Building Broadband ahead of Digital Demand

  • Mortgage-Backed Securities: Is “Skin in the Game” Important? – FRBSF – Financial reform legislation passed by Congress in 2010 requires mortgage originators to retain some loss exposure on the mortgages they securitize. Recent research compares the performance of mortgage-backed securities for different types of issues in which originators retain different degrees of loss exposure. The findings suggest that retention of even modest loss exposure by originators reduces moral hazard and is associated with significantly lower loss rates on these securities.
  • Money, Barter, and Recalculation. A response to Arnold Kling. – Nick Rowe – Arnold Kling has a good "rant against monetarism", triggered by my saying "My position is that a general glut can *only* be caused by an excess demand for the medium of exchange." Arnold’s response: "Most economists believe this, or something like it. I used to believe it, or something like it. I think that it is a horrible, horrible, confusion." (I only wish he were right about the first bit, because I can find very few economists who believe it, and I’ve been trying hard to get them to believe it.) Let’s start with where I agree with Arnold. "If you took money out of the picture, the construction worker and the college student would still be unable to solve their problem. When it comes to the failure of wants to coincide, the existence of money is part of the solution, not part of the problem." Bingo! Yes, absolutely.
  • The Fed’s Contrarian, With a Wary Eye on the Past – All year, Thomas M. Hoenig has been saying no.  As the lone dissenter on the Federal Reserve committee that sets interest rates, Mr. Hoenig, the president of the Federal Reserve Bank of Kansas City, has been a persistent skeptic of just about everything the Fed’s chairman, Ben S. Bernanke, has done to try to stimulate the flagging recovery.  Mr. Hoenig’s latest, loudest objections, aimed at the Fed’s risky $600 billion infusion into the markets to reinvigorate the economy, have made him a champion of the Fed’s critics in Congress, on Wall Street and among business leaders, who, like Mr. Hoenig, fear that the central bank is risking runaway inflation, asset bubbles and a weakened dollar.  At 64, Mr. Hoenig has witnessed jolts in the nation’s economic history that make him deeply skeptical of short-term fixes. He says he believes the Fed’s tools for fixing the economy in the short run are limited and the potential for things to go disastrously wrong is very high.

    Is the Hudson ruling good news for health reform? –District Court Judge Henry E. Hudson, a George W. Bush appointee, has, as expected, ruled the individual mandate unconstitutional. So why are health reformers so unexpectedly pleased? There are two reasons, but first, let’s put this into context. Hudson’s ruling is the third from a district court so far. Previously, Judge Norman Moon found the mandate constitutional, and so too did Judge George Steeh. Both Steeh and Norman were Clinton appointees, which is to say that so far, the rulings are proceeding along predictably partisan lines.  Hudson ruled against the government, but he didn’t stop it (you can read the full opinion here). He refused the plaintiff’s request for an injunction against the legislation’s continued implementation. The construction of the bill’s infrastructure will continue. And second, he refused to overrule anything but the individual mandate itself. The real danger to health-care reform is not that the individual mandate will be struck down by the courts.  The danger is that, in striking down the individual mandate, the court would also strike down the rest of the bill. In fact, that’s exactly what the plaintiff has asked Hudson to do.

    Extending unemployment benefits – Here I make two quick observations on the policies being discussed. The first point has been widely noted, but it bears repeating since I keep hearing comments from people who seem to be unaware of it. When you hear that current unemployment benefits can in some cases be collected for up to 99 weeks, and that Congress is discussing an extension of this program, it is perhaps natural to think this means that some people might be eligible for longer than 99 weeks. But this is not the case. Instead what is being discussed is whether the current limits will be kept in place for another two years or whether the limits will be decreased immediately.The second point to which I’d like to call attention has also been around awhile, but is appropriately still being discussed (e.g., Calculated Risk, Washington Post). The source appears to be observations made by Wal-Mart CEO Bill Simon in September. And if you really think about it, the only reason somebody gets out in the middle of the night and buys baby formula is that they need it, and they’ve been waiting for it. Otherwise, we are open 24 hours — come at 5 a.m., come at 7 a.m., come at 10 a.m. But if you are there at midnight, you are there for a reason.

    Successful Outcome of Climate Negotiations in Cancun – As I said in my November 19th essay – Defining Success for Climate Negotiations in Cancun – the key challenge was to continue the process of constructing a sound foundation for meaningful, long-term global action (not necessarily some notion of immediate, highly-visible triumph).  This was accomplished in Cancun. The Cancun Agreements – as the two key documents (“Outcome of the AWG-LCA” and “Outcome of the AWG-KP”) are called – do just what was needed, namely build on the structure of the Copenhagen Accord with a balanced package that takes meaningful steps toward implementing the key elements of the Accord.  The delegates in Cancun succeeded in writing and adopting an agreement that commits all major economies to greenhouse gas (GHG) cuts, launches a fund to help the most vulnerable countries, and avoids some political landmines that could have blown up the talks, namely decisions on the (highly uncertain) future of the Kyoto Protocol.

    Untellable truths – The differences between Democratic progressives and the president over the tax deal the president has made with Republicans is being argued from a materialist perspective. That perspective is real. It matters who gets how much money and how our money is spent. But what is being ignored is that the answer to material policy questions depends on how Americans understand the issues, that is, on how the issues are realized in the brains of our citizens. Such understanding is what determines political support or lack of it in all its forms, from voting to donations to political pressure to what is said in the media. What policies are proposed and adopted depend on how Americans understand policy and politics. That understanding depends on communication. And it is in that the Democrats — both the president and his progressive critics — have surrendered. The Democrats have left effective communication to the conservatives, who have taken advantage of their superior communications all too well.

    Building Broadband ahead of Digital Demand – Many governments today, especially outside the US, are considering making large subsidies for broadband. Some governments, such as South Korea’s, have already done so, making next-generation broadband widely available. In the US, debates about subsidizing broadband touch two sets of overlapping issues. One set considers the benefits and costs of an expensive action: building wire-line broadband in low-density areas. A second set considers stretching the frontier for broadband far beyond its present capabilities to enable next-generation Internet applications (typically video). In the US today, those favoring building ahead of demand are the most dissatisfied, as are those who want to subsidize rural broadband. This column considers the economic origins behind that dissatisfaction.

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