HOW LONG WILL THE RECESSION LAST?....I don't know. But I was noodling about this and thinking that since the housing bubble is at the core of all our problems, it's unlikely the economy will turn up before the housing market hits bottom. So when will that be?

Based on historical price-to-income ratios, Calculated Risk suggested a few days ago that it would bottom out by Q3 of next year, or maybe a little later. But extending CR's chart and assuming the market bottoms gradually, rather than sharply, it looks to me like we might have to wait until the middle of 2010.

Like I said, this is just noodling. The housing market might bottom sooner than I think, and the economy might start to recover even while the housing market still has a little more slumping to do. But probably not much before. I don't think I'd be surprised if we're still in recession this time next year.

Pure Libertarianism

PURE LIBERTARIANISM....Should the U.S. government bail out the auto industry? Arnold Kling comments:

This is an example where pure libertarianism gets you quickly to the right answer. Lose the "we," and instead ask, would I undertake this policy myself? That is, would I lend money to the auto makers? If the answer is that I wouldn't, then the implication is that "we" shouldn't.

The same reasoning applies to giving money to financial firms. I wouldn't, therefore we shouldn't.

Picture everyone in Congress who voted for TARP standing on a street corner in a Santa suit, ringing a bell, and asking for donations to pay for the rescues of AIG, Citigroup, and so forth. In a libertarian society, that is what they would have to do in order to fund the bailouts.

If that image doesn't move you in a libertarian direction, then nothing will.

Well, then, I guess nothing will. Because this sure doesn't do anything to persuade me.

As it happens, I'm not entirely convinced that Detroit ought to be bailed out. At the moment, I'm probably more in the "prepackaged bankruptcy" camp. Still, the whole point of government is that it does things for us collectively that we can't (or wouldn't) do individually. After all, if congressmen stood on corners begging for donations to the Pentagon they probably wouldn't raise enough to fund a single F-22, but that doesn't mean Congress shouldn't fund the Pentagon. Ditto for roads, courts, police, Social Security, unemployment insurance, foreign embassies, and national parks. The arch-angelic among us excepted, none of us would contribute much money to these causes unless we knew that everyone else who benefited from them was contributing too.

TARP is no different. We aren't rescuing banks because we feel sorry for bankers (though I'll concede that sometimes I kind of wonder about that), we're rescuing them because we think their failure would bring the economy down around our ears and we'd just as soon avoid that. A bit of collective action on this front will help keep all of us out of a repeat of the 1930s.

Now, that might be wrong. Go ahead and make the case for inaction on its merits if that's how you feel. But a generic claim that federal intervention is a bad idea because none of us would intervene as individuals just doesn't hold water for anyone who isn't already a hardcore libertarian. This is the kind of argument that hurts their cause, not the kind that helps it.

The Brazilian government announced this week that it will curb Amazon deforestation by 70 percent over the next decade—an ambitious plan that will be formally presented at the UN climate change conference in Poland this week.

Home to the world's largest area of tropical woodlands, Brazil lost nearly 4,633 square miles of forest between 2007 and 2008. That's roughly the area of Connecticut. Previous efforts to limit deforestation include a recent crackdown on soy production.

Brazil's Environment Minister Carlos Minc said the plan should prevent 4.8 billion tons of carbon dioxide from being emitted through 2018.

America, take note.

—Nikki Gloudeman

Via HuffPo, it's this star-studded musical "tribute" to Proposition 8, featuring the comedic and vocal talents of Margaret Cho, John C. Reilly, Maya Rudolph, Jack Black as Jesus, and a special appearance by Neil Patrick Harris. It's cute, but what does it say that the only celebrity Funny or Die was able to score before the election was Molly Ringwold? [Edit: okay, commenter, and Margaret Cho too.] Now that it's passed, everybody wants to come to the party. Feeling a little guilty for ignoring the queers, anyone? Urgh. Well, maybe one of the California Supreme Court justices will click on it.

The Trade Deficit

THE TRADE DEFICIT....Conventional wisdom says we need to run a big federal deficit in order to stimulate our way out of the current recession. Fine. But if we stimulate demand, that means we're going to be buying ever more stuff from overseas, which in turn means that our trade deficit will continue to remain large and growing, financed by the willingness of China and other trade surplus nations to stockpile U.S. treasury bills in return for shipping their stuff to us. Martin Wolf isn't impressed:

This is not a durable solution to the challenge of sustaining global demand. Sooner or later — sooner in the case of the UK, later in the case of the US — willingness to absorb government paper and the liabilities of central banks will reach a limit. At that point crisis will come. To avoid that dire outcome the private sector of these economies must be able and willing to borrow; or the economy must be rebalanced, with stronger external balances as the counterpart of smaller domestic deficits. Given the overhang of private debt, the first outcome looks not so much unlikely as lethal. So it must be the latter.

....In short, if the world economy is to get through this crisis in reasonable shape, creditworthy surplus countries [i.e., countries like China –ed] must expand domestic demand relative to potential output. How they achieve this outcome is up to them. But only in this way can the deficit countries realistically hope to avoid spending themselves into bankruptcy.

