It's time to put down Ayn Rand and pick up Milton Friedman
Paul Ryan is worried about the Federal Reserve. He is worried the Federal Reserve will try to bring unemployment down. There's a word for this. I can't print it, because this is a family publication.
For the past four years, Ryan has repeatedly warned about the real menace threatening the economy: inflation. Forget that long-term unemployment has surged to levels not seen since the Great Depression, and prices have barely risen -- Ryan is scared of the inflation monster under his bed, and thinks you should be too. He thinks that trying to bring down unemployment will unleash the inflation monster -- and that's why he wrote an op-ed in the Wall Street Journal back in May of 2008 calling on Congress to revoke the Fed's dual mandate to target both low inflation and low unemployment. He wants the Fed to only worry about the former and not the latter.
Ryan is pushing bad economics, and worse history. The chart below looks at core PCE inflation -- the Fed's preferred measure -- since Congress passed the Humphrey-Hawkins Act in 1978 that gave the Fed its dual mandate. After spiking due to the second oil shock, inflation has been on a steady downward trajectory for the past 30 years.
It takes a vivid imagination to interpret this as evidence that Humphrey-Hawkins has caused an inflation problem. Reality says the opposite. Actually, it's much, much worse for Ryan -- the Fed has gotten much, much better at maintaining price stability since the advent of the dual mandate. We don't have data on core PCE inflation before 1959, but we do have numbers for CPI inflation -- that is, including food and energy costs -- going back to 1914. Which period looks like the nirvana of price stability to you in the chart below? (Note: the yellow dot shows when Humphrey-Hawkins became law).
There was 4.4 times more variance in prices before the dual mandate than after it. And those first 20 years came under the gold standard -- which its advocates today claim would "cure" inflation! This last point is crucial because Ryan has something of a soft spot for goldbugs. Now, Ryan doesn't want to bring back the gold standard itself, but he does want to create a commodity standard -- in other words, tie the value of the dollar to a basket of commodities. This is a distinction without much of a difference. The Fed would have to raise interest rates when commodity prices go up, regardless of the state of the economy. This is all kinds of crazy. Commodity prices have shot up the past decade as developing nations have developed -- unrelated to inflation here. It makes no sense to make our economy worse because China's economy is getting better.
Where did Paul Ryan get such a truly nutty idea? It's not from the hero of conservative economic thought, Milton Friedman. Republicans have abandoned Friedman -- at least when it comes to monetary policy. (Although libertarians and conservatives like Scott Sumner, David Beckworth, and Evan Soltas still carry the Friedman torch). Friedman's insight was that low interest rates don't necessarily mean that Fed policy is easy -- usually the reverse -- and that the Great Depression wouldn't have been quite so great if the Fed had printed money to prevent the banking collapse. Ryan hasn't just ignored Friedman; Ryan is the anti-Friedman. He has sharply criticized Fed Chairman Ben Bernanke for printing money, and issued melodramatic (and incorrect) predictions about "currency debasement." Why is Ryan so out of step with what conservatives used to believe about monetary policy? Because he takes his cues on the Fed from a fiction writer instead of a Nobel laureate.
Back in 2005, Ryan explained that one person informed his thoughts on monetary policy: Ayn Rand. In a great catch by Dave Weigel of Slate, Ryan said that he "always goes back to" Francisco d'Anconia's speech from Atlas Shrugged when he thinks about the Fed. The speech in question consists of a rant against paper money and an ode to gold -- in other words, it's just a hop, skip, and a jump from this to Ryan's championing of a commodity-backed dollar. But even that makes more sense than Ryan's suggestion in a 2010 interview with Ezra Klein that the Fed should raise rates to help the economy. As Mike Konczal of the Roosevelt Institute points out, making credit more expensive does not lead to more growth. Now, long-term interest rates do rise when growth goes up, but that doesn't mean that growth will go up when the Fed raises short-term interest rates. The opposite, actually. It was a disaster when the Fed tried that in 1931. Or when the ECB did in 2008. Or when the ECB did in 2011. It's curious that Ryan isn't aware that his ideas have been tried, and failed spectacularly.
