Barry Eichengreen, a prof of econ and poly sci at UC Berkeley, says the EC, ECB, and IMF were more incompetent than Greece in handling the Greek debt problem.
Still, this incompetence pales in comparison with that of the European Commission, the ECB and the IMF. The three institutions opposed restructuring in 2010 when the crisis still could have been resolved at low cost. They continued to resist it in 2015, when a debt write-down was the obvious concession to Mr Tsipras & Company. The cost would have been small. Pretending instead that Greece’s debts could be repaid hardly enhanced their credibility.
Greece has been in an economic depression for over 5 years. The Greeks elected bad politicians who spent too much money. They had retirement benefits kick in too soon for too many government-employed workers. They had too many stated owned enterprises. But how ever did the Greeks manage to ring up such high levels of debt? Reckless northern European financial institutions lent them the money. If only banks in Germany and other countries hadn't been so reckless the Greek crisis wouldn't have happened.
The northern European countries are acting like they are in no way responsible for what has occurred. Yet they recklessly let Greece into their currency union even though Greece already had too much debt and irresponsible government policies on retirement and government-owned companies. The northern European countries were irresponsible.
But the northern European elites naturally don't want to blame themselves. Even more important, the northern European countries probably believe they need to take a hard line toward Greece or else Italy, Spain, and Portugal will spend too much and create conditions for much larger defaults.
What worries me about the Greek crisis: the central banks have already shot their wad in dealing with the last global financial crisis. They can't lower interest rates much because interest rates are already very low. The governments will have a harder time using deficit spending as fiscal stimulus since they ran up so much debt already in the last financial crisis.
I hope the Euro countries really have effective tools to keep the economic crisis in Greece isolated to Greece. They like they do. We will find out.
Tyler Cowen argues In an Uber world fortune favors the freelancer. Self-starters and go-getters gain greater advantages from the ability to sell one's services easily online in smaller increments.
Drivers can earn money without working full time, and without having to wait around at taxi stands for the next passenger. The workers can use their newly acquired spare time for other purposes, including studying for college, teaching themselves programming or simultaneously offering themselves out for different sharing services: If no one wants a ride, go help someone with repairs around the house.
Think about taxi drivers today sitting in a taxi line at an airport waiting for people to walk up and ask for rides. That's terribly inefficient. If someone with a lot of talents can sign up with multiple online work bidding services (e.g. taxi driver, package delivery driver, personal shopping driver, restaurant delivery driver) they can stay busy more of the time and sometimes accomplish multiple things at once (e.g. transport a person and deliver a package).
I can even imagine interleaving security patrols with delivery services, collecting mail while people are on vacation, cutting hair, and other personal services. Do whatever pays the most for the next hour. Then switch to a higher bidding request for a different service.
Since Since a higher percentage of Uber drivers than taxi drivers are college graduates the Uber drivers are smarter on average. In theory they've got greater intellectual capacity to switch between different tasks. Will we see these sorts of people take on a wide mix of personal service jobs as online job bidding services address a larger assortment of needs?
My guess is that services like Uber will widen the already very large employment gaps between educational levels.
The War Nerd Gary Brecher says the Saudis, Qataris, Kuwaitis, Erdogan, Al Jazeera, and some factions in the West want to discredit the socialist, anti-sectarian, anti-chauvinist Kurdish YPG/J fighters in Syria basically because they are socialist, anti-sectarian, anti-chauvinist Kurds who can beat the Islamic State.
So, to sum up, there’s no evidence at all that YPG/J is involved in ethnic cleansing, sectarian massacres, or any of the other atrocities that are SOP for every other military force in Syria. Their crime is being victorious, pursuing the outright monsters of Islamic State onto Sunni Arab turf. If their neighbors were sane, they’d be dancing in the streets to see YPG/J replace IS in Tal Abyad and points south. But this is a sectarian neighborhood, and you don’t cheer for the other tribe, ever.
