David Angelo

davidangelojokes: Now we know why Kim Jong Un is so pissed off...

Tue, 09 Apr 2013 22:39:43 -0400

Now we know why Kim Jong Un is so pissed off all the time.

The War on Women

Tue, 09 Apr 2013 17:14:58 -0400

Who is fighting it?

These images were pulled from the Huffington Post’s front page 5 minutes ago (1:50pm PDT 4/9/13). All these images/”stories” appeared concurrently.

But, remember, they ARE progressive…

see?

for further reading: http://www.huffingtonpost.com/news/gop-war-on-women

David Angelo Jokes: Top 10 Cars of All Time

Mon, 08 Apr 2013 22:47:25 -0400

David Angelo Jokes: Top 10 Cars of All Time:

davidangelojokes:

Car sites and car lists are as old as the internet - yet no one has ever done it right…until now! Here are my top ten best cars TO OWN. We can all stare at Testarossas, but chances are you aren’t going to have one in the driveway anytime soon. Let’s get down to brass tacks…

10. Hyundai Accent…

Response to: The Russians Are Coming! The Russians Are Coming!

Thu, 21 Mar 2013 00:28:00 -0400

Long time no blog!

I was putting together some quotes for my smash hit youtube series, eEconomics, and figured I’d browse through Krugman’s blog as an easy source for some choice B-S.

And this statement about the Cyprus banking crisis jumped out at me:

As long as you haven’t bought into the Barney-Frank-did-it school of thought, you realize that the global crisis of 2008 was in a fundamental sense made possible by the erosion of effective bank regulation. As Gary Gorton (pdf) has documented, we had a 70-year “quiet period” after the Great Depression in which advanced countries had very few major financial flare-ups; Gorton argues, and most of us agree, that the key to this quietness was a constrained, regulated financial system that also limited the opportunities for excessive non-bank leverage.

But this regulation in turn depended, to an important extent, on limited international capital flows; otherwise regulations made in Washington or elsewhere would have been bypassed via havens like, well, Cyprus. And once capital controls began to be lifted in the 1970s we entered an era of ever-bigger financial crises, starting in Latin America, then moving to Asia, and finally striking the whole world.

…

All of which raises the question, is the era of free capital movement just a bubble, fated to end one of these years, maybe soon?

Because - as all these communist economists tell us - regulation is the solution. Government can save us. Rules and laws and protocols will be our salvation.

On some level I agree. But the regulation we need back is sound money. Capital flows are naturally regulated when money has a defined value. Don’t take my word for it, ask the Fiat Maestro himself…

Alan Greenspan, 1998 Congressional Testimony:

There was some evidence of that process working in the latter part of the nineteenth century and early twentieth century when international capital flows were largely uninhibited. Losses, however, in an environment where gold standard rules were tight and liquidity constrained, were quickly reflected in rapid increases in interest rates and the cost of capital generally. This tended to delimit the misuse of capital and its consequences. Imbalances were generally aborted before they got out of hand. But following World War I such tight restraints on economies were seen as too inflexible to meet the economic policy goals of the twentieth century.

…

In the late twentieth century, however, fiat currency regimes have replaced the rigid automaticity of the gold standard in its heyday. More elastic currencies and markets, arguably, are now less sensitive to and, hence, slower to contain the misallocation of capital. Market contagion across national borders has consequently been more prevalent and faster in today’s international financial markets than appears to have been the case a century ago under comparable circumstances.

My fundamental problem with Krugman is that he is so blinded by his ideology/pathological insecurities that he forgets basic economics. The answer to this problem is not capital controls instituted by increasingly autocratic governments. It’s much simpler - just put the monopoly money away and let people be free.

I miss blogging. Forgot how amazing I am at it.

Episode 7! The Sequester and Debt Ceiling. This one was pretty...

Wed, 27 Feb 2013 03:56:27 -0500

Episode 7! The Sequester and Debt Ceiling. This one was pretty fun, please share!

Episode 4 is up!! Go get it!

Thu, 03 Jan 2013 13:25:49 -0500

Episode 4 is up!! Go get it!

Assault Weapons

Sat, 15 Dec 2012 02:25:28 -0500

LOTS of inappropriate and inaccurate commentary on today’s events. Frankly, I’m tired of correcting all the exact same nonsense on this topic.

