12 Responses to “Bloomberg in Boston”
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A slightly off-center perspective on monetary problems.
Bloomberg has a new radio station in Boston (1200AM)
Here’s an interview I did this morning (May 8) with Tom Keene and Michael McKee.
And from last week an interview with my colleague Aaron Jackson, and also Marvin Goodfriend of Carnegie Mellon.
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12 Responses to “Bloomberg in Boston”
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8. May 2013 at 20:35
The topic of the Bloomberg interview is consistent with the ‘results’ from post war cycles:
http://thefaintofheart.wordpress.com/2013/05/09/krugmans-bias-part-ii/
9. May 2013 at 00:11
Your Bloomberg interview raises an interesting question. Do you think Keynes himself would have supported your ideas today, instead of fiscal stimulus, if he had had a chance to observe for himself the Great Moderation under fiat money? Keynes himself knew perfectly well that debasing one’s currency was sufficient to get “aggregate demand” wherever ir needed to be, right? Or did he?
Perhaps a comment that your justification for emphasizing “strategy” over “tactics” essentially comes from – every macro model supported by all sides in the contemporary debate, might have helped? Expectations rule.
I was slightly aghast that you never said the words “level targeting”, though.
And don’t worry mate, I have a crappy cellphone too. For subscribing to things an iPad is best, anyway.
What were they talking about with Bentley being for “busy people”, by the way?
9. May 2013 at 04:05
Marcus, Very good post.
Saturos, I think Keynes would have agreed with Krugman.
Those are good points, but I have very limited time to talk.
I’m busy, but I don’t know about other Bentley people. Perhaps that’s referring to those who already have a career and opt for an MBA.
9. May 2013 at 06:52
Until I found this blog I thought Bentley was a luxury British auto.
9. May 2013 at 08:05
Meanwhile the Macro Super Heroes won’t just be standing there, they’ll be doing something (even if they don’t know the consequences) says Olivier Blanchard;
http://www.voxeu.org/article/rethinking-macroeconomic-policy
And, oh yeah there’s that Bentley guy and his pals to think about;
‘By implication, there is no agreement on how or even whether to integrate financial stability and macro stability in the mandate of central banks. Does it require a tweak to inflation targeting, or much more radical rethinking? The intellectually pleasant position is to argue that macroprudential tools will take care of financial stability, so monetary policy can still focus on its usual business – inflation targeting. I read, perhaps unfairly, Michael Woodford’s (IMF 2013) discussion at this conference to suggest that the crisis should lead us to shift from inflation targeting to nominal income targeting, without a major emphasis on financial stability. I am sceptical that this is the right answer. I think we have to be realistic about the role that macroprudential tools can play, and that monetary policy cannot ignore financial stability.’
Cover all the bases, Ollie.
9. May 2013 at 10:06
You mention the dichotomy between Krugmanite fiscal stimulus and the fiscal conservatism of Cochrane, with your theory being the monetary stimulus third option; what I think this leaves out of consideration is the view that what the economy really needs in the longer run is normalized interest rates, and stimulus of neither variety bring us closer to that. It seems to me that skepticism toward your views is centered on this issue: when monetary stimulus has to be so aggressive that ZIRP and QE on its current scale are not enough to revive growth, how does the situation ever revert to normal interest rates? Its like advising the pilot of a plane diving towards a body of water to lower the pitch of his plane further, steer it into the water so he can bend the trajectory back up and shoot out of the water again. More likely an economy sent below the long term real interest rate zero mark would stay there, just like the plane in the analogy.
Japan’s interest rates have gone further down in response to Abe’s stimulus talk. Could I wish for a better case in point?
9. May 2013 at 18:34
Scott, what did you mean by
“They [the Fed by paying IOER] are paying banks not to move the money out into the economy?”
Bank excess reserves can’t be “lent out” to non-bank businesses and individuals because they don’t have access to Fed deposit accounts. If banks make more loans, then only a small percentage of their excess reserves (less than 10% considering that reserve requirements only apply to demand deposits) will be converted to required reserves. Is that what you were referring to?
The only other places reserves can go are back to the Fed or withdrawn as cash by bank customers from their deposits. Are you saying that if the Fed stopped paying IOER that there would be a significant increase in cash withdrawals from banks? Is that the mechanism you see there?
10. May 2013 at 05:38
Rademaker, You said;
“You mention the dichotomy between Krugmanite fiscal stimulus and the fiscal conservatism of Cochrane, with your theory being the monetary stimulus third option; what I think this leaves out of consideration is the view that what the economy really needs in the longer run is normalized interest rates, and stimulus of neither variety bring us closer to that.”
Nothing has been “left out” This is Cochrane’s view.
And you talk as if we have easy money, and hence would need even easier money to achieve my goals. But as Milton Friedman pointed out ultra-low rates mean money has been tight. We don’t need more of the same, we need the opposite type of monetary policy.
If Japan had 5% expected NGDP growth their interest rates would be higher.
Tom, Yes, negative IOR would boost cash holdings as interest rates on bank deposits went negative.
Certainly NGDPLT would be a much better policy than negative IOR.
10. May 2013 at 05:39
Patrick, I also hate that wishy-washy approach.
10. May 2013 at 07:04
@ssumner, you write
“Tom, Yes, negative IOR would boost cash holdings as interest rates on bank deposits went negative.
Certainly NGDPLT would be a much better policy than negative IOR.”
I can see why you might think a different policy would be superior… I’m just trying to imagine my own response to negative rates on bank deposits…. large enough to abandon the convenience… it would have to be pretty bad because I haven’t physically paid a bill in more than 10 years… all automated through my account… Hmmmm, well if there were truly no other possibility than cash, I would stimulate the economy … by purchasing a good safe! Maybe there’d be new businesses spring up to actually store paper money! Of course they wouldn’t be banks, but something to simulate the convenience of banks for people! Ha! …. seems like taking a GIANT step backwards though!
10. May 2013 at 07:48
Tom, the immediate effect of negative IOR would be to create a currency shortage since the Fed would not be able to print money fast enough to meet demand (unless it drained a lot of the reserves). This would temporarily push down interest rates, but the effect on expectations would be weak since the negative interest rate would have a definite time limit, unlike a normal interest rate cut.
10. May 2013 at 16:16
Tom, The point is that this wouldn’t actually happen unless the central bank had a highly deflationary policy. As a practical matter negative IOR would quickly raise NGDP growth, forcing the Fed to raise interest rates to restrain inflation. Unless it was done in conjunction with a deflationary policy, as in the early 1930s, or Japan.