Grasping Reality on TypePad, by Brad DeLong

Weekend Reading: The Federal Reserve in 2011 Debates Christina Romer's Ideas About the Need for "Regime Change": https://www.federalreserve.gov/monetarypolicy/files/FOMC20111102meeting.pdf

I believe that in a generation or two the histories of the Bernanke Fed are overwhelmingly likely to concentrate on two puzzles:

1. The failure to seek an environment in which inflation was high enough to allow a Federal Funds rate of 5% or so at the [peak of the business cycle, so that Bernanke's successors would have room to respond to a downturn in aggregate demand.

2. The failure to use the credibility of its commitment to low inflation long and painfully built up by Volcker and Greenspan to support policies to rapidly return prime-age employment to its normal share of the population.

In late 2011, in a context in which prime-age employment was severely depressed and not going anywhere, the failure to see these two as policy priorities that called for, well, "regime change" is likely to appear largely inexplicable, and to be judged harshly:

Margaret Talbot: Revisiting the American Nazi Supporters of “A Night at the Garden”: "Even more unnerving than the strangeness of the spectacle is the creeping sense of familiarity it evokes. Kuhn’s snarky excoriation of the 'Jewish-controlled' press, his demand 'that our government shall be returned to the American people who founded it', and even the idolatry of the Founding Fathers all have their echoes in far-right politics today. No moment in the film seems more redolent of our current demagogue’s maga rallies than the one in which a protester scrambles onto the stage—he was Isadore Greenbaum, a twenty-six-year-old plumber’s helper from Brooklyn—and is promptly tackled and pummelled by Kuhn supporters, amid appreciative laughter and hooting from the crowd. One advantage to living through Trumpism is that it has compelled a reckoning with aspects of our country’s past that, for a long time, many Americans preferred not to acknowledge...

A Night at the Garden:

Yannay Spitzer: UC Berkeley Event: Pale in Comparison: The Economic Ecology of the Jews as a Rural Service Minority: "Econ 211, Economic History | February 25 | 2-3:30 p.m. | 639 Evans Hall... https://yannayspitzer.files.wordpress.com/2014/11/spitzer-pale-in-comparison-150426.pdf

How could we tell if someone is interested in maintaining their own place at the top of a pyramid of status, authority, and wealth or in aiding the growth of knowledge?: Stuart Ritchie: @StuartJRitchie: "He’s quietly deleted it now, but here’s the attitude of a senior scholar to people trying to improve the quality of scientific research: Cass Sunstein: 'It is right and important to ask whether social science findings can be replicated—but in another life, the replication police would be Stasi'...

Jemima Kelly: Stuff Elon Says, (Inevitable) Bitcoin Edition: "Tesla CEO Elon Musk appeared on ARK Invest’s “For Your Innovation” podcast on Tuesday, to be fawned over interviewed by Ark CEO Cathie Wood and analyst Tasha Keeney.... A strange choice of podcast for him to appear on given that nobody has heard of it, perhaps? Not really. ARK Invest... is very bullish on Tesla.... Wood has said at various times that Tesla is the next Amazon, the next Apple, and that Musk is 'a one in a billion type of person'. (Implying six other Elons might be on the loose around the planet?)... Wood is also very bullish on blockchain and crypto. Very bullish.... Musk, in response to Wood, said (emphasis ours): 'Yeah. It bypasses currency controls. Yeah. **Paper money is going away, and crypto is a far better way to transfer value than pieces of paper, that’s for sure.' It was already a close correlation, but the Tesla-bro-to-crypto-bro Venn diagram is officially a perfect circle...

The very sharp Gavyn Davies summarizes four views of the macro outlook: Powell/Bernanke/Summers/DeLong. Not sure I belong in this company...

As he sees it, the Fed is now confident that there will neither be inflation which will require it to raise interest rates and trigger a recession nor private-sector weakness which ought to have led the Fed to have already returned the Federal Funds rate to zero. The first seems correct. But I am not sure why the Fed believes in tiger second—and I have no idea what the Fed thinks it can do if the second comes to pass: Gavyn Davies: Recessions and Bear Markets—The Terrible Twins: "Many global markets... are now pricing a probability of recession of at least 50 per cent within 12 months. This recession risk seems far too high.... Inter-relationships between recessions and bear markets are complex and not very well understood. It is clear that they tend broadly to coincide in their timing.... Economists often assume that recessions are basically caused by economic fundamentals, with the financial markets reacting when these fundamentals deteriorate. Sometimes investors may be able to discern rising recession risks before they actually appear in hard economic data...

I would not have called MMT "nonsense economics". Thus I think Jonathan Portes needs to put a choke collar on Prospect's headline writers. It is very much the case that MMT done right focuses attention on the inflation constraint rather than the financiers-are-scared-the-debt-is-too-high constraint, and that would seem to me to be a healthy thing. However, I do worry about multiple equilibria—and jumps between equilibria: Jonathan Portes: Nonsense Economics: The Rise of Modern Monetary Theory: "Under MMT, fiscal policy is the main tool. This may well make sense when interest rates are at or close to zero. But that... was explicitly recognised by government policy during and immediately after the 2008 financial crisis.... It’s an integral part of Labour’s fiscal rule.... It also means that MMT—at least the credible version—does not mean there is no limit to deficits, just a different one, dictated by the potential impact on inflation.... So in the end I... find... MMT... frustrating... [as] a mixture of the tautological, the obvious and the tendentious.... The claim that that MMT means that a future government can dodge hard choices about how to pay for decent public services is just plain nonsense...

