#finance Feed

It was back in 1924 that it was first generally recognized that diversification was the equity investor's biggest friend. A properly-diversified portfolio of equities would outperform bonds by huge amounts with very high provability over long-enough horizons. The problem is that while "diversification" might have been reasonably accomplished with ten well-chosen stocks back in the mid-twentieth century, in the past generation it has required more like fifty. And if we truly are moving into more of a winner-take all economy, in the future it may take 100: Terry Smith: Busting the myths of investment: Do equities outperform bonds?: "The degree of concentration of returns is still startling. Just five companies out of the universe of 25,967 in the study account for 10 per cent of the total wealth creation over the 90 years, and just over 4 per cent of the companies account for all of the wealth created.... The study also looks at returns decade by decade and reaches more or less the same conclusion: that the decade returns for most equities are lower than those earned by investment in Treasury bills...

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Increasing attention to leverage cycles and collateral valuations as sources of macroeconomic risk seems to be very welcome. Leverage and trend-chasing are the two major sources of demand-for-assets curves that slope the wrong way: when prices drop demand falls, either because you need to liquidate in order to repay now-undercollateralized loans or because you do not want to be long in a bear market. And there is every reason to think the government need to take very strong steps to make effective demand curves slope the proper way: Felix Martin: Will there be another crash in 2019?: "One important detail is that this effect is achieved not only directly, by adjusting the cost of borrowing, but also indirectly by making assets cheaper or more expensive...

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Brad DeLong (2007): On Robert Barro's (2005) "Rare Events and the Equity Premium" and T.A. Rietz's (1988) "The Equity Risk Premium: A Solution": Our habit of using the Lucas-tree model of Lucas (1978), "Asset Prices in an Exchange Economy" as a workhorse has turned out to be a trap. The Lucas-tree model has neither production nor accumulation. This makes it easy to solve. But this makes its responses perverse. There are no scarce resources to be allocated among alternative uses. There are only asset prices which must move so as to make agents unwilling to try to reallocate resources. It is, I think, not surprising that an economic model in which resource allocation plays no role is a dangerous tool to use in trying to understand the world...

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Costs and Benefits of International Capital Mobility: Reply to Bhagwati: Hoisted from 20 Years Ago

Needless to say, time has left me a lot wiser: We need to design economies so that they can operate without disaster even when deregulatory clowns like those of the George W. Bush or the Donald J. Trump administrations are in control of the levers of policy at key moments. How to do that is not so clear. What is clear is that only a fool today would think that our political economy would support a clever technocracy so that we might have our cake and eat it too. Indeed, the most likely scenario seems to be that we will be unable to eat our cake, and then the kleptocrats will steal it out from under our noses so that we will not have it either. In short: I should have listened harder to Jagdish 20 years ago...


Hoisted from the Archives: Reply to Bhagwati: "I open my May/June [1998] issue of Foreign Affairs to discover myself pilloried in an article by Jagdish Bhagwati between Paul Krugman and Roger C. Altman (excellent company to be in, by the way: much better than I am used to) as a banner-waving proponent of international capital mobility, guilty of "assum[ing] that free capital mobility is enormously beneficial while simultaneously failing to evaluate its crisis-prone downside."

I rub my eyes in surprise. I had not thought of myself as a banner-waving proponent of international capital mobility.

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Ray [REDACTED]: Gather Round, Kids, While I Tell You About What I Call.. "The Greatest S---show in Crypto": "Many of you will be surprised to learn that there is a thriving industry of paid advice on buying and selling cryptos assets, including newsletters, telegram groups, and subscriber-only emails. Until very recently, one of the most popular paid services was something called Standpoint research, seen here on CNBC with Mr. Wonderful from SharkTank. In February of 2018, Standpoint Research recommended that its subscribers buy an unknown asset known as $DIG, because the owner of Standpoint thought there was insider trading going on. You read that right. He suspected fraud, so he issued a 'buy' recommendation. The coin then subsequently grew from a fraction of a penny to 16 cents per token, as buyers rushed in to acquire this asset. For the craziest reasons you can imagine. The coin itself claims to be backed by $15 billion (not a typo) in Gold Bullion. Their website, if you are curious, is http://arbitrade.io ...

