Raise interest rates to raise inflation? Lower interest rates to lower inflation? It's not that simple.
A correspondent from an emerging market wrote enthusiastically. His country has somewhat too high inflation, currency depreciation and slightly negative real rates. A discussion is going on about raising rates to combat inflation. Do I think that lowering rates in this circumstance is instead the way to go about it?
As you can tell, posing the question this way makes me very uncomfortable! So, thinking out loud, why might one pause at jumping this far, this fast?
Fiscal policy. Fiscal policy deeply underlies monetary policy. In my own "Fisherian" explorations, the fiscal theory of price level is a deep foundation. If the government is printing up money to pay its bills, the central bank can do what it wants with interest rates, inflation is coming anyway.
Conversely, underlying the decline in inflation in the US, Europe, and Japan is an extraordinary demand for nominal government debt.
Bond markets seem to think we'll pay it off. And that is not too terribly an irrational expectation. Sovereign debts are self-inflicted wounds. A little structural reform to get growing again, tweaks to social security and medicare, and next thing you know we're back in the 1990s and wondering what to do when all the government bonds are paid off. Also, valuation is more about discount rates than cashflows. People seem happy -- for now -- to hold government debt despite unusually low prospective returns.
My correspondent answers that his country is actually doing well fiscally. However, his country is also a bit low on reserves and having exchange rate and capital flight problems.
But current deficits are not that important to inflation either in theory or in fact. The fiscal policy that matters is expectations of very long term stability, not just a few years of surpluses. Also, contingent liabilities matter a lot. If investors in government debt see a government that will bail out all and sundry in the next downturn, or faces political risks, even temporary surpluses are not an assurance to investors. (Craig Burnside, Marty Eichenbaum and Sergio Rebelo's "Prospective Deficits and the Asian Currency Crises, in the JPE and ungated here is a brilliant paper on this point.)
Rational expectations. The Fisherian proposition also relies deeply on rational expectations. In the simplest version, \( i_t = r + E_t \pi_{t+1} \), people see nominal interest rates rise, they expect inflation to be higher, so they raise their prices. As a result of that expectation inflation is, on average, higher. (Loose story alert.)
How do they expect such a thing? Well, rational expectations is sensible when there is a long history in one regime. People see higher interest rates, they remember times of high interest rates in the past, like the late 1970s, so they ratchet up their inflation expectations. Or, people see higher interest rates, and they've gotten used to the Fed raising interest rates when the Fed sees inflation coming, so they raise their expectations. The motto of rational expectations is "you can't fool all of the people all of the time," not "you can never fool anyone," nor "people are clairvoyant."
The Fisherian prediction relies on the interest rate change to be credible, long-lasting, and to lead to the right expectations. A one-off experiment, that might be read as cover for a dovish desire to boost growth at the expense of more inflation, and that might be quickly reversed doesn't really map to the equations. Europe and Japan, stuck at the zero bound, with a fiscal bonanza (low interest costs on the debt) and slowly decreasing inflation expectations is much more consistent with those equations.
Liquidity. When interest rates are positive and money does not pay interest, lowering rates means more money in the system, and potentially more lending too. This classic liquidity channel, which goes the other way, is absent for the US, UK, Japan and Europe, since we're at the zero bound and since reserves pay interest. (Granted, I couldn't get the equations of the liquidity effect to be large enough to offset the Fisher effect, but that depends on the particulars of a model. )
Successful disinflations. Disinflations are a combination of fiscal policy, monetary policy, expectations, and liquidity. Tom Sargent's classic ends of four hyperinflations tells the story beautifully.
Large inflations result from intractable fiscal problems, not central bank stupidity. In Tom's examples, the government solves the fiscal problem; not just immediately, but credibly solves it for the forseeable future. For example, the German government in the 1920s faced enormous reparations payments. Renegotiating these payments fixed the underlying fiscal problem. When the long-term fiscal problem was fixed, inflation stopped immediately. Since everybody knew what the fiscal problem was, expectations were quickly rational.
The end of inflation coincided with a large money expansion and a steep reduction in nominal interest rates. During a time of high inflation, people use as little money as possible. With inflation over, real money demand expands. There was no period of monetary stringency or interest-rate raising preceding these disinflations.
So these are great examples in which the Fisher story works well -- lower interest rates correspond to lower inflation, immediately. But you can see that lower interest rates are not the whole story. The central bank of Germany 1922 could not have stopped inflation on its own by lowering rates. I suspect the same is true of high inflation countries today -- usually something is wrong other than just the history of interest rates.
So, apply new theories with caution!
To the raising interest rates question for the US and Europe, some of the same considerations apply. We won't have any liquidity effects, as central banks are planning to just pay more interest on abundant reserves. Higher real interest rates will raise fiscal interest costs, which is an inflationary shock by fiscal theory considerations. The big question is expectations. Will people read higher interest rates as a warning of inflation about to break out, or as a sign that inflation will be even lower?
Thứ Năm, 31 tháng 3, 2016
Thứ Ba, 29 tháng 3, 2016
A very simple neo-Fisherian model
A sharp colleague recently pushed me to write down a really simple model that can clarify the intuition of how raising interest rates might raise, rather than lower, inflation. Here is an answer.
(This follows the last post on the question, which links to a paper. Warning: this post uses mathjax and has graphs. If you don't see them, come back to the original. I have to hit shift-reload twice to see math in Safari. )
I'll use the standard intertemporal-substitution relation, that higher real interest rates induce you to postpone consumption, \[ c_t = E_t c_{t+1} - \sigma(i_t - E_t \pi_{t+1}) \] I'll pair it here with the simplest possible Phillips curve, that inflation is higher when output is higher. \[ \pi_t = \kappa c_t \] I'll also assume that people know about the interest rate rise ahead of time, so \(\pi_{t+1}=E_t\pi_{t+1}\).
Now substitute \(\pi_t\) for \(c_t\), \[ \pi_t = \pi_{t+1} - \sigma \kappa(i_t - \pi_{t+1})\] So the solution is \[ E_t \pi_{t+1} = \frac{1}{1+\sigma\kappa} \pi_t + \frac{\sigma \kappa}{1+\sigma\kappa}i_t \]
Inflation is stable. You can solve this backwards to \[ \pi_{t} = \frac{\sigma \kappa}{1+\sigma\kappa} \sum_{j=0}^\infty \left( \frac{1}{1+\sigma\kappa}\right)^j i_{t-j} \]
Here is a plot of what happens when the Fed raises nominal interest rates, using \(\sigma=1, \kappa=1\):
When interest rates rise, inflation rises steadily.
Now, intuition. (In economics intuition describes equations. If you have intuition but can't quite come up with the equations, you have a hunch not a result.) During the time of high real interest rates -- when the nominal rate has risen, but inflation has not yet caught up -- consumption must grow faster.
People consume less ahead of the time of high real interest rates, so they have more savings, and earn more interest on those savings. Afterwards, they can consume more. Since more consumption pushes up prices, giving more inflation, inflation must also rise during the period of high consumption growth.
One way to look at this is that consumption and inflation was depressed before the rise, because people knew the rise was going to happen. In that sense, higher interest rates do lower consumption, but rational expectations reverses the arrow of time: higher future interest rates lower consumption and inflation today.
(The case of a surprise rise in interest rates is a bit more subtle. It's possible in that case that \(\pi_t\) and \(c_t\) jump down unexpectedly at time \(t\) when \(i_t\) jumps up. Analyzing that case, like all the other complications, takes a paper not a blog post. The point here was to show a simple model that illustrates the possibility of a neo-Fisherian result, not to argue that the result is general. My skeptical colleauge wanted to see how it's even possible.)