The amazing thing is these fighters have advanced to within 30 miles of the ISIS capital in Raqqa Syria and the vaunted Jihadists have retreated before their advance, not fighting very hard. It shows the lameness of all the other factions fighting ISIS.
I think the Kurds deserve their own state carved out of parts of Syria and Iraq at least.
Go look up where you live and check out the income range. You don't have to put an accurate income number in to find out where you stack up.
I think the geographic granularity for that method is not fine enough. If you have kids the biggest middle class question is whether you can afford to live in a school district where your kids are safe in school and have classes taught at a level that is near their level of intellectual ability.
What I wonder: If your son has a 115 IQ is he better off in a school where he's average or above or below average? Similar question for a daughter. Same answer for each?
To me the major purposes of money are insulation and convenience. I want to insulte from criminals, street people, and assorted other dysfunctional types. I also want some degree of comfort and convenience. Safety first. Then a mix of comfort and convenience. I'm closer to my ideal on safety (I think) than on comfort and convenience.
I've given up on an intellectually stimulating circle of friends around where I live and satisfy intellectual needs on the internet. Less than ideal. But good enough.
Will the cost of insulation rise?
Gail Tverberg has an interesting piece on her visit to Cuba. Keep in mind she links everything she writes about to Peak Oil.
We met one farmer who was growing rice, with the help of twenty workers he had hired. The farmer used land that he had leased for $0 per year from the government. He dried his rice on an underutilized two-lane public road. The rice covered one lane for many miles.
Cuba's credit rating is between Jamaica's and Puerto Rico's. Dominican Republic is above them all. Cuba has one quarter of the population density of Puerto Rico.
Cuba's economy suffers from gradual decay going back for decades. It needs American tourism for a big money injection.
Cuba now has a severe problem with old buildings falling apart from decay. I was told that three buildings per day collapse in Havana.
Necessity is a mother. Perhaps the Cuban communists can remain in power by turning the island into a big tourist destination.
In game of brinkmanship being played in Europe over Greece's debt one can't tell if either side will blink. Therefore it is hard to tell whether Greece will have to exit the Euro zone. What's frustrated me after reading many articles about it is just how few facts these articles provide. The emphasis is on quotes from rival negotiators. It is rare for news stories on Greece to provide the essential facts for understanding the financial debate in Europe over Greek government expenditures. This Reuters piece helps.
Greece spent 17.5 percent of its economic output on pension payments, more than any other EU country, according to the latest available Eurostat figures from 2012.
With existing cuts, this figure has since fallen to 16 percent.
The article cites an example of a bank clerk who retired at age 51. Call me unsympathetic. The average retirement ages are considerably higher. They need to raise retirement ages higher still. The government has cut the size of pensions by double digit percentage amounts. Read the article for details.
This Bloomberg article also provides some useful context. The kids have been moving back in with their parents because times are hard.
More than half of those between 25 and 34 live at home.
So I wonder about minimum wage and the ability of the economy to adjust to lower living standards.
Still missing some facts over what percentage of the Greek people work in private industry vs in government. Also, exactly what are the labor market loosening demands from the Northern Europeans? I have no idea. Cut power of private industry unions? Cut power of government employee unions? Enable more people to work without job licenses? Just guessing.
...nations can become what behavioral scientists call "altruistic punishers": people who are willing to cost themselves a great deal in order to punish others whom they believe to have behaved unfairly.
I've written altruistic punishment posts, if you are curious.
Do everyday Americans include people who are making less money because large quantities of low skilled labor have been allowed to come in and drive down wages? Hillary Clinton announcing her run for US President
“Everyday Americans need a champion,” she said then. “And I wanna be that champion.”
No one is going to reach the White House in the foreseeable future with the real goal of helping everyday Americans.
Hillary Clinton’s speech had to be long because the coalition she seeks to assemble is made up of so many different sub-units, each of which needed to be assured that its claim would be included in the total: unauthorized immigrants, indebted college students, working mothers … schoolteachers …Obamacare enrollees …: a coalition of interest groups who may not always recognize each other as allies and who cannot automatically be relied upon to show up on voting day.
