Links 11/20/10

U.S. scanners present skin cancer risk: MDs AFP (hat tip reader May S). I must note this piece cites only one MD, but the flip side is that pilots, who will be screened far more frequently than most passengers, are not happy about the radiation risk posed by the scanners.

Duke cancer researcher quits as papers questioned Associated Press. Reader John M adds, “This doesn’t happen to economists, but it still happens to scientists.”

China’s New Drones Raise Eyebrows Wall Street Journal (hat tip reader Skippy)

House Republicans plan to end ‘birthright citizenship’ Raw Story

Sheriff Who Refused To Evict Foreclosed Homeowners Forced To Resume Huffington Post

A Day After Schooling Banksters, “New Documents” Comes to Light in Waters Ethics Case Dave Dayen, FireDogLake

Foley, Sidrauski, and the Microfoundations Project Rajiv Sethi

Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo approach Gauti B. Eggertsson and Paul Krugman

Key finding:

Our model suggests, however, that when the economy is faced by a large deleveraging shock, increased price flexibility – which we can represent as a steeper aggregate supply curve – actually makes things worse, not better.

tax cuts and deficit commissions Linda Beale

The US Federal Reserve is on the brink of insolvency (not!) Bill Mitchell

Some thoughts on the muni market Bond Girl (hat tip Calculated Risk)

Unions Yield on Two-Tier Wage Scales to Preserve Jobs New York Times

Who Gains From The Eurozone Fiasco? China Simon Johnson

Rep. Brad Miller: “Protecting bank solvency has been a goal of Treasury that I do not share” Dave Dayen, FireDogLake

Antidote du jour:

Picture 53

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  1. attempter

    A few weeks ago a fox which looked just like that one trotted by while I was working at a picnic table. I don’t think he even noticed I was there.

    Billy Blog shreds the corporate academics:

    Apparently, as growth resumes and demand for credit rises the banks will “disgorge their roughly $1 trillion in excess reserves”. To “educate” (read: totally confuse) their readers they offer this gem of nonsense:

    Think of the excess reserves as under-utilized lending capacity. Banks might respond quickly to global lending opportunities, and their response could be rapid and highly correlated. The money multiplier, which has fallen to historic lows during the crisis, could snap back like a rubber band, implying hundreds of billions, or even trillions, in credit expansion, unless the Fed responded by dramatically contracting its balance sheet.

    My first response was the “English colloquialism” – Please? (that is, spare me from this nonsense).

    We see the basic scam here:

    1. Take it as given that money creation and lending has to be laundered through banks, so that the audience will continue to assimilate this lie.

    But the truth is that the government can create money directly at will.

    2. Propagate the lie that the banks want to resume productive lending to the real economy, but “can’t” for some unfathomable reason.

    But the truth is that the one and only reason the banks and corporations are hoarding instead of lending and spending is because they don’t want to restitute that money to the real economy. They stole it, and if possible they want to keep every cent they stole.

    3. This is meant to reinforce the original Bailout Lie, that the Bailout was intended to help the real economy, but for some unfathomable reason could only be laundered through the banks, who would resume lending once bailed out.

    But the truth is that the Bailout was never anything but a massive class war assault, a massive wealth redistribution from the real economy to the FIRE sector (Obama’s, the Dems’, and soon the Reps’ health racket bailout and mandate should be considered part of this), from the non-rich to the rich. That’s all it was intended to do.

    So the job of hacks like these at Columbia and Oberlin is to keep trying to zombify all these lies.

    I happen to have written my own post about MMT this morning:

  2. Ina Deaver

    Those are some sweet little foxes!

    I must admit, I do have difficulty believing that what Maxine Waters did even makes the list of daily corruption events in Congress. Someone should creditably remind people what the hidey-hole rooms were for in the good old days. . . .

  3. crazyeddie

    “China’s New Drones Raise Eyebrows”

    Why is anyone surprised that the Chinese want capable unmanned aircraft? Nobody could have anticipated?

    “Whoa, didn’t see that one coming!”

    1. MyLessThanPrimeBeef

      As soon as China’s Intelligence Ministry masters Modern Art, or is it Post Modern Art, they will be as good as us…able to compete with us in almost any field.