I really like that the Phillips curve here is so completely old fashioned. This is Phillips' Phillips curve, with a permanent inflation-output tradeoff. That fact shows squarely where the neo-Fisherian result comes from. The forward-looking intertemporal-substitution IS equation is the central ingredient.
Model 2:
You might object that with this static Phillips curve, there is a permanent inflation-output tradeoff. Maybe we're getting the permanent rise in inflation from the permanent rise in output? No, but let's see it. Here's the same model with an accelerationist Phillips curve, with slowly adaptive expectations. Change the Phillips curve to \[ c_{t} = \kappa(\pi_{t}-\pi_{t-1}^{e}) \] \[ \pi_{t}^{e} = \lambda\pi_{t-1}^{e}+(1-\lambda)\pi_{t} \] or, equivalently, \[ \pi_{t}^{e}=(1-\lambda)\sum_{j=0}^{\infty}\lambda^{j}\pi_{t-j}. \]
Substituting out consumption again, \[ (\pi_{t}-\pi_{t-1}^{e})=(\pi_{t+1}-\pi_{t}^{e})-\sigma\kappa(i_{t}-\pi_{t+1}) \] \[ (1+\sigma\kappa)\pi_{t+1}=\pi_{t}+\pi_{t}^{e}-\pi_{t-1}^{e}+\sigma\kappa i_{t} \] \[ \pi_{t+1}=\frac{1}{1+\sigma\kappa}\left( \pi_{t}+\pi_{t}^{e}-\pi_{t-1} ^{e}\right) +\frac{\sigma\kappa}{1+\sigma\kappa}i_{t}. \] Explicitly, \[ (1+\sigma\kappa)\pi_{t+1}=\pi_{t}+\gamma(1-\lambda)\left[ \sum_{j=0}^{\infty }\lambda^{j}\Delta\pi_{t-j}\right] +\sigma\kappa i_{t} \]
Simulating this model, with \(\lambda=0.9\).
As you can see, we still have a completely positive response. Inflation ends up moving one for one with the rate change. Consumption booms and then slowly reverts to zero. The words are really about the same.
The positive consumption response does not survive with more realistic or better grounded Phillips curves. With the standard forward looking new Keynesian Phillips curve inflation looks about the same, but output goes down throughout the episode: you get stagflation.
The absolutely simplest model is, of course, just \[i_t = r + E_t \pi_{t+1}\]. Then if the Fed raises
the nominal interest rate, inflation must follow. But my challenge was to spell out the market forces
that push inflation up. I'm less able to tell the corresponding story in very simple terms.
(This follows the last post on the question, which links to a paper. Warning: this post uses mathjax and has graphs. If you don't see them, come back to the original. I have to hit shift-reload twice to see math in Safari. )
I'll use the standard intertemporal-substitution relation, that higher real interest rates induce you to postpone consumption, \[ c_t = E_t c_{t+1} - \sigma(i_t - E_t \pi_{t+1}) \] I'll pair it here with the simplest possible Phillips curve, that inflation is higher when output is higher. \[ \pi_t = \kappa c_t \] I'll also assume that people know about the interest rate rise ahead of time, so \(\pi_{t+1}=E_t\pi_{t+1}\).
Now substitute \(\pi_t\) for \(c_t\), \[ \pi_t = \pi_{t+1} - \sigma \kappa(i_t - \pi_{t+1})\] So the solution is \[ E_t \pi_{t+1} = \frac{1}{1+\sigma\kappa} \pi_t + \frac{\sigma \kappa}{1+\sigma\kappa}i_t \]
Inflation is stable. You can solve this backwards to \[ \pi_{t} = \frac{\sigma \kappa}{1+\sigma\kappa} \sum_{j=0}^\infty \left( \frac{1}{1+\sigma\kappa}\right)^j i_{t-j} \]
Here is a plot of what happens when the Fed raises nominal interest rates, using \(\sigma=1, \kappa=1\):
Now, intuition. (In economics intuition describes equations. If you have intuition but can't quite come up with the equations, you have a hunch not a result.) During the time of high real interest rates -- when the nominal rate has risen, but inflation has not yet caught up -- consumption must grow faster.
People consume less ahead of the time of high real interest rates, so they have more savings, and earn more interest on those savings. Afterwards, they can consume more. Since more consumption pushes up prices, giving more inflation, inflation must also rise during the period of high consumption growth.
One way to look at this is that consumption and inflation was depressed before the rise, because people knew the rise was going to happen. In that sense, higher interest rates do lower consumption, but rational expectations reverses the arrow of time: higher future interest rates lower consumption and inflation today.
(The case of a surprise rise in interest rates is a bit more subtle. It's possible in that case that \(\pi_t\) and \(c_t\) jump down unexpectedly at time \(t\) when \(i_t\) jumps up. Analyzing that case, like all the other complications, takes a paper not a blog post. The point here was to show a simple model that illustrates the possibility of a neo-Fisherian result, not to argue that the result is general. My skeptical colleauge wanted to see how it's even possible.)
I really like that the Phillips curve here is so completely old fashioned. This is Phillips' Phillips curve, with a permanent inflation-output tradeoff. That fact shows squarely where the neo-Fisherian result comes from. The forward-looking intertemporal-substitution IS equation is the central ingredient.
Model 2:
You might object that with this static Phillips curve, there is a permanent inflation-output tradeoff. Maybe we're getting the permanent rise in inflation from the permanent rise in output? No, but let's see it. Here's the same model with an accelerationist Phillips curve, with slowly adaptive expectations. Change the Phillips curve to \[ c_{t} = \kappa(\pi_{t}-\pi_{t-1}^{e}) \] \[ \pi_{t}^{e} = \lambda\pi_{t-1}^{e}+(1-\lambda)\pi_{t} \] or, equivalently, \[ \pi_{t}^{e}=(1-\lambda)\sum_{j=0}^{\infty}\lambda^{j}\pi_{t-j}. \]
Substituting out consumption again, \[ (\pi_{t}-\pi_{t-1}^{e})=(\pi_{t+1}-\pi_{t}^{e})-\sigma\kappa(i_{t}-\pi_{t+1}) \] \[ (1+\sigma\kappa)\pi_{t+1}=\pi_{t}+\pi_{t}^{e}-\pi_{t-1}^{e}+\sigma\kappa i_{t} \] \[ \pi_{t+1}=\frac{1}{1+\sigma\kappa}\left( \pi_{t}+\pi_{t}^{e}-\pi_{t-1} ^{e}\right) +\frac{\sigma\kappa}{1+\sigma\kappa}i_{t}. \] Explicitly, \[ (1+\sigma\kappa)\pi_{t+1}=\pi_{t}+\gamma(1-\lambda)\left[ \sum_{j=0}^{\infty }\lambda^{j}\Delta\pi_{t-j}\right] +\sigma\kappa i_{t} \]
Simulating this model, with \(\lambda=0.9\).
As you can see, we still have a completely positive response. Inflation ends up moving one for one with the rate change. Consumption booms and then slowly reverts to zero. The words are really about the same.
The positive consumption response does not survive with more realistic or better grounded Phillips curves. With the standard forward looking new Keynesian Phillips curve inflation looks about the same, but output goes down throughout the episode: you get stagflation.
The absolutely simplest model is, of course, just \[i_t = r + E_t \pi_{t+1}\]. Then if the Fed raises
the nominal interest rate, inflation must follow. But my challenge was to spell out the market forces
that push inflation up. I'm less able to tell the corresponding story in very simple terms.
Thứ Sáu, 25 tháng 3, 2016
Central banks as central planners
Two news items cropped up this week on the general topic of central banks as emergent central planers.: a nice WSJ editorial by James Mackintosh on QE extended to buying corporate debt, and the Fed's proposed rule governing "Macroprudential" countercyclical capital buffers. The ECB also has a new Macroprudential Bulletin with similar ideas that I will not cover because the post is already too long. (Some earlier thoughts on the issue here. As usual, if the quotes aren't showing right, come back to the original of this post here.)
