Once again, Sweden leads the way

Sweden has long been a leader in the field of monetary policy.  The homeland of Wicksell and Cassel pioneered the first price level targeting regime, in 1931.  In 2008 they depreciated the krona, which is why Sweden did better than the rest of the Eurozone.  Unfortunately they are now pioneers in a rather unfortunate direction.  But first a bit of context.

A few months ago I pointed out that the view of policymakers tend to be shaped by the key events of their youth.  Thus the 55 year-old policymakers of the 1960s had their views shaped by the Depression, and erred on the side of too much inflation.  Today’s policymakers were shaped by the Great Inflation, and you can see the results all around us.  I speculated that the next generation would be obsessed with stamping out bubbles, because the consensus (wrongly) interpreted the Great Recession as being caused by bursting bubbles, whereas in fact the “Ben Bernanke criterion” for judging the stance of monetary policy makes it very clear that the Great Recession was caused by tight money.

I was sad to hear that Lars Svensson decided to retire from the Riksbank.  He was a lonely voice of reason in a policy environment increasingly dominated by irrationality:

Svensson, who taught together with Bernanke at Princeton University more than a decade ago, has spent the years since the onset of the global financial crisis arguing that Sweden’s failure to spur inflation has killed jobs. Annual headline inflation accelerated to zero in March from minus 0.2 percent a month earlier and has been below target since January 2012. Sweden’s 8.5 percent jobless rate is the highest in Scandinavia.

The departure of the most outspoken member of the Riksbank’s six-member board has added sparks to a global debate on the role of monetary policy. The International Monetary Fund this month urged central banks to do more to stimulate growth, even as record liquidity risks fueling assets bubbles. Ingves, who is also the chairman of the Basel Committee on Banking Supervision, has cautioned against excessive easing, arguing monetary policy can’t ignore household debt growth.

Svensson has again and again pointed out that policy has been too tight, even by the forecasts of the central bank itself.  They have set their target interest rates at a level too high to hit their employment and inflation mandate, under any weighting scheme.  His opponents talk vaguely about the dangers of potential bubbles, even though that’s not the Riksbank’s mandate, and there are no good macro models suggesting that debt is addressed more effectively through monetary policy than regulation.

I’ve frequently done blog posts providing long detailed discussions of the minutes of the Riksbank.  I get the feeling that most readers were uninterested.  But in many ways the Riksbank debate was our clearest most transparent window into modern central banking.  The views of both sides were very clearly explained.  There was no zero bound problem.  Here’s what we have learned:

1.  The “austerian debate” is a phony debate.  There are lots of central banks that are not at the zero bound (Sweden, Canada, Australia, the ECB, etc), and yet even in these cases money is currently too tight.  Recall that even Paul Krugman admits that fiscal stimulus is not needed when central banks are not at the zero bound.  The problem in the world today is not fiscal austerity; it’s tight money.  Today many Fed officials want to scale back on QE.

2.  Despite the fact that our mainstream textbooks tell us that low rates don’t mean easy money, most central bankers cannot shake the suspicion that low rates do mean easy money, and that the current relatively low rates are a danger to the economy.  This irrational bias is driving policy failure in much of the world.  Even central banks at the zero bound (like the Fed) are inhibited in their push for unconventional stimulus by this cognitive illusion.

3.  Recall that despite all the problems noted by Svensson, the Riksbank is still one of the world’s more progressive central banks.  Things are even worse in much of the rest of Europe.

Most of our central banks are ignoring the flexible inflation mandates that derive from modern new Keynesian models taught at elite universities, and instead have an Ahab-like obsession with killing the Great White Bubble. When I think of the tragic mistakes being made by these central bankers I’m reminded of a comment made by John Cochrane a few years back:

Some economists tell me, “Yes, all our models, data, and analysis and experience for the last 40 years say fiscal stimulus doesn’t work, but don’t you really believe it anyway?” This is an astonishing attitude. How can a scientist “believe” something different than what he or she spends a career writing and teaching? At a minimum policy-makers shouldn’t put much weight on such “beliefs,” since they explicitly don’t represent expert scientific inquiry.

