Deleted from DeLong’s comment section . . .
Where did I get the crazy idea that back in 2009 DeLong believed we needed to use fiscal policy because monetary policy was out of ammo?
Taken from my own comment section (where I never delete comments, except for language or libel of others):
I tried to post these to Brad’s site yesterday but he deleted my comment…
January 19, 2009:
“The fact that monetary policy has shot its bolt and has no more room for action is what has driven a lot of people like me who think that monetary policy is a much better stabilization policy tool to endorse the Obama fiscal boost plan.
The fact that Gary Becker does not know that monetary policy has shot its bolt makes me think that the state of economics at the University of Chicago is worse than I expected-but I already knew that, or rather I had thought I already knew that.”
http://delong.typepad.com/sdj/2009/01/will-gary-becker-please-return-from-the-gamma-quadrant.htmlJanuary 27, 2009:
“I think we have done [monetary stimulus–the central bank buys short-term safe government bonds for cash] and can’t do any more of it and expect it to have any effect.”
http://delong.typepad.com/sdj/2009/01/delong-smackdown-watch-slope-of-the-lm-curve-edition.htmlFebruary 09, 2009:
“Why We Need a Big Fiscal Boost Program:
Because monetary policy is already tapped out-Treasury interest rates are at zero”
http://delong.typepad.com/sdj/2009/02/why-we-need-a-big-fiscal-boost-program.html
And someone emailed me the following:
The answer to the question “why not do monetary policy?” is “we are.” We are doing expansionary monetary policy–but that we have done all the expansionary monetary policy that we can, and we do not think that it is enough to keep us out of a depression.
Tags:
11. August 2012 at 09:42
I really hope this doesn’t become another to-and-fro like that nasty set of debates with Simon Wren-Lewis & co. I think what Brad did or didn’t say in 2009 is pretty trivial at this point.
11. August 2012 at 10:33
http://delong.typepad.com/sdj/2008/03/monetary-poli-1.html
I like my link, because it was in March 2008 with the Fed Funds rate at 2.25%. It’s like searching for Intellectual Zero in a Mental Hemorrhagic Fever outbreak:
Krugman: “And as I’ve pointed out before, we’re quite close to liquidity trap territory: the point at which open-market purchases of Treasury bills, the normal way monetary policy operates, don’t have any effect because the T-bill rate is near zero.”
Hamilton: “you would still want to draw the line somewhere, and acknowledge that there is some point beyond which lowering the fed funds rate further will do more harm than good. When we’ve got that rate to 2.25%, and people are telling surveyors they are expecting 4.5% inflation, we need to be open to the possibility that we’ve already reached such a point…”
DeLong: “MONETARY POLICY HAS REACHED ITS LIMITS… I am not sure these two points of view are consistent–if we are near a liquidity trap, expected open market operations should, after all, have little impact on inflation as well as little impact on real activity. But here we have two very smart people thinking conventional monetary policy needs to be given a rest.”
In fairness, Brad’s instinct was correct, that the Krugman and Hamilton views were not consistent; rather, the inconsistency was a massive red flag that Krugman and DeLong were closer to Intellectual Zero than DeLong.
11. August 2012 at 10:33
strike “Krugman and DeLong”
“Krugman and Hamilton”
11. August 2012 at 10:37
We fine folks at EJMR have speculated on potential heart conditions:
http://www.econjobrumors.com/topic/delong-having-a-heartache
Dude needs some beta blockers, stat.
11. August 2012 at 10:55
DeLong, the most insecure of the known economics bloggers. He deletes perfectly polite comments if there’s even a whiff of disagreement.
11. August 2012 at 11:18
It’s a shame that so many of our most talented and famous economists have hidden agendas. Not trying to single DeLong out either, he is just one of many.
Politics really does ruin everything.
11. August 2012 at 11:45
Jake, I can’t help but notice that around here only the liberals are ever accused of having political agendas. Notice how it’s not admitted that Mankiw and Hubbard have a much bigger politcal agenda than anyone else as they’re with the Romney team
11. August 2012 at 11:49
“Jake, I can’t help but notice that around here only the liberals are ever accused of having political agendas. ”
Really, Sax, really?
