Rick Perry is truly evil

Here is The Atlantic:

Republican Presidential nominee Rick Perry spoke in Iowa tonight and had some nasty words for Ben Bernanke. Think Progress first reportedPerry’s unusual words for the head of the Federal Reserve. Perry told supporters at the end of his first full day campaigning in Iowa that he wasn’t a big fan of the head of the Fed, and suggested that Texans would probably beat Bernanke up if he prints anymore money before the next election.

As TP points out, the punishment for treason is capitol punishment. . . .

The new quotable comes right on the back of the new Rick Perry backlash occurring in Iowa. Conservatives forwarded a 14 point memo highlighting the candidate’s problems before a radio interview Monday. Karl Rove warned about his “electability.” New York Times Washington correspondant Binyamin Applebaum tweeted that Perry’s comments were “horrifying,” and asked the question, “This is a major party presidential candidate??

Here’s what he said:

“If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous in my opinion.”

1.   Ben Bernanke is a Republican.

2.  If printing money hurts the economy, why would it help Obama get re-elected?  (I want an explanation that assumes demand-side models are wrong.)



97 Responses to “Rick Perry is truly evil”

  1. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 08:56

    Awesome! Now when you vote for Perry, it’ll be all the sweeter.

    He said it clearly it hurts the dollar in your pocket, not the “economy” as you think of it.

    He means it inflates the stock market, putting off the crisis, saving the hides of banksters… keeping Obama from bearing the brunt of his bad decision making.

    OBAMA HAD A CHOICE: he could have been Clinton. Since he chose wrong he must suffer the consequences of his choice.

    he put down his bets and he lost.

    If you aren’t able to CLEARLY and AT LENGTH explain why you think that Fed Decisions are politically neutral you are wrong here.

    Perry admits the truth, and he expects the Fed to favor the free market. A natural demand from the biggest job creating state.

    You are all going to live more like Texas. And Ben should think about who his next president is going to be.

  2. Gravatar of Lars Christensen Lars Christensen
    16. August 2011 at 09:00

    American politics is boring, predictatble and full of idiots…

  3. Gravatar of Scott Sumner Scott Sumner
    16. August 2011 at 09:01

    Morgan, OK, so he doesn’t think it hurts the economy, it just helps his rich friends who invest in stocks. Tell be again why he opposes monetary stimulus?

    Lars, You Danes are so lucky you don’t have to experience this nonsense first hand.

  4. Gravatar of Lars Christensen Lars Christensen
    16. August 2011 at 09:06

    Scott, don’t get me started on Danish politicians…they are not much different.

    Anyway, it would be interesting to ask you some of these politicians who are against “printing money” if they have any clue about the growth of M2. I think most of them would think that there have been an explosion in M2 growth…

  5. Gravatar of John John
    16. August 2011 at 09:17

    To answer question 2: Many of the tea party supporters are familiar with AUdtrian Business Cycle Theory. I also think a lot of people intuitively grasp that counterfeiting is wrong and Obama and Bernanke can use the money to bail out Wall Street at the expense of Main Street to put it in crude terms.

  6. Gravatar of Benjamin Cole Benjamin Cole
    16. August 2011 at 09:18

    Of course, printing lots of money after the GOP is in the White House is okay.

  7. Gravatar of Disgrunt Disgrunt
    16. August 2011 at 09:35

    I thought I was on Brad Delong’s blog.

    Stop being a piece of spongy fecal matter like Krugman and Delong and go back to being a more fair-handed intellectual.

    Using words like “evil” in a little blog on politics are a sign that you’ve hit your peak and have nothing more to add.

  8. Gravatar of OneEyedMan OneEyedMan
    16. August 2011 at 09:37

    Doen’t inflation just have to be bad in the longer run and good in the short run to help Obama win the election?

  9. Gravatar of Chris Cox Chris Cox
    16. August 2011 at 09:48

    Bloomberg View (Ramesh Ponnuru) is now for Nominal NGP Targeting. (http://www.bloomberg.com/news/2011-08-16/loose-money-will-keep-economy-from-sliding-away-ramesh-ponnuru.html)

  10. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 09:48

    “Morgan, OK, so he doesn’t think it hurts the economy, it just helps his rich friends who invest in stocks. Tell be again why he opposes monetary stimulus?”

    Scott, deep down you hate the idea of fire sale, huh? It disgusts you somewhat?

    Investing in stocks is fine IF YOU ALSO HAVE 12M houses being sold for pennies on the dollar – and you still choose stocks.

    Oh, wait. The Fed has been printing money to prop up housing prices to keep the banks from going under?

    So people have been forced into stocks? That sucks.

    Yeah, the investors want all the choices on the table, they don’t don’t to feel like they can’t get returns anywhere else, not when there are 12M cheap houses they should be patting themselves on the back over cigars for leaving the banksters naked.

  11. Gravatar of Thomas Thomas
    16. August 2011 at 10:03

    Perry’s wrong, but he’s no worse than, say, Democrats who complained about the threat of inflation in the summer of 2008. It isn’t hard to believe that OneEyedMan has this right, and that Perry believes, reasonably, that inflation is a short term good and a long term bad. The fact that context matters is what he misses.

    I don’t speak Texan, but I’m reasonably sure that New York Times reporters and the nice people at The Atlantic also lack that skill. I’m not sure why I should think that “we would treat him pretty ugly” necessarily implies violence.

  12. Gravatar of q q
    16. August 2011 at 10:15

    yeah, and he didn’t say what bernanke was doing was treasonous. instead, “almost treasonous”. voila, zero content! “treat him pretty ugly” doesn’t also lacks anything specific. and, nobody will ask the obvious followup questions! ah politics.

  13. Gravatar of Benjamin Cole Benjamin Cole
    16. August 2011 at 10:17


    All joking aside, Perry’s hate speech is stunning in its stupidity and callousness. Beyond that, might not some disaffected nut be encouraged by Perry’s cruel and brutish suggestions?

    Was Perry wearing jodhpurs and shiny boots when he issued this proclamation? Suffering from involuntary arm spasms provoked by martial music?

    Put this guy back in the closet.

  14. Gravatar of Scott Sumner Scott Sumner
    16. August 2011 at 10:28

    Lars, No they don’t know.

    John, How does that comment answer my question? Is more money good for the economy? If not, why would it be politically popular?

    Ben, Yes, then it’s ok.

    Disgrunt, How dare you call me disgusting names! Oh wait, it’s OK because I called Perry disgusting names. How dare I call Perry disgusting names! Oh, wait, it’s all right because Perry called Bernanke disgusting names. How dare Perry . . .

    OyeEyedman (and Morgan), But how could that be so, unless it boosted AD?

    Chris, Excellent.

    Thomas and q, Does Perry think more money boost AD and output, or not? I say he knows it does, otherwise his comment is nonsensical.

    OK, so if Perry thinks we have too much AD, too many jobs, then say so.

    Let’s be adults here, we all know he wants high unemployment until election day, so that he can be elected. It’s as simple as that.

  15. Gravatar of q q
    16. August 2011 at 10:30

    scott, i agree with you. my point, if i had one, was that he was employing a kind of weasel-speak so that he could plausibly deny responsibility for any meaning or impact his words had.

  16. Gravatar of Nick Nick
    16. August 2011 at 10:33

    I am so glad to see the heartland populists standing up to the East Coast elites and their overly tight monetary policy. The Federal Reserve Bank is answerable to the people, and it needs to loosen the money supply to help debtors, not bankers. You shall not crucify mankind on a cross of gold!

    What’s that you say?…The populists want what?

    Oh, never mind.

  17. Gravatar of CA CA
    16. August 2011 at 10:47

    I can’t believe another conservative Texan is now the front runner of the Republican party.


  18. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 11:04

    I have have answered this Scott.

    Boosting AD is purely on the N side, with no R side is not boosting AD.

    You are pretty squirrelly about this stuff.


    You stood in the way of the guys with dry powder and good credit of getting to BUY 12M houses – for pennies on the dollar.

    YOU STOOD IN THE WAY. The hard assets must trade hands – this is not about everybody having enough incoming income from a days labor, no matter what no skill job they do.

    This is about WHO gets to own the assets.

    If you really wanted NDGP, half your blog would be dedicated to making sure the assets change hands, to tearing down the guy Ben eats lunch with, and supporting the SMB owners that HATE BEN.

    We don’t all play for V and transactions and churn – we want to see the banks insolvent, we want to see a generation of students terrified of being in finance.

    We want to see millions of local upper middle class all patting themselves on the back for becoming a landlord in a can’t lose transaction that will pay for their kids college when they sell the house in 15 years.

