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acerimusdux
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And more directly, since this study relies on police reporting of which events fit those various categories, the "surprising" result could be entirely caused simply by there being a tendency for police to accuse blacks more readily of things like "resisting arrest". So you don't need for mundane interactions to become deadly to bias the result, you just need for more mundane interactions to be treated as more serious offenses. And, as the author does point out, police are likely aware there will be close scrutiny of any shooting, but not as much scrutiny of these lower level uses of force.
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Well, I would argue that right now (in the US at least) we are at the point in the cycle where we should now be talking about Keynesian spending cuts (rather than have the Fed raise rates). But yeah, a few years ago, we all wanted more stimulus, and back in 2009, the stimulus wasn't even half as large as it should have been.
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There is good reason for the Fed to be concerned primarily with wage inflation. It is mainly labor costs (not commodities or capital assets) which effectively indicate an overheating economy. 1. commodity prices should be allowed to fall where they will at full employment, as it would be foolish to cost jobs in order to prevent commodity prices from rising. 2. capital assets are typically long term assets which increase in price when inflation is low, not high. Asset bubbles for example occur more often when monetary policy is too tight, not too loose. So if your policy objective is the maximum level of employment you can achieve without causing inflation, then wage inflation is your best measure of whether you have reached that point. But note also that bulk of the housing bubble occurred while the Fed was tightening from 2004-2007. Had the Fed been less aggressive and instead allowed more inflation to occur, asset prices would have corrected more naturally. Bankers would have tightened lending themselves, if they saw the value of long term loans declining due to inflation. So maybe the Fed would do better if it were to react more to inflation, only acting when it starts to get out of control, rather than trying to "stay ahead of it" as seemed to be the obsession in the last 2 decades.
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What you are advocating is fiscal policy. Congress can do all those kinds of spending now, and finance them with treasury bonds, the kind the Fed is able to buy. So what are you trying to accomplish, exactly, are you trying to bypass congress and the president and have the Fed now do fiscal policy? And do you want those things to be privately financed, and then for the Fed to buy those bonds? The Fed can't do that, as that would create a risk of loss. The Fed can only buy bonds that are guaranteed by the US Treasury. Yes fiscal policy is more powerful in a deep recession, but money matters as well. The more the Fed chokes off the private economy with tight money, the more you are going to need of all those government spending projects you are proposing to pick up the slack.
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Well no, they shouldn't be worrying much about commodities; it would be just dumb to slow the economy when commodity prices rise. The only reason to hike rates is if labor markets are tight; let commodity prices fall where they will at full employment. But neither wages & salaries, nor trimmed mean PCE, nor trimmed mean CPI, were even really above target for Q3. Not much case for a hike even in early 2016, unless those numbers spike in Q4. We'll see what October CPI was on Tuesday, but they shouldn't be over-reacting to one month's numbers, either.
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Another right wing myth worth addressing is the idea that low interest rates cause asset bubbles. But anyone with much experience in long term asset markets, such as the stock market or housing market, ought to realize that it is low inflation which tends to boost valuations for long term assets. The current very low inflation expectations are one of the main drivers behind high current US stock market valuations (using measures such as total market cap to GDP). Looser money, because it encourages more inflation, should be expected to limit bubbles. Too tight monetary policy should be expected to cause them. Right wing economics seems to be primarily based on first either ignoring or not understanding the importance of natural rates, and so blaming the Fed any time nominal rates seem low (or even moderate), and then on blaming anything else in the economy that seems to be wrong at them moment on those "low" rates (without any regard to logic, reason, or consistency). Sad to see that even some Fed board members seem to be ignoring the importance of inflation in determing monetary policy. There is no sign at all yet of even meeting the inflation target in the CPI, PCE, or ECI, while the PPI continues to show deflation. Meanwhile market based measures (such as the breakeven rates) show expectations that continue to fall, with the Fed not expected by markets to meet it's target even within a decade. And some are still talking about hiking in December?
