Random notes

1. The FT on Boris, pt. 2

A few days ago, I said this:

Imagine a Democratic president with dictatorial powers. What would a President Sanders or Warren do if there were no restraints on their power?

Yesterday, the FT said this:

Mr Johnson’s move may not be a “coup” but Tories cackling over this wheeze might ponder how they would view a leftwing government under Jeremy Corbyn taking the same step. . . .

There are reasons conventions survive. All sides know that the boot will one day be on the other foot. Conservatives should remember that what goes around comes around.

2. A great Noah Smith tweet:

3. I’m not going to blame Noah Smith for this, as authors don’t get to write their own headlines:

The Fed’s Stimulus Might Be Undermining Growth

What if low interest rates are bad for productivity?

My biggest disappointment over the past 10 years is the complete, total, 100%, lack of progress in getting people to stop reasoning from a price change. That subhead isn’t even a question. It’s nonsense to talk about low interest rates affecting any almost macro variable.

BTW, the headline is fine. Monetary stimulus is a clear concept, and could impact productivity. (I doubt it actually does, and if it does I have no idea in which direction. I also doubt anyone else knows.)

4. On the same note, here’s William Cohan in the NYT:

Instead of continuing to try to right the ship, by gradually raising interest rates, Mr. Powell, in that speech, seemed to be caving to political pressure — from the president and from Wall Street bankers and traders — to keep rates low. Indeed, that is what he has done. On July 31, for the first time in more than a decade, he lowered short-term interest rates.

That was a mistake. Mr. Powell and his colleagues at the Fed need to stand up to Mr. Trump and do what’s right for the economy. If they don’t, the only question that remains is, when will it all blow up? When it does — and that day will be soon — we will be staring down yet another financial panic.

Put aside the problem with reasoning from a price change, and go back to the Bloomberg headline about “monetary stimulus”. Is it contractionary? It’s contractionary for output if it has a contractionary effect on asset markets. If not, then it’s not contractionary. Right now, Fed actions intended to be stimulative generally have a positive impact on asset prices, at least if they are clearly more stimulative than expected.

The next financial crisis is likely to occur in an environment of low interest rates. But it won’t be caused by low interest rates; it will be caused by the things that cause low interest rates. And for the most part that is not monetary stimulus.

Reasoning from a price change seems to be increasingly messing up the entire field of economics. You have Larry Summers making bizarre claims that low rates might slow economic growth. You have the embarrassing debate between New Keynesians and NeoFisherians. Come on people . . . snap out of it!

HT: David Beckworth, Marcus Nunes



47 Responses to “Random notes”

  1. Gravatar of E. Harding E. Harding
    1. September 2019 at 16:30

    Wise, Sumner.

  2. Gravatar of Benjamin Cole Benjamin Cole
    1. September 2019 at 16:39

    Larry Summers is pondering the effectiveness of monetary policy and re-examining fiscal policy.

    The Swiss National Bank recently printed and spent about $100,000 per resident to defend the Swiss franc from appreciation. That is, the Swiss National Bank purchased about $100,000 of foreign bonds on behalf of every Swiss resident.

    If we have globalized capital markets, then this Swiss National Bank program was in essence a quantitative easing program. Yet Switzerland has no inflation and presently has a flatlining economy.

    Is Switzerland an instruction on what happens when the US central bank engages in quantitative easing? That Fed prints money and it enters into global capital markets. So what?

    I guess Larry Summers is positing we should borrow globally and spend locally. Maybe he is right. I would prefer helicopter drops.

  3. Gravatar of mbka mbka
    1. September 2019 at 17:30


    I can only imagine the pain you must feel when you hear or read the daily news. I usually listen to BBC radio on my way to work, and once you’re past the daily news (which are fine) and on to the interviews with economic experts “explaining” the news, it’s a freak show of concepts that are just wrong, or hilariously absurd (“investors moved out of stocks today”, my favorite). It just knocks your IQ down by a few points for a while.

    My chuckle today btw was a piece that said that Argentina battles a falling currency valuation and that the economy suffers under 60% interest rates. Monetary policy must be really tight there.