The WSJ editorial:
The ECB
What's wrong with this?
But central banks so far don't, at least in well run countries. Why not? Independence. The deal for central banks has been: The bank gets great independence. In return, it accepts sharply limited powers. It handles money and interest rates, but it does not funnel credit to specific borrowers, nor does it target asset prices. Branches of government that handle such political decisions are subject to quadrennial electoral wrath. So, though any expansion of financial meddling is unwelcome, the big danger is the inevitable politicization and loss of independence of the Central bank.
And that will happen sooner than you think. Congressional hearings and bills to contain the Fed are already in Congress.
A bit more under the radar, but needing much more attention, the Fed has unveiled rules for implementing "macro-prudential" policy with "counter-cyclical capital buffers."
The proposed rule makes for fun reading. The
(And... "to hold a larger capital buffer. This entire document uses the incorrect verb "hold" to describe capital, as if capital are reserves. One hopes the ideas are not as confused as the language.)
Hayek's famous criticism of central planning is that planners can't possibly have the information needed to properly supply toilet paper. Which they didn't. So as you read this gobbledy-gook, you should ask just that question -- not whether the Fed is well intentioned or not (it is), but how will Fed officials "assess vulnerabilities," "potential systemic vulnerabilities" or tell whether "asset price appreciation or credit growth" are or are not "well supported by underlying economic fundamentals?"
The proposal lays out the answer:
"valuation pressures" and "risk appetite" are not measurable or even defined quantities. "Classes of vulnerabilities" even less so.
If this sounds pretty wooly, you might be a bit reassured by
The key is to distinguish a "boom" from a "bubble." In real time. When all the bankers in your "surveys" and "interactions with market participants" are telling you it's a boom. "We'll look at every vaguely plausible number that comes in" is hardly a reassuring tie to the mast.
But in case even this smorgasbord data-dump seems too limiting; in case some congressional committee member says "you looked at the price of barbecue in setting the first bank of Texas' capital buffer, and that violates the regulation,"
To be clear, I'm all for capital. Lots and lots of capital. Capital issued or retained, not "held," please. I'm for so much capital that the precise amount doesn't really matter.
And that's the point. By pretending that the Fed will set capital ratios down to the second decimal point, and then pretending to be able to adjust that ratio up or down by a few percentage points in response to a Rube-Goldberg model, the Fed pretends there is a very important cost to demanding too much capital, that it knows exactly where the cost-benefit optimum is, not just on average, but with great precision vary it over time. All of this is not just false, it is completely pie-in-the sky. How can anyone with a straight face claim such an absurd level of competence?
So my objection really is the effort to dress this up with the aura of technocratic competence, or pretend the Fed is putting in rules that it will follow. (The link is, after all, a rule-making proposal.) It would be far more honest to issue one line: "The Federal Reserve will adjust capital requirements as it sees fit." Period.
The result is easy to foresee. "Counter-cyclical capital" and "macro-prudential policy" will become one more completely discretionary and judgmental policy tool for the Fed to command the banks. It will be subject to intense political forces. The Fed will get it wrong, and feed the flames. The fallout for the Fed, for good monetary policy, and for the economy will not be good.
While we're on gobbledy-gook language and the revealed confusion by our aspiring technocrats, the "real economy" language is sad. From WSJ, the ECB
Oh, and on negative rates:
The WSJ editorial:
..as the central banks become more desperate to boost inflation and growth, they are starting to break one of the modern tenets of the profession by funneling that cash directly to what they regard as “good” uses.The Bank of Japan’s conditions for companies to qualify for central bank funding include
offering an "improving working environment, providing child-care support, or expanding employee-training programs".... increasing capital spending, expanding spending on research and development or boosting what the Bank of Japan calls “human capital.” The latter means pay raises for staff, taking on more people or improving human resources.
The ECB
... plans to pay banks to borrow from it for up to four years so long as they use the money to help the “real” economy, meaning that they don’t simply pump up the housing markets by offering more mortgage finance.The ECB is also causing a ruckus by stating plans for which private bonds it will buy and which it won't.
What's wrong with this?
“It’s a massive politicization of credit: Here are the legitimate things for lending, and here are the illegitimate things,” said Russell Napier,...“It’s capitalism with Chinese characteristics.”Indeed. But just "politicization" or "central planning" is not the real danger. Our governments do all sorts of highly politicized credit allocation and subsidization -- energy boondoggles, student loans, export financing, housing housing and more housing, community reinvestment act, and so forth. On that scale, it seems hard to get excited about a little more.
But central banks so far don't, at least in well run countries. Why not? Independence. The deal for central banks has been: The bank gets great independence. In return, it accepts sharply limited powers. It handles money and interest rates, but it does not funnel credit to specific borrowers, nor does it target asset prices. Branches of government that handle such political decisions are subject to quadrennial electoral wrath. So, though any expansion of financial meddling is unwelcome, the big danger is the inevitable politicization and loss of independence of the Central bank.
And that will happen sooner than you think. Congressional hearings and bills to contain the Fed are already in Congress.
The proposed rule makes for fun reading. The
countercyclical capital buffer (CCyB) ...is a macroprudential policy tool that the Board can increase during periods of rising vulnerabilities in the financial system and reduce when vulnerabilities recede.[CCyB? OMG, DC alphabet soup is now case-sensitive?]
The CCyB is designed to increase the resilience of large banking organizations when the Board sees an elevated risk of above-normal losses. ... Above-normal losses often follow periods of rapid asset price appreciation or credit growth that are not well supported by underlying economic fundamentals....the Board would most likely use the CCyB ... to address circumstances when potential systemic vulnerabilities are somewhat above normal. By requiring advanced approaches institutions to hold a larger capital buffer during periods of increased systemic risk and removing the buffer requirement when the vulnerabilities have diminished, the CCyB has the potential to moderate fluctuations in the supply of credit over time.Decoded into English, this is what they're saying: Replay the end of the boom, 2005-2007. This time we really will see the crisis coming. This time we will force banks to issue more stock, hold back on paying dividends and bonuses to conserve capital during the boom when things are going great. This time we will directly tell banks to stop lending even though customers are lining up at the doors for cash-out no-doc refis. Replay the beginning of the bust, 2007-2008. This time we really will demand that banks get even more private capital, and stop paying dividends and bonuses, in the middle of a crisis, even though the same banks may be screaming of its impossibility.
(And... "to hold a larger capital buffer. This entire document uses the incorrect verb "hold" to describe capital, as if capital are reserves. One hopes the ideas are not as confused as the language.)
Hayek's famous criticism of central planning is that planners can't possibly have the information needed to properly supply toilet paper. Which they didn't. So as you read this gobbledy-gook, you should ask just that question -- not whether the Fed is well intentioned or not (it is), but how will Fed officials "assess vulnerabilities," "potential systemic vulnerabilities" or tell whether "asset price appreciation or credit growth" are or are not "well supported by underlying economic fundamentals?"
.. by synthesizing information from a comprehensive set of financial-sector and macroeconomic indicators, supervisory information, surveys, and other interactions with market participants. In forming its view about the appropriate size of the U.S. CCyB, the Board will consider a number of financial-system vulnerabilities, including but not limited to, asset valuation pressures and risk appetite, ...
The decision will reflect the implications of the assessment of overall financial-system vulnerabilities as well as any concerns related to one or more classes of vulnerabilities. ...
"valuation pressures" and "risk appetite" are not measurable or even defined quantities. "Classes of vulnerabilities" even less so.
