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

Mike Kimel vs. Yves Smith

I and many others, including Yves Smith, waded into the thicket of Mike Kimel’s provocative generic and specific-reasons-for-the-generic claims in his post here earlier this week titled “Negative Effects of Immigration on the Economy.”  I and others, including academic economist Barkley Rosser, commented in replies in the Comments thread to Mike’s post.  Yves did so on her Naked Capitalism blog, in prefatory comment to her republication of Mike Kimel’s post.

Yves is an expert on such matters as the effects of immigration on the economy.  I, suffice it to say, am not.   But Angry Bear Bruce Webb and I both invoked Yves’ prefatory comment as refutation of Mike’s specific reasons for his generic claims.  But Mike begs to differ, claiming that Yves’ preface is in agreement with his post.

To which I replied:

You and Yves Smith make the same point? Really? Actually, Yves was trying gently to refute your main point, which was your claim that immigration has a negative impact on job creation and your attributing this to the fact that so many immigrants aren’t white and from Europe and therefore, culturally (and intellectually) don’t sufficiently appreciate the importance of such things as time schedules and promptness.

Yves’ point was the opposite: that lower rates of job creation comes from lower rates of increase in GDP, which has nothing to do with the entrepreneurial, timekeeping and English-language skills of the current wave of immigrants and everything to do with the highly successful corporate efforts in the last nearly four decades to suppress wages–one (but only one) tactic of which has been the use of immigrants to keep wages down, thus reducing DEMAND FOR GOODS AND SERVICES. The effect on job creation is, contrary to your claim, not direct and is not the result of what you say it is, and is the indirect result of deliberate corporate goals.

Funny, y’know, but Germany, Holland, Scandinavia and Canada all have had very large non-white immigration in recent decades. All have strong laws supporting worker power, as well as corporate cultures that favor long-term investment and rational executive-suite compensation, and … voila! They have economies that work well.

Obviously, Yves can speak for herself on this if she cares to.  But it’s clear from the comments in the lengthy Comments thread to Mike’s post that I’m far from the only one who takes strong issue with what is at the heart of Mike’s premise.

This is by no stretch the type of thing I normally post about, but it gets to the heart of what others do, here and elsewhere, and certainly concerns issues at the forefront of this election cycle.  And therefore it’s worth my walking out onto this limb here.

 

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The Bizarre and Manipulative Crusade by Centrist NYT Columnists to Persuade Clinton to Adopt the Republican Fiscal and Regulatory Agenda – [with update]

All the experts tell us not to pay too much attention to polls for another week or two. Still, it does look as if Hillary Clinton got a big bounce from her convention, swamping her opponent’s bounce a week earlier. Better still, from the Democrats’ point of view, the swing in the polls appears to be doing what some of us thought it might: sending Donald Trump into a derp spiral, in which his ugly nonsense gets even uglier and more nonsensical as his electoral prospects sink.

As a result, we’re finally seeing some prominent Republicans not just refusing to endorse Mr. Trump, but actually declaring their support for Mrs. Clinton. So how should she respond?

The obvious answer, you might think, is that she should keep doing what she is doing — emphasizing how unfit her rival is for office, letting her allies point out her own qualifications and continuing to advocate a moderately center-­left policy agenda that is largely a continuation of President Obama’s.

But at least some commentators are calling on her to do something very different — to make a right turn, moving the Democratic agenda toward the preferences of those fleeing the sinking Republican ship. The idea, I guess, is to offer to create an American version of a European-­style grand coalition of the center­-left and the center-­right.

I don’t think there’s much prospect that Mrs. Clinton will actually do that. But if by any chance she and those around her are tempted to take this recommendation seriously: Don’t.

No Right Turn, Paul Krugman, New York Times, Aug. 5*

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What Bernie Sanders is doing to help Hillary Clinton [UPDATED]

One charge against Sanders by the likes of Paul Krugman that I just could not abide—there were others, but this post is about this one—was that while Clinton was actively soliciting campaign funds for the Democratic Party to use for down-ballot candidates, Sanders was not.  In a post here about that a couple of weeks ago I pointed out that Sanders and his campaign will be playing a large role both in soliciting campaign funds from ordinary individuals for down-ballot campaigns—especially congressional campaigns—simply through ActBlue.com’s huge database of Sanders donors, and that in fact those solicitations already had begun.  ActBlue.com is the organization that Sanders donors use to make their donations.

