Recent Posts

Wednesday, June 19, 2019


Although I believe the Fed ought to cut rates as a preventative move (if I put aside my heterodox views on interest rate policy), I found it very unsurprising that the Fed did not budge this meeting. One interpretation of the news flow is that the Fed is setting up for a cut in the next meeting, but my bias is that they will wait. A few strong data points will reduce the pressure to cut.

Since I am not in the forecasting or investment recommendation business, I am not the best person to ask what the Fed will do over the next few meetings. I just want to note that the historical bar for rate cuts now is quite high; the only question is whether Powell is more flexible, which would break the continuity of the Fed's policy stance.

Why Specifying r, g Makes No Sense Whatsoever

I ran across yet another article discussing how the r>g condition constrains fiscal policy. (For those who are not big fans of this stuff, that means that the long-term average real rate of interest is greater than the long-term real GDP growth rate.) I explain in this short post why any analysis that is premised on these concepts makes no sense.

Wednesday, June 12, 2019

MMT And "Printing Money"

Yet again, the question of "printing money" and Modern Monetary Theory (MMT) has come up on Twitter. In my view, these debates are confusing because critics of MMT tend to mash multiple concepts into a pile of textual sludge. Unfortunately, MMTers are forced to respond to those attacks, and the end result is that everyone is confused.

One of the advantages of mathematical training is that you are forced to take definitions seriously, and step cautiously from premise to premise. This enforces clarity in logic.

Summer Schedule

I am switching over to a summer schedule, and targeting one article per week.

I have looked over my manuscript, and decided to split my book on recessions into two volumes. The first draft of the first volume is very close to complete, and I will now be iterating on the text. There are only a couple of areas of new material left that would make their way into the blog. Although my normal strategy is to write stand alone articles to advance a few projects at the same time (and have a variety of articles on my website), I now need to focus on the first volume manuscript and polish the text. Based on past history, it should be ready for publication by November.

Although the natural next step would be to work on volume two immediately, I might target a lighter, shorter text. An inexpensive MMT primer is one possibility.

Sunday, June 9, 2019

Book Status Report

Summer weather has finally hit Montreal, and I'm now looking at my plans for the summer. My manuscript on recessions has hit 50,000 words, and I still have to cover neoclassical economics approaches. My publishing strategy is to keep my books short which allows me to keep them at a lower price point. (It might not be a good strategy, but that is another question.) I will have to look over the manuscript to verify feasibility, but I think the best course of action is to split the project into two books.

Unemployment Rate-Based Recession Indicators

A special case of activity-based recession forecasting models are those that use only the unemployment rate. This is of interest since it associated with some recent research by Claudia Sahm. In Sahm’s work, she showed that the unemployment rate itself is a good indicator of NBER-defined recessions in the United States. My view is that this rule is useful (under current institutional arrangements) as we could use it (or a similar rule) to define what a recession is.

(Note: this is an unedited excerpt from my upcoming book on recessions. It is in a chapter that discusses empirical recession indicators. Since the concept was already introduced, the discussion here does not cover background concepts, such as what a recession indicator is used for.)

Thursday, June 6, 2019

Fixing Out-Of-Control Banking Systems?

This is just a short post-script to some points in the James Meadway article I discussed yesterday. What is to be done about financial sectors that are out-of-control, and endangering economic stability?