Three political nudges

It occurred to me that we are finally seeing the voters begin to influence monetary policy.  The most obvious case is Japan, where monetary stimulus was a major issue in the recent election.  But it’s also worth noting that the GOP tied its mast to hard money arguments that would have reduced our already anemic NGDP growth even further.  Obviously monetary policy was not a major issue, but I think it’s fair to say that this was part of a set of policy positions that turned off thoughtful moderates.  And like the Supreme Court, the Fed can read the election returns.

The British case is slightly different.  There has been no recent election, but it’s hard to avoid the suspicion that the Coalition government moved decisively to get someone like Mark Carney because they fear the wrath of voters if fiscal austerity is not offset by monetary stimulus.

That leaves the ECB.  I suppose one could argue that politics plays a role in the policy shift after Draghi took over from Trichet.  But I’m inclined to think that this showed up more in the form of debt bailouts, not easier money.  NGDP growth is still almost nonexistent in the eurozone.  The ECB may be starting to find out what the Fed learned in late 2008 and early 2009, solving a debt crisis doesn’t automatically cure an AD shortfall.

In 2001 Argentine fans of the “currency board” learned that their policy regime was not as impregnable as they’d assumed.  And in 1933 American supporters of the gold standard found that even the world’s largest monetary gold stock couldn’t prevent a devaluation under duress.  The reason was the same in both cases—voters get the last word.

PS. Notice that the eurozone, which lags the other three central banks, is the one currency area that lacks an effective method for voters to voice their opinions.  Of the four systems, it’s the one closest to a technocracy.  Shows we can’t trust those ignorant voters, doesn’t it?  Better leave this stuff to the “experts.”


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41 Responses to “Three political nudges”

  1. Gravatar of Steve Steve
    17. December 2012 at 20:10

    Great post, Scott!

    Some good articles about the predictament in Europe. But, as the ECB once said “Let Them Eat Cake!!!” Oh, wait, that wasn’t the ECB…

    http://news.yahoo.com/french-leaders-popularity-tumbles-mittal-deal-110844584–finance.html

    French leaders’ popularity tumbles after Mittal deal

    “Approval ratings for French President Francois Hollande and Prime Minister Jean-Marc Ayrault hit new lows in December, a poll showed, as left-wing voters showed their discontent over the government’s handling of the economy.

    His administration is also struggling to stop a hemorrhage of industrial jobs while curbing public spending and raising taxes to help slash debt against the background of a stagnant economy.

    The president’s backing slipped by four percentage points to 37 percent in December, the worst rating since he became France’s first Socialist president in 17 years in May”

    http://www.bloomberg.com/news/2012-12-06/lone-german-keynesian-advocates-pooling-euro-debt.html

    “‘People in Germany feel cheated and terribly angry, and that is dangerous, as it can fuel radical political tendencies,’ he says.”

  2. Gravatar of Steve Steve
    17. December 2012 at 20:15

    I never understood why people lauded a “politically independent” central bank. Insulated from electoral cycles, just like the judiciary, yes. But independent from any accountability? That’s crazy talk.

  3. Gravatar of Benjamin Cole Benjamin Cole
    17. December 2012 at 20:22

    For reasons hinted at in this excellent post, I now favor putting the Fed into the Treasury, and having the Fed Chief serve co-terminous with the US President.

    Every public agency would like to be independent and run by experts unaccountable to voters. Every agency can develop cogent, persuasive arguments why it should be left to experts to run. Soon, a pantheon of self-lionizing moral virtues is erected, with the agency in the center of the gilded stage.

    Democracy is ugly, but better than any other system, including independent agencies.

    Really? The Fed is the most important macroeconomic policymaking body out there but I cannot vote my sentiments regarding policy? Only through some Rube Goldbergian method that opaques responsibility and favors mysticism and obscurantism?

    And if the Fed has a bad policy, are the consequences any less horrific than if our Defense Department-foreign policy goons have a bad policy? Not hardly.

    Scott has summed up the Euro situation perfectly. A voter there who wants a more-aggressive monetary policy is lost at sea, and drowning, with weights on his legs and sharks in the water. And a storm brewing.

    Democracy mean transparency and accountability.

    I would also hope that public debates about monetary policy would become a part of Presidential campaigns.

    Is my idea nutty?

    Well, it was proposed by Don Regan, President Reagan’s Treasury Secretary. That’s where I got the idea.

