Assault of Thoughts - 12/19/2012

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Nick Rowe on how you fit bonds into general glut parables. The key ingredients are sticky prices and zero lower bounds.

- Eric Falkenstein has a great post accusing Keen of being a crank. I don't know Keen well, so I won't weigh in on the specific accusation. But what I like about this post is that it provides some commentary on the problems with Minsky which are helpful for someone who (1.) hasn't read a lot of Minsky, and (2.) does appreciate Minsky's fragility arguments. Falkenstein thinks Minsky is on to something, but suggests that he errs in making such a big deal of aggregate debt levels. This comes to the question of the complicated value of "cranks" (I wouldn't necesarily call Minsky a crank, but the post is a good opportunity to talk about this). Often "cranks" aren't exactly right but they have an intuition about a problem that everybody else misses, which makes them worth reading. This is true, for example, of Foster and Catchings in the early 20th century. They weren't as sophisticated as Hayek was but in a lot of ways they had better intuitions for what was wrong than Hayek did, and laid a lot of groundwork for the acceptance of demand-side explanations in the United States. Cranks have their place. Even if you don't like what Falkenstein says about Keen, I think you'll get something out of the discussion of Minsky.

- I haven't been linking to these, but Gene has been picking out some real gems from Malthus. That's a link to one on savings, but you can look through his feed for others. People who know Gene know that he has a knack for finding really insightful passages in whatever he's reading, and he doesn't disappoint here. I've always thought Malthus has been underappreciated, and I also think that people don't get the most out of him by reading his essay on population. I haven't read all of it, but what I have read of Principles of Political Economy is much more engaging. I have the same reaction to Marx. Again, I can't say I've read all of Capital, but Jesus who would want to? It's not a fun read. In contrast, I've always liked the Economic and Philosophic Manuscripts of 1844, Theories of Surplus Value, etc.

- Two good posts on hyperinflation: Jonathan asks whether institutions in the U.S. mean we aren't at risk of  hyperinflation anymore, and J.P. Koning tells us how Schacht ended that hyperinflation in Germany. Which reminds me, I really do need to read Lords of Finance. I meant to years ago, but other stuff kept getting in the way. If you're interested in Schacht I also cannot recomment Wages of Destruction highly enough.

- David Glasner shares my reaction to the Fed announcement the other day: it does not seem as big of a deal as people are hping it up to be. In noting this, he suggests that Robert Waldmann should calm down in criticizing Matt Yglesias about monetary policy in Japan. It's probably good advice, although I have to say Yglesias's blogging often bugs me too. I'm not as down on monetary policy as Waldmann is but I do worry it's not the silver bullet a lot of people think at the ZLB, although still a good policy option, and Yglesias seems to have this unexplained awe for what it can do. I guess I just worry about the veracity of the expectations channel in a way I don't worry about the veracity of direct government creation of demand. I don't know - maybe it's just me.