TGIFriday Reads

Posted: March 25, 2011 | Author: | Filed under: commercial banking, Corporate Crime, Economy, Egypt, financial institutions, Foreign Affairs, morning reads, U.S. Politics, unemployment, Women's Rights | Tags: , , , , | 16 Comments

Good Morning!

There’s been quite a few economists weighing in on the debate going on in congress about the budget.  Paul Krugman’s op-ed is on “The Austerity Delusion”. Krugman’s appalled that more policymakers aren’t concerned with the high rate of unemployment which is contributing to the deficit in several ways.  First, it decreases tax revenues.  Second, it increases state and federal expenditures.  Solve the jobs problem and the deficit will decrease.  He’s worried that all this austerity will just bring on another economic slowdown.

Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.

So jobs now, deficits later was and is the right strategy. Unfortunately, it’s a strategy that has been abandoned in the face of phantom risks and delusional hopes. On one side, we’re constantly told that if we don’t slash spending immediately we’ll end up just like Greece, unable to borrow except at exorbitant interest rates. On the other, we’re told not to worry about the impact of spending cuts on jobs because fiscal austerity will actually create jobs by raising confidence.

Politico features a series of Former CEA members who signed  a letter of concern on the deficit and unsustainable US Budgets. Too bad that people like Greg Mankiw–advisor to Dubya–didn’t speak up when the spending problems were originated.  They mostly trace to Reagan and Bush administrations.  They all suggest using the Cat food commission report as the focus of discussions.  Hang on to your social security, folks!  It’s going to be a bumpy ride.

As former chairmen and chairwomen of the Council of Economic Advisers, who have served in Republican and Democratic administrations, we urge that the Bowles-Simpson report, “The Moment of Truth,” be the starting point of an active legislative process that involves intense negotiations between both parties.

There are many issues on which we don’t agree. Yet we find ourselves in remarkable unanimity about the long-run federal budget deficit: It is a severe threat that calls for serious and prompt attention.

While the actual deficit is likely to shrink over the next few years as the economy continues to recover, the aging of the baby-boom generation and rapidly rising health care costs are likely to create a large and growing gap between spending and revenues. These deficits will take a toll on private investment and economic growth. At some point, bond markets are likely to turn on the United States — leading to a crisis that could dwarf 2008.

“The Moment of Truth” documents that “the problem is real, and the solution will be painful.” It is tempting to act as if the long-run budget imbalance could be fixed by just cutting wasteful government spending or raising taxes on the wealthy. But the facts belie such easy answers.

I suppose you know the professional insane Republican Michelle Bachmann is forming an exploratory committee for a possible presidential run.  I’d vote for any one’s dog before I’d consider Bachmann who doesn’t appear to have paid attention to any course she ever attended in school. I’ve never in my life heard any one outside of maybe a grade school that has such a bad grasp of American History, law, and politics.  I think she should’ve just gotten a mail order degree.  Education appears to have been wasted on her.

CNN has exclusively learned that Rep. Michele Bachmann will form a presidential exploratory committee. The Minnesota Republican plans to file papers for the committee in early June, with an announcement likely around that same time.

But a source close to the congresswoman said that Bachmann could form the exploratory committee even earlier than June so that she could participate in early Republican presidential debates.

“She’s been telling everyone early summer,” the source told CNN regarding Bachmann’s planned June filing and announcement. But the source said that nothing is static.

“If you [debate sponsors] come to us and say, ‘To be in our debates, you have to have an exploratory committee,’ then we’ll say, ‘Okay, fine…I’ll go file the forms.'”

Speaking of Republicans, a former aide to Sen. John Ensign has just been indicted for violating conflict of interest laws.

The Justice Department announced the indictment late Thursday, which charges Doug Hampton with seven counts of violating criminal conflict of interest laws for allegedly engaging in unlawful communication with Ensign’s office, violating the Senate’s “revolving door” policy.

According to the indictment, after Hampton left Ensign’s office in 2008 he “knowingly and willfully made, with the intent to influence, communications to staff members of the U.S. senator” on behalf of an energy company he was employed by at the time.

Hampton is alleged to have sought the assistance of Ensign and other staff members for help in moving forward a proposal to build a power plant in eastern Nevada.

