Dean Baker's Blog, page 551

Greenspan on Face the Nation and Quoted on NPR

Former Federal Reserve Board chair Alan Greenspan shared his wisdom on Face the Nation yesterday. His wise words were presented in the top of the hour news segment on Morning Edition.

Greenspan is best known for being unable to see the $8 trillion housing bubble, the collapse of which wrecked the economy. Given Greenspan's obviously limited understanding of economics, one wonders if Face the Nation and NPR were unable to find a street drunk to share their views. 

Reign of Confusion at the NYT

The NYT told readers that a second recession could be even worse than the first. The reason is that people will have less of a cushion going in and that we are supposedly out of policy tools to get us out. There is some serious confusion here that is worth addressing.

First, it is true that most families have little left in reserve to deal with another layoff, so the NYT is absolutely right that a second downturn would really whack people that are already hurting. But there are two important ...

Fun With Thomas Friedman

Thomas Friedman tells us today that we have "win together or lose together." That's a really cute line.

Folks who look at the National Income and Product Accounts know that corporate profits are at a record high share of national income. And within corporate profits, the financial sector is at a record high. Given that we have 25 million people unemployed, underemployed or who have given up looking for work altogether, that doesn't seem like much togetherness. 

We could increase togetherness ...

Washington Post Redoubles the Effort to Gut Social Security and Medicare

The Washington Post is going full speed ahead in its quest to gut Social Security and Medicare. Its lead editorial told readers that:

"what seems to have sent markets panicking last week is a dawning sense that capitalist democracies may have made more promises than their economies are capable of fulfilling — without significant growth-generating structural reforms."

Cool, how did the Post determine this one? I would have guessed that markets were rattled by the fact that the ECB is run b...

The Difference Between Fox on 15th Street (a.k.a. The Washington Post) and a Real Newspaper

The Post featured a lengthy front page piece on the Republican debt ceiling strategy. Early in the article, it told readers that:

"Democrats called the GOP irresponsible for gambling with the economy and the nation's flawless credit. Republicans countered that an epic clash over the debt limit was inevitable, given the outcome of the election and widespread anger with runaway government spending."

There was no "runaway government spending." The bulk of the increase in spending was for...

The NYT Misrepresents China's Options and Accounting Identities

The NYT told readers that:

"Beijing has few options other than to continue to purchase United States Treasury bonds, Chinese officials are clearly concerned that China's substantial holdings of American debt, worth at least $1.1 trillion, is being devalued."

Both parts of this statement are wrong. Beijing has the option to stop buying dollars from its exporters. The reason that the government accumulates dollars and other foreign currencies is that it buys the currency from the companies w...

Credit Rating Agency that Rated Subprime MBS Investment Grade, Downgrades U.S.

This would have been an appropriate heading for this article on S&P's decision to downgrade U.S. government debt. S&P gave investment grade rating to hundreds of billions of dollars of mortgage backed securities. They received tens of millions of dollars from the investment banks for these ratings.

It would have also been worth asking what S&P thinks it means by this downgrade. U.S. government debt is payable in dollars. The U.S. government issues dollars. What does it mean that S&P thinks...

Trichet Did Allow the Housing Bubbles to Grow Unchecked

The NYT did a pseudo-retrospective on Jean-Claude Trichet as he approaches the end of his 8-year tenture as head of the European Central Bank. Remarkably, the piece never once mentions the fact that he allowed housing bubbles to grow unchecked in Spain, Ireland and elsewhere in the euro zone. These bubbles created huge imbalances that could not be easily corrected, as we are seeing now.

It was 100 percent predictable that these bubbles would burst and lead to a severe downturn. It is hard to ...

Trichet Did the Housing Bubbles to Grow Unchecked

The NYT did a pseudo-retrospective on Jean-Claude Trichet as he approaches the end of his 8-year tenture as head of the European Central Bank. Remarkably, the piece never once mentions the fact that he allowed housing bubbles to grow unchecked in Spain, Ireland and elsewhere in the euro zone. These bubbles created huge imbalances that could not be easily corrected, as we are seeing now.

It was 100 percent predictable that these bubbles would burst and lead to a severe downturn. It is hard to ...

Steven Pearlstein Says There is Little We Can Do About Unemployment

Pearlstein says it's really too bad but there is just not much the government can do to get the economy back on track:

"we shouldn't kid ourselves about how much government can do. Only markets can right-size companies and industries, find the market-clearing price for houses and shopping centers or bring wages in line with global competitive realities. Only markets can wring the speculative premium out of the price of stocks and commodities. And only markets can move workers from where ...