Learn something:

1. Gun Control

2. Why the NRA Pays for Lobbying

Warren Buffett Hathaway with Lying

Wed, 12 Dec 2012 13:51:07 -0500

Oh man, just CLASSIC stuff going on today. It’s difficult to accept that Buffett gets away with his shenanigans, but it’s easy to understand why if you just spend 3 seconds talking with any typical American.

Today, Berkshire Hathaway spent $1.2 billion buying back shares. This was universally reported, without the slightest criticism, by every major news outlet.

So, what’s interesting about it?

First, the context. Ever since he’s accepted his mortality, Warren has been lobbying for higher taxes on the rich - which, I speculate, is to ensure his legacy as a “man of the people.”

we need Congress, right now, to enact a minimum tax on high incomes. I would suggest 30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that. A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy.

In short, he wants the rich to pay higher taxes.

So, what is a share buyback, and how does that contradict his public snakeoil act?

Berkshire Hathaway stock does not pay dividends. Shares are also priced, nominally, quite high (one class-A share will set you back ~$132,000). In short, this is a stock owned by the rich - with the majority of the shares owned by Warren himself.

Because the stock does not pay dividends, the only way to make money on it is through selling it at a higher price - A.K.A. “capital gains.” Capital gains are taxed at a low 15% - a rate every secretary in America can envy!

When Berkshire spends $1.2 billion buying back shares, it basically gives a premium to the stock and increases potential capital gains should the shareholder sell.

And they have good reason to sell because, as luck would have it, in a few weeks the capital gains rate goes to 20%.

How ‘bout that!?

This whole thing is an elaborate tax avoidance scheme. Courtesy of the man who wants to raise taxes.

Cute, huh?

Krugman on Inflation

Sun, 09 Dec 2012 22:03:00 -0500

Some selected Krugman quotes this year about inflation…

Incredible Credibility:

But won’t that money printing cause inflation? Not as long as the economy remains depressed.

Still a Phantom Menace:

Early last year the inflationistas were yelling a lot; commodity prices had jumped, and they were shouting that high inflation was just around the corner, with much talk of debasing the currency and all that.

Whoops.

A couple of further points. One refuge of some of the inflationistas has been to claim that the feds are cooking the data, that true inflation is much higher than reported. You can take those claims apart in detail, but a simpler answer may be just to look at independent inflation measures, like MIT’s Billion Prices Index:

[graph]

No hint of book-cooking there.

Billion Price Update:

For some reason I seem to be seeing a resurgence of inflation scare stories, despite the fact that — gas prices aside — inflation remains quiescent. And along with the scare stories come assertions that the inflation numbers are faked, that the government is hiding the true rate.

Which leads to this bit of preciousness…

The Full McConnell:

there are good reasons to believe that the true inflation rate facing seniors is actually higher, not lower, than the CPI.

Never gets old.

Episode 3! In this one, I discuss historic tax rates and compare...

Wed, 05 Dec 2012 02:40:00 -0500

Episode 3! In this one, I discuss historic tax rates and compare them with the current IRS code. It’s really something! Please share.

Episode 2 of my new series is online! This one compares gas...

Tue, 20 Nov 2012 20:43:00 -0500

Episode 2 of my new series is online! This one compares gas taxes and oil company profits - with surprising results!

Hey guys! I have a new webseries to go along with this website....

Tue, 13 Nov 2012 16:21:40 -0500

Hey guys!

I have a new webseries to go along with this website. First episode is on gas prices. Enjoy!

Intellectually Bankrupt

Wed, 17 Oct 2012 21:25:00 -0400

Hey guys! Long time no blog - sorry.

So, in an effort to be a more informed voter, I figured I’d do some research on the candidates. Because I live in California, that means one of the people on the ballot for president is Roseanne Barr. Of course. So I checked out her website and immediately saw this:

“The whole world is going bankrupt to who?”

Well, that’s a good question, one she presumably wants answered - which is why she’s protesting in the streets.

Here’s the thing: you don’t go bankrupt TO anyone.

Let’s say I get a bunch of investors for my company, 2001 News Years Eve Glasses Incorporated. Now, being that it’s 2012, 2001 NYEG Inc. doesn’t do very well. So, after 3-4 hours of being in business, it becomes clear I cannot repay my debts and thus file for bankruptcy. Nobody stole my money. For starters, it wasn’t my money to begin with. Secondly, the loss of capital was the result of malinvestment. When you go bankrupt, it may bruise your ego, but your creditors are the ones who really shoulder the financial loss.

You can’t go bankrupt unless YOU owe someone money. Your bankruptcy is the result of your inability to repay. Your bankruptcy means other people lose money.

(Now, yes, there are examples of people forced into bankruptcy over medical bills. And while nobody envies that, the financial dynamic is still true.)

Outside of bankruptcy lawyers and repo men, no one really benefits from another party’s bankruptcy. If I’m a bank and I lend you money and you file for bankruptcy, I didn’t take your money - you took mine! Now I have to write-off that loan!

Of course, in the “real” world, banks probably don’t have to write off those loan because all these liberal social programs mean the government will probably reimburse them - especially if the loan is a mortgage or for a “green” energy project. That’s the genius of left wing activism - it lines the pockets of large financial institutions and insulates them from risk.

But, anyway, let’s get back to the original question.

“The whole world is going bankrupt to who?”

Well, technically, it should be “to whom” - but maybe her sign serves the dual purpose of also protesting our declining education standards? Anyway, the answer is “to itself.”

You go bankrupt, then your creditor goes bankrupt, then their creditor goes bankrupt, then the government bails them out, then you owe the government money, then that bailed-out company goes bankrupt anyway, and whatever money there was has been blown on catered lunches and lawyers. Wealth is infinite, but it is not eternal.

Of course, bankruptcy isn’t always bad. The process of restructuring is what’s needed to correct the malinvestment. And if that’s not corrected, well - if you think 2001 glasses aren’t selling now, just wait ‘til you see how bad they do next year!

Until then, let’s get out on the streets and make demands about things we don’t comprehend!

Response to: Debt Is a Drug (And So Is Austerity)

Fri, 28 Sep 2012 19:17:25 -0400

From Krugman:

The Great Depression taught policy makers the hard way that tight money and fiscal austerity were really bad ideas in the face of a deeply depressed economy; but several generations on all that was forgotten except by the economic historians, and policy makers were ready to resurrect the Treasury View, get all worked up about the dangers of inflation despite the absence of actual inflation, and in general to repeat their grandfathers’ mistakes in full.

He writes with such confidence, you’d almost think it wasn’t complete bullshit.

What “tight money” policies did we have during The Depression? In 1934, the government instantaneously devalued the dollar 43% by redefining it as 1/35 an ounce of gold instead of 1/20. That’s not quite “tight money.”

“Fiscal austerity?” This claim continues to boggle my mind. Krugman somehow considers our current, record-level, spending “austerity” - so it makes sense he’d have the same incorrect view of The Great Depression. I’d consider it the opposite of austerity (extravagance?). And, despite not being a Nobel Laureate, the numbers agree with me:

Federal spending as a percentage of GNP:

So, apparently, tripling federal government spending fits Krugman’s definition of “austerity.”

It seems the bad ideas of the past have been forgotten, because that graph reminds me a lot of this one:

You’ll notice this one has much higher percentage of federal spending to begin with - but, nonetheless, Krugman considers it “austerity” to “only” increase it to 25% of GDP.

There was no government austerity during the Depression. Even state and local picked up the pace:

Remember what Krugman says:

The Great Depression taught policy makers the hard way that tight money and fiscal austerity were really bad ideas in the face of a deeply depressed economy; but several generations on all that was forgotten except by the economic historians…

I guess I need to sign up for that history class.

But it gets better:

There have been a fair number of finance types saying things like “government stimulus is heroin”. Actually, they’re wrong; it’s austerity in the face of depression that’s just like heroin, a dangerous drug that resurfaces at intervals because the next generation has forgotten the damage it does.

I think Krugman is actually on heroin. Austerity is a drug? Spending recklessly is the treatment? That actually sounds like the rationalization of a drug user. Let’s bear in mind: there’s no austerity. Not now, or during The Great Depression. We haven’t forgotten about the dangers of austerity; we’ve forgotten how we got into the basement of an abandoned warehouse with a dead prostitute. This is sheer, unadulterated insanity.

Krugman is obsessed with increasing government stimulus despite the indisputable fact we’ve already increased it - just as we did during The Great Depression. In a “call the looney bin” moment of irony, Krugman - advocating for more debt-financed government spending - actually writes this sentence earlier in this post:

But eventually the personal and institutional memory of the dangers of debt fades, leading to deregulation and leveraging up — setting the stage for the next deleveraging crisis.

Three words:

Sixteen. Trillion. Dollars.

——————

Administrative note: I am not going to reply to these types of Krugman posts anymore. He has to first prove the existence of austerity before he can comment on its alleged effects. He might as well blame the recession on the Tooth Fairy. I can’t waste my time like this.

Daily Kos, Endless Agony

Mon, 24 Sep 2012 21:41:00 -0400

I started this website because I was annoyed with a lot of the “intellectual” arguments from self-styled “liberals,” which were often self-contradictory and in opposition to basic economic principles. Krugman’s blog seemed to be the primary source for all high-minded opinions, so I focused on that.

Then, I found Ezra Klein, who is more of a gen-y, cool glasses, even more ridiculous version of Krugman. But he still couches most of his dogma in graphs and GDP-related figures.

Then, there’s Daily Kos. Academically, this is the liberal version of a tractor pull. I’ve never seen complete idiocy presented with more arrogance. It’s, quite simply, horrifying.

Let’s take a look at one article, titled “By the transitive property of his own baloney, Mitt Romney is America’s number one geopolitical foe.”

The “author,” Jed Lewison, cleverly (and we know he’s clever because he used the phrase ‘transitive property’ in his headline) makes the observation that Romeny once referred to Russia as “our number one geopolitical foe,” BUT ALSO invested in Gazprom, the Russian energy giant.

Lewison triumphantly concludes:

So Mitt Romney, as recently as last year, was a part-owner in what he says is without question America’s number one geopolitical foe. And since he hasn’t released 2012 financial information, we don’t know if he has engaged in any transactions involving Russia this year, so he may very well continue to be invested in the country.

So, according to Lewison, the gas company is Romney’s “number one geopolitical foe?”

Because, obviously, buying shares in a utility company is tantamount to financial endorsement of Russia’s political regime. And buying $2,941.60 worth of those shares is basically treason. I’m pretty sure for all transactions over $50, you have to actually go to the Kremlin.

Let’s forget that Obama sold guns to Mexican drug cartels and then falsely blamed it on Bush for a second (or, forever, if you are a DailyKos blogger).

Let’s also forget that the entire point of the Cold War was to end communism and allow for the type of economic freedom that goes hand-in-hand with being able to make capital investments in Russia.

How does buying a tiny ownership stake in a utility company make Romney America’s “greatest foe?” Since Gazprom shares pay dividends, Romney would actually be extracting capital from Russia. Every dollar Gazprom pays Romney (and other private investors) is one dollar less paid to the state. It’s privatization that weakens the political power of the Russian government - the thing Romney (rightly or wrongly) considers America’s “number one geopolitical foe.”

Basically there are two options here. You can either conclude that Mitt Romney is (or at least recently was) in bed with America’s biggest enemy. Or you can conclude that when Mitt Romney shot off his mouth about Russia he didn’t have a clue what he was talking about.

Nope….

You can either conclude that the company that heats Russia and Europe during the winter isn’t what Romney considers “America’s biggest enemy.”

Or you can conclude that Jed Lewison supports concentration camps. Yep. Because, according to the site he works for, DailyKos, “it is well-known in China, that most of the electronics factories, including Foxconn’s factories, are run like military style concentration camps.” And, aside from DailyKos proudly supporting Apple with an iPhone app, Jed Lewison’s own resume says he worked to build a “mobile video delivery system for streaming live television to iPhone and iPad through Mobile Safari.”

If Jed Lewison thinks Romney is investing in “America’s biggest foe,” then - by the same logic - Jed Lewison supports the concentration camps run by the company he promotes and profits from.

Ah, liberals…

Must be hard juggling all these hypocritical notions. Just learn the basics of reality and things will be so much easier for you!