Hampton, if convicted, could face up to five years in prison for each of the seven counts in the indictment.  He is set to be arraigned in U.S. District Court in Washington, D.C. on March 31.

Ensign is retiring.  Probably because of all the scuttlebutt around his affairs and possibly what may come out of this prosecution.  Maybe Tom Delay will have a new cell mate on the way.

Glenn Greenwald has written an excellent piece in Salon on withering Miranda rights under the Obama administration.   You may want to check it out.

The number of instances in which Obama has violently breached his own alleged principles when it comes to the War on Terror and the rule of law are too numerous to chronicle in one place. Suffice to say, it is no longer provocative or controversial when someone like Yale Law Professor Jack Balkin writes, as he did the other day, that Obama “has more or less systematically adopted policies consistent with the second term of the George W. Bush Administration.” No rational person can argue that or even tries to any longer. It’s just a banal expression of indisputable fact.

Today, the Obama DOJ unveiled the latest — and one of the most significant — examples of its eagerness to assault the very legal values Obama vowed to protect. The Wall Street Journal reports that “new rules allow investigators to hold domestic-terror suspects longer than others without giving them a Miranda warning, significantly expanding exceptions to the instructions that have governed the handling of criminal suspects for more than four decades.” The only previous exception to the 45-year-old Miranda requirement that someone in custody be apprised of their rights occurred in 1984, when the Rehnquist-led right-wing faction of the Supreme Court allowed delay “only in cases of an imminent safety threat,” but these new rules promulgated by the Obama DOJ “give interrogators more latitude and flexibility to define what counts as an appropriate circumstance to waive Miranda rights.”

Just hope you never get classified as a terrorist or you’ll disappear down some rabbit hole.  You should also read William Grieder over at The Nation on How Wall Street Crooks Get Out of Jail.

Instead of “Old Testament justice,” federal prosecutors seek “authentic cooperation” from corporations in trouble, urging them to come forward voluntarily and reveal their illegalities. In exchange, prosecutors will offer a deal. If companies pay the fine set by the prosecutor and submit to probationary terms for good behavior, perhaps an outside monitor, then government will defer prosecution indefinitely or even drop it entirely. The corporation thus avoids the stigma of a criminal trial and the bad headlines that depress stock prices. More to the point, the “deferred prosecution agreement,” as it’s called, allows the company to escape the more severe consequences of criminal conviction—the loss of banking and professional licenses, charters, deposit insurance or other government benefits, including eligibility for federal contracts and healthcare programs. In other words, the punishment prescribed in numerous laws.

“With cooperation by the corporation, the government may be able to reduce tangible losses, limit damage to reputation, and preserve assets for restitution,” the Justice Department’s authorizing memorandum explained in 2003. “A deferred prosecution or non-prosecution agreement can help restore the integrity of a company’s operations and preserve the financial viability of a corporation that has engaged in criminal conduct.”

The favored argument for the more conciliatory approach was that criminal indictment may amount to a death sentence for a corporation. The fallout will destroy it, and the economy will lose valuable productive capacity. The collateral consequences are unfair to employees who lose jobs and stockholders who lose wealth. Corporate defenders cited Arthur Andersen, the giant accounting firm that imploded after it was convicted in 2002 of multiple offenses in Enron’s collapse. But was it the firm’s indictment or its criminal behavior that caused clients, accountants and investors to abandon it?

A better name for the Justice Department’s softened policy might be “too big to prosecute.”

Wanna rob a bank?  Don’t do it with a gun.  Just become its President and do what you want to do.

Here’s a disturbing headline from Egypt (h/t to Minx):Secret shame of Egypt’s army: Women protesters were forced to have ‘virginity checks’ after being arrested in Tahrir Square,

Women arrested by the Egyptian police during protests in Cairo’s Tahrir Square were subjected to forced ‘virginity tests’, according to Amnesty International.

Eighteen demonstrators were detained after army officers cleared the square on March 9 at the end of weeks of protest.

Amnesty today said that the women had been beaten, given electric shocks and then subjected to strip searches while being photographed by male soldiers.

They were then given ‘virginity checks’ and threatened with prostitution charges if medics ruled they had had sex, according to the charity.