Will McGrew sends us to new EPI employee and friend of Equitable Growth Pedro Nicolaci da Costa: The U.S. Job Market Doesn’t Feel so Hot Despite the Low Unemployment Rate: "Workers need the economy to stay hot so they can begin to see the dividends of high growth.... There are several reasons a purportedly booming U.S. economy doesn’t feel like much of a boon to millions of American workers, chief among them the startling lack of wage growth many have experienced over the past four decades.... A business- and bank-friendly mindset at the Federal Reserve, whose top officials spend a lot more time with their high-flying Wall Street and industry contacts than with workers and community leaders, deepens this imbalance.... Because of the Fed’s proximity to its business contacts, it tends to think of workers as labor costs (not investments in human capital) and wages as inflation (not improvements in standards of living). This colors the Fed’s definition of 'full employment', making policy makers easily swayed by dubious claims from business executives about chronic labor shortages—made without any contention about why wages are not rising on a sustained basis...

• Comment of the Day: Graydon: "I am pretty sure that the theoretical case—that there's secure encryption—has been, in practical terms, backdoored out of existence at the hardware level. It is difficult to find out, one way or the other. So it's 'no one is secure' AND 'no one knows how secure they're not against which adversary' AND 'humans aren't actually generally capable of doing secure things', all together... #commentoftheday #riseoftherobots

• Comment of the Day: JEC: "I think we should place more emphasis on the fact that the resolution of the Cuban Missile Crisis depended critically on the asymmetry between the American and Soviet political systems. A win-win outcome was possible only because Kennedy needed to 'win' in public, but could 'lose' in secret, while Khrushchev could tolerate a public 'loss' provided he could show CPSU insiders a secret 'win'. As a side note, I think this piece officially qualifies Niall as the 'Eugene Fama of historians', someone who's public polemic demonstrates a deep and profound ignorance of the body of knowledge created by his own discipline. Seriously, the Cuban Missile Crisis has been the subject of intense historical research since the collapse of the Soviet Union, approximately none of which supports Ferguson's 'take'... #commentoftheday #security #gametheory

1. Mesa Verde National Park

2. Meteor Crater

3. *Lynn Schooler * (2005): The Last Shot: The Incredible Story of the C.S.S. Shenandoah and the True Conclusion of the American Civil War https://books.google.com/books?isbn=0060523336

4. Roger Miller (1965): King of The Road

5. Wikipedia: Xiaolongbao

6. Serious Eats: Gong Bao Ji Ding

7. Wikipedia: Lapsang Souchong

8. Michael O'Hare: Do Professors Care Whether College Students Are Actually Learning?: "What we need is not a cheap, lazy way to pretend we are improving our teaching, but a real quality assurance program that a Google or Toyota manager, for example, would recognize as such.... Are you a student, paying through the nose with your time and money for the best possible education?... If you don’t get good answers, recruit your classmates to go in the quad with pitchforks and torches...

9. Wikipedia: Queen

10. Bruce Schneier: There's No Good Reason to Trust Blockchain Technology | WIRED: "What blockchain does is shift some of the trust in people and institutions to trust in technology. You need to trust the cryptography, the protocols, the software, the computers and the network. And you need to trust them absolutely, because they’re often single points of failure. When that trust turns out to be misplaced, there is no recourse...

11. Pottery Barn: Cameron Square Arm Upholstered Sofa with Reversible Chaise Sectional

12. Wikipedia: Electrical Telegraph

13. Menzie Chinn: Industrial and Manufacturing Production Decline: Whence the Business Cycle?: "The advance and second release of GDP will be releaseed (as an “initial” release) on February 28. Until then, keep on guessing!...

14. Temi | Trint | Rev

15. The Mediterranean Dish: Mediterranean Pan Seared Sea Bass Recipe

A new book coming this fall: Heather Boushey: "On the inaugural weekend of the #womensmarch, I decided to write a book for the new economic era and made a plan. Feels really good to have sent the final manuscript in yesterday! 'Unbound' will be out in early fall...

And another from Will McGrew, who is watching California begin trying to implement policies we at Equitable Growth had hoped to see implemented nationwide starting in 2017: Will McGrew: "Congrats to @AnnOLeary & Team Newsom_ on their bold plan for 6 months of paid leave in CA. Research by @HBoushey, @jacobselisabeth & others confirms paid leave can boost labor supply, family earnings & output, driving gov't savings from more tax revenue + less social spending...

The invariable rule in America—except for African-Americans—is that it takes one or at most two generations for immigrants to essentially converge to white native-born outcomes as far as the labor market (but not wealth accumulation!) is concerned. It is true now: it was true for the Famine Irish: William J. Collins and Ariell Zimran: The Economic Assimilation of the Famine Irish in America: "The many John Kellys.... Negative sentiment towards immigrants is often based on fears about their ability to integrate into economic, political, and social institutions. This column analyses the impact of the influx of Irish immigrants into the US in the 19th century. It shows that the children of immigrants had assimilated in terms of labour market outcomes within one generation, providing some perspective for the current debate about immigration policy...

