Random observations

I’m still relying on my iPad, hence this will have to be short. I’ll have more to say on both issues when I return home.

1. Evan Soltas has a very important post on unemployment comp in North Carolina. Unlike Soltas, I am not surprised that the reduction from 73 weeks to 19 weeks has reduced the number new claims. However I am surprised by the size of the decrease. If it persists I’ll have to reexamine my priors. I strongly recommend that people follow this issue over the next few weeks; it won’t take long to know whether the current data is a fluke.

2. Paul Krugman has a new post that is mostly accurate, but seems very misleading to me. You can read it for yourself and see what you think. He begins by praising a Matthew Klein post that is highly critical of a Robert Hall paper. I think most readers would assume that he agrees with at least some of Klein’s criticisms of Hall. But I very much doubt that. For instance, Klein criticizes Hall for talking about banks “lending out reserves.” But of course Krugman does the same, and gets (rightly) outraged when MMTers criticize him for doing so. As an aside, it would be better if people said “banks sell off unwanted reserves.” In Klein’s other criticisms of Hall I think he simply misunderstands what Hall is claiming, although I haven’t had time yet to read the Hall paper, so I can’t be sure. I’ll read it when I get back home and apologize to Klein if he got it right.

Some might argue that I did the same thing to Cullen Roche that I’m accusing Krugman of doing to Hall. But here’s the difference. Krugman leads off by thanking Klein for a post criticizing Hall. It sure looks like Hall made an error. On the other hand I never mentioned Roche’s name. Most Krugman readers don’t follow up the links, and would never suspect that Krugman agrees with Hall. Krugman should not have mentioned Hall’s name. That’s why many economists get upset with Krugman’s style. Or maybe I’m being unfair to Krugman, and readers would not draw that inference. What do you think?

BTW, Krugman’s right that there’s nothing special about banks, so I agree with the main point of his post. But I believe there might be a typo—didn’t Krugman mean “inside money”, not outside money?

The main story however is Soltas, who has what might become the post of the year.


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45 Responses to “Random observations”

  1. Gravatar of Morgan Warstler Morgan Warstler
    25. August 2013 at 16:42

    Queue the Slate / Salon / Wonkbook “NC suffering” stories.

    Juicebox Mafia is such a yawner.

  2. Gravatar of benjamin cole benjamin cole
    25. August 2013 at 17:11

    Kudos Soltas…although we are in a different part of the recession now. In 2008, when you got canned…

    Roche is saying reserves are not lent out (re
    David Humes gold buried in the back yard) and ergo QE is inert…but the people who sold the bonds now have an immediate claim on output…this I think boosts AD and that is the name of the game…

  3. Gravatar of Grim23 Grim23
    25. August 2013 at 17:20

    Evan’s previous post on financial regulation is also well worth a read. I’m not sure if he invented that graph, but it’s very clever.

  4. Gravatar of CA CA
    25. August 2013 at 17:26

    Scott, what do you think of Tyler Cowen’s comment:

    “There is also mounting evidence that QE has been to some extent responsible for southeast Asian financial bubbles, market monetarist evidence one might say, if I may be allowed to needle Scott. Call it Austro-Indonesian business cycle theory.”

    http://marginalrevolution.com/marginalrevolution/2013/08/the-financial-unraveling-of-southeast-asia.html

  5. Gravatar of Mike Sax Mike Sax
    25. August 2013 at 18:59

    North Carolina is setting itself up as quite the little laboratory for terrible ideas that we hope don’t come elsewhere-between their rollback of voting rights and this aggression against the unemployed, it must be a great place to live these days.

    Still, while it really isn’t much fun to live there it is going to be a boon for economists-a chance for the rare big natural experiment.

    In a way this is one case where you could say this really is all about Obama-Obama bashers think everything is because of him but in this case, if he hadn’t been elected in 2008 NC wouldn’t have gone Republican overnight and we wouldn’t have these draconian cuts or the draconian anti-voting laws.

  6. Gravatar of Greg Hill Greg Hill
    25. August 2013 at 19:09

    Morgan,

    By “Juicebox Mafia,” I assume you mean young liberal bloggers like Ezra Klein and Matthew Yglesias. If I’m not mistaken, Scott has had some nice things to say about Mr. Yglesias. But whether Scott likes them or not, these two bloggers have contributed far more to an informed public debate than the conservative Jewish intellectuals who coined the term in the first place.

