Kevin Drum - June 2010

The Specter of Inflation

| Mon Jun. 7, 2010 8:31 AM PDT

David Barboza writes in the New York Times today that labor costs are going up in China, and this is having an effect that will ripple throughout the world:

Coastal factories are raising salaries, local governments are hiking minimum wage standards and if China allows its currency, the renminbi, to appreciate against the U.S. dollar later this year, as many economists are predicting, the cost of manufacturing in China will almost certainly rise.

....“For a long time, China has been the anchor of global disinflation,” said Dong Tao, an economist at Credit Suisse, referring to how the two decade-long shift to manufacturing in China helped many global companies lower costs and prices. “But this may be the beginning of the end of an era.”

....Marshall W. Meyer, a China specialist at the Wharton School at the University of Pennsylvania, says demographic changes in China are reducing the supply of young workers entering the labor force, and that’s behind some of the wage pressure. “Demography will do what the Strategic & Economic Dialogue hasn’t: raise the cost of Chinese goods,” he said, referring to U.S.-China talks on Chinese currency reform and other economic issues. “There is no way out.”

This was a point that Alan Greenspan made several years ago. He argued, basically, that he had had an easier job as Fed chairman than his successors would because the rise of cheap products from China had kept global inflation low, and that in turn meant that he could keep monetary policy loose without worrying much that it would lead to inflation down the road. But that era, he said, was now over, and central bankers in the developed countries would have to start making difficult balancing decisions again. This is one of the reasons, in addition to soaring national deficits, that so many economists are worried about inflation even though there's no sign of it in the current data.

Which leads us yet again to the same dilemma we've had for a long time: we ought to be spending our way out of the current recession, but there's a lot of reluctance to do it because more spending now means it's going to be even harder to cut spending in the future. And at some point in the future, inflation may become a serious threat yet again.

When will that happen? Nobody knows, but probably not for quite a few years. Costs in China will go up, but for a lot of goods that just means that manufacturing will move to India or Vietnam. The "China Effect" isn't completely gone yet. And the experience of Japan suggests that U.S. deficits can get quite a bit higher than they are today before they start having an inflationary effect — something that the financial markets all seem to accept regardless of what Wall Street's economists might say.

So we should be spending now. But we're not because politicians and central bankers, who trusted the market far too much when housing prices were skyrocketing, suddenly don't seem willing to trust the market at all when it says that inflation isn't a near-term problem. As Paul Krugman says, "Lost Decade, Here We Come."

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The Myth of Multitasking

| Sun Jun. 6, 2010 10:27 PM PDT

So you think you're a great multitasker? Research by Stanford's Eyal Ophir says you're probably wrong:

Test subjects were divided into two groups: those classified as heavy multitaskers based on their answers to questions about how they used technology, and those who were not.

In a test created by Mr. Ophir and his colleagues, subjects at a computer were briefly shown an image of red rectangles. Then they saw a similar image and were asked whether any of the rectangles had moved. It was a simple task until the addition of a twist: blue rectangles were added, and the subjects were told to ignore them.

The multitaskers then did a significantly worse job than the non-multitaskers at recognizing whether red rectangles had changed position. In other words, they had trouble filtering out the blue ones — the irrelevant information.

So, too, the multitaskers took longer than non-multitaskers to switch among tasks, like differentiating vowels from consonants and then odd from even numbers. The multitaskers were shown to be less efficient at juggling problems.

But all is not lost. According to researchers at the University of Utah, some people are "supertaskers" who really can juggle multiple information streams efficiently. How many? About 3% of the population. You might be one of them!

But probably not. So put down your iPad, close that Twitter feed, turn off your chat windows, and get to work.

Quote of the Day: Fact Checking

| Sun Jun. 6, 2010 12:39 PM PDT

From Marcy Wheeler, via Twitter:

I propose a new reality show twist to Sunday shows. Fact-checking all around. 3 major errors and you get voted off all Sunday shows.

Well, why not? I've heard worse ideas.

Spelling Bee Secrets Exposed!

| Sat Jun. 5, 2010 12:29 PM PDT

In comments yesterday, wkseattle revealed the seamy underside of the spelling-industrial complex:

Don't be too impressed with modern young spelling champs. Back in the late 80's when I was in junior high, I participated in the regional spelling bees from which winners went to the national bee (now televised on ESPN). I had the good fortune to qualify 3 years in a row for the regional contest for the greater Philadelphia area and learned the "game."

The game was that you can officially be asked any word from some version of the Merriam-Webster dictionary. So, it's it's impressive when a 12 year old kid spells a crazy word. However... they give all contestants a thin pamphlet of study words for practice. During my first year, my parents overheard that all words in the competition came from the pamphlet (I can confirm this from subsequent competitions). The pamphlet is thin enough that a studious competitor can study and memorize it within a few months. This is how the modern spelling feats are explained in the televised competitions.

