Friday, May 4, 2012

Friday Links and Thoughts

Via Noah Smith, solar panels being used for fossil fuel production.  Will this make solar power more or less competitive vis a vis oil?  If it's true that solar panel technology still needs time to mature and that oil technology is already mature, it seems that the positive externalities from investing in solar for oil production may end up making solar more competitive vis a vis oil.

Debt concerns abound.  Ever since the crisis, CDS spreads have been widening among the 50 U.S. states, and the story for European countries?  That should be old news by now.

Via Karl Smith, another spin on the safe assets problem  How do we deepen capital, how do we save money? Without some riskless asset, the result may just be more and more bubbles.

Dutch politics may increasingly turn against the Eurozone.  This stands as a sobering lesson in hasty attempts at economic integration in domains that aren't sustainable.  It would be a shame if the troubles over the Eurozone end up sowing the seeds for the disintegration of other components of the E.U., such as the provisions for migration and agricultural policy.

A response to criticisms of venture capital.  Turns out that venture capital now isn't doing as poorly as the graphs circulated by Noah Smith would suggest.  Rather, performance is pretty close to what it was 3 decades ago.  Yet this still begs the question, are we in a prolonged period of stagnation?  What does it say about venture capital if the returns were not, and are not, that much better than the market.  Perhaps it's just the EMH borne out; we shouldn't expect excess returns anyways.

Variance among the Eurozone countries is quite high, even the Latin American countries are doing better.  Although I don't think that would be a reason to justify a currency union in Latin America: the limited standard deviations may be the cause of divergences as the result of a balancing mechanism between the countries.

Australia's credit bubble will be an interesting test of whether NGDP targeting holds.  The argument has always been that superb monetary policy on Australia's part fueled them through the great recession.  In theory, money should supercede the effects of credit, but we shall see.

A new form of shadow banking in the form of ETF's doing credit mediation.  How was financial regulation supposed to work again?

More on the Take-the-Best Heuristic model.  It turns out a simple rule is pretty good at predicting elections throughout history, especially when out of sample data is used to calibrate the data.  It's competitive with econometric models, which is quite impressive considering the hegemony of multiple regression.  Why isn't this statistical method used more often?

If LTRO is just a weird form of QE, why is the ECB so committed to using such a suboptimal tool?  Why can't the central bank just commit to a generally more expansionary monetary policy?

Credit is diverging from money in the Eurozone.  This seems to reflect my comment that monetary policy needs to look at more than stocks of M1 or M2 because money is defined on a continuum: it's regime dependent.

Austerity isn't the answer: version over 9000.  Debt consolidation isn't going anywhere; it just doesn't fix the relative price problem between the core and the periphery.

Old post from Brad on fiscal policy.  Good insights throughout.

Why is Japan's currency acting out so weird?  The implicit currency peg seems to be not working.

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