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Communications over the world wide doesnt depend on sytax or eloquence or rethoric or articulation but on the emotional context in which the message is being heard.
People can only hear you when they are moving toward you and they are not likely to when your wordss are pursuing them
Even the choices words lose their powe when they are used to overpower.
Attitudes are the real figures of speech '-Friedman

Tuesday, August 30, 2011

Alan Krueger for CEA

Paul Krugman - New York Times Blog



OK, the power is still out at home — but over on Route 1, civilization, plus even a signal (I have Verizon’s internet anywhere, which is actually anywhere except where I live).
So, while the battery lasts: Alan is a fine choice as chief economic adviser. He’s done excellent work, he’s a really good guy, whom I know pretty well, since we keep getting each others’ mail.
Now the question is whether anyone in the administration listens to him …
Update: I gather that there’s some commentary to the effect that Alan is a labor economist rather than a macro person like Christy Romer, and that this means less emphasis on actually increasing demand and solving the slump.
I think that may be reading too much into it. Alan may write about labor markets, but he knows macro and is pretty salt-water and activist by inclination, as far as I know. His advocacy of job tax credits comes from an attempt to work within political constraints, not lack of interest in more decisive solutions. And I think the administration was looking for a high-profile, first-rate economist willing to take the job, rather than tilting toward a particular field.
Also, the reason we get each others’ mail is that Princeton relies on the advanced mail-processing technology known as pigeon-holes, and our slots are next to each other in the Woodrow Wilson School set.


Note: Krueger, 50, served as the Labor Department's chief economist during the Clinton administration, and a look at his curriculum vitae (pdf) reveals that much of his research has focused on issues of employment and wages.
Krueger's study found that the amount of time a worker spends looking for a job decreases "sharply" the longer he's unemployed. Krueger also reported that the jobless are not any more likely to spend time looking for work when their unemployment benefits are set to expire--a finding that undercuts the claim that extending such benefits will discourage the jobless from looking for work.
"Given his expertise in labor economics, he is precisely the right choice to lead the CEA at this moment in history," Treasury Secretary Tim Geithner said of Krueger,



Of course, Krueger will face some institutional obstacles. Past economic advisers with the Obama administration have argued for more aggressive measures targeted at job growth, but were over-ruled after other aides convinced President Obama to focus on deficit reduction. And even with the White House now saying it plans to focus on jobs, Republicans in Congress likely won't support any significant spending measures of the kind most likely to spur growth.
One additional factor may have played a role in the White House's nomination of Krueger: For his Treasury post, he recently cleared the Senate confirmation process, meaning he's likely a good bet to do so again.

EUROPE’S BIG MISTAKE by James Surowiecki

european economic crisis - csp6941148
In July, 2008, on the eve of the biggest financial crisis in memory, the European Central Bank did something both predictable and stupid: it raised interest rates. The move was predictable because the E.C.B.’s president, Jean-Claude Trichet, was an inflation hawk; he worried about rising oil and food prices and saw a rate hike as a way of tamping them down. But the move was also remarkably ill timed. The crisis was already under way, European economic growth had slowed to a crawl, and within a couple of months the global economy had collapsed, inflation had disappeared, and the E.C.B. was forced to slash interest rates, in an attempt to avert economic disaster. That July rate hike was like kicking the economy when it was down



One might have thought that the E.C.B. would learn from the experience. No such luck. This year, Europe has been wrestling with high unemployment, slow growth, and a continuing debt crisis, with the economies of Portugal, Ireland, Italy, Greece, and Spain (the so-called PIIGS) struggling to avoid default. Given the situation, Trichet could have decided to keep interest rates where they were, as both the Federal Reserve and the Bank of England have done. Instead, the E.C.B. raised interest rates in April and, once more, in July. Again, as if on cue, European economic growth stalled and the continent’s debt crisis deepened, which has created problems for markets around the world.
Policymakers make bad decisions all the time, of course. The E.C.B.’s failures, however, are the result not of mere bad judgment but of obsession. That obsession may not have created Europe’s problems, but it has amplified them. The continent’s economic woes boil down, really, to two issues: too much debt and too little growth. These things are connected to each other: the PIIGS are struggling with their debt loads largely because their economies are growing too slowly. By raising interest rates, the E.C.B. increased borrowing costs and slowed economic growth—the opposite of what was needed. And, while the E.C.B. did step up and buy Italian and Spanish government bonds last month, in order to keep those countries afloat, by doing this it was plugging a hole that its own actions had done much to create.
The E.C.B.’s actions have been especially damaging because they’ve come at a time when, in response to the debt crisis, European countries have been forced to take austerity measures, slashing government spending and raising taxes. When fiscal policy is contractionary, expansionary monetary policy can help make up the difference. This is what the Federal Reserve has tried to do in the U.S.—albeit not aggressively enough. The E.C.B., by contrast, has decided to tighten, which means that both fiscal policy and monetary policy are hitting the brakes on the economy.
The perplexing thing about the E.C.B.’s approach is that it’s hard to see who benefits. The traditional explanation for the bank’s anti-inflationary zeal hinges on the fact that the continent’s stronger economies, in particular Germany’s, don’t need any help growing, and don’t like the fact that inflation reduces the real value of assets. So while the PIIGS might prefer a monetary policy that shrank debts and spurred growth, Germany wants low inflation, and Germany wins. Yet right now the entire continent would benefit from easier money. Germany’s economy may have been doing well earlier this year, but it isn’t anymore; in the past quarter, it grew just 0.1 per cent, more slowly than the U.S.’s. Germany is heavily dependent on exports, including exports to the rest of Europe, which means that it can prosper only if other countries do. On top of that, the debt crisis has hurt German banks, which had lent heavily to the PIIGS. Once upon a time, you could argue that the E.C.B.’s approach was helping Europe’s big economies at the expense of the smaller ones. But the current tight-money strategy is making every country a loser.
To be fair, the E.C.B. isn’t alone in its paranoia about inflation. That bias reflects the preferences of many voters, whose hatred of inflation tends to be disproportionate to its real costs. (Cue Rick Perry saying that looser monetary policy would be “almost treasonous.”) Most studies of moderate inflation find that its costs are quite small, but a study of elections in thirteen European countries from the nineteen-sixties to the nineties found that voters were far more likely to toss out politicians when inflation rose than when unemployment did. Inflation hits everyone, after all, even those who have jobs, and it’s easier to get angry about expensive gasoline than about that raise you might have got if the economy were stronger.
Still, the fact that the E.C.B.’s attitude is widely shared doesn’t make it any more excusable. In times of crisis, policymakers need to identify the threats that matter most. Today, rising prices are not a real threat to Europe; recession and debt default are. Trichet is fond of pointing out that the E.C.B.’s primary mandate is to maintain “price stability.” But prices in Europe, where inflation is around 2.5 per cent, are not unstable. And, by acting as if Europe were in danger of repeating the nineteen-twenties, when Weimar Germany succumbed to hyperinflation, Trichet is running the risk of repeating the mistakes of the early thirties, when central bankers’ tight-money policies and zeal for austerity made a bad situation much, much worse. (It’s worth remembering that it was the Depression, not hyperinflation, that toppled the Weimar government and brought Hitler to power.) The E.C.B. has spent this year fighting off the phantom danger of inflation. It’s time for it to face up to the real danger of recession. 


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