The Apocalypse Has Begun

Falling DownAt Wonk Blog, Neil Irwin writes, What’s Happening in the Treasury Bill Market Today Should Terrify You. “Terrify” is not a common word in the Wonk Blog lexicon. And if you are like most people, “treasury bill” is not common to your lexicon. If you know them at all, it is because you’ve seen them listed at the bank. And if you’ve looked at them anytime over the last couple of years, you’ve noticed that they pay very poorly. That’s not the terrifying aspect of them. I’ll get to that shortly.

Treasury bills are short term government debt. They mature at no more than one year, currently either 30, 60, or 90 days. You may know the drill. Suppose the going rate is 1%. In that case, you would buy a $100 bill for $99—at least if it were for a year. But no one has received 1% for a very long time. According to Irwin, on 30 September (just 8 days ago), treasury bills that matured on 17 October had a yield of 0.03%. Are you read to be terrified?

Yesterday (Monday), it was five times higher: 0.16%. Today (Tuesday), it was ten times higher: 0.30%. We’ll see what Wednesday brings.

I thought that the president spoke eloquently today about how not paying any of our bills would hurt our credit rating. (I wrote about this yesterday.) What’s going on with treasury bills shows that you don’t even have to default on your debts for it to hurt you. If you go around in public threatening to default, most lenders will be less inclined trust you. And that’s what’s happening. Irwin writes:

There are reports, including this one from Reuters, indicating that some of the biggest money managers in the world are starting to avoid US government debt that matures in the near future out of fear they will not be repaid promptly. Bond investors seem to be confident that the US government will make good on its obligations in the longer term—securities that mature a year or more from now are actually seeing their rates fall. But they are becoming less confident that these short-term securities will pay on time.

Of course, those longer term bonds too will start to increase if this continues on, especially if we actually do breach the Debt Ceiling. It’s funny, the conservatives who are pushing this are certain that they are the most patriotic of people. What they remind me of is William Foster in Falling Down. The worst traitors always think they are the greatest patriots.

Afterword

When I was younger, people used to say, “America: love it or leave it.” I don’t accept that at all. America isn’t perfect. We need to continue to make it a more perfect union. But I know that these conservatives are of the “love it or leave it” mentality. But they show time and again that their love is entirely dependent upon America being something that they approve of. I cannot quite contain my hatred for these people. Stop fucking up our country!

Update (8 October 2013 7:56 pm)

Dean Baker just wrote, The Post Doesn’t Scare Me. But I think he is being far too sanguine. The issue is not that the rates are very high. The issue is that they are going through the roof because people around the world don’t trust our government. Alone, they don’t mean anything. As an indication of how the world is reacting to this Debt Ceiling crisis, it is terrifying. Irwin used the right word.

Keeping Balanced with Le Chatelier

Henry Louis Le ChatelierWhat a boring day for birthdays. This one’s gonna be short.

Two actors I rather like have birthdays today. First is Sigourney Weaver who is 64 today. She’s been in a lot of really fun movies. Two I especially like are Galaxy Quest and Heartbreakers, which is almost a perfect film for me: a very sweet film about con artists. And of course there are Alien, Aliens, and Alien: Resurrection. Okay, there was Alien³ too. I own them all. Yes, I’ve got it bad. Anyway, I like her generally. The second actor is Matt Damon who is 43. Sue me! I like the Bourne films, especially The Bourne Supremacy. It has a heartbreaking denouement. And Rounders is really good. And look, I thought Good Will Hunting was okay. It was not great writing, however. I have a problem with the main character. I just don’t know of any person who was a mathematical genius and yet also had encyclopedic knowledge of everything he had ever read. That’s just not the way brains work. Still, this scene is totally great:

Other birthdays: microtonal composer Eivind Groven (1901); science fiction writer Frank Herbert (1920); and the most annoying Ramone, Johnny (1948).

The day, however, belongs to the great French chemist Henry Louis Le Chatelier. About the first thing that chemistry students are taught is Le Chatelier’s principle. It says that a disruption in a system’s equilibrium will move in the direction to most directly establish its new equilibrium. It isn’t a difficult idea. In fact, now it seems obvious, but that’s just because we all have the molecular theory of chemistry so ingrained in us that we don’t even think about it. At the time, it was a big deal.

Happy birthday Henry Louis Le Chatelier!

Hollywood is Such an Attention Whore

Have you ever gone the theater and then had to sit through so many previews for coming soon movies that you actually forgot which one you had come to watch? Please tell me I’m not the only one…

Now there is a more insidious and slightly sadistic trend in movie promotion: get in the middle of real people going about their day and then totally fuck with them.

What would you do if you walked in on someone being murdered? The mindfuckers at ThinkModo came up with an interesting way to promote Colin Farrell’s upcoming movie mayhem, Dead Man Down, came up with the Elevator Murder Experiment.

According to Jeanne Moos over at CNN, only 20% of the people (who had been lured there from Craig’s List to participate in focus group) had tried to intervene.

What would I do if I walked into a situation in which a stranger was being murdered? In the past it’s possible I might whack the assailant on the head with my purse or back away and call 911. Now, with the lines between reality and what-the-hell-is-going-on becoming wiggly, I might hesitate and wonder whether I was actually witnessing an attempted murder or if someone was filming me not jumping to the rescue. Either way, I’d be upset and someone might be dead.

The marketing team for the remake of Stephen King’s, Carrie [1], was more elaborate with its staging, but probably caused less soul-searching angst for the witnesses.

Our society is dying a slow, self-inflicted death, so I’m pretty sure if I’m ever mugged, more people will pull out their phones to get a video rather than to call for help.


