helicopter drop, Kalecki, and Lenin

To fix the economy, let's print money and mail it to everyone by Dylan Matthews

Interview with Brown political economist Mark Blyth and hedge fund manager Eric Lonergan

Mark Blyth: There was a brilliant piece in 1943 by the Polish economist Michał Kalecki. It was a critique of full employment policy. He said a problem with Keynesian macroeconomics is that if we get away with it, if you have permanently full employment, two things happen. One, job switching becomes costless and employers no longer have the whip hand. There will be a political revolution, employers will find economists who'll say it's unsustainable, and they'd try to overturn it. He wrote that in 1943, and that was basically the neoliberal revolution foretold.
Two, capitalism embodies an ethic that you must earn your crust, and if you create an economy whereby the crust is there without being earned, it's deeply disturbing on some political, ideological, and moral level. The other thing, besides the vested interest of employers in stopping full employment, is the idea that there must just be something wrong with doing this. 

Deep down inside, many people refuse to accept something simple: central banks, in a fiat money system, are just printing. There's no corresponding liability besides the balance sheet convention of listing cash as a liability. There's nothing claimed against anything else like gold. All that matters is the credibility of policy — that the place is reasonably well-run — and that you have the intergenerational ability to tax. If you have both of these things, you're just printing. So instead of printing it, shoving it through the banking system and hoping some of it trickles down after it's blown the stock market up to 15,000, why not just give people the cash?

And as Chris Dillow wrote:

I agree with Steve that the rich hate inflation not least because it creates uncertainty. (There's also the historical point that the inflationary 70s also saw the nadir of the fortunes of the 1%: this might be just coincidence, but why risk it?) 

This alone creates a bias to tighten. What amplifies this bias is that the rich can tolerate mass unemployment. Nick's parallel with the 1930s is, I think, irrelevant. Back in the 30s, mass unemployment was a threat to the rich because workers could see a plausible alternative to the existing order in communism. Today, by contrast, there are no big feasible alternatives to capitalism and so unemployment is not a political danger - which means it is more tolerable. 

This answers Peter's question: why has the Keynesian coalition vanished from modern politics? It's because it is no longer politically necessary. It was not Keynes who convinced capitalists of the need for full employment but Lenin.

The timeline is a little off. The Soviet Union didn't collapse until the earlier 90s, but basically things turned in the 70s. America destroyed Vietnam in order to save it and Nixon turned the Chinese Communists against the Soviets. Then Reagan and Thatcher came in the 80s as Mitterand's Socialists buckled under pressure from the bond vigilantes.

12 Years a Slave

Spoiler Alert.

Finally, I saw 12 Years a Slave last night and it was really good. The kidnapped Solomon Northrop finally escapes slavery as he is rescued after getting a letter back to the North describing what happened to him. Then he becomes active in the abolitionist movement. Damn hippy activists.

the rich and unemployment

Interest Rates and the 1 Percent by Chris Dillow

...
I agree with Steve that the rich hate inflation not least because it creates uncertainty. (There's also the historical point that the inflationary 70s also saw the nadir of the fortunes of the 1%: this might be just coincidence, but why risk it?) 

This alone creates a bias to tighten. What amplifies this bias is that the rich can tolerate mass unemployment. Nick's parallel with the 1930s is, I think, irrelevant. Back in the 30s, mass unemployment was a threat to the rich because workers could see a plausible alternative to the existing order in communism. Today, by contrast, there are no big feasible alternatives to capitalism and so unemployment is not a political danger - which means it is more tolerable. 

This answers Peter's question: why has the Keynesian coalition vanished from modern politics? It's because it is no longer politically necessary. It was not Keynes who convinced capitalists of the need for full employment but Lenin."

Steampunk - The Knick and You're the Worst

AV Club reviews The Knick: “Where’s The Dignity”

AV Club reviews  You’re The Worst: “Finish Your Milk”

that uneasy feeling & Europe

The Pent-Up Wage Growth Story: Why Does Janet Yellen Say These Things? by Dean Baker

ECB will start buying ABS, covered bonds in October

Jobs Day! First Impressions–It’s a disappointing report, but one month does not a new trend make. by Jared Bernstein

As Dean Baker and I stress, and EPI economists makes the same case here, one standard benchmark is the rate of productivity growth:

…for workers to get their fair share of the economy’s growth, real wages should keep pace with productivity growth. Productivity growth has been weak recently, most economists put the underlying trend at close to 1.5 percent. This means that wage growth at a 3.5 percent annual rate (2 percent inflation plus 1.5 percent productivity growth) would be consistent with the Fed’s inflation target.  

But there’s even more room for non-inflationary wage growth than that. In recent years we’ve seen a large shift within national income from wages to profits. Wage growth paid for by a shift back toward to a more normal split between wages and profits does not put pressure on prices. 

So the persistent trend in average nominal hourly wages of about 2% per year has a lot of room to grow.

Whit Stillman

Stillman has a new show on Amazon called The Cosmopolitans. He was on Charlie Rose last night and I share his sensibility very much. Metropolitan is about how not all of the one percent are assholes. Barcelona was a plea for foreigner to treat Americans in their countries better. Not all Americans are assholes. His father worked for Kennedy and FDR Jr.  He's a romantic but like Salinger and Woody Allen brings some humor to the romanticism.

The Cosmopolitans is set in Paris and about bringing romanticism and nostalgia to the present day, very much like Midnight in Paris. By the way, Corey Stoll who played Hemingway in that is on The Strain.

AV Club gives it a B+.

dangerous times for the 1 percent

Class interests by Simon Wren-Lewis

So if you wanted to critique my (and Kalecki’s) characterisation of the views of the wealthy, you might say that keeping unemployment above its natural rate is not a sustainable strategy (and therefore not rational). To which I would respond maybe, but there could be a reason why now, like the 1980s, is a particularly important time to keep unemployment high for a while. 

The reason for this is that the aftermath of financial crisis is extremely threatening to the neoliberal political consensus and the position of the 1%. I remember saying shortly after the crisis that the neoliberal position that government regulation was always bad and unregulated markets always good had been blown out of the water by the crisis. This was politically naive, in part because a crisis caused by unregulated markets was morphed by the right into a crisis caused by too much government debt, or too many immigrants. But that fiction will not be sustainable once a strong recovery has reduced both government debt and unemployment. For the 1%, these are very dangerous times, and they want to be on favourable territory for the battles ahead.

See Piketty.

inflationistas

Hard money is not a mistake by Steve Randy Waldman

entrepeneurship

via Waldman's tweet

While it is true that France has some old laws that block innovation (e.g. Uber vs Taxis), it is also true that the French National Unemployment Agency (Pole Emploi) is the first business angel in France. Thanks to its monthly allocation, I was personally able to give up a well paid internship at Microsoft to start my own company. 

