Recent activity

I’ll try to keep blogging, but things may slow down a bit as tax season approaches. Meanwhile I have a new post at Econlog comparing Asia, Europe and immigrant societies.  I’ve also had some recent luck getting into major news outlets. A few weeks ago it was the WSJ, today I have a piece in the New York Times (on the strong dollar.)  AFAIK, that’s my first, and hopefully not my last.  Which reminds me, after the sad experience of Razib Khan (recently hired and fired by the NYT on the same day), don’t anyone dare send the Times any of my earlier posts criticizing their fine newspaper.  I take everything back.

🙂


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39 Responses to “Recent activity”

  1. Gravatar of pemakin pemakin
    23. March 2015 at 07:59

    Tax season, really! Do you have a particularly complicated return or do you moonlight as a tax accountant? Inquiring minds want to know.

  2. Gravatar of Nick Rowe Nick Rowe
    23. March 2015 at 08:45

    Razib Khan is very good (though sometimes he’s too smart for me, and it goes over my head). His blog is here:
    http://www.unz.com/gnxp/

  3. Gravatar of Craig Craig
    23. March 2015 at 08:50

    Why so serious? The other 3 authors look much happier in their photos on NYT.

  4. Gravatar of ssumner ssumner
    23. March 2015 at 09:29

    Pemakin, I have a complicated return, which is one reason I despise income taxes and prefer payroll taxes.

    Thanks Nick, It seems like genetics is now more interesting than economics. I know very little about the subject, but I gather they can now trace how humans migrated all over the globe in the distant past—events that a few decades ago we assumed we’d never be able to figure out. Sort of like a jigsaw puzzle.

    It seems the NYT hired an expert on genetic differences between ethnic groups, and fired him when they discovered that he believed that there are genetic differences between ethnic groups. I wonder what they were thinking?

    Craig, You don’t want to see a picture of me smiling. Anyway, it’s tax time.

  5. Gravatar of Edward Edward
    23. March 2015 at 09:37

    ” I take everything back.”
    That my by tested:
    http://krugman.blogs.nytimes.com/2015/03/23/the-loneliness-of-the-not-crazy-conservative/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

    Another stone in your garden by Krugman, Scott

  6. Gravatar of Edward Edward
    23. March 2015 at 09:37

    “may” be tested! 🙂

  7. Gravatar of Edward Edward
    23. March 2015 at 09:38

    I think this is a good sign.
    You’re starting to get noticed by the “voice” on the left.

  8. Gravatar of flow5 flow5
    23. March 2015 at 10:18

    As the unregulated, prudential reserve, (Euro-dollar’s, Yaun-dollar’s, Yen-dollar’s) commercial banking system contracts (not the ECB market), ED’s become more valuable (fewer of them convertible into U.S. dollars).

    Simultaneously, as Yellen dramatically tightened monetary policy N-gDp collapsed – all of which forced the dollar’s exchange rate dramatically higher.

    Ominously, the “Trade Weighted U.S. Dollar Index: Major Currencies” (or the value of the American dollar), just rose by 23 percent vis-à-vis our trading partners (the same percentage it rose between May 2008 and March 2009, i.e., at the start of the Great-Recession).

    The Nattering Naybob points out: “The Fed’s Quandry With Uncle ED (Eurodollar)”

    From Cecchetti and Schoenholtz:

    “The dollar accounts for 80% of trade finance and 87% of foreign currency market transactions. The fact of the matter is that there is a parallel dollar-based financial system – call it the “Global Dollar system” – that operates outside the United States… [where] mostly financial institutions – have issued dollar liabilities of more than $15 trillion. This volume of Global Dollars exceeds the total liabilities of banks operating within the United States. If dollar swap lines are to be part of the permanent crisis response toolkit, we need a clear set of rules to prevent banks outside the United States from relying too heavily on dollar loans from central banks.”

    From January 2015, BIS working paper 483:

    “In December 2013, about 80% of the dollar bank loans to borrowers resident outside the U.S. were booked at banks outside the U.S. Moreover, these U.S. dollar loans are not funded by borrowing from banks in the U.S. Banks headquartered outside the U.S. shifted after the global financial crisis from a “net due to” position vis-à-vis their branches in the U.S. to a “net due from” these branches. In other words, dollar funding flowed into the U.S. through non-US headquartered banks’ balance sheets. Following the money, lower yields on safe Treasury securities led investors to shift flows into riskier bond funds.”

