The Fed is never “done”

The rate cut today was a good start, but we need another 50 basis points at next week’s meeting. At a minimum, the Fed needs to un-invert the yield curve ASAP. A new communication strategy (say level targeting or average inflation targeting) would be even more helpful.

Sometimes I worry that policymakers think in terms of being “done”.  “Oh God, here’s the market asking for another rate cut again.  OK, here you go—are we done now?”

Imagine a lazy truck driver.  “Oh God, another turn in this damn highway.  OK, I’ll turn the steering wheel one more time.  Are we done now?”

The market reacted to this rate cut on Monday last Friday; from now on it’s reacting to signals of future Fed policy .

BTW, David Beckworth directed me to an excellent post by Julius Probst.

Off topic, file the following under misleading statistics. Did you know that the total number of people with the coronavirus has been steadily declining over the past two weeks (due to recoveries exceeding new cases?)

Yes, the exponential growth in “other locations” will soon change this, but nonetheless it’s a surprising fact.

PS. People interested in the epidemic might want to read mbka’s excellent comment, which discusses the situation in Singapore. I found it informative on several different levels.

PPS. Some commenters are peddling the theory that recent market actions are partly explained by the changing fortunes of the Sanders campaign. Maybe one or two percent of the recent market action, at best.

PPPS. I like this comment from Scott Alexander:

I already own a P100 respirator. I bought it during fire season last year, aka the-air-is-unbreathable season. Living in California is full of excitement, and after a couple of years you end up prepared for lots of stuff. And the other day, I wore it on the BART – a densely-packed subway full of people who are constantly breathing in your face. And my friends told me – haven’t you heard that the government says masks don’t work?

An N, P, or R rated respirator, worn properly, in specific high risk situations, can be an appropriate part of a safety strategy. I think an accurate treatment of the topic would admit this, while also stressing the reasons most masks might not appropriate for most people in most situations. The statements and articles I’ve read don’t seem up to this level of subtlety. Instead, they seem focused on getting people to do what they consider the right thing (not hoard masks and panic) at the cost of oversimplifying the situation, sometimes up to the point of mistruth.

Their goal is understandable, and maybe this kind of simple messaging is the right choice during a pandemic. But the thing is, I doubt any government preparedness czar called up the major media companies and started their pitch with “I’m going to ask you to make an unprecedented sacrifice today”. I doubt there were hours of soul-searching in newrooms and government PR departments as people considered whether to take this step. I think this happened instantly and seamlessly because it’s what everybody has been doing all the time for years.

So no, don’t use masks or respirators unless you know what you’re doing and are sure it isn’t inconveniencing anyone else. But also, try to pay attention to the forces shaping your informational environment.

I probably won’t wear a mask, but I like the final sentence.

Update: With Biden’s chances improving, here’s a fun fact. In 2008, roughly 69.5 million people voted for Joe Biden for Vice President of the United States. By 2016, the US population had increased by nearly 20 million over the 2008 level. So how many in this vastly more populous country voted for Trump? Less than 63 million.

And yet, I somehow still expect Trump to win. There’ll be an “October surprise”. (Russia won’t let Trump lose.)

Update#2: I never thought I’d be rooting for traffic jams in Beijing. Yay!!

What a strange world we live in!

Here’s an updated graph:


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85 Responses to “The Fed is never “done””

  1. Gravatar of Steve Steve
    3. March 2020 at 10:48

    Is the Fed talking about interest rate cuts instead of their real job — inflation targeting — and their real tool — money supply shifting — an unfortunate sign that they’ll create more recessions for us in the future?

  2. Gravatar of Garrett Garrett
    3. March 2020 at 10:51

    Commentary I’ve heard today: “markets sold off after the rate cut because now the market knows there’s something to worry about”

    That’s pretty typical. It’s so twisted up it’s like string theory, Not Even Wrong.

  3. Gravatar of ssumner ssumner
    3. March 2020 at 10:58

    Steve, Well, that’s how they always talk.

    Garrett, Yes, and didn’t markets actually rise after the rate cut? ( I was asleep at the time.)

  4. Gravatar of msgkings msgkings
    3. March 2020 at 11:09

    @ssumner: sometimes your sarcasm is pretty dry, are you kidding? Markets plummeted after the rate cut today. And the longer interest rates kept plummeting too.

    Is there any doubt now we are going to have a recession? The bond market sure thinks so.

  5. Gravatar of Jim Bowerman Jim Bowerman
    3. March 2020 at 11:11

    Scott, yes markets rose after cut

    They started the sudden drop with the Powell press conference

    Powell said, that at the moment, they aren’t considering any other tools (still in review, etc) which imo spooked the market

    General tone at the conference wasn’t great imo

    10 year below 1% by the way 🙁

  6. Gravatar of Garrett Garrett
    3. March 2020 at 11:17

    10 year bounced a bit off 92 bps. Scary price action.

    Hey does anybody know why the 5y TIPS rate dips? 4y is -0.5288, 5y is -0.6296, and 6y is -0.5003

  7. Gravatar of cove77 cove77
    3. March 2020 at 11:26

    there’s also notion that other global cb’s were either a) tapped out or b) not persuaded that corona crisis warrants an emergency rate cut BBG/Alan Blinder of view that if you were’nt ALARMED before now you should be because FED knows something no one else either knows or believes

  8. Gravatar of Brian Donohue Brian Donohue
    3. March 2020 at 11:33

    Very good post. I think markets are mostly reacting to the virus right now, because there is a huge cone of uncertainty. But Bernie is a decent chunk of this too- it’s a binary choice and the odds have moved up. I suppose over time we’ll get a clearer picture of the constituent elements.

    My gut says the virus thing is an overreaction and Bernie ain’t gonna win, so…

    Anyway, yes, another 50 bp cut in March would be just what the doctor ordered, but markets are only expecting 25 bps in April, so I expect the yield curve to limp along for a while here inverted (but actually steep between 10 and 30).

  9. Gravatar of Cameron Blank Cameron Blank
    3. March 2020 at 12:09

    If you believe betting markets, Bernie’s odds have fallen considerably since yesterday’s close (50% to 32% nomination, 22-10% presidency) with no corresponding rally since then (this morning stock market was down 1% pre-rate cut, rallied and was up 1% after the rate cut). That’s strong evidence Sanders represents roughly 0% of the recent fall.

    From a practical standpoint, Sanders odds have never been great and even if he wins he’s not going to get 95% of his policies enacted so I wouldn’t expect markets to care much. The conditional probability of him winning and enacting any given policy of his has never been high enough to be relevant, especially with the coronavirus/aggregate demand issues in play right now.

