Author Archives: Menzie Chinn

From October 2013: “The Obamacare implosion is worse than you think”

That’s a title from an oped by former GW Bush speechwriter and current AEI scholar Marc Thiessen nearly a year ago. We can now evaluate whether in fact the implementation of individual insurance mandate component of the ACA did implode. From “New Data Show Early Progress in Expanding Coverage, with More Gains to Come,” White House blog today:

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The Stupidest Paragraph in Perhaps the Stupidest Article Ever Published

Bruce Bartlett brought my attention to this article, which Mark Thoma mused was “The Stupidest Article Ever Published”. From The Inflation Debt Scam, by Paul Craig Roberts, Dave Kranzler and John Williams:

To understand how risky the rise of debt is, nominal debt must be compared to real GDP. Spin masters might dismiss this computation as comparing apples to oranges, but such a charge constitutes denial that the ratio of nominal debt to nominal GDP understates the wealth dilution caused by the government’s ability to issue and repay debt in nominal dollars. …

I’m not a spin master, and yet I cannot help but dismiss this calculation as exactly comparing apples to oranges.

Nominal debt divided by nominal GDP is expressed in years — essentially years worth of GDP necessary to pay off the debt. I can understand what this calculation yields. In contrast, nominal debt is in $, real GDP is in Ch.2009$/year, so nominal debt divided by real GDP is a number expressed in years times dollars per Ch.2009$.

The authors present this figure to buttress their case:


Source: Roberts, Kranzler and Williams, “The Inflation Debt Scam,” The International Economy (Summer 2014).

As far as I can tell, the article is merely an excuse for Williams to haul out the fully discredited “Shadowstats” one more time.

By the way, according to Shadowstats, the US economy has been shrinking nonstop since 2004-05, on a year-on-year basis…

So, if this is not the stupidest article ever, it is in the running (along with Don Luskin’s 2008 gem).

“Facts are Stupid Things”

As Ronald Reagan once said (although he did mean to say “stubborn”)

Regarding the implications of optimal currency area theory and Scottish independence, Reader Patrick Sullivan continues his reign of error, trying to argue that Canada did just fine, just like a bank crisis-free Scotland in a currency union would:

Canada didn’t have a central bank until sometime in the 1930s, and had a less severe depression than the USA.

Well, with a little help from Louis Johnston, (who knows economic history much better than I), I generate the following plot:


Figure 1: Log per capita income in 1990 International dollars for Canada (blue) and United States (red), normalized to 1929=0. Source: Maddison and author’s calculations.

I dunno, but these seem to be comparable declines in output. So, yes, no central bank operating until 1935 [1] (p.22), but no, Canada suffers a pretty big shock (Canada on a de facto gold standard until 1931 (p.21)).

It constantly amazes me how people make easily falsifiable statements with such astounding confidence…

So, I think Scotland should consider very carefully independence conjoined with monetary union with England.

Reading Macro Data: Growth Rates, Annual Rates, Data Breaks

Newcomers to macro often encounter problems in interpreting and using data. The first is how to report growth rates, particularly when trying to assess the current state of the economy. The second is how to read data reported at annual vs. quarterly vs. monthly rates. The third is accounting for the presence of breaks in data collection. (This post primarily for students in Econ 435 and Public Affairs 854.)

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