    And, as for “‘NC suffering stories,'” it’s worth bearing in mind that the same elected officials who sharply reduced unemployment benefits in North Carolina are now engaged in a voter suppression crusade whose cynicism is off the charts. The scope of unemployment insurance is something worth debating. Whether voting should be made more difficult for some segments of the public than others is not.

  7. Gravatar of Morgan Warstler Morgan Warstler
    25. August 2013 at 20:40

    Greg,

    Again YAWN.

    What amount of common sense does it take for lesson of the 1996 Welfare Act to be expected?

    Look man, I have SOLVED THIS. And the juiceboxers don’t have the stones to argue against my plan:

    Which increases consumption in Ghetto by 30%+
    Which increases hedons of 30M unemployed – as they get to take “enjoyable” jobs.
    Which solves the illegal immigration debate – they only truly get jobs we don’t want.
    Which does all this by simply understanding that Minimum Wage works against aid, bc the aid buys less.
    Which can win the support of both the Cong Black Caucus and the Tea Party…. the only way something this radical passes.

    And again, I’ve got @rortybomb @interfluidity @reihan and a host of others, who have engaged and given GI CYB their nod.

    Juiceboxers?

    No way, bc they don’t really care about the poor, not if in the course of delivering the poor a better life, everything they say and think is found childlike and meaningless. Not if in the end, I get to sneer at them from on high for being what and who they are. And that’s the price.

    If you have a real take down of my plan, bring it, otherwise, let’s just admit I can call these mental midgets anything I want.

    http://www.morganwarstler.com/post/44789487956/guaranteed-income-choose-your-boss-the-market-based

  8. Gravatar of Saturos Saturos
    25. August 2013 at 23:29

    As Soltas says there’s been no drop in continued claims for unemployment benefits yet, so the news can’t be that tremendous. If you take continued claims as people pushed out of work from drops in demand, versus the newer claims being those just finding UI increasingly attractive in a slow economy, then it makes enough sense.

  9. Gravatar of Greg Hill Greg Hill
    25. August 2013 at 23:40

    Morgan,

    Sorry, I’m not familiar with your serious policy work. On my way there, however, I was struck by your broader point of view. You write, “For conservatives, particularly now reeling from the correct assumption that the have-nots have been incited to ruin our Republic with their Democracy, I’m here to tell you – the only way out is up.”

    You go on, “Sure, buy guns and (some) gold and move to Texas, but those are just insurance policies against Apocalypse.”

    What do you recommend to prevent the “Apocalypse”? “Nominal Gross Domestic Product on a Level Target (NGDPLT). Conservatives must rally their political strength to this idea.”

    Let me see if I’ve got this right: Scott Sumner’s NGDP targeting will deliver us from the prospect of the have-nots ruining “our” republic, and we won’t have to buy guns and gold and move to Texas. I think I understand where you’re coming from; it’s a neat little package for a segment of the population facing the anxieties that seem to keep you up at night.

  10. Gravatar of ssumner ssumner
    26. August 2013 at 01:27

    Mike, Way too soon to criticize NC. What will you say if claims stay low?

    Saturos, If claims stay low I would regard the data as “tremendous.” Just imagine what Casey Mulligan would say!

  11. Gravatar of kebko kebko
    26. August 2013 at 01:31

    I’ve been trying to estimate effects of EUI, too.

    In this post, I think I arrived at a decent estimate that about 1 million unemployed might be attributable to EUI, and about 500,000 are do to age demographics (this is a separate issue from the low LFP). I also found about another 1 million extra unemployed, anomalous with this recession, related to unusually long unemployment durations that are age related. I would expect these to be somewhat EUI related. And, my analysis left the possibility that more could be attributed to it, especially if we find that unemployment insurance declines even among short durations as a result of eliminating EUI, as Evan might have found. (Oddly, though, unemployment went up in July in North Carolina.)

    http://idiosyncraticwhisk.blogspot.com/2013/08/more-on-duration-demographics-and.html

    Here’s a follow up, where I tried, but failed (I think), to find a corroborating smoking gun.

    http://www.blogger.com/blogger.g?blogID=1110014885778996459#editor/target=post;postID=8044564236556006724

    One thing that occurred to me, if I have my economics straight, is that, for economists who see this as an AD driven recession, these extremely high unemployment durations should be problematic. EUI would have to be a culprit, I think.