  10. Gravatar of rayward rayward
    3. March 2020 at 12:14

    Again, if trade doesn’t get back on track, and soon, the world will experience a major supply shock. And we are in it (the world, that is). Monetary stimulus cannot replace the supply chains in China. Interest rate cuts and other monetary stimulus might boost asset prices, but only if investors buy the Fed’s game. These are interesting times. Oddly, few economists are offering anything but conventional wisdom. Is this another economist fail? [This is not a criticism of Sumner; indeed, his thoughts on this blog offer more creative thinking than what’s on offer elsewhere.]

  11. Gravatar of Jeff Jeff
    3. March 2020 at 12:33

    I don’t think it’s at all clear how the Bernie factor will play out. If Bernie is nominated, his perceived radicalism could mean a Nixon vs McGovern landslide for Trump and Republican control of both Houses of Congress. But if he’s denied the nomination and his backers think it was done unfairly, they might stay home on Election Day. Mayor Pete and Sen Klobuchar both dropping out the day before Super Tuesday and endorsing Biden is surely feeding suspicions that the fix is in.
    The Dems have been kowtowing to their radical Progressive wing since the second Bush administration, and now it’s coming back to bite them.

  12. Gravatar of Ray Lopez Ray Lopez
    3. March 2020 at 12:37

    Sumner spoke too soon, market down now at 3:30 PM nearly 600 points (PPT might kick in the last 30 min). Why professor? Just face it: animal spirits not rational expectations shape markets.

    Sumner: “Off topic, file the following under misleading statistics. Did you know that the total number of people with the coronavirus has been steadily declining over the past two weeks (due to recoveries exceeding new cases?)” – NO! I own this “misleading statistic” and have been spamming everywhere this point. The ‘new cases’ are highly relevant because it shows that the Covid-19 virus has not been stopped in the wild. Only when new cases *in China* stop (or drop dramatically, which they’ve not) will the disease be over. In fact, the stock market seems to respond to “new cases in China” a lot. There was jump in new CHN cases over the weekend. And why is China relevant? Since in effort China’s on the vanguard. If China cannot stop Covid-19 *new* cases, then the disease will infect the world. It’s not enough to say, like Sumner does, “more people are being cured”. The point is, none of us want to catch Covid-19 in the first place.

  13. Gravatar of ssumner ssumner
    3. March 2020 at 12:40

    Msgkings, You said:

    “Markets plummeted after the rate cut today.”

    Are you sure? I was under the impression that markets rose after the rate cut and fell during the press conference.

    Predict it has a 40% chance of recession this year, which seems about right to me. I’m just as in the dark as anyone else. I will say that the Chinese economy now seems to be recovering, which is a good sign.

    Thanks Jim.

    Garrett, If it makes no sense then it may be random noise—illiquidity or something.

    Cameron, Totally agree on Bernie—the price action doesn’t match his changing win probability, at all.

  14. Gravatar of Adam Adam
    3. March 2020 at 12:52

    Traffic is up in Beijing because everyone is taking a cab because they are terrified to be in the subway.

  15. Gravatar of Jim Bowerman Jim Bowerman
    3. March 2020 at 12:59

    Scott, got any contacts at CNBC?….pulling my hair out today listening to it all day and could use a voice of reason

    Mishkin was on today but even he was a bit too upbeat given that 10 year is dropping pretty hard

    Could do a quick phone interview!

    Been busy forward your econlib, etc posts to Kashkari on twitter…who knows..maybe Powell will take a read. I know he browses twitter

  16. Gravatar of Jim Bowerman Jim Bowerman
    3. March 2020 at 13:01

    Mishkin interview for those who missed it:

    https://www.cnbc.com/video/2020/03/03/the-fed-was-right-to-cut-interest-rates-former-fed-governor-mishkin.html

  17. Gravatar of msgkings msgkings
    3. March 2020 at 13:07

    @Jeff: It’s not a ‘fix’ when candidates drop out and endorse someone, it’s how the process works. The party is coalescing around Biden to beat back Sanders. Primary challenges happen all the time where one faction wants some insurgent (Reagan in 1976, Obama in 2008) but the ‘establishment’ works to promote their candidate (Ford in 76, Clinton in 08).

    The fact that Hillary got way more votes than Trump in 2016 even after the Bernie Bros were mad she stole it from them (the DNC emails) means a primary fight doesn’t necessarily ruin the party’s chances.

    It’s more fun this way, compared to when the candidates are obvious from day 1.

  18. Gravatar of dlr dlr
    3. March 2020 at 13:07

    The market reacted to this rate cut last Friday; from now on it’s reacting to signals of future Fed policy.

    Come on. The market was *down* an hour after the 230pm Friday statement. Almost all of its “reaction” actually came Monday afternoon. What’s more, the March Fed Funds contract barely budged on Friday afternoon. This morning, however, it rocketed (implied rate dove) immediately after the 10am 50 pt cut. I think you are cheating the event study and fitting the facts to a narrative that markets are responding in understandable ways to looser than expected policy. in fact I think it’s extremely hard to tell a consistent story of these past few days.

  19. Gravatar of John Arthur John Arthur
    3. March 2020 at 13:11

    Scott,
    This whole story of the Chinese economy is interesting to say the least. China is finally reaching where the East Asian nations were in their vast slowdown periods. I think by the end of this decade, China slows down to 2% growth.

    Also I think their growth for this year will be 4-5%. Contraction in the first quarter, 10% growth in the second, and low growth in Q3 and Q4.

    Also, a quick economic question about California:
    According to Statista, CA’s population grew about 1 million from 2013 to 2018.
    https://www.statista.com/statistics/206097/resident-population-in-california/
    But Fred has CA’s wages rising some $400-500 Billion. That is astonishing amount of growth for minimal wage increases. What happened during 2013? A minimum wage hike?:
    https://fred.stlouisfed.org/series/CAWTOT

  20. Gravatar of Brian Donohue Brian Donohue
    3. March 2020 at 13:16

    Scott or anyone,

    Today’s TIPS closing yields make no sense to me.

    https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield

    Yields on 20 and (especially 30) year TIPS skyrocketed today. The TIPS curve is mind-bogglingly steep and long-term breakeven CPI is around 1%. Is this just some kind of blip or reporting error by Treasury?

    Thank you.

