Friday, July 3, 2015

Marcus Nunes is Shocked I Agree With Him on the Euro

       I recently left a comment agreeing with his-and fellow Market Monetarist David Beckworth-on Greece. As I told him, there's no reason to be shocked, I've never said that I disagree with the MMers on everything just that I don't agree with them on everything either.

      They seem to take the latter for the former.

      As for Greece, no disagreement from me with Beckworth here:

      "The Eurozone crisis is one of the greatest economic tragedies of the past century. It has caused immense human suffering and continues to this day. The standard view attributes it to a pre-crisis buildup of public and private debt augmented by the imposition of austerity during the crisis."

    "While there is evidence of a relationship between these developments and economic growth during the crisis, this evidence upon closer examination points to the common monetary policy shared by these countries as the real culprit for the sharp decline in economic activity. In particular, the ECB’s tightening of monetary policy in 2008 and 2010-2011 seem to have not only caused two recessions but sparked the sovereign debt crisis and gave teeth to the austerity programs. This finding points to the need for a new monetary policy regime in the Eurozone. The case is made that the new regime should be a growth path target for total money spending."

     I totally agree with Beckworth here-at the expense of Tyler Cowen who claims that what's hurting Greece primarily is big government. No, that doesn't explain the pain.

  As for the question of structural reform what is objectionable is for the EU to dictate this to the Greeks. While I believe a yes vote on Sunday would be a big mistake I still welcome it as the Greeks will finally have spoken. 

 If they want to do structural reforms that should be up to them. It may well be that the government needs reform but only they should decide this not the EU pundits, a la Tyler Cowen. 

  As to Marcus, it's too bad we can't be friends. We used to be friendly but quite honestly, he seems to have been offended by some of my disagreements with MM. 

  While my inability to get along with Scott is well known, most of the other MM guys are ok guys at least personally. You'll never meet a classier individual than David Glasner. Somehow like Sumner he's able to answer all comments-this is a good legacy of Sumner and the rest of the MMers; answering comments-without the reflexive snarky defensiveness. 

  Nick Rowe recently wrote a piece about fiscal policy and the size of government that I found touched on a big part of my differences with MM. 

   "Suppose I were totally indifferent about the size of government. Because I thought that the government was always equally good (or equally bad) at spending money as private households and firms. And not just at the margin, but everywhere. Never better, never worse, but always exactly the same. Whether G is 1% of GDP, or 99% of GDP, I don't care. The marginal benefits to government spending (adjusting for thee marginal deadweight cost of taxes, and relative to the marginal benefits of private spending) did not diminish."
    "Then I would find it hard to argue that fiscal policy was worse than monetary policy. You fiscalists want big government spending sometimes, and small government spending at other times? Whatever. We could use monetary policy instead, but who cares?"
   This is in large part how it seems to me-who cares? And Nick argues that this is what's at the heart of the difference. He left this interesting comment for me that I admit does cover a lot of ground-which is what I'm always looking for. 
   "Suppose there's an Ebola outbreak. And at the same time aggregate demand is getting too strong, and you want to reduce total (government + private) spending. Fiscal policy says you should reduce G to reduce total spending. I say you should increase G to cope with the Ebola outbreak, and use monetary policy to reduce total spending."
   "Now put it into reverse. There's a baby bust, so you don't need the government to build as many schools. But at the same time there's a recession, so you want to increase total spending. Fiscal policy says you should increase G to increase total spending. I say you should reduce G, and use monetary policy to increase total spending."

  See, a lot of times I think the MMers-especially Scott- misunderstand me-all I seek is understanding. Like Socrates what were innocent questions on his part were taken as insults by the pious. 

   When I ask a question I'm hoping you can give me a good answer that explains things. I think Nick's answer here whether I agree with it or not-and I have far from totally unpacked it yet, which means it was a very good comment-at least clarifies and makes coherent a big part of the Monetarist preference for fiscal policy over monetary. 

    This is not an endorsement-at this point I haven't even fully unpacked it and all its applications-but I understand at least Nick's Monetarist position a lot better. At least in his examples you see that it doesn't work out as a simple prejudice against more government and a bias for less. He agrees that government spending is how you deal with an Ebola outbreak. 

    P.S. I really don't think Scott is all bad-he and I just don't click for a few reasons. One is ideology but another is temperaments. To an extent ideology and temperament may be related. You could argue that certain temperaments prefer certain ideologies. 

   Scott has a quite different skill set than Nick or David Glasner-or Nunes for that matter. It does take all kinds though. But even his benefactor Ken Duda admits that Sumner can make it harder for himself by his manner. 

  What I do like about Nick is he really is what I'd call a 'congenital teacher'-basically a natural born teacher. His joy is explaining things to his students. 



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