    Oh, and just to cause you to spit your coffee all over your ipad, Scott, I noticed that the first round of EUI was put in place in June 2008, when the Fed Funds rate was at 2%.

  12. Gravatar of kebko kebko
    26. August 2013 at 01:38

    Oops. The second link should be:
    http://idiosyncraticwhisk.blogspot.com/2013/08/more-on-unemployment-duration-and.html

  13. Gravatar of ssumner ssumner
    26. August 2013 at 02:52

    Kebko, Very interesting. I mostly agree, although it’s quite possible that this was a demand driven recession and also that EUI modestly raised the unemployment rate.

    Do you know what sort of EUI we had in previous recessions? I seem to recall 52 weeks in the last one and 39 in the one before, but don’t recall 1982.

  14. Gravatar of SG SG
    26. August 2013 at 03:16

    Commenter catchedlightning on Evan’s blog pointed out that continuing claims data has never measured the continuing claims for federal EUC; it’s only measured continuing claims for state unemployment.

    But, as Scott points out, continuing claims is not the story here. The very large drop in initial claims is a big deal. I can’t wait to hear Krugman’s explanation.

  15. Gravatar of J.V. Dubois J.V. Dubois
    26. August 2013 at 04:00

    SG: For initial claims read second paragraph by catchedlightning where he specifically says that also administrative requirements changed in order to dissuade people from claimin unemployment benefits.

    I did only very brief search and found this site: http://www.mondaq.com/unitedstates/x/249382/Employee+Benefits+Compensation/Sweeping+Changes+to+North+Carolinas+Unemployment+Insurance+Laws+Take+Effect+on+July+1+2013

    There are several administrative changes for unemployment benefits claims starting July 1st – including things like introducing waiting week for every claim.

    However I think that most important change is handling “attached claims” that are supposedly almost 45% of all unemployment claims. From my a brief internet study it seems that “attachment claims” are a lot like “kurzarbeit” concept introduced in Germany during the crisis – that a worker will recieve some unemployment benefits while still being officially on the payroll if not working full time. More on how this could affect benefits can be found here: http://www.safranlaw.com/safranlawblog/2013/7/2/nc-unemployment-insurance-law-changes-update.html

    So in the end I would be more conservative when reading these Evan’s article as there are still a lot of unknowns.

  16. Gravatar of Grim23 Grim23
    26. August 2013 at 04:08

    John Quiggin also has a new post, but it’s critical of market monetarism.

  17. Gravatar of Morgan Warstler Morgan Warstler
    26. August 2013 at 04:29

    Greg,

    So you got nothing, huh? Seriously, all that you need to do is seriously take down GI CYB. Really man give it your best shot. Even Mosler of the MMT Job Guarantee kinda just staggers around mumbling when arguing against it.

    Please, I’m begging you, if you can’t actually find fault with it, explain why Cong Black Caucus or Tea Party won’t LOVE the plan.

    http://www.morganwarstler.com/post/44789487956/guaranteed-income-choose-your-boss-the-market-based

    Serious policy work? I just aim to outthink and invent. Seeing my ideas birthed into the public, to live or die, is what I do every single day. I’m a capitalist.

    So again Greg, outthink me. Don’t get sidetracked by my tone, explain why the policy itself isn’t a far preferable ACHIEVABLE compromise outcome than what we have today.

    And as to NGDPLT, that arg is from Sumner. GI CYB ends unemployment. NGDPLT ensures we don’t have a “crisis in capitalism.”

    The problem you have is you don’t get a visceral dislike for govt. being a larger slice of GDP…. keeps lots of non-religious people up at night.

    We’re called libertarians. I’m actually a geo-libertarian (I think land taxes should be really high). Beyond that, I favor automating and appifying government. We can run this thing with more consumption for the poor using only 5M public employees instead of 22M workers.

  18. Gravatar of ssumner ssumner
    26. August 2013 at 06:09

    Thanks JV, My hunch is that you are right. Another factor is that they make it much harder to collect when you quit your job.

