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August 18, 2014

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Latest Posts from Economist's View


Paul Krugman: Why We Fight

Posted: 18 Aug 2014 12:24 AM PDT

Why do wars still exist?

Why We Fight, y Paul Krugman, Commentary, NY Times: A century has passed since the start of World War I, which many people at the time declared was "the war to end all wars." Unfortunately, wars just kept happening. And with the headlines from Ukraine getting scarier by the day, this seems like a good time to ask why.
Once upon a time wars were fought for fun and profit; when Rome overran Asia Minor or Spain conquered Peru, it was all about the gold and silver. And that kind of thing still happens. ...
If you're a modern, wealthy nation, however, war — even easy, victorious war — doesn't pay. And this has been true for a long time. ... Modern nations can't enrich themselves by waging war. Yet wars keep happening. Why?
One answer is that leaders may not understand the arithmetic.... It's only a guess, but it seems likely that Vladimir Putin thought that he could overthrow Ukraine's government, or at least seize a large chunk of its territory, on the cheap — a bit of deniable aid to the rebels, and it would fall into his lap.
And for that matter, remember when the Bush administration predicted that overthrowing Saddam and installing a new government would cost only $50 billion or $60 billion?
The larger problem, however, is that governments all too often gain politically from war, even if the war in question makes no sense in terms of national interests. ...
And the fact is that nations almost always rally around their leaders in times of war, no matter how foolish the war... Argentina's junta briefly became extremely popular during the Falklands War. For a time, the "war on terror" took President George W. Bush's approval to dizzying heights, and Iraq probably won him the 2004 election. True to form, Mr. Putin's approval ratings have soared since the Ukraine crisis began. ...
Most immediately, we have to worry about escalation in Ukraine. All-out war would be hugely against Russia's interests — but Mr. Putin may feel that letting the rebellion collapse would be an unacceptable loss of face.
And if authoritarian regimes without deep legitimacy are tempted to rattle sabers when they can no longer deliver good performance, think about the incentives China's rulers will face if and when that nation's economic miracle comes to an end — something many economists believe will happen soon.
Starting a war is a very bad idea. But it keeps happening anyway.

Links for 8-18-14

Posted: 18 Aug 2014 12:06 AM PDT

'The Treasury and the Fed are at Loggerheads'

Posted: 17 Aug 2014 04:35 PM PDT

Roger Farmer:

...How successful was operation twist at changing the maturity structure of Treasury securities held by the public? ...I break down Treasuries held by the public as a fraction of total debt outstanding. This ... shows that although the Fed switched its holdings from yields of three months to two years to yields in the two to ten year range (Figure 3) this operation was swamped, after November of 2008, by Treasury operations that increased the supply of maturities in the two to ten year range (Figure 4).  The end result was that the public ended up holding more of these two to ten year bonds in 2010 than before the recession hit.
Could we have a little coordination here guys?

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