Archive for the Category Misc.


FT bond market bleg

Since my previous post was a bit of a fiasco (I seem to have mixed up Canada and the UK on the mortgage interest deduction), let me set this up as a question, so I don’t have two stupid posts in a row.  Here’s today FT:

Republicans’ proposal to slash corporate tax rate to 20 per cent helped spur a rally in Treasuries last week. The expectation was that lower corporate taxes would jolt economic growth and prompt policymakers to step up the pace of their monetary tightening.

But the Senate’s proposal to delay a headline corporate tax cut until 2019 appeared to be driving a reversal in the rally on Friday.

I’m doubly confused.  First of all, when something like economic growth (or inflation) causes interest rates to change, it’s not because it causes policymakers to adjust monetary policy.  Economic growth, inflation, and other macro variables have a direct impact on interest rates.  They would cause a change in interest rates even if the Fed did not exist, and indeed did cause changes in interest rates before the Fed was created (in 1913.)

But that’s not my main source of confusion.  Reading this piece I couldn’t tell whether the FT was talking about bond prices or bond yields.  I had to check the bond yield graph to figure out that it had to be bond prices, as yields fell last week and rose today:

So bond prices rose last week and fell today, as yields and prices move in the opposite direction.  Just as they said.  But then I don’t get the FT claim that Treasuries (prices) rallied last week on expectations of faster economic growth.  Am I having my second brain freeze in a row?  Am I just as mixed up as my undergraduate students occasionally were at Bentley?

PS.  Check out this trailer, especially the final line.  Where can I see this film?  I’m getting bored with Woody Allen films, and would like to see one produced by someone else.


Lost in America

Due to the positive reaction to my previous post, I’ll do something even more self indulgent–keep a running tab of my trip. I write this from a secure undisclosed Red Roof Inn in Utica.

July 20:  After packing I got gas, and was told my sticker had expired months ago Got to get out of Massachusetts before they catch me.  Two blocks from home I enter the Mass Pike (I-90) in the evening “rush” hour.  Not a good start.  Over my entire life I’ve lived in a string of locations along I-90–which means I should have moved to the beautiful Pacific Northwest.

Just as I entered the Hudson River valley, a corny Thomas Cole sunset appeared in front of me, with musical accompaniment from a Joy Division CD.  Surreal. Stopped at a NY wayside at 9:30 and got a stale cheeseburger for dinner.  The AC was so cold it was painful.  Picked up one of those coupon magazine and tried to book a motel an hour down the road.  The call lasted forever–why does modern life have to be so complicated–do you have a room or not?

And that’s it.  Hopefully something more exciting will happen later on the trip. Perhaps my wife will gamble away our 401k plan in Vegas.  (She’s not with me now, but we’ll meet up in the midwest.)  Maybe I’ll find a picture or two to post.

July 21.  Before describing today’s trip I have one request.  I am working on a principles textbook and need some cartoons with economic themes.  I am trying to find one that I recall with a king who is relieved to hear the kingdom is merely run out of gold, not paper and green ink.  If you know any good econ-oriented cartoons (any field within econ), please leave a link in the comment section.

Right next to my hotel in Utica I found an actual original McDonald’s:

After my Egg McMuffin I took off in my new (used) Maxima.  First stop Buffalo, which has one of Frank Llyod Wright’s greatest houses, the Martin house designed in 1903:

So far they’ve spent over $40 million on the restoration, and it shows.  The interior is amazing.  The neighborhood is full of nice old homes.

Then on to the Knox-Albright art museum, which I found disappointing–not at all my taste in art.

Downtown is pretty quiet–much easier to park than in Boston.  But it’s full of nice buildings like this art deco gem:

With a lovely art nouveau mural in the lobby:

Then late at night I arrive at my surprisingly expensive “Super 8” motel, and had endless trouble getting my room key to work.  Remember when hotels had actual keys, which generally worked?  Then a quick KFC dinner, which is pretty horrible stuff, but surprisingly tasty.  I believe it’s the number one fast food in China. The checkout guy described all the deer he had hit with his car, in gory detail.  I was tired and just wanted to get back to my hotel, but I’m too polite, and just waited him out.

