YouSaid · the spoken record

John Cochrane

lines on the record: 63
first: 2021-03-10
most recent: 2021-03-10
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“moment to produce the better economic outcomes that you and I know are there and just sitting, you know, wait, you and I are techno-optimists. I think we think that the US, the world could be vastly wealthier, healthier and cleaner if just the regulatory state would get out of the way. And that's a political question, a political economy, a political structure, a constitutional question, I think. So I'm tempted to turn my attention to that.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Of libertarians, and so we'll just put the question you ask me, make me king for a day. Well, make us king for a day and we could solve most of the problems of the American economy in about ten minutes flat. Yet our Congress doesn't do it. So what is there about our political system that is unable to come to these sensible cause and effect, obvious solutions to obvious problems? It's kind of interesting. America had this amazing flowering of political engineering in 1790, and we seem to have just lived in the building ever since and not really done a great job of thinking about it. So I think that's in any scientific pursuit, you need to start with answers, not with questions. If you start with big questions, you're never going to get anywhere. I think I have some answers, but that certainly strikes me as the question, how can we better engineer our political organization, kind of”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“My problem in life is that my list of earth-shaking projects is growing as I get older and try to bite them off. So I have to pick one or the other. So which one do I want to do? Of course, one should finish what one has started. The fiscal theory of the price level was going to be something that included the theory and how it explains all of historical experience with inflation, money and so forth. I'm at 600 pages, haven't finished the theory part, so one should do that. One needs to understand. I still don't know that I have a good story for the inflation of 70s and 80s, which is a gaping hole. So I should finish that, but I probably won't. I want to go back to, I did mention, I think, that why that takes so much trading to get information into prices, that's kind of like the big unknown thing about asset markets. So I'm tempted to go back to that. And I'm tempted also, part of me wants to go into political philosophy.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“War of the Vox Quillette and so forth curated things that are not publications. So that's really a question about how do you, what's the right format for getting essay length things into the debate more quickly, both on actual economics and economics and politics?”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I don't like the competition, so no, stay out of it, guys. Everybody else in any business, the first thing any businessman does is try to get rid of the competition. The blog is an interesting art form. I don't know how long it will last. It allows me to write short essays quickly that seem to have some following, even though I should edit each of them for a week and make them better. I've found that a useful way to get ideas out and to hear from other people. I think that forum is good. So our academic jury is speaking of, you know, our academic journals are a disaster, and blogs seem to be an interesting way to get ideas back and forth in economics. They merge economics and politics. I don't know if that's a good or a bad idea. The problem with all of us doing it is, I think what we're seeing in the market is less blog, which is a personal brand name and more.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“That way you end up as a libertarian. Now, I'm a libertarian with many adjectives in front of it. Conservative rule of law Pax Americana. There's many different brands of libert”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“The 1970s have taken a class in microeconomics, and this was the time when welfare was a big problem, Woynehan and the destruction of the black family was in the air, and you could see the dysfunction on the south side of Chicago where I live, lots of moralizing about it. And I saw the budget constraint facing a teenage woman, not many means that said, if you have a kid and don't work, we'll give you an apartment and some money. And then there's that kink in the budget constraint. What I saw was eye-opening to someone attuned to many different cultures. It was there but for the grace of God go eye. We are all the same. We just face different budget constraints. Here's an analysis of a social problem, a deep social problem that is just completely cause and effect, and we know how to fix this, and you don't have to get into morals and psychology and religion and all the rest of it. That was my conversion point as an economist. And once you start thinking,”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Little poisonous snakes, and the government just asked me, said, We'll get rid of the vipers. We'll give a bounty of a thousand lira per viper, and that'll clean up the viper problem. Well, the sturdy farmers of the Casantino found out that they could raise vipers a thousand lip per viper. They could raise a lot of vipers fast, and the supply overwhelmed the demand. You know, stories of well-intentioned ideas that have unintended concept.