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You do realize that if the Fed ran a loss, the Treasury, and thus taxpayers, would have to cover it? If the Fed were permitted to take on risk of loss, then it would really be doing fiscal policy, rather than monetary policy.
Toggle Commented Nov 9, 2015 on 'Budgetary Sleight-of-Hand' at Economist's View
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Yes, they say they want to focus on income inequality rather than wealth inequality, but then they say they want to talk about growing wealth (rather than income). This ignores that you can really only increase net wealth in the aggregate if you increase production of real long term assets, like housing. But most wealth is held in the form of financial assets, which only mean in the end that one person owes another money. One person's asset is another's debt. Third Way seems to have the naive idea that you can increase overall well being by growing wealth through an increase in financial assets. They ignore that this really means an equal increase elsewhere in either individual or government debt. In reality, we should probably be talking instead about increasing worker incomes, and reducing excess accumulations of wealth. With the economy now producing jobs, we should be talking about reducing government debt, and doing so by taxing those who are holding excess financial wealth. A financial asset tax of 1.5% for example, would raise over $1 trillion. And would be very progressive, considering that near to half the country has under $10,000 in financial assets. Conservatives seem to forever be proposing bold new ways to make the tax system more regressive. Flat taxes, consumption taxes, cutting capital gains, etc., ad nauseum. I wonder why Progressives can't seem to generate the same kind of enthusiasm for something as simple and bold as a financial asset tax? If you look at the Third Way program, a lot of what they are proposing isn't bad, in itself, but it ends up a laundry list of small solutions which avoids addressing any of the really big problems. Their proposed $500 contribution to private retirement or other long term savings accounts for example ends up similarly being a small benefit for each family that would receive it, but a rather significant amount of money in the aggregate that would likely end up managed by their Wall Street constituents.
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Listening to the Third Way would be political suicide. Never mind the economics, they are getting things completely backwards on the politics. Look at actual polls, and the very things they are criticizing, the minimum wage, social security, and government provided health care, are all generally popular with voters. As is, especially, a focus on addressing economic unfairness and inequality. The biggest political danger to Democrats would be if they were to lose their political edge on those issues. Last presidential election, President Obama had large margins over Mitt Romney amongst voters who earned under $50k (a huge portion of voters). But that was perhaps made easier by Romney himself being an obvious Wall Street Republican. If Democrats were to go more in the direction of adopting the Third Way/Wall Street agenda, while Republicans were to nominate someone with some populist appeal (like a Trump), you might see that vote split, and the Democrats lose. There is going to be some increasing division in the Democratic Party on economic issues, but I would attribute that mainly to some degree of economic success. When the economy was in recession, nearly all Democrats agreed on the need for more spending, and the madness of austerity. But where the economy is today, this is exactly when traditional Keynesian economics calls for spending cuts, not increases. Especially when one considers the lag with fiscal policy, and where the economy is likely to be in a year. In the U.S. at least, true Keynesians should now really be "Austerians". That is maybe going to cause some division between those with overall value preferences for more vs. less government. But if Democrats are potentially going to be asking some on the left to make compromises on these issues, they damned well better still be doing something to aggressively address inequality and the rigged economic system. Otherwise, a lot of those voters will stay home.
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Near to 2% according to who? Core PCE is only 1.3%, and trimmed mean PCE came in at 1.7%. The evidence for significant commodity effects being missed by these measures is weak. Besides, 2% is supposed to be a target, not a ceiling. Falling only a little short of target still wouldn't be a great argument for tightening. If the natural rate really is near to zero right now, any increase at all has the potential to be contractionary.
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Add Daniel Tarullo to the list of doves. He apparently said today "I wouldn't expect it would be appropriate to raise rates" [this year]. So between Tarullo, Evans, and Brainard, there is at least a significant contingent that is likely to be resistant to starting increases just yet. I imagine Lacker, Powell, and Williams would be hawks, so it likely comes down to Yellen, Fisher, Dudley, and Lockhart. Comments from Dudley and Lockhart suggest the fence sitters won't likely move yet in October, but there will be more data available by December.
