This is Scott Beaulier:

Louis Brandeis once said, “I abhor averages.” After reading Average Is Over (Dutton Press) by Tyler Cowen of George Mason University, I’d concur with Brandeis: if the average American’s future is anywhere close to Cowen’s depiction, I’m abhorred!

Drawing in part from some of his previous work about the “great stagnation,” Cowen thinks the average American’s future will be stagnant and no better–technology and gadgets aside–than today in terms of income. Wages for American families have been stagnant since the 1970s, in fact, and Cowen sees no obvious source of wage growth on the horizon for the average American.

In fairness, Beaulier later takes a different and more upbeat perspective, and Tyler is a “utility optimist.”  But many interpret this scenario quite negatively.  Here’s what I don’t get.  This “technology and gadgets” stuff is pretty important.  The American middle class has some of the highest living standards the world has ever seen, and the pessimistic view is they’ll get still higher as new biotech inventions cure diseases and immersive computer games provide kids with thrills far beyond the plastic toy soldiers I played with on the carpet in the 1960s?  What’s the optimistic view?

Then there’s the jobs issue:

What ought to worry local residents is Georgia’s inability to produce workers who can build the sets, run the wires or manage the sound for such films. This skills shortage may endanger the $4 billion or so that Jim Jacoby, whose firm plans to redevelop the complex, reckons the film industry could bring to the state this year.

Georgia’s skills shortage goes beyond the film industry. For every four tradesmen that retire just one takes their place, even though the state’s unemployment rate hovers around 7.4%, over a point higher than the national rate. But a similar problem, albeit in less acute form, is in evidence across America. More than half of the country’s tradesmen are aged over 45. According to the Department of Labour, America will need 41,700 more cement masons, 114,700 more electricians and 218,200 more carpenters by 2022. The government already spends around $17 billion a year trying to close what the president, Barack Obama, calls the “skills gap”. On July 22nd Mr Obama signed laws that he said would make job-training programmes that receive federal money “more effective, more responsive to employers and more accountable for results”.

One such programme is Go Build Georgia, which teaches teenagers a trade. But efforts to train young people as plumbers or pipe-fitters run up against concern from parents. Instead of being proud to raise a future welder, “everyone wants to believe that their child will go to Harvard”, says Matthew Gambill, the director of the Georgia Association for Career and Technical Education. Despite the lower cost of a skills-based education and the solid job prospects, enrollment at technical colleges has dropped 23% since recession-stricken students clamoured for entry in 2010.

So there are lots of good middle class jobs out there like plumbers and electricians, but Americans are turning up their noses.  They don’t want to be seen as blue collar.  They are Harvard material.

So off they go to college to study the STEM fields.  Here’s Kevin Erdmann:

This reminds me of one of the facts about American life that undermines the widely held belief in the death of the American middle class.  That picture of India is the picture of a place where people aren’t middle class but aspire to be.  People who are struggling, work.

Even if you could go hire 1,000 engineers in American universities, you’d still end up with 700 Asian engineers.

College is widely attended in America.  If the middle class is dying, it’s not for lack of education.  And, once you’re there, you can choose among hundreds of areas of study.  They all basically cost the same and take the same amount of time.  But, some require more work.  And the harder subjects generally pay more – engineering, sciences, computer & technology.  The main difference is – how hard do you want to work for the next 4 to 6 years in order to increase your lifetime earnings?  Now, wouldn’t you think latest “first generation that will be worse off than their parents” would be clawing and fighting to get the spots in those subjects?  Yet, how many American universities would literally be closing down those departments if they didn’t have immigrant students to fill up the classes with?

So they don’t want to be plumbers because it’s not glamorous enough.  And they don’t want those STEM jobs because that would require a lot of studying.  Might interfere with the partying.  Wait, I forget about all those students who cannot “afford” to go to college.  And yet strangely enough I see far fewer teenagers working then when I was young.  Now I probably sound like an old reactionary. But if they aren’t working I say good for them!  They should optimize.  I presume they need the money much less than I did when I was 15 or 16 years old, back in the early 1970s.

Despite the decline of the middle class, college administrators tell professors like me that they must offer more and more luxurious student housing to keep up with the fact that kids today don’t grow up sharing a bedroom.  From the NYT:

COLUMBIA, Mo. “” Brenden Heiland had breathed the vanilla lavender-scented clubhouse air. He had seen the beach volleyball court, toured the game room equipped with billiards, Ping-Pong and air hockey tables, and learned with delight of the Friday pool parties with a D.J., free food and snow cones, spiked with rum for those of age.