I doubt televised spelling bees have any bearing on the current state of U.S. education (my parents' 60+ years of classroom experience suggest a significant decline has indeed occurred).

No wonder these kids are expected to know how to spell terribilita, rhytidome, ochidore, juvia, and stromuhr.

UPDATE: Hold on! Wordboydave has more:

As I understand it, that booklet (which I got back in the late 70s; it may be small, but try memorizing over 1,000 obscure words sometime) only gets you out of the regionals. By Round Two of the official Bee, they've dispensed with the official booklet ("Spell It!"), and by the end, literally any word from Merriam-Webster can be used. So yes, the early stages are sort of manageable — which is nice; everyone's on sort of the same footing — but by the end, you really do need to be really lucky or really psychic.

So I guess you really do have to memorize the entire dictionary after all if you want to play in the big leagues.

Friday Newsletter: Obama and the Oil Spill

| Sat Jun. 5, 2010 8:52 AM PDT

This subject of this week's newsletter is the increasingly inane demands for Barack Obama to display more emotion over the BP oil spill. As usual, I wrote it Wednesday night, and by now it seems almost quaint. I think I've seen at least a dozen columns and blog posts saying the same thing since then. The tyranny of lead times doth make hacks of us all sometimes. Starting next week, however, we're going to cut that lead time down and publish these posts early Friday morning, the same time the newsletter is mailed out. That's only a 24-hour lead time, which should help keep these things a wee bit fresher.

In his inauguration speech Barack Obama told America "the time has come to set aside childish things." At least, I thought he was talking to America. But maybe he was really talking to the DC press corps. A few months after that speech, during a press briefing where NBC's Chuck Todd kept badgering him to provide an immediate response to the Iranian election crisis, he finally snapped back, "I know everybody here is on a 24 hour news cycle. I’m not." The message from a president who had already famously rebuked the short attention spans and inane cable chatter that absorbs official Washington could hardly have been clearer: only children demand simple answers and immediate reactions to complex situations. So how about if we act like adults instead?

But if the events of the past few weeks in the Gulf of Mexico are any indication, the press corps still isn't listening. There are plenty of things about the government's response to the gulf oil spill that are worth questioning. Why is the Minerals Management Service still in such sorry shape? Why was BP allowed to misstate the extent of the spill for so long? Are chemical dispersants just making the problem worse? Why is the press still being given the runaround more often than not?

But one thing isn't in question: when it comes to actually capping the broken pipe, BP and the rest of the oil industry are doing everything they can. What's more, they're the ones with all the expertise and President Obama can't change that. Yelling at BP or putting on a mask of faux outrage for the benefit of the cameras won't change that.

But that seems to be what the press wants anyway. At a press briefing, CBS's Chip Reid asked, "Have we really seen rage from the president on this? I think most people would say no." Maureen Dowd insisted that Obama's job is "being a prism in moments of fear and pride, reflecting what Americans feel so they know he gets it." David Gergen counseled Obama to "take command" of the oil spill and Mark Penn demanded that Obama put a bunch of smart people in a room to come up with a solution: "think Manhattan Project meets Independence Day, with fewer aliens and more eggheads." These suggestions range from useless to idiotic. As Clive Crook put it, "Apparently it is a great idea to elect a president who is calm in a crisis, except when there's a crisis. Then what you need is somebody to lead the nation in panic."

But now this is threatening to go beyond just the world of overwrought pundits. On Thursday the New York Times reported that Obama was considering cancelling a long-planned 10-day trip to Asia and Australia. There was no suggestion that this was because Obama could actually stop the spill any faster by being in Washington, just that it might look bad. "This has hijacked his entire legislative agenda," said Douglas Brinkley, a historian at Rice University. Later that day the White House confirmed that the Asia trip was indeed off.

Obama is famous for taking the long view of things. If you do the actual mechanics of governing properly, he believes, the daily media storms will all blow over eventually. Maybe he's right. At the moment, though, betting on the American media to grow up is looking like long odds indeed.

Spelling Bee Madness

| Fri Jun. 4, 2010 3:25 PM PDT

The final round of the 83rd annual Scripps National Spelling Bee starts in a couple of hours. You probably think I have nothing to say about this, and you're almost right about that. But not quite. So here's what I think: like so many events these days that were originally designed for children, it's gotten ridiculously out of hand. Do we really need to be airing this thing on live prime time television? No. We don't. We need to stop professionalizing childhood and go back to letting kids be kids.

I know. Not gonna happen. I'm just being crotchety today. So here's the real reason I'm posting about this: a couple of months ago I was noodling around in the ProQuest archives looking for the etymology of Fannie Mae, and one of the hits I got was a New York Times blurb about the winners of the 6th annual spelling bee in 1930. The reason it popped up is because 22nd place that year went to one Fannie Mae Schwab of Memphis, Tennessee, who misspelled "primarily."

