## Noted for June 24, 2013

• Hemant Mehta: Joe Klein's Time Cover Story Wrongly Attacks Atheists for Not Helping Out Victims of Oklahoma Tornadoes: "Klein… wrote…. 'There was an occupying army of relief workers, led by local first responders, exhausted but still humping it a week after the storm, church groups from all over the country — funny how you don’t see organized groups of secular humanists giving out hot meals….' Wow. My jaw dropped while reading that because it’s absolutely not true…. He made the same mistake that Minister David Brassfield did (though at least Brassfield eventually offered a semi-apology). Klein is simply lying out of his ass. A simple Google search would’ve turned up a number of ways atheists helped in the wake of the Oklahoma tornadoes. But since Klein was too lazy to do it, I’ll do it for him: More than 4,300 people donated more than $120,000 for the family of Rebecca Vitsmun (she promised to donate to charity whatever money she doesn’t need). Foundation Beyond Belief raised over$45,000 for Operation USA and the Regional Food Bank of Oklahoma. Atheists Giving Aid raised over \$18,000 that will be given to local relief groups in Moore, Oklahoma and directly to families that need help. Members of the FreeOK atheist group helped families who needed wreckage removed from their property…. Local atheist groups such as the Oklahoma Atheists, Atheist Community of Tulsa, the Lawton Area Secular Society, Norman Naturalism Group, and the Oklahoma State Secular Organization have organized volunteers, resources, and blood drives…. Is that enough proof that atheists, too, were (and still are) helping out in the aftermath of the tornadoes?… To suggest that we were not there and not doing anything useful for the victims isn’t just factually wrong--it’s slander…. If Klein had mentioned any other group of people--'funny how you don’t see organized groups of Jews giving out hot meals'--you know there would be hell to pay."
• Robert Waldmann: Necessary and Sufficient Conditions for Effective Monetary Policy at the Zero Lower Bound: "For the monetary authority to be able to stimulate demand when the safe short term interest rate is almost exactly zero,  it has to be able to credibly pre-commit to causing high inflation…. This is enough of a problem that the leading theorists and practitioners of monetary policy at the ZLB…. insist that efforts to stimulate with unorthodox monetary policy be complemented by expansionary fiscal policy. I think, however, that there is another problem.  I do not find arguments including 'credibility' to be credible.  At the very least the word should be 'credited', that is, 'believed', not 'credible', that is 'believable'. The assumption of rational expectations has snuck into the language, which is a problem since it has nothing to do with reality…. [But] which people?… [I]nterest rates on TIPS and normal nominal Treasuries… [are] what bond traders seem to believe. But my interest is in the effect on aggregate demand, most of which is not purchases by bond traders…. There are two ways in which expected inflation can affect demand, in both cases demand for housing. First higher expected inflation implies higher nominal wage growth so the fixed nominal mortgage payments correspond to fewer hours of work. Second… expected house prices should move roughly one for one with the expected CPI…. So if potential home buyers and home builders understand these basic stylized facts expected inflation will cause higher expected demand and a pony. Look economists don’t know much, but we do know for sure that people do not believe that inflation causes high wages and house prices."

• Cardiff Garcia: State-contingent policy works best when you know the states on which policy is contingent: "James Bullard weighed in this morning explaining his dissent to the FOMC statement…. Bernanke’s tapering comments reflected a move towards a more variable policy, which he had previously indicated he wanted to do. But as Bullard notes, a variable policy works best when it is state-contingent. The problem is that Bernanke announced a state-contingent policy without saying much about the states on which policy is contingent…. Given the number of possibly relevant variables and how little clarity there is around what the Fed is looking for, it’s at least understandable that markets responded the way they did, even if they’re wrong. It’s unclear how they should price in the various probabilities of what asset purchases will look like from now on."

• Gavyn Davies: Unwinding the world’s biggest economic experiment: "On Wednesday, the chairman of the Federal Reserve announced that the greatest experiment in the history of central banking might be nearing its end. Ben Bernanke’s announcement included many caveats, but the financial markets did not miss the message…. Mr Bernanke has expressed consternation that adjustments to the path for the Fed’s balance sheet, such as the one he announced this week, can have such a profound effect on the bond market. But investors are making logical inferences from central bank behaviour. The Fed does not change direction often. When it does, tightening often comes in a rapid series of interest rate rises that are not fully anticipated…. There are two risks with the Fed’s exit plan. The first, raised by Paul Krugman and other Keynesian economists, is that it sends a premature signal to the world economy that the central banks will tighten before the private sector recovery has achieved escape velocity. This has happened before: the Fed made this error in 1937-8 and the Bank of Japan in 2006. Macro-economists such as Michael Woodford argue that the main economic effect of the Fed’s asset purchases is that they signal to households and business that the central bank is serious about keeping short rates lower for longer than normal. These stimulatory effects could now be reversed. If so, the US recovery might peter out, taking the global economy down with it. The second danger, in sharp contrast, is that the Fed has left it too late… unwinding might take bond yields and credit spreads much higher than economic fundamentals seem to justify."