My afternoon train reads:

• Here’s Stephanie Kelton’s Tremendous Presentation On The Fiscal Cliff, And The Potential Tragedy Of A ‘Deal’(Business Insider)
• WHY I COULD NOT VOTE OBAMA:  An Economic Team Unwilling to Sweep Wall Street Clean (Bloomberg)
• Stephanie Kelton’s Presentation On Fiscal Cliff, And The Potential Tragedy Of A ‘Deal’ (Business Insider)
• Hard Lessons in Modern Lending (Inc.)
• How much did banks pay to become too-big-to-fail and to become systematically important? (EconPapers) see also Election Leaves Uncertainty for Adviser Regulation (WSJ)
• Asia Pacific REIT Market Could Swell to $500 Billion (World Property Channel)
• In Sports or Business, Always Prepare for the Next Play (Business Day)
• Why Do Trees Topple in a Storm? (Scientific American)
• Scientists uncover a new pathway that regulates information processing in the brain (Science Codex)
• After Sandy, a great and complex city reveals traumas new and old (Capital New York)
• An ancient civilization’s wet ascent, dry demise (Science News) see also Why Antarctic sea ice cover has increased under the effects of climate change (Antarctica)

What are you reading?


Looking Past Fiscal Cliff to Fixing Taxes

Source: WSJ

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “10 Tuesday PM Reads”

  1. James Cameron says:

    > • WHY I COULD NOT VOTE OBAMA: An Economic Team Unwilling to Sweep Wall Street Clean

    “I” refers to . . . who?

  2. AHodge says:

    not sure i buy the fiscal deal tragedy
    its too bad they are not extending payroll tax and betewwn that and any top income tax gains it will slow a little

    heres my take on the playbook for the games from my lunch with Rudy yesterday

    1. Odds at least 30 percent of a cliff event. This now much higher than he said 4 months ago. Rudy defines this as sequester /tax hike for some time, thinks it highly likely they do not get down to business “until the ball drops” meaning New years. and agreement days or week or two later
    2. Can be freeze n extension pending quick deal, longer possible but less likely.
    3. He thinks Republicans are quietly ok with major revenue enhancers for upper incomes, either say a tax credit in lieu of deductions and preferences at 28% or maybe less. they may start negotiating at 28%. They are maybe ok with some top bracket tax rate rise—reversion to the old rates , maybe only on incomes of $1 million or more, might go little lower on cutoff. Democrats will likely require $ 60-70 billion first year more revenue from top end.. Rate reversion on $1mio is not big enough.
    4. With those offers, Democrats in his view not working on their end. Not really looking at spending programs an entitlements social security
    5. For Ds a Key problem for social security/ medicare is new regime at AARP. Reasonable people Novelli n reuther are gone and AARP reverts to super tough retracts old reasonableness like saying a new inflation indexing method ok.
    6. He had months earlier said there was little sequester flexibility, amounts would bite immediately by line item.. He now hears talk there may be “Apportionment” flexibility which might lessen sequester bite. Meaning spend more than your quarterly allotment? says “Terrible idea” ( I think it won’t be the first time congress leaves a time bomb if not fixed or agreement reached)
    7. Boehner is well meaning and a statesman. Kantor not. Leadership struggle. He may personally despise Kantor, Says most everyone he knows does. How the hell did he get here is the question asked. Best think he heard anyone say is “not as bad as he looks” The leadership struggle may dissuade Boehner offering final deal til he is (if) re-elected early jan.
    8. We agree on CBO way underestimating fiscal cliff economic shock. He should know he ran it once. They build in nothing for financial markets and business and consumer sentiment meaning hiring and investing. Their multipliers may be a little low as well. I don’t fuld them for showing legislators tax effects that way But with something this big it is MISLEADING to assume there will be no expectations moves

  3. VennData says:

    What we need to do is lower wage rates and increase hours so we can get more out of what we have.

    And give a tax holiday to corporations who are being punished if they bring foreign-earned profits home, that will increase investment. Then cut the punitive regulations on companies, like heat and food safety.

    We could make it illegal for women to work, get them out of the workforce, except strip bars, movies and NFL sideline reporters. This’ll get men back to work. Women’ll need a man to take care of them. Guy’s will have an easier time getting laid which’ll save a bundle of wasteful expenditures on grooming, male fashion, etc…

    Alternatively, we get Congress to just pick a year, say 1948, 1850, whatever, make everything go back to that date, legally, and if they can’t agree – like the debt-ceiling negotiations – the country reverts to Sharia law.

