J. Bradford DeLong's Blog, page 392
March 12, 2018
Harold Macmillan: "Greeks to Their Romans...": Document: On the Twentieth Century Imperial Succession
D.R. Thorpe: Supermac: The Life of Harold Macmillan
[Harold] Macmillan dubbed Roosevelt ���The Emperor of the West���, and Churchill ���The Emperor of the East���. When Eisenhower paid court to Roosevelt, Macmillan said to Bob Murphy, ���Isn���t he just like a Roman centurion?��� The classical analogy famously went further. To Dick Crossman, Director of Psychological Warfare at AFHQ, he said:
We, my dear Crossman, are Greeks in this American empire. You will find the Americans much as the Greeks found the Romans ��� great big vulgar, bustling people, more vigorous than we are and also more idle, with more unspoiled virtues, but also more corrupt. We must run A.F.H.Q. as the Greeks ran the operations of the Emperor Claudius...
The source Thorpe gives for this quote is the Sunday Telegraph for February 9, 1964. Anybody found a longer description? Not in the biographies, and library does not seem to have Crossman's Backbench Diaries...
https://www.icloud.com/keynote/0IhgSjKDwAyUE6DLH-1VzyklA
Thorpe:
On 22 December, Macmillan was summoned to Downing Street. It was one of the turning points of his life. Churchill outlined the complex situation obtaining in North Africa. Macmillan���s importance, he emphasised, would lie in the relationship he could build up with Eisenhower���
As Macmillan prepared to travel to North Africa, Churchill telegraphed Roosevelt. ���He will be, I am sure, a help. He is animated by the friendliest feelings towards the United States, and his mother hails from Kentucky������
For Macmillan who, 12 months earlier, had been occupying a minor post in the Colonial Office, sending out memoranda about the Yeast Company of Jamaica, the opportunities in North Africa were an extraordinary transformation. He may not have been an Octavius Caesar, but he could lay fair claim to being a Maecenas or an Agrippa���
Macmillan���s��� task was fourfold���
Oil the wheels of the Anglo-American relationship at Allied headquarters���
Serve as an informal head to the British civilian officials in Algiers���
Act as the representative of His Majesty���s Government, dealing with the French. In this, his most important function was to persuade American colleagues, both civilian and military, to accept British thinking and policy regarding the French, and the eventual elevation of de Gaulle into the position of a de facto prime minister���
Deal with Italian questions��� as the Allied forces invaded Sicily and then pushed northwards through the Italian mainland.
Persuade the Commander-in-Chief, General Eisenhower, of the wisdom of the policy of His Majesty���s Government in the course of fulfilling those responsibilities���
Macmillan met Eisenhower��� on���2 January.��� ���Considering that neither Washington or London had informed him of my appointment (which one of his staff heard by chance on the radio),��� Macmillan wrote home to Dorothy, ���the interview was quite a success.���
It did not seem so at the outset. Eisenhower bluntly asked Macmillan who he was, and what he was going to do. Macmillan explained that he was to liaise between AFHQ and Churchill, but at present was not au fait with all the political problems. Eisenhower told him that he would have plenty to learn. In any case, Eisenhower said, Hal Mack was a wholly satisfactory liaison officer.
Seeking some kind of common ground, as the interview began to wind down dishearteningly, Macmillan asked Eisenhower if he knew his mother���s home state. Eisenhower, thinking Macmillan meant an English county, did not see how he could possibly be expected to know it. Macmillan then explained that his mother had been born in the town of Spencer in Indiana.
From that moment the tone of the meeting changed. Even though Eisenhower did not treat Macmillan as an equal, even as a British minister of Cabinet rank, he thereafter regarded him as a kinsman���
The Grand Strategy of the British Empire for Superpower Succession
From 1830 to 1900, Britain could out-manufacture any likely coalition of its European enemies. By 1913, that was no longer true���Britain was just one of many projecting power across the globe. Would the 20th Century be a British, a German, or a Russian century? The British Empire preferred that it be a British century, but it was not all-powerful.
In 1800, the U.S. was a developing country���the near-plaything of the superpowers Britain and France. By 1870, the U.S. was a ���power������with an army, a navy, and an industrial base to support them���but unable to project that power south of Mexico City or east of the Bahamas.
