The Economy & Finance

Jun 01

2008, the sequel?

Friday, June 1, 2012 at 10:21 pm Mountain Time

Unless your name is Mitt Romney, this is terrifying.

The head of the World Bank yesterday warned that financial markets face a rerun of the Great Panic of 2008.

On the bleakest day for the global economy this year, Robert Zoellick said crisis-torn Europe was heading for the ‘danger zone’.

Mr Zoellick, who stands down at the end of the month after five years in charge of the watchdog, said it was ‘far from clear that eurozone leaders have steeled themselves’ for the looming catastrophe amid fears of a Greek exit from the single currency and meltdown in Spain.

The flow of money into so-called ‘safe havens’ such as UK, German and US government debt turned into a stampede yesterday.

In Berlin the two-year government bond yield fell below zero for the first time, with the bizarre result that jittery international investors are now paying – rather than being paid – for lending to Germany.

There was a raft of dismal economic news from around the world, with manufacturing output falling in Britain and Europe, unemployment jumping in the eurozone and America, and fast-emerging economies such as Brazil and China showing signs of running out of steam. …

Mr Zoellick warned that the coming months could be as bad as the collapse of US investment bank Lehman Brothers in 2008.

He said: ‘Events in Greece could trigger financial fright in Spain, Italy and across the eurozone. The summer of 2012 offers an eerie echo of 2008.

Money quote: “Eurozone leaders need to be ready. There will not be time for meetings of finance ministers to discuss the outlook and debate the politics of incrementalism. In panicked markets, investors flee to safe assets, sparking other flames.”

Anyone out there think Eurozone leaders are ready, or have any reasonable prospect of becoming ready? Or that our policymakers are, for that matter?

Anyone? Anyone? Bueller?


May 24

One Eurobond to Rule Them All

Thursday, May 24, 2012 at 9:38 am Mountain Time

With the news of Germany standing fast against “Eurobonds,” and the Eurozone crisis worsening as a result of the impasse, I posted this silly tweet last night:

Fear! Fire! Eurobonds! Awake! #PANIC

Political Math said he found this very funny, to which I replied with a faux-quote from Angela Merkel: “Let the little people blow.” This caused a brainstorm, as I suddenly realized there’s waaaay more material there. Lord of the Rings quotes are perfect for this situation! (And every situation, really. But particularly this one.) I immediately couldn’t believe I hadn’t thought of this before. Anyway, the flood gates opened:

“Understand, François, I would use these eurobonds out of a desire to do good. But through me, they would wield a power too great and terrible to imagine.”

“One Bond to rule them all; One Bond to find them; One Bond to bring them all; and in the darkness bind them.”

“Give Greece the weapon of the bankers. Let us use it against them!”
“Greece cannot wield the Eurobond! None of us can.”

Merkel to Hollande: “I will not lead the Eurobond within a hundred leagues of your city.”

“I am the Servant of the Anti-Inflationary Fire, Wielder of the Flame of Weimar. Dark Eurobonds will not avail you, Flame of Udûn!”

European Council: “If you ask it of me, I will give you the right to issue the One Bond.”
Merkel: “You offer it to me freely? I do not deny that my heart has greatly desired this. In the place of a Council you would have a Queen! Not dark but beautiful and terrible as the Morn! Treacherous as the Seas! Stronger than the foundations of the Earth! All shall love me and despair! … I have passed the test. I will diminish, and go into the West, and remain Merkel.”

“Greece is demanding Eurobonds from the south, Spain from the west. And France, you say, has betrayed us. Our list of allies grows thin.”

I eventually broadened the joke to quotes more generally about the Euro situation, not necessarily Eurobond-related:

“I know what you saw, for it is also in my mind. It is what will come to pass if you should fail. The Eurozone is breaking. It has already begun.”

“We Germans cannot hold back this storm. We must weather such things as we have always done.”
“But you’re part of this world! Aren’t you?! You must help! Please!”

“The Euro cannot be destroyed by any craft that we here possess. It was made in the fires of Frankfurt. Only there can it be unmade. It must be taken deep into the heart of the European Central Bank, and cast back into the fiery chasm from whence it came!”

And lastly, my personal favorite:

[Greece throws a few hundred billion euro down a hole.]
Germany: “Fool of a Greek! Throw yourself in next time and rid us of your stupidity!”

UPDATE: Brandon Minich chimes in with more good ones:

(Conversation in the 1990s)
“The European currencies are strong, my Lord. Their roots go deep.”
“Rip them all down!”

Hollande: “What is this new devilry?”
Merkel: “A Bank Run. A demon of the ancient world. This foe is beyond any of you. Run!”

Merkel: “My currency is spent. My chancellorship has ended. Greece has deserted us. ABANDON YOUR DEPOSITS! FLEE, FLEE FOR YOUR CURRENCIES!”

“The Euro is burning…already burning.”
“It’s not dead! It’s not dead!”
“Farewell, Hollande. Go now and die in what way seems best to you.”

Heh! #nerds


“A great bank run, you say?”
“All Barcelona is emptied.”
“How many?”
“Ten thousand strong at least.”
“Ten thousand?!”
“It is a bank run bred for a single purpose: to destroy the Eurozone. The banks will be insolvent by nightfall.”

