Philippe Cousteau dives into oil leak with CNN

The water used to be clear. Read More......

Goldman Sachs agrees with Krugman that more stimulus is needed

Cashing in is usually more challenging during a recession than during a rising economy. More on Goldman's support for more stimulus at Daily Kos. Read More......

BP well could be 'contained' by Monday

It would be a pleasant surprise if this turns out to be accurate or even close to being accurate. Unfortunately, most people stopped believing these stories in May.

The BP oil leak could be completely contained as early as Monday if a new, tighter cap can be fitted over the blown-out well, the government official in charge of the crisis said Friday in some of the most encouraging news to come out of the Gulf in the 21/2 months since the disaster struck.

Crews using remote-controlled submarines plan to swap out the cap over the weekend, taking advantage of a window of good weather following weeks of delays caused by choppy seas.

"I use the word 'contained,"' said retired Coast Guard Adm. Thad Allen. "'Stop' is when we put the plug in down below."

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'The looming danger of deflation'

Paul Krugman:

[Economist John Makin is] politically conservative, and is based at a right-wing think tank. But his warning about the looming danger of deflation reads just like something I or Jan Hatzius (Goldman’s chief economist — never mind the Blankfein stuff, the econ group is very good, and very pessimistic) might have written. Except Makin is even more gloomy, warning that we might enter deflation this year. [my emphasis]

So what is John Makin saying? (Note: This links to the American Enterprise Institute, which is part of Krugman's astonished point.)

As we enter the second half of 2010--the "postcrisis" year--while markets have been obsessed with Europe's debt crisis, they have failed to notice potentially more ominous developments. The United States and Europe are heading toward--and Japan already suffers from--deflation, a classic prolonger of crises that boosts the real burden of debt and crushes profit margins.

And that's just the first paragraph. Feel free to read the rest — it won't hurt you at all.

But for us, let's pause and get clear about "deflation," what it is and what it does:

• Naturally, "deflation" is the opposite of "inflation" — thus it's a period of falling prices.


• Prices express the relationship between "things" and "money". It's like they're on opposite ends of a child's teeter-totter. When things go up in value, money goes down, and vice versa. One of the two is always gaining in value.
  
  In inflationary times, things gain value and money loses value (i.e., the dollar buys less). In deflationary times, money gains value and things lose value (i.e., the dollar buys more).
  
  Keep that last in mind. If you own things in inflationary times, you're in great shape. Things (your house, for example) are gaining in value. To do well in deflationary times, you need to own money, not things.


• Periods of deflation alternate with periods of inflation all the time, just as bear markets alternate with bull markets. And just as bull markets tend to be long and slow (while bears are fast and brutal), inflationary times tend to be long, often multi-generational arcs, with deflationary times the opposite.


• This means — few Americans now living were adults during our last big deflation. That would be the Great Depression of the 30s. As a result, most of us don't know enough to fear it.


• There's a long list of reasons people hate deflationary times. Here are just a few:
  
  
  Most people are loaded up with things, not cash, going into a deflation. Bad news. Only cash is king; things are cash's footstool.
  
  Debt is especially dangerous. You borrow a dollar worth two loaves of bread, and repay a dollar worth four loaves. If prices fall 50%, your debt load doubles, just by sitting there.
  
  You can imagine what happens to business investment in an environment where debt is dangerous. HINT: It tanks, and jobs along with it.

The situation eventually reverses, but not until a great deal of pain is dealt out. Deflationary times are often a downward spiral, self-perpetuating, a death march to the bottom of the drain.

Dealing with the pain (or dealing with not-dealing with the pain) becomes government's chief job during a deflation. People who are loaded up with things, they need lots of help. That turns out to be most of us.

People who are rolling in cash, on the other hand, need . . . nothing; not one thing. They're fat and happy — just waiting for prices to crater so they can buy stuff up with all that super-valuable cash.

