Musk's twitter, shooting itself in the foot, over and over again, forever; is human weak sociabiility "genetic" in any relevant sense?; Drezner on U.S.-China, Mollick on prompting ChatBots, Yglesia...
15 years ago at the start of the Great Recession there were perhaps a dozen banks in my town. With 15 years of monetary easing there may be now 2 dozen banks (and branches). I would suppose tightening will reduce the numbers back to the old days.
Mullin: Of course, the setting of monetary policy instruments ought to respond to things like stock market crashes. That's what it means to have a policy of targeting economic outcomes. Its loose talk to refer to changes in instrument settings as "policy" changes. Central banks are not supposed to have "stances," either. Ther are no stances in tennis while the ball is in play.
It seems correct to me that humans are unusually capable of being trained into being indifferent to strangers.
Take cats as a model. They are semi-social, and can exist in colonies. But no matter how often you integrate a new one into the colony, the incumbent cats will initially be highly suspicious or even hostile. It always takes a matter of weeks to months of cautious interactions, before the new cat is accepted and starts being treated with behaviors of affection -- nose sniffs, mutual grooming, sharing food. The cats never develop a culture of welcoming, or even being indifferent to, the presence of an unknown individual. The unknown cat is always initially suspected of being a competitor for resources or an outright threat. As Moffett notes, chimps are similar -- if anything, _more_ xenophobic than cats.
It also takes a ton of work to get dogs to not freak out when passing a strange dog on the street.
Raising interest rates in the late 1970s and early 1980s quashed inflation by crushing the credit market. I managed to get a 12.25% mortgage. A friend was stuck with one at 19.5%. You can imagine that this deterred a lot of home buyers and destroyed the 1970s era strategy of buying on credit and paying back in deflated dollars. According to FRED, there was only a tiny spike in the bank failure rate. Surely, those banks were also arbitraging the difference between long term and short term interest rates. Why did so few fail? Was it because so many banks back then were too small to fail?
(Yes, I know that lots of banks failed in the 1980s, possibly due to persistent high interest rates. I know that's when they stopped handing out freebies for new deposits. My family never bought small appliances. That's also when NOW accounts allowed them to pay interest on checking accounts and those rates soared.)
Mullin's piece finishes with this quotation of Blinder: "If the critics are complaining that the Greenspan Fed's success in stabilizing inflation and economic activity reduced the perceived level of macroeconomic risk, we are totally unsympathetic — for that is precisely what a central bank is supposed to do."
Do you remember "asset price inflation"? During that period when both inflation and rates were low, there were people who believed that there is a mechanical linkage between low rates and high inflation and that therefore if there was no visible inflation in the presence of low rates, there must be cryptic inflation hidden somewhere. A variation on this was the idea that no, it isn't hidden at all, it's in plain sight manifested as high asset prices. These people generally argued that the Fed should raise rates in order to "prick the asset price bubble".
Now, if you really believe in "asset price inflation", and you think that the Fed should prevent this inflation from getting too high, does it not follow that the Fed should prevent "asset price deflation" too? Regular deflation is usually worse than regular inflation! And yet my impression was that the people who thought the Fed should manage "asset price inflation" and the people who thought the Fed should not offer "the Greenspan put" were mostly one and the same.
And both wrong. I refer to then as "goldbugs and assorted vermin." But we must include people who blame the Great recession on deregulation of the financial markets. Solecism is no respecter of party.
First Republic/bank crises. Investing in a long term asset with short term resources is a normal bank business risk. the term transformation risk is something to be borne. Betting on the yield curve is a totally different kind of risk. Bank were supposed to have learned that you don; fund fixed rate loans or assets with short term liabilities back int the S&L crisis days.
But dozens of Republic /Luna/SVB failures do not make for a crisis. They might, I think should, make the Fed reconsider how quickly it wants to reduce inflation over the nest several months, but that's not a crisis either.
Only if the Fed allows it. I dislike attributing macroeconomic outcomes to events w/o specifying what assumption is being made about the Fed's reaction. The Fed is supposed to be setting its policy instruments to achieve something like a real income maximizing trajectory for inflation, taking account of events along the way. "Deficits" do not cause inflation. "Financial crises" do not cause recessions. "Stimulus" does not stimulate the economy.
