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Scott Sumner: October 2015

An Author Archive by Month (22 entries)

A theory of house temperatures

Monetary Policy
Scott Sumner
Bob Murphy has occasionally complained that I contradict myself on interest rates. I frequently say: 1. Interest rates are a meaningless indicator of the current stance of monetary policy. 2. Raising interest rates makes monetary policy more contractionary, on the... MORE

Prior to late 2008, I had gone 25 years without having a strong opinion on monetary policy. It seemed about right, even if on occasion I might have preferred something a bit easier or a bit tighter. Then it seemed... MORE

These two questions are much more similar that we tend to assume, despite the normative/positive distinction emphasized in EC101 textbooks. They are not identical questions in the short run---say the October or December Fed meetings---but over a long period of... MORE

Delaying the crash

Monetary Policy
Scott Sumner
I am gradually working my way through Bernanke's recent memoir, and so far I am greatly enjoying the book. It does an outstanding job of explaining how things looked from the inside, and is full of fascinating tidbits. For instance,... MORE

How I think

Economic History
Scott Sumner
Over at MoneyIllusion a commenter asked me the following question: What is your "take" (to borrow a sports term) on the role played by mass quantities of gold and silver pouring into Spain during the first centuries of that period?... MORE

Paul Krugman has a new post on Japan, which makes some good points. He considers the possibility that Japan will never escape the zero rate trap. I don't think that we have a good sense of what that scenario implies,... MORE

The libertarian coast

Regulation
Scott Sumner
Yesterday's win for the Canadian Liberals was a huge win for libertarian policies in North America: One other industry may gain from the Liberal landslide. Canadian marijuana stocks including Canopy Growth Corp., Aphria Inc. and Mettrum Health Corp. may gain... MORE

Reply to Arnold Kling

Monetary Policy
Scott Sumner
Arnold Kling replied to me recent post discussing a 4% inflation target (a policy I oppose, by the way.) I strongly disagree with all 6 of his points. He is responding to this claim I made: The simplest solution is... MORE

Bernanke's memoir: First impressions

Monetary Policy
Scott Sumner
Seminars at the University of Chicago were pretty intense. I recall times when the speaker was barely one sentence into his presentation, and was already being challenged by pointed questions. I hate to be "that guy", but . . .... MORE

Market monetarism is not (primarily) about NGDP targeting

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
I was very excited to read about a new San Francisco Fed study that supported one key tenet of market monetarism. A number of commenters seemed confused as to why it was a big deal. To see why, we need... MORE

Thanks Texas

Energy, Environment, Resources
Scott Sumner
I just spent some time in California, and noticed that there are a lot of really rich people out there. My hotel was in Santa Monica, a pleasant beach town where the average house costs $2.7 million. One property was... MORE

More really good news

Monetary Policy
Scott Sumner
I recently pointed out that Fed officials are becoming more receptive to the market monetarist proposal for negative interest on reserves. Today there is more progress, on an even more important front. First let me provide a bit of background... MORE

Reply to Kevin Drum

Scott Sumner
Kevin Drum has a post discussing whether the Fed could achieve a 4% inflation target. The post discusses some of Brad DeLong's idea, and then concludes as follows: So if I'm reading DeLong right, it's not clear that the Fed... MORE

It's hard to teach a central bank new tricks

Monetary Policy
Scott Sumner
How did the Fed do during its first 100 years? For a deeper look at this question, you should read Selgin, Lastrapes and White. Here I'll take a very broad overview, and look at a few key themes. In my... MORE

Market monetarism continues to make progress

Monetary Policy
Scott Sumner
One of the earliest ideas to come out of market monetarism was the proposal for negative interest rates on reserves (negative IOR). I mentioned this idea in a couple papers published in early 2009, and the New York Fed discussed... MORE

Arnold Kling recently responded to a point I made about the Fed not determining the path of interest rates: He wrote, Unfortunately, the Fed doesn't get to decide the path of interest rates. It looks like they do, but that's... MORE

Yes, a strong dollar matters; but why?

International Macroeconomics: Exchange Rates, International Debt, etc.
Scott Sumner
Giles Wilkes directed me to an interesting Financial Times article on the strong dollar: In its April forecast for the global economy, IMF statistics suggested that global gross domestic product in nominal US dollar terms would hit $74.5tn this year,... MORE

Everything's endogenous

Money
Scott Sumner
Your debutante just knows what you need But I know what you want -- Bob Dylan Over at MoneyIllusion I did a post---partly tongue in cheek---pointing out that if Milton Friedman were alive today he might be forced to change... MORE

I've made this point before, but it's worth repeating, given all the recent talk about the Fed relying on the Phillips Curve. The Phillips Curve model only works when the business cycle is driven by demand shocks. When we are... MORE

I recently argued that banks do not play an important role in monetary policy. Rather we need to focus on the supply and demand for base money, which is mostly determined by central bank policies. The blog Spontaneous Finance recently... MORE

When the Fed ignores the market

Monetary Policy
Scott Sumner
Market forecasts are often wrong. But they remain the least bad way we have of predicting the future. In the past, we've paid a heavy price when the Fed ignored market forecasts. In September 2008, the TIPS markets predicted very... MORE

Missing the big picture

Monetary Policy
Scott Sumner
I've done scattered posts discussing the flaws in alternative approaches to monetary economics. Here I'd like to try to show some underlying themes in these critiques. I'll briefly discuss 4 common myths: 1. The trade view 2. The fiscal view... MORE

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