  21. Gravatar of msgkings msgkings
    3. March 2020 at 13:28

    @dlr: This is probably correct. People are too quick to say what ‘the market is telling us’ with every 20 minute spike or drop. It’s many factors, especially now with so much news: virus, Fed, election, economy…

  22. Gravatar of dlr dlr
    3. March 2020 at 13:31

    Brian Donohue. Those numbers are completely wrong long terms TIPS yields dropped today. The 30YR real tips year closed at an all time low of just above zero. Not sure why the Treasury website is wrong maybe Pence is the new HTML Czar.

  23. Gravatar of Brian Donohue Brian Donohue
    3. March 2020 at 14:00

    Thanks dlr.

    website has 20-year at 0.14% and 30 year at 0.70%. I’m guessing maybe -0.14% and 0.07%. Not a great week for bureaucracy.

  24. Gravatar of John Arthur John Arthur
    3. March 2020 at 14:02

    One important thing,
    AtlantaFed has GDP growth tracking 2.7% for Q1. US economy will do fine this year, coronavirus will not hurt it too much.
    https://www.frbatlanta.org/cqer/research/gdpnow

    I would estimate that the fall in the Stock Market is due to the Chinese slowdown, and the weakness of the other countries in the global economy. US is actually doing much better than most people think.

  25. Gravatar of P Burgos P Burgos
    3. March 2020 at 14:05

    Is Sumner predicting that Russia will blackmail the Fed into juicing the economy, with an unexpected rate cut coming in October?

  26. Gravatar of Ryan Fitzgerald Ryan Fitzgerald
    3. March 2020 at 14:18

    Brian,

    LT TIPS rallied strongly today. The Treasury is definitely wrong:

    https://finance.yahoo.com/quote/LTPZ?p=LTPZ

  27. Gravatar of Ryan Fitzgerald Ryan Fitzgerald
    3. March 2020 at 14:19

    Brian, see here as well:

    https://www.wsj.com/market-data/bonds/tips

  28. Gravatar of Benjamin Cole Benjamin Cole
    3. March 2020 at 15:05

    I sometimes think it is sadists who become macroeconomists and obsessed with monetary policy.

    Suppose the unemployment rate was 8% and inflation was running on target for several years at 2%. Then, the Federal Reserve should declare victory?

    I thought the purpose of macroeconomics was to promote prosperity.

    Instead I see acolytes in the Temple of Orthodox Macroeconomic Theology, kneeling down before the hoary 2% Inflation Totem.

  29. Gravatar of ssumner ssumner
    3. March 2020 at 15:05

    Adam, I presume you’re joking, but just in case you aren’t—no, they are less fearful than last week.

    JIm, I just did an interview with an S&P reporter, but it won’t come out for a few days.

    I saw the Mishkin interview, it was fine.

    dlr, I erred in saying Friday, I meant Monday. My take is that markets rose Monday on expectations of a rate cut, and also immediately after the cut, then fell on disappointment over the press conference. That may be wrong, but I don’t see any obvious alternative interpretation. Do you have one?

    Brian, I’m not sure, Bloomberg doesn’t show anything out of the ordinary going on with TIPS today.

  30. Gravatar of Benjamin Cole Benjamin Cole
    3. March 2020 at 15:31

    One caveat to Scott Sumner’s interesting observation that the number of people with coronavirus is actually declining, due to recoveries.

    There actually may be millions of people with coronavirus, but who are simply asymptomatic or had a mild cold. this number is unknowable, but could be expanding rapidly

    The death rate from coronavirus in South Korea is very low. I think this is because the Koreans, who are good at everything, are also very good at testing people who might have been exposed to coronavirus.

    The coronavirus strikes me as an overblown scare story.

  31. Gravatar of dlr dlr
    3. March 2020 at 16:18

    dlr, I erred in saying Friday, I meant Monday. My take is that markets rose Monday on expectations of a rate cut, and also immediately after the cut, then fell on disappointment over the press conference. That may be wrong, but I don’t see any obvious alternative interpretation. Do you have one?

    I wish I could give even an answer to this that felt even modestly satisfying. I’m finding it much harder than usual to tell a coherent event-study type story for the last few trading days that fits my general model of the world. Here are some event facts:

    1. Friday 230pm. Powell surprises markets with oddly-timed vague and terse “act as appropriate” release.

    10YR Breakevens: drop from 1.46 to 1.40 next 30 minutes, close 1.43
    SPY: From 290, vacillates up to 294, down to 288 next hour, spikes last 5 minutes of trading to close at 296.
    FF March: declines from 1.42% 1.35% at 2:30pm then drops back to 1.42%, closing unchanged (from 229pm) at 1.41%.

    2. Monday. G-7 coordinated response rumors leak Monday @ 11am.

    10YR Breakevens: Open at 1.41, drop to 1.38 at 1030am then rise to 1.41 on G-7 news. drop back to 1.40 from noon to 3pm then spike to 1.46 in last hours.
    SPY: Open 298, drop to 294, up to 304 on G7 news late morning then drops to 299 next 3 hours until late spike to 309.
    FF March: open at 1.27, hit 1.23% on G7 at 11am close back up at 1.29%.

    Here I thought word was maybe getting out late in the day that the aforementioned G-7 release was going to include a coordinated cut or stimulus, which seems a little surprising.

    3. Today. G-7 releases anemic statement pre-market. Powell 50 bps cut arrives at 10am.

    10YR Breakevens: Open at 1.45%, spike to 1.51% on cut, at 1.48% by 1pm then drop to 1.42% before closing flat at 1.45%.
    SPY: Open at 309, jump to 313 on the cut, sit around 311 for a bit, drop to 304 during powell press conference but then back up to 308 but the end. Close at 300.
    FF March: open at 1.32%, immediately hit 1.1% on release then continues down most of the day to close at 1%.

    ***

    I think it’s an unavoidable conclusion that the market was not pricing in all of today’s cut given the immediate move in the March FF contract on the announcement, much bigger than any other move Friday or Monday.

  32. Gravatar of ssumner ssumner
    3. March 2020 at 16:25

    Ben, How many people were on the Diamond Princess? How many got sick? How many died. How many were not tested?

    dlr, You said:

    “I think it’s an unavoidable conclusion that the market was not pricing in all of today’s cut given the immediate move in the March FF contract on the announcement, much bigger than any other move Friday or Monday.”

    I agree with that, and the general view that there are recent market moves that are hard to explain. Some may reflect the progress of the virus—I don’t know.

  33. Gravatar of msgkings msgkings
    3. March 2020 at 19:09

    @dlr and ssumner: The reason you guys don’t know is that it’s unknowable. In a time like this with so many news crosscurrents and heightened volume and volatility, there are many reasons markets move in a given day.