  4. Gravatar of Garrett Garrett
    1. September 2019 at 19:59

    I’m usually a fan of Barry Ritholtz, but his reaction to the rate cut was frustrating


  5. Gravatar of ssumner ssumner
    1. September 2019 at 20:21

    mbka, Yes, no zero bound “problem” in Argentina–I wonder why?

    Garrett, Did he even mention the fact that inflation is below 2%? I didn’t see it when I glanced through.

  6. Gravatar of Benjamin Cole Benjamin Cole
    1. September 2019 at 20:49

    “mbka, Yes, no zero bound ‘problem’ in Argentina–I wonder why?”–Scott Sumner.

    There are different nations that seems to prove out one macroeconomic concept or another.

    What does the Swiss model—the Swiss National Bank buying of $100,000 in foreign bonds for every resident—bear out? They have no inflation, a flatlining economy and and Swiss 10-year bond yield (are you ready) a minus 1.008%. (That is the first sovereign I have heard of with the negative yield larger than 1%. Will we see negative 2%?).

  7. Gravatar of mbka mbka
    1. September 2019 at 21:14

    Benjamin Cole,

    “There are different nations that seems to prove out one macroeconomic concept or another. ”

    Really? It’s more like saying, look, this nation tried subsidies and got a glut, and that nation tried price controls and got scarcity, wow, each nation proving a different economic concept.

    Not a specialist here, but the Swiss example simply seems to show that the quantity of currency demanded was higher still than the quantity supplied, including by the Swiss National Bank. The $100,000 number is irrelevant. And bond purchases are hardly unconventional or desperate measures.

  8. Gravatar of D.O. D.O.
    1. September 2019 at 21:51

    Can somebody help me with this thought about SNB foreign asset purchases.

    Suppose Switzerland discovered some great natural resource, which have made them (even more) rich overnight (I mean, they have Alps, but imagine something more than that). I guess, conventional wisdom is that they should have created a sovereign wealth fund, otherwise they would face high inflation, Dutch disease and all that. Now it seems that SNB just created such a wealth fund. Viewed like this, it is a bit unconventional, because normally it’s the decision made by the more obvious parts of the government, but I don’t see why this is different from purely economic point of view. It’s also not clear what great natural resource Swiss discovered overnight, but suppose it is stability of their banking system that is a hot commodity. Then it follows that maybe they should have sold more of it, but just decided not to out of overabundance of prudence.

  9. Gravatar of ssumner ssumner
    2. September 2019 at 05:41

    D.O. Maybe they discovered democracy. True democracy.

  10. Gravatar of Garrett Garrett
    2. September 2019 at 06:08

    Scott, he didn’t. Here’s his view:

    “Let’s start with the obvious: Ask yourself: Why does “the greatest economy ever,” with a 3.8% unemployment rate and 21.54 million new jobs created since January 2010 (when the recession ended) even need a rate cut?

    There are very few legitimate reasons to cut rates from the low Effective Federal Funds rate of 2.38%. Some argue Underemployment is a reason, others say its insurance against an ordinary recession (?!), still others say it is needed to reduce the strength of the US Dollar.

    To which I call bullshit.”

    It’s not that dissimilar from other reactions I’ve seen from finance-types. It’s as if these people don’t believe in aggregate demand, or believe the financial markets are removed from other markets.

  11. Gravatar of Ralph Musgrave Ralph Musgrave
    2. September 2019 at 08:17

    “Monetary stimulus is a clear concept”?? I suggest it’s wholly UNCLEAR.

    It could be taken to mean an interest rate cut engineered by a central bank. Or it could be a helicopter drop. Or it could be a combination of monetary and fiscal stimulus, i.e. government and central bank between them create new money and spend it (and/or cut taxes).

  12. Gravatar of Philo Philo
    2. September 2019 at 09:32

    #3: I suspect monetary stimulus affects productivity favorably in some scenarios and unfavorably in some, and that in most cases the effect is small.

  13. Gravatar of Iskander Iskander
    2. September 2019 at 14:49

    Monetary Stimulus probably aids productivity growth as the returns to innovation increase with market size.

