Feldstein v. Lazear on the Size of the Output Gap

Martin Feldstein is worried that the Federal Reserve will not reverse its increase in the monetary base even as we approach full employment:

Here is what worries me: the structure of US unemployment is very different in the current downturn than it was in the past. Nearly half of the unemployed have been out of work for six months or longer. In the past, the corresponding unemployment duration was only 10 weeks. So there is a danger that the long-term unemployed will be re-employed much more slowly than in previous recoveries. If the unemployment rate is still very high when product markets begin to tighten, the US Congress will want the Fed to allow more rapid growth in order to bring it down, despite the resulting risk to inflation. The Fed is technically accountable to Congress, which could apply pressure on the Fed by threatening to reduce its independence. So inflation is a risk, even if it is not inevitable. The large volume of reserves, together with the liquidity created by quantitative easing and Operation Twist, makes that risk greater. It will take skill – as well as political courage – for the Fed to avoid the rise in inflation that the existing liquidity has created.

Dr. Feldstein is implicitly saying that the GDP gap is not as large as what Ed Lazear wants us to believe:

During the postwar period up to the current recession (1947-2007), the average annual growth rate for the U.S. was 3.4%. The last three decades have experienced somewhat slower growth than the earlier periods, but even in the period 1977-2007, the average growth rate was 3%. According to the National Bureau of Economic Research, the recovery began in the second half of 2009. Since that time, the economy has grown at 2.4%, below our long-term trend by either measure. At this point, the economy is 12% smaller than it would have been had we stayed on trend growth since 2007. Worse, the gap is growing over time. Today, the economy is four percentage points further from the trend line than it was the first quarter of 2009 when this administration's nearly $900 billion fiscal stimulus efforts began. If forecasts of around 2% growth turn out to be accurate, we will add to that gap this year.

Lazear wants us to believe that the economy could have continued to grow by 3.4% per year since 2007QIV even though average growth was less than 2.5% for the 2001 to 2007 period. If that claim had any credence then potential real GDP would have been almost $15.3 trillion as of 2011QIV as opposed to actual real GDP being only $13.4 trillion. In other words, Lazear wants us to believe that the current GDP gap is 12%. Not that anyone should believe such nonsense but isn’t it interesting that Dr. Feldstein is worried that we may be overestimating the GDP gap.

Republicans are simultaneously pushing two themes. One theme is that current Federal Reserve policy is endangering an inflationary spiral, which seems to be the concern of Dr. Feldstein. The other theme is that the Obama Administration is somehow making the recession worse, which Dr. Lazear was so happy to echo. Funny thing – these two themes appear to be contradictory.

Ed Lazear Takes One For Team Republican

Ed Lazear writes a couple of whoppers – one of which was countered by Brad DeLong. Item #1:

During the postwar period up to the current recession (1947-2007), the average annual growth rate for the U.S. was 3.4%. The last three decades have experienced somewhat slower growth than the earlier periods, but even in the period 1977-2007, the average growth rate was 3%. According to the National Bureau of Economic Research, the recovery began in the second half of 2009. Since that time, the economy has grown at 2.4%, below our long-term trend by either measure. At this point, the economy is 12% smaller than it would have been had we stayed on trend growth since 2007. Worse, the gap is growing over time. Today, the economy is four percentage points further from the trend line than it was the first quarter of 2009 when this administration's nearly $900 billion fiscal stimulus efforts began. If forecasts of around 2% growth turn out to be accurate, we will add to that gap this year.

Brad does not buy this 3.4% per year increase in potential real GDP, which is not consistent with what CBO is telling us. Using the FRED database, one can calculate the percentage difference between CBO’s measure of potential GDP versus actual GDP. By mid-2009, this gap had grown to 7.4%. Since then it has slowly declined to around 5.5%.

