tag:blogger.com,1999:blog-2499715909956774229.post1114779738418249094..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: HP Filters and Potential OutputStephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger68125tag:blogger.com,1999:blog-2499715909956774229.post-34130927265266276962012-07-19T10:12:45.096-07:002012-07-19T10:12:45.096-07:00Deficit =/= spending. Spending in the US by the f...Deficit =/= spending. Spending in the US by the federal government has only been around 7 percent of GDP, plus transfers that might get you to 18 percent. Add state/local you get to just under 30 percent. Not 40+ percent.<br /><br />That is, the numbers are retard-crazy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-22951150957533435312012-07-18T10:08:15.640-07:002012-07-18T10:08:15.640-07:00Excellent points, Tom, and I agree with all of the...Excellent points, Tom, and I agree with all of them. In fact, the trends you mention seem to support the claim that the growing concentration of wealth and income helped cause, and will continue to cause, aggregate demand problems. <br /><br />If you add to a middle class anxious to restore its savings, a large number of people who are living hand-to-mouth with incomes that are falling rather than rising, then you've got a problem.Anonymoushttps://www.blogger.com/profile/11677815746117897839noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-58437507065292174702012-07-18T07:39:29.810-07:002012-07-18T07:39:29.810-07:00So I looked around a bit and cannot find evidence ...So I looked around a bit and cannot find evidence to support the claim that the numbers are insanely wrong.<br /><br />This article is a bit dated but the findings are consistent on the spending side:<br /><br />http://http-server.carleton.ca/~winers/papers/Comparative_Size_Proofs_CPP_June_%2007.pdf<br /><br />From the OMB: http://www.whitehouse.gov/omb/budget/Historicals<br /><br />The deficit as a percent of GDP for the federal government alone has been 10.1%, 9.0% and 8.7% for the years 2009-2011.<br /><br />It still seems to me that the fear of future taxes stems not from the level of spending but from the gap between revenue and spending.Anonymoushttps://www.blogger.com/profile/05273349811168008836noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-62278355096692603692012-07-18T06:25:27.062-07:002012-07-18T06:25:27.062-07:00"I see that Canadian government expenditures ..."I see that Canadian government expenditures are 44.1% of GPD while in the United States it is 42.2% (not as far apart as some might suspect)"<br /><br />This number is so insanely wrong as to be impossible to understand. That website (which I refuse to visit) must be some right-wing nutfarm.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-56719150687681993072012-07-17T15:20:24.540-07:002012-07-17T15:20:24.540-07:00You use Canada as an example that consumers and bu...You use Canada as an example that consumers and businesses do not fear higher taxes but from<br /><br />http://www.heritage.org/index/explore?view=by-variables<br /><br />I see that Canadian government expenditures are 44.1% of GPD while in the United States it is 42.2% (not as far apart as some might suspect)<br /><br />While in Canada tax receipts are 31.1% of GDP while in the United Sates it is 24%.<br /><br />To me this suggests the potential for tax increases is greater in the United States than in Canada.Anonymoushttps://www.blogger.com/profile/05273349811168008836noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-70242576848928666082012-07-17T07:53:41.834-07:002012-07-17T07:53:41.834-07:00Suggest you read more carefully - I don't have...Suggest you read more carefully - I don't have an argument for whether or not the Fed policy is optimal or suboptimal or the relationship between fed policy and employment - I'm simply pointing out that SWs argument is circular and cannot be used to claim we are at maximum employment. <br /><br />Not sure why you felt the need to go ad hominem - what I proposed is a serious logical flaw in SW's argument. Do you have a serious rebuttal - or just fixated on anonymous insults?Bennoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-31888733450552558462012-07-16T20:11:50.837-07:002012-07-16T20:11:50.837-07:00For a phenomenological explanation of the business...For a phenomenological explanation of the business cycle, as opposed to a what? post-phenomenological theory? see <b>Money as Debt II</b> <br /><br />http://www.youtube.com/watch?v=lsmbWBpnCNk <br /><br />He goes into (his theory of) the origins of the business cycle about 44 minutes in, (the individual loan process + herd psychology) but watch the whole movie.greghttps://www.blogger.com/profile/08201906679062960215noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-81923193575445743832012-07-16T19:41:07.474-07:002012-07-16T19:41:07.474-07:00I think post '47 (WWII) trends in the USA are ...I think post '47 (WWII) trends in the USA are dominated by the families forming, having babies (boom!), and those kids growing.