Tag: Paul Krugman

One of the best and most refreshing changes established by the Obama Administration has been its reliance on intellectuals, scientists, and experts rather than lobbyists and ideologues. Across a broad swath of federal departments, pragmatism seems once again to be valued. Unfortunately, with the world economy imploding, Obama continues to rely on the advice of corporatist insiders, and their advice is predictably corporatist. There also seems to be a bit of myopia going on.

On Saturday, Joan Walsh warned Obama supporters not to be taking credit for the previous week’s slight market rally:

As someone who has repeatedly defended Obama from GOP efforts to blame him for the current crisis and to deride the “Obama economy” only 55 days into his presidency, I think the administration could be playing a dangerous game. Live by the week’s economic news, die by it as well. If the Dow dives next week, or retail spending dips again, does that mean the stimulus failed?

Right on cue, Vice President Biden then weighed in:

“Consumer confidence is slightly up. The market is slightly up,” Biden said. “It’ll go down again, but the people are beginning to figure out that the president’s got a plan and he believes we can work our way through this.”

Um.

Nouriel Roubini has been warning that there may be “dead cat bounces,” or “bear market suckers rallies,” and there’s no reason to think the latest is anything else. Which means that Biden should maybe be a little more circumspect about taking a day trader’s view of a one week market rally.

Nobel Prize winning economist Joseph Stiglitz, last week:

In “The Big Dither” Paul Krugman warns:

There’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.

Here’s how the pattern works: first, administration officials, usually speaking off the record, float a plan for rescuing the banks in the press. This trial balloon is quickly shot down by informed commentators.  Then, a few weeks later, the administration floats a new plan. This plan is, however, just a thinly disguised version of the previous plan, a fact quickly realized by all concerned. And the cycle starts again.

Welcome to Monty Python’s Flying Bank Bailout Circus.  Everything is under control.  Nudge, nudge.  Wink, wink . . .    

Say no more, say no more.      

 

A long time ago, in an economic universe far, far away, people cared about the trade balance. When the U.S. trade deficit passed $100 billion for the first time, there was much wailing and gnashing of teeth. Doomsayers warned of an imminent ”hard landing” in which a crashing dollar would precipitate economic crisis. Even calmer types regarded the unprecedented red ink as a warning sign.

But a funny thing happened on the way to the 21st century: people lost interest in the trade balance. In January, the Commerce Department announced last week, the United States set a new world record: the biggest monthly trade deficit ever. (Is this a great country, or what?) Measured as a share of G.D.P., last year’s current account deficit (the broadest measure of the trade gap) was wider than ever before. But the markets couldn’t have cared less. They were more interested in the accounts of MicroStrategy (a high-flying tech stock that lost two-thirds of its value in one day when it adopted a new accounting standard) than in those of the United States.

http://query.nytimes.com/gst/f…

The Pony Party is an Open Thread.  Please do not REC the party!

Interesting news today.  Progressives like Paul Krugman, George Soros, and Jerome a Paris have suggested that the economic rescue/bailout would work better if we bought equity in the banks rather than just bad debts.  They see buying bad debt as inefficient and less likely to succeed.  It looks as if Treasury Secretary Hank Paulson is seriously considering partial nationalization of financial instiutions:  

An administration official, who spoke late Tuesday on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.

Treasury Secretary Henry Paulson told reporters that Treasury was moving quickly to implement the $700 billion rescue effort and he specifically mentioned reviewing ways to bolster the capital of banks.

msnbc.com: White House considers bank ownership stakes

More, after the fold.

I haven’t been disappeared into a CIA torture chamber, if those of you concerned for my wellbeing have been wondering.  I started college again late last month, and it’s taken up a lot of my free time.  I’ll probably be doing my updates primarily on the weekends for a while.  Anyway, on to business.

Leave it to Paul Krugman to state what should have been obvious from the start:

Maybe I’m wrong, but my sense is that Jason Furman has become a proxy target for some Obama supporters who, now that the Great Satanness has been defeated, are suddenly starting to have the queasy feeling that their hero might be a bit of a …. centrist. I’m tempted to say I told you so; in fact, I guess I just did.

