Friday, September 12, 2014

Krugman, What Keynes Really Mean, and is Economics a Science?

    The question just came to me again as I read Krugman here.

     "Lars Syll approvingly quotes Hyman Minsky denouncing IS-LM analysis as an “obfuscation” of Keynes; Brad DeLong disagrees. As you might guess, so do I."

      "There are really two questions here. The less important is whether something like IS-LM — a static, equilibrium analysis of output and employment that takes expectations and financial conditions as given — does violence to the spirit of Keynes. Why isn’t this all that important? Because Keynes was a smart guy, not a prophet. The General Theory is interesting and inspiring, but not holy writ."

     Without even starting to take sides between Krugman, Delong on one side and Syll on the other let me just say that no matter how many times Krugman mocks the idea of caring what 'Keynes really meant' I never get why asking what he meant is so self evidently absurd as he, and Delong. and Wren-Lewis, and Noah Smith or Katrik Athreya think it is. 

     As I've chronicled I've tried reading some econ textbooks and in fact am currently reading the one Krugman wrote with his wife Robin Weil, but haven't yet come to the chapter that explains why this is so absurd. Yet there must be some NK textobook somewhere that explains it as all NKers repeat this mantra.

       This is why I wonder if Econ is really a science. You never hear physicists sniffing about 'What Einstein really meant' or "What Newton really meant.'

     At least Krugman-unlike Athreya, to say nothing of Mankiw-doesn't disparage Keynes and GT. He even claims to have read the book. From what Athreya says, the problem with Keynes is that what he does is not what he and his fellow 'modern maccroeconomists' mean by 'macroeconomics'-Keynes writes in 'prose' so it's not a true work of macroeconomics-some argue that Hicks is the first macroeconomist in this vein. 

      In other words, because Keynes uses plain English, his work is just interesting 'literature' much like the work of Proust or Doestevesky. You may like it or not like it but it has little bearing on economics. Again, Krugman in this post actually treats Keynes a little more respectfully but the picture I've drawn here is the typical attitude as represented by Athreya, et. al. 

       In fact, Krugman does go on to defend Keynes-and by extension IS-LM-from a very common criticism of what folks like Stephen Williamson christen 'Modern Macro'-which basically means post-Lucas Macro-that Keynes and then IS-LM use a static equilibrium model. 

         "It’s also a protean work that contains a lot of different ideas, not necessarily consistent with each other. Still, when I read Minsky putting into Keynes’s mouth the claim that"

Only a theory that was explicitly cyclical and overtly financial was capable of being useful
      "I have to wonder whether he really read the book! As I read the General Theory — and I’ve read it carefully — one of Keynes’s central insights was precisely that you wanted to step back from thinking about the business cycle. Previous thinkers had focused all their energy on trying to explain booms and busts; Keynes argued that the real thing that needed explanation was the way the economy seemed to spend prolonged periods in a state of underemployment:
[I]t is an outstanding characteristic of the economic system in which we live that, whilst it is subject to severe fluctuations in respect of output and employment, it is not violently unstable. Indeed it seems capable of remaining in a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse.
     "So Keynes started with a, yes, equilibrium model of a depressed economy. He then went on to offer thoughts about how changes in animal spirits could alter this equilibrium; but he waited until Chapter 22 (!) to sketch out a story about the business cycle, and made it clear that this was not the centerpiece of his theory. Yes, I know that he later wrote an article claiming that it was all about the instability of expectations, but the book is what changed economics, and that’s not what it says.
The point is that Keynes very much made use of the method of temporary equilibrium — interpreting the state of the economy in the short run as if it were a static equilibrium with a lot of stuff taken provisionally as given — as a way to clarify thought. And the larger point is that he was right to do this."

      So Krugman does defend GT and if he says he read it I believe it but that distinguishes him to most NKers I would guess. 

       UPDATE: Krugman also deserves credit for admitting that the GT changed economics-not only do Keynes bashers, but also many alleged 'New Keynesians' damn GT for 'saying nothing new'-I think Hayek begun the line of saying what he was right about had already been said and what hadn't been said was all wet.      

        As Keynes himself had said 'first they say you're all wrong then they say you've said nothing new.'



