Paul Krugman, who's been on quite the Orwellian rant over the past couple of weeks, had a little post on his blog Wednesday, entitled: "
Arsonists Prosecuting Firefighters." In it, he gives us this gem from George, himself...
...Gary Younge reminds us of another great Orwell essay, In Front of Your Nose:
The point is that we are all capable of believing things which we know to be untrue, and then, when we are finally proved wrong, impudently twisting the facts so as to show that we were right. Intellectually, it is possible to carry on this process for an indefinite time: the only check on it is that sooner or later a false belief bumps up against solid reality, usually on a battlefield.
Yep.
Speaking of "in front of your nose," I don't quote much from Brett Arends, but checkout his latest from MarketWatch, from earlier this week: "
The great bank heist of 2010."
The great bank heist of 2010
Commentary: Wall Street wins, Main Street pays--again
By Brett Arends, MarketWatch
December 21, 2010 12:01AM
This was the year America finally took on the power and greed of the Wall Street banks.
And the banks won.
They dodged the bullet of real reform, probably for all time. They bounced back to post huge profits, helped by legal theft from the middle class. They completed their takeover of both political parties -- and bought themselves a new Congress even more pliable than the old one.
Middle-class America is flattened, devastated and broke. The bankers that caused it all have escaped punishment. They're raking in huge profits. Oh, and the tax cuts just got extended for high earners, too!
Game over...
--SNIP--
Think of the lavish campaign checks. The lucrative hedge fund "adviser" jobs. The pervasive influence of pinstriped "progressives" like Larry Summers and Bob Rubin.
This was the year the investment paid off. Big time.
--SNIP--
...It was the greatest heist in history. The bankers pulled it off under everyone's nose.
Bold type is diarist's emphasis.
And, here's more from Krugman on that smell in front of everyone's nose....
ON THE DEFICIT BULLSHIT...
...The hypocrisy of the centrists: Just two weeks ago, the deficit was the great evil, and all the VSPs insisted that we needed fiscal austerity now now now. Then, magically, a big tax cut -- increasing federal debt by more than the original Obama stimulus, and substantially raising the probability of making unaffordable tax cuts permanent -- was the greatest thing since sliced bread.
Why, it's almost as if all the concern about the deficit was a front for opposing anything progressives might want, to be dropped as soon as debt was being run up on behalf of conservative goals. But that can't be true, can it?
ON THE GOPer's "BIG GOVERNMENT" BULLSHIT...
(From his column in today's NY Times: "The Humbug Express.")
...If you listen to the recent speeches of Republican presidential hopefuls, you'll find several of them talking at length about the harm done by unionized government workers, who have, they say, multiplied under the Obama administration...
--SNIP--
....Horrors! Except that according to the Bureau of Labor Statistics, government employment has fallen, not risen, since January 2008. And since January 2009, when Mr. Obama actually did take office, government employment has fallen by more than 300,000 as hard-pressed state and local governments have been forced to lay off teachers, police officers, firefighters and other workers.
So how did the notion of a surge in government payrolls under Mr. Obama take hold?
--SNIP--
...anyone paying attention knew why public employment had risen -- and it had nothing to do with Big Government. It was, instead, the fact that the federal government had to hire a lot of temporary workers to carry out the 2010 Census -- workers who have almost all left the payroll now that the Census is done.
Is it really possible that the authors of those articles and speeches about soaring public employment didn't know what was going on? Well, I guess we should never assume malice when ignorance remains a possibility.
There has not, however, been any visible effort to retract those erroneous claims. And this isn't the only case of a claimed huge expansion in government that turns out to be nothing of the kind...
ON THE ANTI-KEYNESIAN BULLSHIT...
..."We're living in a dark age of macroeconomics," Krugman said during his lecture, before an audience of several hundred students (and several of his former MIT colleagues) in the Stata Center. "Economists themselves are confused," he added. "It's been really amazing within the economics profession to see how much has been lost."
What has been lost above all, Krugman argued, is an appreciation of ideas developed in the 1930s -- most notably the economist John Maynard Keynes's broad view that in certain circumstances government spending is the best tool to instigate an economic recovery. At a time when interest rates are minimal and can hardly be lowered to spur private investment, Krugman argued, Keynesian thought is especially vital, despite some loud arguments to the contrary.
--SNIP--
"We are caught in a situation more than a little reminiscent of the mid-1930s," Krugman emphasized. "How can we be replaying the past so badly?" he added. "That is the question that has worried me a lot."
--SNIP--
....The problem, in his view, is that "political people tend to always look part-way. If you say you need to do this big [bill], they'll say, `All right, let's do part of it.' ... That's very difficult to do in a situation where half a loaf may be not much better than nothing. And that is the situation we face with this crisis. If you do a half-hearted policy, even if economists think you should do more, the conclusion will be, `Well that policy failed.'"
As Krugman sees it, then, the government did too little to fight the recession, and now it's too late to reverse course...
Yes, you can just smell the holiday season in the air (among other things)!
GROWTH/GROSS DOMESTIC PRODUCT: "Why The Upward Revision in Third Quarter GDP Growth is Not Good News."
