Trump was the Black Swan nobody saw coming.
Just like the financial crisis?
Monday, March 28, 2016
Friday, March 18, 2016
Thursday, March 17, 2016
Wednesday, March 16, 2016
Lizza and Sandwichman on Dems; Baker and Beckworth on Fed
The Great Divide by Ryan Lizza
Bern't Offerings by Sandwichman
Arthur Burns Can’t Get the Blame for the 1970s Inflation by Dean Baker
Fed Commentary by David Beckworth
Bern't Offerings by Sandwichman
Arthur Burns Can’t Get the Blame for the 1970s Inflation by Dean Baker
Fed Commentary by David Beckworth
Monday, March 14, 2016
Sunday, March 13, 2016
Feel the Bern and Tuesday
Sanders says in an email:
Here's our path to the nomination
In less than 48 hours, the polls open in five large and delegate-rich states. After everything we’ve overcome together, there’s never been a more important two days for our campaign.
I want to tell you the truth about our job on Tuesday, and it’s something you may not hear a lot about from the corporate media. Our goal on Tuesday is simply this: do well and hold Hillary Clinton’s delegate lead to a minimum.
Because after Tuesday, the map shifts immediately and dramatically in our favor. With every vote cast after Tuesday’s primaries, her lead will only shrink. We will continue to make up delegates, week after week, in state after state, until we capture the lead on June 7th when California, New Jersey, New Mexico, Montana and the Dakotas vote.
That is our path to victory, but we need to [do] well on Tuesday. That’s the first step.
Friday, March 11, 2016
Saturday, March 05, 2016
reverse income policies
Time for helicopter money?
* Getting Serious about Wage Inflation in Japan by Blanchard and Posen
Recently, more radical proposals have surfaced, reflecting a sense of urgency and widespread disappointment with the impact of current monetary policy. Beyond advocating higher minimum wages, some are calling* for “reverse income policies,” with governments imposing across-the-board wage increases on private employers – a move that would drive up prices and defeat deflationary expectations. The fact that economists whose views typically fall nowhere near those of the far left are even thinking about such interventionism shows just how extreme circumstances have become.
I favor all of these proposals, in some form. The details of their implementation would obviously have to vary, depending on each economy’s circumstances. Germany, for example, is in a strong position to implement a reverse income policy, given its huge current-account surplus, though there would undoubtedly be major political barriers. More spending on education, skills upgrading, and infrastructure, however, is a no-brainer almost everywhere, and is politically more feasible.
* Getting Serious about Wage Inflation in Japan by Blanchard and Posen
Friday, March 04, 2016
Yanis Varoufakis on People's QE
MY ‘ADVICE’ TO JEREMY CORBYN… AND GEORGE OSBORNE by Yanis Varoufakis
The Labour Party has an instinctive urge to protect those left behind by the long years of uneven private-debt-fuelled growth and its austerian aftermath. This is good and proper. However, it would be a mistake to waste Labour’s energies on tirades against austerity. If I am right that austerity is a symptom of low investment (and of a government keen to push the inevitable burden on the weaker citizens), Labour should concentrate on policies that will shift idle savings into investment funding, engendering new technologies that produce green, sustainable development and high quality jobs.
Such an economic program will require the creation of a public investment bank that issues its own bonds (to be supported by a non-inflationary Bank of England quantitative easing strategy targeting these bonds), but also a new alliance with enlightened industrialists and parts of the City keen to profit from sustainable recovery. Labour, I believe, will only overcome its infighting, and the toxic media campaign against its leader, by escaping into a Green, investment-led British Renaissance.
Monday, February 29, 2016
Tulsi Gabbard!
Tulsi Gabbard, Rising Democratic Star, Endorses Bernie Sanders by Yamiche Alcindor
“As a veteran of two Middle East deployments, I know first hand the cost of war,” said Ms. Gabbard, one of the first female combat veterans to serve in Congress. “I know how important it is that our commander-in-chief has the sound judgment required to know when to use America’s military power and when not to use that power.
“As a vice chair of the D.N.C., I am required to stay neutral in democratic primaries, but I cannot remain neutral any longer,” she added. “The stakes are just too high. That’s why today I’m endorsing Senator Bernie Sanders to be our next president and commander in chief of the United States.”
Ms. Gabbard, while not mentioning Mrs. Clinton by name, went on to cast Mr. Sanders as being more interested in peace and as someone who would be better trusted with the lives of American troops. She also implied that Mr. Sanders had better foreign policy judgment than his rival.
“We need a commander in chief who has foresight, who exercises good judgment, and who understands the need for a robust foreign policy which defends the safety and security of the American people, and who will not waste precious lives and money on interventionist wars of regime change,” Ms. Gabbard said. “We can elect a president who will lead us into more interventionist wars of regime change, or we can elect a president who will usher in a new era of peace and prosperity.”
Ms. Gabbard, who was born in American Samoa and is the first Hindu elected to Congress, is seen as a young, rising star of the party but has publicly battled Democratic leadership. In October, Ms. Gabbard said she was uninvited from the first Democratic presidential primary debate by the chief of staff to Representative Debbie Wasserman Schultz of Florida, the chairwoman of the national committee, after Ms. Gabbard appeared on television and called for more debates.
At the time, the party’s leadership had been criticized for allowing only a limited number of debates, which some viewed as an effort to deny Mr. Sanders more time to confront Mrs. Clinton when she was ahead in polls. Ms. Wasserman Schultz has denied that Ms. Gabbard was uninvited from the debate.
Mr. Sanders welcomed Ms. Gabbard’s endorsement Sunday.
“Congresswoman Gabbard is one of the important voices of a new generation of leaders,” Mr. Sanders said in a statement. “As a veteran of the Iraq War she understands the cost of war and is fighting to create a foreign policy that not only protects America but keeps us out of perpetual wars that we should not be in.”
Ms. Wasserman Schultz praised Ms. Gabbard with a statement of her own. “As one of the first female combat veterans to serve in Congress and the first American Samoan and Hindu member of Congress, Congresswoman Gabbard is a role model who embodies the American ideal that anyone can dream big and make a difference,” Ms. Wasserman Schultz said. “She is also a colleague in Congress and a friend, and I look forward to continuing to work alongside her when our Party unites behind whoever emerges as our nominee.”
“As a veteran of two Middle East deployments, I know first hand the cost of war,” said Ms. Gabbard, one of the first female combat veterans to serve in Congress. “I know how important it is that our commander-in-chief has the sound judgment required to know when to use America’s military power and when not to use that power.
“As a vice chair of the D.N.C., I am required to stay neutral in democratic primaries, but I cannot remain neutral any longer,” she added. “The stakes are just too high. That’s why today I’m endorsing Senator Bernie Sanders to be our next president and commander in chief of the United States.”
Ms. Gabbard, while not mentioning Mrs. Clinton by name, went on to cast Mr. Sanders as being more interested in peace and as someone who would be better trusted with the lives of American troops. She also implied that Mr. Sanders had better foreign policy judgment than his rival.
“We need a commander in chief who has foresight, who exercises good judgment, and who understands the need for a robust foreign policy which defends the safety and security of the American people, and who will not waste precious lives and money on interventionist wars of regime change,” Ms. Gabbard said. “We can elect a president who will lead us into more interventionist wars of regime change, or we can elect a president who will usher in a new era of peace and prosperity.”
Ms. Gabbard, who was born in American Samoa and is the first Hindu elected to Congress, is seen as a young, rising star of the party but has publicly battled Democratic leadership. In October, Ms. Gabbard said she was uninvited from the first Democratic presidential primary debate by the chief of staff to Representative Debbie Wasserman Schultz of Florida, the chairwoman of the national committee, after Ms. Gabbard appeared on television and called for more debates.
At the time, the party’s leadership had been criticized for allowing only a limited number of debates, which some viewed as an effort to deny Mr. Sanders more time to confront Mrs. Clinton when she was ahead in polls. Ms. Wasserman Schultz has denied that Ms. Gabbard was uninvited from the debate.
Mr. Sanders welcomed Ms. Gabbard’s endorsement Sunday.
“Congresswoman Gabbard is one of the important voices of a new generation of leaders,” Mr. Sanders said in a statement. “As a veteran of the Iraq War she understands the cost of war and is fighting to create a foreign policy that not only protects America but keeps us out of perpetual wars that we should not be in.”
Ms. Wasserman Schultz praised Ms. Gabbard with a statement of her own. “As one of the first female combat veterans to serve in Congress and the first American Samoan and Hindu member of Congress, Congresswoman Gabbard is a role model who embodies the American ideal that anyone can dream big and make a difference,” Ms. Wasserman Schultz said. “She is also a colleague in Congress and a friend, and I look forward to continuing to work alongside her when our Party unites behind whoever emerges as our nominee.”