I also said that Sanders will play a large part in garnering support for Senate and House candidates simply by noting as he campaigns with candidates that he remains a senator and he, Elizabeth Warren and the other few real progressives in Congress need a Democratic-controlled Congress for their policy proposals to get heard in Congress.

Today I received this email message:

Beverly —

As Democrats, we believe that no one who works hard every day should have to live in poverty because they’re paid a minimum wage that’s too low. We know that climate change is a challenge we must confront. We believe no young person should have to spend so much on a college education that they end up shackled by years of debt.

And we know that we can never, never allow Donald Trump to become President of the United States.

Will you donate $3 or more today to help keep that from happening and to elect Democrats who will fight for everything we believe in?

If you’ve saved your payment information, your donation will go through immediately.

QUICK DONATE: $3

QUICK DONATE: $10

QUICK DONATE: $25

QUICK DONATE: $50

QUICK DONATE: $100

Or donate another amount.
Any Republican president would put President Obama’s progress on economic security in danger, make moves to repeal health care reform that millions of Americans are now relying on, and try to move backwards on the steps we’ve taken these past seven years to make our country more equal and more fair.

But it’s clear that Trump — with his repugnant attitude toward women, immigrants, Muslim-Americans, and pretty much anyone he comes across — is the worst of the bunch.

We’re going to be going up against him this fall. So right now, I’m asking you to pitch in $3 or whatever you can so that we can stop Donald Trump and his fellow Republicans:

https://my.democrats.org/Stop-Donald-Trump

Thank you,

Hillary

­­­____

Paid for by the Democratic National Committee, 430 South Capitol Street SE, Washington DC 20003 and not authorized by any candidate or candidate’s committee. Contributions or gifts to the Democratic National Committee are not tax deductible.

There is, I believe, no way that the Clinton campaign would have my email address—that ActBlue would forward it to the Clinton campaign—unless the Sanders campaign agreed at the Clinton campaign’s request to allow it.

Me?  I’m delighted.  I’m with him.  But I’m also now with her.  There’s no conflict there; she will be the nominee, and he will play a large role in policy matters, during the campaign and during the Clinton administration.

As for the message itself, I think the tone was pretty near perfect at this stage, as an opener.

I think Clinton has made some serious blunders in the last few days.  I have no idea why, for example, she thinks she needs to do anything affirmative to gain the votes of moderate Republicans, least of all by rehashing what everyone already knows about Trump.  Just as I don’t know why she thinks women who place a great deal of importance on electing a woman as president need to reminded that she is one and if elected will be the first.  I don’t share her fondness for highlighting the obvious or the already-very-well-known.

And her decision to court, in personal phone solicitations, no less, Republican donors, as the NYT reported two or three days ago—Wall Street ones and others—is stupefying.  Money for TV ads and the like will be far less important than handing Trump, who apparently now expects to be mostly self-funding his campaign because there aren’t all that many Republican donors who want him elected, such tangible campaign arguments to make in his own TV commercials and at his rallies and in interviews.  Trump is a New Yorker; he probably reads the New York Times.  (Well, okay, Paul Manafort probably reads the New York Times.)

Like ordinary voters—actually, even more so, probably—these donors will decide to support Clinton, or not, based not on Clinton but on Trump.  But that is less likely to be so for many Sanders supporters than for most other voters.  Her campaign priorities are skewed here, illustrating yet again her lack of agility in recognizing the differences between this campaign year and, well, others.  Jeb Bush had record amounts of money.

But this post is about Bernie Sanders and his campaign.  And I’m happy that he and it took the step they took.

And I’ll offer this tip to Clinton now that I’m WithHer: A key to beating Trump is to point out that on fiscal and other domestic policy at least, the election contest will not be to determine whether there will be another President Clinton or instead a President Trump.  There will be either a new President Clinton or a President Manafort.

Every time Trump tries to hint at the beginning of a back-away from Conservative Movement fiscal and other domestic policy, and toward some genuine economic-populist fiscal and anti-Chamber of Commerce regulatory policy, Edgar Bergen, er, Paul Manafort, quickly aborts it.

This will be a source of amusement for me going forward, although less so if Clinton fails to note this early and often, whether for fear of losing campaign donations or otherwise.  And less so still if she appears to be running as President Manafort Light.