  19. Gravatar of Mike Russell Mike Russell
    16. August 2011 at 11:15

    Morgan, if you want a questioned answered try asking it coherently. Because, honestly, I have no idea what you’re talking about. Are you advocating wealth redistribution?

    If you saying “why do you think NGDP growth will lead to higher RGDP?”, then in this post Scott talks about the relationship between NGDP and RGDP. http://www.themoneyillusion.com/?p=8687

    I’m sure there are better examples, but in just finding that one after 30 seconds I did more searching than you bothered to.

    Also, “can’t lose transaction”? No such thing, buddy, no such thing.

  20. Gravatar of OneEyedMan OneEyedMan
    16. August 2011 at 11:27

    I think I could tell a story (which I don’t believe). Taxes are on nominal returns, not real ones, so inflation raises the minimum acceptable pretax real return. If the supply of projects doesn’t change, this reduces the level of investment, leading to a one for one increase in spending on consumption. If consumption makes more heavy use of labor, this increases employment and income in the short term. In the long run it reduces the capital stock and we are all worse off.

    Is that an AD story? AD seems constant (just the mix changes)

  21. Gravatar of StatsGuy StatsGuy
    16. August 2011 at 11:28


    “This is about WHO gets to own the assets.”

    True. It is. And your guys have basically said, “we get to own them, or we’ll sabotage the political process”. And it has worked. Congratulations.

    In Rome, they called it Bread and Circus. In the US, it’s food stamps (all time record high, and climbing monthly) and reality TV.

  22. Gravatar of Wonks Anonymous Wonks Anonymous
    16. August 2011 at 11:51

    Based on the title, I assumed you were going to talk about executing Cameron Todd Willingham despite evidence that the arson investigation was botched, and sabotaging the panel that was supposed to look into it.

  23. Gravatar of johnleemk johnleemk
    16. August 2011 at 11:59


    The way you talk about AD is meaningless. Economic growth in macro terms arises from the two blades of the scissors, AD and AS. How far an AD boost leads to growth in the real economy depends entirely on the slope of the AS curve. Traditionally macro views AS as horizontal in the short run, upward sloping in the medium run, and vertical in the long run.

    In the long run, you are right — AD growth has absolutely no impact on real output, and only on the price level. In the short and medium run, you are completely wrong — AD growth leads to at least some growth in real output.

    When AD falls (i.e. NGDP growth falls below trend) and the monetary authority can act to return it to trend, the true treason is insisting that the monetary authority act to keep AD/NGDP growth below trend, as Perry has done.

  24. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 12:00

    Mike, StatsGuys is able to figure out what I’m talking about.

    And Scott knows he just doesn’t like to get into it.

    There are 12M+ homes somewhere in the REO / trustee sale process that if we marked to market OR didn’t bail out the banks, etc….

    Those houses would have flooded the market and for a short brief period of time: All the available capital would have raced to acquire them.

    We’d have seen the stock market go down, we’d have seen banks implode, and big fish in small ponds would all be fattening up their asset pile.

    What does Warren Buffet say, “the farther stock fall, the more I buy!”

    The folks that matter want to do the same thing with all the hard assets in their town.

    And because of Scott’s morality – they don’t get their Buffet moment, not yet anyway.

    Right now in SoCal on the courthouse steps the winning bids are coming in as low as $1 over opening bid.

    The guys I know running a fund in the space are bidding no more than 25% of the last listed sale price. In many of the trustee sales they are keeping the previous owner as the new renter – and he’s renting for 40% of what his mortgage was.

    The funds have been generating 14%+ YOY just on money, with no concern on real estate value at all.

    Just because giant companies haven’t owned 25K rental homes before, doesn’t mean entrepreneurs aren’t ready to make it work, they just need the one thing the banks and Ben are stealing

    the upside.


    the problem you have is this. you don’t have a dog in the fight.

    This is between the two types of wealth, one of them gets to own the hard assets.

    It WILL NOT BE the banksters, the Tea Party crowd will get the trophies.

    The question is WHY you don’t favor policies that just get it over with?

    What do you care about whether Goldman Sachs and BofA management survive?

  25. Gravatar of Meegs Meegs
    16. August 2011 at 12:21

    Perry is following the Morgan Warstler school of FED policy.

    Perry wants the FED to do nothing so the economy stays bad and Obama gets kicked out. Then he wants the FED to get the economy going for a Republican administration.

    Note that Perry didn’t say he is against money printing. He’s just against it between now and the election.

  26. Gravatar of Mike Russell Mike Russell
    16. August 2011 at 12:28

    Morgan, I think here [http://www.themoneyillusion.com/?p=10503] Scott sums up why the policies he advocates are anti-TBTF.

    What I don’t understand is your argument seems to rest on the idea that Perry is correct. Right? You feel the Fed has inflated the money supply, and that has allowed banks to survive. This has kept them from quickly dumping property, which would be purchased by smaller players who could then rent them or whatever.

    The whole proposition is based on the Fed keeping the money supply loose, but they haven’t. That’s why I am having trouble getting what you’re saying, because your base assumption seems, for lack of a better word, wrong.

    I also doubt that the entire economy would be solved by a “hard asset” (which I think you’re defining as “houses”) “fire sale”. It might clear up some uncertainty, and allow some people to make some money renting homes or flipping foreclosed properties. But is real estate really that large? I guess I need some, you know, evidence of how that mechanism would improve the economy as a whole.

    I can understand the argument on philosophical grounds, but you seem to be saying that the only thing holding this economy back is banks not selling 12M+ homes.

  27. Gravatar of Eric Mroey Eric Mroey
    16. August 2011 at 12:31


    You are wrong. The aspiring rentiers that you call the Tea Party are going to get out maneuvered buy the money behind the Tea Party and the financial industry. The gambit of the small town bigwigs to threaten to take down the system unless they get their payday at the expense of others will be their undoing.

    Here’s how they are going to do it legally:

    Don’t worry, there will be some leftovers that still run through the foreclosure process. You are stocking up on Bank equity securities while they are cheap, no?

  28. Gravatar of Thomas Thomas
    16. August 2011 at 12:33

    Scott, I agree that he thinks it does boost AD. That isn’t what makes him wrong.

    Aren’t there articles on Federal Reserve policy in election years?

    Paul Krugman wrote the following about Greenspan, back in 2004: “Some Wall Street analysts suggest that the second George Bush delayed Greenspan’s latest reappointment to pressure him to keep interest rates low until after the election.” If it were true that Bush did this (which Krugman wants us to believe it is), would Bush have been wrong? If it were true, how should Greenspan have reacted? And, more importantly, why does Krugman want us to believe it is true? Why doesn’t he say, we need more AD, and so however we get there, all the better?

  29. Gravatar of John John
    16. August 2011 at 12:39


    It would be politically popular because politicians can use the financing to spend money on politically popular projects that are economically wasteful. More importantly, printing more money leads to a short term increase in activity that people have to pay for with a bust. So the pick up in business activity would help him get elected in the short term but set us up for disaster later. At this later date, many people wouldn’t be able to understand why the bust happened and the politicians who caused it would already be reelected.

  30. Gravatar of Benjamin Cole Benjamin Cole
    16. August 2011 at 12:40

    And they say Perry has closet issues.


  31. Gravatar of Old Whig Old Whig
    16. August 2011 at 12:48

    Hedgefunds and pension funds are right now buying houses in blocks of 100s for $3k/house. ~40 % is trash. ~ 60 % is refurbished and sold with a owner financed mortgage of $30k. They get 7% interest rate. They can later bundle the loans and/or do an asset backed securitazation. In the mean time they’ve overnite made a profit of $1.5 mn on a $300 k investment as well as getting 7% interest on $1.5 mn ( at 50 % dead capital, worthless houses). 

    We also know that had not the banks, Bearns & Stearns, been bailed out the private property market would as the non bailed out commercial real estate market been back on track. In the commercial real estate market, massive mal allocation of capital to condos and hotels, an asset liquidation took place. Equity switched hands from those that took exorbitant risks to those with capital on hand. Banks with bad commercial portfolios went bust and were their portfolios bought out for 60 cents on the dollar. 

    When it comes to creating inflation it’s the rich that win and those that hold bank accounts, life and pension insurance holders as well as those living on a fixed income that loose  The winners are the already rich. A real live example of what happens is Sweden 1968-1993. Massive stimulus spending, bailouts and massive underfunded entitlement spending. The deficits was reduced by devaluing the krona countinously and by printing tons of money. In 1993 it all collapsed. We had interbank rates of 500 % and all Swedish banks became insolvent and had to be guaranteed by the taxpayer. Sweden bit the bullet and did harsh austerity, brutal asset liquidation, deregulated, abolished a but one financial regulatory authority, did away with micro managing financial regulations replaced it with light supervision. It was painful but led to Sweden having old EUs strongest economy. 

