Over at Equitable Growth: How Can We Build a Model in Which an Invisible Japanese Bond Vigilante Attack Is Contractionary?: Daily Focus
Monday DeLong Smackdown Watch: Scott Sumner

Noted for Your Morning Procrastination for December 8, 2014

Screenshot 10 3 14 6 17 PMOver at Equitable Growth--The Equitablog



And Over Here:

  1. David Beckworth: Monday Morning 'Money Still Matters' Round Up: "It's the Domestic Demand Stupid! Ramesh Ponnuru reminds us why worrying about "currency wars" is misguided when economies are depressed. It completely misses the point.... It is not the depreciation that matters, but the boost to domestic demand from easing monetary policy. Unfortunately, not every central bank is interested in stabilizing domestic demand as noted next. Monetary Policy Differences Explain a Lot. Martin Wolf looks across the global economy and finds a common factor behind the variation in economic growth: the stance of monetary policy.... The Nominal GDP Targeting Glass is Half Full..."

  2. Matthew Klein: Did Japan actually lose any decades?: "After adjusting for population, real household spending grew more from 1990-2013 in Japan than in every country in our sample except for Sweden, the UK, and US. Moreover, the UK and US only managed to pull off their superior consumption growth with the help of huge unsustainable debt bubbles and ‘wealth effects’, while Japanese consumers had to contend with sinking asset markets and stagnant nominal wages. So much for the idea that deflation kills the impulse to shop! If we start the clock not in 1990, however, but in 2000, Japan looks even better.... Now, one could argue that some of this is as much a reflection on the severity (and mishandling) of the aftermath of the excesses in other countries as much as it is a testament to the strength of Japan. But even if we use the cherry-picked time frame of 1990-2007, real consumption per person still grew more in Japan than in Germany and Switzerland, and almost as much as in France and Austria..."

  3. Paul Krugman: Shinzo and the Invisibles: "Brad DeLong is puzzled by... Ken Rogoff['s]... warning that Japan could face an attack from invisible bond vigilantes if it doesn’t quickly tackle long-run fiscal issues. I’m puzzled too... The truth is that I said such things about the US back in 2003. But I was wrong.... Rudi Dornbusch’s ‘overshooting’ model.... Invisible bond vigilantes. Suppose... they suddenly demand that Japanese 10-year bonds offer a rate of return 200 basis points higher than US 10-year bonds. You might be tempted to say that Japanese interest rates will spike--but the Bank of Japan controls short-term rates, and long-term rates are mainly an average of expected short-term rates, so how is this supposed to happen?... Instead, the yen would depreciate now so that investors can expect it to appreciate later. And this yen depreciation would be expansionary.... The invisible vigilantes would be doing Japan a favor if they suddenly materialized and attacked! I’ve had many discussions with smart people about this, and have never gotten an explanation of why it’s wrong; we usually end up with something like a warning that Japanese deflation might suddenly turn into uncontrolled inflation, which seems unlikely and certainly isn’t the way the warnings are usually phrased--we’re supposed to worry about turning into Greece 2010, not Weimar 1923. You might think that what we’re talking about is the lessons of history--but as far as I can tell, there are no historical examples of countries with debts in their own currency facing a Greek-style crisis..."

  4. Robert Skidelsky: Speech on the Autumn Statement, in the House of Lords, 4th December 2014: "What happens to the budget is determined by what happens to the economy, and what happens to the economy is not all within the Treasury’s control. But it’s equally important to remember, that what happens to the economy is largely determined by what happens to the budget. This could hardly not be so, as government spends about 40% of GDP. Ever since I started writing and speaking about these matters in 2010, I have been predicting that the Chancellor would not meet his budget targets. The reason I gave was that the pursuit of those targets in itself slows down the economic growth on which their achievement depends. Why? Because it slows down the rate of spending in the economy, and growth depends on spending. The cuts have hit the spending, and the spending has hit growth. So it’s not surprising that the Chancellor finds himself with a projected deficit of £91.3bn this year, when in 2010 he promised to ‘balance the budget’ by the end of this parliament. According to the OBR, the discrepancy between the projection and outcome results from ‘unexpectedly weak performance of tax receipts’. Perhaps it was only unexpected to the experts at the Treasury. In fact, it was the logical consequence of growth being so much below what was expected between 2010 and 2013, and of what has been happening to the labour market since..."

