Re: Animated FED

1

I'm not able to read/watch the link at the moment, but here's Krugman on the expectations question:

Many economists, ranging from the chief economist of the International Monetary Fund to one of Mitt Romney's top economic advisers, have argued, as I have, that higher expected inflation would aid an economy up against the zero lower bound, because it would help persuade investors and businesses alike that sitting on cash is a bad idea. Bernanke endorsed the idea in his "Paralysis" paper, suggesting that the Bank of Japan declare "a target in the 3-to-4-percent range for inflation, to be maintained for a number of years."

"Uncertainty" is a foolish political talking point because it's used as an excuse to recommend stupid policy, and is used highly selectively and not accurately. The "uncertainty" people don't have any problem courting a U.S. default if the alternative is raising the debt ceiling, whatever the impact on "uncertainty."


Posted by: politicalfootball | Link to this comment | 09-11-12 7:49 AM
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as an excuse to recommend stupid policy

This is true of so very much of economics these days. See also, "raising the minimum wage just means businesses will hire fewer employees". Which is true, just as long as *the only variable in the entire business operation* is wages. In the real world, there are many different sources of expense and revenue for a business, all of which change all the damn time without throwing the entire business plan into disarray.


Posted by: apostropher | Link to this comment | 09-11-12 7:58 AM
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He's not really talking about "uncertainty" in the sense that you mean it. He's saying "if everyone knows, like, really knows, that the fed will pump money into the economy until we're growing more, they'll start spending more right now and borrowing and hiring."


Posted by: Robert Halford | Link to this comment | 09-11-12 8:04 AM
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I can think of plenty of people who thought the debt-ceiling stupidity was creating uncertainty (like, everyone who isn't full of shit).


Posted by: Alex | Link to this comment | 09-11-12 8:06 AM
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Yeah, the uncertainty rhetoric is so clearly the product of some Luntz type trying different phrases until they found something that superficially connects people's real economic anxieties to the conservative economic program. But I agree with Heebie: I think expectations of future inflation have negligible impact on the economy. Promising that the Fed will keep interest rates low long after it normally would is pointless.


Posted by: Eggplant | Link to this comment | 09-11-12 8:07 AM
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That said, you know who is a fan of myopic expectations models (for example: the prediction rule is that things next quarter will be like they were this quarter)? Derausqed, that's who.


Posted by: Alex | Link to this comment | 09-11-12 8:07 AM
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And I still fail to see how the Fed buying assets will pump money into the economy, rather than, say, inflating asset prices.


Posted by: Eggplant | Link to this comment | 09-11-12 8:11 AM
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Again, this argument isn't really about uncertainty. He's saying that if people really believe the Fed will do whatever it takes to promote growth, inflation be damned -- and there's a definitive, credible commitment to the Fed doing so -- ordinary people will start acting as if growth is coming and will start spending and hiring people, thus creating growth.


Posted by: Robert Halford | Link to this comment | 09-11-12 8:12 AM
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Economists like this argument because the only variable that is not determined "in equilibrium" is the future inflation rate, so they imagine that this is the key function of the Fed. I find the expected inflation argument wildly implausible, but at the same time every time the Fed (or the ECB) announces something that can be interpreted as easing, the stock market goes wild.


Posted by: Walt Someguy | Link to this comment | 09-11-12 8:16 AM
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That's FDR's, "The only thing we have to fear is fear itself." It's true, so far as it goes. It's also true that if you act as if growth is coming and nobody else does, you'll get screwed.


Posted by: Moby Hick | Link to this comment | 09-11-12 8:17 AM
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He's saying "if everyone knows, like, really knows, that the fed will pump money into the economy until we're growing more, they'll start spending more right now and borrowing and hiring."

Right. I think this is dumb, and it's not what's keeping them from spending and borrowing and hiring. Many of them are not spending and borrowing and hiring because their profits are actually quite fine where they're at, with lower wages and people doing 1.5 jobs, etc.


Posted by: heebie-geebie | Link to this comment | 09-11-12 8:20 AM
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10 to 8.


Posted by: Moby Hick | Link to this comment | 09-11-12 8:21 AM
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The problem is that the QM mechanism is just too far from the real economy. It's just another way of pulling on the now broken interest rate lever within the financial sector. For longer maturities and somewhat different instruments but it's basically the same game as traditional monetary policy.


Posted by: PGD | Link to this comment | 09-11-12 8:23 AM
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First, we can distinguish uncertainty as to whether the Democrats are going to install crippling regulations (absolute bullshit) from uncertainty where the economy is going (possible). But I'm not sure what I think about the latter.

Is there actual evidence, as opposed to economic models and lines of reasoning, that expectation of inflation/growth has an effect independent of that actual inflation/growth?


Posted by: Minivet | Link to this comment | 09-11-12 8:25 AM
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If I'm reading 9 right, you basically agree with right wing economists and Mitt Romney that unemployment is structural, not cyclical. Which implies that we shouldn't have government intervention. That's wrong -- really wrong.


Posted by: Robert Halford | Link to this comment | 09-11-12 8:27 AM
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Why does structural unemployment mean we shouldn't have government intervention?