Yes: she misspelled "primarily." A word that, today, probably wouldn't show up in the first round of a district competition, let alone in the final round of the nationals. And check out some of the other words that knocked kids out of the 1930 contest: blackguard, conflagration, concede, litigation, breach, saxophone, and license. Are you kidding? I could spell all those words. But if you watch tonight's show, you'll be lucky if you've even heard of most of the words, let alone have a snowball's chance of spelling them correctly.

So there you have it. The next time you hear someone complaining about the decline of educational standards in the United States, just show them this. I don't know how we're doing in producing future Nobel prize winners, but we sure are cranking out way better spellers than we used to. Too bad it's an all but useless skill, eh?

UPDATE: I believe this makes my point for me. Get rid of all the prime time TV nonsense and none of this would have happened.

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Friday Cat Blogging - 4 June 2010

| Fri Jun. 4, 2010 12:04 PM PDT

Two cats, one bench. On the left, Domino is rolling around and enjoying the sunshine. On the right, Inkblot is being his usual stately and magnificent self. Enjoy!

Is Sarah Palin Already Running in Iowa?

| Fri Jun. 4, 2010 11:54 AM PDT

Marc Ambinder thinks Sarah Palin plans to run for president in 2012. What makes him think so? The fact that yesterday she endorsed establishment favorite Terry Branstad in the Iowa gubernatorial primary rather than tea party darling Bob Vander Plaats:

[Branstad is] going to be the next governor of Iowa, assuming that there are no stunning surprises next week and Chet Culver, the Democrat, doesn't mount a miraculous election year comeback....If you're thinking about running for president, and I think Palin really is thinking about running for president, you don't get on the wrong side of the guy who will probably be governor during the caucuses by endorsing his opponent, no matter how conservative and Tea Partyish Bob Vander Plaats seems to be.

I don't know if Palin is planning to run or not, but if she is this is a needle she's going to have to thread pretty carefully. Her fans love her, but they love her because she's not part of the establishment. She's an authentic conservative. But then there's real life, and in real life you end up allying yourself with people like John McCain and Terry Branstad for purely pragmatic reasons. And there's the problem. Stay too far on the outside and you lose the ability to raise serious money and put together a serious ground organization. Become too pragmatic and you lose the support of your true believer base. What's a real American rogue to do?

Fighting Fire With Fire

| Fri Jun. 4, 2010 11:26 AM PDT

Bob Somerby continues to be unhappy about the sensibilities of the contemporary progressive media in general and the contemporary progressive blogosphere in particular:

Indeed, the liberal world is increasingly adopting the core values of the mainstream press corps. We run on silly sexy-time tales, and on invented lies by opponents. This is low-IQ tabloid work, pure and simple — and it’s a culture which will never serve progressive interests. By the way: This is the culture of the mainstream press—the punishing culture with which the mainstream chased down, first Clinton, then Gore.

Will progressive interests ever prosper within such a brain-dead culture? We strongly doubt it.

True? Or not so true? Discuss.
 

The CRA Zombie

| Fri Jun. 4, 2010 10:43 AM PDT

Edmund Andrews, finally pushed beyond his breaking point by yet another piece of economic hackery, vents today about the common conservative meme that it was really liberal housing policy that was at fault for the financial crisis:

Of all the canards that have been offered about the financial crisis, few are more repellant than the claim that the "real cause" of the mortgage meltdown was blacks and Hispanics.

Oh, excuse me — did I just accuse someone of racism? Sorry. Proponents of the above actually blame the crisis on "government policy" to boost home-ownership among low-income families, who just happened to be disproportionately non-white and immigrant. Specifically, the Community Reinvestment Act "forced" banks to make bad loans to irresponsible borrowers, while Fannie Mae and Freddie Mac provided the financial torque by purchasing billions worth of subprime paper.

....What makes this smear so repellant is that it blames poor people — mostly minorities — for bringing on the crisis. But what makes it so maddening is that it’s so demonstrably false. We have reams of evidence that banks and mortgage lenders actively targeted blacks, Hispanics and other immigrant groups for reckless loans. The lenders weren’t forced. They were making a fortune.

The evidence is pretty clear on this: CRA had essentially no effect at all on the housing bubble, and Fannie and Freddie can be blamed, at most, for throwing a couple of logs onto a bonfire that Wall Street had touched off long before. Those logs cost them (i.e., you) a helluva lot of money, but they weren't responsible for the financial crisis.

But it's a convenient story for the Sarah Palin wing of the conservative movement, since it deflects blame from the private sector to the public sector, from George Bush to Jimmy Carter and Bill Clinton, and from rich white guys to working class black and brown folks — as the Michael Ramirez cartoon above graphically demonstrates. The only problem is that it's demonstrably not true. Read Andrews's post and follow the links for more.