Month: December 2013

Writing from the land of tall fir trees, mandatory Pendleton wool shirts, and constant rain, the thoughtful Tim Duy notes that neither he nor the markets believe what the Federal Reserve is currently saying

Tim Duy: On Challenging the Fed: “Bond yields… breach[ed] the three percent mark at the end of last week. Mortgage rates have been pulled along… the sustainability of the housing recovery will again be questioned…. This very much looks like a challenge to the Federal Reserve’s forward guidance….

Continue reading “Tim Duy: What Is the Fed Going to Do?” →

That upstart stripling whippersnapper Evan Soltas poses macroeconomists an interesting puzzle:

Evan Soltas: How Did We Miss the Swiss?:

We have ignored another economy [besides Japan] that has spent decades with extraordinarily and persistently low nominal growth and overnight interest rates: Switzerland… [where] NGDP growth has averaged 2.7 percent per year and CPI inflation has averaged 0.7 percent per year…. The Swiss National Bank’s monetary policy instrument, the 3-month LIBOR in Swiss francs… hasn’t been lifted above 3.5 percent in… fifteen years… has been perpetually at or just above the zero lower bound.

Continue reading “Evan Soltas Says That Swiss Monetary Policy Is in Need of More Attention: Monday Focus (December 30, 2013)” →

Must-Reads:

1. James Pethokoukis: 3 key ideas from what will be one of the most important books of 2014: “Here is an excerpt of that excerpt…. ‘We’re living in a time of astonishing progress with digital technologies—those that have computer hardware, software, and networks at their core…. Just as it took generations to improve the steam engine to the point that it could power the Industrial Revolution, it’s also taken time to refine our digital engines…. The transformations brought about… will be profoundly beneficial…. [But] digitization is going to… leave behind some people, perhaps even a lot of people, as it races ahead…. There’s never been a better time to be a worker with special skills or the right education… there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.'”

2. Paul Krugman: The Year of the Weasel: Just a brief thought about what didn’t happen in 2013, and what did. What didn’t happen was the same as what didn’t happen in 2012, or 2011, or 2010. Inflation didn’t take off; bond vigilantes didn’t turn America (or any nation that borrows in its own currency) into Greece, Greece I tell you. What did happen was a significant change in what the usual suspects–the people who have been predicting soaring inflation and interest rates, year after year–were saying. Did they admit having been wrong? No, of course not. But their excuses shifted. Through 2011 and even through 2012, it was still mainly “just you wait!”–inflation was coming any day now, or maybe it was already here but sinister statisticians were faking the numbers. In 2013, however, it became “I never said that!”–declarations that they only said that inflation was a risk, not that it would necessarily happen, so the failure of inflation to materialize was no big deal.

   “This is, I’d argue, a significant development, because it gives us a new window into the nature of the disagreement. As late as last year you could view this as a legitimate contest between rival models. But we’ve now seen that one side of the debate not only refuses to take evidence into account, but tries to dodge personal responsibility for getting it wrong. This has gone from a test of ideas to a test of character, and a lot of people failed.”

3. Tyler Cowen: Her: “As I tend to find Jonze’s work contrived I didn’t expect much, but I was bowled over by what is a must-see movie for anyone interested in tech, or the social sciences, or–for that matter–cinema. Two of its starting premises are a) we as humans now face shadow prices which lead us to deemphasize the physical world of things and live in a world of information, and b) if we are going to have AI, which consumes real resources, which Darwinian principles will govern what kinds of personal assistants survive or do not?  Will they enslave us, will they be our dogs, our friends, our trading partners, or something else altogether?  This movie is the single best place to start on that question.”

Continue reading “Things to Read at Lunchtime on December 29, 2013” →

Tyler Cowen has seen the thing, and writes:

Tyler Cowen: Her: “As I tend to find Jonze’s work contrived I didn’t expect much, but I was bowled over by what is a must-see movie for anyone interested in tech, or the social sciences, or–for that matter–cinema.

Two of its starting premises are a) we as humans now face shadow prices which lead us to deemphasize the physical world of things and live in a world of information, and b) if we are going to have AI, which consumes real resources, which Darwinian principles will govern what kinds of personal assistants survive or do not?  Will they enslave us, will they be our dogs, our friends, our trading partners, or something else altogether?  This movie is the single best place to start on that question.