Although Krugman actually likes Furman, I think his remarks are — as usual — spot on.  The Obamamaniacs got the presidential candidate they wanted, but now that they’ve begun to realize they put their hopes in a fraud they’re getting nervous.  I would be too, if I suddenly realized I’d thrown my support behind another DLCer and in so doing, helped Democrats lose the White House again.

I take Obama to task on a lot of issues, but it wouldn’t be fair if I didn’t acknowledge that he does take some good positions in this campaign.  An example is illustrated in yesterday’s column by the New York Times’ Paul Krugman, which states:

The impression that Mr. McCain’s tax talk is all about pandering is reinforced by his proposal for a summer gas tax holiday – a measure that would, in fact, do little to help consumers, although it would boost oil industry profits.

Obama opposes this silly and, ultimately, fairly useless measure.  Hillary Clinton, on the other hand, agrees with McCain.

Does a candidate’s policy proposals reveal the kind of president he/she would be?  Paul Krugman today in the NYT suggests that policy proposals have revealed the kind of leadership that past presidential candidates.  He points out that Bush proposed big tax cuts for the rich and followed through on them, making life harder for the rest of us.  

The moral is that it’s important to take a hard look at what candidates say about policy….. policy proposals offer a window into candidates’ political souls – a much better window, if you ask me, than a bunch of supposedly revealing anecdotes and out-of-context quotes.

The current issue that McCain, Clinton and Obama have responded to is the mortgage crisis.  Krugman analyzes the three responses and I found his analysis interesting and to be troubling for progressives.    

In a recent EENR entry I posted about Paul Krugman’s blog entry regarding the real reason regulators have failed to reign in the excesses of Wall Street.  Essentially, the failure was deliberate — an effort to systematically remove any and all regulation.  I guess causing one Great Depression wasn’t enough to wake up the laissez-faire assholes into realizing that the days of unrestricted greed should have remained dead and buried; they’ve been working like hell to create another while making their money, and they appear to have succeeded.

But I digress.  In today’s New York Times column, Professor Krugman expands upon this failure to reign in Wall Street by bringing the discussion to the presidential election.

Leave it to Paul Krugman to tell the hard truth about what needs to be done in this financial crisis.

[T]he important thing is to bail out the system, not the people who got us into this mess. That means cleaning out the shareholders in failed institutions, making bondholders take a haircut, and canceling the stock options of executives who got rich playing heads I win, tails you lose.

Not that the Fed shall listen, mind you; Ben Bernanke, like Alan Greenspan before him, cares about the laissez-faire swindlers who caused the latest financial meltdown.  Factoring in the taxpayers only counts for bailing out the criminals, not bailing out the system the crooks abused in order to flush the economy down the toilet.

Krugman goes on to caution:

According to late reports on Sunday, JPMorgan Chase will buy Bear [Stearns] for a pittance. That’s an O.K. resolution for this case – but not a model for the much bigger bailout to come. Looking ahead, we probably need something similar to the Resolution Trust Corporation, which took over bankrupt savings and loan institutions and sold off their assets to reimburse taxpayers. And we need it quickly: things are falling apart as you read this.

He’s right, of course.  Bailing out Bear Stearns might be the smart thing to do as an individual case; for better or worse, that bank is large enough that its failure could — as Krugman suggests — hasten the market panic that would make the Depression we now suffer (the one OpEdNews.com contributor Michael Fox wrote had begun back in November)  official.  But if it’s used simply as a model for bailing out the rest of the Wall Street rip-off artists, then we taxpayers shall have been forced yet again to foot the bill for the irresponsibility of Wall Street.  It’s like a mugging victim being told by a jury that the thug who robbed him wasted the cash on booze and women, so now the victim has to reimburse the thief.

If the Democratic nominee somehow manages to survive the general election in November and become president, he (or she) could do a lot worse than to ask for Bernanke’s resignation as Fed chairman, and offer the job to Professor Krugman.