Might the second domino fall first?
I’ve avoided making predictions about the endgame of eurozone crisis. That’s partly because I don’t know a lot about Europe, and partly because even if I did those sorts of forecasts are extremely difficult to make. But occasionally I recall events from the 1930s that others might find useful.
During 1931 Germany was the first domino and Britain was the second. In modern terms Germany was Greece, and Britain was Spain. Germany faced a more severe crisis than Britain, and it came to a head in July 1931, when Germany imposed exchange controls. But they didn’t devalue, presumably due to memories of the 1923 hyperinflation. In contrast, unemployment was the big fear in Britain, and they did devalue two months later. So the second domino fell first.
I’ve always sort of assumed that Greece is the first domino, and if it fell then Spain and Portugal would also be forced to leave the eurozone. And it’s very possible that will happen. But it’s also possible that Greece will not leave first; that Spain might leave for macroeconomic reasons, not because speculators forced its hand.
Again, I don’t have much confidence in my predictions or even those of better informed experts. I certainly agree with Krugman’s claim that the macro fundamentals of the eurozone periphery are unsustainable. Beyond that, everything seems murky—even the question of which domino goes first.
Part 2. Matt Yglesias (unintentionally) staged a sort of debate between Morgan Warstler and myself. In this post Yglesias points out that the ECB acts as if it’s dual mandate is low inflation plus fanatical Warstlerian anti-statism. For those who don’t read my comment section, Morgan Warstler is a colorful commenter who is totally obsessed with the idea that the Fed and ECB both should and will use this crisis to screw public employees everywhere and implement far-reaching market-oriented reforms. Then Yglesias presents my counterargument to Morgan, which is that central banks should stick to stabilizing NGDP growth and leave public policy-making to democratically elected legislatures.
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18. June 2012 at 12:14
i added a prediction to the CalculatedRisk blog because i was interested in that very same question.
interestingly, so far, not as many people as i thought picked Greece (2/13). its still open, everyone vote!
http://www.hoocoodanode.org/node/16084
“If the Euro collapses in 2012, First Country to Leave the Euro will be: “
18. June 2012 at 12:25
And i agree with you and Yglesias (shock!). monetary dictators are just as bad as all the other kinds. and moreover, when a central bank gets involved in politics, central bank independence is done. Unelected people need to reserve social policy to elected people.
of course, the difference is that in europe there really is not sufficient continent wide political framework. Which puts Draghi in this position in the first place.
18. June 2012 at 12:27
I envy Warstler’s optimism. But it doesn’t change reality:
We. Are. Doomed.
Society is unacceptable. Make a bubble. Bryan has the right idea:
http://econlog.econlib.org/archives/2012/03/my_beautiful_bu.html
18. June 2012 at 12:30
I love that phrase! “fanatical Warstlerian anti-statism”
Mind if I use it-I’d be willing to pay a small fee-LOL!
So what about it Morgan? You’ve spoken for Scott so many times-now what? Most of my negative Sumner conspiracy theories are based on the Warslter Premise. Here Scott has explicitly denied it.
I love you Warstler but this post alone was worth the price of admission.
18. June 2012 at 12:33
Cause that’s always been one of my main resevations about Market Monetarism-I’d have no trouble with the target but worry that it somehow would make my buy in to “fanatical Warstlerian anti-statism
18. June 2012 at 12:34
If any country leaves the Euro, it won’t be because of a cool rational calculation. It’s too radical a decision for a democratic government to make. It won’t happen, if it does, until the system collapses into chaos.
18. June 2012 at 12:42
If you’re worried about the Fed not being independent, why not give it a mandate to set the NGDP target in a way which maximizes long term RGDP. That way FWAS (Fanantical Warstlerian Anti Statism) would be part of its official mandate.
18. June 2012 at 12:43
Cedric, that was the saddest Bryan Caplan post I had ever read.
Max, we’ll see.
18. June 2012 at 12:44
dtoh, are you saying that the Fed should vary its level target from year to year to deliberately hurt the economy and put pressure on governments to get their houses in order? Because I think that’s what Morgan believes.
18. June 2012 at 12:51
I heard there is no provision for booting a country out of EMU. That means a country has to leave voluntarily. If a country leaves the other countries will have to pony up a big carrot (cash) or show a big stick (liquidity crisis?). Greece has chosen to wait around for the carrot, since they get the stick either way. I don’t see why Spain won’t wait for the carrot too.
18. June 2012 at 12:57
“Cedric, that was the saddest Bryan Caplan post I had ever read.”
Haha! But no, it’s BEAUTIFUL. How many people do you know who have driven themselves completely insane fretting about society? Just carve out your own little world and be happy.
At one point early in my career I had a secretary who was a college art professor who fell on hard times. Her dream was to live in the mountains by herself and create art all day; she didn’t even want to show it to anyone. She ended up quitting when she got a job in her home city of London teaching art. I doubt she’ll ever have the right combination of income and health to reach her dream, but I like to think she’ll get there some day.
Live in your beautiful bubble, and everything is OK.
18. June 2012 at 13:01
In the early 1930s, between Japan, Germany, and Britain:
The first country to devalue was Germany, and they came out third in industrial output by 1937.
The second country to devalue was Britain, and they came out second in industrial output by 1937.