But hey – we are indeed far from full employment in my opinion. Item #2:

Are there other factors that may have contributed to the slow recovery that we are experiencing? It would be difficult to argue that government polices over the past three years have enhanced confidence in the U.S. business environment. Threats of higher taxes, the constantly increasing regulatory burden, the failure to pursue an aggressive trade policy that will open markets to U.S. exports, and the enormous increase in government spending all are growth impediments. Policies have focused on short-run changes and gimmicks—recall cash for clunkers and first-time home buyer credits—rather than on creating conditions that are favorable to investment that raise productivity and wages.

Aha – the standard GOP talking points! What enormous increase in government spending? Excuse this Keynesian for suggesting that we’ve had too little fiscal stimulus.

The New York Times and Romney: Lost and Without a Clue

The New York Times tried to play gotcha today with Mitt Romney and displayed truly awful journalism.  How clever we are, they thought: we will show that Romney’s position on energy in 2012 is different from the one he laid out in his book in 2010.  Isn’t this what tough, gritty reporting is all about?

No, it isn’t.  The whole attack is misguided, since reasonable people change their minds about things all the time, even if they can’t admit it while they are running for president.  Unreasonable people also change their minds, or never had a mind in the first place, but inconsistency doesn’t help you figure out who they are.  Readers of this supposedly serious analysis will learn exactly nothing of value.

Meanwhile, here is what the article didn’t say: it is an unquestionable fact that neither Obama nor Romney have it within their power to alter the market price of oil.  The fact that oil prices have risen by more than a third in the last two years has zilch to do with government policy.  The whole “issue” is stupid.

Lost Hours

Those were the hours I spent reading Lost Decades, by Menzie Chinn and Jeff Frieden.  I had high hopes for this book because of the obvious skills of its authors, and I was scouting it out as a possible text for my class on the financial crisis next fall.

Not a chance.

Unpacking the Decoupling Tautology

A couple of weeks ago, Lane Kenworthy asked, "Is Decoupling Real?" I've got another question: "is decoupling a tautology?" Laneworthy was referring to the gap between median family income and per capita GDP in the U.S. Along much the same lines is the chart below produced by the Economic Policy Institute's State of Working America, which compares median family income and productivity growth.

The Sandwichman is concerned with another kind of decoupling -- the much touted decoupling of energy consumption from GDP growth that technological optimists like Amory Lovins promote as the solution to environmental impact and resource exhaustion problems. Relative decoupling of energy consumption per dollar of GDP is a well established fact. What is in dispute is whether that can be translated into absolute decoupling through imminent technological breakthroughs.

The short answer is: it can't. The slightly longer answer is it can't because even the relative decoupling that has occurred over the last 39 years is questionable. Oh, there's no doubt that energy consumption per dollar of GDP has fallen; what's questionable is the composition and distribution of that growing GDP.

Even at the aggregate level, there is the question of the increasing proportion of economic activity that needs to be devoted to repairing the damage done by previous economic activity -- cleaning up toxic spills, recovering from extreme weather events, etc. This is what Stefano Bartolini referred to as negative externalities growth and Roefie Hueting called asymmetric entering. This is a kind of decoupling of GDP increase from any meaningful notion of expanded or improved utility. It is just running faster on a treadmill.

But that's not all. There is also the question of distribution and even the possibility that the growing gap between GDP growth and median incomes is a structural imperative. Now, by "structural imperative" I don't mean something that can't be changed -- only something that isn't going to be budged by moralistic pronouncements about fairness. To show what I mean by structural imperative, I would like to share a composite chart that integrates the data from the EPI productivity and median income chart above and data comparing the energy intensity of GDP to the energy intensity per hour of work. I have added an inverted productivity series (black dotted line) for reasons that will become clear as the narrative unfolds.

Sources: U.S. Bureau of Labor Statistics, Energy Information Agency, U.S. Census Bureau

The first thing that becomes clear from this chart is that productivity, median income and the energy intensity per hour worked tracked each other closely from 1949 to 1973. The latter year was chosen as the index year because energy intensity per hour of work peaked in that year. After 1973, energy intensity per hour of work declined for about ten years and then remained virtually flat up to the present. Productivity and Median Income diverge after 1973.