    The US, where I now live, has two ways to go. Take the Bernanke/Obama route and in 20-25 years time experience financial Armageddon or do  Sweden 1993, harsh austerity with 30 % cut in all Social Security and welfare  as well as massive tax cuts and cut government spending by 1/3.

  32. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 12:55

    Prediction: you’ll see Perry say he supports ending IOR… it screws the bankers.



    You’re nuts. Durbin isn’t able to do bupkiss. Look if you want to see forgiveness FINE.

    The debtors will be forgiven AFTER they lose the house.

    We’ll use the title mess to let them remove the ding from their credit.

    Look, the thing is in action. Fannie Freddie FHA FDIC they are reaching out aggressively and about a system for handing over “tapes” (think 500 houses in a bite).

    And at first they were trying to mix good with bad and play grab bag, but now they are going to slice and dice it up by zip code, neighborhood.

    Seeing being a landlord isn’t something bankers or Wall Street know how to do, so to get maximum dollars out, they have to drop those houses on the guys who can can actually BANG ON DOORS and collect rent.

    All roads lead to Rome Eric. The far more interesting thing you shoudl be asking yourself is:

    Since the progressive left (Dems) don’t really have a dog in the fight, WHAT COULD THEY GET if they helped the Tea Party bitch slap the bankers.

    I keep saying this but if you see Perry as against Obama you don’t get it. This is about the Tea Party being in charge, and not the oligarchs. The KOCH brothers are true believers, fully cognizant that they just needed to wake the giant.

    It is called distributism. look it up.

  33. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 12:58

    Old Whig!

    Finally someone who knows!

    Stick around, these guys could use you.

  34. Gravatar of Mike Russell Mike Russell
    16. August 2011 at 13:06

    Old Whig, I know this is the internet, but a citation please? Where are these $30,000 houses you speak of? Foreclosure rates in my area are at the national average and unemployment is hovering around 9%, but I’m not seeing 100s of $30,000 homes.

    So are we talking about specific regional collapse, Detroit and Vegas, that sort of thing?

    Or is the argument that – with the bailouts – these properties are being held by banks that would have sold them?

    I don’t think anyone is pushing for printing “tons” of money. The argument is for enough NGDP growth to return us to trend. 5%/year, something like that.

  35. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 13:11

    Mike, it isn’t the only thing holding it back. It’s the quickest way of letting the “animal spirits” run wild. Which is a very big deal.

    What we want are the big fish in small ponds all feeling smug with their new balance sheet and cheaper rents for the bottom.

    Many of those 12M homes need fixed up – lots of remodeling work at non-union wages.

    My suggestion has been that the government should only sell the tapes in zip codes / neighborhoods and should offer a big incentive – like say 25% of your purchase price back in 7 years if you haven’t sold a single property.

    To essentially keep the flippers out, and drop rents for a while. But even if they don’t listen… it’s still all finally good news.

    HOWEVER, the other side of the coin is taking on more risk in the public policy side – that means less green regulations, tort reform, less medical licensing, less bureaucracy, ending Davis-Bacon, automating government, privatizing government, pusing to states rights.

    Basically RENOUNCE Obama.

    But if Obama had just sold off the houses, and skipped Obamacare, and said we need TAX REFORM to create jobs… he could be cruising by now.

    I think the oil spill is the perfect metaphor – stop worrying so much, stop listening to the eggheads, and accept that mistakes will be made, what matters is keeping animal spirits up.

  36. Gravatar of Silas Barta Silas Barta
    16. August 2011 at 13:16

    But, but, but Scott, I thought you didn’t believe in speaking in terms of good and evil, I thought that was all obviated by your mechanistic utilitarian framework?

  37. Gravatar of W. Peden W. Peden
    16. August 2011 at 13:22


    So we can get the current bust or we can get an unsustainable boom, but nowhere in between?

  38. Gravatar of Eric Mroey Eric Mroey
    16. August 2011 at 13:33


    Learn to Read. They were criticizing Durbin. Not agreeing with him. The financial lobby will push this through without people needing to give up property if they can afford payments. The bank won’t have to right down as much while maintaining a potential upside from property values over 20+ years.

    You are wrong about the Koch brothers. They are not on your side. Unless you are in their personal favor you will not benefit from any positive sum activities of the Tea Party politics. They plan to take all of the positive sum and then some.

    All roads lead to Rome. A new oligarchy to replace the old or status quo is all that the Tea Party can accomplish.

    In the mean time, those with out a dog in your fight are trying to make sure that you stay out of the way of real progress of getting back on track economically.

  39. Gravatar of MikeDC MikeDC
    16. August 2011 at 13:33

    From a populist perspective (on both sides of the political spectrum …) printing money hurts the economy because it looks exactly like a big scam. While they’re like the shackled prisoners in Plato’s cave, what they perceive is:

    1. The government is spending at an unsustainable rate and borrowing to do it. Everyone on both sides knows it’s unsustainable, yet the government gets to borrow at shockingly and seductively low rates. How?

    2. Well, the Fed, which is owned by its member banks but somehow given nearly omnipotent power by the government, creates new money out of thin air (thereby devaluing all the money in my populist pockets). The member banks buy government debt notes with cash on hand, then sell the notes to the Fed for the newly created cash. Which they then sit on, deposited at the Fed, and collect interest.

    3. In looking this over, who are the winners and who are the losers? The winners are the corrupt and interest groups.
    * Well, the Fed banks are winners. They have a license to print money, and coupled with the Fed paying its members interest to sit on the money, have rapidly recovered from the losses they mostly shouldn’t have been allowed to recover from in 2007-2008.
    * The supplicant constituencies of government are winners, because they’ve been allowed first place at the trough on the debt extravaganza.
    * Yes, to the extent this reflated the stock market, it’s good for everyone that has a 401(k), which is most of us, but the average populist understands that this intent is secondary to the borrow/spend-print/stash money laundering scheme, and it’s largely folks with 401(k)s that are gonna pay the price when it ultimately can’t be done anymore.

    And the losers are:
    * the vast number of unemployed out there, despite what everyone assures us are gigantic quantitative easing efforts. This is especially true in the private sector.

    * Folks in the private sector who understand that ultimately devaluation hurts everyone with money, but seems to be disproportionately helping the big banks and supplicants of big government.

    * Folks in the private sector who still face tight credit, but also face increasing regulatory and perceived tax burdens and who thus conclude that now is not the time to expand.


    Call these crazy populist rantings, but they have import since something like 80% of economists, 98% of politicians, and 99% of the general public don’t understand monetary policy.

    Thus I find it difficult to get worked up about quotes from one particular politician who doesn’t understand monetary policy. One can bet candidate Barack Obama would say the same in a world where there is a President Rick Perry.

    But more importantly, the average left or right populist truly thinks this way, and has very little faith in the current monetary regime because of it. It’s one thing to say they’re totally wrong, but there’s some germs of truth in their too. And worse still, when we’re talking about what 80-99% of people think, it doesn’t much matter whether it’s right or not; it takes on a life of its own, and I seriously question whether even a correct answer from this monetary regime can succeed when the regime itself has come to be seen as so fundamentally illegitimate.


    A couple related questions for Scott that have been on my mind lately.

    1. What would monetary policy look like in a world where most people actually understood monetary policy and the EMH?

    2. Since (if I understand correctly) NGDP futures targeting would be almost entirely mechanical, would there be any use for the Fed as a quasi-public cartel of large banks or of the political processes of the US Government?

  40. Gravatar of cassander cassander
    16. August 2011 at 14:14

    All politicians are evil. In 2007, Obama was against an individual mandate and opposed to raising the debt ceiling, and most Democrats agreed with him. In 2000, Bush was against nation building and wanted a humble foreign policy, and most Republicans agreed with him. Of all the current candidates, Perry seems the most likely to actually want to reduce spending in a serious way, and not simply be saying such because it’s currently advantageous.

  41. Gravatar of joe c joe c
    16. August 2011 at 14:37

    Devaluing the dollar is not necessarily a bad thing….it makes domestic goods cheaper relative the rest of the world. This is a good thing for all those in our country who cry that we do not manufacture enough goods. Theoretically, this should create jobs (perhaps not good ones). But, we need some more low skill jobs anyhow to soak up the excess supply of low skilled workers. A but, simplistic but it illustrates Perry’s ignorance.

    Also, its not even the Presidents job to “fix” the economy. Last time I read the Constitution, which was last weekend, nowhere does it give the President legislative powers. Only the power to periodically recommend what should be done (State of the Union Address) and sign or reject legislation brought before him.

    Plus, I would like to think that my life depends on me, not who the President is. I am my own animal spirit.

  42. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 15:00

    Eric, do you want to bet? Make the terms clear. The housing is being liquidated to at least landlords and flippers, and I hope to just landlords.