For the first time ever, to my knowledge, the Congressional Black Caucus corresponds to the African-American share of the US population: Denise Oliver Velez: The Congressional Black Caucus has expanded in size and clout: "We’ve come a long way from the days when the Congressional Black Caucus (CBC) was founded 48 years ago. Back in 1971, 13 black members of Congress came together to found the organization. The CBC now has 55 members...

Olivier Coibion, Yuriy Gorodnichenko, and Mauricio Ulate: Is Inflation Just Around the Corner? The Phillips Curve and Global Inflationary Pressures: "An expectations-augmented Phillips curve can account for inflation not just in the U.S. but across a range of countries, once household or firm-level inflation expectations are used.... We find that the implied slack was pushing inflation below expectations in the years after the Great Recession but the global and U.S. inflation gaps have shrunk in recent years thus suggesting tighter economic conditions. While we find no evidence that inflation is on the brink of rising, the sustained deflationary pressures following the Great Recession have abated...

Continuing to make slow progress on understanding how to add information and behavior diffusion to economics: Leonardo Bursztyn, Florian Ederer, Bruno Ferman, Noam Yuchtman: Understanding Mechanisms Underlying Peer Effects: Evidence from a Field Experiment on Financial Decisions: "When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice ('social learning') and because his possession of the asset directly affects others' utility of owning the same asset ('social utility'). We randomize whether one member of a peer pair who chose to purchase an asset has that choice implemented... Then we randomize whether the second member of the pair: (1) receives no information... or (2) is informed of the first member's desire to purchase the asset and the result of the randomization.... This allows us to estimate the effects of learning plus possession, and learning alone.... Both social learning and social utility channels have statistically and economically significant effects.... Investors report updating their beliefs about asset quality after learning about their peer's revealed preference... report motivations consistent with 'keeping up with the Joneses' when learning about their peer's possession of the asset. These results can help shed light on the mechanisms underlying herding behavior...

Equitable Growth's monthly charticle about the most useful monthly employment report—not the (usually) first-Friday report, but rather the JOLTS report: Kate Bahn and Raksha Kopparam: JOLTS Day Graphs: December 2018 Report Edition: "Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the latest data for December 2018. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report...

Comment of the Day: Graydon: "I am pretty sure that the theoretical case—that there's secure encryption—has been, in practical terms, backdoored out of existence at the hardware level. It is difficult to find out, one way or the other. So it's "no one is secure" AND "no one knows how secure they're not against which adversary" AND "humans aren't actually generally capable of doing secure things", all together...

Bernard Finn: Underwater Cables: "In 1864 the India promoters laid a new flawless (but somewhat less ambitious) cable from the head of the Persian Gulf to Karachi.... Across the Atlantic... the Anglo-American Telegraph Company... complete[d] the 1865 cable, in 1866.... These first cables quickly spawned more. By 1873 they reached as far as Singapore, Hong Kong, and Sydney. The islands of the Caribbean were linked together and connected to the mainland; as were the islands of the eastern Mediterranean and those of the East Indies...

The judge in the Roger Stone case appears to be doing the right thing here: Southpaw: @nycsouthpaw: "Apology not accepted. via @NatashaBertrand:

Rick Perlstein: The Jesus Landing Pad: "NSC Near East and North African Affairs director Elliott Abrams sitting down with the Apostolic Congress and massaging their theological concerns. Claiming to be 'the Christian Voice in the Nation’s Capital', the members vociferously oppose the idea of a Palestinian state.... fear an Israeli withdrawal from Gaza... object on the grounds that all of Old Testament Israel belongs to the Jews. Until Israel is intact and Solomon’s temple rebuilt, they believe, Christ won’t come back to earth. Abrams attempted to assuage their concerns by stating that 'the Gaza Strip had no significant Biblical influence such as Joseph’s tomb or Rachel’s tomb and therefore is a piece of land that can be sacrificed for the cause of peace'.... Affiliated with the United Pentecostal Church, the Apostolic Congress is part of an important and disciplined political constituency courted by recent Republican administrations. As a subset of the broader Christian Zionist movement, it has a lengthy history of opposition to any proposal that will not result in what it calls a “one-state solution” in Israel...

Comment of the Day: JEC: "I think we should place more emphasis on the fact that the resolution of the Cuban Missile Crisis depended critically on the asymmetry between the American and Soviet political systems. A win-win outcome was possible only because Kennedy needed to 'win' in public, but could 'lose' in secret, while Khrushchev could tolerate a public 'loss' provided he could show CPSU insiders a secret 'win'. As a side note, I think this piece officially qualifies Niall as the 'Eugene Fama of historians', someone who's public polemic demonstrates a deep and profound ignorance of the body of knowledge created by his own discipline. Seriously, the Cuban Missile Crisis has been the subject of intense historical research since the collapse of the Soviet Union, approximately none of which supports Ferguson's 'take'...

