Krugman et al

[Incognitus]

Os chineses e japoneses parece que se estão a fazer caros:

 

• China’s U.S. Debt Buying Seen Limited, Former Adviser Says
• Japan to Buy European Debt With Currency Reserves to Weaken Yen

Com um então tão creditworthy tio Sam, acho que ainda não viste nada.

se fosse verdade as taxas sobre as obrigações americanas estariam a subir. o mercado exigiria maior yield para tão grande risco.
quais são os factos? as yields continuam em mínimos históricos. se não são os chineses nem os japoneses, alguém anda a comprar.
talvez os marcianos.

L

Para o tipo de informação supramencionada ainda dou alguma credebilidade à Businessweek e à Bloomberg. Não dou assim grande credebilidade é à hipótese dos marcianos.

não disse que era falso. disse que se não são os chineses nem os japoneses, alguém a continua a comprar uma vez que as yields continuam em mínimos históricos.

liquidity trap anyone?

 
A Fed compra mais do que todos os outros compradores líquidos, e indo a caminho de comprar todo o déficit é natural que todos os outros compradores, somados, tendam para zero em termos de exposição adicional.

[Lark]

Barbarous Relics

I feel comfortable in my understanding of the economics of the platinum coin, but don’t claim any legal expertise. However, Laurence Tribe knows whereof he speaks — and he says that it’s quite legal. And so there you have it: if we have a crisis over the debt ceiling, it will be only because the Treasury department would rather see economic devastation than look silly for a couple of minutes.

There will, of course, be howls from the usual suspects if that’s how it goes. Some of these will be howls of frustration because their hostage-taking plan was frustrated. But some will reflect sincere horror over a policy turn that their cosmology says must be utterly disastrous.

Ed Kilgore says, in a somewhat different way, much the same thing I and people like Joe Weisenthal have been saying: what we’re looking at here is a collision of worldviews, one might even say of epistemology.

For many people on the right, value is something handed down from on high It should be measured in terms of eternal standards, mainly gold; I have, for example, often seen people claiming that stocks are actually down, not up, over the past couple of generations because the Dow hasn’t kept up with the gold price, never mind what it buys in terms of the goods and services people actually consume.

And given that the laws of value are basically divine, not human, any human meddling in the process is not just foolish but immoral. Printing money that isn’t tied to gold is a kind of theft, not to mention blasphemy.

For people like me, on the other hand, the economy is a social system, created by and for people. Money is a social contrivance and convenience that makes this social system work better — and should be adjusted, both in quantity and in characteristics, whenever there is compelling evidence that this would lead to better outcomes. It often makes sense to put constraints on our actions, e.g. by pegging to another currency or granting the central bank a high degree of independence, but these are things done for operational convenience or to improve policy credibility, not moral commitments — and they are always up for reconsideration when circumstances change.

Now, the money morality types try to have it both ways; they want us to believe that monetary blasphemy will produce disastrous results in practical terms too. But events have proved them wrong.

And I do find myself thinking a lot about Keynes’s description of the gold standard as a “barbarous relic”; it applies perfectly to this discussion. The money morality people are basically adopting a pre-Enlightenment attitude toward monetary and fiscal policy — and why not? After all, they hate the Enlightenment on all fronts.

The bottom line is that we aren’t really having a rational argument here. Nor can we: rationality has a well-known liberal bias.

krugman

[Lark]

Credibility

Ah. Charles Plosser of the Philadelphia Fed is against the platinum coin, which he says “doesn’t solve any real problem” and would hurt our credibility.

Actually, it solves a very real problem: attempted extortion by the GOP. And on the credibility front, who better to lecture us on such matters than a man who has been predicting an inflationary explosion for five years?

This is a favorite theme of Brad DeLong’s, and rightly so. It’s not especially remarkable that the inflation hawks got it wrong: to err is human (and, as a T-shirt I saw on St. Croix said, to arrr is pirate). What is remarkable is the total absence of either self-reflection or accountability. When you get things this wrong, you’re supposed to ask yourself why, and whether your framework of analysis needs updating. And if you should happen to lack the capacity for self-reflection, there should be some external sanction too; people who get it wrong, keep getting it wrong, and show no sign of learning should pay a price in polite society.

But this doesn’t seem to happen to those who got everything wrong about the macroeconomics of a depressed economy; they remain respectable, and even get praised for their consistency. Of course, it’s not just macro: it remains true, for example, that for the most part you’re not considered serious about national security unless you were wrong about Iraq.