The third country to devalue was Japan, and they came out first in industrial output by 1937.
By this data, the theory that going off the gold standard hurts economies, is confirmed.
Not saying I believe the confirmation, just that this is what can happen if you believe economic science is positivist.
——
The Greek voters just elected a pro-Euro government. I think exiting the Euro might be on hold for the next while.
——
If Greece should leave the Euro, on the basis that its problems, and everyone’s problems, can be alleviated by Greek currency (Drachma) devaluation, then why not have every state in the US leave the US dollar, and introduce their own currencies, to solve whatever budget problems states might be having? And why not cities as well? Firms? Individuals?
Anyone who supports both central banking AND Greece re-introducing their own currency, are basing their claims on an inconsistent foundation.
As regards optimal currency area garbage, why not allow individuals to decide for themselves whether they want to transact in a particular commodity OCA economists are claiming is “optimal”? Why not drop all US dollar taxation on gold and silver trading, and taxing those transactions IN silver, at the same rate as US dollar incomes are taxed?
Then we’ll have healthy competition in money, and we’ll see for sure just how much money printing investors really want, given the fact that they are free to transact in, and own, gold and silver denominated assets.
Why aren’t market monetarists getting behind currency competition at the national level? Not fascist enough? Hahaha
18. June 2012 at 13:05
D.Gibson said:
“I heard there is no provision for booting a country out of EMU. That means a country has to leave voluntarily. If a country leaves the other countries will have to pony up a big carrot (cash) or show a big stick (liquidity crisis?). Greece has chosen to wait around for the carrot, since they get the stick either way. I don’t see why Spain won’t wait for the carrot too.”
Incredible. Where would you put the Euro on the list of foreign policy mess-ups of all time?
18. June 2012 at 13:14
Krugman: “Intellectually it was, I think I can say without false modesty, a huge win; I (and those of like mind) have been right about everything.”
http://krugman.blogs.nytimes.com/2012/06/18/a-mythical-anniversary/
18. June 2012 at 13:23
Morgan, I just want to take this opportunity to say the betas can carve out their own bubble, while the alphas can love and hate in their own little bubble! No need to pity auction the betas, they can take care of themselves, with little help from government required.
18. June 2012 at 13:23
Scott, I think that you might consider using other words, rather than “falling dominoes”, which makes it seem like a loss. Wasn’t leaving the Gold Standard a good idea?
Wouldn’t Greece going back on the Drachma and pursuing a better monetary policy a good idea? Yes, it might be better if the ECB did it themselves, but given that they will not, should Greece not leave?
18. June 2012 at 13:24
The peripheral Central Banks owe the German Central Bank 650 Billion Euros. Billions more are owed to the ECB and the stability fund. Billions more are owed to commercial banks in Germany which are backed by the German government.
“When you owe the bank $100,000, you have a problem. When you owe the bank $100,000,000, your bank has a problem.”
Merkel is doing a good job wrangling concessions on fiscal reforms, but in the end Germany will cave.
18. June 2012 at 13:24
Saturos,
From a pure utility point of view, if the Fed believes that by squeezing the economy to force politicians to adopt more pro-growth policies, then they “should” do so provided that the present value of the future income gain exceeds the present value of the current income loss.
Of course there are other considerations than just utility so I’d be reluctant to say “should” from an overall perspective. Morgan would of course say should.
Also, I’m increasingly of the opinion that this is exactly what the Fed is doing now.
18. June 2012 at 13:27
Scott: are you saying that the Eurozone is in many ways analogous to the gold standard of the interwar years? (at least in terms of its impact on monetary policy flexibility)
That makes an incredible amount of sense, but I don’t think I’ve seen you make it explicit. However, I’ve been traveling and may have missed a post or two, as well as several comment threads.
18. June 2012 at 13:43
In the early 1930s, between Japan, Germany, and Britain:
The first country to devalue was Germany, and they came out third in industrial output by 1937.
The second country to devalue was Britain, and they came out second in industrial output by 1937.
The third country to devalue was Japan, and they came out first in industrial output by 1937.
By this data, the theory that going off the gold standard hurts economies, is confirmed.
Not saying I believe the confirmation, just that this is what can happen if you believe economic science is positivist.
Miiiiight have to control for militarization there.
18. June 2012 at 13:44
And didn’t Britain devalue first?
18. June 2012 at 13:52
Morgan should just be honored that the word “Warstlerian” has been coined.
18. June 2012 at 14:04
Floyd Norris at the NYT has an interesting take on the “mess”:
http://www.nytimes.com/2012/06/15/business/as-europes-currency-union-frays-conspiracy-theories-fly.html?_r=3&pagewanted=2&ref=floydnorris&pagewanted=all
18. June 2012 at 14:29
Morgan Wharstler is one of my favorite commenters in the econoblogosphere. Sometimes he sounds a little crazy but other times he’s just shockingly perceptive.
18. June 2012 at 14:33
I like him too Alex. But this begs the question-where is our man-he is AWOL for this high honor of mention.
18. June 2012 at 15:43
dwb, Interesting poll.
Cedric, We all live in bubbles.
Max, Your guess is as good as mine.
dtoh, I don’t think Congress would go for that.
