They may no longer be in danger of immediate default.
Greek funding will support their bonds through the first of July.
Everyone seems to be breathing again.
http://www.nytimes.com/2012/06/08/opinion/krugman-reagan-was-a-keynesian.html?partner=rssnyt&emc=rss
"There’s no question that America’s recovery from the financial crisis has been disappointing. In fact, I’ve been arguing that the era since 2007 is best viewed as a “depression,” an extended period of economic weakness and high unemployment that, like the Great Depression of the 1930s, persists despite episodes during which the economy grows. And Republicans are, of course, trying — with considerable success — to turn this dismal state of affairs to their political advantage.
They love, in particular, to contrast President Obama’s record with that of Ronald Reagan, who, by this point in his presidency, was indeed presiding over a strong economic recovery. You might think that the more relevant comparison is with George W. Bush, who, at this stage of his administration, was — unlike Mr. Obama — still presiding over a large loss in private-sector jobs. And, as I’ll explain shortly, the economic slump Reagan faced was very different from our current depression, and much easier to deal with. Still, the Reagan-Obama comparison is revealing in some ways. So let’s look at that comparison, shall we?
For the truth is that on at least one dimension, government spending, there was a large difference between the two presidencies, with total government spending adjusted for inflation and population growth rising much faster under one than under the other. I find it especially instructive to look at spending levels three years into each man’s administration — that is, in the first quarter of 1984 in Reagan’s case, and in the first quarter of 2012 in Mr. Obama’s — compared with four years earlier, which in each case more or less corresponds to the start of an economic crisis. Under one president, real per capita government spending at that point was 14.4 percent higher than four years previously; under the other, less than half as much, just 6.4 percent.
O.K., by now many readers have probably figured out the trick here: Reagan, not Obama, was the big spender. While there was a brief burst of government spending early in the Obama administration — mainly for emergency aid programs like unemployment insurance and food stamps — that burst is long past. Indeed, at this point, government spending is falling fast, with real per capita spending falling over the past year at a rate not seen since the demobilization that followed the Korean War.
Why was government spending much stronger under Reagan than in the current slump? “Weaponized Keynesianism” — Reagan’s big military buildup — played some role. But the big difference was real per capita spending at the state and local level, which continued to rise under Reagan but has fallen significantly this time around.
And this, in turn, reflects a changed political environment. For one thing, states and local governments used to benefit from revenue-sharing — automatic aid from the federal government, a program that Reagan eventually killed but only after the slump was past. More important, in the 1980s, anti-tax dogma hadn’t taken effect to the same extent it has today, so state and local governments were much more willing than they are now to cover temporary deficits with temporary tax increases, thereby avoiding sharp spending cuts.
In short, if you want to see government responding to economic hard times with the “tax and spend” policies conservatives always denounce, you should look to the Reagan era — not the Obama years.
So does the Reagan-era economic recovery demonstrate the superiority of Keynesian economics? Not exactly. For, as I said, the truth is that the slump of the 1980s — which was more or less deliberately caused by the Federal Reserve, as a way to bring down inflation — was very different from our current depression, which was brought on by private-sector excess: above all, the surge in household debt during the Bush years. The Reagan slump could be and was brought to a rapid end when the Fed decided to relent and cut interest rates, sparking a giant housing boom. That option isn’t available now because rates are already close to zero.
As many economists have pointed out, America is currently suffering from a classic case of debt deflation: all across the economy people are trying to pay down debt by slashing spending, but, in so doing, they are causing a depression that makes their debt problems even worse. This is exactly the situation in which government spending should temporarily rise to offset the slump in private spending and give the private sector time to repair its finances. Yet that’s not happening.
The point, then, is that we’d be in much better shape if we were following Reagan-style Keynesianism. Reagan may have preached small government, but in practice he presided over a lot of spending growth — and right now that’s exactly what America needs."
"
Ballistic in the Baltics
I’m hearing from various sources that my rather mild-mannered post on Estonia has generated a vitriolic response from the nation’s president. I’m not going to try to track the thing down.Let me instead ask the following. Since some people insist that Estonia’s partial — but only partial — recovery from a severe economic crisis demonstrates the wonders of austerity, would they also agree that the evidence below demonstrates the incredible success of FDR’s New Deal policies of promoting unions, raising wages, and increasing government employment?
"
"
Real Government Spending Per Capita
A followup, for the purposes of a project I’m working on, on this post about falling government spending recently. Here are two figures, both in natural logs: overall real government spending per capita, and state and local real government spending per capita, this time in levels rather than changes.
