What does it mean to “have control”

There’s a lot of confusion over my previous post, where I agreed with Jeffrey Hummel’s claim that the Fed has relatively little control over interest rates, at least in the way that most people envision the concept.  (Of course they can create high nominal interest rates through persistent inflation, but that’s another issue.)

Let’s return to the road analogy.  A bus driver in the Alps can turn the wheel to the left and right, as he wishes.  However given the additional constraint that he prefers to avoid a fiery death, he actually has relatively little discretion—for all practical purposes he must follow the road.  In contrast, a hippie driving a VW minivan across the Bonneville Salt Flats can wander to the left and right according to his drug-fueled whims.  He has true freedom, true discretion.

So let’s go beyond pointless debates over the meaning of “control” and focus on the substantive issue here.  I claim that monetary policy is like the bus driver in the Alps, and I also claim that most people, and even many economists, view it as being at least somewhat more like the Bonneville Salt Flats.  Use whatever definition of ‘control’ that you prefer, but that is the substantive difference.

I claim that if Bernanke had adopted the sort of interest rate policy advocated by conservatives then we would have gone into a Great Depression, he would have been quickly replaced, and the Fed would have changed course.  Just as Trichet was replaced in 2011 after his small interest rate increase pushed the eurozone into a double dip recession (plus debt crisis), and just as Miller was replaced in 1979 when his low interest rate policy pushed the US into double-digit inflation.  In both cases their replacement quickly reversed course on interest rates.

Now I may be wrong on these points; some people claim the Fed has little or no control over the economy.  In that case they could set rates where ever they wished, and life would go on as usual.  I take almost the opposite view.  I believe they have very little room to adjust rates without creating a spiral toward hyperinflation or hyperdeflation.  Why don’t we see those disasters more often?  For the same reason we rarely see buses plunge off 100 foot cliffs–the Fed usually follows the road.

So yes, I understand the Fed controls interest rates in the same sense that a bus driver in the Alps controls steering.  To understand what I am trying to say, think about the two driving analogies above.  Then think about how conservatives advocated higher interest rates under Bernanke.  If you thought that was a plausible policy proposal, then you don’t agree with me on the substantive economic issues.  I believe it would have led to disaster, and been quickly reversed.  (Again, unless the higher rates were generated by higher inflation expectations, which is not what those conservatives had in mind.)

Off topic, Trump seems to now view the Obama record on jobs as “excellent” not “terrible”.  Why the sudden change in the characterization of jobs reports averaging 200,000/month?  Could it be because we have a different president?

PS.  My wife now spends most of each day on the phone dealing with bureaucracies (government, insurance, banks, etc.)  What an annoying Kafkaesque society we’ve created.


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30 Responses to “What does it mean to “have control””

  1. Gravatar of Jerry Brown Jerry Brown
    4. August 2017 at 12:49

    So a lot of the control over interest rates depends on how responsive the economy is to them? If the economy responds sharply to small movements in rates, then the Fed really doesn’t have much de facto discretion? But if the economy doesn’t jump in tune with interest rates all the time, then the Fed has much more latitude. If that is what you are saying then I would agree with you. If it isn’t, then I have missed the meaning of yet another post.
    :)

  2. Gravatar of Michael Rulle Michael Rulle
    4. August 2017 at 13:16

    Does the Fed think it’s in the Salt Flats or the Alps? If the latter, they should rarely make mistakes—–maybe they do rarely make mistakes. But they were tight in 2007-2008. You fear they may get tight again. My sense is they are somewhere in between your two analogies.

  3. Gravatar of Major.freedom Major.freedom
    4. August 2017 at 14:07

    1.  If the ONLY way you can actually describe a “substantive issue” is by way of analogy, then your description needs more work.

