Tyler Cowen can count:

In sum, maybe three percent expected inflation conflicts with the desire to rapidly recapitalize banks through maintaining a wide interest rate spread. Maybe we need that zero nominal short rate or at least the Fed thinks we do....

I also regard this as a somewhat gruesome hypothesis. It means that "Main Street" is paying for "Wall Street" (forgive me the use of those awful terms) in at least two ways: high unemployment and inability to earn much on one's savings....

The term structure also implies that the market is expecting rising short rates, so if the bank mess isn't cleaned up soon, heaven forbid. The spread, as a means of restoring bank profitability, won't last forever.

And Ryan Avent (via Brad DeLong) points out the next piece of that puzzle:

[T]he Fed's commitment to undo its interventions is already having an effect. In expectation of more of these moves to come (as well as, perhaps, increases in interest rates) markets have been bidding up the dollar, which has busily appreciated during the month of December. That, in turn, will deprive the American economy of a potential source of demand—growth in consumption of American exports thanks to the effect of a weak dollar.

More bluntly, we're seeing a move toward contractionary monetary policy at a time when unemployment is at 10%. Funny that.

I can't think of a scarier way to end the year. Sorry about that. Best wishes for 2010—we're all going to need them.

Widgia

The BLS released its employment and labor force projections for the period 2008-2018. The report highlights a more diverse and slower growing labor force stemming from a falling labor-force participation rate. Some headline findings of the report are (bold font by yours truly):

Total employment is projected to increase by 15.3 million, or 10.1 percent, during the 2008-18 period, the U.S. Bureau of Labor Statistics reported today. The projections show an aging and more racially and ethnically diverse labor force, and employment growth in service-providing industries.

...and...

Projected employment growth is concentrated in the service-providing sector, continuing a long-term shift from the goods-producing sector of the economy. From 2008 to 2018, service-providing industries are projected to add 14.6 million jobs, or 96 percent of the increase in total employment. The 2 industry sectors expected to have the largest employment growth are professional and business services (4.2 million) and health care and social assistance (4.0 million).

...and...

The largest decline among the detailed industries is expected to be in department stores, with a loss of 159,000 jobs, followed by manufacturers of semiconductors (-146,000) and motor vehicle parts (-101,000).

...and more...

Occupations that usually require a postsecondary degree or award are expected to account for nearly half of all new jobs from 2008 to 2018 and one-third of total job openings. Among the education and training categories, the fastest growth will occur in occupations requiring an associate degree.

The last part is very interesting. According to Table 9 of the employment projections, the growth rates of jobs requiring an associate degree or higher are generally in the double digits. In order to work in a top 10 wage and salary growth industries, one must attain a higher degree.

That little fact explains the projected trend in labor-force participation among those aged 16-24 years: down.

More below the fold...

More below the fold...

The WSJ collects reactions to the release of the latest Case-Shiller index. Let's look at two, just for fun:

One in four mortgages are currently underwater. Foreclosure and delinquency rates, which hit a record high at the end of the third quarter of 2009, are therefore likely to continue to rise, perhaps sharply. In addition to this, the inventory of homes for sale remains near record highs. … Despite the recent positive reports on housing prices, we believe that prices have further to fall—about another 5%-10%. — Patrick Newport, IHS Global Insight....

When the Case-Shiller index began increasing in the summer, there were concerns that exaggerated seasonal patterns were an important driver, as trends had briefly improved in the summer of 2008 as well. However, while some seasonality does appear to have been present, the fact that the Case-Shiller home price index is continuing to increase is good news. We still believe that home prices could fall a bit over the course of 2010, but the majority of the price adjustment has probably already occurred. — Abiel Reinhart, J.P. Morgan Chase

I'm not cherry-picking here. I could make fun of the excluded "the long-awaited U.S. housing market recovery is well upon us" all day, but I'll leave that one to CR (who, I now see, has already done a Variation on the Theme).

But let's look at pieces of the two points, and see why I'm not sanguine (besides being long housing, that is):

1. One in four mortgages are currently underwater. One in four = 25%.
   
2. "[W]e believe that prices have further to fall—about another 5%-10%."
   
3. "[T]he Case-Shiller home price index is continuing to increase"
   
4. "Home prices could fall a bit over the course of 2010, but the majority of the price adjustment has probably already occurred."

Even if you take all of those at face value, you have to combine Bad Economics and Bad Policy to assume the worst is near over.

Details below the fold.

More below the fold...

Robert Waldmann

Zenapax world supplies at risk – well basically nonexistent.

I was thrilled when my father, Thomas Waldmann won a Service to America award in large part for his contribution to the development of Daclizumab, that is, Zenapax TM, a humanized monoclonal antibody which inhibits the immune response. Zenapax is approved for sale for the prevention of rejection of transplanted kidneys. It is also demonstrably beneficial for people who suffer from auto-immunse diseases including Mutliple Schlerosis Uveitis
(the reason Braille was blind) and inflamatory bowel disease and is key to a promising approach to treatment of Hodgkin's lymphoma in the numerous minority of cases in which standard therapies fail .

The patent belongs to Hoffman La Roche Ltd whose role was basically to organize and finance the clinical trials which demonstrated the effectiveness of Zenapax in the prevention of rejection of transplanted kidneys.

However, Hoffman La Roche pharmaceuticals has decided to stop making Zenapax for uhm no comprehesible reason. I quote "This decision has been taken in view of available alternative treatments and the diminishing market demand for ZENAPAX and is not due to any safety issue.

This decision makes no business sense. It casts doubt on the question of whether managers of Hoffman La Roche pharmaceuticals are up to the task of making decisions which affect thousands of lives. By law Hoffman La Roche is not allowed to advertize uses of Zenapax other than the one for which it was approved. No law prevents them from forecasting demand based on the evidence, published in top peer reviewed journals, that Zenapax has many other uses and that demand for the antibody will increase.

Obviously the decision is reversible. I am going to try to convince Hoffman La Roche to not kill the goose that will lay golden eggs.

update: Now I understand. Hoffman La Roche does not completely own all of the rights to daclizumab= Zenapax. The drug will imply huge profits for someone, but not for them even if they make it, because they didn't buy the rights to use it for purposes other than preventing transplant rejection. It's too late to save Hoffman La Roche from itself (also I exagerated since they are making plenty of profits from other drugs).

by cactus

Economic Growth: Blood Suckers v. Free Lunchers

Good evening, and welcome to another episode of Comparing Presidents: Tax Burden v. Economic Growth. But looking at things from a Democrat v. Republican perspective seems to be a step too far for some readers, so this time we'll do something different. For the purpose of this post, I'm going to pretend there are two different parties... the blood suckers and the free lunchers. The blood suckers are those under whom the federal government's revenue as a percentage of total income increased, and the free lunchers are those under whom the federal's government revenue as a percentage of total income decreased.