  14. Gravatar of Benjamin Cole Benjamin Cole
    2. September 2019 at 15:57


    Well sure. The Argentinian model suggests that in globalized capital markets there is not much demand for the Argentinian peso, and the Swiss model showed that in globalized capital markets there seems to be nearly infinite demand for Swiss francs.

    The question is, in the Swiss model does a quantitative easing programme equal to $100,000 per resident have any stimulative effect on the Swiss economy?

    Since capital markets are globalized, is there a lesson in the Swiss experience for US policy makers? Remember, in Switzerland there is no inflation and the economy has been flatlining. The question is, so the US Federal Reserve can print up $4 trillion, buy assets in globalized asset markets (and remember, money is a fungible commodity) but what will that do in terms of domestic production and output?

    Trying to stimulate a local or national economy by pouring money into (already glutted) globalized asset markets….well you could also try to inflate an under-inflated balloon by lowering atmospheric pressures. Or you might try pumping air directly into the balloon.

    It may be that monetary theory, as it pertains to any particular Nation, must accommodate the nature of capital markets, which is that they are now globalized. Capital markets in the US are not part of a closed system.

  15. Gravatar of Brian Donohue Brian Donohue
    3. September 2019 at 04:51

    Cohan’s views represent the hopelessly muddled consensus among Very Serious People. Depressing.

  16. Gravatar of Christian List Christian List
    3. September 2019 at 08:10

    This William Cohan from the NYT is indeed gold. I’m always surprised how a newspaper like the NYT, which is said to be one of the best in the world, delivers such poor quality.

  17. Gravatar of RJB RJB
    3. September 2019 at 09:09

    There is a lot of brain power behind many of these comments, but the degree of disdain that flows throughout them is very off-putting. A game of trying to one-up the other commentators by demonstrating that one is even *more* appalled by various snippets from the media… (“oh the NYT!” ::rolls eyes:: “Oh Cohan’s views!” ::rolls eyes:: “it must be so troubling for you to listen to the people’s radio each morning” ::rolls eyes:: so on so forth).

    Trying to share information, and trying to help us make sense of the unusual things happening in the world of monetary policy, would make for a better message board.

    This comment pertains to the comments section, not the original posts. Thank you

  18. Gravatar of Christian List Christian List
    3. September 2019 at 15:35

    Noah Smith talks too much about transforming local service jobs and “sectoral bargaining” for my taste.

    Excuse me, but a courier is a courier, a waiter is a waiter, and a kindergarten teacher is a kindergarten teacher. It’s already bad enough that some simple garbage men earn quite some money. Why would you want to extend that any further? And who would be paying for this?

  19. Gravatar of Mike Sandifer Mike Sandifer
    4. September 2019 at 06:55


    I wonder if you ever feel like addressing the question of why the hot potato effect doesn’t really work the way it’s presented in undergrad econ courses, at least those I took? It seems to mostly not be the case that an expanded money supply leads to greater consumer spending, and hence an expanded/stable aggregate supply in response. Instead, it seems AS anticipates expanded AD and adjusts accordingly, mostly obviating the need for changes in inflation. This could be a reason why consumer spending seems to be a lagging indicator.

    We don’t often see deflation during recessions, and even when we do, not as much as a simple hot potato AS/AD model would suggest we should. And also, inflation often doesn’t seem to change nearly as much as one would expect before RGDP when it comes to monetary policy shifts, in general.

    The Fed obviously doesn’t actually target inflation alone, but instead targets inflation, with an estimate of potential RGDP in mind(or the closely related NAIRU, part of its dual mandate).

    The implication, as I see it, is that AS will effectively target the Fed’s implicit NGDP target, with the Fed’s preferred division between RGDP and inflation, as best it can, adjusting for second order uncertainty and shocks.

    This could help explain how demand can be deficient for such long periods of time, as it would mean that markets will seem to deliver RGDP results more or less in line with central bank expectations, and mostly stay close to the inflation target.

  20. Gravatar of Mike Sandifer Mike Sandifer
    4. September 2019 at 07:05

    To clarify my last point, the Fed is essentially targeting potential RGDP and inflation simultaneously, such that if AS expands such that NGDP is above what the Fed considers desirable, the Fed will tighten policy and actors determining AS suffer.