    And algorithms are a big part of it too, sometimes the computers buy because the other ones are buying.

  34. Gravatar of Tom Brown Tom Brown
    4. March 2020 at 00:23

    msgkings, it always cracks me up when I hear a market movement pseudo-explained by a market journalist in a few seconds. Here I’ll generate an example one, but perhaps extra ridiculous:

    “Markets move up today on news that glaciers in Antarctica are melting slower than projected.”

    It’s so ridiculous. Almost all of those qualify as “just-so” stories. https://en.wikipedia.org/wiki/Just-so_story

  35. Gravatar of mbka mbka
    4. March 2020 at 01:35

    Scott,

    “Off topic, file the following under misleading statistics. Did you know that the total number of people with the coronavirus has been steadily declining over the past two weeks (due to recoveries exceeding new cases?)”

    The levelling-off pattern might repeat itself in Korea. After a week of pretty explosive growth at the rate of 400-600 new infections a day, we are already “down” to adding at best 150 cases a day, in Korea. China adds cases at less than that daily while being about 30x larger than S Korea, and is now mostly concerned with not re-importing cases: https://www.channelnewsasia.com/news/asia/covid19-china-reports-new-virus-cases-more-death-coronavirus-12498578

    As with SARS, this moves in clusters – which do have a chance of being controllable.

    Another thing that might make a difference: faster testing. Singapore is introducing border checkpoint swabs for identifiable risk groups that give a result within hours: https://www.moh.gov.sg/news-highlights/details/additional-precautionary-measures-in-response-to-escalating-global-situation (scroll down to “Precautionary testing for symptomatic travellers”).

  36. Gravatar of Benjamin Cole Benjamin Cole
    4. March 2020 at 03:10

    Ben, How many people were on the Diamond Princess? How many got sick? How many died. How many were not tested?–Scott Sumner

    I don’t know. From news accounts, six passengers have died. Keep reading, good news follows.

    I would like to see some demographics on the Diamond Princess passengers. They were probably an elderly demographic, and even within that group, looking for an “easy” vacation. The only person I knew who traveled cruises fit the category of older and very sedentary.

    Adding to the confusion, I have not read of crew fatalities on the Diamond Princess. I think there were none, after Google search.

    https://www.cruisewatch.com/top-10/ships-passenger-crew-ratio

    If this website is to believed, there were nearly as many crew members on board as passengers.

    This news account says, “An estimated 2,670 passengers and 1,100 crew members were forced into quarantine beginning on February 3,”

    https://www.aljazeera.com/news/2020/02/filipino-crew-leave-diamond-princess-remain-board-200225020355478.html

    So, judging from dubious news accounts, you get six dead of 2,670 passengers, and out of 1,100 crew members, you had zero deaths.

    That may be telling, about the zero crew deaths. I sure hope it is accurate. In other words, out of 1,100 reasonably healthy adults (the crew), cooped up on a diseased ship-prison, you had zero deaths.

    A 0% death rate for non-elderly adults after heavy and sustained exposure to coronavirus.

    President Don Trump is right again?

    (And lucky? Who could not beat Joe Biden? And where is Pat Paulsen when we need him? Or Alfred E. Nueman)

  37. Gravatar of Spencer Hall Spencer Hall
    4. March 2020 at 05:13

    “Neutrality of money is the idea that a change in the stock of money affects only nominal variables in the economy such as prices, wages, and exchange rates, with no effect on real variables, like employment, real GDP, and real consumption.” – Wikipedia

    There is a “sweet spot”, a window of time where money is robust – not neutral. Milton Friedman agreed with this.

    If there is a short-run robustness, there isn’t, paradoxically, necessarily a long-run robustness.

    Bankrupt-u-Bernanke “In particular, as Friedman told us, a monetary expansion has its more immediate effects on real variables such as output, consumption, and investment, with the bulk of these effects occurring over two to three quarters.”

    Bankrupt-u-Bernanke “The proposition that money has no real effects in the long run, referred to as the principle of long-run neutrality, is universally accepted today by monetary economists.”

    Bankrupt-u-Bernanke “The idea that monetary policy had long-run effects–or, in technical language, that the Phillips curve relationship between inflation and unemployment could be exploited in the long run–proved not only wrong but quite harmful.”

    Remarks by Governor Ben S. Bernanke At the Federal Reserve Bank of Dallas Conference on the Legacy of Milton and Rose Friedman’s Free to Choose, Dallas, Texas –October 24, 2003

    http://www.federalreserve.gov/...

    Bankrupt-u-Bernanke cited Nobel Laureate Dr. Milton Friedman’s “lecture, “The Counter-Revolution in Monetary Theory.” Friedman’s “11 propositions”

  38. Gravatar of Spencer Hall Spencer Hall
    4. March 2020 at 05:27

    Bankrupt-u-Bernanke: In his book “The Courage to Act”

    “Beyond a quarter or two, the economy is difficult to forecast”.

    So the “window of time”, as Nobel Laureate Dr. Milton Friedman advocated, is 2-3 quarters.

    And that modeling corresponds to mine – exactly 10 months for the last 100 + years.

  39. Gravatar of Jose Jose
    4. March 2020 at 06:03

    Prof. Sumner
    The FED did more and faster than the markets were pricing. Under your framework, do you think that was a good thing? I have the impression that fed officials should just follow the markets. Whenever they differ, people start asking why…

  40. Gravatar of Todd Ramsey Todd Ramsey
    4. March 2020 at 06:21

    Prof Sumner

    1. An honest question, for which I have never seen a complete explanation on your blog: Is an inverted yield curve a symptom, or a cause of future economic decline?

    2. Reconciling Rational Expectations with huge market swings: Markets continuously price in not only the total of all KNOWLEDGE of investors (constrained by information costs), but also the total of all EMOTION experienced by investors.

  41. Gravatar of Todd Ramsey Todd Ramsey
    4. March 2020 at 06:36

    Prof Sumner

    3. Is this a good time for you to advocate for elimination of interest on excess reserves? Seems like a blunt tool is warranted here. And your voice is increasingly respected by monetary authorities.

  42. Gravatar of Michael Rulle Michael Rulle
    4. March 2020 at 06:57

    Nice try that “69.5 million people voted for Joe Biden in 2008 election”. 69.5 million voted for the combined ticket of Barack and Joe—-as you well know. I wonder how many would have voted for Barack had Joe had not been on the ballot—-who knows or cares.

