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

You HAVE to read this column by Washington Post blogger Alexandra Petri

Petri is a favorite of mine; I read her regularly.  For those who aren’t familiar with her: Her blog columns are humorous ones about (mostly) politics, and of course these days mostly about the presidential election.

Suffice it to say that this column of hers today is not along those lines.

I’ll just say that this kind of thing is not entirely in the past, and leave it at that for the moment.

(The title of this post is also the “subject” title of the email I just sent to, well, several friends.)


PS: My heartfelt condolences to Ms. Petri on the death of her grandfather.  R.I.P., Editor Neal.

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Larry Summers is beginning to see Effective Demand

Larry Summers wrote a post yesterday about the hollowing out of the middle class and how that has lowered consumption and led to secular stagnation. He says that this effect must be taken into account for policy.

Well I sit here after 4 years of building models of Effective Demand using labor share… My models have performed accurately.The drop in  labor share reflects the hollowing out of the middle class. The data for labor share allows precise models to be built for secular stagnation. Larry Summers is absolutely right when he paints a basic picture of policy implications…

“What is the policy implication? Principally, it is the macroeconomic importance of supporting middle class incomes. This can be done in a range of ways from promoting workers right to collectively bargain to raising spending on infrastructure to making the tax system more progressive. These are hardly new ideas. And I supported them before seeing this new research. But there is now another powerful argument in terms of mitigating secular stagnation in their favor.”

Larry Summers sees new research, but I have seen 4 years of economists not understanding effective demand. So when I see Larry Summers’ post, I again see how far behind economics is in truly understanding the dynamics of effective demand. He notices a connection between labor income and economic potential, but has no model to define it yet. I have a models of effective demand that work and that can be built upon.

From my models, the effects and limits of effective demand are definable and forecastable in terms of labor and capital utilization and more such as interest rate policy. My models show that the effect on natural real rates from a drop in effective demand can be measured.

Larry Summers has not said it yet, but corporate after-tax profit rates will have to drop.

Also, my models show that the Fed missed a whole interest rate cycle and they do not even know it yet. They still think the cycle is just beginning. That shows how much an understanding of effective demand is lacking. It is a serious issue.

Larry Summers does not have precise models yet for effective demand, but he has opened the door to knowing.

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What HE said! (And what I said. Yesterday.)

Any American under the age of 50 has no memory of living with a liberal Supreme Court. That could change soon. Were a Democratic appointee to fill the current opening, laws could change on voting rights, corporate power, campaign finance, criminal justice and many other issues.

“For the first time in decades,” Jeffrey Toobin writes in the current New Yorker, “there is now a realistic chance that the Supreme Court will become an engine of progressive change rather than an obstacle to it.”

A Liberal Supreme Court, David Leonhardt, NYT, today

Time to campaign on this, with specifics, Hillary Clinton.  And time for your surrogates to do so.  As I said yesterday.

Please instruct voters on the difference between Sonia Sotomayor and Samuel Alito.  There is a difference.  A big one.  The Mercers know this.  Please ensure that voters and potential voters know this, too.

Thank you.



ADDENDUM: Anyone who’s actually interested in this subject might want to read the Comments thread to my post from yesterday, which I linked to above.

Added 9/30 at 1:39 p.m.

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Investment rises as opportunity cost of money increases, Part 2

I posted this graph yesterday which has 234 data points from 1954 to 2016…

inv prof rates1

The graph implies that as profit rates come easier over the nominal cost of money the percentage of gross private investment to GDP tends downward.

I tweeted this graph to Miles Kimball who is in favor of negative nominal rates. Negative rates would tend to move the data points to the right implying weaker investment.

He replied that the x-axis has too much inflation in it. He suggested that inflation be added back into the x-axis. So I added core inflation into the x-axis and got this.

inv prof rates2

Same data here but showing trend line and patterns connecting points.

inv prof rates4

Still a downward trend is apparent. So even adding in core inflation to the x-axis did not dismiss the pattern.

This graph would be a problem for those who call for negative nominal rates in face of high after-tax profit rates. The graph implies that investment may not pick up at all.

It goes back to what Stan Fischer said…

“I think we’d be better off if there was a price for using money, or for not investing, in terms of monetary returns”

The red circle marking 2016 data shows that the price of using and getting money is very low by historical standards. Why invest when your returns come so easily? Why invest when creative destruction is weak because weak companies are given a life line with low nominal rates?

UPDATE: Just want to add a graph that shows the % of data points within a certain distance vertically from the trend line in the 3rd graph above. This graph implies that it is less likely to be farther away from the trend line.