DeLong, Taylor, Mankiw, Summers, Stiglitz, Hubbard, Krugman, Cochrane, all birds of a feather.
11. August 2012 at 11:53
Summers, Taylor, Hubbard and Mankiw are on a much, much higher level than the others there when it comes to “not being ridiculous hacks” with Mankiw probably being at the top of that list. Cochrane, Krugman and Stiglitz are a rung lower. DeLong is the absolute bottom of the barrel.
Only Krugman, DeLong and Stiglitz do the asinine “everyone is a hack but me!! Profession captured by insidious forces!!” shtick and (particularly Krugman and super especially extramega particularly DeLong) carry themselves with an extreme lack of professionalism.
11. August 2012 at 11:55
Each of these quotes come from posts that make it pretty clear that Delong is talking about the Fed being unable to lower interest rates through purchases of short term treasuries because interest rates were near zero.
He explicitly points out the possibility of quantitative easing (referring to it as an experiment), money printing and credit stimulus (once quoting Milton Friedman quoting Jacob Viner) coming from the Fed. He simply preferred fiscal stimulus as a policy lever.
His preferred plan was fiscal stimulus and credit stimulus from the Fed (which sounds like quantitative easing to my untrained ear). To quote Delong:
“I think we should do (3) [credit stimulus] and (4) [fiscal policy] in some linear combination–but I have a hard time thinking about (3) because I am Bear of Little Brain.”
11. August 2012 at 12:24
“DeLong, Taylor, Mankiw, Summers, Stiglitz, Hubbard, Krugman, Cochrane, all birds of a feather.”
This can’t be emphasized enough.
“Really, Sax, really?”
You’re talking to the economically-illiterate guy who trolls here and authors a blog maturely titled ‘Diary of a Republican Hater’, what did you expect?
11. August 2012 at 12:32
Mike Sax seems to be a pretty level headed guy to me, despite the name of his blog.
11. August 2012 at 14:26
y’all should go read the comments that SURVIVE the donut eater’s delete button:
http://delong.typepad.com/sdj/2012/08/scott-sumner-needs-a-better-work-ethic-use-the-google-its-not-that-difficult-department.html
11. August 2012 at 14:49
Speaking of rewriting history, has anyone here read Christy Romer saying that it was she, not President Obama, who said that monetary policy had “shot its wad”?
Here is DeLong’s account:
Grunwald gives Christy Romer’s side of the anecdote told by Ron Suskind–the one where Suskind claimed that when Obama first met Romer, “before exchanging hellos or even shaking hands”, Obama said that monetary policy had “shot its wad” thus shocking Romer with the sexualized reference.
Romer has maintained–from the day Suskind’s book came out–that Suskind had it wrong: that Obama had not said it, she had; that she had meant it as a reference to seventeenth-century firearms musketry technology.
Obviously, DeLong would know….but his version seems odd given the fact that Grunwald’s book has Romer urging Bernanke, on a weekly basis, to do more monetary stimulus.
Also, and this is a lesser point, but I can’t stop myself, I don’t personally know many women who are aware that the expression “shot its wad” refers to “seventeenth-century firearms musketry technology.”
Of course, I don’t know many women who use the expression “shots its wad,” either.
11. August 2012 at 15:45
Scott,
This link: http://delong.typepad.com/sdj/2009/03/notes-for-uc-davis-debate-on-the-stimulus-package.html
Appears to actually be a link within a Bentley email account, FYI.
11. August 2012 at 16:53
For those who prefer to watch DeLong say we’re out of ammo with monetary policy, rather than read him (de gustibus…);
http://videosift.com/video/Stimulus-Smackdown
He spends almost all his time defending the Obama fiscal stimulus. It’s Boldrin, near the very end, who comes up with the ‘helicopter drop’ solution.