Some housecleaning before we go on... links to all the data plus a handy google spreadsheet are provided below. As always, we compute the annualized growth in each series (real GDP per capita, gov't revenue / personal income) from the last full year before a President took office to his last full year in office. For those who left office early, if they left in the second half of the year, we consider that to be their last full year in office. Otherwise, we consider the year before they left office to be their last year in office. Finally, due to objections from folks who insist that the Germans saved our economic behinds by bombing Pearl Harbor (and yes, some of the comments I get would make Belushi wince), I'm leaving out Hoover, and only looking at the worst six years of FDR's term (i.e., only going through '38).

So here's what it looks like:

(BTW... for convenience, the numbers you see sitting above each bar are the annualized percentage change in the gov't collections / personal income, by president)

A few quick notes:

1. Its easy to tell a story with the words "cutting taxes leads to faster growth" but very difficult to make any such story compatible with the graph above.
2. The relationship between changes in the tax burden and growth in real GDP per capita is not one to one... clearly other variables matter too.
3. If you truly believe that peeing in the gas tank is going to improve your mileage, sooner or later you're going to end up broken down on the side of the road.
4. I've written one or another variation of this post for the past four or five weeks. I think its fairly obvious what the relationship between taxes and economic growth isn't, even if some readers refuse to accept it. I'm tired of rewriting this same #$% post, so its time to move forward.
__________________________________________
by cactus

Data sources:

Real GDP per capita - NIPA Table 7.1, line 10

Federal gov't's current receipts - NIPA Table 3.2, line 1

Personal Income - NIPA Table 3.2, line 1

The above three BEA spreadsheets, plus my analysis, are all available in this google spreadsheet.

by: Divorced one like Bush

So, we can't bring the Gitmo crowd here because they are dangerous and would create an inviting situation for further terrorism, but we can take the suspected Northwest Airline man to a federal pen just outside of Detroit? A suspected terrorist, in a federal pen?

What?  Does the government really think that we don't need the auto industry now so - so what if Detroit get's all blown up? How could they do this to Detroit, risking all our money after helping GM and Chrysler?

Hope everyone remembers this when the super patriots come screaming again about how dangerous it is to close Gitmo and bring them to a federal pen.   At this point in the game, one is suppose to call Bull S#$t.

by Rebecca Wilder

Earlier this year, I compared US migration with that in Canada - one healthy, the other not so much. As a sequel to the story, the Census released its figures for migration into 2009, and the pattern in the US has worsened (you can download the here).

The picture of American mobility is one of people/workers/households with essentially nowhere to go. Unemployment is ubiquitously high, and the housing market is lousy - can't sell your home, can't get a job. This Great Recession dragged net-domestic migration (moving within the US borders) down in all regions of the country.

Here are some of the headline results according to the Wall Street Journal:

The recession has had a profound effect on migration patterns in the U.S., reversing the flow of people to former housing-boom states such as Florida and Nevada, the latest data from the Census Bureau show.

More below the fold...

This chart from National Geographic combines several data sets which require a little bit of puzzling out, but which come together in one whopper of an illustration.

The parameters are:

Cost per capita - lefthand scale, and lifespan -- righthand scale, which together give a sloped line for each nation showing dollars per year of lifespan.

Thickness of each nation's line indicates number of doctor's visits per year.

Line colour indicates whether the nation has universal health coverage (blue) or not (red.) There are only two red lines -- Mexico and the USA.

Looking at these, you would hope to achieve a low lefthand starting point (low cost), a high righthand point (high longevity), and a thick line (lots of doctor visits.)

The USA line looks like it was drawn by someone who got the instructions backwards -- a very high lefthand starting point (huge cost), a mediocre righthand point (middlin' longevity), and a hairlike line thickness (scanty doctor visits, less than 4 per year.)

Who gets the healthcare bargain on this chart? Japan is the most striking, with the highest lifespan (almost 83 years), and a visit a month or more to the doctor, at a cost of about $2,600 per capita -- one-third the US cost.

Fifteen of the 21 nations shown achieve longer lifespans than the USA, at roughly half the US price.

Nuts, just nuts.

h/t to "fatster" in the comments over on Emptywheel.

More below the fold...

A new topic opens.

Geithner's Baa Humbug to Job's and Labor
(h/t Run75441)

"Ebenezer: Since you ask me what I wish sir, that is my answer. I help to support the establishments I have named; those who are badly off must go there."

Daniel Gross at Slate interviews Tim Geithner here: “We Will Be Judged on How We Dealt with the Things that were Broken”  Some rather revealing statements by Tim Geithner to Daniel Gross's questions:

GROSS: There's a perception that you regard your portfolio narrowly, as primarily focused on the health of Wall Street, with Main Street a distant second.
GEITHNER: "My first and essential responsibility was to fix and reform the financial system. That was necessarily going to be the principal part of what people saw. About half my time from the beginning has been spent on the design of the broader economic strategy. The idea that we did not do much for the broader challenges facing the country is completely unjustified. The Recovery Act itself was not just a sweeping, essential force for growth but included a bunch of targeted investments in education, energy, environment, health care that will have huge long-term benefits."
(Run here: Geithner misses the point or makes the point that finance is the number one concern over Main Street, even though Main Street is financing the rescue of W$. The constituency doesn't want charity in targeted investments in education, energy, education, and environment when it can pay for those investments itself if they are working. Main Street wants jobs? Main street is still waiting for that tsunami of job creation which is one of the broader challenges of any administration and no administration has put into play any package to stimuli it or companies to do more. Jobs are left to free market influences which is content with investing profits elsewhere other than job creating infrastructure.)

GROSS: So you don't think the bailouts were too friendly to Wall Street?
GEITHNER: “The idea that the strategy was unfair and has principally benefited a small number of institutions in New York is a mischaracterization of the design and result of the strategy. I thought people would have understood this after the failure of Lehman Bros. But when you do too little and you leave the system with real fear that everything is going to fall apart, like any financial crisis, it hurts the poorest most. A just and fair strategy, even if it is politically hardest to explain and justify, is to use well-designed but massive force to stabilize the system.“

(Run here: Over at Naked Capitalism, they are debating whether Goldman Sachs drove the collapse of AIG by calling for the mark down of CDO by companies holding too many of them thereby forcing AIG to raise collateral after it was downgraded and eventually paying off on CDO that never were expected to payoff. While AIG is at fault for seeing too many pie in the sky dollars in risk and having too little collateral to cover it, one has to wonder why Goldman Sachs should have received 100% on the dollar on its CDS for its risk with AIG and not knowing how over leveraged AIG was at the time. Goldman Sachs certainly benefited by Geithner's negotiated settlement of AIG's liabilities at 100% on the dollar.)

GROSS: The biggest downside surprise?

GEITHNER: "The [high] level of unemployment relative to what was happening in the economy as a whole. I'm not an economist, but almost all forecasters missed that. And that's hugely consequential, because it's the prism through which most people view basic economic health."

(Run here:He is kidding right? During every economic downturn, it has consistently been Main Street that has been shown the street from their jobs or homes.)

Back on July 28th I posted on what I considered to be the most important provision of the original House Tri-Committee Health Care Bill in Sec 116: Golden Bullet or Smoking Gun Smoking Gun referred to the belief by Republicans that this bill was designed to ultimately transition to Single Payer, and Golden Bullet to my belief that they were right, that if you forced private insurance to give up its predatory business model that ultimately they would abandon less profitable markets just as they did in the heyday of managed care.