    The houses are being sold, there will not be any real loan forgiveness.

    Just bet.

    MikeDc, that is EXACTLY why the only strategy is mine. The Tea Party populists have $ and votes. The progressives just have votes.

    If the shit wasn’t complicated to explain, I’d be wrong… since it is, the best strategy is for progressives to fight behind the Tea Party and let them tear down the oligarchs.

    Progressives only gain when they realize they are just the C power between the two monied interests dong battle.

    It is going to hurt for progressives, they should at least make sure it also hurts the oligarchs.

  43. Gravatar of Rick Perry and “Almost Treason” « Brian Bergfeld Rick Perry and “Almost Treason” « Brian Bergfeld
    16. August 2011 at 15:08

    […] Scott Sumner reacts to this soundbite by calling Rick Perry “truly evil“. Share this:TwitterFacebookLike this:LikeBe the first to like this […]

  44. Gravatar of Bob OBrien Bob OBrien
    16. August 2011 at 15:49

    Has NGDP growth over the last few years been the same in Texas as in the rest of the country?

    I am assuming it has been the same. So how did Texas achieve steady job growth while most of the rest of the country lost jobs. The job growth data is here:


    I would say Rick Perry has a solid record to run on!

  45. Gravatar of John John
    16. August 2011 at 16:15

    W. Peden

    This is the basically the in between. Further monetary stimulus could make things better in the short run but set us up for a bigger crisis in a few years. What Greenspan than Bernanke did in trying to prevent a depression prevented the liquidation of bad investments during the dot com and housing booms leaving us with a stagnating economy. Right now we can trust in the free market to grind out a recovery or continue to paper over our problems and make things worse later.

  46. Gravatar of Silas Barta Silas Barta
    16. August 2011 at 16:23

    @joe_c: Devaluing the dollar is not necessarily a bad thing….it makes domestic goods cheaper relative the rest of the world. This is a good thing for all those in our country who cry that we do not manufacture enough goods.

    Well, genius, if that’s such a good idea, why not devalue the currency to nothing, effectively making us slaves to the users of every other currency, but REALLY supercharging the attractiveness of using our labor!

  47. Gravatar of Scott Sumner Scott Sumner
    16. August 2011 at 16:51

    q, OK, I see.

    Nick, That’s a good one.

    CA, No new Texans!

    Morgan, You said;

    “Boosting AD is purely on the N side, with no R side is not boosting AD.”

    But why would that be politically popular?

    You misrepresent my view on housing–I also want a completely free market.

    OneEyedMan, I agree that AD would change.

    Wonks, I didn’t know about that one.

    Meegs, Yes, I see why Morgan likes Perry so much. Texans are tough!

    Thomas, I would oppose the President pressuring the Fed for easy money in 2004, as there was obviously no need. Today we obviously do need more AD, so I oppose Presidential candidates trying to intimidate the Fed into not easing.

    I have no idea what Krugman thinks of all this, but my hunch is that he agrees with me.

    John, You said;

    “More importantly, printing more money leads to a short term increase in activity that people have to pay for with a bust.”

    So let’s see, you are telling me that with 9.1% unemployment we have to worry about the economy overheating? Would Perry be worried about an overheating economy if he was president?

    Old Whig, I agree with much of what you say.

    1. We need to stop subsidizes speculation in housing. We must go from a debtor society to a high saving society. Sweden offers lots of lessons.

    Sweden also led the way in this recession, showing how stable monetary policy could provide a fast recovery, avoiding the need for huge deficits as far as the eye can see.

    Needless to say, Rick Perry is not a Swedish-style (consensus) politician. He’s a class warrior. Mitt Romney is more of a consensus politician.

    Silas, I have no idea what you are talking about, I often use terms like good and evil. Evil people are people who aren’t utilitarians.

    MikeDC, No we wouldn’t really need the Fed. BTW, keep in mind that “printing money” traditionally refers to buying interest bearing debt with non-interest-bearing cash. The Fed isn’t doing that. It’s doing the reverse of that, as reserves now earn more than T-debt.

    Cassander, You said;

    “All politicians are evil.”

    I agree, it’s a matter of degree. Indeed I suppose all people are evil, at least to some extent. But not everyone is as malicious as Perry.

    I think he’d be a poor president, as he wouldn’t be able to work with the other side.

    joe, And appoint people to the Fed, his most important task.

    Bob, Yes, Texas has done very well, they’ve had well above normal NGDP growth, however.

  48. Gravatar of joe c joe c
    16. August 2011 at 17:59

    Hey, Silas, why so serious?

    I did not say it was “such a good idea” to devalue the currency, I merely pointed out that its not always “necessarily” a bad thing. That implies there is a limit to the amount a currency can depreciate without it being deleterious. I was trying to point out that there are inconsistencies in people’s economic arguments, or at least that there is always another point of view. Gov Perry is taking Obama to task for not creating enough jobs but he is also saying the fed, to help Obama, is devaluing the currency. One thing that can potentially create jobs.

    @ Sumner:

    Some would say the President’s most important job is to appoint supreme court justices. But hey, good Fed people are important too.

  49. Gravatar of MikeDC MikeDC
    16. August 2011 at 18:08

    “BTW, keep in mind that “printing money” traditionally refers to buying interest bearing debt with non-interest-bearing cash. The Fed isn’t doing that. It’s doing the reverse of that, as reserves now earn more than T-debt.”

    Isn’t this to say Fed policy with positive IOR combines the appearance and some of the longer-run dangers of traditional “printing money” with little to none of the expansionary benefits to the economy at large?

    In that context, is it really hard to understand a bit of malice directed at the Fed? Heck, you’ve been railing about IOR and 9% unemployment for years now. Aren’t you a little pissed?

  50. Gravatar of W. Peden W. Peden
    16. August 2011 at 18:14


    “Isn’t this to say Fed policy with positive IOR combines the appearance and some of the longer-run dangers of traditional “printing money” with little to none of the expansionary benefits to the economy at large?”

    Absolutely. It also creates a major black hole in theory, in that (at least in the short-run) removing IOR could have a major expansionary effect. Or not. Prof. Sumner isn’t sure and I’m even less sure.

    Pretty much all monetary theory that isn’t utterly worthless (like MMT) is premised on the basis that M0’s non-interest bearing, depreciating nature makes it radically different from other assets in a modern chronically inflationary economy. Introducing IOR fundamentally changes the dynamics of the monetary system away from traditional theory and distorts the relationship between M0 and the broader aggregates.

  51. Gravatar of Thomas Thomas
    16. August 2011 at 19:15

    Scott, you don’t address whether you think that the Fed ever makes policy decisions for political (or partisan political) purposes. And you don’t explain why believing that monetary easing would increase AD means one should support additional monetary easing now. Is John Taylor evil because he disagrees with you?

  52. Gravatar of cassander cassander
    16. August 2011 at 19:40

    Scott> That’s true, but I don’t seem to recall you thinking Obama was evil for being against raising the debt ceiling in 2006. You assumed, rightly, that it was political posturing. Why do you assume that Perry isn’t doing the same? Seems to me that ANY Republican is going to have to criticize whatever th Fed does, right up until January 20th.

  53. Gravatar of james in london james in london
    16. August 2011 at 21:42

    If Lars doesn’t want to talk about Danish politicians what about the state-arbitraging, but totally state-dependent, highly leveraged, credit-bubble inducing, imprudent leading Danish bank. How Danish banks can’t ven operate without explicit support for “unsecured” wholesale funding.

  54. Gravatar of Morgan Warstler Morgan Warstler
    16. August 2011 at 22:40

    I think we can identify a common trait amongst the sniveling, there are many things they do not want to talk about.

  55. Gravatar of Morgan Warstler Morgan Warstler
    17. August 2011 at 00:59

    Scott, this is why you HAVE TO convince Perry on Tea Party Terms (you go deliver some progressive scalps).

    “To understand why, consider Mr and Mrs James Rentier (a), an apocryphal family in their early 50’s living in upstate New York. The Rentiers are middle income: $80,000 in adjusted gross income, 3 children and $300,000 in savings after setting aside 10% of their income over the last 30 years. Over time, as they aged and given their limited safety net, they shifted their investments into cash and short term fixed income. The current tax system is friendly to the Rentiers; at their income level, after standard deductions, available child tax credits and the payroll tax holiday, their fully-loaded effective tax rate is around 14.5%. But now consider the impact of QE (quantitative easing) on this family. Money market yields, in a normal cycle, are ~ 2% over core inflation; that would be around 3.5% today Zerophilia deprives this family of ~$8,200 per year in after-tax interest income. How substantial is that? Let’s normalize interest rates, and then compute the increase in effective tax rates that results in the same amount of after-tax income the Rentiers have today. As shown below, the punitive impact of QE on this family is the same as raising effective tax rates by one third. These are the unintended consequences of QE: a wealth transfer fromsavers to the over-leveraged, and perhaps, to owners of stocks, although this latter channel isn’t working that well. Note: this is before considering the impact of rising commodity prices on the Rentiers (the Fed rejects the notion that QE affects commodities).”


