Ezra Klein shows how it is done

Ezra Klein's mia culpa on Iraq is actually impressive.  He convinced me that he has learned from his huge mistake.  This is impressive, because he was barely legally adult at the time he made it.  I think everyone should read his column.

I think no one should waste his or her time reading my comment which I reproduce below.

This is a really excellent column.  I'm sure it was painful to write.  I have three thoughts.

First it seems to me that invading Iraq would have been an even worse mistake if there were WMD.  It is clear they wouldn't have been secured.   Before the invasion, it was clear that the US intelligence community didn't know where WMD were (they had given all the useful information they had to the UN inspectors and had given no useful information to the UN inspectors).  After the invasion, the failure to secure Iraqi high explosives (whose location was known) makes it very clear that if there had been WMD they would have fallen into the hands of insurgents and, eventually, al Qaeda in Iraq.  It might be hard to deter Saddam Hussein, but it is impossible to deter terrorists who are willing to commit suicide.

Second, Pollack continues to insist that Saddam Hussein was undeterable.  But we now know that he complied with all UN resolutions before the invasion (not long before but before).  What evidence could possibly convince Pollack that he was deterable ?  I think Pollack is trying to escape into the unknowable.  We can't read Saddam Hussein's mind.  It is impossible in theory to prove that Saddam Hussein wasn't so dangerous that we had to invade Iraq.  It is impossible in theory to prove that Cameron isn't so dangerous that we have to invade the UK.  In this case I think that claiming telepathy is the last resort of someone who was totally utterly wrong and now refuses to deal with facts and data.

Third note how little new evidence collected in 2003 before the invasion affected peoples' beliefs about WMD in Iraq.  This includes me (I was always convinced that Iraq didn't have a threatening nuclear weapons program and was convinced that there was anthrax and nerve gas in Iraq until well after the invasion).  The total collapse of the Bush administration's case that there was an active Iraqi nuclear weapons program and the conclusions of the IAEA seem not to have affected anyone's beliefs at all.  I think that the problem is that most people engaged in the discussion chose a side and then made a case.  

My belief is that once a politician or pundit has publicly declared a position, he or she generally won't allow evidence to cause a retraction.  I am quite sure that this is an optimal strategy to maximize influence or power.  Admitting one was wrong is costly (that's why I admire the column so much).  There is something terribly wrong about the incentives that pundits and politicians and such give each other.  Yes people are also naturally stubborn, but encouraging sticking to one's position in spite of contrary evidence makes things worse.

Chait Contra Chait

Jon Chait is hard on himself too.  He had the integrity to write a post on the invasion of Iraq (which he supported) on its 10th anniversary.  This was clearly very hard for him to do.  In fact, he didn't manage to stick to mie colpe and went on to arn anti-interventionists that they will have to apologise some time too.

Still it was a noble effort.  Unfortunately, I think he still doesn't undestand why his 2003 reasoning was total nonsense.  I tried to explain this to him in a comment.


It is admirable of you to so concisely explain the logic behind your support for the invasion.  The logic however, is very strange.  You seem to jump from an analysis of whether an invasion would be a violation of international law to the conclusion that it would be a good idea.

You note that you had an incorrect belief that there were WMD in Iraq.  I also believed that with great confidence.  I concluded that, therefore, it would be a terrible idea to invade.  Imagine Iraq with anthrax and nerve gas.  It is very clear that the WMD would not have been secured by the invading armies (we know that because conventional weapons weren't secured at all).  some would have fallen into the hands of insurgents.

Are you seriously prepared to argue that it would have been unlikely for none of the WMD to end up in the hands of  al Qaeda in Iraq ?  I note the organization didn't exist when we invaded and that it has access to massive amounts of high explosives.

Did you really think  it preferable to have WMD in a chaotic post war country(not inevitably as chaotic as it was but still chaotic) than in a country ruled by a  deterable dictator ?  I opposed the invasion, but doubted my judgment exactly when I found out that there weren't WMD in Iraq.  Obviously, WMD in Iraq would have been an excellent reason to not invade Iraq.  Here is the 12th blog post I wrote in my life making an argument which you still haven't faced
http://rjwaldmann.blogspot.it/2003/03/well-i-managed-to-resist-posting-about.html

I have other criticisms  too. I note your examples of successful interventions did not include invasion and occupation.