Toggle Commented Oct 13, 2015 on 'Global Dovishness' at Economist's View
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No, I think it holds true either way. That is, unless you are talking about a FOREX devaluation driven by a loss of faith in the ability of the US to pay it's debts. Underlying that would really be a loss in the faith in the currency itself. Yes, inflation driven by such causes would have to be answered by tax increases, regardless of whether wage and employment conditions were favorable. To me, Triffin doesn't apply directly, with a sovereign currency and floating exchange rates, unless this reference is meant to apply only by way of analogy to such a currency crisis. But I wouldn't currently foresee such a crisis right now in a modern industrial democracy like the US or Japan even if debt levels were as high as 500% of GDP. One can certainly imagine though some distopian future wherin our constitutional rights and democratic institutions have so continued to erode, and faith in our system of governance has so deterioated, that the population might be on the verge of rebellion at any hint of further tax increases. In such a case, yes there's a dilemma. But if devalution is driven merely by a shift in desire to invest in US treasury bonds, any loss of domestic demand would be naturally offset by increased exports. The money has to go somewhere. Net imports (exports) have to equal capital inflows (outflows), by way of an accounting identity.
Toggle Commented Jun 30, 2013 on 'Karicature Keynesianism' at Economist's View
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Well who ever did make such a claim? He did get Japan basically right there, and equally relavent is the economic theory is basically the same as that behind his correct calls on the Great Recession. The fact is he was right on the housing bubble, in that there was a bubble and in that it's collapse would send the U.S. economy back into recession. He was also right about the details of what that recession would look like, including liquidity trap conditions, interest rates near zero, very low inflation, and significant excess reserves in the banking system since conventional monetary policy had little traction. He was right about the need for unconventional monetary policy, and that the fiscal stimuslus passed would be insufficient. He may have been right as well about the usefulness of a higher inflation target, something Japan has finally tried. I'm not sure why these specific warnings of what was happening in 2005-2007 should have been published in peer reviewed journals, rather than newspaper columns, when the economics was not new, and the journal publishing process would have insured that the warnings weren't timely. No one is saying he specifically predicted the details of the Great Recession, but the details did turn out to be very consistent with the economics he has laid out over the years in peer reviewed articles, working papers, books, and yes, newspaper columns.
Toggle Commented Jun 29, 2013 on 'Karicature Keynesianism' at Economist's View
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Did you sleep through the Clinton years? Politcal limitations will always be an issue. Both in slumps and in prosperous times, we tend to get less cyclical policy than might be ideally desired. But at least we have been able to get some benefit from Keynesisn cyclical policy.
Toggle Commented Jun 29, 2013 on 'Karicature Keynesianism' at Economist's View
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Maybe you should start with these: Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206. Krugman, Paul, 2000. "Thinking About the Liquidity Trap," Journal of the Japanese and International Economies, Elsevier, vol. 14(4), pages 221-237, December.
Toggle Commented Jun 27, 2013 on 'Karicature Keynesianism' at Economist's View
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Darryl: No, debt is not less of a worry if interest rates remain low. If interest rates increase, the value of outstanding debt falls. So whether to borrow or tax is strictly a financing decision. When interest rates are very low, it is more economical to borrow. When they increase, it will be more economical to tax. Hyperflation can always be avoided so long as there is an ability to sufficiently raise taxes or cut spending. Once there is a sign of an overheating economy, you want to run surplusses, not deficits.
Toggle Commented Jun 27, 2013 on 'Karicature Keynesianism' at Economist's View
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Krugman's record speaks for itself. Kind of laughable that anyone would so disparage his overall record. I don't always agree with Krugman, but when I don't, I'm usually wrong.