15 years ago at the start of the Great Recession there were perhaps a dozen banks in my town. With 15 years of monetary easing there may be now 2 dozen banks (and branches). I would suppose tightening will reduce the numbers back to the old days.
The growth in the sheer numbers of banks, seemingly against the trend of what technology makes possible, still puzzles me greatly...
Mullin: Of course, the setting of monetary policy instruments ought to respond to things like stock market crashes. That's what it means to have a policy of targeting economic outcomes. Its loose talk to refer to changes in instrument settings as "policy" changes. Central banks are not supposed to have "stances," either. Ther are no stances in tennis while the ball is in play.
It seems correct to me that humans are unusually capable of being trained into being indifferent to strangers.
Take cats as a model. They are semi-social, and can exist in colonies. But no matter how often you integrate a new one into the colony, the incumbent cats will initially be highly suspicious or even hostile. It always takes a matter of weeks to months of cautious interactions, before the new cat is accepted and starts being treated with behaviors of affection -- nose sniffs, mutual grooming, sharing food. The cats never develop a culture of welcoming, or even being indifferent to, the presence of an unknown individual. The unknown cat is always initially suspected of being a competitor for resources or an outright threat. As Moffett notes, chimps are similar -- if anything, _more_ xenophobic than cats.
It also takes a ton of work to get dogs to not freak out when passing a strange dog on the street.
Raising interest rates in the late 1970s and early 1980s quashed inflation by crushing the credit market. I managed to get a 12.25% mortgage. A friend was stuck with one at 19.5%. You can imagine that this deterred a lot of home buyers and destroyed the 1970s era strategy of buying on credit and paying back in deflated dollars. According to FRED, there was only a tiny spike in the bank failure rate. Surely, those banks were also arbitraging the difference between long term and short term interest rates. Why did so few fail? Was it because so many banks back then were too small to fail?
(Yes, I know that lots of banks failed in the 1980s, possibly due to persistent high interest rates. I know that's when they stopped handing out freebies for new deposits. My family never bought small appliances. That's also when NOW accounts allowed them to pay interest on checking accounts and those rates soared.)
https://fred.stlouisfed.org/graph/fredgraph.png?g=131Dh
Mullin's piece finishes with this quotation of Blinder: "If the critics are complaining that the Greenspan Fed's success in stabilizing inflation and economic activity reduced the perceived level of macroeconomic risk, we are totally unsympathetic — for that is precisely what a central bank is supposed to do."
Do you remember "asset price inflation"? During that period when both inflation and rates were low, there were people who believed that there is a mechanical linkage between low rates and high inflation and that therefore if there was no visible inflation in the presence of low rates, there must be cryptic inflation hidden somewhere. A variation on this was the idea that no, it isn't hidden at all, it's in plain sight manifested as high asset prices. These people generally argued that the Fed should raise rates in order to "prick the asset price bubble".
Now, if you really believe in "asset price inflation", and you think that the Fed should prevent this inflation from getting too high, does it not follow that the Fed should prevent "asset price deflation" too? Regular deflation is usually worse than regular inflation! And yet my impression was that the people who thought the Fed should manage "asset price inflation" and the people who thought the Fed should not offer "the Greenspan put" were mostly one and the same.
And both wrong. I refer to then as "goldbugs and assorted vermin." But we must include people who blame the Great recession on deregulation of the financial markets. Solecism is no respecter of party.
First Republic/bank crises. Investing in a long term asset with short term resources is a normal bank business risk. the term transformation risk is something to be borne. Betting on the yield curve is a totally different kind of risk. Bank were supposed to have learned that you don; fund fixed rate loans or assets with short term liabilities back int the S&L crisis days.
But dozens of Republic /Luna/SVB failures do not make for a crisis. They might, I think should, make the Fed reconsider how quickly it wants to reduce inflation over the nest several months, but that's not a crisis either.
Tehey do perhaps make for a recession, however...
Only if the Fed allows it. I dislike attributing macroeconomic outcomes to events w/o specifying what assumption is being made about the Fed's reaction. The Fed is supposed to be setting its policy instruments to achieve something like a real income maximizing trajectory for inflation, taking account of events along the way. "Deficits" do not cause inflation. "Financial crises" do not cause recessions. "Stimulus" does not stimulate the economy.
The Takei link is https://universeodon.com/@georgetakei/110293946202302688
(The link given is a generic link to logging in at mastodon.social.)