The Fed’s announcement of another round of so-called “quantitative easing” (QE2) is all over the news. Basically, it’s an announced commitment to create $600 billion dollars or more of new “Federal reserves” – i.e., U.S. dollars – and pump them into the economy by purchasing, on average 5-year loans (“bonds”) the U.S. government takes out.
When the Fed buys Treasury debt, it pays the financial institutions or individuals that are holding it, which means they have cash instead of IOUs to spend, or, for banks, reserves at the Fed that permit them to make loans.
Buying the bonds in massive amounts has another benefit: All the new buying of these so-called “Treasuries” means the government can lower the interest rate it offers to borrow more money. Since so many other interest rates in the economy are pegged to Treasury rates, QE would presumably lower interest rates throughout the economy, making borrowing cheaper for individuals and businesses alike.
All this is suggested in a new song from produced and co-written by our favorite economic songsmith, Nashville investment manager Jon Shayne, aka “Merle Hazard.” We’ve featured his work frequently, and are especially fond of his latest, “Quantitative Easin’,” sung by “Curtis Threadneedle.” (It’s likely not a coincidence that the Bank of England is on Threadneedle street.)
Given all the recent ruckus over QE, and with the new song taking off on the web, I thought it might be timely to conduct a short interview with Merle here.
Paul Solman: What have your most popular songs been, and why, do you think?
Jon Shayne, aka “Merle Hazard:” Purely in terms of public reaction, “H-E-D-G-E” has the most hits, at around 122,000. Not that I am counting or anything. “Inflation or Deflation?” has half as many, but has had probably the highest-quality attention. It got quoted in The Economist (not to mention a play on the NewsHour). It’s really hard to be certain why these two songs got more traction than the others. Avoiding politics, i.e. the smaller side of myself, may have helped. Also, in “Inflation or Deflation?”, I posed questions rather than answering them. The older I get, the more I think that the best answer we have to most of life’s harder questions is actually just an increasingly sharp rephrasing of the question.
My favorite song is one that is very unpromising, in terms of public appeal, and has no video: “Time with You.” This one is about mismatched love between a male country singer, who is supposedly me, and a woman who is a Ph.D physicist.
PS: Who are your watchers/listeners?
JS/MH: I suspect that most male singers, at some level, hope that their raw animal magnetism will attract gorgeous listeners of the opposite sex. Demographic data I get from YouTube says, however, that my listeners tend to be like me: male, and over 45. Many seem to economists. (Being a country singer is just not all it is cracked up to be.) More to your point, though, my songs that satirize Federal Reserve policy were popular with libertarians. The Double Dippin’ song was not, but got some play on progressive web sites.
What I’m most excited by is having my songs used to teach or inform. I’ve collected some “sightings” in college classrooms and the like at my website and Facebook page. The biggest audience for these songs outside of the U.S. is in Germany. This may (or may not) disprove the stereotype that Germans lack a sense of humor. There seems also to be a pocket of listeners in the U.K., but the songs have some listeners all over the world, YouTube tells me.
PS: Do confederates like John Taylor and Arthur Laffer suggest you’ve got a Republican bias?
JS/MH: I can see why people would think that, but actually, it is happenstance that both of my cameo economists are Republicans.
Arthur Laffer moved to Nashville a few years ago. I met him at a dinner, invited by a client of mine. Dr. Laffer seemed amused with my hobby and offered to help me with the next video, which, as it turned out, was “In the Hamptons.” Aside from being fun to get a cameo from a very big-name economist, even one who has made some enemies, it opened up the possibility of a gag at the end of that video poking fun at trickle-down economics. He was totally game for that joke, which is admirable.
The next time I had a cameo for an economist, I asked John Taylor, an economist at Stanford. I did not look into his political ties before asking him, thinking of him only as the creator of the Taylor Rule. Central banks famously use his theory to set interest rate policy. I later found out, as I prepped for the shoot with him, that he has worked in Republican administrations. Nothing wrong with that, of course, but it was not a factor.
The other person I have asked to do a cameo is a Democratic Congressman who plays the banjo and has some serious budgetary expertise. No luck, though. He reacted to my invitation with an amused smile, and the words, “Are you crazy?”
My own views, for what they are worth, are fairly close to the middle of the road, and I do not affiliate with either party. I do believe in free markets, as my songs suggest in parts, but free markets need reasonable and honest regulation in many spots, much as sports contests need referees. I think that comes through reasonably well in a song like Mark to Market.
PS:What do YOU think of the Fed’s QE2?
JS/MH: The Fed has limited options. If I had Bernanke’s job, I think I’d do just about what he is doing. I would not be happy about it, but, what else can he do? What I think should really be happening is for Congress to stimulate with investment in infrastructure such as a new power grid, and in science, and education. Easier said than done, but monetary policy should be in more of a supporting rather than leading role.
Even though the Fed is doing reasonably well with the limited options it has, I still think that commentators and satirists can legitimately poke fun and question policy, as I have tried to do. The main problem is that the Fed and Treasury have become too close to Wall Street, creating an enormous moral hazard. (And the word “moral,” down here in Nashville, comes out sounding more like “Merle”.)
PS: Why doesn’t economics have a better sense of humor?
JS/MH: Most academic disciplines take themselves too seriously, don’t they? But maybe there is hope. John Kenneth Galbraith’s “The Great Crash,” published in the 1950s, is a wry and well-written book. Warren Buffett’s shareholder letters for Berkshire Hathaway are sometimes pretty funny too, for those who, like me, read that kind of thing. A certain PBS reporter I know of, with the initials P.S., does a good job of working multiple puns into some of his economics reports.
I think economics lost something when it emphasized building mathematical models. If it were to return to being a more verbal discipline, as it was during the early part of the 20th century, at least, some of the humor might come back.