Relevant and even prescient commentary on news, politics and the economy.

Trump’s Son inLaw’s paper says Putin Hacked DNC to help Trump

This is genuinely amazing (h/t @jbarro)

New York Observer is a weekly newspaper… . Since July 2006, the paper has been owned and published by the American real‑estate figure Jared Kushner.

I quote without comment

It’s no secret that the DNC was recently subject to a major hack, one which independent cybersecurity experts easily assessed as being the work of Russian intelligence through previously known cut-outs. One of them, called COZY BEAR or APT 29, has used spear-phishing to gain illegal access to many private networks in the West, as well as the White House, the State Department, and the Joint Chiefs of Staff last year. Another hacking group involved in the attack on the DNC, called FANCY BEAR or APT 28, is a well-known Russian front, as I’ve previously profiled.



The answer then is simple: Russian hackers working for the Kremlin cyber-pilfered the DNC then passed the purloined data, including thousands of unflattering emails, to Wikileaks, which has shown them to the world.

This, of course, means that Wikileaks is doing Moscow’s bidding and has placed itself in bed with Vladimir Putin. In response to the data-dump, the DNC has said as much and the Clinton campaign has endorsed the view that Moscow prefers Donald Trump in this election, and it’s using Wikileaks to harm Hillary. This view, considered bizarre by most people as late as last week, is being taken seriously by the White House—as it should be.

It isn’t just fringe lefty pubs like the Washington Post and the New York Times. This is in a paper owned by Trump’s son in law.

Comments (3) | |

Hacked E-mail Servers

Of course the big news is that Russian hackers (probably linked to the Russian government) hacked Democratic National Committee servers and leaked embarassing e-mails (and deliberately leaked social security numbers) via Wikileaks.

This supports the hypothesis that Putin is trying to get Trump elected.

It sounds like a fringe tinfoil hat conspiracy theory, but I read it on the front pages of The New York Times and The Washington Post

In The PostTom Hamburger and Ellen Nakashima have a major major Ballance fail writing “Although other experts remain skeptical of a Russian role, ” . The problem is that (as far as I can tell) they quote no such skeptical experts. My guess is that, rushing to deadline they wrote “opinions on shape of planet differ” before finding the differing opinions.

boring rant after the jump

Comments (21) | |

Clinton achieves the impossible

I was fairly certain that if Clinton were elected president and the Democrats were to win a majority in the Senate, that they would lose that majority in 2018.

I think that Hillary Clinton may have proven me wrong and found the only way to prevent that — by causing the Democrats to lose the majority in 2017.

I think this is about the dumbest thing a politician has done since her husband nominated Lloyd Bentson secretary of the Treasury (OK the stuff he did with Lewinsky wasn’t too smart either but this Clinton wasn’t as tempted this time).

update: just to try to be more nearly clear, my claim in this post is that, if Kaine is elected VP, his Senate seat will be filled for one year by someone chosen by the governor and then there will be a special election. I believe that this election will be in 2017 along with the gubernatorial election. I am fairly confident that it will be won by a Republican. I believe that there aren’t all that many Democratic politicians who can win in purple Virginia in a non Presidential year and that Kaine is one of them.

I think that that high risk of losing a senate seat outweighs any other effect of the choice.

Comments (28) | |

Monte dei Paschi di Siena

For days, I have felt morally obliged to report on the Italian slow motion crisis of banks with tens of billions of non performing loans. I’ve had trouble making myself work (as usual). So I hand the mike to Daniel Davies.

The background is that the world’s oldest bank Monte Dei Paschi di Sienna is in trouble (again). It has about 40 billion Euros of non performing loans on its books and has set aside about 20 billion Euros to cover them. The Italian government wants it to recapitalize by issuing new shares (which the Italian government will buy if no one else wants them as is likely). The European Union is telling the Italian government it can’t do this. There is a Euroconstitutional crisis.

Daniel Davies knows which side he is on.



Comments (1) | |

The Stagnation Capitulation and The Taper Tantrum

Paul Krugman interpreted the recent decline of 10 year safe interest rates from extremely low to astonishingly low as a capitulation to stagnation. He argued (convincingly) that investors have decided that short term safe interest rates will remain extremely low for a long time (evidently at least 10 years) and that the post 2008 pattern of slack demand, low inflation and extremely low interest rates is the new normal. It is probably best to just read his op-ed, but he considered and rejected the arguments that the low safe interest rates are the result of a flight to quality.

I want to compare the recent sharp decline in interest rates to the sharp increase in 2013 which is called the “taper tantrum”. I can’t manage an alliteration however, stagnation capitulation rhymes and is (arguably) the mirror image of the taper tantrum.

