Brad says US GDP growth is relatively bad because we should have population growth
On pop growth. I don't see how it helps GDP growth when the economy is in a liquidity trap. I can see how it keeps inflation low even with rapid GDP growth, but I don't see the relevance under current circumstances.
Also you are arguably unfair to the USA as you start the recession at the US peak. If you set the German peak to 100% then Germany would be below the US each compared to own peak.
So why am I typing this ? Look Brad the US is considered the big country with the most expansionary policy. US relatively bad means Keynes and Friedman failed (to the unwashed pundit masses).
You see the graph as showing that the US is doing nowhere near as well as it could and should. Others see vindication of Angela Trichet.
Of course you are a social scientist and call em as you see em blogger, so you don't care. But in case you did, you would be well advised to blog USA ! USA ! USA ! Better than old Europe in every way !
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Showing posts with label Brad. Show all posts
Showing posts with label Brad. Show all posts
Wednesday, April 25, 2012
Thursday, April 12, 2012
On Krugman vs DeLong on the alleged shortsge of safe assets
http://delong.typepad.com/sdj/2012/04/delong-and-caballero-and-others-smackdown-watch-paul-krugman-asks-if-there-is-really-a-global-shortage-of-safe-assets.html#comment-6a00e551f0800388340163040ce727970d
Brad really. First as you note allll the time the dividend yield should be r-g where g is the expected growth rate of dividends. Krugmans theory is that safe r is low because expected growth is low. That naturally translates to low g. Second, the r in the equation you love above all other equations, is a risk adjusted required rate of return, not the safe r. You position is that the equity premium is unusually high, but here it is important to decide if we want to measure the risk premium as r/rsafe or r-rsafe. As I recall (in one of my most terrifying memories) you could prove it should be r -rsafe in your head while writing 60 words a minute. That's what theory suggests for constant risk.
R-rsafe ( as we both like to stress) is normally huge. Something like 0.05 with rsafe around 2 and g around 2.5 to 3. rsafe is now about 0 so a perfectly ordinary equity premium correspons to growth of 0.5 to 1. Very low, but you have noticed that Krugman is very pessimistic. Expected g of 2.5 should imply a dividend yield of about 0.025 . I just looked it up and found an S&P 2011 yield alleged to be 0.019. But the newish normal for the 21st century seems to be less than I had guessed -- 0.04 to 0.045 but rather 0.3 to 0.35 so my new guess is it should have been 0.01 or 0.015 not 0.025 and I have a big big anomaly of 0.04 to 0.09 to explain. This is a series which has varied from 0.03 to 0.08.
http://blogs.smartmoney.com/advice/2011/12/30/why-the-dow-clobbered-the-sp-in-2011/
I really see almost no puzzle for Krugman at all.
Also, as always, I suggest looking at corporate bond rates. Nominal corporate bond rates are low. Differentials with Treasuries are higher than in say 2006 but lower than in 2003 (except for total junk). The differentials are tiny miniscule and microscopic compared to late 2008 and early 2009. The current malaise looks very different from the omigod the world is ending months. Your analysis is quite similar.
I am getting bored agreeing with Krugman all the time. I do note that I have been arguing against the shortage of safe assets hypothesis for over a year right here in comments on this blog ( one of which you kindly pulled back to the blog).
Brad really. First as you note allll the time the dividend yield should be r-g where g is the expected growth rate of dividends. Krugmans theory is that safe r is low because expected growth is low. That naturally translates to low g. Second, the r in the equation you love above all other equations, is a risk adjusted required rate of return, not the safe r. You position is that the equity premium is unusually high, but here it is important to decide if we want to measure the risk premium as r/rsafe or r-rsafe. As I recall (in one of my most terrifying memories) you could prove it should be r -rsafe in your head while writing 60 words a minute. That's what theory suggests for constant risk.
R-rsafe ( as we both like to stress) is normally huge. Something like 0.05 with rsafe around 2 and g around 2.5 to 3. rsafe is now about 0 so a perfectly ordinary equity premium correspons to growth of 0.5 to 1. Very low, but you have noticed that Krugman is very pessimistic. Expected g of 2.5 should imply a dividend yield of about 0.025 . I just looked it up and found an S&P 2011 yield alleged to be 0.019. But the newish normal for the 21st century seems to be less than I had guessed -- 0.04 to 0.045 but rather 0.3 to 0.35 so my new guess is it should have been 0.01 or 0.015 not 0.025 and I have a big big anomaly of 0.04 to 0.09 to explain. This is a series which has varied from 0.03 to 0.08.
http://blogs.smartmoney.com/advice/2011/12/30/why-the-dow-clobbered-the-sp-in-2011/
I really see almost no puzzle for Krugman at all.