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Ah long period of reflection and it was, you know, I went to, I grew up in kind of a liberal community and was unthinkingly that. And you just start reading, you know, and you read classic things. And I told you my habit of mind is to put things in logical structure. And if you start thinking cause and effect and logical structure and not just my feelings about things and the government has to jump, then you are drawn to. So, you know, there's that classic reading list I had as well as you had. I had some conversion moments. So this is how I became an economist really is the same thing, which is understanding social problems as dispassionate cause and effect things and recognizing how they didn't work otherwise. I'll tell you too. One was a kid reading the newspaper actually in Italy about him. There was a plan, the government of Tuscany, there was a problem with vipers.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Root ways to change things, I think that you make me benevolent dictator. Yeah, I think there's a lot of different ways we could run journals. I think putting things to the market test of ideas would be a lot more helpful. But we got to face the fact that a lot of the markets, a lot of our market is who wants economists, the Federal Reserve wants economists to justify what the Federal Reserve is doing. The regulatory agencies want economists to justify what the regulators are doing. A lot of the market for economists is government intervention. So they're going to turn out a product that justifies government intervention when faced with the market.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't know if they're in a competition with a heavily government subsidized sector. Some of the for profit charter schools I gather are doing a bang up job. The big problem with being a nonprofit, so a nonprofit is protected from the market for corporate control. If Stanford is screwing up, you can't just buy up all the shares, kick out the management, and improve it. That's also part of the secret of why hospitals are so screwed up, because they are also protected from that market. The whole nonprofit business, this is a side issue which we should talk about sometime. The nonprofit status in the U.S. has been like everything else, horribly misused. Now it's a cover. It's a lot of it is a cover for getting out of the estate tax and for subsidizing political activity at taxpayer expense. So I was trying to think of things that open it up to competition better. And if we have to think about”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“I have to obey some much harder rules here that I'm not allowed to put myself in charge. We have to somehow obey competition. It's a remarkable lack of competition among universities. So let's get rid of the entire legal structure of the nonprofit organization to start with. I think that'll lead to getting rid of 10 years. I mean, 10 years useful for one thing. It forces people to make a decision. Tenure is not about the permanent employment. It's about when do you get to have a vote on who else gets to be in this place? And it forces people to sit down and read the damn papers and say, should we keep Tyler on or not? That's kind of a useful thing, but you can have those without tenure. So I have to go back to my libertarian instincts and say what we need is a healthy dose of competition in this business.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Deeply ingrained in the system starting as an undergraduate. So maybe there's a self-perpetuation in that sense that wasn't there in the much more freewheeling earlier era.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Increasing careerism. People don't go to a university. When I first got my job and the dean started telling me about the retirement program, I was just glazing over, what are you talking about? I'm not going to be here then. And now people seem to regard their progression in a company sort of the way the labor markets work in Italy. That's an unfortunate feature of ours. There's not that many of them in economics. And what's driving the Woki Lefton is in economics is the millennials, the American-born millennials who've been through our school systems and our colleges, which teach this kind of stuff. If there's anything different about the demographic composition, it's that people like me can't be in economics anymore. And people like Gene Fama can't be in economics anymore. Gene Fama, his internship when he was an undergrad, was he worked in the steel mills. I applied to be an economics graduate student on a LARC one month before classes start. You can't do that anymore. You have to be.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so good, good. Now we can have a debate. I don't think that's true. Many of the foreigners I know come from socialist-y or much more dimensionist countries. My God, I love this replace. Talk to an Argentinian about government. So I know a lot of libertarian foreigners. I do think economics is a classic case of the wonders of free immigration because listeners may not know. Foreigners are in many economics departments there's few native-born Americans left. We have scooped up the talent from around the world and they bring with them some political inclinations. So you're right. Some of them tend to be more lefty. Some of them tend to look at where they come from. The people pushing back against Princeton's latest woke outbursts are Eastern Europeans who say, hey guys, socialism, we were there. You don't want it. Foreigners, I do think are driving the other unfortunate feature of contemporary economics.