Wednesday, August 17, 2011

Quotes of the day

No joke: Presidential candidate Rick Perry and comedian Stephen Colbert, who last week barraged Iowa voters with advertisements urging voters to support “Rick Parry,” shared the same political committee treasurer – until they didn’t. Salvatore Purpura, who has represented numerous political committees as treasurer over the years, told POLITICO that he resigned on Thursday as treasurer of Colbert’s super PAC, Americans for a Better Tomorrow, Tomorrow.--DAVE LEVINTHAL

So, no disrespect Gov [Perry], but when you’re getting your Keynes on like that, no need to hide it behind all that anti-gov’t rhetoric.--Jared Bernstein

Would Keynesian stimulus spending work only when it came as a surprise? Or only when the spending was outside the range of prior business experience? Keynesian economists have not even begun to answer these questions. For now, Keynesian theory has so many exceptions that we might as well discard it.--Casey Mulligan

It sounds like this time the [People's Bank of China] might be pretty serious about diversifying their risk away from USG bonds, right? Let’s leave aside the fact that every six months we have heard the same thing for the past several years, and nothing has happened, shouldn’t we nonetheless be worried? Won’t reduced PBoC purchases be hugely disruptive to the US economy and to the US Treasury markets? No, they won’t. There is so much nonsense still being said about this, even by economist who should know better, that I thought I would try to address what it would mean if the PBoC were actually serious and not simply making noises aimed at domestic political constituents. First of all, remember that the PBoC does not purchase huge amounts of USG bonds because it has a lot of money lying around and doesn’t know what to do with it. Its purchase of USG bonds is simply a function of its trade policy. You cannot run a current account surplus unless you are also a net exporter of capital, and since the rest of China is actually a net importer of capital, the PBoC must export huge amounts of capital in order to maintain China’s trade surplus. In order the keep the RMB from appreciating, the PBoC must be willing to purchase as many dollars as the market offers at the price it sets. It pays for those dollars in RMB. It is able to do so by borrowing RMB in the domestic markets, or by forcing banks to put up minimum reserves on deposit. What does the PBoC do with the dollars it purchases? Because it is such a large buyer of dollars, it must put them in a market that is large enough to absorb the money and – and this is the crucial point – whose economy is willing and able to run a large enough trade deficit.--Michael Pettis

If you look at the box score from last night’s baseball game, there’s a lot of risk in concluding which player is the best hitter on the team based on what you find in that one box score. We’re very used to seeing, say, player performance vary from game to game and making conclusions about the most productive player based on a large sample of observations, likewise with the stock market. We know that the stock market varies not only day-to-day, but hour-to-hour and minute-to-minute, and we can watch that variation online almost in real-time…. There is a lot of risk in drawing conclusions about what the Dow Jones industrial average index value will be 10 years from now based on what happened yesterday… So again, the current state, or the most recent departure, is not a rational basis for making conclusions about the long-term trend or the long-term state of a system that’s noisy.--Noah Diffenbaugh

Enumerating a long list of disparate things that may happen, without any probabilities, may work for Nouriel Roubini, but he's a charlatan: here he is last week taking credit for his client switching to cash a couple months ago, he doesn't mention he has been suggesting investors go to cash since 1990, always for a slew of reasons (though Lawrence Summers is here giving props to Roub for calling the housing crisis). I have seen reports that endlessly enumerate risks many times in large corporations, and they are highly correlated with people who either are too afraid to make a mistake, or profoundly do not understand their job.--Eric Falkenstein

As expected, the group members rated the most narcissistic leaders as most effective. But they were wrong. In fact, the groups led by the greatest egotists chose the worse candidate for the job. Says Nevicka, “The narcissistic leaders had a very negative effect on their performance. They inhibited the communication because of self-centeredness and authoritarianism.”--Association for Psychological Science

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