Also, as always, I suggest looking at corporate bond rates. Nominal corporate bond rates are low. Differentials with Treasuries are higher than in say 2006 but lower than in 2003 (except for total junk). The differentials are tiny miniscule and microscopic compared to late 2008 and early 2009. The current malaise looks very different from the omigod the world is ending months. Your analysis is quite similar.
I am getting bored agreeing with Krugman all the time. I do note that I have been arguing against the shortage of safe assets hypothesis for over a year right here in comments on this blog ( one of which you kindly pulled back to the blog).
Tuesday, March 27, 2012
Shedding Luce
Brad finds it impossible to disagree with Ed Luce.
I find it possible to disagree with Luce. He writes "AIDS and other diseases" and "fashionable diseases." Kim's major accomplishment came in fighting TB not AIDS. I guess TB is a bit fashionable (the Gates's are interested). Fighting TB is also very hard as half therapy is much worse than none, because it selects drug resistant TB. Kim is alleged to have managed to arrange directly observed therapy (making sure people take all the pills) in the third world.
Of course Okonjo-Iweala also has huge extraordinary accomplishments. Such as ... ? Luce doesn't mention any. He notes that she is now powerful and has already held a top position at the World Bank. Favoring insiders sure doesn't sound "meritocratic" to me. Others have noted that Okonjo-Iweala is very smart. Luce doesn't seem to consider that relevant.
It seems to me that Luce decided that Kim is the wrong choice strictly because of his nationality.
I stress that I don't necessarily disagree with Luce's conclusion, nor do I think his reasoning is unsound. I don't see any reasoning at all.
I find it possible to disagree with Luce. He writes "AIDS and other diseases" and "fashionable diseases." Kim's major accomplishment came in fighting TB not AIDS. I guess TB is a bit fashionable (the Gates's are interested). Fighting TB is also very hard as half therapy is much worse than none, because it selects drug resistant TB. Kim is alleged to have managed to arrange directly observed therapy (making sure people take all the pills) in the third world.
Of course Okonjo-Iweala also has huge extraordinary accomplishments. Such as ... ? Luce doesn't mention any. He notes that she is now powerful and has already held a top position at the World Bank. Favoring insiders sure doesn't sound "meritocratic" to me. Others have noted that Okonjo-Iweala is very smart. Luce doesn't seem to consider that relevant.
It seems to me that Luce decided that Kim is the wrong choice strictly because of his nationality.
I stress that I don't necessarily disagree with Luce's conclusion, nor do I think his reasoning is unsound. I don't see any reasoning at all.
Friday, March 23, 2012
Brad at Brookings
The guy was presenting a paper and he had energy to consider other presentations. How many brains do you think are in that skull. I guess at least three.
3 Separate Comments
3) on Mamelukes. Huh ?!?!? What about Egypt ? Yes it is mostly desert, but the people live in the Nile valley -- ground zero for extracting taxes from agriculture. This is where excess grain beyond that needed to feed the farmers was produced. This was where farmers couldn't run away and farm somewhat less valuable land under another lord (or no lord). Or maybe ground zero was Mesopotamia. The Ibn Kaldun hypothesis makes less than no sense. It is a common story for the Arabian Peninsula on the one hand and Egypt and Mesopotamia on the other. But clearly they are the most nearly opposite ecologies in the old world. Egypt has been under central control or a province of an empire longer than any other place. Saudi Arabia competes with Afghanistan as the area where empire feared to tread (or didn't bother). The idea of a border (along with the first geometry) came from Egypt. Saudi Arabian borders were not defined on maps drawn in my lifetime. The places to look to test Erich Chaney vs Ibn Kaldun are Egypt and Iraq not Iran. 50 years hah. The experiment is well under way.
1) Stock Watson and Blinder together say a drop in aggregate demand has about the same effects no matter what the cause. Keynes would not be surprised by this. It is a problem for newKeynes (have I mentioned that I think that newKeynes seems to have more to learn from Keynes than vice versa ?). To the extent that the dynamics are similar, there is evidence that money isn't so very special after all. This isn't just trouble for Friedman but for all of his followers, that is all mainstream macro-economists.
2. Gauti et all I like your insistence on fiscal not monetary policy. Many of my critical comments on this blog were comments on posts in which you discussed useful things the Fed could legally do. But I didn't disagree 100% then and so I don't agree 100% now. The Fed can irreversibly expand the money supply if it buys a huge amount of illiquid assets. This is not good strategy for an investor as one loses huge amounts of money that way. Ah yes loosing money is irreversibly supplying money. If the Fed manages to have more liabilities than marked to market assets, then it can't retire the liabilities. Now this means using open market operations to give money to financiers. I'd much prefer giving it to ordinary people by cutting T. I also prefer increased G to reduced T. But the Fed can commit by trading very badly.