    I was surprised by the results——although in retrospect, I don’t why I should have been, one way or the other. It is interesting how close up we see the candidates in the debates in the early primaries——but no debates prior to Super Tuesday states. Joe won for the reason he was ahead early on in the season—-last summer. Few people saw him stumble in debates and the party hates the socialist tag. Clearing out the so called “moderate lanes” helped. I wonder, assuming Warren quits, which she has not yet done could help `Sanders. I think she wants to go out like a Buddhist Monk, circa 1965.

    Bloomberg’s entire decision making arc was terrible. He obviously did not want to run for President when all else did. If he had come on like a strong decisive guy in the debates THEN his 5-7 hundred million may have helped. He had promised to put the same amount of money in the Dem candidate that eventually won. If he does, I guess it can’t hurt.

    Although Joe began his Super Tuesday “victory” speech by confusing his wife and his sister——I have never seen him speak better——which while it seems like damning with faint praise —-which it really is——I honestly did not think he could string together a grammatically coherent speech for that length of time. Maybe there are medicines one can take, or if his elation dragged him out of a depressive funk, or if he did not feel like he needed to respond to others it may have caused him to do well. Also, although I had viewed this as complete denial by Dems—-I am now starting to believe none of that forgetting what he is saying in mid-sentence, etc., matters anymore.

    An average of 6 betting sites as of sometime yesterday has Biden at 63%. The “dark arts” of the GOP forecasting machine clearly wanted Bernie.

    But he is still very close, obviously. If this stays close AND Bloomberg can start getting 15% there will be a brokered convention, most likely. But the party will do everything the can to get Biden there and hope Bloomberg keeps his promise.

    And hoping for a recession is surely part of it—-not an accusation—-it’s just politics.

  43. Gravatar of Michael Rulle Michael Rulle
    4. March 2020 at 07:22

    PS—-wow—Bloomberg is out. No brokered convention possible—-I believe it is not arithmetically possible——certainly not practically speaking. This implies he will back Biden with a fortune—-unless he shocks in some other way. Trump will continue with his “they screwed Bernie” meme—-which will now be used to scrape a bunch of those mystical anti-establishment Bernie supporters to his side.

    Well, at least Scott does not have to vote for Bernie—-although that may have been his first choice!

  44. Gravatar of ssumner ssumner
    4. March 2020 at 09:13

    Ben, You probably ought to do some research before responding. If you don’t know the answers to my questions, that’s fine. But don’t talk like you do. Don’t provide meaningless data.

    mbka, Interesting.

    Jose, Good question. The Fed may do more than the markets expect it to do, but it still may be too little if the markets had expected “much to little.”

    Todd, 1. It’s a symptom, or “prediction” if you prefer.

    2. I doubt emotion plays much of a role, it’s rational for markets to have wild swings at a time like this.

    3. I’ve always favored elimination of IOR. And I doubt my voice is “increasingly respected”.

    Michael, You said:

    “did not think he could string together a grammatically coherent speech for that length of time.”

    Thank God we’ve never had a president to fit that description. Oh wait, all the recent GOP presidents fit that description. I meant thank God we haven’t had a Democratic president that fit that description.

    And I always vote Libertarian.

  45. Gravatar of Jose Jose
    4. March 2020 at 09:29

    But then the market monetarism framework falls apart. Every round one must follow the framework. If analysts/policy makers second guess it all the time, there is no framework.

  46. Gravatar of Ray Lopez Ray Lopez
    4. March 2020 at 10:13

    Sumner: “And I always vote Libertarian.” – strange for a practical economist who likes Concrete Steps to waste their vote on a Libertarian ticket, which typically runs pedos and weirdos like John McAfee as potential candidates. But Sumner is full of paradoxes, even and especially with his unorthodox but excellent book “The Midas Paradox”.

  47. Gravatar of Michael Rulle Michael Rulle
    4. March 2020 at 11:19

    Very funny. I tried to be specific with my “grammatically correct”—perhaps I just should have said something more simple—like “complete finished sentences”. But, as I said, Biden has crossed over—in a way similar to Trump—people have accepted how they speak.

    Libertarian—-that makes sense—meaning it seems consistent with much of what you say—-although, you must think Trump is really dangerous to prefer a guy like Bernie—not extremely distasteful or even extremely corrupt—but dangerous.

    and if he finishes 8 years with America reasonably well off or better, you will say “man, did we get lucky”—

    hope we get lucky

  48. Gravatar of Christian List Christian List
    4. March 2020 at 15:52

    mbka’s excellent comment, which discusses the situation in Singapore. I found it informative on several different levels.

    Oh yeah, especially the beginning. Historic moment indeed. I’ll try to remember that before I talk bad about mbka ever again.

    Ben, How many people were on the Diamond Princess? How many got sick? How many died. How many were not tested?

    This should be solvable: 3,711 people on the ship. Everyone was tested, some several times. 705 people have contracted the disease, of which 392 are asymptomatic so far.

    As of 29 February, there have been only 10 recoveries (?) and 6 deaths. Concerning the deaths, at least 4 out of those 6 were over 80 years old, for the other two I can’t find any age information at the moment.

    6 from 705 is quite a lot, and it may not be all. Of course you can blame this on the wrong execution of the quarantine and the pretty high age of cruise participants in general, but you also have to consider that probably very few extremely sick people can go on a cruise in the first place. You have to be reasonably fit to a certain degree, you can’t be bedridden.

    Critics say Japan has responded inappropriately. I tend to agree.

    Oh look Obama got a comment for scaredy-cats and mask aficionados:

    https://twitter.com/BarackObama/status/1235246706817630208

  49. Gravatar of ssumner ssumner
    4. March 2020 at 15:55

    Jose, Sorry, I don’t follow that.

    Ray, All votes in California are wasted, the Dems will win the state.

    Michael, I’ve said over and over and over again that Presidents have relatively little impact on the course of events in America. I usually estimate that about 3% of the outcomes are due to the President, and 97% to other factors.

    Here’s an analogy. If I get very irate about the job my plumber does, it doesn’t mean I think my plumber will cause a recession. I’m not a child, like certain other pundits. But it also doesn’t mean I have no cause to be upset with my plumber.

    BTW, I’ve been calling Biden a buffoon for decades. My views are pretty consistent.

    You said:

    “and if he finishes 8 years with America reasonably well off or better, you will say “man, did we get lucky”—

    You mean like with Clinton and Obama?

  50. Gravatar of ssumner ssumner
    4. March 2020 at 15:57

    Christian, Shorter version of your post—Ben doesn’t know what he’s talking about. I was just trying to get him to admit it, but he doesn’t even know how to dig up the relevant information.