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Yes, it was a mistake for the Federal Reserve to raise interest rates last month: Chris Matthews: Dow Tumbles 650 points as Apple News, Manufacturing Data Spark Fears of Global Slowdown: ".S. stock indexes closed sharply lower Thursday, after a survey of American manufacturers showed the sector growing at its slowest pace in two years, and after a sales forecast cut by Apple Inc AAPL, -9.96% intensified fears of a slowing Chinese economy. The Dow Jones Industrial Average DJIA, -2.83% fell 661.58 points, or 2.8%, to 22,684.66, the S&P 500 index SPX, -2.48% , shed 62.18 points, or 2.5%, to 2,447.87, while the Nasdaq Composite COMP, -3.04% tumbled 202.43 points, or 3%, to 6,463.50...

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Blum Hall B100: Plaza Level: 2 PM: Bill Janeway: The Digital Revolution and the State: The Great Reversal


Bill Janeway: Doing Capitalism in the Innovation Economy 2.0 https://books.google.com/books?isbn=1108471277: "The innovation economy begins with discovery and culminates in speculation. Over some 250 years, economic growth has been driven by successive processes of trial and error: upstream exercises in research and invention and downstream experiments in exploiting the new economic space opened by innovation...

...Drawing on his professional experiences, William H. Janeway provides an accessible pathway for readers to appreciate the dynamics of the innovation economy. He combines personal reflections from a career spanning forty years in venture capital, with the development of an original theory of the role of asset bubbles in financing technological innovation and of the role of the state in playing an enabling role in the innovation process. Today, with the state frozen as an economic actor and access to the public equity markets only open to a minority, the innovation economy is stalled; learning the lessons from this book will contribute to its renewal...

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Over on EconSpark, I think this is wrong: Ben Bernanke: How Important Was The Financial Panic As A Cause Of The Great Recession?: "The collapse of the housing bubble was certainly a primary cause of the Great Recession.  The unwinding of the bubble (1) depressed aggregate demand through its adverse effects on consumer wealth and residential construction, and (2) triggered a financial panic...

The unwinding of the bubble set the table for the financial panic, but it did not trigger it. The bubble had already been unwound before the panic. The triggers of the panic lay elsewhere: in the events in financial markets that produced a sudden, discontinuous boost in the demand for safe assets. One picture I have always found very illuminating is this one:

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Is There Any Reason to Fear Low Interest Rates?

Il Quarto Stato

Paul Krugman tells us: Paul Krugman: @paulkrugman: "The American Economic Association has a new discussion forum set up by Olivier Blanchard. First up is the question of whether low interest rates are leading to excessive risk-taking https://www.aeaweb.org/forum/311/have-low-interest-rates-led-to-excessive-risk-taking..." So I mossed on over and left three comments: one on the forum, one on secular stagnation, and one on whether there is any reason to fear low interest rates:

Is There Any Reason to Fear Low Interest Rates?: Have low interest rates led to excessive risk taking?: I suspect that the right way to make the accurate point that this line of discussion is hunting for is to focus not on the amount of risk but on, rather, who is bearing the risk...

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Anthills have minds. Anthills have minds that can fall victim to positive-feedback bubbles: Bob Holmes: The mind of an anthill: "The creatures’ hive-mind nature led Stephen Pratt, a behavioral biologist at Arizona State University in Tempe, to see if he could study the behavior of ant colonies the same way psychologists study human behavior, such as with experiments forcing the ants to make difficult decisions and trade-offs...

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Wisdom from the office down the hall: claiming that you will tether your cryptocoin to the dollar does not, in fact, make it much less stupid as something for others to invest in. Cryptocurrencies are stupid investments. Investors in them are grifters or fools. A fool can make money if they eventually find a bigger fool to sell to. And the biggest fool of all is the person who sees that fools have made money in stupid investments and thinks that is a reason to imitate them: Barry Eichengreen: The Stable-Coin Myth: "Mania for cryptocurrencies... so-called “stable coins”... Tether, Basis, and Sagacoin... rigidly tied to the dollar...

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Tail Risks

Stegosaurus jpg 700×455 pixels

Tail risks. Can we afford right now to think about tail risks? Probably not: right now what were our tail risks have become head risks, and given them and our day jobs we are all fully absorbed. But if we are going to be spending even a little time thinking about tail risks, the big worry has to be that something happens to cause the Global North to stop investing, as it did in 2008-2009.

Cast your minds back to ten years and two months ago. Back then people were patting themselves on the back; The United States had wound down from its over-the-top overcommitment to housing construction, and had done so without a recession. The Federal Reserve had handled the unpleasantness of mortage-firm, structured-product, and Bear-Stearns bankruptcy. In doing so the Federal Reserve had effectively guaranteed the unsecured debt of every systemically-important commercial and investment bank in and out of New York. The forecast—at least among those who were not close students of Hyman Minsky, an who had not paid attention to Paul Krugman's The Return of Depression Economics—was for at most a small recession, with the balance of risks such that the major risk to the economy—at least in the minds of the Federal Reserve's Open Market Committee—was an increase in core inflation.

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This is, I think, both right and wrong. China has an... interesting property-rights system—your property is secure not through title deeds and such but through networks that link you to party and government officials. It's hard to argue that it does not work. It is easy to argue that it shouldn't work. But it does work, and this does, I think, have something to do with China's stabilization policy success. China has Keynesian demand management—and is willing to use it. China has interest rate tools, but they are in general effective at boosting only exports and construction. And China has effective financial repression, with which it appears to do a lot to manage banking and investment and thus the flow of aggregate demand. I have not seen a good analysis of how China's credit-based stabilization policy really works. I would like to see one. But fiscal policy and monetary policy ought—away from the zero lower bound at least, be powerful enough tools to do the job, and in all likelihood better tools to do the job: Noah Smith: China Invents a Different Way to Run an Economy: "The nation has avoided a recession for a quarter-century. Few countries can make the same claim...

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Monday DeLong Smackdown/Hoisted: Greenspanism Looking Pretty Good...

Oy: This was perhaps the biggest thing I got most wrong in 2008. It's not saved by the weasel-words at the end: "If the tide of financial distress sweeps the Fed and the Treasury away--if we find ourselves in a financial-meltdown world where unemployment or inflation kisses 10%--then I will unhappily concede, and say that Greenspanism was a mistake...: Greenspanism Looking Pretty Good...: Martin Wolf is gloomy:

A year of living dangerously for the world: It is now almost a year since the US subprime crisis went global. Many then hoped that the repricing of risk would be no more than a brief interruption.... Such hopes have been disappointed.... So where is the world economy now? And where might it go? Here are some preliminary answers to these questions.

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But are we sure that our debts are in dollars? Would we know it if the big New York banks had been trying to boost their earnings by selling unhedged dollar puts, in the (probably correct) belief that if they all do this together they do not have a problem, the rest of us have a problem?: Paul Krugman: Opinion | Partying Like It’s 1998 - The New York Times: "Those of us who devoted a lot of time to understanding the Asian financial crisis two decades ago were wondering whether Turkey was going to stage a re-enactment. Sure enough...

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Ten Years Ago: A Federal Reserve Not Understanding the Situation at All

The Ahistorical Federal Reserve by J Bradford DeLong Project Syndicate

Occurrences in August 5, 2008, FOMC Meeting Transcript:

322: Inflation
029: Liquidity
029: Spreads
028: Unemployment
011: Crisis
001: Solvency
000: Minsky
000: Lehman
000: Bear-Stearns

A Federal Reserve looking in exactly the wrong direction ten years ago: Federal Reserve: FOMC Meeting Transcript: BERNANKE: "On inflation, I do have concerns, as everyone else does.... We will continue to see that high level of prices being passed through into the core...

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The Ahistorical Federal Reserve: Live at Project Syndicate

The Ahistorical Federal Reserve by J Bradford DeLong Project Syndicate

The Ahistorical Federal Reserve: The most effective–and thus the most credible–monetary policy is one that reflects not only the lessons of history, but also a willingness to reconsider long-held assumptions. Unfortunately, neither attribute is much in evidence at today's Federal Reserve: BERKELEY–Economic developments over the past 20 years have taught–or ought to have taught–the US Federal Reserve four lessons. Yet the Fed’s current policy posture raises the question of whether it has internalized any of them... READ MOAR at Project Syndicate

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Sunday Morning Twitter: Functional Finance/A Better World Is Possible Tweeting...

Preview of Sunday Morning Twitter Functional Finance A Better World Is Possible Tweeting

A better world—a better twitter—is indeed possible...

Suresh Naidu: I will stake my fancy economics job on this: Nothing in @Ocasio2018's policy program is inconsistent with a 2018 understanding of economics.

Wojtek Kopczuk: I missed it before, by my favorite colleague to disagree with. Congratulations on tenure @snaidunl!

Suresh Naidu: Sigh you drew me out. Tell me which policy is infeasible and not addressing some market failure?

Wojtek Kopczuk: They are inconsistent with the government budget constraint. And her MMT support is definitely inconsistent with mainstream economics.

Suresh Naidu: MMT is totally consistent with lots of mainstream macro when the economy is demand constrained (and fiscal theory of the price level when its not). it is unfortunate its adherents dont see that. And budget constraints are endogenous.

Ivan Werning: What do you have in mind?

Suresh Naidu: Oh crap a real macroeconomist. I think stripped of mysticism, MMT is really boils down to "fiscal mutipliers greater than 1", which could be true in demand constrained economy.

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Aspen—Maroon Bells

Aspen: Multilateral Institutions and International Collaboration: Back when I was in the Clinton administration, I remember pressing the Treasury International people on how better funding and more substantive independence for multilateral institutions ought to be a much higher priority—and their response was: "We want to keep them on their leashes so we can run the show. We are the US. We are the boss".

And then, lo and behold, Bob Dole unleashes Al D'Amato to make trouble about the Mexican financial crisis and the fallout from that leaves the US hobbled when 1997-8 comes around, and there was a general current of: "yeah, it would have been better if a much more well-funded and truly independent IMF had been able to handle both on its own."

US politics now are obviously so fraught and dysfunctional that it seems to me we should be ceding power over multilateral institutions as fast as possible, while also beefing up their financial resources. What roads are available to accomplish that?...

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Robin Wigglesworth: Flat yield curve sends a grim message for investors in 2019: "investors are now starting quietly to fret that the US central bank may be on the brink of making a mistake, tightening monetary policy too aggressively in the face of a vulnerable global economy and still-quiescent inflationary forces. The Fed might get away with two hikes this year, but markets should worry about what might come in 2019..."

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Cognitive Science, Behavioral Economics, and Finance: Some Fairly-Recent Must- and Should-Reads

stacks and stacks of books

I know, this is one hell of a grab-bag of categories. But I do think it is a category:

  • Judea Pearl provides the first good response I have ever heard to Cosma Shalizi's priceless anti-Bayesian rant: Cosma Shalizi (2016): On the Uncertainty of the Bayesian Estimator: "I hardly know where to begin. I will leave aside the color commentary. I will leave aside the internal issues with Dutch book arguments for conditionalization. I will not pursue the fascinating, even revealing idea that something which is supposedly a universal requirement of rationality needs such very historically-specific institutions and ideas as money and making book and betting odds for its expression..."