I’d say the same about using monetary policy to address financial/debt/bubble issues.  Our models tell us that this is not wise.  The Fed tried to pop a bubble in 1929 and it didn’t end well.  We need to focus on the dual mandate, prices and output.  Yet the “beliefs” of central bankers are so powerful that they don’t seem to be able to block out these cognitive biases, as they plunge the developed world ever deeper into slow NGDP growth, high unemployment, and ballooning public debts.

PS.  Stefan Elfwing sent me some very interesting information, (which includes some of Svensson’s devastating criticisms of Riksbank policies), and allowed me to reprint his email, for those interested in Sweden and/or monetary history:

Here is summary of the event during the last half year:
* They have kept the repo rate at 1% (despite worse economic figures before each meeting)

* Lars’ critique in the last published minutes was extra severe  http://www.riksbank.se/Documents/Protokoll/Penningpolitiskt/2013/pro_penningpolitiskt_130212_eng.pdf“Deputy Governor Lars E.O. Svensson began by stating that in order to assess which monetary policy should be conducted it is important to view monetary policy in a broader context. He claimed that what we have been witnessing for some time now is a clear and serious failure of monetary policy. His first point in support of this claim was that CPIF inflation was close to the target of 2 per cent in 2010 but that since then it has steadily trended downwards to arrive at or below 1 per cent in 2012. At the same time,unemployment is now high and rising, and far above a long-run sustainable rate. He wondered what happened in 2010 that can explain the fall in CPIF inflation. From and including the monetary policy meeting in June 2010, the majority on the Executive Board steadily raised the repo rate at every monetary policy meeting, from 0.25 in June 2010 to2 per cent in July 2011, an increase of 1.75 percentage points. Mr Svensson referred to an article he wrote for Brookings Papers on Economic Activity in the autumn of 20111 inwhich he showed that these repo-rate increases began despite the fact that the CPIF forecast in June 2012 was below the target and the unemployment forecast well above a reasonable long-run sustainable rate (Figures 1 and 2, from the Brookings article). Since December 2011, the majority on the Executive Board has, somewhat reluctantly, lowered the repo rate to 1 per cent in December 2012, a cut of 1 percentage point. On average, the repo rate has been approximately 1.5 percentage points higher than if it had remained at 0.25 per cent till now. In terms of the real policy rate, this has entailed a much tighter monetary policy than in the euro area, the United Kingdom and the United States despite the fact that inflation in Sweden has been lower than in these economies while unemployment is now approximately as high as in the United Kingdom and United States (Figure 3).”

* Svensson wrote, for the first time in Swedish (world?) history, a 6 page reservation to

the Riksbank’s Account of monetary policy for 2012 to parliament:The aftermath was a bit bizarre. When announcing the account, there was a link to Svensson’s reservation on the English version of the Riksbank’s homepage.

However, there was no link on Swedish version of the homepage. The reservation was instead

buried deep down in the report section. Here is a link to Lars’ reservation:http://www.riksbank.se/Documents/Rapporter/RPP/2013/probil_dir_B_130319_eng.pdf“I enter a reservation against the Account of monetary policy in 2012, because I consider the account to be incomplete and in several respects misleading and thus it does not offer an adequate basis for an assessment of the Riksbank’s monetary policy. Target attainment is currently poor, since inflation is way below the inflation target and unemployment is way above a reasonable long-run sustainable rate. An important issue is whether target attainment could have been better with a more expansionary monetary policy, but a thorough analysis of this issue is missing in the account. That monetary policy has not been more expansionary is, as far as can be judged, because it has to a great extent been conducted for the purpose of limiting household debt. However, extensive research and several inquiries show quite unequivocally that the policy rate has little effect on the household debt ratio. The fact that this is the case is not indicated in the account. A more expansionary monetary policy with an unchanged low policy rate since 2010 would according to a preliminary calculation have held CPIF inflation close to the target, led to much lower unemployment and led to an insignificantly higher debt ratio in the short term, while not affecting the debt ratio in the long term.”

