by Beverly Mann

Thomas Hartmann writes via Truthout:

Most Americans don't realize that the idea that ‘corporations are people’ and ‘money is speech’ are concepts that were never, ever considered or promoted or even passed by any legislature in the history of America. Neither were they ever promoted or signed into law by any president - if anything, the opposite, with presidents from Grover Cleveland in 1887 to Barack Obama in 2010 condemning them.
...
And Congress and the executive branch are the two of the three branches of government that are elected by the people, and thus the only two to which the founders of this country and the framers of the Constitution gave the right to create laws.
...
The Supreme Court is so much not supposed to create law, that Article 3, Section 2 of the Constitution even says that it must operate ‘under such Regulations as the Congress shall make.

There are two problems with what Hartmann writes. First of all, there needs to be an explicit distinction made between the idea of “corporate personhood” in law, generally, and “corporate personhood” in a constitutional-rights sense. Hartmann, like so many others who are appropriately outraged by Citizens United and earlier corporate-free-speech Supreme Court opinions, clearly intends his comments to apply only to the corporate-free-speech Supreme-Court-created laws, just as the drafters of the proposed constitutional amendment regarding corporate personhood do.

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David Beckworth:

global economic growth over the past few decades has outpaced the capacity of the world economy to produce truly safe assets

Really? The U.S. could have just deficit-spent more, crediting people’s/businesses’ checking accounts and thereby increasing the global stock of the world’s safest asset: U.S. dollars.

It could (by U.S. law is required to) simultaneously issue bonds in/borrow an equivalent amount, but it comes to the same thing as regards the inflationary impact. (Issuing bonds is actually a bit more inflationary because of the future money-creation needed to pay the interest.)

That fear of inflation — and the resultant unwillingness to provide the safe assets that Beckworth thinks the world needs — is the only constraint on Beckworth’s “capacity.”

If he is correct that the supply of dollars is, has been, insufficient to meet global demand, then inflation is not currently a concern — arguably quite the contrary.

Cross-posted at Asymptosis.

This is another look at the idea I put forth here, that - contra the standard economic idea that consumption depends on wealth - I believe that consumption depends on income.  It's worth stressing that wealth and income are not independent variables.  Wealth is the accumulation of unspent income plus returns generated on that wealth over time.  Is it proper to say that wealth is a stock, and income is a flow? 

I believe the evidence very strongly indicates that consumption - also a flow - is tied tightly and directly to income.  This does not mean that wealth cannot play a part in consumption decisions.  People make all kinds of decisions about all kinds of things, for all kinds of reasons.  But consumption decisions are constrained, and there is no reason why they can't be constrained in more than one way. 

I think the idea that consumption depends primarily on wealth is intuitively weak because consumption is aggregated over the population, while wealth is concentrated in a small segment of that population.  A person with little or no wealth will spend the next dollar meeting some unsatisfied need, while the person with lots of wealth has the option of devoting it to rent-seeking or accumulation in an off-shore shelter.  According to data now more than a decade old, the richest 1% of households owned 38% of all the wealth; the top 5% owned over half, and the top 20% owned over 80% of the wealth.  The trend towards rising inequality started in the mid 70's.

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This report is now adjusted to show the impact of the population control adjustment.

The employment report was the strongest this cycle with payroll employment rising 243,000.
The household survey shows a gain of 843,000 but almost 250,000 of that is due to the new population adjustments so the net result is an increase of 631,000. This is what is in the chart, but
the January observation is not comparable to the 2011 observations.
Moreover, hours worked rose 0.6% as compared to the 0.2% norm over most of this cycle.In January government employment was little changed as compared to the 276,000 drop in government employment last year.

Despite all the talk about uncertainty employment gains this cycle continue to be better than last cycle.
The civilian employment/population ratio was little changed last month as it has been for months so the drop in the unemployment rate continued to stem more from the labor force falling rather than employment rising.

But hours worked for nonsupervisory workers rose 0.6% in January, the strongest gain this cycle.

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Robert Waldmann comments on the Freddie Mac story recently in the news (lifted from Stochastic Thoughts):

Freddster (noun): Fraudster who profits from conflict of interest at Freddie Mac (the knife).

Jesse Eisinger, pf ProPublica and Chris Arnold, of the public sector NPR News have the most interesting article about ruthless greedy uh socialism I guess at public sector Freddie Mac.
   