For example,

  • 35% of the data points are within plus or minus 0.6% from the trend line. …
  • 50% are within plus or minus 1% from the trend line.
  • 10% of the data points are farther away than 2.5% from the trend line.

inv prof rates5

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What Clinton and her surrogates need to get across to millennials, racial minorities and union members

Coming soon: President Barack Obama, who’s expected to campaign [in Florida] at least twice before Election Day. First Lady Michelle Obama — more popular than her husband — will likely visit Florida as well, in addition to the ad she cut for Clinton that’s currently airing on Florida radio.

“Hillary Clinton’s campaign is in panic mode. Full panic mode,” said Leslie Wimes, a South Florida-based president of the Democratic African-American Women Caucus.

“They have a big problem because they thought Obama and Michelle saying, ‘Hey, go vote for Hillary’ would do it. But it’s not enough,” Wimes said, explaining that too much of the black vote in Florida is anti-Trump, rather than pro-Clinton. “In the end, we don’t vote against somebody. We vote for somebody.”

Part of the problem Clinton faces is that Obama, the actual black president, is the toughest of acts to follow. Obama enjoyed support from 95 percent of Florida’s black voters in both 2012 and 2008, according to exit polls.

Clinton campaign in ‘panic mode’ over Florida black voters, Marc Caputo and Daniel Ducassi, Politico, yesterday

“In the end, we don’t vote against somebody. We vote for somebody.”  Sounds like a plan!  If your plan is to ensure that the Supreme Court remains in the hands of the rightwing Federalist Society for another two decades, and that the lower federal bench, which after three decades of Federalist Society control is no longer in that stranglehold.

Guess the “we” who, in the end, don’t vote against somebody but instead vote for somebody, are just fine with the Supreme Court’s killing of the Voting Rights Act; the Court’s killing of federal-court habeas corpus review of state-court and state-prosecutor actions wayyy beyond what the 1996 jurisdictional statute they purport to just be interpreting (they’ve actually rewritten it); the Court’s singlehanded creation of a legal doctrine called “qualified immunity” (by their own admission not based on any statute but instead solely on their preferred policy) that exempts all law enforcement people, including (especially) prosecutors (including those who falsify evidence and those who withhold clearly exculpatory evidence) from any civil lawsuit liability, like, ever.

And the possibility of the Supreme Court upholding new campaign-finance laws—federal and state. Including state judicial elections or appointments.  And state attorneys general and local DAs.

You think black lives matter, but you don’t care enough about who in the federal judicial branch is making policy that goes such a long way toward deciding whether or not black lives matter?  Or, you don’t know that it the judiciary—and particularly the federal judiciary—at least as much as Congress that determines the relevant policy, and that the person who determines the makeup of the Supreme court and he lower federal courts, and therefore determines how much latitude state court judges and state prosecutors and state and local police have, is either that person whom you won’t vote for because you’re not enthusiastic about her, or that the person whom you don’t want to just vote against?

Ditto for millennials in general.  Most of the African-Americans saying that are, best as I can tell, millennials, leading me to wonder where they were during the primaries, when African-Americans in the South effectively determined the outcome of the primary contest.  Was Sanders not someone they could vote for?  Apparently not, so I guess they just didn’t vote.  Which should, maybe, suggest to them that if there are things that matter to them that will be determined by whom the next president is, they should ditch their high-mindedness and vote for the one of the two candidates that they would rather see making those decisions who will be making those decisions (court appointments, for example).

But its by means just African-American millennials.  It’s millennials generally.  It’s just the in thing this year.  The fashion. Which is good, to a point.  But not beyond that.

I say: Heck, millennials, just tell reporters and pollsters whatever you want about how cool you are to vote for Gary Johnson or Jill Stein, or to not vote (even for Senate and House, and state legislators).  It’s certainly the millennial in thing to support Johnson or Stein, or not vote.  And it will be unless and until President Trump, say, fulfills his promise to appoint a justice like Antonin Scalia to fill Scalia’s seat on the Court.  But if that’s not what you want to actually see, then vote.  For Clinton.

It’s one thing to threaten to cast a vanity vote, but quite another to actually cast one, ceding to others, without an iota of input, the actual decision about who will become president.

Care about consumer and employee protections (including the Supreme Court’s series of 5-4 opinions rewriting the Federal Arbitration Act in favor of … well, not consumers and employees), and finance-industry regulations?  Really?  But you’re fine with the prospect of President Trump and all those someones he’ll appoint?  Because you only vote for someone—the candidate herself or himself.  You won’t vote against someone.  Or, apparently, all those someones the candidate will appoint once in the White House.