Also, you’ll notice I put “author” in quotes when initially describing Lewison. That’s because he just lifted this story from here. That’s the type of hard-hitting journalism you can expect from the “Daily Kos Senior Policy Editor.” (Imagine what the less-senior writers are doing…)

Promotion

Sat, 22 Sep 2012 19:45:00 -0400

Hey guys.

If you read this site and find it useful, please help me promote it. Post links on Facebook, Twitter, etc. I put work into it, and, while it’s great to reach 20-30 people a month, it doesn’t really help me achieve any real objectives unless the audience can get larger.

Thanks!

Response to: Self-contradictory Fed Bashing

Sat, 22 Sep 2012 19:21:00 -0400

In his new blog, Krugman takes on the opposition to further QE/accommodative Fed lending. And it’s a mind bender.

The right question should be whether, given the actual state of the economy in the naughties, the Fed should — given what it knew at the time — have raised rates faster. Inflation wasn’t out of control:

So why raise rates?

Because Personal Consumption Expenditures isn’t the only measure of inflation. For instance, it ignores home prices:

So, from 2000 to 2005, home prices rose about 70%, or roughly 11% annually (for the junior investors out there, 11% is considered a “speculative” rate).

Well, the retrospective answer is that there was a damaging housing bubble. But there are two things you should know. First, there was widespread denial that there was a housing bubble.

Well, there certainly might have been denial about how long the bubble could last, but it was obvious to great minds like Alan Greenspan and Paul Krugman that there was a bubble. Remember, Krugman recommended a housing bubble to help ease the pain of the dot com crash. From 2002:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

And, of course, Alan Greenspan knew he was inflating a housing bubble - that was the purpose of the low rates. Today, The Federal Reserve openly admits that the purpose of low interest rates is to raise home prices. Sandra Pianalto, president of the Cleveland Federal Reserve Bank, put it nicely a few days ago:

These lower rates should provide further support for the housing sector by encouraging home purchases and refinancing.

So the Federal Reserve KNOWS that lower rates = higher home prices. It’s a bit of what I’ll call “Orwellian mischief” that they use this logic to justify current programs, but adamantly deny the effect their low rates had on the housing bubble.

So, in reference to the title of Krugman’s post, both he and the Fed are currently engaged in “Self-Contradictory Fed Praising.”

Second, the very same people who accuse the Fed of having been too loose then accuse it now of targeting asset prices, trying to boost the stock market rather than focusing on the real economy.

Correct. And the Fed is boosting stock (and gas) prices nicely, to the benefit of the 1% and Wall Street. (Krugman sure loves trickle down economics!)

See the problem? The only reason for the Fed to have tightened in the naughties would have been concern about asset prices — which is the same kind of concern that is apparently dastardly now.

Wrong. The reason the Fed loosened in “the naughties” was concern for asset prices. Tightening would have been a concern for economic fundamentals.

Krugman concludes:

I don’t think any of this makes sense.

That would make a great title for his next book.

Response to: Misinformed Monetary Mitt

Wed, 19 Sep 2012 21:25:00 -0400

Well, this is interesting!

Apparently, Mitt Romney suggested in a Q+A session that The Federal Reserve is buying “like three-quarters of the debt that America issues.” And, in true journalistic fashion, the meticulous researchers at Mother Jones have concluded that:

So Romney is, once again, plucking a scary number he seems to have heard from a tea party symposium somewhere and mindlessly regurgitating it to a receptive audience.

Krugman, wanting - perhaps - a more intellectual analysis of the data, posted his own series of Fed balance sheet graphs followed by the conclusion that:

[Romney] draws his stories about the economy from what he heard somewhere, apparently believing that if the right sort of person says something there’s no need to check it out.

Awesome.

Awesome!

Now, let’s be realistic for a second. Is the Federal Reserve buying three-quarters of the Treasury’s debt? Well, Krugman gives us a graph on that:

See, Krugman and Mother Jones are right! The Fed isn’t buying 3/4 of the debt! Krugman does concede that “there was a period when the Fed was buying a large fraction of federal debt issue — but it didn’t last long.”

See! FACTS! These are the tools we use to find truth! Romney is an idiot who believes stuff other drones tell him! But we’re free thinkers! VICTORY! ACADEMIA TRIUMPHS!

….oh…

….but wait.

Maybe this isn’t the whole story?

After all, I’ve been to enough Occupy Wall Street meetings to know that, maybe - sometimes - banks can be tricky.

