Over at Project Syndicate: What Failed in 2008?

Over at Project Syndicate: For a while the best book on the macroeconomic catastrophe that struck the North Atlantic starting in 2007 was Gary Gorton's Slapped by the Invisible Hand. Them for a while the best book was Alan Blinder's After the Music Stopped. Now these have been superseded by two: the extremely-observant sensible Tory Martin Wolf's The Shifts and the Shocks; and my friend, patron, teacher, and (until the last reshuffle) office neighbor Barry Eichengreen 's Hall of Mirrors. Read and grasp the messages... More >

The Macroeconomic Situation and Macroeconomic Policy: Insiders and Outsiders: Focus

Somebody Is Inside an Echo Chamber. But Who? Paul Krugman fears that somebody is trapped inside an echo chamber, hearing only things that confirm what they already believe: Disagreement... over US monetary policy... [between those] very worried that the Fed may be gearing up to raise rates too soon... [and the] sanguine... seems to depend on one thing: whether the economist in question is currently in a policy position.... We don’t have access to different facts; we don’t, in any fundamental sense, have different economic... More >

Macroeconomics: Listening to Reality: A Note from Twitter I Want to Save

.@MikePMoffatt: Things like this have raised and greatly sharpened my estimate of current ZLB fiscal multiplier: http://delong.typepad.com/sdj/2015/01/over-at-equitable-growth-yes-the-past-four-years-are-powerful-evidence-for-the-keynesian-view-of-what-happens-at-the-zero-l.html Since 2007, reality has spoken. Since 2007, reality has raised my estimate of the U.S. fiscal multiplier from 1.5 to 2.5, and sharpened it. Since 2007, reality has raised my estimate of the U.S. debt capacity from 75% of a year’s GDP to >150%. Since 2007, reality has left my very fuzzy estimate that the effects of QE are small unchanged. Now Scott Sumner says 2013-14 a huge... More >

Morning Must-Read: Tim Duy: While We Wait For Yet Another FOMC Statement

Given the inability of the Federal Reserve to attain traction at the ZLB, its current frame of mind--which appears to be doing certainty-equivalence policy--makes no sense to me. Certainty-equivalence is appropriate only with a symmetric loss function and a symmetric ability to compensate for deviations on either side of the target. We do not have either of those. Has there been an explanation of why the Federal Reserve's policy is appropriate given the asymmetry of the loss function and the asymmetry of the control levers... More >

Things to Read on the Afternoon of January 27, 2015

Must- and Shall-Reads: Heather Boushey: On "Capital in the Twenty-First Century": "We... have lived through an era where the presumption is that our society marches always towards greater equality or less discrimination, even if slowly. But if Thomas is right... this era could be at an end... Downton Abbey... no other way for Grantham’s three daughters to maintain their standard of living other than marrying well. So, the show’s first season focuses on whether the eldest daughters would concede to marry her cousin Matthew. If... More >

Afternoon Must-Read: Heather Boushey: On “Capital in the Twenty-First Century”

Heather Boushey: On "Capital in the Twenty-First Century": "We... have lived through an era... ...where the presumption is that our society marches always towards greater equality or less discrimination, even if slowly. But if Thomas is right... this era could be at an end... Downton Abbey... no other way for Grantham’s three daughters to maintain their standard of living other than marrying well. So, the show’s first season focuses on whether the eldest daughters would concede to marry her cousin Matthew. If Thomas is right,... More >

Afternoon Must-Read: Simon Wren-Lewis: Post-Recession Lessons

A generation or two ago, the push for central-bank independence was all about harnessing central banks' credibility as inflation fighters in a context in which it was feared that elected legislators would lean overboard on the excessive spending side. Today, Simon Wren-Lewis calls for transferring not just monetary policy but fiscal policy stabilization authority over to central banks, on the grounds that their technocratic chops are much better for fiscal policy then relying on elected legislators who are the prisoners of ordoliberal ideologies, the belief... More >

Morning Must-Read: Stephanie Lo and Kenneth Rogoff: Secular Stagnation, Debt Overhang, and Other Rationales for Sluggish Growth, Six Years on

I have a very easy time believing that debt overhangs--private, international, and public--can be enormous headwinds and exert substantial drag on growth and recovery. What I cannot understand is how debt can do so without also being an impaired asset to those who hold it. Debt that is painful enough to bear that it discourages enterprise and spending is also debt that may not be collected in the end, and thus debt that sells at a low price and carries a high face interest rate.... More >

Things to Read on the Afternoon of January 26, 2015

Must- and Shall-Reads: Heather Boushey: The leap not taken: Wage growth | Marketplace.org Luke Brinker: "Look no further than Europe's economic mess for a lesson in the folly of austerity..." Jared Bernstein: Technocrats know how to fix the economy. And they did Via Mark Thoma: Francis Saraceno: Who are the Radicals in Europe? Mark Thoma: "Jamie Galbraith in interviewed by Roger Strassburg on the upcoming Greek election and the prospects and consequences of a possible Syriza government"   Nick Bunker: Did Credit Replace Wage Growth... More >