In the wake of a devastating financial crisis, President Obama has enacted some modest and obviously needed regulation; he has proposed closing a few outrageous tax loopholes; and he has suggested that Mitt Romney’s history of buying and selling companies, often firing workers and gutting their pensions along the way, doesn’t make him the right man to run America’s economy. Wall Street has responded — predictably, I suppose — by whining and throwing temper tantrums. And it has, in a way, been funny to see how childish and thin-skinned the Masters of the Universe turn out to be. Remember when Stephen Schwarzman of the Blackstone Group compared a proposal to limit his tax breaks to Hitler’s invasion of Poland? Remember when Jamie Dimon of JPMorgan ... Continue reading →

May 24, 2012, 9:06 pmEnter, LafferingSorry about blog silence. Too much stuff in Seattle.Tomorrow is Lalaland, doing Bill Maher. Also on, Art Laffer.This might be an occasion to revisit some of the predictions various parties made a few years back. Here’s Laffer three years ago, Get Ready for Inflation and Higher Interest Rates:But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.OK, it’s only three years, so I guess there’s still time for the hyperinflation — but it had better get a move on. ... Continue reading →

May 23, 2012, 11:21 amWas Greed Good?As the debate moves – appropriately! – to a discussion of Romney’s career at Bain, one thing I’ve noticed is that everyone on the right, and a fair number of people who should know better, basically believes that Gordon Gekko was right. Before the Gekkos came along, they assert, American business was sluggish, unproductive, and uncompetitive. Then came the LBOs and all that, and our economic energy was unleashed.As I said, everyone on the right knows that this happened. Needless to say, none of it is at all true.Let’s look at how trends changed after 1980 or so, when the underlying rules of American business (and politics) shifted. Start with productivity – I use a log scale, so that ... Continue reading →

May 22, 2012, 7:11 pmSensible NonsenseOK, I see that Raghuram Rajan is now saying that “sensible” Keynesians see no easy solution to our depression, becauseA general increase in government spending may be too blunt – greater demand in New York is not going to help families eat out in Las Vegas (and hence create more restaurant jobs there).Do people making arguments like this take even a moment to look at the actual data?Reading Rajan here, you’d imagine that New York was close to full employment, that the unemployment problem was mainly in places like Nevada that had the worst housing bubbles. And it’s true that Nevada, with an unemployment rate of 11.7 percent, leads the nation. But New York has an unemployment rate of 8.5 ... Continue reading →

May 22, 2012, 12:04 pmBritain’s BlunderIn the nature of things, the IMF can’t go to a country not in need of a financing program and say bluntly, “Ur doing it wrong”. Nor can it easily climb down from its original endorsement of the Cameron-Osborne austerity program. But the latest consultation comes about as close as the Fund can to saying that a huge error is underway, in particular mentioning “hysteresis”, the risk that the economy’s austerity-induced weakness will inflict long-run damage.So I guess we can add the IMF to those “dangerous voices” Cameron wants to shut up.Also, for all those who went on and on about British inflation: I have a hard time working with the ONS data, but here’s what I get from the ... Continue reading →

May 22, 2012, 11:53 amLet’s All Devalue Against Each OtherJeremy Siegel echoes a lot of what some of us have been saying for years about the infeasibility of internal devaluation, but then argues that the answer is devaluation of the euro as a whole. Um, against whom?I mean, it’s not as if America or Japan are towers of economic strength, easily able to provide the demand Europe lacks. That leaves emerging markets. And while I and others have been pushing for years for an end to Chinese currency manipulation, China is at this point (a) not looking very strong itself (b) just not that big in the world economy — not yet.More generally, Europe as a whole, like America, remains a relatively closed economy. Its ... Continue reading →

May 21, 2012, 11:42 pmGodwinizationSo the Heartland Institute seems to have blown itself up with its billboard equating climate change researchers to the Unabomber. Of course, anyone who believed that the right-wing”think” tank was objective in the least was a fool; but now even the fools have been put on notice.But how could they make such a stupid mistake? I think there’s a process going on here, in which wealth and power creates a bubble in which people are so eager to please the paymasters that they lose any sense of what it sounds like to those not already answering to the same paymasters.You can see the same thing with Grover Norquist’s comparison of anyone trying to stop wealthy Americans from using abandonment of citizenship ... Continue reading →

OK, for a bit of relief, here’s a dispute among reasonable people. I think I’m right (but then I would, wouldn’t I?), but it’s worth serious discussion.Wolfgang Munchau, in the course of an article I otherwise agree with, argues, contra what I and others have been saying, that there isn’t a need for a large real devaluation — internal or otherwise — on the part of Spain and other peripheral economies:The distortions in competitiveness between eurozone member states are important, but in the short run, I would ignore them for three reasons.First, the competitiveness gap is not as big as some of the estimates suggest. I am especially wary of analysis that shows a divergence of unit labour costs, or other national price indices, since ... Continue reading →

May 21, 2012, 10:27 amNone So BlindAs those who will not see.Eddie Lazear has an op-ed in the WSJ on the fiscal cliff that, among other things, pooh-poohs any concerns that sudden cuts in spending might hurt the economy. He weasels a bit, but basically conveys the impression that there’s no evidence for Keynesian effects.What this signifies to me is the politicization and corruption overtaking the economics profession. I’ll give Eddie the benefit of the doubt; he is probably just going by what his friends say. But it’s truly awesome: in the midst of a crisis that has both provided overwhelming evidence for Keynesian views of fiscal policy and inspired a great deal of empirical work that also confirms the case for a Keynesian view, ... Continue reading →

Sometimes it’s hard to explain why we need strong financial regulation — especially in an era saturated with pro-business, pro-market propaganda. So we should always be grateful when someone makes the case for regulation more compelling and easier to understand. And this week, that means offering a special shout-out to two men: Jamie Dimon and Mitt Romney. I’ll come back shortly to the troubles at JPMorgan Chase, the bank Mr. Dimon runs. First, however, let me talk about Mr. Romney, whose remarks about those troubles were so off-point that they constitute a teachable moment. Here’s what the presumptive Republican presidential nominee said about JPMorgan’s $2 billion loss (which may actually have been $3 billion, or $5 billion, or more, but who’s counting?): “This was a ... Continue reading →