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Apps for WordPress.com

Android, Apps, Blackberry, IOS, IPad, IPhone, Mobile, Mobile App, TweetDeck

Blogging at WordPress.com is great, and these applications make it even better by giving you more ways to post and follow your favorite blogs. Whether you’re blogging from your desktop, browser or on the go, make sure to check out these other ways to manage your WordPress.com blog.

Mobile Apps

WordPress for iOS

ios-readerWordPress for iOS lets you follow your favorite blogs, receive notications, view stats, write posts, upload photos, and manage comments on your blog from your iOS device. With support for both WordPress.com and self-hosted WordPress, users of all experience levels can get going in seconds.

WordPress for Android

wp-android-drawerFollow your favorite blogs and write new posts for your WordPress.com or self-hosted WordPress.org blog. Edit content, view stats, and manage comments with built-in…

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Apps for WordPress.com

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Blogging at WordPress.com is great, and these applications make it even better by giving you more ways to post and follow your favorite blogs. Whether you’re blogging from your desktop, browser or on the go, make sure to check out these other ways to manage your WordPress.com blog.

Mobile Apps

WordPress for iOS

ios-readerWordPress for iOS lets you follow your favorite blogs, receive notications, view stats, write posts, upload photos, and manage comments on your blog from your iOS device. With support for both WordPress.com and self-hosted WordPress, users of all experience levels can get going in seconds.

WordPress for Android

wp-android-drawerFollow your favorite blogs and write new posts for your WordPress.com or self-hosted WordPress.org blog. Edit content, view stats, and manage comments with built-in notifications, all on your Android device.

Browser Extensions

Chrome Extension

Install this extension to instantly view your WordPress.com notifications, follow sites, and start new blog posts quickly and easily from your browser toolbar.

Firefox Extension

The Firefox extension allows you to instantly view your WordPress.com notifications, follow sites, and start new blog posts quickly and easily from your browser toolbar.

Desktop Apps

BloGTK

BloGTK is a weblog client that allows you to post to your weblog from GNOME without the need for a separate browser window. BloGTK allows you to connect with many weblog systems, including WordPress.com.

MarsEdit

Write, preview, and publish without a web browser. MarsEdit uses the power of your Mac to provide an amazing blog editing experience. MarsEdit is a desktop blog editor, so you can write a blog without giving up the comforts of your Mac.

Press This

Press This is a bookmarklet, which is a neat word for a little app that runs in your browser and lets you grab text, images and videos from the web and post them to your WordPress.com blog. Use Press This to grab bits of the web from any page and add them to your blog!

ScribeFire

ScribeFire is a full-featured blog editor that integrates with the Firefox web browser and lets you easily post to your blog. You can drag and drop formatted text from pages you are browsing, take notes, upload images, and post to multiple blogs.

Shareaholic

Shareaholic is the easy way to share, spread, and post interesting web pages via your blogs, social networks, email, IM, and more, right from your web browser. Works with all WordPress.com and WordPress.org blogs.

Windows Live Writer

Blog your heart out: Writer makes it easy to share your photos and videos on almost any blog service, including WordPress.com.

Blogo

Blogo is a Mac desktop app that lets you publish directly to your WordPress.com blog or self-hosted site.

Microblogging Apps

HootSuite

HootSuite is the professional microblogging client. With HootSuite, you can manage multiple social network accounts in one easy to use interface, schedule updates, and measure your success.

Spaz

Spaz is an open source, cross-platform app for Twitter, Identi.ca and Laconica. With built-in global search, short URL creation, and support themes, Spaz also works for posting and reading WordPress.com blogs.

TweetDeck

TweetDeck is your personal real-time browser, connecting you with your contacts across WordPress.com, Twitter, Facebook, MySpace, LinkedIn, Foursquare, Google Buzz and more. TweetDeck also lets you post to and read WordPress.com blogs.