What Sec 116 did was to establish minimum Medical Loss Ratios for all plans participating in the proposed Exchanges. Medical Loss Ratio is the industry term for percentage of premium dollar actually spent on provider payments with the remainder retained by the company to pay for marketing, administration, executive compensation, and profit. Under the House Bill the actual mandated MLR for each area would be set by an auction process and in that model you pretty much needed a Public Option to establish a baseline.

Over the course of the summer and fall the language of Sec 116 was displaced and minimized in a way that restricted it only to policies issued before the establishment of the Exchanges and so make it almost useless in the bigger picture. But then a near miracle happened at the last minute, the Team of Ten inserted Section 2718 "BRINGING DOWN THE COST OF HEALTH CARE
COVERAGE". MLR Regulation was back, and better the ever. Text from the Manager's Amendment and commentary below.

More below the fold...

...and it's a world of dread and fear.

May it stay outside your window next year and beyond.

I received a copy of the book Plato and a Platypus Walk into a Bar... by Thomas Cathcart and Daniel Klein today as a gift. I haven't read through the book in awhile. I found the 'Tale of the tailor' to be instructive as well as amusing given the topics we have been discussing concerning the issue of economics. Sometimes it feels discussions go this way:

A man tries on a made-to-order suit and says to the tailor, "I need this sleeve taken in! It's two inches too long!"
The tailor says, "No, just bend your elbow like this. See, it pulls up the sleeve."
The man says, "Well, okay, but now look at the collar! When I bend my elbow, the collar goes halfway up the back of my head."
The tailor says, "So? Raise your head up and back. Perfect."
The man says, "But now the left shoulder is three inches lower than the right one!"
The tailor says, "No problem. Bend at the waist way over to the left and it evens out."
The man leaves the store wearing the suit, his right elbow cooked and sticking out, his head up and back, all the while leaning down to the left. The only way he can walk is with a herky-jerky spastic gait.

Just then two passersby notice him.
Says the first, "Look at that poor crippled guy. My heart goes out to him."
Says the second, "Yeah, but his tailor must be a genius! That suit fits him perfectly!"

If we were wiser think of the things we could accomplish! Merry Christmas and Happy Holidays to all.

Per the Health at a Glance Chart Set, Powerpoint, available here:

All OECD countries have achieved universal or near-universal health care coverage, except Turkey, Mexico and the United States

And it's even more impressive when you go to Slide 36 (whose header is quoted above) and realise that the Public Coverage in those three states is:

Mexico: 82.5
Turkey: 67.2
United States: 27.4

Any room to bend the curve? Certainly looks as if there might be:

Well, at least Turkey and Mexico can feel good about themselves. Happy Xmas!

(hat tip reader Lyle)

by Linda Beale
(cross posted from ataxingmatter)

Economic Theory--how much is it worth
[hat tip--Yves Smith at Naked Capitalism]

Michael Hudson, an economist at the University of Missouri-Kansas City, asks how the economic discipline became so "trivialized from its classical flowering""taking for granted the social structures and dynamics that should be the substance and focal point of the analysis." See Michael Hudson Responds to Paul Krugman, Dec. 19, 2009. He answers the question by discussing "the 'intellectual engineering' that has turned the economics discipline into a pulibc relations exercise for the rentier classes criticized by the classical economists: landlords, bankers and monopolists. It was largely to counter criticisms of their unearned income and wealth, after all, that the post-classical reaction aimed to limit the conceptual 'toolbox' of economists.... It has ended up as an intellectual ploy to distract attention away from the financial and property dynamics that are polarizing our world between debtors and creditors, property owners and renters, while steering politicas from democracy to oligarchy." Economists, Hudson complains, developed consistent theories that won them Nobel prizes, even while pointout that there was no need to be "committeed unduly as to the relation between reality and these [abstract economic] assumptions" (quoting Nobelist Paul Samuelson)--in fact, "the results are implicit in the assumptions made" (quoting Nobelist William Vickery). Yet these theories were nonetheless used to arrive at policy conclusions that impact individuals in the real world.

More below the fold...

LOL...prodded into being by a kind note from MG.

by cactus

Rubinomics Bleg

I've read in a few places that the term "Rubinomics" was coined by Kevin Phillips. Anyone know the original cite? Thanks.

Cactus

Now that I know we're just members of the "Peanut Gallery,"* let this random links post work as a placeholder for longer posts as we prepare for the "holiday":

Shorter Mark Thoma at Marketwatch: If you can't build a better model, best to reappoint a man who doesn't think he has to do half of his job. (UPDATE: Or even less than that. [h/t Linda Beale])

Shorter Mark Thoma at his own blog: All of our current models prefer people to starve and die.

A fun graphic (h/t Abnormal Returns)

Think the Health Insurance "Reform" Bill will "bend the cost curve"? Think again.

*That the "Periodic Table" pretends to be about Finance Bloggers and yet categorizes DeLong, Thoma, and Mankiw, to name three, as "Rocket Scien[tists]" instead of Economists should in no way be seen to impune the quality of the analysis, of course.

by Rebecca Wilder
(crossposted with Newsneconomics)

This week the Federal Reserve reported the Q3 2009 Flow of Funds accounts. The headline indicators show household net worth improving and private debt burden falling.

The private sector - households and firms - is dropping leverage.

Update: This chart has been modified slightly - the leverage level data (highlighted in blue, red, and green) has been updated.
Either by default or by growing saving, the private sector is de-leveraging. According to the D.1 table, households and nonfinancial businesses dropped debt a further 2.6% q/q annualized, while financial sector debt fell another 9.3%. However, total debt (of the domestic nonfinancial sector) grew 2.8%, as the federal and state and local governments grew debt 20.1% and 5.1%, respectively.

More below the fold...

by cactus

Comparing Presidents, Real GDP per capita, All the Lags You Can Eat Three Ways From Thursday

I didn't really wanna write this post, but I keep getting told that when you look at how Preznits did on the economy, lags, lags, and more lags are what matters. I'd like to move on to more useful stuff (i.e., back to how taxes, oil prices, etc. affect growth) so I'm going to bite the bullet and try to cover everything lag related here and now.

Now, before I start, every single bit of information in this post comes from the BEA's NIPA Table 7.1, line 10. The data and the analysis are also shown here.

To recap the last few episodes, data goes back to 1929, and we looked at the growth rate from the full year before a President took office to his last full year in office... that is to say, the baseline from which he was measured was the period before he took office. For Presidents who left office early due to death or excessive Nixonizing... if they lasted into the second half of the year, I considered that a "full year." That leaves this as the recurring, somewhat inconvenient character with halitosis and a big ol head of lettuce in his teeth:



Graph 1: Annualized Growth in Real GDP per capita

Perhaps the worst offense in that graph is the FDR performance, and over the past few weeks I tried a number of things to tone that sucker down... but even if you stick to the period up to the '38 recession he still outshines everyone. So I'm going to pick a period where FDR is safely out of the picture - I'm going to leave out his term, as well as that of his illustrious predecessor and his successor. (I should note - reader Cantab has noted that if you make FDR responsible for only the recessions that occurred during Ike's administration, FDR no longer looks so good. (Thanks for the tip Cantab!) That also has the advantage of focusing on a period of relative stability with no direct superpower v. superpower global wars or Great Depressions.