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, and passing that on, I think the single greatest No, you're right. Well, economists, the question is why has the left current within economics become more powerful? It always was sort of not left right, a free market versus interventionist debate. That is the debate of all time, free market versus interventionist, lefty ideology. and try to run things. But economists, you know, people go into lots of people go into economics because they want to save the world. And then you take some classes that say the best way to save the world is to stay the heck out of the way. And that's kind of discouraging if you're a young millennial who wants to go in and save the world. So we go.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“That certainly is a trenchant observation of the current time. I pause to think whether that's true of all places and times. We live in a time when the cultural elite is moving sharply left in a sort of religious revival, a great awakening. So institutions, you know, the Ford Foundation now is sharply left is hilarious when you consider who Henry Ford was. That's a great example. All of our universities. So a non-competitive institutions are moving sharply left. The institutions of civil society are moving sharply left. But is that not always the case? There was a Reagan Thatcher counter-revolution in the 1970s. You know, there's the natural tendency people in a comfortable society start feeling. Feeling guilty and like telling other people what to do and how the government should spend other people's money.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Ah my god where do you start you know the simple there's nothing like a hibelitza on a cool winter day Tuscan cuisine is supposed to be simple not fancy.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“She's a really smart, she's not only a fiction writer, she has a PhD in economics from the University of Chicago and a smart person in all sorts of ways. We don't really do economics at the dinner table together, but we certainly debate learn a lot about politics and current events. delve too deep in her fiction but it's a very intellectual pursuit for her and she's really committed to writing great young adult literature not just not just stuff that sells and so yeah monstrous beauty is wonderful plus one is her book after that which I recommend it's a secretly a libertarian young adult romance said in a world that comes after a pandemic so ought to have lots of good books sales now”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Trent anyway, and he said, Oh my god, I could see the look in his face. Oh, I haven't told my kid anything. But on the other hand, my wife, Beth Pharma, the same thing at age 12 looked up and had dinner table full of finance people and said, Dad, what's arbitrage?”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm just amazed at the range of my mother, she taught French at the lab school while I was growing up, a remarkable woman. And after my father died, sadly, just as I got back to the University of Chicago, she took on this career of translating and translated many, many books for the University of Chicago Press. I occasionally read what she translated academic books from French and Italian into English. And have you ever tried to read academic history French? Oh my God. And she managed to make sense of that stuff as well. She was the other part of that dinner table where I both learned a lot and learned to think, all right. And then they listen to kids even when they have academic friends around. They listen to kids. So I was expected to show up and play my part. And except for the one time when I was 12 years old and we had a bunch of historians over and I piped up and I said to my dad, Tad, what's the counselor?”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“We had a fantastic dinner table where I cut my teeth on many things intellectually. I don't agree with a lot. Everything he did, he was a converted Catholic who was also a historian who read the minutes of the Council of Trent and the original Latin. That was a challenge for a young 16-year-old atheist. But there's a lot of that left in me.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Everybody else who's ever heard of my father heard of Florence in the Forgotten Centuries, which is the one I'll recommend online, that you've read the historiography book. It says, and I don't know how you do it, that you've read everything that there is, which is a big thing. He was a major influence in my life. One, the historical perspective, I think of that a lot. He was also the writing in Forgotten Centuries was wonderful. And my best read paper of any is Writing Tips for PhD students, which passes along a lot of Eric Cochrane's writing tips for his history graduate students. He's an unusual man. He took us to Florence, where I spent a lot of time as a kid and forced us into the local culture. He was also very connected to the community of the south side of Chicago, sent me to public schools there, which was another culture. So I certainly learned to navigate other cultures.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“I try to, you know, we're all bad at reflecting what our own mental strengths and weaknesses are. I try to reduce things down to a very few fundamental principles and a logical structure. That's why we're not Think about all of monetary policy in the structure of one simple present value equation. So that's my habit of mind. I really admire people of different habits of mind. My historian friends who can keep unbelievable numbers of facts in their citations in their head at one time, I just can't do that. Mathematician friends who are great at seeing logical structure of things without the vision, I admire that. But that's my one uniting theme.