Simon Wren-Lewis Responds on Sumner and Fiscal Policy

      In my previous piece I discussed the NKers and what I see as their somewhat inadequate response to Sumner-I think that like him or not he's had a big impact on the pubic discussion on fiscal and monetary policy, the best way to deal with stabilizing the economy, etc.

       I must admit to being quite gratified that Dr. W-L has responded. He feels I've perhaps mis-characterized the NK response to Sumner.

        The idea of nominal GDP targeting goes back to James Meade at least. It has been endorsed by many NKs - most notably Mike Woodford. But we do not have this kind of religious devotion to it that MMs have. And of course, we also do not have this phobia about fiscal policy.

       "You imply we should debate more with MMs. My experience of this has not been good. A couple of years ago now when I tried to point out what was really a schoolboy error on savings and investment in one of his posts, he came out guns blazing - its difficult to have a serious discussion under those conditions."

        "I had a similar experience with Mark Sadowski recently, which I wrote about here:

        "I should add that this is not true of all MMs. For example I think David Beckworth does try to be constructive (see, and I'm happy to discuss things with Nick Rowe anytime because I learn a lot."

        "So my policy is that if I think there is an issue where I have got something new to say, or where I can help clarify something, or where there is a genuine misunderstanding that others might make, I'll write about that, but not as part of a debating contest. I did see Sumner's reply to my latest post, and I did not really understand the stuff on inflation. Pretty well everyone doing academic work on macro nowadays models the welfare cost of inflation, and they are not 'confusing inflation with NGDP growth'. Most work is based on Woodford's analysis, which looks at misallocation costs due to relative price changes. So either this is simply wrong in a very obvious way, or I have just misunderstood, but in either case it didn't seem worth pursuing."

      No doubt, Sumner does tend to come out with guns blazing-I recall the very discussion WL refers to here-it was where Sumner tried to prove John Cochrane was right or mayve that Krugman and W-L were wrong by referring to the identity S=I.

       I'm not much of a fan Sumner;s style either-my personal dealings with him when I've commented on this blog have been basically always unpleasant as he usually answers any question or point of mine with unmitigated snark. He doesn't seem to appreciate any skepticism very much and when he can't answer something, his fallback position is to say what do I know I'm not an economist. 

       Nevertheless I do think that Sumner can't simply be ignored. For one thing. if he's able to shout down all critics he will better able to carry the day in the public debate. I do think he's had a big impact for perhaps good and ill-I think it has been productive to the extent that laypeople like me were unaware of this whole dimension of economic policy prior to him in particular and the monetary blogs more generally. 

         He has pretty much said his goal is to bury all who would contradict him. 

          It's clear that Sumner sees himself as in a war against what he calls 'Keynesianism.' Mr W-L on the other hand sees Sumner as an annoying school boy throwing spit balls in class.-just ignore him and he'll go away. Except he most certainly hasn't gone away. Why does it matter? Well when Krugman says that 'sorta kind NKers' like himself have gotten this Great Recession right or most right, Sumner is the one who most credibly claims that this is not so. 

           I'm not saying Sumner is right just that he is probably the most effective conservative ideologist today. If there is anything I disagree with him most on besides the fiscal multiplier and 'monetary offset' is something else I've often heard him say: he says that he takes people at their word and criticizes those-basically liberals-who read nefarious motives beneath what they're actual words say. 

          People like Mark Sadowski have suggested that I'm almost delusional in my paranoia but as it has been said just because you're paranoid doesn't mean they aren't out to get you. I would say I respect Sumner's intellect, what I don't do is trust him. At the end of the day I believe he has a very determined political agenda that masquerades as a purely technocratic economic one. What he wants to deny is the very existence of what used to be called political economy. 

          One result of his religious preference for monetary policy over fiscal is the political abrogation of the public's right to have any say in one of the most important social question of all-their own economy. I haven't seen anyone really reflect on what an anti-democratic jibe Sumner's claim that there is no such thing as public opinion in economics really is. 

         So W-L's dismissal of Sumner as a loudmouth is understandable but problematic. Even in his comment to me he admits that he may not understand Sumner's point about inflation. 

