Archive for May 2011


More links

My previous post has some links that I found interesting.  I’m told that those with RSS readers don’t necessarily notice, however, so I’ll start a new list today. 

I plan to return to blogging after July 4th, although with even Nobel Laureates now acknowledging that a tight Fed monetary policy in late 2008 caused the severe slump, I don’t see any pressing need to return.  

I do continue to follow the news and make notes, so I promise a very active July of blogging.  If you want to see my view of current events, just go back 12 months and read my old posts on the Greek crisis.  Nothing’s changed.

In case the WSJ piece falls behind a paywall, here’s the money graf:

Then, in summer 2008, the Fed committed what Mr. Mundell calls one of the worst mistakes in its history: In the middle of the subprime crunch—exacerbated by mark-to-market accounting rules that forced financial companies to cover short-term losses—the central bank paused in lowering the federal funds rate. In response, the dollar soared 30% against the euro in a matter of weeks. Dollar scarcity broke the economy’s back, causing a serious economic contraction and crippling financial crisis.


2.  Yours truly in 1995; Greg Mankiw and Paul Krugman in 2011.

3.  Excellent Reihan Salam post.  (HT:  Tyler Cowen)

4.  Interesting Matt Rognlie post.  (I left a comment.)

5.  Greg Mankiw and I share the same Congressman.

6.  In a recent talk, Robert Lucas argued that a decline in “spending” (i.e. NGDP) produced the severe contractions of 1929-33 and 2008-09.  He argued that the slow recoveries were caused by adverse supply-side polices.  This is not “classical” or RBC economics, it’s AS/AD.   I think he’s right about the the Great Depression and the recent contraction, but only about 30% right about the current recovery (I attribute 70% of the slow recovery to lack of NGDP growth.)  Oddly, Paul Krugman and Matt Yglesias seem to think that Lucas denies that demand shocks cause recessions–which is clearly not Lucas’s view.

7.  One of the reasons why unemployment stays high:

LAST October, I won the Nobel Prize in economics for my work on unemployment and the labor market. But I am unqualified to serve on the board of the Federal Reserve — at least according to the Republican senators who have blocked my nomination. How can this be?

The easy answer is to point to shortcomings in our confirmation process and to partisan polarization in Washington. The more troubling answer, though, points to a fundamental misunderstanding: a failure to recognize that analysis of unemployment is crucial to conducting monetary policy.

Expertise in unemployment is of little help in monetary policy.  But the scary thing is that most people don’t even understand that tight money is contributing to high unemployment—at least Diamond knows that.  The lunatics have taken over the asylum.

8.  If you squint hard enough, and turn sideways, Matt Yglesias sort of, indirectly, hints that Obama should put me on the Fed (or Beckworth or Hendrickson).  At least I’d like to think that’s what he’s saying.

9.  The always insightful Tim Duy on monetary policy:

The turn toward contractionary policy – and monetary policy arguably turned contractionary when Fed policymakers questioned the wisdom of continuing QE2 – is surely one of the shocks that hit the economy.

.  .  .

For now, watch carefully for Fedspeak that speaks to the forecast – whether or not officials continue to see the current challenges as temporary.  And look for concern that additional asset purchases would have no impact, or a reiteration of Bernanke’s concerns that the tradeoffs are less favorable.  We are caught between rhetoric and reality – while the Fed may believe no more is coming, the history of this cycle is that more easing has always been needed.

10.   Paul Krugman notes (correctly) that I’m politically homeless.  The progressive left has recently been so good on monetary policy that I don’t feel any need to rush back into blogging.

11.  Why not put Greg Mankiw up for the Fed position?  He’d be confirmed easily.  A necessary condition for more monetary stimulus is that Ben Bernanke decides we need more monetary stimulus.  If Bernanke made that decision, I think Mankiw would support him.

12.  A report on the recent GOP debate:

Ron Paul, the Texas congressman who has run for president before, did little to shake his image as a fringe candidate by talking too fast and dropping obscure subjects like “Keynesian bubble” and  “monetary policy” into the conversation.

13.  Why NGDP growth is so slow:

The best cure for the economy now is time.

That’s the overwhelming opinion of leading economists in a new Associated Press survey. They say the Federal Reserve shouldn’t bother trying to stimulate the economy — and could actually do damage if it did.

The economists are lowering their forecasts for job creation and economic growth for the rest of this year, mainly because of high oil prices. A batch of bleak data over the past month has suggested that the 2-year-old economic recovery is slowing.

The economists now expect the nation to create 1.9 million jobs this year, about 200,000 fewer than when they were last surveyed eight weeks ago. They expect the unemployment rate, now 9.1 percent, to be 8.7 percent at year’s end. Before, they expected 8.4 percent.

Despite their gloomier outlook, 36 of the 38 economists surveyed oppose any further efforts by the Fed to invigorate growth.

14.  Redonkulus has a good critique of Cochrane.

15.  Our Congressmen are allowed to engage in insider trading, and also to accept some types of bribes.  But no naughty tweets allowed!

16.  The Tea Party has failed.

17.  There are two kinds of people, those who oppose the war on drugs, and evil people.  From Kevin Drum:

So there you have it: a genuine mystical experience with long-lasting positive effects, no reported negative effects, no known medical side effects in healthy people, and with virtually no chance of a bad experience. Does that sound like something you’d like to try? Well, you can’t: no matter how safe and beneficial it might be, psilocybin is a Schedule 1 controlled substance and you can’t have any. You may thank the War on Drugs whenever you like.

18.  Matt Yglesias tries to defend Metcalf, and ends up exposing the shallowness of Metcalf’s article (by making the points Metcalf should have made, but didn’t.)

19.  Bob Higgs on why hyperinflation hasn’t occurred (yet.)  Is the prime rate/Treasury spread wider than usual?

20.  Memo to the NYT editor:  This is less wrong, maybe one more try and you’ll get it right:

11:04 a.m. | Updated A previous version of this post incorrectly stated that Ozone is the highest bar in the world. It is, in fact, the highest bar in Asia, but has been surpassed by at.mosphere, at the Burj Khalifa in Dubai. The post has been corrected.