Tuesday, July 31, 2012


Reading this Post article is more catharsis than anything.  I pretty much agree with Westen on all points, particularly:
Obama’s first mistake was inviting the Republicans to the table. The GOP had just decimated the economy and had been repudiated by voters to such an extent that few Americans wanted to admit that they were registered Republicans. Yet Obama, with his penchant for unilateral bipartisanship, refused to speak ill of what they had done. The American people wanted the perpetrators of the Great Recession held accountable, and they wanted the president and Congress to enact legislation to prevent Wall Street bankers from ever destroying the lives of so many again. Instead they saw renewed bonuses — and then they saw red. Republicans learned very quickly that they could attack Obama and his agenda with impunity. Only at election time, or when he’s up against the ropes, does this president ever tell a story with a villain.
That isn't to say that I disagree with Kevin Drum here.  My biggest frustration is to try and reconcile the above statement with Drum's semi-rebuttal:
First: Obama had to invite Republicans to the table. When he took office Democrats didn't have a filibuster-proof majority...Still, life in the White House is pretty difficult when you have to constantly concern yourself with getting a couple of Republican votes, or, at best, the 60th most liberal Democrat — especially when the 60th most liberal Democrat is a self-righteous showboat like Joe Lieberman or a Nebraska pol like Ben Nelson.
The answer in a rational world should have been simple:  Any GOP senator from any state in the northeast that ever wanted to be reelected should go along with whatever Obama had put on the table those first months.  I think both the Obama administration and Senate Democratic leadership (Harry Reed) were horrid failures when it came to recognizing that they had the upper hand and could have used it.  Maybe they didn't want to but then that is their failure. 

The reality is certainly more complicated, but lots of people were pretty open to trying anything then, and what ended up being tried was just not enough.  I would add that the stimulus was sold as a major victory that would right the economy which really made the first failure even worse. 

Monday, July 30, 2012

Inter-Generational Mobility is Confusing

When I read through posts and then comments on [wealth/income] mobility in society I get the feeling that lots of people don't understand that inter-generational aspect of it.  Mobility in society is less about me making a bit more or less over time and more about where I am compared to where my parents are.

If we really believe that wealth/income relate to achievement and ability then a high mobility is a defining characteristic of that.  Low mobility doesn't mean better off individuals are pushed down by up and comers, it means that the children of better off individuals do better than the children of less well off individuals.  Think of high mobility as a generational reset.  Each new baby will end up as successful as their talents allow, no more no less.

There is no reason to believe that the children in the Walton family are any more capable than the children of school teachers or janitors.  The reason the Walton children do well is because their parents have wealth, and the reason that the Walton parents have wealth is because Sam Walton had a lot of success.  Someone could be born to the Walton family without the mental facilities to tie shoelaces and that person will be a incredulously wealthy individual for his/her entire life.

On the other hand if a genius is born in inner city Baltimore to a way below the poverty line black family then that child will have to struggle to survive and even if he/she does "get out" and find success that success is most likely to mean a college degree and $60k/year.  Pretty good and remarkable considering the outlook, but in a "fair" society that strives for greatness then the Walton child would end up a janitor and the Baltimorian [?] would be a rocket scientist or CEO.

Now we can't have the level of mobility that resets everything...mostly because more successful people would never (nor should they ever) allow their children to be subject to such a system.  Society may have been better off if W had ended up failing out of state school and living the rest of his life as a drunk in a trailer park working as carnival operator, but George and Barbara would never have stood for such.

This is why people use the term "upwardly mobile".  We don't want to prevent parents from doing well by their children, but we do want to give children opportunities when their parents cannot afford to do so.

High mobility means that ability and drive can create success (and that sloth and idiocy can destroy it) even when mom and/or dad can't foot the bill.

Friday, July 20, 2012


Even when HAMP was announced it didn't seem that great a thing.  As time went on it was pretty obvious that about the only folks who could possibly benefit were bankers.  Li'l Timmy is, by most accounts, a pretty smart guy, and he is certainly a very pro-financial institutions kind of guy, so that this program was deliberately designed to help the banks and not homeowners isn't really surprising to me.  That there is some form of evidence regarding this that is only now being brought to light is...well, not really surprising either. 