At the time of the invasion Blix was begging for more time -- for months not years not weeks months.  Bush's huge rush should have convinced us that he feared Blix would report that Iraq was WMD fee.  The evidence on WMD in Iraq changed in 2003 as Saddam Hussein ceased his interference in inspections (the Bush administration said active participation was required -- that is handing over WMD -- it is now clear that there was nothing Saddam Hussein could have done to convince Bush he had complied).  In the event, you are clearly wrong about international law (the invasion was illegal as Saddam Hussein had complied).  This isn't as important as understanding that something can be legal but not a good idea.

A problem is that it is very costly to admit that new evidence has proven one wrong.  Professional incentives lead to rational stubborness.

I've got to stop doing this

I have a very high opinion of Matt Yglesias and very much enjoy reading his blog.   I think this post is brilliant.

But I have to learn to skip posts on monetary policy.  I have learned a new rule -- don't read any post with the word "Bernanke" in it.  The latest is a post on what Bernanke can do based on complete indifference to the law.  Yglesias proposes that Bernanke print up a bunch of dollars and give them to Cyprus.  Why pick on Bernanke ? I propose that Yglesias print up a bunch of dollars and give them to Cyprus.  It would be just as legal for him to do it as for Bernanke to do it.

His post.

My comment.


I think I finally understand why you are convinced that the Fed can save the US economy.  You have decided to ignore the Federal Reserve Act and have decided that US monies may be disbursed without regard for the law (that is you have decided to ignore the consitution too).

The policy you describe would be an impeachable offense.  It would be a felony called misappropriation of funds.  Dollars do not belong to Bernanke and he can't give them away.  The Fed can loan to depositary institutions, it can buy US government issued securities and, during a financial crisis, it can loan to entities other than depositary institutions.  It Can Not give.

I should have guessed from all of your references to "helicopter Ben" that you actually believe that a helicopter drop of money would be legal.  Nope.  Bernanke has no more legal right to just print up money and give it away than you do.

If he tried it, Ron Paul would sue claiming to be harmed because his dollars were diluted.  And he would win, because the law is clear and anyone who owns a dollar has standing.

For years we have been arguing about whether monetary policy can do it or whether fiscal policy is needed.  I finally understand that your view is that giving money away is monetary policy.  The key difference is that a shift in fiscal policy requires Congressional assent and can be blocked by Republicans in Congress.  A helicopter drop of money is a combined monetary policy (it expands the high powered money supply not that this matters at all at the moment) and fiscal policy (it increases Federal Government liabilities without increasing Federal Government assets creating the illusion of wealth which is just what we need right now).

Shooting Fish in a Cell

This is too easy, but I haven't noticed it in all the discussion of how Sen Robert Portman decided to support gay marriage when he found out his son is gay.   I am finally reading the very important Washington Monthly  article "The Conservative War on Prison" by David Dagan and Steven M. Teles

Dayan and Teles write

Few people have done as much to subvert the conservative orthodoxy on crime as Pat Nolan, a former California state legislator who now works at the jailhouse ministry Prison Fellowship. Called “the most important person to make any of this happen” by Julie Stewart of Families Against Mandatory Minimums, Nolan has been so effective as a revisionist precisely because he was weaned on the traditional politics of law and order.
... As a Republican California state assemblyman in the 1970s, ’80s, and ’90s, Nolan helped push through some of the nation’s most draconian sentencing laws. While he did visit prisons to investigate conditions there, he recalls, “I was very much the ‘We need more prisons’ type.”
That changed after Nolan got to see prison from the other side of the bars. 

You don't say.  I wonder if the prison reform movement will succeed without DeLay or if it will have to wait for him to discover that at least one prisoner is a human being.

It is too easy to find examples of conservatives who discover that they had no empathy concerning one issue (and who don't re-examine any of their other beliefs).  Clearly the true challange is to find convservatives who changed their mind due to evidence without having a personal stake in their new position. 

Marcus Mark II

I was reasonably sure that the latest Marcus column would cause to have to uh revise and update my earlier post declaring her a heroine of Ballance.  The fact on which she comments is that Republican representatives live-tweeted snark during the question and answer session with Republican representatives (which was closed to the public because they looked like fools when it was on TV (until Fox News cut away to something else which tells you all you need to know)).

It is very hard to draw ballanced conclusions from a discussion of such an event.  To my amazement Marcus managed.  This column has it all. 1) Bipartisanthink, 2) the cult of the Presidency, 3) a dumb metaphor, 4) recognition that the conclusion is false part way through 5) disrespect for public opinion   6)above all, love of a grand bargain.

