John Cassidy's Blog, page 65

The Inefficiency of the Market Isn’t an Open Question

In an article on the front page of Tuesday’s Times, Binyamin Appelbaum did a nice job of highlighting the difference in views between Robert Shiller and Eugene Fama, who shared this year’s economics Nobel memorial prize with Lars Peter Hansen. But there’s a danger that some readers may come away from the article, and other news coverage of the prize, with the impression that the issue of whether financial markets are efficient remains unsettled. It isn’t. After living through a stock-market bubble and a credit bubble in the past decade and a half, we can be quite sure that financial markets are sometimes chronically inefficient. The only outstanding question is how far this inefficiency extends.

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Inefficient Markets: A Nobel for Shiller (and Fama)

I’m not a big fan of the Nobel memorial prize in economics. For too long, it appeared to be used to reward the recognized elders of the subject, discourage attacks on orthodoxy, and foster the illusion that economics is a hard science like physics or chemistry. At times, it seemed like the principle of Buggins’s turn rather than the recognition of genuinely pathbreaking work was motivating the selections. But this year’s prize, which is being shared three ways, is notable, and even somewhat ironic.

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Ted Cruz and the Politics of Hara-kari

Just when you thought that the G.O.P. might finally be wising up, and looking for a way to stop damaging itself in the eyes of voters, up pops Ted Cruz, the Texas firebrand who helped to get this whole shutdown/debt-ceiling thing started. Appearing before an audience of conservative activists in Washington on Friday, Cruz urged his colleagues to hang tough in the budget battle, and declared, “The Democrats are feeling the heat.”

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Ted Cruz and the Politics of Hari-kari

Just when you thought that the G.O.P. might finally be wising up, and looking for a way to stop damaging itself in the eyes of voters, up pops Ted Cruz, the Texas firebrand who helped to get this whole shutdown/debt-ceiling thing started. Appearing before an audience of conservative activists in Washington on Friday, Cruz urged his colleagues to hang tough in the budget battle, and declared, “The Democrats are feeling the heat.”

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The G.O.P. Debt-Ceiling Offer Is a Travesty

Yippee!

That was the attitude in the financial markets this morning, when it became clear that the Speaker of the House, John Boehner, was offering to raise the debt ceiling for six weeks. The Dow shot up two hundred points, and the cost of insuring against a default in treasuries fell sharply.

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A Janet Yellen Question: Just How Dovish Is She?

As in many areas of applied economics, central banking is about making trade-offs. Although officially independent, the Federal Reserve, in wielding the power of the printing press, which enables it to manipulate interest rates and influence broader financial conditions, is legally obligated to pursue two potentially conflicting targets: “stable prices” and “maximum employment.” According to a traditional taxonomy, Fed officials who focus primarily on squashing inflation are known as hawks, and those that give a higher weight to boosting employment and G.D.P. growth are known as doves.

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Janet Yellen: A Woman Atop the Fed

It isn’t exactly news that President Obama will be nominating Janet Yellen to replace Ben Bernanke as head of the Federal Reserve. (The official announcement will take place on Wednesday afternoon.) Since Larry Summers withdrew his name from contention last month, Yellen has been the prohibitive favorite to get the job. A former professor of economics at Berkeley, she has extensive experience at the Fed: since 2010, she’s been Bernanke’s deputy as its vice-chair.

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Why America Needs a Stock-Market Crash

A week into the partial government shutdown, and there’s still no end in sight to America’s latest self-inflicted fiscal crisis. The two sides, in particular the House Republicans, appear to be getting even more intransigent, and the October 17th deadline for a possible breach of the debt ceiling is now looming. Having just returned from a long-ago arranged six-day trip to Europe, I thought I must have missed at least one significant effort to reach a resolution. In fact, practically nothing had happened since I left, save that both sides have continued to talk past each other. Absent an unexpected softening in attitudes over the next few days, it may well take some outside intervention to break the deadlock.

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G.O.P. Extremists Defy Description

However the budget showdown ends—and, as I write this at lunchtime on Monday, a temporary government shutdown is looking like the most likely outcome—its defining moment came on Saturday, when House Republicans decided to demand a one-year delay in Obamacare as the price of funding the government beyond September 30th. At a closed-door meeting of the Republican caucus, cheers erupted when Speaker Boehner announced the plan. The whole room shouted, “Let’s vote!,” according to John Culberson, a Texan hard-liner. “And I said,” he recalled, “you know, like 9/11: ‘Let’s roll.’ ”

Really, what can you say about that? An elected representative comparing a political protest against a piece of legislation that the President twice ran upon, that Congress voted through, and that the Supreme Court upheld, with the desperate rallying cry of a passenger, Todd Beamer, trapped aboard a jetliner that had been hijacked by Al Qaeda terrorists.

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De Blasio: I’ll Be A Different Type Of Mayor

Bill de Blasio had lunch at The New Yorker on Thursday, and during about fifty minutes of conversation with editors and writers, myself included, he let slip some important news: his mother was “an obsessive New Yorker reader.” Not only that, but, between gulps of a sandwich, the six-five Park Slope resident said that he intends to be a new type of mayor: one who listens to New Yorkers rather than berating and haranguing them in the manner of some of his predecessors.

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