Things to Read on the Evening of January 19, 2015
Must- and Shall-Reads:
- : “James Tobin often remarked that there are worse things than three percent inflation, and from time to time we have them. Indeed, we just did. In the same vein, there are worse things than sovereign debt defaults, and from time to time we have them too. They are in progress as we meet.”
- : “The [SNB] just wanted to try something different. But I confess that it is a great mystery to me why…. This has to be a major hit to Swiss exports and tourism, leave the SNB with little credibility and negative capital… cause significant financial disruptions… around the world.”
- : Hall of Mirrors: The Great Depression, The Great Recession, and the Uses-and Misuses-of History
- : The Poor People’s Campaign: the little-known protest MLK was planning when he died
- : The Effects of School Spending on Educational and Economic Outcomes: Evidence from School Finance Reforms
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: Will The Fed Take a Dovish Turn Next Week?: “We are heading into the next FOMC meeting with the growing expectation that the Fed will take a dovish turn… global economic turmoil, collapsing oil prices, weak inflation, and a stronger dollar… pointing to rapidly rising downside risks…. Expectations of the first rate hike have been pushed out to the end of this year, seemingly in complete defiance of Fed plans…. [But] kind of a ‘Fed is from Mars, markets are from Venus’ situation…. My takeway is that the Fed sees the timing of the first rate hike as less important than everything that comes after that hike. This will leave them less eager to delay the hike… I suspect they see little chance of damage from that first hike alone…. I don’t see how they can justify raising rates without some reasonable acceleration in wage growth… [but] perhaps… they can justify it on the basis of 25bp won’t hurt anyone ..” -
: The SNB, the Exchange-Rate Peg, and the Interest-Rate ZLB: “[Superior] would have been the continuation of the exchange rate floor…. The old regime, with or without the additional 50bps cut… was viable and superior to the new regime…. Central banks can live with very large balance sheets… diversify… out of euro forex…. There is no ostensible problem with the central bank having to live with becoming an even larger hedge fund/asset manager or Sovereign Wealth Fund…. It may be that the political scrutiny that would come with an even larger balance sheet… was a source of concern…. But such discomfort would seem to be a small price to pay compared to the cost to the nation of a massively overvalued currency, serious deflation and the resulting harmful effects on the real economy…. The second superior alternative would have been to abolish the effective lower bound on the nominal interest rate…. There is little empirical evidence on demurrage for paper currency…. There are no serious arguments against creating a financial system where nominal policy rates can be set with equal ease at -5% as at +5%…. The ELB can be eliminated… by abolishing currency/cash… checkable deposits… credit cards, debit cards and cash-on-a-chip cards… existing and yet-to-be invented e-money… taxing currency, in the spirit of Gesell (1916)… end the fixed exchange rate, currently set at unity, between SNB deposits and cash… encourage the use of the deposit Franc as the numéraire… for price and wage setting…. The good news is that, apart for the reputational damage suffered by the SNB… much of the damage can be undone. The SNB… [could] restore as much of the status quo ante as possible by restoring a floor to the exchange rate of the CHF and the euro (or to the effective exchange rate of the CHF for some suitable basket of currencies)…. No doubt the euros would be galloping in at any floor that is not well below 1.20 CHF per euro, but Switzerland has many skilled asset managers who could invest the rapidly expanding resources of the SNB in a globally diversified portfolio of nominal and real assets. The second damage-limiting option is to abolish the ELB on nominal interest rates as soon as possible… -
(1935): “Today a hope of many years’ standing is in large part fulfilled. The civilization of the past hundred years, with its startling industrial changes, has tended more and more to make life insecure. Young people have come to wonder what would be their lot when they came to old age. The man with a job has wondered how long the job would last…” -
: Why Republicans Can’t Replace ObamaCare: “Cato’s Michael Cannon scolds the right for getting outplayed, again and again, on health care. ‘Conservatives are falling into the same trap… conceding… that the government should be trying to provide everybody with health insurance…. Once you accept those premises, all of your solutions look like the left’s solutions.’… Cannon is right. The basic project of health reform, at least as it’s been understood in American politics in recent decades, involves the government giving money to poor people so they can buy health-care insurance. That money needs to come from somewhere…. The problem for conservatives is that making sure poor people have health insurance is politically popular…. Philip Klein illuminates an inconvenient truth: upheaval in the health-care system typically makes for terrible politics…. This is the central problem for conservative health reformers… the party doesn’t want to make the sacrifices necessary to unite behind an alternative to Obamacare, much less actually pass and implement it…. Klein identifies three schools of conservative thought on what to do next: the Reform School… the Replace School… repeal Obamacare and replace it with Obamacare-lite; and the Restart School, which… rejects the idea that the government should be… expand[ing] access to health care…. Klein’s book is… far and away the clearest, most detailed look at conservative health-policy thinking…. But… the important cleavage… is between those in the party who want to prioritize health reform and those who don’t…. And that’s really the problem for conservative health reformers. For all the plans floating around, there’s little evidence Republicans care enough about health reform to pay its cost.”
Should Be Aware of:
- : Review of Roger Moorhouse: ‘The Devils’ Alliance: Hitler’s Pact With Stalin, 1939-41′
- : The New Compassionate Conservatism and Trickle-Down Economics
- Snowdonia Cheese Company
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: The Race Card, Circa 1871: “Jon Chait has an interesting column… Stephen Budiansky… ‘waving the bloody shirt’ wasn’t functionally a smear against post-Civil War Democrats, turning every debate about post-war issues into a re-commencement of old hostilities. Rather…. ‘In 1871, Klansmen in Mississippi accosted Allen Huggins, a northerner who had helped educate freed slaves, thrashed him within an inch of his life, and threatened to kill him…. The bloody shirt was Huggins’s, allegedly waved by Republican Benjamin Butler on the House floor… not the relic of an ancient feud but evidence of an ongoing epidemic of rampant violence.’… It was, right from the start, the double-reverse ‘bloody shirt’ gambit. False flag. An attempt to generate a smokescreen to conceal present violence, by falsely alleging that the people drawing attention to present violence were merely trying to inflame people regarding past violence…. Think of how weird it is that the Democratic attitude, which evolved ‘waving the bloody shirt’ as a rhetorical defense mechanism, was probably something like this: ‘I do not oppose Reconstruction, but of course that does not mean that I do oppose the near-murder of any carpetbagger who would educate former slaves!’ Chait’s point is that, in this case, a propaganda talking point won, becoming proverbial historical wisdom…” -
* : A Defense of Disruption as a Cultural Phenomenon: “Wieseltier’s remark…. Isn’t it possible both to resent living in a universe of content-driven drones, mindlessly copying and pasting articles and co-opting narratives, but still be excited about the democratization of ideas?… Disruption is not the same thing as nihilism. Moreover, nihilism wasn’t invented in the 21st century…”