Remember the famous scene from Raiders of the Lost Ark when Indiana Jones faces off against a guy who unsheathes a scimitar and wows the audience with his fancy swordsmanship—only to get shot in the chest by Indy? The swordsman—that’s House Speaker John Boehner right now on the Bush tax cuts.
— Boehner Is Bluffing Boehner and the fiscal cliff: The House Speaker is bluffing about the Bush tax cuts. - Slate Magazine
Ryan attended a closed meeting with congressional leaders, Bush’s Treasury Secretary Henry Paulson, and Federal Reserve Chairman Ben Bernanke on September 18, 2008. The purpose of the meeting was to disclose the coming economic meltdown and beg Congress to pass legislation to help collapsing banks. Instead of doing anything to help, Ryan left the meeting and on that very same day Paul Ryan sold shares of stock he owned in several troubled banks and reinvested the proceeds in Goldman Sachs, a bank that the meeting had disclosed was not in trouble.
growing evidence that Libor numbers have been deliberately manipulated by banks for years means that millions of people have been paying the wrong interest rate on all manner of financial products. Vast sums of money have been wrongly snatched from innocent people and created equally vast undeserved windfalls for others. The basic structure of the world’s financial system has once again been exposed as fundamentally broken.
And once again, the right says nothing about it, or claims it isn’t a problem because there is no way to fix the problem via tax cuts and deregulation. And if there is no way to fix it via tax cuts and deregulation, it can’t possibly be a real problem.
I’m not much of a car guy, but the way I understand this metaphor to work is that if you want to give rich people credit for being “the engine of the economy” then if the economy is performing subpar it follows that something’s wrong with your engine. And yet I suspect Zambrelli wouldn’t take kindly to that diagnosis.
If something good happens, praise me. If something bad happens, blame yourself. And if you disagree you’re a Marxist from Kenya.
Currency devaluation is best understood not as an alternative to austerity, but as the correct way for a debt-burdened society to implement austerity.
Why did Iceland recover and Ireland get worse? Iceland had a currency to debase. And they debased their currency enough to reset the economy and grow again. Three cheers for currency debasement. Ireland on the other hand, couldn’t debase the Euro. Like a nation on a gold standard, they had no way to make monetary policy changes to get the economy moving.
So if austerity works, shouldn’t it be the other way around? A stagnant Iceland and a booming Ireland?
When New York’s Taxi and Limousine Commission held a public hearing last week to consider whether to raise taxi fares by 20 percent, cabdrivers pled poverty and passengers argued that fares are too high. Paradoxically, both groups were right. This lose-lose scenario is only possible under the taxi medallion system, a regulatory scheme in which the right to operate a taxi is thoroughly divorced from the actual work of driving one. It’s a classic example of the perils of financialization, the process through which economic potential is turned into a liquid and leveraged asset. By converting a portion of cabbies’ future revenue into a freely tradable asset, New York, Chicago, San Francisco, and a host of other cities have created a powerful investor class, medallion owners and financiers, whose interests routinely compete with those of drivers and passengers.
Financialization also makes what should be a trivial deregulation nearly impossible as it would make the Medallion owners very upset. They would be willing to spend big bucks to prevent any attempt at deregulation.
to the best of my knowledge there is no economic theory that says small business owners maximize profits. Think about it from a workers’ perspective. People who work on commercial fishing operations earn a lot more money than most people with comparable levels of education. But nobody thinks it defies economic theory that America’s retail clerks don’t quit their jobs en masse to go fishing. Commercial fishing is dangerous and you have to live on a boat. All else being equal, people prefer to earn more money but they also prefer to do safe work and have the opportunity to socialize. What economic theory says is that workers maximize utility and therefore employers who want to get workers to do something that’s unusually dangerous or unusually unpleasant will have to pay a premium. A small business operator is in the same situation. She’s balancing income against other lifestyle factors, including the hours put in on the job, the pleasantness of the work, the sense of self-esteem that comes from having something to do, possibly a sentimental attachment to a particular location or certain employees. What economic theory says is that a profit maximizing small business person has to be someone with a very unusual utility function.
This can not be repeated enough. Small businesses rarely behave the way politicians describe.
But why does Rogers care so much about Phoenix Products that he wants to send all this business his way? What Phoenix Products has is something unique. It’s based in Kentucky, just like Harold Rogers. Its employees live in Harold Rogers’ district, they shop in stores that are in Harold Rogers’ district, their spouses and siblings live in Harold Rogers’ district, their incomes bolster the tax base for municipalities in Harold Rogers’ district. So if Harold Rogers wants to do the right thing for Harold Rogers’ constituents, he needs to do the right thing for Phoenix Products.
Hayek differentiated between an welfare state of Law versus one of administration. The former would function based on a set of rules in openness and transparency. The latter would be run by bureaucrats who distributed favors for their own political gain. The former would be compatible with a free democratic society, the later would subvert it.
I think we need to start looking at the defense industry as favor distributing patronage system that no longer serves its defined public purpose.
The first option, a sharp weakening of the euro, is unlikely, as Germany is strong and the ECB is not aggressively easing monetary policy. A rapid reduction in unit labor costs, through structural reforms that increased productivity growth in excess of wages, is just as unlikely. It took Germany 10 years to restore its competitiveness this way; Greece cannot remain in a depression for a decade. Likewise, a rapid deflation in prices and wages, known as an “internal devaluation,” would lead to five years of ever-deepening depression. If none of those three options is feasible, the only path left is to leave the eurozone. A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth.
This is a must read. Nouriel Roubini on why Greece must leave the Eurozone.
In 47 of America’s fine states, if you want to accept people’s money in order to give them advice on decorating and other people want to pay you to give advice on decorating, then congratulations—you’re an interior decorator. In the other three states, and the District of Columbia, you need undergo 2,190 hours of training and apprenticeship and pass an exam before practicing. This, of course, is why homes in DC are wildly better-decorated than the homes in the Maryland and Virginia suburbs or in other large American cities such as New York, Los Angeles, Chicago, Boston, Dallas, and Philadelphia. Except of course that’s not true.