  5. Charlie Stross: On the lack of cultural estrangement in SF - Charlie's Diary: "In the previous discussion thread, someone mentioned having a problem with one particular far-future (well, set 400 years hence) SF novel that disrupted their reading of it so badly that they ended up giving up on the book.... I think it's worth taking a look at it, because it's one of my own pet shibboleths.... These are not bad authors and they don't write terrible books: that's part of what makes the problem so jarring for me. And the nature of the problem? It's that the stories they're telling are set in a far future... in an interstellar human polity.... And yet the civilization they portray can best be described as 'Essex suburbia goes interstellar'... or... 'Whitebread Middle American Suburbia to the Stars'... gender politics, religious framework, ideologies, fashions(!) and attitudes... has become a universal norm. And nothing else gets much of a look in.... You can make an argument for writing SF in this mode in that it allows the lazy reader to ignore the enculturation issue and dive straight into the adventure yarn for which the SFnal trappings are just a brightly-coloured wrapper. But I still find it really weird to read a far-future SF story that doesn't deliver a massive sense of cultural estrangement, because in the context of our own history, we are aliens. Imagine yourself abducted by a mad Doctor in a time machine shaped like a blue Police Box (itself an anachronism in today's smartphone-networked world) and dumped on the streets of your home city a century ago, in 1914.... How familiar are you going to find things? The answer is actually 'not very'.... You speak a dialect of the local language, it's true. But you have some words or terms that nobody recognizes ('atom bomb'), some words that have changed meaning radically thanks to the spread of technical neologisms ('virtual', 'computer') or social change ('queer', 'n-----'), and there are other words and slang that you probably don't recognize.... The architecture and layout of cities will be vaguely familiar.... Some things will be mildly disorienting.... Some items will be disgusting (horse shit everywhere, and the flies they attract). It may be hard to tell the difference between a shop front and somebody's living room, if you get away from the market stalls. And it may be hard to tell the difference between a contemporary crack house and the typical living conditions of the early 20th century poor.... Foodstuffs you expect to find are unavailable and exotic (bananas, kiwi fruit, curry), and stuff nobody in their right mind would eat is routinely sold (tripe, kidneys, beef hearts) and eaten.... Don't ask about medicine.... You don't want to know what passes through conservatives' minds in 1914.... It's worth noting, incidentally, that much of the social change that led up to the current cultural matrix was driven by technological change. Better medicine and family planning... which bananas... cheaper than potatoes, people aren't worn out unto death by fifty, civil rights for people who aren't rich white males... you probably aren't dying of tuberculosis. So why do repeatedly we see the depiction of far future societies with cheap interstellar travel in which this hasn't bought about massive social change as a side-effect (other than the trivial example of everyone having a continental sized back yard to mow)? Seriously, I feel that if I'm writing far-future SF, I've got a duty to at least try and portray a plausible society."

Should Be Aware of:


  1. Simon Johnson: Antonio Weiss Is Not Qualified To Be Under Secretary For Domestic Finance | The Baseline Scenario: "In coming years, the overall stance of US fiscal policy will matter a great deal for long-term interest rates, with one key issue being whether domestic and international investors remain convinced that our debt-GDP ratio is on a sustainable path. (James Kwak and I wrote a book on this topic.) Based on the record, there is no indication that Mr. Weiss has the skills likely to help put us on such a path (yes, fiscal policy is determined by Congress as much as by any administration--but the Under Secretary is an important part of the decision-making mix). And there is a legitimate concern about Mr. Weiss’s qualifications which, ironically and perhaps inadvertently, was raised by Mr. Sorkin himself, when he conceded, ‘that Mr. Weiss doesn’t have a lot of experience in the regulatory arena, and at least part of the role he is nominated for involves carrying out the remaining parts of the Dodd-Frank overhaul law.’ The negative fiscal implications in that statement are potentially first-order..."

  2. James Hamilton: New estimates of the effects of the minimum wage | Econbrowser: "Michael Wither and his adviser Professor Jeffrey Clemens... 'Over the late 2000s, the average effective minimum wage rose by 30 percent across the United States. We estimate that these minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point'..."


Noted for Your Morning Procrastination for December 10, 2014