Monday, October 07, 2013


Technically the US has defaulted before...on accident, and it wasn't pretty:

Terry Zivney and Richard Marcus describe the default in The Financial Review (sorry, I can’t find an ungated version):

Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.

Sunday, October 06, 2013


GOPers are afraid of Obamacare, but this is the scariest graph:

Paul Ryan's "solution" was to refuse to let it grow, as if this could be stopped through sheer force of will.

Friday, October 04, 2013

Shut Down.

Estimates of the consequences of the shut down. Also checkout MacroAdvisors shutdown calculator and run your own estimates.

Tuesday, October 01, 2013

Germany the Currency Manipulator

Paul Krugman points out that even within the most extreme version of a fixed exchange rate regime - a currency union - one can think about the misalignment of the underlying currencies (even if their are no underlying currencies).
The general point is that if we imagine a euro breakup, I think everyone would agree that the new mark would soar in value, making German manufacturing much less competitive. The German public imagines that it is being cruelly exploited for the benefit of lazy southerners; arguably, what’s really happening is more like China’s purchases of dollars, which are intended not to subsidize America but to boost industry.


What to expect Day 1. 10 ways it could affect you. Why it happened. And the bigger looming problem of the debt ceiling.

Sunday, September 22, 2013

The Fed Surprise

As an exercise for the macro student, watch this video starting around minute 30. The video is a brief Q&A with Narayana Kocherlakota, the President of the Minneapolis Federal Reserve Bank.

Then make a prediction for monetary policy going forward.
A) The Fed Tapers or
B) The Fed Waits.

Then read what happened here.


Friday, April 19, 2013

Marriage Markets

Lets not forget that what we really do with University education is run a dating service. Ed Glaeser:
The college experience is profoundly different from what comes before and after in life. It is when 19-year-olds have chance encounters in different settings that make it easy to befriend and evaluate others. And they have enough free time to follow relationships where they may lead. Few of us will ever again walk into a dining hall filled with 100 interesting members of the opposite sex of roughly the same age. Most of life is far more structured and far less diverse. Dates and bar encounters present only a dimly lit window into a person’s character. Workplace romances occur, but they create challenges on the job and can produce marriages that are short on industrial or occupational diversification. Optimal portfolio theory, applied to marital choice, suggests that better diversification can push households closer to the risk-return frontier.
But it appears that broadband has improved search in more rural marriage markets. From the paper The Impact of Internet Diffusion on Marriage Rates: Evidence from the Broadband Market:
The Internet has the potential to reduce search frictions by allowing individuals to identify faster a larger set of available options that conform to their preferences. One market that stands to benefit from this process is that of marriage. This paper empirically examines the implications of Internet diffusion in the United States since the 1990s on one aspect of this market: marriage rates. Exploring sharp temporal and geographic variation in the pattern of consumer broadband adoption, I find that the latter has significantly contributed to increased marriages rates among 21-30 year olds. A number of tests suggest that this relationship is causal and that it varies across demographic groups potentially facing thinner marriage markets. I also provide some suggestive evidence that Internet has likely crowded out other traditional meeting venues, such as through family and friends.