by By PAUL KRUGMAN of Paul

Rep. Paul Ryan (R-WI) against $600 billion cash infusion by Federal Reserve – Rep. Paul Ryan (R-WI) joined his voice to the chorus of opposition to the plan concocted by the Federal Reserve to infuse the economy with $600 billion in cash to lower long-term interest rates and increase consumer spending.  The plan, although well received by a number of prominent economists, has been the subject of intense criticism by fiscal conservatives, including Ryan, heads of foreign countries, and politicians from both sides of the aisle. Ryan, who in January will assume the position of chairman of the powerful House Budget Committee, came out on the attack against this proposed plan, citing long-term negative consequences to the economy.  Representing Wisconsin’s 1st Congressional District since 1999, Ryan’s constituents have been battered by higher than average unemployment rates.  The district has an unemployment rate of 8.2% compared with 7.3% for the state of Wisconsin.

 

Obama Plans 2-Year Federal Pay Freeze – Civilian federal government employees will have their pay frozen

for 2011 and 2012, according to a New York Times report: The president’s proposal will effectively wipe out plans for a 1.4 percent across-the-board raise for 2.1 million civilian federal government employees in 2011 and 2012. The military would not be affected. The president has frozen the salaries of his own top White House staff members since taking office 22 months ago. While a pay freeze will make only a small dent in the federal deficit, it represents a symbolic gesture toward public anger over unemployment, the anemic economic recovery and rising national debt By announcing it on Monday, the president effectively will preempt Republicans who have been talking about making such a move once they take over the House and assume more seats in the Senate in January.

 

Marshall Auerback: Bankers Gone Wild in Ireland AND Germany Much ink has been spilled in the press over the Irish problem and the laxity of the country’s southern Mediterranean counterparts in contrast to the highly “disciplined” Germans. But perhaps we have to revisit that caricature. Not only has the Irish crisis blown apart the myth of the virtues of fiscal austerity during rapidly declining economic activity, but it has also illustrated that Germany’s bankers were every bit as culpable as their Irish counterparts in helping to stoke the credit bubble. One of the traditional rationales for the creation of the euro was that a single currency and strict Maastricht criteria would keep the profligate Mediterraneans and their Celtic equivalents in line. Instead, critics, particularly in Germany, increasingly see the European Monetary Union as a means for freeloading nations to offload their liabilities onto fitter neighbors. Not surprisingly, this has engendered much discussion that perhaps it would serve Germany’s interests to leave the euro, rather than booting one of the Mediterranean “scroungers” out. But as Simon Johnson has pointed out, this comforting narrative of German prudence matched up against Irish profligacy doesn’t really stack up

 
Terms of Enslavement; Irish Citizens Say "Default"; Agreement Violates EU and Irish Laws; 50 Ways to Leave the Euro – ANY Ireland bailout terms are onerous given that it is not Ireland that is bailed out but rather banks in the UK, Germany, US, and France (in that order). Moreover and unfortunately, the exact deal foolishly agreed to by Irish Prime Minister Brian Cowen is not only amazingly bad for Ireland, but one of the provisions violates EU and Irish law. Please consider these terms as outlined in EU agrees on $89 billion bailout loan for Ireland
  • Ireland gets Euro 67.5 billion ($89.4 billion) in bailout loans
  • The 16-nation eurozone, the full 27-nation EU, and the global donors of the International Monetary Fund each commit euro 22.5 billion ($29.8 billion).
  • Interest rates on the loans would be 6.05 percent from the eurozone fund, 5.7 percent from the EU fund and 5.7 percent from the IMF.
  • Ireland will have 10 years to pay off its IMF loans.
  • The first repayment won’t be required until 4 1/2 years after a drawdown.
  • Prime Minister Brian Cowen said Ireland will take euro 10 billion immediately to boost the capital reserves of its state-backed banks
Fed’s Bullard Concerned Over Consumer Agency Funding – There are major problems with the way Congress has decided to fund a new consumer protection agency, the head of the Federal Reserve Bank of St. Louis said Monday. James Bullard, president of the St. Louis Fed, noted the newly created Consumer Financial Protection Bureau will be housed within the Fed, but won’t be under its control. “The Fed’s only engagement with this independent bureau is to fund it” as it undertakes a very large mission that will see it watch over a wide swath of the financial system, the official said. Bullard said “the amount of money allocated in the law is not based on any careful assessment of what the needs of the Bureau will be as it attempts to fulfill the mandate of the Congress with regard to consumer protection.” Bullard also noted there is no mechanism for changing the agency’s funding level “should market conditions change, or if the needs of the Bureau change.”

Scientists, Tech Advisers Urge Obama to Spend More on Energy R&D – The U.S. government should review and update its energy policies every four years in the way that it does with its military policies, a group of scientists and technology experts who advise President Barack Obama said in a report today.  The administration should also more than triple the amount of money it spends each year on energy-related research, development and deployment – possibly through new fees or taxes on gasoline or electricity, the panel concluded. The findings by the President’s Council of Advisors on Science and Technology represent the latest effort by big names in academia and business to persuade Washington to spend more money on energy innovation. Similar exhortations have come in recent months from Microsoft Corp. founder Bill Gates, the American Enterprise Institute, the Brookings Institution and the Breakthrough Institute.
 
 
Home Sales: Distressing Gap – Here is an update to a graph I’ve been posting for several years. This graph shows existing home sales (left axis) and new home sales (right axis) through October. This graph starts in 1994, but the relationship has been fairly steady back to the ’60s. Then along came the housing bubble and bust, and the "distressing gap" appeared (due mostly to distressed sales).  Initially the gap was caused by the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn’t compete with the low prices of all the foreclosed properties.  The two spikes in existing home sales were due primarily to the homebuyer tax credits (the initial credit in 2009, followed by the 2nd credit in 2010). There were also two smaller bumps for new home sales related to the tax credits.

Defining Structural Unemployment – Krugman – Here’s what economists mean by “a rise in structural unemployment”: a rise in the minimum unemployment rate you can get to before you start having inflation problems. There’s a story behind why that might happen — it might happen because unemployed workers have the wrong skills, or they’re in the wrong places, or they can live so well off the dole that they don’t really want to work, or whatever. But the measure of structural unemployment is that worsening of the inflation-unemployment tradeoff. Once you realize that’s what it’s about, you see that many of the things people say show a rise in structural unemployment don’t really bear on the issue. You say we had a big bubble in the past? OK, but that doesn’t explain why trying to raise employment now would cause inflation. You say that we’ve been living beyond our means? OK, but again, why does that limit the number of workers we can employ making stuff for somebody? So where’s the evidence of a structural rise in unemployment in America? Wage growth is slowing; core inflation is falling; clearly, we’re not hitting an inflationary wall right now.
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