  21. Gravatar of Mike Sandifer Mike Sandifer
    4. September 2019 at 07:08

    Or, another way of looking at it is, the Fed implicitly has an NGDP target with a specific imbedded inflation target, and it’s in the market’s interest to satisfy the Fed as much as it can to optimize policy within the Fed’s reaction function.

  22. Gravatar of Christian List Christian List
    4. September 2019 at 10:17

    So this is true democracy at work now? Leaving your party. Betraying your constituency. Making a clear Brexit at the promised date impossible – again, and again, and again. Making a No-Deal-Brexit impossible. Rejecting re-elections. Haha, that is the best: Rejecting re-elections.

    Maybe Chairman Corbyn should just be given power for life without any real elections, similar to Chairman Xi in China. Then Scott might write in a positive way about the regime again (it works in China). He seems to like it when undemocratic regimes rule a country for life.


    I would spontaneously think monetary policy simply stabilizes nominal prices. Call that HPE or not.

    Scott seems to think differently about it (or not), but he has explained the HPE very often, for example here:

    “I’ll walk you through the HPE effect step by step, and you tell me where you get off the train:”


    Scott unfortunately (sometimes) lacks the (admittedly very rare) gift of explaining complicated things in a very clear and simple way. He loves analogies, but his analogies don’t always make things clearer. People like Friedman could do this better. But I think in the above example he does a pretty good job, at least partially.

  23. Gravatar of Mike Sandifer Mike Sandifer
    4. September 2019 at 11:20

    Christian List,

    Yes, thanks for pulling that up. Scott seems to address my question somewhat here, in the following quote:

    “However the following is important; if prices are sticky then other things will change to bring about a short run equilibrium in the gold market, before the price level has had time to fully adjust. And obviously one of those “other things” might be a change in interest rates. Other “other things” include changes in asset prices and real output.”

    If I’m interpreting this correctly, he acknowledges that AS shifts can occur in lieu of changes in the price level, but only in the short-run? If so, empirically, it seems more the case that AS often shifts more than the price level, period.

    To give concrete examples, by the time consumer spending starts to fall n a recession, inventories often have already fallen to a large extent, due to retailers cutting back on orders, and hence industrial production having already started to take a hit.

    So, companies in the supply chain don’t just wait for consumer spending to fall before reducing aggregate supply. They get ahead of the trend in response to market signals to reduce the risk of selling surplus inventory. So, real GDP contracts, but prices are somewhat stable.

  24. Gravatar of Christian List Christian List
    4. September 2019 at 13:42


    somehow wages seem to be more important than other prices. I don’t know why but that’s what I read.

    I don’t read much about AS on this subject, so I suppose AD is the problem. And the wages. The companies have to lay off workers. Long story short: It’s an AD problem.

    Maybe these links help:



  25. Gravatar of Mike Sandifer Mike Sandifer
    4. September 2019 at 14:29

    Christian List,

    Yes, it’s definitely about AD and sticky wages. Sticky wages are important, because it means unemployment rises, instead of falling wages when NGDP falls. increases in unemployment necessarily mean lower real GDP.

    What I’m saying is inflation is very misunderstood, if I interpret comments by most economists correctly. I’m saying that AS often largely moves before AD, obviating some of the adjustment in prices that would otherwise occur. Markets don’t have to wait for consumer behavior to change. They can anticipate changes in demand, and react accordingly.

    The ultimate result is exactly as the musical chairs/hot potato model predicts, but largely skipping the intermediate step of changes in the inflation rate.

  26. Gravatar of ssumner ssumner
    4. September 2019 at 15:57

    Mike, You are overlooking two issues:

    In recent years the AD shocks have been smaller, hence less deflation and high inflation.

    The SRAS is often pretty flat in the short run.

    Christian, Your attempt to portray me as a fan of authoritarianism and also Jeremy Corbyn are pathetic. Really sad.

    And no, the UK voters never voted for a hard Brexit. Indeed the Brexiteers promised them a soft Brexit. They lied. The “will of the voters” here is a nonsensical idea. The voters were never given a specific option on the type of Brexit. That’s what’s being debated.