To be serious. If the Fed buys risky assets there are two benefits. One is the one you have been stressing since 2008, that the supply of risky assets to the private sector is too high and this is the root of the problem. But the other is that if things go bad, the monetary expansion can't be reversed (can't retire liabilities if your assets aren't worth that much). So the Fed commits to an irreversible monetary expansion if things go badly. The fact that it transfers its mark to made up balance sheet profits to the Treasury but the Treasury doesn't give the money back, makes it easy for the Fed to gamble -- win for a while and then get stuck so it can't reduce the money supply when it finally looses.
The problem is that if the economy tanks, then the Fed can't avoid creating high inflation expectations (because it will not be able to retire the huge pile of money). Is this a bug or a feature ?
This approach is within the Fed's current legal authority. What's the problem ?
3 Separate Comments
3) on Mamelukes. Huh ?!?!? What about Egypt ? Yes it is mostly desert, but the people live in the Nile valley -- ground zero for extracting taxes from agriculture. This is where excess grain beyond that needed to feed the farmers was produced. This was where farmers couldn't run away and farm somewhat less valuable land under another lord (or no lord). Or maybe ground zero was Mesopotamia. The Ibn Kaldun hypothesis makes less than no sense. It is a common story for the Arabian Peninsula on the one hand and Egypt and Mesopotamia on the other. But clearly they are the most nearly opposite ecologies in the old world. Egypt has been under central control or a province of an empire longer than any other place. Saudi Arabia competes with Afghanistan as the area where empire feared to tread (or didn't bother). The idea of a border (along with the first geometry) came from Egypt. Saudi Arabian borders were not defined on maps drawn in my lifetime. The places to look to test Erich Chaney vs Ibn Kaldun are Egypt and Iraq not Iran. 50 years hah. The experiment is well under way.
1) Stock Watson and Blinder together say a drop in aggregate demand has about the same effects no matter what the cause. Keynes would not be surprised by this. It is a problem for newKeynes (have I mentioned that I think that newKeynes seems to have more to learn from Keynes than vice versa ?). To the extent that the dynamics are similar, there is evidence that money isn't so very special after all. This isn't just trouble for Friedman but for all of his followers, that is all mainstream macro-economists.
2. Gauti et all I like your insistence on fiscal not monetary policy. Many of my critical comments on this blog were comments on posts in which you discussed useful things the Fed could legally do. But I didn't disagree 100% then and so I don't agree 100% now. The Fed can irreversibly expand the money supply if it buys a huge amount of illiquid assets. This is not good strategy for an investor as one loses huge amounts of money that way. Ah yes loosing money is irreversibly supplying money. If the Fed manages to have more liabilities than marked to market assets, then it can't retire the liabilities. Now this means using open market operations to give money to financiers. I'd much prefer giving it to ordinary people by cutting T. I also prefer increased G to reduced T. But the Fed can commit by trading very badly.
To be serious. If the Fed buys risky assets there are two benefits. One is the one you have been stressing since 2008, that the supply of risky assets to the private sector is too high and this is the root of the problem. But the other is that if things go bad, the monetary expansion can't be reversed (can't retire liabilities if your assets aren't worth that much). So the Fed commits to an irreversible monetary expansion if things go badly. The fact that it transfers its mark to made up balance sheet profits to the Treasury but the Treasury doesn't give the money back, makes it easy for the Fed to gamble -- win for a while and then get stuck so it can't reduce the money supply when it finally looses.
The problem is that if the economy tanks, then the Fed can't avoid creating high inflation expectations (because it will not be able to retire the huge pile of money). Is this a bug or a feature ?
This approach is within the Fed's current legal authority. What's the problem ?
Wednesday, March 7, 2012
Brad Kochtopus Cato
Burkean Bells it was hard to find this one
Brad
THE GOOD ARGUMENTS AGAINST THE KOCHS' USING THEIR PROPERTY RIGHTS OVER CATO ARE ALL BURKEAN AND COMMUNITARIAN. THEY ARE NOT LIBERTARIAN
Comment
Brad
THE GOOD ARGUMENTS AGAINST THE KOCHS' USING THEIR PROPERTY RIGHTS OVER CATO ARE ALL BURKEAN AND COMMUNITARIAN. THEY ARE NOT LIBERTARIAN
Comment
I thought that I read this blog regularly, but I missed the post where you wrote
"No one can disdain Cato more than I do, but they thought that they lived in the Republic of Plato and now find that they live in the sewer of Romulus."
I can't find it. The thought that maybe, somehow you refrained from writing that crossed my mind, but, really, it is sooo unpossible.
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