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July 2015

Liveblogging World War II: July 19, 1945: Interim Committee: Notes

Notes of the Interim Committee Meeting:


Members of Committee : Dr. Vannevar Bush, Dr. Karl T. Compton, Dr. James B. Conant, Mr. George L. Harrison, Acting Chairman

By Invitation : Maj. Gen. Leslie R. Groves , Brig. Gen Kenneth C. Royall, Mr. William L. Marbury, Lt. George S. Allan, Lt. George M. Duff, Jr.


The Committee considered a memorandum... [that] requested the [Scientific] Panel to study in some detail the future program of research and development in this field with particular reference to the scale of effort that should be planned for in terms of scientific and technical personnel and financial outlay... so that the Committee might gain a more specific understanding of the dimensions of this subject and its implications to the scientific resources of the nation....

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(Early) Monday DeLong Smackdown: Dean Baker

Must-Read: Dean Baker: The 2001 Recession Actually Was Really Bad News: "I see that I have to disagree with Brad DeLong again...

...Brad wants to see the 2008 downturn as a uniquely bad event due to the overextension of credit and the ensuing financial collapse. I see it as overwhelmingly a story of a burst housing bubble and the resulting fallout in the real sector....

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Weekend Reading: Norm Ornstein: The Birth of Obamacare

Norm Ornstein: The Birth of Obamacare: "It is worth going back and recounting what actually happened leading up to the enactment of Obamacare...

...and reflect a little bit on what might, and what should, happen going forward.

Did Obama Leap Rashly to Consider Healthcare Instead of Focusing on Jobs or the Economy?

There is no doubt that the president made healthcare reform a top early priority. There was good reason for doing so; past experience, including that of the Clinton health-reform plan, showed that waiting to pass a major social-policy change, in the absence of a great crisis, is a fool’s errand. A president’s momentum, his public support, and the backing of his party peak early, and major social-policy change by definition shakes up the status quo, creating losers along with potential winners and an even larger number of those unsettled by change. The longer presidents wait, the greater the likelihood that their opposition will mobilize and exploit uneasy voters. And the closer midterm elections loom, the more nervousness builds among lawmakers from the president’s party. [READ MOAR]

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Weekend Reading: Doug Henwood (1998): Europe's Fateful Monetary Union

Doug Henwood (1998): Europe's Fateful Union: "In just a bit over nine months, the euro will be born...

...and the next stage in the process of European economic and monetary union (EMU) will begin. Of the fifteen countries that make up the European Union (EU), eleven (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain) will begin a three-year process of dissolving their national currencies into a single continental one. Three (Denmark, Sweden, and the UK) are holding off on this step, and one (Greece) just wasn't tough enough to make the cut this time around.

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Liveblogging World War II: July 18, 1945: The Potsdam Conference

: The Potsdam Conference: Milestones - Office of the Historian: "The Potsdam Conference, 1945

The Big Three—Soviet leader Joseph Stalin, British Prime Minister Winston Churchill (replaced on July 26 by Prime Minister Clement Attlee), and U.S. President Harry Truman—met in Potsdam, Germany, from July 17 to August 2, 1945, to negotiate terms for the end of World War II. After the Yalta Conference of February 1945, Stalin, Churchill, and U.S. President Franklin D. Roosevelt had agreed to meet following the surrender of Germany to determine the postwar borders in Europe. Germany surrendered on May 8, 1945, and the Allied leaders agreed to meet over the summer at Potsdam to continue the discussions that had begun at Yalta. Although the Allies remained committed to fighting a joint war in the Pacific, the lack of a common enemy in Europe led to difficulties reaching consensus concerning postwar reconstruction on the European continent.

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German Economic Thought and the European Crisis

Over at Equitable Growth: It is a commonplace among Anglo-Saxon economists that Saxon-Saxon "ordoliberalism" was a post-World War II success only because somebody else--the United States--was both looking after the level of demand in the system as a whole, and also willing to act as an importer of last resort to allow other countries that had insufficient domestic demand to use the United States consumer to rebalance their individual economies at full employment even when domestic demand was grossly insufficient. READ MOAR

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Noted for Your Lunchtime Procrastination for July 17, 2015

Screenshot 10 3 14 6 17 PM

Must- and Should-Reads:

Over at Equitable Growth--The Equitablog


And Over Here:

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Stability of General Equilibrium and Monetary Policy: Baby Steps

Over at Equitable Growth: The very sharp Nick Rowe has a useful piece today giving the baby-step intuition behind Schmidt and Woodford's argument that, no, expected and actual inflation do not as a rule decline one-for-one when a central bank lowers nominal interest rates:

Nick Rowe: Understanding Schmidt and Woodford on Neo-Fisherianism: "Suppose you are really bad at algebra... can't solve...

