Macro Musings

George Selgin, director of the Cato Institute’s Center for Monetary and Financial Alternatives, returns to *Macro Musings* to discuss his new proposal to reform how the Fed conducts open-market operations. He proposes abolishing the current primary dealer system and expanding the Fed’s number of counterparties. David and George also discuss the Fed’s plans for 2017 and whether it will seek to reduce its large balance sheet. David’s blog: macromarketmusings.blogspot.com/ George Selgin’s Cato archive: www.cato.org/people/george-selgin George Selgin’s Alt-M archive: https://www.alt-m.org/author/selgin/ (contains George’s monetary policy primer posts) David’s Twitter: twitter.com/DavidBeckworth George Selgin’s Twitter: twitter.com/georgeselgin Related links: *Money: Free and Unfree* by George Selgin https://www.amazon.com/Money-Free-Unfree-George-Selgin/dp/1944424296 “Reforming Last-Resort Lending: The Flexible Open-Market Alternative” by George Selgin (as part of *Prosperity Unleashed: Smarter Financial Regulati

Steve Hanke is a professor of applied economics and co-director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore. He is also a senior fellow and director of the Troubled Currencies Project at the Cato Institute. Steve joins the show to discuss his work on the history of hyperinflations. David and Steve discuss what exactly constitutes hyperinflation as well as historical examples of hyperinflation from 1940s Hungary to present-day Venezuela. David’s blog: http://macromarketmusings.blogspot.com/ Steve Hanke’s Cato profile: https://www.cato.org/people/steve-hanke David’s Twitter: @DavidBeckworth Steve Hanke’s Twitter: @steve_hanke Related links: Venezuela Enters the Record Book: the 57th Entry in the Hanke-Krus World Hyperinflation Table (contains full list of world hyperinflations) https://object.cato.org/sites/cato.org/files/articles/hanke-sae-december-2016.pdf

Jeffrey Frankel is a professor and economist at Harvard University and the director of the Program in International Finance and Macroeconomics at the National Bureau of Economic Research (NBER). He joins the show to discuss serving on the NBER’s Business Cycle Dating Committee, which officially declares the start and end of recessions. David and Jeff also discuss the monetary history of the Plaza Accord, an international agreement in 1985 to devalue the U.S. dollar. Jeff also shares his thoughts on globalization in the past few decades and current-day challenges facing it. David’s blog: http://macromarketmusings.blogspot.com/ Jeff Frankel’s Harvard profile: https://www.hks.harvard.edu/about/faculty-staff-directory/jeffrey-frankel Jeff Frankel’s NBER publications: http://www.nber.org/authors/jeffrey_frankel David’s Twitter: @DavidBeckworth Related links: “Globalization of the Economy” by Jeffrey Frankel https://www.hks.harvard.edu/fs/jfrankel/NyeGlobWPwFigPost.pdf “Globalization and Chinese Growth: End of Tren

Jason Furman is a senior fellow at the Peterson Institute for International Economics. Previously, he served as the Chairman of the Council of Economic Advisers under President Obama. He joins the show to reflect on his time in the Obama Administration. Among other things, Jason and David discuss the efficacy of fiscal policy, the fiscal multiplier, and whether the platinum coin was ever seriously considered. They also discuss the problem of declining male labor force participation, its causes, and possible solutions. David’s blog: http://macromarketmusings.blogspot.com/ Jason Furman’s PIIE profile: https://piie.com/experts/senior-research-staff/jason-furman David’s Twitter: @davidbeckworth Jason Furman’s Twitter: @jasonfurman Related links: “The New View of Fiscal Policy and Its Application” by Jason Furman http://voxeu.org/article/new-view-fiscal-policy-and-its-application “The Long-Term Decline in US Prime-Age Male Labor Force Participation” by Jason Furman http://voxeu.org/article/long-term-decline-us-pri

Larry White is a professor of economics at George Mason University and has written widely on monetary theory, free banking, and the Austrian School of Economics. Today, he joins the show to discuss the recent demonetization efforts in India to crack down on corruption. White argues that India’s efforts to end the circulation of large notes and begin the circulation of new notes is having pernicious effects on the Indian population. He and David also discuss Austrian Business Cycle Theory, how this theory was developed by great economists such as Ludwig von Mises, and how the theory may have played a role in the lead up to the Great Recession. David’s blog: http://macromarketmusings.blogspot.com/ Larry White’s GMU profile: http://economics.gmu.edu/people/lwhite11 Larry White’s Alt-M archive: https://www.alt-m.org/author/white/ David’s Twitter: @davidbeckworth Larry White’s Twitter: @lawrencehwhite1 Related links: “India’s Currency Cancellation: Seigniorage and Cantillon Effects” by Larry White and Shruti Rajag