    2.  The Fed by its very nature MUST “make mistakes” that it cannot know how to fix, since the only way to know whether one made a “mistake” in the production of something, be it bread or spaceships or money, is through the market process that reveals individual economic preferemces. The population’s preferences, as individual preferences can then be reflected in profits and losses, including bankruptcy and winding down of operations, and doing something with one’s time.   For the Fed, since its revenues are effectively imposed by government decrees and regulations ultimately backed by aggressive, not defensive, threats of force, its mistakes have no means of correction.  No, silly imaginary scenarios of “well if the Fed shrank the money supply by 90% then the mayhem that would result would be a signal it made a mistake!  Well no.  For this mistake is political, not economic.  The mayhem would threaten the Fed politically, not economically.  The Fed is a political institution outside the scope of market activity.  All the nonsense about which rules will minimize “mistakes” are just tacit appeals to those actions the apologists virtue signal about in order for the Fed to advance ITS OWN SAKE.  It certainly isn’t for the sake of the population,  because if it were, then the population would have already been able to chose to not use toilet paper as money had they the freedom to do so without being threatened into paying taxes in that toilet paper. The Fed was created by Congress because the results of the market test was that paper is shit for money. You people are all just concerned with what is good for the Fed, for your own selfish ends that victimize millions if not billions.  You are lying if you claim you have the interests of the population as the primary focus.

    3.  Here is the “substantive issue” with respect to Fed’s affecting of interest rates.  I am not going to use weasel arguments like “It is less than most people believe!” which is not scientific and not even testable, and doesn’t get to the core relations.  The substantive issue can be described like this:  Interest rates are determined by the rates of profit in the economy.  The higher the rates of profit, the higher the rates that firms can pay on loans, and the higher the rate they will demand to loan funds instead of investing them in their own operations.  This is incontrovertible.  It would be impossible for firms to earn 5% profits every year while at the same time be paying 10% cost of (fixed income) capital every year.  Since firms exist, it must be the case that their profits exceed the interest.  So the question then becomes Ok, what determines the rates of profit?  The answer to this is the time preference of the population.  The more people save and invest, the lower, ceteris paribus, will profits become, since more spending takes the form of investment which shows up as costs (as well as revenues to the sellers of means of production) and less spending takes the form of final consumption which shows up as revenues only.  THESE rates are the true “natural rates” since they naturally occur when individuals are naturally able to freely choose what to produce, what to save, and what to buy.  How does the Fed affect interest rates?  It affects them by way of the revenue side (inflation) and the credit expansion side (badly named liquidity effect), with its counterfeiting and goosing of bank reserves.  No, you and your lender are not solely determining the interest rates on loans in a world where the counterfeiters turn to a different arbitrary rule other than targeting a fed funds rate.  It is not true that this generation of people have such low time preferences that rates are near zero for 10 years.  People adjust to the “competitive” rates that become feasible in a given inflationary and capital discoordination environment.  It would be silly to believe that the last couple of increasingly spendthrift generations are saving so much that investments costs are sky high so as as to reduce nominal profitability.  The Fed is the main culprit

  4. Gravatar of Steve J Steve J
    4. August 2017 at 14:12

    The critical part you leave out is we are driving at night and our headlights provide limited visibility of the road ahead. Often the passengers disagree over which way the road is turning. The road shoulder can be hazardous even when you are not in the alps. And often one shoulder is significantly more hazardous than the other. Sorry I like the driving analogy…

  5. Gravatar of ssumner ssumner
    4. August 2017 at 14:50

    Jerry, No, that’s not what I’m saying. Talking about how the “economy responds to small interest rate changes” is reasoning from a price change. Don’t do that.

    Michael, Yes, they are somewhere in between, probably closer to the Alps analogy than most people.

    Steve, I don’t leave those out–uncertain and dangerous conditions are implicit in my analogy.

