Mark, don’t confuse cause and effect. The federal government opened the door of “opportunity” and the banks walked through it. That doesn’t excuse the banks for what they did, but they were responding to incentives that the federal government provided.

The federal government pressured banks to lend money to unqualified homebuyers. The federal government backed Fannie Mae and Freddie Mac, which bought up those home loans, making them essentially risk-free for the original lenders.

The Federal Reserve made money readily available. (On these pages, there has been some dispute about that, but the disagreement reflects the time period under discussion; I don’t think there is any doubt that from 2002 to 2004, under Greenspan, the Federal Reserve increased the money supply, and some would say to an extreme degree.)

The Center for Public Integrity is taking a selective look backward to see who offered subprime mortgages and whether they were the same companies that accepted TARP funds. That's almost tautological.

You will recall that Henry Paulson brought the leading banks into his office and told them that they had to accept funds from the federal government before they could leave the room.

I welcome any improvements on this chronology.

Finally, Maddow interviews Ron Paul. It can safely be said, however, that Keith Olbermann will never interview him.

One of the reasons I like Ron Paul is that he keeps bringing the debate back to foreign policy.

My old friend Dan Klein of George Mason University has compiled a fascinating group of quotations on not-the-usual topics for Econ Journal Watch."Intellectual Hazard: A Liberal Selection of Quotations" is here (pdf).

I just returned from a visit with editors and contributors of Econ Journal Watch. This is an online journal that critiques the stuffy, math-oriented, and statist articles in highbrow economic journals. It does other things, too -- for example, Daniel Klein and Gavin Kennedy conduct a dignified debate over whether Adam Smith's use of the term"invisible hand" was just a casual metaphor (May 2009). (Klein edits the journal.)

But EJW also points out the establishment's erroneous assumptions and illogic and offers more market-oriented alternatives. For example, David Henderson challenges the

smug assumptions of two economists arguing that smoke-free ordinances raise restaurant profits (May 2008).

And William Davis and Bob Kennedy point out that most establishment economists write as though American democracy is a "wise, reliable, melioristic" process (May 2009). Then they discuss a survey revealing that these same economists are actually quite skeptical of the political process; thus, establishment economists' policy prescriptions tend to be at odds with their personal beliefs (May 2009).

The peer-reviewed journal is sponsored by the American Institute of Economic Research in Great Barrington, Massachusetts. It is not a blog and doesn't accept online comments, but it has good readership for an academic journal (you can see the number of hits under "Archive") and its cites are quite respectable. In spite of its belligerence against the current economic establishment, it's gained quite a bit of traction since it started in 2004. Do historians have such a thing?

Mark, thank you for alerting us to a more nuanced view of 20th-century British history -- from an unexpected source, Pat Buchanan.

Often, a long time must pass before we see facts clearly. By the time historians can be objective, most of the relevant people who really knew what happened (and were reluctant to tell it) are dead.

That is also the case with the question of whether FDR withheld knowledge of the pending attack on Pearl Harbor. I have been convinced--by John Toland especially--that Roosevelt and George Marshall knew about the attack and let it happen, but that idea is so offensive to many FDR partisans that it has been mostly ignored. Amazon just informed me that a new book, by George Victor, says somewhat the same thing. I can't wait to read it.

Although forced population movements are not unique to the twentieth century, as anyone of Cherokee, Creek, Seminole, Chickasaw, or Choctaw ancestry can attest, such atrocities are among the greatest disgraces of the past century. One of the earliest such movements in this era was the population exchange between Turkey and Greece under the terms of the 1923 Treaty of Lausanne, which settled the conflict from which the modern Republic of Turkey emerged.

Like most Americans, I know little about Turkey or the history of the territories its present government controls. So I consider the way in which I spent the evening of Monday, May 25, as one of my life’s wholly unexpected experiences. On that occasion, my wife Elizabeth and I found ourselves in the village of Şirince, high on a mountainside about nine kilometers from the town of Selçuk, which itself is about three kilometers from the ruins of the fabulous city of Ephesus, one of the greatest metropolises of the ancient world.

By a series of events unlikely to have happened to anyone but a certain lovely, vivacious, and outgoing Louisianan (a.k.a. my wife), Elizabeth, who had gone to Selçuk earlier on Sunday while I was still occupied with business elsewhere in Turkey, had become acquainted with an affable carpet dealer by the name of Aydin. Through him, we met Metin, a young man who works with or for Aydin. (In Turkey it seems that everybody works with or for a great many others, who are described in most cases as brothers, cousins, uncles, or nephews.) Both Aydin and Metin speak good English and have spent time in the United States.

Metin had previously kept a shop in Şirince, and he took us there on Monday evening, when Aydin, who had promised to take us, was diverted by business dealings. The village was nearly deserted when we arrived just after sundown, and almost all of the shops had closed. Metin informed us that the village had been inhabited for many generations by Greeks, whose houses were built in the customary Greek style (the style in which they remain today, at least on the outside). In the early days of Mustafa Kemal’s (Kemal Atatürk’s) reign as modern Turkey’s founding strong man, these Orthodox Christian people had been expelled in the great population exchange and replaced by Muslim Turks who had previously lived in Greece.