D. Gibson, Yes, they can’t be forced out.
MF, You said;
“The first country to devalue was Germany, and they came out third in industrial output by 1937.
The second country to devalue was Britain, and they came out second in industrial output by 1937.
The third country to devalue was Japan, and they came out first in industrial output by 1937.”
You can’t be dumb, because a dumb person would occasionally be right, just by coincidence. But you are always completely wrong! Uncanny. BTW, Japan devalued first, then Britain, then Germany.
Steve, Yup, no false modestly there.
Luis, They should probably leave, so I didn’t mean any sort of value judgment in the domino metaphor.
Negation, That’s one of the reasons Germany is a big loser here.
dtoh, One should never try do do good things by making things so bad it can only get better. That sort of thinking always backfires. I guarantee Bernanke is not that cruel and misguided. And that theory also doesn’t fit the facts, as we saw in 2008.
Kevin, You must have missed a lot of posts, it’s a point I make frequently, as do many other commentators.
Marcus, Interesting, but Germany’s actually one of the big losers here.
18. June 2012 at 16:03
Scott,
I guarantee Bernanke is not that cruel and misguided. And that theory also doesn’t fit the facts, as we saw in 2008.
If you seriously believe that then I will make you a bet that the Fed will ease if Romney gets elected.
18. June 2012 at 18:11
Sax, I’ve been watching Boondock Saints and Get Him to the Greek and ripping an ungodly amount of carpet out of my new digs.
First, you confuse yourself. The main argument with Scott, the one we have a bet on…
IN THIS DEBATE, there isn’t real conflict because Matty and Scott are arguing the OUGHT, not the SHOULD.
Ought is the moral imperative.
Should is the policy imperative – defined solely by outcomes.
The US ought to invade Iraq to stop human sacrifice, the US should to invade Iraq because they have lots of oil.
Matty specifically says “this is contrary to democratic values,”
But NOTHING I argue has anything to do with Democratic values. I specifically say Money and Monetary Policy are NOT social goods, they are not Democratic functions.
I say that whether Matty or Scott like it or not, both the Fed and the ECB are representatives of the Free Market System – I go so far as to say they are part of the Hegemony.
And so is the Govt. itself. The fact that half the people pay all the taxes isn’t just a burped fact, it reflects that since OUR INCEPTION, the guys who were actually putting down the money have set the rules up in ways that are natural to them and their thinking, but at runtime, frustrate those people who want to pretend that the guys picking up the check don’t get more of say.
My argument has nothing to do with what the Fed ought to do.
I argue, that the FDR and LBJ only succeeded because of early mistakes in gameplay, because the noobs, (the guys paying the tab) were not READY, were not PREPARED for suddenly this new game Democracy and the 16th Amendment and vote for me to get free shit you don’t pay for.
It took a while, for the hegemony to get its footing.
But they have gotten it, and it is now grand master chess vs. the eager high school champs.
This manifests itself in my bet with Sumner, that I say Obama ends up losing Nov, because he didn’t play the Clinton card, he instead played the Greek / Socialist card.
Now it is definitely true that Scott doesn’t like this suggested reality, and he might even want to refuse to discuss the SHOULD, without any moral discussion based on democratic value systems.
Soctt’s ONLY argument on the SHOULD has been that during Financial Crisis, the state, the interests of the left, grows.
And he may be right on the should, and if he is, I will be wrong.
BUT IF Obama loses, then Scott has to confront my argument head on.
Because it means that his own optimal outcomes for his chosen policy objectives REQUIRE him to admit that my SHOULD outweighs beats his OUGHT.
And that’s a great day, because that’s when a guy like Matty, or even yourself Saxie, might just finally give up on the OUGHT, and think solely about what SHOULD means to progressive strategy, and it AIN’T making pleas to democratic value systems.
Second, Sax I argue that Scott’s OUGHT policy of NGDPLT is actually
anti-government.
That’s why I call it a consolation prize.
And Scott isn’t denying that at all.
18. June 2012 at 19:03
Interesting little historiography Morgan though I don’t know about your use of should and ought-to me they seem to mean almost the ssame thing.
18. June 2012 at 20:03
Sax,
It’s a debate thing. The point is Matt and Scott are approaching things based on what they think OUGHT to happen. They have a theory of governance, that they WANT to be the prime directive, even if they are presented evidence the world doesn’t work the way they want.
I pay no attention to that noise. I look at what actually happens, I grasp why it happens, and then I shrug.
I don’t care if the Fed / ECB has a bias, why would I? they have my bias!
Just like the Constitution has a bias to small states, and clear historical focus on negative rights… which makes asserting positive rights VERY HARD, so liberals have to swim upstream.
What they haven’t grasped is that they don’t really swim upstream, they are climbing a greased pole. It gets easier and easier to make them slip, and slip hard with time.
Words mean things. And the Constitution has a singlar true path to change it, write down words that mean things, and amend it…. or climb the greased pole.
The Fed is “independent” – the reality is there very likely wouldn’t have been a 16th amendment, unless the Fed was ‘independent”
The “independent” fed meant that the exact moment when the $50 gold certificate stopped saying “pay to the bearer on demand” at the same time the rich could no longer run to another state to keep from getting taxed, well no worries, the Fed and the US monetary supply is run by banks for the private sector, to make sure the govt. doesn’t make money political.
