Archive for the ‘United States’ Category

Institutional racism in America

August 31, 2020

Here is an interesting article about the role that the Senate plays in institutionalising racism in the United States.

There is also growing controversy about the role of the second chamber in the UK. However, the UK’s House of Lords has little real power and the reason to object to it is that it is stuffed with people who are being rewarded for financial contributions to political parties and other shenanigans that add no value to our society. The US Senate, by contrast, is an active enforcer of racism.

By Jonathan Chait.

In a time when institutions across the country have undergone a searching self-examination, the reckoning has only begun for the most powerful source of institutional racism in American life: the United States Senate. It is not merely a problem of legacy and culture — though the Senate’s traditions are deeply interwoven with white supremacy, as Joe Biden inadvertently confessed when he touted his cooperation with segregationists — but of very-much-ongoing discrimination. Quite simply, achieving anything like functional racial equality without substantially reforming the Senate will be impossible.

The Senate’s pro-white bias is a problem the political system is only beginning to absorb. When Barack Obama urged his party to honor John Lewis’s civil-rights legacy by passing a bill to guarantee democratic reforms like voting rights, statehood for Puerto Rico and D.C., and an end to the filibuster, which he called a “relic of Jim Crow,” the mere suggestion was met with a scorching response from the right. “The door to radicalism is getting busted wide open,” warned a Wall Street Journal editorial. John Podhoretz described Obama’s plan as “a degree of norm-shattering in service of the partisan interests of the Democrats that will, quite simply, tear this country asunder.”

Measured against the backdrop of modern Washington tradition, Obama’s proposal would indeed constitute a radical break with long-standing norms. But measured against the standard of simple political equality, his notion is quite modest. It would leave standing, albeit in altered and less distorted form, an institution that stands as a rebuke to democracy. The Senate is a bulwark of white power.

The Senate was not designed to benefit white voters — almost all voters were white when the Constitution went into effect — but it has had that effect. The reason is simple: Residents of small states have proportionally more representation, and small states tend to have fewer minority voters. Therefore, the Senate gives more voting power to white America, and less to everybody else. The roughly 2.7 million people living in Wyoming, Vermont, Alaska, and North Dakota, who are overwhelmingly white, have the same number of Senators representing them as the 110 million or so people living in California, Texas, Florida, and New York, who are quite diverse. The overall disparity is fairly big. As David Leonhardt calculated, whites have 0.35 Senators per million people, while Blacks have 0.26, Asian-Americans 0.25, and Latinos just 0.19.

The Senate is affirmative action for white people. If we had to design political institutions from scratch, nobody — not even Republicans — would be able to defend a system that massively overrepresented whites. And yet, while we are yanking old 30 Rock episodes and holding White Fragility struggle sessions in boardrooms, a massive source of institutionalized racial bias is sitting in plain sight.

The Senate’s existence is not the product of divine inspiration by the Founders, as schoolchildren have been taught for generations, but the ungainly result of hardheaded political compromise between people who believed in some version of what we’d call “democracy” and people who didn’t. The Founders mostly hated the idea of a one-state, one-vote chamber. They grudgingly accepted it as (in James Madison’s formulation) a “lesser evil,” needed to buy off small states like Delaware.

Obviously, the Constitution contained lots of political compromises. In most cases, the system has evolved toward the principle of one-person, one-vote: The Electoral College has transformed from a group of elites using independent judgment to pick a president to a pass-through entity; the vote was extended to non-landholders, women, and black people (first in theory, and only a century later, in practice).

The Senate has oddly evolved in the opposite direction. The disparity in size between states has exploded. When the Constitution was written, the largest state had less than 13 times as many people as the smallest. Today, the largest state has nearly 70 times as many people as the smallest. As absurd as the likes of Madison and Hamilton considered a legislative chamber equalizing a 13-to-1 disparity, the absurdity is now fivefold. And it continues to grow.

The Senate has also evolved a routine supermajority requirement, which the Founders did not contemplate. The Constitution requires a supermajority in a handful of expressly defined circumstances, like treaties and removing a president from office. The filibuster evolved in the 19th century, first requiring unanimous agreement, then was reduced first to two-thirds in 1917, and then three-fifths in 1975. Custom used to dictate that filibusters were rarely used tools to register unusually strong disagreement (most frequently by southerners, against civil-rights legislation). Its evolution into a routine supermajority requirement is recent.

And so the Senate now has the function of allowing the minority of the country to thwart the majority, to a degree even its critics never imagined. Arguing against the Senate, Hamilton warned, “It may happen that this majority of States is a small minority of the people of America; and two thirds of the people of America could not long be persuaded, upon the credit of artificial distinctions and syllogistic subtleties, to submit their interests to the management and disposal of one third.” The filibuster, combined with the disproportionate growth of the largest states, allows a far more dire tyranny of the minority than this. A filibuster could be maintained by senators representing a mere 11 percent of the public.

In reality, it’s impractical to line up every small state on the same side. (Democrats do have small states.) But in the current Senate, Republicans who represent just a quarter of the population would have enough votes to sustain a filibuster. Even if Democrats win a landslide election in 2020, following another landslide win two years before, Republicans will easily be able to maintain a filibuster against any bill subject to one.

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Since the Senate is inscribed into the Constitution, measures to curtail its distorting effect have centered on abolishing the filibuster and admitting Puerto Rico and D.C. (stripped of the federal areas, which would remain the District of Columbia, and its residential areas constituted as a new state, perhaps called “Douglass Commonwealth.”) The process for admitting new states is just like passing laws.