Shorter in market monetarism terminology:
The NDGP growth in 2012 was 1.6% (RGDP: 0.8%), idiots!
Stefan Elfwing
PS I have taken an interest in Swedish monetary policy during the 30s. It is truly fascinating. There was a very intense and high-level debate when Sweden implemented PLT inspired by Knut Wicksell (he was not involved in the debate since he died 1926). The leading op-ed commentators for the three largest newspapers in Sweden were Bertil Ohlin, Eli Heckscher, and Gustav Cassel (He wrote about 1500 op-eds on economic issues during almost 50 years!)
Bertil Ohlin summarized the experiment in 1936
“The paper currency is nowadays regarded as an alternative to the gold currency not only temporarily in times of crisis but permanently. The pioneering work of educating financial opinion, which has been carried out primarily by Wicksell, Cassel and Keynes, is coming to fruition. A rejection of the antebellum gold standard does, however, not necessarily imply that a restoration of an international monetary system is hopeless. However, it seems probable that gold within such a system will play the role of servant rather than “tyrant”. [—] The experience of a rational monetary policy gained during five years of a paper currency system is a precious advantage. A future monetary system will surely combine several elements of the old gold standard and the paper standard of the crisis era.”
First Wicksell, then Cassel, and placed third, Keynes:-)
Here are character portraits of Wicksell, Cassel, Heckscher, Ohlin and Myrdal by Carlsson and Jonung:
The first four represent the whole liberal spectrum (Wicksell was a hard-core utilitarian).  It is a shame that it was Myrdal who won the war of ideas after W2. http://research.stlouisfed.org/fredgraph.png?g=hKa
We actually caught you in the beginning of 60s:-) Then, 35 years of stagnation due to the closest to real socialism that has been implemented in any western country (and incompetent monetary policy). Tax/ngdp was 25.2% in 1959 and 52.3% in 1991 when the big crisis hit Sweden.



25 Responses to “Once again, Sweden leads the way”

  1. Gravatar of Laurent Laurent
    23. April 2013 at 07:08

    Very interesting. It would seem, as Prof Sumner mentioned, that the same phenomenon is taking place in Canada. However, does Mark Carney have the same reservations as Lars Svensson? If not, is he really the man for the job in Britain?

  2. Gravatar of Floccina Floccina
    23. April 2013 at 07:25

    The thing that is annoying to me about this bubble talk is that few in Government were warning of bubble back in 2005-2007. So now they are all bubble warriors HA!

  3. Gravatar of Lorenzo from Oz Lorenzo from Oz
    23. April 2013 at 07:32

    If you have rising incomes (hence rising demand for assets, as incomes grow beyond expected levels) and technological change, you will get asset price surges. We know this because it is what happened in the C19th, when Atlantic economy incomes rose dramatically and the UK (and US) were afflicted by various forms of “railway mania”. We have it again now when Asian economy incomes are rising dramatically, and we get tech-bubbles, etc. With the extra addition of the Zoned Zone effect on restricted approved-for-building land supply.

    The C19th was a generally tight money era, with silver standards, gold standards, bimetallism and significant deflationary episodes. The asset price volatility was clearly not caused by “loose” money.

    Rising incomes–creating rising demand for assets–and technological uncertainty are bound to create asset price volatility. Apart from looking at prudential regulation and trying not to create Zoned Zones, there is not a lot policy makers can usefully do about it and I fail to see anything central bankers can usefully do about it.

  4. Gravatar of Andy Harless Andy Harless
    23. April 2013 at 07:41

    In 2008 they depreciated the krona, which is why Sweden did better than the rest of the Eurozone.

