J. Bradford DeLong's Blog, page 1127
November 1, 2014
Liveblogging the American Revolution: November 1, 1776: Letter Describing the Battle of Pelham
Historic Pelham: Letter Describing the Battle of Pelham and Events Before and After the Battle:
EXTRACT OF A LETTER FROM A GENTLEMAN IN THE ARMY, DATED CAMP NEAR THE MILLS, ABOUT THREE MILES NORTH OF WHITE-PLAINS, NOVEMBER 1, 1776.
About the 15th of October the great movements of the enemy up the Sound, their landing in large bodies at Frog's Point, and the intelligence which the Generals obtained, that the enemy with their whole force were off against Eastchester and New Rochel, and that both Lord and General Howe were there in person, gave the Generals full satisfaction that General Howe's plan was to make a bold stroke, and hem in and cut off our Army at once. General Lee, I have understood, thought that the situation of the Army of the States of America was much too confined and cramped, and that it could not be good policy to lie still in such a situation, or to hazard the great cause in which we were embarked in one general action, in which, if we should not succeed, the Army might be lost, as a retreat would be extremely difficult, if not impossible. It was determined by the Generals therefore to counteract the enemy by a general movement.
General McDougall's brigade from the lines at Harlem, several regiments of Militia at Fort Washington, and five or six regiments from the Jersey side were ordered over King's Bridge, and marched on towards the enemy, to counteract them in their operations. Generals Heath, Parsons, &c., with more than half the Army, were there before; General Lee also now took his post on that side, not far from the enemy. On the 16th the Generals were all in council, and I suppose determined to leave Harlem, Fort Washington, and King's Bridge, only with a garrison, and march into the country to prevent the enemy from ravaging the coast and surrounding us, and by our movements to lead them into the country. In the mean time the stores, baggage, &c., were moved to places of safety with the greatest expedition. General Lincoln had orders to post himself on Voluntine [Valentine] Hill near Mile Square, and to cast up some works for defence; and redoubts were cast up on the hills and on all difficult passes on the road from King's Bridge to Mile Square, to secure our march.
On the 17th General Spencer's whole division had orders to march to Mile Square, which we reached next day. Two brigades of that division encamped at Mile Square, on the left of General Lincoln, and Lord Stirling marched on further and formed still on the left of them towards the White-Plains, making a front towards the enemy from East-Chester almost to White-Plains, on the east side of the highway, so as to secure the march of the troops behind us on our right, and to defend the teams and wagons that brought on our sick, cannon, stores &c. In this manner one division of the Army passed another, till we extended from the Sound up to White-Plains, and over to King's Street, not far from Connecticut line, where General Parsons took his post, and until the last division on the right wing, which was General Lee's, reached the Plains, and marched out westward between the main body of the Army and the river. This was on the 25th and 26th of October. This left all the road from East-Chester to King's Bridge open to the enemy, excepting a few guards, and a regiment at or near Fort Independence. This I have understood was Colonel Wyllys's, and that his orders were, that if the enemy came on too powerfully to retreat to Fort Washington.
General Greene, I have understood, is at Fort Washington, with about sixteen hundred or two thousand men, and that the garrison is well supplied with provisions and warlike stores, so as to stand a long siege. They have a communication with the forts on the high rocks on the opposite shore. All the barracks and preparations for winter we have been obliged to leave for the present. Our stores of every kind, as far as I can learn, have been brought off, and sent to places of safety. Our field artillery, with two double-fortified twelve pounders and one brass twenty-four pounder, we have brought on with us.
While we were making this grand movement into the country, the enemy were not idle; having collected their troops from all quarters at Frog's Point, and on board their ships, which were ranged along shore, off against the Point and opposite to East-Chester. On the 18th they began a cannonade from their shipping early in the day, and landed some men on a point or neck of land near East-Chester meeting-house, and their main body advanced from Pell's Neck out towards the great post road from Connecticut to New-York. General Lee, who had been watching their motions, had posted a regiment or two of men, with one of the Rifle battalions, in a very advantageous manner, to annoy them and bring them into an ambush; which partly succeeded. A large advanced guard came forward, with two parties on the right and left of them, to flank and get round our people wherever small parties should appear to oppose them.
