Even though the overnight interest rate has been stuck near zero for 20 months, are there options available to the Federal Reserve or the U.S. Treasury to bring longer-term yields down further? I have been looking into this question with Cynthia Wu, an extremely talented UCSD graduate student. We present our findings in a new research paper, some of whose results I summarize here.
What Can Sustain GDP Growth? Open Economy Version
With the consumer in the doldrums, residential investment unlikely to rebound in the near future, and government stimulus constrained by political gridlock, it’s hard to see where the sources of aggregate demand will be. I’m going to extend Jim’s search for silver linings in the latest GDP release.
New database on the maturity structure of publicly-held debt
I have been working on a project with UCSD graduate student Cynthia Wu to try to assess the potential for the Federal Reserve to continue to influence long-term interest rates even when the short-term interest rate is essentially at zero. I’ll be relating the conclusions from that research in a few days. But first I’d like to call attention to a new data set that we developed on the maturity structure of publicly-held debt which may be of interest to other researchers. As Paul Krugman likes to warn, this one is just for the wonks.
GDP revised down
The Bureau of Economic Analysis, which last month had estimated that U.S. real GDP had grown at a 2.4% annual rate during the second quarter, today revised that estimate down to a 1.6% annual rate. But the revision isn’t quite as discouraging as it might sound.
A quantitative assessment of the scientific consensus on anthropogenic climate change
From the abstract to the paper:
… we use an extensive dataset of 1,372 climate
researchers and their publication and citation data to show that (i)
97-98% of the climate researchers most actively publishing in the
field support the tenets of ACC outlined by the Intergovernmental
Panel on Climate Change, and (ii) the relative climate expertise and
scientific prominence of the researchers unconvinced of ACC are
substantially below that of the convinced researchers.
More thoughts on what to expect from the Fed
There is disagreement within the FOMC. How will it be resolved?
Kevin “Dow 36,000” Hassett* Speaks on “Keynesian Economics”
From Bloomberg:
The biggest Keynesian stimulus in U.S. history was a bust.
Incredibly, some Keynesians who supported Barack Obama’s $862 billion stimulus now claim it fell short of their goals not because the idea was flawed, but because the spending package was too small.
Long-term perspective on the stock market
Nobody can tell you for sure what’s going to happen next in the stock market. But thanks to the nice data set collected and maintained by Yale Professor Robert Shiller we can speak with authority about what it’s been doing for the last 140 years.
The June Trade Release: A Clash of Narratives
The recent trade release for June sparked some consternation, as it indicated 2009Q2 2010Q2 growth, conditional on data already released, would be lower. But there was also some unhappiness as it was taken by some to mark the return of the spendthrift consumer.[0] Yet, everywhere I see discussion of how consumption is lackluster, because households are deleveraging and beset by uncertainty. [1] These two narratives clash. Which one is right?
Will the Fed do more?
If conditions deteriorate further, I believe the answer is yes.