Just when you think things will get better, something comes along that just makes things look worse.

So, what’s on your reading and blogging list today?

The Changing Face of the MENA Region (Breaking News)

Posted: March 24, 2011 | Author: | Filed under: Algeria, Bahrain, Egypt, Foreign Affairs, Iran, Iraq, Israel, Jordan, Lebanon, Libya, Syria, Tunisia, Yemen | Tags: , | 8 Comments

The WSJ reports that Yemeni President Saleh is working out a deal that will let him resign. The country’s leading general will also resign. The details will be released on Saturday.

“Both sides have agreed on the main points of departure, and Saturday is expected to be the day that Saleh and General Ahmar both step down,” according to a senior official familiar with the negotiations.

It couldn’t be determined which individuals were being considered as candidates for any transitional authority as talks continued late Thursday between the two leaders.

The support for mainstream opposition party leaders is unclear across the rugged and largely conservative country. Meanwhile, traditional tribal leaders who have great social standing would face problems exerting authority over rival tribes.

The Pentagon is currently holding a presser and has announced that they’re no longer ‘detecting’ Libyan planes in the air. NATO and the UN are expected to make an announcement shortly that NATO will be taking over the No-fly efforts. I just read some interesting analysis at Juan Cole’s Informed Consent on the Top Ten Accomplishments of the UN’s no-fly zone efforts. Cole says the French have also verified that Gadhafi’s air attacks have stopped and that his planes are grounded.  There is also this tidbit.

The participation of the Muslim world in the United Nations no-fly zone over Libya has been underlined. The measure was called for by the Arab League, which has not in fact changed its mind about its desirability. Qatar is expected to be flying missions over Libya by this weekend. Other Arab League countries will give logistical support.

It is significant that the Arab League is supporting this action.  The GCC (Gulf Cooperation Council)–an organization that is an essential part of my research on trade–is also trying to curb problems in Bahrain. This is significant because it shows that region is actively trying to create situations to jointly improve the conditions in the region.

Meanwhile, the people of Syria may be closer to the goals of their mostly peaceful protests. Syria is one of the most repressed countries in the region and has been under martial law for 50 years.  Clashes between protesters and the government have increased recently.

President Bashar al-Assad made a rare public pledge to look into granting Syrians greater freedom on Thursday as anger mounted following attacks by security forces on protesters that left at least 37 dead.

Syrian opposition figures said the promises did not meet the aspirations of the people and were similar to those repeated at regular Baath Party conferences, where committees would be formed to study reforms that do not see the light of day.

“The leadership is trying to absorb the rage of the streets. We want to see reform on the ground,” said a protester in the southern city of Deraa.

A hospital official said at least 37 people had been killed in the southern city of Deraa on Wednesday when security forces opened fire on demonstrators inspired by uprisings across the Arab world that have shaken authoritarian leaders.

While an aide said Assad would study a possible end to 48 years of emergency rule, a human rights group said a leading pro-democracy activist, Mazen Darwish, had been arrested.

It’s exciting to watch the move to democracy and modernity in a region known for strongmen dictators, kings, and harsh political oppression.  This will be an interesting situation to watch. I only hope that the people get what they are hoping for and that modernity and better treatment of women are part of the equation.  Some of the states–like Qatar and the UAE–are further along in this pursuit than others.  Yemen and Syria are perhaps the most dangerous parts of the equation.  The Shia-Sunni dynamic is present and that always makes for a delicate situation.

Also, SOS Hillary Clinton will be making a statement shortly.  We will try to keep you updated and give you interesting links as these new developments unfold.

Tuesday Reads

Posted: March 22, 2011 | Author: | Filed under: Baby Boomers, Bahrain, Foreign Affairs, health hazard, Iraq, Japan, Libya, morning reads, psychology, Syria, U.S. Military, U.S. Politics, Water, Yemen | Tags: , , , , , , , , , , , , , , , , | 30 Comments

Good Morning!!

I’m teaching a Psychology of Personality course this semester, and yesterday I started lecturing about Freud and psychoanalytic theory. I was explaining Freud’s notion of the three parts of the personality–the id, the ego, and the superego. You’re probably familiar with those terms, but basically the id is there when we are born–it is completely self-centered, doesn’t know the difference between fantasy and reality, all it cares about is pleasure. It wants what it wants when it wants it. Sometime during infancy, we develop an ego that gets the id under some control, and around age 4-6 we develop a superego–basically like a conscience, that tells us which behaviors are right or wrong or socially acceptable.