If this sounds pretty wooly, you might be a bit reassured by
The Board intends to monitor a wide range of financial and macroeconomic quantitative indicators including, but not limited to, measures of relative credit and liquidity expansion or contraction, a variety of asset prices, funding spreads, credit condition surveys, indices based on credit default swap spreads, options implied volatility, and measures of systemic risk. In addition, empirical models that translate a manageable set of quantitative indicators of financial and economic performance into potential settings for the CCyB, when used as part of a comprehensive judgmental assessment of all available information, can be a useful input to the Board's deliberations. Such models may include those that rely on small sets of indicators—such as the credit-to-GDP ratio, its growth rate, and combinations of the credit-to-GDP ratio with trends in the prices of residential and commercial real estate... Such models may also include those that consider larger sets of indicators...Though they might as well say "we will look at every number that comes across the wires." It is painfully obvious though that nobody has any clue how to turn this mass of data into a useful real-time index of "vulnerabilities."
The key is to distinguish a "boom" from a "bubble." In real time. When all the bankers in your "surveys" and "interactions with market participants" are telling you it's a boom. "We'll look at every vaguely plausible number that comes in" is hardly a reassuring tie to the mast.
But in case even this smorgasbord data-dump seems too limiting; in case some congressional committee member says "you looked at the price of barbecue in setting the first bank of Texas' capital buffer, and that violates the regulation,"
However, no single indictor or fixed set of indicators can adequately capture all the key vulnerabilities in the U.S. economy and financial system. Moreover, adjustments in the CCyB that were tightly linked to a specific model or set of models would be imprecise due to the relatively short period that some indicators are available, the limited number of past crises against which the models can be calibrated, and limited experience with the CCyB as a macroprudential tool. As a result, the types of indicators and models considered in assessments of the appropriate level of the CCyB are likely to change over time based on advances in research and the experience of the Board with this new macroprudential tool.Translation to English: We will be shooting from the hip, but we will cover up the communique's with a lot of numbers and models and mumbo jumbo to give the illusion of technical competence.
To be clear, I'm all for capital. Lots and lots of capital. Capital issued or retained, not "held," please. I'm for so much capital that the precise amount doesn't really matter.
And that's the point. By pretending that the Fed will set capital ratios down to the second decimal point, and then pretending to be able to adjust that ratio up or down by a few percentage points in response to a Rube-Goldberg model, the Fed pretends there is a very important cost to demanding too much capital, that it knows exactly where the cost-benefit optimum is, not just on average, but with great precision vary it over time. All of this is not just false, it is completely pie-in-the sky. How can anyone with a straight face claim such an absurd level of competence?
So my objection really is the effort to dress this up with the aura of technocratic competence, or pretend the Fed is putting in rules that it will follow. (The link is, after all, a rule-making proposal.) It would be far more honest to issue one line: "The Federal Reserve will adjust capital requirements as it sees fit." Period.
The result is easy to foresee. "Counter-cyclical capital" and "macro-prudential policy" will become one more completely discretionary and judgmental policy tool for the Fed to command the banks. It will be subject to intense political forces. The Fed will get it wrong, and feed the flames. The fallout for the Fed, for good monetary policy, and for the economy will not be good.
While we're on gobbledy-gook language and the revealed confusion by our aspiring technocrats, the "real economy" language is sad. From WSJ, the ECB
will cut the interest rate to as low as minus 0.4%—the ECB paying the banks—if the banks lend more to the real economy than a benchmark amount linked to their recent loans.Here we are in 2016, and our central bankers are peddling the medieval distinction between "real" and "financial" investment. Yes, ordinary Joe can be excused from this fallacy. But people with economics PhDs are supposed to understand that every asset is also a liability. Individually we can "buy paper, not real things." Collectively, we cannot.
“The market would much rather companies take the ECB’s cheap money and use it to buy each other,” said Robert Buckland, an equity strategist at Citigroup Inc.OK, so even private sector equity strategists can get it wrong. But central bankers are supposed to understand accounting identities. I hope these are journalistic misunderstandings and not an accurate reflection of thinking at the ECB.
Oh, and on negative rates:
German reinsurer Munich Re said it plans to store more than €10 million ($11.3 million) of physical bank notes in vaults to test the feasibility of avoiding negative rates.The ECB may have to get going on Miles' Kimball's plan to devalue currency relative to bank reserves!
Thứ Hai, 21 tháng 3, 2016
Videos & Highlights: California’s Distributed Energy Future 2016
 |
| Image Credit: Greentech Media |
Below you'll find two videos featuring:
1. Keynote Panel: Distributed Energy Resources as Grid Assets
2. Fireside Chat: Michael Picker, President, California Public Utilities Commission
3. Audience Vote Feedback on Various topics.
1. Keynote Panel: Distributed Energy Resources as Grid Assets
California is at the forefront of the push to consider distributed energy resources as assets to the grid. On this panel, leading experts discuss the benefits and challenges of shifting the lens through which distributed energy is viewed, and how markets must adjust to enable this transformation.
Caroline Choi, Vice President, Energy & Environmental Policy, Southern California Edison
Mark Ferron, Member, Board of Governors, CAISO, Former Commissioner, CPUC
David L. Geier, Vice President, Electric Transmission & System Engineering, San Diego Gas & Electric
Mark Ferron, Member, Board of Governors, CAISO, Former Commissioner, CPUC
David L. Geier, Vice President, Electric Transmission & System Engineering, San Diego Gas & Electric
Moderator: Rick Thompson, President & Co-Founder, Greentech Media
2. Fireside Chat: Michael Picker, President, California Public Utilities Commission
3. Audience Questions and Answers
1. What will be the primary benefit of the shift toward distributed energy in California?
B) Decreased greenhouse gas emissions (38.7%)
A) Increased customer choice (27.1%)
A) Increased customer choice (27.1%)
2. What will be the primary negative consequence of the shift toward distributed energy in California?
B) Increasing integration costs of intermittent generation. (28.9%)
C) Growing wealth divide (26.9%)
C) Growing wealth divide (26.9%)
3. What remains the greatest challenge for California's distributed energy future?
D) Regulatory - distribution planning, rate reform (40.6%)
C) Structural - utility business model evolution (34.7%)
C) Structural - utility business model evolution (34.7%)
4. What technology will have the greatest impact on the growth of DER in California?
B) Energy Storage (45.1%)
Misfit Official Store: For a Limited Time, New Customers get $10 off all orders of $50 or more with coupon code "BEAMISFIT". Shop Now!
5. What will be the primary solution to the so-called "duck curve" phenomenon?
5. What will be the primary solution to the so-called "duck curve" phenomenon?
B) Energy Storage (59.6%)
The Habit Habit
The Habit Habit. This is an essay expanding slightly on a talk I gave at the University of Melbourne's excellent "Finance Down Under" conference. The slides
(Note: This post uses mathjax for equations and has embedded graphs. Some places that pick up the post don't show these elements. If you can't see them or links come back to the original. Two shift-refreshes seem to cure Safari showing "math processing error".)
Habit past: I start with a quick review of the habit model. I highlight some successes as well as areas where the model needs improvement, that I think would be productive to address.
Habit present: I survey of many current parallel approaches including long run risks, idiosyncratic risks, heterogenous preferences, rare disasters, probability mistakes -- both behavioral and from ambiguity aversion -- and debt or institutional finance. I stress how all these approaches produce quite similar results and mechanisms. They all introduce a business-cycle state variable into the discount factor, so they all give rise to more risk aversion in bad times. The habit model, though less popular than some alternatives, is at least still a contender, and more parsimonious in many ways,
Habits future: I speculate with some simple models that time-varying risk premiums as captured by the habit model can produce a theory of risk-averse recessions, produced by varying risk aversion and precautionary saving, as an alternative to Keynesian flow constraints or new Keynesian intertemporal substitution. People stopped consuming and investing in 2008 because they were scared to death, not because they wanted less consumption today in return for more consumption tomorrow.
