Monday Reads

Good Morning!

Well, it’s yet another Monday.  I’ve been busy checking out the jobs listings for next academic year and one Hawaii posting is looking pretty interesting right now. Anyway, I’ve got a little more writing on stuff to do before I go full force on that in a few weeks.  I spent all weekend with my nose in numbers and didn’t even turn on the TV once.   Let’s start with an academic post at VOXEU on “What caused the recession of 1937- 1938?” for a good start.  It’s on monetary policy and gold.  It shows how worrying about inflation when a recovery hasn’t really taken hold yet can create further problems.  It also is an area that was investigated by economist Christine Romer who showed how tight fiscal policy (i.e. less government spending) and a tightening of monetary policy led to a recession within the Depression.  Sounds familiar!

The recession of 1937-38 is sometimes called “the recession within the Depression.” It came at a time when the recovery from the Great Depression was far from complete and the unemployment rate was still very high. In fact, it was a disastrous setback to the recovery. Real GDP fell 11% and industrial production fell 32%, making it the third-worst US recession in the 20^th century (after 1929-32 and 1920-21).

The recession is often attributed to a tightening of fiscal and monetary policy. Christina Romer (2009) and others have argued that it is relevant to today’s situation because it illustrates the dangers of a premature withdrawal of stimulus when the economy is still weak.

But the recession remains somewhat of a mystery because the two most frequently mentioned causes – the reduction in the fiscal deficit and the Federal Reserve’s decision to double reserve requirements – do not appear to have been powerful enough to generate a recession of the magnitude seen. For example, Romer (1992) herself has argued that “it would be very difficult” to attribute much of the decline in output to changes in fiscal policy.¹ And most studies of the Fed’s doubling of reserve requirements – most recently, Calomiris et al (2011) – have concluded that it had little impact on banks because they held abundant excess reserves, which they did not seek to rebuild after the new requirements took effect.

If fiscal retrenchment and higher reserve requirements cannot fully explain the recession, then what can? There is no doubt that there was a severe monetary shock. As Figure 1 shows, the money supply (M2) grew at a consistent rate of about 12% a year from 1934 to 1936, but then suddenly stopped growing in early 1937 and even fell later in the year. The monetary shock, however, was not the Federal Reserve’s decision to increase reserve requirements, but the often overlooked Treasury Department decision to sterilise all gold inflows starting in December 1936.

Historian Julian Zelizer is wondering about Obama becoming a one-term President.   Minx sent me this link and I found it interesting.  Zelizer seems to think that the midterm election created a timid Obama.  It seems like every where I turn I read an article on Obama plus one term president these days.

With waning approval ratings and a stagnant economy, the possibility that Mr. Obama will not be re-elected has entered the political bloodstream. Suddenly, the opposition party envisions a scenario in which its presidential candidate could defeat Mr. Obama in a referendum on his job performance. Mr. Obama needs to think hard about his own statement and consider what it takes to be a successful one-term president, in the light of history.

One-term presidents usually leave office with their parties divided, the economy in crisis, wars unresolved, approval ratings in the tank and a sullen public rejecting them. Becoming a one-term president means joining a gallery of dashed hopes and crushed ambitions. Among those who were elected for just one term were men who, like Mr. Obama, came to the White House with enormous promise.

Interestingly enough, it may just be the Republicans that defend Social Security in an effort to stop the momentum of Governor Goodhair.  First up, a bit of  ass-kicking on the subject from Mittens.  Romney knows where to play the Social Security card; FLORIDA!

Mitt Romney didn’t wait long to begin his attack on Rick Perry over Social Security—his campaign is doing door-to-door distribution of a flier attacking Perry on the issue.

The flier, which a campagn spokesman said is being left at the doors of Florida GOP primary voters, portrays the GOP primary as a two-candidate race—“Two candidates. Only one will protect what’s important to you,” is the headline.

Of those two, it says, Perry is “reckless and wrong on Social Security.” The bold-face tagline: “Rick Perry: How can we trust anyone who wants to kill Social Security?”

Romney, it says, favors “entitlement reform,” but “wants to save Social Security.”

Perry has not directly advocated abolishing Social Security, although he has called it a “Ponzi scheme” and questioned whether it’s constitutional. In last week’s candidates debate at the Reagan Library debate, the two clashed on the issue, and Romney accused Perry of being “committed to abolishing Social Security. But during the debate, Perry promised emphatically that he wouldn’t do anything to affect the benefits of current retirees or those nearing retirement.

Romney isn’t paying attention to the nuances, however. In the nation’s biggest swing state, which happens to have the second-largest population of 65-plus residents, he clearly hopes to put Perry’s views into question.

