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A Serious Problem For Dems

A Serious Problem For Dems

It is that progressive Dems some time ago glommed onto the idea that protectionism is “progressive.”  It has been going on so long and has become so ingrained that Bernie Sanders has been running around bragging about how he is more protectionist than Trump.  Elizabeth Warren has been a bit more subtle about it, calling to renegotiate all existing US trade agreements to make them super strong on labor and environmental standards.

The problem is that one of the biggest disasters of the Trump presidency has been his trade wars, now pushed further with his latest move to raise tariffs on another $300 billion in Chinese imports.  Stock markets and oil markets took huge dives all over the world on this.  The Fed has just cut interest rates to offset the negative effect on the world economy of Trump’s trade wars.  Trump has delivered a big fat zero in terms of anything positive from his protectionist moves, and even industries that were crying for protection, such as steel and and autos, are now complaining about his trade wars.  And this has done a big fat zero for workers as well, whom supposedly our great “progressive protectionists” claim they are spouting their now completely irrelevant drivel.

This is going to be one of the biggest issues in the coming campaign, and while so far almost nobody is focusing on it, both Sanders and Warren are complete and totally worthless disasters on it.  I find this very frustrating given that on so many other issues they make a lot of sense.

Barkley Rosser

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Origin of the 2 Percent Inflation Target

Origin of the 2 Percent Inflation Target

I have made most of these comments as comments on Econbrowser and Angry Bear (an excellent post by Robert Waldman), as well as on Econbrowser in response to a serious post by Jeffrey Frankel. I note that pgl has added useful comments on this matter in the other blogs.

So it was 1990 that the New Zealand central bank became the first in the world to impose an inflation target of 0-0.002.  It worked out pretty well for NZ, and in general it has not done too badly in general where applied, well beyond the US.  Of course, global inflation has declined, with a handful of exceptions.

In the mid-90s the US grew better than it had  previously, and in the middle of the decade there was an important moment regarding policy.  There was no inflation directive but Fed Chair Greenspan was facing a de facto such directive based on central Fed estimates that there was a known “natural rate of unemployment (=NAIRU) that must not be passed.

As it was then Fed Gov Janet Yellen in the mid 90s convinced Greenspan not to raise interest rates  partly because of a paper by  her husband, Noblelist George Akerlof.  This famous paper from 1996 out of Brookings where George was due to Janet being at the  Fed,

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Degeneration of Bipartisan Blog Sites: Econbrowser

Degeneration of Bipartisan Blog Sites: Econbrowser

This is probably just a whiny complaint of well-known and long running issues.  Indeed for a long time most blog sites (not to mention most twitterspheres and Instogram Idiotspheres) have been mono-partisan in those who participate in their discussions/debates. This has been true for a long time for most sites in the Econoblogosphere, including this site, which clearly tilts “left,” even though we have always been open to comments from a wide variety of views.

I have in mind here a particular blog site that I respect and have been spending a lot of time and attention at for some time. It is Econobrowser, initially set up by Jim Hamilton, now at UCSD, and a leading time-series econometrician, long viewed as a nonpartisan technocrat. Some years ago he brought in Menizie  Chinn of UW-Madison as a co-blogger, with Menzie becoming the main poster recently, with Jim H only rarely now posting or commenting on anything.

This site has been for some time now one of the few among higher level economics sites where people from different partisan positions have been regularly posting, reasonably intelligently.  It has been for some time tilting “left,” as Mr. Apolitical Jim H rarely posts, with Menzie Chinn dominating the site.  He served for both both Clinton and G.W. Bush as staffer on the CEA, giving him a cred cover of bipartisanship, although since Trump came in he has clearly been negative on Trump.

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Hannity Calls For/Predicts War With Iran

Hannity Calls For/Predicts War With Iran

OK, sorry if this is just over the top, but this evening Trump’s close pal, Sean Hannity, has gone over the top both predicting and clearly supporting a full blown attack on Iran, “take out all their nuclear facilities.”  Curiously a sign of how over the top this is was given by one of his guests, a colonel, warned that it would take nuclear weapons by the US to fully take out the most deeply buried  Iranian capabilities.

I am reasonably certain that part of why Hannity was sounding the war trumpet rather than his usual “investigate Hillary and the Steele dossier” baloney is that today Trump put himself into a difficult contradictory situation, having gone doubtful last night on his followers in NC chanting “Send her back” to supporting those chanters today. So, much easier to distract everybody with a possible war in the Persian Gulf (sorry, not “Arabian Gulf,” not yet), especially given that there has been an ongoing escalation of incidents in the Gulf over oil tankers, with Iran pushing back against the US withdrawing from the JCPOA nuclear deal.

But the bottom line is that what Hannity spouts often ends up being what his close pal Trump ends up doing.  I take this spout from Hannity all too seriously.  We may well be in more serious war with Iran soon, with such an effort accompanied by far more massive lies than the Bush admin gave us when he stupidly invaded Iraq on false pretenses, although Hannity is assuring us that “It will be all over very soon, with no boots on the ground.”  Yeah, we have heard that one before.

