Video: Ron Paul versus Paul Krugman


Update: Paul Krugman comments:

Don’t Know Much About (Ancient) History: The things I do for book sales. I debated, sort of, Ron Paul on Bloomberg.Video here. I thought we might have a discussion of why the runaway inflation he and his allies keep predicting keeps not happening. But no, he insisted (if I understood him correctly) that currency debasement and price controls destroyed the Roman Empire. I responded that I am not a defender of the economic policies of the Emperor Diocletian.
Actually, though, appeals to what supposedly happened somewhere in the distant past are quite common on the goldbug side of economics. And it’s kind of telling.
I mean, history is essential to economic analysis. You really do want to know, say, about the failure of Argentina’s convertibility law, of the effects of Chancellor Brüning’s dedication to the gold standard, and many other episodes.
Somehow, though, people like Ron Paul don’t like to talk about events of the past century, for which we have reasonably good data; they like to talk about events in the dim mists of history, where we don’t really know what happened. And I think that’s no accident. Partly it’s the attempt of the autodidact to show off his esoteric knowledge; but it’s also the fact that because we don’t really know what happened — what really did go down during the Diocletian era? — you can project what you think should have happened onto the sketchy record, then claim vindication for whatever you want to believe.
It’s funny, in a way — except that this sort of thinking dominates one of our two main political parties.

James Fallows Has Contempt for Mitt Romney

He has good reason to do so, I believe:

James Fallows: 'Even Jimmy Carter': Mitt Romney informs us that the raid that took out Osama bin Laden one year ago was no big deal, because "even Jimmy Carter would have given that order." Grrrrr….

  1. Jimmy Carter is a graduate of the U.S. Naval Academy who spent ten years in the uniformed service of his country. As far as I can tell, this is ten years more than the cumulative service of members of the Romney clan….
  1. Jimmy Carter did indeed make a gutsy go/no-go call. It turned out to be a tactical, strategic, and political disaster. You can read the blow-by-blow in Mark Bowden's retrospective of "The Desert One Debacle."… Deciding to go ahead with that raid was a close call. Carter's own Secretary of State, Cyrus Vance, had opposed the raid and handed in his resignation even before the results were known. And it was a daring call -- a choice in favor of a risky possible solution to a festering problem, knowing that if it went wrong there would be bad consequences all around, including for Carter himself. So if you say "even Jimmy Carter" to mean "even a wimp," as Romney clearly did, you're showing that you don't know the first thing about the choice he really made.

  2. Precisely because of the consequences of Carter's failure, Obama was the more daring in making his go/no-go decision….

I hope that the crack was a scripted attack line, rather than being yet another spontaneous glimpse of the way Mitt Romney feels and thinks. "Even" Jimmy Carter made a daring choice, and paid the price.

Milken Global Conference Video: The Future of Capitalism

The Future of Capitalism Monday, April 30, 2012 11:00 AM - 12:00 PM


  • Niall Ferguson, Laurence A. Tisch Professor of History, Harvard University; Senior Fellow, Hoover Institution
  • Ana Palacio, Member, Spanish Council of State; former Minister of Foreign Affairs, Spain
  • Peter Passell, Senior Fellow, Milken Institute; Editor, The Milken Institute Review
  • Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance, University of Chicago Booth School of Business


Fannie Mae and Freddie Mac Serious Delinquency rates declined in March

Fannie Mae reported that the Single-Family Serious Delinquency rate declined in March to 3.67%, down from 3.82% in February. The serious delinquency rate is down from 4.44% in March 2011, and is at the lowest level since April 2009. Some of the decline over the last two months is seasonal.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Freddie Mac reported that the Single-Family serious delinquency rate declined to 3.51% in March, down from 3.57% in February. Freddie's rate is down from 3.63% in Feburary 2010. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are loans that are "three monthly payments or more past due or in foreclosure".

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

With the mortgage servicer settlement, I'd expect the delinquency rate to start to decline faster over the next year or so.

