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

Interview with Jamie Galbraith

Via Marketwatch Jamie Galbraith states his thoughts on a how the current US economy functions.  Here are a few snippets:

University of Texas economist Galbraith, the son of the famous Harvard economist John Kenneth Galbraith, believes mainstream economists and the Federal Reserve are too wedded to old ideas to see what is really going on in the economy. Specifically, Galbraith is worried that the consumer is the only game in town — and that can’t last.

Galbraith used his latest book “The End of Normal” to lay out his case that the 2007-08 financial crisis wasn’t just a brief interruption in the life of an otherwise healthy economy but instead the latest crisis for an economy that lost its footing back in the 1980s.

At the American Economic Association meeting in Philadelphia, MarketWatch asked Galbraith to share his views on the economic landscape.

(On inflation and labor) There is no Phillips Curve, and there hasn’t been for decades. The supply of labor is not a constraint. If you wish to pay people higher wages, you could lure people back out of retirement. Net immigration has basically stopped. If you needed more workers, it would start up again. So we don’t have a real labor-force constraint. We are not going to get inflationary pressure from the labor markets. It has been 40 years. Economists are slow learners, and central bankers are a slow-learning subset. They should recognize that things did change in the 1980s.

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Martin Luther King also believed…

Via Alternet:

4 Ways Martin Luther King Was More Radical Than You Thought

The slain civil rights leader was a critic of capitalism, the Vietnam War, and championed reproductive rights.
By Igor Volsky / ThinkProgress January 20, 2014, 7:32 AM GMT

Every January, Martin Luther King, Jr. is universally honored as a national hero who preached a peaceful fight against racial injustice. This saintly image is quite a departure from the kind of attacks the reverend endured over his lifetime. FBI Director J. Edgar Hoover famously called King “the most dangerous Negro” and “the most notorious liar in the country” while keeping him under close surveillance. Over the years, Dr. King’s more controversial edges have been smoothed over, burying his more radical teachings.

1. He pushed for a government-guaranteed right to a job. In the years before his assassination, King re-shifted his focus on economic justice in northern cities as well as the South. He launched the Poor People’s Campaign and put forth an economic and social bill of rights that espoused “a national responsibility to provide work for all.”

….

2. He was a critic of capitalism and materialism. King was a strident critic of capitalism and materialistic society, and urged Americans to “move toward a democratic socialism.” Referring to the now iconic Greensboro Lunch Counter sit-ins, he asked, “What good is having the right to sit at a lunch counter if you can’t afford to buy a hamburger?”

3. He denounced the Vietnam War. King’s harsh words on the Vietnam War alienated even his allies on civil rights, especially President Lyndon B. Johnson. Still, King continued to speak out, asserting that American involvement in Vietnam “has torn up the Geneva Accord” and “strengthened the military-industrial complex.” He also accused the U.S. of being “the greatest purveyor of violence in the world.”

4. He championed Planned Parenthood and reproductive rights. King believed that the spread of family planning was a crucial tool in the fight to end poverty and racial inequality.

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A Reminder That It Was George W. Bush Who Was Responsible For Letting North Korea Get Nuclear Weapons

A Reminder That It Was George W. Bush Who Was Responsible For Letting North Korea Get Nuclear Weapons

Tyler Cowen on Marginal Revolution has provided a link to a 2004 article from Washington Monthly by Fred Kaplan that lays out in great detail how George W. Bush, strongly backed by Cheney and Rumsfeld and against the views of Colin Powell, undid the agreement that Jimmy Carter and Bill Clinton made with the North Koreans in 1994 to shut down the North’s plutonium production program for nuclear weapons.  I have blogged on tis here previously, but this article included more details than I had been aware of while confirming all I had previously said here previously about this unfortunate matter, which remains largely unknown to the vast majority of Americans.  One detail is indeed how Bush’s obsession with invading Iraq (ironically supposedly to get rid of nonexistent WMDs there) contributed to his complete failure to stop North Korea from building these weapons.

