Last Call

The Kroog explains why QE2 is necessary.  The answer appears to be "What else really can we do right now?"

So what can policy do?

1. It can try to achieve negative real interest rates by creating expectations of inflation. That’s actually the more or less free-market solution. Many years ago I tried to explain this by considering a hypothetical world of perfectly flexible prices and a fixed money supply. How would such a world deal with the situation shown above? The answer is, prices would plunge far enough that people would expect them to rise again in the future, generating the expected inflation we need. Since prices aren’t perfectly flexible, and anyway the existence of nominal debt makes massive deflation a really bad idea, the preferred alternative is simply to create expectations of inflation looking forward.

2. Alternatively, governments can step in and spend while the private sector won’t.

3. Finally, central banks can try to circumvent the zero lower bound by buying long-term debt. The point here is that we only have zero rates at the short end, and it’s possible, though not certain, that you can get at least some traction by buying those longer-term bonds.

But now that we’re in this situation, VSPs around the world are objecting to all of these possible actions. Inflation targets are horrible because we must have price stability. Fiscal policy is unacceptable because we must have balanced budgets. QE is outrageous because that’s not what central banks are supposed to do.

Notice that in each case the objection is based on a shibboleth. Price stability is treated as an absolute virtue, without any model to explain why. The same with budget balance. And those who are horrified at the idea of expansionary monetary policy have been inventing concepts on the fly to justify their position.

The simple fact is that we have a global excess supply of savings, which is doing terrible things to workers.

The reasonable thing is to do something about it; it’s deeply unreasonable, and deeply irresponsible, to invent reasons not to act because you’re clinging to simplistic slogans.

I'm a Keynesian, but I think this is bad Keynesian policy.  It's certainly not the best way to stimulate the economy.  It is the best way for the banks to make a hell of a lot more money to sit on and not invest in workers and capital, and unless the banks loosen credit, there's not going to be anything useful out of this.  It's trying to water your crops by blowing up the reservoir dam. You will get water to the crops, it just might take your farm with it.

The problem is the more useful ways to stimulate the economy have been summarily rejected, blocked, and killed by the GOP.  That will not improve in the next two years, so the Fed has to step in.

However this has got to be the most painful way of doing it...short of you know, doing nothing at all.  And we've got nothing else to try.

Deep In The Heartless Of Texas

So, Texans?  How are you liking that Gov. Rick Perry fellow?

His new suggestion is not to split Texas from the other 49 states, but rather to give it the option to secede from the national pension program that has defined retirement in the country for 75 years.

"When you look at social security, it's broke," Perry told the hosts of MSNBC's Morning Joe this morning. "My kids, 27 and 24, they know this is a Ponzi scheme."

One way out of this mess, in Perry's mind? Just abandon Social Security altogether and let the states handle it. Texas (of course) has already fixed Social Security's problem, Perry says, so why should it be saddled with paying the Ponzi debts of every other sucker?

"Why is the federal government even in the pension program or the health care delivery program?" Perry asked. "Let the states do it."

Perry is currently on a national tour touting his book Fed Up! which is focused on the many ways the federal government should, in essence, get off the backs of the 50 states. The tools of federal tyranny Perry describes would be at home at any tea party rally: In a nutshell, taxes are too high, the EPA is too nosy and the health care reform law is an existential terror.

It all goes back to the Founding Fathers, Perry says.

"They did not believe that all of us would be alike, and they really didn't like centralized government and mandating down to these states how to act, how to look," he told NPR. 

Right, because providing a safety net for the elderly is entirely like dictating how states should dress its citizens.  Meanwhile, Rick wants to hide cuts to the program that would be necessary by privatizing it and raising the retirement age.

I understand Texas and its traditional and historic role of independence.  But Perry's just using this silliness to cover his tracks to make cuts to the program and to line the pockets of banks who'd just love to see a privatized retirement system, you know, the same banks that ran out economy into the ground.  Besides, how do you just up and secede from federal programs you don't like?  How does that even work?

Is Texas going to give up all its federal money?  I'd like to see them do that.

Seems to me the phrase here is "all hat, no cattle".

Railing Against Job Creation

When Ohio and Wisconsin voters are still asking "Where are the jobs" two and four years from now, I can safely answer "They were killed by the Republican governors you elected."

Scott Walker, the incoming governor of Wisconsin, for instance, vowed on Wednesday to carry out a campaign pledge to kill a proposed high-speed rail link between Milwaukee and Madison, part of a larger project to create a high-speed rail corridor across the upper Midwest, from Minneapolis to Chicago. The project was to be fully paid for with $810 million in federal stimulus funds. Mr. Walker said he wanted the money spent on roads, although under the terms of the grants, such a use of the funds is prohibited.