Paul Ryan is a true believer. Back in 2009 he invested in commodity and TIPS funds -- in other words, he really does think the inflation monster is about to jump out from under the bed. But Ryan keeps getting it wrong because he has a wrong understanding of monetary policy. He needs to put down the Ayn Rand and pick up the Milton Friedman.
The social network learns more about its users than they might realize.
Facebook, you may have noticed, turned into a rainbow-drenched spectacle following the Supreme Court’s decision Friday that same-sex marriage is a Constitutional right.
By overlaying their profile photos with a rainbow filter, Facebook users began celebrating in a way we haven't seen since March 2013, when 3 million peoplechanged their profile images to a red equals sign—the logo of the Human Rights Campaign—as a way to support marriage equality. This time, Facebook provided a simple way to turn profile photos rainbow-colored. More than 1 million people changed their profile in the first few hours, according to the Facebook spokesperson William Nevius, and the number continues to grow.
“This is probably a Facebook experiment!” joked the MIT network scientist Cesar Hidalgo on Facebook yesterday. “This is one Facebook study I want to be included in!” wrote Stacy Blasiola, a communications Ph.D. candidate at the University of Illinois, when she changed her profile.
The Islamic State is no mere collection of psychopaths. It is a religious group with carefully considered beliefs, among them that it is a key agent of the coming apocalypse. Here’s what that means for its strategy—and for how to stop it.
What is the Islamic State?
Where did it come from, and what are its intentions? The simplicity of these questions can be deceiving, and few Western leaders seem to know the answers. In December, The New York Times published confidential comments by Major General Michael K. Nagata, the Special Operations commander for the United States in the Middle East, admitting that he had hardly begun figuring out the Islamic State’s appeal. “We have not defeated the idea,” he said. “We do not even understand the idea.” In the past year, President Obama has referred to the Islamic State, variously, as “not Islamic” and as al-Qaeda’s “jayvee team,” statements that reflected confusion about the group, and may have contributed to significant strategic errors.
For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?
1. Youngstown, U.S.A.
The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977.
For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression.
The second episode of the new season was a slow burner with a dramatic twist.
Let’s start at the beginning, with Frank in bed with his wife, Jordan, discussing water stains on the ceiling and childhood entombments. I don’t know about you guys, but I found this whole bit slack and familiar. Maybe there was a two-minute scene in there, but five? Maybe a more charismatic actor could have pulled off that lengthy monologue. But Vince Vaughn is no Robert Shaw, and his childhood basement is no U.S.S. Indianapolis.
The historian and Knesset member Michael Oren accuses the president of distancing the U.S. from Israel, and calls out left-wing Jews and Israel’s Jewish critics in the American press.
In a recent post, I suggested that the intervention of two men, the former U.S. national security advisor Tom Donilon and the former Israeli ambassador to the United States, Michael Oren, might help improve the dysfunctional relationship between the Obama administration and the government of Israeli Prime Minister Benjamin Netanyahu.
At the time I wrote this, both men had reputations as people who were concerned about preserving the extraordinarily complicated, and extraordinarily close, U.S.-Israel relationship, and both had spent a good deal of time calming the waters between Obama and Netanyahu. Today, Donilon maintains that reputation. As for Oren …
Put it this way: If Goldblog readers would allow me to withdraw the suggestion, I’d be much obliged. Oren has created a new role for himself: acid critic of the Obama administration and of left-leaning American Jews (especially in the press and in the White House) who, he believes, are trading on their Jewishness when they criticize Israel. Oren’s critique, at its heart, is simple: Obama, in part because he wanted to reconcile the U.S. with the “Muslim world” (a very large, ill-defined, and politically complicated concept, in Oren’s mind), decided to distance the United States from Israel; to surprise Israel by altering U.S. Middle East policy without prior notice; and to negotiate with Israel’s most potent enemy without alerting Israeli leaders.
The president delivers his single most accomplished rhetorical performance, and it’s one you should watch rather than read.