The inverted productivity series now presents a clue as to what exactly is being "decoupled" in all this decoupling. With productivity defined as GDP per hour worked, inverted productivity is hours worked per unit of GDP. Before 1973, inverted productivity appears as simply the mirror image of productivity, median income and energy intensity per hour worked. After 1973, though, it tracks energy intensity of GDP, while the stable energy intensity of hours worked can be understood as the axis around which productivity and energy intensity of GDP rotate and reflect one another. For all intents and purposes, then, one could say that "energy intensity of GDP" is a statistical tautology, which itself, prior to 1973, performed as the axis around which productivity growth translated into steady gains in median income.

Correlation does not imply causation. Sometimes, however, it reveals a hidden tautology. Hours, energy consumption, income and GDP are inputs and outputs of an economic system that transforms some of those into some of these. The inputs don't cause the outputs any more that cattle "cause" beef, they're just different names for the same thing in a different state.

The indexes I have plotted in the graph are ratios between inputs and outputs (productivity and energy intensity of GDP) or inputs and other inputs (hours of work and energy consumption). Median family income can be thought of as a circular ratio of inputs and outputs in which both income and the family can be viewed alternatively as either outputs or inputs -- income provides sustenance for the family; the family supplies labor to industry in return for income and so on.

Ratios between inputs do not wholly determine ratios between outputs or between inputs and outputs. Policies do that. But the quantities of outputs are constrained by the quantities of inputs. It is thus necessary when examining the energy intensity of GDP, for example, to ask what is happening with the other inputs and the other outputs.

In closing, I would like to present a third chart that compares the growth of population, labor force, employment and hours worked in the U.S. from 1950 to 2009.

When I initially chose employment as the numerator of an alternative index, I was aware that there was a rough coincidence with total population and thus would be similar to a per capita energy consumption index but would smooth out some of the cyclical variations. Aggregate hours of work presumably performs this smoothing function even more precisely. For the last fifty years, though, the growth in employment, labor force and aggregate hours has been steeper than population growth, with hours reaching a peak in 2000 of nearly 30% more per capita than in 1961. Employment as a percentage of total population peaked in 2008, even though labor force participation peaked in 2000 because the later ratio considers only the population 16 years and older.

Follow the Honey

There is lots of buzz (sorry) about a pair of just-published articles that provide further evidence that the colony collapse disorder, which is decimating bee populations around the world, can be at least partially attributed to neonicotinoids, one of the most widely used of pesticides. There has been a lot of controversy around this class of agents, and they are banned or restricted in much of Europe—but not in the US. In the writeup in this morning’s New York Times, after a brief summary of the new research, we get this paragraph:

Outside experts were divided about the importance of the two new studies. Some favored the honeybee study over the bumblebee study, while others felt the opposite was true. Environmentalists say that both studies support their view that the insecticides should be banned. And a scientist for Bayer CropScience, the leading maker of neonicotinoids, cast doubt on both studies, for what other scientists said were legitimate reasons.

There followed comments from four of these outside experts. One is from the main producer of neonicotinoids; he thinks the studies are flawed. Another is from the US Department of Agriculture, who thinks the studies shift the weight of research against the pesticide. The other two, both from academia, were evenly balanced, one finding the studies persuasive, the other not.

In other words, the article is a he-said, she-said about pesticides and colony collapse, which relieves the author from having to express his own judgment. Worse, there is no indication whether either or both of the academics have received funding from pesticide manufacturers. Research in entomology and ecotoxicity is expensive, and much of it is funded by industry. Being on the receiving end of pesticide dollars does not invalidate a scholar’s argument, but it is certainly relevant information for nonspecialists who want to know who to believe.

This is an interesting topic for me, because economics has the same problem: a lot of academic, not to mention think tank, economic researchers are funded by business interests with a stake in what their research shows. They present their views to the general public, but rarely with a disclosure of their own interests: the Inside Job problem.

I have two recommendations. First, there should be a public registry, for bee researchers and economists alike, that records any substantial funding they may have received from private individuals or organizations. Journalists should be able to look up this information online and include it in their reports. Professional organizations, like the AEA, should iron out the details and monitor compliance.