    You mean “the rest of the EU” (or maybe “all of the Eurozone”), I take it. Obviously Sweden isn’t part of the Eurozone, or they couldn’t have depreciated the krona.

  5. Gravatar of edeast edeast
    23. April 2013 at 07:50

    Canada is hiring, we should get him.

  6. Gravatar of ssumner ssumner
    23. April 2013 at 07:54

    Thanks Andy, I’ll correct that.

  7. Gravatar of ssumner ssumner
    23. April 2013 at 07:55

    And good points everyone.

  8. Gravatar of Ashok Rao Ashok Rao
    23. April 2013 at 08:09

    “The problem in the world today is not fiscal austerity; it’s tight money. Today many Fed officials want to scale back on QE.”

    This is because the Fed is ultimately a very conservative (literally, not politically) institution. As Tim Duy puts it,
    “If Kocherlakota is correct and monetary policy can only pursue the dual mandate in the context of financial – and, by extension – macroeconomic instability, then we really need to consider which part of the dual mandate needs to be loosened to reduce the reliance on financial instability. My fear is that if Fed policy makers were asked this question, they would unanimously answer that it is the full-employment portion of the mandate that should be jettisoned.”

  9. Gravatar of Geoff Geoff
    23. April 2013 at 08:23

    The problem isn’t that money is “too tight” according to some arbitrary non-market “rule”. A believes the non-market rule for NGDP is that it should grow at 5% while B believes it should grow at 0%, have zero rational grounds from which to prove one is right while the other is wrong.

    If NGDP growth is in fact 4%, then A would believe that money is “too tight” while B would believe that money is “too loose.” The only way to settle this dispute would be for one to have access to, or wield, greater physical coercion over the other. If A’s rule goes into force, then A “wins.” If B’s rule, then B “wins.”


    The actual problem, which seems to go over the heads of aggregate thinking minds such as MMs, is the distortions to individual economic calculation that all non-market money printing rules bring about. If a market in money in the US would have generated a -1% NGDP growth this year, due to trade deficits abroad or cash preference changes, then non-market activity that reverses this will distort investor’s ability to decide which projects to invest in, given the temporal and lateral ends preferences of consumers.

    Over the developed world, during the 1990s, and especially the 2000s, monetary inflation was extremely pronounced. Not by historical standards, but by the standard of what the market would have otherwise generated given actual preferences between money and goods. Re-accelerating inflation now would very likely lead to a further intensification of distortions to calculation. These distortions can either be revealed physically, in the sense that no amount of additional inflation can sustain the structure, which means attempting to sustain the structure would lead to runaway inflation; or, they can be revealed by the central banks containing inflation to save the currency, in the sense that monetary deflation reveals the unsustainable projects. The latter is usually the choice made by most central banks, and is why we have to listen to perpetual whining from misguided ideologues that the problem is “not enough money.”

    There is no rational grounds from which to argue that NGDP growth of some “ideal” past must be repeated ad infinitum. It does not follow that because A occurred in the past, it has to occur again in the future. This status quo fallacy encapsulates the entire MM framework. Take the garbage as a given, then use a different air freshener and pretend you’ve dealt with the garbage in a way that no other 3am infomercial salesmen has done before.

  10. Gravatar of Ashok Rao Ashok Rao
    23. April 2013 at 08:26

    “The problem isn’t that money is “too tight” according to some arbitrary non-market “rule”. A believes the non-market rule for NGDP is that it should grow at 5% while B believes it should grow at 0%, have zero rational grounds from which to prove one is right while the other is wrong.

    If NGDP growth is in fact 4%, then A would believe that money is “too tight” while B would believe that money is “too loose.” The only way to settle this dispute would be for one to have access to, or wield, greater physical coercion over the other. If A’s rule goes into force, then A “wins.” If B’s rule, then B “wins.”