Sunday, February 28, 2016
DeLong, Waldman, and Waldmann
Welfare economics: an introduction (part 1 of a series) by Steve Randy Waldman
New Keynesian Orthdoxy and Hysteresis by Robert Waldmann
DeLong:
New Keynesian Orthdoxy and Hysteresis by Robert Waldmann
DeLong:
Must-Read: I want to endorse this line of thinking from Paul Krugman because I think it is completely right. My initial worries about Sanders-Friedman was that it made promises about where we could get as far as economic growth over the next decade that were very unlikely to be achievable. More important is the Romers' accurate critique that Sanders's plan would not even come close to getting us there even in the unlikely possibility that things do break the way that Sanders-Friedman. And that generates the corollary that is perhaps most important: Sanders's plans look seriously underpowered, and we should be trying to assemble a coalition to do even more than he envisions come 2017...DeLong:
Must-Read: IMHO, Paul Krugman should have had not two but four parting observations:
- Primaries are valuable testing grounds for candidates' ideas and teams, which is a point he makes.
- It's dangerous to believe something because it is what you want to hear, which is a point he makes.
- A point he doesn't make but should: If you believe that hysteresis is not a one-way ratchet--that it is as easy to boost potential via a high-pressure economy as to destroy it via prolonged depression--Sanders's stimulus plans are underpowered by a factor of four.
- A point he doesn't make but should: If you believe--which I do--that so far hysteresis has only gobbled about two-thirds of the gap between current production and the pre-2008 trend, then Sanders's fiscal stimulus plans are about the right size--and HRC's are much too small.
Saturday, February 27, 2016
Friday, February 26, 2016
Romer, Friedman, Krugman and models
Romer and Bernstein on stimulus by Krugman
January 10, 2009
Kudos, by the way, to the administration-in-waiting for providing this — it will be a joy to argue policy with an administration that provides comprehensible, honest reports, not case studies in how to lie with statistics.
That said, the report is written in such a way as to make it hard to figure out exactly what’s in the plan. This also makes it hard to evaluate the reasonableness of the assumed multipliers....
Wednesday, February 24, 2016
Tuesday, February 23, 2016
helicopter drops
Helicopter drops might not be far away by Martin Wolf (2.23.16)
The world economy is slowing, both structurally and cyclically. How might policy respond? With desperate improvisations, no doubt. Negative interest rates have already moved from the unthinkable to reality (see charts). The next step is likely to include fiscal expansion. Indeed, this is what the OECD, long an enthusiast for fiscal austerity, recommends in its Interim Economic Outlook. But that is unlikely to be the end. With fiscal expansion might go direct monetary support, including the most radical policy of all: the “helicopter drops” of money recommended by the late Milton Friedman.
More recently, this is the policy foreseen by Ray Dalio, founder of Bridgewater, a hedge fund. The world economy is not just slowing, he argues, but “monetary policy 1” — lower interest rates — and “monetary policy 2” — quantitative easing — are largely exhausted. Thus, he says, the world will need a “monetary policy 3” directly targeted at encouraging spending. That we might need such a policy is also the recommendation of Adair Turner, former chairman of the Financial Services Authority, in his book Between Debt and the Devil .
Why might the world be driven to such expedients? The short answer is that the global economy is slowing durably. The OECD now forecasts growth of global output in 2016 “to be no higher than in 2015, itself the slowest pace in the past five years”. Behind this is a simple reality: the global savings glut — the tendency for desired savings to rise more than desired investment — is growing and so the “chronic demand deficiency syndrome” is worsening.
This stage of demand weakness must be seen in its historical context. The long-term real interest rate on safe securities has been declining for at least two decades. It has been near zero since the financial crisis of 2007-09. Before then, an unsustainable western credit boom offset the weakness of demand. Afterwards, fiscal deficits, zero interest rates and expansions of central bank balance sheets stabilised demand in the west, while a credit expansion funded massive investment in China. Loose western monetary policies and loose Chinese credit policies also drove the post-crisis commodity boom, though China’s exceptional growth was the most important single factor.
The end of these credit booms is an important cause of today’s weak demand. But demand is also weak relative to a slowing growth of supply. At the world level, growth of labour supply and labour productivity have fallen sharply since the middle of the last decade. Lower growth of potential output itself weakens demand, because it lowers investment, always a crucial driver of spending in a capitalist economy.
It is this background — slowing growth of supply, rising imbalances between desired savings and investment, the end of unsustainable credit booms and, not least, a legacy of huge debt overhangs and weakened financial systems — that explains the current predicament. It explains, too, why economies that cannot generate adequate demand at home are compelled towards beggar-my-neighbour, export-led growth via weakening exchange rates. Japan and the eurozone are in that club. So, too, are the emerging economies with collapsed exchange rates. China is resisting, but for how long? A weaker renminbi seems almost inevitable, whatever the authorities say.
[graph]
No simple solutions for the global economic imbalances of today exist, only palliatives. The current favourite flavour in monetary policy is negative interest rates. Mr Dalio argues that: “While negative interest rates will make cash a bit less attractive (but not much), it won’t drive . . . savers to buy the sort of assets that will finance spending.” I agree. I cannot imagine that businesses will rush to invest as a result. The same is true of conventional quantitative easing. The biggest effect of these policies is likely to be via exchange rates. In effect, other countries will be seeking export-led growth vis-Ã -vis over-borrowed US consumers. That is bound to blow up.
One alternative then is fiscal policy. The OECD argues, persuasively, that co-ordinated expansion of public investment, combined with appropriate structural reforms, could expand output and even lower the ratio of public debt to gross domestic product. This is particularly plausible nowadays, because the major governments are able to borrow at zero or even negative real interest rates, long term. The austerity obsession, even when borrowing costs are so low, is lunatic (see chart).
If the fiscal authorities are unwilling to behave so sensibly — and the signs, alas, are that they are not — central banks are the only players. They could be given the power to send money, ideally in electronic form, to every adult citizen. Would this add to demand? Absolutely. Under existing monetary arrangements, it would also generate a permanent rise in the reserves of commercial banks at the central bank. The easy way to contain any long-term monetary effects would be to raise reserve requirements. These could then become a desirable feature of our unstable banking systems.
The main point is this. The economic forces that have brought the world economy to zero real interest rates and, increasingly, negative central bank rates are, if anything, now strengthening. This is what the world economy is showing. This is what monetary policy is indicating. Increasingly, this is what asset prices are demonstrating.
Policymakers must prepare for a new “new normal” in which policy becomes more uncomfortable, more unconventional, or both. Can the world escape from the chronic demand weakness? Absolutely, yes. Will it? That demands greater boldness. When one has exhausted the just about possible, what remains, however improbable, must be the answer.
No simple solutions for the global economic imbalances of today exist, only palliatives. The current favourite flavour in monetary policy is negative interest rates. Mr Dalio argues that: “While negative interest rates will make cash a bit less attractive (but not much), it won’t drive . . . savers to buy the sort of assets that will finance spending.” I agree. I cannot imagine that businesses will rush to invest as a result. The same is true of conventional quantitative easing. The biggest effect of these policies is likely to be via exchange rates. In effect, other countries will be seeking export-led growth vis-Ã -vis over-borrowed US consumers. That is bound to blow up.
One alternative then is fiscal policy. The OECD argues, persuasively, that co-ordinated expansion of public investment, combined with appropriate structural reforms, could expand output and even lower the ratio of public debt to gross domestic product. This is particularly plausible nowadays, because the major governments are able to borrow at zero or even negative real interest rates, long term. The austerity obsession, even when borrowing costs are so low, is lunatic (see chart).
If the fiscal authorities are unwilling to behave so sensibly — and the signs, alas, are that they are not — central banks are the only players. They could be given the power to send money, ideally in electronic form, to every adult citizen. Would this add to demand? Absolutely. Under existing monetary arrangements, it would also generate a permanent rise in the reserves of commercial banks at the central bank. The easy way to contain any long-term monetary effects would be to raise reserve requirements. These could then become a desirable feature of our unstable banking systems.
The main point is this. The economic forces that have brought the world economy to zero real interest rates and, increasingly, negative central bank rates are, if anything, now strengthening. This is what the world economy is showing. This is what monetary policy is indicating. Increasingly, this is what asset prices are demonstrating.
Policymakers must prepare for a new “new normal” in which policy becomes more uncomfortable, more unconventional, or both. Can the world escape from the chronic demand weakness? Absolutely, yes. Will it? That demands greater boldness. When one has exhausted the just about possible, what remains, however improbable, must be the answer.
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