Where Are the Grown-Ups?- Paul Krugman

[chlamor]

Where Are the Grown-Ups?
By PAUL KRUGMAN
Published: September 25, 2008

Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash — and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.

It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.

So the grown-up thing is to do something to rescue the financial system. The big question is, are there any grown-ups around — and will they be able to take charge?

Earlier this week, Henry Paulson, the Treasury secretary, tried to convince Congress that he was the grown-up in the room, come to protect us from danger. And he demanded total authority over the rescue: $700 billion to be used at his discretion, with immunity for future review.

Congress balked. No government official should be entrusted with that kind of monarchical privilege, least of all an official belonging to the administration that misled America into war. Furthermore, Mr. Paulson’s track record is anything but reassuring: he was way behind the curve in appreciating the depth of the nation’s financial woes, and it’s partly his fault that we’ve reached the current moment of meltdown.

Besides, Mr. Paulson never offered a convincing explanation of how his plan was supposed to work — and the judgment of many economists was, in fact, that it wouldn’t work unless it amounted to a huge welfare program for the financial industry.

But if Mr. Paulson isn’t the grown-up we need, are Congressional leaders ready and able to fill the role?

Well, the bipartisan “agreement on principles” released on Thursday looks a lot better than the original Paulson plan. In fact, it puts Mr. Paulson himself under much-needed adult supervision, calling for an oversight board “with cease and desist authority.” It also limits Mr. Paulson’s allowance: he only (only!) gets to use $250 billion right away.

Meanwhile, the agreement calls for limits on executive pay at firms that get federal money. Most important, it “requires that any transaction include equity sharing.”

Why is that so important? The fundamental problem with our financial system is that the fallout from the housing bust has left financial institutions with too little capital. When he finally deigned to offer an explanation of his plan, Mr. Paulson argued that he could solve this problem through “price discovery” — that once taxpayer funds had created a market for mortgage-related toxic waste, everyone would realize that the toxic waste is actually worth much more than it currently sells for, solving the capital problem. Never say never, I guess — but you don’t want to bet $700 billion on wishful thinking.

The odds are, instead, that the U.S. government will end up having to do what governments always do in financial crises: use taxpayers’ money to pump capital into the financial system. Under the original Paulson plan, the Treasury would probably have done this by buying toxic waste for much more than it was worth — and gotten nothing in return. What taxpayers should get is what people who provide capital are entitled to: a share in ownership. And that’s what the equity sharing is about.

The Congressional plan, then, looks a lot better — a lot more adult — than the Paulson plan did. That said, it’s very short on detail, and the details are crucial. What prices will taxpayers pay to take over some of that toxic waste? How much equity will they get in return? Those numbers will make all the difference.

And in any case, it seems that we don’t have a deal.

This has to be a bipartisan plan, and not just at the leadership level. Democrats won’t pass the plan without votes from rank-and-file Republicans — and as of Thursday night, those rank-and-file Republicans were balking.

Furthermore, one non-rank-and-file Republican, Senator John McCain, is apparently playing spoiler. Earlier this week, while refusing to say whether he supported the Paulson plan, he claimed not to have had a chance to read it; the plan is all of three pages long. Then he inserted himself into the delicate negotiations over the Congressional plan, insisting on a White House meeting at which he reportedly said little — but during which consensus collapsed.

The bottom line, then, is that there do seem to be some adults in Congress, ready to do something to help us get through this crisis. But the adults are not yet in charge.

http://www.nytimes.com/2008/09/26/opini ... ref=slogin (http://www.nytimes.com/2008/09/26/opinion/26krugman.html?_r=2&oref=slogin&oref=slogin)

What an asshole.

Who's 'WE' Paul?

[anaxarchos]

...just around the corner - waiting to be called.

http://emperor.vwh.net/images/ustashe.jpg

[blindpig]

Is this phase two of Keynesianism?

http://news.bbc.co.uk/2/hi/americas/7667190.stm

Tactical withdrawal or desperation?

This dance just gotta end.

[anaxarchos]

Is this phase two of Keynesianism?

http://news.bbc.co.uk/2/hi/americas/7667190.stm

Tactical withdrawal or desperation?

This dance just gotta end.

There is no Nobel Prize in Economics, remember?

http://www.populistindependent.org/phpb ... ght=myrdal (http://www.populistindependent.org/phpbb/viewtopic.php?t=560&highlight=myrdal)

This award is a product of the "reform committee" which was put in place after Nobel's grandson bitched about the Libertarians making it up and giving the "award" to each other. You are quite right. Keynes is back with a vengeance: Keynes II at your theaters today. Interestingly, Krugman is more of an ideologist rather than a technician, with some similarity to Hayek in that regard (if from the opposite side). It is certainly an indication of the pendulum swinging back in this social <cough> <cough> science. I suspect they intend to keep it up forever...

