Aug 24 2012

Just call it “Truthiness”

The Age of Niallism: Ferguson and the Post-Fact World

By Matthew O’Brien, The Atlantic

Aug 24 2012, 10:32 AM ET

I don’t want to go too far down this Ferguson rabbit hole — we get it, he lied — but I do want to answer his response to my fact-check. Ferguson’s reading of my criticism was as lacking as his fidelity to facts. I tried to make clear that I was cataloging two categories of errors in his piece. There were untruths misleadingly framed as truths and truths misleadingly framed so as to be untruths. Or, as I put it, “a fantasy world of incorrect and tendentious facts.”

Let’s take a quick detour into the meta. Ferguson objects that I don’t identify “a single error” and that I’m just offering my own opinions. The former is not true — his description of Obamacare and its budgetary impact are demonstrably false — but the latter is a legitimate point of debate. Ferguson prefers a very narrow definition of fact-checking; I do not think that is sufficient. Facts twisted out of context can be just as deceptive as outright falsehoods — sometimes even more so, because you can cloak them in claims of truthfulness.

Ferguson gets some facts wrong. Ferguson gets some facts right, but frames them incompletely. Why the outrage? Because he’s treating facts as low-grade and cheap materials that are meant to be bent, spliced and morphed for the purpose of building a sensational polemic. Even more outrageous is that his bosses didn’t mind enough to force him to make an honest argument, or even profess embarrassment when its dishonesty came to light.

Ezra Klein Deems Joe Stiglitz, Paul Krugman, and Elizabeth Warren (Plus Other Serious People) Not Credible

Yves Smith, Naked Capitalism

Wednesday, August 22, 2012

Ezra Klein demonstrated how far he’s has to descend into the Humpty Dumpty world of words meaning just what he chooses them to mean in order to defend failed Administration policies.

Washington DC’s Baghdad Bob waded into the fray over a an unconvincing apology in the New York Times for Obama’s bank-friendly response to the mortgage crisis. … While it’s now acceptable for the messaging apparatus to describe the policies as inadequate, the party line is lame: there was no support for bold measures and those big bad servicers were an insurmountable obstacle.

Huh? Sorry, plenty of people vastly more credible than Klein had concrete recommendations at the time that would have been considerably better than Obama-Geithner program of coddling the banks.

For instance, Princeton economist Alan Blinder recommended a Home Owners Loan Corporation style mass refinance. She Who Must Not Be Named came out for it in her campaign. Joe Stiglitz, Paul Krugman, Nouriel Roubini, Mark Zandi, Jeff Merkley, Brad Miller, Ellen Seidman and others backed it. Krugman and Neil Barofsky have also argued the Administration could at a minimum have used $50 billion in unused TARP funds for mortgage mods. Adam Levitin (arguably the top US expert on mortgage securitizations) recently proposed(.pdf) a “bad bank” as a way to implement pooling and standardized restructuring of underwater mortgages. Top mortgage analyst Laurie Goodman has also long advocated principal modification, and she has established that they have much lower redefaults than other types of mortgage modifications.

Or how about using bankruptcy to write down mortgages to the current value of the house, something now done in bankruptcy for every type of collateralized loan except primary residences? Advocates of that approach included the Congressional Oversight Panel under Elizabeth Warren’s chairmanship, and more recently, the IMF. A bill passed in the House but was nixed in the Senate.

How about principal writedowns with shared appreciation mortgages, advocated by Andrew Caplan and Luigi Zingales? Even Greg Mankiw pointed to an approach suggested by John Geanakoplos and Susan Koniak a way to work around those pesky servicers. Dean Baker has pushed for an own to rent program.

This is far from a complete list. There were plenty of credible people who had concrete, specific proposals which would have done better than what the Administration implemented. When the benchmark is HAMP, which managed to make hundreds of thousands of borrowers worse off, or a mortgage settlement that institutionalizes servicer fraud and has already harmed mortgage investors helping pay for the settlement, it’s a low bar to beat.

So if you were honest about this issue, no matter where you draw the line, there were “credible” people who had proposals that were obviously better. And the evidence in part comes in the New York Times article that Klein mentions. It concedes that bankruptcy cramdowns might indeed have been a better idea than the Administration’s limp-wristed response. And don’t tell me Obama couldn’t have gotten this through. He was willing to whip personally to get Bernanke’s contested reappointment approved; he didn’t apply anywhere near that level of effort to this initiative.

(T)he mortgage/housing issue is charged because, as Barofsky stressed, the Administration deliberately chose to use homeowners to foam the runway for banks.

That of course means that it is a priority for Obama to obscure the fact that he chose the banks over ordinary citizens on housing, the single biggest source of wealth for most families.

So to defend this Administration’s sorry record, loyalists like Klein have gone from practicing sophistry to agnotology. In a perverse way, that’s encouraging, because it’s a sign that it’s becoming more difficult for the pundit class to deny the facts on the ground.

GOP Intellectual Decline, Monetary Edition

Paul Krugman, The New York Times

August 24, 2012, 3:42 pm

(T)he GOP platform will reportedly include a call for steps toward a return to the gold standard.

The really strange thing about all this is that this turn toward hard-money mysticism is taking place even as events have demonstrated that the advantages of not being on a gold standard, of having a fiat currency that can be printed freely in emergencies, are even greater than standard analysis had supposed.

Mark Thoma links to an old piece of mine that I think does a pretty good job of laying out that standard case; but we now know that there’s a major additional concern, the ability of the central bank to act as lender of last resort to the government as well as private banks. Consider, as Paul De Grauwe has in one of the most important analyses (pdf) to come out of the crisis, the contrast between Spain and the UK.

(B)orrowing costs have soared in Spain, while falling in Britain.

So the GOP has decided that we must reject the evils of fiat money and go for the gold standard at precisely the moment when events have demonstrated that fiat money is a really useful thing and the loss of flexibility that comes from ending fiat currencies can be utterly disastrous. What’s going on?

In this sense fiat money is like, oh, Social Security. The problem it creates for conservatives is not that it doesn’t work, but that it does – which is a challenge to their philosophy. And so it must die.

What these pieces all have in common is the demonstrated failure of trickle down supply side Chicago School Voodoo Economics.

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