A small party of our troops were sent forward to fire on the large advanced body of the enemy, and to divert and lead them on to a wall behind which the regiments mentioned were principally secreted. The enemy came very near the wall, and received a general fire from our troops which, which broke their advanced party entirely, so that they ran back to the main body, formed, and came on again in large numbers, keeping up a heavy fire with field-pieces on the walls and men. They advanced now very near, and received a second fire, which entirely routed them again, and they retreated in a narrow lane by a wall, in a confused, huddled manner, near which were posted a large body of Riflemen and some companies of Musketmen, who at this favourite moment poured in upon them a most heavy fire once or twice before they could get out of the way; and they were seen to fall in great numbers. The whole body of the enemy then advanced different ways to surround our men; they however kept the wall till the enemy advanced a third time, and after giving them several fires they retreated by order from their officers.
General Lee greatly commended the conduct of the men. The enemy were thought at the lowest computation to have lost five hundred men; some think not less than a thousand. We had but very few killed, and as far as I can learn, not more than fifty or sixty wounded.
The enemy advanced on to a high point or neck of land not far from East-Chester meeting-house, from whence they were able to command the road with their field-pieces, but they kept very much in a body, so that our people on Saturday and Sunday nights, the 19th and 20th of October, brought off more than one hundred barrels of pork that had been left in the store at East-Chester, without any molestation. About the same time the enemy sent fight parties along the shore, as far as New-Rochel and Moroneck, but their main body did not move but very little.
On the evening of the 22d thirty-six of the enemy were taken, and next morning brought to Head-Quarters. They were Tory Rangers, who had listed under the infamous Major Rogers. One of them had been an officer in the New-York service, and deserted from us not long since. Two or three of them I have been told were from Newtown, in Connecticut....
Source: Force, Peter, American Archives: Fifth Series, Containing A Documentary History of the United States of America, From the Declaration of Independence, July 4, 1776, to the Treaty of Peace with Great Britain, September 3, 1783, Vol. III, pp. 471-73 (Washington, D.C.: 1853).
October 31, 2014
A Dialogue on Secular Stagnation: The Honest Broker for the Week of October 24, 2014
Princeps Cogitationis: If I am going to hold down my consulting and speech-making jobs, I need to understand what Larry Summers is talking about here:
Larry Summers: What to do about secular stagnation?
But it is too long! 3000 words! Help! What can I do?
Oeconomicarus: But I thought you read 300 books a year?
Princeps Cogitationis: I read the last chapter of 300 books a year. Then I read three short reviews of each. And then I opine fearlessly. Working through a difficult 3000-word argument and assessing it is not a good use of my time. READ MOAR
Oeconomicarus: So you want me to use my time enlightening you so that you can stamp your brand on my thoughts and make money off of them?
Princeps Cogitationis: Exactly!
Oeconomicarus: Were you not a literary figure of my rhetorical imagination, and did my Demiurge not have the opportunity to attempt to use twenty first-century communications technologies to leverage this dialogue across an audience global in scope, I would tell you to go where you deserve.
Princeps Cogitationis: But you won't, will you?
**Oeconomicarus: No
Princeps Cogitationis: Well?
Knut Wicksell: You need to start by recognizing that financial markets powerfully influenced by central banks set the economy's (safe) real interest rate; that when this market (safe) real interest rate is below the economy's current "natural" interest rate we have (unexpected) inflation; that when this market (safe) real interest rate is above the economy's current "natural" interest rate we have depression; and that when this market (safe) real interest rate is at the economy's current "natural" interest rate we have prosperity (and stable inflation)...
Speculatoricus: And you need to start by recognizing that one factor that can raise the economy's current (safe) "natural" interest rate is wild and enthusiastic financial overspeculation--but that such "bubbles" can do so only temporarily and unsustainably...
Accumulator: And you need to start by recognizing that no matter what it does the central bank cannot push the market (safe) real interest rate below -π, where π is the current rate of inflation. Because savers can always hoard goods or cash, the market nominal interest rate cannot fall below zero, which means the market (safe) real interest rate cannot be less than the rate of inflation.
Princeps Cogitationis: The four of you have lost me.
Oeconomicarus: (To Speculator, Accumulator, and Knut Wicksell) SHUT UP!! (to Princeps Cogitationis): The central bank controls the market interest rate, and needs to set it no higher than the economy's natural interest rate to avoid depression. But when inflation is low, the natural interest rate may be so negative that even when the central bank pushes the market interest rate to zero still doesn't do the job! OK?
Princeps Cogitationis: OK. But what is this about bubbles and inflation?
Oeconomicarus: If the natural interest rate in terms of money is stuck at less than zero, a higher rate of inflation can raise it and bubble psychology can raise it--both make people less eager to hold cash and more eager to put their money to work, and so both raise the natural interest rate in terms of money, and then the central bank can do its job of avoiding depression.
Princeps Cogitationis: But?