Posted by: Moby Hick | Link to this comment | 09-11-12 8:28 AM
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The problem is not uncertainty about the likely direction of the economy. Investors and consumers have a definite opinion of where the economy is going. The entirely rational expectation of a weak economy feeds that weak economy.

The trick is to change those expectations, and the best way to do that is to change the reality underlying those expectations.


Posted by: politicalfootball | Link to this comment | 09-11-12 8:29 AM
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(I'm sure this is stupid, but refrain from treating it as so.)

I personally believe that unemployment is cyclical because I think that's the Keynesian right answer, but why wouldn't structural unemployment respond to government intervention? Gary Jobs Corp. Build infrastructure indefinitely. Whatever.


Posted by: heebie-geebie | Link to this comment | 09-11-12 8:30 AM
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Oh good, Mobes was equally stupid and faster.


Posted by: heebie-geebie | Link to this comment | 09-11-12 8:30 AM
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I don't think unemployment is cyclical, but I don't think it's structural, as that seems to mean if only more workers had college degrees they would have higher employment and wages (I like Yglesias' basketball rebuttal).


Posted by: Eggplant | Link to this comment | 09-11-12 8:35 AM
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In a very insightful fashion, heebie, I think you have confused the concepts of cyclical and structural unemployment. This was very clever of you.


Posted by: politicalfootball | Link to this comment | 09-11-12 8:36 AM
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That should read "as that seems to be used to mean". I'll bring up the rear in the stupid race.


Posted by: Eggplant | Link to this comment | 09-11-12 8:37 AM
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No, wait, I'm the one that's confused. Never mind.


Posted by: politicalfootball | Link to this comment | 09-11-12 8:37 AM
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Excellent job disguising your belief that my comment was stupid!


Posted by: heebie-geebie | Link to this comment | 09-11-12 8:37 AM
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I'm sure they assured all the horses that one more round of oat dumping would get them back the jobs they'd lost to automobiles just before they sent them all for retraining at the glue factory.


Posted by: Eggplant | Link to this comment | 09-11-12 8:45 AM
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I understand the difference between structural unemployment and cyclical unemployment as being, basically, the difference between a trend line and the variation about the trend line. You'd need different types of government intervention to shift the trend line (intervention that wouldn't involve the Fed), but government intervention has certainly been able to do those types of shifts in the past.


Posted by: Moby Hick | Link to this comment | 09-11-12 8:46 AM
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Of course we want to kick off a virtuous cycle. But how do we know the cycle is driven by expectations, rather than by actually-existing inflation and government investment together increasing economic activity? Citations would be helpful.


Posted by: Minivet | Link to this comment | 09-11-12 8:47 AM
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11 - Ignore "uncertainty", Heebie -- the idea is that if companies have a realistic belief that inflation is going to rise in the future, they won't be happy with their money earning 1% in bonds or whatever (which would be a negative real return), and will instead start investing it in factories, expansions, etc. (IMHO, one of the major things that the Fed could do and hasn't done is remove the overnight federal funds rate to 0% which would work in the same way by encouraging banks to actually lend the money out more aggressively. Bernanke, for whatever reason or reasons you want to assign to him, has been very reluctant to do anything even that aggressive.)


Posted by: snarkout | Link to this comment | 09-11-12 8:48 AM
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As a late entry in the stupid race, I confess I'm not sure why equally distributed inflation is bad. It sucks if you're a creditor or have a mattress full of money, but apart from that it seems a quite egalitarian means of redistribution.


Posted by: foolishmortal | Link to this comment | 09-11-12 8:53 AM
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or have a mattress full of money

This is cheaper than that memory foam stuff.


Posted by: Moby Hick | Link to this comment | 09-11-12 8:55 AM
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28: Which makes sense, although I thought the 0% rates were to get companies to borrow, which they would then spend, which they obviously don't. Nobody would have possibly predicted that anyone would be "happy" with 1% returns.

(I think it's stupid to try to game anything for the top corporations instead of interacting directly with unemployed people, because it's just another version of trickle-down economics. Which nobody here is contesting but I'll say it anyway.)


Posted by: heebie-geebie | Link to this comment | 09-11-12 8:55 AM
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Oooh, 15 was supposed to be to 11, not 9. 28 gets it right.

It's not that there's no government intervention that could help structural unemployment, it's that if the unemployment is structural measures to boost demand in the short term won't work and will likely lead to high inflation. You'd need to treat unemployment as a long-term problem of job retraining or whatever because you're already at full employment given the existing skills of the labor force.


Posted by: Robert Halford | Link to this comment | 09-11-12 8:56 AM
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Cyclical unemployment is where everybody gets on their bikes and looks for work; structural unemployment is where everybody stays in their houses and watches TV.


Posted by: chris y | Link to this comment | 09-11-12 8:56 AM
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I don't see why government ever expects corporations to play ball with anything. They do not give a shit what unemployment is, and will respond to all the QE carrots or whatever like T. Rexes testing every inch of the fence to find the weak spot. Don't put T. Rexes in an amusement park.


Posted by: heebie-geebie | Link to this comment | 09-11-12 8:59 AM
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This is cheaper than that memory foam stuff.