Twitterrific

Twitterrific is a fun application that lets you both read and publish posts or “tweets” to the Twitter community website. The application’s user interface is clean, concise and designed to take up a minimum of real estate. With Twitterrific you can enter a WordPress.com account to post updates and read blogs you’re following.

Last modified: November 14, 2014

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Margaret Atwood And Tax Reform

Writing recently in The Financial Times, the renowned novelist Margaret Atwood nailed the lasting effects of the recent – and some would say continuing – global financial crisis. “Those at the top were irresponsible and greedy,” she wrote; consequently and with good reason, very few people now trust our banking elite or the system they operate.  Even Cam Fine, president of Independent Community Bankers of America, is now calling for the country’s largest banks to be broken up.

But the distrust goes deeper and further, just as Ms. Atwood implies. Many people understand perfectly well that the government let the bankers take excessive risk. There was a high degree of group think among prominent officials in the United States and top banking executives in the run-up to the crisis of 2008. As chief economist at the International Monetary Fund from March 2007 through August 2008, I observed some of this first hand.

And politicians are also tarnished. They appointed the officials who failed to regulate effectively. And in 2007-8 the politicians decided to save the big banks – and most of their managers, boards of directors and shareholders – both under President George W. Bush and under President Obama. Now attention turns toward the federal government’s fiscal problems, including the complicated mess that is our tax system. Politicians say they want “tax reform,” but can you trust them to do this in a responsible manner, without falling captive to particular special interests or to otherwise undermine the general social interest? Continue reading

Mitt Romney Still Can’t Do Arithmetic

By James Kwak

From his closed-door fundraiser yesterday, courtesy of NBC:

“I’m going to probably eliminate for high income people the second home mortgage deduction,” Romney said, adding that he would also likely eliminate deductions for state income and property taxes as well.

“By virtue of doing that, we’ll get the same tax revenue, but we’ll have lower rates,” Romney explained.

Let’s check Romney’s arithmetic.

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The Buffett Rule Is A Good Idea

By Simon Johnson

Some high income Americans pay a lot of tax; others do not.  If you have right tax advice and if most of your income can be structured as some form of “capital gains”, your marginal rate – what you pay on the your last dollar of income – may be very low.  The highest marginal income tax rate currently is 35 percent, while long-term (over a year) capital gains are taxed at 15 percent at most.

The Buffett Rule is a proposal is establish a minimum tax rate for “millionaires” – people earning more than $1 million per year – and the Senate is likely to vote on a version this week.  The exact amount of revenue that this would bring in depends on the details, but there is no question that it is small relative to the country’s need to control the federal budget.  (The Joint Committee on Taxation scored one version of this proposal as generating about $30 billion over ten years; the annual budget deficit will remain over $1 trillion in the near term even under the most optimistic projections.)

The biggest sticking point for any reasonable strategy to control the US federal budget is that one side – the Republicans – steadfastly refuse to raise taxes, at all and on anyone. Continue reading

Jim Yong Kim For The World Bank

By Simon Johnson, co-author of White House Burning

A decision on choosing the next president of the World Bank is expected this week – perhaps as early as Monday.  The Obama administration nominated Jim Yong Kim, president of Dartmouth College and a noted public health expert.  The reaction to this nomination from development economists and people experienced in the business of lending to poor countries has been overwhelmingly negative.

They are making a big mistake.  Mr. Kim would make an excellent World Bank president. Continue reading

The Conventional Wisdom of Tax Reform

By James Kwak

In the Times this weekend, David Leonhardt has a generally good overview of the tax policy showdown that is scheduled for later this year, as the Bush tax cuts approach expiration on January 1. He outlines several of the central issues we face: “hypothetical solutions are a lot more popular than actual ones”; everyone says she wants tax reform, but the tax expenditures that would have to be eliminated are very popular; and any significant deficit solution will directly affect vast numbers of Americans.

I have a few differences with Leonhardt, however. First, after his colleagues David Brooks and James Stewart, he seems to have fallen briefly under the spell of Paul Ryan: “Mr. Ryan’s plan would cut the top rate to 25 percent, from 35 percent, and still leave overall tax collection roughly where it has been, by eliminating tax breaks.”