Toggle Commented Jun 26, 2013 on 'Karicature Keynesianism' at Economist's View
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I'll echo, what 30-year decline? As recently as 2000, we had unemployment dipping under 4%, and GDP growth remained strong right up until then. There has been a 30-year decline in wages as a percentage of income or output, but no such decline in disposal personal income, as any fall in wages was offset by increases in transfer payments. And Paul has written plenty on reasons for falling workers share of income. And about the 30-year increase in inequality. Where else is there a 30-year deline? Inflation and interest rates for sure, but the first 15 years of that were likely a good thing. Trade balance, but some degree of that may be good as well (and obviously related to trade liberalization).
Toggle Commented Jun 26, 2013 on 'Karicature Keynesianism' at Economist's View
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@ AldreyN: You should perhaps re-read your own links. The first from Krugman says nothing at all about fiscal policy, and only calls for more agressive monetary policy, both conventional and unconventional. In the second he says nothing at all against structural reform, and only says that desire for structural reform is a poor excuse for bad fiscal and monetary policy. As for Friedman, you have one quote where he was right, about low interest rates being a consequence of too tight money. But he never understood what to do once you get there, believing it was the quantity of money that mattered. His suggestions in that 1999 paper were tried, and failed, in both the US and Japan. Japan has clearly tried expanding the monetary base previously: http://bilbo.economicoutlook.net/blog/wp-content/uploads/2011/09/Japan_monetary_base_1990_2011.jpg What's different this time is the increased inflation target and an unprecedented fiscal stimulus; both policies recommended by Krugman in the earlier 1998 paper, and not mentioned by Friedman in 1999. In addition, the real test of Friedman's understanding of this point is what he himself thought in 2006 right when central banks were creating this problem through clearly too tight money: http://www.econlib.org/library/Columns/y2006/Friedmantranscript.html "My favorite proposal really is a little bit more sophisticated—or less sophisticated if you want to look at it that way—than a straight increase in the quantity of money. I would—if I had my choice—freeze the amount of high-powered money. Not increase it." "I think the real danger of this [the current monetary system] breaking down is there's no danger of it breaking down into a Great Depression. The real danger is it'll break up into an inflation." So he saw no danger in 2006, and was actually calling for tighter policy even when it most needed to be looser.
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AldreyM: You are underestimating Krugman, and misunderstanding him. Since 1998 Krugman has rejected traditional Keynsian fiscal policy alone as a solution for Japan. But he has also pointed out that Friedman's suggestion, purchasing bonds, would also not be enough alone. If all you do is buy bonds, and the markets view that expansion as temporary and easily withdrawn later, then the additional dollars will all simply sit in bank reserves (as has happened with some past attempts at quantitive easing). This is all that Krugman means when he says that "conventional" monetary policy will not work. But his alternative was "unconventional" monetary policy, not just 1960s style Keynesian stimulus. His paper from 1998: http://www.princeton.edu/~pkrugman/japans_trap.pdf On fiscal expansion: "Japan has already engaged in extensive public works spending in an unsuccessful attempt to stimulate its economy. Much of this spending has been notoriously unproductive: bridges more or less to nowhere, airports few people use, etc." On monetary policy: "A permanent as opposed to temporary monetary expansion would, in other words, be effective-because it would cause expectations of inflation" His solution for Japan: "The way to make monetary policy effective, then, is for the central bank to credibly promise to be irresponsible-to make a persuasive case that it will permit inflation to occur, thereby producing the negative real interest rates the economy needs. This sounds funny as well as perverse. Bear in mind, however, that the basic premise-that even a zero nominal interest rate is not enough to produce sufficient aggregate demand-is not hypothetical: it is a simple fact about Japan right now. Unless one can make a convincing case that structural reform or fiscal expansion will provide the necessary demand, the only way to expand the economy is to reduce the real interest rate; and the only way to do that is to create expectations of inflation." Krugman is not really a "Keynesian" of 50 years ago, he's arguably a Friedmanite as much as a Keynesian. More accurately though, I think he's taken the best of both, and then improved on them. He only advocates fiscal expansion be used in liquidity trap conditions, and then only in conjunction with aggressive unconventional monetary policy designed to end the liquidity trap. And now look at what Japan is actually doing. The "three arrows" of Abenomics are: 1. Agressive monetary easing along with doubling the inflation target to 2%. 2. Agressive deficit financed fiscal expansion, especially public works spending 3. Structural reforms to encourage increased private investment That program probably owes more to Krugman than to either Friedman or Keynes. It's increasing inflation expectations, alongside both structural reform and fiscal expansion.