    1. Valissa

      Here is the relevant bit about Yves, since it’s an excellent but very long article…

      Noam Chomsky: … There are books that are now available that I would’ve also referred to which go way beyond what I said – people from right in the middle of the economics profession going to the point of declaring economists criminals. For example, Yves Smith’s book – which is really good – I mean, she just says that those guys are a plague. The field ought to be dismantled. And she goes into the real details of it and shows what there is in economic theory that is so corrupt that it’s hard to discuss. It’s a great book. And there are a couple of others, like probably Simon Johnson’s “13 Bankers,” which I haven’t read yet.

  4. Mark

    How does one know if a TSA scanner using ionizing (i.e., potentially dangerous) radiation is functioning properly and delivering only the tiny dose it was intended to? Because an underpaid, undereducated TSA employee reports that the software says so?

    Read these reports on malfunctioning X-ray hardware and software at hospitals(!) and you will either take the pat down or stop flying:

  5. Stephen V.

    Dunno if this was all over the NYC news or not:
    the usual Bus. w/ our buddies deal–
    COUNCILMAN GREENFIELD: I think that actually is the concern right here. That’s a fascinating question. In fact, last year, right after the Christmas Day bombing, Michael Chertoff, the former director of homeland security ran around and told many news outlets including the New York Times that if only we had these scanners we would have been saved. He conveniently forgot to mention that he actually is the lobbyist for the two manufacturers of this technology. Then they rushed to get a $350 million contract to these two companies.
    GINGER MCCALL: EPIC had a Freedom of Information Act request with DHS to get more details on the scanners. We initially made that request. DHS ignored the request. We took them to court over it. As part of that lawsuit, we got documents, procurements specifications documents that were scripted by TSA and this document described everything that TSA require the manufacturers to put in these machines. One of the requirements was these machines be able to store and transmit the images.
    GINGER MCCALL: There are two different kinds of scanner – there’s millimeter wave and there’s backscatter. The scanners produce a small amount of radiation. It has not really been properly tested. There is not a clear maintenance schedule for who’s going to ensure that the scanners will continue to only put out the proper amount of radiation. There’s not proper testing of the effect of that radiation on children, on pregnant women, on immune-compromised individuals. What happens with the scanners is that you walk through it, you pose, the scanner will scan you and the picture gets sent back to a TSA official in a back room. It is a very, very invasive picture. It shows cellulite. It shows love handles. It is very detailed and very graphic.

  6. joecostello

    Actually, Krugman offers the best critique of his new “thinking” on his blog:

    “The first question many readers might ask is, why do this? It’s actually a very simple model by the standards of modern macroeconomics, but it does have some formidable-looking equations, even as it rests on some patently untrue assumptions about reality.”

    The question remains, why do this? The rest of the post is a defense of Krugman’s thinking that bubbles really don’t exist and that the results of their popping are “gratuitous” and the simple solution that idiots cant understand is just more debt.

    If this is what economics has to offer, the question again is “why do this?”

    1. Hugh

      I agree. His BS model may help him think “more clearly” about current economic conditions but I think it just muddles the waters for the rest of us. All he is doing is recasting Fisher’s debt deflation and Keynesian fiscal stimulus. I happen to agree with both of these but see no reason to mix in some dumb model that ignores massive wealth inequality, bubble blowing, and kleptocracy. Krugman should really consider a more productive enterprise for himself like knitting for instance.

    2. MyLessThanPrimeBeef

      Interesting…bubbles really don’t exist and that the results of their popping are “gratuitous”…

      Actually, I think that’s not a bad idea to pass along to a teeanger struggling with his pimples.

    3. Richard Kline

      More in the vein you’re mining, Joecostello. Here’s a long excerpt from Krug’s blog piece linked:

      “The answer I’d give is that models are an enormously important tool for clarifying your thought. You don’t have to literally believe your model — in fact, you’re a fool if you do — to believe that putting together a simplified but complete account of how things work, with all the eyes crossed and teas dotted or something, helps you gain a much more sophisticated understanding of the real situation. People who don’t use models end up relying on slogans that are much more simplistic than the models — debt bad, inflation bad, savings good, all of which are just wrong some of the time.”

      Now all of that is, prima facie, true. I’m a great believer in models, and recommend them for these reasons and others. But there are two (at least two) salient cavaets to model-based reasoning. Your model is only as useful as the extent to which it captures its represented context. One has to get the gross drivers of action in; one has to get the parameters of input and output roughly in the right place. If a good model is a useful fiction, as Krugman explictly and rightly acknowledges, then a misdrawn model isn’t just a use-less fiction, its a _convincing_ useless fiction, that’s the rub. Having one’s thinking become clearer and more consistent around an unrepresentative fact set is called, by the medical profession, a delusion.