Nevertheless, there was a shift of Britain���s strategy toward the U.S. starting in the 1840s:
Unusually: making a deal with the U.S. over the Oregon Territory���a deal that gives the U.S. what is now Washington state and part of Idaho, which were British settled. (The usual British negotiating strategy would have been to send the gunboats to burn the U.S.'s capital, and then dictate terms.)
Cultural and economic contact: Rhodes Scholarships, dukes marrying the daughters of plutocrats, massive investment in U.S. industrial development.
One often-expressed hope was to find a way to bind together the English-speaking countries:
Maybe the U.S. would outsource foreign policy to the Mother Country?
At least a ���special relationship���
This was very important. By 1913, the U.S. was a potential superpower. By 1939, the U.S. was the superpower:
Population: U.S. vs. British Empire (���European���):
1800: 4 vs. 17
1840: 13 vs. 28
1870: 33 vs. 37
1913: 83 vs. 59���largely due to the great wave of immigration
Manufacturing: U.S. as a percentage of British Plus Dominions:
1860: 30%
1880: 60%
1900: 100%
1913: 175%
1929: 300%
Should-Read: Michael Kremer (1993): The O-Ring Theory of ...
Should-Read: Michael Kremer (1993): The O-Ring Theory of Economic Development: "This paper proposes a production function describing processes subject to mistakes in any of several tasks...
...It shows that high-skill workers-those who make few mistakes-will be matched together in equilibrium, and that wages and output will rise steeply in skill. The model is consistent with large income differences between countries, the predominance of small firms in poor countries, and the positive correlation between the wages of workers in different occupations within enterprises. Imperfect observability of skill leads to imperfect matching and thus to spillovers, strategic complementarity, and multiple equilibria in education....
Quantity cannot be substituted for quality... workers of similar skill will be matched together... schedule of wages as a function of worker skill. Under this production function, small differences in worker skill lead to large differences in wages and output, so wage and productivity differentials between countries with different skill levels are enormous.... Firms will offer jobs to only some workers rather than paying all workers their estimated marginal product. If tasks are performed sequentially, high-skill workers will be allocated to later stages of production.... If firms can choose among technologies with different numbers of tasks, the highest skill workers will use the highest n technology.... These predictions of the model match stylized facts about the world, and although each of these facts may be due to a variety of causes, together they suggest that O-ring production functions are empirically relevant.
Imperfect matching of workers due to imperfect information about worker skill leads to positive spillovers and strategic complementarity in investment in human capital. Thus, subsidies to investment in human capital may be Pareto optimal. Small differences between countries in such subsidies or in exogenous factors such as geography or the quality of the educational system lead to multiplier effects that create large differences in worker skill. If strategic complementarity is sufficiently strong, microeconomically identical nations or groups within nations could settle into equilibria with different levels of human capital.
Michael Kremer (1993): The O-Ring Theory of Economic Development: Quarterly Journal of Economics 100:3 (August), pp. 551-575
Should-Read: Lots to think about about how statistics and...
Should-Read: Lots to think about about how statistics and economics should be being taught these days: Drew Conway (2013): The Data Science Venn Diagram: "The primary colors of data: hacking skills, math and stats knowledge, and substantive expertise...
...On Monday we spent a lot of time talking about "where" a course on data science might exist at a university. The conversation was largely rhetorical, as everyone was well aware of the inherent interdisciplinary nature of the these skills; but then, why have I highlighted these three? First, none is discipline specific, but more importantly, each of these skills are on their own very valuable, but when combined with only one other are at best simply not data science, or at worst downright dangerous.
For better or worse, data is a commodity traded electronically; therefore, in order to be in this market you need to speak hacker.... Being able to manipulate text files at the command-line, understanding vectorized operations, thinking algorithmically; these are the hacking skills that make for a successful data hacker. Once you have acquired and cleaned the data, the next step is to actually extract insight from it. In order to do this, you need to apply appropriate math and statistics methods, which requires at least a baseline familiarity with these tools. This is not to say that a PhD in statistics in required to be a competent data scientist, but it does require knowing what an ordinary least squares regression is and how to interpret it.
