John Cassidy's Blog, page 54

The “Piketty Bubble” Is More Than Hot Air

When does an interesting intellectual development turn into a fad, devoid of any real content? In Thursday’s Financial Times, the columnist Robert Shrimsley presents an amusing taxonomy of what he calls “the Piketty bubble—a social and economic phenomenon that arises when everyone who considers themselves to be anybody feels the need to talk about a new book by French economist Thomas Piketty.”

As one of the first people to write a lengthy review of “Capital in the Twenty-first Century,” as well as a quick guide, in charts, to the story, I may have played a small part in initiating the Piketty phenomenon, which has now extended well beyond what anybody, the author and his publisher included, could have expected. For weeks now, the dense, seven-hundred-page tome has been at or near the top of the Amazon best-seller list. At one point, as orders hugely exceeded the initial print run from Harvard University Press, it sold out online. The digital version was still available for download. But Shrimsley notes that the print copy is especially prized, “as even those who know they will never read it want it on their bookcase.”

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Why Won’t U.S. Firms Invest More?

Kerplunk! That was the sound of the Commerce Department reporting that the U.S. economy almost came to a dead stop in the first three months of the year. Between January and March, G.D.P. grew at a rate of just 0.1 per cent. And that’s an annualized figure. From January to March, the economy expanded by just 0.025 per cent, or thereabouts. That’s virtually no growth at all.

Given the unusually bitter weather, Wall Street had been expecting a slowdown from the previous quarter, when the economy expanded at an annualized rate of 2.6 per cent. But the 0.1-per-cent figure was pretty shocking, and it raises two immediate questions: Why was it so low? And why, five years into an economic recovery, are American firms investing so little money in new capacity, new equipment, and new buildings?

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John Kerry and the A-Word: Three Takeaways

After two days of being pounded by Republicans and supporters of Israel, Secretary of State John Kerry bowed to the inevitable on Monday night, clarifying his warning that Israel, if it turns away from the peace process, risks turning into “an apartheid state.” Contrary to some reports, Kerry didn’t apologize for his language, but he did say he wished he hadn’t used that exact term.

“I have been around long enough to also know the power of words to create a misimpression, even when unintentional,” Kerry said in a statement issued by the State Department. “And if I could rewind the tape, I would have chosen a different word to describe my firm belief that the only way in the long term to have a Jewish state and two nations and two peoples living side by side in peace and security is through a two state solution.”

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John Kerry and the “A-Word”: Three Takeaways

After two days of being pounded by Republicans and supporters of Israel, Secretary of State John Kerry bowed to the inevitable on Monday night, clarifying his warning that Israel, if it turns away from the peace process, risks turning into “an apartheid state.” Contrary to some reports, Kerry didn’t apologize for his language, but he did say he wished he hadn’t used that exact term.

“I have been around long enough to also know the power of words to create a misimpression, even when unintentional,” Kerry said in a statement issued by the State Department. “And if I could rewind the tape, I would have chosen a different word to describe my firm belief that the only way in the long term to have a Jewish state and two nations and two peoples living side by side in peace and security is through a two state solution.”

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Is Vladimir Putin a Rational Actor?

“The goal is not to go after Mr. Putin personally; the goal is to change his calculus, to encourage him to walk the walk, not just talk the talk.”

That was President Obama speaking in Manila on Monday, shortly before the United States unveiled additional economic sanctions against Russian government officials and companies linked to Vladimir Putin. With the crisis in eastern Ukraine still escalating—just today, the mayor of Kharkiv, a city that had previously been pretty calm, was shot by unknown gunmen, leaving him critically wounded—the Obama Administration clearly felt obliged to punish Putin for failing to follow through on the deal reached in Geneva a couple of weeks ago. (The agreement stated, explicitly, “All illegal armed groups must be disarmed; all illegally seized buildings must be returned to legitimate owners; all illegally occupied streets, squares and other public places in Ukrainian cities and towns must be vacated.”)

