Jocular Jim, Jovial Jonah

On the new Remnant, Jonah talks with James Pethokoukis, a fellow at AEI, about how ...

By

On the new Remnant, Jonah talks with James Pethokoukis, a fellow at AEI, about how markets are reacting to coronavirus and what the recovery might look like. (V-shaped? U-shaped? Nike swoosh-shaped?) As a result of their isolation-based hallucinations, they also get particularly animated in the rank punditry and pop culture portions – so don’t miss out on their hottest Star Trek takes, or Jim’s shocking defense of the finales of Lost and Battlestar Galactica.


Show Notes:

–Jim’s podcast, Political Economy

Create a free account
Access additional articles and newsletters for no cost, no credit card information needed. Continue ALREADY HAVE AN ACCOUNT? SIGN IN
By
Comments (15)
Join The Dispatch to participate in the comments.
 
  1. Joe Curtis

    The Cylons did have a plan. But not a plan for everything like some of our politicians.

    Collapse
  2. C White

    Maybe occasionally interview someone you actually maybe have just a little but of a difference w — being able to finish each other’s sentences ought to tell u something: the choir just isn’t that interesting.

    Collapse
    1. Avatar photo
      C C Writer

      Actually Jonah has been doing that. Just not this particular time.

      Collapse
      1. C White

        I’ve listened to his podcast for a couple of years now and can’t think of a lot difference of opinion (it’s not much different than his weekly G-file executive summary). I mostly agree w his ‘takes’ but want out of the silo. I’m not asking for Buckley v Vidal but maybe an occasional: we’ll have to agree to disagree here.

        Collapse
        1. Avatar photo
          C C Writer

          I recall hearing several of those lately.

          Collapse
          1. C White

            Forgive my availability bias but the libertarian push to legalize heroin is not really that mainstream.

            Collapse
  3. Avatar photo
    Bradley Alpert

    Wow! Talk about violating priors! Here we have two guys who supposedly understand the power of free markets, capitalism, and distributed integration of information for distributed decision making, who are agonizing over the right committee composition to make the right centralized decision to re-open the economy! Almost as foolish as our fool in chief.

    Collapse
  4. Melissa

    I like the ideas discussed. In reference to the committee to reopen the economy, I think it seems strange that all of the members would be selected from the executive branch of the government. It is clear that, for the most part, decisions affecting when the economy can effectively reopen will fall to governors. I don't understand, then, why this committee wouldn't include either state governors' representatives, or the governors themselves. For a man who is quite full of bluster about "making deals" (deals the likes of which our great nation has never seen before, deals which will have all of us reaching for our smelling salts for their artfulness and brilliance) an important part of making happen whatever he is wanting to happen is going to require him getting some governors to agree with him. Given that the current President's personal qualities are pretty repugnant and his charisma level is a bit below what he estimates, this is going to take some legwork. He might as well start by bringing these people to the table?

    Collapse
    1. Melissa

      Nevermind -- I listened to the next part and it sounds like you addressed the general ideas.

      Collapse
  5. Avatar photo
    Doug Palzer

    James is right, the fed provides liquidity in times of crisis to banks which serve as the intermediate lender. It then lowers interest rates to make those loans cheaper. By backing the loans, it assumes the burden of risk that would otherwise be placed on businesses and the banks which allows the interest rate to be low when it would otherwise be high due to this extremely volatile time.

    I also agree that there won't be inflation "and for many good reasons!" According to the monetarist theory of inflation, MV=PY. M is the amount of money in the economy. V is the "velocity of money" and can be understood as the number of transactions that take place in the economy. P is the price level or put another way, the price of a good sold in the economy. Y is the total output, or the amount of stuff made in the economy. So, the amount of money, multiplied the number of times that money is transacted, has to equal the price of all the goods, times the amount of all the goods. Inflation is then measured as changes in P (price level).

    In our scenario, the Fed is increasing M (amount of money) because V (transactions) have been dramatically lowered by stay-at-home and non-essential business closure orders. Telling people they can't go to work necessarily lowers Y (output). So, while V and Y are dropping in concert, the Fed is doing everything it can to increase M and keep Y where it's at and P (price level) from dropping as well which would be deflation. So, the fed is less at risk of creating inflation than it is of not being able to stop deflation.

    Moreover, inflationary problems are the devil we know vs the devil we don't. We know to fight inflation, however painful that may be. Deflation, on the other hand, spells death for an economy. Deflation means your money will be worth more tomorrow than it is today. The incentive there is not to spend your money, which lowers V (transactions), tells business to lower Y, which means more deflation unless the fed pumps equivalent money into M. So, you end up in a vicious cycle of not spending, not producing, not earning, not spending, not producing, and so on. While it may sound terrifying to measure our stimulus packages in "Obama stimulus units," the alternative, Fed inaction, is significantly worse as we witnessed during the fed's inaction in 1929.

    Furthermore, this crisis isn't an indictment of our economic behavior the way 2008 was. Private sector lending practices had become unsustainable and the market collapsed. In this instance, people aren't spending and making money for health and safety reasons. To look at our current economic system and say its an example of why capitalism is failing fundamentally misunderstands the root causes of the crisis. We're shutting down on purpose. The economy isn't shutting down because it's broken.

    Free capital flows and private investment allow massive amounts of resources to be funneled towards finding a vaccine and producing the goods necessary to cope in the meantime. While a command economy can also potentially funnel massive resources, it does so at the expense of all its other government programs which sustain the populous. Capitalist societies have the benefit of wealthy gov't fiscal spending as the cherry on top of all the private capital devoted to solving the problem.

    If anything, this crisis is less an indictment of economic systems as it is an example of the perverse incentives regarding freedom of information in an authoritarian, one-party political system much like Lyman Stone suggests.

    Collapse
  6. PM

    We should add masks to our first aid kits.

    There is some hope at least with the recognition that the US should manufacture medicine, aircraft carriers, and the like.

    But we need pants. As far as I know, the US no longer makes jeans -- I haven't seen any pants in years that have an American made label.

    What do women want? Jetpacks, perhaps. But they really want pants. With functional pockets.

    How are you going to fight a war without pants? With functional pockets.

    Collapse
  7. ROBERT

    Great podcast and great guest.
    But please tell me you each had a bottle of scotch prior to taping this!
    Otherwise I'm downing one!
    Because he explained things so well that I'm now scared s##tless!

    Collapse
    1. ROBERT

      So I wrote the above before listening to the last 8 minutes. Now I have and now I KNOW you did drink lots of bottles of Scotch.
      So now I feel better!
      I think....

      Collapse