I forgot to mention an interesting incident when the packers loaded our furniture on Thursday. They spoke a romance language I could not place (which I usually assume means Portuguese), but had an eastern European accent.  It turns out they were Moldovan–I suppose they were speaking Romanian.  In any case I talked to a big burly guy named Vitalia afterwards and he asked what I did.  I said economic research and he asked what area.  I said monetary policy, and then explained that that related to the Federal Reserve (many Americans have no idea what monetary policy is.)  He smiled and said he knew what it was, and then asked me if I was the guy with a blog on the subject.  It turns out he reads my blog, and even described some of the amusing items in the in the comment section.  Lessons? It’s a small world, prob. values of 0.05 are meaningless, and never assume a big muscular worker is not highly educated.

July 22:  I was blown away by the quality of Detroit’s highway system.  It’s far better than what Chicago has, and serves a much smaller population.  You want infrastructure, Detroit has plenty.  And very few cars on either the downtown streets or the expressways.  I also saw lots of new apartment construction along Woodward Ave., which I drove from downtown out to Wayne State, where Detroit’s fine art museum is located.  Speaking of art museums, Toledo has probably the most underrated collection in all of America.  It’s a comprehensive collection, but I only had time to look at the paintings (I’m told they have an impressive glass collection, in another wing.  Toledo is glass city.)

I’m normally pleased when a small city museum has a couple of gems, but Toledo has dozens, with strength in both old masters and impressionism/post-impressionism. To my eye Rubens can seem a bit overdone, but when he’s on his game no one produces more beautiful paintings:

And here is a dazzling Bonnard (much more impressive in real life):

Also some cute modern art:

July 23:  Left Ann Arbor and drove to a house on Lake Michigan, owned by a commenter to this blog.  Once I reached Battle Creek it became an exercise in nostalgia.  As a child we drove once or twice a year from Madison to Lansing, to see family.  That was our one vacation of the year.  The trip was originally 12 hours, but fell to 6 after the interstates were built.  I used to be glued to the window, and now I started seeing a few familiar milestones—Kalamazoo, Paw Paw, and other oddly named towns.  (My grandmother was born in Hell, Michigan.)  But there were a few new additions, signs for “Sun Spa” and “Oriental Health Massage–open until 1am”.  After lunch my 3 hour trip from Benton Harbor to Rockford became 5.5 hours, as traffic in northern Indiana came to a standstill.  Out of frustration I decided to take local roads, the old highway 20.  It passed though downtown Gary as a thunderstorm was approaching.  To say Gary has seen better days would be an understatement–it seemed like a third world country.  I should have taken some pics, but didn’t know if the local residents would appreciate a visit by an aficionado of “ruin porn”.  I’m a long way from Mission Viejo.

July 24:  I returned to my hometown yesterday. In an earlier post, I explained why Madison, Wisconsin has convinced me that progressives are wrong about race in America.

In another post, I discussed my brother Mark’s amazing collection of old stuff.  He was featured on “American Pickers” (the second part of the episode entitled “Catch 32”.)  My best friend is an equally serious collector, except that he collects much larger objects.  Whenever I return to Madison I can count on seeing something new, and this time I was not disappointed.  Roger has purchased the original train station in Madison, as well as a big long train:

I’ve known Roger since I was 5.  When we were 14 we’d go to the rail yards in downtown Madison in the middle of the night, to collect unused flares.  The material was then packed into long aluminum tubes to make fireworks.  (Today we’d be investigated for suspicion of terrorism.)  We were roommates in college, and he started buying and selling bikes out of our apartment.  He gradually built that up into a bike retailing business with many stores, by working harder than anyone I’ve ever met.  The old Madison train station is now one of those stores.

My brother, Roger, and I share a strong interest in the past, and a fascination with old objects, buildings, photos, posters, etc.  Roger’s much more interested in the project of restoring an old building than in any money he’ll make from the venture.

I’m drawn to people who have a strong sense of nostalgia.

