Paul Krugman for Secretary of the Treasury?

I'm a fan of Nobel-Prize winning economist and NYT writer Paul Krugman. He is also author of great books like The Conscience of a Liberal, The Price of Inequality: How Today's Divided Society Endangers Our Future, and End This Depression Now!. He's a force to be reckoned with in the world of economics - few can match his breadth of knowledge, or his willingness to be outspoken. Did I mention he is anti-austerity? Yeah, that's good, too.

Now there's a petition started by actor Danny Glover asking President Obama to seriously consider him for Secretary of Treasury to replace out-going Wall Street guy, Tim Geithner, who is like the anti-Krugman.

As of right now the petition has 208,755 signatures out of the 225,000 that was the original goal. That's huge! And yes, I signed it, too, because I want to join others in sending a message to President Obama that picking another Wall Street insider might not be the most creative idea in the world, or the best thing for our country.

Petition at Sign-On.Org

We urge you to nominate Paul Krugman for Treasury Secretary. Krugman will protect Social Security and Medicare from benefit cuts, promote policies to create jobs, and help defeat the austerity dogma in Washington and around the world.
Petition Background
Press reports say President Obama will soon nominate a new Treasury Secretary . Press speculation has centered on candidates likely to support the Wall Street agenda of cuts to Social Security and Medicare benefits and other domestic spending rather than government policies to create jobs. We want President Obama to nominate Nobel prize-winning economist Paul Krugman, who opposes austerity and wants the government to focus on creating jobs.

Mark Weisbrot, Co-Director of the Center for Economic and Policy Research in Washington, D.C., on why this is a good idea:

Krugman has been right about the major problems facing our economy, where many other economists and much of the business press have been wrong. A few examples: he wrote about the housing bubble before it collapsed and caused the Great Recession; he has forecast and explained that large budget deficits and trillions of dollars of "quantitative easing" (money creation) would not cause inflation or long-term interest rates to rise; and that the "confidence fairies" would not reward governments that pursued austerity in the face of recession.
Most importantly, Krugman is on the side of the majority of Americans. He has written extensively in favor of policies that favor job creation, explained the folly of budget cutting in the face of a weak economy, and opposes cuts to social security and Medicare benefits.
. . . since most of Wall Street's money went to Republican nominee Mitt Romney in the run-up to the November election, Obama doesn't owe anything to the people who crashed our economy and are now fighting to make senior citizens, working and poor people reduce their living standards.

Krugman has responded that maybe he does more for the country playing devil's advocate as the "Outside Man" on the New York Times:

Part of the reason is that I am indeed the World’s Worst Administrator — and that does matter. Someone else can do the paperwork — but an administrative job requires making hiring and firing decisions, it means keeping track of many things, and that, to say the least, is not my forte.
Oh, and there’s not a chance that I would be confirmed.
But the main point, as I see it, is that it would mean taking me out of a quasi-official job that I believe I’m good at and putting me into one I’d be bad at.
So first of all, let’s talk frankly about the job I have. The New York Times isn’t just some newspaper somewhere, it’s the nation’s paper of record. As a result, being an op-ed columnist at the Times is a pretty big deal — one I’m immensely grateful to have been granted — and those who hold the position, if they know how to use it effectively, have a lot more influence on national debate than, say, most senators. Does anyone doubt that the White House pays attention to what I write?

He's got a point about the confirmation, but then again, Obama can get things through Congress that few Presidents can. And the GOP might rather have someone who is a true liberal, someone they can bash daily, unlike Geithner who was a more low-profile Wall Street insider and therefore respected by the GOP as pro-business. Hey - that's another good reason to choose Krugman!

I think it's time to give Krugman a shot to actually work in the Administration instead of being their most vocal economic critic. I signed the petition because I think Krugman is right up there with Elizabeth Warren in his understanding of real Americans, and he cares more about the social safety net than Wall Street.

I am curious how Obama will respond to this. If he thinks Krugman isn't right for Treasury, then heck - make up a new post for him where he can help people! Put him in, Coach!

World Markets Watching Spain

For a long time, market watchers have predicted that Spain might be the next economy to crumble after Greece fell apart and needed a bail-out. Don't you hate it when the doomsayers are right? It just doesn't bode well for the world economy to see all this instability in Europe, and unfortunately it's nowhere near over because Italy is next in line. The pain continues, and could leave the rest of Europe ~ and the world ~ overwhelmed.

