It seems obvious to me that Bernanke would not make that sort of statement.  It also seems obvious that the Fed should occasionally make that sort of statement, if we had a policy regime run by grown-ups that took seriously the notion that fiscal and monetary policy impact aggregate demand.  I happen to think Bernanke is a “grown-up.”  So what’s the problem?  The problem is that the other half of our policy regime is not run by grown-ups.  So Bernanke is forced to talk to Congress in much the same way I used to talk to my daughter about the tooth fairy.  He can’t simply go to Congress and lay “the facts of life” out on the table, because they can’t handle the truth.  They aren’t mentally equipped to deal with the reality that fiscal and monetary stimulus are two ways to boost AD, and if they do more the Fed will probably do less.  They live in a happy dream world where either the Fed has no power at zero rates (the Dems) or the Fed can only affect inflation whereas tax cuts affect real growth (the GOP).  Bernanke knows they live in this dream world, and hence understands that he must address them like second-graders.

The independent central bank has largely been a good idea, making commitments to low inflation more believeable than when politicians could pull the levers. Fiscal and monetary policy are not independent though, and currently it seems like fiscal policy moves first, while pretending that monetary policy is set independently (and perhaps simultaneously). Scott Sumner points out that this may not be ideal.

On the other hand, perhaps having a more flexible regime might bring us a new set of problems. Not to speak of the uproar that would be brought against central bankers when they state that they would only stimulate the economy if the fiscal policy does not.

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Andra intressanta bloggar om: politik, ekonomi

Portugal is at 30.7%, Greece at 46.6%. Spain is at a mind-boggling 51.4%! You can see the chart here, and read their comments here.

Even after we get out of the current crisis, structural reforms are desperately needed if we are to see substantial growth in Europe over the coming decades. I am not knowledgable enough to say whether these statistics are a result of insider-favouring labour market laws, poor education systems, an insufficiently flexible private sector out of alignment with current global demand, or a number of other plausible culprits. But causes need to be identified, and reforms implemented. I doubt that a society can hold together with unemployment levels such as these.

Political leaders (and voters!) ought to find some inspiration in Alex Tabarrok’s recent book on innovation.

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Andra intressanta bloggar om: politik, eu, ekonomi, tillväxt

Harvard economist, and adviser to Mitt Romney, Greg Mankiw lays out some ideas for tax reform that most people should be able to agree on. They follow four basic principles:

1. Broaden the base and lower the rates
2. Tax consumption rather than income
3. Tax bads rather than goods
4. Keep it simple, stupid

Why isn’t this done? Individually, a lot of the specific policies currently in place enjoy substantial political support, and although we would be better off with an overhaul it is too tempting for politicians to cherry pick individual deviations that could win them votes. Perhaps this problem is made bigger by the type of electoral system that the U.S. employs for Congress.

Sweden reformed its tax system in the early 90:s, largely following those principles. Of course, since then, complexity has grown again, as individual policies change the code without paying sufficient attention to their impact on taxation as a whole.

2012 is probably not the best year to attempt something like this in the U.S., but hopefully efforts can be made after the presidential election.

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Andra intressanta bloggar om: politik, ekonomi, usa, skatter

However, it remains relatively unlikely that he will end up on top. The markets give him a 29% chance, considerably up from before the South Carolina win, but still far behind Mitt Romney, who sits at 64%. What Mr Gingrich’s victory did show, is that Mr Romney is not as strong as he has appeared. His performance in the CNN debate leading up to his loss was sub-par, and the exit polls suggest that he lost a significant number of voters there. The Obama team is surely paying attention.

Mr Romney is currently behind Mr Gingrich in the Florida polls. He needs something to break the trend. Since his loss, he has dropped to having a 28% chance at the presidency, down from well above 40%.

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Andra intressanta bloggar om: politik, usa, republikanerna

I suspect that in your Swedish, liberal yet sternly prescriptive way, you’ve rounded them all up, and there is an island out there in the archipelago that is a caring chubby gulag for the weeping obese.