    When a government (central bank) acts, there is by definition a sense of arbitrary activity because government itself is, well, arbitrary.

  11. Gravatar of marcus nunes marcus nunes
    23. April 2013 at 08:38

    One problem with Svensson´s ‘strategy’ was talking about ‘higher inflation’ needed. As you well kow, this is the biggest put-off to central bankers. If only he had adopted MM ‘terminology’…

  12. Gravatar of Integral Integral
    23. April 2013 at 09:14

    Svensson’s retiring from the Riksbank?

    Does that mean we can pick him up for employment in the FOMC?

  13. Gravatar of oh no oh no
    23. April 2013 at 09:27

    Depressing.. His opponents in Riksbanken didn’t even have any argument for why they thought Svensson and Karolina Ekholm was wrong. So they fired him.
    – Like, who is this annoying guy not agreeing with us and asking all these really hard questions? Let’s just fire him.

  14. Gravatar of Patrick R. Sullivan Patrick R. Sullivan
    23. April 2013 at 10:43

    ‘There are lots of central banks that are not at the zero bound (Sweden, Canada, Australia, the ECB, etc), and yet even in these cases money is currently too tight. Recall that even Paul Krugman admits that fiscal stimulus is not needed when central banks are not at the zero bound.’

    Yet, Krugman is currently in full jihad mode against ‘austerians’. Having posted something like a half dozen blog posts claiming they’ve ruined the world. He’s probably not done yet.

  15. Gravatar of John John
    23. April 2013 at 10:56

    I have question for anyone familiar with the Efficient Markets Hypothesis. I was listening to an interview with the theory’s creator, Eugene Fama. Fama said that markets are efficient for all investors, not just people trading at home who are too slow to take advantage of new info.

    How can markets incorporate new information without a single trade taking place? That idea seems like voodoo to me. I had always assumed that trading made markets efficient and that the people or computers able to act first as new information came out would be able to profit.

  16. Gravatar of Bernard King Bernard King
    23. April 2013 at 12:35

    Let’s say hypothetically, that the Fed adopts NGDP targeting tomorrow, and let’s further assume that to hit their target they need inflation to reach 5%.

    Does the Fed just accelerate the same balance sheet expansion approach it is using now, i.e. buying government and MBS bonds with printed money?

    Given the build-up of excess reserves in the face of the Fed’s QE, what would Federal Reserve Chairman Scott Sumner do differently to make sure that the new base money was being loaned out by the banks instead of hoarded as excess reserves?

  17. Gravatar of Michael Michael
    23. April 2013 at 16:18


    In the event that we experienced a period of 0% (or lower) growth in real GDP, we would be better served by 5% inflation than by 0% inflation. Fed chair Scott Sumner would announce an NGDP level target and that he would do whatever it took to maintain the target.

    This could mean more QE than has already been done… but it could also mean less QE. QE would be more effective if the goals of the policy were were mroe explicit and udnerstandable – as they would be under an NGDP level target.

  18. Gravatar of ssumner ssumner
    23. April 2013 at 16:29

    Integral. Great idea, which means there’s zero chance it will happen. He should replace Bernanke next year.

    Oh no, I don’t think he was fired, I think he quit.

    Bernard, See Michael’s comment. Also, they should cut the IOR.

  19. Gravatar of flow5 flow5
    23. April 2013 at 17:41

    “makes it very clear that the Great Recession was caused by tight money”

    “The securitization markets frequently tapped by the shadow banking system started to close down in the spring of 2007, with the first failure of auction-rate offerings to attract bids” – Wikipedia

    During 2007, the FRB-NY’s “trading desk” didn’t conduct any permanent OMOs after May 3rd. And only $8.8 billion of Treasury securities were purchased/monetized early that year.

    “BNP Paribas terminated withdrawals from three hedge funds citing “a complete evaporation of liquidity” on 8/7/2007.