I wonder if this is true!


Posted by: nosflow | Link to this comment | 09-11-12 8:59 AM
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We've had demand side stimulus for the last 30 or so years, in the form of government borrowing and a massive credit expansion. The latter was massive and has come to its end, and all both have done is compensate for the lack of growth in wages.


Posted by: Eggplant | Link to this comment | 09-11-12 9:00 AM
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Oooh, 15 was supposed to be to 11, not 9.

Don't worry, I assumed that the condescension of "That's wrong - really wrong" was supposed to land on me.


Posted by: heebie-geebie | Link to this comment | 09-11-12 9:00 AM
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37 actually said amiably. Obviously I'm uninformed about all this shit.


Posted by: heebie-geebie | Link to this comment | 09-11-12 9:02 AM
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No worries!


Posted by: Robert Halford | Link to this comment | 09-11-12 9:02 AM
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We've had demand side stimulus for the last 30 or so years, in the form of government borrowing and a massive credit expansion.

Bigger than the supply side stimulus? (I actually have no idea how big the tax breaks and R&D write-offs actually add up to.)


Posted by: heebie-geebie | Link to this comment | 09-11-12 9:04 AM
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Not THAT amiably.


Posted by: heebie-geebie | Link to this comment | 09-11-12 9:04 AM
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Hmm, I guess I was using "demand side" a little hazily. I was just thinking of the difference between what the government was taxing out of the economy and what it was paying back in.
41 made me laugh.


Posted by: Eggplant | Link to this comment | 09-11-12 9:06 AM
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35: Probably I was exaggerating.


Posted by: Moby Hick | Link to this comment | 09-11-12 9:08 AM
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demand side stimulus

The home interest tax deduction works as a demand side stimulus, doesn't it? It is huge.


Posted by: Megan | Link to this comment | 09-11-12 9:10 AM
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31: They're only "happy" with 1% in the sense that they don't see any better options. Raising the expected inflation rate is equivalent to lowering the "real" rate of return on a fixed-return investment.

Let's say someone has a choice between investing in a bond that earns them 1% nominal return, and expanding their business in a way that's expected to break even (no gain or loss) after inflation.

If inflation is 0%, they'll take the bond. That's because a 1% return is better than nothing.

If inflation is 2%, they'll expand their business, because even though it's not profitable to do so, at least their investment isn't being eaten away by inflation. (Of course, my example assumes that real investments' value track inflation, which is often but not always true.)


Posted by: Benquo | Link to this comment | 09-11-12 9:19 AM
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44: That isn't really the right way to look at it, but I find myself struggling to explain why.

Let me try: The home interest deduction was part of the status quo - an arrangement in which the government added demand to the economy in some ways, and took it out of the economy in others. Removal of that deduction would constitute a reverse-stimulus, but that doesn't mean that it's existence is properly thought of as an economic stimulus.


Posted by: politicalfootball | Link to this comment | 09-11-12 9:22 AM
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Why wouldn't they just look for higher-returns investment?

You all are saying: We want to create a situation where it's more valuable for them to invest in their business than to collect these safe, measly returns.

They're saying: I've got $$ and I could either invest it in to the hungry business or park it in an account. If they've decided to park the money and the safe measly account is made less attractive, then I'd think they'd hunt for a more lucrative financial investment.

The decision to start hiring just doesn't seem fungible with what type of financial investment to park your non-spending money in.


Posted by: heebie-geebie | Link to this comment | 09-11-12 9:25 AM
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Everyone accepts that the Fed, by regulating interest rate expectations, influences the economy. Changing inflation rate expectations is how you change interest rates when the interest rate is already effectively zero.


Posted by: politicalfootball | Link to this comment | 09-11-12 9:27 AM
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46: It isn't a stimulus because it the current baseline?


Posted by: Megan | Link to this comment | 09-11-12 9:30 AM
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Why wouldn't they just look for higher-returns investment?

They often do, but usually they have a limited risk appetite for their "cash" pile, and (in theory) at a certain point reduced interest rates mean that any financial investment that beats the post-inflation expected return on business investment has a clearly higher risk profile. In practice, the situation is more complicated, and you get businesses like Apple with massive profit margins content to sit on cash piles of tens of billions of dollars.



Posted by: Ginger Yellow | Link to this comment | 09-11-12 10:19 AM
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47 - That's because "investing in a higher-return investment" pretty much boils down to "someone, somewhere spends the money in a potentially productive manner". You could lever up the money and put it in the stock market -- and people and institutions do that -- but large institutions generally don't do that with everything. Bonds -- which are just fancily structured loans -- and loans, particularly for real estate, make up a huge proportion of how money gets invested. So if you're trying to drive your nominal rate of return to 4 or 5%, the money is getting put to work in economy-stimulating ways.

45 - And (he said to Heebie) this is the "zero bound" that Krugman talks about a lot; you can look at the output gap (the difference between what the economy "should" be producing if the recession never happened and what it is producing) and calculate what you'd want to drive the interest rate down to to stimulate things enough to get it there, but you can't, because there's no practical way to get the Federal funds rate below 0%. Helicopter Ben Bernanke used to say he knew of ways but, again, he's not doing things, whether out of malice, misjudgment, or institutional disfunction.


