Noted for June 10, 2013
Thomas Hungerford: I’d be a damn fool to jump off a cliff | | Ronald Brownstein: Why Republicans Can Get Away With Ignoring Their Problems | Dean Baker: More Thoughts on Job Creation in the Recovery | Ben Walsh: Counterparties: America’s consistently dissatisfying jobs market |
Jonathan Portes sends us to Simon Wren-Lewis: Austerity is not even a sensible precautionary policy when we have Quantitative Easing: "I have in the past had… respect for the… argument… for ‘precautionary austerity’: Although there are good reasons why a rapid reduction in government debt is unnecessary, financial markets do not always behave rationally. There is a chance that markets might suddenly panic, and stop buying government debt, forcing up interest rates. As the cost of such an outcome would be very high, macroeconomic policy should do everything it can to avoid it – including reducing debt rapidly - even if that meant deepening the recession…. Jonathan [Portes]’s post also made me wonder whether the precautionary austerity argument was simply wrong…. There is no way the UK (or US) government will ever default… prefer… central bank buy[ing] debt through printing money…. [But if] interest rates got quite high before the central bank was forced to print money, damage could still be done. Quantitative Easing…. Suppose… interest rates on government debt did start rising because the market started to panic, and yet the economy remained depressed and the outlook for inflation was benign. In these circumstances the Bank would buy government debt as part of its inflation targeting strategy…. If you also know that there is a residual buyer who will never panic (the central bank), you can just focus on the fundamentals, which in this case includes how long QE will exist as an option. That in turn depends on the outlook for the economy. So QE is not only the fire engine that will put out the fire, it also reduces the chances of a fire occurring in the first place…. QE… perhaps it has a more important precautionary role, which is to eliminate the possibility of a self-fulfilling panic in the government debt market. But if QE does this, why do we need deep austerity now to placate the markets?"
Scott Erik Kauffman: Awful Greek words that apply to “The Rains of Castamere”: "For Aristotle, the superior play is one in which the audience’s sympathies are focalized through a perspective in a way that personalizes the catastrophe. It’s not just generally sad that these Trojans have to die, it’s particularly sad that we’re forced to watch one of them we care about realize he’s about to die. That’s the heart of traditional tragedy: it’s not the catastrophe itself (because the audience isn’t in actual jeopardy), but the sympathetic identification with the character who realizes he’s about to be killed (because that’s something the audience can actually feel) that makes a tragedy effective."
