W/ apologies for being gone.
For my money, the interesting thing right now economically is that there hasn't been more heat put on Ben Bernanke.
As I've written, I think the case for more QE has been relatively clear for more than one year now. The frustrating thing is that even as new economic data come in which show that inflation is subdued and unemployment is not, there is no change at all in Fed policy. Bernanke believes in the same policy Wednesday as he did Monday, no matter what the BLS said Tuesday. In normal times the Fed almost certainly would have responded to the events of the past few months -- Greece, deflation, poor manufacturing and employment numbers -- by cutting the Federal Funds rate. And Bernanke's only response is to say that all he's gonna do is keep rates low until things get better. The problem is, this might not be enough.
With inflation since January a whopping 0.0%, and unemployment down to 9.5% thanks to a shrinking of the size of the labor market, the case for more Fed action could not be clearer. Of course, it could also not have been any clearer back in January, when unemployment was around 10% and core inflation around 1%, or last summer, when unemployment was around 9% and growing, and core inflation was around 1%.
To me this seems like gross negligence. Sheer, senseless incompetence -- almost like leaving a gas burner on when you leave for work, only doing it on purpose.
This means I must be crazy because it also seems like Ben Bernanke has come under only very sparse criticism, even from liberal bloggers. (Matt Yglesias being an exception...)
It was hilarious to see Yglesias criticized by a Ph.D. Fed economist awhile back on the grounds that since Yglesias hasn't completed a first-year Ph.D. algebra marathon, he cannot understand the complexity of macro, and therefore has nothing to add. Except he's been one of the only voices brave enough to call a spade a spade.
Sometimes, Macro is not that complicated. Inflation is low, unemployment is high. Therefore the Fed should do more. That's it. Were we to start seeing more inflation and/or fast employment growth, then things would start to get more complicated, but we're not there yet.
Thing is, the Fed employs all these economists with Ph.D.'s from fancy institutions, who write down extremely complicated, intricate models backed by sophisticated computer simulations which they spent years meticulously creating, and yet they apparently cannot grasp concepts so simple, a five-year old can understand it. Of course, it's not just Ben Bernanke and his Fed Economists that cannot understand it, but it's also a bunch of others in the media, including liberal econ bloggers who haven't really written much at all about the Fed's lack of policy response to continuing high unemployment, deflation, and the debt crisis, the economists who contribute to columns like voxeu, and Monetary Economists all over the world. These people have no idea what they are talking about.
So, if I'm so smart, then why is Ben Bernanke Fed Chair, and why am I still a grad student blogging out of my student housing?
I'm not sure I know the answer to that, but it's become increasingly clear to me that the only kind of intelligence which gets anyone anywhere is emotional intelligence. Being able to sound smart, to play-act a certain role. Introducing the right bit of jargon at the right time to feed the impression that you know something other people do not. Connecting with people on an emotional level. Coming across as alpha-malish. Bringing the right energy level.
In economics seminars, of course, this is done by introducing a complicated model. A model which, as you click through it, is too complicated for anyone to really follow except for maybe the guy who happened to have worked on the same topic. But, of course, teaching people something is not the point of an economics seminar. Showing other Very Serious People that you work on hard topics with lots of math is the point of economics seminars, which is why these things are a waste of everyone's time.
But I digress. My fears last fall -- that Ben Bernanke should not be reconfirmed as Fed Chair -- have, unfortunately for millions of jobless Americans, proven prescient. Fed policy has been awful, and apparently almost nobody has noticed.
Schedule for Week of January 26, 2020
9 hours ago