    Too bad, a natural experiment would have been nice.

  19. Gravatar of TravisV TravisV
    26. August 2013 at 06:55

    Morgan,

    What journalists / wonks do you admire the most, other than Reihan Salam and Josh Barro?

  20. Gravatar of Morgan Warstler Morgan Warstler
    26. August 2013 at 06:56

    Scott, I know you don’t want to try and find a synthesis with Farmer, but…

    http://krugman.blogs.nytimes.com/2013/08/25/unnatural-models-of-the-labor-market-wonkish/

    And we’ve only measured JOLTS turnovers since like 2000, but if you look at it (putting chart up in next post) it looks like a series of steps:

    We ran at near 6M thru the Internet boom.

    Then in 2000 it plummets until 2004 where turnovers land at 5M and run about there until 2008, where it again plummets and we’re down now to nearer 4M turns a month.

    We are today in two clear steps, turning 4M instead of 6M a month like at the end of Clinton term.

    SO, if you look at Krugman’s data proof (third chart) of the moneyillusion the stickyness of wages appears to:

    1. CORRELATE WITH JOLTS DATA – there are are TWO sudden shocks to JOLTS turnovers, and we see two sudden spikes in the percentage of people who forgo wage increases.

    2. MOREOVER, when the wage stickiness spikes in spike in 2000, it doesn’t get back to anywhere near its previous lows in 2004.

    Meaning, JOLTS appears to show a new equilibrium (5M turns a month) in 2004, that has no intention of heading back to 2000 level of 6M.

    And while we see bumps in wage stickyness during down turns, the “new normal of 2004” appears to mean wages getting historically stickier in good times (2004), corresponding with shocks to JOLTS turns.

    ——-

    My point is if we find a new unemployment equilibrium expressed in the number of job turnover, and then wage stickiness dances to that beat.

    Why do you disagree with Farmer?

  21. Gravatar of Morgan Warstler Morgan Warstler
    26. August 2013 at 07:00

    https://twitter.com/morganwarstler/status/372010506862608385/photo/1

  22. Gravatar of Morgan Warstler Morgan Warstler
    26. August 2013 at 07:20

    TravisV,

    On the left the guy who best groks the issues at hand is Gavin Newsom. He would / will be a great President.

    I don’t like Barro, I think he’s too command and control. And that’s the defining issue. Dem Mayors are more likely to get that DC isn’t the place for rule making, so they are most likely to seek distributes systems.

    To that end, technologists of all stripes, not “technocrats” have a advantage over non-technologists.

    You can be a super-crazy liberal proggie, and IF you really are a serious technologist, you will design a system, I’m going to be fine with.

    To that end, eventually, Matty will be a super strong libertarian-populist, bc:

    1. technology grows up under our feet, making obvious to norms, what was obvious to technologists. So not even Matty will be able to deny we only need 5M public employees.

    2. Matty will come to say the best kind of DC is one that lets many different tests occur. WHY? Because tests do more to END ARGUMENTS and move debate along faster. What is happening now, is just too long a slog. David Robert just left the Internet for a year bc he can’t stand the pace / lack of change. I contend that people who REALLY THINK THEY ARE RIGHT, will learn to trade: let me do it my way in Texas, and you do it your way in CA.

    Theres too many non-event trivialities for peeps not to want to get more bets underway.

    As to “wonks” I contend con wonks are just entrepreneurs, please give this a read:

    http://siliconangle.com/blog/2010/05/27/technologists-a-call-for-a-metapolitical-party/

    TL;DR The guys doing Uber and AirBnB know far more about livery and hotel law. I know a ton of vertical experts, all in tech business. All who have raised investor capital. Real bets placed on their big brain and mastery of subject matter…. NOT ON them please readers.

  23. Gravatar of jknarr jknarr
    26. August 2013 at 07:59

    I’d suggest labor force exit also in North Carolina. Move to a more liberal and/or employable state.

    http://research.stlouisfed.org/fred2/graph/?g=lOm

  24. Gravatar of kebko kebko
    26. August 2013 at 10:13

    Scott,

    I think it’s safe to treat the recent recession as a regime shift.