1. The Market: As an Institution, Its Pros, and Its Cons: People... want to enter into reciprocal gift-exchange relationships.... We devised property as a way of constructing expectations of trust.... We devised money as a substitute for trust.... And so, on the back of these human propensities... we have constructed a largely-peaceful global 7.4B-strong highly-productive societal division of labor... #berkeley #economics #marketfailure #marketsuccess #economicinstitutions 2019-02-18

2. Modes of Market Failure: At lunch last week Richard Thaler was skeptical that I had managed to identify ten different modes of market failure. I admit that this list has a little too much of the Borges-List Nature, but I do think it holds up. What do you think?: The Market Economy: Modes of Failure: Markets can go wrong—badly wrong. They can... #berkeley #economics #marketfailure 2019-02-18

3. Still Haunted by the Shadow of the Greater Recession... #presentations #greatrecession #macro #economicgrowth #economichistory #economics #finance #monetaryeconomics 2019-02-16

4. Hoisted from the Archives: Note: The Ten Americans Who Did the Most to Win the Cold War: "Harry Dexter White... George Kennan... George Marshall... Arthur Vandenberg... Paul Hoffman... Dean Acheson... Harry S Truman:... Dwight D. Eisenhower... Gerald Ford... George Shultz... #hoistedfromthearchives #politics #security #history 2019-02-15

1. I don't know about this "global middle class from 10 to 100 dollars a day" stuff. That seems much too low to me...: Homi Kharas and Kristofer Hamel: A global tipping point: Half the world is now middle class or wealthier

2. Wikipedia: European Research Group

3. Randy Wray: Modern Money Theory: How I Came to MMT and What I Include in MMT

4. Wikipedia: Steven van Zandt

5. Deepak Hegde, Kyle Herkenhoff, and Chenqi Zhu: Patent Publication and Technology Spillovers: "Invention disclosure through patents (i) increases technology spillovers at the extensive and intensive margins (ii) increases overlap between distant but related patents and decreases overlap between similar patents (iii) lowers average inventive step, originality, and scope of new patents (iv) decreases patent abandonments and (v) increases patenting...

6.Wikipedia: Valle de Bravo

1. DIY Cookie Butter Recipe

2. Wikipedia: Hohenzollern-Hechingen

3. Wikipedia: House of La Fayette

4. Wikipedia: Celestial Emporium of Benevolent Knowledge

5. History Matters: Eight Hours for What We Will!

6. Octavia

The Market as an Institution: “The Market” as an Institution:

• We start from what look like to us deep truths of human psychology

  • People are acquisitive
  • People engage in reciprocity—i.e., want to enter into reciprocal gift-exchange relationships
    • In which they are neither cheaters nor saps
    • With those they trust…

• We devised property as a way of constructing expectations of trust…

• We devised money as a substitute for trust…

At lunch last week Richard Thaler was skeptical that I had managed to identify ten different modes of market failure. I admit that this list has a little too much of the Borges-List Nature, but I do think it holds up. What do you think?: The Market Economy: Modes of Failure: Markets can go wrong—badly wrong. They can:

1. not fail, but be failed by governments, that do not properly structure and support them—or that break them via quotas, price floors/ceilings, etc....

2. be out-of-equilibrium...

3. possess actors have market power...

4. be afflicted—if that is the word—by non-rivalry (increasing returns to scale; natural monopolies)...

5. suffer externalities (in production and in consumption, positive and negative; closely related to non-excludibility)...

6. suffer from information lack or asymmetry...

7. suffer from maldistributions—for the market will only see you if you have a willingness to pay, which is predicated on an ability to pay…

8. suffer from non-excludability (public goods, etc.)...

9. suffer from miscalculations and behavioral biases...

10. suffer from failures of aggregate demand...

Patrick Skinner: @SkinnerPm: "Shift ended with one of the worst calls. But what I remember is a call at a diner where a neighbor struggling with serious mental issues wouldn’t/couldn’t pay her $18 bill. Easiest call I handled all day. And best $28 bucks I spent in ages (ex waiter, tip big & tip big often...) Theresa... says ‘I’m guessing it wasn’t you eating at (name of random place in my precinct)’ when she does the checking account.... We’re very fortunate & it’s not often & it saves money overall by avoiding dumb jail for truly truly struggling neighbors.... Plus it’s nicer...

It is long past time to stop pretending that Trump has coherent policy goals that he can attain. And, on trade, having conspicuously folded on NAFTRA, he has no leverage in any dispute he gins up with China: Michelle Klieger: Is Trump Playing Trade War Checkers, While Xi Plays Chess?: "Trade talks starting to look like a familiar trap.... Break it, Restore the Status Quo, Claim Victory. Looking at the last few weeks, the biggest trade headlines were about auto tariffs, soybeans, and liquefied natural gas (LNG) sales and biotechnology approvals... easy wins China was hoping to give the United States to end the trade war. These concessions make great headlines and don’t cost China much if anything. If this is all we get out of the talks in January, then Trump played right into China’s hand. Trump didn’t get stronger intellectual property protection for American companies. He did not get China to end or change its Made in China 2025 campaign. He did not reduce the trade deficit. And foreign companies are still discriminated against under Chinese law. So what was achieved?...

The Philips Curve was always properly used as a heuristic framework for thinking about issues, not as a machine for generating certainty-equivalent forecasts to use in month-to-month policy decisions: Jeanna Smialek: RIP Phillips Curve? The Fed's Wonky Guidestar May Be Dimming: Fed has been moving from tight labor-brings-inflation logic. They’re now waiting for actual, not anticipated, price gains...

Josh Micah Marshall (2002): The real Whitewater Shocker: "People at the highest levels of the Bush administration found out about the Whitewater referral and started in motion a series of actions intended to speed up the handling of it.... Edie Holiday, the secretary to the Cabinet... then-Attorney General William Barr... then-White House counsel C. Boyden Gray.... Washington is replete with rules prohibiting or discouraging contact.... And most cover inappropriate contact between the political side of the executive branch and the law enforcement side of the executive branch... political appointees trying to use their influence over the executive law enforcement agencies for political gain...

This is, as best as I can tell, wrong: I had thought that it was not Khrushchev but Kennedy who cut the backroom deal—and that the deal was secret only because Kennedy thought he needed to hide it from people like, well, Niall Ferguson. Before the Cuban missile crisis the U.S. had missiles in Turkey threatening Russia with no Russian counterbalance, and the U.S. had already supported one invasion of Cuba to overthrow Castro. After the Cuban missile crisis the U.S. had pledged not to invade or support an invasion of Cuba to overthrow Castro, and neither America nor Russia had IRBMs threatening the other. This does not look like successful "brinksmanship" to me. This looks like both Kennedy and Khrushchev cooperating to defuse the crisis against the opposition of their own hawks—that both realized that they had an overwhelming common interest in not pulling too tightly on the ends they he'd of the Knot of War. Am I wrong? Niall Ferguson: Brexitian Rhapsody Going on Far too Long: "Dulles['s] brinkmanship meant that the United States must be willing to threaten nuclear war.... This high-stakes approach was much criticised by liberals, who feared nuclear Armageddon more than they feared the consequences of appeasing the Soviet Union. Yet Eisenhower’s Democrat successor, John F Kennedy, gave a masterclass in brinkmanship during the Cuban Missile Crisis of 1962. When Kennedy learnt that the Soviets were installing nuclear missiles on Cuba, he decided to impose a naval blockade to halt further Soviet shipments of military hardware to the island. In a television address, he issued an ultimatum, demanding the withdrawal of missiles. In case Moscow did not comply, Kennedy ordered the preparation of an invasion force.... Kennedy’s brinkmanship paid off. The Soviet leader Nikita Khrushchev was sufficiently intimidated to cut a secret back-channel deal, whereby he agreed to withdraw the Soviet missiles from Cuba if the Americans withdrew theirs from Turkey...

CERN: W3 Servers: "Note: this page is here for historical interest only; the content hasn't been updated since late 1992...

Dunning-Kruegerrands, and Dunning-Kruegerranderss: Paul Krugman: "Both Ferguson and Taylor signed the infamous letter declaring that Bernanke's policies would produce runaway inflation. Ferguson also, also infamously, fell for bogus claims that inflation was really much higher than reported. You might think that such experiences would make people wonder, at least a bit, about whether they understood monetary economics as well as they thought they did. (Yes, I've made mistakes—and promptly owned up to them. They haven't.) But no. I'm on record as saying that crypto is a mishmash of technobabble and libertarian derp. But I guess that I should add that it's also a giant draw for sufferers from Dunning-Kruger syndrome...

Wise words about how we think we understand things and underestimate uncertainty. What I am not clear about is whether modern tools of communications are truly a source of disruption, or whether it was just that from 1952 to 2007 all of the big surprises (e.g., fall of the Berlin Wall) were good ones: Charlie Stross: Someone Please Cancel 2019 Already?: "The event horizon in politics in a democracy is no more than... the maximum time between elections.... Consider Germany in January 1934, and how outlandish and dystopian the situation would have sounded if you'd described it to a German citizen in January 1929. (30% unemployment! A dictator and a state of emergency! Concentration camps! Anti-Jewish laws!)... The value proposition of democracy is that it provides for a peaceful transfer....But when you get a faction, party, or regime that no longer subscribes to the idea of democracy and refuses to back down gracefully, you get back the old problems... pressure for change builds up and when it erupts the effects can be devastating and unpleasant—especially, as we've had a crash-course reminder... when the tools of communication make it really easy for dangerous demagogues to draw a following...

Endorse: for the upper middle class who own stocks, Jack Bogle was the greatest philanthropist of this or any age. He could have claimed to have alpha magic and collected a vast fortune, but he worked for his clients and the public instead: Barry Ritholtz: Remembering Jack Bogle: "Warren Buffett.... 'The person who has done the most for American investors... Jack Bogle. For decades, Jack has urged investors to invest in ultra-low-cost index funds... [has] amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing–or... less than nothing.... Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me'...

Yes, it looks lie the world economy is now entering a recession—one that the U.S. is so far escaping: Brad Setser: China's Slowdown and the World Economy: "China, it now seems, has entered into a real slump.... China's total imports remained pretty strong though until the last couple of months. But they have now turned down. Sharply.... China (still) isn’t that important a market for the rest of the world’s manufactures. China’s overall imports (of goods) are significant, at around $2 trillion. But about a third are commodities, about a third are parts for re-export (think $800 billion of processing imports vs. exports of around $2.4 trillion), and a bit less than a third are imports of manufactures that China actually uses at home.... A fall in Chinese auto demand has a big impact on Chinese domestic output (most Chinese cars are made in China, with largely Chinese parts, thanks to China’s tariff wall), a measurable impact on the profits of some foreign firms with successful Chinese JVs, a modest impact on German exports and, at the margin, a measurable impact on global growth in oil demand...

key: https://www.icloud.com/keynote/0UtILjGfChXSFFUBSCJ3PTf1g
pages: https://www.icloud.com/pages/0eLbd_zXINsC-YRNSL1zQxIdA
html: http://www.bradford-delong.com/2019/02/haunted-by-the-shadow-of-the-greater-recession.html

#highlighted #presentations #greatrecession #macro #economicgrowth #economichistory #economics #finance #monetaryeconomicss

Simon Wren-Lewis: The Tory Party Lost Its Way from 2010, Not 2016: "'I have had it up to here with the Conservative party.' So writes a one time editor of the Spectator, Matthew d'Ancona. It is a good read: for example 'a chilling populism is now creeping into the language of mainstream Toryism: the language of treachery, snarling tribalism and impatience with anything that smacks of prudence, compromise or caution'. He is talking about Brexit of course, and he is entirely right. What he misses, in my view, was that this problem did not begin with the EU referendum, but six years earlier, with the Tory ‘modernisers’, Cameron and Osborne...

Hoisted from the Archives: Note: The Ten Americans Who Did the Most to Win the Cold War:

• Harry Dexter White: Treasury Assistant Secretary* who was the major force behind the Bretton Woods Conference and the institutional reconstruction of the post-World War II world economy. He accepted enough of John Maynard Keynes's proposals to lay the groundwork for the greatest generation of economic growth the world has ever seen. It was the extraordinary prosperity set in motion by the Bretton Woods' System and institutions--the "Thirty Glorious Years"--that demonstrated that political democracy and the mixed economy could deliver and distribute economic prosperity.

• George Kennan: Author of the "containment" strategy that won the Cold War. Argued--correctly--that World War III could be avoided if the Western Alliance made clear its determination to "contain" the Soviet Union and World Communism, and that the internal contradictions of the Soviet Union would lead it to evolve into something much less dangerous than Stalin's tyranny.

• George Marshall: Architect of victory in World War II. Post-World War II Secretary of State who proposed the Marshall Plan, another key step in the economic and institutional reconstruction of Western Europe after World War II.

• Arthur Vandenberg: Leading Republican Senator from Michigan who made foreign policy truly bipartisan for a few years. Without Vandenberg, it is doubtful that Truman, Marshall, Acheson, and company would have been able to muster enough Congressional support to do their work.

• Paul Hoffman: Chief Marshall Plan administrator. The man who did the most to turn the Marshall Plan from a good idea to an effective aid program.

• Dean Acheson: Principal architect of the post-World War II Western Alliance. That Britain, France, West Germany, Italy, and the United States reached broad consensus on how to wage Cold War is more due to Dean Acheson's diplomatic skill than to any single other person.

• Harry S Truman: The President who decided that the U.S. had to remain engaged overseas--had to fight the Cold War--and that the proper way to fight the Cold War was to adopt Kennan's proposed policy of containment. His strategic choices were, by and large, very good ones.

• Dwight D. Eisenhower: As first commander-in-chief of NATO, played an indispensable role in turning the alliance into a reality. His performance as President was less satisfactory: too many empty words about "rolling back" the Iron Curtain, too much of a willingness to try to skimp on the defense budget by adopting "massive retaliation" as a policy, too much trust in the erratic John Foster Dulles.

• Gerald Ford: In the end, the thing that played the biggest role in the rise of the dissident movement behind the Iron Curtain was Gerald Ford's convincing the Soviet Union to sign the Helsinki Accords. The Soviet Union thought that it had gained worldwide recognition of Stalin's land grabs. But what it had actually done was to commit itself and its allies to at least pretending to observe norms of civil and political liberties. And as the Communist Parties of the East Bloc forgot that in the last analysis they were tyrants seated on thrones of skulls, this Helsinki commitment emboldened their opponents and their governments' failures to observe it undermined their own morale.

• George Shultz: Convinced Ronald Reagan--correctly--that Mikhail Gorbachev's "perestroika" and "glasnost" were serious attempts at reform and liberalization, and needed to be taken seriously. Without Shultz, it is unlikely that Gorbachev would have met with any sort of encouragement from the United States--and unlikely that Gorbachev would have been able to remain in power long enough to make his attempts at reform irreversible. *Also, almost surely an "Agent of Influence" and perhaps an out-and-out spy for Stalin's Russia. If so, never did any intelligence service receive worse service from an agent than Stalin's Russia did from Harry Dexter White....