  • Jonathan Gottschall (2012): The Storytelling Animal: How Stories Make Us Human (New York: Houghton Mifflin Harcourt: 0547391404) https://play.google.com/?id=Bl43cU5rdVwC

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Teasers for "Slouching Towards Utopia?: An Economic History of the Long 20th Century"

Il Quarto Stato

Current Versions of Chapters 1-3:

  1. DRAFT: My Grand Narrative
  2. DRAFT: Themes
  3. DRAFT: Making a Global Economy and Society, 1870-1914

Outtakes and Deleted Scenes:

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Blaming the Pollyannaish fecklessness of the Bank of England on the feckless indolence of Britain's reporters: Simon Wren-Lewis: How UK deficit hysteria began: "Monetary policy ran out of reliable levers to manage the economy. However, journalists wouldn’t know that from the Bank of England, who tended to talk as if Quantitative Easing was a close substitute to interest rates as a monetary policy instrument...

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On the Negative Information Revealed by Marvin Goodfriend's "I Don't Teach IS-LM": Smackdown/Hoisted


So Rich Clarida's (who should be a good Fed Vice Chair) and Michelle Bowman's Federal Reserve nominations (whom I do not know) made it out of the Senate Banking Committee 20-5 and 18-7. Marvin Goodfriend—who made it out 13-12—is still hanging fire on the Senate calendar. There is no reason I see to think that Fed Governor is a job he should have: there are much more sensible and reality-based conservative and inflation-hawkish monetary economists out there. One of them would dominate Marvin along every dimension. So it is time to highlight this again:

Hoisted from the Archives: I think it is time to move Marvin Goodfriend over to the "unprofessional" and "should not have a role making monetary policy" side of the ledger. There are much better inflation hawks as far as policy judgment is concerned. And someone with a demonstrated desire to pander to the yahoos—which is the only way I can make this coherent—is not a good candidate for the Board of Governors: On the Negative Information Revealed by Marvin Goodfriend's "I Don't Teach IS-LM": The smart and snarky Sam Bell wants to taunt me into rising to his bait by twittering https://twitter.com/sam_a_bell/status/872116967070732288 a quote from likely Fed nominee Marvin Goodfriend: "I don't teach IS-LM". He succeeds. Here is the quote:

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Note to Self: Last night I dreamed that I had traveled back in time and was having coffee with the young Schumpeter at the Cafe Central in Vienna. I tried to convince him not to be a "Liquidationist"—that the work of structural adjustment is done in the boom as people are pulled into higher-value activities, not in the depression as people are pushed into zero-value activities. I failed...

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Blurb for Janeway: Doing Capitalism in the Innovation Economy, 2nd Edition

Neither Adam Smith’s nor Henry Ford's picture of the economy is relevant for us today. What thumbnail picture is relevant? We do not know, but Bill Janeway thinks harder and more successfully about this question than anybody else I have seen...

William H. Janeway: Doing Capitalism in the Innovation Economy, 2nd Edition: "Legendary economist Hyman Minsky identified author William H. Janeway as a 'theorist-practitioner' of financial economics; this book is an expression of that double life. Interweaving his unique professional perspective with political and financial history, Janeway narrates the dynamics of the innovation economy from the standpoint of a seasoned practitioner of venture capital, operating on the frontier where innovative technology transforms the market economy. In this fully revised and updated edition, Janeway explains how state investment in national goals enables the innovation process and why financial bubbles accelerate and amplify its impact. Now, the digital revolution, sponsored by the state and funded by speculation, has matured to attack the authority, and even the legitimacy, of governments. The populist response in the west, especially in the United States, opens the door for China to seize leadership of the innovation economy from America..."

