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Tony Yates

Tony Yates

Economist. Consulting, lecturing, a book. Ex Prof at Bham, Ex BoE staffer. Macro, policy, monetary econ, occasional nonsense.

Articles by Tony Yates

Monetary policy delegation rebounded, and an odd trade-off

29 days ago

Back in the day, monetary policy economists and practitioners discussed the benefits of delgating monetary policy to an independent central bank.
There were two kinds.
The first was to remove an ‘average inflation bias’.  Think of a two period game.  In period 1, the government says to an all encompassing trade union ‘we are going to give you 2 per cent inflation’.  Unions bargain for 4 per cent nominal wage increases to cover productivity and expected inflation.  Once those contracts are locked in, the government surprises the economy with 4% inflation, compressing real wages by 2% and boosting employment, which it thought would help with the next election.  However, knowing the government’s trustworthiness, or lack of it, in advance, the union would bargain for 4% plus

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Dismantling and devolving the pernicious union

August 12, 2019

In recent blog posts, I have been advancing ideas that respond to the frightending dysfunction in the UK polity.
1.  Separation of Northern Ireland, Scotland, and Wales into individual, independent countries embedded into the EU, and England levered to tether itself as a non member in name only, or rejoining at some point.
2.  Membership of the euro and aspects of the ‘ever closer political union’ that the UK has thus far been exempted from.
Using the same logic, regional devolution would help achieve and accentuate the same ends.
I am not a fan of regional devolution.  Devolving tax raising and spending powers impairs risk sharing and risks municipal corruption and cronyism.  I am not convinced that regions are better placed to trade-off whatever special insight they have into

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Brexit: the mutually inconsistent views of the desirable anchor and the stormy constitutional sea

August 12, 2019

One feature of Brexit from the perspective of those who see political and economic benefits to remaining a member of the EU is that there is no safe, perpetual compromise position.
There are soft versions of Brexit in which almost all the economic benefits of membership are reaped [for example by remaining in the single market and customs union].  But once we leave it becomes much easier to take further steps away from the EU, and the UK’s economic trading relations, regulatory environment and even to an extent political rights become unethered and more subject to the ebbs and flows of domestic politics.
For Remainers, EU membership is an economic and constitutional anchor;  anything short of this is casting off.
Some Leavers saw things exactly the other way round, of course.

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Asymmetric radicalization of Leavers and [most other] Remainers

August 11, 2019

A striking feature of the post Referendum period is the radicalization of Leavers.   Amongst leading protagonists, many supported remaining in the EU’s single market during the campaign.  Subsequently, the focus shifted towards leaving the single market and customs union in order to fulfil a revised definition of true Brexit by enabling an independent trade policy.  Now, control of the Governing party rests with a faction that openly embraces leaving the European Union without a deal, outriders deployed to dissemble about constructs like ‘managed no deal’, or ‘WTO deal’.
The radicalization has not just been on the part of the Leaver oligarchy.  Polling suggests that about 40% would choose no deal over Remaining in the EU.
There has been no parallel radicalization on the Remain

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The changing calculus of Scottish Independence

August 10, 2019

Much was made of the first poll in favour of Scottish independence.  The calculus is changing.  I would argue that for a variety of reasons, independence is now more attractive.
Relative to 2014, the first benefit is removing Scotland from the influence of two polar opposite, but pernicious political offerings, from Labour and the Tories.  During the 2014 referendum, major parties in the UK all pretty much lived within the rules of acceptable discourse, and were led by groups with different, but relatively pragamatic visions for ther UK.
This is no longer the case.  Both major parties are infested with varieties of racism;  Labour, antisemitism, and the Tories, Islamophobia.  Both parties are led by cabals of ideologues.  The Labour leadership is held by a faction of anti Western

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Lewis Goodall’s ‘Remainers are rubbish’ conclusion.

August 7, 2019

Lewis Goodall, Political Correspondent for Sky, wrote a thread on Twitter today concluding with a familiar line that Remainers are not good at politics.  They ‘may as well pack up and go home’.  They are ’embarrassingly bad at politics’.   The mental connection made is with the commentary that first began in the aftermath of the Referendum victory for Leave by recalling the spectacle of a babble of liberal economists talking conditional forecasts on the one hand, and Leave posters with ‘take back control’ and ‘let’s fund our NHS instead’ on the other.
But this is not a good characterisation of recent events.  Such as it is, the ‘Remain alliance’ is a creature of its largest member, the Parliamentary Labour Party.   That organ is in turn a creature of its leadership structure.  That

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Not entirely negative about Positive Money

June 10, 2019

Positive Money and I have had an exchange of blog posts on FT’s Alphaville about their suggestions for what the successor to Mark Carney, Governor of the Bank of England, should and should not do.
I remain deeply opposed to any move to get the Bank of England involved in climate change mitigation, or any attempt to interfere with credit allocation in pursuit of a policy to re-engineer industrial composition to suit that or other political objectives.  Likewise, we should not set the Bank objectives to target the level of inequality.
However, I do think that having the debate is important and ultimately productive.
It’s uncomfortable reading, and while the debate is happening, it feels like an unwanted increase in the probability that the central bank will be further politicized and

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Labour, Brexit and the European elections

May 12, 2019

Leading figures in Labour like Jess Phillips were out on social media today, with a call to arms to fight the reactionary tendencies represented by The Brexit Party, promising to oppose with progressivism.