[1] I saw the original in the movie theater because my father had no concept of “family friendly” movies. It wasn’t scary, just completely fucked up awful. I won’t be watching the remake.

The Terrible Bargain

Kick Me!The last week, I’ve been hearing a lot more about the lauded Grand Bargain. This is the Holy Grail of centrists throughout Washington. Basically it would be a law that both cut entitlement spending and raised taxes. Obama even alluded to it at today’s press conference where he said, “And whenever I see John Boehner to this day, I still say, you should have taken the deal that I offered you back then, which would have dealt with our long-term deficit problems, would not have impeded growth as much, would have really boosted confidence.” God, how I hate to hear the president talk that way! It shows that he really doesn’t understand how the economy works.

A Grand Bargain would be terrible for the economy. Since it cuts the amount of money spent on Social Security, people would have less money to spend. That would cause the economy to grow slower than it normally would. Since it raises taxes, people would have less money to spend. That would cause the economy to grow slower than it normally would. See the pattern? There was a time when some economists argued that businesses would be so impressed with the government’s fiscal rectitude that they would decide that the future was bright and so start hiring. The theory was that this “confidence” would be so great as to offset the negative effects of the policy (that is, taking money away from people).

The problem is that those economists have been shown to be completely wrong. Everywhere it has been used, “expansionary austerity” has failed—prolonging recessions and in many cases not even paying down government debt. (If the economy is depressed, there are fewer tax revenues and this effect may be bigger than all the spending cuts.) But okay, I get it: that’s economics and economics is hard and there are always people who say the budget deficit is the only thing holding us back. But what about pure politics?

Obama often argues as though a Grand Bargain would give the Democrats and the Republicans something they both want. But both parts of such a deal are unpopular with both parties. Nobody likes tax increases and nobody likes benefit cuts. I understand that Obama wants to be thought of as the adult in the room—the man who made us eat our broccoli. I think he is under the impression that Clinton has a good reputation because he balanced the budget. That is naive in the extreme. He has a good reputation because the economy was booming while he was president. That’s the same reason Reagan has a good reputation. People will likely remember Obama as an okay president, but nothing great because the economy isn’t great. (Although have you seen Sam Wang’s analysis today: has has the Democrats winning back the House; if that happened, we could get a real recovery going.)

The main thing is that there is no good reason for Obama to be for a Grand Bargain at this time. Economically, it would be a disaster. Politically, it would be a disaster for the Democrats. If one were passed now, it would become law with almost no Republicans voting for it. Then, in 2014, the Republicans would beat up the Democrats with it, “You voted to cut Social Security!” And they would be right, and the Republicans would win. I don’t see why Obama would be eager for such a deal.

Afterword

A newer form of the Grand Bargain would counter entitlement cuts with a repeal of the Sequester. That would actually be good for the economy in the short term. But this short term benefit would be at the expense of lower benefits for the elderly and higher taxes for the middle class over time. But an argument can at least be made for that.

Return of the Son of the Night of the Reasonable Republicans

Ross DouthatJonathan Chait calls out Ross Douthat on his recent column, Debt-Ceiling Extortion Isn’t So Bad, Really. Douthat is arguing that forcing a Debt Ceiling crisis isn’t that bad. According to him, the problem with the Republicans is that they are asking for something that is unreasonable, the defunding of Obamacare. If they were just demanding a Grand Bargain, everything would be fine. Chait rightly notes that this is a theme with Douthat: assuming that the Republican Party was the “reasonable” party Douthat wants it to be. But I have a different issue with the man.

The second half of Chait’s article is about Douthat’s admonishment of President Obama to push for the Grand Bargain that Douthat thinks is so important. Chait goes point by point and notes that Obama has done exactly what Douthat thinks he should. This reminds me of Thomas Friedman who is now and forever claiming that we need a new centrist party that just so happens to be the Democratic Party under Obama and Clinton. But at least Friendman is (probably) a Democrat. At least he thinks that after looking at the two parties, Obama is closer to his ideal than, say, Mitt Romney.

But what are we to make of Douthat? He is a Republican. Yet apparently what he wants is what Obama is offering. He isn’t a Republican politician who pretty much has to disagree with whatever the Democrats say. So why all the posturing and pretending? Why can’t he just come out and admit that Obama is exactly what he’s looking for in a president? The answer is simple: Obama is not what he’s looking for in a president.

If you look at Douthat’s writing over time, a pattern emerges. He is for exactly the same policies as the rest of the Republican Party. But he’s not a politician, so he can be more nuanced. He doesn’t have to answer to a constituency that is calling for blood. But he wants to defund Obamacare. He wants to “reform” entitlements. He wants to build the Keystone XL pipeline. Does he really want a Grand Bargain? I figure it is a deal he thinks is worth doing but he’d much rather just have the spending cuts. So urging Obama to do what Obama has been doing almost from the moment he got into office is a kind of false equivalence: the Republicans refuse to consider a Grand Bargain but so does Obama!

This is the thing about the so called reasonable Republicans: they are for exactly what the extremists are for. But it is particularly bad coming from people like Douthat. I don’t doubt that if he were a politician facing re-election in Texas, he would sound every bit as extreme as Louie Gohmert. One of the reasons our country’s politics are so screwed up is that people like Douthat cheer lead for one side while not admitting to agreeing with it. If we are to believe his writing, Douthat (and Barro and Frum…) ought to be Democrats—conservative ones, sure, but Democrats nonetheless. But such people don’t really fit in the Democratic Party. They are very much in the mainstream of the Republican Party. But their posturing provides a patina of reasonableness to the Republican party. That’s their entire reason for existence.