  6. Gravatar of Ray Lopez Ray Lopez
    4. August 2017 at 15:04

    Good post by Sumner, who borrows a drive-the-car (Fed) and be constrained by the road (market) analogy from a reader here. Sumner is right that the Fed has ‘control’ in that they can create hyperinflation, and that there’s an orthodoxy that demands during a downturn that the Fed provide liquidity. But while Sumner is right on these points, he is wrong, in the same way Major Freedom is wrong, that every downturn (including the Great Depression) seems to be a liquidity crisis that is caused by or can be cured by a central bank. It is not. It is sometimes a solvency crisis. Don’t take my word for it, take Gjerstad and Smith (Vernon! Nobelist!) in “Monetary Policy, Credit Extension and Housing Bubbles, 2008 and 1929” in Critical Review 21(2-3), 269-300 (2009): “Aggressive monetary policy designed to increase liquidity does not resolve the crisis [of 1929]. It also seems likely that it would not have resolved the crisis that overtook the financial system between late 1930 and the spring of 1933. Both crises appear to have originated in widespread household insolvencies that then infected the financial system. Liquidity alone could not make the banks and households whole again”. pp. 292-3 (this paper also points out a $10T decrease in the Dot.Com stock crash of 2001 did not cause as much an effect as the $3T crash in assets in housing in 2008, mainly because the former was more spread out and the latter was concentrated in the finance sector).

    This is not the insane ramblings of an internet poster who shares the name of a chess opening, but a Nobel prize in Economics winner. Who to believe? Scott, a retired professor of undergraduate economics or Vernon, a Nobelist worth millions?

  7. Gravatar of Benjamin Cole Benjamin Cole
    4. August 2017 at 15:31

    A Kafkaesque society.

    I wonder if the Sumners could add a room onto their new house.

    Is a second floor out of the question?

  8. Gravatar of Jerry Brown Jerry Brown
    4. August 2017 at 16:23

    Crap. Well I just don’t understand you then at all. I’m going down to the pub instead. Maybe someone there will tell me what you are saying. In any event I will be in a better mood when I get back. If anyone knows what Sumner is saying and is willing to explain it to me I will be at the Spigot Café in Hartford for the next two hours and the beers will be on me.

  9. Gravatar of major.freedom major.freedom
    4. August 2017 at 17:27

    Both the DNC and RNC are currently being sued for fraud.

    That sounds about right.

  10. Gravatar of major.freedom major.freedom
    4. August 2017 at 17:31

    Ray Lopez,

    “that every downturn (including the Great Depression) seems to be a liquidity crisis that is caused by or can be cured by a central bank. It is not. It is sometimes a solvency crisis.”

    Solvency crises brought on by prior undue credit expansion which then appears to you as a solvency crisis.

    You’re wrong Ray, as usual

  11. Gravatar of Jerry Brown Jerry Brown
    4. August 2017 at 20:29

    Well, this is my report from the Spigot. Nobody I talked to seems to know what you are saying either. In fact, none of them seem to have even heard of Scott Sumner and most of them don’t seem to understand that there is a ‘central bank’ in the first place. However, I was able to detect a physical movement away from me when the subject was brought forward. This is no doubt related to rational expectations on some level.

    But- I am in a better mood overall and that is related in some way to your post. Thank you.

  12. Gravatar of Ray Lopez Ray Lopez
    5. August 2017 at 07:36

    @Jerry Brown – the people at the pub never heard of monetarism nor Sumner because it does not matter. The wisdom of crowds. Money is largely neutral.

  13. Gravatar of Matthew Waters Matthew Waters
    5. August 2017 at 11:47

    “@Jerry Brown – the people at the pub never heard of monetarism nor Sumner because it does not matter. The wisdom of crowds. Money is largely neutral.”

    I assure people at the pub have heard of unemployment and inflation. The people at the pub couldn’t talk intelligently about specific heart valves, but they know what death from heart disease is.

    I don’t know the whole background of the neutrality of money thing you have with Sumner. But this argument is absurd on its face. The “wisdom of crowds” has so many disproving examples from history.

  14. Gravatar of Michael Rulle Michael Rulle
    5. August 2017 at 12:09

    I have always found the insolvency versus liquidity argument much more complex than many people think. I think mark to market accounting, which almost everyone thinks is the obvious right thing (me too—-almost), nonetheless has what Soros, in other contexts, has called the Quantum effect. In less liquid markets,mark to market accounting exascerbates the problem in times of stress. In very liquid markets, the impact in times of stress is less.The former reminds me of the old Bar Rosenberg option hedging strategy in the 80s.