The addition of D.C. and Puerto Rico, with four new senators between them, would partially offset the Senate’s massive overrepresentation of whites and Republicans. It would not, however, eliminate that advantage completely — or even come all that close to doing so. A Data for Progress analysis found, a 52-state Senate would still give whites decided overrepresentation, but it would ameliorate the injustice.

Podhoretz complains that admitting Puerto and D.C. would “violate democratic norms,” because “the last grants of statehood,” Alaska and Hawaii, did not alter the Senate’s partisan balance. He is implying, without saying outright, that states have always been admitted in Democrat-Republican pairs.

But this is not remotely true. In the 19th century, statehood was a partisan weapon, used mostly by Republicans, who admitted states not on the basis of population but in an open attempt to “stack the Senate.” After they added Montana, Washington, and split Dakota territory into two states (adding another pair of senators) in 1889, “President Harrison’s son crowed that the Republicans would win all the new states and gain eight more senators,” according to historian Heather Cox Boushey.

Alas, it is not just conservatives who believe that states must always be admitted in partisan pairs. Two years ago, Rhode Island senator Sheldon Whitehouse, a Democrat, confessed not to care at all about D.C. statehood: “I don’t have a particular interest in that issue. If we got one one-hundredth in Rhode Island of what D.C. gets in federal jobs and activity, I’d be thrilled.” And,he said,while he sympathized with Puerto Rico’s case, he opposed it because it would help his party. “Puerto Rico is actually a better case because they have a big population that qualifies as U.S. and they are not, as D.C. is, an enclave designed to support the federal government,” Whitehouse said. “The problem of Puerto Rico is it does throw off the balance so you get concerns like, who do [Republicans] find, where they can get an offsetting addition to the states.”

Offsetting? Who says it has to be offsetting? If Democrats refuse as a general principle to alter a “balance” that massively overrepresents white and Republican voters, they are consigning themselves to permanent minority status in the chamber.

The catch in admitting states is that Republicans could filibuster a statehood bill. But Republicans would filibuster any measure, however watered down, that increases Democratic voting power. (Mitch McConnell has even denounced a bill making Election Day a national holiday as a sinister “power grab.”)

In practice, therefore, any bill to admit new states would require eliminating the filibuster as well, which is why Obama took care to add that his party should change the rules to accomplish it. If Democrats gain 50 senators and the presidency, they would have it within their means to eliminate the filibuster and pass a bill expanding voting protections and admitting D.C. and Puerto Rico as states.

And it is the filibuster that poses the most formidable obstacle to passing any democratic reform. The Senate is shot through with institutionalists, who cling tightly to its traditions and relish the special status the chamber confers on its members. The objective of eliminating the legislative filibuster has gained adherents, but many of the chamber’s older Democrats remain stubbornly attached to it.

Democrats who support the filibuster make two arguments: one self-interested, the other principled. The self-interested argument concedes that yes, it would be helpful for Democrats to pass laws with a majority, but what happens when Republicans have a majority? “I think it would be a short-term advantage and a long term difficulty,” frets Maine senator Angus King. “You know, what concerns me is that this place changes.” Joe Biden, who has hedged on his previous pledges to maintain the filibuster forever, has said, “The filibuster has also saved a lot of bad things from happening too.”

It’s true that the filibuster sometimes stops conservative laws. Over the long run, however, liberals enact more changes than conservatives. This is almost definitional. Looking back over the last 20, 50, or 100 years, most major legislative changes have a progressive cast rather than a reactionary one. What makes the case for reform even stronger is that Republicans can already accomplish most of their goals without overcoming a filibuster. Senate rules allow the confirmation of judges and changing levels of taxation and spending with just a majority. Trump passed his tax cuts with 50 votes, and nearly passed his Obamacare repeal with 50 votes. (King’s warning, “If we didn’t have the 60-vote rule today, the ACA would be gone,” is flatly false.) The filibuster has played hardly any role at all in limiting his agenda.

What’s left of the filibuster primarily inhibits Democrat proposals. Given that the chamber’s one-state, one-vote makeup already favors Republicans, it is bizarre that Democrats would accept a handicap atop another handicap.

Even if none of this were true, and the filibuster thwarted both parties in equal measure, it is difficult to understand why it would be necessary. Many political systems allow a single national vote to constitute a working majority: The Parliamentary majority elects its leader and enacts the agenda it ran on, and if voters don’t like it, they elect a new government. The American system already requires controlling three separately elected bodies — House, Senate, and president — to enact any new law. Why does the system need yet another obstacle to change?

Here is where the principled invocation of the filibuster comes into play. The filibuster forces the two parties to work together. “The whole intention of Congress is basically to have a little bit of compromise with the other side,” argues Joe Manchin, expressing his fervent opposition to eliminating the legislative filibuster. “Our job is to find common and cooling ground, if you will, to make something work that makes sense.”

The simplest rebuttal to this claim is look around you. Do you see a lot of legislative compromise? How many reforms of any importance have amassed 60 Senate votes over the past 30 years? It is odd that senators can still wax idealistic about the filibuster promoting good old-fashioned bipartisanship when its absence is so obvious. Indeed, the same senators who most loudly decry the decline of bipartisanship are also the most convinced that the filibuster enables bipartisanship. Manchin himself has loudly grumbled about his disdain for the chamber, decried its uselessness, and threatened to quit repeatedly. Maybe he should consider the possibility that the rules he seems so attached to aren’t working.

It seems much more likely that the filibuster’s impact on moderation is just the opposite. The Senate’s arcane anti-democratic character enables extremism. By thwarting sensible liberal reforms, it emboldens left-wing radicals who paint the party as hopelessly inept, unable to deliver its promises, and unequal to the challenges of American life. If Biden’s Senate allies allow Republicans to thwart his promises, the left’s takeover of the party will accelerate.