11. August 2012 at 17:51
“You’re talking to the economically-illiterate guy who trolls here and authors a blog maturely titled ‘Diary of a Republican Hater’, what did you expect?”
Tyler you have never come close to showing how I’m economically illiterate.
YOu just like throwing around invective. You’ve done nothing to establish your literacy that’s for sure.
I’m sure there’s some litmus test for being econically literate where I have to love the Republican party
11. August 2012 at 17:53
Tyler either show me what I’ve said that’s illiterate or you should admit that you’re just expressing your mindless antagonism.
11. August 2012 at 18:45
“Summers, DeLong, Krugman…all agree that the FED is not doing enough now…and they have for a few YEARS now.
Kurgman tired to bury the hatchet a long time ago and focused on beating up the Fed instead of the people he agrees with. Sure he flip flopped and to this day does not admit it. And that is galling. But in the big picture… So what ?
You guys have a big job to do and I don’t see how constantly going after each others credibly is helping.
How about we get the policies adopted first, and then you can argue about who gets credit for it ? (No way the M&M’s don’t get the credit. So why keep salting wounds ? )
Right now America’s top demand side economists are fighting over who gets credit for an Idea that seems less and less likely to be put into practice…
It is all getting very surreal.
11. August 2012 at 18:46
We are all apes…Apes love to throw crap…We can’t help ourselves.
11. August 2012 at 19:01
Thanks Brito. You got to understand that the blog title is set now. I couldn’t change it if I wanted to-it would confuse the visitors.
The name is too ubiquitious around the Internet. Which is a good thing.
I just wanted someting provocative and visceral. Actually I had always meant to call my blog Abortion on Demand but when I acutally set it up I forgot that and came up with Diary on the fly.
I did actually use Abortion on Demand as a commetator at the liberal Daily KOS. They actually banned me after just one post.
They didn’t get my irony and thought I was making fun of women who have abortions when I was actually making fun of prolifers who oppose it. That’s why I have to hand it to Scott. Though I don’t know that he alwasy appreciates my commentary he doesn’t ban people frivolously.
Rush Limbaugh used to say that-he may still do for all I know-liberals want there to be as many abortions as possible, taht we seek to maximize abortion.
Funny enough I heard him recently state that if only Marx had been aborted the whole “theory of class analysis”-whatever he thinks that is-would not be with us and there’d be no Obamacare. So apparently he approves of abortion in that one instance.
Brito I like your blog I always learn a lot. I too am a fellow Brit-was born there-and now am a duel citizen.
11. August 2012 at 19:57
Mike Sax:
Tyler you have never come close to showing how I’m economically illiterate.
I have. It only takes one person to show it. Tyler doesn’t have to show the same thing for the 937th time.
You’ve put me in your drama queen diary of hating nameless “republicans”, and I am not even a republican.
What a regretful, immature blog name.
11. August 2012 at 22:02
[…] Source […]
11. August 2012 at 23:53
My analysis of Romney’s choice of Paul Ryan:
http://socialmacro.blogspot.com/2012/08/something-i-didnt-expect.html
12. August 2012 at 02:44
Major you haven’t shown it either. And how do you know I’ve put you in it?
Tough luck if you don’t like the name. I thought you don’t care about Republicans why does it offend you?
Lots of people are intrigued precisely because of the name. Again, Major, who cares about your opinion? Luckily for me many disagree with you.
Though it sounds like you have read me despite your sniffing that you wouldn’t dream of it.
12. August 2012 at 02:47
“What a regretful, immature blog name.”
Do you need a hug?
12. August 2012 at 02:53
Major Slavery you seem to have nothing more on me than Tyler You just don’t like me hating on Republicans thogh you claim not to be any more partial to them than the Democrats.
That you don’t like it is yet another point in its favor.
“You’ve put me in your drama queen diary of hating nameless “republicans”, and I am not even a republican.”
You want me to list every Republican in the world in a title? Can even you be that dumb?
You say you’re not a Republican but your idignation over the name suggests otherwise .
What it make you feel better if we called it Diary of a Republican and Major unFreedom Hater?
