Archive for August 2009

 
 

Harping on the Fed Index

1.   Likely fall in nominal GDP between 2008 and 2009:  1%

Last time NGDP fell that rapidly:  1937-38

2.   Fall in monetary base during first half of 2009:  3.1%

Last time monetary base fell that fast in first half (excluding post-Y2K fall):  1938

3.   Current yield on 3 month T-bills:  0.18%

Yield on 3 month T-bills on January 1st, 1938:  0.10%

4.  Date Fed first instituted a policy of paying banks to hoard reserves:  October 2008.

Previous time Fed instituted a policy which increased the demand for reserves:  1937

5.   Increase in the minimum wage since 2007:  41%   ($5.15 to $7.25)

Largest percentage increase in the minimum wage:  Infinity, November 1938  ($0 to $0.25)

6.   Percentage of US economists who want to see the minimum wage completely eliminated:  47%

Voting pattern of US economists:  3 to 1 Democratic

7.  Change in the PPI between June 2008 and June 2009:   -13.2%

Change in the PPI between June 1937 and June 1938:  -10.0%

8.  Change in the DJIA between August 31, 2008 and November 20, 2008:  -34.6%

Change in the DJIA between August 31, 1937 and November 20, 1937:  -33.4%

Hetzel on monetary policy during 2008:Q3

Because of the recent surge of comments, it has taken me a while to get to the Hetzel paper.  All the comments suggesting that I was nuts defending Rorty have just made me even more ornery.  Thus after returning from China this blog will abandon economics and devote itself full time to:

1.  Showing that Rorty’s argument against objective truth is indisputably correct.

2.  A review of Borges’ A New Refutation of Time, along with some more recent arguments in favor of his view.

3.  A defense of Schopenhauer’s argument that everyone who has ever lived was essentially the same person, the eternal “I.”

4.  Showing the logical impossibility of free will, which you are free to disregard if you’re not interested.

5.  And finally, an argument you have undoubtedly heard ad nauseum, the implication of Nietzsche’s eternal return for the rate of time preference and the time value of money.

.   .   .

Not!


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I thought so too Dr. Friedman

Whenever I have a slightly embarrassing post, like my preceding foray into philosophy, I want to get something new up as quickly as possible, in the hope that perhaps people won’t notice the previous one.  So here are few interesting Milton Friedman quotations from 1998 that a commenter named “123” sent me.  Friedman was discussing Japan:

Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy.

.   .   .

After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.

I thought so too Dr. Friedman.  I don’t think he’d view current Fed policy as expansionary.

PS.  I was going to juxtapose this with the recent comments by Anna Schwartz about low interest rates and monetary ease.  But what’s the point of picking on her, thousands of other economists keep saying similar things.  Still, I feel better knowing that at least Milton Friedman agrees with me.

Are the laws of physics mere social conventions? No, they are social conventions.

Mere?  So much confusion has been caused by one seemingly innocuous adjective.

A commenter named Jian asked me this question after my previous post:

Your point about the arbitrariness of CPI is well taken, but if you were really serious about physical laws being social constructions, I’ll quote Alan Sokal: “Anyone who believes that the laws of physics are mere social conventions is invited to try transgressing those conventions from the windows of my apartment. (I live on the twenty-first floor.)”

I am very serious.  As I indicated in an earlier post, my views of “reality” are similar to those of Richard Rorty.  He takes a pragmatic view of things.  There is no difference between subjective opinions and objective reality, or at least no difference that is discernible to humans.  But many people wrongly infer that this means that human knowledge is useless, simply because there is no such thing as objective truth.  Rorty says that the real question is not whether some belief is “true,” but rather whether it is useful.  The laws of physics tell us not to jump out of windows in tall building, and hence they are useful.  That is all we can really say.  But haven’t they been “proven” to be true?  Let’s take a quick look at the history of one of the most important parts of physics, astronomy.


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Six reasons to abolish inflation

[New readers sent here by the NYT, this is a wacky, offbeat post.  If you want a serious look at my policy views please check out my FAQs.  In addition, this link discusses what went wrong last year.  And finally, I want to thank Tyler Cowen for his very kind review of this blog.]

When Bob Murphy sees this title he’ll probably think it is a dream come true.  The evil inflationist finally sees reason.  Well I’m afraid it’s more like his worst nightmare.  I don’t propose to abolish the phenomenon of inflation, but rather the concept of inflation.  And to be more precise, price inflation, which is what almost everyone means by the term.  I want it stripped from our macroeconomic theories, removed from our textbooks, banished into the dustbin of discarded mental constructs.


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