  4. Gravatar of jknarr jknarr
    17. December 2012 at 20:59

    The EU-ECB will swap an easier monetary policy for fiscal power consolidation. Cash in your hard-won democracies, and maybe the ECB will ease up a bit.

    Curious that any European citizen would tolerate this at the ballot box (or anywhere else for that matter).

  5. Gravatar of Major_Freedom Major_Freedom
    17. December 2012 at 21:30

    But it’s also worth noting that the GOP tied its mast to hard money arguments that would have reduced our already anemic NGDP growth even further. Obviously monetary policy was not a major issue, but I think it’s fair to say that this was part of a set of policy positions that turned off less thoughtful moderates.

    That’s more accurate.

  6. Gravatar of Major_Freedom Major_Freedom
    17. December 2012 at 21:36

    And in 1933 American supporters of the gold standard found that even the world’s largest monetary gold stock couldn’t prevent a devaluation under duress.

    American supporters of the gold standard knew that 1933 was not a gold standard period. Just because 100% fiat money did not exist, it doesn’t mean a gold standard existed. Large scale collapses in the supply of money, such as what occurred in the early 1930s, are virtually impossible under an actual gold standard, because once gold money comes into existence, it tends to stay in existence. In 1933 the money supply was composed of more than gold, which is to say there wasn’t a gold standard. That portion of the money supply collapsed.

    Today the potential for deflation is far more pronounced.

  7. Gravatar of Steve Steve
    17. December 2012 at 22:22

    “In 1933 the money supply was composed of more than gold”

    So Major_Freeman is cool, as long as we have a police state preventing any enterprising citizen from getting the idea that it’s okay to hypothecate gold…

  8. Gravatar of Benjamin Cole Benjamin Cole
    18. December 2012 at 00:05

    I say “44 forty or fight,” and bring on the silver standard.

    My apologies to historians if I botched this somehow….

  9. Gravatar of RebelEconomist RebelEconomist
    18. December 2012 at 02:24

    Central banks are under democratic control, via politicians, but at different time intervals. Like the Supreme Court. And I think that independence and hard money makes for the best economic policy – look at Germany.

    But the problem I believe has been that central banking is increasingly not generating central bankers who really believe in what they are doing, and are willing to go out on the stump and forcefully sell it. When I became a central banker in the 1980s, many of them were old style bankers, for whom keeping promises was essential. By the time I left in 2004, they had been replaced by ambitious, calculating, controlling types drawn from a pool of dilligent and technical academics. They recoil from public battles and tend to appoint on-message assistants. Modern senior central bankers’ economic training tends to make them amoral – a promise is just a tool of “commitment technology”, to be reneged on if that seems optimal. Outside of Germany, there are almost no central bankers willing to come out and argue the case for hard money. Even there, all Weber and Stark did was resign rather than fight their corner.

    The whole idea of independent, inflation-targeting central banking is based on the idea that central bankers tend to be hawkish by nature and that, like an adversarial court system, the right result will emerge from a two-sided debate. But it just does not work any more, because the central bankers have realised that life is more comfortable if they give people what they want, with perhaps a token show of resistance for appearances sake.

    This is why, as I have always said Scott, you have been pushing at an open door with NGDPLT, regardless of its merits (not that I think that it has none).

  10. Gravatar of Luis Pedro Coelho Luis Pedro Coelho
    18. December 2012 at 03:47

    In the EU, the euro is mostly unpopular because of the perception that it caused high inflation. This is false, but the perception matters.

    There is a lot of pressure from the PIIGS for the ECB to intervene and buy their states debt (which it already does, but they’d like an open-ended commitment to monetizing their debt). The North disagrees (obviously).

    This is the axis of European discussion wrt to monetary policy: how much to monetize fiscal policy and whose fiscal policy to monetize. The second point is crucial and EU-specific.

    All of the Southern states, if they had their own central banks, would pursue looser policy. However, the thinking is never in terms of monetary policy per se; but in terms of monetizing public debt in order to allow for certain fiscal policies.

    I think you might be right in that eventually Greece will leave the Euro to pursue its own monetary policy. I have been arguing for the same solution for Portugal, but have not had anyone agree with me yet.

    Politics is a punctuated equilibrium system, so nothing changes until suddenly everything realigns. But, right now, I think that it’s more likely for Euro to unravel rather than the ECB changing its policies.

