Here I thought I was fed up with the Empty Suit in the White House:

What it says to me is all that matters is Obama's reelection (see, for example, the pivot to deficit reduction) -- when the timing's right for that, things will happen -- but don't keep your fingers crossed otherwise. If you are unemployed and struggling, the president will try to help if it also helps him get reelected, but helping because it's the right thing to do? Not likely.

The late, not-quite-great Kenneth Koch—from whom Barry may well have taken a class—may be rolling over in his grave, having discovered that his 1960 play about Richard Nixon, "The Election," has become all the more relevant about the sitting Democratic President.

I'm still in catch-up mode, but I keep coming back to this presentation (PDF)—four times now. It's a speech by BoJ member Masaaki Shirakawa in Tokyo on the 22nd of December last year to the Board of Councillors of Nippon Keidanren (Japan Business Federation), entitled "Globalization and population aging - challenges facing Japan."


Go through the whole thing, but—most especially for U.S. readers—Chart 5.

Pay especial attention to Bank Lending and Housing Prices. Then Riddle Me This, as it were: If U.S. housing prices are stable or basically plateaued overall, then there isn't a growing decline in credit quality from that sector (the way there was in Japan over the comparable period).

So why is bank lending in the U.S. so low and going lower?

For the non-cognoscenti: "IOR" is interest on reserves. Banks keep money in their accounts at the Fed. In October, 2008 the Fed started paying .25% interest on those accounts.

The Fed's also engaged in "quantitative easing," a.k.a. open-market purchases on steroids, creating new money and using it to buy $1.6 trillion dollars worth of bonds from banks. The money is deposited in banks' reserve accounts.

The result: banks have $1.6 trillion dollars in excess reserves (in excess of what they're required to hold) sitting in their accounts at the Fed.

This is the heart of the "pushing on a string" argument -- giving the banks more reserves (making their holdings more "liquid") doesn't (necessarily) increase real-economy transaction volumes (on consumption or investment), either directly through spending by the banks or via bank loans to people and businesses who will spend it. This $1.6 trillion in new money issued by the Fed is effectively stuffed in an electronic mattress.

So I'm curious what would happen if the Fed no longer paid IOR.

I asked Scott Sumner this a while back:

if tomorrow the Fed dropped IOR to zero or even negative, what would happen to:

o Excess reserves
o NGDP
o Inflation

He gave a somewhat less than satisfactory answer:

The IOR question is a good one, and at the risk of being annoying I’m going to slightly dodge the question. I do think it would be expansionary, but it’s hard to know how much, because it’s almost inconceivable to me that it would be done by itself, without any other policy changes. It could be slightly expansionary, or if accompanied by other moves, wildly expansionary.

Less than satisfactory (for me) because he often engages in these kind of simplified thought experiments. Change Variable X, ceteris paribus: what would happen?

I'm basically asking for a free education here (hoping others would appreciate such an education as well), but I'm also hoping to spur a discussion on a tightly focused question that has not been cogently discussed, as far as I can find. (I certainly could have missed it. Pointers welcome.)

Cross-posted at Asymptosis.

In the previous post, I suggested that speculation is driving oil prices higher than they should be.  In this follow-up, I think I can show that oil prices are not behaving in a completely supply-demand determined way.  We'll look at price activity, volatility, and an estimate of what rational pricing might be.

First, here is Brent Crude spot price activity since 1987, data from the U.S Energy Information Administration.  I've taken a weekly average of daily data, and plotted it as of each Friday (it was just a lot easier than trying to work their data table into a daily data plot.) Also included is a 55 week moving average.

As you can see, the price really took off after 2000.  Coincidentally, the Gramm–Leach–Bliley (Financial Services Modernization) Act of 1999, which undid portions of the Glass-Steagall of 1933, was signed into law on Nov 12 of that year, and the Commodities Futures Modernization Act of 2000 was signed into law on Dec 21 of that year.  These new laws allowed mega-consolidation in the finance industry and prohibited the regulation of certain speculative activities.

More below the fold...