Anyway, what’s Plosser saying now, aside from dissing the platinum coin? Why, he’s warning that the Fed’s current efforts will cause inflation.

krugman

[hermes]

Não há nada como dar uma boa lição ao GOP.



Diria mais, não há nada como dar 16 boas lições ao GOP!

Enfim, uma extraordinária lição em como o silêncio é de ouro e a solução é de platina.

[hermes]

Parece que a credibilidade do Krugman está em bear market dada a popularidade conquistada junto dos comediantes main stream.

"I'm not an economist," Stewart said. "But if we're going to just make [stuff] up, I say go big or go home. How about a $20 trillion coin?" Or, he suggested, maybe a $1 "quillion" coin.

"We don’t need some trillion-dollar coin gimmick," Stewart said. "We need a way to get the world to take the U.S. dollar seriously again."

Source with video: It Doesn't Sound Like Jon Stewart Is On Board With 'Mint The Coin'

[Lark]

Lazy Jon Stewart
Oh, dear. Jon Stewart took on the platinum coin, and made a hash of it — he faceplanted, as Ryan Cooper says.

What went wrong? Jon Chait says that he flunked econ, but that’s just part of it. He also flunked law, politics, and just plain professional.

So, yeah, as Chait says, Stewart seems weirdly unaware that there’s more to fiscal policy than balancing the budget. But in this case he also seems unaware that the president can’t just decide unilaterally to spend 40 percent less; he’s constitutionally obliged to spend what the law tells him to spend. True, he’s also constitutionally prohibited from borrowing more if Congress says he can’t — which is a contradiction. But that’s the whole point of the discussion.

And it makes no sense at all to talk about any of this without the context of extortion and confrontation.

Above all, however, what went wrong here is a lack of professionalism on the part of Stewart and his staff. Yes, it’s a comedy show — but the jokes are supposed to be (and usually are) knowing jokes, which are funny and powerful precisely because the Daily Show people have done their homework and understand the real issues better than the alleged leaders spouting nonsense. In this case, however, it’s obvious that nobody at TDS spent even a few minutes researching the topic. It was just yuk-yuk-yuk they’re talking about a trillion-dollar con hahaha.

Hey, if we want this kind of intellectual laziness, we can just tune in to Fox.

Update: Some people are asking why I don’t go on TDS to explain. Um, first I have to be invited — which hasn’t happened since, I think, 2005.

krugman

[hermes]

Bem, o dólar já era motivo de troça a nível internacional:

Geithner insists Chinese dollar assets are safe

By Edmund Conway
On 8:03PM BST 01 Jun 2009

http://www.telegraph.co.uk/finance/financialcrisis/5423650/Geithner-insists-Chinese-dollar-assets-are-safe.html

In his first official visit to China since becoming Treasury Secretary, Mr Geithner told politicians and academics in Beijing that he still supports a strong US dollar, and insisted that the trillions of dollars of Chinese investments would not be unduly damaged by the economic crisis. Speaking at Peking University, Mr Geithner said: "Chinese assets are very safe."

The comment provoked loud laughter from the audience of students. There are growing fears over the size and sustainability of the US budget deficit, which is set to rise to almost 13pc of GDP this year as the world's biggest economy fights off recession. The US is reliant on China to buy many of the government bonds it is planning to issue but Beijing's policymakers have expressed concern about the strength of the dollar and the value of their investments.

However Chinese Vice Premier Wang Qishan said that the two countries were working closely together to fight the economic crisis.

Agora, graças ao Krugman, são os próprios americanos a troçarem do dólar.

[Lark]

Bem, o dólar já era motivo de troça a nível internacional:

Geithner insists Chinese dollar assets are safe

By Edmund Conway
On 8:03PM BST 01 Jun 2009

http://www.telegraph.co.uk/finance/financialcrisis/5423650/Geithner-insists-Chinese-dollar-assets-are-safe.html

In his first official visit to China since becoming Treasury Secretary, Mr Geithner told politicians and academics in Beijing that he still supports a strong US dollar, and insisted that the trillions of dollars of Chinese investments would not be unduly damaged by the economic crisis. Speaking at Peking University, Mr Geithner said: "Chinese assets are very safe."

The comment provoked loud laughter from the audience of students. There are growing fears over the size and sustainability of the US budget deficit, which is set to rise to almost 13pc of GDP this year as the world's biggest economy fights off recession. The US is reliant on China to buy many of the government bonds it is planning to issue but Beijing's policymakers have expressed concern about the strength of the dollar and the value of their investments.

However Chinese Vice Premier Wang Qishan said that the two countries were working closely together to fight the economic crisis.