#hoistedfromthearchives #politics #security #history #highlighted

Is employer-side monopsony the reason the effective labor demand appears to be so inelastic when incresaes in the minimum wage are concerned? Or are we just not being creative enough? And why does the idea that, in America today, minimum-wage increases are "job killers" continue to have rhetorical purchase?: Doruk Cengiz, Arindrajit Dube, Attila Lindner, and Ben Zipperer: The Effect of Minimum Wages on Low-Wage Jobs: Evidence from the United States Using a Bunching Estimator: "Infer[ring] the employment effect of a minimum wage increase by comparing the number of excess jobs paying at or slightly above the new minimum wage to the missing jobs paying below it... using 138 prominent state-level minimum wage changes between 1979 and 2016. We find that the overall number of low-wage jobs remained essentially unchanged over five years following the increase. At the same time, the direct effect of the minimum wage on average earnings was amplified by modest wage spillovers at the bottom of the wage distribution...

On how to do microfoundations right: Atif Mian: In Conversation with Heather Boushey: "Our number of theories is much larger than the number of observations we have, which is a limiting factor of macroeconomics just from an empirical standpoint.... This is where I feel micro data comes in.... Let me just give you one quick example.... The 2000s... you see credit going up, you see aggregate income going up as well.... If it were higher incomes that were driving credit growth, then since income growth is concentrated in the top 1 percent, we should really expect the top 1 percent to borrow a lot more.... Yet that clearly was not the case. So, even a basic breakdown of the data along a more micro level starts to give you a lot more insights than you might be able to deduce from just looking at the macro aggregates...

I confess I do not understand the Brexiteers these days at all. Consider Clive Crook. It used to be the case—before George W. Bush's "victories" in the 2000 election and in the Iraq War—that I disagreed with him but that his arguments were coherent and made sense. Ever since then, however, he seems to have lost coherence. And now there seems to be no reason.

He says that the Britain-EU relationship is a very valuable thing "achieved to great mutual advantage" but had the drawback that it did not allow Britain to throw citizens of other EU countries out when it wishied. In this case one would think the Theresa May deal would be an acceptable thing, because that is what it delvers. But no. Let's try to follow his thought, and fail: Clive Crook: The European Union Could Also Use a Brexit Policy: "Europe could have avoided Brexit altogether... agreed to the request for modest concessions on free movement of people... David Cameron made.... Europe wasn’t really saying it couldn’t be done; it was merely refusing to do it. The result of that intransigence was the referendum and Brexit...

1. Jill Abramson, Formerly of the New York Times, Has Both a Depraved Heart and a Social Intelligence Deficit: She thus made seven changes to Malooley's first sentence, in the process dividing it into two.... She thus made one change to Malooley's second sentence. She then left Malooley's third sentence alone. Clearly the effort of making seven discrete changes to the first sentence had exhausted her...

2. Note to Self: Thinking About Blanchard's Presidential Address...: Blanchard's calculations of the effect of debt on welfare in his AEA Presidential Address all take the form of evaluating the welfare of a generation of economic agents young in some period t after the resolution of all period-t stochastic elements. That is a fine thing to do. That is not quite the same thing as the effect on expected well-being behind the veil of ignorance...

3. Note to Self: All of these people are now very, very quiet: Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz and John. B. Taylor.... James C. Miller III... Barry W. Poulson... Charles W. Calomiris... Donald Luskin... 95 others... Susan Collins...

4. Note to Self: Speaker: "We are bursting at the seams! We have more students than robots!...

1. Jeff Yarbro: @yarbro: "The Constitution anticipates a President like this. It does not anticipate a Congress so indifferent to a President like this...

2. Abba P. Lerner (1943): Functional Finance and the Federal Debt

3. Patrick Iber: "I hereby donate 'Reichstag Fyre Festival' to the public domain...

4. Alex Ward: 25th Amendment: Andrew McCabe says in 60 Minutes Interview that DOJ Discussed Option to Oust Trump: "McCabe is back with a vengeance.... Some top Trump officials feel the president isn’t up to the job...

5. Wikipedia: 1989 murders of Jesuits in El Salvador: "Ignacio Ellacuría, S.J. Ignacio Martín-Baró, S.J. Segundo Montes, S.J. Juan Ramón Moreno, S.J. Joaquín López y López, S.J. Amando López, S.J. Elba Ramos. Celina Ramos...

6. The Browser

7. Michael K. Spencer: The Failure of Crypto Tribalism: "The majority of ICOs aren’t genuine companies, don’t have real products and never were intended to be sustainable business models. That’s a severe problem in ethics of these young engineers and young executives playing with Dapps and investors who are prone to fraud, hype and crypto trafficking of the worst kind-deceit...

8. Zack Beauchamp: Watch Rep. Ilhan Omar hold Elliott Abrams, Trump Venezuela envoy, accountable - Vox: "A rare example of elite accountability...

9. John Scalzi: Courtesy of @joshtpm, a principle henceforth to be known as "Trump's Razor": Josh Marshall: Dominance and Humiliation, No Middle Ground: "I’ve been praised in recent months for having some handle on the Trump phenomenon. The truth is a little different. Early on I realized that when it came to Trump if I figured out the stupidest possible scenario that could be reconciled with the available facts and went with it, that almost always turned out to be right. The stupider, the righter.... I just kept following that model and it kept working...

