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Chart of the Day: Inflation Continues to Fall Short of Weimar Germany Levels

| Thu Feb. 26, 2015 10:51 AM EST

The BLS released its January inflation report today, and guess what? Hyperinflation continues to be kept at bay. In fact, the CPI didn't just stay at a low level in January, it was actually negative. Compared to a month ago, prices dropped 0.7 percent. Compared to a year ago, prices dropped 0.1 percent (blue line in chart below):

This will cause Paul Krugman to dance another victory jig, but the number the Fed really cares about is core inflation, which excludes food and energy (red line in the chart). This is because food and energy tend to be volatile, which makes them unreliable guides to the long-term trajectory of inflation. The core rate is a better predictor of that. But the news is good here too: Core inflation remained low and stable, increasing only 1.6 percent compared to a year ago.

According to the BLS, gasoline was "overwhelmingly" the cause of the sharp decline in the overall CPI, and it's unlikely that this will continue. Gasoline prices have probably fallen about as much as they can, and over the next year will remain stable or perhaps rise a bit. But there's no telling for sure because energy prices are volatile. That's the whole point of focusing on core inflation.

In any case, as you can see, core inflation has remained below the Fed's 2 percent target for quite a while. Two years, in fact. This is why Krugman and many others are urging the Fed to hold off on raising interest rates. The labor market still has some slack, and there's simply no sign of inflation on the horizon—and when there is, there will be plenty of time to act. After all, if the Fed can tolerate two years of inflation below their target, they can tolerate a year or two of inflation above their target. What's more, there's no risk here. The Fed knows perfectly well how to get inflation down if and when it gets above target for a sustained period.

In other news, wages are up a bit:

Real average hourly earnings for production and nonsupervisory employees rose 1.3 percent from December to January, seasonally adjusted. This result stems from a 0.3 percent increase in average hourly earnings combined with a 0.9 percent decrease in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

That's nice, but note that it's mainly an artifact of negative inflation. If you think of core inflation as the better measure of long-term price levels, wages are up only slightly. That's better than nothing, of course, but still nowhere near a sign of dangerous tightness in the labor market.

Bottom line: Inflation continues to be well controlled. There's no need to give up on loose monetary policy yet. Let's wait until the labor market looks like it's really picking up again.

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Obama Just Vetoed the GOP's Keystone Bill, and This Democratic Presidential Hopeful Is Pissed

| Wed Feb. 25, 2015 5:12 PM EST

Jim Webb is sounding increasingly serious about running for the Democratic presidential nomination in 2016. Last week, National Journal's Bob Moser wrote a cover story wondering whether the former Virginia senator could "spark an anti-Hillary uprising," in which Webb explained that his absence from the campaign trail this winter was, in part, the result of major knee surgery to fix problems leftover from his days in the Vietnam War.

Webb struck his first blow against his fellow Democrats on Wednesday. But rather than targeting Clinton, his likely presidential opposition, he struck out against the party's incumbent, President Barack Obama. In a series of tweets, Webb lashed out at the president for vetoing a bill that would have approved construction on the Keystone XL Pipeline.

Webb's tweetstorm doesn't tell the whole story. A letter from the EPA released earlier this month argued that, thanks to recent drops in oil prices, Keystone XL could prove disastrous for carbon emissions.

As I detailed in December, Jim Webb had an atrocious record on climate change and environmental issues while he served in the Senate. Standing up for Virginia's roots as a coal state, Webb tried to thwart Obama's efforts to regulate greenhouse gasses through EPA regulation, and he helped block Democratic attempts to pass a cap-and-trade law.

Clinton, for her part, has regularly sidestepped addressing whether she wants to see the pipeline constructed, though she has generally been supportive of other environmental efforts made by the Obama administration.

While Webb objected to Obama's decision to veto this specific bill, it's still unclear whether the two Democrats disagree on the underlying issue. Obama has strenuously rejected attempts by congressional Republicans to force immediate approval of the pipeline, but his administration has not yet said definitely if it intends to let the project go forward eventually.

This Koala Is So Cute You'll Want It To Get Away With Stealing This Kid's Car

| Wed Feb. 25, 2015 4:52 PM EST

Never leave your Land Rover unattended in the Outback. This "cheeky" koala tried to drive off before the car's owner, a teen about to return home from school, foiled its getaway.

Happy Wednesday.