Tim Duy is a professor of economics at the University of Oregon and a widely read “Fed Watcher.” Today, he joins the show to discuss writing on the Federal Reserve and how to interpret statements from Fed officials. In particular, Tim stresses the importance of the Fed Chair’s post-FOMC meeting press conferences. He also warns against taking too much stock in FOMC minutes. David and Tim also discuss the proper role of the Fed’s balance sheet in stabilizing monetary policy. David’s blog: http://macromarketmusings.blogspot.com/ Tim Duy’s homepage: http://pages.uoregon.edu/duy/ Tim’s “Fed Watch” blog: http://economistsview.typepad.com/timduy/ Tim’s Bloomberg archive: https://www.bloomberg.com/view/contributors/AC6KX2KfHjM/timothy-a-duy David’s Twtter: @davidbeckworth Tim’s Twitter: @TimDuy

Hester Peirce is a Senior Research Fellow at the Mercatus Center at George Mason University and director of Mercatus’ Financial Markets Working Group. She joins the show to discuss the new Mercatus book, *Reframing Financial Regulation: Enhancing Stability and Protecting Consumers*, which she coedited. The book examines the problems with the United States’ current financial regulation regime (including the Dodd-Frank Act) and offers alternative policies that rely less on a centralized regulation and more on market discipline. David’s blog: http://macromarketmusings.blogspot.com/ Hester’s Mercatus profile: https://www.mercatus.org/hester-peirce David’s Twitter: @davidbeckworth Hester’s Twitter: @HesterPeirce *Reframing Financial Regulation: Enhancing Stability and Protecting Consumers* edited by Hester Peirce and Benjamin Klutsey https://www.mercatus.org/publications/reframing-financial-regulation

Sebastian Mallaby is a senior fellow at the Council on Foreign Relations and a contributing columnist for the Washington Post. Today, he joins the show to discuss his new book, *The Man Who Knew: the Life and Times of Alan Greenspan,* a biography of the former Fed Chairman. Sebastian describes Greenspan’s humble origins, his rise to power, and his public career that spanned several decades. David and Sebastian discuss the degree to which Greenspan should be praised for the economic stability of the Great Moderation and blamed for the Great Recession. They also chat about Greenspan’s musical talents, his relationship with Ayn Rand, and his reputation as a “ladies man.” David’s blog: http://macromarketmusings.blogspot.com/ Sebastian’s bio: http://www.cfr.org/experts/financial-crises-regional-security-economics/sebastian-mallaby/b4452 Sebastian’s Washington Post archive: http://www.cfr.org/experts/financial-crises-regional-security-economics/sebastian-mallaby/b4452 David’s Twitter: @davidbeckworth Sebastian Mall

Eswar Prasad is the Tolani Senior Professor of Trade Policy and Professor of Economics at Cornell University and a senior fellow at the Brookings Institution. He joins the show to discuss his new book, *Gaining Currency: The Rise of the Renminbi,* which examines the rise of China’s currency, the renminbi (RMB), and its role in global finance. Prasad argues that the RMB is on the road to becoming a reserve currency, but it will not challenge the US dollar’s dominance as a safe haven currency. David and Eswar also discuss China’s interesting history as the first country with paper money and a fiat currency. David’s blog: http://macromarketmusings.blogspot.com/ Eswar’s Cornell homepage: http://prasad.dyson.cornell.edu/ Eswar’s Brookings homepage: https://www.brookings.edu/experts/eswar-prasad/ David’s Twitter: @davidbeckworth Eswar’s Twitter: @EswarSPrasad Related links: *Gaining Currency: The Rise of the Renminbi* by Eswar S. Prasad https://global.oup.com/academic/product/gaining-currency-9780190631055?cc=us&am

Jesus Fernandez-Villaverde is a professor of economics and director of graduate studies of economics at the University of Pennsylvania. He joins the show to discuss both his extensive work in economic history as well as macroeconomic modeling. David and Jesus discuss the economic history of Germany in the 1920s and 1930s and the events that led to the rise of the Nazis as well as more recent events such as the struggles facing the Eurozone. They also discuss debates surrounding the usefulness of current-day macroeconomic models. David’s blog: http://macromarketmusings.blogspot.com/ Jesus’ webpage: http://economics.sas.upenn.edu/~jesusfv/ David’s Twitter: @davidbeckworth Related links: “The econometrics of DSGE models” by Jesus Fernandez-Villaverde http://economics.sas.upenn.edu/~jesusfv/econometricsDSGE.pdf “Computing DSGE Models with Recursive Preferences and Stochastic Volatility” by Dario Caldara, Jesus Fernandez-Villaverde, Juan Rubio-Ramirez, and Wen Yao https://www.federalreserve.gov/pubs/feds/2012/2012

