Celebrating humanity's flourishing through the spread of capitalism and the rule of law
02 Dec 2015 Leave a comment
in applied price theory, budget deficits, business cycles, economic growth, economic history, economics of regulation, Euro crisis, fiscal policy, global financial crisis (GFC), great depression, great recession, macroeconomics, monetary economics Tags: adverse selection, bank panics, bank runs, banking crises, deposit insurance, economics central banks, financial crises, moral hazard, sovereign defaults
16 Nov 2015 Leave a comment
in currency unions, economic history, economics of regulation, Euro crisis, macroeconomics, monetary economics Tags: bank run, banking crises, banking panics, economics of banking, financial crises
03 Nov 2015 Leave a comment
in economic history, macroeconomics, monetarism, monetary economics Tags: forecasting errors, Paul Krugman, public intellectuals
26 Oct 2015 Leave a comment
in economic history, macroeconomics, monetary economics
Many of the Twitter Left who voted in Jeremy Corbyn to lead the British Labour Party into what will be a self-inflicted electoral oblivion have no adult memory of paying high mortgage payments when there was high inflation.
Source: House Prices Data Download | Nationwide.
Those who have escaped the overweening conceit of youth still have raw memories of high inflation and high mortgage payments and that was when housing was much, much cheaper.
Source: House Prices Data Download | Nationwide.
An excellent wedge issue for the Tories on the 2020 general election will be even under rock bottom interest rates housing affordability is in crisis.
Imagine what will happen if even moderate inflation were to return. There is no buffer left in the budgets of middle class homebuyers to pay much more if there were to be a People’s quantitative easing.
09 Oct 2015 Leave a comment
in business cycles, economic history, macroeconomics, monetary economics Tags: interest rates, monetary policy
15% and more. The long-term view on U.S. Nominal Interest Rates
(from 1.usa.gov/1V2PhP1) http://t.co/52o992NFhJ—
Max Roser (@MaxCRoser) September 20, 2015
03 Oct 2015 Leave a comment
in business cycles, macroeconomics, monetarism, monetary economics, politics - USA Tags: central banks, economics of central banking, monetary policy, rules and discretion, Taylor rule, The Fed
Yellen vs. Congress: The Fed's independence is under attack despite economic rebound bloom.bg/1HM9c0A http://t.co/NQ6548yGJK—
Bloomberg VisualData (@BBGVisualData) August 10, 2015
18 Sep 2015 Leave a comment
in business cycles, macroeconomics, monetary economics, organisational economics Tags: central banks, cheap talk, credible commitments, economics of central banking, Fed speak, inflation targeting, The Fed
When President Clinton appointed Alan Blinder to be deputy chair of the Fed, his big hope was to find out what Alan Greenspan really thought rather than the public facade of gobbledygook. The term Fedspeak (also known as Greenspeak) is what Alan Blinder called "a turgid dialect of English" used by Federal Reserve Board chairmen in making wordy, vague, and ambiguous statements. Greenspan described it this way:
To Blinder’s astonishment, Alan Greenspan spoke just the same as he did at monetary policy meetings of the Fed as he did in public! Blinder never disagreed fundamentally with Greenspan about monetary policy.
18 Sep 2015 Leave a comment
in business cycles, economic history, macroeconomics, monetary economics Tags: monetary policy, The Fed
17 Sep 2015 1 Comment
in business cycles, history of economic thought, inflation targeting, macroeconomics, managerial economics, monetarism, monetary economics, organisational economics Tags: Alan Blinder, Alan Greenspan, credible commitments, Greg Mankiw, modern macroeconomics, monetary policy, neo-Keynesian macroeconomics, new classical macroeconomics, The Fed, timing inconsistency
Two of my brothers studied economics in the early 1970s and then went on to different paths in law and computing respectively. If Greg Mankiw is right, my two older brothers could happily conduct a conversation with a modern central banker. Their 1970s macroeconomics, albeit batting for memory, would be enough for them to hold their own.
Source: AEAweb: JEP (20,4) p. 29 – The Macroeconomist as Scientist and Engineer – Greg Mankiw (2006).
I would spend my time arguing with a central banker that Milton Friedman may be right and central banks should be replaced with a computer. The success of inflation targeting is forcing me to think more deeply about that position. In particular the rise of pension fund socialism means that most voters are very adverse to inflation because of their retirement savings and that is before you consider housing costs are much largest proportions of household budgets these days.
13 Sep 2015 1 Comment
in business cycles, economic history, global financial crisis (GFC), inflation targeting, macroeconomics, monetary economics, politics - New Zealand, urban economics Tags: expressive voting, housing affordability, inflation rates, median voter theorem, mortgage belt, mortgage rates, rational ignorance, rational rationality
Mortgage interest rates were last in the double digits in the late 1980s and early 1990s. Since then, housing prices have exploded in New Zealand and barely paused for the recession in the wake of the Global Financial Crisis.
Source: International House Price Database – Dallas Fed; Housing prices deflated by personal consumption expenditure deflator.
With house prices and mortgages several times what they used to be, the ability for any household income to absorb the sudden return of high mortgage interest rates because of a return of even moderate CPI inflation and double-digit mortgage rates is well-nigh impossible, politically.
Source: Reserve Bank of New Zealand Mortgage rates and Bryan Perry, Household Incomes in New Zealand: trends in indicators of inequality and hardship 1982 to 2014 – Ministry of Social Development, Wellington (August 2015) Table C.5.
The chart above shows that the number of 25 to 44-year-olds in New Zealand who have more than 30% of their income going to housing expenses has doubled since 1988 to nearly a third of all households. The number of 45 to 64-year-olds who pay more than 30% of their income in housing expenses has quadrupled to 20%. That is a lot of voters who would be offended by mismanagement of monetary policy.
None of these households would have much left over to absorb an increasing mortgage interest rates. That is very different political arithmetic too the last time both mortgage rates and CPI inflation were in double digits, which was more than 20 years ago. Not many New Zealanders under the age of 40 or 45 have an adult memory of high inflation and high mortgage rates.
07 Sep 2015 Leave a comment
in business cycles, economic history, financial economics, macroeconomics, monetary economics Tags: central banking
04 Sep 2015 Leave a comment
in business cycles, currency unions, development economics, economic growth, economic history, Euro crisis, financial economics, global financial crisis (GFC), great depression, great recession, growth disasters, growth miracles, law and economics, macroeconomics, monetary economics, property rights Tags: bank runs, banking crises, banking panics, currency crises, current account crises, debt crises, pseudo financial crises, real financial crises, sovereign debt crises, sovereign default
02 Sep 2015 Leave a comment
in business cycles, economic growth, economic history, fiscal policy, global financial crisis (GFC), great recession, macroeconomics, monetary economics, politics - Australia, politics - New Zealand, politics - USA Tags: Australia, recessions and recoveries
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
Celebrating humanity's flourishing through the spread of capitalism and the rule of law
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