June 2009 Archives

Anna Schwartz is the author of a book review that came out in this month's (June 2009) Journal of Economic Literature on a recent biography of the economist and Nobel Laureate, Milton Friedman. One of her criticisms of the new Friedman biography is that the author missed one of the most important aspects of Friedman's personality--his style as an economic debater. She says,

For example, Friedman's style as a debater reveals an aspect of his personality. He was always courteous to his opponents in a debate, never attacked ad hominem. He concentrated on weaknesses of the opponent's arguments and invariably emerged as the victor in the debate.

In addition to being a fallacious logical argument, ad hominem attacks are an indicator of the weakness of an argument. Ad hominem attacks reveal that the proponent either (1) does not understand the subject enough to make a sound argument, (2) is advocating a position that cannot be justified by logical reason, or (3) is simply using the debate as a platform to slander his opponent. Reasons (1) and (2) have relevance for judging the validity of the argument, but reason (3) is irrelevant.

The U.S. CPI numbers came out today (see chart below). A lot of noise was made last week about inflation worries starting to surface in yields from the auctions of U.S. Treasuries. This WSJ piece from last Thursday posited that the higher yields might be signaling inflation in six-to-nine months. Jim Hamilton had a great analysis two weeks ago explaining why we should probably still be more worried about deflation than inflation. I had a post a few months ago debunking some of the inflation rhetoric from the far right. Below is a chart of the core CPI (overall prices minus food and energy) in terms of year-over-year percentage change. We're definitely not in high inflation territory yet.

Because we don't do well with big numbers, this analogy puts some perspective on things:

The Cleveland Fed has put up a site that shows in glorious graphical detail how the Fed's new policy of quantitative easing has developed and grown over the last eight months. The light orange area in the graphic below represents traditional monetary policy. You can navigate through different date ranges and different detail views using menu bars across the top and left sides of the graph. They also include dowloadable source data, brief explanations of the data, as well as a link to a more detailed article.

Thanks to Mark Showalter for pointing me to this great resource, and thanks to the Cleveland Fed for the most simple, beautiful, and interactive display of economic data that I have seen yet. Here's to central bank transparency!

With bankruptcy plans finally announced for GM today, I thought it would be nice to revisit a previous post. On December 20, 2008, I posted an article entitled, "Ford tough," in which I praised Ford's decision not to accept government bailout money. I said the following:

The proposed auto bailout has been one of the most discouraging pieces of government action since the beginning of our current financial crisis. Ford's decision to stick with the market is one of the silver linings in the ominous clouds of the global recession. Ford does, of course, run the risk of not beeing able to compete in the short-run with GM and Chrysler and their new influx of government cash. But that's not really where the competition is anyway. The real contest is to see which U.S. company will be able to compete with their Japanese counterparts. I think the market will look favorably on Ford's long-run positioning.

Just look at what has happened to the stock prices of Ford and GM since December 20, 2008. The market has spoken.