Things to Read on the Evening of March 12, 2014


  1. Lawrence Summers: Why Austerity Is Counterproductive In The New Economy: “As U.S. and [other] industrial economies are currently configured, simultaneous achievement of adequate growth, capacity utilization, and financial stability appears increasingly difficult… [because of] a substantial decline in the equilibrium or natural real [safe] rate of interest…. Addressing these challenges requires different policy approaches than are represented by the current conventional wisdom…. The recovery has not represented a return to potential, and, according to the best estimates we have, the downturn has cast a substantial shadow on the economy’s future potential…. The record of growth for the last five years is disturbing, but I think that is not the whole of what should concern us…. Until 2007 the economy grew at a satisfactory rate… [but] did it do so in a sustainable way? I would suggest not…. The record of industrial countries over the last 15 years is profoundly discouraging as to the prospects of maintaining substantial growth with financial stability…. The preferable strategy… is to raise the level of demand at any given rate of interest…. Policies that are successful in promoting exports… public investments…. With a standard model, increases in demand actually reduce the long-run debt-to-GDP ratio… [That should drive a] reassessment of the policy issues facing the United States and push us towards placing substantial emphasis on increasing demand…”

  2. The problem with stories like this is that the author reveals himself to be either a clueless dork or an unreliable narrator by virtue of assuming the authorial persona of someone who did not realize what life was really like for typical Americans until he fell out of the bubble and it affected him personally. But if you can look past that… very good: My Life as a Retail Worker: Nasty, Brutish, and Cheap – Joseph Williams: “After veteran reporter Joseph Williams lost his job, he could only find employment in a sporting-goods store. In a personal essay, he recalls his struggles with challenges millions of Americans return to day after day.”

  3. Spencer Ackerman: CIA steals the limelight from the NSA – and finds itself in full-blown crisis: “After a year in which the National Security Agency faced global condemnation, the Central Intelligence Agency has now taken over as the US intelligence body most firmly in the midst of a full-blown crisis. The CIA has dug itself into a morass the NSA has firmly avoided: antagonizing its congressional overseers. It is a crisis redolent with ironies. A White House that labored intently to move past the CIA’s post-9/11 torture legacy, disappointing many supporters, must now resolve a row stemming directly from it. A CIA director who first missed out on his job over fears he was soft on agency torture is now in the crosshairs of what his Senate overseers considers a cover-up. A Senate committee chairwoman who has fiercely defended the NSA’s abilities to collect data on every American phone call is furious that the CIA monitored the network usage of her staff, calling the alleged infraction a potential subversion of the Senate’s constitutionally mandated oversight responsibilities. A Justice Department that limited and ultimately dropped a criminal inquiry into CIA torture without bringing charges now has to consider potential criminal liability against Senate staff conducting their own inquiry; and for CIA officials who allegedly attempted to thwart it.”

  4. Susan Berger: How Finance Gutted Manufacturing: “Timken obviously has a business interest in these initiatives: sharing costs for activities that were once borne entirely in-house, educating students who can be recruited for employment, gaining eligibility for new state and federal grants. But in fulfilling its own goals, Timken was also acting as a convener for industry and education. It placed its own resources on the table in order to attract others to do the same. As Timken prepares to split into two smaller publicly listed companies, how likely is it that either of them will be so active in strengthening the Ohio industrial ecosystem? Judging by the records of other companies that have gone through similar restructuring, I am not optimistic…. here is a more favorable climate for manufacturing in the United States today than there has been in decades. Yet these changes are unlikely to have durable effects if the basic weaknesses of the system are not repaired. The new public-private partnerships to rebuild capabilities in the industrial ecosystem seem to have enormous promise. But, as the Timken case illustrates, the financial pressures that broke up American companies in the ’80s persist. The solution may be out of reach. Today California teachers need to protect their pensions by dismantling Ohio manufacturers. The structures of U.S. capital markets and fiscal policy reward investors whose decisions are based on maximizing returns over the short-term. While the Dodd-Frank financial reforms may cut down on some of the riskiest securitization-based investment strategies, new regulations have not created real incentives for the more patient investment that growing production in America requires.”


