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Tag Archives: Stimulus

What about Japan?

What about Japan? It's a question I often hear from advocates of fiscal expansion. Japan has huge debts and no crisis or inflation (so far). Doesn't that prove the US can borrow a ton more money painlessly? I offer two new points today: 1) Not every high debt country is so happy. 2) Just what did Japan get for all its fiscal stimulus? Indeed, I will start asking "What about Japan?" Japan seems a tough case for those who advocate that fiscal stimulus will save us from secular stagnation,...

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Infrastructure and jobs

William Gropper, Construction of the Dam, 1938To many on the left, it's always 1933. Building "roads and bridges" will "create jobs," soaking up the mass army of unemployed desperate for work that they seem to see. Driving around though, I notice that we build roads with big machines, not lots of people. And construction jobs are high-skill jobs, not people with shovels. "Shovel-ready" itself is a misnomer. Nobody uses shovels on a construction site anymore, they use a backhoe. Neither...

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Ip on Bidenomics

Greg Ip has a great column in the WSJ on Bidenomics.  It's not long, it's so well written that it's hard to condense the good parts, and you should really read it all. There is an intellectual framework to Bidenomics, and with that a scarily more durable move on economic policy. There used to be "certain rules about how the world worked: governments should avoid deficits, liberalize trade and trust in markets. Taxes and social programs shouldn’t discourage work."By...

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r < g

r<g is an essay on the question whether r<g means the government can borrow and not worry about repaying debts. No. Abstract: A situation that the rate of return on government bonds r is less than the economy's growth rate g seems to promise that borrowing has no fiscal cost. r<g is irrelevant for the current US fiscal problems. r<g cannot begin to finance current and projected deficits. r<g does not resolve exponentially growing debt. r<g can finance small...

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The wages of stimulus

 Discussing stimulus, a colleague passed along a factoid -- wages and salaries, he said,  are running $20 billion a month or $240 billion a year below where they should be. If the "stimulus" were to aim entirely to replace all lost wages due to the pandemic, that would stop at $240 billion, not $1.9 trillion. (My colleague is usually a pro-stimulus type.) I forgot to get the source, so I tried to recreate it. Here are some documented numbers, total compensation of employees, wage...

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WSJ oped on virus policy

Why is the market going nuts? What should policy do? I put some of my recent thoughts in a Wall Street Journal Op-ed, here. As usual I can't post the whole thing for 30 days, but if you're clever you can find it.This is not a "demand" recession needing "stimulus." The economic policy challenge is to allow the economy to shut down, but make sure it doesn't die in the process. The problem is -- once again -- debt.Had everyone kept a few months of cash around, things would be fine. But many did...

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Monetary policy and coronavirus — French edition

Vox-Fi put up an edited version of my monetary policy and coronavirus post, in French, La politique monétaire en réponse au coronavirusUn collègue et moi avons discuté de la question suivante : la Fed (Federal Reserve, la banque centrale des Etats-Unis) devrait-elle baisser ses taux d’intérêt en réponse au coronavirus?Plus généralement, supposons qu’une pandémie devienne grave et que, par choix ou par décret, une grande partie de l’économie s’arrête pendant quelques semaines ou mois....

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Area 45 pandemic podcast

For you podcast fans, here is a longer podcast with Hoover's Bill Whalen on economics and the pandemic. It clarifies some of my evolving thoughts -- more lending, less bailout.The pandemic is quickly threatening to turn in to a financial crisis. I'm brooding on that for upcoming posts.If you're not worried yet, read herehttps://medium.com/@tomaspueyo/coronavirus-act-today-or-people-will-die-f4d3d9cd99ca

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New Paper — the fiscal roots of inflation

I recently finished drafts of a few academic papers that blog readers might find interesting. Today, "The Fiscal Roots of Inflation."The government debt valuation equation says that the real value of nominal debt equals the present value of surpluses. So, when there is inflation, the real value of nominal debt declines. Does that decline come about by lower future surpluses, or by a higher discount rate? You can guess the answer -- a higher discount rate.Though to me this is interesting for...

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