  56. Gravatar of q q
    17. August 2011 at 01:49


    they saved that $300,000 in CASH? or in CDs or money market instruments? why would they do THAT?

  57. Gravatar of Jeff Jeff
    17. August 2011 at 03:14

    I was watching Fox News last night and Charles Krauthammer was complaining that, at the same time Perry was being criticized for his remarks, Obama on tour was saying that Republicans were putting party ahead of country, but no one seemed to be upset about that.

    What Krauthammer misses is that while Obama was criticizing other politicians, Perry was criticizing someone who’s not supposed to be political.

    The die for this was cast when Bernanke joined Paulson in telling Congress that TARP had to be passed right away because the sky was falling. The public perception is that the Fed is on the side of the guys getting multi-million dollar bonuses at taxpayer expense. It’s no wonder that Fed-bashing is back in fashion.

  58. Gravatar of Jeff Jeff
    17. August 2011 at 03:21

    If you think the fact that Perry and Bush both are from Texas means something, what about Obama and Blogojevich both hailing from Illinois?

  59. Gravatar of MikeDC MikeDC
    17. August 2011 at 04:35

    I will just say that if you know your history it’s more than a little strange to see the “progressive left” jumping to the Fed’s defense.

    I know it’s important to say all the right things when you’re in academia and when you want to engage with noted left-wing intellectuals, but really, there’s a huge elephant in the room here, and I don’t mean the GOP.

  60. Gravatar of Old Whig Old Whig
    17. August 2011 at 06:09

    Mike Russel, 

    It’s happening on the ground right now! Not in the 100s but in the 1000s per month. (info not from the Internet but from real time local info). 

    The luxury failed condo project I now live in was taken over by a large over capitalized, specialist property investment fund, they first bought the note for 60 % on the dollar and now “bought” the property for $47mn, full value of note $98mn. The original investors put in $7 mn equity. 

    Inflation is a beast you cannot tame, control. I grew up in Sweden when we tried exactly the policy you prescribed. In the US Nixon tried it too. In Sweden inflation peaked over 10%. Mortage interest rates close to 20%.  I bought my first condo 1982 and paid 12% interest I remember felt  I was “lucky” so low did I think that rate was. In the US and Sweden in the late 70s inflation ran amok wages as a result ran amok, prices ran amok. Because of the US devaluations and Sweden’s, caused by Nixon leaving the Bretton Woods government debt could expand uncontrolled.

    The US dollar compared to the Swiss Franc of 1973 is worth ~80 % less. The Swedish krona’s worth is even lower.


    Sweden is in a certain aspect a consensus economy. However between 1968-1993 Sweden did a sharp left turn and it resulted in it’s crises. Sweden was before 1968 and again after 1993 was what you in the US call Responsible Liberal, fiscal conservatives that believed in equality but always,always put growth before equality (welfare and income redistribution is a distant second to growth). 

    In 1968 the Loony Left, in the US called Progressives, took command in Sweden. Equality was promoted before growth and entrepreneurship was demonized and taxed to extinction. All entrepreneurs and large family owned businesses fled Sweden for Switzerland and the UK. 

    The consensus that created the Swedish “miracle” was and agreement by the hard right, center and responsible liberal to shun the Loony Left. 80 % of the parties agreed on principles. It could only take place because the Loony Left, Progressives was shunned and marginalized. 

    The consensus was only achievable because if the emergence if people like Rick Perry, the hard fiscal conservative Right and a small but vociferous minority if classic liberals (in the US called libertarians). 

    Consensus in the US can be reached not by marginalizing the Rick Perry’s but by marginalizing the Loony Left, Progressives. Their foremost economic spoked person and scholar is Paul Krugman and their premier media outlet is NYT. In Sweden the cultural and media elites were hard core communists/socialist  and still are, more than 50 % but they were also marginalized by the Moderate Majority among Swedish politicians. The used us classic liberals as their avant garde, attack dogs. 

  61. Gravatar of Morgan Warstler Morgan Warstler
    17. August 2011 at 06:09


    Read: “Over time, as they aged and given their limited safety net, they shifted their investments into cash and short term fixed income.”

    The POINT is that that real people who matter, who have $$$ to spend on elections, who are likely voters are not getting their couple of points a year like they always have.

    Don’t deviate from the point.

    It’s a big deal, and not one that we wave off because an extra 4% of the population isn’t being FORCED to work – I’d auction the work week (starting at $1 per hour) of everyone receiving UI.

    It is a BIG ENOUGH DEAL that we expect to topple the state regulatory system BEFORE we print more money.

  62. Gravatar of Morgan Warstler Morgan Warstler
    17. August 2011 at 06:12


    “Consensus in the US can be reached not by marginalizing the Rick Perry’s but by marginalizing the Loony Left, Progressives. Their foremost economic spoked person and scholar is Paul Krugman and their premier media outlet is NYT.”

    One side has real power the other side doesn’t. Because one side delivers the productivity gains, and the other cries about externalities.

  63. Gravatar of Martin Martin
    17. August 2011 at 06:16

    For someone as Perry to talk bad about stimulative monetary policy, he sure seemed to engage in a lot of stimulative fiscal policy over the years.


    I wonder how they treated him down in Texas for that. 😛

  64. Gravatar of Fake Herzog Fake Herzog
    17. August 2011 at 06:19

    Morgan and Scott,

    Here is another response to Ponnuru’s piece:


    I used to be more of an inflation hawk, strong dollar guy until I started reading Scott. I think our goal should be to get Scott to write advice for Perry, who will be our next President and will be much better than the current occupant of the White House. Monetary policy does involve some value judgements, but there are a lot of technical issues that Scott is well-positioned to explain to the Perry’s of the world.

    Can’t we all get along?

    P.S. Scott — this is a good general introduction to Perry written by a cute reporter:


  65. Gravatar of Mike Russell Mike Russell
    17. August 2011 at 08:08

    In the business we call this anecdotal:

    “It’s happening on the ground right now! Not in the 100s but in the 1000s per month. (info not from the Internet but from real time local info).

    The luxury failed condo project I now live in was taken over by a large over capitalized, specialist property investment fund, they first bought the note for 60 % on the dollar and now “bought” the property for $47mn, full value of note $98mn. The original investors put in $7 mn equity.”

    Look, I believe this is happening and I believe there is money to be made. But the assertions, if I am understanding it correctly, is that banks are able to hold 12M+ empty homes because of TARP and QE1&2. And they should be forced to clear their balance sheets in a fire sale, which will allow hedge funds to purchase these homes and sell them. And that would fix the economy because of renovations. And it’s loose money that is preventing this from happening.

    (a) Without some kind of real evidence, I don’t think this is large enough to have the stimulative effect you’re discussing.
    (b) Our money supply is tight.

    And Morgan, forcing people to work is called slavery. As a Perry supporter, you’ll want to be more sensitive of drawing that connection.

  66. Gravatar of Morgan Warstler Morgan Warstler
    17. August 2011 at 09:27


    You are a idiot. Tell you what, you read my actual PLAN:



    Which BTW Sumner ENDORSES, you read it and then after you have taken the time to get what I’m saying, you can accuse me of promoting slavery.

    Until that time, you are an idiot. And whenever you post here, I’ll just cut and paste this response… because if you are that big an idiot, or simply someone who doesn’t take the time to read, it needs to be publicized.


    On the 12M houses, the REALITY is if the government TRULY wanted to liquidate them three years ago, the Fed could have RAISED rates.

    Think of it this way: Three years ago, the Fed says “mark to market” and overnight the BIG banks are insolvent. The small banks that originated the loans and sold them off are told they MUST take 20% on new mortgage loans they originate. There is no forgiveness, FHA and, Fannie and Freddie start to close up shop.

    The houses sell for nothing and they sell FAST. A house that last sold for $500K is now $100K, but only for guys with $20K and 750 credit scores.

    The inventory is gone overnight… like in a month or two. AND the small regional banks just originated 6M (the original foreclose inventory) loans are PSYCHED.

    And when the smart guys who got their money out early, are buying what was a $500K house for $20K down, if rates are higher they don’t care.

    Now during that time, there’s a short period where homes prices plunge and then recover and the inventory clears, but it doesn’t really effect the 1/3 who own their house outright, or the 1/3 who have real equity (bought before say 98), it just effects the low real equity folks wh come to realize their house isn’t gong to appreciate in the near or mid term.