          So my policy is that if I think there is an issue where I have got something new to say, or where I can help clarify something, or where there is a genuine misunderstanding that others might make, I'll write about that, but not as part of a debating contest. I did see Sumner's reply to my latest post, and I did not really understand the stuff on inflation. Pretty well everyone doing academic work on macro nowadays models the welfare cost of inflation, and they are not 'confusing inflation with NGDP growth'. Most work is based on Woodford's analysis, which looks at misallocation costs due to relative price changes. So either this is simply wrong in a very obvious way, or I have just misunderstood, but in either case it didn't seem worth pursuing.

         So it's at least possible that Sumner made a good point that went over his head. At least this is how Sumner would spin this I have no doubt. What Sumner is saying is that NGDP is the better gauge than inflation as inflation can be 'good or bad'-whether it's good or bad depends on for instance:

          1. Where we are in the business cycle. 
          2. Whether we have supply side or demand side inflation-or for that matter deflation. 

          His argument is that if policymakers focused on NGDP they would only in effect be targeting the 'right kind' of inflation, that which is associated with the demand side rather than the supply side. 

           What I had argued in my previous piece is that this si something that it would help for a NK type like W-L to clarify. 

            Another point is Sumner's disparaging of Keynesians as wrongly focusing on interest rates as the sole or main lever of interest rates while he argues that they are merely an 'epiphenomenon'-now this point I don't think is new to Sumner, it goes back to Friedman, it's a Monetarist jibe. However, if Sumner is wrong then Keynesians of any stripe need to clarify where. 

              I should finish by saying that as W-L admits not all the MMers are personally as obnoxious-to those who disagree with him-as Sumner. Actually, most MMers other than Sumner are pretty polite, and charming folks-Nick Rowe, certainly David Glasner, Scott is kind of the exception. 

               He's not all bad but he sees himself as in a war. Is it all hyperbole? I don't find much that reassures me of that. I feel if Sumner's in a war I want the other side.. 

               The reason for that is because as I said above, I just don't trust him. Sumner says we should take people at their word. For this reason I very much take him at his word when he talks about dancing on the grave of Keynesianism. 


Thursday, September 11, 2014

Scott Sumner vs. Simon-Wren Lewis on Monetary vs. Fiscal Policy

     I'm always grateful when Keynesians of any stripe attempt to respond to Sumner because for the most part I think he's been underestimated by particularly the so-called New Keynesians-Wren-Lewis, Delong, Krugman, Noah Smith, et. al.

     In Sumner's relentless frontal attack on the use of fiscal stimulus he never gets tired of declaring 'the death of Keynesianism.' For the most part Keynesians themselves have been MIA which only emboldens him-kind of like what they say about terrorists.

     Krugman for his part has had very little to say about Sumner; presumably so as not to encourage him. I've found what little Krugman has said about him lately rather weak: basically Krugman argues that the Market Monetarists are wasting their time as they have no natural constituency. That depends on how you define natural constituency. True, the Tea Party House hardly seems open to any kinds of 'Monetarism' whether 'Market' or other. Nevertheless, Mr. Sumner has gotten a hearing in the conservative intelligentsia-on the National Review, by even Larry Kudlow who definitely speaks with some Washington Republicans and now Sumner even writes a regular column at Econolog.

     I don't know how you want to define constituency but Sumner doesn't define it as how many House Republicans he has on his speed dial; not unlike Keynes his target audience he claims is other economists. One of his favorite sayings-right

after 'the fiscal multiplier is roughly zero' is 'there is no such thing as public opinion.

     To a man he is only trying to reach economists so if he reaches them he has his constituency. As for a constituency that will support him, that's conservative economists and more broadly the conservative intelligentsia, and while I would agree they were slow to discover his virtues, they are noticing now. At the end of the day, Sumner understands that today's GOP is a somewhat more unreliable vehicle than the GOP that Milton Friedman rode in his day, so his agenda is not simply achieving Republican control-he hopes to be able to shape the thinking of economists and so their advice to policymakers in what economists call 'the Long Run.'

    Even though I think Krugman needs to do more to really call out Sumner I appreciate any attempts. I did convince Delong to write a piece awhile back. I thought some of his points were good but Sumner as usual just ignores the criticisms he can't answer and as his opponents are much less determined not much happens.