I make the comparison for two reasons. The first is that the conventional term “taper tantrum” asserts that the cause of the 2013 increase is an announcement by the Federal Reserve Open Market Committee (FOMC) that they were considering tapering the monthly pace of quantitative easing (not reducing their assets but reducing the rate of increase). This interpretation would imply that I have been wrong for years as I argue that quantitative easing has only small effects. This is a silly personal reason for continuing to discuss the taper tantrum, so I will move that discussion after the jump.

The second reason is that there is an alternative interpretation of the 2013 increase which is the exact mirror image of Krugman’s stagnation capitulation hypothesis. I tried to present it here. I expressed the idea even worse than usual so I will try again now (and ask the reader to trust me that this is what I had in mind then)

The story is that investors assumed back in 2012 and 2013 that the economy and interest rates would return to normal some time fairly soon. Then in Spring 2013, they decided that this time had come so they all demanded higher returns on bonds. This (not successfully written) story is the exact mirror image of Krugman’s op-ed. He argues that what just happened is that investors suddenly decided that economies were not going to return to normal any time soon.

This is relevant to the old debate about QE, because if markets can shift one way without FOMC action, they could have shifted the other way for reasons other than a bland FOMC announcement. More grinding old axes after the jump.

Comments (8) | |

Do I Disagree with Paul Krugman about the Policy Relevance of Risk Premia ?

As always, I seek an economic issue on which I disagree with Paul Krugman. I think I might only partially agree with his recent tweet storm. I certainly think that Twitter is not the best medium for discussion of economic theory.

update: The man can be irritating. His op-ed (too short but better than a tweet) discusses the issue very clearly and convincingly without any jargon.

The point is Krugman (and I) believe in Keynesian aggregate demand effects of government spending, but they are not central to the current debate.

So why not borrow money at these low, low rates and do some much-needed repair and renovation? This would be eminently worth doing even if it wouldn’t also create jobs, but it would do that too.

end update

Kenneth Rogoff argued that persistently extremely low safe interest rates are not proof of secular stagnation and do not necessarily imply that increased deficit financed public investment would be good policy.

Low real interest rates mask an elevated credit surface … What about the very low value of real interest rates? Low rates are often taken as prima facie by secular stagnation proponents, who argue that only a chronic demand deficiency could be responsible for steadily driving down the global real interest rate. The steady decline of real interest rates is certainly a puzzle, but there are a host of factors.

This puzzled Brad DeLong. I wrote rude things about Rogoff. Brad took the debate to twitter. Krugman wrote a brief (this is twitter) argument defending Keynesian stimulus.

Paul Krugman ‏@paulkrugman 13h
The Policy Irrelevance of the Risk Premium: 1/ Brad DeLong (@delong) has a multi-part discussion of the question of whether the very, very

2/ low interest rates on government debt, short- and long-term, are a good indicator of overall credit conditions. Obviously private agents

3/ can’t borrow as cheaply as the US and German governments. Much less clear whether this risk premium has gone up. But the real point

4/ surely is that from a policy point of view *it doesn’t matter*. Low short-term rates make conventional monetary policy ineffective;

5/ low long-term rates make government borrowing attractive. So it’s the low government borrowing costs that make the case for fiscal

6/ expansion, whatever is going on with risk premiums — unless you have some way to sharply reduce those premiums, which you don’t

The point (if any) of this post, is that I discussed the policy relevance of of risk premia here

I realize that I can’t summarize my post by cutting and pasting a comprehensible bit (I define notation and stuff) nor can I really recommend clicking the link and reading it. The contrast with Krugman’s tweet storm reminds me of his extraordiary ability to discuss technical topics briefly and clearly and cut to the policy relevant point.

But I do want to understand why I seem to disagree with the claim that risk premia are policy irrelevant. I think it is really very simple. Krugman is (as usual) discussing an economy in the liquidity trap. He doesn’t state this because Twitter. This means he assumes that increased Government investment doesn’t crowd out private investment. I discussed an economy with full employment. I really was thinking of an economy in which the unemployment rate is at the target chosen by the monetary authority (the level which they believe — perhaps incorrectly — is the maximum consistent with non accelerating inflation).

I think my assumption is the one relevant to the current policy debate. Although the Federal Funds rate is very low, the FOMC is considering increasing it. The target (0.25-0.5%) isn’t the lowest ever (0.0-0.25%). This tiny difference in interest rates has huge implications for the response of monetary policy to fiscal policy.