In the third critical piece���substance���is where my thoughts on data science diverge from most of what has already been written on the topic. To me, data plus math and statistics only gets you machine learning.... [But] science is about discovery and building knowledge, which requires some motivating questions about the world and hypotheses that can be brought to data and tested with statistical methods....
Finally, a word on the hacking skills plus substantive expertise danger zone. This is where I place people who, "know enough to be dangerous," and is the most problematic area of the diagram. In this area people who are perfectly capable of extracting and structuring data, likely related to a field they know quite a bit about, and probably even know enough R to run a linear regression and report the coefficients; but they lack any understanding of what those coefficients mean. It is from this part of the diagram that the phrase "lies, damned lies, and statistics" emanates, because either through ignorance or malice this overlap of skills gives people the ability to create what appears to be a legitimate analysis without any understanding of how they got there or what they have created. Fortunately, it requires near willful ignorance to acquire hacking skills and substantive expertise without also learning some math and statistics along the way. As such, the danger zone is sparsely populated, however, it does not take many to produce a lot of damage.
Should-Read: *Anatole Kaletsky *: The Market Dogs That Di...
Should-Read: *Anatole Kaletsky *: The Market Dogs That Didn���t Bark: "The bond market���s complacency about US interest rates and inflation may be surprising... [may] turn out to be an expensive mistake... but it is a fact...
...The 30-year US bond yield is still only 3.2% ��� exactly where it was a year ago and in most of 2015 and 2016. It is almost a full percentage point lower than in 2013 and two full points below the level in 2007.... The bond market believes that the long-term outlook for growth and inflation is more or less the same as it was in the period from 2015 until early last year ��� and much weaker than it was a decade ago.... For the moment, however, the behavior of long-term US interest rates implies an almost unshakeable confidence among investors that inflation will never again become a serious threat, despite President Donald Trump���s decision to slash taxes, boost government spending, and abandon deficit limits in a US economy already nearing full employment.
This points our investigation toward the third dog that didn���t bark. Currencies were almost completely unmoved by the stock-market commotion. This quiescence makes sense: If investors are unperturbed by inflationary pressures in the US economy, they can surely be much more confident about the rest of the world. In Europe, Japan, and many emerging markets, cyclical upswings are more recent, inflation is lower, and economic management is sounder than in the US. The implication is obvious: The global expansion and bull market will continue, but leadership will move from America to the more promising economies of Europe, Japan, and the emerging world.
Some Fairly-Recent Must- and Should-Reads...
Noah Smith: "Everyone in the econ world (or the politics world, really) should read this thread about Kevin Hassett: "@dynarski 'Is now a good time to talk about how Kevin Hassett stole the intellectual property of an untenured Harvard professor & her grad student?'...
Mark Belko: As new apartments are built around Pittsburgh, older stock is feeling the pressure: "Pittsburgh is in the midst of a supply surge, with about 4,600 units being built within the last three years...
Ezra Klein: @ezraklein on Twitter: "I don���t know what the [New York] Times should���ve done with Thrush. But I watched the efforts to plant oppo and smear @lkmcgann in the aftermath of her reporting. Anyone who thinks coming forward with these experiences is easy, even now, is wrong. I am beyond proud to be her colleague..."
Martin Wolf: Xi���s power grab means China is vulnerable to the whims of one man: "It had long been evident that... Xi Jinping... could not step down... too many enemies, particularly through his anti-corruption campaign...
Cory Doctorow: Let���s Get Better at Demanding Better from Tech: "In 2018, companies from John Deere to GM to Johnson & Johnson use digital locks and abusive license agreements to force you to submit to surveillance and control how you use their products...
Paul Krugman: It���s Baaack, Twenty Years Later: "In early 1998 I set out to reassure myself... to show that if Japan was having troubles, it was simply because the Bank of Japan wasn���t trying hard enough...
Daniel Drezner: Saving Speaker Ryan?: "Now is normally the time when the hard-working staff here at Spoiler Alerts would bolster a counterintuitive defense of Ryan���s speakership...
Willy Lam: China Paves Way For Xi Jinping To Extend Rule Beyond 2 Terms: "'Xi Jinping has finally achieved his ultimate goal when he first embarked on Chinese politics...
David E. Broockman et al.: The Political Behavior of Wealthy Americans: Evidence from Technology Entrepreneurs: "American politics overrepresents the wealthy. But what policies do the wealthy support?...