    His promise to 'bash anyone standing in my way' is real but at the end of the day Nkers have been slow to recognize this. When Krugman says things like 'People who believe like me and follow standard economics and the IS-LM model; we got a lot of things right in this Lesser Depression' Sumner will swoop in with his childish jibes about a 2013 bet he allegedly won-because growth didn't fall of a cliff there was nothing wrong with doing the sequester.

   In any case, Wren-Lewis's questions Sumner's attack on fiscal stimulus-the zero fiscal multiplier, full monetary offset, etc.-Sumner has at times 'suggested'-one thing that makes him so clever is he so rarely asserts these things merely 'suggests'-that the multiplier could even be negative-seems to me to be handicapped from the start-ie, harder for him to gain traction with.

    What strikes me with NKers is much less their disagreement with MMers but just how much they agree on. They all agree on Long Run Monetary Neutrality and all agree that in normal times monetary policy is superior to fiscal as a stabilization tool. This is why Sumner doesn't see his agenda as such a lift. Basically NKers-who could easily be called New Monetarists-ie, NMers-don't usually like fiscal stimulus either. Only at the ZLB does this change. I wonder with so much agreement how easy it will be for them to disagree effectively here.  Here is WL on the consensus  for monetary policy.

    Suppose there is a shortfall in aggregate demand associated with a rise in involuntary unemployment in a simple closed economy with no capital. Do we try and raise private consumption (C) or government consumption (G)? If the former, why do we prefer to use monetary policy rather than tax cuts?

If consumers have stable preferences over privately and publicly produced goods, then ideally we want to keep the ratio C/G at its optimal level. So if the aggregate demand gap is caused by a sudden fall in C, we will want to do something to raise C. As real interest rates are the price of current versus future consumption, the obvious first best policy is to set nominal interest rates to achieve the real interest rate that gets C to a value that eliminates the consumption shortfall. That is the basic intuition behind the modern preference to use monetary policy as the stabilisation instrument of choice: part of what I have called the consensus assignment.

      Nevertheless while WL prefers conventional monetary policy to fiscal normally, at the zero bound this changes. In reading WL's post I knew Sumner would quibble. One thing, of course, is that WL focuses on QE which is not Sumner's optimal unconventional monetary policy.

Debates over monetary policy should not be debates over QE.  The discussion should focus on what policy regime is optimal.  An optimal policy regime would probably not involve any QE at all. And even if it did, it would still be less inefficient than fiscal stimulus. That was my point.  (Remember that the “advance to consumers” must eventually be clawed back via distortionary taxes.)
One way of stimulating demand when interest rates are stuck at zero is to promise a combination of higher than ideal inflation and higher than ideal output in the future. (This can be done either explicitly or implicitly by using some form of target in the nominal level of something like nominal GDP. For those not familiar with how this works, see here.) The cost of this policy is clear: higher than ideal future inflation and output. Once again, these costs can be worth it because of the severity of the current recession, which is why nominal rates are stuck at zero. Whether these costs are greater or less than the cost of changing government spending is debatable: a paper by Werning that I discussed here suggests optimal policy may involve both.
Given that inflation doesn’t matter at all, it is hardly possible for it to be above or below “ideal” levels.  People who talk about the welfare costs of inflation are confusing inflation with NGDP growth.  There are welfare costs of excessive long run NGDP growth, primarily excess taxation of nominal returns on capital. But inflation by itself does not have important welfare costs.  The only possible inflation cost is the “menu costs” of price changes, but even that is unclear, given that nominal wage changes also involve menu costs.  Thus a NGDPLT policy minimizes both the “welfare cost of inflation” and the problem of suboptimal output fluctuations.  There is no trade-off. NGDPLT also reduces financial sector instability, relative to inflation targeting.  It’s a win-win-win policy.

     Is Sumner claiming that fiscal stimulus will later be taxed back on a 1 to 1 basis from taxpayers? If so, evidently he's unselfconsciously assuming full Ricardian Equivalence. However, it's true that WL fails to notice Sumner's critique of the concept of inflation. Is he unaware of it? Sumner's premise is that NGDP targeting is superior to inflation targeting as there is what you might call 'good inflation' or 'bad inflation' or more precisely there is supply side and demand side inflation. NGDP targeting would prevent the CB from targeting the 'wrong' kind of inflation or for that matter the 'wrong' kind of deflation. When NKers like Krugman say we need higher inflation, Sumner's answer is that what they mean is higher demand side inflation or better yet, higher NGDP.

