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Getting it Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy (The MIT Press) ebook

by Apostolos Serletis,William A. Barnett


Getting It Wrong is a magisterial treatment on the measurement of monetary aggregates by the world's foremost authority. Barnett informs us about how to get the measurements right. He also shows us how the Federal Reserve gets them wrong.

Getting It Wrong is a magisterial treatment on the measurement of monetary aggregates by the world's foremost authority. Indeed, if Paul Volcker's dashboard would have displayed Barnett's monetary metrics, the severe 1981–82 recession might never have occurred. Alas, the Fed's money supply gauges remain in need of an overhaul by Barnett, a monetary master craftsman.

It has been widely argued that the crisis and recession were caused by greed and the failure of mainstream economics. Book · January 2011 with 34 Reads. DOI: 1. 551/mitpress/8731.

In Getting It Wrong, leading economist William Barnett argues instead that there was too little use of the relevant economics .

In Getting It Wrong, leading economist William Barnett argues instead that there was too little use of the relevant economics, especially from the literature on economic measurement. Barnett contends that as financial instruments became more complex, the simple-sum monetary aggregation formulas used by central banks, including the . Federal Reserve, became obsolete. Established in 1962, the MIT Press is one of the largest and most distinguished university presses in the world and a leading publisher of books and journals at the intersection of science, technology, art, social science, and design.

In Getting It Wrong, leading economist William Barnett argues instead that there . In this book, the author, William A. Barnett, wrote part I without mathematics and with minimal use of technical terminology. Better financial data, Barnett argues, could have signaled the misperceptions and prevented the erroneous systemic-risk assessments.

Undermine the Fed, the Financial System, and the Economy. Introduction of the Euro and the Monetary Policy of the European Central Bank

Getting it Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy. 26251016915 Statistics. Understanding Inflation and the Implications for Monetary Policy: A Phillips Curve Retrospective. Imperfect Knowledge Economics: Exchange Rates and Risk (repost). Introduction of the Euro and the Monetary Policy of the European Central Bank. World Scientific Publishing Company (November 18, 2009) ISBN: 981283838430 538 pages PDF.

In Getting It Wrong, William A. Barnett, the Oswald Distinguished Professor of Macroeconomics at the University of. . Barnett, the Oswald Distinguished Professor of Macroeconomics at the University of Kansas, places blame squarely on the shoulders of the Federal Reserve Board in Washington, D. He argues that the quality of monetary data provided by the Board has been declining for decades at the same time that the need for good data has grown due to the increasing complexity of financial markets and instruments. In contrast, the broader aggregates ?

Barnett, William A. Bibliography Note . There was an error while adding the following items. One or more items could not be added because you are not logged in.

Barnett, William A. Bibliography Note: İndeks var. Bibliyografya : . 311. Go to:Top of Page. Türkiye cumhuriyet merkez bankasi. dare Merkezi Para Politikası Destek Hizmetleri Müdürlüğü Anafartalar mah. İstiklal Cad.

Apostolos Serletis and William A. Barnett. Book Description: I would never fly in an airplane designed by an economist. He is the world's foremost authority in the study of monetary and financial aggregation using index number and aggregation theory. Unfortunately, I have to live in an economy where policy makers listen to economists. Professor Barnett, a former rocket scientist, shows clearly how important it is that economists pay attention to details and teaches economists how to do far better. Until economists absorb these lessons, the policy makers they advise will be flying blind.

Book's title: Getting it wrong Elektronische Ressource how faulty . General Note: Foreword: Macroeconomics, Apostolos Serletis

Book's title: Getting it wrong Elektronische Ressource how faulty monetary statistics undermine the Fed, the financial system, and the economy. International Standard Book Number (ISBN): 9780262301343 978-0-262-30134-3. General Note: Foreword: Macroeconomics, Apostolos Serletis.

A leading economist contends that the recent financial crisis was caused not by the failure of mainstream economics but by corrupted monetary data constructed without reference to economics.

Blame for the recent financial crisis and subsequent recession has commonly been assigned to everyone from Wall Street firms to individual homeowners. It has been widely argued that the crisis and recession were caused by “greed” and the failure of mainstream economics. In Getting It Wrong, leading economist William Barnett argues instead that there was too little use of the relevant economics, especially from the literature on economic measurement. Barnett contends that as financial instruments became more complex, the simple-sum monetary aggregation formulas used by central banks, including the U.S. Federal Reserve, became obsolete. Instead, a major increase in public availability of best-practice data was needed. Households, firms, and governments, lacking the requisite information, incorrectly assessed systemic risk and significantly increased their leverage and risk-taking activities. Better financial data, Barnett argues, could have signaled the misperceptions and prevented the erroneous systemic-risk assessments.

When extensive, best-practice information is not available from the central bank, increased regulation can constrain the adverse consequences of ill-informed decisions. Instead, there was deregulation. The result, Barnett argues, was a worst-case toxic mix: increasing complexity of financial instruments, inadequate and poor-quality data, and declining regulation.

Following his accessible narrative of the deep causes of the crisis and the long history of private and public errors, Barnett provides technical appendixes, containing the mathematical analysis supporting his arguments.

