Anniversary thoughts on 9/11

Two reflections on the anniversary of the 9/11 attacks.

■ Paul Krugman, "The Years of Shame"

■ Dave Zirin, sports reporter at The Nation (think parachutists at NFL games)

Posted without comment, but not without thoughts, and memories.

GP Read the rest of this post...

Krugman: Did the euro just enter its death throes?

Friday we wrote about the striking down-move in the euro. (You can read that short piece here. Here's a short-term chart; here's a longer-term one.

The up-move that started in mid-2010, from $1.20 to $1.45(ish) is the eurozone trying to fix its problems by making sure troubled economies are able to make debt repayments to bankers.

Those attempts included (1) austerity (lots of it); then (2) preventing defaults by offering lower-interest loans to troubled governments; then (3) an attempt to create "Eurobonds" as a source of funds to help these same governments. Only debt restructuring and debt forgiveness are off the table (because bankers would then take some of the losses; can't have that).

That long up-move in the euro, which shows optimism, may be ending. I took my cue from the market. Here's Paul Krugman on the same subject. His key point:

[T]he fact that European nations no longer have their own currencies leaves them vulnerable to self-fulfilling debt crises – in effect bank runs on governments rather than banks (although those too).

Think about that for a second — a bank-run on a government instead of on a bank. In other words, instead of people racing to be the first to get their money out of a bank, they race to get their money out of a government.

Why? Because the usual way for a government in debt trouble to get out is to deflate [CORR: devalue; this commenter is correct and my brain is made of butter] their currency. This creates a run on the currency until it finds a bottom and the economy recovers (usually via an export boom; if your currency is cheap, your exports are cheap). But it leaves the government free to still borrow.

But what if you can't devalue your currency to fix your debts? In that case, there's a run on the debt itself, on your bonds. As your ability to repay appears to be less and less, people sell off your bonds to get the highest available price in a rapidly falling market, and that panic selling acts like a bank run. Eventually, those government bonds go to junk.

Then what happens? That government goes broke — (1) If the economy's in trouble, its tax revenues fall. And (2) if its bonds are junk, it can't borrow. Just like a bank run breaks the bank, a bank-run-type sell-off of government bonds breaks the government.

All because they can't devalue the currency first.

For Krugman and others, the solution to fixing the euro and the eurozone is to create a "lender of last resort," since the market won't lend. And this week's news on that front is bad (my emphasis):

To head off this risk, somebody – the EFSF, the ECB, whatever – has to be ready to act as lender of last resort; Eurobonds would have served much the same purpose.

By resigning from the ECB, Juergen Stark has conveyed, deliberately or not, the message that there will be no such lender of last resort, that there isn’t enough political cohesion in the eurozone to stand behind countries under market attack. And this translates directly into soaring spreads for Spain and Italy; the self-fulfilling crisis is on.

"Self-fulfilling crisis" is another name for a bank run. People panic because everyone else is panicking, and the race is on.

Krugman's not the only one who sees the death of the euro (or at least its shrinkage to the supposedly "strong core" countries, like Germany). As the Professor notes, Barry Eichengreen sees the same. (I may have more to say about Eichengreen later. He appears to want both backstopping the banks and debt relief. He also thinks "domestic public opinion" is what's constraining the core governments. I guess that's why he's considered a conservative.)

My question is: Assuming the worst, what's the outcome? I see three scenarii (plural of scenario [EDIT: or not]):

■ The eurozone could shrink to the "strong core" (and northern) countries, like Germany, France, and a few others. The result would be a stronger euro, after the dust cleared. (That dust would include incredibly cheap drachmas, lira and pesetas — plus the collapse of governments.)

■ The core northern countries could try to hold the whole project together against all the market forces allied against it. This could kill the euro for all of them (Eichengreen's scenario).

■ The core northern countries are secretly weaker than anyone thinks. That kills the euro, puts the EU at risk as well (since everyone's grabbing for the same shrinking pie, they become competitors instead of partners), and adds another boat-anchor to the American economy (since a continental market for American goods shrinks, instead of just a few national ones).

Watch the euro this week and next. As I read this chart, there's support at $1.34 and $1.30. If it drops below $1.20, it's trouble indeed, and you won't need a chart to know it.

If a balanced and effective solution doesn't emerge soon, scenario 2 or 3 above looks more and more likely. (Sorry for the length; hope this helps you make sense of this topic.)

GP Read the rest of this post...

How Luntz’s tired 9/11 talking points harm the GOP

Steve Benen performs an admirable smackdown of Republican media manipulator Frank Luntz:

[T]he notion that the [9/11 anniversary] offers us an opportunity to “appreciate” the previous administration “for keeping us safe” strikes me as woefully misguided.