I Want to Hear the Republican Plan For Fighting ISIS

| Wed Feb. 25, 2015 4:12 PM EST

The drumbeat for President Obama to "do something" to fight ISIS is growing louder every day among prospective Republican presidential candidates. It's all a bit weird, since Obama rather plainly is doing something, as interviewers repeatedly point out whenever the subject comes up. But no matter. It's a good sound bite, and in any case, whatever Obama is doing, Republicans insist they want to do more. Today, Paul Waldman points out that all these presidential wannabes are just reflecting what the Republican base wants to hear:

Four months ago, 57 percent of Republicans thought we should use ground troops to fight ISIS in Iraq and Syria; that number has now gone up to 67 percent. Among the conservative Republicans who will dominate the primary contests, it’s even higher, at 71 percent. When Pew asked respondents to choose between “using overwhelming military force is the best way to defeat terrorism around the world” and “relying too much on military force to defeat terrorism creates hatred that leads to more terrorism,” last October 57 percent of Republicans chose the overwhelming military force option; that number is now 74 percent.

I don't suppose that most voters have really thought this through in much detail, but I wonder just how far they really want to go. The ISIS stronghold of Mosul, for example, is about five times the size of Fallujah, and probably has about 3-4 times as many ISIS defenders as Fallujah had Sunni insurgents back in 2004. And Fallujah was a huge battle. It took more than a year to retake the city; required something like 15,000 coalition troops in all; and resulted in more than a hundred coalition deaths.

At a first guess, a full-scale assault on Mosul would likely require at least 2-3 times as many troops and result in several hundred American deaths. And Mosul is only a fraction of the territory ISIS controls. It's a big fraction, but still a fraction.

So this is what I want to hear from Republican critics of Obama's ISIS strategy. I agree with them that training Iraqi troops and relying on them to fight ISIS isn't all that promising. But the alternative is likely to be something like 30-50,000 troops committed to a battle that will result in hundreds of American casualties. Are Jeb Bush and Marco Rubio and Ted Cruz willing to own up to that? If they are, then good for them and we'll let the American public decide who's got the better strategy. But if they're not, then it's all just a con job for the rubes. The GOP candidates are screaming for "more," but not willing to acknowledge what "more" really means.

Let's hear it, folks. When you say "more," what do you really have in mind? Candidates for president shouldn't be allowed to get away with nothing more than vague grumbles and hazy bellicosity any longer. Let's hear the plan.

Health Update

| Wed Feb. 25, 2015 2:28 PM EST

This is not of interest to most of you, but I do get emails and queries fairly frequently, so I figure I ought to share once in a while. The big picture summary is that nothing serious is wrong; a biopsy is scheduled for Friday; and I've been officially enrolled in the second stage of chemo treatment (the stem cell transplant). For those who want to know more, additional detail and miscellaneous griping is below the fold.

Eat What You Want, But Eat Fresh

| Wed Feb. 25, 2015 12:46 PM EST

This is interesting. Yesterday I wrote a post suggesting that we should all try to eat more fresh food and less processed food, but that otherwise it didn't matter much what kind of diet you followed. (Within reason, of course.) This was based solely on my intermittent reading of food research over the years, not on a specific rigorous study. Today, however, fellow MoJoer Tom Philpott tells me that there is indeed a rigorous study that backs this up:

Over the past decade, there has been a bounty of research on the ill effects of highly processed food. And when Yale medical researchers David Katz and Samuel Meller surveyed the scientific dietary literature for a paper in 2013, they found that a "diet of minimally processed foods close to nature, predominantly plants, is decisively associated with health promotion and disease prevention."

Interestingly, Katz and Meller found that as long as you stick to the "minimally processed" bit, it doesn't much matter which diet you follow: low-fat, vegetarian, and Mediterranean have all shown good results. Even the meat-centered "paleo" approach does okay. The authors conclude the "aggregation of evidence" supports meat eating, as long as the "animal foods are themselves the products, directly or ultimately, of pure plant foods—the composition of animal flesh and milk is as much influenced by diet as we are." That's likely because cows fed on grass deliver meat and milk with a healthier fat profile than their industrially raised peers.

Now, Tom is optimistic that processed food is losing its allure as Americans migrate more and more to fresh foods. I can't say that I share this optimism, but I hope he's right. There's nothing wrong with a potato chip or a can of soup here and there (everything in moderation!), but a steady diet of processed food really is something worth avoiding.

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SIM Card Manufacturer Says Its Encryption Keys Are Safe From NSA Hacking

| Wed Feb. 25, 2015 12:19 PM EST

I'm passing this along without comment since I don't have anything substantive to add. I just wanted to keep everyone up to date on the Intercept story about the NSA stealing cell phone encryption data stored on SIM chips:

Security-chip maker Gemalto NV said Wednesday that American and British intelligence services could be responsible for a “particularly sophisticated intrusion” of its networks several years ago, but denied that the alleged hack could have widely compromised encryption it builds into chips used in billions of cellphones world-wide.

