Archive for the Category Uncategorized

 
 

Why Ambrose Evans-Pritchard is essential reading

I thought Americans were supposed to be the ones with the can-do spirit, and the Brits were supposed to be the old-world sophisticates with a fatalistic view of things.  But consider the title and subtitle of this article from the only reporter who really understands what’s going on with monetary policy in the US:

Dangerous Defeatism is taking hold among America’s economic elites

Goldilocks has played a trick on America. Growth is not warm enough to prevent hard-core unemployment climbing to post-war highs and sticking at levels that corrode the body politic, but not yet cold enough to overcome the fierce resistance of the Fed’s regional hawks for a fresh blast of stimulus.

Read the entire article, it’s great.  He has the same views as I do, but writes far better.

In this recent post I talked about how the British seemed to understand our monetary dilemma better they we do.  (I might have added that I once thought we understood the Japanese problem better than they did.  Now I wonder.)  In that earlier post I discussed some recent articles at The Economist Free Exchange and the Financial Times.  Do you ever see any articles in the NYT or WSJ that seem to understand monetary policy?  I suppose I am sounding like Brad DeLong, but on monetary economics the difference between the two countries’ press corps is so striking that it calls out for an explanation.  Does anyone have one?

Remember the phrase “overpaid, over-sexed and over here?”  If even the Brits are telling us Americans to get some (monetary) testosterone and snap out of our malaise, what does that tell you?

HT:  David Stinson

Tlon, Uqbar, and Guugu Yimithirr

I’m surprised Tyler Cowen didn’t link to this NYT story:

But then a remote Australian aboriginal tongue, Guugu Yimithirr, from north Queensland, turned up, and with it came the astounding realization that not all languages conform to what we have always taken as simply “natural.” In fact, Guugu Yimithirr doesn’t make any use of egocentric coordinates at all. The anthropologist John Haviland and later the linguist Stephen Levinson have shown that Guugu Yimithirr does not use words like “left” or “right,” “in front of” or “behind,” to describe the position of objects. Whenever we would use the egocentric system, the Guugu Yimithirr rely on cardinal directions. If they want you to move over on the car seat to make room, they’ll say “move a bit to the east.” To tell you where exactly they left something in your house, they’ll say, “I left it on the southern edge of the western table.” Or they would warn you to “look out for that big ant just north of your foot.” Even when shown a film on television, they gave descriptions of it based on the orientation of the screen. If the television was facing north, and a man on the screen was approaching, they said that he was “coming northward.”

.   .   .

In order to speak a language like Guugu Yimithirr, you need to know where the cardinal directions are at each and every moment of your waking life. You need to have a compass in your mind that operates all the time, day and night, without lunch breaks or weekends off, since otherwise you would not be able to impart the most basic information or understand what people around you are saying. Indeed, speakers of geographic languages seem to have an almost-superhuman sense of orientation. Regardless of visibility conditions, regardless of whether they are in thick forest or on an open plain, whether outside or indoors or even in caves, whether stationary or moving, they have a spot-on sense of direction. They don’t look at the sun and pause for a moment of calculation before they say, “There’s an ant just north of your foot.” They simply feel where north, south, west and east are, just as people with perfect pitch feel what each note is without having to calculate intervals. There is a wealth of stories about what to us may seem like incredible feats of orientation but for speakers of geographic languages are just a matter of course. One report relates how a speaker of Tzeltal from southern Mexico was blindfolded and spun around more than 20 times in a darkened house. Still blindfolded and dizzy, he pointed without hesitation at the geographic directions.

How does this work? The convention of communicating with geographic coordinates compels speakers from the youngest age to pay attention to the clues from the physical environment (the position of the sun, wind and so on) every second of their lives, and to develop an accurate memory of their own changing orientations at any given moment. So everyday communication in a geographic language provides the most intense imaginable drilling in geographic orientation (it has been estimated that as much as 1 word in 10 in a normal Guugu Yimithirr conversation is “north,” “south,” “west” or “east,” often accompanied by precise hand gestures). This habit of constant awareness to the geographic direction is inculcated almost from infancy: studies have shown that children in such societies start using geographic directions as early as age 2 and fully master the system by 7 or 8. With such an early and intense drilling, the habit soon becomes second nature, effortless and unconscious. When Guugu Yimithirr speakers were asked how they knew where north is, they couldn’t explain it any more than you can explain how you know where “behind” is.

And this:

In coming years, researchers may also be able to shed light on the impact of language on more subtle areas of perception. For instance, some languages, like Matses in Peru, oblige their speakers, like the finickiest of lawyers, to specify exactly how they came to know about the facts they are reporting. You cannot simply say, as in English, “An animal passed here.” You have to specify, using a different verbal form, whether this was directly experienced (you saw the animal passing), inferred (you saw footprints), conjectured (animals generally pass there that time of day), hearsay or such. If a statement is reported with the incorrect “evidentiality,” it is considered a lie. So if, for instance, you ask a Matses man how many wives he has, unless he can actually see his wives at that very moment, he would have to answer in the past tense and would say something like “There were two last time I checked.” After all, given that the wives are not present, he cannot be absolutely certain that one of them hasn’t died or run off with another man since he last saw them, even if this was only five minutes ago. So he cannot report it as a certain fact in the present tense. Does the need to think constantly about epistemology in such a careful and sophisticated manner inform the speakers’ outlook on life or their sense of truth and causation? When our experimental tools are less blunt, such questions will be amenable to empirical study.