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The Last Financial Crisis of the Nineteenth Century: Hoisted from the Grasping Reality Archives from Ten Years Ago

Il Quarto Stato

The slides from my “Macroeconomic Situation and Outlook” talk as it stood ten years ago, in June 2008. The subtitle and the conceit of the talk was that what we were then going through was an eruption into the twenty-first century of the kind of financial crisis that was typical of the pre-Great Depression period.

What did I get right and what did I miss? The main thing I missed was that I misunderstood what Bernanke, Paulson, and Geithner were doing. I thought that they were following the now century and a half-old Bagehot rule from Lombard Street for how to handle a financial crisis:

  1. Lend freely
  2. On collateral that is good in normal tomes
  3. At a penalty rate

Most of the talk is therefore devoted to explaining what the Bagehot Rule is, why it is a good thing, and how it is all likely to work out.

But when Lehman hit the wall in the fall they refused to follow (2) in evaluating its collateral, and so they did not do (1). And they never showed any interest in doing (3). And so here we are...


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Nicole Cliffe on John Carreyrou on Theranos and Elizabeth Holmes: Bad Blood: Weekend Reading

Theranos is Silicon Valley s embarrassment Calacanis

Nicole Cliffe: Theranos: Bad Blood, by John Carreyrou

What a healthy and sustainable industry...


The most amazing thing about the Theranos book is how utterly and completely nothing ever worked?

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The usual dodge here is to make "the money" a trader deploys proportional to the gap between the current price and their estimate, and so dodge this question completely: Dan Davies: "The 'Manski Bounds'.... How surprisingly little information you can extract from prices.... All the price tells you is that half the money thinks the true value is more than that and half thinks it's less. It doesn't tell you how much more or how much less. I think this matters a lot when you're trying to analyse fast moving markets like TRY or BTPs. Most of the people selling are selling because their guess about true value has moved a long way, not because the price has moved and they switched from the bid to the offer..."


This Year Post-Great Recession America Falls Behind Post-Great Depression America in Recovery

Recovery from the Great Recession and Great Depression

This year, 2018, will be the 11th year after the 2007 business cycle peak that preceded what is generally called the “Great Recession“. This year American national income per capita will be about 7.5% above its 2007 level. If we are lucky we will hit 10% above 2007 in 2020. That is growth of 0.4% per year—compared to the yardstick of 2.0% per year that we were reasonably expecting back in 2007.

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Intermediate Macroeconomics Review

J. Bradford DeLong
Economics and Blum Center of U.C. Berkeley, WCEG, and NBER
Revised 2018-05-01




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Mark Thoma on the 2009-2015 Dark Age of Macroeconomics: Weekend Reading

School of Athens

Weekend Reading: I would have said that the Dark Age is over. But the behavior of professional Republican economists formerly of note and reputation—and I am looking at you, Robert Barro, Harvey Rosen, Douglas Holtz-Eakin, Larry Lindsey, John Taylor, John Cochrane Glenn Hubbard, Michael Boskin, Charlie Calomiris, Jim Miller, Jagdish Bhagwati, and George Shultz: you know better. And, Marty Feldstein, you really should not have written your defense of Trump's China tariffs. The 2009-2014 Dark Age looks to me, mostly, like a deliberate decision to be stupid and not think issues through. This one looks like a last, vain attempt to gain some influence on Republican policy: Mark Thoma (2009): "A Dark Age of Macroeconomics": "Quoting an email [from Paul Krugman], economists who...

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Joseph Schumpeter’s Liquidationist Errors: DeLong Morning Coffee Podcast

Brad delong morning coffee Google Search

Last Wednesday night at Ars Technica LIVE! at Eli's Mile High Club in Oakland—located beneath where the eight-lane Interstate 580 crosses the ten-lane California Highway 24—there were three demands from the People of the Internet Appearing in Meatspace for a return of the Morning Coffee podcast.

So why not?