  9. Gravatar of flow5 flow5
    23. March 2015 at 10:27

    After Yellen contracted N-gDp (and where were the advocates of targeting N-gDp?), the FOMC has to re-establish its parameters, re-start, and accelerate new growth, (posing a higher hurdle).

    No economist today understands macro-economics, esp. money and central banking. It is axiomatic, the welfare of the economy and the commercial banks is dependent upon the welfare of the non-banks.

    Treasury Secretary Jack Lew (attempting to bankrupt America):

    (1) reaffirmed his stance Friday that a strong United States dollar is a “good thing.”

    (2) “Treasury’s decisions about how to manage government debt are made independently of the Fed’s monetary policy choices, he said”

    The Fed didn’t collaborate with the Treasury on the type of debt to be issued. EFFECTIVE MONETARY MANAGEMENT IS IMPOSSIBLE WITHOUT THE CO-OPERATION OF THE U.S. TREASURY.

    Not only may the Treasury exercise important monetary powers through the timing of their borrowing, but specific monetary objectives may be achieved through a choice of the types of issues to float. Within board limits the Treasury can plan on the types of securities to be sold and decide whether they should be short-term, long-term, marketable, or redeemable, eligible or ineligible for bank investment, etc.

    I.e., the Treasury can decide who will buy a given issue (targeting the non-bank public).

  10. Gravatar of flow5 flow5
    23. March 2015 at 10:30

    “Recurrent countercyclical monetary policies” sapped economic strength:

    These included (1) remunerating reserves which emasculated the Fed’s “open market power”, (2) the FDIC’s unlimited transaction deposit insurance, (3) the bolstering of bank capital adequacy ratios, (4) the Treasury refusing to issue adequate volumes of short-term debt, (5) the Fed missing its inflation target, (6) an absence of capital controls that encouraged foreigner’s to purchase 3.3 trillion dollars of treasury and agency debt (artificially suppressing saver’s rates), etc.
    ——

    And T-bills offered a hyperactive secondary market (the largest, deepest and most liquid in the world). They are fungible (tradable), and represent the esteemed prudential reserves (money stock), of the unregulated E-D market. U.S. Treasury issuance is always oversubscribed. Indeed, investors infrequently pay premiums to acquire them (accepting negative returns).

    Whereas, IBDDs are circumscribed to the member commercial bank’s interbank market (unless they are converted to cash or foreign assets). They haven’t been “hot potatoes” since they were remunerated. It would be ignorant to target the FFR when reserve velocity is non-existent and the CBs are unencumbered.

    See: Vice Chairman Stanley Fischer February 27, 2015

    (1) “Prior to the financial crisis, because reserve balances outstanding averaged only around $25 billion, relatively minor variations in the total amount of reserves supplied by the Desk could move the equilibrium federal funds rate up or down. With the nearly $3 trillion in excess reserves today, the traditional mechanism of adjustments in the quantity of reserve balances to achieve the desired level of the effective federal funds rate may well not be feasible or sufficiently predictable”

    And Bloomberg:

    (2) “Diminishing market depth and a surge in volatility were both on display Oct. 15, when Treasuries experienced the biggest yield fluctuations in a quarter century in the absence of any concrete news. The swings were so unusual that officials from the New York Fed met the next day to TRY AND FIGURE OUT WHAT ACTUALLY HAPPENED”

    No “black swan”. “high frequency and other algorithmic traders” – not.

    I.e., no mystery. The money stock, money flows (& commercial bank credit), can never be managed by any attempt to control the cost of credit (i.e., thru pegging the interest rate returns on government securities; or thru “spreads”, “floors”, “ceilings”, “corridors”, “brackets”, IOeR, etc.).

  11. Gravatar of flow5 flow5
    23. March 2015 at 10:36

    The rate-of-change in monetary flows (our means-of-payment money supply times its transactions rate-of-turnover), or the proxy for inflation, has decelerated by 2/3, since January 2013; and the proxy for real-output, by 1/2, since July 2014.

    That’s an FOMC bankruptcy policy (disorderly and disruptive).