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“I served for a while on the rules committee that sets the rules for gliding competitions, which was a wonderful experience as far as me understanding political economy and just what's wrong with Congress. I had all sorts of wonderful ideas on the scale of health status insurance, and my proposal to reform the issuance of Treasury bonds that went exactly as far in the rules committee as my proposals have gone in Washington. Eventually, reason prevails. Many of the psychological biases you see in many sports are there. I was a safety advocate, so I had some rules in mind that wouldn't hurt the competition, but that would do a lot to increase the safety of this thing. And all the same things that bicycle racers said, oh, we can't have helmets, we won't be able to see glider pilots have the same response to any rules that make things a little bit safer. So it was a great education.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Gliding is so they have killed the domestic industry that makes gliders. There's only a couple left in Europe. Certification of aircraft under the FAA is a disaster. This is more visible in general aviation power. Go down to your local airport and you will see what looks like a Cuban car lot full of designs from the 1950s. It's just incredibly difficult to certify a general aviation airplane. There's standards for pilots' licenses are ridiculously too high. And America is one of the best places in the world. When you go around the world, you will notice if you're a pilot how empty the skies are because everywhere else has regulated general aviation completely to death.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, I did. I did. I didn't do that great, but I had a wonderful time in Hungary. This is a serious sport. What you do is you it's about speed and you try to find these rising currents of air called thermals and you glide to the next one. Our typical races around here in California will be two to three hundred miles or more. I did one at 90 miles an hour last year. I've done them over 100 miles an hour. This is average over 300 miles flying without an engine. Altitudes up to 18,000 feet around here, not so high on the east coast. And you're racing these guys. It's like a sailboat race in three dimensions at 100 miles an hour flying out over the deserts of Nevada. It's just absolutely wonderful. And the game is speed. Can you go to airport A, airport B, and your GPS shows you where you've been and come back and do it two minutes faster than the other guy?”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“So I fly gliders, which are beautiful looking airplanes without engines. And the way they work, I was only champion in one class, which wasn't the very high profile class, I have to admit.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“And see what that is. So that is, we're at kind of the worst of all systems right now in that this system of cross subsidies is just atrociously wasteful and inefficient. It does provide reasonably good care, but at just hugely more expense than it should. So that's a second best. Yeah.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Wait, I said tentatively. Let the government just forthrightly raise taxes, pay for health insurance for poor people, indigent people. We could do a lot better job for the schizophrenics on the streets, for whoever the government wants to pay their healthcare, do that on budget, allocated so we can all see what the government's paying for. And then you and me can be freed to the mercies of an unbridled competitive free market. And if somebody wants to come in and offer us care cheaper and set up a new hospital, they don't need a certificate of need. They don't need all the other stuff. They can come in and offer us whatever we're willing to pay for. We would get far better care, far cheaper, much more medical innovation than we do now. So you would make it be free to the wonders of the free market if we would pay taxes to support whatever the government wants to support. And then we can look at the budget.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“About, you know, they just recently said hospitals have to disclose prices. Heavens, disclose prices. Well, that's a sign this is a horribly uncompetitive business. An airline that tried to not disclose prices till he get off the plane would be bankrupt because no one would go there. This competition in the airlines. So how do we solve this problem? Just forcing hospitals to post prices, they have to cross-subsidize the Medicare-Medicaid that doesn't pay anything like what it costs from something else because the government's not paying. That's why your and my healthcare, you and me don't need health insurance. We have enough money. We need maybe something catastrophic if we get something that costs ten million dollars, which is, you know, you have to get some really rare form of cancer for that. You and me could afford to pay for this like we pay for our FET bills. Why can't we be in the totally free market? Well, because there's this cross subsidy rate going on. So here's the deal. Why don't you?”