• Paul Krugman: The paradox of thrift — for real
• Radley Balko: Andy McCarthy of National Review Cheers on the Commies
• James Hamilton: Back where we started
  BLS reported that the total number of Americans employed in June on nonfarm payrolls came to 131.7 million workers on a seasonally adjusted basis. That's below the June 2000 figure of 131.8 million with which we started the decade.
• Doug Merrill on Gold and Iron, by Fritz Stern
• Justin Fox: Breaking news: Regulators are (re)discovering that maybe speculation CAN be excessive
• Samuelson on Greenspan
  “But the trouble is that he had been an Ayn Rander. You can take the boy out of the cult but you can’t take the cult out of the boy. “
• Alan Greenspan: Economy, Housing Will Rise Together
• Steve Benen: Never Underestimate the GOP Rank and File
  Inexplicably quitting, for less-than-clear reasons, has managed to endear Palin to her party more. Somewhere, Mitt Romney and Mike Huckabee are probably smacking their foreheads, saying, "You've got to be kidding me."
• Topless Robot - Bonus! Rob's Transformers 2 F.A.Q.s!
• Conor Friedersdorf: Sarah Palin's Media Mafia
  Isn’t it actually the case that a good chunk of elite America loves Sarah Palin, or at least is willing to lend rhetorical and financial support to her? Why pretend otherwise?
• Meriwether Said to Shut JWM Hedge Fund After Losses
• Eric Rauchway: ¡Huelga contra WPA!

David Kurtz of TPM:

Glad He Cleared That Up: We've gotten an explanation from Rep. Steve King (R-IA) for why he was the lone vote against acknowledging the role of slaves in building the U.S. Capitol. He did it to protest "a several year effort by liberals in Congress to scrub references to America's Christian heritage from our nation's Capitol":

Our Judeo-Christian heritage is an essential foundation stone of our great nation and should not be held hostage to yet another effort to place guilt on future Americans for the sins of some of their ancestors.

So there you have it.

Paul Krugman has a chart:

and writes:

Bond panic subsiding?: Over the course of the spring there was a substantial rise in long-term interest rates; it was fed partly by talk of green shoots, but also, I suspect, by all the yelling about deficits and inflation. And, of course, the rise in rates was itself taken as evidence that inflation fears etc. were justified.

But the panic seems to be subsiding. Rates are still well above their post-Lehman lows, when credit markets were completely frozen and everyone was piling into govt. debt. But they’re low by historical standards, and not giving much ammunition to the worriers these days.

On the contrary, they are giving a significant amount of ammunition to the worriers--my brand of worriers, a different kind of worriers. We worry that the next two years are going to bring what happened after the end of the 2001 recession: something like this:

A recovery in which unemployment is higher two years later than when the recovery began is not much of a recovery. And I don't see what is going to keep the probability of such an eventuality low.

The lower are ten-year Treasury interest rates, the more are people trading in the bond market willing to bet their money that the future holds that kind of non-recovery recovery. And so I worry.

Why oh why can't we have a better press corps? Noah Milman:

Re-Entering the Palin-Drome: As someone who was quite enthusiastic about Sarah Palin for about 30 seconds, and then walked a long way back towards disliking her intensely.... I feel a certain obligation to make three points....

Point #1: There is an assumption running through Ross’ column that Palin, had she not been thrust into the arena too early and too quickly, might have developed into the kind of right-populist leader that the GOP really needs. That was, in fact, what I thought when I first heard of her (from Reihan, as it happens) some while before her sudden stardom: this looks like someone really promising, and... [McCain] needs to take a big risk because the safe choices aren’t going to do it, and she looks really promising. But it’s not what I think now, because I’ve seen how she actually performed. Ross is perfectly willing to say that she performed poorly. He doesn’t seem to be very willing to say that her performance reflects things about her fundamental character. Why?...

Point #2: The column, and Ross’ writing about Palin generally, treats her not so much as an actual person so much as a symbol, a personification of a certain type of person. There’s an expression for that: identity politics.... I’m surprised by the degree to which movement conservative politics in this country have become entirely the politics of identity, and the Palin phenomenon is the best evidence thereof. I think Ross should be against this trend....

