by more than the eurozone’s low 2% annual inflation target (though by only a small margin).
The widening gap in unit labor costs gave Germany a tremendous competitive advantage and left the southern eurozone economies at a tremendous disadvantage. Germany amassed its ever-larger current account surplus, while the southern eurozone economies were saddled with worsening deficits. Later in the decade, the Greek, Portuguese, and Spanish current account deficits approached or even reached alarming double-digit levels, relative to the sizes of their economies.
In this way, German wage repression is an essential component of the euro crisis. Heiner Flassbeck, the German economist and longtime critic of wage repression, and Costas Lapavistas, the Greek economist best known for his work on financialization, put it best in their recent book Against the Troika: Crisis and Austerity in the Eurozone: “Germany has operated a policy of ‘beggar-thy-neighbor’ but only after ‘beggaring its own people’ by essentially freezing wages. This is the secret of German success during the last fifteen years.”
While Germany’s huge exports across Europe and elsewhere created German jobs and lowered the country’s unemployment rate, the German economy never grew robustly. Wage repression subsidized exports, but it sapped domestic spending. And, held back by this chronic lack of domestic demand, Germany’s economic growth was far from impressive, before or after the Great Recession. From 2002 to 2008, the German economy grew more slowly than the eurozone average, and over the last five years has failed to match even the sluggish growth rates posted by the U.S. economic recovery. With low wage growth, consumption stagnated. German corporations hoarded their profits and private investment relative to GDP fell almost continuously from 2000 on. The same was true for German public investment, held back by the eurozone budgetary constraints.
At the same time, Germany spread instability. Germany’s reliance on foreign demand for its exports drained spending from elsewhere in the eurozone and slowed growth in those countries. That, in turn, made it less likely that German banks and elites would recover their loans and investments in southern Europe.
Wage Repression and the Crisis
No wonder Bernanke now describes higher German wages as an important step toward reducing Europe’s trade imbalances. More spending by German workers on domestic goods and imports would help Germany and its trading partners grow, and improve the lot of working people throughout the eurozone.
Of course, much more needs to be done. Putting an end to the austerity measures imposed on Greece and the other struggling eurozone economies would boost their demand as well. In fact, it would also better serve the interests of Germany and the profit-making class, by helping to stabilize a system from which they have benefited so greatly at the expense of much of the region’s population.
Still, raising the wages of German workers to match productivity gains is, as Bernanke recognizes, surely a step in the right direction. Raising U.S. wages to match productivity gains would help defuse U.S. wage repression and boost economic growth here as well. If Bernanke throws his weight behind that proposition, we’ll truly wonder which side is he on.
Sources:  Kaja Bonesmo Fredrikson, “Income Inequality in the European Union,” OECD Economic Department Working Papers, No. 952, April 16, 2012; Brian Blackstone, “Germany’s Rising Wages Bode Well for Global Economy,” Wall Street Journal, April 12, 2015; Heiner Flassbeck and Costas Lapavistas, Against the Troika: Crisis and Austerity in the Eurozone(Verso, 2015); Real News Network, Interview with Heiner Flassbeck: “Germany’s Collective Denial,”  Feb. 22, 2015; Ben Bernanke, “Greece and Europe: Is Europe Holding up its end of the Bargain?” Ben Bernanke’s Blog, July 17, 2015; Philippe Legrain, “Germany’s Economic Mirage,” Project Syndicate, Sept. 23, 2014.
John Miller is a professor of economics at Wheaton College and a member of the Dollars & Sense collective.

Tuesday, August 18, 2015

Corbynomics and a QE for the people

CORBYNOMICS - MEH by Chris Dillow

Economist defends 'Corbynomics' after Chris Leslie's criticism

People's QE and Corbyn’s QE by Simon Wren-Lewis

Now the Bank of England needs to deliver QE for the people by Mark Blyth, Eric Lonergan and Simon Wren-Lewis

The Constant Reserves Multiplier by Eric Lonergan

On Corbynomics by Chris Dillow

Invest in Our Future by Jeremy Corbyn

The Bank, helicopter money and fiscal conservatism by Simon Wren-Lewis

Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People by Mark Blyth and Eric Lonergan


 The Greek Warrior by Ian Parker
It was as if Christopher Hitchens had woken up one day as Secretary of State. Varoufakis was no longer writing elegantly prosecutorial blog posts about Christine Lagarde, the managing director of the I.M.F.; he was meeting with Lagarde. Within days of Greece’s election, an academic with Marxist roots, a shaved head, and a strong jaw had become one of the world’s most recognizable politicians. He showed a level of intellectual and rhetorical confidence—or, perhaps, unearned swagger—that lifted Greek hearts and infuriated Northern European politicians. His reluctance to wear a tie seemed to convey the impossibility of containing his manliness.

Saturday, August 15, 2015

the enemy

Was it possible, that at every gathering--concert, peace rally, love-in, be-in, and freak-in, here, up north, back east, wherever--those dark crews had been busy all along, reclaiming the music, the resistance to power, the sexual desire from epic to everyday, all they could sweep up, for the ancient forces of greed and fear?
Pynchon, Inherent Vice