    They are not being promised forgiveness, there’s not a $8K credit, the 20% down means far fewer first time home buyers.

    So MAYBE another 6M homes quickly get jingled mailed and go through same process.

    The point is that for the public: Rents are plunging which is good for the poor and newly homeless, and the local SMB Tea Party style entrepreneurs are happy – a couple million of them are now landlords, the system WOKED. And the small regional banks are happy.

    Who’s not happy? Who cares.


    That’s EXACTLY what Sumner needs to do. He needs to accept the political realities and work within them. Tilting at windmills is waste of time.

  67. Gravatar of Benjamin Cole Benjamin Cole
    17. August 2011 at 09:46

    Perry has decided he will wear jodhpurs “for the duration.”

    The big q: What kind of riding crop will he favor?

  68. Gravatar of ja ja
    17. August 2011 at 10:05

    I think asking for a sound and rational basis for any politician’s claims is too optimistic. In their minds it seems to be “‘inflation’ sounds bad and ‘devaluing the dollar’ sounds real bad so I’m going to say the other side is doing / wants to do those things.” Then they can hint that it helps their “rich friends and bankers” but it’s not really necessary since the implication is always that the other side hates America…

    See, for instance, the explanation of the evils of inflation and the Fed from Ron Paul’s camp: http://www.ronpaul.com/on-the-issues/fiat-money-inflation-federal-reserve-2/
    Like, does this make sense: “In our story there are now twice as many dollars in circulation, but your income remains the same and each dollar you earn is worth only about half as much as it used to be.”
    Oh, and this is why they do it: “Who benefits from inflation? Only those who are at the top of the pyramid and receive all that new money directly from the source. As you might have guessed by now, the source is the Federal Reserve, and its recipients include the government…”

    OK, RP is crazy but this rhetoric is apparently convincing people.

    Where are you finding 12M homes in REO?
    I mean this is different by an order of magnitude or two: http://www.corelogic.com/about-us/news/corelogic-reports-shadow-inventory-continues-to-decline.aspx

  69. Gravatar of Mike Russell Mike Russell
    17. August 2011 at 12:30

    Morgan Morgan Morgan, if you want someone to read your “plan” then link to it before saying “It’s a big deal, and not one that we wave off because an extra 4% of the population isn’t being *FORCED to work – I’d auction the work week (starting at $1 per hour) of everyone receiving UI.*”

    Because “FORCED to work” sounds a lot like slavery.

    So, under your plan the currently unemployed gain $10K/yr but lose the ability to say “No, I don’t think I want to pick up dog poop in your yard for an hour for $2.” That’s the plan, right? And that will lead to full employment because I’ll say “I don’t feel like doing the dishes” and I’ll go on this webiste and find someone who has to drive to my house and do my dishes for $3/hr no matter what.

    Oh, wait, in your second post, am I allowed to turn down the offer to pick up dog poop?

    See: “In an Ebay model, both sides give feedback, so both employers and employees gain reputations that each side can use when bidding / *accepting* work.” I thought I had to accept whatever employer bid most for my labor, so who cares about employer reputation? And how do you mean “accepting work”? After all, you’re forcing me to work if I’m in this program. There’s no accepting, except in the sense that I am accepting my fate as your dog poop cleaner.

    Also, I love the idea that there was no unemployment before minimum wages. Again, citation please. (If I’m paraphrasing incorrectly, it’s because your writing is aggressively unclear.)

    I would also love to see a link to where Dr. Sumner, or anyone else, endorses this “plan”. Not negative income taxes. Not basic income with a labor component. Your ebay-based servitude plan outlined in your links. Show me someone. Not a commenter on your blog. Not you deciding that Milton Friedman would love it. Pretty please, show me someone that endorses that plan.

    One of the most frustrating things about our current post-modern era is how people just say things, and then insist they are true without any evidence. This used to be something I mostly identified with the Naomi Klein-left, but clearly that was a foolish assumption. I mean, obviously, the right has people just as sloppy.

    @ja – thank you for bringing sources into the conversation!

  70. Gravatar of Scott Sumner Scott Sumner
    17. August 2011 at 12:55

    joe, The Fed’s more important.

    MikeDC, You are right, and I am pissed.

    Thomas, I see no signs that Taylor is motivated by wanting to see the country suffer so that he can be elected President.

    Cassander, I want them to criticize the Fed, but not for money being too loose. Romney’s not complaining money is too loose.

    Morgan, That’s wrong, because low rates are the result of tight money, not easy money. If we had easier money like Australia, our rates would be much higher. I wish we did.

    Jeff, Good point. But it’s not just that they are both from Texas, they seem quite similar to me in personality.

    Old Whig, Interesting analysis. I keep pushing libertarian ideas over here, so I feel I’m doing my part. But tight money is the enemy of conservatism/libertarianism. It caused the demise of the US conservatives in the early 1930s, and the Argentine conservatives in the early 2000s.

    Fake, You said;

    “P.S. Scott “” this is a good general introduction to Perry written by a cute reporter:”

    I agree with both opinions you injected into that sentence.

    ja, It’s populism at its worst.

  71. Gravatar of What Happened? « Portrait of the Economist as a Young Man What Happened? « Portrait of the Economist as a Young Man
    17. August 2011 at 16:21

    […] http://www.themoneyillusion.com/?p=10540 […]

  72. Gravatar of Mike Sandifer Mike Sandifer
    17. August 2011 at 17:04

    What would piss me off were it surprising is that Obama’s now trying to sound tough on the economy and wants to push a big jobs bill through after refusing to fight when it counted. It seems all too convenient and it wouldn’t surprise me if this were part of his plan all along. How’s that for cynicism?

    On the other hand, I also wouldn’t be surprised to know that he’s changing his tune in response to his falling poll numbers, the weaker economy, and actually listening to voters at his rallies who are unhappy with him, to be kind.

    Obama doesn’t deserve another moment in office and I couldn’t blame anyone at this point for choosing someone like Romney or Hunter over him. He’s been a lame duck since the healthcare bill passed anyway, and there’s no reason to believe that’ll change, especially given that second terms are usually lame duck. We need action, and Obama is simply a failed president.

    Since he seems to want to pretend to be an activist president now, how about some pressure on the Fed? History has it that it worked for Roosevelt and Nixon.

  73. Gravatar of Morgan Warstler Morgan Warstler
    17. August 2011 at 18:51

    Mike, I like to do napkin analysis and force you / see if you think — I only need to give an example “a bar offers a pre-paid coupon on dinner in a short time window” you need to be able to extrapolate and construct the entire operating structure of Groupon / Tippr – assume talent fixes things to grasp what I mean at scale. I even say Ebay / Paypal. They are industrial applications.

    Suffice to say that IF you screw around at the periphery of the argument annoyed you or anybody might have to pick up dog shit…

    You aren’t really much of a business mind, which means to me -you CAN’T be much of an economist. I don’t trust people talking about the economy who don’t know how to start and scale a business.

    A real business / economist mind would skip right over dog shit, but not you….

    So to help you, we auction MAN WEEKS. There is nothing chaotic about it. Money has to be placed into system before hiring even happens.

    If you do a good job for somebody, your tasks are documented by you, you are giving feedback on the employer, and even if they rate you poorly, if they keep hiring you, a computer algorithm will figure out for other bidders that they are intentionally underrating you.

    Clients who routinely underrated get exposed and employees get weighted.

    You want to get better offers, so you carry around your phone and do before after pictures of your work, you build yourself a web presence – this shit is NOT NEGOTIABLE in the future, it is stuff everyone is going to do, have to do in the course of being employed. What is normal for Internet guys today will be standard fare for everyone in 15 years.

    You want to make more money, so you are combing through the system looking for jobs you can snipe, figuring out that YES picking up dog shit for an entire neighborhood (who go in a buy you together) pays more than working for a kindly out lady who’s daughter just wants her to have company.

    Now you might not like what putting 16M people to work looks like but you shouldn’t act like this isn’t a REAL PLAN.

    And yeah, ask Scott, he’s annoyed more than one prig here by supporting it.

  74. Gravatar of Morgan Warstler Morgan Warstler
    17. August 2011 at 18:55

    Scott, I think you need to go deep and long on Easy Money / Tight Money.

    Silas asked a good question around it.

  75. Gravatar of Mark A. Sadowski Mark A. Sadowski
    17. August 2011 at 22:59

    Well, I’ll be damned!

    It turns out that Rick Perry used to be a Democrat! Perry was elected to a West Texas state House seat in 1984 as a Democrat and even served as Al Gore’s Texas chairman during the 1988 presidential race. He only switched to the GOP in 1989.

    Believe it or not, this actually raises my opinion of him in my eyes. He was one of mine, that is, before that bastard switched.

