Tuesday, April 25, 2006

Funny Stuff

Maybe if more macro was in the form of music videos it might make my job easier? Here is a mock up from the Columbia B-school follies of Glenn Hubbard keeping an eye on Bernanke: Every Breath You Take.

Keywords: Monetary Policy, ECO120, ECO301

Monday, April 24, 2006

Political Independence

Ben Bernanke, reminding us why it is so important to be politically independent as the Fed Chief. It allows him the freedom to say things like this:

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said tax cuts can spur greater economic activity and boost economic efficiency, but generally do not wholly pay for themselves.

"Tax cuts that reduce marginal tax rates will likely improve the efficiency of the economy and boost overall economic activity," Bernanke said in an April 18 letter to Rep. Brad Sherman (news, bio, voting record).

"Because they increase economic activity, cuts in marginal tax rates typically lead to revenue losses that are smaller than implied by so-called static analyses, which hold economic activity constant," he said. "However, under normal conditions, tax cuts do not wholly pay for themselves."

The letter, released by Sherman's office on Wednesday, was in response to written questions the California Democrat submitted in connection with a February 15 hearing on monetary policy at which Bernanke testified.

Things that he wouldn't even say if he was only a former CEA, and not head of the fed.

Here we see Greg Mankiw and Glenn Hubbard still being elliptical as Brad DeLong puts it. The sad thing is they had the gunner's chair, they had the inside job, and they could not deliver. Disappointing.

Keywords: Taxes, ECO120

Thursday, April 13, 2006

Central Wankers

When central bankers are not politically independent, they can be enticed into behaving badly. But maybe the Kenya central bankers were just corrupt? From Division of Labour:

How can a corrupt central bank line the pockets of state-connected businessmen? A report from AllAfrica.com counts the ways the Kenya Central Bank has done it:

1. Printing extra cash for the government to disburse.
2. Sweetheart deals on (controlled) foreign exchange.
3. Sweetheart deals on government bonds.
4. Favoritism in bank supervision.
And they also have a post on Turkey's newly nominated CB leader. Who adheres to sharia, the Muslim law prohibiting the charging of interest. Pretty good idea to put someone like that in charge of interest rates.

Keywords: ECO301

Wednesday, April 12, 2006

Bernanke on Long Rates

I merely want to save this speech by Bernanke for future reference. I think he does an excellent job of explaing the mystery of low long term interest rates.

Given the global nature of the decline in yields, an explanation less centered on the United States might be required. About a year ago, I offered the thesis that a "global saving glut"--an excess, at historically normal real interest rates, of desired global saving over desired global investment--was contributing to the decline in interest rates. In brief, I argued that this shift reflects the confluence of several forces. On the saving side, the factors include rapid growth in high-saving countries on the Pacific Rim, export-focused economic development strategies that directly or indirectly hold back the growth of domestic demand, and the surge in revenues enjoyed by oil producers. On the investment side, notable factors restraining the global demand for capital include the legacy of the Asian financial crisis of the late 1990s, which led to continuing sluggishness in investment in some of those economies, and the slower growth of the workforce in many industrial countries. So long as these factors persist, global equilibrium interest rates (and, consequently, the neutral policy rate) will be lower than they otherwise would be.

Keywords: Interest Rates, ECO301, ECO712

Poor Form

From Marginal Revolution: In the war of words between John Lott and Steve Levitt, Lott loses much credibility by suing Levitt. A true academic sticks to the field of battle, and doesn't call in the heavies, unless of course he can't win the battle of ideas.

Hopefully it will be thrown out of court.

Update: Levitt posts the tribune article here.

Monday, April 03, 2006

Immigration in LAX Trib

The piece I wrote for the La Crosse Tribune was published on Sunday. So far no one has gotten mad at me, but it is still early in the day.

Here is Keith's piece. And here is my piece.

There has been a lot written recently on this topic. Here is Greg Mankiw's take and Don Bourdeaux captures my sentiments on the misappropriation of the term 'illegal'. His co-blogger Russ Roberts has a nice post here as well.

Keywords: Immigration, ECO305, ECO120