Overall government:
State and local:
One comparison I find instructive is between Obama and Reagan at this point in their presidencies, in each case compared with four years previous — which in each case roughly corresponds to the beginning of each era’s economic crisis (the double-dip recession that began in early 1980, the financial crisis that began in 2007 but really got serious in early 2008). Here’s what it looks like:
Much more government spending under Reagan. Some of it was Reagan’s weaponized Keynesianism, some of it state and local — sustained in part by revenue-sharing that no longer exists, but also by a much greater willingness at the time to raise taxes on a temporary basis.
Just putting it there for the record."
Overall government:
Just putting it there for the record."
http://www.telegraph.co.uk/finance/financialcrisis/
Cameron: I'll protect Britain from a European superstate
07 Jun 2012
| 688 Comments Johnson Matthey – a UK success story helped by a reduced tax rate
07 Jun 2012
| 3 Comments The comfortable course is no longer an option
07 Jun 2012
| 26 Comments Spain too big for EU rescue fund as China recoils
07 Jun 2012
| 92 Comments Debt crisis: as it happened June 7
07 Jun 2012
| 624 Comments Debt crisis: Fitch blames European leaders for 'absence of a credible vision' for euro
A serious mishandling of the debt crisis by European leaders led Fitch to axe Spain’s credit rating by three notches and issue a warnings on the stability of country’s banks, debt levels and economy.07 Jun 2012
| 110 Comments China cuts interest rates to counter slowing growth
China surprised markets by cutting interest rates as it battles a slowing economy and fears that the eurozone crisis will weigh heavily on a global recovery.07 Jun 2012
| 2 Comments Debt crisis: demand for gilts and bunds soar in May
Trading volumes in German and UK debt jumped by record amounts last month as sovereign bond investors sought safe haven shelters from the advancing debt crisis.07 Jun 2012
| 2 Comments Bernanke: Fed ready to act if crisis intensifies
The US central bank is prepared to take action if the “significant risks” posed by the eurozone crisis threaten the country’s recovery, Federal Reserve chairman Ben Bernanke said.07 Jun 2012
| 12 Comments David Cameron: we won't take part in European banking union
The Prime Minister insists that he would not ask British taxpayers to underwrite the debts of ailing banks in Greece and Spain, saying: 'It is not our currency.'07 Jun 2012
| 472 Comments Debt crisis webchat: put questions to Ambrose Evans-Pritchard
Would Greece be better off outside the eurozone? Can Europe walk the fine line between austerity and growth? What will Germany’s role be in all this? Put your questions to Ambrose Evans-Pritchard in a special debt crisis webchat.07 Jun 2012
George Osborne hints at British referendum on Europe
George Osborne has hinted at a British referendum on Europe, saying any "reshaped" UK relationship with EU would have to be put to British voters for approval.07 Jun 2012
| 645 Comments France's cut to retirement age worries business
Businesses and economists have condemned the new French government’s decision to cut the retirement age from 62 to 60 for hundreds of thousands of workers.07 Jun 2012
| 56 Comments BoE holds rates and leaves QE unchanged
The Bank of England has held interest rates at 0.5pc and left quantitative easing unchanged at £325bn despite mounting speculation that it would take steps to stimulate growth this month.07 Jun 2012
| 33 Comments David Cameron: speed is of the essence in eurozone
The Prime Minister calls for speedy action to deal with the crisis in the eurozone but cautioned against holding Germany solely responsible for delays in dealing with the long-running debt crisis.07 Jun 2012
Osborne: eurozone's 'moment of truth'
The Chancellor says that whilst the eurozone faces "a moment of truth" he is adamant British taxpayers will not contribute to any Spanish bank bail-out.07 Jun 2012
| 5 Comments Fresh calls for EU referendum as Euro crisis deepens
The Government faced fresh demands for a referendum on the UK's continued membership of the European Union today as the continent's leaders struggled to find a solution to the single-currency crisis.07 Jun 2012
Spain borrowing cost rise as it passes bond test
Spain has successfully raised €2.1bn from bond markets but at higher interest rates as investors remain concerned the country might need external help to shore up its troubled banking sector.07 Jun 2012
| 2 Comments Spain to test market confidence with bond auction
Spain will try to raise between €1bn and €2bn in bonds on Thursday, a crucial yet cautious test of Madrid's ability to tap investors after a minister said the country was being cut off from the markets.07 Jun 2012
| 4 Comments BoE meets amid talk of £50bn stimulus
Bank of England policymakers meet today to decide whether to change interest rates or to pump in more money into the ailing economy, with leading economist saying they may opt to inject a further £50bn of stimulus.http://www.spiegel.de/international/topic/debt_crisis/
Combating the Crisis Berlin and EU Weigh Greater Bank Oversight