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How The Banks Stole Medicare

By Simon Johnson

The world’s largest banks have been accused of many things in recent years, including taking excessive risk in the run-up to 2008, doing great damage to the American economy by blowing themselves up and then working hard to resist any sensible notions of financial reform.

All of this is true, but it misses what is likely to be the most profound negative impact of the banks’ behavior on most Americans. The banks’ actions led directly to an increase in government debt, which in turn has made the reduction of that debt by “cutting runaway spending” a centerpiece of the Republican presidential campaign to date.

As a result of this pressure, Medicare now stands on the brink of being eliminated as a viable form of social insurance. Yet the executives who lead these banks – and the politicians with whom they work closely – will not be held accountable this election season. Continue reading

The Incredible, Magically Metamorphosing Taxpayer-Subsidized Executive Perk

By James Kwak

Once upon a time, the story goes, corporate America was fat and happy. Top executives worked in palatial office suites bedecked with flowers, flew everywhere in private jets, and ate every meal at the Four Seasons or Le Bernardin.

Then there was the shareholder value revolution. Michael Jensen and the rest of the Chicago School efficient-market legions showed that shareholder value was the only thing that mattered and stock prices were the only measure of shareholder value. Activist investors demanded an end to executive perks and ushered in the era of pay for performance, in which executives are paid in stock options, so they only make (a lot of) money if shareholders make money. Congress event went along by capping the tax-deductible amount of executives’ base pay, which helped along the shift to stock-based compensation.

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Public Service: Why Nations Fail Crib Notes

By James Kwak

I’m reviewing Why Nations Fail for a print publication, so I’m out of basic courtesy I’m not going to preempt my review here. But if you’re like me and not an expert in the history of every part of the world, sometime around page 250 you probably got confused about where Acemoglu and Robinson discussed the Kingdom of Aksum as opposed to early modern Ethiopia or the Kuba Kingdom as opposed to the Kingdom of Kongo. After a while I created my own crib sheet, which I reproduce here for those who may find it helpful.

1. So Close and Yet So Different: Spanish Conquest, Jamestown, Mexico (19th century)

2. Theories That Don’t Work

3. The Making of Prosperity and Poverty: Korea, Kingdom of Kongo

4. Small Differences and Critical Junctures: The Weight of History: Black Death (14th century), early modern Western Europe

5. “I’ve Seen the Future and It Works”: Growth Under Extractive Institutions: USSR, Kuba Kingdom, Neolithic Revolution, Mayas

6. Drifting Apart: Venice, ancient Rome, Kingdom of Aksum (Ethiopia)

7. The Turning Point: England (17th-18th centuries)

8. Not on Our Turf: Barriers to Development: Spain, Austria-Hungary and Russia, China, Ethiopia, Somalia

9. Reversing Development: Dutch East Indies, Central Africa

10. The Diffusion of Prosperity: Australia, French Revolution, Japan

11. The Virtuous Circle: Great Britain, United States (Progressive movement and 1930s), Argentina

12. The Vicious Circle: Sierra Leone, Guatemala, American South, Ethiopia

13. Why Nations Fail Today: Zimbabwe, Sierra Leone, Clombia, Argentina, North Korea, Uzbekistan, Egypt

14. Breaking the Mold: Botswana, American South, China

15. Understanding Prosperity and Poverty: China, Brazil

White House Burning Open Thread

By James Kwak

Now that the book has been available for a week, I imagine at least two or three people have started reading it. This post is for people to discuss the book if they are so inclined.

If you want to hear Simon discussing the book, the book website has a page of links to past media appearances. Several are the five-minute cable news variety, but for in-depth interviews there are Fresh Air and Leonard Lopate, among others.

This Must Be a Joke

By James Kwak

From the Times article on President Obama’s signing of the JOBS Act (emphasis added):

While soliciting investment funds online has triggered fears of fraudulent schemes, the law’s backers said the greater availability of information through social media sites like Facebook would allow would-be investors to conduct their own background checks, making it difficult for such schemes to succeed.

