Economist Quotes

"The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds."

- John Maynard Keynes

November Jobs Report

November had the largest increase in non-farm payroll employment since January 2012, at 321,000 jobs added. October had a respectable 243,000 added after being revised up from 214,000. The labor market has been gradually picking up pace; the 12 moving average of job growth has been the highest of the recovery for the past few months.

The unemployment rate, at 5.8% didn't change, but that's more a sign of people being encouraged enough to look for work. The unemployment rate for whites is 4.9%, for Hispanics 6.6%, and for blacks 11.1% (higher now still than the overall rate was at the bottom of the Great Recession).

Scott Sumner on Finance and Monetary Economics

I'm often frustrated by the conflation of finance and monetary economics. I understand its occurrence in the lay-public (not hating, just saying), but most economists themselves fall into this trap. It occurs because the signaling mechanism central banks use is short term interest rates, but they could theoretically pick anything. Where interest rates are used, policy is still just about changing the money supply to target a nominal variable. The conflation presents all sorts of cognitive problems, such as thinking the “real problem” is the the financial system, so monetary policy can’t work, to thinking monetary policy is used up because interest rates are at 0%.

Anyway, here is Bently economist Scott Sumner on just how baseless this conflation is:

"…monetary policy consists of changing the supply of cash relative to demand. The nominal size of the entire banking system and all its components; capital, loans, reserves, deposits, etc., is determined endogenously, just like the nominal size of the plastic surgery industry, or nominal size of the ice cream industry. Normally, a permanent 20% increase in the [monetary] base[1] would be expected to increase the nominal size of the banking, plastic surgery, and ice cream industries by 20%. But other things are often not equal. 

Banking is only special a few cases. For instance, government regulation of banks might create a large and time varying demand for base money. Or the public may hoard cash because they fear a banking collapse. Otherwise, banking is of no interest to monetary economics. If the Fed abolished reserve requirements, insured bank deposits, and targeted NGDP growth expectations at 5%, then you might as well drop banking out of monetary textbooks."