Posted by: snarkout | Link to this comment | 09-11-12 10:20 AM
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The other thing is that moderate inflation is objectively good for the indebted -- like people upside-down on their mortgages -- and objectively bad for creditors and people on a fixed income, so even in the absence of a persistent disinflationary bias at the Fed, crazy Randian/Paulist goldbuggery, and a sense that helping the economy is helping Obama, the Republicans would be against it.


Posted by: snarkout | Link to this comment | 09-11-12 10:23 AM
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Felix Salmon had a depressing post, a couple months ago in which he speculated that the reason that the Fed keeps issuing statements in which they say, "conditions call for additional action, but we're not going to do anything right now, maybe soon." Is that they don't have much they can do (without congressional authorization) and don't want to look powerless.

I haven't seen that theory elsewhere, but it seems plausible, I'll see if I can find that.


Posted by: NickS | Link to this comment | 09-11-12 10:32 AM
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51: So you and the OP guy are saying: 0% (or below) rates are trying to coax businesses into spending by giving them sweet deals to accumulate a lot of money, whereas driving up interest rates would try to force businesses into spending by being aversive to hunkering down with your money, and so "uncertainty" means "businesses don't think they're being forced yet".


Posted by: heebie-geebie | Link to this comment | 09-11-12 10:36 AM
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All of the stuff on inflation targeting is far too textbook. Real short term interest rates have gone negative several times during the past several years. Long term rates are at their lowest rate in 50 years. The 10 year Treasury rate is 1.67 percent! The problem with inflation targeting is it's just more monetary policy. So you spread the interest rate reductions through the yield curve -- big whoop. It'll do something around the edges (note the slight but noticeable perking up of the housing market), but it's hard-to-impossible to amp it up to the point where it makes a big difference.

As McManus keeps pointing out, we need actual structural changes in distribution patterns and activity out in the real economy, not shoveling more money into the financial sector through monetary policy and hoping it will eventually come out in investment. The Fed could actually do something like this but they are legitimately frightened that it would go beyond their legislative mandate and get them in political trouble. They could also cooperate with fiscal policy by monetizing the debt (and indeed I think they are effectively already doing this to some extent).


Posted by: PGD | Link to this comment | 09-11-12 10:42 AM
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53:Yeah, there is a lot of talk that the Fed is scared of acting without effect.

(Uh, given that fiscal policy is off the table...)

Krugman said at the beginning, and in his paper on Japan, that the central bank needs to confound expectations, needs to look fucking crazy. Put that in your RE bong and smoke it.

The horrible era I grew up in, that pit of black economic despair, wealth compression, and way too many good-paying jobs, was characterized by periodic monetary shocks. From McChesney's punchbowl to Volcker, the Fed always went too far, farther than expected or safe, in either direction. A real Fed action feels like an earthquake, not a nudge. It ain't east changing the direction of a fifty trillion economy.

Apple needs to get fucking terrified about losing every penny of its 80 cash billions. That is the kind of thing we need, something fucking crazy weird.

Probably not trillions, but tens of trillions. Buy every European bond, and any new ones they print. Buy it with printing not borrowing. Make the hedgers fucking shit themselves.

When tip rates hit double digits, go steady not stop. Then it gets real, and they will take you seriously.


Posted by: bob mcmanus | Link to this comment | 09-11-12 10:46 AM
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53: I've seen it kicked around elsewhere; I'm pretty sure that Brad and/or Krugman have raised it in order to demonstrate that, if that's what Ben thinks, then he's wrong, plus it's not what he used to think.

Has no one here read DeLong's Platonic Dialogue about the Confidence Fairy and the Inflation Imp? He just posted it in the last week or so. It's basically all about this issue - if we think that it's BS to claim that the Confidence Fairy will make the economy grow through the power of wishesexpectations, then why isn't it BS to expect the Inflation Imp to do the same? And the upshot is that the things you do to call up the Inflation Imp are, in fact, inflationary (because demand-stimulationg and growth-causing), and so all you're really looking for is expectations to multiply natural and inherent effects.

Sorry if this is now redundant, but apparently neither DeLong nor the Imp have been mentioned here yet.


Posted by: JRoth | Link to this comment | 09-11-12 10:48 AM
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OK, 56 is right. That is the only thing that would make a monetary-policy alone channel work. It would have to look like Volcker in reverse. But just like Volcker doubled unemployment rates to over 10 percent, you don't know what inflation you might trigger by being that crazy. It would certainly threaten Fed independence, since it would involve the Fed taking undemocratic and autocratic control over the economy.

But big but conventional fiscal policy would be far more effective.

"investing in a higher-return investment" pretty much boils down to "someone, somewhere spends the money in a potentially productive manner". You could lever up the money and put it in the stock market -- and people and institutions do that -- but large institutions generally don't do that with everything.

the problem is that neither economists nor the Fed nor blog commenters have a very good idea of the range of ways there are in today's financial system to generate high returns by playing speculative gains, without moving money out into the real economy. There are real economy effects -- e.g. pumping up the commodity markets with speculation helped lead to the shale oil boom -- but the channel of transmission is indirect and wasteful.

