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Basil Moore dies

Basil Moore dies

I have just learned that prominent Post Keynesian economist, Basil Moore, died yesterday.  I do not know of what or how old he was, although he retired over a decade ago.  He is best known as the author of Horizontalists and Vericalists, in which he strongly argued for the endogeneity of money. In more recent years he had become interested in dynamic complexity economics.

He long taught at Wesleyan in Connecticut.  In the final years of his career he taught at Stellenbosch University in South Africa, his wife, Sibs, being from there, and they continued to live there after he retired.  He will be missed by many, including me.

Barkley Rosser

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Eastern Economic Association Conference

Eastern Economic Association Conference

So, I returned late last night from Boston where I presented three papers at the 44th Eastern Economic Association conference.  Only about 70% of those preregistered made it due to weather, with airport and train station both closed on Friday, first full day of conference.

One of those who did not make it was James Galbraith, scheduled to give the first Godley-Tobin plenary lecture, sponsored by the Review of Keynesian Economics (ROKE).  However, he managed to do it from a Dallas hotel room, with a full room audience. He spoke on “Global macroeconomics – yes, macroeconomics, dammit – income inequality and distribution.”  A good opening for the series.  ROKE editor Tom Palley among those not making it, and the word is out that the last of the founding editors, Louis-Philippe Rochon, is stepping down.

I have accepted an invitation to be one of three editors-in-chief of the fourth edition of the New Palgrave Dictionary in Economics.  I met for the first time with the other two: Matias Vernengo and Esteban Perez Castelnedy, along with publisher, Mike Hermann, from Palgrave.  This will be a large and long project, but at least we know where we are going at this front end for now.

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Saudi Crown Prince Tortures Fellow Princes

Saudi Crown Prince Tortures Fellow Princes

A new report by Hugh Miles at Middle East Monitor, Is the “Saudi Elite Cannibalizing Itself?” by Juan Cole, reports the recent purge of supposedly corrupt princes and high officials was (and continues to be) much more horrendous than previously reported, which I fear does not surprise me.

Apparently Crown Prince Mohammed bin Salman (MbS), whom I have previously posted about here, hired mercenaries to interrogate those arrested and kept at the Ritz Carlton, which turns out to have not been a luxurious hangout.  Money, signed confessions, and promieses of loyalty were demanded, with most let out wearing electronic tags and not allowed to leave the country.  Many were physically beaten, hung upside down, and tortured in vsrious ways.  One of them, the privste secretary of a former governor of Riyadh.  Some have not caved yet and remain imprisoned, although this remnant has been moved out of the Ritz elsewhere a of Feb. 11 when the Ritz reopened for business.

Probably the best known of these has been Walid bin Talal, a multi-billionaire heavily involved in many businesses around the world, including in the US.  Reportedly his torture led to three episodes of emergency medical care being involved. His family was brought to KSA and pictures of his young daughter in handcuffs were shown to him.  A televised interview with him prior to his release had him denying he was tortured, but also had him guzzling Pepsi and comping down condiments that it is known he would never normally eat, being a health fanatic and vegetarian.  It is being touted that this was a sign of him signaling that this interview was under duress.

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The WaPo Gang Going After The Usual Suspects On the Budget Falls On Its Face Factually

The WaPo Gang Going After The Usual Suspects On the Budget Falls On Its Face Factually

All right, all right, that is not completely fair.  Yes, they dump all over Trump and the GOP-run Congress for their massive tax cut directed at the rich, as well as the hypocrisy of the Republicans in so smoothly switching from denouncing budget deficits during the Obama era to a “what? me worry?” attitude now with deficits set to soar in a period of near full employment.  But, of course, the Monday gang at the Washington Post simply cannot avoid making a big deal about somehow “entitlements” are not being cut, although all kinds of other areas are going up, especially defense.  But they just cannot get off this schtick.

I note that Dean Baker has just posted a whole bunch of comments on the newly proposed budget, as well as the recent tax cut, including one focusing on the WaPo gang and their annoying commentaries.  However, I hope to add here some points he does not make.  I am largely in agreement with his posts, with only minor disagreements not worth bothering with here.