The "normal" serious delinquency rate is under 1%, so there is a long way to go.

Note: LPS reported the serious delinquency rate (including in foreclosore) was about 7.5% in March. That includes the Fannie and Freddie loans with serious delinquency rates at less than half the industry average. This is also a reminder of how bad the non-Fannie/Freddie loans are performing.

Milken Global Conference Video: Tax Reform: What’s Fair Got to Do With It?

Tax Reform: What's Fair Got to Do With It?, Monday, April 30, 2012, 9:30 - 10:45 AM


  • Jared Bernstein, Economic Policy Fellow, Milken Institute; Senior Fellow, Center on Budget and Policy Priorities; former Chief Economist to Vice President Joe Biden
  • Steve Forbes, Chairman and Editor-in-Chief, Forbes Media
  • William Gale, Director, Retirement Security Project, Brookings Institution; Co-Director, Urban-Brookings Tax Policy Center
  • Douglas Holtz-Eakin, President, American Action Forum; former Director, Congressional Budget Office; former Chief Economist, Council of Economic Advisors


Update: Richard Green:

I am watching the Milken Global Conference panel on tax reform, and I want to shout: ...the reason fewer people are paying federal income taxes is that more people are making low incomes.


If you are wondering how it is possible that a storied Wall Street law firm like Dewey Leboeuf can find itself in the middle of a white shoe soap opera, complete with partner defections in droves, a Russian spy, financial mismanagement, aborted merger talks, prepackaged Chapter 11 scenarios, lender workout discussions and a reported probe by the Manhattan DA's office,  you may want to read these: 



Occupy Wall Street Sues New York City, JP Morgan #OWS

One of the continuing and largely unrecognized aspects of the ongoing media coverage of Occupy Wall Street is that police brutality and lesser abuses have been airbrushed out.

In the early days of the movement when the number participating was small, it was overly aggressive policing that put them on the map. YouTube clips of women who were already kettled being pepper sprayed and arrests of people on Brooklyn Bridge went viral. Later arrests from a march across Brooklyn Bridge garnered more sympathy when reconstruction of events showed that the protestors had actually been directly by police to walk on the roadway, setting them up to be incarcerated. The real eye opener was when Oakland police critically wounded Iraq war vet Scott Olsen while using tear gas, rubber bullets, and flash grenades to clear Frank H. Ogawa Plaza, with no evidence of any provocation by the protestors.

The powers that be quickly realized their error. When Zuccotti Park was cleared on November 15 as part of a coordinated, national, quasi military crackdown, journalists were not only kept well away from the park, the few that managed to get inside the cordon were roughed up and arrested despite identifying themselves as members of the media. While there were some videos of police assaulting protestors during this period (see this example), major media fell into line, in many cases cheering the efficiency of the policing. In the case of the New York Times, this appears to have resulted from Times journalists having been embedded in the operation.

The heavy handed assaults and media control is meant to convey the message that defiance is useless. Yet this is turning into a protracted struggle over the legitimacy of authority. We’ve commented before on how these crackdowns consume a lot of tax dollars at a time when municipal budgets are already being cut. And they wind up being even more costly than most imagine, because the courts have generally been sympathetic to protestors who are injured in the course of unwarranted police roughings-up, particularly now that what really happened is caught more often than before on smart phone video cameras. The point is a little police overzealousness over time leads to not cheap settlements.

A less costly but nevertheless important front for pushing back is via suits against police violations of Constitutional rights. Bloomberg reports that two cases were filed today, one against four New York City council members, JP Morgan, Brookfield Properties, and Mayor Bloomberg over the use of excessive force by police and denial of constitutional rights. OWS also filed a separate suit against police chief Ray Kelly by five protestors seeking class action status over detention of protestors when they were “never charged with any violation, misdemeanor or crime.”