The newly elected Republican governor of Ohio, John Kasich, who ousted Ted Strickland, a Democrat, has also reiterated a campaign pledge to kill a $400 million stimulus-funded rail project in his state. “Passenger rail is not in Ohio’s future,” Mr. Kasich said at his first news conference after the election. “That train is dead.”

Hey, so lump them in with Chris Christie and other Republican governors who are screaming about jobs but doing everything they can to kill job-creating projects.  Kasich for sure is going to be in real trouble in 2014, because Ohio Republicans now control both the state's House and Senate and are going to use their power to go after Democrats in the state rather than create jobs.

I guess these projects will go to blue states with smarter Governors who will take the money and create jobs there.

Pelosi Push-Pull? Pah.

While it may be fashionable to pretend that there's an irreconcilable gulf between the moderate and progressive factions of the Democrats, the numbers bear out the losses for the Blue Dogs.  They were destroyed in their races because they sided with the Republicans more than the Democrats.  Their support in the Democratic caucus is now next to nil.

"Democrats tend to be more kind to our leader when they have a loss," said Rep. John Dingell (D-Mich.), the longest-serving member of the House, on Detroit's WJR Radio. "She can run and probably get elected. I think she has a good chance of doing that."

The California Democrat has not indicated a timeline for making a decision, but she will likely have to make up her mind before lawmakers return to Washington for a lame-duck session. Though deeply unpopular with the broader public, Pelosi remains well-regarded in a caucus that will lean more liberal after the more conservative Blue Dog Coalition was decimated in the midterms.

Outside liberal groups are already organizing support for Pelosi before she makes a decision. Americans United for Change launched an e-mail campaign on Friday encouraging supporters to "send a personal note to Speaker Pelosi about how much you appreciate her leadership," and to "make sure she knows that we still support her."

The liberal website Daily Kos started a similar online petition.

“Democrats lost because they didn’t fight hard enough for popular progressive reforms in the last two years. The Democratic leader least culpable of doing that is Nancy Pelosi,” the co-founder of the Progressive Change Campaign Committee, Adam Green, said in an interview. “She’s the last person among Democratic Party leaders who should step down.”

I agree.  She got legislation through the House and to the Senate.  Meanwhile, Harry Reid continues to be Senate majority leader when the reason why the Dems got smoked in the House is because so much legislation that Pelosi shepherded through her chamber ran into the brick wall that was Harry Reid's inability to get it to Obama's desk.   That inability of Reid's is precisely because of the filibuster, and that the first thing that needs to go in the 112th Congress.

But that's the Senate.  The House more than ever needs a fighter and someone strong enough to keep Steny Hoyer's urges to agree totally with John Boehner in check.  The Dems lost because the base stayed home.  Dumping Pelosi isn't going to do anything to bring them back to the voting booth in 2012.

Besides, Heath Shuler?  Really?

Dirty Deeds Done Dirt Cheap

North Carolina Democratic Rep. Bob Etheridge lost his re-election bid in part because of this video from last June:



Two "college students" went after Bob with a camera to harass him, and when he blew his stack, it was all caught on film. 

Only now after the election, we find out that those two "students" were in fact GOP operatives who went after Etheridge with the express intent of provoking the reaction you see here, the admission copped to in the NY Times.

They also tried to push Democrats into retirement, using what was described in the presentation as "guerilla tactics" like chasing Democratic members down with video cameras and pressing them to explain votes or positions. (One target, Representative Bob Etheridge of North Carolina, had to apologize for manhandling one of his inquisitors in a clip memorialized on YouTube. Only this week did Republican strategists acknowledge they were behind the episode.)

It gets better.

The video, which first showed up on Andrew Breitbart's Big Government website, showed two college-age kids approaching Etheridge, a North Carolina congressman, on the streets of D.C. last June. They asked him if he supported Obama's agenda, and he inexplicably went into Charles Bronson mode, grabbing one of them by the neck and pulling him into a very uncomfortable and threatening hug. The mystery of who Etheridge's antagonists were—they never identified themselves on the video, despite Etheridge's creepy incantation of "Who are you?" over and over again, and their faces were blurred out—was a brief parlor game at the beginning of the Tea Party summer.

The Democrats immediately accused the kids of being GOP operatives sent to incite democratic congressmen into embarrassing themselves on camera as part of a deliberate and calculated campaign. The Republicans denied it—according to Dave Weigel at the time, "every party committee and conservative group in D.C. was denying knowledge" of the video.

