liquidity trap and secular stagnation

What Is the Eccles Building Thinking Today? III: The Mysterious Absence of Paul Krugman Thought by DeLong

Economists’ evolving understanding of the zero-rate liquidity trap by Ryan Avent

Motörhead

Sanders on the Fed

To Rein In Wall Street, Fix the Fed by Bernie Sanders

The recent decision by the Fed to raise interest rates is the latest example of the rigged economic system. Big bankers and their supporters in Congress have been telling us for years that runaway inflation is just around the corner. They have been dead wrong each time. Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort — not to fight phantom inflation.

Quiggin and DeLong on Piketty

Piketty and the Australian exception by John Quiggin

The Melting Away of North Atlantic Social Democracy by J. Bradford DeLong

Fed: raise one percent per year

In Denver, Worries That the Fed Will Chill a Sizzling Recovery by Binyamin Appelbaum

Janet L. Yellen, the Fed’s chairwoman, and her colleagues have concluded that the economy is finally strong enough to grow with a little less help from the central bank. Indeed, they worry inflation will rise too quickly if they do not start raising interest rates. The first rate increase will be small, then the Fed expects to raise rates about one percentage point a year for the next few years.

Mogwai - Les Revenant

Yellen on inequality

Perspectives on Inequality and Opportunity from the Survey of Consumer Finances by Janet Yellen

Waldman on the rich

Hard money is not a mistake by Steve Randy Waldman

Sumner on Krugman

Word games: Krugman's odd definition of tight money by Scott Sumner

Piketty seminar

Crooked Timber Piketty seminar

Daenerys Targaryen

Baker on Krugman and Summer

Paul Krugman, Larry Summers, and the Fed's Unused Ammunition by Dean Baker

Paul Krugman and Larry Summers both have very good columns this morning noting the economy's continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Fed's scope for action if the economy weakens.

While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate.

For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes.

This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level.

Of course, it would be best if we could count on fiscal policy to play a role in getting us back to full employment (lowering supply through reduced workweeks and work years should also be on the agenda), but the Fed does have more ammunition buried away in the basement and we should be pressing them to use it if the need arises.

Krugman on Reich

Challenging the Oligarchy by Paul Krugman

Supergirl's laser eyes

The episode "Red Faced" has Kara dealing with her anger issues. She's told that humans are terrified of what will happen if Supergirl loses her temper. Her boss advises her to find out what the anger is about behind the anger. By the end of the episode Supergirl concludes that she's angry about having being denied a normal life. Instead, her parents sent her away before her planet expoded and now she has to be a super hero.

Instead of being angry all the time she vows to channel that rage as she does here, channeling it into her heat ray vision.

Bruce Rauner

A Wealthy Governor and His Friends Are Remaking Illinois by Nicholas Confessore

Adair Turner and monetary financing

Between debt and the devil by Adair Turner review by Giles Wilkes

Between Debt and the Devil by Adair Turner review – should the government start printing money? by Tom Clark

The Case for Monetary Finance – An EssentiallyPolitical Issue by Adair Turner (presented at the IMF's Annual Research Conference)

Budgetary sleight-of-hand by Ben Bernanke

Summers on productivity

Is It (just) Hysteresis? Disentangling the Cyclical from the Structural by Lawrence H. Summers

The left's green lantern problem

The Left's Green Lantern Problem by Suzy Khimm

People's QE, Adair Turner and John Cassidy

Why Not Just Print More Money by John Cassidy

Cecchetti & Schoenholtz against people's QE

Learning from Japan: It's Hard to End a Deflation by Cecchetti & Schoenholtz