    What am I saying? If we are going to have mark to market accounting, the Fed has to provide excess liquidity. Market to market accounting often causes insolvency crisis, not because of true value in the underlying assets, but in the MTM impact which drives down security prices (not asset prices necessarily).

    Hence, even in the last crisis I saw it as primarily a liquidity crisis even though of course there were real loses, but which were overstated as history supports. I think the credit crisis, which was certainly real, was not as large as the mark_to market methods made it become (again, quantum effect). I wish I had plausible solutions—which I don’t, but I am not a mark to market ideologue.

  15. Gravatar of Major.Freedom Major.Freedom
    5. August 2017 at 12:21

    Ray your reasoning is flawed. Your average citizen does not need to know about any monetary theory or specific people, before money becomes non-neutral. They only need to have value judgments and be subject to economic laws such as the law of marginal utility.

    In a division of labor economy, each person’s unique output is driven by self-interested pursuit of gains in return. These collections of output are what give us the material means to produce goods. Each individual is responsible for their piece of the puzzle.

    When central banks inflate, the increase in money owned and spent is not all homogenous and equal for everyone. It is not the case that all wages rise together at the same rate, nor is it the case that all prices and spending rise together at the same rate.

    No, specific individual incomes rise before others, and when that happens, because of the division of labor, output from some people expands at the expense of output from other people, since material means are scarce. This brings about a series of relative changes in outputs. The resulting set of means of production then changes. These changes then change what can be produced by everyone going forward.

    The problem with your whole approach is that you don’t understand the non-centrally controlled phenomena in the world, and you don’t understand how to think counter-factually. See, what you are doing is that you are merely looking at historical data, i.e. what actually occurred, which was one possible history out of a practically infinite number of different histories, and then instead of comparing that history to what could have happened, you instead stay in that same historical singular set of data, and you try to find the answer in how that set of data changed over that same singular history.

    Of course you will never grasp the reality of money non-neutrality that way. You will never “see” money neutrality or non-neutrality in action. You will only ever see that specific unwieu history that unfolds and goes past us by way of natural events and our choices that we did make. You will never see money non-neutrality by looking at what happens to prices or what is produced. No more than you will ever see a choice being made. You cannot see me making a choice. You can only see me moving around and affecting my environment. You can only understand what is happening by way of self-reflecting on yourself as an actor, and what you could have otherwise done, and then understanding what you see as one possible outcome.

    Whether money is neutral or non-neutral is a question that you will never “see” happen. You can only understand it.

    You can understand what would happen if you and you alone were given $1 trillion dollars to invest in the production of something of your unique choice. Surely you can understand that if that money is invested under your control, versus say under the control of a brilliant entrepreneur, that the “output of the world” would be far different.

    To say money is neutral is effectively to say that no matter who spends a given sum of money, be it Bill Gates or a bum on the street, that output will be unaffected. We are all homogenous robots all doing the same thing.

    Ray the fact that after all these years you continue to spew falsehoods, even in the face of clear and incontrovertible refutation, tells me that your brain is malfunctioning. Get that fixed already.

  16. Gravatar of Jerry Brown Jerry Brown
    5. August 2017 at 12:32

    Matthew Waters, I think it would be appropriate to credit what you quoted there to the author, who is Ray Lopez. Ray has a lot of interesting comments, many of which I agree with, but not all. This is one I don’t agree with, but am more happy to stay away from. Especially since today I have some god-awful headache that I can’t imagine where it came from. Maybe it was something down at the bar…

  17. Gravatar of msgkings msgkings
    5. August 2017 at 12:34

    @Michael Rulle:

    Exactly correct. The market bottomed on March 9, 2009, literally the day Barney Frank said they’d lean on FASB to switch the MTM rules back to where they were from 1937 to 2007 (no major financial crises in that period). In 2007 they switched them, and what happened next?

    Brian Wesbury at First Trust has done some excellent work about this, and it’s underappreciated as a major factor in the crash.

