Bubbles and Macroeconomics

Arnold Kling

By Arnold Kling, Jun 19 2003

In this essay, I discuss two alleged bubbles and what they might imply for U.S. macroeconomics.

Why do foreign investors invest so heavily in dollar-denominated assets and bear the risk of a decline in the dollar? Personally, I think it is because they are stupid. But that is not an appropriate answer for an economist to give.

If I were forced to pick an economic theory to explain the dollar bubble, it would be the theory of the safe haven.

For Discussion. I argue that U.S. macroeconomic performance is not threatened by the prospect of either the “dollar bubble” or the “bond bubble” popping. Do you agree?

Charles Krauthammer's premise, that reducing demand for oil will reduce terrorism, violates what I call Oil Econ 101. But he does offer the least costly way to achieve the goal. Slap, say, a $5 (or $10--the bazaar is open) tax on every imported barrel. And most important, keep the new price--let's say $35--as a floor...

Jun 19 2003

Social Security

IRA's to the Rescue?

Arnold Kling

Asymmetrical Information points to a paper by Michael Boskin. Roughly $400 billion a year is contributed to various tax-deferred saving vehicles, and the amount is likely to grow with nominal income growth and the increased limits on tax-deferred contributions recently passed into law. Immense additional future deferr...

Jun 19 2003

Macroeconomics

Bubbles and Macroeconomics

Arnold Kling

In this essay, I discuss two alleged bubbles and what they might imply for U.S. macroeconomics. Why do foreign investors invest so heavily in dollar-denominated assets and bear the risk of a decline in the dollar? Personally, I think it is because they are stupid. But that is not an appropriate answer for an economi...

Bubbles and Macroeconomics

Arnold Kling

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Bubbles and Macroeconomics

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