Anyway, after class I was thinking about Muammar Gaddafi and his bizarre behavior–the way he has insisted for weeks that there is no opposition and that he isn’t attacking Libyan citizens. No, he would never do that. It occurred to me that Gaddafi is pretty much acting from his id all the time. Of course his ego keeps him somewhat connected to reality so he can function in the world, but mostly he just cares about his own needs.

I wonder if that is what happens to all leaders who gain absolute control. Does the quote “power corrupts and absolute power corrupts absolutely,” really mean that power causes people to regress to an earlier stage of development?

It sounds peculiar, but think about how powerful people get so many of their needs met by others. Obama doesn’t have to worry about paying for things, getting food or clothing, even getting information. It is all provided by other people. In many ways, it’s a kind of childlike, dependent state. So if the leader doesn’t have a strong character (ego), he can end up behaving in a narcissistic, childlike way.

OK, well that’s my not-very-deep thought for today.

So what’s happening in the news? As has often been the case in recent weeks, much of the big news is coming from outside the U.S.

On Libya, there has been more criticism of the UN resolution and how it is being carried out. I posted quite a few examples of the criticism in my post last night. Most of the objections are based on the fact that Libya is not at all important to the U.S. strategically.

Today I want to recommend a couple of articles that explain why the intervention in Libya, while troubling in many ways, was probably the right thing to do–even for U.S. interests. The first is by Mark Lynch at the Foreign Policy blog. Lynch uses the name “abuardvark” on twitter. His post is headlined Libya in its Arab Context Although Lynch has misgivings about the intervention and has written about them, he still thinks what the U.S. is doing is the right thing–both for the Arab world and for advancing our interests. Here’s his basic argument:

Libya matters to the United States not for its oil or intrinsic importance, but because it has been a key part of the rapidly evolving transformation of the Arab world. For Arab protestors and regimes alike, Gaddafi’s bloody response to the emerging Libyan protest movement had become a litmus test for the future of the Arab revolution. If Gaddafi succeeded in snuffing out the challenge by force without a meaningful response from the United States, Europe and the international community then that would have been interpreted as a green light for all other leaders to employ similar tactics. The strong international response, first with the tough targeted sanctions package brokered by the United States at the United Nations and now with the military intervention, has the potential to restrain those regimes from unleashing the hounds of war and to encourage the energized citizenry of the region to redouble their efforts to bring about change. This regional context may not be enough to justify the Libya intervention, but I believe it is essential for understanding the logic and stakes of the intervention by the U.S. and its allies.

Libya’s degeneration from protest movement into civil war has been at the center of the Arab public sphere for the last month. It is not an invention of the Obama administration, David Cameron or Nicholas Sarkozy. Al-Jazeera has been covering events in Libya extremely closely, even before it tragically lost one of its veteran cameramen to Qaddafi’s forces, and has placed it at the center of the evolving narrative of Arab uprisings. Over the last month I have heard personally or read comments from an enormous number of Arab activists and protest organizers and intellectuals from across the region that events in Libya would directly affect their own willingness to challenge their regimes. The centrality of Libya to the Arab transformation undermines arguments that Libya is not particularly important to the U.S. (it is, because it affects the entire region) or that Libya doesn’t matter more than, say, Cote D’Ivoire (which is also horrible but lacks the broader regional impact).

Lynch is still worried about what could go wrong:

I continue to have many, many reservations about the military intervention, especially about the risk that it will degenerate into an extended civil war which will require troops regardless of promises made today. But as I noted on Twitter over the weekend, for all those reservations I keep remembering how I felt at the world’s and America’s failure in Bosnia and Rwanda. And I can’t ignore the powerful place which Libya occupies in the emerging Arab transformations, and how the outcome there could shape the region’s future. Failure to act would have damned Obama in the eyes of the emerging empowered Arab public, would have emboldened brutality across the region, and would have left Qaddafi in place to wreak great harm. I would have preferred a non-military response — as, I am quite sure, the Obama administration would have preferred. But Qaddafi’s military advances and the failure of the sanctions to split his regime left Obama and his allies with few choices. The intervention did not come out of nowhere. It came out of an intense international focus on the Arab transformations and a conviction that what happens now could shape the region for decades.