So when I say Money, Monetary policy etc. is not a social good, it is a tool of the hegemony, I’m stating fact.
That Scott and Matty want it to not be a fact, well that’s a nice wish, but when I strategize, I don’t do it based on wishes, I do it based on reality.
Admitting the real policy biases of the hegemony is no different than learning and abiding the laws of physics.
Sure, the hegemony can be toppled, etc. but that’s not what Matty and Scott claim to be doing, they claim to be POLICY WONKS.
Policy wonks don’t wish in one hand… they make hard brutal strategy decisions devoid of wishes.
18. June 2012 at 20:38
ssumner:
“The first country to devalue was Germany, and they came out third in industrial output by 1937.”
“The second country to devalue was Britain, and they came out second in industrial output by 1937.”
“The third country to devalue was Japan, and they came out first in industrial output by 1937.”
Wait for it…
You can’t be dumb, because a dumb person would occasionally be right, just by coincidence. But you are always completely wrong! Uncanny.
There you go!
BTW, Japan devalued first, then Britain, then Germany.
No, that’s false.
Germany devalued in July/August 1931.
Britain devalued in September 1931.
Japan abandoned gold convertibility in December 1931, after its invasion of Manchuria.
Get your facts straight.
PS I won’t say you’re an idiot for getting this wrong, because I am more intellectually mature than you are.
18. June 2012 at 21:26
Regarding Japan leaving the gold standard in December 1931, there are many independent sources for this:
http://www2.econ.iastate.edu/classes/econ355/choi/golds.htm Section 6
http://www.ier.hit-u.ac.jp/Common/publication/DP/DP395.pdf Page 2
Miti and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975 page 119.
What are your sources? Why am I “not even dumb” for accepting this sources?
Aren’t you getting carried away with the name calling?
18. June 2012 at 22:25
I think the saddest thing about Greece is that even the radicals don’t understand that the Euro is the heart of their problem. The conservatives obviously don’t want to leave tbe Euro. Neither do the socialists nor the fascists. Syrzia is adamant that it doesn’t want to leave the Euro.
I think only the Communists see the Euro as the problem. So, we are now in the very sad positions where Communists are offering the best economic policy.
Of course this reminds me of the period where FDR tried to devalue the dollar and both conservatives and liberals/socialists united to bash him into stopping this effort. History really does repeat itself.
18. June 2012 at 22:32
Hey Morgan, you might like this:
It appears that Goldman thinks Bernanke is going to root for Team Obama:
https://twitter.com/zerohedge/status/214855529158295552
Of course, if you consider that the exact opposite of what Goldman says to be what they really expect (see their recent call on Spain CDS), then you might win your bet with Sumner.
18. June 2012 at 22:49
Judging by dtoh’s comments, it seems that Warstlerianism could actually become a thing now… *runs for cover*
Morgan, so the guys “picking up the check” have always decided our politics, have they? Was it them who decided, for instance, to have strong protections on industrial labor unions? Or to have the government take over the retirement savings of households across the country? Color me skeptical on that one…
Are you arguing that Obama will fall because he didn’t sell stimulus to the rich like Clinton would have (despite the fact that Clinton appears as clueless on monetary policy as Obama) and instead played “the socialism card” which alienated them? The rich don’t know the economy well enough to decide which candidate’s policies are in their best financial interest, instead going on rhetoric?
19. June 2012 at 03:11
No Saturos, that’s not my argument.
I say in the early 1900’s the left, vote for me to get shit Dems, etc. suddenly had the rich under a new umbrella (the 16th amendment) and suddenly being governor wasn’t the absolute best political job anymore.
DC didn’t have to beg for change, hat in hand, and the rich couldn’t simply move states.
And SURPRISE right when that happened, the Fed came into being. Call it consolation prise.
Anyway, that seriously disrupted the US history. Suddenly up was down, politicians were far more powerful,… it was a new gambit, a new strategy, so during iterative game play, round after round, the left really throttled the right.
AND THEN, slightly under Nixon, but truly seriously under Reagan, the right created another gambit, that took the bat out of the left’s hand, and since that time the right has been beating the bejesus out of Dems.
Now you can try and stand on the left side of things, assume that 1913, the 16th, the Fed, the last of the Gold Notes was all just a natural part of the the US growing up, but that’s wishful thinking, and it is just a mental block of your that wants to take the status quo for granted.
But, I will not be shocked, if Obamcare fails, Germany helps elect Romney, Romney gets QE from the Fed, and Greece ends up either bending to until they become Estonia (hell they get to be Mississippi!), or Greece gets kicked out, and made an example of and suddenly everybody else gets religion.
I’d expect that more power will be handed back to the states, like on immigration, and a newly fortified commerce clause (go 10thers) , and things like the Voters Rights Act fall, and Citizens will make being Governor and State Representative lots more fun.
So I look at that, trend, and I don’t assume that 1913-1968 was “correct” I just assume it happened, and based on game strategy, that 3/4 of what FDR and LBJ accomplished could easily be unrecognizable in another 40 years.
