Friday , July 19 2019
Home / Tag Archives: Macroeconomics

Tag Archives: Macroeconomics

Do longer expansions store up trouble for the future?

A recent FT article criticizes the view that we should try to eliminate the business cycle: All this begs the question of whether longer really is better when it comes to business cycles. Recessions are a natural and normal part of capitalism, not something to be avoided at all costs. Indeed, the Deutsche Bank economists argue that productivity would be higher and American entrepreneurial zeal stronger if the US business cycle had not been artificially prolonged by...

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Two more widely held views

In a recent post, I discussed two widely held views that seem inconsistent. I am indebted to Ryan Bourne for pointing to another example. Unemployment in Western Europe was quite low during the 1960s. During the 1980s, unemployment rose to very high levels, and never fell back again, even after their economies had recovered from the two oil shock recessions. This led to theories of “hysteresis”, the idea that a severe slump could cause permanently high unemployment,...

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When doves fly

I’ve consistently argued that shifts in fashion are far more important than personnel in setting the direction of monetary policy. And in a recent post, I suggested that the monetary policy zeitgeist was likely to shift in a dovish direction. Yesterday provided a couple of good examples. Start with the Financial Times: The global bond market enjoyed a powerful rally on Wednesday as investors bet that Christine Lagarde’s nomination to be the next president of the...

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Keith Weiner Gets Interviewed

Our economic views and unique product are generating buzz. There have been a number of interviews recently (more will be posted soon). Lobo Tiggre interviewed Keith Weiner (video) about the unique Monetary Metals business model to pay interest on gold. Silver Bullion interviewed Keith Weiner (video) when he visited Singapore, about the belief that Basel III regulations are good for the price of gold. Claudio Grass interviewed Keith Weiner in Pro Aurum Newsroom (written) about macroeconomics.

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The greatness of Milton Friedman

I normally try to avoid responding to the monetary “analysis” in Forbes magazine. But since potential Fed nominee Judy Shelton once tweeted approval of a particularly weak example by Nathan Lewis (calling it “brilliant”), I need to set the record straight.  Here is Lewis (in 2016): However, after World War II, conservatives have tended to be split between Stable Money gold-standard advocates, and some form of conservative-flavored “soft money.” Before 1985, this was...

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Macro theory for all times and all places

In 1936, John Maynard Keynes came up with a macro model that was a product of its time. That’s the wrong way to do macro. Models should be based on the empirical facts of all countries and all time periods. If your macro model cannot explain why the US experienced a major deflation (with NGDP falling nearly 30%) from mid-1920 to mid-1921, the model is useless. If it cannot explain why industrial production suddenly fell by 30% after mid-1920, the model is useless. If...

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Does the Fed set monetary policy in Hong Kong?

David Beckworth recently conducted an excellent interview of Mike Bird, which is full of fascinating observations. At one point they were discussing the Hong Kong currency board, which since 1983 has fixed the exchange rate between the Hong Kong and US dollars.  This exchange caught my eye: Beckworth: Yeah. So, interestingly, the Fed sets monetary policy for Hong Kong effectively, right? Bird: Yup. Absolutely, which is very noticeable in the Hong Kong housing market...

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Poke out one of my eyes

The news is becoming increasing surreal. This morning I saw the following story in the Financial Times: The euro sank by about 0.5 per cent against the dollar, reaching a low of just under $1.12, while European equities rose – Germany’s Dax index was up by 2 per cent on the day. In response, Mr Trump suggested that Europe was engaging in currency manipulation. “Mario Draghi just announced more stimulus could come, which immediately dropped the euro against the dollar,...

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What is the optimal NGDP growth rate?

I often get commenters asking my opinion on the optimal NGDP growth rate. This is a difficult question, which can be addressed from a number of perspectives. Josh Hendrickson has a new policy brief at Mercatus, which advocates the “Friedman rule” for NGDP targeting.  This would involve setting the growth rate for NGDP at a point where risk free short term interest rates would be close to zero and there would be no opportunity cost of holding currency. Because currency...

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Annette Vissing-Jorgensen on Fed policy and interest rates

I attended a recent Fed conference in Chicago, which was charged with the task of re-evaluating the monetary policy regime. I had very mixed feelings about the conference. On the plus side: 1. It’s a very good thing that the Fed is taking seriously the need to re-think policy in light of the zero bound problem. 2. The quality of the presentations and discussion was almost uniformly high. Thus in an objective sense I had a very positive reaction. Subjectively, I was...

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