Would that be more specific as you don’t have any common sense? If I see “Republicans” I don’t need to name every specific Republican in the world, I’ve covered my target with one word.
12. August 2012 at 02:59
In my next post Major Freedom (is Slavery) I think I’ll wirte about what a big fan you are of Diary of a Republican Hater.
I’ll then quote you. Then I’ll point out that while you sniff like a little girl after all you can’t please everyone.
And what can we expect-my blog is only meant to appeal to earthlins.
Who knows what goes over on your planet from that distand solar system. Compared to you the Coneheads seem human.
12. August 2012 at 03:55
Lots of great posts by Scott Sumner.
12. August 2012 at 07:21
‘They didn’t get my irony and thought I was making fun of women who have abortions when I was actually making fun of prolifers who oppose it.’
so, you’re pro-death?
12. August 2012 at 08:38
Is this the Mike Sax blog now?
12. August 2012 at 11:01
I’m sorry, but why are you trying so hard to crucify one of your biggest allies on the left?
12. August 2012 at 11:03
“Is this the Mike Sax blog now?”
Would you rather it go back to beeing Major Freedom’s?
😛
12. August 2012 at 11:42
Thank you Carl. I guess the reality is you can’t plase everyone.
Some seem to not like me like Razer-not that i”ve ever done anything to him.
However enough people feel like Brito that I’m not worried.
“Mike Sax seems to be a pretty level headed guy to me, despite the name of his blog”
If anyone has a problem with me it’s probably because they don’t like my blog name. But that’s ok, viscerality sells. It repels some it attracts others.
They really aren’t attacking me on merits anyway.
I think it’s pretty clear that I don’t go around gratutitiously insulting people as some people around here like to do.
12. August 2012 at 11:51
This whole discussion is a STUPID pissing match!
The thrust of the argument appears to be over 1) exactly when we came to agreement and 2) how much we are in agreement over whether NGDP targeting is a good idea.
While I recognize there are some (minor) substantive issues over the right policy mix, the parsing here is way over the top and distinctly NON-utilitarian.
12. August 2012 at 15:29
Mike Sax:
Major you haven’t shown it either.
I’ve shown it on a number of occasions.
And how do you know I’ve put you in it?
I don’t. Nothing I said would even hint that I do. I am going by the economically illiterate comments you’re making on this blog.
Tough luck if you don’t like the name. I thought you don’t care about Republicans why does it offend you?
It doesn’t “offend” me. I said it is a regretful and immature blog name.
You want me to list every Republican in the world in a title? Can even you be that dumb?
No, I don’t want you to list every Republican in the world. There is nothing I said that would imply that I do. Are you really so empty of knowledge that you can only imagine me making certain comments and then you call me dumb on the basis of those non-existent comments?
Interestingly, these rhetorical questions you asked show precisely why the blog name is so regretful and immature and why you’re cognitively impaired. You are not viewing other people as individuals, but rather in a primitive tribalistic manner you view people as primarily members of a group. You then attack the group, and thus you become prejudiced against every individual in that group. It is precisely the same view of man that underlies racial, sexist, and lifestyle bigotry and hate.
What it make you feel better if we called it Diary of a Republican and Major unFreedom Hater?
We? Is there someone else running that blog besides you?
If you did rename it to that, it would only make you look doubly uneducated, if that’s even possible. It would also be ironic, as while you call me “unFreedom”, it is precisely you that advocates for “unFreedom” through the state. You tacitly depend on individualists like me to provide enough people with enough libertarian philosophy to prevent the mob from not only voting away the individual’s economic freedoms, but their civil freedoms as well. If there were more people like you and fewer people like me, then your hate would be even more pronounced in society.
I would recommend against renaming your blog to the above, if it’s even possible.
Would that be more specific as you don’t have any common sense?
You haven’t shown that I don’t have “common sense.”
If I see “Republicans” I don’t need to name every specific Republican in the world, I’ve covered my target with one word.
