"It is easy to confuse what is with what ought to be, especially when what is has worked out in your favor."
- Tyrion Lannister

"Lannister. Baratheon. Stark. Tyrell. They're all just spokes on a wheel. This one's on top, then that's ones on top and on and on it spins, crushing those on the ground. I'm not going to stop the wheel. I'm going to break the wheel."

- Daenerys Targaryen

"The Lord of Light wants his enemies burned. The Drowned God wants them drowned. Why are all the gods such vicious cunts? Where's the God of Tits and Wine?"

- Tyrion Lannister

"The common people pray for rain, healthy children, and a summer that never ends. It is no matter to them if the high lords play their game of thrones, so long as they are left in peace. They never are."

- Jorah Mormont

"These bad people are what I'm good at. Out talking them. Out thinking them."

- Tyrion Lannister

"What happened? I think fundamentals were trumped by mechanics and, to a lesser extent, by demographics."

- Michael Barone

"If you want to know what God thinks of money, just look at the people he gave it to."
- Dorothy Parker

Friday, December 14, 2012

Ben Bernanke has not yet begun to fight by Neil Irwin

Monetary Policy Innovations by Simon Wren-Lewis

A Fed Focused on the Value of Clarity by Binyamin Appelbaum
The Federal Reserve’s decision on Wednesday to announce specific economic objectives for its policies would have stunned and dismayed earlier generations of central bankers, who regarded secrecy as a virtue and obfuscation as a prized technique for manipulating financial markets. 
“Since I’ve become a central banker, I’ve learned to mumble with great coherence,” Alan Greenspan, a former Fed chairman, told reporters in 1987. “If I seem unduly clear to you, you must have misunderstood what I said.” 
But a greater appreciation for the virtues of transparency has been one of the most important shifts in central banking in recent decades. It is a response to public demands for increased accountability and an embrace of economic research on monetary policy that finds speaking clearly is more effective than mumbling. The Fed’s vice chairwoman, Janet Yellen, last month described the result as a “revolution.” 
But the change could have more important consequences in the future. Until now, when economic conditions changed, markets were left to wonder whether Fed policy would change, too. Now, if the pace of growth increases and unemployment falls more quickly, the Fed has already said that it will move to raise interest rates sooner. If the recovery once again falters and unemployment rises, the Fed has already said that it will continue to suppress rates.

Better yet, investors can respond immediately, an effect that Mr. Bernanke described on Wednesday as a kind of “automatic stabilizer” for the economy.

“If the outlook worsens and that leads markets to think that the increase in rates is further out in the future, that will tend to lower long-term rates and that will be supportive of the economy,” he said. “It kind of offsets adverse shocks.”

Thursday, December 13, 2012

Fed Ties Rates to Joblessness, With Target of 6.5% by Binyamin Appelbaum
The forecasts published Wednesday show that Fed officials expect the economy to expand 2.3 percent to 3 percent in 2013, slightly below the September forecast of 2.5 percent to 3 percent. Fed officials have repeatedly overestimated the health of the economy and the pace of the recovery, and the latest changes, while relatively small, continue that pattern.

12/12/12 Paradigm Shift

Bernanke's Non-Stupidity Pact by Krugman

Lost Decade Watch by Krugman


A Fed Bank President's Idea Comes to Life by Michael S. Derby

Mark Carney - the current Governor of the Bank of Canada and new Governor of the Bank of England - is advocating NGDP level targeting.

Wednesday, December 12, 2012

This guy is really funny. Showtime has been running one of his standup routines from this year.

"Stanhope appeared on the FX television show Louie as Eddie, a fictional comedian that Louis C.K. knew 20 years earlier when they first started performing, in the season 2 episode titled "Eddie". It first aired on August 11, 2011."