Yes, It is Terrorism

I'm fairly certain that the media just don't understand what "terrorism" is (which is why Atrios put this up).  Just to be clear: someone who goes someplace with lots of people and starts killing them is a terrorist.  That person may not be connected with any organization, and may not have any agenda, but that is a terrorist.  Full Stop.

Anyone saying that the killings at the movie theater in Colorado are not the work of a terrorist really means, "not a [Muslim/Arab/Middle Eastern/...] terrorist".  For fuck's sake the people who protest abortion by calling doctors murderers and the women whores are terrorists.  They are trying to intimidate and frighten people. 

The murderer in Colorado is also a terrorist.  He may be white (and Christian) and he may not have an agenda (at least not one that is known yet) but he is a terrorist. 

Monday, July 09, 2012

Option B

In the post below I reference an older idea where the Fed would buy student loans.  People would keep paying them off, but however much was sent in for the loans would be returned on a cash card that they had one month to spend.  Basically it was a way to boost the economy that would also help deal with the "people will just save the extra" issue that can arise from most give people money schemes.

It made me think of other strategies to work this.  A clearinghouse strategy that people could opt into.  Basically the government (maybe the fed) will pay off your debt matched to your spending.  It would have a similar effect to that above, but would be more versatile.

It starts with a government owned/subsidized/controlled bank, let's call it "The Fed" which has effectively unlimited supply of money at its disposal.

Then every citizen of the US is issued an account with this bank, into which it can transfer certain debt.  Different limits would apply to different debt.  The transfer option would be open for 1 year.  The account would last for a [user defined?] period of 2-5 years.  No debt accrued after the opening of the accounts would be eligible (not the transfer, the opening).

This would function like any standard bank account.  Any amount of money could be transferred into the account up to the total debt initially placed in there, and that money would a) pay off the debt and b) be available for use through a debit card.  It cannot be transferred to savings or be used it to pay a mortgage or student loans (they don't go away...yet) but it could probably pay most bills.  Any savings, investment, along with the mortgage and student loan payments would have to be from funds not deposited to the account.

For example: someone with $4k take-home per month, $45k of student loans and a $225k mortgage on a $185k house transfers in $40k of student loan debt and $100k in housing debt for $140k total.  The timer is set to 5 years.  She sends half of her paycheck to her normal bank from which she pays mortgage, student loan (minimums), any bills that can't be charged, and maybe sets some aside for savings/emergency cash.  The other half goes to the debt bank, and with that card she pays for groceries, online purchases, clothing, bills, maybe some is saved up over time to be used for vacation, et cetera. At the end of 5 years $120k of debt is "paid off" and that total is dispersed to the relative accounts proportional to what went in (~$85.7k to the mortgage and ~$34.3k to the student loans).  If this is enough to pay off entirely either one of these then the excess goes to the other, and if both are paid off entirely is returned in cash to her.  If she added a bit more after year one and reached the $140k limit ahead of time, then that would end the program and everything would be paid out then.

Note that any funds put into the account but not spent would be "lost" (actually just the bonus money is lost, it still pays off debt).  To encourage faster spending setting a 3 month time period on the funds going in would help.

This type of mechanism is helpful for a few reasons.  One is that it helps with getting out from under debt in a meaningful way: if she can put $140k into that account over 5 years she can probably completely eliminate her student loan and get a huge fraction of her mortgage covered.  It is also no risk: she doesn't lose out on that money to paying off debt, it pays off debt and she gets to use it for normal spending.  She doesn't have to worry about a surprise repair bill preventing her from paying into this, because money paid in can be used to cover that surprise.  It is also a boost to demand: the money is only a bonus if people spend it on stuff, so it encourages more spending.

The biggest downside is that it is overly beneficial to people with decent jobs and lots of debt, but there are a couple fixes: one is the debt limits, and the other is some partial to complete payoff option.  The payoff option would be a benefit to lower income individuals: anyone who put at least [income/2k]% into the account could be forgiven up to [10k/income]% of the total (someone making $25k/year would need to put at least 12.5% into the account and could be forgiven up to 40% of the total).