Second, journalists have to graduate from the duelling quote game. The only alternative is to write stories that explain, in terms that the public can understand, what the substantive issues are in scholarly disputes, and why some experts go one way and others go another. If a journalist does not have the expertise to do this herself, she should outsource the work to a panel of experts. Their job is not to take sides but to explain, as clearly as possible, what the root basis of the disagreement is, so that readers can understand the points on which the argument turns. In this scenario the job of the journalist is to put together the panel and use her writing skills to make their analysis clear to nonspecialists.

Year by year, more of the issues that democracy has to deal with are technical in nature. Journalism is the indispensable intermediary between arcane knowledge and popular debate. The job isn’t being done very well right now.

EU, How About a Public Option for Mobile Phone Users?

The EU has chosen to continue its system of price controls on mobile phone roaming and internet services.  Isn’t there a simpler way?  Why not create an EU-wide public enterprise to provide connectivity under the condition that it cover its cost of capital, and then let private firms compete with it?  If they can overwhelm the public entity with a great burst of innovation, fine.  If not, too bad.  Doesn’t this make more economic sense than trying to micromanage the price structure?

A Puzzler on Statistical Risk and Fundamental Uncertainty

Let’s compare two situations. In situation A there will be a coin toss. The coin is known with complete certainty to be fair. The odds are obviously .5 that it will come up heads and .5 that it will be tails.


In situation B there will also be a coin toss, but in this case we have no information whatever regarding the fairness of the coin. It could be rigged to always come up heads or tails, or it could be biased toward one or the other, or only in windy weather, or who knows. We don’t. What are the odds? With only two possible outcomes and no reason to expect either to be more likely than the other, it is still .5 and .5.

And that’s the puzzler. Does it really make no difference at all whether we know the true odds? From a decision point of view, are situations A and B effectively the same?

Although this is a greatly stripped-down puzzle, it contains the core of the risk vs uncertainty problem. Consider the typical problem faced by a firm of whether to make an investment. There are many possible outcomes of this investment, and its profitability will be affected by events we may not even conceive of in the present—the so-called unknown unknowns. Nevertheless, if the firm has a hurdle rate of return, its decision will boil down to whether it thinks the expected return is above or below the bar. In situation A it is able to calculate an expected rate of return with full confidence, in situation B with partial, and perhaps very little, confidence. Again, from a decision perspective, is there any reason for the confidence of the expectation to matter? Note that, in the absence of relevant information in situation B, there is no reason to expect the variance of the ROI to be greater or less than in situation A.

Did I mention that this is a tremendously important topic not only in macroeconomics, but also in areas of micro like the justification for the precautionary principle?

Is there a literature that frames the problem this way? I haven’t seen it, and I would be very happy if someone could lead me to it and allow me to achieve enlightenment, since this puzzle has kept me awake off an on for years.  (But I have chipped away at it and even published a paper on it a while back...)

If The Supremes Say No To Obamneycare, Then Go To Single Payer

So, the US Supreme Court seems likely to reject the individual mandate in Obamneycare, which would bring down the entire Affordable Care Act, even though the individual mandate was cooked up by the Heritage Foundation and was long the favored Republican plan, emphasizing using private insurance companies and individual responsibility not to be freeloaders on the system.

So, if the Supremes say no, just do what Teddy Kennedy proposed: expand Medicare to the entire population. This takes care of it, and we can get rid of Medicaid as well, which is increasingly an insufferable burden on the hard pressed state budgets (reminder that last year it was state and local governments that were laying people off to balance their budgets, the main source of rising unemployment in the US economy). So, go to single payer, which was better all along anyway.

Time To Lock The Gun Nuts Up In The Looney Bin

US society has been caving and kowtowing to the NRA for some time now, with Dems terrified to stand up to them over anything. Guns in bars, churches, schools, you name it, and then the obnoxious and insane "Stand Your Ground" laws that have been widely passed. We have now seen the fruits of this in Florida where it is not just the awful Martin-Zimmerman case, but a tripling of these sorts of homicides. The old manipulations of data by sock puppet John Lott are no longer able to cover up the truth: encouraging wider availability of guns leads to more people getting killed by them. Time to lock the lying gun nuts into the looney bin.