  12. Gravatar of flow5 flow5
    23. March 2015 at 10:41

    QE3 = WIN2 (whip inflation now)

  13. Gravatar of ssumner ssumner
    23. March 2015 at 10:53

    Edward, thanks, I’ll take a look.

    Wow, 5 from flow5!

  14. Gravatar of TravisV TravisV
    23. March 2015 at 12:14

    Lars Christensen: “Adam Tooze’s great insights into the history of Europe”

    http://marketmonetarist.com/2015/03/23/adam-toozes-great-insights-into-the-history-of-europe

  15. Gravatar of Floccina Floccina
    23. March 2015 at 13:04

    Another reason for me to hate the complex USA income tax system.

  16. Gravatar of Gordon Gordon
    23. March 2015 at 13:21

    Scott, for the opinion pieces that you did for the NYT and WSJ, do you have reprint rights for your blog? I know you’ve covered these topics in posts here but they might make some nice additions to back up those posts when you turn your blog into a book.

  17. Gravatar of TravisV TravisV
    23. March 2015 at 14:01

    The yield on the 10-year Treasury has fallen from 2.24% (March 6th) to 1.91% currently….

  18. Gravatar of Major.Freedom Major.Freedom
    23. March 2015 at 14:29

    NGDP growth will likely continue to fall for at least another quarter, assuming velocity remains muted, which it likely will be.

  19. Gravatar of Major.Freedom Major.Freedom
    23. March 2015 at 14:29

    http://research.stlouisfed.org/fred2/graph/?g=15bP

  20. Gravatar of flow5 flow5
    23. March 2015 at 14:30

    “The yield on the 10-year Treasury has fallen from 2.24% (March 6th) to 1.91% currently…”

    Money growth has reversed, but the drop in Vt hasn’t.

  21. Gravatar of flow5 flow5
    23. March 2015 at 14:38

    Percent change at seasonally adjusted annual rates

    M1…….M2

    3 Months from Nov. 2014 TO Feb. 2015
    15.8….. 8.9

    6 Months from Aug. 2014 TO Feb. 2015
    12.4….. 6.6

    12 Months from Feb. 2014 TO Feb. 2015
    9.9….. 6.3

  22. Gravatar of Derivs Derivs
    23. March 2015 at 15:04

    “when you turn your blog into a book”

    Will Ray write the prologue?

  23. Gravatar of Ray Lopez Ray Lopez
    23. March 2015 at 16:17

    @Derivs – Sumner to his credit has not moderated me so far. Actually that’s the biggest surprise, and the second biggest is that Sumner responds to all his posters (impressive) and third that he is a polemicist, even denying the size of clearly incorrectly sized blue rectangles (see the previous post) to win the argument. The curious case of the unequal blue rectangles.

    Ponder this: “Furthermore, in all cases, the liquidity effect has attenuated markedly through time.” from ‘Whither the Liquidity Effect: The impact of Federal Reserve open market operations in recent years’ by Ruth Judson and Elizabeth Klee (2009). Other findings show velocity (not just liquidity effect) has decreased. Still other findings that M1, and other money measures no longer are effective policy guides (Lucas Critique). No amount of parsing and misdirection by Sumner can change these facts.

    Monetarists what is your response? Even Sumner says money is neutral in the long run, and these findings show it is largely neutral in the short run and/or monetary policy has no effective tools. Have you ever pushed on a string to move a boulder? Won’t work, like monetarism. Pulling works, not pushing. Pulling is arguably fiscal policy, though I prefer to leave the economy to its own devices, like the Austrians want.

  24. Gravatar of Ray Lopez Ray Lopez
    23. March 2015 at 16:28

    @myself – the point about velocity is not that it has just decreased (which is a problem since at the zero bound it means you’re not getting much leverage from open-market operations) but also that Velocity = function of many parameters that change radically with time, and is certainly not a rough constant like the early Milt Friedman thought.