With no tourists swarming in the streets, our stroll around the village before dinner was pleasant and unimpeded. We then sat down to have dinner at a restaurant whose menu was extensive and inviting and in which for an hour or more no one else was being served. In response to our questions about present-day relations between Turks and Greeks, Metin indicated that he had nothing against Greeks. “Problem is not people,” he averred. “Problem is always governments.” In reaction to this delightfully unexpected libertarian statement, we expressed our wholehearted agreement.

When Metin inquired as to how we liked President Barack Obama, we replied that we dislike all politicians. He nodded as if he understood and agreed with our sentiment. Then, after a brief pause, he said. “But there is one who is different.” After pausing again, as if he were searching his mind, he said simply: “Ron Paul.” Quickly following up, he declared emphatically: “I love Ron Paul!” Nearly struck dumb by this amazing declaration, we asked how he knew about Dr. Paul. He said that everybody in Turkey knows about him, and many Turks like him better than other politicians. When we informed him that we are personally acquainted with Dr. Paul, it was almost as if we had told him we are personally acquainted with some world-famous celebrity. Elizabeth confessed to him that although she normally steers clear of politics, she had joined a meetup group to promote Dr. Paul’s Republican presidential candidacy and had placed a big Ron Paul sign in front of our house. Instant solidarity!

On Tuesday, we talked about Ron Paul with Aydin, who shares Metin’s enthusiasm for the Texas congressman and expressed a desire to bring him to Turkey to be elected president. I daresay Turkey could use such a leader, under whom there certainly would be no collectivist state atrocities such as the heartrending Greek-Turkish population relocations of 1923. As we left Aydin’s shop for our final departure from Selçuk, we could hear him speaking to another man. Although we could not understand what he was saying in Turkish, we did catch the recurrent words “Ron Paul.”

Good essay on Tiananmen Square.

A student recently asked me"why do the annual federal budget deficits not match increases in the national debt." It is an excellent question, since the national debt is a stock, and the deficit (or surplus) is the annual flow altering that stock. As we will see, the answer takes on particular significance in these days of fiscal stimulus and bailouts.

But first we must distinguish between the gross national debt and the outstanding national debt, both of which the government regularly reports. The gross national debt includes the holdings of the various federal trust funds for Social Security, Medicare, and several smaller government programs. These programs have run surpluses that are in essence loaned to cover other government expenditures. Consequently, the figure to which most economists and commentators refer is the outstanding national debt, net of the trust funds (i.e., the debt held by the public, including the Federal Reserve). Changes in neither measure of the national debt match annual deficits or surpluses, nor do the changes in either measure match each other.

Let me start with the debt held by the public. When the U.S. government borrows money to cover ordinary expenditures, the full amount appears in annual outlays, the annual deficit, and the annual increase in the outstanding national debt. But when the U.S. government borrows money to make direct loans to private parties, usually only the net present value of those loans is counted as an outlay and part of the deficit. Under the Federal Credit Reform Act of 1990 (applied retroactively in all official budget statistics), the net present value of each loan (and loan guarantee) is the estimated amount of the subsidy (or cost to the government, exclusive of administrative costs). The subsidy is analogous to the loan loss reserves that banks set aside when they make loans. The outstanding national debt, in contrast, increases by the full amount of the loan. The national debt can therefore increase by more than the deficit when the U.S. government makes direct loans and by less than the deficit when the loans are repaid.

This accounting practice today is affecting how the TARP (Troubled Asset Relief Program) bailouts are reported. The Congressional Budget Office puts the TARP's contribution to the fiscal year 2009 deficit at $184 billion, even though the TARP is expected to add an additional $461 billion to the outstanding national debt during the same fiscal year. That means President's Obama's reported budget, coming in at nearly 28 percent of GDP (the highest since World War II), significantly understates the increase in federal spending on a pure cash-flow basis.

The same thing happened last September when the Treasury initiated its Supplementary Financing Program, in which it eventually borrowed half a trillion dollars solely for the purpose of reloaning it to the Fed, primarily to finance the Fed's currency swaps with foreign central banks. None of that money was booked as part of federal outlays, and so it could not appear in the annual deficit. Yet however much remains outstanding (currently down to $200 billion) will be included whenever the national debt is reported.

The additional difference between the outstanding national debt, held by the public, and the gross national debt is of course the total amount in the federal trust funds. Since the trust funds can rise or fall independent of the U.S. government's annual outlays, the increase in the gross debt can be more or less than the increase in the outstanding debt. The easiest way to comprehend this relationship is to keep in mind that when all the trust funds are totally exhausted, the two ways of measuring the national debt will perfectly coincide. (Currently, under intermediate assumptions about future variables, the Medicare trust fund will be empty in 2017 and the Social Security trust fund will be empty in 2037).

A technical point: Many mistakenly believe that, when the Johnson Administration moved Social Security from"off-budget" to"on-budget," it made a major difference. But because both"off-budget" and"on-budget" sets of government outlays and receipts are regularly reported and unified, the change was of little significance, even from an accounting perspective. Indeed, in 1983 Social Security was technically moved"off-budget" again. For details about these virtually meaningless convolutions, go here.