Sustainability 05/30/2009

• Climate Progress » Blog Archive » Big oil made $600 billion under Bush, but invested bupkis in clean energy, Part 2: Details on BP, Chevron, Conoco Phillips, Shell and ExxonMobil

  tags: Sustainability

  • K L Reddington wrote: “If we want to lower crude prices, we will have less battles against drilling in North America.”

    We don’t want to lower crude prices. We want the price of oil, and coal, and natural gas to go up, to internalize the full cost of the environmental damage that they cause, and force them to compete in the market on a level playing field with clean, renewable sources of energy. We want to burn LESS oil, not drill for more of it. We want offshore wind turbines, not offshore oil drilling rigs.

    Besides which, the oil corporations already have vast leases on public lands where they are already permitted to drill, and they aren’t doing it. Why should they? What incentive do the oil corporations have to lower the price of their product by putting more of it on the market?

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Economics 05/28/2009

• Annals of Medicine: The Cost Conundrum: Reporting & Essays: The New Yorker

  tags: Economics

  • When you look across the spectrum from Grand Junction to McAllen—and the almost threefold difference in the costs of care—you come to realize that we are witnessing a battle for the soul of American medicine. Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.
  • As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.
  • When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen.
  • Whom do we want in charge of managing the full complexity of medical care? We can turn to insurers (whether public or private), which have proved repeatedly that they can’t do it. Or we can turn to the local medical communities, which have proved that they can. But we have to choose someone—because, in much of the country, no one is in charge. And the result is the most wasteful and the least sustainable health-care system in the world.
  • omething even more worrisome is going on as well. In the war over the culture of medicine—the war over whether our country’s anchor model will be Mayo or McAllen—the Mayo model is losing. In the sharpest economic downturn that our health system has faced in half a century, many people in medicine don’t see why they should do the hard work of organizing themselves in ways that reduce waste and improve quality if it means sacrificing revenue.

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Economics 05/23/2009

• Beat the Press Archive | The American Prospect

  tags: Economics

  • Zinc and Robert,

    Have you read William Greider’s “Secrets of the Temple”? Perhaps you could test your recollections against Greider’s contemporary analysis.

    Robert, I hope your alien abduction was enjoyable, and that they did not “render” you a third galaxy for the torture of reading Samuelson articles.

    Posted by:
    EconDumbo |
    May 20, 2009 9:12 AM

  • Erik, you should rely on facts, which Dean invariably supplies, and not your memory. Real GDP growth (gross and per capita) in the 70’s was better than in the 80’s (or for that matter the 90’s and 00’s.

    See Dean’s post from early last year. http://www.prospect.org/csnc/blogs/beat_the_press_archive?month=01&year=2008&base_name=why_would_presidents_envy_bad&53.

    While Volcker’s policy certainly helped reduce inflation, the resulting high interest rates (both LIBOR and Prime peaked around 20% in the early 80’s), not only wrecked the US economy, but created havoc in developing countries, in particular Latin America.

    The Latinos don’t call the 80’s the Lost Decade for nothing.

  • “The U.S. economy had high inflation in the late 70s primarily because the OPEC price increases.”

    Correct me if I am wrong, but I think that there is more to that. Many petrodollars left the U. S. (and other countries) for the OPEC nations, because OPEC raised the price of oil. But these nations, by and large, did not have a developed banking system (because of religious strictures). So they sent petrodollars to the big banks in London and New York. Instead of lending the returning dollars in the U. S., which would lower U. S. interest rates, the big New York banks, our friends at Citi, BOA, and others, sought lucrative returns by making risky loans abroad, many to Latin American governments. The risk on these governmental loans was underestimated because of the idea that “governments do not go bankrupt” — and the ignorance of history. But governments do, and did, default on their loans.

  • A large part of our current predicament can be laid at Volcker’s feet. The recovery of 1983-84 was led by a massive expansion of consumer credit, specifically credit cards. (You can see this on any of the graphs showing the rising tide of consumer debt in the US.)

    The problem was that “whipping inflation” depressed wages for the majority of the population. So only the expansion of credit enabled the recovery. (One of the interesting things about the recovery from that recession was that it was led by consumer spending.) And one thing led to another…and then…and then…

• Ezra Klein – Should Ben Bernanke Roll the Dice?

  tags: Economics

  • Thanks Rick00 for the tip on the book. People may also want to check the writings of William Greider, whom I first read in his book on the Fed called Secrets of the Temple.

    It studies the inner deliberations and actions of the Fed during the transition from Carter into the Reagan years, including the fight to kill inflation, and the Savings and Loan collapse. It tells a story of massive hardships forced year after year upon working people and businesses by the Fed’s primary concern for its true constituency, the banks (and secondarily, bondholders).

    And it’s true as a commenter said above, that the Fed’s judgment is pretty poor when it comes to its adjustments. A study of financial history shows that the Fed has actually been screwing up pretty consistently since its creation.

    So there’s one thing consistent about the Fed for you. I’d say on that basis the randomness is already built in.

