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Text of the page (random words):
l street journal following up on thursday s oped mary is as you can tell a well informed interviewer and asks some tough questions she did a great job of pushing hard on the usual wall street wisdom about how the fed though it has not done anything but talk in years is secretly behind every gyration of stock or housing prices the central point came to me hours later as it usually does is the fed in fact holding down interest rates is there some sort of natural market equilibrium that features higher rates now but the fed is pushing down rates that s the conventional view clearly expressed in mary s questions read more posted by john h cochrane at 10 21 pm 49 comments email this blogthis share to x share to facebook share to pinterest labels monetary policy op eds videos 5 million thanks ok it s not marginal revolution it s not even tops in my own family my kids high school animation videos do better 8 million here 5 8 million here but this blog has worked out far better than i hoped when i started and i appreciate all of you who read comment or otherwise participate posted by john h cochrane at 6 00 am 16 comments email this blogthis share to x share to facebook share to pinterest labels economists wednesday september 16 2015 wsj oped director s cut wsj oped the fed needn t rush to normalize an ungated version here via hoover teaser the outcomes we desire from monetary policy are about as good as one could hope inflation is low and steady interest rates are lower than americans have seen in generations unemployment at 5 1 has recovered to near normal and banks and businesses sitting on huge piles of cash don t go bust a boon to financial stability yes economic growth is too slow too many americans have dropped out of the workforce earnings are stagnant and the country faces other serious challenges but monetary policy can t solve long term structural problems opeds are real haikus 950 words is torture for me so lots of good stuff got left on the cutting room floor especially acknowledgement of objections and criticisms yes i m aware of recent empirical work that qe has some effect read more posted by john h cochrane at 6 36 pm 18 comments email this blogthis share to x share to facebook share to pinterest labels commentary inflation monetary policy tuesday september 15 2015 conundrum redux ft s alphaville has an excellent post by matthew klein on long term interest rates organized around greenspan s conundrum the conundrum was that greenspan couldn t control long term rates as he wished long rates do not always track short rates or fed pronouncements as the post nicely shows it was ever thus the following graph from the post struck me as very useful especially as so much bond discussion tends to have short memories if the 10 year rate had followed the pink line you would not have made any more buying 10 year bonds than buying short term bonds the pink line is the forward looking moving average of the one year rates what the graph shows beautifully then is this until 1981 long term bonds were awful you routinely lost money buying 10 year bonds relative to buying one year bonds it goes on year in and year out and starts to look like a constant of nature from 1981 until today the actual 10 year rate has been well above this ex post breakeven rate it s been a great 35 years for long term bond investors that too seems like a constant of nature now of course inflation going down was good for long term bonds but we usually don t think there can be surprises in the same direction 35 years in a row read more posted by john h cochrane at 12 20 pm 8 comments email this blogthis share to x share to facebook share to pinterest labels academic articles finance monetary policy monday september 14 2015 two for growth i saw two very nice short views on growth john taylor can we restart this recovery all over again and andy atkeson lee ohanian and william e simon jr 4 economic growth yes we can achieve that john gets the art prize andy lee and william get the boil it down to basics prose prize safety net policies should not discourage work through high implicit tax rates resulting from means tested programs regulatory policies should not erect barriers to competition and raise costs education policies should expand competition and reward the most successful teachers immigration policies should expand the number of skilled workers and immigrant entrepreneurs and tax policies should simplify the tax code reduce business and personal marginal income tax rates and broaden the tax base posted by john h cochrane at 1 36 pm 4 comments email this blogthis share to x share to facebook share to pinterest labels commentary economists growth friday september 11 2015 sargent on friedman i ran across a little gem by tom sargent the evolution of monetary policy rules alas it s gated in the jedc so you ll need a university ip address to read it and i haven t found a free copy it s a transcript of a talk so doesn t have tom s usual prose polish but insightful nonetheless milton friedman like the rest of us changed his mind over the course of a lifetime coordinating monetary and fiscal policy at different times friedman advocated two apparently polar opposite recommendations in friedman 1948 he proposed the following rule he recommended to the fiscal authorities that they run a balanced budget over the business cycle and he said what the monetary authorities should do whatever the fiscal authority does is to monetize 100 of government debt that monetary rule implies that the entire government deficit is going to be financed with money creation that is it it is interesting to contemplate what friedman s monetary policy rule would imply if the fiscal authority chooses to deviate from friedman s fiscal recommendation by running sustained deficits over the business cycle friedman s monetary rule then throws responsibility for inflation control immediately at the foot of the fiscal authority friedman s 1948 monetary rule tells the fiscal authority that if it wants stable money then it better do the right things if you want a stable price level you had better recognize that you need a sound fiscal policy period the division of responsibilities between monetary and fiscal authorities is clearly and unambiguously delineated it is a completely clean set of rules and this is what friedman advocated until 1960 friedman 1960 advocated what looks to be exactly an opposite set of rules for