Oeconomicarus: Bubbles are, by their nature, unsustainable--hence not a permanent solution--and disruptive. They are not a good answer to a situation in which the economy's natural rate of interest is less than zero. Price stability--an inflation rate of 2%/year or less--is also a good thing to have: it makes business and other economic decisions more rational. Hence if at low inflation the non-bubble natural rate of interest in money terms gets stuck less than zero, we have a big macroeconomic problem. Larry Summers says that it is, and we do.
Princeps Cogitationis: So what is the way out?
Oeconomicarus: One way is a higher inflation target than our current 2%/year--or actually 1.75%/year--but Larry doesn't like that for some reason. The second way is: "increased public investment, reduction in structural barriers to private investment... promot[ing] business confidence". The third way is: "basic social protections so as to maintain spending power... reduc[ing] inequality... redistribut[ing] income towards those with a higher propensity to spend..."
Clio: Seems to me that I have heard of these three before...
Oeconomicarus: Yes. The third is basically J.A. Hobson's Imperialism--that an unequal income distribution either required governments to dissipate huge amounts of wealth in conquest and colonization or suffer chronic depression. The second is, in a way, Hayek: that when the long-run rate of profit is not high enough to support the roundabout investments made, overaccumulation is inevitable, and it will then lead to necessary depressions. And the first is basically Friedman's monetarist k%/year money-stock growth rule as a "neutral" monetary policy, with the in petto corollary that the money-stock growth rate has to be high enough to give enough of an incentive to spend liquid assets for monetarism to gain traction...
Princeps Cogitationis: So why is the problem showing up now?
Oeconomicarus: Summers:
Slower population and possibly technological growth means a reduction in the demand for new capital.... Lower-priced capital goods means... given... saving... purchase[s] more capital.... Iconic cutting edge companies have traditionally needed to go the market to support expansion. Today leading edge companies like Apple and Google are attacked for holding on to huge cash hoards. Rising inequality... raise[s]... income going to those with a lower propensity to spend.... Greater risk aversion... and increased regulatory burdens... debt overhangs... increased uncertainty discourages borrowing... raise the wedge between safe liquid rates and rates charged to borrowers...
Jean-Baptiste Say: But the market can fix it, right? I mean, as long as there are any ways to durably store purchasing power, all you have to do is push the real interest rate below zero for long enough and demand for investment in such storage will rise to get us to full employment, right?
Oeconomicarus: Not if a lack of trust in financial markets creates a failure to mobilize the economy's risk-bearing capacity...
Thrasymachus: How much would you trust Citigroup or JPMC right now if it told you it had a gold-plated risk-free profitable long-run investment vehicle that you could buy?
Princeps Cogitationis: So if we don't fix this, what happens to us?
Oeconomicarus: Perhaps a 15% reduction in our prosperity relative to what we might have attained, followed by permanently slower growth thereafter:
Potential output has declined almost everywhere and in near lockstep with declines in actual output.... When enough investment is discouraged in physical capital, work effort and new product innovation... 'Lack of Demand creates Lack of Supply'... potential declines, the [natural rate of interest] rises, restoring equilibrium, albeit not a very good one...
Princeps Cogitationis: Suppose I sign up for Summers's "Third Way" policy of radical income redistribution on the first hand, restoration of business confidence and increases in the rate of profit via the government providing various puts to risk-takers and entrepreneurs on the second hand, and aggressive expansionary infrastructure-oriented fiscal policy on the third hand--and it doesn't work. What is wrong with a higher inflation target?
Apollo: I must say, it does seem rather Delphic: Summers says:
Even if the zero interest rate constraint does not literally bind, there is the possibility that the positive interest rate consistent with full employment is not consistent with financial stability. Low nominal and real interest rates... increase risk taking as investors reach for yield, promote irresponsible lending as coupon obligations become very low and easy to meet, and make Ponzi financial structures more attractive as interest rates look low relative to expected growth rates.... Operating with a higher inflation rate target... or... finding ways such as quantitative easing that operate to reduce credit or term premiums... are also likely to increase financial stability risks...
Oeconomicarus: Perhaps it is best to say that effective price stability--the expectation of stable 2%/year inflation--is a very costly, hard-won, and valuable property of a market economy. It greatly reduces inflation-tax distortions and allows for more accurate economic calculation. It should not lightly be thrown away. And there is no reason to throw it away: progressive income redistribution, the proper mobilization of the economy's entrepreneurial risk-bearing capacity, and a proper infrastructure-investment oriented fiscal policy can in all likelihood do the full job by themselves.
Princeps Cogitationis: You have just made me sit through a twenty-minute dialogue! I could have read Summers's original piece in ten minutes!