Some argue that an attempt by countries with external deficits [i.e., countries like the United States –ed] to promote export-led growth, via exchange-rate depreciation, is a beggar-my-neighbour policy. This is the reverse of the truth. It is a policy aimed at returning to balance. The beggar-my-neighbour policy is for countries with huge external surpluses to allow a collapse in domestic demand.

I don't know what the answer to this is. U.S. consumption of goods and services is about 5% higher than U.S. production, and this can't keep up forever. Eventually our consumption has to go down and China's has to go up.

But not yet. Because we're in the middle of a financial panic and we need to keep domestic consumption high in order to keep from collapsing. And this isn't hard to do, because in one of the great ironies of a crisis that was brought on by the United States, nervous investors worldwide now believe that U.S. treasuries are the safest place to park their money in a troubled world. So for the time being, there are lots of buyers for treasuries, yields are nearly zero, and we're having no trouble at all financing a big federal deficit.

This won't last forever, of course. Panic will subside soon enough, the treasury bubble will burst, and foreign investors are going to start demanding higher returns. The dollar will have to depreciate, America will have to produce more and consume less, and the domestic economy will trundle along dismally for years until we manage to rebalance things.

Economists have been warning about this for years, of course. But over time, as nothing bad ever came of it, their warnings began to sound like crankery. After all, plenty of them warned us about the housing bubble for years too, and for the most part we didn't listen to them. In a few years, though, when the trade deficit bubble finally goes pear shaped, we're going to be asking once again why no one saw it coming. Even though lots of people did.

Like I said, I don't know what to do about it. The trade deficit bubble helped finance the housing bubble, and now that the housing bubble has burst it's the worst possible time to think about bursting another bubble as well. Eventually, though, the rest of the world will do it for us. Expect a bumpy ride.

mojo-photo-feargal.jpgOh those Brits. We just established that they really seem to like Kings of Leon, but it turns out some of their own most exciting musical subcultures give the police the willies. The UK Independent reports that music venues are to be subjected to a "new piece of bureaucracy" called Form 696, an eight-page questionnaire asking for private information about performers as well as the "ethnic background" of the likely audience. Eh, on what grounds, constable?

Jeez, I guess I was in a turkey-induced coma over the holiday and missed some of these, but Stereogum was on top of it: Brit mags Uncut, Mojo and Q have released their Top 50s, while stateside rag Blender opted for a Top 33, just to be cute. So, are any critical trends emerging, and is any one album this year's In Rainbows, a juggernaut of critical praise?

A Good Day for Al

al-franken-flight-suit-300x375.jpg

Jim Martin lost Tuesday night in Georgia, dashing the Democrats' hopes of getting to 60 seats in the Senate. But the Dems' hopes of getting to 59 were looking a little better Wednesday on the strength of some good news for Al Franken, who is in a recount battle in Minnesota with incumbent Republican Norm Coleman. Franken, who Jonathan profiled for Mother Jones in 2007, entered the recount trailing by over 200 votes. According to the Minnesota Secretary of State's office, he now trails by around 300. That seems like bad news. But all is not as it seems.

In all likelihood, Coleman's actual lead is in the low single digits, writes polling guru Nate Silver of fivethirtyeight.com. The Franken campaign estimated on Tuesday morning that it was only 50 votes behind using the assumption that all vote challenges will be rejected (more than 6,000 challenges have been filed so far). That estimate was before Franken netted 37 votes from a batch of 171 previously uncounted ballots that were discovered in Ramsey County. But why doesn't the way the Secretary of State reports ballot totals make sense? Nate Silver explains:

Soft Power

SOFT POWER....Matt Yglesias talks framing:

Can we retire the term "soft power" already? I always feel that it's been popularized not so much by Professor Nye as by deranged warmongers who like the idea of terming every alternative to militarism as somehow "soft," fluffy, and weak. Soft Power is a good book, but it's a bad coinage for an era in which national security issues have returned as a partisan political topic, and I don't think it's an especially great label for what Nye's talking about.

I agree, but what do we replace it with? "Cultural power" is no good, since it evokes thoughts of cultural imperialism. "Economic power" sounds scary too, and none too apropos anyway considering the economic devastation we're currently wreaking on the world. Anyway, soft power encompasses lots of things, so any individual term won't be enough.

I've heard "smart power" bandied about, but I doubt that will catch on. Too jargony. "Non-military power" gets to the nub of things, but doesn't roll off the tongue very well. So what's a good alternative word that basically means "mostly non-military"? Anybody care to chime in?

UPDATE: In comments, Jon and Matt suggest "civil power." Dan Drezner suggests "social power." Matt Yglesias thinks the problem is with "power," not "soft." On the other hand, plenty of people in comments think "soft power" is just fine as is.

QUOTE OF THE DAY....From Tim Fernholz, on Bill Richardson's nomination as Secretary of Commerce:

For a man who once broke the world record for number of hands shook in eight hours, it seems like he's now gunning for number of cabinet posts held in one lifetime.

Hmmm. Who does hold the record for number of cabinet-level posts held? This will be Richardson's third. Elliot Richardson held four. No other serial cabinet members come immediately to mind. Anyone know?