Digby: "I sure hope that everyone remembers to note in their McCabe pieces that what the IG found him guilty of was lying when he said he hadn't leaked damaging information about Hillary Clinton...

Paul Krugman: What’s Wrong With Functional Finance?: "MMT seems to be pretty much the same thing as Abba Lerner’s 'functional finance'.... So what I want to do in this note is explain why I’m not a full believer in Lerner’s functional finance; I think this critique applies to MMT as well, although if past debates are any indication, I will promptly be told that I don’t understand, am a corrupt tool of the oligarchy, or something...

Note to Self: Thinking About Blanchard's Presidential Address...: Blanchard's calculations of the effect of debt on welfare in his AEA Presidential Address all take the form of evaluating the welfare of a generation of economic agents young in some period t after the resolution of all period-t stochastic elements. That is a fine thing to do. That is not quite the same thing as the effect on expected well-being behind the veil of ignorance, from the nunc stans, taken without any knowledge of the resolution of period-t or indeed of any earlier stochastic elements. But I have not yet been able to wrap my head around what the differences are, or how they matter for conclusions. My notes...

Odds are now 50-50 that the entire Eurozone is or is about to be in a recession: Lucrezia Reichlin: The Threat of a Eurozone Recession: "My company, Now-Casting Economics, first detected a slowdown in the eurozone... started in the third quarter of 2017 and has affected all major eurozone economies, particularly Germany and Italy. This runs contrary to the widely held view of the eurozone as comprising a core of successful countries–especially Germany–and a debt-ridden, slow-growth periphery...

Dan Drezner: Anatomy of a Questioning: "the more I think about it, the more convinced I am that Omar’s line of questioning was spot-on.... If you,,, appoint someone who has a history of lying to Congress about human rights abuses... it is entirely fair to question him about prior acts of bad faith. And it was certainly striking to see someone so 'firmly contemptuous of congressional pressure' become the object of it.... Omar... was fully within her rights to bring up the unsavory and criminal portions of Abrams’s backstory.... The other uncomfortable truth, however, is that while Omar might be right to interrogate Abrams, she is mostly in the wrong about Venezuela...

Note to Self: Current forecast for 2018QIV GDP growth: 2.0%. Current forecast for 2019Q1 GDP growth: 1.5%. All of these people are now very, very quiet:

• Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz and John. B. Taylor: How Tax Reform Will Lift the Economy: "A conventional approach to economic modeling suggests that such an increase in the capital stock would **raise the level of GDP in the long run by just over 4%. If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year...

• Robert Barro (endorsed by Mike Boskin): How US Corporate-Tax Reform Will Boost Growth: "Gauging the effects of the tax-law changes on the costs (referred to as user costs) that businesses attach to investment in equipment and structures. Then I estimate long-run responses of the capital-labor ratio to the changes in user costs.... If we thought of C-corporations as corresponding to the whole economy, the changes in capital-labor ratios would imply a rise in long-run real per capita GDP by about 8.4%.... I made a rough downward adjustment of the long-run level effect from 8.4% to 7%...

• James C. Miller III, Douglas Holtz-Eakin... Barry W. Poulson... Charles W. Calomiris... Donald Luskin... 95 others: Pass tax reform and watch the economy roar: "A twenty percent statutory rate on a permanent basis would, per the Council of Economic Advisers, help produce a GDP boost 'by between 3 and 5 percent'.... It is critical to consider that $1 trillion in new revenue for the federal government can be generated by four-tenths of a percentage in GDP growth. Sophisticated economic models show the macroeconomic feedback generated by the TCJA will exceed that amount—more than enough to compensate for the static revenue loss...

• Susan Collins: Twitter: "On @MeetThePress today said that she had talked to [Holtz-]Eakin, Lindsay and Hubbard and they believed that the supply side stimulus would produce an increase on government revenue. This is problem when other side alleged serious people are really hacks.

Lawrence Glickman: The Strategic and Political Use of Threats of Backlashes: "Douthat claims that if the Dems adopt the Green New Deal, it 'will empower climate-change skeptics, weaken the hand of would-be compromisers in the GOP' and 'possibly help Donald Trump win re-election.' But wait a minute. Isn’t the current GOP already a Party of climate-change denialists and isn’t its Congressional arm completely lacking in 'would-be compromisers'?... Even granting the dubious assumption that the Congressional GOP includes many potential compromisers, this suggests that, if triggered, they will reactively support policies that exacerbate the problem they purported wish to solve. Douthat’s claim seems to be that the GND will have the devastating consequences of leading the GOP to... embrace precisely the policies and tactics that they are employing already...

Jemima Kelly: Niall Ferguson Joins Blockchain Project Ampleforth: "Ampleforth: not just an ideal school to send your kids if you're Catholic and can afford it, but also, 'an ideal money'. More specifically (and perplexingly): 'A decentralised store of value protocol that is volatile in price and supply at launch, but is strictly better than Bitcoin at steady state because it converges on a stable unit of account.' And Niall Ferguson, the rightwing British historian and who once called himself a 'fully paid-up member of the neo-imperialist gang', has joined its advisory board.... Here's Ferguson...