Thrasymachus: But you wouldn't have read it, would you? And if you had you wouldn't have understood it because you would still be ignorant of the proper intellectual context.
Princeps Cogitationis: But how do I boil this down to soundbites? I need soundbites--preferably scary ones about risks that make people sit up and pay attention!
Oeconomicarus: Sorry. Can't help you. The secular stagnation income has very high asset prices and healthy profits because the lousy labor market produces a depressed labor share. It's not very good for entrepreneurs. But it's not the kind of thing to scare the currently rich--that is one big reason we are right now in it.
Thrasymachus: If you want soundbites, go over there to practice "We just jumped the gun on our forecast of hyperinflation! Obamacare is collapsing under its own weight! Massive debasement from quantitative easing is still great threat! Lowering interest rates is a cause of deflation! The spike in the VIX this October proves it" with John Cochrane, Niall Ferguson, Douglas Holtz-Eakin and company...
Princeps Cogitationis: Douglas Holtz Eakin?
Thrasymachus: Yep: Holtz-Eakin says he is going to declare victory, someday:
plus:
Oeconomicarus: (whimpering) But it was QE III, not QE II (sob)...
Apollo: What October 2014 spike in the VIX?
Thrasymachus: You need to look more closely:
or:
Princeps Cogitationis: But I don't want my soundbites to be wrong! And I do need soundbites!
Oeconomicarus: Tough...
1877 words
Liveblogging the American Revolution: October 31, 1776: George III Hanover
George III Hanover: His Majesty’s Most Gracious Speech to Both Houses of Parliament on Thursday, October 31, 1776: "
My Lords, and Gentlemen,
Nothing could have afforded Me so much satisfaction as to have been able to inform you, at the opening of this session, that the troubles, which have so long distracted my colonies in North America, were at an end; and that My unhappy people, recovered from their delusion, had delivered themselves from the oppression of their leaders, and returned to their duty. But so daring and desperate is the spirit of those leaders, whose object has always been dominion and power, that they have now openly renounced all allegiance to the crown, and all political connection with this country. They have rejected, with circumstances of indignity and insult, the means of conciliation held out to them under the authority of our commission: and have presumed to set up their rebellious confederacies for independent states. If their treason be suffered to take root, much mischief must grow from it, to the safety of my loyal colonies, to the commerce of my Kingdoms, and indeed to the present system of all Europe. One great advantage, however, will be derived from the object of the rebels being openly avowed, and clearly understood. We shall have unanimity at home, founded in the general conviction of the justice and necessity of our measures.
I am happy to inform you, that by the blessing of divine Providence, on the good conduct and valor of my officers and forces by sea and land, and on the zeal and bravery of the auxiliary troops in my service, Canada is recovered; and although, from unavoidable delays, the operations at New York could not begin before the month of August, the success in that province has been so important as to give the strongest hopes of the most decisive good consequences: but, notwithstanding this fair prospect, we must, at all events, prepare for another campaign.
I continue to receive assurances of amity from the several courts of Europe; and I am using my utmost endeavors to conciliate unhappy differences between two neighboring powers; and I still hope that all misunderstandings may be removed, and Europe continue to enjoy the inestimable blessings of peace: I think, nevertheless, that in the present situation of affairs, it is expedient that we should be in a respectable state of defense at home.
Gentlemen of the House of Commons,
I will order the estimates for the ensuing year to be laid before you. It is a matter of real concern to me, that the important considerations which I have stated to you must necessarily be followed by great expense; I doubt not, however, but that my faithful Commons will readily and cheerfully grant me such supplies, as the maintenance of the honour of my crown, the vindication of the just rights of Parliament, and the public welfare shall be found to require,
My Lords, and Gentlemen,
In this arduous Contest I can have no other Object but to promote the true Interests of all My Subjects. No people ever enjoyed more Happiness, or lived under a milder Government, than those now revolted Provinces: the improvements in every art, of which they boast, declare it: their numbers, their wealth, their strength by sea and land, which they think sufficient to enable them to make Head against the whole power of the mother country, are irrefragable proofs of it. My desire is to restore to them the blessings of law and liberty, equally enjoyed by every British subject, which they have fatally and desperately exchanged for all the calamities of war, and the arbitrary tyranny of their chiefs.
October 30, 2014
Noted for Your Afternoon Procrastination for October 30, 2014
Over at Equitable Growth--The Equitablog
Suppose-Counterfactual World-That the U.S. Had Avoided Large-Scale QE since the Start of 2010... - Washington Center for Equitable Growth
Over at Project Syndicate: Material Well-Being in America since 1979: (Early) Thursday Focus for October 30, 2014 - Washington Center for Equitable Growth
Lunchtime Must Read: Jonathan Chait: Yellen Mentions Inequality; Right Scandalized - Washington Center for Equitable Growth
Lunchtime Must-Read: Jon Hilsenrath: Fed Critics Have Been Wrong.... Time to Declare the Debate Over - Washington Center for Equitable Growth
Lunchtime Must-Read: Jordan Weissman: Don’t Let Anyone Blame Single Mothers for Economic Inequality - Washington Center for Equitable Growth
Afternoon Must-Watch: Emmanuel Saez and Laura Tyson: Income Inequality in the Twenty-First Century - Washington Center for Equitable Growth
Morning Must-Read: Matt O'Brien: Why the Fed Is Giving Up too Soon on the Economy - Washington Center for Equitable Growth
**: Robert Waldmann: Extra Thursday DeLong QE/Risk Smackdown: Morning Comment - Washington Center for Equitable Growth
The Federal Reserve Retires to Its Tent...: Morning Note on Tim Duy - Washington Center for Equitable Growth
Lunchtime Must-Read: Simon Wren-Lewis: In Praise of Macroeconomists (or at Least One of Them) - Washington Center for Equitable Growth
Nick Bunker: Youth unemployment, finding a career, and labor market churn - Washington Center for Equitable Growth
Nick Bunker: What’s behind the drop in oil prices? - Washington Center for Equitable Growth
Plus:
Things to Read at Lunchtime on October 30, 2014 - Washington Center for Equitable Growth
Must- and Shall-Reads:
Mike Konczal: It's Essential the Federal Reserve Discusses Inequality | Next New Deal
Gavin Davies: Stress tests alone will not bring the eurozone back to health
Neil Irwin: Quantitative Easing Is About to End. Here’s What It Did, in Charts
Lane Kenworthy (2011): How Rich Countries 1.
Simon Wren-Lewis: In praise of Macroeconomists (or at Least One of Them)
Emmanuel Saez and Laura Tyson: Income Inequality in the Twenty-First Century
Jonathan Chait: Yellen Mentions Inequality; Right Scandalized
Matt O'Brien: Why the Fed Is Giving Up too Soon on the Economy
Jon Hilsenrath: Fed Critics Have Been Wrong About QE’s Most Ill Effect
Jordan Weissman: Don’t Let Anyone Blame Single Mothers for Economic Inequality
Paul Krugman: [When Banks Aren't The Problem - NYTimes.com](http://krugman.blogs.nytimes.com/2014...?php=true&type=blogs&module=BlogPost-Title&version=Blog Main&contentCollection=Opinion&action=Click&pgtype=Blogs®ion=Body&_r=0)
Vauhini Vara: The Lowe’s Robot and the Future of Service Work
And Over Here:
Over at Project Syndicate: Material Well-Being in America since 1979 (Brad DeLong's Grasping Reality...)
Over at Equitable Growth: Robert Waldmann: Extra Thursday DeLong QE/Risk Smackdown (Brad DeLong's Grasping Reality...)
Liveblogging World War II: October 30, 2014: The Ruins of Warsaw (Brad DeLong's Grasping Reality...)
Interesting Things I Shoulda Written About When They Were Published, But Didn't: David Frum Pleads for Mercy for the Reformicons... (Brad DeLong's Grasping Reality...)
Anyone Still Supporting Mitch McConnell for Senate Has No Shame at All: Live from teh Roasterie (Brad DeLong's Grasping Reality...)
Over at Equitable Growth: Suppose--Counterfactual World--That the U.S. Had Avoided Large-Scale QE since the Start of 2010... (Brad DeLong's Grasping Reality...)
Simon Wren-Lewis: In praise of Macroeconomists (or at Least One of Them): "One of the architects of that macroeconomic mainstream is Lars Svensson... key papers... maths and rational expectations... member of Sweden’s equivalent of the Monetary Policy Committee from 2007 to 2013.... Svensson... argued that there was still plenty of slack in the economy, and raising rates would be deflationary, so that inflation would fall well below the central bank’s target of 2%. By the end of 2012 inflation had indeed fallen to zero, and since then monthly inflation has more often been negative than positive. It was -0.4% in September. This week the Swedish central bank lowered their interest rate to zero.... Deviating from what mainstream macroeconomists in general advocate (and what one in particular recommended) has proved a costly mistake. (Svensson estimates it has cost 60,000 jobs.)... I am certainly not claiming that mainstream macroeconomics is without fault, as regular readers will know (e.g.) However it is important to recognise the achievements of macroeconomics as well as its faults. If we fail to do that, then central banks can start doing foolish things, with large costs in terms of the welfare of its country’s citizens..."
