J. Bradford DeLong's Blog, page 130

Benito Cereno: The Untold Truth of the Holy Grail: "After...

Benito Cereno: The Untold Truth of the Holy Grail: "After settling into Jerusalem, the Templars protected pilgrims on their way in and out of the city. Over time, the group of knights grew to be a powerful military order for the church. Kings from all around Europe gave the knights land and lordships, so they wound up super rich and bought the island of Cyprus. Though they were valiant fighters known for their bravery, the Templars became just as well known for proto-banking skills. They invented paying by check. That may not sound as exciting as hiding messages in Da Vinci paintings, but it was a pretty big achievement. Pilgrims could give the Templars however much money they'd need in the Holy Land. It would be safer with the group of fearsome knights than a bunch of regular folks walking through the desert. So, the Templars would give the pilgrims a promissory note and make sure all the money would be waiting for them when they got there. They moved enough gold that the Templars became the most powerful bankers in the land. Again, this is probably not the kind of thing that would go in a summer blockbuster, but it's one of the few things we know for sure about the Templars...

#noted

Important to today, I think, is that the aliens in Ossian...

Important to today, I think, is that the aliens in Ossian's Ride are refugees: Henry Farrell: Ossian���s Ride: "In 1959 the famous British astronomer Fred Hoyle published his novel, Ossian���s Ride... a future Ireland miraculously transformed into a technological superpower.... Hoyle wasn���t really interested in talking about Ireland.... Instead, he wanted to score points in an internal fight over British identity... responding to the Christian apologist C.S. Lewis, who regularly denounced Hoyle as a secular atheist on radio and had written his own science fiction novel, That Hideous Strength, a decade before. The villain of Lewis���s book was a sinister institute called NICE, which Satanic aliens wanted to impose contraception, lesbianism, secularism and surrealist art on an unsuspecting Britain.... Hoyle riposted with a novel where rational and benevolently ruthless aliens used an organization called ICE to pull the priest-ridden republic next door into the technological age. His satirical portrait of Ireland told British readers that the world was being transformed around them, and that even their most backwards seeming neighbor would outstrip them if they didn���t embrace modernity. The irony of history is that Hoyle���s parody is now the truth...

...Today���s Ireland has its highways and its contraceptives. The referendum for marriage equality passed in a landslide, and the Taoiseach is a gay man. Ireland���s voters have embraced modernity with enthusiasm and a barely tolerable degree of self-congratulation. Irish Catholic reactionaries are a tiny, bitter minority. It wasn���t NICE or ICE that transformed Ireland, but the Treaty of Nice and the other European treaties before and after. European funding helped build roads, European market access helped build companies and inward investment, and European tax and regulatory loopholes helped build the Irish technology industry. European politics also leached the poison from the Anglo-Irish relationship....

Now it is Britain that has fallen back into the nightmare of history. Alexander Boris de Pfeffel Johnson models himself on Winston Churchill, while Jacob Rees-Mogg, that ungodly hybrid of Bertie Wooster and Roderick Spode, pines openly for the Victorian era. Pro-Brexit conservatives want to reverse the last few several decades, and return to a better era for Britain.... The fight between Lewis and Hoyle has been renewed. Daniel Hannan, a Lewis fan and key intellectual architect of Brexit, boasts that he has used the phrase ���that hideous strength��� to describe the European Union���s threat to Britain for over twenty years....

From the perspective of Ireland, there is nothing mysterious at all. No diabolical forces need be invoked: Europe has helped Ireland become a modern and truly independent country, and most Irish people are happy that it has done so. They look at Britain as Britain once looked at Ireland; a grotesque and somewhat terrifying example of how badly things can turn out in a country not unlike, and intimately connected to their own. Tomorrow, Hoyle���s intellectual descendants are gathering in Dublin for the 77th World Science Fiction Convention...

#books #globalization #neofascism #noted #orangehairedbaboons #sciencefiction

Alberto Gallo: "US 2-10yr yield curve inverts as macro da...

Alberto Gallo: "US 2-10yr yield curve inverts as macro data keeps weakening, central banks continue to embrace loose policy and bond investors rush to buy any oasis left in the yield desert...

#noted

I really do not understand this: if it were to be optimal...

I really do not understand this: if it were to be optimal policy to cut by 50 bp in a month, it is certainly optimal policy to cut by 25 bp now and probably optimal policy to cut by 50 bp now: Tim Duy: Another Portion of Yield Heading Toward Inversion: "Neither of the today���s developments���'easing' trade tensions or higher inflation���should prevent the Fed from easing at next month���s meeting.��I suspect though that they make it hard for the Fed to justify a 50bp cut in September.��If the economy needs a more aggressive Fed response up front to prevent recession, then a lower chance of that outcome... should induce the longer end of the yield curve to flatten further and then invert...