Agora, graças ao Krugman, são os próprios americanos a troçarem do dólar.

graças ao Krugman ou aos lunáticos do GOP? a direita mantém a américa refém através da aprovação/não aprovação no congresso do debt ceiling.
Há dias foi o fiscal cliff.
e o krugman é que provoca a troça do dólar?

abre lá os olhinhos e olha para a realidade com olhos de ver.

[Lark]

pq é que não fazes um artigo didáctico sobre a ideia da trillion dollar coin?
assim o pessoal apercebia-se melhor do que se está a passar.

usar o facto da direita tentar troçar com o krugman não prova nem demonstra nada.
por acaso subiram os juros da dívida? aparentemente o mercado não se riu.

o melhor argumento que a direita encontra para combater o krugman é dizer: 'o kgruman é lunático'.
isso evita que muitas pessoas vão ler o krugman e fiquem elucidadas sobre muita coisa. funciona de alguma forma.
aqui no forum já não funciona de todo, como, concerteza, já te apercebeste.
não consegues desmontar, nem um, nem um pequeno, argumento do krugman. no entanto achas que estás em posição de troçar.

pergunto-me quem troça de quem e quem é o lunático....

[Lark]

On the Unbearable Self-Indulgence of Centrist Economics

Ed Kilgore is deeply annoyed, as he should be, at the “No Labels” people promulgating the notion that all we need to do to solve our problems is transcend our petty partisanship. As he points out, even their diagnosis of what our problems are — specifically, that budget uncertainty is keeping our economy depressed — is something that, as it happens, neither Democrats nor Republicans accept.

But Kilgore goes too easy on these guys. It’s not just that partisans of all stripes would disagree with their diagnosis; there is not a shred of evidence supporting their claims. Where is the evidence that fear of future deficits — as opposed to fear of political chaos over the debt ceiling and all that — is depressing business spending? Where, indeed, is the evidence that out there in the real world of economic decision-making, long-term deficits worry anyone at all? How do you reconcile claims that it’s all about the fiscal outlook with record-low borrowing costs?

The truth is that this is all a self-indulgent fantasy. Very Serious People love to pontificate about the budget, because it makes them sound, well, Very Serious; and so naturally they really like a doctrine which makes everything going wrong a byproduct of the political system’s failure to heed their Very Serious advice. But there is, as I said, no evidence to support that comforting belief, and in fact all the evidence points instead to a Keynesian story about inadequate demand.

What leads to this self-indulgence? In large part it is what Jon Chait calls the “repetitive drone of elite sentiment”, in which the usual suspects pat each other and themselves on the back, with never a skeptical question. Erskine Bowles and Alan Simpson will not appear on a Sunday talk show and get asked why the fiscal crisis they keep predicting hasn’t materialized. David Walker won’t be asked why, if the great danger is that at some point in the future we may be forced to cut benefits, it’s so important that we commit now to … cutting future benefits.

In ordinary life, believing what makes you feel comfortable, never mind reality, is widely understood to be a failing. In the world of Very Serious pontification, the practice is so deeply embedded that people don’t even know that they’re doing it.

krugman

[Lark]

o homem até se dá ao cuidado de explicar às pessoas como se elas tivessem cinco anos:
(artigo de 10 de janeiro)

Coins Against Crazies
By PAUL KRUGMAN
Published: January 10

So, have you heard the one about the trillion-dollar coin? It may sound like a joke. But if we aren’t ready to mint that coin or take some equivalent action, the joke will be on us — and a very sick joke it will be, too.
 
Let’s talk for a minute about the vile absurdity of the debt-ceiling confrontation.

Under the Constitution, fiscal decisions rest with Congress, which passes laws specifying tax rates and establishing spending programs. If the revenue brought in by those legally established tax rates falls short of the costs of those legally established programs, the Treasury Department normally borrows the difference.

Lately, revenue has fallen far short of spending, mainly because of the depressed state of the economy. If you don’t like this, there’s a simple remedy: demand that Congress raise taxes or cut back on spending. And if you’re frustrated by Congress’s failure to act, well, democracy means that you can’t always get what you want.

Where does the debt ceiling fit into all this? Actually, it doesn’t. Since Congress already determines revenue and spending, and hence the amount the Treasury needs to borrow, we shouldn’t need another vote empowering that borrowing. But for historical reasons any increase in federal debt must be approved by yet another vote. And now Republicans in the House are threatening to deny that approval unless President Obama makes major policy concessions.

It’s crucial to understand three things about this situation. First, raising the debt ceiling wouldn’t grant the president any new powers; every dollar he spent would still have to be approved by Congress. Second, if the debt ceiling isn’t raised, the president will be forced to break the law, one way or another; either he borrows funds in defiance of Congress, or he fails to spend money Congress has told him to spend.