I think Barack Obama’s eulogy yesterday for parishioners of the Emanuel African Methodist Episcopal Church in Charleston was his most fully successful performance as an orator. It was also one that could have come only at this point in his public career—and not, for instance, when he was an intriguing figure first coming to national notice, as he was during his celebrated debut speech at the Democratic National Convention in Boston 11 years ago; or when he was a candidate fighting for political survival, as he was when he gave his “Race in America” speech in Philadelphia early in 2008.
I’ll explain why I say so, but first a word about the odd circumstances in which I’ve heard and learned about the speech.
Over the last two weeks, Republican presidential candidates have repeatedly missed opportunities to demonstrate that they care about communities outside of their traditional base.
After Mitt Romney’s defeat in 2012, the Republican National Committee published an “autopsy.” “When it comes to social issues,” the autopsy declared, “the Party must in fact and deed be inclusive and welcoming. If we are not, we will limit our ability to attract young people.” The autopsy also added that, “we need to go to communities where Republicans do not normally go to listen and make our case. We need to campaign among Hispanic, black, Asian, and gay Americans and demonstrate we care about them, too.”
The last two weeks, more than any since Romney’s defeat, illustrate how miserably the GOP has failed.
Start with June 17, when Dylann Roof, a young white man enamored of the Confederate flag, murdered nine African Americans in church. Within three days, Romney had called for the Confederate flag’s removal from South Carolina’s capitol. Four days later, the state’s Republican governor and senators called for its removal too. But during that entire week—even as it became obvious that the politics of the flag were shifting—not a single GOP presidential candidate forthrightly called for it to be taken down. Instead, they mostly called it a state decision, a transparent dodge politicians deploy when they don’t want to make a difficult call.
In 1784, the doctor Benjamin Rush described alcohol as a threat to morality—and a danger to the nascent republic.
Go ahead, have a small beer; it will bring “Serenity of Mind, Reputation, Long Life, & Happiness.” Even a strong beer would be fine, for that brings “Cheerfulness, Strength, and Nourishment,” as long as it’s only sipped at meals. So declared Benjamin Rush, one of the signers of the Declaration of Independence and the early republic’s most prominent physician. In his loquaciously named pamphlet, An Inquiry Into the Effects of Ardent Spirits on the Human Mind and Body, first published in 1784, Rush describes the “usual” downward spiral of drink. What starts as water and wine quickly turns into punches and toddies and cordials, ending with a hopeless vortex of gin, brandy, and rum, “day and night.”* In the pits of intemperance, one can expect such vices as “Idleness, Gaming, peevishness, quarrelling, Fighting, Horse-Racing, Lying and Swearing, Stealing and Swindling, Perjury, Burglary, [and] Murder,” with punishments including “Black eyes and Bags,” “State prison for Life,” or, worst of all, “Gallows.”**
In any case, people have probably heard the phrase in reference to something gone awry at work or in life. In either setting, when the shit does hit the fan, people will tend to look to the most competent person in the room to take over.
And too bad for that person. A new paper by a team of researchers from Duke University, University of Georgia, and University of Colorado looks at not only how extremely competent people are treated by their co-workers and peers, but how those people feel when, at crucial moments, everyone turns to them. They find that responsible employees are not terribly pleased about this dynamic either.
The meaning of the Confederate flag is best discerned in the words of those who bore it.
This afternoon, in announcing her support for removing the Confederate flag from the capitol grounds, South Carolina Governor Nikki Haley asserted that killer Dylann Roof had “a sick and twisted view of the flag” which did not reflect “the people in our state who respect and in many ways revere it.” If the governor meant that very few of the flag’s supporters believe in mass murder, she is surely right. But on the question of whose view of the Confederate Flag is more twisted, she is almost certainly wrong.
Roof’s belief that black life had no purpose beyond subjugation is “sick and twisted” in the exact same manner as the beliefs of those who created the Confederate flag were “sick and twisted.” The Confederate flag is directly tied to the Confederate cause, and the Confederate cause was white supremacy. This claim is not the result of revisionism. It does not require reading between the lines. It is the plain meaning of the words of those who bore the Confederate flag across history. These words must never be forgotten. Over the next few months the word “heritage” will be repeatedly invoked. It would be derelict to not examine the exact contents of that heritage.