Reddit reviews The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression
We found 7 Reddit comments about The Midas Paradox: Financial Markets, Government Policy Shocks, and the Great Depression. Here are the top ones, ranked by their Reddit score.
It wasn't. Oversimplifying but the most convincing account, IMO, is that (a) the Fed allowed the money supply to collapse, which greatly reduced nominal spending, which results in large unemployment effects; and (b) a lot of FDR's policies directly resulted in higher wage rigidity than would have otherwise been the case, which prolonged the period to recovery. See Scott Sumner's The Midas Paradox for a great account of it.
So, a week into the new year, my Christmas gifts arrived: Shure SE215s and Scott Sumner's book, The Midas Paradox.
I plan on reading and reviewing Scott's book soon.^^(TM)
Any thoughts on Sumner's recent book, The Midas Paradox? I enjoyed it a lot.
A better financial history type book is the Reinhart & Rogoff one.
As long as you are building a list, let me share my to-read list after I finish reading my current book:
You should also read Piketty's book and Bernanke's book but I didn't list them since I have read them and assume you have read them too.
I tend to only read and alternate between history and econ books for my pop/non-academic reading. I've only listed the pop-econ books since I assume that's what you are after.
Has anyone else read any of the books on my list? Are some terrible? If so let me know so I can avoid them.
> Financial Bubble - then it was stocks, now it is student loan debt, and likely housing again.
SLABS was never the scale of the problem the mortgage backed security market was, there has never been any pretense it was secured against anything so was never packaged in the same way, and what problem did exist went away when student loans were federalized in 2009.
> Deregulation - little regulation of the market prior to 1929
The depression was caused by the fed making a policy mistake and then a series of spectacularly bad fiscal policy decisions.
The '29 recession should have been relatively short, but relatively deep, the fed raised rates after the crash which sent the economy in to a death spiral. It began recovering towards the end of '32 only to falter again due to bad fiscal policy, started recovering again in '36 only to slip back in to recession in '37 due to TD's gold steralization program and then either recovered in 1941, 1945 or 1949 depending on how you look at the data.
Scott Sumner has a recent book building upon earlier work which covers this in detail.
> deregulation caused the crash in '08
Outside of econ this seems to be a popular hypothesis but the problem was bad regulation not insufficient regulation. The efficacy of regulation matters not how heavy the burden is. Canada is a good example of this in practice, a fraction of our regulatory burden but they are considered to have the safest banking system in the world as they focus on outcomes not the appearance of doing something.
The federal government created MBS's because The '33 Banking Act prevented commercial banks from securitizing debt like they could everywhere else in the world. The removal of mandatory separation (while retaining operational firewalls) brought us in line with the rest of the world, the only other countries to ever have such a restriction on banking are those with Islamic banking systems. Banks diversification, and indeed concentration, both improve banking safety. The US keeps having trouble with this precisely because are banks are typically small and poorly diversified but the public & political response seems to always be in the opposite direction.
While I doubt the GOP will suggest sensible changes simply reducing regulatory burden does not imply a corresponding fall in regulatory efficacy.
> Today we face a liquidity trap that would severely limit the Fed's ability to respond to such a crisis.
The fed are not subject to liquidity restrictions, they can create any amount of money they need to in order to respond to a crisis. Being at the ZLB makes the choice more QE but given how effective that tool was in the last recession there isn't much reason to worry from a monetary policy perspective.
> Tariffs - During the Depression, the Hawley-Smoot Act was disastrous. Trump has made similar policies a cornerstone of his platform.
Tariffs would slow down growth domestically but the most damaging effects would be developing economies, TPP would have boosted Vietnam's output by ~1.4% a year for instance, which damages our growth in the future (many decades) when they would grow to the point of demanding our goods.
While I am worried about Trump's insane ideas about trade I am a little hopeful that someone from USTR talks to him about TPP and NAFTA before he does something stupid. If he is worried about China then he should support TPP, one of the major goals of TPP was to force both China & India to play nice.
> Today, low wages and a high cost of housing and education have taken a similar toll.
Other expenses like transport, food and clothing have fallen sufficiently in price to offset increasing costs of healthcare, education and housing (see this for some pretty pictures). On education the premium to education (wage gains to those with degrees) continues to increase faster then the cost of education.
This covers the oft-cited multiple decade stagnation in income.
As a more general note CPI is not a useful tool for understanding average or individual price experiences in most cases, its designed to understand changes in prices between reporting periods and overestimates price rises for most consumers. This paper covers some of the income based differences, also see this for some more detailed discussion on the CPI.
http://www.amazon.co.uk/Midas-Paradox-Depression-Economic-Instability/dp/1598131508/ref=sr_1_1?ie=UTF8&qid=1452277093&sr=8-1&keywords=scott+sumner
Scott Summers' Blog
He also wrote a really interesting (but pretty dense) book on the great depression.