Paul Krugman: Springtime for Scammers [feedly]

Paul Krugman: Springtime for Scammers
http://economistsview.typepad.com/economistsview/2017/02/paul-krugman-springtime-for-scammers.html

Financial regulation is under attack:

Springtime for Scammers, by Paul Krugman, NY Times: ...Donald Trump ... and his allies in Congress are making it a priority to unravel financial reform — and specifically the parts of financial reform that protect consumers against predators.

Last week Mr. Trump released a memorandum calling on the Department of Labor to reconsider its new "fiduciary rule," which requires financial advisers to act in their clients' best interests — as opposed to, say, steering them into investments on which the advisers get big commissions. He also issued an executive order designed to weaken the Dodd-Frank financial reform...

Why ...was the fiduciary rule created? The main issue here is retirement savings..., "conflicted investment advice" has been ... costing ordinary Americans around $17 billion each year. Where has that $17 billion been going? Largely into the pockets of various financial-industry players. And now we have a White House trying to ensure that this game goes on.

On Dodd-Frank: Republicans would like to repeal the whole law, but probably don't have the votes. What they can do is try to cripple enforcement, especially by undermining the Consumer Financial Protection Bureau, whose goal is to protect ordinary families from financial scams. ...

Remember the Wells Fargo scandal...? This scandal only came to light thanks to the bureau.

So why are consumer protections in the Trump firing line?

Gary Cohn, the Goldman Sachs banker appointed to head Mr. Trump's National Economic Council — populism! — says that the fiduciary rule is like "putting only healthy food on the menu" and denying people the right to eat unhealthy food if they want it. Of course, it doesn't do anything like that. If you want a better analogy, it's like preventing restaurants from claiming that their 1400-calorie portions are health food.

Mr. Trump offers a different explanation for his hostility to financial reform: It's hurting credit availability. ... What we do know is that U.S. banks have generally shunned Mr. Trump's own businesses ... perhaps because of his history of defaults.

Other would-be borrowers, however, don't seem to be having problems. ... Overall bank lending ... has been quite robust since Dodd-Frank was enacted.

So what's motivating the attack on financial regulation? Well, there's a lot of money at stake — money that the financial industry has been extracting from unwitting, unprotected consumers. Financial reform was starting to roll back these abuses, but we clearly now have a political leadership determined to roll back the rollback. Make financial predation great again!

 -- via my feedly newsfeed

The Great Recession: A Macroeconomic Earthquake [feedly]

The Great Recession: A Macroeconomic Earthquake
http://economistsview.typepad.com/economistsview/2017/02/the-great-recession-a-macroeconomic-earthquake.html

Larry Christiano on why the Great Recession happened, why it lasted so long, why it wasn't foreseen, and how it's changing macroeconomic theory (the excerpt below is about the last of these, how it's changing theory):

The Great Recession: A Macroeconomic Earthquake, Federal Reserve Bank of Minneapolis: ...Impact on macroeconomics The Great Recession is having an enormous impact on macroeconomics as a discipline, in two ways. First, it is leading economists to reconsider two theories that had largely been discredited or neglected. Second, it has led the profession to find ways to incorporate the financial sector into macroeconomic theory.

Neglected paradigms
At its heart, the narrative described above characterizes the Great Recession as the response of the economy to a negative shock to the demand for goods all across the board. This is very much in the spirit of the traditional macroeconomic paradigm captured by the famous IS-LM (or Hicks-Hansen) model,⁹ which places demand shocks like this at the heart of its theory of business cycle fluctuations. Similarly, the paradox-of-thrift argument¹⁰ is also expressed naturally in the IS-LM model.

 The IS-LM paradigm, together with the paradox of thrift and the notion that a decision by a group of people¹¹ could give rise to a welfare-reducing drop in output, had been largely discredited among professional macroeconomists since the 1980s. But the Great Recession seems impossible to understand without invoking paradox-of-thrift logic and appealing to shocks in aggregate demand. As a consequence, the modern equivalent of the IS-LM model— the New Keynesian model—has returned to center stage.¹² (To be fair, the return of the IS-LM model began in the late 1990s, but the Great Recession dramatically accelerated the process.)

