"If money isn't loosened up, this sucker could go down" - George W. Bush warned in September 2008

Sunday, March 28, 2010

Really great links - crying ‘Fire! Fire!’ in Noah’s flood - run on the shadow financial system - anti-anti-communism - progress

Brad DeLong - "We sit here in the midst of 10% unemployment in the USA, of fiscal policy that is crippled in some countries by (legitimate) fears that more deficit spending will trigger government debt crises and crippled in others by confusion between short-term cyclical and long term structural deficits, of banking policy crippled by the public populist reaction against more bailouts for the bankers, and of monetary policy crippled by a strange and sinister mindset among central bankers that fears inflation even as rates of wage increase continue to drop—people who are, as R.G. Hawtrey said of their predecessors in the Great Depression, “crying ‘Fire! Fire!’ in Noah’s flood.”"

David Beckworth - "Deposit Insurance" for the Shadow Banking System - "Like deposit holders during the Great Depression, repo holders in this crisis wanted their money back and could get it by (1) forcing the shadow banks to take a haircut on the collateral used in repos or (2) not renewing the repos . As a result, repo markets began freezing up and threatened the shadow banking system. Since the shadow banking system is a conduit for funding the traditional banking system, financial intermediation in general became threatened (See Gorton for more details). The official response to this banking panic was for the Federal Reserve to create liquidity programs to effectively unthaw the repo market. Like deposit insurance in the 1930s, this government intervention stopped the run on the shadow banking system. Now that these liquidity facilities have been tested and shown to work, there is an expectation they will be used again if needed. And like the deposit insurance for the traditional banking system, this modern form of "deposit insurance" for the shadow banking system is bound to create moral hazard problems that will ultimately lead to more government regulation. These are interesting parallels.
 The emergence of the shadow banking system, therefore, not only has implications for the correct measure of the money supply, but also for what will be the new moral hazard and government regulation of the financial system."

Scott Sumner - "One thing I have noticed about progressives is that while they pay lip service to having rejected communism, their real passion is for anti-anti-communism. They seem more outraged that a few Hollywood screenwriters lost their jobs in anti-communist witch hunts decades ago, than they do that policies advocated by those screenwriters, such as “to each according to their needs,” led to the starvation of tens of millions of people. One thing I have noticed about conservatives is that while they pay lip service to opposing racism, their real passion is for anti-anti-racism. They seem more outraged about a white firefighter who was passed over for a promotion then they do for all of the tragic history of African Americans (and Native Americans.)
Just so that I won’t be misunderstood, I want to be clear about one thing. I do not believe that most modern progressives secretly favor communism, nor do I believe that most modern conservatives secretly favor Jim Crow laws. I think both groups have absorbed at least some of the lessons of the 20th century. Both have been somewhat enlightened. But as long as each side continues to talk the way they do, then progressives will continue to suspect that conservatives are secret racists, and conservatives will continue to think that progressives are secret Marxists.
Where is the conservative outrage over 100,000s of black Americans who are in prison for drug law violations, whereas conservatives like Rush Limbaugh go to places like the Betty Ford clinic, not jail."

Brad DeLong - industrial revolution - "Some say it was an agricultural revolution that allowed transfer of a large chunk of the labor force into making things. But eleventh-century China had had a bigger and earlier agricultural revolution than eighteenth-century Britain had.
Some say it was the European conquest of the Americas. But what was shipped back from America across the Atlantic to Europe and what was paid for in imports from Asia with American products was never real wealth but was instead sterile gold, sterile silver, some empty calories (in the form of sugar), and some psychoactive chemicals—coffee, tea, chocolate, and nicotine.
Some say it was the commercial revolution and the rise of the middle class. But in 1776 Adam Smith and a little later David Ricardo were looking forward to a future for Britain in which it became a lot more like China—a full country with high agricultural productivity per acre and a well-developed division of labor but a very poor and low-wage peasantry and working class ruled by very rich landlords."

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