Nighttime Must-Read: Scott Sumner: DeLong on the Mother of All Black Swans

Scott Sumner: Black Swans: “Brad DeLong… is mildly critical of Shiller…

…in almost precisely the same way that I am…. DeLong and I think… the real mystery [is] not so much why stocks were so high in 1929, 2000, and now, but rather why they were so low 90% of the time. I think WWI is a great black swan example, but… I’d like to throw out another possible black swan—1968…. Switching to a permanent fiat system was much more inconceivable to people in the old days than you might imagine…. Even Keynes opposed a pure fiat regime, and viewed these historical examples as sort of pathological cases…. DeLong identifies three periods when stock investors did poorly over the following 10 years—right before WWI, the late 1960s and early 1970s, and the late 1990s. Even today I’m not sure exactly how much of the poor stock market performance of 1968-81 was due to the Great Inflation…. I am confident, however, that moving to a fiat money regime was a black swan for the US 30-year Treasury bond market, and pretty much every other bond market as well.