links for 2008-10-05

• Will Paulson’s Two Plans Unplug the ‘Liquidity Trap’? - Economix
• The worse the US does, the better the dollar does … - Brad Setser
• The CRA: Its a Racial Thing . . . - The Big Picture
• Big Bang or Big Bounce? - Scientific American
• Children aware of white male monopoly on White House - EurekAlert
• Sunspots Are Fewest Since 1954, but Significance Is Unclear - NYTimes.com
• Capitalism to the Rescue - Green Tech - NYTimes.com
• Minding the Inequality Gap - Review - NYTimes.com
• Pursuit of an Edge, in Steroids or Stocks - Economic View - NYTimes.com

Comments

[hari]

Brad Setzer - is asking why the US$ is not falling against its trading partners, at least.

Intuitively, US currency must fall in value given the budget defict and whatnot, as the current year ends. May be we're still ahead of the curve when the real dive take place. Or is it a game of chicken being played by SWFs?

For example, yesterday EU G-4 Summit at Elysee Palace under Sarkosy decided not to support UK proposal to create a (EIB) fund (Euro 25 Billion) to replenish the banking sector in case of default. Germany and France (along with Italy) agreed each country must defend its own banking fortress irrespective of current developments in the financial markets. Germany/Merkel argued that Gov is not the solution at EU level and individual firms must be made responsible for their (in)action.

[anne]

http://www.nytimes.com/2008/10/05/opinion/05nadery.html?ref=opinion&pagewanted=print

October 4, 2008

Peace Under Friendly Fire
By NADER NADERY and HASEEB HUMAYOON

Unless the insurgents in Afghanistan are denied propaganda tools, such as the images of the dead, no number of additional troops will bring success to the American-led mission.

[Propaganda tools, such as the images of the dead....]

[anne]

http://angryarab.blogspot.com/2008/10/to-editor-i-was-delighted-to-receive-my.html

October 4, 2008

"To the Editor:

I was delighted to receive my copy of *Obsession*: (the word complete with scary crescents and guns!) *Radical Islam's War Against the West*. I look forward to the next installments: *Obsession: Jewish War Against the Gentiles by Control of the Banking System* and *Obsession: The Negro's Wars on White Women*. It is disappointing to see *The Chronicle* servilely joining in this kind of fear-mongering and hate-making. It is most disappointing that *The Chronicle of Higher Education* acts inimically to that which it purports to chronicle.

A. Kevin Reinhart
Department of Religion, Dartmouth College
Hanover, N.H." ~

~ Obsession: Radical Islam's War Against the West - http://chronicle.com/weekly/v55/i06/06a03801.htm

-- As'ad AbuKhalil

[anne]

http://angryarab.blogspot.com/2008/10/ralph-nader-will-be-holding-news.html

October 4, 2008

"Ralph Nader will be holding a news conference Friday, October 3 at 11 a.m. outside the Grand Mosque Islamic Center in Washington DC where he will challenge Sens. Barack Obama and John McCain to visit a mosque, like they have churches and synagogues, before the November election as a show of respect and tolerance." *

* http://thirdpartywatch.com/2008/10/03/nader-challenge-to-mccain-and-obama-meet-me-at-the-moaque/

-- As'ad AbuKhalil

[Denis Drew]

Re: Minding the Inequality Gap
Loss of economic well being limits educational aspirations (drop outs); loss of economic power limits educational opportunity (college grants and loans). My answer (as usual): raise the pay of the bottom 90 percentile -- while clipping the pay of the top 3 percentile (that's where the pay went; that's the only place to get it back. My latest scheme -- still in re-write; then to email (about 2000):
*****************************************
To under price higher skilled labor or to overprice lower skilled labor: a minimum wage dilemma?

I read a report on the aftermath of a minimum wage raise from one of those think tanks dedicated to protecting the poor from serious pay raises -- for their own good -- and its major finding was that a percentage of lower skilled workers lost their jobs while fewer higher skilled workers gained employment.

Which raises an all-important dilemma for a nation (USA) hopefully on its way to paying labor more.

Simple (as usual) resolution:
1) Even if lower paid labor lost a percentage of jobs, over a lifetime those workers would earn more under the higher minimum wage because they would earn more when they were working -- which would be most of the time.
2) All other minimum wage workers and workers whose wage were raised by the push-up effect would be making so much more at any point in time that they would be better off paying a bit more taxes to keep the lower skilled in welfare to make up their loss.