...X = 0.5X. So you make a tentative first guess at the answer, say X=1, plug your guess into the right hand side, get X=0.5, which is your second guess, which you plug into the right hand side again, to get X=0.25, which is your third guess, and so on. Eventually your guesses converge to X=0... tatonnement (groping) towards the answer, just like the Walrasian auctioneer who solves the supply and demand equations in micro by raising prices if there's excess demand, and cutting prices if there's excess supply. But... if the equation is X = 2X... your guesses will diverge further and further away from the right answer.... READ MOAR

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Liveblogging World War I: July 16, 1915: Fokker Eindecker Fighters

Fokker EIII 210-16.jpg
"Fokker EIII 210-16". Licensed under Public Domain via Wikimedia Commons

Fokker Eindecker fighters:

The Fokker Eindecker fighters were a series of German World War I monoplane single-seat fighter aircraft designed by Dutch engineer Anthony Fokker.[2] Developed in April 1915, the first Eindecker ('Monoplane') was the first purpose-built German fighter aircraft and the first aircraft to be fitted with a synchronization gear, enabling the pilot to fire a machine gun through the arc of the propeller without striking the blades.[2] The Eindecker granted the German Air Service a degree of air superiority from July 1915 until early 1916. This period was known as the 'Fokker Scourge,' during which Allied aviators regarded their poorly armed aircraft as 'Fokker Fodder'.

Noted for Your Evening Procrastination for July 16, 2015

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Must- and Should-Reads:

Over at Equitable Growth--The Equitablog

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Policy Paralysis and/or Secular Stagnation?

###Some Talking Points from Fall 2014:###

Over at Equitable Growth: I never turned this into a proper piece...

At some deep level, the overwhelming problem is that Eurocrat elites--and, to a remarkably and unhealthy degree, American elites and not just republican legislators--believe that:

  1. Something called "structural reform" is essential for future economic prosperity.
  2. "Structural reform" cannot be accomplished during a time of prosperity and full employment, but requires deep and visible pain to get politicians to do what must be done.
  3. The remarkable failure of austerity to produce either a successful structural rebalancing or political pressures that lead to meaningful "structural reform" since 2007 means only that austerity has not been austere enough.

We are indeed trapped in the sewer of Romulus... READ MOAR

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When Greece, Her Knee in Suppliance Bent...

Graph Gross Domestic Product by Expenditure in Constant Prices Total Gross Domestic Product for Iceland© FRED St Louis Fed

Over at Equitable Growth: The big cost to the Eurozone of Greece's exit is that then the Eurozone becomes transformed from a currency union into a fixed exchange rate system, and fixed exchange rate systems are unstable. Therefore the economic integration an increased prosperity that was anticipated from the currency union will vanish. READ MOAR

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Jamelle Bouie: The Trayvon Martin Killing and the Myth of Black-on-Black Crime: Hoisted from Other People's Archives

Hoisted from Others' Archives from Two Years Ago:

Jamelle Bouie: The Trayvon Martin Killing and the Myth of Black-on-Black Crime: "Last week, in Chicago, 16-year-old Darryl Green was found dead in the yard of an abandoned home...

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Must-Read: It is important to remember that the austerity-forever dead-enders who dominate Republican economic policy right now are not exceptional in any way. The "global warming isn't happening" dead-enders are, rhetorically and cognitively, the same. The "ObamaCare is failing" dead-enders likewise. And the same thing is happening in security policy:

Paul Waldman: The next GOP president won’t walk away from the Iran deal: "Now that we have a nuclear deal with Iran, Republicans are jostling each other to determine...

Continue reading "" »

Live from La Farine: Matthew Yglesias**: A Successful Third Party Would Be a Trumpist Party: "Trumpism... [is] what a third party would have to sound like to get traction...

...a grab-bag of issue positions that appeal to a substantial minority of the electorate but neither party wants to wholeheartedly embrace because the ideas are too toxic in the elite circles that fund campaigns.... Normally whenever you see the big shots of the worlds of politics, business, and media get together to muse about alternatives to partisan politics they come up with an agenda that sounds a lot like an agenda that big shots from the world of politics, business, and media might come up with... a globalization-oriented, business-friendly agenda watered down with light dollops of social concern for the indigent, the global poor, and the environment... liberalish on social issues, but deferential to the police and armed forces; open to tax hikes to reduce the deficit and to government spending on infrastructure and basic research, but fundamentally skeptical of the welfare state; friendly to the aims of environmental groups but hostile in practice to noisy green activists; disdainful of labor unions (especially in the public sector) but admiring of immigrants. These were also the politics of the Simpson-Bowles Commission... No Labels... Unity '08....