I know several entrepreneurs who quit their jobs at big companies, knowing they would get 2 years of allocation, so that they could start their own companies, without having to worry about money for rent. France makes these resources possible to entrepreneurs.

eutanasia of the rentier

Christopher Sims: Ultra-liquidity by Frances Coppola

(via Thoma)

Todd Glass

Glass was on Comedy Central two nights in a row. Tonight on Stewart's Daily Show and the night before on the Meltdown. I liked his jokes on the Meltdown even though he kind of freaked out at the beginning over a mike stand. I guess he was joking about it be he seemed pretty mad. Anyhoo on of his jokes was about being a "passive progressive" at Thanksgiving or something by asking someone making sexist/racist/homophobic etc comments, how old they are, because they sound like an old person. And he had another good one, but he didn't make any gay-themed jokes. On the Daily Show though he was promoting his new book about his 30 years in comedy and how he recently came out. Stewart also said the trailer for his new movie is out. It stars Gael García Bernal.

trade and exchange rates

Dethrone the Dollar, Bring Back the Jobs by Jared Bernstein

A candidate should explain how the Chinese do not allow us to buy Chinese debt. But there's a bipartisan consensus that it should be this way.

NAIRU

OVER AT EQUITABLE GROWTH: A NOTE ON THE CORE PCE INFLATION PHILLIPS CURVE: THE HONEST BROKER FOR THE WEEK OF AUGUST 30, 2014 by DeLong

the Senate

Could an Independent in Kansas Swing the Senate? by Sam Wang

Jon Stewart and priorities

Jon Stewart's Daily Show is back on and he started it off with a bang doing the "Ferguson Challenge" on YouTube which involved him getting pepper sprayed, etc instead of having having an ice bucket dumped on him to raise money for her charity.

Yes celebrities doing stuff for charity is good if it gets rich folks to give money they might not otherwise or might consume ostentatiously. It's good if it gets middle class folks to give instead of say, going to the movies or out to a restaurant or whatever.

But think about the trillion a year output gap. If the authorities were doing their demand management job, the economy would be producing a trillion more a year. Hypothically speaking that could be devoted to cancer research or whatever. That's a trillion a year that's being wasted while people are doing the ice bucket challenge. A trillion a year could be spent on improving the economy so place like Ferguson aren't so bad.

The Fed could be doing more. The government could be spending more. The trade deficit could be erased by lowering the value of the dollar.

French government collapses

Objecting to Austerity, French Style by John Cassidy

Dan Davies on the Swiss

The World Is Squared: Episode 1 – “Switzerland, Country of Joyce” by Daniel Davies

DeLong on Rowe and QE, monetary policy

THE TAPER, NICK ROWE, QUANTITATIVE EASING, AND INTELLECTUAL COORDINATION FAILURES: OVER AT EQUITABLE GROWTH: WEDNESDAY FOCUS FOR AUGUST 27, 2014/THE (NOT SO) HONEST BROKER FOR THE WEEK OF AUGUST 30, 2014 by DeLong

TV

Emmy Awards winners: Breaking Bad, Colbert Report, Julia-Louis Dreyfus for Veep, The Normal Heart, Sarah Silverman and Louis CK.

I also loved Game of Thrones, Orphan Black, The Americans, Person of Interest, The Knick so far, etc.

Coming in 2015: Wolf Hall

pressures on the currency

Austerity, France and Memories by Simon Wren-Lewis

Writing for the Washington Post recently, Matt O’Brien asks didn’t you guys learn anything from the 1930s? That the left in particular appears to ignore these lessons seems strange. In the UK part of the folklore of the left is the fate of Ramsay MacDonald. He led the Labour government from 1929, which eventually fell apart in 1931 over the issue of whether unemployment benefits should be cut in an effort to get loans to stay on the Gold Standard. The UK abandoned the Gold Standard immediately afterwards, but Ramsay MacDonald continued as Prime Minister of a national government, and has been tagged a ‘traitor’ by many on the left ever since.

Not that France needs to look to the UK to see the disastrous and futile attempts to use austerity to stabilise the economy in a depression. By at least one account, the villain in the French case was the Banque de France, which in the 1920s used every means at its disposal to argue the case for deflation in order to return to the Gold Standard at its pre-war parity, and it was instrumental in helping to bring down the left wing Cartel government. When it did rejoin the Gold Standard in 1928, the subsequent imports of gold helped exert a powerful deflationary force on the global economy.

So why has the European left in general, and the French left in particular, not learnt the lessons of the 1920s and 1930s? Why do most mainstream left parties in Europe appear to accept the need to follow the SGP straightjacket as unemployment continues to climb? Perhaps part of the answer lies in more recent memories. After many years in the political wilderness, François Mitterrand was elected President in 1981, and his government became the first left-wing government in 23 years. In the UK and US high inflation was being met with tight monetary policy, but he and his government took a different course, using fiscal measures to support demand, and hoping that productivity improvements that followed would tame inflation. Although the demand stimulus did help France avoid the sharp recession suffered by its neighbours, inflation remained high in 1981 (not helped by increases in minimum wages and other measures that raised costs) and rose in 1982, at a time when inflation elsewhere was falling. The sharp deterioration in the trade balance that followed led to pressure on the Franc, and the government’s fiscal measures were reversed. Economic policy changed course.

International traders dump the currency for other currencies as they see inflation ahead? It's where demand management policies meets exchange rate policy. There was a deterioration in the trade balance.

Bretton Woods

(via Thoma, via Cecchetti and Schoenholtz)

The New York Sun longs for the days of Bretton Woods:

We hope they get around to the pattern of unemployment that has come ever more clearly into focus with each passing season of the age of fiat money. Between 1947 and 1971 — that is, in the first generation of the Bretton Woods agreements, under which America defined the dollar as a 35th of an ounce of gold —the unemployment rate in America averaged but 4.7%. Since 1971 —that is, since America’s abandoned Bretton Woods and opened the age of fiat money — unemployment has averaged 6.4%. 

Now we understand that the above-described coincidence does not establish causality. But what a job for all the Ph.D.s among those who manage what James Grant likes to call the Ph.D.-backed dollar. Let them look, too, to whether the Humphrey Hawkins Full Employment Act of 1978 turns out to have been a good idea. It was the law that gave the Fed its jobs mandate. When President Carter signed that dog’s breakfast, unemployment was 5.8%. It hasn’t been that low in the entire Obama presidency.

 Why did Nixon give up on the Gold Standard? It was too deflationary given the rest of the demand the economy was supplying?

In order to maintain the price of gold, the Treasury had to say it would pay a certain price of gold, but Nixon no longer wanted to do that because things would have been too volatile.

Piketty's argument is that inequality increased a politics moved to the right with Reagan and vice versa.

The social democratic state of 1947-1971 had high taxes and government spending and strong unions. That slowly went away as we entered the neoliberal era. Fiat money lessened the volatility.