“While it seems reasonable to worry about these issues, there is just so much more information these days,” said Timothy Rowe, the chief executive of the Cambridge Innovation Center, which provides office space for start-up firms next to the campus of the Massachusetts Institute of Technology.

The thing speaks for itself.

(True, the phrase “social media sites like Facebook” is paraphrase from the reporter, not a direct quotation, but I have no reason to believe it isn’t an accurate representation of what the act’s backers said.)

Someone Is Wrong In The Times*

By James Kwak

James Stewart has doubled down on his infatuation with Paul Ryan. Ryan’s budget, he says, is a viable centrist starting point for budget negotiations, and attacks from “left and right” are mere “partisan rhetoric.”

This is several different kinds of crazy. First, Stewart repeats his belief that Ryan’s plan would increase taxes on investment income. But that belief has no basis other than Stewart’s own belief that it would be a good idea. As I pointed out before, Ryan’s own budget argues against raising taxes on capital gains and dividends. The only thing Stewart can find is Ryan’s apple-pie platitudes about the need for tax reform. But Ryan’s own vision of tax reform, as evidenced by his budget’s own words, doesn’t include higher capital gains taxes. (In addition, as a signatory to the Taxpayer Protection Pledge, Ryan is sworn to “oppose any and all efforts to increase the marginal income tax rate for individuals and business.” That sounds to me like it includes the capital gains tax rate, which is a marginal income rate.) This is further evidence of columnists’ ability to project their own fantasies onto Paul Ryan’s handsome face.

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The Impossibility of Defense Cuts

By James Kwak

Apparently the thing we need to keep ourselves safe is a fast, lightweight ship that can sweep mines, launch helicopters, fight submarines, and perform other assorted duties—but can’t withstand heavy combat. I don’t claim to know if we really need the Littoral Combat Ship to ensure our national security. According to an article in the Times, John McCain—the Republican Party’s last presidential nominees and one of the Navy’s more famous veterans—is critical, although other Republicans and the administration are in favor of it.

I do know that the Littoral Combat Ship is a classic example of why it’s so hard to reduce budget deficits. You have local politicians who want the jobs. You have a large group of representatives who are reflexively pro-military and will vote for anything the Pentagon wants, and even things the Pentagon doesn’t want. (You have Mitt Romney, who bemoans the fact that the Navy has only 285 ships, the fewest since 1917. Would he rather have the Royal Navy of 1812, which had 1,000 ships, or our navy, with eleven aircraft carrier groups—while no other country has more than one?) You have a procurement and development process that stretches on for years so that even when a weapons system turns out to be a dud, it has to be kept alive because it’s too big to fail—there is no other alternative. Both the Center for American Progress and the Project on Governmental Oversight have recommended cutbacks in the Littoral program. Yet there is no practical way to check its momentum.

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Something for Nothing?

By James Kwak

The so-called JOBS act is a victory of faith over basic logic. The motivating idea seems to be that if we reduce the regulations that govern the process of raising capital, small companies will find it easier to raise money, and that money will translate into jobs. Many people have pointed out some of the problems with the bill: recently, for example, Andrew Ross Sorkin highlighted the potential for companies to take advantage of investors, and Steven Davidoff pointed out that regulation is probably not the reason for the decline in the number of small company IPOs.

There are a couple of more fundamental misunderstanding I want to focus on, however. First, it’s not clear that relaxing regulations will actually make it cheaper for companies to raise money. Sure, eliminating the independent audit requirement will save companies a few bucks. But what really affects the cost of capital is not out-of-pocket fees but the price that investors are willing to pay for equity. The less confidence that investors have in a company’s prospects, the cheaper that company will have to sell its stock. If small companies are allowed to provide less information to investors, that could simply make it more expensive for them to raise money.

