Category: Current Affairs
Russia fact of the day
Shares in Gazprom, a company that made $32bn in net income last year, trade at only 2.6 times forward earnings.
That is from FTAlphaville.
Economists sign petition asking Congress to contain fallout from Argentina debt ruling
The notice is here, signers include Bob Solow and Dani Rodrik. I agree with their arguments, and you will find my slightly different but still consistent earlier critique here. Here is one bit from the press release:
“It’s a widely shared opinion among economists that the court’s attempt to force Argentina into a default that nobody – not the debtor nor more than 90 percent of creditors – wants, is wrong and damaging,” said Mark Weisbrot, economist and Co-Director of the Center for Economic and Policy Research, who helped circulate the letter.
Matt Levine has a good post on the situation here.
Is genetic risk aversion rational?
As the conflict rages, displacing hundreds of thousands, U.N. and Palestinian officials say some families have made a macabre calculation: to split up, with each group seeking refuge in different parts of Gaza. If one part of the family gets killed, others will live on to help the survivors and keep their dynasty alive.
But most families, officials say, still move together as a source of strength and comfort. Some are now living with other relatives, further increasing their familial size, while others have taken shelter in U.N.-run schools and other refuges.
From Sudarsan Raghavan, there is more here. Note that if there is a “single (cost-adjusted) safest perceived place,” splitting up the family into two or more locations is increasing the net expected danger to some family members, without making any members safer.
Ukraine fact of the day
The Ukrainian economy shrank 4.7 per cent annually in the second quarter, far deeper than expected and casting a cloud over the assumptions that underpin the International Monetary Fund’s $17bn bailout.
That follows a 1.1 per cent year-on-year contraction in the first quarter. Given the ongoing unrest in eastern Ukraine, where much of the industrial base can be found, economic growth is unlikely to pick up later this year.
There is more here.
What is the strategy of Hamas?
David Brooks writes:
But when the Muslim Brotherhood government fell, the military leaders cracked down. They sentenced hundreds of the Brotherhood’s leadership class to death. They also closed roughly 95 percent of the tunnels that connected Egypt to Gaza, where the Brotherhood’s offshoot, Hamas, had gained power.
As intended, the Egyptian move was economically devastating to Hamas. Hamas derived 40 percent of its tax revenue from tariffs on goods that flowed through those tunnels. One economist estimated the economic losses at $460 million a year, nearly a fifth of the Gazan G.D.P.
Hamas needed to end that blockade, but it couldn’t strike Egypt, so it struck Israel. If Hamas could emerge as the heroic fighter in a death match against the Jewish state, if Arab TV screens were filled with dead Palestinian civilians, then public outrage would force Egypt to lift the blockade. Civilian casualties were part of the point. When Mousa Abu Marzook, the deputy chief of the Hamas political bureau, dismissed a plea for a cease-fire, he asked a rhetorical question, “What are 200 martyrs compared with lifting the siege?”
The eminent Israeli journalist Avi Issacharoff summarized the strategy in The Times of Israel, “Make no mistake, Hamas remains committed to the destruction of Israel. But Hamas is firing rockets at Tel Aviv and sending terrorists through tunnels into southern Israel while aiming, in essence, at Cairo.”
The full column is here.
Al Qaeda kidnapping markets in everything
While European governments deny paying ransoms, an investigation by The New York Times found that Al Qaeda and its direct affiliates have earned at least $125 million in revenue from kidnappings since 2008, of which $66 million was paid just in the past year.
In various news releases and statements, the United States Treasury Department has cited ransom amounts that, taken together, put the total at around $165 million over the same period.
These payments were made almost exclusively by European governments, who funnel the money through a network of proxies, sometimes masking it as development aid, according to interviews conducted for this article with former hostages, negotiators, diplomats and government officials in 10 countries in Europe, Africa and the Middle East. The inner workings of the kidnapping business were also revealed in thousands of pages of internal Qaeda documents found by this reporter while on assignment for The Associated Press in northern Mali last year.
In its early years Al Qaeda received most of its money from deep-pocketed donors, but counterterrorism officials now believe the group finances the bulk of its recruitment, training and arms purchases from ransoms paid to free Europeans.