Accurate, not in the sense that there actually is such a place, but the Swedish mix of liberal tolerance and stern conformism is peculiar. I found the article highly amusing. Another highlight:

There is a kinship in the countries that value herring; they are northern-European, Dutch and German, Nordic, English and Scots. It’s the bony, oily taste of chilly Protestantism, hard working, hard drinking, taciturn Europe. Biting Europe. Go south and you’re into sardine Europe. That’s the distinction of our continent, the dividing line is between herring and sardine.

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Andra intressanta bloggar om: sverige, kultur

I am not a friend of distributing material against the will of the copyright holders, but I am a friend of free speech, the open infrastructure of the web, and legally constrained government power, which I why I fully support the opposition to these bills. The EFF has a good list of reasons for why you should as well.

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Andra intressanta bloggar om: politik, upphovsrätt, piratkopiering, sopa

Scott Sumner of Bentley University and the blog The Money Illusion talks with EconTalk host Russ Roberts about the state of monetary policy, the actions of the Federal Reserve over the past two years and the state of the economy. Sumner argues that monetary policy has been too tight and helped create the crisis. He disputes the relevance of the so-called liquidity trap and argues that aggressive monetary policy is both possible and desirable. The conversation closes with a discussion of what we have learned and failed to learn during the crisis.

You can listen to it here. Highly recommended!

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Andra intressanta bloggar om: politik, ekonomi

- Front runner Mitt Romney came out more or less unharmed. While the other candidates directed more attacks at him than they have before, nothing seriously hurt him.

- Newt Gingrich, Ron Paul and Rick Perry were what they usually are. I don’t think either debate will affect their fortunes.

- Rick Santorum failed to make full use of his momentum coming out of Iowa. He got considerably more time than in the pre-Iowa debates, but weren’t able to convert it to votes. Presumably, he’ll be disappointed, although South Carolina, and perhaps Florida, will determine whether he’ll be able to remain competitive.

- Jon Huntsman went after the independent vote, with some success. He was sharper than he has been earlier. Still, it will be difficult for him to ride on what will at most be a moderate success, going forward. Personally, I find this unfortunate.

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Andra intressanta bloggar om: politik, usa, republikanerna

It was worth staying up late last night.

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Andra intressanta bloggar om: ishockey, småkronorna

David Brooks paints a relatively positive picture in the New York Times, albeit not without critizism.

Santorum is the grandson of a coal miner and the son of an Italian immigrant. For years, he represented the steel towns of western Pennsylvania. He has spent the last year scorned by the news media — working relentlessly, riding around in a pickup truck to more than 370 towns. He tells that story of hard work and elite disrespect with great fervor at his meetings.

His worldview is not individualistic. His book, “It Takes a Family,” was infused with the conservative wing of Catholic social teaching. It was a broadside against Barry Goldwater-style conservatism in favor of one that emphasized family and social solidarity. While in Congress, he was a leader in nearly every serious piece of antipoverty legislation. On the stump, he cries, “The left has a religion, too. It’s just not based on the Bible. It’s based on the religion of self.”

Peter Suderman of Reason Magazine has less good to say.

Is there any candidate in the GOP race less invested in freedom, and the idea that individuals are better equipped than government to make decisions about their lives, than Rick Santorum? He’s for freedom, except for the freedom of same-sex couples to get married. He’s for freedom, except when state governments want to enforce sweeping bans on types of private sexual activity between consenting adults. He believes that government doesn’t do things better than we do for ourselves, except for “allocating spending” through pork-barrel earmark projects, and funding religious organizations to do social work, and spending hundreds of millions of federal dollars to promote the benefits of the same state-sponsored marriage that he’s worked so hard to deny to gays. He wants to avoid government-driven, top-down policy solutions—except when he votes to pass a brand new prescription drug benefit without paying for it. He’s a freedom fighter, sure. By which I mean he seems to spend a lot of time fighting against freedom.

Personally, I find few reasons to like Mr Santorum. His views correlate strongly with those of his beloved Catholic Church, and crucially, he does not refrain from letting them infuse his views on policy in a manner that leaves freedom in the back seat. On issues like gay marriage and the privacy of the bedroom he is flat out wrong.

And his economic policies are not much better, suggesting an unhealthy mix of active government, corporate welfare and misguided nationalism. Mr Santorum brings together the two parts of the Republican party that I dislike.

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Andra intressanta bloggar om: politik, republikanerna, usa, santorum