Ironically even Trump looks almost good in comparison with Bush on the matter of destroying agreements made by predecessors that put a potential nuclear power that is hostile in a box regarding its program.  In the case of Trump it is Obama’s agreement with Iran, which he regularly denounces and threatens to repeal and indeed nibbles at the edges of by adding new sanctions on Iran. But he has just for the third time recertified that Iran is keeping to the agreement, even as he threatened once again to repeal it if it does not get “fixed.”  It would seem that the difference between the Bush and Trump situations is that while the main foreign policy advisers around Trump, Mattis, McMaster, and Tillerson, are clearly working to keep the agreement going, most of those around Bush, especially Cheney and Rumsfeld, were also keen on ending the agreement with North Korea, convinced that they could bring about the collapse of the North Korean regime, which, needless to  say, they failed to achieve, even as they handed a nuclear North Korea to all of us now.

The article also provides details on the matter of how Bush treated South Korean President Kim Dae Jung in a shameful and disrespectful manner in the months shortly after Bush took office, paving the way to the later collapse of the agreement with North Korea, a matter I have previously posted about here.  All of this is worth keeping in mind when we think that Bush was so much more reasonable than Trump.  Trump has done a lot of blundering, but so far has avoided doing anything nearly as dangerous or destructive as either invading Iraq or acting to push North Korea into getting nuclear weapons.

Barkley Rosser

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What If?

Using crime and public safety as a political issue in an election year, New Mexico Governor Susana Martinez: “’I don’t believe that police officers should be under this constant threat of lawsuits that will often cause them to pause, if they’re following their training, there should be something that protects them.’

The bill would protect cops and citizens from the ‘massive payouts that taxpayers are giving crooks and thieves who are hurt or injured by police officers who are doing their job,’”

Today, the burden of proof is on the injured or the dead’s relatives to prove the police officer was negligent giving police officer’s one more level of immunity to lawsuit and convictions. Governor’s Martinez comment about police following their training, is a statement not recognizing the 2014 Department of Justice finding of a pattern and practice of excessive force being used by the Albuquerque police force against those who are a minor threat and the mentally ill. It is obvious they have not been doing so.

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David Dayen reminds us opioid emergency ends in a couple weeks

Lest we forget:

Politico notes today that the 90-day emergency declared actually ends in a couple weeks, and we’re in essentially the same place that we were before the declaration.
Trump has not formally proposed any new resources or spending, typically the starting point for any emergency response. He promised to roll out a “really tough, really big, really great” advertising campaign to spread awareness about addiction, but that has yet to take shape. And key public health and drug posts in the administration remain vacant, so it’s not clear who has the authority to get new programs moving.

A senior White House official said that the president has used the “bully pulpit” to bring urgency to the crisis, and if there’s one thing you want for your cause these days, it’s Donald Trump talking about it. Also it’s the equivalent of thoughts and prayers. By the way, Congress hasn’t really appropriated anything either, so this is a whole-of-government neglect.

Meanwhile, there’s a class divide among those suffering. Those with the means can get better treatment, in New York City and likely nationwide. The poor have to line up for their methadone treatment every day, putting extreme hassle into their lives.

The story is that an epidemic affecting white people would lead to a far more robust response than one that only affects minorities. With the opioid epidemic that’s only partially true.

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JOLTS report confirms November payrolls strength

JOLTS report confirms November payrolls strength

I’m changing my presentation of JOLTS data somewhat compared with the last year or two.  At this point I’ve pretty much beaten the dead horses of (1) “job openings” are soft and unreliable data, and should be ignored in contrast with the hard “hires” series; and (2) the overall trend is that of late expansion but no imminent downturn.So let’s start a little differently, by comparing nonfarm payrolls from the jobs report with what should theoretically be identical data: total hires minus total separations in the JOTLS report, monthly (first graph) and quarterly (second graph):

While there can be a considerable disparity in any one month, once we start looking longer term there is an incredibly tight fit.

For our immediate purposes, it’s likely that the strength in the JOLTS hiring data over the last several months is the same trend as the very good post-hurricane October and November jobs reports, both of  which showed that more than 200,000 jobs had been added. While any given month can be off significantly, it’s a fair bet that when the December JOLTS report is released in one month, it too will be weaker, just as was the December jobs report.

