Things to Read at Lunchtime on October 30, 2014
Must- and Shall-Reads:
- : It’s Essential the Federal Reserve Discusses Inequality | Next New Deal
- : Stress tests alone will not bring the eurozone back to health
- : Quantitative Easing Is About to End. Here’s What It Did, in Charts
- (2011): How Rich Countries
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: In praise of Macroeconomists (or at Least One of Them)): “One of the architects of that macroeconomic mainstream is Lars Svensson… key papers… maths and rational expectations… member of Sweden’s equivalent of the Monetary Policy Committee from 2007 to 2013…. Svensson… argued that there was still plenty of slack in the economy, and raising rates would be deflationary, so that inflation would fall well below the central bank’s target of 2%. By the end of 2012 inflation had indeed fallen to zero, and since then monthly inflation has more often been negative than positive. It was -0.4% in September. This week the Swedish central bank lowered their interest rate to zero…. Deviating from what mainstream macroeconomists in general advocate (and what one in particular recommended) has proved a costly mistake. (Svensson estimates it has cost 60,000 jobs.)… I am certainly not claiming that mainstream macroeconomics is without fault, as regular readers will know (e.g.) However it is important to recognise the achievements of macroeconomics as well as its faults. If we fail to do that, then central banks can start doing foolish things, with large costs in terms of the welfare of its country’s citizens…” -
Emmanuel Saez and Laura Tyson: Income Inequality in the Twenty-First Century:
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: Yellen Mentions Inequality; Right Scandalized: “Even the American Enterprise Institute’s Michael Strain, a moderate, wrote that Yellen is now ‘in danger of becoming a partisan hack.’… The parties don’t merely disagree about the merits of inequality, they disagree about the merits of even acknowledging it…. Remember Mitt Romney conceding that inequality should only be discussed in ‘quiet rooms’?… Merely by stating facts about inequality in public, even without taking a stand on it, Yellen has placed herself on one side of a partisan divide. It’s like saying ‘Jehovah.’ What Strain does not mention is that Yellen is hardly alone among Federal Reserve chairs…. Hardly a week went by without Greenspan interjecting himself into the political debate. And Greenspan, a former follower of Ayn Rand with staunchly conservative views, had none of Yellen’s careful reserve…. Is the new rule here that, starting now, the Federal Reserve chair has to stay completely out of partisan politics? Or is the rule that they need to stay out of politics unless they’re conservative?” -
: Why the Fed Is Giving Up too Soon on the Economy: “Two years and $1.7 trillion later, the Fed’s latest round of bond-buying, or QE3, is officially over. What did it get us?… The best answer is what it didn’t get us: a recession in 2013…. ‘Fiscal cliff’, ‘sequester’, and ‘debt ceiling’ might be hazy memories from a time when [the Republican House] Congress[ional Caucus] was doing its most to sabotage the recovery, so here’s a refresher…. There’s been an awful lot of austerity the last few years. Enough that the economy should have slowed down quite a bit…. But that’s not what happened…. QE… is the Fed’s way of printing its money where its mouth is when it says rates will stay low for a long time. That’s why, as economist Michael Woodford argued, QE works better when it’s used with forward guidance that makes the Fed’s promises about future policy more explicit. The question, then, is what message the Fed is sending now…” -
: Fed Critics Have Been Wrong About QE’s Most Ill Effect: “In an open letter to former Federal Reserve Chairman Ben Bernanke in 2010, a group of prominent academics and hedge fund managers urged the central bank to stop its bond purchases known as quantitative easing…. With the Fed set to end its bond-purchase program today, it is clear those warnings were wrong…. The critics also argued the QE programs distort financial markets. It is hard to prove or disprove that point. Stock market price-to-earnings ratios look stretched by some measures, but not so stretched by others. Junk bond and leveraged loan issuance has taken off, but corporate balance sheets relatively healthy…. But it is easy to see what didn’t happen. Inflation hasn’t taken off and there has been no currency debasement. Perhaps it will happen someday, but the Fed has been experimenting with QE since 2009 and it clearly hasn’t happened yet. At some point, you need to declare the debate over…” -
: Don’t Let Anyone Blame Single Mothers for Economic Inequality: “Conservatives… aren’t… comfy discussing… skyrocketing CEO pay and Wall Street lucre…. They are, however, extremely at home talking about… single mothers…. In that vein, the American Enterprise Institute has released a new report…. I’m… skeptical… turn[ing] the inequality debate toward single mothers and absent fathers…. As Tim Noah wrote in Slate years ago, the biggest changes in American family structure took place in the ’70s and ’80s, and they help explain why, for instance, the ratio between the 90th percentile of earners and 10th percentile is higher than it was 30 years ago. But the shift away from two-parent households doesn’t really factor into the concentration of wealth among the 1 percent. And the rise of the 1 percent, and the 0.1 percent for that matter, is the real story when it comes to how income inequality is evolving today…” -