More below the fold...

by Bruce Webb

CBO Director's Blog Manager’s Amendment to the Patient Protection and Affordable Care Act

CBO Analysis/Score Senate Health Care bill Manager's Amendment


Also I would like some links to current and historical numbers on Medical Loss Ratios. I found some claims from a commenter at Dean Baker's Meet the Press (and past commenter here) that CMS (Medicare) numbers showed a MLR ratio for private insurance right at 88% and holding over the last few years. A little work on my own showed that MLR for for-profit private insurance ranged between 76% and 84% at around the same time. The difference can not be accounted for by profit alone, that would only explain about half of the difference. Unless of course those who were claiming 'average' 3% profit margins were also including non-profits in the calculations. So lets have links aplenty in comments, with some commentary making clear whether those figures include non-profits in the calculation.

Best links & commentary will be lifted and put under the fold. Plus when I find one a link to the current bill text (or commenters can help there as well).

More below the fold...

I winced typing that title, since it is not wise to disagree with Paul Krugman and since I am going to argue that cutting the minimum wage can cause increased employment. Before going on, I stress that I oppose cutting the minimum wage as the logic of my argument suggests making the tax code more progressive. I think what we need right now is a more progressive tax code. That's what I always think.

More below the fold...

by divorced one like Bush

I just listened to the conference call with Gov. Dean and Wendall Potter.
Toward the very end of the call, the issue of medical loss ratio regulation came up. Seems like a reasonable thing to regulate especially if we are going to get Chicago School of Economics style health care reform implemented via the Shock Doctrine method. (Yes, I've finally started that book and I've got to say, what is happening here with health care reform reads all too familiar.)

Unfortunately, according to Gov. Dean, the CBO keeps scoring MLR regulation as a hit (as in mafia take down) to the budget. Seem from CBO's perspective, if you regulate that the MLR can be no less than somewhere around 90%, such a number placed on profit ability makes all of the nation's health care a government budget item. Thus, something like $2.5 trillion gets added to the budget numbers.

Funny thing this CBO view. Basically this means that I (We the People) can mandate that I buy insurance, that I can only buy it from the private market, that I can write the rules of the market that I buy into, but I can't tell a corporation that is granted a privilege by me to spend it's money on the product it has been granted a privilege to provide? 

Maybe the CBO figures because I decided to help some people in buying the mandated insurance, that by regulating the MLR, I'm making that money a greater expense on the budget because now 90% is going to health care services and not 70%? I really can't figure this one. Is the CBO really saying that I (and you) the government, can not assure that I'm going to get my money's worth? How come this issue does not come up when the government negotiates drug prices for the VA?

I really think, after watching our congress deal with health care, finance reform, military, that we have a bigger problem in this nation regarding economics and who is the boss here than we are willing to admit. Hint: It's We the People who is the government.  It just seems that we have definitely, completely entered the realm of reality where "the market" is the purpose and not the means.  We have been turned to existing to serve "the market".  We have put "the market" before all our needs and desires for us as people.  This is primitive idolizing behavior.  This is sick.

I have to go plow now.

First, you hear the high heels. These are not the pretty heels of Ginger Rogers, floating in ostrich plumes for some impromptu dance across a marble floor.

No no, these are the no-nonsense high heels whose rhythmic ticktock, louder and louder, signify the approach of authority – firm, fair and with eyes that see through every excuse. It’s Dr. Warren, and she’s ticked.

Elizabeth Warren, head C.O.P. over at the Congressional Oversight Panel which is “charged with the job of reviewing the state of the markets, current regulatory system, and the Treasury Department's management of the Troubled Asset Relief Program [and] required to report their findings to Congress every 30 days.” She is a longtime researcher of bankruptcy and professor of bankruptcy law, and she saw the crash of the middle class coming from miles away.

In videos like “The Coming Collapse of the Middle Class” (early 2008) and her various net-based reports, TV appearances, and appearances before Congress, she combines absolute clarity of message with a mildness that tempers that message, often dismaying in its implications, enough so it can be heard and digested.

More below the fold...

This week, the single most important event in global bond markets was the S&P downgrade of Greece's long-term debt obligations, A- to BBB+. Moody's is the last of the major rating agencies to hold Greek debt in the A-category of investment grade (currently at A1); but a major decision from Moody's could come within weeks. This would make Greece the lowest-rated country in the Eurozone, and the only one with 6-B status.

Since the beginning of the month, the Greek 5-Yr government bond jumped over 1% to 5% by Friday.

The chart illustrates comparable 5-yr government bonds across the Eurozone. Interestingly, the region (ex Greece) remained rather resilient to the news. However, Greece is not alone; and its growing government financing problems are in good Eurozone company.

More below the fold...

Good Thing We Have Deficit Hawks in Congress:

The tenants were all living low-rent under a program that's beginning to expire - but had been promised they could still qualify for a federal Section 8 rent subsidy.

But this week, when many of them began to show up at New York City Housing Authority offices, which accepts the vouchers and administers the subsidy, they were told the program was kaput....

NYCHA Chairman John Rhea Thursday blamed the move - which could push thousands into the city's already crowded shelters - on Congress, a lower-than-usual attrition rate in the program and unprecedented demand....

More than half the vouchers - 1,833 - had been given to families and individuals who were once homeless.

Rhea, a former investment banker who took over the agency this year, said Congress didn't set aside enough money to run the program through the end of the year.

Congress took $58 million from the authority in May from funds that were earmarked for Section 8, Rhea said. [link to Rhea appointment added]

Good to see responsible budgeting only means putting 3,000 families out on the streets just in time for the first big snowstorm of the year.

But Steve Randy Waldman already did the heavy lifting:

several of the other officers had been stationed at the height of the housing bubble at facilities located near D.C. in Northern Virginia. They lived in very modest homes which were removed from their workplaces by substantial driving distances, but these homes were nevertheless particularly pricey for someone with a family and on a military salary. The humble homes ate significant chunks out of those salaries as the commutes did to the (already scarce) time these men had to spend with their families....

While we were away, about halfway through our deployment, the crash began and something mysterious had gone horribly wrong with the machinery of America. The small equity positions these men has invested in their respective residences were wiped out in a matter of months. By the time they were close to returning to these homes the men were all badly underwater by over one hundred thousand dollars and, what was worse, the Army had reassigned them....

Their instinct was that if they had borrowed money from a friend or a neighbor they would feel a deep, almost sacred, obligation to make good on their debt and pay it off in full plus interest as soon as they could manage it....That was, after all, the “right thing to do” as they had been taught by their parents and grandparents.

But then the bailouts with taxpayer money started. The “too big to fail” talk began, and then the wave of foreclosures and layoffs and emerging scandals of the unjust excesses of the financial industry, and so on. And these men began to feel that from the personal scale of their little world, their family was also perhaps “too big to fail” by the forfeit of their hard-won life’s savings.