Frum thinks Hillary is signaling her intention to carry on class warfare and to get stuff for people in her coalition at the expense of people not in her coalition. He points out that the retiring Baby Boomers need their entitlements to be paid by younger generations who have stagnant living standards. An increasing fraction of those younger generations aren't white and do not identify with the older retiring white folks. How's that going to work out over the next 30 years?
What's being fought over: if taxers go up on the upper classes who should get the money. Taxes need to go up just to pay for entitlements already enacted. So hard to hand out more stuff to other groups when there isn't enough money for the groups already entitled. How is this going to go down? I'd really like to know. Growing resentments possible over class, race, ethnicity, sex, religion - pretty much anything that puts people into two separate groups.
When living standards were rising quickly across the board the government could grow its share of the pie and still the various classes of working people would experience rising living standards from their growing take-home checks. So the shifting of money around between groups wasn't as obvious. But now politics has become a zero sum game. Hence the bitterness, resentment, and conflict. I expect this to get worse, not better.
My question for the 2016 election: will Democrat retirees vote for Hillary? If she gets elected will she try to cut retiree benefits to fund social programs for younger groups? She doesn't have to cut the size of Social Security checks. She could change Medicare rules in ways that reduce outlays.
Nonetheless, when the specifics in Plan A were presented as the Democratic plan and B as the Republican plan, Democrats preferred A by 75 percent to 17 percent, and Republicans favored B by 13 percent to 78 percent. When the exact same elements of A were presented in the exact same words, but as the Republicans’ plan, and with B as the Democrats’ plan, Democrats preferred B by 80 percent to 12 percent, while Republicans preferred “their party’s plan” by 70 percent to 10 percent. Independents split fairly evenly both times. In short, support for an identical education plan shifted by more than 60 points among partisans, depending on which party was said to back it.
What's important to build support: make sure the plan looks like it is opposed by the other party. What's the lesson here? The US should break up into 2 countries with overwhelming membership in each country only for members of one of the parties. Then within each country there could be more consideration of each proposal on its merits. Or each party would go to the extreme in implementing its policy preferences and we could clearly see what the consequences are for the more extreme preferences of each party.
Then we need a 3rd country for the centrists (or independents or apathetics if you prefer). The 3rd country could watch what works and what messes up badly in the other 2 countries and pick and choose policies from the other 2.
The Ayres and Mellman survey is ingenious because it empirically revealed an uncomfortable reality: the views many of us hold are largely dictated by partisanship and ideological affiliations rather than intellectual rigor.
Of course not. That'd be hard work with little return on individual investment. Plus, most aren't capable of heavy mental lifting anyway.
When I was a kid I used to think America was so great because it was a democracy and free. Now I'm pretty well disillusioned with the voters and would like to find some way to improve the leadership selection process and incentives for leaders. I do not see how to fix American democracy. Nor do I see what to replace it with.
Brendan O'Neill, editor of Spiked Online, argues that the new feminism is an attempt to make us distrust humanity and thereby justify greater management of the populace.
The new feminism — or rather its embrace by relativistic, illiberal elites — has nurtured a new misanthropy. Today, feminism promotes distrust of humanity more thoroughly than almost any other movement. With its scaremongering about rape and sexual assault, its unhinged depiction of campuses as hotbeds of male abuse, its description of the West as a ‘sea of misogyny’, its presentation of the internet as a site of foul commentary, its claim that the streets are unsafe, and its view even of the home — that heart in a heartless world — as a place of violence against women and children, the new feminism gives the impression that humanity is rotten, untrustworthy, requiring closer policing and censorship in order to keep his passions and madnesses in check. Here, too, we are really witnessing modern society’s own distrust of humankind coming to the fore, once again dressed in new-feminist garb rather than revealing its true essence: which is that, as the values of the Enlightenment are unravelled, so the public comes increasingly to be seen as a problem in need of management rather than as a sentient demos capable of freedom and greatness.