“I will not risk open #PANIC.”
“Open #PANIC is upon you, whether you would risk it or not.”

“A red sun rises. Red ink has been spilled this night.”

Panagiotis Pikrammenos: “Go back to the abyss! Fall into the nothingness that awaits you and your fellow lefties!”
Alexis Tsipras: “Do you not know death when you see it? This is my hour!”

“Arise, Voters of Syriza! Spears shall be shaken, shields shall be splintered! A sword day… a red day… ere the sun rises! DEATH!! DEATH!!!”

France to Netherlands re: opposition to eurobonds: “How long has it been since Germany bought you? What was the promised price?”

“Angela… they cannot win this fight. They are all going to die!”
“Then I shall die as one of them!”

“Is there any hope, Angela, for Spain and Italy?”
“There never was much hope. Just a fool’s hope.”

“I’m… naked in the dark, with nothing, no veil… between me… and the € of fire! I can see it… with my waking eyes!”

“Sons of Germany, of France, my brothers! I see in your eyes the same fear that would take the heart of me! A day may come when the Euro fails, when we forsake our friends and break all bonds of currency. But it is not this day! An hour of woes and shattered banks, when the unity of Europe comes crashing down! BUT IT IS NOT THIS DAY! This day we bail out Greece! Again!”

Merkel: “Forgive me. I mistook you for Sarkozy.”
Hollande: “I am Sarkozy. Or rather, Sarkozy as he should have been.”

UPDATE: Welcome, Instapundit readers! Thanks for the link, Glenn! ‘Tis my first Instalanche in a while.

To encourage discussion, I’ve temporarily disabled mandatory comment registration. Chat away!

(Regular readers, if you’re presently logged out, you can still log in here.)


“You did not seriously think that a small Mediterranean economy could contend with the will of the Bond Markets? There are none who can.”

“Smoke rises from the Acropolis of Doom. The hour grows late, and Hollande the Red rides to Berlin, seeking my counsel. For that is why you have come, is it not? My old friend.”

UPDATE: Uh-oh. We have crossover:

“I felt a great disturbance in the Force, as if millions of bondholders suddenly cried out in terror and were suddenly silenced.”

UPDATE: Back to LOTR, with still more jokes, some from comments

“One does not simply walk out of the Eurozone. Its iron gates are guarded by more than central bankers. There are technocrats there who do not sleep. And the great € is ever watchful. Not with ten thousand drachma could you do this. It is folly.”

“The Greeks delved too greedily and too deep. You know what they awoke in the darkness of the Bundesbank.”

“The Euro stands upon the edge of a knife. Stray but a little, and it will fail, to the ruin of all. Yet hope remains while Germany is true.”

“I think you should leave the Euro behind, Greece. Is that so hard?”
“Well, no. … And yes. Now it comes to it, I don’t feel like parting with it. It’s mine, I found it. It came to me!”
“There’s no need to get angry.”
“Well, if I’m angry, it’s your fault! It’s mine… my own… my precious…”
“Precious? It’s been called that before, but not by you.”
“What business is it of yours what I do with my own currency?”
“I think you’ve had the Euro quite long enough.”

“We swears we will enact austerity measures! We swears to serve the master of the Euro. We will swear on… on… the Euro!”

Or, if we make the drachma, instead of the Euro, the “precious”…

“We wants the drachma back. We needs it. Must have the precious. They stole it from us. Sneaky little Eurocrats. Wicked, tricksy, false!”


“Strangers from distant lands, friends of old, you have been summoned to answer the threat of debt. Europe stands upon the brink of destruction. You will unite or you will fall. Each nation is bound to this fate, this one doom. Bring forth the Euro.”

“I owe nothing.”
“Indeed. I can avoid paying my debts for a while if I wish, but to make them disappear entirely, that is a rare gift.”

“They were nations once. Great nations. Then Germany the deceiver gave them Euros of power. Blinded by their greed, they took them without question — one by one, falling into darkness. They are the Euro-gûl. Nation-wraiths, neither living nor dead.”

“I’ve put this off far too long … I regret to announce that this is the end! I am going now. Goodbye!” [slips drachma on finger, vanishes]

Oct 08

My latest meta-political tweet-rant

Saturday, October 8, 2011 at 9:17 pm Mountain Time

Last night, inspired by the generally unsatisfying, incomplete, and often vacuous nature of the tweets I keep seeing from both Left and Right about the “Occupy Wall Street” movement and the ongoing economic calamity — and also by this National Review article, among other big-picture economic pieces I’ve read recently — I went on another one of my extended Twitter monologues of political pessimism and #PANIC. Before it disappears into the nothingness of Twitter’s terrible archive system, I thought I’d post it here for posterity. Warning: some profanity.

Ken Gardner (@kesgardner): America is exceptional and I cherish the system that makes us so: capitalism. I like working hard and being rewarded for it. #iamthe53

Me: Do you like the stagnation in real wages since 1973? #iamconcerned MT @kesgardner: I like working hard and being rewarded for it. #iamthe53

How did we collectively fail to notice that, economically, the American Dream has been moribund for decades? #IAmStagnantRealWagesSince1973

I am not the 99. I am not the 53. I am sick of rigid ideological perspectives that obscure what matters. #IAmStagnantRealWagesSince1973

I am not a number. I am worried about my girls inheriting a crappier America than mine. I am angry at failed leadership & failed ideologies.

