Ben Bernanke listened to his critics, but the recovery is still stuck. What went wrong?
To print or not to print? That is the question dividing the Federal Reserve.
Back in September the Fed launched its latest, and most ambitious, bond-buying program to date, dubbed QE3. Unlike before, the Fed hasn't committed to buying a specific dollar amount of bonds with QE3; instead, it's committed to buying $85 billion of bonds a month until the labor market improves "substantially". But what's "substantial" and what's not? And what if the Fed loses its nerve before the economy arrives at this mysterious moment of "substantial" improvement?
This latter question has gripped markets after the Fed's January meeting when "a number" of members said it should "taper" its bond purchases even before, you guessed it, there's any substantial improvement in unemployment. In other words, an increasing, and increasingly vocal, minority at the Fed are nervous about keeping open-ended bond-buying quite so open-ended. Now, a vocal minority is still a minority -- and besides, Bernanke tends to get his way -- but this hawkish talk has been enough to spook markets that thought QE3 wouldn't end much before 2014.
But there's a better question than how long QE3 will last. That's how much QE3 will work. Let's back up for a minute. Whether you want to call it "quantitative easing" (QE) or "bond-buying" or "large-scale asset purchases" (LSAP), the idea here is fairly simple: the Fed is printing money and buying pieces of paper. It's doing this because it can't boost the economy like it normally does by cutting short-term interest rates; those rates are stuck at zero, and can't go lower. Okay, that's not entirely true. The Fed can't cut nominal rates now, but it can cut real ones -- in other words, it can push up inflation, thereby reducing inflation-adjusted borrowing costs. That's what the Fed has done by printing money and buying long-term bonds from banks. Even if this freshly-printed money ends up as bank reserves (which it mostly has), the Fed is signaling that it wants more inflation.
Take a look at the chart below of what markets (roughly) think will happen with inflation over the next 5 years, annotated with the Fed's unconventional policies. Markets expect more inflation every time the Fed eases, and less every time it stops ... until QE3. Then, almost nothing. That's crazy. QE3 is open-ended, whereas previous rounds were not. This difference should have convinced markets that this time the Fed was really serious about jump-starting the recovery. Has QE hit a wall of diminishing returns? (Note: The black line shows the Fed's 2 percent inflation target).
Look again, but this time, focus on the black line. QE has hit a wall, but it's a wall of incredibly well-anchored inflation expectations, not diminishing returns. In other words, the Fed has quite easily been able to push inflation expectations back up to its 2 percent target, but no more. QE1 and QE2 had big effects, because they came when expected inflation was well below 2 percent and falling; QE3 has not, because expected inflation was already around 2 percent.
But wait. The Fed unveiled the Evans rule back in December, telling us it wouldn't raise rates before unemployment falls to 6.5 percent or inflation rises to 2.5 percent. In other words, isn't the Fed's 2 percent inflation target really a 2.5 percent inflation target now? Not exactly. The Fed is telling us it will tolerate 2.5 percent inflation, not that it will create it -- indeed, the Fed doesn't think inflation will stray at all above 2 percent over the next few years.
The best way to figure out what the Fed wants is to listen. After all, it tells us what it thinks will happen with GDP, unemployment, and inflation over 1, 2, and 3-year periods. Now, it's GDP and unemployment predictions have been, in the spirit of generosity, a tad optimistic, but not so for inflation (which, not-so-coincidentally, is the only above variable the Fed controls directly). The chart below looks at the Fed's core PCE inflation projections since late 2008; upper-range estimates for 1, 2, and 3-year periods are in red, and lower ranges ones are in blue. This is what a 2 percent inflation ceiling looks like.
There's a lot going on here, but there's a depressingly simple message in this chart: QE3 isn't working, because the Fed doesn't want it to work. The Fed revised its inflation projections up after QE1 and QE2, and markets followed; the Fed has kept its inflation projections steady after QE3, and, again, markets have followed. Now, this doesn't mean QE3 is entirely useless -- it's at least stopping inflation expectations from falling -- just that it could be doing much more if the Fed let it. That would be simple enough. The Fed could make its forecasts symmetrical around 2 percent, rather than peaking at 2 percent. Or it could say it expected (or is that wanted?) inflation well above 2 percent over the next two years, but not after that; in other words, make its target more explicitly flexible.
