...Let me start be asking about your view of the economy. How close are we to a full recovery?
Although the economy has continued to recover and the labor market is approaching our maximum employment objective, inflation has been persistently below 2 percent. That has been especially true recently... the drop in oil prices... 12-month changes in the overall personal consumption expenditure (PCE) price index have recently been only a little above zero.... Measures of core inflation have been persistently below 2 percent throughout the economic recovery. That said, as with total inflation, core inflation can be somewhat variable....
Must-Read: The very sharp Michael Burda gets it, I think, completely wrong here.
German failure to make it better for Greece (and Italy, and Spain, and Portugal) to stay in the eurozone and undertake structural adjustment than it would have been for them to have exited the eurozone in 2010 and undertaken the standard IMF-recipe depreciation-plus-structural-reform-and-adjustment recipe is already doing incalculable long-run damage to German's position within Europe, and indeed to the concept of a European Germany. And Germany desperately needs, for its own sake as well as everybody else's, to be a European Germany:
Must-Read: Matthew Klein: Some Fed thoughts: QE4 and All That: "For months, the mid-September meeting of the Federal Open Market Committee was being telegraphed as the most likely start date of the ‘normalisation’ process...
...The theories... postulate unobservable entities, forces, and properties. These hypotheses... are not individually testable, because we cannot directly observe or measure the properties of the hypothetical entities. But the theories as wholes have a great deal of predictive and descriptive power, and they permit us to explain and predict a wide range of physical phenomena. And the best explanation of the success of these theories is that they are true: that the world consists of entities and forces approximately similar to those hypothesized in physical theory. So realism is an inference to the best explanation...
"WTF?!" is the only reaction I can have when I read Daniel Little.
Live from Yellowstone Lake Lodge: The Washington Post has already lasted longer than I thought it would a decade ago--kept afloat by Jeff Bezos's willingness to commit money to it without doing a proper housecleaning.
...Future generations will not believe that it actually existed if they can’t see it with their own eyes.... I thought I had seen Peak Beltway Trolling, but I had not seen anything. How can I find the right analogy for her argument? Imagine if you will that there is a giant anvil hanging by a rope over your head and that the rope is on fire and the anvil will soon fall on you and kill you. Now, imagine that someone comes up with a plan to put out the fire before it burns through the rope and you die. Now imagine that some people are concerned that the rope might catch fire again at some future date and are therefore against putting out the fire right now and saving your life. I could expand on this analogy to make it more realistic, but I think it’s best to keep this really simple. What Ruth Marcus is saying is that of course we should put out this fire, but we shouldn’t be impatient with the people who say that we should not.
was being telegraphed as the most likely start date of the ‘normalisation’ process. Or, to use another bit of central banker-ese, the day when short-term interest rates would begin ‘liftoff’ from the current range of zero to 25 basis points. There is still time before any decision is made, but the latest utterances from America’s central bankers — corroborated by interest rate futures and options — suggest that a September rate increase is becoming less likely. Bill Dudley, the boss of the New York Fed, said on Wednesday that the argument for moving in a few weeks was ‘less compelling’ than it was just ‘several weeks ago’.
The period considered classical Greece (roughly the 4th through 5th century BC) had a profound effect on Western civilization, forming the foundations of politics and philosophy, as well as artistic and scientific thought. Why did Greece experience such economic and cultural growth—and why was it limited to this 200-year period? Josiah Ober, Professor of Political Science and Classics at Stanford University and author of The Rise and Fall of Classical Greece, took the time to explain the reasons behind Greece’s flourishing, and what its economic rise and political fall can tell us about our own world.
...Episode I is gone. Episodes II and III aren't exactly Shakespeare, but stand ing next to the complete and utter train wreck that is Episode I, they sure look like it. At least, III does.... Episode I is a failure on every possible level..... Luckily, George Lucas has... ma[de] the content of Episode I completely irrelevant to the rest of the series.... Every character established in Episode I is either killed or removed before it ends (Darth Maul, Qui-Gon, Chancellor Valorum), unimportant (Nute Gunray, Watto), or es tab lished better in a later episode (Mace Windu, Darth Sidious). Does it ever matter that Palpatine had an apprentice before Count Dooku? Nope.... Does it ever matter that Obi-Wan was being trained by Qui-Gon? Nope.... Search your feelings, you know it to be true! Episode I doesn't matter at all....
