Policy action is needed, with all deliberate speed.
Representative Ryan on Conditional Macroeconomic Prediction
The gold standard and economic growth
Tyler Cowen acknowledges that the gold standard as implemented in 1929-1932 was a disaster, and that a gold standard would also work very poorly in the presence of the big changes in the real value of gold over the last decade. But in the interests of promoting a balanced discussion, he asks:
Dare anyone critical of the gold standard bring themselves to utter these (roughly true) words?: “For the Western world, the gold standard era, defined say as 1815-1913, was arguably the greatest period of human advance ever, at least in matters of economics, culture, and technology.”
Here are my thoughts on Tyler’s question.
Are You Better Off Than You Were at the End of the Bush Administration? A Data-Based Assessment
I’ve heard a lot about the “four years ago” comparison. Four years ago, we were on the cusp of Don Luskin’s famous prediction (“… we’re on the brink not of recession, but of accelerating prosperity.”), and Phill Gramm had two months earlier decried the ongoing “mental recession”. [0] It seems to me the more appropriate marker is the last election, in 2008Q4. We can then assess what the data tells us about 2012Q2 vis a vis 2008Q4.
Return to the gold standard
Several sources reported that the 2012 Republican Platform would call for a commission to explore the possibility of the U.S. returning to a gold standard. However, the final document makes no mention of gold, and instead seems to have settled on a proposal that is unlikely to do any harm:
President Reagan, shortly after his inauguration,
established a commission to consider the feasibility
of a metallic basis for U.S. currency. The
commission advised against such a move. Now, three
decades later, as we face the task of cleaning up the
wreckage of the current Administration’s policies, we
propose a similar commission to investigate possible
ways to set a fixed value for the dollar.
I thought it would be worthwhile to review some of the reasons why we should be thankful that saner heads seem to have prevailed.
Q&A on oil prices
I recently did an interview with OilPrice.com on a range of issues related to oil prices. Here are some excerpts.
Expectations, Uncovered Interest Parity, and the Zero Interest Bound: New Results
One of the most robust findings in international finance is that interest differentials do not point in the right direction for subsequent exchange rate changes. This means that dollar returns on say one year certificates of deposit in the US and in the UK are not on average equalized. In Chinn and Meredith (2004), we show that this anomaly — if it is one — disappears as one goes to longer horizons. This finding was discussed previously here.
U.S. monetary policy since the financial crisis
The Federal Reserve Bank of New York announced on Thursday that it had sold the last remaining securities from its Maiden Lane III portfolio, successfully closing the chapter on its assistance to insurance giant AIG. I thought this would be a good occasion to review the various measures that the Fed implemented over the last 5 years– what they were attended to accomplish, what they did accomplish, and the significance of Thursday’s announcement.
A Debate in Foreign Affairs: Stimulus or Reform
From an exchange in the September/October issue of Foreign Affairs, with Raghuram Rajan, Karl Smith and myself. I write in my comment:
Federal receipts and expenditures
I was interested to take a look at the trends in receipts and expenditures of the U.S. federal government over the last 40 years.