Anupam B. Jena and Andrew R. Olenski: Reduction in Firearm Injuries during NRA Annual Conventions: "We identified emergency department visits and hospitalizations for firearm injuries during NRA convention dates...
Robert Waldmann: A Comment on the Return of ���It���s Baaaack���: "Twenty years ago, Paul Krugman warned that the liquidity trap was not just an issue in the economic history of the 30s...
Some Fairly-Recent Links:
Stephen Mihm: Steel History Shows How America Lost Ground to Europe: "Spoiler alert: Unfair trade practices of foreign nations had nothing to do with it..."
Belle Waring: Young Man Has Crisis While Europe Stumbles Into War: "I read Radetzky March by Joseph Roth, and it is really the best thing ever. You should all read it, and unlike all the other books I���m thinking of, it���s not eleventy billion pages long..."
Sophia Besch: The End of Little Germany?: "Germany has long enjoyed the luxury of pretending to be something it is not: a small country. Now that a new government has finally been formed, Germany must start thinking of itself as the major economic player it is, and behave accordingly���preferably before new ministers settle into old routines..."
Vachel Lindsay: The Congo: A Study of the Negro Race
Brian Faler: 'This is not normal': Glitches mar new tax law: "Rep. Richard Neal.... 'We���re not going to willy nilly into this with, all of a sudden, a technical corrections bill that has not been sufficiently aired', he said. 'There needs to be an acknowledgment that this was done in haste and that there were many mistakes'..."
Valerie Wilson and Janelle Jones: Working harder or finding it harder to work?: "Demographic trends in annual work hours show an increasingly fractured workforce..."
Greg Leiserson: Presentation: U.S. Inequality and Recent Tax Changes: "the recently enacted Tax Cuts and Jobs Act will likely increase disparities in economic well-being, after-tax income, and pre-tax income..."
Ann Marie Marciarille: The Smoking Gun That Is a Swiss Flag: "Collusion... between Michigan's Allegiance Health and Hillsdale Community Health Center... to derail acute care facility competition in treating cancer, heart,and orthopedic patients.... Svvy colluding parties signaled their territorial allocation by the exchange of a Swiss flag. As the Swiss flag traditionally stands for freedom, honor, and fidelity, I'm thinking they may have gotten their signals crossed..."
Hugh Son and Jennifer Surane: Dimon Says He'll Fight for Tax Breaks Amazon Gets for HQ2: "He���ll call the governor of whichever state Amazon.com Inc. picks for its second headquarters and try to get the same benefits. 'I���m not kidding', Dimon said. 'You gotta fight for your company, folks, just keep that in mind. If you don���t, no one else does'..."
Rana Foroohar: Three questions for Federal Reserve chairman Jay Powell: "The Senate should ask about wage compression, power concentration and share buybacks..."
March 11, 2018
Should-Read: Dan Davies: "As I always said, if you think ...
Should-Read: Dan Davies: "As I always said, if you think it's annoying listening to me, try being me...
...You lot can escape this stream of garbage by blocking me on Twitter or walking out the room. I'm stuck with it, every minute of the day, in my head...
Should-Read: Some of us think that Evangelical Christiani...
Should-Read: Some of us think that Evangelical Christianity lost its way early: when your evangelization shifts from: "this works for me; you go and do good���we will meet on the road" to "I am saved and you are not: shape up!", you have already become a hypocrite in your pretense of certainty about First and Last Things. And from that hypocrisy all others are but minor steps, as Michael Gerson should have known long ago. It was never terribly admirable from the days it stopped caring that its congregations where almost exclusively white and started claiming to be concerned with the Rock of Ages rather than the age of rocks: Michael Gerson: Trump and the Evangelical Temptation: "As the prominent evangelical pastor Tim Keller... wrote... '"Evangelical" used to denote people who claimed the high moral ground; now, in popular usage, the word is nearly synonymous with "hypocrite"...
...So it is little wonder that last year the Princeton Evangelical Fellowship, an 87-year-old ministry, dropped the ���E word��� from its name.... A number of serious evangelicals are distancing themselves from the word.... I find this desire understandable but not compelling. Some words, like strategic castles, are worth defending, and evangelical is among them... a ���born-again��� religious experience, a commitment to the authority of the Bible, and an emphasis on the redemptive power of Jesus Christ. I was raised in an evangelical home, went to an evangelical church and high school, and began following Christ as a teen....