    Now by not noting this, WL kind of makes it easy for Sumner to dismiss him-in reality this is besides the point at issue here-whether or not unconventional monetary policy isthough  always and necessarily preferable to fiscal policy.

     In fact, as  Keynesian one probably could call for NGDP targeting and still ask for fiscal stimulus as part of the policy to meet this target. Krugman noted something like this a few years ago when he tentatively seemed to give NGDPLT his blessing.

    Here he seemed to accept that maybe an NGDP target might be politically acceptable-as most noneconomists suffer from what Nick Rowe calls the inflation fallacy. However, Krugman didn't touch on the point Sumner makes about supply side vs. demand side inflation. The selling point of NGDPLT is that the CB won't tighten like the ECB did in 2011 because of a temporarily spike in commodities-driving by the Japanese earthquake that year or the Fed tightening in 2008 because of the run up in the Summer of commodity prices-these were supply side spikes that had nothing to do with AD is the premise.

     However, none of this really effects the debate over fiscal vs. monetary. There's nothing to stop us from using fiscal policy to achieve a nominal target-just direct the CB not to 'offset' it-which is something that even if you listen to the words of Bernanke and the rest of the Fed, seems to have always been overstated.

     Sumner may say that unconventional policy should not be defined as simply QE but what else is really left? Simply expectations.

      The other argument Sumner makes that the NKers fail to respond to is that monetary policy is wrongfully conceived as changes in interest rates but that this is a Keynesian error. I think that the Krugmans, Delongs. and Wren-Lewises need to respond to this-and the supply side demand side of inflation point-to effectively engage Sumner's argument.



Tuesday, September 9, 2014

Apple's Product Announcement: Watching the Pot Boil

     That's how it's felt watching the market so far today. The question is what Apple releases beyond what is known. We know they're going to unveil IPhone 6 today but what will it's exact features be? I'm pretty much doubled down on Apple as I not only have a bunch of its stock but also am long GTAT with 20 calls for the Sept 26 $17/50 strike.

     What investors of GTAT will look at is just how much of a nod Apple gives the use of Sapphire vs. Gorilla glass in its new phone and other products. On the other hand, owners of Corning's stock probably hope the opposite though Corning insists that it would have no problem meeting any new need for Sapphire Apple might need.

     There is some danger being long Apple I know. They've had a tremendous run which can't possible go on forever and why not use this occasion to lighten up? In addition, the release of the IPhone 5 was ultimately a plateau in the stock that it has only returned to now with the ramp up to this moment.

      What investors seem to want is something really new-there's been talk of a wrist watch-which presumably could use Saphiire's scratch resistant surface-and now there's talk of a new 'holy grail'-automatic payments.

       This is the kind of pressure Apple is under. This need to constantly be creating something brand new is perhaps not the best way to get a pot to boil. We shall soon see.

Monday, September 8, 2014

The Stock Market, NFL Week 1 and Being Lucky and Good

     I talked about my new NFL betting strategy the other day. As those who have read my blog in the past know I do like to trade in stock options-basically if I think a stock may be headed lower I buy puts and in it and if I think it will rise I buy calls.

     What I've found when I tell other people about this is that most have a reflexive fear of 'gambling.' I think there's also a notion out in the popular consciousness that it's ok and in fact good to 'invest' but 'betting on stocks' isn't investing. Of course, when you talk to an economist the confusion builds as while some might call buying or selling stocks-or the related options-'investing' and most others may call it 'betting' and 'gambling' economists might actually call it 'saving' or perhaps 'speculating.'

      When I think back to my initial foray into the market back in 2007, I think what drove me there to begin with was that I was struck by the fact that the yield on savings accounts were so low-ironically comparing the interest rates on bank accounts back then to today that now looks like a Golden Age of yield.

       We can debate what the meaning of 'Secular Stagnation' is-a big part of which is an alleged drop in real interest rates. However, one thing I tend to think the SecStag group has right-and even Sumner seems to somewhat be on this train-is that we may be in for a long period of low rates.

       On the other less gloomy hand David Beckworth has argued that there has not been a long term drop in interest rates.