1) "But failure would not only tarnish Republicans; it would also stain Obama’s legacy. "

2) "Great presidential leadership entails figuring out how to deal with even those who do not like you."
 (note that Ruth Marcus has just asserted that Lincoln wasn't a great President).

3) "The president portrayed himself as a sort of maitre d’ for budget negotiations, setting the table for others to forge an agreement. "

4) "It’s true that there are times when presidential intervention in delicate congressional negotiations can be counterproductive. It’s certainly true that there are times when congressional Democrats have advised the White House to butt out. "

"Perhaps he’s posturing; if the president is seen as coveting a deal too much, he won’t be able to get the kind he wants. Perhaps it’s simple realism; Republicans’ refusal to consider revenue raised by curtailing loopholes is unacceptable, and the president shouldn’t accept a cuts-only deal."

5) "he is the one who is going to have to sell the notion of unpopular changes — curbing Medicare spending, reducing Social Security benefits or curtailing popular tax breaks — to a nation that says it wants a balanced bargain but may balk when that bargain is translated into painful specifics."

Notice that the proper response to such a "balk" is presidential leadership not doing what the public wants.  Marcus is assuming her readers assume the public is more ignorant than it is and will be shocked to find out about the painful specifics.  But the public has spoken (to pollsters).  Huge majorities oppose cutting Medicare or Social Security to reduce the deficit.  Marcus has lost confidence in the public and a new public will have to be elected.  She just assumes that Obama must find a way to reach agreement with Republicans (which is impossible) in order to widen the tax base and cut social security and Medicare although the public supports at most one of those actions (solid majorities support higher taxes on high incomes and support reducing tax expenditures in the abstract but that doesn't mean a majority would support say eliminating the mortgage interest deduction).

It is very clear what the public wishes to be left undone.  This public view is unacceptable to Marcus, so she asserts that Obama must find some way to give the public what it doesn't want by working with Republicans who hate him.

6) "the president sounded distinctly pessimistic about the prospects for such a bargain and disturbingly unconcerned about failing to reach one. That, he said, would be more missed opportunity than “crisis.”" 

heh indeed.  So Marcus is disturbed by the claim that a failure to reach a grand bargain wouldnìt be a crisis. Does this mean she thinks it would be a crisis ?  She doesn't say.  The fact that no level of conern about the risk of failint to reach one is eccessive is too obvious for there to be any need for Marcus to argue the point.

The math, by the way, does not demand it.

Beware Doug II

Oh my James Kwak is not pleased at all with the CBO

I didn’t realize until reading Klein’s blog post that the CBO changed its spending assumption just last year. In 2011, this is how it projected spending other than on Social Security and health care: “Beyond 2021, other spending stays at the same share of GDP projected for 2021 . . .” And this is how it changed in 2012: “For projections beyond 2022, CBO assumed that such spending would, during a five-year transition period, gradually return to its average share of GDP during the past 20 years.” The net difference from this one assumption is about 2 percent of GDP. This is a huge amount

Looks like I have to photomutilate a Gary Larson cartoon again

If you think that Elmendorf (and Larson) might be irritated, don't even think of what will happen if Krugman notices that I made Kwak thinner and (I shudder to tyoe this) with thicker hair.

Marx Meets Hegel

oh sorry correction, the title should be Marx Meets Kessler.

I think that Glen Kessler has made it clear that he considers honesty equivilant to proper dedication to cutting entitlements.  Kessler and Politifact both fairly clearly decided that claims were false because they were demagoging Medicaare (which means criticizing a plan to fundamentally transform Medicare into something undoubtably different from Medicare as we know it).  Jon Chait concluded that one member of the Politifact team decided what was a true claim based on arguments about what is a good policy.  I think his post contains proof beyond reasonable doubt.

I think that critics of Politifact and Glenn Kessler have been much too reluctant to consider the extent to which they are determined to reach Ballanced bipartisanthinking conclusions and the extent to which they consider their opinions about policy to be objective truths.

There is no way I can resist critizing Marx for underestimating the role of ideology and upper middle class class interest.  That would be Greg Marx here.

Click the link and read the excellent post.

Here is my  sophomoric comment.


This is an excellent post.  However, I am not just joking when I argue that Marx has over-looked the important role of class interests (I hate to admit that the villager eagerness to cut Social Security and Medicare has convinced me that the other Marx guy actually had a point).