This is a difficult pitch for Labour.  Labour is conceding the main declared objective of The Brexit Party – leaving the EU – the policy that defines the party now, and the achievement of which will give it impetus for its future goals.
In each scenario in which Labour gets to be the architect or co-architect of Brexit policy, Labour promises to deliver Brexit.  If it wins a general election, it negotiates its own deal with the EU, and the UK leaves without a referendum.  If it manages to negotiate a deal with the Tories, the deal comes back to Parliament, but not a referendum,

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‘Bollocks to Brexit’ critiques are bollocks

May 10, 2019

The Liberal Democrat campaign slogan has come under fire.  I think it’s a great slogan.
It weaves together different feelings of those against the project:  ‘oh for God’s sake make it stop this is turning out really badly’ [recall Jolyon Maugham’s ‘make it stop’];  and also ‘this is really a bad idea and I am not ashamed to say so and I am not backing away from it just because of the 2016 referendum.’  Leave initally won the referendum by coalition building.  Of course it turned out that the coalition was false.  Leavers wanted different things from each other [this is why Brexit has not already happend] and some of which turned out to be undeliverable.  The Lib Dem slogan does not commit the same error.
It also swerves the classic Leave smear of Remainers that they are elitists who

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Memetics and economics

May 8, 2019

This post writes up a short thread on Twitter on memetics and economics.  One that tells the story of a ‘paper’ I wrote perhaps 15 years ago or more, now, with the same title as this post, and sent to a now defunct journal ‘The Journal of Memetics’.  I don’t know why the journal folded.  Discussion of memetics is curiously absent on my Twitter feed.  Perhaps the idea proved a dead end, or just died for contingent reasons.  The rise and fall of memetics seems beautifully recursive as a phenomenon, given what memetics is.
You might well conclude from reading this that I entered a period of temporary insanity;  or that I have more heterodox tastes in economics and social science than you’d up to this point guessed from my blog and feed.
It’s also possible that the

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Whatever Powell says, the Fed can’t avoid taking political considerations into account.

December 20, 2018

Yesterday, Jerome Powell said, following the Fed’s decision to raise its policy rate:  “political considerations play no role whatsoever in our discussions”.
In some important senses, this cannot or at least should not be true.
Trump has on several occasions commented in public to the effect that he would prefer the Fed not to raise rates.  The reason is an old one, and relates to why central bank independence was thought a good idea in the first place.  Trump has not wanted the Fed to curtail the kick to the economy that intended when pushing through the tax cut earlier this year.
Powell may be telling the truth to the extent that he means ‘we will not moderate rate increases just because you told us you don’t want us to’.  But that does not mean that political considerations don’t

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What is the best Brexit outcome for the SNP?

December 19, 2018

There are still multiple possible outcomes of the ongoing Brexit process.  The UK could revoke our A50 notice to leave the European Union and remain members.  We could seek a Brexit In Name Only solution, retaining freedom of movement and membership of the single market.  We could ratify the Draft Withdrawal Agreement and negotiate a harder Brexit involving an end to freedom of movement, and a departure from some elements of the single market, depending on efforts to obviate the backstop.  Or we could crash out of the EU with ‘no deal’.
We can presume that the overriding objective of the Scottish National Party [SNP] is to secure independence from the rest of the UK [RoUK].  Despite losing the referendum in 2014, the SNP cannot give up its reason for being.  Which Brexit outcome

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King’s Bloomberg bloopers

December 16, 2018

A link to my New Statesman piece, a rejoinder to Mervyn King’s Bloomberg article encouraging the government to drop Theresa May’s deal before the nation ‘rages’.


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Legitimacy somersaults

December 15, 2018

Have a look at this Tweet by Paul Embery.