BTW, Roger chartered a boat trip for us yesterday, which provided a nice view of the Frank Lloyd Wright convention center and the capital.  Otis Redding died in December 1967, when the plane he was on crashed into this lake:

July 25:  Still in Madison.  Here are some pics from my brother’s “house”, which is more like a museum.  It’s a 5000 sq. foot Ford dealership from 1918, and the inside feels like you are back in time, with old store fronts hiding bedrooms:

Here is a giant clock face from an old bank in Illinois:

And here is “naked Santa”:

This is just the tip of the iceberg.

July 26:  Last day in Madison, not much to report.  Visited my favorite modern housing development (Middleton Hills), which consists of nothing but prairie-style or craftsman style homes:

I was very happy to see that the Wisconsin state capitol building in Madison still has no security at the entrance.  You can just walk right in.  Perhaps there is still a sliver of hope for America.

July 27:  Long drive from Rockford to Bartlesville, OK.  Drove through some of the best farmland in the world in north central Illinois.  My two favorite America hotels are in Oklahoma. Tomorrow we have lunch at the 21 Museum Hotel in OKC, while last night we stayed at the wonderful Price Tower Inn in Bartlesville.  It’s well off the beaten track, but worth it:

July 28:  Driving through Oklahoma reminded me of a trip I took in 1976 (with three others), driving from Madison to Yucatan over Christmas break.  The first “day” was Madison to San Antonio almost non-stop.  By the time we got to Oklahoma is was the middle of the night and there was a freezing rain outside.  The next day the driver of the Oklahoma segment told us he kept trying to keep his eyes open as he zoomed 80 mph over frozen bridges at 4am.  Of course we all laughed it off.  Now I’d be angry about something like that.  What makes 20 year olds so much braver than 60 year olds, despite having far more to lose (in terms of foregone years of life.)

We saw some nice art deco buildings in Tulsa:

Had lunch with Steve Winkler at the Museum Hotel in OKC.  The lobby is full of art—perhaps this one is a comment on the modern GOP:

North Texas is full of windmills—there seems to be thousands of them.  I enjoy driving the old Rte 66:

July 29:  I expected Arizona and New Mexico to be wide open highways and sunny skies.  Instead it was rainy with lots of traffic jams on I-40. Truckers like to drive side by side at 60 mph on a 75 speed limit highway.  What’s up with that? Albuquerque is a mess—no wonder New Mexico is the only state in that part of the country that does not have fast population growth.  However I saw some wonderful old 50s signs and motels along the way.

July 30:  Just arrived in Orange County.  Exhausted.  California traffic was bad, as expected, except the last 20 miles which were like my own private highway.  Wait, it was a toll road, which is sort of like a private highway.  Had dinner at a nice Japanese place on a lake, within walking distance of our house.  It’s 78 degrees and dry, with a cool breeze off the lake.  Paradise:

And had some yummy shrimp wrapped in pork:

No internet connection for the next few days, so blogging will be slow.

Goodbye to Boston

[Probably not of interest to most people–academics may chuckle here or there.]

Just a few days after Scott Alexander heads for the West Coast, I’m also heading west.  I was nearly 27 when I arrived in Boston (in 1982), and today I leave for Southern California, where I’ve always wanted to live (since I was 10.)

I’ve always been a “late bloomer”, perhaps because my parents sent me to school at too young an age.  In first grade I was rated “below grade level” in reading and my high school GPA was only 3.2.

In a public high school.

In the early 1970s.

But I was accepted to the University of Chicago, perhaps because my SATs were much better.  The UC expected each of my parents to contribute $1000/year—good luck with that!  Since I could not afford Chicago, I went to the UW-Madison where tuition was $330 a semester.  I did go to Chicago for graduate school through a combination of student loans for tuition, and working 20 hours a week for room and board.

It was the same story in the job market—a real slow start.  Three months unemployed, then one semester at a branch of the UW, then one year at St. Bonaventure, and then I ended up at Bentley College.  In my second year at Bentley I was given an ultimatum—30 days to produce a letter from my adviser that I was making good progress on my dissertation.  That’s when I started on the project.  I basically did most of the dissertation in about 25 days, sent it to Robert Lucas with the request for a letter, and lucked out.  A few years later I was told that I was up for tenure, which was news to me. Seems I had brought in a year when I was hired.  Who knew that we were supposed to read our contracts?  I asked for a one-year delay and was granted my request.  Then I went up for tenure and was turned down.  Seems I didn’t have any publications.  Oops.

