J. Bradford DeLong's Blog, page 2076

Why We Need More Stimulative--Not More Contractionary--Fiscal, Monetary, and Banking Policy. And Why We Need a Lot More Stimulative Policy

We have, as Mark Thoma says, a long way to go:

And we are not getting there very fast.

Generally Speaking...

Friedrich Engels:

Note to the 1888 English edition of the Communist Manifesto: Generally speaking, for the economical development of the bourgeoisie, England is here taken as the typical country, for its political development, France.

IAS 107: Intermediate Macro: 20110303 Lecture: The Great Recession II

20110303 ias 107.pdf

Download 20110301 delong ias 107 great recession

IAS 107: Intermediate Macro: 20110301 Lecture: The Great Recession

20110301 ias 107.pdf

Download 20110301 delong ias 107 great recession

Deficit Politics

Scott Lemieux:

A Reminder : Lawyers, Guns & Money: 1)Nobody really cares about the deficit, and 2)the major New Deal/Great Society federal programs are extremely popular. If only the Democratic political leadership could immerse themselves in these enduring facts...

Matthew Yglesias Makes a Good Catch: Monetary Policy Department

MY:

Yglesias » Unorthodox Monetary Policy Worked Nicely In Sweden; Will Anyone Notice?: Way back on August 27, 2009 the FT reported: “Bankers Watch as Sweden Goes Negative”. At issue was Sweden’s embrace of unorthodox monetary policy, specifically their decision to cut the interest rate paid on bank reserves below zero. In other words, they were charging a penalty. In the USA, by contrast, the Federal Reserve actually raised the interest rate paid on reserves.

Yesterday, the FT reported: “Sweden records fastest quarterly growth”. That’s the fastest growth Sweden has ever recorded. Ever. They’ve already tightened monetary policy from where it was in the depths of the crisis and, naturally, are poised to do some additional tightening. So are bankers actually watching this? It seems to me they’re not. When Sweden did something unorthodox, people said the world’s central bankers were going to watch. It worked. It worked really really well.

Here is the new story: Andrew Ward:

FT.com / Global Economy - Sweden records fastest quarterly growth: Sweden registered its fastest quarterly economic growth on record in the last three months of last year, burnishing its status as Europe’s best-performing economy. The forecast-beating 7.3 per cent year-on-year expansion looked sure to increase pressure on the country’s central bank to raise interest rates further amid concern over possible overheating. The Riksbank has already increased rates five times since last July, when Sweden became the first European Union member to tighten monetary policy since the start of the global financial crisis.

Scandinavia’s biggest economy has surged back from a deep recession in 2009 as manufacturers such as Volvo, the truckmaker, and SKF, the world’s biggest maker of ball bearings, benefit from rebounding global demand. Domestic consumption has also recovered strongly, helped by robust public finances which have allowed Sweden to avoid the fiscal austerity measures holding back growth in other parts of Europe...

Here is the old story: Andrew Ward and David Oakley:

FT.com / Currencies - Bankers watch as Sweden goes negative: For a world first, the announcement came with remarkably little fanfare. But last month, the Swedish Riksbank entered uncharted territory when it became the world’s first central bank to introduce negative interest rates on bank deposits.... Mervyn King, the Bank of England governor, has hinted he may follow the Swedish example as the danger of a so-called liquidity trap, where cash remains stuck in the banking system and does not filter out to the wider economy, is an increasing concern for the UK....

Sweden’s decision to introduce negative interest rates on deposits at the Riksbank means that commercial banks have to pay for the privilege of saving their money at the central bank, writes David Oakley. The new rate of minus 0.25 per cent forces banks to pay 0.25 per cent to the Riksbank. Normally, banks would be paid interest on these deposits.

It is thought to be the first time that negative rates have been introduced. Central banks usually shy away from such a drastic policy because it is in effect a tax or fine on the commercial banks and could hurt their balance sheets. However, the Riksbank hopes that by charging banks for saving their money, rather than paying them, it will encourage them to increase their lending to individuals and businesses, boosting the economy. It also hopes that it might encourage them to divert the money into other assets, such as government bonds or even highly rated corporate bonds. This would bring down bond yields and act as an stimulant.... At the Riksbank, which now has a deposit rate of minus 0.25 per cent, the most vocal advocate of the policy is deputy governor Lars Svensson, a world-renowned expert on monetary policy theory and a close associate of Ben Bernanke, chairman of the US Federal Reserve, since they worked together at Princeton University.

According to the minutes of the Riksbank’s July meeting, Mr Svensson dismissed the “zero interest rate mystique” that had “exaggerated the problems” associated with zero or sub-zero rates. “There is nothing strange about negative interest rates,” he said. Henrik Mitelman, chief fixed income strategist at SEB, the Swedish bank, said that the negative deposit rate, combined with a cut in the repo rate to an historic low of 0.25 per cent, sent a powerful signal to the market that the Riksbank intended to keep rates close to zero until economic recovery was well under way. “What the Riksbank did was very brave. They decided to see if markets could cope with it and the markets have.”...

Duncan Black Says Genuinely Good News on the Unemployment Front: Only 368,000 New Claims for Unemployment Insurance

Eschaton

Liveblogging World War II: March 3, 1941

Time:

World War, SOUTHERN THEATRE: Jobs Done and To Do - TIME: Britain's Foreign Secretary Anthony Eden and Chief of Imperial General Staff General Sir John Greer Dill flew to Cairo last week. The two men carried with them a tremendous responsibility. Two weeks before, the British had captured Bengasi, and for two weeks the Imperial Army of the Nile had been consolidating its conquests. The messages these two men took from London to General Sir Archibald Percival Wavell, the discussions all three would have, and the plans Sir Archibald and his aides would then draw up —these things would decide not only the future operations of the Army of the Nile, but very possibly the whole future of the war. Would the Army of the Nile transform itself into the Army of Salonika? Was an invasion of Sicily the plan? Would General Wavell push on to Tripoli? Answers to these questions were firmly shut away in the brief cases and the minds of these three men.

The Politico Goes All in on "Opinions on Shape of Earth Differ" Journalism...

Why oh why can't we have a better press corps?

Greg Sargent, at least, is unhappy with this:

The Plum Line - No, it's not okay to traffic in pure fiction about Obama's heritage: Ben Smith writes that my criticism of Mike Huckabee is unfair:

Is the idea that Obama's intellectual history should be tied to his personal narrative and to a father whom he barely knew really all that crazy or racist? I recall some guy writing a book along those lines once. Obama has also spoken himself about the impact growing up in the developing world has had on his views. More broadly, the line that Serwer's dismissing here is the fringe of an argument that's worth taking seriously: Obama's roots in politics, to the degree he thought about foreign policy at all, are on the left, in the campus anti-nuclear movement and in an academic Chicago milieu in which Palestinian activists recalled him as sympathetic. He moved right on all sorts of things as he approached the national stage, but as he puts a very personal stamp on American foreign policy at a turbulent moment, it's legitimate to look at his personal education.

Right, but Huckabee didn't "look at his personal education." Huckabee created an entirely fictional one. It's one thing to tie Obama's politics to his personal narrative, as Smith suggests, but it's another thing entirely to reduce them to caricature through elaborate invention.

The point of Huckabee's "Obama grew up in Kenya sympathizing with the Mau-Mau's" remark is to tell a story about Obama's life that never actually happened.... [I]t doesn't seem like it's asking too much to insist that people use his actual personal background to do so.... Huckabee is pretending that he was raised by his father and grandfather in Kenya, and has a visceral hatred of Winston Churchill, when in reality he was raised largely by his white grandparents in Hawaii. Huckabee is proposing (tentatively) that the only reason to believe the president is not lying about his birth certificate is because the evil Clintons would have exposed him otherwise. He's suggesting that the liberal politics he embraced are, therefore, as David Frum wrote, of the "Kenyan anti-colonialism" thesis, "motivated by anti-white racial revenge."

But Obama's actual life wouldn't confirm any of this.

So conservatives have invented an alternate universe in which Obama's absent father raised him in Kenya to hate the British and that his entire administration is therefore an elaborate scheme for racial payback. The fiction is so pervasive that Huckabee appeared to think it was actually true. He had heard it so many times that he found himself repeating it with no self-consciousness whatsoever.

The question is not whether Obama's "personal background" plays a role in his politics. Everyone's personal background does. But if I said that Huckabee hates Obama because white conservatives from Arkansas hate black people because the National Guard was once called in to forcibly integrate schools in his home state, that would be outrageous, unfair, and false. That isn't much different from saying that Obama's policies are the result of him "growing up in Kenya with a Kenyan father and grandfather." It's the misinformation, in service of a grand fictional narrative, that's the problem.

Inflation Definition from 1934

Justin Lahart emails:

Here’s [the] inflation definition from Webster's New International Edition, Second Edition (1934):

Disproportionate and relatively sharp and sudden increase in the quantity of money or credit, or both, relative to the amount of exchange business. Such increase may come as a result of unexpected additions to the supply of precious metals, as in the period following the Spanish conquests in Central and South America or the period following the opening up of large new gold deposits; or it may come in times of business activity by expansion of credit through the banks; or it may come in times of financial difficulty by governmental issues of paper money without adequate metallic reserve and without provisions for conversion into standard metallic money on demand. In accordance with the law of the quantity theory of money, inflation always produces a rise in the price level.