All this reminds me of Borges:

Hume always noted that Berkeley’s arguments would not admit the least rebuttal, that they created no conviction. That opinion is entirely truthful in its application to the earth; entirely false in Tlön. The nations of that planet are – congenitally – idealists. Their language and the derivations of their languages – religion, letters, metaphysics – presuppose their idealism. The world for them is not a competition of objects in space; it is a heterogenerous series of independent actions. It is successive, temporal, not spatial. There are no nouns in the conjectural Ursprache of Tlön, from which the ‘present’ languages and dialects come: there are impersonal verbs, qualified by monosyllabic suffixes (or prefixes) with adverbial value. For example: there is no word which corresponds to the word ‘moon’, but there is a verb that would be in english ‘mooning’ or ‘to moon’. ‘The moon shone over the water’, one would say ‘hlör u fang axaxaxas mlo’, that is in its order ‘upward (hacia arriba), behind lasting-flowing it was mooning’. (Xul Solar translates with brevity ‘behind the onstreaming, it mooned’. ‘upa tras perfluye luno’.)

the previous refers to the language of the austral hemisphere. In the boreal hemisphere (whose Ursprache there are very few details about in the eleventh volume), the primordial cell is not the verb, but the monosyllabic adjective. nouns are formed of an accumulation of adjectives. One does not say ‘moon’, one says ‘aerial-bright over round-dark’ or ‘vaguely oranging skyful’ or some other aggregation. In the chosen example the mass of adjectives correspond to a real object; the fact is purely fortuitous. In the literature of this hemisphere (as in the subsistent world of Meinong) ideal objects abound, summoned and dissolved in a moment, according to poetic necessities. Mere simultaneity at times determines them. There are objects composed of two ends, one of a visual character and the other auditory: the colour of the east and the remote cry of a bird. There are many of them: the sun and the water upon the chest of a swimmer, the vague tremulous pink that you see with your eyes shut, the feelings of a person who lets the rivers and dreams carry them. Those objects of the second degree can combine themselves with others; the process, by means of certain abbreviations, is practicably infinite. There are famous poems composed of just one enormous word. This word constitutes a poetic object created by the author. The fact that no-one believes in the reality of nouns paradoxically makes it so they are unending in number. The languages of the boreal hemisphere of Tlön possess all the names of the indo-european languages and many more.

HT:  Lorne Smith

Jackson Hole: Speech, Speech . . .

Nearly 2 years ago (in October 2008) I started running around like a chicken with its head cut off.  I talked to distinguished professors, wrote op eds, submitted papers to journals.  I haven’t stopped.  But the most common reaction at the time was:

1.  It’s not a monetary problem it’s a banking problem. 

2.  You can’t push on a string.

3.  Rates are already near zero.

4.  We need fiscal stimulus.

When NGDP is falling fast it is ALWAYS a monetary problem.  Two years later this awareness has seeped all the way down to the Drudge report.  Here are the top three headlines today:

Bernanke Under Pressure to Prop it Up!

Jackson Hole:  Speech, Speech . . .

Weak GDP Raises Stakes for Obama . . .

Now it’s not just one monetary crank, the whole world is looking to Bernanke to save us.  Can he fight off the arch-villain Fed hawks?  Stay tuned . . .

PS.  Yes, I over-dramatized a bit to make myself look good.  There were a few others like David Beckworth, Earl Thompson and Robert Hetzel.  And Jim Hamilton occasionally had some good things to say.  But in retrospect it is absolutely stunning how silent the profession as a whole was, at least on the need for monetary stimulus.  Better late than never.

Alan Blinder endorses negative rates on reserves

Here is Blinder:

Interest on reserves. In October 2008, the Fed acquired the power to pay interest on the balances that banks hold on reserve at the Fed. It has been using that power ever since, with the interest rate on reserves now at 25 basis points. Puny, yes, but not compared to the yields on Treasury bills, federal funds, or checking accounts. And at that puny interest rate, banks are voluntarily holding about $1 trillion of excess reserves.

So the third easing option is to cut the interest rate on reserves in order to induce bankers to disgorge some of them. Unfortunately, going from 25 basis points to zero is not much. But why stop there? How about minus 25 basis points? That may sound crazy, but central bank balances can pay negative rates of interest. It’s happened.

Charging 25 basis points for storage should get banks sending money elsewhere. The question is where. If they just move money from their accounts at the Fed to the federal funds market, the funds rate will fall — but it can’t fall far. After all, it has averaged only 16 basis points since December 2008. If banks move the money into Treasury bills instead, the T-bill rate will fall. But even if it drops all the way to zero, that’s not a big change from its 12-month average of 11 basis points (for three-month bills). So charging 25 basis points is no panacea.

But suppose some fraction of the $1 trillion in excess reserves was to find its way into lending. Even if it’s only 10%, that would boost bank lending by 3%-4%. Better than nothing.

That’s what I keep saying—better than nothing.  Right now the Fed is giving us nothing.

Earl Thompson, R.I.P.

I was saddened to hear that Earl Thompson just passed away, at the age of 71.  Although I never met Professor Thompson, I found him to be one of the most brilliant and original thinkers in the field of macroeconomics.  Unfortunately for him, he was far ahead of his time, and his insights still have not been incorporated into macro theory.  Last year I pointed out that he was one of the few economists who understood that tight money in 2008 was behind the current economic crisis.  Here is an obituary from UCLA, where he taught. 

I was disappointed that the obit didn’t even mention his innovative work on monetary policy.  He was one of the first to call for nominal wage targeting to minimize employment fluctuations, and developed an approach to overcome policy lags that was close to my futures targeting idea.  I believe he may have been the first economist to ever propose this idea, but the paper was never published.  A year later Robert Hall published a different method of using market expectations to implement a price level target.  

He also did excellent work on the role of gold in the Great Depression.  I don’t know much about his work in other fields, but the UCLA obituary has a good summary.

My sympathy to his wife Velma Montoya, and their son.