It’s fascinating. It’s not the only one.  Dan Hannan has sent roughly the same message.
1.  The 2016 Referendum result was legitimate.
2.  Any further referendum would not be legitimate, but instead an act of the establishment trying to get its way because it didn’t like the result of the first.  [Notice, no ill intentions of the establishment intended in the first round].
3.  Despite the second referendum – this is hypothetical at present, of course – being organised through regular constitutional processes, it would be legitimate to simply decide to do stuff via social media, to boycott said referendum, in a way that would leave its mark on the trajectory of the nation for all of us.
4.  Although a second referendum is prima facie

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An optimistic forecast concerning the inconsistent ambitions of Lexiters and Brexiters

December 13, 2018

David Chivers, [AP in macro at Durham University], wrote today:

We can debate just where the electorate agree on post Brexit plans.  But they surely do not agree with all of them.   Not least because they are not consistent with each other.
This leads us to the natural observation that an additional barrier for Lexiters and Brexiters is each other.  Lexiters seek a trajectory to socialism.  Right wing Brexiters – as well as former centrist Remainers – will oppose that vehemently.  They are split amongst themselves, of course: one lot focused on the ideological paraphernalia of nationalism, the other on a rather hazily and abstractly sketched ideology of deregulation and free markets.
Neither side seems to fear the strategic success of the other in the post Brexit world.   As a

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Why Brexit is so much more problematic than the financial crisis of 2008

December 11, 2018

An interesting thread by David Hayward [@SimeonStylites] on Twitter today compared the severity of the crisis engulfing us with Brexit to the financial crisis of 2008.  Although the economic damage has been so far less, and more slow-moving, in may ways I think the difficulties we face now have the potential to be much worse.
For starters, during the financial crisis we had governments that were coherent entities and able to respond to events as they unfolded.  At present, both the opposition and the government cleave between more than one set of leave and remain factions.  No faction has supremacy.  Theresa May is to a large extent impotent to respond.  Conceivably, if the economic damage mounts as the end of the Article 50 period approaches, factions will start to unify around a

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If you can’t beat them, join them: Remainers try their hand at attacks on the civil service.

October 24, 2018

Anthony Adonis tweeted this yesterday: 
Civil servants do not need this unsolicited advice, foghorned over Twitter.  The tweet comes out of nowhere, prompted by nothing in particular, and insinuates in a way full of foreboding by omitting reference to anything specific.  Presumably, if there were some specific allegation, it would have been made?
It is the mirror image of the accusations by the Brexit Ultras that the civil service is run by ‘Remoaner Saboteurs’, of which the latest example in the genre was this:

‘Don’t do anything ethically dodgy’ we are intended to read thus: ‘As someone in the know I have good reason to suspect that ethically dodgy things are being done or may be done if I do not broadcast my warning.’  There is an explicit code of conduct for civil servants.

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Next time do QE with a Treasury twist, not central bank money-printing?

October 23, 2018

This post writes up tweets I sent last night.  The case is not overwhelming, and maybe not even decisive, but it’s worth rehearsing the arguments for.  I’ll write this as though it were for a UK audience only, but the basic idea applies, with some qualifications, for other central banks too.
In the UK QE meant the BoE creating new money, electronic central bank reserves, and buying long-dated government bonds [government bonds that mean that you get your money back in a long time, like 10 years] from private sector holders.
We can think of this as a two step process [even though it was only 1 step in practice].  Step 1:  create new electronic money and buy a short dated government bond [often called a ‘Treasury bill’].  Step 2:  find someone who will swap the short-dated bond with

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Guest post by Will Bott: on the democratic legitimacy of a second referendum

September 27, 2018

Here’s a guest post by Will Bott, also to be found on Twitter.
“If public opinion had shifted as much as many proponents of a second referendum claim, or certainly would like, there would be little question about the legitimacy of a second Brexit referendum. Faced with an overwhelming change of heart, few would claim that a previous vote should be considered forever binding on ourselves and future generations. Unfortunately, we probably do not find ourselves in such a situation. Rather, we find ourselves in one where demographic shifts and subtle but significant changes in particular voting blocks make a second referendum increasingly politically feasible and winnable, albeit likely by a narrow margin. This understandably leaves many remainers feeling uneasy: increasingly tempted by

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Brexit was not really a neoliberal project, whatever that is

August 25, 2018

Simon Wren Lewis argues in a recent post that Brexit was a ‘neoliberal project’.  That the driving force was a form of free-market utopianism.
I have doubts about the project of diganosing Brexit as a neoliberal project.
For starters, there are the Lexiters.  They see the EU as the neoliberal agent, strengthened by the agents of Europe’s companies ganging up on the workers.  They want to break free from the EU to intervene more, not less in markets.
Then there are the nationalists and nativists.
Nationalists want to break free because they have a preference for the sovereignty abstraction;  and a nostalgia for the UK’s imperial past as a great player on the world stage.  That was not about pursuing open markets, but about flexing muscles and imperial preference.
Nativists want to

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Will Ireland back down over the border?

August 22, 2018

I discussed this briefly with ‘Oscar D Torson’ on Twitter.
It must be the hope of the government and all Brexiters that this is what happens – Ireland backing down.  With no modification of the united EU and Ireland position, the government, and whoever succeeds it, has to concede to leaving the EU in name only, or to erecting a regulatory and customs border around Northern Ireland at the Irish Sea.  Or face the economic disruption of No Deal, which might be catastrophic, not only in economic terms, but in political terms for whoever is deemed responsible for bringing it about.
There is what at first might seem a paradoxical quality to the Irish position, as some noted – if I recall correctly Dan Davies was one – in that in order to ensure that the border between the North and South

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Will the Fed Trump the President or vice versa?

August 22, 2018

Donald Trump has been at it again, criticising the Fed over its policy of gradually normalising interest rates.  Commentators are wondering what exactly the Fed will do in response.
Some worry that the Fed will cave in;  and indeed interpret a fall in the dollar coincident with Trump’s remarks as suggesting that this view is shared widely in the markets.
Why would it cave in?  Perhaps to give itself an easy life in its interactions with Congress;  to reduce the likelihood of future campaigns to ‘Audit’ it, or change its mandate.  This seems highly unlikely.  The returns to loyalty appear too uncertain and thin.  Powell himself might well be content with only one term, working hard at a job with low pay.  The White House has almost no influence over most of the other FOMC

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Did I just accidentally blog about the validity of a radical centrist party in the UK?

August 21, 2018

Simon Wren Lewis is sure that a centre party formed by frustrated right-wing Labour MPs is a terrible idea.  Why?  Because it would split the left of centre vote and make it  more likely that a Conservative government held onto power.
I’m not so sure this is true, or, even if it was, that it justifies rebel MPs staying put come what may.  Why?
 Simon’s forecast seems to rule out any explicit cooperation or participation by disaffected left-wing Tory MPs, and the Lib Dems.  A splinter from the Labour Party, orchestrated or coinciding with, or subsequently triggering a symmetric splinter from the Tories, would split both left and right leaning votes.  An orchestrated double split would be a remarkably good idea, if you are in favour of halting a material Brexit, and roughly the same

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Je ne Bregret rien

August 16, 2018

Am I missing something, or are there very few or no prominent Brexiteers changing their minds about the benefits of Brexit?
I find it extraordinary that there are not more.
Opinion polls have shifted somewhat against.  But politicians and commentators have doubled down.  This in the face of very marked changes in the likely costs and benefits of leaving.  The chance of no deal at all in March 2019 has risen greatly;  also I’d conjecture that the chance of Brexit In Name Only, either in the form of a very close tie to the EU, or prolonged ‘transition’ has risen.  The inability of the warring factions in the Tory Party to confront the trade-offs that face the UK, and the crystallisation of the Irish border as a stumbling block, have both reduced the chances of a free trade agreement

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Was poor post crisis macro performance all central banks’ fault?

August 7, 2018

Martin Sandbu’s column excoriates central banks for post financial crisis macroeconomic performance.  He is right about a lot of things, so I am sure – and hope – his broadside is taken seriously.
But I don’t think he is right about this.
Martin’s piece fills a vacuum left by central banks and their finance ministry sponsors. [What?  I hear you thinking.]  Central banks themselves ought to be routinely, even institutionally reviewed.  Stephen Williamson commented on Twitter [something to the effect] that he had never seen a central banker own up to a mistake.  This is bizarre.  We and they know that they make mistakes all the time, and recognition of that informs the next policy decision or policy reform.  A well designed policy this period requires diagnosing the status quo, and

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How big a deal is No Deal? We have no idea.

July 30, 2018

Exiting the EU without a deal having previously been inconceivable, some among the Brexit ultras are trying to present it as an alternative preferable to the negotiating position agreed at the Prime Minister’s Chequers meeting, or whatever the EU might actually offer as a response.
The Government has been alternatively chastised for not attempting to figure out and take mitigating action, and for trying to conceal what they know or what actions they might have planned.
But just how bad would exiting under ‘no deal’  be?
A part of the question was answered by the bodies looking into different Brexit scenarios before the referendum.  The ‘no deal’ scenario envisaged transiting in an orderly fashion towards trading with Europe on WTO terms.  The Centre for Economic Performance, for

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Philip Lane should not be making comments on Irish tax policy

July 30, 2018

Simon Wren Lewis and Frances Coppola have written two thoughtful pieces about Irish central bank Governor Philip Lane’s public comments about Irish tax policy.
My own view is that he should not be making these remarks.
The reason has to do with the effect that making them will have on the presumed nature of the office and the incumbent holder in the future.
If it becomes normal for central bank governors to comment on matters other than monetary and financial policy, there is a risk that governments will seek to vet future candidates for their other policy views, and not appoint primarily on the basis of monetary and financial policy expertise.  And that future candidates will invest time and energy competing on the basis of political acceptability, rather than their skills

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