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October 13, 2011

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"Innuendo, Half Truths, Misdirection, and Utter Non-Sequiturs"

Posted: 13 Oct 2011 12:42 AM PDT

I think it would be fair to say that Jeff Sachs is unhappy with Rupert Murdoch, and for good reason:

The Murdoch Legacy, by Jeffrey Sachs: At age 80, Rupert Murdoch will be long gone in coming decades when the planet is grappling with greatly intensified climate change. ...
I mention this because Murdoch's paper, the Wall Street Journal, again last week performed its usual disservice by publishing an extremely misleading opinion piece on climate change in the banner location of the paper (Robert Bryce, "Five Truths About Climate Change," October 6). That column is not merely an opinion piece among a range of various opinions. It is part of that paper's steady drumbeat of opposition to action on climate change. And the Journal teams up in this with Murdoch's other propaganda outlet, Fox News.
The real problem with the Journal is this. The Journal's business coverage outside of the opinion pages is important and difficult to replicate (and this is still true even as the professional reporters apparently are facing more intrusions from the Murdoch minions). Excellent reporting draws eyes to the Murdoch propaganda and misinformation on the opinion pages.
In this particular column, the writer, Robert Bryce, purports to tell us five truths about climate change to reach the conclusion that we shouldn't care about carbon emissions. The column is a study in innuendo, half truths,... misdirection..., and utter non-sequiturs. Its purpose is to dissuade us from action on carbon dioxide. ...
Murdoch's News Corporation, the owner of the Wall Street Journal and Fox News, is the opposite of a true news corporation. It is news as in Orwell's newspeak. Its major role is to peddle corporate propaganda, frighten politicians, and make lots of money. In those roles it has been successful. ...

"A Breathtaking Act of Economic Vandalism"

Posted: 13 Oct 2011 12:33 AM PDT

As this says, everyone expected Republicans to block President Obama's jobs bill, but it's still disappointing to see the "you're on your ownership socety" in action:

No Jobs Bill, and No Ideas, Editorial, NY Times: It was all predicted, but the unanimous decision by Senate Republicans on Tuesday to filibuster and thus kill President Obama's jobs bill was still a breathtaking act of economic vandalism. There are 14 million people out of work, wages are falling, poverty is rising, and a second recession may be blowing in, but not a single Republican would even allow debate on a sound plan to cut middle-class taxes and increase public-works spending.
The bill the Republicans shot down is not a panacea, but independent economists say it would have a significant and swift effect on the current stagnation. Macroeconomic Advisers ... said it could raise economic growth by 1.25 percentage points and create 1.3 million jobs in 2012. Moody's Analytics estimated new growth at 2 percentage points and 1.9 million jobs. ...
The Republicans offer no actual economic plans, only tired slogans about cutting regulations and spending, and ending health care reform. The party seems content to run out the clock on Mr. Obama's term while doing very little. On Tuesday, Mr. Obama's campaign manager, Jim Messina, accused Republicans of trying to "suffocate the economy" in hopes that the pain would work to their political advantage. They are doing little to refute that charge. ...

"Tim Duy Asks; CG&G Answers"

Posted: 13 Oct 2011 12:24 AM PDT

Stan Collender responds to Tim Duy:

Tim Duy Asks; CG&G Answers, by Stan Collender: Over at his own blog, Tim Duy provided an interesting post about what we should expect fiscal policy-wise in 2013.
Tim said he saw two possibilities -- fiscal austerity or abandon fiscal austerity -- and he that he'd "like to hear the views of the gang at Capital Games and Gains." Since he quoted one of my posts from several weeks ago and mentioned me by name earlier in the piece, I will take up the challenge...
Tim is using "fiscal austerity" as a surrogate for spending cuts, and I strongly suspect that, if the GOP wins the White House as he asks us to assume, that at least a symbolic spending cut will be on the agenda.  If the Senate goes and the House stays Republican, the cut may be more than symbolic.
But...I also expect that a tax cut will be a priority for the GOP at the same time.  In fact, it's likely to be a higher, and perhaps a much higher, priority than anything they will propose on the spending side.  I also expect that the GOP-proposed tax cut will increase the deficit by more than the GOP-proposed spending cut will reduce it, especially in the first two years.
Short-term pain and an increase in federal borrowing to get a long-term gain will be the battle cry.  The fact that the GOP wouldn't let Obama say or so that won't matter a bit.
Is that "austerity"?  I doubt it, but it will be sold as if it is.  
The higher short-term deficits will also be sold as something that was required because of the budget mess Obama left us.  That will be nonsense, of course, but that won't matter in the afterglow of a GOP president taking the oath of office.