Throughout, the essay focuses on challenges for future research, in many cases that seem like low hanging fruit. PhD students seeking advice on thesis topics: I'll tell you to read this. It also may be useful to colleagues as a teaching note on macro-asset pricing models. (Note, the parallel sections of my coursera class "Asset Pricing" cover some of the same material.)
I'll tempt you with one little exercise taken from late in the essay.
A representative consumer with a fixed habit \(x\) lives in a permanent income economy, with endowment \(e_0\) at time 0 and random endowment \(e_1\) at time 1. With a discount factor \(\beta=R^f=1\), the problem is
\[ \max\frac{(c_{0}-x)^{1-\gamma}}{1-\gamma}+E\left[ \frac {(c_{1}-x)^{1-\gamma}}{1-\gamma}\right] \] \[ c_{1} = e_{0}-c_{0} +e_{1} \] \[ e_{1} =\left\{ e_{h},e_{l}\right\} \; pr(e_{l})=\pi. \] The solution results from the first order condition \[ \left( c_{0}-x\right) ^{-\gamma}=E\left[ (c_{1}-x)^{-\gamma}\right] \] i.e., \[ \left( c_{0}-x\right) ^{-\gamma}=\pi(e_{0}-c_{0}+e_{l}-x)^{-\gamma}% +(1-\pi)(e_{0}-c_{0}+e_{h}-x)^{-\gamma}% \] I solve this equation numerically for \(c_{0}\).
The first picture shows consumption \(c_0\) as a function of first period endowment \(e_0\) for \(e_{h}=2\), \(e_{l}=0.9\), \(x=1\), \(\gamma=2\) and \(\pi=1/100\).
The case that one state is a rare disaster is not special. In a general case, the consumer starts to focus more and more on the worst-possible state as risk aversion rises. Therefore, the model with any other distribution and the same worst-possible state looks much like this one.
Watch the blue \(c_0\) line first. Starting from the right, when first-period endowment \(e_{0}\) is abundant, the consumer follows standard permanent income advice. The slope of the line connecting initial endowment \(e_{0}\) to consumption \(c_{0}\) is about 1/2, as the consumer splits his large endowment \(e_{0}\) between period 0 and the single additional period 1.
As endowment \(e_{0}\) declines, however, this behavior changes. For very low endowments \(e_{0}\approx 1\) relative to the nearly certain better future \(e_{h}=2\), the permanent income consumer would borrow to finance consumption in period 0. The habit consumer reduces consumption instead. As endowment \(e_{0}\) declines towards \(x=1\), the marginal propensity to consume becomes nearly one. The consumer reduces consumption one for one with income.
The next graph presents marginal utility times probability, \(u^{\prime}(c_{0})=(c_{0}-x)^{-\gamma}\), and \(\pi_{i}u^{\prime}(c_{i})=\pi _{i}(c_{i}-x)^{-\gamma},i=h,l\). By the first order condition, the former is equal to the sum of the latter two. \ But which state of the world is the more important consideration? When consumption is abundant in both periods on the right side of the graph, marginal utility \(u^{\prime}(c_{0})\) is almost entirely equated to marginal utility in the 99 times more likely good state \((1-\pi)u^{\prime}(c_{h})\). So, the consumer basically ignores the bad state and acts like a perfect foresight or permanent-income intertemporal-substitution consumer, considering consumption today vs. consumption in the good state.
In bad times, however, on the left side of the graph, if the consumer thinks about leaving very little for the future, or even borrowing, consumption in the unlikely bad state approaches the habit. Now the marginal utility of the bad state starts to skyrocket compared to that of the good state. The consumer must leave some positive amount saved so that the bad state does not turn disastrous -- even though he has a 99% chance of doubling his income in the next period (\(e_{h}=2\), \(e_{0}=1\)). Marginal utility at time 0, \(u^{\prime }(c_{0})\) now tracks \(\pi_{l}u^{\prime}(c_{l})\) almost perfectly.
In these graphs, then, we see behavior that motivates and is captured by many different kinds of models:
1. Consumption moves more with income in bad times.
This behavior is familiar from buffer-stock models, in which agents wish to smooth intertemporally, but can't borrow when wealth is low....
2. In bad times, consumers start to pay inordinate attention to rare bad states of nature.
This behavior is similar to time-varying rare disaster probability models, behavioral models, or to minimax ambiguity aversion models. At low values of consumption, the consumer's entire behavior \(c_{0}\) is driven by the tradeoff between consumption today \(c_{0}\) and consumption in a state \(c_{l}\) that has a 1/100 probability of occurrence, ignoring the state with 99/100 probability.
This little habit model also gives a natural account of endogenous time-varying attention to rare events.
The point is not to argue that habit models persuasively dominate the others. The point is just that there seems to be a range of behavior that theorists intuit, and that many models capture.
When consumption falls close to habit, risk aversion rises, stock prices fall, so by Q theory investment falls. We nearly have a multiplier-accelerator, due to rising risk aversion in bad times: Consumption falls with mpc approaching one, and investment falls as well. The paper gives some hints about how that might work in a real model.
(Note: This post uses mathjax for equations and has embedded graphs. Some places that pick up the post don't show these elements. If you can't see them or links come back to the original. Two shift-refreshes seem to cure Safari showing "math processing error".)
Habit past: I start with a quick review of the habit model. I highlight some successes as well as areas where the model needs improvement, that I think would be productive to address.
Habit present: I survey of many current parallel approaches including long run risks, idiosyncratic risks, heterogenous preferences, rare disasters, probability mistakes -- both behavioral and from ambiguity aversion -- and debt or institutional finance. I stress how all these approaches produce quite similar results and mechanisms. They all introduce a business-cycle state variable into the discount factor, so they all give rise to more risk aversion in bad times. The habit model, though less popular than some alternatives, is at least still a contender, and more parsimonious in many ways,
Habits future: I speculate with some simple models that time-varying risk premiums as captured by the habit model can produce a theory of risk-averse recessions, produced by varying risk aversion and precautionary saving, as an alternative to Keynesian flow constraints or new Keynesian intertemporal substitution. People stopped consuming and investing in 2008 because they were scared to death, not because they wanted less consumption today in return for more consumption tomorrow.
Throughout, the essay focuses on challenges for future research, in many cases that seem like low hanging fruit. PhD students seeking advice on thesis topics: I'll tell you to read this. It also may be useful to colleagues as a teaching note on macro-asset pricing models. (Note, the parallel sections of my coursera class "Asset Pricing" cover some of the same material.)
I'll tempt you with one little exercise taken from late in the essay.
A representative consumer with a fixed habit \(x\) lives in a permanent income economy, with endowment \(e_0\) at time 0 and random endowment \(e_1\) at time 1. With a discount factor \(\beta=R^f=1\), the problem is
\[ \max\frac{(c_{0}-x)^{1-\gamma}}{1-\gamma}+E\left[ \frac {(c_{1}-x)^{1-\gamma}}{1-\gamma}\right] \] \[ c_{1} = e_{0}-c_{0} +e_{1} \] \[ e_{1} =\left\{ e_{h},e_{l}\right\} \; pr(e_{l})=\pi. \] The solution results from the first order condition \[ \left( c_{0}-x\right) ^{-\gamma}=E\left[ (c_{1}-x)^{-\gamma}\right] \] i.e., \[ \left( c_{0}-x\right) ^{-\gamma}=\pi(e_{0}-c_{0}+e_{l}-x)^{-\gamma}% +(1-\pi)(e_{0}-c_{0}+e_{h}-x)^{-\gamma}% \] I solve this equation numerically for \(c_{0}\).
