Alan Blinder argues that Obama's stimulus package is working and he should stay the course.
http://www.washingtonpost.com/wp-dyn/content/article/2009/08/10/AR2009081002570.html?wpisrc=newsletter
Not staying the course will be akin to malpractice in medicine. His argument is persuasive. Take a look.
Tuesday, August 11, 2009
Tuesday, August 4, 2009
Is the recession over?
Is the recession over? Several writers have suggested that it is over. Here is a sample of what they are saying. Be warned though. less bad news does not imply good news. Also, note that the stock market is not a perfect guage for predicitng the the level of economic activity.
http://money.cnn.com/2009/06/19/markets/thebuzz/index.htm
http://www.forbes.com/2009/05/04/recovery-indicators-unemployment-opinions-columnists-recession.html
http://www.voxeu.org/index.php?q=node/2785
Here is an entry from the WSJ on the jobless recovery. http://blogs.wsj.com/economics/2009/08/04/secondary-sources-fed-watch-financial-pay-waitress-indicator/
Fed Watch: On Fed Watch, Tim Duy says the jobless recovery means the Fed will be on hold for a long time. “Incoming data continue to confirm the cyclical turn in the U.S. economy. But that cyclical turn is supported by a massive amount of government intervention, in and of itself a testament to the fragility of the recovery. The Fed will be in no rush to withdraw that liquidity — especially if a jobless recovery emerges. Indeed, it is easy to tell a story where the Fed holds rates near zero into 2011. That also means the Fed will not rock any boats. Thus, the jobless recovery is almost a dream come true for those trades dependent on easy Fed policy — which seem to be virtually all trades at the moment. Although there has been talk of the Fed acting preemptively to curtail bubbles, I am skeptical that any such action would be taken with U.S. unemployment staring at double-digits. And there certainly would be no rush to react if low U.S. interest rates fueled bubbles outside U.S. borders; that, after all, would be the responsibility of foreign policymakers. “
http://money.cnn.com/2009/06/19/markets/thebuzz/index.htm
http://www.forbes.com/2009/05/04/recovery-indicators-unemployment-opinions-columnists-recession.html
http://www.voxeu.org/index.php?q=node/2785
Here is an entry from the WSJ on the jobless recovery. http://blogs.wsj.com/economics/2009/08/04/secondary-sources-fed-watch-financial-pay-waitress-indicator/
Fed Watch: On Fed Watch, Tim Duy says the jobless recovery means the Fed will be on hold for a long time. “Incoming data continue to confirm the cyclical turn in the U.S. economy. But that cyclical turn is supported by a massive amount of government intervention, in and of itself a testament to the fragility of the recovery. The Fed will be in no rush to withdraw that liquidity — especially if a jobless recovery emerges. Indeed, it is easy to tell a story where the Fed holds rates near zero into 2011. That also means the Fed will not rock any boats. Thus, the jobless recovery is almost a dream come true for those trades dependent on easy Fed policy — which seem to be virtually all trades at the moment. Although there has been talk of the Fed acting preemptively to curtail bubbles, I am skeptical that any such action would be taken with U.S. unemployment staring at double-digits. And there certainly would be no rush to react if low U.S. interest rates fueled bubbles outside U.S. borders; that, after all, would be the responsibility of foreign policymakers. “
Saturday, August 1, 2009
In defense of Willem Buiter
Paul Krugman has a piece here http://krugman.blogs.nytimes.com/2009/07/31/in-defense-of-larry-summers/ defending Larry Summers from an attack by Willem Buiter http://blogs.ft.com/maverecon/2009/07/should-fed-chairmen-go-around-kissing-babies/
Krugman thinks Buiter is nuts for suggesting Summers is neither a macro economist nor a monetary economist. Here is what he says about the runners for the job of Fed governor.
"The race for the top job at the Fed thus far appears to have three runners: the incumbent, Ben Bernanke, Larry Summers, the current director of the NEC and Janet Yellen, president of the Federal Reserve Bank of San Francisco . Both Bernanke and Yellen are qualified for the job. Summers is not.