At CNN, Peter Bergen tries to explain Why Libya 2011 is not Iraq 2003 I recommend checking it out.

Another article worth reading is by Robert Fisk at The Independent: Right across the Arab world, freedom is now a prospect

In the Middle East, Yemen may be close to ousting President Ali Abdullah Saleh. From the Guardian:

A military showdown is looming in Yemen after the defence minister announced that the army would defend the president against any “coup against democracy”. His statement came hours after 12 military commanders, including a senior general, defected from the regime and promised to protect anti-government protesters in the capital, Sana’a.

[….]

Yemen’s president, Ali Abdullah Saleh, suffered a significant blow when General Ali Mohsen al-Ahmar, his longtime confidant and head of the Yemeni army in the north-west, announced that he would support “the peaceful revolution” by sending soldiers under his command to protect the thousands gathered in the capital to demand that Saleh step down.

“According to what I’m feeling, and according to the feelings of my partner commanders and soldiers … I announce our support and our peaceful backing to the youth revolution,” Ali Mohsen said.

Minutes after his defection, tanks belonging to the republican guards, an elite force led by Ahmed Ali, the president’s son, rolled into the streets of Sana’a, setting the stage for a confrontation between defectors and loyalists.

At Bloomberg: U.S. Faces Loss of Key Ally Against Al-Qaeda in Yemen

…Yemeni President Ali Abdullah Saleh appears unlikely to weather a popular uprising and defections among his ruling elite, former U.S. officials said.

“It’s clear at this point that Saleh will have to step down,” Barbara Bodine, a former U.S. ambassador to Yemen, said in an interview yesterday. With the “mounting numbers of senior people in his administration resigning, we know it’s over. The terms of his departure, I think, are still being negotiated.”

The March 18 killing of at least 46 protesters allegedly by police and pro-regime gunmen — which drew condemnation from Obama and Secretary of State Hillary Clinton and prompted the defection of key military, tribal and government officials — may well be the tipping point.

Protests are continuing to escalate in Syria as well.

In Deraa, hundreds of black-uniformed security forces wielding AK-47 assault rifles lined the streets but did not confront thousands of mourners who marched at the funeral of 23-year-old Raed al-Kerad, a protester killed in Deraa.

“God, Syria, freedom. The people want the overthrow of corruption,” they chanted. The slogan is a play on the words “the people want the overthrow of the regime,” the rallying cry of revolutions that overthrew the veteran rulers of Tunisia and Egypt.

Security forces opened fire last Friday on civilians taking part in a peaceful protest in Deraa to demand the release of 15 children detained for writing protest graffiti.

Authorities released the children on Monday in a sign they were hoping to defuse tension in the border town, which witnessed more protests after Friday’s crackdown.

And there is a lot happening in Bahrain too. This article is worth a read: Libya burns but Bahrain can shake the world

While the world attention remains glued to the fires in Libya potential stakes in Bahrain are actually a hundred times higher. Safaniya Oil Field, the largest oil field in the world, is less than 200 miles from Manama. The Strait of Hormuz, through which passes 20 percent of world oil shipments and 40 percent of the world’s sea-borne oil shipments, is within a 400-mile radius.

More importantly, United States Fifth Fleet, with a forward deployed Carrier Strike Group, Combat Command force, Anti-Terrorism force, Sea Stallion helicopters, Amphibious Force and Patrol and Reconnaissance Force, is headquartered at Naval Support Activity Bahrain (or NSA Bahrain). In essence, Bahrain is home to America’s military might that reigns over the Persian Gulf, Red Sea and the Arabian Sea-all put together.

On March 14, around 2,000 soldiers of the Saudi-led, US-backed Peninsula Shield Force, in their armored carriers and tanks, invaded Bahrain. The stated purpose of the invasion is: to crush an unarmed civilian uprising.