  18. Gravatar of Jerry Brown Jerry Brown
    5. August 2017 at 12:50

    Holy moly MF- you are getting mean in your old age. Lighten up a bit. And I disagree with your statement-“In a division of labor economy, each person’s unique output is driven by self-interested pursuit of gains in return.” Even you, I would bet, have done a certain amount of work, or offered a bit of help, or maybe even parted with some of your property, without considering your own self-interest primarily. I mean what do you write your comments for, is it not to maybe help people understand your point of view? Or am I mistaken and you only write your nonsense because you are paid to do it?

  19. Gravatar of ssumner ssumner
    5. August 2017 at 18:27

    Ben, I have two floors.

  20. Gravatar of Matthew Waters Matthew Waters
    5. August 2017 at 19:53

    @Michael Rulle

    My understanding is the effect of “mark-to-market accounting” was really the effect of margin calls. When broker-dealers depended on margin agreements, then the counterparties are always going to mark-to-market.

    I mean, if you buy stock on margin from your broker, you don’t get to say “well the stock is selling at an unnaturally low price” when the broker makes a margin call. Either the underlying asset needs to be sold or you have to post liquidity.

    If the underlying asset truly had an unnaturally low price, then the natural buffer is more capitalization and other risk controls. A broker-dealer also shouldn’t have played the role of a borrow-short-lend-long bank either without access to FDIC-backed deposits or Fed discount window.

  21. Gravatar of Major.Freedom Major.Freedom
    6. August 2017 at 11:03

    Jerry Brown:

    “Holy moly MF- you are getting mean in your old age. Lighten up a bit.”

    I am light to those who don’t want to impose mean, disrespectful state actions on me, thank you very much. You are the one with “mean” tendencies, because unlike you I do not want to impose my preferences on you by force. I am not going to “lighten up” with people who don’t deserve it.

    “I disagree with your statement-“In a division of labor economy, each person’s unique output is driven by self-interested pursuit of gains in return.” Even you, I would bet, have done a certain amount of work, or offered a bit of help, or maybe even parted with some of your property, without considering your own self-interest primarily. I mean what do you write your comments for, is it not to maybe help people understand your point of view? Or am I mistaken and you only write your nonsense because you are paid to do it?”

    All that is done by people for their own selfish happiness. Charity work? Helping little old ladies cross the street? Donate money? Every voluntary act you do, is done to make you feel better, or think of yourself as a better person than before, or some other positive you experienc.

    This truth is often misunderstood and people run away screaming as if it were the source of all evil in the world. So people make up myths about imaginary concepts that they redirect the attention towards to distract from their own happiness. Oh, you shall obey me, not because it makes me feel good, but because it will make that god over there feel good, or some undefinable abstract concept called humanity feel good, or some arbitrary group of people’s whose interests will be advanced. I speak for them you see because I have absolutely no selfish interests at all in you obeying me.

    Jerry Brown dude, wake the hell up and smell the roses.

  22. Gravatar of Major.Freedom Major.Freedom
    6. August 2017 at 11:15

    There is such a thing as an ethic that both allows everyone to get what they want, and avoid everything they don’t want. When I say everyone, I mean everyone at the same time, as individuals.

    Individual private proper rights is what many have called the ethic that enables everyone to do this.

    Too often though the claim is made that because that ethic will compel a person to not murder or steal from another, that is ethic “oppresses”. No, the ethic actually oppresses oppression, which makes oppressors only feel like they themselves are being oppressed, because they can’t benefit from oppression any more!

    It is not necessary to invent imaginary concepts to attribute the ultimate happiness and benefit. Each person can be concerned with nothing but their own interests, which requires us to not infringe upon anyone’s interests, because then everyone would not be concerned with their own interests, but rather with the interests of others. This includes working your ass off to get what you want from others voluntarily.

    The most benevolent aspects of social life for humanity come from unplanned, unscripted, decentralized decision making.

    Read the essay “I, Pencil”. If there is one piece of literature in all of economics that a person should read, it is that. It encapsulates the above very well.

