"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

Sunday, October 27, 2013

Romer, FDR and regime shift

Monetary Policy in the Post-Crisis World by Christina Romer
Roosevelt staged a regime shift—by which I mean he had a very dramatic change in policy. A month after his inauguration, he took the United States off the gold standard, which had been the basis for our monetary operations since the late 1800s. Then the Treasury, not the Fed, used the revalued gold stock and the gold that flowed in as means to increase the U.S. money supply by about 10 percent per year.  
This regime shift had a powerful effect on expectations. Figure 5 shows stock prices, which can tell us about expectations of future growth, and a measure of expected inflation. In each panel, I have drawn in a line at March 1933, just before the dramatic change in policy. Stock prices surged instantly, suggesting that expectations of future growth improved dramatically. And price expectations also switched radically. These estimates were derived by James Hamilton, an economist at the University of California, San Diego, who backed out estimates of inflation expectations from commodity futures prices in the early 1930s. Hamilton finds that people went from expecting deflation of close to 10 percent a year early in 1933 to expecting inflation of 3 percent just a few months later.

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