Sadowski likes to comes across as Mr. Wonkier Than Thou. He is always the one with the data or the charts that show that, yes, Scott Sumner is actually right about everything after all. However, when you honestly try to engage him, it gets rather unpleasant and you discover that this wonkish poise is just that: a poise. In truth he is a crude propagandist. I learned this once when I was trying to honestly engage him and he got personal instead accusing me of being 'unhinged' because I questioned this Sumnerian ideology that claims that 'the fiscal multiplier is roughly zero.'
http://diaryofarepublicanhater.blogspot.com/2013/10/mark-sadowski-may-be-great-wonk-but-he.html
http://diaryofarepublicanhater.blogspot.com/2013/10/mark-sadowski-and-my-apparent-war-with.html
I don't love the idea of banning people from blogs and I give credit for Sumner in not banning people. However, I do think that Greg makes a good point.
"Well, the only defense I will give of Cullens decision to ban Sadowski (if he in fact did)
is that Cullen is truly trying to run a site that simply discusses these issues in an honest manner. You can come in with a different view but when you make a demonstrably wrong statement you have to own it. Otherwise you are not an honest broker and therefore should not get a voice in a forum which is trying to discern "truth". Scott doesnt ban people but he's not trying to discern truth, he's certain he's DISPENSING truth. He's a high priest of monetarism Anyone who stops by is a potential convert. Im pretty sure I could get banned form Scotts place if I visited there often enough and simply picked on Scott and tried to make a fool of him."
"Here is the thing about Cullen, he's banned guys who were on his side for the most part.
There was commenter named FDO15 that was almost sycophantic in how how he agreed with Cullen yet he also was very rude to people who disagreed with him.... Cullen banned him."
http://www.redrockwealth.com/economics/does-monetary-expansion-stoke-inflation/
http://www.adamsmith.org/blog/money-banking/chart-of-the-week-japanese-monetary-base-and-inflation
"People looked at Granger causation from the base, there is none:
www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf
http://www.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_szemle_cikkei/bulletin_2007june_komaromi.pdf
http://diaryofarepublicanhater.blogspot.com/2013/10/mark-sadowski-may-be-great-wonk-but-he.html
http://diaryofarepublicanhater.blogspot.com/2013/10/mark-sadowski-and-my-apparent-war-with.html
I don't love the idea of banning people from blogs and I give credit for Sumner in not banning people. However, I do think that Greg makes a good point.
"Well, the only defense I will give of Cullens decision to ban Sadowski (if he in fact did)
is that Cullen is truly trying to run a site that simply discusses these issues in an honest manner. You can come in with a different view but when you make a demonstrably wrong statement you have to own it. Otherwise you are not an honest broker and therefore should not get a voice in a forum which is trying to discern "truth". Scott doesnt ban people but he's not trying to discern truth, he's certain he's DISPENSING truth. He's a high priest of monetarism Anyone who stops by is a potential convert. Im pretty sure I could get banned form Scotts place if I visited there often enough and simply picked on Scott and tried to make a fool of him."
"Here is the thing about Cullen, he's banned guys who were on his side for the most part.
There was commenter named FDO15 that was almost sycophantic in how how he agreed with Cullen yet he also was very rude to people who disagreed with him.... Cullen banned him."
I think that's a very good point-there is no good faith in how Sumner and Sadowski operate . Actually I see that another commentator named Lars left a comment that also hits it home.
"Roche is a straight shooter. I've been reading him for 4+ years now. He's tough with people who don't argue honestly and don't contribute positively to his website, but that's mainly because he's out for answers. He spends a lot of time answering questions and helping people understand things. And he's proven over the years that he's not an ideologue. He used to call himself an MMTer, but when a few people like JKH and others started saying he was wrong he stepped back and viewed his position more critically. I found that extremely admirable. It's refreshing to read someone who doesn't think he knows everything and is willing to change his mind when the facts force him to reconsider."
"Scott Sumner and Mark Sadowski are downright nasty, on the other hand. They are not out for answers. They are out to spread their own agenda. That's all. And if you disagree then they call you names or say you don't know what you're talking about."