Indeed, such a claim should come with a series of pretty important caveats. Except for the catastrophic events of 9/11, and the anthrax attacks, and terrorist attacks against U.S. allies, and the terrorist attacks against U.S. troops in Iraq and Afghanistan, and Bush’s inability to capture those responsible for 9/11, and waging an unnecessary war that inspired more terrorists, and the success terrorists had in exploiting Bush’s international unpopularity, the former president’s record on counter-terrorism was awesome.

Luntz is the guy who performs polling on the language Republicans must use to push the party line. He is the guy who renamed the estate tax the death tax. His ultimate goal is to create a political vocabulary that prevents people from having heretical thoughts.

Luntz has been successful because the establishment media is always willing to go along with his schemes. At first the loaded terms pushed by the GOP are introduced as 'what Republicans call', then that becomes 'what many call' and finally the term is used without any prefix and the New York Time, Washington Post et. al. loose some more readers. I have been calling them the establishment media for years since the term 'mainstream' hardly seems appropriate when Jon Stewart outranks them all amoungst the under 45s. Pretty soon the term 'legacy media' is going to be appropriate.

We have seen the Luntz approach before, it was set out by George Orwell in 1984 and Orwell in turn was making a commentary on Stalin. Luntzism is an evolutionary dead end, it is a one-way communication. The Republican party has stopped listening to America.

A few weeks ago I posed the question of how Progressives could get their message through when the establishment media allows the GOP to control the agenda.

This is not an easy task but think for a moment about the fact that the people of Tunisia, Egypt and Libya have succeeded in doing so in the face of government censorship. People in Iran, Bahrain and even in Saudi Arabia have got the message out even if they have not been successful in ridding themselves of their dictatorships.

Here is the simple fact that allowed them to bypass the media: your friends and your family and your co-workers are all much more likely to listen to your arguments than the propaganda broadcast by the establishment media. If you argue a case that matters to them and support it with relevant facts they are far more likely to be convinced by you than by a talking head on the TV.

Over the course of twenty years Luntz has succeeded in getting the GOP and a large part of America to stop thinking. That is why his approach is a dead end, all we need to do to defeat him is to make people think. Read the rest of this post...

Do we really want to hold the presidency the next four years?

A friend recently asked me if we really want to hold the presidency the next four years.  I didn't quite understand his point, so he continued.  The economy is going to be in such bad shape during the entire four years, he explained, whoever is in the White House during that time, whatever party, is going to be eviscerated by the voters for a long time coming. (Try to make the Congress Democratic instead, he argued, so as to blunt the GOP president, but still blame him for the malaise.)

Of course, we all know what would really happen.  If a Democrat is in the White House the next four years, and the economy stinks, we'll be blamed for it for a generation.  If a Republican holds the White House the next four years and the economy stinks, the country will quickly forget what he did and we'll be blamed for it for years to come.

Why?  Because of marketing.  The Democrats don't do PR.  The Republicans thrive by it.  You don't see President Obama blaming the Republicans for the horrible state of the economy (or the deficit) - he didn't at the beginning of his term at all, and now it's too late to try.   You'd better believe the Republicans wouldn't make the same mistake.

It's all well and good for Democrats to constantly imagine the Republican noise machine as some magical unbeatable monstrosity.  But what they do is really quite simple.  They beat a message to death, creatively and endlessly.  Democrats prefer to issue one dry as dirt press release, and then think they're messaging job is over (or in the case of the President, and far too many Dems, they see messaging and PR as "something Republicans do").  Thus, it simply must be dishonest, and clearly should be shunned.

Good PR doesn't have to be evil.  You can sell the truth too.  But even the truth takes some brains to sell.  Sadly, too many Democrats think the truth sells itself.  How's that working out for them? Read the rest of this post...

On eve of 9/11 anniversary, GOP wants to cut money for first-responders

The Republicans always manage to be crazier than the Dems are incompetent.

Yesterday, President Obama requested $5.1 billion to provide disaster relief to communities struggling to recover from recent hurricanes, floods, earthquakes and wildfires. The request includes $500 million in emergency funds FEMA needs to continue to operate effectively through the end of September.

House Majority Leader Eric Cantor, whose home state of Virginia was hit by an earthquake and Hurricane Irene, is demanding more partisan spending cuts in exchange for approving the request. From Politico:

But a spokesperson for House Majority Leader Eric Cantor (R-Va.) signaled late Friday that the GOP is likely to insist on offsets for the $500 million in emergency funds Obama requested for 2011…

“The House has passed $1 billion in disaster relief funds that is fully offset, which we will look to move as quickly as possible.”

Read the rest of this post...