This may on the surface appear to be a quixotic salvo against overwhelming police/bureaucratic force. But this is actually part of a war of attrition. The real game here is to undermine the legitimacy of authority by putting a spotlight on their illegitimate actions. As Richard Kline wrote on an earlier post:

One has to erode the legitimacy of those in the wrong before public opinion shifts sufficiently for their efficacy to sag. This isn’t a linear process, which is why polling is really, really stupid about things most of the time. Supposing some of your friends went down and cop just haulded off and slammed them in the kisser with a baton. Do you think they’d sue? Of course. They wouldn’t see the cop as just doing his job: they only see that when he’s doing his job on somebody else. So in fact, they’re _not_ indifferent to injustice but insulated from it.

Part of a social change movement is pulling out handfuls of insulation—or more often about the police burning it. I know that this isn’t a very satisfying rebutal to your concerns, which are real, but the fact is that you do influence people wearing that symbol simply by being a reasonable person endorsing something which isn’t the same tired bullshit. You can’t know the incremental effect you have until the shift comes. And yes, it may take years. In Egypt, they’d been organizing (in far more difficult conditions) for five years before The Big Unwind. The point is for the Occupation Movement to maintain intitiative and keep the pressure on. The authorities only have a limited playbook, and no solutions whatsoever.

It remains to be seen whether the Occupy movement has the staying power to effect or foment lasting change. But with unemployment high (reducing the stakes to participation in protests) and the elites far more keenly interested in the needs of the 1% than those of ordinary citizens, there is plenty of dry timber for a spark to set off a bigger conflagration.

Milken Global Conference Video: Where Will Economic Growth Come From?


Where Will Economic Growth Come From? Monday, April 30, 2012
8:00 AM - 9:15 AM


  • Willem Buiter, Chief Economist, Citigroup
  • Terry Duffy, Executive Chairman, CME Group Inc.
  • Mohamed El-Erian, CEO and Co-Chief Investment Officer, PIMCO
  • Kevin Warsh, Distinguished Visiting Fellow, Hoover Institution, and former Member, Federal Reserve Board of Governors


Egan Jones Cuts Spain For Second Time In Two Weeks, From BBB- To BB+

Even as the SEC is hell bent on destroying Egan Jones as a rating agency, in the process cementing its status as an objective, independent, and honest third party research entity, the firm is just as hell bent on milking its still existing NRSRO status for all it's worth. Because while Egan Jones was the first entity to cut Spain two weeks ago, only to be followed by Spain, it just did so again minutes ago.

From Egan Jones:

Synopsis: KINGDOM OF SPAIN EJR Sen Rating(Curr/Prj) BB+/ BB Rating Analysis - 4/30/12 EJR CP Rating: A3 Debt: EUR643.1B, Cash: EUR95.1B EJR's 1 yr. Default Probability: 3.0% Miserable trend - over the past three fiscal years (i.e., from 2008 to 2010), Spain's GDP declined from EUR1.09 trillion to EUR1.07 trillion. Meanwhile, its debt mushroomed from EUR381 billion to EUR563 billion. The recently-reported quarters are of little comfort since the debt has risen to EUR 641B while GDP has been more or less flat resulting in a 61% debt to GDP and will continue to rise. Increased social benefits are a major problem; while payments to the govt have been more or less flat over the past four years (up EUR 8 billion), payments from the government have been up EUR 44 billion). As a result, Spain is short about EUR50B per year for social payments, EUR20B per year for interest, and an additional EUR 30B for asset growth; hence the EUR100B per annum increase in debt. Unemployment is near depression levels of 23+% while adjusted wage rates have declined. In addition to its social payment/ unemployment problem, Spain is likely to be faced with payments to support a portion its banking sector and for its weaker provinces. Assets of Spain's largest two banks exceed its GDP. We are slipping our rating to " BB+ " ; watch for requests for support from the banks.

Look for more "legitimate" rating agencies to piggy back on the re-cut shortly. And as noted last night, once all rating agencies move from SpAin to SB(BB)ain, the 5% ECB haircut on collateral is next.

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