For something a bit different, Charlie Rose hosts an interesting round table discussion on the U.S. economy with David Walker, Jared Bernstein, Paul Krugman and Kenneth Rogoff. See here (36:38 minutes; click on the picture).
Update: Readers might also find interesting this NYT op-ed by recent Nobel winner Peter Diamond on the withdrawal of his nomination for the Board of Governors of the Federal Reserve.
26 replies on “Charlie Rose: The State of the U.S. Economy”
No thanks – too convential for my taste , conservative is not the word I would use for Walker.
I am always suspicious of fiscal “conservatives” in America when they do not make much efforts to control the production of private credit.
They either do not know how the monetory system works in the States or know it too well and wish to propel all rewards to the orcs in Wall Street.
Nothing comes close to this 1990s interview with a member of the Mayfair set.
He saw the prototype in action – the deindustrialisation of Britain and perhaps wanted no more part of this badness for badness sake.
Thanks John. I look forward to watching the Charlie Rose piece.
On the separate issue of Peter Diamond, which may not be too relevant to the usual subject matter of this blog, I’d like to express my disgust at the behaviour of Senate Republicans on this issue.
Peter is a fantastic economist who would have brought enormous intellect, expertise and wisdom to the Fed. In addition, I can say that I recall from the days I struggled — mainly vainly — to learn micro-theory from him at MIT, that he seemed to me to be a thoroughly decent individual.
This bizarre development adds to the evidence that the US political process unable to deliver proper government to its people.
Thanks John for the link. BOH.
Btw, going back through some old Bill Moyers episodes over the weekend, I noticed one with David Simon, writer of ‘The Wire’ tv series, based on Baltimore city and society. I thought it was a great interview, and I liked the ridicule that Simon so effortlessly made of the financial industry. BOH.
Made a effort to watch this – predictable fluff, not getting down and dirty with the real issues.
When Bernstein asked Larry Summers best friend about what structural issues Rogoff was pushing it was not dealt with.
No mention was made of reforming the banks !!!!!
The inflation problem as a result of pushing fiscal debt could be solved with a gasoline tax equilivent to European levels.
This would dramatically reduce the US trade deficit / efficiency while getting people back to work.
The real reason why this is not done is because the New York / London banks are making money hand over fist with $100 dollar oil.
They are trying to replicate their success in the 70s and early 80s – destroying whats left of the wests physical industrial economies in return for petrodollars flooding into London and New York.
They are essentially trying to replicate the 80s on steroids.
I really don’t know what to say – we have a cosmopolitan elite in the west that is engaging in a sustained all out economic war against various classes all up the food chain until all capital both physical and mental is destroyed.
Satan was a fallen angel but these guys never had any class – they are the lowest of the low.
Even small proposals by honest MMTers who believe in the economic system will be shot down I figure
Randal Wray gave a interesting interview here
I very much agree. Peter Diamond is a real economist’s economist and is hugely respected. The blocking of his nomination is just ideology trumping capability. I fear the problem is really related to his stance against privatising the Social Security system, which blackened his name with republicans. You probably recall that he was co-chair with Michael Boskin of a panel looking into privatisation issues back in the late 1990s. Boskin bizarrely withdrew from the panel at the last minute as the report was due to be released, leaving Peter exposed. The events are noted in the preface to the report: http://econ-www.mit.edu/files/670.
Some readers might be interested in Peter Diamond’s Nobel lecture, which summarises his work on the search approach to labour markets noted in the NYT piece: http://econ-www.mit.edu/files/6574.
The next US housing shock
Many thanks for the additional material on Peter Diamond’s work. But I am a little amused/bemused(?) at Karl’s concern that his treatment at the hands of the GOP adds further evidence “that the US political process [is] unable to deliver proper government to its people” when this process is far superior to anything on offer at the national level – or at the EU level – here. Yet there’s barely a whimper about reforming the process here, even though there’s no shortage of whimpering after the event when government announces half-baked economic policies and proceeds to have them enacted and implemented – irrespective of any critique.
The US suffers from the malign impact of legislative control over re-districting which tends to polarise the factions, some blight from corporate funding, the Senate becoming even more unrepresentative of the people’s will and the potential of a cohesive minority to fillibuster there. All these require relatively minor tweaks. For example, there is some movement to transfer redistricting from legislative control to independent commissions and the other matters are always under consideration.
However, despite these, contrast the formal and effective separation of powers and the continuous efforts to apply adversarial and evidence-based contestation of public policy with the exercise of excessive executive dominance and the very effective closing down of any debate that might influence policy formation ex ante in Ireland and throughout the EU.
Still, I suppose, the mote in someone else’s eye etc…
…there’s barely a whimper about reforming the process here….
Paul Hunt is essentially correct – America is still potentially a far more dynamic place then the old world.
However various weak administrators and functionaries fill the poltical vacuum now.
