Liquidity trap for me but not for thee?

The idea has not held up.  As I write the rate on 6-month T-Bills is 0.06%.  That is pretty close to zero, right?

And yet everyone is debating what will happen with the rate of price inflation.  No one is claiming it is indeterminate, as the simplest liquidity trap models suggest.  Nor, with rising rates of price inflation, can it be argued that inflation inertia is dominant.  Instead, it is obvious that the Fed has let the current inflation happen.  It is true that the inflationary pressures stem from (roughly) coordinated acts of monetary and fiscal policy, rather than monetary policy alone.  But no one is doubting that the Fed is in charge of forthcoming rates of inflation.

(And if the T-Bill rate is ever so slightly above zero, rather than at or below zero, that too seems to stem from higher expected rates of price inflation in the first place.)

I agree with those individuals who suggest that the currently higher rates of price inflation will not be with us 4-5 years from now, and that is because the Fed does not want that to happen.

Paul Krugman recently wrote (NYT):

Seriously, both recent data and recent statements from the Federal Reserve have, well, deflated the case for a sustained outbreak of inflation. For that case has always depended on asserting that the Fed is either intellectually or morally deficient (or both). That is, to panic over inflation, you had to believe either that the Fed’s model of how inflation works is all wrong or that the Fed would lack the political courage to cool off the economy if it were to become dangerously overheated.

In other words, the Fed to a considerable degree can indeed control the rate of price inflation, and with nominal T-Bill rates very close to zero.  Thus the liquidity trap doctrine is dead, discarded once it no longer provides an argument for an ever-more expansive fiscal policy.

USA facts of the day

A survey of almost 200 police departments indicated that retirements were up 45 percent and resignations rose by 18 percent in the year from April 2020 to April 2021 when compared with the previous 12 months, according to the Police Executive Research Forum, a Washington policy institute.

New York City saw 2,600 officers retire in 2020 compared with 1,509 the year before. Resignations in Seattle increased to 123 from 34 and retirements to 96 from 43. Minneapolis, which had 912 uniformed officers in May 2019, is now down to 699. At the same time, many cities are contending with a rise in shootings and homicides.

Asheville was among the hardest hit proportionally, losing upward of 80 officers, more than one third of its 238-strong force.

Here is more from Neil MacFarquhar at the NYT.

Thursday assorted links

China fact of the day

China is still wrestling with how to rule over a diverse, ethnically mixed population that does not necessarily accept the dominance of the Han or the CCP narrative.  The challenge for the CCP is that ethnic minorities constitute only about 10 percent of the total population but inhabit 60 percent of the land mass, much of which is in sensitive border areas (the Guangxi Zhuang Autonomous region, Inner Mongolia Autonomous Region, Tibet Autonomous Region, and Xinjiang Uyghur Autonomous Region).  The national language is a recent construct and has priority in schools over the local languages.  About 30 percent of the population speaks a language at home other than the national language.

That is from the new and “must read” From Rebel to Ruler: One Hundred Years of Chinese Communism, by Tony Saich.  Keep in mind that the CCP is the most important institution in the world today — have you ever read a book on it?

Long COVID in a prospective cohort of home-isolated patients

Long-term complications after coronavirus disease 2019 (COVID-19) are common in hospitalized patients, but the spectrum of symptoms in milder cases needs further investigation. We conducted a long-term follow-up in a prospective cohort study of 312 patients—247 home-isolated and 65 hospitalized—comprising 82% of total cases in Bergen during the first pandemic wave in Norway. At 6 months, 61% (189/312) of all patients had persistent symptoms, which were independently associated with severity of initial illness, increased convalescent antibody titers and pre-existing chronic lung disease. We found that 52% (32/61) of home-isolated young adults, aged 16–30 years, had symptoms at 6 months, including loss of taste and/or smell (28%, 17/61), fatigue (21%, 13/61), dyspnea (13%, 8/61), impaired concentration (13%, 8/61) and memory problems (11%, 7/61). Our findings that young, home-isolated adults with mild COVID-19 are at risk of long-lasting dyspnea and cognitive symptoms highlight the importance of infection control measures, such as vaccination.

That is from a new Nature paper by Bjørn Blomberg, et.al. Via SK.  On vaccinating the young, here are further relevant observations from Francois Balloux.

The economics of peer review

Springer-Nature, the Anglo-German publisher of the world’s leading scientific journal Nature, announced in 2017 that in some of its publications it was censoring articles that used words like “Taiwan”, “Tibet” and “cultural revolution”, when printing in China.

In April 2020 Nature ran an editorial apologising for its “error” in “associating the virus with Wuhan” in its news coverage.

…The magazines that publish scientific papers have become increasingly dependent on the fees that Chinese scientists pay to publish in them, plus advertisements from Chinese firms and subscriptions from Chinese institutions. In recent years observers have noticed that the news coverage of China in these magazines has begun to look a little less objective than it once did.

Here is the full Matt Ridley piece.

Wednesday assorted links

1. Noah Smith interviews @pmarca.

2. Glad to see so many economists waking up to the potential tyranny of administrative law (in Spanish).  If there should be a jury trial for anything, it is sedition.