The idea is that Freddie Went long on the interest payments on mortgages and not the principal repayments. This means the harder it is to refinance, the better for Freddie Mac. Freddie Mac also has huge regulatory power to decide how hard it is to refinance Freddie Mac insured loans. The conflict of interest is clear.

Via Kevin Drum where commenter Andrew Sprung wrote

Could Einsinger and Arnold''s story have been prompted by an administration leak as a prelude to a recess appointment to replace DeMarco at FHFA?

I hope so, or rather I wish I had any hope that it is so. But at least it is a hint that someone in the White House has decided to put pressure on DeMarco.  I also look forward to testimony by the Freddie Mac CEO Charles Haldeman who I expect will have considerable trouble recalling details (see HR Block).
   
Here is a summary of the conflict of interest from Eisenger and Arnold with human interest and Freddie Mac efforts to respond to the accusation deleted.

Those mortgages underpin securities that get divided into two basic categories.
One portion is backed mainly by principal, pays a low return, and was sold to investors who wanted a safe place to park their money. The other part, the inverse floater, is backed mainly by the interest payments on the mortgages ... . So this portion of the security can pay a much higher return, and this is what Freddie retained.
In 2010 and '11, Freddie purchased $3.4 billion worth of inverse floater portions — their value based mostly on interest payments on $19.5 billion in mortgage-backed securities, according to prospectuses for the deals.

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Matt Yglesias has a great post over at Moneybox (paragraph breaks added):

The need for regime change.

… The Depression discredited the gold standard and a whole set of related notions.

The Great Inflation discredited ideas about the Phillips Curve …

We had, until recently, the Great Moderation Consensus that … the Federal Reserve has the ability to stabilize the macroeconomy by fiddling with interest rates.

Well now here we are and the Federal Reserve can’t stabilize the macroeconomy by fiddling with interest rates.

That calls for the creation of a new regime.

I’ve dumbed it down a bit here. He also talks about employment, for instance, including this great line:

…if the government isn’t abandoning the idea of full employment then they have a mighty strange way of showing it.

But I think I’ve imparted the main question. We’ve been or are going through a paradigm-falsifying “moment.” (As always, some good thinking will be cast aside along with some bad.)

What will move into the vacuum left by the (at least partially) ravaged Great Moderation paradigm?

Courtesy of David Beckworth and The Kauffman Foundation (PDF), here’s how econobloggers would like that question to be answered (thanks, FTA, for the great question):

Personally, I fondly envision some coherent amalgam of the M&M gang: Market Monetarists (NGDPers) and Modern Monetary Theorists (with a decent dose of the Austrian’s insight into real-economy production and productivity). I’m guessing that some have already ventured (some parts of) this amalgamation, quite possibly in posts I’ve already read and since forgotten. Thoughts? Links?

(Even as I post this I find that vimothy, JKH, and Steve Randy Waldman are worrying productively at parts of this very question in the comments here.)

Cross-posted at Asymptosis.

by Rebecca Wilder

Is the ECB/EU Achieving Stated Objective of Balanced Growth?

The primary objective of the European Central Bank is to maintain price stability; however, as a compliment to its primary objective, the Eurosystem “shall also ‘support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union’. These include inter alia ‘full employment’ and ‘balanced economic growth’”. These objectives are laid out in Articles 3 and 127 of the Treaty on the Functioning of the European Union. I wonder whether or not the objectives related to ‘balanced economic growth’ and ‘full employment’ are indeed being achieved? One could argue that they are not.

Put more simply: nominal GDP is diverging across program and non-program countries. If this economic duress leads to early exit, I would posit that the balanced growth clause has been breached.

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I just searched Harvard, U Chicago, and a few other top econ departments’ course offerings and major requirements. The string “account” barely appears.

Chicago says quite explicitly:

Courses such as accounting, investments, and entrepreneurship will not be considered for economics elective credit.

Much less requirements!

No wonder so many economists:

• Have such profound misunderstandings of the National Income and Product Accounts and the Fed Flow of Funds reports (and how they relate to each other). Nobody ever taught them how to read or understand the darn things.

• Have such crazy notions about how producers think when they’re setting prices.

Speaks volumes.

Cross-posted at Asymptosis.