tag:blogger.com,1999:blog-3621026.post3387353370139961106..comments2024-03-29T06:05:04.162+01:00Comments on Robert's Stochastic thoughts: Roberthttp://www.blogger.com/profile/14455788499385673507noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-3621026.post-48698734013398047212009-04-09T16:35:00.000+02:002009-04-09T16:35:00.000+02:00The Keynes quotation is actually a different point...The Keynes quotation is actually a different point from Christy's argument (or at least what Christy's argument should be.) During the late 1930s the purchasing power of gold in world commodity markets rose and fell with shifts in world demand for gold. Massive worldwide dishoarding in 1936-37 pushed commodity prices sharply higher all over the world. Massive gold hoarding in late 1937-38 pushed commodity prices much lower. Gold flows by themselves do not change world gold demand, and hence have no effect on world commodity prices. But by late 1930s only the U.S. and Belgium were still on the gold standard. Thus as gold left Europe and went to the U.S., it did not reduce European money supplies, but did boost the U.S. money supply. So the net effect was less gold demand and thus higher prices. So why did we have mild deflation from mid-1938 to mid-1940? Because of money hoarding at near zero interest rates. The gold pushed up the base, but the base didn't push up prices. Christy is half right. The gold flows did help, ceteris paribus. But I don't think they mattered much in the end. Ceteris paribus we would have had steeper deflation in the late 1930s without gold inflows. But in reality FDR wouldn't have allowed that to happen. He would have pressed the Fed to reduce its gold ratio (less gold demand) and if they refused he would again have devalued the dollar--which had very effectively boosted prices in 1933.Scott Sumnerhttps://www.blogger.com/profile/15864819372390187247noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-38271550095322778042009-04-01T23:13:00.000+02:002009-04-01T23:13:00.000+02:00http://delong.typepad.com/sdj/2009/04/g-20-meeting...http://delong.typepad.com/sdj/2009/04/g-20-meeting-forecast.html<BR/><BR/>April 1, 2009<BR/><BR/>G-20 Meeting Forecast<BR/>By Brad DeLong<BR/><BR/> 1. Obama will tell the G-20 leaders what they ought to do.<BR/><BR/> 2. They will complain.<BR/><BR/> 3. They will do about half of it.<BR/><BR/> 4. That they do half of it will be an extraordinarily good outcome--the best episode of international policy coordination since Bretton Woods itself.<BR/><BR/> 5. Will them doing half of what they ought to do be good enough? Ah, that is the question<BR/><BR/>If we judge the Obama administration based on performance relative to the difficulty of the dive, I think their scores are good: 9.7, 9.3, 8.7, 9.1, and a 4.4 from the East German judge...<BR/><BR/>[Beyond all arrogance, no surprise though.]Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-72531640811553041712009-03-31T19:25:00.000+02:002009-03-31T19:25:00.000+02:00"Plausible estimates of the effects of fiscal and ..."Plausible estimates of the effects of fiscal and monetary changes indicate that nearly all the observed recovery of the U.S. economy prior to 1942 was due to monetary expansion."<BR/><BR/>Romer is denying any economic significance of the Roosevelt Presidency. I find this offensively wrong as did the tens of millions of Roosevelt supporters from 1933 on.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-77856476335116952882009-03-31T19:18:00.000+02:002009-03-31T19:18:00.000+02:00The matter is easy to understand, Christina Romer ...The matter is easy to understand, Christina Romer has decided that Roosevelt and New Deal policy were of no particular effect is our recovering from the Depression. This is false but this is the argument conservatives have made for decades and Romer has decided to agree. Not that the research agrees, only that Romer does.<BR/><BR/>I have to be careful though, because the Berkeley academic police will be alerted if I criticize Romer too much.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-12014765569061061572009-03-31T04:32:00.000+02:002009-03-31T04:32:00.000+02:00Bruce Wilder Yes indeed. If the US was in a liqui...Bruce Wilder <BR/><BR/>Yes indeed. If the US was in a liquidity trap, then foreign gold didn't help us. As far as I can see, Romer really doesn't address this possibility in any way, so her estimates might be totally wrong, because they are based on the assumption that non liquidity trap data can be used to estimate effects during a liquidity trap.<BR/>Excellent point.