Paragraph of the day

My wife found this a bit disturbing:

The WSJ doesn’t like Mark Carney (the new Canadian head of the BofE) because he is a monetarist, and indeed he may actually be a market monetarist. He has said things that could be interpreted as verging on Sumnerism: nominal NGDP targeting!  In other words, he is a wild-eyed inflationist in the Fisher Friedman Bernanke Krugman tradition. These are the kind of people with whom one doesn’t socialize, and whom one doesn’t want one’s daughter to meet, let alone date or, God forbid, marry. They are cheap and unclean. They eat with their hands.

And then there is this:

Why is the Right so in love with hard money, zero inflation, and high unemployment? Here is my answer: because they do not believe that there is such a thing as a free lunch. You could spread out a smorgasbord of caviar, salmon, lobster and Dom Perignon, and they would turn their heads and eat a cheese sandwich. Reflation is easy and thus is sinful. It’s that Protestant thing. The only people who understand monetary policy are Jews and Catholics. They understand that there is a free lunch, and they don’t feel guilty about it.

Maybe that’s why I stopped attending church when I got old enough to be given the choice.  BTW, I don’t agree with the “Jews and Catholics” comment—he should delete “and Catholics.” 

PS.  The post is by Christopher Mahoney.  Does that name sound Catholic?



28 Responses to “Paragraph of the day”

  1. Gravatar of foosion foosion
    11. August 2013 at 06:13

    Seems a rather accurate and amusing take on the WSJ and today’s Right wing. The WSJ and today’s Right wing are more than a bit disturbing.

  2. Gravatar of srw srw
    11. August 2013 at 06:46

    I suppose this interpretation (right wingers/austrians/protestants hate inflation and love unemployment) is partly tongue-in-cheek. But only partly. And it is an example of a style of argument that seems to dominate the economics blogs and much of the established press: bending over backwards to take the least appealing interpretation of the arguments of one’s opponents that one can possibly take.

    Generally name-calling is evidence that the name-caller has low confidence in his arguments. Although I’m not sure this applies any longer since everyone seems to do it.

    Personally I think the market monetarist arguments are strong, and the austrian arguments not so strong. But just because someone believes that helicopter drops of printed money might temporarily distort relative prices and lead to longer term unemployment doesn’t mean he’s ready to join the KKK. And telling him that it does shuts off rational debate.

  3. Gravatar of Saturos Saturos
    11. August 2013 at 07:18

    After redaction, the comment stands as, “The only people who understand monetary policy are the Jews”.

    No, I’m not going to touch that. Just be glad Scott that you’re not yet quite so famous that journalists scour this blog for quotes to blow up into headlines of articles.

  4. Gravatar of Saturos Saturos
    11. August 2013 at 07:22

    If only – this would actually help save the world, and with much less “entropy” in the distribution of expected outcome (because far more immediate) than the stuff he’s currently writing:

    Then again, people like Harry Potter way more than Hari Seldon or John Galt, so perhaps not.

  5. Gravatar of Saturos Saturos
    11. August 2013 at 07:25

    I think that should be outcome, not expected outcome, actually.

  6. Gravatar of ssumner ssumner
    11. August 2013 at 07:31

    Saturos, Hmm, maybe I should have attached a smiley face to my post. I thought the intent was obvious.

  7. Gravatar of Benoit Essiambre Benoit Essiambre
    11. August 2013 at 07:36

    It is the right that wants a free lunch.

    They want a stable, liquid way to store value that doesn’t lose more than one to two percent of real value a year even when the free market can’t provide it at those rates.

    Basically they are saying that since the free market won’t provide a good enough way to store value, they want central banks to subsidize an artificial one made out of paper or electrons.

    Of course this subsidy distorts the market in horrible ways, it prices investments with fundamental intrinsic value out of the market and destroys an immense amount of wealth creation opportunities but hey they can’t have their accumulated wealth be subject to free market forces, they are entitled to the central banks artificially shielding their liquid assets no matter how many people end up poor and jobless.

  8. Gravatar of Justin Irving Justin Irving
    11. August 2013 at 08:04

    I see no correlation between Jewish/Protestant/Catholic and one’s monetary views. For God’s stake Mises was Jewish and Keynes was culturally Protestant! This makes me wonder how Confucian, Buddhist and Shinto are supposed to line up…I wonder what the Dalai Lama thinks of price stickiness!

  9. Gravatar of Bill Woolsey Bill Woolsey
    11. August 2013 at 08:55

    I read this right after returning from services at St. James _Protestant_ Episcopal Church.

    I do support a 3% growth path of nominal GDP, and so, what I hope is a stable price level on average, but I also strongly support “reflation” of nominal GDP when it falls below target (and deflation of nominal GDP when it rises above target.)

    I am not sure how my views about monetary regimes are in any way inconsistent with my skepticism regarding the pretentions of the Bishop in Rome, much less views about whether clergy should be celibate or birth control and divorce prohibited. But hey, maybe I count as an honorary Catholic for purposes of monetary policy.

