Understanding Bernanke: So just why was he not able to get the Fed to act in a more Bagehot way sooner and not in an anti-Bagehot way in June 2010 when the Fed let inflation expectations again fall well under target?
"and not in an anti-Bagehot way in June 2010 when the Fed let inflation expectations again fall well under target?"
Because the 2% 'target' is ceiling - they got inflation under 2%, this is, the promised land of the inflation hawks, and what do you know, the economic performance sucks. If you aren't rich. If you're rich c'est FANTASTIQUE!
But 2% was NOT supposed to be a ceiling. Bernanke knew why, with some downwardly sticky prices, zero is not the optimal rate of inflation. I don't think that inflation 2%< is income maximizing even for the rich.
You're right, the 2% target isn't supposed to be a ceiling, but if you index accumulated core inflation over 10 years (2009-2019) it averages about 1.44% per year. Additionally, Brad posted the Vice FOMC chair's speech to the business guys in 2015, it was 18 paragraphs long, the first fifteen paragraphs were about restraining inflation, one paragraph was about unemployment, and the final two paragraphs were about restraining inflation. That approach echoed everything emitted from the Fed from 2010 to 2020, including Powell's moves to jack up the interest rate in 2019 because everyone thought the US was at full employment. Ergo, the Fed is operating on the mentality that the ECB has as an official legal obligation: keep inflation to 2%.
"I don't think that inflation 2%< is income maximizing even for the rich."
Nope. It isn't! And yet every time the Democrats acquire the trifecta, the constant chatter from the business sector and the right is all about how we're going to have massive inflation, bankruptcy and hyperinflation, the system will collapse, cannibal cats will eat gay dogs in the street, and blood will run everywhere. (Zombies, vampires, death bikers, the return of Jesus, etc. etc.)
If you understand that absent supply shocks (and in the case of the pandemic, fast restart friction), inflation is wages, then it becomes obvious why business types would be extremely committed to keeping wages low, given that 'cutting costs' (NOT expansion!) has been the corporate mantra since the 80's. Aside from that, when you are a billionaire (and even more so on paper), you cannot ever spend all the money. Perks like status and 'respect' and having your employees kiss your ass become the highest priority. (They wouldn't be having a weirdo rich guy dick-sizing contest over building massive, incredibly ugly, and barely sailable super-yachts if it were some other way.)
It's not about the economics, it's entirely about ideology. Power. Control. Status.
The usual suspects keep saying they're keen on driving inflation (AHEM!) below target, which requires (wait for it!) higher unemployment for years, which would certainly keep wages down.
Understanding Trump. I agree as an insider message. Progressives should try as much as possible not to reinforce the idea* that "we are going this TO you deplorables FOR them." But that really just means arguing that Progressive policies are good for "everybody" and actually pushing those policies.
* Said idea did not just unfortunately bubble up to the top of the political froth. The entire Conversative-Media Complex has been cultivating it for decades.
Authers: Someone should have sat down and patiently explained to Ms Truss, et.at. that a repeat of the Republicans "Tax Cuts for the Rich and Deficits Act of 2017" will fail not just in the long run but in the short run if a) ones country does not have the worlds reserve currency, b) one's central bank was already dealing with inflation and c) giving money to rich people has fallen further out of favor since 2017.
Dani Rodrik: An Industrial Policy for Good Jobs: He wants to sound positive about "industrial policy" but is smart enough not to actually favor it. Is there any path to more "good jobs" than more investment (including in people's human capital) to raise marginal products of labor?
Climate is well NOT emphasized. It's a very special [yes hugely important, but not conceptually different] case of the "neoliberal" turn foundering on the shoals of taxes. Intellectually dealing with climate change is Econ 101 easy, but getting first elites and then the public to see the logic of a TAX on net CO2 emissions is hard. And the fact that actual real life-life "Hayekians" are not beating the drums for the tax is quite telling. Maybe they were never Hayekians at all, just ever educated chamber of commerce Republicans.
"An effective book has to tell a narrative, and a narrative needs a beginning, a middle, and AN END."