"I find that approach disgusting and pointless. I don't even read Scott Sumner's website, but only popped over there this evening because I saw Mr. Sadowksi being a jerk on Roche's site."
"Roche is a straight shooter. I've been reading him for 4+ years now. He's tough with people who don't argue honestly and don't contribute positively to his website, but that's mainly because he's out for answers. He spends a lot of time answering questions and helping people understand things. And he's proven over the years that he's not an ideologue. He used to call himself an MMTer, but when a few people like JKH and others started saying he was wrong he stepped back and viewed his position more critically. I found that extremely admirable. It's refreshing to read someone who doesn't think he knows everything and is willing to change his mind when the facts force him to reconsider."
"Scott Sumner and Mark Sadowski are downright nasty, on the other hand. They are not out for answers. They are out to spread their own agenda. That's all. And if you disagree then they call you names or say you don't know what you're talking about."
"I find that approach disgusting and pointless. I don't even read Scott Sumner's website, but only popped over there this evening because I saw Mr. Sadowksi being a jerk on Roche's site."
Now I just noticed that another good commentator Peter P. has left a very incisive criticism of Sadowski when he claimed that the monetary base acted like Sumner says it does because based on some tests he did increasing the MB 'Granger Caused' all kinds of fine things-higher GDP, a rising stock market, etc.
I pointed out that to say that A 'Granger Causes' B is hardly to say that A has necessarily caused B or anything like it. However, Peter P. puts it well and elaborates it in a very helpful way:
"Sadowski's stuff is of course nonsense. If you have a 100% jump in the monetary base in late 2008 then any test will show that it "Granger caused" anything that came afterwards. So you can say: "the monetary base Granger causes the iPad". He is either mathematically illiterate or thinks the Sumner readers are stupid (not a bad assumption). Of course, such an abrupt event is not a good moment to check causality of unique events that came afterwards. Funny enough, if he dared to look at inflation, he would conclude that the monetary base expansion Granger causes... deflation, it happened in Sweden and Japan:"
http://www.redrockwealth.com/economics/does-monetary-expansion-stoke-inflation/
http://www.adamsmith.org/blog/money-banking/chart-of-the-week-japanese-monetary-base-and-inflation
"People looked at Granger causation from the base, there is none:
www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf
http://www.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_szemle_cikkei/bulletin_2007june_komaromi.pdf
Yes, thanks Peter! This is a crucial point. To speak of 'Granger causing' can be a pretty empty thing in the wrong context. Ironically he was claiming that Cullen Roche was wrong about fiscal deficits being good for profits through some pretty bad causality of his own. He claimed that since the deficit went down this year and profits were up then-ergo, that's proof that they aren't good for profits and Keynesianism is dead, etc, etc. This is too facile: the fiscal deficit is one positive factor for profits, but there are others. If some of these other factors went the other way then nothing has been disproved. In fact, one thing that has helped corporate profits this year is a drop in private saving.
This is actually no better for the Sumner Market Monetarist model as Sumner believes the naive version of Say's Law-like most Supply Siders do-that all saving is necessarily future consumption. Considering the Kalecki equation again Sadowski's argument makes even less sense
"First, it’s helpful to review the Kalecki profits equation:
"Profits = Investment – Household Savings – Government Savings – Foreign Savings + Dividends"
Correct Mark, it is helpful. If government savings-ie, a cut in the deficit-subtracts from profit, where is your argument. So I have to agree with the Sumner and Sadowski detractors-these gentlemen, appearances to the contrary, are intellectual sophists. Their aim is not to increase understanding, but confusion. Cullen Roche, on the other hand, clearly seeks to create light not heat. What I think it comes down to is this: Cullen really hates snark, and, in this, I agree with him. Snark in no way advances any arguments or teaches anyone anything. This is a way in which his site is superior to some of the MMT sites out there-though technically he's no longer an MMTer but a MR-'Monetary Realist.'
PeterP.:
ReplyDelete“Sadowski's stuff is of course nonsense. If you have a 100% jump in the monetary base in late 2008 then any test will show that it "Granger caused" anything that came afterwards. So you can say: "the monetary base Granger causes the iPad". He is either mathematically illiterate or thinks the Sumner readers are stupid (not a bad assumption). Of course, such an abrupt event is not a good moment to check causality of unique events that came afterwards.”