I am angry that a broken political system, a worthless press, demagoguery, ignorance & fairy tales prevent America from fixing its problems.

I am sick of a politics dominated by rigid ideologues, Left & Right, whose misplaced self-confidence is exceeded only by their utter myopia.

I hate the inadequacy of our politics AND the sniveling self-regarding Bloombergian vacuousness of many who posture against that inadequacy.

It’s not that we need to be more “bipartisan.” Pitched battles are fine, when informed by facts & reason. The problem is WE NEED TO SOLVE SHIT.

For DECADES we’ve had an energy crisis, a health care crisis, a debt crisis… crisis after crisis. WTF happened to us? We won 2 world wars!

The American Dream was a thing once. Now it’s not, but we pretend it is. Our “leaders” tell us fairy tales while leaving our crises unsolved.

In the end, the problem isn’t Obama, or Bush, or Congress (though they all suck). The problem is us. All of us. Not Left, not Right. Us.

Or maybe the problems of the modern world are just too complex to solve. But again I go back to, DAMMIT WE WON TWO WORLD WARS.

#TeaParty and #OccupyWallStreet have more in common than they’ll ever know. They see a tiny sliver of the truth & think it’s the whole truth.

Why does our binary political system force us to choose who’s f**ing everything up, government or the private sector? What if THEY BOTH ARE?

I have three daughters. I fear they will inherit from my generation a poorer, crappier America, in decline. For this, I blame everyone.

I boldfaced that “more in common than they’ll ever know” tweet because I particularly like it. I really think that’s true. The Tea Party isn’t wrong about our unsustainable debt; they’re just wrong in their myopic focus on that one crisis among many, and in their blind adherence to rigid conservative ideology in seeking solutions to our many problems. Likewise, Occupy Wall Street isn’t wrong about financial sector greed and malfeasance and how it’s screwed us over; they’re just wrong in their myopic focus on that one cause among many for the current mess we’re in, and in their blind adherence to rigid liberal ideology in seeking solutions to our many problems.

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Aug 11

Party like it’s 2008?

Thursday, August 11, 2011 at 9:16 am Mountain Time

Are we experiencing a repeat of the 2008 financial crisis? The New York Times explores the question. It’s a good overview; I encourage you to read the whole thing. I am inclined to side with the pessimists, but I hope I’m wrong.

More broadly, I fear we’ll look back at 2010 as a “dead cat bounce” rather than a genuine (if weak) recovery between recessions, and likewise we’ll view 2011 through whenever not as a “double dip,” but as part two of an ongoing Great Recession/Depression that started in 2007 and has not yet truly ended, and won’t for a while. The structural flaws in the U.S. and global economies that were thrown into sharp relief in 2008 and 2009, then masked by frantic government efforts to prevent a depression, have not actually been solved, even if analysts and investors spent much of 2010 and early 2011 ignoring them and trying to forget about them. The housing market is still in deep doo-doo; global trade imbalances are still massive; we still don’t have a plan for replacing excessive, debt-fueled consumer spending as the “engine of the economy”; and we’ve simply shifted a lot of debt from companies to governments, so instead of too-big-to-fail banks threatening the stability of the economy, we have too-big-to-fail countries doing so, with no one left to backstop them or bail them out (and no political will for additional bailouts of any kind anyway).

Frankly, I never really understood the optimism of 2010 — it always seemed like the argument for pessimism was detailed and nuanced and well-thought-out, while the argument for optimism was basically “meh, we’ll muddle through, somehow or other.” But I partially supressed my doubts because I recognize my own lack of knowledge in this area, and have little choice but to trust the experts. Yet those experts made a lot of valid-seeming points back in 2008-09 about the depth of the problems broadly underlying the crash, and I’ve never really understood the logic of expecting a lasting recovery, even a weak one, before we make more progress toward solving those problems. To make a college football analogy (P.S. THREE WEEKS TILL KICKOFF!!! WHEE!!!), the “recovery” of 2010 felt like a situation where a team is widely and reasonably expected to struggle, because it lacks a proven QB or a solid defense, but then it pulls a somewhat flukey upset in its first game, and suddenly it’s deemed a national title contender… even though it still lacks a proven QB or a solid defense. The pessimists still have the better of the argument, and will probably be proven right in the end.

All the hand-wringing about corporations hoarding cash, holding onto their record profits instead of investing or hiring, misses the possibility that these companies are just more clear-eyed than the rest of us, and recognize what I increasingly suspect is true: that we’re in for a very rough decade, and building up a rainy-day fund (or a rainy-decade fund) before the s**t hits the fan — again — might not be such a bad idea. Again, I hope I’m wrong.

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Aug 08

Fear! Fire! Foes! Awake!

Monday, August 8, 2011 at 2:33 pm Mountain Time

Hey, I needed a different title than #PANIC. Already used that one. And I’m saving #DOOM for a plunge of 800 points / 8% or more. (Tomorrow! Tomorrow! I love ya, tomorrow!) Anyway…

I have a pet theory about this. Sometimes, I think Wall Street gets what it wants from politicians, expecting to feel reassured by it — but instead, investors realize, “wait a minute, I’m still freaked out,” and then they sell. I recall something like this happening after the stimulus passed and/or after TARP succeeded on take 2 (I can’t recall which, or if it was both). It happened last week after we averted default. And I think it might be happening now, with regard to the European Central Bank’s much-anticipated decision to buy Italian and Spanish bonds.