The corruption of a political party is regrettable. The corruption of a religious tradition by politics is tragic, shaming those who participate in it. How did something so important and admirable become so disgraced?... The answer extends back some 150 years... how an influential and culturally confident religious movement became a marginalized and anxious minority seeking political protection under the wing of a man such as Trump, the least traditionally Christian figure���in temperament, behavior, and evident belief���to assume the presidency in living memory.
Understanding that evolution requires understanding the values that once animated American evangelicalism. It is a movement that was damaged in the fall from a great height.... Early evangelicals were an optimistic lot who thought that human effort could help hasten the arrival of the Second Coming. In politics, evangelicals tended to identify New England, and then the whole country, with biblical Israel. Many a sermon described America as a place set apart for divine purposes.... In the mid-19th century, evangelicalism was the predominant religious tradition in America���a faith assured of its social position, confident in its divine calling, welcoming of progress, and hopeful about the future....
A series of momentous intellectual developments that most effectively drove a wedge between evangelicalism and elite culture. Higher criticism of the Bible���a scholarly movement out of Germany that picked apart the human sources and development of ancient texts���called into question the roots, accuracy, and historicity of the book that constituted the ultimate source of evangelical authority. At the same time, the theory of evolution advanced a new account of human origin.... Religious progressives sought common ground between the Christian faith and the new science and higher criticism. Many combined their faith with the Social Gospel���a postmillennialism drained of the miraculous, with social reform taking the place of the Second Coming. Religious conservatives, by contrast, rebelled against this strategy of accommodation in a series of firings and heresy trials designed to maintain control of seminaries....
Fundamentalism... responded to modernity in ways that cut it off from its own past. In reacting against higher criticism, it became simplistic and overliteral in its reading of scripture. In reacting against evolution, it became anti-scientific.... This general pessimism about the direction of society was reflected in a shift away from postmillennialism and toward premillennialism. In this view, the current age is tending not toward progress, but rather toward decadence and chaos under the influence of Satan....
Over time, evangelicalism got a revenge of sorts in its historical rivalry with liberal Christianity. Adherents of the latter gradually found better things to do with their Sundays than attend progressive services.... As its old theological rival faded���or, more accurately, collapsed���evangelical endurance felt a lot like momentum. With the return of this greater institutional self-confidence, evangelicals might have expected to play a larger role in determining cultural norms and standards. But their hopes ran smack into the sexual revolution, along with other rapid social changes.... As a result, the primary evangelical political narrative is adversarial, an angry tale about the aggression of evangelicalism���s cultural rivals.... After shamefully sitting out (or even opposing) the civil-rights movement, white evangelicals became activated on a limited range of issues....
The leaders who had emerged within evangelicalism varied significantly in tone and approach. Billy Graham was the uncritical priest to the powerful. (His inclination to please was memorialized on one of the Nixon tapes, in comments enabling the president���s anti-Semitism.) James Dobson, the founder of Focus on the Family, was the prickly prophet, constantly threatening to bolt from the Republican coalition unless social-conservative purity was maintained. Jerry Falwell Sr. and Pat Robertson (the latter of whom ran for president himself in 1988) tried to be political kingmakers....
Where do evangelicals get their theory of social engagement?... The Christian Bible, after all, can be a vexing document.... Some interpretive theory must elevate the Golden Rule above Iron Age ethics and apply that higher ideal to the tragic compromises of public life. Lacking an equivalent to Catholic social thought, many evangelicals seem to find their theory merely by following the contours of the political movement that is currently defending, and exploiting, them.... It is not that secularization, abortion, and religious liberty are trivial issues; they are extremely important. But the timing and emphasis of evangelical responses have contributed to a broad sense that evangelical political engagement is negative, censorious, and oppositional....