That’s precisely what makes you a bigoted and prejudicial, uneducated, economically illiterate partisan hack.
In my next post Major Freedom (is Slavery) I think I’ll wirte about what a big fan you are of Diary of a Republican Hater.
You’re offering more untruths? Color me surprised.
They really aren’t attacking me on merits anyway.
Yes I am. Every single time. You just want the attacks to be ad hominem so that you can immunize yourself from the corrections that have been made to your uninformed comments.
12. August 2012 at 15:37
I suggest that if market monetarists want to convince Keynesians that the zero bound doesn’t stand as a barrier to increasing nominal spending, then there should be clear and explicit explanations on how the Fed can increase nominal spending via inflation. There needs to be an explanation of exactly what the Fed buys and how that will lead to increased aggregate demand.
So far I have seen only short references of the form “The Fed can buy stocks if they have to.”
12. August 2012 at 16:02
Major Unfreedom
“Interestingly, these rhetorical questions you asked show precisely why the blog name is so regretful and immature and why you’re cognitively impaired. You are not viewing other people as individuals, but rather in a primitive tribalistic manner you view people as primarily members of a group. You then attack the group, and thus you become prejudiced against every individual in that group. It is precisely the same view of man that underlies racial, sexist, and lifestyle bigotry and hate.”
Not so interesting as you don’t knwo what you’re tlaking about. By this definition you do the same thing-you speak of Keynesains and Monetarists,, etc.
Why can’t I therefore speak of “Republicans” as it’s what they call themmselves. As for bigotry you say that property rights gives people the right to their bigotry. You say that if a property owner wants to discriminate he should be allowed to. So you are in no position to reproach anyone for bigotry as you say there’s a right to discriminate and the only evil is trying to stop people from doing so.
“You haven’t shown that I don’t have “common sense.”
Actually you do it every time you open your mouth.
“I don’t. Nothing I said would even hint that I do. I am going by the economically illiterate comments you’re making on this blog.”
You actually haven;t shown anything specific I’ve said that’s illiterate. Not even one example. It’s just your usual fevered imagination.
And you have often said things that more than hint that.
“You’ve put me in your drama queen diary of hating nameless “republicans”, and I am not even a republican.”
So you do know that. This is why I say you either have shot term memory loss or are a pathological liar. Another thing you have in common with most Republicans.
So you keep saying you’ve proven me economically inlliterate but haven’t given even one example. None of your ramlbing on this page has had any substantive point to it. It’s just being your usual pompous nitwit self trying to quibble over trivial meaningless points that even if you were right would add up to nothing.
About the only proof you have of any “economic illiteracy” is that you don’t like my blog name. Again, my blog can’t be the favorite of everyone. I have enough that like it and like the name.
You as a space alien reallly aren’t part of my target audience anyway.
I don’t know what college you possibly got an economics degree at other than a clown college.
13. August 2012 at 05:41
“I think what Brad did or didn’t say in 2009 is pretty trivial at this point.”
It would be trivial if he were willing to admit error. Unfortunately, he’s like the Fed in that respect. The Fed itself is an excellent piece of evidence that refusal to admit errors from late 2007 to 2009 can continue to cause problems, no?
13. August 2012 at 06:07
I think it’s pretty clear that in 08 and 09, DeLong was saying:
(1) that fiscal policy had shot its bolt on interest rates and was reduced to “untried quantitative easing experiments” for further monetary stimulus.
(2) That DeLong thought the UQEE were a bad idea and therefore we should all buckle down and support Obama’s planned fiscal stimulus.
(3) And, of course, that anyone who appeared to disagree with DeLong was an idiot, a liar, or more probably both.
I don’t know what DeLong is saying now about what he said then and I don’t much care, since I’ve written DeLong off a long time ago as not helpful to me. Since he doesn’t engage opposing opinions, only belittle them, his arguments are only interesting if you either already agree with them or are willing to spend a lot of time picking the reasoning out of the bile.
