Should the Fed take over the IMF?

[opebo]

Given the unfortunate globalized situation of the world economy, in fact the Fed can control all other central banks because of the interlocking system, and, by extension, the IMF.

If the Fed were to monetize the Greek debt, the Euro area would have to inflate by a similar amount (in theory) or face appreciation of the Euro, which is after all destructive to their economy.  Basically the Fed can do what it likes, and other central banks have to follow precisely.

So, I would suggest that the Fed print enough dollars to maintain the Greek debt, and to intervene as necessary to equalize yields on Spanish, Italian, French, etc. debt (to German yields).

[Wonkish1]

People that are voting yes to this question shouldn't be taken seriously in a sub forum like this.

[ag]

Agreed. This is a spectacularly stupid post. However, unfortunately, I've committed myself not to use stupidity as criterion for removing posts on this board.

[Wonkish1]

Agreed. This is a spectacularly stupid post. However, unfortunately, I've committed myself not to use stupidity as criterion for removing posts on this board.

Ag you still haven't answered what type of micro econ professor you are? What kinds of classes do you teach? Is it all Intro to Micro or are you more in a sub field?

[Senator Sbane]

I agree with the above posts. Anyone voting yes should be ashamed of themselves.

[ag]

Agreed. This is a spectacularly stupid post. However, unfortunately, I've committed myself not to use stupidity as criterion for removing posts on this board.

Ag you still haven't answered what type of micro econ professor you are? What kinds of classes do you teach? Is it all Intro to Micro or are you more in a sub field?

Given what else I have revealed on this forum, you might as well ask me what my real name is ))

Ok, researchwise, political economy, mostly. Teachingwise, advanced micro theory (both graduate and undergraduate), sometimes also public finance.

[Wonkish1]

Given what else I have revealed on this forum, you might as well ask me what my real name is ))

Ok, researchwise, political economy, mostly. Teachingwise, advanced micro theory (both graduate and undergraduate), sometimes also public finance.

Other than that you were a Econ professor I don't know anything else about you so you at least have nothing to worry about from me.

Interesting though, good to know. Surprised you don't jump into threads and comment a little more often.

[ag]

I do, when it is fun ) Unfortunately, too much macro/finance talk here - both, especially finance, have a tendency of boring me fast .  Also, when things get outright imbecilic, as they sometimes do, I am forced to merely insist on decorum: doing anything else might involve myself breaching it ))

[Wonkish1]

I do, when it is fun ) Unfortunately, too much macro/finance talk here - both, especially finance, have a tendency of boring me fast .  Also, when things get outright imbecilic, as they sometimes do, I am forced to merely insist on decorum: doing anything else might involve myself breaching it ))

So can you give me some examples of topics you would find fun. I'll keep it in mind for the future because I tend to like talking to people that have a lot to offer more than talking to people that are just going to put there small partisan talking point line in and then run off.

[ag]

Political economy, decision theory, experiments, and quite a bit more ))

[Wonkish1]

Political economy, decision theory, experiments, and quite a bit more ))

How are you defining "political economy" because if I'm not mistaken that is a term that can mean wildly different things?

Decision theory as in more like game theory or more like behavioral economics?

What kind of experiments?

[ag]

Modeling political institutions, mostly.
All economics is behavioral. Both games and individual decisions are fun.
Econ experiments of all sorts.

[Wonkish1]

Modeling political institutions, mostly.
All economics is behavioral. Both games and individual decisions are fun.
Econ experiments of all sorts.

Interesting.

Not to poo poo something in your post, but care to explain to me how the laws of compound interest are "behavioral"?

[ag]

care to explain to me how the laws of compound interest are "behavioral"?

Sure. Interest rates are prices. Prices are an equilibrium phenomenon, but, fundamentally, they arise from individual behavior. So, in the end, to explain interest rates you need to build a model of behavior. Change the way people discount the future or form habits, and you will get very different predictions about interest rates. You will also get very different predictions about what sorts of contracts would be signed (so, what sort of interest you'd be compounding and how).

Formulas are just some squiggles on a piece of paper. Their meaning and applicability derive from how we understand the world. And, as economists, fundamentally, we understand the world in terms of human behavior.

[CARLHAYDEN]

care to explain to me how the laws of compound interest are "behavioral"?

Sure. Interest rates are prices. Prices are an equilibrium phenomenon, but, fundamentally, they arise from individual behavior. So, in the end, to explain interest rates you need to build a model of behavior. Change the way people discount the future or form habits, and you will get very different predictions about interest rates. You will also get very different predictions about what sorts of contracts would be signed (so, what sort of interest you'd be compounding and how).

