Part of my job the last three years on leave at the Fed was following public commentary on Fed policy—both expert and lay commentary. There were at least two reasons for doing so. First, lots of good ideas come in, and given the difficult times we were facing, careful consideration of all reasonable ideas was […]
Category: CFE Analysis
A Consistent Set of Interest Rate and Real Growth Assumptions Suggests Stable Debt to GDP Ratios in the Out Years
Larry Summers recently raised the possibility of the US economy being in danger of facing a long period of subpar growth. The fear is at least somewhat reflected in several long-run growth forecasts. Table 1 shows the most recent estimates of steady state real GDP growth from the FOMC Economic Projections, Blue Chip Economic Indicators […]
The U.S. Budget Outlook, with Consistent Growth/Real Rate Assumptions, Looks Much Less Dire!
The CBO’s recent projection of a federal-debt disaster rests critically on the combination of two projections: 1. Real interest rates will rise substantially, increasing the cost of debt service. 2. Real GDP growth will remain tepid, resulting in tepid growth in tax receipts. Either of these outcomes might plausibly occur. But both history and basic […]
The Euro Crisis: Four Hard Truths
German voters go to the polls on Sunday to determine the future leadership of their country – and perhaps the future of the Eurozone, as well. With the continent’s largest economy, and the political clout to match, Germany is a central player in the Euro crisis. Odds are good that Chancellor Angela Merkel, who has […]
Exit Keynes, the Friedmanite, Enter Minsky’s Keynes
Last week Brad Delong reposted his 1996 review of A Tract on Monetary Reform. Delong makes the case, quite compellingly, that Keynes, in this book, provides us with the best monetarist monograph ever written. Delong leads, however, with a sentence that, in 2013 as contrasted to 2006, I think he might want to alter. “This […]
2014: The Year of the Hawk
Fed Chairman Bernanke commented on the monetary policy outlook at a speech at the NBER a couple of weeks ago, and then again in Congressional Testimony. He gave a clear signal that the current voting members of the FOMC plan to maintain a highly accommodative overall stance of monetary policy for some time. These remarks […]