J. Bradford DeLong's Blog, page 121

Moral fault attaches to anyone who supports the New Yor...

Moral fault attaches to anyone who supports the New York Times.

That is all.

#noted

This From Dan Alpert Still Makes Immense Sense

Note to Self: 30-Year Treasury bonds continue astonishingly, bizarrely low:

It is no longer the case that they are at their lowest levels ever, but this from Dan Alpert still makes immense sense: Dan Alpert: "We awake this morning to an all-time low yield on 30 year US Treasury bond: 2.107%. This is nearly 40 basis points below the average interest rate on all marketable treasury securities https://t.co/j3trQPFxfN. It is time to borrow and invest in infrastructure #LockItIn:

#notetoself #fiscalpolicy #macroeonomics

Let me direct your attention to one of the WCEG's young w...

Let me direct your attention to one of the WCEG's young whippersnapper grantees writing smart things: Samir Sonti: The Politics of Inflation: "amir Sonti studies 20th century U.S. labor and economic history. Sonti���s dissertation focuses on the politics of inflation in the United States from the 1930s to the 1980s. He received a bachelor of arts degree in political science and a bachelor of science degree in economics from the University of Pennsylvania...

#noted

Leo Strauss Gives a Cheer for His Right-Wing Principles: Fascist, Authoritarian, Imperial: Weekend Reading

Weekend Reading: Leo Strauss gives a cheer for his right-wing principles: fascist, authoritarian, imperial. I wonder what form his critique of the Nazi regime from those principles actually took?:

Leo Strauss: Paris, May 19, 1933: "Dear Mr. L��with: On your behalf I have in the meantime made the necessary overture to Groethuysen, who is in London. Besides this I had occasion to speak with Van Sickle, the head of the Rockefeller Foundation, and informed him about you, your situation, your work and your interests. He made a note of your name, so I am sure he will remember it when he comes across it in Fehling���s letter. As concerns me, I will receive the second year. Berlin recommended me, and that was decisive. I will also spend my second year in Paris, and I will attempt in this time to undertake something that will make my further work possible. Clearly I have major ���competition���: the entire German-Jewish intellectual proletariat is assembled here. It���s terrible���I���d rather just run back to Germany. But here���s the catch. Of course I can���t opt for just any other country-one doesn���t choose a homeland and, above all, a mother tongue, and in any event I will never be able to write other than in German, even if I must write in another language. On the other hand, I see no acceptable possibility of living under the swastika, i.e., under a symbol that says nothing more to me than: you and your ilk, you are physei subhumans and therefore justly pariahs. There is in this case just one solution. We must repeat: we, ���men of science"-as our predecessors in the Arab Middle Ages called themselves-non habemus locum manentem, sed quaerimus... And, what concerns this matter: the fact that the new right-wing Germany does not tolerate us says nothing against the principles of the right. To the contrary: only from the principles of the right, that is from fascist, authoritarian and imperial principles, is it possible with seemliness, that is, without resort to the ludicrous and despicable appeal to the droits imprescriptibles de l���homme to protest against the shabby abomination...

...I am reading Caesar���s Commentaries with deep understanding, and I think of Virgil���s Tu regere imperio... parcere subjectis et debellare superbos. There is no reason to crawl to the cross, neither to the cross of liberalism, as long as somewhere in the world there is a glimmer of the spark of the Roman thought. And even then: rather than any cross, I���ll take the ghetto. I do not therefore fear the fate of the ��migr��-at most secundum carnem: the hunger or similar deprivations. In a sense our sort are always ���emigrants���; and what concerns the rest, the fear of bitterness, which is certainly very great, and in this sense I think of Klein, who in every sense has always been an emigrant, living proof for the fact that it is not unconquerable.

Dixi, et animam meam salvavi.

Live well! My heartiest greetings to you and your wife

Leo Strauss

P.S.: My wife sends her thanks for your greetings, and reciprocates heartily.

Published Source: Leo Strauss, Gesammelte Schriften, Bd. 3: Hobbes��� politische Wissenschaft und zugeh��rige Schriften, Briefe (Heinrich Meier, ed.), Metzler Verlag 2001, pp. 624-25....

#fascism #moralresponsibiity #weekendreading

I used to push back against those who said that, with Tru...

I used to push back against those who said that, with Trump administration immigration policy, the cruelty is the point. I can no longer do so. In Guatemala, Maria Isabel Bueso would die quickly for lack of cutting-edge treatments:

Farida Jhabvala Romero: Feds to Reconsider Case of Bay Area Woman Getting Lifesaving Treatment Who Faces Deportation: "Maria Isabel Bueso has overcome many challenges as a result of the debilitating genetic disease she was born with that eventually left her confined to a wheelchair, breathing through a device and��reliant upon weekly treatments to survive. She trained to become a dance teacher and now is an instructor, and she graduated��summa cum laude from California State University, East Bay���where she set up a scholarship fund for students with disabilities. She also advocates for people with her disease and other rare illnesses, traveling to Washington, D.C., to lobby for medical research. Now, Bueso��is fighting for her life once more. Immigration authorities previously told her and her family to leave the U.S. by mid-September���or face deportation to her home country of Guatemala...