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Magical Investment Thinking

By James Kwak

From a Times article on pension fund investing:

Mr. Dear cautioned that there were big differences in how various alternative investments performed during the financial crisis.

He said that Calpers’s investments in real estate had been “a disaster” and that its hedge fund investments had not met their benchmarks and were under review. But he said that its private equity holdings had easily beaten public stock returns over the last decade.

“Over the longer term, that kind of outperformance represents real skill, not luck, and it’s worth paying for,” he said.

Holy confirmation bias, Batman! When one asset class beats the stock market that’s skill. But when your other asset classes do badly—that’s random variation? If high returns on private equity are evidence that you should continue investing in private equity, then low returns in hedge funds and real estate are evidence that you should pull your money out of them.

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Volcker Rule Would Cause Irreparable Damage To The Muppets – And Much More Broadly

By Simon Johnson, April 1st, 2012

A major new research report – released this weekend by the renowned international consulting firm, IMS – finds conclusively that implementation of the proposed Volcker Rule would damage not just the irreplaceable Muppets but also “all children-oriented television or other media-based educational program content.”

The logic in the report is straightforward and, quite frankly, compelling.  The Volcker Rule – which aims to limit proprietary trading and excessive risk-taking by the country’s largest banks – would reduce the ability of “too big to fail” institutions to bet heavily on the price of commodities used to produce puppets (mostly cotton, but also apparently wood, aluminum, and some rare earths.)

“In response to the changing demands of their customers, banks have expanded their role of providing financial resources and services to include risk management and intermediation services to [various kinds of puppets]” (p. ES2)

These services are highly profitable and of great value to the skilled artisans who produce puppets, but if the very biggest banks are not allowed to engage in these activities, then no one else will. Continue reading

What’s Liberty Got To Do With It?

By James Kwak

Constitutional law is not my field. I think we spent one day on the Commerce Clause in my constitutional law class. I’ve barely been following the Supreme Court oral arguments this week because I figured (a) they would be silly, (b) we won’t know anything useful until June, and (c) with the rest of the commentariat focusing on it I would have nothing to add. But even at that distance, I can’t help but be shocked by the ludicrous nature of the proceedings, best represented by the framing of the case in terms of individual freedom and government coercion. According to the Times, the case may turn on Anthony Kennedy’s notion of liberty.

What’s wrong with this? Liberty should have nothing to do with this case. I’ll repeat the analysis, made my dozens of law professors more expert than I (Charles Fried, for example). The question is whether Congress has the power to impose the individual mandate under the Commerce Clause, which gives it the power to regulate interstate commerce. If the individual mandate does in fact regulate interstate commerce, then it’s fine unless it violates some other part of the Constitution.

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Is the GOP Still the Party of Business?

By James Kwak

Jonathan Weisman of the Times wrote an article about the reluctance of many Republicans in Congress to extend policies that are traditionally favored by big business (and the Chamber of Commerce), such as infrastructure spending and funding for the Export-Import Bank. This points to a split between the traditional corporate wing of the GOP and the newer, ultra-conservative tax revolt wing.

My guess is that this will blow over and the Republicans will figure out a way to keep big business happy without upsetting the Tea Party too much. But it points out a potential shift among the people who fund the GOP.

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Insurance or Redistribution?

By James Kwak

Mark Thoma makes an important point about the “individual mandate” that applies equally well to health care and to Social Security:

“I don’t see anything wrong with asking people to pay the expected value of their health care — a mandate to get insurance to cover the catastrophic things that society would cover in any case — to avoid this type of gaming of the system. Yes, it’s true that many healthy people will pay, remain healthy, and seem to get nothing. But that’s the wrong way to look at it. They have insurance whether they pay for it or not. Society will not let them die of a standard, treatable illness so insurance services are present. In fact, it’s the knowledge that society is providing these services that motivates many people to take a chance and go without.”

This is the relatively common argument that, since people already have guaranteed access to a basic level of emergency care, they should have to pay for it.

