Blow and Krugman

In “A Week From Hell” Mr. Blow says we as a society will not extinguish violence quickly, but individuals can make a start today.  Prof. Krugman says “Cheap Money Talks,” and that  what it says is to invest in the future.  Here’s Mr. Blow:

Last week was yet another week that tore at the very fiber of our nation.

After two videos emerged showing the gruesome killings of two black men by police officers, one in Baton Rouge, La., and the other in Falcon Heights, Minn., a black man shot and killed five officers in a cowardly ambush at an otherwise peaceful protest and wounded nine more people. The Dallas police chief, David O. Brown, said, “He was upset about Black Lives Matter” and “about the recent police shootings” and “was upset at white people” and “wanted to kill white people, especially white officers.”

We seem caught in a cycle of escalating atrocities without an easy way out, without enough clear voices of calm, without tools for reduction, without resolutions that will satisfy.

There is so much loss and pain. There are so many families whose hearts hurt for a loved one needlessly taken, never to be embraced again.

There is so much disintegrating trust, so much animosity stirring.

So many — too many — Americans now seem to be living with an ambient terror that someone is somehow targeting them.

Friday morning, after the Dallas shootings, my college student daughter entered my room before heading out to her summer job. She hugged me and said: “Dad, I’m scared. Are you scared?” We talked about what had happened in the preceding days, and I tried to allay her fears and soothe her anxiety.

How does a father answer such a question? I’m still not sure I got it precisely right.

Truth is, I am afraid. Not so much for my own safety, which is what my daughter was fretting about, but more for the country I love.

This is not a level of stress and strain that a civil society can long endure.

I feel numb, and anguished and heartbroken, and I fear that I am far from alone.

And yet, I also fear that time is a requirement for remedy. We didn’t arrive at this place overnight and we won’t move on from it overnight.

Centuries of American policy, culture and tribalism are simply being revealed as the frothy tide of hagiographic history recedes.

Our American “ghettos” were created by policy and design. These areas of concentrated poverty became fertile ground for crime and violence. Municipalities used heavy police forces to try to cap that violence. Too often, aggressive policing began to feel like oppressive policing. Relationships between communities and cops became strained. A small number of criminals poisoned police beliefs about whole communities, and a small number of dishonorable officers poisoned communities’ beliefs about entire police forces. And then, too often the unimaginable happened and someone ended up dead at the hands of the police.

Since people have camera phones, we are actually seeing these deaths, live and in living color. Now a terrorist with a racist worldview has taken it upon himself to co-opt a cause and mow down innocent officers.

This is a time when communities, institutions, movements and even nations are tested. Will the people of moral clarity, good character and righteous cause be able to drown out the chorus of voices that seek to use each dead body as a societal wedge?

Will the people who can see clearly that there is no such thing as selective, discriminatory, exclusionary outrage and grieving when lives are taken, be heard above those who see every tragedy as a plus or minus for a cumulative argument?

Will the people who see both the protests over police killings and the killings of police officers as fundamentally about the value of life rise above those who see political opportunity in this arms race of atrocities?

These are very serious questions — soul-of-a-nation questions — that we dare not ignore.

We must see all unwarranted violence for what it is: A corrosion of culture.

I know well that when people speak of love and empathy and honor in the face of violence, it can feel like meeting hard power with soft, like there is inherent weakness in an approach that leans so heavily on things so ephemeral and even clichéd.

But that is simply an illusion fostered by those of little faith.

Anger and vengeance and violence are exceedingly easy to access and almost effortlessly unleashed.

The higher calling — the harder trial — is the belief in the ultimate moral justice and the inevitable victory of righteousness over wrong.

This requires an almost religious faith in fate, and that can be hard for some to accept, but accept it we must.

The moment any person comes to accept as justifiable an act of violence upon another — whether physical, spiritual or otherwise — that person has already lost the moral battle, even if he is currently winning the somatic one.

When we all can see clearly that the ultimate goal is harmony and not hate, rectification and not retribution, we have a chance to see our way forward. But we all need to start here and now, by doing this simple thing: Seeing every person as fully human, deserving every day to make it home to the people he loves.

