One interesting economist

Recommended skimming: Modernizing Monetary Policy Rules by James Bullard.


"Interesting": Finding new ways to look at accepted ideas, resulting in new ideas. I'm thinking of Bullard's earthquake and his 2½-year forecast horizon in addition to the "modernizing" piece.


// Two brief thoughts on Bullard's Modernizing:

1. People look for all sorts of ways to get the inflation number down. Not necessarily to get inflation down, but to get the number down. Bullard subtracts three tenths of a point from the CPI inflation rate, because CPI inflation is higher than PCE inflation.

Is it a reasonable adjustment? Maybe. Probably. But it is just another way to bring the inflation number down.

2. Bullard says

the general level of short-term real interest rates has been trending lower for three decades

He does not talk about why rates have been falling for an extended period. He just goes with the fact, and makes use of it in his calculations.

Granted, the reasons that rates have been falling are not relevant to his topic. I'm just saying he shouldn't have moved on to this topic until the reasons rates have been falling have been thoughtfully and thoroughly examined.

So now of course I will have to search through his works, looking for his thoughts on the reasons rates have been trending lower for three decades. Not today. But I'm thinking that when I do, I'll find Bullard generally accepting the view of John C. Williams and others, that demographics is the main reason for the long-term decline in rates.

The path of interest rates has not been thoughtfully and thoroughly examined unless the discussion includes debt, private debt, its effects on the economy, and the unintended consequences of policy which created such high levels of debt.