Krugman, DeLong and Baker on inflation and the 1970s

Are Investors Less Confused About Real and Nominal Interest Rates Than They Were 40 Years Ago? by Dean Baker

Thoma commenter anne writes: 

There were 2 characteristics of investment structure and understanding in the 1970s that have changed markedly since. 

As for bond portfolios, the concept of duration and how a constant duration bond portfolio can be used to control principle loss during a period of significantly rising interest rates was not developed till late in the 1970s. Bond portfolio managers know how to protect portfolios against increasing inflation or interest rates now. 

As for stock portfolios, there has been a significant change for well established companies in which stock buybacks are demanded by investment managers and accepted by corporate management as a way in which to increase stock prices when economic conditions such as increasing inflation or interest rates make for bear markets.

positive outlook

A Favorable Flow? by Jared Bernstein

Game of Thrones

AV Club reviews Game Of Thrones (Experts): “Two Swords”

AV Club reviews Game Of Thrones (newbies): “Two Swords”

Everyone's favorite Game of Thrones character is secretly George W. Bush by Zach Beauchamp (Vox.com)

Wrong. Wrong. Wrong. She's John Brown/Joan of Arc. No commenting system at Vox?

Piketty and capital

THOMAS PIKETTY UNSUCCESSFUL ATTEMPTED SMACKDOWN WATCH: I FIND MYSELF DISAPPOINTED BY THE USUALLY-RELIABLE JAMES GALBRAITH AND PETHOKOUKIS by DeLong

Piketty

Piketty on Capital: A Footnote by Henry Farrell (Crooked Timber)

Capital in the 21 Century: Still Mired in the 19th by Dean Baker (Huffington Post)

Philip Pilkington: Misdirection – Galbraith on Thomas Piketty’s New Book on Capital by Yves Smith (Naked Capitalism)

Kapital for the Twenty-First Century? by James K. Galbraith (Dissent)

New Inquiry

China as the Doozers by Izabella Kamiska
She links to New Inquiry which has contributions from her, J.W. Mason, Mike Konczal, and Steve Randy Waldman.

Game of Thrones

good comment section.

Post-Red Wedding, Game Of Thrones works to find itself by Sonia Saraiya

the left such as it is

On The Pathetic Left by Krugman

Simon Wren-Lewis asks,

Why does the economic policy pursued or proposed by the left in Europe often seem so pathetic? 

citing the Hollande government as the prime example, but also the limpness of Labour in Britain. And he suggests that it’s a question of resources and organization:

Seeking out good advice (and distinguishing it from bad advice) takes either money or time. An established government finds this much easier than an opposition or a new government. 

Well, I can’t speak to the European situation, but we had our own version of the sorta-kinda left utterly failing to take on austerian macro — Obama’s “pivot” from jobs to deficits, which actually began in 2009, back when Democrats still controlled both houses of Congress. And you can’t make the resources argument there; not only was Obama a sitting president with a Congressional majority, but modern U.S. progressivism has a large policy-analysis apparatus outside the government, much of which was arguing strenuously against the pivot. Yet there was Obama in November 2009 (!) warning, on Fox News no less, that excessive deficits mightcause a double-dip recession. 

So how did that happen? Based on my observations, I’d put it down to the influence of the Very Serious People, whose views on economics tend in turn to be driven largely by the financial industry. It’s hard to believe, but back when Obama was telling Fox that the deficit was a huge threat, there were also widespread rumors that he would soon replace Tim Geithner with … Jamie Dimon. 

And what those finance-industry people were telling Obama was tobeware of the invisible bond vigilantes. 

I would guess that it’s much the same in Europe. Labour should be listening to Jonathan Portes and, well, Simon Wren-Lewis, but I’m sure that it’s listening much more to well-tailored men from the City. Hollande may be a man of the left in a way that nobody in US politics is, but he’s still getting advice from bankers telling him that fiscal rectitude is all (and although France may be well to the left of the United States in most respects, it has nothing like the intellectual infrastructure of the US progressive movement to counter the alleged wisdom of big money.) 

I guess you could say that it was ever thus. But the nature of our current economic situation is that smart policy requires that you ignore what supposedly responsible people, who sound as if they know what they’re talking about — and hey, they’re rich, so they must know something — have to say. And no government of the moderate left has had the intellectual and moral courage to do that.

A Working Class Disarmed by Doug Henwood

deflation

A sign of the times? Conservatism and denial of reality.

Bitcoin's deflation problem by Ryan Avent

TWO weeks ago we published a Free exchange column examining whether Bitcoin could be considered a true money, and if not, why not. Mike Hearn, one of Bitcoin's most prominent software developers, responded to the column somewhat dismissively. I wrote an e-mail response to Mr Hearn, the gist of which I will reproduce here. He makes two broad criticisms. The first is that we have lazily repeated the argument that deflation will kill Bitcoin, which in his view has been debunked. And the second is that we are naive to think put much faith in official inflation statistics. 