Joseph Schumpeter’s Liquidationist Errors: DeLong Morning Coffee Podcast:

Joseph Schumpeter was wrong in his claim the depressions were things to be suffered rather than cured. But how much smarter Schumpeter was than our modern day austerians!!

Joseph Schumpeter’s Liquidationist Errors

RSS: http://delong.micro.blog/podcast.xml. The easiest way to create podcasts appears to be to wander around the campus dictating things to Wavelength which then automatically posts them to the very interesting micro.blog: https://delong.micro.blog/2018/04/14/joseph-schumpeters-liquidationist.html

Text: http://www.bradford-delong.com/2018/04/joseph-schumpeter-on-liquidationism-hoisted-from-the-archives.html

Crisis, Rinse, Repeat: No Longer Fresh at Project Syndicate

Crisis Rinse Repeat by J Bradford DeLong Project Syndicate

Crisis, Rinse, Repeat: Key economic data from the periods following the 1929 stock-market crash and the 2007-2008 financial crisis suggest that the current recovery has been unnecessarily anemic. If policymakers refuse to heed the lessons of the New Deal era, then the next crisis is destined to be as prolonged as the last.

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Joseph Schumpeter on "Liquidationism": Hoisted from the Archives

Clowns (ICP)

Hoisted from the Archives: Joseph Schumpeter on "Liquidationism": Three things strike me while rereading Schumpeter's 1934 "Depressions" (and also his 1927 Explanation of the Business Cycle):

  1. How much smarter Schumpeter is than our modern liquidationists and austerians--he says a great many true things in and amongst the chaff, which is created by his fundamentally mistaken belief that structural adjustment must be triggered by a downturn and a wave of bankruptcies that releases resources into unemployment. How much more fun and useful it would be right now to be debating a Schumpeter right now than the ideologues calling for, say, more austerity for and more unemployment in Greece!

  2. How very strange it is for Schumpeter to be laying out his depressions-cause-structural-change-and-growth theory of business cycles at the very same moment that he is also laying out his entrepreneurs-disrupt-the-circular-flow-and-cause-structural-change-and-growth-theory of enterprise. It is, of course, the second that is correct: Growth comes from entrepreneurs pulling resources into the sectors, enterprises, products, and production methods of the future. It does not come from depressions pushing resources into unemployment. Indeed, as Keynes noted, times of depression and fear of future depression are powerful brakes halting Schumpeterian entrepreneurship: "If effective demand is deficient... the individual enterpriser... is operating with the odds loaded against him. The game of hazard which he plays is furnished with many zeros.... Hitherto the increment of the world’s wealth has fallen short of the aggregate of positive individual savings; and the difference has been made up by the losses of those whose courage and initiative have not been supplemented by exceptional skill or unusual good fortune. But if effective demand is adequate, average skill and average good fortune will be enough..."

  3. How Schumpeter genuinely seems to have no clue at all that the business cycle is a feature of a monetary economy--how very badly indeed he needed to learn, and how he never did learn, what Nick Rowe and company teach today about the effects of monetary stringency on economic coordination.

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Macroeconomics: How Large Is the Shadow Cast by Recessions?

Macroeconomics: How Large Is the Shadow Cast by Recessions?

https://www.icloud.com/keynote/0-rKMXUoFYubeD2FVgezAd8kg http://www.bradford-delong.com/2018/04/macroeconomics-how-large-is-the-shadow-cast-by-recessions.html


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Noise Trading, Bubbles, and Excess Stock Market Volatility: Hoisted from the Archives from 2013

Noise Trading, Bubbles, and Excess Stock Market Volatility: Hoisted from the Archives from 2013: Noah Smith has a very nice post this morning:

Noah Smith: Risk premia or behavioral craziness?:

John Cochrane is quite critical of Robert Shiller.... He... thinks that Shiller is trying to make finance less quantitative and more literary (I somehow doubt this, given that Shiller is first and foremost an econometrician, and not that literary of a guy).

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