The more interesting question is: knowing what we know now, would it have been smarter to focus on fiscal stimulus, monetary stimulus, or both back in 08 and 09? DeLong was all in on fiscal stimulus. Although he conceded the possibility of UQEE, he thought it was a worse alternative to Obama’s planned fiscal stimulus.
Here’s what I think the possibilities are:
1) Monetary stimulus wouldn’t have been effective even if enacted on the Sumner model. That’s a debate that Sumner has been having for the last few years, and I think he’s won, but maybe DeLong believes this.
2) Monetary stimulus might have been effective if enacted, but was a political non-starter because of inflation fears. Possible, if so, it seems like it would have been more reasonable for smart guys like DeLong to clearly describe that possible course so that we could have debated it at the time, rather than write it off in a footnote as a pointless but risky thought experiment.
3) Monetary stimulus was possible and likely to be effective. If so, then it was a crime not to stress it. If nothing else, placing some stimulus supporting fed members would provide monetary stimulus as a backup to the fiscal stimulus. Given that Krugman and presumably DeLong thought the fiscal stimulus wasn’t big enough, it would have been smart to throw monetary and/or banking stimulus into the pile too, even if it took the form of UQEE.
13. August 2012 at 09:08
Mike No Sax:
“Interestingly, these rhetorical questions you asked show precisely why the blog name is so regretful and immature and why you’re cognitively impaired. You are not viewing other people as individuals, but rather in a primitive tribalistic manner you view people as primarily members of a group. You then attack the group, and thus you become prejudiced against every individual in that group. It is precisely the same view of man that underlies racial, sexist, and lifestyle bigotry and hate.”
Not so interesting as you don’t knwo what you’re tlaking about.
I do know what I am talking about, so that means it is interesting.
By this definition you do the same thing-you speak of Keynesains and Monetarists,, etc.
It is not wrong to speak of groups in the way I speak of groups. When I say Keynesians and Monetarists, I am referring to those with a specific set of economic ideas.
When you speak of Republicans, you are not referring to any specific sets of ideas, you are simply judging people according to which party they register with, and “hating” them accordingly.
Not all Republicans think X, but all Monetarists think Y. This is why I can address Monetarists and be non-prejudicial, while you cannot address all Republicans and not be prejudicial.
As for bigotry you say that property rights gives people the right to their bigotry.
I say that there is no justification for initiating force against bigots. I don’t advocate for force to be initiated against you just because you’re a bigot, who may not allow republicans into your home, who may not allow some other group you’re prejudiced against into your home.
You have a right to be a bigot, provided that your bigotry does not manifest itself as an aggression against others. But that is where your type of bigotry leads.
You say that if a property owner wants to discriminate he should be allowed to.
He does not initiate force by simply refusing certain people onto his property and allowing others onto his property. He is expressing his freedom of association and disassociation.
So you are in no position to reproach anyone for bigotry as you say there’s a right to discriminate and the only evil is trying to stop people from doing so.
False. I am in every position to reproach you for being a bigot, because you are a bigot. That I don’t advocate for violence against you in response to your bigotry, does not at all mean I support your bigotry or wish your bigotry to spread.
By not wanting force to be used against people unless they initiate it, or credibly threaten to initiate it, doesn’t not mean I sanction everything they do peacefully, such as being racist in deciding who to marry, or be sexist in deciding who to be friends with, and so on.
See, unlike you, I am not so primitive minded that I conflate lack of initiating force against Mr. Smith as a sanction for everything peacefully Mr. Smith does, such as being a racist or sexist.
Your warped mindset is exactly the same warped mindset of imperialists. They hear some people saying bring the troops from around the world home, and they accuse those people of being “isolationists”, as if they only way Americans can interact with others around the world is through weapons and violence, as if peaceful trade and travel don’t even exist.
“You haven’t shown that I don’t have “common sense.”
Actually you do it every time you open your mouth.
You haven’t shown that either.
“I don’t. Nothing I said would even hint that I do. I am going by the economically illiterate comments you’re making on this blog.”
You actually haven;t shown anything specific I’ve said that’s illiterate. Not even one example.