        This seems wrong as back in 2007 I was frustrated that you could find no rates more than 4% and now you're lucky if you can find a 1% rate. It sure seems like this will be the case for a long time-part of this though may be what Keynes talked about; our tendency to assume the future will be like the present and recent past.

       However, when you remember that these are nominal rates, you see that real interest rates have not dropped quite as much as nominal rates make it seem though they have still dropped. In 2007 if the nominal interest rate was 4% so was the inflation rate so that there was basically no yield. Now with basically a zero nominal rate and an inflation rate of about 1.5 we actually are paying banks to hold our money.

        So my initial interest in stocks was for higher yield which would seem to lend some validity to economists calling stock investing or 'speculating' saving. If buying a stock is saving though what is buying say 10 calls on it? Is this now speculating? With options you risk your entire principle but don't have to put such a large absolute amount as you do for buying the stocks outright.

        My move into options was caused by the 2008 recession and bear market-these actually started in late 2007-and my realization that the plum days for buy and hold were over. Of course, once I realized how much I could make in options my interest in buying and selling stocks waned. I felt like I wanted more than just a high yield savings account.  I was now entranced by the idea that it's possible to make money into more money when it's laying idle-maybe even especially when it is. Here at least Piketty is right: the goal of capital is to hit that Zarathustrian point where the Spirit of Gravity that says 'what goes up must come down' is reversed and where passive money multiplies itself. I don't agree with those though who feel that wealth should solely be a product of one's own savings however.

        So now I've dipped my toe into a new way for passive money to grow-betting on the NFL; I'll probably try the NBA when it starts.

       So how did it go? It actually went swimmingly and I have to say in achieving this I was both lucky and good. I was good in that I got all three of the games I was looking at right: Seattle over Green Bay, the Eagles over Jacksonville and the Steelers over the Browns. I only ended up betting on the first two games and actually made a mistake in that I had meant to only bet straight up in these two games and I actually mistakenly bet the spread.

      Seattle, however, had no trouble beating a 5 and 1/2 point spread against the Packers blowing them out 36-16 and the Eagles actually fell behind 17-0 in the first half at home against the Jaguars and yet somehow managed to not just rally in the second half but beat the 10 and 1/2 point spread with under two minutes left returning a Jaguar int for a TD.

       Of course, as usual, when things go well, I can't quit while I'm ahead and did what I had promised myself I wouldn't: put money on the Giants tonight. I managed to stop myself from betting the G-Men will win outright-though I think they might, but simply have money down that they will beat the 6 and 1/2 point spread. What I'm thinking is that this spread is absurd.

      I tend to think that the Giants are at least a little underrated-though I'm biased of course and I know this. However, looking at the Lions, I feel like they're definitely overrated. Everyone seems to be forgetting that this is a game between two 7-9 teams in 2013-everyone acts as if the Giants are the only 7-9 team-some act as if they were 3-13-while acting as if the Lions were 13-3.

       To top it off, the last game for both teams was a 23-20 Giants win over Detroit to end last season. So have the Lions now gained 10 points over since then? I very much doubt that. I notice that when you ask people why the Lions are such big favorites then answer 'Matthew Sheppard...' but wasn't he here last year and the year before that? How good were the Lions then? It reminds me when people year after year thought Dallas would be great because well, 'Tony Romo...'

      Incidentally, no one ever seems to remember that Brady won't be in NE forever. I was not surprised that they lost yesterday as they are not a great team at all on the road; they are only a great team at home; they were 4-4 on the road last year and 8-0 at home.  Besides that, games with the Dolphins are exactly the kind of volatile long time rivalries where anything can happen regardless of who may be better or worse in a particular year and the Dolphins often have the Pats number in Miami-much as the Jets often have the Dolphins number, etc.

     I was surprised though that they went from a double digit half time lead to losing the game in the second half by double digits. This is very out of character by them and we'll have to see if this is a sign they're finally losing their mojo-it's very early of course but that was very unusual.

     I wouldn't touch their game this week in Minnesota with a 10 foot pole and notice that they are only3 point favorites-the odds makers must realize how poor a bet they are on the road.

     The games I am looking at this week are: the 49ers easily over the Bears in San Fran, the Seahawks over the Chargers in SD-though of coruse I want to see how the Chargers perform tonight and I do think they are pretty good, the 'Hawks are the 'Hawks. They are just a very good bet to win any game wherever they go.

