J. Bradford DeLong's Blog, page 2151

The Difference Between Illiquidity and insolvency

Paul Krugman on Ireland and the "rescue":

HAMPing Europe's Periphery: The markets don’t seem impressed by the Irish bailout — nor should they be. As I read it, European policy makers are still — still! — viewing the crisis as a confidence problem.... The Irish bailout is not, after all, what one normally thinks of as a bailout.... It’s simply an agreement to lend Ireland funds at more or less safe market rates. Now, this represents a considerable gift relative to the situation Ireland would be in without such funding: Ireland must, as you can see, pay very high rates to borrow on the private market. But if we think about why this is true, we can also see why the bailout isn’t likely to succeed.

The basic situation is that given the cost of rescuing Ireland’s banks, and the damage harsh austerity is inflicting on Ireland’s economy, investors are understandably skeptical that the Irish government will actually be able to meet its commitments. That’s why rates are high — to compensate for a possible default. Now, this process is self-reinforcing: higher rates make it even harder to meet Ireland’s commitments, which leads to still higher rates, and so on. The European bailout basically short-circuits this vicious circle. But the bailout will only work if the vicious circle is at the heart of the story — as opposed to being a symptom of the fundamental unsustainability of the austerity-and-full-repayment strategy. That is, it will work only if Ireland is the fundamentally sound victim of a self-fulfilling panic. And that’s a hard claim to make.

What would Ireland (and Greece, and Portugal, and …) need if the problem is not essentially one of confidence and liquidity? Actual debt relief. Yet that is not on the table. As I suggested in the title of this post, this is somewhat like the failure of the HAMP program, whose whole approach was based on the idea that homeowners essentially had a liquidity problem, so that rescheduling their payments would solve everything.

As it is, I don’t see how this is supposed to work. Ireland, like Greece, is now insulated from the need to go to the market. But it still faces an enormous debt load, made worse by deflation and stagnation. The situation has not been resolved.

Why Friends Don't Let Friends Vote Republican

John Berry:

What the Republicans Really Want - TheFiscalTimes.com: [J]ust before the mid-term elections, Senate Minority Leader Mitch McConnell candidly told the  National Journal, "The single most important thing we want to achieve is for President Obama to be a one-term president." If that means doing nothing to help 15 million Americans searching for work who can't find it, too bad. If that means blocking ratification of a nuclear arms control treaty with Russia that's wholeheartedly backed by all the top U.S. military leaders as needed for national security, so be it. If that means stone-walling efforts to stimulate the economy with business tax cuts, or  blocking extension of expiring jobless benefits, that's the way the cookie crumbles. If that means changing the law to direct the Federal Reserve to stop paying attention to unemployment and focus solely on inflation in its monetary policy decisions, we’ll ignore the fact that core inflation is the lowest in half a century.

In short, congressional Republicans don't want conditions in the United States to improve on any front before the 2012 elections. It's also clear they have no intention of cooperating with the president on any of the myriad problems facing the country. This was particularly evident when McConnell and John Boehner, incoming speaker of the newly Republican House of Representatives, said they were too busy to meet with Obama at the White House.

The Two Biggest Lies of George W. Bush

Dan Froomkin:

The Two Most Essential, Abhorrent, Intolerable Lies Of George W. Bush's Memoir: [T]he two most essential lies -- among the many -- in his new memoir are that he had a legitimate reason to invade Iraq, and that he had a legitimate reason to torture detainees. Neither is remotely true. But Bush must figure that if he keeps making the case for himself -- particularly if it goes largely unrebutted by the traditional media, as it has thus far -- then perhaps he can blunt history's verdict....

In "Decision Points," Bush describes the invasion of Iraq as something he came to support only reluctantly and after a long period of reflection. This is a flat-out lie. Anyone who paid any attention to the news at the time knew Bush was dead-set on war long before he sent in the troops in March 2003. And there is now an abundant amount of documentation, in the form of leaks, unclassified memos, witness interviews and other people's memoirs to prove it.... The only real question is whether he actively deceived the American public and the world -- or whether he was so passionate about selling the public on the war that he intentionally blinded himself to how brazenly Vice President Cheney had politicized and abused the intelligence process....