Bachmann is not about to be left out of the situation.  She’s got plans in the work to attack Goodhair on Social Security too.

“Bernie Madoff deals with Ponzi schemes, not the grandparents of America,” says a Bachmann adviser.  “Clearly she feels differently about the value of Social Security than Gov. Perry does.  She believes Social Security needs to be saved, that it’s an important safety net for Americans who have paid into it all their lives.”

Bachmann is in Florida for private meetings and to prepare for Monday night’s GOP debate in Tampa.  It’s no secret the Bachmann camp was unhappy with the moderators of last Wednesday’s Republican debate at the Reagan Library, a debate which began as a Perry-Romney showdown and gave less time to other candidates.  This time, in Tampa, it seems safe to predict that moderators will ask at least some other candidates whether they agree with Perry’s characterization of Social Security.

“Certainly not,” the adviser says.  “She strongly disagrees with his position on that, and it’s clearly not something that’s going to sit well with the people of Florida and Iowa and South Carolina and many of the early states, where there is a large population of seniors who rely heavily on Social Security.  For [Perry] to scare them is wrong.”

This should get interesting.  Oh, a friend and I were having a conversation on Michelle and Marcus last night.  I really though they should be part of a Tennessee Williams like play with John Goodman cast as Marcus.  I think Goodman could stretch his chops enough to do a Blanche Dubois like character, don’t you?

Steve Pearlstein at WAPO has come up with the newest Republican slogan and I like it.  “Repeal the 20th century”.  Actually, it’s more like repeal everything prior to the civil war but what’s a few decades between friends?

It’s not just the 21st century they want to turn the clock back on — health-care reform, global warming and the financial regulations passed in the wake of the recent financial crises and accounting scandals.

These folks are actually talking about repealing the Clean Air Act, the Clean Water Act and the Environmental Protection Agency, created in 1970s.

They’re talking about abolishing Medicare and Medicaid, which passed in the 1960s, and Social Security, created in the 1930s.

They reject as thoroughly discredited all of Keynesian economics, including the efficacy of fiscal stimulus, preferring the budget-balancing economic policies that turned the 1929 stock market crash into the Great Depression.

They also reject the efficacy of monetary stimulus to fight recession, and give the strong impression they wouldn’t mind abolishing the Federal Reserve and putting the country back on the gold standard.

They refuse to embrace Darwin’s theory of evolution, which has been widely accepted since the Scopes Trial of the 1920s.

One of them is even talking about repealing the 16th and 17th amendments to the Constitution, allowing for a federal income tax and the direct election of senators — landmarks of the Progressive Era.

What’s next — repeal of quantum physics?

Cannonfire has an excellent analysis up of a NYT piece on Obama and covert activities. Cannon talks about Obama’s entire background as being spookier than a gothic novel, with Halloween coming up, you could read all the links to his past posts and get in the mood or read his summary at that link.

In 1981, Obama was allegedly an ill-to-do student at Occidental University in L.A. Yet he chose to make a covert trip to Pakistan — his first trip out of the country — at a time when the place was under martial law; the State Department was advising Americans not to travel to that part of the world. Pakistan was, of course, a key part of the covert resupply effort for the anti-Soviet effort in Afghanistan.

There, a local “diplomat” at the U.S. embassy (obviously CIA) set up a meeting with one of the most powerful players in Pakistan — Ahmadmian Soomro. We are given no explanation as to why a poor student would meet with the nation’s most powerful banker and deputy speaker of the Assembly.

At Oxy, Obama took classes in politics, and one of his likely professors (whom I have never named) has a “former” CIA background. (With the CIA, you always have to put the “former” in quotes.) This man was also close to Zbigniew Brzezinski — who later became a key adviser to and influence on Barack Obama.

At the time, young Obama had an Indonesian passport. It’s known that the Agency likes to recruit young men with multiple passports, which can aid in plausible deniability. (For example: Obama’s passport would not have a Pakistan stamp.)

Obama never seemed to have any trouble paying for his expensive university career. After college, he went to work for a firm which was later exposed as offering cover for CIA personnel oversees.

His mother, Ann Dunham, had a remarkably spooky background, working for AID and the Ford Foundation, both well-known for offering cover for the CIA. Although an alleged leftist, she married a man who was the key liaison between Mobil oil and the CIA-installed Suharto regime, which came to power on the backs of some 500,000 corpses. I think it is fair to posit that no real leftist would even have lunch with a guy like that. (Ann made her own mystery trip to Pakistan in 1981 — and was even learning Urdu!)

Pardon me while I get my shoe phone …

Okay, well, that’s a start to the morning for me.  So, what’s on your reading and blogging list today?