J. Bradford DeLong's Blog, page 2268

The Strange and Remarkable World in Which We Live...

I remember when we used to have real bond market vigilantes--rather than invisible ones...

Why, You Have a Better Chance of Learning About the World by Asking that Squirrel Out There than by Reading the Washington Post

Yes, we have long ago moved beyond the "why oh why can't we have a better press corp?" question to begging Warren Buffett and company to simply close the Washington Post down--they get more money, we get less misinformation. It is win-win.

Today Robert Waldmann teaches the lesson:

Washington Post Headline Writer, Part VII: The www.washington.com headline and abstract person has outdone himself or herself, writing:

CBO sees debt estimates soar. Analysts say health law...

DeLong Smackdown Watch: Say's Law, Walras' Law, and Monetary Policy

I think this is directed at me...

Nick Rowe:

Worthwhile Canadian Initiative: Say's Law, Walras' Law, and monetary policy: People (and firms and governments) face budget constraints. If people formulate their demands and supplies of goods reflecting that budget constraint, then we get Walras Law. The individual's planned purchases of goods must be financed by planned sales of goods, including money. So the value of each individual's excess supplies of goods must equal his excess...

We Want Confidence: But In what?

Nick Rowe:

Worthwhile Canadian Initiative: Confidence: In what?: It's a very old argument, and there's some truth in it. Financial crises and recessions are caused by a loss of confidence. And policies that might normally help end the recession might actually make things worse, if they worsen confidence.

Confidence in what? The problem right now is that there is too much confidence: in money, and perhaps in government bonds too. And too little confidence in real investment...

Debt and Deficit (Now Out of Date)

20100630(b)BH.pdf

Arita Hachiro Liveblogs World War II: June 30, 1940

Arita Hachiro:

Greater East Asia Co-Prosperity Sphere: In order to realize world peace, it seems to be the most natural step that peoples who are closely related to one another geographically, racially, and economically should first form a sphere of their own for coexistence and co-prosperity and establish peace and order within that sphere, and at the same time secure a relationship of common existence and prosperity with other spheres....

The countries of East Asia and the...

More Notes on David Leonhardt on White House Views of the Recovery: Why the Line Wobble?

I had thought that the settled White House line was that the normal sources of recovery are not present when a recession is caused by a financial crisis, and that as a result a post-financial crisis recovery tends to look like an "L" rather than a "V". Given that, I thought the White House line was, the fact that we are recovering at all--that it looks like we are going to get a "U"--is both a miracle and testimony to the strength and power of the administration's stimulative policies.

...

Invisible Bond Market Vigilantes: Duncan Black Is Not Shrill Enough Department

Duncan Black is shrill, but not shrill enough:

Monetizing Indebtedness: Frankly we should consider it, but it isn't happening, and nor is there any evidence that the big money people perceive that it's happening. Basically it's the Alan Greenspan culture. They know something should be happening (rising inflation and interest) but it isn't. But invisible beings perceive it might be happening, even though if such a perception existed it would show up in interest rates.

We need to...

Three Representative Reactions to the CBO's Long-Term Budget Outlook

At 6 AM PDT this morning there emerged: http://cbo.gov/ftpdocs/115xx/doc11579/06-30-LTBO.pdf

Sample reactions:

Democrat:

We understand the current-law baseline--it says that PAYGO and health-care reform do what their enabling laws say that they do, and that they bend the deficit curve, and get us to near balance. They are, as CBO agrees, the largest long-run deficit-reducing policy changes in American history. We are proud of that--the task now is to make sure that the...

Doug Elmendorf Speaks! The Message I Hear: Stick to PAYGO and We Are OK...

Our budget is more-or-less balanced over the next 75 years under the current-law baseline, but Doug doesn't believe it:

Long-Term Budget Outlook: The budget outlook is much bleaker under the alternative fiscal scenario, which incorporates several changes to current law that are widely expected to occur or that would modify some provisions of law that might be difficult to sustain for a long period. In this scenario, CBO assumed that:

Medicare’s payment rates for physicians would...