I’ve given many examples. Pretty much every claim you make concerning economics contains errors, as I have shown. It’s why you no longer engage me in economics, but rather drama queen princessy gossip, which is your only “talent” here.
And you have often said things that more than hint that.
Like what?
“You’ve put me in your drama queen diary of hating nameless “republicans”, and I am not even a republican.”
So you do know that.
YOU POSTED IT HERE, and I can read the URL link. It had my name in it.
This is why I say you either have shot term memory loss or are a pathological liar. Another thing you have in common with most Republicans.
Or, you’re against mistaken.
So you keep saying you’ve proven me economically inlliterate but haven’t given even one example.
I’ve given many examples.
None of your ramlbing on this page has had any substantive point to it.
Many of my arguments have a point to it.
It’s just being your usual pompous nitwit self trying to quibble over trivial meaningless points that even if you were right would add up to nothing.
You have an interesting way of saying I have corrected your errors on many occasions.
About the only proof you have of any “economic illiteracy” is that you don’t like my blog name.
It’s not all about your partisan hack blog. I am talking about your claims made on this blog.
Again, my blog can’t be the favorite of everyone. I have enough that like it and like the name.
I don’t care.
You as a space alien reallly aren’t part of my target audience anyway.
You’re neurotic.
I don’t know what college you possibly got an economics degree at other than a clown college.
You sound jealous.
13. August 2012 at 13:24
From “What did Ayn Rand teach Paul Ryan about monetary policy?”
by Brad Plumer…
http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/13/what-did-ayn-rand-teach-paul-ryan-about-monetary-policy/
13. August 2012 at 20:42
I find it interesting that DeLong has also (sort of) evolved his reasoning for supporting fiscal stimulus. It is obvious that he still thinks that running deficits shifts an IS curve up along an upward-sloping LM curve (if one wants to use this way of thinking), i.e., that for a given money supply, an increase in the deficit causes the velocity of money to increase (because the opportunity cost of holding cash balances rises when the nominal interest rate does), and thus raises the level of NGDP. But he has recently also, with this http://delong.typepad.com/sdj/2012/06/a-fragment-on-the-interaction-of-expansionary-monetary-and-fiscal-policy-at-the-zero-nominal-lower-bound-to-interest-rates.html as an example, begun to argue that fiscal expansion will boost nominal spending today because it makes monetary expansion credible, thus getting past the sort of commitment problems plaguing economies at the ZLB in the Krugman-Svensson models.
I just wonder how much weight he puts on each of these arguments, how much truth he sees in the sort of Modigliani-Miller-Barro-Ricardo-esque reasoning involved in the Krugman-Svensson models, and how much he thinks “normal” business fluctuates can be taken care of with monetary policy, when the ZLB problem is not really an issue even when takes the sort of interest-rate view of monetary policy (in other words, how much would he support fiscal expansion during a “normal” downturn, as opposed to the more severe recent one?).
I found here http://braddelong.posterous.com/?page=15 that, at least in 2009, he saw fiscal expansions as “conventional” for fighting recessions. I understand that he seemed to see himself fighting against the position that fiscal expansion never works, but it still is a bit odd, in 2009, to call fiscal policy “conventional” stabilization policy. I am pretty sure the conventional wisdom about what should be used as the “conventional” stabilization tool has been the same for twenty years at least: namely, that monetary policy is the conventional tool. (And this is taking into account the early Bush-era tax cuts–the ones before the real significant cuts in marginal tax rates.)
Also, I find it interesting how people who think (and know) that Ricardian equivalence (the real strong, one-for-one, implication) and the Miller-Modigliani theorem are not true can seriously entertain Ricardian-equivalence-esque thinking for monetary policy. This way of thinking only seems to make sense only if one believes in a sort of one-interest-rate model
stuck at the zero bound, where the central bank can only operate through open market operations and can only affect things by influencing the expected inflation rate. Little consideration is given to the issue of a Pigou-Patinkin-type effect, or the vast numbers of different asset classes and prices, or the other issue of IOR policy.