Now, as he and the three friends he was apartment hunting with stood peering at the pool, Mr. Heiland, 19, pondered what life might be like if he chose to live in this off-campus complex, the Grove, when his sophomore year at the University of Missouri begins this fall.

“It’s like a vacation, almost,” he said. “I’m not going to go to class “” that’s how I look at it.”

As private housing developers try harder than ever to outdo the amenities that their competitors offer in college towns, concern is growing about the academic and social consequences of upscale off-campus student housing.

The spas, tanning salons and sprawling pools offered by these complexes, which often require their tenants to be students, are a far cry from the traditional on-campus residence halls that may house classrooms and faculty and host lectures and academic discussions.

What happened to those cement block prison cell dorm rooms of the 1970s?

During hard times people buy second hand goods.  I have a bunch of furniture I bought used from other people’s houses–still quite nice.  Here’s the WSJ:

That Perfect Dining Room Table?  No One Wants It, Even If It’s Free

.  .  . Whether moving to a smaller abode or simply cleaning out, many people are making an unwelcome discovery: Their prized family heirlooms have turned into junk. Upholstered sofas, formal dining tables and hutches, Victorian-style mahogany and oak furniture, entertainment units, bulky television sets, pianos””all have become almost impossible to sell or, in some cases, give away.

The furnishings industry has a name for the big, dated wood-finished and upholstered pieces that no one wants anymore”””brown furniture.” Stockpiles of “brown leather and brown Ultrasuede couches have nowhere to go,” says Jeffrey Brooks, a Long Valley, N.J., interior designer.

What happened to the market for secondhand furniture? Those consumers are shopping at Ikea, Wal-Mart and Target, says Jerry Epperson, a partner at Mann, Armistead and Epperson, a Richmond, Va., investment bank specializing in the home-furnishings sector. The cost of furniture, in constant dollars, has fallen on average about 50% over the past 30 years, he says, the result of the availability of cheaper imports.

Even the Salvation Army, known for making furniture pickups, has become pickier in recent years, says Major Greg Davis, a general secretary at the nonprofit. Delivery-truck drivers began carrying Internet-enabled tablets about two years ago. When in doubt, they take a quick photo of a piece and send it ahead to the local store to make sure it will be accepted. Many shelving units are turned away, he says, as are pianos .  .  .

OK, some of that baroque brown stuff is pretty hideous, but still . . .

Alan Blinder is a very bright and well-intentioned liberal:

Concentrating on, say, the growing gap between the upper 1% and the lower 99% leads Mr. Piketty to advocate such redistributive policies as higher top income-tax rates, stiffer inheritance taxes and a progressive tax on wealth.

But if you dote instead on plight of the lower 15%-20%, or even on the lack of progress of the lower 50%, you are led to think about policies like giving poor children preschool education, bolstering Medicaid, raising the minimum wage, expanding the Earned Income Tax Credit, and defending anti-poverty programs like food stamps.

These two policy agendas are not inconsistent, but they are certainly very different. The first tries to level from the top; the second tries to level from the bottom. Between the two, I’d like to think that most Americans join me in favoring the second. But I’m worried. Does Pikettymania prove me wrong?

Yes it does Mr. Blinder.  I may not agree with all of Blinder’s policy recommendations, but he’s thinking like a good utilitarian.  In a rational world we’d do “free policies” that help the middle class, like simplifying taxes, abolishing the FDA, removing occupational licensing laws, monetary stimulus to create jobs, etc.  But when it came to policies that actually cost money, we’d focus on the poor in America, or even better on the much poorer people in developing countries.  But not the middle class.

The plight of the American middle class is perhaps the phoniest issue I’ve ever seen.  I don’t know the agenda of the people obsessing about this issue, but I’m pretty sure it’s not utilitarianism.

Kevin Erdmann has an interesting post discussing the evolution of interest rate futures over time. In recent months the date of the first anticipated rise in rates has moved from late-2015 to mid-2015.

But, I expected this to correspond to forward rates for June 2016 Eurodollars of just over 2% and for June 2017 of just over 3%.  Instead, rates have trended around a mean of about 1 5/8% and 2 5/8%.  If that had been my target mean, it would have been perfect for this trade.  (Basically, buying when the price declines and selling when it increases, profiting from random movements over time.)  But, the farther the price moves from my target, the harder it is to profit from the position.  Why haven’t the prices followed the market expectation?