Debt, Income and Aggregate Demand: Scoring Krugman vs Keen

Not having learned from my earlier foray into MMT-land, I’m at it again, sucked into a debate between Paul Krugman and Steve Keen over how to think about debt, money and macroeconomics. It is remarkable that these questions could still be unresolved after eons of economic theorizing; this stuff is not very complicated, after all. Someone has to be right, but who?

Former Chancellor Levy Says Profs Should Work More

OK, I am steamed. It is bad enough when someone is misrepresenting facts, but when they add hypocrisy on top of it, this is really annoying. This is the case with the latest push for bashing faculty, in this case calling for increased teaching loads without any salary increases, all supposedly to reign in rising tuition costs. I fully agree that rising tuition costs are a serious problem in US colleges and universities, but the problem has much more to do with rising spending on administrators and staff than faculty, and this latest blast from David C. Levy, former Chancellor of "New School University" (back to being the New School of Social Research now) in the Sunday Outlook section of the Washington Post, "Do Professors Work Enough?" is the worst, with its focus on faculty and no mention whatsoever of his fellow administrators and other spongers.

So, he provides no evidence of falling faculty workloads (and none exists because they have not), but wants people teaching four course loads to go to five course loads in teaching oriented schools and to teach during the summers as well, apparently on a mandatory basis, whether or not students want to attend during summers. In short, he wants to turn our colleges into high schools. A sentence that shows how weirdly fixated he is follows: "Since faculty salaries make up the largest single cost in virtually all college and university budgets (39 percent at Montgomery College), think what it would mean if the public got full value for these dollars." Yeah, wow, just think of it. Here I thought he was going to trot out something like 70%, and instead we get 39%. So, what is the other 61% being used for? Obviously administrators, staff, books, and maybe sports (at my uni the highest paid individuals are the basketball coach and football coach, even though the athletic program is not a net money earner, which is true for all but about 20 schools in the US). As it is, one could fire a quarter of the faculty at Montgomery, increase the teaching load of the rest by a third, and manage to reduce tuition by, wait for it, 8%! Wow.

So, let us get at what is the real problem, completely ignored by this former high level university administrator. According to the New York Times of 12/5/11, during the decade 1999/2000-2009/2010, salaries for presidents at the 50 wealthiest universities rose 75%, while professorial salaries rose 14%, http://www.nytimes.com/2011/12/05/education/increase-iin-pay-for-presidents-at-private-colleges.html .

Nor is this just a matter of the salaries going up for people like Levy way more than for faculty, it is that the numbers of these parasites has also risen dramatically relative to faculty across the board (so that the 39% figure is not all that surprising, although we tend to think that faculty are doing most of the educating at colleges and universities, not the administrators and staff). So, between 1975 and 2005, while total spending on higher ed roughly tripled in constant dollar terms, student-faculty ratios remained about constant at 15-16, administrator-student ratios went from 84 to 68 and staff-student ratios went from 50 to 21. From 1998 to 2008, while faculty spending rose 22%, admin and staff spending rose 36%. From 1965 to 2005, while the number of faculty rose from 446,830 to 675,000, the numbers of administrators and staff rose from 268,952 to 756,405, http://www.washingtonmonthly.com/magazine/septemberoctober_2011/features/administrators_ate_my_tuition031641.php .

Really, I do not know if this guy Levy, now supposedly president of something called "the education group at Cambridge information group," is as seriously ignorant of these facts as he appears to be, or if he is just supremely hypocritical in ignoring the explosion of spending for his type of person in the higher education firmament. But, the push going on for putting faculty in their place by people like this is simply despicable. I must grant that Levy disavows such advocacy by "the political right [who] have been associated with anti-labor and anti-intellectual values," but this looks pretty empty given that earlier in his piece he singles out the "advent of collective bargaining in higher education" in the early 1970s as a main soure of the supposedly rising salaries of the supposedly wickedly lazy faculty he condemns.