<br />Now about to retire.<br />With a LOT LESS net worth than they had been expecting since about 1995, as most middle income Americans became home owners and had so much Net Worth in the equity in their house.<br /><br />House price equity fall means folks have far less "money for retirement" than they expected. And this drop in Aggregate Net Worth is one reason there is so much less Ag Demand than prior models might predict.<br /><br />The collateral bit is for banks. Consumers see the lost equity/ savings, and now want to save more -- plus the returns on savings are so low, they can't expect savings to compound interest grow much (at 1% it takes what, 72 years to double?)<br /><br />The wrong Fed paying interest on reserves now (not during the bubble) dominates collateral, I think.<br /><br />In general, what if the 1995 (or 1990?)-2006 "trend" is unsustainable?Tom Greyhttps://www.blogger.com/profile/15046612425809449502noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-89155252020842185882012-07-16T17:59:10.755-07:002012-07-16T17:59:10.755-07:00i double checked just to make sure i was not loony...i double checked just to make sure i was not loony (heh). According to the Canadian Mortgage and Housing Corp, the average amortization term at time of approval is 25 years (thats the average, according to the Canadian Association of Mortgage Professionals nov 2011 report, the trend is up and found that for homes purchased in 2011, 41% of mortgages have an amortization period longer<br />than 25 years).<br /><br /><br />as to your point about "overlapping contracts" not being what Keynesians think of as "sticky prices"... fair enough, but my point is that the housing market, having lots of overlapping-but-forward-looking price contracts, will exhibit the same dynamics as any model with overlapping contracts. In the housing market the contracts are much harder to renegotiate. Since its a large share of the economy and 66% of americans are homeowners, the dynamiccs of that one market with have a deep impact.<br /><br />But more importantly, those same overlapping contracts models predict that when contract prices are mostly renegotiated to market (through turnover or whatnot), demand largely returns. the population is growing, eventually demographics and economics will take over.<br /><br />what would help accelerate that process is much higher nominal income growth.dwbnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-29999378980917661252012-07-16T16:54:12.160-07:002012-07-16T16:54:12.160-07:00"is over 25 years." -> should be &quo..."is over 25 years." -> should be "25 years"dwbnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-4845077556926607292012-07-16T16:38:27.832-07:002012-07-16T16:38:27.832-07:00"For example, in Canada the typical mortgage ..."For example, in Canada the typical mortgage contract is for five years or less."<br /><br />i don't think thats 100% accurate. The *term* of a typical mortgage contract in canada might be 5 years, but the amortization period is 25 years. When the term is up, you must renew your mortgage on the remaining principal. The most common *term* is 5 years, but the most common *amortization period* is over 25 years. <br /><br />The "duration" of a US mortgage is also very low - people refi or move making the effective duration of a US mortgage under 4 years typically. The interest rate is not relevant - its the principal outstanding that matters, and with a 25-30 amortization period, you only pay down a small amount of the balance over 5 years.<br /><br />However, you cannot move, refi, or rollover any mortgage in the US or Canada if the principal is higher than the value of the property.dwbnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-15253839458404223782012-07-16T15:16:15.436-07:002012-07-16T15:16:15.436-07:00Stephen you said:
"Whether real GDP is ab...Stephen you said:<br /><br /> "Whether real GDP is above or below some trend measure, or above or below CBO potential output is currently irrelevant to how the Fed should think about "maximum employment." We're there."<br /><br /> As one of the many unemployed certainly encouraging words. The economy as it is is optimum. Guess I'm SOL. <br /><br /> I seem to remember you previously saying there is something that fiscal policy can do-actually via tax rates. Quoting you then:<br /><br /> "Given that the IROR cannot be negative, does this mean we are stuck with the zero lower bound, and the relative price distortions that are the concern of New Keynesians? Well, no. As discussed in this speech by Narayana Kocherlakota and in this paper and this one, fiscal policy gives us a lot of flexibility. Basically, in New Keynesian models, the problems created by sticky prices are relative price distortions which lead to a misallocation of resources. What could be more natural than correcting such distortions with fiscal policy, given a sufficiently rich array of taxes?"<br /><br /> http://newmonetarism.blogspot.com/2010/12/zero-lower-bound-does-not-bind.htmlMike Saxhttps://www.blogger.com/profile/01360689916550576484noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-68831163536233581292012-07-16T15:11:21.342-07:002012-07-16T15:11:21.342-07:00Stephen you said:
"Whether real GDP is a...Stephen you said:<br /><br /> "Whether real GDP is above or below some trend measure, or above or below CBO potential output is currently irrelevant to how the Fed should think about "maximum employment." We're there."<br /><br /> Certainly reassuring to know being that I'm still unemployed. If things are now optimum guess I'm SOL.<br /><br /> I seem to remember you saying before that there could be a role for fiscal policy via the tax code. Quoting you then:<br /><br /> "Given that the IROR cannot be negative, does this mean we are stuck with the zero lower bound, and the relative price distortions that are the concern of New Keynesians? Well, no. As discussed in this speech by Narayana Kocherlakota and in this paper and this one, fiscal policy gives us a lot of flexibility. Basically, in New Keynesian models, the problems created by sticky prices are relative price distortions which lead to a misallocation of resources. What could be more natural than correcting such distortions with fiscal policy, given a sufficiently rich array of taxes?"<br /><br /> http://newmonetarism.blogspot.com/2010/12/zero-lower-bound-does-not-bind.htmlMike Saxhttps://www.blogger.com/profile/01360689916550576484noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-13730074547345015252012-07-16T13:49:23.270-07:002012-07-16T13:49:23.270-07:00I'm not sure what you mean (or what he means, ...I'm not sure what you mean (or what he means, for that matter).Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-25386316313133046112012-07-16T13:40:55.456-07:002012-07-16T13:40:55.456-07:00This is a different issue. It's not price stic...This is a different issue. It's not price stickiness in the sense that Keynesians are typically thinking about it. But it's important, I think. Nominal debt contracts matter. An interesting thing is that the nature of mortgage contracts in the US is in part determined by government intervention in the 1930s. For example, in Canada the typical mortgage contract is for five years or less.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-12099437494972074142012-07-16T13:36:07.072-07:002012-07-16T13:36:07.072-07:00You mean without sticky prices? There is actually ...You mean without sticky prices? There is actually a debate about this. Shimer and Hall claim stickiness helps you match the data. Hagedorn and Manovskii say no.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-49451967435537309262012-07-16T13:11:41.067-07:002012-07-16T13:11:41.067-07:00Scott Sumner asks whether your models assume ratio...Scott Sumner <a href="http://www.themoneyillusion.com/?p=15330#comment-169754" rel="nofollow">asks</a> whether your models assume rationality, and if so how you can justify setting aside the EMH in claiming that markets have underpriced the risk of inflation.TGGPhttps://www.blogger.com/profile/11017651009634767649noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-79585603259403102402012-07-16T12:48:46.398-07:002012-07-16T12:48:46.398-07:00So your argument is that the Fed must think it can...So your argument is that the Fed must think it can do something but chooses not to, therefore imposing (according to its own subjective assessment) suboptimal policies. I think the tinfoil may be frying your brain.