Gauti Eggertsson is a professor of economics at Brown University. Previously, he worked at the research departments at the International Monetary Fund and the Federal Reserve Bank of New York. He joins the show to discuss his work on the history of liquidity traps and extremely low and even negative interest rates. He and David discuss examples from the Great Depression to Japan in the 1990s to today. Gauti also shares his thoughts on the Fed’s quantitative easing (QE) program and why it failed to return the economy back to normal. David’s blog: http://macromarketmusings.blogspot.com/ Gauti’s Brown University homepage: https://sites.google.com/site/gautieggertsson/home David’s Twitter: @davidbeckworth Related links: “The Zero Bound on Interest Rates and Optimal Monetary Policy” by Gauti Eggertsson and Michael Woodford https://www.brookings.edu/bpea-articles/the-zero-bound-on-interest-rates-and-optimal-monetary-policy/ “Great Expectations and the End of the Depression” by Gauti Eggertsson https://www.newyorkfe

Anat Admati is the George G.C. Parker Professor of Finance and Economics at Stanford University’s Graduate School of Business and co-author of the book, *The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It.* She joins the show to discuss her book, which argues that America’s banking system continues to be dangerously fragile even in the aftermath of the Dodd-Frank Act. Anat argues that banks take on too much leverage and that they should be required to hold more equity. David’s blog: http://macromarketmusings.blogspot.com/ Anat’s Stanford profile: https://www.gsb.stanford.edu/faculty-research/faculty/anat-r-admati David’s Twitter: @davidbeckworth Anat’s Twitter: @anatadmati Related: *The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It* by Anat Admati and Martin Hellwig http://bankersnewclothes.com/ Anat’s paper, “It Takes a Village to Maintain a Dangerous Financial System” http://bankersnewclothes.com/wp-content/uploads/2016/06/Takes-a-Village-May-2016.pdf

In this week’s special episode recorded in front of a live audience, David interviews the renowned monetary economist, Allan Meltzer. Meltzer, a professor of political economy at Carnegie Mellon University and one of the founders of the monetarist school of thought discusses his long career in academia and policy. David and Allan also discuss current central bank policy, both in the United States and abroad, and how monetary policy can become more rules-based. Finally, Allan also argues many of our current economic problems are real, not nominal, and he hopes a Trump Administration can address some of these woes. Note: this episode took place before the December 2016 interest rate hike by the Federal Reserve. David’s blog: http://macromarketmusings.blogspot.com/ Allan Meltzer’s bio: http://tepper.cmu.edu/our-faculty-and-research/about-our-faculty/faculty-profiles/am05/meltzer-allan David’s Twitter: @DavidBeckworth Related links: “A History of the Federal Reserve (Volumes I and II)” by Allan Meltzer (Universit

Ylan Mui covers White House economic policy for the Washington Post. Previously, she covered the Federal Reserve. Today, she joins the show to discuss what it is like to attend Fed press conferences and write on the technical nuances of Fed policy. David and Ylan also discuss what a Trump Administration might mean for economic issues ranging from trade to infrastructure spending to monetary policy. David’s blog: http://macromarketmusings.blogspot.com/ Ylan’s archive: https://www.washingtonpost.com/people/ylan-q-mui/ David's Twitter: @davidbeckworth Ylan's Twitter: @ylanmui

In this week’s special episode, David discusses the economics of Christmas with Laura Birg, a post-doctoral researcher at the University of Goettingen, and Anna Goeddke, a professor of economics at the ESB Business School at Reutlingen University. Topics include the dead-weight loss of gift-giving, Christmas’ effects on seasonal GDP, increases in alcohol consumption, and the effect of secularization on Christmas celebrations. [Note: We will be taking a break next week for the holidays, but we will be back the following Monday, January 2, with the Washington Post’s Ylan Mui!] David’s blog: macromarketmusings.blogspot.com/ David’s Twitter: @davidbeckworth Anna’s VoxEU profile: http://voxeu.org/users/annagoeddeke0 Anna’s Twitter: @annagoeddeke Laura’s University of Goettingen profile: https://www.uni-goettingen.de/en/362254.html Related links: “Christmas Economics – A Sleigh Ride” by Laura Birg and Anna Goeddke (2014) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2526055 “The Seasonal Cycle and the Busines