"In 2003 and 2004, Stanhope co-hosted the fifth and sixth seasons of The Man Show withJoe Rogan. He hosted his own radio show on SIRIUS Satellite Radio in 2005.[2] That year, Stanhope hosted Girls Gone Wild: America Uncovered. When asked what it was like working with Girls Gone Wild creator Joe Francis, Stanhope admitted "He's pure, unadulterated evil,"[3] and "The most awful human being I've ever met in all of my time in the entertainment business." [4]

"In cooperation with the mayor of Reykjavik, comedian Jón Gnarr, Stanhope has scheduled a performance in Iceland's only maximum security prison, Litla-Hraun, for September 25th 2011. Fans who want to watch the show would have to commit a crime; for them he invented The Stanhope Defense."

"In August 2008, Stanhope endorsed Democratic presidential candidate Barack Obama, citing his disappointment with the libertarian candidates and a desire to have "a strong, handsome black man in the White House", as well as referring to himself as "the head of the one-man Libertarians for Obama group.""

Stanhope has the ultimate bullshit detector gene. He HAS to see how full of shit many Libertarians are on an array of subjects.

In the recent "Vanity Fair" Louis C.K. says he admires Obama. For those with a dark sense of humor, America with a black president is kind of funny. Obama's re-election must be driving the racists (both overt and closeted varieties) batshit crazy. See the Tea Party.

Dave Attell is darkly funny too.

Prolier-than-thou types are commenting at Yglesias's blog that monetary policy doesn't work. They've been saying this for years.

To me this is analogous conservatives' argument that the ARRA/stimulus didn't work. There have been studies that showed it worked. Just as the Fed assets that QE has worked. The onus is on critics to show that it didn't work.

Michael Woodford on the new Fed policy

FOMC Adopts Game-Changing Conditional Inflation Targeting Rule by Yglesias

More Bond Buying and Thresholds by Tim Duy


Clearer Policy by Ryan Avent

Fed shifts approach in how it gauges U.S. economy by Thoma

Irwin: Five Things to Watch for on Fed Day by Bill McBride
3. "What’s the threshold?". This probably will not happen at this meeting (setting thresholds for raising the Fed Funds rate based on the unemployment rate, inflation, and possibly other economic indicators). As Irwin notes, if they do announce thresholds it "would be a surprise and would be the big headline out of the meeting." 
4. "What kind of year is 2013 going to be?" The projections will be released at 2:00 PM ET. Of course the projections depend on the "fiscal cliff" negotiations. 
5. "What’s our potential?" This is the Fed's longer term projections for GDP growth, the unemployment rate, and inflation, and these will be included in the projections. 

Inside the Risky Bets of Central Banks By JON HILSENRATH and BRIAN BLACKSTONE
Over Sunday dinners in Basel, which often stretch to three hours, they now talk of pressing, real-world problems with authority. The meals are part of two-day meetings held six times a year at the BIS. Dinner guests include leaders of the Fed, ECB, Bank of England and Bank of Japan, as well as central bankers from India, China, Mexico, Brazil and a few other countries. 
"It is a way in which people can talk completely privately," Mr. King said in an interview. "It is a big advantage if you have some feel for how central banks think about questions, what they're likely to do in the future if certain events were to occur." 
Serious matters follow appetizers, wine and small talk, according to people familiar with the dinners. Mr. King typically asks his colleagues to talk about the outlook in their respective countries. Others ask follow-up questions. The gatherings yield no transcripts or minutes. No staff is allowed. 
In November 2010, for example, the Fed launched a $600 billion bond-buying program known as quantitative easing. A few days later, New York Fed President William Dudley and Fed vice chairwoman Janet Yellen attended a weekend meeting here and were surprised by the furor the Fed's stimulus program had stirred among developing countries, according to people familiar with the talks. Mr. Dudley and Ms. Yellen spent much of the meeting explaining the Fed's actions, as other central bankers raised worries the program would cause inflation or spark an unwanted flood of capital into their markets. 
"Every time there is quantitative easing by the Fed, that gets discussed," said Mr. Subbarao. "We all have to reckon with the spillover impact of our policies on other countries." Basel, he said, is the place to air such concerns. 
The role of the Bank for International Settlements has broadened since it was formed in 1930 to handle reparation payments imposed on Germany after World War I. In the 1970s, it became the center of discussions on bank capital rules. In the 1990s, it became the meeting place for central bankers to talk about the global economy. 
The central bankers typically stop short of formally coordinating their moves. Mr. Bernanke, Mr. Draghi and Bank of Japan head Masaaki Shirakawa are more focused on domestic challenges. Mr. Shirakawa has often warned others in Basel about the effectiveness of easy money policies, according to people familiar with his statements. That hesitance has made the BOJ an issue in Sunday's Japan elections. Shinzo Abe, the front-runner to become prime minister, has promised to rein in the BOJ's independence and demand more aggressive efforts to end consumer price deflation.
My knee-jerk reaction is that "developing countries" are usually ruled by a tiny elite who like tight money and slack labor markets. Have to keep the masses in line. It also might be that they don't want U.S. exports to become cheaper and more competitive.