<BR/><BR/>Anonymous 1. I don't see any conservative Roosevelt bashing in the paper. The criticism of Roosevelt was that he listened to conservatives and didn't deficit spend enough. <BR/><BR/>Also Romer is just talking GNP. The purpose of the WPA was not just to pump up the economy and build things which were valuable and wouldn't be built by the private sector. It's aim was also to keep people from starving. The Same GNP without public intervention would have implied many more people in absolute total life threatening poverty. The WPA was better than cash unemployment insurance, but life without either would have been much briefer for many Americans.<BR/><BR/>Anonymous 2. I'd be respectful of Roosevelt too if I were writing a letter to him. In fact, I respect Roosevelt, but I also wish he had run bigger deficits.Roberthttps://www.blogger.com/profile/14455788499385673507noreply@blogger.comtag:blogger.com,1999:blog-3621026.post-75254111123341216712009-03-30T16:44:00.000+02:002009-03-30T16:44:00.000+02:00There we have the braver than brave pretend libera...There we have the braver than brave pretend liberal Robert Waldmann having the nerve to condemn the timidity of Roosevelt by pretending to be Keynes. Keynes of course was remarkably respectful of Roosevelt.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-58271827788244663112009-03-30T16:39:00.000+02:002009-03-30T16:39:00.000+02:00"This paper examines the role of aggregate demand ..."This paper examines the role of aggregate demand stimulus in ending the Great Depression. Plausible estimates of the effects of fiscal and monetary changes indicate that nearly all the observed recovery of the U.S. economy prior to 1942 was due to monetary expansion."<BR/><BR/>The paper by Christina Romer, defended by supposedly liberal economists, is meant only to be insulting to the Roosevelt Administration, and is absurd as such in dismissing Roosevelt in providing for jobs for 3.5 million individuals in a population of about 127 million.<BR/><BR/>This is only conservative Roosevelt bashing with a supposed pretense at seeming liberal. Roosevelt bashing conservatives have been joyful.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-3621026.post-23602645667583350122009-03-30T11:01:00.000+02:002009-03-30T11:01:00.000+02:00I'm no fan of Christina Romer's view of the Great ...I'm no fan of Christina Romer's view of the Great Depression. While I think her work documenting the size and effect of the monetary flow is a valuable addition to the history of that period, it is NOT the history of the period.<BR/><BR/>Having documented FDR's fiscal timidity, and seven or eight years with no evidence of "self-correction", she's now supervising Obama's fiscal timidity, but expecting different results. But, leave that for another day.<BR/><BR/>Romer's thesis would be more plausible if Roosevelt hadn't taken the U.S. so far off the gold standard that owning monetary gold was actually illegal, and if real interest rates were not pretty much flat on the floor for the whole period. What she calls a monetary expansion might better be characterized as equivalent to fiscal expansion -- it was people with money from outside the existing circular flow, adding to the circular flow by spending. Her talk of a "swelled money stock" was surely an audience pleaser among monetarists -- Christina knows her audience -- but it is not an entirely unprejudiced characterization, and, I question whether its analytical significance is established for the historical circumstances. The implicit thesis appears to be that a sufficiently vigorous monetary expansion could have put everything right, despite the inadequate fiscal stimulus of New Deal relief and restructuring projects. After all, the inadvertent monetary expansion of European gold imports did the trick, to a limited extent -- in Romer's narrative, at least.<BR/><BR/>I don't think the revival of our powers of historical empathy and projection, aroused by the present crisis, have done much to enhance the prestige of the monetarist analysis of the Great Depression, despite Romer's good work. (And, it is good work, as far as establishing important facts in the record. I disparage her academic salesmanship, not her actual scholarship.)<BR/><BR/>In any case, the key historical issue of the Depression remains the issue of wages. New Deal policy forced up wage rates, particularly in industrial sectors that were unionizing.<BR/><BR/>If the money-price-system is seriously out-of-whack, then lowering wages can be "without bound" as Keynes would say, and still have no good effect, while raising wages in sectors enjoying large rents might actually have positive effects. But, was the money-price-system seriously out of whack, 1933-40? And, if it was, what does that imply about the shape of the expected effects of that refugee gold flowing from Europe?Bruce Wilderhttps://www.blogger.com/profile/09631065564839959376noreply@blogger.com