  10. Gravatar of ssumner ssumner
    11. August 2013 at 09:09

    Justin, I’m always the last to know a person’s religion/ethnicity.

    Bill, I’m not Catholic or Jewish either. Perhaps I should convert. 🙂

  11. Gravatar of Tom Brown Tom Brown
    11. August 2013 at 10:02

    I don’t know what religion Peter Schiff is (or isn’t!) but when you had that debate with him on Larry Kudlow’s show on CNBC a week back or so, I got the definite impression from him that he has this anti-free lunch concept, essentially saying:

    “The Fed has to STOP so this *phony* recovery stops, and we can get on with the recession (and suffering) that we so richly deserve (for our deeply sinful nature)”

  12. Gravatar of Edward Edward
    11. August 2013 at 10:22

    its disgusting how in love the right is with hard money

  13. Gravatar of J J
    11. August 2013 at 10:51

    Professor Sumner,

    It is odd that the Right, who believe that lower taxes are essentially a free lunch (more growth and maybe even more revenue), are so reluctant to believe that monetary policy can lead to a free lunch.

    That aside, if someone views monetary policy correctly, he/she will see that you do not want a free lunch. Right now, and since 2008, money has been too tight and we have been plagued by the opposite of a free lunch. You are asking for not-tight monetary policy that will not harm the economy. I suppose any ‘free lunch’ can be viewed from this opposite side, but it is still an important point.

  14. Gravatar of Mark A. Sadowski Mark A. Sadowski
    11. August 2013 at 11:49

    “Reflation is easy and thus is sinful. It’s that Protestant thing. The only people who understand monetary policy are Jews and Catholics.”

    I read a piece of really bad journalism the other day (anyone notice how journalism has really gone down the toilet lately?) in the NYT:

    Roger Cohen basically makes the argument that the eurozone crisis is a crisis of North versus South and Protestant versus Catholic/Orthodox. Anyone who has even the slightest familiarity with Europe knows that that is a relatively poorly informed American blithely projecting his own prejudices, not reality.

    I pointed out in comments that of the 17 countries in the eurozone only Finland and the Netherlands are traditionally more Protestant than Catholic. (And today Catholics outnumber Protestants in the Netherlands.) In Germany, Catholicism and Protestantism have been more or less equally represented with Catholicism being traditionally dominant in what was West Germany. (The ECB itself is located in Frankfurt which is a very Catholic town.) Greece is the only Orthodox country in the eurozone.

    In short if I had to pick a characteristic to explain the differences within the eurozone it wouldn’t be religion, as the eurozone nearly uniformly consists of countries that are traditionally Catholic. In fact almost all of the traditionally Protestant countries in Europe have elected *not* to adopt the euro.

    (Similarly the author’s characterization of Catholic and Orthodox as being southern ignores the fact that Ireland, Lithuania and Poland are traditionally Catholic, and that Belarus and Russia are traditionally Orthodox. Northern Europe is considerably more religiously diverse than he made it out to be, even without touching on all the traditional religious minorities.)

    So consider the following.

    Among the big three advanced traditionally Christian currency areas that hit the zero lower bound, the two that did QE are traditionally Protestant, and the the one that has not done any QE at all is predominantly traditionally Catholic.

    Yes, you can make the argument German Ordoliberalism permeates European monetary policy, and that Germany is the least Catholic of the large eurozone states. But as anyone who has discussed monetary policy with people from other parts of the eurozone will testify, the same sort of “hard-money”/”monetary policy is ineffective” point of view is prevalant everywhere.

    In short, is it possible that Catholic self-flagellating tendencies are really to blame for eurozone monetary policy?

    Full disclosure: I’m Catholic.

  15. Gravatar of Lars Christensen Lars Christensen
    11. August 2013 at 11:59

    Ok, I admit it…I grew up protestant, but for more than a decade I spend a lot in Catholic Poland…or maybe it is just because I started reading Friedman when I was 16.

  16. Gravatar of Lars Christensen Lars Christensen
    11. August 2013 at 12:00

    Oops I forgot – I have been making the same argument as Chris:

  17. Gravatar of Morgan Warstler Morgan Warstler
    11. August 2013 at 12:07

    Benoit Essiambre,

    You are exactly right, but you don’t look deep enuff into the abyss, so so you are exactly wrong.

    MP and government itself are constructs of the haves, for the haves… and if oh by the way it helps out the havenots too, great/

    The havenots can’t start and run a currency, let alone a government. Just get over it.

    Once you let go of childish notions of voting and altruism and get down to the brass tacks of constructing policies that will ALWAYS be acceptable to hegemony, you will find the best possible outcome.


    The one quibble I have with Mahoney, is that well its shallow and wrong.

    There may well be “pain now caucus!”

    But I don’t know anyone like that, I do know A LOT of guys with money in the bank, and they WANT to see the guys who are over extended be liquidated, not out of moral issue, but because that’s a NORMAL THING, and you save your pennies PRECISELY so when they get gutted, you can buy thing for pennies on dollar.