On March 15, King Hamad ibn Isa Al Khalifa of Mamlakat al Bahrayn declared martial law under which the Bahrain Defence Force (BDF), numbering around 10,000 personnel, was “empowered to take whatever actions it deems appropriate in dealing with the predominately Shiite-driven unrest.”

I recommend clicking on the link and reading the rest to learn how Iran could get involved in the Bahrain conflict. Yikes!

In Japan workers are still trying to get the Fukushima nuclear plant under control. We keep hearing that things are improving, but it’s kind of hard for me to trust what I hear from governments and corporations these days. After Iraq, Katrina, the BP oil spill, and on and on, I honestly believe just about everyone in government and private business lies their asses off. The biggest fear at the moment is the radiation that is turning up in food and water. Of course the authorities claim that’s nothing to worry about, but why should we believe them?

Away from the plant, mounting evidence of radiation in vegetables, water and milk stirred concerns among Japanese and abroad despite assurances from Japanese officials that the levels were not dangerous.

TEPCO said radiation was found in the Pacific ocean nearby , not surprising given rain and the hosing of reactors with seawater. Some experts said it was unclear where the used seawater was ultimately being disposed.

Radioactive iodine in the sea samples was 126.7 times the allowed limit, while cesium was 24.8 times over, Kyodo said. That still posed no immediate danger, TEPCO said.

“It would have to be drunk for a whole year in order to accumulate to one millisievert,” a TEPCO official said, referring to the standard radiation measurement unit. People are generally exposed to about 1 to 10 millisieverts each year from background radiation caused by substances in the air and soil.

Whatever. I wouldn’t want to drink from the tap or swim in the radioactive ocean water.

Back in the USA, Wisconsin Asks Appeals Court to Block Order Halting Union Bargaining Law

Wisconsin’s attorney general asked an appeals court to block a state judge’s order that temporarily halted a law curbing government employee unions’ collective- bargaining power.

State Attorney General J.B. Van Hollen today also asked the Wisconsin Court of Appeals for permission to file an appeal seeking to overturn the ruling by Circuit Court Judge Maryann Sumi.

“Contrary to established case law, the trial court injected itself into the legislative process and enjoined a legislative act,” Van Hollen said in court papers filed today in Madison. “There is absolutely no authority for the broad, overreaching step taken.”

Sumi on March 18 granted a temporary restraining order blocking publication of the measure signed into law by Governor Scott Walker on March 11, after a hearing in Madison, the state’s capital city. Publication gives the law full force and effect.

I’ll end on a lighter note. If you’re as old as I am, you might remember a guy named Owsley “Bear” Stanley: “the Sixties hero who ‘turned on’ a generation.” Stanley died a few days ago in a car crash at the age of 76.

Stanley, who died in a car crash in Australia on Sunday, fuelled the “flower power” counter-culture that took root in California in the mid-1960s, supplying it with acid that he manufactured after stumbling across a recipe in a chemistry journal.

He also worked with the psychedelic rock band Grateful Dead, who wrote their song “Alice D Millionaire” about him after a newspaper described him as an “LSD millionaire”. One batch of his drugs reputedly inspired Jimi Hendrix’s song “Purple Haze”, and he provided LSD for the notorious “Acid Test” parties hosted by the American writer Ken Kesey, which featured in books by Tom Wolfe and Hunter S Thompson.

News of Stanley’s death – his car swerved off a road and slammed into a tree near his home in north Queensland – elicited tributes, but also surprise. Despite a youth so misspent that his name became slang for good acid, Stanley had made it to the age of 76. He was even a great-grandfather. In a statement yesterday, his family mourned him as “our beloved patriarch”.

Supposedly, a batch of Owsley’s acid inspired Jimi Hendrix’s first big hit, Purple Haze. Rest in peace, Owsley. I am one “casualty” of the ’60s who did learn something significant from my experiences with LSD. One thing I eventually learned is that I don’t need drugs to “get high.”

I guess that’s another not-so-deep thought, but hey, I’m OK with that. What are you reading and blogging about today?

Monday Reads

Posted: March 21, 2011 | Author: | Filed under: collective bargaining, Economy, Farming, financial institutions, Foreign Affairs, Global Financial Crisis, Gulf Oil Spill, Japan, Libya | Tags: , , , , , , | 57 Comments

Good Morning!