  • Anton Cheremukhin et al.: Was Stalin Necessary for Russia’s Economic Development?

  • Cardiff Garcia: Known unknowns about labour market slack: “Here are questions to which the answers remain disputed:v1) To what extent will discouraged workers return?… 2) Are part-time workers… another kind of labour market slack?… 3) How many of the long-term unemployed now represent structural unemployment?… 4) There are also likely to be some labour force dropouts who could hypothetically be coaxed back into the labour market, but whose switching costs are high…. How high would wages have to climb in order to make the opportunity cost tradeoff worthwhile for them to return?… 5) What is the correct estimate of the natural rate of unemployment? 6) How much will inflation climb this year relative to last year? 7) Is the hourly wage growth acceleration of recent months the result of shorter work weeks caused by the winter, and will thus flatten out, or is it the start or a self-sustaining rise? 8) Longer-term secular inflationary forces appear to be pushing in the opposite direction as they were in the 1970s…. But is it true?… 9) What’s the output gap?… The answers to some of these questions are more important and more controversial than others…”

  • John Aziz: How America’s internet can become the fastest on Earth: “The cost of nationwide fiber at Google Fiber speeds? According to an estimate by Goldman Sachs, it’s $140 billion. That sounds like a lot, but next to other large-scale government ventures, it’s very little. The 2008 TARP bank bailouts cost $700 billion, and the wars in Iraq and Afghanistan cost at least $4 trillion! With interest rates on government borrowing remaining near record lows, the market is offering the government cheap money to invest. The potential for economic growth from such an investment is huge. And not just in the extra jobs created by building the network. With such a huge pipe connecting the country, businesses would make use of the bandwidth, leading to a new slew of products, services, and innovations, just as the rollout of the original interstate highway system did.”

Dean Starkman: No, Americans Are Not All To Blame for the Financial Crisis: The Big Lie That Haunts the Post-Crash Economy | Brendan Greeley and Matthew Philips: U.S. Potential GDP Revised Downward as Recession Damage Lingers | Sahil Kapur: GOP’s Anti-Obamacare Bill Would Hike Premiums, Uninsure 13 Million |

Should Be Aware of:

  1. John Scalzi: The Orthodox Church of Heinlein | Whatever: “If you’re an aficionado of passive-aggressive fannish xenophobia, in which the frothing distrust of people who aren’t just like you is couched in language designed to give the appearance of being reasonable until you squint at it closely, then you’re not going to want to miss this piece by Baen publisher Toni Weisskopf. It’s a really fine example of the form…”

  2. Mohamed A. El-Erian: Six Reasons Why Business Investment Has Stalled: “With profitability at or near record levels, cash holdings by the corporate sector in the United States have piled up quarter after quarter, reaching all-time highs–and earning very little at today’s near-zero interest rates…. But, rather than deploy their abundant cash in new investments to expand capacity and tap new markets… companies have so far preferred… to give it back to shareholders…. First, companies are concerned about future demand for their products…. Second, with China such an influential driver of global demand (both directly and indirectly through important network effects), the outlook for the world’s second-largest economy has a disproportionate impact on projections of global corporate revenues…. Third, while companies recognize that innovation is a key comparative advantage in today’s global economy, they are also humbled by its increasingly winner-take-all nature…. Fourth, the longer-term cost-benefit analysis for would-be investors is clouded by legitimate questions about certain operating environments…. Though many corporate leaders may still be unable to grasp the precise threats, they seem uneasy about the longer-term collateral damage implied by running modern market economies at artificially repressed interest rates and with bloated central-bank balance sheets.”


Kevin Drum: Opposition to Obamacare Remains Under 40 Percent, the Same as Always | Liberal Animation | Joe Garofoli and Peter Hartlaub: What out-of-town writers need to know about S.F. | * Scott K. Johnson:* Recent estimates of low climate sensitivity were flawed |

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