 Ezra Klein on Rachel Maddow

. . . If you're picking one indicator to watch to see if it was going to survive or fall, you would pick Spanish bond yields because it would be bad if Greece had to leave the euro, but it would be survivable. There is no world where Spain goes down and the euro endures. If Spain goes down, the euro is going down. Spanish bond yields, the thing you need to remember is the higher a bond yield is, the higher a country has to pay when they borrow money.
Spain can't afford to borrow the money necessary to finance itself, and the Eurozone is going down. and that means our economy might be going down, too.
Well, Spanish bond yields have kept going up. This is way above the level which Spain and the euro can survive.
Tonight's Ezra Klein challenge is to explain why this happened. . . . Austerity isn't working! . . . Spain has been doing what the Eurozone has asked them to do, austerity, cutting budgets. They're trying. everybody agrees they have been a good faith actor. but that treatment is driving them deeper and deeper into recession, and these bond yields are the market . . . saying 'this is not working.'

Visit NBCNews.com for breaking news, world news, and news about the economy

From MSN Money UK:

The Dow Jones Industrial Average, after falling 239 points earlier in the day, ended down 101.11 at 12,721.46. Yields for US government bonds sank to record lows as traders sought the safety of American debt.

Borrowing costs rose sharply for Spain and Italy after news that the Spanish economy contracted by 0.4% in the second quarter. Falling economic output makes it more difficult for Spain to deal with its debts. The Standard & Poor's 500 index fell 12.14 points to 1,350.52. The Nasdaq composite index dropped 35.15 points to 2,890.15.

"Increases in Spanish borrowing costs have brought back questions about the health of Europe," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia. "That's driven a flight to safety."

More Scary Stuff from Bloomberg

Now, that worst-case scenario has re-emerged. The catalyst is Greece. Over the weekend, Germany’s economy minister, Philipp Roesler, said he doubted that Greece would keep the fiscal promises it made in return for its bailout. If help for Greece is cut off, a disorderly exit from the euro becomes much more likely. For the rest of Europe and the world, that’s alarming less in its own right than because of the risk of contagion.

Spain would probably be the first to suffer, and as things stand there’s nothing to stop the situation from unraveling. With anxiety about Greece rising again, it was reported that Spain’s regional governments were seeking bailouts from Madrid, threatening to add to the central government’s debt burden. The Spanish economy is contracting, the latest figures showed last week. At the same time, Prime Minister Mariano Rajoy sparked protests when he said he would press on with further fiscal tightening, which is likely to slow growth even further.

On Monday, Spain’s 10-year bond yields rose for the first time above 7.5 percent. Rates sustained at this level are unaffordable and, in effect, make the Spanish government insolvent. Disturbingly, yields rose sharply at shorter maturities, too, and the cost of insuring against a Spanish default set a record -- both signs that confidence is evaporating.

Spain is the fourth biggest economy in the euro area. If it has to be bailed out, the EFSF and ESM will be overwhelmed. Then comes Italy, whose 10-year bond yield just climbed to a six- month high, remaining well above 6 percent. That’s no less crippling than Spain’s cost of borrowing, because Italy’s debt burden is far greater.

If Europe’s governments continue to stand aside, they will sink not only Greece, Italy and Spain, but the wider European and global economies as well. Europe’s leaders must either greatly expand the ESM and start to use it more proactively, or urge and empower the ECB to buy or somehow guarantee distressed sovereigns’ debt. One way or another, bond yields have to be capped at a supportable level.

Uncertainty in the Eurozone Confuses Markets

As I wrote a few weeks ago, even if the Germans kick Greece out of the Eurozone and they go back to the drachma and a future of austerity, there are other countries in the same shape waiting in the wings. Spain, Portugal, Italy, Ireland . . . know one really knows where the ripples with stop. It's a dangerous time for the world economy. Yesterday the markets seemed happy that Spain will get a $125 billion bail-out - today, not so much.

This article describes the volatile situation succinctly:

Spain, Italy in market storm ahead of Greek vote
12 June 2012 | 14:45 | FOCUS News Agency

Madrid. Investors pounded Spanish and Italian debt on Tuesday, beset by grave doubts over a Spanish banking rescue and fears of a looming Greek exit from the eurozone, AFP reported.
Despite eurozone powers striking a deal Saturday to extend Spain a banking sector rescue loan of up 100 billion euros ($125 billion), the alarm gripping bond markets showed no sign of relaxing.
Two major concerns stood out: doubts over Spain's outlook even with the mega-loan and this Sunday's Greek elections, which in a worst-case scenario could send Athens back to the drachma.
It was impossible to say how things may turn out, said Edward Hugh, an independent economist based in Barcelona.

Paul Krugman Demolishes the Ryan Plan

Remember Eric Fehrnstrom, the hapless surrogate for Mitt Romney who made the etch-a-sketch gaffe? Well, today he was out of his depth once again on ABC's "This Week" trying to debate economics with the master, Paul Krugman, who deftly squashed the idea that the Paul Ryan budget makes economic sense, referring to it as a "fraud" and "imaginary."




