To draw upon Amanda's post and her reference to an interesting piece by Fareed Zakaria, it is interesting to think about the determinants of US economic performance, particularly in election season.
One thing to consider from Krugman's chapter 7. Nestled in the analysis are a couple of tidbits. First, note that the "hard work" in changing the economic malaise of the late 1970s was done by Fed chairman Paul Volcker. Now think about time lags, as Amanda notes. Volcker was appointed in 1979. By Jimmy Carter. Did Reagan get credit for what a Carter appointee did?
And, to be clear, this is not a one-sided partisan thought experiment. Notice that Krugman suggests the Clinton era jobs record would have been nowhere near what it was with someone else at the head of the Fed. Greenspan didn't take the punch bowl away just as the party got started. Did Clinton get credit for Greenspan's own "irrational exuberance"?
In short, you can find arguments on either side of this politically (and this certainly informs the current debate on Capitol Hill over whether Ben Bernanke is "helping Obama" or just "helping the economy"). But the larger question is: just how much leverage does monetary policy have over our economic performance?
Put another way: who is the most important person shaping economic policy in the United States? The President? Or the Chair of the Fed?
Thursday, October 25, 2012
Tuesday, October 23, 2012
On China's lending (or not)
To buttress some of what we discussed in class today:
Japan is set to overtake China as the top foreign lender to the U.S.
Japan is set to overtake China as the top foreign lender to the U.S.
Thursday, October 18, 2012
Not the only columnist out there, but...
George Will has been on a Federal Reserve kick. And it seems rather timely for our purposes. Will is greatly concerned (as noted in a previous post) that the Fed is arrogating too much responsibility for the country's economic management.
To buttress his point, he has drawn in recent columns on several conversations with several presidents of regional Federal Reserve banks (of which there are 12 around the country). Will makes the case that the Fed's primary emphasis should be on "price stability — preserving the currency as a store of value by tightly controlling inflation". But the Fed's recent actions suggest the other half of it's "dual mandate": maximizing employment. This is really another way of saying George Will and many "hawkish" Fed leaders would like to insist that interest rates be raised as needed, and certainly not kept near zero for so long that inflation rears its ugly head.
It should be noted that this has been a minority position inside the Fed in recent years. The presidents of the Dallas and St. Louis Federal Reserve banks have lost out to the majority that say interest rates should be low until employment recovers and/or at least until there is some concrete sign of consumer inflation (for price in items other than volatile commodities like oil and some food prices).
It should also be recalled that many people nowadays would echo with a sentiment I linked to in a previous post that runs against Will's logic. Will believes economic management is fundamentally the responsibility of Congress, not a bunch of technocrats at the Fed. (Though Will certainly does want to the Fed to behave technocratically in the way he defines, by keeping prices stable.) Others, like Senator Chuck Schumer referred to in Will's piece, would say the Fed has to act, because "Congress is lame".
You make your own call.
To buttress his point, he has drawn in recent columns on several conversations with several presidents of regional Federal Reserve banks (of which there are 12 around the country). Will makes the case that the Fed's primary emphasis should be on "price stability — preserving the currency as a store of value by tightly controlling inflation". But the Fed's recent actions suggest the other half of it's "dual mandate": maximizing employment. This is really another way of saying George Will and many "hawkish" Fed leaders would like to insist that interest rates be raised as needed, and certainly not kept near zero for so long that inflation rears its ugly head.
It should be noted that this has been a minority position inside the Fed in recent years. The presidents of the Dallas and St. Louis Federal Reserve banks have lost out to the majority that say interest rates should be low until employment recovers and/or at least until there is some concrete sign of consumer inflation (for price in items other than volatile commodities like oil and some food prices).
It should also be recalled that many people nowadays would echo with a sentiment I linked to in a previous post that runs against Will's logic. Will believes economic management is fundamentally the responsibility of Congress, not a bunch of technocrats at the Fed. (Though Will certainly does want to the Fed to behave technocratically in the way he defines, by keeping prices stable.) Others, like Senator Chuck Schumer referred to in Will's piece, would say the Fed has to act, because "Congress is lame".
You make your own call.
Tuesday, October 09, 2012
QE3 (and QE2 and QE1...)
A pretty decent explanation from The Economist of quantitative easing, a major post-2008 version of expanding the money supply.