Clinton, her husband, and her campaign do seem finally, and ever so belatedly, to have gotten the message you’ve sent through the polls.  But she doesn’t seem to fully know what to do about it.  Yes, it’s great that she’s finally campaigning on the Party platform—and even doing so with Bernie!  And her most potent surrogate besides Sanders, Elizabeth Warren, is becoming active after (what I’m guessing) was a period of about seven weeks when Clinton and her campaign didn’t want these two prominently campaigning for her.  Suburban moderate women would have been thrilled about what platform planks these two would have highlighted.  But, y’know, all those name Establishment Republicans whose endorsements she was trying for (successfully, for the most part) might not have happened.

And since this election cycle is nothing if not one in which to highlight support of name Establishment folks, that seemed to Clinton, her husband and her campaign as the route to the White House.  Even if everyone else was stupefied by it.

Well, almost everyone else.  But Clinton, her husband and her campaign really, really do finally understand this (even if Paul Krugman does not and still thinks Clinton’s failure to campaign intensely, or at all, on the Party platform for six weeks, and to not herself respond immediately and very publicly to the late-August Clinton Foundation pay-to-play meme).  Sort of, anyway; Clinton still won’t tell the public about the Mercers or the oil-and-gas billionaires who will in effect be making these appointments—nor, apparently, even wants Sanders and Warren to do so.

But this week there does seem to be real progress. Or at least it had seemed that way.  But today there is this, from Greg Sargent:

Clinton may have erred in calling “half” of Trump’s supporters “deplorables,” but there’s little question she wants this broader national argument. Of course, in some ways, Trump might also want this debate. He obviously sees expressing outrage about Clinton’s “deplorables” and “implicit bias” comments as a way to juice up his base by playing to white grievance.

But Trump also needs to improve his appeal among college educated whites, who are already convinced that Trump is either personally biased against minorities or is running a campaign designed to appeal to bigotry, which could be one reason his unfavorable numbers remain so high among those voters. And in this context, it’s worth appreciating that there’s a basic political imbalance underlying this debate: It energizes the base for both candidates, but it arguably could limit the broader appeal of only one of them.

As Democratic strategists have pointed out, by fully confronting Trump’s bigotry, and by talking about systemic racism as a continuing societal problem, Clinton may be able to engage core Dem voter groups in ways that tip the composition of the electorate in her direction on election day. It is always possible that engaging this debate might alienate some swing voters. But it seems more likely at this point that a continuing national focus on Trump’s racism could further alienate from him those college educated whites that Clinton hopes to win among, which would make her the first Democrat in over half a century to pull that off.

Either way, Clinton appears fully committed to this debate at this point, and most signs are that Democrats broadly see this orientation of the party as a short-term and long-term positive. So she probably won’t stop taking about it anytime soon.

Presumably this is because there are a few people hiding in caves with not even radio transmission who don’t know that this has been debated intensely for the last 16 months.  Or who want to hear still more debate about it. Maybe that’s the ticket.  Then again, maybe not.

It’s the court and agency appointments, stupid.*

Got that?  It’s the court and agency appointments, stupid.**

But … whatever.  As always, it’s only the Republicans who understand and campaign on this.  Or at least who campaign on this–even if they’re not the only candidates who understand this.

Progressives of all generations are tired of this.  Really.  We are.  Although by and large, it’s only millennials who plan to play with matches.



NOTE: *That line is intended as a takeoff on the (I guess no longer) famous line that Bill Clinton’s 1992 campaign manager, James Carville, posted to his office wall to remind himself of what to focus on above all else during the campaign: “It’s the economy, stupid.”

The “stupid” being a reference to … himself. As in: Remember, James, you idiot. It’s the economy that should be the main focus of the candidate’s campaign, not the side stuff (like culture wars issues). That campaign was during a recession.

After reading the first comment in the Comments thread I realized that I needed to explain that rather than presume that this would be understood, as it would have been, say, even a decade ago. Oh, dear.

Added 9/29 at 5:07 p.m.

**I just added this link to the Wikipedia article about “It’s the economy, stupid.”


Added 9/29 at 5:27 p.m.

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Does the DNC cyberattacker weigh 400 lbs? Or is it the cyberattacker’s bed that weighs 400 lbs?

Asked by Holt what he would do to prevent cyberattacks, Trump replied: “As far as the cyber . . . we should be better than anybody else, and perhaps we’re not. I don’t think anybody knows it was Russia that broke into the DNC [Democratic National Committee]. She’s saying Russia, Russia, Russia. . . . Maybe it was. . . . But it could also be China, it could also be lots of other people. It also could be somebody sitting on their bed that weighs 400 pounds.”

