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February 4, 2013

Latest Posts from Economist's View


Latest Posts from Economist's View


Posted: 30 Nov 2012 01:08 AM PST
The class war isn't over:
Class Wars of 2012, by Paul Krugman, Commentary, NY Times: On Election Day ... Logan International Airport in Boston was running short of parking spaces. Not for cars — for private jets. Big donors were flooding into the city to attend Mitt Romney's victory party.
They were, it turned out, misinformed about political reality. But the disappointed plutocrats weren't wrong about who was on their side. This was very much an election pitting the interests of the very rich against those of the middle class and the poor.
And the Obama campaign won largely by disregarding the warnings of squeamish "centrists" and ... stressing the class-war aspect of the confrontation. This ensured not only that President Obama won by huge margins among lower-income voters, but that those voters turned out in large numbers, sealing his victory.
The important thing to understand now is that while the election is over, the class war isn't. The same people who bet big on Mr. Romney, and lost, are now trying to win by stealth — in the name of fiscal responsibility — the ground they failed to gain in an open election. ...
Consider, as a prime example, the push to raise the retirement age, the age of eligibility for Medicare, or both. This is only reasonable, we're told — after all, life expectancy has risen... In reality,... it would be a hugely regressive policy change...
Or take a subtler example, the insistence that any revenue increases should come from limiting deductions rather than from higher tax rates. The key thing to realize here is that the math just doesn't work... So any proposal to avoid a rate increase is, whatever its proponents may say, a proposal that we let the 1 percent off the hook and shift the burden, one way or another, to the middle class or the poor.
The point is that the class war is still on, this time with an added dose of deception. And this, in turn, means that you need to look very closely at any proposals coming from the usual suspects, even — or rather especially — if the proposal is being represented as a bipartisan, common-sense solution. ...
So keep your eyes open as the fiscal game of chicken continues. It's an uncomfortable but real truth that we are not all in this together; America's top-down class warriors lost big in the election, but now they're trying to use the pretense of concern about the deficit to snatch victory from the jaws of defeat. Let's not let them pull it off.
Posted: 30 Nov 2012 12:06 AM PST
Posted: 29 Nov 2012 11:51 AM PST
Have to teach classes in a bit, and running late, so just have time for a quick post -- this is from Ricardo Fernholz, a professor of economics at Claremont McKenna College:
High-Frequency Trading and High Returns, The Baseline Scenario: The rise of high-frequency trading (HFT) in the U.S. and around the world has been rapid and well-documented in the media. According to a report by the Bank of England, by 2010 HFT accounted for 70% of all trading volume in US equities and 30-40% of all trading volume in European equities. This rapid rise in volume has been accompanied by extraordinary performance among some prominent hedge funds that use these trading techniques. A 2010 report from Barron's, for example, estimates that Renaissance Technology's Medallion hedge fund – a quantitative HFT fund – achieved a 62.8% annual compound return in the three years prior to the report.
Despite the growing presence of HFT, little is known about how such trading strategies work and why some appear to consistently achieve high returns. The purpose of this post is to shed some light on these questions and discuss some of the possible implications of the rapid spread of HFT. ...
Posted: 29 Nov 2012 09:49 AM PST
Since Brad DeLong is such a shy, wallflower type, I'll take it upon myself to highlight his latest column:
America's Political Recession, by Brad DeLong, Commentary, Project Syndicate: The odds are now about 36% that the United States will be in a recession next year. The reason is entirely political: partisan polarization has reached levels never before seen, threatening to send the US economy tumbling over the "fiscal cliff"...
Obama broadly follows Ronald Reagan's (second-term) security policy, George H.W. Bush's spending policy, Bill Clinton's tax policy, the bipartisan Squam Lake Group's financial-regulatory policy, Perry's immigration policy, John McCain's climate-change policy, and Mitt Romney's health-care policy... And yet he has gotten next to no Republicans to support their own policies. ...
There are obvious reasons for this. A large chunk of the Republican base, including many of the party's largest donors, believes that any Democratic president is an illegitimate enemy of America, so that whatever such an incumbent proposes must be wrong and thus should be thwarted. ... Moreover, ever since Clinton's election in 1992, those at the head of the Republican Party have believed that creating gridlock whenever a Democrat is in the White House ... is their best path to electoral success.
That was the Republicans' calculation in 2011-2012. And November's election did not change the balance of power anywhere in the American government...
Now, it is possible that Republican legislators may rebel against their leaders... It is possible that Republican leaders like Representatives John Boehner and Eric Cantor and Senator Mitch McConnell will conclude that their policy of obstruction has been a failure. ... But don't count on it. ...
It seems to me that the odds are around 60% that real negotiation will not begin until tax rates go up on January 1. And it seems to me that, if gridlock continues into 2013, the odds are 60% that it will tip the US back into recession. Let us hope that it will be short and shallow.
Nah, the press will do its job, expose the fraud that underlies the Republican's budget and tactics, and they will be forced to fold their hand (are you laughing yet -- that's supposed to be a joke).

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