The return of the dynamic version of the IS-LM model is revolutionary because that model is closely allied with the view that the economic system can sometimes become dysfunctional, necessitating some form of government intervention. This is a big shift from the dominant view in the macroeconomics profession in the wake of the costly high inflation of the 1970s. Because that inflation was viewed as a failure of policy, many economists in the 1980s were comfortable with models that imply markets work well by themselves and government intervention is typically unproductive.

Accounting for the financial sector 
The Great Recession has had a second important effect on the practice of macroeconomics. Before the Great Recession, there was a consensus among professional macroeconomists that dysfunction in the financial sector could safely be ignored by macroeconomic theory. The idea was that what happens on Wall Street stays on Wall Street—that is, it has as little impact on the economy as what happens in Las Vegas casinos. This idea received support from the U.S. experiences in 1987 and the early 2000s, when the economy seemed unfazed by substantial stock market volatility. But the idea that financial markets could be ignored in macroeconomics died with the Great Recession.

Now macroeconomists are actively thinking about the financial system, how it interacts with the broader economy and how it should be regulated. This has necessitated the construction of new models that incorporate finance, and the models that are empirically successful have generally integrated financial factors into a version of the New Keynesian model, for the reasons discussed above. (See, for example, Christiano, Motto and Rostagno 2014.)

Economists have made much progress in this direction, too much to summarize in this brief essay. One particularly notable set of advances is seen in recent research by Mark Gertler, Nobuhiro Kiyotaki and Andrea Prestipino. (See Gertler and Kiyotaki 2015 and Gertler, Kiyotaki and Prestipino 2016.) In their models, banks finance long-term assets with short- term liabilities. This liquidity mismatch between assets and liabilities captures the essential reason that real world financial institutions are vulnerable to runs. As such, the model enables economists to think precisely about the narrative described above (and advocated by Bernanke 2010 and others) about what launched the Great Recession in 2007. Refining models of this kind is essential for understanding the root causes of severe economic downturns and for designing regulatory and other policies that can prevent a recurrence of disasters like the Great Recession.

 -- via my feedly newsfeed

Links for 02-08-17 [feedly]

Links for 02-08-17
http://economistsview.typepad.com/economistsview/2017/02/links-for-02-08-17.html

• Is There A Trump Bubble? - Paul Krugman
• Unequal opportunities, unequal growth - VoxEU
• Immigrants Do Not Increase Crime, Research Shows - Scientific American
• Restricting Immigration Would Make America Smaller, Not Greater - NYTimes
• When Authors Forget What their Own Abbreviations Stand For - Tim Taylor
• Treasury Pick's Oversight of "Robo-Signing" Heats Up Nomination - RegBlog
• How lies work - Stumbling and Mumbling
• Path-dependence of measuring real GDP? - Nick Rowe
• Misallocation in Europe during the Global Crisis - VoxEU
• Net Exports Continue to Bedevil GDPNow - macroblog

 -- via my feedly newsfeed

Don’t fix what isn’t broken: Why Betsy DeVos’ radical agenda for U.S. public education makes no sense [feedly]

Don't fix what isn't broken: Why Betsy DeVos' radical agenda for U.S. public education makes no sense
http://www.epi.org/blog/dont-fix-what-isnt-broken-why-betsy-devos-radical-agenda-for-u-s-public-education-makes-no-sense/

As the Senate prepares to vote on the nomination of Betsy DeVos, President Trump's pick for secretary of education, it is critical to confront a key (but not always explicit) assumption. DeVos asserts that "U.S. schools are failing," and many senators assume that to be the case. But is this true? And if so, in what ways? Answering these questions is very important, as strategies to fix failing schools should be very different from those designed to improve schools that are already doing well.

