Tag: Panic of 2008

Well, OK, I’m summarizing. I was startled to read at Agent Orange that Summers was a progressive thinker because Summers recognizes the massive increase in economic inequality that has taken place over the past three or four decades:

It would be, however, a serious mistake to suppose that our only problems are cyclical or amenable to macroeconomic solutions. Just as evolution from an agricultural to an industrial economy had far reaching implications for society, so too will the evolution from an industrial to a knowledge economy. Witness structural trends that predate the Great Recession and will be with us long after recovery is achieved: The most important of these is the strong shift in the market reward for a small minority of persons, relative to the rewards available to everyone else. In the United States, according to a recent CBO study, the incomes of the top 1 percent of the population have, after adjusting for inflation, risen by 275 percent from 1979 to 2007. At the same time, incomes for the middle class (in the study, the middle 60 percent of the income scale) grew by only 40 percent. Even this dismal figure overstates the fortunes of typical Americans; the number unable to find work or who have abandoned the job search has risen. In 1965, only 1 in 20 men between ages 25 and 54 was not working. By the end of this decade it will likely be 1 in 6-even if a full cyclical recovery is achieved.

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There is no issue that will be more important to the politics of the industrialized world over the next generation than its response to a market system that distributes rewards increasingly inequitably and generates growing disaffection in the middle class. …

Burning the Midnight Oil for Economic Populism

crossposted from Voices on the Square

Yves Smith at the excellent and insightful Naked Capitalism has recently been taking at a close look at the role of the Congressional Budget Office, the vaunted "CBO", in the "fiscal cliff" scam that the corporate aristocracy is attempting to perpetrate on us mere commoners.

On 4 November, 2012, in Fed Budgetary Experts Demolish CBO Health Cost Model, the Lynchpin of Budget Hysteria, Yves looked at how the CBO put its thumb on the scale to exaggerate the magnitude of the fiscal challenge that we face (as I noted just recently, while there is a challenge, there is certainly nothing of the magnitude or urgency to justify treating like a crisis). Yves does this by drawing on the analysis of analysts at the Fed that highlight the questionable and, in at least one case, clearly flawed, assumptions made by the CBO in their modelling. On 14 November, 2012, in The CBO’s Latest Con Job: Disappearing Data to Deter Analysis of its Deficit Scaremongering, Yves looks at how the CBO fudges the numbers, omitting figures it once included in the fine print of CBO analyses … after it has been pointed out that taking those figures into account, the CBO modelling implies debt staying below 80% of GDP through 2020, rather than rising to about 90% of GDP in 2022 as the CBO has been claiming.

However, those two are a bit "wonky", to use a term beloved of the recently losing VP nominee. They bookend a post in which Yves Smith points out the suspect behavior of the CBO in terms that are a bit less "wonky". And that is what I am taking a look at myself, in this essay.

Burning the Midnight Oil for a Brawny Recovery

“LQD” is an abbreviation I first encountered at EuroTrib: it means “Lazy Quote Diary”.

The quote from Warren Mosler:

Credit ratings are based on ability to pay and willingness to pay.

David Beers of S&P knows this and has discussed this in the past.

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So why then did David T. Beers decide to downgrade the US on ability to pay, and not explicitly on willingness to pay?

Sure looks like a case of intellectual dishonesty.

And I have no idea why.

So much for his legacy.

Well, its a very short post, so fair use restricts it to an even shorter quote.

But this is the gist of it: no issuer of its own currency is ever forced to default on debt issued in its own currency.

Think about it: if your family’s IOU’s were accepted by the bank to repay debts … could you ever run short of the means to pay your debts?

What would an honest downgrade have said? Below the fold.

Burning the Midnight Oil for the Economics of Freedom

Quoted by digby:

TIM GEITHNER: Well, let’s start with what this deal does. The most important thing is it creates more room for the private sector to grow because although it locks in some very substantial long term savings, the near term cuts are very modest. So that– that was the really critical thing in making sure that this economy continue to grow and recover. Now, it locks in a very big down payment and it sets in motion what we think is going to be a very effective process for forcing congress to come together…

Now, for the ordinary person reading this carefully, the only reasonable response is, WTF?. However, as your insider correspondent from the quite bizarre Economist Tribe, my response is, “oh, yeah, that bullshit again.”

Ah, well, economics is not the only science {*} where analyzing scat is a necessary research tool. Join me after the fold.