Grasping Reality on TypePad, by Brad DeLong

1. Nick Rowe: Reverse-Engineering the MMT Model: "The MMT AD curve is vertical.... Fiscal policy can be used, and must be used, because this model, with its vertical AD curve, has no inherent tendency towards 'full employment' output...

2. Financial Times: The ECB Is Attempting to Get Ahead of Events: "The European Central Bank’s U-turn this week—reviving part of its stimulus programme after two years of weaning the eurozone off easy money—took markets by surprise. It should not have done. Signs of eurozone weakening, especially in Germany, and in key partners such as China, had been evident for months. Once the US Federal Reserve signalled a pause before lifting rates again, the ECB became likely to follow suit. In his final months in the role, ECB president Mario Draghi is clearly trying to get ahead of events. Less clear is whether the bank has done enough, or has the means to do so, if the weakening continues...

3. Melissa Dell: The Persistent Effects of Peru’s Mining Mita: "This study utilizes regression discontinuity to examine the long-run impacts of the mita, an extensive forced mining labor system in effect in Peru and Bolivia between 1573 and 1812. Results indicate that a mita effect lowers household consumption by around 25% and increases the prevalence of stunted growth in children by around 6 percentage points in subjected districts today. Using data from the Spanish Empire and Peruvian Republic to trace channels of institutional persistence, I show that the mita’s influence has persisted through its impacts on land tenure and public goods provision. Mita districts historically had fewer large landowners and lower educational attainment. Today, they are less integrated into road networks and their residents are substantially more likely to be subsistence farmers...

4. Marcy Wheeler: Art of the Get-Screwed-in-Your-Russian-Quid-Pro-Quo Deal | emptywheel: "Putin’s election year operation exacerbated the polarization between Democrats and Republicans such that most Republicans and a goodly number of Democrats have been unable to step back and say, holy shit, this country got attacked and we need to come together to do something about it. Trump’s win got Republicans to fear Trump’s base so much that they care more about those fevered hordes than doing what is right for this country. And Democrats rightly want to punish Trump for cheating, but haven’t thought about what a least-damaging off-ramp for that cheater might look like. Putin doesn’t care if Trump benefits... though he is happy to keep toying with Trump like a cat plays before he eviscerates his mouse.... There are multiple ways for him to get a win out of this, whether or not Trump manages to eke out any kind of real payoff... Putin isn’t the only one playing this game. Certainly, Mohammed bin Salman feels the same way, even if his record of ruthless dealmaking is shorter and sloppier than Putin’s.... Donald Trump and Jared Kushner are easy marks for a whole range of skilled operators willing to stroke their egos and dangle loot... to the detriment of the interests of the United States. That they are so bad at deal making in no way disproves their culpability. There is no Trump Tower in Moscow. But there never had to be. All that was needed was the promise of a ridiculously lucrative narcissism-stroking deal for the Trump family to agree to shit that would hurt this country. And all the evidence suggests that they did, and continue to do so...

5. Let me hoist this from last year: Kate Bahn summarizing the evidence that imposing work requirements simply does not work: it has none of the benefits that people wish that it would have, and all of the drawbacks you can think of: Kate Bahn: Work Requirements for U.S. Public Assistance Programs Don’t Work: "Analysis from the Center on Budget and Policy Priorities finds that imposing work requirements simply doesn’t work. One reason is because increased red tape may lead to eligible recipients losing their benefits even though they are eligible for them. People with volatile work hours or who hold multiple jobs may have a hard time collecting and submitting sufficient documentation to demonstrate they are working regularly. As CBPP points out, completing work-requirement red tape is even harder for self-employed workers, which should be cause for concern as gig-based employment becomes more prevalent...

6. Even though the first quarter of 2019 is only two-thirds over, practically all of the private-sector decisions that will determine the level of economic growth from the first quarter of 2018 to the first quarter of 2019 have already been made. Moreover, because of a statistical quirk 8/9 of the components of the growth rate have already occurred, and we have reasonable data on 2/3 of the components. So the Federal Reserve Bank of New York's forecast that the first-quarter growth rate will be only 1.4% is now a semi-solid thing: you cannot take it to the bank, but you can borrow on it (the last three month-out misses were 0, +0.2, and -0.4 respectively). It's not a recession. Not quite. But it is clear that even if 2.4% were the right target for the short safe nominal interest rate two months ago, it is not the right target for the short safe nominal interest rate now. The Fed should cut. It is far from clear to me that the risk of a U.S. recession this year is low. The risk that a recession will be called is low. The risk that a recession will start is 30%: Gavyn Davies: Alarm Bells Ring for the Goldilocks World Economy: "Markets seem willing to overlook the continuing slowdown in the advanced economies, which has taken the latest growth rate to only 0.8 per cent.... This is perversely seen as good news because it will reduce the likelihood of further interest rate increases.... The dovish turn in US monetary policy has been confirmed by an unusual volte-face in policy guidance by the Fed leadership in the space of a few weeks.... This phase of the cycle is often described as the Goldilocks zone, in which growth — like the heroine’s porridge in The Story of the Three Bears—is neither too hot nor too cold.... Meanwhile, growth is still high enough to indicate that the risk of outright recession in the next 12 months remains close to zero.... While the US is still clinging to the middle of the Goldilocks zone, the eurozone is flirting with the bottom boundary of its zone. Any further decline in the nowcast would see a large increase in the probability of a European recession this year. With the Japanese nowcast already in negative territory and Asian trade flows headed sharply downwards, the markets may not be able to ignore much further weakness in the world economy...

7. Larry Kudlow (December 7, 2007): Bush Boom Continues: "There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told...

8. Larry Kudlow (February 5, 2008): “I’m going to bet that the economy will be rebounding sometime this summer, if not sooner. We are in a slow patch. That’s all. It’s nothing to get up in arms about...

9. Miranda Aldersley: The Girl Who Executed Nazis after Seducing Them in Bars Dies Aged 92: "Freddie Oversteegen... with her older sister Truus and their friend Hannie Schaft... blew up bridges and railway tracks with dynamite, smuggled Jewish children out of concentration camps and executed as many Nazis as she could, using a firearm hidden in the basket of her bike.... First approach the Nazi men in bars, and, having successfully seduced them, ask if they wanted to 'go for a stroll' in the forest, where, as Freddie herself put it, they would be 'liquidated'.... 'It was a necessary evil, killing those who betrayed the good people'. When asked how many people she had killed or helped kill, she demurred: 'One should not ask a soldier any of that'.... She was the last surviving member of the Netherlands' most famous female resistance cell...

10. From any sensible risk-management perspective, the Fed ought to have been cutting interest rates for the past month. Yet it has not been. They seem to me to bet playing a game not of "risk management" but rather "let's pretend we have not wedged ourselves into a corner and should be working much harder to get out of it": Jon Hilsenrath and Nick Timiraos: Central Banks Play a Game of Risk Management: "The world’s central banks are engaged in a major policy reversal to prevent the world economy from sinking into unexpected recession... calling off interest-rate increases.... In many cases, the central bankers are boxed in, with few policy tools available to cushion their economies.... Six months ago, Fed officials thought they would raise short-term interest rates three times in 2019 on the way toward a policy rate near 3.5% in 2020. Fed officials recently signaled they have paused for now, with short-term rates just below 2.5%. Their actions and words strongly suggest they could be done altogether.... They have unlimited space to fight accelerating inflation with higher interest rates and little-to-no space to fight slowing inflation with lower rates.... The risk may be diminished after the latest reversal by central banks, but it’s hardly gone...

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