Why The Upward Revision in Third Quarter GDP Growth is Not Good News
By Mark Thoma
Professor of Economics
University of Oregon
Maximum Utility Blog
December 22, 2010
The growth rate for GDP for the third quarter was revised upward from 2.5 percent to 2.6 percent, but a closer look at the numbers reveals it's actually not such good news. Dean Baker explains why:
Inventories and the Wonders of GDP Accounting, by Dean Baker: The news stories are coming out on the Commerce Department's release of revised data on 3rd quarter GDP and it seems that almost everyone has missed the story. The headlines of the articles are telling us that GDP growth was revised up slightly from 2.5 percent to 2.6 percent. While that may sound like at least somewhat positive news a more careful review of the data shows the opposite.
While the rate of GDP growth was revised up, the rate of final demand growth was revised down. Final demand, which is GDP excluding inventory accumulations, grew at just a 0.9 percent annual rate in the 3rd quarter, the same as its growth rate in the second quarter. The reason that GDP growth was revised upward was a more rapid reported growth in inventories.
The reported rate of inventory accumulation in the 3rd quarter was $121.4 billion (in 2005 dollars), the fastest pace ever. This added more than 1.6 percentage points to the rate of GDP growth in the quarter.
It is very unlikely that this pace of inventory growth will be sustained..., because the upward revision to GDP growth was based on more rapid accumulation of inventories it should not be viewed as a positive for the economy's growth prospects.
A graph may help. This is a graph of business inventories from the Cleveland Fed: Business Inventories October 2010
WHEN IS A FULL-TIME JOB NOT? Stockman: "Jobs outlook worse than people think"
Stockman: "Jobs outlook worse than people think"
by gjohnsit
Daily Kos
Sun Dec 12, 2010 at 04:01:29 PM EST
We've heard a lot about how the economy has created one million jobs since the end of the recession in 2009, but until recently we haven't heard anyone break down what those jobs are like. That changed last week when David Stockman appeared on CNBC.
"The jobs that they count every month and people get excited about are really part-time jobs," he said.
THE LINK BETWEEN MORTGAGES AND SMALL BUSINESS: "The Effect of Falling Home Prices on Small Business Borrowing."
The Effect of Falling Home Prices on Small Business Borrowing
Mark Thoma
Professor of Economics
University of Oregon
Economist's View Blog
Tuesday, December 21, 2010
I didn't realize how much small businesses depend upon home equity to finance their business operations:
The Effect of Falling Home Prices on Small Business Borrowing, by Mark E. Schweitzer and Scott A. Shane, Economic Commentary, FRB Cleveland: Small businesses continue to report problems obtaining the financing they need. Because small business owners may rely heavily on the value of their homes to finance their businesses (through mortgages or home equity lines), the fall in housing prices might be one of the causes of their difficulty. We analyze information from a variety of sources and find that homes do constitute an important source of capital for small business owners and that the impact of the recent decline in housing prices is significant enough to be a real constraint on small business finances.
A persistent issue throughout the recovery has been the reported inability of small businesses to get the financing that they need. To better understand the sources of any shortfall, the Federal Reserve System undertook a project in 2010 to meet with representatives from banks and small businesses.1 In some of the focus groups..., participating small business owners explained that the reduced value of their homes has made it difficult for them to provide the necessary collateral for small business loans. Other participants said that the reduced value of homes has made home equity borrowing as a source of business capital more difficult to come by, also contributing to the difficulty many small businesses face in obtaining sufficient capital to finance their operations. While the small business owners' message of a link between home values and small business borrowing came through loud and clear in the focus groups, the process did not provide estimates on the magnitude of the effect of declining home values on small businesses' access to capital...
WALL STREET FRAUD: "Deutsche Bank Agrees to Pay $553.6 Million to Settle U.S. Tax Shelter Case."
Deutsche Bank Agrees to Pay $553.6 Million to Settle U.S. Tax Shelter Case
By David Glovin, David Voreacos and Bob Van Voris - Wed Dec 22 00:01:01 GMT 2010
Dec. 22 (Bloomberg) -- Deutsche Bank AG, Germany's largest bank, admitted criminal wrongdoing and agreed to pay $553.6 million to avoid prosecution in the U.S. over fraudulent tax shelters that generated $29 billion in "bogus" tax losses.
The U.S. Justice Department, under an agreement yesterday, won't prosecute the Frankfurt-based bank for fraud or tax evasion for enabling wealthy U.S. citizens to avoid $5.9 billion in taxes, after the bank admitted criminal wrongdoing.
The settlement includes a $149 million civil penalty, the fees that Deutsche Bank generated from the shelters, and the taxes and penalties the Internal Revenue Service was unable to collect from taxpayers because of the misconduct, according to the agreement.
From 1996 to 2002, "Deutsche Bank assisted high net worth United States citizens, who, through 2005, reported approximately $29.3 billion in bogus tax benefits on their tax returns," according to the agreement. "DB acknowledges that it was wrong and unlawful to have engaged in these transactions and regrets having done so..."
Bold type is diarist's emphasis.
And, then there's this, just up on Naked Capitalism over the past couple of hours: "Fraud Ruling Against Wells Fargo in Minnesota Points to Widespread Abuses in Securities Lending Program."