SPIEGEL ONLINE - June 05, 2012 Chancellor Merkel and European Commission President Barroso on Monday met to talk about creating a banking union to increase oversight over systemically important European banks. The move could mark a step toward providing direct aid from Brussels to ailing EU financial institutions.http://www.guardian.co.uk/business/debt-crisis
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Cartoon, 7 Jun 2012: PM says Britain accepts need for deeper integration but he will fight to defend UK interests at EU summit in Brussels
78 comments - 7 Jun 2012: Government now openly admits country's second largest lender requires a €1.8bn lifeline by the end of the month
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7 Jun 2012: 'David' and 'Angela' politely ignore their differences during wide-ranging 90-minute discussion streamed worldwide
- 7 Jun 2012: Simon Jenkins: The eurozone suffers from the same folly that, in the 14th century, saw the Black Death blamed on everything bar its cause 113 comments
- 7 Jun 2012: Mark Weisbrot: The IMF chief surely knows better than to believe Latvia's disastrous internal devaluation is a good plan for the eurozone
22 comments -
7 Jun 2012: PM says Britain accepts need for deeper integration but he will fight to defend UK interests at EU summit in Brussels
- 7 Jun 2012: Europe's fourth largest economy now hovering just above junk status with credit agency blaming policy elite for deepening crisis 102 comments
- 7 Jun 2012: Bernanke tells Congress that economic recovery remains fragile and warns that Europe's woes pose siginificant risks to US
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7 Jun 2012: Ilias Kasidiaris, a high-profile member of the neo-Nazi party, lashed out at two prominent leftwingers, then went on the run
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Interactive, 7 Jun 2012: As European nations clash on the football fields of Poland and Ukraine, many of their economies are facing something more like relegation. Who would come out on top in the struggle to avoid economic crisis?
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Audio (27min 14sec), 7 Jun 2012: Heather Stewart, Michael White and Philip Oltermann join Tom Clark to discuss Germany's role in the eurozone crisis and the inquiry into the conduct of Tory party chair Sayeeda Warsi
1 comment -
7 Jun 2012: Interest rates to remain at 0.5% and quantitative easing will not be increased, says monetary policy committee
- 7 Jun 2012: Ilias Kasidiaris of the far-right Chrysi Avgi party throws water at deputy Rena Dourou before lashing out at Liana Kanelli
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Cartoon, 7 Jun 2012: Something to cheer us up!
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7 Jun 2012: Chancellor says he believes solution is imminent, but calls for 'harmonisation' of fiscal policies to secure single currency
http://www.nakedcapitalism.com/
Thursday, June 7, 2012
Links 6/7/11
Bodies with Histories Boston Review. On race. A must read.Kohr Principles New York Times (Vlad)
Teenager reportedly finds solution to 350 year old math and physics problem PhysOrg (Chuck L)
Science fiction master Ray Bradbury dies Washington Post
Diary: In Fukushia Rebecca Solint London Review of Books (martha r). From last month, still very much worth reading.
China on the Launch Pad Project Syndicate
Is Libya Cracking Up? New York Review of Books (Lambert)
The eurozone’s architects have created a doomsday machine and a gift for speculative capital Marshall Auerback, Credit Writedowns
Greece and the Euro: Fifty Ways to Leave Your Lover Truthout
The Sometimes Picayune Harry Shearer, Columbia Journalism Review
“The politics of envy won in Wisconsin and will now accelerate nationwide” Gaius Publius, AmericaBlog
Wisconsin: What Happens When Movements Turn Into Campaigns Black Agenda Report
Variations on “Only Nixon Can Go to China” Mike Kimel, Angry Bear. Be sure to read the last paragraph.
Group Forms to Urge Strict Oversight of Wall Street Floyd Norris, New York Times
The TIPS curve has become inverted Sober Look. Inverted yield curves forecast recessions, but they also can send false positives.
Fed risks diminishing returns with more QE Financial Times
Steve Keen: Why Economics is Bunk BBC Radio 4 (Tim C)
Sorry Jamie Dimon, But You Know Things Are Bad When The Editor Of Vanity Fair Reams You In The July Issue Clusterstock
Federal Reserve set to unveil capital proposals Financial Times. Dimon gets whacked again.
Corzine’s first sin was to bet on MF Global John Gapper, Financial Times
Officers shoot homeowner being evicted from foreclosed house KMOV (Max)
D.C. Council Chairman Charged with Bank Fraud Legal Times. This is how your Department of Justice is spending its time: prosecuting someone for lying on a home equity loan. And if the accused has a competent attorney, he’ll probably be acquitted. Why? Odds are high this was a no income verification loan. The lender didn’t want or use the info.
New York, Delaware Can Intervene In Bank Of America Deal Bloomberg
CALIFORNIA STATEWIDE MORATORIUM ON HOME FORECLOSURES: RALLY AND MARCH June 25. If you are a California resident, I hope you’ll consider going.
Manufacturing Public Opinion Global Economic Intersection
Cypress is not big enough to be really upsetting.
The precedent will not be good.
The next big lump will be Italy or Greece or maybe both at once.
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