Fed and poverty reduction

A photo for Kervick

NYT on the Mark on the Fed and Interest Rates by Dean Baker

First, the Fed's actions on interest rates swamp the importance of almost every government spending program designed to help low and moderate income people. There were big battles in Washington in the last couple of years over Republican proposals to cut food stamps by $4 billion a year. If the Fed keeps the unemployment rate one percentage point higher than a level it could reach without triggering an inflationary spiral then it would be preventing close to 3 million people from working. (A rule of thumb is that for the number of people not currently in the labor force who find a job is roughly equal to the number of unemployed people who find a job.)
...
We have been here before. Back in the mid-1990s the absolute consensus in the economics profession was that the unemployment rate could not get much below 6.0 percent without triggering inflationary pressures. This was a view held not only by conservative economists, but by liberals like Janet Yellen, Alan Blinder, and Paul Krugman. Fortunately, Federal Reserve Board Chair Alan Greenspan was not a mainstream economist. He argued there was no evidence of inflationary pressures, therefore he saw no reason to keep the unemployment rate from falling below the 6.0 percent threshold.

The unemployment rate fell below 5.0 percent in 1997 and was at 4.0 percent as a year-round average in 2000. Not only were millions of people to get jobs who would not have otherwise been able to work, workers at the middle and bottom of the wage ladder saw sustained real wage growth for the first time since the early 1970s. And, there was a huge swing from budget deficits to budget surpluses, giving the country the budget surpluses that the Clintonites always celebrate.

welfare reform

DeLong quotes Kevin Drum against his own instance that blue states did well with welfare reform while only red states didn't.

Kevin Drum: Welfare Reform and the Great Recession “CBPP…. Welfare reform… in its first few years… 

…seemed like a great success… but it was a bubbly economy that made the biggest difference. So how would welfare reform fare when it got hit with a real test? Answer: not so well. In late 2007 the Great Recession started, creating an extra 1.5 million families with children in poverty. TANF, however, barely responded at all. There was no room in strapped state budgets for more TANF funds…. This is why conservatives are so enamored of block grants. It’s not because they truly believe that states are better able to manage programs for the poor than the federal government. That’s frankly laughable. The reason they like block grants is because they know perfectly well that they’ll erode over time. That’s how you eventually drown the federal government in a bathtub. If Paul Ryan ever seriously proposes—and wins Republican support for—a welfare reform plan that includes block grants which (a) grow with inflation and (b) adjust automatically when recessions hit, I’ll pay attention. Until then, they’re just a Trojan Horse…. After all, those tax cuts for the rich won’t fund themselves, will they?

safe assets

After Clinton, Greenspan and the tech stock boom/bubble balanced the budget there was a shortage of safe assets, to the private market in collusion with the ratings agencies created the shadow banking system with mortgage-backed securities and sold them as safe.

Bernanke has said he might have been wrong to call this a "global savings glut." There's something else going on on the flip side, a dearth of investment and asset prices move higher. Interest rates move lower. But Beckworth says interest rates remain the same, it's just the risk premium goes up.

monetary policy

NYT on the Mark on the Fed and Interest Rates by Dean Baker

We have been here before. Back in the mid-1990s the absolute consensus in the economics profession was that the unemployment rate could not get much below 6.0 percent without triggering inflationary pressures. This was a view held not only by conservative economists, but by liberals like Janet Yellen, Alan Blinder, and Paul Krugman. Fortunately, Federal Reserve Board Chair Alan Greenspan was not a mainstream economist. He argued there was no evidence of inflationary pressures, therefore he saw no reason to keep the unemployment rate from falling below the 6.0 percent threshold.

I wonder if Yellen, Blinder and Krugman preferred more government spending in comensation for rising rates, i.e. they wanted more government.

Better late than never but early is better still by Scott Sumner

Monetary and Fiscal Policy

Basically the Fed prints money and gives it to the banks. It borrows from the private sector rather than taxing them outright. With the interest the private sector earns from government debt, it allocates new demand.

Lately the private sector hasn't been investing enough to maintain full employment and the jobs it creates are not as high paying as they once were, damaging aggregate demand further. The main focus of the corporate sector is profits and rent extraction.

The private sector doesn't allocate demand very well at all. Exhibit A is the housing bubble and financial crisis. Exhibit B is the low quality of jobs being created. Much better to tax and spend instead of borrow.

In the meantime, however conservatives need to be beaten into obscurity as they were in the 40s, 50s and 60s and the Rubinite neoliberals need to be purged from the Democrats.

In the meantime Fed policy can promote wage inflation. Government can borrow cheaply and invest as the euthanasia of the rentiers continues apace. The capitalists and liquidity specialists are their own gravediggers(TM).

In the meantime ultimately a social movement is needed. International and based on the labor movement and OWS, incorporating those "interest groups."

Abenomics

"Asked about potentially more aggressive approaches to monetary easing, such as targeting a price level or a rate of growth for nominal gross domestic product, Mr. Kuroda said he thought they were reasonable steps to consider but that the Bank of Japan would stick to its current policy for now. "

Japan Escaping Deflation Trap, Central Bank Chief Says

JACKSON HOLE, Wyo.–Japan is gradually escaping a prolonged period of deflation that has impeded economic growth, stifled investment and put downward pressure on wages, Bank of Japan Gov. Haruhiko Kuroda said Saturday. 

Speaking at the Kansas City Federal Reserve’s Jackson Hole, Wyo., conference, Mr. Kuroda said that, unlike the U.S. and Europe, Japan isn’t struggling with unemployment, which currently stands at 3.7%. 

However, he said deflation had led to other forms of economic malaise that continue to plague the Japanese economy, but which Mr. Kuroda said is gradually healing as aggressive economic policies take hold. 

“Wage-setting practices have changed during the prolonged period of deflation. Wages of regular employees tend to reflect labor market conditions only quite slowly,” he said. “Some kind of mechanism, a ‘visible’ hand, is necessary for wages to rise.” 

Part of such a mechanism is the central bank’s aggressive monetary easing, which includes an indication that it will take all steps necessary to return Japan’s inflation rate back up to 2% after two decades of falling prices and wages. 

“The Bank of Japan’s price stability target can serve as a benchmark for firms’ wage setting,” Mr. Kuroda said. 

He added the policies were having a tangible impact on economic conditions, with labor market conditions improving and firms showing a greater propensity to invest. 

Still, Mr. Kuroda acknowledged that it could change some time to push up Japanese consumers’ inflation expectations after so many years of deflation. 

Asked about potentially more aggressive approaches to monetary easing, such as targeting a price level or a rate of growth for nominal gross domestic product, Mr. Kuroda said he thought they were reasonable steps to consider but that the Bank of Japan would stick to its current policy for now. 

“Maybe in the future. But at this stage I don’t think we should change our plan,” Mr. Kuroda said. 

Under price-level targeting, a central bank would promise to overshoot its inflation target to make up for any period of undershooting. Under nominal GDP targeting, the central bank would target a constant growth rate in noninflation adjusted GDP. 

Mr. Kuroda vowed to maintain Japan’s aggressive monetary-policy easing until the country reaches its 2% inflation target, which he said could happen as early as this fiscal year. 

Mr. Kuroda said that once inflation starts moving higher, 10-year government bond rates around 0.5% will not be sustainable.

You're The Best

Aya Cash played an unusually articulate Occupy Wall Streeter - in a Sorkin way - on The Newsroom. I don't know which episode, HBO was rerunning it but the menu said it was Veep.

