Relevant and even prescient commentary on news, politics and the economy.

Answers: Taking IOR to Zero

I want to thank all the commenters on my last post — at Angry Bear, at Asymptosis, and at Mike Norman’s blog. You’ve provided me with exactly the education I hoped to achieve. Here’s hoping others benefited similarly. I asked: what would happen if the the Fed cut the interest rate on reserves from its […]

Question for Market Monetarists and MMTers: What Happens if IOR Goes to Zero?

For the non-cognoscenti: “IOR” is interest on reserves. Banks keep money in their accounts at the Fed. In October, 2008 the Fed started paying .25% interest on those accounts. The Fed’s also engaged in “quantitative easing,” a.k.a. open-market purchases on steroids, creating new money and using it to buy $1.6 trillion dollars worth of bonds […]

Menzie Chinn Explains it All for You: Demand Inflation Now!

Whether it’s Market Monetarist NGDP targeting (a.k.a. Damn The Inflation Rate; We Need Growth!) or Menzie’s recommendation of Conditional Inflation Targeting with a notably higher target, everything tells us that somewhat higher inflation is the current path to greater and more widespread long-term prosperity. Raising the expected inflation rate will lower real interest rates and […]

The Great Ricardian Equivalence Debate of 2011: Do Mainstream Economists Agree on Anything?

Krugman started it, in response to Lucas. Everyone piles on. Plutocracy Files has the list of links. (Plus don’t miss Nick Rowe’s, which includes a long comment thread.) Here’s what wows me: all these world-classical economists are accusing each other of contradicting “textbook economics,” and circling through extraordinary contortions in their efforts to reconcile that school […]

Casey Mulligan Wonders Why People Use Unemployment Insurance

Casey Mulligan is curious: what could have caused the big uptick in the uptake on unemployment insurance in recent years? It’s a mystery. Or, maybe not: Sorry, the JOLTS data only goes back to 2001. Which directly addresses Mulligan’s basic assertion: People are lazy. They don’t like to work. Well yeah. (People especially don’t like […]

This Time Is Different: Federal Debt Didn’t Dive Before the Depression

Randall Wray made a fascinating observation a while back: Since 1776 there have been six periods of substantial budget surpluses and significant reduction of the debt. … The United States has also experienced six periods of depression. The depressions began in 1819, 1837, 1857, 1873, 1893, and 1929. And I confirmed it (graphs): Every depression in U.S. history was […]

It’s Beginning to Look a Lot More Riskless (To the tune of…)

There’s such fun in disastering. When you’ve won the mastering.Of the u-ni-verse! Hat tip to RJ Sigmund: Lyrics by Marcy Shaffer (Dan here … lyrics under the fold) It’s beginning to look a lot more riskless.At least for guys like me.It’s neat being this elite.The government makes it sweet.Complete with robber baron guarantee! It’s beginning […]

A Surfeit of Dearth? Tight "Money" and the Decline of AAAs

This Credit Suisse graph posted by Cardiff Garcia on December 5 has been getting some serious attention in wonkier sections of the econoblogosphere: And Angry Bear‘s own Rebecca Wilder gave us this on December 21: 2007-2011 in charts: moving down in quality 2007… …Vs. 2011 Brad DeLong discussed this on December 21, riffing off David […]

“Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity Is Not Expensive”

Real Reasons Bankers Don’t Like Basel’s Rules: Clive Crook – Bloomberg. Why bankers’ whining about higher equity requirements is just that: A much-cited paper by Stanford’s Anat Admati and colleagues — “Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity Is Not Expensive” — should have ended this debate once […]