#noted

Talking points for [Squawk Box: Business, Politics, Investors and Traders: 7:45 AM EDT 2019-08-24

Note to Self: Talking points for Squawk Box: Business, Politics, Investors and Traders, 7:45 AM EDT 2019-08-24:

Deficits matter. How they matter depends on:

Is unemployment high or low?
Are interest rates low or high?
Is the debt sold to finance the deficit a solid asset or a shaky one?
Are you worried because the debt service is large, the deficit is large, or the debt is large?

At the moment the unemployment rate is low, so there is no reason to run a deficit:

A competent government would be running a surplus, to increase the fiscal space available to run a deficit when one becomes desirable.

But we have not had an even half-competent government since January 21, 2017
I would argue Mitch McConnell, John Boehner, and Paul Ryan's political strategies have kept us from having a more than half-competent one since January 21, 2011.

At the moment interest rates are very low, and the debt we sell is regarded by everyone as a very safe asset:

Thus running a deficit���even a very large deficit���is not an immediate problem.
Remember: economists look at quantities and prices:

We have an immediate problem when the quantity of the deficit to be financed is high and the price at which the bonds to finance it are sold is low,.
That is not us, now.

At the moment, debt service is low:

If we were a private borrower, standard financial planners and advisors would say that we were in quite good shape.
They would recommend that we carry a greater proportion of our debt long-term to lock in��the extremely advantageous interest rates at which we can borrow.
But they would not advise us to strain muscles to reduce our debt load.

There are subtleties with respect to a national debt that make things more complicated than a private household's accounts.
But the main message is: other problems are much more serious, and scarce energy should be spent dealing with more urgent problems.






#finance #fiscalpolicy #macro #notetoself #talkingpoints #2019-08-14

America���s Superpower Panic: Project Syndicate

Project Syndicate: America���s Superpower Panic: History suggests that a global superpower in relative decline should aim for a soft landing, so that it still has a comfortable place in the world once its dominance fades. By contrast, US President Donald Trump's incoherent, confrontational approach toward China could seriously damage America���s long-term interests.

BERKELEY���Global superpowers have always found it painful to acknowledge their relative decline and deal with fast-rising challengers. Today, the United States finds itself in this situation with regard to China. A century and a half ago, imperial Britain faced a similar competitive threat from America. And in the seventeenth century, the Dutch Republic was the superpower and England the challenger.

History suggests that the global superpower should aim for a soft landing, including by engaging with its likely successor, so that it still has a comfortable place in the world once its dominance fades. Sadly, US President Donald Trump is no historian. And his incoherent, confrontational approach to China could seriously damage America���s long-term interests.

Like Britain and the Dutch Republic before it, America is the world���s dominant military power, and its reach is global. It has some of the world���s most productive industries, and dominates global trade and finance.

But, also like its predecessors, America now faces a rising power���a confident, ambitious country that has a larger population, is hungry for wealth and global preeminence, and believes it has a manifest destiny to supplant the current hegemon. And, unless something goes badly wrong, the challenger���s continued rise is all but assured.

Inevitably, conflicts will arise. The up-and-coming superpower wants more access to markets and to intellectual property than the incumbent wishes to provide. And what the incumbent does not willingly give, its challenger will seek to take. Moreover, the rising superpower wants a degree of influence in international bodies commensurate to what its fundamental power will be a generation from now, and not to what it is today.

These are all legitimate disagreements, and the two powers need to manage them by advancing and defending their respective interests. But these tensions do not outweigh the two countries��� common interest in peace and prosperity.

What, then, should the incumbent hegemon do?

In the Anglo-Dutch case, a series of trade skirmishes and naval wars in the 1600s led to a remarkably large number of derogatory expressions entering the English language, such as Dutch book, Dutch concert, Dutch courage, Dutch leave, Dutch metal, Dutch nightingale, and Dutch reckoning. In the long run, though, Britain���s fundamental strengths proved decisive, and the country became a global power. Yet the Dutch created a world in which they were largely comfortable long after their predominance ended.

The Dutch shift from opposing Britain to engaging with it was a crucial factor in this transition. On October 24, 1688, a change in wind direction allowed the Dutch fleet to leave harbor in support of the aristocratic Whig faction in England, thereby ending the would-be absolutist Stuart dynasty. Thereafter, the two powers��� joint interests in limited government, mercantile prosperity, and anti-Catholicism formed the basis of a durable alliance in which the Dutch were the junior partner. Or, as a viral slogan of the 1700s more bluntly put it, there would be ���no popery or wooden shoes!��� ��� the latter being a contemporary symbol of French poverty. And with British backing, the Dutch remained independent, rather than falling involuntarily under French control.