Emmanuel Saez and Laura Tyson: Income Inequality in the Twenty-First Century:
Jonathan Chait: Yellen Mentions Inequality; Right Scandalized: "Even the American Enterprise Institute’s Michael Strain, a moderate, wrote that Yellen is now ‘in danger of becoming a partisan hack.’... The parties don’t merely disagree about the merits of inequality, they disagree about the merits of even acknowledging it.... Remember Mitt Romney conceding that inequality should only be discussed in ‘quiet rooms’?... Merely by stating facts about inequality in public, even without taking a stand on it, Yellen has placed herself on one side of a partisan divide. It's like saying 'Jehovah.' What Strain does not mention is that Yellen is hardly alone among Federal Reserve chairs.... Hardly a week went by without Greenspan interjecting himself into the political debate. And Greenspan, a former follower of Ayn Rand with staunchly conservative views, had none of Yellen’s careful reserve.... Is the new rule here that, starting now, the Federal Reserve chair has to stay completely out of partisan politics? Or is the rule that they need to stay out of politics unless they’re conservative?"
Matt O'Brien: Why the Fed Is Giving Up too Soon on the Economy: "Two years and $1.7 trillion later, the Fed's latest round of bond-buying, or QE3, is officially over. What did it get us?... The best answer is what it didn't get us: a recession in 2013.... 'Fiscal cliff', 'sequester', and 'debt ceiling' might be hazy memories from a time when [the Republican House] Congress[ional Caucus] was doing its most to sabotage the recovery, so here's a refresher.... There's been an awful lot of austerity the last few years. Enough that the economy should have slowed down quite a bit.... But that's not what happened.... QE... is the Fed's way of printing its money where its mouth is when it says rates will stay low for a long time. That's why, as economist Michael Woodford argued, QE works better when it's used with forward guidance that makes the Fed's promises about future policy more explicit. The question, then, is what message the Fed is sending now..."
Jon Hilsenrath: Fed Critics Have Been Wrong About QE’s Most Ill Effect: "In an open letter to former Federal Reserve Chairman Ben Bernanke in 2010, a group of prominent academics and hedge fund managers urged the central bank to stop its bond purchases known as quantitative easing.... With the Fed set to end its bond-purchase program today, it is clear those warnings were wrong.... The critics also argued the QE programs distort financial markets. It is hard to prove or disprove that point. Stock market price-to-earnings ratios look stretched by some measures, but not so stretched by others. Junk bond and leveraged loan issuance has taken off, but corporate balance sheets relatively healthy.... But it is easy to see what didn’t happen. Inflation hasn’t taken off and there has been no currency debasement. Perhaps it will happen someday, but the Fed has been experimenting with QE since 2009 and it clearly hasn’t happened yet. At some point, you need to declare the debate over..."
Jordan Weissman: Don’t Let Anyone Blame Single Mothers for Economic Inequality: "Conservatives... aren't... comfy discussing... skyrocketing CEO pay and Wall Street lucre.... They are, however, extremely at home talking about... single mothers.... In that vein, the American Enterprise Institute has released a new report.... I’m... skeptical... turn[ing] the inequality debate toward single mothers and absent fathers.... As Tim Noah wrote in Slate years ago, the biggest changes in American family structure took place in the '70s and '80s, and they help explain why, for instance, the ratio between the 90th percentile of earners and 10th percentile is higher than it was 30 years ago. But the shift away from two-parent households doesn't really factor into the concentration of wealth among the 1 percent. And the rise of the 1 percent, and the 0.1 percent for that matter, is the real story when it comes to how income inequality is evolving today..."
Paul Krugman: [When Banks Aren't The Problem - NYTimes.com](http://krugman.blogs.nytimes.com/2014...?php=true&type=blogs&module=BlogPost-Title&version=Blog Main&contentCollection=Opinion&action=Click&pgtype=Blogs®ion=Body&_r=0): "Sometimes it seems to me as if economists and policymakers have spent much of the past six years slowly, stumblingly figuring out stuff they would already have known if they had read my 1998 Brookings Paper (pdf) on Japan’s liquidity trap.... Huge confusion about whether Ricardian equivalence makes fiscal policy ineffective, vast amazement that increases in the monetary base haven’t led to big increases in the broader money supply... and... here we go with another: the role of troubled banks.... In the 90s it was conventional wisdom that Japan’s zombie banks were the problem, and that once they were fixed all would be well. But I took a hard look at the logic and evidence for that proposition (pp. 174-177), and it just didn’t hold up.... It has been really frustrating to watch so many people reinvent fallacies that were thoroughly refuted long ago..."
Vauhini Vara: The Lowe’s Robot and the Future of Service Work: "Lowe’s plans to release several OSHbots into one of its Orchard Supply Hardware stores (the ‘OSH’ in OSHbot) in San Jose, California. The robots’ job will be to greet customers, help them find what they need, and guide them around the store. In a typical interaction, Nel told me, an OSHbot would roll up and greet you as you walked in: ‘Hi, can I help you? What are you looking for today?’ You might answer that you need to replace some plumbing pipes, prompting the OSHbot to ask whether you’ve got the original pipe. If you had it, you would put it in front of a viewfinder, and the robot would scan it, identify it, and direct you to the item in the store. It could even guide you to the place where the item is stocked. The OSHbot will be conversant in English and Spanish, to start.... Because the OSHbot’s skill set sounds at least a bit like what an Orchard salesperson typically does, a perennial question has arisen: Are robots coming for our jobs? In fact, they began stealing our jobs a long time ago.... Even if the Lowe’s OSHbot isn’t meant to replace workers, retail executives are surely aware of the opportunities to lower costs that robots could bring. ‘That is probably the most important economic phenomenon of the past decade or so,’ Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology, told me.... Toward the end of our conversation, I mentioned that, during the rise of automation in manufacturing, people were encouraged to turn to service work. I wondered aloud where service workers might go if their positions, too, were to be eliminated in favor of automated replacements. ‘That is a great question,’ he said. ‘I’m not sure I know the answer. Technology has always been destroying jobs.’ He added, on a somewhat more optimistic note, ‘I think a lot of the jobs of the future have titles that we haven’t even thought of yet.’..."
Should Be Aware of:
Scott Lemieux: A Disgrace Even By Roberts Court Standards
Libby Nelson: How Kentucky became a rare Common Core success story - Vox
E-Gear 30 Day Lantern
Chris Mooney: Climate scientists aren’t too alarmist. They’re too conservative
Greg Sargent: Architect of Democratic strategy for keeping Senate is hopeful, but realistic
Clay Shirky: Why I Just Asked My Students To Put Their Laptops Away
Anne Laurie: Long Read: “Can Scott Walker Unite the Republicans?”: "Robert Draper’s GQ profile... reads as though Draper couldn’t get a grip on his subject because Walker is that genuine political rarity: a pure sociopath, uncomplicated by the usual attendant narcissism.... From the outside, it looks like Scott Walker has prospered mightily by selling other peoples’ assets to any robber baron who made an offer, with a total lack of concern for even his closest allies and associates, enabled by a shrinking but still-powerful bloc of noisy racists and aging low-information voters. But, then, nobody said sharks aren’t dangerous!"
Jonathan Chait: McConnell Afraid to Vote to Repeal Obamacare: "Mitch McConnell... asked if Republicans... would vote to repeal Obamacare... was revealingly evasive. First McConnell conceded that the Senate wouldn’t bother passing repeal because ‘Obviously, he's not going to sign a full repeal.’ But then McConnell [said]... 'There are pieces of it that are extremely unpopular with the American public that the Senate ought to have a chance to vote on: repealing the medical device tax, trying to restore the 40-hour work week, voting on whether or not we should continue the individual mandate, which people hate, detest and despise,' McConnell said. 'I think Obamacare is the single worst piece of legislation passed in the last 50 years.... I'd like to put the Senate Democrats in the position of voting on the most unpopular parts of this law and see if we can put it on the president's desk and make him take real ownership of this highly destructive Obamacare.’ It is true that Obama would never sign a full repeal of Obamacare. He would never sign a repeal of the individual mandate, either.... [So] why won’t Republicans force Obama and Senate Democrats to defend the law as a whole? The answer is that McConnell realizes that repealing Obamacare is unpopular..."
Comments:
Noted for Your Morning Procrastination for November 2, 2014
Lunchtime Must-Read: Simon Wren-Lewis: In Praise of Macroeconomists (or at Least One of Them)
Simon Wren-Lewis: In Praise of Macroeconomists (or at Least One of Them): "One of the architects of that macroeconomic mainstream is Lars Svensson...
...key papers... maths and rational expectations... member of Sweden’s equivalent of the Monetary Policy Committee from 2007 to 2013.... Svensson... argued that there was still plenty of slack in the economy, and raising rates would be deflationary, so that inflation would fall well below the central bank’s target of 2%. By the end of 2012 inflation had indeed fallen to zero, and since then monthly inflation has more often been negative than positive. It was -0.4% in September. This week the Swedish central bank lowered their interest rate to zero.... Deviating from what mainstream macroeconomists in general advocate (and what one in particular recommended) has proved a costly mistake. (Svensson estimates it has cost 60,000 jobs.)... I am certainly not claiming that mainstream macroeconomics is without fault, as regular readers will know (e.g.) However it is important to recognise the achievements of macroeconomics as well as its faults. If we fail to do that, then central banks can start doing foolish things, with large costs in terms of the welfare of its country’s citizens...
The Federal Reserve Retires to Its Tent...
A very interesting piece by Tim Duy on the recently-concluded Federal Reserve FOMC meeting. The precis: the Federal Reserve does not view itself as moving to tighten policy, but rather as moving to a policy that is still extraordinarily stimulative--especially considering the level of the unemployment rate.
If the unemployment rate were the only piece of information we had available, I would understand the FOMC's position. But I see 2%/year wage growth. I see a prime-age employment-to-population ratio that is still extremely low, I see Japan where Abenomics hangs in the balance and a Eurozone where a triple dip is a 50-50 chance, I see the continued failure of the Obama Administration to fill Governor slots and the resulting rightward bias of the FOMC voices...
Either the FOMC consensus or I am greatly misreading the current macroeconomic situation. It may well be me. But I do not think so...
Tim Duy: FOMC Recap: "To the extent there were any surprises, they were on the hawkish side....
The Fed dismissed the decline in market-based inflation expectations. They clearly believe financial markets over-reacted to the decline in oil prices, and that that decline would ultimately prove to be a one-time price shock rather than the beginning of a sustained disinflationary process. This is why we watch core-inflation. And note that the Fed sent a pretty big signal... they do not hold market-based measures of inflation expectations as the Holy Grail. Especially with unemployment below 6%, pay more attention to survey-based measures. And recognize they will discount even those if they feel they are unduly affected by energy prices....
I have trouble imagining a scenario in which the Fed is content to watch unemployment fall below 5.5% without at least beginning the rate hike cycle. Remember that they think that even as they increase rates, they believe that policy will continue to be accommodative. In other words, they do not fear raising rates as necessarily a tightening of policy. They will view it as a necessary adjustment in financial accommodation in response to a decline in labor market slack. Hence the line:
The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run...
Over at Equitable Growth: Robert Waldmann: Extra Thursday DeLong QE/Risk Smackdown
Over at Equitable Growth: Robert Waldmann: Extra Thursday DeLong Smackdown: "The fact that the economy seems desperately in need of looser monetary policy...
...after massive QE tends to suggest that QE just doesn't work. In 2010 it was possible to argue that massive purchases of long term treasuries would have an effect similar to reductions in the Federal Funds rate. Now not so much. READ MOAR
I do object to your identifying the risk born by the Fed with 'duration risk'. That is true only of the pointless QE based on purchasing long term treasuries. The Fed also bought agency issued mortgage backed bonds. That is a very different kind of QE (one which I thought would work so my predictions are--as usual--bad).
I don't see why anyone would think that the Fed bearing duration risk would stimulate fixed capital investment. Long term bonds are risky, because short term rates might go up--either because of inflation and the Fisher effect or because of high demand and FOMC fear of over heating and inflation. Actual physical capital is a hedge against these risks. That is long term bonds are a good hedge against the risk of lower than expected inflation or aggregate demand.
Making a hedge against the risks of NIPA investment more expensive is a very odd way to encourage more NIPA investment.
Risk is not a scalar. Correlations matter and some of them are negative.
Touché...
Morning Must-Read: Matt O'Brien: Why the Fed Is Giving Up too Soon on the Economy
As I see it, Federal Reserve policy right now is reasonable only if the unemployment rate is taken as a sufficient statistic for the state of the labor market. And it seems to me the odds are 4-1 against that being true...
Matt O'Brien: Why the Fed is giving up too soon on the economy: "Two years and $1.7 trillion later...
...the Fed's latest round of bond-buying, or QE3, is officially over. What did it get us?... The best answer is what it didn't get us: a recession in 2013.... 'Fiscal cliff', 'sequester', and 'debt ceiling' might be hazy memories from a time when [the Republican House] Congress[ional Caucus] was doing its most to sabotage the recovery, so here's a refresher.... There's been an awful lot of austerity the last few years. Enough that the economy should have slowed down quite a bit.... But that's not what happened.... QE... is the Fed's way of printing its money where its mouth is when it says rates will stay low for a long time. That's why, as economist Michael Woodford argued, QE works better when it's used with forward guidance that makes the Fed's promises about future policy more explicit. The question, then, is what message the Fed is sending now...
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