    Why the left, or even MM want to try to reduce the intent of the bears into “no free lunch” well I suspect its because they aren’t actual business folk.

    Buying low and selling high, it starts with finding some other poor bastard who’s gone gotten himself screwed sideways.

    That’s 50% of the game.

    Its hard to trust people who don’t like the ENTIRE GAME.


    Everyone doesn’t deserve a trophy, somebody has to lose.

  18. Gravatar of ssumner ssumner
    11. August 2013 at 13:08

    Everyone, Lot’s of good points.

    Mark, Good observation about religion, I missed that.

    Lars, I used to talk of “puritanism” but more in connection with the view that after run up big debts it was time to suffer in the form of . . . a long vacation (called unemployment.)

  19. Gravatar of Bob Murphy Bob Murphy
    11. August 2013 at 15:03

    I will pray for that blogger. And your wife is a saint, Scott.

  20. Gravatar of xtophr xtophr
    11. August 2013 at 17:51

    “First they ignore you, then they laugh at you, then they fight you, then you win.”

    Those quotes above sound like fighting words. You must be moving up!

  21. Gravatar of J.V. Dubois J.V. Dubois
    12. August 2013 at 00:53

    Mark: very good observations. The sad thing that these things like “protestant work ethics is superior” meme were brought into Europe as part of the baggage of liberal reforms, Laffer curve, Coca-Cola and american movies. This meme that protestant countries are somehow superior and that they are behind western wealth is quite troubling. Especially since one does not have to search too long that it is not true:

    Northern Italy – one of the richest regions for centuries that laid basics for many a breakthrough in economic theory and practice is and always was overwhelming catholic. Bavaria, the richest and most industrial part of the Germany was always Catholic as well as Austria. France was always very strong bastion of catholicism. And do not let me even start on things like how come that Chinese, Japanese and many other successful Asian countries are definitely not protestant.

  22. Gravatar of benjamin cole benjamin cole
    12. August 2013 at 01:45

    I think the relevant lense is northern cultures vs southern. Think Teutonic vs. Sicilian.
    Something about winter and the need to prepare.
    That said the right-wing has gone bananas on monetary policy and that has supplanted culture.
    Also, central bankers inevitably start fussing about monetary asceticism in every culture.

  23. Gravatar of Brian Donohue Brian Donohue
    12. August 2013 at 02:57

    I ain’t religious- I think that’s a red herring.

    To me, there are two types of economists: those who spend their time conjuring up free lunches, and those who go around debunking them. I’ve always sympathized with the second group.

    To call Austrians pre-Copernican is to misunderstand heliocentrism, economics, or both. It just drips with hubris.

    Scott, I think you might be right, and recently and over the next few years, y’all are getting your turn at the plate. If I were an economist, though, I would continue to kick the tires on this thing and, maybe more importantly, try to be the first to ferret out the next set of unintended consequences that make this free lunch not all it’s cracked up to be.

  24. Gravatar of Brian Donohue Brian Donohue
    12. August 2013 at 03:05


    A bird in the hand is worth two in the bush. Tomorrow is uncertain.

    The idea that a positive real interest rate for intertemporal decision-making is a free lunch is absurd.

  25. Gravatar of J Mann J Mann
    12. August 2013 at 05:19

    In limited defense of the right, they come by their (probably) mistaken belief rationally.

    1) If someone claims to have found a free lunch (or $20 on the sidewalk) and you don’t understand how it’s free, it’s fairly rational to assume it’s not.

    2) Macro is hard to understand. Add to that that a large group of apparently smart economists will not sign off on Sumnerism, and scepticism sounds like a rational response if you’re a reasonably educated person who doesn’t understand the macro well enough to follow Scott’s reasoning.

    3) I buy Scott’s argument, at least in as much as I think it’s worth a five year serious attempt, but it wouldn’t suprise me tremendously if it all goes wrong somehow. Why? Because it sounds too good to be true, which sets off some alarm bells.

  26. Gravatar of Blackadder Blackadder
    12. August 2013 at 08:06

    Larry Kudlow is Catholic. So is Ramesh Ponnuru. Not sure about Pethokoukis. So maybe there is hope for us yet.

  27. Gravatar of chris mahoney chris mahoney
    12. August 2013 at 09:58

    I am glad to know that my cultural interpretation of monetary policy came from someone of your stature, as opposed to some defunct economist.

  28. Gravatar of ssumner ssumner
    12. August 2013 at 10:22

    Bob, I agree.

    JV Good point.

    Ben, I agree that that makes more sense than religion (and better explains Belgium, for instance) Of course even that has lots of problems as the success of Northern Italy suggests. It’s part of the story, but the full story is very complicated.

    Brian, We are a very long way from having our turn at the plate. But we are making progress.

    J Mann, I don’t believe good monetary policy can make us richer. But I believe bad monetary policy can make us poorer. So only in that sense do I think good monetary policy can make us richer. Does that make sense?

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