Mark Sadowski vs. Marko in Restrospect

     I found their confrontation kind of interesting on a lot of levels. However, what I notice is that Marko listed a number of IMF macroeconomists who had done empirical research which strongly suggests there's proof in the credit impulse idea. 

     http://diaryofarepublicanhater.blogspot.com/2014/03/on-merits-koo-its-mark-sadowski-vs-marko.html

     Mark went from kind of quibbling with them to after being called out by Marko to saying he had no problem with them just to Mark's interpretation of them to finally offering up objections to them based on their personal views while considering that the empirical results do show correlations. This last turn I find interesting  as Mark usually presents himself as rigorously empirical and only interested in looking at the data. Then there 's the fact that the credit impulse idea is one that Sumner is quite scornful of-he doesn't think anything as ephemeral as having to pay down credit card debt could be very important to the macroeconomy. 

   Here is some criticism of these authors by Mark:

   "The views of William White are well summarized by the following paper:

    http://dallasfed.org/assets/documents/institute/wpapers/2012/0126.pdf

    "The paper has quotes by both John Maynard Keynes and Ludwig von Mises at the top of the first page. If one reads it you will note this was done intentionally as the paper takes up the Austrian case against the Keynesian."

     I find this rather rich. He's trying to appeal to Keynesians while his MMers do nothing but raz these very same Keynesains all day with Sumner going as far as declaring that Keynesianism is dead and that he's driven 'yet another stake through its heart.'

      Here's Mark on Borio:

     "The views of Claudio Borio are well represented by the following paper:"

      http://www.bis.org/publ/work404.pdf

      "Graph 9 shows the "Finance Neutral" policy rates. Borio et al. recommend raising the fed funds rate above zero by early 2010 and above 2% by early 2011. They also recommend raising the UK's policy rate to nearly 7% by 2011."

      "Think this only applies to monetary policy? Of course not."

      "Go back to Graph 8 to see their fiscal policy recommendations. The most shocking one is for Spain. (Keep in mind that Spain does not have the option of monetary stimulus.) Spain's actual budget deficit was about 9% of GDP in 2010. A production function (conventional) approach to the output gap suggests that the budget deficit should be less than 4% of GDP."

       "But that isn't tight enough for Borio et al. The Finance Neutral recommendation is a budget deficit equal to less than 0.5% of GDP. (I guess 27% unemployment isn't high enough for them.)"

     I certainly find this fiscal policy recommendation ghastly. Yet Sumner would likely have no problem with it either. He'd dismiss Keynesian worries about it and say that with enough QE-or forward guidance or NGDPLT or whatever-it wouldn't hurt at all. 

      I'm a bit bemused to hear Mark talk about how financial innovation and deregulation caused the asset bubble. After all Sumner is all for innovation, categorically opposes deregulation and as for bubbles claims they either don't exist or it doesn't matter if they do. 

    When I say I don't trust Sumner based on some of his personal views MMers dismiss me as not being rigorous of not looking at what he says rather than inferring what he really might mean. Yet Mark does the same thing with these authors here. I'm glad to know that even he sometimes uses intuition and is not simply a data mining machine.