I think Mr Hearn may have misunderstood the piece's argument. It was not that deflation would kill Bitcoin. Rather, it is that deflation will prevent Bitcoin from becoming a unit of account, and that, in turn, will keep it from displacing traditional currencies. But Bitcoin could survive and indeed thrive without becoming the coin of the realm. 

The issue, as the piece explains, is that deflation in the unit of account leads to unemployment, thanks to the fact that wages generally don't adjust downward. Mr Hearn suggests that the idea that deflation might be costly is controversial among economists. I must disagree; it really isn't. Economists would love it if he were right that deflation didn't matter—that money, in economists' parlance, is neutral. If wages adjusted quickly and cleanly then they could go back to applying really straightforward classical economic models and everyone's life would be simpler. But the data are very clear on this point; wages are "sticky", and so deflation in the currency in which wages are set is costly.

(emphasis added.)

Baker has a contrarian take which has some truth to it.

Baker on HFT

High Speed Trading and Slow-Witted Economic Policy by Dean Baker

By contrast, the front-running high speed trader, like the inside trader, is providing no information to the market. They are causing the price of stocks to adjust milliseconds more quickly than would otherwise be the case. It is implausible that this can provide any benefit to the economy. This is simply siphoning off money at the expense of other actors in the market.

There are many complicated ways to try to address this problem, but there is one simple method that would virtually destroy the practice. A modest tax on financial transactions would make this sort of rapid trading unprofitable since it depends on extremely small margins. A bill proposed by Senator Tom Harkin and Representative Peter DeFazio would impose a 0.03 percent tax on all trades of stocks, bonds, and derivatives. This would quickly wipe out the high-frequency trading industry while having a trivial impact on normal investors....

Game of Thrones

"Dornish law does not apply." Tyrion had been so ensnared in his own troubles that he'd never stopped to consider the succession. "My father will crown Tommen, count on that."

"He may indeed crown Tommen, here in King's Landing. Which is not to say that my brother may not crown Myrcella, down in Sunspear. Will your father make war on your niece on behalf of your nephew? Will your sister?" [Oberyn] gave a shrug. "Perhaps I should marry Queen Cersei after all, on the condition that she support her daughter over her son. Do you think she would?"

Never, Tyrion wanted to say, but the word caught in his throat.... "I don't know how my sister would choose, between Tommen and Myrcella," he admitted. "It makes no matter. My father will never give her that choice."

"Your father," said Prince Oberyn, "may not live forever."

Something about the way he said it made the hairs on the back of Tyrion's neck bristle. Suddenly he was mindful of Elia again, and all that Oberyn had said as they crossed the field of ash. He wants the head that spoke the words, not just the hand that swung the sword. "It is not wise to speak such treasons in the Red Keep, my prince. The little birds are listening."

"Let them. Is it treason to say a man is mortal? Valar morghulis was how they said it in Valyria of old. All men must die. And the Doom came and proved it true."

        George R.R. Martin -- A Storm of Swords

Stop freaking out about debt by Yglesias

Samuelson

LITTLE KEYNESIAN ECONOMICS PURGE ON THE PRAIRIE WEBLOGGING: LIVE FROM THE ROASTERIE CXXVIII: MARCH 27, 2014 by DeLong

Paul Samuelson: "Like the mini-skirt, the radical faction gradually subsided..."

Game of Thrones

Only ten days until season 4.

New excerpt from the Winds of Winter.

The Americans

AV Club reviews The Americans: “The Deal”

Liberal Arts (film)

Dickens

Charles Dickens’s Inner Child by Hitchens

The Dark Side of Dickens by Hitchens

Piketty

Doug Henwood reviews Thomas Piketty's Capital in the Twenty-First Century

Forces of Divergence: Is surging inequality endemic to capitalism? by John Cassidy

PIKETTY’S INEQUALITY STORY IN SIX CHARTS by John Cassidy

Dialogue: Eleven (so Far) Worthwhile Reviews of and Reflections on Thomas Piketty’s “Capital in the Twenty-First Century”: Wednesday Focus: March 26, 2014 by DeLong

Fed governor Jeremy Stein

Leaning, then toppling by Ryan Avent

Baker and DeLong

DeLong responds to Krugman and others below:

A Dialogue on the Resolution of the Financial Crisis of 1989 and the Non-Resolution of the Financial Crisis of 2007: Tuesday Focus: March 25, 2014

and Dean Baker again (he commented at DeLong's blog)

Krugman and DeLong on Avoiding Secular Stagnation