I know we Americans want to make this all about us, as per usual, but really, Europe is the primary risk at the moment, methinks. The S&P downgrade is mostly just a potent symbol; its substance is based on stuff everyone already knew. It alone shouldn’t tank the markets like this. But in combination with continued European fears, and broader economic anxieties? Yeah. This is a classic #PANIC.

[/armchair market analysis]

More pretty (ugly) charts after the jump!

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Aug 07

Two scary economic charts

Sunday, August 7, 2011 at 10:39 pm Mountain Time

As if recent events haven’t created enough cause for #PANIC already, I’ve recently seen a couple of charts of economic data that really put things into (scary) perspective.

One is the “real” monthly employment picture since 2009, subtracting out the 150,000 jobs that must be added per month just to keep up with population growth:


The other requires a bit more explanation. Nate Silver explains:

The rate of growth [in the U.S. economy] has in fact been quite steady over the long run: since 1877, the annual rate of G.D.P. growth has averaged about 3.5 percent after inflation. … I’ve plotted how far ahead or below of the long-term trend that the economy is at any given time. …


Here, you can really see the effects of the Great Depression. In early 1933, G.D.P. was about 40 percent below what it “should” have been based on long-term growth rates. But the economy recovered at a rapid clip over the course of the next decade. In fact, G.D.P. temporarily overshot, exceeding the long-term trend during World War II as America employed all the industry and labor that it could get its hands on to help with the war effort.

By this measure, most post-World War II recessions are barely detectable. They look more like reversions to the mean after years of above-average growth.

The Great Recession, however, is highly visible. G.D.P. had already been a couple of percentage points below the long-term trend before it began, as the recovery from the 2001-2 recession was not particularly robust. But things got much worse in a hurry.

Looked at this way, in fact, not only is the worst not yet over — the situation is still deteriorating. Every quarter that the economy grows at a rate below 3.5 percent, it loses ground relative to the long-term trend. Although the economy grew at a 3.8 annual percent rate from fall 2009 through summer 2010, over the past year growth has averaged just 1.6 percent, putting us farther behind.

Right now, gross domestic product is about $13.3 trillion dollars, adjusted for inflation — when it “should” be $15.7 trillion based on the long-term trend. That puts us more than 15 percent below what we might think of as full output, by far the worst number since the Great Depression.

If the economy were to enter another recession and shrink by 1 percent over the course of the next year, we would wind up 19 percent behind the long-term trend. But even if it were to grow at 2 percent, we would still be 17 percent behind.

What we need, instead, is above-average growth — in fact, quite a lot of it. Even if the economy were to begin growing at a 5 percent annual rate, it would take until 2018 for it to catch up to the long-term trend.

Anyone think that’s gonna happen?

Realistically, we’re looking at that ugly red dip extending well into the 2020s. At some point, doesn’t such an extended period of economic difficulty start to approach a functional definition of “depression”? Or at least a “lost decade” or two?

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Aug 02

Quote of the day

Tuesday, August 2, 2011 at 10:10 am Mountain Time

“One of the most important things about this piece of legislation is that never again will any president, of either party, be able to raise the debt ceiling without being held accountable for it by the American people.” –Mitch McConnell, just now.

Translation: henceforth, members of Congress, of both parties, will feel even more freedom to pass irresponsible budgets, pretending that they are somehow unaware that they are requiring the president to borrow money, since it’s mathematically impossible to cover the spending mandated by Congress with the revenue allowed by Congress. They’ll do this because they know they can pretend to be “deficit hawks” when the president makes the necessary request to borrow the money that Congress has mathematically required him to borrow, at which point they can deny simple arithmetic and create a big f***ing months-long dog-and-pony show about “fiscal responsibility,” blaming the president for the arithmetic of the prior years’ budgets that Congress passed.

Didn’t the Tea Party require a reading of the Constitution at the beginning of this session of Congress? Apparently it didn’t sink in. Congress has the power of the purse. Not the President. Congress.

Our “leaders” are a disgrace to this nation. And because we allow them to be our leaders, so are we.


UPDATE: The bill passes.

Aug 01

Deal reached; now what?

Monday, August 1, 2011 at 12:17 pm Mountain Time

President Obama, Speaker Boehner and Senate leaders in both parties have agreed to a deal that would effectively raise the debt ceiling through 2012 while enacting a mostly Republican-friendly package of spending cuts (and no new revenues). It would also set up a likely showdown in December over a second wave of deficit-reduction measures as recommended by a bipartisan congressional “supercommittee” — assuming the committee members, who will be evenly split between the parties, can agree. If they can’t agree, or if Congress doesn’t pass their recommendations, harsh across-the-board cuts in defense spending, Medicare and other programs would follow — a “trigger” that is designed to force both parties to bargain in good faith. But hey, at least the “trigger” won’t be default.

Tea Partiers, having quite clearly “won” the negotiations, are, of course, outraged. So are liberals, who see this as yet another Obama capitulation (though really, I’m not convinced Obama had that much choice in the matter, when his opponents were willing to “shoot the hostage” — in this case, the economy — if their demands weren’t met). Consequently, although it’s likely to breeze through the Senate, it’s not at all clear the deal will pass the House, where there are fewer moderates and more hard-line, unruly partisans on both sides of the aisle.