Fraud Ruling Against Wells Fargo in Minnesota Points to Widespread Abuses in Securities Lending Program
Yves Smith
Naked Capitalism
Friday, December 24, 2010 12:44AM
A fraud and breach of fiduciary duty ruling against Wells Fargo in a major scandal in Minnesota may have much broader ramifications for this sanctimonious bank.
The facts are not pretty. Wells Fargo, in its investment management operation, used securities lending to boost returns. But the returns it increased appeared to be only those of the bank. Institutional investors in various programs lost money as a result of this activity. Four Minnesota plaintiffs, including two of the state's high profile charities, sued. A jury had already awarded the plaintiffs $29.9 million for fraud. A post trial ruling by the judge has added costs, interest, and reimbursement of fees that looks set to more than $15 million to the total.
District Judge M. Michael Monahan concurred with the jury's main findings:
Wells Fargo breached its duty of full disclosure by not adequately disclosing that it was changing the risk profile of the securities lending program, that it breached its duty of impartiality by favoring certain participants over other participants, and that it breached its duty of loyalty by advancing the interest of the borrowing brokers to the detriment of one or more of the plaintiffs.
What makes this ruling interesting is that although it set aside a minor part of the jury award, a $1.6 million issue, to be subject to a new trial, is that it was punitive as a result of the judge's determination that the fraud was systematic. It is unusual to award the payment of the plaintiff's attorney's fees, or to order disgorgement of fees paid for services (the other component of the additional $15 million plus is interest on the $29.9 million). The basis for awarding attorneys' fees? The bank is such a menace to society that having counsel root it out is a public service...
Which brings me to the last portion of my post, tonight: "What Were They Smoking? The 10 Dumbest Stories of 2010."
(Please note below, per New Deal 2.0, the number one dumbest story of the year...a story near and dear to me, and a topic upon which I've written numerous diaries.)
What Were They Smoking? The 10 Dumbest Stories of 2010
Thursday, 12/23/2010 - 9:04 am by Tim Price, New Deal 2.0
It's been an unpredictable year, and if our pundits and policymakers could do it all over again, there are some moments they'd probably love to take back. Unfortunately for them, the Internet never forgets, and the ND20 team has decided to look back over 2010 by counting down the dumbest headlines, decisions, and predictions. There was a lot of dumb to cover, so if you think we missed something, be sure to let us know.
10. One and done: To be a great president, Obama should not seek reelection in 2012 (WaPo)
...
9. Heritage Foundation and the "Luck" of the Irish (OurFuture.org)
...
8. The Health Care Bill is Dead (Weekly Standard)
...
7. Off-Message Watch: "I Don't Know That for Sure" (Economist's View)
Austan Goolsbee brought a lot of good will with him to the Council of Economic Advisers, but when he turned out to be agnostic about the benefits of a bigger stimulus package, it made us wonder if he was off-message or if the entire administration was.
...
6. Robert Rubin: `Virtually Nobody' Saw Crisis Coming, Bush Deserves Much Of The Blame (HuffPo)
...
5. The war recovery? (WaPo)
...
4. Christine O'Donnell TV Ad: "I'm Not a Witch... I'm You" (CBS)
...
3. President Obama: Drill, Baby, Drill (ABC)
...
2. The Politics of Foreclosure (WSJ)
When the foreclosure scandal broke, the Wall Street Journal argued that liberals were making too big a fuss about "the pain that results when the anonymous paper pusher who kicks you out of your home is not the anonymous paper pusher who is supposed to kick you out of your home." The editorial stated that the good folks at the Journal were "not aware of a single case so far of a substantive error."
And...drumroll please...without a doubt, THE dumbest story of not just 2010 (per New Deal 2.0), IMHO, but of 2009 and 2008, too.
1. Welcome to the Recovery (NY Times)
Tim Geithner probably didn't mean for the title of his now-infamous op-ed to sound sarcastic, but as Wall Street's profits soared and the middle class continued to sink, it was hard for anyone to take it seriously...
# # #
So, what lies ahead, in 2011? Just look at a few of the lies left behind (up above)...
"Stiglitz: What Lies Ahead in 2011?" h/t Mark Thoma
Stiglitz: What Lies Ahead in 2011?
ProjectSyndicate.org
Monday, December 13, 2010
...The problem is politics: in the US, the Republican Party would rather see President Barack Obama fail than the economy succeed...
In both Europe and America, the free-market ideology that allowed asset bubbles to grow unfettered - markets always know best, so government must not intervene - now ties policymakers' hands in designing effective responses to the crisis. One might have thought that the crisis itself would undermine confidence in that ideology. Instead, it has resurfaced to drag governments and economies down the sinkhole of austerity.
If politics is the problem in Europe and America, only political changes are likely to restore them to growth. Or else they can wait until the overhang of excess capacity diminishes, capital goods become obsolete, and the economy's internal restorative forces work their gradual magic. Either way, victory is not around the corner...
# # #
Yes, our fresh nuts are being roasted on the open fire...and Jack Frost's nipping at our door.
Merry Christmas...to you!