    CNN reported “Central bank provides liquidity in three separate operations Friday in an effort to stabilize money supplies”

    The 3 day, $ 38 billion dollar, temporary repo injections were untimely & insufficient (inadequate to forestall the approaching economic collapse). They did not reverse the 2 year trend (didn’t alter the negative roc’s in required reserves). Returning Treasuries after 1-15 days to the primary dealers doesn’t constitute an easy money policy. I.e., there should have been permanent injections – not temporary ones.

  20. Gravatar of flow5 flow5
    23. April 2013 at 17:49

    Liquidity is supplied by the FRB-NY’s “trading desk” buying securities in the secondary market. Bankrupt you Bernanke actually drained CB liquidity (first for 29 consecutive months of office). Bankrupt you Bernanke allowed it’s SOMA securities portfolio to roll off without their replacement & reinvestment.

    SEE: 24 month rate-of-change in RRs (required reserves) or the proxy for inflation for the last 100 years:

    2006 jan ,,,,,,, 45496 ,,,,,,, 0.04
    ,,,,, feb ,,,,,,, 43084 ,,,,,,, 0.01
    ,,,,, mar ,,,,,,, 41242 ,,,,,,, -0.02
    ,,,,, apr ,,,,,,, 42920 ,,,,,,, -0.03
    ,,,,, may ,,,,,,, 43648 ,,,,,,, -0.02
    ,,,,, jun ,,,,,,, 43278 ,,,,,,, -0.01
    ,,,,, jul ,,,,,,, 43328 ,,,,,,, -0.03
    ,,,,, aug ,,,,,,, 41162 ,,,,,,, -0.06
    ,,,,, sep ,,,,,,, 40865 ,,,,,,, -0.08
    ,,,,, oct ,,,,,,, 40088 ,,,,,,, -0.08
    ,,,,, nov ,,,,,,, 40543 ,,,,,,, -0.06
    ,,,,, dec ,,,,,,, 41461 ,,,,,,, -0.07
    2007 jan ,,,,,,, 43113 ,,,,,,, -0.11
    ,,,,, feb ,,,,,,, 41214 ,,,,,,, -0.09
    ,,,,, mar ,,,,,,, 39159 ,,,,,,, -0.11
    ,,,,, apr ,,,,,,, 41072 ,,,,,,, -0.09
    ,,,,, may ,,,,,,, 42699 ,,,,,,, -0.05
    ,,,,, jun ,,,,,,, 42034 ,,,,,,, -0.05
    ,,,,, jul ,,,,,,, 41164 ,,,,,,, -0.08
    ,,,,, aug ,,,,,,, 39906 ,,,,,,, -0.07
    ,,,,, sep ,,,,,,, 40460 ,,,,,,, -0.07
    ,,,,, oct ,,,,,,, 40161 ,,,,,,, -0.04
    ,,,,, nov ,,,,,,, 40331 ,,,,,,, -0.04
    ,,,,, dec ,,,,,,, 41048 ,,,,,,, -0.04
    2008 jan ,,,,,,, 42398 ,,,,,,, -0.07
    ,,,,, feb ,,,,,,, 41070 ,,,,,,, -0.05
    ,,,,, mar ,,,,,,, 39731 ,,,,,,, -0.04
    ,,,,, apr ,,,,,,, 41642 ,,,,,,, -0.03
    ,,,,, may ,,,,,,, 43062 ,,,,,,, -0.01
    ,,,,, jun ,,,,,,, 41616 ,,,,,,, -0.04
    ,,,,, jul ,,,,,,, 42083 ,,,,,,, -0.03
    ,,,,, aug ,,,,,,, 42055 ,,,,,,, 0.02
    ,,,,, sep ,,,,,,, 42456 ,,,,,,, 0.04
    ,,,,, oct ,,,,,,, 46930 ,,,,,,, 0.17
    ,,,,, nov ,,,,,,, 50363 ,,,,,,, 0.24
    ,,,,, dec ,,,,,,, 53723 ,,,,,,, 0.3

    Then as the trajectory for RRs (in Dec 2007) indicated that a recession would begin in the 4th qtr of 2008, Bankrupt you Bernanke drained liquidity – just as real-gDp collapsed.