House Republican leaders are touting the new deal as better than the measure that they narrowly, and belatedly, passed last week. But the provisions on the Balanced Budget Act are already attracting criticism from conservatives.

Twenty-two House Republicans voted no on that bill, and it is likely that there will be more defections on the measure embraced by President Obama Sunday night. If every Democrat voted against it, Republicans could only afford about two dozen “no” votes and still pass it. …

Yet it remains unclear how many Democrats will vote yes on the debt-limit bill. Rep. Raul Grijalva (D-Ariz.), a co-leader of the Congressional Progressive Caucus, bashed the agreement on Sunday. Others are expected to follow his lead on Monday. …

[House Democratic leader Nancy] Pelosi…has not publicly endorsed the deal. … [She] issued this statement: “We all agree that our nation cannot default on our obligations and that we must honor our nation’s commitments to our seniors and our men and women in the military.

“I look forward to reviewing the legislation with my caucus to see what level of support we can provide.” …

Pelosi has wanted to raise the debt ceiling, but preferred that a “clean” bill go through without any strings attached.

A few of her deputies, meanwhile, have argued that Obama should invoke the 14th Amendment to raise the debt ceiling.

Regarding the “clean” debt ceiling increase, House Republicans put that notion up for a political show vote back in May, uniformly voting against it. House Democratic Whip Steny Hoyer urged his colleagues to vote against it, and most did — even though they actually supported the underlying policy it purported to enact — because they wanted to deny the GOP its desired political victory on the designed-to-fail bill. I’ve said all along, and it’s now completely clear in retrospect, that this was a tactical mistake, as well as a substantive one. Democrats would be in a much better political position today if they were already on record as supporting a “clean” increase, which is, of course, the only correct solution to this invented problem. Their too-cute-by-half decision to oppose a bill they support (paging John Kerry!) makes them look like idiots, and greatly complicates their argument now.

In any case, with time having essentially run out, the question at this point for Democrats is which is worse: cementing the horrible precedent that debt-ceiling extortion works, or allowing a default that will damage the economy and destroy Obama’s presidency? They can float bogus 14th Amendment arguments all they want, they can complain that Republican intransigence and illegitimate hostage-bargaining put them in this unfair and untenable position (and they’re right!), but that’s the choice they face, like it or not. I have no idea which way they’ll come down. All I know is that this whole thing is a farce, we should never have arrived at this juncture, and — whatever happens — I will never forgive the shameless Republicans who manufactured this “crisis” for political gain.

(Having said that… don’t think for a moment that Democrats, led by the same liberals who are crying foul over today’s deal, won’t eagerly use this same horrible precedent — that debt-ceiling extortion works — the next time they control part of Congress and a Republican president requests a debt ceiling increase, which will certainly happen. They’ll do it on goose-gander grounds, and to try and achieve policy objectives that would otherwise be impossible. And when they do, that will be unreservedly the Democrats’ fault. The debt ceiling is a math problem, not a policy decision.)

Jul 29

Seriously? Seriously? We’ve wasted three whole days, with national default* on our legal obligations mere days away, for this?!?

House Republicans will link passage of a balanced-budget amendment to Speaker John Boehner’s (R-Ohio) last-ditch debt-ceiling plan, which GOP lawmakers said would move the measure to passage in a high-stakes vote later on Friday. …

Republican lawmakers say the Boehner framework would still pave the way for the debt limit to be raised through the 2012 election in two chunks. But it would also mandate that the second hike of the ceiling could only occur after a balanced-budget amendment passed both chambers of Congress and went to the states for ratification.

Mind you, that would require a two-thirds vote in both chambers of Congress. In a divided government. And “if” that doesn’t happen, then we default in a few months. F***ing brilliant.

This is completely insane, and does not represent a remotely serious attempt to resolve the debt-limit crisis. This “revamped” Boehner bill has, by design, literally zero chance of success. Any journalist who reports this development in a way that credulously treats it as a serious attempt at pertinent legislating is deceiving his or her readers. This is sheer nonsense. But don’t believe me; believe Paul Ryan, yesterday:

What I never really agreed with is the idea that we would expect Harry Reid and Nancy Pelosi to deliver 40 [and] 15 votes from Democrats for our version of the Balanced Budget Amendment. You know, I just never thought that was realistic, to demand Democrats vote against their conscience for our version of the Balanced Budget Amendment. So I just never thought that would work.

Or, if you prefer, John McCain:

I will take back seat to none in my support of the balanced budget amendment. Thirteen times I voted for it. I will vote for it tomorrow. But what is really amazing about this is that some, some members are believing that we can pass a balanced budget amendment to the Constitution in this body with its present representation, and that is foolish. That is worse than foolish. That is deceiving. …

That is not fair to the American people, to hold out and say we won’t agree to raising the debt limit until we pass a balanced budget amendment to the Constitution. It’s unfair, it’s bizarro. And maybe some people who have only been in this body for six or seven months or so really believe that. Others know better. Others know better.