The first picture shows consumption \(c_0\) as a function of first period endowment \(e_0\) for \(e_{h}=2\), \(e_{l}=0.9\), \(x=1\), \(\gamma=2\) and \(\pi=1/100\).
The case that one state is a rare disaster is not special. In a general case, the consumer starts to focus more and more on the worst-possible state as risk aversion rises. Therefore, the model with any other distribution and the same worst-possible state looks much like this one.
Watch the blue \(c_0\) line first. Starting from the right, when first-period endowment \(e_{0}\) is abundant, the consumer follows standard permanent income advice. The slope of the line connecting initial endowment \(e_{0}\) to consumption \(c_{0}\) is about 1/2, as the consumer splits his large endowment \(e_{0}\) between period 0 and the single additional period 1.
As endowment \(e_{0}\) declines, however, this behavior changes. For very low endowments \(e_{0}\approx 1\) relative to the nearly certain better future \(e_{h}=2\), the permanent income consumer would borrow to finance consumption in period 0. The habit consumer reduces consumption instead. As endowment \(e_{0}\) declines towards \(x=1\), the marginal propensity to consume becomes nearly one. The consumer reduces consumption one for one with income.
The next graph presents marginal utility times probability, \(u^{\prime}(c_{0})=(c_{0}-x)^{-\gamma}\), and \(\pi_{i}u^{\prime}(c_{i})=\pi _{i}(c_{i}-x)^{-\gamma},i=h,l\). By the first order condition, the former is equal to the sum of the latter two. \ But which state of the world is the more important consideration? When consumption is abundant in both periods on the right side of the graph, marginal utility \(u^{\prime}(c_{0})\) is almost entirely equated to marginal utility in the 99 times more likely good state \((1-\pi)u^{\prime}(c_{h})\). So, the consumer basically ignores the bad state and acts like a perfect foresight or permanent-income intertemporal-substitution consumer, considering consumption today vs. consumption in the good state.
In bad times, however, on the left side of the graph, if the consumer thinks about leaving very little for the future, or even borrowing, consumption in the unlikely bad state approaches the habit. Now the marginal utility of the bad state starts to skyrocket compared to that of the good state. The consumer must leave some positive amount saved so that the bad state does not turn disastrous -- even though he has a 99% chance of doubling his income in the next period (\(e_{h}=2\), \(e_{0}=1\)). Marginal utility at time 0, \(u^{\prime }(c_{0})\) now tracks \(\pi_{l}u^{\prime}(c_{l})\) almost perfectly.
In these graphs, then, we see behavior that motivates and is captured by many different kinds of models:
1. Consumption moves more with income in bad times.
This behavior is familiar from buffer-stock models, in which agents wish to smooth intertemporally, but can't borrow when wealth is low....
2. In bad times, consumers start to pay inordinate attention to rare bad states of nature.
This behavior is similar to time-varying rare disaster probability models, behavioral models, or to minimax ambiguity aversion models. At low values of consumption, the consumer's entire behavior \(c_{0}\) is driven by the tradeoff between consumption today \(c_{0}\) and consumption in a state \(c_{l}\) that has a 1/100 probability of occurrence, ignoring the state with 99/100 probability.
This little habit model also gives a natural account of endogenous time-varying attention to rare events.
The point is not to argue that habit models persuasively dominate the others. The point is just that there seems to be a range of behavior that theorists intuit, and that many models capture.
When consumption falls close to habit, risk aversion rises, stock prices fall, so by Q theory investment falls. We nearly have a multiplier-accelerator, due to rising risk aversion in bad times: Consumption falls with mpc approaching one, and investment falls as well. The paper gives some hints about how that might work in a real model.
Chủ Nhật, 20 tháng 3, 2016
Today in Trumpland
Today in Trumpland
by digby
Just to catch you up if you have a life and haven't been following Trump central:
Then there's this with Trump's thuggish campaign manager who last week was accused of roughing up a Breitbart reporter in Florida:
Why int the hell is the campaign manager even interacting with protesters at all? Shouldn't this be left to the authorities?
As for the protesters blocking cars on the way to the Trump rally --- cry me a river.
.
by digby
Just to catch you up if you have a life and haven't been following Trump central:
"These are professional agitators, and I think that somebody should say that when a road is blocked going into the event so that people have to wait sometimes hours to get in, I think that's very fair and there should be blame there, too," he said on ABC's "This Week."
He added that protesters put up signs during his rallies that have "tremendous profanity."
"I mean the worst profanity, and you have television cameras all over the place and people see these signs," he said.
"I think maybe those people have some blame and should suffer some blame also."
At a rally in Arizona on Saturday, protesters parked their cars near the location to block traffic. Traffic was backed up for miles, CNN reported.
Trump called it "unfair" that "professional" and "sick" protesters could put their cars in the road and block thousands of people from coming to his speech. He said the rally was delayed for an hour because of the protesters.
"And nobody says anything about that," he said.
He also defended his rallies, saying he has huge numbers of people come out with few incidents. He added he does not condone violence.
"And we have very little violence — very, very little violence at the rallies," he said.
VIOLENCE at another Donald Trump rally, this time in Tucson, AZ. Man hits and kicks protester: pic.twitter.com/7FWuSeE0Jt— Frank Thorp V (@frankthorpNBC) March 19, 2016
Went to the Trump rally just to see how crazy it would be........this is insane pic.twitter.com/QFwSwmNoI0— Alex Satterly (@alex_satterly) March 19, 2016
Then there's this with Trump's thuggish campaign manager who last week was accused of roughing up a Breitbart reporter in Florida:
In a second incident, Trump campaign manager Corey Lewandowski appears to get into an altercation with another protestor. I want to be clear what we know in this caee and do not know. The video below was posted by CBS News reporter Jacqueline Alemany. She identifies the man with close cropped hair, to the protestors left, as Lewandowski. That appears correct to me but I can't independently confirm that. The man identified as Lewandowski appears to grab the protestors collar and yank him back.
Here is Donald Trump's campaign manager in the Tucson crowd grabbing the collar of a protester. pic.twitter.com/JZ9RntWlHY— Jacqueline Alemany (@JaxAlemany) March 19, 2016
Why int the hell is the campaign manager even interacting with protesters at all? Shouldn't this be left to the authorities?
As for the protesters blocking cars on the way to the Trump rally --- cry me a river.
.
Politics and Reality Radio by Joshua Holland w/ David K. Johnston, Julia Sweig, Martin Longman
Politics and Reality Radio: Trump's taxes, Cuba Libre and The Supremes
by Joshua Holland
Hello, Hullabaloo readers (Hullabalooers?), and a huge thanks to Digby for letting me park my show, Politics and Reality Radio, in her driveway. By way of introduction, I'm Joshua Holland, and I'm a contributor to The Nation. I also contribute occasionally to Salon and Raw Story, and I used write for AlterNet and Moyers and Company.
The show is pretty simple: Each week, we talk to progressive journalists, newsmakers and academics, and we take some time digging into the topics at hand rather than trying to boil down complex issues into a series of short sound-bytes. We also try to have some fun with it, because American politics can be depressing as Hell otherwise. (Digby's one of our favorite regular guests.) And it's 100% commercial free, so if I've got something totally wrong, it's not because of pressure from advertisers.
Link to this week's podcast
This week, we look at what might be lurking in the tax returns that Republican front-runner and slick con artist Donald Trump refuses to make public. If anyone's in a position to offer an informed theory, it's David Cay Johnston, who won a Pulitzer Prize working the tax beat for The New York Times. He's first up.
Then, as Obama embarks on a historic visit to Cuba, we're joined by UT Austin research fellow Julia Sweig, who just returned from Cuba to offer a perspective on what's going on down there now – and what the future may hold – that you won't often hear on the evening news.
