What do we think of the Federal Reserve’s doing a 25-bp policy-rate reduction in June?; Nilay Patel turns SEO into an art form; the distribution of world manufacturing; BREXIT effects on UK video...
Dr. Delong, I think part of the unstated disagreement here has to do with the serial correlation of policy rate changes. It need not be high, but it is in fact quite hight, because the Fed assigns a PR cost to directional changes in the path of the funds rate. It is part of the political environment, broadly taken, in which they operate. It has nothing to do with the intellectual case for attenuation. It is entirely PR, and it does impose a cost measured in the lost function. I think that cost is low, but I think it is fun to identify what is actually going on here.
Re Brexit being "the 3rd rail" of British politics - I can infer that Starmer *believes* that for myself. I would have appreciated some analysis about whether this is really true and why. Is it really the case that Labour will win more seats by supporting Brexit than opposing it? And how can Starmer hope to lead a successful administration if he ties himself to an economically losing policy? Neither Sunak nor Starmer have won a general election yet, so it's not like they are proven political geniuses.
Kim: I never could figure out what Hirschman could mean in practice when I was studying development in 1966 at U Michigan and I have an equally clear idea of what Kim recommends now.
Brexit: As bad as it was to have called the frigging referendum, and his milktoast campaign to stay, Cameron's worst, most cowardly, decision was to resign instead of taking responsibility for his errors. He could have, should have, negotiated and agreement that preserved virtually all of the the freedom of movement of goods services and people. If the English really WANTED less influence over the rules governing trade, they could have had it w/o damaging the UK economy.
Manufacturing economies: Interesting that the TPP countries shown exactly equal Chinese VA.
The Sanders-Warren wing of the Democratic party have a lot to answer for, which is not to excuse Clinton and Biden for not just telling them to go jump in a lake. Do we not rightly excoriate Republicans for falling in with Trump? Same principle for Democrats with Sanders-Warren.
"What do we think of the Federal Reserve’s doing a 25-bp policy-rate reduction in June?"
6 months too late.
If they had they might tick back up by 25bp
"You cannot effectively stimulate the economy if you land at the zero interest-rate lower bound."
Categorically untrue" The Fed can just buy something else: longer term notes, go to zero (or lower) IOR, or foreign exchange, or that Trillionth note that the Treasury should have been issuing. There is an expression in Spanish: "Quiero, puedo y no me da meido!" <I want to, I can, and and I'm not afraid to do if." Any time the Fed wants to inflate, it can if it's not afraid.
I do not understand the "forbearance" remark. The Fed delayed touching the EFFR (because it has not so singled in advance?) from September 2021 when the TIPS rose above target until March 2022. Less delay and it wod not have had to go so high so fast.
Nick Rowe was one of those people who used to argue that central banks ought to target the price level, not the rate at which the price level increases. And while he had a respectable argument in support of this view - a contract is a contract! - it occurs to me that if we were following this program, we would now have to *raise* rates to goose disinflation, very likely inducing a recession. Given that the economy is doing fine without this, I am "revising my priors" against price level targeting. Supreme Fed responsibility lies with the economy, not some farcical morality play!
"If the world can’t even get food to starving children, how can it come together to defeat climate change?" Well obviously because almost all of the places with starving children are active war zones. Even altruistic people are reluctant to work in a war zone where they might be killed or kidnapped. Also rival militias and armies tend to use food as a weapon. And as for climate change, it's too late to defeat it. The best we can hope for is mitigation in order to keep climate change from defeating us.
Dr. Delong, I think part of the unstated disagreement here has to do with the serial correlation of policy rate changes. It need not be high, but it is in fact quite hight, because the Fed assigns a PR cost to directional changes in the path of the funds rate. It is part of the political environment, broadly taken, in which they operate. It has nothing to do with the intellectual case for attenuation. It is entirely PR, and it does impose a cost measured in the lost function. I think that cost is low, but I think it is fun to identify what is actually going on here.
There was no error by your lights, and I agree with your lights. But there was an error by their lights because they forecasted very poorly.
Re Brexit being "the 3rd rail" of British politics - I can infer that Starmer *believes* that for myself. I would have appreciated some analysis about whether this is really true and why. Is it really the case that Labour will win more seats by supporting Brexit than opposing it? And how can Starmer hope to lead a successful administration if he ties himself to an economically losing policy? Neither Sunak nor Starmer have won a general election yet, so it's not like they are proven political geniuses.
Kim: I never could figure out what Hirschman could mean in practice when I was studying development in 1966 at U Michigan and I have an equally clear idea of what Kim recommends now.
"If the world can’t even get food to starving children, how can it come together to defeat climate change and reorient the global economy?"
Indeed. The latter is in their narrowly economic self interest; the former is not.
Brexit: As bad as it was to have called the frigging referendum, and his milktoast campaign to stay, Cameron's worst, most cowardly, decision was to resign instead of taking responsibility for his errors. He could have, should have, negotiated and agreement that preserved virtually all of the the freedom of movement of goods services and people. If the English really WANTED less influence over the rules governing trade, they could have had it w/o damaging the UK economy.
Manufacturing economies: Interesting that the TPP countries shown exactly equal Chinese VA.
The Sanders-Warren wing of the Democratic party have a lot to answer for, which is not to excuse Clinton and Biden for not just telling them to go jump in a lake. Do we not rightly excoriate Republicans for falling in with Trump? Same principle for Democrats with Sanders-Warren.
"What do we think of the Federal Reserve’s doing a 25-bp policy-rate reduction in June?"
6 months too late.
If they had they might tick back up by 25bp
"You cannot effectively stimulate the economy if you land at the zero interest-rate lower bound."
Categorically untrue" The Fed can just buy something else: longer term notes, go to zero (or lower) IOR, or foreign exchange, or that Trillionth note that the Treasury should have been issuing. There is an expression in Spanish: "Quiero, puedo y no me da meido!" <I want to, I can, and and I'm not afraid to do if." Any time the Fed wants to inflate, it can if it's not afraid.
I do not understand the "forbearance" remark. The Fed delayed touching the EFFR (because it has not so singled in advance?) from September 2021 when the TIPS rose above target until March 2022. Less delay and it wod not have had to go so high so fast.
Nick Rowe was one of those people who used to argue that central banks ought to target the price level, not the rate at which the price level increases. And while he had a respectable argument in support of this view - a contract is a contract! - it occurs to me that if we were following this program, we would now have to *raise* rates to goose disinflation, very likely inducing a recession. Given that the economy is doing fine without this, I am "revising my priors" against price level targeting. Supreme Fed responsibility lies with the economy, not some farcical morality play!
"If the world can’t even get food to starving children, how can it come together to defeat climate change?" Well obviously because almost all of the places with starving children are active war zones. Even altruistic people are reluctant to work in a war zone where they might be killed or kidnapped. Also rival militias and armies tend to use food as a weapon. And as for climate change, it's too late to defeat it. The best we can hope for is mitigation in order to keep climate change from defeating us.