  11. Gravatar of Major_Freedom Major_Freedom
    18. December 2012 at 05:19

    Steve:

    So Major_Freeman is cool, as long as we have a police state preventing any enterprising citizen from getting the idea that it’s okay to hypothecate gold…

    You misunderstand me Steve. I am not an advocate of the gold standard. I am just describing what a gold standard actually entails, and in 1933 it wasn’t a gold standard.

    As for your accusation that I am OK with police states, that is highly ironic, because police states are what enforce our current fiat money regime, which you and everyone else on this blog fully advocate. Thus, you are a hypocrite for accusing me of supporting a police state.

    The gold standard is much like a fiat standard in terms of police state enforcement (e.g. states threatening people with cage or death if they don’t pay taxes in fiat money which of course brings about a demand for them thus monetizing them, FBI raids of competing money such as the Liberty Dollar, the state reneging on contractual promises to redeem fiat notes for gold starting in 1933 for citizens and then in 1971 for foreign central banks, imposing sanctions on oil producing countries’ civilians when those foreign states threaten to sell oil in something other than dollars, etc, etc, etc).

    You want to talk about a police state? We are living among one when it comes to central banking. Please don’t be so naive so as to believe we have legitimate monetary competition.

  12. Gravatar of ZHD ZHD
    18. December 2012 at 05:32

    Professor Sumner,
    I have been thoroughly enjoying your blogging for the past couple of years; your appreciation and excitement for new ideas in macro grants you a lot of admiration from my obscure corner of quantitative capital markets.

    I think the response to this post would be an MMTer’s wet dream. You just compared two sovereign currencies to one non-sovereign—wondering why the non-sovereign is underperforming.

    To me it seems like the MMs and MMTs are not so different. You’re just at different points along the theoretical causal chain. I think there is an embedded time variable in the quantity theory of money function that can explain both schools of thought when we take a first order derivative of the function and look for empirical deltas.

    Please email me if you’d like to discuss further.

    Cheers

  13. Gravatar of ssumner ssumner
    18. December 2012 at 05:33

    Steve and Ben and jknarr, Good points.

    Rebeleconomist, You said;

    “Central banks are under democratic control, via politicians, but at different time intervals. Like the Supreme Court. And I think that independence and hard money makes for the best economic policy – look at Germany.”

    Or look at America in the 1930s, when an independent central bank helped create the Great Depression. Or Argentina in the late 1990s and early 2000s, when an independent central bank ushered the left back into power. Or the entire Western world today, when indpendent central banks created the Great Recession.

    Luis, That confirms my suspicion that Europeans (like Americans) don’t understand macroeconomics–don’t understand that AD matters.

  14. Gravatar of Luis Pedro Coelho Luis Pedro Coelho
    18. December 2012 at 06:02

    Scott, I think you’ll get a few vehement disagreement with your last statement from many Europeans who say that of course AD matters, which is why you need fiscal expansion and which is why (fiscal) austerity always fails.

    It’s all pre-fiat-money Keynesianism.

  15. Gravatar of Saturos Saturos
    18. December 2012 at 06:02

    Scott, indeed, they are dumber than elephants: http://marginalrevolution.com/marginalrevolution/2012/12/elephants-engage-in-mengerian-indirect-exchange.html

  16. Gravatar of Simon Simon
    18. December 2012 at 06:16

    Brilliant point about the technocrats

  17. Gravatar of Josiah Josiah
    18. December 2012 at 06:59

    Scott,

    I think you are overreaching with respect to the U.S. election. Monetary policy was hardly mentioned, and the Republican candidate was hardly a hard money guy. Even you voted for president based on non-monetary policy concerns (IIRC, you supported Gary Johnson, whose proposed policies were much more deflationary than either Obama or Romney).

  18. Gravatar of RebelEconomist RebelEconomist
    18. December 2012 at 07:05

    You are missing my point Scott, which is that central bankers hardly need to be nudged these days, so I fear that we are not having a proper debate. I made a comment on Nick Rowe’s blog earlier about having a feeling like watching the unquestioning enthusiasm as we slide into a disaster like WWI or the holocaust.

    You know more about the depression than me, but my understanding is that a gold standard prevented the central bank from creating more of the means of exchange, with the result that elevated demand for money as a safe asset led to economic downturn. How is it that Argentina failed to make a currency board work whereas Singapore and Hong Kong can? I would attribute it to a strength to take unpopular measures in the public interest, such as fiscal sterlisation of foreign exchange intervention. And, as you know, I think the present economic downturn was inevitable long before what you regard as a monetary mistake occurred.