More important, it has enabled the Republican Party’s long rightward lurch. Why should conservatives compromise their principles when they can use their counter-majoritarian power to block change? The Republican Party’s strategic response to a country that is moving demographically against it is not to adapt to the electorate but instead to thwart its will.

The defenses of the filibuster offered by the Senate’s traditionalists have a creepily familiar tone. Here are old, white, comfortable men, hesitant to make a (very small) amount of space in their elite institution for minorities. Whatever wan arguments they can offer for the status quo reek of the musty scent of clubbiness and nostalgia. They can hardly make the case that the system works, but it surely works for them.

Several years of heavy use have dulled the sharp edge of the word “reckoning.” But if there is any institution in American life that needs a reckoning, it is the U.S. Senate.

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The original article is here.

Essential viewing for Johnson, Hancock and Trump

August 19, 2020

Just in case the leaders of Britain and the United States want to know what competent management of Covid looks like, Taiwan’s Digital Minister Audrey Tang explains how the island identified the Covid threat early and used, built and modified technical systems to deal with it effectively.

The leaders of Britain and the United States are warned that the content is a bit ‘sciency’ and ‘experty’ and they may find it harder to follow than Love Island. However, it is well worth watching.

Ms Tang’s explication begins at 12 minutes.

She explains the advantages of attentive research and using your brain after minute 14.

She explains the advantages of trusting your population around minute 16.

She explains the advantages of being honest, open and transparent about levels of PPE supply after minute 17.

She explains how to counter idiotic misinformation and establish facts after minute 23.

She talks about data privacy and quarantine monitoring after minute 26. And again at minute 39.

She explains why masks are important and offers to share the technology to make millions of them every day after minute 49. After minute 56 she again stresses the point that masks stop you touching your mouth and nose with potentially infected hands.

She makes several points about false dilemmas that may be presented in relation to Covid after minute 58.

She notes that mainland Chinese whistleblower Li Wenliang likely saved the lives of many people in Taiwan (because Taiwan was paying attention) and reminds us that what is most different about Covid-19 is asymptomatic transmission, after minute 63.

As of today, Taiwan has had just 486 recorded cases of Covid and seven deaths. Here are ongoing data.

Unfortunately Ms Tang’s slides do not appear on the video below.

Good luck Boris, Matt and Donald!

Happy New Year from America: Mike Pence’s gateway

January 1, 2018

As hung on the Aspen gatepost of Vice-President Mike Pence’s home. The word on the yellow strip, which is not easy to read, is ‘America’.

The local sheriff has not, as I understand it, seen any reason to remove the banner.

A happy new year to everyone, including Mike.

MakeAmericaGayAgain 1217

Ferguson versus Perugia

November 27, 2014

Ferguson 2

 

 

 

 

 

Ferguson 3

Ferguson 4

 

 

 

 

 

 

As Ferguson, Missouri smoulders (literally and figuratively) following the decision not to indict a police officer who shot an unarmed black man dead, it is interesting to read Joshua Rozenberg’s opinion piece about the systemic failings of the arcane grand jury system that is still used in around 20 American states. It was a grand jury that decided not to indict the police officer.

What leaps out at me are the similarities between the functioning of grand juries (which only decide if there is a case to answer) and the functioning of Italy’s actual court system, as seen in the Sollecito-Knox satanic ritual murder trial in Perugia, about which I have blogged a great deal (see the ‘Italy to avoid’ tab).

The basics of a grand jury are that the prosecutor decides which witnesses to call and which witnesses to grant immunity from potential prosecution. There is no screening of jurors for potential bias and no objections can be raised about the choice of jurors. Proceedings, framed by the prosecutor who asks the questions (there is a theoretical right for jurors to ask questions at the end of testimony), are held entirely in secret and the grand jury decision is final. A longer outline of grand jury rules is here. Mostly it is the good ole boys of the south who still use grand juries, but a good number of supposedly more liberal states in the north-east do too; see here.

Well, if you look at the Sollecito-Knox satanic ritual murder trial in Perugia, several things that shocked me were: no capacity to screen jurors for bias, prosecution framed by the prosecuting magistrate (Giuliano Mignini) without any independent oversight, and jury deliberations framed and overseen in camera by the presiding judge rather than taking place independently. I am not saying this is a perfect analogue, but the excessive power granted to prosecutors and the lack of transparency do appear to be commonalities.

Of course in America the problem afflicts the indictment system in some states. In Italy it afflicts the entire national judicial process.

 

Later:

Here is another recent grand jury, in New York, failing to indict police officers over the death of a black man who was put in a choke-hold, and kept in one despite saying ‘I can’t breathe’. It was all captured on video. Coverage from the FT (sub needed). And here is coverage from The Guardian of protests in many US cities against the decision not to indict; again, the video of the police action is embedded.

Tits and bums

November 24, 2014

Oh, so now you’re paying attention.

In the past couple of weeks I have posted blogs that seemed to me important. About the Xi Jinping-Obama understanding on emissions that paves the way for a global deal to arrest climate change in Paris next year. And about Adair Turner’s argument that governments may have to print money to pay for fiscal expenditure and monetise part of their debts if we are to head off another asset bubble by raising interest rates while at the same time avoiding global economic depression.

Well, these momentous developments have garnered little more than the usual rate of traffic on this blog. So, looking at email addresses of the several hundred people who now subscribe to every single post (dear oh dear), I note that most of you are academics, researchers, money managers, NGO-types and ‘activists’. So it occurs that what you really want is a bit of gratuitous demi-porn to take the edge off your lives of monotonous intellectual mind-wrestling.