#noted #orangehairedbaboons

Being poor���and, more so, being poorer than you had expe...

Being poor���and, more so, being poorer than you had expected you would be and having to retrench���stresses you out and makes you unhappy. Blanchflower and Clark decompose the children-make-you-unhappy fact in Europe into a "poverty" and an "other" component, and what they report makes a slot of sense: Children in a well-funcioning family setting are a source of profound happiness, and poverty in particular and stress in general are sources of profound unhappiness:

David G. Blanchflower and Andrew E. Clark: Children, Unhappiness and Family Finances: Evidence from One Million Europeans: "The common finding of a zero or negative correlation between the presence of children and parental well-being continues to generate research interest.... One million observations on Europeans from ten years of Eurobarometer surveys.... Children are expensive, and controlling for financial difficulties turns almost all of our estimated child coefficients positive.... Marital status matters. Kids do not raise happiness for singles, the divorced, separated or widowed...

#noted

Melissa Etheridge and Serena Ryder: The Sing-Off...

Melissa Etheridge and Serena Ryder: The Sing-off!:

#fortheweekend #music

Weekend Reading: Nikita Khrushchev (1959): On Peaceful Coexistence

Nikita Khrushchev (1959): On Peaceful Coexistence: "The socialist states are ruled by the working people themselves.... To them war spells grief and tears, death, devastation and misery. Ordinary people have no need for war.... Peaceful coexistence does not mean merely living side by side... with the constantly remaining threat of [war] breaking out in the future. Peaceful coexistence can and should develop into peaceful competition for the purpose of satisfying man's needs in the best possible way.... Let us try out in practice whose system is better, let us compete without war. This is much better than competing in who will produce more arms and who will smash whom. We stand and always will stand for such competition as will help to raise the well-being of the people to a higher level.... We Communists believe that the idea of Communism will ultimately be victorious throughout the world, just as it has been victorious in our country, in China and in many other states.... We may argue, we may disagree with one another. The main thing is to keep to the positions of ideological struggle, without resorting to arms in order to prove that one is right.... With military techniques what they are today, there are no inaccessible places in the world. Should a world war break out, no country will be able to shut itself off from a crushing blow.... Ultimately that system will be victorious on the globe which will offer the nations greater opportunities for improving their material and spiritual life...

#weekendreading #coldwar #security #khrushchev #peacefulcoexistence

Weekend Reading: Charles Kindleberger: Anatomy of a Typical Financial Crisis

Weekend Reading: Charles Kindleberger: Anatomy of a Typical Financial Crisis: From Charlie Kindleberger, A Financial History of Western Europe:

p. 90 ff: No discretion was allowed in the issuance of bank notes, however.... Sir Robert Peel, the Prime Minister, first contemplated allowing a relaxing power in the 1844 legislation, but ultimately decided against it.... Peel protected himself... in a letter from Windsor Castle, written on 4 June 1844: "My confidence is unshaken that we have taken all the precautions which legislation can prudently take against a recurrence of a pecuniary crisis. It may occur in spite of our precautions; and if it does and if it be necessary to assume a grave responsibility, I dare say men will be found willing to assume such a responsibility (BPP 1847 [1969], Vol. 2, p. xxix)"...

The difficulty in making the note issue inelastic... is that it became inelastic at all times, when the requirement in an internal financial crisis is that money be freely available...

The Bank of England came to the rescue of the South Sea Company... belatedly, and at a punishing price... to dispose of a dangerous rival. Its recognition of its responsibilities in preventing, or at least mitigating, financial crisis in the public interest took more time. There was a lag in understanding the need to have the money supply inelastic in the long run but elastic in the short. A further question was whose task it was to serve as lender of last resort...

Thomas Ashton has stated that... the Bank of England was already the lender of last resort in the eighteenth century.... It is true that the Bank of England was pressured... but its response was, on the whole, reluctant and defensive.... The Bank occasionally took steps that increased the public's fear... 1745... 1772... 1782... 1793...

Critical debate over who should act as lender of last resort... took place behind closed doors in December 1825.... [Chancellor] Lord Liverpool, having warned the market... that the speculators were going too far and that the government would not save them... threatened to resign if Exchequer bills were provided.... The emergency required action by someone.... Lord Liverpool... applied enormous pressure on the Bank to force it to issue special advances to merchants against inventories...