I suspect that under such a world, something like my Guaranteed Income plan happens, and for the same reason, I think FINALLY the left wakes up, and see that keeping their own tax dollars in there Blue States is the best possible strategy, so they let go of the foolish idea that they get to be be the boss since they pick up the check.
See what I did there?
The Battle Royale is not between two halves of society, it is between two different kinds of wealth: distributed small market wealth (with 40M+ capitalists) and centralized oligarch wealth (with 20K capitalists).
And our nations foundations were established PRECISELY to let the rich in small states be big fish in little ponds. I assume that is the magic of America.
States rights isn’t a political thing.
States rights means regional economic interests have veto cards to play against other regional interests.
In many ways what you see is a Fed and a ECB standing for decentralized regional power – hey there are REGIONAL banks!
Germany is not attacking Spain and Greece. Remember historically in Europe, cultural barriers, made it lots easier to trap the rich in France, or Spain, or Germany.
Germany is establishing that a bunch of poor southern states can’t be overrun by leftists which in turn overrun the ECB.
Instead, in the European Southern States, the local big fish will be the entrepreneurs, and politicians that serve them.
That’s REALLY what so angers the left side of Greece, even in their OWN country, they will be second fiddle the free market Greeks, who will be the only viable option.
Two continents each with different founding positions each moving toward the same end…
This stuff isn’t a conspiracy. One way of life works, and one doesn’t.
Both ways of thinking and living are not created equal.
19. June 2012 at 04:14
Scott, good points. The main difference between the Greek and the Spanish government is the degree of control of their countries. When troika discusses with the Greek government, they can be certain that for all the mistrust between them, the Greek government does indeed represent all of Greece. On the other hand, Spain has the additional headache that whatever measures they agree too with Europe, once they land back in Spain the have to sell them to the regional governments of the Basques, Catalans etc and they also have to work out an internal compromise about who borrows how much, who implements what, who pays, etc. The Germans have managed to maneuver themselves to an extremely rigid position where even the slightest deviation from buba madness is out of the question, because a) the German government has bet the house on convincing their electorate that buba madness is the only way out and b) because they really do hold (at least most of them) a good faith belief that expansionary monetary policy is the work of the devil.
So who leaves first depends on the Germans. If they were willing to let the ECB do its job then it’s probably Greece (our € membership is beyond saving in my opinion and in the past week which i have spent in Athens I haven’t heard any conservative or progressive economists say otherwise). If the Germans stick to the strategy of unrelenting buba madness, it’s Spain, simply because they will be in essence asking Rajoy to pick between euro membership and Catalonia and the choice there is obvious.
In my view, the Spanish are seriously underplaying their hand. The correct strategy would be to use the majority on ECB board which they presently command in order to tell the Germans: “Look, Spain and Italy are solvent and NGDP is far bellow trend, so starting tomorrow we are turning on the printing presses and all you can do is decide whether you want to remain in the euro”. It’s not a good option but at least there are some chances that the Germans would at least give it a chance, when on the other hand I don’t see the slightest possibility of the Spanish taking any chances with the unity of their country.
As I said before, buy real estate in central Barcelona. If the crisis is resolved you will do fine, if it all goes down in flames you might still make some money with 200+ countries all looking for places to house their new embassies.
19. June 2012 at 06:09
Bernanke has good reason to root for Obama-check out the white paper they sent to Congress earlier this year. Really ticked off the Repugs.
Unless we presume that everyone means the opposite of what they say-especialy Romney.
Which is believable particularly Romney
19. June 2012 at 06:21
“But, I will not be shocked, if Obamcare fails, Germany helps elect Romney, Romney gets QE from the Fed, and Greece ends up either bending to until they become Estonia (hell they get to be Mississippi!), or Greece gets kicked out, and made an example of and suddenly everybody else gets religion.”
“I’d expect that more power will be handed back to the states, like on immigration, and a newly fortified commerce clause (go 10thers) , and things like the Voters Rights Act fall, and Citizens will make being Governor and State Representative lots more fun.”
Morgan as you move down your list of things that will not shock you, you get less plausible. The first half of the first paragraph is kind of plausible. By the time you get to the Voters Right Act repeal you’re just plain dreaming.
Even your boy in Wisconsin admits that GOPers are wildly over ebulient based on that one result-which by the way left Walker basically as a lame duck. For one he now has a Dem state senate. For another he’s sounding the opposite of you-very conciliatory. Walker himself of course may be gone soon anyway which is why he has a legal defense fund.
There’s no “nyah, nyah” at all. Which just shows he’s not stupid in over celebrating. You wnoder why whenever the Repugs win one they imagine that no one will ever vote Democrat again? It happens every time.
In Ohio they voted down an even tougher law against the unions. In Michigan, Rick Snyder has told the state GOP not to send anymore Right to Work laws- as it’s “too divisive” his words.
Not that I mind you being overconfident. You admit that your boys got surprised once. It’s naive to think it won’t happen again. It’s also naive to always be ready for the last battle. If anything the way the Left did it the first time was undoubtedly through the same door-the overconfidence of the Right.
19. June 2012 at 07:25
Sax, I’m just telling you that SCOTUS under Romney seems like a group of guys that look at both Affirmative Action and the Voter Rights Act and say, enough of this…
Gerrymandering is legal, it is up to states to decide, and there will be no consideration for race, creed, etc.
