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Links (6/5/19)

Thursday, June 13, 2019 17:00

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What to Do About China? – J. Bradford DeLong By attempting to “get tough” with China, US President Donald Trump’s administration is highlighting the extent to which America’s star has fallen this century. If the US ever wants to reclaim the standing it once had in the world, it must become the country it would have been if Al Gore had won the 2000 presidential election.
Trump Makes America Irresponsible Again – Paul Krugman … Trump says that “TARIFF is a beautiful word indeed,” but the actual history of U.S. tariffs isn’t pretty — and not just because tariffs, whatever the tweeter in chief says, are in practice taxes on Americans, not foreigners. In fact, it’s now a good bet that Trump’s tariffs will more than wipe out whatever breaks middle-class Americans got from the 2017 tax cut. …
The Economics of Rihanna’s Superstardom – Alan Krueger The hit song “The Winner Takes It All” was released by the Swedish pop group Abba in 1980. That year also happened to be a turning point for economic inequality. Since 1980, more than 100 percent of the total growth in income in the United States has gone to the top 10 percent of families. A whopping two-thirds of all income gains have gone to the top 1 percent. The bottom 90 percent saw their combined income actually shrink. Why has the economy become more of a winner-take-all affair? …
Why the U.S. economy is worse than it seems – Bernstein, Parrott, Zandi Much has been made lately of the hot economy, a narrative driven largely by a long run of strong jobs numbers. But this enthusiastic story line is ignoring a few disturbing structural problems that suggest that the economy is not as strong as these numbers suggest. Underneath the hood, problems persist, including earnings below what families need to get by, stark inequalities in wealth and income, an increasingly jittery stock market, an affordable housing shortage, damaged fiscal accounts, and slower growth on the horizon. …
Powell Tells Us What We Should Already Know – Tim Duy Federal Reserve Chair Jerome Powell delivered opening remarks for the Fed’s “Conference on Monetary Policy Strategy, Tools, and Communications Practices.” Market participants buzzed over the inclusion of this paragraph: I’d like first to say a word about recent developments involving trade negotiations and other matters. We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective. My comments today, like this conference, will focus on longer-run issues that will remain even as the issues of the moment evolve. The inclusion of this paragraph is notable. It looks like a last minute addition. It was clearly intended to send a signal. But what sort of signal? …
Old economists can teach us new tricks – Financial Times Economists’ reputations, like skirt lengths, go in and out of fashion. In the past 10 years, John Maynard Keynes has received fresh appreciation, and Hyman Minsky has been having a moment. I think it’s time for John Kenneth Galbraith to have his. The late liberal economist’s “concept of countervailing power”, put forth in his 1952 book American Capitalism, is a critique of the “market knows best” view that has dominated the US political economy since the era of Ronald Reagan. There could not be a better time to re-read it. …
It’s tempting for the Fed to move slowly on interest rates. That would be a grave error. – Larry Summers The Federal Reserve will over the next several months make monetary policy decisions that are as consequential as any it has made since the financial crisis and Great Recession of 2007-2008. The temptation in a highly uncertain and politicized environment will be to move cautiously. Yet this would be a grave error in the current context, where a recession could be catastrophic and the odds of one beginning in the next year, while still less than 50-50, now appear significant and increasing.
The climate crisis is our third world war. It needs a bold response – Joseph Stiglitz Advocates of the Green New Deal say there is great urgency in dealing with the climate crisis and highlight the scale and scope of what is required to combat it. They are right. They use the term “New Deal” to evoke the massive response by Franklin Delano Roosevelt and the United States government to the Great Depression. An even better analogy would be the country’s mobilization to fight World War II. Critics ask, “Can we afford it?” and complain that Green New Deal proponents confound the fight to preserve the planet, to which all right-minded individuals should agree, with a more controversial agenda for societal transformation. On both accounts the critics are wrong.
Korea, the “Germany” of Northeast Asia… – Brad Setser Korea, like Germany, is an export driven economy that has been hit hard by the recent slowdown in global trade. Output fell in the first quarter. Like Germany, Korea specializes in manufacturing. It has been slowed by the broader global slowdown in auto demand—and Hyundai isn’t doing quite as well in North America as it once did. Korea has also seen its terms of trade deteriorate thanks to the recent fall in the price of many semiconductors. And Korea, like Germany, has been reluctant to use its obvious fiscal space even with a slowing economy. …