I shall conclude with one more source on the bottom line statistics here, which puts to shame his jibe about collective bargaining. These come from the National Center for Education Statistics as reported by Mark Perry at http://mperry.blogspot.com/2009/08/college-tuition-increases-and-faculty.html . So, between 1978 and 2007, while tuitions rose 7.9% per year, faculty salaries rose just barely faster than inflation, 4.5% per year against the CPI at 4.1% per year. Somehow Levy never bothered to notice or cite such numbers in his ridiculous screed. I sincerely hope we do not see too much more of this sort of drivel from this sort of person.

Greg Mankiw Admits a Political Operative Into the Pigou Club

Via Greg comes some odd piece by Jim McTague:

President Obama habitually made the superhero boast, especially in regard to his energy policies. Consequently, now that pump prices have topped $4 in many parts of the country, he finds himself tangled in his cape, with his approval ratings several points below the crucial 50% deemed necessary for re-election. This is a campaign crisis for the president, which is why he is focusing so much of his time on it, including two solid days last week. Obama's mistake was to advertise himself as a hi-tech guru with the added, superhuman ability to manipulate market forces to create a green-energy utopia where batteries, algae and solar cells would replace climate unfriendly fossil fuels like coal and gasoline. His lengthy litany of powers included the ability to raise the cost of these dirty fuels to reduce their pricing advantage over renewable energy. He harped that this was desirable and necessary. The political imprinting worked better than our president ever imagined. Now that gasoline prices are pinching pocketbooks, the public expects Obama to exercise his superpowers and manipulate prices lower. Protestations by Obama that market forces beyond his control are setting the prices are greeted with disdain rather than sympathy.

McTague does go onto to praise Greg:

Harvard University economist Greg Mankiw, currently an advisor to GOP presidential hopeful Mitt Romney, has long been an advocate of a $1-per-gallon gas-tax hike phased in over 10 years (Romney won't countenance the tax). Absent the tax, politicians resort to crazy, Obama-like schemes to achieve the same end of reducing our dependence on foreign oil supplies. MANKIW PRESCIENTLY STATED during a 2006 interview conducted by CNBC's Larry Kudlow that the alternative to a simple gas tax is "an energy policy that looks like it was created in the Kremlin." "An alternative in Washington to gas taxes," he said, "is very heavy-handed regulation that's extraordinarily intrusive and not particularly effective. Things like CAFE standards"—the fuel-efficiency rules that auto manufacturers are required to follow—"and biofuel mandates are tremendously regulatory. The gas tax is really the least invasive way of getting toward our energy goals." In an Oct. 20, 2006, op-ed piece in The Wall Street Journal, Mankiw said higher gasoline taxes would be the least invasive way to reduce pollution and highway congestion. The tax would encourage manufacturers to make fuel-efficient cars and eliminate the need for bureaucratic mandates. Mankiw estimated in his 2006 article that tax revenue would amount to $100 billion a year, which could be used to lower the deficit.

OK – a little credit may have been due this silly op-ed for noting that Romney has not endorsed Mankiw’s tax except for the claim by McTague that “oil men don't have a knee-jerk opposition to such a tax”. McTague also seems to have missed this account of how Romney used to support the same eco-friendly positions that McTague ridicules.

To be honest – I had no idea who Jim McTague was until I found this:

I have little respect for journalists like Larry Kudlow and Jim Mctague who are merely right wing, Republican, political operatives masquerading as financial journalists. Since they are mere mouth pieces for industry groups, and self interested big business, who knows what financial incentives they receive? I have more respect for prostitutes, at least they’re upfront about what they do.

My only problem with this last blog post is that it claimed Kudlow used to be an economist.

Cochrane Confuses Keynesian and the Laugher Crowd

Noahpinion catches John Cochrane making a little sense:

Austerity isn't working in Europe. Greece is collapsing, Italy and Spain’s output is declining, and even Germany and the U.K. are slowing down. In addition to its direct economic costs, these “austerity” programs aren't even swiftly closing budget gaps. As incomes decline, tax revenue drops, and it is harder to cut spending. A downward spiral looms.