Curiously, the usually more annoying WaPo editorial page editor, Fred Hiatt, was less annoying than the usual WaPo Monday economics commentator, Robert J. Samuelson.  Of course, Hiatt mourned that in 2012 and 2013 Obama and Boehner could not agree on “tax hikes and entitlement cuts.”  Quite aside from this annoying terminology of “entitlements,” there simply was never any good reason for cutting Social Security, Medicare, or Medicaid, at least not directly.  As has been pointed out by many of us from well before then and up to the current time, especially Dean Baker, cuts could have been made, but the way to  do it was to get the wildly high US medical care costs under control in general, which would show up in reductions of Medicare and Medicaid spending, without any loss in quality in care, assuming things were to be managed reasonably.  But Hiatt and crew simply never recognize that. It is just how irresponsible all these politicians are or not just cut cut cutting those darned entitlements, although preferably in conjunction with that very unlikely to happen tax increase.  As noted already, while Hiatt nods at dumping on Dems for supporting some spending increases (not noting that some of them such as disaster relief are really needed), he spends most of his fire dumping on Trump and the GOPsters for their deficit hypocrisy.

However, Samuelson puts on one of his classic performances, indeed worse than usual.  Yes, he does plenty of bashing on the GOP tax cut, but he seems to justify the GOP-pushed increase in military spending (plus $80 billion, the largest increase of any item).  According to RJS, “On defense, President Obama’s budgets reduced readiness, left the services too small and made it harder to counter new technological threats, notably cyberwarfare.” Really?  The US has bases in 70 nations and special forces in at least 122.  Do we need all that, not to mention that our military spending exceeds the sum of all that going on in the next five or so nations’ spending?  I almost do not even know what more to say about this item.

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Drastically Changing the Rules On Infrastructure Spending

Drastically Changing the Rules On Infrastructure Spending

Most observers have figured out that the Trump infrastructure spending plan seems to be weirdly lopsided in an unrealistic way, with $200 billion in federal spending somehow supposed to inspire a total of $1.5 trillion in spending by state and local sources along with private ones.  What has not been made all that clear publicly is how this plan upends decades of established practice in fiscal relations between the federal and the state and local governments.  The long-established formula has been 8 to 2, that is $8 in federal money for $2 in state or local money in infrastructure construction projects.  Trump’s plan proposes to completely reverse this to a 2 to 8 formula, $2 in federal money for $8 in state or local money.  Anyone who thinks this is going to provide any actual infrastructure activity that would not have otherwise is simply completely delusional.

Of course it is well known that the private sector input will involve tolls or other payment methods to make sure the private interests make a positive rate of return. One important area many want to see work done is on fixing bridges. The American Society of Engineers has identified about 50,000 bridges in the nation that need repair.  However they also estimate that only about 100 of those are reasonably suitable for private tolling.  This is another not-going-anywhere part of the proposal.

However, Trump is apparently hoping to raise money by outright selling off some publicly owned infrastructure assets.  The Washington Post reports today that in the Washington area this includes the two main airports, Dulles and Reagan National, as well as the George Washington Memorial Parkway (currently not tolled).  I can hardly wait and am curious what else around the country is going to be put on the block for a grand fire sale leading to all kinds of tolls and other nonsense.

Barkley Rosser

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End Of The Obama-Yellen Economy

End Of The Obama-Yellen Economy

For the past year the US has been essentially operating on an Obama-Yellen economy, at least as far as the big macroeconomic policies have been concerned in terms of fiscal and monetary policies.  We saw basically a continuation of what had been seeing in previous years, steady growth with inflation under control.  There was some uptick in wage growth, although that had already started in the previous year.  He has supposedly engaged in a lot of deregulation, but most of it that has gotten a lot of attention has involved making it easier for firms to pollute in various ways, with squashing renewable energy projects while super encouraging fossil fuels and coal.  Indeed, about 50% of the increase in capital investment in the US last year was in the energy sector.

One area where Trump’s policy, or expectation of it, has had a noticeable influence has been the expectation of his corporate tax cut on the stock market, ,which has risen a lot since his election, even after taking account of the declines in the past week (although the market rose more in percentage terms in Obama’s first year than it did in Trump’s first year).  But, of course, stock markets are famous for buying on the rumor and selling on the news.  Now the market continued to zoom after the tax cut passed for awhile, but now some realities may be kicking in regarding the full implications of it.  The Obama fiscal policy is over, and Janet Yellen officially went out the door at the Fed at 9 AM this morning when her successor was sworn in as the new Fed Chair.