  51. Gravatar of Benjamin Cole Benjamin Cole
    4. March 2020 at 16:08

    The S&P up 4% in one day, on Wednesday.

    Of 1,100 crew members on the Diamond Princess, who were kept on board and who did not receive quarantine procedures, that is they ate in common mess halls, there was not a single death. In other words, of any group of reasonably healthy non-elderly adults you will have zero deaths from coronavirus, even after prolonged exposure in confined conditions.

    The risk to the economy from the coronavirus are the procedures government implements and fear induced by the media.

    I think the market is figuring it out.

    Some headlines suggest the market is reacting to the ascendance of Joe Biden. Maybe so. But is that because the markets have concluded that there is no way Joe Biden could ever win in the national contest?

  52. Gravatar of Julius Probst Julius Probst
    5. March 2020 at 01:08

    Dear Scott,

    I only saw this yesterday morning and I had client meetings all day.
    Thank you so much for linking to our blog and the very kind words about my post.
    Helps to work for a company that deals with global Macro data and has excellent charting and analysis tools.
    I certainly learned a lot reading your blog for at least 8 years now!
    Also it was great to meet you and David and George Selgin at Cato at the fist AMU. Hope you continue that program because it was amazing!
    Best,
    Julius

  53. Gravatar of Benjamin Cole Benjamin Cole
    5. March 2020 at 03:53

    https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/bank-of-england-set-to-provide-loans-to-companies-amid-coronavirus-fears-bailey-57418739

    The Bank of England plans to directly loan money to supply-chain businesses hurt by the coronavirus.

    “We must act in a coordinated fashion, we can’t let our notions of independence get in the way,” he [Andrew Bailey] said, though later made clear that the independence of the BoE was paramount.

    “I think it is reasonable to expect us to supply some form of supply chain finance in the not-too-distant future to ensure the effect of the virus is not damaging to many forms of activity and probably particularly to SMEs. We are going to have to move very quickly to do that,” he said.”

    —-30—-

    I am beginning to wonder if the Fed is world’s stodgiest, most hidebound central bank, and the one with the weakest tools and charter.

  54. Gravatar of Jose Jose
    5. March 2020 at 04:31

    If I understand it correctly, monetary policy is a process with many consecutive steps. That is why central banks “are never done”. But the market monetarist framework means central bankers don’t “forecast” anything, they follow the implied “market forecast”.

    That is not what the FED did. The FED went further. And you justified it by saying: “The Fed may do more than the markets expect it to do, but it still may be too little if the markets had expected “much to little.” “.

    That means the FED should go back to doing its own forecast then? Makes no sense. If FED officials second guess the market expection (the best we can get!!), they are back doing their own forecast. But the idea of being a market monetarist was exactly to avoid doing that, right?

    Under your framework it seems to me that one should never praise fed officials that go against the market expectation. Period.

  55. Gravatar of Spencer Hall Spencer Hall
    5. March 2020 at 06:03

    I guess the Fed’s mandates are being thrown out the window:

    The Federal Reserve System—“was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system”.

    “The 1977 Reform Act amended the original act by explicitly directing the Federal Reserve to ”maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote the goals of maximum employment, stable prices, and moderate long-term interest rates.”

  56. Gravatar of Spencer Hall Spencer Hall
    5. March 2020 at 06:07

    If the Fed continues with their repurchase agreement pegging policies, interest rates will fall below zero. It is axiomatic. It takes increasing infusions of Reserve Bank credit to generate the same inflation adjusted dollar amounts of GDP.

    The solution is to drive the commercial banks out of the savings business. The solution is to increase the noninflationary transactions’ velocity of funds, not the volume of an increasingly frozen money stock.

  57. Gravatar of Todd Ramsey Todd Ramsey
    5. March 2020 at 06:35

    Prof Sumner-

    You: “I doubt my voice is ‘increasingly respected’.”

    In 2008, you were a lone voice shouting into the wilderness. In 2019, a Bloomberg headline reads “Fed’s Nominal-GDP Targeters Stage Mini Revolt: Conference Update”. One of the “revolutionaries” is President of a Federal Reserve Bank: as insider as it gets.

    Your pessimism is a disservice to both you personally and to the world.

    You personally will feel happier and more fulfilled if you continually remind yourself how far the Fed has come in 11 years, in large part because of you.

    Those happy and fulfilled feelings will help give you the energy to keep up the fight. And keep up the fight you must! Your ideas have likely already helped millions of people, and have the potential to help billions.

  58. Gravatar of Christian List Christian List
    5. March 2020 at 07:46

    how far the Fed has come in 11 years

    So Todd, how far have they come? They were behind the curve then, they are behind now. NGDP targeting was not an issue then, it’s not an issue now. So what has changed? Oh yeah right, at least back then there were still real economists and monetary policy experts at the head of the Fed and the ECB. And today? Jurists, politicians, bureaucrats.

  59. Gravatar of Michael Rulle Michael Rulle
    5. March 2020 at 08:06

    Scott—yes I was aware of your “97%” view. And, therefore agree on your “Clinton and Obama” comparisons. Yet—this makes your views on Trump, while strong, not that important to you. Interesting—need to think about that.

    In the long run, I have to agree with you—at least as it relates to US economy (I do think a “3%” effect is a bit too small–but basically agree)—Tracking GDP, Market performance, employment, etc for last 75 years—certainly does not seem related to which party holds the presidency. Foreign policy is far higher in impact as well as social and regulatory policies, I believe. Not all the time, but more than “3%” of the time.

    However, one might think a registered independent who espouses massive redistribution polices (if not out right socialist policies—depending one’s definition) would have some real effect beyond 3%. This is the real reason for my comment—Sanders seems very different–and yes—it can and likely would be offset by Congress–but he appears to be a true believer.

  60. Gravatar of anon/portly anon/portly
    5. March 2020 at 08:09

    Jose, the “market forecast” isn’t a point, it’s a function.

    It would actually have multiple inputs and outputs but let’s say it has only one input, x, which describes the Fed’s current policy stance (obviously, a single variable can’t cover all the relevant things the Fed has done in the past, what it’s doing right now, and what this implies – to the market – it will do in the future, but let’s say it can), and one output, f(x), which is the expected NGDP growth rate.

    At any given point in time there are many possible values for x, since the Fed has choices, but of course the market observes only one. That’s your “what the market expects it to do” in the current moment. I would put it “what the market expects it to do, based on what it’s doing now and what it’s done in the past” so that you have the “what it’s doing now” in there, since obviously the Fed can’t change the future or the past, directly, but it can change the “what it’s doing now,” directly.