    According to this paper:
    http://www.iza.org/conference_files/UnIRe2011/grubb_d6938.pdf

    “The weighted average
    potential duration of EB and EUC combined was only 13 weeks in the early 1980s, 16 weeks in the early
    1990s and 14 weeks in the early 2000s (Nicholson and Needels, 2004b, Table 2). By contrast, the weighted
    average potential duration of UI benefits reached 90 weeks – quite close to the absolute maximum of 99
    weeks – in late 2009 (Aaronson et al., 2010). Given that the average extension was much closer to the
    maximum extension, on a weighted average basis the average extension in 2008-2011 (64 weeks) was
    about 4.4 times greater than in the three preceding recessions.”

    Also, regarding North Carolina, I think we should expect extended UI to cause an increase in reported labor force participation, so I would expect LFP in North Carolina to decrease, without requiring any sort of migration effect.

  25. Gravatar of JP Koning JP Koning
    26. August 2013 at 10:15

    “But I believe there might be a typo””didn’t Krugman mean “inside money”, not outside money?”

    Yeah, I noticed that too when I read the post on Saturday — even sent in a comment about it. Still no change. I really hope it is a typo… if not, we’ve got some major problems.

  26. Gravatar of TravisV TravisV
    26. August 2013 at 10:28

    Prof. Sumner,

    Would Stan Fischer be a good Fed Chairman? How bout compared to Yellen?

    http://delong.typepad.com/sdj/2013/08/yes-stan-fischer-would-be-an-excellent-fed-chair.html

  27. Gravatar of Gordon Gordon
    26. August 2013 at 10:47

    I assume you don’t want to be encumbered with a portable keyboard to go along with your iPad but have you explored input alternatives such as

    https://itunes.apple.com/us/app/path-input-swype-keyboard/id618909051?mt=8

    It may not be quite as fast as typing on a real keyboard but some people have achieved impressive typing speeds with this approach. And no matter your proficiency, it should be faster than the standard iPad virtual keypad as you’re lifting your finger far less often to type.

  28. Gravatar of TravisV TravisV
    26. August 2013 at 11:18

    Morgan,

    Thanks for the link. Fascinating stuff! You frequently have very interesting things to say. In particular, I’m glad you support land taxes (compared to other taxes).

  29. Gravatar of Steve Steve
    26. August 2013 at 14:52

    http://www.cnbc.com/id/100988773

    Obama source predicts Summers will be named Fed chief soon

  30. Gravatar of Steve Steve
    26. August 2013 at 14:59

    In a follow up, Obama confirmed that Summers possesses “Big Swinging Gravitas”, whereas Obama was unable to locate Yellen’s gravitas.

    j/k

  31. Gravatar of Geoff Geoff
    26. August 2013 at 15:27

    If all welfare were abolished, if minimum wage was abolished, if all labor market interventions were abolished, unemployment would be at a minimum. Unemployment isn’t a demand problem. It never is actually.

  32. Gravatar of Bill Ellis Bill Ellis
    26. August 2013 at 15:40

    If the post is about random observations…can a comment be off topic ? 😉

    What would conservative hero Ronald Reagan do if a brutal dictator in the Middle East dared to use chemical weapons ?

    Overtly Nothing… Behind closed doors– he would HELP them.

    The Nothing–
    “Saddam Hussein’s chemical warfare development and use can be divided into three phases:

    Phase 1: January 1981 to June 1983, Iraq started testing chemical weapons.
    Phase 2: August 1983 to December 1983, chemical weapons were used to a limited extent.
    Phase 3: February 1984 to the end of the war, chemical weapons were used extensively.”…from wiki.

    The Help– Under Reagan we sold Iraq key components in making chemical weapons– ostensibly as pesticide manufacturing equipment. Now there is new evidence that we gave him intelligence on where to use them…

    http://www.foreignpolicy.com/articles/2013/08/25/secret_cia_files_prove_america_helped_saddam_as_he_gassed_iran

    We are about to do something really ignorant… again.

  33. Gravatar of Bill Ellis Bill Ellis
    26. August 2013 at 15:53

    Geoff says…” if all labor market interventions were abolished, unemployment would be at a minimum.”

    That includes collusion by the employers…right?

  34. Gravatar of Geoff Geoff
    26. August 2013 at 16:01

    “That includes collusion by the employers…right?”