This same equation can govern all wide spectrum wage increases of course.
******
Quick income share tutorial:
The average income of $185,000 reported by the Census for the top 20% of families may sound out of expected proportion -- your typical primary care provider earning well short of that these days -- but actually it is a bit short of what you would expect to find if you assumed family income growth kept pace with per capita income growth reported by the Census as doubled since 1968: top 20 percentile families in 1968 reported earning $95,000.

But, family growth, all percentiles, only added up to 67% overall -- 33% short of per capita growth. The missing 33%, hidden by the "top code" of all income over $1 million per family, would add another $110,000 to top family income.

For several reasons, family income may have grown only 90% overall in those years or even closer to 85%. No matter: 90% growth would just mean that $85,000 was missing from the top 20 percentile report rather than $110,000. Whatever the amount missing for whatever percentage growth -- if an amount were added to the lower four percentile incomes enough to bring them up to the whatever percentage growth: the four added up would yield an amount equal to the unreported top quintile income, dollar for dollar.

If we could throw a reset switch and distribute today’s doubled income according to 1973 proportions, all four lower quintile wage earners would still be in the same RELATIVE (skill/pay) bargaining positions towards each other in the job market -- so there would be little reason to expect them to suffer higher unemployment because they were paid a good deal more; there would just be more money to pay everybody (my "Chinese snake dance" theory of wage competition :-]).

Nobody believes that paying many top percentile earners 5-25X what they got paid for doing what equivalent earners made 25-35 years ago serves any useful economic purpose. Everybody agrees that impoverishing the lower paid half of the job market keeps many if not most from reaching their productive potential.
******
How to return to 1973 pay proportions? Just do what we should have done in the first place:
1) Maintain the minimum wage at about half the "real" average wage which today is about $25/hr (not the limited definition average wage reported by the gov which covers only about 80% of all personal income). LBJ’s minimum was about two-thirds of the real average -- really pushing it.
2) Forget the 1940s, old labor law DNA, card check. That legislation would leave our law behind Indonesia’s (third world), Argentina’s (second world) and most of the first world’s. At the very least import the lite version of sector-wide labor agreements from our next-door neighbor, French Canada. Sector-wide is the only (repeat "only") serious answer to the race to the bottom.

A decades long running (if only beginning to be recognized in the land of the economic awareness free) "Great Wage Depression" deserves to be addressed with better than Obama’s short-of-LBJ’s minimum wage and the Dems short of third world’s best labor legislation.

[Searching]

MS..."Despite the dramatic increase in money supply last week, it remains surprisingly difficult to get loans..."

Many citizens wouldn't pay back the money they borrowed, and now no one wants to lend them any more. What a surprise. Lenders are searching for people who will pay them back, not increased risk of future inflation that will destroy their loans. Wrong prescription.

[hari]

British Commander of Afghanistan forces has revealed - although surreptiously - there is no way to win the war against Taliban. Better to get them around the table to negotiate a peaceful solution to the current problems.

Sounds familiar! My concept of suing for peace is now becoming a real force on the ground in form of confidential British military report - somehow got into hands of UK press.

[robertdfeinman]

Doonesbury nails it today as far as McCain's foreign policy is concerned:

http://www.doonesbury.com/strip/dailydose/index.html?uc_full_date=20081005

It's all about Iraq being a proxy for the "failure" in Vietnam.

[Bruce Wilder]

Robert H Frank: "The only effective remedy is to change people’s incentives. . . ., that means . . . rules backed by strict enforcement."

Professor Frank's capacity for mushy "thinking" never ceases to amaze me.

[RW]

WRT the 'Paulson Plan,' that was always the problem and always the weakness of the plan was it not: Not just how to recapitalize the banks but how to get them to lend afterward? Ability of any potential borrower to repay or not appears to be irrelevant: Why lend to anyone at all if you can rebuild your capital by scalping a point or two at no risk.

WRT Setzer, foreign banks have their own liquidity problems to deal with and there is some reason to suspect the recent US Dollar rally may be more technical than fundamental; e.g., a run on bank Eurodollar deposits generates a demand for dollars requisite to their liquidation (see http://tinyurl.com/4mxed4 )

WRT Afghanistan, it appears to be inexorably transforming itself into a narco-terrorist state w/ NATO forces currently constituting the muscle for the Kabul gang. Was that inevitable? I don't know, but it always seemed likely.

[Richard H. Serlin]

The work of Cornell economist Robert Frank regarding positional/prestige externalities, as exemplified in Mark's link for him, is gargantuanly important and horribly underappreciated in Economics. One of the most important things we can do is to get the academic Economics community to align and prioritize their efforts much more with what will do the most good for society, and that means extensively studying and considering these gargantuan externalities throughout the field.

