Interest Rates and Economic Recovery

The Fed has been actively suppressing interest rates, keeping them near zero, for a long time. This is in addition to the Obama administration’s economic policies, and the two attitudes have combined to produce an economic recovery from the Panic of 2008 that is one in name only. See this graph, adapted from one in a recent Wall Street Journal to see just how bad the current “recovery” is. The numbers other than the two first quarter 2015 are average annualized rates of increase.EconomicRecovery_Cropped-Resized

Certainly, the Obama policies need to be corrected, but here’s something the Fed can do all by itself: it could let interest rates float, and see them rise to market rates, probably with a temporary overshoot, given the duration of its suppression and separate money printing, but that’s only going to get worse as the Fed delays correcting its own error.

With interest at their more normal level, banks would be more willing to lend, and without lowering their credit standards; businesses would be more willing to borrow, since even though they’d be paying more for their debt, they’d recognize the positive economic indicator; and folks dependent on fixed income sources for their living—widows and orphans—would have more money to spend, even if only on necessities, which would help make that positive economic indicator more concrete.

Timidity of Smart Diplomacy

Motorboat Skipper and Guy Who Sits In the Secretary of State’s Chair John Kerry is demonstrating it.

This is what People’s Republic of China Foreign Minister Wang Yi said Saturday about the PRC’s occupation of the South China Sea and its construction on some of the islands of the Spratly Islands group:

The determination of the Chinese side to safeguard our own sovereignty and territorial integrity is as firm as a rock and it is unshakable. It is the demand of our people on our government as well as a legitimate right of ours.

This is Kerry’s response:

I urged China through Foreign Minister Wang to take actions that will join with everybody in helping to reduce tensions and increase the prospect of a diplomatic solution[.]

Yeah, that’ll show them. The PRC will be packing up and leaving by the end of the week. Sure.

Special Snowflakes

…gotta be part of the blizzard. That’s the opening lament of a collection of graduate pupils in the University of California’s Master of Arts program in Art and Design. These Magnificent Seven, an entire class of the program and who have completed a year of it, wrote a letter explaining their decision to withdraw en masse from the program and posted it on the Art&Education Web site.

Some high points of their letter follow.

We are a group of seven artists who have been forced by the school’s dismantling of each of these elements to dissolve our MFA candidacies.

No, Dears. No one, including USC, stuck a gun in your ears. You made this decision all by yourselves.

We were fully aware of the scarcity of, and the paucity of compensation for, most teaching jobs…. However, a different funding model was presented to us by the Roski administration upon our acceptance to the program: we would receive a scholarship for some of our first-year tuition; and for the entirety of our second year we would have a teaching assistantship with fully-funded tuition, a stipend, and benefits, upon completion of our first-year coursework. We, the incoming class of 2014, were the first students since 2011 to take on debt to attend Roski, and the first students since 2006 to gain no teaching experience during our first-year in the program.

So, before you signed accepting Art and Design’s appointments of you to their program, you knew the funding parameters which would apply to you, and you knew the nature of the changes made from the status quo ante. And you knew a priori the limited employment opportunities following graduation. Now you’re complaining because after a three year (three whole years) interregnum, reality intruded into the program and the monies available to support it, and you can’t get a free ride for both years—you only get benefits and a “fully-funded tuition, a stipend” for the second year, assuming your scholarship was enough up to snuff for the school to continue you.

Oh! The impermanence of Life! How will you get on in the real world, where change is reality, plans don’t match the world forever, or even for very long?

In a slew of unproductive, confounding, and contradictory meetings with the dean and other assorted members of the Roski administration in early 2015, we were told that we would now have to apply for, and compete with a larger pool of students for, the same TAships promised to us during recruitment.

Having to mingle with the unwashed, actually to compete with those not as good as you for scarce resources? The ignominy of it. Whatever to do? Oh, wait—you’ve decided that. Quit, and run away.

We will continue to hold crits ourselves and be involved in each other’s work. We will be staging a series of readings, talks, shows, and events at multiple sites throughout the next year, and will follow with seven weeks of “thesis” shows beginning in April of 2016. Our collective and interdependent force….

That’s what initiative is all about. That’s what you should have been doing right along during your year in the program. You shouldn’t need—as you’re belatedly discovering—to wait on someone else to tell you what you should do; faculty in a graduate program guides and critiques, they don’t tell or spoon-feed like a first grade teacher must.

RTWT. It’s sad and a tired, played out complaint.

Help, or Watch?

Unfortunately, we already know which President Barack Obama will select, as he’s made clear in another venue.

The cause for concern this time is the economic strait in which Ukraine finds itself.

The contraction in Ukraine’s economy accelerated to 17.6% in the first quarter compared with a year earlier, the State Statistics Service said Friday, hammered by a conflict with Russia-backed separatists in its eastern industrial heartland that has slashed industrial output.

Obama—and Europe, to be fair—have already refused to supply Ukraine with the wherewithal to defend itself militarily against Russia’s invasion and support of the rebels in eastern Ukraine and Crimea. Indeed, his Secretary of State already has surrendered both areas to Russian occupation with his offer to lift economic sanctions against Russia if only they will agree to go no further.

If we—or the Europeans, but they seem even more timid than our own administration—don’t start providing serious economic aid to the Ukrainians, Russia won’t need further military advances in order to gain control over all of Ukraine. Ukraine’s economic collapse will hand what’s left of the nation to the Russians without any further ado.

Instead, we should be arming the Ukrainians and ratcheting up the sanctions on Russia, driving the Russians into economic collapse. It’s anybody’s guess, though, whether Ukraine can hold out for another year and a half at which point we might have a more responsible and capable White House.

The Obama Guarantee

President Barack Obama made this guarantee in his statement at the end of his recent Meeting of the Deputies involving the Gulf Cooperation Council national leadership seconds.

The United States is prepared to work jointly with the GCC states to deter and confront an external threat to any GCC state’s territorial integrity that is inconsistent with the UN Charter. In the event of such aggression or the threat of such aggression, the United States stands ready to work with our GCC partners to determine urgently what action may be appropriate, using the means at our collective disposal, including the potential use of military force, for the defense of our GCC partners.

Translation: we agree to talk about a response to an ongoing attack against one of you, and that response might include a military one. Hopefully, we’ll reach some sort of accommodation before you’ve been overrun.

That’s reassuring. There’s a real line there, one that should not be crossed. Else Obama might shake his finger very firmly at you.