All bark but no bite? What does the yield curve tell us about growth? – Bank Underground …in this post we analyse how the yield curve has performed as a predictor of GDP growth over time in the US and the UK, focussing on the performance of the different components of the yield curve: expected short interest rates and term premia. …
Curbing Ticket Bots – Regulatory Review Cardi B and Offset may have stolen the stage at the Rolling Loud Festival in December, but the issues in the entertainment industry extend far beyond artists’ relationship problems. For consumers, problems arise from ticket bots. …
Improving U.S. Monetary Policy Communications – Cecchetti & Schoenholtz “When I was at the Federal Reserve, I occasionally observed that monetary policy is 98 percent talk and only 2 percent action.” Ben S. Bernanke, Inaugurating a New Blog, March 30, 2015. “I do not like them, Sam-I-am. I do not like green eggs and ham.” Dr. Seuss, Green Eggs and Ham, 1965. Tomorrow, June 4, we will present our paper, Improving U.S. Monetary Policy Communications, as part of the Federal Reserve’s review of its monetary policy strategy, tools, and communications practices. This post summarizes our methodology, analysis and recommendations. …
Some Snapshots of the Economic Well-Being of U.S. Households – Tim Taylor For the last six years, the Federal Reserve has been doing an annual Survey of Household Economics and Decisionmaking, which is designed to be nationally representative of the 18-and-older US population. The most recent survey was carried out in October and November 2018, and the Federal Reserve published the result in “Report on the Economic Well-Being of U.S. Households in 2018″ in May 2019. Here, I’ll offer a few tables from the report that especially caught my eye. What was interesting to me is how the survey answers conveyed both a sense that the US economy is going pretty well, but also that many people felt dissatisfied. …
Trump Is Slowing US Economic Growth – Robert J. Barro The current state of US macroeconomic policymaking across four key areas does not bode well. Although the 2017 tax legislation has done its job in promoting faster growth, rising trade tensions, persistent regulatory burdens, and a lack of investment in infrastructure all threaten to limit the US economy’s potential.
Interview with William A Darity Jr – FRB Minneapolis Reparations for African Americans are in the news these days as presidential candidates consider whether and how to support such initiatives. Pundits weigh in. Writers opine. Politicians test waters. The debate is far from new, obviously. Union General William Sherman promised 40 acres (and later, the mule) to former slaves in January 1865, a debt never paid. No economist has addressed the issue with the persistence and power that Duke University’s William Darity Jr. has. For nearly three decades, “Sandy” Darity has written papers and given presentations discussing the rationale and design of reparations policy.
Why Is the Fed’s Balance Sheet Still So Big? – FRBSF The Federal Reserve’s balance sheet is significantly larger today than it was before the financial crisis of 2008–2009. Rising demand for currency due to greater economic activity is partly responsible for this increase. The balance sheet will also need to remain large because the Federal Reserve now implements monetary policy in a regime of ample reserves, using a different set of tools than in the past to achieve its interest rate target.
Lagged Variables as Instruments – Marc F. Bellemare A few years ago, Taka Masaki, Tom Pepinsky, and I published an article in the Journal of Politics titled “Lagged Explanatory Variables and the Estimation of Causal Effects,” where we looked at the phenomenon (then relatively widespread in political science, less so in economics) of lagging an explanatory variable in an effort to exogenize it…
Perspectives on U.S. Monetary Policy Tools and Instruments – Jim Hamilton The Federal Reserve characterizes its current policy decisions in terms of targets for the fed funds rate and the size of its balance sheet. The fed funds rate today is essentially an administered rate that is heavily influenced by regulatory arbitrage and divorced from its traditional role as a signal of liquidity in the banking system. The size of the Fed’s balance sheet is at best a very blunt instrument for influencing interest rates. In this paper I compare the current operating system with the historical U.S. system and the procedures of other central banks. I then examine strategies for transitioning from the current system to one that would give the Federal Reserve more accurate tools with which to achieve its strategic objective of influencing inflation and output.
The intergenerational effects of a large wealth shock – VoxEU One striking feature of many underdeveloped societies is that economic power is concentrated in the hands of very small powerful elites. This column explores why some elites how remarkable persistence, even after major economic disruptions, using the American Civil War’s effect on the Southern states. Using census data, it shows that when the abolition of slavery threatened their economic status, Southern elites invested in their social networks which helped them to recoup their losses fairly quickly.

Source: http://economistsview.typepad.com/economistsview/2019/06/links-6519.html

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