Author Archives: William Black

Democrats Should Reject Bernanke’s ‘Wily E. Coyote’ Criticism of Trump’s Deficits

By William K. Black
June 11, 2018     Kansas City, MO

Ben Bernanke recently gave a speech predicting that President Trump’s deficits will cause the economy to “go off a cliff in 2020.”  Many Democratic Party politicians, of course, will rush to embrace the criticism and prove that they are the true party of fiscal responsibility.  They can then get back to pushing for increased taxation and cuts to the safety net “to save it” from collapse – and feeling virtuous.  These Democrats will glory in their supposed virtue and gravitas as they oppose ‘excessive’ stimulus, cut the safety net to ‘save it,’ oh-so-judiciously cut funding for social programs, and push for higher taxes.  They know this is bad politics, but that adds to their faith that the more bitter the medicine the greater the curative properties.  Faith-based federal deficit phobia, however, is terrible economics and terrible politics.

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The New York Times Editorial Board’s Incoherence on Italian Austerity and the Euro

William K. Black
June 2, 2018     Bloomington, MN

(Third in a series of articles on Italy, Austerity, and the euro)

The New York Times’ editorial board published a May 29, 2018 editorial about Italy’s ongoing political and financial issues that praised austerity in Italy.  The board cheered the anti-democratic appointment of “Carlo Cottarelli, a solidly pro-Europe and pro-austerity economist and former official of the International Monetary Fund, to form a nonelected government.”  In particular, the board expressed its horror that Italy (which continues to have unemployment levels one expects to find in a severe recession) would have adopted “grandiose spending plans” (fiscal stimulus) if the Italian establishment had not sought to block the results of the recent Italian election.

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The EU Commission’s In-House Bigot Invites Financiers to Extort Italian Voters

By William K. Black
May 30, 2018     Bloomington, MN

The European Union’s (EU) leadership continues to prove our family rule that it is impossible to compete with unintentional self-parody.  “EU leadership” is an oxymoron, largely composed of regular morons.  Consider only two examples — European Commission (EC) President Jean-Claude Juncker and Commissioner and Budget and Human Resources Minister (one of the EC’s most powerful leadership positions) Günther Oettinger.

Juncker heads the EC because he led the most infamous EU tax giveaway to wealthy corporations as Luxembourg’s finance minister and then prime minister.  Whistleblowers and the International Consortium of Investigative Journalists (ICIJ) eventually exposed the fact that for over a decade the wealthiest companies in the world created front companies in Luxembourg and met secretly with the finance minister to negotiate secret sweetheart deals allowing the companies to pretend to earn their income in Luxembourg – and to pay obscenely low tax rates.  The secret deals “allowed some of them to pay effective tax rates of less than 1 percent on profits shuffled into Luxembourg.”  Luxembourg is so tiny that even at these ridiculously low tax rates the covert deals made the country wealthy (at the direct expense of the public sectors of other EU nations and the United States).  Juncker’s eagerness to aid plutocrats made him the EU’s longest-serving leader as Luxembourg’s PM until a different scandal brought him down.  These sweetheart tax scandals led, not prevented, Juncker’s elevation to run the EC.  In response to the exposure of the scandal, Luxembourg: greatly increased the number of sweetheart deals, prosecuted the whistleblowers and the investigative journalists, and took no action against Luxembourg’s “let’s make a deal” leaders or the plutocrats (which included Koch Industries).

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The New York Times Praises the Italian Establishment’s Economic Illiteracy and Assault on Democracy

By William K. Black
May 29, 2018     Bloomington, MN

Italy’s establishment has just revealed its truest beliefs and priorities.  The context was the two parties that received the most votes in the last election forming a coalition government.  The two parties seeking to form a coalition government won a majority of the seats in both houses of Italy’s parliament in the most recent election.  The New York Times reported many of the key facts, but missed the key analytics.

Italy’s populists seethed and the European Union sighed with temporary relief on Sunday night after an anti-establishment alliance poised to govern the bloc’s fourth-largest economy imploded at the last minute amid concerns that it was planning to sneak out the back door of the eurozone.

Less than a week after Italy’s populist parties, the anti-establishment Five Star Movement and the anti-immigrant League, ironed out their policy differences and jubilantly received a mandate to form a government that they said would usher in a new era in Italian and European history, its designated prime minister announced on Sunday evening that he had failed to form a government.

Both paragraphs are lies.  Bizarrely, the rest of the article demonstrates both lies.  I do not support key aspects of either party’s platforms, so I am not writing as a disgruntled supporter.  I start with the NYT’s second lie, for exposing it also exposes the first lie.  Giuseppe Conte, the “designated prime minister,” did not “announce … that he had failed to form a government.”  He announced an undisputed fact – a political rival, President Sergio Mattarella, refused to allow the two parties to form a coalition government because he objected to their selection of Paolo Savona as their economics minister.

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Fair Seas and Following Wind John McCain

William K. Black
May 15, 2018     Bloomington, MN

As a savings and loan regulator, on April 9, 1987, I experienced Senator John McCain at his very worst.  He, and his four Senate colleagues, collectively, the “Keating Five,” pressured my colleagues and me to withdraw our recommendation that our agency place Charles Keating’s Lincoln Savings and Loan into conservatorship.  Keating was looting Lincoln Savings and would soon defraud thousands of widows.  Lincoln Savings became the most expensive failure because the combination of the ‘Keating Five’ and Speaker of the House James Wright, Jr. successfully intimidated the new leadership of our regulatory agency.  The cowardly new leadership team refused even to consider our conservatorship recommendation and took the unprecedented action of removing our regulatory jurisdiction over Lincoln Savings.  Senator McCain and his colleagues acted badly for poor reasons and caused grave harm.  Senator McCain has said that his actions on behalf of Keating caused him greater pain than his North Vietnamese torturers.