    If the Fed just does what the market thinks it’s going to do, that could be good, if the market expects it to do something good, or bad, if the market expects it to do something bad.

    The Fed shouldn’t just do what the market expects it to do in the current moment, it should choose x so that the market will be expecting it to do something good.

    If currently f(x) = 2% and the Fed wants it to be 4%, it needs to change x, so that f(x) = 4%.

    Sumner can always correct this if it’s wrong, or tell you to ignore it. I hope it’s not so wrong it makes him physically ill or anything.

  61. Gravatar of Michael Rulle Michael Rulle
    5. March 2020 at 08:23

    PS BTW, agree completely on Biden

    PPS Warren out—however small her audience one would think most go to Bernie. The Biden “surprise”—which was clearly helped by those who run the Dem Party—only has him about even with Sanders. The human tendency to believe tomorrow will be like today (because in most things it is!) makes “everyone” think Joe’s recent “delta” pick up RELATIVE to expectations will continue even as expectations have changed. But his supposed pick-up on “late Voters” is viewed by some as his new expectation—-meaning his real delta is much higher—but calling him a clear frontrunner seems premature—guessing of course.

    Bloomberg’s money, Dem Party fear of Sander’s “down ticket” impact, is partially offset by Warren.

    But it is not over yet.

  62. Gravatar of Michael Rulle Michael Rulle
    5. March 2020 at 08:29

    PPPS 538 shows how much late vote went to Biden. It actually was enormous—median pick-up was 19% more in states he won versus -22% for Bernie in those same states

    Jomentum might be real

  63. Gravatar of cove77 cove77
    5. March 2020 at 10:03

    Still in shock over BBG…..has anyone ever droppped $500 mill that fast in Las Vegas?

  64. Gravatar of msgkings msgkings
    5. March 2020 at 10:31

    @cove77: He’s worth $60 billion, what else is he gonna spend it on? He can’t take it with him…

    I hope he is true to his word and showers the Dems with more. I’d like to see us keep the House Dem, the Senate Rep, and elect Biden.

  65. Gravatar of ssumner ssumner
    5. March 2020 at 10:45

    Ben, So healthy people who are free of coronavirus virus did not die? I’m stunned. (By the absurdity of your comments.)

    Julius, Thanks, great post.

    Jose, You said:

    “If I understand it correctly,”

    No you don’t. Not even close. The Fed needs to do the market forecast of what’s required to hit the target, not the market forecast of what it will actually do.

    I agree that NGDP targeting has made progress. But I still don’t think my views are taken very seriously.

    Michael, You said:

    “Market performance, employment, etc for last 75 years—certainly does not seem related to which party holds the presidency.”

    Actually, the market and economy tend to do better under the Dems, at least over the past 100 years. I suspect that’s just random noise.

    anon/portly, Good comment.

  66. Gravatar of Todd Kreider Todd Kreider
    5. March 2020 at 16:16

    Scott,

    Off topic but your good 2010 article on neoliberalism posted at Econlog got the UK wrong. Their GDP per capita was not higher in 2008 than Germany, Italy and France. Germany was $4,000 higher and about the same as France and Italy and all three countries had notable more leisure time than Britain.

  67. Gravatar of Benjamin Cole Benjamin Cole
    5. March 2020 at 16:24

    Scott Sumner—

    Think really hard for a really long time: Of 1,100 crew members on the Diamond Princess, who bunked and ate in common quarters, in extremely confined conditions on a boat that had become a prison, not one died.

    A 0% death rate.

    All crew must have been exposed to the coronavirus. Obviously, most never became infected, they simply shrugged the virus off from the start. Others were asymptomatic or had a very mild case. A few did become ill but did not die.

    This large sample reveals that middling healthy, non-elderly adults are not at risk from coronavirus, in general.

    Hey, take good news when you can get it.

  68. Gravatar of yersinia pestis yersinia pestis
    5. March 2020 at 16:42

    another view:
    http://newmonetarism.blogspot.com/2020/03/coronavirus-and-monetary-policy.html

  69. Gravatar of Benjamin Cole Benjamin Cole
    6. March 2020 at 02:26

    10-year US Treasuries at….0.93%?

    Just a guess, but I think the Inflation Bogeyman has been speared through the heart with a silver arrow.

    Do you think central banks need to start obsessing not about inflation…but with aggregate demand and economic growth?

  70. Gravatar of cove77 cove77
    6. March 2020 at 03:47

    how about US 10yrs at…….75% !

    Scott have you seen Summers comments? Also alluded to poor FED communications/delivery of rate cut Thanks

    havhttps://www.bloomberg.com/news/videos/2020-03-03/larry-summers-says-fed-risks-scaring-people-with-rate-cut-video

  71. Gravatar of Christian List Christian List
    6. March 2020 at 06:21

    This large sample reveals that middling healthy, non-elderly adults

    Benjamin,

    No one has claimed that (percentage-wise) masses of young, healthy people die of corona. But it can take 2 to 6 weeks until you are healthy again and/or until you are allowed to work again. That’s quite long.

    One thing you can learn from Diamond Princess is that the Japanese messed up. That’s not a good way to advertise for the Olympics. The Japanese are so unhelpful that the British cruise line had to hire an Australian company to provide doctors and nurses to take care of patients. The Japanese provided the bureaucrats who gave smart-ass advice from the top down.

    Even a Japanese infection expert who visited the ship said that Japanese officials messed up. Too many new infections. Evacuations too late. Bureaucrats in charge.

    The mortality is also slightly higher than expected, at 0.85% right now, and no one slipped through, everyone was tested. The hope was 0.1-0.2% in cases where all people of a sample can be tested.

  72. Gravatar of Spencer Hall Spencer Hall
    6. March 2020 at 07:26

    You’ve got 2018 wrong. Inflation was too high. Savings flowed into time deposits. That destroyed money velocity.

    Michel de Nostredame

  73. Gravatar of Michael Rulle Michael Rulle
    6. March 2020 at 07:30

    I find it interesting that high yield bond funds have significantly outperformed equities YTD. The total returns range from plus .18% to -.35%. I assume the reason is we have no liquidity crisis, and most investors are happy to hold. But if Equity expectations have created -15% in equities, I would have expected HY expectations would follow. Maybe they always lag——but if 2008 is an example, that was not true—-no lag.

    Is this inconsistent? And treasuries being up is not the reason. A flight to quality and risk aversion should show up in HY too.

