Back in the old days, Fed officials like Jeremy Stein suggested that there was a trade-off between growth and stability. While low interest rates promote growth, it might come at the cost of financial stability.

Market monetarists warned against reasoning from a price change. Low rates often reflect weak NGDP expectations, and in the long run the best way to avoid financial crises is to make sure that NGDP keeps growing at an adequate rate.

Now the Fed seems to be coming around to this view:

People sometimes tell me that Powell is better than Yellen. Here’s how I’d put it. When Yellen was chair, Powell was no better on monetary policy, maybe a tiny bit worse. But Powell has benefited by observing 4 years of market monetarist critiques of Yellen’s policies. He saw how we warned that Phillips Curve models were not reliable, and that market indicators suggested that inflation was likely to undershoot the Fed’s target. When it did, Powell was a quick learner. In 2019, the Fed didn’t make the mistake previous Fed chairs would have made, they cut rates sharply on market forecasts of a slowdown, even though Phillips curve models said 3.5% unemployment should drive inflation higher.

He learned from market monetarists that it’s not enough to target inflation at 2%, you need to catch up to the previous trend line when there’s a big undershoot, and AIT was adopted in 2020. Going forward, this should allow the Fed to avoid the mistakes of the 2010s, when there was no catch-up. Time will tell.

He learned from market monetarists that financial crises are caused by falling NGDP, and that one cannot assume that money is too easy just because interest rates are low.

So if it ends up being true that Powell’s term has been more successful than Yellen’s (and it’s too early to say) it won’t be because Powell is more talented, it will be because he came later. He had more time to benefit from market monetarist insights.

Or at least that’s what I’d like to believe. 🙂

PS. The same is true of Australia. Mercatus just published a new working paper by Stephen Kirchner with the following abstract:

It’s now completely obvious that the RBA blew it in the years leading up to the Covid recession. In recent years, Stephen Kirchner, David Beckworth and I all pushed back against their policy of allowing inflation to fall below the target range because of fears that ultra low rates could lead to financial excesses. In the long run, contractionary monetary policies push interest rates even lower than what you’d get with a more expansionary policy, with no gain in financial stability.

Consider the following two women:

Cindy McCain, wife of John McCain. She voted for Biden out of disgust for Trump. (Note that in 2016, 4 of the 5 living GOP presidential candidates also refused to vote for Trump.)

Rep. Marjorie Taylor Greene of Georgia. She has a history of extreme views:

Greene (R-Ga.) filled her feed with extremist content for years before she was elected in November, becoming the first open supporter of QAnon, an extremist ideology based on false claims, to win a seat in Congress. In a January 2019 post, Greene “liked” a comment advocating “a bullet to the head” of House Speaker Nancy Pelosi (D-Calif.), according to a screenshot published by CNN’s KFile. . . .

In now-deleted posts, Greene “liked” one comment encouraging her to “beat Pelosi’s a–” and another that advocated Pelosi’s ouster “through removal or death, doesn’t matter, as long as she goes.”

In others, she criticized FBI agents not being sufficiently loyal to Trump. She “liked” one comment that proposed capital punishment for those law enforcement officials, reading: “Trump already said there were some great ones working with FBI but some have fallen and quite frankly need to be hung for TREASON!”

Which of these two women was recently expelled from the Republican Party?

Today, the QAnon mindset is increasingly prevalent within the GOP. For instance, the Republican Party of Oregon has publicly endorsed the loony theory that the mob that stormed the Capitol was comprised of left wingers disguised as Trumpistas.

The Northwest office of the Anti-Defamation League issued a statement Tuesday, calling the comparison “offensive” and “absurd.”

“The violence at the US Capitol on January 6th was a large-scale physical assault on our nation’s democratic values and institutions perpetrated by right-wing conspiracy theorists, extremists, and supporters of former President Trump. That is a fact,” the ADL wrote.

The civil rights organization also said Oregon Republicans were misusing history when referencing the Reichstag fire to “advance a baseless conspiracy theory.”

“Such a comparison cheapens one of the most significant moments leading up to Holocaust and is extremely inappropriate,” the organization wrote.

As more people leave the GOP in disgust, the lunatic fringe will gain ever greater control over the party. To answer the question in the post title, it was Cindy McCain that was expelled by the Arizona GOP:

Referencing the more than 9,200 Republicans who left the [Arizona] party since January 6, Hamer fears the political outcome for Republicans. “This party is being run by a fringe, essentially calling for a purge,” Hamer said. “This is a party that lost the White House, two Senate races, and shows no interest in bringing people together and certainly no interest in expanding the base of Republicans. It’s turned into the circular firing squad.”