    Define “collusion”, and show me why employers would rather sacrifice profits.

  35. Gravatar of Bill Ellis Bill Ellis
    26. August 2013 at 16:23

    Geoff, Any time power and prestige is valued over profit. Because we don’t really value money. We value its utility.

    To maintain power, it is the differential that is key. The greater the inequity the more actual power the elite have.

    There comes a point early on when the elite have all they want materially, after that power becomes more valuable than growth. And power is better obtained by colluding with your fellow elite than competing against them. No doubt.

    It is just human nature…We see the same pattern repeated over all of our history.

  36. Gravatar of Geoff Geoff
    26. August 2013 at 16:29

    Bill Ellis:

    Define “power and prestige” and explain why it is mutually exclusive of profit-making such that it is an either or choice the way you describe.

    Also, still waiting for your definition of “collusion” and how it relates to the labor market.

  37. Gravatar of Geoff Geoff
    26. August 2013 at 16:30

    Also, define “elite”. Who is a member?

  38. Gravatar of Bill Ellis Bill Ellis
    26. August 2013 at 20:18

    “Define “power and prestige” Also, define “elite” …”waiting for your definition of “collusion” and how it relates to the labor market.”

    Seriously ? And while I am at it maybe I should define Obfuscation too.

    “…explain why it is mutually exclusive of profit-making such that it is an either or choice the way you describe.”

    So you are saying that the elite can choose to widen the power gap— gain more and permanent power (something all humans want)… while not colluding ? You believe that is the way free markets work ?

    And that is an argument in favor of you prescriptions how?

    If it is the way you believe free markets to work and that they mete out justice, then… I reject the morality of your conception.

  39. Gravatar of BC BC
    26. August 2013 at 20:29

    Re: the Soltas post. Perhaps, there are many firms that are trying to downsize through “voluntary” attrition rather than forced layoffs. When UI benefits are generous, more workers may be willing to accept a severance or early retirement package and go on UI while looking for another job. When UI benefits are less generous, fewer workers accept the packages and, hence, the drop in initial claims. Just a thought.

  40. Gravatar of Morgan Warstler Morgan Warstler
    26. August 2013 at 20:46

    Geoff saying this:

    “If all welfare were abolished, if minimum wage was abolished, if all labor market interventions were abolished, unemployment would be at a minimum. Unemployment isn’t a demand problem. It never is actually.”

    IS RIGHT.

    And Bill saying this:

    “Geoff, Any time power and prestige is valued over profit. Because we don’t really value money. We value its utility.

    To maintain power, it is the differential that is key. The greater the inequity the more actual power the elite have.

    There comes a point early on when the elite have all they want materially, after that power becomes more valuable than growth. And power is better obtained by colluding with your fellow elite than competing against them. No doubt.

    It is just human nature…We see the same pattern repeated over all of our history.”

    IS RIGHT.

    —–

    What’s not right?

    The sense of hopelessness or no moves on the chess board.

    I pitch GI CYB as PASSABLE.

    These are my assumptions:

    1. The Cong Black Caucus can trump the Dem elites if and when they ever want to… as long as they have OTHER VOTES.
    2. The Tea Party can trump republican elites if and when they ever want to…as long as they have OTHER VOTES.

    Now I know most of you are econos, you don’t count Cong districts, look at what the effect of gerrymandering means in real terms.

    There are enough Dem districts, and enuff Repub districts no beholden to elites, that IF someone, me, could craft a solution that so obviously benefits both groups…..

    The elites lose.

    Again. ELITES. LOSE.

    But the deal, the policy has to be perfect.

    Nobody starts inventing from this ideal: craft a major economic policy that the Tea PArty and Cong black / hispanic caucus both LIKE enuff to support.

    —–

    My plan gives the Tea party what they want: a smaller decentralized govt.

    Poor minorities get something they have NEVER been offered before: their own entrepreneurs in their community get the vast majority of the excess labor, at discount of 90% off current labor rates.

    In the poorest black ghetto, under my plan, a black entrepreneur will be able to open up MULTIPLE hamburger stands that make McDonalds literally UNABLE to compete.

    Home rehabs? 50% cheaper.

    Daycare? 70% cheaper.