Finally, just consider the vileness of that G.O.P. threat. If we were to hit the debt ceiling, the U.S. government would end up defaulting on many of its obligations. This would have disastrous effects on financial markets, the economy, and our standing in the world. Yet Republicans are threatening to trigger this disaster unless they get spending cuts that they weren’t able to enact through normal, Constitutional means.

Republicans go wild at this analogy, but it’s unavoidable. This is exactly like someone walking into a crowded room, announcing that he has a bomb strapped to his chest, and threatening to set that bomb off unless his demands are met.

Which brings us to the coin.

As it happens, an obscure legal clause grants the secretary of the Treasury the right to mint and issue platinum coins in any quantity or denomination he chooses. Such coins were, of course, intended to be collectors’ items, struck to commemorate special occasions. But the law is the law — and it offers a simple if strange way out of the crisis.

Here’s how it would work: The Treasury would mint a platinum coin with a face value of $1 trillion (or many coins with smaller values; it doesn’t really matter). This coin would immediately be deposited at the Federal Reserve, which would credit the sum to the government’s account. And the government could then write checks against that account, continuing normal operations without issuing new debt.

In case you’re wondering, no, this wouldn’t be an inflationary exercise in printing money. Aside from the fact that printing money isn’t inflationary under current conditions, the Fed could and would offset the Treasury’s cash withdrawals by selling other assets or borrowing more from banks, so that in reality the U.S. government as a whole (which includes the Fed) would continue to engage in normal borrowing. Basically, this would just be an accounting trick, but that’s a good thing. The debt ceiling is a case of accounting nonsense gone malignant; using an accounting trick to negate it is entirely appropriate.

But wouldn’t the coin trick be undignified? Yes, it would — but better to look slightly silly than to let a financial and Constitutional crisis explode.

Now, the platinum coin may not be the only option. Maybe the president can simply declare that as he understands the Constitution, his duty to carry out Congressional mandates on taxes and spending takes priority over the debt ceiling. Or he might be able to finance government operations by issuing coupons that look like debt and act like debt but that, he insists, aren’t debt and, therefore, don’t count against the ceiling.

Or, best of all, there might be enough sane Republicans that the party will blink and stop making destructive threats.

Unless this last possibility materializes, however, it’s the president’s duty to do whatever it takes, no matter how offbeat or silly it may sound, to defuse this hostage situation. Mint that coin!

krugman

[Incognitus]

In case you’re wondering, no, this wouldn’t be an inflationary exercise in printing money. Aside from the fact that printing money isn’t inflationary under current conditions, the Fed could and would offset the Treasury’s cash withdrawals by selling other assets or borrowing more from banks, so that in reality the U.S. government as a whole (which includes the Fed) would continue to engage in normal borrowing. Basically, this would just be an accounting trick, but that’s a good thing. The debt ceiling is a case of accounting nonsense gone malignant; using an accounting trick to negate it is entirely appropriate.

Não creio que a Fed o fizesse (que vendesse $1 trilião em dívida pública para fazer o offset à moeda).

[kitano]

Porque achas que não haveria comprador?

[Incognitus]

Porque achas que não haveria comprador?

Não - simplesmente porque a Fed não o faria, a Fed não tem qualquer plano para vender dívida pública em quantidade. A dívida pública que a Fed compra, é como se deixasse de existir e faz parte do plano fazer isso mesmo, emitir dívida e comprá-la. No fundo é o verdadeiro dinheiro de graça que já está a ser praticado.

[Lark]

All Our Base Are Belong To Us (Wonkish)
Well, almost all, at least in normal times.

Via Mark Thoma, I see that Steve Randy Waldman believes that the distinction between monetary base — the stuff only the central bank can create — and short-term debt in general has disappeared, not just for the moment, but permanently. It’s a point of view I hear fairly often, along with the view that in fact there never was a difference. But it’s a view based, I think, on a slip of the tongue.

What do I mean by that? That people saying these things — you can see it clearly in Waldman’s post — slide much too easily into identifying monetary base with bank reserves. And since bank reserves now pay interest, well, aren’t they just debt?

But bank reserves are just one component of the monetary base — and in normal times, a trivial component. Here (pdf) is a useful table:


Before the crisis, only about 5 percent of the monetary base consisted of bank reserves. The rest was basically currency.