How much government spending do you think those people want? Yep . . . none. The math — and the incentives — are pretty simple. Which perhaps explains all the "no new deficit" screaming you hear, who is screaming it — and why.

Yours in less things, and a lot less screaming,

Gaius Read More......

Obama to announce new drilling moratorium

This is a step in the right direction. Big Oil is responding to the change in attitude by moving their rigs overseas where they can find governments who aren't as bothered with pollution and environmental disasters. Although the courts have so far blocked progress on halting the offshore drilling, the industry understands that the mood has changed and any investment today is highly questionable for the future. While the GOP is still fully supporting Big Oil, for the rest, people finally see the risk outweighing the benefit. Reuters:

The Obama administration promised on Friday it would announce a new deepwater oil drilling moratorium shortly, and a U.S. company became the first to pull a rig out of the Gulf of Mexico because of uncertainty surrounding the ban.

Diamond Offshore Drillings said it was moving its Ocean Endeavor rig to Egypt from the Gulf, where deepwater drilling has been halted because of the 81-day-old BP oil spill.

A federal court in New Orleans on Thursday refused to reinstate the six-month ban on drilling below 500 feet , which the Obama administration imposed after BP's Macondo undersea well blew out on April 20.

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Saturday Morning Open Thread

Joe is in NYC with Carlos, attending a friend's wedding. I'm getting ready for a trip to Chicago to take Sasha to my sister while I head to the annual Netroots Nation blog conference in Vegas, and then off to Chris' place in France to do my annual house sitting and cat sitting for him and his wife while they're away on vacation. Lots more planned, so now in my usual pre-travel freak out mode where I try to go through the list of everything I may ever need in various climates. It's almost a year ago that I was diagnosed with my torn, and tearing, retina in Paris, and then had fantastic surgery at 1/10th the cost of what they'd charge here. Hard to imagine time has flown so quickly.

In other news, it's now been three months since I've had a complete night's sleep, thanks to Sasha the wonder puppy. Don't get me wrong, she's adorable, and full of spunk, but my God, it's like having a kid who just doesn't stop. This past week Sasha has unilaterally decided that she no longer wants to sleep in her crate at night, so about 3 am she wakes up and starts barking, non-stop, for a good two hours or so until the normal time I let her in my bed (don't want her there full time for a variety of reasons, including potential allergies). Man I hated her at that hour. But then she tries to attack a dog on TV while I'm watching Stargate, and she's my adorable little puppy all over again (see video below). My favorite part was when she went around and looked behind the TV to see where the dog was hiding.

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It's Tour de France time

With all of the doping scandals (plus the ones that we all know exist) this kind of cycling is a lot more interesting. A friend is down from Holland this weekend so we're heading out bright and early for a long ride somewhere. I baptized my new bike last weekend and she immediately let me know who was in control. Clearly it wasn't me as I had some nice road rash and grapefruit sized bruise on my hip within the first hour of a five hour ride. The change from my basic Giant to a decked out Kuota has otherwise been a lot of fun. I liked the idea of going with a smaller production company and after looking at a few other Italian producers (Fondriest was also nice) I opted for a Kuota with Campy gears and French (Mavic) wheels. After a week of riding, we're now getting along much better so it's time to find a new route for a sunny Saturday. Read More......

China makes it official: Google license renewed

What kind of a deal was cut to allow this to happen? The Independent:

"We are very pleased that the government has renewed our ICP license and we look forward to continuing to provide web search and local products to our users in China," Google's top lawyer, David Drummond, said in a statement.

The one-sentence statement gave no details. A Google spokeswoman, Courtney Hohne, said information on what services Google will offer in China would be released in coming weeks.

There was no immediate statement on the website of China's Internet regulator, the Ministry of Industry and Information Technology.

Google had to make concessions to get its license renewed, opting not to leave China completely so it could pursue its commercial ambitions — a music service, its mobile phone business, a Beijing development center and a staff to sell ads for the Chinese-language version of its U.S. search engine.

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