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John Cochrane Loves the Rule of Law (Some Exceptions Apply)

By William K. Black
December 22, 2017     Bloomington, MN

As Brad DeLong aptly puts it, John Cochrane was once an economist.  Cochrane is now a right wing ideologue surrounded by similar ideologues at Hoover.  He is pushing his new chapter in a Hoover book entitled American Exceptionalism in a New Era.  His chapter’s title is “Law and the Regulatory State.”  I will be writing several articles responding to Cochrane’s chapter, but this first piece concentrates on one key belief that Cochrane said he held that we all agree with.  My point is that Cochrane is not living up to his claimed beliefs, which he summarized in his introduction.

To be a conservative—or, as in my case, an empirical, Pax-Americana, rule-of-law, constitutionalist, conservative libertarian—is pretty much by definition to believe that America is “exceptional”—and that it is perpetually in danger of losing that precious characteristic. Exceptionalism is not natural or inborn but must be understood, cherished, maintained, and renewed each generation—and its garden is always perilously unattended.

This first column shows that under Cochrane’s own reasoning the “danger” to the “precious” “rule of law” has never been greater in the last 50 years.  Instead of “cherish[ing]” and “maintain[ing]” the “garden,” Cochrane has chosen to leave it “perilously unattended” because of his fanatic partisanship.  Trump is ripping up and sowing salt in Cochrane’s “precious” “garden” and Cochrane stirs himself primarily to attack Trump’s critics.  Brad’s description requires amendment.  Cochrane was once an economist and once a self-described “rule-of-law constitutionalist, conservative libertarian.”  Now, he is an unexceptionable apologist for Trump’s authoritarianism, venality, and corruption.  Whatever remains of Cochrane is what you get when you burn a substance and retain only its most noxious waste gases. Continue reading

Modern Macro Got the 2008 Crisis Painfully Wrong

By William K. Black

December 19, 2017     Bloomington, MN

Lawrence J. Christiano was the lead author of the article announcing the Dilettante doctrine that I discussed in the first column in this series.  His ‘dilettante article’ claimed that modern macro got the last crisis so wrong because it ignored the ‘shadow’ financial sector.  I have found a 2008 article by him and two Minneapolis Fed co-authors that illustrates modern macro’s blindness to the shadow financial sector.  The article is entitled “Facts and Myths about the Financial Crisis of 2008” and the first footnote says that they wrote the article based on information available on October 25, 2008.  The purpose of the article was to demand that proponents of fiscal and monetary stimulus prove a specific “market failure” justifying stimulus.  Christiano and his co-authors agree that the Nation is in a “financial crisis” and that it could lead to a serious recession, but see no reason for the government to act.

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DSGE Dilettantes v. ADM God Devotees

By William K. Black

December 18, 2017     Bloomington, MN

The truly exceptional thing about ‘modern macroeconomics’ devotees is not that they are so consistently and horrifically wrong or that they persist in their errors – but their exceptional combination of arrogance and disdain for those who have dramatically better records and broader and more relevant expertise.  Kartik Athreya, the Richmond Fed’s Research Director, led the modern macro parade on June 17, 2010 with his blog (which he later withdrew in embarrassment) when he announced the Athreya Axiom of Absolute Arrogance.

So far, I’ve claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy. Taken literally, I am almost certainly wrong. Some of them have great ideas, for sure. But this is irrelevant. The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.

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It is Impossible to Compete with Unintentional Self-Parody: Trump and Opioids

By William K. Black
October 22, 2017      Kansas City, MO

This is the first in a series of columns I will write that are prompted by the joint 60 Minutes and Washington Post investigations of the role of Congress and the White House in making it far harder to sanction effectively companies selling massive numbers of opioids that they know will go largely to those addicted to opioids.  I will use the case study to illustrate many important points that criminologists know about elite white-collar crime and how to limit it and sanction perpetrators.

In this column, I introduce one of the most important concepts in white-collar crime – “seeming legitimacy.”  The most elite predators use the seemingly legitimate entities in the business, government, and non-profit sectors that they run as “weapons” of predation and “shields” against sanctions.  The criminology term for this is “control fraud.”  The same logic applies to non-criminal predation.  I will show in later columns in this series that Representative Marino (R, PA), the worst of the political shills for the opioid Predator Class, repeatedly spread the falsehood that the worst of the opioid predators could not be predators because they structured their firm as if it were “legitimate.”  As a former state and local prosecutor, Marino knows that CEOs running the largest frauds pose as seemingly legitimate firms because it optimizes control fraud.

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Cheap Sexism and Intellectual Dishonesty about Marriage

By William K. Black
October 2, 2017     Kansas City, MO

This is the second column in my series about win-win strategies to strengthen the family and countering the conservative culture warriors who use the family as a means to oppose win-win solutions that bring people together.  Mark Regnerus is one of the most notorious of these hard right culture warriors.  He is the disgraced pseudo-scholar who right-wing groups funded to try to gin up evidence that same sex marriage harmed children.  His efforts collapsed in an embarrassing spectacle that made clear that his dogmas rule his work.

Regnerus is back in the Wall Street Journal flogging his new book in an op ed entitled “Cheap Sex and the Decline of Marriage.”  He introduces his thesis with the claim that because unmarried heterosexual women are willing to have sex, tens of millions of men are no longer willing to marry.  If unmarried heterosexual women wish to improve their chances of getting married, they need to be virgins – and convince their sisters to remain virgins until marriage (at an average age of around 28 for college-educated women).

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