    Posted by: wapomadness | May 22, 2009 12:04 PM
    | Report abuse

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Sustainability 05/20/2009

• Ezra Klein – Your World in Maps: Climate Change Edition

  tags: Sustainability

  • The scattered protesters received most of the coverage at the University of Notre Dame yesterday. But Barack Obama’s speech merits some attention too

  • “Your generation must decide how to save God’s creation from a changing climate that threatens to destroy it,” Obama thundered. “You’ll be called to seek new sources of energy that can save our planet.” This isn’t new: The Evangelical Climate Change initiative has long been arguing that global warming is particularly salient to the Christian activist. Scorching the earth is poor stewardship.

    Which might explain the shift in Obama’s language. he normally speaks of climate change in terms of American interests, jobs, and security. Not yesterday. Climate change was presented not as a domestic issue but as a global danger. It is not just our nation that’s threatened, but the planet. That’s actually a more honest approach. But it gets at one of the real difficulties of addressing climate change. America — the world’s leading emitter of carbon — must make the most changes even as it derives the least benefits.

  • The developed countries that benefit most from fossil fuels will suffer least. The countries with the maximum incentive to prevent climate change have no power to do it. At Notre Dame, Obama exhorted the graduates to recognize that “that our fates are tied up, as Dr. King said, in a ’single garment of destiny.’” But we are not bound equally. No wonder Obama is looking to create a new coalition.

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Economics 05/16/2009

• Felix Salmon » Blog Archive » When banks try to defend credit cards | Blogs |

  tags: Economics

  • I have credit card bills from 20 years ago. The rate was about 12-15 percent on the cards I had. It was the scandalous cards at 19.8. Moreover, there was no such thing 20 years ago as a default rate or companies raising your rate based on your other relationships with the bank. The grace period was also 30 days, compared to 20 today. The junk fees (late, over-the-limit, forex) were lower. And consumers were NOT paying the same rate. There was a wonderful diversity of card issuers and rates (almost all fixed) available.

• The Skirmish over Credit Cards « The Baseline Scenario

  tags: Economics

  • As we’ve written before, there is a complex relationship of co-dependency between the government and the banking sector. The administration has placed its bets on the banking sector in its current form, with its current leaders, and has provided it large amounts of financial support; and many members of Congress have even more direct allegiances to the banking sector via the mechanism of campaign finance. At the same time, banks are largely hated today, and credit card companies perhaps more than any other part of the banking industry. (They are largely the same companies – Bank of America, Citigroup, and JPMorgan Chase all have huge credit card businesses – but people feel differently about their credit cards and their checking accounts.) So this bill, and President Obama’s lobbying for it, is a way to strike a blow for the beleaguered consumer while not doing too much damage to banks’ profitmaking ability. As Felix Salmon pointed out, the Federal Reserve already defined new credit card regulations that go into effect in July 2010. 

    From the banks’ perspective, this may look like a slippery slope to more regulation, and so they are trotting out all the usual arguments that Salmon describes in his post. But when push comes to shove, I doubt they will call in all their favors fighting this battle. The big fight will be over the new regulatory structure in the fall, and in the meantime it doesn’t hurt to let the administration have a victory.

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Economics 05/08/2009

• EzraKlein Archive | The American Prospect

  tags: Economics

  • The subprime mortgages aren’t the real evil. They are like the kid who acts as a mule for a big-time drug dealer; involved but fungible. If it wasn’t subprime mortgages it could have been something else, such as tech stocks or tulips. Total subprime mortgages were worth less than 1 trillion, of those, a few hundred billion worth of defaults. That is a lot of money, but an amount that could have been absorbed by the economy without causing particular harm.
    The real evil is unregulated derivatives. Credit default swaps alone are estimated at over $60 trillion. Those are all just side bets on the original 1 trillion of subprimes. It’s like a craps table. The guy holding the dice drops a $100 chip on the table. If he loses, he goes home $100 poorer. But the derivatives markets then bet the farm on that same roll of the dice. And I mean the whole farm. The entire world’s domestic gross product is estimated at about $60 trillion. Derivatives makers and dealers bet the equivalent of the world’s economy on whether some poor schlub would default on his mortgage.
    Deal with everything else but not unregulated derivatives, and this will all happen again. Deal with the derivatives market, and everything else is just mopping up.
    For more info, google Frank Partnoy, or read the 2009 re-release of his book, F.I.A.S.C.O.

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Policy 05/02/2009

• EzraKlein Archive | The American Prospect

  tags: Policy

  • One could make a case for saying leave things as they are.

    I can’t detail this, but my impression over the decades has been that in any particular time the Court often leans against otherwise fairly unified political currents in the legislature and executive – and certainly against fads.

    There’s a great advantage, as one of the major checks and balances, in the Court’s composition being able to last as a legacy for, say, 30 years. This time period surely outlasts other political change.

    And remember, this reliance we’ve developed on legislation by the judiciary stems from the gutlessness of legislatures, and is not a sign of strength in our system.

    We should be relying on the U.S. Supreme Court to tell us if the rest of our process has adhered to the Constituion, and for nothing else.

    Posted by:
    Ross Hunter |
    May 1, 2009 2:21 PM

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