Finally, we speak to Martin Longman, web editor for The Washington Monthly (you may be more familiar with him as the blogger known as Booman) about Obama's nomination of Merrick Garland to the Supreme Court. Some progressives aren't pleased with the pick, but Booman likes it.
And here are this week's musical breaks:
Vintage Jazz Cardigans with Haley Reinhart: "Lovefool"
AronChupa: "I'm an Albatraos"
Love: "Always See Your Face"
Gregory Isaacs: "Slave Master"
You can also subscribe to the show on Podbean or iTunes (but right now there's some sort of snag with iTunes that we're working to straighten out).
Hope you enjoy it:
by Joshua Holland
Hello, Hullabaloo readers (Hullabalooers?), and a huge thanks to Digby for letting me park my show, Politics and Reality Radio, in her driveway. By way of introduction, I'm Joshua Holland, and I'm a contributor to The Nation. I also contribute occasionally to Salon and Raw Story, and I used write for AlterNet and Moyers and Company.
The show is pretty simple: Each week, we talk to progressive journalists, newsmakers and academics, and we take some time digging into the topics at hand rather than trying to boil down complex issues into a series of short sound-bytes. We also try to have some fun with it, because American politics can be depressing as Hell otherwise. (Digby's one of our favorite regular guests.) And it's 100% commercial free, so if I've got something totally wrong, it's not because of pressure from advertisers.
Link to this week's podcast
This week, we look at what might be lurking in the tax returns that Republican front-runner and slick con artist Donald Trump refuses to make public. If anyone's in a position to offer an informed theory, it's David Cay Johnston, who won a Pulitzer Prize working the tax beat for The New York Times. He's first up.
Then, as Obama embarks on a historic visit to Cuba, we're joined by UT Austin research fellow Julia Sweig, who just returned from Cuba to offer a perspective on what's going on down there now – and what the future may hold – that you won't often hear on the evening news.
Finally, we speak to Martin Longman, web editor for The Washington Monthly (you may be more familiar with him as the blogger known as Booman) about Obama's nomination of Merrick Garland to the Supreme Court. Some progressives aren't pleased with the pick, but Booman likes it.
And here are this week's musical breaks:
Vintage Jazz Cardigans with Haley Reinhart: "Lovefool"
AronChupa: "I'm an Albatraos"
Love: "Always See Your Face"
Gregory Isaacs: "Slave Master"
You can also subscribe to the show on Podbean or iTunes (but right now there's some sort of snag with iTunes that we're working to straighten out).
Hope you enjoy it:
The riot planners
The riot planners
by digby
You may recall that Florida Governor Rick Scott was one of the sponsors of the Tea Party townhalls back in 2009:
We shouldn't be surprised to learn that he's endorsed Trump and he has no problem predicting riots if Trump is not allowed the nomination.
And he knows how to make it happen.
.
by digby
You may recall that Florida Governor Rick Scott was one of the sponsors of the Tea Party townhalls back in 2009:
Greg Sargent reports that Rick Scott, the disgraced hospital executive bankrolling the anti-health reform group Conservatives for Patients’ Rights, is now joining the effort to disrupt health care town halls. The for-profit health industry is contributing a great deal of resources to pressure lawmakers against reform. Last weekend, the health insurance lobby announced that they will be sending staff to “confront” lawmakers at town halls and will be transitioning to negative ads.
We shouldn't be surprised to learn that he's endorsed Trump and he has no problem predicting riots if Trump is not allowed the nomination.
FLorida Gov. Rick Scott suggested disgruntled Donald Trump supporters might be justified in rioting if the Republican Party chooses another presidential nominee — but he refused to say whether those upheavals would be violent.
The GOP presidential frontrunner said Wednesday that his supporters could take to the streets if he’s passed over as the nominee at the Republican National Convention in Cleveland.
“I think we will win before getting to the convention,” Trump told CNN. “But I can tell you, if we didn’t and if we’re 20 votes short or if we’re 100 short and we’re at 1,100 and somebody else is at 500 or 400 because we’re way ahead of everybody, I don’t think you can say that we don’t get it automatically, I think you would have riots. I think you would have riots.”
Scott, who has come out in support of Trump following his win Tuesday in Florida’s primary, appeared Thursday on “Fox and Friends” to discuss his endorsement and the possibility of mob violence.
“Clearly the voters are frustrated with party leaders, they don’t trust party leaders right now, so Trump is either going to end up with a majority or pretty close to it, so if we go to the convention and he doesn’t get the nomination, I think the voters are going to be pretty frustrated, and I think it will impact our ability to win in November,” Scott said.
And he knows how to make it happen.
.
Property in Australia by @BloggersRUs
Property in Australia
by Tom Sullivan
Photo by Guillaume Blanchard via Creative Commons.
Given the animus in Washington directed at the current Democratic president, my wish list for the 2016 Democratic candidate is pretty modest. There are gubernatorial and other state races that have much more local impact than who occupies 1600 Pennsylvania Avenue. So I want only two things: the next two Supreme Court picks and coattails. For the first, I need the Democratic candidate to win. For the second, I need the candidate to win big.
Norm Ornstein and Thomas Mann examine for Atlantic magazine how that might work out. The nominating conventions of both major parties will have a say in that. Ornstein and Mann observe that Cleveland has ordered riot gear for 2,000 in advance of the Republican convention in July:
We may shock you if we say that whatever the circumstances, if Trump does capture the Republican nomination and there is no significant third party or independent effort, he has a chance, however remote it looks now, to win. With America’s tribal politics, any nominee probably starts with a floor of 45 percent of the votes. What if there is serious economic turbulence or a Paris-style attack in the fall? Could enough voters in key states like Ohio and Michigan go to the strong man? It’s possible. And although a Trump presidency would be constrained by the elements of the American political system that have brought gridlock—separated powers, separate institutions, and centers of power—it would not be pretty.Several Republican groups are taking extreme measures (what else?) to see that that never happens. A delegate-by-delegate fight to keep Trump from securing enough delegates to win nomination on the first ballot is an option, but one at this point with little margin for error. Fielding an independent candidate is a last-ditch measure, but not out of the question. Weekly Standard editor Bill Kristol circulated a memo to allies on how that might play out. Others may embrace the hated Sen. Ted Cruz:
Trump’s monumental ego would be blown up even more by a presidential victory, and his modus operandi in business and the nominating process—telling his subordinates to act with no questions asked, using bluster and intimidation to force others to bend to his will—would be reinforced. He has already threatened House Speaker Paul Ryan with consequences if Ryan does not go along with his desires and priorities. And Ryan, Senate Leader McConnell, and other key Republicans and Democrats would not go along with most of them. Would Trump move unilaterally with executive actions, going far beyond any previous president? The prospect of American leadership in the world under a President Trump is downright frightening. What happens when Mexico and China tell him where to put his demands that they pay for a wall and alter their currencies and trading habits? What if Trump early on faces the kind of international challenge George W. Bush had when China shot down an American plane and refused to give it up? Would Trump react as Bush did, with restraint by using diplomatic means? Would Trump try to use the resources of the executive branch, including the Secret Service, the military, the IRS and intelligence agencies, to force members of Congress, the press and other countries to comply? Perhaps not. But there could quickly be a crisis in governance that has not been seen in generations.
About two dozen conservative leaders met Thursday at a private club in Washington, where some pushed for the group to come out for Mr. Cruz to rebut the perception that the stop-Trump campaign was an establishment plot. “If we leave here supporting Cruz, then we’re anti-establishment,” said one participant, who could be heard by a reporter outside.So far there is not an epidemic of flop sweat in Washington, but that may come even without Zika's help. Ornstein and Mann think the prospects for a Trump win is still slim, but not so slim that shopping for property in Australia is out of the question. Given that Trump seems to have no conception of how laws are made nor how political rather than commercial deals are made, it could be a long time before a President Trump "would or could recognize the reality of governing in a democracy."