The Enlightenment project has been on the retreat for a long time. Early 19th century progressivism is now buttressed with new feminism. I expect a continued erosion of fundamental rights. Got no solution to the problem in the next 10 years.
The arrest rate in Baltimore has dropped about 40% since the Freddie Gray funeral in Baltimore. Police have to move around in groups to do arrests due to hostility from portions of the black populace. This hurts the rest of the black populace, police, and everyone else. The result is a test of theories about whether too many people get put in prison. See Alex Tabarrok's post In Baltimore Arrests are Down and Crime is Way Up. He's got cool graphs that reduce the cognitive load needed to understand what is going on there.
Over 10 years ago Alex and Jonathan Klick published a paper that showed increased policing in Washington DC during terror alerts led to reductions in crime that provided benefits well in excess of the additional cost of police. Alex is of the opinion that higher crime areas are under-policed. So the Baltimore hostility to police makes an already bad situation much worse.
Ever feel nostalgic for the good old days? The intellectual godfather of al-Qaida laments how ISIS disrepects al-Qaida and behaves savagely. If only Osama Bin Laden was around to proclaim the Caliphate is a fraud things would be different.
Both men are particularly appalled, they said, by the way Isis has used their scholarship to cloak its savagery in ideological legitimacy, to gain recruits and justify its battle with al-Qaida and its affiliates. “Isis took all our religious works,” Maqdisi said. “They took it from us – it’s all our writings, they are all our books, our thoughts.” Now, Abu Qatada said, “they don’t respect anyone”.
Such impudent behaviour, the two men agreed, would never have been accepted in the days when Bin Laden was alive. “No one used to speak against him,” Maqdisi lamented. “Bin Laden was a star. He had special charisma.”
Maqdisi's buddy Abu Qatada agrees with him. At least they've got each other to sympathize with.
Meanwhile in the ISIS zone the supply of female slaves is glutting the market and driving down prices: Isis slave markets sell girls for 'as little as a pack of cigarettes', UN envoy says. No wonder ISIS doesn't have a problem recruiting lots of young men to fight for Jihad.
America is too politically correct to handle ISIS. What Russia ought to do: offer to put together a mercenary force to destroy ISIS. Get Iraq and Iran to fund it. I bet ISIS could be destroyed for $10 billion. Greg Cochran thinks 10,000 mercs would be enough to destroy ISIS. Iran is therefore being very cost ineffective in its strategy in Syria where it spends $6 per year to prop up Assad.
The biggest surprise in an NY Times article about the Greek debt negotiations is that the IMF thinks Europe needs to take a big loss on its loans to Greece because the current Greek debt load is 180% of Greek GDP and this is just not sustainable. But the Europeans won't cut the debt load.
It was irresponsible for the Europeans to lend so much money to the Greek government in the first place. It takes two to tango.
This reminds me: back during the Reagan Administration the US deficit went up sharply. This was blamed at the time on Reagan tax cuts and defense spending. But J.W. Mason says most of the spike was due to high borrowing costs due to Fed chair Paul Volcker's hiking up the interest rate.
While the overall deficit was about 4.5 points higher under Reagan compared with the average of the 1960s and 1970s, the primary deficit was only 1.4 points higher. So over two-thirds of the increase in deficits was higher interest spending. For that, we can blame Paul Volcker (a Carter appointee), not Ronald Reagan.
Why does that matter? The US government has a much higher level of debt relative to GDP than it did in the 1980s. If interest rates were to rise sharply the US would face its own debt crisis.
The California state senate has voted to raise minimum wage to $13 per hour. Whatever can they be thinking except of course to help VC-funded robotics start-ups? That's very forward-thinking. I normally do not expect such clever and wise industrial policy to come out of a legislative body.
Still, this does not go far enough. If LA, SF, San Jose, Sacramento and some other major cities in California were to put themselves on paths toward $20 per hour minimum wage then we'd witness a huge acceleration in funding for robotics development. I think this would be great.