Bob's reference to 'making the hedgers shit themselves' is relevant here. It takes a lot more to do that than it once might have.


Posted by: PGD | Link to this comment | 09-11-12 10:55 AM
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46: It isn't a stimulus because it the current baseline?

Yup. As Einstein said: economic stimulus, morality and time are all relative.


Posted by: politicalfootball | Link to this comment | 09-11-12 10:57 AM
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Also, if I remember correctly, the Fed used to force the hand of Congress. The Fed can make the other branches move fiscal policy, Kennedy's tax cut and tax surcharge for example, by simply fucking up the economy in a drastic way.

Crazy, but you want a Jobs act? Bernanke raises overnight rates to 10%. Model it. Maybe 20%.

We do survive this shit, you know, we have been making, buying and selling in a lot of different conditions.


Posted by: bob mcmanus | Link to this comment | 09-11-12 10:58 AM
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A form of 'unconventional' monetary policy that would work -- actually on the border between monetary and fiscal -- is for the Fed to guarantee particular categories of loans. There was a fair amount of that done by the special Fed facilities set up during the crisis. But Dodd-Frank makes that very difficult to do without approval from Treasury.


Posted by: PGD | Link to this comment | 09-11-12 11:00 AM
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51.1 gets it right.

Right now we're in an unhealthy equilibrium, one in which companies are profiting, with all the $$ going to the 1%, and everyone else more or less immiserated. As much as anything else, inflation targeting or whatever is about upsetting that equilibrium.

Part of what's poisonous about the current debate is that a fair number of people appear to fear upsetting the equilibrium, because CHANGEBAD, even though it's objectively a shitty equilibrium for the 99% (certainly for the 95% - 96 to 99 might be doing OK).


Posted by: JRoth | Link to this comment | 09-11-12 11:00 AM
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But big but conventional fiscal policy would be far more effective.

Well, yes, but that option isn't remotely on the table, where a move toward a more radical Fed policy has been strongly advocated by ... the chairman of the federal reserve (admittedly in a past life).


Posted by: politicalfootball | Link to this comment | 09-11-12 11:01 AM
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Right now we're in an unhealthy equilibrium, one in which companies are profiting, with all the $$ going to the 1%, and everyone else more or less immiserated. As much as anything else, inflation targeting or whatever is about upsetting that equilibrium.

Right, but monetary policy channels all the resources to change that equilibrium through the 1 percent in the first place. It's a basically trickle-down technique. I'm not sure that LOTS and LOTS of conventional monetary policy (even backed up by a committment that changes expectation) substantially change that equation. The problem with statements like 51.1 is that they don't take into account the multitude of ways that exist in the modern financial system to turn money into more money without changing the distributional equation or fueling the larger economy particularly effectively.

Well, yes, but that option isn't remotely on the table

As long as it's not on the table I don't think we're getting very far. There are various ways to do fiscal policy -- notably through loan guarantees or debt forgiveness -- that may not show up directly as government spending. Monetary policy is basically about doing economic management while dodging (or seeming to dodge) the core political issue of distribution. That's inherently difficult to do when the problem is distributional.

Don't get me wrong, I think inflation targeting or nominal GDP targeting is definitely worth a try. I'm just skeptical that it will work. And I do wonder if the scale necessary to make it work as the only strategy you are relying on might have unintended consequences.


Posted by: PGD | Link to this comment | 09-11-12 11:22 AM
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Inflation is adding cash to the economy, and when there is more cash in the economy, people buy more things. Its the increase in demand that gets business spending, much more so than fear of earning -1% rather than 1% annual interest rate.

Increasing inflation expectations is important because it basically tells business "hey, there's going to be some demand coming your way," and so they get moving with whatever they need to do to meet the upcoming expected demand - and by doing so, create additional demand above and beyond what inflation was able to provide on its own.


Posted by: Spike | Link to this comment | 09-11-12 11:46 AM
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65: When there is more cash, people buy more things or pay more for the same things. Right now industries are below capacity, so that isn't a worry, but you certainly can increase inflation without increasing consumption.


Posted by: Moby Hick | Link to this comment | 09-11-12 11:51 AM
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65: sure, but the question is whether it matters *how* cash is added to the economy. Monetary policy is basically neutral on that, if you pour more money in at one end it will eventually raise the demand level uniformly. Fiscal policy allows you to target who gets the money.


Posted by: PGD | Link to this comment | 09-11-12 12:02 PM
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47: Why wouldn't they just look for higher-returns investment?

Presumably they would have already done that, if one were available.

Boosting inflation expectations will increase real investment only to the extent that it changes the ordinal ranking of investment returns, and makes real investment more attractive relative to sitting on cash.


Posted by: Benquo | Link to this comment | 09-11-12 12:09 PM
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Although in practice people try to do that anyway, and then get burned when all that high-yield debt or whatever turns out to be riskier than they thought, and not free money after all.


Posted by: Benquo | Link to this comment | 09-11-12 12:10 PM
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Monetary policy is basically neutral on that, if you pour more money in at one end it will eventually raise the demand level uniformly.