But the group failed to agree on an endorsement, instead pleading for Mr. Kasich and Mr. Cruz to avoid competing in states where one of them is favored. “They’re going to have to come to terms and lay off each other,” said Erick Erickson, an influential conservative commentator, who convened the meeting.
"If Republicans in Congress can’t help themselves from giving a collective middle finger to the outgoing president," they ask, "how will they treat a new Democratic president?" Exactly why my wish list is so modest.
Thứ Bảy, 19 tháng 3, 2016
Synchronicity: Criterion reissues The Manchurian Candidate **** by Dennis Hartley
Saturday Night at the Movies
Synchronicity: Criterion reissues The Manchurian Candidate ****
By Dennis Hartley
Would I block you? I would spend every cent I own, and all I could borrow, to block you. There are people who think of Johnny as a clown and a buffoon, but I do not. I despise John Iselin and everything that Iselinism has come to stand for. I think, if John Iselin were a paid Soviet agent, he could not do more to harm this country than he's doing now.
-from The Manchurian Candidate (1962)
That’s Senator Thomas Jordan (John McGiver), in response to Mrs. Eleanor Shaw Iselin (Angela Lansbury), the wife and political handler of Senator John Yerkes Iselin (James Gragory), who has just asked him if he would have any objection if her McCarthy-esque husband’s name were to be “put forward” at an upcoming political convention. Thank god that’s from a movie, because, well…could you imagine what kind of chaos would ensue in this country if someone who is widely perceived as a “clown and buffoon” were somehow jockeyed into a position of high office…perhaps even the highest office? I mean, that’s purely something that could “only happen in the movies”, amirite? Anyone?
Here’s what I know. Donald Trump is a phony, a fraud. His promises are as worthless as a degree from Trump University. He’s playing the members of the American public for suckers. He gets a free ride to the White House and all we get is a lousy hat. His domestic policies would lead to recession. His foreign policies would make America and the world less safe. He has neither the temperament nor the judgment to be president and his personal qualities would mean that America would cease to be a shining city on a hill.
-from Mitt Romney’s recent speech regarding Donald Trump’s bid for the presidency
Who said that? Mitt Romney? Really? He denounced his own party’s steamrolling frontrunner in the race for the Republican presidential nominee? I suppose I see some parallels between Donald Trump and the fictional Senator Iselin, but let’s keep this in mind…director John Frankenheimer’s Cold War thriller was made 54 years ago. And the story itself is set in the early 1950s, at the height of the Red Scare. Those were different times! Back then, the political climate was informed by fear and paranoia. You actually had politicians publicly calling each other commies, fergawdsakes. What is that line in the film, where Senator Jordan is explaining to Senator Iselin’s stepson Raymond Shaw (Laurence Harvey) the chief reasons for the political enmity between himself and the insufferable tag team of Raymond’s Red-baiting stepfather and control freak mother…?
One of your mother’s more endearing traits is her tendency to refer to anyone who disagrees with her about anything as a communist.
Yes, that was it. See? That was then, but this is now. Donald Trump doesn’t go that far.
Republican presidential front-runner Donald Trump on Saturday blamed supporters of Democratic candidate Bernie Sanders for protests that shut down his Chicago rally, calling the U.S. senator from Vermont “our communist friend”.
Oh. But, in the film, it’s the candidate’s wife who is described as a Red-baiter, so let’s not get carried away. Because if that were the case, this would be getting pretty darn spooky.
[Bernie] Sanders is a communist. I was born in a communist country, so I know when I see them or hear them.
All right…now it’s getting pretty darn spooky.
Speaking of “spooky”, in January of 2011, in my armchair psychologist’s attempt to answer “Why?” regarding yet another mass shooting, I explored the pathology of the perversely “All-American” phenomenon known as the “lone gunman” via what morphed into a rather wordy genre study. In the piece, I posed some questions. What is the motivation? Madness? Political beef? A cry for attention? What is to blame? Society? Demagoguery? Legislative torpor? The internet? Then, prompted by last year’s horrible Charleston church shooting, I felt compelled to republish a revised version of that piece.
In the intro to that revised posting, I noted an unsettling similarity between something Republican presidential hopeful Donald Trump said in his official campaign kickoff speech to what the Charleston shooter had allegedly said to his victims just one day later:
“When Mexico sends its people (to America), they are not sending their best… (Mexican immigrants) are bringing drugs and they are bringing crime, and they’re rapists.”
-from Donald Trump’s speech announcing his presidential bid, June 16, 2015
“(African-Americans) rape our women and you’re taking over our country.”
-Charleston shooter’s statement to his victims before opening fire, June 17, 2015
Was it coincidence, or was it cause-and-effect? I drew no conclusions then, nor do I now. At any rate, my point is…one of the films I analyzed in the post was The Manchurian Candidate
, which is now available in a newly restored 4K Blu-ray edition from Criterion.
, which is now available in a newly restored 4K Blu-ray edition from Criterion.The story is set after the Korean War. Frank Sinatra stars as former POW Major Bennett Marco. Marco and his platoon were captured by the Soviets and transported to Manchuria for a period, then released. As a consequence, Marco suffers from (what we would now call) PTSD, in the form of recurring nightmares. Marco’s memories of the captivity are hazy; but he suspects his dreams hold the key. His suspicions are confirmed when he hears from several fellow POWs, who are share specific (and disturbing) details in their dreams involving the platoon’s sergeant, Raymond Shaw. As the mystery unfolds, a byzantine conspiracy is uncovered, involving brainwashing, subterfuge and assassination.
I’ve watched this film maybe 9 or 10 times over the years, and I must say that it’s held up remarkably well, despite a few dated trappings. It works on a number of levels; as a conspiracy thriller, political satire, and a perverse family melodrama. Interestingly, every time I see it, it strikes me more and more as a black comedy; which could be attributable to its prescient nature (perhaps the political reality has finally caught up with its more far-fetched elements…which now makes it a closer cousin to Dr. Strangelove and Network).
Indeed, I found myself laughing out loud at lines like “Yak dung…tastes good, like a cigarette should!” and “…having been relieved of those uniquely American symptoms of guilt and fear, he cannot possibly give himself away” (both delivered by droll scene-stealer Khigh Dhiegh, as the Manchurian brainwashing expert). Sinatra is given one of the most quotable lines: “Mr. Secretary-I’m kinda new at this job, but I don’t think it’s good public relations to talk that way to a United States senator…even if he is an idiot.” The intelligent screenplay was adapted from Richard Condon’s novel by George Axelrod.
Good performances abound, but Lansbury is the standout, with a magnificent turn as one of cinema’s greatest heavies. Harvey is heartbreaking as the tortured Raymond. Sinatra is, well, Sinatra (i.e. uneven). It’s been well-documented that he was never a fan of doing multiple takes; frankly it shows and works against him here, particularly whenever he lapses into that Rat Pack patois (he recounts a dream as “one swinger of a nightmare”). It’s not enough to sink the film, but those moments do take Sinatra out of his character.
As usual, Criterion packs in some worthwhile extras. They port over the 1997 commentary track by the director that was done for the original MGM DVD release, as well as an 8-minute roundtable between Frankenheimer, screenwriter Axelrod and Sinatra that was recorded in 1987. New supplements exclusive to this edition include a recent 11-minute interview with Lansbury (engaging as ever at 89), a 21-minute interview with historian Susan Carruthers, and an enlightening 16-minute appreciation by documentary filmmaker Errol Morris, who gleans a few subtexts I’ve never picked up on. That’s one mark of a truly great film-the more times you “watch” it, the more you’ll see.
More reviews at Den of Cinema
--Dennis Hartley
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