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December 10, 2008


Jim Ryan

Good post.

Charlie (Colorado)

You know, this is why I hate economics. The meaning of terms changes depending on the political orientation of the economist; the facts move to suit the theory; the "scientific results" seem clearly driven by the outcome they desire; and economists who are really doing empirical research don't become well known unless they're politically convenient.

There was another recent example that struck me, when the NBER declared there had been a recession for the last year. Now, if you look up recession, you'll find that old definition of two successive quarters of "negative growth", ie, reduction, in GDP. In other words, if GDP is G, then a recession starts when dG/dt < 0 and ends when dG/dt ≥ 0 again.

Look at the NBER report, and they define a recession as the time between when the rate of change of GDP changes downwards. and ends when it reverses. So to the NBER, a recession starts when d²G/dt² < 0 and ends when d²G/dt² ≥ 0.

In other words, the difference is between when you stop your car and put it into reverse, or when you're driving at 60 and start to slow down.

How can you make any decisions based on this nonsense?

BEIJING - CHINA may soon cut business tax as part of its efforts to prop up the slowing economy amid the global financial crisis, state media reported on Tuesday. The government is 'very likely' to soon cut the business tax for enterprises by one percentage point, the China Daily said, citing an unnamed source close to policymakers.

Meanwhile, "The One" is proposing public works projects that only unions would, and a commie should, love.


You say .. what about Fannie and Freddie ?

"Fannie Mae did not cause the current crisis," said Raines. "If anything, Fannie Mae played catch-up to the banks and investment banks who drove the securitization of the most toxic subprime mortgages."

Raines said that while Fannie and Freddie hold some responsibility for not appropriately managing their own credit risk, regulators must share in the blame. He argued that government officials -- he named the Federal Reserve, Federal Trade Commission, Department of Housing and Urban Development, among others -- were asleep at the switch. The regulators, he said, failed to use their authority to put a stop to extremely dangerous lending practices.

"While regulations did not force financial institutions to make bad loans, the absence of consumer protection regulation allowed many bad loans to be made to the detriment of consumers," he said.

Yeah, that's the ticket .. noone was there to tell Franklin Raines not to lend again.


The headline says it all ...Pay raise for judges tucked into bailout plan


TM, someone needs to report on the Waxman hearings held yesterday regarding Fannie Mae/Freddie Mac. Don't let Blago/auto bailout distract you...


How can you make any decisions based on this nonsense?

One would hope that the powers that be are making decisions based on other factors than what we are fed in the press.


tax cuts, especially for upper-income Americans and corporations...the modern-day equivalent of leeches.
I know how he means it, but it's quite easy to paint this as
money : blood,
government : sick person, and
productive Americans : leeches.

OT, I have the DVR set to record "Children of the Damned" today. That's the one where superbright multiethnic young people with creepy dead eyes band together and hypnotize everyone else into committing terribly destructive acts.
By which I mean, I think I know an alternative catchphrase for "Team of Rivals".

"While regulations did not force financial institutions to make bad loans, the absence of consumer protection regulation allowed many bad loans to be made to the detriment of consumers," he said.
This is, quite simply, a baldfaced lie. It was the presence of regulations forcing financial institutions to make bad loans that forced them to make bad loans.

With Citigroup now on the government dole, exactly what qualified them to takeover the "Wacky Bank" weeks ago ?


Stiglitz has to balance this with his
admiration for Hugo Chavez, who rode another commodity bubble into the ground; with grave consequences for his country.
He was an occasionally perceptive economist
who went mad at some point; re Krugman.
Speaking of economic analysts who should properly be buried in peet moss, like the Vogons recommend. Someone gave Henry Blodget
the former Merrill Lynch tech analyst a blog; and in addition to his financial picks, he's going for a little Trig Trutherism ;following Sullivan's delusions
'out where the buses don't run'


It is always a source of amazement to me when left leaning economists argue that taz increases are good in the face of the fact patterns since the 1930s of the negative consequences of raising corporate and personal income taxes. Europe is another good example: the countries with the lowest income tax rates have great GDP growth than countries with high tax rates. The US has very high corporate tax rates. One of the reasons for the loss of jobs and manufacturing is that capital seeks low tax zones.


Wasn't he an advisor to John Edwards, the populist?

Patrick R. Sullivan

I wonder what Ken Rogoff has to say about this, given his admiration for Stiglitz as
expressed in this 2002 letter:

Joe, you may not remember this, but in the late 1980s, I once enjoyed the privilege of being in the office next to yours for a semester. We young economists all looked up to you in awe. One of my favorite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, "Ken, you used to work for Volcker at the Fed. Tell me, is he really smart?" I responded something to the effect of "Well, he was arguably the greatest Federal Reserve Chairman of the twentieth century" To which you replied, "But is he smart like us?" I wasn't sure how to take it, since you were looking across at Carl, not me, when you said it.

Good post. Got me reading article and response in detail.

Thomas Esmond Knox

Wells Fargo


<<"And going forward, there may be a day when letting a big firm or two fail will be a very good thing.">>

Like Lehman?

Ooops. Anybody but Lehman.


i'm a bit shocked neither you or stiglitz mentions OIL.

the oil bibble was one of the things whch burst the bubble.

i say 3 things caused the current recession:

oil; greenspan's 17 rate increases (cuz he feared inflation); and CRA/FANNIE MAE derivatives.

the current crisis REQUIRED all three. two would have been a far different matter.

these ae the three legs of the cirrents crisis's stool.

Thomas Esmond Knox

Wells Fargo.

What did they do right?

Was it patience?

Was it patience and other virtues?

Tell me.


Oh, that's easy, they employ my daughter.


I do not know how to use the Hellgate gold ; my friend tells me how to use.

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