The problem with monetary policy is that its run by bankers, who feel that the best way to operate monetary policy is to make sure the benefits get filtered through banks on their way to stimulate the rest of the economy. We could target monetary policy by having the fed mail check to everyone who filed a tax return below some arbitrary multiple of the poverty line. Or we could have the fed cut the treasury a nice big check to pay for high-speed railroads. Or we could load a bunch of cash into helicopters and drop it on random, unsuspecting citizens.

But for some reason these options are unthinkable. Instead, we choose to inflate by lavishing a massive subsidy on banks and asset holders. Its the American way.


Posted by: Spike | Link to this comment | 09-11-12 12:22 PM
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70: Congress is equally to blame; the lawful mechanism for that kind of stimulus in the US is for congress to spend more money than it takes in, and for the Fed to buy gov't debt to keep its borrowing costs low.

There's no legal or practical obstacle whatsoever right now to Congress directing the treasury to mail each citizen a check for $3,209.33 (that would be about $1T stimulus), except that Congress doesn't want to.


Posted by: Benquo | Link to this comment | 09-11-12 12:30 PM
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I'd spend the first $2,000 on liquor and save the rest. An economist would worry about the second part and my family the first.


Posted by: Moby Hick | Link to this comment | 09-11-12 12:32 PM
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71: Well of course they don't want to. It would be inflationary!


Posted by: politicalfootball | Link to this comment | 09-11-12 12:33 PM
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72: I suppose a low-inflation environment would be the time to invest in real assets that are fairly liquid (in both the literal sense, and the figurative sense because they're commodities), and will retain their real value, or even appreciate, over time.


Posted by: Benquo | Link to this comment | 09-11-12 12:34 PM
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Which is why my liquor cabinet has been steadily growing.


Posted by: Benquo | Link to this comment | 09-11-12 12:35 PM
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Well, the contents of the cabinet, at least.


Posted by: Benquo | Link to this comment | 09-11-12 12:35 PM
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Not quite off-topic and yet the kind of cryptic thing I shouldn't say because I can't expand on it, it sure does feel good to hear people standing up to/mocking Jamie Dimon.


Posted by: Thorn | Link to this comment | 09-11-12 12:50 PM
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70 has it right.

So does 71. By creating such a low interest right environment the Fed has teed it up for Congress (or Treasury, or the FHFA...) to borrow money for fiscal policy. When I talk to people at the Fed they give me this look and say 'we've done a lot, now we need help from the other end of the street' and make a vague gesture toward the Capitol dome.


Posted by: PGD | Link to this comment | 09-11-12 12:55 PM
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OT: Unless you truly enjoy the occasional pitying stare, I'd say you ought to avoid telling your friendly neighborhood classical musician anything like "Cross-cultural influences are all well and good, but if I'm going to pay full price to listen to [Very Famous Musician] play the [instrument], I want to hear some Bach."

I felt like Hank Hill.*

* "And propane Bach accessories."


Posted by: Flippanter | Link to this comment | 09-11-12 7:21 PM
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I'm wondering what was played instead of Bach. I'm going with Toto's "Africa".


Posted by: Stanley | Link to this comment | 09-11-12 7:28 PM
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That song was great.


Posted by: Moby Hick | Link to this comment | 09-11-12 7:30 PM
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We were just discussing Toto's "Africa"! Turns out, makes no sense.


Posted by: Sifu Tweety | Link to this comment | 09-11-12 7:33 PM
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That's what happens when a hundred men or more try to do something.


Posted by: Moby Hick | Link to this comment | 09-11-12 7:37 PM
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I hear a hundred men or more tried to do nosflow's mother last night.


Posted by: Stanley | Link to this comment | 09-11-12 7:41 PM
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"[T]ried"?


Posted by: Flippanter | Link to this comment | 09-11-12 7:45 PM
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My retired parents are sitting pretty, with their house paid off and lots of money in the bank. The one thing that they worry about is inflation, which will make the money they have in the bank buy fewer goods or services.

Granted. they know that subsequent generations are facing troubles: they're outraged by housing prices and worried about stagnant wages. However, they are the type of voters who, when confused, would vote "their interests." And their immediate interest is to keep inflation low.

Hell, if we don't get around to reforming estate taxes, it looks like keeping inflation low is also in my interest. I'm not counting on any sort of inheritance (oh goodness, would it be nice), but a lot of people are looking at the bleak landscape for their kids and wanting to provide for them as best they can.

That's the rentier class interest here, which is a major voting bloc. Probably a lot of the retired middle-income-working-class, at this point.


Posted by: Jackmormon | Link to this comment | 09-11-12 7:47 PM
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... People's expectations don't mean squat.

Of course people's expectations matter. If they are nervous about the future they are less likely to buy things like cars and especially houses.

It appears to me the basic problem with the economy for some time has been people are trying to save more money than the system can safely accommodate. The recent crisis has just made this worse by making people nervous about the future.


Posted by: James B. Shearer | Link to this comment | 09-11-12 7:51 PM
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62

Part of what's poisonous about the current debate is that a fair number of people appear to fear upsetting the equilibrium, because CHANGEBAD, even though it's objectively a shitty equilibrium for the 99% (certainly for the 95% - 96 to 99 might be doing OK).