  27. Gravatar of Mike Sandifer Mike Sandifer
    4. September 2019 at 18:21


    Thanks for the correction. I mischaracterized the standard econ 101 view, because I’ve been drawing the flatter portion of SRAS curves at a 45 degree angle. So, I guess I misremembered basic econ.

    That said, unless I’m interpreting the actual econ 101 curves and the data incorrectly, it still doesn’t look like the best fit. It still seems pre-emptive SRAS curve shifts would do a better job explaining the data.


    Notice also that changes in PCE not too infrequently lag changes in NGDP and RGDP a bit. There are exceptions, but this would seem inconsistent with the idea that changes in consumption must come first, causing changes in the price level, and then AS.

    In fact, I believe you consider NGDP to essentially equal AD. If that’s true, then doesn’t RGDP equal AS? And if that’s true, then it doesn’t make much since to have a SRAS curve and RGDP on the x axis.

  28. Gravatar of Mike Sandifer Mike Sandifer
    4. September 2019 at 19:27

    Also, I believe the market monetarist claim is that inflation can occur even when RGDP is below potential. It’s easy to see how this could work regarding a positive demand shock. But, why would there be inflation sans a shock? If RGDP was below potential for at least some of the long recovery after the Great Recession, how could there be an inflation rate near a fairly consistent 2%, which also happened to be the central bank’s explicit target? If the 2% inflation is expected, and RGDP is below potential, then why doesn’t RGDP simply grow closer to its potential?

  29. Gravatar of Anonymous Anonymous
    4. September 2019 at 19:30

    But look, if you take no-deal Brexit of the table then there can be no Brexit at all. Obviously the EU will not negotiate with someone who has absolutely no leverage whatsoever. What will happen if the EU refuses to negotiate? UK stays in the EU. That is what the EU wants, so there will be no negotiation. Parliament has already voted against the May deal, and now they have voted against the possibility of getting anything but the May deal. So, they have repealed Brexit.

    I wonder if the whole thing was a setup. Put May in charge of Brexit even though she’s a Remainer, she makes no preparations for hard Brexit, blunders negotiations deliberately, quits and gives up. Boris comes in and appalls everyone, claims he did the best he could, but they pull out of Brexit. Oops, popular will subverted, again!

  30. Gravatar of The Fed’s Between The Rock And The Hard Place | The Capital Spectator The Fed’s Between The Rock And The Hard Place | The Capital Spectator
    5. September 2019 at 03:22

    […] Some economists, however, say the standard analysis is wrong. Scott Sumner, an economist who advocates that the central bank policy should focus on stabilizing nominal GDP growth, thinks a reckoning of sorts is coming: […]

  31. Gravatar of Benjamin Cole Benjamin Cole
    5. September 2019 at 03:34

    This has become a cavalcade—every central banker is squealing “Go to bigger budget deficits. Don’t look at us!”

    “The inflation conundrum in advanced economies and a way out”

    Paper by Mr Luiz Awazu Pereira da Silva, Deputy General Manager of the BIS, Enisse Kharroubi, Emanuel Kohlscheen and Benoît Mojon based on remarks at the University of Basel, 5 May 2019.

    BIS speech | 05 September 2019
    by Luiz Awazu Pereira da Silva, Enisse Kharroubi, Emanuel Kohlscheen and Benoit Mojon

    We review the current inflation conundrum of advanced economies. They are experiencing simultaneously low interest rates, low unemployment and low inflation. Several medium-term trends on labour markets can explain why inflation has remained contained in spite of the drop in the unemployment rate. Among these, ageing work forces and the lasting effects of the crisis on the mobility of employees as well as changes in the contractual relationship between employers and employees. These trends imply that the equilibrium rate of unemployment has declined and that the participation of seniors in the labour market has been increasing in AEs. Overall, labour market slack may have declined much less than suggested by the drop in the rates of unemployment. Second, after monetary policy played a major contra-cyclical role in during the GFC, it has reached its limits. One possible way out, in view of the exceptionally low levels of interest rates, for the stabilization of the business cycle should rely now and when fiscal space is available rather more on fiscal policy than on monetary policy. Fiscal policy and public investment might also help to enhance productivity and address climate-related risks. In addition, to the extent that low real rates reflect a shortage of safe assets, issuing more public debt would could contribute to raise the equilibrium real rate and to expand the monetary policy space.