Fortunately I am in a position to indulge you. The peg is the recent APEC summit in Beijing, which was important not just for an apparent meeting of minds between the Chinese and US presidents, but also for an alleged pass made by the Russian president, Vladimir Putin, at Xi Jinping’s wife.

Personally, I don’t think there is much to it, although Putin is now officially a single man, which puts him (even more) firmly in the frame in terms of motive. However the extraordinary reaction of Chinese censors, who moved immediately to expunge any trace of Vlad’s let-me-get-your-coat-darling moment from the Chinese Interweb, reminds us that in Chinese Communist Party cultural terms Vlad was indeed on quite thin ice. Here, side by side, are the photo (similar to the one below) briefly posted by Chinese state news agency Xinhua and, to the right, the notice you got shortly after/still get at the same URL saying in Chinese that the page has been deleted.

Obama to Xi: 'Looks like Ukraine is not the only thing Vladimir wants to get into.'

Obama to Xi: ‘Looks like Ukraine is not the only thing Vladimir wants to get into.’

And here is a brief story from Foreign Policy about the whole incident, including a link to video if you really want more.

The Putin-Peng Liyuan (yes, she has a name) frisson got me thinking, as I am sure it has you, about the broader subject of global leaders hitting on other leaders, their wives and partners. So here, in no particular order, are some memorable moments I have been able to come up with:

 

1. Henry Kissinger’s ever-penetrating analysis. These must surely be among the most famous images of the genre, as Henry first enjoys a full frontal review of Lady Diana’s strategic assets, and then follows up from behind with a sly ass-check.

kissinger Di 1 kissinger Di 2

 

 

 

2. The Brezhnev. But did you know that back in 1973 Kissinger’s own date, former Bond girl Jill St. John, was subjected a famous occular eye-over by the leader of the Unfree World, Leonid Brezhnev? In the photo below you can almost see Brezhnev calculating out the potential upside of detente with the Americans. Coincidentally, it was in 1973 that Kissinger was quoted in the New York Times saying that: ‘Power is the ultimate aphrodisiac.’

Brezhnev Jill St John 1

 

 

 

 

 

 

 

 

Here is a shot that shows Kissinger (back to camera) and Jill as another guy (described in Walter Isaacson’s Kissinger biography as a ‘naval aide’) gives Jill’s ass a caressing gaze too.

Brezhnev and Jill St. John at Nixon Pool Party

 

 

 

 

 

 

 

 

3. Size doesn’t matter. Deng Xiaoping. There is no killer photo here, just various official ones like that below. However, when Ronald and Nancy Reagan visited China in 1984 and were received in the Great Hall of the People, Deng said to Nancy (in range of the foreign press corps): ‘I hope you’ ll come the next time and leave the president home.’ After translation, the ever-cool Ron batted the remark away.

Deng XP Nancy R and Ron R

 

 

 

 

 


 

4. Obama-Gucci Helle. These images are so recently famous they hardly bear posting. Except to tee up the less well-known 5., below. Here Obama flirts with Danish prime minister Helle Thorning-Schmidt, known to her countrymen as Gucci Helle for her rather un-Danish love of branded designer clothing.

obama helle 1

 

 

 

 

 

 

 

And here is the US president after a bollocking from his wife, who was sitting on the other side of him all along. (There is another image of Brave Dave Cameron forcing his way into Helle and Obama’s selfie, but it is just too depressing to post.)

obama no-helle michelle

 

 

 

 

 

 

 

5. Obabma and Lil sis’ Yingluck. Now here is the collector’s item. It is Obama and Thaksin’s little sister Yingluck, who was running Thailand after Thaksin was thrown out in a coup, at least until Yingluck was also thrown out in a coup. What was that song about ‘One night in Bangkok’?

Obama Yingluck

 

 

 

 

 

 

 

 

 

To be fair to Obama, however, I think the story may have been that it was young Yingluck who was providing the come-on.

Obama Yingluck 2

 

 

 

 

 

 

 

Vacuous China

November 21, 2014

Xi Jinping’s anti-corruption campaign shows no sign of abating, with admirals and generals fearing for their futures as much as mere civilian bureaucrats and Party cadres. Meanwhile Xi’s vicious clamp-down on dissent goes on apace, with more human rights lawyers being themselves tried on trumped-up charges and Internet censors now firing blunderbusses at great swathes of the webosphere. Today, Ilham Tohti’s life sentence has been confirmed by an appeal ‘court’ that held its ‘hearing’ inside his detention centre.

So, what better time to discover a video of Chinese rich kid students in California flaunting their Bentleys, Maseratis, Porsches and more?

Are you watching, Mr Mao?

 

A little clear thinking

November 18, 2014

I am posting a number of documents by Adair Turner relating to the concept of ‘helicopter money’. The term was coined by Milton Friedman and refers to the idea of simply dropping money into an economy to expand the monetary base without any commitment by a government or central bank to ‘pay’ for the money. Indeed, the point is to increase money supply, possibly permanently, in order to pay for government expenditure.

Printing money to cover a government’s bills is never going to be an easy policy to sell. But Turner has bravely put this option on the table because the place to which the major economies of the world are heading under current policy may actually be worse.

How so? Turner’s point is that the policy of central banks expanding their balance sheets and flooding financial markets with cash to force down interest rates to zero is merely fuelling asset bubbles – in real estate, in stocks, and even now in things like fine art. What the world needs is a return to somewhat higher interest rates to head off another speculative bubble and bust (selling some Apple shares yesterday at 18 times earnings and more than four times what I paid for them reminds me we may already be in bubble territory). The problem, of course, is that higher interest rates cannot come at the expense of another collapse in the demand in the real economy and hence a spiral of 1930s-style deflation. Logically, as Turner argues, the only option may therefore be to expand the monetary base, create a bit of inflation to allow a meaningful rate of interest, and simultaneously use the printed cash pay off some government debt and fund expenditures that maintain real economic growth.