The full story is here. by Rukmini Callimachi. Oh, and don’t forget this:
Negotiators take a reported 10 percent of the ransom, creating an incentive on both sides of the Mediterranean to increase the overall payout, according to former hostages and senior counterterrorism officials.
It turns out that Al Qaeda hardly ever executes prisoners any more.
For the pointer I thank Michael Rosenwald.
Stratfor on Israel and Gaza
Israel’s major problem is that circumstances always change. Predicting the military capabilities of the Arab and Islamic worlds in 50 years is difficult. Most likely, they will not be weaker than they are today, and a strong argument can be made that at least several of their constituents will be stronger. If in 50 years some or all assume a hostile posture against Israel, Israel will be in trouble.
Time is not on Israel’s side. At some point, something will likely happen to weaken its position, while it is unlikely that anything will happen to strengthen its position. That normally would be an argument for entering negotiations, but the Palestinians will not negotiate a deal that would leave them weak and divided, and any deal that Israel could live with would do just that.
What we are seeing in Gaza is merely housekeeping, that is, each side trying to maintain its position. The Palestinians need to maintain solidarity for the long haul. The Israelis need to hold their strategic superiority as long as they can. But nothing lasts forever, and over time, the relative strength of Israel will decline. Meanwhile, the relative strength of the Palestinians may increase, though this isn’t certain.
Looking at the relative risks, making a high-risk deal with the Palestinians would seem prudent in the long run. But nations do not make decisions on such abstract calculations. Israel will bet on its ability to stay strong. From a political standpoint, it has no choice. The Palestinians will bet on the long game. They have no choice. And in the meantime, blood will periodically flow.
There is more here, of interest throughout, via Eric Reguly.
Germany fact of the day
…in Germany, the government is rolling out a red carpet by simplifying immigration procedures, funding free language classes, even opening “welcome centers” for newcomers looking to carve out a piece of the German dream.
In the rankings of the globe’s most prosperous countries, this economic powerhouse of 82 million has now leapfrogged Canada, Britain, Italy and Spain to become the largest destination for immigrants after the United States, according to the Paris-based Organization for Economic Cooperation and Development.
The article is here.
The real import of the Jon Gruber fracas
It would be much easier if (some) people would simply say “Of course this normally should be kicked back into the legislature for clarification. But I don’t want to do that because I don’t regard Republican control of the House, and how that control is used, as a legitimate form of rule.” One may agree, or not, but the nature of the case is pretty clear.
Instead we read irrelevant blog posts and tweets about how the experts meant to have subsidies at all levels all along. Of course they did. But did Congress know what it was doing in a detailed sense, one way or another? Hard to say, personally I doubt it, and Alex says no. The basic starter hypothesis here is that many of them knew this was a health care bill, it would extend coverage, it had a mandate, it had some subsidies, it had a Medicaid expansion, it had some complicated cost control, it was approved by leading Democratic Party experts, it met some CBO standards, and beyond that — if you pull out those who were confused on the details of the exchanges and the subsidies do you still have majority support? I doubt it. Most absurd of all are the tweets asking the critics to show Congress intended no federal-level subsidies.
So, to return to the title of this post, the import of the Gruber fracas is to show that if he can be confused (more than once, at that, and is “confused” even the right word?) a lot of ACA supporters in Congress probably were confused too.
So given that across-the-board subsidies are not written into the bill formally, and given the importance of precedent, and rule of law, why not kick the matter back into the legislature for redrafting? Which brings us back to the first paragraph of this blog post…
I have drawn on some Ross Douthat tweets in thinking through this post.
The Paul Ryan anti-poverty plan
The Ryan plan is here (pdf), an NYT summary is here. Overall it’s pretty good. It attacks excess incarceration and occupational licensing and regressive regulations, three issues where a serious dialogue is badly needed. It makes a good attempt to limit the incentives for lower-income people not to work. It’s better than what the Left is turning out for the first time in…how long?