More than a century later, imperial Britain eventually adopted a similar strategy of engagement and cooperation with America. This culminated, as Harold Macmillan unwisely (because too publicly) put it when he was seconded to General Eisenhower���s staff in North Africa during World War II, in Britain playing Greece to America���s Rome. As a result, the US became Britain���s staunchest geopolitical ally of the twentieth century.

Today, US policymakers could learn much by studying the actions of the Dutch Republic and Britain when they were global hyperpowers pursuing soft landings. In addition, they should read ���The Sources of Soviet Conduct,��� the 1947 article by US diplomat George F. Kennan that advocated a US policy of containment toward the Soviet Union.

Three of Kennan���s points stand out. First, he wrote, US policymakers should not panic, but recognize what the long game is and play it. Second, America should not try to contain the Soviet Union unilaterally, but rather assemble broad alliances to confront, resist, and sanction it. Third, America should become its best self, because as long as the struggle between the US and Soviet systems remained peaceful, liberty and prosperity would ultimately be decisive.

But since taking office in January 2017, Trump has steadfastly ignored such advice. Instead of forming alliances to contain China, Trump withdrew the US from the proposed Trans-Pacific Partnership trade deal. And he continues to make random, incoherent demands���such as immediately eliminating the bilateral US-China trade deficit.

Rather than carefully playing the long game with regard to China, Trump seems to be panicking. And, increasingly, China and the world know it.

#aspen #globalization #highlighted #orangehairedbaboons #projectsyndicate #strategy

Liveblogging: The Anglo-Saxon Chronicle: Egelbert

The Anglo-Saxon Chronicle (J.A. Giles and J. Ingram trans.): Egelbert: "A.D. 650. This year Egelbert, from Gaul, after Birinus the Romish bishop, obtained the bishopric of the West-Saxons...

...A.D. 651. This year King Oswin was slain, on the twentieth day of August; and within twelve nights afterwards died Bishop Aidan, on the thirty-first of August...

#liveblogging #history #anglosaxonchronicle

Is Plutocracy Really the Biggest Problem?: No Longer Fresh at Project Syndicate

Project Syndicate: Is Plutocracy Really the Biggest Problem?: After the 2008 financial crisis, economic policymakers in the United States did enough to avert another Great Depression, but fell far short of what was needed to ensure a strong recovery. Attributing that failure to the malign influence of the plutocracy is tempting, but it misses the root of the problem:

BERKELEY ��� Why did the policy response to the Great Recession only partly reflect the lessons learned from the Great Depression? Until recently, the smart money was on the answers given by the Financial Times commentator Martin Wolf and my Berkeley colleague Barry Eichengreen. Each has argued that while enough was remembered to prevent the 1929-size shock of 2008 from producing another Great Depression, many lessons were plowed under by a rightward ideological shift in the years following the crisis. Since then, the fact that the worst was avoided has served as an alibi for a suboptimal status quo.

Now, Nobel laureate economist Paul Krugman has offered an alternative explanation: plutocracy. At the start of the 2010s, the top 0.01%���30,000 people around the world, half of them in the United States���cared little about high unemployment, which didn���t seem to affect them, but were greatly alarmed by government debt. They began demanding austerity, and, as Krugman contends, ���the political and media establishment internalized the preferences of the extremely wealthy.���

Would the US economy of the 2010s have been materially different if the share of total income accruing to the top 0.01% had not quadrupled in recent decades, from 1.3% to 5%? Krugman certainly thinks so. ���While vigilance can mitigate the extent to which the wealthy get to define the policy agenda,��� he writes, ���in the end big money will find a way ��� unless there���s less big money to begin with.��� Hence, curbing plutocracy should be America���s top priority.
In fact, big money does not always find a way, nor does its influence necessarily increase as the top 0.01% captures a larger share of total income. Whether the average plutocrat has 1,000 or 50,000 times more than the average worker makes little difference in this respect. More to the point, big money wasn���t the primary determinant of whether policymakers heeded or forgot the lessons of the Great Depression.

For example, one lesson from that earlier episode is that high unemployment is extremely unhealthy for an economy and society; a depression is not, as the early twentieth-century economist Joseph Schumpeter once claimed, a ���good, cold douche��� for the economy. But this lesson was forgotten only by a lunatic fringe, some of whom suggested that the Great Recession was needed to shift workers out of bloated sectors such as home construction.

As for lessons that were forgotten, one is that persistent ultra-low interest rates mean the economy is still short of safe, liquid stores of value, and thus in need of further monetary expansion. During and after the Great Recession, denying this plain truth and calling for an end to stimulus became a litmus test for any Republican holding or seeking office. Worse, these politicians were joined by an astonishingly large number of conservative economists, who conveniently seemed to forget that the short-term safe interest rate is a good thermometer for the economy.