Edit: Via IMDB she was in three episodes as Shelly Wexler during the second season.

soft oppression

commenter Darryl:

Maybe, but expecting that inflation can rise and keep up with Fed rate hikes that starting from the ZLB late in 2015 will reach 4% in eight years placing 30-year conforming fixed interest loans at roughly 5.75% to 6% with full but likely somewhat under-employment along with proportionate nominal wages gains plus a tiny little for real is not radical. It may violate neoliberal tenets of rent collection, but not neoliberal instincts for self-preservation and survival.  

Actually, I hope that I am wrong because if I am correct then the establishment survives with barely more than a scratch. If I am wrong then the deck gets reshuffled and there will be a whole new deal. 

This doesn't make sense to me. Seem teleological.

THe old bulls can have their run of the pasture for now because the young bulls of tomorrow are still calves. Some of them may become steers fattened for the slaughter, but there will still be plenty of millenial BS to spread around when the old bulls get slow and soft. There is a side to the generational conflict that the establishment is stewing up over boomer retirement and supporting their social security and Medicare that may backfire. Nothing lasts forever.

Steampunk - The Knick

AV Club reviews The Knick: “The Busy Flea”

trolls

trying to get people on record

safe asset shortage / competitive devaluations

Talking About the Past Five Years by David Beckworth

Triffin Dilemma for US treasuries:
Why the Global Shortage of Safe Assets Matters by David Beckworth

The structural dimension is that global economic growth over the past few decades has outpaced the capacity of the world economy to produce truly safe assets. Ricardo Caballero, the author of this view, argues that it probably started with the collapse of Japaneses assets in the early 1990s, was exacerbated by emerging market crises throughout the 1990s, and got heightened by the rapid economic growth of the Asia in the early-to-mid 2000s. These developments along with the fact that most of the fast growing countries have lacked the capability to produce safe assets made the assets shortage a structural problem.

Misunderstanding (Totally!) Competitive Currency Devaluations by David Glasner

misc links

It's Hard to Find Good Help, Chicago Cubs Edition by Dean Baker

Inflation Erodes Assets: That’s Why Some People Fear It by Jared Bernstein

Hegel Meets Reagan by Andrew Hartman

The many hands of Fed Chair Janet Yellen by Jared Bernstein

What are the long-term factors suppressing wage growth? In fact, Yellen cites a recent paper on the decline in labor’s share of national income, attributing that decline — though she omits this point — to “the offshoring of the labor-intensive component of the U.S. supply chain,” i.e., the loss of jobs due to imbalanced trade.

Yellen links to The Decline of the U.S. Labor Share by  Elsby, Hobijn, and Sahin

WEEKEND READING: JANET YELLEN: LABOR MARKET DYNAMICS AND MONETARY POLICY

Helicopter Drop and the SecStags

William Buiter:

A permanent/irreversible increase in the nominal stock of fiat base money rate which respects the intertemporal budget constraint of the consolidated Central Bank and Treasury.... Three conditions must be satisfied for helicopter money always to boost aggregate demand. First, there must be benefits from holding fiat base money other than its pecuniary rate of return. Second, fiat base money is irredeemable – viewed as an asset by the holder but not as a liability by the issuer. Third, the price of money is positive. Given these three conditions, there always exists – even in a permanent liquidity trap – a combined monetary and fiscal policy action that boosts private demand – in principle without limit. Deflation, ‘lowflation’ and secular stagnation are therefore unnecessary. They are policy choices."

(via DeLong)

Depression is a choice as Steve Randy Waldman wrote.

Why don't the elites like helicopter drops or universal basic income? Because they don't want to provide economic and even political rights (campaign cash outweighs voting). Legal rights are okay but even there, there's two different system. 

They'd rather that campaign spending equal free speech and the banks distribute the Fed's digital money.

the rich and exclusiveness

#FF: THE BEST OF DANIEL DAVIES: OVER AT EQUITABLE GROWTH: FRIDAY FOCUS FOR AUGUST 22, 2014 by Delong

Daniel Davies: No Riff-Raff: "Entering into the Brad DeLong Eat The Rich Controversy...
...I offer this observation: 

If it is not the case "that the rich are spiteful--that they enjoy the envy of the poor", then why is the word "exclusive" so popular in the marketing material for hotels, nightclubs, holiday resorts and residential property developments. "Exclusive" is probably these days an advertising man's synonym for "nice", but it also has a clear and specific literal meaning. It means that the hotel, nightclub, resort etc is providing a bundled service; partly, the provision of a normal hotel or nightclub, and partly the service of excluding a segment of the population from that service. One pays extra to go to a health club whose swimming pool is not polluted by the greasy, hairy polloi. 

The reason that this service is valuable is that those who consume it get utility from a) dividing society into two groups, rich and poor, b) creating institutions which physically and socially segregate these two groups and c) them being in the "rich" group. Nobody would apply for membership of Bouji's or the Bucks if it was just a matter of waiting your turn and paying your fee. This would completely defeat the point of the exercise and destroy the value proposition. The point is that in order to attract a better class of customer, you have to keep the riff-raff out. Basil Fawlty understood this; why doesn't the blogosphere?

(See the Dorothy Parker quote at the top of the blog.)

Plosser and the rentiers

A Note on Understanding the Debate Inside the Federal Reserve: Afternoon Comment by DeLong

euthanasia of the rentier

The Euthanasia of the Rentier by Krugman

A commenter quotes John Maynard Keynes: 

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.

It is, of course, a perfect quote for our times, too. It comes from the last chapter of the General Theory — a chapter that definitely bears rereading in the light of current debates. 

For what Keynes describes in this chapter is, pretty much, a condition of secular stagnation — of persistently low returns on investment, in which there is a chronic oversupply of saving. He believed, in 1936, that this would be the state of affairs in the decades ahead, and was of course wrong in that belief. But he wasn’t wrong about the possibility of such a state of affairs, and since Larry Summers came out as a secular stagnationist, the view that we may well be there now has gone mainstream. 

What struck me, looking at what Keynes wrote, were his remarks on interest rates and the return to capital: low rates of interest, he suggested,
Actually, for now at least profits remain high — but bond yields are very low.

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.

would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. 

What Keynes didn’t say, but now seems obvious, is that the rentiers are unlikely to accept their euthanasia gracefully. And therein, I’d argue, lies the ultimate explanation of the persistent clamor for monetary tightening despite weak economies and low inflation. I’ve described on a number of occasions how tight-money advocates are constantly shifting their arguments — it’s about inflation; no, it’s about sound market functioning; no, it’s about financial stability — but always with the same bottom line: rates must rise now now now.

Well, what I think we’re hearing is the sound of rentiers and those who, explicitly or implicitly, work for them, demanding their natural right to earn good returns even if the resource they control isn’t actually scarce anymore. They are not willing to go gently into their euthanasia.

 From Chapter 24:

Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest to-day rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital. An intrinsic reason for such scarcity, in the sense of a genuine sacrifice which could only be called forth by the offer of a reward in the shape of interest, would not exist, in the long run, except in the event of the individual propensity to consume proving to be of such a character that net saving in conditions of full employment comes to an end before capital has become sufficiently abundant. But even so, it will still be possible for communal saving through the agency of the State to be maintained at a level which will allow the growth of capital up to the point where it ceases to be scarce. 

