#john cochrane

[random-bookquotes]

of all denied them— lasting love, warmth, daylight, breath— most missed is true death

John Cochrane, Vampyr Verse

[arcticdementor]

I salute President Biden's nominations for the Federal Reserve Board, especially Sarah Bloom Raskin and Lisa Cook. (Philip Jefferson seems straightforward and uncontroversial, but other than reading a CV I haven't looked that hard.)

We can now have an honest conversation about where the Fed is going, and whether and how the Fed should use its tools, primarily regulation, to advance the Administration's agenda on climate, race, and inequality.

…

This is wonderful. For the last year that I have been following the issue, it has all been clouded in what I regard as deceitful misinformation -- Oh, we're not trying to regulate climate policy. That's beyond our mandate. We just look around at risks to the financial system and lo and behold we find that climate poses an important risk to the financial system. So we're just doing our job as dispassionate financial regulators. The idea of climate risk to the financial system is, in my view (and my reading of the scientific literature) so farcical that I called this out as a subterfuge. But there the argument lay.

No more. Thank you Ms. Raskin for stating the truth so clearly. Now we're ready to put that nonsense smokescreen aside and have an honest debate. Should the Fed get involved in allocating capital in order to pursue climate policies? Especially to go beyond what Congress, Administration, and EPA are willing to do, for fear of wrathful voters?

…

A few journalists approached me to ask about Professor Cook's qualifications. Since they had an obvious agenda, I did not comment. But it is a line of argument you will hear.

My answer is simple: It depends what the job is. Just spend some time on her website. Read her CV. Cook is an academic, so her main qualification is her writing, not business or other experience which some other Fed board members bring.

…

So, I answer the question, Lisa Cook is superbly qualified, by written word, experience, and connections -- if the job is to bring the Administration and progressive supporters' racial policies to the Fed. That might mean requiring DEI or ESG practices at banks, or to companies that banks lend to, directing credit to some areas or by race, and strengthening the DEI initiatives and race based hiring and promotion practices within the Fed.

Should the Fed be doing that? Again, thanks Mr. President, we can now have a straightforward discussion.

[updatingjen]

The optimal inflation rate

Anthony Diercks has a very useful review of the the academic literature on the question, what is the optimal inflation rate? He includes 150 papers, ordered from low to high inflation.

Broadly speaking, we start with the Friedman result that the optimal nominal interest rate is zero, so the optimal inflation rate is the negative of the real rate of interest. The optimal nominal interest rate is zero, so people feel no incentive to economize on money holdings, or devote effort to cash management, paying bills late and collecting early. Many sticky price models suggest an optimal inflation rate of zero, so you don't have to change sticky prices. Then,

Most all of the studies that have found a positive optimal inflation rate have been written in the last ten years. The increase in the number of studies with a positive optimal inflation rate can be explained predominantly by the rise of two modelling features: (1) inclusion of the zero lower bound and (2) financial frictions.  

[sprachspiele]

John Cochrane on “Is there an alternative to Obamacare?”

[economistsdoitwithmodels]

Richard Thaler has a new book, and John Cochrane has his Chicago-school panties all in a twist.

[hokie-ravenclaw]

Watching old seasons of survivor, especially South Pacific and dude what crazy pill is Ozzy taking. While good physically, he wasn't smart at all and had this arrogant, self righteous attitude and he had the balls to call Sofie privileged and spoiled in this game. Wow like she was totally calm the whole game and made the right moves at the right time and was never mean or almost had a bullying attitude towards anyone. Like Ozzy (and Jim, Keith, & Whitney) was with Cochrane.

[economicreading-blog]

One last thought: If the US’s main economic problem, and financial markets’ main shock, is whether the overnight federal funds rates rises by 0.25 percentage point, in the context of a slowly improving real economy and very low inflation, there to sit another 6 months to a year, this will be great news. The world is blowing up, Russia is invading Ukraine, Greece could go under, bond markets could go haywire. Look to the variance, not the mean. How the Fed will react to a big shock is far more important than what they will do in a perpetually quiet world. There will be more shocks!

John Cochrane (The Grumpy Economist) | Chicago Booth School of Business http://johnhcochrane.blogspot.com/2015/02/liftoff-levers.html?m=1

[economicreading-blog]

Once again, the news is full of opinions that Greece might be forced to leave the Euro. Once again, it makes little sense to me. U.S. corporations, municipalities, and even states default, and do not have to leave the dollar zone as a result.