  19. Gravatar of Major_Freedom Major_Freedom
    18. December 2012 at 07:15

    Luis, That confirms my suspicion that Europeans (like Americans) don’t understand macroeconomics–don’t understand that AD matters.

    Yes, AD matters, but not all ADs are created equal. The central bank brings about varieties of AD that consist of relative demands that lead to physical unsustainability, because the central banks don’t operate in a context of private property subject to profit and loss. There is no price system for the means of producing money, and no matter what the central bank does, they are not subject to market force competition in a division of labor.

    It’s easy to see not all ADs are created equal. Imagine a fixed AD, any number you want, say $20 trillion. Then imagine that suddenly half the country’s demands drop to zero, and the other half of the country’s demands increase by exactly the amount of the fall. AD remains the same, but unemployment and output would, in the short run, collapse.

    Yes, this example is extreme, but no more extreme than the typical defenses of AD management, which take the form of the rhetorical question “Imagine if 90% of the money supply and volume of spending disappeared. Are you actually saying it wouldn’t have any effect on employment or output? That prices and wages would instantly adjust everywhere?”

    There are practically an infinite number of possible ADs in terms of relative spending. Only one is consistent with sustainable production, fully employed labor, and fully utilized resources.

    MMs naively believe that the same AD quantity has the same real implications. That if AD is $20 trillion, then it doesn’t matter which of the various relative demand forms exists. They ALL should be consistent with physical sustainability, full employment, and full resource utilization, at least in a context of laissez-faire micro. Too bad :(

  20. Gravatar of jknarr jknarr
    18. December 2012 at 07:15

    I mentioned this elsewhere, but it bears repeating: The ECB is a supranational institution acting in the EU – not national government – interests. Their challenge is to fiscally unite the EU – a political agenda. Austerity is the hammer, debt is the anvil toward a federalized Europe. It’s really no mystery. Can’t unite Europe without destroying countries first.

    This is why AD, inflation, employment questions are moot in Europe. The ECB is not technocratic, except in the interest of federalism.

  21. Gravatar of jknarr jknarr
    18. December 2012 at 07:30

    I might add that federalism is profoundly anti democratic. Would you rather have 1/(local population) influence over fiscal spending priorities, or 1/(EU population)? It’s simply already manifested in ECB accountability. After centuries of struggle against kings, who would have guessed disenfranchisement would be so easy?

  22. Gravatar of Greg Ransom Greg Ransom
    18. December 2012 at 07:58

    Competitive Devaluation.

    LET’S GO!

  23. Gravatar of Major_Freedom Major_Freedom
    18. December 2012 at 08:26

    Greg Ransom:

    Competitive Devaluation.

    LET’S GO!

    It’s not devaluation, Greg. It’s “stimulus.”

    And what’s more, everyone’s income adjusts instantly and perfectly to Ben CTRL+P Bernanke’s counterfeiting operations.

    You would not believe what happened last week. Last week when Bernanke announced $45 billion extra a month in inflation, my entire neighborhood received envelopes of money in the places where we left our garbage. Apparently we “swapped” our garbage for money. So don’t accuse us of getting free gifts! That garbage cost money!

    Anyway, with our additional spending (and I assume everyone else everywhere in the country were able to swap their garbage for more money on that day), we saw that pretty much all the consumer goods stores in our area did not instantly increase their prices. The fools! Thus, we were able to trick consumer goods sellers into selling us more of their goods at those non-adjusted prices, because they have no idea what the exact prices would be in response to the inflation. In fact, many of them had no idea what Bernanke even did! Those backward looking fools, mwahaha!

    Anyway, it’s all for good, because this trickery means more “movement” of goods and labor, all for our benefit and not the sellers of course, and this additional “economic activity”, even if it is physically unsustainable in the long run, is able to boost various economic indicators that government paid data munching quant employees report to the media as proof the stimulus is working.

    If you don’t like it, you can move to Somalia. Assimilate or get out. Live it. Love it.

  24. Gravatar of Major_Freedom Major_Freedom
    18. December 2012 at 08:41

    jknarr:

    This is why AD, inflation, employment questions are moot in Europe. The ECB is not technocratic, except in the interest of federalism.

    So why then are AD, inflation and employment questions practically moot in the US (i.e. monetary inflation is unsufficient)? What are the technocratic goals for the Fed?