  23. Gravatar of Jerry Brown Jerry Brown
    6. August 2017 at 12:23

    MF, I would point out that I was responding to your treatment of Ray Lopez rather than what I wrote. I personally don’t want to impose upon you in any way so I wish you would take that part of your statement back.

    As far as the rest of your ‘understandings’ about human behavior- I think you are somewhat nuts. I mean maybe you never had a mother or father or someone somewhere that loved you and did things for you when you were young and helpless, whether out of love, or even out of a sense of responsibility for you. If that is the case, it is truly heartbreaking, and maybe I could understand why you write the things you do. Not all human behavior is economically motivated and people do not only do some things because they are ‘forced to’ or because they make them ‘happy inside’.

    Maybe you happen to be this way- but most others I have met really aren’t that way. Most people have a sense of responsibility- they will usually behave according to that. Most people have an understanding that they benefit from society to a certain extent. And usually they can understand that maybe they have some obligations towards society, to maintain it at the very least. But you don’t. You refuse to recognize any obligations on your part. And you bitch and moan about being ‘forced’ by society all the time. Well, our society allows a lot of moaning and groaning, which is probably good for you, and the rules can be changed by that, but at the end of the day, if you live in the society you are just gonna have to put up with its rules. But that is just my opinion.

  24. Gravatar of Matthew Waters Matthew Waters
    6. August 2017 at 14:18

    Yeah, MF is really gone off the deep end.

    There are very sounds reasons for libertarian ideas, especially free markets. But there is also a vicious, hard libertarianism in the Ayn Rand mold.

    I’m sorry, but there’s a complete vacuum of trust, empathy or goodness in the bitter Hobbesian world wished by Randian hard libertarians. Humans generally have an instinct to blame circumstances for their failures and credit their own in ate goodness for their successes.

    Hard libertarianism turns that instinct up to 11. Strangely, many people that have “earned” their wealth can have obvious direct unearned benefits, such as inheritance. All of the wealthy have unearned benefits from infrastructure, rule of law, military/police, etc. Both Trump and Bernie shows how unshared prosperity can possibly end very poorly as the social contract comes under strain. Obviously Bernie moreso, but primary Trump had a real populist appeal.

    If you really think the world always works in such a brutal manner, then I feel sorry for you. There is *some* truth to such selfishness of course. But there are also acts of true feeling, empathy, compassion, etc. It’s not all one of the other.

  25. Gravatar of Mike Rulle Mike Rulle
    7. August 2017 at 06:07

    Matthew

    I agreee in the context of your example. I also would agree if you used Futures Markets as examples. These are the markets where “Mark to market” discipline is effective. But when the underlying collateral is senior debt in CMOs, or other structured vehicles, they are too many steps removed from the underlying collaterall, which in the recent crisis were houses. I believe it was VIRTUALLY obvious at the time, that these securties were disconnected in price relative to the required probability of default to justify them. Wall Street and others made a fortune on this (even though ironically they were initially the most hurt by mtm accounting. So Goldman gets saved from AIGs bailout of fake mark to market acounting). I would have preferred this would have been settles by the parties themselves.

    But to my original conundrum, I do not have a better proposal at this time but to accept mtm. But just because I DONT HAVE A BETTER PROPOSAL, does not mean there isnt one.

  26. Gravatar of Doug M Doug M
    7. August 2017 at 10:58

    My metaphor would be a ship at sea.

    The ship has a desired destination, a course, a heading (which may be different from the course, especially if the ship is a little bit off course), controls (rudder and throttle), and must deal with wind, waves and currents that may cause the ship to deviate from course.

    The central bank has a goal (price stability with low unemployment), and policy (2% inflation), a heading (easy money or tight money), and controls (open market operations, discount rate, etc.), and exogenous shocks that might knock things off course.

    Like the hippy on the salt flat, it would be possible for the ship to head to Japan instead of Seattle, if that was what the captain chose to do. But, the captain is a “very serious person” who has incentives to get this ship to her destination. And, there are other officers on the deck, who have helped to plot the course, and might object if compass needle started to show a heading of east instead of north-west.

