Jonathan Portes Writes to the Financial Times About All the Very Serious People Who Are Ruining Europe
Rajiv Sethi: Remembering Albert Hirschman
Mark Carney: "From our perspective, thresholds exhaust the guidance options available to a central bank operating under flexible inflation targeting. If yet further stimulus were required, the policy framework itself would likely have to be changed. For example, adopting a nominal GDP (NGDP)-level target could in many respects be more powerful than employing thresholds under flexible inflation targeting. This is because doing so would add 'history dependence' to monetary policy. Under NGDP targeting, bygones are not bygones and the central bank is compelled to make up for past misses on the path of nominal GDP…"
Peter Orszag: Fiscal Cliff May Unbuild America
Robert Skidelsky: Growth Debate Speech: "My Lords, the best thing about the report… is that it reflects a broad agreement that something more than deficit reduction is needed…. The noble Lord has been anxious not to breach the Chancellor's deficit reduction programme… but it is precisely this that needs to be questioned. We are in an extraordinary position. The main international organisations now all agree that austerity is having a chilling effect on the economies of Europe, yet they also say that there is no alternative. That seems much too passive…. The only thing worth talking about today is the validity of the targets themselves and the theory of the economy on which they are based, but that is the last thing this House seems to be willing to discuss. I hope we will soon be given more than three minutes per speaker to address the larger issue."
Robin Harding: Thresholds for the Fed: "One topic the Federal Open Market Committee is likely to discuss this week is replacing its forecast of low rates 'at least through mid-2015' with some sort of economic conditions… rates stay low until unemployment falls below x per cent as long as inflation remains below y per cent…. The challenge is to find a good formulation for x and y that everyone can agree on. My guess is there may be some kind of staff proposal at this FOMC meeting, but more likely one for comment by the committee, rather than one ready to act on."
Olivier Blanchard and Jonathan D Ostry: The multilateral approach to capital controls
Lisa Pollack: Losing for tax purposes, a diagram: "‘Muaaah-ha-ha’, added Reuters."
Dan Hopkins: The auto bailout didn’t decide the election: "[V]oters are only rarely moved by their self-interest… that’s not to say that self-interest has no role in politics—the behavior of organized interest groups strongly suggests otherwise. But… the direct influence of self-interest in voter decision-making in any one election is surprisingly small."
Noah Smith: Noahpinion: Did risky mortgage lending cause the financial crisis?: "No…. The financial crisis consisted of two things: 1. A liquidity crunch or bank run, in which financial institutions all wanted to sell their long-term assets in order to pay off short-term liabilities at the same time, but couldn't. 2. A solvency crisis, in which so many systemically important financial institutions had made bad bets that their simultaneous failure threatened the health of the financial sector itself. Both of these things involved risky mortgage lending. But risky mortgage lending, by itself, was not sufficient to cause either one of these. That's why I say that risky mortgage lending didn't cause the crisis. Why not? Because in an efficient financial market, risk is fine. Risk is OK. In an efficient financial market, risk is priced. In an efficient financial market, if I buy a risky asset from you, I pay you less money because of the fact that I agree to take on more risk. (Paying less money up front means a higher expected return. So higher returns are my compensation for taking on more risk.) What happened in the financial crisis was that risk was mispriced."
Rex Nutting: "Now that Republicans have conceded two of their most cherished economic ideals, the path is open for them to reach a deal…. Foremost, they’ve now agreed to raise taxes on the wealthy, thus abandoning their No. 1 talking point that taxes can never go up…. And, just by acknowledging that the fiscal cliff has to be avoided because of the damage that austerity would inflict on the economy, they’ve rotated 180 degrees to become Keynesians in their economics…. We don’t know the details of the Republican proposal…. [T]he money will come from the very few who make more than $250,000 a year. That’s what Obama campaigned on and it looks like he’ll get what he wanted…. The economic evidence suggests that it won’t matter very much to the economy which way the politicians choose to raise more revenue, as long as they get a deal done early in the year. The political impact of their choices will be a different matter. One side or the other still must swallow something very bitter."