This isn't true. Retired people are doing fine as are people with stable employment. The pain is very concentrated in a minority of the population which is why there isn't much pressure to do anything about it.


Posted by: James B. Shearer | Link to this comment | 09-11-12 7:54 PM
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OT: Unless you truly enjoy the occasional pitying stare, I'd say you ought to avoid telling your friendly neighborhood classical musician anything like "Cross-cultural influences are all well and good, but if I'm going to pay full price to listen to [Very Famous Musician] play the [instrument], I want to hear some Bach."

Yo-Yo Ma/Cello? Itzhak Perlman/Violin? (Or here with Andy Statman, how awesome is that?)


Posted by: nosflow | Link to this comment | 09-11-12 8:21 PM
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Too bad Statman isn't playing the clarinet.


Posted by: nosflow | Link to this comment | 09-11-12 8:22 PM
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One of those, in potentia. She would probably be able to obtain inexpensive tickets anyway, making it unlikely that one would feel entitled to yell "Hey! No new crap! Play Number 3 in C!"


Posted by: Flippanter | Link to this comment | 09-11-12 8:33 PM
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Presumably I learned about it from a link here, but I appreciate Toto's "Africa" so much more thanks to this video.


Posted by: essear | Link to this comment | 09-11-12 8:48 PM
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Aren't we all, in the end, longing for some... solitary company?


Posted by: essear | Link to this comment | 09-11-12 9:00 PM
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I thought it was "I touched the rain" until watching that. I learned something.


Posted by: Moby Hick | Link to this comment | 09-11-12 9:03 PM
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An "I" that is "We" and a "We" that is "I".


Posted by: nosflow | Link to this comment | 09-11-12 9:04 PM
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I

"As a Titian sun tints dusk,
I think: kith and kin--
Staid aunts in satin, Dada in a sash.
I think: haunts distant and at hand--
A hind in an ash-stand at Usk hush,
Kids and Uzis in Judah's huts,
Stand-in tusks and junk in Kansu,
Shad and tuna in St. Kitts.

"And I think, this haunt, distant and at hand--us.

"Shun us, Judas and Satan!
Aid us, Tati and Tintin!
Kind Santa, add us a kiss!

"A dish and a hunk, that's us--
I as us, us as I.

"Shanti"

II

"Am I a margrave in Riga?
Am I a mavin in gaming?
Am I an engineer in Weimar?
Am I a G-man in a warren?

"Were we ever in Vienna?
In Navarre were we garnering a mirage?
Were we imagining Ravenna?

"Emerge, weir in a raw river,
Raven I imagine in a ravine,
Gravamen ever mine,
Game I engage anew:
I agree.

"We are a merger in nirvana.
Magi are nearing a manger:

I am we, we are I."

III

"This and that is distant--
Datsuns in Tajikistan,
A dud shah that skis in his Hindu Kush,
Kazakstanian hash,
Nits in Kinshasha,

"And Sadat at Assuan is distant,
And sad Susuki's unjust thanks,
And Stukas in Tunisia,
And a Saks hat:

"Shanti

"Dust is dust

"A hand in a hand,
A hint that didn't hint
And just thanks
That knit this unit, us:

An 'I' and an 'I' that kiss."

IV

"Dusk waning,
A warmer view emerging
Weaving an unsaid image
Engaging us in a never-never reign
Graven in just data,
A reigning junta that is mine and mine,
An evergreen stand that grew with rare dint,
A wager winning a stash that in a raw era sustains us,
A ring naming us,
Immersing us in manna and grave huzzahs."

V

Twining wreaths with their mere names,
These meted verses were written
With treasured intimates in mind, this twain,
Judith and Irving, that in a mediate time returned
With a divine retinue, thus drawing near;
Venus and Athena having Judith's hands in theirs,
Hermes and Mars, either taking Irving's arm in his.
And initiating the rite Athena asked Irving,
was this his mate?
And he answered:
"She is mine, this radiant sister, this urgent gamine,
this sweet Guevarista singer, this migraine-saint,
this Aida--mia regina, mia Venere!"
Then, hearing his statement, Venus gave her divine assent.
And Hermes assuming the rite asked Judith, was this her man?
And she answered:
"He is mine, this disarming giant, this ardent wag, this gin-drinking
anagrammatist, this mind's emir--ma tendresse, ma vie!"
Then, hearing her statement, Mars gave his divine assent,
And in this manner Judith and Irving were married
And are ever married,
And we thus utter due and vivid thanks
That this new event
as sweet as sugared dates
as warm as Haitian sun
as true as their twin hearts
Has here attained the unerring end where it starts anew.


Posted by: nosflow | Link to this comment | 09-11-12 9:05 PM
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But you just go ahead and make fun if that makes you feel good, essear.


Posted by: nosflow | Link to this comment | 09-11-12 9:06 PM
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96 is totes awesome. No fun to make.


Posted by: essear | Link to this comment | 09-11-12 9:10 PM
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Is 96 proposed new lyrics to "Africa?" if so, I'm having trouble getting them to scan. If it's something else, very good.