You don't consider another possible explanation for calling incivility a lie -- the fact checkers feel they must reach ballanced conclusions http://bit.ly/Z0Kgsk .  I recall a post chat or something in which someone noted that Kessler fact checked more claims by Republicans.  Kessler said he had checked and yes it is true and he will try harder to fact check Democrats.  The possibility that there could be a standard based on the importance and dubiousness of claims which did not yield a balanced result was not mentioned in the discussion.   It is clearly possible that, for example, Democrats make more false claims than Republicans.  If this is the case, then non-partisan unbiased reporting must reflect it.  Kessler showed no sign of recognizing this possibility.  Unless the parties are, in fact, roughly similar in falsehood, his reporting must be biased given his stated aim of reaching a balanced conclusion.

Most of the examples you note say that claims by Democrats that the fact checkers don't like are false.  Yes the Palin "fact check" includes the claim of ESP powers and the Pawlenty fact check insists that a word may not be used with its conventional meaning.    But the claims and the fact checks are obscure.

I admit that I can't help suspecting that you carefully looked for improper fact checks of Republicans, because you had examples of improper fact checks of claims by Democrats in your mind and wanted to write a Ballanced post.  I think it is OK to do that if and only if you write that you did that .  This is an opinion piece.  There is no reason not to discuss your thoughts along the way.  But, while I can't help suspecting, I don't claim ESP.  So I suggest you ask yourself if this is what you did and, if it is, whether you should have reported the process.

There is also a third possibility.  You consider inaccuracy and incivility possible causes of lie of the year pants on fire Pinocchios.  Another possibility is that advocating policy choices of which the fact checkers disapprove is penalized with Pinocchios.  Kessler has views on proper policy.  His dubious fact checks frequently involbe accusing people who don't agree with his views of falsehood.  His latest offers the opinion that Obama's deficit reduction plan is not a real plan.  His argument includes "However, the president has not directly taken on members of his own party; he also has not made the case for overhauling entitlement programs to the American people."

Here Kessler pretty much says that he won't side with Obama over Boehner on a claim of fact, although Boehner's claim was clearly false, because Obama hasn't done what Kessler thinks he should do.  I think Kessler has just clearly stated that his loyalty to "entitlement reform" is more important to him that mere facticity.  I know you wrote your post before his latest column (not an op-ed but a non fact check in the place of the fact check column because he's a Washington Post columnists can do whatever he wants).  But others guessed what is now proven beyond doubt.  Again, I suspect you guessed this too, but decided that civility, moderation (and any hope of actual influence) forced you to not mention the hypothesis that Kessler thinks only that which he considers rational is real.

Graphic Humor

Visual Presentation For Humorous Effect

Source: Mathews and Yglesias.

Pope claims he opposed the murder of priests

Not The Onion The Associated Press.  

I miss Ratzinger.

update: "He also has ties to the shadowy network of international conservative Catholic organizations that John Paul II enabled and encouraged throughout his long reign. In Bergoglio's case, it's the Comunione e Liberazione movement in Italy

Read more: New Pope Saint Francis I - Meet Your New Pope - Esquire http://www.esquire.com/blogs/politics/new-pope-saint-francis-031313#ixzz2NT5wDyQZ" 

You have got to be kidding me.  Comunione e Liberazione is not just extremely reactionary.  They are also unbelievably corrupt.  Many of them will be taking comunione in prison until their Liberazione at the end of their sentences basically for treating the health budget of the Lombardy region as their personal ATM.

See the case of Roberto Formigoni former Memor Domini of Comunione e Liberazione.

I add that I consider it perfectly safe to say that Roberto Formigoni took a bribe from Saddam Hussein .  Note that, where I am typing, calumny is a felony.

Ballance meets Unbalanced

Ruth Marcus wishes to draw Ballanced conclusions from the fact that Breitbart.com published a satirical story about Paul Krugman as fact. This is a challenge, but she manages. Then she decides to Ballance the White House and Congressional Republicans.  Then she doesn't bother.

I spend a lot of time interviewing administration officials and congressional Republicans, and sometimes I think: What these people really need is a good marriage counselor, someone who can get them to stop long enough to understand the situation as the opposition sees it.

One fact, stunning to White House officials, is the degree to which many Republicans remain unaware of the substance of the administration’s offers on entitlement reform. This is symptomatic of a messaging failure on the part of the White House but also of the poisonous environment in which both sides live.

That's just going through the motions.  Marcus makes a Ballanced claim.  She presents evidence that the claim is true of Republicans (her word).  She concludes "both sides".  Marcus humbly asserts taht she understands Congressional Republicans much better than those in the Obama administration does.  She presents no evidence to support this claim.  She presents no evidence, because she is arrogantly boasting.  She sees no problem with this, because she has to claim she is more rational than Obama administration officials or else she would have to admit that they are less insane than Republicans.