Continue reading “Lunchtime Must-Watch: Spike Jonze’s “Her”” →

James Pethokoukis: 3 key ideas from what will be one of the most important books of 2014:

Here is an excerpt of that excerpt….

We’re living in a time of astonishing progress with digital technologies—those that have computer hardware, software, and networks at their core…. Just as it took generations to improve the steam engine to the point that it could power the Industrial Revolution, it’s also taken time to refine our digital engines…. The transformations brought about… will be profoundly beneficial…. [But] digitization is going to… leave behind some people, perhaps even a lot of people, as it races ahead…. There’s never been a better time to be a worker with special skills or the right education… there’s never been a worse time to be a worker with only ‘ordinary’ skills and abilities to offer, because computers, robots, and other digital technologies are acquiring these skills and abilities at an extraordinary rate.

In Race Against the Machine, Brynjolfsson and McAfee offered a numbers of ideas — there are even more in the new book — to help carbon-based lifeforms compete. Among them: 1) pay teachers more so better students want to become teachers; 2) hold teachers more accountable for performance by eliminating tenure; 3) encourage more high-skill immigration; 4) create special visas for entrepreneurs; 5) teach entrepreneurship throughout higher education; 6) create a database of “startup-in-a-box” templates; 7) lower governmental barriers to starting a business; 8) upgrade the nation’s transportation, energy, and communication infrastructure; 9) increase government funding for basic research such as that carried out by DARPA and NIH; 10) resist efforts to regulate hiring and firing; 11) lower payroll taxes; 12) decouple benefits, such as health insurance, from jobs; 13) don’t rush to regulate new innovation business structures such as crowdsourcing; 14) eliminate inefficient, crony capitalist distortions such as the home mortgage deduction and the Too Big To Fail big bank subsidy; 15) shorten copyright periods and increase the flexibility of fair use.

Here is the key thing: Even if you  are a technopessimist, that list of policy ideas makes pretty good sense anyway as way of boosting growth and helping more Americans flourish and prosper.

Paul Krugman: The Year of the Weasel:

Just a brief thought about what didn’t happen in 2013, and what did. What didn’t happen was the same as what didn’t happen in 2012, or 2011, or 2010. Inflation didn’t take off; bond vigilantes didn’t turn America (or any nation that borrows in its own currency) into Greece, Greece I tell you. What did happen was a significant change in what the usual suspects–the people who have been predicting soaring inflation and interest rates, year after year–were saying. Did they admit having been wrong? No, of course not. But their excuses shifted. Through 2011 and even through 2012, it was still mainly “just you wait!”–inflation was coming any day now, or maybe it was already here but sinister statisticians were faking the numbers. In 2013, however, it became “I never said that!”–declarations that they only said that inflation was a risk, not that it would necessarily happen, so the failure of inflation to materialize was no big deal.

This is, I’d argue, a significant development, because it gives us a new window into the nature of the disagreement. As late as last year you could view this as a legitimate contest between rival models. But we’ve now seen that one side of the debate not only refuses to take evidence into account, but tries to dodge personal responsibility for getting it wrong. This has gone from a test of ideas to a test of character, and a lot of people failed.

Underpinning the value of gold is that if all else fails you can use it to make pretty things. Underpinning the value of the dollar is a combination of (a) the fact that you can use them to pay your taxes to the U.S. government, and (b) that the Federal Reserve is a potential dollar sink and has promised to buy them back and extinguish them if their real value starts to sink at (much) more than 2%/year (yes, I know).

Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve’s role as actual dollar source, and its commitment not to allow deflation to happen.

Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function… until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is… what, exactly?

At the moment, it’s only a $10 billion bubble–or, if you are going to convince me that it is not a bubble, you are going to have to find me a market player willing to become a bitcoin sink…

Timothy B. Lee has smart things to say:

Continue reading “Watching Bitcoin, Dogecoin, Etc…” →

Must-Reads:

1. Wonkblog: Emily Oster’s graph of the year: Why is the U.S. falling behind in life expectancy?: Emily Oster: “Amidst all the focus on health insurance, I think it’s crucial not to lose focus on the fact that–insurance or not–the United States is lagging behind in health status. This chart–from a broader report–demonstrates not only how low our life expectancy is relative to other developed countries, but also how far we have fallen even in the last 30 years. Why are we not realizing the same gains that countries with comparable incomes are?”