By the turn of the millennium, many, including myself, were convinced that religious conservatism was fading as a political force.... I believed that the old evangelical model of social engagement was exhausted, and that something more positive and principled was in the offing. I was wrong. In fact, evangelicals would prove highly vulnerable to a message of resentful, declinist populism.... It is remarkable to hear religious leaders defend profanity, ridicule, and cruelty as hallmarks of authenticity and dismiss decency as a dead language. Whatever Trump���s policy legacy ends up being, his presidency has been a disaster in the realm of norms. It has coarsened our culture, given permission for bullying, complicated the moral formation of children, undermined standards of public integrity, and encouraged cynicism about the political enterprise. Falwell, Graham, and others are providing religious cover for moral squalor���winking at trashy behavior and encouraging the unraveling of social restraints. Instead of defending their convictions, they are providing preemptive absolution for their political favorites.... Setting matters of decency aside, evangelicals are risking their faith���s reputation on matters of race.... For some of Trump���s political allies, racist language and arguments are part of his appeal. For evangelical leaders, they should be sources of anguish....
Here is the uncomfortable reality: I do not believe that most evangelicals are racist. But every strong Trump supporter has decided that racism is not a moral disqualification in the president of the United States. And that is something more than a political compromise. It is a revelation of moral priorities.... Evangelical leaders have associated the Christian faith with racism and nativism... with misogyny and the mocking of the disabled... with lawlessness, corruption, and routine deception... with moral confusion about the surpassing evils of white supremacy and neo-Nazism....
It is the strangest story: how so many evangelicals lost their interest in decency, and how a religious tradition called by grace became defined by resentment.... It is difficult to see something you so deeply value discredited so comprehensively. Evangelical faith has shaped my life, as it has the lives of millions. Evangelical history has provided me with models of conscience. Evangelical institutions have given me gifts of learning and purpose. Evangelical friends have shared my joys and sorrows. And now the very word is brought into needless disrepute...
The Time Series Figures for the Most Basic of Business Cycle Macro Analyses: What Is to Be Explained and Accounted For
Real GDP:
Real GDP per Worker:
National Income Components as Shares of Potential GDP
Investment as a Share of Potential GDP:
Consumption as a Share of Potential GDP:
Gross Exports as a Share of Potential GDP:
Imports as a Share of Potential GDP:
Net Exports as a Share of Potential GDP:
Monetary
Price Level:
Inflation Rate:
Interest and Exchange Rates
Nominal Short-Term Safe Rate:
Long-Term Real Safe Rate:
**Long-Term Real Risky Rate:
Real Exchange Rate (Value of Foreign Goods/Currency):
https://www.icloud.com/keynote/0RKCnJXmJVfA6-NlgZEP-CD7w
Notes on Figures
Real GDP
Real GDP: labor productivity times employment
The principal aspect of this graph is long-run growth: the American economy today is eight times the size of the economy of 1950
2.5 times as many workers
3.1 times output per worker
The secondary aspect is the business cycle
The tertiary aspect is speedup and slowdown in the growth trend
Real GDP per Worker
Real GDP per worker (in 2009 dollars) was $45,000 per year in 1950 and is $115,000 today
Note the productivity growth speedup of the mid-1990s
And note the productivity growth collapse since 2000
Investment Spending as a Share of Potential GDP
The major driver of the business cycle is fluctuating investment spending
This is investment spending as a share of potential GDP
In our simple macro model, I/Y☆
These waves are the business cycles
Note the anemic investment recovery of 2009-present
Personal Consumption Expenditures as a Share of Potential GDP
In the language of our simple macro model, this is C/Y☆
When Y is low relative to Y☆, C/☆ is low as well
C/Y☆ was low in the business cycle troughs of 2009, 1992, 1982, 1975, 1970, 1960, etc.
