Category: Politics

Dean Baker makes what seems to be a stunningly obvious point, one that I haven’t seen discussed anywhere. Condensed and with emphasis added for your consideration: …the value of our [government] debt will plummet if interest rates rise… we could buy back long-term debt issued today at interest rates of less than 2.0 percent for discounts of…

You’re seeing a lot of crowing these days from the likes of Scott Sumner, David Beckworth, Lars Christensen, et al., claiming that fiscal austerity has obviously had no effect on GDP growth. “Look!” they say: “Even with the sequester and all the other government spending cuts, growth in 2013 has been the same as 2012!…

I’m constantly astounded that nobody on the left or the right ever mentions Milton Friedman’s proposal for taxes on corporate profits. On page 174 of (my edition of) Friedman’s libertarian bible Capitalism and Freedom, he proposes what seems a simple and sensible plan (transcription here): …the abolition of the corporate income tax, … with the requirement…

This line by Matt McOsker, in a comment on one of my recent posts, now reigns as the best line of the year in my personal pantheon. QE’s only direct effect is on the financial sector. It only affects the real sector — where people work to produce, buy, and sell real goods, and produce…

Much ado is made of the Fed’s “credibility,” which is dog-whistle-speak for its ability, willingness, and decided inclination to jump all over any (expected or imagined) whiff of that horrifying threat — inflation! — especially the most terrifying bogeyman, “wage inflation.” You won’t, on the other hand, find “credibility” discussed when people speak of the…

Allan Marks, in a comment on a Krugman post, reminds me of one of my favorite scenes in filmdom. Krugman’s complaining that he doesn’t understand the rules that his detractors are arguing by, and Marks suggests he watch this (55 seconds; hit refresh if you don’t see it below): Is anyone else wishing our esteemed…

This graph speaks volumes: Profits as a Percent of GDP: Financial Corporations vs. Nonfinancial Corporations We saw a big decline in real businesses’ profit share in the 40s, then a slower semi-steady decline through the 70s, as wages constituted a larger share of GDP. Financial corps doubled, expanding and increasing profits, but they remained small…

The OECD has finally updated their national account data with 2011 info for most countries, so I thought I’d update this post from a couple of years ago. If you’re thinking that the current (overblown) hoo-ra-ra about U.S. government deficits is a result of too much spending, or that U.S. taxes are insanely high and…

I’ve ground the axe quite a bit over the years for the argument that Kevin Drum makes — and dismisses — here. In brief: poorer people spend a larger share of their income/wealth than richer people. So if poorer people have more income/wealth — if the distribution is more equal — there will be higher…

I’m joking of course. He’s still grinding the supply-side axe (though judiciously here, IMO). But you gotta admire a fellow when he follows the logic of the data where his own logic requires him to go. He’s just done three posts about Germany’s growth and unemployment rates through the great recession: Annualized change, Q1 2006…

Fiscal austerity–or deficit cutting–is the subject of much current debate. As Europe proves, severe austerity can slow growth or lead to recession. Despite periodic slowdowns, the US economy is on a sustainable fiscal path. The deficit is projected to drop below 2.5 percent of GDP by 2017, below its 30-year average, helped partially by the…

I finally figured out a simple way to explain my confusion (and that of many others, including many economists) with the whole Saving issue. I may also have figured out a useful solution to that confusion, which I present at the bottom here for my gentle readers’ delectation and denunciation. Econ profs: I’m really curious.…

I’m just sayin’. (Emphasis mine, words Solow’s): [Bernanke’s] preferred answer is better and more system-oriented regulation. One has to ask then why regulation failed to see the crisis of 2007–2008 coming and take action to head it off. Bernanke suggests that regulators were lulled into inattention by the so-called Great Moderation. Our masters are all too…

Erica Payne sent out a request for writeups from Patriotic Millionaires members, and I provided this. I hate not to re-use perfectly good copy… I live (quite well) off financial investments — no need to work any more — and my taxes every year are ridiculously, embarrassingly low. Meanwhile tens, hundreds of millions of hard workers who…

Many economists — mostly the freshwater/neoclassical/supply-side/conservative types, but also many on the left — hold in their heads a very peculiar model of how economies work. It’s a model of a barter/real-goods economy in which money only plays the role of convenience. In this model, if you don’t eat some portion of the corn you…

Following up on my earlier post, about people swimming in a stream of economic change over which they have no control: As I often do, I was re-reading some old Steve Randy Waldman posts, and came across one that made the same point quite elegantly: “Stabilizing prices is immoral“. (If you want to understand how economies…

Update 4/7: Josh brings home the very same point, but regarding sovereign debt, in a new post. If you’re a fish merrily swimming in a stream, is it your fault if a flood — say from a large release from the dam upstream — causes you to be washed out through the sluicegates? Or if…

Discussing the failure of modern macro to incorporate the financial system into its models, Ben asks, why did the bursting of the housing bubble spank the economy so much harder than the dot bomb crash? He sez (courtesy Brad DeLong, emphasis mine): …the decline in wealth associated with the tech bubble bursting [in 2001] and…

Imagine that all bank deposits — the dollars in your checking account — were 100% backed, one-for-one, by your bank’s reserve holdings at the Fed (the modern, fiat-money-world equivalent of gold reserves). Runs on bank deposits would be impossible, because the outfit that issues reserves and currency can’t run out of reserves and currency —…

Update April 4: Steve Waldman kindly links to this post, and I’m rather abashed that he does because it’s wrong as written. As pointed out by Ramanan. (Though the spirit is right.) I should have said: Private Domestic Nonfinancial (i.e. households and businesses, a.k.a. the “real” economy in which people produce, sell, and buy goods…