A time series X is said to Granger-cause Y if it can be shown that lagged values of X collectively provide statistically significant information about future values of Y. There is simply no coherent way that values of X immediately preceding the range of observations could cause the lagged values of X in the range of observations to spuriously provide statistical information about future values of Y.
There are lots of things that the US monetary base does not Granger cause over the period since 2008, many of them things that people claim that QE has had an effect on. In particular the monetary base does not Granger cause the price of gold, copper, crude oil, or emerging market equities. To claim that simply because there was a near doubling in the monetary base between August and December 2008 that this would lead to spuriously positive Granger causality results with anything that occurred after it is quite frankly silly.
PeterP.
“Funny enough, if he dared to look at inflation, he would conclude that the monetary base expansion Granger causes... deflation, it happened in Sweden and Japan:
http://www.redrockwealth.com/economics/does-monetary-expansion-stoke-inflation/
http://www.adamsmith.org/blog/money-banking/chart-of-the-week-japanese-monetary-base-and-inflation
The example of Sweden during the 1990s is not very relevant for a couple of reasons. First of all it wasn’t QE in the conventional sense of the central bank making large scale asset purchases. It is better described as Credit Easing (CE). The Swedish Central Bank lent heavily to the financial sector due to the 1990s Swedish financial crisis. Secondly the Riksbank repo rate was extremely high throughout the period of monetary base expansion (1994-1997) reaching 8.9% from May 1995 through October 1996:
http://www.riksbank.se/en/Interest-and-exchange-rates/Repo-rate-table/
This was done mainly in order to defend the krona’s exchange rate. Sweden in 1994-1997 is simply not an example of a central bank doing QE because it was at the zero lower bound in interest rates.
In the case of Japan there is in fact published research showing that reserve balances Granger caused core CPI during their original QE from 2001-2006. See Table 2 on Page 29:
http://www2.econ.osaka-u.ac.jp/library/global/dp/0708.pdf
PeterP.
ReplyDelete“People looked at Granger causation from the base, there is none:”
http://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf
http://www.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbszemle/mnben_szemle_cikkei/bulletin_2007june_komaromi.pdf
Carpenter et al ‘s Granger causality results can be found in Table 1. What they actually show is that reserve balances Granger causes required reserves, reservable deposits and large time deposits, but not loans and managed liabilities. The fact that reserve balances didn’t Granger cause loans isn’t surprising since the time period in question is 1990-2007, which completely precedes the US QE.
Komaromi’s results can be found in Table 1 on Page 36. What they show is that the monetary base does not Granger cause M1 or M2, but M1 and M2 Granger cause the monetary base. But again, the period in question is 1998-2007 which completely precedes the US QE.
It’s not surprising that the monetary base does not Granger cause broad money during a period of time when the main policy instrument is the fed funds rate, something which I implicitly referred to in several comments in the Money Illusion comment thread to which these comments are replying.
http://www.themoneyillusion.com/?p=24551
Now, let me comment on the econometrics employed in these two Granger causality results.
Carpenter et al. did their test on logged and first differenced data, which evidently was done to address the issue of nonstationarity. In the words of the master econometrician Dave Giles, “this is wrong”. Granger causality tests should be done on level data otherwise the results will be inconsistent. This is in fact addressed by James Hamilton in “Time Series” on pages 651-3. I’m very surprised that nobody has commented on the fact that Carpenter et al’s Granger causality results are inconsistent before now.
Komaromi did his test on level data and first-differenced data. He reports the results for the level data and states that the results for the first-differenced data are similar. But there is no evidence that the issue of nonstationarity was dealt with in the published results for the level data. Thus it is very likely that they are also statistically biased.
All of my Granger causality tests have been done in levels using a VAR technique developed by Toda and Yamamato that addresses the issue of nonstationarity by added additional lagged terms as exogenous variables. Thus my results are not subject to the same kinds of econometric problems that the Granger causality results contained in Carpenter et al and Komaromi almost certainly have.