And finally, given the fact that the US’s outstanding government debt is fairly substantial, I wonder at DeLong’s invocation of Sargent-Wallace-type thinking as an additional justification for running more deficits in order to constraint future incarnations of the Fed. Does not the size of the debt already outstanding also constrain the Fed’s future actions? (Living in California and having seen a few local municipalities file for bankruptcy and others heading in that direction, I find it hard to believe that at the very least some of the already-accumulated debt will have to be inflated away/or monetized directly in the case of the Federal govt.’s obligations).
I guess he will probably say that he realizes this and will point out that market-derived estimates of inflationary expectations show that the outstanding debt is not constraining the Fed enough.
Who knows.
13. August 2012 at 20:46
^*will not
14. August 2012 at 10:12
From Ezra Klein’s piece;
—————quote—————-
Update: There’s been some criticism of Ryan’s suggestion that we should increase the federal funds rate to push capital out into the private sector, so I asked Ryan if he’d like to expand on the point. Here’s his reply:
“Of course I do not think increasing the federal funds rate is what one does to spur immediate economic growth. But I do think we need to understand that the extremely accommodative monetary policy we have had for the past two years is not risk free. Observers like Kansas City Fed President Tom Hoening have made the case for a modest increase in the federal funds rate to send signals of monetary credibility, get back to normalcy and ward off speculative behavior (i.e., the next bubble). (More from Hoening [pdf]).
Also – I’m not convinced – but intrigued – with the debate over the carry trade that is going on right now. What I mean by that is banks can borrow at essentially no cost from the Fed, plow the money back into no-risk Treasury securities, and earn that modest spread. This dynamic, while obviously helping banks recapitalize, could be curbing capital deployment in the private sector.
I’m intrigued – but not convinced – by this argument. I appreciate the opportunity to fully explain my point.”
—————endquote————-
15. August 2012 at 08:54
It was my impression that DeLong believed that the additional monetary polices advocated by Sumner (and others) were untried/untested and hence potentially ineffective or could have unforeseen negative consequences and as such, given there was another mechanism readily available (or potentially as ready as available as any other) that the focus should be on the lesser of two risks. Put anther way, he preferred one mechanism to another. The latter I think is quite different than stating “for” or “against”.
I don’t disagree that the quotes you’ve posted could be interpreted as contradicting your position, but I think you really have to stretch to get there and you have to ignore DeLong’s other stated positions to come to that conclusion. Regardless, he’s also clarified his position in response to you, so why not take him at his word and throw him in your support corner?
16. August 2012 at 05:13
IndyRdr, I think at a minimum, it’s a fair criticism that DeLong, as a public intellectual, wrote stuff that would tend to give readers the impression that in 2008 and 09, we needed to do fiscal stimulus because monetary stimulus was “out of ammo”, had “shot its bolt”, or was already “doing all it can.”
It would have been better if Brad had wrote clearly back then that we had a few choices — experimental monetary stimulus, do nothing, and fiscal stimulus — then explained why he thought fiscal stimulus was better.
As it was, it is sort of painful that Obama put the Fed on autopilot. Even if you’re an Obama partisan, it didn’t do Obama any favors not to pay more strategic attention to the Fed.
At a minimum, Brad would have been more responsible as a public intellectual to say something like “we have to press forward on two fronts. First, we need to make sure that the Fed keeps the pedal pushed to the metal, which is both our most effective mechanism and a necessary condition for step two. Second, we need fiscal stimulus.”
22. August 2012 at 06:17
Yglesias and Salam provide a useful viewpoint to the DeLong debate here:
http://www.nationalreview.com/agenda/314632/matt-yglesias-president-obamas-monetary-policy-preferences-reihan-salam
If DeLong is right that he was proposing BOTH pedal to the metal monetary expansion AND fiscal stimulus back in 08, he did a lousy job of it, and Obama paid the price, as did the US economy.
The bottom line was that a lot of Obama people thought that the Fed was either irrelevant or doing the best possible job under the circumstances.