    Let’s sum up the strikes against monetarism: (1) no long term effect on economy (Sumner concedes this, i.e., money is neutral long term), (2) smaller short term liquidity effect than before (i.e., Fed cannot, with open-market operations change money supply and thus change short-term interest rates much, (3) no historic cause-and-effect between Fed operations and inflation expectations (witness my post about the Volcker Fed and inflation–and, btw, in a documentary entitled “Money for Nothing: Inside the Fed Reserve” (2013), which is IMO Fed-friendly, Volcker states in an interview that he was forced at times to *lower* interest rates (which paradoxically lowered inflation) in response to dissent from his fellow Fed colleagues), and, (4) Nobel Prize in Economics non-winner Fisher Black believed the Fed is impotent and follows the market, and, the “Rational Expectations” school of the 1970s and 80s thought likewise. At least three strikes and you’re out!

    Against all this, you still believe? I am impressed by your ‘faith-based economics’!

  25. Gravatar of Jim Glass Jim Glass
    23. March 2015 at 19:07

    Stanley Fischer speaks:

    “Monetary Policy Lessons and the Way Ahead”

    http://www.federalreserve.gov/newsevents/speech/fischer20150323a.htm

  26. Gravatar of Mike Sax Mike Sax
    23. March 2015 at 19:32

    Well I take back everything I’ve ever said about you too now that you wrote for the Times. LOL

    Actually, I like the Journal a lot too even if I rarely agree with the editorial page-though I did when they wrote about immigration.

  27. Gravatar of Derivs Derivs
    23. March 2015 at 19:49

    Ray. Using a ruler I got 6 times larger on the blue. 6.5mm vs 40mm

    Shakeys?…a great ceaser dressing requires a mortar and pestle.. and authentic cheese from parma… anything else is just a sad sad sad excuse.. food preparation requires love.

    As for Velocity… I think it’s the most interesting of all the variables.

  28. Gravatar of TravisV TravisV
    24. March 2015 at 03:28

    “UK inflation is dead”

    http://www.businessinsider.com/uk-inflation-cpi-figures-for-february-2015-3

    “Europe is growing at the fastest pace in 4 years”

    http://www.businessinsider.com/eurozone-march-pmi-day-flash-2015-3

  29. Gravatar of ssumner ssumner
    24. March 2015 at 05:29

    Gordon, As I do the book all of the arguments get reworded anyway.

    Ray, The US rectangle is twice as tall as India’s is wide, and 50% wider than India’s is tall. That’s 3 times bigger.

  30. Gravatar of Dan W. Dan W.
    24. March 2015 at 05:35

    @Ray wrote: “Velocity = function of many parameters that change radically with time”

    Yep, this is it. The planners push and even pull on many strings. They believe they are the puppet masters. Yet the only puppets are those (the media and politicians and academia) who play along with the masters’ game. This feedback emboldens the masters even further. But the truth is the masters never are in control. The Federal Reserve no more controls the velocity of money then Roy Horn controlled his tiger. And when things go out of control the impotence is stark and the consequence is tragic.

    “On October 3, 2003, during a show at the Mirage, Roy Horn was bitten on the neck by a 7-year-old male white tiger named Mantecore. Horn was critically injured and sustained severe blood loss. While being taken to the hospital, Horn said, “Montecore is a great cat. Make sure no harm comes to Montecore.”
    http://en.wikipedia.org/wiki/Siegfried_%26_Roy

  31. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    24. March 2015 at 06:26

    Stanley Fischer, master of understatement (from Jim Glass’s link);

    ‘The extraordinary monetary policy accommodation that the Federal Reserve has undertaken in response to the crisis has contributed importantly to the economic recovery, though the recovery has taken longer than we expected.’

    Other than that, Mrs. Lincoln ….?

  32. Gravatar of flow5 flow5
    24. March 2015 at 07:55

    Disinformation Ray (who can’t define money, velocity, or monetarism):

    “Other findings show velocity (not just liquidity effect) has decreased. Still other findings that M1, and other money measures no longer are effective policy guides (Lucas Critique). No amount of parsing and misdirection by Sumner can change these facts”

    What facts?

    Surprisingly, nothing has changed in over 100 years. Money is still the measure of liquidity, the yardstick by which the liquidity of all other assets is measured.

    Economic prognostications (within one year), are infallible. This is inviolate and sacrosanct. It is proven science. But who’s going to tell the burglar where the jewels are hidden?

