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

No more mister nice guy

(Dan here…lifted from Robert’s Stochastic Thoughts)

by Robert Waldmann

Nomoremisterniceblog almost states the bitter truth, but he’s too nice to tell us what fools we are.

He wrote:

I don’t want to relitigate the McGovern and Mondale campaigns, but Dukakis? “Free everything and impossible promises” weren’t what defeated him.

My comment

I want to relitigate events of 1984, which Delaney has sent down the memory hole. Mondale was not hammered because he made promises he couldn’t keep. He said he was going to talk to us like grownups. He said he was going to increase taxes (but not increase taxes on families with income under $ 30,000 which would be about $60,000 now with inflation).

So the people of the USA had to choose between a serious guy who told us the truth and the guy who promised that lower taxes meant higher revenues. It is obvious that most voted for Reagan who made absurd promises which he obviously couldn’t keep.

Now there have been Democratic candidates who promised to reduce the deficit and reduce taxes on most families — Clinton and Obama ‘– exactly the two non incumbent Democrats who won when the Income tax was constitutional and the top rate was under 55%. Obama also actually delivered (not that many people noticed) while Clinton was suddenly (not permanently) unpopular when Rubin convinced him we couldn’t afford a middle class tax cut.

Unlike her husband, Hillary Clinton was honest about budgetary and political limits. Unlike his wife, Bill Clinton was elected President.

The lesson is simple. Don’t treat the US public like adults. Do make promises, including some you can’t keep. The data are clear. Anyone who lives in the real world knows this. Only dreamers like Delaney, Dukakis, Mondale, Gore think you can win as the speaker of inconvenient truths.

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The Change in the U.S. Direct Investment Position

by Joseph Joyce   (Joseph P. Joyce is a Professor of Economics at Wellesley College, where he holds the M. Margaret Ball Chair of International Relations. He served as the first Faculty Director of the Madeleine Korbel Albright Institute for Global Affairs.)

The Change in the U.S. Direct Investment Position

The U.S. has long held an external balance sheet that is comprised of foreign equity assets, mainly in the form of direct investment (DI), and liabilities held abroad primarily in the form of debt, including U.S. Treasury securities. This composition is known “long equity, short debt.” Pierre-Olivier Gourinchas of UC-Berkeley and Hélène Rey of the London Business School claim that this allocation has allowed the U.S. to serve as the “world’s venture capitalist,” issuing short-term debt in order to invest in high-yield assets. But the U.S. direct investment position has changed from a surplus to a deficit, with uncertain consequences for the international monetary system.

There is more than one reason for the change. To see this, it is important to understand that the U.S. Bureau of Economic Analysis, which reports these data, uses several methods to value direct investment. One of these utilizes stock market prices to calculate the market values of the assets and liabilities. The second method is the use of the historical costs of the investments when they were made. The third is the current, or replacement, costs of the direct investment assets and liabilities.

Direct investment includes equity and debt instruments. The latter is based on intra-company borrowing. Historically, the equity component has registered a net positive position that outweighed the negative debt position. But the net direct investment equity position, which had been falling for several years, plunged in late 2017. The falloff continued in 2018 and led to a negative balance, which combined with the negative net direct investment debt position, turned the overall net direct investment balance negative.

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Climate Chaos?

Dan here.  You will be reading more of him soon…David Zetland has contributed here on water issues via Aguanomics. He now publishes his blog The one-handed economist.  He is a native Californian who moved to Amsterdam several years ago. David is an assistant professor of political economy at Leiden University College, a liberal arts school located in The Hague. He teaches courses in social and business entrepreneurship, cooperation in the commons, and environmental, growth and development economics.

Here is a more informal piece on his newsletter:

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My forecast for the rest of 2019 is . . . .

by New Deal democrat

My forecast for the rest of 2019 is . . . .

. . . up at Seeking Alpha!

I’ll be doing my long term forecast through mid year 2020 once Q2 GDP comes out on Friday. It’ll probably get posted sometime next week.

P.S. Sorry for the lack of posting yesterday. I submitted the above to SA on Sunday, but they didn’t get around to putting it up until late yesterday afternoon.  If I have the energy, I’ll put up an extra post maybe this afternoon.

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Weekly Indicators for July 15 – 19 at Seeking Alpha

by New Deal Democrat

Weekly Indicators for July 15 – 19 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

There were a number a changes among the short leading indicators this week at the margins, in a somewhat surprising direction. Since I’ll be posting my semi-annual updates of my short and long term forecasts over the next week or two, there is a lot for me to think about!

Anyway, as usual, clicking over and reading should be educational for you, and also rewards me a little bit for the effort I put into this enterprise.

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Bill Black says what if…

(Dan here… Via Real News Network, Bill Black discusses the what-ifs of President Trump’s policies in a spectacular contrast to current expectations…providing. a jumping off point from what we expect from the way it is framed now. I assume the complex interalationships of the wealthy elites (let us see how the Epstein case unwinds for another aspect) plays an important but not so well known role in this drama.  I find his thought his conclusions dismaying if even somewhat accurate.)

BILL BLACK: Sure. The question I ask in the article is why did Trump choose to be so spectacularly unpopular? Because had he done what he promised and had a true middle class tax cut that gave, for example, $5,000 a year to the typical middle class household, he would be spectacularly popular. And almost certainly they would have–the Republicans would have retained control of the House, and quite possibly they would have gained seats in the House. And of course they would have gained seats in the Senate. And Trump would be well positioned for re-election. He would have greatly expanded his base, and he would have paid off to his base, as well. And you know, convinced them that backing him was exactly the right thing.

And that’s the biggest thing. But also, if Trump had done what he promised and had a true infrastructure bill, where he spent $2 trillion on infrastructure, he would have divided the Democratic Party.

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