That leaves us with one last question. The Fed has shown time and again it can push inflation expectations (which largely determine inflation) up to 2 percent, even when short-term rates are parked at zero. But is that as much inflation as the Fed can create? It's hard to see why that would be the case, other than the Fed's self-imposed 2 percent ceiling. But the great thing about self-imposed problems is you can stop imposing them. The Fed doesn't need a new mandate (like NGDP targeting) to speed up the recovery; it just needs to tell us it wants -- gasp! -- 3 percent inflation for a year or two.
Until then, the recovery will suffer the outrageous slings and arrows of our 2 percent ceiling.
A Hillary Clinton presidential victory promises to usher in a new age of public misogyny.
Get ready for the era of The Bitch.
If Hillary Clinton wins the White House in November, it will be a historic moment, the smashing of the preeminent glass ceiling in American public life. A mere 240 years after this nation’s founding, a woman will occupy its top office. America’s daughters will at last have living, breathing, pantsuit-wearing proof that they too can grow up to be president.
A Clinton victory also promises to usher in four-to-eight years of the kind of down-and-dirty public misogyny you might expect from a stag party at Roger Ailes’s house.
You know it’s coming. As hyperpartisanship, grievance politics, and garden-variety rage shift from America’s first black commander-in-chief onto its first female one, so too will the focus of political bigotry. Some of it will be driven by genuine gender grievance or discomfort among some at being led by a woman. But in plenty of other cases, slamming Hillary as a bitch, a c**t (Thanks, Scott Baio!), or a menopausal nut-job (an enduringly popular theme on Twitter) will simply be an easy-peasy shortcut for dismissing her and delegitimizing her presidency.
The San Francisco quarterback has been attacked for refusing to stand for the Star Spangled Banner—and for daring to criticize the system in which he thrived.
It was in early childhood when W.E.B. Du Bois––scholar, activist, and black radical––first noticed The Veil that separated him from his white classmates in the mostly white town of Great Barrington, Massachusetts. He and his classmates were exchanging “visiting cards,” invitations to visit one another’s homes, when a white girl refused his.
“Then it dawned upon me with a certain suddenness that I was different from the others; or like, mayhap, in heart and life and longing, but shut out from their world by a vast veil. I had thereafter no desire to tear down that veil, to creep through; I held all beyond it in common contempt, and lived above it in a region of blue sky and great wandering shadows,” Du Bois wrote in his acclaimed essay collection, The Souls of Black Folk. “That sky was bluest when I could beat my mates at examination-time, or beat them at a foot-race, or even beat their stringy heads.”
The talk-radio host claims that he never took Donald Trump seriously on immigration. He neglected to tell his immigration obsessed listeners.
For almost a decade, I’ve been angrily documenting the way that many right-wing talk-radio hosts betray the rank-and-file conservatives who trust them for information. My late grandmother was one of those people. She deserved better than she got. With huge platforms and massive audiences, successful hosts ought to take more care than the average person to be truthful and avoid misinforming listeners. Yet they are egregiously careless on some days and willfully misleading on others.
And that matters, as we’ll come to see.
Rush Limbaugh is easily the most consequential of these hosts. He has an audience of millions. And over the years, parts of the conservative movement that ought to know better, like the Claremont Institute, have treated him like an honorable conservative intellectual rather than an intellectually dishonest entertainer. The full cost of doing so became evident this year, when a faction of populists shaped by years of talk radio, Fox News, and Breitbart.com picked Donald Trump to lead the Republican Party, a choice that makes a Hillary Clinton victory likely and is a catastrophe for movement conservatism regardless of who wins.
Which is a different way of asking: Can a bot commit libel?
Facebook set a new land-speed record for situational irony this week, as it fired the people who kept up its “Trending Topics” feature and replaced them with an algorithm on Friday, only to find the algorithm promoting completely fake news on Sunday.
Rarely in recent tech history has a downsizing decision come back to bite the company so publicly and so quickly.
Practices meant to protect marginalized communities can also ostracize those who disagree with them.