They also started to question how the bailouts could make sense without some of the benefits flowing to innocent and responsible men such as themselves....

Go Read the Whole Thing.

Note:I mentioned this near the end of my last post, but it really deserves to be seen and read by more than the six people who might read to the end of that one.

Down here it’s just winners and losers
And don’t get caught on the wrong side of that line

This will be a long post. Even with all the pictures above the fold.

It started with a finger exercise during my daughter’s swim team practice:

Just in case you thought I was picking on The Big C in my previous post, let us look at the other major financial institutions (Too Big to Fail, or TBTF, Banks) over the same time period.

The Remaining Investment Banks:

While Goldman Sachs—as with most of the other so-called Winners—shows a significant upturn and major gains since the beginning of 2009, Morgan Stanley’s appreciation has been rather less apparent. However, both have returned only to approximately the price they held during the interregnum (after Bear Stearns fell but while Lehman Brothers ignored the warning and decided not to right the ship).

The Mortgage Lending Leaders:

Both firms show an increase in stock performance beginning in Q1 of 2009. Wells Fargo had a precipitous dive after LEH filed bankruptcy, but recovered in a similar amount of time. JPMorganChase, having acquired Bear for either a song or too much money, remains below the level it reached during the interregnum, but solidly in the middle of its range since 2006.

The Consumers-as-Profit-Center (“Retail”) Banks:

As is apparent, Capital One’s stock decline was not precipitated by the proximate solvency crisis itself, but rather by the decline in earnings and profits, and deflation in wages, that was in full swing by early 2006. While Bank of America does not have that preamble, it sees a similar decline in its stock price from the middle of 2007. By the time the recession is officially declared, the trend has started. And while Bear’s fire sale to JPM causes a decline in bank stocks, it is not until LEH that BAC mirrors its competitors above. More like MS than GS, BAC’s recovery to less than one-half of its pre-recession trading price suggests that the market is less confident than management that the firm’s major issues are behind it.

But one thing abides. The market isn't happy.

More below the fold...

by Bruce Webb

I posted the below last Christmas Eve. Which was too late to actually discuss the issue. People decry the commercialization of Christmas, which is fair enough. And on econoblogs we discuss income inequality a lot, plus we wonder why working class people simply accept the logic of "no poor person ever gave me a job". Well I suggest the answer may be as simple as teaching poor kids that Santa hates them and the Tooth Fairy thinks they are second class citizens. Those early lessons stick. More downer below the fold. But there is a point here.

More below the fold...

UPDATE: It gets even stranger. The bankrupt-since-October-2008 Lehman Brothers is going to pay $50,000,000 in bonuses for this year. (h/t alea's Twitter feed)

It appears all of the "gosh, we really made a lot of money from bailing out rich bankers who socked it to their customers" rhetoric is having a small problem in the realization:

The U.S. government abruptly shelved plans to start trimming its 34% stake in Citigroup Inc., after investors demanded a price so low that the Treasury Department would have lost money on the deal....

The huge offering encountered a lukewarm reception on Wall Street, where investors were skeptical of the company's earnings prospects...

Gosh, golly, gee. Really? I wonder if that's a recent phenomenon:

(Recession period—still not officially over—shown in cyan.)

Hmmm. Guess not. Ah, well, there's always next year. Or the year after. Or...

Economic Populist points us to consideration of re-instating the Glass-Steagall Act.

Plain vanilla banking at a tidy profit for regular banking functions is still a good idea.

by Linda Beale (cross posted from ataxingmatter)

Banks exiting TARP

Citibank has confirmed its plans to pay back the bailout funds directly provided to it. See NY Times. Of course, the fact that banks are paying back direct bailout funds does not mean that there is no further bank bailout going on. The government now stands as guarantor, an assurance that has provided a significant cost-of-funds advantage to big banks. One has to wonder whehter there will ever be a complete reckoning regarding the total amount of the assistance that big banks and insurers have received. It is something that is terribly important, if we want to make wise decisions on financial system reforms. One suspects that whatever bill passes the Congress will have a number of poor provisions, given the influence of bank lobbyists and the vulnerability of Congress to that influence. Without public pressure expressing the rightious rage at bank's profiting from the bailout without corresponding assistant to Main Street and bankers' profiting personally while middle America hemorhages jobs, we'll continue without the significant changes that are needed.

Not surprisingly, the banks that exit the US bailout program are going to continue to benefit from the "special" rules written to override the regular rules preventing loss trafficking. Last week, Treasury made clear that government sales of stakes in banks won't be taken into account in determining whether there has been a sufficient ownership change to invoke the rules under section 382 et seq that limit loss use to a formula intended to keep losses used at pre-ownership change use rate.

More below the fold...

by cactus

Obama, Bush, and Mankiw: A Look Taxes, Spending, and Bull#@% in the Great Recession

This post serves as a quick follow-up to my previous post on real GDP per capita growth and the tax burden. Let's start with a few facts.... not random opinion, but facts.

1. The "Great Recession" began in December of 07 - that is, Q4 07.

2. If you look at Current Federal Gov't receipts (line 1 of the BEA's NIPA Table 3.2) divided by personal incomes and (line 1 of the BEA's NIPA Table 2.1) you get this:

.

I dunno about you, but to me this looks an awful lot like a game of "Meet the new boss, same as the old boss." Because both bosses seem to be cutting gov't revenues, that is to say, taxes.

In fact, Obama seems to be a bit more prolific.... (Gubmint Revenues / Personal Income) = 0.22 in Q3 of 2007, and .2000 in Q4 of 2008, GW's last quarter in office. That is to say, a change of 0.02 over 5 quarters, or about 0.004 a quarter.

But in Q3 of 2009, the last quarter for which we have data, (Gubmint Revenues / Personal Income) = 0.183, which distributed over the three quarters of Obama's term so far, comes to about 0.005 a quarter. That is to say, the percentage of your income the gubmint takes away went down faster during the time Obama was in office than during the recession months when GW ran the show. Sure, a lot of that was stuff that started under GW, but it is silly to say anything along the lines that taxes have gone up since Obama took office and that's what's wrong with the economy right now.

3. The next graph looks at how gubmint revenues and gubmint spending (line 20 of the above mentioned NIPA table 3.2) have changed since Q3 of 2007, the last quarter before the recession. (I've adjusted for inflation using the CPI from the middle month of the quarter - data from FRED.)

I'm doing this at speed (deadlines!!!!) but if I didn't screw up, it looks like this:

All of which is to say, the stimulus, such as it is, is (slightly) more of a reduction in gov't revenues than an increase in gov't spending. I had a series of posts last year about how the stimulus was badly designed, and indicating that I was afraid Obama was going to simply continue following the failed policies of the old administration. So far, Obama has disappointed me by doing just that. And we're all paying a price.
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by cactus

It's coming closer:

Once the tax expires, those inheriting estates after Dec. 31 will have to pay capital gains taxes on any asset sold. The cost will be based on the original price of the property, which could mean record-keeping headaches and bigger tax bills for some people.

