John H. Cochrane
Economist at the Hoover Institution, previously at the University of Chicago's Booth School of Business, and the author of the fiscal theory of the price level. Writes at The Grumpy Economist.
John H. Cochrane did not write this page.
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Their wordsIn “expectations and the neutrality of interest rates” I show that even in an old-Keynesian adaptive expectations model, that otherwise well captures standard doctrines, higher interest rates cannot durably lower inflation without a fiscal tightening to pay interest costs on the debt.
- 5 days earlier
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Their wordsAdam Smith’s vision, how greedy self-interest serves the public good is unnatural.
↗Affordability Trilogy, Part 3. Why is the free market so unpopular?grumpy-economist.com
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Their wordsRevitalizing the institutions of limited government may be more promising.
↗Affordability Trilogy, Part 3. Why is the free market so unpopular?grumpy-economist.com
- 1 day earlier
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Their wordsMoreover, supply- and technologically-induced deflation, goods getting cheaper as wages stay the same, is fine. We’ve seen that in electronics, and AI may bring it more widely.
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Their wordsI don’t think long recessions would be necessary. That’s pure Phillips curve thinking, that the only way to lower inflation is via high unemployment.
- 1 day earlier
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Our reading
Policy consists of rules, either explicit or inferred from repeated behavior, not actions.
Their wordsPolicy consists of rules, either explicit or inferred from repeated behavior, not actions.
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Their wordsHall’s approach is also the cornerstone of all subsequent macroeconomics.
- 1 day earlier
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Their wordsSubsidies against fixed supply, like energy and housing, just drive prices up more.
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Their wordsAs I hope you know, the government cannot, by taxing, spending, borrowing or regulating, make anything “more affordable” overall.
- 10 days earlier
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Their wordsCentral banks should hold inflation-protected bonds as the primary assets on their balance sheets.
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Their wordsAt a basic level, holding real assets should help central banks to control inflation.
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Their wordsThe general FTPL with debt on the left and surpluses on the right adapts to sticky prices by real interest rate variation.
- 8 days earlier
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Our reading
Banks oppose interest-paying stablecoins to avoid competition on checking account interest rates.
Their wordsBanks don’t want competition, which would force them to pay interest on checking deposits. Plain and simple.
↗Political economy in financial regulationgrumpy-economist.com
- 4 days earlier
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Their wordsIn QE, the Treasury issued long-term bonds. The Fed bought up the long bonds, issued overnight debt, and passed the interest difference back to the Treasury. In the end, it is just as if the Treasury issued overnight debt in the first place.
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Their wordsSimplifying a bit, the Treasury should introduce a fixed-coupon perpetuity and a fixed-value floating-rate perpetuity. These should gradually make up the bulk of government debt.
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Their wordsThe tradeoff between cost of borrowing and how much interest rate risk taxpayers shoulder should be squarely on the shoulders of the politically-accountable Treasury not the independent Fed.
- 11 months earlier
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Their wordsBusiness only raise prices when accounting losses force them to do so.
↗A note on tariffs from the real worldgrumpy-economist.com 1st of 2 in this piece
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Their wordsI suspect higher prices make people leave more quickly than lower prices make them come.
↗A note on tariffs from the real worldgrumpy-economist.com 2nd of 2 in this piece
- 5 weeks earlier
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Their wordsclimate change though real is not the civilization-threatening disaster pitched at Davos, Paris, and the media, that hugely expensive climate policies do no good
↗Climate turning pointgrumpy-economist.com 1st of 4 in this piece
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Their wordsThe “climate crisis” has been taught as gospel for 20 years. Now the average person can see their teachers have been preaching politics in the name of science.
↗Climate turning pointgrumpy-economist.com 2nd of 4 in this piece
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Their wordsWell, when the institutions are over and over spectacularly wrong, whether just incompetent, politicized, or mendacious, there is a reason for loss of trust.
↗Climate turning pointgrumpy-economist.com 3rd of 4 in this piece
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Their wordsThe average European and UK voter, once he or she moves on from immigration, will notice how Europe and the UK have made energy unaffordable, stopped its growth-exactly as degrowthers wish-and deindustrialized, on the altar of climate policies that do nothing to improve the climate.
↗Climate turning pointgrumpy-economist.com 4th of 4 in this piece
- 5 months earlier
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Their wordsTariffs are easy: The right answer is unilateral free trade.
↗Tariffs, saving, and investmentgrumpy-economist.com 1st of 6 in this piece
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Our reading
The American trade deficit is foreigners choosing to invest in America, not America being cheated.
Their wordsthis story tells us how an increase in foreign demand to save in the US rather than at home will push up the dollar, and cause the trade deficit, which is in effect how foreigners send us factories which they would rather build here than in their own countries.
↗Tariffs, saving, and investmentgrumpy-economist.com 2nd of 6 in this piece
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Their wordsIn sum, spurred on by the federal government (in many ways), the US borrowed a huge amount from foreigners at very low rates, and went on a consumption binge. Sooner or later we have to pay it back, or we go though the wrenching adjustment of a debt crisis.
↗Tariffs, saving, and investmentgrumpy-economist.com 3rd of 6 in this piece
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Our reading
The binding constraint on building anything in America is permitting and litigation, not money.
Their wordsEndless lawsuits, cost-exploding contracting requirements, decades to get permits, and more bedevil any attempt to invest here.
↗Tariffs, saving, and investmentgrumpy-economist.com 4th of 6 in this piece
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public debtinterest ratestariffs
Their wordsBut the spike in interest rates require to do this would be huge. And the trade shock will cause a sharp recession, or worse, putting even more stress on the budget. A debt crisis is likely along the way as the US finds it impossible to roll over debt.
↗Tariffs, saving, and investmentgrumpy-economist.com 5th of 6 in this piece
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Their wordsCure the disease, not the symptoms. Reform taxes to tax consumption, not saving and investment. Stop funneling borrowed money to consumption.
↗Tariffs, saving, and investmentgrumpy-economist.com 6th of 6 in this piece
- 8 months earlier
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Their wordsPrice gouging is wonderful for all the reasons that letting supply equals demand is wonderful. When there is a limited supply, then a sharply higher price directs that supply to those who really need it.
↗Praise for Price-Gouginggrumpy-economist.com 1st of 4 in this piece
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Their wordsHoarding goes with price controls, anticipated empty shelves.
↗Praise for Price-Gouginggrumpy-economist.com 2nd of 4 in this piece