Scott Erik Kaufman: Except “Rafalca Style” would actually involve riding a horse: "At this point, I feel like most conservative writers have resorted to digging out their old Culture War Mad Libs and 'spicing it up' with topical subjects like 'exercise is good' and 'Obama isn’t'. It’s disheartening."
Andrew Kaczynski: Poll Truthers Now In Charge Of Figuring Out What Went Wrong For Republicans: "According to a report in Politico the RNC has launched an official review committee to figure out what went wrong and what worked in 2012. But during the election, two of its members — former Bush spokesman Ari Fleischer and Republican committeeman Henry Barbour — pushed the narrative that the polls were skewed, and Mitt Romney would ultimately prevail."
Jonathan Chait: Marco Rubio and the Coming Conservative Revolt: "[T]he future of the [Republican] party is already taking shape, and that future will be, in some form or fashion, a conservative reaction against the Republican leadership that has sold them out. The smarter Republicans have already shaken off the trauma of electoral defeat and begun positioning themselves to capitalize…. Rubio spoke at a party event in New York Washington, a speech that prompted New York Times columnists David Brooks and Ross Douthat, whose defining trait is to always see a Republican moderate around the corner that never arrives, confidently predicted a Republican moderation yet again…. Both columnists noted in passing that the great new moderation they foresaw was as yet entirely confined to rhetoric…"
Kevin O’Rourke: The Irish Economy » Blog Archive » Notes from the continent where good times are always just around the corner: "[W]hat if Wolfgang Münchau is right, and the real problem in Italy right now is the austerity policies that Monti is pursuing, and that are being praised to the skies by the entire European establishment as we speak? Bang on cue, we learned this morning that Italian industrial output fell by 1.1% in October…. One of the things that makes it possible for Europe’s politicians to persist with this nonsense is their conviction, like Mr Micawber, that something will turn up. There is no sign in Ireland that anything at all is turning up. The most important indicator of all, employment, is still falling, and you can see signs of strain all around if you care to look…"
Joe Weisenthal: POLITICO'S Hilarious Article On What It Will Take To Make The Economy 'Boom': "Jim VandeHei and Mike Allen of POLITICO have a funny article on the ideas that people bandy about in private in Washington on how the economy could be made to 'boom'…. We're finally going to get the inside dish. But then when we get to the solutions, all that we get are the most Op-Ed friendly cliches about tax reform, entitlements, and confidence. Literally there's nothing in there that isn't said every day by CEOs promising 'bold' action to deal with the economy…. There are actually some ideas that could help the economy that don't get talked about. Bailing out underwater homeowners is an idea that a lot of economists favor, but which Obama won't touch. Actually, pretty much all stimulus is considered 'unserious' if proposed. But we don't get any of that here. Just cliche ideas repackaged as a-political wisdom."
Matt Bruenig: Nicholas Kristof is an irresponsible moron
Wolfgang Münchau: Politics have burst the Monti bubble
Buzzfeed breaking innovative new ground in beat-sweetening: buzzfeed.com/rebeccaberg/23…— Matt Yglesias (@mattyglesias) December 11, 2012
"I will remember that I didn't make the world, and it doesn't satisfy my equations." - Financial Modelers' Manifesto: wilmott.com/blogs/paul/ind…— Epicurean Dealmaker (@EpicureanDeal) December 11, 2012
IPCC Climate Forecast from 1990- Amazingly Accurate. - bit.ly/X5UR5e— Paul Kedrosky (@pkedrosky) December 11, 2012
Obama: I think there will be an agreement. ABC: Obama said GOP will "cave"!!!; #journalism— Eric Boehlert (@EricBoehlert) December 12, 2012
Fed thinks QE 1 & 2 boosted gdp 3%, jobs by 2m - roughly what we'd lose by going over fiscal cliff.— Greg Ip (@greg_ip) December 12, 2012