the Banks

Rant Of The Day by Andrew Sullivan

Emily Bazelon

Bazelon was one of my favorite regulars on The Colbert Report along with the German ambassador. Hopefully she'll visit the new show.

Fed under pressure

As Federal Reserve Selects New Top Officials, Coalition Calls for Public Input by Binyamin Appelbaum

Mid Terms and minimum wage

Bad news is that Republicans took governorships and the Senate. Good news on the minimum wage and rewarding work.

For all that, the minimum wage is popular, very popular, as voters in four red states proved once again Tuesday. Nebraskans approved a ballot measure to raise that state’s minimum wage to $8 an hour next year and $9 in 2016; South Dakotans voted to raise it to $8.50 next year. Arkansas voters approved a gradual increase to $8.50 by 2017. And Alaskans agreed to raise it to $9.75 by 2016. 

In Illinois, the one blue state to consider the issue, voters opted for $10 an hour starting next year, albeit in a nonbinding referendum. 

Consequently, a majority of states, containing more than half of the working-age population, have or soon will have minimum wages higher than the federal minimum.

via Dean Baker

Anyhow, Lane wants politicians to stop raising the minimum wage so he proposes indexing it to the rate of inflation. The idea of indexation is good, but Lane has the wrong target. Back in the good old days, when we had 4.0 percent growth and 3.0 percent unemployment, the minimum wage rose in step with productivity. If it had continued to rise in step with productivity since its peak level in 1968 it would be more than $17 an hour today.

Keynes and the ZLB

The Liquidity Trap, the Great Depression, and Unconventional Policy: Reading Keynes at the Zero Lower Bound by Richard Sutch

QE and inflation

The Effect of QE on UST Yields by Mark Dow

Via Matthew Klein

Mark Dow has persuasively argued that it boils down to learning: a lot of people used to think bond-buying was equivalent to the policies that led to the Weimar hyperinflation and those people either changed their mind or were forced to leave the market because their trades kept blowing up. 

(Peter Thiel comes to mind.) 

Another possibility is that QE3 did affect inflation expectations but in a way that is invisible to the naked eye because we can’t know what would have happened in the absence of additional bond-buying. While intriguing, this unfalsifiable hypothesis leaves us feeling empty inside.

Did Dow anticipate Robert Waldmann?

Wren-Lewis, Mason and Waldman

Michael Woodford on the Interdependence of Monetary and Fiscal Policy by JW Mason

Some thoughts on QE by Steve Randy Waldman

Fighting the last war by Simon Wren-Lewis

Konczal on monetary policy

Did the Federal Reserve Do QE Backwards? by Mike Konczal

It would have been nice for a journalist or Congressperson to have asked Bernanke. This is why they wanted to get out of QE ASAP.

O'Brien on QE

Why the Fed is giving up too soon on the economy by Matt O'Brien

Kockerlakota and the North Dakota oil boom

Kocherlakota dissents. I believe his turn about first came when he visited the North Dakota "man camps" of the oil boom.

Oct. 29 FOMC statement:

Voting against the action was Narayana Kocherlakota, who believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to keeping the current target range for the federal funds rate at least until the one-to-two-year ahead inflation outlook has returned to 2 percent and should continue the asset purchase program at its current level.

'The Overnighters' shows dark side of North Dakota oil boom

Her

Joaquin Phoenix turned 40 today and I just watched his film Her by Spike Jonze. It was really good and has some great actresses and actors in it: Chris Pratt, Rooney Mara, Scarlett Johansson, Olivia Wilde, Amy Adams and Matt Letscher.*

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* Letscher was the father in the Carrie Diaries with Annasophia Robb who in turn was in the saddest movie ever. He also plays the fascist Joe Kennedy on Boardwalk Empire.