A new analysis of changes in U.S. student performance over the past decade strongly suggests that our nation's schools are not failing. Rather, they have made real progress on two related issues we care deeply about: boosting student achievement and closing race-based achievement gaps. This analysis, by economists Martin Carnoy of Stanford University and EPI's Emma Garcia, uses a reliable and valid gauge—reading and math scores on the National Assessment of Educational Progress (NAEP), commonly known as "the Nation's Report Card."

Read more

 -- via my feedly newsfeed

No wage thief should be labor secretary [feedly]

No wage thief should be labor secretary
http://www.epi.org/blog/no-wage-thief-should-be-labor-secretary/

By now, anyone following Andrew Puzder's nomination to be the secretary of labor knows that the restaurant chain he leads has a long history of cheating its workers out of wages they earned. Not just the franchisees that own the bulk of the Carl's Jr. and Hardees restaurants, but CKE itself, the franchisor corporation, has been found guilty of wage theft and compelled to pay back tens of thousands of dollars of wages stolen from workers earning poverty level wages. The U.S. Department of Labor, which he seeks to head, is the agency that busted Puzder's corporation.

Today, the New York Times reports that Puzder violated immigration laws, too, not in his role as CEO of the restaurant chain, but in his private life. For years, Puzder employed a housekeeper who was not authorized to work in the United States, and also failed to pay employment taxes.

Puzder wants to be the chief enforcer of the nation's labor laws, but his history of flouting those laws makes it clear that he is unfit for the job. Puzder's violations of immigration law make him a strange choice to be a cabinet officer in President Donald Trump's administration, given the president's near hysteria about the presence of undocumented immigrant workers in the United States.

Read more

 -- via my feedly newsfeed

Increased U.S. trade deficit in 2016 illustrates dangers of malign neglect of the dollar [feedly]

Increased U.S. trade deficit in 2016 illustrates dangers of malign neglect of the dollar
http://www.epi.org/blog/increased-u-s-trade-deficit-in-2016-illustrates-dangers-of-malign-neglect-of-the-dollar/

The U.S. Census Bureau reports that the annual U.S. trade deficit in goods and services increased slightly from $500.4 billion in 2015 to $502.3 billion in 2016, an increase of $1.9 billion (0.4 percent). This reflects a $14.4 billion (5.5 percent) decline in the services trade surplus and a $12.5 billion (1.6 percent) decrease in the goods trade deficit. However, the small increase in the overall goods and services trade deficit, and its downward trend over the past decade, mask important structural shifts in U.S. trade.

Falling petroleum prices and rising domestic petroleum production and exports have obscured surging imports of nonpetroleum goods (NPGs) —the vast bulk of which are manufactured products—into the United States since 2013. The trade deficit in NPGs, which has the most impact on workers and communities, has increased sharply. The U.S. trade deficit in petroleum goods declined by $22.7 billion (32.8 percent) in 2016, while the trade deficit in NPGs increased by $16.4 billion (2.5 percent), continuing the sharp run-up in the NPG trade deficit since 2013.

The U.S. trade deficit in NPGs is now at an all-time high (shown with dark blue bars in the figure below) while the overall U.S. balance of trade in goods and services (shown with light blue bars) has fallen sharply from a peak of $761.7 billion in 2006 to $502.3 billion in 2016—obscuring the much larger (and more important) trade deficit in NPGs.

Read more

 -- via my feedly newsfeed

Eastern Panhandle Independent Community (EPIC) Radio:The Are You Crazy Show, Resistance Radio,-- and all-day Health Programming -- Feb 8, 2017

John Case has sent you a link to a blog:



Blog: Eastern Panhandle Independent Community (EPIC) Radio
Post: The Are You Crazy Show, Resistance Radio,-- and all-day Health Programming -- Feb 8, 2017
Link: http://www.enlightenradio.org/2017/02/the-are-you-crazy-show-resistance-radio.html

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