There’s a slightly different point in there that I emphasized above and that I want to focus on. Health insurance, like any kind of insurance, can be framed after the fact as redistribution. You pay health insurance premiums, you stay healthy, and therefore you “lose”—your money goes to pay for other people’s losses. But this is true of any kind of insurance. It’s equally true of homeowner’s insurance: if your house doesn’t burn down, you are the victim of redistribution from you to the people whose houses do burn down.

The other way to think of insurance is, well, as insurance. We want and value insurance in the current period, before we know if we’ll be “winners” or “losers” in the future period. The insurance itself has value to us. In fact, whenever you buy insurance, you are hoping that you will end up as a loser.

The framing of the health care individual mandate as a transfer from the healthy to the sick is the exact same as the framing of tax-funded social insurance programs as a transfer from the rich to the poor. At the time you enter the system, you probably don’t know which category you will fall into. You might have some knowledge of the probabilities, but you could turn out to be very wrong: there are plenty of people who are healthy in their twenties but get very sick later. In either case, the framing as redistribution and the focus on winners and losers is a way of making something that all people value—protection from risk, backed by the federal government’s balance sheet—seem like a from of zero-sum redistribution brokered by that evil, meddling federal government.

New “Debt for Beginners” Section

By James Kwak

I created a new “Debt for Beginners” page on the White House Burning website. It’s a collection of previous articles, mainly written for a general audience, on deficits, the national debt, government spending, taxes, and the politics thereof. It’s intended as a starting point for people who want to get up to speed on these issues.

Loyal readers are probably familiar with all the material already.

Why White House Burning Is Wrong, Liberal Edition

By James Kwak

Dean Baker, a leading economic commentator and author of the Beat the Pressblog, has written a review of White House Burning for the Huffington Post. Baker manages the admirable feat of being gracious and complimentary while delivering several serious criticisms of the book.

I’ll skip over the nice things he said and get to Baker’s main objections, of which I think there are three. The first is that long-term fiscal sustainability is the wrong problem to be focused on:

 “While the solutions do not especially upset me, I do very much disagree with the diagnosis of the problem. The most immediate issue is that we have a fire at the moment in the form of too little demand leading to too much unemployment. This is wrecking the lives of millions of workers and their families.

“Johnson and Kwak understand this and certainly do not argue for deficit reduction in the short-term, but their focus on a longer-term deficit problem can be distracting from the more urgent problem.”

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Why Do New York Times Columnists Keep Swooning for Paul Ryan?

By James Kwak

After David Brooks last year, now it’s James Stewart who has fallen for Paul Ryan’s rugged good looks. He attempts to defend Ryan’s tax proposals against charges that they favor the rich:

“To me it sounds like a proposal to raise [the wealthy’s] taxes by depriving them of cherished ‘loopholes,’ to use the proposal’s word. . . .

“There’s no getting around the fact that a 25 percent rate on the top earners would nearly double Mr. Romney’s effective rate and more than double it for the 101 of the top 400 taxpayers who pay less than 10 percent, assuming the loopholes are indeed closed.”

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Last Ditch Attempt To Save A Little Bit Of Investor Protection In The United States

By Simon Johnson

As it currently stands, the “JOBS” bill now before the Senate would gut investor protection in the United States.  The title of the bill is a complete misnomer – anything that weakens investor protection makes it more risky to invest in companies and increases the cost of capital to honest entrepreneurs.  (For more background on the bill and links, see this piece.)

Much of the 1930s-era Securities legislation, which served us well for more than 70 years, is about to be repealed in a moment of bipartisan madness.

Almost all attempts to amend the House version of this legislation – and to make it more favorable to investors – have now failed in the Senate, and the “cloture motion” received more than 60 votes (so the bill cannot be filibustered).  But Senator Jack Reed (D., Rhode Island) is leading one last charge to make the Senate version more reasonable. Continue reading

“JOBS” Disaster Looms

By Simon Johnson

The House “JOBS” bill is a thinly disguised repeal of investor protection in the United States.  This legislation would help unscrupulous people in the securities industry but it would be bad for nonfinancial businesses – by raising the risks to investors, it would push up the cost of capital for honest entrepreneurs.   Investment professionals belonging to the CFA Institute have expressed their serious concerns and strong opposition.  Attempts to amend this legislation – and to make it more sensible – failed in the Senate yesterday.

