The market mess (5×8 – 8/8/11)

The downgrade debacle, dragon boats, the 78-square-foot apartment, the food truck controversy in St. Paul, and cigarettes and the first 30 minutes of your day.

The Monday Morning Rouser:


This morning we’ll find out what the stock markets think about Friday’s Standard & Poor’s downgrade of the U.S. credit rating. You don’t often see a food fight in the big-money world but the Treasury Department let S&P have it after the downgrade:

…Independent of this error, there is no justifiable rationale for downgrading the debt of the United States. There are millions of investors around the globe that trade Treasury securities. They assess our creditworthiness every minute of every day, and their collective judgment is that the U.S. has the means and political will to make good on its obligations. The magnitude of this mistake – and the haste with which S&P changed its principal rationale for action when presented with this error – raise fundamental questions about the credibility and integrity of S&P’s ratings action.

Yahoo’s finance blog, though, says we deserved it:

The Financial Times is calling the downgrade “a contentious and historic move that highlights the weakened fiscal stature of the world’s most powerful country.” The key word there is “highlights.” Which is humiliating but hard to argue. Make no mistake: The U.S. more than earned this downgrade. The nation is absurdly debt-laden and shows absolutely no signs of stopping.

The downgrade came after the debt deal ending the threat of a government default. The Washington Post revisits the showdown and finds the table for it was set years ago…

The frantic showdown that followed, bringing the nation to the brink of default, looked like the haphazard escalation of a typical partisan standoff.

It wasn’t.

It was the natural outgrowth of a years-long effort by GOP recruiters to build a new majority and reverse the party’s fortunes. That effort began before the economy collapsed in 2008, before the government bailouts that followed, before the tea party rose in response to push its anti-tax, anti-spending message.

S&P attributed the downgrade to the dysfunctional Washington politicians, who spent yesterday proving S&P right.

Dave Kansas, who writes the Morning Market Beat for the Wall St. Journal, says the overnight markets in Europe probably have more to do with the debt crisis there than here. Kansas, by the way, is writing his last column today. He is moving back to his home state of Minnesota to become the new chief operating officer at MPR.

This is all a big story, of course, which is why MPR is dedicating much of its programming to the issue today. We’ve also trotted out a live blog to follow all the, err, action.


Does any state in the nation have the breathtaking array of festivals every weekend that Minnesota has?

This weekend’s pick: The annual Dragon Boat Festival on Lake Bemidji.

Minneapolis had its Fringe Festival


You make it hard not to love you, Minnesota.


In my neck of the woods — Woodbury — a neighbor is building a shed in his backyard, the roof of which is as tall as his house and the footprint of which could easily house a small family, or at least most of his “stuff.” Many of my neighbors have sheds, which has always struck me as a signal that you’ve got too much stuff. But the new display of status seems to be the size of your shed.

Architect Luke Clark Tyler does not have too much stuff. He lives in a 78-square foot apartment. He also works from home.

That’s New York, of course, where there’s a shortage of affordable housing to begin with. The Twin Cities are heading in that direction. The Star Tribune reports there’s a shortage of apartments here.


It was only a matter of time. Restaurant owners in downtown St. Paul are fighting back against food trucks, the Pioneer Press says.

At Faces in Lowertown, chef/owner David Fhima calls food trucks “fair weather friends,” around only on nice days or when a big festival is going on: “Where are they when it’s 100 degrees or it’s snowing?”

Still, he appreciates that food trucks bring diversity to downtown and give people more eating options. He just doesn’t want a noisy truck parked outside his patio for hours. He thinks the rules of the game need to be spelled out.

“They get to come and go as they please,” he said. “It’s a little bit of an unfair advantage. I can’t walk outside and tell someone my bread is organic or my salami is better-quality.”


New research says lighting a cigarette within 30 minutes of waking up nearly doubles the already high risk of lung cancer.

Bonus: Just because…


Defense Secretary Leon Panetta is asking that the Pentagon be exempt from further spending cuts when congressional negotiators begin budget work this fall. Today’s Question: Should the U.S. military be spared deep cuts in the budget process?


Midmorning (9-11 a.m.) – First hour: How to trust your boss.

Second hour: Linguist John McWhorter looks at how we define language, how languages evolve, and what we’ll lose when these languages are gone.

Midday (11 a.m. – 1 p.m.) – First hour: a preview of the Iowa straw poll.