Also she attempts to defend congress.  She notes that they work very hard.  She neglects to mention that they spend much (most according to the DCCC) of their working time raising campaign funds.  Her argument is that if we only knew how much time congresspeople spend sucking up to rick people and trying to get money without actually selling votes, then we would think more highly of them.

Jack the Ripper probably worked up a sweat.  Does Marcus expect me to admire his athletic dedication ?

Comment on DeLong on Cowan

Click the link if you want to know what I am typing about.





1) We should also consider pulling spending forward. Roads need to be resurfaced sooner or later.  If we do it 5 years sooner we pay the 5 year real interest rate on the cost (which is negative).  The true costs are lanes are blocked by construction sooner and we have to pull the next resurfacing forward 5 years.  The benefit is we get new smooth roads sooner.  Lets ignore the hassle of blocked lanes and any benefit from getting new roads sooner (assume one horse shay depreciation for roads so they are perfect up until the end of their useful life then must be resurfaced to be used at all).  Oh he is also assuming a multiplier of 0 so there is no increase in taxes collected now or any social benefit from lower unemployment now.  We get minus the 5 year rate and pay 5 years rates every 30 years.   A normal 30 years rate means the cost paid in 60 years is worth less than half the cost in 30 years. So say the cost is twice the cost paid in 30 years and discount with the current 30 year rate (-0.65) and hmmm carry the one ... we get total cost equals amount paid to get it done times roughly 5 times the current 5 year rate (-1.39) plus about 1.6 times 5 times the normal 5 year rate (1.52 avg 2003 when FRED starts through 2006) .  If the current real rate were low enough, that would add up to a negative number.

It pains me to actually check the numbers and find out that pointlessly anticipating investments 5 years is currently costly -- costs in 30 years are about like costs now if one is discounting at 0.65% a year.

Note this has nothing to do with dead weight losses from taxes.  The claim is that, for a low enough real interest rate, doing the project 5 years sooner would give a lower debt in 100 years for the same taxes.  It has nothing to do with Keynes.  I am assuming a multiplier of 0.  It has nothing to do with roads being useful.  I am assuming that the new resurfaced road is no better than the one which is within 5 years of the end of its useful life.  This is all 100% about how a low enough real interest rate can make the threshold return on an investment less than zero.

Sad to say I calculated after typing and find that the threshold return is about 1% per year or with Cowan's dead weight losses about 1.2% per year.  That return is the value of having a new smooth road sooner minus the cost of having a lane closed sooner.

The numbers would work better for pulling forward fewer than 5 years.

2) . I think I know why Cowan doesn't believe my argument in point 5. I think it is because he doesn't believe that because we do something which we have to do in 5 years now we will spend less in 5 years.  His world view is that marginal public spending is all due to capture by rent seeking special interests so if we don't have to resurface a road 5 years from now (because we resurfaced it now) we will just spend the same money on something else.

Here we see, as always, that the debate about Keynesian stimulus is always really a debate about public spending in general. Cowan will not accept Krugman's argument that if spending was about right in 2003 then it should be higher now, because he thinks spending was way too high in 2003.  He won't accept my argument that it is better to spend it now than in 5 years, because he thinks that spending if 5 years will have nothing to do with social returns to spending in 5 years.

3) the calculation of how risk averse the Federal Government should be assumes a multiplier of zero.  If unexpected and automatically higher spending or lower tax receipts cause higher GDP (and vice versa) then the correct calculation is different.  I have no doubt at all that the optimal level of Federal risk aversion is negative.  That is for the same expected return it would be socially better for the Federal Government to invest in risky assets whose returns are postively correlated with GDP growth.  Here I am most definitely assuming Ricardian non equivalence.  The general view that automatic stabilizers are a good thing implies the general view that the Federal Government should seak to bear risk (really it is hiding risk not bearing it -- it takes non Ricardian consumers for the trick to work -- but of course it does work).



4) wait with a hurdle rate over 20% how could firms ever possibly decide to invest ? From a survey Larry Summers found out that the median boss uses 30% somehow.  My guess of the way this works is that they when considering an investment of size K they make a stream of profit or loss equal to extra revenues net of other costs minus (r + delta)K using some not totally crazy value for real interest r and depreciation delta (where nominal interest counts as a not totally crazy value for r) and then discount the stream at 30% per year.  This would be pure myopia.  It has nothing to do with restraining cowboy managers.