In this week’s special episode, David compares and contrasts the economics of the Star Wars and Star Trek universes. He is joined by Zachary Feinstein, an Assistant Professor at Washington University in St. Louis, and Manu Saadia, author of *Trekonomics.* Topics include the economic fallout from the destruction of the Death Star, the absence of money in Star Trek, and whether a universe can really eliminate scarcity. David’s blog: http://macromarketmusings.blogspot.com/ David’s Twitter: @davidbeckworth Manu’s *Trekonomics* website: https://trekonomics.tumblr.com/ (you can order the book, *Trekonomics,* here as well) Manu’s Twitter: @trekonomics Zach’s faculty profile: https://sites.wustl.edu/fictionomics/ Zach’s Twitter: @FictionomicsWU Related links: “It’s a Trap: Emperor Palpatine’s Poison Pill” by Zachary Feinstein https://arxiv.org/pdf/1511.09054.pdf “The Case for the Empire” by Jonathan Last http://www.weeklystandard.com/the-case-for-the-empire/article/2540

Peter Conti-Brown is an Assistant Professor at The Wharton School of the University of Pennsylvania. He joins the show to discuss his new book, *The Power and Independence of the Federal Reserve,* which exams the evolution of the Federal Reserve and what central bank independence really means. Peter also shares his thoughts on what a Trump presidency might mean for monetary policy. David’s bio: http://macromarketmusings.blogspot.com/ Peter’s UPenn bio: https://lgst.wharton.upenn.edu/profile/30645/ David’s Twitter: @davidbeckworth Peter’s Twitter: @PeterContiBrown Related links: *The Power and Independence of the Federal Reserve* by Peter Conti-Brown https://www.amazon.com/Power-Independence-Federal-Reserve/dp/0691164002 *America’s Bank: The Epic Struggle to Create the Federal Reserve* by Roger Lowenstein https://www.amazon.com/Americas-Bank-Struggle-Federal-Reserve/dp/1594205493

JP Koning is an economic consultant and writer. He joins the show to discuss fascinating stories in monetary history in Libya, Zimbabwe, and Switzerland. He also shares his thoughts on Blockchain technology and Fedcoin, a hypothetical cryptocurrency stabilized by the Federal Reserve. David’s blog: http://macromarketmusings.blogspot.com/ JP’s blog “Moneyness”: http://jpkoning.blogspot.com/ David’s Twitter: @davidbeckworth JP’s Twitter: @JP_Koning Related links: “What Happens When a Central Bank Splits in Two?” by JP Koning http://jpkoning.blogspot.com/2016/06/what-happens-when-central-bank-is-split.html “A Modern Example of Gresham’s Law” by JP Koning http://jpkoning.blogspot.com/2016/11/a-modern-example-of-greshams-law.html “Fedcoin” by JP Koning http://jpkoning.blogspot.ca/2014/10/fedcoin.html

Mark Calabria is the director of Financial Regulation Studies at the Cato Institute. Before joining Cato in 2009, he worked as a member of the senior staff of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. He joins the show to discuss working on Capitol Hill amidst the 2008 financial crisis. Mark also discusses his recent Cato paper where he argues insights from behavioral economics suggest monetary policy should be more rules-based. David’s blog: macromarketmusings.blogspot.com/ Mark’s Cato Institute profile: https://www.cato.org/people/mark-calabria Mark’s Alt-M archive: http://www.alt-m.org/author/calabria/ David’s Twitter: @davidbeckworth Mark’s Twitter: @markcalabria Related links: “Yes, the Fed has a Diversity Problem” by Mark Calabria https://www.cato.org/blog/yes-federal-reserve-has-diversity-problem “Behavioral Economics and Fed Policymaking” by Mark Calabria https://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2016/9/cj-v36n3-6.pdf

Roger Farmer is a Distinguished Professor of Economics at UCLA. He joins the show to discuss his new book, Prosperity for All: How to Prevent Financial Crises. He and David also discuss his criticism of the natural rate of unemployment hypothesis, an important proposition in mainstream macroeconomics. David’s blog: http://macromarketmusings.blogspot.com/ Roger’s personal website: http://www.rogerfarmer.com/ David’s Twitter: @davidbeckworth Roger’s Twitter: @farmerrf Related links: Roger’s UCLA profile http://www.econ.ucla.edu/faculty/regular/Farmer.html Prosperity for All: How to Prevent Financial Crises by Roger Farmer https://global.oup.com/academic/product/prosperity-for-all-9780190621438?cc=us&lang=en& “The Natural Rate Hypthesis: An Idea Past Its Sell-by Date” by Roger Farmer http://www.nber.org/papers/w19267