I see, therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work. And with the disappearance of its rentier aspect much else in it besides will suffer a sea-change. It will be, moreover, a great advantage of the order of events which I am advocating, that the euthanasia of the rentier, of the functionless investor, will be nothing sudden, merely a gradual but prolonged continuance of what we have seen recently in Great Britain, and will need no revolution.

trolling commenters

Matt Young:

"A bunch of idiotic American economists who believed John Keynes, the man with no math skills."

You can usually tell where someone is coming from by their attitude towards Keynesianism.

Austerians

While thinking about public choice theory, Daniel Kuehn links to Krugman and Noah Smith about the push for austerity. Krugman links to Naomi Klein and Mike Konczal.

OMO

DeLong retweets Harless

Conventional def'n of monetary policy (OMOs) imparts fiscalist bias by defining mon. pol. as something that inherently works against itself

Yes

As a kid I was more of Yes man than a Rush man. A neighborhood friend had a much older stoner brother who had a large, eclectic album collection. I was drawn by Yes's imaginative album covers and grew to like music.

misc. links from Baker, Bernstein, Kaminska, Sumner, Williamson, and Wren-Lewis

The Federal Reserve Board Responds to Bankers by Dean Baker

The symmetry test by Simon Wren-Lewis

Elsa the Ice Princess on Monetary Policy by Jared Bernstein

What is not a Ponzi? by Isabella Kaminska

DeLong on the mother of all black swans by Scott Sumner

Secular Stagnation: Useful Ideas or Hot Air? by Stephen Williamson

DeLong review of Keynes biography

From a Decade Ago: My Review of the First Two Volumes of Robert Skidelsky’s Superb Biography of John Maynard Keynes by DeLong

new normal, secstags and euthanasia of the rentier

Krugman: 

In practice the zero lower bound has huge adverse effects on policy effectiveness… [and] drastically changes the rules… [as] virtue becomes vice and prudence is folly. We want less saving, higher expected inflation, and more…. Liquidity-trap analysis has been overwhelmingly successful in its predictions: massive deficits didn’t drive up interest rates, enormous increases in the monetary base didn’t cause inflation, and fiscal austerity was associated with large declines in output and employment…. 

Secular stagnation adds… the strong possibility that this Alice-through-the-looking-glass world is the new normal….

As is the euthanasia of the rentier. As J.W. Mason put it, If credit is so cheap why do we need liquidity specialists? Mason has a new post up.

Reviewing Lawrence Summers’s et al.’s VoxEU Ebook on “Secular Stagnation”: The Honest Broker for the Week of August 23, 2014 by DeLong

Instead, I see the root causes as the confluence of an unreasonably high premium return on equities and other risky assets with a deflation or a very low inflation price trend. And where Summers sees this as operating since the mid-1990s and the start of the dot-com boom, I see it as operating since 1895, if not 1865.

Ferguson

Someone tweets:

Excuse me, but I was promised a corporate cyberpunk dystopia and not this rerun-of-1960s-Bull-Connor-America dystopia

Geitnerism

OVER AT EQUITABLE GROWTH: COMMENT ON: AYAKO SAIKI AND JON FROST: "HOW DOES UNCONVENTIONAL MONETARY POLICY AFFECT INEQUALITY? EVIDENCE FROM JAPAN" by DeLong

Over at Equitable Growth: Comment on: Ayako Saiki and Jon Frost: "How Does Unconventional Monetary Policy Affect Inequality? Evidence from Japan" 

I want to make three big points: READ MOAR 

Figuring out what we expect QE to mean for income and wealth inequality is difficult because we are not sure what QE is supposed to do for the macroeconomy. Is it a way of credibly committing to lower nominal interest and higher inflation rates in the long run by goosing the monetary base at the zero lower bound? Is it a way of reducing the supply of assets subject to risk and thus reducing the risk premium? If the first, it is the government imposing--relative to the baseline--a transfer from those who are going to save, who are going to cut their spending below their income and shift purchasing power into the further future, and to those who are going to borrow and to those who have saved in the past. If the second, it is the government imposing--relative to the baseline--a transfer from those who are going to supply risk-bearing services to those who will lay off risks into the future and those who have already committed to bearing risk in the past. In either case, it is bound to be the rich today who have born risk in the past (and been lucky) or who have saved in the past. So today's inequality should, we think, rise. It is nice to see that it is true--and it is interesting that the effects look to be so large...

Looking forward, however, QE seems to be a piece of what Keynes called the euthanasia of the rentier--or of the risk-bearer. Wealthholders who are going to stay influential wealthholders must reinvest at rate n+g, so their true free cash is only r-n-g. What if they spend more? Keynes thought that there was a social compact: if the rich do not accumulate--if they spend more than r-n-g--then the political process will soon take their wealth away. Thus a world of QE is a world in which the rich have extremely high wealth levels, yet surprisingly little weight, given their wealth, on consumption patterns. There is high wealth inequality. And there is very high income inequality along the transition path as asset prices attain their new equilibrium levels. But less spending inequality.

The Geithner view of the world: monetary policy is unreliable witchcraft, fiscal policy is "sugar" that makes you feel really good for four hours before you drop into a diabetic coma, the only source of durable prosperity is to reinforce business and financial prosperity by giving them the returns they think they deserve--and then a little more. I parody. But this is the dominant view in the North Atlantic, at least. Basically, the bankers and investors and CEOs have us by the plums. If QE reinforces business confidence, it is worth doing in spite of its inequality effects. If, on the other hand, QE scares our upper class by (a) making them fear that asset prices are unsustainably high and will crash, and (b) making them fear that their future deals will have to squeeze returns out of an eyedropper, then the inequality effects are yet another reason to exit as fast as possible. Now I am not a believer in Geithnerism. But many people are. And it is certainly a live analytical position...

I think it's helpful to distinguis DeLong as a "soft" neoliberal from Geithner who is a "strong" neoliberal. He even had the Treasury working at cross purposes with the Fed over QE. Was this in his book? I hope Bernanke will discuss it.

Baker on bubbles

Stock Returns: Between Shiller and DeLong by Dean Baker

Dan Davies

Evening Must-Read: Daniel Davies: D-squared Digest–FOR Bigger Pies and Shorter Hours and AGAINST More-or-Less Everything Else by DeLong

Daniel Davies has unlocked his weblog. Plus: Daniel–Crooked Timber: “I’ve had a life event recently. As of today (I’m posting this from the WiFi at Geneva airport) and for the next year, I am doing less of the stockbroking, and more of the travelling round the world with my family…” | And: “The single most sensible thing said in political philosophy in the twentieth century was JK Galbraith’s aphorism…

…that the quest of conservative thought throughout the ages has been ‘the search for a higher moral justification for selfishness’. Some rightwingers are not hypocrites because they admit that their basic moral principle is ‘what I have, I keep’. Some rightwingers are hypocrites because they pretend that ‘what I have, I keep’ is always and everywhere the best way to express a general unparticularised love for all sentient things. Then there are the tricky cases where the rightwingers happen to be on the right side because we haven’t yet discovered a better form of social organisation than private property for solving several important classes of optimisation problem…. 