  4. RW says:

    I am not sure who the “I” is in the article’s title at BP either (not its title on Bloomberg) but I did find myself mostly in agreement with first nine paragraphs of William D. Cohan’s piece. Then I hit the tenth and eleventh paragraphs in which he recommended Erskine Bowles for Treasury Secretary and repeated the falsehood that the Erskine-Simpson report was a “Commission report” rather than the published opinions of the two Chairs after their commission failed to reach agreement. Whether that is just sloppiness or an attempt to bamboozle audience no longer really matters; the article took a shot in the head.

    NB: Bowles may be a competent manager but he is clearly dedicated to the plutocracy and would certainly not be inclined to “clean up” Wall Street. His “report” with Simpson pretty clearly showed that he was all too willing to practice that peculiar form of “bi-partisanship” in Washington where Republicans get 70% of what they want and the plutocrats get 99.9% of what they want while the working class and poor (and increasingly the middle class) get more austerity and the promise of a pony (the pony gets .1% just cuz it feels good).

  5. Nov update of my Debt Wall model projects $16.394 trillion Debt Limit will handcuff Congress in 28 days (Dec 11th). Last monthly update had indicated Jan 7th. Look for a sense of urgency momentarily.

    Debt Wall chart:

  6. Joe Friday says:


    Nov update of my Debt Wall model projects $16.394 trillion Debt Limit will handcuff Congress in 28 days (Dec 11th). Last monthly update had indicated Jan 7th. Look for a sense of urgency momentarily.

    Even if your analysis were correct, Treasury can easily extend by at least six weeks, likely longer.

  7. RW says:

    Some wag is reported to have quipped that “Karl Rove distributed more money from billionaires than Obama ever did” and that’s probably true but what is certainly true is there was a gawd-awful amount of money chewed up in this election and a big chunk of it was (a) from untraceable sources and/or (b) not spent very effectively; e.g.,

    Pretty good racket these political consultants, operatives, fund raisers and PR flacks have going. Now I can see why Citizens United made sense: it was really the judicial equivalent to the Financial Services Modernization Act. Deregulate me baby, oh yeah, send me mo’ fish; uh huh, now send me mo’ bigger fish! (wonder when or even if the plutocrats realized they may have strayed into the prey reservation).

  8. CSF says:

    On S. Kelton and the Fiscal Cliff:

    At least one version of a “grand bargain” suggests that a sweeping agreement on tax hikes (excuse me, revenue increases) and budget cuts, along with tax reform, would give us breathing room to delay their implementation. This would allow time for deleveraging and job creation. This doesn’t sound austere.

    The presentation is intriguing, but if money printing and debts don’t matter, then why not double down on fiscal stimulus? Heck, why not triple it? Something’s not right with this reasoning.

  9. Francois says:

    ” then why not double down on fiscal stimulus? Heck, why not triple it? Something’s not right with this reasoning.”

    For the same reason so many people can’t find happiness…they refuse to let go of their preconceived ideas. In this case, it is the idea that money has a physically (the keyword here!) finite supply.

    It doesn’t! Since we left the gold standard as a matter of fact.

    Which does NOT mean money supply is infinite; just that it doesn’t have a physical limit.

    Proof? If you’re a Fortune 100 and want to get a loan for 1 billion, does the banker say:” Lemme go into the vault to see if we have enough.”?

    Hmmm…no! The bank look at you, the corporation, your creditworthiness and if it is OK, they credit your account via the keystrokes of one of their computers.

    That’s it! 1 billion USD were created, just like that!

    Transfer this observation to the US government, who happens to be the ISSUER of the currency.

    Why is it that the government couldn’t create a couple of trillion to invest in infrastructure, roads, bridges etc. since the money just created is owed to…the government itself?

    The ONLY reason it doesn’t happen is politics, nothing else.

  10. RW says:

    @VennData, you’ve really been exploring the boundaries of Poe’s Law lately. Fun.