What Time Is It ?

Troubles with technology.  I started with 2 problems.
1) my computer's clock is not set to the correct time
2) my watch band if falling apart so I keep my watch not on my wrist but on my desk or uh where is it
(trouble with low tech leather there)

So I go to the web and type atomicclock (I assume correctly that google isn't fussy about hitting the space bar). I get to atomic-clock.org.uk which told me it was 22:52:20

Now I know that Rome time is either 22:52:20 or 23:52:20.  Hmm I think atomic-clock.org.uk should be GMT so it's 23:52:20 here.  But wait atomic-clock.org.uk knows I'm in Italy (damn web spying on me)
Hello Italy!

Shipping Costs:
9.95 €
Delivery Time.
3 - 5 days

so maybe it's telling me Rome time.

I decide I have to find my watch (will have to sooner or later anyway I guess) and find that the disloyal queen hating turncoats at  atomic-clock.org.uk  have no respect for Greenwich and are trying to trick me.  I also find that my watch was slow (so I was later to my lectures than I thought).

troubles with modern technology too.

A Determined Citizen

In Kamukunji constituency Nairobi Kenya

Elizabeth Mwende gave birth to a premature baby at 6.15am a few minutes after the polling station in which she was voting –Muthurwa- was opened. She proceeded to vote after the delivery before being rushed to Pumwani Maternity hospital.

Wow.

via The Monkey Cage
via @MarkThoma

The Optics aren't what they looked like II

Neither is the ophthamologist.

Dr. Salomon Melgen is an influence seeker.  Pimp not so much.

Time for a Lexis "Nexis" search or at least a google.

A bit more on lagged inflation and TIPS Breakevens

I'm afraid that exploring the high correlation of inflation over the past year and the breakeven inflation rate which would make the return on Treasury Inflation Protected Securities (TIPS) equal to the nominal treasury rate threatens to move from hobby pass time to work.  It is very easy and even fun to make some graphs using FRED and show a surprisingly very high correlation between inflation in the past year and the 5 year constant maturity breakeven.

This is OK for a blog post, but won't do for anything more for several reasons.  First, for some reason, the FRED series only go back to 2003 for some reason (even though TIPS were first auctioned in January 1997).  Second the matched series of real and nominal interest rates are not simple calculations from the prices of specific assets but "constant maturity" series based on estimation of a yield curve and interpolation.  I don't know exactly how this is done and I should find out.

This little post (here because it is not up to www.angrybearblog.com standards) is a pathetic attempt to deal with the first problem by Googling.   I was looking for older data on TIPS breakevens.  Pu Shen at the Kansas City Fed wrote a working paper on the topic (warning pdf).  Shen's point is that the breakeven inflation rate was low and variable and interprets the average excess returns on TIPS as compensation for their low liquidity.  A constant difference would not be a problem, but the TIPS breakeven varied a lot while median Blue Chip survey expected inflation and actual achieved iflation changed very little.

Anyway I stole the graph (I don't have the numbers I just took a screen shot).  The part from 2003 through 2006 is familiar from the FRED based post to which I link above.  For comparison have a corresponding FRED graph of the average of CPI inflation and CPI minus food and energy inflation over the past year.  The correlation in the period 1999-2003 was impressive if not perfect.

The correlation isn't perfect by any means, but the breakeven series looks much more like the past year inflation series than like the survey forecast of inflation to put it very mildly.

Auto Anonymity

One blogger expressed irritation at the rule that reporters always grant themselves anonymity.  The blogger approves of rules restricting the granting of anonymity (and wishes they were actually followed).  But, for some reason absolutely incomprehensible to the blogger, reporters are expected to refer to themselves not with "me","myself" and "I" or even the verbose and pompous "this reporter" but with "a reporter." or "one reporter" Thus a reporter is expected to deliberately suppress information on whether one reporter who is quoted is the same damn reporter who is quoting.  When one reporter quotes a leading or tricky question asked by one reporter, one blogger wishes he or she knew if those reporters were wearing the same socks at the time.

I am fairly confident that Ezra Klein is "a reporter" mentioned by Ezra Klein

Would it matter, one reporter asked the veteran legislator, if the president were to put chained-CPI — a policy that reconfigures the way the government measures inflation and thus slows the growth of Social Security benefits — on the table?