Trumpism.... Recently, Donald Trump's main theme has been the evils of immigration, especially from Mexico. In this he speaks for the nearly 40 percent of pollsters who tell people there are too many immigrants in America.... Similarly, polls show that huge swathes of the electorate believe free trade agreements reduce Americans' wages, kill jobs, and even slow economic growth.... Trump criticized other Republicans... who want to 'do a big number' on Social Security and Medicare.... The Trump worldview... holds together... popular among highly 'ethnocentric' white voters...

Noted for Your Evening Procrastination for July 14, 2015

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Must- and Should-Reads:

Over at Equitable Growth--The Equitablog


And Over Here:

Continue reading "Noted for Your Evening Procrastination for July 14, 2015" »

Must-Read: Three percent of the prime-age population who really ought to be at work right now in a full-employment economy are not at work. Whatever your estimate of potential output growth is, the economy is surely not growing markedly faster than it. Inflation is below your target. And yet the Federal Reserve believes that it is time to tighten policy?

It is very hard to understand...

Graph Employment Population Ratio 25 54 years FRED St Louis Fed

Tim Duy: More Mediocrity: "Federal Reserve Chair Janet Yellen will be playing a game of mixed messages with Congress tomorrow...

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Across the Wide Missouri The first sign on whether Zanny Minton Beddoes has managed to improve the Economist that John Micklethwaite handed her is a "no":

Scott Eric Kaufman: The Economist: Ta-Nehisi Coates’ “Between the World and Me” is “just good enough to get away with” justifying its existence: "Wrestling with the ideas contained in a book that’s difficult for many people to read...

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DeLong and Eichengreen: New Preface to Charles Kindleberger, "The World in Depression 1929-1939": Hoisted from the Archives

New Preface to Charles Kindleberger, "The World in Depression 1929-1939":


J Bradford DeLong and Barry J. Eichengreen: New preface to Charles Kindleberger,* The World in Depression 1929-1939*:

The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening. We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.

Both the existence of these parallels and their tragic nature would not have escaped Charles Kindleberger, whose World in Depression, 1929-1939 was published exactly 40 years ago, in 1973.[1]  Where Kindleberger’s canvas was the world, his focus was Europe. While much of the earlier literature, often authored by Americans, focused on the Great Depression in the US, Kindleberger emphasised that the Depression had a prominent international and, in particular, European dimension. It was in Europe where many of the Depression’s worst effects, political as well as economic, played out. And it was in Europe where the absence of a public policy authority at the level of the continent and the inability of any individual national government or central bank to exercise adequate leadership had the most calamitous economic and financial effects.[2]

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Liveblogging History: July 14, 1945: Eleanor Roosevelt

Eleanor Roosevelt: My Day: July 14, 1945:

One day last week I went down to Orange, New Jersey, to see my cousin, Mrs. Henry Parish, who has not been very well. A charming looking woman spoke to me on the tube and, when I got into the train, came and sat beside me. It was a heartwarming experience, because she said she had long wanted to have an opportunity to talk with me. Once before she had spoken to me in a New York shop, but that was not exactly an opportunity for conversation. She told me how much my husband's leadership had meant in the past few years, and we talked of the things that must be done by each one of us as individuals if we hope for peace in the world of the future.

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The Flaws in the Rietz-Barro Explanation of the Equity Premium: Hoisted from the Archives from 2005

I have an itch I need to scratch, ever since I found Ken Rogoff writing:

Robert Barro... has shown that in canonical equilibrium macroeconomic models... small changes in the market perception of tail risks can lead both to significantly lower real risk-free interest rates and a higher equity premium.... Martin Weitzman, has espoused a different variant of the same idea based on how people form Bayesian assessments of the risk of extreme events...

Rogoff, Barro, and Weitzman are all sharper than I am by substantial margins. But this seems to me to be wrong. I don't think that what their papers mean is that the equity return premium is driven by fears of the rare event of a complete macroeconomic catastrophe. And it definitely does not mean what the math of Barro (2005) says: that high equity prices in 1929 and 2000 were driven by a much higher than normal expectation of such a complete macroeconomic catastrophe.

Barro and Weitzman both work in a model in which safe assets are in zero aggregate supply. What they both found seem to me to be consequences of an observation by John Geweke (2001) Because constant relative risk aversion does not play well with zeroes, in any model with (a) a representative agent with constant relative risk aversion, and (b) no safe assets at all, adding a very small amount of kurtosis (could be downward skewness as well, but doesn't have to be skewness) to a geometric-normal stochastic process for the evolution of wealth introduces negative-infinities into the asset pricing formulas.

I wrote the first draft of this in late 2005, and then taught it in 2007-2009:

A (Graduate) Teaching Note on Barro's (2005) "Rare Events and the Equity Premium" and Rietz's (1988) "The Equity Premium: A Solution":

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