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, the biggest original sin I see now in our healthcare system is cross-subsidies. The government wants to provide for poor people and other people and doesn't want to make them pay where old people they don't want to pay. But the government doesn't want to raise taxes and provide their health care. So what the government does is it tells hospitals, for example, you must treat everybody who walks in the emergency room. Hospital say that's nice where we get the money from. And then the government says, well, you can overcharge private employer-provided insurance, which will force employers to give, and you can overcharge the few cash paying customers who come in. Well, the problem with that is you can't allow competition. If you're overcharging people, then you can't allow hospital B to come in and say, you know, we're going to offer a less price and we won't even have an emergency room. And so you've killed competition. And that, I think, is the original sin, the deepest problem in our healthcare system.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“That means you're going to be more expensive, the government gives you a lump sum. Here's 50 grand and we'll put that in your health status insurance account and that will fund your higher insurance payments for the rest of your life. See you later. There's a clear argument for lump sum transfers to be ex post insurance. If that's all the government did and then left the rest of the health care and insurance industry free to cutthroat, free market, innovative competition, drive out the incumbents, serve you and be better, I'd be fine with it.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“You've spent too much time teaching Econ 101. We're at 5%. We figure out that markets can handle 95% and then you're going to focus on the last 5% and tell me, no, the government's got to run everything. It does so like any insurance, health status insurance, you have to buy it before information is revealed that you're sick. That's fairly reasonable. Now, one answer to that is let's do this at the family level so I can buy health status insurance before I conceive a child for that child. And then if there's a genetic problem that's knowable, then the kid is covered. The other answer, so I will have perfectly reasonable, unless you're at two o'clock in the morning drinking stuff with libertarians, it is allowable for the government to step in when there's a very clear market failure. I would be fine with when we start this up and you, Tyler, have some genetic known genetic quantity.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Can't be done in a one year contract. That's also something that we didn't have until the 1960s or 70s. Institutions take a while to adapt. You've got to take a longer read view here, Tyler. But I do want to advertise it for our listeners who hadn't heard of that. We're still in this pre-existing conditions as the original sin of markets whereby the government must completely screw up your and my healthcare. That is not true. Free markets can handle the question of pre-existing conditions, your need for long-term insurance, term life insurance has had it forever. If you buy term life insurance, when you're young and healthy, you get to keep that insurance no matter how sick you get as time goes on. There's no failure of insurance markets that means we can't have it.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Come on. Technical innovation takes a remarkably long time to spread, and this is a technical innovation. So one thing is just it takes time for institutional, especially in an incredibly regulated industry where you have 50 state regulators who have to bless every single contract. It takes a long time, and then it was made illegal under Obamacare, which isn't happening. You know, it's taking United Airlines still hasn't figured out that Southwest knows how to get people on planes faster. That sort of stuff takes time. But also, the reason is why wasn't this in health insurance to start with? When health insurance first started up, there wasn't this thing of a disease, of a pre-existing condition, something that we get news that's going to make you really expensive. If you either kind of die or you didn't die, and that was the end of that. So very expensive health that is very persistent and where you need insurance against ongoing future expenses.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“When it was in the 1990s. Which insurance company? This is deep in. So a better word for it that Mike Cannon Cato came up with is health status insurance that you can insure your guest self against the risk of getting sick in the future. And one insurance company started offering the right to buy health insurance in the future if you're sick now, which is essentially that's the beginning of the idea. Also, good old-fashioned health insurance starting in the 1990s was guaranteed renewable, meaning if you bought the health insurance now, you had the right to continue buying that health insurance without your premiums going up if you got sick. That's essentially the same thing as health status insurance. So private insurance was working its way in this direction.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Spreads, but the government does not control the quantity of money, doesn't even pretend to control the quantity of money anymore. You need a liquidity demand for some special asset money, and you need the government to control its supply if you want that to determine the price level. Instead, the price level is determined by fiscal theory, and then the quantities of money versus other assets are determined by people's desire for various liquidity things. So all the liquidity ends up doing is it ends up driving slight interest rate spreads. If the government doesn't give you enough money, then you have a little bit higher interest rate spread on one asset versus another. But that's not the key for determining the price level when the government doesn't control the supply of money.