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Negative Interest Rates and a Term Structure Puzzle

Negative Interest Rates and a Term Structure Puzzle

James Hamilton provided us with another interesting discussion on negative interest rates:

we now have several years of experience from Sweden, Denmark, Switzerland, Japan, and the European Central Bank in which the central bank successfully induced negative interest rates in hopes of stimulating a greater level of spending on goods and services.

Please read the entire post including some interesting comments. Alas I must be late to the party as I could not provide a reply to an interesting query from Barkley Rosser:

Does anybody have an explanation as to why when a nation has negative nominal target interest rates it often seems that the time horizon of government securities that end up having the most negative rates are often at the two years time horizon? Look at the Sweden case, where this has been the case, and it has also been in quite a few other nations as well. I have yet to see an explanation of this peculiarly non-monotonic yield curve in this situation so often.

Maybe Europe has turned Japanese. I’ve been looking at an Excel file of their government bond rates provided by the Ministry of Finance (not the Bank of Japan). Japan had low but not negative interest rates before 2012 with a somewhat upward sloping term structure. Since 2012, two features describe this data: (1) one-year rates hovering around zero – sometimes positive and sometimes negative; (2) two-year rates hovering near the one-year rate and it times just below them. What is driving this? I have no answer.

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Our President Talking About Immigration

Why are we having all these people from shithole countries come here?” Trump said, according to these people, referring to African countries and Haiti. He then suggested that the United States should instead bring more people from countries like Norway, whose prime minister he met Wednesday.

and the excuse?

“Certain Washington politicians choose to fight for foreign countries, but President Trump will always fight for the American people,” spokesman Raj Shah said in a statement issued after The Washington Post first reported Trump’s remarks. “. . .Like other nations that have merit-based immigration, President Trump is fighting for permanent solutions that make our country stronger by welcoming those who can contribute to our society, grow our economy and assimilate into our great nation.”

And the argument?

I guess merit based means you can not come from a shithole country. Immigrants assimilate into our country over a generation. The children do so more than the parents. Immigrants bring youth and lower our median age over time which translates into a more vibrate workforce. We need a younger population. What scares Trump and many Republicans is their eventually being in the minority as white people.

Graham is not what I would call a strong advocate and he would sell out to Trump or party lines over country in a flash.

“Graham and Durbin thought they would be meeting with Trump alone and were surprised to find immigration hard-liners such as Rep. Bob Goodlatte (R-Va.) and Sen. Tom Cotton (R-Ark.) at the meeting. The meeting was impromptu and came after phone calls Thursday morning, Capitol Hill aides said.

So much for bipartisanship.

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Does the United States Have A “Poland Problem”?

Does the United States Have A “Poland Problem”?

It certainly looks like it.

Again, for anybody not having seen one of these, a “Poland problem” involves an apparent disconnect between economics and politics, nations with reasonably well performing economies where the populace becomes unhappy and supports opposition, especially “populist” nationalist authoritarian candidates, with 2015 victory in Poland of the Law and Justice Party the poster boy for this, even though Poland has been one of the best performing economies in Europe for quite some time.

The funny thing is that we may be seeing two separate rounds of this in the US. Thus we had Trump defeating Hillary even though the economy had been steadily growing for many years, unemployment steadily falling, and the stock market rising.  Now that Trump is in he has been trying to assert all this that has been going on for some time is due to him, which is silly apart perhaps from some of the upward stock market moves thanks to his pro-corporate profits policies.  But his popularity has fallen and is at lows not seen in many decades for a recently installed president.  Indeed, increasingly columnists of various stripes have begun to notice this disjuncture, alrhough they have not been providing a name for the syndrome as I have with “Poland problem.”

Of course it can be argued that things have not been and really are still not all that good economically.  We all know that that the widely touted unemployment rate overstates the strength  of the labor market given so many having dropped out of the labor force, and upward pressure on wages has remained weak, despite some improvement on that front recently.  Of course, Trump, having heard the story about labor force participation claimed at one point while running that the UR was really 42% and also  accused the BLS of cooking the unemployment numbers for political reasons, only to turn on a dime after getting in office to tout the low and falling standard UR numbers.

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