Such a policy would (probably) put the fiscal boot on the other foot compared with the past six years. Almost all UK and US policy since 2008 has favoured those with assets – real estate, stocks and bonds — as asset values have been restored by the near-zero interest rate policy. If rates rise, those who hold assets under leverage will pay more debt service and asset prices will come under pressure. On the other hand, a positive real interest rate gives those with only a bit of cash (the young, the poor) some return on their money in the bank, while money creation can pay for lower taxes on work and investment in things like infrastructure. In other words, such a policy tilts the table away from those with assets and towards those without assets but with a willingness to work for a living. You begin to see quite how outrageous this proposal is…

The proposition is indeed shocking. However it is a measure of the times in which we live that you really should read what Turner is saying. He is not a red, and nor are the economists (like Milton Friedman and Irving Fisher) whom he cites in support. Turner is pretty much an Establishment figure…

The lightest iteration of what Turner is saying is an FT opinion piece from last week. I have not done this before, but I am reproducing it in the hope the FT won’t pursue me for breach of copyright. (Having only been paid £250 for my recent opinion piece for them, perhaps they will decide they owe me a bonus; one notes that deflation is already haunting the Pink’Un.)

November 10, 2014

Printing money to fund deficit is the fastest way to raise rates

By Adair Turner

No technical reasons exist for rejecting this, only the fear of breaking a taboo, writes Adair Turner

What is the right course for monetary policy? The International Monetary Fund seems to answer with forked tongue. Its latest World Economic Outlook urges that monetary policy should stay loose to stimulate growth. Yet its Global Financial Stability Review warns that loose monetary policy risks creating financial instability, which could crimp growth. In fact the best policy is to print money and raise interest rates. That sounds contradictory, but it is not.

The global economy is suffering the hangover from many decades of excessive private sector credit growth. In 1950 private credit in advanced economies was 50 per cent of gross domestic product; by 2007 it was 170 per cent.

After the 2008 crisis, households and companies began trying to pay back what they owed. This depressed consumption and investment, generating large fiscal deficits as tax revenues fell and social expenditure rose. It then seemed essential to balance public sector accounts, which has depressed growth further and made deleveraging harder.

Debt owed by the public and private sectors has actually increased as a proportion of GDP, from 170 per cent five years ago to 200 per cent today. Weak demand has led to below-target inflation in all major economies.

Economists agree that this is how we got into the current mess, but they disagree about how to get out of it. Some, such as Paul Krugman and Lawrence Summers, argue for more relaxed fiscal policies. Cutting taxes or increasing public expenditure is the most certain way to stimulate demand. In Milton Friedman’s words it is an injection directly “into the income stream”. But this route out of recession would increase public debt even further. It seems blocked.

Instead, most countries have opted to combine fiscal tightening with ultra-loose monetary policy, setting short-term interest rates close to zero and using quantitative easing to reduce long-term rates and boost asset prices.

There are no technical reasons to reject such measures, only the fear of breaking a taboo.

But there are dangers. Sustained low interest rates create incentives for highly leveraged financial engineering. They make it easier for uncompetitive companies to survive, which could stymie productivity growth. And they work by restarting growth in private credit – which is what led to our current predicament. The Bank for International Settlements therefore argues that monetary policy should be tightened as well as fiscal, but that would depress demand yet further.

We should indeed seek a swift return to higher interest rates, to remove the dangerous subsidy to high leverage. But paradoxically, the best way to do that, particularly in Japan and the eurozone, would be to deploy a variant of Friedman’s idea of dropping money from a helicopter. Government deficits should temporarily increase, and they should be financed with new money created by the central bank and added permanently to the money supply.

Money-financed deficits would increase demand without creating debts that have to be serviced. This would lift either real output or inflation and allow interest rates to return to normal more quickly. True, banks might amplify the stimulus by creating additional private credit, but they can be restrained with higher reserve requirements.

There are no technical reasons to reject this option, only the fear that once we break the taboo, money-financed deficits will be used on too large a scale.

Despite that fear, de facto monetisation is inevitable in some countries, even if policy makers deny it.

Japan’s official policy involves using sales tax increases to make government debts sustainable, while massive monetary stimulus spurs inflation and growth. In fact there is no believable scenario in which Japan will generate fiscal surpluses sufficient to pay back its debts, nor one in which the Bank of Japan will sell all its holdings of government debt back to the market.

All the same, the pretence undermines the effectiveness of the policy. Japan should either delay the next sales tax increase, or announce a temporary fiscal stimulus financed with new money. It should make clear that the debt the government owes the central bank will never need to be repaid, dispelling fears of a massive future fiscal tightening.

Orthodox theory sees helicopter money as risky. But current quantitative easing policies are at least as risky, and have produced adverse side effects. In the UK the Bank of England has bought £375bn of government bonds to try to stimulate the economy through swollen asset prices and rock-bottom interest rates. It could instead have created new money to finance a smaller one-off increase in the fiscal deficit. If it had done so, a return to normal interest rate disciplines would now be nearer.

 

More. Turner for grown-ups:

Turner’s original CASS business school speech on this subject (2013)

And the slides that go with the CASS speech. (Lots of them, but many worth having if you live in the UK and are about to have people knocking on your door in the run-up to the May national elections asking you to vote for them. ‘Come in,’ you can say. ‘Have a seat and let’s look at the slides together!’)

A bit of Q&A with Turner and Michael Woodford from the Institute For New Economic Thinking blog.

