Scary Future

Daniel Costello, "Golden Opportunity"

Historically, U.S. Treasury bills are considered to be one of the world's safest investments. But growing insecurity about the long term health of the U.S. economy and recent weakness in the dollar benefits gold, which is often used as an alternative asset hedge to a depreciating dollar.

What if investors are moving away from the dollar for good? Foreigners own a little more than half of publicly-held U.S. government securities, according to the Treasury Department. So if these foreigners - both central banks and private investors - decided to give their Treasury portfolio a heave-ho, it could leave to a devaluation of the greenback and rising interest rates, and the cost of borrowing for consumers and businesses could rise. That would be bad for economic growth.

The Economy: Meet the Good News, Same As the Bad News

Paul Krugman, "Too Little of a Good Thing

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that's also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we're looking at many years of high unemployment.

And the really bad news is that "centrists" in Congress aren't able or willing to draw the obvious conclusion, which is that we need a lot more federal spending on job creation ....

.... Last week's G.D.P. report showed the economy growing again, at a better-than-expected annual rate of 3.5 percent. As Mark Zandi of Moody's Economy.com put it in recent testimony, "The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery."

But it's not doing enough ....

.... What I keep hearing from Washington is one of two arguments: either (1) the stimulus has failed, unemployment is still rising, so we shouldn't do any more, or (2) the stimulus has succeeded, G.D.P. is growing, so we don't need to do any more. The truth, which is that the stimulus was too little of a good thing — that it helped, but it wasn't big enough — seems to be too complicated for an era of sound-bite politics.

But can we afford to do more? We can't afford not to ....

.... O.K., I know I'm being impractical: major economic programs can't pass Congress without the support of relatively conservative Democrats, and these Democrats have been telling reporters that they have lost their appetite for stimulus.

Just Because

(Some links that have been collecting dust.)

• Fish, Stanley. "What Should Colleges Teach?" Think Again. The New York Times. August 24, 2009.


• Krugman, Paul. "How Did Economists Get It So Wrong?" The New York Times. September 6, 2009; page MM36.


• Corbett, Sara. "The Holy Grail of the Unconscious". The New York Times. September 20, 2009; page MM34.

Wall Street's New World Order

Matt Taibbi, "The Big Takeover"

As complex as all the finances are, the politics aren't hard to follow. By creating an urgent crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. There is a reason it used to be a crime in the Confederate states to teach a slave to read: Literacy is power. In the age of the CDS and CDO, most of us are financial illiterates. By making an already too-complex economy even more complex, Wall Street has used the crisis to effect a historic, revolutionary change in our political system — transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below.

The most galling thing about this financial crisis is that so many Wall Street types think they actually deserve not only their huge bonuses and lavish lifestyles but the awesome political power their own mistakes have left them in possession of. When challenged, they talk about how hard they work, the 90-hour weeks, the stress, the failed marriages, the hemorrhoids and gallstones they all get before they hit 40.

"But wait a minute," you say to them. "No one ever asked you to stay up all night eight days a week trying to get filthy rich shorting what's left of the American auto industry or selling $600 billion in toxic, irredeemable mortgages to ex-strippers on work release and Taco Bell clerks. Actually, come to think of it, why are we even giving taxpayer money to you people? Why are we not throwing your ass in jail instead?"

(h/t to Mo.)

Really, I'm Actually Posting Friedman

Thomas L. Friedman, "The Inflection Is Near?"

Let's today step out of the normal boundaries of analysis of our economic crisis and ask a radical question: What if the crisis of 2008 represents something much more fundamental than a deep recession? What if it's telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: "No more."

We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...

We can't do this anymore.

It's Getting Harder Not To Notice

E.J. Dionne Jr., "Capitalism's Reality Check"

The biggest political story of 2008 is getting little coverage. It involves the collapse of assumptions that have dominated our economic debate for three decades.

Since the Reagan years, free-market cliches have passed for sophisticated economic analysis. But in the current crisis, these ideas are falling, one by one, as even conservatives recognize that capitalism is ailing.

You know the talking points: Regulation is the problem and deregulation is the solution. The distribution of income and wealth doesn't matter. Providing incentives for the investors of capital to "grow the pie" is the only policy that counts. Free trade produces well-distributed economic growth, and any dissent from this orthodoxy is "protectionism.