    [Other than sending $40 billion to Iraq to finance the invasion, of course. Maybe the Fed cares for children who have unemployed parents? Well, maybe, but not including the children who were murdered in the middle east I mean. After all, American children are more important. Important enough to have the President wipe away non-existent tears for the camera after his latest child killing drone strike.]

  25. Gravatar of jknarr jknarr
    18. December 2012 at 08:52

    Major_

    Consider TJ: “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

    NGDP targeting gets closer to the goal, because as we have now established, targeting does not require the private Fed, bank reserves, or a central bank. The trick is to avoid a mutant hybrid of a reserve-creating-NGDP-targeting central banks, which I fear will ultimately bring discredit on the otherwise very good policy approach.

  26. Gravatar of Gabe Gabe
    18. December 2012 at 09:07

    The brazilian house keeper that works for us called me the day of the FOMC announcement and informed us she was raising her rates by 2.5% because of the obviosu implications of the new monetary policy announcements. Scott’s working assumptions are correct…all the changes flow through the system instantly…I bet our economy is going to be pretty darned good this time next year with all the imrpovents being made by the economic experts, I’ll tell my wife this afternoon that maybe we can afford that vacation home she has been wanting.

  27. Gravatar of Doug M Doug M
    18. December 2012 at 09:11

    In the US any politician that suggests greater political involvement at the Fed is dismissed as a crank — See Paul, Ron.

    Milton Freedman gave some good explanations that what was most important was that the central bank be predictable. This was why he advocated of a rules based monitary policy.

  28. Gravatar of Becky Hargrove Becky Hargrove
    18. December 2012 at 09:17

    Josiah, in the U.S. election it almost seemed as though people were reacting to what they didn’t quite understand in monetary terms, which also allowed an older economic framework to continue in public discussion. While hard money advocates had plenty of adherents, lack of public counterargument in actuality “won the day” in a sense, and so the candidates left standing had no real reason to pursue monetary issues. I doubt this will be the case in the next U.S. presidential election…

  29. Gravatar of Luis Pedro Coelho Luis Pedro Coelho
    18. December 2012 at 09:20

    “The brazilian house keeper that works for us called me the day of the FOMC announcement and informed us she was raising her rates by 2.5% because of the obviosu implications of the new monetary policy announcements.”

    It’s because she did not that Scott is right, of course.

  30. Gravatar of Saturos Saturos
    18. December 2012 at 09:24

    Gabe, are you being intentionally obtuse? Scott holds that asset prices react instantaneously, whilst other prices are sticky. That’s why money is non-neutral. And that’s the whole point of this blog.

  31. Gravatar of Major_Freedom Major_Freedom
    18. December 2012 at 09:32

    Saturos:

    Gabe, are you being intentionally obtuse? Scott holds that asset prices react instantaneously, whilst other prices are sticky. That’s why money is non-neutral. And that’s the whole point of this blog.

    First, which assets? All of them?

    Second, if that’s the point of the blog, then why the denial of the Cantillon effect in bond purchases? If some prices rise before others, that’s the effect in action.

  32. Gravatar of Major_Freedom Major_Freedom
    18. December 2012 at 09:38

    Gabe:

    The brazilian house keeper that works for us called me the day of the FOMC announcement and informed us she was raising her rates by 2.5% because of the obvious implications of the new monetary policy announcements. Scott’s working assumptions are correct…all the changes flow through the system instantly…I bet our economy is going to be pretty darned good this time next year with all the improvements being made by the economic experts, I’ll tell my wife this afternoon that maybe we can afford that vacation home she has been wanting.

    But Gabe, all this is fine. Even though you are not actually saving more, and thus bringing about a tying up of scarce resources in consumption industries, the resulting expansion in the capital industries will of course be magically accompanied by an instantaneous increase in real complimentary capital that can sustain such expansions in the long run. Pay no attention to anyone who says the scarce complimentary capital needed will have to be produced. They don’t understand that this is a “demand problem”.

    Scarcity is abolished with the printing press you silly goose.

  33. Gravatar of Doug M Doug M
    18. December 2012 at 10:04

    Jknarr,

    Federalism — In the US, Federalism suggests more local control of government. In Europe it means more central control. It is all tied into the histories of the two continents. But both drift toward large central governments with weaker local governments.

