Monday, January 26, 2009

Cochrane on Fiscal Stimulus

A thought-provoking piece by University of Chicago economist John Cochrane. His bottom line:
cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is a plausible diagnosis and a logically consistent argument under which fiscal stimulus could help: We are experiencing a strong portfolio and precautionary demand for government debt, along with a credit crunch. People want to hold less private debt and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y want to save, and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y want to hold Treasuries, money, or government-guaranteed debt. However, this demand can be satisfied in far greater quantity, much more quickly, much more reversibly, and without cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 danger of a fiscal collapse and inflation down cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 road, if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Fed and Treasury were simply to expand cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir operations of issuing treasury debt and money in exchange for high-quality private debt and especially new securitized debt.
Updates: Phill Swagel, who until recently was Assistant Secretary of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Treasury for Economic Policy, emails me this observation:
The bit you posted from John Cochrane is precisely what cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 TALF is about -- cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 joint Treasury-Fed facility aimed at securitized assets (consumer lending at first, but it could be scaled up to non-agency RMBS and CMBS).

Thanks, Phill.

Around cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 econoblogosphere, John's piece is proving controversial. Harvard's Dani Rodik calls it cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 "best argument against a conventional fiscal stimulus that I have seen" and notes "since it is also very well written every macroeconomics student should read it in full." Meanwhile, Berkeley's Brad DeLong accuses John of making "an elementary, freshman mistake."