That's right folks, this all goes back to our old "responsible journalist" friend, Andrew Breitbart.  The GOP provoked the reaction and the video surfaces as a Breitbart exclusive.  Just like ACORN, just like Shirley Sherrod, you can add Bob Etheridge to the heads Breitbart has collected.

Anything on his site has to be considered suspect.  The larger problem is of course that the GOP and Breitbart will continue to get away with this, as there's no punishment meted out for stuff like this, only rewards.

Metal Hand Covering Launched, Contacts Facial Area Of Opponent

President Obama used his weekly address today to challenge the GOP at its own "fiscal responsibility" game.

In his weekly address Saturday, Obama said that Democrats and Republicans not only agree on middle-class tax cuts but the need to rein in spending, and used this to try to drive his position on the tax cuts.

"At a time when we are going to ask folks across the board to make such difficult sacrifices, I don’t see how we can afford to borrow an additional $700 billion from other countries to make all the Bush tax cuts permanent, even for the wealthiest 2 percent of Americans," the president said. "We’d be digging ourselves into an even deeper fiscal hole and passing the burden on to our children."

Obama noted the importance of extending the tax cuts in the lame-duck session, but focused the address on digging in against the full extension sought by Republicans and some Democrats.

"If Congress doesn’t act by New Year’s Eve, middle-class families will see their taxes go up starting on New Year’s Day," he warned.

Now, this is the message President Obama should have been putting out since last year.  In fact, the Dems should have passed a bill to keep the tax cuts for 98% of Americans and dared the GOP to kill it.  That never happened thanks to the Blue Dog caucus, but now 2/3rds of them won't be back in January.  Obama is laying the groundwork here for the attack the Dems need to make.

Considering only 8% of Americans think extending the Bush tax cuts to the wealthy is our top legislative priority right now, this is a fight Obama can absolutely win.  Let's see the Republicans play Obama's game here and have their first post-election act be raising taxes on all Americans.  That'll help them in 2012, right?

Here's the rest of his address:

Mass Consumption Function

The latest salvo in this year's holiday shopping wars?  Retailer Sears is hoping you'll show up on Thanksgiving morning.

Why wait for Black Friday? Sears isn't.

The retailer will open its Sears stores from 7 a.m. until noon on Thanksgiving, according a leaked circular obtained by CNBC.com. 

This would mark the first time Sears will be open during the holiday in the 85 years it has operated retail locations. (Sears operated as a catalog company before that.) 

By contrast, Kmart, which is also a unit of Sears Holdings has been opening on Thanksgiving for nearly two decades. 

"We made the decision, based on our customers' desire to shop for great values, to open Sears' stores on Thanksgiving," the company said in an email. 

The Sears schedule will be limited to the morning hours in order to balance the needs of its customers and its workers, Sears said.

Wal-Mart continues to put pressure on everybody as retailers continue to chase an increasingly shrinking US dollar.  Helicopter Ben's latest move will only make imports and basic commodities more expensive and force retail chains to boost prices.  You might save on Thanksgiving Day and Black Friday deals, but when your dinner is more expensive this year, you'll notice...and especially as gas and food prices start going up again.

Dollar stretching is going to become an art form, folks.

Signs of the Stupocalypse Part I

Reality TV may have finally contributed to society. Ice skates in hell are at an all time high, while pork bellies are down.

In a brilliant move, a new series is coming that is showing families how to deal with tough times. Downsized, a new show on WE, we get to follow a family who went from $1.5 million to selling off personal possessions to make rent. This is great for a couple of reasons. If they succeed then there is a life lesson for millions of people. If they fail, the same lessons are there. These people will be the first in a long public downsizing as Americans come to grips with the problems we face, economically and socially. As a stark contrast, watch Hoarders or The Biggest Loser to see the result of our bloated and wasteful ways.

A huge power shift is going to come while the economy stabilizes and hopefully begins to come back. Wastefulness will no longer be chic, and creativity and hard work will divide the long term winners from the losers. The geek shall inherit the earth. That's our silver lining, but the journey we take will be a tough one. There is more to this than learning how to clip coupons and recycle leftovers. This is an attitude adjustment, long overdue. With a little humility and eye opening, we will get through.

StupidiNews, Weekend Edition!

• The death toll from the latest eruption of Indonesia's Mount Merapi is up to 76 as ash and gas assault nearby villages.
• One of Mexico's most wanted drug lords has been killed in a shootout with Mexican forces south of Brownsville, Texas.
• Retired Gen. Stanley McChrystal will lead soldiers again, this time in a charity bike ride in North Carolina.
• President Obama vows to fight terrorism as he visits the site of the 2008 Mumbai attacks in India.
• Both the cable industry and ISPs are blaming each other for the failure of net neutrality laws, according to rule comments both industries have made to the FCC.