  33. Gravatar of flow5 flow5
    24. March 2015 at 08:12

    An even greater impediment than a revisions of this act to achieving the monetarist goal, involves acquiring a technical staff for congress and the fed which

    (1) does not confuse the supply of money with the supply of loan-funds,

    (2) can make the proper distinctions between means of payment money & liquid assets,

    (3) knows the difference between money creating institutions and financial intermediaries,

    (4) recognizes aggregate monetary demand is measured by the flow of money not nominal gnp,

    (5) recognizes that interest rates are the price of loan-funds, not the price of money,

    (6) recognizes that the price of money is represented by the price CPI level, and

    (7) realizes that prior to Oct. 2008, inflation was the most important factor determining interest rates, operating as it does through both the demand for and the supply of loan-funds.

    And above all else, recognize that even a temporary pegging of a series of federal funds rates over time, forces the fed to abdicate its power to regulate properly the money supply.

  34. Gravatar of ssumner ssumner
    24. March 2015 at 12:19

    Dan, You said:

    “The Federal Reserve no more controls the velocity of money then Roy Horn controlled his tiger.”

    Sometimes I get commenters who say things that are not true. And then there are commenters (like Ray) who don’t even know what the debate is about. They don’t understand the issues being discussed.

    Like Ray, you are one of those commenters. As I’ve explained to you before you are in way over your head. No one thinks the Fed could or should control V. It has no bearing on anything. I suggest that you become a lion tamer, you seem to know more about that field.

    One Ray is cute, someone we can all have a good laugh mocking. But two is one too many. It becomes tiresome.

  35. Gravatar of Don Geddis Don Geddis
    24. March 2015 at 15:03

    @Ray Lopez: “monetary policy has no effective tools

    Again, Ray, if you honestly believe what you write, then why are you so concerned with what we discuss here? You (apparently) think it’s irrelevant. So why don’t you go spend your time somewhere more productive? If MM ideas (according to you) can’t affect the economy one way or the other, then why does it matter what monetary policies we promote?

    Or, are you … perhaps … lying about what you (claim to) believe?

  36. Gravatar of Ray Lopez Ray Lopez
    25. March 2015 at 08:15

    @Don Geddis – I am here because this blog is gaining prominence, as the Piper pipes away. I am attempting to stifle this movement in its tracks, before it gets momentum. I have money I wish to preserve in value. As for the blue and tan rectangles of the McKinsey report, only if you assume one hides the other, which is not obvious, do you get the requisite areas.

  37. Gravatar of Charlie Jamieson Charlie Jamieson
    25. March 2015 at 08:30

    Just seconding what Ray says:
    My impression is that many parts of our society are living in an ‘illusionary’ world; in economics, for example, we’ve given up on having real policy and are looking for answers by fiddling with the nominal values. So Japan devalues its currency to achieve growth. And so a school of thought develops that if the central bank can set inflation at certain targets that consistent growth will ensue. It *sounds* great, doesn’t it. It’s really no different an impulse from people who want to go back to the gold standard.
    One reason this is happening is that conventional economists have no credibility anymore after pretty much completely missing the boat on the financial crisis … even to the point that they can’t explain what happened even after the fact.

  38. Gravatar of Don Geddis Don Geddis
    25. March 2015 at 11:04

    @Ray Lopez: “I am attempting to stifle this movement in its tracks, before it gets momentum.

    But you (claim to) think that monetary policy is impotent, with no effects. Why do you care whether this fantasy debate gains momentum or not?

    I have money I wish to preserve in value.

    But that’s trivially easy. Simply don’t keep your wealth in pure cash, but instead in assets (which incorporate inflation into their future value). If you’re really concerned, buy TIPS. Now you’re completely immune (according to you) to anything the Fed does. Why don’t you invest there, and leave here?

  39. Gravatar of ssumner ssumner
    25. March 2015 at 14:27

    Ray, You said:

    “As for the blue and tan rectangles of the McKinsey report, only if you assume one hides the other, which is not obvious, do you get the requisite areas.”

    Like I said before, most kids learn this concept at 8 months.

    Charlie, It’s not just that you are wrong, it’s that you don’t even know the views of the people you disagree with. If you don’t understand their views, how can you POSSIBLY have an intelligent opinion on their views? Don’t you have to understand something before you criticize it? No one advocates the things that you are suggesting they advocate.

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