Hell, I wouldn’t be surprised if down the line in the course of states rights, the next Amendment we see says that you have to be born to US citizens to be a citizen.
And I disagree with that.
I’m just not so certain that whites when faced with being the minority will not use their super-majority state control to pass any number of structural hurdles to maximizing their leverage.
Saxie, have you ever played RISK? Or poker? At any time during that gameplay do you play by rules that aren’t written down in stone? Are you nice, just because your morality tells you to be?
The rules are the rules, the states can basically do whatever the hell they want, and the Constitution can be amended.
19. June 2012 at 17:27
dtoh, The Fed is likely to ease in 2013 regardless of who gets elected. But you need to tell me why the Fed ran the tightest monetary policy in my lifetime when Mccain was desparately trying to hold the presidency for the GOP in late 2008.
Bernanke views the modern GOP with contempt, it’s pretty obvious when you see him answer questions about Rick Perry’s comments, etc. Romney has promised to fire Bernanke—do you seriously think he’d try to get Romney elected?
MR, Germany did not devalue in 1931. You are right that Japan did, but they didn’t even join the gold standard until December 1930.
Liberal Roman, That’s interesting.
OrionOrbit, I agree that monetary stimulus is needed. It’s interesting that you think Greece is unified enough to carry out reforms–I’ve read exactly the opposite–that the lower levels of government refuse to implement the reforms. But that’s just what I’ve read, I have no expertise in that area.
19. June 2012 at 17:51
19. June 2012 at 18:49
Scott,
1) What is the reason for the Fed easing in 2013 and won’t ease now.
2) Re: 2008, McCain was a lost cause….why waste bullets…. and like any organization decision making is not instantaneous so even if they had wanted to help McCain, it’s not clear they could have moved that fast.
3) Politicians say things to get elected. Romney is not a “modern” Republican, and “modern” Republicans don’t particularly like Romney.
4) The President can’t fire the Fed Chair. I have to believe Bernanke favors Romney over more Obama, and politics makes for strange bedfellows.
19. June 2012 at 18:50
ssumner:
MR, Germany did not devalue in 1931. You are right that Japan did, but they didn’t even join the gold standard until December 1930.
Germany did devalue in 1931.
“Germany went off gold before the UK in 1931, in July and August, that is, before late September when the UK devalued. The story however is a bit complex because Germany went off gold by eliminating the free flow of gold. They kept the value of the mark steady all through the Nazi period (see Adam Tooze’s good book), but they controlled the flow of foreign exchange. The reason that this does not show up on your graph is that the German chancellor in 1931 (Bruening) followed the dictates of the gold standard in 1931, keeping interest rates high and deflating the economy. This is what I called the gold-standard mentality in Lessons from the Great Depression (1989).” – Peter Temin.
Yes, Japan didn’t have a gold standard until December 1930, but as of January 1931, they did have a gold standard, and the order of countries in terms of devaluation from that point is 1. Germany, 2. Britain, and then 3. Japan.
19. June 2012 at 21:22
“Germany imposed exchange controls. But they didn’t devalue, presumably due to memories of the 1923 hyperinflation.”
Germany’s war reparations were fixed in terms of gold. Therefore a devaluation would have increased Germany’s burden of the war reparations.
19. June 2012 at 21:36
“Warstler … is totally obsessed with the idea that the Fed and ECB both should and will use this crisis to screw public employees everywhere and implement far-reaching market-oriented reforms.”
I think Morgan is right on about what these central banks are TRYING to do. Obviously I disagree with him about whether they should do this.
Using Friedman’s Methodology of Positive Economics, the FOMC is acting AS IF it is trying to do all it can to make Obama fail and give control of the government to the Republicans without most people catching on to what it is up to. I also suspect Bernanke to be part of trying to achieve this objective, but may be wrong about this. If Bernanke is not a participant in supporting this objective he is incredibly weak in not forcing the FOMC to change its policies.
19. June 2012 at 21:44
“is that the German chancellor in 1931 (Bruening) followed the dictates of the gold standard in 1931, keeping interest rates high and deflating the economy”
Bruening was known as “der Hungerkanzler.”
The continuence of this policy by the democratic parties put German voters into the position that the only way they could vote against this brutal austerity was to vote for either the NAZIs or the Communists, so that eventually the democratic parties did not have enough seats in the Reichstag to form a majority coalistion.
A similar situation may well develop in Greece.
19. June 2012 at 21:54
“Bernanke views the modern GOP with contempt, it’s pretty obvious when you see him answer questions about Rick Perry’s comments, etc. Romney has promised to fire Bernanke””do you seriously think he’d try to get Romney elected?”
I have answered this many times…
If pushed, to the Fed:
Bankers > Private Sector > Public Sector
Immediately afterward (when they feel safe again) they feel guilty for putting bankers in front of their private sector customers (depositors / equity owners), who are God’s chosen people.
So there is very little chance of the Fed which is eating humble pie at the club for so THOROUGHLY screwing up things is going to say, “AND THEN let’s screw them again and more again with a Massive State takeover.
Any guilt bankers have is NOT for the taxpayers, it is for nasty looks and frowns they get at the Country Club.
