Roberts - NOT a wingnut! (non-economics)

Brad DeLong's favorite moniker for right-wingers with intellectual laziness is "wingnut".  Indeed, he challenges any intellectual foundations of modern conservatism.

However, in the case of Roberts, Professor DeLong is wrong.  John Roberts, in my reasoning, is very much a "constructionist" intellectually.  He definitely approaches from the right, but his arguments are well reasoned.  It's the formation of his underling assumptions, the basis of his constructionist arguments, that go against most liberal ideals.

As an instance, Roberts' famous statement: "The way to stop discrimination on the basis of race is to stop discrimination on the basis of race" is not that of a wingnut.  The point, most obvious to me, is that we can't choose when it is "ok" to treat people differently based on the color of thier skin.  It should never be "ok".  It certainly should not be ok for segregation, but then perfectly ok for integration.

When discrimination is observed and proved (statistically, or through evidence of direct action), it should be punished and repairations made as appropriate.

This is where I disagree with President Obama.  I don't not agree with his view that affirmative action is an appropriate reaction to the nations history of slavery and discrimination.  As ugly as that history is, affirmative action is inherently inconsistent for the reasons above.

It's time to put our ugly history behind us, and move forward blindly, in every way, to the color of our skin.

The Council on Foreigh Relations can do better!

This article is a bait and switch! Benn Steil and his Council keep conflating the argument. The stimulus is not about the governemnt spending more on consumption goods in the private sector, as this cock-eye'd paragraph suggests

The Obama administration and Congress justify the vast new government borrowing and spending by asserting that it constitutes “fiscal stimulus.” Not only would each
dollar the government borrowed and spent produce a dollar of GDP that would
never have been created had the dollar been left in private hands (a fiscal
“multiplier” of 1.0), but it would stimulate a wave of new private sector
spending, investment and employment that would generate 30, 40, 50 cents or more
of additional new wealth per dollar (a multiplier above 1.0).

Instead the stimulus is about the government spending on public goods that the private sector will never provide. Paul Krugman makes the point! More to the point the private sector is simply not spending, so the govenment must ... temporarily.

One More Data Point on the (Lack of a) Recovery

Starting in September of 2007, my company saw it's sales fall off dramatically. It was a very visible indicator of a change in the economy. Mostly, at that time, our customers were pushing contract decisions into 2008. Much of that business never materialized in 2008 due to the unfolding crisis (businesses were "hunkering down") and the slowness in sales has continued with a flat trend. Q1 of 2009 was one exception with a small increase in sales. My business does not directly correlate with corrections in inventory, so I was hopful that this was a "green shoot" for our business. However, Q2 2009 is looking to drop back to the flat level of 2008.

Bottom line, I'm not seeing any signs of a recovery yet. It still looks very "L" shapped to me.

Elizabeth Warren is on the right track

Niall Ferguson continues to hawk his free market snake oil. I think Elizabeth Warren is on the right regulatory track. The financial products market IS broken. We need more regulation on the front end. The productization and resulting demand for CDO's drove the market for sub-prime mortgages. Anyone who thinks consumers drove the sub-prime mortage market is delusional. The CDO market was PROFITABLE and the financial services industry couldn't get enough of them. If the right regulations were there for mortgage origination, the market would never have developed. Yes, that's Monday morning quarterbacking. And, yes, that exactly the kind of lesson we need to learn to provide the RIGHT reglulatory environment in the future.

California Proposition 1A

Vote No. We shouldn't be modifying the state constitution in response to the worst downturn since the Great Depression. Tax increases are the last thing California needs right now. We should "Cowboy Up" in classic Californina fashion and live with less services for a few years.

Cramdown Inequality

So the Times reports that the mortgage cramdown legislation died.  This is such a blatant example of the stranglehold that that banking lobies have on our government.  Moreover, the cramdown double standard is staggering.  Isn't the conversion of bank debt to equity a cram down for the tax payer? Of course it is.  If it's fair for us it should be fair for them. 

So far, the housing market is showing signs of life.  However, if things turn for the worse again, we're going to need a way to clear the housinig market quickly and a key component of that will need to be restructuring of subprime mortgages.