Tuesday, December 11, 2012

Workers Are Losing Out Globally by Yglesias
The bulk of the paper is dedicated to developing a technical model in which those factors can be linked and explained as a function of the declining cost of investment goods. That certainly could be right. 
In terms of discussions on the Web that militates in favor of something like the technology explanation and against something like the "robber baron" hypothesis since technology is more something that's the same everywhere. I think my conjecture about the impact of asymetrical macroeconomic stabilization holds up here in the sense that the "Great Moderation" move to strict inflation targeting regimes was more-or-less global, but you'd want to check on that. I'm less confident in that account than I was before seeing this, and more inclined to buy technology-based theories.
I don't know what to make of this.

Commenter Sadowski writes: "The technological story has been pushed aggresively by organizations like the BIS that are perpetually in favor of tight money and want to let policymakers off the hook."

The BIS is pretty bad.

Monday, December 10, 2012


The Cult of "Price Stability" Is Killing American Workers by Yglesias

Sticky (economics)

What has surprised Krugman and Jane Yellin lately is the extent of downward nominal wage rigidity.


Mysteries Of Deflation (Wonkish) (7.26.10)

Sticky Wages and the Macro Story  (7.22.12)

Nominally Legal  (7.12.12)

New Lizzy Caplan show next year.

via Dan Davies:
useful stylebook for "Bayesian" fanboys:
In "Lincoln," David Costabile played James Ashley. I identified with the character's politics: hardcore abolitionist but not totally unrealistic. Costabile was also in "The Wire," "Flight of the Conchords," "Breaking Bad" and played a baddie on "Suits" a show I haven't watched.

Postive Outlook

Goldman's Top Economist Explains The World's Most Important Chart, And His Big Call For The US Economy by Joe Weisenthal

(via DeLong)

So if the Fed gets better at policy like adopting an Evans Rule and then later NGDP level targetting we could get better demand management. The private sector will deleverage and housing construction should spur more employment and demand next year. Late 2013 could be better than the tepid growth we've had since the collapse of the housing bubble.

The open question is whether we get another bubble having forgotten the most recent one.

The Cult of "Price Stability" Is Killing American Workers by Yglesias
My first introduction to the mysteries of monetary policy came when I was maybe 15 or 16 in the mid-to-late nineties and I was scanning the newspaper over breakfast. I saw a story about a strong Employment Situation Report from the BLS and how it sent the stock market falling in response because markets were anticipating a rise in interest rates. Why, I asked my dad, would an increase in employment be bad? He explained that when too few people were unemployed, the Federal Reserve tended to get worried because with so few unemployed people around workers would start agitating for higher pay. And higher pay leads to inflation. So it's important for the Fed to respond to low unemployment with high interest rates to push unemployment higher and prevent wage gains. This sometimes has the incidental impact of causing stock prices to fall.

That sounded insane to me, and my dad agreed that it was insane and explained that executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.
Now don't get me wrong. The moral of the story isn't that inflation per se is a good thing. But if you watch Kevin Durant play a whole season of basketball and his free throws never miss to the right, that's not a sign of shooting skill it's a sign of shooting error. Some misses are inevitable, but you want the misses to be roughly symmetrical because you're aiming for the hoop. If all your free throw misses are misses to the left, something's going wrong.

The Food is Poison and the Portions are Too Small II: Krugman and Productivity Growth by Dean Baker