To be sure, ���big finance��� did play a role here, by insisting that the Fed was trying to push value away from ���fundamentals,��� even though economic fundamentals are generally whatever the Fed says they are. But an even more obvious culprit was hyper-partisanship.

Another lesson is that printing or borrowing money to buy stuff is an effective means for governments to address worryingly high unemployment. After 2009, the Obama administration effectively rejected this lesson, in favor of the logic of austerity, even though the unemployment rate was still 9.9%. A related lesson is that high levels of government debt need not lead to price instability or an inflationary spiral. As John Maynard Keynes argued in January 1937, ���The boom, not the slump, is the right time for austerity at the Treasury.��� Unfortunately, in the early 2010s, those of us who recalled this lesson were consigned to the margins of debate.

Yet, here, big-money influence was a secondary problem compared to the Democratic Party���s broader surrender to neoliberalism, which started under President Bill Clinton, but reached its apotheosis in the Obama era. After all, the plutocracy itself profits when money is cheap and lending is dear.
The larger issue, then, is an absence of alternative voices. If the 2010s had been anything like the 1930s, the National Association of Manufacturers and the Conference Board would have been aggressively calling for more investment in America, and these arguments would have commanded the attention of the press. Labor unions would have had a prominent voice as advocates for a high-pressure economy. Both would have had very powerful voices inside the political process through their support of candidates.

Did the top 0.01% put something in the water to make the media freeze out such voices after 2008? Did the ultra-wealthy create our modern campaign-finance system, in which elite social networks and door-to-door canvassing are less important than a candidate���s fund-raising totals? The problem is not so much that the plutocracy has grown stronger as that countervailing powers have disappeared. After all, there are wealthy donors and philanthropists on the left as well as the right, and some billionaires have even started to demand that they be taxed more.

Of course, the political implications of plutocracy are dangerous and destructive. In the US, Olin money has captured the judiciary, Koch money has misinformed the public about global warming, and Murdoch money routinely terrifies retirees about immigrants. But just because the public sphere is tainted and skewed by plutocratic influence does not mean that more rational policymaking is doomed. Once we are aware of the problem, we can begin to work around it.

Krugman admits as much when he warns ���centrist politicians and the media���not to pull another 2011, treating the policy preferences of the 0.1% as the Right Thing as opposed to, well, what a certain small class of people want.��� For journalists, academics, elected officials, and concerned citizens generally, the first task is to ask oneself everyday: Whose voices are getting more attention than they deserve, and who isn���t being heard at all? Ultimately, it is the public that will decide the fate of the public sphere.

#equitablegrowth #highlighted #inequality #projectsyndicate #plutocracy #publicsphere


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Another of the long-time right-wing affinity-fraud grifte...

Another of the long-time right-wing affinity-fraud grifters, S.E. Cupp, decides that it is time to leave the good ship SS. Trump & National Rifle Association: Ed Mazza: Conservative Pundit S.E. Cupp Quits The NRA, Makes Powerful Plea For Gun Control: "The former 'NRA Mom' now says 'we must do something'.... S.E. Cupp.... 'I am so sick and tired of participating in this predictable cycle of politics, where a mass shooting happens, the left calls for new gun laws���some meaningful, some unproductive���the right yells "slippery slope" and hides behind the Constitution....' She said that in the past, she���s defended the NRA and its members and argued against stricter gun laws. But not this time: 'I am no longer an NRA member. Being right no longer feels righteous because in the wake of more mass shootings, acts of senseless violence that sent innocent people running for their lives, leaving children orphaned, loved ones dead on the ground, we must do something about guns'... universal background checks, gun violence restraining orders, raising the minimum age for gun purchases to 21, banning 100-round drums, fixing the National Instant Criminal Background Check System, and mental health programs in schools. And she said some people, including domestic abusers and those who make violent threats, 'should never have access to a gun of any kind, period'...

#noted

The Flight to Safety in Asset Markets Has Now Become a Thing in Itself...

Note to Self: The market has now delivered 100 basis points of easing in the ten-year Treasury window since the end of last October. On the 30-year bond, you would have made a 20% profit if you both i9t last October and sold it today, compared to a 3.5% profit on the S&P Composite over the same period. That is a major, major sentiment shift. That means that a number of people short debt with riskier operations than the S&P Composite are about to face margin calls and rollover difficulties. We will shortly see how solvent the market judges them.

No, it is not yet August 2007. But it is much closer to August 2007 than I expected to see for another generation:

#forecasting #macro #notetoself #recessionwatch