I just saw “The White Tiger” on Netflix. As a film, it’s quality middlebrow entertainment, roughly comparable to Slumdog Millionaire. On the other hand, it’s a big step down from Parasite (which has a similar plot). But I’m not interesting in the artistic quality of the film, I wonder about its politics.

I noticed that one character was a female Dalit leader of a northern Indian state, who was enriching herself through corruption—presumably Mayawati.

And reading a recent post by Razib Khan, I noticed this comment:

Narendra Modi, India’s current Prime Minister, is no Nehru. While Nehru was a Kashmiri Brahmin Pandit, Modi comes from a so-called “backward caste.” Nehru earned a degree at Trinity Hall, Cambridge. He then studied law at the “Inner Temple” in London. Modi received a third-class degree from the School of Open Learning at the University of Delhi. Nehru’s father was a wealthy lawyer who served twice as President of the Indian National Congress. Modi helped his parents run a tea stall at a railroad station.

This sounds a lot like the class (caste) conflict at the heart of the film. Indeed the lower caste protagonist (who carries the film) had to drop out of school in order to work in a tea shop. He becomes rather nationalistic and anti–Muslim. I won’t say more, as I don’t want to give away the plot.

A question for my Indian readers. How much of this film is a commentary on events in India that a viewer like me might overlook? Is it a stretch to think the main character somehow refers to Modi?

BTW, Razib Khan’s two part essay on Indian history is brilliant. While it’s long for a blog post, you’ll learn more about India than you would in many full length books. The final portion is a thoughtful meditation on the role that cancel culture has always played in science, right up to the present day. The following quote occurs toward the end, referring to the pressures that scientists face not to contradict cherished beliefs:

Such capricious conformity and mercurial manias are in the charter of the human condition; we’re mortal, we’re curious, we’re creative, we’re dogged, we’re social, we’re hubristic, we’re fragile, we’re clannish and we’re thin-skinned. But we’re all we have. Group identities and loyalties fluctuate and morph over the long-term. And present-day collective passions have a short-term sell-by date. The truth trundles inexorably along, regardless of whether we mortals mark it. . . .

The passions of the present will fade in their own time. Often, overnight. Scientists ignore the zeitgeist at their own peril, but posterity will reap the greatest rewards from those thinkers who wore its shackles most lightly. Their ultimate master is the truth, not the judgment of the public, or even their peers. Coming decades will likely deliver many more wondrous discoveries, each guaranteed to shock or offend some group or other’s sensibilities. But if the past teaches us anything, it is that the future is not built by those most exquisitely attuned to the whims of their age. The future is built by those who checked their data, consulted their own conscience, and insisted eppur si muove.

Right after the election, I speculated on the prospect of a bad interregnum. I’d say a coup attempt by a sitting president and a horrific increase in Covid deaths counts as bad:

But now we can see the light at the end of the tunnel. The pace of vaccinations is speeding up and a big chuck of old people will likely be vaccinated by the end of February (including me?!?!?) So the IFR should fall sharply during March. By summer the economy may be booming. We don’t need fiscal stimulus; we need a faster vaccine rollout.

Another good sign is that the daily case total has finally peaked and is trending downward. That might reverse, however, if the UK variant becomes very widespread. Thus vaccination is a sort of race against time.

Nonetheless, I think we finally have a pretty good grasp of what the final US death toll will look like, something in the ballpark of 1/2 million. And the US doesn’t look good when compared to other parts of the world:

There’s certainly more underreporting in Latin America than in the US, but even accounting for that we are doing far worse than the world average. Don’t forget that there’s also underreporting in the US.

The vast majority of humans live on the three “A continents”, and thus for most people Covid was not a major health problem. But even there the economic effects were substantial (much worse in India than China, for reasons I that am not able to fully explain.)

There could be more surprises. I’ve consistently underestimated how bad it would get, but I think we finally have a picture of how it’s playing out. One thing is clear, the commenters who told me “don’t try to stop it, everyone will eventually get it” were almost laughably off base. I don’t expect them to admit they were wrong.

New Jersey lost at least 0.236% of its population to Covid (and rising), and would have lost many more without social distancing. So people who suggested the IFR was 0.25% were way off. Without social distancing, America would have lost more than a million lives, perhaps much more. And the deaths would have almost all bunched up in March, April and May (before improved treatments were available), creating a complete disaster in our hospital system.

Of course, there was zero chance of that happening. Even if the government hadn’t encouraged social distancing, the public would have done it anyway.

Rule #1 of social science: Most people don’t want to die.

This is a great idea (he’s discussing government debt):

There is some risk that the government could change the way it computes NGDP. But there is also risk that the government changes the way it calculates the CPI, and that doesn’t stop people from buying TIPS.