One reporter is being mischevious here, since our one president has put chained CPI on the table.  A congressperson (anonymity granted) said "Absolutely".  The socially useful spartypantsing seems to me characteristic of one reporter who shares eyebrows weith Ezra Klein.

If you think that the blogger is being a twit, tell me in comments.  I am in constant contact with him or her.-  

Brother David Ignatius Explains it all to You

I don't want to take anything from Ron Fournier, but I think this column by David Ignatius is the perfect expression of village idiocy.

It has it all
1) Ballance.  Ignatius neglects to mention that Obama proposed the sequester when the only alternative was default.  He doesn't mention that there was a debt ceiling crisis in 2011.  He more or less accuses Democrats (all of us) of treason to balance his criticism of insane Republicans.
2) The cult of the Presidency.  Obama should take control "firmly" by making a "Presidential Statement".  Here (my 2nd link to that post) Krugman mocks the idiocy better than I can here.
3) Obama is too mean.  It would work if his statement were addressed to all Americans not just those who voted for him and he is playing the blame game.  Obama is too nice.  He must speak firmly with the Republicans as Ignatius speaks firmly to drunk drivers and take the wheel firmly in his hands.  If I am very charitable and interpret this is a proposal rather than a metaphor run off the road, then I conclude that Ignatius just proposed a coup.  In any case he's doing it wrong.
4) Pompous and very bad writing. OK I write for shit, but I'm not pretentious.  Ignatius uses an simily -- Republicans are like drunk drivers.  He makes a mess of it.  He says Obama should firmly take the wheel (a coup?).  He also says that the thing to do when in a car driven by a drunk is to speak firmly.  Has Ignatius attempted to grab the wheel from a drunk driver ?  I sure haven't.  I don't think that works very well.  In any case, when he gets off his high horse of a metaphor which has run off the rails, Ignatius is back to proposing speech a "presidential statement" which will solve everything somehow.  So what do you do if the drunk just keeps driving and ignores your firm command to hand over the keys ?  I don't know and I don't think Ignatius does.  He's lead into a trap by his metaphor  If someone is in the drivers seat with their foot on the gas and just won't listen, there really isn't much a passenger can do.  Obama isn't just a passenger.  Ignatius chose the metaphor.  It doesn't serve his purposes.  But the dozens of words are too valuable to erase.
5) no consideration at all of the possibility that it might be a bad idea to cut the deficit immediately when unemployment is 7.9% and we are in a liquidity trap.  Ignatius goes off topic to discuss policy.  He thinks that he has explained what is to be done when he suggests cutting Medicare and social security and "modestly" increasing tax revenues.  He didn't have to insert this in a column on how the Republicans in congress are acting insanely and on what can be done about this.

Great Minds Think Alike

The thoughts of Paul Krugman and Brad DeLong turn to Darth Vader.

I liked the film, but, at the time, I thought great minds grew up.

Still not calm about Monetary Policy

David Glasner has a post here commenting on an earlier post of mine.  I can't decide what to quote so please just read it if you want to make any sense of what follows.

One question I forgot to ask in comments:  what does WADR stand for ?


I wrote two comments which I am basically storing here for future reference.  Also the first was typed on an iPad with autocorrect (BLEG how does one turn that off) which corrects my English to Italian and makes worse gobbledygook than I do by myself.  I have corrected the spelling here using the new improved super technology called "a keyboard"

I haven’t really read this post (just skimmed it). I note your question on breakevens and stock prices. I haven’t 2 through to which are, at legasti, sincere.
1) I don’t think that stock prices tell us much about anything. In particolar they have a low correlation with future GDP and employment growth IIRC. I through this question was settled in 1987.
2) I don’t think that monetary policy has much effect on expected inflation (except through past inflation). I note that event studies (in the huge Woodford paper) show Tiny effects 3 out of 4 (or 4 out of 5) have the expected sign.
3) I think breakevens are vero well explained by lagged inflation, lagged core inflation and lagged changes in the price of petrolem. I don’t see any effects of shifts of monetary policy in this graph

http://www.angrybearblog.com/2013/02/inflation-expectations-and-lagged.html

4) I also think that in the early 80s that monetary policy shifts affected expected inflation via high interest ratea caused high unemployment which caused low inflation which caused low expected inflation.

5) I am not convinced that any model developer other than * adaptive* expectations augmented Phillips curve is as empirically successful.

Are you sure that we don’t disagree all that much ?

I promise this comment is sincere and not exaggerated.