Let’s remember a few things.

The Federal Reserve has been expanding its balance sheet with mostly mortgage-backed securities while lending money to member banks at 0% interest.

Member banks have been buying Treasury debt.

As a sample case study*, in 2007, Bank of America owned $759 million worth of U.S. government debt. In 2011, they owned $42.86 billion worth of U.S. government debt.

So does The Federal Reserve buy 3/4 of the debt the government issues? No (not right now, anyway). Do they make it possible for their member banks to buy government debt at no cost? Yes.

At the end of last year, did the Federal Reserve cut the cost of borrowing to European banks so it would be cheaper for them to invest in high-performing dollar-denominated assets like Treasury bonds? Yes.

Earlier this year, did the Treasury let the China’s central bank purchase debt directly for the first time in history, so the Chinese could more easily maintain their peg to the U.S. dollar? Yes.

Is the 1.79% interest rate on a 10-year Treasury bond below the current core inflation rate of 1.9%? Yes.

Are legitimate private investors potentially buying U.S. Treasuries because they anticipate non-market forces will keep prices rising; as happened during the mortgage-backed security bubble? Probably. Did the Federal Reserve end up buying all those mortgage-backed securities in the end? Yes.

Is Treasury debt in a bubble? Is our central bank being less-than-transparent about its role in government debt purchases? Is Mitt Romney at least correct in assuming that our debt is unsustainable? Could Krugman stand to be more thorough? Are a lot of debt apologists mindlessly regurgitating the same points to a receptive audience?

Well, you decide that for yourself.

I got all my money in Euros.

——-

*I’d do an exhaustive research study, but, let’s be honest - the 5 people who come to this website are mostly here because they incorrectly Googled something.

The 47%

Tue, 18 Sep 2012 04:27:00 -0400

After Mitt Romney was unknowingly recorded by someone courageous enough to remain anonymous, we’ve seen roughly 47% of the population furious over what was said.

For what was said, please use other, widely available sources for that information. I’d like to look at Ezra Klein’s response. Klein is the intellectual powerhouse of the liberal elite, second only to Krugman - so his opinion matters because I’m bound to hear it parroted all over the internet.

For what it’s worth, this division of “makers” and “takers” isn’t true. Among the Americans who paid no federal income taxes in 2011, 61 percent paid payroll taxes — which means they have jobs and, when you account for both sides of the payroll tax, they paid 15.3 percent of their income in taxes, which is higher than the 13.9 percent that Romney paid.

Yes, the payroll tax. This is the go-to rebuttal for left-wingers when confronted with the very disturbing reality that half of Americans, don’t pay income tax. Of course, what is the payroll tax? It’s the revenue stream for social welfare programs that mostly benefit…the people who don’t pay income taxes.

So yes, non-income taxpayers, congratulations on paying those payroll taxes for programs you demand. What a burden that must be! I’m sure the government would happily alleviate that expense if you would only stop rioting in the street every time they dare mention reform.

Part of the reason so many Americans don’t pay federal income taxes is that Republicans have passed a series of very large tax cuts that wiped out the income-tax liability for many Americans. That’s why, when you look at graphs of the percent of Americans who don’t pay income taxes, you see huge jumps after Ronald Reagan’s 1986 tax reform and George W. Bush’s 2001 and 2003 tax cuts. So whenever you hear that half of Americans don’t pay federal income taxes, remember: Ronald Reagan and George W. Bush helped build that. (You also see a jump after the financial crisis begins in 2008, but we can expect that to be mostly temporary.)

Oh. So Republicans are responsible for lowering taxes on the lower and middle classes? Republicans are responsible for increasing the lower and middle classes’ take-home pay? Republicans increased the standard of living for the lower and middle classes by reducing their share of the income tax?

Hmmmm. That’s not the standard narrative I usually hear.

I admire Ezra Klein for crediting Republicans with instituting a tax system that places a higher burden on the rich and a much lower one on the poor. That’s really sweet.

That’s why Romney’s theory here is more than merely impolitic. It’s actually core to his economic agenda.

So, if I follow this correctly, Ezra - the core of Romney’s economic agenda is to create a more progressive tax system that shifts the tax burden from the poor to the rich? Like Reagan and Bush did??