There is one thing about Keynes, though. He implies a tacit acceptance of the fundamental correctness of the classicals: Smith, Ricardo and... Marx ("the greatest of the Classical Economists" - J.M. Keynes). How sad we are once again conceding the correctness of Marx, just when no Marxists are left.

Maybe Krugman can explain him to us....

http://img.timeinc.net/time/time100/images/main_keynes.jpg

[blindpig]

Damn, I was looking to post to that thread and couldn't find it.

Could be this is an augury of Obama victorious?

Funny, the Obamists at DU wanted his head for trashing Obama's health care "plan". Now they want him for Sec of Treasury.

[Kid of the Black Hole]

Is this phase two of Keynesianism?

http://news.bbc.co.uk/2/hi/americas/7667190.stm

Tactical withdrawal or desperation?

This dance just gotta end.

There is no Nobel Prize in Economics, remember?

http://www.populistindependent.org/phpb ... ght=myrdal (http://www.populistindependent.org/phpbb/viewtopic.php?t=560&highlight=myrdal)

This award is a product of the "reform committee" which was put in place after Nobel's grandson bitched about the Libertarians making it up and giving the "award" to each other. You are quite right. Keynes is back with a vengeance: Keynes II at your theaters today. Interestingly, Krugman is more of an ideologist rather than a technician, with some similarity to Hayek in that regard (if from the opposite side). It is certainly an indication of the pendulum swinging back in this social <cough> <cough> science. I suspect they intend to keep it up forever...

There is one thing about Keynes, though. He implies a tacit acceptance of the fundamental correctness of the classicals: Smith, Ricardo and... Marx ("the greatest of the Classical Economists" - J.M. Keynes). How sad we are once again conceding the correctness of Marx, just when no Marxists are left.

Maybe Krugman can explain him to us....

http://img.timeinc.net/time/time100/images/main_keynes.jpg

These Columbia dudes..

They are sorta kinda opposed to unilateral US foreign policy, especially the militaristic side. This would presumably put them at odds with the neo-con/neo-lib bloc but hypocrisy's not really much of a "problem" is it?

But how far is their lame crap about "correcting" imperfect markets and promoting sustainable development going to take them if they don't play ball (which ia basically capitulation)? Are they really going to buddy up with the likes of the warmed over retread slated to replace Ahmadinejad, Tsvaringi, and who/whatever emerges in South Africa? (answer: yes, but..)

Its a weird playing field ain't it? The players we're talking about here are Soros, Jeffrey Sachs, Stiglitz, Krugman *gag*, and so on. I think Juan Cole is another one but I'm not 100% sure -- I know he was slobbering over Khatami..

I mean it makes sense -- they get to decry imperialism in words, demand reform for more equitable Third World integration -- mainly through debt forgiveness/cancellation and opening markets. That all fits in nicely with their "global Keynsianism" and you can even tack on support for regional unity (along "responsible" lines of course).

Here's a bit from Sach's Wiki bio, don't really need to say more:


More recently, Sachs has turned to global issues of economic development, poverty alleviation, health and aid policy, and environmental sustainability. He has written extensively on climate change, disease control, and globalization, and is one of the world's leading experts on sustainable development. [5]

In his 2005 work, The End of Poverty, Sachs wrote that "Africa's governance is poor because Africa is poor." According to Sachs, with the right policies and key interventions, extreme poverty – defined as living on less than $1 a day – can be eradicated within 20 years. India and China serve as examples, with the latter lifting 300 million people out of extreme poverty during the last two decades. Sachs believes a key element to accomplishing this is raising aid from $65 billion in 2002 to $195 billion a year by 2015. He emphasizes the role of geography and climate, with much of Africa suffering from being landlocked and disease-prone. However, he stresses that these problems can be overcome. [6]

Sachs suggests that with improved seeds, irrigation, and fertilizer, the crop yields in Africa and other places with subsistence farming can be increased from 1 ton/hectare to 3-5 tons/hectares. He reasons that increased harvests would significantly increase the income of subsistence farmers, thereby reducing poverty. Sachs does not believe that increased aid is the only solution. He also supports establishing credit and microloan programs, which are often lacking in impoverished areas. [7] Sachs has also advocated the distribution of free insecticide-treated bed nets to combat malaria. The economic impact of malaria has been estimated to cost Africa US$12 billion per year. Sachs estimates that malaria can be controlled for US$3 billion per year, thus suggesting that anti-Malaria projects would be an economically justified investment. [8]

[anaxarchos]

Damn, I was looking to post to that thread and couldn't find it.

Could be this is an augury of Obama victorious?

Funny, the Obamists at DU wanted his head for trashing Obama's health care "plan". Now they want him for Sec of Treasury.

