So both John Cochrane and Martin Wolf are advocating 100% reserve banking. If these two agree on anything, it’s worth taking seriously! (It’s pretty amazing how advocates for narrow banking come from across the political spectrum.) We have some thoughts on banking and private money creation, but you’ll have to read our book to figure out what they are. Instead, we …
As we mentioned in our post yesterday, economists care much more about inequality in well-being rather than inequality in income or wealth. Data on well-being are more difficult to gather, but we discussed some evidence that inequality in consumption also increased from 1980 to 2010. Consumption directly affects the utility of an individual in most economic models. Income does not. Here is some …
What are the determinants of inequality? The first step in answering this question is defining exactly what we mean by inequality. A working paper by Chetty, Hendren, Kline, and Saez takes an interesting approach: it measures inequality based on the likelihood that a child born into a poor family will rise in the overall income distribution. They …
“I asked Mr. Summers what was behind secular stagnation, and he said he was still thinking through all of its causes. But globalization, automation, income inequality and changes in corporate finance might be important factors, he said. Income is now more concentrated in the hands of the rich. Those well-off households tend to save and …
A central argument we have made on this blog and in our book is that the distribution of income/wealth matters a great deal for thinking about the macro-economy. Convincing some of this fact is not easy — many continue to work within a modeling framework in which all distributional considerations are assumed away, the so-called “representative-agent” framework. Perhaps the …
Why the Income Distribution Matters for Macroeconomics Read More »
Here is a chart from Ed Leamer showing jobless recoveries after the last two recessions. There are several ways to see jobless recoveries in the data, but this one is particularly striking. It may take a little effort to follow it, but it is worth the effort. On the horizontal axis is the total amount of hours …
We all know that households cut back on spending dramatically during the Great Recession. Are they spending now? Has spending caught up to the trend the United States was on before? The red line in the chart below plots retail spending in real terms in the United States from 1992 to 2013. We want to …
The FOMC meets this week, and most expect them to continue to taper their purchases of longer term MBS and Treasuries at a slow pace. Of course, there could be a surprise around the corner. If there is a surprise, what assets are likely to be affected? And why? The second question is challenging–it has …
For the past couple of years, the quarterly release of the Federal Reserve Flow of Funds data has been cheered because it has shown a sharp rise in household wealth, particularly of financial assets. This goes hand in hand with increasing incomes through means outside of employment. We agree this is good news, but the …