Gravelblade
The Federal Reserve constructs its measures of the money supply by simply adding up the dollar amounts in various categories of assets. This is called a Simple Sum Aggregate. For example, the M2 measure includes cash, checking accounts, savings accounts, money market accounts, time deposits less than $100,000, etc. It is obviously incorrect to treat time deposits the same as cash, since consumers do not spend cash the same way they spend money in time deposit accounts. Friedman and Schwarz, in their classic Monetary History of the United States (1970), recognized this important point, emphasizing that each category of monetary asset should be weighted by its degree of "moneyness". Friedman also acknowledged that he was unable to determine the proper weights in order to calculate a realistic measure of the money supply. Many others tried, but only Barnett succeeded. Barnett's measure of the money supply, based on the index number created by Francois Divisia in the 1920s, is called the Divisia Aggregate of the Money Supply.

The present volume recounts the entire history of monetary aggregation, including the compelling evidence, both theoretical and empirical, that the Divisia Monetary Aggregates are "right" and the Federal Reserve's Simple Sum Monetary Aggregates are "wrong". To take but one example, the "velocity" of money is the number of times that money changes hands in a period of time. To hold cash, one gives up interest. If the interest rate is low, there is no penalty to holding cash. One would expect that if the interest rate increases, then velocity would increase, too; this happens for the Divisia Monetary Aggregates, but not for the Federal Reserve's Simple Sum Aggregates.

Barnett traces the consequences of the Fed's continued insistence on getting it wrong. He writes (p. 133), "[M]onetary policy in recent decades might have been more expansionary than was realized by the Federal Reserve and thereby might have fed the bubbles. Also policy more recently might have been more contractionary than realized by the Federal Reserve at the start of the crisis."

Noting that other central banks, e.g., the Bank of England, the Polish central bank, and the Bank of Israel all get it right when it comes to measuring the money supply, one must wonder, Why would the Federal Reserve intentionally "get it wrong"? You'll have to read the book to find out but, as Barnett writes, page 153, "It is tempting to conclude that the Federal Reserve has been producing inferior data simply by innocent mistake. But this is clearly not true. The Fed does not employ hundreds of stupid economists." The book recounts many disturbing incidents that testify to the Fed's lack of transparency and accountability.

Barnett concludes (page 145), "This book documents the fact that the economics profession, financial firms, borrowers, lenders, and the central banks themselves have repeatedly been misled by poor central bank monetary data over the past half century." But the situation is worse than even that! The Fed has tried to prevent others from producing good data! One egregious incident, described on pages 27-28, was that in 2006, the Fed stopped supplying data others could use to construct Divisia indices of the money supply. It was as if the Fed was trying to prevent people from using reliable measures of the money supply, just as the housing bubble was nearing its peak. That the Fed would do this is heartbreaking to this economist, and it shows the Fed for what it is. In fact, I stumbled on to this book over my concern about QE1 and QE2, and the portent for (hyper?)inflation resulting from the Fed's actions. I knew the Fed's Simple Sum Aggregates to be worse than useless for analyzing inflationary trends, and a google search led me to this book. In case the Fed again decides to prevent me (or anyone else) from knowing the Divisia money supply indices, Barnett has seen to having them provided at the Center for Financial Stability, [...] where I will be checking in regularly to find out the latest Divisia numbers.
Malaris
Great Condition!
Mr.Twister
I hate statistics but this book very comfortably explained how to view statistics related to monetary parameters. It is not a hard read
Malann
Avery important book that is very useful in my research.
Thozius
Barnett delivers on his statement: "reading this book can be as casual and rapid or as challenging and deep as the reader may choose." Part I of this book lays out Barnett's argument in a way that is accessible to a general readership and reserves the mathematics for Part II. In short, Barnett offers a cogent and compelling argument for a fundamental underlying cause of the recent financial crisis and the ensuing "Great Recession": faulty data. He explains that information supplied by the Federal Reserve (and other central banks) has been inadequate in large part because of "flagrant" violations of "basic principles of index number theory, aggregation theory, and elementary accounting." Barnett is a mathematician (and wryly notes that he actually was a rocket scientist) and was a member of the Board of Governor's staff in 1980. During his time there Barnett wrote about a "right" way to construct monetary aggregates building on the work of the mathematician Divisia. Since other data (on industrial production, for example) provided by the same institutions do employ this methodology it is hard not to agree with Barnett that the economists on the Board staff know they are "doing it wrong" and the motivation is the bureaucracies' self interests. The backstories alone (such as the one where the FBI was sent to track down the person who released interest rate data to Consumer Reports) make for good reading. I am an economist and have read extensively about the Federal Reserve and I learned things I didn't know. Full disclosure: I received this book to review for Choice and highly recommended it.
Daiktilar
Barnett does an excellent job of partitioning the book based upon the reader's level of interest and academic background. The first section of the book is appropriately titled "The Facts Without the Math," and Dr. Barnett's experience as an educator is clearly demonstrated by his natural progression of concepts. He has a tendency to begin with simple, intuitive examples before describing the same concepts as they apply to economics and the science of collecting and using data. The latter half of the book contains a mathematical appendix. Even though there are pages upon pages of multi-variable calculus and differential equations, the footnotes of the "Facts Without the Math" section occasionally make reference to several easily understood formulas in the appendix which can provide insight to most readers.
Getting it Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy (The MIT Press) ebook
Author:
Apostolos Serletis,William A. Barnett
Category:
Politics & Government
EPUB size:
1477 kb
FB2 size:
1264 kb
DJVU size:
1837 kb
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Publisher:
The MIT Press (December 16, 2011)
Pages:
360 pages
Rating:
4.6
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