I’m finishing up a paper today that’s off to be published on Real Estate Investment Trusts (REITS). Don’t worry!  I won’t bore you with the details but it’s basically about locating speculation bubbles like the one that happened in real estate markets in the 2000s.  There were a lot of folks that made money off of that ride although most of us little guys lost a lot.  The reason I’m bringing it up is that my first read of the day is a Paul Krugman response to Allan Greenspan’s critique of Obama’s economic policy.  I just wanted to remind you of what a mess the first part of the century has been and that many of the pots and the kettles still appear to be confused about their true nature.  I mean, the entire mess has given me a great research agenda, but at what cost?

Greenspan’s tut tuts Obama’s ability to create economic chaos in the academic journal International Finance (pdf here). While most of us are still trying to figure out what went so horribly wrong, Greenspan is trying to pin the blame on the new guys. I’m going to quote his abstract because it’s just more of the same old same old  from one of the beasts that brought us to this mess and its worth the bask in the arrogance to just remember his access to power.  Greenspan says it’s too much government regulation and Obma activism that’s hampering the recovery and that he can prove it with bad, outdated statistical methods.  This comes from the man that gave Wall Street a lot of cheap money and no regulation so they could go hog wild.  The recovery may be tepid, the stock market may be recovering, but I’ll be damned if there’s any regulation left standing upon which he can float his argument. Oh, Krugman dismisses the methods by which Greenspan infers that it’s government activism and its inherent chaos that’s created a stale recovery.  To be honest, a first year doctoral student would use better methodology and know the literature better.  That really scares me, frankly. What did he do while at the Fed?  Reread The Fountainhead?

So, here’s the bubblemeister’s blowing you know what up you know where with techniques that wouldn’t get me published in a mimeographed neighborhood newsletter let alone International Finance. Why hasn’t this man retired to an island somewhere?

The US recovery from the 2008 financial and economic crisis has been disappointingly tepid. What is most notable in sifting through the variables that might conceivably account for the lacklustre rebound in
GDP growth and the persistence of high unemployment is the unusually low level of corporate illiquid long-term fixed asset investment. As a share of corporate liquid cash flow, it is at its lowest level since 1940.

This contrasts starkly with the robust recovery in the markets for liquid corporate securities. What, then, accounts for this exceptionally elevated level of illiquidity aversion? I break down the broad potential sources, and analyse them with standard regression techniques. I infer that a minimum of half and  possibly as much as three-fourths of the effect can be explained by the shock of vastly greater uncertainties embedded in the competitive, regulatory and financial  environments faced by businesses since the collapse of Lehman Brothers, deriving from the surge in government activism. This explanation is buttressed by comparison with similar conundrums experienced during the 1930s. I conclude that the current government activism is hampering what should be a broadbased robust economic recovery, driven in significant part by the positive wealth effect of a buoyant U.S. and global stock market.

So, here’s Paul Krugman with ‘Rantings of an Ex-Maestro’.

He’s no longer the Man Who Knows; he’s the man who presided over an economy careening to the worst economic crisis since the Great Depression — and who saw no evil, heard no evil, refused to do anything about subprime, insisted that derivatives made the financial system more stable, denied not only that there was a national housing bubble but that such a bubble was even possible.

If he wants to redeem himself through hard and serious reflection about how he got it so wrong, fine — and I’d be interested in listening. If he thinks he can still lecture us from his pedestal of wisdom, he’s wasting our time.

Brad Delong actually does some analysis over at his blog Grasping Reality.

I don’t see how this hangs together in any coherent fashion at all.

If businesses are unwilling to invest in illiquid capital out of the fear that government action will impair the value of their investments, businesses must also fear that government action will impair the value of their existing illiquid investments. What is the value of their existing illiquid investments? The value of their existing illiquid investments is nothing more than the stock market value of their companies–liquid stock market value is, in the last analysis, nothing more than the cash flows proceeding from the illiquid investments that companies have made that generate the profits.

A much better and more sensible explanation for the relatively high value that the stock market places on existing illiquid corporate assets and the relatively low value that companies place on illiquid investments to expand their fixed capital is precisely that capacity utilization is low–so why spend more money now building factories when doing so would be more expensive and only add to your idle capacity?