    So like the driver on the alpine road, it is only sensible to tolerate a small amount of deviation from the desired course. And as a very serious person, the captain would like to get back on course with only minor corrections if at all possible.

    It is an open debate in the economics community, just how much rudder control there is aboard this ship, and how quickly it may be before we are able to observe the ships change in direction when an adjustment has been made. I know hour professor thinks that the ship responds quickly, and the rudder control is significant, while others would talk about “long and variable lags,” and “pushing on a string”

  27. Gravatar of Matthew Waters Matthew Waters
    7. August 2017 at 11:47

    Mike,

    Well, ideally these mark-to-market agreements are wholly between private parties. A better solution, should one exist, depends on what’s negotiated.

    Other parties, namely the Fed and Treasury, became involved later with the Goldman-AIG contract. Both Goldman and AIG were ultimately solvent, with the government making back its capital investment in both companies.

    A common argument is that Goldman and AIG weren’t “really” solvent. A tough thing is solvency itself depends on the more general economy. Goldman and AIG were solvent under the slow recovery. If the Fed did nothing except zero interest rates and we got 25% unemployment, their assets would have of course performed much worse. They would have been forced into bankruptcy regardless of solvency due to liquidity demands.

    The “answer,” I believe, is to remove the federal government’s interest in banks. The real underlying issue in September 2008 was the zero-lower-bound. Lehman pushed the natural rate below zero. Given the real or imagined constraints of Fed policy at the ZLB, I have to agree with the bailouts.

    But there is no technical reason for the ZLB existing. The solution is ultimately giving Fed power to set unlimited negative rates. The supposed technical issue with negative rates is paper cash, but there are several ways around it.

  28. Gravatar of Patrick Sullivan Patrick Sullivan
    7. August 2017 at 21:41

    Back in 2009 I had opined;

    ‘Antidisestablishsumnerianism–which only ties for word length–would presumably describe economists who, in the event that targeting NGDP became official Fed policy, were committed to keeping that status quo in the face of organized dissent.’

    To which, Scott responded;

    ‘Patrick, That’s right. And that term would then describe me. I’d become a reactionary defending my ideas against upstarts with even better plans.’

    It has come to my attention that Duke Ellington coined an even longer word;

    https://www.youtube.com/watch?v=TA1gfjvpFOE

    So, Reactionary Scott would be an old Antidisestablishsumnerianismist.

    Still leaves us tied for word length though. How about, ‘Antidisestablishsumnerianismeologue’? Should we call the OED, or Guinness.

  29. Gravatar of JP Koning JP Koning
    8. August 2017 at 08:52

    Great analogies, Scott. I may be borrowing them in the future.

  30. Gravatar of major.freedom major.freedom
    9. August 2017 at 15:26

    Jerry Brown:

    “I personally don’t want to impose upon you in any way so I wish you would take that part of your statement back.”

    That obviously isn’t true, because if it were, you would be an advocate of absolute individual liberty, i.e. anarchism. You can’t have your cake and eat it too. Either you don’t want anarchism and thus do want to impose your preferences on me by force (of government), or vice versa. You have to choose one or the other.

    “As far as the rest of your ‘understandings’ about human behavior- I think you are somewhat nuts. I mean maybe you never had a mother or father or someone somewhere that loved you and did things for you when you were young and helpless, whether out of love, or even out of a sense of responsibility for you. If that is the case, it is truly heartbreaking, and maybe I could understand why you write the things you do. Not all human behavior is economically motivated and people do not only do some things because they are ‘forced to’ or because they make them ‘happy inside’.”

    Your pathetic and totally inaccurate assessment of my history only shows you have no substantive argument to make. It means you cannot refute what was argued earlier.

    I never claimed nor even hinted that all behavior is “economic”. You’re just projecting the only flotsam and jetsam statements you remember from school and hoping it applies.

    Google “Psychological egoism”.

