Facebook Twitter LinkedIn That’s the title of my new book, which can be found for free at this link: Alternative Approaches to Monetary Policy A few comments: 1. This is just a rough draft, although it has gone through the editorial process, so I hope there are relatively few typos. I will revise the book after receiving feedback, and the revised book will eventually come out as a “first edition.” That version will also be available online for free, or in paper for a modest price. 2. You can think of this book as addressing the question of how to identify monetary policy. In my view, a big f ..read more

Facebook Twitter LinkedIn There seems to be an increasingly widely held view that the US is about to slide into recession. One piece of evidence is the inversion of the yield curve. And yet, the level of fed funds futures is still pretty high in early 2024, around 3% to 4%. That’s much higher than during 2019, which was a boom year. Indeed, that suggests a soft landing. So what’s going on? I’m not sure, but here’s one hypothesis worth considering: Let’s suppose that I’m correct in my claim that the US economy is wildly overheated. In that case, we might observe a recession in growth rate term ..read more

Facebook Twitter LinkedIn In November, a SARS outbreak occurs in an area around a wild animal market in a giant city in southern China. The city is more that 1000 kilometers from the bat caves where SARS viruses are believe to originate. It is believed that the virus went from bats to mammals sold in the market, who then infected human workers and shoppers. Of course I’m describing the 2002 SARS-1 outbreak. And also the 2019 SARS-2 outbreak. And yet for some bizarre reason, most people view these two events as being completely unrelated. An alternative “lab leak” hypothesis has gained majority ..read more

Facebook Twitter LinkedIn In 1968, President Johnson tried to use tax increases to control inflation. The policy was a miserable failure. This policy experiment helped to launch the supply side movement. Economists like Art Laffer and Robert Mundell argued that a combination of tax cuts and monetary austerity was the best way to achieve a combination of growth and low inflation. Now we have some progressives arguing the exact opposite, claiming that the best way to control inflation is with higher taxes and less emphasis on contractionary monetary policy. I’d prefer that we don’t use fiscal po ..read more

Facebook Twitter LinkedIn How many people wish to destroy all human life? I’d guess the answer is at least six digits, maybe seven. In other words, hundreds of thousands, if not millions. (If 0.1% of humans wish to kill humanity, that’s 8 million people. If it’s 0.01%, then 800,000 people.) In the past few years, I can recall several stories of airline pilots committing suicide and taking an entire commercial airliner with them. Depressed people seem to occasionally have an urge to spread their own suffering onto the rest of humanity. Are airline pilots typical human beings? No, they are sc ..read more

Facebook Twitter LinkedIn . . . GOP voters will pick Trump every time. I keep telling you guys not to count out Trump. He was counted out after the 2020 election. He was counted out after January 6. After the midterms, DeSantis rose far above Trump in the betting markets, as voters rejected all those Trumpian nutcases. Now Trump’s back on top in the polls and betting markets. Of course DeSantis has lots of things going for him. Almost all conservative intellectuals support him over Trump. GOP politicians privately support him. College educated GOP voters prefer him by a wide margin. The betti ..read more

Facebook Twitter LinkedIn After everything that’s happened over the last decade, it’s hard to believe that Europeans would trust any commitments made by US policymakers. And yet according to the Financial Times: Europe’s financial regulators are furious at the handling of the Silicon Valley Bank collapse, privately accusing US authorities of tearing up a rule book for failed banks that they had helped to write. While the disapproval has yet to be conveyed in a formal setting, some of the region’s top policymakers are seething over the decision to cover all depositors at SVB, fearing it will u ..read more

Facebook Twitter LinkedIn Suppose we’d recently experienced 15 years of roughly 10% NGDP growth (as in the late 1960s and the 1970s.) Now NGDP growth slows to 7%. It would be reasonable to call the slowdown a successful contractionary monetary policy. Twelve month NGDP growth was 12.2% in the fourth quarter of 2021, and slowed to 7.4% in the fourth quarter of 2022. So does that also represent a successful application of a contractionary monetary policy? No. Context is everything. Over the last 30 years, the Fed has successfully kept the average inflation rate fairly close to 2%, until recently ..read more

Facebook Twitter LinkedIn In the remote chance you are planning a trip to Chile, here are a few travel tips: 1. Do not visit Chile during February. This is far and away my most important suggestion. Most of the problems we ran into were directly or indirectly related to the decision to visit at a time when the tourist areas are very crowded. I’d suggest December or March. 2. Visiting Chile is much more difficult than visiting New Zealand, and requires more careful planning. Of Chile’s 4 most important scenic areas, we only saw one (Torres del Paine.) And that’s despite renting a car and drivin ..read more

Facebook Twitter LinkedIn The New York Times has some bad news for the foreign policy establishment in the US: The announcement by Iran and Saudi Arabia that they are re-establishing diplomatic ties could lead to a major realignment in the Middle East. It also represents a geopolitical challenge for the United States and a victory for China, which brokered the talks between the two longstanding rivals. Under the agreement announced on Friday, Iran and Saudi Arabia will patch up a seven-year split by reviving a security cooperation pact, reopening embassies in each other’s countries ..read more