How much would you pay to avoid a second Depression?
Not all information is beneficial.
The economist John Maynard Keynes said that in the long run, we are all dead. If he were around today he might say that, in the long run, we are all on Social Security and Medicare.
In fact, the world needs more nerds.
I am very proud of my nerd-dom.
Monetary policy cannot do much about long-run growth, all we can try to do is to try to smooth out periods where the economy is depressed because of lack of demand.
Speaking as somebody who has been happily married for 35 years, I can’t imagine any choice more consequential for a lifelong journey than the choice of a traveling companion.
It must be awfully frustrating to get a small raise at work and then have it all eaten by a higher cost of commuting.
I and others were mistaken early on in saying that the subprime crisis would be contained. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict.
A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.
We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.
The impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.
Life is amazingly unpredictable; any 22-year-old who thinks they know where they will be in 10 years, much less in 30, is simply lacking imagination.
The central bank needs to be able to make policy without short term political concerns.
If we acted, nobody would thank us. But if we did not act, who would? Making politically unpopular decisions for the long-run benefit of the country is the reason the Fed exists as a politically independent central bank. It was created for precisely this purpose: to do what must be done – what others cannot or will not do.
I had become a Great Depression buff in the way that other people are Civil War buffs, reading not only about the economics of the period but about the politics, sociology, and history as well.
Economists are criticized for not being able to predict the future, but, because the data are incomplete and subject to revision, we cannot even be sure what happened in the recent past. Noisy data make effective policymaking all the more difficult.
They also reminded me of a story Dallas Fed president Richard Fisher included in one of his speeches about the early nineteenth-century French diplomat Talleyrand and his archrival, Prince Metternich of Austria. When Talleyrand died, Metternich was reported to have said, “I wonder what he meant by that?” It seemed that no matter what I said or how plainly I said it, the markets tried to divine some hidden meaning.
If you’ve got a squirt gun in your pocket, you may have to take it out. If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out,” he said. Sometimes market fears can be self-fulfilling, and a strong demonstration can avoid the worst outcomes. I was reminded of the military doctrine of “overwhelming force” as the way to prompt quick surrender and minimize casualties.
They believed that anyone who worked hard to feed his or her family, no matter how humble the work, deserved respect.
Barney Frank wanted to know where the Fed was going to get the $85 billion to lend to AIG. I didn’t think this was the time to explain the mechanics of creating bank reserves. I said, “We have $800 billion,” referring to the pre-crisis size of the Fed’s balance sheet. Barney looked stunned. He didn’t see why the Fed should have that kind of money at its disposal.