So why is the realization of the end of the Obama-Yellen economy downing the market so hard?  One side item that has probably exacerbated things and has little to do with Trump or the rest has been the more dramatic collapse of the cryptocurrency markets, now down well over 50% from its November high. I shall not get into the details of that or where I think it is going, but I suspect the sharper plunging those markets were doing this past week have spilled over to some extent into the stock market.

That said, it has been noted by a wide range of people, with Robert Shiller perhaps the most prominent, that the US stock market appeared to have become somewhat overvalued, with Shiller claiming it has had the highest ratios of prices to recent trends of earnings of any major national stock market.  Many have been warning of an impending correction, and it looks like it is here.  If it does not go down too much more, it will not in the end be a big deal, a merely useful correction.

That said, and along with the caveat regarding the drag coming from the epiphenomenon of the crytpocurrency crash, there is reason to believe that this recent market drop may well reflect some realizations about the implications of Trump policies, along with perhaps jut a bit of confidence loss due to the departure of the incredibly calming and reliable Janet Yellen from the Fed.  A lot of talk has been that with wage pressures rising, inflation expectations may be rising, and with that that interest rates may be pushed up by the Fed.  On top of that there was the realization a week ago that Treasury borrowing is really up thanks to the Trump tax cut, estimated to be up 84%, and we have a debt ceiling increase needed in probably a month, not to mention another possible government shutdown looming this week (probably to be put off for another month).  In any case the unexpectedly high increase in borrowing will put upward pressure on interest rates, irrespective of inflation or Fed policies affecting short term interest rates.  I suspect this matter is what has really gotten the stock market spooked.  They sent all last year capitalizing in their higher after tax profits, but had failed to capitalize in the higher interest rates to accompany the higher budget deficits.

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Distractions, Distractions

Distractions,  Distractions

Wow!  We have a great controversy!  A squib of a memo by the House Intel Comm has completely devoured the media.  A constitutional crisis!  Egad!  In two weeks, or maybe two months, it will be nothing.  But for now, well, very very very serious. At a minimum it has distracted everybody from Trump’s gloriously successful State of the Union speech, which was so well received until this distraction that he thinks will bring about the end of that nasty Mueller investigation.

However, it now appears that this follows an older pattern.  When really serious stuff shows up in Trump World, the world is easily distracted by some much more minor scandal that gobbles up media and public attention.  So, during the campaign there was an important moment when it was reported that emails of the DNC had been hacked by Russians and handed over to Julian Assange and publicly leaked, with these memos being drip drip drip leaked day by day through the campaign.  But did this rather serious report get any public attention?  No no no. We had a much more important scandal to distract us with its outstanding shockingness.  It was the Grab ’em by the Pussy tapes, that, shock! were supposedly going to completely upend and end Trump’s campaign.  Within a few weeks again it was no big deal, distracted by further scandals, but in the meantime the more serious matter of Russian serious intervention in the US election barely ever made it to any public attention at all, although we have been living with that attention to it ever since.

So what might this soon-to-be-forgotten memo be distracting us from (and I recognize that it is more serious than the grab ’em distraction)?  Well, buried on the inner pages of WaPo yesterday and scattered across secondary parts of the internet is a curious story that looks a lot more important than this nothing memo. Not only did Trump on the day befor his SOTU speech violate the Constitution by failing to obey a 515-5 vote in Congress to impose further sanctions on Russia for interfering in the US 2016 presidential election, but this astounding action was preceded by an apparently historically unprecedented event, the visit to Washington by the directors of all three of the top Russian intel agencies prior to his decision to ignore the mandate of the Congress.  Is anybody paying attention to this ultimate payoff to Putin for all the barely hidden Russian money in his unreleased tax returns?  Not with this wonderful distraction of this squib memo.

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Is Treasury Secretary Mnuchin Right About The Impact Of The Dollar On US Trade?

Is Treasury Secretary Mnuchin Right About The Impact Of The Dollar On US Trade?

Maybe yes.

In Davos some days ago Treasury Secretary Mnuchin declared that a lower valued dollar would lead to a lower US trade deficit. The dollar promptly fell several percents and various persons and many observers reacted in horror, most prominently former TreasSec Larry Summers. He did no actually dispute Mnuchin’s claim factually, rather he asserted that people holding that position as he did should follow a strong dollar policy and talk it up, that a lower dollar raises prices of imports (true) and that advocating it is just plain irresponsible, even though his predecessor, Lloyd Bentsen, in the Clinton administration also talked down the dollar at one point as a job-increasing policy.