Finally, on Thursday 20 November, the UK parliament will hold a backbench debate on the topic of ‘money creation and society’. It will be the first time that the issue has been addressed in a full debate in the House since the 19th century. You can watch here on Parliament TV and discover just how ill-equipped our politicians are to deal with the aftermath of the global financial crisis.

 

 

Possibly one of those days that the world changed (for the better)

November 12, 2014

This looks like very big news.

Obama and Xi Jinping have reached an understanding (no written agreement, mainly — I am guessing — because of the difficulty of ratifying one in a Republican-dominated congress) on curbing carbon energy emissions.

I am just pasting the New York Times coverage below. You can also click through to a supporting opinion piece by John Kerry.

Some immediate thoughts:

  1. China is promising that its carbon emissions will peak, at the latest, in 2030. Cynics will say the Chinese have not said what the peak will be, or limited it. However China’s carbon emissions per unit of GDP are already officially targeted to fall 40-45% 2020 vs 2005. And China has set and met/is meeting targets to cut energy consumption per unit of GDP 19% in 2005-10 and 16% in 2010-15. These targets were in the last two five-year plans and it would be hard to move away from what is now a 10-year trajectory line in cutting energy intensity in forthcoming five-year plans. In sum, I think the emissions peak by 2030 is a very meaningful target that will not be rendered meaningless by political jiggery-pokery.
  2. China also promised to make renewables 20% of total energy production by 2030. Last year was the first one in which Chinese installation of renewables’ generating capacity exceeded that of carbon electricity generating capacity. A cursory reflection on the numbers suggests to me that installation of power generation capacity going forward will, in just a few years, be almost all renewable in order to achieve the 2030 target. (If your ‘investment advisor’ has not already shorted the stock of Harbin Electric and Dongfang Electric, the two most exposed coal turbine and boiler makers, sack him/her. You probably don’t want to own Shanghai Electric either.)
  3. The US has promised huge cuts versus trend line carbon emissions, too. More cerebrally-challenged Republicans are already doing their nuts.
  4. Obama is back. He’s done healthcare. Now he might go down as the President who saved the planet. So much for playing too much golf…
  5. Xi Jinping’s domestic position goes from strength to strength. But it is a little frightening when one guy commands so much popular support in a society with too few checks and balances on executive power.
  6. Here’s a speculative thought. If the delivery of this understanding turns out to be as good as what appears to be written on the tin, the Nobel Committee will have to think very seriously about giving Obama and Xi a joint Peace Prize. At first blush that might seem a tough choice for the committee, given China’s human rights record and the anti-dissent crackdown under Xi. But should a prize be given, it would be even tougher on President Xi. How could he accept after Liu Xiaobo already got the prize in 2010? This is very premature, but I throw out the thought.

Meanwhile, make a note of where you were when you heard this potentially historic news. I was in the library.

U.S. and China Reach Deal on Climate Change in Secret Talks

By

NOV. 11, 2014

President Obama and President Xi Jinping of China were greeted by children during a ceremony inside the Great Hall of the People in Beijing on Wednesday. Credit Feng Li/Getty Images

BEIJING — China and the United States made common cause on Wednesday against the threat of climate change, staking out an ambitious joint plan to curb carbon emissions as a way to spur nations around the world to make their own cuts in greenhouse gases.

The landmark agreement, jointly announced here by President Obama and President Xi Jinping, includes new targets for carbon emissions reductions by the United States and a first-ever commitment by China to stop its emissions from growing by 2030.

Administration officials said the agreement, which was worked out secretly between the United States and China over nine months and included a letter from Mr. Obama to Mr. Xi proposing a joint approach, could galvanize efforts to negotiate a new global climate agreement by 2015.

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It was the signature achievement of an unexpectedly productive two days of meetings between the leaders. Mr. Obama and Mr. Xi also agreed to a military accord designed to avert clashes between Chinese and American planes and warships in the tense waters off the Chinese coast, as well as an understanding to cut tariffs for technology products.

A climate deal between China and the United States, the world’s No. 1 and No. 2 carbon polluters, is viewed as essential to concluding a new global accord. Unless Beijing and Washington can resolve their differences, climate experts say, few other countries will agree to mandatory cuts in emissions, and any meaningful worldwide pact will be likely to founder.

“The United States and China have often been seen as antagonists,” said a senior official, speaking in advance of Mr. Obama’s remarks. “We hope that this announcement can usher in a new day in which China and the U.S. can act much more as partners.”

As part of the agreement, Mr. Obama announced that the United States would emit 26 percent to 28 percent less carbon in 2025 than it did in 2005. That is double the pace of reduction it targeted for the period from 2005 to 2020.

China’s pledge to reach peak carbon emissions by 2030, if not sooner, is even more remarkable. To reach that goal, Mr. Xi pledged that so-called clean energy sources, like solar power and windmills, would account for 20 percent of China’s total energy production by 2030.

Administration officials acknowledged that Mr. Obama could face opposition to his plans from a Republican-controlled Congress. While the agreement with China needs no congressional ratification, lawmakers could try to roll back Mr. Obama’s initiatives, undermining the United States’ ability to meet the new reduction targets.

Still, Mr. Obama’s visit, which came days after a setback in the midterm elections, allowed him to reclaim some of the momentum he lost at home. As the campaign was turning against the Democrats last month, Mr. Obama quietly dispatched John Podesta, a senior adviser who oversees climate policy, to Beijing to try to finalize a deal.

For all the talk of collaboration, the United States and China also displayed why they are still fierce rivals for global economic primacy, promoting competing free-trade blocs for the Asian region even as they reached climate and security deals.