Now here’s Prof. Krugman:

What with everything else going on, from Trump to Brexit to the horror in Dallas, it’s hard to focus on developments in financial markets — especially because we’re not facing any immediate crisis. But extraordinary things have been happening lately, especially in bond markets. And because money still makes the world go ’round, attention must be paid to what the markets are trying to tell us.

Specifically, there has been an extraordinary plunge in long-term interest rates. Late last year the yield on 10-year U.S. government bonds was around 2.3 percent, already historically low; on Friday it was just 1.36 percent.  German bonds, the safe asset of the eurozone, are yielding minus — that’s right, minus — 0.19 percent. Basically, investors are willing to offer governments money for nothing, or less than nothing. What does it mean?

Some commentators blame the Federal Reserve and the European Central Bank, accusing them of engineering “artificially low” interest rates that encourage speculation and distort the economy. These are, by the way, largely the same people who used to predict that budget deficits would cause interest rates to soar. In any case, however, it’s important to understand that they’re not making sense.

For what does “artificially low” mean in this context? Compared to what? Historically, the consequence of excessively easy money — the way you know that money is too easy — has been out-of-control inflation. That’s not happening in America, where inflation is still below the Fed’s target, and it’s definitely not happening in Europe, where the central bank has been trying to raise inflation, without success.

If anything, developments in the real economies of the advanced world are telling us that interest rates aren’t low enough — that is, while low rates may be having their usual effects of boosting the housing sector and, to some extent, the stock market, those effects aren’t big enough to produce a strong recovery. But why?

In some past episodes of very low government borrowing costs, the story has been one of a flight to safety: investors piling into U.S. or German bonds because they’re afraid to buy riskier assets. But there’s little sign of such a fear-driven process now. The premiums on risky corporate bonds, which soared during the 2008 financial crisis, have stayed fairly low. European bond spreads, like the difference between Italian and German interest rates, have also stayed low. And stock prices have been hitting new highs.

By the way, the financial fallout from Britain’s vote to leave the European Union looks fairly limited, at least so far. The pound is down, and investors have been pulling money from funds that invest in the London property market. But British stocks are up, and there’s nothing like the kind of panic some pre-referendum rhetoric seemed to predict. All that seems to have happened is an intensification of the trend toward ever-lower interest rates.

So what’s going on? I think of it as the Great Capitulation.

A number of economists — most famously Larry Summers, but also yours truly and others — have been warning for a while that the whole world may be turning Japanese. That is, it looks as if weak demand and a bias toward deflation are enduring problems. Until recently, however, investors acted as if they still expected a return to what we used to consider normal conditions. Now they’ve thrown in the towel, in effect conceding that persistent weakness is the new normal. This means low short-term interest rates for a very long time, and low long-term rates right away.

Many people don’t like what’s happening, but raising rates in the face of weak economies would be an act of folly that might well push us back into recession.

What policy makers should be doing, instead, is accepting the markets’ offer of incredibly cheap financing. Investors are willing to pay the German government to take their money; the U.S. situation is less extreme, but even here interest rates adjusted for inflation are negative.

Meanwhile, there are huge unmet demands for public investment on both sides of the Atlantic. America’s aging infrastructure is legendary, but not unique: years of austerity have left German roads and railways in worse shape than most people realize. So why not borrow money at these low, low rates and do some much-needed repair and renovation? This would be eminently worth doing even if it wouldn’t also create jobs, but it would do that too.

I know, deficit scolds would issue dire warnings about the evils of public debt. But they have been wrong about everything for at least the past eight years, and it’s time to stop taking them seriously.

They say that money talks; well, cheap money is speaking very clearly right now, and it’s telling us to invest in our future.

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2 Responses to “Blow and Krugman”

  1. Pablo Hoffman Says:

    Mr. Blow, let’s take as a given, as I do, that inequality is profoundly ingrained in our society. I am struck by the paucity of suggested remedies in the writings and pronouncements of many of those who enjoy the eminence of a public forum. Propounding “the belief in the ultimate moral justice and the inevitable victory of righteousness over wrong” is not a remedy, it is cant. There have been righteous individuals throughout time, but there is little in the long scroll of human history to support this belief, and much to belie it in the macrocosm. What achievable concrete steps do you propose to alleviate this condition?

    P H, NYC

  2. Russian Sage Says:

    What relieves the market of constraints such as government borrowing is the dynamics of betting on the future. Cyclical stocks are not the future.

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