    WRT Kelton and the Fiscal Cliff: Personally I think the so-called fiscal cliff is strictly a political problem and Dr. Kelton is correct that money creation and debt increase are simply not constraints from a technical and national accounting standpoint for any nation in control of its own currency — MMT is empirically accurate and correctly rejects comparison of a ‘currency producer’ (fiat currency nation) to ‘currency consumers’ (households, corporations, etc) — but as far as I can tell, what is critically left out of the MMT model are behavioral factors; market or social responses to fiscal/central bank policy moves could be unpredictable without an adequate accounting for that domain, at least IMHO.

    That said, the “Deficit Scolds” (including Erskine Bowles) and those touting the seriousness of the so-called fiscal cliff have been dead wrong about just about everything on the fiscal and monetary front for the past four years and there is no indication they are doing any better now so the real question remains: why does it seem like everybody is listening to people who don’t seem to understand the problem or, in many cases, even demonstrate basic comprehension of economics? Despite my doubts about MMT I think Kelton’s presentation was rational, knowledgeable, reasonably balanced and fair.

  11. Hantra says:

    I would like to hear the actual presentation, but I’m not buying into the whole MMT argument. We can just spend breathtaking amounts of money constantly, without anything negative ever happening. It sounds like fantasy to me.

  12. gordo365 says:

    I don’t understand the rhetoric around the fiscal cliff.

    So – a $800B stimulus package didn’t create any jobs (OK $300B of that was tax cuts – but whatever) But a $500B fiscal cliff cut (Spread over 10 years – so really a $50B cut per year) will send the economy into a recession.

    Which is it? Gov spending does matter – and a $800B bump causes expansion, and a $5oB annual cut causes contraction.

    Or – gov spending doesn’t matter, and a $800B bump does nothing and a $50B cut does nothing.

    You can’t logically claim that a huge stimulus spend does nothing, but a small trim job will wreck the economy.

  13. James Cameron says:

    Maybe there’s a better way to address our fiscal AND political challenges . . .

    “Among those states with large numbers of petitioners asking out: Louisiana (more than 28,000 signatures at midday Tuesday), which gets about $1.45 in federal largess for every $1 it pays in taxes; Alabama (more than 20,000 signatures), which takes $1.71 for every $1 it puts in; South Carolina (26,000), which takes $1.38 for its dollar; and Missouri (22,000), which takes $1.29 for its dollar.”

    The Confederacy of Takers

  14. Bob A says:

    The fiscal cliff I’m thinkin of is the one where the tea party faithful try base jumping without a parachute…
    safety net? who needs it.

  15. Francois says:

    Speaking of fiscal cliff, note the data occultation con job the CBO is trying to pull off.

    Fortunately, Yves Smith at naked Capitalism is seriously getting under the CBO’s top brass collective skin for exposing their lack of honesty.

  16. Lukey says:

    My understanding of MMT is that the government can spend what it wants with no negative effect until it causes inflation. So if you are spending on roads and bridges, the inflationary effect is smaller than if you are spending on welfare, but it still exists. The trick is to know when to stop so inflation does not occur. I’m not confident our political leadership (including the folks at the Fed) possesses the wisdom to know ahead of time when to stop. Free money is a pretty addictive drug. I am not ready to give up the notion that there’s no such thing as the proverbial “free lunch.”

  17. Bridget says:

    If deficits don’t matter, why raise taxes on the 1%?

  18. rd says:

    Here is an interesting article on the current status of Money Market Funds:

    As an unsophisticated, non-professional investor, I couldn’t figure out what all the fuss was about with the Primary Reserve Fund in 2008-2009. It was obvious to me that if you invested in something that was non-US government debt with holding periods loger than a couple of days and it was not FDIC-insured, that it could lose a couple of pennies on the dollar in a major crisis. That is simply the risk you take to get the higher yield that a mixed-bag money-market fund would give you in those days.

    I was quite stunned when the professionals were bleating that the world was collapsing because one money-market fund was going to break the buck. What else were they expecting to happen in a universe of thousands of money market funds during a major financial crisis? However, I would also figure that the holdings would be spread across many issuers, so that it would only be very bad security selection and diversication practives that would make it lose more than 1 or 2 percent.

    Does everybody in the financial sector actually believe you can get something for nothing? You even have to pay money to buy politicians and regulators, so why would they expect to get higher yields with no risk in a maoney market fund?

  19. RW says:

    @Bridget, that’s a good question and I think the answer is that it is the 1% that want deficit reduction (AKA austerity) so they should be the ones to pay for it.