  34. Gravatar of Doug M Doug M
    18. December 2012 at 10:06

    Benjamin Cole,

    When you realise that the Federal Reserve Banking system is a quasi-private institution,owned by the banks, with an executive board appointed by the Cheif executive, its governence makes a little bit more sense.

  35. Gravatar of Gabe Gabe
    18. December 2012 at 10:07

    There are no benefits to any class or group from Cantillion…I have learned that much in this blog. The monetary policy experts are looking out for my best interests and they are learning about and improving the system. With all of these good things there is little reason for me to worry about this stuff anymore..I am a little fuzzy on what types of prices instantaneusly react to the FOMC announcements…I thought my labor potential was an asset with expected future cash flows…but I guess I was wrong and it is a not a asset…is it a liability…perhaps? but Scott’s clear logic has convinced me that as the NGDPLT train moves along my earnings and wealth will continue to improve. Thaks for the good work.

    Carney gets it…I think bernake wants to fix tyhings and understands how to overcome the grinch like republicans who have kept money tight. If only the japanese and germans weren’t so stupid and insistant on deflation then the whole world economy would be humming along in no time, perhaps santa will drop off some new asset monetization machines for christmas and with a little luck we will all be wealthier in 2013.

  36. Gravatar of jknarr jknarr
    18. December 2012 at 10:43

    Doug –

    Not drift — pushed.

    The Fed is running tight monetary policy, leading overindebted states into austerity constraints, and so states have given up relative power and influence to the central government.

    The ECB is running tight monetary policy, leading overindebted nations into austerity constraints, and so nations have given up relative power and influence to the central government.

    It’s a federalization project, pure and simple. Biggest successful wave of empire building since the 19th century.

  37. Gravatar of Doug M Doug M
    18. December 2012 at 11:01

    In the US drift…150 years of drift.

  38. Gravatar of Major_Freedom Major_Freedom
    18. December 2012 at 11:30

    Gabe:

    This blog has taught me that inflation engenders no real problems to economic calculation. The Federal Reserve System’s money creation and interest rate manipulation has no serious adverse effect on investors and consumers who operate in a state of almost total ignorance relative to the entire knowledge and preferences that exist in a complex division of labor.

    When the central banking system engineers lower interest rates, every single individual in the country is able to perfectly discern which part was due to changes of the time preferences of other individuals, and which part was due to the changes of the central banking system’s nominal influences. Investors are particularly omniscient. They are able to know that even if nominal interest rates on 10 year loans are 3.5%, investors instantly know that 64.276% was due to changes in Fed policy, and 35.724% was due to changes in time preference. Then, they use that perfect knowledge to make their investment decisions as if free market interest rates really are 6.36%, because they aren’t ever fooled by the Fed’s activity. For the Fed puts little messages on every loan detailing exactly how much they are responsible for the associated rate. They have an incentive to educate the public so as to prevent them from being “stimulated” in a different way as compared to the free market.

    I also learned that when these price distortions that lead to real economic distortions is finally revealed by stingy central banks, that all these problems would have continued to be covered up and prolonged if only the central bank never got stingy in the first place. If only they printed at different rates, none of it would have happened.

    Most importantly, I learned that inflation affects idle resources and unemployed people first, before it affects everything else. I mean, that’s why there is unemployment. It’s because wages respond to NGDP expectations, and wages are sticky too. So wages both change and don’t change. When the problem is not enough inflation, wages don’t change. When there is enough inflation, wages suddenly change one for one, and upwards of course. Never mind the data. It’s a fluke.

  39. Gravatar of Becky Hargrove Becky Hargrove
    18. December 2012 at 11:32

    Gabe…….a little holiday depression getting the best of you?

  40. Gravatar of gabe gabe
    18. December 2012 at 11:46

    I am not derpressed. I am euphoric…the monetary utopia is near. I truly do want to see these ideas tried so that we can prove it’s merits once and for all.

  41. Gravatar of ssumner ssumner
    19. December 2012 at 06:00

    Rebeleconomist, Your facts are almost all wrong. The Fed had lots of discretion that they failed to use. Yes gold put some constraints on policy, and gold did contribute to the Depression. But the Fed was far tighter than they needed to be.

    Singapore doesn’t even have a currency board, and HK is an absurd comparison for Argentina—you are comparing one of the most flexible economies to one of the least. And Argentina has a completely different industry mix (commodities vs financial services for China.) There is simply no comparison. But that’s why conservatives keep ushering the left back into power, they keep destroying promising free market experiments with insane monetary policy.

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