      The second salient cavaet regarding model-based reasoning is that, no matter how shiny and neat it appears it should be presumed wrong until it has actual evidence run through it, preferably 50-100 time, but certainly more than once. The advantage of a model, much as Krug says, is that you throw away most of the available information to isolate what is key. You can’t really tell whether you kept the right parts, let alone if you weighted and assembled them usefully, until you wind up the shiny-pretty and see if it flies. This part, the ‘testing’ part is grossly underperformed in economics; often, it isn’t performed at all. If the math comes out, that’s presumed to be ‘proof’—except the model was designed specifically so that the math could come out, so the demonstration is circular.

      To see what happens if one doesn’t well-define the model’s parameters or do more than a pro forma ‘show me’ evidence testing crops up in several telling statements in Krugman’s own post. Economics is rife with this, but why not let him speak [if out of context, follow the link] for himself.

      Krugman: “The model, and more broadly overall logic, suggests that there is good no reason why the economy has to suffer a large loss of output and employment after a Minsky moment. The capacity is there, and nothing about the fact that some people have too much debt makes it impossible to use that capacity to produce goods and services for other people.” Now, it is all very well for Paul & Co. pushing graphemes around on paper to mathematically derive that ‘some people’s debt has no weight.’ It’s wholly different in practice because the effects of that debt don’t stop at the presumed-to-be discrete dermatological interfaces of supposedly isolated economic agents. To simplify, that debt has negative multiplier effets just as surely as does positive liquid capital. This is without even considering the psychological impact of debt on those who have it and those who are near to those who have it. That psychological factor not only has no place in economic caluclations such as in this model but is in fact represented as an irrational failure of the real actors to conform to the predicted outcome. I can’t come up with a metaphor for _that_ kind of reasoning without cursing, so I’ll let y’all select your own. The debt; the stupefying debt; “It’s the stupid debt, stupid.” These are intrinsic factors in making a model. Deleveraging usually means that many someones end up with very large cement galoshes of debt. For those ‘sitting in control rooms’ to which Krugman’s kind of model is presumably addressed, ‘some people’s debt’ can be factored out from their control levers. For the rest of us, it shorts out large parts of ‘the apparatus’ rendering the readings and results of those pushing of levers either false, futile, or both.

      Or then we get this lovely chestnut:

      Krugman, in a passing comment: “The foundations for the shock were laid by a long period of relative stability, especially low inflation . . . .” Well, no. Yes, the _dials_ read low inflation in the Oughties—but it was a fundamentally false reading. One could conside a single factor, the purchase of US government debt at realistically ‘below market’ prices to maintain their currency peg [whatever one thinks of the peg] to understand that reasoning from a presumed ‘low inflationary’ period in the Oughties is _highly likely_ to be unsound. It was not ‘low inflation’ but ‘low inflation in a context of (x + Y) X z,’ but the rest of that was all factored out. Low inflation 2000s are NOT directly comparable to, say, low inflation 1950s: the contexts differ markedly. The details really matter, you see, but it is exactly those little devils that math-base economics are designed to exclude from the pretty picture.

      Sure Paul, make models. But bring your head out of the ozone and down to the fact set before you start. Puh-leeeeze.

  7. Doc Holiday

    That was an interesting link:

    Re: “Q: And most of this is governed by state courts. You said to Ezra Klein that we have resolution authority, and we may get a chance to use it. Do you still believe that?

    Rep. Miller: There is no possibility of another bailout. Not any possibility Congress will come riding to the rescue. Even if the alternative is an economic cataclysm. This may ultimately give us the opportunity to see how resolution authority works.

    I’ve known Adam Levitin since the beginning of the cramdown debate. He has two possibilities, either one of which may result in insolvency for the banks. One, the investor suits, and from what I’ve seen, there’s a lot of merit to the claims for put-backs. The failure of documentation was pervasive, and the pooling and servicing agreements are very clear to the consequences, that banks would have to buy them back at face value. And the liability would exceed capitalization. Two, if we did what Levitin proposed, reduce principal and quiet title in a special process, the problem from the banks’ perspective is that would also push them over to bankruptcy.

    Q: Do you get the sense that Republicans are paying attention to this issue at all? ”

    A: Fing no…. no way in hell, how do yah think we got in this black hole … it just sort of opened up one day; wake up sonny … blah, blah….

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