coordinating monetary and fiscal policy friedman now advocated that the federal reserve come hell or high water it is not a taylor rule for technical reasons should increase high powered money or something close to it at k percent a year where k is the growth rate of the economy the fed is told to stick to the k percent rule no matter what recession or no recession under this rule the arithmetic of the government budget constraint will force the fiscal authority to balance its budget in a present value sense read more posted by john h cochrane at 2 45 pm 4 comments email this blogthis share to x share to facebook share to pinterest labels academic articles commentary economists inflation monetary policy thursday september 10 2015 cheaper sugar a nice trade epigram from david henderson i don t think trump understands that when we open trade to other countries we gain not just as exporters but as consumers but then what u s politician running for president does marco rubio rubio argued a few years ago that he would favour getting rid of quotas on sugar imports if we got something in return but we do get something in return it s called cheaper sugar and getting cheaper sugar by the way might have caused lifesavers not to move from michigan to quebec david might have added we also get more exports automatically without political deals when other countries sell us sugar they get dollars of every single one ends up buying us exports or invested in the us nothing new it s in adam smith but nicely expressed economics needs good stories posted by john h cochrane at 12 54 pm 13 comments email this blogthis share to x share to facebook share to pinterest labels commentary regulation saturday september 5 2015 greece and banking the oped source wall street journal getty images a wall street journal oped with andy atkeson summarizing many points already made on this blog this was published august 5 so today i m allowed to post it in its entirety you ve probably seen it already but this blog is in part an archive if not here is the whole thing with my preferred first paragraph local pdf here greece s ills and more importantly the euro s require a banking fix greece suffered a run on its banks closing them on june 29 payments froze and the economy was paralyzed greek banks reopened on july 20 with the help of the european central bank but many restrictions including those on cash withdrawals and international money transfers remain the crash in the greek stock market when it reopened aug 3 reminds us that greece s economy and financial system are still in awful shape read more posted by john h cochrane at 5 00 am 12 comments email this blogthis share to x share to facebook share to pinterest labels banking commentary euro european debt crisis financial reform op eds politics and economics regulation thursday september 3 2015 historical fiction steve williamson has a very nice post historical fiction rebutting the claim largely by paul krugman that the late 1970s keynesian macroeconomics with adaptive expectations was vindicated in describing the reagan volker era disinflation the claims were startling to say the least as they sharply contradict received wisdom in just about every macro textbook the keynesian is lm model whatever its other virtues or faults failed to predict how quickly inflation would take off in the 1970 as the expectations adjusted phillips curve shifted up it then failed to predict just how quickly inflation would be beaten in the 1980s it predicted agonizing decades of unemployment instead expectations adjusted down again the inflation battle ended quickly the intellectual battle ended with rational expectations and forward looking models at the center of macroeconomics for 30 years just who said what in memos or opeds 40 years ago is somewhat of a fodder for a big blog debate which i won t cover here steve posted a graph from an interesting 1980 james tobin paper simulating what would happen this is a nicer source than old memos or opeds from the early 1980s warning of impeding doom memos and opeds are opinions simulations capture models the graph source james tobin bpea i thought it would be more effective to contrast this graph with the actual data rather than rely on your memories of what happened the black lines are the tobin simulation the blue lines are what actually happened i m not good enough with photoshop to superimpose the graphs so i read tobin s data off his chart the two curves parallel in 81 to 83 with reality moving much faster but in 1984 it all falls apart you can see the phillips curve shift in the classic rational expectations story the booming recovery that followed the 82 recession and you can see the crucial keynesian prediction error after the monetary tightening is over in 1986 no we do not need years and years of grinding 10 unemployment so conventional history is it turns out right after all adaptive expectations islm models and their interpreters were predicting years and years of unemployment to quash inflation and it didn t happen read more posted by john h cochrane at 5 55 pm 25 comments email this blogthis share to x share to facebook share to pinterest labels commentary economists inflation macro monetary policy thesis topics unemployment newer posts older posts home subscribe to posts atom about me and this blog john h cochrane this is a blog of news views and commentary from a humorous free market point of view after one too many rants at the dinner table my kids called me the grumpy economist and hence this blog and its title in real life i m a senior fellow of the hoover institution at stanford i was formerly a professor at the university of chicago booth school of business i m also an adjunct scholar of the cato institute i m not really grumpy by the way any opinions i express are mine alone and do not represent the position of the hoover institution or stanford university view my complete profile follow by email get new posts by email subscribe powered by follow on twitter follow johnhcochrane find posts by label academic articles 207 academic freedom 10 art 10 banking 138 cancel culture 25 commentary 1040 cronyism 54 debt 53 econometrics 18 economists 388 education 4 energy 58 environment 68 essays 9 euro 61 european debt crisis 61 finance 181 financial reform 154 fiscal theory 37 freedom 22 growth 100 health economics 99 housing 27 immigration 18 inequality 66 inflation 261 interesting papers 99 interviews 20 labor 22 language 4 macro 115 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