Bush writes in his memoir that the idea of attacking Iraq came up at a meeting of his national security team at Camp David, four days after the 9/11 attacks. By his account, it was then Deputy Defense Secretary Paul Wolfowitz who "suggested that we consider confronting Iraq as well as the Taliban." Bush writes that he eventually decided that "[u]nless I received definitive evidence tying Saddam Hussein to the 9/11 plot I would work to resolve the Iraq problem diplomatically."... In the first tell-all book from inside Bush's national security team, Richard A. Clarke wrote in 2004 of a meeting he had with Bush the day after 9/11:

The president in a very intimidating way left us, me and my staff, with the clear indication that he wanted us to come back with the word there was an Iraqi hand behind 9/11 because they had been planning to do something about Iraq from before the time they came into office.... I think they had a plan from day one they wanted to do something about Iraq. While the World Trade Center was still smoldering, while they were still digging bodies out, people in the White House were thinking: 'Ah! This gives us the opportunity we have been looking for to go after Iraq.'

Clarke notes that the following day, Defense Secretary Donald Rumsfeld complained in a meeting that there were no decent targets for bombing in Afghanistan and that the U.S. should consider bombing Iraq, which had better targets.

At first I thought Rumsfeld was joking. But he was serious and the President did not reject out of hand the idea of attacking Iraq. Instead, he noted that what we needed to do with Iraq was to change the government, not just hit it with more cruise missiles, as Rumsfeld had implied.

Just over two months later, on Nov. 21, 2001, Bush formally instructed Rumsfeld that he wanted to develop a plan for war in Iraq. Sixteen months after that, in March 2003, the invasion began....

That torture is even a subject of debate today is a testament to the devastating effect the Bush administration has had on our concept of morality. And in his book and on his book tour, far from hanging his head in shame, Bush is more explicit and enthusiastic than ever before endorsing one of torture's iconic forms. "Damn right," he quotes himself as saying in response to a CIA request to waterboard Khalid Sheikh Mohammed. "Had we captured more al Qaeda operatives with significant intelligence value, I would have used the program for them as well."

Bush's two-part argument is simple; That waterboarding was legal (i.e., that it was not really torture); and that it worked. But neither assertion is remotely true. Waterboarding -- essentially controlled drowning -- involves immobilizing someone and pouring water over their mouth and nose in a way that makes them choke. It causes great physical and mental suffering, but leaves no marks. It's not new; villains and despots have been using it extract confessions for something like 700 years. The CIA just perfected it. It is self-evidently, almost definitionally, torture. The U.S. government had always considered it torture. In 1947, the U.S. charged a Japanese officer who waterboarded an American with war crimes. It is flatly a violation of international torture conventions. And as far as I know, no American government official had ever even suggested it wasn't torture until a small handful of lawyers in Bush's supine Justice Department, working under orders from the vice president, claimed otherwise...

Friends Don't Let Friends Vote Republican

Why we would be better off if the Republican Party simply dried up and blew away tomorrow:

Video Cafe:

AMANPOUR: And, again, as Admiral Mullen said, it's not just a nice treaty with a foreign country. It is about Russia's cooperation on all the issues that the United States needs, whether it's Afghanistan, Iran, and all the rest of it. Plus, I don't know what you think, but some are saying that this could give rise to the hard-liners in Russia again, who just do not want to -- who just don't want to deal with the United States.

LUCE: Oh, absolutely. I think it's -- it's a dream -- if you picked two countries that would like to see a failure of [START]ratification, it would be North Korea and Iran. And I think that -- if that argument doesn't work with the Republicans, that sort of basic elemental national security argument doesn't work, nothing is. There's -- there's a greater hatred of Obama than there is a love of American national security.

Berkeley IIS Talk December 2

Thursday December 2: IES Rapid Response Forum:

Crying "Fire Fire" in Noah's Flood: What's behind the call for British Austerity?: Adiscussion with J. Bradford DeLong, Professor of Economics

12:30 pm European Studies Seminar Room (201 Moses Hall). A light lunch will be served.

I Can See That Imperial Romanov Russia Is a Bear. But What Is England?

Imperial German Propaganda: War is the answer!:

Liveblogging World War II: November 22, 1940

Greek forces capture the town of Korçe, 10 miles inside Albania, after heavy fighting.

Since Sarah Palin called for the Fed to "Cease and Desist" from Its Policy of Quantitative Easing, Has a Single Republican Economist Dared to Publicly Support Bernanke?

i Have Seven Lectures I Want to Give in the Rest of Econ 1 and Only Three Slots in Which to Give Them...

Econ 1: Fall 2010: U.C. Berkeley: Files for November 22 "Risk Aversion and Information Goods" Lecture

Risk Aversion and Information Goods:

Slides