Spring break is in full effect, and while most students are sitting on beaches in Mexico, I am taking the time to go through the stacks of .pdfs I have accumulated in my "other readings" folder throughout the year. Time to sit on a warm porch with a cold beer and read:
Cash Flow Multipliers and Optimal Investment Decisions. SSRN
Stressed not Frozen: The Fed Funds Market in the Financial Crisis. SSRN
if you haven't subscribed to Wayne Marr's twitter, I highly suggest it. Mr. Marr is a founder of the SSRN, which is basically the greatest thing since university libraries.
The Real New Deal. The American Interest. One of my favorite courses in History (taught by the wonderful Claudio Fogu when he was at USC) was the intro 301 course, which wrestled with this entire concept of history as a narrative versus history as facts. The art vs. science of the topic. Of course, this is an issue that plagues all social sciences, and while economics has a distance from this through its lovely models, we still build narratives about the past. It is useful to remember that, from time to time.
A fascinating discussion on China prompted by this column by Krugman stating that the US should "get tough" on China and it's massive purchases of dollars in the foreign exchange market. This caused Ryan Avent of the Economist to strike back, along with Scott Sumner. Avent responds that the "get tough" approach discounts or ignores the fundamental savings disparity between China and the US, and ignores other political realities and risks of "getting tough". After a clarification of the argument, Krugman makes a civilized response which provokes Sumner and Avent (with a further follow up here). The discussion goes into the politics, the zero bound (which may not be as binding as we suspect .pdf), and all sorts of currency and current account discussions.
A Crisis of Understanding. Robert Shiller on the complexity of economic systems and why that makes crafting simple narratives about why they fail very, very difficult.
Michael Lewis’s ‘The Big Short’? Read the Harvard Thesis Instead! DealJournal (wsj). As both fans of baseball and the financial markets, Michael Lewis is a favorite. Anyways, he has gushing praise for this undergraduate thesis.
Guest Post: The Fed Is Responsible for the Crash in the Money Multiplier … And the Failure of the Economy to Recover. via Yves Smith/Naked Capitalism. This is basically the Scott Sumner argument for the Great Recession. That paying interests on reserves collapsed the money multiplier, reducing AD.