John Cassidy's Blog, page 58

Does Tackling Inequality Reduce Growth? No

In the ongoing debate about rising income inequality, two questions are often raised: one from the left—Is rising inequality impeding economic growth? And the other from the right: Does tackling inequality, which usually involves some form of redistribution, reduce growth?

The questions reflect differing concerns and differing world views. In his 2012 book, “The Price of Inequality,” Joseph Stiglitz, the liberal Columbia economist, argued that recent trends in income distribution threatened not just economic growth but the very fabric of democracy. On the other side of the ideological divide, conservative economists claim that tackling inequality—by, for instance, raising taxes on the rich and using it to finance government programs for the poor—has adverse effects on incentives and restricts growth, which is counterproductive for everybody.

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Bitcoin Falls Victim to Galbraith’s “Bezzle”

For those of us who have resisted the urge to invest any financial or intellectual capital in bitcoins, the collapse of Mt. Gox, the largest trading platform for investors in the virtual currency, can be observed with detachment, and even amusement. But some, perhaps many, “owners” of bitcoins aren’t so lucky. The old-school cash—dollars and euros and yen—that they swapped for a string of digits appears, at first glance, to have been lost.

Kolin Burgess, a British bitcoin investor who spent much of Tuesday protesting outside of Mt. Gox’s abandoned office, in Tokyo, told a reporter for Reuters that he thought he had accumulated Bitcoins that were worth three hundred thousand dollars at the market’s peak. “I’m very angry,” he said. “It looks like that’s disappeared.”

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Obama’s Unpopular Stimulus Won’t Be the Last

In Monday’s Financial Times, Ed Luce, one of the most astute Washington columnists, made the argument that President Obama’s 2009 stimulus package, despite its evident success in preventing an economic cataclysm, might well mark the end of Keynesian stimulus policies, at least on this side of the Atlantic. “On political grounds, the largest fiscal stimulus in history is close to being toxic,” Luce wrote. And he went on: “The Keynesian Humpty Dumpty was shattered the day Mr. Obama’s stimulus was enacted. It is very hard to see how it will be put back together again…. Keynesianism has been supplanted by Austerianism.”

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Facebook and WhatsApp: A Deal Too Far?

I’m on vacation in Mexico this week, with limited Internet access, but here are a few immediate thoughts on Facebook’s acquisition of WhatsApp, a messaging start-up. I won’t pretend to be an expert on WhatsApp, or on what distinguishes its technology from that of other similar services. But, from a financial perspective, the obvious thing that stands out is the price that Facebook is paying: up to nineteen billion dollars.

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Does Comcast Own Washington?

Well, the initial verdicts on the Comcast-Time Warner merger proposal are in, and they are largely negative? The Consumers Union: “This has the potential to be a very bad deal for consumers.” The Financial Times: “Too often, the Federal Communications Commission has let itself be bought off…This time it should steel itself to say no.” Michael Copps, former member of the F.C.C.: “This is so over-the-top it ought to be dead on arrival at the F.C.C.”

With big cable companies already hugely unpopular, someone unfamiliar with Washington might assume that the merger has no chance of being approved. But that would be an error. Comcast is an extremely well-connected company, and it is going up against a set of politicians and regulators who are compromised by their prior dealings with the company, or other big players in the cable industry.

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G.O.P. Succumbs to Rare Outbreak of Sanity

This post has been updated.

There was a rare outbreak of sanity in the Grand Old Party on Tuesday, when Speaker John Boehner and a group of his allies joined with the Democrats to approve a raise in the debt ceiling without any preconditions, thereby avoiding the risk of the United States defaulting on its financial obligations. Never fear, though: the outbreak has been contained, and there doesn’t seem to be any danger of contagion.

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Ten Takeaways from Janet Yellen’s Big Day

1) She did well. When testifying on Capitol Hill, especially when testifying for the first time, the primary task of any Fed chief is to avoid making mistakes that could upset the markets, or undermine confidence in his or her abilities. This, Janet Yellen, the pride of Fort Hamilton High School, certainly accomplished. For more than three and a half hours, she sat patiently before the members of the House Financial Services Committee and took questions on everything from quantitative easing to Japanese trade policies. By the time she’d finished, the headline of the day was still one taken from her written testimony, in which she promised “a great deal of continuity” with the policies of her predecessor, Ben Bernanke. That was a sure sign that Yellen hadn’t made any gaffes.

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The New Public-Interest Journalism

Lately, there’s been a lot of coverage of well-known journalists launching their own Web sites or going it alone with their existing ones: Glenn Greenwald, Nate Silver, Ezra Klein, and the All Things Digital crew come to mind. Now there’s an unlikely addition to the field: Bill Keller, the former executive editor and columnist of the Times. On Sunday, Keller announced he was leaving the paper to lead an online startup devoted to covering the criminal justice system.

The news about Keller came hours before Greenwald’s new site, The Intercept, went live. It launched with an exclusive and disturbing story about the N.S.A.’s role in selecting targets for drone attacks, which, it claimed, contributes to the killing of innocent civilians in places like Pakistan and Yemen. The story relied on an unnamed source who used to operate U.S. drones, and it also quoted from documents that Edward Snowden that discussed drone operations. (Greenwald and Laura Poitras, one of his colleagues at The Intercept, were two of the journalists who broke the Snowden story.)

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Which Internet Stock Is the Most Overvalued?

This was the week that some Internet stocks hit an air pocket. Twitter, LinkedIn, and Pandora all fell sharply after issuing earnings reports that disappointed Wall Street. Relative to the rest of the market, though, online companies are still valued highly, and their prices have risen significantly. On February 6, 2009, the Nasdaq Internet index, which consists of eighty online companies, closed at 83.80. On Friday, five years later, it closed at 400.34. That’s a rise of more than four hundred and seventy-five per cent.

Which raises a question: After this week’s fall, which Internet company is the most overvalued?

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Jobs Report Is Disappointing But Not Disastrous

Not so very long ago, I was talking with someone who is, as they say, close to the White House. It’s so frustrating, he told me: we keep getting these periods when the economy seems to be picking up, and job growth is accelerating; then, wham, we get another disappointing employment report, and it’s back to where we were.

Well, the White House just took another one on the chin—two, actually. The latest payroll report by the Labor Department showed that the economy created just a hundred thirteen thousand jobs in January, and seventy-five thousand in December. That’s not even half the rate of job growth we saw for 2013 as a whole. Taken at face value, it suggests that the economic recovery, far from strengthening—which is what I and many other analysts have been suggesting—is actually sputtering.

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