In Today's Round Of "Guess The Macrosievert Emission" We Have Fred "Napoleon Dynamite" Mishkin
Everyone's favorite Iceland expert, Fred "Napoelon Dynamite" Mishkin was on Bloomberg TV today. He said a bunch of stuff. None of it mattered, for the simple reason that as has been now confirmed beyond a reasonable doubt, Mishkin will say anything that he is paid $___ to say. In other words, only those who enjoy experiencing subdural hematomas from absorbing macrosievert emissions of hypocrisy, should subject themselves to the following clip. Incidentally, speaking of emissions levels, after observing the warm glow emanating from the former New York Fed governator's epithelial covering, we open it up to debate: just what is the halflife of the "healthy and perfectly digestible" macrosievert emission from the "Dynamite's" skin?
For those who are confused why Mishkin is the butt of jokes in professional and academic circles, the following clip (referenced previously on Zero Hedge) should make it all too clear.
So anyway, for those who enjoy cackling uncontrollably, below is Mishkin's latest public humiliation. In it among other things is the following discussion of soon to be paywalled Krugman- "Paul is a great economist, by the way, and completely deserves his Nobel Prize." No further comment needed.
On Paul Krugman:
"There is an issue, and this has been a real problem in terms of some of Paul's discussion during the last couple of years, which is that expectations really are key. One of the important lessons that we've learned over the last 30 years in macroeconomics is that expectations and how people assess the future is key to what they do today. For example, if you have expansionary fiscal policy now, people are actually worried that you are going to end up taxing like crazy them in the future because you are not dealing with long run fiscal sustainability, the expansionary fiscal policy will not work as well. That's been a big problem. What we actually need right now would be long run fiscal sustainability, actually contraction there dealing with entitlements, which would give us more room to do fiscal expansion. Unfortunately, Paul has not discussed that issue, which is very disappointing. I have to tell you that in this context--Paul, who a great economist, by the way and completely deserves his Nobel Prize--on this policy issue, he really has pushed us back where our level of understanding in macroeconomics doesn't say that there's no effect from fiscal policy, but under certain circumstances actually expansionary fiscal policy may not work or could actually be contractionary. There are cases where actually contracting by actually getting your long run fiscal situation in balance can actually be expansionary."
On the stock market's role in recovery:
"I feel that people focus much too much on the stock market. Particularly during the crisis, the issue was not getting the stock market up, it was preventing the financial system from imploding and it was really the bond markets which were much more important. There's this wonderful quip by Paul Samuelsson who said that the stock market has forecast nine of the last five recessions, so it is a piece of information that is important, but the health of the financial system is really the key element in terms of getting things working again. We still have some serious problems, not so much in the financial markets for corporates, but we still have problems for small businesses in terms of credit and the consumer still has issues that they have to deal with."
On headline inflation vs. core inflation:
"In terms of what you should care about, it should be headline because a big component of our spending, and actually what we spend on every day, tends to be food and energy, which is actually cut out of headline and is what the core is basically---headline excluding those two items. On the other hand, what we really care about in terms of policy, is underlying inflation, the trend in inflation. You don't want to react to blips in temporary movements in prices in food and energy if in fact they're not telling you about what's going on in the long run. For example, in 2007 and 2008, we had headline which was moving up tremendously. A lot of people said inflation is a big problem. The Federal Reserve said basically said no, underlying inflation is not moving up like that and our big problem is the financial crisis. In fact, during that period with headline moving up, the Federal Reserve was cutting interest rates very dramatically, and that actually was the right thing to do. It still wasn't enough to keep us out of this mess, but it certainly was the right thing to do, so you really want to focus on something that is a deeper concept."
"There's one important difference between the Europe and the U.S. In the case of the U.S., it turns out that core seems to be doing better in terms of telling us where inflation is going to be in the longer run context. Not is true in Europe. In the U.S., headline inflation heads towards core. In Europe, that's actually not true. So the problems of having higher headline inflation is in fact a more serious problem for them than for us."
On if the Fed can get in front of the debate:
"I think the Fed actually always has to try to be ahead of the curve and look forward and make predications--and move before something has actually happened. When I was in the Federal Reserve in August 2007, the economy was actually very strong at the time. That third quarter was a very strong quarter, inflation was actually going up. The financial crisis hit on August 7 and the Federal Reserve then started to ease policy in the face of data that was actually very strong. The people who understood financial crises said that this is a big problem, it's going to be a big drag on the economy and we actually have to act preemptively. That's what you're always trying to do. The problem is that forecasting is a tough business and that you always don't get it right."
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