And what's so delicious is that George Will also pushes and gets Fehrnstrom to admit that Romney backs the scorched-earth Ryan Plan. You'll recall that last weekend, the conservative Will expressed frustration with Romney for cozying up to "bloviating ignoramus" Trump, for which The Donald called him the "most overrated journalist alive." George got a little revenge today, helping to put Fehrnstrom on the hot seat so that Krugman could move in for the coup de grace. Politics really does make strange bedfellows these days. Who knew that George Will and Paul Krugman could be a tag-team?




Read and learn, children. This is how we do it:
Transcript from Crooks and Liars:

KRUGMAN: Well, the economy is weak. It's not terrible, but it's weak. The bitter irony here has to be for Obama, certainly for people like me, is that if the Republican answer is "let's slash spending, let's have low taxes," that's actually the policy we've been following. It's amazing, actually. Especially if you look at the last couple of years, what we've actually seen is sharply...

(CROSSTALK)

STEPHANOPOULOS: Let me show you -- we have a chart in your blog this morning.

KRUGMAN: Yeah, this is...

STEPHANOPOULOS: We created it. It shows the point you're making.

KRUGMAN: Yeah, this is real government spending, so it's federal, state and local combined, deflated, you know, adjusted for population growth and inflation, and it is plunging. It's plunging mostly because of cutbacks at the state and local level, because the aid that they were receiving in the stimulus has run out, but also because unemployment benefits have been expiring because Congress won't -- you know, Republicans in Congress won't extend them.

So in effect - and, by the way, if you extend that chart backwards, there's been nothing like this since the demobilization after the Korean War. We're actually practicing government austerity on a scale that we haven't seen in 60 years. It's not the president's policy. In effect, we've already got the policies that Republicans say they will impose if they take the election, and yet, of course, it may lead to the defeat of this president.

STEPHANOPOULOS: And that's the point Stephanie was making, so bringing it back to you, what would Governor Romney do right now -- not in the future -- right now, to get the economy moving again?

FEHRNSTROM: Well, it's not just, as Paul says, tax policy. That's part of it, of course, but it's also spending policy, it's regulatory policy. It's confronting China on their unfair trade practices. It's -- it's a whole -- it's labor policy, George.
The governor has laid out very detailed plans. People can go to mittromney.com and learn about them for themselves. But I think what we really have here...

(CROSSTALK)

KRUGMAN: ... ...I know from detailed plans and there is nothing there. There is not...

CUTTER: ... he's going to deregulate Wall Street, which we know how that turns out. We're going to go back to risky financial deals that crashed our economy. And on China, you know, we've been hearing this blustering on China for quite a while now. What exactly is the governor going to do? There's...

(CROSSTALK)

STEPHANOPOULOS: ... I want to bring in George Will.

FEHRNSTROM:  He'll do what this president has failed to do in China, which is to declare that China is a currency manipulator. Look, we're all in favor of free trade. In fact, we don't think this president has done enough to reinvigorate trade talks -- trade talks with our friends, but China is -- is robbing us blind. They're stealing...

(CROSSTALK)

KRUGMAN: I was very much for that. I've been demanding that we declare -- but the window for that has passed. Right now, the Chinese economy is tanking. So if you were thinking you were going to get a big boost out of beating up on the Chinese now, two years ago I thought was really a good time to do that. But my god, now that is totally out of date.




WILL: On another matter, I didn't hear a robust answer to George's question. Where does the governor stand, Governor Romney, on the Ryan plan? Does he endorse it?

FEHRNSTROM: Oh, he's for -- he's for -- he's for the Ryan plan. He believes it goes in the right direction. The governor has also put forward a plan to reduce spending by $500 billion by the year 2016. In fact, he's put details on the table about how exactly he would achieve that. So to say he doesn't have a plan to -- a plan to restrain government spending is just not true.

KRUGMAN: Can I say, the Ryan plan -- and I guess this is what counts as a personal attack -- but it isn't. It's not an attack on the person; it's an attack on the plan. The plan's a fraud. The plan is a big bunch of tax cuts, some specified spending cuts, basically for poor people, and then a huge magic asterisk which is supposed to turn into a deficit reduction plan, but, in fact, if you look what's actually in it, it's a deficit-increasing plan.

And so to say that -- just tell the truth that there is really no plan there, neither from Ryan, nor from Governor Romney, is just the truth. That's not -- if that's -- if that's being harsh and partisan, gosh, then I guess the truth is anti-bipartisanship.

FEHRNSTROM: So may I ask you, Paul, do you prefer the president's plan? KRUGMAN: Oh, yeah. I mean, the president -- at least it's -- you know, I don't approve of everything, but there are no gigantic mystery numbers in his stuff. We do know what he's talking about. His numbers are -- you know, all economic forecasts are wrong, but his are not -- are not insane.

