Political Posturing

There has always been considerable hyperbole about American elections -- "the most important election since 1920!" or some such. Conversely, from the perspective of economic institutions, it is hard to see any fundamental changes since the early 1990s. Up until earlier this month, my base case was that the Biden administration would be replay of the Obama one. However, one can see a story where things have fundamentally changed.

Fiscal Crisis Sighted! Break Out The Popcorn!

Apparently we are due for some excitement in Treasury market, as per the analysis in "A Debt Crisis is on the Horizon," penned by the luminaries Michael J. Boskin, John H. Cochrane, John F. Cogan, George P. Shultz and John B. Taylor. As a regular reader might suspect, I am somewhat skeptical about the claims in said article. That said, one may note that the discussion therein is not totally incompatible with a Functional Finance framework, although we would need to paraphrase what they wrote. However, the interest rate determination part of the article is pretty weak.