____

UPDATE:  Yikes.  Yves Smith posted this comment at Naked Capitalism:

What Bernie Sanders is doing to help Hillary Clinton Beverly Mann, Angry Bear. I am posting this only because I am just about certain this is wrong. Mann is almost certainly correct on her opening point, Sanders will help on downticket Democratic party races, but I assume he will help only ideologically aligned Dems, not the remaining Blue Dogs. But if these Congresscritters are to the left of Clinton, they could serve to keep her honest (or more accurately, less dishonest) rather than “help” her. But I am certain she is wrong about her getting an anti-Trump DNC message via Bernie sharing his list with her. First, I am told by someone in the Sanders operation that Sanders will not do that (although there is the risk that his list is hacked or stolen). Second, I have given to Sanders via ActBlue and have gotten no such message. Third, as a blogger, I have gotten DNC propaganda upon occasion, including solicitations, before I gave to Sanders (and I haven’t given to anyone save a couple of locals via check since I gave a mere $20 to Obama as a result of seeing Palin’s acceptance speech). Every time I unsubscribe. Mann has written often about Clinton and Sanders, so I suspect she got added to the list that way.

Sooo … I was wrong in my assumption about the underlying source of that DNC email to me.

Meanwhile, reader EMichael linked in the Comments thread to this article today by Matthew Yglesias at Vox.  I responded to EMichael’s comment:

Nice article. Thanks for linking to it. I don’t read Vox; I don’t care much for it. So I probably wouldn’t have known of the article otherwise.

I’m really glad to see someone with a high profile say what I, a low-profile type, have been saying here at AB for weeks now.

The Yglesias article is titled “The real reason Bernie Sanders will enthusiastically back Hillary Clinton in November.”

So I guess the bottom line is that Sanders indeed is helping Clinton, just not directly.  Not yet.

Added 5/10 at 12:14 p.m.

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Blackie, in Wantagh, NY [Sweet dog still needs a home. 8/23]

I see so many listings about older dogs whose owner can no longer care for him or her, usually because of finances. I just received this sweet, touching email notice,* from Hempstead Animal Shelter in Wantaugh, NY (Nassau County), via RescueMe.org, and thought I’d pass it along.

*Corrected link, thanks to Noni Mausa.  A note has been added to the listing since earlier today saying: “URGENT: This animal could be euthanized if not adopted soon.

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 UPDATE: Yves Smith has now linked to this post, under the topic “Class Warfare”:

Blackie, in Wantaugh, NY Angry Bear. Another sad reminder of the costs of the crisis.

Metro New York City is a huge place. There must be many people who can, and would be happy to, adopt this sweet dog. So thanks, Yves, for publicizing my post.  And for making the point you make.

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SECOND UPDATE: Blackie was adopted today!  See the Comments thread below. 8/20

THIRD, SAD, FRUSTRATING UPDATE: Please see my second post on this, above.

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I keep wondering: Is anyone under the age of 40 ‘Ready for Hillary’?

Yves Smith linked this morning on her Naked Capital blog to my post from yesterday called “The Secretive Democracy Alliance’s Secret Is Out: Some of its members are elitist, racist and self-serving,” and added a comment about it:

Helpful, but does not follow the logic to the obvious conclusion. Why is the Dem apparatus harping on the Kochs and not issues that would motivate voters, like more jobs, better access to housing and education? Because they’ve done nothing on those fronts and don’t intend to. […]

The link and Yves’ comment “pinged back” as a comment to my post.  In response to Yves and to a comment by Daniel Becker, I wrote:

My intended point, Yves, was that harping on the IS harping on the issues that would motivate voters, like more jobs, better access to housing and education.  Steve Phillips, et al., think that only white men and married white women are smart enough to understand the connection between politicians’ financial benefactors and those politicians’ proposed legislation and attempts to block legislation.  I think Phillips is wrong.

The failure of the Obama administration–courtesy largely of Tim Geithner and of Obama’s weird infatuation with him throughout Obama’s first term, but also to Obama’s laconic, detached, I’m-a-centrist! persona–to propose and then fight for substantial Keynesian fiscal policies and for other progressive policies–is not, say, Nancy Pelosi’s, or Dick Durbin’s, or Sherrod Brown’s, or Tom Harkin’s fault.

And, yes, the very last thing that the Dems need is yet another presidential nominee who’s never had an original policy idea in her life; who almost never takes a policy position that actually leads rather than follows (and in the one instance in which she did–drivers’ licenses for unauthorized immigrants–scrambles and backtracks at first sign of political harm to her; who spends her time posting to a silly Twitter account and trying to enhance her personal persona rather than ever, ever, ever actually thinking about and offering specific domestic policy proposals; and who apparently can’t function without the constant presence of an entourage of her “people,” i.e., her devotees.

