Kieran Healy: You Had Me at “Swedish-American Economist Ronald Coase”: "As best I can tell from the article, I think Jim Buchanan and Ronald Coase starred in The Treasure of the Sierra Madre, which was financed from the profits made by The Communist Manifesto, a tract written by Gary Becker and funded by the U.S. Department of Defense in the 1940s." #GraeberErrors #LARBErrors
Ryan McCarthy: Counterparties: Well Fed critics: Bernanke’s speech comes on the heels of this year’s Ira Sohn conference in New York, where, as Joe Weisenthal and Reuters both noted, one of the major themes among hedge fund bigwigs was “Bernanke hate”…. Why all the anti-Bernanke comments and talk of Fed-induced bubbles?… Paul Krugman thinks the Fed bashing may be just be self-interest — hedge fund managers are paid as a percentage of their overall profits, and the industry certainly has been terrible in that regard of late. Weisenthal says “anti-inflation is kind of a nostalgia trip” for old American hedge fund managers stuck in the mentality of the 1980s. Pawel Morski looks at lending, the shadow banking sector and the bond market and sees little evidence that the Fed is pushing the financial sector into anything resembling pre-crisis behavior."
Christina Romer Anna J. Schwartz: 'Perhaps the most important thing I saw was that gender didn’t seem to matter when you were as good as Anna. She worked harder than anyone else; wrote better books than anyone else; and made more perceptive comments than anyone else. As a result, the men in the room had no choice but to respect her…. Now this lesson that gender didn’t seem to matter when you are brilliant was one that was pretty hard to follow. You can’t just will yourself to be as good an economist as Anna Schwartz. But, as a young woman, it gave me something to strive for. And it gave me hope that if I worked really, really hard, I might be treated with some of the admiration and professional respect that Anna had earned. Another thing I learned from watching Anna was that it was OK for a woman economist to be tough. Anna did not suffer fools lightly…. [But] she was almost always right. So, we may not have looked forward to her tough comments, but we appreciated them, because they helped us to do better work."
Evan Soltas: Which Fiscal Policy Works?: "In Bloomberg, I talk with Ricardo Reis about a new paper he has written with Alisdair McKay. Reis and McKay find that relieving borrowing constraints and underinsurance are the two most important qualities of fiscal stimulus -- and that somewhat revises the dominant view of aggregate stabilization…. Transfer payments can indeed stabilize output, they find, but mainly through a different channel -- not by changing disposable income in the aggregate, but by changing its distribution. Fiscal policy, in other words, is all about inequality. 'It’s the redistribution that has a lot of kick', Reis said in an interview. 'The usual argument for transfers is basically Keynesian. We find that has very low impact in our model…. When you look at the different programs, we find that food stamps and similar programs are really the ones that work, because they are being targeted to individuals who are up against their borrowing constraints and aren't going to work less because they are already unemployed', Reis told me. 'They have very high marginal propensities to consume and are very underinsured, so it can very stimulative'."
Pawel Morski: Loose Money: Stop Us Before We Kill Again: Loose Money: "'You see there have already been several programs written that help you to arrive at decisions by properly ordering and analysing all the relevant facts so that they then point naturally towards the right decision. The drawback with these is that the decision which all the properly ordered and analysed facts point to is not necessarily the one you want. Well, Gordon’s great insight was to design a program which allowed you to specify in advance what decision you wished it to reach, and only then to give it all the facts. The program’s task, which it was able to accomplish with consummate ease, was simply to construct a plausible series of logical-sounding steps to connect the premises with the conclusion. “And I have to say that it worked brilliantly. Gordon was able to buy himself a Porsche almost immediately despite being completely broke and a hopeless driver. Even his bank manager was unable to find fault with his reasoning. Even when Gordon wrote it off three weeks later.' Adams, Douglas (2009-08-21). Dirk Gently’s Holistic Detective Agency (p. 69). Macmillan Publishers UK. Kindle Edition. The answer is austerity and tight money. Now, what was the question? Inflation is clearly in the toilet and not set to resurface any time soon (so to speak), and looking really extraordinarily low once you look at core measures. The hyperinflationistas have lost the argument so comprehensively that you have a certain grudging admiration that they’re still sharing their wisdom. The grounds for opposing loose monetary policy is now Financial Stability…. This is actually a pretty formidable argument, given that the success of loose money appears to depend on the financial sector not being cretinous, selfish and shortsighted. Even Mike Konczal in the go-to takedown of the Financial Stability argument is forced to concede that: 'It’s hard not to read the financial stability arguments as saying “look, we can’t trust the financial sector to accomplish its most basic goals.' What follows is basically my outline of why I think so far the industry has avoided the pitfalls that it’s being accused of falling into again, and what I’d suggest looking out for as a sign of 'Honey I Shrunk the Economy'."
Mark Thoma: 'The Fed Dials the Wrong Unemployment Number': Gavyn Davies argues the Fed is targeting the wrong thing (unemployment instead of employment): '…the Fed has a headache. Its forward guidance on unemployment is in danger of giving misleading signals about the need for tightening, and it probably needs to be changed.... The difficulty is that unemployment is declining towards the announced threshold in part because large numbers of people have left the labour force altogether as the recession has dragged on, and this probably means that the official unemployment rate is no longer acting as a consistent measuring rod for the amount of slack in the labour market. The upshot is that the Fed will probably want to keep short rates at zero until unemployment has dropped a long way below 6.5 per cent... [I]t is a distortion which the Fed cannot afford to ignore. Its mandate requires that it should aim for “maximum employment”, not “minimum unemployment on the official statistics”, which is what it risks doing under its current forward guidance.…' If the Fed is going to make a mistake -- ease too long or tighten too soon -- you can probably guess which mistake I think is worse."