"If we do not extend our estate tax law, all taxpayers, all heirs will be subject to massive, massive confusion in trying to determine the value of their underlying asset," Baucus argued on the Senate floor.

Fortunately, unlike Health Care "Reform," this only affects a few people:

The estates of about a quarter of 1 percent [0.0025 -- ken] of Americans would be subject to the tax under the House bill, according to the the Brookings Institution-Urban Institute Tax Policy Center.

I guess someone hasn't blown Joe Lieberman enough this week.

(Title Reference)

Hat tip to Glen Greenwald for following this case and today's presentation for Mohamed v. Jeppesen and Ben Wizner's oral argument at the United States Court of Appeals Ninth Circuit.

Slate's Dahlia Lithwick also offers comment.
____________________________________

Today marks the beginning of testimony for a jobs policy hearings in the Senate as well.
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Does anyone know how to save a word into Blogger's dictionary?

I'm really getting tired of ignoring its questions about "DeLong," "Krugman," and "Bernanke."

I don't pretend to know Joe Lieberman's motivation, but it's working to perfection if his goal is to divide Party leaders (Obama, Reid, etc.) from the Democratic progressive base. I don't remember seeing this level of outrage from movement progressives before, and I wonder if the only possible way to quell it is to secure Snowe's vote for reform and then remove Lieberman from his chairmanship. I'm not necessarily advocating that, but many people (including many on the Hill) believe that he is playing us for chumps (not waiting for the CBO score of the Medicare buy-in, opposing something he advocated a couple of months ago), and there need to be consequences. It's not an easy decision, though, and I don't envy Reid.

Let me help this Hill staffer out, because I am suspecting Joe's motivation is as clear as A B C, or more precisely M L R. More below the fold.

More below the fold...

by Tom aka Rusty Rustbelt

Health Care Provider Taxes

An under-the-radar tax funding scheme is the prevalence of health care providers taxes. Our most current information indicates 44 state have some variation of a provider tax (in addition to various schemes to use or misuse tobacco settlements allegedly earmarked for health care spending).

Most of the taxes are assessed on specific providers and then used to provide match for federal Medicaid dollars (limited in percentage). This creates a sort of a money loop, causing the feds to provide extra subsidy to the states, the states then returning the funds to providers..

Some of the taxes work out to provider advantage, e.g., due to the populations of nursing homes much of the tax is returned either directly or indirectly (this does in effect levy an extra tax on private pay residents).

Physicians tend to resist these taxes because the docs end up subsidizing other providers. A recent attempt to impose a physician tax in Michigan died a quick death.

Ethics aside for a moment, is this “money loop” the best way to finance Medicaid services? Should private pay patients be “taxed” indirectly to subsidize government programs? Do we need an entirely new model for Medicaid funding?
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Tom aka Rusty Rustbelt

Alan Greenspan:

The U.S. Federal Reserve has done all it can do to reduce unemployment and needs to worry more about the risk of inflation from the stimulus it poured into the economy, former Fed Chairman Alan Greenspan said on Sunday.

But didn't we just Get All That Money Back? [link added]

Greenspan's reason unemployment will go down soon: GOVERNMENT JOBS:

Greenspan said he expected the U.S. unemployment rate, which is currently at 10 percent, to "be significantly lower a year from now" but still very high.

The U.S. Census Bureau's plan to hire close to 800,000 workers by April will take several tenths of a percent off the unemployment rate, he said.

Let's ignore that 800,000 temporary hires won't balance the 900,000 jobs to be lost on the state level next year (h/t Brad DeLong) And let's ignore that temporary jobs are, by definition, "frictional" and not "structural" employment.

But let's not forget, as Ben Bernanke did,* that, as noted by Dean Baker, "the dual mandate [of the Fed] is full employment (defined as 4.0 percent unemployment) and price stability." [emphasis mine].

10.0% is not 4.0%. Indeed, 9.3% (10.0-0.7) is not 4.0%. So unless there is a miraculous 5.3% of other employment coming Real Soon Now (and I don't even see Daniel Gross predicting that, let alone Mark Thoma or Paul Krugman), the Fed, as has been standard under Bernanke, is missing its targets.

Following up on this post, a 4-week auction over year-end (PDF) that sold at 0.00% interest, with a coverage ratio of 4.4:1. (Yield unchanged from the previous week, and the week before that.)

Who could see Looming Inflation in this? See next post.

Via alea's Twitter feed, the Office of the Comptroller of the Currency—the people who were specifically selected by the company to regulate AIG—has launched a Financial Literacy campaign.

(Full disclosure: I have, in the past, had discussions with the OCC. I won one and lost one.)

I urge everyone to Go Read Garth. And then you will understand that Economics is The Science of Supporting the Status Quo and Stifling Innovation, as Steve Jobs (h/t Patrick) noted several days ago.

UPDATE: Greg Sargent (via Glenn Greenwald's Twitter feed) notes that I am hardly alone in my concluding pargraph.

The last even semi-useful part of health care "reform" (and that was of dubious value) is dead:

The idea of letting people ages 55 to 64 buy into Medicare, announced just last week, had threatened to explode the Democrats' hopes of getting a bill through the Senate when Sen. Joseph Lieberman came out against it.

Yes, that's the same Joe Lieberman who told a Hartford newspaper that it was good idea three months ago.

Sen. Evan Bayh (D., Ind.) said Democrats agreed that the dispute over Medicare shouldn't hold up legislation that would extend coverage to tens of millions of Americans.

How can you tell when Son-of-a-Birch is lying? (His father is rolling over in his grave, probably at Warp Seven.)

There is now no reason not to vote Republican in all future elections—if you bother to vote at all, that is.

Rahm Emanuel accidentally Tells the Truth and Shames the Devil:

“We have to get them off the sidelines and get them to play a more active role in our economic recovery,” Rahm Emanuel, the White House chief of staff, said on Sunday. “They play an essential role in helping the economy grow.”

Gosh, the Administration has noticed that the banks have been "on the sidelines" (read: reaping windfall profits from tax dollars and funneling those funds to themselves). Guess

Brad DeLong probably will be next. (At least, he seems savable.)

Subtle hint to the Chicago School (who are not savable): the reason we don't believe Monetary Policy works is that it hasn't worked.


(h/t Lance Mannion's Twitter feed)

by cactus

Comparing Presidents: Real GDP per capita Growth Rates and Changes in the Tax Burden
In last week's exciting episode I posted this graph:

A few quick comments... this is actually a correction - I screwed up the graph the last time by not following the same convention with Nixon and Ford that I did with the rest of the Preznits - namely, if a dude was in the Oval Office for more than half a year, he got attributed the year. I guess its Tricky Dicky to mess up the fact that Nixon resigned in August of '74, and so should get "credit" for '74.

BTW... the data for the graph comes from line 10 of the BEA’s National Income and Product Accounts Table 7.1 and the processing is shown in this google spreadsheet. The annualized change in the real GDP per capita is computed from the last full year before a President took office to his last full year in office.