If New York and Massachusetts want their high tech industries to get ahead of Silicon Valley here is your chance. $25 per hour minimum wage would do it. Granted, you folks would need to phase it in. Step up to $10 per hour and then go up, say, $1.50 per hour every year. Knowing that $25 per hour will be the minimum by 2025 would concentrate a lot of minds on cost reduction and automation.
I also see a big opportunity for cities. How to turn gentrification into overdrive? High minimum wage. This will drive out lower classes and make neighborhoods ripe for upgrade to only high income residents. Any city that takes this route will lower costs of social welfare programs, get big boosts in school performance, and create demand for very upscale services.
What the Iraqi army left behind in Mosul when it decided it did not want to fight ISIS: Iraqi PM Haider Al-Abadi Says Forces Lost 2,300 Humvees to ISIS. Lots of ammo, tanks, guns, and other equipment too.
Rudaw columnist David Romano says ISIS also got a pretty big haul of weapons when they captured Ramadi too.
Following the capture of Ramadi, ISIS also published photos of huge stockpiles of (mostly American) ammunition crates, machine guns, rocket-propelled grenades and other shiny new weapons that Iraqi forces left behind – which makes one wonder if someone is not telling the truth about lacking supplies and ammunition? Or perhaps supplies and ammunition were only delivered to Iraqi Army Shiite fighters who do not see the point of risking their lives to defend a Sunni town, while Sunni defenders of the city with a will to fight had little to work with?
50,000 ghost soldiers pay their commanders a cut of their pay so they do not have to show up. Others do not get paid.
While Iraqi security forces vastly outnumbered ISIS fighters, morale was low because troops had been stationed in the city for at least a year without leave or reinforcements, the officials said. Many soldiers had not been paid for as long as six months, had not been properly resupplied and many armored vehicles sat in disrepair because lack of parts, they said.
The Iraqi Shiites (at least in the Army) lack a will to fight. Should we let them get conquered and ruled again by Sunnis? Or let the Iranians bring in lots of fighters and conquer the Sunnis? We don't want our own soldiers to die there. Should we care at all?
Unfortunately, this enduring exaggeration of external dangers can blind us to real problems. In fact, if you look at the past 25 years or so, it is abundantly clear that external enemies have done far less damage to the United States than we have done to ourselves. Saddam Hussein was a very bad man, but he wasn’t threatening or harming Americans after we kicked his ass in 1991. Ditto Slobodan Milosevic, Muammar al-Qaddafi, and the whole wretched Assad family. They were all problems, to be sure, but they weren’t threatening many Americans and U.S. leaders did business with each of them at one time or another.
The Iraq war cost us a few trillion dollars and our assorted interventions in the Middle East against dictators have let loose civil wars and the most repressive strains of Islam.
I agree with Stephen Walt. Our biggest problems by far are internal. The Eternal War wing of the Republican Party has alienated me fairly completely. Its allies on the Left ditto.
Is the large increase in inequality in America in recent decades driven by wider pay ranges within each corporation? No. The big divergences in salaries are happening between corporations.
The bigger driver of inequality, then, is that companies are becoming more specialized: Some employ mostly high-paid workers, and others mostly low-paid ones.
I'd like to see companies ranked by average pay vs profit growth rate. Are the companies with highly paid workers on average growing their earnings faster than companies with lower paid workers?
There is another angle to this story: Outside orkplaces both automation and greater segregation of neighborhoods by income are reducing the exposure of well paid people to lower income people. Well, the same phenomenon is playing out inside workplaces. It used to be that big industrial corporations employed most of the higher and lower earning people. Now companies that do a lot of design and development outsource manufacturing. Also, more manufacturing is done by machines. So companies are becoming places which insulate people by economic and cognitive strata.
Companies gain public relations advantages if they only hire highly paid workers who generate high value. They are able to brag about their great benefits and working conditions. By contrast, look at companies that utilize a lot of low value and low paid workers, Uber, for example,. Social Justice Warriors are upset at Uber over how much Uber drivers make. Reihan Salam argues that it isn't Uber's fault that there is glut of people available to do low skilled work with limited demand. I agree with Reihan. But the SJWs really don't want to know this.