Sure. But there is a major thread about coal, oil and oil wars, and the energy surplus that gives you lots of economic growth. I know the Great Moderation is the revealed utopia, but it sure is interesting that correlation is not causation, and also that two periods of rapid American economic expansion coincide the eras of cheap oil: 1945-1973 and 1986-2006. (And the best economic performance of the post-GFC period was post-2014 when the oil price collapsed.)
"It is indeed true that, as my friend Yingyi Qian says, come 2100 the story that everyone will see as central starts in 1976 with the accession of Deng Xiaoping and is the story of the Chinese 21st century. But that, again, is a different story."
Is it though?
elm
this seems to be an article of faith but i don't see the underlying elements to make that work
You have admirably championed the resurrection of the letters thorn and eth. You have correctly labelled the state ruled by Putin as Muscovy. But you disappoint me with respect to energy. Energy is a conserved quantity! Let us not speak of energy shortages or energy crises; we ought to name our dependency plainly: it is low entropy.
Agree with Davis. Tooze's point around climate centrality is silly - did he depict WWI or the 2008 crash as climate catastrophes? But within his point is another - one that your cutting room floor points to as well: energy centrality. You wanted to write an economic history, not a geopolitical one, and a contingent history, not a "structural" one: all fair enough, but maybe the result is still a little too light on oil.
Full disclosure: I probably wouldn't have been sensible to this point at all had I not been reading Helen Thompson's 'Disorder' right before I picked up STU. You don't have to buy Thompson's whole argument to be struck by the fact that outside of US and Russia, no global north decision-maker (after, say, 1914?) could operate without regard to access to energy. Acknowledging that constraint (whose violation by political leaders, often triggers Polanyian-rights-type reactions) may in fact make an account of the 20th century more "economic", not less.
But heck with all that - more interesting I think are the differences between Tooze's and your accounts of the 2008 crash and its aftermath. I'll be parsing that one out for a while.
The way I thought of it: I had 20 industries I wanted to cover. Do I do 1 paragraph on each, or 10 paragraphs on 2? I decided on the second, and picked electricity and semiconductors...
Understanding Bernanke: So just why was he not able to get the Fed to act in a more Bagehot way sooner and not in an anti-Bagehot way in June 2010 when the Fed let inflation expectations again fall well under target?
"and not in an anti-Bagehot way in June 2010 when the Fed let inflation expectations again fall well under target?"
Because the 2% 'target' is ceiling - they got inflation under 2%, this is, the promised land of the inflation hawks, and what do you know, the economic performance sucks. If you aren't rich. If you're rich c'est FANTASTIQUE!
elm
bon appetit
But 2% was NOT supposed to be a ceiling. Bernanke knew why, with some downwardly sticky prices, zero is not the optimal rate of inflation. I don't think that inflation 2%< is income maximizing even for the rich.
You're right, the 2% target isn't supposed to be a ceiling, but if you index accumulated core inflation over 10 years (2009-2019) it averages about 1.44% per year. Additionally, Brad posted the Vice FOMC chair's speech to the business guys in 2015, it was 18 paragraphs long, the first fifteen paragraphs were about restraining inflation, one paragraph was about unemployment, and the final two paragraphs were about restraining inflation. That approach echoed everything emitted from the Fed from 2010 to 2020, including Powell's moves to jack up the interest rate in 2019 because everyone thought the US was at full employment. Ergo, the Fed is operating on the mentality that the ECB has as an official legal obligation: keep inflation to 2%.
"I don't think that inflation 2%< is income maximizing even for the rich."
Nope. It isn't! And yet every time the Democrats acquire the trifecta, the constant chatter from the business sector and the right is all about how we're going to have massive inflation, bankruptcy and hyperinflation, the system will collapse, cannibal cats will eat gay dogs in the street, and blood will run everywhere. (Zombies, vampires, death bikers, the return of Jesus, etc. etc.)
If you understand that absent supply shocks (and in the case of the pandemic, fast restart friction), inflation is wages, then it becomes obvious why business types would be extremely committed to keeping wages low, given that 'cutting costs' (NOT expansion!) has been the corporate mantra since the 80's. Aside from that, when you are a billionaire (and even more so on paper), you cannot ever spend all the money. Perks like status and 'respect' and having your employees kiss your ass become the highest priority. (They wouldn't be having a weirdo rich guy dick-sizing contest over building massive, incredibly ugly, and barely sailable super-yachts if it were some other way.)