     On the other hand I have the Bengals who are a very good bet to win a game at home-8-0 last year but 2-6 on the road.





Thursday, September 4, 2014

Jim Cramer: Draghi Pulls a FDR

     This is the spectre he raised this morning on CNBC's Squawk on the Street likening ECB President Mario Draghi's latest moves to FDR. Draghii has now official pulled a play out of Bernanke's playbook with the ECB's foray into QE-the ECB also lowered interest rates. 

     "The European Central Bank has acted in the face of stalling European growth. Cutting three main interest rates, including one that was already negative, ECB President Mario Draghi also announced plans to buy private-sector assets, suggested quantitative easing is still on the table and that rates are the lowest they will go. The message was clear that banks should accept this, start borrowing money from the ECB and lend it to the real economy."

       To be sure whether or not this is kind of QE is up to some debate-semantics-but no one questions taht this is virgin territory as it were for the way  behind the curve ECB. 

         I'm a big Cramer fan and I also liked his imagery of FDR. He expiciltly made the poiint that it was a conscious decision of his to reference not Draghi following Bernanke but rather as following FDR. In many ways Scott Sumner would probably agree with Cramer here-he too has talked about 'Rooseveltian Resolve'-Bernanke wrote a paper on this. 


         However,  what Sumner praises FDR for was what he did about the gold standard. Cramer described Draghi here as basically an end run around the Germans in order to get an 'autobahn' project, basically a New Deal for the Eurozone. 

           Cramer isn't always right but he's always worth listening too and Iet's hope he's right on not just the market picks he gave us today but also his NFL pick: he has Seattle beating Green Bay. I just made my first ever bet on an NFL game with Seattle over Green Bay. The reason why I think this is a good idea is it's straight up. GB is a very good team lead by one of the best QBs in the NFL with Rogers but Seattle in recent years has been a total lock at home.

           I put $600 on them and after this I'll try a bet on the Eagles over Jacksonville in Philly. The Eagles surely have to be as close to a sure thing at home against the Jags as you're going to get-they're Cramer's team of course. So this weekend Cramer and I are simpatico on football as well-not a bad place to be in either the NFL or the markets.

Wednesday, September 3, 2014

The NY Giants: What a 5-0 Preseason and $.50 Cents Will Get You

      It will get you a cup of coffee assuming that's what coffee costs now a days as I'm not a coffee drinker I wouldn't know-is it more like $1.00 now I'm thinking?

      Certainly no one is giving the Giants anything for their 5-0 preseason. Overall the sentiment seems to be very pessimistic on the G-Men. On this morning's Mike and Mike show, Mike Gralic picked them dead last in the NFC East with a 4-12 record, while Mike Greenberg had them 6-10 and second to last-the only thing gratifying for me is that he had Dallas last at 5-11.

       Overall, the predictions are quite bearish for the Big Blue this year. That they went 5-0 in preseason has been totally discounted. All anyone talks about is the subpar performance of Eli Manning and the first string offense.

       "Eli Manning finished the preseason 20 of 41, for 188 yards and one touchdown. In what was basically 1 1/2 games of football, it's not what the Giants were expecting. "


        Giant fans perhaps shouldn't take the dire too much to heart. While he had only one touchdown, at least he didn't throw any interceptions. Will he be able to adjust to the West Coast offense, will he get on the same page with Reuben Randle? The thing to keep in mind is that 41 throws over 5 games-even if you spin it as 1 1/2 games, it was spread out over 5 weeks and no matter how you want to look at it, is a lot of time. In any NFL season your only going to learn so much in 1 and 1/2 weeks.

        There hasn't been much focus on what the G-Men did do right. There was just one pick by Eli. Then there was the very impressive play of the second and third units under the West Coast offense. Yes, I know these are only scrubs, but at the least the Giants scrubs were a lot better with the West Coast offense than opposing defenses were at stopping them. Then there was the great play of the running game-134.6 per game.

         More than anything, Giant fans should keep in mind that in 2007 the overall sentiment of NFL prognosticators was no better than now about the Giants. The Giants are rarely the darlings of August. More than once they've been the stars of January however.