Jason Smith — Success?

A few days ago, I had a back and forth with Narayana Kocherlakota on Twitter where he called economic forecasting of inflation a "success":

Information Transfer Economics
Success?
Jason Smith

Bill Black — White-Collar Criminologists Answer the call of Conventional Macroeconomists: An Open Letter to Dr. Kartik Athreya, Research Director of the Richmond Fed

I want to thank two prominent “freshwater” macroeconomists, Dr. Narayana Kocherlakota (until recently the President of the Minneapolis Fed and previously the Chair of the University of Minnesota’s economics department) and Dr. Kartik Athreya (Research Director of the Richmond Fed) for their article (2010) and book (2013) , respectively, designed to convey the current status of macroeconomics. Reading their descriptions, and reviewing the work of Oliver Williamson, Roger Myerson, and Leonid Hurwicz in light of the discussion of macroeconomics has made it clear to me that the central difficulties in micro and macroeconomics are with concepts that are the core of what we study as white-collar criminologists and what I dealt with as a financial regulator. There is, therefore, an opportunity for substantial advances should economics draw on the findings of the discipline (white-collar criminology) and the insights of the professionals (successful financial regulators) with the preeminent expertise in these problem areas. Athreya also stresses the key role of law and how the effort to contain fraud explains significant portions of the legal rules for commerce. I also have expertise in law.

Since I combine those three forms of expertise and teach various microeconomics courses, I thought I would write this open letter to orthodox macroeconomists and macroeconomists. For reasons that I will discuss, the perfect person to address is Athreya, with a “cc” to Kocherlakota.

Where economists have drawn on our insights, the results have proven successful. Indeed, I will show that one of the greatest opportunities for the advancement of “modern” macro (and micro) economics would be to cease ignoring George Akerlof and Paul Romer’s 1993 article “Looting: The Economic Underworld of Bankruptcy for Profit.” I can think of no other field in which a Nobel Laureate, writing in his area of greatest expertise (fraud is the most damaging form of “asymmetrical information”), who proved correct and explicitly warned his field about the need to focus on “looting” (via “accounting control fraud”) would be religiously ignored by scholars in his or her discipline.…

Absolutely must-read.

New Economic Perspectives
White-Collar Criminologists Answer the call of Conventional Macroeconomists: An Open Letter to Dr. Kartik Athreya, Research Director of the Richmond Fed
William K. Black | Associate Professor of Economics and Law, UMKC

Kocherlakota's article on "helicopter money" is bizarre

Narayana "orange juice" Kocherlakota wrote some bizarre article on Bloomberg about helicopter money.

He says this crazy shit:

To understand helicopter money, consider two ways that the government can raise $100 billion to fund new spending (or a tax cut).

First, let me backtrack, here's how he defines helicopter money:

"helicopter money," a policy that entails creating money and giving it directly to people or the government to spend.

"Creating money and giving it to the government to spend???"

Are you kidding?

Then this...

The Treasury can sell $100 billion in bonds to investors.
The Treasury can issue $100 billion in bonds to the Fed, which pays for them by creating new money.

"Raise money."

How do you "raise money" when it's your own freakin' currency? You have to fucking put it there first and you're the sovereign, the monopolist, the "maker."

And by the way, the sale of Treasuries is a reserve drain. He should know that. How do you do a reserve drain without first doing a reserve ADD??? The government is not raising money.

And since when does the Treasury sell bonds directly to the Fed as he suggests? The Fed buys in the secondary market. The money to buy bonds comes from government spending itself.

This guy's comments are bizarre.

The Fed is totally f**ked up. These people who work there are hopeless. They should close it down. I think I am for that now. I think I am in Rand Paul's camp now.

By the way, Stephanie Kelton praises this guy for "getting the monetary operations right."

Yep. And he's got the monetary operations right as well. https://t.co/tOaHXf06qK

— Stephanie Kelton (@StephanieKelton) March 26, 2016

I'm floored. Maybe he got the monetary operations right, but he got so much wrong. Fundamentally wrong.