Holidays Hiatus

So I’ll be more or less out of commission until Jan. 4 – I’m sorry. I will be back at the helm after the holidays, and it will be better than ever. As far as preludes to the 2009 Mundy blog go, I hope to solve the economic crisis, successfully push for the release of Detox, permanently suspend the release of U2’s next album, and pass the Employee Free Choice Act. Wish me luck, and, as always, post anything of interest, or your thoughts on anything, or random insults, over this break. Peace!

Additions…

Here’s an update on the post below (why ZIRP probably won’t work, according to Slate) – check it out here.

And here’s a pseudo-update to my war on drugs post two posts below – a story on a particularly vicious drug dealer/kidnapper in the pseudo-narcostate sharing America’s southern border. Check it out here.

And, finally, as an update to why Dennis Miller’s a redunant, unfunny, bearded, bigoted, dimwitted, blowhard asshole, I give you this:

Embed’s not working AGAIN, so here’s the link.

The thing is that, aside from finding him extremely offensive, idiotic and repulsive to both my eyes and ears, he’s just atrociously unfunny.

I’ll be out tonight, so this is the extent of my posting, but I’ll be back tomorrow! Enjoy.

Trap Muzik

If anyone has been reading this for the last little bit, you should know two things: one, that I like Nobel Prize-winning economist Paul Krugman, and two, that I know little about economics. In any case, I do know one thing – that the Fed slashing interest rates to almost zero is a drastic and intensely problematic move. Not that it wasn’t the right move, necessarily – there really wasn’t much left for the Fed to do to the economy, though I do question painting itself into a corner like this – but it does signal how incredibly bad things are.

As far as the monetary policy pistol goes, that was the last round, and all that’s left is fiscal policy (government-directed efforts). I have some faith in Obama that he’s going to make the right moves on this front (he’s already looking to massive infrastructure and green economy spending, which is exactly what this country needs), and I’m only worried that Republicans, after years (decades) in the spend-way-too-much wilderness, will find their way back to their thus far empty rhetoric. My fingers are crossed though.

Krugman comes into this discussion because of his extensive work on depression economics, specifically his work on liquidity traps, which the U.S. may find soon find itself in. Japan stumbled into a liquidity trap in the 90s, when it slashed its interest rate to zero and found that it was impossible to actually recover. Monetary policy had run its course, and their fiscal policy didn’t make enough of a difference, leaving the economy in a prolonged slump. It was real, real bad, apparently.

Basically, the idea behind the liquidity trap is that with the interest rates at zero, people don’t expect high returns on their investments, so they start hoarding their money rather than investing it long-term. Further, banks aren’t lending much money out – even if it’s provided by the government, as has been through the latest bailout – because they’re worried about individuals and businesses defaulting on those loans. Plus, banks are doing their best to hold onto liquid assets, because illiquid assets are so much more volatile, and hold a greater potential to lose more money on (on a side note, this has was an obvious consequence of the lending of money to banks – in the UK, for example, they mandated that the banks have to lend out the money they’re given, while here they’ve just been sitting on it, merging with other banks and storing the cash up, essentially wiping out any possible gains for the real economy). The liquidity injected into the economy, then, is trapped behind these banks. And finally, individuals and businesses are unwilling to borrow that money (even if the bank was to lend it), because the real interest rates are higher than the nominal interest rate of zero. All of these factors deepen the recession, and as proved in Japan, it’s extremely difficult to get out of.

Krugman, having worked on this a ton, is really worried about it. His theory on how to get out of this trap, should America fall into it, is to get the Fed to promise inflation over the next few years, thus bringing the real interest rate down to a level that people are more comfortably borrowing. He says the central bank needs to “credibly promise to be irresponsible.” There has been pretty significant debate over whether or not this is the right move, but I’ll trust Krugman on this, mainly because he’s been right on a lot of other recession-y stuff so far, and a Nobel Prize tends to garner my support.

The problem, though, is whether the Fed would ever be willing to do something like this – it is a pretty exotic and out there policy, and the Fed has, generally, been a model of orthodoxy far more often than not. As Matt Yglesias notes here, pretty level-headed approaches to recessions – like Sweden’s taking over the banks and running them during its own economic crisis – are ideologically taboo here. And while Sweden’s approach falls into the communism bogeyman camp of ideological taboos (one that Krugman’s managed inflation theory doesn’t fall into), I fear that more radical approaches to problems will never find traction in the U.S. Although, as Yglesias does note, apparently Obama was a fan of the Swedish approach, so maybe we will see a little ideological flexibility this time around (though, of course, he doesn’t control the Fed, but the government certainly would play a major role in attempting to convince the private sector that the Fed will be credibly irresponsible).

Thoughts?

For one of Krugman’s papers on Japan’s liquidity trap, click here. And for a discussion of Krugman’s latest book reissue and depression economics in general by a group of super smart people, click here.

As a late, additional disclaimer, I clearly don’t know a lot about much of this, so if I’m wrong anywhere, or people have other interpretations/ideas on the problem, I’d love to hear them. As always.

Drug Wars

First off, I vividly remember playing Drug Wars on my TI-83 in high school, and it was super, super awesome. That, combined with my memorization of ‘Ten Crack Commandments’ and an obsession with The Wire has led me to believe that, should this writing ish not pan out, drug sales is the way to go.

