Inflation and the Fed: A Follow-Up

Ryan Cooper suggests that we don't really know if the Fed can significantly raise inflation:

Here's the thing: this is pretty much what the Bank of Japan has been doing for the past few years. The chart on the right shows QE in Japan compared to the US over the past six years (indexed to 100 at the end of the Great Recession). The BOJ balance sheet has more than quadrupled since then, and the inflation rate in Japan is....

-0.4 percent.

Since this hasn't worked—and since doubling the Fed's balance sheet in 2013 has produced declining inflation—it seems likely the Fed would have to increase its balance sheet by, say, 8x, to have any chance of producing substantially higher inflation. In dollars, that means $28 trillion in additional asset purchases. They would run out of treasuries to buy long before they hit that mark and would start gobbling up every corporate and MBS bond in sight. That's really not a tenable suggestion.

This is all just back-of-the-envelope stuff, not meant to be taken too literally. For one thing, we're starting off with a higher inflation rate than Japan did. Still, this gives you a rough idea of what the Fed is up against. In theory, they can do endless helicopter drops until they get the inflation they want. In practice, it's a lot less clear they truly have a plausible path to 3 or 4 percent inflation.

Greg Ip in the Wall Street Journal today:

Central banks have shown the will to hit their growth and inflation targets. But do they have the way?

That question is more pointed after the Bank of Japan on Wednesday announced two new central bank firsts. It now wants inflation not just to meet its 2% target, but to overshoot it. And it will now target not just short-term interest rates, but long-term government bond yields....Japan’s monetary travails matter to all central banks since so many countries are coming to resemble Japan, with slow growth and too-low inflation—factors that make it difficult for an economy to tolerate interest rates much above zero.

I suspect we're learning something new: central banks can squash inflation by raising interest rates and causing a recession, but no central bank has ever tried to raise inflation. It's simply been assumed that they have the power to affect inflation in both directions. But they don't—at least, not in practice. I assume that if a central bank committed to flooding the economy with enough money it could, eventually, raise inflation rates, but no central bank is willing to go that far. And since it's never been done, we don't actually know for sure that it would work anyway. It might have side effects that trash the economy so badly that it wouldn't be worth doing.

Pretty much every central bank in the developed world would like inflation to be higher, but not a single one has been successful at doing it. This suggests to me that in practical terms, inflation is a one-way ratchet. Central banks can reduce it, but they can't raise it. I'm not entirely sure what this means, but economists need to come to grips with this apparent fact and figure it out.

Donald Trump Is Still a Birther

Ben Garbarek, a local news reporter in Toledo, asked Donald Trump today what it was that changed his mind about President Obama's birthplace:

BG: This announcement earlier this week with you saying that you believe President Obama was in fact born in the United States, after all the years where you've expressed some doubt, what changed?

Trump: Well I just wanted to get on with, I wanted to get on with the campaign. A lot of people were asking me questions. We want to talk about jobs. We want to talk about the military. We want to talk about ISIS and get rid of ISIS. We want to talk about bringing jobs back to this area because you've been decimated so we just wanted to get back on the subject of jobs, military, taking care of our vets, etc.

He also asked Trump about his foundation:

BG: And with the Washington Post report out this week about the Trump Foundation. Could you explain to people why you may have used some charitable donations for personal uses?

Trump: The foundation is really rare. It gives money to vets. It's really been doing a good job. I think we put that to sleep just by putting out the last report."

This is all the usual gibberish, barely worth taking note of. Except for one thing: Trump must know that he's going to have to answer these questions in the debate on Monday. Even if Lester Holt turns out to be a complete doofus, he's going to insist on Trump actually addressing the substance of these issues. When did you change your mind about birtherism? What changed your mind? Why did you use a charitable foundation to pay business expenses? Have you done it more than the two times the Post caught you at?

I know Trump never does anything as lame as prepping for a debate, but his staff must at least be mulling over what kind of answer he's going to give to these questions. This kind of huffing and puffing isn't going to cut it on live national television.

The Jackie Robinson of Tennis Is....

The Washington Post has a list of "36 Must-See Items" at the newly-opened Museum of African American History and Culture, and the accompanying picture included a tennis racket. I clicked the link, hoping it was the right tennis racket, and was pleased to see that it was:

I don't want to pretend that Althea Gibson has been lost to history or anything like that, but she unquestionably plays second fiddle to Arthur Ashe when the topic is African-American tennis players. But with all due respect to Ashe, who was a great player and a champion of civil rights, Gibson did it all first. She broke into tennis in 1950, fifteen years before Ashe. She won five grand-slam singles titles to Ashe's three, and almost certainly would have won many more if she'd been wealthy enough to continue playing amateur tennis. She was the Jackie Robinson of tennis, but there's no Althea Gibson Stadium at the National Tennis Center.

As I said, Gibson is hardly invisible. Nonetheless, she deserves to be a lot better known than she is.

My One Wish For the First Debate

Don't worry, Lester, this is nothing partisan. Feel free to grill Hillary Clinton about her emails and the Clinton Foundation and so forth. And by all means, grill Trump about the Trump Foundation and his lie about opposing the Iraq War and when he decided Obama was born in the US and all the other Trumpisms America wants to hear about.