How many other Secretaries of State had a constant go-fer?  How many other FORMER Secretaries of State brought along that same constant go-fer after leaving office? How many couldn’t manage without one?

I keep wondering: Is anyone under the age of 40 “ready for Hillary”? Best as I can tell, the answer is, no. What people ARE ready for is a politician–like Durbin, Harkin, Elizabeth Warren, Sherrod Brown, the former two who are too old to run for president, the latter two who don’t appear interpeted in doing so–who doesn’t have a Twitter account, or a personal entourage, or a daughter whose parents thought it was a good idea for her to sell her celebrity name (and nothing more) to a network news program for a huge amount of money, and talked their daughter into doing that.  Someone, in other words, who’s not famous for just being an ‘icon’, but who has built a mostly-quiet career as an economics populist in Congress or academia.

And, Daniel, I, like you, still cringe, as I did in 2008, at a campaign run almost entirely on a promise of Hope and Change, the substance of which the candidate never specified because he himself had no particular person convictions or policy ideas.  We don’t need another such standard bearer–not even one who replaces Hope and Change with WOMEN! WOMEN! WOMEN!  One Dem presidential candidate, and Dem president, of that ilk is more than enough, thank you very much.

Daniel, I think you and Yves have it backwards. The Dems can’t show progress in policy BECAUSE of the billionaire-controlled campaign-finance system.

So now I’ve gotten it off my chest.  It, being my dismay and utter frustration at the silly Hillary-or-bust obsession of the seemingly hypnotized Establishment Democrats and pundits.

This woman has written a narcissistic book for which she was paid handsomely-being paid handsomely appears to be her primary concern–and is in the process of blowing her book-tour interviews.  Which is nice, because now maybe–just maybe; it’s by no means certain–some actual longtime progressive policy person of some political stature, who doesn’t have a Twitter account or a personal entourage, and is not entirely self-obsessed–will step forward and run for the Dem presidential nomination, on a platform that details policy rather than relies upon personal celebrity and gender.

Hope springs eternal. Although the Kochs, the Chamber of Commerce, and some hedge fund folks have noticed, few political journalists–and apparently no Dem pols and political consultants–have.  This country is suddenly moving rapidly toward a progressive economic-populist era.  Instead, the over-40 professional political crowd thinks that the political sun rises and sets each morning with Hillary Clinton’s personal appearances and Twitter comments.  It doesn’t.

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Post edited slightly for clarity after posting. 6/25 at 3:58 p.m.

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Jamie Galbraith on inequality and macroeconomics

Via Naked Capitalism comes this youtube video from Jamie Galbraith on inequality and macroeconomics, a speech delivered at the INET talks in Berlin:

Galbraith has marshaled a great deal of cross country data over time, and shows how changes in equality happened in a very large number of economies in parallel. He explains, persuasively, that the most plausible culprit is changes in the financial regime.

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More Caution and Skepticism About Federal Mortgage “Investigation”

Yves Smith continues to follow the progress of investigations in  More Caution and Skepticism About Federal Mortgage “Investigation”

While a large number of “liberal” groups, ranging from the official Democratic party outlets (the Center for American Progress) to ones that sometimes cross swords with the Administration (MoveOn, the Working Families Party) praised the Tuesday evening announcement of mortgage “investigations” with Schneiderman co-chairing the effort, others who have been watching the mortgage legal fight closely were far more ambivalent about the creation of a new unit in an initiative …which has done pretty much nothing since its creation in 2009 (boldface mine):


Attorney General Eric Holder, Treasury Secretary Tim Geithner, Housing and Urban Development (HUD) Secretary Shaun Donovan, and Securities and Exchange Commission (SEC) Chairwoman Mary Schapiro today announced that President Barack Obama has established by Executive Order an interagency Financial Fraud Enforcement Task Force to strengthen efforts to combat financial crime. The Department of Justice will lead the task force and the Department of Treasury, HUD and the SEC will serve on the steering committee. The task force’s leadership, along with representatives from a broad range of federal agencies, regulatory authorities and inspectors general, will work with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.
 …
 The Times identified the two red flags. First, why are the settlement talks still proceeding? This is ridiculous if the plan is to do investigations. The fact that they have not been halted calls this exercise into question. Second, if this is supposed to be a heavyweight investigation, why hasn’t Obama set up an independent prosecutor, a role much more likely to attract the sort of kick-ass litigator that the Times correctly thinks is necessary for the job?