  76. Gravatar of John Thacker John Thacker
    18. August 2011 at 00:55

    “Believe it or not, this actually raises my opinion of him in my eyes. He was one of mine, that is, before that bastard switched.”

    I have to say I find that sad. Especially since there’s little indication that he actually changed his views on much (I don’t really consider LBJ that different from GWB, either), so it’s just a case of rooting for your favorite team, not policy.

  77. Gravatar of Mike Russell Mike Russell
    18. August 2011 at 02:29

    Morgan, you’re truly adorable. I see now, you’re an idea man. You’re looking a the BIG PICTURE! Let the little people figure out the details, right?

    But here is the thing, anyone can say “there should be coupons on the internet.” The details are what makes Groupon into Groupon. Implementation is everything, my friend.

    And what I’m saying your plan is impossible to implement, lacks any kind of internal logic, and requires high levels of coercion. All you’ve done is loosely sketch out a government run elance where the freelancers lack the ability to turn down work.

    But, hey, I’m glad you – in your mind – have developed a plan to put 16M people to work. Good luck with that.

    p.s. I notice that you again didn’t respond to my request for citations, or show me an economist that supports your plan.

  78. Gravatar of Rob Rob
    18. August 2011 at 04:17

    The most curious part of the statement to me is this part: “I dunno what y’all would do to him in Iowa…” Shouldn’t a national candidate try to convince voters he understands them and not that he doesn’t understand them?

    This too shall pass.

  79. Gravatar of MP MP
    18. August 2011 at 05:26


    Add me to those who are… disappointed by title of your post. I’m not too impressed with this statement from Perry either on rhetorical or economic grounds, but ‘truly evil’? That’s well over the top.

    Not sure what Perry is thinking with regards to point 1, but at a guess he’s trying to pay outsider v insider as more important that party affiliation. Hardly the first to do it.

    As for point 2, the people I know who are really concerned about inflation focus on the tranfer of value from a minority of responsible savers (themselves) to the majority of irresponsible over-borrowers. The macroeconomic impact is a side issue. Another possibility is that inflation offers short-term, illusory gain but with long-term costs. Isn’t this the basic argument for independent central banking?

    I’m not making these arguments myself, but I can see how they’d make sense to some people.

  80. Gravatar of Thomas Thomas
    18. August 2011 at 05:40

    Scott–Let me know if I’m missing something: I’ve shown that accusations of partisan or political bias in Fed policymaking aren’t unusual or unprecedented, and have in fact been made recently by some of those criticizing Perry. And we agree that there are those who are mistaken about the merits of monetary easing without being mistaken about the immediate effects and without being motivated by wanting to see the country suffer for political benefit. Since we agree on all that, how do we get to “Perry is truly evil”? Mind-reading?

  81. Gravatar of Morgan Warstler Morgan Warstler
    18. August 2011 at 05:47

    Mike, as you imagine it, there’s no such thing as a “idea man.” To get that title, you have to go from from idea to “problem solved” – that’s WHY I expect you to be able to do it, before you have opinions on the economy.

    Ideas are 1 in 1000, then the 1 figures it all out, and turns it into a company. And the success rate of the those that “get it done” is somewhere between 1 in 5 and 1 in 20.

    If you can’t birth the idea and actually deliver it, you aren’t an idea man.

    You apparently are still in the 999. I myself have only done technology startups for 16 years, so I’ve earned the title.

    Funnily enough, my idea ALREADY works. There is nothing new in it. I’m just explaining to you what government WILL LOOK LIKE when the Internet guys get hold of it… You just don’t want to pick up dog shit.

    Remember, three years ago Matty was STEADFAST against the idea of larger classrooms, now even to him it is a fait accompli.

    Budget crisises are GREAT because government finally runs like I want it to… with the fear.

    That’s why we won’t just be printing money, this is HOW we force government to become GOV2.0.

  82. Gravatar of Scott Sumner Scott Sumner
    18. August 2011 at 09:38

    Mike, Yes, at this point Obama looks like a failed president–unless he turns things around fast.

    Mark, Him and Strom Thurmond.

    Rob, Good observation.

    MP, You need to explain why you are disappointed. Is it inappropriate to insult Rick Perry? If so, why? he’s a public figure who is behaving very irresponsibly, and causing damage to the economy. I consider that evil. It’s an American tradition to insult those people. Obviously I don’t need to worry about hurting his feelings, as he’s not the sort of person who objects to over the top language. If I thought he was well-intentioned I wouldn’t have insulted him. He seems like the sort of person who doesn’t want what’s best for the country, but rather what’s best for him and his cronies.

    Thomas, I’m claiming Perry wouldn’t make this argument if he was president. So I don’t see the other cases you mentioned as being equivalent. I don’t recall Dems complaining about easy money during Bush’s first term, even though they had a much better better justification for making that complaint.

  83. Gravatar of Scott Sumner Scott Sumner
    18. August 2011 at 09:40

    MP, One other point. In an earlier post I pointed out that our tight money policy is really hurting savers–and they’d be much better off with easier money and higher interest rates.

  84. Gravatar of Mike Russell Mike Russell
    18. August 2011 at 10:08

    Morgan, I notice that you consistently refuse to cite outside sources to back up your claims, and now are just insulting me personally. I have held back from insulting you, even if I have been dismissive of your so-called plans and your explanation of them. Why can’t you do the same? Try refuting my argument instead of just calling me dumb.

    Also, there are ~14M unemployed people in America. [http://www.bls.gov/news.release/empsit.nr0.htm] And it looks like there are about ~4M people collecting UI. [http://money.cnn.com/2011/08/18/news/economy/unemployment_benefits/]
    So, here is an implementation question, how does your plan provide employment for the remaining 10M people? After all, you claim that your plan will eliminate unemployment. When you say “eliminate unemployment” do you just mean unemployment insurance? Or do you have alternate sources to refute these numbers? Because the way I look at it, your plan – ceteris paribus – only solves less than 1/3rd of the employment problem.

    [Scott, I’m sorry I’m not dropping this. It is childish of me, I know.]

  85. Gravatar of Scott Sumner Scott Sumner
    18. August 2011 at 17:47

    Mike, Insults are Morgan’s specialty.

  86. Gravatar of Thomas Thomas
    18. August 2011 at 19:35

    Scott–I quoted Krugman insinuating that Greenspan had traded reappointment for easy monetary policy through the election, which as I read it was both a smear and an attempt by Krugman to intimidate Greenspan into raising rates. We don’t have to go looking for examples, I’ve pointed you to one above in the thread. But I hope you are right that he won’t make this argument if he’s president. I’m worried that he will, and that conservatives will take failed monetary policy to be a lesson on Obama’s policies just as Obama mistook failed monetary policy for regulatory failure.

  87. Gravatar of Morgan Warstler Morgan Warstler
    18. August 2011 at 20:33

    Mike Russell,

    I’m a very benevolent libertarian realist. I am giving any US citizen who wants to work Guaranteed Income. I’d expect the number to push past 20M at the start. And then when some people have to work, it drops off a bit…

    But I’d encourage the handicapped, the elderly, the mentally slow, ANYBODY who will let the private market try and make a buck on their labor… as long y keep giving it the good old Harvard try – then they are in like flynn.

    Also, don’t get too hung up on the hour minimum guarantee, I pulled $5 + $1 (from the bid) from the ether, because I honestly don’t think that anybody is only worth $40 a week. I think American entrepreneurs can probably make a profit off anybody at $3…. which get us to about the current minimum wage overall in my schedule.

    Note in my schedule even when someone get $10.50 per hour, the government is still kicking $.25.

    What matters is that the GI program is truly graduated, so each new $X per hour bid saves the government 1/2X per hour.

    And what matters is that there’s no real conditions on the buyer. They aren’t on the hook for taxes, workers comp, just deposit the $, win your bid, the worker shows up the following week. Old fashioned simplicity. Internet simplicity. Government is forced to be simple.

    Yes, part of that is getting rid of UI and minimum wage (officially). Now realistically it might not get cut down to zero weeks, but I’d after 90 days of someone not finding a job, society should make them get in the GI system.

    I KNOW this is hard for you, but you have to keep asking yourself… If you could buy a guy’s week for $120, do you THINK you could justify it / make a profit off it?

    And I am granting you the compliment that you are the kind of person who realizes that putting 20M people to work this way is EASY PEASY.

    At $120 per week, there are probably 5M households who’d take on full time staff.

    Yes, some will work from home. Yes, some will be “shared” but REALLY the interesting thing is that Day Care get CHEAP, so more mommies can work.

    And IF the government would be an honest bidder – meaning someone is trying to get real value out of it – I’d be happy to see the government bidding $4 per hour for park monitors or lawn mowers etc.