I know what the right-wing chorus will say: “Well, at least the Republicans have passed a bill! Where is the Democratic bill?” But both of the Republican bills — Cut, Cap & Balance, and now this — are completely meaningless as actual attempts to legislate and govern, because they were passed with 100% certain knowledge of failure. They are the equivalent of the Democrats passing a debt-ceiling bill that would cut the deficit by way of a carbon tax, and tie future increases to the passage of a constitutional amendment confirming that the individual mandate is permissible. Imagine if a Democratic House, responding to a request by President Romney and the Republican Senate to raise the debt ceiling, passed such a bill as a condition of raising the ceiling. Would you be impressed? Or would you recognize it as total baloney? Such a bill would obviously have no chance of becoming law in a divided government, and would not represent an actual attempt to govern, but rather, pure political posturing and pandering. This bill is the same way. So, yeah, there’s a “Republican bill,” and there will soon be two of them — both designed solely to score points with to a radical base that lives in an alternate universe. If you think the raw number of bills passed by each party is significant, ask yourself: would we be materially closer to a resolution if there was a “Democratic bill” along the lines I just proposed? Of course not. It would be a pointless, if not counterproductive, piece of legislation. So is this. The House GOP is not even attempting to govern at this point. These people are a joke, and a disgrace.

F*** you, Washington. F*** you, Tea Party.

P.S. *Or “semi-default,” or whatever you want to call it. I realize we wouldn’t immediately default on our debt, presuming Treasury can & does prioritize payments, and the markets don’t freak out so badly that we’re unable to “roll over” short-term debt. But we will certainly “default” on legal obligations of one kind or another, not making payments that are required by law. (What ever happened to conservative respect for the rule of law, by the way?)

P.P.S. Via the indispensible Megan McArdle, center-right economics writer and noted RINO (I kid!), here’s more on what a failure to raise the debt ceiling would actually look like.

UPDATE: Don’t believe Ryan or McCain? How about arch-conservative commentator Bill Kristol?

Last night, Speaker Boehner toyed with adding a gimmicky balanced budget amendment provision to the Republican budget bill in order to try to get the final handful of votes he needs for passage. He thought better of this last night, and didn’t do so. He should continue to avoid pointless and embarrassing gimmicks to try to secure a last-gasp victory on the House floor. Such a tainted “win” would truly be dead on arrival in the Senate. And it would do nothing to increase McConnell’s leverage, or Boehner’s own, if and when a Senate-passed bill comes over to the House this weekend.

RINO. [/sarcasm]

Jul 29


Friday, July 29, 2011 at 7:28 am Mountain Time

As if the increasing odds of a debt-ceiling disaster weren’t bad enough, now there’s this:

The U.S. economy came perilously close to flat-lining in the first quarter and grew at a meager 1.3 percent annual rate in the April-June period as consumer spending barely rose.

The Commerce Department data on Friday also showed the current lull in the economy began earlier than had been thought, with the growth losing steam late last year.

That could raise questions on the long held view by both Federal Reserve officials and independent economists that the slowdown in growth as the year started was largely the result of transitory factors.

Growth in gross domestic product — a measure of all goods and services produced within U.S. borders – rose at a 1.3 percent annual rate. First-quarter output was sharply revised down to a 0.4 percent pace from a 1.9 percent increase.

Economists had expected the economy to expand at a 1.8 percent rate in the second quarter. Fourth-quarter growth was revised to a 2.3 percent rate from 3.1 percent.

“The second quarter disappointed, but the first-quarter downward revision is more disturbing. It advances the pangs of concern. The debt ceiling nonsense is not going to help us. We’re already in an economy that is subpar,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

I for one welcome our new Texan overlords. (Well, not really.)


Jul 28

Boehner #FAIL

Thursday, July 28, 2011 at 10:27 pm Mountain Time

Today’s debt ceiling developments, summarized in a single tweet:

Standard & Poor’s downgrading US credit rating to WTF.Fri Jul 29 03:05:50 via TweetDeck

Oh, and I also had a little (more) fun with a Drudge mockup:

Continue reading »

Jul 28

Shake down the debt limit from the sky

Thursday, July 28, 2011 at 9:36 am Mountain Time

The Republicans are feverishly rounding up supporters ahead of this afternoon’s dramatic Boehner-bill vote on the House floor. The Speaker is cautiously optimistic his bill will pass. (We’ll know he’s really confident if he schedules a vote before the markets close.) Oh, and there’s a Notre Dame angle:

Rep. Mike Kelly (R-Pa.), a bulky former Notre Dame football player, gave a rousing football-themed speech and said he would vote for the bill. He told colleagues they needed to do three things: put on your helmet, put in your mouth piece and tighten your chinstrap. He gave out signs with the Notre Dame football saying: Play like a champion today.

“Let’s kick the sh*t out of them,” Kelly said in the meeting, according to several sources.

Heh. Nate Silver thinks it’s all over but the face-saving. I think the bill will pass by a vote or two. (But if it fails, it’ll be by a dozen or more, because of yes-to-no switches once it becomes clear it’s gonna fail.)

