Assorted Musings

Here are some assorted musings piled into one post.

1. Just when the IMF thought it was becoming relevant again, the Asian Development Bank Fund moves closer to establishing an Asian Monetary Fund.
   
2. Ben Bernanke is feeling the heat. Congress is planning televised hearings on whether Bernanke and Paulson pressured Ken Lewis and Bank of America (BoA) to be quiet and complete its acquisition of Merrill Lynch after BoA found out there were more problems with the bank. The WSJ reports that the congressional "review of documents, notes from phone conversations involving Federal Reserve officials and other information suggest 'there's fire there.' "
3. Wow. Ben Bernanke was interested in pushing the federal funds rate to 0% in 2003. One can only imagine how much more pronounced the housing bubble and subsequent financial collapse would have been had the policy rate hit 0%.
4. I listened to Russ Robert interview Ed Leamer on EconTalk (while doing grades!). One interesting point that Leamer makes is that no matter what has hit the the U.S. economy it has always returned to its trend growth rate of just over 3% per annum. While this consistency is a remarkable, what I find even more amazing is that the level of the U.S. economy seems to follow a deterministic trend. One striking example of this can be seen by looking at the log level of the U.S. economy after the Great Depression. The U.S. economy is where it would have been--based on a linear trend--had there been no Great Depression! This can be seen in the figure below (click on it to enlarge):
   

In short, the eyeball test seems to indicate that over the long run the U.S. economy is trend stationary not difference stationary. (Menzie Chinn provides some formal evidence that my eyeball test is correct.) It is almost as if this trend is a constant of nature.