The reason is that the slope of the yield curve has declined while the expected date of the rise has moved back.  Late in 2013, the slope was up to around 33 bp.  (Rates would be expected to rise 33 basis points per quarter after the initial rise.)  For reference, in the past two cycles, during the rate recovery period, short term rates rose at a pace of 50 to 75 bp per quarter.

So, what’s going on?  I think that the market has been surprised by how healthy the economy has remained in the face of the tapering of QE3.  This diminishes inflation fears and also signals a hawkish intention from the Fed.

But, I think this reflects the Wizard of Oz view of the Fed’s interest rate policy.  I think that there is a systematic underestimation of how much Fed policy chases the Wickesellian interest rate.  I think the Wickesellian rate is probably already above zero.  This is part of the reason that we have seen an acceleration in economic activity and employment this year.  QE3 appears to have been only slightly accommodative, for reasons I don’t completely understand, and so its taper has probably not changed the objective stance of monetary policy that much.  But, before QE3, a non-QE zero rate policy was probably disinflationary.  The increase in the Wickesellian rate over the past 2 years means that at the end of QE3, a non-QE zero rate policy will probably be inflationary.

This might be right, but let me throw out another possible explanation.  Perhaps the markets are reacting to the disconnect between the unemployment data and the GDP data.  All throughout the recovery the unemployment rate has done better than the GDP data.  Even back as far as 2011 I was doing posts entitled “A job-filled non-recovery.”  But the disconnect has recently gotten worse, with NGDP growth coming in at under 4% over the last 6 quarters, and the unemployment rate falling by 1.7% over 18 months, roughly 0.1% per month.  That’s a very fast decline in the unemployment rate, which suggests we’ll hit full employment fairly soon.  But GDP growth has been really slow.

This pattern has gotten even more pronounced over the past 6 months.  You can write off the first quarter due to bad weather, but weather certainly did not affect second quarter GDP.  And yet NGDP in Q2 was up only 2.5% (annual rate) over 2013:4.  That’s a shockingly low rate of NGDP growth, and yet the rapid decline in the unemployment rate continued.  And we recently had the fastest 6 months of job creation since the late 1990s.  One thing we know for sure is that job growth must slow at some point.  Labor force growth will be exceedingly slow due to retiring boomers, and returning discouraged workers can only do so much.  I’ve suggested 3% is the new normal for NGDP, but if you applied Okun’s Law to the recent data (and account for inflation) you’d get even a lower estimate.

So if you look at the unemployment data and the NGDP data together, rather than separately, you are forced to conclude that trend NGDP growth has slowed very sharply.  If the markets are gradually figuring this out as more data comes in, it could explain the flattening of the yield curve. The rapid fall in unemployment explains why a rate increase is expected within less than a year, and the declining estimates of trend NGDP growth explain why rates are not expected to rise as far after that first rate increase.

PS.  Kevin Erdmann also has a very good post linking school choice, banking regulation, and the right to exit.  Highly recommended.

HT:  TravisV

Here’s an interesting news story:

New revisions to the code of behavior for primary and middle school students no longer require them to “love the Chinese people and love the Communist Party of China (CPC).”

.   .   .

As well as taking out the demand to love the Party and the public, the new code has also erased general phrases about self-respect and confidence and replaced them with more specific directives.

Meanwhile, more specific rules have been added. For patriotism, the code now states that students should be aware of Chinese history and salute at flag-raising ceremonies.

Students are required to practice garbage classification and live a low-carbon life, while the new code also prohibits them from smoking and drinking as well as Internet abuse.

It also encourages students to express their opinion and listen attentively in class.

The MOE launched the revision work on the code of behavior in 2012, starting a public debate. The current code, published in 2004, was deemed out of date and impractical among many Net users, especially after comparison with students’ codes of behavior in other countries that emphasize self-protection rather than patriotism or loyalty to the Party.

From Mao Zedong to a low carbon life in 50 years.