    Personally, I think they are wrong, and the answer is money-financed fiscal programs.

  32. Gravatar of Christian List Christian List
    5. September 2019 at 03:39


    I agree with you. The majority of influential politicians and the parliament never wanted a Brexit. It was only the narrow majority in the referendum that wanted a Brexit. Since the politicians didn’t want to act against the referendum in a too obvious way, they organized this shitshow for a few years, but the end result was always clear: no Brexit ever.

    The only thing that might have been briefly considered was a result that cannot be called Brexit, but even here it is questionable whether this solution was ever really on the table or just an act.

    The “will of the voters” here is a nonsensical idea.


    It’s clearly not. There must be re-elections as soon as possible, then the will is very clear, no matter in which direction. There can be no more lies and excuses, in the way that people have not been “properly” informed. That was the real lie from the beginning. The propaganda machine of the remain-side had more than enough time, they should be done by now, they had years, or do they need even more time??? For what?

    I assume the vote will be “remain” but who knows for sure these days.

    And it is unacceptable that certain directions are banned before the elections. This is undemocratic and absurd. It is just as wrong as delaying the re-elections. Enough of the tricks.

    fan of authoritarianism

    You are a “fan” in the sense that you write too often too positively about China, in the sense that the Chinese regime is portrayed in a positive light. At the same time you play down negative aspects of the regime, for example its expansion plans and its aggressiveness. At the same time human rights seem to end at the border for you. Basically, at this point you even represent 1:1 the position of the Chinese regime over and over again, which loves to use the term “inner-Chinese affairs”, in which one must not interfere under any circumstances. What an absurd idea. Human rights don’t stop at the border, it’s not the fault of Chinese dissidents that they were not born as Americans. Basically, you’re no different than nationalists in this case. You share the same absurd central idea.

    You don’t have a plausible political concept for this situation. If the Chinese regime does not invade other countries, there is unfortunately nothing you can do. You also lack any mechanism of reactions and sanctions. You speak out purely verbally against authoritarianism, but it has no real consequence. Yes, all this makes you look like a fan, a phony, extremely naive at best, and not as a determined opponent.

  33. Gravatar of Michael Rulle Michael Rulle
    5. September 2019 at 04:54

    Your blog is by far the most interesting economics one I read. It is also the one I least understand. I have a large question—-it relates to my view of your view—“that bad monetary policy is the primary cause of most if not all nominal gdp problems——either by its exaggerated response to a supply shock like 1973-74—leading to excessive NGDP ——-or being too tight and causing a low nominal gdp problem (like what Powell is flirting with today).

    It is simply very hard to accept (meaning intellectually counterintuitive—-or non-intuitive completely) the idea that targeting NGDP is all we really need to do to forestall Fed caused disasters (I believe it is accurate to say the Fed caused the 07-08 recession to become at least close to a disaster). For example—-my take and question on 07-08 follows.

    The California /Nevada/ Arizona refinancing “excesses” (?) created asset classes that investors wanted to sell and could not. I viewed this as illiquidity being a self fulfilling prophecy. Too much fear and willingness to sell at any price thus causing a “run”. AIG, who directly and indirectly (Goldman forcing cash collateral call) had mark to market “losses” totaling maybe a few hundred billion in their credit derivatives book, in the end never lost a dollar. I “know” this because I explicitly was discussing this with the Fed as an advisor to the person(s) directly in charge of the AIG situation. I told them—-before I saw anything (the year was 2010) —-that it was my opinion they did not have a single default. And my reasons were simple——default rates overall in actual housing were too low to ever impact the senior positions AIG held. This was a closely held fact by the Fed.

    Of course, there really were true losses system wide—-but most recovered. But the high placed fear mongers were talking of potential losses equal to half the total mortgage debt outstanding. And “everyone” believed it was not implausible, but perhaps likely.

