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Old 09-05-2011, 03:07 AM
Parallax Parallax is offline
Join Date: May 2011
Posts: 219
Default Re: Booze and Money (Tim Fernholz & Megan McArdle)

Originally Posted by sugarkang View Post
Yes, when measured against CPI. When have CPI metrics been updated? Do you think it accurately tracks inflation today?

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.
Actually I use Median CPI as inflation measure. But do you have a better gauge of inflation? As long as there isn't any that point is moot.

I am not Paul Krugman (although I would fancy a nobel prize and a job at Princeton) so saying he wanted a housing bubble seems irrelevant to our current discussion.

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.
Well I was also pointing out the fact that a libertarian loaning money for a long time at negative real rates might collide with the 'government bad' message.

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."
You know that I am calling for easy money, right? No economist except the goldbugs is against easier monetary policy right now. Fiscal expansion has more opponents and is more controversial but fiscal policy was not mentioned in the diavlog (if it was mentioned it was quite brief compared to the discussion on Fed and monetary policy).

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.
I did not have time to listen to this so I am not sure what part of what I said is being contradicted. Also Selgin is one of the anti-Fed goldbugs I was referring to and my general rule is to ignore people who are for abolishing Fed. Finally I would like to add that Hayek would favor substantial easing from Fed right now. Since he supported stablizing nominal spending which is the same as NGDP targeting. And you can go back and watch De Long - Lindsay diavlog to make sure but if Fed was targeting NGDP it had to engage in extensive easing ( more than 200 billon asset purchases a month every month until unemployment came below a target like 7.5%).

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?

This is frustrating, US is not Ireland, Greece or Portugal! There are important differences:

1. In 2012 Greece's debt to GDP ratio will hit 170% and Portugal has a ratio of 95%. US on the other hand has a debt to GDP ratio of 70%.

2. Ireland made the foolish move to guarantee all bank loans, letting the creditors get off with no cost.

3. US has its own central bank, Portugal, Ireland and Greece don't.
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