What America and indeed Europe needs is not more teachers pets who have found a deep crevice in the Body Politic of the west but bad to the bone engineers with outright contempt for the poltical mechanisms of this broken arrow.
I fear I have failed to make myself clear. My focus is on the process of public policy formulation (particularly in the economic sphere), its scrutiny, amendment, enactment, implementation and review. All the hoo-haa about abolishing the Senate, reducing the number of TDs, possibly changing the voting system, gender quotas, etc. is all displacement activity and is designed to divert any attention from the excessive executive dominance government exercises and the way policy is formulated behind the scenes, presented as a fait accompli, spun furiously and whipped through the Oireachtas. Any evidence-based critique before the event is simply ignored if it isn’t aligned perfectly with the policy intent; shouting after the event is obviously futile, but it seems to give many people a warm fuzzy feeling.
I’m just bemused that those who have the knowledge and competence to impact usefully and constructively on the formulation of public policy appear to lack interest in advocating the case for reforming the process to make it more transparent and subject to adversarial contestation and evidence-based critiques. No guarantee that stupid policies wouldn’t be rammed through, but their incidence and severity would be reduced.
Richard Bruton’s latest Escape to Delusion about reform of ‘labour policies’ is a good example of displacement activity.
“Less ‘restrictive labour policies’ will create a more competitive environment and get more people (back) to work (in retail and hospitality).”
Pity that the consumers of these services have decided its time to take some time out and curtail their consumption. Less money in their pay packets and pensions means that they are incentivised to go out an consume – like, less! Drive on Richard. Another successful failure.
“Never underestimate the destructive power of bad ideas” [P Krugman]
Reform of FoI? Not bloody likely!
Any chance of Paul Hunt, if he were willing, to get a guest thread on Reform: purpose, process and desirable outcomes.
‘Reform’ is one of those words, like ‘adjustment’ and ‘confidence’ which seem to mean different things to different people.
@ Paul Hunt
“The US suffers from the malign impact of legislative control over re-districting which tends to polarise the factions, *some blight from corporate funding*, the Senate becoming even more unrepresentative of the people’s will and the potential of a cohesive minority to fillibuster there. All these require relatively minor tweaks.”
Is this for real ? “Some blight from corporate funding” indeed. What is your take on healthcare reform? Or mountaintop removal in Appalachia ?
The US political system is rotten. Do you know how much it will cost to reelect Obama next year? Do you know where the money will come from?
We’re going a bit off-piste here, but in the 230 years since the Constituonal Conventions that established the US, the US process of political governance has gone through various spasms, but has continuously found the ability to renew and refresh itself in line with the original intentions of the Founding Fathers. It will take some time to repair the damage done by the Neocon hegemony of the last 30 years, but I am confident it will be repaired – though it will take some time.
What is relevant here is that the justifiably renowned economists/’policy entrepreneurs’ speaking in the clip in John McHale’s post, even if they do not have formal roles in the adminisistration, not only have the opportunity to debate economic policy prospectively, they also have opportunities to participate in public policy formulation and to present testimony before Congressional Cttees formulating, assessing and reviewing policy and legislation – and, most importantly, before the event (enactment). In addition, this gives them the opportunityto contest and rebut testimony and evidence by other interested parties – including that presented by administration officials. That doesn’t mean the evidence they present and the wisdom they distill is taken into account, but the process is open and transparent and voters can form their own views on the policy issues – and on the decisions the legislators they elect make on these issues.
The simple point I am making is that this process is in complete contrast to what happens here – and generally throughout the EU. In the limited interval between a public policy appearing in almost final form for enactment and the process of enactment there is a vanishingly small opportunity for any critique by knowledgeable and competent parties to have any impact. Indeed, government’s intent is to close down debate and to prevent the emergence of any evidence-based critique that might compel amendment of the policy.
It would require very limited changes in Dail procedure to provide the time, space and resource for the adversarial contesting of policy proposals and for effective critique and scrutiny – before enactment.
@ Paul Hunt
It is rotten , congressional committees notwithstanding
This from 2009
“But where So Damn Much Money really stands out is in the chapters that trace the broader trends that Cassidy’s rise represented. Kaiser explains how earmarks became routine. He describes the explosion in the number of political action committees after the post-Nixon campaign finance reforms of 1974. He surveys the astounding increases in the costs of campaigns, from $77 million for all Senate and House campaigns in 1974 to $343 million just eight years later, with costs for television ads accounting for much of the difference. He discusses the rise of the new class of political consultants and the new technologies they began to use, the incessant polling and focus-grouping we know so well today. He analyzes the appearance of what the journalist Sidney Blumenthal termed, in 1980, the “permanent campaign,” which turned lawmaking into a nonstop battle for partisan advantage.