Hypocrisy doesn’t really enter into the equation with rightwing politics; you don’t (or shouldn’t) get any extra points for being sincere about being selfish. So where does that leave our students? Well, they’re young. They’re most likely insecure. They don’t actually have a lot, and it’s hardly surprising that they’re a bit precious about what they have…. People in general seem to be horribly uncomfortable with the idea that, by the standards they use to judge political situations, they themselves don’t come out as moral heroes. At base, this is a fairly childish and decidedly illiberal attitude; childish because it demands a sort of moral perfection which everyone intellectually knows can’t exist outside fairy stories (unless you count the way that parents appear to their children) and illiberal because it suggests that you’re only prepared to have normal social interactions with people who pass your own personal moral examination…

Philosophies of economic policymaking - a comment which growed by Daniel Davies

...And (I think I'm making my own position clear here) I think this is why Friedmanism fails.  Because actually, the buck does have to stop somewhere, and pretending that you can manage a complex system via a simple rule is basically impossible (it falls foul of Stafford Beer's Principle Of Sufficient Variability).  In practice, in a system based on a Taylor Rule, an Evans Rule or even an NGDP target, the buck stops with whoever it is that is responsible for maintaining the model which generates the forecasts of the control parameter.  And this person is always going to deny that he's making activist policy and claim that he's a technocrat who simply goes where the data takes him.  Friedmanism in economic policy, in the general sense I'm talking about here, is nothing more nor less than a distributed responsibility avoidance system.

Chomskyites

WEEKEND READING: MCSWEENEY’S INTERNET TENDENCY: UNUSED AUDIO COMMENTARY BY HOWARD ZINN AND NOAM CHOMSKY, RECORDED SUMMER 2002 FOR THE FELLOWSHIP OF THE RING (PLATINUM SERIES EXTENDED EDITION) DVD. PART ONE.

As is usually the case, the followers are worse than the man himself. The McSweeney writers probably have friend or acquaintances who are Chomskyites.

The Leftovers

AV Club reviews The Leftovers: “Cairo”

So Jill has joined the Guilty Remnant. As an AV Clubber writes, she may just miss her mom. The review links to a Vanity Fair writer's tweet about how the show is about depression.

What’s interesting is that the statement has some bias built in: It implies that depression offers clarity into the human condition—something more real, more reliable, more logical.

There’s a term for this: depressive realism, a psychological hypothesis introduced in 1979 that suggested that maybe the reason certain people suffer from depression is because they’re able to see the world more clearly, without the bias of optimism. It’s a dark interpretation of the disease—and one that has been challenged quite a bit in the psychological community. But its particular insidious appeal, I think, is that depressive realism follows the logic of depression itself—this pessimism is the only sensible way to look at the world.

A few weeks ago, Vanity Fair’s Richard Lawson introduced the idea that The Leftovers serves, at least in part, as an examination of depression. That seems more relevant than ever in tonight’s episode, “Cairo,” which tells the story of how Jill Garvey, a teenage girl like Hazel, ends up joining the Guilty Remnant. There’s other stuff happening in this episode, but “Cairo” feels like Jill’s episode. This is the first time her struggle has felt important and real. And what it feels like is a struggle with depression.

With what's going on in Ferguson I think of Cornel West. A main distinction he would make was between optimism and hope. Things might not get better, but you hope they will. Being optimistic is unrealistic but being hopeful wards off despair.

market monetarists and gold bugs

MONDAY DELONG SMACKDOWN: THE WELLSPRINGS OF BAD MONETARY ECONOMICS IN GOLDBUGISM

Geithnerism and QE

TheTreasury and the Fed are at Loggerheads over QE by Roger Farmer

Warpaint

bubbly stock market? and Fed Fail

UNDER WHAT CIRCUMSTANCES SHOULD YOU WORRY THAT THE STOCK MARKET IS "TOO HIGH"?: THE HONEST BROKER FOR THE WEEK OF AUGUST 16, 2014 by DeLong

The 10.8 trillion failures of the Federal Reserve by Rex Nutting

WASHINGTON (MarketWatch) — The conventional wisdom says the Federal Reserve is keeping interest rates so low that it doesn’t pay to play it safe, and that it’s encouraging investors to do all sorts of crazy things to earn a higher yield. 

Supposedly, the central bank is forcing investors pump up stocks, junk bonds, farm land and all the other bubbles you’ve been reading about. 

It’s a nice story, but the data show that U.S. investors are still conservative about where they put their money. 

Just how conservative are they? 

Data from the little-noticed financial accounts report show the American people have $10.8 trillion parked in cash, bank accounts and money-market funds that pay little or no interest. 

At the end of the first quarter, low-yielding assets totaled 84.5% of annual disposable personal income, the highest share in 23 years. Sure, people need to keep some money handy to pay their bills and some folks might have a few hundred or a few thousand in a rainy-day fund, but no one needs immediate access to the equivalent of 11 months of income. 

In essence, there’s $10.8 trillion stuffed into mattresses. 

That $10.8 trillion hoard represents a failure of Fed policy. 

Since the Fed began quantitative easing in September 2012, U.S. households have socked away $1.17 trillion in their low-yield accounts. That means that 95% of the Fed’s $1.24 trillion QE3 ended up not in bubbly markets but in a safe and boring bank account. 

Since the recession began more than six years ago, the Fed has been trying to encourage people to put their money to work in the economy. That’s why the Fed has kept interest rates low and has been buying up trillions of dollars worth of relatively safe securities, hoping to push us to take on a little more risk. 

After all, an economy can’t really grow if no one’s willing to gamble on the future. 

But many of us don’t want to. We are still afraid, so we prefer to put a large part of our savings in assets that are guaranteed, like FDIC-insured bank accounts, or into money-market funds whose sponsor guarantees the return of the principle.

The point of Fed policy has been to get people either to consume more or to lend their money to others who would invest it productively. Either way, aggregate demand would rise, boosting the economy and creating more jobs. 

The Fed can point to some successes: Consumer spending and business investment have bounced back, but both are somewhat weaker than they usually are coming out of recessions. 

The majority of Americans are doing their patriotic bit, spending nearly everything they earn. A recent report from the Fed showed that little more than a third of families are able to save any money at all after they pay their bills each month. More than 60% say they couldn’t come up with $400 in an emergency without borrowing or pawning something. 

Most people are saving next to nothing, while just a few are saving a significant amount. Those who do save are saving a ton — more than $1.2 trillion a year. 

According to the Fed’s financial accounts data and definitions, the personal savings rate has averaged about 10% of disposable income since the recession ended, up from around 7% before the recession. That means upper-middle class and wealthy Americans are saving nearly $400 billion more a year than they used to. 

That extra $400 billion would be a boon to the economy if it were being consumed or invested.
But high-income Americans don’t want to consume any more than they already do. The upper-middle class is desperately saving for their kids’ college and for their own retirement. And the truly wealthy have everything they desire, so they are saving a lot, buying equities, bonds and real estate, and adding to their bank balance. 

