Ryan Avent: Monetary policy: Unconventional policy forever: THE Federal Open Market Committee concluded its two-day meeting today with a nothing-burger of a statement…. [T]he Fed doesn't anticipate unemployment returning to its natural level until 2015 at the earliest. It should go without saying that seven full years with unemployment above normal is a sign of a pretty lousy monetary-policy performance. A good part of the explanation for that miserable showing can be summed up in three words: zero lower bound (ZLB)…. Surely, then, the Fed is looking ahead and trying to make sure that in the future it doesn't have to use unconventional tools. Right? Not exactly…. I attempted to ask Ben Bernanke whether the FOMC was concerned about the lack of a cushion between the fed funds rate and the ZLB and whether the FOMC had considered adjusting policy to address the issue—by raising the long-run inflation target, for instance. His answer, essentially, was that the Fed had only just announced its 2% inflation target and had no plans to change it. And he reckoned that weighing the costs and benefits of ZLB events with an eye toward computing the optimal inflation target was a matter for academic debate. Some research suggests that at low inflation rates an economy will hit the ZLB more often than was previously assumed, he noted, which might make the cost-benefit trade-off of a higher target more attractive…. Most of the other questions at the press conference concerned the problem of continued high unemployment and the Fed's assessment of the risks of unconventional policy. We are living the consequences of the ZLB and the Fed's best estimates have America right back in the same hole when the next recession hits. If the Fed is simply waiting for academia to sort things out, that's really disconcerting. Alternatively, if the Fed is actually pretty comfortable using unconventional policy and not particularly worried about rolling it out again during the next downturn then one has to ask why it isn't doing much more now to address unemployment."
Mark Thoma: Economist's View: 'The Future of the Euro: Lessons from History': "[DeLong] goes on to try to explain why the system ended up with so many dysfunctional features. (I would add the us-them nature of the interactions between the nations in Europe that the various crises have exposed. It is not the 'all for one and one for all' attitude that is needed to implement the things Brad is suggesting, e.g. a 'a single Eurovia-wide banking regulator' and a 'fiscal-transfer' system. Instead it's a point your finger at others and moralize about the differences in behavior. It's a lot like the peace we thought we had in macroeconomics -- the convergence of thought between the various schools that people like Olivier Blanchard talked about -- until the Great Recession exposed the deep divisions that still exist)."
The D-Squared Digest One-Minute MBA | Rudiger Dornbusch and Alejandro Werner: Stabilization, Reform, and No Growth | Simon Johnson: The London Whale, Richard Fisher and Cyprus | Caroline M. Hoxby and Christopher Avery: The Hidden Supply of High-Achieving, Low Income Students | Raj Arunachalam and Suresh Naidu: The Price of Fertility: Marriage Markets and Family Planning in Bangladesh | Brookings Papers on Economic Activity: Latest Conference |
Scott Lemieux: More Iraq Links: "David Rees had two great posts on the uniquely irritating Michael Ignatieff. (“The narrative tension is: Can the hero be wrong about everything, survive, and still convince people he’s smarter than everyone in Moveon.org?”) A very useful compilation of the vicious attacks people who were right about the war were consistently subjected to. Henley’s explanation for why he was right is also very good. (I’m especially reminded of Randy Barnett, who took some time off from arguing that the entire 20th century welfare state is immoral to assert that spending trillions of dollars to attack a country that posed no threat to the United States was just dandy.) Unless I’ve missed something, Dan Savage hasn’t written anything for the 10th anniversary. But he really should. Stephen Walt reminds us who was right — i.e. most of the actual experts in the field, from a variety of ideological and methodological perspectives."
Paul Murphy: Cyprus – just pop the red pill, please: "Cyprus was trying to accede to eurozone demands… good bank and a bad bank, leave insured depositors untouched, while burning those above €100,000… objections from the ECB. Big depositors in Cypriot banks stand to lose circa 40 per cent of their money here, which has drawn plenty of fury and veiled threats from Russia. But what exactly can the Russians do about this? Sell euros? Tear up double taxation agreements? Murder Cypriot bankers? Medvedev and co could not have played a worse hand during this crisis — and it’s not immediately clear why. Cyprus now has a binary choice: become a gimp state for Russian gangsta finance, or turn fully towards Europe, close down much of its shady banking sector and rebuild its economy on something more sustainable. The choice is obvious."
Ben Harris: Automatic Retirement Saving Inches Forward: "Automatic enrollment is slowly gaining steam as the choice strategy to encourage retirement saving. A bold plan in California would eventually make the practice widespread and could revolutionize the state’s saving landscape. Last September, the California legislature approved a framework for automatically enrolling private-sector workers in a retirement savings plan. Employers with more than five workers would have to offer a workplace retirement plan, automatically enroll employees in the newly established California Secure Choice Retirement Savings Plan (SCP), or face a fine. Workers enrolled in SCP would automatically contribute 3 percent of their pay to an IRA-like account unless they opted out; like an IRA, benefits would be based on account contributions and investment returns. Employers are only required to set up the plan, not to contribute to the account, and there is no explicit cost to taxpayers. A third-party—either a private firm or California’s pension administrator (CALPERS)—would administer the plan, investing no more than half the pooled funds in equities. (A private administrator may be the superior option given CALPERS’ recent history of fraud and mismanagement.) Annual administrative expenses would be limited to one percent of fund assets. The framework also calls for a guaranteed return, although the details have yet to be ironed out."
On March 22, 2013:
- Bonnie Raitt: Since I Fell for You : Friday Night Music
- L'Esprit de l'Escalier for March 22, 2013 http://delong.typepad.com/sdj/2013/03/lesprit-de-lescalier-for-march-22-2013.html
- Liveblogging World War II: March 22, 1943 http://delong.typepad.com/sdj/2013/03/liveblogging-world-war-ii-march-22-1943.html
- Noted for March 22, 2013 http://delong.typepad.com/sdj/2013/03/noted-for-march-22-2013.html
- MARTY FELDSTEIN TOLD US SO: THE EURO AND INTERNATIONAL CONFLICT WEBLOGGING http://delong.typepad.com/sdj/2013/03/marty-feldstein-told-us-so-the-euro-and-international-conflict-weblogging.html
- Comment on Ricardo Reis (2013, forthcoming), "Mis-Allocation of Capital Flows: The Portuguese Lost Decade(s) and the Euro-Crisis", Brookings Papers on Economic Activity http://delong.typepad.com/sdj/2013/03/comment-on-ricardo-reis-2013-forthcoming-mis-allocation-of-capital-flows-the-portuguese-lost-decades-and-the-euro-cri.html