Our financial/political system has at least as much corruption as China.  It's also really hard to see it improving anytime soon.  As an aside I think this is mostly right, but has one thing wrong [my bold]:
The Fed’s additional “Twist” is a whimper, not a shout.  In fact, that is probably a good thing, since monetary policy has its limits, and we are near them.  We expect no more from the Fed for the rest of this year unless there is a seriously negative event.
There is no reason to think monetary policy is near its limits unless the only way for it to work is provide cheap money to banks.  But that is only "conventional" monetary policy.  Monetary policy is just affecting the supply of money.  They don't have to buy treasuries thereby effectively just giving cheap money to banks and some financial institutions.  They can create $10k in every person's bank account, or buy other debt (student loans, mortgages, credit card, ...) and light it on fire.

In addition to actual monetary policy, the fed (and other central banks) can modify expectations.  Even without putting a lot more money out there, if they indicated that 4% inflation was A-OK, then we could see changes in behavior to offset that which could positively impact the economy.

So long as the Fed keeps its 2% inflation target and refuses to use its power to create money that directly helps people, yes we are probably near the limits.  But the limits are self-induced, not real.

Friday, July 06, 2012

Debt Problems

Looking at a few blurbs on balance sheet recessions (Mike Konczal has a lit rundown).  I think the economics is fine, but the focus is really on one major part: the housing bubble.  That is certainly the big problem, and the debt overhang from the bubble deflation is huge, but I think that student loan debt needs to be inserted into this as a complimentary problem for two reasons:

1. Housing debt and student loan debt land on two somewhat overlapping segments of society that do massive amounts of purchasing relative to their income/wealth. Basically young(er) people getting started, but at slightly different stages.

2. Lots of people used home equity to pay off student loans.  This was seen as a good thing (and really, it probably was).

In the years from ~2000 - 2007 one of the "smartest" things a new college grad with loads of debt and a shiny new job could do was buy a house, wait a year or so (maybe make some improvements) then pull out the equity through a refi and use it to pay off student loans/the car/credit cards.  Suddenly you are left with one bill, much smaller than the combined others, and the interest is all tax deductible.  Huge win.  Even if the house value falls, this is a pretty good deal.

Imagine a world where we didn't end up in massive debt to go to college...say 30 years ago.  Those college grads who used equity to pay off their loans would now have less total debt and would be less likely to be underwater which also makes them less likely to, say, walk away (which, in any non-recourse state is also the smart move).

College grads today could either afford to move out on their own, getting an apartment and furnishing it, or would at least have more money to spend on fun/car/clothes/whatever.

The easy fix would be for the fed to use its magical "make money" power to obliterate student loans and give say $25k to any homeowner. A better fix would be for the fed to buy up all that debt and incentivize both paying it off and spending.  This could be through the debit card plan I proposed for student loans earlier but other means could work as well. 

Just Stop Talking

Listening to Obama talk about how Romney will take us back to Bush/GOP economics and disaster makes me want to throw the radio out the window.  I just don't think that's much of an argument coming from someone who has spent his first term largely focused on implementing GOP economics!

GOP - Cut taxes (for rich people)
Obama - cut taxes (for everyone) and hasn't repealed any of W's tax cuts

GOP - Gubment debt is bad (unless it helps rich people)
Obama - a whole fucking year talking about reducing the debt!

GOP - Free marketz rulz
Obama -  free market (GOP) health care plan, less than minimum intervention in finance markets

The pisser is that when Obama talks, he frequently says the right things. But he doesn't fucking do them!  In rhetoric this election sounds like FDR vs. Regan, but in reality it's Regan vs. Hoover's stupid and evil twin.  (Note: Obama is Regan, both in this analogy, and pretty much in reality.)

Thursday, July 05, 2012

Keep Treating the Symptom, Ignore the Cause

At least that's what we're doing with the recession.  It isn't entirely inaction.  Any time a bank has problems all the gubments trip over themselves to make sure the banks get lots of money.  When it's people who are having the problems they don't care.  Unfortunately so long as people side isn't fixed, the banks will just keep turning up more problems. 

Monday, July 02, 2012

Is That Irony I Smell?

Sniffing the salts, methinks:
WASHINGTON — Announcements of a housing recovery have become a wrongheaded rite of summer, but after several years of false hopes, evidence is accumulating that the optimists may finally be right.
Then it proceeds to say why this time it's REAL!!!  Except it isn't.  So long as huge numbers of homes are underwater and lots of foreclosures are kept off the market to hold back the flood, there will be no recovery in housing.  Since no one has been willing to do what it will take to correct, it won't correct until the economy fully recovers, and no one is doing anything to make that happen either, so no, housing isn't back.