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“So, physical theory does not require that money and treasuries are perfect substitutes. It allows that, which is the lovely fact given the greater and greater substitutability of all financial assets. But you can add liquidity demands for all sorts of stuff very easily in the fiscal theory. So liquid treasuries trade is an on-the-run off the spread that liquid treasuries have slightly different interest rates than on liquid treasuries. Money can trade at a different interest rate than treasuries. No problem whatsoever to have a variety of assets that have a variety of liquid discounts in the fiscal theory. The question is, do these liquidity spreads, do they determine the price level? The dog and the tail don't have to be in exactly the same place. The question is if you hold the tail does the dog wag. And the central problem with the view you mentioned, the classic monetary problem, there are”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Will, you short Bitcoin, or here's why I think Bitcoin eventually will die, because it is a pure fiat unbacked money. It doesn't have a government that can raise taxes to soak up the extra money if needed. It's not a promise of anything real. It's just a thing that's in limited supply because in order to short it, you have to use up a lot of computer power. But you can create substitutes. So it's classic. I'm very interested to watch the crypto community relearn centuries of monetary economics. It's classic MV equals PY fiat money. It has value because it has a liquidity use. It's useful for anonymous transactions to put it politely. And it's in limited supply because it takes money to make it. But there's nothing that stops you from making substitutes and nothing that stops you from making derivative claims on Bitcoin that trade just like Bitcoin. If there's nothing that stops you from making substitutes or derivative claims, eventually that value has to go to zero.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“We're sitting on a powder keg. We're sitting on the possibility of a run, a crisis, which would be a sharp unforecast inflation, which the Fed can't do. So yes, it's about risk. It's not about forecast. That's a good way of putting it.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“It's inherently unpredictable. Efficient or inefficient, we're never done to arguing about information versus risk premiums, which I don't want to argue about. There is even an inefficient market. There's such a thing as a bank run. There's everything looks fine until all of a sudden the bank run, the black swan. And that's the mechanism of the inflation. So it can look fine. Interest rates never forecast inflation. We can get religious about efficient markets or not. In the 1970s, interest rates were not high ahead of inflation. In the 1980s, interest rates were not low ahead of disinflation. Interest rates are kind of random walky, just like exchange rates. This is kind of like a deep fact of empirical finance. Asset prices don't seem to move on information about fundamentals, if you want to call them that, like about cash flows. They move on discount rate news. Another way of saying there's money to be made buying when prices are low and selling when prices are high if you can wait a long time.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Sovereign financial crisis. And I think the answer is yes. Ken Rogoff is out there. He's even more of a hawk than I am on these issues most of the time. Now, it's a danger. It's like Greek debt was great 2005, 2006, low interest rates. Why hasn't Greek debt exploded? I don't know. Well, until all of a sudden it didn't. The mechanism is like a run. It's like an earthquake. We're in danger of a rollover crisis that bond markets look at 25 trillion of US debt. And then in the next crisis, we want to borrow another ten trillion and they say, sorry guys, we're done. And now everything that looks sustainable is all of a sudden not sustainable. And the Rs that were less than G are suddenly a lot bigger than G. So you're sitting on a powder keg and a powder keg, a run, a crisis. If you could predict it happening, it would already have happened.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Theories make conditional predictions. Theories make if x happens and you hold everything else constant than y ought to happen. But economics is awfully bad at making unconditional predictions. You know, here's what's going to happen, period. And I think it's a mistake to get into that game. But let me tell you, what fiscal theory says, in part, I've been worried about inflation for 10 years and critics say, look, it still hasn't happened. So what a dummy you were. Government debt, fiscal theory is not particularly special here. It just opens the possibility that if you have too much debt and you can't pay it back and bond markets get tired of you, that there will be a sharp inflation to get rid of that debt rather than a default. That's all the fiscal theory offers, which is in some sense pretty obvious. Well, that could happen. Having built up a lot of debt, are we in danger of some sort of run global financial?”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Years while we slowly grow out of the debt, what's in prospect for the US is borrowing forever and ever. So if the interest rate is 1% less than the growth rate, that gives you 1% of GDP sort of for free. But the U.S. is borrowing 5% of GDP forever. That doesn't compute even if R is less than G. So if R is less than G, finally answer question, big fiscal borrowing must be repaid by taxes. Anything over one percent of GDP has to be repaid by taxes. And if it isn't going to be repaid by taxes, people are still going to try to get rid of that government debt and they'll cause inflation.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“without the government having to do a lot to pay back that debt. So this is the shining promise, which is really, so if that's true, and if it scales, this is the crucial thing, if you can borrow more and the interest rates don't go up, then government debt is a money machine. Nobody needs to work anymore. No one needs to pay taxes anymore. You can tell that's not the case. The question is, why is that not the case? And when you look at the strategy, that's just not about, so I'm going to root that back to the answering your question. Today's fiscal question has really nothing to do with the r greater or less than g, even though it's been a technical issue that makes economists just love writing papers about it because you get to do all sorts of limits and transversality conditions and interesting models about it. And the reason is what's in prospect for the US is not borrowing once and then running no surplus or deficit for four years.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Between money and government bonds isn't that important. What matters is overall government debt and the government's ability to pay that debt back and inflation comes when people lose faith in the government's ability to pay back its debt. They try to get rid of the debt because they know it's not going to get paid back. What do you do with it? You buy stuff and that drives up the price of goods and services. So that's your quick background. What is the fiscal feature of the price level? Now RS than G stuff. This is a broader issue than fiscal theory. It's the question of debt sustainability. And it's a big deal right now. Does our government have to pay back debt or can it borrow? Here's the strategy. Borrow money and never pay it back. In other words, just roll over the debt, let it grow at the interest rate. Well, for you and me, that doesn't work because the repo man comes calling. But for the government, if the economy grows faster than this rate of interest, then the ratio of debt to GDP will come back all on its own.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“I wish I could say the manuscripts forthcoming. It's turning into the key to all mythologies, but there is a draft up. This is a big book project I'm working on. I put the drafts up on my website as it goes along. And I just wrote a G greater than R section last week. I knew this was coming. So let me just back up. The fiscal theory, for those of you who haven't heard of it, this is a attempt at the basic plumbing of where inflation comes from. It's not about the Fed printing up too much money. It's not about the magic of controlling interest rates, but fundamentally money gains its value because the government soaks it up. The government can soak it up by charging taxes at the end of the day. That seems perfectly obvious, but it actually changes a lot about how all of the monetary theory we do works. Okay, so it's related. It's among other things, just backing up here for a second for our listeners. It says that the distinction”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“Of everybody, what people are looking to now is well, who's active in currency markets? And our banks are active and how do their balance sheets look and the facts are just astounding. It does look like when people put it, when there's a lot of demand, prices go up. That shouldn't be that in financial markets, people putting in a bunch of orders shouldn't drive the prices up. Well, there's these facts about trading and volume and prices and flows. So the institutional finance, that's the exciting thing that just happened. And now we have a great new data point in front of us. So any scientific field feels kind of chaotic in the moment, but I still think it's an exciting place to be.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source
“out there to be learned about and I filled them both with excitement and dread that I don't have enough hours in the day to work on it. I mentioned one. Why is there so much trading? Here's a fundamental question we don't know about asset markets. What happened in the last 10 years has been, I think, really deep asset field of finance turned from what I was doing, sort of macro finance versus the behavioralists who want to put psychological imperfections at the heart of everything that kind of faded in an immense amount of effort went into the plumbing of finance. They call it institutional finance, which is the plumbing failed in 2008. And so we learned a tremendous amount about the plumbing and about liquidity and about all the ways in which asset markets don't look like the simple models, as you mentioned. What's wrong with interest rates in Brazil? Well, rather than look to habits of everybody or to psychological imperfections.”
2021-03-10 · Conversations with Tyler · John Cochrane on Economic Puzzles and Habits of Mind · IDENTIFIED FROM THE TRANSCRIPT · source