The lender of last resort function reached full flower under the Bank Act of 1844. 'Overtrading' which Adam Smith held to be the cause of financial crises���which were in his lexicon 'revulsion' and 'discredit'���produced incidents in 1847, 1857, and 1866.... [M]en of responsibility, as foreseen by Sir Robert Peel, figured out a way to suspend the Bank Act.... [T]he Chancellor of the Exchequer issued a letter to the Bank of England...

p. 270 ff: The macroeconomic system receives some shock���caused by Hyman Minsky, who virtually alone of modern economists is interested in financial instability, a 'displacement' (1982). This displacement can be monetary or real... changes expectations... with respect to the profitability of some range of investments.... [I]t can happen, and historically has happened, that the sum total of all the people reacting to the opportunity is excessive... credit is extended... stimulates business... credit is extended further... euphoria... speculation... more pervasive credit expansion...

Time and time again in these pages it has been stressed that when the macroeconomic system is constrained by a tight supply of money, it creates more, at least for a time... bank money, bank notes, bills of exchange, especially chains of bills of exchange, bank deposits, open-book credits, credit cards, certificates of deposit, euro-currencies, and so one...

At some stage... it becomes clear to a few, and then to more, that... positions are extended beyond some limit sustainable in the long run, and that the maintenance of capital gains depends on getting out of assets rising in price ahead of others.... More and more speculators seek to get out of whatever was the object of speculation, to reduce their distended liabilities, and switch into money; and more and more it becomes cleer that not everyone can do so at once. There is a rush, a panic, and a crash���or perhaps the lender of last resort intervenes to make clear it will furnish the market with all the cash it insists it requires. In this circumstance, perhaps belatedly, panic and distress subside...

Historically, the burden of proof runs against a theorist who says that destabilizing speculation is impossible when the record shows displacement, euphoria, distress, panic, and crisis occurring decade after decade, century after century, and noted by such classical observers as Adam Smith in the eighteenth century and Lord Overstone in the nineteenth, quoted with approval by Walter Bagehot (1852 [1978], Vol. 9, p. 273).... Bagehot adds: "Common sense teaches that booksellers should not speculate in hops, or bankers in turpentine; that railways should not be promoted by maiden ladies, or canals by beneficed clergymen... in the name of common sense, let there by common sense (1852 [1978], Vol. 9, p. 275)." But history demonstrates that common sense in these questions is uncommon, at least at ten-year intervals....

Whether there is a theoretical rationale for letting the market find its way out of a panic or not, the historical fact is that panics that have been met most successfully almost invariably found some source of cash to ease the liquidation of assets before prices fell to ruinous levels. An important question is who has responsibility to provide that cash...

The lender of last resort role is riddled with... ambiguity, verging on duplicity. One must promise not to rescue banks and merchant houses that get into trouble, in order to force them to take responsibility for their behavior, and then rescue them when, and if, they do get into trouble for otherwise trouble might spread...

The central bank presumably seeks to follow rules of helping only sound houses with good paper. The dilemma is that if it holds off too long, what had been good paper becomes bad.... Lending to sound houses introduces a note of discretion and judgment... questions of insider-outsider, favoritism, and prejudice.... [T]here are bound to be questions raised as to whether the Establishment took care of its own and rejected the outsiders and pushy upstarts...

������

#weekendreading #finance #financialcrises #economicsgoneright

Hoisted from the Archives: In the interest of keeping our...

Hoisted from the Archives: In the interest of keeping our eye on the ball in FinReg, let me present Alan Blinder stating that incentives in banks that are too big to fail simply must be totally and completely broken and misaligned:

Alan Blinder (2005): On Raghuram Rajan: "I���d like to defend Raghu a little bit against the unremitting attack he is getting here for not being a sufficiently good Chicago economist.... The way a lot of these funds operate, you can become richer than Croesus on the upside, and on the downside you just get your salary. These are extremely convex returns. I���ve wondered for years why this is so. You don���t need to have public regulatory concerns to worry about it.... I remember a discussion I had with... one of the principals of the LTCM, while it was riding high. He agreed with me that the skewed incentives are a problem. But they weren���t solving it.... What can make it a systemic problem is herding, which Raghu mentioned, or bigness, which is related to the discussion that Fraga raised, and so on. If you are very close to the capital���for example, if the trader is the capitalist���then you have internalized the problem. So, it may be that bigness has a lot to do with whatever systemic concerns we have. Thus, I���d draw a distinction between the giant organizations and the smaller hedge funds. Whether that thinking leads to a regulatory cure, I don���t know. In other domains, we know, bigness has been dealt with in a regulatory way...

#noted #hoistedfromthearchives