1. Bad monetary policy produces inflation and/or recessions. But the greatest cost of bad monetary policy is that it leads to bad policies in other areas, including wasteful fiscal stimulus, protectionism, bank bailouts and price controls. In China, an overly restrictive monetary policy has led the government into a project involving the purchase of large quantities of| TheMoneyIllusion
I've had very low expectations for the Fed's upcoming review of its operating regime. I had thought that the previous review (back in 2020) had hit the nail on the head, until I learned that| TheMoneyIllusion
In the mid-1990s, the consensus view was that central banks should target inflation at 2%. Then in the late 1990s, a light rain of “magic dust” descended on the islands of Japan. The dust made people passive and fatalistic, and the economists there suddenly forgot how to create inflation, a previously inconceivable development. At the […]| TheMoneyIllusion
A recent Bloomberg article suggested that we may be moving toward a regime characterized by fiscal dominance, at least part of the time: In their paper, three economists from New York University, Stanford and London Business School argue that the US is moving from a regime of “monetary dominance” to one of “fiscal dominance.” In […]| TheMoneyIllusion
Matt Yglesias directed me to this tweet: If you looked at certain polls, you’d think the economy was doing poorly. On the other hand, if you looked at state economic performance polls, or polls asking about an individual’s personal financial situation, then things look far better. But one thing is clear—the US is outperforming the […]| TheMoneyIllusion
I’ve been amazed by the response to Russia’s invasion of Ukraine. The most militarily expansionist leader since Hitler and Stalin starts a war that threatens to spiral out of control. He leads a country with enough weapons to destroy most of the US population. He threatens to use nuclear weapons (and is scolded by China […]| TheMoneyIllusion
There has recently been a lot of discussion about how all of the conspiracy nuts are moving over to the GOP, whereas not so long ago they were at least as common among Democrats. Matt Yglesias has a very good post that points out how this is a problem for both sides. The TLDR is […]| TheMoneyIllusion
One of my biggest frustrations over the past 15 years has been the economics profession’s drift away from certain well established propositions, such as the fact that the Fed controls the price level. But there are signs of light. David Beckworth has a twitter thread discussing how inflation has recently fallen sharply despite absurdly large […]| TheMoneyIllusion
Brad DeLong directed me to a tweet that contained this intriguing graph: If you polled 51 million Americans and found that 50 million supported X, whereas 1 million opposed X, that would be a highly significant survey. So what should we make of the fact that over the past 35 years, Democratic presidents have “created” […]| TheMoneyIllusion
Here’s Richard Hanania: We can already see Republican candidates and institutions shifting over to Gribble messaging. The Heritage Foundation, once believed to represent elite conservative thought, goes to Twitter and implies that the Secret Service tried to assassinate Trump. JD Vance has praised Alex Jones as a truth teller. Meanwhile, Ted Cruz and Vivek Ramaswamy […]| TheMoneyIllusion
The FT has a good article that might be seen as being tangentially related to my earlier post on lab leak vs. zoonosis: If a screenwriter were to come up with a storyline in which a tech tycoon drowns when his luxury yacht is hit by a freak storm just two days after his co-defendant in a multibillion dollar fraud trial| TheMoneyIllusion
For readers who don't already know this, my new blog is over at Substack:scottsumner.substack.comThis will be my final Money Illusion post. The blog began on February 2, 2009. But the events that led to the blog took place in late 2008. Indeed my life can be divided into two segments, before and after September 16, 2008. It was that specific| TheMoneyIllusion
The old TV sitcom Cheers began with a nostalgic song about a time and place| TheMoneyIllusion
Tyler Cowen directed me to a Greg Mankiw essay on inflation: And as a textbook author, I sometimes get the suggestion that the whole discussion of the Phillips curve be removed from my books on the grounds that the idea is hopelessly out-of-date. By contrast, my own thinking is closer to that of George Akerlof (2002), who in his Nobel prize| TheMoneyIllusion
During my recent trip to the Bay Area, I met lots of people who are involved in the field of AI. My general impression is that this region has more smart people than anywhere else, at least per capita. And not just fairly smart, I'm talking about extremely high IQ individuals. I don't claim to have met a representative cross| TheMoneyIllusion
I recently attended a blogging conference in Berkeley. From the perspective of interesting conversation, it was probably the best weekend of my life. Lots of super smart people. As I get older (I'm 68), I notice that most other people in the blogging/twitter world are one or even two generations younger than me. Most of the ones I follow| TheMoneyIllusion
Yesterday, I saw Dune 2 in a huge theater (with only one other patron.) Before the feature presentation, I was subjected to 35 minutes of torture. First a series of ads, then one preview after another full of loud explosions and ridiculous CGI monsters. (Remakes of Planet of the Apes, King Kong and Mad Max, among other| TheMoneyIllusion
There are times when the claims of bubble proponents becomes so far-fetched that you wonder if it's all just a spoof. Bloomberg provides a recent example: Nvidia Corp.’s rise is captivating the stock market and driving the S&P 500 Index to new highs. But it also raises cautionary reminders of another investor darling that soared on dreams of a technological transformation, only| TheMoneyIllusion
I don't mean that literally. Atheists have not started believing in God. But in one respect they have replaced Christians---they are now the group that views all humans as having equal worth. In contrast, universalist Christianity has largely been replaced with Christian nationalism (which of course is a sort of oxymoron.) Here's Matt Yglesias: George W. Bush took up| TheMoneyIllusion
Here's how I would describe Orange County, my home since 2017:1. The population is a bit over 3 million.2. It's one of the most affluent places in the entire world. There are many luxury car dealerships, marinas that are full of expensive boats, and elegant shopping malls full of the usual stores.3. It has a very| TheMoneyIllusion