    Anyone have some ideas on this?

  74. Gravatar of Michael Rulle Michael Rulle
    6. March 2020 at 07:42

    PS—-ignore above—-wrong. HY down about 3-4% ytd

  75. Gravatar of Michael Rulle Michael Rulle
    6. March 2020 at 07:51

    PPS. Check out the WSJ markets page—-all non treasury bonds are up and HY are down between .28 and 2%

    So——I still find this interesting—-and odd. If equities are more risky, Corporate Bonds should be more risky——but, this might be true—-but not reflected in prices.

  76. Gravatar of Brian Donohue Brian Donohue
    6. March 2020 at 08:13

    Well, at least the yield curve is no longer inverted. In fact, the gap between the 10-year and 30-year is historically quite high.

  77. Gravatar of Michael Rulle Michael Rulle
    6. March 2020 at 09:24

    I know this seems obsessive, if not out right irrelevant, but I cannot help but keep looking at the Influenza stats versus the Covid Stats.

    Somehow, we have the precise number of Americans (or we print “exact” numbers, is the accurate way to say it) who have Covid-19 but huge ranges on Influenza.

    The range CDC has for American deaths this season (Oct-Feb) is 20,000-52,000. The range for those infected is 32 million-50 million. Covid 19 (Feb-March), deaths are 12 and cases are 115.

    Yes, different cycles, yes, we don’t know how many can get it once the “compounding” gets a head of steam going, but to catch up to the range of flu deaths (which would be a disaster) the annualized compounded rate of “death growth” is between 3000% -3500% for the next 6 months. To reach 1000 deaths growth rate of death would be 1300% annualized.

    Ok—just some math. Yes this is for all practical purposes day 1. But we ALREADY know how many people die from flu. Why are we not being extreme in the same way? It is total deaths that matter, not % who get it and die that matters.

    Globally, we have already seen the “cured” equal new cases. This is an equilibrium but we don’t know if that stabilizes at 2 billion people or 5 million people. There are signs that cures may be higher than new cases—which if true has a “negative compound rate”.

    Free markets and experts are hyper afraid—-and are obviously forecasting that this will be an incremental new rate of deaths beyond “what is acceptable”—-which today is between 30-50 thousand in US.

    Yes, it is not the flu—-but forget COVID, we already have been dying at huge rates for flu——and actually don’t “care”.

    I admit to temptation toward conscious and unconscious conspiracy. No panic or real time count-o-meters at all when an extra 10000 dies from H1N1 in one year—-when Obama was President. When Trump is president——our brains are bombarded with fear—-when 12 died—-and remember, 1000 died before Obama declare an emergency.

    That too was “unknown”—-they thought 10% who got it would die. (My son had it. We did not know it (H1N1) was a “big deal” till 4 months after he was cured. We just thought is was “just a flu”—which it was- but later they called it a pandemic.

  78. Gravatar of Michael Rulle Michael Rulle
    6. March 2020 at 09:44

    Scott—-agree on Dems “outperforming”—have seen that too—-agree it is noise.

    PS on Covid obsession

    There is also a replacement factor (like buying tangerines instead of oranges)—-some who get Covid May have gotten Flu—have not yet read you can get both at once.

  79. Gravatar of Rodrigo Rodrigo
    6. March 2020 at 11:29

    The fed is going into a quiet period next week, but it feels like we need them to cut rates to zero right now. Could they/would they? Predictit prob of a recession over 50% today and the market feel as heavy as is ever has (trading wise). It feels like a very good spot for the fed to make a mistake putting up their hand and saying there is nothing they can do against the virus! Please tell us they wont do this!

  80. Gravatar of Christian List Christian List
    6. March 2020 at 12:06

    Please tell us they wont do this!

    Rodrigo, I think you know the answer to this one. =)

    Free markets and experts are hyper afraid—-and are obviously forecasting that this will be an incremental new rate of deaths beyond “what is acceptable”

    Michael,

    no they are not “obviously” forecasting this, and no they are not “hyper afraid”. I doubt that markets are very interested in 30,000 to 50,000 very old people dying. This can even be demonstrated, see influenza.

    Markets care that major events are cancelled, that people have to stay at home, travel less, work less, consume less, that whole supply chains are broken, that the Fed is behind the curve again, and so on. This isn’t even forecasting anymore, it’s reality.

    have not yet read you can get both at once.

    It’s even better: if you have a heart attack, you can’t get cancer. And if you bump your head, then no one can hit you on the head with a shovel anymore.

  81. Gravatar of ssumner ssumner
    6. March 2020 at 12:38

    Todd, What was my source?

    Ben, It’s pointless to try to educate you.

    Michael. Many flu deaths are people who were already near death. I don’t know if my father died of flu or emphysema, and I was with him when he died (at home). It’s kind of arbitrary. If he died of the flu, he was already gravely ill with emphysema when he contracted it.

    Rodrigo. Let’s hope they act forcefully.

  82. Gravatar of Todd Kreider Todd Kreider
    6. March 2020 at 13:12

    Scott,

    You wrote that you used per capita GDP (PPP) ratios of countries to that of the U.S. as stated by the World Bank.

    You have the UK at .765 in 2008 and Germany as.763. The OECD usesGDP (PPP) at constant dollars and has the UK at .773 and Germany at .839.

    Maybe you used current dollars instead of constant dollars (2015), which the OECD uses.

    So 2008, Germany’s GDP per capita was about 10% higher than Britain’s and workers worked 15% fewer hours in Germany compared with workers in Britain.

    https://stats.oecd.org/index.aspx?DataSetCode=PDB_LV

  83. Gravatar of ssumner ssumner
    6. March 2020 at 19:36

    Todd, No I didn’t use current dollars, I used PPP. But perhaps different sources use different methods for PPP. I agree that Germany was probably richer and my data point was probably wrong.

  84. Gravatar of Todd Kreider Todd Kreider
    7. March 2020 at 04:08

    Scott,

    The World Bank gives GDP (PPP) in both current and constant dollars, which is why I thought that error was possible. An economist who writes on Japan made that mistake a couple of years ago, so I thought possible. GDP per capita figures are actually very close across the World Bank, the IMF and the OECD if adjusted for $2011 dollars (WB) and $2015 (OECD).

  85. Gravatar of Jose Jose
    9. March 2020 at 08:58

    Prof. Sumner
    you said: “The Fed needs to do the market forecast of what’s required to hit the target, not the market forecast of what it will actually do.”
    if markets understand the central bank policy, those are the same. It is a circular argument. It was implied.

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