Our Word is Our Weapon

Nice to see a bit of class analysis from Ygls: "The top two percent and the pollution lobby don’t really care who won the election, aren’t impressed by slogans about how elections have consequences, and don’t care if people have health care or if the working class gets a tax cut. They just go to work every day to press for their agenda, and they’ll get their way unless people are pressing back."

Interesting: "Homeowners can retire mortgages not only by paying them off, but also by buying an equivalent face amount of bonds at market price. Because the value of homes and the associated mortgage bonds tend to move in the same direction, homeowners should not end up with negative equity in their homes. To state it more clearly, as home prices decline, the amount that a homeowner must spend to retire his mortgage decreases because he can buy the bonds at lower prices."

This does not to me look like an orderly restructuring of the economy so much as a disorderly collapse across the board, but particularly in 'blue-collar' sectors. As Yglesias says, "endlessly fascinating as the financial snarl may be, you’re mostly look at a collapse in demand. People in general are buying less stuff, leading to fewer jobs in the fields of making stuff, moving it around, and selling it."

"The right-wing advocates of no bailout and “spending freeze” are, in essence, calling for a return to the Hoover-Mellon policies that had disastrous results in the past. The nature of those results is spelled out in the chart. What people are living through today is no walk in the park, but it’s vastly better than the alternative. Meanwhile, the left-populist alternative of no bailouts and massive stimulus wouldn’t have been quite as bad because some proportion of the masses of the unemployed could have been employed in public sector jobs. To get stimulus on that scale, however, would have required an extremely high percentage of pure makework and essentially wasted funds."

Interesting. A new HUD / DOT taskforce "will develop Federal housing affordability measures that include housing, and transportation costs and other costs that affect location choices. Although transportation costs now approach or exceed housing costs for many working families, Federal definitions of housing affordability don’t recognize the strain of soaring transportation costs on homeowners and renters who live in areas isolated from work opportunities and transportation choices…"

"I mean, this is probably a bad thing to say to someone from a comedy magazine, but I don't like genre. I think that genre was something made up by some spotty clerk in WH Smiths in the 1920s to make his worthless fucking job a little bit easier for him: "it'd be easier if these books said what they were about on the spine". My experience of life is that it is not divided up into genres; it's a horrifying, romantic, tragic, comical, science-fiction cowboy detective novel. You know, with a bit of pornography if you're lucky."

This seems to put together the various pieces quite well: "the institutional structure that underpins sub-prime lending in the UK appears to amplify the levels of risk unnecessarily. Sub-prime lending is conducted disproportionately through centralised lenders reliant on securitization for funding and using brokers to originate loans. This builds a series of information asymmetries into the system and has exposed borrowers to volatility in rates and credit supply that occurred from the fall in world-wide liquidity in 2007. It is suggested that in principle risks could be better handled by integrating the sub-prime market within the mainstream market and applying a graduated approach to risk-based pricing."

Jesus, if only one major country is in recession in 2010 I'll be bloody delighted, even if that one is the UK.

"without even factoring in the less easily established costs of damage to wildlife, noise pollution, contribution to climate change, and end-of-life disposal of motor vehicles, it is already clear that drivers do not currently pay anything like the full cost of motoring. Drivers who advance the argument that cyclists and horse riders should pay road tax risk shooting themselves in the foot: if all road users paid in proportion to the full cost of their chosen method of transport then cars and lorries would be considerably more expensive than is currently the case, and bicycles might even be subsidised."

"A revenue neutral change that makes taxes more progressive increases work effort. That is, when taxes on the middle class go down by a dollar and taxes on the wealthy go up by a dollar, the increase in work effort by middle class workers more than offsets and fall in work effort by the wealthy"

"when you hear it being said that we have entered a new economy of permanent prosperity with prices of financial instruments reflecting that happy fact, you should take cover … Schumpeter thought inevitable and even beneficial what he called "creative destruction" — the cyclical process by which the system eliminates the people and institutions which are mentally too vulnerable for useful economic service. Unfortunately the process has larger and less benign effects, including the possibility of painful recession or depression"

"This directive [to maximize the firm’s “return on equity”] encouraged Mr. Cayne to make the firm as profitable as possible — a worthy goal, no doubt — but without raising any more cash or issuing any new stock, as doing either would increase the denominator of the return-on-equity calculation, and thereby lower the bonus pool Mr. Cayne and his executives could split among themselves.

When viewed through this simple prism, it is not the least bit surprising that when Bear Stearns ran into trouble soon after its two hedge funds blew up in June 2007, Mr. Cayne — and later Mr. Schwartz — chose not to raise new equity, even though they could easily have done so back then. So Bear’s balance sheet remained larded with extremely risky assets that the firm had leveraged to the hilt by borrowing cheaply in the overnight financing markets. "

Tips on how to manage, if you're the one of the people who should be managing, which you're probably not.

"A UK Meteorological Office study concluded there would be a 75% loss of tree cover if the world warmed by three degrees for a century."

We could go down in history as the generation that let the Amazon burn. Or as the generation that decided not to.

Arnold Kling's wilful ignorance in respect of sociology is mostly just stupid, but also sad. You would think that recent events would have helped convince economists that theirs was a social science too, and one with something to learn from the likes of Weber, Mills and Merton …

Unreasonably awesome Watchmen cartoon

Liverpool have the fifth most expensive squad in the EPL, behind Spurs and City.

Watch and laugh as various people including a 'professor of business' at Maryland U fail to grasp the concept of marginal tax rates and assert that returning tax rates for the rich back up to the levels of 2001 so constitutes 'class war'.

"Here, when progressive tax policy has been in place during a period of growth, and that growth has led to a budget surplus, you argue not that it’s smart to balance the budget over the course of the business cycle, but rather that the surplus reflects the government “overcharging” in taxes that should be returned to those who pay the most taxes; which is to say to those who have the most money; which is to say to the rich. That’s a 1999 argument. Then if the economy falls into recession wiping out the surpluses, you argue that a tax cut for the rich is needed as economic stimulus. That’s a 2001 argument. And if the economy is growing during a period of conservative tax policy, you argue that the low taxes produced the growth so need to be kept in place forever. That’s a 2005 argument. And then if the economy falls into recession again, you argue that additional permanent tax cuts for the wealthy are the only solution.

Ta-da! That’s a little business cycle mojo. "

Brad DeLong for Treasury job? Like one commenter says, that'll be one fun confirmation hearing.

Shameful idiocy from David Henderson about Keynes and totalitarianism.