By then I was sending a bunch of papers out to journals like the JME and JPE.  My NGDP futures targeting paper was revised and resubmitted to the JME four times before being rejected.  (That’s unusual.)  My JPE paper (with Steve Silver) was rejected the first time, but then I complained and it was accepted.  (That’s also unusual.)  Indeed I had a number of papers flat out rejected the first time around, but later accepted after I complained.  I think that’s because I wasn’t a very good writer, and it was only in my complaint letter that I properly explained what the heck I was trying to do.  Ironically I got three pubs immediately after being rejected for tenure, including the JPE

So I re-applied for tenure in my terminal year at Bentley, while I also went on the job market.  I got an offer from the New York Fed for $57,000, but decided to stay at Bentley for $33,000.  My colleagues thought I was crazy.  I probably was—but the NY Fed might not have let me do TheMoneyIllusion, at least the way I actually did it.  Then after doing almost nothing on my extra long tenure track period, I started averaging three or four publications a year after I got tenure.  That’s sort of the reverse of how it’s supposed to be done.

Initially I was a very poor teacher.  My evaluations were below 3 out of 5, which is bottom 10%.  After about two years I rose to 4 out of 5, which is average at Bentley, and stayed there until I started blogging.  I expected the blogging to hurt my student evaluations, because I was so busy.  Instead they rose to well above average, until finally in my very last semester (fall of 2014) I got a perfect score (by now the scale was out of 6) on at least some of the questions.  It’s so weird, I had to take a picture to convince myself:

William Galston has a nice piece in the WSJ where he describes returning to a much richer Prague after being away for 22 years, and feeling kind of melancholy. It lacked the romance of his first visit:

In 1995 I could still pass for young, and Europe was young again. As we convened in Prague for an international conference on civic education, everything seemed possible. If history had not quite ended, it was moving in the right direction, and more rapidly than sober analysts had thought possible. With Vaclav Havel in the Castle, the idealists had turned out to be the true realists.

Prague was still struggling to remove the accumulated grime of four communist decades, but the surface didn’t matter. Spirits were high. Music was everywhere, in churches as well as bars, announced on huge placards that magically appeared each morning before breakfast. Students thronged the squares. The ancient buildings were more than reminders of the past; they had become part of a new drama written and staged by a generation that had prevailed against all odds. As Wordsworth wrote of a similar moment: “Bliss it was in that dawn to be alive, But to be young was very heaven!”

I landed in Prague this time under different circumstances. The surface was gleaming, but the spirit had darkened.

Boston was a bit run down when I arrived in 1982, and is now being spruced up in all sorts of ways.  Objectively is a far better city, indeed one of the finest in the world.  But when I think of my life in my 20s and 30s, all this improvement seems kind of meaningless.

I also have mixed feelings about my house, which is a Georgian 2-family built in 1930.  People tell me it was a good investment, but I regret ever becoming a landlord.  I like the appearance of old houses, but over time I got sick of the constant problems.  In retrospect, I realize that this is a sort of toxic waste dump, full of asbestos, lead paint, etc.  I don’t care about the lead, but I have a family history of lung disease so I probably shouldn’t have spend so much time doing dusty construction projects without wearing a face mask.  It’s also a good feeling to get rid of an enormous mountain of junk that I had accumulated.  Whatever possessed me to accumulate stuff like a pile of old Fortune magazines from the 1930s?  I don’t seem able to throw anything away.  Millennials are smart in being less materialistic.

Tomorrow morning I start a cross-country drive.  I won’t miss driving in Boston, which is bad in almost every conceivable way (bad traffic, potholes, no street signs, rude drivers, low speed limits, no parking, snow, unfriendly cops, etc.)  But I will miss the movie scene, especially the Harvard Film Archive.  I plan to switch to watching “films” on TV, since everything is becoming digital anyway.  If only the price of 77-inch OLEDs would drop . . .

Back in 2011, my dream was a midcentury modern house high up in the hills of Sherman Oaks, with a view out over a kidney shaped pool to the valley below.  I’d spend my retirement years reading (or re-reading) my favorite 19th century Anglo-American authors or 20th century European/Latin American and Japanese authors. (Not sure why my taste switched continents around 1910.) Then prices soared and I ended up buying in boring Orange County.