The maneuvering came during a conference of Pacific Rim economies held in Beijing that has showcased China’s growing dominance in Asia, but also the determination of the United States, riding a resurgent economy, to reclaim its historical role as a Pacific power.

Adding to the historic nature of the visit, Mr. Obama and Mr. Xi were scheduled to give a joint news conference on Wednesday that will include questions from reporters — a rare concession by the Chinese leader to a visiting American president.

On Tuesday evening, Mr. Xi invited Mr. Obama to dinner at his official residence, telling his guest he hoped they had laid the foundation for a collaborative relationship — or, as he more metaphorically put it, “A pool begins with many drops of water.”

Greeting Mr. Obama at the gate of the walled leadership compound next to the Forbidden City, Mr. Xi squired him across a brightly lighted stone bridge and into the residence. Mr. Obama told the Chinese president that he wanted to take the relationship “to a new level.”

“When the U.S. and China are able to work together effectively,” he added, “the whole world benefits.”

But as the world witnessed this week, it is more complicated than that. Mr. Xi won approval Tuesday from the 21 countries of the Asia-Pacific Economic Cooperation forum to study the creation of a China-led free-trade zone that would be an alternative to Mr. Obama’s Trans-Pacific Partnership, a 12-nation trading bloc that excludes China.

On Monday, Mr. Obama met with members of that group here and claimed progress in negotiating the partnership, a centerpiece of his strategic shift to Asia.

Negotiations for the Trans-Pacific Partnership are much further along than those for the nascent Chinese plan, known as the Free Trade Area of Asia Pacific, and some analysts said the approval by the Pacific Rim nations of a two-year study was mainly a gesture to the Chinese hosts to give them something to announce at the meeting.

For all the jockeying, the biggest trade headline was a breakthrough in negotiations with China to eliminate tariffs on information technology products, from video-game consoles and computer software to medical equipment and semiconductors.

Weekend reading: abuse of state power special

August 25, 2013

It has been a bumper week for abuse of state power. Here are some of the highlights:

Bradley Manning goes down for 35 years. On the watch of the ‘liberal’ president, Barack Obama. The FT (sub needed) argues that Manning got off lightly and may get parole in 10 years. The Guardian takes a different view on the proportionality of Manning’s sentence, a position closer to mine.

While the reaction pieces are being penned, Manning expresses a desire for hormone treatment to assist in a desired gender reassignment. Federal prisons offer this, military ones do not. Manning has asked that she [sic] be referred to henceforth as Chelsea, with the former name Bradley reserved only for letters to the the confinement facility at Fort Leavenworth, Kansas. There are worse ways to spend half an hour than writing him/her a letter of support, so why not do so?.

From, for me, the damaged but well-meaning Manning to the thoughtful, lucid and brave Edward Snowden. In the UK, Alan Rusbridger, Guardian editor, reveals threats from the British government, securocrats, and indirectly from David Cameron himself, to pre-emptively shut down further reporting of the Snowden cache using British legal powers of pre-emption.

It is depressing to read how the poodles in the UK government told their bosses in Washington that Guardian journalist Glen Greenwald’s partner David  Miranda would be detained at Heathrow, how Met police say they checked they were using anti-terrorism legislation correctly and how the police reckon they were procedurally perfect. Having taken the call from the lickspittle Brits, Washington then moved to distance itself from the Miranda detention and the seizure of his possessions, saying it wouldn’t happen in the US. As the Economist points out (sub needed), the anti-terrorism legislation under which Miranda was detained was established for the police to ascertain if a person “is or has been concerned in the commission, preparation or instigation of acts of terrorism”. To use such legislation against journalists is grotesque.

Over to China, where 70 policemen take the unusual risk of appending their thumbprints to a denunciation of the acting president of the Shanghai High Court who, they say, has been engaged in massive long-term corruption including stealing several tons of alcohol from the police booze budget each year. Court president Cui Yadong was already feeling the heat after senior Shanghai judges were recently captured on video cavorting with prostitutes. The video of the judges has had over 4 million hits.

Separately in China, the New York Times discusses ‘Document number 9’ and the alleged ‘seven subversive currents’ at large in the Chinese nation. Per my recent blog about Xi Jinping, we are starting to get more visibility on the new Chinese president and what we are seeing is not pretty. Xi’s evolving proto-Maoist approach to politics provides the background to the trial on corruption and abuse of power charges of fellow princeling Bo Xilai, which started this week. Bo was the person who invented the ‘New Red’ school of modified Maoist populism when he was running Chongqing. As Xi and pals move to crush him, the irony and hypocrisy are not lost on John Garnaut in Foreign Policy.

Here in Italy, meanwhile, we are enjoying a peculiarly Italian twist on the abuse of state power. Silvio Berlusconi, having been definitively condemned for a felony for the first time, has opted for an attack on state power that recalls, for me, Italy’s fascist past (much more so than the claims, which I previously dismissed on this site, that Beppe Grillo is proto fascist). Over the Ferragosto holiday Sil promised a programme of direct action on Italy’s beaches, with his supporters leafleting holiday makers who would otherwise be trying to catch a rest. The focus of Sil’s campaign is not so much a proposal for structural reform of the judiciary, or indeed enforcement of existing norms (which would be half the job done already), but instead a direct attack on magistrates and judges as a species. The strategy has more than a whiff of hoped-for intimidation.

Here is a lead story (in Italian) from Berlusconi’s Il Giornale during the holiday. Although the article was on the front page, it has no news content, and comprises a simple frontal assault on the judiciary, likening its perceived efforts to ‘attain political power’ over the nation to Mao Zedong’s Long March. The connection with Maoism/communism is established in the first sentence. Italy, we learn, does not have a mundanely inefficient legal system to be improved by systemic change, but an extremist, personal, visceral political conspiracy against the Italian people (to wit, Sil and his businesses).

