Things to Read on the Morning of February 7, 2015

Must- and Shall-Reads:

• David Glasner**: A Keynesian Postscript on the Bright and Shining, Dearly Beloved, Depression of 1920-21
• Michael Pettis: Syriza and the French indemnity of 1871-73
• Eric Segall: The Rewriting of the Affordable Care Act by the Challengers in King v. Burwell
• Lawrence Mishel: Expanding Opportunity
• Tim Duy: Fed Updates
• Edwin Park: Republican Health Plan Would Cause Millions to Lose Current Coverage and Add to the Ranks of the Uninsured and Underinsured

1. Simon Wren-Lewis: Asymmetries and Uncertainties: “One way to put this point is to go back to the basic rationalisation behind flexible inflation targeting. It is OK to have a target based on inflation alone, with no mention of the output gap, because you cannot in the long run keep inflation at target without also keeping the output gap at zero. This is sometimes called the divine coincidence. However if, at low inflation rates, inflation becomes a noisy, weak and asymmetric indicator of the output gap, then focusing on inflation is going to perform badly. In these circumstances it could be many years before it becomes clear that we have been continually running the economy under capacity, and needlessly wasting resources. Unfortunately even when that point of realisation arrives, for obvious reasons monetary policymakers are going to be reluctant to acknowledge the mistake.”

2. Matthew Klein: Michael Pettis Explains the Euro Crisis: “This is literally the best analysis of the euro area’s problems we’ve ever read. You should take the time to closely read the whole thing yourself. We’ll wait. Now that you’re back, we thought we could add some value by highlighting and expanding on what we believe to be Pettis’s most important insights. First, the relevant units… aren’t countries but… sectors…. We shouldn’t forget that German workers have suffered from stagnant wages and decaying infrastructure…. Second, when it comes to big flows of capital across borders, it’s usually better to give than to receive… huge inflows of money are almost never matched by commensurate increases in the number of profitable investment projects, so a ton of money gets wasted….(Borrowing in a currency you can print is helpful but it doesn’t prevent a lot of resources getting misallocated and a lot of people ending up with excessive debt burdens.)… Third, it makes no sense to blame the recipients of the capital inflows for causing the crisis. If enough money is sloshing around willing to invest in any stupid idea, you shouldn’t be too surprised that a lot of stupid ideas get funded…. Schaeuble’s assignment of blame… prevents optimal solutions that are best for the majority of Europeans, Greek, Spanish, and German alike…. Fourth, it matters how your obligations are structured. Many smart people, most notably Daniel Davies, have argued that the headline numbers surrounding Greece’s public debt burden are irrelevant to understanding the situation in Greece…. But the focus on flows misses the impact of the structure of the debt stock on the incentives of private sector lenders and producers…. This is why Pettis thinks Varoufakis’s plan to swap existing Greek debts for obligations indexed to GDP is a good idea…. That’s very different from the current setup, where the Troika has every incentive to tie its funding to the willingness to implement austerity programmes…. That leads to the fifth point: euro area officials are running out of time…. We at Alphaville have no insight into the future of monetary policy or global liquidity here or in Europe. But we wouldn’t be surprised if it turned out that the optimal window for restructuring, even if you leave aside the political implications of persistently high unemployment, could soon close. Something for the can-kicking eurocrats to keep in mind. Finally… nothing about the euro crisis is particularly new. All of this has happened before and all of it will (probably) happen again…

3. John Herrman: The Next Internet Is TV: “Fusion… want[s]… to build ‘a new kind of newsroom to greet the changing demographics of America’ that is also ‘a little bit outside of the media bubble.’… For Fusion to talk about ‘promiscuous media’ and ‘build[ing] our brand in the places [the audience] is spending time’–as opposed to publishing everything on a single website and hoping it spreads from there–is not strange in the context of television companies… used to filling channels that they don’t totally control. Meanwhile, some of the most visible companies in internet media are converging on a nearby point…. [Suppose] websites are unnecessary vestiges of a time before there were better ways to find things to look at on your computer or your phone. What happens next? What does a media that knows or believes this look like? This is an incredibly obvious question that nobody seems to have taken much time to talk about??? I mean you have the ‘director of audience development’ at Vox telling trade publications that ‘in general, we do see higher sharing rates from the native-only posts’ and then its ‘global vp of marketing and partnerships’ dropping this excellent quote: ‘The great thing about Facebook leaning in to the new video strategy is that publishers on average are seeing a lot more views and a lot more engagement with that video content. This could theoretically be a pretty massive revenue stream with publishers when and if they do enable monetization around this inventory.’… Companies… begin to see their websites as Just One More App, and realize that fewer people are using them, proportionally…. Some of what worked in print didn’t work on the web; some of what worked on the web didn’t work on social media; some of what worked on social media won’t work in these apps…. What was even the point of websites, certain people will find themselves wondering. Were they just weird slow apps with nobody in them?…

Should Be Aware of:

• Richard Mayhew: “A major hospital in Baton Rouge, Louisiana is closing its emergency room because it is hemorrhaging money…”

1. Ramesh Ponnuru: Sorry, Bobby Jindal Is Still Wrong: “Conservatives continue to debate how (or whether) to replace the Affordable Care Act…. In response to my criticism of his idea, Jindal argues that his plan would have the advantage of lowering insurance premiums, and that the disadvantage I mention–it would result in millions of people losing their health insurance–is a ‘feature’ rather than a ‘bug.’… Jindal has talked himself into a perverse position. It would be, he says, a capitulation to the left for conservatives to back policies that would make it easier for millions of people to buy health insurance. But it’s Jindal who agrees with the left that the U.S. has to choose between conservatism and affordable coverage for all. He’s the one who thinks that if a plan results in such coverage, it is by definition not conservative. That’s the real capitulation, and it’s one conservatives shouldn’t make.”