19. June 2012 at 22:03
Cedric, so long as she doesn’t snap and turn into Ted Kaczynski…
Becky, if society is split into two separate bubbles, who’s to say which one’s the Alpha and which one’s the Beta bubble? God?
19. June 2012 at 22:18
Hey Morgan, check out Jonah Goldberg’s latest column.
http://www.nationalreview.com/articles/303290/are-dems-doomed-jonah-goldberg
I think he comes down on my side in our debate from a few days ago. Dems aren’t doing as well with the “vote for free stuff” mantra right now because people are more sensitive to waste in a down economy. But of course, people will forget — the economy will get a bit better, and the left will be more successful in the future. We. Are. Doomed.
20. June 2012 at 00:02
Scott, what you’ve read is accurate, but the resistance of the rent seekers is very limited now that their political patronage is over. Also, even their limited resistance to reform is not of the “reform is unnecessary” kind but of the “reform is irrelevant” kind. I explain:
The lack of reform is maybe responsible for 5 pct points of unemployment (why? because we always had a really silly and inefficient public sector but never unemployment above 10%). Unemployment right now is 23% (28% if you count discouraged workers) and this is the result of monetary strangulation. Importers have been closing down (rightly so in many cases because we don’t need to be the country with the highest count of Porsches/head in the world) but there is no credit to finance other kind of businesses. Additionally, even exporters face huge problems because their counterparties simply refuse to pay them in anticipation of the drachma. The standard fine that Greek courts impose for delayed payment is around 5% per year which is obviously worth the risk when the upside for delaying your payment is fulfilling it in a 50% or so devalued currency. Add to this the deposit flight and you can clearly see that the country is bleeding euros and locked into an M1 spiral of death, reform or no reform.
So even if all reform goes through, we are doomed, which raises the question of why bother reforming in the first place? Any resistance to reform is usually along these lines.
20. June 2012 at 02:16
I love this conversation Cedric! How we define doomed is probably quite different.
When Morgan talks about his optimistic scenario it sounds like doom to me-overturning the Voting Rights Act, no one not born in the country can become a citizen. State rich guys getting to be a big fish in a small pond.
So it’s confusing-when you say “we’re dommed” maybe your doom is not-doom for me…
20. June 2012 at 03:15
Cedric, the economy never gets better WHILE Dems get what they want.
Like the 1990’s, you can be a Dem President that pays off the GOP spending OR you lose.
That’s my hypothesis. That’s my bet.
Then when a Republican takes over. he cuts taxes, moves even more spending to things that have no direct benefit to Dem voters. MAINLY, the next GOP Pres fixes the Bush mistake: he weakens Public Employee Unions, so there is nothing but corporate funding for Dem elections.
And no matter what, he make sure that when / if a Dem is President he faces a massive deficit.
Repeat.
Saxie,
WHY on earth would you not like “State’s rich guys getting to be a big fish in a small pond.”
Is nothing getting through?
Unless the liberal rich guys in CA, and NY, and WA, and MA etc. get to each take their best shot keeping their money at home and building a lefty nirvana, you could face another 40 years just like the last 40 years!
BUT under states rights, you could have IMMEDIATE new huge progressive efforts!!!
Suddenly CA gets to do their train with money to spare!
MA and NY can control the diets and food purchases of their citizens with much greater rigor!
WA can hire twice as many teachers!
Let me ask this Saxie, let’s just pretend I’m right, and America the nation continues to lurch to the right, driven mainly by above strategy…
WHEN do you finally change the old Dem playbook??
WHEN do you finally say “screw this man, lets just make our blue states SUPER BLUE??”
The only thing holding these states back from really going hog liberal wild is a balanced budget, BUT if they get to keep their cash, there’s tons more money to spend!
CA gets $300B!!!
AND the small poor red states that thwart your future, they have to suffer their poverty, and no long be carried on the back of your Blue State elites!
How bad doe sit have to get for you and your team before you stop making giant cash transfers?
20. June 2012 at 06:22
Morgan what state are you from-I’ve always suspected it’s one of the Southern states but how Deep South? I say that based on:
“I’m just telling you that SCOTUS under Romney seems like a group of guys that look at both Affirmative Action and the Voter Rights Act and say, enough of this…”
“Gerrymandering is legal, it is up to states to decide, and there will be no consideration for race, creed, etc.”
“Hell, I wouldn’t be surprised if down the line in the course of states rights, the next Amendment we see says that you have to be born to US citizens to be a citizen.”
I mena desiring the gutting of the Civil Rights Act is a tell. Again, I appreciate you not telling me it’s raining.
“Now you can try and stand on the left side of things, assume that 1913, the 16th, the Fed, the last of the Gold Notes was all just a natural part of the the US growing up, but that’s wishful thinking, and it is just a mental block of your that wants to take the status quo for granted.”
Nice history. I think the truth is that you’re right it aint ste in stone. However the play that’s worked for 40 years wont necessarily work anymore than the Dems old playbook always working.
However, to make the case that maybe the country is “growing up” albeit it slowly and over time you’d have to say that the first blow to you guys was before 1913. Heck, even Teddy Roosevelt was already off the reservation.
It was in fact the election of Lincoln. That was the first blow against states rights. This was when it was proven once and for all that the feds trump the states.