Point #3: Ross is critical of the idea of meritocracy.... I’m interested, though, in how Sarah Palin represented a meaningful response to that idea. Meritocracy, in practice, means the selection of the “best and the brightest” for positions of power and authority, primarily by means of testing and scholastic hoop-jumping... “Mandarins.”... [T]here are alternative roads to power and authority... work[ing] your way up slowly through an organization... nepotism... "Talents”... who distinguished themselves by achievement in an entrepreneurial fashion.... Sarah Palin would, presumably, be one of this last group. But what, exactly, is her achievement, beyond her one election to the Alaska governorship?... [W]hat exactly is the great counter-meritocratic message that Palin purportedly embodies, and that Ross wants to salvage (presumably for some future candidate) from the wreckage of her brief career on the political stage?

Not surprising, with Jonathan Weisman on the beat:

A Dig at Berlusconi?: Jonathan Weisman reports from L’Aquila, Italy: President Barack Obama had only been in Italy for a few hours before tongues began wagging over a perceived snub from the U.S. president to Italy’s colorful and embattled prime minister, Silvio Berlusconi.

In Rome just after noon, Obama stood next to the serious, elderly president of Italy, Giorgio Napolitano, a former Italian Communist Party leader, and praised him highly as a man “who has the admiration of the Italian people.” That admiration stems not just from the 84-year-old’s lifetime of service, the U.S. president continued, but because of “his integrity.”

“I had heard of the wonderful reputation of President Napolitano as somebody who has the admiration of the Italian people not only for his longstanding service but also his integrity, and his graciousness,” Obama said. “And I just want to confirm everything I have heard about him is true.”

With Berlusconi enmeshed in scandal over a teenager and alleged call girls caught on tape partying with the prime minister, Obama may not make mention of integrity when he meets the host of the summit of the Group of Eight leading economies here this afternoon.

But then again, the gregarious Berlusconi, always a showman for the cameras, isn’t likely to hold it against Obama.

Why oh why can't we have a better press corps?

• Bob Herbert: After the War Was Over
• Ezra Klein: An Interview with Henry Waxman - An Interview With Henry Waxman

Whether or not you think that it is good for the system for banks to buyback the preferred-stock investments that the Treasury has made through the TARP program, there is no argument at all that it is good for the system to buy back the equity warrants: we want banks to have more equity capital right now, not less. If you don't want the U.S. government holding them, sell them on the open market. But don't retire them until the financial crisis is two years past.

There's at least one chance in ten that the banks will hit the wall again sometime in the next couple of years if the recession turns out to be worse than forecast, and we may once again be desperate to have the banks have as much equity as possible.

And I haven't even reached the issue of what price the warrants should be valued at: just don't do it.

David Mildenberg:

U.S. TARP Warrant Plan Favors Banks, Professor Says: Policy makers want to speed the withdrawal of the government from the banking industry, rather than attempt to maximize returns for the taxpayers by waiting for share prices to rise, Washington banking lawyer William Sweet of Skadden, Arps, Slate, Meagher & Flom said last week. “The president has clearly stated that his objective is to dispose of the government’s investments in individual companies as quickly as is practicable,” the Treasury statement said. The Obama administration gave approval in June for 10 of the biggest U.S. banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley, to repay $68 billion of TARP funds. When the money was first obtained, banks had to give the Treasury preferred stock plus warrants to buy stock at a future date at a specific price, called the strike price.

Wilson values JPMorgan’s warrants at $1.55 billion using the traditional method of determining how much the stock may gain in the next decade, compared with $1.33 billion set by Treasury, he said. The strike price for JPMorgan is $42.42, about 25 percent higher than yesterday’s closing price of $34.11 in New York Stock Exchange composite trading. Banks will have 15 days after retiring government stakes to propose a “fair-market value” for the warrants, the Treasury said last week. Should officials object to the estimate, up to three “independent advisers” will help set a price. If lenders don’t make an offer, the warrants will auctioned.

Negotiations as planned by Treasury open the door to political favoritism and corruption, Simon Johnson, an economist at Massachusetts Institute of Technology, said in an interview. Johnson favors public auctions. “The question is why wouldn’t you sell these on the open market and the answer is that the banks would probably lose,” he said. Treasury is bound by contracts with the banks that set out a specific negotiating process, spokesman Andrew Williams said.

Valuing the warrants may rile Congress because lawmakers including Sen. Jack Reed, a Rhode Island Democrat, have warned Treasury Secretary Timothy Geithner not to let banks buy back government stakes at discount prices. “I will be watching closely to ensure Treasury’s pricing system works both fairly and efficiently for the benefit of taxpayers,” Reed said in a June 26 statement. At least 10 smaller banks have negotiated warrant buybacks with Treasury, including First Niagara Financial Group Inc., which paid $2.7 million, according to a statement this week. It’s among the best prices Treasury has received so far, equal to 65 percent of what the warrants were actually worth, compared with an average of 48 percent for the 10 previous repurchases, Wilson said.