In any case, extremely low safe interest rates don’t have to be zero — my discussion of fiscal policy with positive safe interest rates below the growth rate of the economy might have some trace of policy relevance.

In this case, public investment crowds out private investment. I presented a model in which this is definitely a good thing as the very low safe real interest rate implies that private investment is Pareto inefficiently high (there is dynamic inconsistency). I also present an alternative model in which the crowding out causes a transfer to current owners of capital at the expence of future generations. This means there is a model in which public investments with a social return higher than the safe rate and lower than the risky rate are bad policy.

The reason I think Krugman’s tweet storm is not the last words on the topic is that monetary policy will not always be at the lower bound. The question of what fiscal authorities should do when safe interest rates are very low but not zero may be of some policy relevance.

Of course real world fiscal authorities will ignore the discussion entirely, so it is purely academic and not worth your time.

Comments (3) | |

What’s so Great about Equality of Opportunity ?

I think this post by Dylan Matthews is brilliant and a must read.

He says we should focus less on equality of opportunity and more on average outcomes and equality of outcomes.

When you say Dylan he thinks you’re talking about Dylan Thomas (whoever he was), man he ain’t got no respect for posts on ethics and public policy.

Don’t trust this summary, but I think Matthews denounces the focus on equality of opportunity with independent devastating arguments. He argues that achieving perfect equality (of outcome or opportunity) is impossible and any attempt would involve horrible costs. He argues against levelling — if one thinks only of equality then one must prefer reduced opportunity for some with no increase for any. He argues that different outcomes based only on ability can be unfair. He even argues that outcomes based only on effort can be unfair. He argues for less inequality of outcomes. Finally, he argues that we can achieve decent outcomes for all and so we are obliged to do so

I agree with all of these arguments. I have to admit that I think I have been making all of them for 4 decades now (give or take a year).

I write this post, because I think I might have a couple of minor points to add.

First, I think the discussion of perfect equality is a red herring. No one argues for perfect equality of opportunity of outcome. Few can resist the temptation to argue with a straw man who argues for perfect equality of some sort. Even Matthews can’t. There is a silly equivocation in the phrase “I believe in equality” which can mean either, a) “for average outcomes the same, I would rather they be more equal” or “I believe that equality is the only thing that matters, so any equal outcome no matter how horrible is better than any unequal one.” In practice “i believe in equality” is interpreted the first way and “you foolishly believe in equality” the other. This is an example of a false dichotomy — an error of thought more common than any other error of thought or any valid method of reasoning. Equality can be good without being the only good thing — a goal without being the only goal.

Second, since the case against a focus on equality of opportunity is very strong, why do so many people talk about equality of opportunity so much ? I am firmly convinced that most are arguing in bad faith. Mathews notes the strikingly broad ideological spectrum of advocates of equality of opportunity — from Franklin Roosevelt and Lyndon Johnson to Paul Ryan. I believe it is often invoked by people who really care about equality of outcome exactly because equality of opportunity is such a slippery concept that it can be interpreted in exactly opposite ways.

I think it is clear (as argued by Matthews) that we can’t have equal opportunities for one generation without equal outcomes for the previous one. In practice a sincere effort to provide equality of opportunity, must involve assistance to the poor until there are no more poor. This means that people who wish to reduce inequality of outcome can say they are reducing inequality of opportunity. If there were an equal generation some of whose children obtained poverty through single minded laziness, then FDR and LBJ would have a problem. I am not surprised that they didn’t lose any sleep over that danger.

Exactly because “we must have equality of opportunity even if we accept inequality of outcome” is nonsense, egalitarians can say that without paying a political cost. By claiming that they would accept some hypothetical impossible form of inequality, they can fight real world inequality. They can convince some people that they have made a concession without conceding anything.So they do.

Similarly anti-egalitarians find the nonsense distinction useful (and I am sure that Ryan is against equality — even if he isn’t Ayn Rand certainly was). They say “not equality of opportunity rather equality of opportunity”. This too is impossible. But that way they can pretend they are in favor of equality of some sort, while fighting for inequality. They can convince some people that they have made a concession without conceding anything. So they do.

I don’t understand why anyone falls for either argument, but I am sure that most people who have thought seriously about the issues don’t and are arguing in bad faith

I write more nasty things about Paul Ryan after the jump.

Comments (55) | |

Jon Chait rhymes with Click Bait

I find Jon Chait extremely interesting and stimulating. I often check his blog and regret the rareness of his posts (look who’s typing). He usually overstates his case and has an even the liberal New Republic hippy punching background.

