Are central bankers chasing their own shadow?
Back in 1993 John Taylor, a professor at Stanford Economics, wrote down a rule to describe how central bankers in the US set the policy rate, the Fed Funds rate.
EconomicsFinance
The Two Cents.
Hanno Lustig and Romain Wacziarg on economic policy and political economy.
Recent essays
21 of 21Europe chose insurance. America chose growth.
Europe and America chose different points on the efficiency-equity trade-off. That used to be a matter of preferences. It isn't anymore.
Junior doesn't vote
One of the best political interviews I’ve seen in years is François Bayrou’s interview, the French PM, on the French evening news by Gilles Bouleau on Wednesday, 27 August 2025 8 p.m.
How the war was funded.
When the FOMC met on the morning of June 9, 2020, in the midst of the pandemic, the question on the table was whether yield curve control (YCC) would be an appropriate tool to deploy in the pandemic. One FOMC member said "there are no bazookas left in our unco…
How do governments use financial repression to lower their cost of funding?
Joint work with Roberto Gomez-Cram, Howard Kung, and David Zeke.
Is Vanguard always just a price taker?
Really interesting and provocative column in the FT yesterday on passive investors by Stuart Kirk.
Party like it's 1999! YHOO joins the S&P 500.
I moved to the Bay Area in 1997.
Who's looking out for passive investors?
When you think about asset management, managing other people’s money, the first thing you have to worry about is the alignment of incentives.
The United States Capital Structure
The U.S.
Harrison, Kreps, and the SpaceX IPO
Google Inc.
What's the Sticker Price of Exorbitant Privilege?
If you buy into this Pflueger/Yared perspective, then the price of exorbitant privilege is outspending your military adversaries. And the US has outspent other advanced economies by a large margin when you express defense spending as a fraction of GDP. I took…
Central Bank Independence: Lessons from Maastricht
On September 25, 2025, an amicus brief was filed at the Supreme Court in Trump v.
Wrong-way Robinhood: Alpha Redistribution
How do Robinhood investors fare?
U.S. Treasury Investors' Massive Bet on AI
With Howard Kung (LBS) and James Paron (Stanford GSB).
What about Japan? (Part II)
The Bank of Japan’s low-rate policies have kept Japan’s debt sustainable for a decade. Someone had to fund that. It wasn’t foreigners.
What about Japan? (Part I)
Running a SWF with borrowed money.
The Housing Affordability Paradox
Last year, on August 19 2025, the day before Powell was to give his annual Jackson Hole speech, the White House pressured Chairman Powell to lower rates.
Emptying Planet
Paul Ehrlich's legacy
Why Eurobonds won't work
Olivier Blanchard and Ángel Ubide have put forward a bold proposal. EU countries, they argue, should replace a substantial portion of their existing national debt with jointly issued “blue bonds,” senior to the remaining national “red bonds,” with governments…
How can you help to protect your local central banker?
The U.S.
Blue Bonds for Europe
The Ghost of Alexander Hamilton Wandering around Brussels