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Old 09-02-2011, 11:48 PM
sugarkang sugarkang is offline
Join Date: Oct 2008
Location: Cali, Small-Govt Liberal
Posts: 2,186
Default Re: Booze and Money (Tim Fernholz & Megan McArdle)

Originally Posted by Parallax View Post
The journalism problem is not that she opposes 6% inflation, the journalism problem is that he discredits Rogoff for personal ideological biases.
Megan is pretty good about guarding against biases, though you may be right. No person is free from bias.

That is the puritanical spirit!

First of all the US government has not punished traditional savings for decades. Look at inflation in the past 30 years, it has been in steady decline throughout that period.
Yes, when measured against CPI. When have CPI metrics been updated? Do you think it accurately tracks inflation today?

And secondly I don't see an inherent reason for saving being better than borrowing. If anything one of the roots of the crisis was that on a global scale we had too much savings.
Krugman's theory is that we are in a liquidity trap. House prices plummeted so homeowners felt poor overnight and were reluctant to spend causing the demand problem. Why did this happen? Someone in 2002 thought it'd be a good idea to replace the stock market bubble with a housing bubble. Who was that? Krugman.

Why are we now pushing for the Yuan to appreciate against the dollar? Because it would make the Chinese to save less and spend more.

The yield on 5-year TIPS is -0.93% and the 10-year TIPS stands at -0.05%. So if she buys TIPS, she is basically paying the US government to hold on to her money. Hardly an investment that a libertarian would undertake with an easy conscious.
Not a great investment, but it would definitely serve as an easy hedge against the improper motives that you've imputed to her. That's assuming we go by CPI, which I assume you feel is a reasonable metric.

No, actually the opposite is true. Among economists the only people that are for hard money right now are the gold standard, anti-Fed fringe who secretly think deflation is a good thing. This narrow section is now being enabled by politicians who wish the economy to stay depressed until the election.
You have misread my paragraph or I have expressed myself poorly. Here's what I said:
Originally Posted by sugarkang
I don't think it's that clear, even if I, personally, favor spending now.
If you are looking for prominent economists on the right calling for more aggressive monetary policy you can check out Greg Mankiw and Scott Sumner for starters.
I read Mankiw regularly. I am also aware of Sumner's opinion. I agree, he acknowledges a demand problem. However, let's not overlook this crucial bit of information as well:

"If you talk about how those labor market rigidities might have raised our natural rate of unemployment, progressives will sneer that there is no empirical evidence (there is), and that you are just a mean right-winger who thinks unemployed people are lazy bums. Whenever you read those progressives you should always keep the following in mind:

1. The progressives completely failed to predict that the natural rate of unemployment in welfare states like France would rise from about 3% prior to 1973 to about 10% after 1980, and then stay up there permanently.

2. To this very day, the progressives have no plausible explanation for why this happened in many European countries (not all.)

I知 not saying it will happen here, but I知 also not assuming it won稚."

EU, Japan and your preferences are politics. US might very well choose a president that is against any kind of monetary and fiscal stimulus as well. It does not make it the right policy. The point is that austerity might get you elected but it does not work when you look at the economics.
Here's a BBC4 debate at the London School of Economics between economists that runs counter to what you've stated. Keynes vs. Hayek debate. Some people are talking about Eurobonds backed by gold in order to save the Euro.

She says if US keeps selling large quantities of treasuries there is a point at which the market won't want anymore of it causing the price of US debt to fall and hence raising US borrowing costs catastrophically. However reality is not very kind to her wild fantasies: 10-year treasury now yields +2.01%.
I agree those prices are low. But when does it become clear that we have a problem on our hands? How quickly does that problem manifest?

The mixing of populations lowers the cost of being unusual.

Last edited by sugarkang; 09-02-2011 at 11:55 PM..
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