Second hour: TBA

Talk of the Nation (1-3 p.m.) – First hour: TBA

Second hour: Rethinking school discipline.

  • boB from WA

    I trust that today’s 5×8 is of some future reality (8/8/22)? And if so, there must still be time to change it.

  • First – a welcome home to Mr. Kansas.

    The WaPo would, of course, blame Republicans for the problems in Washington. Gee – a political party was trying to recruit new members to gain a majority? Color me shocked.

    The think the table was set with the stimulus. I was reminded of an excellent piece in the Harvard Journal as to why the stimulus failed, and the conclusion was that Obama & Democrats chose the wrong means of stimulating the economy. For example, the business tax incentives in the stimulus package didn’t do anything to reduce the cost of employment to the company. Had the Democrats proposed reducing corporate tax rates to stimulate employment, the Republicans would have been hard pressed to disagree. This form of stimulus would have taken an effect on the economy almost immediately.

    Instead of tax cuts for stimulus, the White House and Congressional democrats pushed for spending on things such as infrastructure. The problem with that sort of stimulus is it takes time to plan and therefore any effects take considerably longer to be felt in the economy.

    So- I think the table was set during the stimulus debate when the Democrats refused the notion that tax cuts stimulate the economy better than government programs. If the economy was doing better, or if the stimulus had worked, the debt ceiling debate would have been a bit different.

    Here’s the Harvard piece:

  • Bonnie

    boB from WA – If only twas true!

  • vivian

    Market Mess:

    they did the monster mash

    wall street crash

    caught on in a flash

  • Jim Shapiro

    Drea – While I’m probably not on the short list for this year’s Nobel Prize for Economics, at least I don’t make stuff up to the benefit of the corporations from which I receive stipends.

    Sadly, the same cannot be said for at least one Harvard economics professor.

    View this award-winning documentary at your own emotional risk:

    But the truth shall set us free, right? ( Hasn’t served to incarcerate any fraudulent bankers though)

  • Jim – it’s a little condescending to suggest my emotions are somehow involved.

    It’s not just one (apparently questionable) professor at Harvard suggesting business tax cuts are needed for stimulus, the British are seriously discussing it too. The Brits are a people who can scarcely be called “emotional,” so if it’s gotten to that point for them, why shouldn’t I think it’s needed here too?

  • vivian


    a discourse between drae and jim shapiro is like watching a 1960’s japanese monster science fiction flick, although i am not sure which one to call it. ; )

  • Jim Shapiro

    Drea – I intended no condescension in my comment. I apologize if my at times overly cute style indicated otherwise.

    The “emotional” component enters when previously respected institutions – like Harvard or Standard and Poors – are proven to have corrupt elements.

    Most people choose to continue believing rather than accept the evidence and be forced to adjust trust paradigms.

    I respect your opinion and would be interested in your response to the film.

  • Jim Shapiro

    Vivian – Can we name our own monsters? I wanna be “The Irish Catholic Russian Jew Over-Educated Iconoclast That Ate Everything In Sight”.

  • vivian

    @ Jim


    I wonder what that would look like? hhhmmmm.

    (btw I had to look up iconoclast-funny)

  • @ Vivian –

    I’ll be Hayekatus or Friedmonsterous or Adamous Smithsaurus Rex. I like that last one.

    @Jim Shapiro – Oh, I agree people get emotional rather than examine evidence and adjust their positions accordingly. I think it’s as good an explanation as any as to why the Keynesians are reduced to name calling.

  • Jim Shapiro

    Drea – What do you get when you mate a Hayekatus with a Friedmonsterous?

    A brutal Pinochetadon.

  • Tyler

    If you’re smoking within 30 minutes of waking up, you’re probably smoking double the cigarettes of the average smoker. Those stats make sense to me!

  • Vivian

    //A brutal Pinochetadon.

    Whose alter ego is run by a character he calls Jimneycrickseratops.

  • @ Jim Shapiro – what? First of all, free markets didn’t lead to Pinochet. And, btw, now Chile is one of the best economies in Latin America.

    And no – that’s not an endorsement of authoritarianism. Capitalism and authoritarian forms of government don’t work well together, which is probably why Chile transitioned to democracy. It’s the thinking behind Nixon’s move to embrace China. Capitalism depends of the free flow of goods, people and information. China will have to rectify this at some point.

    If we’re going to dismiss economic theories based on the number and/or level of thugs and thuggery attached to them, then I’d say capitalism still looks the best.