Barkley Rosser

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Eliminate The Debt Ceiling

Eliminate The Debt Ceiling

Several days ago in WaPo, Catherine Rampell published a highly reasonable column calling for eliminating the century-old US debt ceiling, something no other nation has ever had, a position supported by a wide array of economists including such a conservative GOP stalwart as the recently deceased Martin Feldstein, a former CEA Chair for Reagan.  I have made numerous posts here on this in the past, but the issue is hot again as once again the debt ceiling is being rapidly approached.

The latest story is that the “adults in the room,” Treasury Secretary Steven Mnuchin and Speaker of the House Nancy Pelosi, may be very near an agreement to raise the debt ceiling, Reportedly Pelosi has been open to eliminating the ceiling, but in the current circumstances I certainly understand why she might be wanting to secure a two year agreement to preserve funding for social safety programs crazy right wingers want to use the debt ceiling issue to trash as well as holding off any shutdowns this fall.  This is what used to be known as “good government,” but in the current environment, even this apparently reasonable deal, which also has no non-economic sideshows involving abortion or whatever, may yet not pass.  Pelosi says it must be agreed to by tomorrow evening if it will get passed properly by Congress before they all go on leave and the government might run out of money in early September (corporate tax payments have been way down due to Trump tax law).  Eliminating the ceiling would avoid all this bs, but this is not the moment for that.

This is definitely a weird and unprecedented situation.  For over a century we have had this completely indefensible debt ceiling, which has been raised so many times it is not worth counting, and when the WH and Congress have been controlled by the same party, it has been no big deal, although obviously that is what we need to get rid of the damned thing.  However, historically, when there has been split partisan control the game has been the WH pushing raising the ceiling while the opposition party in Congress has made lots of complaining noises and often made demands for raising it.  The problem this time is that the major power broker of the administration, Acting Chief of Staff Mulvaney, was part of the tea party fanatics in the House who when Obama was prez tried to block raising the ceiling.  Apparently at times he and Trump have indulged in fantasies that if there is a default he could personally control which agencies get funded and which do not.  This is not true, and maybe they are figuring it out, but Mulvaney has said nothing, and Trump must pass on this.

If he messes up the deal, it will be all his fault, as his own Treasury Secretary has cut it with the Congressional leader of the opposition party in the House, with reportedly the toadish GOP-controlled Senate ready to go along.  He may or may not have figured out that triggering a shutdown did not help him, but if he thinks triggering a default will not be worse, this will be a big mistake, to put it mildly.

Barkley Rosser

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Fox News Is Calling The Persian Gulf “The Arabian Gulf”

Fox News Is Calling The Persian Gulf “The Arabian Gulf”

Yes.  For centuries throughout the entire world that crucial body of water has been called “the Persian Gulf,” even though in 1935 the nation of Persia changed its named to “Iran.”  I became aware several decades ago when I was in Saudi Arabia that they have a really big fuss that it should be called “the Arabian Gulf.”  I think maybe their fellow Arab GCC members have been supporting this nonsense as well, but nobody else did, certainly not the US.

But now here it is, and I had noticed in some other US media outlets recently. Is this yet another payoff to the murderous Saudi Crown Prince Mohammed bin Salman (MbS) for funneling piles of money to Jared Kushner and the Trump Organization?  I mean, Fox News does what Trump and his flunkies want.  So, not only are we not punishing MbS for his awful war in Yemen, which even the UAE is now getting out of, not only are we not punishing him for ordering the assassination of a US-based journalist, Jamal Khashoggi, but, heck, Trump through Fox News and I am not sure who is trying to change the name of this body of water from its historical origin to kiss the ass of this disgusting murderer.

Oh, there is also the matter that Trump has gotten himself off into a totally anti-Iran schtick, with his withdrawal from the JCPOA and his imposition of massive sanctions on Iran.  But this looks like an attempted permanent punishment.  Frankly, I hope the rest of the world does not go along with this bs, but in the US, I fear he may have succeeded, so many people are so ignorant.

Barkley Rosser

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A Half Century Since Apollo 11 Launched To The Moon

A Half Century Since Apollo 11 Launched To The Moon

On July 16, 1969, a half century ago today, a Saturn 5 rocket launched from Cape Kennedy on its way to the moon, where Neil Armstrong and Buzz Aldrin would land on the moon on July 20 before returning successfully to earth.  Recent books have made clear just how close a call it was with many things nearly going wrong that would have doomed them, including such oddities as Aldrin using a felt tipped pen to adjust a minor switch that was needed for them to return.  My late father played an important role in that event, which I have posted about here before.  At that time he and I had many disagreements, but on this matter we were in agreement, and I was pleased to watch the famous landing with him.

The recent book, _One Giant Leap_ by Charles Fishman, argues that JFK was motivated to push the project out of Cold War competition with the USSR.  My late father agreed that this was a motive that provided the support for it.  This does raise the question whether it was really worth it.  I mean, nobody has gone back since 1972, although there is much noise now about maybe going back.

