Kudlow on market monetarism
Don’t anyone tell Noah Smith, but yesterday (July 20) I was on Larry Kudlow’s radio show and during the intro (around the 45:30 mark) he indicated that market monetarism had influenced his thinking on monetary policy.
PS. I was invited to give a talk at the Mont Pelerin Society next year. My panel is: “The Coming Inflation Threat.” The 500 classical liberals in the audience will be surprised to learn that the threat is that inflation will be too low over the next 5 years.
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21. July 2013 at 11:40
PLEASE let there be video of that MPS summit. Please.
21. July 2013 at 12:38
Great interview Scott. But given that the TIPS spread doesn’t appear to be widening, I’m assuming that this extra growth you’re suspecting (from the interest rate rise) is going to come from a forecasted leap in wage adjustment?
21. July 2013 at 12:39
Great interview Scott. But given that the TIPS spread doesn’t appear to be widening, I’m assuming that the extra growth you’re suspecting (from the interest rate rise) is going to come from a forecasted leap in wage adjustment?
21. July 2013 at 12:40
Darn it, this is what happens when you trust IE…
21. July 2013 at 13:00
Anyone want to take a stab at why the Fed bailed out the banks post-2008, with a cumulative total of $9 trillion in low interest rate loans, and extensive OMOs, whereas the Fed just let Detroit declare bankruptcy?
I’ll give you a hint. It has nothing to do with the Fed’s charter, the law, or anything “regulation” related.
21. July 2013 at 15:42
Geoff,
Detroit is filled with poor minorities.
21. July 2013 at 16:07
Thanks Saturos. Actually I don’t see signs of faster growth, but the stock market seems to. Or perhaps stock prices are reacting to something else. I’m not really sure what to expect.
Again, we really need a NGDP futures market.
Geoff, Umm, maybe because the Fed knew the banks would repay the loans and they knew that Detroit would not repay the loans.
21. July 2013 at 16:34
“Geoff, Umm, maybe because the Fed knew the banks would repay the loans and they knew that Detroit would not repay the loans.”
I doubt it. An institution that can create any quantity of money it wants would likely not be worried about loan defaults.
Go deeper.
21. July 2013 at 16:39
J:
“Detroit is filled with poor minorities.”
Your theory is that the Fed is concerned primarily about the well-being of wealthy, white people, while poor people, particularly poor minorities, be damned?
With the exception of the race thing, can’t say I disagree with that.
21. July 2013 at 21:30
The 500 classical liberals in the audience will be surprised to learn that the threat is that inflation will be too low over the next 5 years.–Sumner.
Love that line.
Another one:
“When the Fed started QE, the fear was that it would not be able to keep inflation in single digits—and they were right, sometimes inflation sunk below single-digits.”
22. July 2013 at 02:50
[…] also pleased to read that Scott will be attending next year’s Mont Pelerin Society meeting, where he will be on a […]
22. July 2013 at 04:03
Ben, That’s a good one.
22. July 2013 at 06:28
Krugman’s remora (Noah) BELIEVES MM is correct.
I suspect he’s a bigger believer than Kudlow, which says a lot.
But Noah, doesn’t care what is best for overall economy, he’s concerned about the strength of govt. relative to private sector.
As an example, imagine:
A US economy that grows at 4.5% for 20 years (2.5% RGDP), where the poor get 3% more consumption a year WHILE public sector shreds 50% of labor force, from 22M to 11M.
No one could argue that’s not a awesome next twenty years. Even retired public employees would LIKE IT.
Noah would be against it. I GUARANTEE IT. Because it will bankrupt the Democratic party. And that will inform Noah’s policy choices and he’ll never just say it outright.
I view all econ bloggers as self-interested agents, which is why its so hysterical to see Noah glom onto Waldman’s note that the fed is packed with Macroeconomists, and Noah uses that to question Macro.
22. July 2013 at 06:31
One suggestion — if I may: don’t say “inflation will be too low”. Say inflation rates will be too low as compared to the level of growth built into all contracts, etc. The economy can handle slow reductions in inflation growth expectations — occurring over many years. But it can’t handle “shocks” to inflation growth expectations.
I think classical liberals will find it much easier to accept that kind of argument than “inflation is too low” by itself.
And given your view that inflation as a concept is much less meaningful and practically useful than NGDP, you might want to bring that up too.
22. July 2013 at 07:25
Geoff,
“anyone want to take a stab at why the Fed bailed out the banks post-2008, with a cumulative total of $9 trillion in low interest rate loans, and extensive OMOs, whereas the Fed just let Detroit declare bankruptcy?”
Because Detroit isn’t systemically important.
Because the creditors of Detroit are largely “retail” whereas the creditors of Citigroup were largely “institutional.”
Because “the Federal Reserve’s duties fall into four general areas:
conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system”
http://www.federalreserve.gov/aboutthefed/mission.htm
Because the Federal Reserve is owned by the banks and exists to serve the banks.
My question back to you then — Why was General Motors deserving of a bailout where Detroit is not?
22. July 2013 at 07:40
@Doug M,
Neither GM nor Detroit “deserve” a bailout. Both are grossly mismanaged organizations/institutions who repeatedly did not control their costs relative to their revenues. Politically, the bailout/”special bankruptcy” of GM was essentially a wealth transfer to private sector unions relative to the likely outcome of a standard bankruptcy proceeding. I wonder what the Detroit bailout would be?
23. July 2013 at 07:46
Thanks Jeremy, I will emphasize both points.