    Now while you are looking up data, think about the cost savings associated with this spend 20M * $10K a year = $200B at max.

    $200B. Dude, for $200B the Fed doesn’t have to print money.

  88. Gravatar of Mike Russell Mike Russell
    19. August 2011 at 03:11


    Ah shit man, thanks. That’s great, that’s really really great. Too too funny.

  89. Gravatar of MP MP
    19. August 2011 at 05:59


    Perry comes out with bad economics and overheated rhetoric. You respond with better economics but similarly over-the-top rhetoric. That’s why I was disappointed. I’m new to your blog, but I’ve found the economics really interesting and your willingness to engage in dialogue is great. So I guess I was expecting a high-minded dismantling of Perry rather than the “He brings an knife, you bring a gun” escallation of name-calling. You say it’s an American tradition? It’s one American tradition I guess I’d rather go without.

    I also think there’s a pretty big gap between stupid irresponsibility and evil, and I generally operate on the principal of assuming the former. But hey, if you’ve looked into Perry’s soul and determined that he wants to tank the economy for personal gain, you may be right that he deserves the latter.

    On a substantive note, can you point me to the post on tight money being bad for savers? I saw your point about high rates being linked to loose money and vice versa, but I thought that was just getting at the nominal/real difference. And I guess if you’re saving at a floating rate, you should be fairly indifferent to inflation. But if you’re saving at a fixed rate, how is subsequent inflation not bad for you? Or, given long-term fixed rate mortgage debt is more common for the average person than long-term fixed rate savings, how is an increase in inflation (above that which is implicitly priced into your fixed rate) not a benefit to debtors? I can absolutely see how a period of high inflation could be both policitally popular (given the prevelance of over-extended debtors) but economically damaging to savers and the economy in general. I know a few people who are worried about precisely this, and I assumed that was what Perry was getting at too. (Again, I’m not saying this myself. I get the case for moderate inflation. I get that we’re below target. I’m not particularly worried about excessive inflation. But if you were, I could see how you get from there to a ‘good for Obama / bad for economy’ conclusion.)

  90. Gravatar of Morgan Warstler Morgan Warstler
    19. August 2011 at 06:45

    Mike Russell,

    I took from your question you actually wanted to understand.

    Is there some gaping hole in logic that neither I (nor Scott) am failing to see?

    With the dead on rock wall of debt realities we are running into, and the clear technology trends in the private economy – I don’t know why you think this isn’t a trend for the public system.

    Please enlighten!

  91. Gravatar of johnleemk johnleemk
    19. August 2011 at 07:25


    The moral and ethical implications of the economics are pretty clear. Someone who calls it treason to implement policy that would put millions of people back to work and enhance real living standards, simply for his own political gain is evil. Name-calling is fine by me, as long as it’s backed up by empirics.

    Maybe it’s because I grew up with the Westminster-style political tradition, where politicians call each other all sorts of names in Parliament, as long as they don’t mislead the House.

    Re inflation’s impact on saving, that only holds true in a static analysis. In a dynamic analysis, when nominal growth leads to real growth (as it does in a demand crisis like the one we’re in), inflation helps savers.

  92. Gravatar of Doc Merlin Doc Merlin
    19. August 2011 at 07:28

    “I am giving any US citizen who wants to work Guaranteed Income.”

    Well, the bottom quintile have a negative income tax rate which is kinda like a guaranteed income. Well, its a subsidy on work anyway.

  93. Gravatar of Mike Russell Mike Russell
    19. August 2011 at 08:07

    Let me sum up your plan:
    Step 1 – Internet!
    Step 2 – ???
    Step 3 – 100% employment!

    So, here are some honest implementation questions:

    1) Joe is laid off from his job and is unable to find work within three months, so enrolls in your GI program. He lists his skills on the site, and someone bids $3/hour for his labor. Is Joe allowed to take vacation time? If someone bids on his labor 52 weeks each year, does he have to work all 52 weeks?

    2) If yes, how does Joe interview for a full-time position somewhere and leave your GI program?

    3) Joe has no ability to quit his job in your program; if the firm keeps bidding for his labor he has to keep going to the office. I assume to not do so would be a criminal act since you say “FORCED”. What incentive is there for the firm to treat Joe well?

    4) In the absence of a competing firm, what incentive is there for the company to bid up the price of labor?

    5) Do you personally have any problem, morally, with Joe losing the right to negotiate the price of his own labor? I’m just curious.

    6) Does Joe have the right to leave your program at any time? If Joe decides he would rather beg on the street corner does he have that right?

    7) If you found yourself unemployed and broke, would you enter your GI program?

    8) Say this plan is enacted, how do you address the inevitable 13th Amendment challenge?

  94. Gravatar of Mike Russell Mike Russell
    19. August 2011 at 08:18

    You know what Morgan, don’t bother answering those questions. I really don’t care about your crackpot ideas. It’s not even fun anymore. This is just stupid.

    I’m sure the companies you’ve started have employed tens of people, so who am I to argue with you about the economy, right?

    Good luck, God bless, but we both have better things to do with our time.

  95. Gravatar of Scott Sumner Scott Sumner
    19. August 2011 at 17:34

    Thomas, Krugman isn’t running for president, and hence can’t intimidate anyone. I’m not defending him, as I don’t know the facts of the case, just pointing out it’s a completely different situation.

    MP, You said;

    “I also think there’s a pretty big gap between stupid irresponsibility and evil, and I generally operate on the principal of assuming the former.”

    I agree, and 99% of the time I’d give them the benefit of the doubt. But this seemed blatant. I’d be interested in knowing what sort of actions by a politician you’d consider evil. And don’t mention Hitler, that’s an over used cliche–something more relevant to the US.

    Here’s the post on savers:


    One more point about evil. In the late 1937 minutes of the Fed, one Governor admits he was reluctant to change course (as a recession approached) because it would make the public question the Fed’s previous decision to raise reserve requirements in early 1937. The Fed would lose face. He actually said that. Is that evil? I say yes.

  96. Gravatar of MP MP
    20. August 2011 at 06:47


    Thanks for the link to the other post. Makes perfect sense to me. I thought I might be missing something more subtle. Of course, you make it clear in the title you’re talking about “a little inflation”. The people I know who obsess about inflation are concerned we’ll blow right through that to very high levels or even hyperinflation, either because it’s hard to fine tune these things or in a deliberate effort to bail out irresponsible borrowers. (Again, not my view.)

    As for the evil, I think we might just have to agree to disagree on the threshold. I can’t think of anything by a modern US politician I’d classify that way. If we go back a few years, I’d tag the virulent segregationists that way. Widening out from politicians, I’d see ‘evil’ in anti-abortion bombings and shootings, political violence around G-20 and similar events, things like that. When it comes to most policy though, I guess I give the benefit of the doubt 99.99% of the time to your 99%. If, for example, I though Bush had wanted to invade Iraq to help out his friends in the oil and arms industries, I’d consider that evil; but I think he truly believed that it was in the long-term interest of the country. If I thought Obama was deliberately sabotaging the economy so he could leverage people’s fear to expand the role of government and the Democrats’ political power, I’d consider that evil; but I think he really thinks he’s putting out the best policies he can. As for the 1937 Fed Governor, that does sound pretty bad. If it’s a simple matter of worrying that “People will laugh at me at the club”, I’d probably call that cowardly rather than evil. If he was thinking that the Fed needs to maintain credibility to be effective and this wasn’t the right place to spend that, I might not even be that harsh. If it was “Screw the economy, I have my own portfolio to worry about”, that would rate as evil.


    I don’t think the implications of the policy are that clear, but that’s kind of beside the point. Say Perry’s economics were better and he said instead “Failure to implement NGDP targeting is almost treasonous.” I’d still object to the rhetoric, even if I liked the substance. And I don’t go for the “I’ll see your ‘treasonous’ and raise you an ‘evil'” approach.

    Not sure whether that difference in views is due to different political traditions or not. I have plenty of exposure to Westminster politics, and while it’s certainly more lively than the US legislature, I can’t remember anyone calling anyone else ‘evil’ over macroeconomic policy. (I think the notion of ‘evil’ was discredited once Bush used it in his Axis of Evil speech, but that’s a whole tangent we probably don’t need to go down.)

  97. Gravatar of Scott Sumner Scott Sumner
    20. August 2011 at 14:40

    MP, It is not at all hard to prevent high inflation–just don’t let TIPS spreads rise above 4%. Not one country in the entire world has had trouble controlling inflation since the Taylor principle was discovered. Not one. That’s not luck, it’s because it’s not hard to do.

    Of course some countries like Zimbabwe didn’t try to control inflation.

    I agree about Bush and Iraq. An regarding Perry, I’m actually more used to taking your side of the debate. It just ticked me off.

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