The Senate will vote today on whether to adopt the main provisions of the House bill.   Passing this bill would be a major public policy mistake – akin to the disastrous (and bipartisan) deregulation of the financial sector in the 1990s.  This kind of excessive deregulation leads to disaster – and to fiscal crisis.  (For more background and the historical comparison, see this piece.) Continue reading

CFA Institute Against the “JOBS” bill

By Simon Johnson

The Senate is due to vote today on the so-called “JOBS” bill – a piece of legislation, originating in the House, which aims to reduce disclosure and other securities law protections for investors (see my review yesterday; a link to HR3606 is here).

Supporters of the law claim that it will greatly increase the number of companies going public – and that this will boost economic growth and job creation.  Opponents argue that by weakening investor protection, the risks of investing in start-up companies will increase – there will be more frauds and scams – and this will increase the cost of capital for honest entrepreneurs.

Members of the CFA Institute have an interest in getting this right – this is the “global association of investment professionals” and they make their living by figuring out what is a good investment and what is likely to become a losing proposition.  These people also have a lot of expertise on the key issue – which is better for business, weakening investor protections or keeping them in place?  Which way are these experts voting?

Overwhelmingly, members of the CFA Institute are against the “JOBs” bill as it currently stands. Continue reading

How Long Can We Finance the Debt?

By James Kwak

Everyone should know by now that the Treasury Department can borrow money at historically low rates. That is a major reason why some very smart economists think that the federal government should borrow more money in the short term (i.e., this year and next) and use that money to boost economic growth.

In the medium term (say, the next decade), however, the big question is how long we will be able to finance new government borrowing at such low rates. Today’s low rates are a product of several factors. One is certainly the slow rate of economic growth, in particular the depressed housing market, which has reduced demand for credit. But another factor is the Federal Reserve’s aggressive moves to keep long-term interest rates down; another is foreign central banks’ appetite for Treasuries.

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A Colossal Mistake of Historic Proportions: The “JOBS” bill

By Simon Johnson, co-author of White House Burning: The Founding Fathers, Our National Debt, And Why It Matters To You

From the 1970s until recently, Congress allowed and encouraged a great deal of financial market deregulation – allowing big banks to become larger, to expand their scope, and to take on more risks.  This legislative agenda was largely bipartisan, up to and including the effective repeal of the Glass-Steagall Act at the end of the 1990s.  After due legislative consideration, the way was cleared for megabanks to combine commercial and investment banking on a complex global scale.  The scene was set for the 2008 financial crisis – and the awful recession from which we are only now beginning to emerge.

With the so-called JOBS bill, on which the Senate is due to vote Tuesday, Congress is about to make the same kind of mistake again – this time abandoning much of the 1930s-era securities legislation that both served investors well and helped make the US one of the best places in the world to raise capital.  We find ourselves again on a bipartisan route to disaster. Continue reading

The Fetishization of Balance

By James Kwak

I generally don’t bother reading Thomas Friedman. A good friend gave me a copy of The World Is Flat, and I started reading it. Somewhere in the first one hundred pages Friedman has an extended discussion of workflow software (as a key enabler of globalization) and I realized that he knew absolutely nothing about workflow software, so I stopped reading it and gave it away.

Another friend pointed out Friedman’s op-ed in the Times earlier this week in which he argues for “grand bargains” and “balanced” solutions to, well, all of our problems. For example, he says, “We need a proper balance between government spending on nursing homes and nursery schools — on the last six months of life and the first six months of life.” Despite the nice ring, that’s about as empty a statement as you can make about public policy.

