Assorted links

1. An oldie but goodie: let’s not forget Christina Romer’s classic paper on spurious volatility in the historical data (pdf).  This is with reference to recent writings from Eichengreen and Roubini.  I don’t favor a gold standard but criticisms should start with this paper.

2. Critical review of the new MLK memorial.

3. What do anesthetics do?

4. Predictions by Pettis, mostly correct I think, in any case worth a read.

5. Some of Alan Krueger’s academic work.



We started with two principle drugs in 1850, chloroform and diethylether. [snip] [B]oth drugs have gone by the wayside and the safety profile of the drugs we do use has continuously improved. But it’s not because of us knowing how they work. It's all been empirical, trial and error stuff.

For most drugs isn't safety mostly empirical? This isn't an anesthetic specific issue is it? Can we judge any drug to be safe a priori based on mechanisms and structure alone?

Well, for one thing, anesthetics may have helped us discover how we become conscious - Orch-OR

What does that unsubstantiated crank theory have to do with anaesthetics' impact on consciousness?

Don't agree with Pettis. For 2030, I agree with his predictions. Not for 2020.

Seconded. I am impressed by Pettis' willingness to stick his neck out with concrete, near-term predictions. His analysis of the underlying dynamics is spot-on. But he significantly underestimates the ability of established trends and institutions to get propped up and muddle through even when their underlying unsustainability is known to all.

Good point. On the other hand, though, weaknesses are usually hidden or ignored until a breaking point is reached, and then everything goes south at once. This was the case, for example, in the U.S. financial system and the EU debt crisis. The players in both were far more transparent and less autocratic than China. How much do we really know about China's finances?

I initially thought the title was "What do aesthetics do?" Now that's a really interesting question in evolutionary economics.

The MLK statue reminds me quite a bit of the statues that dotted Budapest symbolizing communism and Soviet oppression in Hungary. These were removed to a park in the early 1990s (, but I still remember where most of them were in the city. They were terrifying objects at the time, the very embodiments of fear and intimidation. I believe the only one left is at Freedom Square (Szabadsag Ter), just in front of the US embassy. ( From the photo, the US embassy would be on the right (not visible). Parliament is a block diagonally on the left.)

It's odd to look at these massive objects today. For me, the fear--the emotion--is gone, like the bite of hot pepper left too long on the shelf. The taste lingers, but the edge is gone. They are just sculpture today, some of them not too bad.

The problem with the argument for a gold standard is that advocates believe a Gold Standard is more stable than fiat -- but this is not always the case. A more prudent policy -- one advocated by Hayek and others -- is to legalize the competition. In fact, Ron Paul personally advocates this position...I asked him in 2007 and he said those very words (legalize the competition).

It would start with other sovereign currencies, but would spread to private currencies eventually. So you could stock your bank account with Euros or Swiss Francs or Aussie Dollars or whatever...or gold doesn't matter. The US government would still reserve the right to collect tax payments in the form of fractional reserve bank notes -- and that's fine. But what legalizing the competition would do is prevent reckless activity on behalf of the Fed.

Isn't this true now? I can hold Euros today, and there's nothing illegal about a merchant accepting them in exchange for goods, is there?

I'm honestly not sure about the US, but there are certainly many countries in the world where the US dollar is generally accepted, in addition to the local currency. This does not appear stabilizing....

"there are certainly many countries in the world where the US dollar is generally accepted, in addition to the local currency."

That is almost by definition not testing competing currencies. How stable would they be without the US dollar?

Well, we don't have currency controls, but you cannot deposit them in a US bank, nor can you buy and sell goods and services in the US with them. You can basically acquire them and sit on them.

So what people like Ron Paul mean when they say "legalize the competition" is "force the government to pass laws requiring banks and US merchants to accept these other currencies"?
Alright then. Glad we cleared that up.

Yes, I guess. By the way you can already do this in many countries and it has, to a rough order of magnitude, no impact whatsoever on monetary policy.


Euros or USD held in the UK:

And in Canada:,1608,CID13209_LIDen,00.html

The issue, I believe, is taxes. You don't have to pay capital gains if the US dollar appreciates, but you have to pay taxes if your gold, silver or euros appreciate and you want to trade them for goods or services.

By the way, can you really not buy and sell goods and services with them? Or are they just not accepted by most merchants because they are not competitive?

Here in Canada, lots of merchants will accept USD - you can walk into Starbucks with nothing but US currency and walk out with a double-tall non fat latte.

If I opened a store in New York that accepted both Euros and Dollars would the government come and shut me down or something? This seems bizzarre.

Plenty of shops in US border areas will accept Canadian currency, too. The New York State Thruway even collected tolls in CAD and had a different set of toll rates posted for them. I don't know whether this is still true.

I doubt there would be any legal issues with using other currencies. It is probably legal, but there is obviously little demand for it.

Thanks dan.

So when Nick above says " nor can you buy and sell goods and services in the US with them" what he means is that retailers have elected not to accept them, I guess.

More of Alan Krueger:

"Why not pass a 5 percent consumption tax to take effect two years from now? There are many different ways to implement a consumption tax, but for simplicity think about a national sales tax.

In the short run, the anticipation of a consumption tax would encourage households to spend money now, rather than after the tax is in place. Along with the rest of the economic recovery package, this would help jump-start spending in the economy and thereby increase production and employment.

In the long run, a 5 percent consumption tax would raise approximately $500 billion a year, and fill a considerable hole in the budget outlook. In addition, a consumption tax would encourage more saving in the long run. Many economists consider a consumption tax an efficient way of raising tax revenue, especially in a global economy. The prospect of greater revenue flowing into federal coffers would probably help lower long-term interest rates because the government would need to borrow less down the road, and further bolster the economy."

In Kruger's world, I'll get to buy the bullet that I'll be shot with by the government firing squad. Don't want to risk the government choosing the bullet for me, they may choose the wrong one and make the suffering worse.

#2 - Sailer did a great job w/ that one.


Yes, MLK had some very brutal commands indeed.

It seems that the onus of proof should be on those promoting a non-gold standard for currency. After all, it is the newer proposition.

Also, if they were honest they would compare their system that has had nearly 100 years of tweaks (and still has plenty of instability) to the current thinking on gold as money. Nothing worked in the depression, and I kind of doubt libertarians were running banks and The Treasury at the time.

Middle classes in the form of confiscated savings? Has he actually talked to any middle class Spaniard, Portiguese or Greek? The middle classes are full of workers that have no actual savings, especially those under 40: All they might have is what they put in their homes, and we all know that has been taken from them already.

Today, we see both major Spanish political parties agreeing on amending the constitution to include debt limits without even talking to the people! You don't have to be very smart to know how all of that will end.

Re: #2. It's about damn time.

"I don’t favor a gold standard..."

yet. This blog seems to be getting more and more loopy...

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