And, indeed, if you ask people running businesses what is their single most important problem, they say that it is not (as they sometimes say it is) taxes; they say that it is not (as they said it was at the start of 2000) the cost and quality of labor; it is not (as they said it was in 2004) the availability and cost of insurance; it is not (as they briefly said it was at the start of 1993) government requirements. What do they say their biggest problem is? Poor sales.

Yup, it’s pretty basic.  You gotta have customers and those customers gotta have jobs and decent paychecks.  That’s the problem right now.

Read the rest of this entry »

Late Night Update: Libya

Posted: March 20, 2011 | Author: | Filed under: Foreign Affairs, House of Representatives, John McCain, Libya, U.S. Military, U.S. Politics | Tags: , , , , , , , , , , , , | 11 Comments

The “allied forces” have been bombing targets in Libya for a second day. Gaddafi is outraged and has issued multiple threats. Meanwhile, here at home there is quite a bit of criticism of the President’s decision to participate in the UN action.

The Guardian has a pretty detailed description of events in Libya over the past couple of days: “Coalition attacks wreak havoc on ground troops.” I’m leaving out the bloodthirsty-sounding paragraphs–you can read them if you choose.

The barrage of attacks led by France, Britain and the US on Libya’s army, air bases and other military targets drew threats of a prolonged war from Gaddafi himself. But on the ground many of his forces were in disarray and fleeing in fear of further attacks from a new and unseen enemy.

The air assault halted and then reversed the advances by Gaddafi’s army on Benghazi and other rebel-held towns. But the revolutionary leadership wanted more. On Sunday it appealed for an intensification of the air assault to destroy the Libyan ruler’s forces and open the way for the rebels to drive him from power.

The air bombardment is regarded among rebel military commanders as creating a more level battle field by removing Gaddafi’s advantage of heavy armour.

“There must be more attacks, to destroy his forces and heavy weapons,” said Kamal Mustafa Mahmoud, a rebel soldier on the edge of Benghazi. “Then they can leave Gaddafi to us. We know how to fight him but we are afraid of his heavy weapons. I want them to destroy the ground forces of Gaddafi.”

Quite a few people in the US have problems with that notion. Secretary of Defense Robert Gates, who has opposed the U.S. getting involved in the Libyan uprising had a few words of warning today.

Defense Secretary Robert Gates said the U.S. military campaign against Libya’s Muammar Qaddafi should be limited to the terms of a United Nations resolution rather than being broadened to target the leader directly.

The coalition with the U.K., France and Arab countries relies on the terms laid out in the UN Security Council resolution adopted last week, Gates told reporters traveling with him to Russia today on a trip he delayed yesterday so he could monitor the start of “Operation Odyssey Dawn.” The resolution backed military action to prevent Qaddafi from using his forces to attack fellow Libyans.

“If we start adding additional objectives, then I think we create a problem in that respect,” Gates said. “I also think that it is unwise to set as specific goals things that you may or may not be able to achieve.”

Here’s a bit more from Gates:

Gates said the mission is backed by a diverse coalition, and adding additional objectives to the mission “create a problem in that respect.” He also said “it’s unwise to set as specific goals things that you may or may not be able to achieve.”

Gates said most nations in the region want to see Libya remain a unified state, and “having states in the region begin to break up because of internal differences, I think, is a formula for real instability in the future.”

The Pentagon chief also cautioned against getting too involved in the internal conflict of that country, saying the internal conflict should be left to be resolved by Libyans themselves.

After Gates made these remarks, Pentagon spokesman Navy Vice Adm. Bill Gortney said that there is no plan to directly attempt to oust Gaddafi. Gortney:

“I can guarantee that he’s not on the targeting list.”

Gortney said Khadafy’s forces were already beginning to crumble, but stressed that the focus of the campaign remains protecting civilians, not taking out the despot.

In addition,

Chairman of the Joint Chiefs of Staff Admiral Mike Mullen acknowledged that Khadafy might remain in power when the mission is over.

“It’s hard to know exactly how this turns out,” Mullen said on CBS. “I recognise that’s a possibility.”

Today French and British forces did “expand” the bombing campaign, and actually targeted a building within Gaddafi’s private compound. Read more below the fold. Read the rest of this entry »

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