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Facebook: The World’s Biggest Direct-Marketing Company

Having written a big piece about Facebook way back in 2006, I still feel a bit proprietorial about it—although it’s hard to have personal feelings for a Web site that eight hundred million people use every day. But Facebook, although it’s no longer new or cool, is still a fascinating company, especially if you are interested in online media, and the broader economics of the Internet economy. This week, the company announced bumper results for the first quarter of 2014: a billion dollars in pre-tax income and more than six hundred and forty-two million dollars in net income. Earnings were up about twenty per cent from the last three months of 2013. Compared to the same quarter twelve months ago, the firm generated almost three times as much income.

True, in the world of successful tech companies, Facebook is still a bit of a minnow. Apple made $10.2 billion in its latest quarter; Microsoft made $5.7 billion; Google made $3.5 billion. But Facebook has been a public company for less than two years, and during that time it has convincingly answered two questions that were hanging over its I.P.O. in May, 2012, when I described it, somewhat facetiously, as “the ultimate dot-com”: Could it translate its vast user base into dollars? And would it adapt successfully to the mobile world?

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Another Good Day for the Conservative Backlash

It’s been almost fifty years since Richard Nixon settled on his “Southern strategy” of mobilizing white voters alienated by civil-rights reforms. Almost the same amount of time has elapsed since the John Olin Foundation and other conservative groups set out to rein in the nation’s courts, and, in particular, the Supreme Court, which had played a key role in expanding the civil-rights agenda.

Both of these efforts reflected a broad-based backlash, overwhelmingly white, that Lyndon Johnson, Patrick Moynihan, and others foresaw quite clearly during the nineteen-sixties. Partly for demographic reasons, however, the political backlash eventually ran out of steam. After winning five elections out of six between 1968 and 1988, Nixon’s Republican party lost the popular vote in five out of the six subsequent elections, and it might well lose the next one, too. At the level of national politics, the old cry that whites are being treated unfairly seems to have lost some of its potency.

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Hillary Clinton’s Hard Choices

For more than a year, ever since leaving the post of Secretary of State, Hillary Clinton has been playing the game of being in but not officially in the 2016 Presidential contest. This strategy has accomplished what it was clearly intended to do: freezing the race and deterring any other top-level Democrats from entering it, while protecting Clinton from the additional media scrutiny and Republican attacks she would have faced if she had already declared her candidacy.

We are now at the place, though, where things get a bit trickier for the former senator and First Lady. On Friday, with the announcement that her upcoming memoir will be titled “Hard Choices,” she took a step in her move from undeclared candidate to somebody once again fully in the public eye. In making that transition, she faces a number of challenges that are distinct but ultimately come down to the same thing. When the electorate is convinced that the political system is broken, and wants change, how does one market an insider who has been on the national stage for more than twenty years, and who wants to advertise experience and sound judgment as her primary qualities?

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Is America an Oligarchy?

From the Dept. of Academics Confirming Something You Already Suspected comes a new study concluding that rich people and organizations representing business interests have a powerful grip on U.S. government policy. After examining differences in public opinion across income groups on a wide variety of issues, the political scientists Martin Gilens, of Princeton, and Benjamin Page, of Northwestern, found that the preferences of rich people had a much bigger impact on subsequent policy decisions than the views of middle-income and poor Americans. Indeed, the opinions of lower-income groups, and the interest groups that represent them, appear to have little or no independent impact on policy.

“Our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts,” Gilens and Page write:

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What Janet Yellen Didn’t Say: The B-Word

Appearing at a luncheon of the Economic Club of New York on Wednesday, Janet Yellen, the new head of the Federal Reserve, gave her first big speech on monetary policy, and, in some ways, a fine address it was. Yellen reiterated that there is still a good deal of slack in the labor market, and that the headline unemployment rate isn’t necessarily a reliable indicator. She said that low inflation and the threat of deflation were currently a bigger threat than rapidly rising prices. And, after comments last month that confused the markets, she gave every indication that the Fed would most likely keep interest rates at very low levels for a good time to come.

So far, so good. But what was most striking to me about Yellen’s remarks was that she didn’t even discuss the financial markets and the overriding need to avoid another damaging speculative bubble, like the ones that the American economy experienced in the late nineteen-nineties and mid-two-thousands. Indeed, Yellen didn’t use the B-word at all. Given that her immediate predecessors, Alan Greenspan and Ben Bernanke, will be remembered for, among other things, their roles in inflating the bubbles in the stock market and the housing market, that was a pretty remarkable omission.

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