Jul 25

A debt ceiling history lesson

Monday, July 25, 2011 at 10:36 pm Mountain Time

This brief article by James Surowiecki is a must-read. It says just about everything I’ve been trying to say about the debt ceiling situation, but more succinctly and with less rage. It also includes a useful history lesson:

The truth is that the United States doesn’t need, and shouldn’t have, a debt ceiling. Every other democratic country, with the exception of Denmark, does fine without one. There’s no debt limit in the Constitution. And, if Congress really wants to hold down government debt, it already has a way to do so that doesn’t risk economic chaos—namely, the annual budgeting process. The only reason we need to lift the debt ceiling, after all, is to pay for spending that Congress has already authorized. If the debt ceiling isn’t raised, we’ll face an absurd scenario in which Congress will have ordered the President to execute two laws that are flatly at odds with each other. If he obeys the debt ceiling, he cannot spend the money that Congress has told him to spend, which is why most government functions will be shut down. Yet if he spends the money as Congress has authorized him to he’ll end up violating the debt ceiling.

As it happens, the debt ceiling, which was adopted in 1917, did have a purpose once—it was a way for Congress to keep the President accountable. Congress used to exercise only loose control over the government budget, and the President was able to borrow money and spend money with little legislative oversight. But this hasn’t been the case since 1974; Congress now passes comprehensive budget resolutions that detail exactly how the government will tax and spend, and the Treasury Department borrows only the money that Congress allows it to. (It’s why TARP, for instance, required Congress to pass a law authorizing the Treasury to act.) This makes the debt ceiling an anachronism. These days, the debt limit actually makes the President less accountable to Congress, not more: if the ceiling isn’t raised, it’s President Obama who will be deciding which bills get paid and which don’t, with no say from Congress.

Read the whole thing. And also read Felix Salmon’s take. And then weep. And #PANIC.

Jul 25

Debt standoff: Playing with Fiendfyre

Monday, July 25, 2011 at 11:30 am Mountain Time

I have one additional thought on the debt ceiling, which I meant to include in my previous post, but which probably deserves its own post, so here goes:

I think politicians on both sides of the aisle — and more broadly, partisans on both ends of the ideological spectrum — are vastly underestimating the political downside risk of a failure to raise the debt ceiling, and the resulting default or semi-default. The political consequences for the current powers that be, Republican and Democrat alike, are potentially catastrophic. I don’t just mean suffering dips in approval ratings, or losing the 2012 elections. That’s small potatoes. Worst-case scenario, this could go much deeper. With unfavorable ratings for both major parties already nearing record highs, and vulgar anti-Washington hashtags making waves on Twitter, things are already approaching a boiling point. As I tweeted a few days ago, in the spirit of Harry Potter, the politicians engaging in this debt-ceiling brinkmanship aren’t just playing with fire. They’re playing with Fiendfyre.

If a deal is reached, or if a short-term semi-default happens but is quickly remedied and the negative economic consequences are relatively tame (and/or indistinguishable from the already poor economic climate), the current bout of voter anger will largely fade into the background noise of standard-fare anti-Washington sentiment. But if there’s no deal, and default or semi-default happens, and there are severe (and easily identifiable) economic consequences — real-world economic pain hitting voters, and flowing directly from the total dysfunction of our federal government — there is almost no ceiling to the potential political fallout.

If such a thing were to happen, all the back-and-forth talking points of the present negotiations would appear totally childish and ridiculous in retrospect; the only salient fact would be that Washington’s inaction caused a recession or depression. Voters’ rage would be unmeasurable, and rightfully so. To quote from another fantasy movie, their wrath would be terrible, their retribution swift. At a minimum, I think you would see a credible, and maybe successful, third-party candidacy in 2012 — I’ve already predicted a third-party victory if unemployment exceeds 13% in the wake of a failure to raise the debt ceiling — but that could be just the beginning, if things get bad enough. If a severe second recession, or even a depression, can be traced to a specific, identifiable failure of both parties to govern the country in a defensible way, it could conceivably be the end of one or both of the major parties as we know them.

I recognize that pronouncements of “OMG THE DEATH OF THE MAJOR PARTIES!!1!” are a dime a dozen from squishy No Labels-ish centrists like me, folks with a history of political love affairs with Lieberman and Bloomberg and their ilk. But this is different, I think. I’m not talking about a third-party (and perhaps fourth- and fifth-party) movement led by coastal, technocratic centrist elites, self-styled Good Government Types who think There Must Be A Better Way. I’m talking about a broad-based rage against the current governing parties that would awaken the sleeping giants of American politics: the largely unengaged, uninformed, low-information voters who don’t really know or care much about politics, but who would easily understand and care about such a simple, basic — and, in this scenario, true — storyline as, “You personally have been directly f***ed over by an abject failure of your entire federal government. We are now in a recession/depression because they, all of them, didn’t do their damn jobs.”

If you think the Tea Party was an example of the grassroots waking up and rising up, just wait until you piss off the Great Middle in this fashion. The momentum of the awakening I’m describing would be unstoppable; all nuance would be lost; everyone would be blamed. Even if the actual proximate-cause equation were to become complicated — for instance, if the downturn following a default is worsened by unrelated factors like, say, a collapse of Italy next month or whatever — too bad. These voters, once roused to anger, won’t care about excuses like that. They’d be mad as hell, unwilling to take it anymore, and who knows what our politics would look like by the time they’re done?