Posted by: Moby Hick | Link to this comment | 09-11-12 9:14 PM
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It is Harry Mathews' epithalamium for Judith Kazantzis and Irving Weinman.


Posted by: nosflow | Link to this comment | 09-11-12 9:20 PM
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You see, in the first section, only letters appearing in "Judith Kazantzis" are used; in the second, only those appearing in "Irving Weinman". The third repeats the requirement of the first, and in the fourth section any one word has letters appearing only in the one name or in the other. Finally, in the fifth, letters from each name are used freely.


Posted by: nosflow | Link to this comment | 09-11-12 9:21 PM
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Hence "Twining wreaths with their mere names".


Posted by: nosflow | Link to this comment | 09-11-12 9:22 PM
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Is it too late in the thread to note that since Fed is an abbreviation rather than an acronym, it really oughtn't be in all-caps?


Posted by: x.trapnel | Link to this comment | 09-11-12 9:27 PM
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Never!


Posted by: nosflow | Link to this comment | 09-11-12 9:28 PM
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Capitalize the FED! Monetize the debt!


Posted by: Stanley | Link to this comment | 09-11-12 9:29 PM
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I'm very tired and should probably go to bed. Good night.


Posted by: Stanley | Link to this comment | 09-11-12 9:30 PM
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Our neighboring Native nation is about to have an interesting time. They're giving $10,000 to each member. $5,000 to kids, and the other 5 when they hit 18. Nearly 8,000 members.

Banks are bracing for a lot of check cashing.

http://missoulian.com/news/local/m-to-be-distributed-to-confederated-salish-and-kootenai-tribal/article_5819a54a-faf7-11e1-accf-0019bb2963f4.html


Posted by: CharleyCarp | Link to this comment | 09-11-12 10:57 PM
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if I'm going to pay full price to listen to [Very Famous Musician] play the [instrument], I want to hear some Bach

The Boston Celebrity Series annoys me to no end by often not telling you what pieces classical artists will be playing at all. Pay full price to hear the Emerson Quartet play... something! I would absolutely pay to hear them play Bartok quartets, and absolutely not to hear them play, say, Haydn.


Posted by: Blume | Link to this comment | 09-12-12 4:01 AM
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Pay full price to hear the Emerson Quartet play... something!

If they aren't saying, 100-1 it's just plinky-plinky modern gunge.


Posted by: Flippanter | Link to this comment | 09-12-12 6:01 AM
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Flippanter prefers Haydn.


Posted by: chris y | Link to this comment | 09-12-12 6:06 AM
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plinky-plinky modern gunge

The good stuff, in other words.


Posted by: essear | Link to this comment | 09-12-12 6:12 AM
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109: gawd we wish. You have severely misjudged Boston.


Posted by: Sifu Tweety | Link to this comment | 09-12-12 6:33 AM
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Or the BSO's favorite programming strategy, which is to have a minor piece by a composer you want to hear, and then hours of puke. At least when they had a 10-minute Ligeti piece paired with very much Tchaikovsky, they did them in that order so you could leave.


Posted by: Blume | Link to this comment | 09-12-12 7:01 AM
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You guys should move to SF! Dig our contemporary chamber music scene!


Posted by: nosflow | Link to this comment | 09-12-12 7:55 AM
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Lots of that looks awesome. I see that they are playing a piece by Evan Ziporyn in April. It is interesting to know that he gets attention outside of MIT; he's relatively well known here, but I could never tell if he was just a local thing.

He had a specially made gamelan that is tuned to the western scale, so that he could compose pieces for it and strings. The ones I have seen performed are ghastly. What a horrible idea.


Posted by: Blume | Link to this comment | 09-13-12 8:42 AM
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Well, it looks like Bernake was persuaded by these animated GIFs, and we're now going to get QEIII. So I guess we'll get to see if it makes a difference or not.


Posted by: Robert Halford | Link to this comment | 09-13-12 10:40 AM
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116: Cunard had better get its act together. There's a QE gap!


Posted by: Benquo | Link to this comment | 09-13-12 12:44 PM
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Whoops, this was hard to find, but I guess the Fed's only just caught up to Cunard, not surpassed it:

http://www.dailymail.co.uk/travel/article-1240826/Queen-Elizabeth-3-takes-seas-floated-dock-time.html


Posted by: Benquo | Link to this comment | 09-13-12 12:46 PM
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Also, Prince William and his wife.


Posted by: Moby Hick | Link to this comment | 09-13-12 12:47 PM
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119: Yeah, she needs to change her name.


Posted by: Benquo | Link to this comment | 09-13-12 12:48 PM
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116: it seems like he really did do pretty much exactly what the GIFs recommended. So, thanks Compuserve!


Posted by: Sifu Tweety | Link to this comment | 09-13-12 12:54 PM
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I can't wait for the first judicial opinion that uses animated GIFs. You know one is coming.


Posted by: Robert Halford | Link to this comment | 09-13-12 1:00 PM
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Search Westlaw for "I Can Has Cheezburger" and see if that comes up.


Posted by: Moby Hick | Link to this comment | 09-13-12 1:02 PM
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