In theory, the money they deposit in the bank should flow into the economy when the bank makes a loan. But bank lending to businesses has been very soft, up just $160 billion in the past year. 

Businesses haven’t been relying on bank loans anyway, because their internal cash flow has been more than adequate to finance their investments in new structures, equipment and intellectual property. Since the recession ended, internal funds have exceeded capital spending in every quarter. 

When companies do borrow, they use the proceeds to buy back shares or to acquire whole companies, neither of which adds to the stock of our national wealth. Since the recession ended, corporations have spent about twice as much money on buying their own stock and the shares of acquired companies as they have borrowed from banks. 

Corporations have been buying so many shares that they haven’t raised any money on net in the stock market from households in years. In fact, households have been raising money from corporations, to the tune of about $450 billion a year. 

So, even though U.S. households are saving lots of money, very little of it is flowing through to the economy. There are 10.8 trillion reasons to think the Fed has failed to get the American people to take on more risk.

meme event

new meme event prompted by J.W. Mason:

Eusthanasia of the Rentier

Blinder tweaking the WSJ with K21

The Supply-Side Case for Government Redistribution by Alan Blinder

Farmer and Britain's Financial Policy Committee

No more boomb and bust? by Roger Farmer

(via Thoma)

Baker on job openings

The Skills Gap is Most Evident in Retail Trade and Restaurants by Dean Baker

Dan Davies

The end of a glittering career.... by Dan Davies

Steampunk - The Knick

AV Club reviews The Knick: "Mr. Paris Shoes"

Pitchfork streams Cliff Martinez's soundtrack

My dream project is a steampunk "prestige drama" about Ada Lovelace along the lines of The Knick.

Bono's daughter plays nurse Lucy Elkins.

SecStags

Secular Stagnation: The Book by Krugman

Secular Stagnation: Missing the Forest for the Trees by David Beckworth

There is a new VoxEU ebook on secular stagnation. The book is a collection of essays by many prominent economists, most of whom are proponents of secular stagnation. As readers know, I am not convinced that this problem lingers over the U.S. economy and have explained why at the Washington Post and on this blog. This latest book does nothing to ease my skepticism. Many of the authors continue to mismeasure the real interest rate and ignore what I see as important technology and demographic developments that undermine the case for secular stagnation. Let's review these key issues. 

First, real interest rates adjusted for the risk premium have not been in a secular decline. Everyone from Larry Summers to Paul Krugman to Olivier Blanchard ignore this point in the book. They all claim that real interest rates have been trending down for decades. The editors of the book, Coen Teulings and Richard Baldwin, even claim that this development is the 'prima facie' evidence for secular stagnation. What they are doing wrong is only subtracting expected inflation from the observed nominal interest rate. They also need to subtract the risk premium to get the natural interest rate, the interest rate at the heart of the story. For it is the natural interest rate that is affected by expected growth of technology and the labor force.

Beckworth is optimistic saying we just had a bad business cycle. Edward Lambert says we'll have a startling bad recession in the next three years with signs showing the next six months because of the "effective demand" limit.

Germany and population growth

A Rapidly Aging Population Is Not a Depression Problem by Dean Baker

Matt O'Brien had a good piece in Wonkblog pointing out that the current downturn in the euro zone has been worse for these countries than the Great Depression. However it does get part of the story wrong. 

At one point it outlines the troubles of the region: 

"The combination of zombie banks, a rapidly aging population and, most importantly, too-tight money have pushed it into a "lowflationary" trap that makes it hard to grow, and is even harder to escape from. That's what happened to Japan in the 1990s, and now, 20 years later, its nominal GDP is actually smaller than it was then. "

The aging of the population, and therefore a slow-growing or declining labor force, does not belong on the list of problems here. What matters for well-being is per capita growth. (That is not the only thing that matters, but insofar as GDP matters it is GDP per capita.) If the population is growing very slowly or even shrinking slowly, it will likely be associated with lower overall growth, but not necessarily with lower per capita GDP growth. 

Germany has managed to get its unemployment rate down to 5.1 percent, compared to 7.8 percent before the downturn, in spite of having considerably lower growth than the United States over this period. Its employment rate for prime age workers (ages 25-54) has risen by 3.0 percentage points, compared to a drop of 3.5 percentage points in the United States.

As a result of its slow population growth, few in Germany would see its slow economic growth as being a problem. In fact, most view the economy as being relatively prosperous right now. This is one of the reasons that the country is reluctant to support measures that would help its neighbors, since Germany is not really sharing in their pain at the moment. Similiarly, Japan's slow population growth meant that most people in the country were not suffering in the way that its weak GDP growth may have suggested.

wikileaks

If you want to send a message, use Western Ukraine by Dan Davies

What was needed was for someone (probably Baroness Ashton) to go and deliver the message "Don't worry Vlad, not while the Ukrainian people have holes in their arses will they be members of the EU and as far as NATO membership is concerned they are somewhere behind North Korea. We fully appreciate that Ukraine is your back yard, not ours and we have no interest in doing anything that makes you feel threatened". At which point it could all have been stood down in a cloud of bad temper, but kept relations on the same broadly productive track they were before.

Thing is, this is now the post-Wikileaks era. And the trouble with the little speech I indicated in the last paragraph is that a) it's a total lie and obviously so, and b) it involves selling out the Ukrainian opposition in a really unedifying way - we keep financing these people and providing the expectation of help that we're never going to deliver, in order to use them as pawns in our game of chip-bits, and I suspect they might kind of know that, but we can't rub their faces in it and expect to keep their support. There is no way that any official is going to be prepared to have that speech attached to their name, and so no way anyone's going to do it if there is a risk of it being plastered all over the internet (and there is; EU diplomats have screwed up their comms at least once already and seen embarrassing conversations appear in the papers). There's a symmetry too here - there are all sorts of threats and deals that Putin might want to communicate but can't.

So the normal channels of diplomatic communication aren't working, and people are working blind, while trying to communicate strategies and alternatives to each other by the traditional Cold War means of costly signalling theory. My answer to the question of "why did Putin invade Crimea?" is that it is quite likely that he did it "in order to transmit a single bit of information". We're trying to use various forms of sanctions as a communication tool, but we haven't got an agreed code to match them up with - we need to develop a set of bidding conventions, like bridge players have. My guess is that because it has now become someone's job to develop a new substitute diplomatic communication channel, and fast, it will get done, and things will get a lot more normal. But it's also possible that they won't, and that we will be seeing a lot more use of the tactic of annexation of territory as a means of self-expression.\

Reminds me of the increased partisanship in Congress where old-style, bipartisan deals can no longer be made.

strange defeat of fair trade and sound finance

I pretty much agree with DeLong and Krugman on most things.. But DeLong's defense of NAFTA has returned memories of how Krugman used to argue for free trade in the late 90s as the left protested NAFTA and the the Battle in Seattle had riots over a WTO meeting, which began the militarization of the police.

In the discussion of Piketty a main focus is the aggregate of capital and labor income share. Larry Summers suggest free trade is in the process of working itself out. Dean Baker, another great teacher and populizer like DeLong and Krugman, has suggested the same in regards to China.