And here is a very interesting excerpt from Micklethwait and Wooldridge’s excellent new book on governance:

The regime’s enthusiasm for meritocracy has deep roots: Chinese parents have been telling their children for more than 1000 years that “those who work with strength are ruled. Those who work with their minds manage others. Those who excel in scholarship become officials.” Polling indicates that most Chinese like the idea of being ruled by a wise guardian class.  The worship of intellectual prowess helps.  This is a country where infant formulas are routinely packaged to tiger moms as “brainpower boosters” and McDonald’s Web site features a professor Ronald who offers happy courses for multiplication and language learning.

It is not hard to find examples of the way that bright young people, carefully selected and promoted, are tackling big problems. In Shenzhen a young civil servant called Ma Hong is doing what David Cameron tried to do in Britain: build a big society by getting nongovernmental organizations to deliver public services, mainly care for the elderly. She has dismantled most of the controls on local NGOs, so all they need to do is register with her. By mid-2012 she had brought in more than 5000 “social groups” and paid out several hundred million yuan to them to perform social work. All the groups are evaluated by third parties on things like corporate governance: the higher their rating the more money she trusts them with.  By 2012 she had closed down twenty-six NGOs and warned seventy others that their internal standards were not up to par.  Already her model is being copied around the country.

Ma epitomizes the businesslike way in which China’s best civil servants are trying to tackle social problems. Her starting point is to look around the world at what works. She studied in Hong Kong in 2005 and noted that some 90% of social work was done by NGOs, paid for by the state.  She is also an admirer of Singapore and has borrowed its balance between easy registration for NGOs and stern punishment for underperformance. She wants her social groups to become the engines of Chinese society, “just as private companies are in the economy.” Indeed she thinks that the public sector needs to be changed in the same way as the private sector, with the state creating the right environment for companies and charities to do more of its work. “We are in a transition from a big state to a small state,” she says, “and from the small society to a big society.”

Notice the strange mixture of top-down elitism and Hayekian bottom-up self governance.  We need to think about these issues in more than 2 dimensions.

When I started studying economics (1973) you’d read stories about how China’s per capita GDP was about $100.  Then a few years later it would be $200, then $400, then $800, then $1600, then $3200, then $6400.  Some of that is inflation, but you get the idea.

Now the IMF has China at about $10,000 and the World Bank says $12,000.  In comparison, places like Japan, France and Britain are all around $36,000.  China is 2 more doublings away from being a rich country.  This tells me that the next two decades will be crucial.  One of two things will happen, either of which would dramatically affect China:

1.  China quickly becomes rich (and probably democratic.)

2.  More likely, China’s growth slows dramatically.   They still become rich, but it takes more than 2 decades.

Westerners often frame this issue in terms of politics.  Will China become democratic or will the Communist Party hang on to power?  Why does it have to be an either or choice?  Singapore seems to be the model for many Chinese policymakers, and in that country the quasi-dictatorship keeps winning elections as the political system becomes increasingly democratic.  This is probably the long term goal of China’s leaders (although I’m not at all confident they will succeed.)

Tyler Cowen linked to an excellent essay that discusses how economic forces are pushing the government toward a shift in the economic model.  Michael Pettis has been talking about this problem for years.  The old model simply won’t work much longer. After reading the first link, consider the political angle discussed in this news story:

President Xi Jinping told top officials he was disregarding “life, death and reputation” to fight corruption in a terse speech signalling a possible dispute and doubts among party elites over the campaign.

An official mainland newspaper and a person familiar with the matter confirmed the president’s statement.

Xi was believed to have made the remark in a closed-door Politburo meeting on June 26, the details of which were publicly revealed only when the city newspaper Changbaishan Daily on Monday reported that local officials received instructions from the president.

“[I] had left life and death, as well as my personal reputation, out of consideration in the combat against corruption,” Xi said, according to Changbaishan city’s party chief, Li Wei.

Li said the top leadership’s remarks emphasised a sense of crisis, and some of the words were “shockingly” sharp and harsh. However, he did not provide more details.

.  .  .

The Changbaishan Daily also said that Xi urged graft busters to focus on four types of officials: those who are strongly opposed by the public; those who have not restrained themselves after the party’s 18th congress in 2012; younger cadres in key positions; and those who might potentially take on more important roles.

The daily’s article was soon deleted from the website as some internet operators said they received a gag order from propaganda authorities.

A person familiar with the president’s speech told the South China Morning Post earlier that Xi made the strongly worded speech to the Politburo to counter some critics and silence doubts against his anti-corruption campaign.

Xi warned the party elites that nothing would be off limits in his anti-graft drive, the person said.