Moving has been a hassle, but visions of my new gazebo with a lake view have kept me motivated:

I still have some packing to do tonight, and won’t have much time for blogging over the next 12 days.  But I’ll try to check in occasionally.

The GOP has fallen and it can’t get up

From Politico:

As he entered McConnell’s office on Thursday morning, Corker confirmed the party is leaning toward maintaining Obamacare’s tax on wealthy individuals’ investments. The GOP would then reallocate that money to help more people from low-income households pay for insurance, although Thune said some Republicans want to use those funds for deficit-reduction purposes instead.

No final decision has been made, Republicans said, but the party is leaning strongly toward at least partly reshaping the bill to be less of a tax cut for the wealthy and more to supply health insurance options to the working poor.

“We are going to figure out a way, I believe, before Friday comes, to greatly enhance the ability of lower-income Americans to buy health insurance on the exchanges that actually covers them. And my sense is the [investment tax] is going to go away,” Corker said. “It’s not an acceptable proposition to have a bill that increases the burden on lower-income citizens and lessens the burden on wealthy citizens.”

Killing or delaying the tax cuts will give the party significantly more money to play with and potentially change the optics of a bill portrayed by Democrats and some GOP critics as a tax cut for the rich at the expense of curtailing benefits for the poor.

So all of this effort is just going to lead us back to ObamaCare?  I expect by Labor Day the GOP will be advocating single payer. Wouldn’t want to look “mean”.

Maybe they could save face by calling it “RomneyCare”.

If you want something more substantive, I have a new monetary post at Econlog.

PS.  My previous three flights were 4, 4 1/2 and 2 1/2 hours late.  This one will be at least 5 hours late.  I’m stuck in Salt Lake City in brew pub with a menu that announces that they card everyone.  Does that apply to Queen Elizabeth II, if she stops by for a beer?


The new free world

The past week has seen some pretty important changes in the political map:

1.  Former Chancellor George Osborne has described Theresa May as a “dead woman walking”, after her humiliating performance against the pathetic Jermey Corbyn, which involved blowing a 20 point lead in just a few weeks, and also losing her majority in Parliament.  (Thank God PCism is less extreme in the UK.  In humorless America that would have been taken as an assassination threat, and Osborne would have been forced to apologize.)

2.  Emmanuel Macron won a massive victory in the first round of the legislative elections, and is set to have a huge majority in the Assembly.  This gives him a powerful mandate for change:

One key plank of Macron’s vision is the controversial labor-market overhaul that he has promised to deliver by mid-September. With the French economy lagging its peers, the president also wants to change tax rates and fix inequalities in the pension system. He’s already started to revamp French intelligence services after terrorists claimed more than 200 lives since the beginning of 2015.

After campaigning on his plan to simplify France’s labor code, the president began a round of initial meetings with union leaders within 10 days of taking office on May 14. Those talks will get under way in earnest after the second-round vote as the government seeks common ground for reworking the country’s byzantine labor rules.

Macron wants individual companies to negotiate wages rather than being bound by industry-wide agreements. He has argued that a more flexible labor market would help boost growth and win the trust of France’s European partners, above all Germany.

Historic Opportunity

For at least two decades, French unions have opposed such efforts, emphasizing job protection instead, but a week from now, Macron may find himself in a stronger position than any French president for a generation. With a majority in parliament and hundreds of lawmakers who are completely new to politics, the president would hold extensive control over the levers of government.

“This victory will no doubt go down as one of the great electoral achievements in our country’s recent history,” said Bruno Cautres, a politics professor at Sciences Po who works with pollster BVA.

It remans to be seen how much he can accomplish—previous governments tended to back off after street protests.

Of course the Trump wing of American conservatism favored LePen, who promised to make France even more socialist. Yes, that’s how much they dislike dark-skinned people.

3.  With Trump kissing up to dictators and insulting our traditional allies, and the UK Conservatives in disarray over Brexit, Merkel and Macron are the new leaders of the free world.  At least until Trump leaves office, and America regains its dominant position.