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-57292130173541870282012-07-16T12:47:05.815-07:002012-07-16T12:47:05.815-07:00I'm certain Allan has better things to do than...I'm certain Allan has better things to do than bandy words with a halfwit.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-3268207561330563372012-07-16T11:57:09.758-07:002012-07-16T11:57:09.758-07:00Using SW's own definitions, "we're at...Using SW's own definitions, "we're at maximum employment" is logically only a statement that present policies are valued above all others.<br /><br />The basic arguments are circular - ending up back at a value judgment. If you think we're at maximum employment by SW's definition, then you believe present policies are "optimal" and "maximize aggregate economic welfare" so we are at our potential GDP. However, if you value the policies as suboptimal, then voila, we are no longer at maximum employment and something can be done. <br /><br />Also, SW has managed to effectively define the Fed's employment mandate as meaningless. In effect, as long as the Fed believes it is doing the optimal thing it is, by definition, doing the optimal thing. And here I thought it was only the Supreme Court that could interpret a law away.Bennoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-42464868785605273832012-07-16T08:48:09.968-07:002012-07-16T08:48:09.968-07:00Allan Meltzer, is that you?
So SW has been ghosti...Allan Meltzer, is that you?<br /><br />So SW has been ghosting your columns for the WSJ?Anonymoushttps://www.blogger.com/profile/07904132869021579763noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-48393725736617479392012-07-16T08:00:34.303-07:002012-07-16T08:00:34.303-07:00"You ridicule the sticky wages idea, but you ..."You ridicule the sticky wages idea, but you never even mention nominal wage cut resistance, which you could imagine lasting for many years."<br /><br />I can imagine ninjas with wings who attack goblins in a war occurring entirely within my left nostril as well. Imagination is fun! Like inventing positional externalities to justify taking successful people's money.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-48058589577780185072012-07-16T07:58:33.569-07:002012-07-16T07:58:33.569-07:00And you have a mental problem, John D.And you have a mental problem, John D.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-54797995124889288272012-07-16T05:31:28.122-07:002012-07-16T05:31:28.122-07:00Noah pretty much sums up what is wrong with all of...Noah pretty much sums up what is wrong with all of this when he wrote, yesterday:<br /><br />Now, some modern macroeconomists will tell you that all these judgment calls are fine. A theorist's conclusions, they will tell you, follow from their assumptions. Judgment calls are just assumptions.The job of a theorist, they will tell you, is to make a theory that is internally consistent. The purpose of the mathematics is to show that the conclusions - the policy recommendations, the forecasts - flow logically from the assumptions, or judgment calls. As for which judgment calls are appropriate, well, that is what academics spend their time arguing about, using their common sense to guide them.<br /><br />Doesn't it seem to you that this way of doing "science" is a little too vulnerable to cultural/political biases among the body of practicing macroeconomists? It seems that way to me<br /><br />This is clearly one of those cultural/political biases:<br /><br />The "dual mandate" the Fed operates under includes language to the effect that the Fed should try to achieve maximum employment. Lacker says we're there, and I'm inclined to agree with him.<br /><br />SW, given the errors in your past inclinations (inflation, interest rates, etc.) whatever makes you think you are right on this one, especially as you are so wrong on the facts. The gov't need only borrow a very few billions at nominal interest, buy rakes, and employ millions at minimum wages.<br /><br />We have an aggregate demand problem.Anonymoushttps://www.blogger.com/profile/07904132869021579763noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-46971020320932855992012-07-16T00:44:31.805-07:002012-07-16T00:44:31.805-07:00In fact with our current definition of recession/d...In fact with our current definition of recession/depression, unemployment could be 30% and if we have two quarters of GDP growth from the 70% who do have jobs, economists would say the Depressions over!Richard H. Serlinhttps://www.blogger.com/profile/09824966626830758801noreply@blogger.com