Formulas are just some squiggles on a piece of paper. Their meaning and applicability derive from how we understand the world. And, as economists, fundamentally, we understand the world in terms of human behavior.

Ag,

There is a difference between "interest rates" and "compound interest."

[ag]

The formula for compounding interest only makes sense if you understand what the interest is, doesn't it? What if we can forecast changes in interest rate over time, we will use a different formula, won't we? The formula by itself is not economics (no formula is): it's the meaning that makes it interesting.

[Wonkish1]

The formula for compounding interest only makes sense if you understand what the interest is, doesn't it? What if we can forecast changes in interest rate over time, we will use a different formula, won't we? The formula by itself is not economics (no formula is): it's the meaning that makes it interesting.

Not really. Interest rates can be fixed, but that is besides the point. The formula(without even imputing specific interest rates) most definitely is economics and it can be applied to a host of things like growth, inflation and prices, etc. Just in the case of growth we can apply it many different ways. We could look at the effect on one country or compare two. So lets compare to. Lets say we have country A and B and the spread between the two's growth rates never equals 0. Now lets say both countries started with the exact same GDP and population(and thereby the same GDP per capita). If we were to figure out that over time A always averaged at least slightly higher growth rates than B we could safely assume that as time approached infinite eventually the standards of living of even the some of the poorest people in A would be higher than some of the most well off in B.


Just pointing out that there is at least some mathematical(and non behavioral) laws of economics(and I would argue that there is a ton of mathematical(non behavioral) laws in mathematics.

[ag]

Derivatives can also be applied to a host of situations, but that doesn't make them economics. And I don't know, how many times have I written 2+2=4 in solving econ problems - but that's not econ either. By itself, this formula is as applicable to many phenomena that has nothing to do w/ economics (this is just a computation of some quantities growing at a constant rate: could be physics, could be biology). Only knowing when to apply it makes it economics: and that's about behavior.

[ag]

As for growth rates: all modern models of growth try to explain it by using human behavior. Mechanical explanations are not interesting to economists.

[opebo]

Jesus christ, guys, this isn't the men's room at the Republican National Convention.

[ag]

Jesus christ, guys, this isn't the men's room at the Republican National Convention.

Nor is it a psychiatric asylum, sorry.

[Politico]

To me, economics is about analyzing human behavior with the most predictive models/formulas you can possibly achieve given the current state of knowledge/technology (or, if you want a more formal textbook definition, the science of resource allocation in a world of scarcity).

The formulas/models achieve a level of knowledge about human behavior, but do not necessarily cause or direct human behavior in any way, shape or form. However, it is interesting how certain ideas/theories/philosophies/models can drive human behavior after becoming widespread/accepted (and even without people realizing this is happening). It reminds me of that famous line from Keynes about everybody being the slave of some defunct economist.

[opebo]

Politico, human behavior comes from pointing a gun at them.  'Economics' is just a very funny attempt to mask what is really going on.

By the way who is the other non-brainwashed person who voted with me on my scheme?

[Politico]

By the way who is the other non-brainwashed person who voted with me on my scheme?

The only other person on the forum who appreciates your trolling efforts.

[Wonkish1]

Derivatives can also be applied to a host of situations, but that doesn't make them economics. And I don't know, how many times have I written 2+2=4 in solving econ problems - but that's not econ either. By itself, this formula is as applicable to many phenomena that has nothing to do w/ economics (this is just a computation of some quantities growing at a constant rate: could be physics, could be biology). Only knowing when to apply it makes it economics: and that's about behavior.

I just don't agree with you! You can run around saying that the behavior is the key condition for econ. And I can run around saying that the math is a key condition, but the truth is that for most things you need both. To underestimate the effect that the math has on future behavior is I think completely missing the point.


How about inflation? MV = PY is a completely mathematical construct and correctly shows the relationship between the money supply and inflation. Explain to me how that is behavioral in nature.

How about fractional reserve banking? The formula for maxing out the depository leverage in banks is entirely mathematical and isn't dependent upon behavior at all(except for maybe the fed increasing monetary base). That formula can accurately predict the point in the money supply where it has fully leveraged out its base.

I could go on and on! Also I would argue that behavioral analysis is only as much as a factor in economics as people engage in the way you don't expect them to. When the math is pointing to expected behavior and they engage in that then the math is the driver. Example: Fed lowers base rates. Mortgage rates come falling down dropping the price of home ownership down. The mathematical economist would argue that home buyers would sky rocket approximately to the degree that cost of servicing that mortgage falls. Sure enough the behavior followed exactly that. So what was the driver there? Human behavior driving the economy or the effect of mathematical laws changing human behavior?