Brad DeLong : Noted for March 12, 2013

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Paul Krugman: The Market Speaks: "What, then, are the markets actually telling us?… [L]ow interest rates are the sign of an economy that is nowhere near to a full recovery… high level of stock prices… a reflection of the growing disconnect between productivity and wages…. [A]lmost all of the economy’s major players are simultaneously trying to pay down debt by spending less than their income… this means a deeply depressed economy… [and] low interest rates… loosely… everyone wants to save and nobody wants to invest. So we’re awash in desired savings with no place to go… Under these conditions, of course, the government should ignore its short-run deficit and ramp up spending to support the economy. Unfortunately, policy makers have been intimidated by those false priests, who have convinced them that they must pursue austerity or face the wrath of the invisible market gods."

Jeffrey Frankel: Ronald McKinnon Claims that If RMB-$ Appreciation Does Not Reduce Trade Imbalances, Then RMB-$ Appreciation Would Not Reduce Trade Imbalances | Mummy CT scans show preindustrial hunter gatherers had clogged arteries | Brett Blakemore | National Geographic Found | Kit Whitfield's Blog | Volcanic Aerosols Tamped Down Recent Surface Warming | Jay Rosen: The present situation in the American press: a sketch for media historians | Ayelet the Forester and John the Shoeless on Used E-Book Sales |

Itay Goldstein and Assaf Razin: Theories of financial crises: "Broadly speaking, there are three types of economic crisis: banking crises and panics, credit frictions and market freezes, and currency crises. This column argues that features from these types of crises have been at work and interacted with each other to shape the events of the last few years. From an extensive review of literature on these issues, it’s clear that the biggest challenge policymakers and economists face is in developing integrative models that better describing contemporary economic realities."
John Gordon: Strange loops: "I used that term in a 2008 post on how Google search, and especially their (then novel) customized search results, was changing how I thought and wrote. This five year recursive dialog is itself a product of that cognitive extension function…. [And]I started this blog post because today I rediscovered DeLong's 2007 paper…. I searched on a key phrase looking for a text version. That search, probably customized… returned a post I wrote in 2008. That's just weird…. On the one hand it would be nice if I'd remembered I wrote it. On the other hand I've written well over 10,000 blog posts."
Ed Luce praises Ben Bernanke: A good engineer who knows his own limits: "Most of the unorthodox steps Mr Bernanke has taken since 2008… may seem obvious in retrospect. But it is not clear any of his former rivals for the job would have responded the same way. 'Bernanke’s grasp of the Great Depression and also of Japan’s liquidity trap in the 1990s has been a very important element of how the Fed has handled its challenges since 2008', says Liaquat Ahamed, whose book, Lords of Finance, chronicles the central banking errors of the 1930s. 'There is no doubt he is the right chairman for this kind of crisis'. Mr Bernanke’s grounding has given him the authority to dismiss those who view the meltdown through a moral lens and want to purge society for its excesses…. As Mr Bernanke noted in Texas shortly after Rick Perry, its governor, had all but threatened him with a lynch mob: 'I am not a believer in the Old Testament theory of the business cycle'…. For the bulk of the past five years, the Fed has been the only serious economic actor in Washington – and remains so today. With the big exception of President Barack Obama’s 2009 stimulus, it alone has tried to find ways to keep the US economy afloat. Since 2011, fiscal policy has been a drag on the recovery. US growth is expected to hit about 2 per cent in 2013. Were it not for the fiscal cliff and the sequestration, it might be heading for 3 per cent. Likewise the Fed has stood alone in its attempts to confront America’s jobs and housing crises."
Gavyn Davies: Do economic fundamentals underpin peak equities?: "Global equities have now risen by 115 per cent since the major bottom on March 9, 2009…. [N]one of this constitutes any form of investment advice. Robert Shiller points out, rightly, that equities are far too volatile for that. However, the high profit share, and low risk free rates, are factors which argue that equities are not yet flying on thin air. If there is a valuation bubble, the data suggest that it is primarily in government bonds."
Simon Wren-Lewis: mainly macro: The Unlikely Friends of Austerity: There is an understandable concern about debt and markets…. I remember being asked by economists working for the UK government in 2009 just how far can we let debt rise before markets panic? I knew that my answer, which was that in a balance sheet recession there was a higher demand for government debt (particular when it was accompanied by a flight to safety), was based on a solid macro model. But though I thought the chances of my being wrong were small, I also knew the costs of my being wrong could be very high, which should make anyone cautious. Now I am much more confident, because events have vindicated the model. However I recognise that some people are hyper risk averse, or believe markets are totally fickle, which is partly why I have always stressed that fiscal expansion can be done without issuing more debt… balanced budget fiscal expansion or other, more innovative, changes in the fiscal mix."
Prefect of the Congregation for Divine Worship and the Discipline of the Sacraments, Cardinal Mistermix:: Balloon Juice » Blog Archive » A Man of Constant Sorrow: "I happened to see a couple of minutes of Jeb [Bush] on Face the Nation and I agree with Steve Benen: It’s still pretty hard to figure out Bush’s immigration position after he changed it four times in the last six days. Still, immigration aside, if your campaign strategy is to bravely embrace the disaster that was your brother who, four years later, voters are still blaming for our economic disaster, and who remains the only living ex-President with an approval rating under 50%, then you had better be out raising a shitload of money, because Bieber knows you’ll need it."
Willem van Zandweghe: Interpreting the Recent Decline in Labor Force Participation: "At the turn of the 21st century, labor force participation in the United States reversed its decades-long increase and started trending lower. A more startling development has been the recent sharp decline in the labor force participation rate—from 66.0 percent in 2007 to 64.1 percent in 2011—a far bigger drop than in any previous four-year period…. [T]he evidence indicates that long-term trend factors account for about half of the decline in labor force participation from 2007 to 2011, with cyclical factors accounting for the other half."