The president also rebuked the “school of thought” that the relentless drive against errant officials would only plunge the country in chaos and that Xi, in the end, would “eat humble pie”.

According to the person, Xi retorted: “What is there to be scared of?”

Zhang Ming, a political scientist at Renmin University in Beiing, said the remarks showed the anti-corruption campaign had certainly threatened some interest groups in the upper echelons.

“The combat between Xi and the interest groups has been white-hot and Xi also realised that [it] is make or break,” he said.

I think the best way to read this is not to focus on the veracity of Xi’s claims, but rather the purpose that is being served by this statement.  Especially by the fact that it was published.  It seems pretty obvious that Xi is much more of a politician that Hu Jintao, everyone agrees on that point.  My impression from talking to Chinese people is that Xi’s anti-corruption campaign is very popular. There’s a lot of resentment at the lavish lifestyle of corrupt officials.  Westerners often view China as being “corrupt”, but it’s also worth noting that Chinese culture puts a lot of emphasis on the importance of merit.  As we’ve seen in Singapore, Chinese culture is also consistent with a strikingly non-corrupt bureaucracy, a meritocracy.  In a political sense, China is up for grabs.  As an analogy, both North and South Korea are in some sense embodiments of “Korean culture.” Ditto for Mao’s China and capitalist Taiwan.  Culture is surprisingly plastic in some dimensions, less so in others.

China will probably start moving toward democracy long before it becomes democratic in the Western sense. It seems to me that Xi’s speech should be viewed as a sort of campaign speech, trying to position the Communist Party, or at least his wing of the Communist Party, in the way that Lee successfully positioned the ruling party in Singapore.  If there is to be a battle, Xi wants the public on his side, especially the 90 million members of the Communist Party (most of whom are average urban residents.)

PS.  Tyler also linked to a review of a book on Chinese minorities, which seemed somewhat misleading to me:

Thousands of Western tourists visit the temples of Tibet, the spice markets of Xinjiang and the lush jungles of Yunnan each year. David Eimer did, too, repeatedly, over the past decade, but he had a larger purpose in mind: to investigate the nature of Chinese rule in the restive border regions where its 55 ethnic minorities live.

Those minorities number more than 100 million but as a group are all but invisible to the outside world, their situation complicated by the seeming paradox of being citizens of China without being part of the Chinese people.  .  .  .

Because Mr. Eimer is not bound by diplomatic or journalistic niceties, he can be blunt in the terminology he uses. To him, China is not so much a state or a nation as a “huge, unwieldy and unstable empire,” with the Han in the dominant position that the Austrians, Turks or English once enjoyed in empires now vanished. Uighurs and Tibetans, consequently, are peoples resisting “the colonization of their country,” that last word being one Beijing abhors and considers an expression of “splittism.”

It’s hard to think of a worse comparison for China than the “English” empire.  First a few numbers. Of the 105 million minority population in China, 6.3 million are Tibetan and 10 million are Uyghurs.  That’s slightly over 1% of China’s population.  These are the two groups that one can at least imagine might form independent countries some day (although I doubt it.)  The rest tend to live in eastern China, in provinces where the Han population is larger than the minority population.  Even Yunnan province is 67% Han.  The other groups are not pushing for independence, and it seems inconceivable to me that any majority Han province would ever break away from China.

If you look at a map of China by ethnicity, the Tibetans are a particularly interesting group. Although not at all numerous, they occupy an enormous region spanning several different provinces.  Almost all of Qinghai is Tibetan, as is the entire western half of Sichuan.  Yet they have 1.5% of Sichuan’s population.  If you add in Xinjiang, (where the Uyghurs are concentrated) you are basically talking about the entire western third of China.   (China is roughly the size of the US, including Alaska.)  That’s a big region, and it helps explain why the issue is so sensitive to the Chinese.  Terrorism in Xinjiang is a rapidly growing problem for China.  The province is 43% Uyghur and 41% Han, to give you a sense of how difficult the ethnic situation would be to resolve. Think Northern Ireland, or Israel/Palestine, or some other chronic trouble spot, not British Empire.

A better analogy for China (in terms of demographics, not human rights) would be Canada, where there are lots of indigenous people in the vast, thinly populated north, or the US, or Brazil, or Australia.  But none of those 4 countries has a large indigenous muslim population. The human rights abuses currently taking place in China can (hopefully) be fixed over time.  But I’m not at all sure that would make the Tibetan and Uyghur issues go away.  Xinjiang is nothing like India, where the British could just walk away.