Potential career aside, the war on drugs has been a catastrophic – to risk understatement – failure, and remedying it should be one of the top priorities of any administration. Unfortunately, Bush has left Obama with two intractable wars, a devastated economy, a bloated executive branch, the national embarrassment-cum-tragedy of Gitmo, a drowned city, a towering deficit, and – oh yes – a completely ruined reputation to deal with. So, in a way, I understand why it is nowhere near the top of Obama’s priorities. That, of course, leaves aside the basic fact that even if it were on his list of priorities, the hysteria that often crowds the issue tends to lead reform to nowhere really, really quickly. My disclaimer digresses.

Mark Kleiman made a pretty exhaustive list of all the things the new administration should know about drugs, and I urge you to check it out here. There are about four points, though, that I think are particularly important, and I’ve listed and briefly discussed them below.

11. Drug-related arrests and incarceration not falling, likely still rising along with the rest of the prison population; about half a million behind bars for drug-defined crime. Drug convictions account for more than half the Federal prison population, and drug prisoners have led to the development of gang and violence problems in the high-security parts of Federal prison system that resemble the problems in some of the bad state prisons. Drug prisoners still overwhelmingly African-American and Latino.

This, more than anything, is the problem with the current war on drugs. Putting the moral issues of locking up often non-violent drug offenders for years at a time aside, the punitive emphasis of the war on drugs – especially mandatory minimums – is profoundly counter-productive. Much of what it does is create hundreds of thousands of criminals (who had little options in the first place), push them into a physically and sexually violent and brutal environment for a few years, render them near-unemployable by branding them as felons,  and then unleash them to the streets, where they – predictably – end up contributing little back to society at the best of times, and reoffend at the most of times. It goes without saying that spending more money on public assistance and directed aid to low-income urban areas (where the drug trade offers a viable alternative to low-wage, little-future traditional employment) would be far more effective than the myopic current policy, which bleeds tax dollars while creating a societally unsustainable cohort of drug felons. A crushing statistic: in 2005 states spent $42.89 billion on corrections, and $24.69 billion on public assistance. To quoth Tupac – ‘Instead of a war on poverty, they got a war on drugs, so the police can bother me.’ Yikes.

16. Treatment as actually delivered, especially in drug-diversion programs, continues to suffer from low compliance and inappropriate modalities (e.g., drug-free counseling for heroin addiction). Parity for addiction treatment a useful start, but separation of addiction treatment system from physical health treatment system (both finance and service delivery) may discourage treatment participation and limit the adoption and diffusion of evidenced based practices and cost-effective therapeutic approaches.

One of the most important shifts that could happen in the war on drugs would be one away from its predominantly punitive present state vis-a-vis drug users. While states and municipalities differ in their approaches, a federal paradigmatic shift towards treating drug abuse as a health problem rather than a criminal one would do wonders for taxpayers and drug users alike. There have definitely been some interesting strategies (like in San Francisco) that seem to be aiming for a more reality-based approach to the problem. I think the key phrase here is ‘evidence based practices and cost-effective therapeutic approaches.’ Common sense should be the name of the game here, right? Please?

19. No noticeable progress in the efficacy of prevention as delivered; DARE remains dominant in the schools and useless, national media campaign not much better. Some evidence that general-purpose efforts to reduce risk behaviors (e.g., the “good behavior game”) may be effective.

DARE does not work. At all. Study after study has led to this conclusion. That it continues to be the by-far dominant approach to drug prevention says much about the epic fail that is the war on drugs. The sheer idiocy of the DARE-based prevention model is perhaps only rivaled by the abstinence-only fuckery that has characterized the Bush administration’s approach to teenage sex. The gap between fantasy and reality, though old hat by this point, stuns me to this day.

21. Mexico continues to supply large volumes of cocaine, heroin, cannabis, and methamphetmaine to the U.S. market. Drug market violence in Mexican border cities now amounting to virtual civil war, with thousands dead and no guarantee that the government, even using the military, will prevail. Increased enforcement pressure seems to be forcing some of the traffic into the Caribbean. Increased enforcement against Caribbean smuggling may shift the problem back towards Mexico. Enforcement planning rarely considers such effects. Some undetermined amount of the Mexican bad guys’ guns come from the U.S.

Ugh. The most illuminating piece I’ve read on this came from Rolling Stone – check out an excerpt here (if you can find the full article, I highly recommend you check it out – pretty eye-opening stuff). The Caribbean-Mexico dilemma reeks of the whole whack-a-mole fiasco that has come to define a lot of the street-level enforcement, which locks up one outfit only to see another pop up in its place just as quickly. It’s raw capitalism, and failing to appreciate the economic nature of the problem has kneecapped the war from the beginning. But if watching America’s southern neighbor slowly collapse into a narco-state hasn’t been enough to shake officials out of their stupor, I don’t know what will.

And if you just want to skip everything and head for the best story on drugs I’ve read in the last year-and-a-half, check this Rolling Stone story out – ‘How America Lost the War on Drugs.’ Haunting stuff, and should be immediate required reading for the incoming administration.

Country First

No time to write anything, but here’s a good analysis of why the congressional Republicans smacked down the auto bailout – apparently Reaganomics lives on, even in the face of abject failure.

Oh, and that $73 an hour that the UAW bleeds from American auto manufacturers? Complete bullshit.

I’ll be back to more frequent posting very, very soon.