A curious way of looking at this in perspective is to think about what we thought the future would look like from that time period as compared with what has happened.  One way of looking at that is to think about how the moon and human presence there was depicted in the movie “2001: A Space Odyssey,” which came out in 1968, the year before Apollo 11.  I well remember taking very seriously the forecast in that movie, which depicted fairly substantial and established US and Soviet moon bases for 20001, now 18 years in the past.  That certainly did not remotely happen, although some other things shown in that movie have come to pass, such as people being able to see each other while communicating with each other over distances (thank you, Skype!).

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Does Turkish Lira Decline Mean Turkey Leaves NATO?

Does Turkish Lira Decline Mean Turkey Leaves NATO?

Probably not, but Turkey is about to receive Russian S-400 missiles against US demands.  More signifigantly the US will kill high level US F-35 agreements, and will not fly US planes over Turkey if it uses the Russian systems.  This threatens Turkish membership in NATO.

The immediate result of this in financial markets has been a substantial decline of the Turkish lira over the last several weeks.  While pushing off the US has costs, there will be gains from favoring Russia, from Russian tourist business to other economic deals, as well as cooperation with Russia not only in Syria, but also with respect to Iran, where both Turkey and Russia disagree with US policy to pull out of the JCPOA nuclear agreement with Iran, which has led to a very bad state.

More deeply we see the limits of the weltenschaaung that Trump put forward last September at the UN GA to massive laughter by many other  national leaders, a moment not known to most Americans while unprecedented, the idea of super nationalism. Now he is facing the outcome of his folly on these matters: both Putin and Turkish leader Erdogan agree with him on this nationalist baloney, but now they are allying against him and the US. This shows that the end of this approach is not international cooperation through international organizations like the UN.  It is nationalist competition and rivalries leading to warfare.

Oh, and Erdogan seems to be imitating Trump also on economic policy, although he is playing a weaker hand, with the Turkish economy’s problems one of the reasons the US Fed is looking at lowering interest rates, not only a supposed ally, but one of the G20 nations whose economic problems are serious enough to draw the attention of the US Fed.

Barkley Rosser

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The Condition Of North Korean Conventional Weapons

The Condition Of North Korean Conventional Weapons

This is based on essentially gossip, or if you prefer, a rumor.  I have been dining in Washington again and someone there who is in fact both well known and very well informed, but whom I shall not name, made a comment about the state of conventional weapons in DPRK and also said that this has not been publicly known.  According to this person their condition is much worse than publicly believed.  So out of date and out of condition are they  that supposedly North Korea can no longer  seriously threaten Seoul with a conventional attack (as has long been taken for granted as being possible and looming over the situation there).

The supposed implication of this, if indeed it is true (which it may not be, and this is simply not easily checked on), would be that the DPRK needs its nuclear weapons more than we have thought and will be even less willing to give them up than has been thought, not that many of us have taken too seriously the idea that they would be willing to give them up.  Indeed, there have been recent rumblings out of Washington, denied by the administration, that Trump may be willing to return to the position of earlier administrations and cease trying to get DPRK to give up those weapons while trying to put some limits on the program instead.  Needless to say, Trump has had nothing but ridicule for this position when it seemed to be that of Obama, but if he does it, well, this will sort of be like calling NAFTA the worst trade deal ever and then negotiation a new NAFTA that is only slightly different from it and proclaiming it to be the best trade deal ever.

Barkley Rosser

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The Expansion Of Assets With Negative Nominal Interest Rates

The Expansion Of Assets With Negative Nominal Interest Rates

Buried in the Weekend section of the Financial Times is a report that the aggregate value of assets that earn negative nominal yields has substantially expanded since the beginning of 2019 and has reached a new high.  So on January 1, 2019, the value of these assets was at $8.3 trillion.  As of six months later it had reached $13 trillion, a more than 50 percent increase.  There are fewer assets around that have negative yields than a few years ago, but the amount of money in them has grown, and the depth of some of the negative interest rates has deepened.  It used to be said that -0.5 percent was a lower bound, but some Swiss franc bonds are down to -0.8 percent.  The main ten year German government bond’s yield has fallen to -0.4 percent.

This reflects a general decline of interest rates around the world.  This would seem to be tied to a general slowdown in the growth of the world economy.  One of the most sharply shifting economies is that of Germany, in recent years the fastest growing in the EU, but apparently in negative GDP growth territory for the second quarter of 2019.  This is not a good sign for the entire European economy.  Of course, China has also been slowing down.

This general slowdown has spilled over into US long term interest rates, which the Fed really does not control.  Indeed, for only the seventh time since 1980, the ten-year Treasury bond’s yield dipped below the federal funds rare, a more dramatic inversion of the yield curve than we have seen so far, with the US economy going into recession soon after this inversion five out of the six previous times this happened. So this is not a definite sign of recession, but it is quite understandable that the Fed is now talking lowering short term rates, and not just because Trump is shouting at them to do so.

Barkley Rosser

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