Nobody does. And I’m not sure this is a risk that anyone in power — Obama or Boehner or McConnell or Reid or Pelosi or Cantor or anybody else inside the Beltway — really appreciates adequately. The scenario I’m describing is unlikely to come to pass, but I’d say it’s more plausible than at any previous time in my lifetime to date. And if it does happen? Hold onto your seats.

Jul 25

A debt ceiling update, and a question

Monday, July 25, 2011 at 10:33 am Mountain Time

The “debate” between Democrats and the Anti-Arithmetic Right over whether or not the nation should be economically ruined now seemingly boils down to three options:

1) John Boehner’s utterly disastrous plan, which I hereby dub the Omnibus Kick-The-Can-Down-The-Road Act of 2011, to pass a short-term debt ceiling increase, then re-run this entire charade in the middle of an election year, when it will surely be much easier to put aside naked partisanship and reach a mutually acceptable bipartisan deal (!?!?!) … really, we should call this the “Make Obama Veto A Debt Ceiling Bill So He Can’t Blame Us For The Crisis We Caused” plan, since that’s all it’s intended to accomplish;

2) Harry’s Reid’s plan to cut $2.7 trillion in spending without any revenue increases, which is such a complete capitulation to the Republicans’ core demand that it will undoubtedly be rejected by hardline Republicans and Tea Partiers, who wouldn’t know a favorable deal if it smacked them in the face and dumped tea on them while waving a Gadsden flag and reading aloud the collected works of Ayn Rand;

3) Default. Or technical default. Or “semi-default.” Or whatever you want to call it if the United States government is unable to make payments required by law — probably not including debt interest or principal, though that can’t be guaranteed because it depends in part on how the markets react, which cannot be confidently predicted because this is a completely unprecedented circumstance brought about by fuzzy math and right-wing nutters — and is forced to operate on a daily (not monthly! not yearly!) cashflow basis and shut down 40+ percent of its operations instantly, including a wide variety of services that everyone regards as essential.

Regarding option #3, it’s not clear that next Tuesday, August 2, is the actual date on which this would happen, as we’ve been hearing for months. That was Treasury’s estimate back in May of when the money would run out, but we may have an extra week or so:

In a note published Friday, the Barclays Interest Rates Research team wrote that “the date on which the Treasury will run out of cash to pay its obligations might not be August 2; it might be around August 10 instead.”

Why the change? The note explains that previous projections showed the Treasury running out of money on the morning of Wednesday, August 3. On that day, it was predicted, the Treasury would need to spend $32 billion, including $22 billion in Social Security payments — and it was only projected to have $30 billion at its disposal.

That projection was made on July 13. But since then, the researchers say, the Treasury has taken in about $14 billion more than expected, and paid out about $1 billion less than expected. Hence, the deadline date might actually be August 10, a week later than previously believed.

Other reports suggest August 9 might be the “real” deadline. Either way, August 2 is Treasury’s story, and it’s sticking to it, presumably for the rather obvious reason that if you tell Congress that it has an additional week to dither, delay, grandstand, posture and bloviate, Congress will proceed to dither, delay, grandstand, posture and bloviate for an additional week. I imagine Treasury will announce this “extra week” at the moment it becomes clear Congress is going to miss the August 2 deadline, and not a second sooner.

Anyway, I have a question, and it’s an honest one — I’m not trying to make a rhetorical, partisan point here; I really don’t know the answer to this. But it’s been perplexing me for a while now. The debt ceiling is a federal law saying Treasury can’t borrow more than X amount. But there are also lots of other federal laws saying Treasury must spend money on various things — paying prison guards, funding air traffic control systems, sending out Social Security checks, etc. If the money runs out, and Treasury can’t borrow any more money because of the debt ceiling, then it can’t do some of the spending required by law. So, if the debt ceiling isn’t raised, Treasury will be required (by arithmetic) to violate federal law, one way or another. Why does everyone assume that Treasury would necessarily violate the various federal laws requiring it to spend money? Why is that any more justifiable than violating the debt ceiling law? They’re all federal laws, presumably of equal weight, right? Mind you, I’m not talking about the 14th Amendment argument, which I believe is bunk. Rather, I’m merely talking about conflicts among federal statutes. It’s not like there’s 40+ percent of federal spending that Treasury can just discretionarily choose, without violating the law, to stop overnight. (Or is there?!?) I’m not advocating one course of action or another, I’m just saying I don’t understand why the debt ceiling is presumed to take priority over the countless other federal laws that I imagine Treasury would necessarily violate by failing to make required payments (of various sorts; I’m not just talking about debt interest payments, I’m talking about everything Treasury does, all of it pursuant to laws passed by Congress). What am I missing here?

P.S. For the record, among the three options listed above, my order of preference is: #2, then #3, then #1. Yeah — it’s a close call, but ultimately, I’d rather risk the consequences of a brief semi-default (and hope those consequences finally set the Republicans straight before things get too bad) than go through this nightmare again next spring. Partly because I suspect the market consequences of such a punt would be pretty bad in and of themselves. And partly because, at some point, you have to stop giving ever more power to economic hostage-takers. They cannot be allowed to pull this stunt again so soon, and certainly not in the midst of a presidential election, when everyone will have more motive than ever to be intransigent and inflexible. Really, it’s insane that anybody is even proposing such a ridiculous option. But then again, this whole situation is insane, so I guess I shouldn’t be surprised.