I’m not crazy about the complicated plan to monitor the lives of the poor in more detail (“…work with families to design a customized life plan to provide a structured roadmap out of poverty.”) And my biggest conceptual objection is the heavy stress on block grants and letting the states figure things out. I’m not opposed to that in principle, and I might even favor it, but I think it’s often the lazy man’s way of avoiding talk about difficult trade-offs. I’d like to see a possible plan for just a single state, or better yet two or three, that is supposed to represent an improvement. That shouldn’t be too hard to do, or if it is maybe the states can’t do it either. It’s not as if fifty states are giving us a market-based discovery process, as the rhetoric sometimes implies. Furthermore we have a bunch of large states with ongoing bad governance, such as CA, NY, and IL, and maybe the federal government really can do better for those places.
Here is Vox on the regulation side of the plan. Kevin Drum offers comment. Ross Douthat mostly likes it. Jared Bernstein doesn’t like it. Robert Greenstein is critical. Here is Neil Irwin. And Annie Lowrey. And Josh Barro. And Yuval Levin. And Ezra Klein. Other people have opinions about it, too. Or so I am led to believe.
Jonathan Gruber describes Obamacare, circa 2012
What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits — but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges.
There is more detail here, from Peter Suderman, along with the video and also the fuller context for those (such as myself) who have not been following this issue very closely.
America fact of the day
The manufacturing sector is now operating at 77.8 percent of its capacity, according to Federal Reserve data, well above the 76 percent average during the last expansion and not far from the 79.1 percent peak during the mid-2000s.
That is from Neil Irwin. As I’ve been saying for over a year, we are no longer at the point where boosting nominal demand will help very much if at all.
*Storyline*, by The Washington Post
From my email:
The Washington Post today launches ‘Storyline’, a new digital initiative led by economics writer Jim Tankersley examining how U.S. public policy is affecting the lives of Americans across the nation. Storyline will feature a mix of narrative writing, data journalism and visual storytelling to explore big questions like: who’s being lifted by the economic recovery, and who’s left waiting for it to kick in? How are Americans adapting to life under Washington’s immigration deadlock?
http://www.washingtonpost.com/news/storyline
How bad is Chinese debt really?
China’s total debt load has climbed to more than two and a half times the size of its economy, underscoring the difficult challenge facing Beijing as it seeks to spur growth without sowing the seeds of a financial crisis.
The total debt-to-gross domestic product ratio in the world’s second-largest economy reached 251 per cent at the end of June, up from just 147 per cent at the end of 2008, according to a new estimate from Standard Chartered bank.
Such a rapid build-up is far more of a concern than the absolute level of debt, since increases of that magnitude in such a short period have almost always been followed by financial turmoil in other economies.
While calculations of the ratio vary depending on exactly what types of credit are included, several other economists agreed with the new figure. Even those with slightly different calculations said the general trend was clear.
…“China’s current level of debt is already very high by emerging markets standards and the few economies with higher debt ratios are all high-income ones,” said Chen Long, China economist at Gavekal Dragonomics, a research advisory. “In other words China has become indebted before it has become rich.”
The U.S. total debt-to-gdp ratio is now about 260 percent. From the FT, there is more here.
I also would like to see an estimate of the Chinese wealth-to-income ratio, relative to the U.S. ratio. I would expect a higher ratio for the United States, which would militate in favor of greater sustainability for American debt, but of course that is why we wish to have the actual numbers.
An Israeli median voter theorem? (model this war)
…on July 13, about four days before the actual incursion began, about 67 percent of Israelis supported a ground operation. By authorizing one, Netanyahu has given the public what it has demanded.
That is from Brent Sasley.
Fred Kaplan wonders whether Israel has lost its ability to think strategically. Even Max Boot seems to think Hamas will stay in charge of Gaza.
Or is the fear that even intercepted Hamas rockets will in the long run spur too much Israeli emigration? Are the economics of long-run rocket/shoot-down reciprocity unacceptable to Israel?
A friend of mine suggests that Israel feels the need to send a tough signal to Iran.
Or all of the above?
I am by the way not impressed by various Twitter demands that I should spend more time moralizing about this conflict. I do think it is deontologically wrong on the part of the Israelis, and I also do not understand their strategy from even a purely nationalistic point of view. But my voice will have no influence, and I would rather learn something from the comments section about why such strategies are being pursued. Call me selfish if you wish, I am.