(Update: Dan here...Brad DeLong takes note)

I think this is a totally fair excerpt from this post by Kantoos

I realized this three years ago, in early 2009, when I read John Cochrane’s piece on fiscal stimulus . It is a little convoluted, unfortunately, but an interesting read nonetheless. I would have loved to read a proper response by Paul or Brad DeLong, but only found unjustified rants that had little to do with John’s arguments – if you actually read the whole piece.

Note that he dismisses and denounces a post by Brad DeLong and a post by Paul Krugman asserting that they were not thorough and well enoughh argued criticisms of a post by John Cochrane, yet provides no quotes, evidence, argument or explanation of his dismissal of their posts.

I don't think I have read a more dramatic demonstration of lack of self awareness on the internet. The previous record holding text was "I am aware of all internet traditions."

If anyone can think of more blatant projection (including especially this post) he or she is asked to link to it in comments. Note this is not a post about Cochrane's arguments. I merely note that Kantoos criticism of DeLong's and Krugman's is a much more valid criticism of itself than of their posts, since he provides explanation at all of why he condemns those posts

Kantoos notes that Brad is insanely patient

[Update: Brad DeLong replies in a long post, which is remarkable, given that John's piece is three years old. Impressive! Thanks, Brad.]

Note there* is no comment on whether Kantoos wishes to reconsider his harsh condemnation of Brad's earlier post.

*update spelling corrected

Maybe the appropriate title for this is: Do as I say and not as I do....

Just listening to Thom Hartman and he noted something that struck a cord (chord?) with me: voter ID, electronic ballots. In the caucuses last night, the Republican party did not require and ID, they allowed onsite registration and hand counted the ballots.  This is completely and totally counter to the Republican national position.  Even RIland passed an ID law.  Dare I use the over used word "hypocrisy"?  No, this is not hypocrisy.  This is flat out A-holeism.  This is the big middle finger from the GOP to the nation that the MSM villagers have totally...ignored? Avoided?  To stupid to recognize?  Believes in?  

To strong you say?  Then consider these graphs from Juan Cole (ht digby):

Didby looks at these graphs is sees it as a means to interpret the MSM Villagers favorite phrase: Real Americans.  She correct in that one too.

Today, the Consumer Financial Protection Bureau gets its first director -- and its full powers. President Obama gave Richard Cordray a recess appointment that Republicans cannot block.

An organization that is called: American Institute of Certified Tax Coaches has put up a summary graphic of the various tax proposals ofthe GOP candidates. It not only notes the major points of their plans, but what their plans would cost.

It is presented in a sort of game board race layout. The Institute introduces it thusly:

The US tax code is so complexeven those who write the law don’t understand all of it. Infact, few members of Congress prepare their annual tax returnsaccording to a survey by the congressional newspaper, “The Hill.” Politicians cite the complexity of the tax code as the primary reasonleading them to turn to professionals for help. Even theCommissioner of the IRS can’t prepare his own tax returns!

Ask most taxpayers and theyagree our current system is too complicated and unfair. So there’sno easier way for a politician to gain approval than to say thecurrent system should be eliminated.

It’s no surprise theRepublican presidential candidates have come out with somewide-ranging tax proposals. Even deciphering the content ofthese plans can be a challenge, so we took it upon ourselves toidentify how the GOP hopefuls’ differ and just what is in them.

Click on the AICTC link to see their take. The image is too big to post here. (Thanks C & L)

Last Spring, some Democrats and liberals (Ed Schultz and Bernie Sanders spring readily to mind) who have somehow resisted the enlightenment of unfettered free markets suggested that high oil prices are due to speculation.

Noah Smith took this subject on, asking the question: "Do speculators cause oil and/or gas prices to rise above their "natural" or fundamental level?" Noah's take is that speculation is innocent, and he cites some corroborating experimental evidence. I'm a big fan, but this time I think Noah missed the point. First, I'll state right up front that futures markets play a vital role in allowing the producers and first-line purchasers of various commodities to be able to stabilize their cash flows and construct realistic business plans. So - yes, futures markets are a good thing.

On the other hand, when quizzed by Senator Cantwell on why big, trans-national oil companies should continue to receive multiple billions of dollars in tax breaks, Exxon CEO Rex Tillerson admitted that a good estimate of a supply-demand determined price (considering the price of the next marginal barrel) for crude is in the range of $60 to $70 per barrel.

More below the fold...