Last week, the University of Chicago’s dean of students sent a welcome letter to freshmen decrying trigger warnings and safe spaces—ways for students to be warned about and opt out of exposure to potentially challenging material. While some supported the school’s actions, arguing that these practices threaten free speech and the purpose of higher education, the note also led to widespread outrage, and understandably so. Considered in isolation, trigger warnings may seem straightforwardly good. Basic human decency means professors like myself should be aware of students’ traumatic experiences, and give them a heads up about course content—photographs of dead bodies, extended accounts of abuse, disordered eating, self-harm—that might trigger an anxiety attack and foreclose intellectual engagement. Similarly, it may seem silly to object to the creation of safe spaces on campus, where members of marginalized groups can count on meeting supportive conversation partners who empathize with their life experiences, and where they feel free to be themselves without the threat of judgment or censure.
Like a little white Lazarus with red eyes, the paralyzed mouse was walking again.
A few days earlier, the mouse had been sprawled on an operating table while two Chinese graduate students peered through a microscope and operated on its spine. With a tiny pair of scissors, they removed the top half of a fingernail-thin vertebra, exposing a gleaming patch of spinal-cord tissue. It looked like a Rothko, a clean ivory rectangle bisected by a red line. Cautiously—the mouse occasionally twitched—they snipped the red line (an artery) and tied it off. Then one student reached for a $1,000 scalpel with a diamond blade so thin that it was transparent. With a quick slice of the spinal cord, the mouse’s back legs were rendered forever useless.
His latest ugly truth came during a Bloomberg TV interview last Friday, when he said George W. Bush deserves responsibility for the fact that “the World Trade Center came down during his time.” Politicians and journalists erupted in indignation. Jeb Bush called Trump’s comments “pathetic.” Ben Carson dubbed them “ridiculous.”
In the name of emotional well-being, college students are increasingly demanding protection from words and ideas they don’t like. Here’s why that’s disastrous for education—and mental health.
Something strange is happening at America’s colleges and universities. A movement is arising, undirected and driven largely by students, to scrub campuses clean of words, ideas, and subjects that might cause discomfort or give offense. Last December, Jeannie Suk wrote in an online article for The New Yorker about law students asking her fellow professors at Harvard not to teach rape law—or, in one case, even use the word violate (as in “that violates the law”) lest it cause students distress. In February, Laura Kipnis, a professor at Northwestern University, wrote an essay in The Chronicle of Higher Education describing a new campus politics of sexual paranoia—and was then subjected to a long investigation after students who were offended by the article and by a tweet she’d sent filed Title IX complaints against her. In June, a professor protecting himself with a pseudonym wrote an essay for Vox describing how gingerly he now has to teach. “I’m a Liberal Professor, and My Liberal Students Terrify Me,” the headline said. A number of popular comedians, including Chris Rock, have stopped performing on college campuses (see Caitlin Flanagan’s article in this month’s issue). Jerry Seinfeld and Bill Maher have publicly condemned the oversensitivity of college students, saying too many of them can’t take a joke.
A new anatomical understanding of how movement controls the body’s stress response system
Elite tennis players have an uncanny ability to clear their heads after making errors. They constantly move on and start fresh for the next point. They can’t afford to dwell on mistakes.
Peter Strick is not a professional tennis player. He’s a distinguished professor and chair of the department of neurobiology at the University of Pittsburgh Brain Institute. He’s the sort of person to dwell on mistakes, however small.
“My kids would tell me, dad, you ought to take up pilates. Do some yoga,” he said. “But I’d say, as far as I’m concerned, there's no scientific evidence that this is going to help me.”
Still, the meticulous skeptic espoused more of a tennis approach to dealing with stressful situations: Just teach yourself to move on. Of course there is evidence that ties practicing yoga to good health, but not the sort that convinced Strick. Studies show correlations between the two, but he needed a physiological mechanism to explain the relationship. Vague conjecture that yoga “decreases stress” wasn’t sufficient. How? Simply by distracting the mind?
To become a citizen of the United States, naturalizing immigrants must take a test. Many native-born Americans would fail this test. Indeed, most of us have never really thought about what it means to be a citizen. One radical idea from the immigration debate is the repeal of birthright citizenship—guaranteed by the Fourteenth Amendment—to prevent so-called anchor babies. Odious and constitutionally dubious as this proposal may be, it does prompt a thought experiment: What if citizenship were not, in fact, guaranteed by birth? What if everyone had to earn it upon turning 18, and renew it every 10 years, by taking an exam? What might that exam look like?