That’s odd because, as a reader of Ezra Klein’s blog, I thought that Romney will increase taxes on the poorest Americans.

WOW!

I don’t understand politics AT ALL!

Thank God these unbiased, rational bloggers with air-tight logic and consistent messages have straightened it out for me!

Krugman on QE and Money Markets

Mon, 17 Sep 2012 04:24:00 -0400

Just a few comments on two recent Krugman posts.

In “How Could QE Work?” Krugman suggests:

…we actually can hope that the Fed’s new policy will boost housing as well as operating through other channels, and therefore that it can act more like conventional monetary policy in fostering recovery.

So, ideally, Fed policy can create a housing bubble. Use your own recent memory and powers of deduction to decide if that’s the best solution.

———

In “Ron Paul on Money Market Funds,” Krugman flexes his academic skills by destroying multiple straw men. He first presents Ron Paul as being against “fractional reserve banking” and, therefore, must be at odds with money market mutual funds.

How do the Austrians propose dealing with money market funds?

I mean, it has always been a peculiarity of that school of thought that it praises markets and opposes government intervention — but that at the same time it demands that the government step in to prevent the free market from providing a certain kind of financial service. As I understand it, the intellectual trick here is to convince oneself that fractional reserve banking, in which banks don’t keep 100 percent of deposits in a vault, is somehow an artificial creation of the government. This is historically wrong, but maybe the actual history of banking is deep enough in the past for that wrongness to get missed.

Well, no, not quite. I’m not a certified ”Austrian” - so I won’t speak for them - but I’ll give my opinion.

Fractional reserve banking, while not the creation of government, has triumphed in the market precisely because of government deposit guarantees. I think this is the point Ron Paul is making as well. From his website:

Banks should no longer have a government backstop of any sort in the event of failure. Banks, like every other business, should have to face the spectre of market regulation. Those banks which engage in sound business practices, keep adequate reserves on hand, and gain the confidence of their customers will survive, while others fall by the wayside.

True believers in free markets don’t expect or want the government to “step in to prevent the free market from providing a certain kind of financial service.” We’d simply like the government to stop favoring certain financial services. (for more, look up “moral hazard in banking”)

Krugman continues:

But consider a more recent innovation: money market funds. Such funds are just a particular type of mutual fund — and surely the Austrians don’t want to ban financial intermediation (or do they?). Yet shares in a MMF are very clearly a form of money — you can even write checks on them — created out of thin air by financial institutions, with very few pieces of green paper behind them.

Well, I’d argue that shares in MMF are not “very clearly a form of money.” Like all shares, they are equity claims - and, as such, have no specific value defined in terms of “money.” It’s true that MMF shares are highly liquid and treated like money, but - again - this quality is influenced by government involvement in money markets. At the first hint of concern in money market mutual funds during the 2008 crisis, the government i mmediately stepped in to guarantee against losses. So, yes - MMF accounts can be effectively treated just like FDIC insured bank accounts; but not because of the inherent nature of money markets - which would implode if the government could no longer pay back debt by issuing new debt. So this example is not exactly “the free market” at work.

Krugman concludes:

One of the key lessons of the 2008 crisis was precisely that banks are defined by what they do, not by what they look like, and there are a whole range of financial arrangements that in economic terms act a lot like fractional reserve banking. So would a Ron Paul regulatory regime have teams of “honest money” inquisitors fanning across the landscape, chasing and closing down anyone illegitimately creating claims that might compete with gold and silver? How is this supposed to work?

Well, again, in the Ron Paul system, there would be no need for “inquisitors” (why does Krugman never use that term to describe other government regulators?). The market - free of politically motivated distortions - should regulate itself much more efficiently.

OK, I don’t expect a serious answer. But it’s scary that this has become the more or less official doctrine of the GOP.

Well, that’s my attempt at a serious answer.

I think I understand how Austrians deal with money market funds. At least, I know how I reconcile free market principles with opposition to forces that distort money markets and fractional reserve banking…

…the bigger question is how does Paul Krugman propose dealing with money market funds?

If MMF shares are “clearly money,” and MMFs can create credit with Treasury bonds and high-quality debt - all while offering low risk to shareholders - then why do we need The Federal Reserve system?

I certainly don’t expect a serious answer.