....Company executives also asserted that the interceptions wouldn’t have compromised the security of its newer SIM cards for 3G and 4G cellular networks, only older 2G networks. The reason: Gemalto says the new technology no longer require it to send telecom companies the keys to decrypt individuals’ communications—so they couldn’t have been intercepted.

Hmmm. On the one hand, many of the Snowden documents are indeed fairly old, dating back to 2010 or 2011. So they could be out of date. On the other hand, the NSA didn't necessarily have to "intercept" anything here. A sufficiently sophisticated hack could presumably have given them direct access to the Gemalto database that contains the encryption keys. And needless to say, Gemalto has a vested interest in assuring everyone that their current products are safe.

So....who knows what really happened here. We'll likely hear more about it as Gemalto's internal investigation continues.

DHS Funding Fight Is Going Down to the Wire

| Wed Feb. 25, 2015 11:31 AM EST

We're getting down to the wire in the funding fight over the Department of Homeland Security: DHS will shut down this weekend if funding isn't approved by Friday. In the Senate, Mitch McConnell wants to simply hold two separate votes: one to fund DHS and another to repeal President Obama's recent immigration actions. But tea partiers in the House are adamantly opposed to that: they want to keep the two things together in one bill, which they hope will force Democrats to cave in and kill the immigration plan. In reality, it will only produce deadlock in the Senate and a shutdown of DHS that Republicans will be blamed for. So what's John Boehner to do? Greg Sargent comments:

We’ve seen this particular thriller a number of times already. Here’s how it always goes: We are told there’s no way Boehner would ever dare move must-pass legislation with a lot of Democrats. He’s stuck! Then pressure builds and builds, and Boehner does end up passing something with a lot of Democrats. Last I checked, he’s still Speaker.

....The fact that Boehner has the mere option of passing clean funding with the help of a lot of Democrats is rarely even mentioned. You can read article after article about this whole showdown and not be informed of that basic fact. Thus, the actual reason we’re stuck in this crisis — Boehner is delaying the moment where he does pass something with Dems for as long as possible — goes oddly unmentioned. Yet recent history suggests that Boehner himself knows this is how it will end, and that all of this drama won’t change the outcome.

Probably so. After all, the only thing that changed in the last election was control of the Senate, and Senate Republicans are willing to compromise. The House is probably going to have to go down that road eventually too.

But my guess is that they're going to shut down DHS for a while first. Boehner has made it pretty clear that he feels like he needs to demonstrate his conservative bona fides at the beginning of this new session of Congress, and that means holding out as long as he can. It's a waste of time, and it's going to hurt Republican efforts to work on other legislation, but that's life. Symbols are important, and Boehner needs to show whose side he's on. There's a good chance this will last a couple of weeks before it gets resolved.

This Is the Best Reason Why a Newspaper Has Ever Withheld a Source's Identity

| Wed Feb. 25, 2015 11:19 AM EST

When a New York Times reporter approached a random woman about the improved conditions inside the bathrooms at the usually disgusting Port Authority Bus Terminal, the reporter probably did not anticipate the question would lead to fulfilling a profound lifelong goal. Alas, dreams delivered:

The brand new Port Authority, where it's always best to stay anonymous.

Rachel Maddow Slams "Ballistic" Bill O'Reilly Over Threats to Reporter

| Wed Feb. 25, 2015 9:13 AM EST

Bill O'Reilly has a history of hurling insults and threats at his detractors. With the controversy over the reports from Mother Jones, CNN, and others that he embellished his reporting experience in the Falklands War, the Fox News host has added to this reputation by suggesting Mother Jones editor David Corn be placed in "the kill zone" and by telling a New York Times reporter she would face consequences if a story on the controversy did not please him.

"I am coming after you with everything I have. You can take that as a threat," O'Reilly told Times reporter Emily Steel.

During the "Debunktion Junction" segment on her show Tuesday night, MSNBC's Rachel Maddow slammed O'Reilly over his latest personal attacks and threats.

"Fox News has a bunch of folks like Mr. O'Reilly on their shows—part of why I call them 'Republican TV,'" Maddow said. "But they also have a lot of real reporters on staff who do real reporting all day long on real news...I'm sure they don't take kindly when their own reporters get threatened for trying to do their jobs. But it is hard to imagine what this is going to do to the work environment at Fox News channel for the Fox News channel's real reporters, and they do have them."

Watch below: