The ghost of predictions past

John Cochrane, the beaming fellow in this photo, took on Paul Krugman here: http://johnhcochrane.blogspot.com/2014/12/deflation-links.html

Okay, I'm a little late to the fair, but I'm traveling this week, not doing any blogging at all, so you're reading something written when that Cochrane blog entry was still fresh.

Cochrane's point is that NY Times columnist (and Nobel Prize winner) Paul Krugman repeatedly, in 2009 and 2010, warned of a deflationary disaster if the Fed didn't really put the pedal to the medal on money creation.

Well, the Fed didn't. Not by Krugman's standards. And the deflationary disaster didn't happen.

In case you didn't follow the above link, I'll paste the gist of Cochrane's take-down here:

--------------------------------

"But deflation is a huge risk — and getting out of a deflationary trap is very, very hard. We truly are flirting with disaster."

"So we're really heading into Japanese-style deflation territory"

"So tell me why we aren’t looking at a very large risk of getting into a deflationary trap, in which falling prices make consumers and businesses even less willing to spend."

"But the risk that America will turn into Japan — that we’ll face years of deflation and stagnation — seems, if anything, to be rising."

"What I take from this is that deflation isn’t some distant possibility — it’s already here by some measures, not far off by others."

"Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap."

Comments

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge. We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a maj...

The Lyrics of "Live Like You Were Dying"

Back in 2004 Tim McGraw recorded the song "Live Like You were Dying." As a way of marking the one-decade anniversary of this song, I'd like to admit that a couple of the lines have confused me for years. I could use your help understanding them. In the first couple of verses, the song seems easy to follow. Two men are talking, and one tells the other about his diagnosis. The doctors have (recently? or a long time ago and mistakenly? that isn't clear) given him the news that he would die soon. "I spent most of the next days/Looking at the X-rays." Then we get a couple of lines about a man crossing items off of his bucket list. "I went sky diving, I went rocky mountain climbing, I went two point seven seconds on a bull named Fu Man Chu." Then the speaker -- presumably still the old man -- shifts to the more characterological consequences of the news. As he was doing those things, he found he was loving deeper and speaking sweeter, and givin...

Five Lessons from the Allegory of the Cave

Please correct me if there are others. But it seems to be there are five lessons the reader is meant to draw from the story about the cave. First, Plato is working to devalue what we would call empiricism. He is saying that keeping track of the shadows on the cave wall, trying to make sense of what you see there, will NOT get you to wisdom. Second, Plato is contending that reality comes in levels. The shadows on the wall are illusions. The solid objects being passed around behind my back are more real than their shadows are. BUT … the world outside the the cave is more real than that — and the sun by which that world is illuminated is the top of the hierarchy. So there isn’t a binary choice of real/unreal. There are levels. Third, he equates realness with knowability. I only have opinions about the shadows. Could I turn around, I could have at least the glimmerings of knowledge. Could I get outside the cave, I would really Know. Fourth, the parable a...

Jamesian Philosophy Refreshed

Search This Blog