But there has been a long run of the working out. Now, both DeLong and Krugman say the U.S. could lower its trade deficit by devaluing the currency but don't emphasize it the way Baker does.

J.W. Mason has been focused on the euthanasia of the rentier and that's another matter of debate under Piketty's K21. It's part of the process of what's being worked out as Summers put it. But with rising inequality, the 1 percent gain in political power and can keep the their returns up.

DeLong and Krugman mistankenly focused on "sound finance" sort of. Krugman on how the Bush tax cuts and deficits would drive up rates. DeLong on Clinton's deal with Greenspan. But both were the pushed to the left by the Bush years, the housing bubble/financial crisis and the Insane Clown Posse Show/ Dark Age of Economics. To be reality-based is to be radical.

hedge funds and the euthanasia of the rentier

Capital Decimation Partners: slight return by Daniel Davies

Investors Pay for Hedge-Fund Illusions by Noah Smith

Innovation in Higher Ed, 1680 Edition by J.W. Mason

Makes me think of Nate Silver's Signal and the Noise and wishes he had a chapter on hedge funds.

Abenomics

Stocks, Flows, and Abenomics by Dean Baker

Abenomics has only worked because foreigners think it will by Matt O'Brien

Robin Williams

Vox quotes some from his Reddit AMA

lawlshane: Can you come to Canada so I can hug you? I love you for naming your daughter Zelda. 

RW: I will be there as soon as I can! You have to give me a more specific location, you are a big country. You are the kindest country in the world. You are like a really nice apartment over a meth lab. 

And thank you. My other son, Mario, sends his greetings.

the cultural vogue for zombie apocalypse

Zombies and Congressional Dysfunction: What’s the Connection? by Jared Bernstein

The Walking Dead on AMC has been a huge hit. This summer on his HBO Show, Bill Maher ticked off Republican "Zombie lies" like trickle-down economics. I thought of Quiggin's book. Maybe Maher and his writers got it via Krugman. Right now the FX channel has the alien vampire zombies of The Strain. (Patient zero is "The Master," a squid-like vampire alien.) In September, the Syfy channel will have a series titled "Z Nation" about a zombie apocalypse.

Since I pay attention, the 2008 financial crisis was scary as was the recent debt ceiling clown show. I've become less worried and a little inured to it since Obama faced the Republicans down and the Fed has resolution authority, bit if we hit the next recession while at the Zero Lower Bound - and given the hatred for bailouts - we could enter Mad Max territory:



Fortunately Yellen seems to get it and understands the danger of raising rates too quickly. Also the debt-to-GDP ratio is low again, not that it ever was seriously a problem. There will be less fiscal drag going forward.

Also the movie Pacific Rim, with its Jaegers versus Kaiju. The Japanese are making a push with Abenomics. Germany and Europe are struggling. (Although Germany is riding a bit high after winning the World Cup. But then again Ukraine.)

I'd add that shows like Masters of Sex and The Knick are more hopeful from a progressive perspective. They suggest a hope in science and empiricism like we've seen in the Obama stimulus, QE, and Obamacare. And progress on the social front like gay marriage, a black two-term President and marjuana decriminalization. There's a lot of shows about hospitals, like House.

Kiwis

Is New Zealand once again heading the way by Scott Sumner

In 1990 the Kiwis were the first to adopt inflation targeting, and now there is a report that they may be the first to give the central bank control over both monetary policy and an important tool of fiscal policy: 

New Zealand’s main opposition Labour Party plans to change legislation governing the country’s central bank in its first term if it wins next month’s election, finance spokesman David Parker said. 

The plans, which include giving the Reserve Bank of New Zealand an alternative tool for managing inflation, have been discussed with Governor Graeme Wheeler, though “not in detail,” Parker told reporters in Auckland today after Labour began its election campaign. The vote takes place Sept. 20. 

Labour wants to give the central bank the ability to recommend changes to the rate of contribution to the national pension savings program, Kiwisaver. The RBNZ could use the new tool as an alternative to the official cash rate to “take the heat out of the economy,” Parker said in April, when the policy was announced. 

Quick reactions: 

1. It would be better to rely 100% of monetary policy, particular as NZ doesn’t face the zero bound problem. 

2. But if others insist we need a combined monetary/fiscal approach, then this is far, far better than other forms of fiscal policy. I would think it would appeal to people like Brad DeLong, who focus a lot on the savings/investment imbalance perspective.

austerity, thanks Tea Party

Stanley Fischer:

The stance of U.S. fiscal policy in recent years constituted a significant drag on growth as the large budget deficit was reduced. Historically, fiscal policy has been a support during both recessions and recoveries. In part, this reflects the operation of automatic stabilizers, such as declines in tax revenues and increases in unemployment benefits, that tend to accompany a downturn in activity. In addition, discretionary fiscal policy actions typically boost growth in the years just after a recession. In the U.S., as well as in other countries--especially in Europe--fiscal policy was typically expansionary during the recent recession and early in the recovery, but discretionary fiscal policy shifted relatively fast from expansionary to contractionary as the recovery progressed. In the United States, at the federal level, the end of the payroll tax cut, the sequestration, the squeeze on discretionary spending from budget caps, and the declines in defense spending have all curtailed economic growth. Last year, for example, the Congressional Budget Office estimated that fiscal headwinds slowed the pace of real GDP growth in 2013 by about 1-1/2 percentage points relative to what it would have been otherwise. Moreover, state and local governments, facing balanced budget requirements, have responded to the large and sustained decline in their revenues owing to the deep recession and slow recovery by reducing their purchases of real goods and services. Job cuts at federal, state, and local governments have reduced payrolls by almost 3/4 of a million workers, resulting in a decline in total government civilian employment of 3-1/4 percent since its peak in early 2009. The fiscal adjustments of the last few years have reduced the federal government deficit to an expected level of 3 percent of GDP in 2014 and fiscal drag over the next few years is likely to be relatively low. 

Robin Williams

Remembering Robin Williams, the amazing elastic man

Mork from Happy Days, then his own show. World According to Garp. Good Morning Vietnam. The Bird Cage. Fisher King. At the beginning of Good Will Hunting his vet psychologist from Southie was teaching a college course where he would joke with the students. And in Dead Poets Society, too, that's how I saw him as the cool teacher who made school bearable and the rest of us were students.

reverse hystersis

Fed Vice-Chair Stan Fischer on Whether Stronger Actual Growth Can Boost Potential Growth by Jared Bernstein by Jared Bernstein

Manhattan

The show Manhattan certainly has high stakes, although we know how it turns out.

The scientists at Los Alamos believe they are working against the clock and Werner Heisenberg who is in charge of Germany's bomb program.

I wonder how Walter White decided on the name Heisenberg.

effective demand and class

New Revisions of Labor Share show economy at the effective demand limit by Edward Lambert

I don't buy it. He's predicting recession.

The Pathos of Aggregate Demand Management by Sandwichman

supply and demand

The Trucking Industry Needs More Drivers. Maybe It Needs to Pay More. by Neil Irwin

In Connecticut, If Businesses Are Upset By Rising Wages, It Doesn't Matter What the Facts Are by Dean Baker