He writes:

We do not need a second stimulus plan: As the US unemployment rate has risen to 9.5 per cent from 8.1 per cent since the $787bn fiscal stimulus package was enacted in February, many Democrats have become very nervous. They say that another large stimulus may be needed to keep unemployment from rising.... Another stimulus would be a grave mistake. The first one was justified by extraordinary circumstances. But it must be given time to work. People should not allow their impatience to lead to the adoption of policies that will not only fail to reduce unemployment this year, but could stoke inflation in the not-too-distant future....

The forecast also showed the unemployment rate peaking at 8 per cent with the stimulus and 9 per cent without. Obviously this was wrong. Yet it would be incorrect to conclude that the stimulus was doomed to failure, as many Republicans and conservative economists argued.... [T]he Romer-Bernstein document presents reasonable estimates of how quickly different forms of spending would raise gross domestic product. Tax cuts and government transfers are slow to have an effect and have a low multiplier, raising GDP less than $1 for every $1 increase in the deficit even when fully effective after two years. By contrast, government purchases stimulate growth much more quickly and have a higher multiplier, raising GDP by $1.57 for every $1 spent. Unfortunately, the low-impact spending has been the fastest to come online while the high-impact spending is dribbling out very slowly.

In a recent report to the International Monetary Fund, Doug Elmendorf, Congressional Budget Office director, looked at the rates of spending for different components of the stimulus package. He estimates that by the end of fiscal year 2009, which falls on September 30, 32 per cent of the income transfers for things such as food stamps and extended unemployment benefits will have been spent and 31 per cent of the tax cuts will have been disbursed. By the end of fiscal year 2010 virtually all of the money allocated to these programmes will have been spent.

However, just 11 per cent of the discretionary spending on highways, mass transit, energy efficiency and other programmes involving direct government purchases will have been spent by the end of this fiscal year. Even by the end of 2010 less than half the funds will have been disbursed and by the end of 2011 more than a quarter of the money will be unspent. Consequently, it is hardly surprising that five months after the stimulus bill passed it has not yet affected the unemployment rate....

What all this means is that it is foolish to think that any sort of stimulus that is enacted now will have an impact on the economy any time soon. We just have to wait for the medicine we have already taken to work. Pushing ahead with another stimulus will only make it harder to tighten fiscal policy down the road to keep inflation in check.

It's a balance of risks. Any second stimulus package passed this fall would have little impact on the economy until late 2010, that is true. But come late 2010 we might really need more demand to curb unemployment. On balance the inflationary risks of having an extra stimulus hit the economy in late 2010 if it is not needed are outweighed by the deflationary risks of not having an extra stimulus hit the economy in late 2010 if it is needed.

It is like driving a car with its windshield painted black by looking in the rear view mirror.

Last December I said that a $1 trillion stimulus looked appropriate but that the incoming administration should get a second stimulus into the budget resolution, with appropriate triggers so that it would be sprung if things turned out to be worse than we then expected.

If the Obama administration had done so, right now we wouldn't be trying to persuade a political system that a stimulus designed for an 8% peak unemployent recession is too small for the 10% unemployment recession we have--let alone the 12% peak unemployment recession we fear.

I wish I weren't so smart...

Laura Tyson adds her voice to the good guys:

naked capitalism: Submitted by Edward Harrison of Credit Writedowns. Laura Tyson, an advisor to President Barack Obama, said in a speech to day in the lead up to the –8 conference that the ground work for a potential second stimulus bill must be laid now. To be sure, the G-8 leaders are expected to recommend continued policy accommodation worldwide. However, Vice President Joe Biden recently suggested that the Obama Administration has no plans for a second stimulus bill on the political TV show Meet the Press (transcript here).  So, which is it – stimulus or no stimulus?

The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an adviser to President Barack Obama.

The current plan “will have a positive effect, but the real economy is a sicker patient,” Tyson said in a speech in Singapore today. The package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration.

Tyson’s comments contrast with remarks made two days ago by Vice President Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years.

Obama said last month that a second package isn’t needed yet, though he expects the jobless rate will exceed 10 percent this year. When Obama signed the first stimulus bill in February, his chief economic advisers forecast it would help hold the rate below 8 percent.

• Reihan Salam: I wouldn’t exactly be surprised if [Sarah Palin] turned blue, sprouted several additional arms, and decided to become America’s chief advocate of a forceful Hindutva politics
• Deborah: Monday Movie Review Rerun: To Have and Have Not