Here I am again.  I have now read the post.  I have two observations

1) Get the null on your side is my motto (I admit it).  You follow this.  You suggest that your hypothesis is the hull hypothesis then abuse Neyman and Person by implying that we can draw interesting conclusions from failure to reject the null.  Basically the sentence which includes the word "null" is the assertion that we should assume you are right and I am wrong until I offer solid proof.  To be briefer, since we are working in social science, you are asking that I assume you are right.  This is not an ideal approach to debate.
I ask you to review your sentence which contains the word "null" and reconsider if you really believe it.  The choice of the null should be harmless (it is an a priori choice without a prior).  How about we make the usual null hypothesis that an effect is zero.  Can you reject the null that monetary policy since 2009 has had no effect ? At what confidence level is the null rejected ?  Did you use a t-test ? an f-test ?  "null" is a technical term and I ask again if you would be willing to retract the sentence including the word "null".


2) using expected inflation to identify monetary policy is only a valid statistical procedure if one is willing to assume that nothing else affects expected inflation.  If you think that say OPEC ever had any influence on expected inflation, then you can't use your identifying assumption.  In particular TIPS breakevens can be fairly well fit (not predicted because not out of sample) using lagged data other than data on what the FOMC did.

again I refer to

http://www.angrybearblog.com/2013/02/inflation-expectations-and-lagged.html

(legend here red is the 5 year TIPS breakeven or expected inflation, Blue is the change over the *past* year of the price of a barrel of oil times 0.1 plus 1.6, green is the geometric mean of the change over the *past year* of the personal consumption deflator and the personal consumption minus food and energy deflator.

I find the brief and boring period 203-2007 most interesting.   Expected inflation is almost perfectly fit by lagged inflation (geomentric mean of core and total).

I don't see how anyone could look at this graph and then claim we can identify monetary policy by the TIPS breakeven.  That is only valid if nothing but monetary policy affects inflation expectations.

Similarly in 1933 monetary policy wasn't the only thing that changed.  I understand that there was considerable policy reform in the so called "first hundred days.  " The idea that we can identify the effect of monetary policy by looking at the USA in 1933 is based on the assumption that Roosevelt did nothing else.  This is not reasonable.

But I think we can detect the effect of recent monetary policy on TIPS breakevens if we agree that it (including QE) is working principally through forward guidance.  There should be quick effects on asset prices when surprising shifts are announced.  QE 4 (December 2012) was definitely a surprise.  The TIPS spread barely moved (within the range of normal fluctuations).  I think the question is settled.  I do not think it is optimal to ignore daily data when you have it and treat same quarter as the same instant.  Some prices are sticky and some aren't.  Bond prices aren't.

Robert Waldmann will not calm down.

Comment on this post by David Glasner

I do not find any reference to the zero lower bound in this post.  Your analysis of monetary expansion does not distinguish between the cases when the ZLB holds and when it doesn't.  You assume that the effect of an expansion of the money supply on domestic demand can be analyzed ignoring that detail. I think it is clear that the association between the money supply and domestic demand has been different in the USA since oh September 2008 than it was before.  This doesn't seem to me to be a detail which can be entirely overlooked in any discussion of current policy.


Also, I note that prior to his Stelzer "jejune dismissal of monetary policy," Stelzer jenunely dismissed fiscal policy.  You don't mention this at all.  Your omission is striking, since the evidence that Stelzer is wrong to dismiss fiscal policy is overwhelming (not overwhelming enough to overwhelm John Taylor but then mere evidence couldn't do that).  In contrast, the dismissal of monetary policy when an economy is in a liquidity trap is consistent with the available evidence.

I hereby challenge you to show data on US "growth"  meaning (I agree with your guess) mostly employment growth since 2007 to someone unfamiliar with the debate and ask that person to find the dates of shifts in monetary policy.  I am willing to bet actual money (not much I don't have much) that the person will not pick out QEIII or operation twist.    I also guess that this person will not detect forward guidance looking at day to day changes in asset prices. €

I claim that the null that nothing special happened the day QEIV was announced or any of the 4 plausible dates of announcement of QE2 (starting with a FOMC meeting, then Bernanke's Jackson Hole speech then 2 more) can't be rejected by the data. This is based on analysis by two SF FED economists who look at the sum of changes over three of the days (not including the Jackson Hole day when the sign was wrong) and get a change (of the sign they want) whose square is less than 6 times the variance of daily changes (of the 10 year rate IIRC).  IIRC 4.5 times.  Cherry picking and not rejecting the null one wants to reject is a sign that one's favored (alternative) hypothesis is not strongly supported by the data.