In a recent post I suggested that severe demand shortfalls were also market predictions of severe demand shortfalls.  In the comment section Larry quoted me and then asked an interesting question:

“But when it fails, it’s really, really hard to fix the problem, because doing so requires policymakers to be more effective than the markets predict. I won’t say that things are hopeless when markets predict disaster, but I wouldn’t put much hope on stabilization policy.”

This seems quite fatalistic. So if the monetary authority blows it there is nothing to be done? Does this pessimism apply to both monetary and fiscal policy?

Yes, it applies to both monetary and fiscal, but it’s important to distinguish between two types of difficulty:

1.  In both the 1930s and the 2010s the markets believe that monetary stimulus is very easy to do in a technical sense.  Asset prices rally strongly on even rather small stimulus measures from the central bank.  

2.  Asset markets tend to be very pessimistic about the prospects for reflation after monetary policy has had a severe failure.  This suggests that markets believe the political barriers to reflation are formidable.

Japan is a perfect case study.  Asset markets took off after mid-November 2012, when then candidate Abe first indicated he was going to push for a 2% inflation target.  The yen fell from about 80 to the dollar to 103 today, while the Nikkei rose from under 8700 to over 15,300 today.  So the asset price gains have been sustained.  And we did see a rise in the Japanese price level, RGDP and NGDP.  So in one sense Abenomics “worked.”

On the other hand the Japanese 10 year bond yield is 0.51%, vs. 2.50% in the US, and the 30 year bond yield is 1.67%, vs. 3.30% in the US.  That tells me that the bond market probably expects Japanese inflation to remain well below US levels in the long run, perhaps close to zero.  And that suggests that Japanese asset markets believe that the political obstacles remain formidable.  After all, Abe won’t be the prime minister forever.

And yet if the BOJ did another round of stimulus—enough to push the yen down to 120, there is little doubt that stocks would rally again and GDP growth would pick up (at least nominal, and probably real as well.)  The problems are political, not technical.

Here’s an analogy.  The 1924 British expedition to Everest failed to achieve the summit, but did get a couple men above 28,000 feet—a great achievement in those days.  (Unfortunately several died.) So was it a failure or a success?  A bit of both.  Successes were achieved, but it failed to achieve the announced goal.

Of course mountain climbing is not a perfect analogy, as in 1924 people would have laughed if anyone argued that debasing a currency was “difficult” (Germany’s price level rose over a billion fold between 1920 and 1923.)  Again, the difficulties are political, not technical.

Of course asset markets are often wrong, and they might well be wrong about Japan.  It’s also possible that the bond yields are not a forecast of Japanese inflation being much lower than in the US.  (I was not able to find long term forward rates for the yen, and don’t even know if interest parity holds in this case.)

MMs believe that market forecasts are the best we have.  Thus I immediately saw that the policy “worked” in a limited sense, because announcements repeatedly affected asset prices, but also immediately saw the long term doubts about the BOJ’s willingness to carry through with its promises.

A near perfect analogy is the dollar depreciation program of 1933.  FDR abandoned it before hitting his announced price level target (returning prices to pre-depression levels) under intense political pressure.  But it did achieve some important limited objectives.  The stock market rally was comparable to the recent Japanese rally.

So my overall views on Japan are mixed.  I view the depreciation of the yen and the huge stock market rally as signals that the Abe government overcame formidable political odds.  Good for them.  I view the low bond yields as a sign that the markets now expect the BOJ to rest on its laurels, and not try to push the price level even higher.  That’s not so good.  The labor market is no longer the biggest problem in Japan; it’s the debt situation.  As long as nominal interest rates are near-zero the BOJ is needlessly worsening Japan’s long term fiscal situation.

Don’t pay any attention to GDP, which soared in Q1 and will plunge in Q2.  The forex rate and stock prices are the best short term indicator of how the BOJ is doing.  If the yen moves into the 110 to 120 range, that would suggest my political forecast was too pessimistic.  If it moves below 95, I was too optimistic.

PS.  Matt Yglesias points out the absurdity of Obama touting the strong jobs market.  But Yglesias’s post is marred by an unwillingness to mock Obama for saying this while also arguing for bringing back the emergency unemployment insurance program–intended for lousy job markets.