The medium-term rise in C/Y☆ as the U.S. becomes a save-and-invest-less country
Gross Exports
Demand for U.S. exports has risen massively since 1950: from 5% to 13% of national income and product
When the value of foreign currency/bonds is high, exports boom
When the value of foreign currency/goods is low, exports are depressed
Gross Imports
Imports have risen from 4% to 16% of national income and product since 1950
���Globalization��� and ���hyperglobalization���
The coming of the container ship
The tripling of world oil prices in the 1970s a big moment
As is the great expansion of world trade with the coming of the internet
Value chains
The China shock
The Trade Balance
Net exports are a balancing item: you have to add them to C+I+G to get total spending on domestically-produced goods
The high interest rates of the 1980s that drove the value of foreign currency up led to a large negative swing in net exports
So did the optimism about America of the dot-com boom, and the so-called ���strong dollar policy���
Most of all, however, the medium-term shift in the trade balance is due to the savings shortfall
Largely induced by large government deficits
Short-Term Safe Nominal Interest Rate: Treasury Bills
The interest rate the Federal Reserve can nail: the short-term safe nominal interest rate
Note the regular cycles as the Federal Reserve tries to ���lean against the wind���
Note the impact of the inflationary wave of the 1970s on the Treasury bill rate the Fed thought was appropriate
Note the extended time at the zero lower bound in the 2010s
Long-Term Safe Real Interest Rate
Subtract the current inflation rate and add on the term premium���the difference between the 3-mo. T-bill and the 10-yr. T-bond rate���and get what current and expected future Federal Reserve policy have on incentives for investment
Note the:
Substantial tightening of the early 1970s
Loosening of the mid 1960s
Volcker disinflation of the early 1980s
The Greenspan preemption of the mid 1990s
The great easing of policy at the end of the 2000s
Long-Term Risky Real Interest Rate
But the interest rate that actually matters for the determination of investment is the long-term real risky interest rate
The safe rate plus the risk premium assigned by financial markets
See the sharp tightenings coming from Federal Reserve policy and the financial system in:
the late 2000s,
the early 1980s, and
the early 1970s
Real Exchange Rate
Dollar pegged to other currencies under the Bretton Woods system until the early 1970s
Since then, three major dollar cycles
Exports drop (and manufacturing hammered) when the value of foreign currency/goods falls
Reagan deficits
Internet/China
���Taper tantrum���
Trumpenomics
Price Level
Headline and core
Cumulative and compounded 7.5-fold inflation since 1950
Consumer prices today 2.5 times what they were in 1984
Consumer prices in 1950 1/3 what they were in 1984
2.5% per year
Inflation Rate
Consumer Price Index
Not PCE���
���Headline��� and ���core���
Current core a better forecast of future headline than current headline is
Korean War
Mid-50s to late 60s
The 70s inflation
���Opportunistic��� disinflation
The era of the zero lower bound
March 10, 2018
Should-Read: Robert Waldmann: A Dynamic Macroeconomic Mod...
Should-Read: Robert Waldmann: A Dynamic Macroeconomic Model with Downward Nominal Rigidity II: "This note explores the implications of downward nominal rigidity...
...To make things clear and simple, I will assume absolute downward nominal rigidity so prices and nominal wages are never cut. This is simply assumed with a nod at US data and not explained. Downward nominal rigidity is quite different from standard assumptions about sticky wages and prices in which wage and price setting is slow but takes expected inflation into account. Downward nominal rigidity implies indeterminate equilibrium with a continuum of outcomes possible for given tastes and technology. It is possible for the economy to fall into a liquidity trap for no particular reason, and it is possible for the economy to escape from that trap for no particular reason...
March 9, 2018
Should-Read: The number I have in my head is: 15% of sexu...
Should-Read: The number I have in my head is: 15% of sexually-active women die in childbed in the Agrarian Age. But what was that risk before?: Susan Pfeiffer et al.: Discernment of mortality risk associated with childbirth in archaeologically derived forager skeletons: "An obstetric dilemma may have been a persistent characteristic of human evolution...
...in which the bipedal female's pelvis is barely large enough to accommodate the birth of a large-brained neonate. Evidence in the archaeological record for mortality risk associated with childbirth is rare, especially among highly mobile, immediate return hunter-gatherer populations. This research explores the idea that if excess mortality is associated with first pregnancy, females will outnumber males among young adult skeletons. The sample is of 246 skeletons (119 males, 127 females) representing Later Stone Age (LSA) foragers of the South African Cape. Young adults are distinguished through incomplete maturation of the medial clavicle, iliac crest and vertebral bodies. With 26 women and 14 men in the young category, a higher mortality risk for women is suggested, particularly in the Southern Cape region. Body size does not distinguish mortality groups; there is evidence of a dietary protein difference between young and older women from the Southern Cape. Possible increased mortality associated with first parturition may have been linked to morphological or energetic challenges, or a combination of both. Exploration of the sex ratio among young adult skeletons provides a tool for exploring the antiquity of an important evolutionary factor...
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