Archive for January 2019

 
 

What should we expect from Fed officials?

I occasionally see comments from people who have an unrealistic set of expectations for Fed officials.

An institution like the Fed will tend to reflect the consensus view of economists. Back in late 2008, I was among perhaps a few dozen people in the entire world who blamed the Great Recession on a tight money policy of the Fed. Even today, that view is only slightly more popular, mostly due to the effort of market monetarist bloggers. It’s entirely unrealistic to expect Fed officials to reflect the views of market monetarists—that’s now how our system works. Nor will they reflect the views of other obscure groups, like MMTers or fans of the fiscal theory of the price level. That’s why I favor NGDP level targeting, it’s a regime that will lead to pretty good results under almost any competent leadership.

I’m not saying the people appointed to the Fed don’t matter at all. Bernanke did better than Volcker or Greenspan would have done (based on their public comments during the Great Recession), and better than the average economist would have done. Mario Draghi did better than Trichet. But for the most part, Fed policy merely reflects the consensus view of economists and financial market pundits. Don’t expect anything more than that.

David Beckworth recently interviewed Neil Irwin, who pointed out that Bernanke was under a lot of pressure to adopt a more contractionary policy.  He also noted that while Trump has criticized the Fed for raising rates, he has also appointed Marvin Goodfriend to the Fed, a relatively hawkish economist.  Obama also appointed several people who were more hawkish than Bernanke.  If Trump wants dovish policies then he might try appointing doves.

Over at Econlog, I have a “Ted talk” on the future of money.

Is populism popular? Has it peaked?

I don’t know the answer to these questions, but Simon Kuper presents an interesting contrarian view:

Sometimes, our street is so packed with protesters that you can hardly open the front door. But last Saturday, I gingerly stepped outside to encounter only a few hundred marchers in gilets jaunes (yellow vests). Later, on TV, I watched the tear gas and shoving on the Champs-Elysées. But the odd aerial camera shot revealed that the Champs was mostly empty. Friends abroad asked if we were safe. We were: I spent half the weekend freezing on suburban touchlines watching my kids play football.

About 10,000 gilets jaunes marched in Paris and 125,000 across France, says the government. That same day, the green “march for the climate” drew about twice as many protesters in Paris

His observation on the US election is also interesting:

Populist movements may be the past, not the future. In November’s midterms, Trump’s Republicans lost the popular vote for the House of Representatives by 8.6 per cent — the biggest defeat for a majority party since records began in 1942. Meanwhile, as Brexit becomes increasingly hilarious, polls consistently show that most Britons now oppose it. Approval of the EU across the rest of Europe is the highest since 1983, says the European Commission’s polling wing.

Don’t assume that “the populists” are equivalent to “the people”.  Hillary got millions more votes than Trump.  The French gas tax increase was defeated, but worry about climate change is extremely widespread:

The new obsession with white-working-class politics misses much else. If you’re worried about poverty, look at very poor non-whites. And if you want to identify movements of the future, try the greens. For a so-called elitist movement, they seem pretty broad-based. About two-thirds of French people say they support the gilets jaunes, but 85 per cent worry about climate change, according to pollsters Ifop. In Germany, the much fussed-over far-right Alternative für Deutschland party now polls at 14 per cent; the Greens are six points higher. German anti-immigrant rallies (like Tommy Robinson’s British versions) are typically dwarfed by protests against them.

Scott Alexander has a post showing that Trump’s views on trade and immigration are becoming less and less popular.  I made a similar observation about 20 months ago.

Speaking of Alexander, another of his posts provides an almost perfect example of how commenters misinterpret my views:

Imagine the US currently devotes 100% of its defense budget to countering Russia. Some analyst determines that although Russia deserves 90% of resources, the Pentagon should also use 10% to counter China. Since no one person can shift very much of the defense budget, this analyst might spend all her time arguing we need to counter China more, trying to convince everyone that China is really very dangerous; if she succeeds, maybe the budget will shift to 99-to-1 and she’ll have done the best she can. But if she really spends all her time talking about China, this might look to other people like she’s an extremist – that crazy single-issue China person – “Why are you spending all your time talking about China? Don’t you realize Russia is important too?” Still, she’s taking the right strategy, and it’s hard to figure out what she could do better.

Because I’m trying to talk the US out of starting a foolish cold war with China, I’m seen as an apologist for Xi Jinping’s authoritarian policies.  In fact, I view almost all countries as being too authoritarian (think of the 400,000 Americans in jail for drug violations), and China as being far too authoritarian, much worse than the US.