Dean Baker at Beat the Press responded to all this with two days worth of posts defending the factual basis of Mnuchin’s claim against his critics (some of whom did not dispute his facts but rather argued the policy was unwise for other reasons). He argued that indeed lower values of the currency leads to lower trade deficits, noting experience in the 1980s especially when a strong dollar led to a soaring o the US trade deficit that fed into a sharp decline in manufacturing employment in the US Rust Belt, with the deficit declining as the dollar fell after the 1985 Plaza Accord. He pointed out that a lower dollar lowers the price of US exports abroad, which tends to increase the quantity of exports, and raise the price of imports in the US (as Summers noted), which tends to decrease the quantity of imports. All of this is indeed true, even if the size of those changes may vary a lot.

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Parsing the Poland Problem Paradox: Local Versus National Outcomes

Parsing the Poland Problem Paradox: Local Versus National Outcomes

As argued in numerous posts here, we have seen an apparently emerging disconnect between economic conditions and political outcomes in a variety of nations, with anti-immigrant or more generally nationalist or populist parties with authoritarian tendencies gaining strength in many nations despite apparently improving or even largely pretty good economic conditions.  A list of those showing this includes Poland, the US, Germany, UK with the Brexit vote, Austria, Sweden, the Netherlands, and some others (I had Iran on the list, but it seems to a more complicated case).  I labeled this phenomenon to be the “Poland problem,” with the Law and Justice Party coming to power in 2015, despite Poland having been probably the best economically performing of all the European transition economies, as well as being the only European nation not to having gone into recession in 2009.

Now a study by Yann Algan, Sergei Guriev, Elias Papaionnou, and Eugenia Passari at Pro Market (and linked to today by Mark Thoma at Economistsview) finds that if one looks closely at local economic conditions in parts of European nations over recent years, specifically changes in unemployment rates, one finds that there seems to be a relationship between such increases and increased support for “populist” parties, a “specter hanging over Europe.”  I find the study reasonably persuasive.  So this would mean that a possible explanation for the Poland problem is that unhappiness in suffering and poorer regions overwhelms broader good economic performance in nations, leading in some cases to actual takeovers by these parties.

I note that for at least some nations where I know the geographic details better, this fits with the odd situation where those regions voting most vigorously for strongly anti-immigrant parties are also th regions with fewest immigrants.  This reminds me of the old wisecrack about Poland from 1968 when there was a major outbreak of anti-Semitism that Poland was showing how to have anti-Semitism while having few Jews.

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Is Trump’s Washing Machine Tariff To Punish South Korea For Being Too Friendly With North Korea?

Is Trump’s Washing Machine Tariff To Punish South Korea For Being Too Friendly With North Korea?

I have seen nobody claim this, and this may simply be a matter of collateral damage, as Trump has officially approved of the recent openings related to the forthcoming Winter Olympics in South Korea, especially since South Korean President Moon went out of his way to give credit to Trump publicly for this opening, credit Trump publicly accepted.  It is probably more that Trump simply is not thinking, but it is also the case that he had previously dissed moves by Moon to follow a more peaceful approach to North Korea.

For anybody who does not know, South Korea is the leading source of washing machines imported into the US, so South Korea will take the largest hit from the recently announced by Trump tariff hike on washing machines.  It may have nothing to do with South Korea at all, with the fact that domestic producer Whirlpool being located in politically sensitive Ohio that played a major role, with Dem Sen. Sherrod Brown praising Trump’s move (and the tariff on solar cells probably part of his ongoing effort to help domestic fossil fuels, especially coal).

OTOH, Trump has for some time been railing against the free trade agreement with South Korea, even as South Korea has been under this war threat from North Korea.  Trump preferred disgraced former President Park to leftier current President Moon.  But aside from his general protectionist MAGA theme, probably the most likely reason Trump has fussed about the Korean agreement rather than some other strictly bilateral ones is that it came about while Obama was president.  And we know well that he seems obsessed with undoing every jot and wiggle of anything Obama did.  That this would harm a nation his foreign policy actions have been putting under serious threat has not slowed him down much on this, although this washing machine tariff seems to be the first actual move against South Korea economically.

In any case, probably this move was not primarily driven by a desire to punish South Korea for being to wussy soft with North Korea, but it is certainly consistent with such a motive.

Barkley Rosser

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