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Comments on Inequality, Leverage, and Crises

Clifford Clark’s post at ataxingmatter* is worth a more complete look. This also brings to mind Steve Keen’s work on private debt and the economy on his blog Debt Watch as well as Lane Kenworthy’s exploration of poverty and severe poverty at Consider the Evidence, and Angry Bear Robert Waldmann’s recent posts here and here.

Comments on Inequality, Leverage, and Crises–Kumhof & Ranciere Nov 2010 IMF working paper

[guest post by Clifford D. Clark]

Michael Kumhof’s and Romain Ranciere’s November 2010 paper relates income inequality to national economic crises, particularly those experienced as the Great Depression and the Great Recession. They conclude that increases in income inequality –comparing the top 5% of households to the bottom 95%–in the years leading up to the two crises exerted a determining influence on the economy.

First, income inequality grew in similar ways in the years before the depression and the recent deep recession. …. The authors find a link between the two phenomena: income inequality increased at a greater rate than consumption expenditures in the years before the two crises. The public was spending at rates greater than increases in their income.

Second, in the years before the recent downturn the growth in household debt was due almost entirely to the bottom 95%. Real hourly wages of the top 10% of households increased by an accumulated 70% between 1967 and 2003, while the median households decreased by 5% and wages at the bottom 10% decreased by about 25%. … That represents a clear switch: whereas in 1983 the top wealth group was more indebted than the bottom 95%, by 2007 the reverse was true. By then the bottom 95% had debts equal to 140 % of income, nearly twice that of the top 5%. They conclude that almost all of the change in the debt to income ratio in aggregate was due to the bottom 95%.

Third, an increase in debt requires and increased need for financial intermediation: accordingly, the size of the financial sector between 1980 and 2007 increased considerably. Measured by the ratio of private credit of deposit banks and other financial institutions to GDP, that quantity increased from 90% in 1981 to 210% in 2007…

Their conclusion is succinctly stated.

The key mechanism, reflected in a rapid growth in the size of the financial sector, is the recycling of part of the additional income gained by high income households back to the rest of the population by way of loans, thereby allowing the latter to sustain consumption levels, at least for a while. But without the prospect of a recovery in the incomes of poor and middle income households over a reasonable time horizon, the inevitable result is that loans keep growing, and therefore so does leverage and the probability of a major crisis that, in the real world, typically also has severe implications for the real economy.” Id. at 22.

* correction of source

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Denial in the Mortgage Industrial Complex

Yves Smith provides a snapshot of her perception of at least public thoughts from mortgage industry conference participants. It is worth a read.

Denial in the Mortgage Industrial Complex

I just came back from the AmeriCatalyst conference in Austin, which was a packed two days focused on the state of the housing and securitization market. The panels were very informative, and it was also good to see some of the people I’ve read or heard about, in particular the leading analyst, Laurie Goodman of Amherst Securities. She gave a talk that where she went through a very persuasive (and conservative) analysis that there are 8.3 to 10.3 million more foreclosures baked give how underwater borrowers are. And she had some striking bits of information. One is if you take out the homes where no one has made a mortgage payment in a year or more, homeownership in the US is 61%. In addition, Judge Annette Rizzo discussed a successful program she had developed in Philadelphia to do remediation. The success rate on modifications that come out of her court is 85% after 18 months.

I had quite a few people come and commend me on my comments. I think the main reason was that the viewpoint presented on this blog, that there are deep seated problems resulting from chain of title issues, and that servicers have engaged in a lot of abuses, was sorely underrepresented. I don’t blame the organizer,

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Naked Capitalism’s Yves Smith is on fire…

Yves Smith has been on fire lately. Here’s an article on when offshoring fails.

…As these industry examples illustrate, the tradeoff between cost and flexibility can be quite involved and difficult to evaluate. It now appears that the labour-cost benefits gained from offshoring might not be sufficient to cover the lost flexibility under many circumstances.

Here she discusses the continuing robosigning.

And here is the view from within a bank.

A writer for the Minneapolis CityPages managed to worm his way into a presentation to the annual meeting of the Minnesota Chamber of Commerce by US Bank’s CEO, Richard Davis…

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