Friday, October 05, 2012
Iran Too Fast
Something to flag for conversation next week, when we discuss money and currency, banking, inflation, and exchange rates. We may be watching a spiral of inflation and currency collapse in real time. In Iran. We live in interesting times.
You can be Pro-Romney and Pro-Trade, if you want...
Some useful perspective from Ezra Klein of the Washington Post. The post there is a bit older (late September), but is pertinent to the discussions we have had. In addition to hitting some themes that have come up lately, it also does a couple of other things.
First, Ezra Klein authorizes you (as an official policy wonk gatekeeper) to be pro-trade and anti-currency-manipulation. By extension, some of you may be happy that you can be pro-Romney and pro-free trade, regardless of his attacks on China.
Second, it shows that Romney has a way with the classic stock and trade of economics: simplified models of the world that often involve two actors, two factors, and the like (think comparative advantage, Rogowski, etc.) Notice the part where Romney talks about a 200-person economy. Interesting stuff.
First, Ezra Klein authorizes you (as an official policy wonk gatekeeper) to be pro-trade and anti-currency-manipulation. By extension, some of you may be happy that you can be pro-Romney and pro-free trade, regardless of his attacks on China.
Second, it shows that Romney has a way with the classic stock and trade of economics: simplified models of the world that often involve two actors, two factors, and the like (think comparative advantage, Rogowski, etc.) Notice the part where Romney talks about a 200-person economy. Interesting stuff.
Thursday, October 04, 2012
The Real Upset in the Debate: The China-Free Zone!
I defer to Camie's superior instincts about presidential debates, but I was shocked (SHOCKED, I say!) about the limited discussion of China in the debate. Now admittedly, I was in and out of the room a bit and didn't catch every word, but am I right in thinking trade and China barely came up at all? Given the recent surge in China-specific ads as campaign material (which Annelise rightly notes has been going on for a time, but which seems to have hit fever pitch lately), I expected a ton of this whenever words like "jobs" came up.
Amanda notes that the debate went in a different direction. (Though I should say as an aside that "direction" is a funny word here, because at the risk of getting into the raw politics of it the main theme for me was actually Obama's directionlessness in the debate - which I read as spurred in turn by an uncertainty in how to deal with Romney's shape-shifting.) The direction of the debate. was not unrelated to IPE, just more indirectly related, I suppose.
Anyway, maybe the China and outsourcing questions will come in the next debate, which is focused on "foreign policy"? Or the third one, which is focused on (I suppose) everything? I find it strange, nonetheless, that this aspect of domestic policy barely surfaced. In part, I attribute this to what I would argue was Obama's really poor performance - he seemed to me rather ofter to forget he was running a campaign against Romney and wandered around instead inside his own head. Maybe that's what people mean when they say he sounded "professorial"?
D'oh!
In any event, I hope that by now (after looking at Wolf, Stiglitz, Rogowski, Coughlin, et al., Krasner, and so on) we all might consider that the distinction between "international" and "domestic" is a false distinction at best, and misleading and damaging at worse.
Amanda notes that the debate went in a different direction. (Though I should say as an aside that "direction" is a funny word here, because at the risk of getting into the raw politics of it the main theme for me was actually Obama's directionlessness in the debate - which I read as spurred in turn by an uncertainty in how to deal with Romney's shape-shifting.) The direction of the debate. was not unrelated to IPE, just more indirectly related, I suppose.
Anyway, maybe the China and outsourcing questions will come in the next debate, which is focused on "foreign policy"? Or the third one, which is focused on (I suppose) everything? I find it strange, nonetheless, that this aspect of domestic policy barely surfaced. In part, I attribute this to what I would argue was Obama's really poor performance - he seemed to me rather ofter to forget he was running a campaign against Romney and wandered around instead inside his own head. Maybe that's what people mean when they say he sounded "professorial"?
D'oh!
In any event, I hope that by now (after looking at Wolf, Stiglitz, Rogowski, Coughlin, et al., Krasner, and so on) we all might consider that the distinction between "international" and "domestic" is a false distinction at best, and misleading and damaging at worse.
Tuesday, October 02, 2012
SimCities, Spillovers, and Something Else
Still wrestling with how to bring these pieces together precisely, but I am intrigued by the interaction between several recent blog posts: from Merve, Camie, and Freddy. There is much to be said about the ways people operate differently in their different local contexts, and how economic modeling reflects the possibilities that come from different jurisdictions (think model cities or particular EU countries) affect the broader political-economic framework. Something for consideration.
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