    As nutty as this was, I could still understand it. But——and finally here is my question—what is the mechanism by the Fed that causes the actual people responsible for repos to stop increasing the collateral requirements—-which caused forced sales, at prices which made no sense? This could never have happened in the futures markets, by the way, and did not (never say never, but the order of magnitude of the problem would have to be like a 10 on the Richter scale)—-but it happened in an OTC market.

    I viewed it as a complex mystery of misunderstanding with guys like John Paulson leading the charge. You say it was simply Bernanke being too tight—-as does he.

    Your answer is “so simple” sounding—-not that the underlying processes are simple—-but that the actions to be taken are simple—-signal, then follow thru on not tightening.

    Then the recession would have been normal. Is that true?

    Are we potentially heading for yet another Fed induced serious crash and recession?

  34. Gravatar of msgkings msgkings
    5. September 2019 at 09:24


    You seem to espouse a very neo-conservative view of world politics, that we must all fight against all human rights abuses in every nation. What should we do about the Uighurs, specifically? How about the Syrians? South Sudanese? Rohingya? Besides berating blog authors for insufficient empathy, what else should we be doing?

    Yes the Chinese are not Westerners, they run their country differently. It’s not a great look, but it’s not our country. They aren’t a threat to our countries the way Soviet Russia or Nazi Germany were. I guess I’m a Kissingerian realpolitik guy, but what are you expecting us to do here?

  35. Gravatar of TravisV TravisV
    5. September 2019 at 10:25

    My buddies are asking me about this new story in Bloomberg:

    “The Big Short’s Michael Burry Explains Why Index Funds Are Like Subprime CDOs”

    Seems like a bunch of nonsense to me. For example, notice the claim that bonds are certainly overvalued. Ticking time bomb. Give me a break. Look at inflation expectations.

  36. Gravatar of Economy Expanded at a Modest Pace Through August – TradingGods.net Economy Expanded at a Modest Pace Through August - TradingGods.net
    5. September 2019 at 11:01

    […] Some economists, however, say the standard analysis is wrong. Scott Sumner, an economist who advocates that the central bank policy should focus on stabilizing nominal GDP growth, thinks a reckoning of sorts is coming: […]

  37. Gravatar of George George
    5. September 2019 at 11:42

    I think you are all insane. It is capitalism, pure greed, all the things that allow us to profit and externalize the destruction of the public good. The destruction of the environment over time will be a bill the Fed can’t pay. You won’t be able to pay for it. Your children won’t be able to pay for it. We will all suffer from the inaction and stupidity of modern monetary theory. There is nothing, not even switching to NGDP that will save humanity. The only thing that will help us is to understand that we are in deep shit and need to change the whole economic system to include environmental externalities as a cost. Let’s factor in the destructive cost of growth now and save our kids.

  38. Gravatar of José José
    5. September 2019 at 12:16

    As a practitioner in trading and investment, I have a lot of dificulty in hiring young people, particularly from good schools, because they have absolutely no idea how a speculative market works, why prices move. I think our schools are not doing a great job after all.

  39. Gravatar of Christian List Christian List
    5. September 2019 at 13:51


    There are some things we can do, especially intellectuals like Scott. Here are just a few remarks:

    Critical focus on China, as it is currently the most important country in the world, and the country with the largest and most dangerous authoritarian regime – with a corresponding negative impact on all other countries in the world. (And Scott always wonders why authoritarian regimes and nationalism continue to spread, that’s such a bad joke, it’s unbelievable.)

    Understanding that Hong Kong and Taiwan are currently key.
    Having ideas and a concept of what the free world should do if the CCP continues to oppress Hong Kong. And what are we doing if the CCP continues to escalate? The CCP needs to know in advance what critical measures will happen when they knock down the rebellion.

    Helping Hong Kong’s activists if they are reaching out. And they are reaching out to Western media, politicians, and intellectuals. They are reaching out basically to anyone with a little power, anyone who will listen and support their movement. But there’s hardly any help so far, or at least not enough help, it’s really sad.

    And especially for Scott: Don’t spread CCP propaganda ffs.

  40. Gravatar of msgkings msgkings
    6. September 2019 at 09:09


    So nothing concrete, we should just put some “critical focus” on China, do some “understanding” about HK and Taiwan, “have some ideas”…basically type things here that you like and not what Sumner types.