Here's Market Watch implying that the "award" was political... Hah...

MARKETWATCH FIRST TAKE:
Liberal media rejoice! Krugman wins a Nobel

http://www.marketwatch.com/news/story/l ... dist=msr_9 (http://www.marketwatch.com/news/story/liberal-media-rejoice-ny-timess/story.aspx?guid=%7B186E733E-9061-492B-8BB7-A02BC998B33F%7D&dist=msr_9)

"Hey, that's our phoney-baloney 'award'..."
http://www.pbs.org/newshour/images/noble_medals.jpg

[anaxarchos]

These Columbia dudes..

They are sorta kinda opposed to unilateral US foreign policy, especially the militaristic side. This would presumably put them at odds with the neo-con/neo-lib bloc but hypocrisy's not really much of a "problem" is it?

But how far is their lame crap about "correcting" imperfect markets and promoting sustainable development going to take them if they don't play ball (which ia basically capitulation)? Are they really going to buddy up with the likes of the warmed over retread slated to replace Ahmadinejad, Tsvaringi, and who/whatever emerges in South Africa? (answer: yes, but..)

Its a weird playing field ain't it? The players we're talking about here are Soros, Jeffrey Sachs, Stiglitz, Krugman *gag*, and so on. I think Juan Cole is another one but I'm not 100% sure -- I know he was slobbering over Khatami..

I mean it makes sense -- they get to decry imperialism in words, demand reform for more equitable Third World integration -- mainly through debt forgiveness/cancellation and opening markets. That all fits in nicely with their "global Keynsianism" and you can even tack on support for regional unity (along "responsible" lines of course).



Quote for you:

"How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and the intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement? Even if we need a religion, how can we find it in the turbid rubbish of the red bookshop? It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here, unless he has first suffered some strange and horrid process of conversion which has changed all his values."

J.M. Keynes on "communism", Essays in Persuasion, 1931
.

[blindpig]

Damn, I was looking to post to that thread and couldn't find it.

Could be this is an augury of Obama victorious?

Funny, the Obamists at DU wanted his head for trashing Obama's health care "plan". Now they want him for Sec of Treasury.

Here's Market Watch implying that the "award" was political... Hah...

MARKETWATCH FIRST TAKE:
Liberal media rejoice! Krugman wins a Nobel

http://www.marketwatch.com/news/story/l ... dist=msr_9 (http://www.marketwatch.com/news/story/liberal-media-rejoice-ny-timess/story.aspx?guid=%7B186E733E-9061-492B-8BB7-A02BC998B33F%7D&dist=msr_9)

"Hey, that's our phoney-baloney 'award'..."
http://www.pbs.org/newshour/images/noble_medals.jpg

Politics, economics.....

http://www.affordablehousinginstitute.org/blogs/us/worm_ouroboros_small.jpg

[blindpig]

By gawd, here's one libertarian who ain't gonna sit down for this pendulum business.



Prior to 2008 the Nobel Prize had never been awarded posthumously. So great minds such as John Maynard Keynes and Fischer Black never received the coveted award. But all that has changed. This year, the prize for economics is going to Paul Krugman, an economist who died a decade ago.

To clarify, the person named Paul Krugman, the living and breathing man who will accept the Nobel in Stockholm this December, is merely a public intellectual — a person operating in the same domain as, say, Oprah Winfrey.

The living Krugman’s rabidly liberal New York Times column has, for nine years now, traded on the dead Krugman’s reputation as an economist, a reputation that only will be burnished by the award of the Nobel Prize. Yet his column is pure politics, not economics. It is the equivalent of astronomers Mather and Smoot — the 2006 Nobelists in physics — writing on astrology.

This living Paul Krugman can’t be the same person as the dead economist. The dead economist wrote eloquently of the supreme importance of globalization and international trade as engines of prosperity. But the living public intellectual remains silent on these subjects when the Democratic party’s nominee for president threatens to abrogate the North American Free Trade Agreement.

These days Krugman’s liberal agenda always takes precedence over economic principle. He has described himself as “an unabashed defender of the welfare state.” He has declared, “For me, Sweden of 1980 would be ideal.” He has called Barack Obama’s sweeping plan for socialized medicine “naïve” because it doesn’t contain enough mandates. He has said that “We should be getting 28% of GDP in [tax] revenue,” when the highest level ever collected, even in wartime, is less than 21 percent.

Krugman is entitled to such opinions, whether as a public intellectual or an economist. But there have been serious questions about his journalistic integrity — suggestions that the living Krugman has debased and corrupted the very science the dead Krugman did so much to advance.