If the outlines of this squalid story are familiar, the details still have the power to shock, and the corrosive influence of high-powered lobbying is clear. When, in 2007, House Democrats initiated an effort to raise the tax rate on the earned income of hedge and equity fund managers from 15 percent to 35 percent, New York Senator Charles Schumer sprang immediately and publicly into action to oppose it. For the 2008 elections, Schumer ran the Democratic Senatorial Campaign Committee. Under his leadership, congressional Democrats raised $4.9 million from hedge funds, twice the amount raised from hedge funds by Republicans in Congress.
Obama is trying to change the lobbying culture. He recognizes that doing so is not only a question of good government but also one of advancing his progressive policies. If he is to pass major health care reform or a comprehensive cap-and-trade system to regulate greenhouse gas emissions, the power of various corporate lobbies must be curtailed. It is after all the lobbies, and their servants on Capitol Hill, who typically defeat such measures. Public opinion often supports them.
It’s impossible to make such changes overnight, or in two or three years. It will take more reform legislation, especially in campaign finance, on something like free television time for political campaigns (the activity on which they spend most of their money). But it will take still more than that. On a range of fronts, the Obama administration and Congress have to follow a process that lobbyists don’t control and produce outcomes that lobbyists did not pervert. ”
A health care bill that passes against the major lobbies’ opposition and then actually works to deliver better health care to people will go a long way toward diminishing the power of all large lobbies.”
Obama lost. The lobbyists won like they always do.
The US process: agreed, in parts rotten, but redeemable.
The Irish (and broader EU) process: parts dysfunctional, parts rotten, but no incentive for those whose responsibility it is to identify the problems and implement the remedies.
Thanks for making the pitch, but I doubt it’ll gain any traction. Apart from a general desire on this board to keep the economics pure and away from the grubby taint of politics, it seems the principal interest in the political process is to poke fun at the inanity of many of those who participate in it. The penny doesn’t seem to have dropped that the path to future economic well-being and prosperity leads through the political process. How quickly this is achieved – and the extent to which it is achieved – is directly related to the nature and quality of the political process.
And I agree. ‘Reform’ has become hackneyed and has lost its precision. ‘Restoration’ may be more appropriate in the sense of a restoration of the democratic process of governance to strike a balance between interests that conflict, to ensure the advocacy of valid collective interests that suffer from under-representation, to restrain the exercise of power or privilege acquired or secured without direct popular consent and to advance certain interests at the expense of others – but in the common good and in a transparent manner.
We seem have lost a full understanding of the process of democratic governance – and how it should function. Indeed, we may have never grasped it fully – we painted much of the inherited British system green. But it needs to be restored.
@Cearbhall O’Dalaigh Says:
June 7th, 2011 at 7:47 am
Thanks for the link – I’d heard about that and kind of goes with the territory with these guys.
I would suggest sparing some time to take a look at this and some of the parties concerned as they have some significant interest in our situation.
Fascinatiing stuff. The insider/outsider dynamic operates at so many different levels. Even the Nobel Prize des get you an admission ticket. The US is such a massive, powerful economy, with so many competing centres of power and influence. Some of their philanthropic foundations probably have more clout, and more collective brain power, than our DoF. No reflection on the individuals, it’s the management culture.
This is a very small island, where all the elites are on first name terms. Faction fighting remains a national sport, so what is being said matters less than which jersey the speaker is wearing.
Survival in our institutions demands an ability to tolerate the absence of enlightened, reasoned debate, in formal settings at least. Paul Hunt articulates the blocked, cramped nature of our political processes. Wasn’t it Parnell who said no one had the right to say ne plus ultra to the march of a nation ? Three cheers for theirisheconomy.ie
The DoC has, as usual, tossed in a few crackers. The Goldsmith interview is indeed a classic. The economy ought to seve society. Karl Polanyi would approve.
As for Randall Wray, he was ridiculously reasonable. Wonder why MMT is not on the orthodox curriculum ? Oh yeah, it doesn’t suit the megabanks and TPTB.
Great link. Exactly what I raised here a few times and only hoganmahew commented on it. Much the same silence greeted what I said about definition of GTP and the relevant factors to consider when looking at the fiscal account, also that a discussion of first principles would seem an elementary requirement of an economics blog – if participants are not too insecure in, or head-in-the-sand protective of, their programmings to address such issues.
Given all the nonsense that prevails, I think it is also important to wonder about the extent of preclusion of higher faculty brain development the programming system does, a system which is self evaluating and self propagating, and the role it played in bringing the G7 world to where it is and what can be done about it. Bulky robotic referencing seems to be the predominant measure of merit.
Further to the flirting with suicide of the G7 that the link addresses:
These emerging nations are gradually moving up the ladder and becoming competitive in what we regard as the more advanced industries, such as IT technology and so I would expect that they will gradually put us out of business there too. China has another ace up its sleeve there: Pretty much the entire know world supply of rare earth minerals are located in Chine, which are important in IT, etc. I recently read that from 1st of May 2010 to end of April 2011 China exported 1819 tons of these, a drop of over 50 percent from the previous year and at escalating prices.