links for 2011-10-13

Posted: 13 Oct 2011 12:06 AM PDT

Fed Watch: Widespread Lack of Conviction

Posted: 12 Oct 2011 09:27 AM PDT

Tim Duy:

Widespread Lack of Conviction, by Tim Duy: Menzie Chinn at Econbrowser looks at the OECD data and concludes the world is close to stall speed. Alcoa is an early victim, as the impact of the European financial crisis becomes evident. Via Reuters:

[Alcoa] CEO Klaus Kleinfeld warned of weak economic conditions through the year, particularly in Europe, "as confidence in the global recovery faded."

That sapped aluminum demand from the automotive, industrial products, construction and packaging sectors since the second quarter, with only the aerospace and transport sectors growing.

Can the global economy recovery? Will the damage be limited to Europe? With growth teetering on an edge, it would be nice to have one old US recession indicator back in the tool kit - the yield curve. With short-term interest rates at zero, it is impossible for the yield curve to invert, a traditional indication of recession. Bloomberg reports on an effort to overcome this challenge and regain that tool:

The bond market indicator that has predicted every U.S. recession since 1970 shows that the economy has about a 60 percent chance of contracting within 12 months.

The so-called Treasury yield curve, adjusted for distortions caused by the Federal Reserve's record low zero to 0.25 percent target interest rate for overnight loans between banks, shows that two-year notes yield 20 basis points, or 0.20 percentage point, less than five-year notes, according to Bank of America Corp. research. The unadjusted gap of 79 basis points at the end of last week indicates the chance of recession at about 15 percent...

..."The adjusted curve is giving a powerful signal for an upcoming U.S. recession," said Ruslan Bikbov, a fixed-income strategist in New York at Bank of America, one of the 22 primary dealers of U.S. government securities that trade with the Fed. "If that happens, the Fed's target rate could remain near zero beyond 2014," more than a year longer than the central bank has indicated, he said in an interview on Oct. 3.

More on the topic can be found at the FT Alphaville blog, including this chart:

Yieldchart

Alas, still not the defining indicator we could hope for. While 60% is better than even, it is still a call that lacks conviction. As are the other outlooks reported by Bloomberg. First:

Goldman Sachs Group Inc., another primary dealer, puts the odds of another recession at 40 percent, the firm's economists wrote in an Oct. 3 report.

Next:

JPMorgan Chase & Co. economists said in an Oct. 7 report that they see "a soft growth picture, but one that is not falling into recession at the moment." The firm, also a primary dealer, forecasts the 10-year note yield will end the year at 2.25 percent.

Then:

"Markets these days give mild signs of a collapse," Gross said in an Oct. 4 Bloomberg Television interview with Lisa Murphy. The odds of recession in developed economies is about 50 percent, with the U.S. on the "brink," he said. "This is one of those times where you are worried about the return of your money."

60%, 40%, 50%. Still seems to be only one firm with a strong conviction:

A "contagion" of economic indicators have come together to signal the economy is tipping into a contraction, according to Lakshman Achuthan, co-founder of ECRI, a research firm that predicts changes in the economic cycle.

"You have wildfire among the leading indicators across the board," Achuthan said in a radio interview on Sept. 30 on "Bloomberg Surveillance" with Tom Keene and Ken Prewitt. "It's a vicious cycle that is going to get quite a bit worse."

Truth be told, I can't admit to being much better. I am seduced by the logic that room for recession is limited given the failure of many sectors, notably autos and housing, to fully or even begin to recover from the last recession. That said, the near-term policy picture in the US looks dismal and I am extremely wary to dismiss the European financial crisis as something easily resolved. Moreover, while some attributed Monday's rally on Wall Street to a positive reaction to the news that China was moving to support their banks, I saw only an indication the Chinese economy is on a very weak footing. Combining these thoughts with the memory that the safe bet over the past three years has been on the weak side of the coin, I too am pushed over the edge with better than even odds of recession. And while I will be searching for clues about the Fed's intentions in the release of the FOMC meeting minutes, I suspect that if the seeds of recession are already planted, policymakers are already too far behind the curve to engineer a timely rebound.

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