While the BEA data begins in 1929, Hoover was left off the graph because I've been informed a zillion times that the Great Depression started under FDR, so it would be unfair to show Hoover considering that the effects of FDR's perfidy worked their way backward in time producing a monster negative growth rate from 1929 to 1932. And speaking of FDR, for his term only the period through 1938 was used because I've been informed a zillion times a zillion times that the economy only started humming when the Germans saved us by bombing Pearl Harbor. I figured 1938, being in the middle of a recession (and prior to the war, Lend Lease, and even the Destroyers for Bases agreement) did a sufficient job of avoiding the effect of the war.

Unfortunately, the data refuses to show the truth, namely that superior Republican economic policies produced superior economic growth. But you know what, this ain't about Democrats and Republicans - this is about the policies they followed. And to Republicans (and Libertarians, for that matter), "policy" means a number of things, but out of the top five, numbers one, two, three, four and five all seem to be "cutting taxes." So let's cut to the chase and focus on taxes that people pay. On second thought, make that everything that people pay the gubmint, because some Presidents cough cough Reagan cough enjoyed cutting taxes and simultaneously raising "user fees" and other revenue generation devices that somehow aren't viewed as taxes by the tax-cutting crowd today.

The graph below shows current federal receipts (line 1 from the BEA's NIPA table 3.1) divided by everybody's personal income (line 1 from the BEA's NIPA table 2.1), sorted from top to bottom.

Now an interesting coincidence emerges... there are twelve Presidents represented in the two graphs. Five increased the amount the gubmint collected in taxes (in graph 2). All five are among the six that produced the fastest increases in real GDP per capita (in graph 1). The only tax cutter in the top half of performers also happens to the be the second smallest tax cutter in the sample.

The next graph combines the two previous one:

Anyway, none of this is definitive, but as I keep stating, looking at the data in a straightforward manner makes it very, very hard to see how one can argue that lower taxes = faster growth. I will look at this a bit more in depth in the coming weeks. Also... I hope to have time to extend this a bit further and look at what Obama has done during the Great Recession, not to mention commenting on Greg Mankiw's recent piece in the Times.
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by cactus

UPDATE: D-Squared chimes in, saying in less than 100 words what took me a couple of thousand (though with no quotes):

After the "first hundred days" in the term of a new Democratic President comes the next stage; the almost impreceptible transition among his supporters from saying

"of course, he's been hampered by all sorts of obstacles to date, but he's about to start delivering on all those promises he made to his supporters on the left"

to saying

"well, he never really promised anything and it's terribly naive to think he was ever going to deliver anything to his supporters on the left"

Apparently we've reached it.

That's why he gets the big bucks, folks.

Brad DeLong attempts to attack Matt Taibbi's facts. Tao Jonesing replies in comments (DeLong starts; Jonesing in bold) :

1. The financial reform bill that just passed the House is not nearly as strong a bill as the Treasury wanted. The reason is not that Obama and Geithner did not push for a stronger bill, but rather that the members of congress balked at a stronger bill. What financial did Obama and Geithner "push for," exactly? And don't point us to speeches. What did they push for, i.e., actually apply the pressure of the bully pulpit? Unless there's some way to establish that they brought pressure to bear, I think this fact is an opinion.
   
   
2. Citigroup did not receive a $306 billion bailout as the first major act of Obama's presidency. First, where does the $306 billion number come from? The number I associate with Citigroup is $45 billion of TARP money. Certainly Citigroup would be bust and gone if not for government aid extended to it during George W. Bush's presidency--aid that Obama endorsed--but it now looks as though Citigroup will pay everything back: that the government will profit from the aid it extended to Citigroup.Clearly, Taibbi is including the backstop in his number, which you realize in 8.*
   
   
3. James P. Rubin is not James S. Rubin.
   
   
4. The James Rubin whom Mike Froman brought in to staff the economic policy search was not Bob Rubin's son. 3-4. Taibbi admits this error.**
   
   
5. The Obama economic policy inner circle--Tim Geithner, Gene Sperling, Larry Summers, Christie Romer, Peter Orszag--is not "a group of Wall Street bankers." It is only 5% Wall Street banker--only 1/4 of Larry Summers can possibly count as a Wall Street banker.You misread what Taibbi said, which was that two people in Obama's economic policy inner circle--Goolsbee and Kornbluh-- were replaced with a group of Wall Stret bankers. Taibbi did not say that the all of the inner circle were Wall Street bankers. So, your fifth "fact" is actually a strawman. Perhaps you are focused on the subtitle? I can't lay the subtitle at his feet because editorial staff make that decision. Note from Ken: Brad is incredibly generous in the case of Geithner, whose dinner plans while at the NY Fed were consistently at the homes of Wall Street bankers, and Summers, whose work since attempting to destroy Harvard's endowment has been with Goldman, D. E. Shaw, and other paragons of Wall Street. Summers may have worked for years without being on Wall Street, but it has been his primary source of income since his divorce.
   
   
6. Mike Froman staffed the economic policy search. Mike Froman--a very smart and capable man--did not lead the economic policy search. He was not some corrupt Svengali who foisted advisors who would whisper evil in the innocent Obama's ear. Obama led the economic policy search. Come now, Obama led the search? Really? What did that leadership entail, delegating the day-to-day responsibilities to somebody else? Froman, maybe? Since you seem to know, what did Froman actually do? And Taibbi never said or implied Froman was a corrupt evil Svengali. His point was that Froman was a Citi insider. Overall, this fact seems more like opinion.
   
   
7. Austan Goolsbee's absence from the transition staff was not notable. Austan Goolsbee does have a senior subcabinet appointment. And Austan Goolsbee is not a voice on the economic left--this is the man who told the Canadians not to take Barack Obama's claims that he wanted to renegotiate NAFTA seriously. I don't know the story of Karen Kornbluh.Your opinion of Goolsbee's departure is an opinion, not a fact. I don't know whose opinion is correct, although I'd bet on yours.
   
   
8. Ah. Taibbi says: "the government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets." First of all, $277 + $45 = $322, not $306. But a guarantee is not money at risk and money at risk is not money lost. As I said, it looks like the government is going to make money off of its support of Citi. (Albeit not off its support of AIG.) Clearly, Taibbi is including the backstop in his number, which you realize in 8. Note from Ken: This is, by the way, bullshit, since it's actually another example of the Rubinesque "contracts are only valid if they favor Wall Street firms." What is being counted as "profits" are deeply-discounted equity options that have value because of the mass amount of subsidization and drug money that has gone into the banking system without in the least being passed on to the consumer who is footing the bill.
   
   
9. Tim Geithner was not hired as Treasury Secretary by Mike Froman. Tim Geithner was hired as Treasury Secretary by Barack Obama. You are correct that Obama hired Geithner. Nobody else could have, at least in the end. But who proposed Geithner? And what weight did Obama give the opinion of the people who proposed him? Did Obama just rubber stamp the recommendation after meeting Geithner? Who else was on the list? While there's no doubt that Taibbi was making a lot of assumptions about Froman's role and level of influence to jump to the obviously false conclusion that Froman hired Geithner, the fact that the conclusion was obviously false does not detract from ugly optics that Taibbi was attempting to magnify.
   
