Dean Baker's Blog, page 477

NYT Promotes Generational War

The NYT had an article reporting the fact that whites did not constitute a majority of births in the United States for the first time in the 12 months from July 2010 to July 2011. While this is interesting, it is important to note that the concept of "white" is not well-defined. In the late 19th century, many people of northern European ancestry would not have considered people from the southern Europe and eastern Europe to be of the same racial group. This hostility was put into law in immig...

Credit Suisse Pulls Up the Firetruck After the Building Has Burnt to the Ground

The Wall Street Journal gave considerable play to a new report by Credit Suisse that warns about the condition of multi-employer pension plan. The article tells readers that the Department of Labor:

"uses an 'actuarial' reading of the numbers, which envisions an average (and hefty) 7.5% rate of return on investments, smoothed over five years."

Actually, given the current price to earning ratio in the stock market, a 7.5 percent nominal return assumption is perfectly reasonable for funds that...

WAPO Wrong Again: Spain and Ireland Did Not Overspend and Overborrow

As President Reagan used to say, "there you go again." Yes, the Washington Post is once again telling its readers that the problem in Europe is profligate spending by the crisis countries. The fact that this is not true apparently does not concern the paper.

At one point a front page article on the governmental crisis in Greece tells readers:

"Governments have dramatically cut spending in Greece and other euro-zone members — including Spain, Italy and Ireland — to try to restore investor conf...

Robert Samuelson's Lessons from Jamie Dimon's Bad Bet

Robert Samuelson says that people are taking away the wrong lessons from JPMorgan's $2 billion loss on a proprietary trade gone bad. He has some legitimate points but carries his case too far.

First, he notes that this bet did not threaten either the banking system or JPMorgan. He points out that JPMorgan is a huge and highly profitable bank. Its books look to be in reasonably good shape. A $2 billion loss will be felt, but this is less than the normal profit in a quarter. It does not come cl...

The Washington Post Says That Critics of European Austerity Don't Say How Spending Would be Funded

I think what we have here is a failure to communicate. All the critics I know, like Paul Krugman, Brad DeLong, Mark Thoma and myself, have been very specific that the European Central Bank (ECB) will have to provide some form of guarantee for the debt of the crisis countries. It will also have to promote higher inflation in the euro zone as a whole and particularly in Germany and other core countries. The former step would allow countries to borrow, while the latter would provide the basis fo...

Washington Post Uses News Section to Bemoan Cutbacks in Government Waste

The Washington Post constantly uses both its news and editorial pages to push for its view of fiscal responsibility. While this ostensibly means lower budget deficits, the theme that is most consistent in Post reporting is that programs that benefit the middle class (e.g. Social Security and Medicare) should be cut.

This was very clear in a news story on the prospects for a year-end budget deal. The very first sentence in the piece was:

"defense contractors have slowed hiring."

This is clearl...

Europe Does Have a Safety Net, It's Called the European Central Bank

A Washington Post article on the crisis in Greece and its potential impact on Europe's economy told readers that:

"growth in China slowing and U.S. officials looking to tame record government deficits .....[is] leaving Europe, in a sense, operating without a safety net."

Actually, Europe has a perfectly good safety net. It is called the European Central Bank (ECB). The ECB, if it chose to act like a central bank, could guarantee the debt of Italy, Spain and other heavily indebted countries. T...

David Brooks Is Disappointed that Politicians Are Not Philosophers

In a discussion of President Obama's re-election prospects David Brooks bemoans the fact that:

"this race, like almost all re-election races, is shaping up to be a referendum on the incumbent, not a choice between two visions."

When would an election ever be "a choice between two visions?" Why would anyone expect a politician to have a vision? Do accountants and truck drivers have visions?

Most probably do, but it is irrelevant to their jobs, just as a presidential candidate's vision is irrel...

Too Little Trading on Wall Street? The NYT Should be Kidding

I had to check repeatedly to make sure that it is not April 1 when I read a NYT editorial complaining about too little trading on Wall Street. The editorial does raise a legitimate point. Many people are wary of Wall Street because they don't trust the financial sector to treat them honestly for some of the reasons mentioned in the piece.

However this has little to do with trading volume. Middle class people should be able to be comfortable putting money in the stock market, but they should a...

The Economic Crisis is Just So Complicated: #54,311

Andrew Gelman points us to a peculiar Bloomberg column by Reid Hastie that refers to some well-known research results from cognitive pyschology with the seeming purpose of undermining efforts to hold anyone accountable for the economic crisis. The piece tells us:

"Just as we are wired to like a diet rich in fats and sugars, we have an appetite for simple, coherent narratives."

which we are urged to remember:

"the next time you hear a good story about why the financial recession, or any other...