2. Menzie Chinn: British Economic Triumphalism in Perspective: “Prime Minister Osborne has lauded the recent UK growth numbers as validation for the policy of austerity (recently relaxed, although he doesn’t mention that). Paul Krugman refers to the the Three Stooges in explaining the deficiencies of this logic. And Richard Portes (head of CEPR) states: ‘The current policies have been disastrous…. My view is pretty much the view I had a little over three years ago when I said the austerity program would be a disaster. And it has been. It has been responsible for the painfully slow recovery.’ So who is right? Well, I think it useful to compare the US and the UK. The former embarked upon a policy of fiscal stimulus, and then retrenchment, but nothing compared to the retrenchment implemented in the latter. And in the US, per capita GDP growth was much more rapid than in the UK.”

3. George Zornick: The dark money in climate change: “Robert J. Brulle… [finds] that climate-denial money has largely been driven underground to dark-money sources. About 75 percent… untraceable, primarily via conservative foundations and shadowy tax-exempt groups that obscure their funding sources…. ExxonMobil and Koch Industries… have withdrawn their publicly traceable funding in recent years, and that withdrawal tracked closely with an increase in untraceable funding. You don’t have to be a genius to figure out what’s happening there. So why is industry money going underground?… Environmentalists have been able to achieve in the past decade or so is making climate denialism (1) seem increasingly kooky and unfounded, and (2) seem like the efforts of an industry that is protecting itself rather than one that wants an honest debate about the science…. The rush by ExxonMobil and other industry funders to obscure their funding of climate denialism could be a confirmation of those vulnerabilities…. If you force transparency into the system, corporate giving could at least moderate. The trends in climate denial funding suggest again that’s probably the case.”

Continue reading “Things to Read on the Evening of December 27, 2013” →

Wonkblog: Emily Oster’s graph of the year: Why is the U.S. falling behind in life expectancy?:

Emily Oster:

Amidst all the focus on health insurance, I think it’s crucial not to lose focus on the fact that — insurance or not — the United States is lagging behind in health status. This chart — from a broader report — demonstrates not only how low our life expectancy is relative to other developed countries, but also how far we have fallen even in the last 30 years. Why are we not realizing the same gains that countries with comparable incomes are?

Must-Reads:

1. Angus Deaton: US inequality and the Pareto Criterion: “There is much to be said for equality of opportunity, and for not penalizing people for the success that comes from their own hard work. Yet… the United States is in fact not particularly good at actually delivering equal opportunities…. Look at the correlation between earnings of fathers and sons…. In the United States, the correlation is 0.5, which is the highest of the OECD countries and is exceeded only by those of China and a handful of countries where there appears to be the least equality of opportunity. Even if we believe that equality of opportunity is what we want, and don’t care about inequality of outcomes, the two tend to go together, which suggests that inequality itself is a barrier to equal opportunity.”

2. Bob Forester: Daily Kos: I signed up for health insurance, told my GOP Congressman about it, and made the local news: “My healthcare saga began in 2002…. No longer did I have a group plan selected by an employer. I had to shop for my own coverage. At first it was easy…. But each year the dreaded renewal letter arrived, and the premiums increased by leaps and bounds…. But the big shock was yet to come… renewal letter… $756 instead of $463–a staggering 63% increase…. I applied for a very-high-deductible plan that would keep my monthly payment in the $400 range. Given that I was still insured, the insurance folks got a copy of the blood test, which they proceeded to search line by line…. Out of two pages of data, there was a single thyroid reading was outside of “normal” range (side note: there’s nothing wrong with my thyroid; it was simply their excuse to make me pay that outrageous premium). They’d found their so-called preexisting condition, and denied me access to the new plan with the lower premium. With the help of my doctor, who wrote a letter on my behalf, I appealed…. ‘It wasn’t a government bureaucrat that came between me and my doctor; it was an insurance-company bureaucrat.’…”

3. Erik Brynjolfsson and Andrew McAfee: The Second Machine Age: “Now comes the second machine age. Computers and one digital advances are doing for mental power… what the steam engine and its descendants did for muscle power… to blow past previous limitations…. Whether or not the new machine age bends the curve as dramatically as Watt’s steam engine, it is a very big deal indeed…”

Continue reading “Things to Read on the Evening of December 26, 2013” →