Alas, Cochrane switches to his usual rant criticizing fiscal stimulus, which Noah ably takes down. But let’s focus on this:

Economists have been arguing about whether this “multiplier” is more or less than one; five is beyond any reported estimate. Keynesians made fun of “supply siders” in the 1980s, who made similar claims for tax cuts. At least those cuts had incentives on their side, which stimulus doesn't.

Mark Thoma had a similar concern. I wish Cochrane had read this post and how Mark resolved his concern:

The people making the claim about government spending are careful to note that it only applies to very depressed economies

Art Laffer was claiming that tax cuts pay for themselves even if the economy were at full employment and even if the Federal Reserve was setting interest rates well above zero. In case, Cochrane does not realize that interest rates today are a far cry from what they were during the 1980’s, here’s a graph of Treasury bill rates.

Is The West Shooting Itself In The Foot With Iran Oil Sanctions?

Juan Cole describes a translation from a questionable web source, Javan, of the Iranian Revolutionary Guards, who claim there was a summit of intel analysts from the US (CIA), Israel (Mossad), UK (MI6), Germany (BND), and France (DSGE) on March 20 in Stockholm in which they supposedly discussed how Iran has gained $3 billion in revenues from the higher oil prices due to the sanctions against Iran, which supposedly have failed to reduce Iran's oil sales all that much, and of course are hurting the western oil-importing countries, http://www.juancole.com/2012/03/western-intelligence-analysts-worry-that-iran-sanctions-are-hurting-west-irgc.html .

One must suspect that even if the reported meeting took place and that the claims about what has been reported are at least somewhat accurate, that this may be a report intended to understate damage to the Iranian economy and an effort to discourage the sanctions. The issue seems to be Iranian inflation, which has almost certainly accelerated due to the substantial devaluation of the Iranian rial that has happened since the sanctions began being imposed. Indeed, the translation does not deny that this is the case. Rather it says that this does not matter politically or stategically in that the March 2 Majlis election has already passed with pro-Khamenei supporters winning solidly and with the Iranian public supposedly convinced that the increased inflation is strictly due to domestic causes. Even if they are not so convinced, there is reason to believe that the response of the Iranian public, even those critical of the government, is to be angry at outsiders for imposing the sanctions, with much past evidence to support such a view.

Another matter in the translation is that there was reportedly a split at the meeting, with the European nations criticizing the US and Israel, with the German BND being particularly incensed over the negative impact of rising oil prices induced by the sanctions. Supposedly it was decided that the UK should engage in an expanded propaganda effort in Iran to convince their public that the higher inflation there is caused by the sanctions (as if this will do much).

What should be noted here is that even if the report is seriously flawed, this fits in with an ongong theme of intel agencies in western countries being far less enamored of and supportive of the vigorous anti-nuclear-Iran efforts being pushed by most of the media and politicians. In the US, a solid majority believes Iran is actively pursuing a nuclear weapons program, even though all 16 US intel agencies in the latest NIE on this subject agree that Iran is not actively pursuing nuclear weapons (although it may be pursuing a potential capability to pursue them). Less reported than the NIE report is the fact that Israeli Mossad completely agrees with this assessment as well, even though the disjuncture with Israeli politicians is much greater than is the case currently in the US, with the Israeli leaders pushing for an attack, even against public opinion in Israel, which may be more negative on that than public opinion in the US.

Although it is possible that this report is simply bogus propaganda from the Iranians (and that no such meeting in Stockholm occurred or had very different results than reported), it remains that like most sanctions programs this one is probably not as damaging as many think and certainly does have a damaging feedback on the oil-importing countries still struggling to come out of the depths of the past recession, with these sanctions basically pointlessly directed at a nonexistent nuclear weapons program (and Iran's actual nuclear activities completely legal under the Nuclear Non-Proliferation Treaty of which it is a party).