In 1999 Paul Krugman was paid $50,000 by Enron as a consultant on its “advisory board,” and that same year he wrote a glowing article about Enron for Fortune magazine. But he would change his tune. After Enron collapsed in 2001, Krugman wrote several columns excoriating the company. (One featured what may be the most absurd howler in the history of op-ed journalism: “I predict that in the years ahead Enron, not Sept. 11, will come to be seen as the greater turning point in U.S. society.”) In most of these columns Krugman worked hard to link Enron to the Bush administration, and in one he actually blamed Enron’s consultants for the company’s collapse — while neglecting to mention that he, too, had been an Enron consultant.

Daniel Okrent, while ombudsman for the New York Times, wrote that “Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers.” Indeed. But Krugman’s distortions were so rampant, and his unwillingness to correct them so intransigent, that Okrent — no doubt pressured into service by my Krugman Truth Squad column for NRO — did something about it. Okrent forced the Times op-ed page to adopt for the first time a corrections policy for op-ed columnists. That was in 2004. Later, when Krugman flouted that policy, the Krugman Truth Squad went to work on Okrent’s successor, Byron Calame, who pressed for the adoption of a new, more stringent policy in 2005.

Krugman wasn’t happy about the pressure coming from the Krugman Truth Squad. After I met him in person at a lecture he gave in connection with one of his books, he smeared me on national television by saying, “that’s a guy who actually stalks me on the web, and once stalked me personally.”

That didn’t stop me from writing many more Krugman Truth Squad columns for NRO. But this one is the first in quite a while. I stopped not because I was afraid of Krugman’s defamations, but because I became aware that Krugman’s influence was waning.

Before the Times began to hold Krugman accountable for what he actually wrote in his columns, Krugman was having a powerful impact on the way public policy was being debated and decided. But no longer. Funny thing — it’s a lot harder to have a political impact when you can’t lie.

In this sense, Krugman is not only a dead economist. He’s also a dead propagandist.

With last year’s Nobel Peace Prize having gone to Al Gore, one has to wonder whether Krugman’s award is a left-leaning political statement, perhaps intended to revive Krugman’s influence. Probably not. In recent years several right-leaning economists have won the prize.

More likely, the Nobel committee decided deliberately to overlook Krugman’s political extremism, just as it chose to overlook John Nash’s schizophrenia in 1994. That’s not to say Krugman is crazy, though he has stated: “my economic theories have no doubt been influenced by my relationship with my cats.”

Whatever the committee was thinking, the only remaining question is what the living Paul Krugman will do with his $1.4 million prize. Will he pay taxes on it at the low rates established in 2003 by George W. Bush, a president and a policy that Krugman has worked so assiduously to discredit? Or will he voluntarily pay at the higher rates he advocates?

http://article.nationalreview.com/?q=Nm ... RmYjc4NDQ= (http://article.nationalreview.com/?q=NmZmMzlmZjU4NDVlMmFlZWRlZDM4YjZiYmRmYjc4NDQ=)

Snot fair, indeed

[Kid of the Black Hole]

http://stopmebeforeivoteagain.org/2008/ ... rtals.html (http://stopmebeforeivoteagain.org/2008/10/among_the_immortals.html)

Our fearless pwog terrier, Paul Krugman, has won the Swedish bank's pseudo-Nobel prize for "economic science." This rigorous friend of all things small-fry and Bush-battered, champion of long-gone well-hung safety nets, and well-versed anal-solonic regulators, and... and... oh Christ, blah blah blah.

Why him? Well, before he became the relentless tribune of the naked truth, the master of bright-line, gotcha! political arithmetic, over there on the op-ed pages of the Times of Laputa -- before all that, he was an innovative breakthroughish academic econ-conner; in fact, a paragon in his field. It's a field which for the last 60 years or so has required its heros and saints to boldly go where no academic mind has gone before, and formally, simply, and crisply, model some chunk of obvious everyday marketplace reality that has stared us all in the face since Columbus cheated Chief Nugawana at cards, and yet, until the publication of this particular paper, has evaded algebraic capture. Yes, trap it in Greek letters and render it in the toonish galaxy-far-far-away terms that please the rarefied minds of ivydom's Dismalians.

In Paul's case, he took an earlier breakthrough model by Dixit Stiglitz and frigged it around some, and used it, after suitable relabeling, to prove something -- well -- obvious: Toyota and General Motors might rationally choose to sell and produce in each others' home markets -- and profit maximally.

Sound impressive? No? Well, it got him overnight to the top tier of young Turks in trade theory.

But wait! There's more! Not satisfied with his initial earthshaking achievement, about a decade later, Paul built a model of optimal human civilization -- the genesis of urban habitat, those nodes of folks that pimple the market plain, swelling to the point where the economies of agglomeration just nicely balance the costs of transportation. As a lover of such toy train-set worlds, I could go on and on -- but I won't.

Street value of this body of work that won him the Swedish bankers' prize? Somewhere between the value of six mice and one large pumpkin, down at the local cab stand.