Archive for March 2009


I shouldn’t do this but . . .

. . . I couldn’t resist.  This is from Krugman’s March 1 post:

A quick response to Scott Sumner

OK, I see that Scott Sumner has written an open letter to me. But I’m puzzled. He writes:

“I think you have acknowledged that there is some level of quantitative easing that would boost demand. If I am not mistaken you are concerned that if such a policy boosted inflation expectations sharply, the Fed would have to quickly sell off these assets, suffering massive capital losses.”

Um, you are mistaken. I’ve never said such a thing. Did you mean to address this letter to someone else?

And here is something from his blog 19 days later:

My back of the envelope calculation looks like this: if the Fed buys $1 trillion of 10-year bonds at 2.5%, and has to sell those bonds in an environment where the market demands a yield to maturity of more than 5%, it will take around a $200 billion loss.

I’m not complaining; I think quantitative easing (it’s really qualitative easing, but I give up on trying to fix the terminology) is the right way to go. But we should go into it with our eyes open.

Any Krugman defenders wish to comment?

Harmgart and Huck on Dogville

There were a lot of interesting comments on my political art piece, and since I don’t have time to do a new topic today, I thought I would develop the idea a bit further, and also comment on a very recent article that illustrates some of the strengths and weaknesses of political art.  Next Sunday I hope to have something new ready.

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Some graphs

This has been a very busy week.  But I’m not complaining, as I got what I wanted—lots more people paying attention to my views.  I’d like to correct one thing I said in my previous post, it is not true that Earl Thompson has given up on macro.  He has done quite a bit of work that I was not aware of, and you can link to many of his papers by going to his website.  He has some very unconventional views that combine monetary policy, fiscal policy, and politics into an overarching model.

My previous post was my final attempt to sell my view of the crisis.  In the future I will spend more time responding to commenter requests, discussing current events, and other miscellaneous topics.  One request was for more graphs, which might buttress my argument.  Hence today’s post.  Soon I hope to respond to a request for a post on 1932, and then a request for something on monetary policy options in other countries.

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The history of an idea

I was originally going to entitle this entire post “Why me?”  But I thought that would be too self-indulgent, even by the standards of this blog.  What I would like to do here is trace the development of my research into monetary economics since 1986, so that you can see things through my eyes.  Almost no one accepts my view that a tight money policy by the Fed caused the crash that occurred in late 2008.  I hope that if you better understand the development of market-based monetary policy proposals, you will come to see my hypothesis as natural, even inevitable.  If you’ve ever read Murders in the Rue Morgue, you might recall a scene where the detective walks silently through the streets of Paris with a friend, observing all the things his friend notices along the way.  Then he suddenly breaks into his friend’s (silent) internal monologue, as if they had been conversing all along.  That’s what I hope to do here.

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Is the term ‘political art’ an oxymoron? (Part 2)

[I call this “part 2,” because if you plan on reading the previous post, do that one first.]

I’ve always had a cynical attitude toward overtly political themes in art.  Some of this comes from reading movie reviews, which often provide preposterous political interpretations.  Thus New York magazine says last year’s Wall-E, a film about a society where a government-run corporation controls 100% of the economy, is a critique of “free markets.”   Films about the Three Gorges Dam (which epitomizes Maoist economics) are critiques of capitalism.  I know this is like shooting ducks in a barrel, but coverage of political art isn’t really any better at more highbrow publications, such as the New York Review of Books.

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