But this is the one that really confused me (and my friend):

“The first is a grand bargain to fix our long-term structural deficit by phasing in $1 in tax increases, via tax reform, for every $3 to $4 in cuts to entitlements and defense over the next decade.”

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Making Banks Small Enough And Simple Enough To Fail

By Simon Johnson

Almost exactly two years ago, at the height of the Senate debate on financial reform, a serious attempt was made to impose a binding size constraint on our largest banks. That effort – sometimes referred to as the Brown-Kaufman amendment – received the support of 33 senators and failed on the floor of the Senate. (Here is some of my Economix coverage from the time.)

On Wednesday, Senator Sherrod Brown, Democrat of Ohio, introduced the Safe, Accountable, Fair and Efficient Banking Act, or SAFE, which would force the largest four banks in the country to shrink. (Details of this proposal, similar in name to the original Brown-Kaufman plan, are in this briefing memo for a Senate banking subcommittee hearing on Wednesday, available through Politico; see also these press…

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Jamie Dimon And The Fall Of Nations

By Simon Johnson

Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” by Daron Acemoglu and James Robinson, is a brilliant and sometimes breathtaking survey of country-level governance over history and around the world. Professors Acemoglu and Robinson discern a simple pattern – when elites are held in check, typically by effective legal mechanisms, everyone else in society does much better and sustained economic growth becomes possible. But powerful people – kings, barons, industrialists, bankers – work long and hard to relax the constraints on their actions. And when they succeed, the effects are not just redistribution toward themselves but also an undermining of economic growth and often a tearing at the fabric of society. (I’ve worked with the authors on related issues, but I was not involved in writing…

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The “Me, Too” Party

By James Kwak

In the current issue of Democracy, Elbert Ventura discusses the history of a problem that I’ve brought up as well: the transformation of the Democratic Party into the party of tax cuts. Except, that with the Republican Party as the real party of Texas-sized tax cuts, the Democrats can never be more than the kid brother, half-hearted, talking-out-of-both-sides-of-its-mouth party of tax cuts.

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Things That Don’t Make Sense

By James Kwak

From Sebastian Mallaby’s review of Robert Shiller’s new book:

Psychologists have established that the key to happiness lies not in riches but in social esteem; therefore, Shiller says, financiers face powerful emotional incentives to balance profit seeking with a social conscience. “The futility of conquest in business mirrors the futility of conquest in war,” he writes. Just as it is impossible to extract much wealth from conquered countries, so it is impossible to extract much happiness from wealth earned unscrupulously.

Does anyone actually think that Wall Street traders and Greenwich fund managers, in general, temper their profit seeking because they want to be seen as doing good for society?

(Besides, the first clause above is simply wrong as a matter of fact: psychologists have established that happiness is a complicated thing, and…

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Introducing The Latin Euro

By Peter Boone and Simon Johnson

The verdict is now in:  traditional German values lost and the Latin perspective won.  Germany fought hard over many years to include “no bailout” clauses in the Maastricht Treaty (the founding document of the euro currency area), and to limit the rights of the European Central Bank (ECB) to lend directly to national governments.  Last week, the ECB governing council – over German objections – authorized purchasing unlimited quantities of short-term national debts and effectively erased any traditional Germanic restrictions on its operations.  (The finding this week by the German Constitutional Court — that intra-European financial rescue funds are consistent with German law — is just icing on this cake, as far as those who support bailouts are concerned.)

With this critical defeat at the ECB, Germany is forced…

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Too Big To Fail Remains Very Real

By Simon Johnson

Prominent voices within the financial sector are increasingly insisting on one point: We have ended “too big to fail.” The idea is simple: through a combination of legislation (the Dodd-Frank legislation of 2010) and supportive regulation (particularly regarding how big banks would be handled in the event of “liquidation”), very large financial institutions are no longer perceived by investors to be too big to fail.

Unfortunately, while tempting, this idea is completely at odds with the facts. The market perception that some financial institutions are “too big to fail” is alive and well. If you want to remove that perception, you need to break up our biggest banks.

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