   
10. According to CBO, the ARRA so far is not worth 640,000 extra jobs as of September 2009 but rather 1.1 million plus or minus 500,000--and that number will grow.You got your number from the CBO, but Taibbi says he got his number from the White House. There is a website managed by an executive branch agency that proclaims the 640,329 job number used by Taibbi.

So that scores as 5 (or 6, since I'm inclined to count [2] in the Taibbi column) to 3 (3, 4, and arguably 7) against DeLong, with (8) called a draw (I would give it to Taibbi—the guarantee covers $306B in "assets" without cherry-picking, so potential buyers are seeing "support"-level offers for the entire $306B. But there is a specific issue in using the $306B number, and Dr. DeLong correctly notes that the actual backstopping was greater than Taibbi reports. Whether this makes his interpretation here preferable is left as an exercise.)

Hint for the future: if you're going to claim you've got fifty corrections, lead with your ten best.

*From the comments later, Our Own Rusty lays out the details:

Wall Street Journal 11/24/2008...Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses...In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion.

So it didn't happen during Obama's presidency, but it did happen post-election, and during the time that the Obama Administration was—by its own declarations—actively holding discussions with the parties.

Charlie Stross talks about liquidity:

What we've just seen, hidden in the euphemism here, is a confession that drug cartels and other organized criminals have gone on a $352Bn asset-buying spree — and the banks and regulators, world-wide, turned a blind eye to this because the alternative was to allow the banks to collapse. And the corollary is that these investments are now in the system, laundered, whitewashed, and legit. These narcodollars aren't neatly bundled up inside the mattress any more; they're in the system, doing their owners' bidding.

A third of a trillion dollars is a lot of money; it's enough to fund the US military invading another country halfway around the world, or a manned Mars exploration program. Obviously, there's no single Mr Big here, no Blofeld investing SPECTREs ill-gotten billions in an ambitious bid to go legit.

But one wonders whether the "organised criminals" have been investing in anything innovative. (Politicians, if they're smart.) And what the long-term consequences are going to be ...

It won't be Stross's next novel, but it might be Ben Bernanke's. Or Larry Summers, whose latest foray into fiction is here.

Paul Samuelson, 94 mostly-glorious years.

And if you think he wasn't doing much recently, check out the two-part interview with Connor Clarke—The Atlantic's real economics expert—here and here.

Households in the US and the UK are members of the "most levered club". But put their balance sheets side-by-side, and the outlook for the US economy looks a little brighter than that for the UK. Why? Both are dropping debt burden, but a qualitative analysis suggests that the UK household leverage (probably) should be falling at a more accelerated pace.

The chart illustrates leverage in the US and UK, or household debt (loans) as a percentage of disposable income (DPI) through Q3 2009 and Q2 2009, respectively (the UK releases Q3 Economic Accounts at the end of December). By Q2 2009, UK and US households dropped leverage rather coincidentally, -4.8% and -4.4%, respectively. However, the debt bubble was bigger in the UK than in the US, peaking at 160% of DPI compared to 131% in the US. Why isn't leverage falling more quickly? Spending.

More below the fold...

Various pundits have been putting forward candidates for the big human crisis confronting us. They all agree that something is, but can’t settle on one or another.

Throw a dart. Is it human rights? Terrorism? How about “the economy?” Not many people talking about the fisheries, though you could make a good case for a collapse of the ocean biosphere. Or how about one that effects us all -- climate change?

The crisis facing humanity is not any of those. The crisis is “waking up.”

We have slept over the past thousands of years, with our little dreams, our amateur class plays of wars and histories and arts. While all this went on, our mother earth uncomplainingly fed and washed and cleaned up after us.

So long as the “house” was big enough and we were small enough so our messes could be absorbed, we have had a lot of room to do what children do – learn and grow and break things. (I have a theory that breaking, burning and cutting things is a indispensable part of childhood. How else can you learn the properties of materials like sticks and vases and your little sister’s hair?)

Well, the clumsy, drooling baby stage is over. The kid’s gotten to be big and strong, destructive, creative, with the flashes of insight and compassion that presage adulthood. The baby is now a teen. Be afraid.

The teen years are the time of maximum health and energy, combined with intelligence, ingenuity, and the tendency to make disastrous decisions. Research has shown that the human brain doesn't really come fully online until the early 20s. We’re not there yet, believe me.

Luckily, although our species as a whole shows many teen-like qualities at the moment, quite a number of individuals have progressed into adulthood. We know what it looks like. This goes for nations also. In particular, the Scandinavian countries seem to have a grip on the concept of adulthood.

Don't kid yourself that we will evolve out of this teen stage. As a species, biologically we have scarcely chipped our way out of the eggshell. Instead, the genius of our species is to devise and put in place social structures that preserve a shared memory and channel us towards some behaviors and preferences, and away from others. This genius, unfolding some 40,000 years ago, has allowed us to blanket the world with our species in every niche in every continent except the Antarctic. It's the equivalent of the baby growing up into a teen who can raid the fridge and enjoy the entire house, coming and going as he pleases.

More below the fold...

Most of time when I write something, I sign it. A piece in the first Great American Baseball Stat Book. The first three editions of a book called Interest Rate Trends and Comparisons put out by the bank at which I worked in the late 1980s.* Review pieces in various publications. A piece in Institutional Investor last year on the opportunities for clean water and sewage investment in Emerging Market countries. Blog posts, such as this one.

There are two exceptions to this. I reviewed for several years for Publishers Weekly, back in the days when they paid better and protected anonymity by fiat. So while I claim to have been the first person to use "fuck" or "cunnilingus" in a PW review, I can't be certain that's so—and, more relevantly, no one else can be certain it was me.

The other is a collaborative novel entitled Atlanta Nights, whose sole author credit is Travis Tea. You may have heard of it. While I did write one chapter of it (Chapter 16; by the way, I did not play midfield for Hull in the 1960s, no matter how Wikipedia links), you'll find no attribution of that in the book itself. (Nor did any of the other authors take credit; it was a charity work. How the Google book deal will handle such work is left as an exercise.)

I like the book, and am very happy to have had a small part in its development. But I certainly didn't expect that someone ("manwithoutabody") would do a Dramatic Reading of, apparently, the entire book, and post same on YouTube.

My wife's chapter is below, for your enjoyment. Or, possibly, use in the next Eschaton/Sadly No video battle.

cross-posted from skippy, the bush kangaroo

*I believe I may be listed as "Research Associate" in the 1986 edition.

Robert Waldmann



One of the puzzling aspects of the European debate over how to increase financial regulation after the crash was the idea that hedge funds should be regulated more. This is odd as they didn't destabilize the system. I just assumed the Europeans can't stand unregulated people making huge amounts of money. Now I have a rationalization. The idea is that all the smart investment bankers set up hedge funds leaving behind the fools. Then the smart hedge fund managers bet against the fools and destroy the investment banks. So the problem is that hedge fund managers make too much money compared to you poor long suffering traders at investment banks.

I am not joking.

More below the fold...