This meant that the simple textbook description of how an open-market operation increases the money supply — a bank lends out 1-r of its new reserves (with r the reserve ratio), which return to the banking system, leading to another round of lending, and eventually the money supply rises by 1/r times the injection — is deeply misleading. What actually limits the growth in the money supply is the fact that a substantial part of each round of lending leaks out of the banking system, getting added to hoards of green paper bearing the faces of dead presidents.

And dead presidents, as you may have noticed, don’t pay interest.

Now, under current conditions that doesn’t matter; dead presidents don’t pay interest, but neither do T-bills, so short term debt and currency form an aggregate (a Hicksian composite commodity, for the serious nerds out there), whose composition doesn’t matter. But interest rates won’t always be zero, and at that point the size of the monetary base — dead presidents plus a sliver of bank reserves that can be converted into dead presidents at will — will matter again.

It’s true that the Fed could sterilize the impact of a rise in the monetary base by raising the interest rate it pays on reserves, thereby keeping that base from turning into currency. But that’s just another form of borrowing; it doesn’t change the result that under non-liquidity trap conditions, printing money and issuing debt are not, in fact, the same thing.

[hermes]

pq é que não fazes um artigo didáctico sobre a ideia da trillion dollar coin?
assim o pessoal apercebia-se melhor do que se está a passar.

Mais didáctico que o Jon Stewart, é quase impossível.

Na minha opinião, o programa do Jon Stewart marca o ponto de viragem do dólar. De uma só penada o Krugman criou as condições para o aumento da velocidade de circulação do dólar, i.e. resolveu aquilo que o Ben Bernanke e o Tim Geitner não conseguiram em 4 anos.

pergunto-me quem troça de quem e quem é o lunático....

Como já te disse mais do que uma vez, o Krugman tem o meu completo apoio!

[as]

Muito bom!

http://www.thedailyshow.com/watch/thu-january-10-2013/the-trillion-dollar-coin

[Local]

Um texto em português
O fantasma da "estagdeflação" segundo Paul Krugman
http://expresso.sapo.pt/o-fantasma-da-estagdeflacao-segundo-paul-krugman=f779299

[Lark]

All Your Base Are Belong To Us, Continued (Still Wonkish)

Steve Randy Waldman replies reasonably to my post about the currency domination of the monetary base. But I think we’re still having a failure to communicate.

What Waldman is now saying is that in the future the Fed will manage monetary policy by varying the interest rate it pays on reserves rather than the size of the conventionally measured monetary base. That’s possible, although I don’t quite see why. But in his original post he argued that under such a regime “Cash and (short-term) government debt will continue to be near-perfect substitutes”.

Well, no — not if by “cash” you mean, or at least include, currency — which is the great bulk of the monetary base in normal times.

But this could come across as word games. I think the way to get at the substance is to ask the question that set this discussion off: what happens if the US government issues a trillion-dollar coin to pay its bills?

Everyone sensible (a group containing nobody on the political right) agrees that right now it makes no difference: financing the government by selling T-bills with zero yield, and financing it by making a deposit at the Fed, which either adds to the monetary base or sells some of its zero-yield assets, has, um, zero implication for anything except some peoples’ blood pressure.

But what happens if and when the economy recovers, and market interest rates rise off the floor?

There are several possibilities:

1. The Treasury redeems the coin, which it does by borrowing a trillion dollars.

2. The coin stays at the Fed, but the Fed sterilizes any impact on the economy, either by (a) selling off assets or (b) raising the interest rate it pays on bank reserves

3. The Fed simply expands the monetary base to match the value of the coin, an expansion that mainly ends up in the form of currency, without taking offsetting measures to sterilize the effect.

What Waldman is saying is that he believes that the actual outcome would be 2(b). And I think he’s implying that there’s really no difference between 2(b) and 3.

But that’s not right either in economic or in fiscal terms. Option 3 would be inflationary; on the other hand, it would not lead to any increase in government debt. Option 2(b) would not be inflationary — but it would affect the federal budget. Why? Because the Fed’s additional interest payments would reduce the amount it can remit to the Treasury.

In fact, the effects of option 2(b) would be identical, both for the economy and for the federal government’s cash flow, to option 1. Either way, the budget deficit would be enlarged by the payment of interest on $1 trillion of borrowing. In that sense, the Treasury will have redeemed the coin, for practical purposes, even if it never redeems the coin.

The bottom line, as I see it, is that the Fed’s new policy of paying interest on reserves makes much less difference than some people think. Short-term debt and currency are still not at all the same thing, and this is what matters.

krugman

[Zel]

http://www.thedailyshow.com/watch/mon-january-14-2013/paul-krugman---the-trillion-dollar-coin