    “Maybe you happen to be this way- but most others I have met really aren’t that way. Most people have a sense of responsibility- they will usually behave according to that.”

    No, that is your own philosophy being jammed on top of what is actually taking place. “Responsibility” is not incompatible with self-interested action (the only kind).

    Just because you are scared, and cannot handle the thought of it existing, it doesn’t mean it doesn’t exist.

    “Most people have an understanding that they benefit from society to a certain extent.”

    Most people cannot even define what “society” exactly means, nor can they actually explain how it differs from specific people interacting with me with respect or with disrespect. Society does not benefit me, I and other specific individuals benefit me, and in my principles, the benefit should be welcomed, asked for, and specifically consented to.

    You are presuming, falsely, that I am “benefitting” in ways that for some magical reason you know about me better than I know about me.

    “And usually they can understand that maybe they have some obligations towards society, to maintain it at the very least.”

    This is exactly how the communists justified oppressing people. The individual is born into bondage, that they “owe” not society, but specific people you fail to even grasp are not society but assholes in the state.

    When you say “society”, you really mean a relatively small group of goons with badges.

    You don’t mean those individuals who volunteer to deal with me, where we trade, where both sides benefit. No, you mean payment at gunpoint, and whatever is financed with the loot, I am supposed to be a good little sheep like you and be thankful for it.

    I am not a sheep like you, so please do not believe your own brainwashing will be mine as well.

    “But you don’t. You refuse to recognize any obligations on your part.”

    FALSE. I very much do recognize the obligations I have. I just refuse to accept the myth that the obligations you have in your mind, are my actual obligations.

    “And you bitch and moan about being ‘forced’ by society all the time. Well, our society allows a lot of moaning and groaning, which is probably good for you, and the rules can be changed by that, but at the end of the day, if you live in the society you are just gonna have to put up with its rules. But that is just my opinion.”

    Praise the Dear Leader. For the Motherland! We know what’s best for you, you don’t know what’s best for you.

    You don’t actually have the knowledge you presume to have. You do not know what benefits me, without observing my revealed preferences through you respecting my individual property rights. Only then can you know what benefits me, and you will know what benefits me by what I choose to do without you or anyone else threatening me with a cage if I attempt to opt out peacefully without introducing any aggression against anyone.

    Give it up Jerry, your claims are boring, old, and nothing I have not seen before.

    ——————————————

    Matthew Waters:

    “There are very sounds reasons for libertarian ideas, especially free markets. But there is also a vicious, hard libertarianism in the Ayn Rand mold.”

    It is not vicious to refrain from aggressing against other people’s persons or property. It is not vicious to have voluntary dealings. It is not vicious to be free from threats or actual uses of violence against one’s person or property.

    “I’m sorry, but there’s a complete vacuum of trust, empathy or goodness in the bitter Hobbesian world wished by Randian hard libertarians. Humans generally have an instinct to blame circumstances for their failures and credit their own in ate goodness for their successes.”

    You should apologize for your nihilistic, pessimistic, and self-advertised moral unscrupulousness.

    Not everyone does what you claim they would do. Those individuals deserve to be free from your BS. For those who are as weak as you describe, they can live with you in the master-slave society you want for not only yourself, which is bad enough, but for others without even having the decency to ask and respect their decision, which is inexcusable.

    “Hard libertarianism turns that instinct up to 11. Strangely, many people that have “earned” their wealth can have obvious direct unearned benefits, such as inheritance. All of the wealthy have unearned benefits from infrastructure, rule of law, military/police, etc. Both Trump and Bernie shows how unshared prosperity can possibly end very poorly as the social contract comes under strain. Obviously Bernie moreso, but primary Trump had a real populist appeal.”

    No, STATISM turns people against each other. You have it all backwards. The very apocalyptic future you imagine people doing, is already being done in the name of “society”.

    “If you really think the world always works in such a brutal manner, then I feel sorry for you. There is *some* truth to such selfishness of course. But there are also acts of true feeling, empathy, compassion, etc. It’s not all one of the other.”

    It is not brutal to respect individual property rights oh master of confusion.

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