    Also, no mention of what we should be doing about Syria or South Sudan or Myanmar. Basically you just want to posture.

    Again, I’m a realpolitik guy. China is not a threat to the US or Germany, and HK is their country not ours. They are not the West, they won’t always do things the way the West likes.

  41. Gravatar of Benjamin Cole Benjamin Cole
    6. September 2019 at 18:11

    A second BIS High official says central banks are out of ammo, “the ball is not in our court,” and Team Fiscal will have to run onto the field in the next recession.


    Okay, as Market Monetarists, we can say, “You central bankers are still on the field! Play harder!”

    But suppose they do not listen? After all, central bankers have huge staffs, full of 100s of PhD economists and generations of thought and self-reverential tropes built up. As the BIS official cited above says, central bankers rescued the globe from the last recession through amazing derring-do, but now they have exhausted their weapons. .

    And remember, we worship at the alter of “central bank independence.”

    Hmmm. I see a problem here. The central banks say they have done all they can do, and we worship their independence. Ooooooh boy.

    So now what?

    Well, maybe fiscal will work.

    Probably money-financed fiscal programs will work better.

    Whether you like helicopters or not is not the question. Whether you like helicopters when central banks insist they are bunkered down for the duration is the question.

  42. Gravatar of Christian List Christian List
    6. September 2019 at 19:20


    I became very specific, if you don’t have the reading comprehension, it’s not my problem.

    China has made agreements with the West regarding Hong Kong. China has not complied with these agreements for years. It only got worse. Two more reasons to respond appropriately.

    I have also clearly said why I didn’t write about Syria or South Sudan or Myanmar. Again: reading comprehension. The current focus should be on China. I’ve outlined the reasons for this as well.

    But it’s funny that you mention these three countries, because each country represents at least one of the three fundamental evils that the West has encountered for several decades now. Behind each of these conflicts lurks at least one fundamental problem: The regime in Russia, certain types of Islamism, and/or the regime in China.

    The West must focus on these three fundamental problems, with the Chinese regime, as I said before, appearing to be the most urgent problem right now, as they are the most powerful.

    You are a “Realpolitik” clown who mentions Kissinger. I get that. Now only Bismarck is missing, then you have completed your meaningless name dropping. I’m not as extreme and cynical as you and Kissinger. Let me assure you of that. Waging wars and undemocratic coups d’état are not my thing. But everything else must be on the table.

    Your only “insight” so far is that “they are not the West”. Did you need a globe for this meaningless blabber, or did you come up with this on your own, without using a map at all?

  43. Gravatar of msgkings msgkings
    6. September 2019 at 20:52


    I bet that all sounded very clever in your head. Oh well, so much for discussion.

  44. Gravatar of Art Andreassen Art Andreassen
    7. September 2019 at 03:55

    China has one billion people in poverty who want to become middle class. China has no resources and a system that promises equality for all. China is building a massive a
    military with no neighbor able to invade it. Russia should be worried about Siberia.

  45. Gravatar of Christian List Christian List
    7. September 2019 at 18:03

    What a butthurt crybaby you are. Playing the dying swan. Just ridiculous. You dish out like crazy but aren’t able to take the hits. Do we need to call an ambulance or can you walk out of the door?

    Come back if your “insights” ever consist of more than “Chinese are not Westerners” and “I love Henry Kissinger”. But I doubt that.

  46. Gravatar of Michael Rulle Michael Rulle
    9. September 2019 at 05:54

    Travis D

    Index Funds are nothing like subprime CDOs. Not even the same universe. Don’t ask me if or when or how much the market will decline—-but it will have zero to do with Index funds——no more than the S&P 500 futures market. It is an absurd idea——there is always something we should always be worried about it——but “Mr Big Short” is willfully distorting.

  47. Gravatar of Mike Sax Mike Sax
    10. September 2019 at 15:29

    “The year is 3019. The British Potentate, as every year, comes to Brussels to plead for a ‘Brexit Extension’. No one knows what exactly that is.”

    “The origin of this strange ceremony is lost in the mists of time, but it’s considered to be great fun and draws tourists to the city”


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