Precisely. Like unseasoned bond traders using duration alone to forecast changes in bond prices due to interest rate movements, these macro forecasters ignore the concept of "convexity", i.e. the multiplier is a non-linear function, and not a constant.
I wonder if Keynes realized that as well? Any thoughts, Lord Skidelsky?
Why should taxpayers have to pay one cent in taxes to provide "resilience" to homeowners who never should have built homes on floodplains, barrier islands and oceanfronts in the first place, please? The economics of providing subsidized flood insurance, artificially depressed in price auto and home insurance, seawalls and dikes are just perverse. Like the TBTF banks, such residents enjoy their costly water views while they can, and then pass along the costs of a natural disaster to those of us who can not or will not live in such risky places. Let such homeowners pay the fully-loaded, risk-adjusted costs of their homes, and only then come to me with hands out for "resilience" investments.
The private sector will never purchase Euro-denominated debt if the currency is expected to fall to parity with the USD. Adding in the costs of both credit protection and currency hedging, the yields will have to rise significantly--not fall--to reflect such risks. Speak to bond traders, not just academics, when offering currency devaluation as a policy option, please.
Models Behaving Badly
Precisely. Like unseasoned bond traders using duration alone to forecast changes in bond prices due to interest rate movements, these macro forecasters ignore the concept of "convexity", i.e. the multiplier is a non-linear function, and not a constant.
I wonder if Keynes realized that as well? Any thoughts, Lord Skidelsky?
Underinvesting in Resilience
Why should taxpayers have to pay one cent in taxes to provide "resilience" to homeowners who never should have built homes on floodplains, barrier islands and oceanfronts in the first place, please? The economics of providing subsidized flood insurance, artificially depressed in price auto and home insurance, seawalls and dikes are just perverse. Like the TBTF banks, such residents enjoy their costly water views while they can, and then pass along the costs of a natural disaster to those of us who can not or will not live in such risky places. Let such homeowners pay the fully-loaded, risk-adjusted costs of their homes, and only then come to me with hands out for "resilience" investments.
An Optimistic Case for the Euro
The private sector will never purchase Euro-denominated debt if the currency is expected to fall to parity with the USD. Adding in the costs of both credit protection and currency hedging, the yields will have to rise significantly--not fall--to reflect such risks. Speak to bond traders, not just academics, when offering currency devaluation as a policy option, please.