[Winslow R.]

Will Paulson’s Two Plans Unplug the ‘Liquidity Trap’? - Economix

This article should have had its own post :) It's rare for a banker to be so forthright. Economists, especially Delong, should study carefully.

[anne]

http://angryarab.blogspot.com/2008/10/influential-group-of-georgian.html

October 5, 2008

"An influential group of Georgian opposition leaders has mounted a blistering political campaign against U.S.-backed President Mikheil Saakashvili, accusing his government of running an autocratic regime that tramples human rights and stifles democracy." *

* http://www.mcclatchydc.com/world/story/53444.html

[anne]

So then, it turns out that having launched an attack with no provocation again Russian peace-keeping soldiers and Russian civilians in Ossetia, having occupied Ossetia bringing about a Russian military response, the dictatorial Georgian President is finally being terms so in Georgia.

The question was always how could the President possibly have attacked Russia, for that was what the attack was, if not a dictator. There was no legislative debate on Ossetia, simply a sustained bombardment in the night and an invasion ordered by the President who America at once defended, who Obama and McCain defended as much as Secretary Rice.

[anne]

Repeatedly the point about American foreign policy is just how closely the Democratic leadership follows Republican leadership, and in the likely event of a Democratic Administration is planning to continue Republican policy from Somalia to Afghanistan and Pakistan, though possibly as preferred by Afghans who are in no way against the war there will be ways found to better mask the dead. * Success in Afghanistan then as success in Iraq with proper masking of the victims of war will be easily defined and we will surely continue to be successful.

http://www.nytimes.com/2008/10/05/opinion/05nadery.html?ref=opinion&pagewanted=print

Unless the insurgents in Afghanistan are denied propaganda tools, such as the images of the dead, no number of additional troops will bring success to the American-led mission.

[hari]

It's always difficult to break the central mould of American foreign policy establishment as represented by Council on Foreign Relations - who literally pay for unemployed public servants/diplomats when new Admin comes in.

And who funds the CFR?

So what you're asking is a very difficult q' indeed. The seelf-preservation of American establishment is (their) first priority. The public may or may not appreciate their nuances and bipartisanship.

[hari]

However I am intrigued by the British Commander's report that was leaked to Sun (Lon) paper suggesting there was no military solution in Afghanistan. Can you imagine that he's literally suing for peace in Hindu Kush with Taliban as a part of gov of national unity - with Shek Omar upfront.

I had no idea he was reading our commentary on this thread either....!!!!

Now we have Pres. Karsai and British Commander of forces on the ground espousing the same long term strategy to bring peace and security in Hindu Kush. Of course, what's missing in this link is India and Iran...and Rice started that dialogue yesterday in New Delhi, according to The Hindu.

[anne]

http://www.juancole.com/2008/10/you-betcha-get-out-those-snorkels-wink.html

October 4, 2008

You Betcha, Get out Those Snorkels, *Wink*

The bad news is that 250 million years ago, global warming almost killed the planet.

'Through the darkest days, the planet was a barren wasteland. Ocean circulation, so vital to our modern climate, had shut off. Huge algal blooms sucked the seas dry of oxygen. Poisonous hydrogen sulfide built up to lethal concentrations in the water and may have even been belched into the atmosphere, suffocating organisms on shore.'

The good news is that the 160 feet along the shoreline where the waves come in aerated the water and created a narrow band where crustaceans and other forms of life could survive until the planet cooled down again.

So if humans do unalterably again poison the planet by digging oil and coal up out of the ground and pumping carbon dioxide into our atmosphere, apparently it will be we who get boiled and the lobsters that laze about all day snapping their pincers.

* http://dsc.discovery.com/news/2008/10/03/permian-extinction.html

-- Juan Cole

[Governor Palin, wink, you betcha, made it clear that global warming is a concern long before she was nominated to run for Vice President, but what is truth when deception and public ridicule and shaming will do, wink.]

[lonesome moderate]

"Governor Palin, wink, you betcha, made it clear that global warming is a concern long before she was nominated to run for Vice President, but what is truth when deception and public ridicule and shaming will do, wink."

So far as I know, nobody has claimed that Governor Palin did not show concern about global warming. What she did say was that she did not believe humans caused it.

[anne]

"Governor Palin, wink, you betcha, in an article in the New York Times made it clear that global warming is a concern long before she was nominated to run for Vice President, but what is truth when deception and public ridicule and shaming will do, wink."

Continue on with the public shaming though, wink, you betcha.