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Yes. Suppose you have $15 trillion in debt financed at 2% for 20 years. Suppose the 20-year interest rate now increases to 5%. The value of that $15T in bonds on the market falls from $15T to about $8.4T. Whether to borrow or tax is simply a financing decision. If you think interest rates are going to increase, that makes borrowing the better financing decision. It's a much better deal for taxpayers in the above scenario, if tax increases were postponed until after interest rates rose. The only limit to how much debt a government should issue is the ability to raise taxes when needed to pay it off. For countries like Japan and the US, there should really be no worries there for debt levels of less than 500% of GDP.
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But it won't necessarily force the banks to put the money to productive uses. It might cause them to put more into vault cash instead. That said, it is possible, and would have some effect, and some smart folks like Alan Blinder have argued in favor.
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It's not a bubble from a value perspective, but I think there may be one forming from a psychological perspective. I think we have been in a secular bear since 2000, and previous such bears have tended to run for 15-20 years. I'm not convinced we're ready to break out from this one after only 12. I don't think the volume will be there to support that. Also, previous secular bears have resulted in exceptional buying opportunities before breaking free. I don't think we're quite there yet. In addition, after a 4 year bull run, I think the market is going to run out of steam. The market made new highs at the end of 2007 as well, before dropping through 2008. Very tough to call this with certainty, though. I really like it when a value analysis and technical analysis point in the same direction. Much harder call here when the valuation says buy and the technicals say it's due for a drop. It could be better to follow Buffet and not try to time it. But I will anyway. Recent economic news has been positive, helping to extend the run. But two things can go wrong now. One, the economic news could turn. The other, continued economic strengthening could lead to an end to quantative easing, which obviously has functioned through supporting asset prices.
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From news reports on BusinessInsider.com (typepad seems to swallow my posts with links): 'Pope Francis on Wednesday condemned as "slave labour" the conditions for hundreds of workers killed in a factory collapse in Bangladesh and urged political leaders to fight unemployment in a sweeping critique of "selfish profit".' 'The 76-year-old later spoke to thousands of followers in St Peter's Square, urging politicians to fight unemployment and calling for greater "social justice" against "selfish profit". "I call on politicians to make every effort to relaunch the labour market," he said in his traditional weekly address.' 'And then this morning, the Pope Tweeted the following: My thoughts turn to all who are unemployed, often as a result of a self-centred mindset bent on profit at any cost. — Pope Francis (@Pontifex) May 2, 2013'
Toggle Commented May 2, 2013 on Links for 05-02-2013 at Economist's View
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Frank, you aren't getting Lerner here. Read the above again, or the actual paper linked. The inflation is caused only by spending in an economy already at capacity. This is not quantity theory of money, it's supply and demand. 1. Even if you keep your trillion under your bed, it's useless to you unless you intend to spend it at some point. Why should we allow you to think you have more money than you do, when we know that this will only cause you to overspend eventually? 2. If the economy is at capacity, the researchers you hire to cure cancer were already working on curing cancer, you just hired them away from someone else at a higher price to do the same job. 3. If you decide to borrow the trillion in private markets, that will be a trillion someone else can't borrow, and it will effect interest rates. So it will not increase overall spending or cause inflation. 4. No the government can't use the trillion to do anything else, that would be spending. They are burning the trillion, they aren't going to burn anything of value.
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