Trump’s night of sniffles and screw-ups, Kathleen Parker, Washington Post, today

For nearly two days now I’ve wondered why Trump thinks the body weight of the DNC cyberattacker could be relevant to the issue of who the attacker might be.  I’d thought that possibly the point was to exclude Putin, who, I’m guessing, is about 180 lbs. of solid muscle.

But after reading the quote in Parker’s column rather than just recalling it from memory, I think Trump was talking not about the weight of the cyberattacker but instead about the weight of his or her bed.

Which presents the question of why Trump thinks the weight of the cyberattacker’s bed could be relevant to the issue of who the cyberattacker might be.  I don’t even have a working theory on this.


UPDATE:  Reader Warren, who is helping me solve this riddle, thinks the problem is not Trump, but Parker.  He offered this, in the Comments thread:

Warren / September 28, 2016 8:08 pm

The problem is not Trump, but Parker, who did not place the commas where they should have gone: “It also could be somebody, sitting on their bed, that weighs 400 pounds.”

Commas make the difference between “Let’s eat, Grandma” and “Let’s eat Grandma.”

I responded:

Beverly Mann/ September 28, 2016 8:37 pm

Well, this is true. So, do you think my original theory is right that Trump thinks the body weight of the DNC cyberattacker could be relevant to the issue of who the attacker might be because if the attacker weighs 400 lbs., he or she could not be Putin?

Warren will get back to me soon, I’m sure, given the importance of this.  The NSA thinks Putin is the cyberattacker, but they reached that conclusion before Monday night’s debate, and based upon this new evidence they may have jumped the gun.

Updated 9/28 at 9:03 p.m.

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A Lesson from Project and People Management

Authored by Mike Kimel

I straddle a couple of economic worlds.  In my day job, I run the Pricing and Market Analytics group for a foreign manufacturing company.  But I also retain at least an ear to the ground in a small business my wife and I started about seven years ago.  We buy, fix up, and rent out residential properties in Northeast Ohio.  My wife runs day-to-day operations.  In the past few years, we’ve also taken on a long time family friend as business partner.  Like my wife, he has a lot more daily involvement than I do, though like me, he has a white-collar job. 

The juxtaposition between the three of us got me thinking about the difference between what my wife does and what I do at my job.  To a large extent, I manage people and projects.  My wife does the same thing.  But if I have scheduled someone to do X, I don’t have to worry about whether they will show up falling-down drunk, or even whether they will show up at all.  In two decades of work, those issues have never come up.   My wife, on the other hand, deals with that kind of thing regularly.  Not with every plumber or electrician or construction worker, mind you, but it happens a lot. 

None of this is to say that Blue Collar work is worse than White Collar work, but my experience is that more Blue Collar people would trade places with White Collar workers than vice versa, all else being equal.  However, where people end up in life owes a lot to luck, ambition, desire, willingness to work and presentation.  The inability to keep one’s vices in check, however, can and often will  negate everything else, and there are a lot people who have demons they cannot control.

One more observation.  People who get fired from a work site because they are drugged or inebriated enough to threaten themselves or others can get belligerent.  The boss who fired them, even if it comes after the second or third “second chance” is always, to them, an expletive. 

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No, Mr. Trump, nothing made you smart. To illustrate: You think a VAT tax is a trade tariff.

Nick Confessore


9:20 PM ET

Just to pull back for a second here, you can see a part of Clinton’s strategy. She is not campaigning against him as a crazy man. She is campaigning against him as a traditional and, in her argument, flawed conservative Republican.

First Clinton and Trump Debate: Analysis, New York Times, live blogging of debate


Okay, all you regular Bear readers won’t be surprised that my most favoritist lines in the entire debate were, “We settled the suit with zero — with no admission of guilt. It was very easy to do.”  And, “I settled that lawsuit with no admission of guilt, but that was a lawsuit brought against many real estate firms, and it’s just one of those things.”

He settled that lawsuit with no admission of guilt.  Which is how lawsuits traditionally are settled.  It’s also why lawsuits of certain types are settled for more money than they otherwise would be; an admission of guilt gets you a settlement discount.

This particular type of lawsuit normally is settled with no admission of guilt–just a court decree in which the defendants promise to stop doing what they were not guilty of doing.  An admission of guilt would defeat the main purpose of settling: minimizing harm to the reputation of the business and its owners or executives.

Those lines of Trump’s last night, stupifyingly stupid as they were, did have some tough competition for my designation of The Best.  After all, there was that protestation by Trump that his cheering for the housing-bubble collapse is “called business, by the way.”  And that an architect Clinton mentioned who was among the thousands of workers and small-business owners whom Trump has refused to pay after they’s completed the work for him “maybe” “didn’t do a good job and [Trump] was unsatisfied with his work.”

And that Trump’s never paying any federal income taxes “makes [him] smart.”

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