There are several reasons why Summers would be an inappropriate choice as chairman of the Fed. Let’s start with Fed-relevant knowledge and expertise. Summers is not a monetary economist or macroeconomist. He has never shown any serious interest in researching and understanding the workings of the kind of complex, interdependent dynamic systems that represent the environment a central bank operates in. He is the arch-typical quick and dirty partial equilibrium man, full of clever isolated micro-insights, but incapable of grasping the whole. His macroeconomics stalled at the Keynesian cross. As a monetary economist he has never seen a Federal Funds rate target so low he did not want it just a bit lower."
This is what he says about Janet Yellen.
"Janet Yellen is an outstanding monetary and macroeconomist. I have known this for a long time, because when I came to Yale as a PhD student in 1971, we all passed our Comprehensive Examinations (Comps) in macroeconomics thanks to the ‘Yellen notes’, the wonderful collection of ‘augmented’ lecture notes from James Tobin’s lectures, created by Janet Yellen as Tobin’s teaching assistant. She was a professor at Berkeley for many years, a member of the Board of Governors of the Federal Reserve System from 1994 to 1997 and chair of the President’s Council of Economic Advisors from 1997 till 1999. Her abilities as a regulator and supervisor have not, as far as I know, been tested. These are, of course, at least as important for a chairman of the Fed as his or her command of the conventional monetary policy tools. Her ability to stand up to the populists in the Congress and the relentless lobbying efforts of Wall Street and the rest of the financial establishment are also unknown. But at least we can hope."
Krugman calling Buiter nuts is indeed surprisng to me given the reasons that Buiter gave for not seeing Summers as a macro or monetary economist. When I think of a macro economist I think of individuals likeYellen not Summers.
An aside. Janet Yellen was one of my graduate macronomics teacher at the London school of Economics and Political science.The other, her husband, George Akerlof. Also note, Buiter is currently a professor at the London School of Economics and Political Science
Krugman thinks Buiter is nuts for suggesting Summers is neither a macro economist nor a monetary economist. Here is what he says about the runners for the job of Fed governor.
"The race for the top job at the Fed thus far appears to have three runners: the incumbent, Ben Bernanke, Larry Summers, the current director of the NEC and Janet Yellen, president of the Federal Reserve Bank of San Francisco . Both Bernanke and Yellen are qualified for the job. Summers is not.
There are several reasons why Summers would be an inappropriate choice as chairman of the Fed. Let’s start with Fed-relevant knowledge and expertise. Summers is not a monetary economist or macroeconomist. He has never shown any serious interest in researching and understanding the workings of the kind of complex, interdependent dynamic systems that represent the environment a central bank operates in. He is the arch-typical quick and dirty partial equilibrium man, full of clever isolated micro-insights, but incapable of grasping the whole. His macroeconomics stalled at the Keynesian cross. As a monetary economist he has never seen a Federal Funds rate target so low he did not want it just a bit lower."
This is what he says about Janet Yellen.
"Janet Yellen is an outstanding monetary and macroeconomist. I have known this for a long time, because when I came to Yale as a PhD student in 1971, we all passed our Comprehensive Examinations (Comps) in macroeconomics thanks to the ‘Yellen notes’, the wonderful collection of ‘augmented’ lecture notes from James Tobin’s lectures, created by Janet Yellen as Tobin’s teaching assistant. She was a professor at Berkeley for many years, a member of the Board of Governors of the Federal Reserve System from 1994 to 1997 and chair of the President’s Council of Economic Advisors from 1997 till 1999. Her abilities as a regulator and supervisor have not, as far as I know, been tested. These are, of course, at least as important for a chairman of the Fed as his or her command of the conventional monetary policy tools. Her ability to stand up to the populists in the Congress and the relentless lobbying efforts of Wall Street and the rest of the financial establishment are also unknown. But at least we can hope."
Krugman calling Buiter nuts is indeed surprisng to me given the reasons that Buiter gave for not seeing Summers as a macro or monetary economist. When I think of a macro economist I think of individuals likeYellen not Summers.
An aside. Janet Yellen was one of my graduate macronomics teacher at the London school of Economics and Political science.The other, her husband, George Akerlof. Also note, Buiter is currently a professor at the London School of Economics and Political Science
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