DeLong: productive vs. extractive

Very Rough: Exploding Wealth Inequality and Its Rent-Seeking Society Consequences: (Early) Monday Focus for October 27, 2014 by DeLong

What I would like to see Emmanuel and Gabriel guess it is the share of wealth that is productive–that boosts the productivity of the working class and that shares those productivity benefits with workers–and the share of wealth that is extractive–that are pure claims on income rather than useful instruments of production, and thus that erode rather than boost the incomes of others. Wealth plays two roles, you see: as useful factors of production that boost productivity, and as extractive social power that is the result, the cause, and the maintainer of the rent-seeking society.

Baker and Krugman on QE

Krugman on Quantitative Easing and Inequality by Dean Baker

Housing and Fed Fail

Baker would agree investment is as expected - pace Yglesias, but would disagree about housing.

Over at Equitable Growth: Is There Really a Profits-Investment Disconnect?: (Late) Friday Focus for October 24, 2014 by DeLong

As a result of the housing bubble, the mortgage frauds, the attempts at regulatory arbitrage on their balance sheets by the money-center universal banks, the financial crisis, et sequelae, U.S. real GDP today is now 12% below what we back in 2007 expected it to be now. Since the post financial-crisis trough U.S. real economic growth has proceeded at 2.24%/year, compared to the 3.00%/year growth rate we saw between 1990 and 2007.

So far there are no signs anywhere that the gap between today and the pre-2007 trend in levels will be made up. So far there are no signs anywhere that the gap between today and the pre-2007 trend in growth rates will be made up. 

That means that, come 2024 a decade hence, we can now expect a U.S. economy to be 19.5% smaller than the economy we confidently projected as of 2007 we would have. 

And, with a capital-output ratio of roughly 3, that means that between 2007 and 2024 cumulative net investment will be lower than projected back in 2007 by 58.5%-point years of GDP--and cumulative gross investment considerably lower.

Gross versus Net

Reading it a lot lately.

Gough Whitlam

Gough Whitlam has died by John Quiggin

NGDP futures market

Quick update on NGDP futures
by Scott Sumner

No one told me it was going to be hard to give away money!  Seriously, there are a few more complications than I anticipated, and I am now waiting for specific instructions from iPredict and Hypermind about how to proceed.  But it will get worked out.

Meanwhile the early Hypermind Q3 futures contract, with 100 euros in prize money, has now been upgraded to a combined Q3 and Q4 with 1000 euros in prize money. So it just became much more attractive.  Recall that at Hypermind, traders do not have to put up their own money–it’s not “gambling.”  But you do need to register first.  

Eventually we will deliver much more money for prizes at Hypermind.

Update:  I was sent the following information:

The real-time forecasts are published on this page, which requires the password: “illusion“.

https://hypermind.lumenogic.com/hypermind/app.html?gtp=vitrine&selection=NGDP

The contracts are at about 34/35 right now, which means 3.4% to 3.5% annualized growth.  That seems like an opportunity. 

PS.  Super busy this week.  All I have time for is to point out that the collapse of the Chinese economy, predicted for 20 years, once again failed to materialize in Q3.  Now some brave souls are predicting Chinese growth will slow over time.  You mean they won’t keep growing at 10% as they become highly developed?  I never would have guessed.

Person of Interest

AV Club reviews Person Of Interest: “Prophets”

Rogue

20 additional episodes have been ordered.

Sorrowing man, look how worn you've become

You once were Lord of the barren sea

There's blood on our hands in this perfect madness

You're living on borrowed time

Oh how you have lost your way,

Oh how you have lost your way

There's no sympathy for we don't know the cure

Cause what you've got, well it runs too deep

But you've lived and breathed more than any man I know

But you're not done, oh, at least I hope

Oh how you have lost your way,

Oh how you have lost your way

In this life we have made together

Oh how you have lost your way

Oh, how you have lost your way

Oh, how you have lost your way.

Yglesias on neoliberalism, dividends and buybacks

One paragraph that explains why the American economy isn't working for the middle class by Matt Yglesais