: When Banks Aren’t The Problem – NYTimes.com: “Sometimes it seems to me as if economists and policymakers have spent much of the past six years slowly, stumblingly figuring out stuff they would already have known if they had read my 1998 Brookings Paper (pdf) on Japan’s liquidity trap…. Huge confusion about whether Ricardian equivalence makes fiscal policy ineffective, vast amazement that increases in the monetary base haven’t led to big increases in the broader money supply… and… here we go with another: the role of troubled banks…. In the 90s it was conventional wisdom that Japan’s zombie banks were the problem, and that once they were fixed all would be well. But I took a hard look at the logic and evidence for that proposition (pp. 174-177), and it just didn’t hold up…. It has been really frustrating to watch so many people reinvent fallacies that were thoroughly refuted long ago…” -
: The Lowe’s Robot and the Future of Service Work: “Lowe’s plans to release several OSHbots into one of its Orchard Supply Hardware stores (the ‘OSH’ in OSHbot) in San Jose, California. The robots’ job will be to greet customers, help them find what they need, and guide them around the store. In a typical interaction, Nel told me, an OSHbot would roll up and greet you as you walked in: ‘Hi, can I help you? What are you looking for today?’ You might answer that you need to replace some plumbing pipes, prompting the OSHbot to ask whether you’ve got the original pipe. If you had it, you would put it in front of a viewfinder, and the robot would scan it, identify it, and direct you to the item in the store. It could even guide you to the place where the item is stocked. The OSHbot will be conversant in English and Spanish, to start…. Because the OSHbot’s skill set sounds at least a bit like what an Orchard salesperson typically does, a perennial question has arisen: Are robots coming for our jobs? In fact, they began stealing our jobs a long time ago…. Even if the Lowe’s OSHbot isn’t meant to replace workers, retail executives are surely aware of the opportunities to lower costs that robots could bring. ‘That is probably the most important economic phenomenon of the past decade or so,’ Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology, told me…. Toward the end of our conversation, I mentioned that, during the rise of automation in manufacturing, people were encouraged to turn to service work. I wondered aloud where service workers might go if their positions, too, were to be eliminated in favor of automated replacements. ‘That is a great question,’ he said. ‘I’m not sure I know the answer. Technology has always been destroying jobs.’ He added, on a somewhat more optimistic note, ‘I think a lot of the jobs of the future have titles that we haven’t even thought of yet.’…”
Should Be Aware of:
- : A Disgrace Even By Roberts Court Standards
- : How Kentucky became a rare Common Core success story – Vox
- E-Gear 30 Day Lantern
- : Climate scientists aren’t too alarmist. They’re too conservative
- : Architect of Democratic strategy for keeping Senate is hopeful, but realistic
- : Why I Just Asked My Students To Put Their Laptops Away
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Anne Laurie: Long Read: “Can Scott Walker Unite the Republicans?”: “Robert Draper’s GQ profile… reads as though Draper couldn’t get a grip on his subject because Walker is that genuine political rarity: a pure sociopath, uncomplicated by the usual attendant narcissism…. From the outside, it looks like Scott Walker has prospered mightily by selling other peoples’ assets to any robber baron who made an offer, with a total lack of concern for even his closest allies and associates, enabled by a shrinking but still-powerful bloc of noisy racists and aging low-information voters. But, then, nobody said sharks aren’t dangerous!”
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: McConnell Afraid to Vote to Repeal Obamacare: “Mitch McConnell… asked if Republicans… would vote to repeal Obamacare… was revealingly evasive. First McConnell conceded that the Senate wouldn’t bother passing repeal because ‘Obviously, he’s not going to sign a full repeal.’ But then McConnell [said]… ‘There are pieces of it that are extremely unpopular with the American public that the Senate ought to have a chance to vote on: repealing the medical device tax, trying to restore the 40-hour work week, voting on whether or not we should continue the individual mandate, which people hate, detest and despise,’ McConnell said. ‘I think Obamacare is the single worst piece of legislation passed in the last 50 years…. I’d like to put the Senate Democrats in the position of voting on the most unpopular parts of this law and see if we can put it on the president’s desk and make him take real ownership of this highly destructive Obamacare.’ It is true that Obama would never sign a full repeal of Obamacare. He would never sign a repeal of the individual mandate, either…. [So] why won’t Republicans force Obama and Senate Democrats to defend the law as a whole? The answer is that McConnell realizes that repealing Obamacare is unpopular…”