  21. Gravatar of flow5 flow5
    23. April 2013 at 17:53

    See: bit.ly/yUdRIZ

    Quantitative Easing and Money Growth:
    Potential for Higher Inflation?
    Daniel L. Thornton

    93%-96% of all bank debits clear thru these transaction based accounts.

    Prima facie evidence that the Reserve banks & the commercial banks have created credit, as with all bank credit creation, is an expansion in the money stock. Prima facie evidence that the money stock (transaction based accounts) has expanded, is given by the rate-of-change in legal (required) reserves (the base).

    So long as the 24 month roc in RRs (proxy for inflation) is no more than 2-3 percentage points above the 10 month roc in RRs (proxy for real-output), inflation is otherwise quiescent (i.e., for the last 100 years anyway).

  22. Gravatar of ChargerCarl ChargerCarl
    23. April 2013 at 20:37

    We should pay Svensson a billion dollars a year to come out of retirement and run the FED

  23. Gravatar of J.V. Dubois J.V. Dubois
    24. April 2013 at 02:02

    “Shorter in market monetarism terminology:
    The NDGP growth in 2012 was 1.6% (RGDP: 0.8%), idiots!”

    This is it. Anyways, I am still totally perplexed – how on earth can one of the most important institutions in the country totally ignore the mandate which is the purpose it created for? I mean not only some formal mandate – like Riksbank totally ignoring inflation and unemployment target they are tasked to pursue, but actual idea behind, the very thing they were created for (prevent demand-side recessions). It is on the same level as if General Army staff would shrink from their broad responsibility to defend the nation and would decide that they will for instance pursue policies aimed at cleaner environment instead – on the grounds that soldiers actually helped in some environmental projects on some occasions.

    And I am totally and absolutely astonished why there is no pushback at all? I keep hearing about central bankers following economist consensus a lot. But is it so? For instance central bankers seemed pretty immune to RBC “revolution” when everyone and their mothers were under RBC spell and shouted that era of business cycles are gone.

    And if we are at that, do other state agencies switch their policies to accommodate latest fashion among broader “expert” field? Is for instance so that the defense strategy of USA is influenced by opinions of military enthusiasts as for what is the next coolest toy or strategy to pursue? Do Supreme Court judges change their view of arguments and verdicts so they correctly reflect the recent mood among attorneys or broader law experts? And even if it is so – are these changes relevant to the underlying responsibilities of these agencies as per previous paragraph? I honestly don’t know.

  24. Gravatar of ssumner ssumner
    24. April 2013 at 05:47

    Chargercarl, Yup.

    JV. I fear it is the consensus. In the US only a small share of economists think money is too tight.

  25. Gravatar of Mattias Mattias
    25. April 2013 at 01:22

    On the last meeting the Riksbank cut their interest rate forecasts and more analysts expect rates will be cut the next few months. So maybe, it will be easier to change course now that Svensson leaves and they can come with arguments why it was right to wait.

    One interesting thing about Svensson is that he voted for the rate hike in september 2008, but now admits he has reworked his models and now thinks that decision was wrong. The chairman Stefan Ingves was also for that rate hike, but as far as I know, he still says that was the right move. The vote was 4-3 then.

    Although Svensson’s leaving the Riksbank now might seem like an important change, I think the selection of two new members last year was more important. If the committee that oversees the Riksbank had wanted to change policy then, they would have not chosen two members who were expected to vote with the majority. Svensson’s fate was sealed then, and I think he realized he could be more influential leaving in protest and then continue the discussion outside the Riksbank.

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