The Economics and Politics of Elizabeth Warren

The Economics and Politics of Elizabeth Warren – Simon Johnson – Congressional Republicans are apparently intent on a big showdown with Elizabeth Warren, who is currently building up the new Consumer Financial Protection Bureau (CFPB). This is very good news for the White House, if they use this opportunity wisely. Some Republicans seem to think that Ms. Warren is about “big government” or “intrusive regulation”.  But this is not the case – Elizabeth Warren’s approach is much more appealing and already popular with almost everyone on right and left: Transparency. Look carefully at Ms. Warren’s September speech to the Financial Services Roundtable and think about how this plays as a broader political message. Her political principle is clear and completely compelling: “…the best way, in my view, to strengthen those middle class families is to find solutions that are deep and lasting, that strengthen the markets, and that will create a robust, competitive consumer credit industry that works for families, not against them.” Her economic approach is also right on target – the market should work for the consumer.

Credit Default Swap Volumes Fall Before Pending Rule Changes –  Yves Smith – From Bloomberg: Trading in credit-default swaps, Wall Street’s fastest-growing business before the credit crisis, has tumbled 40 to 60 percent from three years ago as banks prepare for new regulation of derivatives.  On the one hand, I’m being proven somewhat wrong in my dismissive views of the impact of Dodd-Frank. Credit default swaps, a product I’ve viewed as essential to rein in (it’s a fee machine for Wall Street that has produced clear harm and has almost no socially productive uses) have fallen markedly in volume prior to expected rule changes this summer. On the other hand, Wall Street is hammering out details (code for watering the legislation down by wrangling for favorable interpretation) and volumes are expected to partially rebound once this period of uncertainty has passed.


Sure, the government is just like your family –So your mortgage payment’s overdue and you’re lying awake at 4 a.m. wondering where the money’s going to come from when the kitchen smoke alarm starts beeping. What to do? If you’re like the two jokers who jumped the gun on President Obama’s ballyhooed deficit reduction commission while he was visiting Asia, you’d jump out of bed, ignore the fire, back the car out of the garage and slap a "For Sale" sign on the windshield. Mission accomplished! Never mind that the nation currently has 9.6 million unemployed, and upward of 25 million either out of work, struggling to make do with part-time jobs, or who have simply given up. The really big problem facing the nation is that Social Security may exhaust its reserves 25 years from now. Why, it’s an emergency.


  15 Mind-Blowing Facts About Wealth And Inequality In Am…Bargain Sale, lots of charts – see 2, 3, &4 !

PONDERING THE NEXT PHASE OF THE DEBT CRISIS – The Fed’s latest round of monetary easing—QE2—has stabilized inflation expectations at a modestly higher level of late. Since mid-October, the inflation forecast based on the yield spread between the nominal and inflation-indexed 10-year Treasuries has bounced around in the low-2% range. That represents a victory of sorts from the summer plunge in the market’s inflation outlook, when fears of a new recession were on the rise. It’s tempting to declare that QE2 has been a success and that all’s well. But that’s premature. It will take many more months to assess the impact on the economy. Meantime, we’re in a precarious state of stability. For all the Fed’s monetary maneuverings of late, it’s still not clear if the higher inflation represents a fundamental change or a temporary bounce. Indeed, the forces of disinflation/deflation are still swirling in the global economy, as the debt troubles in Europe remind. What’s more, it’s not obvious that the current remedies are enough to ease worries of default.

Switch to renewables will take generations, not years – The latest world energy outlook released by the International Energy Agency is a useful reminder of the enduring place of fossil fuels in the global energy mix. Energy demand and supply patterns change only slowly, and moving away from existing carbon-intensive energy systems will take generations, not years. Despite widespread worries about climate change, there is little evidence that the global energy picture is about to be transformed within the next two decades.  According to the IEA, even if governments around the world fully deliver on the commitments they have made to reduce greenhouse gas emissions and phase out fossil fuel subsidies – a very big ‘if’ – world primary energy demand is set to increase by 36 per cent between 2008 and 2035. Moreover, fossil fuels account for more than half of the growth in overall energy use, with oil remaining the dominant source of energy (albeit its share diminishes over time). Global oil demand rises by 15 million barrels to reach 99 million barrels per day by 2035, with 100 per cent of the incremental demand coming from emerging economies.

Obamacare: where are we? – Tyler Cowen – I became so sick of blogging this topic, but it’s time to revisit where matters stand: 1. The health care sector is becoming more concentrated, largely through mergers and acquisitions.2. It seems more obvious that requiring health insurance companies to limit their overhead costs is a mistake.  3. Contrary to my earlier expectations, the legal issues are not going away.  4. Negative trends in health care markets continue, and many of these will be blamed, by many people, on the new health care reform.  5. The differential payment rates across Medicare, Medicaid, and private insurance are becoming unsustainable more quickly than I had anticipated; 6. I am less worried about mandate enforcement than I used to be; Austin Frakt has had good posts on this at TheIncidentalEconomist. 7. I am more worried about employers shedding employees onto the subsidized exchanges than I used to be;  8. I have the new worry of uncooperative state governors trying to shed their Medicaid loads onto the federally-subsidized health insurance exchanges.  Could one or two rogue states on this issue create a crisis in the system?  9. The Republicans still don’t have a good alternative plan or compromise to offer..
The Progressive Deficit Plan – Krugman – A coalition of progressive think tanks has released a plan for dealing with the deficit. It’s at least as responsible as any of the other plans being advanced, with a very different emphasis: more reliance on revenue, no attack on Social Security. Some of the revenue comes from indirect taxes — green taxes and fuel taxes — but the rest comes from measures that would raise taxes mainly on upper-income Americans. I’ll need to work through the proposal, but one thing it clearly does is to explode the myth that there is no alternative to the Bowles-Simpson-type regressive proposal. A lot of inside-the-Beltway types have been trying to sell the notion that a severely weakened social safety net is the only possibility; it isn’t. And it’s definitely worth noting that even with the revenue measures in the progressive plan, the US would have lower overall taxation than almost any other advanced country.
Not Waving But Drowning – Krugman – The markets are evidently not reassured. But why should they be? It’s hard to escape the sense that European policy makers are just completely out of their depth. They know how to deal with liquidity problems, but they cannot come to grips with the reality that this requires more than buying a bit more time. It’s as if we’re having the following dialogue: “Ireland really can’t afford to pay these debts.” “Here’s a credit line!” “No, really, we just can’t afford to pay.” “Here’s a credit line!” It really is like watching a car wreck.

The people must act or we will remain irrelevant – Before an election, a civic movement has to create a critical mass around the idea of radical political reform HAVING AN election after agreeing a four-year deal that will shape all key decisions is like debating which brand of condom to buy after you’ve become pregnant. It is a parody of democratic choice. Popular sovereignty has almost no meaning in Ireland right now. Its restoration is the precondition for a meaningful election. We need a non-party technical administration to hold the fort while the people have their say on the four-year plan and on radical reform of our political system. Within that space, we need to make a collective decision on the International Monetary Fund-European Union deal. The primary goal of the IMF-EU package to which any new government will be committed is not to stop Ireland spiralling downwards into economic depression. It is to ensure that Irish citizens cough up yet more money for the banks.

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