    Laundry / Dry cleaning? 50% cheaper.

    Look guys you are ECONOS, you know what PPP is right?????

    PPP isn’t stronger in Thailand bc commodities are cheaper. Raw fossil fuel inputs aren’t cheaper.

    But somehow they live a pretty good life on $8K a year. WHY? Cheap labor.

    Note what Geoff points out! What should the ghetto have, but is being denied?

    Cheap labor?

    Who has 20M unemployed who if they had GI, could work for cheap, driving down prices???

    The ghetto.

    The ghettos has cheap labor, that if we didn’t outlaw it (sticky wages) would massively increase consumption in poor areas.

    —-

    Meanwhile the Tea Party likes it too, if you want to argue about it, just remember I thought of it.

    Boehner will have 25K voters ruin his sister’s bar if he doesn’t deliver it.

  41. Gravatar of Chuck E Chuck E
    27. August 2013 at 09:03

    If the Fed is buying Treasuries, and China & Japan are the largest foreign owners of Treasuries (about $2.3 trillion), doesn’t that mean all the new money is going out of the country?

  42. Gravatar of ssumner ssumner
    28. August 2013 at 12:51

    Morgan, I don’t follow your argument. All these things are correlated with the business cycle, but in addition the trend rate of wage growth has been headed lower due to lower NGDP growth. So wage stickiness is an increasing problem. What is your evidence that wage stickiness is not a problem?

    kebko, Yes, a regime shift, but I still think AD is the main factor in the recession.

    JP, Has it been corrected yet?

    Travis, I don’t know.

    Thanks Gordon.

    Steve, Let’s hope not.

    BC, Good point.

    Chuck, No, there are plenty of Treasuries to buy here. And even if they bought them from China, it would simply swap the money for other types of bonds.

  43. Gravatar of kebko kebko
    28. August 2013 at 17:14

    Scott, I totally agree about AD as the main factor. I’m not proposing these other effects as substitutions, but simply as explanations for some of the subsequent odd characteristics of the recovery. I’m kind of trying to support your AD story, in a way, by saying, “EUI, aging labor force, and maybe some minimum wage effects can explain all of the structural issues here. Adjust for those things, and we’re clearly looking at an aggregate demand problem. These effects are reducing real growth, so the 2% inflation target is pulling us even farther below a 5% NGDP growth counterfactual.”

    The economist who should really have a problem with my analysis is one who would try to call this an AD recession while denying that these are aggravating factors.

    To me it’s a classic case of how politics muddies economic discourse when we happen to see the long term unemployed add 20 weeks to their UE duration, totally unprecedented, right when we instituted 99 week EUI, totally unprecedented, and this isn’t universally seen as an obvious issue.

  44. Gravatar of ssumner ssumner
    29. August 2013 at 10:21

    kebko, I fully agree.

  45. Gravatar of Geoff Geoff
    29. August 2013 at 22:14

    Bill Ellis:

    “Define “power and prestige” Also, define “elite” …”waiting for your definition of “collusion” and how it relates to the labor market.”

    “Seriously ? And while I am at it maybe I should define Obfuscation too.”

    Yes seriously. No, you don’t have to define “obfuscate.”

    I made an argument about the labor market, and you’re talking about “the elite”, suggesting they stand in the way in some respect, which means “the elite” and the labor market are antithesis. I am wondering who you are viewing as antithetical to the labor market.

    “…explain why it is mutually exclusive of profit-making such that it is an either or choice the way you describe.”

    “So you are saying that the elite can choose to widen the power gap”” gain more and permanent power (something all humans want)… while not colluding ? You believe that is the way free markets work ?”

    I asked a question. I didn’t make an argument. I am asking you to explain why it is mutually exclusive of profit-making such that it is an either or choice the way you describe.

    “And that is an argument in favor of you prescriptions how?”

    I wasn’t making an argument there!

    “If it is the way you believe free markets to work and that they mete out justice, then… I reject the morality of your conception.”

    Well, I reject your morality.

    So now what? How will we settle our moral differences? Should it come down to who has the bigger gun? Or should it come down to the method of solving this problem, which in my view should be through voluntary interaction, respect for property rights?

    Why don’t you speak directly instead of asking questions in response to my questions?

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