Lincoln did the Emanicpation Proclamation and we got the greenback and he also gave is the first income tax. So the seeds were already panted 50 years prevous to your narrative.
However seen from that longer time frame you can see that the move has been progressive. Certainly on social issues the change has been huge.
Captialism itself thwarts the social cons. Again I’m all for captialism don’t misunderstand me.
Incidentally I don’t know why conservatives are so against immigration. But it’s really helping the Dems. This has been a major change from the Bush years.
He at least could charm them a little with his mangled Spanish. He got 40% of the Latino vote. That’s a big change. I believe in the red states you’re right that the fear of whites being a minority is a bid deal-here in NY we don’t give a shit about it.
But I think you’re describing a regional trend there. Regionally you see a new crazy Republican state law everyday more draconian against immigration law every day.
20. June 2012 at 06:45
Saturos,
You asked the million dollar question (that could have a million answers) which can turn a mind into mush, on some days: “If society is split into two separate bubbles, who’s to say which one’s the alpha and which one the beta? God?”
Alpha and beta can be fluid and interchangable according to circumstance. Beta can be further tapped by the purposeful ‘mining’ of knowledge (or skill) along a continuum, instead of the random mining that now occurs at the peak of the spectrum. Of course, money needs the peak of the spectrum in order to keep all the moving parts active.
20. June 2012 at 08:05
dtoh, I answered some of your comments elsewhere. Romney has said he would not reappoint him in january 2014.
The economy will be slightly stronger by 2013, and Fed policy tends to be slightly procyclical. So I think it would be easier under either president.
MF, Only you would quote Temin showing you are wrong, and keep claiming you are right. I give up.
Orionorbit. I basically agree with that.
20. June 2012 at 08:10
Saxie, Canton(Ohio)-Los Angeles-New York-Miami-Austin, I just understand the Voting Rights Act assuring minority representation is not sacrosanct. Surely, you’ve read that the court could very well go there.
I’m for personal Affirmative Action, nothing else. If you personally think that someone has gotten a bad deal, you ought to personally hook them up even if they aren’t grateful.
To your specific point, I did a year of school in North Carolina and wasn’t happy that the athletes were basically the only blacks on campus, and they were all kept in an athletic dorm half a mile from the main quad. I didn’t like North Carolina.
But having seen it I’m still totally comfy with letting states run their own show and suffer for it, even if there is some shadows of stuff I saw in the 1990 still there.
Some people are pigs. The way you solve for that is not making being a pig illegal. You just any end laws that require people to be pigs (see Jim Crow).
Then you sit back and let the people who gain money and power use that power to ruin pigs lives.
I know this will float past you, but I basically see people who acquire lots of money as people who have a pretty good head on their shoulders, I think they have a natural inclination to cater tot he market, and pretty good sense of justice.
The problem arises when you let people with money use LAW to achieve those ends. Then you get more laws. I think we shouldn’t rely on laws that much. I’d prefer to see guys with money here about a some racist pig, and simply reach out and touch him.
Meaning while you see some racist bigot bar owner who won’t let blacks in, I see a guy who should suddenly find out he can’t carry Coke or Pepsi, Budweiser, etc. And suddenly has online advertising showing up in his browser calling him a pig molester, and warning women in his town not to bare his mutant children.
Saxie, there’s a natural inclination in this country to right wrongs.
And I don’t mind if you use govt. to solve for it, as long as that doesn’t require hiring public employees to solve for it.
If you can’t in fact solve the problem without growing govt. than I prefer to let the system run Wild West style.
I’ve always been impressed with free market vigilantism, corporations don’t like bad publicity. People need to deal with corporations to live ok lives. The Internet makes that much easier to track, punish and reward.
Now granted, your internet efforts won’t take down Rush Limbaugh, but you can definitely finger the bar owner and ruin his day… and Rush, well maybe you can teach him not to call a girl a slut.
20. June 2012 at 08:42
Mike Sax,
“So it’s confusing-when you say “we’re dommed” maybe your doom is not-doom for me.”
I predict doom for all of us. On the upside for you — you get a temporary high because your policies get enacted. And THEN we’re doomed 🙂
20. June 2012 at 09:17
@FEH, don’t forget that syriza is not communist, in fact its leader cites Krugman more often than Marx and has been pragmatic every time he had to make a meaningful decision. Additionally, they have been calling a few economists to ask them if they would be willing to participate in a left government that are certainly not communists, some of the people that have been approached are even right-of-center. Once Greece collapses, Syriza will likely get a quite strong majority and form a government that will follow broadly Keynesian policies. The fun part here is that the economy is so depressed that even discredited socialist policies from the 70s might work for a while. In the first 12-18 months after grexit there will be total chaos but no commies or nazis in government. Hopefully.
20. June 2012 at 23:47
ssumner:
MF, Only you would quote Temin showing you are wrong, and keep claiming you are right. I give up.
Only you would believe the Temin quote that shows I am right, somehow means I am wrong and you are right.
I don’t know how much more clear “Germany went off gold before the UK in 1931, in July and August” can get.
The context was who went off the gold standard. You can’t switch this to “who printed more than others first.” That’s not what the original discussion was about.
But I’m not surprised you would try to change the context halfway through after you realized you were wrong about history.