Yes well I think the entire structure of world trade is grossly unsustainable now and indeed has been that way since at least the late 80s
Americas 1980s relationship with Japan appears more symbiotic given Japans vulnerability to oil and metal imports and certain weaknesses in Americas mass production techniques but China’s continental postion and strategy seems very different.
The cartel may have misjudged their strength somewhat – indeed the potential loss of Japanese industrial strength could be the equilivent of Sterling’s loss of India after the war.
The efforts to keep the Imperium in place from the mid 80s on may have continued the flow of revenue to the western banks but they seem to have reduced redundencey to extreme levels to achieve this goal.
The poor quality and wages of shipmates on trans ocean voyages now is a good example – a completly different situation from the more robust 19th century world although technology is undoubtedly a factor.
The interesting concept of credibility inflation is certainly a very good explanation for the decay we are witnessing in the monetory sphere
But the decades of inactivity in the west as it farmed labour using cheap oil to extend extreme labour arbitrage is the real physical mechanism for the entropy.
As for rare earths – well I believe they are not so rare but are very dirty to mine – as both industry and pollution have been exported to China by the big players due to western environmental laws – as a result of the overly specialised nature of modern commerce it seems to have been concentrated in China although the Chinese may have strategic geo-economic reasons also.
Teleb makes a very forceful point when he talks of lack of redundencey in systems – it may make a animal more effecient but not necessarily more successful.
A Banker may wish you to operate with one eye and one Kidney so that he can offload biological capital to another but is it wise and even if it is ,will you accept your new visage ?
A geographical remove, but relevant all the same.
Iceland’s ex-PM charged over crisis.
What are the chances of summons being issued in the Drumcondra and Tullamore areas I wonder?
…….. Yes, I thought so much.
Further to my post above, I would also refer to http://www.irisheconomy.ie/index.php/2011/05/27/one-size-fits-all/#comments , comment 50:
Gavin Kostick essentially asks, in the case of the production of a work of art, how it changes money supply, unit of money value and wealth of the society.
I found the replies to be of very low quality, perhaps they express some kind of model, but regardless I think an economics forum with plenty of people who claim to know and are paid to be well informed about such matters really should step up to address the issue he raises, either to show that they can make good sense or otherwise. If the latter, …
Yes, I agree that the entire structure of world trade is cause for alarm.
Perhaps my opinion coincides more closely with James Goldsmith’s than yours. I think the issue is the size of the population with whom trade is being liberalised, its per cappita income (and the rapidity of the liberalisation).
I see Japan as quite different in these respects and, regardless of a symbiotic factor, is part of a model that has been in operation for about 50 years and was doing very well, and like the rest of the G7 is endangered by the new policy.
@Peter – perhaps but money is just a symbolic representation of energy yet to be used – we are all BTU addicts / slaves – societies develop , collapse, make war etc etc around the energy dynamic and not the reverse
The classical pre great war Gold standard system was based around capital sticky but highly productive coal centric economies.
The first and second world wars were fought to capture a more fluid and dynamic oil ecosystem.
This gradually broke down the gold payments system until finally with Arabian oil exploding in production and American oil production peaking the US defaulted on its Gold obligations and reverted to a full petro dollar system.
Brent crude and other oil metrics is the Louisiana slave trade of today – whats more important then the price is the actual amount of BTUs consumed and the balance of trade that it creates.
I have recently read “The Ship of the seven murders” which chronicles a major oceangoing multiple murder – the first chapter or so was really illuminating as it conveys how busy Cobh was in the early 19th century before coal replaced sail.
The ship like many of the time traveled to Barbados with a cargo of Mules and returned with sugar from the cane fields.
It seems that global finance has always used technology and particullary energy to arbitrage labour over vast distances and thereby profiting from the surplus.
If cheap oil from the desert does indeed peak it will again change the monetory ecosystem.
I would imagine internal continental and national capital would again become more important overtime and would kill Friedmans freefloating fx currency system that seems the primary mechanism through which the vast networked banking system milks the global energy surplus at the moment.
The recaptilisation of smaller units now needed in a world of $100+ dollar oil is being resisted by entrenched financial interests with skin in the game of the old system – if these forces are temporally successful we may indeed see $10 dollar oil but no mechanism to extract it -i.e. global collapse before the system can become more redundant again.
My comment regarding the Kostick question is in the context of my first post in this thread and its purpose is to challenge those who have not commented on it to show themselves.
I’ll take this as an opportunity to correct a minor flaw in my statement of the issue:
“… Gavin Kostick essentially asks, in the case of the production … and sale … of a work of art, …”.