3. Early days of the comic book industry.  And the rise of the $10 million disc golf celebrity.

4.  Way back when, the major Keynesians endorsed Nixon’s wage and price controls.  Sigh…

5. Free Britney Spears!  Really (NYT).  “Ms. Spears, 39, expressed serious opposition to the conservatorship earlier and more often than had previously been known, and said that it restricted everything from whom she dated to the color of her kitchen cabinets.”  Now imagine being in this same position without her fame and her (only partially controlled) resources.  I find it remarkable how little our world cares about this issue.

6. “This looks like a post-apocalyptic scene from a Cinderella nightmare, but these faux chateaux are real!

How and why is Conquest’s Second Law true?

“Any organization not explicitly and constitutionally right-wing will sooner or later become left-wing.”

That is the topic of my latest Bloomberg column, here is one excerpt:

Additional forces strengthen Conquest’s Second Law. Educational polarization increasingly characterizes U.S. politics, with more educated Americans more likely to vote Democratic. Those same Americans are also likely to run nonprofits or major corporations, which would partially explain the ideological migration of those institutions.

There are, of course, numerous U.S. institutions that have maintained or even extended a largely right-wing slant, including many police forces, significant parts of the military, and many Protestant Evangelical churches. Those institutions tend to have lower educational requirements, and so they are not always so influential in the media, compared to many left-wing institutions.

Furthermore, the military and police are supposed to keep out of politics, and so their slant to the right is less noticeable, although no less real. The left is simply more prominent in mass media, so Conquest’s Second Law appears to be truer than it really is. (Note that by definition the law excludes explicitly right-wing media.)

And:

The common thread to these explanations is that left-wing views find it easier to win in spheres of reporting, talk and rhetoric — and that those tendencies strengthen over time.

It follows that, if Conquest’s Second Law is true, societies are more right-wing than they appear. Furthermore, it is the intelligentsia itself that is most likely to deluded about this, living as it does in the world of statements and proclamations. It is destined to be repeatedly surprised at how “barbarian” American society is.

There is also a significant strand of right-wing thought, most notably in opposition to Marxism, that stresses the immutable realities of human nature, and that people change only so much in response to their environments. So all that left-wing talk doesn’t have to result in an entirely left-wing society.

Conservatives thus should be able to take some comfort in Conquest’s Second Law. They may find the discourse suffocating at times. But there is more to life than just talk — and that, for liberals as well as conservatives, should be counted as one of life’s saving graces.

Racial segregation is increasing in many parts of America

Some of the nation’s largest metropolitan regions have become increasingly segregated in the last 30 years, underscoring racial inequalities that have led to poorer life outcomes in Black and brown neighborhoods, according to a study released Monday by the University of California Berkeley’s Othering & Belonging Institute.

The study found that 81% of regions with more than 200,000 residents were more segregated in 2019 than they were in 1990, despite fair housing laws and policies created to promote integration.

Some of the most segregated areas included Chicago, Milwaukee and Detroit in the Midwest and New York, northern New Jersey and Philadelphia in the mid-Atlantic.

Conversely, large metropolitan regions that saw the biggest decrease in segregation included Savannah, Georgia, San Antonio and Miami.

Here is the full story, exactly as I argued in my earlier book The Complacent Class.  Via Ilya Novak.  And from the study, don’t forget this:

Southern states have lower overall levels of segregation, and the Mountain West and Plains states have the least

Ouch…!

Tuesday assorted links

New York Fact of the Day

NYTimes: New York City built only 163,000 units of housing in the 2010s, fewer than the 205,000 created in the 1930s, during and after the Great Depression, according to a city report. From 2009 to 2018, the New York metro region added 0.5 units of housing for every new job, down from 2.2 units per job in the previous decade.

The article continues:

In December, a New York Supreme Court judge annulled the city’s rezoning plan for Inwood…The Inwood plan would have increased the allowable height and density in parts of the neighborhood, which could have brought 3,900 new units to the area, including 1,600 below-market apartments, according to the Department of City Planning. The city is appealing the decision.

The judge agreed that the city’s environmental review process, which aims to measure the impact of development, did not adequately study a number of concerns, including the risk of racial displacement and the effect of speculative development on local businesses, many of which can be more valuable to landlords as land sales.

This is another illustration of how collective decision making impedes innovation. Neither judges nor regulators should be making these “balancing” decisions which politicizes and creates veto players who can dam innovation at low-cost to themselves. Decisions about when and where to build should by left to the spontaneous order operating under the principles of private property and the rule of law.

Look at this nonsense and imagine if every decision had to be so studied for every group and interest that one could possibly imagine:

“They don’t have to study the racial impact? That’s ridiculous,” said Michael Sussman, the petitioners’ attorney, who argued that speculation would have an outsize impact on minority residents in the area, many of whom live in rent-regulated apartments.

Milton Friedman was once a Keynesian

In the early 1940s, Friedman’s own analysis of monetary policy adhered closely to the dismissive tone prevalent in much other Keynesian literature of that vintage.  His solo-authored contribution to 1943’s Taxing to Prevent Inflation, written while he was at the Treasury, plotted growth rates of the nominal money stock and nominal income for the United States for the period 1899-1929.  To the modern reader, the scatter plot in Friedman’s paper indicates that the monetary growth/income relationship is clearly positive, and reasonably tight by the standards of rate-of-change data.  That was not, however, the judgment Friedman reached in his 1943 paper, in which he concluded instead that the relationship was “extremely unstable.”

That is from p.95 of the recent Edward Nelson two-volume set on Milton Friedman — one of the best books written on any economist!