Here are some current icons from Berlusconi’s PDL/FI site:

banner-forzasilvio pdl-logo 20ANNI-DI-CACCIA-UOMO 995980_621688441198598_1936708951_n 998453_620420304658745_378895156_n 998913_622166501150792_278588033_n 1097945_620420421325400_707118344_n slide-1-638

The manner in which Berlusconi’s personal interests, those of the Mediaset group he controls, and national politics are conflated is bewildering for anyone from the First World. But of course this is not the First World. Next month Sil will relaunch Forza Italia (FT, sub needed), his original political movement named for a football chant (in the country that now boasts the worst record of football violence and racism in western Europe). ‘Ancora in campo’ / Back on the Field is the new tag line.

To me the strategy looks more than a little fascistic, involving as it does an attack on the institutions of the state and promises of more direct action. However, as the holidays wind down I suspect that we won’t see a proto-fascist movement take hold in Italy. Instead we will see business as usual.  The main evidence of Sil’s promised campaign of direct action so far (the plan on the beaches described here in the FT, sub needed) is a few Forza Italia militants in Rome (here telling journalists they have not been paid to march, that they are ‘spontaneous volunteers’ and that they have ‘just come for Him [Sil]’) and a pisspoor little plane dragging a bit of superannuated toilet paper above a few holidaymakers. ‘Forza Italia, Forza Sil’, I think it says.

I don’t want to do you down Sil, but I’m not sure you’ve really got the fascist cojones for this thing….

Forza Italia sul ferragosto 2013

Meanwhile, my own experience with abuse of state power occurs when I stop at Sasso, the bar on the river on the way to Citta di Castelllo. Despite the fact that there were few people around when I stopped, and lots of safe parking available, a carabinieri police car was parked across the zebra crossing that leads to the children’s playground, with two wheels outside the white parking line and hence well into the road. Thinking this a bit slack, even by Italian police standards, I took a photo on my phone. Walking into the bar, I found two carabinieri eating cream buns. I bought a small bottle of cold water and went outside to drink it in the sun.

While I was doing this, it seems one of regular clients at the bar told the carabinieri I had taken a photo. One of the carabinieri came over and demanded ‘a document’. Of course, I said, handing him my EU photo driving licence. He took it away and wrote down all the details, resting on the boot of his car. Then he came back and said: ‘I have taken down all your details because you took a photo.’ I replied: ‘Yes I did take a photo because of the way you parked.’ The policeman responded: ‘You have no idea what business we are engaged on here.’ I resisted the urge to reply: ‘It looked like you were engaged in eating cream buns.’ Both policemen were standing over me, not completely in my face, but close enough to make me feel uncomfortable.

The officers then made a series of threats:

1. ‘We have your details. If that photo is published on the Internet [he only seemed concerned about the Internet] we know who you are.’ I replied that I have no problem with them knowing who I am.

2. [from the second carabinieri, thinner and younger]: ‘That is a MILITARY vehicle. Do you understand?’ I replied that I am fully aware that the carabinieri is a para-military force.

3. The first officer mentioned seizing my phone (the verb he employed was ‘sequestrare’). I remained impassive, just looked him in the eye. There were a few people around the bar (maybe 8), plus the female boss, whom I have known for years. He didn’t take the phone in the end, just saying: ‘Get rid of that photo or I will seize your phone.’ I said nothing.

2013-08-16 11.56.41

At this point the policemen appeared to run out of threats. They went back to their car, got in it, turned around, and followed me to Citta di Castello, before turning off in the direction of the police station. Should I complain to the justice system or should I launch a proto-fascist programme of direct action? Thankfully this dilemma no longer presents itself. I now live in Cambridge. I think I’ll just go home.

More:

If you would like to harass people on street corners until Silvio is let off his felony, you should be able to sign up at the site below. (Latest talk is of a general amnesty for convicted felons facing up to as much as four years’ jail time. This would be a triple triumph — saving money spent on prisons, reducing Italy’s huge trial waiting lists, and getting Sil off his fraud sentence (plus other sentences that may soon follow). The only downside would be to put a few thousand crooks, some of them violent, back on the streets. What is not to like?)

ForzaSilvio.it

Holiday reading and viewing: booze, race, nationalism

July 23, 2013

English beach

 

Since I am sort of on holiday this week, I have decided that everybody else should be too. So here is weekend reading re-dressed as holiday reading.

 

1. First up, to get us started, a great discussion of the role of alcohol, and of alcohol addiction, in writing.

Next, the serious stuff.

Here are three articles on questions of race and nationalism.

2a. Orville Schell and John Delury offer a thoughtful piece about China’s need to move on from the narrative of national humiliation that the country’s schools and politicians have fed the population ever since 1949 (and indeed longer in the case of early converts to the communist party’s cause).

2b. In the United States, Barak Obama can no longer avoid speaking out about the Trayvon Martin case.

2c. Philip Stephens in the FT (sub needed) reflects on the mindless racism of Italian politics, but ends with his ideas that just maybe Gianni Letta represents change. Would that it were so!

3. Third, a near miss. Gideon Rachman in the FT (sub needed) has a thoughtful piece on Putin’s Russia but fails to nuance it with what Putin’s government is doing to put Russia back on an economic development path — in essence, reining in the oligarchs and bringing cash flows from national mineral assets back under public control. Putin may be a revolting man, and yet may also be a revolting man whose time has come.

4. Finally, a heartening curiosity. Teach First seems to be working. It is now Britain’s single biggest recruiter. So it turns out that smart people often do care, and don’t reflexively sell their souls to a law firm or investment bank.

 


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