A slightly off-center perspective on monetary problems.
People that develop new ways of looking at the world are most successful if they can create a new language, a new set of metaphors. I don’t have the literary skills of a Keynes or a Freud, but then again I also don’t have such grandiose theoretical objectives.
Den ganzen Beitrag lesen…
My view of the period from mid-2006 to mid-2008 is as follows:
Too much capital was allocated into housing during 2004-06. After the U.S. housing market peaked in mid-2006, for the next two years we had a mildly painful readjustment, as resources were moved out of housing and into other sectors of the economy. Because it is difficult to re-allocate resources, the structural unemployment rate crept up from the mid-4s in mid-2007 to the mid-5s a year later. Other sectors of the economy kept growing. There were no signs of bubbles in U.S. manufacturing, which grew at the normal rate during the previous expansion, and of course manufacturing prices were well-behaved (unlike housing.) The big bubble was in housing, and after 2006 we had to go through a painful readjustment as labor and capital was re-allocated to other sectors.
I woke up today dreading having to write part 2 of my liberalism and utilitarianism post, and then decided to just blow it off. I suppose a blog should be more like jazz improv, rather than the laborious construction of a symphony in parts. So tonight I’ll do shorter pieces on the following 4 questions:
1. Are macroeconomists just a bunch of astrologers?
2. Are Democrats just a bunch of socialists?
3. Do soaps promote liberal values?
4. How many Tyler Cowens are there?
This is inspired by Mankiw’s Pigou Club; and like Mankiw I’m not asking permission—I get to decide who belongs. Surely some of the people who participate in this blog would qualify, but I’ll leave that up to them. I have also clearly hinted that I think George Warren, Earl Thompson and Robert Hall all belong. Warren is dead. My hunch is that Thompson wouldn’t mind being included, whereas Hall would. But they have no choice—all three go in. Today I add another member to this distinguished group:
FREDERIC S. MISHKIN
I am pleased that Greg Mankiw has recently given the interest penalty on reserves idea more visibility. (It is also nice to be called a “prominent economist” by Mankiw.) Unfortunately, like the rings of Saturn, this issue is much more complicated than it appears at first glance. Many economists try to look at the entire liquidity trap issue by boiling it down to a few fundamentals; the perfect substitutibility of cash and T-bills at zero rates, or the problem of credibly promising a permanent expansion in the money supply. Unfortunately none of those easy thought experiments are enough. The problem must be examined from multiple perspectives at once. Hence I plan a long post that will have readers crying “No mas, just try Sumner’s plan so I don’t have to read any more of this.”
