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« Some Research Questions To Think About | Main | Law, Economics, and Superstition Part 1: "Ordeals" »


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Another fine presentation.

Thanks for posting this. On that same day I was at a talk hosted by the econ department at my school from a guy from the Bank of England.

Which could have been called "Yes, We Really Need a Central Bank!"

Excellent presentation.
My only discrepancy is that although you do not need to appeal to conspiration explanations for the creation of central banks, the incentive system in place plus human nature lead and solidify solutions that promote interventionism and capture.

Per usual, great speech. I just have a couple of questions:
1) You spend some time talking about how promoting inflation is in the Fed’s best interest; isn’t it also reasonable to say that promoting inflation is in the broader economy’s best interest in terms of easing the adjusting of sticky prices (i.e. wages)?
2) I’m having trouble seeing your connection for the government created cartel in rating agencies leading to poor/inflated ratings; isn’t the issue of over-rated securities much more easily explained by originators paying for ratings on their securities? Taking this a few steps further, so long as the mechanism for payment for ratings services remained the same, wouldn’t competition for bank/originator services led to even greater inflating of securities’ ratings?


1) No. Inflation, understood as an excess supply of money, is always bad. Sticky prices are a good reason to avoid DEflation, but not an argument for INflation. Using inflation to offset sticky wages is thinking too much in aggregates. Inflation will discoordinate all of the individual wages that are needed for labor market coordination in the name of changing some aggregate measure of wages.

2. Before the cartel, the buyers of securities, not the originators, paid for the agencies' services. It was the advent of the various regulations that created the cartel and gave them sole responsibility for rating particular kinds of securities that led them to serve the sellers not the buyers. So it was the cartelization process itself that turned around the relationship.

Very insightful, thanks!

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