J. Bradford DeLong's Blog, page 2190
September 29, 2010
Six Lectures on Depression Economics
EPUB and PDF versions of the first tranche of the fall 2010 lecture notes...
PDF version: 20100929 six lectures.pdf
EPUB version: J. Bradford DeLong, Six Lectures on Depression Economics
Open publication - Free publishing
September 28, 2010
Michel Foucault: Discourse and Truth
Michel Foucault: Discourse and Truth: the Problematization of Parrhesia: 1983 Berkeley Lectures...
Shades of "Hai Rui Reprimands the Emperor"...
"Hash Is Illegal! And Lentil Loaf Ought to Be!"
That was my favorite line from Cyra McFadden's 1974 The Serial. But I had never actually seen Lentil Loaf. Until now:
What Paul Krugman Says...
PK:
Structural Problems, Not Structural Unemployment: Maxine Udall responds to my writing about structural unemployment and the absence thereof by arguing that the US economy probably does have some major structural problems. She’s right, of course — but there’s no contradiction between arguing that structural unemployment has very little to do with the sharp rise over the past three years, and arguing that the economy was badly distorted even in 2007. To be fair, Udall seems to get that; but others might not...
Something Totally Batshit Insane Shows Up on Henry Blodget's Clusterstock
Amazing:
Gonzalo Lira: Is Krugman Actually Suggesting War As A Fiscal Solution?
No. Paul is not.
The pile of rubbish grows ever larger...
We Are Number Four!
The National Resource Council http://www.nap.edu/rdp/ put Berkeley Economics at number 12 in 1983 and number 7 in 1995.
We are now in the top 5--even though our ranking in graduate student support, frankly, sucks:
The Bank of Englands Adam Posen Joins the Reanimation Caucus
We have moved beyond mere need for more stimulus to get the recovery on track. The recovery is dead We are now at the stage where what is needed is more: the reanimation of dead tissue.
David Wessel listens to Adam Posen as he joins the reanimation caucus and says: "GIVE THE ECONOMY... LIFE!!!":
Bank of England’s Posen: Central Banks Should Do More — A Lot More: Adam Posen, an American who sits on the Bank of England’s Monetary Policy Committee, is no on-the-one-hand-this/on-the-other-hand-that economist. In a speech at the Chamber of Commerce in Hull today, Posen made the case that the world’s central banks — not only in the U.K. — urgently need to pursue more aggressive bond-buying to rescue the world economy from stagnation that clouds the future as well as the present.
Along the way, he adds a few new metaphors to the debate over central banking: “Fear of looking ineffective should not be a deterrent to doing the right thing," he said:
When facing a worsening situation, you work with the tools you have, whether you’re a central bank in the aftermath of a financial crisis, or someone stranded on the road with a car problem when night is falling. And you try to get help. In every major country, actual output has fallen so much versus where trend growth would have put us, and trend growth has not been above potential for long enough as yet, that there remains a significant gap between what the economy could be producing at full employment and it currently produces. Thus, policymakers should not settle for weak growth out of misplaced fear of inflation...
Despite a 3.1% increase in consumer prices over the past 12 months in the U.K., Posen said that “if price stability is at risk over the medium-term, meaning over the two- to three-year time-horizon for the Monetary Policy Committee’s decisions, it is on the downside.”
The risks posed by doing too little monetary easing far exceed risks posed by doing too much, he argued, making a case for looking beyond the economic metrics:
There are… some very serious risks if we make policy errors by tightening prematurely, or even if we loosen insufficiently. Those risks are not primarily the potential for a double-dip recession or even of temporary measured deflation. While bad, those situations would still be within the range of short-term cyclical developments, and could be weighed against simple inflationary pressures from monetary policy trying to stimulate too much. The risks that I believe we face now are the far more serious ones of sustained low growth turning into a self-fulfilling prophecy, and/or inducing a political reaction that could undermine our long-run stability and prosperity. Inaction by central banks could ratify decisions both by businesses to lastingly shrink the economy’s productive capacity, and by investors to avoid risk and prefer cash. Those tendencies are already present, and insufficient monetary response is likely to worsen them.
Posen, a Harvard Ph.D. economist who maintains a perch at the Peterson Institute for International Economics, a Washington think tank, said the only central bank weapon with sufficient oomph is likely to be more “large scale asset purchases,” or LSAP, another term for “quantitative easing.” Although he suggests the Bank of England buy more gilts, or U.K. government bonds, he expressed interest in purchasing corporate or other private bonds as well.
Posen expressed impatience with central bankers around the world who would rather wait and gauge the impact of the steps they have taken already.
We will only know we will have done enough with QE [quantitative easing] or other monetary stimulus when we have clear indications that our policies are moving the desired variables — market interest rates, wages, output, employment, and inflation expectations — sufficiently and in the right directions on a sustained basis. I do not think that is not enough for a central bank to say, ‘Look, we expanded our balance sheet more than any time in history,’ or ‘we did things we never did before,’ and argue that therefore we must have done a lot, if not too much (not that the Bank of England has done so). In my opinion, that is backwards logic. It would be like saying ‘that fire must be out, because we’ve already pumped more water than for any previous fire we’ve fought,’ or ‘we must have gotten to our destination, because I’ve been driving for hours and we’ve already used a full tank of gas.’
This is a worse fire than any of us have ever seen in our lifetimes, and we are farther from home than we have ever been, and so we cannot judge our progress by how much effort or resources we have already put in,” he continued. “We can only gauge the success of our efforts by our results, and until we achieve those results, there is no danger from our heavy use of the available instruments. This is not a normal situation with finely balanced risks on both sides or with monetary policy able to finely calibrate to an outcome...
OGMB "Slimes" John Cochrane
Hoisted from Comments: Reacting to other comments on Howard Kurtz's inaccurate and mendacious Paul Krugman profile, OGMB writes:
Martin Wolf Understands Economics: If posting an embarrassing old quote counts as sliming, then I'm happy to slime John "Bantam Cock" Cochrane once again...
Most of all, caveat emptor -- these are a matters for buyers and sellers, not regulators. Nobody else gets hurt if you buy a lousy mortgage pool. The government does not need to write a new rule every time someone buys a rotten tomato. Investors will demand the right transparency, complexity, and risk-sharing or monitoring of mortgage pools. That is, unless they get bailed out and learn to count on that instead! The history of the mortgage market is a grand story of bringing credit to people who need it, upon the removal of layer after layer well-intended but counterproductive "protective" regulation. -- John Cochrane, 2007
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