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David Andolfatto
The views and opinions expressed by me in this blog are my own and should in no way be attributed to the Federal Reserve Bank of St. Louis, or to the Federal Reserve System.

David Andolfatto: Macro Mania

David Andolfatto, Vice President of the St. Louis Fed, created MacroMania as a resource for people wanting a better understanding the Fed’s marcoeconomic policy. His commentary is incisive and thorough, particularly his thoughts on Bitcoin and blockchain technology.

The recession of 2012-13 and the taper tantrum

I admit this is a rather strange title for a post, but bear with me. Every once in a while I reflect back on the so-called "taper tantrum" event in the summer of 2013 when Fed Chair Ben Bernanke made an off-the-cuff remark that the FOMC was thinking of maybe slowing down the pace QE3 asset purchases (see here). The stock market had a temporary sell-off, which turned out to be no big deal. What I find more interesting is how long bond yields rose sharply and persistently. Even more...

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U.S. GDP Expenditure Components

One way to decompose the GDP is in terms of its expenditure components, Y ≡ C + I + G + NX. I like to write "≡" instead of "=" to remind myself that this decomposition is measurement, not theory.   In what follows, consumption is measured in terms of nondurables and services only--I add consumer durables with private investment. The data is inflation-adjusted, quarterly, and I report year-over-year percent changes. I'll start with recent history (since 2010) and then later look at a longer...

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Fiscal theories of the price-level

This post is me thinking out loud about how fiscal considerations may influence the price-level.  The question of what determines the price-level is an old one. It's a question that economists struggle with to this day. To begin, what do we mean by the price-level? Loosely, the price-level refers to the "cost-of-living," where cost is measured in units of money. Living refers to the flow of services consumed (destroyed) for the purpose of survival/enjoyment. (Note that the cost-of-living...

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Blockchain: what it is, what it does, and why you probably don’t need one

Dilbert - by Scott AdamsInterest in blockchain is at a fever pitch lately. This is in large part due to the eye-popping price dynamics of Bitcoin--the original bad-boy cryptocurrency--which everyone knows is powered by blockchain...whatever that is. But no matter. Given that even big players like Goldman Sachs are getting into the act (check out their super slick presentation here: Blockchain--The New Technology of Trust) maybe it's time to figure out what all the fuss is about. What...

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Lowflation: Then and Now

The term "lowflation" was initially coined by economists at the IMF in 2014 (see here). It refers to an inflation rate that is persistently low (relative to some target) but positive. Here is what lowflation looks like in the United States: How should we think about lowflation? I've written a bit on the subject here and here. Is the phenomenon unusual? Is it something we should worry about?As it turns out, the phenomenon is not unusual even in recent U.S. monetary history. The following...

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Fedcoin and blockchain

I see Campbell Harvey promoting the idea of Fedcoin here: "Bitcoin is Big. But Fedcoin is Bigger." I'm not sure I agree with his pitch for the idea.Let's start with Harvey's claim that "Bitcoin and other cryptocurrencies are based on a complicated technology known as blockchain, which acts like a digital ledger of all transactions completed with the currency." Complicated? Well, yes and no. As I explain here "Why the blockchain should be familiar to you," there's a sense in which...

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My perspective on the Bitcoin Project (collected works)

It's true, I really did say that.It's Christmas time and I'm in a giving mood. So I thought I'd collect all my writings and talks related to Bitcoin and blockchain in one easy-to-access spot. Like many people, I first took notice of Bitcoin in 2013, after its price soared to over $1000, before plummeting significantly. Thank goodness I didn't buy any back then (D'oh!). Many economists dismissed the phenomenon as just another bubble/scam. This was my initial instinct as well, but after...

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Interpreting the yield curve

There's been a lot of talk lately about the flattening of the yield curve, what's causing it, and what it portends. In this post, I describe a simple "neoclassical" theory of the yield curve and ask to what extent it serves as a useful guide for our thinking on the matter.   Let's start by defining terms. Let I(m) denote the yield (market interest rate) on (say) a U.S. treasury bond with maturity m. So, I(1) denotes the yield on a one-year bond and I(10) denotes the yield on a ten-year...

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Tyler Cowen on Central Bank Cryptocurrencies

I enjoy reading Tyler Cowen and have learned a lot from his columns. So before I criticize his most recent effort, I want to thank him for all his fine contributions! Unfortunately, I think he drops the ball a little bit on his most recent effort. No worries--we all do sooner or later. What follows are some thoughts that came to my mind as I read his most recent article entitled "Cryptocurrencies Don't Belong in Central Banks." My (unedited/uncensored thoughts are recorded in blue...Tyler,...

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