This subtitle is pure click bait

How Can Hillary Clinton Win the Bernie Sanders Vote?
By moving to the … right? That’s what the data says.

In the post Chait argues that the (surprisingly useful) concepts of Left and Right can’t capture the diversity of political views. In particular he notes the NBC-Survey Monkey result that a majority of people who support Sanders but not Clinton over Trump describe their orientation as “Moderate” placing themselves to the right of the median Clinton supporter.

It is clearly true that many people supported Sanders’s nomination for reasons other than his leftism — Chait notes that he keeps noting this. He puts it well

As I argued a month ago, Sanders has tapped into a good-government tradition that has run through a century of progressive politics, and animated campaigns by figures like Adlai Stevenson, Eugene McCarthy, George McGovern, Jimmy Carter, Gary Hart, Jerry Brown, Howard Dean, and Barack Obama. Sanders has the image of an authentic, independent, non-corporate conviction candidate that contrasts perfectly against Clinton’s scandal-tainted persona.

If this is completely true, it provides no support for Chait’s subtitle. The claim that politics can’t be reduced to left and right is combined with the assumption that politics can be reduced to left and right, so if Clinton shouldn’t move left, she should move right. The subtitle is mere contrarian provocation, that is, click bait. So is mine.

According to Chait’s actual logic, to win Sanders supporters who don’t support her, Clinton shoult convince them that she is more honest than Trump. Since he is a con man and pathological liar, this should be possible.

The interesting question is whether strong support for Sanders suggests that Democrats should move left. Chait argues against this noting that not all Sanders supporters are leftists. This doesn’t follow at all. The general assumption (certainly Chait’s and mine) was that the label “socialist” was electoral poison. It clearly isn’t. Sanders calls himself a Democratic Socialist and leads all recent general election polls . He leads general election polls in North Carolina ! This isn’t your father’s electorate.

On issue after issue, the main stream Democratic position is to the right of the median adult’s (although elected Democrats are shifting their positions quickly).

This is true on Social Security, Medicare (click and search for “increase spending”), marijuana, taxes on the wealthy and corporations, , Medicare, and Medicaid, and Medicare-for-all (click and search).

The surprising support for Sanders is not all due to surprising leftism. However, it is additional evidence (as if any were needed) that the views of ordinary people in the USA on bread and butter issues are well to the left of those which members of the elite imagine ordinary people have.

update: Clearly Hillary Clinton isn’t following Chait’s advice as Dara Lind notes “Think Hillary Clinton is pivoting to the center? Her new video sure isn’t.
It’s a celebration of protests and difficult women.” What does the savvy disciplined (ok calculating) Clinton up to ?

Here the original point of my original post (which I forgot to type) is that Clinton absolutely does have to worry about Sanders supporters who *tell pollsters* they will vote for her. People who don’t end up voting don’t admit they won’t. In fact, people who didn’t vote don’t all admit it when asked. The key question for Clinton (and for Democrats always) is “will young people vote ?”.

This means that the problem is to get people who definitely will not vote for Trump but may not vote at all enthusiastic. I think this means that a lefty tone is optimal. In any case, it sure seems that Clinton thinks this.

Comments (15) | |

Liberal GMO phobia

It is sometimes argued that Conservatives and Republicans are anti science. There is often a quest for Ballance (or a so’s your mother reply from conservatives). I recall reading about liberal anti vaxxers (sorry I don’t recall actual URLs). Chris Mooney noted that there is no detectable association of vaccine phobia with partizanship or ideology.

I thought there might be an association with GMO phobia. This is my second google search. The second hit is this Razib Khan post at

which includes this figure based on data from the General Social Survey which I fairuse


That’s 2 minutes of googling (plus some more minutes to post here).

I conclude that both defensive conservatives and knee jerk ballanced centrists don’t care enough about evidence to spend 5 minutes checking a claim before writing it. But I would conclude that wouldn’t I ?

Comments (1) | |

Irritating text messages I get on my cell phone

No wait don’t go bear with me. The irritating messages have headers such as

@EricTrump: Really p




So how do Eric and Donald Trump (who appear to be so poor that they are sharing a cell phone) know that an Italian resident TIM customer is a US citizen who could vote for @realDonalTrump (in a run off against Abu Bakr Al Baghdadi or when hell freezes over whichever comes first)?

I don’t recall telling either mr Trump my phone number. I did have to show ID to get it (Italy doesn’t want untraceable burner phones). All my IDs indicate my place of birth. TIM isn’t supposed to share this information (for example by selling it to Trump2016).

Comments (7) | |