Niall Ferguson is confused (at best)

On the same link below, Naill evidently complained that our Fiscal and Monetary policies are at odds.   He really needs to read Brad DeLong (who has very impressive analytical skills).  Read this post from Dr. DeLong.  

Bill Bradley has a great idea!

If Citi doesn't straighten up and begin to fly right, the government should just buy them!  Citi has a market cap of $17B but has sucked up $400B.  Seems like a no brainer to me.  Read more at Roubini's link

I'm not getting a good feeling....

So, while Bernanke is telling us that the banks will be able to raise the additional capital they need, the WSJ says that a survey of BANKS says the worst of the downturn is yet to come!  So on the one hand, the banks argue with the Fed regarding their "grades" on the stress test.  On the other hand, they respond to a Fed survey that the worst is yet to come.  Has anyone in the Fed reconciled the results of the survey with the assumptions underlying the stress tests (i.e. another 22% decline in housing prices this year)?  I doubt it.

Do These Staff at Berkeley Have Any Business Experience?

On my drive home today, I heard one of Robert Reich's collegues at Berkeley (unfortunately, I missed the name) reinforce his point: if the Government is bailing out GM & Chrysler, then they should find a way to do it while preserving jobs! As an example, the speaker tried to draw a parallel with the Edsel! Specifically, that Edsel downsized itself out of business. While this is false, Edsel was produced by Ford, it's also a very poor atttempt at an analogy. The Edsel was a crappy car, if GM and Chrysler start producing crappy products, they too should cease to exist.

Let's perform a little "thought experiment". The hypothesis of the experiment is that GM and Chrysler can restructure successfully without downsizing their work force. A precondition for this hypothesis to be true would be that the current labor force from ALL their brands could be reorganized to produce higher quality, more reliable cars with designs that are profitable and competitive in the marketplace. Currently, GM & Chrysler are "main lining" cash from the Government! How much additional subsidizing do you think the tax payers will need to provide before GM & Chrysler accomplish such a reorganization? Let me give you a hint: it would take years!

A more pragmatic approach would be to keep the very best of GM & Chrysler, the most talented labor and the most successful models, and build a profitable company from those fundementals. Does anyone really think Pontiac can be made profitable in anything like the near term? Let's build GM & Chrysler from solid bedrock, not the shifting sand it's sitting on today.

Bank's Are Out Of Control

The banks should not be arguing with the Government over the stress tests.  By all accounts, the test scenarios were constructed with pretty rosey growth scenarios.  These banks are exhibiting way too much political power for my liking. 

The Banks Are Too Big So Break'em Up!

Wow, I hope President Obama is reading James Kwak and Zephyr Teachout.  Here is a great post on Baseline Scenario by James Kwak discussing how anti-trust laws might be applied to break up the big banks.  A great quote from Teachout is "Economies of scale [of large corporations] might work all too well when it comes to influencing government."

 

How would this argument be made against other corporations that aren't, at least at the moment, so threatening such as Walmart or IBM?  Some large corporations don't consider themselves as "US Companies" - this is not a new problem.  Compliance with any new anti-trust laws will need to be a precondition to doing business in the US market, regardless of loop-holes on "nationality" based on esoteric criteria.

Geithner And The Banks (again)

This article by Henry Bloget reinforces my first post below.  The banks need to be restructured.  "Too big to fail" should mean that these large banks should be too big to exist.  Again, Geithner is too cozy with the banks!

GM & Chrysler

The Auto Bailout Is Going Off Yhe Road:

Robert Reich makes a fair point.  If the public is footing the bill for the auto bailouts, why should we accept all the layoffs.  However, while fair, it misses the practicality of the situaiton.  Both GM's and Chrysler's costs are just too high.  The argument can be made that they are selling too many types, the wrong types, etc.  The reality is that jobs are going to have to be cut if GM and/or Chrysler are to be saved.  If a business doesn't have the revenue comming in, and it doesn't have a realistic plan to get cash comming in fast (a long term investor of some kind - not Uncle Sam), it has no choice but to cut its cost - for GM and Chrysler that means closing facilities, cutting expenses, and reductions in the work force.  Sorry Dr. Reich.

First Post

Here's my first post: I like Tim Geithner, but he's just too cozy with the banks. I realize he has a thin line to walk, but the banks are basically turning thier backs on him and his plans.  He needs to find ways to get tough.