But here's my wish: do it in the second half-hour. Debate hosts have a habit of wanting to come out of the gate with a "tough" question that demonstrates what hard-hitting journalists they are, and that usually means some kind of edgily worded question about either a scandal or a "scandal." Instead, let's show that policy is what's most important. You can still ask tough questions, probing around in the details the candidates would rather not address, but make the first half hour all about the actual, concrete plans they have for their presidency. There's plenty of time for the zinger-fest later.

That's it. That's my wish list.

This seems like pretty good news for the Clinton camp:

These haven't all shown up in the poll aggregates yet, but they will soon.

Help Me Solve the Mystery of Question 25

Ladies and gentlemen, I present question 25 from the latest WaPo/ABC News poll:

Golly, I wonder where people got that idea from? In over a year of investigation, there's been no evidence of a Foundation donor getting anything from Hillary Clinton more important than a better seat at a State Department luncheon. And yet 59 percent of Americans have come away with the impression that both the Foundation and Hillary Clinton personally are corrupt.

How could this be? It's a chin scratcher, all right.

The Shorenstein Center's Thomas Patterson has analyzed Hillary Clinton's press coverage during the month of the two political conventions. He presents his findings today in the LA Times:

If Clinton loses, blame the email controversy and the media

My analysis of media coverage in the four weeks surrounding both parties’ national conventions found that her use of a private email server while secretary of State and other alleged scandal references accounted for 11% of Clinton’s news coverage in the top five television networks and six major newspapers, including the Los Angeles Times. Excluding neutral reports, 91% of the email-related news reports were negative in tone. Then, there were the references to her character and personal life, which accounted for 4% of the coverage; that was 92% negative.

....How about her foreign, defense, social or economic policies? Don’t bother looking. Not a single one of Clinton’s policy proposals accounted for even 1% of her convention-period coverage; collectively, her policy stands accounted for a mere 4% of it. But she might be thankful for that: News reports about her stances were 71% negative to 29% positive in tone. Trump was quoted more often about her policies than she was. Trump’s claim that Clinton “created ISIS,” for example, got more news attention than her announcement of how she would handle Islamic State.

Luckily, the online version includes a link to Patterson's report. It tells a different story. During the period Patterson studied, Trump's news coverage was 75 percent negative, while Clinton's was 56 percent negative. Overall, the media was harsher toward Trump than it was toward Clinton.

Now, there are different kinds of negative. Trump got a lot of negative coverage for running a chaotic convention, which is the kind of thing that blows over quickly. Clinton got a lot of negative coverage over Emailgate, which is the kind of thing that sets a permanent tone. And Patterson points out that a full 8 percent of Clinton's coverage was about her emails, by far the biggest category for a single issue.

We also don't know the relative placement of all this coverage. Negative coverage on page A12 is a lot different than negative coverage on the front page.

Nonetheless, the fact remains that Trump apparently got significantly more negative coverage than Clinton. What's frustrating for a lot of Democrats, I think, is that Trump's voluminous negative coverage doesn't seem to do him any harm. And that's largely because of a disconnect about what counts as "negative." In the normal world inhabited by journalists, lying, cheating, bullying, insulting, and general ignorance are considered bad things. In Trumpworld they're good things. His followers seem to agree that he's a bastard, but by God, he's going to be their bastard.

So, oddly enough, the more negative coverage Trump gets, the better his supporters like him. Whether the small number of undecided voters see things the same way as Trump's fans is unknown, but the entire election might hinge on it.

Kellyanne Conway sure has taken to the job of idiot Trump apologist with gusto:

Gee, if a for-profit business gets someone else to pay its fine, how on earth does that help the business? It's so confusing. This Fahrenthold guy is just obsessed with Donald Trump. What's his deal, anyway?

Oh, and Donald writes secret checks to help people all the time. He's just too shy to let anyone know about it.

It's just lie after lie after lie. But maybe I'm being unfair. If you've been the recipient of Trump's secret largesse to ordinary folks, please let me know. It's a little surprising that none of you have come forward over the past year, but bygones. Now's your chance.

Who Do Republicans Listen To?

The lovely folks at the Princeton University Press sent me a copy of the 2nd edition of Larry Bartels' Unequal Democracy today. "Completely revised and updated," they promise. I haven't read it yet, of course, but I figured I'd browse through all the charts and find something interesting to post. Here's one:

When Democrats took control of Congress in 2007, one of their first initiatives was a bill to raise the minimum wage, which had been eroding downward for more than a decade. Republicans refused to support an increase unless it was paired with a tax break for small businesses, and they made this stick by filibustering the bill.

This is despite the fact that literally everyone supported raising the minimum wage except for one tiny group: well-off Republicans, who were slightly opposed. Nevertheless, this tiny group controlled the entire process, with Republicans doing their bidding even though 70 percent of their own party wanted the minimum wage to go up. In the end, small businesses got their tax break and the bill passed. It was the only way to get Republican legislators to pay attention to the will of literally the entire country except for rich Republicans.