Live from Jackson Hole 2015 Weblogging: Memo to National Park Service: I think you should add some signs saying: "Are you carrying water? How much water?" next to the "Please don't feed the animals" signs...
Live from Jackson Hole 2015 Weblogging: Peggy Noonan Wall Street Journal column or Onion parody?
Peggy Noonan:America Is so in Play: "Something is going on, some tectonic plates are moving in interesting ways...
...My friend Cesar works the deli counter at my neighborhood grocery store. He is Dominican, an immigrant, early 50s, and listens most mornings to a local Hispanic radio station, La Mega, on 97.9 FM. Their morning show is the popular “El Vacilón de la Mañana,” and after the first GOP debate, Cesar told me, they opened the lines to call-ins, asking listeners (mostly Puerto Rican, Dominican, Mexican) for their impressions. More than half called in to say they were for Mr. Trump. Their praise, Cesar told me a few weeks ago, dumbfounded the hosts. I later spoke to one of them, who identified himself as D.J. New Era. He backed Cesar’s story. “We were very surprised,” at the Trump support, he said. Why? “It’s a Latin-based market!”
Over at Project Syndicate: A Cautionary History of US Monetary Tightening: BERKELEY JACKSON HOLE – The US Federal Reserve has embarked on an effort to tighten monetary policy four times in the past four decades. On every one of these occasions, the effort triggered processes that reduced employment and output far more than the Fed’s staff had anticipated. As the Fed prepares to tighten monetary policy once again, an examination of this history – and of the current state of the economy – suggests that the United States is about to enter dangerous territory. READ MOAR
Then there will come a crash.... After the crash, China will revert to the standard pattern of an emerging market economy without successful institutions that duplicate or somehow mimic those of the North Atlantic... convergence to the North Atlantic growth-path norm will be slow... and political risks... [cause] the most likely surprises. I have been wrong for 25 years straight -- and the jury is still out on the period since 2005. Thus, I'm very hesitant to count out China and its supergrowth miracle. But now 'a' crash -- even if, perhaps, not 'the' crash I was predicting -- is at hand. [READ MOAR]
Live from Jackson Hole 2015 Weblogging: I have finally figured out what I feel like here at the Jackson Lake Lodge: I feel like Jacob Marley's Ghost.
It was 23 years ago that Larry Summers and I came here to say, among other things, that reducing the inflation target below 4% per year was extremely risky and unwise because it greatly raised the chances of running into zero lower bound in a recession.
Jeebus! We were right. By the Sacred and Holy Name of the One Who Is! We were right.
And now the Federal Reserve is stuck.
Outside on the patio as the first rays of the sun hit the peak of Mount Moran St. Louis Federal Reserve President James Bullard was saying that Financial markets are wrong and the fact that the market 10-year inflation breakeven is now 1.5% is something the Federal Reserve is ignoring. Because the market does not know what it is doing. James Bullard. Is there any other circumstance under which James Bullard would say that the market does not know what it is doing, other than when the market is telling him that his monetary policy is inappropriately tight?
Not a 4%/year target as an average. Not a 2%/year target as an average. Not even a 2%/year ceiling. The market is saying that they are not even going to make 2%/year as a ceiling over the next decade. And the response is fingers-in-your-ears and: "We can't hear you!"
Must-Read: I cannot help but note strong divergence between the near-consensus views of Fed Chair Janet's and Fed Vice-Chair Stan's still-academic colleagues and students that tightening now is grossly premature, financial markets' agreement with the hippies as evidenced by the ten-year breakeven, commercial-banker and wingnut demands for immediate tightening, the extraordinarily awful performance since 2007 of not all but the average regional Fed president as revealed in the transcripts, and the Federal Reserve's strong predisposition to an interest-rate liftoff soon. That divergence plus the apparent focus of what is a global hegemon on its domestic situation make me think that this is not a well-functioning institution we have here: