Sunday assorted links

1. The culture that is Singapore golf club script theft punishment. 2. Very good thread on some Matt Rognlie results, paper here.  The whole “market power lowering the returns to labor” bit really doesn’t seem to be holding up. 3. The Viewer (recommended videos, affiliated with The Browser). 4. ABBA outfits, and their story as […]

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The headline should match the article

Headlines are typically not written by the same person that pens the article. Nonetheless, the headline should at least match the content of the article. Bloomberg failed with this headline:

Treasury Traders Are Doubtful Powell Can Drive Inflation Higher

I was surprised by this headline, as the Fed obviously can drive inflation higher.  Perhaps they meant that Powell cannot convince the FOMC to drive inflation higher, but that would be an odd way of phrasing that claim.

The article itself is excellent:

The Treasury market has set a high bar for the Federal Reserve to jump in order to recharge inflation expectations and upend a bullish tone that has surfaced since Chair Jerome Powell laid out a new plan to allow consumer prices to run hot.

Bond-market gauges of inflation expectations have declined for the past two weeks, signaling traders are demanding that Fed policy makers deliver more information about how they will engender a rise in inflation. Benchmark 10-year yields have fallen to below 0.70%, helped also by haven demand as lofty U.S. stock prices turned lower.

Many economists predict Federal Open Market Committee members won’t take any new actions when they wrap up a two-day gathering on Wednesday, an outcome likely to embolden bond bulls and further crimp inflation expectations. . . .

“The market definitely needs more from the Fed now,” Aneta Markowska, chief U.S. financial economist at Jefferies, said by phone. “The Fed will be undershooting on inflation for the better part of four years, so why wait to do more? And inflation expectations have already been fading.”

Markowska’s absolutely right; the Fed should adopt a more expansionary monetary policy.  A dramatic boost in QE would be a good start, although other tools are also available.  So why don’t they?

The headline should have read:

Treasury Traders Are Doubtful Powell Will Drive Inflation Higher

If the Fed fails to adopt a more expansionary monetary policy in the near future, it will be a tacit admission that the average inflation targeting policy is not serious. The Fed is facing the possibility of a very serious policy failure—I hope they understand that fact.

PS.  Of course it’s theoretically possible (albeit exceedingly unlikely) that the Fed cannot raise inflation.  But that hypothesis is not even worth entertaining until they’ve done all they could and failed.  In all of human history, no (fiat money) central bank has ever exhausted its ability to inflate.  The Fed is not about to do so.

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O’Rourke on the Millennials and Socialism

As soon as children discover that the world isn’t nice, they want to make it nicer. And wouldn’t a world where everybody shares everything be nice? Aw … kids are so tender-hearted.

But kids are broke — so they want to make the world nicer with your money. And kids don’t have much control over things — so they want to make the world nicer through your effort. And kids are very busy being young — so it’s your time that has to be spent making the world nicer.

This is from P.J. O’Rourke, “This is why millennials adore socialism,” New York Post, September 12, 2020.

Lots of good stuff here. I do want to address one error, an error that P.J. seems to agree with “progressives” about. He writes:

That would have been in the 19th century — during America’s first “Progressive Era” — when mechanization liberated kids from onerous farm chores and child labor laws let them escape from child labor.

Actually, it wasn’t child labor laws that let them escape from child labor: it was economic growth. As people grew wealthier, parents no longer needed their children to be productive. Instead, they could support the family without their children’s income and so instead could send their kids to school. And incidentally, as E.G. West showed in Education and the State, the state in Britain was not a major funder of education and yet schooling was widespread.

It is true that child labor laws reduced child labor around the edges. But they’re an instance of what is almost a general law in economic policy. I’m using “general law” in the sense of regularity. The laws that pick up enough support are usually ones that require people to do what the majority are doing already. I believe for example, although I can’t find the source immediately, that the legislated 40-hour work week came about only after it had become standard practice.

Another good excerpt:

Intellectuals like Marxism because Marx makes economics simple — the rich get their money from the poor. (How the rich manage this, since the poor by definition don’t have any money, is beyond me. But never mind.)

This excerpt reminds me of a great paragraph from Paul Krugman’s 1990 book The Age of Diminished Expectations that I used in the first edition of The Concise Encyclopedia of Economics, in a sidebar on the article “Distribution of Income” by Frank Levy:

One reason that action to limit growing income inequality in the United States is difficult is that the growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story—the rich becoming richer by exploiting the poor. But that’s just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don’t work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.)

The O’Rourke piece is excerpted from P.J. O’Rourke, A Cry from the Far Middle, 2020.

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