    And I’ve changed my monster name. I want to be “Economic Darwinist.”

  • Jim Shapiro

    Drea – “…free markets didn’t lead to Pinochet.”

    OK, the DESIRE to access free markets irrespective of consequences led to Pinochet.

    Pinochet’s advisors invited von Hayek and Friedman, neither of whom thought the well-known abuse of human rights was sufficient cause to decline or even object.

    And if you want your monster epithet to be based on evolution AND the least brutal form of economic system, how ’bout: “Democratic Mixed Economy Erectus” ?

  • Jim – uh, you keep spelling my name wrong. It’s ok – I’ll just start calling you Sharpio. 😉

    von Hayek correctly predicted Chile’s transition to democracy, and I believe the same will eventually happen in China. Economic freedom as a path to political freedom.

    And sadly no one seems concerned about the well know abuse of human rights going on in China. At least, it doesn’t stop economists or politicians from speaking in China. Nor should it. We won’t solve the problems in China by shunning the Chinese.

    Capitalist economies have prerequisites like the previously stated free flow of goods, people and information. They also need a transparent form of government. These are issues the Chinese are going to have to confront as they continue to shift towards capitalism. I personally don’t believe their economy is all it’s cracked up to be. Their censorship and secrecy will catch up to them.

    But I am digressing. The evidence suggests that Chile is actually a success of the Chicago School. They liberated Chile economically and politically because really, they go hand-in-hand.

  • Jim Shapiro

    Drae- Mea culpa re the spelling error. Probably late-onset dyslexia. That said, what’s a Drae? 🙂

    From your lips to Dog’s (there goes that dyslexia again) ears re the inattention to China’s human rights abuses and their eventual comeuppance.

    But not shunning does not mean not holding responsible, and using whatever remaining leverage we have to do so.

    Sadly, negotiating with the Chinese appears to be similar to negotiating with the tea party. Give them whatever they want or they’ll take the ball and go home – even if it means ruining the game for everybody.

    But wait. Did you really say that the Chicago School policies liberated Chile politically? Wasn’t Allende freely and democratically elected? And wasn’t Pinochet ( who utilized said policies) a brutal dictator who entered power via a military coup?

    With liberation like that, who needs slavery?

  • Jim – again, the Chicago School didn’t lead to Pinochet. Nor will you find Friedman or Hayek advocating societal oppression in conjunction with free market reforms. To continue to suggest that they are somehow responsible for the existence or brutality of the Pinochet regime because he embraced their free market economic policies (after he was in power) is intellectually dishonest.

  • Jim Shapiro

    Drae – I have never postulated a causal relationship between the Chicago School and the eventual brutality of the Pinochet dictatorship- a strong correlation, arguably – but it would be intellectually dishonest to unequivocally claim causality.

    Neither did I ever state that Friedman or von Hayek advocated social oppression in conjunction with free market reforms.

    That task was adequately carried out by their cheerleader, Jean Kirkpatrick, who said that torture by oppressive regimes in Latin America should be disregarded because it was carried out by authoritarian capitalists, not totalitarian communists.

    From your positive descriptions of the work of von Hayek and Friedman, I take it that you view them as “good men”.

    To paraphrase Edmund Burke, “The only thing necessary for the triumph of evil is for good men to remain silent.”

    And silence is complicity – be it in China, Chile, or Chicago.

  • Jim – I’m having a great time chatting with you, btw.

    I view Fred and Milty as intelligent men with some keen insights. I didn’t know them personally, so I can’t speak to their “goodness.” I’m sure they were as good and as flawed and as complex as the next person.

    And fear not. I’ve recently discussed the heavy handed policies of Mayor Rahm Emanuel against the public employees of Chicago, so no complicity there. Whew.

    Paraphrasing Burke…eh. That standard would make an awful lot of people complicit in a large array of atrocities happening at any given moment on the planet simply because we’re not discussing it. I, for one, don’t recall ever seeing you speak out against tiger poaching. Does that make you complicit in their approaching extinction? Hardly.

    But I do get the impression the goalpost has moved. Weren’t we discussing emotions and evidence before? You seem a little vested in this link but it’s now reduced to “silence is complicity.” And maybe you’re right, maybe silence is complicity, but I think that damns an awful lot of people – most of whom won’t be guilty from having advocated free market economic policies.

    This was fun. Let’s do it again sometime.