It's not about the economics, it's entirely about ideology. Power. Control. Status.
The usual suspects keep saying they're keen on driving inflation (AHEM!) below target, which requires (wait for it!) higher unemployment for years, which would certainly keep wages down.
elm
the fix, they are wishing it to be in
Yes. It would help if macro courses would help folk understand inflation optimization (although it really is a micro concept).
Many thanks to Gary San Diego for empirical evidence that I am not the only subscriber to this Substack. :)
Understanding Trump. I agree as an insider message. Progressives should try as much as possible not to reinforce the idea* that "we are going this TO you deplorables FOR them." But that really just means arguing that Progressive policies are good for "everybody" and actually pushing those policies.
* Said idea did not just unfortunately bubble up to the top of the political froth. The entire Conversative-Media Complex has been cultivating it for decades.
Authers: Someone should have sat down and patiently explained to Ms Truss, et.at. that a repeat of the Republicans "Tax Cuts for the Rich and Deficits Act of 2017" will fail not just in the long run but in the short run if a) ones country does not have the worlds reserve currency, b) one's central bank was already dealing with inflation and c) giving money to rich people has fallen further out of favor since 2017.
Dani Rodrik: An Industrial Policy for Good Jobs: He wants to sound positive about "industrial policy" but is smart enough not to actually favor it. Is there any path to more "good jobs" than more investment (including in people's human capital) to raise marginal products of labor?
Climate is well NOT emphasized. It's a very special [yes hugely important, but not conceptually different] case of the "neoliberal" turn foundering on the shoals of taxes. Intellectually dealing with climate change is Econ 101 easy, but getting first elites and then the public to see the logic of a TAX on net CO2 emissions is hard. And the fact that actual real life-life "Hayekians" are not beating the drums for the tax is quite telling. Maybe they were never Hayekians at all, just ever educated chamber of commerce Republicans.
"An effective book has to tell a narrative, and a narrative needs a beginning, a middle, and AN END."
Sure. But there is a major thread about coal, oil and oil wars, and the energy surplus that gives you lots of economic growth. I know the Great Moderation is the revealed utopia, but it sure is interesting that correlation is not causation, and also that two periods of rapid American economic expansion coincide the eras of cheap oil: 1945-1973 and 1986-2006. (And the best economic performance of the post-GFC period was post-2014 when the oil price collapsed.)
"It is indeed true that, as my friend Yingyi Qian says, come 2100 the story that everyone will see as central starts in 1976 with the accession of Deng Xiaoping and is the story of the Chinese 21st century. But that, again, is a different story."
Is it though?
elm
this seems to be an article of faith but i don't see the underlying elements to make that work
You have admirably championed the resurrection of the letters thorn and eth. You have correctly labelled the state ruled by Putin as Muscovy. But you disappoint me with respect to energy. Energy is a conserved quantity! Let us not speak of energy shortages or energy crises; we ought to name our dependency plainly: it is low entropy.
Touché...
Re Trimble: is Prof. DeLong a secret gear head?
Agree with Davis. Tooze's point around climate centrality is silly - did he depict WWI or the 2008 crash as climate catastrophes? But within his point is another - one that your cutting room floor points to as well: energy centrality. You wanted to write an economic history, not a geopolitical one, and a contingent history, not a "structural" one: all fair enough, but maybe the result is still a little too light on oil.
Full disclosure: I probably wouldn't have been sensible to this point at all had I not been reading Helen Thompson's 'Disorder' right before I picked up STU. You don't have to buy Thompson's whole argument to be struck by the fact that outside of US and Russia, no global north decision-maker (after, say, 1914?) could operate without regard to access to energy. Acknowledging that constraint (whose violation by political leaders, often triggers Polanyian-rights-type reactions) may in fact make an account of the 20th century more "economic", not less.
But heck with all that - more interesting I think are the differences between Tooze's and your accounts of the 2008 crash and its aftermath. I'll be parsing that one out for a while.
The way I thought of it: I had 20 industries I wanted to cover. Do I do 1 paragraph on each, or 10 paragraphs on 2? I decided on the second, and picked electricity and semiconductors...