These are -- these are just imaginary.

Pundits Slam Greece as Euro Exit Looms

Considering some of the Greek-bashing going on in Europe, you wouldn't know that other countries such as France, Spain, Portugal, Italy, and Ireland might have lots of trouble if Greece makes a disorderly exit from the Euro. Who will the pundits blame when Greece is no longer the scapegoat?

Last week Christine Lagarde, the International Monetary Fund chief, insulted the Greeks by implying they were all tax dodgers. She told Guardian UK:

"Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax."
Even more than she thinks about all those now struggling to survive without jobs or public services?
"I think of them equally. And I think they should also help themselves collectively."
How?
"By all paying their tax. Yeah."
It sounds as if she's essentially saying to the Greeks and others in Europe, you've had a nice time and now it's payback time.
"That's right." She nods calmly. "Yeah."

That statement brought an onslaught of criticism to Lagarde's Facebook Page where she later posted an apology:

As I have said many times before, I am very sympathetic to the Greek people and the challenges they are facing. . . . An important part of this effort is that everyone should carry their fair share of the burden, especially the most privileged and especially in terms of paying their taxes. . . .

Bill Mitchell, an Australian economist saw Lagarde's statement as more European bullying towards the Greek people, especially from the IMF. He wrote in his blog:

. . . the European banking system interacted with the bailout funds to benefit the German banks. The benefits dwarf the amount of funds Greece has received.
So when Lagarde talks about payback time it is clear that she is continuing the IMF tradition of bullying the weak and vulnerable to benefit the rich and strong.
. . . Remember, that Greece was not in crisis before the Euro was imposed. Its crisis is the result of lax regulation by EU officials interacting with a flawed monetary system design.

Unfortunately, other Europeans continue to enjoy some Greek bashing, like this so-called "Wealth Manager" Nick Dewhirst from Integral Asset Management who echoed Lagarde's condescending judgment when interviewed by CNBC today (my transcript):

Dewhirst: I think the easiest way to understand it is at the ordinary human level. Nations are just very large numbers of human beings. And it's like a club, so I was down at my Sailing Club . . . talking to a few friendly Greeks among others and the attitude is very simple. As a club member you have to obey by certain rules. Lots of people cheat a little bit. They get away with it. Some people cheat a helluva lot. They get away with it until everybody notices. And that's the key difference between now and a couple of years ago.
Every German voter, every Slovak, Finn, and every other savings nation voter now knows that cheating is not just the occasional email joke he's got about Greece, but a way of life.

Question: What's the real impact of Greece leaving the eurozone as you say on June 18th?

Dewhirst: Probably like Y2K. A lot less than everybody thinks.

Question: But there are so many unknown unknown-unknowns...

Dewhirst: Um, I don't think so. I wrote a piece in December 2010 predicting this would happen and predicting how it would happen. We would have a bank holiday . . . and during that period they would have to pass a simple law amending one clause of the European treaties they signed. And then your accounts would be frozen. And everyone would come in on Monday and say 'they've stolen my money - they can't do that!' But they can! They've just done it and it's been done before. It was done in Argentina in 2001.

Question: But isn't the concern here the knock on impact through the banking system, because there would be quite significant implications for the Greek banks? The European financial system is very interconnected . . . Banks are holding some debt as well....
Question: Because if the new currency in Greece devalues 50-70% and they've lost that amoung of their wealth, why wouldn't every person in Spain, in Italy, or anywhere else that this could potentially happen and put it into a safer currency, thus perpetuating the bank runs?

Dewhirst: Um, that's very sensible, and indeed, I think about 30% of the Greek bank deposits have all ready disappeared that way. And 8% of those in other countries have done the same sort of thing. That's true.

Dewhirst was also quoted by CNBC as saying:

“The euro zone is a club but you get cheaters who get away with it until everyone finds out and at that point you need to remove them otherwise everyone will cheat. It’s better for Greece to leave," . . .
“The basic question is that a German has to increase working from 65 to 67 and that is to pay for Greeks retiring at 50. The 17th of June is the perfect opportunity to say either 'we’ll behave' or 'we’ll carry on cheating.

And Dewhirst continues his undiplomatic rant with a flippant joke:

“Greeks would no longer be able to afford German cars and Germans would be able to buy Greek villas and the young unemployed in Greece would have jobs as tourism booms. The best thing would be that they [Greeks] could blame the foreigners."

Unbelievable, and it's no wonder they left that last bit out of the video below. Let's hope Mr. Dewhirst never makes a bad investment or loses his wealth (*cough* JP Morgan *cough*). Woe betide him if he's ever part of the 99% in any country. He might be hungry enough to eat his words.