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U.N. Debates the Breadth of a Mission in the Central African Republic
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Great Homes and Destinations
Earth, Wind and Fire
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U.S.
Obama Starts Initiative for Young Black Men, Noting His Own Experience
President Obama’s My Brother’s Keeper effort is aimed at finding ways for business and civic leaders to help keep young black men and other men of color on a successful course.Lowflation and the Two Zeroes
Via the always invaluable Mark Thoma, the IMF blog — yes, the IMF has in effect become an econblogger — has a terrific piece on the problem with low inflation in Europe.
It’s the perfect antidote to the do-nothing voices insisting that
there’s no problem, because we don’t see actual deflation yet.
Part of the IMF analysis concerns debt
dynamics. They don’t put it quite this way, but I’d say that to have
debt deflation — in which falling prices due to a weak economy increase
the real burden of debt, which depresses the economy further, and so on —
you don’t need to have literal deflation. The process begins as soon as
you have lower inflation than expected when interest rates were set.
It’s also noteworthy that inflation rates in the highly indebted
countries are all well below the eurozone average (pdf), with actual deflation in Greece and near-deflation in the rest. So the debt deflation spiral is in fact well underway.
Beyond that, the trouble with low inflation is that it exacerbates the problem posed by the two zeroes — the impossibility of cutting interest rates below zero and the great difficulty of cutting nominal wages.
Is ECB policy constrained by the zero lower
bound? You could argue that it isn’t, since it could cut a bit further
than it has but hasn’t. I’d argue, however, that if nominal interest
rates were much higher — say, 4 percent — but the overall euro macro
situation were what it is, with inflation clearly below target and
unemployment very high, the ECB wouldn’t (and certainly shouldn’t)
hesitate at all about cutting rates substantially. It’s only the fact
that zero is already so close that makes cutting rates seem like a big
deal, an admission that things are looking dangerous (which they are).
Meanwhile, the zero on wages is hugely
important now. The fundamental issue here is that Spain (and other
debtors) needs to reduce its wages relative to Germany, reversing the
runup in relative wages during the bubble years. The argument some of us have been making
for a long time is that it’s vastly easier if this adjustment takes
place via rising German wages rather than falling Spanish wages — partly
because of the debt dynamics, but also and crucially because it’s very
hard to cut nominal wages.
What would you look for if downward nominal
wage rigidity were a seriously binding constraint? A spike in the
distribution of actual wage changes at zero. And sure enough:
International Monetary Fund
To be technical about it: Yowza. This is prima facie evidence that excessively low European inflation is already a huge problem.
The point is that there is no red line at
zero inflation; excessively low inflation is still a very severe
problem, especially given the European situation, even if the number is
positive.
So when people warn about Europe’s potential Japanification,
they’re way behind the curve. Europe is already experiencing all the
woes one associates with deflation, even though it’s only low inflation
so far; and the human and social costs are, of course, far worse than
Japan ever experienced.
This need not lead to a breakup of the euro:
Pessimists on that front, me very much included, misjudged the strength
of European elites’ commitment to the project. But the euro might yet
survive — and be a continuing disaster."
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Technology
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Business Day
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Sports
Connecticut Finishes Undefeated and Clinches First A.A.C. Title
Connecticut’s women’s basketball team trounced No. 3 Louisville on Monday, its 37th straight win.
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Solipsists.
http://en.wikipedia.org/wiki/Solipsism
"As a metaphysical position, solipsism goes further to the conclusion that the world and other minds do not exist."
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Cities Mobilize to Help Those Threatened by Gentrification
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U.S. Seeks to Keep ‘Potentially Inflammatory Topics’ Out of Terror Trial
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Federal Prosecutors Looking Closely at Christie Aides, Court Papers Show
A lawyer for Gov. Chris Christie’s former campaign manager, Bill Stepien, revealed that federal investigators visited Mr. Stepien’s home in New Jersey and questioned his landlord.
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That Buzz You Hear Is Nascar After Earnhardt’s Big Victory
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U.N. Debates the Breadth of a Mission in the Central African Republic
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Magazine
Behind the Cover Story: Nathaniel Rich on the Truth About Corgis and Synthetic Biology
Nathaniel Rich argues that the natural world, as we know it, is already a distant knock-off of what existed before we got here.
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The power of the "Bully Pulpit".
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Broadcast still exists. Rain wipes out the signal.
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Business Day
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Process ‘Reboot’ Aims to End Senate Gridlock
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2 Films Feature Fierce Women in Pink Saris, Confusing Viewers
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World
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