My guess is that neither Plouffe nor Whetstone will make the most compelling case for Uber, which is that service jobs are often pretty terrible and that even if driving on the Uber platform is terrible too, it is, at the very least, less terrible. That is not a very sexy slogan. Yet it happens to be true. What critics of Uber need to understand is that their real gripe is not with Uber. It’s with larger forces that are making it extremely hard for service workers to make a good living, whether they’re driving cabs, washing dishes, mowing lawns, keeping offices and homes neat and clean, or doing clerical work.
Of course, a company with an overwhelmingly highly paid workforce can hire some administrative assistants and janitors, pay them really well, provide lots of perks in the workplace, and tell the world that the corporation's leaders are a bunch of great guys. This can work. I expect we'll see a lot more of this in the future as companies increasingly specialize by doing work in a narrow cognitive range.
Gun violence is up more than 60% compared with this time last year, according to Baltimore police, with 32 shootings over Memorial Day weekend. May has been the most violent month the city has seen in 15 years.
In Milwaukee, homicides were up 180% by May 17 over the same period the previous year. Through April, shootings in St. Louis were up 39%, robberies 43%, and homicides 25%.
She lists other cities with rising crime rates. Click thru and read the extent of it. Then she blames anti-cop messages from the media, Obama Administration, and some state and local governments. This seems plausible. The elites are pushing to slash incarceration rates (in spite of recidivism rate data) and state governments, partly due to financial woes, have already begun locking up fewer people starting about 6 years ago. But the reversal in crime rates in the most pathological cities happened so suddenly it must be a reaction to the rhetoric and legal threats to cops flowing from elite and media reaction to Ferguson and Baltimore. The cops are intimidated and fear prosecution for how they have to deal with dangerous people. The criminals are emboldened.
The upside: Some people will be enlightened by the resulting crime wave. Our elites have accidentally or intentionally initiated an experiment that causes a big pull-back by police and have intentionally initiated an experiment to reduce incarceration rates. The results will be educational.
Do not become a victim of the experiment. Think about how this impacts you personally and how it impacts friends and family. Become more careful about where you choose to live and where you choose to visit. Do not put your life at risk.
Update:Click thru to see 10 cities where you shouldn't live. The only surprise for me was Little Rock, Arkansas. Didn't know it was that violent.
Nationwide, 368 violent crimes were reported for every 100,000 people in 2013. Such crimes include murder, rape, aggravated assault, and robbery. In America’s 10 most dangerous cities, there were more than 1,300 violent crimes per 100,000 residents.
If you read this blog I'm going to guess you live in a relatively low crime area that is below the national average. Why do I guess that? I expect my readers are better educated than the average American and have the sense to choose to live in better neighborhoods.
Ambrose Evans-Pritchard summarizes the doom and gloom about the world economy. The worst part of it is that governments ran up big debts in the last downturn and central banks lowered their interest rates and never raised them again. They've got a much smaller tool set to use the next time the world economy starts contracting.
Stephen King from HSBC warns that the global authorities have alarmingly few tools to combat the next crunch, given that interest rates are already zero across most of the developed world, debts levels are at or near record highs, and there is little scope for fiscal stimulus.
"The world economy is sailing across the ocean without any lifeboats to use in case of emergency," he said.
500 basis points, 500 basis points, my kingdom for 500 basis points!
The next time the world economy goes into a recession the central banks will not be able to cut interest rates the needed 500 basis points (5%). Interest rates are well below that. What's left? Governments could run big budget deficits and have central banks buy their bonds.
Should you care about all this? That just depends. Are you vulnerable? Suppose jhard times come. Could your employer automate your job? Outsource it? Just shut down the line of business you are in? Go bankrupt?
In your career the best defense is a good offense. Step up your game. Take on more responsibilities. Change to a new role that requires you to learn much more. Take classes to learn new skills. Move away from a stagnant part of the economy to a city that has high tech growing companies. Don't just wait for the ax to fall.